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CTSM Reviewer: TRANSPORTATION LAW

SESSION 3
Cases
II. Common Carrier
Registered Owner

Duavit v. CA, 173 SCRA 490 (1989)


G.R. No. 82318 May 18, 1989
GILBERTO M. DUAVIT, petitioner,
vs.
THE HON. COURT OF APPEALS, Acting through the Third Division, as
Public Respondent, and ANTONIO SARMIENTO, SR. & VIRGILIO
CATUAR respondents.
Rodolfo d. Dela Cruz for petitioner.
Bito, Lozada, Ortega & Castillo for respondents.
GUTIERREZ, JR., J.:
DIGEST:
1. Respondents were aboard a jeep. This jeep collided with another
jeep owned by Petitioner because of a tire mishap.
2. Respondent Passengers were injured (one was thrown in the middle
of the road, the other one was trapped inside) so they filed a case to
claim from Petitioner and the Jeepney driver.
3. Petitioner did not deny ownership but denied that the driver of the
jeep was his employee. This driver, likewise, admitted this fact as he
took the jeep of the Petitioner from the garage W/O his consent and
that his parents just apologized to Petitioner.
4. RTC: Driver negligent, absolved Petitioner.
5. CA: Petitioner liable also.
HELD: Petitioner should NOT be liable with the driver. Petitioners jeep
was virtually STOLEN and to hold Petitioner liable for an accident caused
by someone who was neither his driver nor employee would be absurd. It
would be like holding liable the owner of a stolen vehicle for an accident
caused by the person who stole such vehicle.
x

DOCTRINE: An owner of a vehicle cannot be held liable for an accident


involving the said vehicle if the same was driven without his consent or
knowledge and by a person not employed by him.
FACTS:
1. Respondents Antonio Sarmiento, Sr. and Virgilio Catuar were aboard
a jeep, owned by Respondent, Ruperto Catuar was driving the said
jeep on Ortigas Avenue, San Juan, Rizal; that Respondent's jeep, at
the time, was running moderately at 20 to 35 kilometers per hour and
while approaching Roosevelt Avenue, Virgilio Catuar slowed down;
that suddenly, another jeep driven by Oscar Sabiniano hit and
bumped Respondents jeep on the portion near the left rear wheel,
and as a result of the impact the jeep fell on its right and skidded by
about 30 yards; that as a result jeep was damaged, particularly the
windshield, the differential, the part near the left rear wheel and the
top cover of the jeep; that Respondent Virgilio Catuar was thrown to
the middle of the road; his wrist was broken and he sustained
contusions on the head; that likewise Respondent Antonio Sarmiento,
Sr. was trapped inside the fallen jeep, and one of his legs was
fractured.
- Evidence also shows that the Respondent Virgilio Catuar spent
a total of P2,464.00 for repairs of the jeep, as shown by the
receipts of payment of labor and spare parts tried to prove that
Respondent Virgilio Catuar, immediately after the accident was
taken to Immaculate Concepcion Hospital, and then was
transferred to the National Orthopedic Hospital; that while
Respondent Catuar was not confined in the hospital, his wrist
was in a plaster cast for a period of 1 month, and the

contusions on his head were under treatment for about two (2)
weeks; that for hospitalization, medicine and allied expenses,
Respondent Catuar spent P5,000.00.
- Evidence also shows that as a result of the incident,
Respondent Antonio Sarmiento, Sr. sustained injuries on his
leg; that at first, he was taken to the National Orthopedic
Hospital (Exh. K but later he was confined at the Makati
Medical Center from July 29, to August 29, 1971 and then from
September 15 to 25, 1971; that his leg was in a plaster cast for
a period of eight (8) months; and that for hospitalization and
medical attendance, plaintiff Antonio Sarmiento, Sr. spent no
less than P13,785.25 as evidenced by receipts in his
possession. (Exhs. N to N-1).
- Proofs were adduced also to show that Respondent Antonio
sarmiento Sr. is employed as Assistant Accountant of the
Canlubang Sugar Estate with a salary of P1,200.00 a month;
that as sideline he also works as accountant of United Haulers
Inc. with a salary of P500.00 a month; and that as a result of
this incident, plaintiff Sarmiento was unable to perform his
normal work for a period of at least 8 months.
- On the other hand, evidence shows that the other Respondent
Virgilio Catuar is a Chief Clerk in Canlubang Sugar Estate with
a salary of P500.00 a month, and as a result of the incident, he
was incapacitated to work for a period of one (1) month.
2. The Respondents have filed this case both against Oscar Sabiniano
as driver, and against Gualberto Duavit as owner of the jeep.
- Petitioner Gualberto Duavit, while admitting ownership of the
other jeep (Plate No. 99-07-F-J Manila, 1971), denied that the
driver Oscar Sabiniano was his employee.
- Duavit claimed that he has not been an employer of defendant
Oscar Sabiniano at any time up to the present.
- On the other hand documentary and testimonial evidence show
that driver Oscar Sabiniano was an employee of the Board of
Liquidators from November 14, 1966 up to January 4, 1973
(Annex A of Answer).
- Driver Sabiniano, in his testimony, categorically admitted that
he took the jeep from the garage of defendant Duavit without
the consent or authority of the latter (TSN, September 7, 1978,
p. 8). He testified further, that Duavit even filed charges against
him for theft of the jeep, but which Duavit did not push through
as his (Sabiniano's) parents apologized to Duavit on his behalf.
- Driver Oscar Sabiniano, on the other hand in an attempt to
exculpate himself from liability, makes it appear that he was
taking all necessary precaution while driving and the accident
occurred due to the negligence of Virgilio Catuar. Sabiniano
claims that it was plaintiffs vehicle which hit and bumped their
jeep. (Reno, pp. 21-23)
3. RTC: The trial court found driver Oscar Sabiniano negligent in driving
the vehicle but found no employer-employee relationship between
him and the petitioner because the latter was then a government
employee and he took the vehicle without the authority and consent
of the owner. The petitioner was, thus, absolved from liability under
Article 2180 of the Civil Code.
4. CA: The private respondents appealed the case. On January 7,
1988, the Court of Appeals rendered the questioned decision holding
the Petitioner jointly and severally liable with Sabiniano. The
appellate court in part ruled:
- We cannot go along with appellee's argument. It will be seen
that in Vargas v. Langcay, supra, it was held that it is immaterial
whether or not the driver was actually employed by the
operator of record or registered owner, and it is even not
necessary to prove who the actual owner of the vehicle and
who the employer of the driver is.
- When the Supreme Court ruled, thus: 'We must hold and
consider such owner-operator of record (registered owner) as
the employer in contemplation of law, of the driver,' it cannot be
construed other than that the registered owner is the employer
of the driver in contemplation of law. It is a conclusive
presumption of fact and law, and is not subject to rebuttal of
proof to the contrary. Otherwise, as stated in the decision, we
quote: The purpose of the principles evolved by the decisions
in these matters will be defeated and thwarted if we entertain
Page 1 of 62

the argument of petitioner that she is not liable because the


actual owner and employer was established by the evidence. . .
- Along the same vein, the defendant-appellee Gualberto Duavit
cannot be allowed to prove that the driver Sabiniano was not
his employee at the time of the vehicular accident.
- The ruling laid down in Amar V. Soberano (1966), 63 O.G.
6850, by this Court to the effect that the burden of proving the
non-existence of an employer-employee relationship is upon
the defendant and this he must do by a satisfactory
preponderance of evidence, has to defer to the doctrines
evolved by the Supreme Court in cases of damages arising
from vehicular mishaps involving registered motor vehicle. (See
Tugade v. Court of Appeals, 85 SCRA 226, 230).
- The appellate court also denied the petitioner's motion for
reconsideration. Hence, this petition.
5. The petitioner contends that the respondent appellate court
committed grave abuse of discretion in holding him jointly and
severally liable with Sabiniano in spite of the absence of an
employer-employee relationship between them and despite the fact
that the petitioner's jeep was taken out of his garage and was driven
by Sabiniano without his consent.
ISSUE: Whether the owner of a private vehicle which figured in an
accident can be held liable under Art. 2180 CC when the said vehicle was
(1) neither driven by an employee of the owner nor (2) taken with the
consent of the latter.
HELD:
1. IMPT: As early as in 1939, we have ruled that an owner of a vehicle
cannot be held liable for an accident involving the said vehicle if the
same was driven without his consent or knowledge and by a person
not employed by him.
2. Thus, in Duquillo v. Bayot (67 Phil. 131-133-134) [1939] we said:
Under the facts established, the defendant cannot be held liable for
anything. At the time of the accident, James McGurk was driving the
truck, and he was not an employee of the defendant, nor did he have
anything to do with the latter's business; neither the defendant nor
Father Ayson, who was in charge of her business, consented to have
any of her trucks driven on the day of the accident, as it was a holy
day, and much less by a chauffeur who was not in charge of driving
it; the use of the defendant's truck in the circumstances indicated was
done without her consent or knowledge; it may, therefore, be said,
that there was not the remotest contractual relation between the
deceased Pio Duquillo and the defendant. It necessarily follows from
all this that articles 1101 and following of the Civil Code, cited by the
appellant, have no application in this case, and, therefore, the errors
attributed to the inferior court are without basis.
3. The Court upholds the above ruling as still relevant and better
applicable to present day circumstances.
4. The respondent court's misplaced reliance on the cases of Erezo v.
Jepte (102 Phil. 103 [1957] and Vargas v. Langcay (6 SCRA 174
[1962]) cannot be sustained. In the Erezo case, Jepte, the registered
owner of the truck which collided with a taxicab, and which resulted in
the killing of Erezo, claimed that at the time of the accident, the truck
belonged to the Port Brokerage in an arrangement with the
corporation but the same was not known to the Motor Vehicles Office.
This Court sustained the trial court's ruling that since Jepte
represented himself to be the owner of the truck and the Motor
Vehicles Office, relying on his representation, registered the vehicle
in his name, the Government and all persons affected by the
representation had the right to rely on his declaration of ownership
and registration. Thus, even if Jepte were not the owner of the truck
at the time of the accident, he was still held liable for the death of
Erezo significantly, the driver of the truck was fully authorized to drive
it. Likewise, in the Vargas case, just before the accident occurred
Vargas had sold her jeepney to a third person, so that at the time of
the accident she was no longer the owner of the jeepney. This court,
nevertheless, affirmed Vargas' liability since she failed to surrender to
the Motor Vehicles Office the corresponding AC plates in violation of
the Revised Motor Vehicle Law and Commonwealth Act No. 146.
- We further ruled that the operator of record continues to be the
operator of the vehicle in contemplation of law, as regards the
public and third persons, and as such is responsible for the

consequences incident to its operator. The vehicle involved


was a public utility jeepney for hire. In such cases, the law does
not only require the surrender of the AC plates but orders the
vendor operator to stop the operation of the jeepney as a form
of public transportation until the matter is reported to the
authorities. As can be seen, the circumstances of the above
cases are entirely different from those in the present case.
5. CAB: Herein petitioner does not deny ownership of the vehicle
involved in tire mishap but completely denies having employed the
driver Sabiniano or even having authorized the latter to drive his jeep.
The jeep was virtually stolen from the petitioner's garage. To hold,
therefore, the petitioner liable for the accident caused by the
negligence of Sabiniano who was neither his driver nor employee
would be absurd as it would be like holding liable the owner of a
stolen vehicle for an accident caused by the person who stole such
vehicle. In this regard, we cannot ignore the many cases of vehicles
forcibly taken from their owners at gunpoint or stolen from garages
and parking areas and the instances of service station attendants or
mechanics of auto repair shops using, without the owner's consent,
vehicles entrusted to them for servicing or repair.
6. We cannot blindly apply absolute rules based on precedents whose
facts do not jibe four square with pending cases. Every case must be
determined on its own peculiar factual circumstances. Where, as in
this case, the records of the petition fail to indicate the slightest
indicia of an employer-employee relationship between the owner and
the erring driver or any consent given by the owner for the vehicle's
use, we cannot hold the owner liable.
7. We, therefore, find that the respondent appellate court committed
reversible error in holding the petitioner jointly and severally liable
with Sabiniano to the private respondent.
DISPOSITIVE: WHEREFORE, the petition is GRANTED and the decision
and resolution appealed from are hereby ANNULLED and SET ASIDE.
The decision of the then Court of First Instance (now Regional Trial Court)
of Laguna, 8th Judicial District, Branch 6, dated July 30, 1981 is
REINSTATED. SO ORDERED.

Fores v. Miranda, 105 Phil 266 (1959)


G.R. No. L-12163
March 4, 1959
PAZ FORES, petitioner,
vs.
IRENEO MIRANDA, respondent.
Alberto O. Villaraza for petitioner.
Almazan and Ereneta for respondent.
REYES, J.B.L., J.:
NATURE: Defendant-petitioner Paz Fores brings this petition for review of
the decision of the Court of Appeals (C.A. Case No. 1437-R) awarding to
the plaintiff-respondent Ireneo Miranda the sums of P5,000 by way of
actual damages and counsel fees, and P10,000 as moral damages, with
costs.
DOCTRINE:
Approval of the Public Service Commission is necessary for sale
(alienation, lease, encumbrance) of a public service vehicle.
Moral damages are not recoverable in damage actions predicted on a
breach of the contract of transportation. Where the injured passenger
does not die, moral damages are not recoverable unless it is proved
that the carrier was guilty of malice or bad faith. We think it is clear that
the mere carelessness of the carrier's driver does not per se constitute
of justify an inference of malice or bad faith on the part of the carrier
DIGEST:
1. Respondent suffered injuries when the driver of the jeepney he was
in lost control and it swerved to a bridge wall in Sta. Mesa.
2. The driver of this jeep was held guilty of serious physical injuries
through reckless imprudence.
3. This jeepney was owned by Petitioner but he denied liability for
breach of contract of carriage saying that, a day before the
accident, the jeepney was sold to a 3rd person (Carmen Sackerman).
Page 2 of 62

ISSUES:
(1) Is the approval of the Public Service Commission necessary for the
sale of a public service vehicle even without conveying therewith the
authority to operate the same? YES.
(2) To what damages is the respondent entitled?
HELD 1: Approval of the Public Service Commission is necessary for sale
of a public service vehicle.
1. The provisions of the statute are clear and prohibit the sale,
alienation, lease, or encumbrance of the property, franchise,
certificate, privileges or rights, or any part thereof of the owner or
operator of the public service Commission.
2. The law was designed primarily for the protection of the public
interest; and until the approval of the Public Service Commission is
obtained the vehicle is, in contemplation of law, still under the service
of the owner or operator standing in the records of the Commission
which the public has a right to rely upon.
HELD 2: Moral damages not recoverable. Actual damages reduced.
1. The P10,000 actual damages awarded by the Court of First Instance
of Manila were reduced by the Court of Appeals to only P2,000, on
the ground that a review of the records failed to disclose a sufficient
basis for the trial court's appraisal, since the only evidence presented
on this point consisted of respondent's bare statement that his
expenses and loss of income amounted to P20,000.
2. On the other hand, "it cannot be denied," the lower court said, "that
appellee (respondent) did incur expenses"' It is well to note further
that respondent was a painter by profession and a professor of Fine
Arts, so that the amount of P2,000 awarded cannot be said to be
excessive.
3. IMPT: Anent the moral damages ordered to be paid to the
respondent, the same must be discarded. We have repeatedly ruled
that moral damages are not recoverable in damage actions predicted
on a breach of the contract of transportation. Where the injured
passenger does not die, moral damages are not recoverable unless it
is proved that the carrier was guilty of malice or bad faith. We think it
is clear that the mere carelessness of the carrier's driver does not per
se constitute of justify an inference of malice or bad faith on the part
of the carrier; and in the case at bar there is no other evidence of
such malice to support the award of moral damages by the CA.
x

FACTS:
1. Respondent was one of the passengers on a jeepney driven by
Eugenio Luga. While the vehicle was descending the Sta. Mesa
bridge at an excessive rate of speed, the driver lost control thereof,
causing it to swerve and to his the bridge wall. The accident occurred
on the morning of March 22, 1953. 5 passengers were injured,
including the respondent who suffered a fracture of the upper right
humerus. He was taken to the National Orthopedic Hospital for
treatment, and later was subjected to a series of operations; the first
on May 23, 1953, when wire loops were wound around the broken
bones and screwed into place; a second, effected to insert a metal
splint, and a third one to remove such splint. At the time of the trial, it
appears that respondent had not yet recovered the use of his right
arm.
2. The driver was charged with serious physical injuries through
reckless imprudence, and upon interposing a plea of guilty was
sentenced accordingly.
3. The contention that the evidence did not sufficiently establish the
identity of the vehicle as the belonging to the petitioner was rejected
by the appellate court which found, among other things, that is
carried plate No. TPU-1163, SERIES OF 1952, Quezon City,
registered in the name of Paz Fores, (appellant herein) and that the
vehicle even had the name of "Doa Paz" painted below its wind
shield. No evidence to the contrary was introduced by the petitioner,
who relied on an attack upon the credibility of the two policemen who
went to the scene of the incident.
4. A point to be further remarked is petitioner's contention that on March
21, 1953, or one day before the accident happened, she allegedly
sold the passenger jeep that was involved therein to a certain
Carmen Sackerman.

ISSUE: Is the approval of the Public Service Commission necessary for


the sale of a public service vehicle even without conveying the authority to
operate the same? YES.
HELD: The ruling should be upheld.
1. Section 20 of the Public Service Act (Commonwealth Act No. 146)
provides: Sec. 20. Subject to established limitations and exceptions
and saving provisions to the contrary, it shall be unlawful for any
public service or for the owner, lessee or operator thereof, without the
previous approval and authority of the Commission previously had
x x x (g) To sell, alienate, mortgage, encumber or lease its property,
franchises, certificates, privileges, or rights, or any part thereof; or
merge or consolidate its property, franchises, privileges or rights, or
any part thereof, with those of any other public service. The approval
herein required shall be given, after notice to the public and after
hearing the persons interested at a public hearing, if it be shown that
there are just and reasonable grounds for making the mortgage or
encumbrance, for liabilities of more than one year maturity, or the
sale, alienation, lease, merger, or consolidation to be approved and
that the same are not detrimental to the public interest, and in case of
a sale, the date on which the same is to be consummated shall be
fixed in the order of approval: Provided, however, That nothing herein
contained shall be construed to prevent the transaction from being
negotiated or completed before its approval or to prevent the sale,
alienation, or lease by any public service of any of its property in the
ordinary course of its business.
2. Interpreting the effects of this particular provision of law, we have
held in the recent cases of Montoya vs. Ignacio, * 50 Off. Gaz. No. 1,
p. 108; Timbol vs. Osias, et al., G. R. No. L-7547, April 30, 1955, and
Medina vs. Cresencia, 99 Phil., 506; 52 Off. Gaz. No. 10, p. 4606,
that a transfer contemplated by the law, if made without the requisite
approval of the Public Service Commission, is not effective and
binding in so far as the responsibility of the grantee under the
franchise in relation to the public is concerned.
3. Petitioner assails, however, the applicability of these rulings to the
instant case, contending that in those cases, the operator did not
convey, by lease or by sale, the vehicle independently of his rights
under the franchise. This line of reasoning does not find support in
the law.
4. IMPT: The provisions of the statute are clear and prohibit the sale,
alienation, lease, or encumbrance of the property, franchise,
certificate, privileges or rights, or any part thereof of the owner or
operator of the public service Commission. The law was designed
primarily for the protection of the public interest; and until the
approval of the Public Service Commission is obtained the vehicle is,
in contemplation of law, still under the service of the owner or
operator standing in the records of the Commission which the public
has a right to rely upon.
5. The proviso contained in the aforequoted law, to the effect that
nothing therein shall be construed "to prevent the transaction from
being negotiated or complete before its approval", means only that
the sale W/O the required approval is still valid and binding between
the parties (Montoya vs. Ignacio, supra). The phrase "in the ordinary
course of its business" found in the other proviso" or to prevent the
sale, alienation, or lease by any public service of any of its property".
As correctly observed by the lower court, could not have been
intended to include the sale of the vehicle itself, but at most may refer
only to such property that may be conceivably disposed or by the
carrier in the ordinary course of its business, like junked equipment or
spare parts.
6. IMPT: The case of Indalecio de Torres vs. Vicente Ona (63 Phil., 594,
597) is enlightening; and there, it was held: Under the law, the Public
Service Commission has not only general supervision and regulation
of, but also full jurisdiction and control over all public utilities including
the property, equipment and facilities used, and the property rights
and franchise enjoyed by every individual and company engaged i
the performance of a public service in the sense this phrase is used
in the Public Service Act or Act No. 3108. By virtue of the provisions
of said Act, motor vehicles used in the performance of a service, as
the transportation of freight from one point to another, have to this
date been considered and they cannot but be so consideredpublic service property; and, by reason of its own nature, a TH truck,
Page 3 of 62

7.

8.
9.

10.

11.

12.

13.

14.

15.

which means that the operator thereof places it at the disposal of


anybody who is willing to pay a rental of its use, when he desires to
transfer or carry his effects, merchandise or any other cargo from one
place to another, is necessarily a public service property. (Emphasis
supplied)
IMPT: Of course, this court has held in the case of Bachrach Motor
co. vs. Zamboanga Transportation Co., 52 Phil., 244, that there may
be a nunc pro tunc authorization which has the effect of having the
approval retroact to the date of the transfer; but such outcome cannot
prejudice rights intervening in the meantime.
CAB: It appears that no such approval was given by the Commission
before the accident occurred.
The P10,000 actual damages awarded by the Court of First Instance
of Manila were reduced by the Court of Appeals to only P2,000, on
the ground that a review of the records failed to disclose a sufficient
basis for the trial court's appraisal, since the only evidence presented
on this point consisted of respondent's bare statement that his
expenses and loss of income amounted to P20,000. On the other
hand, "it cannot be denied," the lower court said, "that appellee
(respondent) did incur expenses"' It is well to note further that
respondent was a painter by profession and a professor of Fine Arts,
so that the amount of P2,000 awarded cannot be said to be
excessive (see Arts. 2224 and 2225, Civil Code of the Philippines).
The attorney's fees in the sum of P3,000 also awarded to the
respondent are assailed on the ground that the Court of First
Instance did not provided for the same, and since no appeal was
interposed by said respondent, it was allegedly error for the Court of
Appeals to award them motu proprio. Petitioner fails to note that
attorney's fees are included in the concept of actual damages under
the Civil Code and may be awarded whenever the court deems it is
just and equitable (Art. 2208, Civil Code of the Philippines). We see
no reason to alter these awards.
Anent the moral damages ordered to be paid to the respondent, the
same must be discarded. We have repeatedly ruled (Cachero vs.
Manila Yellow Taxicab Co. Inc., 101 Phil., 523; 54 Off. Gaz., [26],
6599; Necesito, et al vs. Paras, 104 Phil., 75; 56 Off. Gaz., [23] 4023,
that moral damages are not recoverable in damage actions predicted
on a breach of the contract of transportation, in view of Articles 2219
and 2220 of the new Civil Code, which provide as follows:
- Art. 2219. Moral damages may be recovered in the following
and analogous cases: (1) A criminal offense resulting in
physical injuries; (2) Quasi-delicts causing physical injuries; x x
- Art. 2220. Willful injury to property may be a legal ground for
awarding moral damages if the court should find that, under
circumstances, such damages are justify due. The same rule
applies to breaches of contract where the defendant acted
fraudulently or in bad faith.
By contrasting the provisions of these two article it immediately
becomes apparent that: Art. 2176. Whoever by act or omission
causes damage to another, there being fault or negligence, is obliged
to pay for the damage dome. Such fault or negligence, if there is no
pre-existing contractual relation between the parties, is called a
quasi-delict and is governed by the provisions of this Chapter.
The exception to the basic rule of damages now under consideration
is a mishap resulting in the death of a passenger, in which case
Article 1764 makes the common carrier expressly subject to the rule
of Art. 2206, that entitles the deceased passenger to "demand moral
damages for mental anguish by reason of the death of the deceased"
(Necesito vs. Paras, 104 Phil., 84, Resolution on motion to
reconsider, September 11, 1958).
IMPT: But the exceptional rule of Art. 1764 makes it all the more
evident that where the injured passenger does not die, moral
damages are not recoverable unless it is proved that the carrier was
guilty of malice or bad faith.
CAB: We think it is clear that the mere carelessness of the carrier's
driver does not per se constitute of justify an inference of malice or
bad faith on the part of the carrier; and in the case at bar there is no
other evidence of such malice to support the award of moral
damages by the Court of Appeals. To award moral damages for
breach of contract, therefore, without proof of bad faith or malice on
the part of the defendant, as required by Art. 220, would be to violate
the clear provisions of the law, and constitute unwarranted judicial
legislation.

16. The Court of Appeals has invoked our rulings in Castro vs. Acro
Taxicab Co., G.R. No. 49155, December 14, 1948 and Layda vs.
Court of Appeals, 90 Phil., 724; but these doctrines were predicated
upon our former law of damages, before judicial discretion in fixing
them became limited by the express provisions of the new Civil Code
(previously quoted). Hence, the aforesaid rulings are now
inapplicable.
17. IMPT:Upon the other hand, the advantageous position of a party
suing a carrier for breach of the contract of transportations explains,
to some extent, the limitations imposed by the new Code on the
amount of the recovery. The action for breach of contract imposes on
the defendant carrier a presumption of liability upon mere proof of
injury to the passenger; that latter is relieved from the duty to
established the fault of the carrier, or of his employees, and the
burden is placed on the carrier to prove that it was due to an
unforseen event or to force majeure (Cangco vs. Manila Railroad
Co., 38 Phil., 768, 777). Moreover, the carrier, unlike in suits for
quasi-delict, may not escape liability by proving that it has exercised
due diligence in the selection and supervision of its employees (Art.
1759, new civil code; Cangco vs. Manila Railroad Co., supra; Prado
vs. Manila Electric Co., 51 Phil., 900).
18. CAB: The difference in conditions, defenses and proof, as well as the
codal concept of quasi-delict as essentially extra contractual
negligence, compel us to differentiate between action ex contractu,
and actions quasi ex delicto, and prevent us from viewing the action
for breach of contract as simultaneously embodying an action on tort.
Neither can this action be taken as one to enforce on employee's
liability under Art. 103 of the Revised Penal Code, since the
responsibility is not alleged to be subsidiary, nor is there on record
any averment or proof that the driver of appellant was insolvent. In
fact, he is not even made a party to the suit.
19. It is also suggested that a carrier's violation of its engagement to
safety transport the passenger involves a breach of the passenger's
confidence, and therefore should be regarded as a breach of contract
in bad faith, justifying recovery of moral damages under Art. 2220.
This theory is untenable, for under it the carrier would always be
deemed in bad faith, in every case its obligation to the passenger is
infringed, and it would be never accountable for simple negligence;
while under the law (Art. 1756). the presumption is that common
carriers acted negligently (and not maliciously), and Art. 1762 speaks
of negligence of the common carrier.
- ART. 1756. In case of death of or injuries to passengers,
common carriers are presumed to have been at fault or to have
acted negligently, unless they prove that they observed
extraordinary diligence as prescribed in article 1733 and 1755.
- ART. 1762. The contributory negligence of the passenger does
not bar recovery of damages for his death or injuries, if the
proximate cause thereof is the negligence of the common
carrier, but the amount of damages shall be equitably reduced.
- The distinction between fraud, bad faith or malice in the sense
of deliberate or wanton wrong doing and negligence (as mere
carelessness) is too fundamental in our law to be ignored (Arts.
1170-1172); their consequences being clearly differentiated by
the Code.
- ART. 2201. In contracts and quasi-contracts, the damages for
which the obligor who acted in good faith is liable shall be those
that are the natural and probable consequences of the breach
of the obligation, and which the parties have foreseen or could
have reasonably foreseen at the time the obligation was
constituted.
- In case of fraud, bad faith, malice or wanton attitude, the
obligor shall be responsible for all damages which may be
reasonably attributed to the non-performance of the obligation.
20. It is to be presumed, in the absence of statutory provision to the
contrary, that this difference was in the mind of the lawmakers when
in Art. 2220 they limited recovery of moral damages to breaches of
contract in bad faith. It is true that negligence may be occasionally so
gross as to amount to malice; but that fact must be shown in
evidence, and a carrier's bad faith is not to be lightly inferred from a
mere finding that the contract was breached through negligence of
the carrier's employees.

Page 4 of 62

DISPOSITIVE: In view of the foregoing considerations, the decision of the


Court of Appeals is modified by eliminating the award of P5,000.00 by
way of moral damages. (Court of Appeals Resolution of May 5, 1957). In
all other respects, the judgment is affirmed. No costs in this instance. So
ordered.

Lim et al. v. CA, G.R. No. 125817 (16 January 2002)


G.R. No. 125817
January 16, 2002
ABELARDO LIM and ESMADITO GUNNABAN, petitioners,
vs.
COURT OF APPEALS and DONATO H. GONZALES, respondents.
BELLOSILLO, J.:
TRUCK v JEEP KABIT = JEEP
DIGEST:
1. Private Respondent purchased an Isuzu passenger jeepney from a
holder of a Certificate of Public Convenience.
2. He continued to operate it W/O transferring the registration of the
vehicle to his name and W/O securing a CPC himself. Thus, the
original owner remained to be the registered owner and operator of
the vehicle.
3. Unfortunately, the vehicle got involved in a road mishap which
caused it severe damage. The 10-wheeler-truck which caused the
accident was owned by Petitioner Lim and was driven by copetitioner Gunnaban. Gunnaban admitted responsibility for the
accident, so that Petitioner Lim shouldered the costs of
hospitalization of those wounded, compensation for the heirs of the
deceased passenger and restoration of the other vehicle involved.
4. He also negotiated for the repair of the Private Respondent's jeepney
but the latter refused and demanded for its replacement. Hence,
Private Respondent filed a complaint for damages against
Petitioners. Meanwhile, the jeepney was left by the roadside to
corrode and decay.
5. RTC: In favor of private respondent (jeep).
6. CA: Affirmed the decision of the trial court.
ISSUE: Whether the new owner who continued to operate the jeep under
the kabit system and in the course thereof met an accident has the legal
personality to bring the action for damages against erring vehicle YES.
HELD: Evil sought to be avoided in kabit system does not exist.
1. SC affirmed. The thrust of the law in enjoining the kabit system is to
identify the person upon whom responsibility may be fixed in case of
an accident with the end view of protecting the riding public.
2. In the present case, it is once apparent that the evil sought to be
prevented in enjoining the kabit system does not exist.
3. CAB: In the present case it is at once apparent that the evil sought to
be prevented in enjoining the kabit system does not exist.
- First, neither of the parties to the pernicious kabit system is
being held liable for damages.
- Second, the case arose from the negligence of another vehicle
in using the public road to whom no representation, or
misrepresentation, as regards the ownership and operation of
the passenger jeepney was made and to whom no such
representation, or misrepresentation, was necessary. Thus it
cannot be said that private respondent Gonzales and the
registered owner of the jeepney were in estoppel for leading
the public to believe that the jeepney belonged to the registered
owner.
- Third, the riding public was not bothered nor inconvenienced at
the very least by the illegal arrangement. On the contrary, it
was private respondent himself who had been wronged and
was seeking compensation for the damage done to him.
Certainly, it would be the height of inequity to deny him his
right.
4. CAB: In light of the foregoing, it is evident that private respondent
has the right to proceed against petitioners for the damage
x

FACTS:
1. Sometime in 1982 private respondent Donato Gonzales purchased
an Isuzu passenger jeepney from Gomercino Vallarta, holder of a
certificate of public convenience for the operation of public utility
vehicles plying the Monumento-Bulacan route.
2. While private respondent Gonzales continued offering the jeepney for
public transport services he did not have the registration of the
vehicle transferred in his name nor did he secure for himself a
certificate of public convenience for its operation. Thus Vallarta
remained on record as its registered owner and operator.
3. On 22 July 1990, while the jeepney was running northbound along
the North Diversion Road somewhere in Meycauayan, Bulacan, it
collided with a ten-wheeler-truck owned by petitioner Abelardo Lim
and driven by his co-petitioner Esmadito Gunnaban. Gunnaban
owned responsibility for the accident, explaining that while he was
traveling towards Manila the truck suddenly lost its brakes. To avoid
colliding with another vehicle, he swerved to the left until he reached
the center island. However, as the center island eventually came to
an end, he veered farther to the left until he smashed into a Ferroza
automobile, and later, into private respondent's passenger jeepney
driven by one Virgilio Gonzales. The impact caused severe damage
to both the Ferroza and the passenger jeepney and left one (1)
passenger dead and many others wounded.
4. Petitioner Lim shouldered the costs for hospitalization of the
wounded, compensated the heirs of the deceased passenger, and
had the Ferroza restored to good condition. He also negotiated with
private respondent and offered to have the passenger jeepney
repaired at his shop. Private respondent however did not accept the
offer so Lim offered him P20,000.00, the assessment of the damage
as estimated by his chief mechanic. Again, petitioner Lim's
proposition was rejected; instead, private respondent demanded a
brand-new jeep or the amount of P236,000.00. Lim increased his bid
to P40,000.00 but private respondent was unyielding. Under the
circumstances, negotiations had to be abandoned; hence, the filing of
the complaint for damages by private respondent against petitioners.
5. In his answer Petitioner Lim denied liability by contending that he
exercised due diligence in the selection and supervision of his
employees. He further asserted that as the jeepney was registered in
Vallartas name, it was Vallarta and not private respondent who was
the real party in interest. For his part, petitioner Gunnaban averred
that the accident was a fortuitous event which was beyond his
control.
6. Meanwhile, the damaged passenger jeepney was left by the roadside
to corrode and decay. Private respondent explained that although he
wanted to take his jeepney home he had no capability, financial or
otherwise, to tow the damaged vehicle.
7. The main point of contention between the parties related to the
amount of damages due private respondent. Private respondent
Gonzales averred that per estimate made by an automobile repair
shop he would have to spend P236,000.00 to restore his jeepney to
its original condition. On the other hand, petitioners insisted that they
could have the vehicle repaired for P20,000.00.5
8. RTC: On 1 October 1993 the trial court upheld private respondent's
claim and awarded him P236,000.00 with legal interest from 22 July
1990 as compensatory damages and P30,000.00 as attorney's fees.
In support of its decision, the trial court ratiocinated that as vendee
and current owner of the passenger jeepney private respondent
stood for all intents and purposes as the real party in interest. Even
Vallarta himself supported private respondent's assertion of interest
over the jeepney for, when he was called to testify, he dispossessed
himself of any claim or pretension on the property. Gunnaban was
found by the trial court to have caused the accident since he
panicked in the face of an emergency which was rather palpable from
his act of directing his vehicle to a perilous streak down the fast lane
of the superhighway then across the island and ultimately to the
opposite lane where it collided with the jeepney. On the other hand,
petitioner Lim's liability for Gunnaban's negligence was premised on
his want of diligence in supervising his employees. It was admitted
during trial that Gunnaban doubled as mechanic of the ill-fated truck
despite the fact that he was neither tutored nor trained to handle such
task.6
9. CA: Forthwith, petitioners appealed to the Court of Appeals which, on
17 July 1996, affirmed the decision of the trial court. In upholding the
Page 5 of 62

decision of the court a quo the appeals court concluded that while an
operator under the kabit system could not sue without joining the
registered owner of the vehicle as his principal, equity demanded that
the present case be made an exception. Hence this petition.
PETITIONER CONTENDS:
It is petitioners' contention that the CA erred in sustaining the decision of
the trial court despite their opposition to the well-established doctrine that
an operator of a vehicle continues to be its operator as long as he
remains the operator of record. According to petitioners, to recognize an
operator under the kabit system as the real party in interest and to
countenance his claim for damages is utterly subversive of public policy.
Petitioners further contend that inasmuch as the passenger jeepney was
purchased by private respondent for only P30,000.00, an award of
P236,000.00 is inconceivably large and would amount to unjust
enrichment.
ISSUE: When a passenger jeepney covered by a certificate of public
convenience is sold to another who continues to operate it under the
same certificate of public convenience under the so-called kabit system,
and in the course thereof the vehicle meets an accident through the fault
of another vehicle, may the new owner sue for damages against the
erring vehicle? Otherwise stated, does the new owner have any legal
personality to bring the action, or is he the real party in interest in the suit,
despite the fact that he is not the registered owner under the certificate of
public convenience? YES.
HELD:
1. Petitioners attempt to illustrate that an affirmance of the appealed
decision could be supportive of the pernicious kabit system does not
persuade. Their labored efforts to demonstrate how the questioned
rulings of the courts a quo are diametrically opposed to the policy of
the law requiring operators of public utility vehicles to secure a
certificate of public convenience for their operation is quite
unavailing.
2. The kabit system is an arrangement whereby a person who has
been granted a certificate of public convenience allows other persons
who own motor vehicles to operate them under his license,
sometimes for a fee or percentage of the earnings. Although the
parties to such an agreement are not outrightly penalized by law, the
kabit system is invariably recognized as being contrary to public
policy and therefore void and inexistent under Art. 1409 of the Civil
Code.
3. IMPT: In the early case of Dizon v. Octavio, the Court explained that
one of the primary factors considered in the granting of a certificate of
public convenience for the business of public transportation is the
financial capacity of the holder of the license, so that liabilities arising
from accidents may be duly compensated. The kabit system renders
illusory such purpose and, worse, may still be availed of by the
grantee to escape civil liability caused by a negligent use of a vehicle
owned by another and operated under his license. If a registered
owner is allowed to escape liability by proving who the supposed
owner of the vehicle is, it would be easy for him to transfer the
subject vehicle to another who possesses no property with which to
respond financially for the damage done. Thus, for the safety of
passengers and the public who may have been wronged and
deceived through the baneful kabit system, the registered owner of
the vehicle is not allowed to prove that another person has become
the owner so that he may be thereby relieved of responsibility.
Subsequent cases affirm such basic doctrine.
4. IMPT: It would seem then that the thrust of the law in enjoining the
kabit system is not so much as to penalize the parties but to identify
the person upon whom responsibility may be fixed in case of an
accident with the end view of protecting the riding public. The policy
therefore loses its force if the public at large is not deceived, much
less involved.
5. CAB: In the present case it is at once apparent that the evil sought to
be prevented in enjoining the kabit system does not exist.
- First, neither of the parties to the pernicious kabit system is
being held liable for damages.
- Second, the case arose from the negligence of another vehicle
in using the public road to whom no representation, or
misrepresentation, as regards the ownership and operation of

6.

7.

8.

9.

10.

11.

12.

the passenger jeepney was made and to whom no such


representation, or misrepresentation, was necessary. Thus it
cannot be said that private respondent Gonzales and the
registered owner of the jeepney were in estoppel for leading
the public to believe that the jeepney belonged to the registered
owner.
- Third, the riding public was not bothered nor inconvenienced at
the very least by the illegal arrangement. On the contrary, it
was private respondent himself who had been wronged and
was seeking compensation for the damage done to him.
Certainly, it would be the height of inequity to deny him his
right.
CAB: In light of the foregoing, it is evident that private respondent
has the right to proceed against petitioners for the damage caused
on his passenger jeepney as well as on his business. Any effort then
to frustrate his claim of damages by the ingenuity with which
petitioners framed the issue should be discouraged, if not repelled.
In awarding damages for tortuous injury, it becomes the sole design
of the courts to provide for adequate compensation by putting the
plaintiff in the same financial position he was in prior to the tort. It is a
fundamental principle in the law on damages that a defendant cannot
be held liable in damages for more than the actual loss which he has
inflicted and that a plaintiff is entitled to no more than the just and
adequate compensation for the injury suffered. His recovery is, in the
absence of circumstances giving rise to an allowance of punitive
damages, limited to a fair compensation for the harm done. The law
will not put him in a position better than where he should be in had
not the wrong happened.
In the present case, petitioners insist that as the passenger jeepney
was purchased in 1982 for only P30,000.00 to award damages
considerably greater than this amount would be improper and
unjustified. Petitioners are at best reminded that indemnification for
damages comprehends not only the value of the loss suffered but
also that of the profits which the obligee failed to obtain. In other
words, indemnification for damages is not limited to damnum
emergens or actual loss but extends to lucrum cessans or the
amount of profit lost.
Had private respondent's jeepney not met an accident it could
reasonably be expected that it would have continued earning from
the business in which it was engaged. Private respondent avers that
he derives an average income of P300.00 per day from his
passenger jeepney and this earning was included in the award of
damages made by the trial court and upheld by the appeals court.
The award therefore of P236,000.00 as compensatory damages is
not beyond reason nor speculative as it is based on a reasonable
estimate of the total damage suffered by private respondent, i.e.
damage wrought upon his jeepney and the income lost from his
transportation business. Petitioners for their part did not offer any
substantive evidence to refute the estimate.
However, we are constrained to depart from the conclusion of the
lower courts that upon the award of compensatory damages legal
interest should be imposed beginning 22 July 1990, i.e. the date of
the accident. Upon the provisions of Art. 2213 of the Civil Code,
interest "cannot be recovered upon unliquidated claims or damages,
except when the demand can be established with reasonable
certainty." It is axiomatic that if the suit were for damages,
unliquidated and not known until definitely ascertained, assessed and
determined by the courts after proof, interest at the rate of six percent
(6%) per annum should be from the date the judgment of the court is
made (at which time the quantification of damages may be deemed
to be reasonably ascertained).
In this case, the matter was not a liquidated obligation as the
assessment of the damage on the vehicle was heavily debated upon
by the parties with private respondent's demand for P236,000.00
being refuted by petitioners who argue that they could have the
vehicle repaired easily for P20,000.00. In fine, the amount due
private respondent was not a liquidated account that was already
demandable and payable.
One last word. We have observed that private respondent left his
passenger jeepney by the roadside at the mercy of the elements.
Article 2203 of the Civil Code exhorts parties suffering from loss or
injury to exercise the diligence of a good father of a family to
minimize the damages resulting from the act or omission in question.
Page 6 of 62

One who is injured then by the wrongful or negligent act of another


should exercise reasonable care and diligence to minimize the
resulting damage. Anyway, he can recover from the wrongdoer
money lost in reasonable efforts to preserve the property injured and
for injuries incurred in attempting to prevent damage to it.
13. However we sadly note that in the present case petitioners failed to
offer in evidence the estimated amount of the damage caused by
private respondent's unconcern towards the damaged vehicle. It is
the burden of petitioners to show satisfactorily not only that the
injured party could have mitigated his damages but also the amount
thereof; failing in this regard, the amount of damages awarded
cannot be proportionately reduced.
DISPOSITIVE: WHEREFORE, the questioned Decision awarding private
respondent Donato Gonzales P236,000.00 with legal interest from 22 July
1990 as compensatory damages and P30,000.00 as attorney's fees is
MODIFIED. Interest at the rate of six percent (6%) per annum shall be
computed from the time the judgment of the lower court is made until the
finality of this Decision. If the adjudged principal and interest remain
unpaid thereafter, the interest shall be twelve percent (12%) per annum
computed from the time judgment becomes final and executory until it is
fully satisfied. Costs against petitioners. SO ORDERED.

Lita Enterprises v. IAC, 129 SCRA 79 (1984)


G.R. No. L-64693 April 27, 1984
LITA ENTERPRISES, INC., petitioner,
vs.
SECOND CIVIL CASES DIVISION, INTERMEDIATE APPELLATE
COURT, NICASIO M. OCAMPO and FRANCISCA P. GARCIA,
respondents.
ESCOLIN, J.:
DOCTRINE:
Kabit System system whereby a person who has been granted a
certificate of convenience allows another person who owns motors
vehicles to operate under such franchise for a fee;
Ex pacto illicito non oritur actio" [No action arises out of an illicit
bargain]. Having entered into an illegal contract, neither can seek relief
from the courts, and each must bear the consequences of his acts.
The defect of inexistence of a contract is permanent and incurable,
and cannot be cured by ratification or by prescription. Mere lapse of
time cannot give efficacy to contracts that are null void.
A Certificate of Public Convenience is a special privilege
conferred by the government. Abuse of this privilege by the grantees
thereof cannot be countenanced.
DIGEST:
1. Respondent Spouses purchased 5 Toyota Corona Standard cars to
be used as taxicabs; they had no franchise to operate taxicabs, so
they contracted with Petitioner (Lita Enterprises) for the use of the
latters Certificate of Public Convenience in consideration of an initial
payment of 1,000.00 and a monthly rental of 200.00 per taxicab unit;
the aforesaid cars were then registered in the name of Lita
Enterprises (Possession remained with Respondent Spouses).
2. One of the taxicabs driven by Petitioners employee, Emeterio Martin,
collided with a motorcycle whose driver died from the head injuries.
3. A criminal case was filed against the taxi driver Martin, while a civil
case for damages was instituted by heir of the victim against Lita
Enterprises.
4. RTC and CA: Ruled against Petitioner.
ISSUE: Whether Petitioner (Lita) is liable to the heir of the victim who died
as a result of the gross negligence of Respondent Spouses driver while
driving one private respondents taxicabs YES.
HELD: Petitioner is liable.
1. Parties operated under the "kabit system", whereby a person who
has been granted a Certificate of Convenience allows another person
who owns motors vehicles to operate under such franchise for a fee.
2. It is contrary to public policy and is void.

3. No action may arise out of an illicit bargain. It was flagrant error on


the part of the lower courts to have accorded the parties relief from
their predicament.
- Article 1409 CC: As a result, the court will not aid either party to
enforce an illegal contract, but will leave them both where it
finds them (in pari delicto rule)
- Art. 1412 CC: If the act in which the unlawful or forbidden
cause consists does not constitute a criminal offense, the
following rules shall be observed; (1) when the fault, is on the
part of both contracting parties, neither may recover what he
has given by virtue of the contract, or demand the performance
of the others undertaking.
x

FACTS:
1. Sometime in 1966, the spouses Nicasio M. Ocampo and Francisca
Garcia, herein private respondents, purchased in installment from the
Delta Motor Sales Corporation five (5) Toyota Corona Standard cars
to be used as taxicabs.
2. Since they had no franchise to operate taxicabs, they contracted with
petitioner Lita Enterprises, Inc., through its representative, Manuel
Concordia, for the use of the latter's certificate of public convenience
in consideration of an initial payment of P1,000.00 and a monthly
rental of P200.00 per taxicab unit. To effectuate the agreement, the
cars were registered in the name of petitioner Lita Enterprises, Inc,
Possession, however, remained with spouses Ocampo who operated
and maintained the same under the name Acme Taxi, petitioner's
trade name.
3. About a year later, on March 18, 1967, 1 of said taxicabs driven by
their employee, Emeterio Martin, collided with a motorcycle whose
driver, one Florante Galvez, died from the head injuries sustained
therefrom.
4. CFI: A criminal case was eventually filed against the driver Emeterio
Martin, while a civil case for damages was instituted by Rosita
Sebastian Vda. de Galvez, heir of the victim, against Lita Enterprises,
Inc., as registered owner of the taxicab in the latter case, Civil Case
No. 72067 of the Court of First Instance of Manila, petitioner Lita
Enterprises, Inc. was adjudged liable for damages in the amount of
P25,000.00 and P7,000.00 for attorney's fees.
- This decision having become final, a writ of execution was
issued. One of the vehicles of respondent spouses with Engine
No. 2R-914472 was levied upon and sold at public auction for
12,150.00 to one Sonnie Cortez, the highest bidder. Another
car with Engine No. 2R-915036 was likewise levied upon and
sold at public auction for P8,000.00 to a certain Mr. Lopez.
5. Thereafter, in March 1973, respondent Nicasio Ocampo decided to
register his taxicabs in his name. He requested the manager of
petitioner Lita Enterprises, Inc. to turn over the registration papers to
him, but the latter allegedly refused. Hence, he and his wife filed a
complaint against Lita Enterprises, Inc., Rosita Sebastian Vda. de
Galvez, Visayan Surety & Insurance Co. and the Sheriff of Manila for
reconveyance of motor vehicles with damages, docketed as Civil
Case No. 90988 of the Court of First Instance of Manila. Trial on the
merits ensued and on July 22, 1975, the said court rendered a
decision, the dispositive portion of which reads: WHEREFORE, the
complaint is hereby dismissed as far as defendants Rosita Sebastian
Vda. de Galvez, Visayan Surety & Insurance Company and the
Sheriff of Manila are concerned. Defendant Lita Enterprises, Inc., is
ordered to transfer the registration certificate of the 3 Toyota cars not
levied upon with Engine Nos. 2R-230026, 2R-688740 and
2R-585884 [Exhs. A, B, C and D] by executing a deed of conveyance
in favor of the plaintiff. Plaintiff is, however, ordered to pay Lita
Enterprises, Inc., the rentals in arrears for the certificate of
convenience from March 1973 up to May 1973 at the rate of P200 a
month per unit for the three cars. Petitioner Lita Enterprises, Inc.
moved for reconsideration of the decision, but the same was denied
by the court a quo on October 27, 1975. (p. 121, Ibid.)
6. CA: On appeal by petitioner, docketed as CA-G.R. No. 59157-R, the
Intermediate Appellate Court modified the decision by including as
part of its dispositive portion another paragraph, to wit: In the event
the condition of the 3 Toyota rears will no longer serve the purpose of
the deed of conveyance because of their deterioration, or because
Page 7 of 62

they are no longer serviceable, or because they are no longer


available, then Lita Enterprises, Inc. is ordered to pay the plaintiffs
their fair market value as of July 22, 1975.
ISSUES: Its first and second motions for reconsideration having been
denied, petitioner came to Us, praying that: 2. ... after legal proceedings,
decision be rendered or resolution be issued, reversing, annulling or
amending the decision of public respondent so that: (a) the additional
paragraph added by the public respondent to the DECISION of the lower
court (CFI) be deleted; (b) that private respondents be declared liable to
petitioner for whatever amount the latter has paid or was declared liable
(in Civil Case No. 72067) of the Court of First Instance of Manila to Rosita
Sebastian Vda. de Galvez, as heir of the victim Florante Galvez, who died
as a result ot the gross negligence of private respondents' driver while
driving one private respondents' taxicabs. (p. 39, Rollo.)
HELD:
1. Unquestionably, the parties herein operated under the "kabit system",
whereby a person who has been granted a certificate of convenience
allows another person who owns motors vehicles to operate under
such franchise for a fee.
2. A Certificate of Public Convenience is a special privilege conferred
by the government. Abuse of this privilege by the grantees thereof
cannot be countenanced. The "kabit system" has been Identified as
one of the root causes of the prevalence of graft and corruption in the
government transportation offices. In the words of Chief Justice
Makalintal, "this is a pernicious system that cannot be too severely
condemned. It constitutes an imposition upon the good faith of the
government.
3. Although not outrightly penalized as a criminal offense, the "kabit
system" is invariably recognized as being contrary to public policy
and, therefore, void and inexistent under Article 1409 of the Civil
Code, It is a fundamental principle that the court will not aid either
party to enforce an illegal contract, but will leave them both where it
finds them.
4. CAB: Upon this premise, it was flagrant error on the part of both the
trial and appellate courts to have accorded the parties relief from their
predicament. Article 1412 of the Civil Code denies them such aid. It
provides: ART. 1412. if the act in which the unlawful or forbidden
cause consists does not constitute a criminal offense, the following
rules shall be observed; (1) when the fault, is on the part of both
contracting parties, neither may recover what he has given by virtue
of the contract, or demand the performance of the other's
undertaking. The defect of inexistence of a contract is permanent and
incurable, and cannot be cured by ratification or by prescription. As
this Court said in Eugenio v. Perdido, "the mere lapse of time cannot
give efficacy to contracts that are null void."
5. The principle of in pari delicto is well known not only in this
jurisdiction but also in the United States where common law prevails.
Under American jurisdiction, the doctrine is stated thus: "The
proposition is universal that no action arises, in equity or at law, from
an illegal contract; no suit can be maintained for its specific
performance, or to recover the property agreed to be sold or
delivered, or damages for its property agreed to be sold or delivered,
or damages for its violation. The rule has sometimes been laid down
as though it was equally universal, that where the parties are in pari
delicto, no affirmative relief of any kind will be given to one against
the other." Although certain exceptions to the rule are provided by
law, We see no cogent reason why the full force of the rule should
not be applied in the instant case.
DISPOSITIVE: IAC decision annulled and set aside. SO ORDERED.

II. Breach of Contract


Acceptance

Fisher v. Yangco Steamship Company, et al., 31 Phil 1 (1915)


G.R. No. L-8095
March 31, 1915
F.C. FISHER, plaintiff,
vs.

YANGCO STEAMSHIP COMPANY, J.S. STANLEY, as Acting Collector of


Customs of the Philippine Islands, IGNACIO VILLAMOR, as AttorneyGeneral of the Philippine Islands, and W.H. BISHOP, as prosecuting
attorney of the city of Manila, respondents.
CARSON, J.:
DOCTRINE:
The provision of the Act (Act 98) which prescribes that, "No common
carrier ... shall, under any pretense whatsoever, fail or refuse to
receive for carriage ... to carry any person or property offering for
carriage," is NOT to be construed in its literal sense and without regard
to the context, so as to impose an imperative duty on all common
carriers to accept for carriage, and to carry all and any kind of freight
which may be offered for carriage without regard to the facilities which
they may have at their disposal.
We find nothing confiscatory or unreasonable in the conditions
imposed in the Philippine statute upon the business of common
carriers. Correctly construed they do not force him to engage in any
business against his will or to make use of his facilities in a manner or
for a purpose for which they are not reasonably adapted. It is only
when he offers his facilities as a common carrier to the public for hire,
that the statute steps in and prescribes that he must treat all alike, that
he may not pick and choose which customer he will serve, and,
specifically, that he shall not make any undue or unreasonable
preferences or discriminations whatsoever to the prejudice not only of
any person or locality but also of any particular kind of traffic.
The legislator having enacted a regulation prohibiting common carriers
from giving unnecessary or unreasonable preferences or advantages
to any particular kind of traffic or subjecting any particular kind of traffic
to any undue or unreasonable prejudice or discrimination whatsoever,
it is clear that whatever may have been the rule at the common law,
common carriers in this jurisdiction cannot lawfully decline to accept a
particular class of goods for carriage, to the prejudice of the traffic in
those goods, (UNLESS) it appears that for some sufficient reason the
discrimination against the traffic in such goods is reasonable and
necessary. Mere whim or prejudice will not suffice. The grounds for the
discrimination must be substantial ones, such as will justify the courts
in holding the discrimination to have been reasonable and necessary
under all circumstances of the case.
DIGEST:
1. Respondent Company adopted a resolution expressly declaring that
as a common carrier it shall not carry dynamite, powder, or other
explosives.
2. The Acting Collector of Customs demanded Respondent Company to
accept and carry explosives and threatened not only to (1) suspend
the issuance of the necessary clearance of the Respondent
Company but also to (2) institute proceedings under Act 98, should it
refuse.
3. Notwithstanding demands, Plaintiff Stockholder and the Respondent
Company refused to carry the explosives.
- Plaintiff contended that the statute deprives him of his liberty by
compelling him to engage in business against his will.
ISSUE: Whether the refusal of the Board of Directors of Respondent
Company to carry explosives is lawful NO.
HELD: Demurrer must be sustained. Plaintiff has NOT shown why
discrimination is reasonable and necessary.
1. Common carriers in this jurisdiction cannot lawfully decline to accept
a particular class of goods (UNLESS) it appears that for some
sufficient reason the discrimination for such is reasonable and
necessary.
- CAB: Board has not met those conditions.
2. The nature of the business of a common carrier as a public
employment is such that it is within the power of the State to impose
such just regulations in the interest of the public as the legislator may
deem proper.
3. In construing Act 98 for the alleged violation, the test is whether the
refusal of YSC to carry the explosives without qualification or
conditions may have the effect of subjecting any person or locality or
Page 8 of 62

the traffic is such explosives to an unduly unreasonable or


unnecessary prejudice or discrimination.
x

FACTS:
1. Plaintiff (FC Fisher) is a stockholder in the Respondent Company
(Yangco Steamship Company), the owner of a large number of steam
vessels, duly licensed to engage in the coastwise trade of the
Philippine Islands
2. The directors of the Respondent Company adopted a resolution
which was ratified and affirmed by the shareholders of the company,
"expressly declaring and providing that the classes of merchandise to
be carried by the company in its business as a common carrier do
not include dynamite, powder or other explosives, and expressly
prohibiting the officers, agents and servants of the company from
offering to carry, accepting for carriage said dynamite, powder or
other explosives;"
3. Respondent Acting Collector of Customs demanded and required of
the company the acceptance and carriage of such explosives; that he
has refused and suspended the issuance of the necessary clearance
documents of the vessels of the company unless and until the
company consents to accept such explosives for carriag.
4. Plaintiff Stockholder is advised and believes that should the company
decline to accept such explosives for carriage, the Respondent
Attorney-General of the Philippine Islands and the Respondent
prosecuting attorney of the city of Manila intend to institute
proceedings under the penal provisions of sections 4, 5, and 6 of Act
No. 98 of the Philippine Commission against the company, its
managers, agents and servants, to enforce the requirements of the
Acting Collector of Customs as to the acceptance of such explosives
for carriage.
5. Notwithstanding the demands of the Plaintiff Stockholder, the
manager, agents and servants of the company decline and refuse to
cease the carriage of such explosives, on the ground that by reason
of the severity of the penalties with which they are threatened upon
failure to carry such explosives, they cannot subject themselves to
"the ruinous consequences which would inevitably result" from failure
on their part to obey the demands and requirements of the Acting
Collector of Customs as to the acceptance for carriage of explosives;
6. Plaintiff Stockholder believes that the Acting Collector of Customs
erroneously construes the provisions of Act No. 98 in holding that
they require the company to accept such explosives for carriage
notwithstanding the above mentioned resolution of the directors and
stockholders of the company, and that if the Act does in fact require
the company to carry such explosives it is to that extent
unconstitutional and void;
7. Notwithstanding this belief of complainant as to the true meaning of
the Act, the questions involved cannot be raised by the refusal of the
company or its agents to comply with the demands of the Acting
Collector of Customs, without the risk of irreparable loss and damage
resulting from his refusal to facilitate the documentation of the
company's vessels, and without assuming the company to test the
questions involved by refusing to accept such explosives for carriage.
8. The prayer of the complaint is as follows: Wherefore your petitioner
prays to this honorable court as follows:
- First. That to the due hearing of the above entitled action be
issued a writ of prohibition perpetually restraining the
respondent Yangco Steamship Company, its appraisers,
agents, servants or other representatives from accepting to
carry and from carrying, in steamers of said company
dynamite, powder or other explosive substance, in accordance
with the resolution of the board of directors and of the
shareholders of said company.
- Second. That a writ of prohibition be issued perpetually
enjoining the respondent J.S. Stanley as Acting Collector of
Customs of the Philippine Islands, his successors, deputies,
servants or other representatives, from obligating the said
Yangco Steamship Company, by any means whatever, to carry
dynamite, powder or other explosive substance.
- Third. That a writ of prohibition be issued perpetually enjoining
the respondent Ignacio Villamor as Attorney-General of the
Philippine Islands, and W.H. Bishop as prosecuting attorney of

the city of Manila, their deputies representatives or employees,


from accusing the said Yangco Steamship Company, its
officers, agents or servants, of the violation of Act No. 98 by
reason of the failure or omission of the said company to accept
for carriage out to carry dynamite powder or other explosive.
Fourth. That the petitioner be granted such other remedy as
may be meet and proper.

ISSUE: Whether the refusal of the owners and officers of a steam vessel,
duly licensed to engage in the coastwise trade of the Philippine Islands
and engaged in that trade as a common carrier, to accept for carriage
"dynamite, powder or other explosives" from any and all shippers who
may offer such explosives for carriage can be held to be a lawful act
without regard to any question as to the conditions under which such
explosives are offered to carriage, or as to the suitableness of the vessel
for the transportation of such explosives, or as to the possibility that the
refusal to accept such articles of commerce in a particular case may have
the effect of subjecting any person or locality or the traffic in such
explosives to an undue, unreasonable or unnecessary prejudice or
discrimination.
HELD:
1. To this complaint the respondents demurred, and we are of opinion
that the demurrer must be sustained, on the ground that the
complaint does not set forth facts sufficient to constitute a cause of
action.
2. It will readily be seen that plaintiff seeks in these proceedings to
enjoin the steamship company from accepting for carriage on any of
its vessels, dynamite, powder or other explosives, under any
conditions whatsoever; to prohibit the Collector of Customs and the
prosecuting officers of the government from all attempts to compel
the company to accept such explosives for carriage on any of its
vessels under any conditions whatsoever; and to prohibit these
officials from any attempt to invoke the penal provisions of Act No.
98, in any case of a refusal by the company or its officers so to do;
and this without regard to the conditions as to safety and so forth
under which such explosives are offered for carriage, and without
regard also to any question as to the suitableness for the
transportation of such explosives of the particular vessel upon which
the shipper offers them for carriage; and further without regard to any
question as to whether such conduct on the part of the steamship
company and its officers involves in any instance an undue,
unnecessary or unreasonable discrimination to the prejudice of any
person, locality or particular kind of traffic.
3. There are no allegations in the complaint that for some special and
sufficient reasons all or indeed any of the company's vessels are
unsuitable for the business of transporting explosives; or that
shippers have declined or will in future decline to comply with such
reasonable regulations and to take such reasonable precautions as
may be necessary and proper to secure the safety of the vessels of
the company in transporting such explosives. Indeed the contention
of petitioner is that a common carrier in the Philippine Islands may
decline to accept for carriage any shipment of merchandise of a class
which it expressly or impliedly declines to accept from all shippers
alike, because as he contends "the duty of a common carrier to carry
for all who offer arises from the public profession he has made, and
limited by it."
4. In support of this contention counsel cites for a number of English
and American authorities, discussing and applying the doctrine of the
common law with reference to common carriers. But it is
unnecessary now to decide whether, in the absence of statute, the
principles on which the American and English cases were decided
would be applicable in this jurisdiction. The duties and liabilities of
common carriers in this jurisdiction are defined and fully set forth in
Act No. 98 of the Philippine Commission, and until and unless that
statute be declared invalid or unconstitutional, we are bound by its
provisions.
5. Sections 2, 3 and 4 of the Act are as follows:
- SEC. 2. It shall be unlawful for any common carrier engaged in
the transportation of passengers or property as above set forth
to make or give any unnecessary or unreasonable preference
or advantage to any particular person, company, firm,
corporation or locality, or any particular kind of traffic in any
Page 9 of 62

6.

7.

8.

9.

10.

11.

respect whatsoever, or to subject any particular person,


company, firm, corporation or locality, or any particular kind of
traffic, to undue or unreasonable prejudice or discrimination
whatsoever, and such unjust preference or discrimination is
also hereby prohibited and declared to be unlawful.
- SEC. 3. No common carrier engaged in the carriage of
passengers or property as aforesaid shall, under any pretense
whatsoever, fail or refuse to receive for carriage, and as
promptly as it is able to do so without discrimination, to carry
any person or property offering for carriage, and in the order in
which such persons or property are offered for carriage, nor
shall any such common carrier enter into any arrangement,
contract or agreement with any other person or corporation
whereby the latter is given an exclusive or preferential or
monopolize the carriage any class or kind of property to the
exclusion or partial exclusion of any other person or persons,
and the entering into any such arrangement, contract or
agreement, under any form or pretense whatsoever, is hereby
prohibited and declared to be unlawful.
- SEC. 4. Any willful violation of the provisions of this Act by any
common carrier engaged in the transportation of passengers or
property as hereinbefore set forth is hereby declared to be
punishable by a fine not exceeding five thousand dollars money
of the United States, or by imprisonment not exceeding two
years, or both, within the discretion of the court.
The validity of this Act has been questioned on various grounds, and
it is vigorously contended that in so far as it imposes any obligation
on a common carrier to accept for carriage merchandise of a class
which he makes no public profession to carry, or which he has
expressly or impliedly announced his intention to decline to accept for
carriage from all shippers alike, it is ultra vires, unconstitutional and
void.
We may dismiss without extended discussion any argument or
contention as to the invalidity of the statute based on alleged
absurdities inherent in its provisions or on alleged unreasonable or
impossible requirements which may be read into it by a strained
construction of its terms.
IMPT: We agree with counsel for petitioner that the provision of the
Act which prescribes that, "No common carrier ... shall, under any
pretense whatsoever, fail or refuse to receive for carriage ... to carry
any person or property offering for carriage," is not to be construed in
its literal sense and without regard to the context, so as to impose an
imperative duty on all common carriers to accept for carriage, and to
carry all and any kind of freight which may be offered for carriage
without regard to the facilities which they may have at their disposal.
The legislator could not have intended and did not intend to prescribe
that a common carrier running passenger automobiles for hire must
transport coal in his machines; nor that the owner of a tank steamer,
expressly constructed in small watertight compartments for the
carriage of crude oil must accept common carrier must accept and
carry contraband articles, such as opium, morphine, cocaine, or the
like, the mere possession of which is declared to be a criminal
offense; nor that common carriers must accept eggs offered for
transportation in paper parcels or any merchandise whatever do
defectively packed as to entail upon the company unreasonable and
unnecessary care or risks.
IMPT: Read in connection with its context this, as well as all the other
mandatory and prohibitory provisions of the statute, was clearly
intended merely to forbid failures or refusals to receive persons or
property for carriage involving any "unnecessary or unreasonable
preference or advantage to any particular person, company, firm,
corporation, or locality, or any particular kind of traffic in any respect
whatsoever," or which would "subject any particular person,
company, firm, corporation or locality, or any particular kind of traffic
to any undue or unreasonable prejudice or discrimination
whatsoever."
The question, then, of construing and applying the statute, in cases
of alleged violations of its provisions, always involves a consideration
as to whether the acts complained of had the effect of making or
giving an "unreasonable or unnecessary preference or advantage" to
any person, locality or particular kind of traffic, or of subjecting any
person, locality, or particular kind of traffic to any undue or
unreasonable prejudice or discrimination. It is very clear therefore

12.

13.

14.

15.

16.

that the language of the statute itself refutes any contention as to its
invalidity based on the alleged unreasonableness of its mandatory or
prohibitory provisions.
So also we may dismiss without much discussion the contentions as
to the invalidity of the statute, which are based on the alleged
excessive severity of the penalties prescribed for violation of its
provisions. Upon general principles it is peculiarly and exclusively
within the province of the legislator to prescribe the pains and
penalties which may be imposed upon persons convicted of
violations of the laws in force within his territorial jurisdiction. With the
exercise of his discretion in this regard where it is alleged that
excessive fines or cruel and unusual punishments have been
prescribed, and even in such cases the courts will not presume to
interfere in the absence of the clearest and most convincing
argument and proof in support of such contentions. (Weems vs.
United States, 217 U.S., 349; U.S. vs. Pico, 18 Phil. Rep., 386.) We
need hardly add that there is no ground upon which to rest a
contention that the penalties prescribed in the statute under
consideration are either excessive or cruel and unusual, in the sense
in which these terms are used in the organic legislation in force in the
Philippine Islands.
But it is contended that on account of the penalties prescribed the
statute should be held invalid upon the principles announced in Ex
parte Young (209 U.S., 123, 147, 148); Cotting vs. Goddard (183
U.S., 79, 102); Mercantile Trust Co. vs. Texas Co. (51 Fed., 529);
Louisville Ry. vs. McCord (103 Fed., 216); Cons. Gas Co. vs. Mayer
(416 Fed., 150). We are satisfied however that the reasoning of those
cases is not applicable to the statute under consideration. The
principles announced in those decisions are fairly indicated in the
following citations found in petitioner's brief: But when the legislature,
in an effort to prevent any inquiry of the validity of a particular statute,
so burdens any challenge thereof in the courts that the party affected
is necessarily constrained to submit rather than take the chances of
the penalties imposed, then it becomes a serious question whether
the party is not deprived of the equal protection of the laws. (Cotting
vs. Goddard, 183 U. S., 79, 102.)
It may therefore be said that when the penalties for disobedience are
by fines so enormous and imprisonment so severe as to intimidate
the company and its officers from resorting to the courts to test the
validity of the legislation, the result is the same as if the law in terms
prohibited the company from seeking judicial construction of laws
which deeply affect its rights.
It is urged that there is no principle upon which to base the claim that
a person is entitled to disobey a statute at least once, for the purpose
of testing its validity, without subjecting himself to the penalties for
disobedience provided by the statute in case it is valid. This is not an
accurate statement of the case. Ordinarily a law creating offenses in
the nature of misdemeanors or felonies relates to a subject over
which the jurisdiction of the legislature is complete in any event. In
the case, however, of the establishment of certain rates without any
hearing, the validity of such rates necessarily depends upon whether
they are high enough to permit at least some return upon the
investment (how much it is not now necessary to state), and an
inquiry as to that fact is a proper subject of judicial investigation. If it
turns out that the rates are too low for that purpose, then they are
illegal. Now, to impose upon a party interested the burden of
obtaining a judicial decision of such a question (no prior hearing
having been given) only upon the condition that, if unsuccessful, he
must suffer imprisonment and pay fines, as provided in these acts, is,
in effect, to close up all approaches to the courts, and thus prevent
any hearing upon the question whether the rates as provided by the
acts are not too low, and therefore invalid. The distinction is obvious
between a case where the validity of the act depends upon the
existence of a fact which can be determined only after investigation
of a very complicated and technical character, and the ordinary case
of a statute upon a subject requiring no such investigation, and over
which the jurisdiction of the legislature is complete in any event.
We hold, therefore, that the provisions of the acts relating to the
enforcement of the rates, either for freight or passengers, by
imposing such enormous fines and possible imprisonment as a result
of an unsuccessful effort to test the validity of the laws themselves,
are unconstitutional on their face, without regard to the question of
Page 10 of 62

the insufficiency of those rates. (Ex parte Young, 209 U.S., 123 147,
148.)
17. An examination of the general provisions of our statute, of the
circumstances under which it was enacted, the mischief which it
sought to remedy and of the nature of the penalties prescribed for
violations of its terms convinces us that, unlike the statutes under
consideration in the above cited cases, its enactment involved no
attempt to prevent common carriers "from resorting to the courts to
test the validity of the legislation;" no "effort to prevent any inquiry" as
to its validity. It imposes no arbitrary obligation upon the company to
do or to refrain from doing anything. It makes no attempt to compel
such carriers to do business at a fixed or arbitrarily designated rate,
at the risk of separate criminal prosecutions for every demand of a
higher or a different rate. Its penalties can be imposed only upon
proof of "unreasonable," "unnecessary" and "unjust" discriminations,
and range from a maximum which is certainly not excessive for
willful, deliberate and contumacious violations of its provisions by a
great and powerful corporation, to a minimum which may be a merely
nominal fine. With so wide a range of discretion for a contention on
the part of any common carrier that it or its officers are "intimidated
from resorting to the courts to test the validity" of the provisions of the
statute prohibiting such "unreasonable," "unnecessary" and "unjust"
discriminations, or to test in any particular case whether a given
course of conduct does in fact involve such discrimination. We will
presume, for the purpose of declaring the statute invalid, that there is
so real a danger that the Courts of First Instance and this court on
appeal will abuse the discretion thus conferred upon us, as to
intimidate any common carrier, acting in good faith, from resorting to
the courts to test the validity of the statute. Legislative enactments,
penalizing unreasonable discriminations, unreasonable restraints of
trade, and unreasonable conduct in various forms of human activity
are so familiar and have been so frequently sustained in the courts,
as to render extended discussion unnecessary to refute any
contention as to the invalidity of the statute under consideration,
merely it imposes upon the carrier the obligation of adopting one of
various courses of conduct open to it, at the risk of incurring a
prescribed penalty in the event that the course of conduct actually
adopted by it should be held to have involved an unreasonable,
unnecessary or unjust discrimination. Applying the test announced in
Ex parte Young, supra, it will be seen that the validity of the Act does
not depend upon "the existence of a fact which can be determined
only after investigation of a very complicated and technical
character," and that "the jurisdiction of the legislature" over the
subject with which the statute deals "is complete in any event." There
can be no real question as to the plenary power of the legislature to
prohibit and to penalize the making of undue, unreasonable and
unjust discriminations by common carriers to the prejudice of any
person, locality or particular kind of traffic. (See Munn vs. Illinois, 94
U.S., 113, and other cases hereinafter cited in support of this
proposition.)
18. Petitioner: Counsel for petitioner contends also that the statute, if
construed so as to deny the right of the steamship company to elect
at will whether or not it will engage in a particular business, such as
that of carrying explosives, is unconstitutional "because it is a
confiscation of property, a taking of the carrier's property without due
process of law," and because it deprives him of his liberty by
compelling him to engage in business against his will. The argument
continues as follows:
- To require of a carrier, as a condition to his continuing in said
business, that he must carry anything and every thing is to
render useless the facilities he may have for the carriage of
certain lines of freight. It would be almost as complete a
confiscation of such facilities as if the same were destroyed.
Their value as a means of livelihood would be utterly taken
away. The law is a prohibition to him to continue in business;
the alternative is to get out or to go into some other business
the same alternative as was offered in the case of the Chicago
& N.W. Ry. vs. Dey (35 Fed. Rep., 866, 880), and which was
there commented on as follows: "Whatever of force there may
be in such arguments, as applied to mere personal property
capable of removal and use elsewhere, or in other business, it
is wholly without force as against railroad corporations, so large
a proportion of whose investment is in the soil and fixtures

appertaining thereto, which cannot be removed. For a


government, whether that government be a single sovereign or
one of the majority, to say to an individual who has invested his
means in so laudable an enterprise as the construction of a
railroad, one which tends so much to the wealth and prosperity
of the community, that, if he finds that the rates imposed will
cause him to do business at a loss, he may quit business, and
abandon that road, is the very irony of despotism. Apples of
Sodom were fruit of joy in comparison. Reading, as I do, in the
preamble of the Federal Constitution, that it was ordained to
"establish justice," I can never believe that it is within the
property of an individual invested in and used for a purpose in
which even the Argus eyes of the police power can see nothing
injurious to public morals, public health, or the general welfare.
I read also in the first section of the bill of rights of this state
that "all men are by nature free and equal, and have certain
inalienable rights, among which are those of enjoying and
defending life and liberty, acquiring, possessing, and protecting
property, and pursuing and obtaining safety and happiness;"
and I know that, while that remains as the supreme law of the
state, no legislature can directly or indirectly lay its withering or
destroying hand on a single dollar invested in the legitimate
business of transportation." (Chicago & N.W. Ry. vs. Dey, 35
Fed. Rep., 866, 880.)
19. IMPT/CAB: It is manifest, however, that this contention is directed
against a construction of the statute, which, as we have said, is not
warranted by its terms. As we have already indicated, the statute
does not "require of a carrier, as a condition to his continuing in said
business, that he must carry anything and everything," and thereby
"render useless the facilities he may have for the carriage of certain
lines of freight." It merely forbids failures or refusals to receive
persons or property for carriage which have the effect of giving an
"unreasonable or unnecessary preference or advantage" to any
person, locality or particular kind of traffic, or of subjecting any
person, locality or particular kind of traffic to any undue or
unreasonable prejudice or discrimination.
20. Petitioner: Counsel expressly admits that the statute, "as a
prohibition against discrimination is a fair, reasonable and valid
exercise of government," and that "it is necessary and proper that
such discrimination be prohibited and prevented," but he contends
that "on the other hand there is no reasonable warrant nor valid
excuse for depriving a person of his liberty by requiring him to
engage in business against his will. If he has a rolling boat,
unsuitable and unprofitable for passenger trade, he may devote it to
lumber carrying. To prohibit him from using it unless it is fitted out
with doctors and stewards and staterooms to carry passengers would
be an invalid confiscation of this property. A carrier may limit his
business to the branches thereof that suit his convenience. If his
wagon be old, or the route dangerous, he may avoid liability for loss
of passengers' lives and limbs by carrying freight only. If his vehicles
require expensive pneumatic tires, unsuitable for freight
transportation, ha may nevertheless carry passengers. The only
limitation upon his action that it is competent for the governing
authority to impose is to require him to treat all alike. His limitations
must apply to all, and they must be established limitations. He cannot
refuse to carry a case of red jusi on the ground that he has carried for
others only jusi that he was green, or blue, or black. But he can
refuse to carry red jusi, if he has publicly professed such a limitation
upon his business and held himself out as unwilling to carry the same
for anyone."
21. CAB: To this it is sufficient answer to say that there is nothing in the
statute which would deprive any person of his liberty "by requiring
him to engage in business against his will." The prohibitions of the
statute against undue, unnecessary or unreasonable regulations
which the legislator has seen fit to prescribe for the conduct of the
business in which the carrier is engaged of his own free will and
accord. In so far as the self-imposed limitations by the carrier upon
the business conducted by him, in the various examples given by
counsel, do not involve an unreasonable or unnecessary
discrimination the statute would not control his action in any wise
whatever. It operates only in cases involving such unreasonable or
unnecessary preferences or discriminations. Thus in the hypothetical
case suggested by the petitioner, a carrier engaged in the carriage of
Page 11 of 62

22.

23.

24.

25.

26.

green, blue or black jusi, and duly equipped therefor would manifestly
be guilty of "giving an unnecessary and unreasonable preference to a
particular kind of traffic" and of subjecting to "an undue and
reasonable prejudice a particular kind of traffic," should he decline to
carry red jusi, to the prejudice of a particular shipper or of those
engaged in the manufacture of that kind of jusi, basing his refusal on
the ground of "mere whim or caprice" or of mere personal
convenience. So a public carrier of passengers would not be
permitted under this statute to absolve himself from liability for a
refusal to carry a Chinaman, a Spaniard, an American, a Filipino, or a
mestizo by proof that from "mere whim or caprice or personal
scruple," or to suit his own convenience, or in the hope of increasing
his business and thus making larger profits, he had publicly
announced his intention not to carry one or other of these classes of
passengers.
IMPT: The nature of the business of a common carrier as a public
employment is such that it is clearly within the power of the state to
impose such just and reasonable regulations thereon in the interest
of the public as the legislator may deem proper. Of course such
regulations must not have the effect of depriving an owner of his
property without due process of law, nor of confiscating or
appropriating private property without just compensation, nor of
limiting or prescribing irrevocably vested rights or privileges lawfully
acquired under a charter or franchise. But aside from such
constitutional limitations, the determination of the nature and extent
of the regulations which should be prescribed rests in the hands of
the legislator.
IMPT: Common carriers exercise a sort of public office, and have
duties to perform in which the public is interested. Their business is,
therefore, affected with a public interest, and is subject of public
regulation. (New Jersey Steam Nav. Co. vs. Merchants Bank, 6 How.,
344, 382; Munn vs. Illinois, 94 U.S., 113, 130.) Indeed, this right of
regulation is so far beyond question that it is well settled that the
power of the state to exercise legislative control over railroad
companies and other carriers "in all respects necessary to protect the
public against danger, injustice and oppression" may be exercised
through boards of commissioners. (New York etc. R. Co. vs. Bristol,
151 U.S., 556, 571; Connecticut etc. R. Co. vs. Woodruff, 153 U.S.,
689.)
Regulations limiting of passengers the number of passengers that
may be carried in a particular vehicle or steam vessel, or forbidding
the loading of a vessel beyond a certain point, or prescribing the
number and qualifications of the personnel in the employ of a
common carrier, or forbidding unjust discrimination as to rates, all
tend to limit and restrict his liberty and to control to some degree the
free exercise of his discretion in the conduct of his business. But
since the Granger cases were decided by the Supreme Court of the
United States no one questions the power of the legislator to
prescribe such reasonable regulations upon property clothed with a
public interest as he may deem expedient or necessary to protect the
public against danger, injustice or oppression. (Munn vs. Illinois, 94
U.S., 113, 130; Chicago etc. R. Co. vs. Cutts, 94 U.S., 155; Budd vs.
New York, 143 U.S., 517; Cotting vs. Goddard, 183 U.S., 79.)
IMPT: The right to enter the public employment as a common carrier
and to offer one's services to the public for hire does not carry with it
the right to conduct that business as one pleases, without regard to
the interest of the public and free from such reasonable and just
regulations as may be prescribed for the protection of the public from
the reckless or careless indifference of the carrier as to the public
welfare and for the prevention of unjust and unreasonable
discrimination of any kind whatsoever in the performance of the
carrier's duties as a servant of the public.
Business of certain kinds, including the business of a common
carrier, holds such a peculiar relation to the public interest that there
is superinduced upon it the right of public regulation. (Budd vs. New
York, 143 U.S., 517, 533.) When private property is "affected with a
public interest it ceases to be juris privati only." Property becomes
clothed with a public interest when used in a manner to make it of
public consequence and affect the community at large. "When,
therefore, one devotes his property to a use in which the public has
an interest, he, in effect, grants to the public an interest in that use,
and must submit to be controlled by the public for the common good,
to the extent of the interest he has thus created. He may withdraw his

27.

28.

29.

30.

31.

grant by discontinuing the use, but so long as he maintains the use


he must submit to control." (Munn vs. Illinois, 94 U.S., 113; Georgia
R. & Bkg. Co. vs. Smith, 128 U.S., 174; Budd vs. New York, 143
U.S., 517; Louisville etc. Ry. Co. vs. Kentucky, 161 U.S., 677, 695.)
Of course this power to regulate is not a power to destroy, and
limitation is not the equivalent of confiscation. Under pretense of
regulating fares and freight the state can not require a railroad
corporation to carry persons or property without reward. Nor can it do
that which in law amounts to a taking of private property for public
use without just compensation, or without due process of law.
(Chicago etc. R. Co. vs. Minnesota, 134 U.S., 418; Minneapolis
Eastern R. Co. vs. Minnesota, 134 U.S., 467.) But the judiciary ought
not to interfere with regulations established and palpably
unreasonable as to make their enforcement equivalent to the taking
of property for public use without such compensation as under all the
circumstances is just both to the owner and to the public, that is,
judicial interference should never occur unless the case presents,
clearly and beyond all doubt, such a flagrant attack upon the rights of
property under the guise of regulations as to compel the court to say
that the regulation in question will have the effect to deny just
compensation for private property taken for the public use. (Chicago
etc. R. Co. vs. Wellman, 143 U.S., 339; Smyth vs. Ames, 169 U.S.,
466, 524; Henderson Bridge Co. vs. Henderson City, 173 U.S., 592,
614.)
Under the common law of England it was early recognized that
common carriers owe to the public the duty of carrying indifferently
for all who may employ them, and in the order in which application is
made, and without discrimination as to terms. True, they were
allowed to restrict their business so as to exclude particular classes
of goods, but as to the kinds of property which the carrier was in the
habit of carrying in the prosecution of his business he was bound to
serve all customers alike (State vs. Cincinnati etc. R. Co., 47 Ohio
St., 130, 134, 138; Louisville etc. Ry. Co. vs. Quezon City Coal Co.,
13 Ky. L. Rep., 832); and it is to be observed in passing that these
common law rules are themselves regulations controlling, limiting and
prescribing the conditions under which common carriers were
permitted to conduct their business. (Munn vs. Illinois, 94 U. S., 113,
133.)
It was found, in the course of time, that the correction of abuses
which had grown up with the enormously increasing business of
common carriers necessitated the adoption of statutory regulations
controlling the business of common carriers, and imposing severe
and drastic penalties for violations of their terms. In England, the
Railway Clauses Consolidation Act was enacted in 1845, the Railway
and Canal Traffic Act in 1854, and since the passage of those Acts
much additional legislation has been adopted tending to limit and
control the conduct of their business by common carriers. In the
United States, the business of common carriers has been subjected
to a great variety of statutory regulations. Among others Congress
enacted "The Interstate Commerce Act" (1887) and its amendments,
and the Elkins Act as amended (1906); and most if not all of the
States of the Union have adopted similar legislation regulating the
business of common carriers within their respective jurisdictions.
Unending litigation has arisen under these statutes and their
amendments, but nowhere has the right of the state to prescribe just
and reasonable regulations controlling and limiting the conduct of the
business of common carriers in the public interest and for the general
welfare been successfully challenged, though of course there has
been wide divergence of opinion as to the reasonableness, the
validity and legality of many of the regulations actually adopted.
The power of the Philippine legislator to prohibit and to penalize all
and any unnecessary or unreasonable discriminations by common
carriers may be maintained upon the same reasoning which justified
the enactment by the Parliament of England and the Congress of the
United States of the above mentioned statutes prohibiting and
penalizing the granting of certain preferences and discriminations in
those countries.
CAB: As we have said before, we find nothing confiscatory or
unreasonable in the conditions imposed in the Philippine statute upon
the business of common carriers. Correctly construed they do not
force him to engage in any business against his will or to make use of
his facilities in a manner or for a purpose for which they are not
reasonably adapted. It is only when he offers his facilities as a
Page 12 of 62

32.

33.

34.

35.

36.

37.

common carrier to the public for hire, that the statute steps in and
prescribes that he must treat all alike, that he may not pick and
choose which customer he will serve, and, specifically, that he shall
not make any undue or unreasonable preferences or discriminations
whatsoever to the prejudice not only of any person or locality but also
of any particular kind of traffic.
IMPT: The legislator having enacted a regulation prohibiting common
carriers from giving unnecessary or unreasonable preferences or
advantages to any particular kind of traffic or subjecting any particular
kind of traffic to any undue or unreasonable prejudice or
discrimination whatsoever, it is clear that whatever may have been
the rule at the common law, common carriers in this jurisdiction
cannot lawfully decline to accept a particular class of goods for
carriage, to the prejudice of the traffic in those goods, (UNLESS) it
appears that for some sufficient reason the discrimination against the
traffic in such goods is reasonable and necessary. Mere whim or
prejudice will not suffice. The grounds for the discrimination must be
substantial ones, such as will justify the courts in holding the
discrimination to have been reasonable and necessary under all
circumstances of the case.
CAB: The prayer of the petition in the case at bar cannot be granted
unless we hold that the refusal of the defendant steamship company
to accept for carriage on any of its vessels "dynamite, gunpowder or
other explosives" would in no instance involve a violation of the
provisions of this statute. There can be little doubt, however, that
cases may and will arise wherein the refusal of a vessel "engaged in
the coastwise trade of the Philippine Islands as a common carrier" to
accept such explosives for carriage would subject some person,
company, firm or corporation, or locality, or particular kind of traffic to
a certain prejudice or discrimination. Indeed it cannot be doubted that
the refusal of a "steamship company, the owner of a large number of
vessels" engaged in that trade to receive for carriage any such
explosives on any of its vessels would subject the traffic in such
explosives to a manifest prejudice and discrimination. The only
question to be determined therefore is whether such prejudice or
discrimination might in any case prove to be undue, unnecessary or
unreasonable.
This of course is, in each case, a question of fact, and we are of the
opinion that the facts alleged in the complaint are not sufficient to
sustain a finding in favor of the contentions of the petitioner. It is not
alleged in the complaint that "dynamite, gunpowder and other
explosives" can in no event be transported with reasonable safety on
board steam vessels engaged in the business of common carriers. It
is not alleged that all, or indeed any of the defendant steamship
company's vessels are unsuited for the carriage of such explosives. It
is not alleged that the nature of the business in which the steamship
company is engaged is such as to preclude a finding that a refusal to
accept such explosives on any of its vessels would subject the traffic
in such explosives to an undue and unreasonable prejudice and
discrimination.
Plaintiff's contention in this regard is as follows: In the present case,
the respondent company has expressly and publicly renounced the
carriage of explosives, and expressly excluded the same terms from
the business it conducts. This in itself were sufficient, even though
such exclusion of explosives were based on no other ground than the
mere whim, caprice or personal scruple of the carrier. It is
unnecessary, however, to indulge in academic discussion of a moot
question, for the decision not a carry explosives rests on substantial
grounds which are self-evident.
We think however that the answer to the question whether such a
refusal to carry explosives involves an unnecessary or unreasonable
preference or advantage to any person, locality or particular kind of
traffic or subjects any person, locality or particular to traffic to an
undue or unreasonable prejudice and discrimination is by no means
"self-evident," and that it is a question of fact to be determined by the
particular circumstances of each case.
CAB: The words "dynamite, powder or other explosives" are broad
enough to include matches, and other articles of like nature, and may
fairly be held to include also kerosene oil, gasoline and similar
products of a highly inflammable and explosive character. Many of
these articles of merchandise are in the nature of necessities in any
country open to modern progress and advancement. We are not fully
advised as to the methods of transportation by which they are made

commercially available throughout the world, but certain it is that


dynamite, gunpowder, matches, kerosene oil and gasoline are
transported on many vessels sailing the high seas. Indeed it is a
matter of common knowledge that common carriers throughout the
world transport enormous quantities of these explosives, on both land
and sea, and there can be little doubt that a general refusal of the
common carriers in any country to accept such explosives for
carriage would involve many persons, firms and enterprises in utter
ruin, and would disastrously affect the interests of the public and the
general welfare of the community.
38. It would be going to far to say that a refusal by a steam vessel
engaged in the business of transporting general merchandise as a
common carrier to accept for carriage a shipment of matches, solely
on the ground of the dangers incident to the explosive quality of this
class of merchandise, would not subject the traffic in matches to an
unnecessary, undue or unreasonable prejudice and discrimination
without proof that for some special reason the particular vessel is not
fitted to carry articles of that nature. There may be and doubtless are
some vessels engaged in business as common carriers of
merchandise, which for lack of suitable deck space or storage rooms
might be justified in declining to carry kerosene oil, gasoline, and
similar products, even when offered for carriage securely packed in
cases; and few vessels are equipped to transport those products in
bulk. But in any case of a refusal to carry such products which would
subject any person, locality or the traffic in such products would be
necessary to hear evidence before making an affirmative finding that
such prejudice or discrimination was or was not unnecessary, undue
or unreasonable. The making of such a finding would involve a
consideration of the suitability of the vessel for the transportation of
such products ; the reasonable possibility of danger or disaster
resulting from their transportation in the form and under the
conditions in which they are offered for carriage; the general nature
of the business done by the carrier and, in a word, all the attendant
circumstances which might affect the question of the reasonable
necessity for the refusal by the carrier to undertake the transportation
of this class of merchandise.
39. But it is contended that whatever the rule may be as to other
explosives, the exceptional power and violence of dynamite and
gunpowder in explosion will always furnish the owner of a vessel with
a reasonable excuse for his failure or refusal to accept them for
carriage or to carry them on board his boat. We think however that
even as to dynamite and gunpowder we would not be justified in
making such a holding unaided by evidence sustaining the
proposition that these articles can never be carried with reasonable
safety on any vessel engaged in the business of a common carrier. It
is said that dynamite is so erratic an uncontrollable in its action that it
is impossible to assert that it can be handled with safety in any given
case. On the other hand it is contended that while this may be true of
some kinds of dynamite, it is a fact that dynamite can be and is
manufactured so as to eliminate any real danger from explosion
during transportation. These are of course questions of fact upon
which we are not qualified to pass judgment without the assistance of
expert witnesses who have made special studies as to the chemical
composition and reactions of the different kinds of dynamite, or
attained a thorough knowledge of its properties as a result of wide
experience in its manufacture and transportation.
40. CAB: As we construe the Philippine statute, the mere fact that violent
and destructive explosions can be obtained by the use of dynamite
under certain conditions would not be sufficient in itself to justify the
refusal of a vessel, duly licensed as a common carrier of
merchandise, to accept it for carriage, if it can be proven that in the
condition in which it is offered for carriage there is no real danger to
the carrier, nor reasonable ground to fear that his vessel or those on
board his vessel will be exposed to unnecessary and unreasonable
risk in transporting it, having in mind the nature of his business as a
common carrier engaged in the coastwise trade in the Philippine
Islands, and his duty as a servant of the public engaged in a public
employment. So also, if by the exercise of due diligence and the
taking of unreasonable precautions the danger of explosions can be
practically eliminated, the carrier would not be justified in subjecting
the traffic in this commodity to prejudice or discrimination by proof
that there would be a possibility of danger from explosion when no
such precautions are taken.
Page 13 of 62

41. CAB: The traffic in dynamite, gunpowder and other explosives is


vitally essential to the material and general welfare of the people of
these Islands. If dynamite, gunpowder and other explosives are to
continue in general use throughout the Philippines, they must be
transported by water from port to port in the various islands which
make up the Archipelago. We are satisfied therefore that the refusal
by a particular vessel, engaged as a common carrier of merchandise
in the coastwise trade of the Philippine Islands, to accept any or all of
these explosives for carriage would constitute a violation of the
prohibitions against discriminations penalized under the statute,
(UNLESS) it can be shown by affirmative evidence that there is so
real and substantial a danger of disaster necessarily involved in the
carriage of any or all of these articles of merchandise as to render
such refusal a due or a necessary or a reasonable exercise of
prudence and discretion on the part of the shipowner.
42. CAB: The complaint in the case at bar lacking the necessary
allegations under this ruling, the demurrer must be sustained on the
ground that the facts alleged do not constitute a cause of action.
43. A number of interesting questions of procedure are raised and
discussed in the briefs of counsel. As to all of these questions we
expressly reserve our opinion, believing as we do that in sustaining
the demurrer on the grounds indicated in this opinion we are able to
dispose of the real issue involved in the proceedings without entering
upon the discussion of the nice questions which it might have been
necessary to pass upon had it appeared that the facts alleged in the
complaint constitute a cause of action.
DISPOSITIVE:
1. We think, however, that we should not finally dispose of the case
without indicating that since the institution of these proceedings the
enactment of Acts No. 2307 and No. 2362 (creating a Board of Public
Utility Commissioners and for other purposes) may have materially
modified the right to institute and maintain such proceedings in this
jurisdiction. But the demurrer having been formallly submitted for
judgment before the enactment of these statutes, counsel have not
been heard in this connection. We therefore refrain from any
comment upon any questions which might be raised as to whether or
not there may be another adequate and appropriate remedy for the
alleged wrong set forth in the complaint. Our disposition of the
question raised by the demurrer renders that unnecessary at this
time, though it may not be improper to observe that a careful
examination of those acts confirms us in the holding upon which we
base our ruling on this demurrer, that is to say "That whatever may
have been the rule at the common law, common carriers in this
jurisdiction cannot lawfully decline to accept a particular class of
goods for carriage, to the prejudice of the traffic in those goods,
unless it appears that for some sufficient reason the discrimination
against the traffic in such goods is reasonable and necessary. Mere
prejudice or whim will not suffice. The grounds of the discrimination
must be substantial ones, such as will justify the courts in holding the
discrimination to have been reasonable and necessary under all the
circumstances of the case.
2. Unless an amended complaint be filed in the meantime, let judgment
be entered 10 days hereafter sustaining the demurrer and dismissing
the complaint with costs against the complainant, and twenty days
thereafter let the record be filed in the archives of original actions in
this court. SO ORDERED.
SEPARATE OPINION: MORELAND, J., concurring.
1. I may briefly say, although the nature of the action is stated at length
in the foregoing opinion, that it is an action by a shareholder of the
Yangco Steamship Co. against the company itself and certain
officials of the Insular Government for an injunction against the
company prohibiting it from carrying dynamite on its ships and
preventing the defendant officials from compelling the company to do
so under Act No. 98.
2. A demurrer was filed to the complaint raising the question not only of
its sufficiency in general, but putting in issue also the right of the
plaintiff to maintain the action under the allegations of his complaint.
3. It should be noted that all of the boats of the defendant company,
under the allegations of the complaint, are boats which carry
passengers as well as freight, and that the holding of the opinion
which I am discussing compels passenger ships to carry dynamite

4.

5.
6.

7.
8.

9.
10.

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13.

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18.

and all other high explosives when offered for shipment. (See
paragraph 3 of the complaint.)
I base my opinion for a dismissal of the complaint on the ground that
the plaintiff has not alleged in his complaint a single one of the
grounds, apart from that of being a stockholder, necessary for him to
allege to maintain a shareholder's action.
In the case of Hawes vs. Oakland (104 U.S., 450) it was said relative
to the right of a stockholder to bring an action which should regularly
be bought by the company of which he is a stockholder:
We understand that doctrine to be that, to enable a stockholder in a
corporation to sustain in a court of equity in his own name, a suit
founded on a right of action existing in the corporation itself, and in
which the corporation itself is the appropriate plaintiff, there must
exist as the foundation of the suit:
Some action or threatened action of the managing board of directors
or trustees of the corporation, which is beyond the authority conferred
on them by their character or other source of organization;
Or such a fraudulent transaction, completed or contemplated by the
acting managers, in connection with some other party, or among
themselves, or with other shareholders as will in serious injury to the
corporation, or to the interest of the other shareholders;
Or where the board of directors, or a majority of them, are acting for
their own interest, in a manner destructive of the corporation itself, or
of the rights of the other shareholders;
Or where the majority of shareholders themselves are oppressively
and illegally pursuing a course in the name of the corporation, which
is in violation of the rights of the other shareholders, and which can
only be restrained by the aid of a court of equity.
It was also said: "In this country the cases outside of the Federal
Courts are not numerous, and while they admit the right of a
stockholder to sue in cases where the corporation is the proper party
to bring the suit, they limit this right to cases where the directors are
guilty of a fraud or a breach of trust, or are proceeding ultra vires."
Further on in the same case we find: "Conceding appellant's
construction of the company's charter to be correct, there is nothing
which forbids the corporation from dealing with the city in the manner
it has done. That city conferred on the company valuable rights by
special ordinance; namely, the use of the streets for the laying of its
pipes, and the privilege of furnishing water to the whole population.
It may be the exercise of the highest wisdom, to let the city use the
water in the manner complained of. The directors are better able to
act understandingly on this subject than a stockholder residing in
New York. The great body of the stockholders residing in Oakland or
other places in California may take this view of it, and be content to
abide by the action of their directors."
This case is conclusive of the right of the plaintiff in the case at bar to
maintain the action. The complaint is devoid of allegations necessary
to sustain a complaint by a shareholder.
The contention of the plaintiff based upon the case of Ex parte Young
(209 U.S. 123) is not sustained by that case. The decision there
requires precisely the same allegations in the complaint as does the
case of Hawes vs. Oakland. Not one of those allegations appears in
the complaint in the case at bar except the allegation that the plaintiff
is a stockholder.
Indeed, not only does the complaint lack allegations essential to its
sufficiency, but it contains allegations which affirmatively show the
plaintiff is not entitled to maintain the action. I do not stop to
enumerate them all. I call attention to one only, namely the allegation
that the company, by its authorized officials, has acted in strict
conformity with the plaintiff's wishes and has refused to accept
dynamite for carriage. This allegation shows that the plaintiff has
been able to obtain his remedy and accomplish his purpose within
the corporation itself, and it is sufficient, therefore, under the case of
Hawes vs. Oakland and that of Ex parte Young, to require that the
demurrer be sustained.
I am opposed to a decision of this case on the merits.
In the first place, there has been no adequate discussion of the
merits by the parties. Substantially all of the brief of the government
was devoted to what may be called the technical defects of the
complaint, such as I have referred to above. Indeed, it is doubtful if
any portion of the brief can be said to be directly a discussion of the
merits.
Page 14 of 62

19. In the second place, there is no real pending in this court. It is clear
from the complaint that the case is a collusive one (not in any
improper sense) between the plaintiff and the defendant company.
There is no reason found in the complaint why the company should
not have brought the action itself, every member of the board of
directors and every stockholder, according to the allegations of the
complaint, being in absolute accord with the contentions of the
plaintiff on the proposition that the company should not carry
dynamite, and having passed unanimously resolutions to that effect.
Moreover, there has been no violation of Act No. 98. No shipper, or
any other person, has offered dynamite to the defendant company for
shipment, and, accordingly, the defendant company has not refused t
o accept dynamite for carriage. Nor have the defendant government
officials begun proceedings, or threatened to bring proceedings,
against the defendant company in any given case. According to the
allegations of the complaint, the parties are straw parties and the
case a straw case.
20. In the third place, Act No. 98, under which this proceeding is brought
and under which, it is alleged, the defendant public officers are
threatening to enforce, has been repealed, in so far as it affects
public service corporations, by Act No. 2307, as amended by Act No.
2362. More than that; not only has the law been repealed, but
proceedings of this character have been placed, in the first instance,
under the exclusive jurisdiction of the Board of Public Utilities. I am
unable to see why this court should, under the facts of this case,
undertake to render a decision on the merits when the Act under
which it is brought has been repealed and the jurisdiction to render a
decision on the subject matter involved has been turned over to
another body. As I have said before, it was unnecessary to a decision
of this case to touch the merits in any way; and I am opposed to an
attempt to lay down a doctrine on a subject which is within the
exclusive jurisdiction of another body created by law expressly for the
purpose of removing such cases as this from the jurisdiction of the
courts.
21. I am of the opinion that the complaint should be dismissed, but upon
grounds apart from the merits. If the merits of the case were alone to
govern, I should be distinctly in favor of the plaintiff's contention so far
as it relates to the carriage of dynamite on ships carrying
passengers; and, while I am opposed to a decision on the merits of
this case, nevertheless, the merits having been brought into the case
by the opinion of some of my brethren, I desire to refer briefly to the
jurisprudence of the subject.
22. So far as my researches go, the proposition that passenger boats
must carry dynamite and other high explosives is without support in
the decisions of any English speaking country. I have been unable to
find a case anywhere which lays down such a doctrine. Indeed, I
have been unable to find a case which holds that freight boats must
carry dynamite or other high explosives. Every case that I have been
able to find states a contrary doctrine; and neither in courts nor in text
books is there even a hint supporting the contention of my brethren.
The opinion cites no authorities to support it; and I am constrained to
believe that, in any opinion so elaborately written, cases to support its
thesis would have been cited if any such existed.
23. On page 372, Vol. 6 of Cyc., will be found the following: "Common
carriers owe to the public the duty of carrying indifferently for all who
may employ them, and in the order in which the application is made,
and without discrimination as to terms. They may, however, restrict
their business so as to exclude particular classes of goods, and they
are not bound to receive dangerous articles, such as nitro-glycerine,
dynamite, gunpowder, oil of vitriol, matches, etc."
24. In the case of California Powder Works vs. Atlantic and Pacific R. R.
Co. (113 Cal., 329), it was said: "Nor are the exemptions contained in
the contract of the shipping order void for lack of consideration. The
defendant was not obliged to received and transport the powder at
all. A common carrier is not bound to receive ... dangerous articles,
as nitro-glycerine, dynamite, gunpowder, aqua fortis, oil of vitriol,
matches, etc."
25. This, so far as I can learn, is the universal doctrine. The California
case is reproduced in 36 L.R.A., 648 and has appended to it a note.
It is well known that the L.R.A. cites in its notes all of the cases
reasonably obtainable relative to the subject matter of the case which
it annotates. The note in L.R.A. with reference to the California case
cites a considerable number of authorities holding that a carrier of

26.

27.

28.
29.

30.

31.
32.

33.

34.

35.

36.

37.

goods is not obliged to receive dynamite or other dangerous


explosives for carriage. It does not cite or refer to a case which holds
the contrary.
The reporter of the L.R.A, at the beginning of the note with reference
to the California case, says: "The law upon this question is to be
drawn from inference or from dicta rather than from decided cases.
California Powder Works vs. Atlantic & Pacific R. R. Co. seems to be
the first case to have squarely decided that the carrier is not bound to
transport dangerous articles, although there has been what may be
regarded as a general understanding that such is the fact."
In Hutchinson on Carriers (sec. 145), it is said, relative to the
necessity of a carrier receiving for carriage dynamite or other
dangerous explosives: "He may, for instance, lawfully refuse to
receive them (the goods) if they are improperly packed or if they are
otherwise in an unfit condition for carriage. Or he may show that the
goods offered were of a dangerous character, which might subject
him or his vehicle, or strangers or his passengers, or his other freight,
to the risk of injury."
In a note to the text the author says: "Nor is he bound to accept such
articles as nitro-glycerine, dynamite, gunpowder, oil of vitriol and the
like."
In Elliot on Railroads (vol. 4, p. 151), appears the following: "Again,
goods may properly be refused which are tendered in an unfit
condition for transportation, or which are dangerous, or which are
reasonably believed to be dangerous."
In the case of Boston & Albany Railroad Co. vs. Shanly (107 Mass.,
568), the court said at page 576: "Both the dualin and the exploders
are thus alleged to be explosive and dangerous articles. Each of
them was sent without giving notice of its character to the plaintiffs,
and they were ignorant in respect to it. The rule of law on this subject
is in conformity with the dictates of common sense and justice, and is
well established. One who has in his possession a dangerous article,
which he desires to send to another, am send it by a common carrier
if he will take it; but it is his duty to give him notice of its character, so
that he may either refuse to take it, or be enabled, if he takes it, to
make suitable provision against the danger."
This case cites three English cases as follows, Williams vs. East
India Co. (3 East, 192); Brass vs. Maitland (6 El. & Bl. 470; Farrant
vs. Barnes (11 C.B. [N.S.], 553).
In the case of Porcher vs. Northeastern R. Co. (14 Rich. L., 181), the
court quoted with approval the following from Story on Bailments: "If
he (the carrier) refuses to take charge of the goods because his
coach is full or because they are of a nature which will at the time
expose them to extraordinary danger or to popular rage, or because
he has no convenient means of carrying such goods with security,
etc., these will furnish reasonable grounds for his refusal, and will, if
true, be a sufficient legal defense to a suit for the non-carriage of the
goods."
In the case of Fish vs. Chapman (2 Ga., 349), the court said: "A
common carrier is bound to convey the goods of any person offering
to pay his hire, unless his carriage be already full, or the risk sought
to be imposed upon him extraordinary, or unless the goods be of a
sort which he cannot convey or is not in the habit of conveying."
In the case of Farrant vs. Barnes, above cited, the court said that the
shipper "knowing the dangerous character of the article and omitting
to give notice of it to the carrier so that he might exercise his
discretion as to whether he would take it or not was guilty of a clear
breach of duty."
To the same effect, generally, are Jackson vs. Rodgers (2 Show.,
327); Riley vs. Horne (5 Bing., 217); Lane vs. Cotton (1 Ld. Raym.,
646); Edwards vs. Sheratt (1 East, 604); Elsee vs. Gatward (5 T. R.,
143); Dwight vs. Brewster (1 Pick., 50); Jencks vs. Coleman (2
Summ., 221); Story on Bail., 322, 323; Patton vs. Magrath (31 Am.
Dec., 552).
In Story on Bailments (sec. 508), is found the following: "If a carrier
refuses to take charge of goods because his coach is full; or because
the goods are of a nature which will at the time expose them to
extraordinary danger; ... these will furnish reasonable grounds for his
refusal; and will, if true, be a sufficient legal defense to a suit for the
non-carriage of the goods."
It will be noted that all of these cases holding that a common carrier
is not obliged to receive a dangerous substance, such as dynamite
and other high explosives, refer exclusively to carriers of
Page 15 of 62

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39.

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41.

42.

43.

44.

merchandise and not to carriers of passengers. If the authorities are


uniform in holding that companies carrying freight are not obliged to
accept dangerous explosives for carriage, there can be no question
as to what the rule would be with reference to a carrier of
passengers.
Far from requiring passenger boats to accept dynamite and other
high explosives for carriage, the attitude of the people of the United
States and of various States is shown by their statutes. The laws of
the United States and of many of the States prohibit passengers
boats and passenger trains from carrying dangerous explosives.
Sections 232, 233, 234, 2345 and 236 of the Criminal Code of the
United States (Compiled Stat., 1901), read:
SEC. 232. It shall be unlawful to transport, carry, or convey, any
dynamite, gunpowder, or other explosive, between a place in a
foreign country and a place within or subject to the jurisdiction of the
United States, or between a place in any State, Territory, or District of
the United States, or place non-contiguous to but subject to the
jurisdiction thereof, and a place in any other State, Territory, or
District of the United States, or place non-contiguous to but subject to
the jurisdiction thereof, on any vessel or vehicle of any description
operated by a common carrier, which vessel or vehicle is carrying
passengers for hire: . . ..
SEC. 233. The Interstate Commerce Commission shall formulate
regulations for the safe transportation of explosives, which shall be
binding all common carriers engaged in interstate or foreign
commerce which transport explosives by land. Said commission, of
its own motion, or upon application made by any interested party,
may make changes or modifications in such regulations, made
desirable by new information or altered conditions. Such regulations
shall be in accord with the best known practicable means for securing
in transit, covering the packing, marking, loading, handling while in
transit, and the precautions necessary to determine whether the
material when offered is in proper condition to transport.
Such regulations, as well as all changes or modifications thereof,
shall take effect after ninety days after their formulation and
publication commission and shall be in effect until reversed, set
aside, or modified.
SEC. 234. It shall be unlawful to transport, carry, or convey, liquid
nitroglycerin, fulminate in bulk "in dry condition, or other like
explosive, between a place in a foreign country and a place within or
subject to the jurisdiction of the United States, or between a place in
one State, Territory, or District of the United States, or place noncontiguous to but subject to the jurisdiction thereof, and a place in
any other State, Territory, or District of the United States, or place
non-contiguous to but subject to the jurisdiction thereof, on any
vessel or vehicle of any description operated by a common carrier in
the transportation of passengers or articles of commerce by land or
water.
SEC. 235. Every package containing explosives or other dangerous
articles when presented to a common carrier for shipment shall have
plainly marked on the outside thereof the contents thereof; and it
shall be unlawful for any person to deliver, or cause to be delivered,
to any common carrier engaged in interstate or foreign commerce by
land or water, for interstate or foreign transportation, or to carry upon
any vessel or vehicle engaged in interstate or foreign transportation,
any explosive, or other dangerous article, under any false or
deceptive marking, description, invoice, shipping order, or other
declaration, or without informing the agent of such carrier of the true
character thereof, at or before the time such delivery or carriage is
made. Whoever shall knowingly violate, or cause to be violated any
provision of this section, or of the three sections last preceding, or
any regulation made by the Interstate Commerce Commission in
pursuance thereof, shall be fined not more than two thousand dollars,
or imprisoned not more than eighteen months, or both.
SEC. 236. When the death or bodily injury of any person is caused
by the explosion of any article named in the four sections last
preceding, while the same is being placed upon any vessel or vehicle
to be transported in violation thereof, or while the same is being so
transported, or while the same is being removed from such vessel or
vehicle, the person knowingly placing, or aiding or permitting the
placing of such articles upon any such vessel or vehicle, to be so
transported, shall be imprisoned not more than ten years.

45. Human ingenuity has been continuously exercised for ages to make
sea travel safe, that men might sail the seas with as little risk as
possible; that they might rely upon the quality of the ship and the
character and experiences of the sailors who manned her; that they
might feel that the dangers of the deep had been reduced to the
minimum. Not only this; the abilities of legislators have been taxed to
the same end; to frame that would ensure seaworthy ships, safe
appliances, and reliable officers and crews; to curb the avarice of
those who would subordinate the safety of passengers to a desire for
freight; and to so regulate travel by sea that all might safely confide
their property and their lives to the ships sailing under the flag of their
country. Can a decision which requires passenger ships to carry
dynamite and all high explosives be made to harmonize with this
purpose? What is there in the Philippine Islands to justify the
requirement that passenger ships carry dynamite, while in the United
States the carrying of dynamite by passenger ships is a crime? Why
should passengers in the Philippine Islands be subjected to
conditions which are abhorent in the United States? Why compel
shipowners in the Philippine Islands to perform acts which, if done in
the United States, would send them to the penitentiary?
46. I do not believe that we should require passengers to travel on ships
carrying, perhaps, many tons of nitro-glycerine, dynamite or
gunpowder in their holds; nor do I believe that any public official
should do anything calculated to add to the calamity of fire, collision,
or shipwreck the horrors of explosion.
SEPARATE OPINION: ARAULLO, J., dissenting.
1. I do not agree with the decision of the majority of this court in this
case, first, because one of the grounds of the demurrer to the
complaint the first one is that of lack of legal capacity to sue on
the part of the plaintiff and nothing is said in the decision regarding
this very important point. It is one which ought to have received
special attention, even before the other alleged in the demurrer that
the complaint does not state facts sufficient to constitute a cause of
action, and the only one that received any consideration in the
decision in question. Second, because notwithstanding that in the
decision no consideration was paid to the alleged lack of legal
capacity on the part of the plaintiff, he is, reason of the demurrer
being sustained, authorized to present an amended complaint within
ten days, an authorization which could not and should not have on
the part of said plaintiff was not lacking.
2. DECISION OF MARCH 31, 1915. CARSON, J.: This case is again
before us upon a demurrer interposed by the respondent officials of
the Philippine Government to an amended complaint filed after
publication of our decision sustaining the demurrer to the original
complaint. In our former opinion, entered November 5, 1914, we
sustained the demurrer on the ground that the original complaint did
not set forth facts sufficient to constitute a cause of action. In that
decision we held that the statute (Act No. 98) the validity of which
was attacked by counsel por plaintiff was, when rightly construed, a
valid and constitutional enactment, and ruled: That whatever may
have been the rule at the common law, common carriers in this
jurisdiction cannot lawfully decline to accept a particular class in
those goods, unless it appears that for some sufficient reason the
discrimination against the traffic in such goods is reasonable and
necessary. Mere prejudice or whim will not suffice. The grounds of
the discrimination must be substantial ones, such as will justify the
courts in holding the discrimination to have been reasonable and
necessary under all the circumstances of the case. x x x The traffic in
dynamite, gunpowder and other explosives is vitally essential to the
material and general welfare of the people of these Islands. If
dynamite, gunpowder and other explosives are to continue in general
use throughout the Philippines, they must be transported by water
from port to port in the various islands which make up the
Archipelago. We are satisfied therefore that the refusal by a particular
vessel, engaged as a common carrier of merchandise in the
coastwise trade of the Philippine Islands, to accept any or all of these
explosives for carriage would constitute a violation of the prohibitions
against discriminations penalized under the statue, unless it can be
shown by affirmative evidence that there is so real and substantial a
danger of disaster necessarily involved in the carriage of any or all of
these articles of merchandise as to render such refusal a due or a
Page 16 of 62

3.

4.

5.

6.

7.

8.
9.

10.
11.

12.

necessary or a reasonable exercise of prudence and discretion on


the part of the ship owner.
Resting our judgment on these rulings we held that the allegations of
the complaint, which in substance alleged merely that the respondent
officials were coercing the respondent steamship company to carry
explosives upon some of their vessels, under authority of, and in
reliance upon the provisions of the Act, did not set forth facts
constituting a cause of action; or in other words, that the allegations
of the complaint even if true, would sustain a finding that the
respondent officials were acting "without or in excess of their
jurisdiction" and lawful authority in the premises.
The amended complaint filed on November 14, 1914, is substantially
identical with the original complaint, except that it charges the
respondent officials, as of the date of the amended complaint, with
the unlawful exercise of the authority or intent to exercise unlawful
authority which should be restrained, and substitutes the names of
the officers now holding the offices of Collector of Customs, AttorneyGeneral and prosecuting attorney for those of the officials holding
those offices at the date of the filing of the original complaint; and
except further that it adds the following allegations:
That each and every one of the vessels of the defendant company is
dedicated and devoted to the carriage of passengers between
various ports in the Philippine Islands, and each of said vessels, on
all of said voyages between the said ports, usually and ordinarily
does carry a large number of such passengers.
That dynamite, powder, and other explosives are dangerous
commodities that cannot be handled and transported in the manner
and from in which ordinary commodities are handled and transported.
That no degree of care, preparation and special arrangement in the
handling and transportation of dynamite, powder and other
explosives will wholly eliminate the risk and danger of grave peril and
loss therefrom, and that the highest possible degree of care,
preparation of said commodities is only capable of reducing the
degree of said danger and peril. That each and every one of the
vessels of the defendant company is wholly without special means
for the handling, carriage, or transportation of dynamite, powder and
other explosives and such special means therefor which would
appreciably and materially reduce the danger and peril therefrom
cannot be installed in said vessels without a costs and expense unto
said company that is unreasonable and prohibitive.
As we read them, the allegations of the original complaint were
intended to raise and did in fact raise, upon demurrer, a single
question which, if ruled upon favorably to the contention of plaintiff,
would, doubtless, have put an end to this litigation and to the dispute
between the plaintiff stockholder of the steamship company and the
officials of the Philippine Government out of which it has arisen.
In their brief, counsel for plaintiff, in discussing their right to maintain
an action for a writ of prohibition, relied upon the authority of Ex parte
Young (209 U. S. [123] 163, 165), and asserted that:
Upon the authority, therefore, of Ex parte Young, supra, the merits of
the question pending between petitioner and respondents in this
action is duly presented to this court by the complaint of petitioner
and general demurrer of respondents thereto. That question, in plain
terms, is as follows:
Is the respondent Yangco Steamship Company legally required to
accept for carriage and carry "any person or property offering for
carriage?"
"The petitioner contends that the respondent company is a common
carrier of only such articles of freight as they profess to carry and
hold themselves out as carrying;" and in discussing the legal capacity
of plaintiff to maintain this action, counsel in their printed brief
asserted that "here we have no address to the court to determine
whether a minority or a majority shall prevail in the corporate affairs;
here we ask plainly and unmistakably who shall fix the limits of the
corporate business the shareholders and directors of the
corporation, or certain officials of the government armed with an
unconstitutional statute?
Counsel for plaintiff contended that under the guaranties of the
Philippine Bill of Rights a common carrier in the Philippine Islands
may arbitrarily decline to accept for carriage any shipment or
merchandise of a class which it expressly or impliedly declines to
accept from all shippers alike; that "the duty of a common carrier to
carry for all who offer arises from the public profession he has made,

13.

14.
15.

16.

and is limited by it;" that under this doctrine the respondent


steamship company might lawfully decline to accept for carriage
"dynamite, powder or other explosives," without regard to any
question as to the conditions under which such explosives are
offered for carriage, or as to the suitableness of its vessels for the
transportation of such explosives, or as to the possibility that the
refusal to accept such articles of commerce in a particular case might
have the effect of subjecting any person, locality or the traffic in such
explosives to an undue, unreasonable or unnecessary prejudice or
discrimination: and in line with these contentions counsel boldly
asserted that Act No. 98 of the Philippine Commission is invalid and
unconstitutional in so far as it announces a contrary doctrine or lays
down a different rule. The pleader who drew up the original complaint
appears to have studiously avoided the inclusion in that complaint of
any allegation which might raise any other question. In doing so he
was strictly within his rights, and having in mind the object sought to
be attained, the original complaint is a model of skillful pleading, well
calculated to secure the end in view, that is to say, a judgment on the
precise legal issue which the pleader desired to raise as to the
construction and validity of the statute, which would put an end to the
controversy, if that issue were decided in his favor.
Had the contentions of plaintiff as to the unconstitutionality of the
statute been well founded, a writ of prohibition from this court would
have furnished an effective and appropriate remedy for the alleged
wrong. The issue presented by the pleadings on the original
complaint, involving a question as to the validity of a statute and
affecting, as it did, the shipping and public interests of the whole
Islands, and submitting be complicated question or series of
questions of fact, was of such a nature that this court could not
properly deny the right of the plaintiff to invoke its jurisdiction in
original proceedings. We deemed it our duty therefore to resolve the
real issue raised by the demurrer, and since we are of opinion that
the contentions of counsel for plaintiff were not well founded, and
since a ruling to that effect necessarily resulted in an order sustaining
the demurrer, we did not deem it necessary or profitable to consider
questions of practice or procedure which it might have been
necessary to decide under a contrary ruling as to the principal
question raised by the pleadings; nor did we stop to consider whether
the "subject matter involved" in the controversy might properly be
submitted to the Board of Public Utility Commissioners, because
upon the authority of Ex parte Young (supra) we are satisfied as to
the jurisdiction and competency of this court to deal with the real
issues raised by the pleadings on the original complaint, and
because, furthermore, the Act of the Philippine Legislature creating
the Board of Public Utility Commissioners could not deprive this court
of jurisdiction already invoked in prohibition proceedings instituted for
the purpose of restraining the respondent official as of the
Government from the alleged unlawful exercise of authority under
color of an invalid and without jurisdiction in the premises.
The amended complaint, however, presents for adjudication in
original prohibition proceedings in this court questions of a wholly
different character from those submitted in the original complaint.
In so far as it reiterates the allegation s of the former complaint to the
effect that the respondent officials are unlawfully coercing the
steamship company by virtue and under color of the provisions of an
invalid or unconstitutional statute, it is manifest, of course, that the
amended complaint is no less subject to criticism than was the
original complaint. If, therefore, the action can be maintained upon its
allegations that those officials are coercing the company to carry
explosives on vessels which, as a matter of fact, are not suitably
equipped for that purpose, and which from the nature of the business
in which they are engaged should not be required to carry explosives.
It will readily be seen, under our former opinion, that these
allegations raise no question as to the validity or constitutionality of
any statute; that the real question which plaintiff seeks to submit to
this court in original prohibition proceedings is whether the
respondent officials of the Government are correctly exercising the
discretion and authority with which they have been clothed; and that
his contention in the amended complaint is not, as it was in the
original complaint, that these officials are acting without authority and
in reliance upon an invalid and unconstitutional statute, but rather
that they are exercising their authority improvidently, unwisely or
mistakenly.
Page 17 of 62

17. Under the provisions of sections 226 and 516 of the Code of Civil
Procedure jurisdiction in prohibition proceedings is conferred upon
the courts when the complaint alleges "the proceedings of any
inferior tribunal, corporation, board, or person, whether exercising
functions judicial or ministerial, were without or in excess of the
jurisdiction of such tribunal, corporation, board or person." It is
manifest therefore that the allegations of the amended complaint,
even if true, will not sustain the issuance of a writ of prohibition
without further amendment unless they be construed to in effect a
charge that the respondent officials are abusing the discretion
conferred upon them in the exercise of their authority in such manner
that the acts complained of should be held to be without or in excess
of their jurisdiction.
18. It may well be doubted whether the doctrine of the case Ex parte
Young (supra), relied upon by the plaintiff in his argument be invoked
in support of a right of action predicated upon such premises; so
also, since the acts complained of in the amended complaint are
alleged to have been done at a date subsequent to the enactment of
the statutes creating the Board of Public Utility Commissioners, it
may well be doubted whether the courts should entertain prohibition
proceedings seeking to restrain alleged abuses of discretion on the
part of officers and officials of the Government, and of public service
corporations with regard to the rules under which such corporations
are operated, until and unless redress for the alleged wrong has
been sought at the hands of the Board.
19. We do not deem it expedient or necessary, however, to consider or
decide any of these questions at this time, because we are of opinion
that we should not permit our original jurisdiction to be set in motion
upon the allegations of the amended complaint.
20. It is true that this court is clothed with original jurisdiction in
prohibition proceedings (sec. 516, Act No. 190). But this jurisdiction is
concurrent with the original jurisdiction of the various Courts of First
Instance throughout the Islands, except in cases where the writ runs
to restrain those courts themselves, when of course it is exclusive;
and we are satisfied that it could have been the intention of the
legislator to require this court to assume original jurisdiction in all
cases wherein the plaintiff elects to invoke it. Such a practice might
result in overwhelming this court with the duty of entertaining and
deciding original proceedings which from their nature could much
better be adjudicated in the trial courts; and in unnecessarily diverting
the time and attention of the court from its important appellate
functions to the settlement of controversies of no especial interest to
the public at large, in the course of which it might become necessary
to take testimony and to make findings touching complicated and
hotly contested issues of fact.
21. We are of opinion and so hold that unless special reasons appear
therefor, this court should decline to permit its original jurisdiction to
be invoked in prohibition proceedings, and this especially when the
adjudication of the issues raised involves the taking of evidence and
the making of findings touching controverted facts, which, as a rule,
can be done so much better in the first instance by a trial court than
an appellate court organized as is ours.
22. Spelling on Injunctions and Other Extraordinary Remedies (vol. 2, p.
1493), in discussing the cases in which the appellate courts in the
United States permit their original jurisdiction to be invoked where
that jurisdiction is concurrent with that of some inferior court, says:
23. Of the plan of concurrent jurisdiction West Virginia may be taken as
an illustration. The Supreme Court of Appeals of that State has
concurrent original jurisdiction with the circuit courts in cases of
prohibition, but by a rule adopted by the former court it will not take
such original jurisdiction unless reasons appear therefor.
24. We deemed it proper to assume jurisdiction to adjudicate and decide
the issues raised by the rulings on the original complaint, involving as
they did a question as to the validity of a public statute of vital interest
to shippers and shipowners generally as also to the public at large,
presenting for determination no difficult or complicated questions of
fact: but we are satisfied that we should decline to take jurisdiction of
the matters relied upon in the amended complaint in support of
plaintiff's prayer for the writ.
25. The question of the construction and validity of the statute having
been disposed of in our ruling on the demurrer to the original
complaint, it must be apparent that of the allegations of the amended
complaint are sufficient to maintain the plaintiff's action for a writ of

prohibition, a question as to which we expressly reserve our opinion,


the action should be brought in one of the Courts of First Instance.
26. Twenty days hereafter let the complaint de dismissed at the costs of
the plaintiff, unless in the meantime it is amended so as to disclose a
right upon the part of the plaintiff to invoke the original jurisdiction of
this court without first proceeding in one of the Courts of First
Instance. So ordered.
27. Arellano, C.J., Torres, and Trent, JJ., concur.

Southern Lines, Inc. v. CA, 4 SCRA 258 (1962)


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.:
NATURE: 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.
DOCTRINE:
If the fact of improper packing is known to the carrier or his servants,
or apparent upon ordinary observation, but it accepts the goods
notwithstanding such condition, it is not relieved of liability for loss or
injury resulting therefrom.
ORDER RICE
DIGEST:
Respondent City of Iloilo requisitioned rice from NARIC to which NARIC
complied and shipped said rice through Petitioner Carriers vessel. Upon
arrival in Iloilo, there was a shortage. Respondent City sought to recover
the amount paid for the shortage and filed a case against NARIC and
Petitioner Carrier. RTC & CA absolved NARIC but held Petitioner Carrier
liable.
ISSUES:
1. Whether Petitioner Carrier is liable for the shortage YES.
2. Whether Respondent City is precluded from filing an action for
damages on account of its failure to present a claim within 24 hours
from receipt of the shipment as stated in the bill of lading NO.
HELD (Shortage): Due to negligence of Petitioner Carrier
1. If the fact of improper packing is known to Petitioner carrier or his
servants, or apparent upon ordinary observation, but it accepts the
goods notwithstanding such condition, it is not relieved of liability for
loss or injury resulting therefrom.
2. Petitioner 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." The shortage resulted from the negligence of
petitioner.
HELD (Prescription): Waived.
1. The SC noted that Petitioner Carrier failed to plead this defense in its
answer to City of Iloilos complaint and, therefore, the same is
deemed waived and cannot be raised for the first time.
2. City of Iloilo filed the action within a reasonable time; that the action
is one for the refund of the amount paid in excess, and not for
damages or the recovery of shortage; bill of lading does not at all limit
the time for the filing of action for the refund of money paid in excess.
x

FACTS:
Page 18 of 62

1. Sometime in 1948, Respondent City of Iloilo requisitioned (meaning:


demand) for rice from the National Rice and Corn Corporation
(hereafter referred to as NARIC) in Manila.
2. 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 Petitioner 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
P224.38
Trucking at P2.50 per bag
P323.62
Total = 63,115.50
3. On September 3, 1948, the Respondent 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.
4. On February 14, 1951 the Respondent City of Iloilo filed a complaint
in the CFI Iloilo against NARIC and the Petitioner Southern Lines,
Inc. for the recovery of the amount of P6,486.35 representing the
value of the shortage of the shipment of rice.
5. RTC: After trial, the lower court absolved NARIC from the complaint,
but sentenced Petitioner 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.
6. CA: Affirmed. Hence, this petition for review.
ISSUE: Whether the Petitioner-carrier is liable for the shortage YES.
HELD:
1. 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. Proof of these accidents is
incumbent upon the carrier.
2. 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 established
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.
3. IMPT: 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.
4. Under Article 361, Petitioner-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).
5. 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.

6. CAB: 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.
7. 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)
8. CAB: In the case at bar, the record shows that Petitioner-carrier
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.
DISPOSITIVE: CA decision affirmed. With costs against the petitioner.

G. Martini Ltd. v. Macondray & Co., 39 Phil 934 (1919)


EN BANC
[G.R. No. 13972. July 28, 1919.]
G. MARTINI, LTD., Plaintiff-Appellee, vs. MACONDRAY & CO.
(INC.), Defendant-Appellant.
DECISION
STREET, J.:
DOCTRINES:
Page 19 of 62

Where the loading on deck has taken place with the consent of

the merchant, it is obvious that no remedy against the


shipowner or master for a wrongful loading of the goods on
deck can exist. The general rule of the English law, that no one
can maintain an action for a wrong, where he has consented or
contributed to the act which occasioned his loss, leads to the
same conclusion.
Where the shipper consents to have his goods carried on deck
he takes the risks of any damage or loss sustained as a
consequence of their being so carried.
- CAB: In the present case it is indisputable that the goods
were injured during the voyage and solely as a
consequence of their being on deck, instead of in the
ships hold. The loss must therefore fall on the owner.
And this would be true, under the authorities, even
though paragraph 19 of the bills of lading, quoted near
the beginning of this opinion, had not been made a term
of the contract.
A clean bill of lading is one in the common form without any
memorandum in the margin or on its face showing that the
goods are to be carried on deck

ON DECK; FEIGN SURPRISE


DIGEST:
1. Plaintiff Shipper arranged with Defendant Carrier the shipment
of 219 cases of chemical products from Manila to Japan.
2. Upon arrival, it was found that the chemicals suffered
damaged from the effects of fresh and salt water.
3. So the Plaintiff Shipper sought to recover the amount of
damages.
4. The lower court ruled in its favour. Plaintiff Shipper argued it
did not consent to the cargo being placed on deck.
HELD: However, SC found this contention unmeritorious.
1. Facts would say that the Plaintiff Shipper assented to the
terms of the BoL, saying that the (1) goods would be on deck
(2) under shippers risk.
2. The Defendant Carrier obtained its consent not only through
the BoL but also through correspondence with one of the
employees of Plaintiff Shipper over the telephone (this
employee even feigned surprise and pretended that he did not
know the shipment would be placed on deck).
3. Thus, Plaintiff Shipper cannot claim otherwise, because it did
not even try to stop the shipment.
4. With that, negligence should be alleged and proved on the
part of the shipping company, otherwise, one cannot recover
from loss.
x

3.

4.

5.

6.

7.

FACTS:
1. In September of the year 1916, the Plaintiff G. Martini, Ltd.,
arranged with the Defendant company, as agents of the
Eastern and Australian Steamship Company, for the shipment
of 219 cases or packages of chemical products from Manila,
Philippine Islands, to Kobe, Japan. The goods were embarked
at Manila on the steamship Eastern, and were carried to Kobe
on the deck of that ship. Upon arrival at the port of destination
it was found that the chemicals comprised in the shipment had
suffered damage from the effects of both fresh and salt water;
and the present action was instituted by the Plaintiff to recover
the amount of the damage thereby occasioned.
2. CFI: In the Court of First Instance judgment was rendered in
favor of the Plaintiffs for the sum of P34,997.56, with interest

8.

from March 24, 1917, and costs of the proceeding. From this
judgment the Defendant appealed.
- That the damage was caused by water, either falling in
the form of rain or splashing aboard by the action of wind
and waves, is unquestionable; and the contention of the
Plaintiff is that it was the duty of the ships company to
stow this cargo in the hold and not to place it in an
exposed position on the open deck.
- The defense is that by the contract of affreightment the
cargo in question was to be carried on deck at the
shippers risk; and attention is directed to the fact that on
the face of each bill of lading is clearly stamped with a
rubber stencil in conspicuous letters the words on deck
at shippers risk.
Defendant: In this connection the Defendant Company relies
upon paragraph 19 of the several bills of lading issued for
transportation of this cargo, which reads as follows:
19. Goods signed for on this bill of lading as carried on deck
are entirely at shippers risk, whether carried on deck or under
hatches, and the steamer is not liable for any loss or damage
from any cause whatever.
Plaintiff: The Plaintiff insists that the agreement was that the
cargo in question should be carried in the ordinary manner,
that is, in the ships hold, and that the Plaintiff never gave its
consent for the goods to be carried on deck.
The material facts bearing on this controverted point appear to
be these: On September 15, 1916, the Plaintiff applied to the
Defendant for necessary space on the steamship Eastern,
and received a shipping order, which constituted authority for
the ships officers to receive the cargo aboard. One part of this
document contained a form which, when signed by the mate,
would constitute the mates receipt, showing that the cargo
had been taken on.
Ordinarily the shipper is supposed to produce the mates
receipt to the agents of the ships company, who thereupon
issue the bill of lading to the shipper. When, however, the
shipper, as not infrequently happens, desires to procure the
bill of lading before he obtains the mates receipt, it is
customary for him to enter into a written obligation, binding
himself, among other things, to abide by the terms of the
mates receipt.
In the present instance the mates receipt did not come to the
Plaintiffs hand until Monday night, but as the Plaintiff was
desirous of obtaining the bills of lading on the Saturday
morning preceding in order that he might negotiate them at
the bank, a request was made for the delivery of the bills of
lading on that day To effectuate this, the Plaintiff was required
to enter into the written obligation, calling itself a letter of
guarantee, which was introduced in evidence as Exhibit D-C.
This document is of the date of September 16, 1916, and of
the following tenor: In consideration of your signing us clean
B/L for the undermentioned cargo per above steamer to be
shipped on or under deck at ships option, for Kobe without
production of the mates receipt, we hereby guarantee to hold
you free from any responsibility by your doing so, and for any
expense should the whole or part of the cargo be shut out, or
otherwise, and to hand you said mates receipt as soon as it
reaches us and to abide by all clauses and notations on the
same.
In conformity with the purpose of this document the bills of
lading were issued, and the negotiable copies were, upon the
same day, negotiated at the bank by the Plaintiff for 90 per
cent of the invoice value of the goods. As already stated these
bills of lading contained on their face, conspicuously stenciled,
the words on deck at shippers risks. The mates receipt,
received by the Plaintiff 2 days later also bore the notation on
Page 20 of 62

9.

10.

11.

12.

deck at shippers risk, written with pencil, and evidently by the


officer who took the cargo on board and signed the receipt.
The Plaintiff insists that it had at no time agreed for the cargo
to be carried on deck; and G. Martini, manager of Martini &
Company, says that the first intimation he had of this was
when, at about 4 p.m. on that Saturday afternoon, he
examined the nonnegotiable copies of the bills of lading,
which had been retained by the house, and discovered the
words on deck at shippers risk stamped thereon. Martini
says that upon seeing this, he at once called the attention of
S. Codina thereto, the latter being an employee of the house
whose duty it was to attend to all shipments of merchandise
and who in fact had entire control of all matters relating to the
shipping of this cargo. Codina pretends that up to the time
when Martini directed his attention to the fact, he himself was
unaware that the cargo was being stowed on deck; and upon
the discovery of this fact the two gentlemen mentioned
expressed mutual surprise and dissatisfaction. Martini says
that he told Codina to protest at once to Macondray &
Company over the telephone, while Martini himself proceeded
to endite a letter, which appears in evidence as Exhibit D-T of
the Defendant and is in its material part as follows: MANILA,
September 16, 1916. MESSRS. MACONDRAY & Co.,
Manila, DEAR SIRS: In re our shipment per steamship
Eastern, we are very much surprised to see that the remark
on deck at shippers risk has been stamped on the bills of
lading Nos. 8 to 23. . . . and although not believing that the
same have actually been shipped on deck we must hold you
responsible for any consequence, loss, or damage deriving
from your action should they have been shipped as stated.
Yours faithfully, G. MARTINI, LTD. By S. CODINA.
This letter was followed by another of the same date and of
substantially the same tenor but containing the following
additional statement: It is the prevailing practice that,
whenever a cargo is being carried on deck, shipowners or
agents give advice of it to shippers previous to shipment
taking place, and obtain their consent to it. If we had been
advised of it, shipment would not have been effected by us.
We regret very much this occurrence, but you will understand
that in view of your having acted in this case on your own
responsibility, we shall have to hold you amenable for any
consequences that may be caused from your action.
The first of these letters was forthwith dispatched by
messenger, and upon receiving it, Macondray & Company
called Codina by telephone at about 4.30 p.m. and, referring
to the communication just received, told him that Macondray &
Company could not accept the cargo for transportation
otherwise than on deck and that if Martini & Company were
dissatisfied, the cargo could be discharged from the ship.
There is substantial conformity in the testimony of the two
parties with respect to the time of the conversation by
telephone and the nature of the message which Macondray &
Company intended to convey, though the witnesses differ as
to some details and in respect to what occurred immediately
thereafter. Basa, who was in charge of the shipping
department of Macondray & Company and who conducted the
conversation on the part of the latter, says that he told Codina
that if Martini & Company was unwilling for the cargo to be
carried on deck that they could discharge it and further
advised him that Macondray & Companys empty boats were
still at the ships side ready to receive the cargo. In reply
Codina stated that Martini, the manager, was then out and that
he would answer in a few minutes, after communication with
Martini. Within the course of half an hour Codina called Basa
up and said that as the cargo was already stowed on deck,
Martini & Company were willing for it to be carried in this way,

and that their protest was a mere formality. Codina admits that
he was informed by Basa that the cargo could not be carried
under the hatches, and that if Martini & Company were
dissatisfied to have it carried on deck, they could discharge it.
He denies being told that it could be taken off in Macondray &
Companys boats. Codina further states that when the
conversation was broken off for the purpose of enabling him to
communicate with Martini, he consulted with the latter, and
was directed to say that Martini & Company did not consent
for the cargo to be carried on deck and that it must be
discharged. Upon returning to the telephone, he found that the
connection had been broken, and he says that he was
thereafter unable to get Macondray & Company by telephone
during that afternoon, although he attempted to do so more
than once.
HELD (Consent of shipment on deck): Consent given.
1. CAB: In the light of all the evidence the conclusion seems
clear enough that, although Martini & Company would have
greatly preferred for the cargo to be carried under the hatches,
they nevertheless consented for it to go on deck. Codina, if
attentive to the interests of his house, must have known from
the tenor of the guaranty to which his signature is affixed that
the Defendant had reserved the right to carry it on deck, and
when the bills of lading were delivered to the Plaintiff they
plainly showed that the cargo would be so carried.
2. CAB: It must therefore be considered that the Plaintiff was
duly affected with notice as to the manner in which the cargo
was shipped. No complaint, however, was made until after the
bills of lading had been negotiated at the bank. When the
manager of Martini & Company first had his attention drawn to
the fact that the cargo was being carried on deck, he called
Codina to account, and the latter found it to his interest to
feign surprise and pretend that he had been deceived by
Macondray & Company. Even then there was time to stop the
shipment, but Martini & Company failed to give the necessary
instructions, thereby manifesting acquiescence in the
accomplished fact.
3. In a later letter of October 25, 1916, addressed to Macondray
& Company, Martini, referring to the incident says: If previous
to the mailing of the documents, you had actually notified us
by phone or otherwise that you could not accept our cargo in
any other way but on deck, we should have promptly given
you instructions to leave it on the lighters and at our disposal.
4. From this it is inferable that one reason why the Plaintiff
allowed the cargo to be carried away without being
discharged, was that the bills had been discounted and to stop
the shipment would have entailed the necessity of refunding
the money which the bank had advanced, with the
inconveniences incident thereto. Another reason apparently
was that Martini discerned, or thought he discerned the
possibility of shifting the risk so as to make it fall upon the
ships company.
5. With reference to the practicability of discharging the cargo in
the late afternoon or evening of Saturday, September 16,
before the ship departed, as it did at 8 p.m. some evidence
was introduced tending to show that in order to get the cargo
off certain formalities were necessary which could not be
accomplished, as for instance, the return of the mates receipt
(which had not yet come to the Plaintiffs hands), the securing
of a permit from the customs authorities, and the securing of
an order of discharge from the steamship company. In view of
the fact that the Plaintiff did nothing whatever looking towards
the discharge of the cargo, not even so much as to notify
Macondray & Company that the cargo must come off, the
proof relative to the practicability of discharge is inconclusive.
Page 21 of 62

If the Plaintiff had promptly informed Macondray & Company


of their resolve to have the cargo discharged, and the latter
had nevertheless permitted the ship to sail without discharging
it, there would have been some ground for Plaintiffs
contention that its consent had not been given for the goods to
be carried on deck. Needless to say we attach no weight to
the statement of Codina that he was unable to get Macondray
& Company by telephone in order to communicate directions
for the discharge of the cargo.
6. The evidence submitted in behalf of the Defendant shows that
there was no space in the hold to take the cargo; and it was
therefore unnecessary to consider whether the chemicals to
be shipped were of an explosive or inflammable character,
such as to require stowage on deck. By reason of the fact that
the cargo had to be carried on deck at all events, if carried at
all, the guaranty Exhibit D-C was so drawn as to permit
stowage either on or under deck at the ships option; and the
attention of Codina must have been drawn to this provision
because Macondray & Company refused to issue the bills of
lading upon a guaranty signed by Codina upon another form
(Exhibit R), which contained no such provision. The
messenger between the two establishments who was sent for
the bills of lading accordingly had to make a second trip and
go back for a letter of guaranty signed upon the desired form.
The pretense of Codina that he was deceived into signing a
document different from that which he supposed himself to be
signing is wholly unsustained.
7. The result of the discussion is that Martini & Company must
be held to have assented to the shipment of the cargo on deck
and that they are bound by the bills of lading in the form in
which they were issued.
- The trial court in our opinion erred in holding otherwise,
and in particular by ignoring, or failing to give sufficient
weight to the contract of guaranty.
HELD (Liability of Defendant Company): Not liable. Negligence
not alleged or proved. Damage caused by rain/sea water.
1. Having determined that the Plaintiff consented to the shipment
of the cargo on deck, we proceed to consider whether the
Defendant can be held liable for the damage which befell the
cargo in question.
- It of course goes without saying that if a clean bill of
lading had been issued and the Plaintiff had not
consented for the cargo to go on deck, the ships
company would have been liable for all damage which
resulted from the carriage on deck.
2. In the case of The Paragon (1 Ware, 326; 18 Fed. Cas. No.
10708), decided in 1836 in one of the district courts of the
United States, it appeared that cargo was shipped from
Boston, Massachusetts, to Portland, Maine, upon what is
called a clean bill of lading, that is, one in the common
form without any memorandum in the margin or on its face
showing that the goods are to be carried on deck. It was
proved that the shipper had not given his consent for carriage
on deck. Nevertheless, the master stowed the goods on deck;
and a storm having arisen, it became necessary to jettison
them. None of the cargo in the hold was lost. It was thus
evident that although the cargo in question was lost by peril of
the sea, it would not have been lost except for the fact that it
was being carried on deck. It was held that the ship was liable.
In the course of the opinion the following language was used:
It is contended that the goods, in this case, having been lost
by the dangers of the seas, both the master and the vessel
are exempted from responsibility within the common
exemption in bills of lading; and the goods having been thrown
overboard from necessity, and for the safety of the vessel and

cargo, as well as the lives of the crew, that it presents a case


for a general average or contribution, upon the common
principle that when a sacrifice is made for the benefit of all,
that the loss shall be shared by all. . . . In every contract of
affreightment, losses by the dangers of the seas are excepted
from the risks which the master takes upon himself, whether
the exception is expressed in the contract or not. The
exception is made by the law, and falls within the general
principle that no one is responsible for fortuitous events and
accidents of major force. Casus fortuitous nemo praestat. But
then the general law is subject to an exception, that when the
inevitable accident is preceded by a fault of the debtor or
person bound without which it would not have happened, then
he becomes responsible for it. (Pothier, des Obligations, No.
542; Pret. a Usage, No. 57; Story, Bailm., c. 4, No. 241; In
Majorious casibus si culpa ejus interveniat tenetur; Dig. 44, 7,
1, s. 4.)
- The master is responsible for the safe and proper
stowage of the cargo, and there is no doubt that by the
general maritime law he is bound to secure the cargo
safely under deck. . . . If the master carries goods on
deck without the consent of the shipper . . . he does it at
his own risk. If they are damaged or lost in consequence
of their being thus exposed, he cannot protect himself
from responsibility by showing that they were damaged
or lost by the dangers of the seas. . . . When the shipper
consents to his goods being carried on deck, he takes
the risk upon himself of these peculiar perils. . . . This is
the doctrine of all the authorities, ancient and modern.
- Van Horn vs. Taylor (2 La. Ann., 587; 46 Am. Dec., 558),
was a case where goods stowed on deck were lost in a
collision. The court found that the ship carrying these
goods was not at fault, and that the shipper had notice of
the fact that the cargo was being carried on deck. It was
held that the ship was not liable. Said the court: It is said
that the Plaintiffs goods were improperly stowed on
deck; that the deck load only was thrown overboard by
the collision, the cargo in the hold not being injured. The
goods were thus laden with the knowledge and implied
approbation of the Plaintiff. He was a passenger on
board the steamer, and does not appear to have made
any objection to the goods being thus carried, though the
collision occurred several days after the steamer
commenced her voyage.
3. In the case of The Thomas P. Thorn (8 Ben., 3; 23 Fed., Cas.
No. 13927), decided in the District Court in the State of New
York, it appeared that tobacco was received upon a canal
boat, with the understanding that it was to be carried on deck,
covered with tarpaulins. Upon arrival at its destination it was
found damaged by water, for the most part on the top, and
evidently as a consequence of rains. At the same time a
quantity of malt stowed below deck on the same voyage was
uninjured. In discussing the question whether upon a contract
to carry on deck, the vessel was liable for the wetting of the
tobacco, the court said:
- It is manifest that the injury to the tobacco arose simply
from the fact that it was carried on deck. The malt,
carried below, although an article easily injured, received
no damage, and the voyage was performed with usual
care, and without disaster. Indeed, there is evidence of a
statement by the libelant, that tobacco must of necessity
be injured by being carried on deck. But, under a
contract to carry upon deck, the risk of any damage
resulting from the place of carriage rests upon the
shipper, and, without proof of negligence causing the
damage, there can be no recovery. Here the evidence
Page 22 of 62

4.

5.

6.

7.

shows that all reasonable care was taken of the tobacco


during its transportation; that the manner of stowing and
covering it was known to and assented to by the shipper;
and the inference is warranted that the injury arose,
without fault of the carrier, from rain, to which
merchandise transported on deck must necessarily be in
some degree exposed. Any loss arising from damaged
thus occasioned is to be borne by the shipper.
Lawrence vs. Minturn (17 How [U.S,], 100; 15 L ed., 58), was
a case where goods stowed on deck with the consent of the
shipper were jettisoned during a storm at sea. In discussing
whether this cargo was entitled to general average, the
Supreme Court of the United States said:
- The maritime codes and writers have recognized the
distinction between cargo placed on deck, with the
consent of the shipper, and cargo under deck.
- There is not one of them which gives a recourse against
the master, the vessel, or the owners, if the property lost
had been placed on deck with the consent of its owner,
and they afford very high evidence of the general and
appropriate usages, in this particular, of merchants and
shipowners.
- So the courts of this country and England, and the
writers on this subject, have treated the owner of goods
on deck, with his consent, as not having a claim on the
master or owner of the ship in case of jettison. The
received law, on the point, is expressed by Chancellor
Kent, with his usual precision, in 3 Com., 240: Nor is the
carrier in that case (Jettison of deck load) responsible to
the owner, unless the goods were stowed on deck
without the consent of the owner, or a general custom
binding him, and then he would be chargeable with the
loss.
In Gould vs. Oliver (4 Bing., N. C., 132), decided in the
English Court of Common Pleas in 1837, Tindal, C.J., said:
- IMPT: Where the loading on deck has taken place with
the consent of the merchant, it is obvious that no remedy
against the shipowner or master for a wrongful loading of
the goods on deck can exist. The foreign authorities are
indeed express; on that point. And the general rule of the
English law, that no one can maintain an action for a
wrong, where he has consented or contributed to the act
which occasioned his loss, leads to the same
conclusion.
IMPT/CAB: The foregoing authorities fully sustain the
proposition that where the shipper consents to have his goods
carried on deck he takes the risks of any damage or loss
sustained as a consequence of their being so carried. In the
present case it is indisputable that the goods were injured
during the voyage and solely as a consequence of their being
on deck, instead of in the ships hold. The loss must therefore
fall on the owner. And this would be true, under the authorities,
even though paragraph 19 of the bills of lading, quoted near
the beginning of this opinion, had not been made a term of the
contract.
It is undoubtedly true that, upon general principle, and
momentarily ignoring paragraph 19 of these bills of lading, the
ships owner might be held liable for any damage directly
resulting from a negligent failure to exercise the care properly
incident to the carriage of the merchandise on deck. For
instance, if it had been improperly placed or secured, and had
been swept overboard as a proximate result of such lack of
care, the ship would be liable, to the same extent as if the
cargo had been deliberately thrown over without justification.
So, if it had been shown that, notwithstanding the stowage of
these goods on deck, the damage could have been

8.

9.

10.

11.

prevented, by the exercise of proper skill and diligence in the


discharge of the duties incumbent on the ship, the owner
might still be held.
To put the point concretely, let it be supposed that a custom
had been proved among mariners to protect deck cargo from
the elements by putting a tarpaulin over it; or approaching still
more to imaginable conditions in the present case, let it be
supposed that the persons charged with the duty of
transporting this cargo, being cognizant of the probability of
damage by water, had negligently and without good reason
failed to exercise reasonable care to protect it by covering it
with tarpaulins. In such case it could hardly be denied that the
ships company should be held liable for such damage as
might have been avoided by the use of such precaution.
CAB: But it should be borne in mind in this connection that it
is incumbent on the Plaintiff, if his cause of action is founded
on negligence of this character, to allege and prove that the
damage suffered was due to failure of the persons in charge
of the cargo to use the diligence properly incident to carriage
under these conditions.
In Clark vs. Barnwell (12 How. [U.S.], 272; 13 L. ed., 985), the
Supreme Court distinguishes with great precision between the
situation where the burden of proof is upon the shipowner to
prove that the loss resulted from an excepted peril and that
where the burden of proof is upon the owner of the cargo to
prove that the loss was caused by negligence on the part of
the persons employed in the conveyance of the goods. The
first two syllabi in Clark vs. Barnwell read as follows:
- Where goods are shipped and the usual bill of lading
given, promising to deliver them in good order, the
dangers of the seas excepted, and they are found to be
damaged the onus probandi is upon the owners of the
vessel, to show that the injury was occasioned by one of
the excepted causes.
- But, although the injury may have been occasioned by
one of the excepted causes, yet still the owners of the
vessel are responsible if the injury might have been
avoided, by the exercise of reasonable skill and attention
on the part of the persons employed in the conveyance
of the goods. But the onus probandi then becomes
shifted upon the shipper, to show the negligence.
- The case just referred to was one where cotton thread,
put up in boxes, had deteriorated during a lengthy
voyage in a warm climate, owing to dampness and
humidity. In discussing the question of the responsibility
of the ships owner, the court said: Notwithstanding,
therefore, the proof was clear that the damage was
occasioned by the effect of the humidity and dampness
of the vessel, which is one of the dangers of navigation,
it was competent for the libelants to show that the
Respondents might have prevented it by proper skill and
diligence in the discharge of their duties; but no such
evidence is found in the record. For caught that appears
every precaution was taken that is usual or customary, or
known to shipmasters, to avoid the damage in question.
And hence we are obliged to conclude that it is to be
attributed exclusively to the dampness of the atmosphere
of the vessel, without negligence or fault on the part of
the master or owners.
CAB: Exactly the same words might be used as applicable to
the facts of the present case; and as it is apparent that the
damage here was caused by rain and sea water the risk of
which is inherently incident to carriage on deck the
Defendant cannot be held liable. It is not permissible for the
court, in the absence of any allegation or proof of negligence,
to attribute negligence to the ships employees in the matter of
Page 23 of 62

protecting the goods from rains and storms. The complaint on


the contrary clearly indicates that the damage done was due
to the mere fact of carriage on deck, no other fault or
delinquency on the part of anybody being alleged.
12. It will be observed that by the terms of paragraph 19 of the
bills of lading, the ship is not to be held liable, in the case of
goods signed for as carried on deck, for any loss or damage
from any cause whatever. We are not to be understood as
holding that this provision would have protected the ship from
liability for the consequences of negligent acts, if negligence
had been alleged and proved. From the discussion in Manila
Railroad Co. vs. Compania Transatlantica and Atlantic, Gulf &
Pacific Co. (38 Phil. Rep., 875), it may be collected that the
carrier would be held liable in such case, notwithstanding the
exemption contained in paragraph 19. But however that may
be damages certainly cannot be recovered on the ground of
negligence, even from a carrier, where negligence is neither
alleged nor proved.
DISPOSITIVE: The judgment appealed from is reversed and the

Defendant is absolved from the complaint. No express


pronouncement will be made as to the costs of either instance. SO
ORDERED.
Delivery

Saludo, Jr. v. CA, 207 SCRA 499 (1992)


G.R. No. 95536 March 23, 1992
ANICETO G. SALUDO, JR., MARIA SALVACION SALUDO, LEOPOLDO
G. SALUDO and SATURNINO G. SALUDO, petitioners,
vs.
HON. COURT OF APPEALS, TRANS WORLD AIRLINES, INC., and
PHILIPPINE AIRLINES, INC., respondents.
REGALADO, J.:
NATURE: Assailed in this petition for review on certiorari is the decision in
CA-G.R. CV No. 20951 of respondent Court of Appeals 1 which affirmed
the decision of the trial court 2 dismissing for lack of evidence herein
petitioners' complaint in Civil Case No R-2101 of the then Court of First
Instance of Southern Leyte, Branch I.
SWITCHED DEAD BODY
DOCTRINE:
The oft-repeated rule regarding a carrier's liability for delay is that in the
absence of a special contract, a carrier is not an insurer against delay in
transportation of goods. When a common carrier undertakes to convey
goods, the law implies a contract that they shall be delivered at
destination within a reasonable time, in the absence, of any agreement as
to the time of delivery. But where a carrier has made an express contract
to transport and deliver properly within a specified time, it is bound to fulfill
its contract and is liable for any delay, no matter from what cause it may
have arisen. This result logically follows from the well-settled rule that
where the law creates a duty or charge, and the default in himself, and
has no remedy over, then his own contract creates a duty or charge upon
himself, he is bound to make it good notwithstanding any accident or
delay by inevitable necessity because he might have provided against it
by contract. Whether or not there has been such an undertaking on the
part of the carrier is to be determined from the circumstances surrounding
the case and by application of the ordinary rules for the interpretation of
contracts.
DIGEST:
1. The mother of the petitioners died in Chicago, Illinois.
2. So a Funeral Home in Chicago made the necessary preparations for
the shipment of the remains to the Philippines. It brought the remains
to the Continental Mortuary Air Services (CMAS) at the Chicago

Airport which made the necessary arrangements such as flights,


transfers, etc. CMAS booked the shipment with PAL thru the carriers
agent Air Care International. PAL Airway Bill Ordinary was issued
wherein the requested routing was from Chicago to San Francisco on
board Trans World Airline (TWA) and from San Francisco to Manila
on board PAL.
3. One of the petitioners, upon arrival at San Francisco, went to the
TWA to inquire about her mothers remains. But she was told they did
not know anything about it. She then called the Funeral Home to tell
them that her mothers remains were not at the West Coast terminal.
The Funeral Home immediately called CMAS which informed that the
remains were on a plane to Mexico City, that there were 2 bodies at
the terminal, and somehow they were switched.
4. Petitioners filed a complaint against TWA and PAL for the
misshipment and delay.
5. Petitioners alleged that Private Respondents received the casketed
remains of Crispina on October 26, 1976, as evidenced by the
issuance of PAL Airway Bill by Air Care and from said date, Private
Respondents were charged with the responsibility to exercise
extraordinary diligence so much so that the alleged switching of the
caskets on October 27, 1976, or one day after the private
respondents received the cargo, the latter must necessarily be liable.
ISSUE:
Whether there was delivery of the cargo upon mere issuance of the
airway bill NO.
HELD: NO to both, but TWA was held to pay petitioners nominal
damages of P40,000 for its violation of the degree of diligence required by
law to be exercised by every common carrier
1. Ordinarily, a receipt is not essential to a complete delivery of goods
to the carrier for transportation but, when issued, is competent and
prima facie, but not conclusive, evidence of delivery to the carrier. A
bill of lading, when properly executed and delivered to a shipper, is
evidence that the carrier has received the goods described therein for
shipment. Except as modified by statute, it is a general rule as to the
parties to a contract of carriage of goods in connection with which a
bill of lading is issued reciting that goods have been received for
transportation, that the recital being in essence a receipt alone, is not
conclusive, but may be explained, varied or contradicted by parol or
other evidence.
2. In other words, on October 26, 1976 the cargo containing the
casketed remains was booked for PAL Flight Number PR-107 leaving
San Francisco for Manila on October 27, 1976, PAL Airway Bill No.
079-01180454 was issued, not as evidence of receipt of delivery of
the cargo on October 26, 1976, but merely as a confirmation of the
booking thus made for the San Francisco-Manila flight scheduled on
October 27, 1976. Actually, it was not until October 28, 1976 that PAL
received physical delivery of the body at San Francisco, as duly
evidenced by the Interline Freight Transfer Manifest of the American
Airline Freight System and signed for by Virgilio Rosales at 1945H, or
7:45 P.M. on said date.
3. Explicit is the rule under Article 1736 of the Civil Code that the
extraordinary responsibility of the common carrier begins from the
time the goods are delivered to the carrier. This responsibility
remains in full force and effect even when they are temporarily
unloaded or stored in transit, unless the shipper or owner exercises
the right of stoppage in transitu, and terminates only after the lapse of
a reasonable time for the acceptance, of the goods by the consignee
or such other person entitled to receive them. And, there is delivery to
the carrier when the goods are ready for and have been placed in the
exclusive possession, custody and control of the carrier for the
purpose of their immediate transportation and the carrier has
accepted them. Where such a delivery has thus been accepted by
the carrier, the liability of the common carrier commences eo instanti.
4. Hence, while we agree with petitioners that the extraordinary
diligence statutorily required to be observed by the carrier
instantaneously commences upon delivery of the goods thereto, for
such duty to commence there must in fact have been delivery of the
cargo subject of the contract of carriage. Only when such fact of
delivery has been unequivocally established can the liability for loss,
destruction or deterioration of goods in the custody of the carrier,
Page 24 of 62

absent the excepting causes under Article 1734, attach and the
presumption of fault of the carrier under Article 1735 be invoked.
5. As already demonstrated, the facts in the case at bar belie the
averment that there was delivery of the cargo to the carrier on
October 26, 1976. Rather, as earlier explained, the body intended to
be shipped as agreed upon was really placed in the possession and
control of PAL on October 28, 1976 and it was from that date that
private respondents became responsible for the agreed cargo under
their undertakings in PAL Airway Bill No. 079-01180454.
Consequently, for the switching of caskets prior thereto which was
not caused by them, and subsequent events caused thereby, private
respondents cannot be held liable.
6. The oft-repeated rule regarding a carrier's liability for delay is that in
the absence of a special contract, a carrier is not an insurer against
delay in transportation of goods. When a common carrier undertakes
to convey goods, the law implies a contract that they shall be
delivered at destination within a reasonable time, in the absence, of
any agreement as to the time of delivery. But where a carrier has
made an express contract to transport and deliver property within a
specified time, it is bound to fulfill its contract and is liable for any
delay, no matter from what cause it may have arisen. This result
logically follows from the well-settled rule that where the law creates
a duty or charge, and the party is disabled from performing it without
any default in himself, and has no remedy over, then the law will
excuse him, but where the party by his own contract creates a duty or
charge upon himself, he is bound to make it good notwithstanding
any accident or delay by inevitable necessity because he might have
provided against it by contract. Whether or not there has been such
an undertaking on the part of the carrier to be determined from the
circumstances surrounding the case and by application of the
ordinary rules for the interpretation of contracts.
7. A common carrier undertaking to transport property has the implicit
duty to carry and deliver it within reasonable time, absent any
particular stipulation regarding time of delivery, and to guard against
delay. In case of any unreasonable delay, the carrier shall be liable
for damages immediately and proximately resulting from such neglect
of duty. As found by the trial court, the delay in the delivery of the
remains of Crispina Saludo, undeniable and regrettable as it was,
cannot be attributed to the fault, negligence or malice of private
respondents, a conclusion concurred in by respondent court and
which we are not inclined to disturb.
x

3.

4.
5.

6.

7.

FACTS:
1. The facts, as recounted by the court a quo and adopted by
respondent court after "considering the evidence on record," are as
follows: After the death of plaintiffs' mother, Crispina Galdo Saludo, in
Chicago Illinois, (on) October 23, 1976 (Exh. A), Pomierski and Son
Funeral Home of Chicago, made the necessary preparations and
arrangements for the shipment, of the remains from Chicago to the
Philippines. The funeral home had the remains embalmed (Exb. D)
and secured a permit for the disposition of dead human body on
October 25, 1976 (Exh. C), Philippine Vice Consul in Chicago,
Illinois, Bienvenido M. Llaneta, at 3:00 p.m. on October 26, 1976 at
the Pomierski & Son Funeral Home, sealed the shipping case
containing a hermetically sealed casket that is airtight and waterproof
wherein was contained the remains of Crispina Saludo Galdo (sic)
(Exb. B). On the same date, October 26, 1976, Pomierski brought the
remains to C.M.A.S. (Continental Mortuary Air Services) at the airport
(Chicago) which made the necessary arrangements such as flights,
transfers, etc.; C.M.A.S. is a national service used by undertakers to
throughout the nation (U.S.A.), they furnish the air pouch which the
casket is enclosed in, and they see that the remains are taken to the
proper air freight terminal (Exh. 6-TWA).
2. C.M.A.S. booked the shipment with PAL thru the carrier's agent Air
Care International, with Pomierski F.H. as the shipper and Mario
(Maria) Saludo as the consignee. PAL Airway Bill No. 079-01180454
Ordinary was issued wherein the requested routing was from
Chicago to San Francisco on board TWA Flight 131 of October 27,
1976 and from San Francisco to Manila on board PAL Flight No. 107

8.

9.

10.

of the same date, and from Manila to Cebu on board PAL Flight 149
of October 29, 1976 (See Exh. E., Also Exh. 1-PAL).
In the meantime, plaintiffs Maria Salvacion Saludo and Saturnino
Saludo, thru a travel agent, were booked with United Airlines from
Chicago to California, and with PAL from California to Manila. She
then went to the funeral director of Pomierski Funeral Home who had
her mother's remains and she told the director that they were booked
with United Airlines. But the director told her that the remains were
booked with TWA flight to California. This upset her, and she and her
brother had to change reservations from UA to the TWA flight after
she confirmed by phone that her mother's remains should be on that
TWA flight. They went to the airport and watched from the look-out
area. She saw no body being brought. So, she went to the TWA
counter again, and she was told there was no body on that flight.
Reluctantly, they took the TWA flight upon assurance of her cousin,
Ani Bantug, that he would look into the matter and inform her about it
on the plane or have it radioed to her. But no confirmation from her
cousin reached her that her mother was on the West Coast.
Upon arrival at San Francisco at about 5:00 p.m., she went to the
TWA counter there to inquire about her mother's remains. She was
told they did not know anything about it.
She then called Pomierski that her mother's remains were not at the
West Coast terminal, and Pomierski immediately called C.M.A.S.,
which in a matter of 10 minutes informed him that the remains were
on a plane to Mexico City, that there were two bodies at the terminal,
and somehow they were switched; he relayed this information to Miss
Saludo in California; later C.M.A.S. called and told him they were
sending the remains back to California via Texas (see Exh. 6-TWA).
It-turned out that TWA had carried a shipment under PAL Airway Bill
No. 079-ORD-01180454 on TWA Flight 603 of October 27, 1976, a
flight earlier than TWA Flight 131 of the same date. TWA delivered or
transferred the said shipment said to contain human remains to PAL
at 1400H or 2:00 p.m. of the same date, October 27, 1976 (Bee Exh.
1- TWA). "Due to a switch(ing) in Chicago", this shipment was
withdrawn from PAL by CMAS at 1805H (or 6:05 p.m.) of the same
date, October 27 (Exh. 3-PAL, see Exh. 3-a-PAL).
What transpired at the Chicago (A)irport is explained in a memo or
incident report by Pomierski (Exh. 6-TWA) to Pomierski's lawyers
who in turn referred to said' memo and enclosed it in their
(Pomierski's lawyers) answer dated July 18, 1981 to herein plaintiff's
counsel (See Exh. 5-TWA). In that memo or incident report (Exh. 6TWA), it is stated that the remains (of Crispina Saludo) were taken to
CMAS at the airport; that there were two bodies at the (Chicago
Airport) terminal, and somehow they were switched, that the remains
(of Crispina Saludo) were on a plane to Mexico City; that CMAS is a
national service used by undertakers throughout the nation (U.S.A.),
makes all the necessary arrangements, such as flights, transfers,
etc., and see(s) to it that the remains are taken to the proper air
freight terminal.
The following day October 28, 1976, the shipment or remains of
Crispina Saludo arrived (in) San Francisco from Mexico on board
American Airlines. This shipment was transferred to or received by
PAL at 1945H or 7:45 p.m. (Exh. 2-PAL, Exh. 2-a-PAL). This casket
bearing the remains of Crispina Saludo, which was mistakenly sent to
Mexico and was opened (there), was resealed by Crispin F. Patagas
for shipment to the Philippines (See Exh. B-1). The shipment was
immediately loaded on PAL flight for Manila that same evening and
arrived (in) Manila on October 30, 1976, a day after its expected
arrival on October 29, 1976. 3
In a letter dated December 15, 1976, 4 petitioners' counsel informed
private respondent Trans World Airlines (TWA) of the misshipment
and eventual delay in the delivery of the cargo containing the remains
of the late Crispin Saludo, and of the discourtesy of its employees to
petitioners Maria Salvacion Saludo and Saturnino Saludo. In a
separate letter on June 10, 1977 addressed to co-respondent
Philippine Airlines (PAL), 5 petitioners stated that they were holding
PAL liable for said delay in delivery and would commence judicial
action should no favorable explanation be given.
Both private respondents denied liability. Thus, a damage suit was
filed by petitioners before the then Court of First Instance, Branch III,
Leyte, praying for the award of actual damages of P50,000.00, moral
damages of P1,000,000.00, exemplary damages, attorney's fees and
costs of suit.
Page 25 of 62

11. CFI: As earlier stated, the court below absolved the 2 respondent
airlines companies of liability.
12. CA: The Court of Appeals affirmed the decision of the lower court in
toto, and in a subsequent resolution, 7 denied herein petitioners'
motion for reconsideration for lack of merit.
ISSUE:
1. Whether the delay in the delivery of the casketed remains of was due
to the fault of respondent airline companies
NO. Reliance on airway bill. Fault of CMAS (Letter of
Petitioners = Admission)
2. Whether the 1-day delay in the delivery of the same constitutes
contractual breach as would entitle petitioners to damages
NO. No special or specific contract had been entered
into, the airway bill was clear (no specific airplane etc).
Put on an earlier flight to give more time to assure arrival.
3. Whether damages are recoverable by petitioners for the humiliating,
arrogant and indifferent acts of the employees of TWA and PAL
NO. PAL employees were not rude. It was from the PAL
employees that Petitioners knew the status of transfer.
4. Whether private respondents should be held liable for actual, moral
and exemplary damages, aside from attorney's fees and litigation
expenses.
Nominal damages. No bad faith.
HELD:
1. I. Petitioners fault respondent court for "not finding that private
respondents failed to exercise extraordinary diligence required by law
which resulted in the switching and/or misdelivery of the remains of
Crispina Saludo to Mexico causing gross delay in its shipment to the
Philippines, and consequently, damages to petitioners."
2. Petitioner allege that private respondents received the casketed
remains of petitioners' mother on October 26, 1976, as evidenced by
the issuance of PAL Air Waybill No. 079-01180454 18 by Air Care
International as carrier's agent; and from said date, private
respondents were charged with the responsibility to exercise
extraordinary diligence so much so that for the alleged switching of
the caskets on October 27, 1976, or one day after private
respondents received the cargo, the latter must necessarily be liable.
3. IMPT: To support their assertion, petitioners rely on the jurisprudential
dictum, both under American and Philippine law, that "(t)he issuance
of a bill of lading carries the presumption that the goods were
delivered to the carrier issuing the bill, for immediate shipment, and it
is nowhere questioned that a bill of lading is prima facie evidence of
the receipt of the goods by the carrier. . . . In the absence of
convincing testimony establishing mistake, recitals in the bill of lading
showing that the carrier received the goods for shipment on a
specified date control (13 C.J.S. 235)."
4. IMPT: A bill of lading is a written acknowledgment of the receipt of
the goods and an agreement to transport and deliver them at a
specified place to a person named or on his order. Such instrument
may be called a shipping receipt, forwarder's receipt and receipt for
transportation. The designation, however, is immaterial. It has been
hold that freight tickets for bus companies as well as receipts for
cargo transported by all forms of transportation, whether by sea or
land, fall within the definition. Under the Tariff and Customs Code, a
bill of lading includes airway bills of lading.
- The two-fold character of a bill of lading is all too familiar; it
is a receipt as to the quantity and description of the goods
shipped and a contract to transport the goods to the consignee
or other person therein designated, on the terms specified in
such instrument. 22
5. IMPT: Logically, since a bill of lading acknowledges receipt of goods
to be transported, delivery of the goods to the carrier normally
precedes the issuance of the bill; or, to some extent, delivery of the
goods and issuance of the bill are regarded in commercial practice as
simultaneous acts. However, except as may be prohibited by law,
there is nothing to prevent an inverse order of events, that is, the
execution of the bill of lading even prior to actual possession and
control by the carrier of the cargo to be transported. There is no law
which requires that the delivery of the goods for carriage and the
issuance of the covering bill of lading must coincide in point of time
or, for that matter, that the former should precede the latter.

6. IMPT: Ordinarily, a receipt is not essential to a complete delivery of


goods to the carrier for transportation but, when issued, is competent
and prima facie, but not conclusive, evidence of delivery to the
carrier. A bill of lading, when properly executed and delivered to a
shipper, is evidence that the carrier has received the goods described
therein for shipment. Except as modified by statute, it is a general
rule as to the parties to a contract of carriage of goods in connection
with which a bill of lading is issued reciting that goods have been
received for transportation, that the recital being in essence a receipt
alone, is not conclusive, but may be explained, varied or contradicted
by parol or other evidence.
7. While we agree with petitioners' statement that "an airway bill estops
the carrier from denying receipt of goods of the quantity and quality
described in the bill," a further reading and a more faithful quotation
of the authority cited would reveal that "(a) bill of lading may contain
constituent elements of estoppel and thus become something more
than a contract between the shipper and the carrier. . . . (However),
as between the shipper and the carrier, when no goods have been
delivered for shipment no recitals in the bill can estop the carrier from
showing the true facts . . . Between the consignor of goods and
receiving carrier, recitals in a bill of lading as to the goods shipped
raise only a rebuttable presumption that such goods were delivered
for shipment. As between the consignor and a receiving carrier, the
fact must outweigh the recital." 25 (Emphasis supplied)
8. For this reason, we must perforce allow explanation by private
respondents why, despite the issuance of the airway bill and the date
thereof, they deny having received the remains of Crispina Saludo on
October 26, 1976 as alleged by petitioners.
9. The findings of the trial court, as favorably adopted by the Court of
Appeals and which we have earner quoted, provide us with the
explanation that sufficiently over comes the presumption relied on by
petitioners in insisting that the remains of their mother were delivered
to and received by private respondents on October 26, 1976. Thus
. . . Philippine Vice Consul in Chicago, Illinois, Bienvenido M. Llaneta,
at 3:00 p.m. on October 26, 1976 at the Pomierski & Son Funeral
Home, sealed the shipping case containing a hermetically sealed
casket that is airtight and waterproof wherein was contained the
remains of Crispina Saludo Galdo (sic) (Exh. B). On the same date
October 26, 1976, Pomierski brought the remains to C.M.A.S.
(Continental Mortuary Air Services) at the airport (Chicago) which
made the necessary arrangements such as flights, transfers, etc;
C.M.A.S. is a national service used by undertakers throughout the
nation (U.S.A.), they furnish the air pouch which the casket is
enclosed in, and they see that the remains are taken to the proper air
freight terminal (Exh. G-TWA). C.M.A.S. booked the shipment with
PAL thru the carrier's agent Air Care International, with Pomierski
F.H. as the shipper and Mario (Maria) Saludo as the consignee. PAL
Airway Bill No. 079- 01180454 Ordinary was issued wherein the
requested routing was from Chicago to San Francisco on board TWA
Flight-131 of October 27;1976, and from San Francisco to Manila on
board PAL Flight No. 107 of the same date, and from Manila to Cebu
on board PAL Flight 149 of October 29, 1976 (See Exh. E, also Exh.
1-PAL). 26 (Emphasis ours.)
10. Moreover, we are persuaded to believe private respondent PAL's
account as to what transpired October 26, 1976: . . . Pursuant
thereto, on 26 October 1976, CMAS acting upon the instruction of
Pomierski, F.H., the shipper requested booking of the casketed
remains of Mrs. Cristina (sic) Saludo on board PAL's San FranciscoManila Flight No. PR 107 on October 27, 1976. 2. To signify
acceptance and confirmation of said booking, PAL issued to said
Pomierski F.H., PAL Airway Bill No. 079-01180454 dated October 27,
1976 (sic, "10/26/76"). PAL confirmed the booking and transporting of
the shipment on board of its Flight PR 107 on October 27, 1976 on
the basis of the representation of the shipper and/or CMAS that the
said cargo would arrive in San Francisco from Chicago on board
United Airlines Flight US 121 on 27 October 1976.
11. CAB: In other words, on October 26, 1976 the cargo containing the
casketed remains of Crispina Saludo was booked for PAL Flight
Number PR-107 leaving San Francisco for Manila on October 27,
1976, PAL Airway Bill No. 079-01180454 was issued, not as evidence
of receipt of delivery of the cargo on October 26, 1976, but merely as
a confirmation of the booking thus made for the San FranciscoManila flight scheduled on October 27, 1976. Actually, it was not until
Page 26 of 62

12.

13.

14.

15.

October 28, 1976 that PAL received physical delivery of the body at
San Francisco, as duly evidenced by the Interline Freight Transfer
Manifest of the American Airline Freight System and signed for by
Virgilio Rosales at 1945H, or 7:45 P.M. on said date.
IMPT: Explicit is the rule under Article 1736 of the Civil Code that the
extraordinary responsibility of the common carrier begins from the
time the goods are delivered to the carrier. This responsibility
remains in full force and effect even when they are temporarily
unloaded or stored in transit, unless the shipper or owner exercises
the right of stoppage in transitu, and terminates only after the lapse of
a reasonable time for the acceptance, of the goods by the consignee
or such other person entitled to receive them. And, there is delivery to
the carrier when the goods are ready for and have been placed in the
exclusive possession, custody and control of the carrier for the
purpose of their immediate transportation and the carrier has
accepted them. Where such a delivery has thus been accepted by
the carrier, the liability of the common carrier commences eo instanti.
Hence, while we agree with petitioners that the extraordinary
diligence statutorily required to be observed by the carrier
instantaneously commences upon delivery of the goods thereto, for
such duty to commence there must in fact have been delivery of the
cargo subject of the contract of carriage. Only when such fact of
delivery has been unequivocally established can the liability for loss,
destruction or deterioration of goods in the custody of the carrier,
absent the excepting causes under Article 1734, attach and the
presumption of fault of the carrier under Article 1735 be invoked.
CAB: As already demonstrated, the facts in the case at bar belie the
averment that there was delivery of the cargo to the carrier on
October 26, 1976. Rather, as earlier explained, the body intended to
be shipped as agreed upon was really placed in the possession and
control of PAL on October 28, 1976 and it was from that date that
private respondents became responsible for the agreed cargo under
their undertakings in PAL Airway Bill No. 079-01180454.
- Consequently, for the switching of caskets prior thereto which
was not caused by them, and subsequent events caused
thereby, private respondents cannot be held liable.
Petitioners, proceeding on the premise that there was delivery of the
cargo to private respondents on October 26,1976 and that the latter's
extraordinary responsibility had by then become operative, insist on
foisting the blame on private respondents for the switching of the two
caskets which occurred on October 27, 1976. It is argued that since
there is no clear evidence establishing the fault Continental Mortuary
Air Services (CMAS) for the mix-up, private respondents are
presumably negligent pursuant to Article 1735 of the Civil Code and,
for failure to rebut such presumption, they must necessarily be held
liable; or, assuming that CMAS was at fault, the same does not
absolve private respondents of liability because whoever brought the
cargo to the airport or loaded it on the plane did so as agent of
private respondents.
- This contention is without merit. As pithily explained by the
Court of Appeals: The airway bill expressly provides that
"Carrier certifies goods described below were received for
carriage", and said cargo was "casketed human remains of
Crispina Saludo," with "Maria Saludo as Consignee; Pomierski
F.H. as Shipper; Air Care International as carrier's agent." On
the face of the said airway bill, the specific flight numbers,
specific routes of shipment and dates of departure and arrival
were typewritten, to wit: Chicago TWA Flight 131/27 to San
Francisco and from San Francisco by PAL 107 on, October 27,
1976 to Philippines and to Cebu via PAL Flight 149 on October
29, 1976. The airway bill also contains the following typewritten
words, as follows: all documents have been examined (sic).
Human remains of Crispina Saludo. Please return back (sic)
first available flight to SFO.
- But, as it turned out and was discovered later the casketed
human remains which was issued PAL Airway Bill
#079-1180454 was not the remains of Crispina Saludo, the
casket containing her remains having been shipped to Mexico
City.
- However, it should be noted that, Pomierski F.H., the shipper of
Mrs. Saludo's remains, hired Continental Mortuary Services
(hereafter referred to as C.M.A.S.), which is engaged in the
business of transporting and forwarding human remains. Thus,

16.

17.

18.

19.

C.M.A.S. made all the necessary arrangements such as flights,


transfers, etc. for shipment of the remains of Crispina
Saludo.
- The remains were taken on October 26th, 1976, to C.M.A.S. at
the airport. These people made all the necessary
arrangements, such as flights, transfers, etc. This is a national
service used by undertakers throughout the nation. They
furnished the air pouch which the casket is enclosed in, and
they see that the remains are taken to the proper air frieght
terminal. I was very surprised when Miss Saludo called me to
say that the remains were not at the west coast terminal. I
immediately called C.M.A.S. They called me back in a matter of
ten minutes to inform me that the remains were on a plane to
Mexico City. The man said that there were two bodies at the
terminal, and somehow they were switched. . . . (Exb. 6
"TWA", which is the memo or incident report enclosed in the
stationery of Walter Pomierski & Sons Ltd.)
- Consequently, when the cargo was received from C.M.A.S. at
the Chicago airport terminal for shipment, which was supposed
to contain the remains of Crispina Saludo, Air Care
International and/or TWA, had no way of determining its actual
contents, since the casket was hermetically sealed by the
Philippine Vice-Consul in Chicago and in an air pouch of
C.M.A.S., to the effect that Air Care International and/or TWA
had to rely on the information furnished by the shipper
regarding the cargo's content. Neither could Air Care
International and/or TWA open the casket for further
verification, since they were not only without authority to do so,
but even prohibited.
CAB: Thus, under said circumstances, no fault and/or negligence
can be attributed to PAL (even if Air Care International should be
considered as an agent of PAL) and/or TWA, the entire fault or
negligence being exclusively with C.M.A.S. It can correctly and
logically be concluded, therefore, that the switching occurred or, more
accurately, was discovered on October 27, 1976; and based on the
above findings of the Court of Appeals, it happened while the cargo
was still with CMAS, well before the same was place in the custody
of private respondents.
Thus, while the Air Cargo Transfer Manifest of TWA of October 27,
1976 34 was signed by Garry Marcial of PAL at 1400H, or 2:00 P.M.,
on the same date, thereby indicating acknowledgment by PAL of the
transfer to them by TWA of what was in truth the erroneous cargo,
said misshipped cargo was in fact withdrawn by CMAS from PAL as
shown by the notation on another copy of said manifest 35 stating
"Received by CMAS Due to switch in Chicago 10/27-1805H," the
authenticity of which was never challenged. This shows that said
misshipped cargo was in fact withdrawn by CMAS from PAL and the
correct shipment containing the body of Crispina Saludo was
received by PAL only on October 28, 1976, at 1945H, or 7:45 P.M.,
per American Airlines Interline Freight Transfer Manifest No.
AA204312. 36
Petitioners consider TWA's statement that "it had to rely on the
information furnished by the shipper" a lame excuse and that its
failure to prove that its personnel verified and identified the contents
of the casket before loading the same constituted negligence on the
part of TWA.
We uphold the favorable consideration by the Court of Appeals of the
following findings of the trial court: It was not (to) TWA, but to
C.M.A.S. that the Pomierski & Son Funeral Home delivered the
casket containing the remains of Crispina Saludo. TWA would have
no knowledge therefore that the remains of Crispina Saludo were not
the ones inside the casket that was being presented to it for
shipment. TWA would have to rely on there presentations of C.M.A.S.
The casket was hermetically sealed and also sealed by the Philippine
Vice Consul in Chicago. TWA or any airline for that matter would not
have opened such a sealed casket just for the purpose of
ascertaining whose body was inside and to make sure that the
remains inside were those of the particular person indicated to be by
C.M.A.S. TWA had to accept whatever information was being
furnished by the shipper or by the one presenting the casket for
shipment. And so as a matter of fact, TWA carried to San Francisco
and transferred to defendant PAL a shipment covered by or under
PAL Airway Bill No. 079-ORD-01180454, the airway bill for the
Page 27 of 62

20.

21.

22.

23.

24.

shipment of the casketed remains of Crispina Saludo. Only, it turned


out later, while the casket was already with PAL, that what was inside
the casket was not the body of Crispina Saludo so much so that it
had to be withdrawn by C.M.A.S. from PAL. The body of Crispina
Saludo had been shipped to Mexico. The casket containing the
remains of Crispina Saludo was transshipped from Mexico and
arrived in San Francisco the following day on board American
Airlines. It was immediately loaded by PAL on its flight for Manila.
CAB: The foregoing points at C.M.A.S., not defendant TWA much
less defendant PAL, as the ONE responsible for the switching or mixup of the two bodies at the Chicago Airport terminal, and started a
chain reaction of the misshipment of the body of Crispina Saludo and
a one-day delay in the delivery thereof to its destination.
CAB: Verily, no amount of inspection by Respondent airline
companies could have guarded against the switching that had
already taken place. Or, granting that they could have opened the
casket to inspect its contents, private respondents had no means of
ascertaining whether the body therein contained was indeed that of
Crispina Saludo except, possibly, if the body was that of a male
person and such fact was visually apparent upon opening the casket.
However, to repeat, Private Respondents had no authority to unseal
and open the same nor did they have any reason or justification to
resort thereto.
IMPT: It is the right of the carrier to require good faith on the part of
those persons who deliver goods to be carried, or enter into contracts
with it, and inasmuch as the freight may depend on the value of the
article to be carried, the carrier ordinarily has the right to inquire as to
its value. Ordinarily, too, it is the duty of the carrier to make inquiry
as to the general nature of the articles shipped and of their value
before it consents to carry them; and its failure to do so cannot defeat
the shipper's right to recovery of the full value of the package if lost,
in the absence of showing of fraud or deceit on the part of the
shipper. In the absence of more definite information, the carrier has a
the right to accept shipper's marks as to the contents of the package
offered for transportation and is not bound to inquire particularly
about them in order to take advantage of a false classification and
where a shipper expressly represents the contents of a package to
be of a designated character, it is not the duty of the carrier to ask for
a repetition of the statement nor disbelieve it and open the box and
see for itself. However, where a common carrier has reasonable
ground to suspect that the offered goods are of a dangerous or illegal
character, the carrier has the right to know the character of such
goods and to insist on an inspection, if reasonable and practical
under the circumstances, as a condition of receiving and transporting
such goods.
IMPT: It can safely be said then that a common carrier is entitled to
fair representation of the nature and value of the goods to be carried,
with the concomitant right to rely thereon, and further noting at this
juncture that a carrier has no obligation to inquire into the correctness
or sufficiency of such information. The consequent duty to conduct an
inspection thereof arises in the event that there should be reason to
doubt the veracity of such representations. Therefore, to be
subjected to unusual search, other than the routinary inspection
procedure customarily undertaken, there must exist proof that would
justify cause for apprehension that the baggage is dangerous as to
warrant exhaustive inspection, or even refusal to accept carriage of
the same; and it is the failure of the carrier to act accordingly in the
face of such proof that constitutes the basis of the common carrier's
liability.
CAB: In the case at bar, private respondents had no reason
whatsoever to doubt the truth of the shipper's representations. The
airway bill expressly providing that "carrier certifies goods received
below were received for carriage," and that the cargo contained
"casketed human remains of Crispina Saludo," was issued on the
basis of such representations. The reliance thereon by private
respondents was reasonable and, for so doing, they cannot be said
to have acted negligently. Likewise, no evidence was adduced to
suggest even an iota of suspicion that the cargo presented for
transportation was anything other than what it was declared to be, as
would require more than routine inspection or call for the carrier to
insist that the same be opened for scrutiny of its contents per
declaration.

25. Neither can private respondents be held accountable on the basis of


petitioners' preposterous proposition that whoever brought the cargo
to the airport or loaded it on the airplane did so as agent of private
respondents, so that even if CMAS whose services were engaged for
the transit arrangements for the remains was indeed at fault, the
liability therefor would supposedly still be attributable to private
respondents.
26. While we agree that the actual participation of CMAS has been
sufficiently and correctly established, to hold that it acted as agent for
private respondents would be both an inaccurate appraisal and an
unwarranted categorization of the legal position it held in the entire
transaction.
27. CAB: It bears repeating that CMAS was hired to handle all the
necessary shipping arrangements for the transportation of the human
remains of Crispina Saludo to Manila. Hence, it was to CMAS that
the Pomierski & Son Funeral Home, as shipper, brought the remains
of petitioners' mother for shipment, with Maria Saludo as consignee.
Thereafter, CMAS booked the shipment with PAL through the
carrier's agent, Air Care International. 45 With its aforestated
functions, CMAS may accordingly be classified as a forwarder
which, by accepted commercial practice, is regarded as an agent of
the shipper and not of the carrier. As such, it merely contracts for the
transportation of goods by carriers, and has no interest in the freight
but receives compensation from the shipper as his agent.
28. At this point, it can be categorically stated that, as culled from the
findings of both the trial court and appellate courts, the entire chain of
events which culminated in the present controversy was not due to
the fault or negligence of private respondents. Rather, the facts of the
case would point to CMAS as the culprit. Equally telling of the more
likely possibility of CMAS' liability is petitioners' letter to and
demanding an explanation from CMAS regarding the statement of
private respondents laying the blame on CMAS for the incident,
portions of which, reading as follows: . . . we were informed that the
unfortunate a mix-up occurred due to your negligence. . . . Likewise,
the two airlines pinpoint the responsibility upon your agents.
Evidence were presented to prove that allegation. On the face of this
overwhelming evidence we could and should have filed a case
against you. . . .
29. CAB: Clearly allude to CMAS as the party at fault. This is tantamount
to an admission by petitioners that they consider private respondents
without fault, or is at the very least indicative of the fact that
petitioners entertained serious doubts as to whether herein private
respondents were responsible for the unfortunate turn of events.
30. Undeniably, petitioners' grief over the death of their mother was
aggravated by the unnecessary inconvenience and anxiety that
attended their efforts to bring her body home for a decent burial. This
is unfortunate and calls for sincere commiseration with petitioners.
But, much as we would like to give them consolation for their
undeserved distress, we are barred by the inequity of allowing
recovery of the damages prayed for by them at the expense of
private respondents whose fault or negligence in the very acts
imputed to them has not been convincingly and legally demonstrated.
31. Neither are we prepared to delve into, much less definitively rule on,
the possible liability of CMAS as the evaluation and adjudication of
the same is not what is presently at issue here and is best deferred to
another time and addressed to another forum.
HELD:
1. II. Petitioners further fault the Court of Appeals for ruling that there
was no contractual breach on the part of private respondents as
would entitle petitioners to damages.
2. Petitioners hold that respondent TWA, by agreeing to transport the
remains of petitioners' mother on its Flight 131 from Chicago to San
Francisco on October 27, 1976, made itself a party to the contract of
carriage and, therefore, was bound by the terms of the issued airway
bill. When TWA undertook to ship the remains on its Flight 603, ten
hours earlier than scheduled, it supposedly violated the express
agreement embodied in the airway bill. It was allegedly this breach of
obligation which compounded, if not directly caused, the switching of
the caskets.
3. In addition, petitioners maintain that since there is no evidence as to
who placed the body on board Flight 603, or that CMAS actually put
the cargo on that flight, or that the two caskets at the Chicago airport
Page 28 of 62

4.

5.

6.

7.

8.

were to be transported by the same airline, or that they came from


the same funeral home, or that both caskets were received by
CMAS, then the employees or agents of TWA presumably caused the
mix-up by loading the wrong casket on the plane. For said error, they
contend, TWA must necessarily be presumed negligent and this
presumption of negligence stands undisturbed unless rebutting
evidence is presented to show that the switching or misdelivery was
due to circumstances that would exempt the carrier from liability.
Private respondent TWA professes otherwise. Having duly delivered
or transferred the cargo to its co-respondent PAL on October 27,
1976 at 2:00 P.M., as supported by the TWA Transfer Manifest, TWA
faithfully complied with its obligation under the airway bill. Said
faithful compliance was not affected by the fact that the remains were
shipped on an earlier flight as there was no fixed time for completion
of carriage stipulated on. Moreover, the carrier did not undertake to
carry the cargo aboard any specified aircraft, in view of the condition
on the back of the airway bill which provides: CONDITIONS OF
CONTRACT: xxx xxx xxx It is agreed that no time is fixed for the
completion of carriage hereunder and that Carrier may without notice
substitute alternate carriers or aircraft. Carrier assumes no obligation
to carry the goods by any specified aircraft or over any particular
route or routes or to make connection at any point according to any
particular schedule, and Carrier is hereby authorized to select, or
deviate from the route or routes of shipment, notwithstanding that the
same may be stated on the face hereof. The shipper guarantees
payment of all charges and advances. Hence, when respondent TWA
shipped the body on earlier flight and on a different aircraft, it was
acting well within its rights. We find this argument tenable.
CAB (No ambiguity): The contention that there was contractual
breach on the part of private respondents is founded on the
postulation that there was ambiguity in the terms of the airway bill,
hence petitioners' insistence on the application of the rules on
interpretation of contracts and documents. We find no such
ambiguity. The terms are clear as to preclude the necessity to probe
beyond the apparent intendment of the contractual provisions.
The hornbook rule on interpretation of contracts consecrates the
primacy of the intention of the parties, the same having the force of
law between them. When the terms of the agreement are clear and
explicit, that they do not justify an attempt to read into any alleged
intention of the parties, the terms are to be understood literally just as
they appear on the face of the contract. The various stipulations of a
contract shall be interpreted together and such a construction is to be
adopted as will give effect to all provisions thereof. A contract cannot
be construed by parts, but its clauses should be interpreted in
relation to one another. The whole contract must be interpreted or
read together in order to arrive at its true meaning. Certain
stipulations cannot be segregated and then made to control; neither
do particular words or phrases necessarily determine the character of
a contract. The legal effect of the contract is not to be determined
alone by any particular provision disconnected from all others, but in
the ruling intention of the parties as gathered from all the language
they have used and from their contemporaneous and subsequent
acts.
CAB: Turning to the terms of the contract at hand, as presented by
PAL Air Waybill No. 079-01180454, respondent court approvingly
quoted the trial court's disquisition on the aforequoted condition
appearing on the reverse side of the airway bill and its disposition of
this particular assigned error: The foregoing stipulation fully answers
plaintiffs' objections to the one-day delay and the shipping of the
remains in TWA Flight 603 instead of TWA Flight 131. Under the
stipulation, parties agreed that no time was fixed to complete the
contract of carriage and that the carrier may, without notice,
substitute alternate carriers or aircraft. The carrier did not assume the
obligation to carry the shipment on any specified aircraft.
Furthermore, contrary to the claim of plaintiffs-appellants, the
conditions of the Air Waybill are big enough to be read and noticed.
Also, the mere fact that the cargo in question was shipped in TWA
Flight 603, a flight earlier on the same day than TWA Flight 131, did
not in any way cause or add to the one-day delay complained of and/
or the switching or mix-up of the bodies.
Indubitably, that private respondent can use substitute aircraft even
without notice and without the assumption of any obligation
whatsoever to carry the goods on any specified aircraft is clearly

9.

10.

11.

12.

13.

14.

15.

sanctioned by the contract of carriage as specifically provided for


under the conditions thereof.
Petitioners' invocation of the interpretative rule in the Rules of Court
that written words control printed words in documents, to bolster their
assertion that the typewritten provisions regarding the routing and
flight schedule prevail over the printed conditions, is tenuous. Said
rule may be considered only when there is inconsistency between the
written and printed words of the contract.
As previously stated, we find no ambiguity in the contract subject of
this case that would call for the application of said rule. In any event,
the contract has provided for such a situation by explicitly stating that
the above condition remains effective "notwithstanding that the same
(fixed time for completion of carriage, specified aircraft, or any
particular route or schedule) may be stated on the face hereof."
While petitioners hinge private respondents' culpability on the fact
that the carrier "certifies goods described below were received for
carriage," they may have overlooked that the statement on the face
of the airway bill properly and completely reads Carrier certifies
goods described below were received for carriage subject to the
Conditions on the reverse hereof the goods then being in apparent
good order and condition except as noted hereon. (Emphasis ours.)
Private respondents further aptly observe that the carrier's
certification regarding receipt of the goods for carriage "was of a
smaller print than the condition of the Air Waybill, including Condition
No. 5 and thus if plaintiffs-appellants had recognized the former,
then with more reason they were aware of the latter.
In the same vein, it would also be incorrect to accede to the
suggestion of petitioners that the typewritten specifications of the
flight, routes and dates of departures and arrivals on the face of the
airway bill constitute a special contract which modifies the printed
conditions at the back thereof. We reiterate that typewritten
provisions of the contract are to be read and understood subject to
and in view of the printed conditions, fully reconciling and giving
effect to the manifest intention of the parties to the agreement.
V. IMPT: The oft-repeated rule regarding a carrier's liability for delay
is that in the absence of a special contract, a carrier is NOT an
insurer against delay in transportation of goods. When a common
carrier undertakes to convey goods, the law implies a contract that
they shall be delivered at destination W/N a reasonable time, in
the absence, of any agreement as to the time of delivery. (BUT)
where a carrier has made an express contract to transport and
deliver property within a specified time, it is bound to fulfill its contract
and is liable for any delay, no matter from what cause it may have
arisen. This result logically follows from the well-settled rule that
where the law creates a duty or charge, and the party is disabled
from performing it without any default in himself, and has no remedy
over, then the law will excuse him, but where the party by his own
contract creates a duty or charge upon himself, he is bound to make
it good notwithstanding any accident or delay by inevitable necessity
because he might have provided against it by contract. Whether or
not there has been such an undertaking on the part of the carrier to
be determined from the circumstances surrounding the case and by
application of the ordinary rules for the interpretation of contracts.
IMPT: Echoing the findings of the trial court, the respondent court
correctly declared that In a similar case of delayed delivery of air
cargo under a very similar stipulation contained in the airway bill
which reads: "The carrier does not obligate itself to carry the goods
by any specified aircraft or on a specified time. Said carrier being
hereby authorized to deviate from the route of the shipment without
any liability therefor", our Supreme Court ruled that common carriers
are not obligated by law to carry and to deliver merchandise, and
persons are not vested with the right to prompt delivery, (UNLESS)
such common carriers previously assume the obligation. Said rights
and obligations are created by a specific contract entered into by
the parties (Mendoza vs. PAL, 90 Phil. 836).
CAB: There is no showing by plaintiffs that such a special or specific
contract had been entered into between them and the defendant
airline companies. And this special contract for prompt delivery
should call the attention of the carrier to the circumstances
surrounding the case and the approximate amount of damages to be
suffered in case of delay (See Mendoza vs. PAL, supra). There was
no such contract entered into in the instant case.
Page 29 of 62

16. Also, the theory of petitioners that the specification of the flights and
dates of departure and arrivals constitute a special contract that
could prevail over the printed stipulations at the back of the airway bill
is vacuous. To countenance such a postulate would unduly burden
the common carrier for that would have the effect of unilaterally
transforming every single bill of lading or trip ticket into a special
contract by the simple expedient of filling it up with the particulars of
the flight, trip or voyage, and thereby imposing upon the carrier duties
and/or obligations which it may not have been ready or willing to
assume had it been timely, advised thereof.
17. Neither does the fact that the challenged condition No. 5 was printed
at the back of the airway bill militate against its binding effect on
petitioners as parties to the contract, for there were sufficient
indications on the face of said bill that would alert them to the
presence of such additional condition to put them on their guard.
Ordinary prudence on the part of any person entering or
contemplating to enter into a contract would prompt even a cursory
examination of any such conditions, terms and/or stipulations.
18. IMPT: There is a holding in most jurisdictions that the acceptance of
a bill of lading without dissent raises a presumption that all terms
therein were brought to the knowledge of the shipper and agreed to
by him, and in the absence of fraud or mistake, he is estopped from
thereafter denying that he assented to such terms. This rule applies
with particular force where a shipper accepts a bill of lading with full
knowledge of its contents, and acceptance under such circumstances
makes it a binding contract. In order that any presumption of assent
to a stipulation in a bill of lading limiting the liability of a carrier may
arise, it must appear that the clause containing this exemption from
liability plainly formed a part of the contract contained in the bill of
lading. A stipulation printed on the back of a receipt or bill of lading or
on papers attached to such receipt will be quite as effective as if
printed on its face, if it is shown that the consignor knew of its terms.
Thus, where a shipper accepts a receipt which states that its
conditions are to be found on the back, such receipt comes within the
general rule, and the shipper is held to have accepted and to be
bound by the conditions there to be found.
19. IMPT: Granting arguendo that Condition No. 5 partakes of the nature
of a contract of adhesion and as such must be construed strictly
against the party who drafted the same or gave rise to any ambiguity
therein, it should be borne in mind that a contract of adhesion may be
struck down as void and unenforceable, for being subversive of
public policy, only when the weaker party is imposed upon in dealing
with the dominant bargaining party and is reduced to the alternative
of taking it or leaving it, completely deprived of the opportunity to
bargain on equal footing. However, Ong Yiu vs. Court of Appeals, et
al. instructs us that contracts of adhesion are not entirely prohibited.
The one who adheres to the contract is in reality free to reject it
entirely; if he adheres, be gives his consent.
20. CAB: Accordingly, petitioners, far from being the weaker party in this
situation, duly signified their presumed assent to all terms of the
contract through their acceptance of the airway bill and are
consequently bound thereby. It cannot be gainsaid that petitioners'
were not without several choices as to carriers in Chicago with its
numerous airways and airliner servicing the same.
21. We wish to allay petitioners' apprehension that Condition No. 5 of the
airway bill is productive of mischief as it would validate delay in
delivery, sanction violations of contractual obligations with impunity or
put a premium on breaches of contract.
22. IMPT: Just because we have said that condition No. 5 of the airway
bill is binding upon the parties to and fully operative in this
transaction, it does not mean, and let this serve as fair warning to
respondent carriers, that they can at all times whimsically seek
refuge from liability in the exculpatory sanctuary of said Condition No.
5 or arbitrarily vary routes, flights and schedules to the prejudice of
their customers. This condition only serves to insulate the carrier
from liability in those instances when changes in routes, flights and
schedules are clearly JUSTIFIED by the peculiar circumstances of a
particular case, or by general transportation practices, customs and
usages, or by contingencies or emergencies in aviation such as
weather turbulence, mechanical failure, requirements of national
security and the like. And even as it is conceded that specific routing
and other navigational arrangements for a trip, flight or voyage, or
variations therein, generally lie within the discretion of the carrier in

23.

24.

25.

26.

the absence of specific routing instructions or directions by the


shipper, it is plainly incumbent upon the carrier to exercise its rights
with due deference to the rights, interests and convenience of its
customers.
IMPT: A common carrier undertaking to transport property has the
implicit duty to carry and deliver it within reasonable time, absent
any particular stipulation regarding time of delivery, and to guard
against delay. In case of any unreasonable delay, the carrier shall be
liable for damages immediately and proximately resulting from such
neglect of duty.
CAB: As found by the trial court, the delay in the delivery of the
remains of Crispina Saludo, undeniable and regrettable as it was,
cannot be attributed to the fault, negligence or malice of private
respondents, a conclusion concurred in by respondent court and
which we are not inclined to disturb. We are further convinced that
when TWA opted to ship the remains of Crispina Saludo on an earlier
flight, it did so in the exercise of sound discretion and with reasonable
prudence, as shown by the explanation of its counsel in his letter of
February 19, 1977 in response to petitioners' demand letter:
CAB: Investigation of TWA's handling of this matter reveals that
although the shipment was scheduled on TWA Flight 131 of October
27, 1976, it was actually boarded on TWA Flight 603 of the same day,
approximately 10 hours earlier, in order to assure that the shipment
would be received in San Francisco in sufficient time for transfer to
PAL. This transfer was effected in San Francisco at 2:00 P.M. on
October 27, 1976. 66
Precisely, private respondent TWA knew of the urgency of the
shipment by reason of this notation on the lower portion of the airway
bill: "All documents have been certified. Human remains of Cristina
(sic) Saludo. Please return bag first available flight to SFO."
Accordingly, TWA took it upon itself to carry the remains of Crispina
Saludo on an earlier flight, which we emphasize it could do under the
terms of the airway bill, to make sure that there would be enough
time for loading said remains on the transfer flight on board PAL.

HELD:
1. III. Petitioners challenge the validity of respondent court's finding that
private respondents are not liable for tort on account of the
humiliating, arrogant and indifferent acts of their officers and
personnel. They posit that since their mother's remains were
transported ten hours earlier than originally scheduled, there was no
reason for private respondents' personnel to disclaim knowledge of
the arrival or whereabouts of the same other than their sheer
arrogance, indifference and extreme insensitivity to the feelings of
petitioners. Moreover, being passengers and not merely consignors
of goods, petitioners had the right to be treated with courtesy,
respect, kindness and due consideration.
2. In riposte, TWA claims that its employees have always dealt politely
with all clients, customers and the public in general. PAL, on the
other hand, declares that in the performance of its obligation to the
riding public, other customers and clients, it has always acted with
justice, honesty, courtesy and good faith.
3. Respondent appellate court found merit in and reproduced the trial
court's refutation of this assigned error.
4. CAB: The testimony does not show any humiliating or arrogant
manner with which the personnel of both defendants treated the two
plaintiffs. Even their alleged indifference is not clearly established.
The initial answer of the TWA personnel at the counter that they did
not know anything about the remains, and later, their answer that
they have not heard anything about the remains, and the inability of
the TWA counter personnel to inform the two plaintiffs of the
whereabouts of the remains, cannot be said to be total or complete
indifference to the said plaintiffs. At any rate, it is any rude or
discourteous conduct, malfeasance or neglect, the use of abusive or
insulting language calculated to humiliate and shame passenger or
had faith by or on the part of the employees of the carrier that gives
the passenger an action for damages against the carrier (Zulueta vs.
Pan American World Airways, 43 SCRA 397; Air France vs.
Carrascoso, et al., 18 SCRA 155; Lopez, et al. vs. Pan American
World Airways, 16 SCRA 431; Northwest Airlines, Inc. vs. Cuenca, 14
SCRA 1063), and none of the above is obtaining in the instant case.
5. We stand by respondent court's findings on this point, but only to the
extent where it holds that the manner in which private respondent
Page 30 of 62

6.

7.

8.

9.

10.

TWA's employees dealt with petitioners was not grossly humiliating,


arrogant or indifferent as would assume the proportions of malice or
bad faith and lay the basis for an award of the damages claimed. It
must however, be pointed out that the lamentable actuations of
respondent TWA's employees leave much to be desired, particularly
so in the face of petitioners' grief over the death of their mother,
exacerbated by the tension and anxiety wrought by the impasse and
confusion over the failure to ascertain over an appreciable period of
time what happened to her remains.
IMPT: Airline companies are hereby sternly admonished that it is their
duty not only to cursorily instruct but to strictly require their personnel
to be more accommodating towards customers, passengers and the
general public. After all, common carriers such as airline companies
are in the business of rendering public service, which is the primary
reason for their enfranchisement and recognition in our law. Because
the passengers in a contract of carriage do not contract merely for
transportation, they have a right to be treated with kindness, respect,
courtesy and consideration. A contract to transport passengers is
quite different in kind and degree from any other contractual relation,
and generates a relation attended with public duty. The operation of a
common carrier is a business affected with public interest and must
be directed to serve the comfort and convenience of passengers.
Passengers are human beings with human feelings and emotions;
they should not be treated as mere numbers or statistics for revenue.
The records reveal that petitioners, particularly Maria and Saturnino
Saludo, agonized for nearly 5 hours, over the possibility of losing
their mother's mortal remains, unattended to and without any
assurance from the employees of TWA that they were doing anything
about the situation. This is not to say that petitioners were to be
regaled with extra special attention. They were, however, entitled to
the understanding and humane consideration called for by and
commensurate with the extraordinary diligence required of common
carriers, and not the cold insensitivity to their predicament. It is hard
to believe that the airline's counter personnel were totally helpless
about the situation. Common sense would and should have dictated
that they exert a little extra effort in making a more extensive inquiry,
by themselves or through their superiors, rather than just shrug off
the problem with a callous and uncaring remark that they had no
knowledge about it. With all the modern communications equipment
readily available to them, which could have easily facilitated said
inquiry and which are used as a matter of course by airline
companies in their daily operations, their apathetic stance while not
legally reprehensible is morally deplorable.
Losing a loved one, especially one's, parent, is a painful experience.
Our culture accords the tenderest human feelings toward and in
reverence to the dead. That the remains of the deceased were
subsequently delivered, albeit belatedly, and eventually laid in her
final resting place is of little consolation. The imperviousness
displayed by the airline's personnel, even for just that fraction of time,
was especially condemnable particularly in the hour of bereavement
of the family of Crispina Saludo, intensified by anguish due to the
uncertainty of the whereabouts of their mother's remains. Hence, it is
quite apparent that private respondents' personnel were remiss in the
observance of that genuine human concern and professional
attentiveness required and expected of them.
CAB: The foregoing observations, however, do not appear to be
applicable or imputable to respondent PAL or its employees. No
attribution of discourtesy or indifference has been made against PAL
by petitioners and, in fact, petitioner Maria Saludo testified that it was
to PAL that they repaired after failing to receive proper attention from
TWA. It was from PAL that they received confirmation that their
mother's remains would be on the same flight to Manila with them.
We find the following substantiation on this particular episode from
the deposition of Alberto A. Lim, PAL's cargo supervisor earlier
adverted to, regarding their investigation of and the action taken on
learning of petitioner's problem:
ATTY. ALBERTO C. MENDOZA: Yes. Mr. Lim, what exactly was
your procedure adopted in your so called investigation?
ALBERTO A. LIM: I called the lead agent on duty at that time
and requested for a copy of airway bill, transfer manifest and
other documents concerning the shipment.
ATTY ALBERTO C. MENDOZA: Then, what?

ALBERTO A. LIM: They proceeded to analyze exactly where


PAL failed, if any, in forwarding the human remains of Mrs.
Cristina (sic) Saludo. And I found out that there was not (sic)
delay in shipping the remains of Mrs. Saludo to Manila. Since we
received the body from American Airlines on 28 October at 7:45
and we expedited the shipment so that it could have been
loaded on our flight leaving at 9:00 in the evening or just barely
one hour and 15 minutes prior to the departure of the aircraft.
That is so (sic) being the case, I reported to Manila these
circumstances.
HELD: Nominal damages awarded from TWA alone. No BF.
1. IV. Finally, petitioners insist, as a consequence of the delay in the
shipment of their mother's remains allegedly caused by wilful
contractual breach, on their entitlement to actual, moral and
exemplary damages as well as attorney's fees, litigation expenses,
and legal interest.
2. The uniform decisional tenet in our jurisdiction bolds that moral
damages may be awarded for wilful or fraudulent breach of contract
or when such breach is attended by malice or bad faith. However, in
the absence of strong and positive evidence of fraud, malice or bad
faith, said damages cannot be awarded. Neither can there be an
award of exemplary damages nor of attorney's fees as an item of
damages in the absence of proof that defendant acted with malice,
fraud or bad faith.
3. The censurable conduct of TWA's employees cannot, however, be
said to have approximated the dimensions of fraud, malice or bad
faith. It can be said to be more of a lethargic reaction produced and
engrained in some people by the mechanically routine nature of their
work and a racial or societal culture which stultifies what would have
been their accustomed human response to a human need under a
former and different ambience.
4. Nonetheless, the facts show that petitioners' right to be treated with
due courtesy in accordance with the degree of diligence required by
law to be exercised by every common carrier was violated by TWA
and this entitles them, at least, to nominal damages from TWA alone.
Articles 2221 and 2222 of the Civil Code make it clear that nominal
damages are not intended for indemnification of loss suffered but for
the vindication or recognition of a right violated of invaded. They are
recoverable where some injury has been done but the amount of
which the evidence fails to show, the assessment of damages being
left to the discretion of the court according to the circumstances of
the case. In the exercise of our discretion, we find an award of
P40,000.00 as nominal damages in favor of, petitioners to be a
reasonable amount under the circumstances of this case.
DISPOSITIVE: WHEREFORE, with the modification that an award of
P40,000.00 as and by way of nominal damages is hereby granted in favor
of petitioners to be paid by respondent Trans World Airlines, the appealed
decision is AFFIRMED in all other respects. SO ORDERED.

Maersk Line v. CA, 222 SCRA 108, (1993)


G.R. No. 94761 May 17, 1993
MAERSK LINE, petitioner,
vs.
COURT OF APPEALS AND EFREN V. CASTILLO, doing business under
the name and style of Ethegal Laboratories, respondents.
BIDIN, J.:
DOCTRINE:
1. In Magellan, (supra), we ruled: A bill of lading operates both as a
receipt and as contract to transport and deliver the same a therein
stipulated. As a contract, it names the parties, which includes the
consignee, fixes the route, destination, and freight rates or charges,
and stipulates the rights and obligations assumed by the parties.
Being a contract, it is the law between the parties who are bound by
its terms and conditions provided that these are not contrary to law,
morals, good customs, public order and public policy. A bill of lading
usually becomes effective upon its delivery to and acceptance by the
shipper. It is presumed that the stipulations of the bill were, in the
Page 31 of 62

absence of fraud, concealment or improper conduct, known to the


shipper, and he is generally bound by his acceptance whether he
reads the bill or not.
2. While it is true that common carriers are not obligated by law to carry
and to deliver merchandise, and persons are not vested with the right
to prompt delivery, unless such common carriers previously assume
the obligation to deliver at a given date or time (Mendoza v.
Philippine Air Lines, Inc., 90 Phil. 836 [1952]), delivery of shipment or
cargo should at least be made within a reasonable time.
DIGEST:
1. Private respondent ordered 600,000 empty gelatin capsules from a
company in Puerto Rico. The cargo was to be shipped to the
Philippine through Petitioner Carriers vessel.
2. For reasons unknown, said cargo of capsules were mishipped and
diverted to Virginia, USA and then transported back California, USA.
3. The goods only arrived in the Philippines after (2) months from the
date specified in the memorandum.
4. Private respondent, as consignee, refused to take delivery of the
goods on account of delay. Private respondent alleging gross
negligence and undue delay in the delivery of the goods, filed an
action for rescission of contract with damages against petitioner since
evidence on record shows that the delay in the delivery of the
shipment was attributable solely to petitioner.
5. RTC and CA ruled in favor of private respondent.
ISSUE: Whether Respondent Castillo is entitled to damages resulting
from delay in the delivery of the shipment in the absence in the bill of
lading of a stipulation on the period of delivery YES.
HELD:
1. SC The questioned provision in the subject bill of lading has the
effect of practically leaving the date of arrival of the subject shipment
on the sole determination and will of the carrier.
2. An examination of the subject bill of lading shows that the subject
shipment was estimated to arrive in Manila on April 3, 1977. While
there was no special contract entered into by the parties indicating
the date of arrival, petitioner nevertheless, was very well aware of the
specific date when the goods were expected to arrive as indicated in
the bill of lading itself. In this regard, there arises no need to execute
another contract for the purpose as it would be a mere superfluity.
3. While it is true that common carriers are not obligated by law to carry
and to deliver merchandise, and persons are not vested with the right
to prompt delivery, unless such common carriers previously assume
the obligation to deliver at a given date or time (Mendoza v.
Philippine Air Lines, Inc., 90 Phil. 836 [1952]), delivery of shipment or
cargo should at least be made within a reasonable time.
4. CAB: A delay in the delivery of the goods spanning a period of two
(2) months and seven (7) days falls was beyond the realm of
reasonableness. Described as gelatin capsules for use in
pharmaceutical products, subject shipment was delivered to, and left
in, the possession and custody of petitioner-carrier for transport to
Manila via Oakland, California. But through petitioner's negligence
was mishipped to Richmond, Virginia. Petitioner's insistence that it
cannot be held liable for the delay finds no merit.
x

FACTS:
1. Petitioner Maersk Line is engaged in the transportation of goods by
sea, doing business in the Philippines through its general agent
Compania General de Tabacos de Filipinas.
2. Private respondent Efren Castillo, on the other hand, is the proprietor
of Ethegal Laboratories, a firm engaged in the manufacture of
pharmaceutical products.
3. On November 12, 1976, private respondent ordered from Eli Lilly. Inc.
of Puerto Rico through its (Eli Lilly, Inc.'s) agent in the Philippines,
Elanco Products, 600,000 empty gelatin capsules for the
manufacture of his pharmaceutical products. The capsules were
placed in six (6) drums of 100,000 capsules each valued at US
$1,668.71.
4. Through a Memorandum of Shipment (Exh. "B"; AC GR CV No.
10340, Folder of Exhibits, pp. 5-6), the shipper Eli Lilly, Inc. of Puerto

5.

6.

7.

8.

9.

10.

11.

Rico advised private respondent as consignee that the 600,000


empty gelatin capsules in six (6) drums of 100,000 capsules each,
were already shipped on board MV "Anders Maerskline" under
Voyage No. 7703 for shipment to the Philippines via Oakland,
California. In said Memorandum, shipper Eli Lilly, Inc. specified the
date of arrival to be April 3, 1977.
For reasons unknown, said cargo of capsules were mishipped and
diverted to Richmond, Virginia, USA and then transported back
Oakland, Califorilia. The goods finally arrived in the Philippines on
June 10, 1977 or after two (2) months from the date specified in the
memorandum. As a consequence, private respondent as consignee
refused to take delivery of the goods on account of its failure to arrive
on time.
Private respondent alleging gross negligence and undue delay in the
delivery of the goods, filed an action before the court a quo for
rescission of contract with damages against petitioner and Eli Lilly,
Inc. as defendants.
Denying that it committed breach of contract, petitioner alleged in its
that answer that the subject shipment was transported in accordance
with the provisions of the covering bill of lading and that its liability
under the law on transportation of good attaches only in case of loss,
destruction or deterioration of the goods as provided for in Article
1734 of Civil Code (Rollo, p. 16).
- Defendant Eli Lilly, Inc., on the other hand, filed its answer with
compulsory and cross-claim. In its cross-claim, it alleged that
the delay in the arrival of the the subject merchandise was due
solely to the gross negligence of petitioner Maersk Line.
The issues having been joined, private respondent moved for the
dismissal of the complaint against Eli Lilly, Inc.on the ground that the
evidence on record shows that the delay in the delivery of the
shipment was attributable solely to petitioner.
RTC: Acting on private respondent's motion, the trial court dismissed
the complaint against Eli Lilly, Inc. Correspondingly, the latter
withdraw its cross-claim against petitioner in a joint motion dated
December 3, 1979.
After trial held between respondent and petitioner, the court a quo
rendered judgment dated January 8, 1982 in favor of respondent
Castillo, the dispositive portion of which reads: IN VIEW OF THE
FOREGOING, this Court believe (sic) and so hold (sic) that there was
a breach in the performance of their obligation by the defendant
Maersk Line consisting of their negligence to ship the 6 drums of
empty Gelatin Capsules which under their own memorandum
shipment would arrive in the Philippines on April 3, 1977 which under
Art. 1170 of the New Civil Code, they stood liable for damages.
- Considering that the only evidence presented by the defendant
Maersk line thru its agent the Compania de Tabacos de
Filipinas is the testimony of Rolando Ramirez who testified on
Exhs. "1" to "5" which this Court believe (sic) did not change
the findings of this Court in its decision rendered on September
4, 1980, this Court hereby renders judgment in favor of the
plaintiff Efren Castillo as against the defendant Maersk Line
thru its agent.
CA: On appeal, respondent court rendered its decision dated August
1, 1990 affirming with modifications the lower court's decision as
follows: WHEREFORE, the decision appealed from is affirmed with a
modification, and, as modified, the judgment in this case should read
as follows: Judgment is hereby rendered ordering defendantappellant Maersk Line to pay plaintiff-appellee (1) compensatory
damages of P11,680.97 at 6% annual interest from filing of the
complaint until fully paid, (2) moral damages of P50,000.00, (3)
exemplary damages of P20,000,00, (3) attorney's fees, per
appearance fees, and litigation expenses of P30,000.00, (4) 30% of
the total damages awarded except item (3) above, and the costs of
suit. SO ORDERED.

ISSUES:
1. Whether a defendant's cross-claim against a co-defendant
(petitioner) survives or subsists even after the dismissal of the
complaint against defendant-cross claimant (petitioner) NO.
2. Whether Respondent Castillo is entitled to damages resulting from
delay in the delivery of the shipment in the absence in the bill of
lading of a stipulation on the period of delivery YES.
Page 32 of 62

3. Whether Respondent CA erred in awarding actual, moral and


exemplary damages and attorney's fees despite the absence of
factual findings and/or legal bases in the text of the decision as
support for such awards NO.
4. Whether Respondent CA committed an error when it rendered an
ambiguous and unexplained award in the dispositive portion of the
decision which is not supported by the body or the text of the
decision YES.
HELD (Cross-claim):
1. With regard to the first issue raised by petitioner on whether or not a
defendant's cross-claim against co-defendant (petitioner herein)
survives or subsists even after the dismissal of the complaint against
defendant-cross-claimant (petitioner herein), we rule in the negative.
2. Apparently this issue was raised by reason of the declaration made
by respondent court in its questioned decision, as follows: Re the first
assigned error: What should be rescinded in this case is not the
"Memorandum of Shipment" but the contract between appellee and
defendant Eli Lilly (embodied in three documents, namely: Exhs. A,
A-1 and A-2) whereby the former agreed to buy and the latter to sell
those six drums of gelatin capsules. It is by virtue of the cross-claim
by appellant Eli Lilly against defendant Maersk Line for the latter's
gross negligence in diverting the shipment thus causing the delay
and damage to appellee that the trial court found appellant Maersk
Line liable. . . . xxx Re the fourth assigned error: Appellant Maersk
Line's insistence that appellee has no cause of action against it and
appellant Eli Lilly because the shipment was delivered in good order
and condition, and the bill of lading in question contains "stipulations,
exceptions and conditions" Maersk Line's liability only to the "loss,
destruction or deterioration," indeed, this issue of lack of cause of
action has already been considered in our foregoing discussion on
the second assigned error, and our resolution here is still that
appellee has a cause of action against appellant Eli Lilly. Since the
latter had filed a cross-claim against appellant Maersk Line, the trial
court committed no error, therefore, in holding the latter appellant
ultimately liable to appellee. (Rollo, pp. 47-50; Emphasis supplied)
3. Reacting to the foregoing declaration, petitioner submits that its
liability is predicated on the cross-claim filed its co-defendant Eli Lilly,
Inc. which cross-claim has been dismissed, the original complaint
against it should likewise be dismissed. We disagree. It should be
recalled that the complaint was filed originally against Eli Lilly, Inc. as
shipper-supplier and petitioner as carrier. Petitioner being an original
party defendant upon whom the delayed shipment is imputed cannot
claim that the dismissal of the complaint against Eli Lilly, Inc. inured
to its benefit.
HELD (Liability): Carrier liable. Negligent in 2 months and 7 days delay.
1. Respondent court, erred in declaring that the trial court based
petitioner's liability on the cross-claim of Eli Lilly, Inc. As borne out by
the record, the trial court anchored its decision on petitioner's delay
or negligence to deliver the six (6) drums of gelatin capsules within a
reasonable time on the basis of which petitioner was held liable for
damages under Article 1170 of the New Civil Code which provides
that those who in the performance of their obligations are guilty of
fraud, negligence, or delay and those who in any manner contravene
the tenor thereof, are liable for damages.
2. Nonetheless, petitioner maintains that it cannot be held for damages
for the alleged delay in the delivery of the 600,000 empty gelatin
capsules since it acted in good faith and there was no special
contract under which the carrier undertook to deliver the shipment on
or before a specific date (Rollo, p. 103).
3. On the other hand, private respondent claims that during the period
before the specified date of arrival of the goods, he had made several
commitments and contract of adhesion. Therefore, petitioner can be
held liable for the damages suffered by private respondent for the
cancellation of the contracts he entered into.
4. We have carefully reviewed the decisions of respondent court and
the trial court and both of them show that, in finding petitioner liable
for damages for the delay in the delivery of goods, reliance was
made on the rule that contracts of adhesion are void. Added to this,
the lower court stated that the exemption against liability for delay is
against public policy and is thus, void. Besides, private respondent's

5.

6.

7.

8.

9.

10.

11.

action is anchored on Article 1170 of the New Civil Code and not
under the law on Admiralty (AC-GR CV No. 10340, Rollo, p. 14).
The bill of lading covering the subject shipment among others, reads:
6. GENERAL (1) The Carrier does not undertake that the goods shall
arrive at the port of discharge or the place of delivery at any particular
time or to meet any particular market or use and save as is provided
in clause 4 the Carrier shall in no circumstances be liable for any
direct, indirect or consequential loss or damage caused by delay. If
the Carrier should nevertheless be held legally liable for any such
direct or indirect or consequential loss or damage caused by delay,
such liability shall in no event exceed the freight paid for the transport
covered by this Bill of Lading. (Exh. "1-A"; AC-G.R. CV No. 10340,
Folder of Exhibits, p. 41)
It is not disputed that the aforequoted provision at the back of the bill
of lading, in fine print, is a contract of adhesion. Generally, contracts
of adhesion are considered void since almost all the provisions of
these types of contracts are prepared and drafted only by one party,
usually the carrier (Sweet Lines v. Teves, 83 SCRA 361 [1978]). The
only participation left of the other party in such a contract is the
affixing of his signature thereto, hence the term "Adhesion" (BPI
Credit Corporation v. Court of Appeals, 204 SCRA 601 [1991];
Angeles v. Calasanz, 135 SCRA 323 [1985]).
Nonetheless, settled is the rule that bills of lading are contracts not
entirely prohibited (Ong Yiu v. Court of Appeals, et al., 91 SCRA 223
[1979]; Servando, et al. v. Philippine Steam Navigation Co., 117
SCRA 832 [1982]). One who adheres to the contract is in reality free
to reject it in its entirety; if he adheres, he gives his consent
(Magellan Manufacturing Marketing Corporation v. Court of Appeals,
et al., 201 SCRA 102 [1991]).
IMPT: In Magellan, (supra), we ruled: It is a long standing
jurisprudential rule that a bill of lading operates both as a receipt and
as contract to transport and deliver the same a therein stipulated. As
a contract, it names the parties, which includes the consignee, fixes
the route, destination, and freight rates or charges, and stipulates the
rights and obligations assumed by the parties. Being a contract, it is
the law between the parties who are bound by its terms and
conditions provided that these are not contrary to law, morals, good
customs, public order and public policy. A bill of lading usually
becomes effective upon its delivery to and acceptance by the
shipper. It is presumed that the stipulations of the bill were, in the
absence of fraud, concealment or improper conduct, known to the
shipper, and he is generally bound by his acceptance whether he
reads the bill or not. (Emphasis supplied)
CAB: However, the aforequoted ruling applies only if such contracts
will not create an absurd situation as in the case at bar. The
questioned provision in the subject bill of lading has the effect of
practically leaving the date of arrival of the subject shipment on the
sole determination and will of the carrier.
IMPT: While it is true that common carriers are not obligated by law
to carry and to deliver merchandise, and persons are not vested with
the right to prompt delivery, unless such common carriers previously
assume the obligation to deliver at a given date or time (Mendoza v.
Philippine Air Lines, Inc., 90 Phil. 836 [1952]), delivery of shipment or
cargo should at least be made within a reasonable time.
In Saludo, Jr. v. Court of Appeals (207 SCRA 498 [1992]) this Court
held: The oft-repeated rule regarding a carrier's liability for delay is
that in the absence of a special contract, a carrier is not an insurer
against delay in transportation of goods. When a common carrier
undertakes to convey goods, the law implies a contract that they shall
be delivered at destination within a reasonable time, in the absence,
of any agreement as to the time of delivery. But where a carrier has
made an express contract to transport and deliver properly within a
specified time, it is bound to fulfill its contract and is liable for any
delay, no matter from what cause it may have arisen. This result
logically follows from the well-settled rule that where the law creates
a duty or charge, and the default in himself, and has no remedy over,
then his own contract creates a duty or charge upon himself, he is
bound to make it good notwithstanding any accident or delay by
inevitable necessity because he might have provided against it by
contract. Whether or not there has been such an undertaking on the
part of the carrier is to be determined from the circumstances
surrounding the case and by application of the ordinary rules for the
interpretation of contracts.
Page 33 of 62

12. An examination of the subject bill of lading (Exh. "1"; AC GR CV No.


10340, Folder of Exhibits, p. 41) shows that the subject shipment was
estimated to arrive in Manila on April 3, 1977. While there was no
special contract entered into by the parties indicating the date of
arrival of the subject shipment, petitioner nevertheless, was very well
aware of the specific date when the goods were expected to arrive as
indicated in the bill of lading itself. In this regard, there arises no need
to execute another contract for the purpose as it would be a mere
superfluity.
13. CAB: In the case before us, we find that a delay in the delivery of the
goods spanning a period of two (2) months and seven (7) days falls
was beyond the realm of reasonableness. Described as gelatin
capsules for use in pharmaceutical products, subject shipment was
delivered to, and left in, the possession and custody of petitionercarrier for transport to Manila via Oakland, California. But through
petitioner's negligence was mishipped to Richmond, Virginia.
Petitioner's insistence that it cannot be held liable for the delay finds
no merit.
HELD (Award): Actual, moral, exemplary, attorneys fees.
1. Petition maintains that the award of actual, moral and exemplary
dames and attorney's fees are not valid since there are no factual
findings or legal bases stated in the text of the trial court's decision to
support the award thereof.
2. Indeed, it is settled that actual and compensataory damages requires
substantial proof (Capco v. Macasaet. 189 SCRA 561 [1990]). In the
case at bar, private respondent was able to sufficiently prove through
an invoice (Exh. 'A-1'), certification from the issuer of the letter of
credit (Exh.'A-2') and the Memorandum of Shipment (Exh. "B"), the
amount he paid as costs of the credit line for the subject goods.
Therefore, respondent court acted correctly in affirming the award of
eleven thousand six hundred eighty pesos and ninety seven
centavos (P11,680.97) as costs of said credit line.
3. As to the propriety of the award of moral damages, Article 2220 of the
Civil Code provides that moral damages may be awarded in
"breaches of contract where the defendant acted fraudulently or in
bad faith" (Pan American World Airways v. Intermediate Appellate
Court, 186 SCRA 687 [1990]).
4. In the case before us, we that the only evidence presented by
petitioner was the testimony of Mr. Rolando Ramirez, a claims
manager of its agent Compania General de Tabacos de Filipinas,
who merely testified on Exhs. '1' to '5' (AC-GR CV No. 10340, p. 2)
and nothing else. Petitioner never even bothered to explain the
course for the delay, i.e. more than two (2) months, in the delivery of
subject shipment. Under the circumstances of the case, we hold that
petitioner is liable for breach of contract of carriage through gross
negligence amounting to bad faith. Thus, the award of moral
damages if therefore proper in this case.
5. In line with this pronouncement, we hold that exemplary damages
may be awarded to the private respondent. In contracts, exemplary
damages may be awarded if the defendant acted in a wanton,
fraudulent, reckless, oppresive or malevolent manner. There was
gross negligence on the part of the petitioner in mishiping the subject
goods destined for Manila but was inexplicably shipped to Richmond,
Virginia, U.S.A. Gross carelessness or negligence contitutes wanton
misconduct, hence, exemplary damages may be awarded to the
aggrieved party (Radio Communication of the Phils., Inc. v. Court of
Appeals, 195 SCRA 147 [1991]).
6. Although attorney's fees are generally not recoverable, a party can
be held lible for such if exemplary damages are awarded (Artice
2208, New Civil Code). In the case at bar, we hold that private
respondent is entitled to reasonable attorney`s fees since petitioner
acte with gross negligence amounting to bad faith.
7. Delete 30%: However, we find item 4 in the dispositive portion of
respondent court`s decision which awarded thirty (30) percent of the
total damages awarded except item 3 regarding attorney`s fees and
litigation expenses in favor of private respondent, to be
unconscionable, the same should be deleted.
DISPOSITIVE: WHEREFORE, with the modification regarding the
deletion of item 4 of respondent court`s decision, the appealed decision is
is hereby AFFIRMED in all respects.

Tan Chiong Sian v. Inchausti, 22 Phil 152 (1912)


G.R. No. L-6092
March 8, 1912
TAN CHIONG SIAN, plaintiff-appellee,
vs.
INCHAUSTI AND CO., defendant-appellant.
Haussermann, Cohn and Fisher for appellant.
O'Brien and DeWitt for appellee.
TORRES, J.:
NATURE: This is an appeal through bill of exceptions, by counsel for the
firm of Inchausti & Co., from a judgment rendered by the Honorable A.S.
Crossfield, judge.
FACTS:
1. On January 11, 1909, the Chinaman, Tan Chiong Sian or Tan Chinto,
filed a written complaint, which was amended on the 28th of the
same month and again amended on October 27 of the same year,
against the said firm, wherein he alleged, among other things, as a
cause of action: That, on or about November 25, 1908, the plaintiff
delivered to the defendant 205 bundles or cases of general
merchandise belonging to him, which Inchausti & Co., upon
receiving, bound themselves to deliver in the pueblo of Catarman,
Province of Samar, to the Chinaman, Ong Bieng Sip, and in
consideration of the obligations contracted by the defendant party,
the plaintiff obligated himself to pay to the latter the sum of P250
Philippine currency, which payment should be made upon the
delivery of the said merchandise in the said pueblo Catarman; but
that the defendant company neither carried nor delivered the
aforementioned merchandise to the said Ong Bieng Sip, in
Catarman, but unjustly and negligently failed to do so, with the result
that the said merchandise was almost totally lost; that, had the
defendant party complied well and faithfully with its obligation,
according to the agreement made, the merchandise concerned would
have a value of P20,000 in the said pueblo of Catarman on the date
when it should have been delivered there, wherefore the defendant
party owed the plaintiff the said sum of P20,000, which it had not paid
him, or any part thereof, notwithstanding the many demands of the
plaintiff; therefore the latter prayed for judgment against the
defendant for the said sum, together with legal interest thereon from
November 25, 1908, and the costs of the suit.
2. Counsel for the defendant company, in his answer, set forth, that he
admitted the allegations of paragraphs 1 and 2 of the complaint,
amended for the second time, and denied those paragraphs 3, 4, 5, 6
and 7 of the same.
- As his first special defense, he alleged that on or about
November 28, 1908, his client, the said firm, received in Manila
from Ong Bieng Sip 205 bundles, bales, or cases of
merchandise to be placed on board the steamer Sorsogon,
belonging to the defendant, for shipment to the port of Gubat,
Province of Sorsogon, to be in the said port transshipped into
another of the defendant's vessels for transportation to the port
of Catarman, Samar, and delivered to the aforesaid Chinaman,
Ong Bieng Sip; that the defendant company, upon receiving the
said merchandise from the latter, Ong Bieng Sip, and on its
entering into a contract of maritime transportation with him did
not know and was not notified that the plaintiff, Tan Chiong
Sian, had any interest whatever in the said merchandise and
had made with the plaintiff no contract relative to the
transportation of such goods, for, on receiving the latter from
the said Ong Bieng Sip, for transportation, there were made out
and delivered to him three bills of lading, Nos. 38, 39 and 76,
which contained a list of the goods received and, printed on the
back thereof were the terms of the maritime transportation
contract entered into by and between the plaintiff and the
defendant company, copies of which bills of lading and
contract, marked as Exhibits A, B, and C, are of record,
attached to and made an integral part of the said answer; that
Ong Bieng Sip accepted the said bills of lading and the contract
extended on the backs thereof; that the merchandise
mentioned was put on board the steamer Sorsogon and carried
to the port of Gubat, Province of Sorsogon, where this vessel
Page 34 of 62

arrived on November 28, 1908, on which date the lorcha Pilar,


into which the said merchandise was to be transshipped for
carriage to Catarman, was not at Gubat, and therefore the
goods had to be unloaded and stored in the defendant
company's warehouses at Gubat; that, on the 4th of December
of the same year, the lorcha Pilar arrived at Gubat and, after
the termination of certain necessary work, the goods received
from Chinaman, Ong Bieng Sip, were taken aboard the same,
together with other merchandise belonging to the defendant
party, for the purpose of transportation to the port of Catarman;
that, before the said lorcha could leave for its destination, a
strong wind arose which in the course of the day increased in
force until, early in the morning of the following day, the lorcha
was dragged and driven, by the force of the storm, upon the
shore, despite the means employed by the crew to avoid the
accident, and notwithstanding the five anchors that held the
craft, which was thus wrecked and completely destroyed and
the merchandise with which it was laden, including the 205
bundles or packages taken aboard for the said Chinaman, was
scattered on the shore; that, on the occasion, the lorcha Pilar
was in good condition, provided with all the proper and
necessary equipment and accessories and carried a crew of
sufficient number in command of a skillful patron or master,
wherefore the wreck of the said craft was solely due to the
irresistible force of the elements and of the storm which drove it
upon the shore; that the defendant company, with the greatest
possible diligence, gathered up the said shipwrecked goods
that had been shipped by the Chinaman, Ong Bieng Sip, but,
owing to the damage they had suffered, it was impossible to
preserve them, so, after having offered to deliver them to him,
the defendant proceeded, in the presence of a notary, to sell
them at public auction and realized from the sale thereof
P1,693.67, the reasonable value of the same in the condition in
which they were after they had been gathered up and salved
from the wreck of the lorcha Pilar; that the expenses
occasioned by such salvage and sale of the said goods
amounted to P151.35, which were paid by the defendant party;
that the latter offered to the Chinese shipper, the plaintiff, the
amount realized from the sale of the said merchandise, less
P151.35, the amount of the expenses, and the sum of P250,
the amount of the freight stipulated, and is still willing to pay
such products of the said sale to the aforementioned Ong
Bieng Sip or to any other person who should establish his
subrogation to the rights of the Chinaman, Ong Bieng Sip, with
respect to the said amount;
- That, as his client's second special defense, the defendant
company alleged that one of the conditions of the shipping
contract executed between it and the Chinaman, Ong Bieng
Sip, relative to the transportation of the said merchandise, was
that the said firm should not be held liable for more than P25
for any bundle or package, unless the value of its contents
should be stated in the bill of lading, and that the shipper,
Chinaman, Ong Bieng Sip, did not state in the bill of lading the
value of any of the bundles or packages in which the goods
shipped by him were packed. Counsel for the defendant
company, therefore, prayed the court to absolve his client from
the complaint, with costs against the plaintiff.
3. LC: After the hearing of the case and the introduction of testimony by
the parties, judgment was rendered, on March 18, 1910, in favor of
the plaintiff, Tan Chiong Sian or Tan Chinto, against the defendant
Inchausti and Co., for the sum of P14,642.63, with interest at the rate
of 6 per cent per annum from January 11, 1909, and for the costs of
the trial. The defendant party appealed from this judgment.
4. This suit was brought for the purpose of collecting a certain sum
which it is alleged the defendant firm owes the plaintiff for losses and
damages suffered by the latter as a result of the former's
noncompliance with the terms of an agreement or contract to
transport certain merchandise by sea from this city to the pueblo of
Catarman, Island of Samar, for the sum of P250.
ISSUE: Whether Defendant Company is liable for loss of the merchandise
and for failure to deliver the same at the place of destination, or whether
he is relieved from responsibility on the ground of force majeure.

HELD:
1. Article 1601 of the Civil Code prescribes: Carriers of goods by land or
by water shall be subject with regard to the keeping and preservation
of the things entrusted to them, to the same obligations as
determined for innkeepers by articles 1783 and 1784.
2. The provisions of this article shall be understood without prejudice to
what is prescribed by the Code of Commerce with regard to
transportation by sea and land.
3. Article 1602 reads: Carriers are also liable for the loss of and damage
to the things which they receive, (UNLESS) they prove that the loss
or damage arose from a fortuitous event or force majeure.
4. The articles aforecited are as follows:
- ART. 1783. The depositum of goods made by travelers in inns
or hostelries shall also be considered a necessary one. The
keepers of inns and hostelries are liable for them as such
bailees, (provided) that notice thereof may have been given to
them or to their employees, and that the travelers on their part
take the precautions which said innkeepers or their substitutes
may have advised them concerning the care and vigilance of
said goods.
- ART. 1784. The liability referred to in the preceding article shall
include damages to the goods of the travelers caused the
servants or employees of the keepers for inns or hostelries as
well as by strangers, but not those arising from robbery or
which may be caused by any other case of force majeure.
5. Article 361 of the Code of Commerce provides: Merchandise shall be
transported at the risk and venture of the shipper, (UNLESS) the
contrary was expressly stipulated. Therefore, all damages and
impairment suffered by the goods in transportation, by reason of
accident, force majeure, or by virtue of the nature or defect of the
articles, shall be for the account and risk of the shipper. The proof of
these accidents in incumbent on the carrier.
6. ART. 362. The carrier, however, shall be liable for the losses and
damages arising from the causes mentioned in the foregoing article if
it is proved that they occurred on account of his negligence or
because he did not take the precautions usually adopted by careful
persons, (UNLESS) the shipper committed fraud in the bill of lading,
stating that the goods were of a class or quality different from what
they really were. If, notwithstanding the precaution referred to in this
article, the goods transported run the risk of being lost on account of
the nature or by reason of an unavoidable accident, without there
being time for the owners of the same to dispose thereof, the carrier
shall proceed to their sale, placing them for this purpose at the
disposal of the judicial authority or of the officials determined by
special provisions.
7. ART. 363. With the exception of the cases prescribed in the second
paragraph of article 361, the carrier shall be obliged to deliver the
goods transported in the same condition in which, according to the
bill of lading, they were at the time of their receipt, without any
detriment or impairment, and should he not do so, he shall be obliged
to pay the value of the goods not delivered at the point where they
should have been and at the time the delivery should have taken
place. If part of the goods transported should be delivered the
consignee may refuse to receive them, when he proves that he can
not make use thereof without the others.
8. On November 25, 1908, Inchausti & Co. received in Manila from the
Chinaman, Ong Bieng Sip, 205 bundles, bales or cases of goods to
be conveyed by the steamer Sorsogon to the port of Gubat, Province
of Sorsogon, where they were to be transshipped to another vessel
belonging to the defendant company and by the latter transported to
the pueblo of Catarman, Island of Samar, there to be delivered to the
Chinese shipper with whom the defendant party made the shipping
contract. To this end three bills of lading were executed, Nos. 38, 39,
and 76, copies of which, marked as Exhibits A, B, and C, are found
on pages 13, 14, and 15 of the record.
9. The steamer Sorsogon, which carried the goods, arrived at the port
of Gubat on the 28th of that month and as the lorcha Pilar, to which
the merchandise was to be transshipped for its transportation to
Catarman, was not yet there, the cargo was unloaded and stored in
the defendant company's warehouses at that port.
10. Several days later, the lorcha just mentioned arrived at Gubat and,
after the cargo it carried had been unloaded, the merchandise
Page 35 of 62

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12.

13.

14.

15.

belonging to the Chinaman, Ong Bieng Sip, together with other


goods owned by the defendant Inchausti & Co., was taken aboard to
be transported to Catarman; but on December 5, 1908, before the
Pilar could leave for its destination, towed by the launch Texas, there
arose and, as a result of the strong wind and heavy sea, the lorcha
was driven upon the shore and wrecked, and its cargo, including the
Chinese shipper's 205 packages of goods, scattered on the beach.
Laborers or workmen of the defendant company, by its order, then
proceeded to gather up the plaintiff's merchandise and, as it was
impossible to preserve it after it was salved from the wreck of the
lorcha, it was sold at public auction before a notary for the sum of
P1,693.67.
CAB: The contract entered into between the Chinese shipper, Ong
Bieng Sip, and the firm of Inchausti & Co., provided that
transportation should be furnished from Manila to Catarman,
although the merchandise taken aboard the steamer Sorsogon was
to be transshipped at Gubat to another vessel which was to convey it
from that port to Catarman; it was not stipulated in the said contract
that the Sorsogon should convey the goods to their final destination,
nor that the vessel into which they were to be transshipped, should
be a steamer. The shipper, Ong Bieng Sip, therefore assented to
these arrangements and made no protest when his 205 packages of
merchandise were unloaded from the ship and, on account of the
absence of the lorcha Pilar, stored in the warehouses at Gubat nor
did he offer any objection to the lading of his merchandise on to this
lorcha as soon as it arrived and was prepared to receive cargo;
moreover, he knew that to reach the port of Catarman with
promptness and dispatch, the lorcha had to be towed by some vessel
like the launch Texas, which the defendant company had been
steadily using for similar operations in those waters.
Hence the shipper, Ong Bieng Sip, made no protest or objection to
the methods adopted by the agents of the defendant for the
transportation of his gods to the port of their destination, and the
record does not show that in Gubat the defendant possessed any
other means for the conveyance and transportation of merchandise,
at least for Catarman, than the lorcha Pilar, towed by said launch and
exposed during its passage to all sorts of accidents and perils from
the nature and seafaring qualities of a lorcha, from the circumstances
then present and the winds prevailing on the Pacific Ocean during
the months of November and December.
It is to be noted that a lorcha is not easily managed or steered when
the traveling, for, out at sea, it can only be moved by wind and sails;
and along the coast near the shore and in the estuaries where it
customarily travels, it can only move by poling. For this reason, in
order to arrive at the pueblo of Catarman with promptness and
dispatch, the lorcha was usually towed by the launch Texas.
The record does not show that, from the afternoon of the 4th of
December, 1908, until the morning of the following day, the 5th, the
patron or master of the lorcha which was anchored in the cove of
Gubat, received any notice from the captain of the steamer Ton Yek,
also anchored near by, of the near approach of a storm. The said
captain, Juan Domingo Alberdi, makes no reference in his sworn
testimony of having given any such notice to the patron of the lorcha,
nor did the latter, Mariano Gadvilao, testify that he received such
notice from the captain of the Ton Yek or from the person in charge of
the Government observatory. Gadvilao, the patron, testified that only
between 10 and 11 o'clock of Saturday morning, the 5th of
December, was he informed by Inchausti & Co.'s agent in Gubat that
a baguio was approaching; that thereupon, on account of the
condition of the sea, he dropped the four anchors that the lorcha had
on board and immediately went ashore to get another anchor and a
new cable in order more securely to hold the boat in view of the
predicted storm. This testimony was corroborated by the said
representative, Melchor Muoz. So the lorcha, when the storm broke
upon it, was held fast by five anchors and was, as testified by the
defendant without contradiction or evidence to the contrary, well
found and provided with all proper and necessary equipment and had
a sufficient crew for its management and preservation.
CAB: The patron of the lorcha testified specifically that at Gubat or in
its immediate vicinity there is no port whatever adequate for the
shelter and refuge of vessels in cases of danger, and that, even
though there were, on being advised between 10 and 11 o'clock of
the morning of the 5th, of the approach of a storm from the eastern

16.

17.
18.

19.

20.

21.

22.

23.

Pacific, it would have been impossible to spread any sails or weigh


anchor on the lorcha without being dragged or driven against the
reefs by the force of the wind. As the craft was not provided with
steam or other motive power, it would not have been possible for it to
change its anchorage, nor move from the place where it lay, even
several hours before the notice was received by its patron. A lorcha
can not be compared with a steamer which does not need the help or
assistance of any other vessel in its movements.
Due importance must be given to the testimony of the weather
observer, Antonio Rocha, that the notice received from the Manila
Observatory on the afternoon of December 4, with regard to a storm
travelling from the east of the Pelew Islands toward the northwest,
was not made known to the people of Gubat and that he merely left a
memorandum notice on the desk of the station, intending to give
explanations thereof to any person who should request them of him.
So the notice of the storm sent by the Manila Observatory was only
known to the said observer, and he did not apprise the public of the
approach of the storm until he received another notice from Manila at
20 minutes past 8 o'clock on Saturday morning, December 5. Then
he made a public announcement and advised the authorities of the
storm that was coming.
The patron of the lorcha Pilar is charged with gross negligence for
not having endeavored to remove his craft to a safe place in the
Sabang River, about half a mile from where it was anchored.
In order to find out whether there was or was not such negligence on
the part of the patron, it becomes necessary to determine, first,
whether the lorcha, on the morning of December 5, could be moved
by its own power and without being towed by any steamboat, since it
had no steam engine of its own; second, whether the lorcha, on
account of its draft and the shallowness of the mouth of the said river,
could have entered the latter before the storm broke.
CAB: The patron, Mariano Gadvilao, stated under oath that the
weather during the night of December 4 was not threatening and he
did not believe there would be a storm; that he knew the Sabang
River; and that the lorcha Pilar, when loaded, could not enter as there
was not sufficient water in its channel; that, according to an official
chart of the port of Gubat, the bar of the Sabang River was covered
by only a foot and a half of water at ordinary low tide and the lorcha
Pilar, when loaded, drew 6 feet and a half; that aside from the fact
that the condition of the sea would not have permitted the lorcha to
take shelter in the said river, even could it have relied upon the
assistance of a towboat, at half past 8 o'clock in the morning the tide
was still low; there was but little water in the river and still less over
the bar.
It was proven by the said official chart of the port of Gubat, that the
depth of water over the bar or entrance of the Sabang River is only
one foot and a half at ordinary low tide; that the rise and fall of the
tide is about 4__ feet, the highest tide being at 2 o'clock in the
afternoon of every day; and at that hour, on the 5th of December, the
hurricane had already made its appearance and the wind was
blowing with all its fury and raising great waves.
CAB: The lorcha Pilar, loaded as it had been from the afternoon of
December 4, even though it could have been moved by means of
poles, without being towed, evidently could not have entered the
Sabang River on the morning of the 5th, when the wind began to
increase and the sea to become rough, on account of the low tide,
the shallowness of the channel, and the boat's draft.
The facts stated in the foregoing paragraph were proved by the said
chart which was exhibited in evidence and not rejected or assailed by
the plaintiff. They were also supported by the sworn testimony of the
patron of the lorcha, unrebutted by any oral evidence on the part of
the plaintiff such as might disprove the certainty of the facts related,
and, according to section 275 of the Code of Civil Procedure, the
natural phenomenon of the tides, mentioned in the official
hydrographic map, Exhibit 7, which is prima facie evidence on the
subject, of the hours of its occurrence and of the conditions and
circumstances of the port of Gubat, shall be judicially recognized
without the introduction of proof, unless the facts to the contrary be
proven, which was not done by the plaintiff, nor was it proven that
between the hours of 10 and 11 o'clock of the morning of December
5, 1908, there did not prevail a state of low tide in the port of Gubat.
The oral evidence adduced by the plaintiff with respect to the depth
of the Sabang River, was unable to overcome that introduced by the
Page 36 of 62

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25.

26.

27.

28.

29.

30.

defendant, especially the said chart. According to section 320 of the


Code of Civil Procedure, such a chart is prima facie evidence of
particulars of general notoriety and interest, such as the existence of
shoals of varying depths in the bar and mouth of the Sabang River
and which obstruct the entrance into the same; the distance, length,
and number of the said shoals, with other details apparently well
known to the patron of the lorcha Pilar, to judge from his testimony.
Vessels of considerable draft, larger than the said lorcha, might have
entered the Sabang River some seven or nine years before,
according to the testimony of the Chinaman, Antonio B. Yap Cunco,
though he did not state whether they did so at high tide; but, since
1901, or previous years, until 1908, changes may have taken place in
the bed of the river, its mouth and its bar. More shoals may have
formed or those in existence may have increased in extent by the
constant action of the sea. This is the reason why the patron,
Gadvilao, who was acquainted with the conditions of the port and
cove of Gubat, positively declared that the lorcha Pilar could not, on
account of her draft, enter the Sabang River, on account of low water.
The patron of the lorcha, after stating (p.58) that at Gubat or in its
vicinity there is no port that affords shelter, affirmed that it was
impossible to hoist the sails or weigh the anchors on the morning of
the 5th of December, owing to the force of the wind and because the
boat would immediately have been dragged or driven upon the
shoals; that furthermore the lorcha was anchored in a channel some
300 brazas wide, but, notwithstanding this width, the Pilar was, for
want of motive power, unable to move without being exposed to be
dashed against the coast by the strong wind and the heavy sea then
prevailing. The testimony of this witness was neither impugned nor
offset by any evidence whatever; he was a patron of long years of
service and of much practice in seafaring, especially in the port of
Gubat and its vicinity, who had commanded or been intrusted with
the command of other crafts similar to the lorcha Pilar and his
testimony was absolutely uncontradicted.
The patron Gadvilao, being cognizant of the duties imposed upon
him by rules 14 and 15 of article 612, and others, of the Code of
Commerce, remained with sailors, during the time the hurricane was
raging, on board the lorcha from the morning of December 5 until
early the following morning, the 6th, without abandoning the boat,
notwithstanding the imminent peril to which he was exposed, and
kept to his post until after the wreck and the lorcha had been dashed
against the rocks. Then he solicited help from the captain of the
steamer Ton Yek, and, thanks to the relief afforded by a small boat
sent by the latter officer, Gadvilao with his crew succeeded in
reaching land and immediately reported the occurrence to the
representative of Inchausti & Co. and to the public official from whom
he obtained the document of protest, Exhibit 1. By such procedure,
he showed that, as a patron skilled in the exercise of his vocation, he
performed the duties imposed by law in cases of shipwreck brought
about by force majeure.
Treating of shipwrecks, article 840 of the Code of Commerce
prescribes: The losses and damages suffered by a vessel and her
cargo by reason of shipwreck or standing shall be individually for the
account of the owners, the part of the wreck which may be saved
belonging to them in the same proportion.
And Article 841 of the same code reads: If the wreck or stranding
should arise through the malice, negligence, or lack of skill of the
captain, or because the vessel put to sea insufficiently repaired and
supplied, the owner or the freighters may demand indemnity of the
captain for the damages caused to the vessel or cargo by the
accident, in accordance with the provisions contained in articles 610,
612, 614, and 621.
The general rule established in the first of the foregoing articles is
that the loss of the vessel and of its cargo, as the result of shipwreck,
shall fall upon the respective owners thereof, save for the
exceptions specified in the second of the said articles.
These legal provisions are in harmony with those of articles 361 and
362 of the Code of Commerce, and are applicable whenever it is
proved that the loss of, or damage to, the goods was the result of a
fortuitous event or of force majeure; but the carrier shall be liable for
the loss or the damage arising from the causes aforementioned, if it
shall have been proven that they occurred through his own fault or
negligence or by his failure to take the same precautions usually
adopted by diligent and careful persons.

31. CAB: In the contract made and entered into by and between the
owner of the goods and the defendant, no term was fixed within
which the said merchandise should be delivered to the former at
Catarman, nor was it proved that there was any delay in loading the
goods and transporting them to their destination. From the 28th of
November, when the steamer Sorsogon arrived at Gubat and landed
the said goods belonging to Ong Bieng Sip to await the lorcha Pilar
which was to convey them to Catarman, as agreed upon, no vessel
carrying merchandise made the voyage from Gubat to the said
pueblo of the Island of Samar, and with Ong Bieng Sip's merchandise
there were also to be shipped goods belonging to the defendant
company, which goods were actually taken on board the said lorcha
and suffered the same damage as those belonging to the Chinaman.
So that there was no negligence, abandonment, or delay in the
shipment of Ong Bieng Sip's merchandise, and all that was done by
the carrier, Inchausti & Co., was what it regularly and usually did in
the transportation by sea from Manila to Catarman of all classes of
merchandise. No attempt has been made to prove that any course
other than the foregoing was pursued by that firm on this occasion;
therefore the defendant party is not liable for the damage occasioned
as a result of the wreck or stranding of the lorcha Pilar because of the
hurricane that overtook this craft while it was anchored in the port of
Gubat, on December 5, 1908, ready to be conveyed to that of
Catarman.
32. It is a fact not disputed, and admitted by the plaintiff, that the lorcha
Pilar was stranded and wrecked on the coast of Gubat during the
night of the 5th or early in the morning of the 6th of December, 1908,
as a result of a violent storm that came from the Pacific Ocean, and,
consequently, it is a proven fact that the loss or damage of the goods
shipped on the said lorcha was due to the force majeure which
caused the wreck of the said craft.
33. According to the aforecited article 361 of the Code of Commerce,
merchandise shall be transported at the risk and venture of the
shipper, unless the contrary be expressly stipulated. No such
stipulation appears of record, therefore, all damages and impairment
suffered by the goods in transportation, by reason of accident, force
majeure, or by virtue of the nature or defect of the articles, are for the
account and risk of the shipper.
34. A final clause of this same article adds that the burden of proof of
these accidents is upon the carrier; the trial record fully discloses that
the loss and damage of the goods shipped by the Chinaman, Ong
Bieng Sip, was due to the stranding and wreck of the lorcha Pilar in
the heavy storm or hurricane aforementioned; this the plaintiff did not
deny, and admitted that it took place between the afternoon of the 5th
and early in the morning of the 6th of December, 1908, so it is
evident that the defendant is exempt from the obligation imposed by
the law to prove the occurrence of the said storm, hurricane, or
cyclone in the port of Gubat, and, therefore, if said goods were lost or
damaged and could not be delivered in Catarman, it was due to a
fortuitous event and a superior, irresistible natural force, or force
majeure, which completely disabled the lorcha intended for their
transportation to the said port of the Island of Samar.
35. The record bears no proof that the said loss or damage caused by
the stranding or wreck of the lorcha Pilar as a result of the storm
mentioned, occurred through carelessness or negligence on the part
of the defendant company, its agents or the patron of the said lorcha,
or because they did not take the precautions usually adopted by
careful and diligent persons, as required by article 362 of the Code of
Commerce; the defendant company, as well as its agents and the
patron of the lorcha, had a natural interest in preserving the craft and
its own goods laden therein an interest equal to that of the
Chinese shipper in preserving his own which were on board the ship
lorcha and, in fact, the defendant, his agents and the patron did
take the measures which they deemed necessary and proper in order
to save the lorcha and its cargo from the impending danger;
accordingly, the patron, as soon as he was informed that a storm was
approaching, proceeded to clear the boat of all gear which might offer
resistance to the wind, dropped the four anchors he had, and even
procured an extra anchor from the land, together with a new cable,
and cast it into the water, thereby adding, in so far as possible, to the
stability and security of the craft, in anticipation of what might occur,
as presaged by the violence of the wind and the heavy sea; and
Inchausti & Company's agent furnished the articles requested by the
Page 37 of 62

36.

37.

38.

39.

patron of the lorcha for the purpose of preventing the loss of the boat;
thus did they all display all the diligence and care such as might have
been employed by anyone in similar circumstances, especially the
patron who was responsible for the lorcha under his charge; nor is it
possible to believe that the latter failed to adopt all the measures that
were necessary to save his own life and those of the crew and to free
himself from the imminent peril of shipwreck.
CAB: In view of the fact that the lorcha Pilar had no means of
changing its anchorage, even supposing that there was a better one,
and was unable to accept help from any steamer that might have
towed it to another point, as wherever it might have anchored, it
would continually have been exposed to the lashing of the waves and
to the fury of the hurricane, for the port of Gubat is a cove or open
roadstead with no shelter whatever from the winds that sweep over it
from the Pacific Ocean, and in view of the circumstances that it was
impossible for the said lorcha, loaded as it then was, to have entered
the Sabang River, even though there had been a steamer to tow it,
not only because of an insufficient depth of water in its channel, but
also on account of the very high bar at the entrance of the said river,
it is incontrovertible that the stranding and wreck of the lorcha Pilar
was due to a fortuitous event or to force majeure and not to the fault
and negligence of the defendant company and its agents or of the
patron, Mariano Gadvilao, inasmuch as the record discloses it to
have been duly proved that the latter, in difficult situation in which
unfortunately the boat under his charge was placed, took all the
precautions that any diligent man should have taken whose duty it
was to save the boat and its cargo, and, by the instinct of selfpreservation, his own life and those of the crew of the lorcha;
therefore, considering the conduct of the patron of the lorcha and that
of the defendant's agent in Gubat, during the time of the occurrence
of the disaster, the defendant company has not incurred any liability
whatever for the loss of the goods, the value of which is demanded
by the plaintiff; it must, besides, be taken into account that the
defendant itself also lost goods of its own and the lorcha too.
From the moment that it is held that the loss of the said lorcha was
due to force majeure, a fortuitous event, with no conclusive proof or
negligence or of the failure to take the precautions such as diligent
and careful persons usually adopt to avoid the loss of the boat and its
cargo, it is neither just nor proper to attribute the loss or damage of
the goods in question to any fault, carelessness, or negligence on the
part of the defendant company and its agents and, especially, the
patron of the lorcha Pilar.
Moreover, it is to be noted that, subsequent to the wreck, the
defendant company's agent took all the requisite measures for the
salvage of such of the goods as could be recovered after the
accident, which he did with the knowledge of the shipper, Ong Bieng
Sip, and, in effecting their sale, he endeavored to secure all possible
advantage to the Chinese shipper; in all these proceedings, as
shown by the record, he acted in obedience to the law.
From all the foregoing it is concluded that the defendant is not liable
for the loss and damage of the goods shipped on the lorcha Pilar by
the Chinaman, Ong Bieng Sip, inasmuch as such loss and damage
were the result of a fortuitous event or force majeure, and there was
no negligence or lack of care and diligence on the part of the
defendant company or its agents.

DISPOSITIVE: Therefore, we hold it proper to reverse the judgment


appealed from, and to absolve, as we hereby do, the defendant, Inchausti
& Co., without special findings as to costs.
Arellano, C.J., Mapa and Johnson, JJ., concur.
Carson and Trent, JJ., dissent.
SEPARATE OPINION: MORELAND, J., dissenting.
1. In my opinion the decision of the court below, which this court
reverses, is clearly in accordance with law and in strict conformity
with equity and justice. The defendant, a shipowner, agreed with the
plaintiff to transport P14,000 worth of property from Manila to
Catarman, Province of Samar. The defendant never fulfilled its
contract. Instead of delivering the property at Catarman, Province of
Samar, it left it on board of a lorcha in the waters of Gubat, a port in
the southern part of the Island of Luzon, where, during a storm, the
lorcha foundered and the property was lost.

2. This court holds that the Chinaman must lose his property. This is the
manner in which the defendant lost the goods of the plaintiff: The
Sorsogon, on which the goods were loaded at Manila, arrived at
Gubat about the 28th of November, 1908. A few days later the lorcha
Pilar arrived at Gubat, towed by the tug Texas. The lorcha was
without means of locomotion of its own, except its sails, which, from
the record, appear never to have been used and were substantially
useless, and could move about and protect itself from the weather
only by being towed or "poled." The only boat on the coast owned by
the defendant which could tow the lorcha was the tug Texas.
Sometime before the 5th of December, at least one day before the
storm broke, the goods belonging to the plaintiff were loaded on this
lorcha. The tug Texas, under the orders of the defendant, left the
locality where the lorcha was loaded and did not return until after it
was wrecked.
3. Let us see what were the conditions at the time the defendant
voluntarily and unnecessarily placed the property of the plaintiff on
the lorcha Pilar:
4. (1) It must be remembered that Gubat is located on the Pacific coast.
The waters of Gubat are not protected waters; they are not inclosed;
they are in the form of a bay; they are directly open to the winds from
the Pacific Ocean, without protection or shelter of any kind, except
possibly the mouth of the river, a matter here in dispute and which
will be referred to later. They are likewise open to the full sweep of
the waves of the Pacific coming from its widest reaches.
5. (2) At the time the plaintiff's goods were loaded upon the lorcha Pilar
it was the height of the typhoon season in that locality. The prevailing
winds were from the Pacific. Destructive baguios might reasonably
be expected at any time. It was only with the exercise of diligence
and prudence that shipping could be protected therefrom.
6. (3) As I have before indicated, the lorcha Pilar had substantially no
means of locomotion of its own and depended for its protection in
stormy weather entirely upon the steam tug Texas or being "poled"
into the mouth of the river by its crew. At the time of the storm which
destroyed the lorcha, and for some time prior thereto and for some
days thereafter, the Texas was at the port of Barcelona, on the coast
several miles south of Gubat, having been sent by order of the
defendant, its owner.
7. Summarizing, then, we have the defendant voluntarily placing the
property of the plaintiff upon the kind of craft above described,
dispatching to a distant port substantially the only means of
locomotion and protection which that craft had, except, as we have
said, by being poled, placing that lorcha in waters directly exposed to
the winds and waves of the Pacific and at the mercy of every baguio
that blew; and this during a season of the year when winds were
generally high and destructive baguios might be expected at any
time, and with full knowledge that if a typhoon came while the agents
of the defendant were unprepared the property of the plaintiff would
in all probability be lost.
8. Having these facts in mind, let us see what the agents of the
defendant did to protect the property of the plaintiff which they had
voluntarily placed in a situation of such peril.
9. (4) At the time of the destruction of the lorcha there was a
Government weather observatory at Gubat which received advices
many hours in advance of the approach of a typhoon toward the
locality. It had been there for some years. The purpose of that
observatory was to furnish information to the public concerning the
formation and approach of typhoons from the Pacific and of warning
the people with exposed shipping to take such precautions as were
necessary for its protection. This was known to the defendant's
agents at Gubat. They knew that the observatory had a public office,
open to anybody who cared to visit it, in which would be found all of
the latest information relating to storms and baguios coming from the
Pacific Ocean. They knew that the officials of said observatory were
there for the express purpose of giving such information. The
defendant's agents had at Gubat a barometer and all the other
instruments usually kept by seamen and navigators for forecasting
the weather.
10. (5) As we have said, the storm occurred on the 5th of December. It
wrought its greatest havoc late in the afternoon and the early part of
the night. At about 2 o'clock on the day before the storm, that is, on
the 4th of December, the observatory at Gubat received notice from
the Manila observatory that a baguio was forming in the Pacific
Page 38 of 62

Ocean. At about the same time at Barcelona, only 10 miles south of


Gubat, the barometer on board the Texas dropped so rapidly as to
indicate such dangerous weather probabilities that the captain of the
Texas deemed it unsafe to venture out of the harbor. On the same
afternoon the barometer on board the only steam vessel near Gubat,
the Ton Yek, also went down. Although it does not expressly appear
in the evidence, yet it is an inference entirely fair from the record, and
against which nothing whatever can be urged, that the barometer in
the possession of agents of the defendant also dropped with the
same rapidity. In all human probability this could not be otherwise in
view of the rapid and decisive fall of the barometer on board the
Texas, only 10 miles away, and the fact that the typhoon broke over
both places equally. At the same time, and more pronounced a little
later, every symptom which men who have to deal with the sea could
and would readily observe, and which the captain of the Ton Yek did
observe as a matter of fact, indicated the approach of a heavy storm.
These evidences were heeded by the captain of the Ton Yek, who,
early on the morning of the 5th, without waiting for the appearance of
a storm signal at the observatory, sent a messenger to the
observatory for the purpose of ascertaining with more accuracy what
was going to happen. In spite of all these things, most of which
occurred on the afternoon or evening of the day preceding the storm,
the agents of the defendant did absolutely nothing to inform
themselves as to the prospective whether conditions or as to whether
or not a baguio was approaching, and did absolutely nothing to
preserve or protect the property which they had placed in so exposed
and dangerous a place.
11. (6) The morning of the 5th arrived. As we have already stated, all of
the signs which men who have to do with the sea so readily read
indicated unquestionably and decisively the approach of the storm
which the advices received by the observatory at 2 o'clock on the
afternoon before told the inhabitants of that locality was probably
coming. Still the agents of the defendant did nothing. The captain of
the Ton Yek, although his vessel was a steam vessel and was able to
take care of itself by reason of its machinery, judging these signs and
portents, found it advisable to consult with the observatory early on
the morning of the 5th. The approach of a storm was apparent to him
and he took precautions accordingly. Yet the agents of the defendant
did nothing. Although the lorcha on which they had put the property of
the plaintiff was, according to their own admissions, utterly
unprotected, and although P14,000 worth of goods intrusted to their
care was in great danger of being lost, still they did absolutely
nothing, either by anticipation or otherwise, to protect that property
therefrom.
12. (7) On the morning of the 5th at about 8.20 or 8.30 o'clock the
observatory run up the first danger signal. Still the agents of the
defendant noted nothing, did nothing. They paid absolutely no
attention to it, as they had paid no attention whatever to the other
indications. They left the lorcha to its fate without lifting a finger to
save it. At 9 o'clock the wind had risen and the waves had
commenced to roll. Still nothing was done. At 9.30 the winds were
still stronger and the waves higher. Still nothing was done. At 10.30
the increase in the strength of the wind and of the height of the
waves continued. And yet the agents of the defendant did nothing. It
was well toward 11 o'clock before they began to move. And that time
it was too late. The wind and waves were so high that, with the
means at hand, the lorcha could not be moved from the exposed
position in which it was, even if it be conceded that there was any
safer place within those waters. The lorcha was prevented from
dashing itself immediately upon the rocks only by virtue of its anchor.
At between 10.30 and 11 o'clock the captain of the lorcha came to
ashore to secure additional anchors. And that time, however, as we
have observed, it was too late to unload the goods and too late to
remove the lorcha to a safe place within the mouth of the river, even
if that were possible. The agents of the defendant, having done
absolutely nothing up to this time, now found, after they had
awakened from their lethargy, that it was too late to do more than
stand by and see the property, which had been intrusted to their care
and for carrying of which they had been paid, dashed to pieces on
the rock and swallowed up by the sea.
13. (8) For nearly eighteen hours prior to the disaster the information that
the disaster was coming lay under the very noses of the agents of the
defendant. For nearly eighteen hours the barometer had been

14.
15.
16.

17.

18.

19.
20.

dropping steadily, so much so that their own vessel dared not leave a
port only 10 miles distant on the afternoon before. For eighteen hours
every warning which nature could give, indicating the disaster which
subsequently came, had been repeatedly thrust upon them. Yet they
did nothing. Having placed the goods of the plaintiff in an exposed
and dangerous position, in waters open to the winds and waves of
the Pacific Ocean, at the height of the typhoon season, in a vessel
which had no motive power of its own, and having sent away that
which they themselves substantially admit was its only protection, the
agents of the defendant exercised no care or precaution whatever to
the end that they might protect the goods which they themselves had
so recklessly exposed.
Yet this court, under such circumstances, holds that the defendant
may go in peace and that the plaintiff is the one who must bear the
burden of such negligence.
With that decision I can not agree.
An act of God can not be urged for the protection of a person who
has been guilty of gross negligence in not trying to avert its results.
One who has accepted responsibility for pay can not weakly fold his
hands and say that he was prevented from meeting that responsibility
by an act of God, when the exercise of the ordinary care and
prudence would have averted the results flowing from that act. One
who has placed the property of another, intrusted to his care, in an
unseaworthy craft, upon dangerous waters, cannot absolve himself
by crying, "an act of God," when every effect which a typhoon
produced upon that property could have been avoided by the
exercise of common care and prudence. When the negligence of the
carrier concurs with an act of God producing a loss, the carrier is not
exempted from liability by showing that the immediate cause of the
damage was the act of God; or, as it has been expressed, "when the
loss is caused by the act of God, if the negligence of the carrier
mingles with it as an active and cooperative cause, he is still liable."
The loss and damage to perishable articles in consequence of the
weather will not excuse the carrier if it could have been prevented by
due care and diligence. The carrier must not only show that it did all
that was usual, but all that was necessary to be done under the
circumstances. (Wing vs. New York, etc., Ry. Co., 1 Hilt. (N.Y.), 235;
Philleo vs. Sanford, 17 Tex., 228.) To be exempt from liability for loss
because of an act of God, the common carrier must be free from any
previous negligence or misconduct by which that loss or damage
may have been occasioned. For, although the immediate or
proximate cause of a loss in any given instance may have been what
is termed an act of God, yet if the carrier unnecessarily exposed the
property to such accident by any culpable act or omission of his own,
he is not excused. (Mc-Graw vs. Baltimore and Ohio Ry. Co., 41 Am.
Rep., 696.) In the case of Wolf vs. American Express Co,., 43 Mo.,
421, Wagner, J., said:
The act of God which excuses the carrier must not only be the
proximate cause of the loss, but the better opinion is that it must be
the sole cause. And where the loss is caused by the "act of God," if
the negligence of the carrier mingles with it as an active and
cooperative cause, he is still responsible. (Amies vs. Stevens, 1
Stra., 128.)
Where perishable property, such as potatoes, is received by a
common carrier at a season when a very low temperature may
reasonably apprehended, great diligence should be used in
forwarding such property with dispatch and haste; and where, by a
delay of two or three days, the property is damaged by freezing, the
carrier may be held liable for the damage. (Hewett vs. The Chicago,
B & Q. Ry. Co., 63 Ia., 611.) A carrier is bound to provide a vessel in
all respects adequate to the purpose, with a captain and crew of
requisite skill or ability; and, failing in these particulars, though the
loss be occasioned by an act of God, the carrier may not set up a
providential calamity to protect himself against what may have arisen
from his own folly. (Hart vs. Allen and Grant, 2 Watts (Pa.), 114.)
This doctrine is fully supported by the Spanish authorities on the
subject.
Manresa in his commentaries to section 1105 of the Civil Code of
Spain, volume 8, page 91, says: Elucidation of article 1105 and the
idea of the accident is interesting under the following aspects;
Relation between it and the blame; enumeration of the requisites that
must be present; proof of the event and characterization thereof; and
the consequence it produces. Let us examine them.
Page 39 of 62

21. Even when the distinction is simple and reasonable between blame
for some exempting circumstance (because it may not be serious
enough to involve such blame, under the law or the obligation) and
accident, since the former admits an imputation which the latter
excludes, even when the former may not be the basis for legal
responsibility, and therefore it can not be said that where no
responsible blame exists there the accident commences, yet the
latter is undeniably characterized by unexpectedness and
inevitability, circumstances susceptible of relative interpretation, and
so whatever relates to the blame must be taken into account,
because, as we shall see, it is in certain sense, especially in practical
application, connected with the matter under consideration.
22. Aside from this statement of ideas, there may be another of
consequences, for in the complexity of facts, in the same obligation,
there may be present blame enough to involve such and also
accident. When both causes are present, with separation of time and
affects, for partial breach due to one of them may be possible and
then the other may operate to aggravate or complete these
consequences, the distinction is easy and to each cause may be
assigned its own effect for the corresponding result, as neither
exemption, on account of accident, can be extended to what may be
imputed nor to what in any way depends upon it by basing
responsibility arising from blame on the fact that the damage is the
result thereof.
23. The problem becomes more difficult when both causes concur to
produce the same effect or when, even though the effect may be due
to accident, the obligor has not exercised necessary diligence,
however, blameless he was for the results arising from the breach. In
the first of the last two suppositions, the solution is plain, because
when the obligor incurs the blame of actually producing the result, or
even when it is not the only cause, or even the principal one, there is
still sufficient connection between it and the consequences to cause
them to be imputed to him and, as a voluntary elements exists in the
causes, there is lacking the circumstance indispensable to exemption
on account of accident. The second supposition presents a very
difficult problem of proof, which rests upon the obligor, and calls for a
careful analysis of the origin of the breach. The difficulty in this case
consists in that the blame, in addition to its subjective aspect for
imputing the consequences to the obligor, has an objective aspect, to
wit, that these consequences may rise, that the damage which must
be repaired is caused, in such manner that due diligence may be
lacking and yet not extend to the point of involving responsibility,
because it produces no results. Now then, if an accident occurs
under these conditions, absolutely independent of the negligence that
may have existed, it may have occurred with or without negligence
and therefore any derivation of consequences was lacking, then it
can not be said that responsibility arises therefrom; but to reach this
conclusion there first rests with the obligor proof so difficult that, in
addition to overcoming the presumption of existence of blame, it
involves the very fine distinction of the origin of the breach and
perfectly reveals the occurrence of the accident, joined by their
coexistence, and demonstrating absolute lack of consequences and
influence of blame.
24. In connection with this question, a judgment of November 22, 1904,
declares that there are some events which, independent of the will of
the obligor, hinder the fulfillment of the obligation, and yet do not
constitute cases of force majeure for the purposes of such fulfillment,
because the possibility that they would occur could have been
foreseen, articles 1101 and 1104 being applicable and not article
1105, since negligence or blame is also present from not informing
the obligee, either at first or later on, of the state of affairs and the
situation, so as to avoid the consequent damage. This was the case
of a bull fight that could not be held because the ring was not
completed in time for reasons beyond the control of the contractor,
but the fact that the contract did not state that the ring was
unconstructed and the possibility that it would not be at the time
specified, reveals, in the opinion of the court, the lack of foresight or
the negligence which makes article 1105 inapplicable.
25. In an essentially analogous way, judgments were pronounced on
June 12, 1899 (Tribunal contencioso administrativo), and on October
27, 1905 (Sala tercera), against the company leasing the tobacco
monopoly, for losses caused by theft and fire. It was further decided
in these cases that the company and not the State must bear the

26.

27.

28.

29.

30.

31.

losses, for while accidental fire in a tobacco factory and theft of


stamped goods stored in a branch house may constitute accidents,
yet they do not deserve this characterization when they occur
through omission, neglect or lack of care which imply breach of the
contract.
According to the text of article 1105, which agrees with the rational
idea of accident, it is sufficient for the event to constitute such that it
have any of the two characteristics enumerated; if it is foreseen, it is
of little import that it be unavoidable; and if it is unavoidable it does
not matter that it may have been foreseen. The first supposition
requires some explanation: an event may be wholly unforeseen, but,
after it has occurred, be very slow in producing effects, and in such
case, although it could not have been foreseen, as there is time
before it produces its effects, the latter must be considered.
Besides this special supposition, in which, if carefully considered, the
two characteristics do not concur, since the idea of unexpectedness,
as is seen, is relative, it will be sufficient that one or the other be
present. The possibility of foresight must be weighed rationally with
consideration of all the circumstances, but this general rule has,
strictly speaking, an exception when the event, although in a general
way very difficult, almost impossible to be foreseen, should for some
reason be known to the obligor in due time.
The condition of inevitability can not be understood in so absolute a
sense that it should take away the character of accident from many
that are strictly such, because they are undoubtedly causes, however
powerful they may be, whose injurious effects may have been
avoided by exercising a number of precautions, so exaggerated and
so out of proportion to the importance of the trouble anticipated, that
they would be unreasonable and not required in law. In such cases, if
the means which can and must rationally be employed are not
effective, it will be held to have been unavoidable. So we see
demonstrated how the idea of diligence is related, somewhat in the
nature of limitation, to the accident.
Such was the doctrine established in our ancient law regarding the
obligor; the reasons whereof are theoretically set forth further on; and
as a written provision, law 20, title 13, partida 5, which expressly laid
down this principle in connection with pawn-broking contracts, and
which was, by analogy, made the basis for extending a similar
provision to the remaining cases.
That the Civil Code is inspired by the same idea is clearly expressed
in article 1183 thereof, the commentary on which should be
consulted. Still such solution depends upon the nature of proof and of
the accident, since its existence as an abnormal event hindering the
fulfillment of the obligation must be proved and not presumed, and
the burden of this proof rests upon the obligor, and not upon the
obligee, whose proof would have to be negative. Moreover since an
accident is the basis for exemption from responsibility, it must be
proved by him who will benefit thereby and who objects to the
requirement that he fulfill his obligations. To these reasons are joined
those above set forth in connection with the proof of contractual
blame, since they are, according to the same article, 1183, above
cited, closely related questions, so much so that they become two
phases of one question presumption against the existence of
accident of what tends to establish presumption of blame, in the
absence of proof to overcome it.
Proof of accident must include these points; the occurrence of the
event, the bearing it has upon breach of the obligation, and the
concurrence of unexpectedness and inevitably. In connection with the
first two points, the proof resting upon the obligor must be specific
and exact; but as for the last, although it may be admitted as a
general proposition that, in addition to proving the event, he must
also demonstrate that it involves the condition required to make it an
accident, there are some of such magnitude and, by their nature, of
almost impossible prevision, that proof of their occurrence
demonstrates their condition. Undoubtedly, and differently from proof
of the accident, the exceptional circumstance that the event (which
should as a general proposition be regarded as unforeseen) was
known to the obligor for some special reason, must be of proven by
the obligee who asserts it, since the obligation of proof resting upon
the former is fulfilled in this regard by demonstrating that the event
ought rationally to be held to have been unforeseen.

Page 40 of 62

32. Since proof of the accident is related to proof of the blame, it is


evident that the obligor must also prove, so far as he is concerned,
that he is not to blame for breach of the obligation.
33. Exemption from responsibility in accidents established by article 1105
has, according to its text, two exceptions, whereby an event may be
plainly proven, and be unforeseen and unavoidable and still not
produce such exemption, viz, when the execution is either stipulated
in the obligation or is expressly mentioned by the law. The basis for
these exceptions rests, according to this cases, either upon the
freedom of contracts, which is opposed to prohibition of a compact,
wherein, without immorality, there is merely an emphasized
stipulation, which is meant to guarantee in every case an interest and
indirectly to secure careful and special diligence in the fulfillment of
the obligation; or upon the nature of the obligations when risk is an
essential element therein; or finally upon cases whose
circumstances, as happens with that provided for by the last
paragraph of article 1096, justify the special strictness of the law.
34. In conclusion, we shall point out that in order to relieve the obligor
from his obligation, it must be remembered that the occurrence of the
event does not suffice, but that the impossibility of fulfilling the
obligation must be the direct consequences of the accident, so that
when it can be fulfilled it will subsists, even if only in part, and
therefore, in order to see whether or not the accident produces this
result the nature of the obligation must be considered, and according
to whether it be specific or general, etc., it will or will not be
extinguished.
35. To hold the carrier responsible in the case at bar, it is not necessary
to go so far as the authorities just cited. The negligence is so clear
that it is not necessary to strain doctrines or even press them to their
limits.
36. I do not agree here argue the assertion of the plaintiff denied by the
defendant, that, at any time before nine o'clock of the day of the
destruction of the lorcha, the defendant's agents could have placed
the lorcha in the mouth of the river out of harm's way. I believe that a
fair preponderance of the evidence shows that this could have been
done. The defendant denies this, asserting that the water was too
shallow. Nevertheless, fourteen days after the storm, the foundered
lorcha, water-logged and undoubtedly containing water, was " poled"
by its crew from the place where it went on the rocks to a place of
safety inside the mouth of the river. It is more than probable that this
could have been done at any time before the storm became too high.
At last common prudence would have required the unloading of the
lorcha, which could easily have been accomplished before the storm
if the agents of the defendant had awakened themselves to their
duty.

Magellan Mfg. Marketing Corp v. CA, 201 SCRA 102 (1991)


G.R. No. 95529 August 22, 1991
MAGELLAN MANUFACTURING MARKETING CORPORATION, *
petitioner,
vs.
COURT OF APPEALS, ORIENT OVERSEAS CONTAINER LINES and
F.E. ZUELLIG, INC. respondents.
REGALADO, J.:p
NATURE:
Petitioner, via this petition for review on certiorari, seeks the reversal of
the judgment of respondent Court of Appeals in CA-G.R. CV No. 18781, 1
affirming in part the decision of the trial court, 2 the dispositive portion of
which reads: Premises considered, the decision appealed from is affirmed
insofar as it dismisses the complaint. On the counter-claim, however,
appellant is ordered to pay appellees the amount of P52,102.45 with legal
interest from date of extra-judicial demand. The award of attorney's fees
is deleted.
FACTS:
The facts as found by respondent appellate court are as follows: On May
20, 1980, plaintiff-appellant Magellan Manufacturers Marketing Corp.
(MMMC) entered into a contract with Choju Co. of Yokohama, Japan to
export 136,000 anahaw fans for and in consideration of $23,220.00. As

payment thereof, a letter of credit was issued to plaintiff MMMC by the


buyer. Through its president, James Cu, MMMC then contracted F.E.
Zuellig, a shipping agent, through its solicitor, one Mr. King, to ship the
anahaw fans through the other appellee, Orient Overseas Container
Lines, Inc., (OOCL) specifying that he needed an on-board bill of lading
and that transhipment is not allowed under the letter of credit (Exh. B-1).
On June 30, 1980, appellant MMMC paid F.E. Zuellig the freight charges
and secured a copy of the bill of lading which was presented to Allied
Bank. The bank then credited the amount of US$23,220.00 covered by
the letter of credit to appellant's account. However, when appellant's
president James Cu, went back to the bank later, he was informed that
the payment was refused by the buyer allegedly because there was no
on-board bill of lading, and there was a transhipment of goods. As a result
of the refusal of the buyer to accept, upon appellant's request, the
anahaw fans were shipped back to Manila by appellees, for which the
latter demanded from appellant payment of P246,043.43. Appellant
abandoned the whole cargo and asked appellees for damages.
In their Partial Stipulation of Facts, the parties admitted that a shipment of
1,047 cartons of 136,000 pieces of Anahaw Fans contained in 1 x 40 and
1 x 20 containers was loaded at Manila on board the MV 'Pacific
Despatcher' freight prepaid, and duly covered by Bill of Lading No.
MNYK201T dated June 27, 1980 issued by OOCL; that the shipment was
delivered at the port of discharge on July 19, 1980, but was subsequently
returned to Manila after the consignee refused to accept/pay the same. 4
Elaborating on the above findings of fact of respondent court and without
being disputed by herein private respondents, petitioner additionally avers
that:
When petitioner informed private respondents about what happened, the
latter issued a certificate stating that its bill of lading it issued is an on
board bill of lading and that there was no actual transhipment of the fans.
According to private respondents when the goods are transferred from
one vessel to another which both belong to the same owner which was
what happened to the Anahaw fans, then there is (no) transhipment.
Petitioner sent this certification to Choju Co., Ltd., but the said company
still refused to accept the goods which arrived in Japan on July 19, 1980.
Private respondents billed petitioner in the amount of P16,342.21 for such
shipment and P34,928.71 for demurrage in Japan from July 26 up to
August 31, 1980 or a total of P51,271.02. In a letter dated March 20,
1981, private respondents gave petitioner the option of paying the sum of
P51,271.02 or to abandon the Anahaw fans to enable private respondents
to sell them at public auction to cover the cost of shipment and
demurrages. Petitioner opted to abandon the goods. However, in a letter
dated June 22, 1981 private respondents demanded for payment of
P298,150.93 from petitioner which represents the freight charges from
Japan to Manila, demurrage incurred in Japan and Manila from October
22, 1980 up to May 20, 1981; and charges for stripping the container van
of the Anahaw fans on May 20, 1981.
On July 20, 1981 petitioner filed the complaint in this case praying that
private respondents be ordered to pay whatever petitioner was not able to
earn from Choju Co., Ltd., amounting to P174,150.00 and other damages
like attorney's fees since private respondents are to blame for the refusal
of Choju Co., Ltd. to accept the Anahaw fans. In answer thereto the
private respondents alleged that the bill of lading clearly shows that there
will be a transhipment and that petitioner was well aware that MV (Pacific)
Despatcher was only up to Hongkong where the subject cargo will be
transferred to another vessel for Japan. Private respondents also filed a
counterclaim praying that petitioner be ordered to pay freight charges
from Japan to Manila and the demurrages in Japan and Manila amounting
to P298,150.93.
RTC: The lower court decided the case in favor of private respondents. It
dismissed the complaint on the ground that petitioner had given its
consent to the contents of the bill of lading where it is clearly indicated
that there will be transhipment. The lower court also said that petitioner is
liable to pay to private respondent the freight charges from Japan to
Manila and demurrages since it was the former which ordered the
reshipment of the cargo from Japan to Manila.
CA: On appeal to the respondent court, the finding of the lower (court)
that petitioner agreed to a transhipment of the goods was affirmed but the
finding that petitioner is liable for P298,150.93 was modified. It was
reduced to P52,102.45 which represents the freight charges and
demurrages incurred in Japan but not for the demurrages incurred in
Marta. According to the respondent (court) the petitioner can not be held
liable for the demurrages incurred in Manila because Private respondents
Page 41 of 62

did not timely inform petitioner that the goods were already in Manila in
addition to the fact that private respondent had given petitioner the option
of abandoning the goods in exchange for the demurrages.
ISSUE:
Petitioner, being dissatisfied with the decision of respondent court and the
motion for reconsideration thereof having been denied, invokes the
Court's review powers for the resolution of the issues as to whether or not
respondent court erred (1) in affirming the decision of the trial court which
dismissed petitioner's complaint; and (2) in holding petitioner liable to
private respondents in the amount of P52,102.45. 6
I. Petitioner obstinately faults private respondents for the refusal of its
buyer, Choju Co., Ltd., to take delivery of the exported anahaw fans
resulting in a loss of P174,150.00 representing the purchase price of the
said export items because of violation of the terms and conditions of the
letter of credit issued in favor of the former which specified the
requirement for an on board bill of lading and the prohibition against
transhipment of goods, inasmuch as the bill of lading issued by the latter
bore the notation "received for shipment" and contained an entry
indicating transhipment in Hongkong.
HELD:
1. We find no fault on the part of private respondents. On the matter of
transhipment, petitioner maintains that "... while the goods were
transferred in Hongkong from MV Pacific Despatcher, the feeder
vessel, to MV Oriental Researcher, a mother vessel, the same cannot
be considered transhipment because both vessels belong to the
same shipping company, the private respondent Orient Overseas
Container Lines, Inc." 7 Petitioner emphatically goes on to say: "To
be sure, there was no actual transhipment of the Anahaw fans. The
private respondents have executed a certification to the effect that
while the Anahaw fans were transferred from one vessel to another in
Hong Kong, since the two vessels belong to one and the same
company then there was no transhipment. 8
2. Transhipment, in maritime law, is defined as "the act of taking cargo
out of one ship and loading it in another," 9 or "the transfer of goods
from the vessel stipulated in the contract of affreightment to another
vessel before the place of destination named in the contract has
been reached," 10 or "the transfer for further transportation from one
ship or conveyance to another." 11 Clearly, either in its ordinary or its
strictly legal acceptation, there is transhipment whether or not the
same person, firm or entity owns the vessels. In other words, the fact
of transhipment is not dependent upon the ownership of the
transporting ships or conveyances or in the change of carriers, as the
petitioner seems to suggest, but rather on the fact of actual physical
transfer of cargo from one vessel to another.
3. That there was transhipment within this contemplation is the
inescapable conclusion, as there unmistakably appears on the face
of the bill of lading the entry "Hong Kong" in the blank space labeled
"Transhipment," which can only mean that transhipment actually took
place. 12 This fact is further bolstered by the certification 13 issued
by private respondent F.E. Zuellig, Inc. dated July 19, 1980, although
it carefully used the term "transfer" instead of transhipment.
Nonetheless, no amount of semantic juggling can mask the fact that
transhipment in truth occurred in this case.
4. Petitioner insists that "(c)onsidering that there was no actual
transhipment of the Anahaw fans, then there is no occasion under
which the petitioner can agree to the transhipment of the Anahaw
fans because there is nothing like that to agree to" and "(i)f there is
no actual transhipment but there appears to be a transhipment in the
bill of lading, then there can be no possible reason for it but a mistake
on the part of the private respondents. 14
5. Petitioner, in effect, is saying that since there was a mistake in
documentation on the part of private respondents, such a mistake
militates against the conclusiveness of the bill of lading insofar as it
reflects the terms of the contract between the parties, as an
exception to the parol evidence rule, and would therefore permit it to
explain or present evidence to vary or contradict the terms of the
written agreement, that is, the bill of lading involved herein.
6. It is a long standing jurisprudential rule that a bill of lading operates
both as a receipt and as a contract. It is a receipt for the goods
shipped and a contract to transport and deliver the same as therein
stipulated. As a contract, it names the parties, which includes the

7.

8.

9.

10.

11.

consignee, fixes the route, destination, and freight rates or charges,


and stipulates the rights and obligations assumed by the parties. 15
Being a contract, it is the law between the parties who are bound by
its terms and conditions provided that these are not contrary to law,
morals, good customs, public order and public policy. 16 A bill of
lading usually becomes effective upon its delivery to and acceptance
by the shipper. It is presumed that the stipulations of the bill were, in
the absence of fraud, concealment or improper conduct, known to the
shipper, and he is generally bound by his acceptance whether he
reads the bill or not. 17
The holding in most jurisdictions has been that a shipper who
receives a bill of lading without objection after an opportunity to
inspect it, and permits the carrier to act on it by proceeding with the
shipment is presumed to have accepted it as correctly stating the
contract and to have assented to its terms. In other words, the
acceptance of the bill without dissent raises the presumption that all
the terms therein were brought to the knowledge of the shipper and
agreed to by him and, in the absence of fraud or mistake, he is
estopped from thereafter denying that he assented to such terms.
This rule applies with particular force where a shipper accepts a bill
of lading with full knowledge of its contents and acceptance under
such circumstances makes it a binding contract. 18
In the light of the series of events that transpired in the case at bar,
there can be no logical conclusion other than that the petitioner had
full knowledge of, and actually consented to, the terms and
conditions of the bill of lading thereby making the same conclusive as
to it, and it cannot now be heard to deny having assented thereto. As
borne out by the records, James Cu himself, in his capacity as
president of MMMC, personally received and signed the bill of lading.
On practical considerations, there is no better way to signify consent
than by voluntary signing the document which embodies the
agreement. As found by the Court of Appeals
Contrary to appellant's allegation that it did not agree to the
transhipment, it could be gleaned from the record that the appellant
actually consented to the transhipment when it received the bill of
lading personally at appellee's (F.E. Zuellig's) office. There clearly
appears on the face of the bill of lading under column "PORT OF
TRANSHIPMENT" an entry "HONGKONG' (Exhibits'G-l'). Despite
said entries he still delivered his voucher (Exh. F) and the
corresponding check in payment of the freight (Exhibit D), implying
that he consented to the transhipment (Decision, p. 6, Rollo). 19
Furthermore and particularly on the matter of whether or not there
was transhipment, James Cu, in his testimony on crossexamination,
categorically stated that he knew for a fact that the shipment was to
be unloaded in Hong Kong from the MV Pacific Despatcher to be
transferred to a mother vessel, the MV Oriental Researcher in this
wise:
Q Mr. Cu, are you not aware of the fact that your shipment is to
be transferred or transhipped at the port of Hongkong?
A I know. It's not transport, they relay, not trans... yes, that is why
we have an agreement if they should not put a transhipment in
Hongkong, that's why they even stated in the certification.
xxx xxx xxx
Q In layman's language, would you agree with me that
transhipment is the transfer of a cargo from one vessel to the
other?
A As a layman, yes.
Q So, you know for a fact that your shipment is going to be
unloaded in Hongkong from M. V. Dispatcher (sic) and then
transfer (sic) to another vessel which was the Oriental
Dispatcher, (sic) you know that for a fact?
A Yes, sir. (Emphasis supplied.)
Under the parol evidence rule, the terms of a contract are rendered
conclusive upon the parties, and evidence aliunde is not admissible
to vary or contradict a complete and enforceable agreement
embodied in a document, subject to well defined exceptions which do
not obtain in this case. The parol evidence rule is based on the
consideration that when the parties have reduced their agreement on
a particular matter into writing, all their previous and
contemporaneous agreements on the matter are merged therein.
Accordingly, evidence of a prior or contemporaneous verbal
agreement is generally not admissible to vary, contradict or defeat
the operation of a valid instrument. 22 The mistake contemplated as
Page 42 of 62

12.

13.

14.

15.

16.

17.
18.
19.
20.

an exception to the parol evidence rule is one which is a mistake of


fact mutual to the parties. 23 Furthermore, the rules on evidence, as
amended, require that in order that parol evidence may be admitted,
said mistake must be put in issue by the pleadings, such that if not
raised inceptively in the complaint or in the answer, as the case may
be, a party can not later on be permitted to introduce parol evidence
thereon. 24 Needless to say, the mistake adverted to by herein
petitioner, and by its own admission, was supposedly committed by
private respondents only and was raised by the former rather
belatedly only in this instant petition. Clearly then, and for failure to
comply even only with the procedural requirements thereon, we
cannot admit evidence to prove or explain the alleged mistake in
documentation imputed to private respondents by petitioner.
Petitioner further argues that assuming that there was transhipment,
it cannot be deemed to have agreed thereto even if it signed the bill
of lading containing such entry because it had made known to private
respondents from the start that transhipment was prohibited under
the letter of credit and that, therefore, it had no intention to allow
transhipment of the subject cargo. In support of its stand, petitioner
relies on the second paragraph of Article 1370 of the Civil Code
which states that "(i)f the words appear to be contrary to the evident
intention of the parties, the latter shall prevail over the former," as
wen as the supposed ruling in Caltex Phil., Inc. vs. Intermediate
Appellate Court, et al. 25 that "where the literal interpretation of a
contract is contrary to the evident intention of the parties, the latter
shall prevail."
As between such stilted thesis of petitioner and the contents of the
bill of lading evidencing the intention of the parties, it is irremissible
that the latter must prevail. Petitioner conveniently overlooks the first
paragraph of the very article that he cites which provides that "(i)f the
terms of the contract are clear and leave no doubt upon the intention
of the contracting parties, the literal meaning of the stipulations shall
control." In addition, Article 1371 of the same Code provides that "(i)n
order to judge the intention of the contracting parties, their
contemporaneous and subsequent acts shall be principally
considered."
The terms of the contract as embodied in the bill of lading are clear
and thus obviates the need for any interpretation. The intention of the
parties which is the carriage of the cargo under the terms specified
thereunder and the wordings of the bill of lading do not contradict
each other. The terms of the contract being conclusive upon the
parties and judging from the contemporaneous and subsequent
actuations of petitioner, to wit, personally receiving and signing the
bill of lading and paying the freight charges, there is no doubt that
petitioner must necessarily be charged with full knowledge and
unqualified acceptance of the terms of the bill of lading and that it
intended to be bound thereby.
Moreover, it is a well-known commercial usage that transhipment of
freight without legal excuse, however competent and safe the vessel
into which the transfer is made, is a violation of the contract and an
infringement of the right of the shipper, and subjects the carrier to
liability if the freight is lost even by a cause otherwise excepted. 26 It
is highly improbable to suppose that private respondents, having
been engaged in the shipping business for so long, would be
unaware of such a custom of the trade as to have undertaken such
transhipment without petitioner's consent and unnecessarily expose
themselves to a possible liability. Verily, they could only have
undertaken transhipment with the shipper's permission, as evidenced
by the signature of James Cu.
Another ground for the refusal of acceptance of the cargo of anahaw
fans by Choju Co., Ltd. was that the bill of lading that was issued was
not an on board bill of lading, in clear violation of the terms of the
letter of credit issued in favor of petitioner. On cross-examination, it
was likewise established that petitioner, through its aforesaid
president, was aware of this fact, thus:
Q If the container van, the loaded container van, was transported
back to South Harbor on June 27, 1980, would you tell us, Mr. Cu,
when the Bill of Lading was received by you?
A I received on June 30, 1980. I received at the same time so then I
gave the check.
xxx xxx xxx
Q So that in exchange of the Bill of Lading you issued your check
also dated June 30, 1980?

21. A Yes, sir.


22. Q And June 27, 1980 was the date of the Bill of Lading, did you
notice that the Bill of Lading states: 'Received for shipment'only? .
23. A Yes, sir.
24. Q What did you say?
25. A I requested to issue me on board bill of lading.
26. Q When?
27. A In the same date of June 30.
28. Q What did they say?
29. A They said, they cannot.
30. xxx xxx xxx
31. Q Do you know the difference between a "received for shipment bill
of lading" and "on board bill of lading"?
32. A Yes, sir.
33. Q What's the difference?
34. A Received for shipment, you can receive the cargo even you don't
ship on board, that is placed in the warehouse; while on-board bill of
lading means that is loaded on the vessel, the goods.
35. xxx xxx xxx
36. Q In other words, it was not yet on board the vessel?
37. A During that time, not yet.
38. xxx xxx xxx
39. Q Do you know, Mr. Cu, that under the law, if your shipment is
received on board a vessel you can demand an on-board bill of
lading not only a received for shipment bill of lading.?
40. A Yes sir.
41. Q And did you demand from F.E. Zuellig the substitution of that
received for shipment bill of lading with an on-board bill of lading?
42. A Of course, instead they issue me a certification.
43. Q They give you a ... ?
44. A ... a certification that it was loaded on board on June 30.
45. xxx xxx xxx
46. Q Mr. Cu, are you aware of the conditions of the Letter of Credit to
the effect that there should be no transhipment and that it should also
get an on board bill of lading.?
47. A Yes sir. 27
48. Undoubtedly, at the outset, petitioner knew that its buyer, Choju Co.,
Ltd., particularly required that there be an on board bill of lading,
obviously due to the guaranty afforded by such a bill of lading over
any other kind of bill of lading. The buyer could not have insisted on
such a stipulation on a pure whim or caprice, but rather because of
its reliance on the safeguards to the cargo that having an on board
bill of lading ensured. Herein petitioner cannot feign ignorance of the
distinction between an "on board" and a "received for shipment" bill
of lading, as manifested by James Cu's testimony. It is only to be
expected that those long engaged in the export industry should be
familiar with business usages and customs.
49. In its petition, MMMC avers that "when petitioner teamed of what
happened, it saw private respondent F.E. Zuellig which, in turn,
issued a certification that as of June 30, 1980, the Anahaw fans were
already on board MV Pacific Despatcher (which means that the bill of
lading is an on- board-bill of lading or 'shipped' bill of lading as
distinguished from a 'received for shipment'bill of lading as governed
by Sec. 3, par. 7, Carriage of Goods by Sea Act) ...." 28 What the
petitioner would suggest is that said certification issued by F.E.
Zuellig, Inc., dated July 19, 1980, had the effect of converting the
original "received for shipment only" bill of lading into an "on board"
bill of lading as required by the buyer and was, therefore, by
substantial compliance, not violative of the contract.
50. An on board bill of lading is one in which it is stated that the goods
have been received on board the vessel which is to carry the goods,
whereas a received for shipment bill of lading is one in which it is
stated that the goods have been received for shipment with or
without specifying the vessel by which the goods are to be shipped.
Received for shipment bills of lading are issued whenever conditions
are not normal and there is insufficiency of shipping space. 29 An on
board bill of lading is issued when the goods have been actually
placed aboard the ship with every reasonable expectation that the
shipment is as good as on its way. 30 It is, therefore, understandable
that a party to a maritime contract would require an on board bill of
lading because of its apparent guaranty of certainty of shipping as
well as the seaworthiness of the vessel which is to carry the goods.
Page 43 of 62

51. It cannot plausibly be said that the aforestated certification of F.E.


Zuellig, Inc. can qualify the bill of lading, as originally issued, into an
on board bill of lading as required by the terms of the letter of credit
issued in favor of petitioner. For one, the certification was issued only
on July 19, 1980, way beyond the expiry date of June 30, 1980
specified in the letter of credit for the presentation of an on board bill
of lading. Thus, even assuming that by a liberal treatment of the
certification it could have the effect of converting the received for
shipment bill of lading into an on board of bill of lading, as petitioner
would have us believe, such an effect may be achieved only as of the
date of its issuance, that is, on July 19, 1980 and onwards.
52. The fact remains, though, that on the crucial date of June 30, 1980
no on board bill of lading was presented by petitioner in compliance
with the terms of the letter of credit and this default consequently
negates its entitlement to the proceeds thereof. Said certification, if
allowed to operate retroactively, would render illusory the guaranty
afforded by an on board bill of lading, that is, reasonable certainty of
shipping the loaded cargo aboard the vessel specified, not to mention
that it would indubitably be stretching the concept of substantial
compliance too far.
53. Neither can petitioner escape hability by adverting to the bill of lading
as a contract of adhesion, thus warranting a more liberal
consideration in its favor to the extent of interpreting ambiguities
against private respondents as allegedly being the parties who gave
rise thereto. The bill of lading is clear on its face. There is no
occasion to speak of ambiguities or obscurities whatsoever. All of its
terms and conditions are plainly worded and commonly understood
by those in the business.
54. It will be recalled that petitioner entered into the contract with Choju
Co., Ltd. way back on May 20,1980 or over a month before the expiry
date of the letter of credit on June 30, 1980, thus giving it more than
ample time to find a carrier that could comply with the requirements
of shipment under the letter of credit. It is conceded that bills of lading
constitute a class of contracts of adhesion. However, as ruled in the
earlier case of Ong Yiu vs. Court of Appeals, et al. 31 and reiterated
in Servando, et al. vs. Philippine Steam Navigation Co., 32 plane
tickets as well as bills of lading are contracts not entirely prohibited.
The one who adheres to the contract is in reality free to reject it
entirely; if he adheres, he gives his consent. The respondent court
correctly observed in the present case that "when the appellant
received the bill of lading, it was tantamount to appellant's adherence
to the terms and conditions as embodied therein.
55. In sum, petitioner had full knowledge that the bill issued to it
contained terms and conditions clearly violative of the requirements
of the letter of credit. Nonetheless, perhaps in its eagerness to
conclude the transaction with its Japanese buyer and in a race to
beat the expiry date of the letter of credit, petitioner took the risk of
accepting the bill of lading even if it did not conform with the indicated
specifications, possibly entertaining a glimmer of hope and imbued
with a touch of daring that such violations may be overlooked, if not
disregarded, so long as the cargo is delivered on time. Unfortunately,
the risk did not pull through as hoped for. Any violation of the terms
and conditions of the letter of credit as would defeat its right to collect
the proceeds thereof was, therefore, entirely of the petitioner's
making for which it must bear the consequences. As finally averred
by private respondents, and with which we agree, "... the questions of
whether or not there was a violation of the terms and conditions of
the letter of credit, or whether or not such violation was the cause or
motive for the rejection by petitioner's Japanese buyer should not
affect private respondents therein since they were not privies to the
terms and conditions of petitioner's letter of credit and cannot
therefore be held liable for any violation thereof by any of the parties
thereto."
ISSUE:
II. Petitioner contends that respondent court erred in holding it liable to
private respondents for P52,102.45 despite its exercise of its option to
abandon the cargo. It will be recalled that the trial court originally found
petitioner liable for P298,150.93, which amount consists of P51,271.02 for
freight, demurrage and other charges during the time that the goods were
in Japan and for its reshipment to Manila, P831.43 for charges paid to the
Manila International Port Terminal, and P246,043.43 for demurrage in
Manila from October 22, 1980 to June 18, 1981. On appeal, the Court of

Appeals limited petitioner's liability to P52,102.45 when it ruled: As


regards the amount of P51,271.02, which represents the freight charges
for the return shipment to Manila and the demurrage charges in Japan,
the same is supported by appellant's own letter request (Exh. 2) for the
return of the shipment to Manila at its (appellant's) expense, and hence, it
should be held liable therefor. The amount of P831.43 was paid to the
Manila International Port Terminal upon arrival of the shipment in Manila
for appellant's account. It should properly be charged to said appellant. 35
However, respondent court modified the trial court's decision by excluding
the award for P246,043.43 for demurrage in Manila from October 22,
1980 to June 18, 1981.
HELD:
1. Demurrage, in its strict sense, is the compensation provided for in the
contract of affreightment for the detention of the vessel beyond the
time agreed on for loading and unloading. Essentially, demurrage is
the claim for damages for failure to accept delivery. In a broad sense,
every improper detention of a vessel may be considered a
demurrage. Liability for demurrage, using the word in its strictly
technical sense, exists only when expressly stipulated in the contract.
Using the term in its broader sense, damages in the nature of
demurrage are recoverable for a breach of the implied obligation to
load or unload the cargo with reasonable dispatch, but only by the
party to whom the duty is owed and only against one who is a party
to the shipping contract. 36 Notice of arrival of vessels or
conveyances, or of their placement for purposes of unloading is often
a condition precedent to the right to collect demurrage charges.
2. Private respondents, admittedly, have adopted the common practice
of requiring prior notice of arrival of the goods shipped before the
shipper can be held liable for demurrage, as declared by Wilfredo
Hans, head of the accounting department of F.E. Zuellig, Inc., on
cross-examination as a witness for private respondents:
Q ... you will agree with me that before one could be charged
with demurrage the shipper should be notified of the arrival of
the shipment?
A Yes sir.
Q Without such notification, there is no way by which the shipper
would know (of) such arrival?
A Yes.
Q And no charges of demurrage before the arrival of the cargo?
A Yes sir. 37
3. Accordingly, on this score, respondent court ruled: However, insofar
as the demurrage charges of P246,043.43 from October up to May
1980, arriv(al) in Manila, are concerned, We are of the view that
appellant should not be made to shoulder the same, as it was not at
fault nor was it responsible for said demurrage charges. Appellee's
own witness (Mabazza) testified that while the goods arrived in
Manila in October 1980, appellant was notified of said arrival only in
March 1981. No explanation was given for the delay in notifying
appellant. We agree with appellant that before it could be charged for
demurrage charges it should have been notified of the arrival of the
goods first. Without such notification it could not- be so charged
because there was no way by which it would know that the goods
had already arrived for it to take custody of them. Considering that it
was only in March 1981 (Exh. K) that appellant was notified of the
arrival of the goods, although the goods had actually arrived in
October 1980 (tsn, Aug. 14, 1986, pp. 10-14), appellant cannot be
charged for demurrage from October 1980 to March 1981. ...
4. While being satisfied with the exclusion of demurrage charges in
Manila for the period from October 22,1980 to June 18,1981,
petitioner nevertheless assails the Court of Appeals' award of
P52,102.43 in favor of private respondents, consisting of P51,271.01
as freight and demurrage charges in Japan and P831.43 for charges
paid at the Manila International Port Termninal.
5. Petitioner asserts that by virtue of the exercise of its option to
abandon the goods so as to allow private respondents to sell the
same at a public auction and to apply the proceeds thereof as
payment for the shipping and demurrage charges, it was released
from liability for the sum of P52,102.43 since such amount represents
the shipping and demurrage charges from which it is considered to
have been released due to the abandonment of goods. It further
argues that the shipping and demurrage charges from which it was
released by the exercise of the option to abandon the goods in favor
Page 44 of 62

6.

7.

8.

9.

10.

11.

12.

13.

of private respondents could not have referred to the demurrage


charges in Manila because respondent court ruled that the same
were not chargeable to petitioner. Private respondents would rebut
this contention by saying in their memorandum that the abandonment
of goods by petitioner was too late and made in bad faith. 39
On this point, we agree with petitioner. Ordinarily, the shipper is liable
for freightage due to the fact that the shipment was made for its
benefit or under its direction and, correspondingly, the carrier is
entitled to collect charges for its shipping services. This is particularly
true in this case where the reshipment of the goods was made at the
instance of petitioner in its letter of August 29, 1980. 40
However, in a letter dated March 20, 1981, 41 private respondents
belatedly informed petitioner of the arrival of its goods from Japan
and that if it wished to take delivery of the cargo it would have to pay
P51,271.02, but with the last paragraph thereof stating as follows:
Please can you advise within 15 days of receipt of this letter whether
you intend to take delivery of this shipment, as alternatively we will
have to take legal proceedings in order to have the cargo auctioned
to recover the costs involved, as well as free the container which are
(sic) urgently required for export cargoes.
Clearly, therefore, private respondents unequivocally offered
petitioner the option of paying the shipping and demurrage charges in
order to take delivery of the goods or of abandoning the same so that
private respondents could sell them at public auction and thereafter
apply the proceeds in payment of the shipping and other charges.
Responding thereto, in a letter dated April 3, 1981, petitioner
seasonably communicated its decision to abandon to the goods in
favor of private respondents with the specific instruction that any
excess of the proceeds over the legal costs and charges be turned
over to petitioner. Receipt of said letter was acknowledged by private
respondents, as revealed by the testimony of Edwin Mabazza, a
claim officer of F.E. Zuellig, Inc., on cross-examination. 42
Despite petitioner's exercise of the option to abandon the cargo,
however, private respondents sent a demand letter on June 22, 1981
43 insisting that petitioner should pay the entire amount of
P298,150.93 and, in another letter dated Apiril 30, 1981, 44 they
stated that they win not accept the abandonment of the goods and
demanded that the outstanding account be settled. The testimony of
said Edwin Mabazza definitely admits and bears this out. 45
Now, there is no dispute that private respondents expressly and on
their own volition granted petitioner an option with respect to the
satisfaction of freightage and demurrage charges. Having given such
option, especially since it was accepted by petitioner, private
respondents are estopped from reneging thereon. Petitioner, on its
part, was well within its right to exercise said option. Private
respondents, in giving the option, and petitioner, in exercising that
option, are concluded by their respective actions. To allow either of
them to unilaterally back out on the offer and on the exercise of the
option would be to countenance abuse of rights as an order of the
day, doing violence to the long entrenched principle of mutuality of
contracts.
It will be remembered that in overland transportation, an
unreasonable delay in the delivery of transported goods is sufficient
ground for the abandonment of goods. By analogy, this can also
apply to maritime transportation. Further, with much more reason can
petitioner in the instant case properly abandon the goods, not only
because of the unreasonable delay in its delivery but because of the
option which was categorically granted to and exercised by it as a
means of settling its liability for the cost and expenses of reshipment.
And, said choice having been duly communicated, the same is
binding upon the parties on legal and equitable considerations of
estoppel.

DISPOSITIVE: WHEREFORE, the judgment of respondent Court of


Appeals is AFFIRMED with the MODIFICATION that petitioner is likewise
absolved of any hability and the award of P52,102.45 with legal interest
granted by respondent court on private respondents' counterclaim is SET
ASIDE, said counterclaim being hereby DISMISSED, without
pronouncement as to costs. SO ORDERED.

Trans-Asia Shipping Lines, Inc. v. CA, 254 SCRA 260 (1996)

G.R. No. 118126 March 4, 1996


TRANS-ASIA SHIPPING LINES, INC., petitioner,
vs.
COURT OF APPEALS and ATTY. RENATO T. ARROYO, respondents.
DAVIDE, JR., J.:p
As formulated by the petitioner, the issue in this petition for review on
certiorari under Rule 45 of the Rules of Court is as follows:
In case of interruption of a vessel's voyage and the consequent delay in
that vessel's arrival at its port of destination, is the right of a passenger
affected thereby to be determined and governed by the vague Civil Code
provision on common carriers, or shall it be, in the absence of a specific
provision thereon governed by Art. 698 of the Code of Commerce? 1
The petitioner considers it a "novel question of law."
Upon a closer evaluation, however, of the challenged decision of the
Court of Appeals of 23 November 1994, 2 vis-a-vis, the decision of 29
June 1992 in Civil Case No. 91-491 of the Regional Trial Court (RTC) of
Cagayan de Oro City, Branch 24, 3 as well as the allegations and
arguments adduced by the parties, we find the petitioner's formulation of
the issue imprecise. As this Court sees it, what stands for resolution is a
common carrier's liability for damages to a passenger who disembarked
from the vessel upon its return to the port of origin, after it suffered engine
trouble and had to stop at sea, having commenced the contracted voyage
on one engine.
The antecedents are summarized by the Court of Appeals as follows:
Plaintiff [herein private respondent Atty. Renato Arroyo], a public attorney,
bought a ticket [from] defendant [herein petitioner], a corporation engaged
in . . . inter-island shipping, for the voyage of M/V Asia Thailand vessel to
Cagayan de Oro City from Cebu City on November 12, 1991.
At around 5:30 in the evening of November 12, 1991, plaintiff boarded the
M/V Asia Thailand vessel. At that instance, plaintiff noticed that some
repair works [sic] were being undertaken on the engine of the vessel. The
vessel departed at around 11:00 in the evening with only one (1) engine
running.
After an hour of slow voyage, the vessel stopped near Kawit Island and
dropped its anchor thereat. After half an hour of stillness, some
passengers demanded that they should be allowed to return to Cebu City
for they were no longer willing to continue their voyage to, Cagayan de
Oro City. The captain acceeded [sic] to their request and thus the vessel
headed back to Cebu City.
At Cebu City, plaintiff together with the other passengers who requested
to be brought back to Cebu City, were allowed to disembark. Thereafter,
the vessel proceeded to Cagayan de Oro City. Plaintiff, the next day,
boarded the M/V Asia Japan for its voyage to Cagayan de Oro City,
likewise a vessel of defendant.
On account of this failure of defendant to transport him to the place of
destination on November 12, 1991, plaintiff filed before the trial court a
complaint for damages against defendant. 4
In his complaint, docketed as Civil Case No. 91-491, plaintiff (hereinafter
private respondent) alleged that the engines of the M/V Asia Thailand
conked out in the open sea, and for more than an hour it was stalled and
at the mercy of the waves, thus causing fear in the passengers. It sailed
back to Cebu City after it regained power, but for unexplained reasons,
the passengers, including the private respondent, were arrogantly told to
disembark without the necessary precautions against possible injury to
them. They were thus unceremoniously dumped, which only exacerbated
the private respondent's mental distress. He further alleged that by
reason of the petitioner's wanton, reckless, and willful acts, he was
unnecessarily exposed to danger and, having been stranded in Cebu City
for a day, incurred additional expenses and loss of income. He then
prayed that he be awarded P1,100.00, P50,000.00, and P25,000.00 as
compensatory, moral; and exemplary damages, respectively. 5
In his pre-trial brief, the private respondent asserted that his complaint
was "an action for damages arising from bad faith, breach of contract and
from tort," with the former arising from the petitioner's "failure to carry
[him] to his place of destination as contracted," while the latter from the
"conduct of the [petitioner] resulting [in] the infliction of emotional distress"
to the private respondent. 6
After due trial, the trial court rendered its decision 7 and ruled that the
action was only for breach of contract, with Articles 1170, 1172, and 1173
of the Civil Code as applicable law not Article 2180 of the same Code.
It was of the opinion that Article 1170 made a person liable for damages if,
in the performance of his obligation, he was guilty of fraud, negligence, or
Page 45 of 62

delay, or in any manner contravened the tenor thereof; moreover,


pursuant to Article 2201 of the same Code, to be entitled to damages, the
non-performance of the obligation must have been tainted not only by
fraud, negligence, or delay, but also bad faith, malice, and wanton
attitude. It then disposed of the case as follows:
WHEREFORE, it not appearing from the evidence that plaintiff was left in
the Port of Cebu because of the fault, negligence, malice or wanton
attitude of defendant's employees, the complaint is DISMISSED.
Defendant's counterclaim is likewise dismissed it not appearing also that
filing of the case by plaintiff was motivated by malice or bad faith. 8
The trial court made the following findings to support its disposition:
In the light of the evidence adduced by the parties and of the above
provisions of the New Civil Code, the issue to be resolved, in the
resolution of this case is whether or not, defendant thru its employees in
[sic] the night of November 12, 1991, committed fraud, negligence, bad
faith or malice when it left plaintiff in the Port of Cebu when it sailed back
to Cagayan de Oro City after it has [sic] returned from Kawit Island.
Evaluation of the evidence of the parties tended to show nothing that
defendant committed fraud. As early as 3:00 p.m. of November 12, 1991,
defendant did not hide the fact that the cylinder head cracked. Plaintiff
even saw during its repair. If he had doubts as to the vessel's capacity to
sail, he had time yet to take another boat. The ticket could be returned to
defendant and corresponding cash [would] be returned to him.
Neither could negligence, bad faith or malice on the part of defendant be
inferred from the evidence of the parties. When the boat arrived at [the]
Port of Cebu after it returned from Kawit Island, there was an
announcement that passengers who would like to disembark were given
ten (10) minutes only to do so. By this announcement, it could be inferred
that the boat will [sic] proceed to Cagayan de Oro City. If plaintiff
entertained doubts, he should have asked a member of the crew of the
boat or better still, the captain of the boat. But as admitted by him, he was
of the impression only that the boat will not proceed to Cagayan de Oro
that evening so he disembarked. He was instead, the ones [sic] negligent.
Had he been prudent, with the announcement that those who will
disembark were given ten minutes only, he should have lingered a little by
staying in his cot and inquired whether the boat will proceed to Cagayan
de Oro City or not. Defendant cannot be expected to be telling [sic] the
reasons to each passenger. Announcement by microphone was enough.
The court is inclined to believe that the story of defendant that the boat
returned to the Port of Cebu because of the request of the passengers in
view of the waves. That it did not return because of the defective engines
as shown by the fact that fifteen (15) minutes after the boat docked [at]
the Port of Cebu and those who wanted to proceed to Cagayan de Oro
disembarked, it left for Cagayan de Oro City.
The defendant got nothing when the boat returned to Cebu to let those
who did not want to proceed to Cagayan de Oro City including plaintiff
disembarked. On the contrary, this would mean its loss instead because it
will have to refund their tickets or they will use it the next trip without
paying anymore. It is hard therefore, to imagine how defendant by leaving
plaintiff in Cebu could have acted in bad faith, negligently, wantonly and
with malice.
If plaintiff, therefore, was not able to [m]ake the trip that night of
November 12, 1991, it was not because defendant maliciously did it to
exclude him [from] the trip. If he was left, it was because of his fault or
negligence. 9
Unsatisfied, the private respondent appealed to the Court of Appeals (CAG.R. CV No. 39901) and submitted for its determination the following
assignment of errors: (1) the trial court erred in not finding that the
defendant-appellee was guilty of fraud, delay, negligence, and bad faith;
and (2) the trial court. erred in not awarding moral and exemplary
damages. 10
In its decision of 23 November 1994, 11 the Court of Appeals reversed the
trial court's decision by applying Article 1755 in relation to Articles 2201,
2208, 2217, and 2232 of the Civil Code and, accordingly, awarded
compensatory, moral, and exemplary damages as follows:
WHEREFORE, premises considered, the appealed decision is hereby
REVERSED and SET ASIDE and another one is rendered ordering
defendant-appellee to pay plaintiff-appellant:
1. P20,000.00 as moral damages;
2. P10,000.00 as exemplary damages;
3. P5,000.00 as attorney's fees;
4. Cost of suit.
SO ORDERED. 12

It did not, however, allow the grant of damages for the delay in the
performance of the petitioner's obligation as the requirement of demand
set forth in Article 1169 of the Civil Code had not been met by the private
respondent. Besides, it found that the private respondent offered no
evidence to prove that his contract of carriage with the petitioner provided
for liability in case of delay in departure, nor that a designation of the time
of departure was the controlling motive for the establishment of the
contract. On the latter, the court a quo observed that the private
respondent even admitted he was unaware of the vessel's departure time,
and it was only when he boarded the vessel that he became aware of
such. Finally, the respondent Court found no reasonable basis for the
private respondent's belief that demand was useless because the
petitioner had rendered it beyond its power to perform its obligation; on
the contrary, he even admitted that the petitioner had been assuring the
passengers that the vessel would leave on time, and that it could still
perform its obligation to transport them as scheduled.
To justify its award of damages, the Court of Appeals ratiocinated as
follows:
It is an established and admitted fact that the vessel before the voyage
had undergone some repair work on the cylinder head of the engine. It is
likewise admitted by defendant-appellee that it left the port of Cebu City
with only one engine running. Defendant-appellee averred:
. . . The dropping of the vessel's anchor after running slowly on only one
engine when it departed earlier must have alarmed some nervous
passengers . . .
The entries in the logbook which defendant-appellee itself offered as
evidence categorically stated therein that the vessel stopped at Kawit
Island because of engine trouble. It reads:
2330 HRS STBD ENGINE' EMERGENCY STOP
2350 HRS DROP ANCHOR DUE TO ENGINE TROUBLE, 2 ENGINE
STOP.
The stoppage was not to start and synchronized [sic] the engines of the
vessel as claimed by defendant-appellee. It was because one of the
engines of the vessel broke down; it was because of the disability of the
vessel which from the very beginning of the voyage was known to
defendant-appellee.
Defendant-appellee from the very start of the voyage knew for a fact that
the vessel was not yet in its sailing condition because the second engine
was still being repaired. Inspite of this knowledge, defendant-appellee still
proceeded to sail with only one engine running.
Defendant-appellee at that instant failed to exercise the diligence which
all common carriers should exercise in transporting or carrying
passengers. The law does not merely require extraordinary diligence in
the performance of the obligation. The law mandates that common
carrier[s] should exercise utmost diligence the transport of passengers.
Article 1755 of the New Civil Code provides:
Art. 1755. A common carrier is bound to carry the passengers safely as
far as human care and foresight can provide, using the utmost diligence
of very cautious persons, with a due regard for all the circumstances.
Utmost diligence of a VERY CAUTIOUS person dictates that defendantappellee should have pursued the voyage only when its vessel was
already fit to sail. Defendant-appellee should have made certain that the
vessel [could] complete the voyage before starting [to] sail. Anything less
than this, the vessel [could not] sail . . . with so many passengers on
board it.
However, defendant-appellant [sic] in complete disregard of the safety of
the passengers, chose to proceed with its voyage even if only one engine
was running as the second engine was still being repaired during the
voyage. Defendant-appellee disregarded the not very remote possibility
that because of the disability of the vessel, other problems might occur
which would endanger the lives of the passengers sailing with a disabled
vessel.
As expected, . . . engine trouble occurred. Fortunate[ly] for defendantappellee, such trouble only necessitated the stoppage of the vessel and
did not cause the vessel to capsize. No wonder why some passengers
requested to be brought back to Cebu City. Common carriers which are
mandated to exercise utmost diligence should not be taking these risks.
On this premise, plaintiff-appellant should not be faulted why he chose to
disembark from the vessel with the other passengers when it returned
back to Cebu City. Defendant-appellee may call him a very "panicky
passenger" or a "nervous person", but this will not relieve defendantappellee from the liability it incurred for its failure to exercise utmost
diligence. 13
Page 46 of 62

xxx xxx xxx


As to the second assigned error, we find that plaintiff-appellant is entitled
to the award of moral and exemplary damages for the breach committed
by defendant-appellee.
As discussed, defendant-appellee in sailing to Cagayan de Oro City with
only one engine and with full knowledge of the true condition of the
vessel, acted. in bad faith with malice, in complete disregard for the safety
of the passengers and only for its own personal advancement/interest.
The Civil Code provides:
Art. 2201.
xxx xxx xxx
In case of fraud, bad faith, malice or wanton attitude, the obligor shall be
responsible for all damages which may be reasonably attributed to the
non-performance of the obligation.
Plaintiff-appellant is entitled to moral damages for the mental anguish,
fright and serious anxiety he suffered during the voyage when the
vessel's engine broke down and when he disembarked from the vessel
during the wee hours of the morning at Cebu City when it returned. 14
Moral damages are recoverable in a damage suit predicated upon a
breach of contract of carriage where it is proved that the carrier was guilty
of fraud or bad faith even if death does not result. 15
Fraud and bad faith by defendant-appellee having been established, the
award of moral damages is in order. 16
To serve as a deterrent to the commission of similar acts in the future,
exemplary damages should be imposed upon defendant-appellee. 17
Exemplary damages are designed by our civil law to permit the courts to
reshape behavior that is socially deleterious in its consequence by
creating . . . negative incentives or deterrents against such behavior. 18
Moral damages having been awarded, exemplary damages maybe
properly awarded. When entitlement to moral damages has been
established, the award of exemplary damages is proper. 19
The petitioner then instituted this petition and submitted the question of
law earlier adverted to.
Undoubtedly, there was, between the petitioner and the private
respondent, a contract of common carriage. The laws of primary
application then are the provisions on common carriers under Section 4,
Chapter 3, Title VIII, Book IV of the Civil Code, while for all other matters
not regulated thereby, the Code of Commerce and special laws. 20
Under Article 1733 of the Civil Code, the petitioner was bound to observe
extraordinary diligence in ensuring the safety of the private respondent.
That meant that the petitioner was, pursuant to Article 1755 of the said
Code, bound to carry the private respondent safely as far as human care
and foresight could provide, using the utmost diligence of very cautious
persons, with due regard for all the circumstances. In this case, we are in
full accord with the Court of Appeals that the petitioner failed to discharge
this obligation.
Before commencing the contracted voyage, the petitioner undertook
some repairs on the cylinder head of one of the vessel's engines. But
even before it could finish these repairs, it allowed the vessel to leave the
port of origin on only one functioning engine, instead of two. Moreover,
even the lone functioning engine was not in perfect condition as sometime
after it had run its course, it conked out. This caused the vessel to stop
and remain a drift at sea, thus in order to prevent the ship from capsizing,
it had to drop anchor. Plainly, the vessel was unseaworthy even before
the voyage began. For a vessel to be seaworthy, it must be adequately
equipped for the voyage and manned with a sufficient number of
competent officers and crew. 21 The failure of a common carrier to
maintain in seaworthy condition its vessel involved in a contract of
carriage is a clear breach of its duty prescribed in Article 1755 of the Civil
Code.
As to its liability for damages to the private respondent, Article 1764 of the
Civil Code expressly provides:
Art. 1764. Damages in cases comprised in this Section shall be awarded
in accordance with Title XVIII of this Book, concerning Damages. Article
2206 shall also apply to the death of a passenger caused by the breach of
contract by common carrier.
The damages comprised in Title XVIII of the Civil Code are actual or
compensatory, moral, nominal, temperate or moderate, liquidated, and
exemplary.
In his complaint, the private respondent claims actual or compensatory,
moral, and exemplary damages.
Actual or compensatory damages represent the adequate compensation
for pecuniary loss suffered and for profits the obligee failed to obtain. 22

In contracts or quasi-contracts, the obligor is liable for all the damages


which may be reasonably attributed to the non-performance of the
obligation if he is guilty of fraud, bad faith, malice, or wanton attitude. 23
Moral damages include moral suffering, mental anguish, fright, serious
anxiety, besmirched reputation, wounded feelings, moral shock, social
humiliation, or similar injury. They may be recovered in the cases
enumerated in Article 2219 of the Civil Code, likewise, if they are the
proximate result of, as in this case, the petitioner's breach of the contract
of carriage. 24 Anent a breach of a contract of common carriage, moral
damages may be awarded if the common carrier, like the petitioner, acted
fraudulently or in bad faith. 25
Exemplary damages are imposed by way of example or correction for the
public good, in addition to moral, temperate, liquidated or compensatory
damages. 26 In contracts and quasi-contracts, exemplary damages may
be awarded if the defendant acted in a wanton, fraudulent, reckless,
oppressive or malevolent manner. 27 It cannot, however, be considered
as a matter of right; the court having to decide whether or not they should
be adjudicated. 28 Before the court may consider an award for exemplary
damages, the plaintiff must first show that he is entitled to moral,
temperate or compensatory damages; but it is not necessary that he
prove the monetary value thereof. 29
The Court of Appeals did not grant the private respondent actual or
compensatory damages, reasoning that no delay was incurred since there
was no demand, as required by Article 1169 of the Civil Code. This article,
however, finds no application in this case because, as found by the
respondent Court, there was in fact no delay in the commencement of the
contracted voyage. If any delay was incurred, it was after the
commencement of such voyage, more specifically, when the voyage was
subsequently interrupted when the vessel had to stop near Kawit Island
after the only functioning engine conked out.
As to the rights and duties of the parties strictly arising out of such delay,
the Civil Code is silent. However, as correctly pointed out by the
petitioner, Article 698 of the Code of Commerce specifically provides for
such a situation. It reads:
In case a voyage already begun should be interrupted, the passengers
shall be obliged to pay the fare in proportion to the distance covered,
without right to recover for losses and damages if the interruption is due
to fortuitous event or force majeure, but with a right to indemnity if the
interruption should have been caused by the captain exclusively. If the
interruption should be caused by the disability of the vessel and a
passenger should agree to await the repairs, he may not be required to
pay any increased price of passage, but his living expenses during the
stay shall be for his own account.
This article applies suppletorily pursuant to Article 1766 of the Civil Code.
Of course, this does not suffice for a resolution of the case at bench for,
as earlier stated, the cause of the delay or interruption was the petitioner's
failure to observe extraordinary diligence. Article 698 must then be read
together with Articles 2199, 2200, 2201, and 2208 in relation to Article 21
of the Civil Code. So read, it means that the petitioner is liable for any
pecuniary loss or loss of profits which the private respondent may have
suffered by reason thereof. For the private respondent, such would be the
loss of income if unable to report to his office on the day he was
supposed to arrive were it not for the delay. This, however, assumes that
he stayed on the vessel and was with it when it thereafter resumed its
voyage; but he did not. As he and some passengers resolved not to
complete the voyage, the vessel had to return to its port of origin and
allow them to disembark. The private respondent then took the
petitioner's other vessel the following day, using the ticket he had
purchased for the previous day's voyage.
Any further delay then in the private respondent's arrival at the port of
destination was caused by his decision to disembark. Had he remained
on the first vessel, he would have reached his destination at noon of 13
November 1991, thus been able to report to his office in the afternoon.
He, therefore, would have lost only the salary for half of a day. But actual
or compensatory damages must be proved, 30 which the private
respondent failed to do. There is no convincing evidence that he did not
receive his salary for 13 November 1991 nor that his absence was not
excused.
We likewise fully agree with the Court of Appeals that the petitioner is
liable for moral and exemplary damages. In allowing its unseaworthy M/V
Asia Thailand to leave the port of origin and undertake the contracted
voyage, with full awareness that it was exposed to perils of the sea, it
deliberately disregarded its solemn duty to exercise extraordinary
Page 47 of 62

diligence and obviously acted with bad faith and in a wanton and reckless
manner. On this score, however, the petitioner asserts that the safety or
the vessel and passengers was never at stake because the sea was
"calm" in the vicinity where it stopped as faithfully recorded in the vessel's
log book (Exhibit "4"). Hence, the petitioner concludes, the private
respondent was merely "over-reacting" to the situation obtaining then. 31
We hold that the petitioner's defense cannot exculpate it nor mitigate its
liability. On the contrary, such a claim demonstrates beyond cavil the
petitioner's lack of genuine concern for the safety of its passengers. It
was, perhaps, only providential then the sea happened to be calm. Even
so, the petitioner should not expect its passengers to act in the manner it
desired. The passengers were not stoics; becoming alarmed, anxious, or
frightened at the stoppage of a vessel at sea in an unfamiliar zone as
nighttime is not the sole prerogative of the faint-hearted. More so in the
light of the many tragedies at sea resulting in the loss of lives of hopeless
passengers and damage to property simply because common carriers
failed in their duty to exercise extraordinary diligence in the performance
of their obligations.
We cannot, however, give our affirmance to the award of attorney's fees.
Under Article 2208 of the Civil Code, these are recoverable only in the
concept of actual damages, 32 not as moral damages 33 nor judicial
costs. 34 Hence, to merit such an award, it is settled that the amount
thereof must be proven. 35 Moreover, such must be specifically prayed
for as was not done in this caseand may not be deemed
incorporated within a general prayer for "such other relief and remedy as
this court may deem just and equitable." 36 Finally, it must be noted that
aside from the following, the body of the respondent Court's decision was
devoid of any statement regarding attorney's fees:
Plaintiff-appellant was forced to litigate in order that he can claim moral
and exemplary damages for the suffering he encurred [sic]. He is entitled
to attorney's fees pursuant to Article 2208 of the Civil Code. It states:
Art. 2208. In the absence of stipulation, attorney's fees and expenses of
litigation, other than judicial costs cannot be recovered except:
1. When exemplary damages are awarded;
2. When the defendant's act or omission has compelled the plaintiff to
litigate with third persons or to incur expenses to protect his interest.
This Court holds that the above does not satisfy the benchmark of
"factual, legal and equitable justification" needed as basis for an award of
attorney's fees. 37 In sum, for lack of factual and legal basis, the award of
attorney's fees must be deleted.
WHEREFORE, the instant petition is DENIED and the challenged
decision of the Court of Appeals in CA-G.R. CV No. 39901 is AFFIRMED
subject to the modification as to the award for attorney's fees which is
hereby SET ASIDE.
Costs against the petitioner.
SO ORDERED.

Eastern Shipping v. CA, 234 SCRA 78 (1994)


G.R. No. 97412 July 12, 1994
EASTERN SHIPPING LINES, INC., petitioner,
vs.
HON. COURT OF APPEALS AND MERCANTILE INSURANCE
COMPANY, INC., respondents.
Alojada & Garcia and Jimenea, Dala & Zaragoza for petitoner.
Zapa Law Office for private respondent.
DIGEST:
Three different consignees had shipments on the M/S Asiatica, but
it sank due to fire, causing total loss of ship and cargo. The
insurance companies (and the reinsurer) is claiming from the
carrier. The Court said that 1) Carrier admitted it is the operator of
the ship 2) The law applicable is the law applicable to which the
goods are to be transported (PH) and 3) Fire is not one of the
causes in Art. 1734. Therefore, the presumption of fault under Art.
1735 applies. No extraordinary diligence was found by the lower
courts, as the fire must have started 24 hours before it was
noticed.
VITUG, J.:

The issues, albeit not completely novel, are: (a) whether or not a
claim for damage sustained on a shipment of goods can be a
solidary, or joint and several, liability of the common carrier, the
arrastre operator and the customs broker; (b) whether the
payment of legal interest on an award for loss or damage is to be
computed from the time the complaint is filed or from the date the
decision appealed from is rendered; and (c) whether the
applicable rate of interest, referred to above, is twelve percent
(12%) or six percent (6%).
The findings of the court a quo, adopted by the Court of Appeals,
on the antecedent and undisputed facts that have led to the
controversy are hereunder reproduced:
This is an action against defendants shipping company, arrastre
operator and broker-forwarder for damages sustained by a
shipment while in defendants' custody, filed by the insurersubrogee who paid the consignee the value of such losses/
damages.
On December 4, 1981, two fiber drums of riboflavin were shipped
from Yokohama, Japan for delivery vessel "SS EASTERN
COMET" owned by defendant Eastern Shipping Lines under Bill of
Lading
No. YMA-8 (Exh. B). The shipment was insured under plaintiff's
Marine Insurance Policy No. 81/01177 for P36,382,466.38.
Upon arrival of the shipment in Manila on December 12, 1981, it
was discharged unto the custody of defendant Metro Port Service,
Inc. The latter excepted to one drum, said to be in bad order,
which damage was unknown to plaintiff.
On January 7, 1982 defendant Allied Brokerage Corporation
received the shipment from defendant Metro Port Service, Inc.,
one drum opened and without seal (per "Request for Bad Order
Survey." Exh. D).
On January 8 and 14, 1982, defendant Allied Brokerage
Corporation made deliveries of the shipment to the consignee's
warehouse. The latter excepted to one drum which contained
spillages, while the rest of the contents was adulterated/fake (per
"Bad Order Waybill" No. 10649, Exh. E).
Plaintiff contended that due to the losses/damage sustained by
said drum, the consignee suffered losses totaling P19,032.95, due
to the fault and negligence of defendants. Claims were presented
against defendants who failed and refused to pay the same (Exhs.
H, I, J, K, L).
As a consequence of the losses sustained, plaintiff was compelled
to pay the consignee P19,032.95 under the aforestated marine
insurance policy, so that it became subrogated to all the rights of
action of said consignee against defendants (per "Form of
Subrogation", "Release" and Philbanking check, Exhs. M, N, and
O). (pp. 85-86, Rollo.)
There were, to be sure, other factual issues that confronted both
courts. Here, the appellate court said:
Defendants filed their respective answers, traversing the material
allegations of the complaint contending that: As for defendant
Eastern Shipping it alleged that the shipment was discharged in
good order from the vessel unto the custody of Metro Port Service
so that any damage/losses incurred after the shipment was
incurred after the shipment was turned over to the latter, is no
longer its liability (p. 17, Record); Metroport averred that although
subject shipment was discharged unto its custody, portion of the
same was already in bad order (p. 11, Record); Allied Brokerage
alleged that plaintiff has no cause of action against it, not having
negligent or at fault for the shipment was already in damage and
bad order condition when received by it, but nonetheless, it still
exercised extra ordinary care and diligence in the handling/
delivery of the cargo to consignee in the same condition shipment
was received by it.
From the evidence the court found the following:
The issues are:
Page 48 of 62

1. Whether or not the shipment sustained losses/damages;


2. Whether or not these losses/damages were sustained while in
the custody of defendants (in whose respective custody, if
determinable);
3. Whether or not defendant(s) should be held liable for the
losses/damages (see plaintiff's pre-Trial Brief, Records, p. 34;
Allied's pre-Trial Brief, adopting plaintiff's Records, p. 38).
As to the first issue, there can be no doubt that the shipment
sustained losses/damages. The two drums were shipped in good
order and condition, as clearly shown by the Bill of Lading and
Commercial Invoice which do not indicate any damages drum that
was shipped (Exhs. B and C). But when on December 12, 1981
the shipment was delivered to defendant Metro Port Service, Inc.,
it excepted to one drum in bad order.
Correspondingly, as to the second issue, it follows that the losses/
damages were sustained while in the respective and/or
successive custody and possession of defendants carrier
(Eastern), arrastre operator (Metro Port) and broker (Allied
Brokerage). This becomes evident when the Marine Cargo Survey
Report (Exh. G), with its "Additional Survey Notes", are
considered. In the latter notes, it is stated that when the shipment
was "landed on vessel" to dock of Pier # 15, South Harbor, Manila
on December 12, 1981, it was observed that "one (1) fiber drum
(was) in damaged condition, covered by the vessel's Agent's Bad
Order Tally Sheet No. 86427." The report further states that when
defendant Allied Brokerage withdrew the shipment from defendant
arrastre operator's custody on January 7, 1982, one drum was
found opened without seal, cello bag partly torn but contents
intact. Net unrecovered spillages was
15 kgs. The report went on to state that when the drums reached
the consignee, one drum was found with adulterated/faked
contents. It is obvious, therefore, that these losses/damages
occurred before the shipment reached the consignee while under
the successive custodies of defendants. Under Art. 1737 of the
New Civil Code, the common carrier's duty to observe
extraordinary diligence in the vigilance of goods remains in full
force and effect even if the goods are temporarily unloaded and
stored in transit in the warehouse of the carrier at the place of
destination, until the consignee has been advised and has had
reasonable opportunity to remove or dispose of the goods (Art.
1738, NCC). Defendant Eastern Shipping's own exhibit, the "TurnOver Survey of Bad Order Cargoes" (Exhs. 3-Eastern) states that
on December 12, 1981 one drum was found "open".
and thus held:
WHEREFORE, PREMISES CONSIDERED, judgment is hereby
rendered:
A. Ordering defendants to pay plaintiff, jointly and severally:
1. The amount of P19,032.95, with the present legal interest of
12% per annum from October 1, 1982, the date of filing of this
complaints, until fully paid (the liability of defendant Eastern
Shipping, Inc. shall not exceed US$500 per case or the CIF value
of the loss, whichever is lesser, while the liability of defendant
Metro Port Service, Inc. shall be to the extent of the actual invoice
value of each package, crate box or container in no case to
exceed P5,000.00 each, pursuant to Section 6.01 of the
Management Contract);
2. P3,000.00 as attorney's fees, and
3. Costs.
B. Dismissing the counterclaims and crossclaim of defendant/
cross-claimant Allied Brokerage Corporation.
SO ORDERED. (p. 207, Record).
Dissatisfied, defendant's recourse to US.
The appeal is devoid of merit.
After a careful scrutiny of the evidence on record. We find that the
conclusion drawn therefrom is correct. As there is sufficient
evidence that the shipment sustained damage while in the

successive possession of appellants, and therefore they are liable


to the appellee, as subrogee for the amount it paid to the
consignee. (pp. 87-89, Rollo.)
The Court of Appeals thus affirmed in toto the judgment of the
court
a quo.
In this petition, Eastern Shipping Lines, Inc., the common carrier,
attributes error and grave abuse of discretion on the part of the
appellate court when
I. IT HELD PETITIONER CARRIER JOINTLY AND SEVERALLY
LIABLE WITH THE ARRASTRE OPERATOR AND CUSTOMS
BROKER FOR THE CLAIM OF PRIVATE RESPONDENT AS
GRANTED IN THE QUESTIONED DECISION;
II. IT HELD THAT THE GRANT OF INTEREST ON THE CLAIM
OF PRIVATE RESPONDENT SHOULD COMMENCE FROM THE
DATE OF THE FILING OF THE COMPLAINT AT THE RATE OF
TWELVE PERCENT PER ANNUM INSTEAD OF FROM THE
DATE OF THE DECISION OF THE TRIAL COURT AND ONLY AT
THE RATE OF SIX PERCENT PER ANNUM, PRIVATE
R E S P O N D E N T ' S C L A I M B E I N G I N D I S P U TA B LY
UNLIQUIDATED.
The petition is, in part, granted.
In this decision, we have begun by saying that the questions
raised by petitioner carrier are not all that novel. Indeed, we do
have a fairly good number of previous decisions this Court can
merely tack to.
The common carrier's duty to observe the requisite diligence in the
shipment of goods lasts from the time the articles are surrendered
to or unconditionally placed in the possession of, and received by,
the carrier for transportation until delivered to, or until the lapse of
a reasonable time for their acceptance by, the person entitled to
receive them (Arts. 1736-1738, Civil Code; Ganzon vs. Court of
Appeals, 161 SCRA 646; Kui Bai vs. Dollar Steamship Lines, 52
Phil. 863). When the goods shipped either are lost or arrive in
damaged condition, a presumption arises against the carrier of its
failure to observe that diligence, and there need not be an express
finding of negligence to hold it liable (Art. 1735, Civil Code;
Philippine National Railways vs. Court of Appeals, 139 SCRA 87;
Metro Port Service vs. Court of Appeals, 131 SCRA 365). There
are, of course, exceptional cases when such presumption of fault
is not observed but these cases, enumerated in Article 1734 1 of
the Civil Code, are exclusive, not one of which can be applied to
this case.
The question of charging both the carrier and the arrastre operator
with the obligation of properly delivering the goods to the
consignee has, too, been passed upon by the Court. In Fireman's
Fund Insurance vs. Metro Port Services (182 SCRA 455), we have
explained, in holding the carrier and the arrastre operator liable in
solidum, thus:
The legal relationship between the consignee and the arrastre
operator is akin to that of a depositor and warehouseman (Lua
Kian v. Manila Railroad Co., 19 SCRA 5 [1967]. The relationship
between the consignee and the common carrier is similar to that of
the consignee and the arrastre operator (Northern Motors, Inc. v.
Prince Line, et al., 107 Phil. 253 [1960]). Since it is the duty of the
ARRASTRE to take good care of the goods that are in its custody
and to deliver them in good condition to the consignee, such
responsibility also devolves upon the CARRIER. Both the
ARRASTRE and the CARRIER are therefore charged with the
obligation to deliver the goods in good condition to the consignee.
We do not, of course, imply by the above pronouncement that the
arrastre operator and the customs broker are themselves always
and necessarily liable solidarily with the carrier, or vice-versa, nor
that attendant facts in a given case may not vary the rule. The
instant petition has been brought solely by Eastern Shipping
Lines, which, being the carrier and not having been able to rebut
Page 49 of 62

the presumption of fault, is, in any event, to be held liable in this


particular case. A factual finding of both the court a quo and the
appellate court, we take note, is that "there is sufficient evidence
that the shipment sustained damage while in the successive
possession of appellants" (the herein petitioner among them).
Accordingly, the liability imposed on Eastern Shipping Lines, Inc.,
the sole petitioner in this case, is inevitable regardless of whether
there are others solidarily liable with it.
It is over the issue of legal interest adjudged by the appellate court
that deserves more than just a passing remark.
Let us first see a chronological recitation of the major rulings of
this Court:
The early case of Malayan Insurance Co., Inc., vs. Manila Port
Service, 2 decided 3 on 15 May 1969, involved a suit for recovery
of money arising out of short deliveries and pilferage of goods. In
this case, appellee Malayan Insurance (the plaintiff in the lower
court) averred in its complaint that the total amount of its claim for
the value of the undelivered goods amounted to P3,947.20. This
demand, however, was neither established in its totality nor
definitely ascertained. In the stipulation of facts later entered into
by the parties, in lieu of proof, the amount of P1,447.51 was
agreed upon. The trial court rendered judgment ordering the
appellants (defendants) Manila Port Service and Manila Railroad
Company to pay appellee Malayan Insurance the sum of
P1,447.51 with legal interest thereon from the date the complaint
was filed on 28 December 1962 until full payment thereof. The
appellants then assailed, inter alia, the award of legal interest. In
sustaining the appellants, this Court ruled:
Interest upon an obligation which calls for the payment of money,
absent a stipulation, is the legal rate. Such interest normally is
allowable from the date of demand, judicial or extrajudicial. The
trial court opted for judicial demand as the starting point.
But then upon the provisions of Article 2213 of the Civil Code,
interest "cannot be recovered upon unliquidated claims or
damages, except when the demand can be established with
reasonable certainty." And as was held by this Court in Rivera vs.
Perez, 4 L-6998, February 29, 1956, if the suit were for damages,
"unliquidated and not known until definitely ascertained, assessed
and determined by the courts after proof (Montilla c. Corporacion
de P.P. Agustinos, 25 Phil. 447; Lichauco v. Guzman,
38 Phil. 302)," then, interest "should be from the date of the
decision." (Emphasis supplied)
The case of Reformina vs. Tomol, 5 rendered on 11 October 1985,
was for "Recovery of Damages for Injury to Person and Loss of
Property." After trial, the lower court decreed:
WHEREFORE, judgment is hereby rendered in favor of the
plaintiffs and third party defendants and against the defendants
and third party plaintiffs as follows:
Ordering defendants and third party plaintiffs Shell and Michael,
Incorporated to pay jointly and severally the following persons:
xxx xxx xxx
(g) Plaintiffs Pacita F. Reformina and Francisco Reformina the
sum of P131,084.00 which is the value of the boat F B Pacita III
together with its accessories, fishing gear and equipment minus
P80,000.00 which is the value of the insurance recovered and the
amount of P10,000.00 a month as the estimated monthly loss
suffered by them as a result of the fire of May 6, 1969 up to the
time they are actually paid or already the total sum of P370,000.00
as of June 4, 1972 with legal interest from the filing of the
complaint until paid and to pay attorney's fees of P5,000.00 with
costs against defendants and third party plaintiffs. (Emphasis
supplied.)
On appeal to the Court of Appeals, the latter modified the amount
of damages awarded but sustained the trial court in adjudging
legal interest from the filing of the complaint until fully paid. When
the appellate court's decision became final, the case was

remanded to the lower court for execution, and this was when the
trial court issued its assailed resolution which applied the 6%
interest per annum prescribed in Article 2209 of the Civil Code. In
their petition for review on certiorari, the petitioners contended that
Central Bank Circular
No. 416, providing thus
By virtue of the authority granted to it under Section 1 of Act 2655,
as amended, Monetary Board in its Resolution No. 1622 dated
July 29, 1974, has prescribed that the rate of interest for the loan,
or forbearance of any money, goods, or credits and the rate
allowed in judgments, in the absence of express contract as to
such rate of interest, shall be twelve (12%) percent per annum.
This Circular shall take effect immediately. (Emphasis found in the
text)
should have, instead, been applied. This Court 6 ruled:
The judgments spoken of and referred to are judgments in
litigations involving loans or forbearance of any money, goods or
credits. Any other kind of monetary judgment which has nothing to
do with, nor involving loans or forbearance of any money, goods or
credits does not fall within the coverage of the said law for it is not
within the ambit of the authority granted to the Central Bank.
xxx xxx xxx
Coming to the case at bar, the decision herein sought to be
executed is one rendered in an Action for Damages for injury to
persons and loss of property and does not involve any loan, much
less forbearances of any money, goods or credits. As correctly
argued by the private respondents, the law applicable to the said
case is Article 2209 of the New Civil Code which reads
Art. 2209. If the obligation consists in the payment of a sum of
money, and the debtor incurs in delay, the indemnity for damages,
there being no stipulation to the contrary, shall be the payment of
interest agreed upon, and in the absence of stipulation, the legal
interest which is six percent per annum.
The above rule was reiterated in Philippine Rabbit Bus Lines, Inc.,
v. Cruz, 7 promulgated on 28 July 1986. The case was for
damages occasioned by an injury to person and loss of property.
The trial court awarded private respondent Pedro Manabat actual
and compensatory damages in the amount of P72,500.00 with
legal interest thereon from the filing of the complaint until fully
paid. Relying on the Reformina v. Tomol case, this Court 8
modified the interest award from 12% to 6% interest per annum
but sustained the time computation thereof, i.e., from the filing of
the complaint until fully paid.
In Nakpil and Sons vs. Court of Appeals, 9 the trial court, in an
action for the recovery of damages arising from the collapse of a
building, ordered,
inter alia, the "defendant United Construction Co., Inc. (one of the
petitioners)
. . . to pay the plaintiff, . . . , the sum of P989,335.68 with interest
at the legal rate from November 29, 1968, the date of the filing of
the complaint until full payment . . . ." Save from the modification
of the amount granted by the lower court, the Court of Appeals
sustained the trial court's decision. When taken to this Court for
review, the case, on 03 October 1986, was decided, thus:
WHEREFORE, the decision appealed from is hereby MODIFIED
and considering the special and environmental circumstances of
this case, we deem it reasonable to render a decision imposing,
as We do hereby impose, upon the defendant and the third-party
defendants (with the exception of Roman Ozaeta) a solidary (Art.
1723, Civil Code, Supra.
p. 10) indemnity in favor of the Philippine Bar Association of FIVE
MILLION (P5,000,000.00) Pesos to cover all damages (with the
exception to attorney's fees) occasioned by the loss of the building
(including interest charges and lost rentals) and an additional ONE
HUNDRED THOUSAND (P100,000.00) Pesos as and for
attorney's fees, the total sum being payable upon the finality of
Page 50 of 62

this decision. Upon failure to pay on such finality, twelve (12%) per
cent interest per annum shall be imposed upon aforementioned
amounts from finality until paid. Solidary costs against the
defendant and third-party defendants (Except Roman Ozaeta).
(Emphasis supplied)
A motion for reconsideration was filed by United Construction,
contending that "the interest of twelve (12%) per cent per annum
imposed on the total amount of the monetary award was in
contravention of law." The Court 10 ruled out the applicability of
the Reformina and Philippine Rabbit Bus Lines cases and, in its
resolution of 15 April 1988, it explained:
There should be no dispute that the imposition of 12% interest
pursuant to Central Bank Circular No. 416 . . . is applicable only in
the following: (1) loans; (2) forbearance of any money, goods or
credit; and
(3) rate allowed in judgments (judgments spoken of refer to
judgments involving loans or forbearance of any money, goods or
credits. (Philippine Rabbit Bus Lines Inc. v. Cruz, 143 SCRA
160-161 [1986]; Reformina v. Tomol, Jr., 139 SCRA 260 [1985]). It
is true that in the instant case, there is neither a loan or a
forbearance, but then no interest is actually imposed provided the
sums referred to in the judgment are paid upon the finality of the
judgment. It is delay in the payment of such final judgment, that
will cause the imposition of the interest.
It will be noted that in the cases already adverted to, the rate of
interest is imposed on the total sum, from the filing of the
complaint until paid; in other words, as part of the judgment for
damages. Clearly, they are not applicable to the instant case.
(Emphasis supplied.)
The subsequent case of American Express International, Inc., vs.
Intermediate Appellate Court 11 was a petition for review on
certiorari from the decision, dated 27 February 1985, of the then
Intermediate Appellate Court reducing the amount of moral and
exemplary damages awarded by the trial court, to P240,000.00
and P100,000.00, respectively, and its resolution, dated 29 April
1985, restoring the amount of damages awarded by the trial court,
i.e., P2,000,000.00 as moral damages and P400,000.00 as
exemplary damages with interest thereon at 12% per annum from
notice of judgment, plus costs of suit. In a decision of 09
November 1988, this Court, while recognizing the right of the
private respondent to recover damages, held the award, however,
for moral damages by the trial court, later sustained by the IAC, to
be inconceivably large. The Court 12 thus set aside the decision of
the appellate court and rendered a new one, "ordering the
petitioner to pay private respondent the sum of One Hundred
Thousand (P100,000.00) Pesos as moral damages, with
six (6%) percent interest thereon computed from the finality of this
decision until paid. (Emphasis supplied)
Reformina came into fore again in the 21 February 1989 case of
Florendo v. Ruiz 13 which arose from a breach of employment
contract. For having been illegally dismissed, the petitioner was
awarded by the trial court moral and exemplary damages without,
however, providing any legal interest thereon. When the decision
was appealed to the Court of Appeals, the latter held:
WHEREFORE, except as modified hereinabove the decision of
the CFI of Negros Oriental dated October 31, 1972 is affirmed in
all respects, with the modification that defendants-appellants,
except defendant-appellant Merton Munn, are ordered to pay,
jointly and severally, the amounts stated in the dispositive portion
of the decision, including the sum of P1,400.00 in concept of
compensatory damages, with interest at the legal rate from the
date of the filing of the complaint until fully paid (Emphasis
supplied.)
The petition for review to this Court was denied. The records were
thereupon transmitted to the trial court, and an entry of judgment
was made. The writ of execution issued by the trial court directed

that only compensatory damages should earn interest at 6% per


annum from the date of the filing of the complaint. Ascribing grave
abuse of discretion on the part of the trial judge, a petition for
certiorari assailed the said order. This Court said:
. . . , it is to be noted that the Court of Appeals ordered the
payment of interest "at the legal rate" from the time of the filing of
the complaint. . . Said circular [Central Bank Circular No. 416]
does not apply to actions based on a breach of employment
contract like the case at bar. (Emphasis supplied)
The Court reiterated that the 6% interest per annum on the
damages should be computed from the time the complaint was
filed until the amount is fully paid.
Quite recently, the Court had another occasion to rule on the
matter. National Power Corporation vs. Angas, 14 decided on 08
May 1992, involved the expropriation of certain parcels of land.
After conducting a hearing on the complaints for eminent domain,
the trial court ordered the petitioner to pay the private respondents
certain sums of money as just compensation for their lands so
expropriated "with legal interest thereon . . . until fully paid." Again,
in applying the 6% legal interest per annum under the Civil Code,
the Court 15 declared:
. . . , (T)he transaction involved is clearly not a loan or forbearance
of money, goods or credits but expropriation of certain parcels of
land for a public purpose, the payment of which is without
stipulation regarding interest, and the interest adjudged by the trial
court is in the nature of indemnity for damages. The legal interest
required to be paid on the amount of just compensation for the
properties expropriated is manifestly in the form of indemnity for
damages for the delay in the payment thereof. Therefore, since
the kind of interest involved in the joint judgment of the lower court
sought to be enforced in this case is interest by way of damages,
and not by way of earnings from loans, etc. Art. 2209 of the Civil
Code shall apply.
Concededly, there have been seeming variances in the above
holdings. The cases can perhaps be classified into two groups
according to the similarity of the issues involved and the
corresponding rulings rendered by the court. The "first group"
would consist of the cases of Reformina v. Tomol (1985),
Philippine Rabbit Bus Lines v. Cruz (1986), Florendo v. Ruiz
(1989)
and National Power Corporation v. Angas (1992). In the "second
group" would be Malayan Insurance Company v. Manila Port
Service (1969), Nakpil and Sons v. Court of Appeals (1988), and
American Express International v. Intermediate Appellate Court
(1988).
In the "first group", the basic issue focuses on the application of
either the 6% (under the Civil Code) or 12% (under the Central
Bank Circular) interest per annum. It is easily discernible in these
cases that there has been a consistent holding that the Central
Bank Circular imposing the 12% interest per annum applies only
to loans or forbearance 16 of money, goods or credits, as well as
to judgments involving such loan or forbearance of money, goods
or credits, and that the 6% interest under the Civil Code governs
when the transaction involves the payment of indemnities in the
concept of damage arising from the breach or a delay in the
performance of obligations in general. Observe, too, that in these
cases, a common time frame in the computation of the 6% interest
per annum has been applied, i.e., from the time the complaint is
filed until the adjudged amount is fully paid.
The "second group", did not alter the pronounced rule on the
application of the 6% or 12% interest per annum, 17 depending on
whether or not the amount involved is a loan or forbearance, on
the one hand, or one of indemnity for damage, on the other hand.
Unlike, however, the "first group" which remained consistent in
holding that the running of the legal interest should be from the
time of the filing of the complaint until fully paid, the "second
Page 51 of 62

group" varied on the commencement of the running of the legal


interest.
Malayan held that the amount awarded should bear legal interest
from the date of the decision of the court a quo, explaining that "if
the suit were for damages, 'unliquidated and not known until
definitely ascertained, assessed and determined by the courts
after proof,' then, interest 'should be from the date of the
decision.'" American Express International v. IAC, introduced a
different time frame for reckoning the 6% interest by ordering it to
be "computed from the finality of (the) decision until paid." The
Nakpil and Sons case ruled that 12% interest per annum should
be imposed from the finality of the decision until the judgment
amount is paid.
The ostensible discord is not difficult to explain. The factual
circumstances may have called for different applications, guided
by the rule that the courts are vested with discretion, depending on
the equities of each case, on the award of interest. Nonetheless, it
may not be unwise, by way of clarification and reconciliation, to
suggest the following rules of thumb for future guidance.
I. When an obligation, regardless of its source, i.e., law, contracts,
quasi-contracts, delicts or quasi-delicts 18 is breached, the
contravenor can be held liable for damages. 19 The provisions
under Title XVIII on "Damages" of the Civil Code govern in
determining the measure of recoverable damages. 20
II. With regard particularly to an award of interest in the concept of
actual and compensatory damages, the rate of interest, as well as
the accrual thereof, is imposed, as follows:
1. When the obligation is breached, and it consists in the payment
of a sum of money, i.e., a loan or forbearance of money, the
interest due should be that which may have been stipulated in
writing. 21 Furthermore, the interest due shall itself earn legal
interest from the time it is judicially demanded. 22 In the absence
of stipulation, the rate of interest shall be 12% per annum to be
computed from default, i.e., from judicial or extrajudicial demand
under and subject to the provisions of Article 1169 23 of the Civil
Code.
2. When an obligation, not constituting a loan or forbearance of
money, is breached, an interest on the amount of damages
awarded may be imposed at the discretion of the court 24 at the
rate of 6% per annum. 25 No interest, however, shall be adjudged
on unliquidated claims or damages except when or until the
demand can be established with reasonable certainty. 26
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.
WHEREFORE, the petition is partly GRANTED. The appealed
decision is AFFIRMED with the MODIFICATION that the legal
interest to be paid is SIX PERCENT (6%) on the amount due
computed from the decision, dated
03 February 1988, of the court a quo. A TWELVE PERCENT
(12%) interest, in lieu of SIX PERCENT (6%), shall be imposed on
such amount upon finality of this decision until the payment
thereof.
SO ORDERED.

Qualified By

Lu Do v. Binamira, 101 Phil 120 (1957)


G.R. No. L-9840
April 22, 1957
LU DO & LU YM CORPORATION, petitioner-defendant,
vs.
I. V. BINAMIRA, respondent-plaintiff.
Ross, Selph, Carrascoso and Janda for petitioner.
I. V. Binamira in his own behalf.
BAUTISTA ANGELO, J.:
On April 4, 1954, plaintiff filed an action in the Court of First
Instance of Cebu against defendant to recover the sum of P324.63
as value of certain missing shipment, P150 as actual and
compensatory damages, and P600 as moral and pecuniary
damages. After trial, the court rendered judgment ordering
defendant to pay plaintiff the sum of P216.84, with legal interest.
On appeal, the Court of Appeals affirmed the judgment, hence the
present petition for review.
On August 10, 1951, the Delta Photo Supply Company of New
York shipped on board the M/S "FERNSIDE" at New York, U.S.A.,
six cases of films and/or photographic supplies consigned to the
order of respondent I. V. Binamira. For this shipment, Bill of Lading
No. 29 was issued. The ship arrived at the port of Cebu on
September 23, 1951 and discharged her cargo on September 23,
and 24, 1951, including the shipment in question, placing it in the
possession and custody of the arrastre operator of said port, the
Visayan Cebu Terminal Company, Inc.
Petitioner, as agent of the carrier, hired the Cebu Stevedoring
Company, Inc. to unload its cargo. During the discharge, good
order cargo was separated from the bad order cargo on board the
ship, and a separate list of bad order cargo was prepared by
Pascual Villamor, checker of the stevedoring company. All the
cargo unloaded was received at the pier by the Visayan Cebu
Terminal Company Inc, arrastre operator of the port. This terminal
company had also its own checker, Romeo Quijano, who also
recorded and noted down the good cargo from the bad one. The
shipment in question, was not included in the report of bad order
cargo of both checkers, indicating that it was discharged from the,
ship in good order and condition.
On September 26, 1951, three days after the goods were
unloaded from the ship, respondent took delivery of his six cases
of photographic supplies from the arrastre operator. He discovered
that the cases showed signs of pilferage and, consequently, he
hired marine surveyors, R. J. del Pan & Company, Inc., to
examine them. The surveyors examined the cases and made a
physical count of their contents in the presence of representatives
of petitioner, respondent and the stevedoring company. The
surveyors examined the cases and made a physical count of their
contents in the presence of representatives of petitioner,
respondent and the stevedoring company. The finding of the
surveyors showed that some films and photographic supplies were
missing valued at P324.63.
It appears from the evidence that the six cases of films and
photographic supplies were discharged from the ship at the port of
Cebu by the stevedoring company hired by petitioner as agent of
the carrier. All the unloaded cargo, including the shipment in
question, was received by the Visayan Cebu Terminal Company
Inc., the arrastre operator appointed by the Bureau of Customs. It
also appears that during the discharge, the cargo was checked
both by the stevedoring company hired by petitioner as well as by
the arrastre operator of the port, and the shipment in question,
when discharged from the ship, was found to be in good order and
condition. But after it was delivered to respondent three days later,
Page 52 of 62

the same was examined by a marine surveyor who found that


some films and supplies were missing valued at P324.63.
The question now to be considered is: Is the carrier responsible
for the loss considering that the same occurred after the shipment
was discharged from the ship and placed in the possession and
custody of the customs authorities?
The Court of Appeals found for the affirmative, making on this
point the following comment:
In this jurisdiction, a common carrier has the legal duty to deliver
goods to a consignee in the same condition in which it received
them. Except where the loss, destruction or deterioration of the
merchandise was due to any of the cases enumerated in Article
1734 of the new Civil Code, a carrier is presumed to have been at
fault and to have acted negligently, unless it could prove that it
observed extraordinary diligence in the care and handling of the
goods (Article 1735, supra). Such presumption and the liability of
the carrier attach until the goods are delivered actually or
constructively, to the consignee, or to the person who has a right
to receive them (Article 1736, supra), and we believe delivery to
the customs authorities is not the delivery contemplated by Article
1736, supra, in connection with second paragraph of Article 1498,
supra, because, in such a case, the goods are then still in the
hands of the Government and their owner could not exercise
dominion whatever over them until the duties are paid. In the case
at bar, the presumption against the carrier, represented appellant
as its agent, has not been successfully rebutted.
It is now contended that the Court of Appeals erred in its finding
not only because it made wrong interpretation of the law on the
matter, but also because it ignored the provisions of the bill of
lading covering the shipment wherein it was stipulated that the
responsibility of the carrier is limited only to losses that may occur
while the cargo is still under its custody and control.
We believe this contention is well taken. It is true that, as a rule, a
common carrier is responsible for the loss, destruction or
deterioration of the goods it assumes to carry from one place to
another unless the same is due to any to any of the causes
mentioned in Article 1734 on the new Civil Code, and that, if the
goods are lost, destroyed or deteriorated, for causes other that
those mentioned, the common carrier is presumed to have been at
fault or to have acted negligently, unless it proves that it has
observed extraordinary diligence in their care (Article 1735,
Idem.), and that this extraordinary liability lasts from the time the
goods are placed in the possession of the carrier until they are
delivered to the consignee, or "to the person who has the right to
receive them" (Article 1736, Idem.), but these provisions only
apply when the loss, destruction or deterioration takes place while
the goods are in the possession of the carrier, and not after it has
lost control of them. The reason is obvious. While the goods are in
its possession, it is but fair that it exercise extraordinary diligence
in protecting them from damage, and if loss occurs, the law
presumes that it was due to its fault or negligence. This is
necessary to protect the interest the interest of the owner who is at
its mercy. The situation changes after the goods are delivered to
the consignee.
While we agree with the Court of Appeals that while delivery of the
cargo to the consignee, or to the person who has a right to receive
them", contemplated in Article 1736, because in such case the
goods are still in the hands of the Government and the owner
cannot exercise dominion over them, we believe however that the
parties may agree to limit the liability of the carrier considering that
the goods have still to through the inspection of the customs
authorities before they are actually turned over to the consignee.
This is a situation where we may say that the carrier losses control
of the goods because of a custom regulation and it is unfair that it
be made responsible for what may happen during the
interregnum. And this is precisely what was done by the parties

herein. In the bill of lading that was issued covering the shipment
in question, both the carrier and the consignee have stipulated to
limit the responsibility of the carrier for the loss or damage that
may because to the goods before they are actually delivered by
insert in therein the following provisions:
1. . . . The Carrier shall not be liable in any capacity whatsoever
for any delay, nondelivery or misdelivery, or loss of or damage to
the goods occurring while the goods are not in the actual custody
of the Carrier. . . . (Emphasis ours.)
(Paragraph 1, Exhibit "1")
2. . . . The responsibility of the Carrier in any capacity shall
altogether cease and the goods shall be considered to be
delivered and at their own risk and expense in every respect when
taken into the custody of customs or other authorities. The Carrier
shall not be required to give any notification of disposition of the
goods. . . . (Emphasis ours.)
(Paragraph 12, Exhibit "1")
3. Any provisions herein to the contrary notwithstanding, goods
may be . . . by Carrier at ship's tackle . . . and delivery beyond
ship's tackle shall been tirely at the option of the Carrier and solely
at the expense of the shipper or consignee.
(Paragraph 22, Exhibit "1")
It therefore appears clear that the carrier does not assume liability
for any loss or damage to the goods once they have been "taken
into the custody of customs or other authorities", or when they
have been delivered at ship's tackle. These stipulations are clear.
They have been adopted precisely to mitigate the responsibility of
the carrier considering the present law on the matter, and we find
nothing therein that is contrary to morals or public policy that may
justify their nullification. We are therefore persuaded to conclude
that the carrier is not responsible for the loss in question, it
appearing that the same happened after the shipment had been
delivered to the customs authorities.
Wherefore, the decision appealed from is reversed, without
pronouncement as to costs.
Presumption of Negligence

Ynchausti Steamship, Co. v. Dexter, 41 Phil 289 (1920)

G.R. No. L-15652 December 14, 1920


THE YNCHAUSTI STEAMSHIP COMPANY, petitioner,
vs.
I. B. DEXTER, as Auditor of the Philippine Islands, and C. E. UNSON, as
Acting Purchasing Agent of the Philippine Islands, respondents.
Cohn & Fisher for petitioner.
Attorney-General Paredes and Assistant Attorney-General A. Santos for
respondents.
STREET, J.:
This a petition for a writ of mandamus filed in this court of the Ynchausti
Steamship Company to compel the Purchasing Agent of the Philippine
Islands and the Insular Auditor to sign, countersign, and deliver to the
petitioner a warrant upon the Treasurer of the Philippine Islands for the
sum of P82.79 in satisfaction of a claim for that amount, which is alleged
to be due the petitioner as a common carrier for freight earned in
transporting for the Government two distinct consignments of mineral oil
from Manila to two other ports in the Philippine Islands. After the
defendants had duly answered, denying all the allegations of the petition
except such as relate to the character and places of residence of the
parties to the petition (which are admitted) the controversy was submitted
for determination by this court upon an agreed statement of facts as
follows:
On July 23, 1918, the Government of the Philippine Islands, acting by and
through the respondent Insular Purchasing Agent, employed the services
of the petitioner, Ynchausti Steamship Co., a common carrier, for the
transportation, on board the steamship Venus, from the port of Manila to
the port of Aparri, Cagayan, of a consignment of merchandise, consisting
of thirty (30) cases of "White Rose" mineral oil of two five-gallon cans to
the case; and on September 18, 1918, the said Government likewise
Page 53 of 62

employed the services of petitioner for the transportation on board the


steamship Venus, from Manila to Aparri, Cagayan, of ninety-six cases of
"Cock" Brand mineral oil, ten gallons to the case. The goods were
delivered by the shipper to the carrier, which accordingly received them,
and to evidence the contract of transportation, the parties duly executed
and delivered what is popularly called the Government bill of lading
(General Form 9-A), hereto attached, marked Exhibit A and made a part
hereof, wherein and whereby it was stipulated that the carrier, the
petitioner Ynchausti & Co., received the above-mentioned supplies in
apparent good condition, obligating itself to carry said supplies to the
place agreed upon, in accordance with the authorized and prescribed
rates and classifications, and subject to the law of common carriers in
force on the date of the shipment, and to the conditions prescribed by the
Insular Collector of Customs in Philippine Marine Regulations at page 16
under the heading of "Bill of Lading Conditions," hereto attached, marked
Exhibit B and made a part hereof.
Upon the delivery of the said shipment of "Cock" brand oil and consignee
claimed that one case was delivered empty, and noted such claim upon
the bill of lading; and upon the delivery of the said shipment of "White
Rose," brand oil the consignee claimed that one case was delivered
empty, and noted said claim upon the bill of lading.
Thereafter, notwithstanding the protestations of the petitioner, Ynchausti
Steamship Co., that said shortages were due to causes entirely unknown
to it, and were not due to any fault or negligence on its part, or on the part
of its agents or servants, the Acting Insular Purchasing Agent of the
Philippine Islands notified the petitioners herein that after due
investigation the Insular Auditor found and decided that the leakages of
the two whole cases were due to its negligence and that the deduction of
the sum of P22.53, the invoice value of the goods lost, and held by the
Auditor to be the true value thereof had been authorized by the said
Insular Auditor.
Petitioner thereupon protested against the threatened deduction, and
demanded that it be paid the full amount due for the transportation of the
two said shipments of merchandise, to wit, the sum of P82.79, as shown
by its transportation voucher presented in this cause, hereto attached.
marked Exhibit C and made a part hereof.
Thereafter, notwithstanding the protest and demand of the petitioner as
aforesaid, the Insular Auditor, in conformity with his ruling, declined and
still declines to issue to the petitioner a warrant for the full sum of P82.79,
and has tendered to it a warrant for the sum of P60.26, which the
petitioner has refused to accept.lawphi1.net
The sum of P22.53 authorized to be deducted by the Insular Auditor, as
appears herein, has not at any time been liquidated by consent,
agreement, or by the judgment of any court of competent jurisdiction.
Upon a perusal of the foregoing agreed statement it will be seen that the
present litigation had its origin in a situation practically identical with that
considered by this court in Compaia General de Tabacos vs. French and
Unson (39 Phil., 34). It will be noted, however, that the case mentioned
was decided upon demurrer, while the one now before us is to be heard
and determined upon the petition, answer, and the admitted facts.
We note that in this case, as in the case of Compaia General de
Tabacos vs. French and Unson (supra), the petition alleges that the
leakage of the lost gasoline was due to causes unknown to the petitioner
and was not due to any fault or negligence of petitioner, its agents, or
servants. The respondents, by demurring to the petition in the earlier
case, admitted that allegation. In the case now before us that allegation is
put in issue, and we find nothing in the admitted statement of facts to
support it. It results that if that allegation is material to the relief here
sought, the petition must fail.
We are of the opinion that the allegation in question is material and that
the belief sought in this case cannot be granted.
In section 646 of the Administrative Code it is provided that when
Government property is transmitted from one place to another by carrier,
it shall be upon proper bill of lading, or receipt, from such carrier, and it
shall be the duty of the consignee, or his representative, to make full
notation of any evidence of loss, shortage, or damage, upon the bill of
lading, or receipt, before accomplishing it. It is admitted by the petitioner
in the agreed statement of facts that the consignee, at the time the oil was
delivered, noted the loss in the present case upon the two respective bills
of lading. The notation of these losses by the consignee, in obedience to
the precept of section 646 of the Administrative Code, is competent
evidence to show that the shortage in fact existed. As the petitioner
admits that the oil was received by it for carriage and inasmuch as the

fact of loss is proved in the manner just stated, it results that there is a
presumption that the petitioner was to blame for the loss; and it was
incumbent upon the petitioner in order to entitle it to relief in the case to
rebut that presumption by proving, as is alleged in the petition, that the
loss was not due to any fault or negligence of the petitioner.
The mere proof of delivery of goods in good order to a carrier, and of their
arrival at the place of destination in bad order, makes out a prima facie
case against the carrier, so that if no explanation is given as to how the
injury occurred, the carrier must be held responsible. (4 R. C. L., p. 917.)
It is incumbent upon the carrier to prove that the loss was due to accident
or some other circumstance inconsistent with its liability. (Articles
361-363, Code of Commerce.) Indeed, if the Government of the Philippine
Islands had instituted an action in a court of law against the petitioner to
recover the value of the oil lost while these consignments were in the
court of transportation, it would, upon the facts appearing before us, have
been entitled to judgment.
From this it is apparent that the mandamus prayed for cannot be granted.
It is a rule of universal application that a petition for extraordinary relief of
the character here sought must show merit. That is, the petitioner's right
to relief must be clear. Such cannot be said to be the case where, as
here, a presumption of responsibility on the part of the petitioner stands
unrefuted upon the record.
We are of the opinion that, in the absence of proof showing that the
carrier was not at fault in respect to the matter under discussion, the
Insular Auditor was entitled to withhold, from the amount admittedly due to
the petitioner for the freight charges, a sum sufficient to cover the value of
the oil lost in transit.
The petition will be dismissed, with costs against the petitioner. So
ordered.

Mirasol v. The Robert Dollar Co., 53 Phil 124 (1929)


G.R. No. 29721, Mirasol v. The Robert Dollar Co., 53 Phil. 124
content follows
Republic of the Philippines
SUPREME COURT
Manila
EN BANC
March 27, 1929
G.R. No. 29721
AMANDO MIRASOL, plaintiff-appellant,
vs.
THE ROBERT DOLLAR CO., defendant-appellant.
Vicente Hilado for plaintiff-appellant.
J.A. Wolfson for defendant-appellant.
STATEMENT
After the promulgation of the decision rendered by the Second Division of
February 13, 1929,[[1]] the defendant filed a motion to have the case
heard and decided in banc, and inasmuch as the legal questions involved
are important to the shipping interests, the court thought it best to do so.
After the formal pleas, plaintiff alleges that he is the owner and consignee
of two cases of books, shipped in good order and condition at New York,
U.S.A., on board the defendant's steamship President Garfield, for
transport and delivery to the plaintiff in the City of Manila, all freight
charges paid. That the two cases arrived in Manila on September 1, 1927,
in bad order and damaged condition, resulting in the total loss of one case
and a partial loss of the other. That the loss in one case is P1,630, and
the other P700, for which he filed his claims, and defendant has refused
and neglected to pay, giving as its reason that the damage in question
"was caused by sea water." That plaintiff never entered into any contract
with the defendant limiting defendant's liability as a common carrier, and
when he wrote the letter of September 3, 1927, he had not then
ascertained the contents of the damaged case, and could not determine
their value. That he never intended to ratify or confirm any agreement to
limit the liability of the defendant. That on September 9, 1927, when the
other case was found, plaintiff filed a claim for the real damage of the
books therein named in the sum of $375.
Plaintiff prays for corresponding judgment, with legal interest from the
filing of the complaint and costs.
For answer the defendant made a general and specific denial, and as a
separate and special defense alleges that the steamship President
Garfield at all the times alleged was in all respects seaworthy and
Page 54 of 62

properly manned, equipped and supplied, and fit for the voyage. That the
damage to plaintiff's merchandise, if any, was not caused through the
negligence of the vessel, its master, agent, officers, crew, tackle or
appurtenances, nor by reason of the vessel being unseaworthy or
improperly manned, "but that such damage, if any, resulted from faults or
errors in navigation or in the management of said vessel." As a second
separate and special defense, defendant alleges that in the bill of lading
issued by the defendant to plaintiff, it was agreed in writing that defendant
should not be "held liable for any loss of, or damage to, any of said
merchandise resulting from any of the following causes, to wit: Acts of
God, perils of the sea or other waters," and that plaintiff's damage, if any,
was caused by "Acts of God" or "perils of the sea." As a third special
defense, defendant quoted clause 13 of the bill of lading, in which it is
stated that in no case shall it be held liable "for or in respect to said
merchandise or property beyond the sum of two hundred and fifty dollars
for any piece, package or any article not enclosed in a package, unless a
higher value is stated herein and ad valorem freight paid or assessed
thereon," and that there was no other agreement. That on September 3,
1927 the plaintiff wrote the defendant a letter as follows:
Therefore, I wish to file claim of damage to the meager maximum value
that your bills of lading will indemnify me, that is $250 as per condition 13.
As a fourth special defense, defendant alleges that the damage, if any,
was caused by "sea water," and that the bill of lading exempts defendant
from liability for that cause. That damage by "sea water" is a shipper's
risk, and that defendant is not liable.
As a result of the trial upon such issues, the lower court rendered
judgment for the plaintiff for P2,080, with legal interest thereon from the
date of the final judgment, with costs, from which both parties appealed,
and the plaintiff assigns the following errors:
I. The lower court erred in holding that plaintiff's damage on account of
the loss of the damaged books in the partially damaged case can be
compensated with an indemnity of P450 instead of P750 as claimed by
plaintiff.
II. The lower court, consequently, also erred in giving judgment for plaintiff
for only P2,080 instead of P2,380.
III. The lower court erred in not sentencing defendant to pay legal interest
on the amount of the judgment, at least, from the date of the rendition of
said judgment, namely, January 30, 1928.
The defendant assigns the following errors:
I. The lower court erred in failing to recognize the validity of the limited
liability clause of the bill of lading, Exhibit 2.
II. The lower court erred in holding defendant liable in any amount and in
failing to hold, after its finding as a fact that the damage was caused by
sea water, that the defendant is not liable for such damage by sea water.
III. The lower court erred in awarding damages in favor of plaintiff and
against defendant for P2,080 or in any other amount, and in admitting,
over objection, Exhibits G, H, I and J.
JOHNS, J.:
Plaintiff's contention that he is entitled to P700 for his Encyclopedia
Britannica is not tenable. The evidence shows that the P400 that the court
allowed, he could buy a new set which could contain all of the material
and the subject matter of the one which he lost. Plaintiff's third
assignment of error is well taken, as under all of the authorities, he is
entitled to legal interest from the date of his judgement rendered in the
lower court and not the date when it becomes final. The lower court found
that plaintiff's damage was P2,080, and that finding is sustained by that
evidence. There was a total loss of one case and a partial loss of the
other, and in the very nature of the things, plaintiff could not prove his loss
in any other way or manner that he did prove it, and the trial court who
heard him testify must have been convinced of the truth of his testimony.
There is no claim or pretense that the plaintiff signed the bill of lading or
that he knew of his contents at the time that it was issued. In that situation
he was not legally bound by the clause which purports to limit defendant's
liability. That question was squarely met and decided by this court in banc
in Juan Ysmael and Co., vs. Gabino Baretto and Co., (51 Phil., 90; see
numerous authorities there cited).
Among such authorities in the case of The Kengsington decided by the
Supreme Court of the U.S. January 6, 1902 (46 Law. Ed., 190), in which
the opinion was written by the late Chief Justice White, the syllabus of
which is as follows:
1. Restrictions of the liability of a steamship company for its own
negligence or failure of duty toward the passenger, being against the
public policy enforced by the courts of the United States, will not to be

upheld, though the ticket was issued and accepted in a foreign country
and contained a condition making it subject to the law thereof, which
sustained such stipulation.
2. The stipulation in a steamship passenger's ticket, which compels him to
value his baggage, at a certain sum, far less than it is worth, or, in order to
have a higher value put upon it, to subject it to the provisions of the Harter
Act, by which the carrier would be exempted from all the liability therefore
from errors in navigation or management of the vessel of other negligence
is unreasonable and in conflict with public policy.
3. An arbitrary limitation of 250 francs for the baggage of any steamship
passenger unaccompanied by any right to increase the amount of
adequate and reasonable proportional payment, is void as against public
policy.
Both the facts upon which it is based and the legal principles involved are
square in point in this case.
The defendant having received the two boxes in good condition, its legal
duty was to deliver them to the plaintiff in the same condition in which it
received them. From the time of their delivery to the defendant in New
York until they are delivered to the plaintiff in Manila, the boxes were
under the control and supervision of the defendant and beyond the control
of the plaintiff. The defendant having admitted that the boxes were
damaged while in transit and in its possession, the burden of proof then
shifted, and it devolved upon the defendant to both allege and prove that
the damage was caused by reason of some fact which exempted it from
liability. As to how the boxes were damaged, when or where, was a matter
peculiarly and exclusively within the knowledge of the defendant and in
the very nature of things could not be in the knowledge of the plaintiff. To
require the plaintiff to prove as to when and how the damage was caused
would force him to call and rely upon the employees of the defendant's
ship, which in legal effect would be to say that he could not recover any
damage for any reason. That is not the law.
Shippers who are forced to ship goods on an ocean liner or any other ship
have some legal rights, and when goods are delivered on board ship in
good order and condition, and the shipowner delivers them to the shipper
in bad order and condition, it then devolves upon the shipowner to both
allege and prove that the goods were damaged by the reason of some
fact which legally exempts him from liability; otherwise, the shipper would
be left without any redress, no matter what may have caused the
damage.
The lower court in its opinion says:
The defendant has not even attempted to prove that the two cases were
wet with sea water by fictitious event, force majeure or nature and defect
of the things themselves. Consequently, it must be presumed that it was
by causes entirely distinct and in no manner imputable to the plaintiff, and
of which the steamer President Garfield or any of its crew could not have
been entirely unaware.
And the evidence for the defendant shows that the damage was largely
caused by "sea water," from which it contends that it is exempt under the
provisions of its bill of lading and the provisions of the article 361 of the
Code of Commerce, which is as follows:
Merchandise shall be transported at the risk and venture of the shipper, if
the contrary was not expressly stipulated.
Therefore, all damages and impairment suffered by the goods during the
transportation, by reason of accident, force majeure, or by virtue of the
nature or defect of the articles, shall be for the account and risk of the
shipper.
The proof of these accidents is incumbent on the carrier.
In the final analysis, the cases were received by the defendant in New
York in good order and condition, and when they arrived in Manila, they
were in bad condition, and one was a total loss. The fact that the cases
were damaged by "sea water," standing alone and within itself, is not
evidence that they were damaged by force majeure or for a cause beyond
the defendant's control. The words "perils of the sea," as stated in
defendant's brief apply to "all kinds of marine casualties, such as
shipwreck, foundering, stranding," and among other things, it is said:
"Tempest, rocks, shoals, icebergs and other obstacles are within the
expression," and "where the peril is the proximate cause of the loss, the
shipowner is excused." "Something fortuitous and out of the ordinary
course is involved in both words 'peril' or 'accident'."
Defendant also cites and relies on the case of Government of the
Philippine Islands vs. Ynchausti & Company (40 Phil., 219), but it appears
from a reading of that case that the facts are very different and, hence, it
is not in point. In the instant case, there is no claim or pretense that the
Page 55 of 62

two cases were not in good order when received on board the ship, and it
is admitted that they were in bad order on their arrival at Manila. Hence,
they must have been damaged in transit. In the very nature of things, if
they were damaged by reason of a tempest, rocks, icebergs, foundering,
stranding or the perils of the sea, that would be a matter exclusively within
the knowledge of the officers of defendant's ship, and in the very nature of
things would not be within plaintiff's knowledge, and upon all of such
questions, there is a failure of proof.
The judgment of the lower court will be modified, so as to give the plaintiff
legal interest on the amount of his judgment from the date of its rendition
in the lower court, and in all respects affirmed, with costs. So ordered.
Johnson, Malcolm, Ostrand, Romualdez, and Villa-Real, JJ., concur.
Separate Opinions
STREET, J., dissenting in part:
I gave a hesitating adherence to the decision of this case in division, and
upon further reflection, I am now constrained to record my belief that the
decision is in part erroneous. I agree with the court that the defendant is
liable to the plaintiff, but I think that its liability is limited, under clause 13,
printed on the back of the bill of lading, to the amount of 250 dollars for
each of the two boxes of books comprising this consignment. While the
law does not permit a carrier gratuitously to exempt itself from liability for
the negligence of its servants, it cannot effectually do so for a valuable
consideration; and where freight rates are adjusted upon the basis of a
reasonable limited value per package, where a higher value is not
declared by the shipper, the limitation as to the value is binding. This court
in two well considered decisions has heretofore upheld a limitation of
exactly the character of that indicated in clause 13 (H.E. Heacock Co. vs.
Macondray & Co., 42 Phil., 205; Freixas & Co. vs. Pacific Mail Steamship
Co., 42 Phil., 198); and I am unable to see any sufficient reason for
ignoring those decisions.

Vda. de Bataclan and 5 minors v. Medina, G.R. No. L-10126, 102


Phil 181 22 October 1957

BUS & TORCH CASE


FACTS:
1.
Shortly after midnight, on September 13, 1952 bus no. 30 of
the Medina Transportation, operated by its owner defendant Mariano
Medina, left the town of Amadeo, Cavite, on its way to Pasay City, driven
by its regular chauffeur, Conrado Saylon. There were about 18
passengers, including the driver and conductor.
2.
At about 2:00 o'clock that same morning, while the bus was
running within the jurisdiction of Imus, Cavite, one of the front tires burst
and the vehicle began to zig-zag until it fell into a canal or ditch on the
right side of the road and turned turtle. Some of the passengers managed
to leave the bus the best way they could, others had to be helped or
pulled out, while the three passengers seated beside the driver, named
Bataclan, Lara and the Visayan and the woman behind them named
Natalia Villanueva, could not get out of the overturned bus. Some of the
passengers, after they had clambered up to the road, heard groans and
moans from inside the bus, particularly, shouts for help from Bataclan and
Lara, who said they could not get out of the bus.
3.
There is nothing in the evidence to show whether or not the
passengers already free from the wreck, including the driver and the
conductor, made any attempt to pull out or extricate and rescue the four
passengers trapped inside the vehicle, but calls or shouts for help were
made to the houses in the neighborhood.
4.
After half an hour, came about 10 men, one of them carrying a
lighted torch made of bamboo with a wick on one end, evidently fueled
with petroleum. These men presumably approach the overturned bus,
and almost immediately, a fierce fire started, burning and all but
consuming the bus, including the four passengers trapped inside it.
5.
That same day, the charred bodies of the four deemed
passengers inside the bus were removed and duly identified that of Juan
Bataclan. By reason of his death, his widow, Salud Villanueva, in her
name and in behalf of her five minor children, brought the present suit to
recover from Mariano Medina compensatory, moral, and exemplary
damages and attorney's fees in the total amount of P87,150.

6.
CFI Cavite: Awarded P1,000 to the plaintiffs plus P600 as
attorney's fee, plus P100, the value of the merchandise being carried by
Bataclan to Pasay City for sale and which was lost in the fire.
a.
Case involves a breach of contract of transportation
b.
There was negligence on the part of the defendant, through his
agent, the driver Saylon. There is evidence the bus was speeding, as
testified; from the point where one of the front tires burst up to the canal
there was a distance of about 150 meters but because of the velocity, its
momentum carried it over a distance of 150 meters before it fell into the
canal and turned.
c.
The proximate cause of the death of Bataclan was not the
overturning of the bus, but rather, the FIRE; that at the time the fire
started, Bataclan, was still alive, and so damages were awarded, not for
his death, but for the physical injuries suffered by him.
ISSUE: What is the proximate cause of Bataclans death?
HELD: Not the FIRE but OVERTURNING OF BUS
1.
ART. 1733. Common carriers, from the nature of their business
and for reasons of public policy, are bound to observe extraordinary
diligence in the vigilance over the goods and for the safety of the
passengers transported by them, according to all the circumstances of
each case. Such extraordinary diligence in the vigilance over the goods is
further expressed in articles 1734, 1735, and 1745, Nos. 5, 6, and 7, while
the extra ordinary diligence for the safety of the passengers is further set
forth in articles 1755 and 1756.
2.
ART. 1755. A common carrier is bound to carry the passengers
safely as far as human care and foresight can provide, using the utmost
diligence of very cautious persons, with a due regard for all the
circumstances.
3.
ART. 1756. In case of death of or injuries to passengers,
common carriers are presumed to have been at fault or to have acted
negligently, unless they prove that they observed extraordinary diligence
as prescribed in articles 1733 and 1755
4.
ART. 1759. Common carriers are liable for the death of or
injuries to passengers through the negligence or willful acts of the
former's employees, although such employees may have acted beyond
the scope of their authority or in violation of the order of the common
carriers.
5.
This liability of the common carriers does not cease upon proof
that they exercised all the diligence of a good father of a family in the
selection and supervision of their employees.
6.
ART. 1763. A common carrier responsible for injuries suffered
by a passenger on account of the willful acts or negligence of other
passengers or of strangers, if the common carrier's employees through
the exercise of the diligence of a good father of a family could have
prevented or stopped the act or omission.
7.
CAB: There is no question that under the circumstances, the
defendant carrier is liable. The only question is to what degree. We
disagree with CFI that proximate cause was the FIRE.
a.
Proximate cause (Amjur.):
i.
'that cause, which, in natural and continuous sequence,
unbroken by any efficient intervening cause, produces the injury, and
without which the result would not have occurred.'
ii.
'the proximate legal cause is that acting first and producing the
injury, either immediately or by setting other events in motion, all
constituting a natural and continuous chain of events, each having a close
causal connection with its immediate predecessor, the final event in the
chain immediately effecting the injury as a natural and probable result of
the cause which first acted, under such circumstances that the person
responsible for the first event should, as an ordinary prudent and
intelligent person, have reasonable ground to expect at the moment of his
act or default that an injury to some person might probably result
therefrom.
8.
CAB: In the present case under the circumstances obtaining,
we do not hesitate to hold that the proximate cause was the
OVERTURNING of the bus, this for the reason that when the vehicle
turned not only on its side but completely on its back, the leaking of the
gasoline from the tank was not unnatural or unexpected; that the coming
of the men with a lighted torch was in response to the call for help, made
not only by the passengers, but most probably, by the driver and the
conductor themselves, and that because it was dark (about 2:30 in the
morning), the rescuers had to carry a light with them, and coming as they
did from a rural area where lanterns and flashlights were not available;
Page 56 of 62

and what was more natural than that said rescuers should innocently
approach the vehicle to extend the aid and effect the rescue requested.
9.
CAB: What is more, the burning of the bus can also in part be
attributed to the negligence of the carrier, through is driver and its
conductor. According to the witness, the driver and the conductor were on
the road walking back and forth. They, or at least, the driver should and
must have known that gasoline could and must have leaked, can be smelt
and directed even from a distance, and yet neither the driver nor the
conductor would appear to have cautioned or taken steps to warn the
rescuers not to bring the lighted torch too near the bus.
10.
According to the evidence, one of the passengers who,
because of the injuries suffered by her, was hospitalized, and while in the
hospital, she was visited by the defendant Mariano Medina, and in the
course of his visit, she overheard him speaking to one of his bus
inspectors, telling said inspector to have the tires of the bus changed
immediately because they were already old, and that as a matter of fact,
he had been telling the driver to change the said tires, but that the driver
did not follow his instructions. If this be true, it goes to prove that the
driver had not been diligent and had not taken the necessary precautions
to insure the safety of his passengers. Yet the criminal case against the
driver was provisionally dismissed, because according to the fiscal, the
witnesses on whose testimony he was banking to support the complaint,
either failed or appear or were reluctant to testify. In the public interest the
prosecution of said erring driver should be pursued, this, not only as a
matter of justice, but for the promotion of the safety of passengers on
public utility buses. Let a copy of this decision be furnished the
Department of Justice and the Provincial Fiscal of Cavite.
DISPOSITIVE: AFFIRMED. Rule for PETITIONER, with the modification
that the damages awarded by the trial court are increased to P6,000 and
P800 for the death of Bataclan and for the attorney's fees, respectively.

Dangwa Transportation Co., & Lardizabal y Malecdan v. CA, &


Heirs of Pedro Cudiamat, GR 95582, 202 SCRA 574 (1991), supra.

REGALADO, J.:p
DOCTRINES:
- The victim in the case at bar, by stepping and standing on the platform
of the bus, is already considered a passenger and is entitled to all the
rights and protection pertaining to such a contractual relation.
- The duty which the carrier of passengers owes to its patrons extends
to persons boarding and alighting the cars.
- Common carriers, from the nature of their business and for reasons of
public policy, are bound to observe extraordinary diligence for the
safety of the passengers transported by them, according to all the
circumstances of each case. A common carrier is bound to carry the
passengers safely as far as human care and foresight can provide,
using the utmost diligence of very cautious persons, with a due regard
for all the circumstances.
- By the contract of carriage, the carrier assumes that express
obligation to transport the passenger to his destination safely and to
observe extraordinary diligence with a due regard for all the
circumstances, and any injury that might be suffered by the passenger
is right away attributable to the fault or negligence of the carrier.
- The amount recoverable by the heirs of a victim of a tort is not the loss
of the entire earnings, but the loss of that portion of the earnings which
the beneficiary would have received. In other words, only net earnings,
not gross earnings, are to be considered, that is, the total of the
earnings less expenses necessary in the creation of such earnings or
income and minus living and other incidental expenses.
DIGEST:
1. This is a case where a bus belonging to the Petitioner ran over one
of its passengers because it suddenly accelerated before waiting for
its passenger to secure his seat.
2. As the deceased was boarding the bus, which was at full stop, and
closing his umbrella its the platform, the driver suddenly accelerated
the bus causing him to fall to the ground and hit by the bus rear
tires.
3. Instead of bringing the fallen passenger to the nearest hospital, the
driver opted to bring his other passengers and a refrigerator to their

4.
5.

respective destinations before bringing said victim to the Lepanto


Hospital where he expired.
RTC ruled that the victim was negligent but the CA reversed.
SC held that the CA is correct in saying that the Petitioners are liable
and that the deceased is not negligent. As soon as the victim stood
on the platform of the bus, he was already considered a passenger
so he obligation to observe extraordinary diligence, by the contract of
carriage commenced. Moreover, the failure of the driver and
conductor to immediately bring the victim to the hospital is a patent
and incontrovertible proof of their negligence.

FACTS:
1. On May 13, 1985, private Respondents filed a complaint for
damages against Petitioners for the death of Pedrito Cudiamat as a
result of a vehicular accident which occurred on March 25, 1985 at
Marivic, Sapid, Mankayan, Benguet. Among others, it was alleged
that on said date, while petitioner Theodore M. Lardizabal was
driving a passenger bus belonging to petitioner corporation in a
reckless and imprudent manner and without due regard to traffic
rules and regulations and safety to persons and property, it ran over
its passenger, Pedrito Cudiamat.
2. However, instead of bringing Pedrito immediately to the nearest
hospital, the said driver, in utter bad faith and without regard to the
welfare of the victim, first brought his other passengers and cargo to
their respective destinations before bringing said victim to the
Lepanto Hospital where he expired.
3. On the other hand, petitioners alleged that they had observed and
continued to observe the extraordinary diligence required in the
operation of the transportation company and the supervision of the
employees, even as they add that they are not absolute insurers of
the safety of the public at large. Further, it was alleged that it was the
victim's own carelessness and negligence which gave rise to the
subject incident, hence they prayed for the dismissal of the complaint
plus an award of damages in their favor by way of a counterclaim.
4. RTC: RTC ruled in favor of petitioners, saying Pedrito Cudiamat was
negligent, which negligence was the proximate cause of his death.
Nonetheless, defendants in equity, are hereby ordered to pay the
heirs of Pedrito Cudiamat the sum of P10,000.00 which
approximates the amount defendants initially offered said heirs for
the amicable settlement of the case.
5. CA: CA set aside the decision of the lower court, and ordered
petitioners to pay private respondents: Indemnity for death of the
victim Pedrito Cudiamat; moral damages; actual and compensatory
damages; costs of this suit.
6. Petitioners' MR was denied by the Court of Appeals in its resolution
dated October 4, 1990, hence this petition.
ISSUE: Whether CA erred in reversing RTC decision and in finding
petitioners negligent and liable for the damages claimed NO.
HELD: CA correct, petitioners liable, deceased not negligent.
1. It is an established principle that the factual findings of the Court of
Appeals as a rule are final and may not be reviewed by this Court on
appeal. However, this is subject to settled exceptions, one of which
is when the findings of the appellate court are contrary to those of
the trial court, in which case a reexamination of the facts and
evidence may be undertaken.
2. In the case at bar, the trial court and the Court of Appeal have
discordant positions as to who between the petitioners an the victim
is guilty of negligence. Perforce, we have had to conduct an
evaluation of the evidence in this case for the proper calibration of
their conflicting factual findings and legal conclusions.
3. The lower court, in declaring that the victim was negligent, made the
following findings: This Court is satisfied that Pedrito Cudiamat was
negligent in trying to board a moving vehicle, especially with one of
his hands holding an umbrella. And, without having given the driver
or the conductor any indication that he wishes to board the bus. But
defendants can also be found wanting of the necessary diligence. In
this connection, it is safe to assume that when the deceased
Cudiamat attempted to board defendants' bus, the vehicle's door
was open instead of being closed. This should be so, for it is hard to
believe that one would even attempt to board a vehicle (i)n motion if
the door of said vehicle is closed. Here lies the defendant's lack of
Page 57 of 62

4.

5.

6.

7.

8.

9.

diligence. Under such circumstances, equity demands that there


must be something given to the heirs of the victim to assuage their
feelings. This, also considering that initially, defendant common
carrier had made overtures to amicably settle the case. It did offer a
certain monetary consideration to the victim's heirs.
However, respondent court, in arriving at a different opinion, declares
that: From the testimony of appellees own witness in the person of
Vitaliano Safarita, it is evident that the subject bus was at full stop
when the victim Pedrito Cudiamat boarded the same as it was
precisely on this instance where a certain Miss Abenoja alighted
from the bus. Moreover, contrary to the assertion of the appellees,
the victim did indicate his intention to board the bus as can be seen
from the testimony of the said witness when he declared that Pedrito
Cudiamat was no longer walking and made a sign to board the bus
when the latter was still at a distance from him. It was at the instance
when Pedrito Cudiamat was closing his umbrella at the platform of
the bus when the latter made a sudden jerk movement (as) the
driver commenced to accelerate the bus.
Evidently, the incident took place due to the gross negligence of the
appellee-driver in prematurely stepping on the accelerator and in not
waiting for the passenger to first secure his seat especially so when
we take into account that the platform of the bus was at the time
slippery and wet because of a drizzle. The defendants-appellees
utterly failed to observe their duty and obligation as common carrier
to the end that they should observe extra-ordinary diligence in the
vigilance over the goods and for the safety of the passengers
transported by them according to the circumstances of each case
(Article 1733, New Civil Code).
CAB: After a careful review of the evidence on record, we find no
reason to disturb the above holding of the Court of Appeals. Its
aforesaid findings are supported by the testimony of petitioners' own
witnesses. One of them, Virginia Abalos, testified on crossexamination as follows:
Q It is not a fact Madam witness, that at bunkhouse 54, that is
before the place of the incident, there is a crossing?
A The way going to the mines but it is not being pass(ed) by the
bus.
Q And the incident happened before bunkhouse 56, is that not
correct?
A It happened between 54 and 53 bunkhouses.
The bus conductor, Martin Anglog, also declared:
Q When you arrived at Lepanto on March 25, 1985, will you
please inform this Honorable Court if there was any unusual
incident that occurred?
A When we delivered a baggage at Marivic because a person
alighted there between Bunkhouse 53 and 54.
Q What happened when you delivered this passenger at this
particular place in Lepanto?
A When we reached the place, a passenger alighted and I
signaled my driver. When we stopped we went out because I saw
an umbrella about a split second and I signaled again the driver,
so the driver stopped and we went down and we saw Pedrito
Cudiamat asking for help because he was lying down.
Q How far away was this certain person, Pedrito Cudiamat, when
you saw him lying down from the bus how far was he?
A It is about two to three meters.
Q On what direction of the bus was he found about three meters
from the bus, was it at the front or at the back?
A At the back, sir. (Emphasis supplied.)
CAB: The foregoing testimonies show that the place of the accident
and the place where one of the passengers alighted were both
between Bunkhouses 53 and 54, hence the finding of the Court of
Appeals that the bus was at full stop when the victim boarded the
same is correct. They further confirm the conclusion that the victim
fell from the platform of the bus when it suddenly accelerated
forward and was run over by the rear right tires of the vehicle, as
shown by the physical evidence on where he was thereafter found in
relation to the bus when it stopped. Under such circumstances, it
cannot be said that the deceased was guilty of negligence.
The contention of petitioners that the driver and the conductor had
no knowledge that the victim would ride on the bus, since the latter
had supposedly not manifested his intention to board the same, does
not merit consideration. When the bus is not in motion there is no

10.

11.

12.

13.

14.

15.

16.

17.

necessity for a person who wants to ride the same to signal his
intention to board. A public utility bus, once it stops, is in effect
making a continuous offer to bus riders. Hence, it becomes the duty
of the driver and the conductor, every time the bus stops, to do no
act that would have the effect of increasing the peril to a passenger
while he was attempting to board the same. The premature
acceleration of the bus in this case was a breach of such duty.
IMPT: It is the duty of common carriers of passengers, including
common carriers by railroad train, streetcar, or motorbus, to stop
their conveyances a reasonable length of time in order to afford
passengers an opportunity to board and enter, and they are liable for
injuries suffered by boarding passengers resulting from the sudden
starting up or jerking of their conveyances while they are doing so.
Further, even assuming that the bus was moving, the act of the
victim in boarding the same cannot be considered negligent under
the circumstances. As clearly explained in the testimony of the
aforestated witness for petitioners, Virginia Abalos, the bus had "just
started" and "was still in slow motion" at the point where the victim
had boarded and was on its platform.
IMPT: It is not negligence per se, or as a matter of law, for one
attempt to board a train or streetcar which is moving slowly. An
ordinarily prudent person would have made the attempt board the
moving conveyance under the same or similar circumstances. The
fact that passengers board and alight from slowly moving vehicle is a
matter of common experience both the driver and conductor in this
case could not have been unaware of such an ordinary practice.
IMPT: The victim herein, by stepping and standing on the platform of
the bus, is already considered a passenger and is entitled all the
rights and protection pertaining to such a contractual relation. Hence,
it has been held that the duty which the carrier passengers owes to
its patrons extends to persons boarding cars as well as to those
alighting therefrom.
Common carriers, from the nature of their business and reasons of
public policy, are bound to observe extraordinary diligence for the
safety of the passengers transported by the according to all the
circumstances of each case. A common carrier is bound to carry the
passengers safely as far as human care and foresight can provide,
using the utmost diligence very cautious persons, with a due regard
for all the circumstances.
IMPT: It has also been repeatedly held that in an action based on a
contract of carriage, the court need not make an express finding of
fault or negligence on the part of the carrier in order to hold it
responsible to pay the damages sought by the passenger. By
contract of carriage, the carrier assumes the express obligation to
transport the passenger to his destination safely and observe
extraordinary diligence with a due regard for all the circumstances,
and any injury that might be suffered by the passenger is right away
attributable to the fault or negligence of the carrier. This is an
(EXCEPTION) to the general rule that negligence must be proved,
and it is therefore incumbent upon the carrier to prove that it has
exercised extraordinary diligence as prescribed in Articles 1733 and
1755 of the Civil Code.
CAB: Moreover, the circumstances under which the driver and the
conductor failed to bring the gravely injured victim immediately to the
hospital for medical treatment is a patent and incontrovertible proof
of their negligence. It defies understanding and can even be
stigmatized as callous indifference. The evidence shows that after
the accident the bus could have forthwith turned at Bunk 56 and
thence to the hospital, but its driver instead opted to first proceed to
Bunk 70 to allow a passenger to alight and to deliver a refrigerator,
despite the serious condition of the victim. The vacuous reason
given by petitioners that it was the wife of the deceased who caused
the delay was tersely and correctly confuted by respondent court:
The pretension of the appellees that the delay was due to the fact
that they had to wait for about 20 minutes for Inocencia Cudiamat to
get dressed deserves scant consideration. It is rather scandalous
and deplorable for a wife whose husband is at the verge of dying to
have the luxury of dressing herself up for about twenty minutes
before attending to help her distressed and helpless husband.
CAB: Further, it cannot be said that the main intention of petitioner
Lardizabal in going to Bunk 70 was to inform the victim's family of
the mishap, since it was not said bus driver nor the conductor but the
companion of the victim who informed his family thereof. In fact, it
Page 58 of 62

was only after the refrigerator was unloaded that one of the
passengers thought of sending somebody to the house of the victim.
18. ACTUAL DAMAGES COMPUTATION: With respect to the award of
damages, an oversight was, however, committed by respondent
Court of Appeals in computing the actual damages based on the
gross income of the victim. The rule is that the amount recoverable
by the heirs of a victim of a tort is not the loss of the entire earnings,
but rather the loss of that portion of the earnings which the
beneficiary would have received. In other words, only NET earnings,
not gross earnings, are to be considered, that is, the total of the
earnings less expenses necessary in the creation of such earnings
or income and minus living and other incidental expenses.
19. We are of the opinion that the deductible living and other expense of
the deceased may fairly and reasonably be fixed at P500.00 a month
or P6,000.00 a year. In adjudicating the actual or compensatory
damages, respondent court found that the deceased was 48 years
old, in good health with a remaining productive life expectancy of 12
years, and then earning P24,000.00 a year. Using the gross annual
income as the basis, and multiplying the same by 12 years, it
accordingly awarded P288,000. Applying the aforestated rule on
computation based on the net earnings, said award must be, as it
hereby is, rectified and reduced to P216,000.00. However, in
accordance with prevailing jurisprudence, the death indemnity is
hereby increased to P50,000.00.
DISPOSITIVE: Subject to the above modifications, the challenged
judgment and resolution of respondent Court of Appeals are hereby
AFFIRMED in all other respects. SO ORDERED.

La Mallorca v CA, 17 SCRA 739 (1966)


G.R. No. L-20761
July 27, 1966
LA MALLORCA, petitioner,
vs.
HONORABLE COURT OF APPEALS, MARIANO BELTRAN, ET AL.,
respondents.
G. E. Yabut, R. Monterey and M.C. Lagman for petitioner.
Ahmed Garcia for respondents.
BARRERA, J.:
La Mallorca seeks the review of the decision of the Court of Appeals in
CA-G.R. No. 23267-R, holding it liable for quasi-delict and ordering it to
pay to respondents Mariano Beltran, et al., P6,000.00 for the death of his
minor daughter Raquel Beltran, plus P400.00 as actual damages.
The facts of the case as found by the Court of Appeals, briefly are:
On December 20, 1953, at about noontime, plaintiffs, husband and wife,
together with their minor daughters, namely, Milagros, 13 years old,
Raquel, about 4 years old, and Fe, over 2 years old, boarded the
Pambusco Bus No. 352, bearing plate TPU No. 757 (1953 Pampanga),
owned and operated by the defendant, at San Fernando, Pampanga,
bound for Anao, Mexico, Pampanga. At the time, they were carrying with
them four pieces of baggages containing their personal belonging. The
conductor of the bus, who happened to be a half-brother of plaintiff
Mariano Beltran, issued three tickets (Exhs. A, B, & C) covering the full
fares of the plaintiff and their eldest child, Milagros. No fare was charged
on Raquel and Fe, since both were below the height at which fare is
charged in accordance with the appellant's rules and regulations.
After about an hour's trip, the bus reached Anao whereat it stopped to
allow the passengers bound therefor, among whom were the plaintiffs and
their children to get off. With respect to the group of the plaintiffs, Mariano
Beltran, then carrying some of their baggages, was the first to get down
the bus, followed by his wife and his children. Mariano led his companions
to a shaded spot on the left pedestrians side of the road about four or five
meters away from the vehicle. Afterwards, he returned to the bus in
controversy to get his other bayong, which he had left behind, but in so
doing, his daughter Raquel followed him, unnoticed by her father. While
said Mariano Beltran was on the running board of the bus waiting for the
conductor to hand him his bayong which he left under one of its seats
near the door, the bus, whose motor was not shut off while unloading,
suddenly started moving forward, evidently to resume its trip,
notwithstanding the fact that the conductor has not given the driver the
customary signal to start, since said conductor was still attending to the
baggage left behind by Mariano Beltran. Incidentally, when the bus was

again placed into a complete stop, it had travelled about ten meters from
the point where the plaintiffs had gotten off.
Sensing that the bus was again in motion, Mariano Beltran immediately
jumped from the running board without getting his bayong from the
conductor. He landed on the side of the road almost in front of the shaded
place where he left his wife and children. At that precise time, he saw
people beginning to gather around the body of a child lying prostrate on
the ground, her skull crushed, and without life. The child was none other
than his daughter Raquel, who was run over by the bus in which she rode
earlier together with her parents.
For the death of their said child, the plaintiffs commenced the present suit
against the defendant seeking to recover from the latter an aggregate
amount of P16,000 to cover moral damages and actual damages
sustained as a result thereof and attorney's fees. After trial on the merits,
the court below rendered the judgment in question.
On the basis of these facts, the trial court found defendant liable for
breach of contract of carriage and sentenced it to pay P3,000.00 for the
death of the child and P400.00 as compensatory damages representing
burial expenses and costs.
On appeal to the Court of Appeals, La Mallorca claimed that there could
not be a breach of contract in the case, for the reason that when the child
met her death, she was no longer a passenger of the bus involved in the
incident and, therefore, the contract of carriage had already terminated.
Although the Court of Appeals sustained this theory, it nevertheless found
the defendant-appellant guilty of quasi-delict and held the latter liable for
damages, for the negligence of its driver, in accordance with Article 2180
of the Civil Code. And, the Court of Appeals did not only find the petitioner
liable, but increased the damages awarded the plaintiffs-appellees to
P6,000.00, instead of P3,000.00 granted by the trial court.
In its brief before us, La Mallorca contends that the Court of Appeals erred
(1) in holding it liable for quasi-delict, considering that respondents
complaint was one for breach of contract, and (2) in raising the award of
damages from P3,000.00 to P6,000.00 although respondents did not
appeal from the decision of the lower court.
Under the facts as found by the Court of Appeals, we have to sustain the
judgement holding petitioner liable for damages for the death of the child,
Raquel Beltran. It may be pointed out that although it is true that
respondent Mariano Beltran, his wife, and their children (including the
deceased child) had alighted from the bus at a place designated for
disembarking or unloading of passengers, it was also established that the
father had to return to the vehicle (which was still at a stop) to get one of
his bags or bayong that was left under one of the seats of the bus. There
can be no controversy that as far as the father is concerned, when he
returned to the bus for his bayong which was not unloaded, the relation of
passenger and carrier between him and the petitioner remained
subsisting. For, the relation of carrier and passenger does not necessarily
cease where the latter, after alighting from the car, aids the carrier's
servant or employee in removing his baggage from the car.1 The issue to
be determined here is whether as to the child, who was already led by the
father to a place about 5 meters away from the bus, the liability of the
carrier for her safety under the contract of carriage also persisted.
It has been recognized as a rule that the relation of carrier and passenger
does not cease at the moment the passenger alights from the carrier's
vehicle at a place selected by the carrier at the point of destination, but
continues until the passenger has had a reasonable time or a reasonable
opportunity to leave the carrier's premises. And, what is a reasonable time
or a reasonable delay within this rule is to be determined from all the
circumstances. Thus, a person who, after alighting from a train, walks
along the station platform is considered still a passenger.2 So also, where
a passenger has alighted at his destination and is proceeding by the
usual way to leave the company's premises, but before actually doing so
is halted by the report that his brother, a fellow passenger, has been shot,
and he in good faith and without intent of engaging in the difficulty, returns
to relieve his brother, he is deemed reasonably and necessarily delayed
and thus continues to be a passenger entitled as such to the protection of
the railroad and company and its agents.3
In the present case, the father returned to the bus to get one of his
baggages which was not unloaded when they alighted from the bus.
Raquel, the child that she was, must have followed the father. However,
although the father was still on the running board of the bus awaiting for
the conductor to hand him the bag or bayong, the bus started to run, so
that even he (the father) had to jump down from the moving vehicle. It
was at this instance that the child, who must be near the bus, was run
Page 59 of 62

over and killed. In the circumstances, it cannot be claimed that the


carrier's agent had exercised the "utmost diligence" of a "very cautions
person" required by Article 1755 of the Civil Code to be observed by a
common carrier in the discharge of its obligation to transport safely its
passengers. In the first place, the driver, although stopping the bus,
nevertheless did not put off the engine. Secondly, he started to run the
bus even before the bus conductor gave him the signal to go and while
the latter was still unloading part of the baggages of the passengers
Mariano Beltran and family. The presence of said passengers near the
bus was not unreasonable and they are, therefore, to be considered still
as passengers of the carrier, entitled to the protection under their contract
of carriage.
But even assuming arguendo that the contract of carriage has already
terminated, herein petitioner can be held liable for the negligence of its
driver, as ruled by the Court of Appeals, pursuant to Article 2180 of the
Civil Code. Paragraph 7 of the complaint, which reads
That aside from the aforesaid breach of contract, the death of Raquel
Beltran, plaintiffs' daughter, was caused by the negligence and want of
exercise of the utmost diligence of a very cautious person on the part of
the defendants and their agent, necessary to transport plaintiffs and their
daughter safely as far as human care and foresight can provide in the
operation of their vehicle.
is clearly an allegation for quasi-delict. The inclusion of this averment for
quasi-delict, while incompatible with the other claim under the contract of
carriage, is permissible under Section 2 of Rule 8 of the New Rules of
Court, which allows a plaintiff to allege causes of action in the alternative,
be they compatible with each other or not, to the end that the real matter
in controversy may be resolved and determined.4
The plaintiffs sufficiently pleaded the culpa or negligence upon which the
claim was predicated when it was alleged in the complaint that "the death
of Raquel Beltran, plaintiffs' daughter, was caused by the negligence and
want of exercise of the utmost diligence of a very cautious person on the
part of the defendants and their agent." This allegation was also proved
when it was established during the trial that the driver, even before
receiving the proper signal from the conductor, and while there were still
persons on the running board of the bus and near it, started to run off the
vehicle. The presentation of proof of the negligence of its employee gave
rise to the presumption that the defendant employer did not exercise the
diligence of a good father of the family in the selection and supervision of
its employees. And this presumption, as the Court of Appeals found,
petitioner had failed to overcome. Consequently, petitioner must be
adjudged peculiarily liable for the death of the child Raquel Beltran.
The increase of the award of damages from P3,000.00 to P6,000.00 by
the Court of Appeals, however, cannot be sustained. Generally, the
appellate court can only pass upon and consider questions or issues
raised and argued in appellant's brief. Plaintiffs did not appeal from that
portion of the judgment of the trial court awarding them on P3,000.00
damages for the death of their daughter. Neither does it appear that, as
appellees in the Court of Appeals, plaintiffs have pointed out in their brief
the inadequacy of the award, or that the inclusion of the figure P3,000.00
was merely a clerical error, in order that the matter may be treated as an
exception to the general rule.5 Herein petitioner's contention, therefore,
that the Court of Appeals committed error in raising the amount of the
award for damages is, evidently, meritorious.1wph1.t
Wherefore, the decision of the Court of Appeals is hereby modified by
sentencing, the petitioner to pay to the respondents Mariano Beltran, et
al., the sum of P3,000.00 for the death of the child, Raquel Beltran, and
the amount of P400.00 as actual damages. No costs in this instance. So
ordered.

LRTA & Rodolfo Roman v. Marjorie Navidad, Heirs of Nicanor


Navidad, Prudent Security Agency, GR 145804,
(2003), supra.

397 SCRA 75

VITUG, J.:
NATURE: The case before the Court is an appeal from the decision and
resolution of the Court of Appeals, which has modified the decision of
RTC Pasig City, exonerating Prudent Security Agency (Prudent) from
liability and finding Light Rail Transit Authority (LRTA) and
Rodolfo Roman liable for damages on account of the death of Nicanor
Navidad.

DOCTRINES:
- The law requires common carriers to carry passengers safely using
the utmost diligence of very cautious persons with due regard for all
circumstances. Such duty of a common carrier to provide safety to its
passengers so obligates it not only during the course of the trip but for
so long as the passengers are within its premises and where they
ought to be in pursuance to the contract of carriage.
- Instances when a common carrier becomes liable for death of or injury
to passengers.The statutory provisions render a common carrier
liable for death of or injury to passengers (a) through the negligence or
willful acts of its employees or b) on account of willful acts or
negligence of other passengers or of strangers if the common carriers
employees through the exercise of due diligence could have
prevented or stopped the act or omission.
- Presumption of Negligence; In case of such death or injury, a carrier is
presumed to have been at fault or been negligent.In case of such
death or injury, a carrier is presumed to have been at fault or been
negligent, and by simple proof of injury, the passenger is relieved of
the duty to still establish the fault or negligence of the carrier or of its
employees and the burden shifts upon the carrier to prove that the
injury is due to an unforeseen event or to force majeure.
- Tort; Should Prudent be made likewise liable? If at all, that liability
could only be for tort under the provisions of Article 2176 and related
provisions, in conjunction with Article 2180, of the Civil Code. The
premise, however, for the employers liability is negligence or fault on
the part of the employee. Once such fault is established, the employer
can then be made liable on the basis of the presumption juris tantum
that the employer failed to exercise diligentissimi patris families in the
selection and supervision of its employees. The liability is primary and
can only be negated by showing due diligence in the selection and
supervision of the employee, a factual matter that has not been
shown.
- In fine, a liability for tort may arise even under a contract, where tort is
that which breaches the contract. A contractual obligation can be
breached by tort and when the same act or omission causes the injury,
one resulting in culpa contractual and the other in culpa aquiliana,
Article 2194 of the Civil Code can well apply. When an act which
constitutes a breach of contract would have itself constituted the
source of a quasi-delictual liability had no contract existed between the
parties, the contract can be said to have been breached by tort,
thereby allowing the rules on tort to apply.
- Damages; Nominal Damages; It is an established rule that nominal
damages cannot co-exist with compensatory damages.The award of
nominal damages in addition to actual damages is untenable. Nominal
damages are adjudicated in order that a right of the plaintiff, which has
been violated or invaded by the defendant, may be vindicated or
recognized, and not for the purpose of indemnifying the plaintiff for any
loss suffered by him. It is an established rule that nominal damages
cannot co-exist with compensatory damages.
FACTS:
1. On 14 October 1993, about half an hour past seven oclock in the
evening, Nicanor Navidad, then drunk, entered the EDSA LRT
station after purchasing a token (representing payment of the
fare). While Navidad was standing on the platform near the LRT
tracks, Junelito Escartin, the security guard assigned to the area
approached Navidad.
A misunderstanding or an altercation
between the two apparently ensued that led to a fist fight. No
evidence, however, was adduced to indicate how the fight started or
who, between the two, delivered the first blow or how Navidad later
fell on the LRT tracks. At the exact moment that Navidad fell, an
LRT train, operated by petitioner Rodolfo Roman, was coming
in. Navidad was struck by the moving train, and he was killed
instantaneously.
2. The widow of Nicanor, herein respondent Marjorie Navidad, along
with her children, filed a complaint for damages against Junelito
Escartin, Rodolfo Roman, the LRTA, the Metro Transit Organization,
Inc. (Metro Transit), and Prudent for the death of her
husband. LRTA and Roman filed a counterclaim against Navidad
and a cross-claim against Escartin and Prudent. Prudent, in its
answer, denied liability and averred that it had exercised due
diligence in the selection and supervision of its security guards.
Page 60 of 62

3.

4.
5.
6.

7.

8.

9.

The LRTA and Roman presented their evidence while Prudent and
Escartin, instead of presenting evidence, filed a demurrer
contending that Navidad had failed to prove that Escartin was
negligent in his assigned task.
RTC: RTC ruled against the defendants Prudent Security and
Junelito Escartin ordering the latter to pay jointly and severally the
plaintiffs.
CA: CA exonerated Prudent from any liability for the death of
Nicanor Navidad and, instead, holding the LRTA and Roman jointly
and severally liable.
The appellate court ratiocinated that while the deceased might not
have then as yet boarded the train, a contract of carriage
theretofore had already existed when the victim entered the place
where passengers were supposed to be after paying the fare and
getting the corresponding token therefor.
In exempting Prudent from liability, the court stressed that there was
nothing to link the security agency to the death of Navidad. It said
that Navidad failed to show that Escartin inflicted fist blows upon the
victim and the evidence merely established the fact of death of
Navidad by reason of his having been hit by the train owned and
managed by the LRTA and operated at the time by Roman. The
appellate court faulted petitioners for their failure to present expert
evidence to establish the fact that the application of emergency
brakes could not have stopped the train.
Petitioners would contend that the appellate court ignored the
evidence and the factual findings of the trial court by holding them
liable on the basis of a sweeping conclusion that the presumption of
negligence on the part of a common carrier was not
overcome. Petitioners would insist that Escartins assault upon
Navidad, which caused the latter to fall on the tracks, was an act of
a stranger that could not have been foreseen or prevented. The
LRTA would add that the appellate courts conclusion on the
existence of an employer-employee relationship between Roman
and LRTA lacked basis because Roman himself had testified being
an employee of Metro Transit and not of the LRTA.
Respondents, supporting the decision of the appellate court,
contended that a contract of carriage was deemed created from the
moment Navidad paid the fare at the LRT station and entered the
premises of the latter, entitling Navidad to all the rights and
protection under a contractual relation, and that the appellate court
had correctly held LRTA and Roman liable for the death of Navidad
in failing to exercise extraordinary diligence imposed upon a
common carrier.

ISSUES:
1. Whether there was a contract of carriage YES. Such duty of a
common carrier to provide safety and utmost diligence to its
passengers so obligates it not only during the course of the trip but
for so long as the passengers are within its premises and where
they ought to be in pursuance to the contract of carriage.
2. Whether CA erred in finding petitioners LRTA & Roman liable
PARTLY. Roman absolved.
3. Whether CA erred in finding that Roman is an employee of LRTA
YES.
HELD: CA AFFIRMED. No nominal, only Roman absolved.
1. Law and jurisprudence dictate that a common carrier, both from the
nature of its business and for reasons of public policy, is burdened
with the duty of exercising utmost diligence in ensuring the safety of
passengers.
2. The Civil Code, governing the liability of a common carrier for death
of or injury to its passengers, provides: Article 1755. A common
carrier is bound to carry the passengers safely as far as human
care and foresight can provide, using the utmost diligence of very
cautious persons, with a due regard for all the circumstances.
3. Article 1756. In case of death of or injuries to passengers, common
carriers are presumed to have been at fault or to have acted
negligently, (UNLESS) they prove that they observed extraordinary
diligence as prescribed in articles 1733 and 1755.
4. Article 1759. Common carriers are liable for the death of or injuries
to passengers through the negligence or willful acts of the formers
employees, although such employees may have acted beyond the

scope of their authority or in violation of the orders of the common


carriers.
5. This liability of the common carriers does not cease upon proof that
they exercised all the diligence of a good father of a family in the
selection and supervision of their employees.
6. Article 1763. A common carrier is responsible for injuries suffered by
a passenger on account of the willful acts or negligence of other
passengers or of strangers, if the common carriers employees
through the exercise of the diligence of a good father of a family
could have prevented or stopped the act or omission.
7. IMPT: The law requires common carriers to carry passengers safely
using the utmost diligence of very cautious persons with due regard
for all circumstances. Such duty of a common carrier to provide
safety to its passengers so obligates it not only during the course of
the trip but for so long as the passengers are within its premises
and where they ought to be in pursuance to the contract of carriage.
8. In case of such death or injury, a carrier is presumed to have been
at fault or been negligent, and by simple proof of injury, the
passenger is relieved of the duty to still establish the fault or
negligence of the carrier or of its employees and the burden shifts
upon the carrier to prove that the injury is due to an unforeseen
event or to force majeure. In the absence of satisfactory explanation
by the carrier on how the accident occurred, which petitioners,
according to the appellate court, have failed to show, the
presumption would be that it has been at fault, an exception from
the general rule that negligence must be proved.
9. CAB: The foundation of LRTAs liability is the contract of carriage
and its obligation to indemnify the victim arises from the breach of
that contract by reason of its failure to exercise the high diligence
required of the common carrier. In the discharge of its commitment
to ensure the safety of passengers, a carrier may choose to hire its
own employees or avail itself of the services of an outsider or an
independent firm to undertake the task. In either case, the common
carrier is not relieved of its responsibilities under the contract of
carriage.
10. CAB: Should Prudent be made likewise liable? If at all, that liability
could only be for tort under the provisions of Article 2176[12] and
related provisions, in conjunction with Article 2180,[13] of the Civil
Code. The premise, however, for the employers liability is
negligence or fault on the part of the employee. Once such fault is
established, the employer can then be made liable on the basis of
the presumption juris tantum that the employer failed to
exercise diligentissimi patris families in the selection and
supervision of its employees. The liability is primary and can only
be negated by showing due diligence in the selection and
supervision of the employee, a factual matter that has not been
shown. Absent such a showing, one might ask further, how then
must the liability of the common carrier, on the one hand, and an
independent contractor, on the other hand, be described? It would
be solidary. A contractual obligation can be breached by tort and
when the same act or omission causes the injury, one resulting
in culpa contractual and the other in culpa aquiliana, Article
2194[14] of the Civil Code can well apply.[15] In fine, a liability for tort
may arise even under a contract, where tort is that which breaches
the contract.[16] Stated differently, when an act which constitutes a
breach of contract would have itself constituted the source of a
quasi-delictual liability had no contract existed between the parties,
the contract can be said to have been breached by tort, thereby
allowing the rules on tort to apply.[17]
11. CAB: Regrettably for LRT, as well as perhaps the surviving spouse
and heirs of the late Nicanor Navidad, this Court is concluded by the
factual finding of the Court of Appeals that there is nothing to link
(Prudent) to the death of Nicanor (Navidad), for the reason that the
negligence of its employee, Escartin, has not been duly proven x x
x. This finding of the appellate court is not without substantial
justification in our own review of the records of the case.
12. CAB: There being, similarly, no showing that petitioner Rodolfo
Roman himself is guilty of any culpable act or omission, he must
also be absolved from liability. Needless to say, the contractual tie
between the LRT and Navidad is not itself a juridical relation
between the latter and Roman; thus, Roman can be made liable
only for his own fault or negligence.
Page 61 of 62

13. The award of nominal damages in addition to actual damages is


untenable. Nominal damages are adjudicated in order that a right
of the plaintiff, which has been violated or invaded by the defendant,
may be vindicated or recognized, and not for the purpose of
indemnifying the plaintiff for any loss suffered by him. It is an
established rule that nominal damages cannot co-exist with
compensatory damages.
DISPOSITIVE: CA decision is AFFIRMED w/ MODIFICATION (a) the
award of nominal damages is DELETED and (b) petitioner Roman
absolved.

Page 62 of 62