G.R. No. 85331 August 25, 1989
KAPALARAN BUS LINE, petitioner,
vs.
ANGEL CORONADO, LOPE GRAJERA, DIONISIO SHINYO,
and THE COURT OF APPEALS, respondents,
FELICIANO, J.:
Petitioner Kapalaran Bus Line ("Kapalaran") seeks the
reversal or modification of the Court of Appeals' decision
in CA G.R. CV No. 12476 and the absolution of petitioner
from all liability arising from the collision between one of
petitioner's buses and a jeepney owned by respondent
Coronado, driven by respondent Grajera and in which
jeepney respondent Shinyo was a passenger.
The facts of this case as found by the trial court and
adopted by the Court of Appeals, are summarized in the
trial court's decision and quoted in the Court of Appeals'
own judgment in the following terms:
The accident happened on the National
Highway at 10:30 A.M. on August 2, 1982. The
jeepney driven by Lope Grajera was then corning
from Pila, Laguna on its way towards the direction
of Sta. Cruz, traversing the old highway. As it
reached the intersection where there is a traffic
sign 'yield,' it stopped and cautiously treated the
intersection as a "Thru Stop' street, which it is not.
The KBL bus was on its way from Sta. Cruz, Laguna,
driven by its regular driver Virgilio Llamoso, on its
way towards Manila. The regular itinerary of the
KBL bus is through the town proper of Pila,
Laguna, but at times it avoids this if a bus is
already fully loaded with passengers and can no
longer accommodate additional passengers. As
the KBL bus neared the intersection, Virgilio
Llamoso inquired from his conductor if they could
still accommodate passengers and learning that
they were already full, he decided to bypass Pila
and instead, to proceed along the national
highway. Virgilio Llamoso admitted that there was
another motor vehicle ahead of him.
The general rule is that the vehicle on
the national highway has the right-of-way as
against a feeder road. Another general rule is that
the vehicle coming from the right has the right-of-
way over the vehicle coming from the left. The
general rules on right-of-way may be invoked only
if both vehicles approach the intersection at
almost the same time. In the case at bar, both
roads are national roads. Also, the KBL bus was
still far from the intersection when the jeepney
reached the same. As testified to by Atty. Conrado
L. Manicad who was driving a Mustang car coming
from the direction of Sta. Cruz and proceeding
towards the direction of Manila, he stopped at the
intersection to give way to the jeepney driven by
Grajera. Behind Manicad were two vehicles, a car
of his client and another car. A Laguna Transit bus
had just entered the town of Pila ahead of Atty.
Manicad.
The sketch marked Exhibit 'E' indicates very
clearly that the jeepney had already traversed the
intersection when it met the KBL bus head-on. It is
also obvious that the point of impact was on the
right lane of the highway which is the lane
properly belonging to the jeepney. As testified to
by Lope Grajera, the KBL bus ignored the stopped
vehicles of Atty. Manicad and the other vehicles
behind Atty. Manicad and overtook both vehicles
at the intersection, therefore, causing the
accident.
Judging from the testimony of Atty.
Conrado L. Manicad and the sketch (Exhibit 'E'),
the sequence of events shows that the first vehicle
to arrive at the intersection was the jeepney.
Seeing that the road was clear, the jeepney which
had stopped at the intersection began to move
forward, and for his part, Atty. Manicad stopped
his car at the intersection to give way to the
jeepney. At about this time, the KBL bus was
approaching the intersection and its driver was
engaged in determining from his conductor if they
would still pass through the town proper of Pila.
Upon learning that they were already full, he
turned his attention to the road and found the
stopped vehicles at the intersection with the
jeepney trying to cross the intersection. The KBL
bus had no more room within which to stop
without slamming into the rear of the vehicle
behind the car of Atty. Manicad. The KBL driver
chose to gamble on proceeding on its way,
unfortunately, the jeepney driven by Grajera,
which had the right-of-way, was about to cross the
center of the highway and was directly on the
path of the KBL bus. The gamble made by Llamoso
did not pay off. The impact indicates that the KBL
bus was travelling at a fast rate of speed because,
after the collision, it did not stop; it travelled for
another 50 meters and stopped only when it hit
an electric post (pp. 3-4, Decision; pp. 166167,
Record). 1
On 14 September 1982, Kapalaran, apparently believing
that the best defense was offense, filed a complaint for
damage to property and physical injuries through
reckless imprudence against respondents Angel
Coronado and Lope Grajera in the Regional Trial Court,
Branch 27, Sta. Cruz, Laguna. Respondents answered
with their own claims (counter-claims) for damages. A
third-party complaint and/or a complaint for
intervention was also filed in the same case against
Kapalaran by jeepney passenger Dionisio Shinyo.
On 15 October 1986, after trial, the trial court rendered
a judgment in favor of private respondents and ordering
Kapalaran
(a) to pay Angel Coronado the sum of
P40,000.00 as compensation for the totally wrecked
 jeepney, plus the sum of P5,000.00 as attorney's
fees and litigation expenses, and
(b) to Dionisio Shinyo the sum of
P35,000.00 representing the expenses incurred by
said intervenor for his treatment including his car-
hire, the further sum of P30,000.00 representing the
expenses said defendant will incur for his second
operation to remove the intramedulary nail from his
femur, the additional sum of P50,000.00 to serve as
moral damages for the pain and suffering inflicted
on said defendant, plus the sum of P10,000.00 in the
concept of exemplary damages to serve as a
deterrent to others who, like the plaintiff, may be
minded to induce accident victims to perjure
themselves in a sworn statement, and the sum of
P15,000.00 as attorney's fees and litigation
expenses.
From the above judgment, Kapalaran appealed to the
Court of Appeals assailing the trial court's findings on the
issue of fault and the award of damages. The Court of
Appeals, on 28 June 1988, affirmed the decision of the
trial court but modified the award of damages by setting
aside the grant of exemplary damages as well as the
award of attomey's fee and litigation expenses made to
Dionisio Shinyo. 2
This decision of the Court of Appeals is now before us on
a Petition for Review, a motion for reconsideration by
Kapalaran having been denied by that court on 13
October 1988.
Kapalaran assails the findings of fact of the Regional Trial
Court and of the Court of Appeals, and insists before this
Court that respondent Grajera, driver of the jeepney,
was at fault and not the driver of Kapalaran's bus. It
must be remembered that it is not the function of this
Court to analyze and weigh evidence presented by the
parties all over again and that our jurisdiction is in
principle limited to reviewing errors of law that might
have been committed by the Court of Appeals.
Kapalaran has made no compelling showing of any
misapprehension of facts on the part of the Court of
Appeals that would require us to review and overturn
the factual findings of that court. On the contrary,
examination of the record shows that not only are the
conclusions of fact of the Court of Appeals and the trial
court on who the bus driver or the jeepney driver
had acted negligently and was at fault in the collision of
their vehicles, amply supported by the evidence of
record, but also that Kapalaran's bus driver was grossly
negligent and had acted wantonly and in obvious
disregard of the applicable rules on safety on the
highway.
Kapalaran's driver had become aware that some vehicles
ahead of the bus and travelling in the same direction had
already stopped at the intersection obviously to give way
either to pedestrians or to another vehicle about to
enter the intersection. The bus driver, who was driving
at a speed too high to be safe and proper at or near an
intersection on the highway, and in any case too high to
be able to slow down and stop behind the cars which
had preceded it and which had stopped at the
intersection, chose to swerve to the left lane and
overtake such preceding vehicles, entered the
intersection and directly smashed into the jeepney
within the intersection. Immediately before the collision,
the bus driver was actually violating the following traffic
rules and regulations, among others, in the Land
Transportation and Traffic Code, Republic Act No. 4136,
as amended:
Sec. 35. Restriction as to speed. (a) Any person
driving a motor vehicle on a highway shall drive the
same at a careful and prudent speed, not greater
nor less than is reasonable and proper, having due
regard for the traffic, the width of the highway, and
or any other condition then and there existing;
and no person shall drive any motor vehicle upon a
highway at such a speed as to endanger the life,
limb and property of any person, nor at a speed
greater than will permit him to bring the vehicle to
a stop within the assured clear distance ahead.
xxx xxx xxx
Sec. 41. Restrictions on overtaking and passing.
_1 (a) The driver of a vehicle shall not drive to the
left side of the center line of a highway in
overtaking or passing another vehicle, proceeding
in the same direction, unless such left side is
clearly visible, and is free of oncoming traffic for a
sufficient distance ahead to permit such
overtaking or passing to be made in safety.
xxx xxx xxx
(c) The driver of a vehicle shall not overtake or
pass any other vehicle proceeding in the same
direction, at any railway grade crossing, or at any
intersection of highways, unless such intersection
or crossing is controlled by traffic signal, or unless
permitted to do so by a watchman or a peace
officer, except on a highway having two or more
lanes for movement of traffic in one direction
where the driver of a vehicle may overtake or pass
another vehicle on the right. Nothing in this
section shall be construed to prohibit a driver
overtaking or passing, upon the right, another
vehicle which is making or about to make a left
turn.
xxx xxx xxx
(Emphasis supplied)
Thus, a legal presumption arose that the bus driver was
negligent 3 a presumption Kapalaran was unable to
overthrow.
Petitioner's contention that the jeepney should have
stopped before entering the "Y-intersection" because of
the possibility that another vehicle behind the cars
which had stopped might not similarly stop and might
swerve to the left to proceed to the highway en route to
Manila, is more ingenious than substantial. It also offers
illustration of the familiar litigation tactic of shifting
blame from one's own shoulders to those of the other
party. But the jeepney driver, seeing the cars closest to
the intersection on the opposite side of the highway
come to a stop to give way to him, had the right to
assume that other vehicles further away and behind the
stopped cars would similarly come to a stop and not
seek illegally to overtake the stopped vehicles and come
careening into the intersection at an unsafe
speed. 4 Petitioner's bus was still relatively far away from
the intersection when the jeepney entered the same;
the bus collided head on into the jeepney because the
bus had been going at an excessively high velocity
immediately before and at the time of overtaking the
stopped cars, and so caught the jeepney within the
intersection. It was also the responsibility of the bus
driver to see to it, when it overtook the two (2) cars
ahead which had stopped at the intersection, that the
left lane of the road within the intersection and beyond
was clear. The point of impact was on the left side of the
intersection (the light lane so far as concerns the
jeepney coming from the opposite side), which was
precisely the lane or side on which the jeepney had a
right to be.
Petitioner Kapalaran also assails the award of moral
damages against itself, upon the ground that its own bus
driver, third-party defendant, was apparently not held
liable by the trial court . 5 Hence, Kapalaran argues that
there was no justification for holding it, the employer,
liable for damages, considering that such liability was
premised upon the bus driver's negligence and that
petitioner "as mere employer" was not guilty of such
negligence or imprudence. 6This contention in
thoroughly unpersuasive. The patent and gross
negligence on the part of the petitioner Kapalaran's
driver raised the legal presumption that Kapalaran as
employer was guilty of negligence either in the selection
or in the supervision of its bus driver, 7 Where the
employer is held liable for damages, it has of course a
right of recourse against its own negligent employee. If
petitioner Kapalaran was interested in maintaining its
right of recourse against or reimbursement from its own
driver, 8 it should have appealled from that portion of
the trial court's decision which had failed to hold the bus
driver is not "merely subsidiary," and is not limited to
cases where the employee "cannot pay his liability" nor
are private respondents compelled frist to proceed
against the bus driver. The liability of the employer
under Article 2180 of the Civil Code is direct and
immediate; it is not conditioned upon prior recourse
against the negligent employee and a prior showing of
the insolvency of such employee. 9 So far as the record
shows, petitioner Kapalaran was unable to rebut the
presumption of negligence on its own part. The award of
moral damages against petitioner Kapalaran is not only
entirely in order; it is also quite modest consideirng
Dionisio Shinyo's death during the pendency of this
petition, a death hastened by, if not directly due to, the
grievous injuries sustained by him in the violent collision.
The Court of Appeals deleted the award of exemplary
damages which the trial court had granted in order "to
serve as a deterrent to others who, like the plaintiff
[Kapalaran], may be minded to induce accident victims
to perjure themselves in a sworn statement." The Court
of Appeals held that htere was no basis for this award of
exemplary damages, stating that it was not "such a
reprehensible act to try to gather witnesses for one's
cause" and that there was no evidence of use of
"presure or influence" to induce the accident victims to
perjure themselves While that might have been so, both
the trial court and the Court of Appeals overlook another
and far more compelling basis for the award of
exemplary damages against petitioner Kapalaran in this
case. There is no question that petitioner's bus driver
was grossly and very probably criminally negligent in his
reckless disregard of the rights of other vehicles and
their pasangers and of pedestrian as well The Court is
entitled to take judicial notice of the gross negligence
and the appalling disregard of the physical safety and
property of others so commonly exhibited today by the
drivers of passanger bussses and similar vehicles on our
highways. The law requires petitioner as common carrier
to exercise extraordinary diligence incarrying and
transporting their passanger safely "as far as human care
and foresight can proved, using the utmost diligence of
very cautious persons, with due regard for all
circumstances." 10 In requiring the highest possible
degree of diligence from common carriers and creating a
presumption of negligence against them, the law
compels them to curb the recklessness of their
drivers. 11 While the immediate beneficiaries of the
standard of extraordinary diligence are, of course, the
passengers and owners of cargo carried by a common
carrier, they are not only persons that the law seeks to
benefit. For if common carriers carefully observed the
statutory standard of extraordinary diligence in respect
of of their own passengers, they cannot help but
simultaneously benefit pedestrians and the owners and
passengers of other vehicles who are equally entitled to
the safe and convenient use of our roads and
highways. 12 The law seeks to stop and prevent the
slaughter and maiming of people (whether passengers or
not) and the destruction of property (whether freight or
not) on our highways by buses, the very size and power
of which seem often to inflame the minds of their
drivers. Article 2231 of the Civil Code explicitly
authorizes the imposition of exemplary damages in cases
of quasi-delicts "if the defendant acted with gross
negligence." Thus we believe that the award of
exemplary damages by the trial court was quite proper,
although granted for the wrong reason, and should not
only be restored but augmented in the present case. The
Court is aware that respondent Shinyo did not file a
separate petition for review to set aside that portion of
the Court of Appeals'decision which deleted the grant by
the trial court of exemplary damages. It is settled,
however, that issues which must be resolved if
substantial justice is to be rendered to the parties, may
and should be considered and decided by this Court
even if those issues had not been explicitly raised by the
party affected. 13 In the instant case, it is not only the
demands of substantial justice but also the compelling
considerations of public policy noted above, which impel
us to the conclusion that the trial court's award of
exemplary damages was erroneously deleted and must
be restored and brought more nearly to the level which
public policy and substantial justice require.
In much the same vein, we believe that the award by the
trial court of P15,000.00 as attorney's fees and litigation
expenses, deleted by the Court of Appeals, should
similarly be restored, being both authorized by
law 14 and demanded by substantial justice in the instant
case.
WHEREFORE, the Petition for Review on certiorari is
DENIED for lack of merit and the Decision of the Court of
Appeals is hereby AFFIRMED, except (1) that the award
of exemplary damages to Dionisio Shinyo shall be
restored and increased from P10,000.00 to P25,000.00,
and (2) that the grant of attorney's fees and litigation
expenses in the sum of P15,000.00 to Dionisio Shinyo
shall similarly be restored. Costs against petitioner. SO
ORDERED.
G.R. No. L-45637 May 31, 1985
ROBERTO JUNTILLA, petitioner,
vs.
CLEMENTE FONTANAR, FERNANDO BANZON and
BERFOL CAMORO, respondents.
GUTIERREZ, JR., J.:
This is a petition for review, on questions of law, of the
decision of the Court of First Instance of Cebu which
reversed the decision of the City Court of Cebu and
exonerated the respondents from any liability arising
from a vehicular accident.
The background facts which led to the filing of a
complaint for breach of contract and damages against
the respondents are summarized by the Court of First
Instance of Cebu as follows:
The facts established after trial show that the plaintiff
was a passenger of the public utility jeepney bearing
plate No. PUJ-71-7 on the course of the trip from
Danao City to Cebu City. The jeepney was driven by
defendant Berfol Camoro. It was registered under the
franchise of defendant Clemente Fontanar but was
actually owned by defendant Fernando Banzon.
When the jeepney reached Mandaue City, the right
rear tire exploded causing the vehicle to turn turtle.
In the process, the plaintiff who was sitting at the
front seat was thrown out of the vehicle. Upon
landing on the ground, the plaintiff momentarily lost
consciousness. When he came to his senses, he found
that he had a lacerated wound on his right palm.
Aside from this, he suffered injuries on his left arm,
right thigh and on his back. (Exh. "D"). Because of his
shock and injuries, he went back to Danao City but on
the way, he discovered that his "Omega" wrist watch
was lost. Upon his arrival in Danao City, he
immediately entered the Danao City Hospital to
attend to his injuries, and also requested his father-
in-law to proceed immediately to the place of the
accident and look for the watch. In spite of the efforts
of his father-in-law, the wrist watch, which he bought
for P 852.70 (Exh. "B") could no longer be found.
xxx xxx xxx
Petitioner Roberto Juntilla filed Civil Case No. R-17378
for breach of contract with damages before the City
Court of Cebu City, Branch I against Clemente Fontanar,
Fernando Banzon and Berfol Camoro.
The respondents filed their answer, alleging inter alia
that the accident that caused losses to the petitioner
was beyond the control of the respondents taking into
account that the tire that exploded was newly bought
and was only slightly used at the time it blew up.
After trial, Judge Romulo R. Senining of the Civil Court of
Cebu rendered judgment in favor of the petitioner and
against the respondents. The dispositive portion of the
decision reads:
WHEREFORE, judgment is hereby rendered in favor
of the plaintiff and against the defendants and the
latter are hereby ordered, jointly and severally, to
pay the plaintiff the sum of P750.00 as
reimbursement for the lost Omega wrist watch, the
sum of P246.64 as unrealized salary of the plaintiff
from his employer, the further sum of P100.00 for
the doctor's fees and medicine, an additional sum of
P300.00 for attorney's fees and the costs.
The respondents appealed to the Court of First Instance
of Cebu, Branch XIV.
Judge Leonardo B. Canares reversed the judgment of the
City Court of Cebu upon a finding that the accident in
question was due to a fortuitous event. The dispositive
portion of the decision reads:
WHEREFORE, judgment is hereby rendered
exonerating the defendants from any liability to the
plaintiff without pronouncement as to costs.
A motion for reconsideration was denied by the Court of
First Instance.
The petitioner raises the following alleged errors
committed by the Court of First Instance of Cebu on
appeal
a. The Honorable Court below committed grave
abuse of discretion in failing to take cognizance of the
fact that defendants and/or their employee failed to
exercise "utmost and/or extraordinary diligence"
required of common carriers contemplated under
Art. 1755 of the Civil Code of the Philippines.
b. The Honorable Court below committed grave
abuse of discretion by deciding the case contrary to
the doctrine laid down by the Honorable Supreme
Court in the case of Necesito et al. v. Paras, et al.
We find the petition impressed with merit.
The City Court and the Court of First Instance of Cebu
found that the right rear tire of the passenger jeepney in
which the petitioner was riding blew up causing the
vehicle to fall on its side. The petitioner questions the
conclusion of the respondent court drawn from this
finding of fact.
The Court of First Instance of Cebu erred when it
absolved the carrier from any liability upon a finding that
the tire blow out is a fortuitous event. The Court of First
Instance of Cebu ruled that:
After reviewing the records of the case, this Court
finds that the accident in question was due to a
fortuitous event. A tire blow-out, such as what
happened in the case at bar, is an inevitable accident
that exempts the carrier from liability, there being
absence of a showing that there was misconduct or
negligence on the part of the operator in the
operation and maintenance of the vehicle involved.
The fact that the right rear tire exploded, despite
being brand new, constitutes a clear case of caso
fortuito which can be a proper basis for exonerating
the defendants from liability. ...
The Court of First Instance relied on the ruling of the
Court of Appeals in Rodriguez v. Red Line Transportation
Co., CA G.R. No. 8136, December 29, 1954, where the
Court of Appeals ruled that:
A tire blow-out does not constitute
negligence unless the tire was already old and
should not have been used at all. Indeed, this
would be a clear case of fortuitous event.
The foregoing conclusions of the Court of First Instance
of Cebu are based on a misapprehension of overall facts
from which a conclusion should be drawn. The reliance
of the Court of First Instance on the Rodriguez case is not
in order. In La Mallorca and Pampanga Bus Co. v. De
Jesus, et al. (17 SCRA 23), we held that:
Petitioner maintains that a tire blow-out is a
fortuitous event and gives rise to no liability for
negligence, citing the rulings of the Court of Appeals
in Rodriguez v. Red Line Transportation Co., CA G.R.
No. 8136, December 29, 1954, and People v.
Palapad, CA-G.R. No. 18480, June 27, 1958. These
rulings, however, not only are not binding on this
Court but were based on considerations quite
different from those that obtain in the case at bar.
The appellate court there made no findings of any
specific acts of negligence on the part of the
defendants and confined itself to the question of
whether or not a tire blow-out, by itself alone and
without a showing as to the causative factors, would
generate liability. ...
In the case at bar, there
are specific acts of negligence on the part of the
respondents. The records show that the passenger
jeepney turned turtle and jumped into a ditch
immediately after its right rear tire exploded. The
evidence shows that the passenger jeepney was running
at a very fast speed before the accident. We agree with
the observation of the petitioner that a public utility jeep
running at a regular and safe speed will not jump into a
ditch when its right rear tire blows up. There is also
evidence to show that the passenger jeepney was
overloaded at the time of the accident. The petitioner
stated that there were three (3) passengers in the front
seat and fourteen (14) passengers in the rear.
While it may be true that the tire that blew-up was still
good because the grooves of the tire were still visible,
this fact alone does not make the explosion of the tire a
fortuitous event. No evidence was presented to show
that the accident was due to adverse road conditions or
that precautions were taken by the jeepney driver to
compensate for any conditions liable to cause accidents.
The sudden blowing-up, therefore, could have been
caused by too much air pressure injected into the tire
coupled by the fact that the jeepney was overloaded and
speeding at the time of the accident.
In Lasam v. Smith (45 Phil. 657), we laid down the
following essential characteristics of caso fortuito:
xxx xxx xxx
... In a legal sense and, consequently, also in
relation to contracts, a caso fortuito presents the
following essential characteristics: (1) The cause of
the unforeseen and unexpected occurrence, or of the
failure of the debtor to comply with his obligation,
must be independent of the human will. (2) It must
be impossible to foresee the event which constitutes
the caso fortuito, or if it can be foreseen, it must be
impossible to avoid. (3) The occurrence must be such
as to render it impossible for the debtor to fulfill his
obligation in a normal manner. And (4) the obligor
(debtor) must be free from any participation in the
aggravation of the injury resulting to the creditor.
(5 Encyclopedia Juridica Espanola, 309.)
In the case at bar, the cause of the unforeseen and
unexpected occurrence was not independent of the
human will. The accident was caused either through the
negligence of the driver or because of mechanical
defects in the tire. Common carriers should teach their
drivers not to overload their vehicles, not to exceed safe
and legal speed limits, and to know the correct measures
to take when a tire blows up thus insuring the safety of
passengers at all times. Relative to the contingency of
mechanical defects, we held in Necesito, et al. v. Paras,
et al. (104 Phil. 75), that:
... The preponderance of authority is in favor of the
doctrine that a passenger is entitled to recover
damages from a carrier for an injury resulting from
a defect in an appliance purchased from a
manufacturer, whenever it appears that the defect
would have been discovered by the carrier if it had
exercised the degree of care which under the
circumstances was incumbent upon it, with regard
to inspection and application of the necessary tests.
For the purposes of this doctrine, the manufacturer
 is considered as being in law the agent or servant of
the carrier, as far as regards the work of
constructing the appliance. According to this
theory, the good repute of the manufacturer will
not relieve the carrier from liability' (10 Am. Jur.
205, s, 1324; see also Pennsylvania R. Co. v. Roy,
102 U.S. 451; 20 L. Ed. 141; Southern R. Co. v.
Hussey, 74 ALR 1172; 42 Fed. 2d 70; and Ed Note,
29 ALR 788.: Ann. Cas. 1916E 929).
The rationale of the carrier's liability is
the fact that the passenger has neither choice nor
control over the carrier in the selection and use of
the equipment and appliances in use by the carrier.
Having no privity whatever with the manufacturer
or vendor of the defective equipment, the
passenger has no remedy against him, while the
carrier usually has. It is but logical, therefore, that
the carrier, while not an insurer of the safety of his
passengers, should nevertheless be held to answer
for the flaws of his equipment if such flaws were at
all discoverable. ...
It is sufficient to reiterate that the source of a common
carrier's legal liability is the contract of carriage, and by
entering into the said contract, it binds itself to carry the
passengers safely as far as human care and foresight can
provide, using the utmost diligence of a very cautious
person, with a due regard for all the circumstances. The
records show that this obligation was not met by the
respondents.
The respondents likewise argue that the petitioner
cannot recover any amount for failure to prove such
damages during the trial. The respondents submit that if
the petitioner was really injured, why was he treated in
Danao City and not in Mandaue City where the accident
took place. The respondents argue that the doctor who
issued the medical certificate was not presented during
the trial, and hence not cross-examined. The
respondents also claim that the petitioner was not
wearing any wrist watch during the accident.
It should be noted that the City Court of Cebu found that
the petitioner had a lacerated wound on his right palm
aside from injuries on his left arm, right thigh and on his
back, and that on his way back to Danao City, he
discovered that his "Omega" wrist watch was lost. These
are findings of facts of the City Court of Cebu which we
find no reason to disturb. More so when we consider the
fact that the Court of First Instance of Cebu impliedly
concurred in these matters when it confined itself to the
question of whether or not the tire blow out was a
fortuitous event.
WHEREFORE, the decision of the Court of First Instance
of Cebu, Branch IV appealed from is hereby REVERSED
and SET ASIDE, and the decision of the City Court of
Cebu, Branch I is REINSTATED, with the modification that
the damages shall earn interest at 12% per annum and
the attorney's fees are increased to SIX HUNDRED PESOS
(P600.00). Damages shall earn interests from January 27,
1975. SO ORDERED.
G.R. No. L-69044 May 29, 1987
EASTERN SHIPPING LINES, INC., petitioner,
vs.
INTERMEDIATE APPELLATE COURT and DEVELOPMENT
INSURANCE & SURETY CORPORATION, respondents.
No. 71478 May 29, 1987
EASTERN SHIPPING LINES, INC., petitioner,
vs.
THE NISSHIN FIRE AND MARINE INSURANCE CO., and
DOWA FIRE & MARINE INSURANCE CO.,
LTD., respondents.
MELENCIO-HERRERA, J.:
These two cases, both for the recovery of the value of
cargo insurance, arose from the same incident, the
sinking of the M/S ASIATICA when it caught fire,
resulting in the total loss of ship and cargo.
The basic facts are not in controversy:
In G.R. No. 69044, sometime in or prior to June, 1977,
the M/S ASIATICA, a vessel operated by petitioner
Eastern Shipping Lines, Inc., (referred to hereinafter as
Petitioner Carrier) loaded at Kobe, Japan for
transportation to Manila, 5,000 pieces of calorized lance
pipes in 28 packages valued at P256,039.00 consigned to
Philippine Blooming Mills Co., Inc., and 7 cases of spare
parts valued at P92,361.75, consigned to Central Textile
Mills, Inc. Both sets of goods were insured against
marine risk for their stated value with respondent
Development Insurance and Surety Corporation.
In G.R. No. 71478, during the same period, the same
vessel took on board 128 cartons of garment fabrics and
accessories, in two (2) containers, consigned to
Mariveles Apparel Corporation, and two cases of
surveying instruments consigned to Aman Enterprises
and General Merchandise. The 128 cartons were insured
for their stated value by respondent Nisshin Fire &
Marine Insurance Co., for US $46,583.00, and the 2 cases
by respondent Dowa Fire & Marine Insurance Co., Ltd.,
for US $11,385.00.
Enroute for Kobe, Japan, to Manila, the vessel caught fire
and sank, resulting in the total loss of ship and cargo.
The respective respondent Insurers paid the
corresponding marine insurance values to the
consignees concerned and were thus subrogated unto
the rights of the latter as the insured.
G.R. NO. 69044
On May 11, 1978, respondent Development Insurance &
Surety Corporation (Development Insurance, for short),
having been subrogated unto the rights of the two
insured companies, filed suit against petitioner Carrier
for the recovery of the amounts it had paid to the
insured before the then Court of First instance of Manila,
Branch XXX (Civil Case No. 6087).
Petitioner-Carrier denied liability mainly on the ground
that the loss was due to an extraordinary fortuitous
event, hence, it is not liable under the law.
On August 31, 1979, the Trial Court rendered judgment
in favor of Development Insurance in the amounts of
P256,039.00 and P92,361.75, respectively, with legal
interest, plus P35,000.00 as attorney's fees and costs.
Petitioner Carrier took an appeal to the then Court of
Appeals which, on August 14, 1984, affirmed.
Petitioner Carrier is now before us on a Petition for
Review on Certiorari.
G.R. NO. 71478
On June 16, 1978, respondents Nisshin Fire & Marine
Insurance Co. NISSHIN for short), and Dowa Fire &
Marine Insurance Co., Ltd. (DOWA, for brevity), as
subrogees of the insured, filed suit against Petitioner
Carrier for the recovery of the insured value of the cargo
lost with the then Court of First Instance of Manila,
Branch 11 (Civil Case No. 116151), imputing
unseaworthiness of the ship and non-observance of
extraordinary diligence by petitioner Carrier.
Petitioner Carrier denied liability on the principal
grounds that the fire which caused the sinking of the
ship is an exempting circumstance under Section 4(2) (b)
of the Carriage of Goods by Sea Act (COGSA); and that
when the loss of fire is established, the burden of
proving negligence of the vessel is shifted to the cargo
shipper.
On September 15, 1980, the Trial Court rendered
judgment in favor of NISSHIN and DOWA in the amounts
of US $46,583.00 and US $11,385.00, respectively, with
legal interest, plus attorney's fees of P5,000.00 and
costs. On appeal by petitioner, the then Court of Appeals
on September 10, 1984, affirmed with modification the
Trial Court's judgment by decreasing the amount
recoverable by DOWA to US $1,000.00 because of $500
per package limitation of liability under the COGSA.
Hence, this Petition for Review on certiorari by
Petitioner Carrier.
Both Petitions were initially denied for lack of merit. G.R.
No. 69044 on January 16, 1985 by the First Division, and
G. R. No. 71478 on September 25, 1985 by the Second
Division. Upon Petitioner Carrier's Motion for
Reconsideration, however, G.R. No. 69044 was given due
course on March 25, 1985, and the parties were required
to submit their respective Memoranda, which they have
done.
On the other hand, in G.R. No. 71478, Petitioner Carrier
sought reconsideration of the Resolution denying the
Petition for Review and moved for its consolidation with
G.R. No. 69044, the lower-numbered case, which was
then pending resolution with the First Division. The same
was granted; the Resolution of the Second Division of
September 25, 1985 was set aside and the Petition was
given due course.
At the outset, we reject Petitioner Carrier's claim that it
is not the operator of the M/S Asiatica but merely a
charterer thereof. We note that in G.R. No. 69044,
Petitioner Carrier stated in its Petition:
There are about 22 cases of the "ASIATICA" pending
in various courts where various plaintiffs are
represented by various counsel representing various
consignees or insurance companies. The common
defendant in these cases is petitioner herein, being
the operator of said vessel. ... 1
Petitioner Carrier should be held bound to said
admission. As a general rule, the facts alleged in a party's
pleading are deemed admissions of that party and
binding upon it. 2 And an admission in one pleading in
one action may be received in evidence against the
pleader or his successor-in-interest on the trial of
another action to which he is a party, in favor of a party
to the latter action. 3
The threshold issues in both cases are: (1) which law
should govern the Civil Code provisions on Common
carriers or the Carriage of Goods by Sea Act? and (2) who
has the burden of proof to show negligence of the
carrier?
On the Law Applicable
The law of the country to which the goods are to be
transported governs the liability of the common carrier
in case of their loss, destruction or deterioration. 4 As the
cargoes in question were transported from Japan to the
Philippines, the liability of Petitioner Carrier is governed
primarily by the Civil Code. 5 However, in all matters not
regulated by said Code, the rights and obligations of
common carrier shall be governed by the Code of
Commerce and by special laws. 6 Thus, the Carriage of
Goods by Sea Act, a special law, is suppletory to the
provisions of the Civil Code. 7
On the Burden of Proof
Under the Civil Code, common carriers, from the nature
of their business and for reasons of public policy, are
bound to observe extraordinary diligence in the vigilance
over goods, according to all the circumstances of each
case. 8Common carriers are responsible for the loss,
destruction, or deterioration of the goods unless the
same is due to any of the following causes only:
(1) Flood, storm, earthquake, lightning or other
natural disaster or calamity;
xxx xxx xxx 9
Petitioner Carrier claims that the loss of the vessel by fire
exempts it from liability under the phrase "natural
disaster or calamity. " However, we are of the opinion
that fire may not be considered a natural disaster or
calamity. This must be so as it arises almost invariably
from some act of man or by human means. 10 It does
not fall within the category of an act of God unless
caused by lightning 11 or by other natural disaster or
calamity. 12
It may even be caused by the actual fault or privity of the
carrier. 13
Article 1680 of the Civil Code, which considers fire as an
extraordinary fortuitous event refers to leases of rural
lands where a reduction of the rent is allowed when
more than one-half of the fruits have been lost due to
such event, considering that the law adopts a protection
policy towards agriculture. 14
As the peril of the fire is not comprehended within the
exception in Article 1734, supra, Article 1735 of the Civil
Code provides that all cases than those mention in
Article 1734, the common carrier shall be presumed to
have been at fault or to have acted negligently, unless it
proves that it has observed the extraordinary deligence
required by law.
In this case, the respective Insurers. as subrogees of the
cargo shippers, have proven that the transported goods
have been lost. Petitioner Carrier has also proved that
the loss was caused by fire. The burden then is upon
Petitioner Carrier to proved that it has exercised the
extraordinary diligence required by law. In this regard,
the Trial Court, concurred in by the Appellate Court,
made the following Finding of fact:
The cargoes in question were, according to the
witnesses defendant placed in hatches No, 2 and 3
cf the vessel, Boatswain Ernesto Pastrana noticed
that smoke was coming out from hatch No. 2 and
hatch No. 3; that where the smoke was noticed, the
fire was already big; that the fire must have started
twenty-four 24) our the same was noticed; that
carbon dioxide was ordered released and the crew
was ordered to open the hatch covers of No, 2 tor
commencement of fire fighting by sea water: that all
of these effort were not enough to control the fire.
Pursuant to Article 1733, common carriers are
bound to extraordinary diligence in the vigilance
over the goods. The evidence of the defendant did
not show that extraordinary vigilance was observed
by the vessel to prevent the occurrence of fire at
hatches numbers 2 and 3. Defendant's evidence did
not likewise show he amount of diligence made by
the crew, on orders, in the care of the cargoes.
What appears is that after the cargoes were stored
in the hatches, no regular inspection was made as
to their condition during the voyage. Consequently,
the crew could not have even explain what could
have caused the fire. The defendant, in the Court's
mind, failed to satisfactorily show that
extraordinary vigilance and care had been made by
the crew to prevent the occurrence of the fire. The
defendant, as a common carrier, is liable to the
consignees for said lack of deligence required of it
under Article 1733 of the Civil Code. 15
Having failed to discharge the burden of proving that it
had exercised the extraordinary diligence required by
law, Petitioner Carrier cannot escape liability for the loss
of the cargo.
And even if fire were to be considered a "natural
disaster" within the meaning of Article 1734 of the Civil
Code, it is required under Article 1739 of the same Code
that the "natural disaster" must have been the
"proximate and only cause of the loss," and that the
carrier has "exercised due diligence to prevent or
minimize the loss before, during or after the occurrence
of the disaster. " This Petitioner Carrier has also failed to
establish satisfactorily.
Nor may Petitioner Carrier seek refuge from liability
under the Carriage of Goods by Sea Act, It is provided
therein that:
Sec. 4(2). Neither the carrier nor the ship shall be
responsible for loss or damage arising or resulting
from
(b) Fire, unless caused by the actual fault or privity
of the carrier.
xxx xxx xxx
In this case, both the Trial Court and the Appellate Court,
in effect, found, as a fact, that there was "actual fault" of
the carrier shown by "lack of diligence" in that "when
the smoke was noticed, the fire was already big; that the
fire must have started twenty-four (24) hours before the
same was noticed; " and that "after the cargoes were
stored in the hatches, no regular inspection was made as
to their condition during the voyage." The foregoing
suffices to show that the circumstances under which the
fire originated and spread are such as to show that
Petitioner Carrier or its servants were negligent in
connection therewith. Consequently, the complete
defense afforded by the COGSA when loss results from
fire is unavailing to Petitioner Carrier.
On the US $500 Per Package Limitation:
Petitioner Carrier avers that its liability if any, should not
exceed US $500 per package as provided in section 4(5)
of the COGSA, which reads:
(5) Neither the carrier nor the ship shall in any
event be or become liable for any loss or damage to
or in connection with the transportation of goods in
an amount exceeding $500 per package lawful
money of the United States, or in case of goods not
shipped in packages, per customary freight unit, or
the equivalent of that sum in other currency, unless
the nature and value of such goods have been
declared by the shipper before shipment and
inserted in bill of lading. This declaration if
embodied in the bill of lading shall be prima facie
evidence, but all be conclusive on the carrier.
By agreement between the carrier, master or
agent of the carrier, and the shipper another
maximum amount than that mentioned in this
paragraph may be fixed: Provided, That such
maximum shall not be less than the figure above
named. In no event shall the carrier be Liable for
more than the amount of damage actually
sustained.
xxx xxx xxx
Article 1749 of the New Civil Code also allows the
limitations of liability in this wise:
Art. 1749. A stipulation that the common carrier's
liability as limited to the value of the goods
appearing in the bill of lading, unless the shipper or
owner declares a greater value, is binding.
It is to be noted that the Civil Code does not of itself limit
the liability of the common carrier to a fixed amount per
package although the Code expressly permits a
stipulation limiting such liability. Thus, the COGSA which
is suppletory to the provisions of the Civil Code, steps in
and supplements the Code by establishing a statutory
provision limiting the carrier's liability in the absence of a
declaration of a higher value of the goods by the shipper
in the bill of lading. The provisions of the Carriage of
Goods by.Sea Act on limited liability are as much a part
of a bill of lading as though physically in it and as much a
part thereof as though placed therein by agreement of
the parties. 16
In G.R. No. 69044, there is no stipulation in the
respective Bills of Lading (Exhibits "C-2" and "I-3") 1 7
limiting the carrier's liability for the loss or destruction of
the goods. Nor is there a declaration of a higher value of
the goods. Hence, Petitioner Carrier's liability should not
exceed US $500 per package, or its peso equivalent, at
the time of payment of the value of the goods lost, but
in no case "more than the amount of damage actually
sustained."
The actual total loss for the 5,000 pieces of calorized
lance pipes was P256,039 (Exhibit "C"), which was
exactly the amount of the insurance coverage by
Development Insurance (Exhibit "A"), and the amount
affirmed to be paid by respondent Court. The goods
were shipped in 28 packages (Exhibit "C-2") Multiplying
28 packages by $500 would result in a product of
$14,000 which, at the current exchange rate of P20.44 to
US $1, would be P286,160, or "more than the amount of
damage actually sustained." Consequently, the
aforestated amount of P256,039 should be upheld.
With respect to the seven (7) cases of spare parts
(Exhibit "I-3"), their actual value was P92,361.75 (Exhibit
"I"), which is likewise the insured value of the cargo
(Exhibit "H") and amount was affirmed to be paid by
respondent Court. however, multiplying seven (7) cases
by $500 per package at the present prevailing rate of
P20.44 to US $1 (US $3,500 x P20.44) would yield
P71,540 only, which is the amount that should be paid
by Petitioner Carrier for those spare parts, and not
P92,361.75.
In G.R. No. 71478, in so far as the two (2) cases of
surveying instruments are concerned, the amount
awarded to DOWA which was already reduced to $1,000
by the Appellate Court following the statutory $500
liability per package, is in order.
In respect of the shipment of 128 cartons of garment
fabrics in two (2) containers and insured with NISSHIN,
the Appellate Court also limited Petitioner Carrier's
liability to $500 per package and affirmed the award of
$46,583 to NISSHIN. it multiplied 128 cartons
(considered as COGSA packages) by $500 to arrive at the
figure of $64,000, and explained that "since this amount
is more than the insured value of the goods, that is
$46,583, the Trial Court was correct in awarding said
amount only for the 128 cartons, which amount is less
than the maximum limitation of the carrier's liability."
We find no reversible error. The 128 cartons and not the
two (2) containers should be considered as the shipping
unit.
In Mitsui & Co., Ltd. vs. American Export Lines, Inc. 636 F
2d 807 (1981), the consignees of tin ingots and the
shipper of floor covering brought action against the
vessel owner and operator to recover for loss of ingots
and floor covering, which had been shipped in vessel
supplied containers. The U.S. District Court for the
Southern District of New York rendered judgment for the
plaintiffs, and the defendant appealed. The United
States Court of Appeals, Second Division, modified and
affirmed holding that:
When what would ordinarily be considered
packages are shipped in a container supplied by the
carrier and the number of such units is disclosed in
the shipping documents, each of those units and not
the container constitutes the "package" referred to
in liability limitation provision of Carriage of Goods
by Sea Act. Carriage of Goods by Sea Act, 4(5), 46
U.S.C.A.& 1304(5).
Even if language and purposes of Carriage of
Goods by Sea Act left doubt as to whether carrier-
furnished containers whose contents are disclosed
should be treated as packages, the interest in
securing international uniformity would suggest that
they should not be so treated. Carriage of Goods by
Sea Act, 4(5), 46 U.S.C.A. 1304(5).
... After quoting the statement in Leather's
Best, supra, 451 F 2d at 815, that treating a
container as a package is inconsistent with the
congressional purpose of establishing a reasonable
minimum level of liability, Judge Beeks wrote, 414 F.
Supp. at 907 (footnotes omitted):
Although this approach has not completely
escaped criticism, there is, nonetheless, much to
commend it. It gives needed recognition to the
responsibility of the courts to construe and apply
the statute as enacted, however great might be
the temptation to "modernize" or reconstitute it
by artful judicial gloss. If COGSA's package
limitation scheme suffers from internal illness,
Congress alone must undertake the surgery. There
is, in this regard, obvious wisdom in the Ninth
Circuit's conclusion in Hartford that technological
advancements, whether or not forseeable by the
COGSA promulgators, do not warrant a distortion
or artificial construction of the statutory term
"package." A ruling that these large reusable metal
pieces of transport equipment qualify as COGSA
packages at least where, as here, they were
carrier owned and supplied would amount to
just such a distortion.
Certainly, if the individual crates or cartons
prepared by the shipper and containing his goods
 can rightly be considered "packages" standing by
themselves, they do not suddenly lose that
character upon being stowed in a carrier's
container. I would liken these containers to
detachable stowage compartments of the ship.
They simply serve to divide the ship's overall cargo
stowage space into smaller, more serviceable loci.
Shippers' packages are quite literally "stowed" in
the containers utilizing stevedoring practices and
materials analogous to those employed in
traditional on board stowage.
In Yeramex International v. S.S. Tando,, 1977 A.M.C.
1807 (E.D. Va.) rev'd on other grounds, 595 F 2nd
943 (4 Cir. 1979), another district with many
maritime cases followed Judge Beeks' reasoning in
Matsushita and similarly rejected the functional
economics test. Judge Kellam held that when rolls
of polyester goods are packed into cardboard
cartons which are then placed in containers, the
cartons and not the containers are the packages.
xxx xxx xxx
The case of Smithgreyhound v. M/V
Eurygenes, 18 followed the Mitsui test:
Eurygenes concerned a shipment of stereo
equipment packaged by the shipper into cartons
which were then placed by the shipper into a
carrier- furnished container. The number of cartons
was disclosed to the carrier in the bill of lading.
Eurygenes followed the Mitsui test and treated the
cartons, not the container, as the COGSA
packages. However, Eurygenes indicated that a
carrier could limit its liability to $500 per container
if the bill of lading failed to disclose the number of
cartons or units within the container, or if the
parties indicated, in clear and unambiguous
language, an agreement to treat the container as
the package.
(Admiralty Litigation in Perpetuum: The
Continuing Saga of Package Limitations and Third
World Delivery Problems by Chester D. Hooper &
Keith L. Flicker, published in Fordham
International Law Journal, Vol. 6, 1982-83,
Number 1) (Emphasis supplied)
In this case, the Bill of Lading (Exhibit "A") disclosed the
following data:
2 Containers
(128) Cartons)
Men's Garments Fabrics and Accessories Freight
Prepaid
Say: Two (2) Containers Only.
Considering, therefore, that the Bill of Lading clearly
disclosed the contents of the containers, the number of
cartons or units, as well as the nature of the goods, and
applying the ruling in the Mitsui and Eurygenes cases it is
clear that the 128 cartons, not the two (2) containers
should be considered as the shipping unit subject to the
$500 limitation of liability.
True, the evidence does not disclose whether the
containers involved herein were carrier-furnished or not.
Usually, however, containers are provided by the
carrier. 19 In this case, the probability is that they were
so furnished for Petitioner Carrier was at liberty to pack
and carry the goods in containers if they were not so
packed. Thus, at the dorsal side of the Bill of Lading
(Exhibit "A") appears the following stipulation in fine
print:
11. (Use of Container) Where the goods receipt of
which is acknowledged on the face of this Bill of
Lading are not already packed into container(s) at
the time of receipt, the Carrier shall be at liberty
to pack and carry them in any type of container(s).
The foregoing would explain the use of the estimate
"Say: Two (2) Containers Only" in the Bill of Lading,
meaning that the goods could probably fit in two (2)
containers only. It cannot mean that the shipper had
furnished the containers for if so, "Two (2) Containers"
appearing as the first entry would have sufficed. and if
there is any ambiguity in the Bill of Lading, it is a cardinal
principle in the construction of contracts that the
interpretation of obscure words or stipulations in a
contract shall not favor the party who caused the
obscurity. 20 This applies with even greater force in a
contract of adhesion where a contract is already
prepared and the other party merely adheres to it, like
the Bill of Lading in this case, which is draw. up by the
carrier. 21
On Alleged Denial of Opportunity to Present Deposition
of Its Witnesses: (in G.R. No. 69044 only)
Petitioner Carrier claims that the Trial Court did not give
it sufficient time to take the depositions of its witnesses
in Japan by written interrogatories.
We do not agree. petitioner Carrier was given- full
opportunity to present its evidence but it failed to do so.
On this point, the Trial Court found:
xxx xxx xxx
Indeed, since after November 6, 1978, to August
27, 1979, not to mention the time from June 27,
1978, when its answer was prepared and filed in
Court, until September 26, 1978, when the pre-trial
conference was conducted for the last time, the
defendant had more than nine months to prepare
its evidence. Its belated notice to take deposition
on written interrogatories of its witnesses in Japan,
served upon the plaintiff on August 25th, just two
days before the hearing set for August 27th,
knowing fully well that it was its undertaking on
July 11 the that the deposition of the witnesses
would be dispensed with if by next time it had not
yet been obtained, only proves the lack of merit of
the defendant's motion for postponement, for
which reason it deserves no sympathy from the
Court in that regard. The defendant has told the
Court since February 16, 1979, that it was going to
take the deposition of its witnesses in Japan. Why
did it take until August 25, 1979, or more than six
months, to prepare its written interrogatories. Only
 the defendant itself is to blame for its failure to
adduce evidence in support of its defenses.
xxx xxx xxx 22
Petitioner Carrier was afforded ample time to present its
side of the case. 23 It cannot complain now that it was
denied due process when the Trial Court rendered its
Decision on the basis of the evidence adduced. What
due process abhors is absolute lack of opportunity to be
heard. 24
On the Award of Attorney's Fees:
Petitioner Carrier questions the award of attorney's fees.
In both cases, respondent Court affirmed the award by
the Trial Court of attorney's fees of P35,000.00 in favor
of Development Insurance in G.R. No. 69044, and
P5,000.00 in favor of NISSHIN and DOWA in G.R. No.
71478.
Courts being vested with discretion in fixing the amount
of attorney's fees, it is believed that the amount of
P5,000.00 would be more reasonable in G.R. No. 69044.
The award of P5,000.00 in G.R. No. 71478 is affirmed.
WHEREFORE, 1) in G.R. No. 69044, the judgment is
modified in that petitioner Eastern Shipping Lines shall
pay the Development Insurance and Surety Corporation
the amount of P256,039 for the twenty-eight (28)
packages of calorized lance pipes, and P71,540 for the
seven (7) cases of spare parts, with interest at the legal
rate from the date of the filing of the complaint on June
13, 1978, plus P5,000 as attorney's fees, and the costs.
2) In G.R.No.71478,the judgment is hereby affirmed. SO
ORDERED.
G.R. No. 153563 February 07, 2005
NATIONAL TRUCKING AND FORWARDING
CORPORATION, petitioner,
vs.
LORENZO SHIPPING CORPORATION, Respondent.
DECISION
QUISUMBING, J.:
For review on certiorari are the Decision1 dated January
16, 2002, of the Court of Appeals, in CA-G.R. CV No.
48349, and its Resolution,2 of May 13, 2002, denying the
motion for reconsideration of herein petitioner National
Trucking and Forwarding Corporation (NTFC). The
impugned decision affirmed in toto the judgment3 dated
November 14, 1994 of the Regional Trial Court (RTC) of
Manila, Branch 53, in Civil Case No. 90-52102.
The undisputed facts, as summarized by the appellate
court, are as follows:
On June 5, 1987, the Republic of the Philippines, through
the Department of Health (DOH), and the Cooperative
for American Relief Everywhere, Inc. (CARE) signed an
agreement wherein CARE would acquire from the United
States government donations of non-fat dried milk and
other food products from January 1, 1987 to December
31, 1989. In turn, the Philippines would transport and
distribute the donated commodities to the intended
beneficiaries in the country.
The government entered into a contract of carriage of
goods with herein petitioner National Trucking and
Forwarding Corporation (NTFC). Thus, the latter shipped
4,868 bags of non-fat dried milk through herein
respondent Lorenzo Shipping Corporation (LSC) from
September to December 1988. The consignee named in
the bills of lading issued by the respondent was
Abdurahman Jama, petitioners branch supervisor in
Zamboanga City.
On reaching the port of Zamboanga City, respondents
agent, Efren Ruste4 Shipping Agency, unloaded the 4,868
bags of non-fat dried milk and delivered the goods to
petitioners warehouse. Before each delivery, Rogelio
Rizada and Ismael Zamora, both delivery checkers of
Efren Ruste Shipping Agency, requested Abdurahman to
surrender the original bills of lading, but the latter
merely presented certified true copies thereof. Upon
completion of each delivery, Rogelio and Ismael asked
Abdurahman to sign the delivery receipts. However, at
times when Abdurahman had to attend to other
business before a delivery was completed, he instructed
his subordinates to sign the delivery receipts for him.
Notwithstanding the precautions taken, the petitioner
allegedly did not receive the subject goods. Thus, in a
letter dated March 11, 1989, petitioner NTFC filed a
formal claim for non-delivery of the goods shipped
through respondent.
In its letter of April 26, 1989, the respondent explained
that the cargo had already been delivered to
Abdurahman Jama. The petitioner then decided to
investigate the loss of the goods. But before the
investigation was over, Abdurahman Jama resigned as
branch supervisor of petitioner.
Noting but disbelieving respondents insistence that the
goods were delivered, the government through the
DOH, CARE, and NTFC as plaintiffs filed an action for
breach of contract of carriage, against respondent as
defendant, with the RTC of Manila.
After trial, the RTC resolved the case as follows:
WHEREFORE, judgment is hereby rendered in favor of
the defendant and against the plaintiffs, dismissing the
latters complaint, and ordering the plaintiffs, pursuant
to the defendants counterclaim, to pay, jointly and
solidarily, to the defendant, actual damages in the
amount of 50,000.00, and attorneys fees in the
amount of 70,000.00, plus the costs of suit.
SO ORDERED.5
Dissatisfied with the foregoing ruling, herein petitioner
appealed to the Court of Appeals. It faulted the lower
court for not holding that respondent failed to deliver
the cargo, and that respondent failed to exercise the
extraordinary diligence required of common carriers.
Petitioner also assailed the lower court for denying its
claims for actual, moral, and exemplary damages, and
for awarding actual damages and attorneys fees to the
respondent.6
The Court of Appeals found that the trial court did not
commit any reversible error. It dismissed the appeal, and
affirmed the assailed decision in toto.
Undaunted, petitioner now comes to us, assigning the
following errors:
I extraordinary diligence over the goods.
THE COURT OF APPEALS GRAVELY ERRED WHEN IT
FAILED TO APPRECIATE AND APPLY THE LEGAL
STANDARD OF EXTRAORDINARY DILIGENCE IN THE
SHIPMENT AND DELIVERY OF GOODS TO THE
RESPONDENT AS A COMMON CARRIER, AS WELL AS THE
ACCOMPANYING LEGAL PRESUMPTION OF FAULT OR
NEGLIGENCE ON THE PART OF THE COMMON CARRIER,
IF THE GOODS ARE LOST, DESTROYED OR
DETERIORATED, AS REQUIRED UNDER THE CIVIL CODE.
II
THE COURT OF APPEALS GRAVELY ERRED WHEN IT
SUSTAINED THE BASELESS AND ARBITRARY AWARD OF
ACTUAL DAMAGES AND ATTORNEYS FEES INASMUCH
AS THE ORIGINAL COMPLAINT WAS FILED IN GOOD
FAITH, WITHOUT MALICE AND WITH THE BEST
INTENTION OF PROTECTING THE INTEREST AND
INTEGRITY OF THE GOVERNMENT AND ITS CREDIBILITY
AND RELATIONSHIP WITH INTERNATIONAL RELIEF
AGENCIES AND DONOR STATES AND ORGANIZATION.7
The issues for our resolution are: (1) Is respondent
presumed at fault or negligent as common carrier for the
loss or deterioration of the goods? and (2) Are damages
and attorneys fees due respondent?
Anent the first issue, petitioner contends that the
respondent is presumed negligent and liable for failure
to abide by the terms and conditions of the bills of
lading; that Abdurahman Jamas failure to testify should
not be held against petitioner; and that the testimonies
of Rogelio Rizada and Ismael Zamora, as employees of
respondents agent, Efren Ruste Shipping Agency, were
biased and could not overturn the legal presumption of
respondents fault or negligence.
For its part, the respondent avers that it observed
extraordinary diligence in the delivery of the goods. Prior
to releasing the goods to Abdurahman, Rogelio and
Ismael required the surrender of the original bills of
lading, and in their absence, the certified true copies
showing that Abdurahman was indeed the consignee of
the goods. In addition, they required Abdurahman or his
designated subordinates to sign the delivery receipts
upon completion of each delivery.
We rule for respondent.
Article 17338 of the Civil Code demands that a common
carrier observe extraordinary diligence over the goods
transported by it. Extraordinary diligence is that extreme
measure of care and caution which persons of unusual
prudence and circumspection use for securing and
preserving their own property or rights.9 This exacting
standard imposed on common carriers in a contract of
carriage of goods is intended to tilt the scales in favor of
the shipper who is at the mercy of the common carrier
once the goods have been lodged for shipment. Hence,
in case of loss of goods in transit, the common carrier is
presumed under the law to have been at fault or
negligent.10 However, the presumption of fault or
negligence, may be overturned by competent evidence
showing that the common carrier has observed
In the instant case, we agree with the court a quo that
the respondent adequately proved that it exercised
extraordinary diligence. Although the original bills of
lading remained with petitioner, respondents agents
demanded from Abdurahman the certified true copies of
the bills of lading. They also asked the latter and in his
absence, his designated subordinates, to sign the cargo
delivery receipts.
This practice, which respondents agents testified to be
their standard operating procedure, finds support in
Article 353 of the Code of Commerce:
ART. 353. . . .
After the contract has been complied with, the bill of
lading which the carrier has issued shall be returned to
him, and by virtue of the exchange of this title with the
thing transported, the respective obligations and actions
shall be considered cancelled, .
In case the consignee, upon receiving the goods, cannot
return the bill of lading subscribed by the carrier,
because of its loss or of any other cause, he must give
the latter a receipt for the goods delivered, this receipt
producing the same effects as the return of the bill of
lading. (Emphasis supplied)
Conformably with the aforecited provision, the
surrender of the original bill of lading is not a condition
precedent for a common carrier to be discharged of its
contractual obligation. If surrender of the original bill of
lading is not possible, acknowledgment of the delivery
by signing the delivery receipt suffices. This is what
respondent did.
We also note that some delivery receipts were signed by
Abdurahmans subordinates and not by Abdurahman
himself as consignee. Further, delivery checkers Rogelio
and Ismael testified that Abdurahman was always
present at the initial phase of each delivery, although on
the few occasions when Abdurahman could not stay to
witness the complete delivery of the shipment, he
authorized his subordinates to sign the delivery receipts
for him. This, to our mind, is sufficient and substantial
compliance with the requirements.
We further note that, strangely, petitioner made no
effort to disapprove Abdurahmans resignation until
after the investigation and after he was cleared of any
responsibility for the loss of the goods. With
Abdurahman outside of its reach, petitioner cannot now
pass to respondent what could be Abdurahmans
negligence, if indeed he were responsible.
On the second issue, petitioner submits there is no basis
for the award of actual damages and attorneys fees. It
maintains that its original complaint for sum of money
with damages for breach of contract of carriage was not
fraudulent, in bad faith, nor malicious. Neither was the
institution of the action rash nor precipitate. Petitioner
avers the filing of the action was intended to protect the
integrity and interest of the government and its
relationship and credibility with international relief
agencies and donor states.
On the other hand, respondent maintains that
petitioners suit was baseless and malicious because
instead of going after its absconding employee,
petitioner wanted to recoup its losses from respondent.
The trial court and the Court of Appeals were justified in
granting actual damages and reasonable attorneys fees
to respondent.
On this point, we agree with petitioner.
The right to litigate should bear no premium. An adverse
decision does not ipso facto justify an award of
attorneys fees to the winning party.11 When, as in the
instant case, petitioner was compelled to sue to protect
the credibility of the government with international
organizations, we are not inclined to grant attorneys
fees. We find no ill motive on petitioners part, only an
erroneous belief in the righteousness of its claim.
Moreover, an award of attorneys fees, in the concept of
damages under Article 2208 of the Civil Code,12 requires
factual and legal justifications. While the law allows
some degree of discretion on the part of the courts in
awarding attorneys fees and expenses of litigation, the
discretion must be exercised with great care
approximating as closely as possible, the instances
exemplified by the law.13 We have searched but found
nothing in petitioners suit that justifies the award of
attorneys fees.
Respondent failed to show proof of actual pecuniary
loss, hence, no actual damages are due in favor of
respondent.14
WHEREFORE, the petition is PARTIALLY GRANTED. The
assailed decision and resolution of the Court of Appeals
in CA-G.R. CV No. 48349 dated January 16, 2002 and
May 13, 2002 respectively, denying petitioners claim for
actual, moral and exemplary damages are AFFIRMED.
The award of actual damages and attorneys fees to
respondent pursuant to the latters counterclaim in the
trial court is DELETED. SO ORDERED.
G.R. No. 164820 March 28, 2007
VICTORY LINER, INC., Petitioner,
vs.
PABLO M. RACE, Respondent.
DECISION
CHICO-NAZARIO, J.:
In this Petition for Review on Certiorari under Rule 45 of
the Rules of Court,1 petitioner Victory Liner Inc. seeks to
set aside the Decision of the Court of Appeals dated 26
April 2004 in CA-G.R. SP No. 74010,2 affirming the
Decision and Resolution of the National Labor Relations
Commission (NLRC) dated 30 July 2002 and 30 August
2002, respectively, in NLRC-CA-029327-01.3 In its
Decision and Resolution, the NLRC vacated the
Decision4 of Labor Arbiter Salimathar V. Nambi (Labor
Arbiter Nambi) dated 31 July 2001 in NLRC-NCR-00-09-
08922-99 and ordered the petitioner to reinstate
respondent Pablo M. Race to his former position as a bus
driver without loss of seniority rights and other
privileges and benefits with full backwages computed
from the time of his illegal dismissal in January 1998 up
to his actual reinstatement.
Culled from the records are the following facts:
In June 1993, respondent was employed by the
petitioner as a bus driver. As a requisite for his hiring,
the respondent deposited a cash bond in the amount of
10,000.00 to the petitioner. Respondent was assigned
to the Alaminos, Pangasinan - Cubao, Quezon City, route
on the evening schedule.5
On the night of 24 August 1994, respondent drove his
assigned bus from Alaminos, Pangasinan, destined to
Cubao, Quezon City. While traversing Moncada, Tarlac,
the bus he was driving was bumped by a Dagupan-bound
bus. As a consequence thereof, respondent suffered a
fractured left leg and was rushed to the Country Medical
and Trauma Center in Tarlac City where he was operated
on and confined from 24 August 1994 up to 10 October
1994. One month after his release from the said hospital,
the respondent was confined again for further treatment
of his fractured left leg at the Specialist Group Hospital in
Dagupan City. His confinement therein lasted a month.
Petitioner shouldered the doctors professional fee and
the operation, medication and hospital expenses of the
respondent in the aforestated hospitals.6
In January 1998, the respondent, still limping heavily,
went to the petitioners office to report for work. He
was, however, informed by the petitioner that he was
considered resigned from his job. Respondent refused to
accede and insisted on having a dialogue with the
petitioners officer named Yolanda Montes (Montes).
During their meeting, Montes told him that he was
deemed to have resigned from his work and to accept a
consideration of 50,000.00. Respondent rejected the
explanation and offer. Thereafter, before Christmas of
1998, he again conversed with Montes who reiterated to
him that he was regarded as resigned but raised the
consideration therein to 100,000.00. Respondent
rebuffed the increased offer.7
On 30 June 1999, respondent, through his counsel, sent
a letter to the petitioner demanding employment-
related money claims. There being no response from the
petitioner, the respondent filed before the Labor Arbiter
on 1 September 1999 a complaint for (1) unfair labor
practice; (2) illegal dismissal; (3) underpayment of
wages; (4) nonpayment of overtime and holiday
premium, service incentive leave pay, vacation and sick
leave benefits, 13th month pay; (5) excessive deduction
of withholding tax and SSS premium; and (6) moral and
exemplary damages and attorneys fees. This was
docketed as NLRC-NCR-00-09-08922-99.8
In its Position Paper dated 27 March 2000, petitioner
claimed that respondent was paid strictly on commission
basis; that respondent was a mere field personnel who
performed his duties and functions outside the
petitioners premises and whose time of work cannot be
determined with reasonable certainty; that petitioner,
therefore, was exempted from paying the respondent
overtime compensation, night shift differential, holiday
pay and service incentive leave; that notwithstanding
the specific exemptions provided for in the Labor Code,
the petitioner gave the respondent benefits better than
those received by the other bus drivers of the petitioner;
that during his employment, respondent was charged
with and found guilty of numerous offenses which were
sufficient bases for his dismissal; that the prescriptive
period for the filing of an action or claim for
reinstatement and payment of labor standard benefits is
four years from the time the cause of action accrued;
and that the respondents cause of action against
petitioner had already prescribed because when the
former instituted the aforesaid complaint on 1
September 1999, more than five years had already
lapsed from the accrual of his cause of action on 24
August 1994.9
In his Reply dated 30 June 2000, respondent explained
that when he stated in his complaint that he was illegally
dismissed on 24 August 1994, what he meant and
referred to was the date when he was no longer in a
position to drive since he was hospitalized from 24
August 1994 up to 10 October 1994. Respondent also
admitted that it was only in January 1998 that he
informed the petitioner of his intent to report back for
work.10
On 31 July 2001, Labor Arbiter Nambi rendered his
Decision dismissing the complaint of respondent for lack
of merit. He stated that the prescriptive period for filing
an illegal dismissal case is four years from the dismissal
of the employee concerned. Since the respondent stated
in his complaint that he was dismissed from work on 24
August 1994 and he filed the complaint only on 1
September 1999, Labor Arbiter Nambi concluded that
respondents cause of action against petitioner had
already prescribed. He also noted that respondent
committed several labor-related offenses against the
petitioner which may be considered as just causes for
the termination of his employment under Article 282 of
the Labor Code.
Further, Labor Arbiter Nambi opined that respondent
was not a regular employee but a mere field personnel
and, therefore, not entitled to service incentive leave,
holiday pay, overtime pay and 13th month pay. He also
ruled that respondent failed to present evidence
showing that the latter was entitled to the abovestated
money claims. The fallo of the said decision reads:
WHEREFORE, considering that the causes of action in
this case rooted from the purported illegal dismissal of
Pablo M. Race on August 24, 1994 when he figured in a
vehicular accident, or on October 10, 1994 when he was
released from the hospital, and he filed his complaint
only on September 1, 1999 after a lapse of more than
five (5) years, the action has long prescribed, aside from
the fact that there is absolutely no evidence that
respondent Victory Liner, Inc. is guilty of unfair labor
practice and unjust dismissal, in addition to its specific
exemptions from the letters of Article 82 of the Labor
Code, as amended, the complaint and money claims are
hereby DISMISSED by reason of prescription and for
utter lack of merit and total absence of legal and factual
basis in support thereof.11
Respondent appealed to the NLRC. On 30 July 2002, the
NLRC promulgated its Decision reversing the decision of
Labor Arbiter Nambi. It ordered the reinstatement of the
respondent to his former position without loss of
seniority rights and other privileges and benefits with full
back-wages computed from the time of his illegal
dismissal in January 1998 up to his actual reinstatement.
It held that the respondents cause of action accrued,
not on 24 August 1994, but in January 1998, when the
respondent reported for work but was rejected by the
petitioner. Thus, the respondents filing of complaint on
1 September 1999 was well-within the four-year
prescriptive period. It also ruled that respondent was
illegally dismissed by the petitioner as the latter failed to
accord him due process. It found that the petitioner did
not give the respondent a written notice apprising him
of acts or omissions being complained of and a written
notice informing him of the termination of his
employment. In conclusion, the NLRC stated:
WHEREFORE, in view of all the foregoing, respondent-
appellees company is hereby ordered to reinstate
complainant-appellant to his former position without
loss of seniority rights and other privileges and benefits
with full backwages computed from the time of his
illegal dismissal on (sic) January 1988 up to his actual
reinstatement. Except for this modification, the
appealed decision is hereby AFFIRMED.12
Petitioner filed a Motion for Reconsideration of the
NLRC Decision alleging, among other things, that the
award of backwages to the respondent computed from
January 1988 up to the promulgation of the NLRC
Decision on 30 July 2002 was unlawful and unjust
considering that respondent was employed only in June
1993. The NLRC, however, denied the same for lack of
merit in its Resolution dated 30 August 2002.
Petitioner assailed the NLRC Decision and Resolution,
dated 30 July 2002 and 30 August 2002, respectively, via
a Petition for Certiorari to the Court of Appeals. On 26
April 2004, the Court of Appeals dismissed the Petition,
and found no grave abuse of discretion on the part of
the NLRC. It ruled that the NLRC committed a simple
typographical error when it stated in the fallo that the
backwages of respondent shall be computed from
January 1988 instead of January 1998 because in the
paragraph prior to the dispositive portion, the NLRC
categorically declared that the full backwages of the
respondent was to be computed from January1998. In
addition, the NLRC has indicated in its Statement of Facts
that respondent was hired by the petitioner sometime in
June 1993. It also held that the respondents filing of
complaint on 1 September 1999 was within the four-
year prescriptive period since the cause of action
accrued when the respondent reported for work in
January 1998 and was informed that he was considered
resigned. It ratiocinated that respondent did not
abandon his work and, instead, continued to be an
employee of petitioner after he was discharged from the
hospital, viz:
Race did not abandon his work and continued to be an
employee of Victory Liner, and their contemporaneous
conduct show this. He has his pay slip covering the
period of August 1-15, 1998 (p. 114, record), he was
consulting the company physician who issued him
receipts dated October 28, 1996 and July 21 1997 (p.
115, record), and he wrote a letter dated March 18,
1996 addressed to Gerarda Villa, Vice-President for
Victory Liner, signifying his intention to be a dispatcher
or conductor due to his injured leg (p. 116, Record).
Further, annexed to Victory Liners Consolidated
Supplemental Position Paper and Formal Offer of
Evidence with Erratum is Exhibit "6-A-Race" (p. 56,
record) submitted before the Labor Arbiter, where Race
stated before the investigator that after his release from
the hospital he reported to Victory Liner twice a month.
He also said that he filed for a sick leave which was
approved for the maximum of 120 days. After his sick
leave, he filed for disability leave, and this was also
approved and ran until sometime in May 1997.13
It also found that the petitioner failed to comply with the
requirements of due process in terminating the
employment of respondent. The decretal portion of the
said decision reads:
WHEREFORE, the petition is DENIED DUE COURSE and
DISMISSED.14
Petitioner filed the instant petition on the following
grounds:
THE HONORABLE COURT OF APPEALS SERIOUSLY ERRED
CONTRARY TO LAW AND JURISPRUDENCE WHEN IT HELD
IN THE ASSAILED DECISION THAT:
A.
THE CAUSE OF ACTION OF RESPONDENT FOR ILLEGAL
DISMISSAL HAS NOT YET PRESCRIBED DESPITE HAVING
BEEN FILED AFTER FOUR (4) YEARS AND NINE (9)
MONTHS FROM THE ACCRUAL OF THE ALLEGED
ACTIONABLE WRONG;
B.
RESPONDENT IS ENTITLED TO REINSTATEMENT WITH
FULL BACKWAGES AND OTHER BENEFITS CONSIDERING
THAT THE TERMINATION OF HIS EMPLOYMENT BY
PETITIONER WAS LEGAL AND JUSTIFIED.15
Anent the first issue, petitioner insisted that respondent
had already abandoned his work and ceased to be its
employee since November 1994; that the alleged "pay
slip" for the period August 1-15, 1998 was not actually a
pay slip but a mere cash advance/monetary aid
extended to the respondent as the large amount of
65,000.00 stated therein was clearly inconsistent and
disproportionate to the respondents low salary of
192.00 a day; that the petitioner merely
accommodated the respondent as its former employee
when the latter consulted the petitioners physician on
28 October 1996 and 21 July 1997; that the respondents
letter dated 18 March 1996 to the petitioners Vice-
President Gerarda Villa was only an application for the
position of dispatcher or conductor and that such
application was not granted; and that the foregoing
circumstances cannot be considered as an indication of
employer-employee relationship between the petitioner
and respondent.16
Moreover, petitioner asserted that although the
respondent reported for work twice a month after he
was discharged from the hospital, it does not imply that
the respondent was still considered as an employee at
that time by the petitioner; that it allowed the
respondent to have a 120-day sick leave because the
latter was a former employee; and that it granted
disability leave to the respondent since the latter was a
former employee and that respondents application for
disability leave implied an admission on the part of the
respondent that he was no longer fit to work as a bus
driver.17
Petitioner also asseverated that, based on the four-fold
tests in determining the employer-employee relationship
which includes the payment of wages and power to
control the conduct of the employees, the respondent
was no longer its employee upon the latters discharge
from the hospital in November 1994 because at such
time, the respondent was no longer fit to work as a bus
driver and respondent did not render services to the
petitioner. Thus, petitioner reasoned that it had no more
power to control the conduct of, and it no longer paid
any wages to, the respondent.18
Petitioner also argued that the cause of action of
respondent had accrued on 10 November 1994; that
from 10 November 1994 up to November 1998, the
respondent did not render any services to nor filed a
case or action against the petitioner; that the
respondents filing of a complaint against petitioner on 1
September 1999 was clearly beyond the four-year
prescriptive period allowed by law; that if the reckoning
period of the accrual of a cause of action would be the
time when the written demand was made by the
respondent on the petitioner, then the four-year
prescriptive period would be interminable as it could be
extended to one or more years; that this is not the spirit
or intent of the law; that otherwise there is no more
need to provide the four-year prescriptive period as any
complainant may simply allow the lapse of four years
and file the action thereafter and that it would be
considered as a compliance by simply making a
purported demand for reinstatement after more than
four years.19
These contentions are devoid of merit.
It should be emphasized at the outset that as a rule, this
Court is not a trier of facts and this applies with greater
force in labor cases. Hence, factual findings of quasi-
judicial bodies like the NLRC, particularly when they
coincide with those of the Labor Arbiter and if supported
by substantial evidence, are accorded respect and even
finality by this Court. But where the findings of the NLRC
and the Labor Arbiter are contradictory, as in the
present case, this Court may delve into the records and
examine for itself the questioned findings.20
In illegal dismissal cases, the employee concerned is
given a period of four years from the time of his
dismissal within which to institute a complaint. This is
based on Article 1146 of the New Civil Code which states
that actions based upon an injury to the rights of the
plaintiff must be brought within four years. We
explained the rationale in the case of Callanta v.
Carnation Philippines, Inc.,21 thus:
[O]nes employment, profession, trade or calling is a
"property right," and the wrongful interference
therewith is an actionable wrong. The right is considered
to be property within the protection of a constitutional
guaranty of due process of law. Clearly then, when one is
arbitrarily and unjustly deprived of his job or means of
livelihood, the action instituted to contest the legality of
ones dismissal from employment constitutes, in
essence, an action predicated "upon an injury to the
rights of the plaintiff," as contemplated under Art. 1146
of the New Civil Code, which must be brought within
four years.
The four-year prescriptive period shall commence to run
only upon the accrual of a cause of action of the worker.
It is settled that in illegal dismissal cases, the cause of
action accrues from the time the employment of the
worker was unjustly terminated.22 Thus, the four-year
prescriptive period shall be counted and computed from
the date of the employees dismissal up to the date of
the filing of complaint for unlawful termination of
employment.23
Proceeding therefrom, we shall now discuss and
determine when the respondents cause of action
accrued in order to ascertain whether the same had
already prescribed.
It is error to conclude that the employment of the
respondent was unjustly terminated on 10 November
1994 because he was, at that time, still confined at the
Specialist Group Hospital, Dagupan City, for further
treatment of his fractured left leg. He must be
considered as merely on sick leave at such time.
Likewise, the respondent cannot also be deemed as
illegally dismissed from work upon his release from the
said hospital in December 1994 up to December 1997
since the records show that the respondent still reported
for work to the petitioner and was granted sick and
disability leave by the petitioner during the same
period.24
The respondent must be considered as unjustly
terminated from work in January 1998 since this was the
first time he was informed by the petitioner that he was
deemed resigned from his work. During that same
occasion, the petitioner, in fact, tried to convince the
respondent to accept an amount of 50,000.00 as a
consolation for his dismissal but the latter rejected
it.25 Thus, it was only at this time that the respondents
cause of action accrued. Consequently, the respondents
filing of complaint for illegal dismissal on 1 September
1999 was well within the four-year prescriptive period.
It is also significant to note that from 10 November 1994
up to December 1997, the petitioner never formally
informed the respondent of the fact of his dismissal
either through a written notice or hearing. Indeed, it
cannot be gainfully said that respondent was unlawfully
dismissed on 10 November 1994 and that the cause of
action accrued on that date.
As to the alleged abandonment of work by the
respondent on 10 November 1994, it should be
emphasized that two factors must be present in order to
constitute an abandonment: (a) the failure to report for
work or absence without valid or justifiable reason; and
(2) a clear intention to sever employer-employee
relationship. The second factor is the more
determinative factor and is manifested by overt acts
from which it may be deduced that the employee has no
more intention to work. The intent to discontinue the
employment must be shown by clear proof that it was
deliberate and unjustified. Mere absence from work
does not imply abandonment.26
It is apparent that respondent did not abandon his work.
His absence from work for a long period of time was
obviously due to the fact that he was still recuperating
from two operations on his fractured leg. Petitioner
knew this very well. In fact, petitioner shouldered the
respondents medication and hospital expenses during
the latters confinement and operation in two
hospitals.27 Moreover, when the respondent was able to
walk, although limping heavily, he still reported for work
to the petitioner and was granted sick and disability
leave.28 Clearly then, respondent did not abandon his job
on 10 November 1994.
In the same vein, the employer-employee relationship
between the petitioner and respondent cannot be
deemed to have been extinguished on 10 November
1994. It should be borne in mind that there are four tests
in determining the existence of employer-employee
relationship: (1) the manner of selection and
engagement; (2) the payment of wages; (3) the presence
or absence of the power of dismissal; and (4) the
presence or absence of the power of control. The so-
called "control test" is commonly regarded as the most
crucial and determinative indicator of the presence or
absence of an employer-employee relationship. Under
the control test, an employer-employee relationship
exists where the person for whom the services are
performed reserves the right to control not only the end
achieved, but also the manner and means to be used in
reaching that end.29
Applying the aforecited tests, the employer-employee
relationship between petitioner and respondent
continued even after the latters discharge from the
hospital in December 1994 up to 1997. Respondent had
reported for work to the petitioner after his release from
the hospital in December 1994. Subsequently,
respondent was also granted a 120-day sick leave and
disability leave by the petitioner.30 Respondent also
availed himself of the services of the petitioners
physician on two occasions after his release from the
hospital in December 1994.31
On the other hand, the petitioner failed to establish the
fact that the respondent ceased to be its employee on
10 November 1994. Except for its flimsy reason that the
sick leave, disability leave and physician consultations
were given to the respondent as mere accommodations
for a former employee, the petitioner did not present
any evidence showing that its employer-employee
relationship with the respondent was extinguished on 10
November 1994.
Evidently, these circumstances clearly manifest that
petitioner exercised control over the respondent and
that the latter was still under the employment of the
petitioner even after December 1994.
Given the foregoing considerations, petitioners
assertion that the respondents cause of action accrued
on 10 November 1994 must fail.
Apropos the second issue, petitioner contended that the
order for the reinstatement of the respondent as bus
driver was unconstitutional for being tantamount to
involuntary servitude; that when the respondent filed his
complaint for illegal dismissal, the latter no longer
desired to be reinstated to his former position as bus
driver; that the respondents unwillingness to be
reinstated as bus driver was also evident from his letter
to the petitioner where the respondent manifested his
intention to be hired as a dispatcher or conductor; and
that to reinstate the respondent as bus driver despite
the fact that it is against his will is involuntary
servitude.32
Petitioner also argued that the order for the
reinstatement was contrary to law; that as a common
carrier, it is obliged under the law to observe extra-
ordinary diligence in the conduct of its business; that it
will violate such obligation if it will reinstate the
respondent as bus driver; that to allow the respondent
to drive a bus, despite the fact that the latter sustained a
fractured left leg and was still limping, would imperil the
lives of the passengers and the property of the
petitioner; and that the award of backwages to the
respondent was unjustified.33
The Labor Code mandates that before an employer may
legally dismiss an employee from the service, the
requirement of substantial and procedural due process
must be complied with. Under the requirement of
substantial due process, the grounds for termination of
employment must be based on just or authorized
causes. The following are just causes for the termination
of employment under Article 282 of the Labor Code:
(a) Serious misconduct or willful disobedience by the
employee of the lawful orders of his employer or
representative in connection with his work;
(b) Gross and habitual neglect by the employee of
his duties;
(c) Fraud or willful breach by the employee of the
trust reposed in him by his employer or duly
authorized representative;
(d) Commission of a crime or offense by the
employee against the person of his employer or any
immediate member of his family or his duly
authorized representative; and
(e) Other causes analogous to the foregoing.
Abandonment of work, or the deliberate and unjustified
refusal of an employee to resume his employment, may
be a just cause for the termination of employment under
paragraph (b) of Article 282 of the Labor Code since it is
a form of neglect of duty.
As earlier discussed, the petitioner insisted that
respondent had already abandoned his work on 10
November 1994 and, thus, the latters employment was
deemed terminated as of such date. We, however,
found that there was no abandonment of work on the
part of the respondent. Petitioner also alleged that
respondent was guilty of insubordination as well as gross
and habitual neglect in the performance of his duties for
reckless driving and for being involved in several
vehicular accidents.34 The records, nonetheless, failed to
show that the said charges were proven and that
respondent was duly informed and heard with regard to
the accusations. Since the petitioner, as an employer, is
burdened to prove just cause for terminating the
employment of respondent with clear and convincing
evidence, and that petitioner failed to discharge this
burden, we hold that respondent was dismissed without
just cause by the petitioner.
It has been established that petitioners failed to comply
with the requirement of substantial due process in
terminating the employment of respondent. We will
now determine whether the petitioner had complied
with the procedural aspect of a lawful dismissal.
In the termination of employment, the employer must
(a) give the employee a written notice specifying the
ground or grounds of termination, giving to said
employee reasonable opportunity within which to
explain his side; (b) conduct a hearing or conference
during which the employee concerned, with the
assistance of counsel if the employee so desires, is given
the opportunity to respond to the charge, present his
evidence or rebut the evidence presented against him;
and (c) give the employee a written notice of
termination indicating that upon due consideration of all
circumstances, grounds have been established to justify
his termination.35
Petitioner miserably failed to comply with the foregoing
requirements. There was nothing in the records which
evinces that petitioner had sent a written notice to the
respondent informing him of the ground or grounds of
his termination or the reason why he was deemed
resigned. It does not also appear that the petitioner held
a hearing or conference where the respondent was given
the opportunity to answer the charges of abandonment,
insubordination and habitual neglect of duty against
him. Neither did the petitioner send a written notice to
the respondent informing the latter that his service is
terminated after considering all the circumstances.
In view of the fact that the petitioner neglected to
observe the substantial and procedural due process in
terminating the employment of respondent, we rule that
the latter was illegally dismissed from work by the
petitioner.
Consequently, the respondent is entitled to
reinstatement without loss of seniority rights, full
backwages, inclusive of allowances, and other benefits
or their monetary equivalent computed from the time
his compensation was withheld from him up to the time
of his actual reinstatement as provided for under Article
279 of the Labor Code.
It appears, however, that respondent was not seeking
reinstatement. In his complaint for illegal dismissal
against petitioner, respondent stated:
RELIEF
Complainant/s pray/s for the following:
Reinstatement: No More.36
Respondent also sent to the petitioner a letter applying
for the position of a dispatcher or conductor.37 In the
said letter, the respondent explained that since he
cannot drive anymore due to his leg injury, he was
willing to be hired as a dispatcher or conductor. The
abovestated facts obviously show that respondent was
unwilling to be reinstated as a bus driver.
Even assuming that respondent is willing to be
reinstated as petitioners bus driver, the reinstatement is
still unwarranted. There is a serious doubt as to whether
the respondent is physically capable of driving a bus
based on the following undisputed facts: (1) respondent
was operated on and confined twice in two different
hospitals for a fractured left leg; (2) steel plates were
attached to his fractured leg;38 (3) each confinement
lasted for a month; (4) after his discharge from the
second confinement, respondent was still limping
heavily; (5) when respondent had reported for work to
the petitioner in January 1998, he was also
limping;39 and (6) respondent does not have a medical
certificate which guarantees that his leg injury has
already healed and that he is now physically capable of
driving a bus.
It should be stressed that petitioner is a common carrier
and, as such, is obliged to exercise extra-ordinary
diligence in transporting its passengers safely.40 To allow
the respondent to drive the petitioners bus under such
uncertain condition would, undoubtedly, expose to
danger the lives of the passengers and the property of
the petitioner. This would place the petitioner in
jeopardy of violating its extra-ordinary diligence
obligation and, thus, may be subjected to numerous
complaints and court suits. It is clear therefore that the
reinstatement of respondent not only would be
deleterious to the riding public but would also put
unreasonable burden on the business and interest of the
petitioner. In this regard, it should be remembered that
an employer may not be compelled to continue to
employ such persons whose continuance in the service
will patently be inimical to his interests.41
Based on the foregoing facts and circumstances, the
reinstatement of the respondent is no longer feasible.
Thus, in lieu of reinstatement, payment to respondent of
separation pay equivalent to one month pay for every
year of service is in order.42
WHEREFORE, the petition is PARTLY GRANTED insofar as
it prays for the non-reinstatement of respondent. The
Decision of the Court of Appeals dated 26 April 2004 in
CA-G.R. SP No. 74010, is hereby AFFIRMED with the
following MODIFICATIONS: Petitioner is ordered to pay
the respondent, in lieu of reinstatement, separation pay
of ONE (1) MONTH PAY for every year of service, and full
backwages inclusive of allowances and other benefits or
their monetary equivalent from 1 January 1998 up to the
finality of this Decision. No costs. SO ORDERED.