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CALTEX (PHILIPPINES), INC. petitioner, vs. SULPICIO LINES, INC., GO SIOC SO, ENRIQUE S.

GO,
EUSEBIO S. GO, CARLOS S. GO, VICTORIANO S. GO, DOMINADOR S. GO, RICARDO S.
GO, EDWARD S. GO, ARTURO S. GO, EDGAR S. GO, EDMUND S. GO, FRANCISCO
SORIANO, VECTOR SHIPPING CORPORATION, TERESITA G. CAEZAL AND SOTERA E.
CAEZAL, respondents.

DECISION
PARDO, J.:

Is the charterer of a sea vessel liable for damages resulting from a collision between the
chartered vessel and a passenger ship?
When MT Vector left the port of Limay, Bataan, on December 19, 1987 carrying
petroleum products of Caltex (Philippines), Inc. (hereinafter Caltex) no one could have
guessed that it would collide with MV Doa Paz, killing almost all the passengers and crew
members of both ships, and thus resulting in one of the countrys worst maritime disasters.
The petition before us seeks to reverse the Court of Appeals decision[1]holding petitioner
jointly liable with the operator of MT Vector for damages when the latter collided with
Sulpicio Lines, Inc.s passenger ship MV Doa Paz.
The facts are as follows:
On December 19, 1987, motor tanker MT Vector left Limay, Bataan, at about 8:00 p.m.,
enroute to Masbate, loaded with 8,800 barrels of petroleum products shipped by petitioner
Caltex.[2] MT Vector is a tramping motor tanker owned and operated by Vector Shipping
Corporation, engaged in the business of transporting fuel products such as gasoline,
kerosene, diesel and crude oil. During that particular voyage, the MT Vector carried on
board gasoline and other oil products owned by Caltex by virtue of a charter contract
between them.[3]
On December 20, 1987, at about 6:30 a.m., the passenger ship MV Doa Paz left the port
of Tacloban headed for Manila with a complement of 59 crew members including the
master and his officers, and passengers totaling 1,493 as indicated in the Coast Guard
Clearance.[4] The MV Doa Paz is a passenger and cargo vessel owned and operated by
Sulpicio Lines, Inc. plying the route of Manila/ Tacloban/ Catbalogan/ Manila/ Catbalogan/
Tacloban/ Manila, making trips twice a week.
At about 10:30 p.m. of December 20, 1987, the two vessels collided in the open sea
within the vicinity of Dumali Point between Marinduque and Oriental Mindoro. All the
crewmembers of MV Doa Paz died, while the two survivors from MT Vector claimed that they
were sleeping at the time of the incident.
The MV Doa Paz carried an estimated 4,000 passengers; many indeed, were not in the
passenger manifest. Only 24 survived the tragedy after having been rescued from the
burning waters by vessels that responded to distress calls.[5] Among those who perished were
public school teacher Sebastian Caezal (47 years old) and his daughter Corazon Caezal (11
years old), both unmanifested passengers but proved to be on board the vessel.
On March 22, 1988, the board of marine inquiry in BMI Case No. 653-87 after investigation
found that the MT Vector, its registered operator Francisco Soriano, and its owner and actual
operator Vector Shipping Corporation, were at fault and responsible for its collision with MV
Doa Paz.[6]
On February 13, 1989, Teresita Caezal and Sotera E. Caezal, Sebastian Caezals wife and
mother respectively, filed with the Regional Trial Court, Branch 8, Manila, a complaint for
Damages Arising from Breach of Contract of Carriage against Sulpicio Lines, Inc. (hereafter
Sulpicio). Sulpicio, in turn, filed a third party complaint against Francisco Soriano, Vector
Shipping Corporation and Caltex (Philippines), Inc. Sulpicio alleged that Caltex chartered MT
Vector with gross and evident bad faith knowing fully well that MT Vector was improperly
manned, ill-equipped, unseaworthy and a hazard to safe navigation; as a result, it rammed
against MV Doa Paz in the open sea setting MT Vectors highly flammable cargo ablaze.
On September 15, 1992, the trial court rendered decision dismissing the third party
complaint against petitioner. The dispositive portion reads:

WHEREFORE, judgement is hereby rendered in favor of plaintiffs and against defendant-3rd


party plaintiff Sulpicio Lines, Inc., to wit:

1. For the death of Sebastian E. Caezal and his 11-year old daughter Corazon G. Caezal,
including loss of future earnings of said Sebastian, moral and exemplary damages, attorneys
fees, in the total amount of P 1,241,287.44 and finally;

2. The statutory costs of the proceedings.

Likewise, the 3rd party complaint is hereby DISMISSED for want of substantiation and with
costs against the 3rd party plaintiff.

IT IS SO ORDERED.

DONE IN MANILA, this 15th day of September 1992.

ARSENIO M. GONONG

Judge[7]

On appeal to the Court of Appeals interposed by Sulpicio Lines, Inc., on April 15, 1997,
the Court of Appeal modified the trial courts ruling and included petitioner Caltex as one of
the those liable for damages. Thus:

WHEREFORE, in view of all the foregoing, the judgment rendered by the Regional Trial Court is
hereby MODIFIED as follows:

WHEREFORE, defendant Sulpicio Lines, Inc., is ordered to pay the heirs of Sebastian E. Caezal
and Corazon Caezal:

1. Compensatory damages for the death of Sebastian E.Caezal and Corazon Caezal the
total amount of ONE HUNDRED THOUSAND PESOS (P100,000);

2. Compensatory damages representing the unearned income of Sebastian E. Caezal, in the


total amount of THREE HUNDRED SIX THOUSAND FOUR HUNDRED EIGHTY (P306,480.00) PESOS;

3. Moral damages in the amount of THREE HUNDRED THOUSAND PESOS (P 300,000.00);

4. Attorneys fees in the concept of actual damages in the amount of FIFTY THOUSAND PESOS
(P 50,000.00);

5. Costs of the suit.

Third party defendants Vector Shipping Co. and Caltex (Phils.), Inc. are held equally liable
under the third party complaint to reimburse/indemnify defendant Sulpicio Lines, Inc. of the
above-mentioned damages, attorneys fees and costs which the latter is adjudged to pay
plaintiffs, the same to be shared half by Vector Shipping Co. (being the vessel at fault for the
collision) and the other half by Caltex (Phils.), Inc. (being the charterer that negligently
caused the shipping of combustible cargo aboard an unseaworthy vessel).

SO ORDERED.

JORGE S. IMPERIAL

Associate Justice

WE CONCUR:
RAMON U. MABUTAS. JR. PORTIA ALIO HERMACHUELOS

Associate Justice Associate Justice[8]

Hence, this petition.


We find the petition meritorious.
First: The charterer has no liability for damages under Philippine Maritime laws.
The respective rights and duties of a shipper and the carrier depends not on whether the
carrier is public or private, but on whether the contract of carriage is a bill of lading or
equivalent shipping documents on the one hand, or a charter party or similar contract on
the other.[9]
Petitioner and Vector entered into a contract of affreightment, also known as a voyage
charter.[10]
A charter party is a contract by which an entire ship, or some principal part thereof, is let
by the owner to another person for a specified time or use; a contract of affreightment is
one by which the owner of a ship or other vessel lets the whole or part of her to a merchant
or other person for the conveyance of goods, on a particular voyage, in consideration of the
payment of freight.[11]
A contract of affreightment may be either time charter, wherein the leased vessel is
leased to the charterer for a fixed period of time, or voyage charter, wherein the ship is
leased for a single voyage. In both cases, the charter-party provides for the hire of the vessel
only, either for a determinate period of time or for a single or consecutive voyage, the ship
owner to supply the ships store, pay for the wages of the master of the crew, and defray the
expenses for the maintenance of the ship.[12]
Under a demise or bareboat charter on the other hand, the charterer mans the vessel
with his own people and becomes, in effect, the owner for the voyage or service stipulated,
subject to liability for damages caused by negligence.
If the charter is a contract of affreightment, which leaves the general owner in possession
of the ship as owner for the voyage, the rights and the responsibilities of ownership rest on
the owner. The charterer is free from liability to third persons in respect of the ship.[13]
Second : MT Vector is a common carrier
Charter parties fall into three main categories: (1) Demise or bareboat, (2) time charter,
(3) voyage charter. Does a charter party agreement turn the common carrier into a private
one? We need to answer this question in order to shed light on the responsibilities of the
parties.
In this case, the charter party agreement did not convert the common carrier into a
private carrier. The parties entered into a voyage charter, which retains the character of the
vessel as a common carrier.
In Planters Products, Inc. vs. Court of Appeals,[14] we said:

It is therefore imperative that a public carrier shall remain as such, notwithstanding the
charter of the whole or portion of a vessel by one or more persons, provided the charter is
limited to the ship only, as in the case of a time-charter or voyage charter. It is only when the
charter includes both the vessel and its crew, as in a bareboat or demise that a common
carrier becomes private, at least insofar as the particular voyage covering the charter-party
is concerned. Indubitably, a ship-owner in a time or voyage charter retains possession and
control of the ship, although her holds may, for the moment, be the property of the
charterer.

Later, we ruled in Coastwise Lighterage Corporation vs. Court of Appeals:[15]

Although a charter party may transform a common carrier into a private one, the same
however is not true in a contract of affreightment xxx
A common carrier is a person or corporation whose regular business is to carry
passengers or property for all persons who may choose to employ and to remunerate
him.[16] MT Vector fits the definition of a common carrier under Article 1732 of the Civil
Code. In Guzman vs. Court of Appeals,[17] we ruled:
The Civil Code defines common carriers in the following terms:

Article 1732. Common carriers are persons, corporations, firms or associations engaged in the
business of carrying or transporting passengers for passengers or goods or both, by land,
water, or air for compensation, offering their services to the public.

The above article makes no distinction between one whose principal business activity is the
carrying of persons or goods or both, and one who does such carrying only as
an ancillary activity (in local idiom, as a sideline). Article 1732 also carefully avoids making
any distinction between a person or enterprise offering transportation service on a regular or
scheduled basis and one offering such services on a an occasional, episodic or unscheduled
basis. Neither does Article 1732 distinguish between a carrier offering its services to the
general public, i.e., the general community or population, and one who offers services or
solicits business only from a narrow segment of the general population. We think that Article
1733 deliberately refrained from making such distinctions.

It appears to the Court that private respondent is properly characterized as a common


carrier even though he merely back-hauled goods for other merchants from Manila to
Pangasinan, although such backhauling was done on a periodic, occasional rather than
regular or scheduled manner, and even though respondents principal occupation was not
the carriage of goods for others. There is no dispute that private respondent charged his
customers a fee for hauling their goods; that the fee frequently fell below commercial freight
rates is not relevant here.

Under the Carriage of Goods by Sea Act :

Sec. 3. (1) The carrier shall be bound before and at the beginning of the voyage to exercise
due diligence to -

(a) Make the ship seaworthy;


(b) Properly man, equip, and supply the ship;
xxx xxx xxx
Thus, the carriers are deemed to warrant impliedly the seaworthiness of the ship. For a
vessel to be seaworthy, it must be adequately equipped for the voyage and manned with a
sufficient number of competent officers and crew. The failure of a common carrier to
maintain in seaworthy condition the vessel involved in its contract of carriage is a clear
breach of its duty prescribed in Article 1755 of the Civil Code.[18]
The provisions owed their conception to the nature of the business of common
carriers. This business is impressed with a special public duty. The public must of necessity rely
on the care and skill of common carriers in the vigilance over the goods and safety of the
passengers, especially because with the modern development of science and invention,
transportation has become more rapid, more complicated and somehow more
hazardous.[19] For these reasons, a passenger or a shipper of goods is under no obligation to
conduct an inspection of the ship and its crew, the carrier being obliged by law to impliedly
warrant its seaworthiness.
This aside, we now rule on whether Caltex is liable for damages under the Civil Code.
Third: Is Caltex liable for damages under the Civil Code?
We rule that it is not.
Sulpicio argues that Caltex negligently shipped its highly combustible fuel cargo aboard
an unseaworthy vessel such as the MT Vector when Caltex:
1. Did not take steps to have M/T Vectors certificate of inspection and coastwise
license renewed;
2. Proceeded to ship its cargo despite defects found by Mr. Carlos Tan of Bataan
Refinery Corporation;
3. Witnessed M/T Vector submitting fake documents and certificates to the Philippine
Coast Guard.
Sulpicio further argues that Caltex chose MT Vector to transport its cargo despite these
deficiencies:
1. The master of M/T Vector did not posses the required Chief Mate license to
command and navigate the vessel;
2. The second mate, Ronaldo Tarife, had the license of a Minor Patron, authorized to
navigate only in bays and rivers when the subject collision occurred in the open
sea;
3. The Chief Engineer, Filoteo Aguas, had no license to operate the engine of the
vessel;
4. The vessel did not have a Third Mate, a radio operator and a lookout; and
5. The vessel had a defective main engine.[20]
As basis for the liability of Caltex, the Court of Appeals relied on Articles 20 and 2176 of
the Civil Code, which provide:

Article 20. - Every person who contrary to law, willfully or negligently causes damage to
another, shall indemnify the latter for the same.

Article 2176. - Whoever by act or omission causes damage to another, there being fault or
negligence, is obliged to pay for the damage done. Such fault or negligence, if there is no
pre-existing contractual relation between the parties, is called a quasi-delict and is
governed by the provisions of this Chapter.

And what is negligence?


The Civil Code provides:

Article 1173. The fault or negligence of the obligor consists in the omission of that diligence
which is required by the nature of the obligation and corresponds with the circumstances of
the persons, of the time and of the place. When negligence shows bad faith, the provisions
of Article 1171 and 2201 paragraph 2, shall apply.

If the law does not state the diligence which is to be observed in the performance, that
which is expected of a good father of a family shall be required.

In Southeastern College, Inc. vs. Court of Appeals,[21] we said that negligence, as


commonly understood, is conduct which naturally or reasonably creates undue risk or harm
to others. It may be the failure to observe that degree of care, precaution, and vigilance,
which the circumstances justly demand, or the omission to do something which ordinarily
regulate the conduct of human affairs, would do.
The charterer of a vessel has no obligation before transporting its cargo to ensure that
the vessel it chartered complied with all legal requirements. The duty rests upon the common
carrier simply for being engaged in public service.[22] The Civil Code demands diligence
which is required by the nature of the obligation and that which corresponds with the
circumstances of the persons, the time and the place.Hence, considering the nature of the
obligation between Caltex and MT Vector, the liability as found by the Court of Appeals is
without basis.
The relationship between the parties in this case is governed by special laws. Because of
the implied warranty of seaworthiness,[23] shippers of goods, when transacting with common
carriers, are not expected to inquire into the vessels seaworthiness, genuineness of its licenses
and compliance with all maritime laws. To demand more from shippers and hold them liable
in case of failure exhibits nothing but the futility of our maritime laws insofar as the protection
of the public in general is concerned. By the same token, we cannot expect passengers to
inquire every time they board a common carrier, whether the carrier possesses the necessary
papers or that all the carriers employees are qualified. Such a practice would be an
absurdity in a business where time is always of the essence. Considering the nature of
transportation business, passengers and shippers alike customarily presume that common
carriers possess all the legal requisites in its operation.
Thus, the nature of the obligation of Caltex demands ordinary diligence like any other
shipper in shipping his cargoes.
A cursory reading of the records convinces us that Caltex had reasons to believe that MT
Vector could legally transport cargo that time of the year.
Atty. Poblador: Mr. Witness, I direct your attention to this portion here containing the entries
here under VESSELS DOCUMENTS
1. Certificate of Inspection No. 1290-85, issued December 21, 1986, and Expires
December 7, 1987, Mr. Witness, what steps did you take regarding the impending
expiry of the C.I. or the Certificate of Inspection No. 1290-85 during the hiring of MT
Vector?
Apolinar Ng: At the time when I extended the Contract, I did nothing because the tanker
has a valid C.I. which will expire on December 7, 1987 but on the last week of
November, I called the attention of Mr. Abalos to ensure that the C.I. be renewed and
Mr. Abalos, in turn, assured me they will renew the same.
Q: What happened after that?
A: On the first week of December, I again made a follow-up from Mr. Abalos, and said
they were going to send me a copy as soon as possible, sir.[24]
xxx xxx xxx
Q: What did you do with the C.I.?
A: We did not insist on getting a copy of the C.I. from Mr. Abalos on the first place,
because of our long business relation, we trust Mr. Abalos and the fact that the vessel
was able to sail indicates that the documents are in order. xxx[25]
On cross examination -
Atty. Sarenas: This being the case, and this being an admission by you, this Certificate of
Inspection has expired on December 7. Did it occur to you not to let the vessel sail on
that day because of the very approaching date of expiration?
Apolinar Ng: No sir, because as I said before, the operation Manager assured us that they
were able to secure a renewal of the Certificate of Inspection and that they will in
time submit us a copy.[26]
Finally, on Mr. Ngs redirect examination:
Atty. Poblador: Mr. Witness, were you aware of the pending expiry of the Certificate of
Inspection in the coastwise license on December 7, 1987. What was your assurance for
the record that this document was renewed by the MT Vector?
Atty. Sarenas: xxx
Atty. Poblador: The certificate of Inspection?
A: As I said, firstly, we trusted Mr. Abalos as he is a long time business partner; secondly,
those three years, they were allowed to sail by the Coast Guard. That are some that
make me believe that they in fact were able to secure the necessary renewal.
Q: If the Coast Guard clears a vessel to sail, what would that mean?
Atty. Sarenas: Objection.
Court: He already answered that in the cross examination to the effect that if it was
allowed, referring to MV Vector, to sail, where it is loaded and that it was scheduled
for a destination by the Coast Guard, it means that it has Certificate of Inspection
extended as assured to this witness by Restituto Abalos. That in no case MV Vector will
be allowed to sail if the Certificate of Inspection is, indeed, not to be extended. That
was his repeated explanation to the cross-examination. So, there is no need to clarify
the same in the re-direct examination.[27]
Caltex and Vector Shipping Corporation had been doing business since 1985, or for
about two years before the tragic incident occurred in 1987. Past services rendered showed
no reason for Caltex to observe a higher degree of diligence.
Clearly, as a mere voyage charterer, Caltex had the right to presume that the ship was
seaworthy as even the Philippine Coast Guard itself was convinced of its seaworthiness. All
things considered, we find no legal basis to hold petitioner liable for damages.
As Vector Shipping Corporation did not appeal from the Court of Appeals decision, we
limit our ruling to the liability of Caltex alone. However, we maintain the Court of Appeals
ruling insofar as Vector is concerned .
WHEREFORE, the Court hereby GRANTS the petition and SETS ASIDE the decision of the
Court of Appeals in CA-G. R. CV No. 39626, promulgated on April 15, 1997, insofar as it held
Caltex liable under the third party complaint to reimburse/indemnify defendant Sulpicio
Lines, Inc. the damages the latter is adjudged to pay plaintiffs-appellees. The Court
AFFIRMS the decision of the Court of Appeals insofar as it orders Sulpicio Lines, Inc. to pay the
heirs of Sebastian E. Caezal and Corazon Caezal damages as set forth therein. Third-party
defendant-appellee Vector Shipping Corporation and Francisco Soriano are held liable to
reimburse/indemnify defendant Sulpicio Lines, Inc. whatever damages, attorneys fees and
costs the latter is adjudged to pay plaintiffs-appellees in the case.
No costs in this instance.
SO ORDERED.

[G.R. No. 137775. March 31, 2005]

FGU INSURANCE CORPORATION, petitioner, vs. THE COURT OF APPEALS, SAN MIGUEL
CORPORATION, and ESTATE OF ANG GUI, represented by LUCIO, JULIAN, and JAIME, all
surnamed ANG, and CO TO, respondents.

[G.R. No. 140704. March 31, 2005]

ESTATE OF ANG GUI, Represented by LUCIO, JULIAN and JAIME, all surnamed ANG, and CO
TO, petitioners, vs. THE HONORABLE COURT OF APPEALS, SAN MIGUEL CORP., and FGU
INSURANCE CORP., respondents.

DECISION
CHICO-NAZARIO, J.:

Before Us are two separate Petitions for review assailing the Decision[1] of the Court of
Appeals in CA-G.R. CV No. 49624 entitled, San Miguel Corporation, Plaintiff-Appellee versus
Estate of Ang Gui, represented by Lucio, Julian and Jaime, all surnamed Ang, and Co To,
Defendants-Appellants, ThirdParty Plaintiffs versus FGU Insurance Corporation, Third-Party
Defendant-Appellant, which affirmed in toto the decision[2] of the Regional Trial Court of
Cebu City, Branch 22. The dispositive portion of the Court of Appeals decision reads:

WHEREFORE, for all the foregoing, judgment is hereby rendered as follows:

1) Ordering defendants to pay plaintiff the sum of


P1,346,197.00 and an interest of 6% per annum to be reckoned from the filing of this
case on October 2, 1990;
2) Ordering defendants to pay plaintiff the sum of
P25,000.00 for attorneys fees and an additional sum of P10,000.00 as litigation
expenses;
3) With cost against defendants.

For the Third-Party Complaint:

1) Ordering third-party defendant FGU Insurance Company to pay and reimburse


defendants the amount of P632,700.00.[3]

The Facts

Evidence shows that Anco Enterprises Company (ANCO), a partnership between Ang
Gui and Co To, was engaged in the shipping business. It owned the M/T ANCO tugboat and
the D/B Lucio barge which were operated as common carriers. Since the D/B Lucio had no
engine of its own, it could not maneuver by itself and had to be towed by a tugboat for it to
move from one place to another.
On 23 September 1979, San Miguel Corporation (SMC) shipped from Mandaue City,
Cebu, on board the D/B Lucio, for towage by M/T ANCO, the following cargoes:

Bill of Lading No. Shipment Destination

1 25,000 cases Pale Pilsen Estancia, Iloilo


350 cases Cerveza Negra Estancia, Iloilo
2 15,000 cases Pale Pilsen San Jose, Antique
200 cases Cerveza Negra San Jose, Antique
The consignee for the cargoes covered by Bill of Lading No. 1 was SMCs Beer Marketing
Division (BMD)-Estancia Beer Sales Office, Estancia, Iloilo, while the consignee for the cargoes
covered by Bill of Lading No. 2 was SMCs BMD-San Jose Beer Sales Office, San Jose, Antique.
The D/B Lucio was towed by the M/T ANCO all the way from Mandaue City to San Jose,
Antique. The vessels arrived at San Jose, Antique, at about one oclock in the afternoon of 30
September 1979. The tugboat M/T ANCO left the barge immediately after reaching San
Jose, Antique.
When the barge and tugboat arrived at San Jose, Antique, in the afternoon of 30
September 1979, the clouds over the area were dark and the waves were already big. The
arrastre workers unloading the cargoes of SMC on board the D/B Lucio began to complain
about their difficulty in unloading the cargoes. SMCs District Sales Supervisor, Fernando
Macabuag, requested ANCOs representative to transfer the barge to a safer place
because the vessel might not be able to withstand the big waves.
ANCOs representative did not heed the request because he was confident that the
barge could withstand the waves. This, notwithstanding the fact that at that time, only the
M/T ANCO was left at the wharf of San Jose, Antique, as all other vessels already left the
wharf to seek shelter. With the waves growing bigger and bigger, only Ten Thousand Seven
Hundred Ninety (10,790) cases of beer were discharged into the custody of the arrastre
operator.
At about ten to eleven oclock in the evening of 01 October 1979, the crew of D/B Lucio
abandoned the vessel because the barges rope attached to the wharf was cut off by the
big waves. At around midnight, the barge run aground and was broken and the cargoes of
beer in the barge were swept away.
As a result, ANCO failed to deliver to SMCs consignee Twenty-Nine Thousand Two
Hundred Ten (29,210) cases of Pale Pilsen and Five Hundred Fifty (550) cases of Cerveza
Negra. The value per case of Pale Pilsen was Forty-Five Pesos and Twenty Centavos (P45.20).
The value of a case of Cerveza Negra was Forty-Seven Pesos and Ten Centavos (P47.10),
hence, SMCs claim against ANCO amounted to One Million Three Hundred Forty-Six
Thousand One Hundred Ninety-Seven Pesos (P1,346,197.00).
As a consequence of the incident, SMC filed a complaint for Breach of Contract of
Carriage and Damages against ANCO for the amount of One Million Three Hundred Forty-Six
Thousand One Hundred Ninety-Seven Pesos (P1,346,197.00) plus interest, litigation expenses
and Twenty-Five Percent (25%) of the total claim as attorneys fees.
Upon Ang Guis death, ANCO, as a partnership, was dissolved hence, on 26 January
1993, SMC filed a second amended complaint which was admitted by the Court impleading
the surviving partner, Co To and the Estate of Ang Gui represented by Lucio, Julian and
Jaime, all surnamed Ang. The substituted defendants adopted the original answer with
counterclaim of ANCO since the substantial allegations of the original complaint and the
amended complaint are practically the same.
ANCO admitted that the cases of beer Pale Pilsen and Cerveza Negra mentioned in the
complaint were indeed loaded on the vessel belonging to ANCO. It claimed however that it
had an agreement with SMC that ANCO would not be liable for any losses or damages
resulting to the cargoes by reason of fortuitous event. Since the cases of beer Pale Pilsen and
Cerveza Negra were lost by reason of a storm, a fortuitous event which battered and sunk
the vessel in which they were loaded, they should not be held liable. ANCO further asserted
that there was an agreement between them and SMC to insure the cargoes in order to
recover indemnity in case of loss. Pursuant to that agreement, the cargoes to the extent of
Twenty Thousand (20,000) cases was insured with FGU Insurance Corporation (FGU) for the
total amount of Eight Hundred Fifty-Eight Thousand Five Hundred Pesos (P858,500.00) per
Marine Insurance Policy No. 29591.
Subsequently, ANCO, with leave of court, filed a Third-Party Complaint against FGU,
alleging that before the vessel of ANCO left for San Jose, Antique with the cargoes owned
by SMC, the cargoes, to the extent of Twenty Thousand (20,000) cases, were insured with
FGU for a total amount of Eight Hundred Fifty-Eight Thousand Five Hundred Pesos
(P858,500.00) under Marine Insurance Policy No. 29591. ANCO further alleged that on or
about 02 October 1979, by reason of very strong winds and heavy waves brought about by
a passing typhoon, the vessel run aground near the vicinity of San Jose, Antique, as a result
of which, the vessel was totally wrecked and its cargoes owned by SMC were lost and/or
destroyed. According to ANCO, the loss of said cargoes occurred as a result of risks insured
against in the insurance policy and during the existence and lifetime of said insurance
policy. ANCO went on to assert that in the remote possibility that the court will order ANCO
to pay SMCs claim, the third-party defendant corporation should be held liable to indemnify
or reimburse ANCO whatever amounts, or damages, it may be required to pay to SMC.
In its answer to the Third-Party complaint, third-party defendant FGU admitted the
existence of the Insurance Policy under Marine Cover Note No. 29591 but maintained that
the alleged loss of the cargoes covered by the said insurance policy cannot be attributed
directly or indirectly to any of the risks insured against in the said insurance policy. According
to FGU, it is only liable under the policy to Third-party Plaintiff ANCO and/or Plaintiff SMC in
case of any of the following:
a) total loss of the entire shipment;
b) loss of any case as a result of the sinking of the vessel; or
c) loss as a result of the vessel being on fire.
Furthermore, FGU alleged that the Third-Party Plaintiff ANCO and Plaintiff SMC failed to
exercise ordinary diligence or the diligence of a good father of the family in the care and
supervision of the cargoes insured to prevent its loss and/or destruction.
Third-Party defendant FGU prayed for the dismissal of the Third-Party Complaint and
asked for actual, moral, and exemplary damages and attorneys fees.[1]
The trial court found that while the cargoes were indeed lost due to fortuitous event,
there was failure on ANCOs part, through their representatives, to observe the degree of
diligence required that would exonerate them from liability. The trial court thus held the
Estate of Ang Gui and Co To liable to SMC for the amount of the lost shipment. With respect
to the Third-Party complaint, the court a quo found FGU liable to bear Fifty-Three Percent
(53%) of the amount of the lost cargoes. According to the trial court:

. . . Evidence is to the effect that the D/B Lucio, on which the cargo insured, run-aground
and was broken and the beer cargoes on the said barge were swept away. It is the sense of
this Court that the risk insured against was the cause of the loss.

...

Since the total cargo was 40,550 cases which had a total amount of P1,833,905.00 and the
amount of the policy was only for P858,500.00, defendants as assured, therefore, were
considered co-insurers of third-party defendant FGU Insurance Corporation to the extent of
975,405.00 value of the cargo. Consequently, inasmuch as there was partial loss of only
P1,346,197.00, the assured shall bear 53% of the loss[4] [Emphasis ours]

The appellate court affirmed in toto the decision of the lower court and denied the
motion for reconsideration and the supplemental motion for reconsideration.
Hence, the petitions.

The Issues

In G.R. No. 137775, the grounds for review raised by petitioner FGU can be summarized
into two: 1) Whether or not respondent Court of Appeals committed grave abuse of
discretion in holding FGU liable under the insurance contract considering the circumstances
surrounding the loss of the cargoes; and 2) Whether or not the Court of Appeals committed
an error of law in holding that the doctrine of res judicata applies in the instant case.
In G.R. No. 140704, petitioner Estate of Ang Gui and Co To assail the decision of the
appellate court based on the following assignments of error: 1) The Court of Appeals
committed grave abuse of discretion in affirming the findings of the lower court that the
negligence of the crewmembers of the D/B Lucio was the proximate cause of the loss of the
cargoes; and 2) The respondent court acted with grave abuse of discretion when it ruled
that the appeal was without merit despite the fact that said court had accepted the
decision in Civil Case No. R-19341, as affirmed by the Court of Appeals and the Supreme
Court, as res judicata.

Ruling of the Court

First, we shall endeavor to dispose of the common issue raised by both petitioners in their
respective petitions for review, that is, whether or not the doctrine of res judicata applies in
the instant case.
It is ANCOs contention that the decision in Civil Case No. R-19341,[5] which was decided
in its favor, constitutes res judicata with respect to the issues raised in the case at bar.
The contention is without merit. There can be no res judicata as between Civil Case No.
R-19341 and the case at bar. In order for res judicata to be made applicable in a case, the
following essential requisites must be present: 1) the former judgment must be final; 2) the
former judgment must have been rendered by a court having jurisdiction over the subject
matter and the parties; 3) the former judgment must be a judgment or order on the merits;
and 4) there must be between the first and second action identity of parties, identity of
subject matter, and identity of causes of action.[6]
There is no question that the first three elements of res judicata as enumerated above
are indeed satisfied by the decision in Civil Case No. R-19341. However, the doctrine is still
inapplicable due to the absence of the last essential requisite of identity of parties, subject
matter and causes of action.
The parties in Civil Case No. R-19341 were ANCO as plaintiff and FGU as defendant while
in the instant case, SMC is the plaintiff and the Estate of Ang Gui represented by Lucio, Julian
and Jaime, all surnamed Ang and Co To as defendants, with the latter merely impleading
FGU as third-party defendant.
The subject matter of Civil Case No. R-19341 was the insurance contract entered into by
ANCO, the owner of the vessel, with FGU covering the vessel D/B Lucio, while in the instant
case, the subject matter of litigation is the loss of the cargoes of SMC, as shipper, loaded in
the D/B Lucio and the resulting failure of ANCO to deliver to SMCs consignees the lost cargo.
Otherwise stated, the controversy in the first case involved the rights and liabilities of the
shipowner vis--vis that of the insurer, while the present case involves the rights and liabilities of
the shipper vis--vis that of the shipowner. Specifically, Civil Case No. R-19341 was an action
for Specific Performance and Damages based on FGU Marine Hull Insurance Policy No. VMF-
MH-13519 covering the vessel D/B Lucio, while the instant case is an action for Breach of
Contract of Carriage and Damages filed by SMC against ANCO based on Bill of Lading No.
1 and No. 2, with defendant ANCO seeking reimbursement from FGU under Insurance Policy
No. MA-58486, should the former be held liable to pay SMC.
Moreover, the subject matter of the third-party complaint against FGU in this case is
different from that in Civil Case No. R-19341. In the latter, ANCO was suing FGU for the
insurance contract over the vessel while in the former, the third-party complaint arose from
the insurance contract covering the cargoes on board the D/B Lucio.
The doctrine of res judicata precludes the re-litigation of a particular fact or issue already
passed upon by a court of competent jurisdiction in a former judgment, in another action
between the same parties based on a different claim or cause of action. The judgment in
the prior action operates as estoppel only as to those matters in issue or points controverted,
upon the determination of which the finding or judgment was rendered.[7] If a particular
point or question is in issue in the second action, and the judgment will depend on the
determination of that particular point or question, a former judgment between the same
parties or their privies will be final and conclusive in the second if that same point or question
was in issue and adjudicated in the first suit.[8]
Since the case at bar arose from the same incident as that involved in Civil Case No. R-
19341, only findings with respect to matters passed upon by the court in the former judgment
are conclusive in the disposition of the instant case. A careful perusal of the decision in Civil
Case No. R-19341 will reveal that the pivotal issues resolved by the lower court, as affirmed
by both the Court of Appeals and the Supreme Court, can be summarized into three legal
conclusions: 1) that the D/B Lucio before and during the voyage was seaworthy; 2) that
there was proper notice of loss made by ANCO within the reglementary period; and 3) that
the vessel D/B Lucio was a constructive total loss.
Said decision, however, did not pass upon the issues raised in the instant case. Absent
therein was any discussion regarding the liability of ANCO for the loss of the cargoes. Neither
did the lower court pass upon the issue of the alleged negligence of the crewmembers of
the D/B Lucio being the cause of the loss of the cargoes owned by SMC.
Therefore, based on the foregoing discussion, we are reversing the findings of the Court
of Appeals that there is res judicata.
Anent ANCOs first assignment of error, i.e., the appellate court committed error in
concluding that the negligence of ANCOs representatives was the proximate cause of the
loss, said issue is a question of fact assailing the lower courts appreciation of evidence on the
negligence or lack thereof of the crewmembers of the D/B Lucio. As a rule, findings of fact of
lower courts, particularly when affirmed by the appellate court, are deemed final and
conclusive. The Supreme Court cannot review such findings on appeal, especially when they
are borne out by the records or are based on substantial evidence.[9] As held in the case
of Donato v. Court of Appeals,[10] in this jurisdiction, it is a fundamental and settled rule that
findings of fact by the trial court are entitled to great weight on appeal and should not be
disturbed unless for strong and cogent reasons because the trial court is in a better position
to examine real evidence, as well as to observe the demeanor of the witnesses while
testifying in the case.[11]
It is not the function of this Court to analyze or weigh evidence all over again, unless
there is a showing that the findings of the lower court are totally devoid of support or are
glaringly erroneous as to constitute palpable error or grave abuse of discretion.[12]
A careful study of the records shows no cogent reason to fault the findings of the lower
court, as sustained by the appellate court, that ANCOs representatives failed to exercise the
extraordinary degree of diligence required by the law to exculpate them from liability for the
loss of the cargoes.
First, ANCO admitted that they failed to deliver to the designated consignee the Twenty
Nine Thousand Two Hundred Ten (29,210) cases of Pale Pilsen and Five Hundred Fifty (550)
cases of Cerveza Negra.
Second, it is borne out in the testimony of the witnesses on record that the barge D/B
Lucio had no engine of its own and could not maneuver by itself. Yet, the patron of ANCOs
tugboat M/T ANCO left it to fend for itself notwithstanding the fact that as the two vessels
arrived at the port of San Jose, Antique, signs of the impending storm were already manifest.
As stated by the lower court, witness Mr. Anastacio Manilag testified that the captain or
patron of the tugboat M/T ANCO left the barge D/B Lucio immediately after it reached San
Jose, Antique, despite the fact that there were already big waves and the area was already
dark. This is corroborated by defendants own witness, Mr. Fernando Macabueg.[13]
The trial court continued:

At that precise moment, since it is the duty of the defendant to exercise and observe
extraordinary diligence in the vigilance over the cargo of the plaintiff, the patron or captain
of M/T ANCO, representing the defendant could have placed D/B Lucio in a very safe
location before they left knowing or sensing at that time the coming of a typhoon. The
presence of big waves and dark clouds could have warned the patron or captain of M/T
ANCO to insure the safety of D/B Lucio including its cargo. D/B Lucio being a barge, without
its engine, as the patron or captain of M/T ANCO knew, could not possibly maneuver by
itself. Had the patron or captain of M/T ANCO, the representative of the defendants
observed extraordinary diligence in placing the D/B Lucio in a safe place, the loss to the
cargo of the plaintiff could not have occurred. In short, therefore, defendants through their
representatives, failed to observe the degree of diligence required of them under the
provision of Art. 1733 of the Civil Code of the Philippines.[14]

Petitioners Estate of Ang Gui and Co To, in their Memorandum, asserted that the
contention of respondents SMC and FGU that the crewmembers of D/B Lucio should have
left port at the onset of the typhoon is like advising the fish to jump from the frying pan into
the fire and an advice that borders on madness.[15]
The argument does not persuade. The records show that the D/B Lucio was the only
vessel left at San Jose, Antique, during the time in question. The other vessels were transferred
and temporarily moved to Malandong, 5 kilometers from wharf where the barge
remained.[16] Clearly, the transferred vessels were definitely safer in Malandong than at the
port of San Jose, Antique, at that particular time, a fact which petitioners failed to dispute
ANCOs arguments boil down to the claim that the loss of the cargoes was caused by the
typhoon Sisang, a fortuitous event (caso fortuito), and there was no fault or negligence on
their part. In fact, ANCO claims that their crewmembers exercised due diligence to prevent
or minimize the loss of the cargoes but their efforts proved no match to the forces unleashed
by the typhoon which, in petitioners own words was, by any yardstick, a natural calamity, a
fortuitous event, an act of God, the consequences of which petitioners could not be held
liable for.[17]
The Civil Code provides:

Art. 1733. Common carriers, from the nature of their business and for reasons of public policy
are bound to observe extraordinary diligence in the vigilance over the goods and for the
safety of the passengers transported by them, according to all the circumstances of each
case.

Such extraordinary diligence in vigilance over the goods is further expressed in Articles 1734,
1735, and 1745 Nos. 5, 6, and 7 . . .

Art. 1734. Common carriers are responsible for the loss, destruction, or deterioration of the
goods, unless the same is due to any of the following causes only:

(1) Flood, storm, earthquake, lightning, or other natural disaster or calamity;

...

Art. 1739. In order that the common carrier may be exempted from responsibility, the natural
disaster must have been the proximate and only cause of the loss. However, the common
carrier must exercise due diligence to prevent or minimize loss before, during and after the
occurrence of flood, storm, or other natural disaster in order that the common carrier may
be exempted from liability for the loss, destruction, or deterioration of the goods . . .
(Emphasis supplied)

Caso fortuito or force majeure (which in law are identical insofar as they exempt an
obligor from liability)[18] by definition, are extraordinary events not foreseeable or avoidable,
events that could not be foreseen, or which though foreseen, were inevitable. It is therefore
not enough that the event should not have been foreseen or anticipated, as is commonly
believed but it must be one impossible to foresee or to avoid.[19]
In this case, the calamity which caused the loss of the cargoes was not unforeseen nor
was it unavoidable. In fact, the other vessels in the port of San Jose, Antique, managed to
transfer to another place, a circumstance which prompted SMCs District Sales Supervisor to
request that the D/B Lucio be likewise transferred, but to no avail. The D/B Lucio had no
engine and could not maneuver by itself. Even if ANCOs representatives wanted to transfer
it, they no longer had any means to do so as the tugboat M/T ANCO had already departed,
leaving the barge to its own devices. The captain of the tugboat should have had the
foresight not to leave the barge alone considering the pending storm.
While the loss of the cargoes was admittedly caused by the typhoon Sisang, a natural
disaster, ANCO could not escape liability to respondent SMC. The records clearly show the
failure of petitioners representatives to exercise the extraordinary degree of diligence
mandated by law. To be exempted from responsibility, the natural disaster should have been
the proximate and only cause of the loss.[20] There must have been no contributory
negligence on the part of the common carrier. As held in the case of Limpangco Sons v.
Yangco Steamship Co.:[21]

. . . To be exempt from liability because of an act of God, the tug must be free from any
previous negligence or misconduct by which that loss or damage may have been
occasioned. For, although the immediate or proximate cause of the loss in any given
instance may have been what is termed an act of God, yet, if the tug unnecessarily
exposed the two to such accident by any culpable act or omission of its own, it is not
excused.[22]

Therefore, as correctly pointed out by the appellate court, there was blatant negligence
on the part of M/T ANCOs crewmembers, first in leaving the engine-less barge D/B Lucio at
the mercy of the storm without the assistance of the tugboat, and again in failing to heed
the request of SMCs representatives to have the barge transferred to a safer place, as was
done by the other vessels in the port; thus, making said blatant negligence the proximate
cause of the loss of the cargoes.
We now come to the issue of whether or not FGU can be held liable under the insurance
policy to reimburse ANCO for the loss of the cargoes despite the findings of the respondent
court that such loss was occasioned by the blatant negligence of the latters employees.
One of the purposes for taking out insurance is to protect the insured against the
consequences of his own negligence and that of his agents. Thus, it is a basic rule in
insurance that the carelessness and negligence of the insured or his agents constitute no
defense on the part of the insurer.[23] This rule however presupposes that the loss has
occurred due to causes which could not have been prevented by the insured, despite the
exercise of due diligence.
The question now is whether there is a certain degree of negligence on the part of the
insured or his agents that will deprive him the right to recover under the insurance contract.
We say there is. However, to what extent such negligence must go in order to exonerate the
insurer from liability must be evaluated in light of the circumstances surrounding each case.
When evidence show that the insureds negligence or recklessness is so gross as to be
sufficient to constitute a willful act, the insurer must be exonerated.
In the case of Standard Marine Ins. Co. v. Nome Beach L. & T. Co.,[24] the United States
Supreme Court held that:

The ordinary negligence of the insured and his agents has long been held as a part of the
risk which the insurer takes upon himself, and the existence of which, where it is the
proximate cause of the loss, does not absolve the insurer from liability. But willful exposure,
gross negligence, negligence amounting to misconduct, etc., have often been held to
release the insurer from such liability.[25] [Emphasis ours]

...

In the case of Williams v. New England Insurance Co., 3 Cliff. 244, Fed. Cas. No. 17,731, the
owners of an insured vessel attempted to put her across the bar at Hatteras Inlet. She struck
on the bar and was wrecked. The master knew that the depth of water on the bar was such
as to make the attempted passage dangerous. Judge Clifford held that, under the
circumstances, the loss was not within the protection of the policy, saying:

Authorities to prove that persons insured cannot recover for a loss occasioned by their own
wrongful acts are hardly necessary, as the proposition involves an elementary principle of
universal application. Losses may be recovered by the insured, though remotely occasioned
by the negligence or misconduct of the master or crew, if proximately caused by the perils
insured against, because such mistakes and negligence are incident to navigation and
constitute a part of the perils which those who engage in such adventures are obliged to
incur; but it was never supposed that the insured could recover indemnity for a loss
occasioned by his own wrongful act or by that of any agent for whose conduct he was
responsible.[26] [Emphasis ours]

From the above-mentioned decision, the United States Supreme Court has made a
distinction between ordinary negligence and gross negligence or negligence amounting to
misconduct and its effect on the insureds right to recover under the insurance contract.
According to the Court, while mistake and negligence of the master or crew are incident to
navigation and constitute a part of the perils that the insurer is obliged to incur, such
negligence or recklessness must not be of such gross character as to amount to misconduct
or wrongful acts; otherwise, such negligence shall release the insurer from liability under the
insurance contract.
In the case at bar, both the trial court and the appellate court had concluded from the
evidence that the crewmembers of both the D/B Lucio and the M/T ANCO were blatantly
negligent. To wit:
There was blatant negligence on the part of the employees of defendants-appellants when
the patron (operator) of the tug boat immediately left the barge at the San Jose, Antique
wharf despite the looming bad weather. Negligence was likewise exhibited by the
defendants-appellants representative who did not heed Macabuags request that the barge
be moved to a more secure place. The prudent thing to do, as was done by the other sea
vessels at San Jose, Antique during the time in question, was to transfer the vessel to a safer
wharf. The negligence of the defendants-appellants is proved by the fact that on 01
October 1979, the only simple vessel left at the wharf in San Jose was the D/B
Lucio.[27] [Emphasis ours]

As stated earlier, this Court does not find any reason to deviate from the conclusion
drawn by the lower court, as sustained by the Court of Appeals, that ANCOs representatives
had failed to exercise extraordinary diligence required of common carriers in the shipment of
SMCs cargoes. Such blatant negligence being the proximate cause of the loss of the
cargoes amounting to One Million Three Hundred Forty-Six Thousand One Hundred Ninety-
Seven Pesos (P1,346,197.00)
This Court, taking into account the circumstances present in the instant case, concludes
that the blatant negligence of ANCOs employees is of such gross character that it amounts
to a wrongful act which must exonerate FGU from liability under the insurance contract.
WHEREFORE, premises considered, the Decision of the Court of Appeals dated 24
February 1999 is hereby AFFIRMED with MODIFICATION dismissing the third-party complaint.
SO ORDERED.

G.R. No. 101503 September 15, 1993

PLANTERS PRODUCTS, INC., petitioner,


vs.
COURT OF APPEALS, SORIAMONT STEAMSHIP AGENCIES AND KYOSEI KISEN KABUSHIKI
KAISHA, respondents.

Gonzales, Sinense, Jimenez & Associates for petitioner.

Siguion Reyna, Montecillo & Ongsiako Law Office for private respondents.

BELLOSILLO, J.:

Does a charter-party 1 between a shipowner and a charterer transform a common carrier


into a private one as to negate the civil law presumption of negligence in case of loss or
damage to its cargo?

Planters Products, Inc. (PPI), purchased from Mitsubishi International Corporation (MITSUBISHI)
of New York, U.S.A., 9,329.7069 metric tons (M/T) of Urea 46% fertilizer which the latter shipped
in bulk on 16 June 1974 aboard the cargo vessel M/V "Sun Plum" owned by private
respondent Kyosei Kisen Kabushiki Kaisha (KKKK) from Kenai, Alaska, U.S.A., to Poro Point, San
Fernando, La Union, Philippines, as evidenced by Bill of Lading No. KP-1 signed by the master
of the vessel and issued on the date of departure.

On 17 May 1974, or prior to its voyage, a time charter-party on the vessel M/V "Sun Plum"
pursuant to the Uniform General Charter 2 was entered into between Mitsubishi as
shipper/charterer and KKKK as shipowner, in Tokyo, Japan. 3Riders to the aforesaid charter-
party starting from par. 16 to 40 were attached to the pre-printed agreement. Addenda Nos.
1, 2, 3 and 4 to the charter-party were also subsequently entered into on the 18th, 20th, 21st
and 27th of May 1974, respectively.
Before loading the fertilizer aboard the vessel, four (4) of her holds 4 were all presumably
inspected by the charterer's representative and found fit to take a load of urea in bulk
pursuant to par. 16 of the charter-party which reads:

16. . . . At loading port, notice of readiness to be accomplished by certificate


from National Cargo Bureau inspector or substitute appointed by charterers for
his account certifying the vessel's readiness to receive cargo spaces. The vessel's
hold to be properly swept, cleaned and dried at the vessel's expense and the
vessel to be presented clean for use in bulk to the satisfaction of the inspector
before daytime commences. (emphasis supplied)

After the Urea fertilizer was loaded in bulk by stevedores hired by and under the supervision
of the shipper, the steel hatches were closed with heavy iron lids, covered with three (3)
layers of tarpaulin, then tied with steel bonds. The hatches remained closed and tightly
sealed throughout the entire voyage. 5

Upon arrival of the vessel at her port of call on 3 July 1974, the steel pontoon hatches were
opened with the use of the vessel's boom. Petitioner unloaded the cargo from the holds into
its steelbodied dump trucks which were parked alongside the berth, using metal scoops
attached to the ship, pursuant to the terms and conditions of the charter-partly (which
provided for an F.I.O.S. clause). 6 The hatches remained open throughout the duration of the
discharge. 7

Each time a dump truck was filled up, its load of Urea was covered with tarpaulin before it
was transported to the consignee's warehouse located some fifty (50) meters from the wharf.
Midway to the warehouse, the trucks were made to pass through a weighing scale where
they were individually weighed for the purpose of ascertaining the net weight of the cargo.
The port area was windy, certain portions of the route to the warehouse were sandy and the
weather was variable, raining occasionally while the discharge was in progress. 8 The
petitioner's warehouse was made of corrugated galvanized iron (GI) sheets, with an opening
at the front where the dump trucks entered and unloaded the fertilizer on the warehouse
floor. Tarpaulins and GI sheets were placed in-between and alongside the trucks to contain
spillages of the ferilizer. 9

It took eleven (11) days for PPI to unload the cargo, from 5 July to 18 July 1974 (except July
12th, 14th and 18th). 10A private marine and cargo surveyor, Cargo Superintendents
Company Inc. (CSCI), was hired by PPI to determine the "outturn" of the cargo shipped, by
taking draft readings of the vessel prior to and after discharge. 11 The survey report submitted
by CSCI to the consignee (PPI) dated 19 July 1974 revealed a shortage in the cargo of
106.726 M/T and that a portion of the Urea fertilizer approximating 18 M/T was contaminated
with dirt. The same results were contained in a Certificate of Shortage/Damaged Cargo
dated 18 July 1974 prepared by PPI which showed that the cargo delivered was indeed
short of 94.839 M/T and about 23 M/T were rendered unfit for commerce, having been
polluted with sand, rust and
dirt. 12

Consequently, PPI sent a claim letter dated 18 December 1974 to Soriamont Steamship
Agencies (SSA), the resident agent of the carrier, KKKK, for P245,969.31 representing the cost
of the alleged shortage in the goods shipped and the diminution in value of that portion said
to have been contaminated with dirt. 13

Respondent SSA explained that they were not able to respond to the consignee's claim for
payment because, according to them, what they received was just a request for
shortlanded certificate and not a formal claim, and that this "request" was denied by them
because they "had nothing to do with the discharge of the shipment." 14 Hence, on 18 July
1975, PPI filed an action for damages with the Court of First Instance of Manila. The
defendant carrier argued that the strict public policy governing common carriers does not
apply to them because they have become private carriers by reason of the provisions of the
charter-party. The court a quo however sustained the claim of the plaintiff against the
defendant carrier for the value of the goods lost or damaged when it ruled thus: 15

. . . Prescinding from the provision of the law that a common carrier is presumed
negligent in case of loss or damage of the goods it contracts to transport, all
that a shipper has to do in a suit to recover for loss or damage is to show receipt
by the carrier of the goods and to delivery by it of less than what it
received. After that, the burden of proving that the loss or damage was due to
any of the causes which exempt him from liability is shipted to the carrier,
common or private he may be. Even if the provisions of the charter-party
aforequoted are deemed valid, and the defendants considered private
carriers, it was still incumbent upon them to prove that the shortage or
contamination sustained by the cargo is attributable to the fault or negligence
on the part of the shipper or consignee in the loading, stowing, trimming and
discharge of the cargo. This they failed to do. By this omission, coupled with their
failure to destroy the presumption of negligence against them, the defendants
are liable (emphasis supplied).

On appeal, respondent Court of Appeals reversed the lower court and absolved the carrier
from liability for the value of the cargo that was lost or damaged. 16 Relying on the 1968 case
of Home Insurance Co. v. American Steamship Agencies, Inc., 17 the appellate court ruled
that the cargo vessel M/V "Sun Plum" owned by private respondent KKKK was a private
carrier and not a common carrier by reason of the time charterer-party. Accordingly, the
Civil Code provisions on common carriers which set forth a presumption of negligence do
not find application in the case at bar. Thus

. . . In the absence of such presumption, it was incumbent upon the plaintiff-


appellee to adduce sufficient evidence to prove the negligence of the
defendant carrier as alleged in its complaint. It is an old and well settled rule
that if the plaintiff, upon whom rests the burden of proving his cause of action,
fails to show in a satisfactory manner the facts upon which he bases his claim,
the defendant is under no obligation to prove his exception or defense
(Moran, Commentaries on the Rules of Court, Volume 6, p. 2, citing Belen v.
Belen, 13 Phil. 202).

But, the record shows that the plaintiff-appellee dismally failed to prove the
basis of its cause of action, i.e. the alleged negligence of defendant carrier. It
appears that the plaintiff was under the impression that it did not have to
establish defendant's negligence. Be that as it may, contrary to the trial court's
finding, the record of the instant case discloses ample evidence showing that
defendant carrier was not negligent in performing its obligation . . . 18 (emphasis
supplied).

Petitioner PPI appeals to us by way of a petition for review assailing the decision of the Court
of Appeals. Petitioner theorizes that the Home Insurance case has no bearing on the present
controversy because the issue raised therein is the validity of a stipulation in the charter-party
delimiting the liability of the shipowner for loss or damage to goods cause by want of due
deligence on its part or that of its manager to make the vessel seaworthy in all respects, and
not whether the presumption of negligence provided under the Civil Code applies only to
common carriers and not to private carriers. 19 Petitioner further argues that since the
possession and control of the vessel remain with the shipowner, absent any stipulation to the
contrary, such shipowner should made liable for the negligence of the captain and crew. In
fine, PPI faults the appellate court in not applying the presumption of negligence against
respondent carrier, and instead shifting the onus probandi on the shipper to show want of
due deligence on the part of the carrier, when he was not even at hand to witness what
transpired during the entire voyage.

As earlier stated, the primordial issue here is whether a common carrier becomes a private
carrier by reason of a charter-party; in the negative, whether the shipowner in the instant
case was able to prove that he had exercised that degree of diligence required of him
under the law.

It is said that etymology is the basis of reliable judicial decisions in commercial cases. This
being so, we find it fitting to first define important terms which are relevant to our discussion.

A "charter-party" is defined as a contract by which an entire ship, or some principal part


thereof, is let by the owner to another person for a specified time or use; 20 a contract of
affreightment by which the owner of a ship or other vessel lets the whole or a part of her to a
merchant or other person for the conveyance of goods, on a particular voyage, in
consideration of the payment of freight; 21 Charter parties are of two types: (a) contract of
affreightment which involves the use of shipping space on vessels leased by the owner in
part or as a whole, to carry goods for others; and, (b) charter by demise or bareboat
charter, by the terms of which the whole vessel is let to the charterer with a transfer to him of
its entire command and possession and consequent control over its navigation, including the
master and the crew, who are his servants. Contract of affreightment may either be time
charter, wherein the vessel is leased to the charterer for a fixed period of time, or voyage
charter, wherein the ship is leased for a single voyage. 22 In both cases, the charter-party
provides for the hire of vessel only, either for a determinate period of time or for a single or
consecutive voyage, the shipowner to supply the ship's stores, pay for the wages of the
master and the crew, and defray the expenses for the maintenance of the ship.

Upon the other hand, the term "common or public carrier" is defined in Art. 1732 of the Civil
Code. 23 The definition extends to carriers either by land, air or water which hold themselves
out as ready to engage in carrying goods or transporting passengers or both for
compensation as a public employment and not as a casual occupation. The distinction
between a "common or public carrier" and a "private or special carrier" lies in the character
of the business, such that if the undertaking is a single transaction, not a part of the general
business or occupation, although involving the carriage of goods for a fee, the person or
corporation offering such service is a private carrier. 24

Article 1733 of the New Civil Code mandates that common carriers, by reason of the nature
of their business, should observe extraordinary diligence in the vigilance over the goods they
carry. 25 In the case of private carriers, however, the exercise of ordinary diligence in the
carriage of goods will suffice. Moreover, in the case of loss, destruction or deterioration of the
goods, common carriers are presumed to have been at fault or to have acted negligently,
and the burden of proving otherwise rests on them. 26 On the contrary, no such presumption
applies to private carriers, for whosoever alleges damage to or deterioration of the goods
carried has the onus of proving that the cause was the negligence of the carrier.

It is not disputed that respondent carrier, in the ordinary course of business, operates as a
common carrier, transporting goods indiscriminately for all persons. When petitioner
chartered the vessel M/V "Sun Plum", the ship captain, its officers and compliment were
under the employ of the shipowner and therefore continued to be under its direct
supervision and control. Hardly then can we charge the charterer, a stranger to the crew
and to the ship, with the duty of caring for his cargo when the charterer did not have any
control of the means in doing so. This is evident in the present case considering that the
steering of the ship, the manning of the decks, the determination of the course of the
voyage and other technical incidents of maritime navigation were all consigned to the
officers and crew who were screened, chosen and hired by the shipowner. 27

It is therefore imperative that a public carrier shall remain as such, notwithstanding the
charter of the whole or portion of a vessel by one or more persons, provided the charter is
limited to the ship only, as in the case of a time-charter or voyage-charter. It is only when the
charter includes both the vessel and its crew, as in a bareboat or demise that a common
carrier becomes private, at least insofar as the particular voyage covering the charter-party
is concerned. Indubitably, a shipowner in a time or voyage charter retains possession and
control of the ship, although her holds may, for the moment, be the property of the
charterer. 28
Respondent carrier's heavy reliance on the case of Home Insurance Co. v. American
Steamship Agencies, supra, is misplaced for the reason that the meat of the controversy
therein was the validity of a stipulation in the charter-party exempting the shipowners from
liability for loss due to the negligence of its agent, and not the effects of a special charter on
common carriers. At any rate, the rule in the United States that a ship chartered by a single
shipper to carry special cargo is not a common carrier, 29 does not find application in our
jurisdiction, for we have observed that the growing concern for safety in the transportation of
passengers and /or carriage of goods by sea requires a more exacting interpretation of
admiralty laws, more particularly, the rules governing common carriers.

We quote with approval the observations of Raoul Colinvaux, the learned barrister-at-
law 30

As a matter of principle, it is difficult to find a valid distinction between cases in


which a ship is used to convey the goods of one and of several persons. Where
the ship herself is let to a charterer, so that he takes over the charge and control
of her, the case is different; the shipowner is not then a carrier. But where her
services only are let, the same grounds for imposing a strict responsibility exist,
whether he is employed by one or many. The master and the crew are in each
case his servants, the freighter in each case is usually without any representative
on board the ship; the same opportunities for fraud or collusion occur; and the
same difficulty in discovering the truth as to what has taken place arises . . .

In an action for recovery of damages against a common carrier on the goods shipped, the
shipper or consignee should first prove the fact of shipment and its consequent loss or
damage while the same was in the possession, actual or constructive, of the carrier.
Thereafter, the burden of proof shifts to respondent to prove that he has exercised
extraordinary diligence required by law or that the loss, damage or deterioration of the
cargo was due to fortuitous event, or some other circumstances inconsistent with its
liability. 31

To our mind, respondent carrier has sufficiently overcome, by clear and convincing proof,
the prima faciepresumption of negligence.

The master of the carrying vessel, Captain Lee Tae Bo, in his deposition taken on 19 April 1977
before the Philippine Consul and Legal Attache in the Philippine Embassy in Tokyo, Japan,
testified that before the fertilizer was loaded, the four (4) hatches of the vessel were cleaned,
dried and fumigated. After completing the loading of the cargo in bulk in the ship's holds,
the steel pontoon hatches were closed and sealed with iron lids, then covered with three (3)
layers of serviceable tarpaulins which were tied with steel bonds. The hatches remained
close and tightly sealed while the ship was in transit as the weight of the steel covers made it
impossible for a person to open without the use of the ship's boom. 32

It was also shown during the trial that the hull of the vessel was in good condition, foreclosing
the possibility of spillage of the cargo into the sea or seepage of water inside the hull of the
vessel. 33 When M/V "Sun Plum" docked at its berthing place, representatives of the
consignee boarded, and in the presence of a representative of the shipowner, the foreman,
the stevedores, and a cargo surveyor representing CSCI, opened the hatches and
inspected the condition of the hull of the vessel. The stevedores unloaded the cargo under
the watchful eyes of the shipmates who were overseeing the whole operation on rotation
basis. 34

Verily, the presumption of negligence on the part of the respondent carrier has been
efficaciously overcome by the showing of extraordinary zeal and assiduity exercised by the
carrier in the care of the cargo. This was confirmed by respondent appellate court thus

. . . Be that as it may, contrary to the trial court's finding, the record of the instant
case discloses ample evidence showing that defendant carrier was not
negligent in performing its obligations. Particularly, the following testimonies of
plaintiff-appellee's own witnesses clearly show absence of negligence by the
defendant carrier; that the hull of the vessel at the time of the discharge of the
cargo was sealed and nobody could open the same except in the presence of
the owner of the cargo and the representatives of the vessel (TSN, 20 July 1977,
p. 14); that the cover of the hatches was made of steel and it was overlaid with
tarpaulins, three layers of tarpaulins and therefore their contents were protected
from the weather (TSN, 5 April 1978, p. 24); and, that to open these hatches, the
seals would have to be broken, all the seals were found to be intact (TSN, 20 July
1977, pp. 15-16) (emphasis supplied).

The period during which private respondent was to observe the degree of diligence required
of it as a public carrier began from the time the cargo was unconditionally placed in its
charge after the vessel's holds were duly inspected and passed scrutiny by the shipper, up to
and until the vessel reached its destination and its hull was reexamined by the consignee,
but prior to unloading. This is clear from the limitation clause agreed upon by the parties in
the Addendum to the standard "GENCON" time charter-party which provided for an F.I.O.S.,
meaning, that the loading, stowing, trimming and discharge of the cargo was to be done by
the charterer, free from all risk and expense to the carrier. 35 Moreover, a shipowner is liable
for damage to the cargo resulting from improper stowage only when the stowing is done by
stevedores employed by him, and therefore under his control and supervision, not when the
same is done by the consignee or stevedores under the employ of the latter. 36

Article 1734 of the New Civil Code provides that common carriers are not responsible for the
loss, destruction or deterioration of the goods if caused by the charterer of the goods or
defects in the packaging or in the containers. The Code of Commerce also provides that all
losses and deterioration which the goods may suffer during the transportation by reason of
fortuitous event, force majeure, or the inherent defect of the goods, shall be for the account
and risk of the shipper, and that proof of these accidents is incumbent upon the
carrier. 37 The carrier, nonetheless, shall be liable for the loss and damage resulting from the
preceding causes if it is proved, as against him, that they arose through his negligence or by
reason of his having failed to take the precautions which usage has established among
careful persons. 38

Respondent carrier presented a witness who testified on the characteristics of the fertilizer
shipped and the expected risks of bulk shipping. Mr. Estanislao Chupungco, a chemical
engineer working with Atlas Fertilizer, described Urea as a chemical compound consisting
mostly of ammonia and carbon monoxide compounds which are used as fertilizer. Urea also
contains 46% nitrogen and is highly soluble in water. However, during storage, nitrogen and
ammonia do not normally evaporate even on a long voyage, provided that the
temperature inside the hull does not exceed eighty (80) degrees centigrade. Mr.
Chupungco further added that in unloading fertilizer in bulk with the use of a clamped shell,
losses due to spillage during such operation amounting to one percent (1%) against the bill
of lading is deemed "normal" or "tolerable." The primary cause of these spillages is the
clamped shell which does not seal very tightly. Also, the wind tends to blow away some of
the materials during the unloading process.

The dissipation of quantities of fertilizer, or its daterioration in value, is caused either by an


extremely high temperature in its place of storage, or when it comes in contact with water.
When Urea is drenched in water, either fresh or saline, some of its particles dissolve. But the
salvaged portion which is in liquid form still remains potent and usable although no longer
saleable in its original market value.

The probability of the cargo being damaged or getting mixed or contaminated with foreign
particles was made greater by the fact that the fertilizer was transported in "bulk," thereby
exposing it to the inimical effects of the elements and the grimy condition of the various
pieces of equipment used in transporting and hauling it.

The evidence of respondent carrier also showed that it was highly improbable for sea water
to seep into the vessel's holds during the voyage since the hull of the vessel was in good
condition and her hatches were tightly closed and firmly sealed, making the M/V "Sun Plum"
in all respects seaworthy to carry the cargo she was chartered for. If there was loss or
contamination of the cargo, it was more likely to have occurred while the same was being
transported from the ship to the dump trucks and finally to the consignee's warehouse. This
may be gleaned from the testimony of the marine and cargo surveyor of CSCI who
supervised the unloading. He explained that the 18 M/T of alleged "bar order cargo" as
contained in their report to PPI was just an approximation or estimate made by
them after the fertilizer was discharged from the vessel and segregated from the rest of the
cargo.

The Court notes that it was in the month of July when the vessel arrived port and unloaded
her cargo. It rained from time to time at the harbor area while the cargo was being
discharged according to the supply officer of PPI, who also testified that it was windy at the
waterfront and along the shoreline where the dump trucks passed enroute to the
consignee's warehouse.

Indeed, we agree with respondent carrier that bulk shipment of highly soluble goods like
fertilizer carries with it the risk of loss or damage. More so, with a variable weather condition
prevalent during its unloading, as was the case at bar. This is a risk the shipper or the owner
of the goods has to face. Clearly, respondent carrier has sufficiently proved the inherent
character of the goods which makes it highly vulnerable to deterioration; as well as the
inadequacy of its packaging which further contributed to the loss. On the other hand, no
proof was adduced by the petitioner showing that the carrier was remise in the exercise of
due diligence in order to minimize the loss or damage to the goods it carried.

WHEREFORE, the petition is DISMISSED. The assailed decision of the Court of Appeals, which
reversed the trial court, is AFFIRMED. Consequently, Civil Case No. 98623 of the then Court of
the First Instance, now Regional Trial Court, of Manila should be, as it is hereby DISMISSED.

Costs against petitioner.

SO ORDERED.

VIRGINES CALVO doing business under the name and style TRANSORIENT CONTAINER
TERMINAL SERVICES, INC., petitioner, vs. UCPB GENERAL INSURANCE CO., INC. (formerly
Allied Guarantee Ins. Co., Inc.) respondent.

DECISION
MENDOZA, J.:

This is a petition for review of the decision,[1] dated May 31, 2001, of the Court of Appeals,
affirming the decision[2] of the Regional Trial Court, Makati City, Branch 148, which ordered
petitioner to pay respondent, as subrogee, the amount of P93,112.00 with legal interest,
representing the value of damaged cargo handled by petitioner, 25% thereof as attorneys
fees, and the cost of the suit.
The facts are as follows:
Petitioner Virgines Calvo is the owner of Transorient Container Terminal Services, Inc.
(TCTSI), a sole proprietorship customs broker. At the time material to this case, petitioner
entered into a contract with San Miguel Corporation (SMC) for the transfer of 114 reels of
semi-chemical fluting paper and 124 reels of kraft liner board from the Port Area in Manila to
SMCs warehouse at the Tabacalera Compound, Romualdez St., Ermita, Manila. The cargo
was insured by respondent UCPB General Insurance Co., Inc.
On July 14, 1990, the shipment in question, contained in 30 metal vans, arrived in Manila
on board M/V Hayakawa Maru and, after 24 hours, were unloaded from the vessel to the
custody of the arrastre operator, Manila Port Services, Inc. From July 23 to July 25, 1990,
petitioner, pursuant to her contract with SMC, withdrew the cargo from the arrastre operator
and delivered it to SMCs warehouse in Ermita, Manila. On July 25, 1990, the goods were
inspected by Marine Cargo Surveyors, who found that 15 reels of the semi-chemical fluting
paper were wet/stained/torn and 3 reels of kraft liner board were likewise torn. The damage
was placed at P93,112.00.
SMC collected payment from respondent UCPB under its insurance contract for the
aforementioned amount. In turn, respondent, as subrogee of SMC, brought suit against
petitioner in the Regional Trial Court, Branch 148, Makati City, which, on December 20, 1995,
rendered judgment finding petitioner liable to respondent for the damage to the shipment.
The trial court held:

It cannot be denied . . . that the subject cargoes sustained damage while in the custody of
defendants. Evidence such as the Warehouse Entry Slip (Exh. E); the Damage Report (Exh. F)
with entries appearing therein, classified as TED and TSN, which the claims processor, Ms.
Agrifina De Luna, claimed to be tearrage at the end and tearrage at the middle of the
subject damaged cargoes respectively, coupled with the Marine Cargo Survey Report (Exh.
H - H-4-A) confirms the fact of the damaged condition of the subject cargoes. The
surveyor[s] report (Exh. H-4-A) in particular, which provides among others that:

. . . we opine that damages sustained by shipment is attributable to improper handling in


transit presumably whilst in the custody of the broker . . . .

is a finding which cannot be traversed and overturned.

The evidence adduced by the defendants is not enough to sustain [her] defense that [she is]
are not liable. Defendant by reason of the nature of [her] business should have devised ways
and means in order to prevent the damage to the cargoes which it is under obligation to
take custody of and to forthwith deliver to the consignee. Defendant did not present any
evidence on what precaution [she] performed to prevent [the] said incident, hence the
presumption is that the moment the defendant accepts the cargo [she] shall perform such
extraordinary diligence because of the nature of the cargo.

....

Generally speaking under Article 1735 of the Civil Code, if the goods are proved to have
been lost, destroyed or deteriorated, common carriers are presumed to have been at fault
or to have acted negligently, unless they prove that they have observed the extraordinary
diligence required by law. The burden of the plaintiff, therefore, is to prove merely that the
goods he transported have been lost, destroyed or deteriorated. Thereafter, the burden is
shifted to the carrier to prove that he has exercised the extraordinary diligence required by
law. Thus, it has been held that the mere proof of delivery of goods in good order to a
carrier, and of their arrival at the place of destination in bad order, makes out a prima facie
case against the carrier, so that if no explanation is given as to how the injury occurred, the
carrier must be held responsible. It is incumbent upon the carrier to prove that the loss was
due to accident or some other circumstances inconsistent with its liability. (cited in
Commercial Laws of the Philippines by Agbayani, p. 31, Vol. IV, 1989 Ed.)

Defendant, being a customs brother, warehouseman and at the same time a common
carrier is supposed [to] exercise [the] extraordinary diligence required by law, hence the
extraordinary responsibility lasts from the time the goods are unconditionally placed in the
possession of and received by the carrier for transportation until the same are delivered
actually or constructively by the carrier to the consignee or to the person who has the right
to receive the same.[3]

Accordingly, the trial court ordered petitioner to pay the following amounts

1. The sum of P93,112.00 plus interest;


2. 25% thereof as lawyers fee;

3. Costs of suit.[4]

The decision was affirmed by the Court of Appeals on appeal. Hence this petition for
review on certiorari.
Petitioner contends that:
I. THE COURT OF APPEALS COMMITTED SERIOUS AND REVERSIBLE ERROR [IN] DECIDING
THE CASE NOT ON THE EVIDENCE PRESENTED BUT ON PURE SURMISES, SPECULATIONS
AND MANIFESTLY MISTAKEN INFERENCE.
II. THE COURT OF APPEALS COMMITTED SERIOUS AND REVERSIBLE ERROR IN
CLASSIFYING THE PETITIONER AS A COMMON CARRIER AND NOT AS PRIVATE OR
SPECIAL CARRIER WHO DID NOT HOLD ITS SERVICES TO THE PUBLIC.[5]
It will be convenient to deal with these contentions in the inverse order, for if petitioner is
not a common carrier, although both the trial court and the Court of Appeals held
otherwise, then she is indeed not liable beyond what ordinary diligence in the vigilance over
the goods transported by her, would require.[6] Consequently, any damage to the cargo she
agrees to transport cannot be presumed to have been due to her fault or negligence.
Petitioner contends that contrary to the findings of the trial court and the Court of
Appeals, she is not a common carrier but a private carrier because, as a customs broker and
warehouseman, she does not indiscriminately hold her services out to the public but only
offers the same to select parties with whom she may contract in the conduct of her business.
The contention has no merit. In De Guzman v. Court of Appeals,[7] the Court dismissed a
similar contention and held the party to be a common carrier, thus

The Civil Code defines common carriers in the following terms:

Article 1732. Common carriers are persons, corporations, firms or associations engaged in the
business of carrying or transporting passengers or goods or both, by land, water, or air for
compensation, offering their services to the public.

The above article makes no distinction between one whose principal business activity is the
carrying of persons or goods or both, and one who does such carrying only as
an ancillary activity . . . Article 1732 also carefully avoids making any distinction between a
person or enterprise offering transportation service on a regular or scheduled basis and one
offering such service on an occasional, episodic or unscheduled basis. Neither does Article
1732 distinguish between a carrier offering its services to the general public, i.e., the general
community or population, and one who offers services or solicits business only from a
narrow segment of the general population. We think that Article 1732 deliberately refrained
from making such distinctions.

So understood, the concept of common carrier under Article 1732 may be seen to coincide
neatly with the notion of public service, under the Public Service Act (Commonwealth Act
No. 1416, as amended) which at least partially supplements the law on common carriers set
forth in the Civil Code. Under Section 13, paragraph (b) of the Public Service Act, public
service includes:

x x x every person that now or hereafter may own, operate, manage, or control in the
Philippines, for hire or compensation, with general or limited clientele, whether permanent,
occasional or accidental, and done for general business purposes, any common
carrier, railroad, street railway, traction railway, subway motor vehicle, either for freight or
passenger, or both, with or without fixed route and whatever may be its classification, freight
or carrier service of any class, express service, steamboat, or steamship line, pontines, ferries
and water craft, engaged in the transportation of passengers or freight or both, shipyard,
marine repair shop, wharf or dock, ice plant, ice-refrigeration plant, canal, irrigation system,
gas, electric light, heat and power, water supply and power petroleum, sewerage system,
wire or wireless communications systems, wire or wireless broadcasting stations and other
similar public services. x x x [8]

There is greater reason for holding petitioner to be a common carrier because the
transportation of goods is an integral part of her business. To uphold petitioners contention
would be to deprive those with whom she contracts the protection which the law affords
them notwithstanding the fact that the obligation to carry goods for her customers, as
already noted, is part and parcel of petitioners business.
Now, as to petitioners liability, Art. 1733 of the Civil Code provides:

Common carriers, from the nature of their business and for reasons of public policy, are
bound to observe extraordinary diligence in the vigilance over the goods and for the safety
of the passengers transported by them, according to all the circumstances of each case. . . .

In Compania Maritima v. Court of Appeals,[9] the meaning of extraordinary diligence in


the vigilance over goods was explained thus:

The extraordinary diligence in the vigilance over the goods tendered for shipment requires
the common carrier to know and to follow the required precaution for avoiding damage to,
or destruction of the goods entrusted to it for sale, carriage and delivery. It requires common
carriers to render service with the greatest skill and foresight and to use all reasonable means
to ascertain the nature and characteristic of goods tendered for shipment, and to exercise
due care in the handling and stowage, including such methods as their nature requires.

In the case at bar, petitioner denies liability for the damage to the cargo. She claims that
the spoilage or wettage took place while the goods were in the custody of either the
carrying vessel M/V Hayakawa Maru, which transported the cargo to Manila, or the arrastre
operator, to whom the goods were unloaded and who allegedly kept them in open air for
nine days from July 14 to July 23, 1998 notwithstanding the fact that some of the containers
were deformed, cracked, or otherwise damaged, as noted in the Marine Survey Report (Exh.
H), to wit:

MAXU-2062880 - rain gutter deformed/cracked

ICSU-363461-3 - left side rubber gasket on door distorted/partly loose

PERU-204209-4 - with pinholes on roof panel right portion

TOLU-213674-3 - wood flooring we[t] and/or with signs of water soaked

MAXU-201406-0 - with dent/crack on roof panel

ICSU-412105-0 - rubber gasket on left side/door panel partly detached loosened.[10]

In addition, petitioner claims that Marine Cargo Surveyor Ernesto Tolentino testified that
he has no personal knowledge on whether the container vans were first stored in petitioners
warehouse prior to their delivery to the consignee. She likewise claims that after withdrawing
the container vans from the arrastre operator, her driver, Ricardo Nazarro, immediately
delivered the cargo to SMCs warehouse in Ermita, Manila, which is a mere thirty-minute drive
from the Port Area where the cargo came from. Thus, the damage to the cargo could not
have taken place while these were in her custody.[11]
Contrary to petitioners assertion, the Survey Report (Exh. H) of the Marine Cargo Surveyors
indicates that when the shipper transferred the cargo in question to the arrastre operator,
these were covered by clean Equipment Interchange Report (EIR) and, when petitioners
employees withdrew the cargo from the arrastre operator, they did so without exception or
protest either with regard to the condition of container vans or their contents. The Survey
Report pertinently reads
Details of Discharge:

Shipment, provided with our protective supervision was noted discharged ex vessel to dock
of Pier #13 South Harbor, Manila on 14 July 1990, containerized onto 30 x 20 secure metal
vans, covered by clean EIRs. Except for slight dents and paint scratches on side and roof
panels, these containers were deemed to have [been] received in good condition.

....

Transfer/Delivery:

On July 23, 1990, shipment housed onto 30 x 20 cargo containers was [withdrawn] by
Transorient Container Services, Inc. . . . without exception.

[The cargo] was finally delivered to the consignees storage warehouse located at
Tabacalera Compound, Romualdez Street, Ermita, Manila from July 23/25, 1990.[12]

As found by the Court of Appeals:

From the [Survey Report], it [is] clear that the shipment was discharged from the vessel to the
arrastre, Marina Port Services Inc., in good order and condition as evidenced by clean
Equipment Interchange Reports (EIRs). Had there been any damage to the shipment, there
would have been a report to that effect made by the arrastre operator. The cargoes were
withdrawn by the defendant-appellant from the arrastre still in good order and condition as
the same were received by the former without exception, that is, without any report of
damage or loss. Surely, if the container vans were deformed, cracked, distorted or dented,
the defendant-appellant would report it immediately to the consignee or make an
exception on the delivery receipt or note the same in the Warehouse Entry Slip (WES). None
of these took place. To put it simply, the defendant-appellant received the shipment in good
order and condition and delivered the same to the consignee damaged. We can only
conclude that the damages to the cargo occurred while it was in the possession of the
defendant-appellant. Whenever the thing is lost (or damaged) in the possession of the
debtor (or obligor), it shall be presumed that the loss (or damage) was due to his fault, unless
there is proof to the contrary. No proof was proffered to rebut this legal presumption and the
presumption of negligence attached to a common carrier in case of loss or damage to the
goods.[13]

Anent petitioners insistence that the cargo could not have been damaged while in her
custody as she immediately delivered the containers to SMCs compound, suffice it to say
that to prove the exercise of extraordinary diligence, petitioner must do more than merely
show the possibility that some other party could be responsible for the damage. It must
prove that it used all reasonable means to ascertain the nature and characteristic of goods
tendered for [transport] and that [it] exercise[d] due care in the handling [thereof]. Petitioner
failed to do this.
Nor is there basis to exempt petitioner from liability under Art. 1734(4), which provides

Common carriers are responsible for the loss, destruction, or deterioration of the goods,
unless the same is due to any of the following causes only:

....

(4) The character of the goods or defects in the packing or in the containers.

....

For this provision to apply, the rule is that if the improper packing or, in this case, the
defect/s in the container, is/are known to the carrier or his employees or apparent upon
ordinary observation, but he nevertheless accepts the same without protest or exception
notwithstanding such condition, he is not relieved of liability for damage
resulting therefrom.[14] In this case, petitioner accepted the cargo without exception despite
the apparent defects in some of the container vans. Hence, for failure of petitioner to prove
that she exercised extraordinary diligence in the carriage of goods in this case or that she is
exempt from liability, the presumption of negligence as provided under Art. 1735[15] holds.
WHEREFORE, the decision of the Court of Appeals, dated May 31, 2001, is AFFIRMED.
SO ORDERED.

PHILIPPINE AIRLINES, INC., petitioner, vs. CIVIL AERONAUTICS BOARD and GRAND
INTERNATIONAL AIRWAYS, INC., respondents.

DECISION
TORRES, JR., J.:

This Special Civil Action for Certiorari and Prohibition under Rule 65 of the Rules of Court
seeks to prohibit respondent Civil Aeronautics Board from exercising jurisdiction over private
respondent's Application for the issuance of a Certificate of Public Convenience and
Necessity, and to annul and set aside a temporary operating permit issued by the Civil
Aeronautics Board in favor of Grand International Airways (GrandAir, for brevity) allowing the
same to engage in scheduled domestic air transportation services, particularly the Manila-
Cebu, Manila-Davao, and converse routes.
The main reason submitted by petitioner Philippine Airlines, Inc. (PAL) to support its
petition is the fact that GrandAir does not possess a legislative franchise authorizing it to
engage in air transportation service within the Philippines or elsewhere. Such franchise is,
allegedly, a requisite for the issuance of a Certificate of Public Convenience or Necessity by
the respondent Board, as mandated under Section 11, Article XII of the Constitution.
Respondent GrandAir, on the other hand, posits that a legislative franchise is no longer a
requirement for the issuance of a Certificate of Public Convenience and Necessity or a
Temporary Operating Permit, following the Court's pronouncements in the case of Albano vs.
Reyes,[1] as restated by the Court of Appeals in Avia Filipinas International vs. Civil
Aeronautics Board[2] and Silangan Airways, Inc. vs. Grand International Airways, Inc., and the
Hon. Civil Aeronautics Board.[3]
On November 24, 1994, private respondent GrandAir applied for a Certificate of Public
Convenience and Necessity with the Board, which application was docketed as CAB Case
No. EP-12711.[4] Accordingly, the Chief Hearing Officer of the CAB issued a Notice of Hearing
setting the application for initial hearing on December 16, 1994, and directing GrandAir to
serve a copy of the application and corresponding notice to all scheduled Philippine
Domestic operators. On December 14, 1994, GrandAir filed its Compliance, and requested
for the issuance of a Temporary Operating Permit. Petitioner, itself the holder of a legislative
franchise to operate air transport services, filed an Opposition to the application for a
Certificate of Public Convenience and Necessity on December 16, 1995 on the following
grounds:

"A. The CAB has no jurisdiction to hear the petitioner's application until the latter has first
obtained a franchise to operate from Congress.

B. The petitioner's application is deficient in form and substance in that:

1. The application does not indicate a route structure including a computation of trunkline,
secondary and rural available seat kilometers (ASK) which shall always be maintained at a
monthly level at least 5% and 20% of the ASK offered into and out of the proposed base of
operations for rural and secondary, respectively.

2. It does not contain a project/feasibility study, projected profit and loss statements,
projected balance sheet, insurance coverage, list of personnel, list of spare parts inventory,
tariff structure, documents supportive of financial capacity, route flight schedule, contracts
on facilities (hangars, maintenance, lot) etc.

C. Approval of petitioner's application would violate the equal protection clause of the
constitution.

D. There is no urgent need and demand for the services applied for.

E. To grant petitioner's application would only result in ruinous competition contrary to


Section 4(d) of R.A. 776."[5]

At the initial hearing for the application, petitioner raised the issue of lack of jurisdiction of
the Board to hear the application because GrandAir did not possess a legislative franchise.
On December 20, 1994, the Chief Hearing Officer of CAB issued an Order denying
petitioner's Opposition. Pertinent portions of the Order read:

"PAL alleges that the CAB has no jurisdiction to hear the petitioner's application until the
latter has first obtained a franchise to operate from Congress.

The Civil Aeronautics Board has jurisdiction to hear and resolve the application. In Avia
Filipina vs. CAB, CA G.R. No. 23365, it has been ruled that under Section 10 (c) (I) of R.A. 776,
the Board possesses this specific power and duty.

In view thereof, the opposition of PAL on this ground is hereby denied.

SO ORDERED."

Meantime, on December 22, 1994, petitioner this time, opposed private respondent's
application for a temporary permit maintaining that:

"1. The applicant does not possess the required fitness and capability of operating the
services applied for under RA 776; and,

2. Applicant has failed to prove that there is clear and urgent public need for the services
applied for."[6]

On December 23, 1994, the Board promulgated Resolution No. 119(92) approving the
issuance of a Temporary Operating Permit in favor of Grand Air[7] for a period of three
months, i.e., from December 22, 1994 to March 22, 1994. Petitioner moved for the
reconsideration of the issuance of the Temporary Operating Permit on January 11, 1995, but
the same was denied in CAB Resolution No. 02 (95) on February 2, 1995.[8] In the said
Resolution, the Board justified its assumption of jurisdiction over GrandAir's application.

"WHEREAS, the CAB is specifically authorized under Section 10-C (1) of Republic Act No. 776
as follows:

'(c) The Board shall have the following specific powers and duties:

(1) In accordance with the provision of Chapter IV of this Act, to issue, deny, amend revise,
alter, modify, cancel, suspend or revoke, in whole or in part, upon petitioner-complaint, or
upon its own initiative, any temporary operating permit or Certificate of Public Convenience
and Necessity; Provided, however; that in the case of foreign air carriers, the permit shall be
issued with the approval of the President of the Republic of the Philippines."
WHEREAS, such authority was affirmed in PAL vs. CAB, (23 SCRA 992), wherein the Supreme
Court held that the CAB can even on its own initiative, grant a TOP even before the
presentation of evidence;

WHEREAS, more recently, Avia Filipinas vs. CAB, (CA-GR No. 23365), promulgated on
October 30, 1991, held that in accordance with its mandate, the CAB can issue not only a
TOP but also a Certificate of Public Convenience and Necessity (CPCN) to a qualified
applicant therefor in the absence of a legislative franchise, citing therein as basis the
decision of Albano vs. Reyes (175 SCRA 264) which provides (inter alia) that:

a) Franchises by Congress are not required before each and every public utility may operate
when the law has granted certain administrative agencies the power to grant licenses for or
to authorize the operation of certain public utilities;

b) The Constitutional provision in Article XII, Section 11 that the issuance of a franchise,
certificate or other form of authorization for the operation of a public utility does not
necessarily imply that only Congress has the power to grant such authorization since our
statute books are replete with laws granting specified agencies in the Executive Branch the
power to issue such authorization for certain classes of public utilities.

WHEREAS, Executive Order No. 219 which took effect on 22 January 1995, provides in Section
2.1 that a minimum of two (2) operators in each route/link shall be encouraged and that
routes/links presently serviced by only one (1) operator shall be open for entry to additional
operators.

RESOLVED, (T)HEREFORE, that the Motion for Reconsideration filed by Philippine Airlines on
January 05, 1995 on the Grant by this Board of a Temporary Operating Permit (TOP) to Grand
International Airways, Inc. alleging among others that the CAB has no such jurisdiction, is
hereby DENIED, as it hereby denied, in view of the foregoing and considering that the
grounds relied upon by the movant are not indubitable."

On March 21, 1995, upon motion by private respondent, the temporary permit was
extended for a period of six (6) months or up to September 22, 1995.
Hence this petition, filed on April 3, 1995.
Petitioners argue that the respondent Board acted beyond its powers and jurisdiction in
taking cognizance of GrandAirs application for the issuance of a Certificate of Public
Convenience and Necessity, and in issuing a temporary operating permit in the meantime,
since GrandAir has not been granted and does not possess a legislative franchise to engage
in scheduled domestic air transportation. A legislative franchise is necessary before anyone
may engage in air transport services, and a franchise may only be granted by Congress. This
is the meaning given by the petitioner upon a reading of Section 11, Article XII,[9] and Section
1, Article VI,[10] of the Constitution.
To support its theory, PAL submits Opinion No. 163, S. 1989 of the Department of Justice,
which reads:
Dr. Arturo C. Corona
Executive Director
Civil Aeronautics Board
PPL Building, 1000 U.N. Avenue
Ermita, Manila
Sir:

This has reference to your request for opinion on the necessity of a legislative franchise
before the Civil Aeronautics Board (CAB) may issue a Certificate of Public Convenience and
Necessity and/or permit to engage in air commerce or air transportation to an individual or
entity.
You state that during the hearing on the application of Cebu Air for a congressional
franchise, the House Committee on Corporations and Franchises contended that under the
present Constitution, the CAB may not issue the abovestated certificate or permit, unless the
individual or entity concerned possesses a legislative franchise. You believe otherwise,
however, for the reason that under R.A. No. 776, as amended, the CAB is explicitly
empowered to issue operating permits or certificates of public convenience and necessity
and that this statutory provision is not inconsistent with the current charter.

We concur with the view expressed by the House Committee on Corporations and
Franchises. In an opinion rendered in favor of your predecessor-in-office, this
Department observed that,-

xxx it is useful to note the distinction between the franchise to operate and a
permit to commence operation. The former is sovereign and legislative in
nature; it can be conferred only by the lawmaking authority (17 W and P, pp.
691-697). The latter is administrative and regulatory in character (In re
Application of Fort Crook-Bellevue Boulevard Line, 283 NW 223); it is granted
by an administrative agency, such as the Public Service Commission [now
Board of Transportation], in the case of land transportation, and the Civil
Aeronautics Board, in case of air services. While a legislative franchise is a
pre-requisite to a grant of a certificate of public convenience and necessity
to an airline company, such franchise alone cannot constitute the authority
to commence operations, inasmuch as there are still matters relevant to such
operations which are not determined in the franchise, like rates, schedules
and routes, and which matters are resolved in the process of issuance of
permit by the administrative. (Secretary of Justice opn No. 45, s. 1981)

Indeed, authorities are agreed that a certificate of public convenience and necessity is an
authorization issued by the appropriate governmental agency for the operation of public
services for which a franchise is required by law (Almario, Transportation and Public Service
Law, 1977 Ed., p. 293; Agbayani, Commercial Law of the Phil., Vol. 4, 1979 Ed., pp. 380-381).

Based on the foregoing, it is clear that a franchise is the legislative authorization to engage in
a business activity or enterprise of a public nature, whereas a certificate of public
convenience and necessity is a regulatory measure which constitutes the franchises
authority to commence operations. It is thus logical that the grant of the former should
precede the latter.

Please be guided accordingly.

(SGD.) SEDFREY A. ORDOEZ

Secretary of Justice"

Respondent GrandAir, on the other hand, relies on its interpretation of the provisions of
Republic Act 776, which follows the pronouncements of the Court of Appeals in the cases of
Avia Filipinas vs. Civil Aeronautics Board, and Silangan Airways, Inc. vs. Grand International
Airways (supra).
In both cases, the issue resolved was whether or not the Civil Aeronautics Board can issue
the Certificate of Public Convenience and Necessity or Temporary Operating Permit to a
prospective domestic air transport operator who does not possess a legislative franchise to
operate as such. Relying on the Court's pronouncement in Albano vs. Reyes (supra), the
Court of Appeals upheld the authority of the Board to issue such authority, even in the
absence of a legislative franchise, which authority is derived from Section 10 of Republic Act
776, as amended by P.D. 1462.[11]
The Civil Aeronautics Board has jurisdiction over GrandAir's Application for a Temporary
Operating Permit. This rule has been established in the case of Philippine Air Lines Inc., vs.
Civil Aeronautics Board, promulgated on June 13, 1968.[12] The Board is expressly authorized
by Republic Act 776 to issue a temporary operating permit or Certificate of Public
Convenience and Necessity, and nothing contained in the said law negates the power to
issue said permit before the completion of the applicant's evidence and that of the
oppositor thereto on the main petition. Indeed, the CAB's authority to grant a temporary
permit "upon its own initiative" strongly suggests the power to exercise said authority, even
before the presentation of said evidence has begun. Assuming arguendo that a legislative
franchise is prerequisite to the issuance of a permit, the absence of the same does not affect
the jurisdiction of the Board to hear the application, but tolls only upon the ultimate issuance
of the requested permit.
The power to authorize and control the operation of a public utility is admittedly a
prerogative of the legislature, since Congress is that branch of government vested with
plenary powers of legislation.

"The franchise is a legislative grant, whether made directly by the legislature itself, or by any
one of its properly constituted instrumentalities. The grant, when made, binds the public, and
is, directly or indirectly, the act of the state."[13]

The issue in this petition is whether or not Congress, in enacting Republic Act 776, has
delegated the authority to authorize the operation of domestic air transport services to the
respondent Board, such that Congressional mandate for the approval of such authority is no
longer necessary.
Congress has granted certain administrative agencies the power to grant licenses for, or
to authorize the operation of certain public utilities. With the growing complexity of modern
life, the multiplication of the subjects of governmental regulation, and the increased difficulty
of administering the laws, there is a constantly growing tendency towards the delegation of
greater powers by the legislature, and towards the approval of the practice by the
courts.[14] It is generally recognized that a franchise may be derived indirectly from the state
through a duly designated agency, and to this extent, the power to grant franchises has
frequently been delegated, even to agencies other than those of a legislative nature. [15] In
pursuance of this, it has been held that privileges conferred by grant by local authorities as
agents for the state constitute as much a legislative franchise as though the grant had been
made by an act of the Legislature.[16]
The trend of modern legislation is to vest the Public Service Commissioner with the power
to regulate and control the operation of public services under reasonable rules and
regulations, and as a general rule, courts will not interfere with the exercise of that discretion
when it is just and reasonable and founded upon a legal right.[17]
It is this policy which was pursued by the Court in Albano vs. Reyes. Thus, a reading of the
pertinent issuances governing the Philippine Ports Authority,[18] proves that the PPA is
empowered to undertake by itself the operation and management of the Manila
International Container Terminal, or to authorize its operation and management by another
by contract or other means, at its option. The latter power having been delegated to the
PPA, a franchise from Congress to authorize an entity other than the PPA to operate and
manage the MICP becomes unnecessary.
Given the foregoing postulates, we find that the Civil Aeronautics Board has the authority
to issue a Certificate of Public Convenience and Necessity, or Temporary Operating Permit
to a domestic air transport operator, who, though not possessing a legislative franchise,
meets all the other requirements prescribed by the law. Such requirements were
enumerated in Section 21 of R.A. 776.
There is nothing in the law nor in the Constitution, which indicates that a legislative
franchise is an indispensable requirement for an entity to operate as a domestic air transport
operator. Although Section 11 of Article XII recognizes Congress' control over any franchise,
certificate or authority to operate a public utility, it does not mean Congress has exclusive
authority to issue the same. Franchises issued by Congress are not required before each and
every public utility may operate.[19] In many instances, Congress has seen it fit to delegate
this function to government agencies, specialized particularly in their respective areas of
public service.
A reading of Section 10 of the same reveals the clear intent of Congress to delegate the
authority to regulate the issuance of a license to operate domestic air transport services:

SECTION 10. Powers and Duties of the Board. (A) Except as otherwise provided herein, the
Board shall have the power to regulate the economic aspect of air transportation, and shall
have general supervision and regulation of, the jurisdiction and control over air carriers,
general sales agents, cargo sales agents, and air freight forwarders as well as their property
rights, equipment, facilities and franchise, insofar as may be necessary for the purpose of
carrying out the provision of this Act.

In support of the Board's authority as stated above, it is given the following specific
powers and duties:

(C) The Board shall have the following specific powers and duties:

(1) In accordance with the provisions of Chapter IV of this Act, to issue, deny, amend, revise,
alter, modify, cancel, suspend or revoke in whole or in part upon petition or complaint or
upon its own initiative any Temporary Operating Permit or Certificate of Public Convenience
and Necessity: Provided however, That in the case of foreign air carriers, the permit shall be
issued with the approval of the President of the Republic of the Philippines.

Petitioner argues that since R.A. 776 gives the Board the authority to issue "Certificates of
Public Convenience and Necessity", this, according to petitioner, means that a legislative
franchise is an absolute requirement. It cites a number of authorities supporting the view that
a Certificate of Public Convenience and Necessity is issued to a public service for which a
franchise is required by law, as distinguished from a "Certificate of Public Convenience"
which is an authorization issued for the operation of public services for which no franchise,
either municipal or legislative, is required by law.[20]
This submission relies on the premise that the authority to issue a certificate of public
convenience and necessity is a regulatory measure separate and distinct from the authority
to grant a franchise for the operation of the public utility subject of this particular case, which
is exclusively lodged by petitioner in Congress.
We do not agree with the petitioner.
Many and varied are the definitions of certificates of public convenience which courts
and legal writers have drafted. Some statutes use the terms "convenience and necessity"
while others use only the words "public convenience." The terms "convenience and
necessity", if used together in a statute, are usually held not to be separable, but are
construed together. Both words modify each other and must be construed together. The
word 'necessity' is so connected, not as an additional requirement but to modify and qualify
what might otherwise be taken as the strict significance of the word necessity. Public
convenience and necessity exists when the proposed facility will meet a reasonable want of
the public and supply a need which the existing facilities do not adequately afford. It does
not mean or require an actual physical necessity or an indispensable thing.[21]

"The terms 'convenience' and 'necessity' are to be construed together, although they are not
synonymous, and effect must be given both. The convenience of the public must not be
circumscribed by according to the word 'necessity' its strict meaning or an essential
requisites."[22]

The use of the word "necessity", in conjunction with "public convenience" in a certificate
of authorization to a public service entity to operate, does not in any way modify the nature
of such certification, or the requirements for the issuance of the same. It is the law which
determines the requisites for the issuance of such certification, and not the title indicating the
certificate.
Congress, by giving the respondent Board the power to issue permits for the operation of
domestic transport services, has delegated to the said body the authority to determine the
capability and competence of a prospective domestic air transport operator to engage in
such venture. This is not an instance of transforming the respondent Board into a mini-
legislative body, with unbridled authority to choose who should be given authority to
operate domestic air transport services.

"To be valid, the delegation itself must be circumscribed by legislative restrictions, not a
"roving commission" that will give the delegate unlimited legislative authority. It must not be a
delegation "running riot" and "not canalized with banks that keep it from overflowing."
Otherwise, the delegation is in legal effect an abdication of legislative authority, a total
surrender by the legislature of its prerogatives in favor of the delegate."[23]

Congress, in this instance, has set specific limitations on how such authority should be
exercised.
Firstly, Section 4 of R.A. No. 776, as amended, sets out the following guidelines or policies:

"SECTION 4. Declaration of policies. In the exercise and performance of its powers and duties
under this Act, the Civil Aeronautics Board and the Civil Aeronautics Administrator shall
consider the following, among other things, as being in the public interest, and in
accordance with the public convenience and necessity:

(a) The development and utilization of the air potential of the Philippines;

(b) The encouragement and development of an air transportation system properly adapted
to the present and future of foreign and domestic commerce of the Philippines, of the Postal
Service and of the National Defense;

(c) The regulation of air transportation in such manner as to recognize and preserve the
inherent advantages of, assure the highest degree of safety in, and foster sound economic
condition in, such transportation, and to improve the relations between, and coordinate
transportation by, air carriers;

(d) The promotion of adequate, economical and efficient service by air carriers at
reasonable charges, without unjust discriminations, undue preferences or advantages, or
unfair or destructive competitive practices;

(e) Competition between air carriers to the extent necessary to assure the sound
development of an air transportation system properly adapted to the need of the foreign
and domestic commerce of the Philippines, of the Postal Service, and of the National
Defense;

(f) To promote safety of flight in air commerce in the Philippines; and,

(g) The encouragement and development of civil aeronautics.

More importantly, the said law has enumerated the requirements to determine the
competency of a prospective operator to engage in the public service of air transportation.

SECTION 12. Citizenship requirement. Except as otherwise provided in the Constitution and
existing treaty or treaties, a permit authorizing a person to engage in domestic air commerce
and/or air transportation shall be issued only to citizens of the Philippines.[24]

SECTION 21. Issuance of permit. The Board shall issue a permit authorizing the whole or any
part of the service covered by the application, if it finds: (1) that the applicant is fit, willing
and able to perform such service properly in conformity with the provisions of this Act and
the rules, regulations, and requirements issued thereunder; and (2) that such service is
required by the public convenience and necessity; otherwise the application shall be
denied.
Furthermore, the procedure for the processing of the application of a Certificate of
Public Convenience and Necessity had been established to ensure the weeding out of
those entities that are not deserving of public service.[25]
In sum, respondent Board should now be allowed to continue hearing the application of
GrandAir for the issuance of a Certificate of Public Convenience and Necessity, there being
no legal obstacle to the exercise of its jurisdiction.
ACCORDINGLY, in view of the foregoing considerations, the Court RESOLVED to DISMISS
the instant petition for lack of merit. The respondent Civil Aeronautics Board is hereby
DIRECTED to CONTINUE hearing the application of respondent Grand International Airways,
Inc. for the issuance of a Certificate of Public Convenience and Necessity.
SO ORDERED.

6, G.R. No. L-19857 March 2, 1923

THE ILOILO ICE AND COLD STORAGE COMPANY, petitioner,


vs.
PUBLIC UTILITY BOARD, respondent.

This action in certiorari is for the purpose of reviewing a decision of the Public Utility
Commissioner, affirmed by the Public Utility Board, holding that the petitioner, the Iloilo Ice
and Cold Storage Company, is a public utility and, as such, subject to the control and
jurisdiction of the Public Utility Commissioner.

The case can be best understood by a consideration of its various phases, under the
following topic: Statement of the issue, statement of the case, statement of the facts,
statement of the law, statement of the authorities, statement of the petitioner's case, and of
the government's case, and judgment.

STATEMENT OF THE ISSUE

The issue is whether the Iloilo Ice and Cold Storage Company is a public utility, as that term is
defined by section 9 of Act No. 2694.

STATEMENT OF THE CASE

Francisco Villanueva, Jr., secretary of the Public Utility Commission, investigated the
operation of ice plants in Iloilo early in November, 1921. He reported to the Public Utility
Commissioner that the Iloilo Ice and Cold Storage Company should be considered a public
utility, and that, accordingly, the proper order should issue.

Agreeable to the recommendation of Secretary Villanueva, the Public Utility Commissioner


promulgated an order on December 19, 1921, reciting the facts abovementioned, and
directing the Iloilo Ice and Cold Storage Company to show cause why it should not be
considered a public utility and as such required to comply with each and every duty of
public utilities provided in Act No. 2307, as amended by Act No. 2694. To this order, John
Bordman, treasurer of the Iloilo Ice and Cold Storage Company, interposed a special
answer, in which it was alleged that the company is, and always has been operated as a
private enterprise.

Hearing was then had, at which the testimonies of Francisco Villanueva, Jr., and of John
Bordman were received. Various exhibits were presented and received in evidence. Mr.
Bordman, as the managing director and treasurer of the company, later submitted an
affidavit.

The Public Utility Commissioner rendered a decision holding in effect that the Iloilo Ice and
Cold Storage Company was a public utility, and that, accordingly, it should file in the office
of the Public Utility Commissioner, a statement of its charges for ice. This decision was
affirmed on appeal to the Public Utility Board. From this last decision, petitioner has come
before this court, asking that the proceeding below be reviewed, and the decisions set
aside.

STATEMENT OF THE FACTS

The petitioner, the Iloilo Ice and Cold Storage Company, is a corporation organized under
the laws of the Philippine Islands in 1908, with a capital stock of P60,000. Continuously since
that date, the company has maintained and operated a plant for the manufacture and
sale of ice in the City of Iloilo. It also does business to a certain extent in the Provinces of
Negros, Capiz, and Antique, and with boats which stop at the port of Iloilo. At the time its
operation were started, two additional ice plants were operating in Iloilo. Subsequently,
however, the other plants ceased to operate, so that the petitioner now has no competitor
in the field.

The normal production of ice of the Iloilo Ice and Cold Storage Company is about 3 tons per
day. In the month of January, 1922, a total of 83,837 kilos of ice were sold, of which 56,400
kilos were on written contracts in the City of Iloilo and adjoining territory, 14,214 kilos, also on
written contracts, to steamers calling at the port of Iloilo, and 13,233 kilos on verbal
contracts. Although new machinery has been installed in the plant, this was merely for
replacement purposes, and did not add to its capacity. The demand for ice has usually
been much more than the plant could produce and no effort has been made to provide
sufficient ice to supply all who might apply.

Since 1908, the business of the Iloilo Ice and Cold Storage Company, accordingly to its
managing director and treasurer, has been carried on with selected customers only.
Preference, however, is always given to hospitals, the request of practicing physicians, and
the needs of sick persons. The larger part of the company's business is perfected by written
contracts signed by the parties served, which, in the present form, includes an agreement
that no right to future service is involved.

The coupon books of the company contain on the outside the following:

This agreement witnesseth, that The Iloilo Ice and Cold Storage Co. will furnish the
undersigned with ice as indicated herein at the rate of one coupon per day. These
coupons are not transferable. It is further agreed that the company is not obligated to
similar service in future except by special agreement.

Iloilo, ......................................................................................., 192 ......

(Signed) ....................................................................... No. ..................

Cash sales of ice are accomplished on forms reading: "In receiving the ice represented by
this ticket I hereby agree that the Iloilo Ice and Cold Storage Co. is not bound in future to
extend to me further service." A notice posted in the Iloilo store reads: "No ice is sold to the
public by this plant. Purchases can only be made by private contract." In August, 1918, all
storage facilities were abolished, and resumed in 1920 only with contracts, a copy of the
form at present in use waiving any right to continued service.

On only one point of fact is there any divergence, and this is relatively unimportant.
Secretary Villanueva reported, and the Public Utility Commissioner found, that the Iloilo Ice
and Cold Storage Company sold ice to the public, and advertised its sale through the
papers; while managing director Bordman claims that only once have the instructions of the
board of directors prohibiting public advertising been violated.

STATEMENT OF THE LAW


The original public utility law, Act No. 2307, in its section 14, 1n speaking of the jurisdiction of
the Board of Public Utility Commissioner, and in defining the term "public utility," failed to
include ice, refrigeration, and cold storage plants. This deficiency was, however, remedied
by Act No. 2694, enacted in 1917, which amended section 14 of Act No. 2307, to read as
follows:

* * * The term "public utility" is hereby defined to include every individual,


copartnership, association, corporation or joint stock company, whether domestic or
foreign, their lessee, trustees or receivers appointed by any court whatsoever, or any
municipality, province or other department of the Government of the Philippine
Islands, that now or hereafter may own, operate, manage or control within the
Philippine Islands any common carrier, railroad, street railway, traction railway,
steamboat or steamship line, small water craft, such as bancas, virais, lorchas, and
others, engaged in the transportation of passengers and cargo, line of freight and
passenger automobiles, shipyard, marine railway, marine repair shop, ferry, freight or
any other car services, public warehouse, public wharf or dock not under the
jurisdiction of the Insular Collector of Customs, ice, refrigeration, cold storage, canal,
irrigation, express, subway, pipe line, gas, electric light, heat, power, water, oil sewer,
telephone, wire or wireless telegraph system, plant or equipment, for public
use: Provided, That the Commission or Commissioner shall have no jurisdiction over ice
plants, cold storage plants, or any other kind of public utilities operated by the Federal
Government exclusively for its own and not for public use. . . .

It will thus be noted that the term "public utility," in this jurisdiction, includes every individual,
copartnership, association, corporation, or joint stock company that now or hereafter may
own, operate, manage, or control, within the Philippine Islands, any ice, refrigeration, cold
storage system, plant, or equipment, for public use. Particular attention is invited to the last
phrase, "for public use."

STATEMENT OF THE AUTHORITIES

The authorities are abundant, although some of them are not overly instructive. Selection is
made of the pertinent decisions coming from our own Supreme Court, the Supreme Court of
the United States, and the Supreme Court of California.

In the case of United States vs. Tan Piaco ([1920], 40 Phil., 853), the facts were that the trucks
of the defendant furnished service under special agreements to carry particular persons and
property. Following the case of Terminal Taxicab Co. vs. Kutz ([1916], 241 U. S., 252), it was
held that since the defendant did not hold himself out to carry all passengers and freight for
all persons who might offer, he was not a public utility and, therefore, was not criminally
liable for his failure to obtain a license from the Public Utility Commissioner. It was said:

Under the provisions of said section, two things are necessary: (a) The individual,
copartnership, etc., etc., must be a public utility; and (b) the business in which such
individual, copartnership, etc., etc., is engaged must be for public use. So long as the
individual or copartnership, etc., etc., is engaged in a purely private enterprise,
without attempting to render service to all who may apply, he can in no sense be
considered a public utility, for public use.

"Public use" means the same as "use by the public." The essential feature of the public
use is that it is not confined to privileged individuals, but is open to the indefinite public.
It is this indefinite or unrestricted quality that gives it its public character. In determining
whether a use is public, we must look not only to the character of the business to be
done, but also to the proposed mode of doing it. If the use is merely optional with the
owners, or the public benefit is merely incidental, it is not a public use, authorizing the
exercise of the jurisdiction of the public utility commission. There must be, in general, a
right which the law compels the owner to give to the general public. It is not enough
that the general prosperity of the public is promoted. Public use is not synonymous with
public interest. The true criterion by which to judge of the character of the use is
whether the public may enjoy it by right or only by permission.

In the decision of the Supreme Court of the United States in Terminal Taxicab
Company vs. Kutz, supra, it was held: "A taxicab company is a common carrier within the
meaning of the Act of March 4, 1913 (37 Stat. at L., 938, chap. 150), sec. 8, and hence
subject to the jurisdiction of the Public Utilities Commission of the District of Columbia as a
"public utility" in respect of its exercise of its exclusive right under lease from the Washington
Terminal Company, the owner of the Washington Union Railway Station, to solicit livery and
taxicab business from persons passing to or from trains, and of its exclusive right under
contracts with certain Washington hotels to solicit taxicab business from guest, but that part
of its business which consists in furnishing automobiles from its central garage on individual
orders, generally by telephone, cannot be regarded as a public utility, and the rates
charged for such service are therefore not open to inquiry by the Commission." Mr. Justice
Holmes, delivering the opinion of the court, in part said:

The rest of the plaintiff's business, amounting to four tenths, consists mainly in furnishing
automobiles from its central garage on orders, generally by telephone. It asserts the
right to refuse the service, and no doubt would do so it the pay was uncertain, but it
advertises extensively, and, we must assume, generally accepts any seemingly solvent
customer. Still, the bargains are individual, and however much they may tend towards
uniformity in price, probably have not quite the mechanical fixity of charges that
attends the use of taxicabs from the station and hotels. There is no contract with a
third person to serve the public generally. The question whether, as to this part of its
business, it is an agency for public use within the meaning of the statute, is more
difficult. . . . Although I have not been able to free my mind from doubt, the court is of
opinion that this part of the business is not to be regarded as a public utility. It is true
that all business, and, for the matter of that, every life in all its details, has a public
aspect, some bearing upon the welfare of the community in which it is passed. But,
however it may have been in earlier days as to the common callings, it is assumed in
our time that an invitation to the public to buy does not necessarily entail an
obligation to sell. It is assumed an ordinary shopkeeper may refuse his wares arbitrary
to a customer whom he dislikes, and although that consideration is not conclusive (233
U. S., 407), it is assumed that such a calling is not public as the word is used. In the
absence of clear language to the contrary it would be assumed that an ordinary livery
stable stood on the same footing as a common shop, and there seems to be no
difference between the plaintiff's service from its garage and that of a livery stable. It
follows that the plaintiff is not bound to give information as to its garage rates.

The Supreme Court of California in the case of Thayer and Thayer vs. California Development
Company ([1912], 164 Cal., 117), announced, among other things, that the essential feature
of a public use is that "it is not confined to privileged individuals, but is open to the indefinite
public. It is this indefiniteness or unrestricted quality that gives it its public character."
Continuing, reference was made to the decision of the United States Supreme Court in
Fallbrook Irrigation District vs. Bradley ([1896], 164 U. S., 161), where the United States Supreme
Court considered the question of whether or not the water belonging to an irrigation district
organized under the California statute of 1887, and acquired for and applied to its
authorized uses and purposes, was water dedicated to a public use. Upon this question, the
Supreme Court on appeal said:

The fact that the use of the water is limited to the landowner is not therefore a fatal
objection to this legislation. It is not essential that the entire community, or even any
considerable portion thereof, should directly enjoy or participate in an improvement in
order to constitute a public use. All landowners in the district have the right to a
proportionate share of the water, and no one landowner is favored above his fellow in
his right to the use of the water. It is not necessary, in order that the use should be
public, that every resident in the district should have the right to the use of the water.
The water is not used for general, domestic, or for drinking purposes, and it is plain from
the scene of the act that the water is intended for the use of those who will have
occasion to use it on their lands. . . . We think it clearly appears that all who by reason
of their ownership of or connection with any portion of the lands would have occasion
to use the water, would in truth have the opportunity to use it upon the same terms as
all others similarly situated. In this away the use, so far as this point is concerned, is
public because all persons have the right to use the water under the same
circumstances. This is sufficient.

The latest pronouncement of the United States Supreme Court here available is found in the
case of Producers Transportation Company vs. Railroad Commission of the State of California
([1920], 251 U. S., 228). Mr. Justice Van Devander, delivering the opinion of the court, in part
said:

It is, of course, true that if the pipe line was constructed solely to carry oil for particular
procedures under strictly private contracts and never was devoted by its owner to
public use, that is, to carrying for the public, the State could not by mere legislative fiat
or by any regulating order of a commission convert it into a public utility or make its
owner a common carrier; for that would be taking private property for public use
without just compensation, which no State can do consistently with the due process of
law clause of the Fourteenth Amendment. . . . On the other hand, if in the beginning or
during its subsequent operation the pipe line was devoted by its owner to public use,
and if the right thus extended to the public has not been withdrawn, there can be no
doubt that the pipe line is a public utility and its owner a common carrier whose rates
and practices are subject to public regulation. Munn vs. Illinois, supra.

The state court, upon examining the evidence, concluded that the company
voluntarily had devoted the pipe line to the use of the public in transporting oil, and it
rested this conclusion upon the grounds . . . that, looking through the maze of
contracts, agency agreements and the like, under which the transportation was
effected, subordinating form to substance, and having due regard to the agency's
ready admission of new members and its exclusion of none, it was apparent that the
company did in truth carry oil for all producers seeking its service, in other words, for
the public. (See Pipe Line Cases, 234 U. S., 548.)

Lastly, we take note of the case of Allen vs. Railroad Commission of the State of California
([1918], 179 Cal., 68; 8 A. L. R., 249). It was here held that a water company does not, by
undertaking to furnish a water supply to a municipality which will require only a small
percentage of its product, become a public utility as to the remainder, which it sells under
private contracts. The court observed that its decision fully recognized that a private water
company may be organized to sell water for purposes of private gain, and that in doing, it
does not become a public utility. "To hold that property has been dedicated to a public
use," reads the opinion, "is not a trivial thing, and such dedication is never presumed without
evidence of unequivocal intention." Continuing, the court discusses what is a public utility in
the following language:

What is a public utility, over which the state may exercise its regulatory control without
regard to the private interest which may be affected thereby? It its broadest sense
everything upon which man bestows labor for purpose other than those for the
benefits of his immediate family is impressed with a public use. No occupation
escapes it, no merchant can avoid it, no professional man can deny it. As an
illustrative type one may instance the butcher. He deals with the public; he invites and
is urgent that the public should deal with him. The character of his business is such that,
under the police power of the state, it may well be subject to regulation, and in many
places and instances is so regulated. The preservation of cleanliness, the inspection of
meats to see that they are wholesome, all such matters are within the due and
reasonable regulatory powers of the state or nation. But these regulatory powers are
not called into exercise because the butcher has devoted his property to public
service so as to make it a public utility. He still has the unquestionable right to fix his
prices; he still has the questioned right to say that he will or will not contract with any
member of the public. What differentiates all such activities from a true public utility is
this and this only: That the devotion to public use must be of such character that the
public generally, or that part of it which has been served and which has accepted the
services, has the right to demand that that service shall be conducted, so long as it is
continued, with reasonable efficiency under reasonable charges. Public use, then,
means the use by the public and be every individual member of it, as a legal right.

STATEMENT OF THE PETITIONER'S CASE AND OF THE GOVERNMENT'S CASE

Petitioner contends on the facts, that the evidence shows that the petitioner is operating a
small ice plant in Iloilo; that no attempt has been made to supply the needs of all who may
apply for accommodation or to expand the plant to meet all demands; that sales have
been made to selected customers only, and that the right has been freely exercised to
refuse sales not only to whole districts, but constantly to individuals as wells; that the greater
portion of the business is conducted through signed contracts with selected individuals, and
on occasions, when there is a surplus, the same is sold for cash to selected applicants; that
no sales are made except to persons who have waived all claim of right to similar
accommodation in the future; and that no offer, agreement, or tender of service to the
public has ever been made. Petitioner contends, as to the law, that the decisions heretofore
referred to are controlling.

The Government has no quarrel with the petitioner as to the facts. But the Attorney-General
attempts to differentiate the authorities from the instant situation. The Attorney-General also
argues that to sanction special contracts would "open a means of escape from the
application of the law."

The result is, therefore, that we have substantial agreement between the petitioner and the
government as to the issue, as to the facts, as to the law, and as to the applicable
authorities. The question, however, remains as puzzling as before.

Planting ourselves of the authorities, which discuss the subject of public use, the criterion by
which to judge of the character of the use is whether the public may enjoy it by right or only
by permission. (U. S. vs. Tan Piaco, supra.) The essential feature of a public use is that it is not
confined to privileged individuals, but is open to the indefinite public. (Thayler and
Thayler vs. California Development Company, supra.) The use is public if all persons have the
right to the use under the same circumstances. (Fall brook Irrigation
District vs. Bradley, supra.) If the company did in truth sell ice to all persons seeking its service,
it would be a public utility. But if on the other hand, it was organized solely for particular
persons under strictly private contracts, and never was devoted by its owners to public use, it
could not be held to be a public utility without violating the due process of law clause of the
Constitution. (Producers Transportation Co. vs. Railroad Commission, supra.) And the
apparent and continued purpose of the Iloilo Ice and Storage Company has been, and is,
to remain a private enterprise and to avoid submitting to the Public Utility law.

The argument for the Government, nevertheless, merits serious consideration. The attempt of
the Public Utility Commissioner to intervene in corporate affairs, to protect the public, is
commendable. Sympathetic thought should always be given to the facts laid before the
Commissioner, with reference to the law under which he is acting.

Aware of the foregoing situation, the members of the Court are of the opinion that the
present case is governed by the authorities mentioned in this decision, which means, of
course, that, upon the facts shown in the record, the Iloilo Ice and Storage Company is not a
public utility within the meaning of the law. Like Mr. Justice Holmes, in his opinion in Terminal
Taxicab Company vs. Kutz, supra, when, in speaking for himself personally, he admitted that
he had not been able to free his mind from doubt, so has the writer not been able to free his
mind from doubt, but is finally led to accept the authorities as controlling.

JUDGMENT
It is declared that the business of the Iloilo Ice and Cold Storage Company is not a public
utility, subject to the control and jurisdiction of the Public Utility Commissioner, and that,
accordingly, the decisions of the Public Utility Commissioner and of the Public Utility Board
must be revoked, without special finding as to costs. So ordered.

SPOUSES TEODORO1 and NANETTE PERENA, Petitioners,


vs.
SPOUSES TERESITA PHILIPPINE NICOLAS and L. ZARATE, NATIONAL RAILWAYS, and the COURT
OF APPEALS Respondents.

DECISION

BERSAMIN, J.:

The operator of a. school bus service is a common carrier in the eyes of the law. He is bound
to observe extraordinary diligence in the conduct of his business. He is presumed to be
negligent when death occurs to a passenger. His liability may include indemnity for loss of
earning capacity even if the deceased passenger may only be an unemployed high school
student at the time of the accident.

The Case

By petition for review on certiorari, Spouses Teodoro and Nanette Perefia (Perefias) appeal
the adverse decision promulgated on November 13, 2002, by which the Court of Appeals
(CA) affirmed with modification the decision rendered on December 3, 1999 by the Regional
Trial Court (RTC), Branch 260, in Paraaque City that had decreed them jointly and severally
liable with Philippine National Railways (PNR), their co-defendant, to Spouses Nicolas and
Teresita Zarate (Zarates) for the death of their 15-year old son, Aaron John L. Zarate (Aaron),
then a high school student of Don Bosco Technical Institute (Don Bosco).

Antecedents

The Pereas were engaged in the business of transporting students from their respective
residences in Paraaque City to Don Bosco in Pasong Tamo, Makati City, and back. In their
business, the Pereas used a KIA Ceres Van (van) with Plate No. PYA 896, which had the
capacity to transport 14 students at a time, two of whom would be seated in the front
beside the driver, and the others in the rear, with six students on either side. They employed
Clemente Alfaro (Alfaro) as driver of the van.

In June 1996, the Zarates contracted the Pereas to transport Aaron to and from Don Bosco.
On August 22, 1996, as on previous school days, the van picked Aaron up around 6:00 a.m.
from the Zarates residence. Aaron took his place on the left side of the van near the rear
door. The van, with its air-conditioning unit turned on and the stereo playing loudly, ultimately
carried all the 14 student riders on their way to Don Bosco. Considering that the students
were due at Don Bosco by 7:15 a.m., and that they were already running late because of
the heavy vehicular traffic on the South Superhighway, Alfaro took the van to an alternate
route at about 6:45 a.m. by traversing the narrow path underneath the Magallanes
Interchange that was then commonly used by Makati-bound vehicles as a short cut into
Makati. At the time, the narrow path was marked by piles of construction materials and
parked passenger jeepneys, and the railroad crossing in the narrow path had no railroad
warning signs, or watchmen, or other responsible persons manning the crossing. In fact, the
bamboo barandilla was up, leaving the railroad crossing open to traversing motorists.

At about the time the van was to traverse the railroad crossing, PNR Commuter No. 302
(train), operated by Jhonny Alano (Alano), was in the vicinity of the Magallanes Interchange
travelling northbound. As the train neared the railroad crossing, Alfaro drove the van
eastward across the railroad tracks, closely tailing a large passenger bus. His view of the
oncoming train was blocked because he overtook the passenger bus on its left side. The
train blew its horn to warn motorists of its approach. When the train was about 50 meters
away from the passenger bus and the van, Alano applied the ordinary brakes of the train.
He applied the emergency brakes only when he saw that a collision was imminent. The
passenger bus successfully crossed the railroad tracks, but the van driven by Alfaro did not.
The train hit the rear end of the van, and the impact threw nine of the 12 students in the rear,
including Aaron, out of the van. Aaron landed in the path of the train, which dragged his
body and severed his head, instantaneously killing him. Alano fled the scene on board the
train, and did not wait for the police investigator to arrive.

Devastated by the early and unexpected death of Aaron, the Zarates commenced this
action for damages against Alfaro, the Pereas, PNR and Alano. The Pereas and PNR filed
their respective answers, with cross-claims against each other, but Alfaro could not be
served with summons.

At the pre-trial, the parties stipulated on the facts and issues, viz:

A. FACTS:

(1) That spouses Zarate were the legitimate parents of Aaron John L. Zarate;

(2) Spouses Zarate engaged the services of spouses Perea for the adequate
and safe transportation carriage of the former spouses' son from their residence
in Paraaque to his school at the Don Bosco Technical Institute in Makati City;

(3) During the effectivity of the contract of carriage and in the implementation
thereof, Aaron, the minor son of spouses Zarate died in connection with a
vehicular/train collision which occurred while Aaron was riding the contracted
carrier Kia Ceres van of spouses Perea, then driven and operated by the
latter's employee/authorized driver Clemente Alfaro, which van collided with
the train of PNR, at around 6:45 A.M. of August 22, 1996, within the vicinity of the
Magallanes Interchange in Makati City, Metro Manila, Philippines;

(4) At the time of the vehicular/train collision, the subject site of the
vehicular/train collision was a railroad crossing used by motorists for crossing the
railroad tracks;

(5) During the said time of the vehicular/train collision, there were no
appropriate and safety warning signs and railings at the site commonly used for
railroad crossing;

(6) At the material time, countless number of Makati bound public utility and
private vehicles used on a daily basis the site of the collision as an alternative
route and short-cut to Makati;

(7) The train driver or operator left the scene of the incident on board the
commuter train involved without waiting for the police investigator;

(8) The site commonly used for railroad crossing by motorists was not in fact
intended by the railroad operator for railroad crossing at the time of the
vehicular collision;

(9) PNR received the demand letter of the spouses Zarate;

(10) PNR refused to acknowledge any liability for the vehicular/train collision;

(11) The eventual closure of the railroad crossing alleged by PNR was an
internal arrangement between the former and its project contractor; and
(12) The site of the vehicular/train collision was within the vicinity or less than 100
meters from the Magallanes station of PNR.

B. ISSUES

(1) Whether or not defendant-driver of the van is, in the performance of his
functions, liable for negligence constituting the proximate cause of the vehicular
collision, which resulted in the death of plaintiff spouses' son;

(2) Whether or not the defendant spouses Perea being the employer of
defendant Alfaro are liable for any negligence which may be attributed to
defendant Alfaro;

(3) Whether or not defendant Philippine National Railways being the operator of
the railroad system is liable for negligence in failing to provide adequate safety
warning signs and railings in the area commonly used by motorists for railroad
crossings, constituting the proximate cause of the vehicular collision which
resulted in the death of the plaintiff spouses' son;

(4) Whether or not defendant spouses Perea are liable for breach of the
contract of carriage with plaintiff-spouses in failing to provide adequate and
safe transportation for the latter's son;

(5) Whether or not defendants spouses are liable for actual, moral damages,
exemplary damages, and attorney's fees;

(6) Whether or not defendants spouses Teodorico and Nanette Perea


observed the diligence of employers and school bus operators;

(7) Whether or not defendant-spouses are civilly liable for the accidental death
of Aaron John Zarate;

(8) Whether or not defendant PNR was grossly negligent in operating the
commuter train involved in the accident, in allowing or tolerating the motoring
public to cross, and its failure to install safety devices or equipment at the site of
the accident for the protection of the public;

(9) Whether or not defendant PNR should be made to reimburse defendant


spouses for any and whatever amount the latter may be held answerable or
which they may be ordered to pay in favor of plaintiffs by reason of the action;

(10) Whether or not defendant PNR should pay plaintiffs directly and fully on the
amounts claimed by the latter in their Complaint by reason of its gross
negligence;

(11) Whether or not defendant PNR is liable to defendants spouses for actual,
moral and exemplary damages and attorney's fees.2

The Zarates claim against the Pereas was upon breach of the contract of carriage for the
safe transport of Aaron; but that against PNR was based on quasi-delict under Article 2176,
Civil Code.

In their defense, the Pereas adduced evidence to show that they had exercised the
diligence of a good father of the family in the selection and supervision of Alfaro, by making
sure that Alfaro had been issued a drivers license and had not been involved in any
vehicular accident prior to the collision; that their own son had taken the van daily; and that
Teodoro Perea had sometimes accompanied Alfaro in the vans trips transporting the
students to school.
For its part, PNR tended to show that the proximate cause of the collision had been the
reckless crossing of the van whose driver had not first stopped, looked and listened; and that
the narrow path traversed by the van had not been intended to be a railroad crossing for
motorists.

Ruling of the RTC

On December 3, 1999, the RTC rendered its decision,3 disposing:

WHEREFORE, premises considered, judgment is hereby rendered in favor of the plaintiff and
against the defendants ordering them to jointly and severally pay the plaintiffs as follows:

(1) (for) the death of Aaron- Php50,000.00;

(2) Actual damages in the amount of Php100,000.00;

(3) For the loss of earning capacity- Php2,109,071.00;

(4) Moral damages in the amount of Php4,000,000.00;

(5) Exemplary damages in the amount of Php1,000,000.00;

(6) Attorneys fees in the amount of Php200,000.00; and

(7) Cost of suit.

SO ORDERED.

On June 29, 2000, the RTC denied the Pereas motion for reconsideration,4 reiterating that
the cooperative gross negligence of the Pereas and PNR had caused the collision that led
to the death of Aaron; and that the damages awarded to the Zarates were not excessive,
but based on the established circumstances.

The CAs Ruling

Both the Pereas and PNR appealed (C.A.-G.R. CV No. 68916).

PNR assigned the following errors, to wit:5

The Court a quo erred in:

1. In finding the defendant-appellant Philippine National Railways jointly and


severally liable together with defendant-appellants spouses Teodorico and
Nanette Perea and defendant-appellant Clemente Alfaro to pay plaintiffs-
appellees for the death of Aaron Zarate and damages.

2. In giving full faith and merit to the oral testimonies of plaintiffs-appellees


witnesses despite overwhelming documentary evidence on record, supporting
the case of defendants-appellants Philippine National Railways.

The Pereas ascribed the following errors to the RTC, namely:

The trial court erred in finding defendants-appellants jointly and severally liable for actual,
moral and exemplary damages and attorneys fees with the other defendants.

The trial court erred in dismissing the cross-claim of the appellants Pereas against the
Philippine National Railways and in not holding the latter and its train driver primarily
responsible for the incident.

The trial court erred in awarding excessive damages and attorneys fees.
The trial court erred in awarding damages in the form of deceaseds loss of earning capacity
in the absence of sufficient basis for such an award.

On November 13, 2002, the CA promulgated its decision, affirming the findings of the RTC,
but limited the moral damages to P 2,500,000.00; and deleted the attorneys fees because
the RTC did not state the factual and legal bases, to wit:6

WHEREFORE, premises considered, the assailed Decision of the Regional Trial Court, Branch
260 of Paraaque City is AFFIRMED with the modification that the award of Actual Damages
is reduced to P 59,502.76; Moral Damages is reduced to P 2,500,000.00; and the award for
Attorneys Fees is Deleted.

SO ORDERED.

The CA upheld the award for the loss of Aarons earning capacity, taking cognizance of the
ruling in Cariaga v. Laguna Tayabas Bus Company and Manila Railroad Company,7 wherein
the Court gave the heirs of Cariaga a sum representing the loss of the deceaseds earning
capacity despite Cariaga being only a medical student at the time of the fatal incident.
Applying the formula adopted in the American Expectancy Table of Mortality:

2/3 x (80 - age at the time of death) = life expectancy

the CA determined the life expectancy of Aaron to be 39.3 years upon reckoning his life
expectancy from age of 21 (the age when he would have graduated from college and
started working for his own livelihood) instead of 15 years (his age when he died).
Considering that the nature of his work and his salary at the time of Aarons death were
unknown, it used the prevailing minimum wage of P 280.00/day to compute Aarons gross
annual salary to be P 110,716.65, inclusive of the thirteenth month pay. Multiplying this annual
salary by Aarons life expectancy of 39.3 years, his gross income would aggregate
to P 4,351,164.30, from which his estimated expenses in the sum of P 2,189,664.30 was
deducted to finally arrive at P 2,161,500.00 as net income. Due to Aarons computed net
income turning out to be higher than the amount claimed by the Zarates,
only P 2,109,071.00, the amount expressly prayed for by them, was granted.

On April 4, 2003, the CA denied the Pereas motion for reconsideration.8

Issues

In this appeal, the Pereas list the following as the errors committed by the CA, to wit:

I. The lower court erred when it upheld the trial courts decision holding the petitioners jointly
and severally liable to pay damages with Philippine National Railways and dismissing their
cross-claim against the latter.

II. The lower court erred in affirming the trial courts decision awarding damages for loss of
earning capacity of a minor who was only a high school student at the time of his death in
the absence of sufficient basis for such an award.

III. The lower court erred in not reducing further the amount of damages awarded, assuming
petitioners are liable at all.

Ruling

The petition has no merit.

1.
Were the Pereas and PNR jointly
and severally liable for damages?
The Zarates brought this action for recovery of damages against both the Pereas and the
PNR, basing their claim against the Pereas on breach of contract of carriage and against
the PNR on quasi-delict.

The RTC found the Pereas and the PNR negligent. The CA affirmed the findings.

We concur with the CA.

To start with, the Pereas defense was that they exercised the diligence of a good father of
the family in the selection and supervision of Alfaro, the van driver, by seeing to it that Alfaro
had a drivers license and that he had not been involved in any vehicular accident prior to
the fatal collision with the train; that they even had their own son travel to and from school
on a daily basis; and that Teodoro Perea himself sometimes accompanied Alfaro in
transporting the passengers to and from school. The RTC gave scant consideration to such
defense by regarding such defense as inappropriate in an action for breach of contract of
carriage.

We find no adequate cause to differ from the conclusions of the lower courts that the
Pereas operated as a common carrier; and that their standard of care was extraordinary
diligence, not the ordinary diligence of a good father of a family.

Although in this jurisdiction the operator of a school bus service has been usually regarded as
a private carrier,9primarily because he only caters to some specific or privileged individuals,
and his operation is neither open to the indefinite public nor for public use, the exact nature
of the operation of a school bus service has not been finally settled. This is the occasion to
lay the matter to rest.

A carrier is a person or corporation who undertakes to transport or convey goods or persons


from one place to another, gratuitously or for hire. The carrier is classified either as a
private/special carrier or as a common/public carrier.10 A private carrier is one who, without
making the activity a vocation, or without holding himself or itself out to the public as ready
to act for all who may desire his or its services, undertakes, by special agreement in a
particular instance only, to transport goods or persons from one place to another either
gratuitously or for hire.11The provisions on ordinary contracts of the Civil Code govern the
contract of private carriage.The diligence required of a private carrier is only ordinary, that is,
the diligence of a good father of the family. In contrast, a common carrier is a person,
corporation, firm or association engaged in the business of carrying or transporting
passengers or goods or both, by land, water, or air, for compensation, offering such services
to the public.12Contracts of common carriage are governed by the provisions on common
carriers of the Civil Code, the Public Service Act,13 and other special laws relating to
transportation. A common carrier is required to observe extraordinary diligence, and is
presumed to be at fault or to have acted negligently in case of the loss of the effects of
passengers, or the death or injuries to passengers.14

In relation to common carriers, the Court defined public use in the following terms in United
States v. Tan Piaco,15viz:

"Public use" is the same as "use by the public". The essential feature of the public use is not
confined to privileged individuals, but is open to the indefinite public. It is this indefinite or
unrestricted quality that gives it its public character. In determining whether a use is public,
we must look not only to the character of the business to be done, but also to the proposed
mode of doing it. If the use is merely optional with the owners, or the public benefit is merely
incidental, it is not a public use, authorizing the exercise of the jurisdiction of the public utility
commission. There must be, in general, a right which the law compels the owner to give to
the general public. It is not enough that the general prosperity of the public is promoted.
Public use is not synonymous with public interest. The true criterion by which to judge the
character of the use is whether the public may enjoy it by right or only by permission.
In De Guzman v. Court of Appeals,16 the Court noted that Article 1732 of the Civil Code
avoided any distinction between a person or an enterprise offering transportation on a
regular or an isolated basis; and has not distinguished a carrier offering his services to the
general public, that is, the general community or population, from one offering his services
only to a narrow segment of the general population.

Nonetheless, the concept of a common carrier embodied in Article 1732 of the Civil Code
coincides neatly with the notion of public service under the Public Service Act, which
supplements the law on common carriers found in the Civil Code. Public service, according
to Section 13, paragraph (b) of the Public Service Act, includes:

x x x every person that now or hereafter may own, operate, manage, or control in the
Philippines, for hire or compensation, with general or limited clientle, whether permanent or
occasional, and done for the general business purposes, any common carrier, railroad,
street railway, traction railway, subway motor vehicle, either for freight or passenger, or both,
with or without fixed route and whatever may be its classification, freight or carrier service of
any class, express service, steamboat, or steamship line, pontines, ferries and water craft,
engaged in the transportation of passengers or freight or both, shipyard, marine repair shop,
ice-refrigeration plant, canal, irrigation system, gas, electric light, heat and power, water
supply and power petroleum, sewerage system, wire or wireless communications systems,
wire or wireless broadcasting stations and other similar public services. x x x.17

Given the breadth of the aforequoted characterization of a common carrier, the Court has
considered as common carriers pipeline operators,18 custom brokers and
warehousemen, and barge operators even if they had limited clientle.
19 20

As all the foregoing indicate, the true test for a common carrier is not the quantity or extent
of the business actually transacted, or the number and character of the conveyances used
in the activity, but whether the undertaking is a part of the activity engaged in by the carrier
that he has held out to the general public as his business or occupation. If the undertaking is
a single transaction, not a part of the general business or occupation engaged in, as
advertised and held out to the general public, the individual or the entity rendering such
service is a private, not a common, carrier. The question must be determined by the
character of the business actually carried on by the carrier, not by any secret intention or
mental reservation it may entertain or assert when charged with the duties and obligations
that the law imposes.21

Applying these considerations to the case before us, there is no question that the Pereas as
the operators of a school bus service were: (a) engaged in transporting passengers generally
as a business, not just as a casual occupation; (b) undertaking to carry passengers over
established roads by the method by which the business was conducted; and (c) transporting
students for a fee. Despite catering to a limited clientle, the Pereas operated as a
common carrier because they held themselves out as a ready transportation indiscriminately
to the students of a particular school living within or near where they operated the service
and for a fee.

The common carriers standard of care and vigilance as to the safety of the passengers is
defined by law. Given the nature of the business and for reasons of public policy, the
common carrier is bound "to observe extraordinary diligence in the vigilance over the goods
and for the safety of the passengers transported by them, according to all the
circumstances of each case."22 Article 1755 of the Civil Code specifies that the common
carrier should "carry the passengers safely as far as human care and foresight can provide,
using the utmost diligence of very cautious persons, with a due regard for all the
circumstances." To successfully fend off liability in an action upon the death or injury to a
passenger, the common carrier must prove his or its observance of that extraordinary
diligence; otherwise, the legal presumption that he or it was at fault or acted negligently
would stand.23 No device, whether by stipulation, posting of notices, statements on tickets, or
otherwise, may dispense with or lessen the responsibility of the common carrier as defined
under Article 1755 of the Civil Code. 24
And, secondly, the Pereas have not presented any compelling defense or reason by which
the Court might now reverse the CAs findings on their liability. On the contrary, an
examination of the records shows that the evidence fully supported the findings of the CA.

As earlier stated, the Pereas, acting as a common carrier, were already presumed to be
negligent at the time of the accident because death had occurred to their passenger.25 The
presumption of negligence, being a presumption of law, laid the burden of evidence on
their shoulders to establish that they had not been negligent.26 It was the law no less that
required them to prove their observance of extraordinary diligence in seeing to the safe and
secure carriage of the passengers to their destination. Until they did so in a credible manner,
they stood to be held legally responsible for the death of Aaron and thus to be held liable for
all the natural consequences of such death.

There is no question that the Pereas did not overturn the presumption of their negligence by
credible evidence. Their defense of having observed the diligence of a good father of a
family in the selection and supervision of their driver was not legally sufficient. According to
Article 1759 of the Civil Code, their liability as a common carrier did not cease upon proof
that they exercised all the diligence of a good father of a family in the selection and
supervision of their employee. This was the reason why the RTC treated this defense of the
Pereas as inappropriate in this action for breach of contract of carriage.

The Pereas were liable for the death of Aaron despite the fact that their driver might have
acted beyond the scope of his authority or even in violation of the orders of the common
carrier.27 In this connection, the records showed their drivers actual negligence. There was a
showing, to begin with, that their driver traversed the railroad tracks at a point at which the
PNR did not permit motorists going into the Makati area to cross the railroad tracks. Although
that point had been used by motorists as a shortcut into the Makati area, that fact alone did
not excuse their driver into taking that route. On the other hand, with his familiarity with that
shortcut, their driver was fully aware of the risks to his passengers but he still disregarded the
risks. Compounding his lack of care was that loud music was playing inside the air-
conditioned van at the time of the accident. The loudness most probably reduced his ability
to hear the warning horns of the oncoming train to allow him to correctly appreciate the
lurking dangers on the railroad tracks. Also, he sought to overtake a passenger bus on the
left side as both vehicles traversed the railroad tracks. In so doing, he lost his view of the train
that was then coming from the opposite side of the passenger bus, leading him to
miscalculate his chances of beating the bus in their race, and of getting clear of the train. As
a result, the bus avoided a collision with the train but the van got slammed at its rear,
causing the fatality. Lastly, he did not slow down or go to a full stop before traversing the
railroad tracks despite knowing that his slackening of speed and going to a full stop were in
observance of the right of way at railroad tracks as defined by the traffic laws and
regulations.28 He thereby violated a specific traffic regulation on right of way, by virtue of
which he was immediately presumed to be negligent.29

The omissions of care on the part of the van driver constituted negligence,30 which,
according to Layugan v. Intermediate Appellate Court,31 is "the omission to do something
which a reasonable man, guided by those considerations which ordinarily regulate the
conduct of human affairs, would do, or the doing of something which a prudent and
reasonable man would not do,32 or as Judge Cooley defines it, (t)he failure to observe for
the protection of the interests of another person, that degree of care, precaution, and
vigilance which the circumstances justly demand, whereby such other person suffers
injury."33

The test by which to determine the existence of negligence in a particular case has been
aptly stated in the leading case of Picart v. Smith,34 thuswise:

The test by which to determine the existence of negligence in a particular case may be
stated as follows: Did the defendant in doing the alleged negligent act use that reasonable
care and caution which an ordinarily prudent person would have used in the same
situation? If not, then he is guilty of negligence. The law here in effect adopts the standard
supposed to be supplied by the imaginary conduct of the discreet paterfamilias of the
Roman law. The existence of negligence in a given case is not determined by reference to
the personal judgment of the actor in the situation before him. The law considers what would
be reckless, blameworthy, or negligent in the man of ordinary intelligence and prudence
and determines liability by that.

The question as to what would constitute the conduct of a prudent man in a given situation
must of course be always determined in the light of human experience and in view of the
facts involved in the particular case. Abstract speculation cannot here be of much value
but this much can be profitably said: Reasonable men govern their conduct by the
circumstances which are before them or known to them. They are not, and are not
supposed to be, omniscient of the future. Hence they can be expected to take care only
when there is something before them to suggest or warn of danger. Could a prudent man, in
the case under consideration, foresee harm as a result of the course actually pursued? If so,
it was the duty of the actor to take precautions to guard against that harm. Reasonable
foresight of harm, followed by the ignoring of the suggestion born of this prevision, is always
necessary before negligence can be held to exist. Stated in these terms, the proper criterion
for determining the existence of negligence in a given case is this: Conduct is said to be
negligent when a prudent man in the position of the tortfeasor would have foreseen that an
effect harmful to another was sufficiently probable to warrant his foregoing the conduct or
guarding against its consequences. (Emphasis supplied)

Pursuant to the Picart v. Smith test of negligence, the Pereas driver was entirely negligent
when he traversed the railroad tracks at a point not allowed for a motorists crossing despite
being fully aware of the grave harm to be thereby caused to his passengers; and when he
disregarded the foresight of harm to his passengers by overtaking the bus on the left side as
to leave himself blind to the approach of the oncoming train that he knew was on the
opposite side of the bus.

Unrelenting, the Pereas cite Phil. National Railways v. Intermediate Appellate Court,35 where
the Court held the PNR solely liable for the damages caused to a passenger bus and its
passengers when its train hit the rear end of the bus that was then traversing the railroad
crossing. But the circumstances of that case and this one share no similarities. In Philippine
National Railways v. Intermediate Appellate Court, no evidence of contributory negligence
was adduced against the owner of the bus. Instead, it was the owner of the bus who proved
the exercise of extraordinary diligence by preponderant evidence. Also, the records are
replete with the showing of negligence on the part of both the Pereas and the PNR.
Another distinction is that the passenger bus in Philippine National Railways v. Intermediate
Appellate Court was traversing the dedicated railroad crossing when it was hit by the train,
but the Pereas school van traversed the railroad tracks at a point not intended for that
purpose.

At any rate, the lower courts correctly held both the Pereas and the PNR "jointly and
severally" liable for damages arising from the death of Aaron. They had been impleaded in
the same complaint as defendants against whom the Zarates had the right to relief, whether
jointly, severally, or in the alternative, in respect to or arising out of the accident, and
questions of fact and of law were common as to the Zarates.36 Although the basis of the right
to relief of the Zarates (i.e., breach of contract of carriage) against the Pereas was distinct
from the basis of the Zarates right to relief against the PNR (i.e., quasi-delict under Article
2176, Civil Code), they nonetheless could be held jointly and severally liable by virtue of their
respective negligence combining to cause the death of Aaron. As to the PNR, the RTC rightly
found the PNR also guilty of negligence despite the school van of the Pereas traversing the
railroad tracks at a point not dedicated by the PNR as a railroad crossing for pedestrians and
motorists, because the PNR did not ensure the safety of others through the placing of
crossbars, signal lights, warning signs, and other permanent safety barriers to prevent
vehicles or pedestrians from crossing there. The RTC observed that the fact that a crossing
guard had been assigned to man that point from 7 a.m. to 5 p.m. was a good indicium that
the PNR was aware of the risks to others as well as the need to control the vehicular and
other traffic there. Verily, the Pereas and the PNR were joint tortfeasors.
2.
Was the indemnity for loss of
Aarons earning capacity proper?

The RTC awarded indemnity for loss of Aarons earning capacity. Although agreeing with the
RTC on the liability, the CA modified the amount. Both lower courts took into consideration
that Aaron, while only a high school student, had been enrolled in one of the reputable
schools in the Philippines and that he had been a normal and able-bodied child prior to his
death. The basis for the computation of Aarons earning capacity was not what he would
have become or what he would have wanted to be if not for his untimely death, but the
minimum wage in effect at the time of his death. Moreover, the RTCs computation of
Aarons life expectancy rate was not reckoned from his age of 15 years at the time of his
death, but on 21 years, his age when he would have graduated from college.

We find the considerations taken into account by the lower courts to be reasonable and
fully warranted.

Yet, the Pereas submit that the indemnity for loss of earning capacity was speculative and
unfounded.1wphi1 They cited People v. Teehankee, Jr.,37 where the Court deleted the
indemnity for victim Jussi Leinos loss of earning capacity as a pilot for being speculative due
to his having graduated from high school at the International School in Manila only two years
before the shooting, and was at the time of the shooting only enrolled in the first semester at
the Manila Aero Club to pursue his ambition to become a professional pilot. That meant,
according to the Court, that he was for all intents and purposes only a high school graduate.

We reject the Pereas submission.

First of all, a careful perusal of the Teehankee, Jr. case shows that the situation there of Jussi
Leino was not akin to that of Aaron here. The CA and the RTC were not speculating that
Aaron would be some highly-paid professional, like a pilot (or, for that matter, an engineer, a
physician, or a lawyer). Instead, the computation of Aarons earning capacity was premised
on him being a lowly minimum wage earner despite his being then enrolled at a prestigious
high school like Don Bosco in Makati, a fact that would have likely ensured his success in his
later years in life and at work.

And, secondly, the fact that Aaron was then without a history of earnings should not be
taken against his parents and in favor of the defendants whose negligence not only cost
Aaron his life and his right to work and earn money, but also deprived his parents of their
right to his presence and his services as well. Our law itself states that the loss of the earning
capacity of the deceased shall be the liability of the guilty party in favor of the heirs of the
deceased, and shall in every case be assessed and awarded by the court "unless the
deceased on account of permanent physical disability not caused by the defendant, had
no earning capacity at the time of his death."38Accordingly, we emphatically hold in favor of
the indemnification for Aarons loss of earning capacity despite him having been
unemployed, because compensation of this nature is awarded not for loss of time or
earnings but for loss of the deceaseds power or ability to earn money.39

This favorable treatment of the Zarates claim is not unprecedented. In Cariaga v. Laguna
Tayabas Bus Company and Manila Railroad Company,40 fourth-year medical student
Edgardo Carriagas earning capacity, although he survived the accident but his injuries
rendered him permanently incapacitated, was computed to be that of the physician that
he dreamed to become. The Court considered his scholastic record sufficient to justify the
assumption that he could have finished the medical course and would have passed the
medical board examinations in due time, and that he could have possibly earned a modest
income as a medical practitioner. Also, in People v. Sanchez,41 the Court opined that murder
and rape victim Eileen Sarmienta and murder victim Allan Gomez could have easily landed
good-paying jobs had they graduated in due time, and that their jobs would probably pay
them high monthly salaries from P 10,000.00 to P 15,000.00 upon their graduation. Their
earning capacities were computed at rates higher than the minimum wage at the time of
their deaths due to their being already senior agriculture students of the University of the
Philippines in Los Baos, the countrys leading educational institution in agriculture.

3.
Were the amounts of damages excessive?

The Pereas plead for the reduction of the moral and exemplary damages awarded to the
Zarates in the respective amounts of P 2,500,000.00 and P 1,000,000.00 on the ground that
such amounts were excessive.

The plea is unwarranted.

The moral damages of P 2,500,000.00 were really just and reasonable under the established
circumstances of this case because they were intended by the law to assuage the Zarates
deep mental anguish over their sons unexpected and violent death, and their moral shock
over the senseless accident. That amount would not be too much, considering that it would
help the Zarates obtain the means, diversions or amusements that would alleviate their
suffering for the loss of their child. At any rate, reducing the amount as excessive might prove
to be an injustice, given the passage of a long time from when their mental anguish was
inflicted on them on August 22, 1996.

Anent the P 1,000,000.00 allowed as exemplary damages, we should not reduce the amount
if only to render effective the desired example for the public good. As a common carrier, the
Pereas needed to be vigorously reminded to observe their duty to exercise extraordinary
diligence to prevent a similarly senseless accident from happening again. Only by an award
of exemplary damages in that amount would suffice to instill in them and others similarly
situated like them the ever-present need for greater and constant vigilance in the conduct
of a business imbued with public interest.

WHEREFORE, we DENY the petition for review on certiorari; AFFIRM the decision promulgated
on November 13, 2002; and ORDER the petitioners to pay the costs of suit.

SO ORDERED.

9, G.R. No. L-56487 October 21, 1991

REYNALDA GATCHALIAN, petitioner,


vs.
ARSENIO DELIM and the HON. COURT OF APPEALS, respondents.

At noon time on 11 July 1973, petitioner Reynalda Gatchalian boarded, as a paying


passenger, respondent's "Thames" mini bus at a point in San Eugenio, Aringay, La Union,
bound for Bauang, of the same province. On the way, while the bus was running along the
highway in Barrio Payocpoc, Bauang, Union, "a snapping sound" was suddenly heard at one
part of the bus and, shortly thereafter, the vehicle bumped a cement flower pot on the side
of the road, went off the road, turned turtle and fell into a ditch. Several passengers,
including petitioner Gatchalian, were injured. They were promptly taken to Bethany Hospital
at San Fernando, La Union, for medical treatment. Upon medical examination, petitioner
was found to have sustained physical injuries on the leg, arm and forehead, specifically
described as follows: lacerated wound, forehead; abrasion, elbow, left; abrasion, knee, left;
abrasion, lateral surface, leg, left. 1

On 14 July 1973, while injured. passengers were confined in the hospital, Mrs. Adela Delim,
wife of respondent, visited them and later paid for their hospitalization and medical
expenses. She also gave petitioner P12.00 with which to pay her transportation expense in
going home from the hospital. However, before Mrs. Delim left, she had the injured
passengers, including petitioner, sign an already prepared Joint Affidavit which stated,
among other things:
That we were passengers of Thames with Plate No. 52-222 PUJ Phil. 73 and
victims after the said Thames met an accident at Barrio Payocpoc Norte,
Bauang, La Union while passing through the National Highway No. 3;

That after a thorough investigation the said Thames met the accident due to
mechanical defect and went off the road and turned turtle to the east canal of
the road into a creek causing physical injuries to us;

xxx xxx xxx

That we are no longer interested to file a complaint, criminal or civil against the
said driver and owner of the said Thames, because it was an accident and the
said driver and owner of the said Thames have gone to the extent of helping us
to be treated upon our injuries.

xxx xxx xxx 2

(Emphasis supplied)

Notwithstanding this document, petitioner Gathalian filed with the then Court of First
Instance of La Union an action extra contractu to recover compensatory and moral
damages. She alleged in the complaint that her injuries sustained from the vehicular mishap
had left her with a conspicuous white scar measuring 1 by 1/2 inches on the forehead,
generating mental suffering and an inferiority complex on her part; and that as a result, she
had to retire in seclusion and stay away from her friends. She also alleged that the scar
diminished her facial beauty and deprived her of opportunities for employment. She prayed
for an award of: P10,000.00 for loss of employment and other opportunities; P10,000.00 for the
cost of plastic surgery for removal of the scar on her forehead; P30,000.00 for moral
damages; and P1,000.00 as attorney's fees.

In defense, respondent averred that the vehicular mishap was due to force majeure, and
that petitioner had already been paid and moreover had waived any right to institute any
action against him (private respondent) and his driver, when petitioner Gatchalian signed
the Joint Affidavit on 14 July 1973.

After trial, the trial court dismissed the complaint upon the ground that when petitioner
Gatchalian signed the Joint Affidavit, she relinquished any right of action (whether criminal
or civil) that she may have had against respondent and the driver of the mini-bus.

On appeal by petitioner, the Court of Appeals reversed the trial court's conclusion that there
had been a valid waiver, but affirmed the dismissal of the case by denying petitioner's claim
for damages:

We are not in accord, therefore, of (sic) the ground of the trial court's dismissal of
the complaint, although we conform to the trial court's disposition of the case
its dismissal.

IN VIEW OF THE FOREGOING considerations, there being no error committed by


the lower court in dismissing the plaintiff-appellant's complaint, the judgment of
dismissal is hereby affirmed.

Without special pronouncement as to costs.

SO ORDERED. 3

In the present Petition for Review filed in forma pauperis, petitioner assails the decision of the
Court of Appeals and ask this Court to award her actual or compensatory damages as well
as moral damages.
We agree with the majority of the Court of Appeals who held that no valid waiver of her
cause of action had been made by petitioner. The relevant language of the Joint Affidavit
may be quoted again:

That we are no longer interested to file a complaint, criminal or civil against the
said driver and owner of the said Thames, because it was an accident and the
said driver and owner of the said Thames have gone to the extent of helping us
to be treated upon our injuries. (Emphasis supplied)

A waiver, to be valid and effective, must in the first place be couched in clear and
unequivocal terms which leave no doubt as to the intention of a person to give up a
right or benefit which legally pertains to him. 4 A waiver may not casually be attributed
to a person when the terms thereof do not explicitly and clearly evidence an intent to
abandon a right vested in such person.

The degree of explicitness which this Court has required in purported waivers is illustrated
in Yepes and Susaya v. Samar Express Transit (supra), where the Court in reading and
rejecting a purported waiver said:

. . . It appears that before their transfer to the Leyte Provincial Hospital,


appellees were asked to sign as, in fact, they signed the document Exhibit I
wherein they stated that "in consideration of the expenses which said operator
has incurred in properly giving us the proper medical treatment, we hereby
manifest our desire to waive any and all claims against the operator of the
Samar Express Transit."

xxx xxx xxx

Even a cursory examination of the document mentioned above will readily show
that appellees did not actually waive their right to claim damages from
appellant for the latter's failure to comply with their contract of carriage. All that
said document proves is that they expressed a "desire" to make the waiver
which obviously is not the same as making an actual waiver of their right. A
waiver of the kind invoked by appellant must be clear and
unequivocal (Decision of the Supreme Court of Spain of July 8, 1887) which is
not the case of the one relied upon in this appeal. (Emphasis supplied)

If we apply the standard used in Yepes and Susaya, we would have to conclude that
the terms of the Joint Affidavit in the instant case cannot be regarded as a waiver
cast in "clear and unequivocal" terms. Moreover, the circumstances under which the
Joint Affidavit was signed by petitioner Gatchalian need to be considered. Petitioner
testified that she was still reeling from the effects of the vehicular accident, having
been in the hospital for only three days, when the purported waiver in the form of the
Joint Affidavit was presented to her for signing; that while reading the same, she
experienced dizziness but that, seeing the other passengers who had also suffered
injuries sign the document, she too signed without bothering to read the Joint Affidavit
in its entirety. Considering these circumstances there appears substantial doubt
whether petitioner understood fully the import of the Joint Affidavit (prepared by or at
the instance of private respondent) she signed and whether she actually intended
thereby to waive any right of action against private respondent.

Finally, because what is involved here is the liability of a common carrier for injuries sustained
by passengers in respect of whose safety a common carrier must
exercise extraordinary diligence, we must construe any such purported waiver most strictly
against the common carrier. For a waiver to be valid and effective, it must not be contrary
to law, morals, public policy or good
customs. 5 To uphold a supposed waiver of any right to claim damages by an injured
passenger, under circumstances like those exhibited in this case, would be to dilute and
weaken the standard of extraordinary diligence exacted by the law from common carriers
and hence to render that standard unenforceable. 6 We believe such a purported waiver is
offensive to public policy.

Petitioner Gatchalian also argues that the Court of Appeals, having by majority vote held
that there was no enforceable waiver of her right of action, should have awarded her
actual or compensatory and moral damages as a matter of course.

We have already noted that a duty to exercise extraordinary diligence in protecting the
safety of its passengers is imposed upon a common carrier. 7 In case of death or injuries to
passengers, a statutory presumption arises that the common carrier was at fault or had
acted negligently "unless it proves that it [had] observed extraordinary diligence as
prescribed in Articles 1733 and 1755." 8 In fact, because of this statutory presumption, it has
been held that a court need not even make an express finding of fault or negligence on the
part of the common carrier in order to hold it liable. 9 To overcome this presumption, the
common carrier must slow to the court that it had exercised extraordinary diligence to
prevent the injuries. 10 The standard of extraordinary diligence imposed upon common
carriers is considerably more demanding than the standard of ordinary diligence, i.e., the
diligence of a good paterfamilias established in respect of the ordinary relations between
members of society. A common carrier is bound to carry its passengers safely" as far as
human care and foresight can provide, using the utmost diligence of a very cautious
person, with due regard to all the circumstances". 11

Thus, the question which must be addressed is whether or not private respondent has
successfully proved that he had exercised extraordinary diligence to prevent the mishap
involving his mini-bus. The records before the Court are bereft of any evidence showing that
respondent had exercised the extraordinary diligence required by law. Curiously, respondent
did not even attempt, during the trial before the court a quo, to prove that he had indeed
exercised the requisite extraordinary diligence. Respondent did try to exculpate himself from
liability by alleging that the mishap was the result of force majeure. But allegation is not proof
and here again, respondent utterly failed to substantiate his defense of force majeure. To
exempt a common carrier from liability for death or physical injuries to passengers upon the
ground of force majeure, the carrier must clearly show not only that the efficient cause of
the casualty was entirely independent of the human will, but also that it was impossible to
avoid. Any participation by the common carrier in the occurrence of the injury will defeat
the defense of force majeure. In Servando v. Philippine Steam Navigation Company, 12 the
Court summed up the essential characteristics of force majeure by quoting with approval
from the Enciclopedia Juridica Espaola:

Thus, where fortuitous event or force majeure is the immediate and proximate
cause of the loss, the obligor is exempt from liability non-performance. The
Partidas, the antecedent of Article 1174 of the Civil Code, defines "caso fortuito"
as 'an event that takes place by accident and could not have been foreseen.
Examples of this are destruction of houses, unexpected fire, shipwreck, violence
of robber.

In its dissertation on the phrase "caso fortuito" the Enciclopedia Juridica


Espaola says: 'In legal sense and, consequently, also in relation to contracts, a
"caso fortuito" presents the following essential characteristics: (1) the cause of
the unforeseen and unexpected occurence, or of the failure of the debtor to
comply with his obligation, must be independent of the human will; (2) it must
be impossible to foresee the event which constitutes the "caso fortuito", or if it
can be foreseen, it must be impossible to avoid; (3) the occurrence must be
such as to render it impossible for the debtor to fulfill his obligation in a normal
manner; and (4) the obligor must be free from any participation in the
aggravation of the injury resulting to the creditor.

Upon the other hand, the record yields affirmative evidence of fault or negligence on the
part of respondent common carrier. In her direct examination, petitioner Gatchalian
narrated that shortly before the vehicle went off the road and into a ditch, a "snapping
sound" was suddenly heard at one part of the bus. One of the passengers, an old woman,
cried out, "What happened?" ("Apay addan samet nadadaelen?"). The driver replied,
nonchalantly, "That is only normal" ("Ugali ti makina dayta"). The driver did not stop to check
if anything had gone wrong with the bus. Moreover, the driver's reply necessarily indicated
that the same "snapping sound" had been heard in the bus on previous occasions. This could
only mean that the bus had not been checked physically or mechanically to determine
what was causing the "snapping sound" which had occurred so frequently that the driver
had gotten accustomed to it. Such a sound is obviously alien to a motor vehicle in good
operating condition, and even a modicum of concern for life and limb of passengers
dictated that the bus be checked and repaired. The obvious continued failure of
respondent to look after the roadworthiness and safety of the bus, coupled with the driver's
refusal or neglect to stop the mini-bus after he had heard once again the "snapping sound"
and the cry of alarm from one of the passengers, constituted wanton disregard of the
physical safety of the passengers, and hence gross negligence on the part of respondent
and his driver.

We turn to petitioner's claim for damages. The first item in that claim relates to revenue which
petitioner said she failed to realize because of the effects of the vehicular mishap. Petitioner
maintains that on the day that the mini-bus went off the road, she was supposed to confer
with the district supervisor of public schools for a substitute teacher's job, a job which she had
held off and on as a "casual employee." The Court of Appeals, however, found that at the
time of the accident, she was no longer employed in a public school since, being a casual
employee and not a Civil Service eligible, she had been laid off. Her employment as a
substitute teacher was occasional and episodic, contingent upon the availability of
vacancies for substitute teachers. In view of her employment status as such, the Court of
Appeals held that she could not be said to have in fact lost any employment after and by
reason of the accident. 13 Such was the factual finding of the Court of Appeals, a finding
entitled to due respect from this Court. Petitioner Gatchalian has not submitted any basis for
overturning this finding of fact, and she may not be awarded damages on the basis of
speculation or conjecture. 14

Petitioner's claim for the cost of plastic surgery for removal of the scar on her forehead, is
another matter. A person is entitled to the physical integrity of his or her body; if that integrity
is violated or diminished, actual injury is suffered for which actual or compensatory damages
are due and assessable. Petitioner Gatchalian is entitled to be placed as nearly as possible
in the condition that she was before the mishap. A scar, especially one on the face of the
woman, resulting from the infliction of injury upon her, is a violation of bodily integrity, giving
raise to a legitimate claim for restoration to her conditio ante. If the scar is relatively small
and does not grievously disfigure the victim, the cost of surgery may be expected to be
correspondingly modest. In Araneta, et al. vs. Areglado, et al., 15 this Court awarded actual
or compensatory damages for, among other things, the surgical removal of the scar on the
face of a young boy who had been injured in a vehicular collision. The Court there held:

We agree with the appellants that the damages awarded by the lower court for
the injuries suffered by Benjamin Araneta are inadequate. In allowing not more
than P1,000.00 as compensation for the "permanent deformity and something
like an inferiority complex" as well as for the "pathological condition on the left
side of the jaw" caused to said plaintiff, the court below overlooked the clear
evidence on record that to arrest the degenerative process taking place in the
mandible and restore the injured boy to a nearly normal condition, surgical
intervention was needed, for which the doctor's charges would amount to
P3,000.00, exclusive of hospitalization fees, expenses and
medicines. Furthermore, the operation, according to Dr. Dio, would probably
have to be repeated in order to effectuate a complete cure, while removal of
the scar on the face obviously demanded plastic surgery.

xxx xxx xxx


The father's failure to submit his son to a plastic operation as soon as possible
does not prove that such treatment is not called for. The damage to the jaw
and the existence of the scar in Benjamin Araneta's face are physical facts that
can not be reasoned out of existence. That the injury should be treated in order
to restore him as far as possible to his original condition is undeniable. The
father's delay, or even his negligence, should not be allowed to prejudice the
son who has no control over the parent's action nor impair his right to a full
indemnity.

. . . Still, taking into account the necessity and cost of corrective measures to
fully repair the damage; the pain suffered by the injured party; his feelings of
inferiority due to consciousness of his present deformity, as well as the voluntary
character of the injury inflicted; and further considering that a repair, however,
skillfully conducted, is never equivalent to the original state, we are of the
opinion that the indemnity granted by the trial court should be increased to a
total of P18,000.00. (Emphasis supplied)

Petitioner estimated that the cost of having her scar surgically removed was somewhere
between P10,000.00 to P15,000.00. 16 Upon the other hand, Dr. Fe Tayao Lasam, a witness
presented as an expert by petitioner, testified that the cost would probably be between
P5,000.00 to P10,000.00. 17 In view of this testimony, and the fact that a considerable amount
of time has lapsed since the mishap in 1973 which may be expected to increase not only the
cost but also very probably the difficulty of removing the scar, we consider that the amount
of P15,000.00 to cover the cost of such plastic surgery is not unreasonable.

Turning to petitioner's claim for moral damages, the long-established rule is that moral
damages may be awarded where gross negligence on the part of the common carrier is
shown. 18 Since we have earlier concluded that respondent common carrier and his driver
had been grossly negligent in connection with the bus mishap which had injured petitioner
and other passengers, and recalling the aggressive manuevers of respondent, through his
wife, to get the victims to waive their right to recover damages even as they were still
hospitalized for their injuries, petitioner must be held entitled to such moral damages.
Considering the extent of pain and anxiety which petitioner must have suffered as a result of
her physical injuries including the permanent scar on her forehead, we believe that the
amount of P30,000.00 would be a reasonable award. Petitioner's claim for P1,000.00 as
atttorney's fees is in fact even more modest. 19

WHEREFORE, the Decision of the Court of Appeals dated 24 October 1980, as well as the
decision of the then Court of First Instance of La Union dated 4 December 1975 are hereby
REVERSED and SET ASIDE.Respondent is hereby ORDERED to pay petitioner Reynalda
Gatchalian the following sums: 1) P15,000.00 as actual or compensatory damages to cover
the cost of plastic surgery for the removal of the scar on petitioner's forehead; 2) P30,000.00
as moral damages; and 3) P1,000.00 as attorney's fees, the aggregate amount to bear
interest at the legal rate of 6% per annum counting from the promulgation of this decision
until full payment thereof. Costs against private respondent.

SO ORDERED.

10. G.R. No. L-31379 August 29, 1988

COMPAIA MARITIMA, petitioner,


vs.
COURT OF APPEALS and VICENTE CONCEPCION, respondents.

Petitioner Compaia Maritima seeks to set aside through this petition for review on certiorari
the decision 1 of the Court of Appeals dated December 5, 1965, adjudging petitioner liable
to private respondent Vicente E. Concepcion for damages in the amount of P24,652.97 with
legal interest from the date said decision shall have become final, for petitioner's failure to
deliver safely private respondent's payloader, and for costs of suit. The payloader was
declared abandoned in favor of petitioner.

The facts of the case are as follows:

Private respondent Vicente E. Concepcion, a civil engineer doing business under the name
and style of Consolidated Construction with office address at Room 412, Don Santiago Bldg.,
Taft Avenue, Manila, had a contract with the Civil Aeronautics Administration (CAA)
sometime in 1964 for the construction of the airport in Cagayan de Oro City Misamis Oriental.

Being a Manila based contractor, Vicente E. Concepcion had to ship his construction
equipment to Cagayan de Oro City. Having shipped some of his equipment through
petitioner and having settled the balance of P2,628.77 with respect to said shipment,
Concepcion negotiated anew with petitioner, thru its collector, Pacifico Fernandez, on
August 28, 1964 for the shipment to Cagayan de Oro City of one (1) unit payloader, four (4)
units 6x6 Reo trucks and two (2) pieces of water tanks. He was issued Bill of Lading 113 on the
same date upon delivery of the equipment at the Manila North Harbor. 2

These equipment were loaded aboard the MV Cebu in its Voyage No. 316, which left Manila
on August 30, 1964 and arrived at Cagayan de Oro City in the afternoon of September 1,
1964. The Reo trucks and water tanks were safely unloaded within a few hours after arrival,
but while the payloader was about two (2) meters above the pier in the course of unloading,
the swivel pin of the heel block of the port block of Hatch No. 2 gave way, causing the
payloader to fall. 3 The payloader was damaged and was thereafter taken to petitioner's
compound in Cagayan de Oro City.

On September 7, 1964, Consolidated Construction, thru Vicente E. Concepcion, wrote


Compaia Maritima to demand a replacement of the payloader which it was considering
as a complete loss because of the extent of damage. 4 Consolidated Construction likewise
notified petitioner of its claim for damages. Unable to elicit response, the demand was
repeated in a letter dated October 2, 1964. 5

Meanwhile, petitioner shipped the payloader to Manila where it was weighed at the San
Miguel Corporation. Finding that the payloader weighed 7.5 tons and not 2.5 tons as
declared in the B-111 of Lading, petitioner denied the claim for damages of Consolidated
Construction in its letter dated October 7, 1964, contending that had Vicente E. Concepcion
declared the actual weight of the payloader, damage to their ship as well as to his
payloader could have been prevented. 6

To replace the damaged payloader, Consolidated Construction in the meantime bought a


new one at P45,000.00 from Bormaheco Inc. on December 3, 1964, and on July 6, 1965.,
Vicente E. Concepcion filed an action for damages against petitioner with the then Court of
First Instance of Manila, Branch VII, docketed as Civil Case No. 61551, seeking to recover
damages in the amount of P41,225.00 allegedly suffered for the period of 97 days that he
was not able to employ a payloader in the construction job at the rate of P450.00 a day;
P34,000.00 representing the cost of the damaged payloader; Pl 1, 000. 00 representing the
difference between the cost of the damaged payloader and that of the new payloader;
P20,000.00 representing the losses suffered by him due to the diversion of funds to enable him
to buy a new payloader; P10,000.00 as attorney's fees; P5,000.00 as exemplary damages;
and cost of the suit. 7

After trial, the then Court of First Instance of Manila, Branch VII, dismissed on April 24, 1968 the
complaint with costs against therein plaintiff, herein private respondent Vicente E.
Concepcion, stating that the proximate cause of the fall of the payloader was Vicente E.
Concepcion's act or omission in having misrepresented the weight of the payloader as 2.5
tons instead of its true weight of 7.5 tons, which underdeclaration was intended to defraud
Compaia Maritima of the payment of the freight charges and which likewise led the Chief
Officer of the vessel to use the heel block of hatch No. 2 in unloading the payloader. 8
From the adverse decision against him, Vicente E. Concepcion appealed to the Court of
Appeals which, on December 5, 1965 rendered a decision, the dispositive portion of which
reads:

IN VIEW WHEREOF, judgment must have to be as it is hereby reversed;


defendant is condemned to pay unto plaintiff the sum in damages of P24,652.07
with legal interest from the date the present decision shall have become final;
the payloader is declared abandoned to defendant; costs against the latter. 9

Hence, the instant petition.

The principal issue in the instant case is whether or not the act of private respondent Vicente
E. Concepcion in furnishing petitioner Compaia Maritima with an inaccurate weight of 2.5
tons instead of the payloader's actual weight of 7.5 tons was the proximate and only cause
of the damage on the Oliver Payloader OC-12 when it fell while being unloaded by
petitioner's crew, as would absolutely exempt petitioner from liability for damages under
paragraph 3 of Article 1734 of the Civil Code, which provides:

Art. 1734. Common carriers are responsible for the loss, destruction, or
deterioration of the goods, unless the same is due to any of the following causes
only:

xxx xxx xxx

(3) Act or omission of the shipper or owner of the goods.

Petitioner claims absolute exemption under this provision upon the reasoning that private
respondent's act of furnishing it with an inaccurate weight of the payloader constitutes
misrepresentation within the meaning of "act or omission of the shipper or owner of the
goods" under the above- quoted article. It likewise faults the respondent Court of Appeals
for reversing the decision of the trial court notwithstanding that said appellate court also
found that by representing the weight of the payloader to be only 2.5 tons, private
respondent had led petitioner's officer to believe that the same was within the 5 tons
capacity of the heel block of Hatch No. 2. Petitioner would thus insist that the proximate and
only cause of the damage to the payloader was private respondent's alleged
misrepresentation of the weight of the machinery in question; hence, any resultant damage
to it must be borne by private respondent Vicente E. Concepcion.

The general rule under Articles 1735 and 1752 of the Civil Code is that common carriers are
presumed to have been at fault or to have acted negligently in case the goods transported
by them are lost, destroyed or had deteriorated. To overcome the presumption of liability for
the loss, destruction or deterioration of the goods under Article 1735, the common carriers
must prove that they observed extraordinary diligence as required in Article 1733 of the Civil
Code. The responsibility of observing extraordinary diligence in the vigilance over the goods
is further expressed in Article 1734 of the same Code, the article invoked by petitioner to
avoid liability for damages.

Corollary is the rule that mere proof of delivery of the goods in good order to a common
carrier, and of their arrival at the place of destination in bad order, makes out prima
facie case against the common carrier, so that if no explanation is given as to how the loss,
deterioration or destruction of the goods occurred, the common carrier must be held
responsible. 10 Otherwise stated, it is incumbent upon the common carrier to prove that the
loss, deterioration or destruction was due to accident or some other circumstances
inconsistent with its liability.

In the instant case, We are not persuaded by the proferred explanation of petitioner alleged
to be the proximate cause of the fall of the payloader while it was being unloaded at the
Cagayan de Oro City pier. Petitioner seems to have overlooked the extraordinary diligence
required of common carriers in the vigilance over the goods transported by them by virtue of
the nature of their business, which is impressed with a special public duty.

Thus, Article 1733 of the Civil Code provides:

Art. 1733. Common carriers, from the nature of their business and for reason of
public policy, are bound to observe extraordinary diligence in the vigilance over
the goods and for the safety of the passengers transported by them according
to all the circumstances of each case.

Such extraordinary diligence in the vigilance over the goods is further expressed
in Articles 1734, 1735 and 1745, Nos. 5, 6 and 7, ...

The extraordinary diligence in the vigilance over the goods tendered for shipment requires
the common carrier to know and to follow the required precaution for avoiding damage to,
or destruction of the goods entrusted to it for safe carriage and delivery. It requires common
carriers to render service with the greatest skill and foresight and "to use all reasonable
means to ascertain the nature and characteristic of goods tendered for shipment, and to
exercise due care in the handling and stowage including such methods as their nature
requires." 11 Under Article 1736 of the Civil Code, the responsibility to observe extraordinary
diligence commences and lasts from the time the goods are unconditionally placed in the
possession of, and received by the carrier for transportation until the same are delivered,
actually or constructively, by the carrier to the consignee, or to the person who has the right
to receive them without prejudice to the provisions of Article 1738.

Where, as in the instant case, petitioner, upon the testimonies of its own crew, failed to take
the necessary and adequate precautions for avoiding damage to, or destruction of, the
payloader entrusted to it for safe carriage and delivery to Cagayan de Oro City, it cannot
be reasonably concluded that the damage caused to the payloader was due to the
alleged misrepresentation of private respondent Concepcion as to the correct and
accurate weight of the payloader. As found by the respondent Court of Appeals, the fact is
that petitioner used a 5-ton capacity lifting apparatus to lift and unload a visibly heavy
cargo like a payloader. Private respondent has, likewise, sufficiently established the laxity
and carelessness of petitioner's crew in their methods of ascertaining the weight of heavy
cargoes offered for shipment before loading and unloading them, as is customary among
careful persons.

It must be noted that the weight submitted by private respondent Concepcion appearing at
the left-hand portion of Exhibit 8 12 as an addendum to the original enumeration of
equipment to be shipped was entered into the bill of lading by petitioner, thru Pacifico
Fernandez, a company collector, without seeing the equipment to be shipped. 13 Mr.
Mariano Gupana, assistant traffic manager of petitioner, confirmed in his testimony that the
company never checked the information entered in the bill of lading. 14 Worse, the weight of
the payloader as entered in the bill of lading was assumed to be correct by Mr. Felix Pisang,
Chief Officer of MV Cebu. 15

The weights stated in a bill of lading are prima facie evidence of the amount received and
the fact that the weighing was done by another will not relieve the common carrier where it
accepted such weight and entered it on the bill of lading. 16 Besides, common carriers can
protect themselves against mistakes in the bill of lading as to weight by exercising diligence
before issuing the same. 17

While petitioner has proven that private respondent Concepcion did furnish it with an
inaccurate weight of the payloader, petitioner is nonetheless liable, for the damage caused
to the machinery could have been avoided by the exercise of reasonable skill and attention
on its part in overseeing the unloading of such a heavy equipment. And circumstances
clearly show that the fall of the payloader could have been avoided by petitioner's crew.
Evidence on record sufficiently show that the crew of petitioner had been negligent in the
performance of its obligation by reason of their having failed to take the necessary
precaution under the circumstances which usage has established among careful persons,
more particularly its Chief Officer, Mr. Felix Pisang, who is tasked with the over-all supervision
of loading and unloading heavy cargoes and upon whom rests the burden of deciding as to
what particular winch the unloading of the payloader should be undertaken. 18 While it was
his duty to determine the weight of heavy cargoes before accepting them. Mr. Felix Pisang
took the bill of lading on its face value and presumed the same to be correct by merely
"seeing" it. 19 Acknowledging that there was a "jumbo" in the MV Cebu which has the
capacity of lifting 20 to 25 ton cargoes, Mr. Felix Pisang chose not to use it, because
according to him, since the ordinary boom has a capacity of 5 tons while the payloader was
only 2.5 tons, he did not bother to use the "jumbo" anymore. 20

In that sense, therefore, private respondent's act of furnishing petitioner with an inaccurate
weight of the payloader upon being asked by petitioner's collector, cannot be used by said
petitioner as an excuse to avoid liability for the damage caused, as the same could have
been avoided had petitioner utilized the "jumbo" lifting apparatus which has a capacity of
lifting 20 to 25 tons of heavy cargoes. It is a fact known to the Chief Officer of MV Cebu that
the payloader was loaded aboard the MV Cebu at the Manila North Harbor on August 28,
1964 by means of a terminal crane. 21 Even if petitioner chose not to take the necessary
precaution to avoid damage by checking the correct weight of the payloader,
extraordinary care and diligence compel the use of the "jumbo" lifting apparatus as the most
prudent course for petitioner.

While the act of private respondent in furnishing petitioner with an inaccurate weight of the
payloader cannot successfully be used as an excuse by petitioner to avoid liability to the
damage thus caused, said act constitutes a contributory circumstance to the damage
caused on the payloader, which mitigates the liability for damages of petitioner in
accordance with Article 1741 of the Civil Code, to wit:

Art. 1741. If the shipper or owner merely contributed to the loss, destruction or
deterioration of the goods, the proximate cause thereof being the negligence
of the common carrier, the latter shall be liable in damages, which however,
shall be equitably reduced.

We find equitable the conclusion of the Court of Appeals reducing the recoverable amount
of damages by 20% or 1/5 of the value of the payloader, which at the time the instant case
arose, was valued at P34,000. 00, thereby reducing the recoverable amount at 80% or 4/5 of
P34,000.00 or the sum of P27,200.00. Considering that the freight charges for the entire
cargoes shipped by private respondent amounting to P2,318.40 remained unpaid.. the same
would be deducted from the P27,000.00 plus an additional deduction of P228.63
representing the freight charges for the undeclared weight of 5 tons (difference between 7.5
and 2.5 tons) leaving, therefore, a final recoverable amount of damages of P24,652.97 due
to private respondent Concepcion.

Notwithstanding the favorable judgment in his favor, private respondent assailed the Court
of Appeals' decision insofar as it limited the damages due him to only P24,652.97 and the
cost of the suit. Invoking the provisions on damages under the Civil Code, more particularly
Articles 2200 and 2208, private respondent further seeks additional damages allegedly
because the construction project was delayed and that in spite of his demands, petitioner
failed to take any steps to settle his valid, just and demandable claim for damages.

We find private respondent's submission erroneous. It is well- settled that an appellee, who is
not an appellant, may assign errors in his brief where his purpose is to maintain the judgment
on other grounds, but he may not do so if his purpose is to have the judgment modified or
reversed, for, in such case, he must appeal. 22 Since private respondent did not appeal from
the judgment insofar as it limited the award of damages due him, the reduction of 20% or
1/5 of the value of the payloader stands.
WHEREFORE, in view of the foregoing, the petition is DENIED. The decision of the Court of
Appeals is hereby AFFIRMED in all respects with costs against petitioner. In view of the length
of time this case has been pending, this decision is immediately executory.

11. G.R. No. 84458 November 6, 1989

ABOITIZ SHIPPING CORPORATION, petitioner,


vs.
HON. COURT OF APPEALS, ELEVENTH DIVISION, LUCILA C. VIANA, SPS. ANTONIO VIANA and
GORGONIA VIANA, and PIONEER STEVEDORING CORPORATION, respondents.

In this appeal by certiorari, petitioner Aboitiz Shipping Corporation seeks a review of the
decision 1 of respondent Court of Appeals, dated July 29, 1988, the decretal portion of which
reads:

WHEREFORE, the judgment appealed from as modified by the order of October


27, 1982, is hereby affirmed with the modification that appellant Aboitiz Shipping
is hereby ordered to pay plaintiff-appellees the amount of P30,000.00 for the
death of Anacleto Viana; actual damages of P9,800.00; P150,000.00 for
unearned income; P7,200.00 as support for deceased's parents; P20,000.00 as
moral damages; P10,000.00 as attorney's fees; and to pay the costs.

The undisputed facts of the case, as found by the court a quo and adopted by respondent
court, are as follows: .

The evidence disclosed that on May 11, 1975, Anacleto Viana boarded the
vessel M/V Antonia, owned by defendant, at the port at San Jose, Occidental
Mindoro, bound for Manila, having purchased a ticket (No. 117392) in the sum of
P23.10 (Exh. 'B'). On May 12, 1975, said vessel arrived at Pier 4, North Harbor,
Manila, and the passengers therein disembarked, a gangplank having been
provided connecting the side of the vessel to the pier. Instead of using said
gangplank Anacleto Viana disembarked on the third deck which was on the
level with the pier. After said vessel had landed, the Pioneer Stevedoring
Corporation took over the exclusive control of the cargoes loaded on said
vessel pursuant to the Memorandum of Agreement dated July 26, 1975 (Exh. '2')
between the third party defendant Pioneer Stevedoring Corporation and
defendant Aboitiz Shipping Corporation.

The crane owned by the third party defendant and operated by its crane
operator Alejo Figueroa was placed alongside the vessel and one (1) hour after
the passengers of said vessel had disembarked, it started operation by
unloading the cargoes from said vessel. While the crane was being operated,
Anacleto Viana who had already disembarked from said vessel obviously
remembering that some of his cargoes were still loaded in the vessel, went back
to the vessel, and it was while he was pointing to the crew of the said vessel to
the place where his cargoes were loaded that the crane hit him, pinning him
between the side of the vessel and the crane. He was thereafter brought to the
hospital where he later expired three (3) days thereafter, on May 15, 1975, the
cause of his death according to the Death Certificate (Exh. "C") being
"hypostatic pneumonia secondary to traumatic fracture of the pubic bone
lacerating the urinary bladder" (See also Exh. "B"). For his hospitalization, medical,
burial and other miscellaneous expenses, Anacleto's wife, herein plaintiff, spent
a total of P9,800.00 (Exhibits "E", "E-1", to "E-5"). Anacleto Viana who was only forty
(40) years old when he met said fateful accident (Exh. 'E') was in good health.
His average annual income as a farmer or a farm supervisor was 400 cavans of
palay annually. His parents, herein plaintiffs Antonio and Gorgonia Viana, prior
to his death had been recipient of twenty (20) cavans of palay as support or
P120.00 monthly. Because of Anacleto's death, plaintiffs suffered mental anguish
and extreme worry or moral damages. For the filing of the instant case, they had
to hire a lawyer for an agreed fee of ten thousand (P10,000.00) pesos. 2

Private respondents Vianas filed a complaint 3 for damages against petitioner corporation
(Aboitiz, for brevity) for breach of contract of carriage.

In its answer. 4 Aboitiz denied responsibility contending that at the time of the accident, the
vessel was completely under the control of respondent Pioneer Stevedoring Corporation
(Pioneer, for short) as the exclusive stevedoring contractor of Aboitiz, which handled the
unloading of cargoes from the vessel of Aboitiz. It is also averred that since the crane
operator was not an employee of Aboitiz, the latter cannot be held liable under the fellow-
servant rule.

Thereafter, Aboitiz, as third-party plaintiff, filed a third-party complaint 5 against Pioneer


imputing liability thereto for Anacleto Viana's death as having been allegedly caused by the
negligence of the crane operator who was an employee of Pioneer under its exclusive
control and supervision.

Pioneer, in its answer to the third-party complaint, 6 raised the defenses that Aboitiz had no
cause of action against Pioneer considering that Aboitiz is being sued by the Vianas for
breach of contract of carriage to which Pioneer is not a party; that Pioneer had observed
the diligence of a good father of a family both in the selection and supervision of its
employees as well as in the prevention of damage or injury to anyone including the victim
Anacleto Viana; that Anacleto Viana's gross negligence was the direct and proximate
cause of his death; and that the filing of the third-party complaint was premature by reason
of the pendency of the criminal case for homicide through reckless imprudence filed against
the crane operator, Alejo Figueroa.

In a decision rendered on April 17, 1980 by the trial court, 7 Aboitiz was ordered to pay the
Vianas for damages incurred, and Pioneer was ordered to reimburse Aboitiz for whatever
amount the latter paid the Vianas. The dispositive portion of said decision provides:

WHEREFORE, judgment is hereby rendered in favor of the plantiffs:

(1) ordering defendant Aboitiz Shipping Corporation to pay to plaintiffs the sum
of P12,000.00 for the death of Anacleto Viana P9,800.00 as actual damages;
P533,200.00 value of the 10,664 cavans of palay computed at P50.00 per cavan;
P10,000.00 as attorney's fees; F 5,000.00, value of the 100 cavans of palay as
support for five (5) years for deceased (sic) parents, herein plaintiffs Antonio and
Gorgonia Viana computed at P50.00 per cavan; P7,200.00 as support for
deceased's parents computed at P120.00 a month for five years pursuant to Art.
2206, Par. 2, of the Civil Code; P20,000.00 as moral damages, and costs; and

(2) ordering the third party defendant Pioneer Stevedoring Corporation to


reimburse defendant and third party plaintiff Aboitiz Shipping Corporation the
said amounts that it is ordered to pay to herein plaintiffs.

Both Aboitiz and Pioneer filed separate motions for reconsideration wherein they similarly
raised the trial court's failure to declare that Anacleto Viana acted with gross negligence
despite the overwhelming evidence presented in support thereof. In addition, Aboitiz
alleged, in opposition to Pioneer's motion, that under the memorandum of agreement the
liability of Pioneer as contractor is automatic for any damages or losses whatsoever
occasioned by and arising from the operation of its arrastre and stevedoring service.

In an order dated October 27, 1982, 8 the trial court absolved Pioneer from liability for failure
of the Vianas and Aboitiz to preponderantly establish a case of negligence against the
crane operator which the court a quo ruled is never presumed, aside from the fact that the
memorandum of agreement supposedly refers only to Pioneer's liability in case of loss or
damage to goods handled by it but not in the case of personal injuries, and, finally that
Aboitiz cannot properly invoke the fellow-servant rule simply because its liability stems from a
breach of contract of carriage. The dispositive portion of said order reads:

WHEREFORE, judgment is hereby modified insofar as third party defendant


Pioneer Stevedoring Corporation is concerned rendered in favor of the plaintiffs-
,:

(1) Ordering defendant Aboitiz Shipping Corporation to pay the plaintiffs the
sum of P12,000.00 for the death of Anacleto Viana; P9,000.00 (sic) as actual
damages; P533,200.00 value of the 10,664 cavans of palay computed at P50.00
per cavan; P10,000.00 as attorney's fees; P5,000.00 value of the 100 cavans of
palay as support for five (5) years for deceased's parents, herein plaintiffs
Antonio and Gorgonia Viana,computed at P50.00 per cavan; P7,200.00 as
support for deceased's parents computed at P120.00 a month for five years
pursuant to Art. 2206, Par. 2, of the Civil Code; P20,000.00 as moral damages,
and costs; and

(2) Absolving third-party defendant Pioneer Stevedoring Corporation for (sic)


any liability for the death of Anacleto Viana the passenger of M/V Antonia
owned by defendant third party plaintiff Aboitiz Shipping Corporation it
appearing that the negligence of its crane operator has not been established
therein.

Not satisfied with the modified judgment of the trial court, Aboitiz appealed the same to
respondent Court of Appeals which affirmed the findings of of the trial court except as to the
amount of damages awarded to the Vianas.

Hence, this petition wherein petitioner Aboitiz postulates that respondent court erred:

(A) In holding that the doctrine laid down by this honorable Court in La Mallorca
vs. Court of Appeals, et al. (17 SCRA 739, July 27, 1966) is applicable to the case
in the face of the undisputable fact that the factual situation under the La
Mallorca case is radically different from the facts obtaining in this case;

(B) In holding petitioner liable for damages in the face of the finding of the court
a quo and confirmed by the Honorable respondent court of Appeals that the
deceased, Anacleto Viana was guilty of contributory negligence, which, We
respectfully submit contributory negligence was the proximate cause of his
death; specifically the honorable respondent Court of Appeals failed to apply
Art. 1762 of the New Civil Code;

(C) In the alternative assuming the holding of the Honorable respondent Court
of Appears that petitioner may be legally condemned to pay damages to the
private respondents we respectfully submit that it committed a reversible error
when it dismissed petitioner's third party complaint against private respondent
Pioneer Stevedoring Corporation instead of compelling the latter to reimburse
the petitioner for whatever damages it may be compelled to pay to the private
respondents Vianas. 9

At threshold, it is to be observed that both the trial court and respondent Court of Appeals
found the victim Anacleto Viana guilty of contributory negligence, but holding that it was
the negligence of Aboitiz in prematurely turning over the vessel to the arrastre operator for
the unloading of cargoes which was the direct, immediate and proximate cause of the
victim's death.

I. Petitioner contends that since one (1) hour had already elapsed from the time Anacleto
Viana disembarked from the vessel and that he was given more than ample opportunity to
unload his cargoes prior to the operation of the crane, his presence on the vessel was no
longer reasonable e and he consequently ceased to be a passenger. Corollarily, it insists that
the doctrine in La Mallorca vs. Court of Appeals, et al. 10 is not applicable to the case at bar.

The rule is that the relation of carrier and passenger continues until the passenger has been
landed at the port of destination and has left the vessel owner's dock or premises. 11 Once
created, the relationship will not ordinarily terminate until the passenger has, after reaching
his destination, safely alighted from the carrier's conveyance or had a reasonable
opportunity to leave the carrier's premises. All persons who remain on the premises a
reasonable time after leaving the conveyance are to be deemed passengers, and what is a
reasonable time or a reasonable delay within this rule is to be determined from all the
circumstances, and includes a reasonable time to see after his baggage and prepare for his
departure. 12 The carrier-passenger relationship is not terminated merely by the fact that the
person transported has been carried to his destination if, for example, such person remains in
the carrier's premises to claim his baggage. 13

It was in accordance with this rationale that the doctrine in the aforesaid case of La
Mallorca was enunciated, to wit:

It has been recognized as a rule that the relation of carrier and passenger does
not cease at the moment the passenger alights from the carrier's vehicle at a
place selected by the carrier at the point of destination, but continues until the
passenger has had a reasonable time or a reasonable opportunity to leave the
carrier's premises. And, what is a reasonable time or a reasonable delay within
this rule is to be determined from all the circumstances. Thus, a person who, after
alighting from a train, walks along the station platform is considered still a
passenger. So also, where a passenger has alighted at his destination and is
proceeding by the usual way to leave the company's premises, but before
actually doing so is halted by the report that his brother, a fellow passenger, has
been shot, and he in good faith and without intent of engaging in the difficulty,
returns to relieve his brother, he is deemed reasonably and necessarily delayed
and thus continues to be a passenger entitled as such to the protection of the
railroad company and its agents.

In the present case, the father returned to the bus to get one of his baggages
which was not unloaded when they alighted from the bus. Racquel, the child
that she was, must have followed the father. However, although the father was
still on the running board of the bus waiting for the conductor to hand him the
bag or bayong, the bus started to run, so that even he (the father) had to jump
down from the moving vehicle. It was at this instance that the child, who must
be near the bus, was run over and killed. In the circumstances, it cannot be
claimed that the carrier's agent had exercised the 'utmost diligence' of a 'very
cautious person' required by Article 1755 of the Civil Code to be observed by a
common carrier in the discharge of its obligation to transport safely its
passengers. ... The presence of said passengers near the bus was not
unreasonable and they are, therefore, to be considered still as passengers of the
carrier, entitled to the protection under their contract of carriage. 14

It is apparent from the foregoing that what prompted the Court to rule as it did in said case is
the fact of the passenger's reasonable presence within the carrier's premises. That
reasonableness of time should be made to depend on the attending circumstances of the
case, such as the kind of common carrier, the nature of its business, the customs of the
place, and so forth, and therefore precludes a consideration of the time element per
se without taking into account such other factors. It is thus of no moment whether in the
cited case of La Mallorca there was no appreciable interregnum for the passenger therein
to leave the carrier's premises whereas in the case at bar, an interval of one (1) hour had
elapsed before the victim met the accident. The primary factor to be considered is the
existence of a reasonable cause as will justify the presence of the victim on or near the
petitioner's vessel. We believe there exists such a justifiable cause.
It is of common knowledge that, by the very nature of petitioner's business as a shipper, the
passengers of vessels are allotted a longer period of time to disembark from the ship than
other common carriers such as a passenger bus. With respect to the bulk of cargoes and the
number of passengers it can load, such vessels are capable of accommodating a bigger
volume of both as compared to the capacity of a regular commuter bus. Consequently, a
ship passenger will need at least an hour as is the usual practice, to disembark from the
vessel and claim his baggage whereas a bus passenger can easily get off the bus and
retrieve his luggage in a very short period of time. Verily, petitioner cannot categorically
claim, through the bare expedient of comparing the period of time entailed in getting the
passenger's cargoes, that the ruling in La Mallorca is inapplicable to the case at bar. On the
contrary, if we are to apply the doctrine enunciated therein to the instant petition, we
cannot in reason doubt that the victim Anacleto Viana was still a passenger at the time of
the incident. When the accident occurred, the victim was in the act of unloading his
cargoes, which he had every right to do, from petitioner's vessel. As earlier stated, a carrier is
duty bound not only to bring its passengers safely to their destination but also to afford them
a reasonable time to claim their baggage.

It is not definitely shown that one (1) hour prior to the incident, the victim had already
disembarked from the vessel. Petitioner failed to prove this. What is clear to us is that at the
time the victim was taking his cargoes, the vessel had already docked an hour earlier. In
consonance with common shipping procedure as to the minimum time of one (1) hour
allowed for the passengers to disembark, it may be presumed that the victim had just gotten
off the vessel when he went to retrieve his baggage. Yet, even if he had already
disembarked an hour earlier, his presence in petitioner's premises was not without cause. The
victim had to claim his baggage which was possible only one (1) hour after the vessel arrived
since it was admittedly standard procedure in the case of petitioner's vessels that the
unloading operations shall start only after that time. Consequently, under the foregoing
circumstances, the victim Anacleto Viana is still deemed a passenger of said carrier at the
time of his tragic death.

II. Under the law, common carriers are, from the nature of their business and for reasons of
public policy, bound to observe extraordinary diligence in the vigilance over the goods and
for the safety of the passengers transported by them, according to all the circumstances of
each case. 15 More particularly, a common carrier is bound to carry the passengers safely as
far as human care and foresight can provide, using the utmost diligence of very cautious
persons, with a due regard for all the circumstances. 16 Thus, where a passenger dies or is
injured, the common carrier is presumed to have been at fault or to have acted
negligently. 17 This gives rise to an action for breach of contract of carriage where all that is
required of plaintiff is to prove the existence of the contract of carriage and its non-
performance by the carrier, that is, the failure of the carrier to carry the passenger safely to
his destination, 18 which, in the instant case, necessarily includes its failure to safeguard its
passenger with extraordinary diligence while such relation subsists.

The presumption is, therefore, established by law that in case of a passenger's death or injury
the operator of the vessel was at fault or negligent, having failed to exercise extraordinary
diligence, and it is incumbent upon it to rebut the same. This is in consonance with the
avowed policy of the State to afford full protection to the passengers of common carriers
which can be carried out only by imposing a stringent statutory obligation upon the latter.
Concomitantly, this Court has likewise adopted a rigid posture in the application of the law
by exacting the highest degree of care and diligence from common carriers, bearing utmost
in mind the welfare of the passengers who often become hapless victims of indifferent and
profit-oriented carriers. We cannot in reason deny that petitioner failed to rebut the
presumption against it. Under the facts obtaining in the present case, it cannot be gainsaid
that petitioner had inadequately complied with the required degree of diligence to prevent
the accident from happening.

As found by the Court of Appeals, the evidence does not show that there was a cordon of
drums around the perimeter of the crane, as claimed by petitioner. It also adverted to the
fact that the alleged presence of visible warning signs in the vicinity was disputable and not
indubitably established. Thus, we are not inclined to accept petitioner's explanation that the
victim and other passengers were sufficiently warned that merely venturing into the area in
question was fraught with serious peril. Definitely, even assuming the existence of the
supposed cordon of drums loosely placed around the unloading area and the guard's
admonitions against entry therein, these were at most insufficient precautions which pale
into insignificance if considered vis-a-vis the gravity of the danger to which the deceased
was exposed. There is no showing that petitioner was extraordinarily diligent in requiring or
seeing to it that said precautionary measures were strictly and actually enforced to subserve
their purpose of preventing entry into the forbidden area. By no stretch of liberal evaluation
can such perfunctory acts approximate the "utmost diligence of very cautious persons" to be
exercised "as far as human care and foresight can provide" which is required by law of
common carriers with respect to their passengers.

While the victim was admittedly contributorily negligent, still petitioner's aforesaid failure to
exercise extraordinary diligence was the proximate and direct cause of, because it could
definitely have prevented, the former's death. Moreover, in paragraph 5.6 of its petition, at
bar, 19 petitioner has expressly conceded the factual finding of respondent Court of Appeals
that petitioner did not present sufficient evidence in support of its submission that the
deceased Anacleto Viana was guilty of gross negligence. Petitioner cannot now be heard
to claim otherwise.

No excepting circumstance being present, we are likewise bound by respondent court's


declaration that there was no negligence on the part of Pioneer Stevedoring Corporation, a
confirmation of the trial court's finding to that effect, hence our conformity to Pioneer's being
absolved of any liability.

As correctly observed by both courts, Aboitiz joined Pioneer in proving the alleged gross
negligence of the victim, hence its present contention that the death of the passenger was
due to the negligence of the crane operator cannot be sustained both on grounds, of
estoppel and for lack of evidence on its present theory. Even in its answer filed in the court
below it readily alleged that Pioneer had taken the necessary safeguards insofar as its
unloading operations were concerned, a fact which appears to have been accepted by
the plaintiff therein by not impleading Pioneer as a defendant, and likewise inceptively by
Aboitiz by filing its third-party complaint only after ten (10) months from the institution of the
suit against it. Parenthetically, Pioneer is not within the ambit of the rule on extraordinary
diligence required of, and the corresponding presumption of negligence foisted on,
common carriers like Aboitiz. This, of course, does not detract from what we have said that
no negligence can be imputed to Pioneer but, that on the contrary, the failure of Aboitiz to
exercise extraordinary diligence for the safety of its passenger is the rationale for our finding
on its liability.

WHEREFORE, the petition is DENIED and the judgment appealed from is hereby AFFIRMED in
toto.

SO ORDERED.

12. [G.R. No. 118126. March 4, 1996]

TRANS-ASIA SHIPPING LINES, INC., petitioner, vs. COURT OF APPEALS and ATTY. RENATO T.
ARROYO, respondents.

DECISION
DAVIDE, JR., J.:
As formulated by the petitioner, the issue in this petition for review on certiorari under Rule
45 of the Rules of Court is as follows:

In case of interruption of a vessels voyage and the consequent delay in that vessels arrival at
its port of destination, is the right of a passenger affected thereby to be determined and
governed by the vague Civil Code provision on common carriers, or shall it be, in the
absence of a specific provision thereon, governed by Art. 698 of the Code of Commerce?[1]

The petitioner considers it a novel question of law.


Upon a closer evaluation, however, of the challenged decision of the Court of Appeals
of 23 November 1994,[2] vis-a-vis, the decision of 29 June 1992 in Civil Case No. 91-491 of the
Regional Trial Court (RTC) of Cagayan de Oro City, Branch 24,[3] as well as the allegations
and arguments adduced by the parties, we find the petitioners formulation of the issue
imprecise. As this Court sees it, what stands for resolution is a common carriers liability for
damages to a passenger who disembarked from the vessel upon its return to the port of
origin, after it suffered engine trouble and had to stop at sea, having commenced the
contracted voyage on one engine.
The antecedents are summarized by the Court of Appeals as follows:

Plaintiff [herein private respondent Atty. Renato Arroyo], a public attorney, bought a ticket
[from] defendant [herein petitioner], a corporation engaged in x x x inter-island shipping, for
the voyage of M/V Asia Thailand vessel to Cagayan de Oro City from Cebu City on
November 12, 1991.

At around 5:30 in the evening of November 12, 1991, plaintiff boarded the M/V Asia Thailand
vessel. At that instance, plaintiff noticed that some repair works [sic] were being undertaken
on the engine of the vessel. The vessel departed at around 11:00 in the evening with only
one (1) engine running.

After an hour of slow voyage, the vessel stopped near Kawit Island and dropped its anchor
thereat. After half an hour of stillness, some passengers demanded that they should be
allowed to return to Cebu Cityfor they were no longer willing to continue their voyage to
Cagayan de Oro City. The captain acceded [sic] to their request and thus the vessel
headed back to Cebu City.

At Cebu City, plaintiff together with the other passengers who requested to be brought back
to Cebu City, were allowed to disembark. Thereafter, the vessel proceeded to Cagayan de
Oro City. Plaintiff, the next day, boarded the M/V Asia Japan for its voyage to Cagayan de
Oro City, likewise a vessel of defendant.

On account of this failure of defendant to transport him to the place of destination


on November 12, 1991, plaintiff filed before the trial court a complaint for damages against
defendant.[4]

In his complaint, docketed as Civil Case No. 91-491, plaintiff (hereinafter private
respondent) alleged that the engines of the M/V Asia Thailand conked out in the open sea,
and for more than an hour it was stalled and at the mercy of the waves, thus causing fear in
the passengers. It sailed back to Cebu City after it regained power, but for unexplained
reasons, the passengers, including the private respondent, were arrogantly told to disembark
without the necessary precautions against possible injury to them. They were thus
unceremoniously dumped, which only exacerbated the private respondents mental distress.
He further alleged that by reason of the petitioners wanton, reckless, and willful acts, he was
unnecessarily exposed to danger and, having been stranded in Cebu City for a day,
incurred additional expenses and loss of income. He then prayed that he be awarded
P1,100.00, P50,000.00, and P25,000.00 as compensatory, moral, and exemplary damages,
respectively.[5]
In his pre-trial brief, the private respondent asserted that his complaint was an action for
damage&arising from bad faith, breach of contract and from tort, with the former arising
from the petitioners failure to carry [him] to his place of destination as contracted, while the
latter from the conduct of the [petitioner] resulting [in] the infliction of emotional distress to
the private respondent.[6]
After due trial, the trial court rendered its decision[7] and ruled that the action was only
for breach of contract, with Articles 1170, 1172, and 1173 of the Civil Code as applicable law
- not Article 2180 of the same Code. It was of the opinion that Article 1170 made a person
liable for damages if, in the performance of his obligation, he was guilty of fraud,
negligence, or delay, or in any manner contravened the tenor thereof; moreover, pursuant
to Article 2201 of the same Code, to be entitled to damages, the non-performance of the
obligation must have been tainted not only by fraud, negligence, or delay, but also bad
faith, malice, and wanton attitude. It then disposed of the case as follows:

WHEREFORE, it not appearing from the evidence that plaintiff was left in
the Port of Cebu because of the fault, negligence, malice or wanton attitude of defendants
employees, the complaint is DISMISSED. Defendants counterclaim is likewise dismissed it not
appearing also that filing of the case by plaintiff was motivated by malice or bad faith.[8]

The trial court made the following findings to support its disposition:

In the light of the evidence adduced by the parties and of the above provisions of the New
Civil Code, the issue to be resolved, in the resolution of this case is whether or not, defendant
thru its employee in [sic] the night of November 12, 1991, committed fraud, negligence, bad
faith or malice when it left plaintiff in the Port of Cebu when it sailed back to Cagayan de
Oro City after it has [sic] returned from Kawit Island.

Evaluation of the evidence of the parties tended to show nothing that defendant
committed fraud. As early as 3:00 p.m. of November 12, 1991, defendant did not hide the
fact that the cylinder head cracked. Plaintiff even saw during its repair. If he had doubts as
to the vessels capacity to sail, he had time yet to take another boat. The ticket could be
returned to defendant and corresponding cash [would] be returned to him.

Neither could negligence, bad faith or malice on the part of defendant be inferred from the
evidence of the parties. When the boat arrived at [the] Port of Cebu after it returned
from Kawit Island, there was an announcement that passengers who would like to disembark
were given ten (10) minutes only to do so. By this announcement, it could be inferred that
the boat will [sic] proceed to Cagayan de Oro City. If plaintiff entertained doubts, he should
have asked a member of the crew of the boat or better still, the captain of the boat. But as
admitted by him, he was of the impression only that the boat will not proceed to Cagayan
de Oro that evening so he disembarked. He was instead, the ones [sic] negligent. Had he
been prudent, with the announcement that those who will disembark were given ten
minutes only, he should have lingered a little by staying in his cot and inquired whether the
boat will proceed to Cagayan de Oro City or not. Defendant cannot be expected to be
telling [sic] the reasons to each passenger. Announcement by microphone was enough.

The court is inclined to believe that the story of defendant that the boat returned to
the Port of Cebu because of the request of the passengers in view of the waves. That it did
not return because of the defective engines as shown by the fact that fifteen (15) minutes
after the boat docked [at] the Port of Cebu and those who wanted to proceed to Cagayan
de Oro disembarked, it left for Cagayan de Oro City.

The defendant got nothing when the boat returned to Cebu to let those who did not want
to proceed to Cagayan de Oro City including plaintiff disembarked. On the contrary, this
would mean its loss instead because it will have to refund their tickets or they will use it the
next trip without paying anymore. It is hard therefore, to imagine how defendant by leaving
plaintiff in Cebu could have acted in bad faith, negligently, want only and with malice.
If plaintiff, therefore, was not able to [m]ake the trip that night of November 12, 1991, it was
not because defendant maliciously did it to exclude him [from] the trip. If he was left, it was
because of his fault or negligence.[9]

Unsatisfied, the private respondent appealed to the Court of Appeals (CA-G.R. CV No.
39901) and submitted for its determination the following assignment of errors: (1) the trial
court erred in not finding that the defendant-appellee was guilty of fraud, delay,
negligence, and bad faith; and (2) the trial court erred in not awarding moral and
exemplary damages.[10]
In its decision of 23 November 1994,[11] the Court of Appeals reversed the trial courts
decision by applying Article 1755 in relation to Articles 2201, 2208, 2217, and 2232 of the Civil
Code and, accordingly, awarded compensatory, moral, and exemplary damages as
follows:

WHEREFORE, premises considered, the appealed decision is hereby REVERSED and SET ASIDE
and another one is rendered ordering defendant-appellee to pay plaintiff-appellant:

1. P20,000.00 as moral damages;


2. P10,000.00 as exemplary damages;
3. P5,000.00 as attorneys fees;
4. Cost of suit.

SO ORDERED.[12]

It did not, however, allow the grant of damages for the delay in the performance of the
petitioners obligation as the requirement of demand set forth in Article 1169 of the Civil Code
had not been met by the private respondent. Besides, it found that the private respondent
offered no evidence to prove that his contract of carriage with the petitioner provided for
liability in case of delay in departure, nor that a designation of the time of departure was the
controlling motive for the establishment of the contract. On the latter, the court a
quo observed that the private respondent even admitted he was unaware of the vessels
departure time, and it was only when he boarded the vessel that he became aware of
such. Finally, the respondent Court found no reasonable basis for the private respondents
belief that demand was useless because the petitioner had rendered it beyond its power to
perform its obligation; on the contrary, he even admitted that the petitioner had been
assuring the passengers that the vessel would leave on time, and that it could still perform its
obligation to transport them as scheduled.
To justify its award of damages, the Court of Appeals ratiocinated as follows:

It is an established and admitted fact that the vessel before the voyage had undergone
some repair work on the cylinder head of the engine. It is likewise admitted by defendant-
appellee that it left the port of Cebu City with only one engine running. Defendant-appellee
averred:

x x x The dropping of the vessels anchor after running slowly on only one engine when it
departed earlier must have alarmed some nervous passengers x x x

The entries in the logbook which defendant-appellee itself offered as evidence


categorically stated therein that the vessel stopped at Kawit Island because of engine
trouble. It reads:

2330 HRS STBD ENGINE EMERGENCY STOP

2350 HRS DROP ANCHOR DUE TO. ENGINE TROUBLE, 2 ENGINE STOP.

The stoppage was not to start and synchronized [sic] the engines of the vessel as
claimed by defendant-appellee. It was because one of the engines of the vessel broke
down; it was because of the disability of the vessel which from the very beginning of the
voyage was known to defendant-appellee.
Defendant-appellee from the very start of the voyage knew for a fact that the vessel
was not yet in its sailing condition because the second engine was still being repaired. Inspite
of this knowledge, defendant-appellee still proceeded to sail with only one engine running.
Defendant-appellee at that instant failed to exercise the diligence which all common
carriers should exercise in transporting or carrying passengers. The law does not merely
require extraordinary diligence in the performance of the obligation. The law mandates that
common carrier[s] should exercise utmost diligence in the transport of passengers.
Article 1755 of the New Civil Code provides:

ART. 1755. A common carrier is bound to carry the passengers safely as far as human care
and foresight can provide, using the utmost diligence of very cautious persons, with a due
regard for all the circumstances.

Utmost diligence of a VERY CAUTIOUS person dictates that defendant-appellee should


have pursued the voyage only when its vessel was already fit to sail. Defendant-appellee
should have made certain that the vessel [could] complete the voyage before starting [to]
sail. Anything less than this, the vessel [could not] sail x x x with so many passengers on board
it.
However, defendant-appellant [sic] in complete disregard of the safety of the
passengers, chose to proceed with its voyage even if only one engine was running as the
second engine was still being repaired during the voyage. Defendant-appellee disregarded
the not very remote possibility that because of the disability of the vessel, other problems
might occur which would endanger the lives of the passengers sailing with a disabled vessel.
As expected, x x x engine trouble occurred. Fortunate[ly] for defendant-appellee, such
trouble only necessitated the stoppage of the vessel and did not cause the vessel to
capsize. No wonder why some passengers requested to be brought back to Cebu City.
Common carriers which are mandated to exercise utmost diligence should not be taking
these risks.
On this premise, plaintiff-appellant should not be faulted why he chose to disembark
from the vessel with the other passengers when it returned back to Cebu City. Defendant-
appellee may call him a very panicky passenger or a nervous person, but this will not relieve
defendant-appellee from the liability it incurred for its failure to exercise utmost diligence.[13]
xxx xxx xxx
As to the second assigned error, we find that plaintiff-appellant is entitled to the award of
moral and exemplary damages for the breach committed by defendant-appellee.
As discussed, defendant-appellee in sailing to Cagayan de Oro City with only one
engine and with full knowledge of the true condition of the vessel, acted in bad faith with
malice, in complete disregard for the safety of the passengers and only for its own personal
advancement/interest.
The Civil Code provides:

Art 2201.

xxx xxx xxx

In case of fraud, bad faith, malice or wanton attitude, the obligor shall be responsible for all
damages which may be reasonably attributed to the non-performance of the obligation.

Plaintiff-appellant is entitled to moral damages for the mental anguish, fright and serious
anxiety he suffered during the voyage when the vessels engine broke down and when he
disembarked from the vessel during the wee hours of the morning at Cebu City when it
returned.[14]
Moral damages are recoverable in a damage suit predicated upon a breach of
contract of carriage where it is proved that the carrier was guilty of fraud or bad faith even if
death does not result.[15]
Fraud and bad faith by defendant-appellee having been established, the award of
moral damages is in order.[16]
To serve as a deterrent to the commission of similar acts in the future, exemplary
damages should be imposed upon defendant-appellee.[17] Exemplary damages are
designed by our civil law to permit the courts to reshape behavior that is socially deleterious
in its consequence by creating x x x negative incentives or deterrents against such
behavior.[18]
Moral damages having been awarded, exemplary damages maybe properly awarded.
When entitlement to moral damages has been established, the award of exemplary
damages is proper.[19]
The petitioner then instituted this petition and submitted the question of law earlier
adverted to.
Undoubtedly, there was, between the petitioner and the private respondent, a contract
of common carriage. The laws of primary application then are the provisions on common
carriers under Section 4, Chapter 3, Title VIII, Book IV of the Civil Code, while for all other
matters not regulated thereby, the Code of Commerce and special laws.[20]
Under Article 1733 of the Civil Code, the petitioner was bound to observe extraordinary
diligence in ensuring the safety of the private respondent. That meant that the petitioner
was, pursuant to Article 1755 of the said Code, bound to carry the private respondent safely
as far as human care and foresight could provide, using the utmost diligence of very
cautious persons, with due regard for all the circumstances. In this case, we are in full accord
with the Court of Appeals that the petitioner failed to discharge this obligation.
Before commencing the contracted voyage, the petitioner undertook some repairs on
the cylinder head of one of the vessels engines. But even before it could finish these repairs,
it allowed the vessel to leave the port of origin on only one functioning engine, instead of
two. Moreover, even the lone functioning engine was not in perfect condition as sometime
after it had run its course, it conked out. This caused the vessel to stop and remain adrift at
sea, thus in order to prevent the ship from capsizing, it had to drop anchor. Plainly, the vessel
was unseaworthy even before the voyage began. For a vessel to be seaworthy, it must be
adequately equipped for the voyage and manned with a sufficient number of competent
officers and crew.[21] The failure of a common carrier to maintain in seaworthy condition its
vessel involved in a contract of carriage is a clear breach of is duty prescribed in Article 1755
of the Civil Code.
As to its liability for damages to the private respondent, Article 1764 of the Civil Code
expressly provides:

ART. 1764. Damages in cases comprised in this Section shall be awarded in accordance with
Title XVIII of this Book, concerning Damages. Article 2206 shall also apply to the death of a
passenger caused by the breach of contract by common carrier.

The damages comprised in Title XVIII of the Civil Code are actual or compensatory, moral,
nominal, temperate or moderate, liquidated, and exemplary.
In his complaint, the private respondent claims actual or compensatory, moral, and
exemplary damages.
Actual or compensatory damages represent the adequate compensation for pecuniary
loss suffered and for profits the obligee failed to obtain.[22]
In contracts or quasi-contracts, the obligor is liable for all the damages which may be
reasonably attributed to the non-performance of the obligation if he is guilty of fraud, bad
faith, malice, or wanton attitude.[23]
Moral damages include moral suffering, mental anguish, fright, serious anxiety,
besmirched reputation, wounded feelings, moral shock, social humiliation, or similar injury.
They may be recovered in the cases enumerated in Article 2219 of the Civil Code, likewise, if
they are the proximate result of, as in this case, the petitioners breach of the contract of
carriage.[24] Anent a breach of a contract of common carriage, moral damages may be
awarded if the common carrier, like the petitioner, acted fraudulently or in bad faith.[25]
Exemplary damages are imposed by way of example or correction for the public good,
in addition to moral, temperate, liquidated or compensatory damages.[26] In contracts and
quasi-contracts, exemplary damages may be awarded if the defendant acted in a wanton
fraudulent, reckless, oppressive or malevolent manner.[27] It cannot, however, be considered
as a matter of right; the court having to decide whether or not they should be
adjudicated.[28] Before the court may consider an award for exemplary damages, the
plaintiff must first show that he is entitled to moral, temperate or compensatory damages;
but it is not necessary that he prove the monetary value thereof.[29]
The Court of Appeals did not grant the private respondent actual or compensatory
damages, reasoning that no delay was incurred since there was no demand, as required by
Article 1169 of the Civil Code. This article, however, finds no application in this case because,
as found by the respondent Court, there was in fact no delay in the commencement of the
contracted voyage. If any delay was incurred, it was after the commencement of such
voyage, more specifically, when the voyage was subsequently interrupted when the vessel
had to stop near KawitIsland after the only functioning engine conked out.
As to the rights and duties of the parties strictly arising out of such delay, the Civil Code is
silent. However, as correctly pointed out by the petitioner, Article 698 of the Code of
Commerce specifically provides for such a situation. It reads:

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

This article applies suppletorily pursuant to Article 1766 of the Civil Code.
Of course, this does not suffice for a resolution of the case at bench for, as earlier stated,
the cause of the delay or interruption was the petitioners failure to observe extraordinary
diligence. Article 698 must then be read together with Articles 2199, 2200, 2201, and 2208 in
relation to Article 21 of the Civil Code. So read, it means that the petitioner is liable for any
pecuniary loss or loss of profits which the private respondent may have suffered by reason
thereof. For the private respondent, such would be the loss of income if unable to report to
his office on the day he was supposed to arrive were it not for the delay. This, however,
assumes that he stayed on the vessel and was with it when it thereafter resumed its voyage;
but he did not. As he and some passengers resolved not to complete the voyage, the vessel
had to return to its port of origin and allow them to disembark. The private respondent then
took the petitioners other vessel the following day, using the ticket he had purchased for the
previous days voyage.
Any further delay then in the private respondents arrival at the port of destination was
caused by his decision to disembark. Had he remained on the first vessel, he would have
reached his destination at noon of 13 November 1991, thus been able to report to his office
in the afternoon. He, therefore, would have lost only the salary for half of a day. But actual or
compensatory damages must be proved,[30] which the private respondent failed to do.
There is no convincing evidence that he did not receive his salary for 13 November 1991 nor
that his absence was not excused.
We likewise fully agree with the Court of Appeals that the petitioner is liable for moral and
exemplary damages. In allowing its unseaworthy M/V Asia Thailand to leave the port of
origin and undertake the contracted voyage, with full awareness that it was exposed to
perils of the sea, it deliberately disregarded its solemn duty to exercise extraordinary
diligence and obviously acted with bad faith and in a wanton and reckless manner. On this
score, however, the petitioner asserts that the safety of the vessel and passengers was never
at stake because the sea was calm in the vicinity where it stopped as faithfully recorded in
the vessels log book (Exhibit 4). Hence, the petitioner concludes, the private respondent was
merely over-reacting to the situation obtaining then.[31]
We hold that the petitioners defense cannot exculpate it nor mitigate its liability. On the
contrary, such a claim demonstrates beyond cavil the petitioners lack of genuine concern
for the safety of its passengers. It was, perhaps, only providential that the sea happened to
be calm. Even so, the petitioner should not expect its passengers to act in the manner it
desired. The passengers were not stoics; becoming alarmed, anxious, or frightened at the
stoppage of a vessel at sea in an unfamiliar zone at nighttime is not the sole prerogative of
the faint-hearted. More so in the light of the many tragedies at sea resulting in the loss of lives
of hopeless passengers and damage to property simply because common carriers failed in
their duty to exercise extraordinary diligence in the performance of their obligations.
We cannot, however, give our affirmance to the award of attorneys fees. Under Article
2208 of the Civil Code, these are recoverable only in the concept of actual damages,[32] not
as moral damages[33] nor judicial costs.[34] Hence, to merit such an award, it is settled that the
amount thereof must be proven.[35] Moreover, such must be specifically prayed for - as was
not done in this case - and may not be deemed incorporated within a general prayer for
such other relief and remedy as this court may deem just and equitable.[36] Finally, it must be
noted that aside from the following, the body of the respondent Courts decision was devoid
of any statement regarding attorneys fees:

Plaintiff-appellant was forced to litigate in order that he can claim moral and exemplary
damages for the suffering he encurred [sic]. He is entitled to attorneys fees pursuant to
Article 2208 of the Civil Code. It states:

Article 2208. In the absence of stipulation, attorney s fees and expenses of litigation, other
than judicial costs cannot be recovered except:

1. When exemplary damages are awarded;


2. When the defendants act or omission has compelled the plaintiff to litigate with
third persons or to incur expenses to protect his interest.
This Court holds that the above does not satisfy the benchmark of factual, legal and
equitable justification needed as basis for an award of attorneys fees.[37] In sum, for lack of
factual and legal basis, the award of attorneys fees must be deleted.
WHEREFORE, the instant petition is DENIED and the challenged decision of the Court of
Appeals in CA-G.R. CV No. 39901 is AFFIRMED subject to the modification as to the award for
attorneys fees which is hereby SET ASIDE.
Costs against the petitioner.
SO ORDERED.

13. [G.R. No. 110398. November 7, 1997]

NEGROS NAVIGATION CO., INC., petitioner, vs. THE COURT OF APPEALS, RAMON MIRANDA,
SPS. RICARDO and VIRGINIA DE LA VICTORIA, respondents.

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

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

To Ramon Miranda:

P42,025.00 for actual damages;

P152,654.55 as compensatory damages for loss of earning capacity of his wife;

P90,000.00 as compensatory damages for wrongful death of three (3) victims;

P300,000.00 as moral damages;

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

P40,000.00 as attorneys fees.

To Spouses Ricardo and Virginia de la Victoria:


P12,000.00 for actual damages;

P158,899.00 as compensatory damages for loss of earning capacity;

P30,000.00 as compensatory damages for wrongful death;

P100,000.00 as moral damages;

P20,000.00 as exemplary damages, all in the total amount of P320,899.00; and

P15,000.00 as attorneys fees.

On appeal, the Court of Appeals[1] affirmed the decision of the Regional Trial Court with
modification
1. Ordering and sentencing defendants-appellants, jointly and severally, to pay
plaintiff-appellee Ramon Miranda the amount of P23,075.00 as actual damages
instead of P42,025.00;
2. Ordering and sentencing defendants-appellants, jointly and severally, to pay
plaintiff-appellee Ramon Miranda the amount of P150,000.00, instead
of P90,000.00, as compensatory damages for the death of his wife and two
children;
3. Ordering and sentencing defendants-appellants, jointly and severally, to pay
plaintiffs-appellees Dela Victoria spouses the amount of P50,000.00, instead
of P30,000.00, as compensatory damages for the death of their daughter Elfreda
Dela Victoria;
Hence this petition, raising the following issues:
(1) whether the members of private respondents families were actually passengers of
the Don Juan;
(2) whether the ruling in Mecenas v. Court of Appeals,[2] finding the crew members of
petitioner to be grossly negligent in the performance of their duties, is binding in
this case;
(3) whether the total loss of the M/V Don Juan extinguished petitioners liability; and
(4) whether the damages awarded by the appellate court are excessive,
unreasonable and unwarranted.
First. The trial court held that the fact that the victims were passengers of the M/V Don
Juan was sufficiently proven by private respondent Ramon Miranda, who testified that he
purchased tickets numbered 74411, 74412, 74413, and 74414 at P131.30 each from the
Makati office of petitioner for Voyage No. 47-A of the M/V Don Juan, which was leaving
Manila on April 22, 1980. This was corroborated by the passenger manifest (Exh. E) on which
the numbers of the tickets and the names of Ardita Miranda and her children and Elfreda de
la Victoria appear.
Petitioner contends that the purchase of the tickets does not necessarily mean that the
alleged victims actually took the trip. Petitioner asserts that it is common knowledge that
passengers purchase tickets in advance but do not actually use them. Hence, private
respondent should also prove the presence of the victims on the ship. The witnesses who
affirmed that the victims were on the ship were biased and unreliable.
This contention is without merit. Private respondent Ramon Miranda testified that he
personally took his family and his niece to the vessel on the day of the voyage and stayed
with them on the ship until it was time for it to leave. There is no reason he should claim
members of his family to have perished in the accident just to maintain an action. People do
not normally lie about so grave a matter as the loss of dear ones. It would be more difficult
for private respondents to keep the existence of their relatives if indeed they are alive than it
is for petitioner to show the contrary. Petitioners only proof is that the bodies of the supposed
victims were not among those recovered from the site of the mishap. But so were the bodies
of the other passengers reported missing not recovered, as this Court noted in
the Mecenas[3] case.
Private respondent Mirandas testimony was corroborated by Edgardo Ramirez. Ramirez
was a seminarian and one of the survivors of the collision. He testified that he saw Mrs.
Miranda and Elfreda de la Victoria on the ship and that he talked with them. He knew Mrs.
Miranda who was his teacher in the grade school. He also knew Elfreda who was his
childhood friend and townmate. Ramirez said he was with Mrs. Miranda and her children
and niece from 7:00 p.m. until 10:00 p.m. when the collision happened and that he in fact
had dinner with them. Ramirez said he and Elfreda stayed on the deck after dinner and it
was there where they were jolted by the collision of the two vessels. Recounting the
moments after the collision, Ramirez testified that Elfreda ran to fetch Mrs. Miranda. He
escorted her to the room and then tried to go back to the deck when the lights went out. He
tried to return to the cabin but was not able to do so because it was dark and there was a
stampede of passengers from the deck.
Petitioner casts doubt on Ramirez testimony, claiming that Ramirez could not have talked
with the victims for about three hours and not run out of stories to tell, unless Ramirez had a
storehouse of stories. But what is incredible about acquaintances thrown together on a long
journey staying together for hours on end, in idle conversation precisely to while the hours
away?
Petitioner also points out that it took Ramirez three (3) days before he finally contacted
private respondent Ramon Miranda to tell him about the fate of his family. But it is not
improbable that it took Ramirez three days before calling on private respondent Miranda to
tell him about the last hours of Mrs. Miranda and her children and niece, in view of the
confusion in the days following the collision as rescue teams and relatives searched for
survivors.
Indeed, given the facts of this case, it is improper for petitioner to even suggest that
private respondents relatives did not board the ill-fated vessel and perish in the accident
simply because their bodies were not recovered.
Second. In finding petitioner guilty of negligence and in failing to exercise the
extraordinary diligence required of it in the carriage of passengers, both the trial court and
the appellate court relied on the findings of this Court in Mecenas v. Intermediate Appellate
Court,[4] which case was brought for the death of other passengers. In that case it was found
that although the proximate cause of the mishap was the negligence of the crew of the
M/T Tacloban City, the crew of the Don Juan was equally negligent as it found that the
latters master, Capt. Rogelio Santisteban, was playing mahjong at the time of collision, and
the officer on watch, Senior Third Mate Rogelio De Vera, admitted that he failed to call the
attention of Santisteban to the imminent danger facing them. This Court found that Capt.
Santisteban and the crew of the M/V Don Juan failed to take steps to prevent the collision or
at least delay the sinking of the ship and supervise the abandoning of the ship.
Petitioner Negros Navigation was found equally negligent in tolerating the playing of
mahjong by the ship captain and other crew members while on board the ship and failing to
keep the M/V Don Juan seaworthy so much so that the ship sank within 10 to 15 minutes of its
impact with the M/T Tacloban City.
In addition, the Court found that the Don Juan was overloaded. The Certificate of
Inspection, dated August 27, 1979, issued by the Philippine Coast Guard Commander at Iloilo
City stated that the total number of persons allowed on the ship was 864, of whom 810 are
passengers, but there were actually 1,004 on board the vessel when it sank, 140 persons
more than the maximum number that could be safely carried by it.
Taking these circumstances together, and the fact that the M/V Don Juan, as the faster
and better-equipped vessel, could have avoided a collision with the PNOC tanker, this Court
held that even if the Tacloban City had been at fault for failing to observe an internationally-
recognized rule of navigation, the Don Juan was guilty of contributory negligence. Through
Justice Feliciano, this Court held:
The grossness of the negligence of the Don Juan is underscored when one considers the
foregoing circumstances in the context of the following facts: Firstly, the Don Juan was more
than twice as fast as the Tacloban City. The Don Juans top speed was 17 knots; while that of
the Tacloban City was 6.3. knots. Secondly, the Don Juan carried the full complement of
officers and crew members specified for a passenger vessel of her class. Thirdly, the Don
Juan was equipped with radar which was functioning that night. Fourthly, the Don Juans
officer on-watch had sighted the Tacloban City on his radar screen while the latter was still
four (4) nautical miles away. Visual confirmation of radar contact was established by the
Don Juan while the Tacloban City was still 2.7 miles away. In the total set of circumstances
which existed in the instant case, the Don Juan, had it taken seriously its duty of extraordinary
diligence, could have easily avoided the collision with the Tacloban City. Indeed, the Don
Juan might well have avoided the collision even if it had exercised ordinary diligence
merely.

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

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

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

Petitioner criticizes the lower courts reliance on the Mecenas case, arguing that,
although this case arose out of the same incident as that involved in Mecenas, the parties
are different and trial was conducted separately. Petitioner contends that the decision in this
case should be based on the allegations and defenses pleaded and evidence adduced in
it or, in short, on the record of this case.
The contention is without merit. What petitioner contends may be true with respect to the
merits of the individual claims against petitioner but not as to the cause of the sinking of its
ship on April 22, 1980 and its liability for such accident, of which there can only be one
truth. Otherwise, one would be subscribing to the sophistry: truth on one side of the Pyrenees,
falsehood on the other!
Adherence to the Mecenas case is dictated by this Courts policy of maintaining stability
in jurisprudence in accordance with the legal maxim stare decisis et non quieta
movere (Follow past precedents and do not disturb what has been settled.) Where, as in this
case, the same questions relating to the same event have been put forward by parties
similarly situated as in a previous case litigated and decided by a competent court, the rule
of stare decisis is a bar to any attempt to relitigate the same issue.[6] In Woulfe v. Associated
Realties Corporation,[7] the Supreme Court of New Jersey held that where substantially similar
cases to the pending case were presented and applicable principles declared in prior
decisions, the court was bound by the principle of stare decisis. Similarly, in State ex rel.
Tollinger v. Gill,[8] it was held that under the doctrine of stare decisis a ruling is final even as to
parties who are strangers to the original proceeding and not bound by the judgment under
the res judicata doctrine. The Philadelphia court expressed itself in this wise: Stare decisis
simply declares that, for the sake of certainty, a conclusion reached in one case should be
applied to those which follow, if the facts are substantially the same, even though the parties
may be different.[9] Thus, in J. M. Tuason v. Mariano, supra, this Court relied on its rulings in
other cases involving different parties in sustaining the validity of a land title on the principle
of stare decisis et non quieta movere.
Indeed, the evidence presented in this case was the same as those presented in
the Mecenas case, to wit:

Document Mecenas case This case

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


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

Decision of the Minister Exh. 11[11] Exh. ZZ


of National Defense dated 3/12/82

Resolution on the motion Exh. 13[12] Exh. AAA


for reconsideration of the (private respondents)
decision of the Minister of
National Defense dated 7/24/84

Certificate of inspection Exh. 1-A[13] Exh. 19-NN


dated 8/27/79

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


dated 12/16/76

Nor is it true that the trial court merely based its decision on the Mecenas case. The trial
court made its own independent findings on the basis of the testimonies of witnesses, such as
Senior Third Mate Rogelio de Vera, who incidentally gave substantially the same testimony
on petitioners behalf before the Board of Marine Inquiry. The trial court agreed with the
conclusions of the then Minister of National Defense finding both vessels to be negligent.
Third. The next issue is whether petitioner is liable to pay damages notwithstanding the
total loss of its ship. The issue is not one of first impression. The rule is well-entrenched in our
jurisprudence that a shipowner may be held liable for injuries to passengers notwithstanding
the exclusively real and hypothecary nature of maritime law if fault can be attributed to the
shipowner.[15]
In Mecenas, this Court found petitioner guilty of negligence in (1) allowing or tolerating
the ship captain and crew members in playing mahjong during the voyage, (2) in failing to
maintain the vessel seaworthy and (3) in allowing the ship to carry more passengers than it
was allowed to carry. Petitioner is, therefore, clearly liable for damages to the full extent.
Fourth. Petitioner contends that, assuming that the Mecenas case applies, private
respondents should be allowed to claim only P43,857.14 each as moral damages because in
the Mecenas case, the amount of P307,500.00 was awarded to the seven children of the
Mecenas couple. Under petitioners formula, Ramon Miranda should receive P43,857.14,
while the De la Victoria spouses should receive P97,714.28.
Here is where the principle of stare decisis does not apply in view of differences in the
personal circumstances of the victims. For that matter, differentiation would be justified even
if private respondents had joined the private respondents in the Mecenas case. The doctrine
of stare decisis works as a bar only against issues litigated in a previous case. Where the issue
involved was not raised nor presented to the court and not passed upon by the court in the
previous case, the decision in the previous case is not stare decisis of the question presently
presented.[16] The decision in the Mecenas case relates to damages for which petitioner was
liable to the claimants in that case.
In the case at bar, the award of P300,000.00 for moral damages is reasonable
considering the grief petitioner Ramon Miranda suffered as a result of the loss of his entire
family. As a matter of fact, three months after the collision, he developed a heart condition
undoubtedly caused by the strain of the loss of his family. The P100,000.00 given to Mr. and
Mrs. de la Victoria is likewise reasonable and should be affirmed.
As for the amount of civil indemnity awarded to private respondents, the appellate
courts award of P50,000.00 per victim should be sustained. The amount of P30,000.00 formerly
set in De Lima v. Laguna Tayabas Co.,[17] Heirs of Amparo delos Santos v. Court of
Appeals,[18] and Philippine Rabbit Bus Lines, Inc. v. Intermediate Appellate Court[19] as
benchmark was subsequently increased to P50,000.00 in the case of Sulpicio Lines, Inc. v.
Court of Appeals,[20] which involved the sinking of another interisland ship on October 24,
1988.
We now turn to the determination of the earning capacity of the victims. With respect to
Ardita Miranda, the trial court awarded damages computed as follows:[21]

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

In accordance with the ruling in Villa-Rey Transit, Inc. v. Court of Appeals,[22] we think the life
expectancy of Ardita Miranda was correctly determined to be 21.33 years, or up to age
69.Petitioner contends, however, that Mrs. Miranda would have retired from her job as a
public school teacher at 65, hence her loss of earning capacity should be reckoned up to
17.33 years only.
The accepted formula for determining life expectancy is 2/3 multiplied by (80 minus the
age of the deceased). It may be that in the Philippines the age of retirement generally is 65
but, in calculating the life expectancy of individuals for the purpose of determining loss of
earning capacity under Art. 2206(1) of the Civil Code, it is assumed that the deceased would
have earned income even after retirement from a particular job. In this case, the trial court
took into account the fact that Mrs. Miranda had a masters degree and a good prospect of
becoming principal of the school in which she was teaching. There was reason to believe
that her income would have increased through the years and she could still earn more after
her retirement, e.g., by becoming a consultant, had she not died. The gross earnings which
Mrs. Miranda could reasonably be expected to earn were it not for her untimely death was,
therefore, correctly computed by the trial court to be P218,077.92 (given a gross annual
income of P10,224.00 and life expectancy of 21.33 years).
Petitioner contends that from the amount of gross earnings, 60% should be deducted as
necessary living expenses, not merely 30% as the trial court allowed. Petitioner contends that
30% is unrealistic, considering that Mrs. Mirandas earnings would have been subject to taxes,
social security deductions and inflation.
We agree with this contention. In Villa-Rey Transit, Inc. v. Court of Appeals,[23] the Court
allowed a deduction of P1,184.00 for living expenses from the P2,184.00 annual salary of the
victim, which is roughly 54.2% thereof. The deceased was 29 years old and a training
assistant in the Bacnotan Cement Industries. In People v. Quilaton,[24] the deceased was a
26-year old laborer earning a daily wage. The court allowed a deduction of P120,000.00
which was 51.3% of his annual gross earnings of P234,000.00. In People v. Teehankee,[25] the
court allowed a deduction of P19,800.00, roughly 42.4% thereof from the deceaseds annual
salary of P46,659.21. The deceased, Maureen Hultman, was 17 years old and had just
received her first paycheck as a secretary. In the case at bar, we hold that a deduction of
50% from Mrs. Mirandas gross earnings (P218,077.92) would be reasonable, so that her net
earning capacity should be P109,038.96. There is no basis for supposing that her living
expenses constituted a smaller percentage of her gross income than the living expenses in
the decided cases. To hold that she would have used only a small part of her income for
herself, a larger part going to the support of her children would be conjectural and
unreasonable.
As for Elfreda de la Victoria, the trial court found that, at the time of her death, she was
26 years old, a teacher in a private school in Malolos, Bulacan, earning P6,192.00 per
annum.Although a probationary employee, she had already been working in the school for
two years at the time of her death and she had a general efficiency rating of 92.85% and it
can be presumed that, if not for her untimely death, she would have become a regular
teacher. Hence, her loss of earning capacity is P111,456.00, computed as follows:

net earning capacity (x) = life expectancy x [ gross annual income less reasonable &
necessary living expenses (50%) ]

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

= 36 x 3,096.00

= P111,456.00

On the other hand, the award of actual damages in the amount of P23,075.00 was
determined by the Court of Appeals on the basis of receipts submitted by private
respondents. This amount is reasonable considering the expenses incurred by private
respondent Miranda in organizing three search teams to look for his family, spending for
transportation in going to places such as Batangas City and Iloilo, where survivors and the
bodies of other victims were found, making long distance calls, erecting a monument in
honor of the four victims, spending for obituaries in the Bulletin Today and for food, masses
and novenas.
Petitioners contention that the expenses for the erection of a monument and other
expenses for memorial services for the victims should be considered included in the
indemnity for death awarded to private respondents is without merit. Indemnity for death is
given to compensate for violation of the rights of the deceased, i.e., his right to life and
physical integrity.[26] On the other hand, damages incidental to or arising out of such death
are for pecuniary losses of the beneficiaries of the deceased.
As for the award of attorneys fees, we agree with the Court of Appeals that the amount
of P40,000.00 for private respondent Ramon Miranda and P15,000.00 for the de la Victoria
spouses is justified. The appellate court correctly held:

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

The award of exemplary damages should be increased to P300,000.00 for Ramon


Miranda and P100,000.00 for the de la Victoria spouses in accordance with our ruling in
the Mecenascase:

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

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

To private respondent Ramon Miranda:

P23,075.00 for actual damages;

P109,038.96 as compensatory damages for loss of earning capacity of his wife;

P150,000.00 as compensatory damages for wrongful death of three (3) victims;

P300,000.00 as moral damages;

P300,000.00 as exemplary damages, all in the total amount of P882,113.96; and

P40,000.00 as attorneys fees.

To private respondents Spouses Ricardo and Virginia de la Victoria:

P12,000.00 for actual damages;

P111,456.00 as compensatory damages for loss of earning capacity;

P50,000.00 as compensatory damages for wrongful death;

P100,000.00 as moral damages;

P100,000.00 as exemplary damages, all in the total amount of P373,456.00; and

P15,000.00 as attorneys fees.

Petitioners are further ordered to pay costs of suit.


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

14. G.R. No. 73835 January 17, 1989


CHINA AIRLINES, LTD., petitioner,
vs.
INTERMEDIATE APPELLATE COURT and CLAUDIA B. OSORIO, respondent respondents.

This is a petition to review the decision 1 dated January 21, 1986 of the then Intermediate
Appellate Court in AC-G.R. No. 00915 entitled, "Claudia B. Osorio v. China Airlines, Ltd.", as
well as the resolution of February 28, 1986 denying petitioner's motion for reconsideration of
said decision.

It is worthwhile noting at the outset that there exists in this case a conflict in the findings of
facts of the trial and appellate courts which made a thorough review of the records of the
case imperative. Such exercise disclosed that:

On April 14, 1980, after a four-day delay caused by an engine malfunction, private
respondent Claudia B. Osorio boarded in Manila Flight No. CI-812 of petitioner China Airlines,
Ltd., for Taipei. Said flight, as originally scheduled, was to bring private respondent and nine
(9) other passengers to Taipei in time for petitioner airline's Flight No. CI-002 for Los Angeles
(LAX). As this schedule had been rendered impossible by the delay, it was agreed, prior to
their departure from Manila that private respondent and the nine (9) other passengers
similarly situated would spend the night in Taipei at petitioner's expense and would be
brought the following day to San Francisco (SF), U.S.A., where they would be furnished an
immediate flight connection to LAX.

This arrangement went well until private respondent and her co-passengers arrived in San
Francisco, U.S.A. on April 15, 1980 at around 1:31 p.m., SF local time. No instructions having
been received regarding them by petitioner's SF Office due to the delay in the transmission
of the telex messages from Manila, private respondent and her co-passengers were asked to
deplane and wait while contact with Manila was being made. This, however, could not be
done immediately because of the time difference between the two (2) places.

Later, when it appeared that private respondent and her co-passengers might have to
spend the night in San Francisco, they asked that they be provided food and overnight
accommodations as transit passengers, but were refused by petitioner's passenger service
agent, Dennis Cheng. Apparently irked by this refusal, in addition to the information that their
luggage were not unloaded, private respondent and some of her fellow passengers angrily
left petitioner's SF Office without leaving a contact address. Thus, when word from Manila
came at 6:45 p.m. authorizing the issuance of tickets for LAX to private respondent and her
companions, the latter could not be informed thereof.

It was only on the following day, April 16, 1980, after spending the night at the YMCA, paying
a fee of $5.00 therefor, that private respondent learned thru her companions Atty. Laud and
Mrs. Sim that her ticket for LAX and luggage were ready for pick-up any time.
Notwithstanding, private respondent preferred to pick up her luggage on April 17, 1980 and
fly to LAX on said date with a Western Airlines ticket which she purchased for $56.00. Private
respondent spent the night of April 16, 1980 in the house of Mrs. Sims friend who did not
charge anything. Private respondent, however, bought some groceries for her hostess.

On June 30, 1980, private respondent filed before the then Court of First Instance of Manila a
complaint for damages arising from breach of contract against petitioner airline. After trial,
the court a quo rendered judgment 2on October 7, 1981, absolving petitioner airline from
any liability for damages to private respondent, except for the sum of Pl,248.00 representing
reimbursement of the $100.00 spent by private respondent as an involuntarily rerouted
passenger in San Francisco, California, U.S.A and the $56.00 paid by her for her SFC-LAX
Western Airlines ticket. 3

On appeal, respondent Intermediate Appellate Court reversed the lower court's decision.
Finding a palpable breach of contract of carriage to have been committed by petitioner
airlines, the respondent court ordered the latter to pay to private respondent, in addition to
the actual damages imposed by the trial court, moral and exemplary damages in the
amounts of P100,000 and P20,000, respectively, with attorney's fees of P5,000. 4

Its motion for reconsideration having been denied, petitioner airline brought the instant
petition for review, alleging that:

THE RESPONDENT COURT WRONGLY INCLUDED FROM THE PROVEN FACTS AND,
INDEED WENT AGAINST THE EVIDENCE, WHEN IT FOUND THE PETITIONER AS
HAVING COMMITTED A PALPABLE BREACH OF THE CONTRACT OF CARRIAGE.

'THE RESPONDENT COURT COMMITTED AN ERROR OR LAW CORRECTIBLE BY


REVIEW ON CERTIORARI WHEN IT AWARDED MORAL AND EXEMPLARY DAMAGES
IN FAVOR OF THE PRIVATE RESPONDENT. 5

The issues posed for determination are; did the failur1e of petitioner airline to arrange for
private respondent's immediate flight to Los Angeles constitute a palpable breach of
contract of carriage? Was the treatment of private respondent by petitioner's agent in San
Francisco characterized by malice or bad faith?

The records manifest that it was upon petitioner's traffic agent Mrs. Diana Lim's assurance of
an immediate flight connection from San Francisco that private respondent agreed to be re-
routed to San Francisco, thus:

Q. What was the condition before leaving Manila, how would these passengers
be flown to Taipei? Since their destination petition is Los Angeles?

A. From Manila to Taipei, they would still take the China Airlines, the night where
they were really booked on. They still stay overnight in Taipei. From Taipei they
will connect the next day to San Francisco. Then from San Francisco we
promised that we would give them tickets from San Francisco to Los Angeles.

Q. That same day?

A. To San Francisco, that would be the next day.

Q. Then what happened next?

A. We told them that before they left.

Q. How about the flights for them from San Francisco to Angeles?

A. It would be immediate connection. As soon as they arrive, they would be


given tickets so that they could catch up on the next available flights. '

Q. What airlines?

A. These was no airlines because they will make the booking.

Q. Who would make the booking?

A. Our reservation sir.

Q. So do you wish to inform this Honorable Court that these ten (10) passengers
were informed that they would be flown to Taipei and from Taipei they will be
flown to San Francisco and will be furnished transportation from San Francisco to
Los Angeles?

A. Yes, sir.
Q. All at the expense of China Airlines?

A. Yes, sir. .

xxx xxx xxx

Q. Did they agree to this condition before departing for Taipei?

A. For the Sims they had no objection at all. In fact, they wanted to stay longer
in San Francisco.

Q. How about the plaintiff?

A. For Osorio and Laud, at first they did not agree, until I told them that San
Francisco would issue them the new tickets from San Francisco to Los Angeles.

Q. So that when Laud and Osorio were informed by you that they would be
furnished tickets from San Francisco to Los Angeles, did they still continue to
object?

A. No more sir.

Q. But were you sure that there would be booking for them for immediate
connection?

A. The reservation would do that because from San Francisco to Los Angeles
there would be flight every hour. As soon as they arrive and they. . . if they would
not catch up with the very first flight, they would catch the next one.

Q. So, accommodation of flight from San Francisco to Los Angeles is no


problem?

A. No problem because there is flight every hour. 6

Due, however, to the delay in the receipt of the telex messages regarding private
respondent's status and the arrangements to be made for her, the promised immediate
flight connection was not reaped. The testimony of Mrs. Lim on the circumstances
surrounding the transmission of the telex messages in question is as follows:

Q. Would you know Mrs. Lim whether the Manila office had been sending
Telexes on April 14, 1980 regarding these passengers?

A. Yes, sir.

xxx xxx xxx

Q Now, are there any other Telexes sent by the Manila office in connection with
this case by you personally and by Mr. Austria the Sales Director?

A Here sir, (Witness handing to Atty. de Santos two Telexes)

xxx xxx xxx

Q. These Telexes Mrs. Lim intended for San Francisco, they were duly received?

Court:

A. In other words, they were sent out?


Q. Yes, sir but we have had a lot of experiences wherein the messages would be
received late. We sent out the messages immediately but sometimes the
Hongkong link will be down so the messages would arrive late. It stuck there sir.

A. Did you have any understanding with these passengers including the plaintiff
on how they would subsist in San Francisco should there be a delay in the
transmission of messages?

Q. No sir because I did not expect any delay. It was very sudden. I did not
expect any delay at all from San Francisco. I knew all the time they would
connect immediately.

A. What I mean is that should the communication sent out from Manila be not
received on time in San Francisco, did you cover that . . . or did you take some
steps to answer for that contingency?

Q. No sir, we did not. We never thought of it that way. We always took it for
granted that everything would be alright. It has never happened before. In
other cases where we had cases like this, they were always on time. We never
had this problem where the passengers would be stranded. This is the first time.

A. There would be a time lag of around two days. Because one night in Taipei.
They left Manila April 14?

Q. They arrived Taipei April 14. They arrived San Francisco April 15.

A. So the 24-hour or more time gap would be normally sufficient for all your
messages to reach San Francisco?

Q. Yes, sir.

A. And never before did you experience such a delay?

Q. Yes, sir. 7

The respondent court considered petitioner airline as wanting in human care and foresight in
providing for the care and safety of its passengers in not having taken other steps to ensure
receipt by its San Francisco Office of the instructions about the re-routed passengers,
notwithstanding its previous experience with delayed transmission of messages. For
respondent court, this omission on the part of petitioner, coupled with what respondent court
received as rude and arrogant behavior of petitioner's passenger service agent Dennis
Cheng, constituted a palpable breach of contract of carriage entitling private respondent
to an award of actual, moral and exemplary damages as well as attorney's fees. We are not
in complete agreement.

Verily, petitioner airlines committed a breach of contract in failing to secure an immediate


flight connection for private respondent. Under Article 1755 of the Civil Code of the
Philippines, petitioner, as a common carrier, is duty bound to "carry passengers safely as far
as human care and foresight can provide, using the utmost diligence of very cautious
persons, with due regard for all the circumstances." The reliance of petitioner on the subject
telex communications falls short of the utmost diligence of a very cautious person expected
of it, thereby rendering it liable for its failure to abide by the promised immediate
connection. 8

Be that as it may, we, however, find that the breach of contract committed by petitioner
was not attended by gross negligence, recklessness or wanton disregard of the rights of
private respondent as a passenger. Telex was the established mode of communication
between petitioner's Manila and San Francisco offices. Contact by telephone was not a
practice due to the time difference between the two places. Thus, while petitioner's Manila
office was aware of the possibility of transmission delay, it bad to avail itself of this mode of
communication. For this course of action, we do not find petitioner to have acted wantonly
or recklessly. Considering the gap of more than 24 hours between the time the telex
messages were sent out and private respondent's expected arrival at San Francisco, it was
not unreasonable for petitioner to expect that this time gap would cover whatever delay
might be encountered at the Hongkong Link. 9 Thus, while petitioner may have been remiss
in its total reliance upon the telex communications and therefore considered negligent in
view of the degree of diligence required of it as a common carrier, such negligence cannot
under the obtaining circumstances be said to be so gross as to amount to bad faith.

As regards petitioners passenger service agent Dennis Cheng's treatment of private


respondent, we share the trial court's observation, thus:

Neither is the court impressed with plaintiffs (private respondent) allegation that
she was ill-treated by defendant's (petitioner) personnel at the San Francisco
airport area. Her self-serving declaration on this score does not suffice to
contradict the straightforward and detailed deposition of Dennis Cheng (see
Exhs. 10 to 10-1), let along the well-known custom and policy of Chinese
businessmen and employees of being courteous and attentive to customers... 10

The respondent appellate court chose to believe private respondent's allegation of rudeness
and arrogance over Dennis Cheng's categorical denial contained in his deposition 11 on the
ground that said deposition is hearsay. This is an error on respondent court's part. The
deposition was taken in accordance with the Rules of Court and is admissible under the
Rules of Evidence. It is a material and vital evidence that the appellate court had
overlooked, nay, ignored; a factor which calls for the Court's review powers and which
excludes the case from the general rule that findings of facts of the Court of Appeals are
binding on this court.

We are convinced that petitioner's personnel were not motivated by ill will or malice in their
dealings with private respondent. Their refusal to accede to her demands for a flight
connection to Los Angeles and/or food and hotel accommodations was due primarily to
lack of information or knowledge upon which to act upon and not from a deliberate intent
to ignore or disregard private respondent's rights as a passenger. They cannot be faulted for
wanting to verify with Manila private respondent's status before acting upon her request as
tickets for Los Angeles cannot be used in going to San Francisco, and possession of a ticket
with Los Angeles as destination was not an indication that one was a transit or an
involuntarily re-routed passenger.

Contact thru telephone with Manila could not immediately be made because of the time
difference and private respondent was accordingly advised that information from Manila
could be expected at around 6:30 p.m., the time that the Manila Office would have begun
its office hours. 12 This repeated advise, notwithstanding, private respondent left the airport
without leaving a contact address. In this sense, it was private respondent herself who
rendered it impossible for petitioner airlines to perform its obligation of bringing her to Los
Angeles as contracted for.

The breach of contract under consideration having been incurred in good faith, petitioner
airlines is liable for damages which are the natural and probable consequences of said
breach and which the parties have foreseen at the time the obligation was
constituted. 13 These damages consist of the actual damages awarded by the trial court to
private respondent.

With respect to moral damages, the rule is that the same are recoverable in a damage suit
predicated upon a breach of contract of carriage only where [1] the mishap results in the
death of a passenger 14 and [2] it is proved that the carrier was guilty of fraud or bad faith,
even if death does not result. 15 As the present case does not fall under either of the cited
instances, the award of moral damages should be, as it is hereby disallowed.
The award of exemplary damages must likewise be deleted, as it has not been shown that
petitioner, in committing the breach of contract of carriage, acted in a wanton, fraudulent,
reckless, oppressive or malevolent manner. 16

The award of attorney's fees is justified under Article 2208(2) of the Civil Code which states
that the same may be recovered when the defendant's act or omission has compelled the
plaintiff to litigate with third persons or to incur expenses to protect his interest. The amount of
P6,000.00 awarded by respondent court should be increased to P10,000.00 considering that
the case has reached this Tribunal.

WHEREFORE, the decision under review is hereby MODIFIED in that the award of moral and
exemplary damages to private respondent Claudia B. Osorio is eliminated and the attorney's
fees is increased to P10,000.00. No pronouncement as to costs.

SO ORDERED.

15. G.R. No. 101089. April 7, 1993.

ESTRELLITA M. BASCOS, petitioners,


vs.
COURT OF APPEALS and RODOLFO A. CIPRIANO, respondents.

1. CIVIL LAW; COMMON CARRIERS; DEFINED; TEST TO DETERMINE COMMON CARRIER.


Article 1732 of the Civil Code defines a common carrier as "(a) person, corporation or firm, or
association engaged in the business of carrying or transporting passengers or goods or both,
by land, water or air, for compensation, offering their services to the public." The test to
determine a common carrier is "whether the given undertaking is a part of the business
engaged in by the carrier which he has held out to the general public as his occupation
rather than the quantity or extent of the business transacted." . . . The holding of the Court in
De Guzman vs. Court of Appeals is instructive. In referring to Article 1732 of the Civil Code, it
held thus: "The above article makes no distinction between one whose principal business
activity is the carrying of persons or goods or both, and one who does such carrying only as
an ancillary activity (in local idiom, as a "sideline"). Article 1732 also carefully avoids making
any distinction between a person or enterprise offering transportation service on a regular or
scheduled basis and one offering such service on an occasional, episodic or unscheduled
basis. Neither does Article 1732 distinguished between a carrier offering its services to the
"general public," i.e., the general community or population, and one who offers services or
solicits business only from a narrow segment of the general population. We think that Article
1732 deliberately refrained from making such distinctions."

2. ID.; ID.; DILIGENCE REQUIRED IN VIGILANCE OVER GOODS TRANSPORTED; WHEN


PRESUMPTION OF NEGLIGENCE ARISES; HOW PRESUMPTION OVERCAME; WHEN PRESUMPTION
MADE ABSOLUTE. Common carriers are obliged to observe extraordinary diligence in the
vigilance over the goods transported by them. Accordingly, they are presumed to have
been at fault or to have acted negligently if the goods are lost, destroyed or deteriorated.
There are very few instances when the presumption of negligence does not attach and
these instances are enumerated in Article 1734. In those cases where the presumption is
applied, the common carrier must prove that it exercised extraordinary diligence in order to
overcome the presumption . . . The presumption of negligence was raised against petitioner.
It was petitioner's burden to overcome it. Thus, contrary to her assertion, private respondent
need not introduce any evidence to prove her negligence. Her own failure to adduce
sufficient proof of extraordinary diligence made the presumption conclusive against her.

3. ID.; ID.; HIJACKING OF GOODS; CARRIER PRESUMED NEGLIGENT; HOW CARRIER ABSOLVED
FROM LIABILITY. In De Guzman vs. Court of Appeals, the Court held that hijacking, not
being included in the provisions of Article 1734, must be dealt with under the provisions of
Article 1735 and thus, the common carrier is presumed to have been at fault or negligent. To
exculpate the carrier from liability arising from hijacking, he must prove that the robbers or
the hijackers acted with grave or irresistible threat, violence, or force. This is in accordance
with Article 1745 of the Civil Code which provides: "Art. 1745. Any of the following or similar
stipulations shall be considered unreasonable, unjust and contrary to public policy . . . (6)
That the common carrier's liability for acts committed by thieves, or of robbers who do not
act with grave or irresistible threat, violences or force, is dispensed with or diminished"; In the
same case, the Supreme Court also held that: "Under Article 1745 (6) above, a common
carrier is held responsible and will not be allowed to divest or to diminish such responsibility
even for acts of strangers like thieves or robbers, except where such thieves or robbers in
fact acted "with grave of irresistible threat, violence of force," We believe and so hold that
the limits of the duty of extraordinary diligence in the vigilance over the goods carried are
reached where the goods are lost as a result of a robbery which is attended by "grave or
irresistible threat, violence or force."

4. REMEDIAL LAW; EVIDENCE; JUDICIAL ADMISSIONS CONCLUSIVE. In this case, petitioner


herself has made the admission that she was in the trucking business, offering her trucks to
those with cargo to move. Judicial admissions are conclusive and no evidence is required to
prove the same.

5. ID.; ID.; BURDEN OF PROOF RESTS WITH PARTY WHO ALLEGES A FACT. Petitioner
presented no other proof of the existence of the contract of lease. He who alleges a fact
has the burden of proving it.

6. ID.; ID.; AFFIDAVITS NOT CONSIDERED BEST EVIDENCE IF AFFIANTS AVAILABLE AS WITNESSES.
While the affidavit of Juanito Morden, the truck helper in the hijacked truck, was
presented as evidence in court, he himself was a witness as could be gleaned from the
contents of the petition. Affidavits are not considered the best evidence if the affiants are
available as witnesses.

7. CIVIL LAW; OBLIGATIONS AND CONTRACTS; CONTRACT IS WHAT LAW DEFINES IT TO BE.
Granting that the said evidence were not self-serving, the same were not sufficient to prove
that the contract was one of lease. It must be understood that a contract is what the law
defines it to be and not what it is called by the contracting parties.

DECISION

CAMPOS, JR., J p:

This is a petition for review on certiorari of the decision ** of the Court of Appeals in
"RODOLFO A. CIPRIANO, doing business under the name CIPRIANO TRADING ENTERPRISES
plaintiff-appellee, vs. ESTRELLITA M. BASCOS, doing business under the name of BASCOS
TRUCKING, defendant-appellant," C.A.-G.R. CV No. 25216, the dispositive portion of which is
quoted hereunder:

"PREMISES considered, We find no reversible error in the decision appealed from, which is
hereby affirmed in toto. Costs against appellant." 1

The facts, as gathered by this Court, are as follows:

Rodolfo A. Cipriano representing Cipriano Trading Enterprise (CIPTRADE for short) entered
into a hauling contract 2 with Jibfair Shipping Agency Corporation whereby the former
bound itself to haul the latter's 2,000 m/tons of soya bean meal from Magallanes Drive, Del
Pan, Manila to the warehouse of Purefoods Corporation in Calamba, Laguna. To carry out its
obligation, CIPTRADE, through Rodolfo Cipriano, subcontracted with Estrellita Bascos
(petitioner) to transport and to deliver 400 sacks of soya bean meal worth P156,404.00 from
the Manila Port Area to Calamba, Laguna at the rate of P50.00 per metric ton. Petitioner
failed to deliver the said cargo. As a consequence of that failure, Cipriano paid Jibfair
Shipping Agency the amount of the lost goods in accordance with the contract which
stated that:
"1. CIPTRADE shall be held liable and answerable for any loss in bags due to theft, hijacking
and non-delivery or damages to the cargo during transport at market value, . . ." 3

Cipriano demanded reimbursement from petitioner but the latter refused to pay. Eventually,
Cipriano filed a complaint for a sum of money and damages with writ of preliminary
attachment 4 for breach of a contract of carriage. The prayer for a Writ of Preliminary
Attachment was supported by an affidavit 5 which contained the following allegations:

"4. That this action is one of those specifically mentioned in Sec. 1, Rule 57 the Rules of Court,
whereby a writ of preliminary attachment may lawfully issue, namely:

"(e) in an action against a party who has removed or disposed of his property, or is about to
do so, with intent to defraud his creditors;"

5. That there is no sufficient security for the claim sought to be enforced by the present
action;

6. That the amount due to the plaintiff in the above-entitled case is above all legal
counterclaims;"

The trial court granted the writ of preliminary attachment on February 17, 1987.

In her answer, petitioner interposed the following defenses: that there was no contract of
carriage since CIPTRADE leased her cargo truck to load the cargo from Manila Port Area to
Laguna; that CIPTRADE was liable to petitioner in the amount of P11,000.00 for loading the
cargo; that the truck carrying the cargo was hijacked along Canonigo St., Paco, Manila on
the night of October 21, 1988; that the hijacking was immediately reported to CIPTRADE and
that petitioner and the police exerted all efforts to locate the hijacked properties; that after
preliminary investigation, an information for robbery and carnapping were filed against Jose
Opriano, et al.; and that hijacking, being a force majeure, exculpated petitioner from any
liability to CIPTRADE.

After trial, the trial court rendered a decision *** the dispositive portion of which reads as
follows:

"WHEREFORE, judgment is hereby rendered in favor of plaintiff and against defendant


ordering the latter to pay the former:

1. The amount of ONE HUNDRED FIFTY-SIX THOUSAND FOUR HUNDRED FOUR PESOS
(P156,404.00) as an (sic) for actual damages with legal interest of 12% per cent per annum to
be counted from December 4, 1986 until fully paid;

2. The amount of FIVE THOUSAND PESOS (P5,000.00) as and for attorney's fees; and

3. The costs of the suit.

The "Urgent Motion To Dissolve/Lift preliminary Attachment" dated March 10, 1987 filed by
defendant is DENIED for being moot and academic.

SO ORDERED." 6

Petitioner appealed to the Court of Appeals but respondent Court affirmed the trial court's
judgment.

Consequently, petitioner filed this petition where she makes the following assignment of
errors; to wit:
"I. THE RESPONDENT COURT ERRED IN HOLDING THAT THE CONTRACTUAL RELATIONSHIP
BETWEEN PETITIONER AND PRIVATE RESPONDENT WAS CARRIAGE OF GOODS AND NOT LEASE
OF CARGO TRUCK.

II. GRANTING, EX GRATIA ARGUMENTI, THAT THE FINDING OF THE RESPONDENT COURT THAT
THE CONTRACTUAL RELATIONSHIP BETWEEN PETITIONER AND PRIVATE RESPONDENT WAS
CARRIAGE OF GOODS IS CORRECT, NEVERTHELESS, IT ERRED IN FINDING PETITIONER LIABLE
THEREUNDER BECAUSE THE LOSS OF THE CARGO WAS DUE TO FORCE MAJEURE, NAMELY,
HIJACKING.

III. THE RESPONDENT COURT ERRED IN AFFIRMING THE FINDING OF THE TRIAL COURT THAT
PETITIONER'S MOTION TO DISSOLVE/LIFT THE WRIT OF PRELIMINARY ATTACHMENT HAS BEEN
RENDERED MOOT AND ACADEMIC BY THE DECISION OF THE MERITS OF THE CASE." 7

The petition presents the following issues for resolution: (1) was petitioner a common carrier?;
and (2) was the hijacking referred to a force majeure?

The Court of Appeals, in holding that petitioner was a common carrier, found that she
admitted in her answer that she did business under the name A.M. Bascos Trucking and that
said admission dispensed with the presentation by private respondent, Rodolfo Cipriano, of
proofs that petitioner was a common carrier. The respondent Court also adopted in toto the
trial court's decision that petitioner was a common carrier, Moreover, both courts
appreciated the following pieces of evidence as indicators that petitioner was a common
carrier: the fact that the truck driver of petitioner, Maximo Sanglay, received the cargo
consisting of 400 bags of soya bean meal as evidenced by a cargo receipt signed by
Maximo Sanglay; the fact that the truck helper, Juanito Morden, was also an employee of
petitioner; and the fact that control of the cargo was placed in petitioner's care.

In disputing the conclusion of the trial and appellate courts that petitioner was a common
carrier, she alleged in this petition that the contract between her and Rodolfo A. Cipriano,
representing CIPTRADE, was lease of the truck. She cited as evidence certain affidavits
which referred to the contract as "lease". These affidavits were made by Jesus Bascos 8 and
by petitioner herself. 9 She further averred that Jesus Bascos confirmed in his testimony his
statement that the contract was a lease contract. 10 She also stated that: she was not
catering to the general public. Thus, in her answer to the amended complaint, she said that
she does business under the same style of A.M. Bascos Trucking, offering her trucks for lease
to those who have cargo to move, not to the general public but to a few customers only in
view of the fact that it is only a small business. 11

We agree with the respondent Court in its finding that petitioner is a common carrier.

Article 1732 of the Civil Code defines a common carrier as "(a) person, corporation or firm, or
association engaged in the business of carrying or transporting passengers or goods or both,
by land, water or air, for compensation, offering their services to the public." The test to
determine a common carrier is "whether the given undertaking is a part of the business
engaged in by the carrier which he has held out to the general public as his occupation
rather than the quantity or extent of the business transacted." 12 In this case, petitioner
herself has made the admission that she was in the trucking business, offering her trucks to
those with cargo to move. Judicial admissions are conclusive and no evidence is required to
prove the same. 13

But petitioner argues that there was only a contract of lease because they offer their
services only to a select group of people and because the private respondents, plaintiffs in
the lower court, did not object to the presentation of affidavits by petitioner where the
transaction was referred to as a lease contract.

Regarding the first contention, the holding of the Court in De Guzman vs. Court of Appeals
14 is instructive. In referring to Article 1732 of the Civil Code, it held thus:
"The above article makes no distinction between one whose principal business activity is the
carrying of persons or goods or both, and one who does such carrying only as an ancillary
activity (in local idiom, as a "sideline"). Article 1732 also carefully avoids making any
distinction between a person or enterprise offering transportation service on a regular or
scheduled basis and one offering such service on an occasional, episodic or unscheduled
basis. Neither does Article 1732 distinguish between a carrier offering its services to the
"general public," i.e., the general community or population, and one who offers services or
solicits business only from a narrow segment of the general population. We think that Article
1732 deliberately refrained from making such distinctions."

Regarding the affidavits presented by petitioner to the court, both the trial and appellate
courts have dismissed them as self-serving and petitioner contests the conclusion. We are
bound by the appellate court's factual conclusions. Yet, granting that the said evidence
were not self-serving, the same were not sufficient to prove that the contract was one of
lease. It must be understood that a contract is what the law defines it to be and not what it is
called by the contracting parties. 15 Furthermore, petitioner presented no other proof of the
existence of the contract of lease. He who alleges a fact has the burden of proving it. 16

Likewise, We affirm the holding of the respondent court that the loss of the goods was not
due to force majeure.

Common carriers are obliged to observe extraordinary diligence in the vigilance over the
goods transported by them. 17 Accordingly, they are presumed to have been at fault or to
have acted negligently if the goods are lost, destroyed or deteriorated. 18 There are very
few instances when the presumption of negligence does not attach and these instances are
enumerated in Article 1734. 19 In those cases where the presumption is applied, the
common carrier must prove that it exercised extraordinary diligence in order to overcome
the presumption.

In this case, petitioner alleged that hijacking constituted force majeure which exculpated
her from liability for the loss of the cargo. In De Guzman vs. Court of Appeals, 20 the Court
held that hijacking, not being included in the provisions of Article 1734, must be dealt with
under the provisions of Article 1735 and thus, the common carrier is presumed to have been
at fault or negligent. To exculpate the carrier from liability arising from hijacking, he must
prove that the robbers or the hijackers acted with grave or irresistible threat, violence, or
force. This is in accordance with Article 1745 of the Civil Code which provides:

"Art. 1745. Any of the following or similar stipulations shall be considered unreasonable, unjust
and contrary to public policy;

xxx xxx xxx

(6) That the common carrier's liability for acts committed by thieves, or of robbers who do not
act with grave or irresistible threat, violences or force, is dispensed with or diminished;"

In the same case, 21 the Supreme Court also held that:

"Under Article 1745 (6) above, a common carrier is held responsible and will not be
allowed to divest or to diminish such responsibility even for acts of strangers like thieves or
robbers except where such thieves or robbers in fact acted with grave or irresistible threat,
violence or force. We believe and so hold that the limits of the duty of extraordinary
diligence in the vigilance over the goods carried are reached where the goods are lost as a
result of a robbery which is attended by "grave or irresistible threat, violence or force."

To establish grave and irresistible force, petitioner presented her accusatory affidavit, 22
Jesus Bascos' affidavit, 23 and Juanito Morden's 24 "Salaysay". However, both the trial court
and the Court of Appeals have concluded that these affidavits were not enough to
overcome the presumption. Petitioner's affidavit about the hijacking was based on what had
been told her by Juanito Morden. It was not a first-hand account. While it had been
admitted in court for lack of objection on the part of private respondent, the respondent
Court had discretion in assigning weight to such evidence. We are bound by the conclusion
of the appellate court. In a petition for review on certiorari, We are not to determine the
probative value of evidence but to resolve questions of law. Secondly, the affidavit of Jesus
Bascos did not dwell on how the hijacking took place. Thirdly, while the affidavit of Juanito
Morden, the truck helper in the hijacked truck, was presented as evidence in court, he
himself was a witness as could be gleaned from the contents of the petition. Affidavits are
not considered the best evidence if the affiants are available as witnesses. 25 The
subsequent filing of the information for carnapping and robbery against the accused
named in said affidavits did not necessarily mean that the contents of the affidavits were
true because they were yet to be determined in the trial of the criminal cases.

The presumption of negligence was raised against petitioner. It was petitioner's burden to
overcome it. Thus, contrary to her assertion, private respondent need not introduce any
evidence to prove her negligence. Her own failure to adduce sufficient proof of
extraordinary diligence made the presumption conclusive against her.

Having affirmed the findings of the respondent Court on the substantial issues involved, We
find no reason to disturb the conclusion that the motion to lift/dissolve the writ of preliminary
attachment has been rendered moot and academic by the decision on the merits.

In the light of the foregoing analysis, it is Our opinion that the petitioner's claim cannot be
sustained. The petition is DISMISSED and the decision of the Court of Appeals is hereby
AFFIRMED.

SO ORDERED.

16. G.R. No. 52159 December 22, 1989

JOSE PILAPIL, petitioner,


vs.
HON. COURT OF APPEALS and ALATCO TRANSPORTATION COMPANY, INC., respondents.

This is a petition to review on certiorari the decision* rendered by the Court of Appeals dated
19 October 1979 in CA-G.R. No. 57354-R entitled "Jose Pilapil, plaintiff-appellee versus Alatco
Transportation Co., Inc., defendant-appellant," which reversed and set aside the judgment
of the Court of First Instance of Camarines Sur in Civil Case No. 7230 ordering respondent
transportation company to pay to petitioner damages in the total sum of sixteen thousand
three hundred pesos (P 16,300.00).

The record discloses the following facts:

Petitioner-plaintiff Jose Pilapil, a paying passenger, boarded respondent-defendant's bus


bearing No. 409 at San Nicolas, Iriga City on 16 September 1971 at about 6:00 P.M. While said
bus No. 409 was in due course negotiating the distance between Iriga City and Naga City,
upon reaching the vicinity of the cemetery of the Municipality of Baao, Camarines Sur, on
the way to Naga City, an unidentified man, a bystander along said national highway, hurled
a stone at the left side of the bus, which hit petitioner above his left eye. Private respondent's
personnel lost no time in bringing the petitioner to the provincial hospital in Naga City where
he was confined and treated.

Considering that the sight of his left eye was impaired, petitioner was taken to Dr.
Malabanan of Iriga City where he was treated for another week. Since there was no
improvement in his left eye's vision, petitioner went to V. Luna Hospital, Quezon City where he
was treated by Dr. Capulong. Despite the treatment accorded to him by Dr. Capulong,
petitioner lost partially his left eye's vision and sustained a permanent scar above the left
eye.
Thereupon, petitioner instituted before the Court of First Instance of Camarines Sur, Branch I
an action for recovery of damages sustained as a result of the stone-throwing incident. After
trial, the court a quo rendered judgment with the following dispositive part:

Wherefore, judgment is hereby entered:

1. Ordering defendant transportation company to pay plaintiff Jose


Pilapil the sum of P 10,000.00, Philippine Currency, representing
actual and material damages for causing a permanent scar on the
face and injuring the eye-sight of the plaintiff;

2. Ordering further defendant transportation company to pay the


sum of P 5,000.00, Philippine Currency, to the plaintiff as moral and
exemplary damages;

3. Ordering furthermore, defendant transportation company to


reimburse plaintiff the sum of P 300.00 for his medical expenses and
attorney's fees in the sum of P 1,000.00, Philippine Currency; and

4. To pay the costs.

SO ORDERED 1

From the judgment, private respondent appealed to the Court of Appeals where the appeal
was docketed as CA-G.R. No. 57354R. On 19 October 1979, the Court of Appeals, in a
Special Division of Five, rendered judgment reversing and setting aside the judgment of the
court a quo.

Hence the present petition.

In seeking a reversal of the decision of the Court of Appeals, petitioner contends that said
court has decided the issue not in accord with law. Specifically, petitioner argues that the
nature of the business of a transportation company requires the assumption of certain risks,
and the stoning of the bus by a stranger resulting in injury to petitioner-passenger is one such
risk from which the common carrier may not exempt itself from liability.

We do not agree.

In consideration of the right granted to it by the public to engage in the business of


transporting passengers and goods, a common carrier does not give its consent to become
an insurer of any and all risks to passengers and goods. It merely undertakes to perform
certain duties to the public as the law imposes, and holds itself liable for any breach thereof.

Under Article 1733 of the Civil Code, common carriers are required to observe extraordinary
diligence for the safety of the passenger transported by them, according to all the
circumstances of each case. The requirement of extraordinary diligence imposed upon
common carriers is restated in Article 1755: "A common carrier is bound to carry the
passengers safely as far as human care and foresight can provide, using the utmost
diligence of very cautious persons, with due regard for all the circumstances." Further, in
case of death of or injuries to passengers, the law presumes said common carriers to be at
fault or to have acted negligently. 2

While the law requires the highest degree of diligence from common carriers in the safe
transport of their passengers and creates a presumption of negligence against them, it does
not, however, make the carrier an insurer of the absolute safety of its passengers. 3

Article 1755 of the Civil Code qualifies the duty of extraordinary care, vigilance and
precaution in the carriage of passengers by common carriers to only such as human care
and foresight can provide. what constitutes compliance with said duty is adjudged with due
regard to all the circumstances.

Article 1756 of the Civil Code, in creating a presumption of fault or negligence on the part of
the common carrier when its passenger is injured, merely relieves the latter, for the time
being, from introducing evidence to fasten the negligence on the former, because the
presumption stands in the place of evidence. Being a mere presumption, however, the same
is rebuttable by proof that the common carrier had exercised extraordinary diligence as
required by law in the performance of its contractual obligation, or that the injury suffered by
the passenger was solely due to a fortuitous event. 4

In fine, we can only infer from the law the intention of the Code Commission and Congress
to curb the recklessness of drivers and operators of common carriers in the conduct of their
business.

Thus, it is clear that neither the law nor the nature of the business of a transportation
company makes it an insurer of the passenger's safety, but that its liability for personal injuries
sustained by its passenger rests upon its negligence, its failure to exercise the degree of
diligence that the law requires. 5

Petitioner contends that respondent common carrier failed to rebut the presumption of
negligence against it by proof on its part that it exercised extraordinary diligence for the
safety of its passengers.

We do not agree.

First, as stated earlier, the presumption of fault or negligence against the carrier is only a
disputable presumption. It gives in where contrary facts are established proving either that
the carrier had exercised the degree of diligence required by law or the injury suffered by
the passenger was due to a fortuitous event. Where, as in the instant case, the injury
sustained by the petitioner was in no way due to any defect in the means of transport or in
the method of transporting or to the negligent or willful acts of private respondent's
employees, and therefore involving no issue of negligence in its duty to provide safe and
suitable cars as well as competent employees, with the injury arising wholly from causes
created by strangers over which the carrier had no control or even knowledge or could not
have prevented, the presumption is rebutted and the carrier is not and ought not to be held
liable. To rule otherwise would make the common carrier the insurer of the absolute safety of
its passengers which is not the intention of the lawmakers.

Second, while as a general rule, common carriers are bound to exercise extraordinary
diligence in the safe transport of their passengers, it would seem that this is not the standard
by which its liability is to be determined when intervening acts of strangers is to be
determined directly cause the injury, while the contract of carriage Article 1763 governs:

Article 1763. A common carrier is responsible for injuries suffered by a passenger


on account of the wilful acts or negligence of other passengers or of strangers, if
the common carrier's employees through the exercise of the diligence of a
good father of a family could have prevented or stopped the act or omission.

Clearly under the above provision, a tort committed by a stranger which causes injury to a
passenger does not accord the latter a cause of action against the carrier. The negligence
for which a common carrier is held responsible is the negligent omission by the carrier's
employees to prevent the tort from being committed when the same could have been
foreseen and prevented by them. Further, under the same provision, it is to be noted that
when the violation of the contract is due to the willful acts of strangers, as in the instant case,
the degree of care essential to be exercised by the common carrier for the protection of its
passenger is only that of a good father of a family.
Petitioner has charged respondent carrier of negligence on the ground that the injury
complained of could have been prevented by the common carrier if something like mesh-
work grills had covered the windows of its bus.

We do not agree.

Although the suggested precaution could have prevented the injury complained of, the rule
of ordinary care and prudence is not so exacting as to require one charged with its exercise
to take doubtful or unreasonable precautions to guard against unlawful acts of strangers.
The carrier is not charged with the duty of providing or maintaining vehicles as to absolutely
prevent any and all injuries to passengers. Where the carrier uses cars of the most approved
type, in general use by others engaged in the same occupation, and exercises a high
degree of care in maintaining them in suitable condition, the carrier cannot be charged
with negligence in this respect. 6

Finally, petitioner contends that it is to the greater interest of the State if a carrier were made
liable for such stone-throwing incidents rather than have the bus riding public lose
confidence in the transportation system.

Sad to say, we are not in a position to so hold; such a policy would be better left to the
consideration of Congress which is empowered to enact laws to protect the public from the
increasing risks and dangers of lawlessness in society.

WHEREFORE, the judgment appealed from is hereby AFFIRMED.

SO ORDERED.

17. THE PHILIPPINE AMERICAN GENERAL INSURANCE CO., INC., petitioner, vs. MGG MARINE
SERVICES, INC. and DOROTEO GAERLAN, respondents.

This petition for review seeks the reversal of the Decision, dated September 23, 1998, of
the Court of Appeals in CA-G.R. CV No. 43915,[1] which absolved private respondents MCG
Marine Services, Inc. and Doroteo Gaerlan of any liability regarding the loss of the cargo
belonging to San Miguel Corporation due to the sinking of the M/V Peatheray Patrick-G
owned by Gaerlan with MCG Marine Services, Inc. as agent.
On March 1, 1987, San Miguel Corporation insured several beer bottle cases with an
aggregate value of P5,836,222.80 with petitioner Philippine American General Insurance
Company.[2] The cargo were loaded on board the M/V Peatheray Patrick-G to be
transported from Mandaue City to Bislig, Surigao del Sur.
After having been cleared by the Coast Guard Station in Cebu the previous day, the
vessel left the port of Mandaue City for Bislig, Surigao del Sur on March 2, 1987. The weather
was calm when the vessel started its voyage.
The following day, March 3, 1987, M/V Peatheray Patrick-G listed and subsequently sunk
off Cawit Point, Cortes, Surigao del Sur. As a consequence thereof, the cargo belonging to
San Miguel Corporation was lost.
Subsequently, San Miguel Corporation claimed the amount of its loss from petitioner.
Upon petitioners request, on March 18, 1987, Mr. Eduardo Sayo, a surveyor from the
Manila Adjusters and Surveyors Co., went to Taganauan Island, Cortes, Surigao del Sur where
the vessel was cast ashore, to investigate the circumstances surrounding the loss of the
cargo. In his report, Mr. Sayo stated that the vessel was structurally sound and that he did not
see any damage or crack thereon. He concluded that the proximate cause of the listing
and subsequent sinking of the vessel was the shifting of ballast water from starboard to
portside. The said shifting of ballast water allegedly affected the stability of the M/V
Peatheray Patrick-G.
Thereafter, petitioner paid San Miguel Corporation the full amount of P5,836,222.80
pursuant to the terms of their insurance contract.
On November 3, 1987, petitioner as subrogee of San Miguel Corporation filed with the
Regional Trial Court (RTC) of Makati City a case for collection against private respondents to
recover the amount it paid to San Miguel Corporation for the loss of the latters cargo.
Meanwhile, the Board of Marine Inquiry conducted its own investigation of the sinking of
the M/V Peatheray Patrick-G to determine whether or not the captain and crew of the
vessel should be held responsible for the incident.[3] On May 11, 1989, the Board rendered its
decision exonerating the captain and crew of the ill-fated vessel for any administrative
liability. It found that the cause of the sinking of the vessel was the existence of strong winds
and enormous waves in Surigao del Sur, a fortuitous event that could not have been forseen
at the time the M/V Peatheray Patrick-G left the port of Mandaue City.It was further held by
the Board that said fortuitous event was the proximate and only cause of the vessels sinking.
On April 15, 1993, the RTC of Makati City, Branch 134, promulgated its Decision finding
private respondents solidarily liable for the loss of San Miguel Corporations cargo and
ordering them to pay petitioner the full amount of the lost cargo plus legal interest, attorneys
fees and costs of suit.[4]
Private respondents appealed the trial courts decision to the Court of Appeals. On
September 23, 1998, the appellate court issued the assailed Decision, which reversed the
ruling of the RTC. It held that private respondents could not be held liable for the loss of San
Miguel Corporations cargo because said loss occurred as a consequence of a fortuitous
event, and that such fortuitous event was the proximate and only cause of the loss.[5]
Petitioner thus filed the present petition, contending that:
(A)

IN REVERSING AND SETTING ASIDE THE DECISION OF RTC BR. 134 OF MAKATI CITY ON
THE BASIS OF THE FINDINGS OF THE BOARD OF MARINE INQUIRY, APPELLATE COURT
DECIDED THE CASE AT BAR NOT IN ACCORD WITH LAW OR WITH THE APPLICABLE
DECISIONS OF THE HONORABLE COURT;

(B)

IN REVERSING THE TRIAL COURTS DECISION, THE APPELLATE COURT GRAVELY ERRED IN
CONTRADICTING AND IN DISTURBING THE FINDINGS OF THE FORMER;

(C)

THE APPELLATE COURT GRAVELY ERRED IN REVERSING THE DECISION OF THE TRIAL
COURT AND IN DISMISSING THE COMPLAINT.[6]

Common carriers, from the nature of their business and for reasons of public policy, are
mandated to observe extraordinary diligence in the vigilance over the goods and for the
safety of the passengers transported by them.[7] Owing to this high degree of diligence
required of them, common carriers, as a general rule, are presumed to have been at fault or
negligent if the goods transported by them are lost, destroyed or if the same deteriorated.[8]
However, this presumption of fault or negligence does not arise in the cases enumerated
under Article 1734 of the Civil Code:

Common carriers are responsible for the loss, destruction, or deterioration of the goods,
unless the same is due to any of the following causes only:

(1) Flood, storm, earthquake, lightning or other natural disaster or calamity;

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

(3) Act or omission of the shipper or owner of the goods;


(4) The character of the goods or defects in the packing or in the containers;

(5) Order or act of competent public authority.

In order that a common carrier may be absolved from liability where the loss, destruction
or deterioration of the goods is due to a natural disaster or calamity, it must further be shown
that the such natural disaster or calamity was the proximate and only cause of the
loss;[9] there must be an entire exclusion of human agency from the cause of the injury of the
loss.[10]
Moreover, even in cases where a natural disaster is the proximate and only cause of the
loss, a common carrier is still required to exercise due diligence to prevent or minimize loss
before, during and after the occurrence of the natural disaster, for it to be exempt from
liability under the law for the loss of the goods.[11] If a common carrier fails to exercise due
diligence--or that ordinary care which the circumstances of the particular case demand[12] --
to preserve and protect the goods carried by it on the occasion of a natural disaster, it will
be deemed to have been negligent, and the loss will not be considered as having been due
to a natural disaster under Article 1734 (1).
In the case at bar, the issues may be narrowed down to whether the loss of the cargo
was due to the occurrence of a natural disaster, and if so, whether such natural disaster was
the sole and proximate cause of the loss or whether private respondents were partly to
blame for failing to exercise due diligence to prevent the loss of the cargo.
The parties do not dispute that on the day the M/V Peatheray Patrick-G sunk, said vessel
encountered strong winds and huge waves ranging from six to ten feet in height. The vessel
listed at the port side and eventually sunk at Cawit Point, Cortes, Surigao del Sur.
The Court of Appeals, citing the decision of the Board of Marine Inquiry in the
administrative case against the vessels crew (BMI--646-87), found that the loss of the cargo
was due solely to the existence of a fortuitous event, particularly the presence of strong
winds and huge waves at Cortes, Surigao del Sur on March 3, 1987:
xxx

III. WHAT WAS THE PROXIMATE CAUSE OF SINKING?

Evidence shows that when "LCT Peatheray Patrick-G" left the port of Mandawe, Cebu for
Bislig, Surigao del Sur on March 2, 1987 the Captain had observed the fair atmospheric
condition of the area of the pier and confirmed this good weather condition with the Coast
Guard Detachment of Mandawe City. However, on March 3, 1987 at about 10:00 o'clock in
the evening, when the vessel had already passed Surigao Strait. the vessel started to
experience waves as high as 6 to 7 feet and that the Northeasterly wind was blowing at
about five (5) knot velocity. At about 11:00 o'clock P.M. when the vessel was already about
4.5 miles off Cawit Point, Cortes, Surigao del Sur, the vessel was discovered to be listing 15
degrees to port side and that the strength of the wind had increased to 15 knots and the
waves were about ten (10) feet high [Ramilo TSN 10-27-87 p. 32). Immediately thereafter,
emergency measures were taken by the crew. The officers had suspected that a leak or
crack might had developed at the bottom hull particularly below one or two of the empty
wing tanks at port side serving as buoyancy tanks resulting in ingress of sea water in the tanks
was confirmed when the Captain ordered to use the cargo pump. The suction valves to the
said tanks of port side were opened in order to suck or draw out any amount of water that
entered into the tanks. The suction pressure of the pump had drawn out sea water in large
quantity indicating therefore, that a leak or crack had developed in the hull as the vessel
was continuously batted and pounded by the huge waves. Bailing out of the water through
the pump was done continuously in an effort of the crew to prevent the vessel from sinking.
but then efforts were in vain. The vessel still continued to list even more despite the
continuous pumping and discharging of sea water from the wing tanks indicating that the
amount of the ingress of sea water was greater in volume that that was being discharged by
the pump. Considering therefore, the location of the suspected source of the ingress of sea
water which was a crack or hole at the bottom hull below the buoyancy tank's port side
which was not acessible (sic) for the crew to check or control the flow of sea water into the
said tank. The accumulation of sea water aggravated by the continuous pounding, rolling
and pitching of the vessel against huge waves and strong northeasterly wind, the Captain
then had no other recourse except to order abandonship to save their lives.[13]

The presence of a crack in the ill-fated vessel through which water seeped in was
confirmed by the Greutzman Divers who were commissioned by the private respondents to
conduct an underwater survey and inspection of the vessel to determine the cause and
circumstances of its sinking. In its report, Greutzman Divers stated that along the port side
platings, a small hole and two separate cracks were found at about midship.[14]
The findings of the Board of Marine Inquiry indicate that the attendance of strong winds
and huge waves while the M/V Peatheray Patrick-G was sailing through Cortes, Surigao del
Norte on March 3, 1987 was indeed fortuitous. A fortuitous event has been defined as one
which could not be foreseen, or which though foreseen, is inevitable.[15] An event is
considered fortuitous if the following elements concur:

xxx (a) the cause of the unforeseen and unexpected occurrence, or the failure of the debtor
to comply with his obligations, must be independent of human will; (b) it must be impossible
to foresee the event which constitutes the caso fortuito, or if it can be foreseen, it must be
impossible to avoid; (c) the occurrence must be such as to render it impossible for the debtor
to fulfill his obligation in a normal manner; and (d) the obligor must be free from any
participation in the aggravation of the injury resulting to the creditor. xxx[16]

In the case at bar, it was adequately shown that before the M/V Peatheray Patrick-G left
the port of Mandaue City, the Captain confirmed with the Coast Guard that the weather
condition would permit the safe travel of the vessel to Bislig, Surigao del Sur. Thus, he could
not be expected to have foreseen the unfavorable weather condition that awaited the
vessel in Cortes, Surigao del Sur. It was the presence of the strong winds and enormous
waves which caused the vessel to list, keel over, and consequently lose the cargo contained
therein. The appellate court likewise found that there was no negligence on the part of the
crew of the M/V Peatheray Patrick-G, citing the following portion of the decision of the
Board of Marine Inquiry:

I. WAS LCT PEATHERAY PATRICK-G SEAWORTHY WHEN SHE LEFT THE PORT OF MANDAWE, CEBU
AND AT THE TIME OF SINKING?

Evidence clearly shows that the vessel was propelled with three (3) diesel engines of 250 BHP
each or a total of 750 BHP. It had three (3) propellers which were operating satisfactorily from
the time the vessel left the port of Mandawe up to the time when the hull on the double
bottom tank was heavily floaded (sic) by uncontrollable entry of sea water resulting in the
stoppage of engines. The vessel was also equipped with operating generator pumps for
emergency cases. This equipment was also operating satisfactorily up to the time when the
engine room was heavily floaded (sic) with sea water. Further, the vessel had undergone
emergency drydocking and repair before the accident occurred (sic) on November 9, 1986
at Trigon Shipyard, San Fernando, Cebu as shown by the billing for the Drydocking and
Repair and certificate of Inspection No. 2588-86 issued by the Philippine coast Guard on
December 5, 1986 which expired on November 8, 1987.

LCT Peatheray Patrick-G was skippered by Mr. Manuel P. Ramilo, competent and
experienced licensed Major Patron who had been in command of the vessel for more than
three (3) years from July 1984 up to the time of sinking March 3, 1987. His Chief Mate Mr.
Mariano Alalin also a licensed Major Patron had been the Chief Mate of " LCT Peatheray
Patrick-G" for one year and three months at the time of the accident. Further Chief Mate
Alalin had commanded a tanker vessel named M/T Mercedes of MGM Corporation for
almost two (2) years from 1983-1985 (Alalin TSN-4-13-88 pp. 32-33).
That the vessel was granted SOLAS clearance by the Philippine Coast Guard on March 1,
1987 to depart from Mandawe City for Bislig, Surigao del Sur as evidenced by a certification
issued to D.C. Gaerlan Oil Products by Coast Guard Station Cebu dated December 23, 1987.

Based on the foregoing circumstances, "LCT Peatheray Patrick-G" should be considered


seaworthy vessel at the time she undertook that fateful voyage on March 2, 1987.

To be seaworthy, a vessel must not only be staunch and fit in the hull for the voyage to be
undertaken but also must be properly equipped and for that purpose there is a duty upon
the owner to provide a competent master and a crew adequate in number and competent
for their duty and equals in disposition and seamanship to the ordinary in that calling. (Ralph
299 F-52, 1924 AMC 942). American President 2td v. Ren Fen Fed 629. AMC 1723 LCA 9 CAL
1924).[17]

Overloading was also eliminated as a possible cause of the sinking of the vessel, as the
evidence showed that its freeboard clearance was substantially greater than the authorized
freeboard clearance.[18]
Although the Board of Marine Inquiry ruled only on the administrative liability of the
captain and crew of the M/V Peatheray Patrick-G, it had to conduct a thorough
investigation of the circumstances surrounding the sinking of the vessel and the loss of its
cargo in order to determine their responsibility, if any. The results of its investigation as
embodied in its decision on the administrative case clearly indicate that the loss of the
cargo was due solely to the attendance of strong winds and huge waves which caused the
vessel accumulate water, tilt to the port side and to eventually keel over. There was thus no
error on the part of the Court of Appeals in relying on the factual findings of the Board of
Marine Inquiry, for such factual findings, being supported by substantial evidence are
persuasive, considering that said administrative body is an expert in matters concerning
marine casualties.[19]
Since the presence of strong winds and enormous waves at Cortes, Surigao del Sur on
March 3, 1987 was shown to be the proximate and only cause of the sinking of the M/V
Peatheray Patrick-G and the loss of the cargo belonging to San Miguel Corporation, private
respondents cannot be held liable for the said loss.
WHEREFORE, the assailed Decision of the Court of Appeals is hereby AFFIRMED and the
petition is hereby DENIED.
SO ORDERED.

18. G.R. No. L-48757 May 30, 1988

MAURO GANZON, petitioner,


vs.
COURT OF APPEALS and GELACIO E. TUMAMBING, respondents.

The private respondent instituted in the Court of First Instance of Manila 1 an action against
the petitioner for damages based on culpa contractual. The antecedent facts, as found by
the respondent Court, 2 are undisputed:

On November 28, 1956, Gelacio Tumambing contracted the services of Mauro B. Ganzon to
haul 305 tons of scrap iron from Mariveles, Bataan, to the port of Manila on board the lighter
LCT "Batman" (Exhibit 1, Stipulation of Facts, Amended Record on Appeal, p. 38). Pursuant to
that agreement, Mauro B. Ganzon sent his lighter "Batman" to Mariveles where it docked in
three feet of water (t.s.n., September 28, 1972, p. 31). On December 1, 1956, Gelacio
Tumambing delivered the scrap iron to defendant Filomeno Niza, captain of the lighter, for
loading which was actually begun on the same date by the crew of the lighter under the
captain's supervision. When about half of the scrap iron was already loaded (t.s.n.,
December 14, 1972, p. 20), Mayor Jose Advincula of Mariveles, Bataan, arrived and
demanded P5,000.00 from Gelacio Tumambing. The latter resisted the shakedown and after
a heated argument between them, Mayor Jose Advincula drew his gun and fired at
Gelacio Tumambing (t.s.n., March 19, 1971, p. 9; September 28, 1972, pp. 6-
7).<re||an1w> The gunshot was not fatal but Tumambing had to be taken to a hospital
in Balanga, Bataan, for treatment (t.s.n., March 19, 1971, p. 13; September 28, 1972, p. 15).

After sometime, the loading of the scrap iron was resumed. But on December 4, 1956, Acting
Mayor Basilio Rub, accompanied by three policemen, ordered captain Filomeno Niza and
his crew to dump the scrap iron (t.s.n., June 16, 1972, pp. 8-9) where the lighter was docked
(t.s.n., September 28, 1972, p. 31). The rest was brought to the compound of NASSCO
(Record on Appeal, pp. 20-22). Later on Acting Mayor Rub issued a receipt stating that the
Municipality of Mariveles had taken custody of the scrap iron (Stipulation of Facts, Record on
Appeal, p. 40; t.s.n., September 28, 1972, p. 10.)

On the basis of the above findings, the respondent Court rendered a decision, the dispositive
portion of which states:

WHEREFORE, the decision appealed from is hereby reversed and set aside and a
new one entered ordering defendant-appellee Mauro Ganzon to pay plaintiff-
appellant Gelacio E. Tumambimg the sum of P5,895.00 as actual damages, the
sum of P5,000.00 as exemplary damages, and the amount of P2,000.00 as
attorney's fees. Costs against defendant-appellee Ganzon. 3

In this petition for review on certiorari, the alleged errors in the decision of the Court of
Appeals are:

THE COURT OF APPEALS FINDING THE HEREIN PETITIONER GUILTY OF BREACH OF THE
CONTRACT OF TRANSPORTATION AND IN IMPOSING A LIABILITY AGAINST HIM COMMENCING
FROM THE TIME THE SCRAP WAS PLACED IN HIS CUSTODY AND CONTROL HAVE NO BASIS IN
FACT AND IN LAW.

II

THE APPELLATE COURT ERRED IN CONDEMNING THE PETITIONER FOR THE ACTS OF HIS
EMPLOYEES IN DUMPING THE SCRAP INTO THE SEA DESPITE THAT IT WAS ORDERED BY THE
LOCAL GOVERNMENT OFFICIAL WITHOUT HIS PARTICIPATION.

III

THE APPELLATE COURT FAILED TO CONSIDER THAT THE LOSS OF THE SCRAP WAS DUE TO A
FORTUITOUS EVENT AND THE PETITIONER IS THEREFORE NOT LIABLE FOR LOSSES AS A
CONSEQUENCE THEREOF. 4

The petitioner, in his first assignment of error, insists that the scrap iron had not been
unconditionally placed under his custody and control to make him liable. However, he
completely agrees with the respondent Court's finding that on December 1, 1956, the
private respondent delivered the scraps to Captain Filomeno Niza for loading in the lighter
"Batman," That the petitioner, thru his employees, actually received the scraps is freely
admitted. Significantly, there is not the slightest allegation or showing of any condition,
qualification, or restriction accompanying the delivery by the private respondent-shipper of
the scraps, or the receipt of the same by the petitioner. On the contrary, soon after the
scraps were delivered to, and received by the petitioner-common carrier, loading was
commenced.

By the said act of delivery, the scraps were unconditionally placed in the possession and
control of the common carrier, and upon their receipt by the carrier for transportation, the
contract of carriage was deemed perfected. Consequently, the petitioner-carrier's
extraordinary responsibility for the loss, destruction or deterioration of the goods
commenced. Pursuant to Art. 1736, such extraordinary responsibility would cease only upon
the delivery, actual or constructive, by the carrier to the consignee, or to the person who has
a right to receive them. 5 The fact that part of the shipment had not been loaded on board
the lighter did not impair the said contract of transportation as the goods remained in the
custody and control of the carrier, albeit still unloaded.

The petitioner has failed to show that the loss of the scraps was due to any of the following
causes enumerated in Article 1734 of the Civil Code, namely:

(1) Flood, storm, earthquake, lightning, or other natural disaster or calamity;

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

(3) Act or omission of the shipper or owner of the goods;

(4) The character of the goods or defects in the packing or in the containers;

(5) Order or act of competent public authority.

Hence, the petitioner is presumed to have been at fault or to have acted negligently. 6 By
reason of this presumption, the court is not even required to make an express finding of fault
or negligence before it could hold the petitioner answerable for the breach of the contract
of carriage. Still, the petitioner could have been exempted from any liability had he been
able to prove that he observed extraordinary diligence in the vigilance over the goods in his
custody, according to all the circumstances of the case, or that the loss was due to an
unforeseen event or to force majeure. As it was, there was hardly any attempt on the part of
the petitioner to prove that he exercised such extraordinary diligence.

It is in the second and third assignments of error where the petitioner maintains that he is
exempt from any liability because the loss of the scraps was due mainly to the intervention of
the municipal officials of Mariveles which constitutes a caso fortuito as defined in Article 1174
of the Civil Code. 7

We cannot sustain the theory of caso fortuito. In the courts below, the petitioner's defense
was that the loss of the scraps was due to an "order or act of competent public authority,"
and this contention was correctly passed upon by the Court of Appeals which ruled that:

... In the second place, before the appellee Ganzon could be absolved from
responsibility on the ground that he was ordered by competent public authority
to unload the scrap iron, it must be shown that Acting Mayor Basilio Rub had the
power to issue the disputed order, or that it was lawful, or that it was issued
under legal process of authority. The appellee failed to establish this. Indeed, no
authority or power of the acting mayor to issue such an order was given in
evidence. Neither has it been shown that the cargo of scrap iron belonged to
the Municipality of Mariveles. What we have in the record is the stipulation of the
parties that the cargo of scrap iron was accilmillated by the appellant through
separate purchases here and there from private individuals (Record on Appeal,
pp. 38-39). The fact remains that the order given by the acting mayor to dump
the scrap iron into the sea was part of the pressure applied by Mayor Jose
Advincula to shakedown the appellant for P5,000.00. The order of the acting
mayor did not constitute valid authority for appellee Mauro Ganzon and his
representatives to carry out.

Now the petitioner is changing his theory to caso fortuito. Such a change of theory on
appeal we cannot, however, allow. In any case, the intervention of the municipal officials
was not In any case, of a character that would render impossible the fulfillment by the carrier
of its obligation. The petitioner was not duty bound to obey the illegal order to dump into the
sea the scrap iron. Moreover, there is absence of sufficient proof that the issuance of the
same order was attended with such force or intimidation as to completely overpower the will
of the petitioner's employees. The mere difficulty in the fullfilment of the obligation is not
considered force majeure. We agree with the private respondent that the scraps could
have been properly unloaded at the shore or at the NASSCO compound, so that after the
dispute with the local officials concerned was settled, the scraps could then be delivered in
accordance with the contract of carriage.

There is no incompatibility between the Civil Code provisions on common carriers and
Articles 361 8 and 362 9 of the Code of Commerce which were the basis for this Court's ruling
in Government of the Philippine Islands vs. Ynchausti & Co.10 and which the petitioner
invokes in tills petition. For Art. 1735 of the Civil Code, conversely stated, means that the
shipper will suffer the losses and deterioration arising from the causes enumerated in Art.
1734; and in these instances, the burden of proving that damages were caused by the fault
or negligence of the carrier rests upon him. However, the carrier must first establish that the
loss or deterioration was occasioned by one of the excepted causes or was due to an
unforeseen event or to force majeure. Be that as it may, insofar as Art. 362 appears to
require of the carrier only ordinary diligence, the same is .deemed to have been modified by
Art. 1733 of the Civil Code.

Finding the award of actual and exemplary damages to be proper, the same will not be
disturbed by us. Besides, these were not sufficiently controverted by the petitioner.

WHEREFORE, the petition is DENIED; the assailed decision of the Court of Appeals is hereby
AFFIRMED. Costs against the petitioner.

This decision is IMMEDIATELY EXECUTORY.

19. [G.R. No. 119197. May 16, 1997]

TABACALERA INSURANCE CO., PRUDENTIAL GUARANTEE & ASSURANCE, INC., and NEW
ZEALAND INSURANCE CO., LTD., petitioners, vs. NORTH FRONT SHIPPING SERVICES, INC.,
and COURT OF APPEALS, respondents.

TABACALERA INSURANCE CO., Prudential Guarantee & Assurance, Inc., and New
Zealand Insurance Co., Ltd., in this petition for review on certiorari, assail the 22 December
1994 decision of the Court of Appeals and its Resolution of 16 February 1995 which affirmed
the 1 June 1993 decision of the Regional Trial Court dismissing their complaint for damages
against North Front Shipping Services, Inc.
On 2 August 1990, 20,234 sacks of corn grains valued at P3,500,640.00 were shipped on
board North Front 777, a vessel owned by North Front Shipping Services, Inc. The cargo
wasconsigned to Republic Flour Mills Corporation in Manila under Bill of Lading No. 001[1] and
insured with the herein mentioned insurance companies. The vessel was inspected prior to
actual loading by representatives of the shipper and was found fit to carry the merchandise.
The cargo was covered with tarpaulins and wooden boards. The hatches were sealed and
could only be opened by representatives of Republic Flour Mills Corporation.
The vessel left Cagayan de Oro City on 2 August 1990 and arrived Manila on 16 August
1990. Republic Flour Mills Corporation was advised of its arrival but it did not immediately
commence the unloading operations. There were days when unloading had to be stopped
due to variable weather conditions and sometimes for no apparent reason at all. When the
cargo was eventually unloaded there was a shortage of 26.333 metric tons. The remaining
merchandise was already moldy, rancid and deteriorating. The unloading operations were
completed on 5 September 1990 or twenty (20) days after the arrival of the barge at the
wharf of Republic Flour Mills Corporation in Pasig City.
Precision Analytical Services, Inc., was hired to examine the corn grains and determine
the cause of deterioration. A Certificate of Analysis was issued indicating that the corn grains
had 18.56% moisture content and the wetting was due to contact with salt water. The
mold growth was only incipient and not sufficient to make the corn grains toxic and unfit for
consumption. In fact the mold growth could still be arrested by drying.
Republic Flour Mills Corporation rejected the entire cargo and formally demanded
from North Front Shipping Services, Inc., payment for the damages suffered by it. The
demands however were unheeded. The insurance companies were perforce obliged to pay
Republic Flour Mills Corporation P2,189,433.40.
By virtue of the payment made by the insurance companies they were subrogated to
the rights of Republic Flour Mills Corporation. Thusly, they lodged a complaint for damages
against North Front Shipping Services, Inc., claiming that the loss was exclusively attributable
to the fault and negligence of the carrier. The Marine Cargo Adjusters hired by the insurance
companies conducted a survey and found cracks in the bodega of the barge and heavy
concentration of molds on the tarpaulins and wooden boards. They did not notice any seals
in the hatches. The tarpaulins were not brand new as there were patches on them, contrary
to the claim of North Front Shipping Services, Inc., thus making it possible for water to seep
in. They also discovered that the bulkhead of the barge was rusty.
North Front Shipping Services, Inc., averred in refutation that it could not be made
culpable for the loss and deterioration of the cargo as it was never negligent. Captain
Solomon Villanueva, master of the vessel, reiterated that the barge was inspected prior to
the actual loading and was found adequate and seaworthy. In addition, they were issued a
permit to sail by the Coast Guard. The tarpaulins were doubled and brand new and the
hatches were properly sealed. They did not encounter big waves hence it was not possible
for water to seep in. He further averred that the corn grains were farm wet and not properly
dried when loaded.
The court below dismissed the complaint and ruled that the contract entered into
between North Front Shipping Services, Inc., and Republic Flour Mills Corporation was a
charter-party agreement. As such, only ordinary diligence in the care of goods was required
of North Front Shipping Services, Inc. The inspection of the barge by the shipper and the
representatives of the shipping company before actual loading, coupled with the Permit to
Sail issued by the Coast Guard, sufficed to meet the degree of diligence required of the
carrier.
On the other hand, the Court of Appeals ruled that as a common carrier required to
observe a higher degree of diligence North Front 777 satisfactorily complied with all the
requirements hence was issued a Permit to Sail after proper inspection. Consequently, the
complaint was dismissed and the motion for reconsideration rejected.
The charter-party agreement between North Front Shipping Services, Inc., and Republic
Flour Mills Corporation did not in any way convert the common carrier into a private
carrier. We have already resolved this issue with finality in Planters Products, Inc. v. Court of
Appeals[2] thus -

A 'charter-party' is defined as a contract by which an entire ship, or some principal part


thereof, is let by the owner to another person for a specified time or use; a contract of
affreightment by which the owner of a ship or other vessel lets the whole or a part of her to a
merchant or other person for the conveyance of goods, on a particular voyage, in
consideration of the payment of freight x x x x Contract of affreightment may either be time
charter, wherein the vessel is leased to the charterer for a fixed period of time, or voyage
charter, wherein the ship is leased for a single voyage. In both cases, the charter-party
provides for the hire of the vessel only, either for a determinate period of time or for a single
or consecutive voyage, the ship owner to supply the ship's store, pay for the wages of the
master of the crew, and defray the expenses for the maintenance of the ship.

Upon the other hand, the term 'common or public carrier' is defined in Art. 1732 of the Civil
Code. The definition extends to carriers either by land, air or water which hold themselves
out as ready to engage in carrying goods or transporting passengers or both for
compensation as a public employment and not as a casual occupation x x x x
It is therefore imperative that a public carrier shall remain as such, notwithstanding the
charter of the whole or portion of a vessel by one or more persons, provided the charter is
limited to the ship only, as in the case of a time-charter or voyage-charter (underscoring
supplied).

North Front Shipping Services, Inc., is a corporation engaged in the business of


transporting cargo and offers its services indiscriminately to the public. It is without doubt a
common carrier. As such it is required to observe extraordinary diligence in its vigilance over
the goods it transports.[3]. When goods placed in its care are lost or damaged, the carrier is
presumed to have been at fault or to have acted negligently.[4] North Front Shipping
Services, Inc., therefore has the burden of proving that it observed extraordinary diligence in
order to avoid responsibility for the lost cargo.
North Front Shipping Services, Inc., proved that the vessel was inspected prior to actual
loading by representatives of the shipper and was found fit to take a load of corn
grains. They were also issued Permit to Sail by the Coast
Guard. The master of the vessel testified that the corn grains were farm wet when
loaded. However, this testimony was disproved by the clean bill of lading issued by North
Front Shipping Services, Inc., which did not contain a notation that the corn grains were wet
and improperly dried. Having been in the service since 1968, the master of the vessel would
have known at the outset that corn grains that were farm wet and not properly dried would
eventually deteriorate when stored in sealed and hot compartments as in hatches of a
ship. Equipped with this knowledge, the master of the vessel and his crew should have
undertaken precautionary measures to avoid or lessen the cargo's possible deterioration as
they were presumed knowledgeable about the nature of such cargo. But none of such
measures was taken.
In Compania Maritima v. Court of Appeals[5] we ruled -

x x x x Mere proof of delivery of the goods in good order to a common carrier, and of their
arrival at the place of destination in bad order, makes out prima facie case against the
common carrier, so that if no explanation is given as to how the loss, deterioration or
destruction of the goods occurred, the common carrier must be held responsible. Otherwise
stated, it is incumbent upon the common carrier to prove that the loss, deterioration or
destruction was due to accident or some other circumstances inconsistent with its liability x x
xx

The extraordinary diligence in the vigilance over the goods tendered for shipment requires
the common carrier to know and to follow the required precaution for avoiding damage to,
or destruction of the goods entrusted to it for safe carriage and delivery. It requires common
carriers to render service with the greatest skill and foresight and 'to use all reasonable
means to ascertain the nature and characteristics of goods tendered for shipment, and to
exercise due care in the handling and stowage, including such methods as their nature
requires' (underscoring supplied).

In fine, we find that the carrier failed to observe the required extraordinary diligence in
the vigilance over the goods placed in its
care. The proofs presented by North Front ShippingServices, Inc., were insufficient to rebut
the prima facie presumption of private respondent's negligence, more so if we consider the
evidence adduced by petitioners.
It is not denied by the insurance companies that the vessel was indeed inspected before
actual loading and that North Front 777 was issued a Permit to Sail. They proved the fact of
shipment and its consequent loss or damage while in the actual possession of the
carrier. Notably, the carrier failed to volunteer any explanation why there was spoilage and
how it occurred. On the other hand, it was shown during the trial that the vessel had rusty
bulkheads and the wooden boards and tarpaulins bore heavy concentration of molds. The
tarpaulins used were not new, contrary to the claim of North Front Shipping Services, Inc., as
there were already several patches on them, hence, making it highly probable for water to
enter.
Laboratory analysis revealed that the corn grains were contaminated with salt
water. North Front Shipping Services, Inc., failed to rebut all these arguments. It did not even
endeavor to establish that the loss, destruction or deterioration of the goods was due to the
following: (a) flood, storm, earthquake, lightning, or other natural disaster or calamity; (b) act
of the public enemy in war, whether international or civil; (c) act or omission of the shipper or
owner of the goods; (d) the character of the goods or defects in the packing or in the
containers; (e) order or act of competent public authority.[6] This is a closed list. If the cause
of destruction, loss or deterioration is other than the enumerated circumstances, then the
carrier is rightly liable therefor.
However, we cannot attribute the destruction, loss or deterioration of the cargo solely to
the carrier. We find the consignee Republic Flour Mills Corporation guilty of
contributorynegligence. It was seasonably notified of the arrival of the barge but did not
immediately start the unloading operations. No explanation was proffered by the consignee
as to why there was a delay of six (6) days. Had the unloading been commenced
immediately the loss could have been completely avoided or at least minimized. As testified
to by the chemist who analyzed the corn samples, the mold growth was only at its incipient
stage and could still be arrested by drying. The corn grains were not yet toxic or unfit for
consumption. For its contributory negligence, Republic Flour Mills Corporation should share at
least 40% of the loss.[7]
WHEREFORE, the Decision of the Court of Appeals of 22 December 1994 and its
Resolution of 16 February 1995 are REVERSED and SET ASIDE. Respondent North Front Shipping
Services, Inc., is ordered to pay petitioners Tabacalera Insurance Co., Prudential Guarantee
& Assurance, Inc., and New Zealand Insurance Co. Ltd., P1,313,660.00 which is 60% of the
amount paid by the insurance companies to Republic Flour Mills Corporation, plus interest at
the rate of 12% per annum from the time this judgment becomes final until full payment.
SO ORDERED.

22. G.R. No. 95536 March 23, 1992

ANICETO G. SALUDO, JR., MARIA SALVACION SALUDO, LEOPOLDO G. SALUDO and


SATURNINO G. SALUDO, petitioners,
vs.
HON. COURT OF APPEALS, TRANS WORLD AIRLINES, INC., and PHILIPPINE AIRLINES,
INC., respondents.

Assailed in this petition for review on certiorari is the decision in CA-G.R. CV No. 20951 of
respondent Court of Appeals 1 which affirmed the decision of the trial court 2 dismissing for
lack of evidence herein petitioners' complaint in Civil Case No R-2101 of the then Court of
First Instance of Southern Leyte, Branch I.

The facts, as recounted by the court a quo and adopted by respondent court after
"considering the evidence on record," are as follows:

After the death of plaintiffs' mother, Crispina Galdo Saludo, in Chicago Illinois,
(on) October 23, 1976 (Exh. A), Pomierski and Son Funeral Home of Chicago,
made the necessary preparations and arrangements for the shipment, of the
remains from Chicago to the Philippines. The funeral home had the remains
embalmed (Exb. D) and secured a permit for the disposition of dead human
body on October 25, 1976 (Exh. C), Philippine Vice Consul in Chicago, Illinois,
Bienvenido M. Llaneta, at 3:00 p.m. on October 26, 1976 at the Pomierski & Son
Funeral Home, sealed the shipping case containing a hermetically sealed
casket that is airtight and waterproof wherein was contained the remains of
Crispina Saludo Galdo (sic) (Exb. B). On the same date, October 26, 1976,
Pomierski brought the remains to C.M.A.S. (Continental Mortuary Air Services) at
the airport (Chicago) which made the necessary arrangements such as flights,
transfers, etc.; C.M.A.S. is a national service used by undertakers to throughout
the nation (U.S.A.), they furnish the air pouch which the casket is enclosed in,
and they see that the remains are taken to the proper air freight terminal (Exh. 6-
TWA). C.M.A.S. booked the shipment with PAL thru the carrier's agent Air Care
International, with Pomierski F.H. as the shipper and Mario (Maria) Saludo as the
consignee. PAL Airway Bill No. 079-01180454 Ordinary was issued wherein the
requested routing was from Chicago to San Francisco on board TWA Flight 131
of October 27, 1976 and from San Francisco to Manila on board PAL Flight No.
107 of the same date, and from Manila to Cebu on board PAL Flight 149 of
October 29, 1976 (See Exh. E., Also Exh. 1-PAL).

In the meantime, plaintiffs Maria Salvacion Saludo and Saturnino Saludo, thru a
travel agent, were booked with United Airlines from Chicago to California, and
with PAL from California to Manila. She then went to the funeral director of
Pomierski Funeral Home who had her mother's remains and she told the director
that they were booked with United Airlines. But the director told her that the
remains were booked with TWA flight to California. This upset her, and she and
her brother had to change reservations from UA to the TWA flight after she
confirmed by phone that her mother's remains should be on that TWA flight.
They went to the airport and watched from the look-out area. She saw no body
being brought. So, she went to the TWA counter again, and she was told there
was no body on that flight. Reluctantly, they took the TWA flight upon assurance
of her cousin, Ani Bantug, that he would look into the matter and inform her
about it on the plane or have it radioed to her. But no confirmation from her
cousin reached her that her mother was on the West Coast.

Upon arrival at San Francisco at about 5:00 p.m., she went to the TWA counter
there to inquire about her mother's remains. She was told they did not know
anything about it.

She then called Pomierski that her mother's remains were not at the West Coast
terminal, and Pomierski immediately called C.M.A.S., which in a matter of 10
minutes informed him that the remains were on a plane to Mexico City, that
there were two bodies at the terminal, and somehow they were switched; he
relayed this information to Miss Saludo in California; later C.M.A.S. called and
told him they were sending the remains back to California via Texas (see Exh. 6-
TWA).

It-turned out that TWA had carried a shipment under PAL Airway Bill No. 079-
ORD-01180454 on TWA Flight 603 of October 27, 1976, a flight earlier than TWA
Flight 131 of the same date. TWA delivered or transferred the said shipment said
to contain human remains to PAL at 1400H or 2:00 p.m. of the same date,
October 27, 1976 (Bee Exh. 1- TWA). "Due to a switch(ing) in Chicago", this
shipment was withdrawn from PAL by CMAS at 1805H (or 6:05 p.m.) of the same
date, October 27 (Exh. 3-PAL, see Exh. 3-a-PAL).

What transpired at the Chicago (A)irport is explained in a memo or incident


report by Pomierski (Exh. 6-TWA) to Pomierski's lawyers who in turn referred to
said' memo and enclosed it in their (Pomierski's lawyers) answer dated July 18,
1981 to herein plaintiff's counsel (See Exh. 5-TWA). In that memo or incident
report (Exh. 6-TWA), it is stated that the remains (of Crispina Saludo) were taken
to CMAS at the airport; that there were two bodies at the (Chicago Airport)
terminal, and somehow they were switched, that the remains (of Crispina
Saludo) were on a plane to Mexico City; that CMAS is a national service used by
undertakers throughout the nation (U.S.A.), makes all the necessary
arrangements, such as flights, transfers, etc., and see(s) to it that the remains are
taken to the proper air freight terminal.

The following day October 28, 1976, the shipment or remains of Crispina Saludo
arrived (in) San Francisco from Mexico on board American Airlines. This shipment
was transferred to or received by PAL at 1945H or 7:45 p.m. (Exh. 2-PAL, Exh. 2-a-
PAL). This casket bearing the remains of Crispina Saludo, which was mistakenly
sent to Mexico and was opened (there), was resealed by Crispin F. Patagas for
shipment to the Philippines (See Exh. B-1). The shipment was immediately loaded
on PAL flight for Manila that same evening and arrived (in) Manila on October
30, 1976, a day after its expected arrival on October 29, 1976. 3

In a letter dated December 15, 1976, 4 petitioners' counsel informed private respondent Trans
World Airlines (TWA) of the misshipment and eventual delay in the delivery of the cargo
containing the remains of the late Crispin Saludo, and of the discourtesy of its employees to
petitioners Maria Salvacion Saludo and Saturnino Saludo. In a separate letter on June 10,
1977 addressed to co-respondent Philippine Airlines (PAL), 5 petitioners stated that they were
holding PAL liable for said delay in delivery and would commence judicial action should no
favorable explanation be given.

Both private respondents denied liability. Thus, a damage suit 6 was filed by petitioners before
the then Court of First Instance, Branch III, Leyte, praying for the award of actual damages of
P50,000.00, moral damages of P1,000,000.00, exemplary damages, attorney's fees and costs
of suit.

As earlier stated, the court below absolved the two respondent airlines companies of liability.
The Court of Appeals affirmed the decision of the lower court in toto, and in a subsequent
resolution, 7 denied herein petitioners' motion for reconsideration for lack of merit.

In predictable disagreement and dissatisfaction with the conclusions reached by respondent


appellate court, petitioners now urge this Court to review the appealed decision and to
resolve whether or not (1) the delay in the delivery of the casketed remains of petitioners'
mother was due to the fault of respondent airline companies, (2) the one-day delay in the
delivery of the same constitutes contractual breach as would entitle petitioners to damages,
(3) damages are recoverable by petitioners for the humiliating, arrogant and indifferent acts
of the employees of TWA and PAL, and (4) private respondents should be held liable for
actual, moral and exemplary damages, aside from attorney's fees and litigation expenses. 8

At the outset and in view of the spirited exchanges of the parties on this aspect, it is to be
stressed that only questions of law may be raised in a petition filed in this Court to review
on certiorari the decision of the Court of Appeals. 9 This being so, the factual findings of the
Court of Appeals are final and conclusive and cannot be reviewed by the Supreme Court.
The rule, however, admits of established exceptions, to wit: (a) where there is grave abuse of
discretion; (b) when the finding is grounded entirely on speculations, surmises or
conjectures;(c) when the inference made is manifestly-mistaken, absurd or impossible; (d)
when the judgment of the Court of Appeals was based on a misapprehension of facts; (e)
when the factual findings are conflicting; (f) when the Court of Appeals, in making its
findings, went beyond the issues of the case and the same are contrary to the admissions of
both appellant and appellee; 10 (g) when the Court of Appeals manifestly overlooked
certain relevant facts not disputed by the parties and which, if properly considered, would
justify a different conclusion; 11 and (h) where the findings of fact of the Court of Appeals are
contrary to those of the trial court, or are mere conclusions without citation of specific
evidence, or where the facts of set forth by the petitioner are not disputed by the
respondent, or where the findings of fact of the Court of Appeals are premised on the
absence of evidence and are contradicted by the evidence on record. 12

To distinguish, a question of law is one which involves a doubt or controversy on what the law
is on a certain state of facts; and, a question of fact, contrarily, is one in which there is a
doubt or difference as to the truth or falsehood of the alleged facts. 13 One test, it has been
held, is whether the appellate court can determine the issue raised without reviewing or
evaluating the evidence, in which case it is a question of law, otherwise it will be a question
of fact. 14

Respondent airline companies object to the present recourse of petitioners on the ground
that this petition raises only factual questions. 15 Petitioners maintain otherwise or,
alternatively, they are of the position that, assuming that the petition raises factual questions,
the same are within the recognized exceptions to the general rule as would render the
petition cognizable and worthy of review by the Court. 16

Since it is precisely the soundness of the inferences or conclusions that may be drawn from
the factual issues which are here being assayed, we find that the issues raised in the instant
petition indeed warrant a second look if this litigation is to come to a reasonable
denouement. A discussion seriatim of said issues will further reveal that the sequence of the
events involved is in effect disputed. Likewise to be settled is whether or not the conclusions
of the Court of Appeals subject of this review indeed find evidentiary and legal support.

I. Petitioners fault respondent court for "not finding that private respondents failed to exercise
extraordinary diligence required by law which resulted in the switching and/or misdelivery of
the remains of Crispina Saludo to Mexico causing gross delay in its shipment to the
Philippines, and consequently, damages to petitioners." 17

Petitioner allege that private respondents received the casketed remains of petitioners'
mother on October 26, 1976, as evidenced by the issuance of PAL Air Waybill No. 079-
01180454 18 by Air Care International as carrier's agent; and from said date, private
respondents were charged with the responsibility to exercise extraordinary diligence so
much so that for the alleged switching of the caskets on October 27, 1976, or one day after
private respondents received the cargo, the latter must necessarily be liable.

To support their assertion, petitioners rely on the jurisprudential dictum, both under American
and Philippine law, that "(t)he issuance of a bill of lading carries the presumption that the
goods were delivered to the carrier issuing the bill, for immediate shipment, and it is nowhere
questioned that a bill of lading is prima facie evidence of the receipt of the goods by the
carrier. . . . In the absence of convincing testimony establishing mistake, recitals in the bill of
lading showing that the carrier received the goods for shipment on a specified date control
(13 C.J.S. 235)." 19

A bill of lading is a written acknowledgment of the receipt of the goods and an agreement
to transport and deliver them at a specified place to a person named or on his order. Such
instrument may be called a shipping receipt, forwarder's receipt and receipt for
transportation. 20 The designation, however, is immaterial. It has been hold that freight tickets
for bus companies as well as receipts for cargo transported by all forms of transportation,
whether by sea or land, fall within the definition. Under the Tariff and Customs Code, a bill of
lading includes airway bills of lading. 21 The two-fold character of a bill of lading is all too
familiar; it is a receipt as to the quantity and description of the goods shipped and a
contract to transport the goods to the consignee or other person therein designated, on the
terms specified in such instrument. 22

Logically, since a bill of lading acknowledges receipt of goods to be transported, delivery of


the goods to the carrier normally precedes the issuance of the bill; or, to some extent,
delivery of the goods and issuance of the bill are regarded in commercial practice as
simultaneous acts. 23 However, except as may be prohibited by law, there is nothing to
prevent an inverse order of events, that is, the execution of the bill of lading even prior to
actual possession and control by the carrier of the cargo to be transported. There is no law
which requires that the delivery of the goods for carriage and the issuance of the covering
bill of lading must coincide in point of time or, for that matter, that the former should
precede the latter.

Ordinarily, a receipt is not essential to a complete delivery of goods to the carrier for
transportation but, when issued, is competent and prima facie, but not conclusive, evidence
of delivery to the carrier. A bill of lading, when properly executed and delivered to a shipper,
is evidence that the carrier has received the goods described therein for shipment. Except
as modified by statute, it is a general rule as to the parties to a contract of carriage of goods
in connection with which a bill of lading is issued reciting that goods have been received for
transportation, that the recital being in essence a receipt alone, is not conclusive, but may
be explained, varied or contradicted by parol or other evidence. 24

While we agree with petitioners' statement that "an airway bill estops the carrier from
denying receipt of goods of the quantity and quality described in the bill," a further reading
and a more faithful quotation of the authority cited would reveal that "(a) bill of lading may
contain constituent elements of estoppel and thus become something more than a contract
between the shipper and the carrier. . . . (However), as between the shipper and the
carrier, when no goods have been delivered for shipment no recitals in the bill can estop the
carrier from showing the true facts . . . Between the consignor of goods and receiving carrier,
recitals in a bill of lading as to the goods shipped raise only a rebuttable presumption that
such goods were delivered for shipment. As between the consignor and a receiving carrier,
the fact must outweigh the recital." 25 (Emphasis supplied)

For this reason, we must perforce allow explanation by private respondents why, despite the
issuance of the airway bill and the date thereof, they deny having received the remains of
Crispina Saludo on October 26, 1976 as alleged by petitioners.

The findings of the trial court, as favorably adopted by the Court of Appeals and which we
have earner quoted, provide us with the explanation that sufficiently over comes the
presumption relied on by petitioners in insisting that the remains of their mother were
delivered to and received by private respondents on October 26, 1976. Thus

. . . Philippine Vice Consul in Chicago, Illinois, Bienvenido M. Llaneta, at 3:00 p.m.


on October 26, 1976 at the Pomierski & Son Funeral Home, sealed the shipping
case containing a hermetically sealed casket that is airtight and waterproof
wherein was contained the remains of Crispina Saludo Galdo (sic) (Exh. B). On
the same date October 26, 1976, Pomierski brought the remains to C.M.A.S.
(Continental Mortuary Air Services) at the airport (Chicago) which made the
necessary arrangements such as flights, transfers, etc; C.M.A.S. is a national
service used by undertakers throughout the nation (U.S.A.), they furnish the air
pouch which the casket is enclosed in, and they see that the remains are taken
to the proper air freight terminal (Exh. G-TWA). C.M.A.S. booked the shipment
with PAL thru the carrier's agent Air Care International, with Pomierski F.H. as the
shipper and Mario (Maria) Saludo as the consignee. PAL Airway Bill No. 079-
01180454 Ordinary was issued wherein the requested routing was from Chicago
to San Francisco on board TWA Flight-131 of October 27;1976, and from San
Francisco to Manila on board PAL Flight No. 107 of the same date, and from
Manila to Cebu on board PAL Flight 149 of October 29, 1976 (See Exh. E, also
Exh. 1-PAL). 26(Emphasis ours.)

Moreover, we are persuaded to believe private respondent PAL's account as to what


transpired October 26, 1976:

. . . Pursuant thereto, on 26 October 1976, CMAS acting upon the instruction of


Pomierski, F.H., the shipper requested booking of the casketed remains of Mrs.
Cristina (sic) Saludo on board PAL's San Francisco-Manila Flight No. PR 107 on
October 27, 1976.

2. To signify acceptance and confirmation of said booking, PAL issued to said


Pomierski F.H., PAL Airway Bill No. 079-01180454 dated October 27, 1976 (sic,
"10/26/76"). PAL confirmed the booking and transporting of the shipment on
board of its Flight PR 107 on October 27, 1976 on the basis of the representation
of the shipper and/or CMAS that the said cargo would arrive in San Francisco
from Chicago on board United Airlines Flight US 121 on 27 October 1976. 27

In other words, on October 26, 1976 the cargo containing the casketed remains of Crispina
Saludo was booked for PAL Flight Number PR-107 leaving San Francisco for Manila on
October 27, 1976, PAL Airway Bill No. 079-01180454 was issued, not as evidence of receipt of
delivery of the cargo on October 26, 1976, but merely as a confirmation of the booking thus
made for the San Francisco-Manila flight scheduled on October 27, 1976. Actually, it was not
until October 28, 1976 that PAL received physical delivery of the body at San Francisco, as
duly evidenced by the Interline Freight Transfer Manifest of the American Airline Freight
System and signed for by Virgilio Rosales at 1945H, or 7:45 P.M. on said date. 28

Explicit is the rule under Article 1736 of the Civil Code that the extraordinary responsibility of
the common carrier begins from the time the goods are delivered to the carrier. This
responsibility remains in full force and effect even when they are temporarily unloaded or
stored in transit, unless the shipper or owner exercises the right of stoppage in transitu, 29 and
terminates only after the lapse of a reasonable time for the acceptance, of the goods by
the consignee or such other person entitled to receive them. 30 And, there is delivery to the
carrier when the goods are ready for and have been placed in the exclusive possession,
custody and control of the carrier for the purpose of their immediate transportation and the
carrier has accepted them. 31 Where such a delivery has thus been accepted by the carrier,
the liability of the common carrier commences eo instanti. 32

Hence, while we agree with petitioners that the extraordinary diligence statutorily required to
be observed by the carrier instantaneously commences upon delivery of the goods thereto,
for such duty to commence there must in fact have been delivery of the cargo subject of
the contract of carriage. Only when such fact of delivery has been unequivocally
established can the liability for loss, destruction or deterioration of goods in the custody of
the carrier, absent the excepting causes under Article 1734, attach and the presumption of
fault of the carrier under Article 1735 be invoked.

As already demonstrated, the facts in the case at bar belie the averment that there was
delivery of the cargo to the carrier on October 26, 1976. Rather, as earlier explained, the
body intended to be shipped as agreed upon was really placed in the possession and
control of PAL on October 28, 1976 and it was from that date that private respondents
became responsible for the agreed cargo under their undertakings in PAL Airway Bill No. 079-
01180454. Consequently, for the switching of caskets prior thereto which was not caused by
them, and subsequent events caused thereby, private respondents cannot be held liable.

Petitioners, proceeding on the premise that there was delivery of the cargo to private
respondents on October 26,1976 and that the latter's extraordinary responsibility had by then
become operative, insist on foisting the blame on private respondents for the switching of
the two caskets which occurred on October 27, 1976. It is argued that since there is no clear
evidence establishing the fault Continental Mortuary Air Services (CMAS) for the mix-up,
private respondents are presumably negligent pursuant to Article 1735 of the Civil Code and,
for failure to rebut such presumption, they must necessarily be held liable; or, assuming that
CMAS was at fault, the same does not absolve private respondents of liability because
whoever brought the cargo to the airport or loaded it on the plane did so as agent of
private respondents.

This contention is without merit. As pithily explained by the Court of Appeals:

The airway bill expressly provides that "Carrier certifies goods described below
were received for carriage", and said cargo was "casketed human remains of
Crispina Saludo," with "Maria Saludo as Consignee; Pomierski F.H. as Shipper; Air
Care International as carrier's agent." On the face of the said airway bill, the
specific flight numbers, specific routes of shipment and dates of departure and
arrival were typewritten, to wit: Chicago TWA Flight 131/27 to San Francisco and
from San Francisco by PAL 107 on, October 27, 1976 to Philippines and to Cebu
via PAL Flight 149 on October 29, 1976. The airway bill also contains the following
typewritten words, as follows: all documents have been examined (sic). Human
remains of Crispina Saludo. Please return back (sic) first available flight to SFO.
But, as it turned out and was discovered later the casketed human remains
which was issued PAL Airway Bill #079-1180454 was not the remains of Crispina
Saludo, the casket containing her remains having been shipped to Mexico City.

However, it should be noted that, Pomierski F.H., the shipper of Mrs. Saludo's
remains, hired Continental Mortuary Services (hereafter referred to as C.M.A.S.),
which is engaged in the business of transporting and forwarding human remains.
Thus, C.M.A.S. made all the necessary arrangements such as flights, transfers,
etc. for shipment of the remains of Crispina Saludo.

The remains were taken on October 26th, 1976, to C.M.A.S. at the


airport. These people made all the necessary arrangements, such
as flights, transfers, etc. This is a national service used by undertakers
throughout the nation. They furnished the air pouch which the
casket is enclosed in, and they see that the remains are taken to
the proper air frieght terminal. I was very surprised when Miss Saludo
called me to say that the remains were not at the west coast
terminal. I immediately called C.M.A.S. They called me back in a
matter of ten minutes to inform me that the remains were on a
plane to Mexico City. The man said that there were two bodies at
the terminal, and somehow they were switched. . . . (Exb. 6
"TWA", which is the memo or incident report enclosed in the
stationery of Walter Pomierski & Sons Ltd.)

Consequently, when the cargo was received from C.M.A.S. at the Chicago
airport terminal for shipment, which was supposed to contain the remains of
Crispina Saludo, Air Care International and/or TWA, had no way of determining
its actual contents, since the casket was hermetically sealed by the Philippine
Vice-Consul in Chicago and in an air pouch of C.M.A.S., to the effect that Air
Care International and/or TWA had to rely on the information furnished by the
shipper regarding the cargo's content. Neither could Air Care International
and/or TWA open the casket for further verification, since they were not only
without authority to do so, but even prohibited.

Thus, under said circumstances, no fault and/or negligence can be attributed to


PAL (even if Air Care International should be considered as an agent of PAL)
and/or TWA, the entire fault or negligence being exclusively with
C.M.A.S. 33 (Emphasis supplied.)

It can correctly and logically be concluded, therefore, that the switching occurred or, more
accurately, was discovered on October 27, 1976; and based on the above findings of the
Court of appeals, it happened while the cargo was still with CMAS, well before the same was
place in the custody of private respondents.

Thus, while the Air Cargo Transfer Manifest of TWA of October 27, 1976 34 was signed by Garry
Marcial of PAL at 1400H, or 2:00 P.M., on the same date, thereby indicating
acknowledgment by PAL of the transfer to them by TWA of what was in truth the erroneous
cargo, said misshipped cargo was in fact withdrawn by CMAS from PAL as shown by the
notation on another copy of said manifest 35 stating "Received by CMAS Due to switch in
Chicago 10/27-1805H," the authenticity of which was never challenged. This shows that said
misshipped cargo was in fact withdrawn by CMAS from PAL and the correct shipment
containing the body of Crispina Saludo was received by PAL only on October 28, 1976, at
1945H, or 7:45 P.M., per American Airlines Interline Freight Transfer Manifest No. AA204312. 36

Witness the deposition of TWA's ramp serviceman, Michael Giosso, on this matter:

ATTY. JUAN COLLAS, JR.:


On that date, do (sic) you have occasion to handle or deal with the
transfer of cargo from TWA Flight No. 603 to PAL San Francisco?

MICHAEL GIOSSO:

Yes, I did.

ATTY. JUAN COLLAS, JR.:

What was your participation with the transfer of the cargo?

MICHAEL GIOSSO:

I manifested the freight on a transfer manifest and physically moved


it to PAL and concluded the transfer by signing it off.

ATTY. JUAN COLLAS, JR.:

You brought it there yourself?

MICHAEL GIOSSO:

Yes sir.

ATTY. JUAN COLIAS, JR.:

Do you have anything to show that PAL received the cargo from
TWA on October 27, 1976?

MICHAEL GIOSSO:

Yes, I do.

(Witness presenting a document)

ATTY. JUAN COLLAS, JR.:

For purposes of clarity, Exhibit I is designated as Exhibit I-TWA.

xxx xxx xxx

ATTY. JUAN COLLAS, JR.:

This Exhibit I-TWA, could you tell what it is, what it shows?

MICHAEL GIOSSO:

It shows transfer of manifest on 10-27-76 to PAL at 1400 and verified


with two signatures as it completed the transfer.

ATTY. JUAN COLLAS, JR.:

Very good,. Who was the PAL employee who received the cargo?

MICHAEL GIOSSO:

The name is Garry Marcial." 37

The deposition of Alberto A. Lim, PAL's cargo supervisor at San Francisco, as deponent-
witness for PAL, makes this further clarification:
ATTY. CESAR P. MANALAYSAY:

You mentioned Airway Bill, Mr. Lim. I am showing to you a PAL


Airway Bill Number 01180454 which for purposes of evidence, I
would like to request that the same be marked as evidence Exhibit I
for PAL.

xxx xxx xxx

In what circumstances did you encounter Exhibit I-PAL?

ALBERTO A. LIM:

If I recall correctly, I was queried by Manila, our Manila office with


regard to a certain complaint that a consignee filed that this
shipment did not arrive on the day that the consignee expects the
shipment to arrive.

ATTY CESAR P. MANALAYSAY:

Okay. Now, upon receipt of that query from your Manila office, did
you conduct any investigation to pinpoint the possible causes of
mishandling?

ALBERTO A. LIM:

Yes.

xxx xxx xxx

ATTY. CESAR P. MANALAYSAY:

What is the result of your investigation?

ALBERTO A. LIM:

In the course of my investigation, I found that we received the body


on October 28, 1976, from American Airlines.

ATTY. CESAR P. MANALAYSAY:

What body are you referring to?

xxx xxx xxx

ALBERTO A. LIM:

The remains of Mrs. Cristina (sic) Saludo.

ATTY. CESAR P. MANALAYSAY:

Is that the same body mentioned in this Airway Bill?

ALBERTO A. LIM:

Yes.

ATTY. CESAR P. MANALAYSAY:

What time did you receive said body on October 28, 1976?
ALBERTO A. LIM:

If I recall correctly, approximately 7:45 of October 28, 1976.

ATTY. CESAR P. MANALAYSAY:

Do you have any proof with you to back the statement?

ALBERTO A. LIM:

Yes. We have on our records a Transfer Manifest from American


Airlines Number 204312 showing that we received a human remains
shipment belong to Mrs. Cristina (sic) Saludo or the human remains
of Mrs. Cristina (sic) Saludo.

ATTY. CESAR P. MAIALAYSAY:

At this juncture, may I request that the Transfer Manifest referred to


by the witness be marked as an evidence as Exhibit II-PAL.

xxx xxx xxx

Mr. Lim, yesterday your co-defendant TWA presented as their Exhibit


I evidence tending to show that on October 27, 1976 at about 2:00
in the, afternoon they delivered to you a cargo bearing human
remains. Could you go over this Exhibit I and please give us your
comments as to that exhibit?

ATTY. ALBERTO C. MENDOZA:

That is a vague question. I would rather request that counsel


propound specific questions rather than asking for comments on
Exhibit I-TWA.

ATTY. CESAR P. MANALAYSAY:

In that case, I will reform my question. Could you tell us whether


TWA in fact delivered to you the human remains as indicated in that
Transfer Manifest?

ALBERTO A. LIM:

Yes, they did.

ATTY. CESAR P. MANALAYSAY:

I noticed that the Transfer Manifest of TWA marked as Exhibit I-TWA


bears the same numbers or the same entries as the Airway Bill
marked as Exhibit I-A PAL tending to show that this is the human
remains of Mrs Cristina (sic) Saludo. Could you tell us whether this is
true?

ALBERTO A. LIM:

It is true that we received human remains shipment from TWA as


indicated on this Transfer Manifest. But in the course of investigation,
it was found out that the human remains transferred to us is not the
remains of Mrs. Cristina (sic) Saludo this is the reason why we did not
board it on our flight. 38
Petitioners consider TWA's statement that "it had to rely on the information furnished by the
shipper" a lame excuse and that its failure to prove that its personnel verified and identified
the contents of the casket before loading the same constituted negligence on the part of
TWA. 39

We upbold the favorable consideration by the Court of Appeals of the following findings of
the trial court:

It was not (to) TWA, but to C.M.A.S. that the Pomierski & Son Funeral Home
delivered the casket containing the remains of Crispina Saludo. TWA would
have no knowledge therefore that the remains of Crispina Saludo were not the
ones inside the casket that was being presented to it for shipment. TWA would
have to rely on there presentations of C.M.A.S. The casket was hermetically
sealed and also sealed by the Philippine Vice Consul in Chicago. TWA or any
airline for that matter would not have opened such a sealed casket just for the
purpose of ascertaining whose body was inside and to make sure that the
remains inside were those of the particular person indicated to be by C.M.A.S.
TWA had to accept whatever information was being furnished by the shipper or
by the one presenting the casket for shipment. And so as a matter of fact, TWA
carried to San Francisco and transferred to defendant PAL a shipment covered
by or under PAL Airway Bill No. 079-ORD-01180454, the airway bill for the
shipment of the casketed remains of Crispina Saludo. Only, it turned out later,
while the casket was already with PAL, that what was inside the casket was not
the body of Crispina Saludo so much so that it had to be withdrawn by C.M.A.S.
from PAL. The body of Crispina Saludo had been shipped to Mexico. The casket
containing the remains of Crispina Saludo was transshipped from Mexico and
arrived in San Francisco the following day on board American Airlines. It was
immediately loaded by PAL on its flight for Manila.

The foregoing points at C.M.A.S., not defendant TWA much less defendant PAL,
as the ONE responsible for the switching or mix-up of the two bodies at the
Chicago Airport terminal, and started a chain reaction of the misshipment of the
body of Crispina Saludo and a one-day delay in the delivery thereof to its
destination. 40

Verily, no amount of inspection by respondent airline companies could have guarded


against the switching that had already taken place. Or, granting that they could have
opened the casket to inspect its contents, private respondents had no means of
ascertaining whether the body therein contained was indeed that of Crispina Saludo
except, possibly, if the body was that of a male person and such fact was visually apparent
upon opening the casket. However, to repeat, private respondents had no authority to
unseal and open the same nor did they have any reason or justification to resort thereto.

It is the right of the carrier to require good faith on the part of those persons who deliver
goods to be carried, or enter into contracts with it, and inasmuch as the freight may depend
on the value of the article to be carried, the carrier ordinarily has the right to inquire as to its
value. Ordinarily, too, it is the duty of the carrier to make inquiry as to the general nature of
the articles shipped and of their value before it consents to carry them; and its failure to do
so cannot defeat the shipper's right to recovery of the full value of the package if lost, in the
absence of showing of fraud or deceit on the part of the shipper. In the absence of more
definite information, the carrier has a the right to accept shipper's marks as to the contents
of the package offered for transportation and is not bound to inquire particularly about
them in order to take advantage of a false classification and where a shipper expressly
represents the contents of a package to be of a designated character, it is not the duty of
the carrier to ask for a repetition of the statement nor disbelieve it and open the box and see
for itself. 41 However, where a common carrier has reasonable ground to suspect that the
offered goods are of a dangerous or illegal character, the carrier has the right to know the
character of such goods and to insist on an inspection, if reasonable and practical under
the circumstances, as a condition of receiving and transporting such goods. 42
It can safely be said then that a common carrier is entitled to fair representation of the
nature and value of the goods to be carried, with the concomitant right to rely thereon, and
further noting at this juncture that a carrier has no obligation to inquire into the correctness or
sufficiency of such information. 43 The consequent duty to conduct an inspection thereof
arises in the event that there should be reason to doubt the veracity of such representations.
Therefore, to be subjected to unusual search, other than the routinary inspection procedure
customarily undertaken, there must exist proof that would justify cause for apprehension that
the baggage is dangerous as to warrant exhaustive inspection, or even refusal to accept
carriage of the same; and it is the failure of the carrier to act accordingly in the face of such
proof that constitutes the basis of the common carrier's liability. 44

In the case at bar, private respondents had no reason whatsoever to doubt the truth of the
shipper's representations. The airway bill expressly providing that "carrier certifies goods
received below were received for carriage," and that the cargo contained "casketed
human remains of Crispina Saludo," was issued on the basis of such representations. The
reliance thereon by private respondents was reasonable and, for so doing, they cannot be
said to have acted negligently. Likewise, no evidence was adduced to suggest even an iota
of suspicion that the cargo presented for transportation was anything other than what it was
declared to be, as would require more than routine inspection or call for the carrier to insist
that the same be opened for scrutiny of its contents per declaration.

Neither can private respondents be held accountable on the basis of petitioners'


preposterous proposition that whoever brought the cargo to the airport or loaded it on the
airplane did so as agent of private respondents, so that even if CMAS whose services were
engaged for the transit arrangements for the remains was indeed at fault, the liability
therefor would supposedly still be attributable to private respondents.

While we agree that the actual participation of CMAS has been sufficiently and correctly
established, to hold that it acted as agent for private respondents would be both an
inaccurate appraisal and an unwarranted categorization of the legal position it held in the
entire transaction.

It bears repeating that CMAS was hired to handle all the necessary shipping arrangements
for the transportation of the human remains of Crispina Saludo to Manila. Hence, it was to
CMAS that the Pomierski & Son Funeral Home, as shipper, brought the remains of petitioners'
mother for shipment, with Maria Saludo as consignee. Thereafter, CMAS booked the
shipment with PAL through the carrier's agent, Air Care International. 45 With its aforestated
functions, CMAS may accordingly be classified as a forwarder which, by accepted
commercial practice, is regarded as an agent of the shipper and not of the carrier. As such,
it merely contracts for the transportation of goods by carriers, and has no interest in the
freight but receives compensation from the shipper as his agent. 46

At this point, it can be categorically stated that, as culled from the findings of both the trial
court and appellate courts, the entire chain of events which culminated in the present
controversy was not due to the fault or negligence of private respondents. Rather, the facts
of the case would point to CMAS as the culprit. Equally telling of the more likely possibility of
CMAS' liability is petitioners' letter to and demanding an explanation from CMAS regarding
the statement of private respondents laying the blame on CMAS for the incident, portions of
which, reading as follows:

. . . we were informed that the unfortunate a mix-up occurred due to your


negligence. . . .

Likewise, the two airlines pinpoint the responsibility upon your agents. Evidence
were presented to prove that allegation.

On the face of this overwhelming evidence we could and should have filed a
case against you. . . . 47
clearly allude to CMAS as the party at fault. This is tantamount to an admission by petitioners
that they consider private respondents without fault, or is at the very least indicative of the
fact that petitioners entertained serious doubts as to whether herein private respondents
were responsible for the unfortunate turn of events.

Undeniably, petitioners' grief over the death of their mother was aggravated by the
unnecessary inconvenience and anxiety that attended their efforts to bring her body home
for a decent burial. This is unfortunate and calls for sincere commiseration with petitioners.
But, much as we would like to give them consolation for their undeserved distress, we are
barred by the inequity of allowing recovery of the damages prayed for by them at the
expense of private respondents whose fault or negligence in the very acts imputed to them
has not been convincingly and legally demonstrated.

Neither are we prepared to delve into, much less definitively rule on, the possible liability of
CMAS as the evaluation and adjudication of the same is not what is presently at issue here
and is best deferred to another time and addressed to another forum.

II. Petitioners further fault the Court of Appeals for ruling that there was no contractual
breach on the part of private respondents as would entitle petitioners to damages.

Petitioners hold that respondent TWA, by agreeing to transport the remains of petitioners'
mother on its Flight 131 from Chicago to San Francisco on October 27, 1976, made itself a
party to the contract of carriage and, therefore, was bound by the terms of the issued
airway bill. When TWA undertook to ship the remains on its Flight 603, ten hours earlier than
scheduled, it supposedly violated the express agreement embodied in the airway bill. It was
allegedly this breach of obligation which compounded, if not directly caused, the switching
of the caskets.

In addition, petitioners maintain that since there is no evidence as to who placed the body
on board Flight 603, or that CMAS actually put the cargo on that flight, or that the two
caskets at the Chicago airport were to be transported by the same airline, or that they
came from the same funeral home, or that both caskets were received by CMAS, then the
employees or agents of TWA presumably caused the mix-up by loading the wrong casket on
the plane. For said error, they contend, TWA must necessarily be presumed negligent and
this presumption of negligence stands undisturbed unless rebutting evidence is presented to
show that the switching or misdelivery was due to circumstances that would exempt the
carrier from liability.

Private respondent TWA professes otherwise. Having duly delivered or transferred the cargo
to its co-respondent PAL on October 27, 1976 at 2:00 P.M., as supported by the TWA Transfer
Manifest, TWA faithfully complied with its obligation under the airway bill. Said faithful
compliance was not affected by the fact that the remains were shipped on an earlier flight
as there was no fixed time for completion of carriage stipulated on. Moreover, the carrier did
not undertake to carry the cargo aboard any specified aircraft, in view of the condition on
the back of the airway bill which provides:

CONDITIONS OF CONTRACT

xxx xxx xxx

It is agreed that no time is fixed for the completion of carriage hereunder and
that Carrier may without notice substitute alternate carriers or aircraft. Carrier
assumes no obligation to carry the goods by any specified aircraft or over any
particular route or routes or to make connection at any point according to any
particular schedule, and Carrier is hereby authorized to select, or deviate from
the route or routes of shipment, notwithstanding that the same may be stated
on the face hereof. The shipper guarantees payment of all charges and
advances. 48
Hence, when respondent TWA shipped the body on earlier flight and on a different aircraft, it
was acting well within its rights. We find this argument tenable.

The contention that there was contractual breach on the part of private respondents is
founded on the postulation that there was ambiguity in the terms of the airway bill, hence
petitioners' insistence on the application of the rules on interpretation of contracts and
documents. We find no such ambiguity. The terms are clear enough as to preclude the
necessity to probe beyond the apparent intendment of the contractual provisions.

The hornbook rule on interpretation of contracts consecrates the primacy of the intention of
the parties, the same having the force of law between them. When the terms of the
agreement are clear and explicit, that they do not justify an attempt to read into any
alleged intention of the parties, the terms are to be understood literally just as they appear
on the face of the contract. 49 The various stipulations of a contract shall be interpreted
together 50 and such a construction is to be adopted as will give effect to all provisions
thereof. 51 A contract cannot be construed by parts, but its clauses should be interpreted in
relation to one another. The whole contract must be interpreted or read together in order to
arrive at its true meaning. Certain stipulations cannot be segregated and then made to
control; neither do particular words or phrases necessarily determine the character of a
contract. The legal effect of the contract is not to be determined alone by any particular
provision disconnected from all others, but in the ruling intention of the parties as gathered
from all the language they have used and from their contemporaneous and subsequent
acts. 52

Turning to the terms of the contract at hand, as presented by PAL Air Waybill No. 079-
01180454, respondent court approvingly quoted the trial court's disquisition on the
aforequoted condition appearing on the reverse side of the airway bill and its disposition of
this particular assigned error:

The foregoing stipulation fully answers plaintiffs' objections to the one-day delay
and the shipping of the remains in TWA Flight 603 instead of TWA Flight 131.
Under the stipulation, parties agreed that no time was fixed to complete the
contract of carriage and that the carrier may, without notice, substitute
alternate carriers or aircraft. The carrier did not assume the obligation to carry
the shipment on any specified aircraft.

xxx xxx xxx

Furthermore, contrary to the claim of plaintiffs-appellants, the conditions of the


Air Waybill are big enough to be read and noticed. Also, the mere fact that the
cargo in question was shipped in TWA Flight 603, a flight earlier on the same day
than TWA Flight 131, did not in any way cause or add to the one-day delay
complained of and/or the switching or mix-up of the bodies. 53

Indubitably, that private respondent can use substitute aircraft even without notice and
without the assumption of any obligation whatsoever to carry the goods on any specified
aircraft is clearly sanctioned by the contract of carriage as specifically provided for under
the conditions thereof.

Petitioners' invocation of the interpretative rule in the Rules of Court that written words
control printed words in documents, 54 to bolster their assertion that the typewritten provisions
regarding the routing and flight schedule prevail over the printed conditions, is tenuous. Said
rule may be considered only when there is inconsistency between the written and printed
words of the contract.

As previously stated, we find no ambiguity in the contract subject of this case that would call
for the application of said rule. In any event, the contract has provided for such a situation
by explicitly stating that the above condition remains effective "notwithstanding that the
same (fixed time for completion of carriage, specified aircraft, or any particular route or
schedule) may be stated on the face hereof." While petitioners hinge private respondents'
culpability on the fact that the carrier "certifies goods described below were received for
carriage," they may have overlooked that the statement on the face of the airway bill
properly and completely reads

Carrier certifies goods described below were received for carriage subject to
the Conditions on the reverse hereof the goods then being in apparent good
order and condition except as noted hereon. 55 (Emphasis ours.)

Private respondents further aptly observe that the carrier's certification regarding receipt of
the goods for carriage "was of a smaller print than the condition of the Air Waybill, including
Condition No. 5 and thus if plaintiffs-appellants had recognized the former, then with more
reason they were aware of the latter. 56

In the same vein, it would also be incorrect to accede to the suggestion of petitioners that
the typewritten specifications of the flight, routes and dates of departures and arrivals on the
face of the airway bill constitute a special contract which modifies the printed conditions at
the back thereof. We reiterate that typewritten provisions of the contract are to be read and
understood subject to and in view of the printed conditions, fully reconciling and giving
effect to the manifest intention of the parties to the agreement.

The oft-repeated rule regarding a carrier's liability for delay is that in the absence of a special
contract, a carrier is not an insurer against delay in transportation of goods. When a
common carrier undertakes to convey goods, the law implies a contract that they shall be
delivered at destination within a reasonable time, in the absence, of any agreement as to
the time of delivery. 57 But where a carrier has made an express contract to transport and
deliver property within a specified time, it is bound to fulfill its contract and is liable for any
delay, no matter from what cause it may have arisen. 58 This result logically follows from the
well-settled rule that where the law creates a duty or charge, and the party is disabled from
performing it without any default in himself, and has no remedy over, then the law will
excuse him, but where the party by his own contract creates a duty or charge upon himself,
he is bound to make it good notwithstanding any accident or delay by inevitable necessity
because he might have provided against it by contract. Whether or not there has been such
an undertaking on the part of the carrier to be determined from the circumstances
surrounding the case and by application of the ordinary rules for the interpretation of
contracts. 59

Echoing the findings of the trial court, the respondent court correctly declared that

In a similar case of delayed delivery of air cargo under a very similar stipulation
contained in the airway bill which reads: "The carrier does not obligate itself to
carry the goods by any specified aircraft or on a specified time. Said carrier
being hereby authorized to deviate from the route of the shipment without any
liability therefor", our Supreme Court ruled that common carriers are not
obligated by law to carry and to deliver merchandise, and persons are not
vested with the right to prompt delivery, unless such common carriers previously
assume the obligation. Said rights and obligations are created by a specific
contract entered into by the parties (Mendoza vs. PAL, 90 Phil. 836).

There is no showing by plaintiffs that such a special or specific contract had


been entered into between them and the defendant airline companies.

And this special contract for prompt delivery should call the attention of the
carrier to the circumstances surrounding the case and the approximate amount
of damages to be suffered in case of delay (See Mendoza vs. PAL, supra). There
was no such contract entered into in the instant case.60

Also, the theory of petitioners that the specification of the flights and dates of departure and
arrivals constitute a special contract that could prevail over the printed stipulations at the
back of the airway bill is vacuous. To countenance such a postulate would unduly burden
the common carrier for that would have the effect of unilaterally transforming every single
bill of lading or trip ticket into a special contract by the simple expedient of filling it up with
the particulars of the flight, trip or voyage, and thereby imposing upon the carrier duties
and/or obligations which it may not have been ready or willing to assume had it been timely,
advised thereof.

Neither does the fact that the challenged condition No. 5 was printed at the back of the
airway bill militate against its binding effect on petitioners as parties to the contract, for there
were sufficient indications on the face of said bill that would alert them to the presence of
such additional condition to put them on their guard. Ordinary prudence on the part of any
person entering or contemplating to enter into a contract would prompt even a cursory
examination of any such conditions, terms and/or stipulations.

There is a holding in most jurisdictions that the acceptance of a bill of lading without dissent
raises a presumption that all terms therein were brought to the knowledge of the shipper and
agreed to by him, and in the absence of fraud or mistake, he is estopped from thereafter
denying that he assented to such terms. This rule applies with particular force where a
shipper accepts a bill of lading with full knowledge of its contents, and acceptance under
such circumstances makes it a binding contract. In order that any presumption of assent to a
stipulation in a bill of lading limiting the liability of a carrier may arise, it must appear that the
clause containing this exemption from liability plainly formed a part of the contract
contained in the bill of lading. A stipulation printed on the back of a receipt or bill of lading
or on papers attached to such receipt will be quite as effective as if printed on its face, if it is
shown that the consignor knew of its terms. Thus, where a shipper accepts a receipt which
states that its conditions are to be found on the back, such receipt comes within the general
rule, and the shipper is held to have accepted and to be bound by the conditions there to
be found. 61

Granting arguendo that Condition No. 5 partakes of the nature of a contract of adhesion
and as such must be construed strictly against the party who drafted the same or gave rise
to any ambiguity therein, it should be borne in mind that a contract of adhesion may be
struck down as void and unenforceable, for being subversive of public policy, only when the
weaker party is imposed upon in dealing with the dominant bargaining party and is reduced
to the alternative of taking it or leaving it, completely deprived of the opportunity to bargain
on equal footing. 62However, Ong Yiu vs. Court of Appeals, et al 63 instructs us that contracts
of adhesion are not entirely prohibited. The one who adheres to the contract is in reality free
to reject it entirely; if he adheres, be gives his consent. Accordingly, petitioners, far from
being the weaker party in this situation, duly signified their presumed assent to all terms of the
contract through their acceptance of the airway bill and are consequently bound thereby.
It cannot be gainsaid that petitioners' were not without several choices as to carriers in
Chicago with its numerous airways and airliner servicing the same.

We wish to allay petitioners' apprehension that Condition No. 5 of the airway bill is productive
of mischief as it would validate delay in delivery, sanction violations of contractual
obligations with impunity or put a premium on breaches of contract.

Just because we have said that condition No. 5 of the airway bill is binding upon the parties
to and fully operative in this transaction, it does not mean, and let this serve as fair warning
to respondent carriers, that they can at all times whimsically seek refuge from liability in the
exculpatory sanctuary of said Condition No. 5 or arbitrarily vary routes, flights and schedules
to the prejudice of their customers. This condition only serves to insulate the carrier from
liability in those instances when changes in routes, flights and schedules are clearly justified
by the peculiar circumstances of a particular case, or by general transportation practices,
customs and usages, or by contingencies or emergencies in aviation such as weather
turbulence, mechanical failure, requirements of national security and the like. And even as it
is conceded that specific routing and other navigational arrangements for a trip, flight or
voyage, or variations therein, generally lie within the discretion of the carrier in the absence
of specific routing instructions or directions by the shipper, it is plainly incumbent upon the
carrier to exercise its rights with due deference to the rights, interests and convenience of its
customers.

A common carrier undertaking to transport property has the implicit duty to carry and deliver
it within reasonable time, absent any particular stipulation regarding time of delivery, and to
guard against delay. In case of any unreasonable delay, the carrier shall be liable for
damages immediately and proximately resulting from such neglect of duty. 64 As found by
the trial court, the delay in the delivery of the remains of Crispina Saludo, undeniable and
regrettable as it was, cannot be attributed to the fault, negligence or malice of private
respondents, 65 a conclusion concurred in by respondent court and which we are not
inclined to disturb.

We are further convinced that when TWA opted to ship the remains of Crispina Saludo on an
earlier flight, it did so in the exercise of sound discretion and with reasonable prudence, as
shown by the explanation of its counsel in his letter of February 19, 1977 in response to
petitioners' demand letter:

Investigation of TWA's handling of this matter reveals that although the shipment
was scheduled on TWA Flight 131 of October 27, 1976, it was actually boarded
on TWA Flight 603 of the same day, approximately 10 hours earlier, in order to
assure that the shipment would be received in San Francisco in sufficient time for
transfer to PAL. This transfer was effected in San Francisco at 2:00 P.M. on
October 27, 1976. 66

Precisely, private respondent TWA knew of the urgency of the shipment by reason of this
notation on the lower portion of the airway bill: "All documents have been certified. Human
remains of Cristina (sic) Saludo. Please return bag first available flight to SFO." Accordingly,
TWA took it upon itself to carry the remains of Crispina Saludo on an earlier flight, which we
emphasize it could do under the terms of the airway bill, to make sure that there would be
enough time for loading said remains on the transfer flight on board PAL.

III. Petitioners challenge the validity of respondent court's finding that private respondents
are not liable for tort on account of the humiliating, arrogant and indifferent acts of their
officers and personnel. They posit that since their mother's remains were transported ten
hours earlier than originally scheduled, there was no reason for private respondents'
personnel to disclaim knowledge of the arrival or whereabouts of the same other than their
sheer arrogance, indifference and extreme insensitivity to the feelings of petitioners.
Moreover, being passengers and not merely consignors of goods, petitioners had the right to
be treated with courtesy, respect, kindness and due consideration.

In riposte, TWA claims that its employees have always dealt politely with all clients, customers
and the public in general. PAL, on the other hand, declares that in the performance of its
obligation to the riding public, other customers and clients, it has always acted with justice,
honesty, courtesy and good faith.

Respondent appellate court found merit in and reproduced the trial court's refutation of this
assigned error:

About the only evidence of plaintiffs that may have reference to the manner
with which the personnel of defendants treated the two plaintiffs at the San
Francisco Airport are the following pertinent portions of Maria Saludo's testimony:

Q When you arrived there, what did you do, if any?

A I immediately went to the TWA counter and I inquired about


whether my mother was there or if' they knew anything about it.

Q What was the answer?


A They said they do not know. So, we waited.

Q About what time was that when you reached San Francisco from
Chicago?

A I think 5 o'clock. Somewhere around that in the afternoon.

Q You made inquiry it was immediately thereafter?

A Right after we got off the plane.

Q Up to what time did you stay in the airport to wait until the TWA
people could tell you the whereabouts?

A Sorry, Sir, but the TWA did not tell us anything. We stayed there
until about 9 o'clock. They have not heard anything about it. They
did not say anything.

Q Do you want to convey to the Court that from 5 up to 9 o'clock in


the evening you yourself went back to the TWA and they could not
tell you where the remains of your mother were?

A Yes sir.

Q And after nine o'clock, what did you do?

A I told my brother my Mom was supposed to be on the Philippine


Airlines flight. "Why don't" we check with PAL instead to see if she
was there?" We tried to comfort each other. I told him anyway that
was a shortest flight from Chicago to California. We will be with our
mother on this longer flight. So, we checked with the PAL.

Q What did you find?

A We learned, Yes, my Mom would be on the flight.

Q Who was that brother?

A Saturnino Saludo.

Q And did you find what was your flight from San Francisco to the
Philippines?

A I do not know the number. It was the evening flight of the


Philippine Airline(s) from San Francisco to Manila.

Q You took that flight with your mother?

A We were scheduled to, Sir.

Q Now, you could not locate the remains of your mother in San
Francisco could you tell us what did you feel?

A After we were told that my mother was not there?

Q After you learned that your mother could not fly with you from
Chicago to California?

A Well, I was very upset. Of course, I wanted the confirmation that


my mother was in the West Coast. The fliqht was about 5 hours from
Chicago to California. We waited anxiously all that time on the
plane. I wanted to be assured about my mother's remains. But there
was nothing and we could not get any assurance from anyone
about it.

Q Your feeling when you reached San Francisco and you could not
find out from the TWA the whereabouts of the remains, what did
you feel?

A Something nobody would be able to describe unless he


experiences it himself. It is a kind of panic. I think it's a feeling you
are about to go crazy. It is something I do not want to live through
again. (Inting, t.s.n., Aug. 9, 1983, pp. 14-18).

The foregoing does not show any humiliating or arrogant manner with which the
personnel of both defendants treated the two plaintiffs. Even their alleged
indifference is not clearly established. The initial answer of the TWA personnel at
the counter that they did not know anything about the remains, and later, their
answer that they have not heard anything about the remains, and the inability
of the TWA counter personnel to inform the two plaintiffs of the whereabouts of
the remains, cannot be said to be total or complete indifference to the said
plaintiffs. At any rate, it is any rude or discourteous conduct, malfeasance or
neglect, the use of abusive or insulting language calculated to humiliate and
shame passenger or had faith by or on the part of the employees of the carrier
that gives the passenger an action for damages against the carrier (Zulueta vs.
Pan American World Airways, 43 SCRA 397; Air France vs. Carrascoso, et al., 18
SCRA 155; Lopez, et al. vs. Pan American World Airways, 16 SCRA 431; Northwest
Airlines, Inc. vs. Cuenca, 14 SCRA 1063), and none of the above is obtaining in
the instant case. 67

We stand by respondent court's findings on this point, but only to the extent where it holds
that the manner in which private respondent TWA's employees dealt with petitioners was not
grossly humiliating, arrogant or indifferent as would assume the proportions of malice or bad
faith and lay the basis for an award of the damages claimed. It must however, be pointed
out that the lamentable actuations of respondent TWA's employees leave much to be
desired, particularly so in the face of petitioners' grief over the death of their mother,
exacerbated by the tension and anxiety wrought by the impasse and confusion over the
failure to ascertain over an appreciable period of time what happened to her remains.

Airline companies are hereby sternly admonished that it is their duty not only to cursorily
instruct but to strictly require their personnel to be more accommodating towards customers,
passengers and the general public. After all, common carriers such as airline companies are
in the business of rendering public service, which is the primary reason for their
enfranchisement and recognition in our law. Because the passengers in a contract of
carriage do not contract merely for transportation, they have a right to be treated with
kindness, respect, courtesy and consideration. 68 A contract to transport passengers is quite
different in kind and degree from any other contractual relation, and generates a relation
attended with public duty. The operation of a common carrier is a business affected with
public interest and must be directed to serve the comfort and convenience of
passengers. 69 Passengers are human beings with human feelings and emotions; they should
not be treated as mere numbers or statistics for revenue.

The records reveal that petitioners, particularly Maria and Saturnino Saludo, agonized for
nearly five hours, over the possibility of losing their mother's mortal remains, unattended to
and without any assurance from the employees of TWA that they were doing anything
about the situation. This is not to say that petitioners were to be regaled with extra special
attention. They were, however, entitled to the understanding and humane consideration
called for by and commensurate with the extraordinary diligence required of common
carriers, and not the cold insensitivity to their predicament. It is hard to believe that the
airline's counter personnel were totally helpless about the situation. Common sense would
and should have dictated that they exert a little extra effort in making a more extensive
inquiry, by themselves or through their superiors, rather than just shrug off the problem with a
callous and uncaring remark that they had no knowledge about it. With all the modern
communications equipment readily available to them, which could have easily facilitated
said inquiry and which are used as a matter of course by airline companies in their daily
operations, their apathetic stance while not legally reprehensible is morally deplorable.

Losing a loved one, especially one's, parent, is a painful experience. Our culture accords the
tenderest human feelings toward and in reverence to the dead. That the remains of the
deceased were subsequently delivered, albeit belatedly, and eventually laid in her final
resting place is of little consolation. The imperviousness displayed by the airline's personnel,
even for just that fraction of time, was especially condemnable particularly in the hour of
bereavement of the family of Crispina Saludo, intensified by anguish due to the uncertainty
of the whereabouts of their mother's remains. Hence, it is quite apparent that private
respondents' personnel were remiss in the observance of that genuine human concern and
professional attentiveness required and expected of them.

The foregoing observations, however, do not appear to be applicable or imputable to


respondent PAL or its employees. No attribution of discourtesy or indifference has been
made against PAL by petitioners and, in fact, petitioner Maria Saludo testified that it was to
PAL that they repaired after failing to receive proper attention from TWA. It was from PAL
that they received confirmation that their mother's remains would be on the same flight to
Manila with them.

We find the following substantiation on this particular episode from the deposition of Alberto
A. Lim, PAL's cargo supervisor earlier adverted to, regarding their investigation of and the
action taken on learning of petitioner's problem:

ATTY. ALBERTO C. MENDOZA:

Yes.

Mr. Lim, what exactly was your procedure adopted in your so called
investigation?

ALBERTO A. LIM:

I called the lead agent on duty at that time and requested for a
copy of airway bill, transfer manifest and other documents
concerning the shipment.

ATTY ALBERTO C. MENDOZA:

Then, what?

ALBERTO A. LIM:

They proceeded to analyze exactly where PAL failed, if any, in


forwarding the human remains of Mrs. Cristina (sic) Saludo. And I
found out that there was not (sic) delay in shipping the remains of
Mrs. Saludo to Manila. Since we received the body from American
Airlines on 28 October at 7:45 and we expedited the shipment so
that it could have been loaded on our flight leaving at 9:00 in the
evening or just barely one hour and 15 minutes prior to the
departure of the aircraft. That is so (sic) being the case, I reported
to Manila these circumstances. 70
IV. Finally, petitioners insist, as a consequence of the delay in the shipment of their mother's
remains allegedly caused by wilful contractual breach, on their entitlement to actual, moral
and exemplary damages as well as attorney's fees, litigation expenses, and legal interest.

The uniform decisional tenet in our jurisdiction bolds that moral damages may be awarded
for wilful or fraudulent breach of contract 71 or when such breach is attended by malice or
bad faith. 72 However, in the absence of strong and positive evidence of fraud, malice or
bad faith, said damages cannot be awarded. 73 Neither can there be an award of
exemplary damages 74 nor of attorney's fees 75 as an item of damages in the absence of
proof that defendant acted with malice, fraud or bad faith.

The censurable conduct of TWA's employees cannot, however, be said to have


approximated the dimensions of fraud, malice or bad faith. It can be said to be more of a
lethargic reaction produced and engrained in some people by the mechanically routine
nature of their work and a racial or societal culture which stultifies what would have been
their accustomed human response to a human need under a former and different
ambience.

Nonetheless, the facts show that petitioners' right to be treated with due courtesy in
accordance with the degree of diligence required by law to be exercised by every
common carrier was violated by TWA and this entitles them, at least, to nominal damages
from TWA alone. Articles 2221 and 2222 of the Civil Code make it clear that nominal
damages are not intended for indemnification of loss suffered but for the vindication or
recognition of a right violated of invaded. They are recoverable where some injury has been
done but the amount of which the evidence fails to show, the assessment of damages being
left to the discretion of the court according to the circumstances of the case. 76 In the
exercise of our discretion, we find an award of P40,000.00 as nominal damages in favor of,
petitioners to be a reasonable amount under the circumstances of this case.

WHEREFORE, with the modification that an award of P40,000.00 as and by way of nominal
damages is hereby granted in favor of petitioners to be paid by respondent Trans World
Airlines, the appealed decision is AFFIRMED in all other respects.

SO ORDERED.

LAMBERT S. RAMOS, G.R. No. 184905


Petitioner,
Present:
Ynares-Santiago, J. (Chairperson),
- versus - Chico-Nazario,
Velasco, Jr.,
Nachura, and
Peralta, JJ.
C.O.L. REALTY CORPORATION,
Respondent. Promulgated:

August 28, 2009


x ---------------------------------------------------------------------------------------- x

DECISION

YNARES-SANTIAGO, J.:

The issue for resolution is whether petitioner can be held solidarily liable with his driver,
Rodel Ilustrisimo, to pay respondent C.O.L. Realty the amount of P51,994.80 as actual
damages suffered in a vehicular collision.
The facts, as found by the appellate court, are as follows:

On or about 10:40 oclock in the morning of 8 March 2004, along


Katipunan (Avenue), corner Rajah Matanda (Street), Quezon City, a vehicular
accident took place between a Toyota Altis Sedan bearing Plate Number XDN
210, owned by petitioner C.O.L. Realty Corporation, and driven by Aquilino Larin
(Aquilino), and a Ford Expedition, owned by x x x Lambert Ramos (Ramos) and
driven by Rodel Ilustrisimo (Rodel), with Plate Number LSR 917. A passenger of
the sedan, one Estela Maliwat (Estela) sustained injuries. She was immediately
rushed to the hospital for treatment.

(C.O.L. Realty) averred that its driver, Aquilino, was slowly driving the
Toyota Altis car at a speed of five to ten kilometers per hour along Rajah
Matanda Street and has just crossed the center lane of Katipunan Avenue
when (Ramos) Ford Espedition violently rammed against the cars right rear door
and fender. With the force of the impact, the sedan turned 180 degrees
towards the direction where it came from.

Upon investigation, the Office of the City Prosecutor of Quezon City found
probable cause to indict Rodel, the driver of the Ford Expedition, for Reckless
Imprudence Resulting in Damage to Property. In the meantime, petitioner
demanded from respondent reimbursement for the expenses incurred in the
repair of its car and the hospitalization of Estela in the aggregate amount of
P103,989.60. The demand fell on deaf ears prompting (C.O.L. Realty) to file a
Complaint for Damages based on quasi-delict before the Metropolitan Trial
Court of Metro Manila (MeTC), Quezon City, docketed as Civil Case No. 33277,
and subsequently raffled to Branch 42.

As could well be expected, (Ramos) denied liability for damages insisting


that it was the negligence of Aquilino, (C.O.L. Realtys) driver, which was the
proximate cause of the accident. (Ramos) maintained that the sedan car
crossed Katipunan Avenue from Rajah Matanda Street despite the concrete
barriers placed thereon prohibiting vehicles to pass through the intersection.

(Ramos) further claimed that he was not in the vehicle when the mishap
occurred. He asserted that he exercised the diligence of a good father of a
family in the selection and supervision of his driver, Rodel.

Weighing the respective evidence of the parties, the MeTC rendered the
Decision dated 1 March 2006 exculpating (Ramos) from liability, thus:

WHEREFORE, the instant case is DISMISSED for lack of merit.


The Counterclaims of the defendant are likewise DISMISSED for lack
of sufficient factual and legal basis.

SO ORDERED.

The aforesaid judgment did not sit well with (C.O.L. Realty) so that he (sic)
appealed the same before the RTC of Quezon City, raffled to Branch 215, which
rendered the assailed Decision dated 5 September 2006, affirming the MeTCs
Decision. (C.O.L. Realtys) Motion for Reconsideration met the same fate as it
was denied by the RTC in its Order dated 5 June 2007.[1]

C.O.L. Realty appealed to the Court of Appeals which affirmed the view that Aquilino
was negligent in crossing Katipunan Avenue from Rajah Matanda Street since, as per
Certification of the Metropolitan Manila Development Authority (MMDA) dated November
30, 2004, such act is specifically prohibited. Thus:

This is to certify that as per records found and available in this office the
crossing of vehicles at Katipunan Avenue from Rajah Matanda Street to Blue
Ridge Subdivision, Quezon City has (sic) not allowed since January 2004 up to
the present in view of the ongoing road construction at the area.[2] (Emphasis
supplied)

Barricades were precisely placed along the intersection of Katipunan


Avenue and Rajah Matanda Street in order to prevent motorists from crossing Katipunan
Avenue. Nonetheless, Aquilino crossed Katipunan Avenue through certain portions of the
barricade which were broken, thus violating the MMDA rule.[3]

However, the Court of Appeals likewise noted that at the time of the collision, Ramos
vehicle was moving at high speed in a busy area that was then the subject of an ongoing
construction (the Katipunan Avenue-Boni Serrano Avenue underpass), then smashed into
the rear door and fender of the passengers side of Aquilinos car, sending it spinning in a 180-
degree turn.[4] It therefore found the driver Rodel guilty of contributory negligence for driving
the Ford Expedition at high speed along a busy intersection.

Thus, on May 28, 2008, the appellate court rendered the assailed Decision,[5] the
dispositive portion of which reads, as follows:

WHEREFORE, the Decision dated 5 September 2006 of the Regional Trial


Court of Quezon City, Branch 215 is hereby MODIFIED in that respondent
Lambert Ramos is held solidarily liable with Rodel Ilustrisimo to pay petitioner
C.O.L. Realty Corporation the amount of P51,994.80 as actual damages.
Petitioner C.O.L. Realty Corporations claim for exemplary damages, attorneys
fees and cost of suit are DISMISSED for lack of merit.

SO ORDERED.

Petitioner filed a Motion for Reconsideration but it was denied. Hence, the instant
petition, which raises the following sole issue:

THE COURT OF APPEALS DECISION IS CONTRARY TO LAW AND


JURISPRUDENCE, AND THE EVIDENCE TO SUPPORT AND JUSTIFY THE SAME IS
INSUFFICIENT.

We resolve to GRANT the petition.

There is no doubt in the appellate courts mind that Aquilinos violation of the MMDA
prohibition against crossing Katipunan Avenue from Rajah Matanda Street was theproximate
cause of the accident. Respondent does not dispute this; in its Comment to the instant
petition, it even conceded that petitioner was guilty of mere contributory negligence.[6]

Thus, the Court of Appeals acknowledged that:


The Certification dated 30 November 2004 of the Metropolitan Manila
Development Authority (MMDA) evidently disproved (C.O.L. Realtys) barefaced
assertion that its driver, Aquilino, was not to be blamed for the accident

TO WHOM IT MAY CONCERN:

This is to certify that as per records found and available in this


office the crossing of vehicles at Katipunan Avenue from Rajah
Matanda Street to Blue Ridge Subdivision, Quezon City has (sic) not
allowed since January 2004 up to the present in view of the
ongoing road construction at the area.

This certification is issued upon request of the interested


parties for whatever legal purpose it may serve.

(C.O.L. Realty) admitted that there were barricades along the intersection
of Katipunan Avenue and Rajah Matanda Street. The barricades were placed
thereon to caution drivers not to pass through the intersecting roads. This
prohibition stands even if, as (C.O.L. Realty) claimed, the barriers were broken at
that point creating a small gap through which any vehicle could pass. What is
clear to Us is that Aquilino recklessly ignored these barricades and drove
through it. Without doubt, his negligence is established by the fact that he
violated a traffic regulation. This finds support in Article 2185 of the Civil Code

Unless there is proof to the contrary, it is presumed that a


person driving a motor vehicle has been negligent if at the time of
the mishap, he was violating any traffic regulation.

Accordingly, there ought to be no question on (C.O.L. Realtys)


negligence which resulted in the vehicular mishap.[7]

However, it also declared Ramos liable vicariously for Rodels contributory


negligence in driving the Ford Expedition at high speed along a busy intersection. On this
score, the appellate court made the following pronouncement:

As a professional driver, Rodel should have known that driving his vehicle
at a high speed in a major thoroughfare which was then subject of an on-going
construction was a perilous act. He had no regard to (sic) the safety of other
vehicles on the road. Because of the impact of the collision, (Aquilinos) sedan
made a 180-degree turn as (Ramos) Ford Expedition careened and smashed
into its rear door and fender. We cannot exculpate Rodel from liability.

Having thus settled the contributory negligence of Rodel, this created a


presumption of negligence on the part of his employer, (Ramos). For the
employer to avoid the solidary liability for a tort committed by his employee, an
employer must rebut the presumption by presenting adequate and convincing
proof that in the selection and supervision of his employee, he or she exercises
the care and diligence of a good father of a family. Employers must submit
concrete proof, including documentary evidence, that they complied with
everything that was incumbent on them.

(Ramos) feebly attempts to escape vicarious liability by averring that


Rodel was highly recommended when he applied for the position of family
driver by the Social Service Committee of his parish. A certain Ramon Gomez, a
member of the churchs livelihood program, testified that a background
investigation would have to be made before an applicant is recommended to
the parishioners for employment. (Ramos) supposedly tested Rodels driving skills
before accepting him for the job. Rodel has been his driver since 2001, and
except for the mishap in 2004, he has not been involved in any road accident.

Regrettably, (Ramos) evidence which consisted mainly of testimonial


evidence remained unsubstantiated and are thus, barren of significant weight.
There is nothing on the records which would support (Ramos) bare allegation of
Rodels 10-year unblemished driving record. He failed to present convincing
proof that he went to the extent of verifying Rodels qualifications, safety record,
and driving history.

So too, (Ramos) did not bother to refute (C.O.L. Realtys) stance that his
driver was texting with his cellphone while running at a high speed and that the
latter did not slow down albeit he knew that Katipunan Avenue was then
undergoing repairs and that the road was barricaded with barriers. The
presumption juris tantum that there was negligence in the selection of driver
remains unrebutted. As the employer of Rodel, (Ramos) is solidarily liable for the
quasi-delict committed by the former.

Certainly, in the selection of prospective employees, employers are


required to examine them as to their qualifications, experience and service
records. In the supervision of employees, the employer must formulate standard
operating procedures, monitor their implementation and impose disciplinary
measures for the breach thereof. These, (Ramos) failed to do.[8]

Petitioner disagrees, arguing that since Aquilinos willful disregard of the MMDA
prohibition was the sole proximate cause of the accident, then respondent alone should
suffer the consequences of the accident and the damages it incurred. He argues:

20. It becomes apparent therefore that the only time a plaintiff, the
respondent herein, can recover damages is if its negligence was only
contributory, and such contributory negligence was the proximate cause of the
accident. It has been clearly established in this case, however, that respondents
negligence was not merely contributory, but the sole proximate cause of the
accident.

xxxx

22. As culled from the foregoing, respondent was the sole proximate
cause of the accident. Respondents vehicle should not have been in that
position since crossing the said intersection was prohibited. Were it not for the
obvious negligence of respondents driver in crossing the intersection that was
prohibited, the accident would not have happened. The crossing of
respondents vehicle in a prohibited intersection unquestionably produced the
injury, and without which the accident would not have occurred. On the other
hand, petitioners driver had the right to be where he was at the time of the
mishap. As correctly concluded by the RTC, the petitioners driver could not be
expected to slacken his speed while travelling along said intersection since
nobody, in his right mind, would do the same. Assuming, however, that
petitioners driver was indeed guilty of any contributory negligence, such was not
the proximate cause of the accident considering that again, if respondents
driver did not cross the prohibited intersection, no accident would have
happened. No imputation of any lack of care on Ilustrisimos could thus be
concluded. It is obvious then that petitioners driver was not guilty of any
negligence that would make petitioner vicariously liable for damages.

23. As the sole proximate cause of the accident was respondents own
driver, respondent cannot claim damages from petitioner.[9]
On the other hand, respondent in its Comment merely reiterated the appellate courts
findings and pronouncements, conceding that petitioner is guilty of mere contributory
negligence, and insisted on his vicarious liability as Rodels employer under Article 2184 of the
Civil Code.

Articles 2179 and 2185 of the Civil Code on quasi-delicts apply in this case, viz:

Article 2179. When the plaintiffs own negligence was the immediate and
proximate cause of his injury, he cannot recover damages. But if his negligence
was only contributory, the immediate and proximate cause of the injury being
the defendants lack of due care, the plaintiff may recover damages, but the
courts shall mitigate the damages to be awarded.

Article 2185. Unless there is proof to the contrary, it is presumed that a


person driving a motor vehicle has been negligent if at the time of the mishap,
he was violating any traffic regulation.

If the master is injured by the negligence of a third person and by the concurring
contributory negligence of his own servant or agent, the latters negligence is imputed to his
superior and will defeat the superiors action against the third person, assuming of course
that the contributory negligence was the proximate cause of the injury of which complaint is
made.[10]

Applying the foregoing principles of law to the instant case, Aquilinos act of
crossing Katipunan Avenue via Rajah Matanda constitutes negligence because it was
prohibited by law. Moreover, it was the proximate cause of the accident, and thus
precludes any recovery for any damages suffered by respondent from the accident.

Proximate cause is defined as that cause, which, in natural and continuous sequence,
unbroken by any efficient intervening cause, produces the injury, and without which the
result would not have occurred. And more comprehensively, the proximate legal cause is
that acting first and producing the injury, either immediately or by setting other events in
motion, all constituting a natural and continuous chain of events, each having a close
causal connection with its immediate predecessor, the final event in the chain immediately
effecting the injury as a natural and probable result of the cause which first acted, under
such circumstances that the person responsible for the first event should, as an ordinary
prudent and intelligent person, have reasonable ground to expect at the moment of his act
or default that an injury to some person might probably result therefrom.[11]

If Aquilino heeded the MMDA prohibition against crossing Katipunan Avenue from
Rajah Matanda, the accident would not have happened. This specific untoward event is
exactly what the MMDA prohibition was intended for. Thus, a prudent and intelligent person
who resides within the vicinity where the accident occurred, Aquilino had reasonable
ground to expect that the accident would be a natural and probable result if he crossed
Katipunan Avenue since such crossing is considered dangerous on account of the busy
nature of the thoroughfare and the ongoing construction of the Katipunan-Boni Avenue
underpass. It was manifest error for the Court of Appeals to have overlooked the principle
embodied in Article 2179 of the Civil Code, that when the plaintiffs own negligence was the
immediate and proximate cause of his injury, he cannot recover damages.

Hence, we find it unnecessary to delve into the issue of Rodels contributory


negligence, since it cannot overcome or defeat Aquilinos recklessness which is the
immediate and proximate cause of the accident. Rodels contributory negligence has
relevance only in the event that Ramos seeks to recover from respondent whatever
damages or injuries he may have suffered as a result; it will have the effect of mitigating the
award of damages in his favor. In other words, an assertion of contributory negligence in this
case would benefit only the petitioner; it could not eliminate respondents liability for
Aquilinos negligence which is the proximate result of the accident.

WHEREFORE, the petition is GRANTED. The Decision of the Court of Appeals dated May
28, 2008 in CA-G.R. SP No. 99614 and its Resolution of October 13, 2008 are hereby REVERSED
and SET ASIDE. The Decision of the Regional Trial Court of Quezon City, Branch 215 dated
September 5, 2006 dismissing for lack of merit respondents complaint for damages is
hereby REINSTATED.

SO ORDERED.

G.R. No. L-9671 August 23, 1957

CESAR L. ISAAC, plaintiff-appellant,


vs.
A. L. AMMEN TRANSPORTATION CO., INC., defendant-appellee.

Angel S. Gamboa for appellant.


Manuel O. Chan for appellee.

BAUTISTA ANGELO, J.:

A. L. Ammen Transportation Co., Inc., hereinafter referred to as defendant, is a corporation


engaged in the business of transporting passengers by land for compensation in the Bicol
provinces and one of the lines it operates is the one connecting Legaspi City, Albay with
Naga City, Camarines Sur. One of the buses which defendant was operating is Bus No. 31.
On May 31, 1951, plaintiff boarded said bus as a passenger paying the required fare from
Ligao, Albay bound for Pili, Camarines Sur, but before reaching his destination, the bus
collided with a motor vehicle of the pick-up type coming from the opposite direction, as a
result of which plaintiff's left arm was completely severed and the severed portion fell inside
the bus. Plaintiff was rushed to a hospital in Iriga, Camarines Sur where he was given blood
transfusion to save his life. After four days, he was transferred to another hospital in Tabaco,
Albay, where he under went treatment for three months. He was moved later to the
Orthopedic Hospital where he was operated on and stayed there for another two months.
For these services, he incurred expenses amounting to P623.40, excluding medical fees
which were paid by defendant.

As an aftermath, plaintiff brought this action against defendants for damages alleging that
the collision which resulted in the loss of his left arm was mainly due to the gross
incompetence and recklessness of the driver of the bus operated by defendant and that
defendant incurred in culpa contractual arising from its non-compliance with its obligation to
transport plaintiff safely to his, destination. Plaintiff prays for judgment against defendant as
follows: (1) P5,000 as expenses for his medical treatment, and P3,000 as the cost of an
artificial arm, or a total of P8,000; (2) P6,000 representing loss of earning; (3) P75,000 for
diminution of his earning capacity; (4) P50,000 as moral damages; and (5) P10,000 as
attorneys' fees and costs of suit.

Defendant set up as special defense that the injury suffered by plaintiff was due entirely to
the fault or negligence of the driver of the pick-up car which collided with the bus driven by
its driver and to the contributory negligence of plaintiff himself. Defendant further claims that
the accident which resulted in the injury of plaintiff is one which defendant could not foresee
or, though foreseen, was inevitable.

The after trial found that the collision occurred due to the negligence of the driver of the
pick-up car and not to that of the driver of the bus it appearing that the latter did everything
he could to avoid the same but that notwithstanding his efforts, he was not able to avoid it.
As a consequence, the court dismissed complaint, with costs against plaintiff. This is an
appeal from said decision.

It appears that plaintiff boarded a bus of defendant as paying passenger from Ligao, Albay,
bound for Pili, Camarines Sur, but before reaching his destination, the bus collided with a
pick-up car which was coming from the opposite direction and, as a, result, his left arm was
completely severed and fell inside the back part of the bus. Having this background in view,
and considering that plaintiff chose to hold defendant liable on its contractual obligation to
carry him safely to his place of destination, it becomes important to determine the nature
and extent of the liability of a common carrier to a passenger in the light of the law
applicable in this jurisdiction.

In this connection, appellant invokes the rule that, "when an action is based on a contract of
carriage, as in this case, all that is necessary to sustain recovery is proof of the existence of
the contract of the breach thereof by act or omission", and in support thereof, he cites
several Philippine cases.1 With the ruling in mind, appellant seems to imply that once the
contract of carriage is established and there is proof that the same was broken by failure of
the carrier to transport the passenger safely to his destination, the liability of the former
attaches. On the other hand, appellee claims that is a wrong presentation of the rule. It
claims that the decisions of this Court in the cases cited do not warrant the construction
sought to be placed upon, them by appellant for a mere perusal thereof would show that
the liability of the carrier was predicated not upon mere breach of its contract of carriage
but upon the finding that its negligence was found to be the direct or proximate cause of
the injury complained of. Thus, appellee contends that "if there is no negligence on the part
of the common carrier but that the accident resulting in injuries is due to causes which are
inevitable and which could not have been avoided or anticipated notwithstanding the
exercise of that high degree of care and skill which the carrier is bound to exercise for the
safety of his passengers", neither the common carrier nor the driver is liable therefor.

We believe that the law concerning the liability of a common carrier has now suffered a
substantial modification in view of the innovations introduced by the new Civil Code. These
innovations are the ones embodied in Articles 1733, 1755 and 1756 in so far as the relation
between a common carrier and its passengers is concerned, which, for ready reference, we
quote hereunder:

ART. 1733. Common carriers, from the nature of their business and for reasons of public
policy, are bound to observe extra ordinary diligence in the vigilance over the goods
and for the safety of the passengers transported by them according to all the
circumstances of each case.

Such extraordinary diligence in the vigilance over the goods is further expressed in
articles 1734, 1735, and 1745, Nos. 5, 6, and 7, while the extraordinary diligence for the
safety of the passengers is further set forth in articles 1755 and 1756.

ART. 1755. A common carrier is bound to carry the passengers safely as far as human
care and foresight can provide, using the utmost diligence of very cautious persons,
with a due regard for all the circumstances.
ART. 1756. In case of death of or injuries to passengers, common carriers are presumed
to have been at fault or to have acted negligently, unless they prove that they
observed extraordinary diligence as prescribed in articles 1733 and 1755.

The Code Commission, in justifying this extraordinary diligence required of a common carrier,
says the following:

A common carrier is bound to carry the passengers safely as far as human care and
foresight can provide, using the utmost deligence of very cautions persons, with due
regard for all circumstances. This extraordinary diligence required of common carriers
is calculated to protect the passengers from the tragic mishaps that frequently occur
in connection with rapid modern transportation. This high standard of care is
imperatively demanded by the precariousness of human life and by the consideration
that every person must in every way be safeguarded against all injury. (Report of the
Code Commission, pp. 35-36)" (Padilla, Civil Code of the Philippines, Vol. IV, 1956 ed.,
p. 197).

From the above legal provisions, we can make the following restatement of the principles
governing the liability of a common carrier: (1) the liability of a carrier is contractual and
arises upon breach of its obligation. There is breach if it fails to exert extraordinary diligence
according to all circumstances of each case; (2) a carrier is obliged to carry its passenger
with the utmost diligence of a very cautious person, having due regard for all the
circumstances; (3) a carrier is presumed to be at fault or to have acted negligently in case
of death of, or injury to, passengers, it being its duty to prove that it exercised extraordinary
diligence; and (4) the carrier is not an insurer against all risks of travel.

The question that now arises is: Has defendant observed extraordinary diligence or the
utmost diligence of every cautious person, having due regard for all circumstances, in
avoiding the collision which resulted in the injury caused to the plaintiff?

After examining the evidence in connection with how the collision occurred, the lower court
made the following finding:

Hemos examinado muy detenidamente las pruebas presentadas en la vista,


principalmente, las declaraciones que hemos acotado arriba, y hernos Ilegado a la
conclusion de que el demandado ha hecho, todo cuanto estuviere de su parte para
evitar el accidente, pero sin embargo, no ha podido evitarlo.

EI hecho de que el demandado, antes del choque, tuvo que hacer pasar su truck
encima de los montones de grava que estaban depositados en la orilla del camino,
sin que haya ido mas alla, por el grave riesgo que corrian las vidas de sus pasajeros, es
prueba concluyente de lo que tenemos dicho, a saber: que el cuanto esuba de su
parte, para evitar el accidente, sin que haya podidoevitardo, por estar fuera de su
control.

The evidence would appear to support the above finding. Thus, it appears that Bus No. 31,
immediately prior to the collision, was running at a moderate speed because it had just
stopped at the school zone of Matacong, Polangui, Albay. The pick-up car was at full speed
and was running outside of its proper lane. The driver of the bus, upon seeing the manner in
which the pick-up was then running, swerved the bus to the very extreme right of the road
until its front and rear wheels have gone over the pile of stones or gravel situated on the
rampart of the road. Said driver could not move the bus farther right and run over a greater
portion of the pile, the peak of which was about 3 feet high, without endangering the safety
of his passengers. And notwithstanding all these efforts, the rear left side of the bus was hit by
the pick-up car.

Of course, this finding is disputed by appellant who cannot see eye to eye with the evidence
for the appellee and insists that the collision took place because the driver of the bus was
going at a fast speed. He contends that, having seen that a car was coming from the
opposite direction at a distance which allows the use of moderate care and prudence to
avoid an accident, and knowing that on the side of the road along which he was going
there was a pile of gravel, the driver of the bus should have stopped and waited for the
vehicle from the opposite direction to pass, and should have proceeded only after the other
vehicle had passed. In other words, according to appellant, the act of the driver of the bus
in squeezing his way through of the bus in squeezing his way through between the oncoming
pick-up and the pile of gravel under the circumstances was considered negligent.

But this matter is one of credibility and evaluation of the evidence. This is evidence. This is the
function of the trial court. The trial court has already spoken on this matter as we have
pointed out above. This is also a matter of appreciation of the situation on the part of the
driver. While the position taken by appellant appeals more to the sense of caution that one
should observe in a given situation to avoid an accident or mishap, such however can not
always be expected from one who is placed suddenly in a predicament where he is not
given enough time to take the course of action as he should under ordinary circumstances.
One who is placed in such a predicament cannot exercise such coolness or accuracy of
judgment as is required of him under ordinary circumstances and he cannot therefore be
expected to observe the same judgment, care and precaution as in the latter. For this
reason, authorities abound where failure to observe the same degree of care that as
ordinary prudent man would exercise under ordinary circumstances when confronted with a
sadden emergency was held to be warranted and a justification to exempt the carrier from
liability. Thus, it was held that "where a carrier's employee is confronted with a sudden
emergency, the fact that he is obliged to act quickly and without a chance for deliberation
must be taken into account, and he is held to the some degree of care that he would
otherwise be required to exercise in the absence of such emergency but must exercise only
such care as any ordinary prudent person would exercise under like circumstances and
conditions, and the failure on his part to exercise the best judgement the case renders
possible does not establish lack of care and skill on his part which renders the company,
liable. . . . (13 C. J. S., 1412; 10 C. J.,970). Considering all the circumstances, we are
persuaded to conclude that the driver of the bus has done what a prudent man could have
done to avoid the collision and in our opinion this relieves appellee from legibility under our
law.

A circumstances which miliates against the stand of appellant is the fact borne out by the
evidence that when he boarded the bus in question, he seated himself on the left side
thereof resting his left arm on the window sill but with his left elbow outside the window, this
being his position in the bus when the collision took place. It is for this reason that the collision
resulted in the severance of said left arm from the body of appellant thus doing him a great
damage. It is therefore apparent that appellant is guilty of contributory negligence. Had he
not placed his left arm on the window sill with a portion thereof protruding outside, perhaps
the injury would have been avoided as is the case with the other passenger. It is to be noted
that appellant was the only victim of the collision.

It is true that such contributory negligence cannot relieve appellee of its liability but will only
entitle it to a reduction of the amount of damage caused (Article 1762, new Civil Code), but
this is a circumstance which further militates against the position taken by appellant in this
case.

It is the prevailing rule that it is negligence per se for a passenger on a railroad


voluntarily or inadvertently to protrude his arm, hand, elbow, or any other part of his
body through the window of a moving car beyond the outer edge of the window or
outer surface of the car, so as to come in contact with objects or obstacles near the
track, and that no recovery can be had for an injury which but for such negligence
would not have been sustained. (10 C. J. 1139)

Plaintiff, (passenger) while riding on an interurban car, to flick the ashes, from his cigar,
thrust his hand over the guard rail a sufficient distance beyond the side line of the car
to bring it in contact with the trunk of a tree standing beside the track; the force of the
blow breaking his wrist. Held, that he was guilty of contributory negligence as a matter
of law. (Malakia vs. Rhode Island Co., 89 A., 337.)

Wherefore, the decision appealed from is affirmed, with cost against appellant.

G.R. No. 114167 July 12, 1995

COASTWISE LIGHTERAGE CORPORATION, petitioner,


vs.
COURT OF APPEALS and the PHILIPPINE GENERAL INSURANCE COMPANY, respondents.

RESOLUTION

FRANCISCO, R., J.:

This is a petition for review of a Decision rendered by the Court of Appeals, dated December
17, 1993, affirming Branch 35 of the Regional Trial Court, Manila in holding that herein
petitioner is liable to pay herein private respondent the amount of P700,000.00, plus legal
interest thereon, another sum of P100,000.00 as attorney's fees and the cost of the suit.

The factual background of this case is as follows:

Pag-asa Sales, Inc. entered into a contract to transport molasses from the province of
Negros to Manila with Coastwise Lighterage Corporation (Coastwise for brevity), using the
latter's dumb barges. The barges were towed in tandem by the tugboat MT Marica, which is
likewise owned by Coastwise.

Upon reaching Manila Bay, while approaching Pier 18, one of the barges, "Coastwise 9",
struck an unknown sunken object. The forward buoyancy compartment was damaged, and
water gushed in through a hole "two inches wide and twenty-two inches long" 1 As a
consequence, the molasses at the cargo tanks were contaminated and rendered unfit for
the use it was intended. This prompted the consignee, Pag-asa Sales, Inc. to reject the
shipment of molasses as a total loss. Thereafter, Pag-asa Sales, Inc. filed a formal claim with
the insurer of its lost cargo, herein private respondent, Philippine General Insurance
Company (PhilGen, for short) and against the carrier, herein petitioner, Coastwise
Lighterage. Coastwise Lighterage denied the claim and it was PhilGen which paid the
consignee, Pag-asa Sales, Inc., the amount of P700,000.00, representing the value of the
damaged cargo of molasses.

In turn, PhilGen then filed an action against Coastwise Lighterage before the Regional Trial
Court of Manila, seeking to recover the amount of P700,000.00 which it paid to Pag-asa
Sales, Inc. for the latter's lost cargo. PhilGen now claims to be subrogated to all the
contractual rights and claims which the consignee may have against the carrier, which is
presumed to have violated the contract of carriage.

The RTC awarded the amount prayed for by PhilGen. On Coastwise Lighterage's appeal to
the Court of Appeals, the award was affirmed.

Hence, this petition.

There are two main issues to be resolved herein. First, whether or not petitioner Coastwise
Lighterage was transformed into a private carrier, by virtue of the contract of affreightment
which it entered into with the consignee, Pag-asa Sales, Inc. Corollarily, if it were in fact
transformed into a private carrier, did it exercise the ordinary diligence to which a private
carrier is in turn bound? Second, whether or not the insurer was subrogated into the rights of
the consignee against the carrier, upon payment by the insurer of the value of the
consignee's goods lost while on board one of the carrier's vessels.

On the first issue, petitioner contends that the RTC and the Court of Appeals erred in finding
that it was a common carrier. It stresses the fact that it contracted with Pag-asa Sales, Inc. to
transport the shipment of molasses from Negros Oriental to Manila and refers to this contract
as a "charter agreement". It then proceeds to cite the case of Home Insurance Company vs.
American Steamship Agencies, Inc. 2 wherein this Court held: ". . . a common carrier
undertaking to carry a special cargo or chartered to a special person only becomes a
private carrier."

Petitioner's reliance on the aforementioned case is misplaced. In its entirety, the conclusions
of the court are as follows:

Accordingly, the charter party contract is one of affreightment over the whole
vessel, rather than a demise. As such, the liability of the shipowner for acts or
negligence of its captain and crew, would remain in the absence of
stipulation. 3

The distinction between the two kinds of charter parties (i.e. bareboat or demise and
contract of affreightment) is more clearly set out in the case of Puromines, Inc. vs. Court of
Appeals, 4 wherein we ruled:

Under the demise or bareboat charter of the vessel, the charterer will generally
be regarded as the owner for the voyage or service stipulated. The charterer
mans the vessel with his own people and becomes the owner pro hac vice,
subject to liability to others for damages caused by negligence. To create a
demise, the owner of a vessel must completely and exclusively relinquish
possession, command and navigation thereof to the charterer, anything short of
such a complete transfer is a contract of affreightment (time or voyage charter
party) or not a charter party at all.

On the other hand a contract of affreightment is one in which the owner of the
vessel leases part or all of its space to haul goods for others. It is a contract for
special service to be rendered by the owner of the vessel and under such
contract the general owner retains the possession, command and navigation of
the ship, the charterer or freighter merely having use of the space in the vessel in
return for his payment of the charter hire. . . . .

. . . . An owner who retains possession of the ship though the hold is the property
of the charterer, remains liable as carrier and must answer for any breach of
duty as to the care, loading and unloading of the cargo. . . .

Although a charter party may transform a common carrier into a private one, the same
however is not true in a contract of affreightment on account of the aforementioned
distinctions between the two.

Petitioner admits that the contract it entered into with the consignee was one of
affreightment. 5 We agree. Pag-asa Sales, Inc. only leased three of petitioner's vessels, in
order to carry cargo from one point to another, but the possession, command and
navigation of the vessels remained with petitioner Coastwise Lighterage.

Pursuant therefore to the ruling in the aforecited Puromines case, Coastwise Lighterage, by
the contract of affreightment, was not converted into a private carrier, but remained a
common carrier and was still liable as such.

The law and jurisprudence on common carriers both hold that the mere proof of delivery of
goods in good order to a carrier and the subsequent arrival of the same goods at the place
of destination in bad order makes for a prima facie case against the carrier.
It follows then that the presumption of negligence that attaches to common carriers, once
the goods it transports are lost, destroyed or deteriorated, applies to the petitioner. This
presumption, which is overcome only by proof of the exercise of extraordinary diligence,
remained unrebutted in this case.

The records show that the damage to the barge which carried the cargo of molasses was
caused by its hitting an unknown sunken object as it was heading for Pier 18. The object
turned out to be a submerged derelict vessel. Petitioner contends that this navigational
hazard was the efficient cause of the accident. Further it asserts that the fact that the
Philippine Coastguard "has not exerted any effort to prepare a chart to indicate the location
of sunken derelicts within Manila North Harbor to avoid navigational accidents" 6 effectively
contributed to the happening of this mishap. Thus, being unaware of the hidden danger that
lies in its path, it became impossible for the petitioner to avoid the same. Nothing could have
prevented the event, making it beyond the pale of even the exercise of extraordinary
diligence.

However, petitioner's assertion is belied by the evidence on record where it appeared that
far from having rendered service with the greatest skill and utmost foresight, and being free
from fault, the carrier was culpably remiss in the observance of its duties.

Jesus R. Constantino, the patron of the vessel "Coastwise 9" admitted that he was not
licensed. The Code of Commerce, which subsidiarily governs common carriers (which are
primarily governed by the provisions of the Civil Code) provides:

Art. 609. Captains, masters, or patrons of vessels must be Filipinos, have legal
capacity to contract in accordance with this code, and prove the skill capacity
and qualifications necessary to command and direct the vessel, as established
by marine and navigation laws, ordinances or regulations, and must not be
disqualified according to the same for the discharge of the duties of the
position. . . .

Clearly, petitioner Coastwise Lighterage's embarking on a voyage with an unlicensed patron


violates this rule. It cannot safely claim to have exercised extraordinary diligence, by placing
a person whose navigational skills are questionable, at the helm of the vessel which
eventually met the fateful accident. It may also logically, follow that a person without license
to navigate, lacks not just the skill to do so, but also the utmost familiarity with the usual and
safe routes taken by seasoned and legally authorized ones. Had the patron been licensed,
he could be presumed to have both the skill and the knowledge that would have prevented
the vessel's hitting the sunken derelict ship that lay on their way to Pier 18.

As a common carrier, petitioner is liable for breach of the contract of carriage, having failed
to overcome the presumption of negligence with the loss and destruction of goods it
transported, by proof of its exercise of extraordinary diligence.

On the issue of subrogation, which petitioner contends as inapplicable in this case, we once
more rule against the petitioner. We have already found petitioner liable for breach of the
contract of carriage it entered into with Pag-asa Sales, Inc. However, for the damage
sustained by the loss of the cargo which petitioner-carrier was transporting, it was not the
carrier which paid the value thereof to Pag-asa Sales, Inc. but the latter's insurer, herein
private respondent PhilGen.

Article 2207 of the Civil Code is explicit on this point:

Art. 2207. If the plaintiffs property has been insured, and he has received
indemnity from the insurance company for the injury or loss arising out of the
wrong or breach of contract complained of, the insurance company shall be
subrogated to the rights of the insured against the wrongdoer or the person who
violated the contract. . . .
This legal provision containing the equitable principle of subrogation has been applied in a
long line of cases including Compania Maritima v. Insurance Company of North
America; 7 Fireman's Fund Insurance Company v. Jamilla & Company, Inc., 8 and Pan
Malayan Insurance Corporation v. Court of Appeals, 9 wherein this Court explained:

Article 2207 of the Civil Code is founded on the well-settled principle of


subrogation. If the insured property is destroyed or damaged through the fault
or negligence of a party other than the assured, then the insurer, upon payment
to the assured will be subrogated to the rights of the assured to recover from the
wrongdoer to the extent that the insurer has been obligated to pay. Payment
by the insurer to the assured operated as an equitable assignment to the former
of all remedies which the latter may have against the third party whose
negligence or wrongful act caused the loss. The right of subrogation is not
dependent upon, nor does it grow out of, any privity of contract or upon written
assignment of claim. It accrues simply upon payment of the insurance claim by
the insurer.

Undoubtedly, upon payment by respondent insurer PhilGen of the amount of P700,000.00 to


Pag-asa Sales, Inc., the consignee of the cargo of molasses totally damaged while being
transported by petitioner Coastwise Lighterage, the former was subrogated into all the rights
which Pag-asa Sales, Inc. may have had against the carrier, herein petitioner Coastwise
Lighterage.

WHEREFORE, premises considered, this petition is DENIED and the appealed decision
affirming the order of Branch 35 of the Regional Trial Court of Manila for petitioner Coastwise
Lighterage to pay respondent Philippine General Insurance Company the "principal amount
of P700,000.00 plus interest thereon at the legal rate computed from March 29, 1989, the
date the complaint was filed until fully paid and another sum of P100,000.00 as attorney's
fees and costs" 10 is likewise hereby AFFIRMED

SO ORDERED.