2. The sum of P90,000.
00 for the transportation expenses, as well as moral
THIRD DIVISION
[G.R. No. 108897. October 2, 1997]
SARKIES TOURS PHILIPPINES, INC. petitioner vs. HONORABLE
COURT OF APPEALS (TENTH DIVISION), DR. ELINO G.
FORTADES, MARISOL A. FORTADES and FATIMA A.
FORTADES., respondent.
DECISION
ROMERO, J.:
This petition for review is seeking the reversal of the decision of the
Court of Appeals in CA-G.R. CV No. 18979 promulgated on January 13, 1993,
as well as its resolution of February 19, 1993, denying petitioners motion for
reconsideration for being a mere rehash of the arguments raised in the
appellants brief.
The case arose from a damage suit filed by private respondents Elino,
Marisol, and Fatima Minerva, all surnamed Fortades, against petitioner for
breach of contract of carriage allegedly attended by bad faith.
On August 31, 1984, Fatima boarded petitioners De Luxe Bus No. 5 in
Manila on her way to Legazpi City.Her brother Raul helped her load three
pieces of luggage containing all of her optometry review books, materials and
equipment, trial lenses, trial contact lenses, passport and visa, as well as her
mother Marisols U.S. immigration (green) card, among other important
documents and personal belongings. Her belongings was kept in the baggage
compartment of the bus, but during a stopover at Daet, it was discovered that
all but one bag remained in the open compartment. The others, including
Fatimas things, were missing and could have dropped along the way. Some
of the passengers suggested retracing the route to try to recover the lost
items, but the driver ignored them and proceeded to Legazpi City.
Fatima immediately reported the loss to her mother who, in turn, went
to petitioners office in Legazpi City and later at its head office in Manila. The
latter, however, merely offered her P1,000.00 for each piece of luggage lost,
which she turned down. After returning to Bicol disappointed but not defeated,
they asked assistance from the radio stations and even from Philtranco bus
drivers who plied the same route on August 31st. The effort paid off when one
of Fatimas bags was recovered. Marisol also reported the incident to the
National Bureau of Investigations field office in Legazpi City, and to the local
police.
On September 20, 1984, respondents, through counsel, formally
demanded satisfaction of their complaint from petitioner. In a letter dated
October 1, 1984, the latter apologized for the delay and said that (a) team has
been sent out to Bicol for the purpose of recovering or at least getting the full
detail[1] of the incident.
After more than nine months of fruitless waiting, respondents decided
to file the case below to recover the value of the remaining lost items, as well
as moral and exemplary damages, attorneys fees and expenses of
litigation. They claimed that the loss was due to petitioners failure to observe
extraordinary diligence in the care of Fatimas luggage and that petitioner dealt
with them in bad faith from the start. Petitioner, on the other hand, disowned
any liability for the loss on the ground that Fatima allegedly did not declare
any excess baggage upon boarding its bus.
On June 15, 1988, after trial on the merits, the court a quo adjudged the
case in favor of herein respondents, viz:
PREMISES CONSIDERED, judgment is hereby rendered in favor of the
plaintiffs (herein respondents) and against the herein defendant Sarkies
Tours Philippines, Inc., ordering the latter to pay to the former the following
sums of money, to wit:
1. The sum of P30,000.00 equivalent to the value of the personal belongings
of plaintiff Fatima Minerva Fortades, etc. less the value of one luggage
recovered;
damages;
3. The sum of P10,000.00 by way of exemplary damages;
4. The sum of P5,000.00 as attorneys fees; and
5. The sum of P5,000.00 as litigation expenses or a total of One Hundred
Forty Thousand (P140,000.00) Pesos.
to be paid by herein defendant Sarkies Tours Philippines, Inc. to the herein
plaintiffs within 30 days from receipt of this Decision.
SO ORDERED.
On appeal, the appellate court affirmed the trial courts judgment, but
deleted the award of moral and exemplary damages. Thus,
WHEREFORE, premises considered, except as above modified, fixing the
award for transportation expenses at P30,000.00 and the deletion of the
award for moral and exemplary damages, the decision appealed from is
AFFIRMED, with costs against defendant-appellant.
SO ORDERED."
Its motion for reconsideration having was likewise rejected by the Court
of Appeals, so petitioner elevated its case to this Court for a review.
After a careful scrutiny of the records of this case, we are convinced
that the trial and appellate courts resolved the issues judiciously based on the
evidence at hand.
Petitioner claims that Fatima did not bring any piece of luggage with
her, and even if she did, none was declared at the start of the trip. The
documentary and testimonial evidence presented at the trial, however,
established that Fatima indeed boarded petitioners De Luxe Bus No. 5 in the
evening of August 31, 1984, and she brought three pieces of luggage with
her, as testified by her brother Raul, [2] who helped her pack her things and
load them on said bus. One of the bags was even recovered with the help of
a Philtranco bus driver. In its letter dated October 1, 1984, petitioner tacitly
admitted its liability by apologizing to respondents and assuring them that
efforts were being made to recover the lost items.
The records also reveal that respondents went to great lengths just to
salvage their loss. The incident was reported to the police, the NBI, and the
regional and head offices of petitioner. Marisol even sought the assistance of
Philtranco bus drivers and the radio stations. To expedite the replacement of
her mothers lost U.S. immigration documents, Fatima also had to execute an
affidavit of loss.[3] Clearly, they would not have gone through all that trouble in
pursuit of a fancied loss.
Fatima was not the only one who lost her luggage. Other passengers
suffered a similar fate: Dr. Lita Samarista testified that petitioner offered
her P1,000.00 for her lost baggage and she accepted it;[4] Carleen Carullo-
Magno also lost her chemical engineering review materials, while her brother
lost abaca products he was transporting to Bicol. [5]
Petitioners receipt of Fatimas personal luggage having been thus
established, it must now be determined if, as a common carrier, it is
responsible for their loss. Under the Civil Code, (c)ommon 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 x x x transported by
them,[6] and this liability 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 for
transportation until the same are delivered, actually or constructively, by the
carrier to x x x the person who has a right to receive them, [7] unless the loss
is due to any of the excepted causes under Article 1734 thereof.[8]
The cause of the loss in the case at bar was petitioners negligence in
not ensuring that the doors of the baggage compartment of its bus were
securely fastened. As a result of this lack of care, almost all of the luggage
was lost, to the prejudice of the paying passengers. As the Court of Appeals
correctly observed:
x x x. Where the common carrier accepted its passengers baggage for
transportation and even had it placed in the vehicle by its own employee, its
failure to collect the freight charge is the common carriers own lookout. It is
responsible for the consequent loss of the baggage. In the instant case,
defendant appellants employee even helped Fatima Minerva Fortades and
her brother load the luggages/baggages in the bus baggage compartment,
without asking that they be weighed, declared, receipted or paid for (TSN,
August 4, 1986, pp. 29, 34, 54, 57, 70; December 23, 1987, p. 35). Neither
was this required of the other passengers (TSN, August 4, 1986, p. 104;
February 5, 1988, p. 13).

Finally, petitioner questions the award of actual damages to

respondents. On this point, we likewise agree with the trial and appellate
courts conclusions. There is no dispute that of the three pieces of luggage of
Fatima, only one was recovered. The other two contained optometry books,
materials, equipment, as well as vital documents and personal
belongings. Respondents had to shuttle between Bicol and Manila in their
efforts to be compensated for the loss. During the trial, Fatima and Marisol
had to travel from the United States just to be able to testify. Expenses were
also incurred in reconstituting their lost documents. Under these
circumstances, the Court agrees with the Court of Appeals in
awarding P30,000.00 for the lost items and P30,000.00 for the transportation
expenses, but disagrees with the deletion of the award of moral and
exemplary damages which, in view of the foregoing proven facts, with
negligence and bad faith on the fault of petitioner having been duly
established, should be granted to respondents in the amount of P20,000.00
and P5,000.00, respectively.

WHEREFORE, the assailed decision of the Court of Appeals dated

January 13, 1993, and its resolution dated February 19, 1993, are hereby
AFFIRMED with the MODIFICATION that petitioner is ordered to pay
respondent an additional P20,000.00 as moral damages and P5,000.00 as
exemplary damages. Costs against petitioner.

SO ORDERED.
 THIRD DIVISION
[G.R. No. 102316. June 30, 1997]
VALENZUELA HARDWOOD AND INDUSTRIAL SUPPLY,
INC., petitioner, vs. COURT OF APPEALS AND SEVEN
BROTHERS SHIPPING CORPORATION, respondents.
DECISION
PANGANIBAN, J.:
Is a stipulation in a charter party that the (o)wners shall not be
responsible for loss, split, short-landing, breakages and any kind of damages
to the cargo[1] valid? This is the main question raised in this petition for review
assailing the Decision of Respondent Court of Appeals[2] in CA-G.R. No. CV-
20156 promulgated on October 15, 1991. The Court of Appeals modified the
judgment of the Regional Trial Court of Valenzuela, Metro Manila, Branch
171, the dispositive portion of which reads:
WHEREFORE, Judgment is hereby rendered ordering South Sea Surety
and Insurance Co., Inc. to pay plaintiff the sum of TWO MILLION PESOS
(P2,000,000.00) representing the value of the policy of the lost logs with
legal interest thereon from the date of demand on February 2, 1984 until the
amount is fully paid or in the alternative, defendant Seven Brothers Shipping
Corporation to pay plaintiff the amount of TWO MILLION PESOS
(P2,000,000.00) representing the value of lost logs plus legal interest from
the date of demand on April 24, 1984 until full payment thereof; the
reasonable attorneys fees in the amount equivalent to five (5) percent of the
amount of the claim and the costs of the suit.
Plaintiff is hereby ordered to pay defendant Seven Brothers Shipping
Corporation the sum of TWO HUNDRED THIRTY THOUSAND PESOS
(P230,000.00) representing the balance of the stipulated freight charges.
Defendant South Sea Surety and Insurance Companys counterclaim is
hereby dismissed.
In its assailed Decision, Respondent Court of Appeals held:
WHEREFORE, the appealed judgment is hereby AFFIRMED except in so
far (sic) as the liability of the Seven Brothers Shipping Corporation to the
plaintiff is concerned which is hereby REVERSED and SET ASIDE.[3]
The Facts
The factual antecedents of this case as narrated in the Court of Appeals
Decision are as follows:
It appears that on 16 January 1984, plaintiff (Valenzuela Hardwood and
Industrial Supply, Inc.) entered into an agreement with the defendant Seven
Brothers (Shipping Corporation) whereby the latter undertook to load on
board its vessel M/V Seven Ambassador the formers lauan round logs
numbering 940 at the port of Maconacon, Isabela for shipment to Manila.
On 20 January 1984, plaintiff insured the logs against loss and/or damage
with defendant South Sea Surety and Insurance Co., Inc. for P2,000,000.00
and the latter issued its Marine Cargo Insurance Policy No. 84/24229
for P2,000,000.00 on said date.
On 24 January 1984, the plaintiff gave the check in payment of the premium
on the insurance policy to Mr. Victorio Chua.
In the meantime, the said vessel M/V Seven Ambassador sank on 25
January 1984 resulting in the loss of the plaintiffs insured logs.
On 30 January 1984, a check for P5,625.00 (Exh. E) to cover payment of
the premium and documentary stamps due on the policy was tendered due
to the insurer but was not accepted. Instead, the South Sea Surety and
Insurance Co., Inc. cancelled the insurance policy it issued as of the date of
the inception for non-payment of the premium due in accordance with
Section 77 of the Insurance Code.
On 2 February 1984, plaintiff demanded from defendant South Sea Surety
and Insurance Co., Inc. the payment of the proceeds of the policy but the
latter denied liability under the policy. Plaintiff likewise filed a formal claim
with defendant Seven Brothers Shipping Corporation for the value of the lost
logs but the latter denied the claim.
After due hearing and trial, the court a quo rendered judgment in favor of
plaintiff and against defendants. Both defendants shipping corporation and
the surety company appealed.
Defendant-appellant Seven Brothers Shipping Corporation impute (sic) to
the court a quo the following assignment of errors, to wit:
A. The lower court erred in holding that the proximate cause of the sinking of
the vessel Seven Ambassadors, was not due to fortuitous event but to the
negligence of the captain in stowing and securing the logs on board, causing
the iron chains to snap and the logs to roll to the portside.
B. The lower court erred in declaring that the non-liability clause of the
Seven Brothers Shipping Corporation from logs (sic) of the cargo stipulated
in the charter party is void for being contrary to public policy invoking article
1745 of the New Civil Code.
C. The lower court erred in holding defendant-appellant Seven Brothers
Shipping Corporation liable in the alternative and ordering/directing it to pay
plaintiff-appellee the amount of two million (P2,000,000.00) pesos
representing the value of the logs plus legal interest from date of demand
until fully paid.
D. The lower court erred in ordering defendant-appellant Seven Brothers
Shipping Corporation to pay appellee reasonable attorneys fees in the
amount equivalent to 5% of the amount of the claim and the costs of the
suit.
E. The lower court erred in not awarding defendant-appellant Seven
Brothers Corporation its counter-claim for attorneys fees.
F. The lower court erred in not dismissing the complaint against Seven
Brothers Shipping Corporation.
Defendant-appellant South Sea Surety and Insurance Co., Inc. assigns the
following errors:
A. The trial court erred in holding that Victorio Chua was an agent of
defendant-appellant South Sea Surety and Insurance Company, Inc. and
likewise erred in not holding that he was the representative of the insurance
broker Columbia Insurance Brokers, Ltd.
B. The trial court erred in holding that Victorio Chua received
compensation/commission on the premiums paid on the policies issued by
the defendant-appellant South Sea Surety and Insurance Company, Inc.
C. The trial court erred in not applying Section 77 of the Insurance Code.
D. The trial court erred in disregarding the receipt of payment clause
attached to and forming part of the Marine Cargo Insurance Policy No.
84/24229.
E. The trial court in disregarding the statement of account or bill stating the
amount of premium and documentary stamps to be paid on the policy by the
plaintiff-appellee.
F. The trial court erred in disregarding the indorsement of cancellation of the
policy due to non-payment of premium and documentary stamps.
G. The trial court erred in ordering defendant-appellant South Sea Surety
and Insurance Company, Inc. to pay plaintiff-appellee P2,000,000.00
representing value of the policy with legal interest from 2 February 1984 until
the amount is fully paid,
H. The trial court erred in not awarding to the defendant-appellant the
attorneys fees alleged and proven in its counterclaim.
The primary issue to be resolved before us is whether defendants shipping
corporation and the surety company are liable to the plaintiff for the latters
lost logs.[4]
The Court of Appeals affirmed in part the RTC judgment by sustaining
the liability of South Sea Surety and Insurance Company (South Sea), but
modified it by holding that Seven Brothers Shipping Corporation (Seven
Brothers) was not liable for the lost cargo.[5] In modifying the RTC judgment,
the respondent appellate court ratiocinated thus:
It appears that there is a stipulation in the charter party that the ship owner
would be exempted from liability in case of loss.
The court a quo erred in applying the provisions of the Civil Code on
common carriers to establish the liability of the shipping corporation. The
provisions on common carriers should not be applied where the carrier is not
acting as such but as a private carrier.
Under American jurisprudence, a common carrier undertaking to carry a
special cargo or chartered to a special person only, becomes a private
carrier.
As a private carrier, a stipulation exempting the owner from liability even for
the negligence of its agent is valid (Home Insurance Company, Inc. vs.
American Steamship Agencies, Inc., 23 SCRA 24).
The shipping corporation should not therefore be held liable for the loss of
the logs.[6]
South Sea and herein Petitioner Valenzuela Hardwood and Industrial
Supply, Inc. (Valenzuela) filed separate petitions for review before this
Court. In a Resolution dated June 2, 1995, this Court denied the petition of
South Sea.[7] There the Court found no reason to reverse the factual findings
of the trial court and the Court of Appeals that Chua was indeed an authorized
agent of South Sea when he received Valenzuelas premium payment for the
marine cargo insurance policy which was thus binding on the insurer. [8]
The Court is now called upon to resolve the petition for review filed by
Valenzuela assailing the CA Decision which exempted Seven Brothers from
any liability for the lost cargo.
The Issue
Petitioner Valenzuelas arguments revolve around a single issue:
whether or not respondent Court (of Appeals) committed a reversible error in
upholding the validity of the stipulation in the charter party executed between
the petitioner and the private respondent exempting the latter from liability for
the loss of petitioners logs arising from the negligence of its (Seven Brothers)
captain.[9]
The Courts Ruling
The petition is not meritorious.
Validity of Stipulation is Lis Mota
The charter party between the petitioner and private respondent
stipulated that the (o)wners shall not be responsible for loss, split, short-
landing, breakages and any kind of damages to the cargo.[10] The validity of
thisstipulation is the lis mota of this case.
It should be noted at the outset that there is no dispute between the
parties that the proximate cause of the sinking of M/V Seven
Ambassadors resulting in the loss of its cargo was the snapping of the iron
chains and the subsequent rolling of the logs to the portside due to the
negligence of the captain in stowing and securing the logs on board the vessel
and not due to fortuitous event.[11] Likewise undisputed is the status of Private
Respondent Seven Brothers as a private carrier when it contracted to
transport the cargo of Petitioner Valenzuela. Even the latter admits this in its
petition.[12]
The trial court deemed the charter party stipulation void for being
contrary to public policy,[13] citing 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:
(1) That the goods are transported at the risk of the owner or shipper;
(2) That the common carrier will not be liable for any loss, destruction, or
deterioration of the goods;
(3) That the common carrier need not observe any diligence in the custody
of the goods;
(4) That the common carrier shall exercise a degree of diligence less than
that of a good father of a family, or of a man of ordinary prudence in the
vigilance over the movables transported;
(5) That the common carrier shall not be responsible for the acts or
omissions of his or its employees;
(6) That the common carriers liability for acts committed by thieves, or of
robbers who do not act with grave or irresistible threat, violence or force, is
dispensed with or diminished;
(7) That the common carrier is not responsible for the loss, destruction, or
deterioration of goods on account of the defective condition of the car,
vehicle, ship, airplane or other equipment used in the contract of carriage.
Petitioner Valenzuela adds that the stipulation is void for being contrary
to Articles 586 and 587 of the Code of Commerce[14] and Articles 1170 and
1173 of the Civil Code. Citing Article 1306 and paragraph 1, Article 1409 of
the Civil Code,[15] petitioner further contends that said stipulation gives no duty
or obligation to the private respondent to observe the diligence of a good
father of a family in the custody and transportation of the cargo."
The Court is not persuaded. As adverted to earlier, it is undisputed that
private respondent had acted as a private carrier in transporting petitioners
lauan logs. Thus, Article 1745 and other Civil Code provisions on common
carriers which were cited by petitioner may not be applied unless expressly
stipulated by the parties in their charter party.[16]
In a contract of private carriage, the parties may validly stipulate that
responsibility for the cargo rests solely on the charterer, exempting the
shipowner from liability for loss of or damage to the cargo caused even by the
negligence of the ship captain. Pursuant to Article 1306[17] of the Civil
Code, such stipulation is valid because it is freely entered into by the parties
and the same is not contrary to law, morals, good customs, public order, or
public policy. Indeed, their contract of private carriage is not even a contract
of adhesion. We stress that in a contract of private carriage, the parties may
freely stipulate their duties and obligations which perforce would be binding
on them. Unlike in a contract involving a common carrier, private carriage
does not involve the general public. Hence, the stringent provisions of the
Civil Code on common carriers protecting the general public cannot justifiably
be applied to a ship transporting commercial goods as a private
carrier. Consequently, the public policy embodied therein is not contravened
by stipulations in a charter party that lessen or remove the protection given
by law in contracts involving common carriers.
The issue posed in this case and the arguments raised by petitioner are
not novel; they were resolved long ago by this Court in Home Insurance Co.
vs. American Steamship Agencies, Inc.[18] In that case, the trial court similarly
nullified a stipulation identical to that involved in the present case for being
contrary to public policy based on Article 1744 of the Civil Code and Article
587 of the Code of Commerce. Consequently, the trial court held the
shipowner liable for damages resulting from the partial loss of the cargo. This
Court reversed the trial court and laid down, through Mr. Justice Jose P.
Bengzon, the following well-settled observation and doctrine:
The provisions of our Civil Code on common carriers were taken from
Anglo-American law. Under American jurisprudence, a common carrier
undertaking to carry a special cargo or chartered to a special person only,
becomes a private carrier. As a private carrier, a stipulation exempting the
owner from liability for the negligence of its agent is not against public policy,
and is deemed valid.
Such doctrine We find reasonable. The Civil Code provisions on common
carriers should not be applied where the carrier is not acting as such but as
a private carrier. The stipulation in the charter party absolving the owner
from liability for loss due to the negligence of its agent would be void only if
the strict public policy governing common carriers is applied. Such policy
has no force where the public at large is not involved, as in this case of a
ship totally chartered for the use of a single party.[19] (Underscoring
supplied.)
Indeed, where the reason for the rule ceases, the rule itself does not
apply. The general public enters into a contract of transportation with common
carriers without a hand or a voice in the preparation thereof. The riding public
merely adheres to the contract; even if the public wants to, it cannot submit
its own stipulations for the approval of the common carrier. Thus, the law on
common carriers extends its protective mantle against one-sided stipulations
inserted in tickets, invoices or other documents over which the riding public
has no understanding or, worse, no choice. Compared to the general public,
a charterer in a contract of private carriage is not similarly situated. It can --
and in fact it usually does -- enter into a free and voluntary agreement. In
practice, the parties in a contract of private carriage can stipulate the carriers
obligations and liabilities over the shipment which, in turn, determine the price
or consideration of the charter. Thus, a charterer, in exchange for
convenience and economy, may opt to set aside the protection of the law on
common carriers. When the charterer decides to exercise this option, he
takes a normal business risk.
Petitioner contends that the rule in Home Insurance is not applicable to
the present case because it covers only a stipulation exempting a private
carrier from liability for the negligence of his agent, but it does not apply to a
stipulation exempting a private carrier like private respondent from the
negligence of his employee or servant which is the situation in this
case.[20] This contention of petitioner is bereft of merit, for it raises a distinction
without any substantive difference. The case of Home Insurance specifically
dealt with the liability of the shipowner for acts or negligence of its captain and
crew[21] and a charter party stipulation which exempts the owner of the vessel
from any loss or damage or delay arising from any other source, even from
the neglect or fault of the captain or crew or some other person employed by
the owner on board, for whose acts the owner would ordinarily be liable except
for said paragraph.[22] Undoubtedly, Home Insurance is applicable to the case
at bar.
The naked assertion of petitioner that the American rule enunciated
in Home Insurance is not the rule in the Philippines[23] deserves scant
consideration. The Court there categorically held that said rule was
reasonable and proceeded to apply it in the resolution of that case. Petitioner
miserably failed to show such circumstances or arguments which would
necessitate a departure from a well-settled rule. Consequently, our ruling in
said case remains a binding judicial precedent based on the doctrine of stare
decisis and Article 8 of the Civil Code which provides that (j)udicial decisions
applying or interpreting the laws or the Constitution shall form part of the legal
system of the Philippines.
In fine, the respondent appellate court aptly stated that [in the case of]
a private carrier, a stipulation exempting the owner from liability even for the
negligence of its agent is valid.[24]
Other Arguments
On the basis of the foregoing alone, the present petition may already
be denied; the Court, however, will discuss the other arguments of petitioner
for the benefit and satisfaction of all concerned.
Articles 586 and 587, Code of Commerce
Petitioner Valenzuela insists that the charter party stipulation is contrary
to Articles 586 and 587 of the Code of Commerce which confer on petitioner
the right to recover damages from the shipowner and ship agent for the acts
or conduct of the captain.[25] We are not persuaded. Whatever rights petitioner
may have under the aforementioned statutory provisions were waived when
it entered into the charter party.
Article 6 of the Civil Code provides that (r)ights may be waived, unless
the waiver is contrary to law, public order, public policy, morals, or good
customs, or prejudicial to a person with a right recognized by law. As a
general rule patrimonial rights may be waived as opposed to rights to
personality and family rights which may not be made the subject of
waiver.[26] Being patently and undoubtedly patrimonial, petitioners right
conferred under said articles may be waived. This, the petitioner did by
acceding to the contractual stipulation that it is solely responsible for any
damage to the cargo, thereby exempting the private carrier from any
responsibility for loss or damage thereto. Furthermore, as discussed above,
the contract of private carriage binds petitioner and private respondent
alone; it is not imbued with public policy considerations for the general public
or third persons are not affected thereby.
Articles 1170 and 1173, Civil Code
Petitioner likewise argues that the stipulation subject of this controversy
is void for being contrary to Articles 1170 and 1173 of the Civil Code[27] which
read:
Art. 1170. Those who in the performance of their obligations are guilty of
fraud, negligence, or delay, and those who in any manner contravene the
tenor thereof, are liable for damages
Art. 1173. The fault or negligence of the obligor consists in the omission of
that diligence which is required by the nature of the obligation and
corresponds with the circumstances of the persons, of the time and of the
place. When negligence shows bad faith, the provisions of articles 1171 and
2201, 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.
The Court notes that the foregoing articles are applicable only to the
obligor or the one with an obligation to perform. In the instant case, Private
Respondent Seven Brothers is not an obligor in respect of the cargo, for this
obligation to bear the loss was shifted to petitioner by virtue of the charter
party. This shifting of responsibility, as earlier observed, is not void. The
provisions cited by petitioner are, therefore, inapplicable to the present case.
Moreover, the factual milieu of this case does not justify the application
of the second paragraph of Article 1173 of the Civil Code which prescribes
the standard of diligence to be observed in the event the law or the contract
is silent. In the instant case, Article 362 of the Code of Commerce[28] provides
the standard of ordinary diligence for the carriage of goods by a carrier. The
standard of diligence under this statutory provision may, however, be modified
in a contract of private carriage as the petitioner and private respondent had
done in their charter party.
Cases Cited by Petitioner Inapplicable
Petitioner cites Shewaram vs. Philippine Airlines, Inc.[29] which, in turn,
quoted Juan Ysmael & Co. vs. Gabino Barreto & Co.[30] and argues that the
public policy considerations stated there vis--vis contractual stipulations
limiting the carriers liability be applied with equal force to this case. [31] It also
cites Manila Railroad Co. vs. Compaia Transatlantica[32] and contends that
stipulations exempting a party from liability for damages due to negligence
should not be countenanced and should be strictly construed against the party
claiming its benefit.[33]We disagree.
 The cases of Shewaram and Ysmael both involve a common carrier;
thus, they necessarily justify the application of such policy considerations and
concomitantly stricter rules. As already discussed above, the public policy
considerations behind the rigorous treatment of common carriers are absent
in the case of private carriers.Hence, the stringent laws applicable to common
carriers are not applied to private carriers. The case of Manila Railroad is also
inapplicable because the action for damages there does not involve a contract
for transportation.Furthermore, the defendant therein made a promise to use
due care in the lifting operations and, consequently, it was bound by its
undertaking; besides, the exemption was intended to cover accidents due to
hidden defects in the apparatus or other unforseeable occurrences not
caused by its personal negligence. This promise was thus construed to make
sense together with the stipulation against liability for damages.[34] In the
present case, we stress that the private respondent made no such
promise. The agreement of the parties to exempt the shipowner from
responsibility for any damage to the cargo and place responsibility over the
same to petitioner is the lone stipulation considered now by this Court.

Finally, petitioner points to Standard Oil Co. of New York vs. Lopez
Costelo,[35] Walter A. Smith & Co. vs. Cadwallader Gibson Lumber Co.,[36] N.
T. Hashim and Co. vs. Rocha and Co.,[37] Ohta Development Co. vs.
SteamshipPompey[38] and Limpangco Sons vs. Yangco Steamship Co.[39] in
support of its contention that the shipowner be held liable for
damages.[40] These however are not on all fours with the present case
because they do not involve a similar factual milieu or an identical stipulation
in the charter party expressly exempting the shipowner from responsibility for
any damage to the cargo.

Effect of the South Sea Resolution

In its memorandum, Seven Brothers argues that petitioner has no

cause of action against it because this Court has earlier affirmed the liability
of South Sea for the loss suffered by petitioner. Private respondent submits
that petitioner is not legally entitled to collect twice for a single loss.[41] In view
of the above disquisition upholding the validity of the questioned charter party
stipulation and holding that petitioner may not recover from private
respondent, the present issue is moot and academic. It suffices to state that
the Resolution of this Court dated June 2, 1995[42] affirming the liability of
South Sea does not, by itself, necessarily preclude the petitioner from
proceeding against private respondent. An aggrieved party may still recover
the deficiency from the person causing the loss in the event the amount paid
by the insurance company does not fully cover the loss. Article 2207 of the
Civil Code provides:

ART. 2207. If the plaintiffs property has been insured, and he has received
indemnity from the insurance company for the injury or loss arising out of the
wrong or breach of contract complained of, the insurance company shall be
subrogated to the rights of the insured against the wrongdoer or the person
who has violated the contract. If the amount paid by the insurance company
does not fully cover the injury or loss, the aggrieved party shall be entitled to
recover the deficiency from the person causing the loss or injury.

WHEREFORE, premises considered, the petition is hereby DENIED for

its utter failure to show any reversible error on the part of Respondent
Court. The assailed Decision is AFFIRMED.

SO ORDERED.
 FIRST DIVISION
G.R. No. 75118 August 31, 1987
SEA-LAND SERVICE, INC., petitioner,
vs.
INTERMEDIATE APPELLATE COURT and PAULINO CUE, doing
business under the name and style of "SEN HIAP HING," respondents.
NARVASA, J.:
The main issue here is whether or not the consignee of seaborne freight is
bound by stipulations in the covering bill of lading limiting to a fixed amount
the liability of the carrier for loss or damage to the cargo where its value is
not declared in the bill.
The factual antecedents, for the most part, are not in dispute.
On or about January 8, 1981, Sea-Land Service, Inc. (Sea-Land for brevity),
a foreign shipping and forwarding company licensed to do business in the
Philippines, received from Seaborne Trading Company in Oakland,
California a shipment consigned to Sen Hiap Hing the business name used
by Paulino Cue in the wholesale and retail trade which he operated out of an
establishment located on Borromeo and Plaridel Streets, Cebu City.
The shipper not having declared the value of the shipment, no value was
indicated in the bill of lading. The bill described the shipment only as "8
CTNS on 2 SKIDS-FILES. 1 Based on volume measurements Sea-land
charged the shipper the total amount of US$209.28 2 for freight age and
other charges. The shipment was loaded on board the MS Patriot, a vessel
owned and operated by Sea-Land, for discharge at the Port Of Cebu.
The shipment arrived in Manila on February 12, 1981, and there discharged
in Container No. 310996 into the custody of the arrastre contractor and the
customs and port authorities. 3 Sometime between February 13 and 16,
1981, after the shipment had been transferred, along with other cargoes to
Container No. 40158 near Warehouse 3 at Pier 3 in South Harbor, Manila,
awaiting trans-shipment to Cebu, it was stolen by pilferers and has never
been recovered. 4
On March 10, 1981, Paulino Cue, the consignee, made formal claim upon
Sea-Land for the value of the lost shipment allegedly amounting to
P179,643.48. 5 Sea-Land offered to settle for US$4,000.00, or its then
Philippine peso equivalent of P30,600.00. asserting that said amount
represented its maximum liability for the loss of the shipment under the
package limitation clause in the covering bill of lading.6 Cue rejected the
offer and thereafter brought suit for damages against Sea-Land in the then
Court of First Instance of Cebu, Branch X.7 Said Court, after trial, rendered
judgment in favor of Cue, sentencing Sea-Land to pay him P186,048.00
representing the Philippine currency value of the lost cargo, P55,814.00 for
unrealized profit with one (1%) percent monthly interest from the filing of the
complaint until fully paid, P25,000.00 for attorney's fees and P2,000.00 as
litigation expenses.8
Sea-Land appealed to the Intermediate Appellate Court.9 That Court
however affirmed the decision of the Trial Court xxx in all its parts ...
. 10 Sea-Land thereupon filed the present petition for review which, as
already stated, poses the question of whether, upon the facts above set
forth, it can be held liable for the loss of the shipment in any amount beyond
the limit of US$600.00 per package stipulated in the bill of lading.
To begin with, there is no question of the right, in principle, of a consignee in
a bill of lading to recover from the carrier or shipper for loss of, or damage
to, goods being transported under said bill ,although that document may
have been — as in practice it oftentimes is — drawn up only by
the consignor and the carrier without the intervention of
the consignee. In Mendoza vs. Philippine Air Lines, Inc. 11 the Court delved
at some length into the reasons behind this when, upon a claim made by
the consignee of a motion picture film shipped by air that he was never a
party to the contract of transportation and was a complete stranger
thereto, it said:
But appellant now contends that he is not suing on a
breach of contract but on a tort as provided for in Art.
1902 of the Civil Code. We are a little perplexed as to
this new theory of the appellant. First, he insists that the
articles of the Code of Commerce should be applied:
that he invokes the provisions of aid Code governing
the obligations of a common carrier to make prompt
delivery of goods given to it under a contract of
transportation. Later, as already said, he says that he
was never a party to the contract of transportation and
was a complete stranger to it, and that he is now suing
on a tort or a violation of his rights as a stranger (culpa
aquiliana) If he does not invoke the contract of carriage
entered into with the defendant company, then he would
hardly have any leg to stand on. His right to prompt
delivery of the can of film at the Phil. Air Port stems and
is derived from the contract of carriage under which
contract, the PAL undertook to carry the can of film
safely and to deliver it to him promptly. Take away or
ignore that contract and the obligation to carry and to
deliver and right to prompt delivery disappear. 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. In the present case, the findings of
the trial court which as already stated, are accepted by
the parties and which we must accept are to the effect
that the LVN Pictures Inc. and Jose Mendoza on one
side, and the defendant company on the other, entered
into a contract of transportation (p. 29, Rec. on Appeal).
One interpretation of said finding is that the LVN
Pictures Inc. through previous agreement with Mendoza
acted as the latter's agent. When he negotiated with the
LVN Pictures Inc. to rent the film "Himala ng Birhen"
and show it during the Naga town fiesta, he most
probably authorized and enjoined the Picture Company
to ship the film for him on the PAL on September 17th.
Another interpretation is that even if the LVN Pictures
Inc. as consignor of its own initiative, and acting
independently of Mendoza for the time being, made
Mendoza as consignee, a stranger to the contract if that
is possible, nevertheless when he, Mendoza appeared
at the Phil Air Port armed with the copy of the Air Way
Bill (Exh. 1) demanding the delivery of the shipment to
him, he thereby made himself a party to the contract of
transportation. The very citation made by appellant in
his memorandum supports this view. Speaking of the
possibility of a conflict between the order of the shipper
on the one hand and the order of the consignee on the
other, as when the shipper orders the shipping
company to return or retain the goods shipped while the
consignee demands their delivery, Malagarriga in his
book Codigo de Comercio Comentado, Vol. 1, p. 400,
citing a decision of the Argentina Court of Appeals on
commercial matters, cited by Tolentino in Vol. II of his
book entitled "Commentaries and Jurisprudence on the
Commercial Laws of the Philippines" p. 209, says that
the right of the shipper to countermand the shipment
terminates when the consignee or legitimate holder of
the bill of lading appears with such big of lading before
the carrier and makes himself a party to the contract.
Prior to that time he is a stranger to the contract.
Still another view of this phase of the case is that
contemplated in Art. 1257, paragraph 2, of the old Civil
Code (now Art, 1311, second paragraph) which reads
thus:
Should the contract contain any
stipulation in favor of a third person,
he may demand its fulfillment
provided he has given notice of his
acceptance to the person bound
before the stipulation has been
revoked.
 Here, the contract of carriage between the LVN Pictures
Inc. and the defendant carrier contains the stipulations
of delivery to Mendoza as consignee. His demand for
the delivery of the can of film to him at the Phil Air Port
may be regarded as a notice of his acceptance of the
stipulation of the delivery in his favor contained in the
contract of carriage and delivery. In this case he also
made himself a party to the contract, or at least has
come to court to enforce it. His cause of action must
necessarily be founded on its breach.
Since the liability of a common carrier for loss of or damage to goods
transported by it under a contract of carriage is governed by the laws of the
country of destination 12 and the goods in question were shipped from the
United States to the Philippines, the liability of petitioner Sea-Land to the
respondent consignee is governed primarily by the Civil Code, and as
ordained by the said Code, suppletorily, in all matters not determined
thereby, by the Code of Commerce and special laws. 13 One of these
suppletory special laws is the Carriage of Goods by Sea Act, U.S. Public Act
No. 521 which was made applicable to all contracts for the carriage of goods
by sea to and from Philippine ports in foreign trade by Commonwealth Act
No. 65, approved on October 22, 1936. Sec. 4(5) of said Act in part reads:
(5) Neither the carrier nor the ship shall in any event be
or become liable for any loss or damage to or in
connection with the transportation of goods in an
amount exceeding $500 per package lawful money of
the United States, or in case of goods not shipped in
packages, per customary freight unit, or the equivalent
of that sum in other currency, unless the nature and
value of such goods have been declared by the shipper
before shipment and inserted in the bill of lading. This
declaration, if embodied in the bill of lading, shall be
prima facie evidence, but shall not be conclusive on the
carrier.
By agreement between the carrier, master, or agent of
the carrier, and the shipper another maximum amount
than that mentioned in this paragraph may be fixed:
Provided, That such maximum shall not be less than the
figure above named. In no event shall the carrier be
liable for more than the amount of damage actually
sustained.
xxx xxx xxx
Clause 22, first paragraph, of the long form bill of lading customarily issued
by Sea-Land to its shipping clients 14 is a virtual copy of the first paragraph
of the foregoing provision. It says:
22. VALUATION. In the event of any loss, damage or
delay to or in connection with goods exceeding in actual
value $500 per package, lawful money of the United
States, or in case of goods not shipped in packages,
per customary freight unit, the value of the goods shall
be deemed to be $500 per package or per customary
freight unit, as the case may be, and the carrier's
liability, if any, shall be determined on the basis of a
value of $500 per package or customary freight unit,
unless the nature and a higher value shall be declared
by the shipper in writing before shipment and inserted in
this Bill of Lading.
And in its second paragraph, the bill states:
If a value higher than $500 shag have been declared in
writing by the shipper upon delivery to the carrier and
inserted in this bill of lading and extra freight paid, if
required and in such case if the actual value of the
goods per package or per customary freight unit shall
exceed such declared value, the value shall
nevertheless be deemed to be declared value and the
carrier's liability, if any, shall not exceed the declared
value and any partial loss or damage shall be adjusted
pro rata on the basis of such declared value.
Since, as already pointed out, Article 1766 of the Civil Code expressly
subjects the rights and obligations of common carriers to the provisions of
the Code of Commerce and of special laws in matters not regulated by said
(Civil) Code, the Court fails to fathom the reason or justification for the
Appellate Court's pronouncement in its appealed Decision that the Carriage
of Goods by Sea Act " ... has no application whatsoever in this case. 15 Not
only is there nothing in the Civil Code which absolutely prohibits agreements
between shipper and carrier limiting the latter's liability for loss of or damage
to cargo shipped under contracts of carriage; it is also quite clear that said
Code in fact has agreements of such character in contemplation in
providing, in its Articles 1749 and 1750, that:
ART. 1749 A stipulation that the common carrier's
liability is limited to the value of the goods appearing in
the bill of lading, unless the shipper or owner declares a
greater value, is binding.
ART. 1750. A contract fixing the sum that may be
recovered by the owner or shipper for the loss,
destruction, or deterioration of the goods is valid, if it is
reasonable and just under the circumstances, and has
been fairly and freely agreed upon.
Nothing contained in section 4(5) of the Carriage of Goods by Sea Act
already quoted is repugnant to or inconsistent with any of the just-cited
provisions of the Civil Code. Said section merely gives more flesh and
greater specificity to the rather general terms of Article 1749 (without doing
any violence to the plain intent thereof) and of Article 1750, to give effect to
just agreements limiting carriers' liability for loss or damage which are freely
and fairly entered into.
It seems clear that even if said section 4(5) of the Carriage of Goods by Sea
Act did not exist, the validity and binding effect of the liability limitation
clause in the bill of lading here are nevertheless fully sustainable on the
basis alone of the cited Civil Code provisions. That said stipulation is just
and reasonable is arguable from the fact that it echoes Art. 1750 itself in
providing a limit to liability only if a greater value is not declared for the
shipment in the bill of lading. To hold otherwise would amount to questioning
the justice and fairness of that law itself, and this the private respondent
does not pretend to do. But over and above that consideration, the lust and
reasonable character of such stipulation is implicit in it giving the shipper or
owner the option of avoiding acrrual of liability limitation by the simple and
surely far from onerous expedient of declaring the nature and value of the
shipment in the bill of lading. And since the shipper here has not been heard
to complaint of having been "rushed," imposed upon or deceived in any
significant way into agreeing to ship the cargo under a bill of lading carrying
such a stipulation — in fact, it does not appear that said party has been
heard from at all insofar as this dispute is concerned — there is simply no
ground for assuming that its agreement thereto was not as the law would
require, freely and fairly sought and given.
The private respondent had no direct part or intervention in the execution of
the contract of carriage between the shipper and the carrier as set forth in
the bill of lading in question. As pointed out in Mendoza vs. PAL, supra, the
right of a party in the same situation as respondent here, to recover for loss
of a shipment consigned to him under a bill of lading drawn up only by and
between the shipper and the carrier, springs from either a relation of agency
that may exist between him and the shipper or consignor, or his status as a
stranger in whose favor some stipulation is made in said contract, and who
becomes a party thereto when he demands fulfillment of that stipulation, in
this case the delivery of the goods or cargo shipped. In neither capacity can
he assert personally, in bar to any provision of the bill of lading, the alleged
circumstance that fair and free agreement to such provision was vitiated by
its being in such fine print as to be hardly readable. Parenthetically, it may
be observed that in one comparatively recent case 16where this Court found
that a similar package limitation clause was "(printed in the smallest type on
the back of the bill of lading, it nonetheless ruled that the consignee was
bound thereby on the strength of authority holding that such provisions on
liability limitation are as much a part of a bill of lading as though physically in
it and as though placed therein by agreement of the parties.
There can, therefore, be no doubt or equivocation about the validity and
enforceability of freely-agreed-upon stipulations in a contract of carriage or
bill of lading limiting the liability of the carrier to an agreed valuation unless
the shipper declares a higher value and inserts it into said contract or bill.
This pro position, moreover, rests upon an almost uniform weight of
authority. 17
The issue of alleged deviation is also settled by Clause 13 of the bill of
lading which expressly authorizes trans-shipment of the goods at any point
in the voyage in these terms:
13. THROUGH CARGO AND TRANSSHIPMENT. The
carrier or master, in the exercise of its or his discretion
and although transshipment or forwarding of the goods
may not have been contemplated or provided for herein,
may at port of discharge or any other place whatsoever
transship or forward the goods or any part thereof by
any means at the risk and expense of the goods and at
any time, whether before or after loading on the ship
named herein and by any route, whether within or
outside the scope of the voyage or beyond the port of
discharge or destination of the goods and without notice
to the shipper or consignee. The carrier or master may
delay such transshipping or forwarding for any reason,
including but not limited to awaiting a vessel or other
means of transportation whether by the carrier or
others.
awarding the private respondent P186,048.00 as the peso value of the lost
shipment is clearly based on a conversion rate of P8.00 to US$1.00, said
respondent having claimed a dollar value of $23,256.00 for said
shipment.24 All circumstances considered, it is just and fair that Sea-Land's
dollar obligation be convertible at the same rate.
WHEREFORE, the Decision of the Intermediate Appellate Court complained
of is reversed and set aside. The stipulation in the questioned bill of lading
limiting Sea-Land's liability for loss of or damage to the shipment covered by
said bill to US$500.00 per package is held valid and binding on private
respondent. There being no question of the fact that said shipment
consisted of eight (8) cartons or packages, for the loss of which Sea-Land is
therefore liable in the aggregate amount of US$4,000.00, it is the judgment
of the Court that said petitioner discharge that obligation by paying private
respondent the sum of P32,000.00, the equivalent in Philippine currency of
US$4,000.00 at the conversion rate of P8.00 to $1.00. Costs against private
respondent.
SO ORDERED.

Said provision obviates the necessity to offer any other justification for
offloading the shipment in question in Manila for transshipment to Cebu City,
the port of destination stipulated in the bill of lading. Nonetheless, the Court
takes note of Sea-Land's explanation that it only directly serves the Port of
Manila from abroad in the usual course of voyage of its carriers, hence its
maintenance of arrangements with a local forwarder. Aboitiz and Company,
for delivery of its imported cargo to the agreed final point of destination
within the Philippines, such arrangements not being prohibited, but in fact
recognized, by law. 18

Furthermore, this Court has also ruled 19 that the Carriage of Goods by Sea
Act is applicable up to the final port of destination and that the fact that
transshipment was made on an interisland vessel did not remove the
contract of carriage of goods from the operation of said Act.

Private respondent also contends that the aforecited Clauses 22 and 13 of

the bill of lading relied upon by petitioner Sea Land form no part of the short-
form bill of lading attached to his complaint before the Trial Court and
appear only in the long form of that document which, he claims. SeaLand
offered (as its Exhibit 2) as an unused blank form with no entries or
signatures therein. He, however, admitted in the Trial Court that several
times in the past shipments had been delivered to him through Sea-
Land, 20 from which the assumption may fairly follow that by the time of the
consignment now in question, he was already reasonably apprised of the
usual terms covering contracts of carriage with said petitioner.

At any rate, as observed earlier, it has already been held that the provisions
of the Carriage of Goods by Sea Act on package limitation [sec 4(5) of the
Act hereinabove referred to] are as much a part of a bill of lading as though
actually placed therein by agreement of the parties. 21

Private respondent, by making claim for loss on the basis of the bill of
lading, to all intents and purposes accepted said bill. Having done so, he —

... becomes bound by all stipulations contained therein

whether on the front or the back thereof. Respondent
cannot elude its provisions simply because they
prejudice him and take advantage of those that are
beneficial. Secondly, the fact that respondent shipped
his goods on board the ship of petitioner and paid the
corresponding freight thereon shows that he impliedly
accepted the bill of lading which was issued in
connection with the shipment in question, and so it may
be said that the same is finding upon him as if it had
been actually signed by him or by any other person in
his behalf. ... 22.

There is one final consideration. The private respondent admits 23 that as

early as on April 22, 1981, Sea-Land had offered to settle his claim for
US$4,000.00, the limit of said carrier's liability for loss of the shipment under
the bill of lading. This Court having reached the conclusion that said sum is
all that is justly due said respondent, it does not appear just or equitable that
Sea-Land, which offered that amount in good faith as early as six years ago,
should, by being made to pay at the current conversion rate of the dollar to
the peso, bear for its own account all of the increase in said rate since the
time of the offer of settlement. The decision of the Regional Trial Court
 Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 88092 April 25, 1990
CITADEL LINES, INC., petitioner,
vs.
COURT OF APPEALS* and MANILA WINE MERCHANTS,
INC., respondents.
Del Rosario & Del Rosario Law Offices for petitioner.
Limqueco and Macaraeg Law Office for private respondent.
REGALADO, J.:
Through this petition, we are asked to review the decision of the Court of
Appeals dated December 20, 1988, in CA-G.R. No. CV-10070, 1 which
affirmed the August 30, 1985 decision of the Regional Trial Court of Manila,
Branch 27, in Civil Case No. 126415, entitled Manila Wine Merchants, Inc.
vs. Citadel Lines, Inc. and E. Razon, Inc., with a modification by deleting the
award of attorney's fees and costs of suit.
The following recital of the factual background of this case is culled from the
findings in the decision of the court a quo and adopted by respondent court
based on the evidence of record.
Petitioner Citadel Lines, Inc. (hereafter referred to as the CARRIER) is the
general agent of the vessel "Cardigan Bay/Strait Enterprise," while
respondent Manila Wine Merchants, Inc. (hereafter, the CONSIGNEE) is the
importer of the subject shipment of Dunhill cigarettes from England.
On or about March 17, 1979, the vessel "Cardigan Bay/Strait Enterprise"
loaded on board at Southampton, England, for carriage to Manila, 180
Filbrite cartons of mixed British manufactured cigarettes called "Dunhill
International Filter" and "Dunhill International Menthol," as evidenced by Bill
of Lading No. 70621374 2 and Bill of Lading No. 70608680 3 of the Ben Line
Containers Ltd. The shipment arrived at the Port of Manila Pier 13, on April
18, 1979 in container van No. BENU 204850-9. The said container was
received by E. Razon, Inc. (later known as Metro Port Service, Inc. and
referred to herein as the ARRASTRE) under Cargo Receipt No. 71923
dated April 18, 1979. 4
On April 30, 1979, the container van, which contained two shipments was
stripped. One shipment was delivered and the other shipment consisting of
the imported British manufactured cigarettes was palletized. Due to lack of
space at the Special Cargo Coral, the aforesaid cigarettes were placed in
two containers with two pallets in container No. BENU 204850-9, the original
container, and four pallets in container No. BENU 201009-9, with both
containers duly padlocked and sealed by the representative of the
CARRIER.
In the morning of May 1, 1979, the CARRIER'S headchecker discovered
that container van No. BENU 201009-9 had a different padlock and the seal
was tampered with. The matter was reported to Jose G. Sibucao, Pier
Superintendent, Pier 13, and upon verification, it was found that 90 cases of
imported British manufactured cigarettes were missing. This was confirmed
in the report of said Superintendent Sibucao to Ricardo Cosme, Assistant
Operations Manager, dated May 1, 1979 5 and the Official Report/Notice of
Claim of Citadel Lines, Inc. to E. Razon, Inc. dated May 8, 1979. 6 Per
investigation conducted by the ARRASTRE, it was revealed that the cargo in
question was not formally turned over to it by the CARRIER but was kept
inside container van No. BENU 201009-9 which was padlocked and sealed
by the representatives of the CARRIER without any participation of the
ARRASTRE.
When the CONSIGNEE learned that 90 cases were missing, it filed a formal
claim dated May 21, 1979, 7 with the CARRIER, demanding the payment of
P315,000.00 representing the market value of the missing cargoes. The
CARRIER, in its reply letter dated May 23, 1979, 8 admitted the loss but
alleged that the same occurred at Pier 13, an area absolutely under the
control of the ARRASTRE. In view thereof, the CONSIGNEE filed a formal
claim, dated June 4, 1979, 9 with the ARRASTRE, demanding payment of
the value of the goods but said claim was denied.
After trial, the lower court rendered a decision on August 30, 1985,
exonerating the ARRASTRE of any liability on the ground that the subject
container van was not formally turned over to its custody, and adjudging the
CARRIER liable for the principal amount of P312,480.00 representing the
market value of the lost shipment, and the sum of P30,000.00 as and for
attorney's fees and the costs of suit.
As earlier stated, the court of Appeals affirmed the decision of the court a
quo but deleted the award of attorney's fees and costs of suit.
The two main issues for resolution are:
1. Whether the loss occurred while the cargo in question was in the custody
of E. Razon, Inc. or of Citadel Lines, Inc; and
2. Whether the stipulation limiting the liability of the carrier contained in the
bill of lading is binding on the consignee.
The first issue is factual in nature. The Court of Appeals declared in no
uncertain terms that, on the basis of the evidence presented, the subject
cargo which was placed in a container van, padlocked and sealed by the
representative of the CARRIER was still in its possession and control when
the loss occurred, there having been no formal turnover of the cargo to the
ARRASTRE. Besides, there is the categorical admission made by two
witnesses, namely, Atty. Lope M. Velasco and Ruben Ignacio, Claims
Manager and Head Checker, respectively, of the CARRIER, 10 that for lack
of space the containers were not turned over to and as the responsibility of
E. Razon Inc. The CARRIER is now estopped from claiming otherwise.
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. 11 If the goods are lost, destroyed or
deteriorated, common carriers are presumed to have been at fault or to have
acted negligently, unless they prove that they observed extra ordinary
diligence as required in Article 1733 of the Civil Code. 12 The duty of the
consignee is to prove merely that the goods were lost. Thereafter, the
burden is shifted to the carrier to prove that it has exercised the
extraordinary diligence required by law. And, its 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 them. 13
Considering, therefore, that the subject shipment was lost while it was still in
the custody of herein petitioner CARRIER, and considering further that it
failed to prove that the loss was occasioned by an excepted cause, the
inescapable conclusion is that the CARRIER was negligent and should be
held liable therefor.
The cases cited by petitioner in support of its allegations to the contrary do
not find proper application in the case at bar simply because those cases
involve a situation wherein the shipment was turned over to the custody and
possession of the arrastre operator.
We, however, find the award of damages in the amount of P312,800.00 for
the value of the goods lost, based on the alleged market value thereof, to be
erroneous. It is clearly and expressly provided under Clause 6 of the
aforementioned bills of lading issued by the CARRIER that its liability is
limited to $2.00 per kilo. Basic is the rule, long since enshrined as a
statutory provision, that a stipulation limiting the liability of the carrier to the
value of the goods appearing in the bill of lading, unless the shipper or
owner declares a greater value, is binding. 14 Further, a contract fixing the
sum that may be recovered by the owner or shipper for the loss, destruction
or deterioration of the goods is valid, if it is reasonable and just under the
circumstances, and has been fairly and freely agreed upon. 15
The CONSIGNEE itself admits in its memorandum that the value of the
goods shipped does not appear in the bills of lading. 16 Hence, the
stipulation on the carrier's limited liability applies. There is no question that
the stipulation is just and reasonable under the circumstances and have
been fairly and freely agreed upon. In Sea-land Service, Inc.vs. Intermediate
Appellate Court, et al. 17 we there explained what is a just and reasonable,
and a fair and free, stipulation, in this wise:

. . . That said stipulation is just and reasonable arguable from the

fact that it echoes Art. 1750 itself in providing a limit to liability only
if a greater value is not declared for the shipment in the bill of
lading. To hold otherwise would amount to questioning the justice
and fairness of that law itself, and this the private respondent does
not pretend to do. But over and above that consideration the just
and reasonable character of such stipulation is implicit in it giving
the shipper or owner the option of avoiding accrual of liability
limitation by the simple and surely far from onerous expedient of
declaring the nature and value of the shipment in the bill of lading.
And since the shipper here has not been heard to complain of
having been "rushed," imposed upon or deceived in any
significant way into agreeing to ship the cargo under a bill of
lading carrying such a stipulation — in fact, it does not appear,
that said party has been heard from at all insofar as this dispute is
concerned — there is simply no ground for assuming that its
agreement thereto was not as the law would require, freely and
fairly sought and well.

The bill of lading shows that 120 cartons weigh 2,978 kilos or 24.82 kilos per
carton. Since 90 cartons were lost and the weight of said cartons is 2,233.80
kilos, at $2.00 per kilo the CARRIER's liability amounts to only US$4,467.60.

WHEREFORE, the judgment of respondent court is hereby MODIFIED and

petitioner Citadel Lines, Inc. is ordered to pay private respondent Manila
Wine Merchants, Inc. the sum of US$4,465.60. or its equivalent in Philippine
currency at the exchange rate obtaining at the time of payment thereof. In all
other respects, said judgment of respondent Court is AFFIRMED.

SO ORDERED.
 SECOND DIVISION
[G.R. No. 122494. October 8, 1998]
EVERETT STEAMSHIP CORPORATION, petitioner, vs. COURT OF
APPEALS and HERNANDEZ TRADING CO. INC., respondents.
DECISION
MARTINEZ, J.:
Petitioner Everett Steamship Corporation, through this petition for
review, seeks the reversal of the decision[1] of the Court of Appeals, dated
June 14, 1995, in CA-G.R. No. 428093, which affirmed the decision of the
Regional Trial Court of Kalookan City, Branch 126, in Civil Case No. C-15532,
finding petitioner liable to private respondent Hernandez Trading Co., Inc. for
the value of the lost cargo.
Private respondent imported three crates of bus spare parts marked as
MARCO C/No. 12, MARCO C/No. 13 andMARCO C/No. 14, from its supplier,
Maruman Trading Company, Ltd. (Maruman Trading), a foreign corporation
based in Inazawa, Aichi, Japan. The crates were shipped from Nagoya,
Japan to Manila on board ADELFAEVERETTE, a vesselowned by petitioners
principal, Everett Orient Lines. The said crates were covered by Bill of Lading
No. NGO53MN.
Upon arrival at the port of Manila, it was discovered that the crate
marked MARCO C/No. 14 was missing. This was confirmed and admitted by
petitioner in its letter of January 13, 1992 addressed to private respondent,
which thereafter made a formal claim upon petitioner for the value of the lost
cargo amounting to One Million Five Hundred Fifty Two Thousand Five
Hundred (Y1,552,500.00) Yen, the amount shown in an Invoice No. MTM-
941, dated November 14, 1991. However, petitioner offered to pay only One
Hundred Thousand (Y100,000.00) Yen, the maximum amount stipulated
under Clause 18 of the covering bill of lading which limits the liability of
petitioner.
Private respondent rejected the offer and thereafter instituted a suit for
collection docketed as Civil Case No. C-15532, against petitioner before the
Regional Trial Court of Caloocan City, Branch 126.
At the pre-trial conference, both parties manifested that they have no
testimonial evidence to offer and agreed instead to file their respective
memoranda.
On July 16, 1993, the trial court rendered judgment[2] in favor of private
respondent, ordering petitioner to pay: (a) Y1,552,500.00; (b) Y20,000.00 or
its peso equivalent representing the actual value of the lost cargo and the
material and packaging cost; (c) 10% of the total amount as an award for and
as contingent attorneys fees; and (d) to pay the cost of the suit. The trial court
ruled:
Considering defendants categorical admission of loss and its
failure to overcome the presumption of negligence and fault, the
Court conclusively finds defendant liable to the plaintiff. The next
point of inquiry the Court wants to resolve is the extent of the
liability of the defendant. As stated earlier, plaintiff contends that
defendant should be held liable for the whole value for the loss
of the goods in the amount of Y1,552,500.00 because the terms
appearing at the back of the bill of lading was so written in fine
prints and that the same was not signed by plaintiff or shipper
thus, they are not bound by the clause stated in paragraph 18 of
the bill of lading. On the other hand, defendant merely admitted
that it lost the shipment but shall be liable only up to the amount
of Y100,000.00.
The Court subscribes to the provisions of Article 1750 of the
New Civil Code -
Art. 1750. A contract fixing the sum that may be
recovered by the owner or shipper for the loss,
destruction or deterioration of the goods is valid, if it is
reasonable and just under the circumstances, and has
been fairly and freely agreed upon.
It is required, however, that the contract must be reasonable and
just under the circumstances and has been fairly and freely
agreed upon. The requirements provided in Art. 1750 of the New
Civil Code must be complied with before a common carrier can
claim a limitation of its pecuniary liability in case of loss,
destruction or deterioration of the goods it has undertaken to
transport.
In the case at bar, the Court is of the view that the requirements
of said article have not been met. The fact that those conditions
are printed at the back of the bill of lading in letters so small that
they are hard to read would not warrant the presumption that the
plaintiff or its supplier was aware of these conditions such that
he had fairly and freely agreed to these conditions. It can not be
said that the plaintiff had actually entered into a contract with the
defendant, embodying the conditions as printed at the back of
the bill of lading that was issued by the defendant to plaintiff.
On appeal, the Court of Appeals deleted the award of attorneys fees
but affirmed the trial courts findings with the additional observation that private
respondent can not be bound by the terms and conditions of the bill of lading
because it was not privy to the contract of carriage. It said:
As to the amount of liability, no evidence appears on record to
show that the appellee (Hernandez Trading Co.) consented to
the terms of the Bill of Lading. The shipper named in the Bill of
Lading is Maruman Trading Co., Ltd. whom the appellant
(Everett Steamship Corp.) contracted with for the transportation
of the lost goods.
Even assuming arguendo that the shipper Maruman Trading
Co., Ltd. accepted the terms of the bill of lading when it delivered
the cargo to the appellant, still it does not necessarily follow that
appellee Hernandez Trading Company as consignee is bound
thereby considering that the latter was never privy to the
shipping contract.
xxxxxxxxx
Never having entered into a contract with the appellant, appellee
should therefore not be bound by any of the terms and
conditions in the bill of lading.
Hence, it follows that the appellee may recover the full value of
the shipment lost, the basis of which is not the breach of contract
as appellee was never a privy to the any contract with the
appellant, but is based on Article 1735 of the New Civil Code,
there being no evidence to prove satisfactorily that the appellant
has overcome the presumption of negligence provided for in the
law.
Petitioner now comes to us arguing that the Court of Appeals erred
(1) in ruling that the consent of the consignee to the terms and conditions of
the bill of lading is necessary to make such stipulations binding upon it; (2) in
holding that the carriers limited package liability as stipulated in the bill of
lading does not apply in the instant case; and (3) in allowing private
respondent to fully recover the full alleged value of its lost cargo.
We shall first resolve the validity of the limited liability clause in the bill
of lading.
A stipulation in the bill of lading limiting the common carriers liability for
loss or destruction of a cargo to a certain sum, unless the shipper or owner
declares a greater value, is sanctioned by law, particularly Articles 1749 and
1750 of the Civil Code which provide:
ART. 1749. A stipulation that the common carriers liability is
limited to the value of the goods appearing in the bill of lading,
unless the shipper or owner declares a greater value, is binding.
ART. 1750. A contract fixing the sum that may be recovered by
the owner or shipper for the loss, destruction, or deterioration of
the goods is valid, if it is reasonable and just under the
circumstances, and has been freely and fairly agreed upon.
Such limited-liability clause has also been consistently upheld by this
Court in a number of cases.[3] Thus, in Sea Land Service, Inc. vs
Intermediate Appellate Court[4], we ruled:
It seems clear that even if said section 4 (5) of the Carriage of Goods by
Sea Act did not exist, the validity and binding effect of the liability limitation
clause in the bill of lading here are nevertheless fully sustainable on the
basis alone of the cited Civil Code Provisions. That said stipulation is just
and reasonable is arguable from the fact that it echoes Art. 1750 itself in
providing a limit to liability only if a greater value is not declared for the
shipment in the bill of lading. To hold otherwise would amount to questioning
the justness and fairness of the law itself, and this the private respondent
does not pretend to do. But over and above that consideration, the just and
reasonable character of such stipulation is implicit in it giving the shipper or
owner the option of avoiding accrual of liability limitation by the simple and
surely far from onerous expedient of declaring the nature and value of the
shipment in the bill of lading..
Pursuant to the afore-quoted provisions of law, it is required that the
stipulation limiting the common carriers liability for loss must be reasonable
and just under the circumstances, and has been freely and fairly agreed upon.
The bill of lading subject of the present controversy specifically
provides, among others:
18. All claims for which the carrier may be liable shall be
adjusted and settled on the basis of the shippers net invoice cost
plus freight and insurance premiums, if paid, and in no event
shall the carrier be liable for any loss of possible profits or any
consequential loss.
The carrier shall not be liable for any loss of or any damage to or
in any connection with, goods in an amount exceeding One
Hundred Thousand Yen in Japanese Currency (Y100,000.00) or
its equivalent in any other currency per package or customary
freight unit (whichever is least) unless the value of the goods
higher than this amount is declared in writing by the shipper
before receipt of the goods by the carrier and inserted in the Bill
of Lading and extra freight is paid as required. (Emphasis
supplied)
The above stipulations are, to our mind, reasonable and just. In the bill
of lading, the carrier made it clear that its liability would only be up to One
Hundred Thousand (Y100,000.00) Yen. However, the shipper, Maruman
Trading, had the option to declare a higher valuation if the value of its
cargo was higher than the limited liability of the carrier. Considering that
the shipper did not declare a higher valuation, it had itself to blame for
not complying with the stipulations.
The trial courts ratiocination that private respondent could not have
fairly and freely agreed to the limited liability clause in the bill of lading
because the said conditions were printed in small letters does not make the
bill of lading invalid.
We ruled in PAL, Inc. vs. Court of Appeals[5] that the jurisprudence on
the matter reveals the consistent holding of the court that contracts of
adhesion are not invalid per se and that it has on numerous occasions upheld
the binding effect thereof. Also, in Philippine American General Insurance
Co., Inc. vs. Sweet Lines , Inc.[6] this Court , speaking through the learned
Justice Florenz D. Regalado, held:
x x x Ong Yiu vs. Court of Appeals, et.al., instructs us
that contracts of adhesion wherein one party imposes a ready-
made form of contract on the other x x x are contracts not
entirely prohibited. The one who adheres to the contract is in
reality free to reject it entirely; if he adheres he gives his
consent. In the present case, not even an allegation of ignorance
of a party excuses non-compliance with the contractual
stipulations since the responsibility for ensuring full
comprehension of the provisions of a contract of carriage
devolves not on the carrier but on the owner, shipper, or
consignee as the case may be. (Emphasis supplied)
It was further explained in Ong Yiu vs Court of Appeals[7] that
stipulations in contracts of adhesion are valid and binding.
While it may be true that petitioner had not signed the plane
ticket x x, he is nevertheless bound by the provisions
thereof. Such provisions have been held to be a part of the
contract of carriage, and valid and binding upon the passenger
regardless of the latters lack of knowledge or assent to the
regulation. It is what is known as a contract of adhesion, in
regards which it has been said that contracts of adhesion
wherein one party imposes a ready-made form of contract on the
other, as the plane ticket in the case at bar, are contracts not
entirely prohibited. The one who adheres to the contract is in
reality free to reject it entirely; if he adheres, he gives his
consent. x x x , a contract limiting liability upon an agreed
valuation does not offend against the policy of the law forbidding
one from contracting against his own negligence. (Emphasis
supplied)
Greater vigilance, however, is required of the courts when dealing with
contracts of adhesion in that the said contracts must be carefully scrutinized
in order to shield the unwary (or weaker party) from deceptive schemes
contained in ready-made covenants,[8] such as the bill of lading in
question. The stringent requirement which the courts are enjoined to observe
is in recognition of Article 24 of the Civil Code which mandates that (i)n all
contractual, property or other relations, when one of the parties is at a
disadvantage on account of his moral dependence, ignorance,
indigence, mental weakness, tender age or other handicap, the courts
must be vigilant for his protection.
The shipper, Maruman Trading, we assume, has been extensively
engaged in the trading business. It can not be said to be ignorant of the
business transactions it entered into involving the shipment of its goods to its
customers. The shipper could not have known, or should know the
stipulations in the bill of lading and there it should have declared a higher
valuation of the goods shipped. Moreover, Maruman Trading has not been
heard to complain that it has been deceived or rushed into agreeing to ship
the cargo in petitioners vessel. In fact, it was not even impleaded in this case.
The next issue to be resolved is whether or not private respondent, as
consignee, who is not a signatory to the bill of lading is bound by the
stipulations thereof.
Again, in Sea-Land Service, Inc. vs. Intermediate Appellate
Court (supra), we held that even if the consignee was not a signatory to the
contract of carriage between the shipper and the carrier, the consignee can
still be bound by the contract.Speaking through Mr. Chief Justice Narvasa,
we ruled:
To begin with, there is no question of the right, in principle, of
a consignee in a bill of lading to recover from the carrier or
shipper for loss of, or damage to goods being transported under
said bill, although that document may have been- as in
practice it oftentimes is-drawn up only by the consignor and
the carrier without the intervention of the consignee. x x x.
x x x the right of a party in the same situation as respondent
here, to recover for loss of a shipment consigned to him
under a bill of lading drawn up only by and between the
shipper and the carrier, springs from either a relation of
agency that may exist between him and the shipper or
consignor, or his status as stranger in whose favor some
stipulation is made in said contract, and who becomes a
party thereto when he demands fulfillment of that
stipulation, in this case the delivery of the goods or cargo
shipped. In neither capacity can he assert personally, in bar
to any provision of the bill of lading, the alleged
circumstance that fair and free agreement to such provision
was vitiated by its being in such fine print as to be hardly
readable.Parenthetically, it may be observed that in one
comparatively recent case (Phoenix Assurance Company vs.
Macondray & Co., Inc., 64 SCRA 15) where this Court found
that a similar package limitation clause was printed in the
smallest type on the back of the bill of lading, it nonetheless
ruled that the consignee was bound thereby on the strength
of authority holding that such provisions on liability
limitation are as much a part of a bill of lading as though
physically in it and as though placed therein by agreement
of the parties.
There can, therefore, be no doubt or equivocation about the
validity and enforceability of freely-agreed-upon stipulations in a
contract of carriage or bill of lading limiting the liability of the
carrier to an agreed valuation unless the shipper declares a
higher value and inserts it into said contract or bill. This
proposition, moreover, rests upon an almost uniform weight of
authority. (Underscoring supplied)
When private respondent formally claimed reimbursement for the
missing goods from petitioner and subsequently filed a case against the latter
based on the very same bill of lading, it (private respondent) accepted the
provisions of the contract and thereby made itself a party thereto, or at least
has come to court to enforce it.[9] Thus, private respondent cannot now reject
or disregard the carriers limited liability stipulation in the bill of lading. In other
words, private respondent is bound by the whole stipulations in the bill of
lading and must respect the same.
Private respondent, however, insists that the carrier should be liable for
the full value of the lost cargo in the amount of Y1,552,500.00, considering
that the shipper, Maruman Trading, had "fully declared the shipment x x x, the
contents of each crate, the dimensions, weight and value of the
contents,"[10] as shown in the commercial Invoice No. MTM-941.

This claim was denied by petitioner, contending that it did not know of
the contents, quantity and value of "the shipment which consisted of three
pre-packed crates described in Bill of Lading No. NGO-53MN merely as 3
CASES SPARE PARTS.[11]

The bill of lading in question confirms petitioners contention. To defeat

the carriers limited liability, the aforecited Clause 18 of the bill of lading
requires that the shipper should have declared in writing a higher
valuation of its goods before receipt thereof by the carrier and insert the
said declaration in the bill of lading, with the extra freight paid. These
requirements in the bill of lading were never complied with by the shipper,
hence, the liability of the carrier under the limited liability clause stands. The
commercial Invoice No. MTM-941 does not in itself sufficiently and
convincingly show that petitioner has knowledge of the value of the cargo as
contended by private respondent. No other evidence was proffered by private
respondent to support is contention. Thus, we are convinced that petitioner
should be liable for the full value of the lost cargo.

In fine, the liability of petitioner for the loss of the cargo is limited to One
Hundred Thousand (Y100,000.00) Yen, pursuant to Clause 18 of the bill of
lading.

WHEREFORE, the decision of the Court of Appeals dated June 14,

1995 in C.A.-G.R. CV No. 42803 is hereby REVERSED and SET ASIDE.

SO ORDERED.
 THIRD DIVISION
[G.R. No. 121824. January 29, 1998]
BRITISH AIRWAYS, petitioner, vs. COURT OF APPEALS, GOP
MAHTANI, and PHILIPPINE AIRLINES, respondents.
DECISION
ROMERO, J.:
In this appeal by certiorari, petitioner British Airways (BA) seeks to set
aside the decision of respondent Court of Appeals [1] promulgated on
September 7, 1995, which affirmed the award of damages and attorneys fees
made by the Regional Trial Court of Cebu, 7th Judicial Region, Branch 17, in
favor of private respondent GOP Mahtani as well as the dismissal of its third-
party complaint against Philippine Airlines (PAL).[2]
The material and relevant facts are as follows:
On April 16, 1989, Mahtani decided to visit his relatives in Bombay, India. In
anticipation of his visit, he obtained the services of a certain Mr. Gumar to
prepare his travel plans. The latter, in turn, purchased a ticket from BA
where the following itinerary was indicated:[3]
CARRIER FLIGHT DATE TIME STATUS
MANILA MNL PR 310Y 16 APR 1730 OK
HONGKONG HKG BA 20 M 16 APR 2100 OK
BOMBAY BOM BA 19 M 23 APR 0840 OK
MANILA MNL"
Since BA had no direct flights from Manila to Bombay, Mahtani had to
take a flight to Hongkong via PAL, and upon arrival in Hongkong he had to
take a connecting flight to Bombay on board BA.
Prior to his departure, Mahtani checked in at the PAL counter in Manila
his two pieces of luggage containing his clothings and personal effects,
confident that upon reaching Hongkong, the same would be transferred to the
BA flight bound for Bombay.
Unfortunately, when Mahtani arrived in Bombay he discovered that his
luggage was missing and that upon inquiry from the BA representatives, he
was told that the same might have been diverted to London. After patiently
waiting for his luggage for one week, BA finally advised him to file a claim by
accomplishing the Property Irregularity Report.[4]
Back in the Philippines, specifically on June 11, 1990, Mahtani filed his
complaint for damages and attorneys fees[5] against BA and Mr. Gumar before
the trial court, docketed as Civil Case No. CEB-9076.
[6]
On September 4, 1990, BA filed its answer with counter claim to the
complaint raising, as special and affirmative defenses, that Mahtani did not
have a cause of action against it. Likewise, on November 9, 1990, BA filed a
third-party complaint[7] against PAL alleging that the reason for the non-
transfer of the luggage was due to the latters late arrival in Hongkong, thus
leaving hardly any time for the proper transfer of Mahtanis luggage to the BA
aircraft bound for Bombay.
On February 25, 1991, PAL filed its answer to the third-party complaint,
wherein it disclaimed any liability, arguing that there was, in fact, adequate
time to transfer the luggage to BA facilities in Hongkong. Furthermore, the
transfer of the luggage to Hongkong authorities should be considered as
transfer to BA.[8]
After appropriate proceedings and trial, on March 4, 1993, the trial court
rendered its decision in favor of Mahtani,[9] the dispositive portion of which
reads as follows:
WHEREFORE, premises considered, judgment is rendered for
the plaintiff and against the defendant for which defendant is
ordered to pay plaintiff the sum of Seven Thousand (P7,000.00)
Pesos for the value of the two (2) suit cases; Four Hundred U.S.
($400.00) Dollars representing the value of the contents of
plaintiffs luggage; Fifty Thousand (P50,000.00) Pesos for moral
and actual damages and twenty percent (20%) of the total
amount imposed against the defendant for attorneys fees and
costs of this action.
The Third-Party Complaint against third-party defendant
Philippine Airlines is DISMISSED for lack of cause of action.
SO ORDERED.
Dissatisfied, BA appealed to the Court of Appeals, which however,
affirmed the trial courts findings. Thus:
WHEREFORE, in view of all the foregoing considerations,
finding the Decision appealed from to be in accordance with law
and evidence, the same is hereby AFFIRMED in toto, with costs
against defendant-appellant.
SO ORDERED.[10]
BA is now before us seeking the reversal of the Court of Appeals
decision.
In essence, BA assails the award of compensatory damages and
attorneys fees, as well as the dismissal of its third-party complaint against
PAL. [11]
Regarding the first assigned issue, BA asserts that the award of
compensatory damages in the separate sum of P7,000.00 for the loss of
Mahtanis two pieces of luggage was without basis since Mahtani in his
complaint[12]stated the following as the value of his personal belongings:
8. On said travel, plaintiff took with him the following items and
its corresponding value, to wit:
1. personal belonging - - - - - - - - - - - - - - P10,000.00
2. gifts for his parents and relatives - - - - - $5,000.00
Moreover, he failed to declare a higher valuation with respect to his
luggage, a condition provided for in the ticket, which reads:[13]
Liability for loss, delay, or damage to baggage is limited unless a
higher value is declared in advance and additional charges are
paid:
1. For most international travel (including domestic corporations
of international journeys) the liability limit is approximately U.S.
$9.07 per pound (U.S. $20.00) per kilo for checked baggage and
U.S. $400 per passenger for unchecked baggage.
Before we resolve the issues raised by BA, it is needful to state that the
nature of an airlines contract of carriage partakes of two types, namely: a
contract to deliver a cargo or merchandise to its destination and a contract to
transport passengers to their destination. A business intended to serve the
travelling public primarily, it is imbued with public interest, hence, the law
governing common carriers imposes an exacting standard.[14]Neglect or
malfeasance by the carriers employees could predictably furnish bases for an
action for damages.[15]
In the instant case, it is apparent that the contract of carriage was
between Mahtani and BA. Moreover, it is indubitable that his luggage never
arrived in Bombay on time. Therefore, as in a number of cases[16] we have
assessed the airlines culpability in the form of damages for breach of contract
involving misplaced luggage.
In determining the amount of compensatory damages in this kind of
cases, it is vital that the claimant satisfactorily prove during the trial the
existence of the factual basis of the damages and its causal connection to
defendants acts.[17]
In this regard, the trial court granted the following award as
compensatory damages:
Since plaintiff did not declare the value of the contents in his
luggage and even failed to show receipts of the alleged gifts for
the members of his family in Bombay, the most that can be
expected for compensation of his lost luggage (2 suit cases) is
Twenty U.S. Dollars ($20.00) per kilo, or a combined value of
Four Hundred ($400.00) U.S. Dollars for Twenty kilos
representing the contents plus Seven Thousand (P7,000.00)
Pesos representing the purchase price of the two (2) suit cases.
However, as earlier stated, it is the position of BA that there should have
been no separate award for the luggage and the contents thereof since
Mahtani failed to declare a separate higher valuation for the luggage, [18]and
therefore, its liability is limited, at most, only to the amount stated in the ticket.
Considering the facts of the case, we cannot assent to such specious
argument.
Admittedly, in a contract of air carriage a declaration by the passenger
of a higher value is needed to recover a greater amount. Article 22(1) of the
Warsaw Convention,[19] provides as follows:
xxxxxxxxx
(2) In the transportation of checked baggage and goods, the
liability of the carrier shall be limited to a sum of 250 francs per
kilogram, unless the consignor has made, at the time the
package was handed over to the carrier, a special declaration of
the value at delivery and has paid a supplementary sum if the
case so requires. In that case the carrier will be liable to pay a
sum not exceeding the declared sum, unless he proves that the
sum is greater than the actual value to the consignor at delivery.
American jurisprudence provides that an air carrier is not liable for the
loss of baggage in an amount in excess of the limits specified in the tariff
which was filed with the proper authorities, such tariff being binding on the
passenger regardless of the passengers lack of knowledge thereof or assent
thereto.[20] This doctrine is recognized in this jurisdiction. [21]
Notwithstanding the foregoing, we have, nevertheless, ruled against
blind reliance on adhesion contracts where the facts and circumstances justify
that they should be disregarded.[22]
In addition, we have held that benefits of limited liability are subject to
waiver such as when the air carrier failed to raise timely objections during the
trial when questions and answers regarding the actual claims and damages
sustained by the passenger were asked.[23]
Given the foregoing postulates, the inescapable conclusion is that BA
had waived the defense of limited liability when it allowed Mahtani to testify
as to the actual damages he incurred due to the misplacement of his luggage,
without any objection. In this regard, we quote the pertinent transcript of
stenographic notes of Mahtanis direct testimony:[24]
Q - How much are you going to ask from this court?
A - P100,000.00.
Q - What else?
A - Exemplary damages.
Q - How much?
A - P100,000.00.
Q - What else?
A - The things I lost, $5,000.00 for the gifts I lost and my
personal belongings, P10,000.00.
Q - What about the filing of this case?
A - The court expenses and attorneys fees is 30%.
Indeed, it is a well-settled doctrine that where the proponent offers
evidence deemed by counsel of the adverse party to be inadmissible for any
reason, the latter has the right to object. However, such right is a mere
privilege which can be waived. Necessarily, the objection must be made at
the earliest opportunity, lest silence when there is opportunity to speak may
operate as a waiver of objections.[25] BA has precisely failed in this regard.
To compound matters for BA, its counsel failed, not only to interpose a
timely objection, but even conducted his own cross-examination as well.[26] In
the early case of Abrenica v. Gonda,[27] we ruled that:
x x x (I)t has been repeatedly laid down as a rule of evidence
that a protest or objection against the admission of any evidence
must be made at the proper time, and that if not so made it will
be understood to have been waived. The proper time to make a
protest or objection is when, from the question addressed to the
witness, or from the answer thereto, or from the presentation of
proof, the inadmissibility of evidence is, or may be inferred.
Needless to say, factual findings of the trial court, as affirmed by the
Court of Appeals, are entitled to great respect.[28] Since the actual value of the
luggage involved appreciation of evidence, a task within the competence of
the Court of Appeals, its ruling regarding the amount is assuredly a question
of fact, thus, a finding not reviewable by this Court.[29]
As to the issue of the dismissal of BAs third-party complaint against
PAL, the Court of Appeals justified its ruling in this wise, and we quote: [30]
Lastly, we sustain the trial courts ruling dismissing appellants
third-party complaint against PAL.
The contract of air transportation in this case pursuant to the
ticket issued by appellant to plaintiff-appellee was exclusively
between the plaintiff Mahtani and defendant-appellant BA. When
plaintiff boarded the PAL plane from Manila to Hongkong, PAL
was merely acting as a subcontractor or agent of BA. This is
shown by the fact that in the ticket issued by appellant to
plaintiff-appellee, it is specifically provided on the Conditions of
Contract, paragraph 4 thereof that:
4. x x x carriage to be performed hereunder by
several successive carriers is regarded as a single
operation.
The rule that carriage by plane although performed by
successive carriers is regarded as a single operation and that
the carrier issuing the passengers ticket is considered the
principal party and the other carrier merely subcontractors or
agent, is a settled issue.
We cannot agree with the dismissal of the third-complaint.
In Firestone Tire and Rubber Company of the
Philippines v. Tempengko,[31] we expounded on the nature of a third-party
complaint thus:
The third-party complaint is, therefore, a procedural device
whereby a third party who is neither a party nor privy to the act
or deed complained of by the plaintiff, may be brought into the
case with leave of court, by the defendant, who acts as third-
party plaintiff to enforce against such third-party defendant a
right for contribution, indemnity, subrogation or any other relief,
in respect of the plaintiffs claim. The third-party complaint is
actually independent of and separate and distinct from the
plaintiffs complaint. Were it not for this provision of the Rules of
Court, it would have to be filed independently and separately
from the original complaint by the defendant against the third-
party. But the Rules permit defendant to bring in a third-party
defendant or so to speak, to litigate his separate cause of action
in respect of plaintiffs claim against a third-party in the original
and principal case with the object of avoiding circuitry of action
and unnecessary proliferation of law suits and of disposing
expeditiously in one litigation the entire subject matter arising
from one particular set of facts.
Undeniably, for the loss of his luggage, Mahtani is entitled to damages
from BA, in view of their contract of carriage. Yet, BA adamantly disclaimed
its liability and instead imputed it to PAL which the latter naturally denies.In
other words, BA and PAL are blaming each other for the incident.
In resolving this issue, it is worth observing that the contract of air
transportation was exclusively between Mahtani and BA, the latter merely
endorsing the Manila to Hongkong leg of the formers journey to PAL, as its
subcontractor or agent. In fact, the fourth paragraph of the Conditions of
Contracts of the ticket[32] issued by BA to Mahtani confirms that the contract
was one of continuous air transportation from Manila to Bombay.
4. x x x carriage to be performed hereunder by several successive
carriers is regarded as a single operation.
Prescinding from the above discussion, it is undisputed that PAL, in
transporting Mahtani from Manila to Hongkong acted as the agent of BA.
Parenthetically, the Court of Appeals should have been cognizant of the
well-settled rule that an agent is alsoresponsible for any negligence in the
performance of its function[33] and is liable for damages which the principal
may suffer by reason of its negligent act.[34] Hence, the Court of Appeals erred
when it opined that BA, being theprincipal, had no cause of action against
PAL, its agent or sub-contractor.
Also, it is worth mentioning that both BA and PAL are members of the
International Air Transport Association (IATA), wherein member airlines are
regarded as agents of each other in the issuance of the tickets and other
matters pertaining to their relationship.[35] Therefore, in the instant case, the
contractual relationship between BA and PAL is one of agency, the former
being the principal, since it was the one which issued the confirmed ticket,
and the latter the agent.

Our pronouncement that BA is the principal is consistent with our ruling

in Lufthansa German Airlines v. Court of Appeals.[36] In that case, Lufthansa
issued a confirmed ticket to Tirso Antiporda covering five-leg trip aboard
different airlines. Unfortunately, Air Kenya, one of the airlines which was to
carry Antiporda to a specific destination bumped him off.

An action for damages was filed against Lufthansa which, however,

denied any liability, contending that its responsibility towards its passenger is
limited to the occurrence of a mishap on its own line. Consequently, when
Antiporda transferred to Air Kenya, its obligation as a principal in the contract
of carriage ceased; from there on, it merely acted as a ticketing agent for Air
Kenya.

In rejecting Lufthansas argument, we ruled:

In the very nature of their contract, Lufthansa is clearly the

principal in the contract of carriage with Antiporda and remains
to be so, regardless of those instances when actual carriage was
to be performed by various carriers. The issuance of confirmed
Lufthansa ticket in favor of Antiporda covering his entire five-leg
trip aboard successive carriers concretely attest to this.

Since the instant petition was based on breach of contract of carriage,

Mahtani can only sue BA alone, and not PAL, since the latter was not a party
to the contract. However, this is not to say that PAL is relieved from any
liability due to any of its negligent acts. In China Air Lines, Ltd. v. Court of
Appeals,[37] while not exactly in point, the case, however, illustrates the
principle which governs this particular situation. In that case, we recognized
that a carrier (PAL), acting as an agent of another carrier, is also liable for its
own negligent acts or omission in the performance of its duties.

Accordingly, to deny BA the procedural remedy of filing a third-party

complaint against PAL for the purpose of ultimately determining who was
primarily at fault as between them, is without legal basis. After all, such
proceeding is in accord with the doctrine against multiplicity of cases which
would entail receiving the same or similar evidence for both cases and
enforcing separate judgments therefor. It must be borne in mind that the
purpose of a third-party complaint is precisely to avoid delay and circuity of
action and to enable the controversy to be disposed of in one suit.[38] It is but
logical, fair and equitable to allow BA to sue PAL for indemnification, if it is
proven that the latters negligence was the proximate cause of Mahtanis
unfortunate experience, instead of totally absolving PAL from any liability.

WHEREFORE, in view of the foregoing, the decision of the Court of

Appeals in CA-G.R. CV No. 43309 dated September 7, 1995 is hereby
MODIFIED, reinstating the third-party complaint filed by British Airways dated
November 9, 1990 against Philippine Airlines. No costs.

SO ORDERED.
 SECOND DIVISION
G.R. No. L-37750 May 19, 1978
SWEET LINES, INC., petitioner,
vs.
HON. BERNARDO TEVES, Presiding Judge, CFI of Misamis Oriental
Branch VII, LEOVIGILDO TANDOG, JR., and ROGELIO
TIRO, respondents.
Filiberto Leonardo, Abelardo C. Almario & Samuel B. Abadiano for
petitioner.
Leovigildo Vallar for private respondents.
SANTOS, J.:
This is an original action for Prohibition with Pre Injunction filed October 3,
1973 to restrain respondent Judge from proceeding further with Civil Case
No. 4091, entitled Leovigildo D. Tandog, Jr. and Rogelio Tiro v. Sweet
Lines, Inc." after he denied petitioner's Motion to Dismiss the complaint, and
the Motion for Reconsideration of said order. 1
Briefly, the facts of record follow. Private respondents Atty. Leovigildo
Tandog and Rogelio Tiro, a contractor by professions, bought tickets Nos.
0011736 and 011737 for Voyage 90 on December 31, 1971 at the branch
office of petitioner, a shipping company transporting inter-island passengers
and cargoes, at Cagayan de Oro City. Respondents were to board
petitioner's vessel, M/S "Sweet Hope" bound for Tagbilaran City via the port
of Cebu. Upon learning that the vessel was not proceeding to Bohol, since
many passengers were bound for Surigao, private respondents per advice,
went to the branch office for proper relocation to M/S "Sweet Town".
Because the said vessel was already filled to capacity, they were forced to
agree "to hide at the cargo section to avoid inspection of the officers of the
Philippine Coastguard." Private respondents alleged that they were, during
the trip," "exposed to the scorching heat of the sun and the dust coming
from the ship's cargo of corn grits," and that the tickets they bought at
Cagayan de Oro City for Tagbilaran were not honored and they were
constrained to pay for other tickets. In view thereof, private respondents
sued petitioner for damages and for breach of contract of carriage in the
alleged sum of P10,000.00 before respondents Court of First Instance of
Misamis Oriental. 2
Petitioner moved to dismiss the complaint on the ground of improper venue.
This motion was premised on the condition printed at the back of the tickets,
i.e., Condition No. 14, which reads:
14. It is hereby agreed and understood that any and all
actions arising out of the conditions and provisions of
this ticket, irrespective of where it is issued, shall be
filed in the competent courts in the City of Cebu. 3
The motion was denied by the trial court. 4 Petitioner moved to reconnsider
the order of denial, but no avail. 5 Hence, this instant petition for prohibition
for preliminary injunction, 'alleging that the respondent judge has departed
from the accepted and usual course of judicial preoceeding" and "had acted
without or in excess or in error of his jurisdicton or in gross abuse of
discretion. 6
In Our resolution of November 20, 1973, We restrained respondent Judge
from proceeding further with the case and required respondent to
comment. 7 On January 18, 1974, We gave due course to the petition and
required respondent to answer. 8 Thereafter, the parties submitted their
respesctive memoranda in support of their respective contentions. 9
Presented thus for Our resolution is a question is aquestion which, to all
appearances, is one of first impression, to wit — Is Condition No. 14 printed
at the back of the petitioner's passage tickets purchased by private
respondents, which limits the venue of actions arising from the contract of
carriage to theCourt of First Instance of Cebu, valid and enforceable?
Otherwise stated, may a common carrier engaged in inter-island shipping
stipulate thru condition printed at the back of passage tickets to its vessels
that any and all actions arising out of the ocntract of carriage should be filed
only in a particular province or city, in this case the City of Cebu, to the
exclusion of all others?
Petitioner contends thaty Condition No. 14 is valid and enforceable, since
private respndents acceded to tit when they purchased passage tickets at its
Cagayan de Oro branch office and took its vessel M/S "Sweet Town" for
passage to Tagbilaran, Bohol — that the condition of the venue of actions in
the City of Cebu is proper since venue may be validly waived, citing
cases; 10 that is an effective waiver of venue, valid and binding as such,
since it is printed in bold and capital letters and not in fine print and merely
assigns the place where the action sing from the contract is institution
likewise citing cases; 11 and that condition No. 14 is unequivocal and
mandatory, the words and phrases "any and all", "irrespective of where it is
issued," and "shag" leave no doubt that the intention of Condition No. 14 is
to fix the venue in the City of Cebu, to the exclusion of other places; that the
orders of the respondent Judge are an unwarranted departure from
established jurisprudence governing the case; and that he acted without or
in excess of his jurisdiction in is the orders complained of. 12
On the other hand, private respondents claim that Condition No. 14 is not
valid, that the same is not an essential element of the contract of carriage,
being in itself a different agreement which requires the mutual consent of the
parties to it; that they had no say in its preparation, the existence of which
they could not refuse, hence, they had no choice but to pay for the tickets
and to avail of petitioner's shipping facilities out of necessity; that the carrier
"has been exacting too much from the public by inserting impositions in the
passage tickets too burdensome to bear," that the condition which was
printed in fine letters is an imposition on the riding public and does not bind
respondents, citing cases; 13 that while venue 6f actions may be transferred
from one province to another, such arrangement requires the "written
agreement of the parties", not to be imposed unilaterally; and that assuming
that the condition is valid, it is not exclusive and does not, therefore, exclude
the filing of the action in Misamis Oriental, 14
There is no question that there was a valid contract of carriage entered into
by petitioner and private respondents and that the passage tickets, upon
which the latter based their complaint, are the best evidence thereof. All the
essential elements of a valid contract, i.e., consent, cause or consideration
and object, are present. As held in Peralta de Guerrero, et al. v. Madrigal
Shipping Co., Inc., 15
It is a matter of common knowledge that whenever a
passenger boards a ship for transportation from one
place to another he is issued a ticket by the shipper
which has all the elements of a written contract,
Namely: (1) the consent of the contracting parties
manifested by the fact that the passenger boards the
ship and the shipper consents or accepts him in the
ship for transportation; (2) cause or consideration which
is the fare paid by the passenger as stated in the ticket;
(3) object, which is the transportation of the passenger
from the place of departure to the place of destination
which are stated in the ticket.
It should be borne in mind, however, that with respect to the fourteen (14)
conditions — one of which is "Condition No. 14" which is in issue in this
case — printed at the back of the passage tickets, these are commonly
known as "contracts of adhesion," the validity and/or enforceability of which
will have to be determined by the peculiar circumstances obtaining in each
case and the nature of the conditions or terms sought to be enforced. For,
"(W)hile generally, stipulations in a contract come about after deliberate
drafting by the parties thereto, ... there are certain contracts almost all the
provisions of which have been drafted only by one party, usually a
corporation. Such contracts are called contracts of adhesion, because the
only participation of the party is the signing of his signature or his 'adhesion'
thereto. Insurance contracts, bills of lading, contracts of make of lots on the
installment plan fall into this category" 16
By the peculiar circumstances under which contracts of adhesion are
entered into — namely, that it is drafted only by one party, usually the
corporation, and is sought to be accepted or adhered to by the other party,
in this instance the passengers, private respondents, who cannot change
the same and who are thus made to adhere thereto on the "take it or leave
it" basis — certain guidelines in the determination of their validity and/or
enforceability have been formulated in order to that justice and fan play
characterize the relationship of the contracting parties. Thus, this Court
speaking through Justice J.B.L. Reyes in Qua Chee Gan v. Law Union and
Rock Insurance Co., 17 and later through Justice Fernando in Fieldman
Insurance v. Vargas, 18 held —
The courts cannot ignore that nowadays, monopolies,
cartels and concentration of capital endowed with
overwhelm economic power, manage to impose upon
parties d with them y prepared 'agreements' that the
weaker party may not change one whit his participation
in the 'agreement' being reduced to the alternative 'to
take it or leave it,' labelled since Raymond Saleilles
'contracts by adherence' (contracts d' adhesion) in
contrast to those entered into by parties bargaining on
an equal footing. Such contracts (of which policies of
insurance and international bill of lading are prime
examples) obviously cap for greater strictness and
vigilance on the part of the courts of justice with a view
to protecting the weaker party from abuses and
imposition, and prevent their becoming traps for the
unwary.
To the same effect and import, and, in recognition of the character of
contracts of this kind, the protection of the disadvantaged is expressly
enjoined by the New Civil Code —
In all contractual property or other relations, when one
of the parties is at a disadvantage on account of his
moral dependence, ignorance indigence, mental
weakness, tender age and other handicap, the courts
must be vigilant for his
protection. 19
Considered in the light Of the foregoing norms and in the context Of
circumstances Prevailing in the inter-island ship. ping industry in the country
today, We find and hold that Condition No. 14 printed at the back of the
passage tickets should be held as void and unenforceable for the following
reasons first, under circumstances obligation in the inter-island ship. ping
industry, it is not just and fair to bind passengers to the terms of the
conditions printed at the back of the passage tickets, on which Condition No.
14 is Printed in fine letters, and second, Condition No. 14 subverts the public
policy on transfer of venue of proceedings of this nature, since the same will
prejudice rights and interests of innumerable passengers in different s of the
country who, under Condition No. 14, will have to file suits against petitioner
only in the City of Cebu.
It should also be stressed that slapping companies are franchise holders of
certificates of public convenience and therefore, posses a virtual monopoly
over the business of transporting passengers between the ports covered by
their franchise. This being so, shipping companies, like petitioner, engaged
in inter-island shipping, have a virtual monopoly of the business of
transporting passengers and may thus dictate their terms of passage,
leaving passengers with no choice but to buy their tickets and avail of their
vessels and facilities. Finally, judicial notice may be taken of the fact that the
bulk of those who board these inter-island vested come from the low-income
groups and are less literate, and who have little or no choice but to avail of
petitioner's vessels.
2. Condition No. 14 is subversive of public policy on transfers of venue of
actions. For, although venue may be changed or transferred from one
province to another by agreement of the parties in writing t to Rule 4,
Section 3, of the Rules of Court, such an agreement will not be held valid
where it practically negates the action of the claimants, such as the private
respondents herein. The philosophy underlying the provisions on transfer of
venue of actions is the convenience of the plaintiffs as well as his witnesses
and to promote 21 the ends of justice. Considering the expense and trouble a
passenger residing outside of Cebu City would incur to prosecute a claim in
the City of Cebu, he would most probably decide not to file the action at all.
The condition will thus defeat, instead of enhance, the ends of justice. Upon
the other hand, petitioner has branches or offices in the respective ports of
call of its vessels and can afford to litigate in any of these places. Hence, the
filing of the suit in the CFI of Misamis Oriental, as was done in the instant
case, will not cause inconvenience to, much less prejudice, petitioner.
Public policy is ". . . that principle of the law which holds that no subject or
citizen can lawfully do that which has a tendency to be injurious to the public
or against the public good ... 22 Under this principle" ... freedom of contract
or private dealing is restricted by law for the good of the public. 23 Clearly,
Condition No. 14, if enforced, will be subversive of the public good or
interest, since it will frustrate in meritorious cases, actions of passenger
cants outside of Cebu City, thus placing petitioner company at a decided
advantage over said persons, who may have perfectly legitimate claims
against it. The said condition should, therefore, be declared void and
unenforceable, as contrary to public policy — to make the courts accessible
to all who may have need of their services.
WHEREFORE, the petition for prohibition is DISMISS. ED. The restraining
order issued on November 20, 1973, is hereby LIFTED and SET ASIDE.
Costs against petitioner.

1. It is a matter of public knowledge, of which We can take judicial notice,

that there is a dearth of and acute shortage in inter- island vessels plying
between the country's several islands, and the facilities they offer leave
much to be desired. Thus, even under ordinary circumstances, the piers are
congested with passengers and their cargo waiting to be transported. The
conditions are even worse at peak and/or the rainy seasons, when
Passengers literally scramble to whatever accommodations may be availed
of, even through circuitous routes, and/or at the risk of their safety — their
immediate concern, for the moment, being to be able to board vessels with
the hope of reaching their destinations. The schedules are — as often as not
if not more so — delayed or altered. This was precisely the experience of
private respondents when they were relocated to M/S "Sweet Town" from
M/S "Sweet Hope" and then any to the scorching heat of the sun and the
dust coming from the ship's cargo of corn grits, " because even the latter
was filed to capacity.

Under these circumstances, it is hardly just and proper to expect the

passengers to examine their tickets received from crowded/congested
counters, more often than not during rush hours, for conditions that may be
printed much charge them with having consented to the conditions, so
printed, especially if there are a number of such conditions m fine print, as in
this case. 20

Again, it should be noted that Condition No. 14 was prepared solely at the
ms of the petitioner, respondents had no say in its preparation. Neither did
the latter have the opportunity to take the into account prior to the purpose
chase of their tickets. For, unlike the small print provisions of contracts —
the common example of contracts of adherence — which are entered into by
the insured in his awareness of said conditions, since the insured is afforded
the op to and co the same, passengers of inter-island v do not have the
same chance, since their alleged adhesion is presumed only from the fact
that they purpose chased the tickets.
 EN BANC
G.R. No. L-20099 July 7, 1966
PARMANAND SHEWARAM, plaintiff and appellee,
vs.
PHILIPPINE AIR LINES, INC., defendant and appellant.
Ponce Enrile, Siguion Reyna, Montecillo and Belo for defendant and
appellant.
Climaco and Associates for plaintiff and appellee.
ZALDIVAR, J.:
Before the municipal court of Zamboanga City, plaintiff-appellee Parmanand
Shewaram instituted an action to recover damages suffered by him due to
the alleged failure of defendant-appellant Philippines Air Lines, Inc. to
observe extraordinary diligence in the vigilance and carriage of his luggage.
After trial the municipal court of Zamboanga City rendered judgment
ordering the appellant to pay appellee P373.00 as actual damages, P100.00
as exemplary damages, P150.00 as attorney's fees, and the costs of the
action.
Appellant Philippine Air Lines appealed to the Court of First Instance of
Zamboanga City. After hearing the Court of First Instance of Zamboanga
City modified the judgment of the inferior court by ordering the appellant to
pay the appellee only the sum of P373.00 as actual damages, with legal
interest from May 6, 1960 and the sum of P150.00 as attorney's fees,
eliminating the award of exemplary damages.
From the decision of the Court of First Instance of Zamboanga City,
appellant appeals to this Court on a question of law, assigning two errors
allegedly committed by the lower court a quo, to wit:
1. The lower court erred in not holding that plaintiff-appellee was
bound by the provisions of the tariff regulations filed by defendant-
appellant with the civil aeronautics board and the conditions of
carriage printed at the back of the plane ticket stub.
2. The lower court erred in not dismissing this case or limiting the
liability of the defendant-appellant to P100.00.
The facts of this case, as found by the trial court, quoted from the decision
appealed from, are as follows:
That Parmanand Shewaram, the plaintiff herein, was on
November 23, 1959, a paying passenger with ticket No. 4-30976,
on defendant's aircraft flight No. 976/910 from Zamboanga City
bound for Manila; that defendant is a common carrier engaged in
air line transportation in the Philippines, offering its services to the
public to carry and transport passengers and cargoes from and to
different points in the Philippines; that on the above-mentioned
date of November 23, 1959, he checked in three (3) pieces of
baggages — a suitcase and two (2) other pieces; that the suitcase
was mistagged by defendant's personnel in Zamboanga City, as
I.G.N. (for Iligan) with claim check No. B-3883, instead of MNL (for
Manila). When plaintiff Parmanand Shewaram arrived in Manila
on the date of November 23, 1959, his suitcase did not arrive with
his flight because it was sent to Iligan. So, he made a claim with
defendant's personnel in Manila airport and another suitcase
similar to his own which was the only baggage left for that flight,
the rest having been claimed and released to the other
passengers of said flight, was given to the plaintiff for him to take
delivery but he did not and refused to take delivery of the same on
the ground that it was not his, alleging that all his clothes were
white and the National transistor 7 and a Rollflex camera were not
found inside the suitcase, and moreover, it contained a pistol
which he did not have nor placed inside his suitcase; that after
inquiries made by defendant's personnel in Manila from different
airports where the suitcase in question must have been sent, it
was found to have reached Iligan and the station agent of the PAL
in Iligan caused the same to be sent to Manila for delivery to Mr.
Shewaram and which suitcase belonging to the plaintiff herein
arrived in Manila airport on November 24, 1959; that it was also
found out that the suitcase shown to and given to the plaintiff for
delivery which he refused to take delivery belonged to a certain
Del Rosario who was bound for Iligan in the same flight with Mr.
Shewaram; that when the plaintiff's suitcase arrived in Manila as
stated above on November 24, 1959, he was informed by Mr.
Tomas Blanco, Jr., the acting station agent of the Manila airport of
the arrival of his suitcase but of course minus his Transistor Radio
7 and the Rollflex Camera; that Shewaram made demand for
these two (2) items or for the value thereof but the same was not
complied with by defendant.
xxx xxx xxx
It is admitted by defendant that there was mistake in tagging the
suitcase of plaintiff as IGN. The tampering of the suitcase is more
apparent when on November 24, 1959, when the suitcase arrived
in Manila, defendant's personnel could open the same in spite of
the fact that plaintiff had it under key when he delivered the
suitcase to defendant's personnel in Zamboanga City. Moreover,
it was established during the hearing that there was space in the
suitcase where the two items in question could have been placed.
It was also shown that as early as November 24, 1959, when
plaintiff was notified by phone of the arrival of the suitcase, plaintiff
asked that check of the things inside his suitcase be made and
defendant admitted that the two items could not be found inside
the suitcase. There was no evidence on record sufficient to show
that plaintiff's suitcase was never opened during the time it was
placed in defendant's possession and prior to its recovery by the
plaintiff. However, defendant had presented evidence that it had
authority to open passengers' baggage to verify and find its
ownership or identity. Exhibit "1" of the defendant would show that
the baggage that was offered to plaintiff as his own was opened
and the plaintiff denied ownership of the contents of the baggage.
This proven fact that baggage may and could be opened without
the necessary authorization and presence of its owner, applied
too, to the suitcase of plaintiff which was mis-sent to Iligan City
because of mistagging. The possibility of what happened in the
baggage of Mr. Del Rosario at the Manila Airport in his absence
could have also happened to plaintiffs suitcase at Iligan City in the
absence of plaintiff. Hence, the Court believes that these two
items were really in plaintiff's suitcase and defendant should be
held liable for the same by virtue of its contract of carriage.
It is clear from the above-quoted portions of the decision of the trial court
that said court had found that the suitcase of the appellee was tampered,
and the transistor radio and the camera contained therein were lost, and that
the loss of those articles was due to the negligence of the employees of the
appellant. The evidence shows that the transistor radio cost P197.00 and
the camera cost P176.00, so the total value of the two articles was P373.00.
There is no question that the appellant is a common carrier. 1 As such
common carrier the appellant, from the nature of its business and for
reasons of public policy, is bound to observe extraordinary diligence in the
vigilance over the goods and for the safety of the passengers transported by
it according to the circumstances of each case. 2 It having been shown that
the loss of the transistor radio and the camera of the appellee, costing
P373.00, was due to the negligence of the employees of the appellant, it is
clear that the appellant should be held liable for the payment of said loss. 3
It is, however, contended by the appellant that its liability should be limited to
the amount stated in the conditions of carriage printed at the back of the
plane ticket stub which was issued to the appellee, which conditions are
embodied in Domestic Tariff Regulations No. 2 which was filed with the Civil
Aeronautics Board. One of those conditions, which is pertinent to the issue
raised by the appellant in this case provides as follows:
The liability, if any, for loss or damage to checked baggage or for
delay in the delivery thereof is limited to its value and, unless the
passenger declares in advance a higher valuation and pay an
additional charge therefor, the value shall be conclusively deemed
not to exceed P100.00 for each ticket.
The appellant maintains that in view of the failure of the appellee to declare
a higher value for his luggage, and pay the freight on the basis of said
declared value when he checked such luggage at the Zamboanga City
airport, pursuant to the abovequoted condition, appellee can not demand
payment from the appellant of an amount in excess of P100.00.
The law that may be invoked, in this connection is Article 1750 of the New the public are settled. It cannot lawfully stipulate for exemption
Civil Code which provides as follows: from liability, unless such exemption is just and reasonable, and
unless the contract is freely and fairly made. No contractual
limitation is reasonable which is subversive of public policy.
A contract fixing the sum that may be recovered by the owner or
shipper for the loss, destruction, or deterioration of the goods is
valid, if it is reasonable and just under the circumstances, and has "Par. 195. 7. What Limitations of Liability Permissible. — a.
been fairly and freely agreed upon. Negligence — (1) Rule in America — (a) In Absence of Organic or
Statutory Provisions Regulating Subject — aa. Majority Rule. — In
the absence of statute, it is settled by the weight of authority in the
In accordance with the above-quoted provision of Article 1750 of the New
United States, that whatever limitations against its common-law
Civil Code, the pecuniary liability of a common carrier may, by contract, be
liability are permissible to a carrier, it cannot limit its liability for
limited to a fixed amount. It is required, however, that the contract must be
injury to or loss of goods shipped, where such injury or loss is
"reasonable and just under the circumstances and has been fairly and freely
caused by its own negligence. This is the common law doctrine
agreed upon."
and it makes no difference that there is no statutory prohibition
against contracts of this character.
The requirements provided in Article 1750 of the New Civil Code must be
complied with before a common carrier can claim a limitation of its pecuniary
"Par. 196. bb. Considerations on which Rule Based. — The rule, it
liability in case of loss, destruction or deterioration of the goods it has
is said, rests on considerations of public policy. The undertaking is
undertaken to transport. In the case before us We believe that the
to carry the goods, and to relieve the shipper from all liability for
requirements of said article have not been met. It can not be said that the
loss or damage arising from negligence in performing its contract
appellee had actually entered into a contract with the appellant, embodying
is to ignore the contract itself. The natural effect of a limitation of
the conditions as printed at the back of the ticket stub that was issued by the
liability against negligence is to induce want of care on the part of
appellant to the appellee. The fact that those conditions are printed at the
the carrier in the performance of its duty. The shipper and the
back of the ticket stub in letters so small that they are hard to read would not
common carrier are not on equal terms; the shipper must send his
warrant the presumption that the appellee was aware of those conditions
freight by the common carrier, or not at all; he is therefore entirely
such that he had "fairly and freely agreed" to those conditions. The trial court
at the mercy of the carrier unless protected by the higher power of
has categorically stated in its decision that the "Defendant admits that
the law against being forced into contracts limiting the carrier's
passengers do not sign the ticket, much less did plaintiff herein sign his
liability. Such contracts are wanting in the element of voluntary
ticket when he made the flight on November 23, 1959." We hold, therefore,
assent.
that the appellee is not, and can not be, bound by the conditions of carriage
found at the back of the ticket stub issued to him when he made the flight on
appellant's plane on November 23, 1959. "Par. 197. cc. Application and Extent of Rule — (aa) Negligence
of Servants. — The rule prohibiting limitation of liability for
negligence is often stated as a prohibition of any contract relieving
The liability of the appellant in the present case should be governed by the
the carrier from loss or damage caused by its own negligence or
provisions of Articles 1734 and 1735 of the New Civil Code, which We quote
misfeasance, or that of its servants; and it has been specifically
as follows:
decided in many cases that no contract limitation will relieve the
carrier from responsibility for the negligence, unskillfulness, or
ART. 1734. Common carries are responsible for the loss, carelessness of its employer." (Cited in Ysmael and Co. vs.
destruction, or deterioration of the goods, unless the same is due Barreto, 51 Phil. 90, 98, 99).
to any of the following causes only:
In view of the foregoing, the decision appealed from is affirmed, with costs
(1) Flood, storm, earthquake, or other natural disaster or calamity; against the appellant.

(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.1äwphï1.ñët

ART. 1735. In all cases other than those mentioned in Nos. 1, 2,

3, 4 and 5 of the preceding article, if the goods are lost, destroyed
or deteriorated, common carriers are presumed to have been at
fault or to have acted negligently, unless they prove that they
observed extraordinary diligence as required in Article 1733.

It having been clearly found by the trial court that the transistor radio and the
camera of the appellee were lost as a result of the negligence of the
appellant as a common carrier, the liability of the appellant is clear — it must
pay the appellee the value of those two articles.

In the case of Ysmael and Co. vs. Barreto, 51 Phil. 90, cited by the trial court
in support of its decision, this Court had laid down the rule that the carrier
can not limit its liability for injury to or loss of goods shipped where such
injury or loss was caused by its own negligence.

Corpus Juris, volume 10, p. 154, says:

"Par. 194, 6. Reasonableness of Limitations. — The validity of

stipulations limiting the carrier's liability is to be determined by
their reasonableness and their conformity to the sound public
policy, in accordance with which the obligations of the carrier to
 EN BANC
G.R. No. L-20761 July 27, 1966
LA MALLORCA, petitioner,
vs.
HONORABLE COURT OF APPEALS, MARIANO BELTRAN, ET
AL., respondents.
G. E. Yabut, R. Monterey and M.C. Lagman for petitioner.
Ahmed Garcia for respondents.
BARRERA, J.:
La Mallorca seeks the review of the decision of the Court of Appeals in CA-
G.R. No. 23267-R, holding it liable for quasi-delict and ordering it to pay to
respondents Mariano Beltran, et al., P6,000.00 for the death of his minor
daughter Raquel Beltran, plus P400.00 as actual damages.
The facts of the case as found by the Court of Appeals, briefly are:
On December 20, 1953, at about noontime, plaintiffs, husband
and wife, together with their minor daughters, namely, Milagros,
13 years old, Raquel, about 4½ years old, and Fe, over 2 years
old, boarded the Pambusco Bus No. 352, bearing plate TPU No.
757 (1953 Pampanga), owned and operated by the defendant, at
San Fernando, Pampanga, bound for Anao, Mexico, Pampanga.
At the time, they were carrying with them four pieces of baggages
containing their personal belonging. The conductor of the bus,
who happened to be a half-brother of plaintiff Mariano Beltran,
issued three tickets (Exhs. A, B, & C) covering the full fares of the
plaintiff and their eldest child, Milagros. No fare was charged on
Raquel and Fe, since both were below the height at which fare is
charged in accordance with the appellant's rules and regulations.
After about an hour's trip, the bus reached Anao whereat it
stopped to allow the passengers bound therefor, among whom
were the plaintiffs and their children to get off. With respect to the
group of the plaintiffs, Mariano Beltran, then carrying some of their
baggages, was the first to get down the bus, followed by his wife
and his children. Mariano led his companions to a shaded spot on
the left pedestrians side of the road about four or five meters away
from the vehicle. Afterwards, he returned to the bus in controversy
to get his other bayong, which he had left behind, but in so doing,
his daughter Raquel followed him, unnoticed by her father. While
said Mariano Beltran was on the running board of the bus waiting
for the conductor to hand him his bayong which he left under one
of its seats near the door, the bus, whose motor was not shut off
while unloading, suddenly started moving forward, evidently to
resume its trip, notwithstanding the fact that the conductor has not
given the driver the customary signal to start, since said conductor
was still attending to the baggage left behind by Mariano Beltran.
Incidentally, when the bus was again placed into a complete stop,
it had travelled about ten meters from the point where the plaintiffs
had gotten off.
Sensing that the bus was again in motion, Mariano Beltran
immediately jumped from the running board without getting
his bayong from the conductor. He landed on the side of the road
almost in front of the shaded place where he left his wife and
children. At that precise time, he saw people beginning to gather
around the body of a child lying prostrate on the ground, her skull
crushed, and without life. The child was none other than his
daughter Raquel, who was run over by the bus in which she rode
earlier together with her parents.
For the death of their said child, the plaintiffs commenced the
present suit against the defendant seeking to recover from the
latter an aggregate amount of P16,000 to cover moral damages
and actual damages sustained as a result thereof and attorney's
fees. After trial on the merits, the court below rendered the
judgment in question.
On the basis of these facts, the trial court found defendant liable for breach
of contract of carriage and sentenced it to pay P3,000.00 for the death of the
child and P400.00 as compensatory damages representing burial expenses
and costs.
On appeal to the Court of Appeals, La Mallorca claimed that there could not
be a breach of contract in the case, for the reason that when the child met
her death, she was no longer a passenger of the bus involved in the incident
and, therefore, the contract of carriage had already terminated. Although the
Court of Appeals sustained this theory, it nevertheless found the defendant-
appellant guilty of quasi-delict and held the latter liable for damages, for the
negligence of its driver, in accordance with Article 2180 of the Civil Code.
And, the Court of Appeals did not only find the petitioner liable, but
increased the damages awarded the plaintiffs-appellees to P6,000.00,
instead of P3,000.00 granted by the trial court.
In its brief before us, La Mallorca contends that the Court of Appeals erred
(1) in holding it liable for quasi-delict, considering that respondents
complaint was one for breach of contract, and (2) in raising the award of
damages from P3,000.00 to P6,000.00 although respondents did not appeal
from the decision of the lower court.
Under the facts as found by the Court of Appeals, we have to sustain the
judgement holding petitioner liable for damages for the death of the child,
Raquel Beltran. It may be pointed out that although it is true that respondent
Mariano Beltran, his wife, and their children (including the deceased child)
had alighted from the bus at a place designated for disembarking or
unloading of passengers, it was also established that the father had to return
to the vehicle (which was still at a stop) to get one of his bags or bayong that
was left under one of the seats of the bus. There can be no controversy that
as far as the father is concerned, when he returned to the bus for
his bayongwhich was not unloaded, the relation of passenger and carrier
between him and the petitioner remained subsisting. For, the relation of
carrier and passenger does not necessarily cease where the latter, after
alighting from the car, aids the carrier's servant or employee in removing his
baggage from the car.1 The issue to be determined here is whether as to the
child, who was already led by the father to a place about 5 meters away
from the bus, the liability of the carrier for her safety under the contract of
carriage also persisted.
It has been recognized as a rule that the relation of carrier and passenger
does not cease at the moment the passenger alights from the carrier's
vehicle at a place selected by the carrier at the point of destination, but
continues until the passenger has had a reasonable time or a reasonable
opportunity to leave the carrier's premises. And, what is a reasonable time
or a reasonable delay within this rule is to be determined from all the
circumstances. Thus, a person who, after alighting from a train, walks along
the station platform is considered still a passenger.2 So also, where a
passenger has alighted at his destination and is proceeding by the usual
way to leave the company's premises, but before actually doing so is halted
by the report that his brother, a fellow passenger, has been shot, and he in
good faith and without intent of engaging in the difficulty, returns to relieve
his brother, he is deemed reasonably and necessarily delayed and thus
continues to be a passenger entitled as such to the protection of the railroad
and company and its agents.3
In the present case, the father returned to the bus to get one of his
baggages which was not unloaded when they alighted from the bus. Raquel,
the child that she was, must have followed the father. However, although the
father was still on the running board of the bus awaiting for the conductor to
hand him the bag or bayong, the bus started to run, so that even he (the
father) had to jump down from the moving vehicle. It was at this instance
that the child, who must be near the bus, was run over and killed. In the
circumstances, it cannot be claimed that the carrier's agent had exercised
the "utmost diligence" of a "very cautions person" required by Article 1755 of
the Civil Code to be observed by a common carrier in the discharge of its
obligation to transport safely its passengers. In the first place, the driver,
although stopping the bus, nevertheless did not put off the engine.
Secondly, he started to run the bus even before the bus conductor gave him
the signal to go and while the latter was still unloading part of the baggages
of the passengers Mariano Beltran and family. The presence of said
passengers near the bus was not unreasonable and they are, therefore, to
be considered still as passengers of the carrier, entitled to the protection
under their contract of carriage.
But even assuming arguendo that the contract of carriage has already
terminated, herein petitioner can be held liable for the negligence of its
driver, as ruled by the Court of Appeals, pursuant to Article 2180 of the Civil
Code. Paragraph 7 of the complaint, which reads —
 That aside from the aforesaid breach of contract, the death of
Raquel Beltran, plaintiffs' daughter, was caused by the negligence
and want of exercise of the utmost diligence of a very cautious
person on the part of the defendants and their agent, necessary to
transport plaintiffs and their daughter safely as far as human care
and foresight can provide in the operation of their vehicle.

is clearly an allegation for quasi-delict. The inclusion of this averment

for quasi-delict, while incompatible with the other claim under the contract of
carriage, is permissible under Section 2 of Rule 8 of the New Rules of Court,
which allows a plaintiff to allege causes of action in the alternative, be they
compatible with each other or not, to the end that the real matter in
controversy may be resolved and determined.4

The plaintiffs sufficiently pleaded the culpa or negligence upon which the
claim was predicated when it was alleged in the complaint that "the death of
Raquel Beltran, plaintiffs' daughter, was caused by the negligence and want
of exercise of the utmost diligence of a very cautious person on the part of
the defendants and their agent." This allegation was also proved when it
was established during the trial that the driver, even before receiving the
proper signal from the conductor, and while there were still persons on the
running board of the bus and near it, started to run off the vehicle. The
presentation of proof of the negligence of its employee gave rise to the
presumption that the defendant employer did not exercise the diligence of a
good father of the family in the selection and supervision of its employees.
And this presumption, as the Court of Appeals found, petitioner had failed to
overcome. Consequently, petitioner must be adjudged peculiarily liable for
the death of the child Raquel Beltran.

The increase of the award of damages from P3,000.00 to P6,000.00 by the

Court of Appeals, however, cannot be sustained. Generally, the appellate
court can only pass upon and consider questions or issues raised and
argued in appellant's brief. Plaintiffs did not appeal from that portion of the
judgment of the trial court awarding them on P3,000.00 damages for the
death of their daughter. Neither does it appear that, as appellees in the
Court of Appeals, plaintiffs have pointed out in their brief the inadequacy of
the award, or that the inclusion of the figure P3,000.00 was merely a clerical
error, in order that the matter may be treated as an exception to the general
rule.5Herein petitioner's contention, therefore, that the Court of Appeals
committed error in raising the amount of the award for damages is,
evidently, meritorious.1äwphï1.ñët

Wherefore, the decision of the Court of Appeals is hereby modified by

sentencing, the petitioner to pay to the respondents Mariano Beltran, et al.,
the sum of P3,000.00 for the death of the child, Raquel Beltran, and the
amount of P400.00 as actual damages. No costs in this instance. So
ordered.
 SECOND DIVISION
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.
Herenio E. Martinez for petitioner.
M.R. Villaluz Law Office for private respondent.
REGALADO, J.:
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 unloading area and the guard's admonitions against entry therein, these
or near the petitioner's vessel. We believe there exists such a justifiable were at most insufficient precautions which pale into insignificance if
cause. 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
It is of common knowledge that, by the very nature of petitioner's business
actually enforced to subserve their purpose of preventing entry into the
as a shipper, the passengers of vessels are allotted a longer period of time
forbidden area. By no stretch of liberal evaluation can such perfunctory acts
to disembark from the ship than other common carriers such as a passenger
approximate the "utmost diligence of very cautious persons" to be exercised
bus. With respect to the bulk of cargoes and the number of passengers it
"as far as human care and foresight can provide" which is required by law of
can load, such vessels are capable of accommodating a bigger volume of
common carriers with respect to their passengers.
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 While the victim was admittedly contributorily negligent, still petitioner's
can easily get off the bus and retrieve his luggage in a very short period of aforesaid failure to exercise extraordinary diligence was the proximate and
time. Verily, petitioner cannot categorically claim, through the bare expedient direct cause of, because it could definitely have prevented, the former's
of comparing the period of time entailed in getting the passenger's cargoes, death. Moreover, in paragraph 5.6 of its petition, at bar, 19 petitioner has
that the ruling in La Mallorca is inapplicable to the case at bar. On the expressly conceded the factual finding of respondent Court of Appeals that
contrary, if we are to apply the doctrine enunciated therein to the instant petitioner did not present sufficient evidence in support of its submission that
petition, we cannot in reason doubt that the victim Anacleto Viana was still a the deceased Anacleto Viana was guilty of gross negligence. Petitioner
passenger at the time of the incident. When the accident occurred, the cannot now be heard to claim otherwise.
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
No excepting circumstance being present, we are likewise bound by
only to bring its passengers safely to their destination but also to afford them
respondent court's declaration that there was no negligence on the part of
a reasonable time to claim their baggage.
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.
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
As correctly observed by both courts, Aboitiz joined Pioneer in proving the
clear to us is that at the time the victim was taking his cargoes, the vessel
alleged gross negligence of the victim, hence its present contention that the
had already docked an hour earlier. In consonance with common shipping
death of the passenger was due to the negligence of the crane operator
procedure as to the minimum time of one (1) hour allowed for the
cannot be sustained both on grounds, of estoppel and for lack of evidence
passengers to disembark, it may be presumed that the victim had just gotten
on its present theory. Even in its answer filed in the court below it readily
off the vessel when he went to retrieve his baggage. Yet, even if he had
alleged that Pioneer had taken the necessary safeguards insofar as its
already disembarked an hour earlier, his presence in petitioner's premises
unloading operations were concerned, a fact which appears to have been
was not without cause. The victim had to claim his baggage which was
accepted by the plaintiff therein by not impleading Pioneer as a defendant,
possible only one (1) hour after the vessel arrived since it was admittedly
and likewise inceptively by Aboitiz by filing its third-party complaint only after
standard procedure in the case of petitioner's vessels that the unloading
ten (10) months from the institution of the suit against it. Parenthetically,
operations shall start only after that time. Consequently, under the foregoing
Pioneer is not within the ambit of the rule on extraordinary diligence required
circumstances, the victim Anacleto Viana is still deemed a passenger of said
of, and the corresponding presumption of negligence foisted on, common
carrier at the time of his tragic death.
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,
II. Under the law, common carriers are, from the nature of their business and the failure of Aboitiz to exercise extraordinary diligence for the safety of its
for reasons of public policy, bound to observe extraordinary diligence in the passenger is the rationale for our finding on its liability.
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
WHEREFORE, the petition is DENIED and the judgment appealed from is
common carrier is bound to carry the passengers safely as far as human
hereby AFFIRMED in toto.
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 SO ORDERED.
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, 18which, 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
 FIRST DIVISION
G.R. No. 145804 February 6, 2003
LIGHT RAIL TRANSIT AUTHORITY & RODOLFO ROMAN, petitioners,
vs.
MARJORIE NAVIDAD, Heirs of the Late NICANOR NAVIDAD &
PRUDENT SECURITY AGENCY, respondents.
DECISION
VITUG, J.:
The case before the Court is an appeal from the decision and resolution of
the Court of Appeals, promulgated on 27 April 2000 and 10 October 2000,
respectively, in CA-G.R. CV No. 60720, entitled "Marjorie Navidad and Heirs
of the Late Nicanor Navidad vs. Rodolfo Roman, et. al.," which has modified
the decision of 11 August 1998 of the Regional Trial Court, Branch 266,
Pasig City, exonerating Prudent Security Agency (Prudent) from liability and
finding Light Rail Transit Authority (LRTA) and Rodolfo Roman liable for
damages on account of the death of Nicanor Navidad.
On 14 October 1993, about half an hour past seven o’clock in the evening,
Nicanor Navidad, then drunk, entered the EDSA LRT station after
purchasing a "token" (representing payment of the fare). While Navidad was
standing on the platform near the LRT tracks, Junelito Escartin, the security
guard assigned to the area approached Navidad. A misunderstanding or an
altercation between the two apparently ensued that led to a fist fight. No
evidence, however, was adduced to indicate how the fight started or who,
between the two, delivered the first blow or how Navidad later fell on the
LRT tracks. At the exact moment that Navidad fell, an LRT train, operated
by petitioner Rodolfo Roman, was coming in. Navidad was struck by the
moving train, and he was killed instantaneously.
On 08 December 1994, the widow of Nicanor, herein respondent Marjorie
Navidad, along with her children, filed a complaint for damages against
Junelito Escartin, Rodolfo Roman, the LRTA, the Metro Transit
Organization, Inc. (Metro Transit), and Prudent for the death of her husband.
LRTA and Roman filed a counterclaim against Navidad and a cross-claim
against Escartin and Prudent. Prudent, in its answer, denied liability and
averred that it had exercised due diligence in the selection and supervision
of its security guards.
The LRTA and Roman presented their evidence while Prudent and Escartin,
instead of presenting evidence, filed a demurrer contending that Navidad
had failed to prove that Escartin was negligent in his assigned task. On 11
August 1998, the trial court rendered its decision; it adjudged:
"WHEREFORE, judgment is hereby rendered in favor of the plaintiffs and
against the defendants Prudent Security and Junelito Escartin ordering the
latter to pay jointly and severally the plaintiffs the following:
"a) 1) Actual damages of P44,830.00;
2) Compensatory damages of P443,520.00;
3) Indemnity for the death of Nicanor Navidad in the sum of
P50,000.00;
"b) Moral damages of P50,000.00;
"c) Attorney’s fees of P20,000;
"d) Costs of suit.
"The complaint against defendants LRTA and Rodolfo Roman are dismissed
for lack of merit.
"The compulsory counterclaim of LRTA and Roman are likewise
dismissed."1
Prudent appealed to the Court of Appeals. On 27 August 2000, the appellate
court promulgated its now assailed decision exonerating Prudent from any
liability for the death of Nicanor Navidad and, instead, holding the LRTA and
Roman jointly and severally liable thusly:
"WHEREFORE, the assailed judgment is hereby MODIFIED, by exonerating
the appellants from any liability for the death of Nicanor Navidad, Jr. Instead,
appellees Rodolfo Roman and the Light Rail Transit Authority (LRTA) are
held liable for his death and are hereby directed to pay jointly and severally
to the plaintiffs-appellees, the following amounts:
a) P44,830.00 as actual damages;
b) P50,000.00 as nominal damages;
c) P50,000.00 as moral damages;
d) P50,000.00 as indemnity for the death of the
deceased; and
e) P20,000.00 as and for attorney’s fees."2
The appellate court ratiocinated that while the deceased might not have then
as yet boarded the train, a contract of carriage theretofore had already
existed when the victim entered the place where passengers were supposed
to be after paying the fare and getting the corresponding token therefor. In
exempting Prudent from liability, the court stressed that there was nothing to
link the security agency to the death of Navidad. It said that Navidad failed
to show that Escartin inflicted fist blows upon the victim and the evidence
merely established the fact of death of Navidad by reason of his having
been hit by the train owned and managed by the LRTA and operated at the
time by Roman. The appellate court faulted petitioners for their failure to
present expert evidence to establish the fact that the application of
emergency brakes could not have stopped the train.
The appellate court denied petitioners’ motion for reconsideration in its
resolution of 10 October 2000.
In their present recourse, petitioners recite alleged errors on the part of the
appellate court; viz:
"I.
THE HONORABLE COURT OF APPEALS GRAVELY ERRED BY
DISREGARDING THE FINDINGS OF FACTS BY THE TRIAL COURT
"II.
THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN FINDING
THAT PETITIONERS ARE LIABLE FOR THE DEATH OF NICANOR
NAVIDAD, JR.
"III.
THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN FINDING
THAT RODOLFO ROMAN IS AN EMPLOYEE OF LRTA."3
Petitioners would contend that the appellate court ignored the evidence and
the factual findings of the trial court by holding them liable on the basis of a
sweeping conclusion that the presumption of negligence on the part of a
common carrier was not overcome. Petitioners would insist that Escartin’s
assault upon Navidad, which caused the latter to fall on the tracks, was an
act of a stranger that could not have been foreseen or prevented. The LRTA
would add that the appellate court’s conclusion on the existence of an
employer-employee relationship between Roman and LRTA lacked basis
because Roman himself had testified being an employee of Metro Transit
and not of the LRTA.
Respondents, supporting the decision of the appellate court, contended that
a contract of carriage was deemed created from the moment Navidad paid
the fare at the LRT station and entered the premises of the latter, entitling
Navidad to all the rights and protection under a contractual relation, and that
the appellate court had correctly held LRTA and Roman liable for the death
of Navidad in failing to exercise extraordinary diligence imposed upon a
common carrier.
Law and jurisprudence dictate that a common carrier, both from the nature
of its business and for reasons of public policy, is burdened with the duty of
exercising utmost diligence in ensuring the safety of passengers. 4 The Civil
Code, governing the liability of a common carrier for death of or injury to its
passengers, provides:
"Article 1755. A common carrier is bound to carry the passengers safely as
far as human care and foresight can provide, using the utmost diligence of
very cautious persons, with a due regard for all the circumstances.
"Article 1756. In case of death of or injuries to passengers, common carriers
are presumed to have been at fault or to have acted negligently, unless they
prove that they observed extraordinary diligence as prescribed in articles
1733 and 1755."
"Article 1759. Common carriers are liable for the death of or injuries to
passengers through the negligence or willful acts of the former’s employees,
although such employees may have acted beyond the scope of their
authority or in violation of the orders of the common carriers.
"This liability of the common carriers does not cease upon proof that they
exercised all the diligence of a good father of a family in the selection and
supervision of their employees."
"Article 1763. A common carrier is responsible for injuries suffered by a
passenger on account of the willful acts or negligence of other passengers
or of strangers, if the common 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."
is not itself a juridical relation between the latter and Roman; thus, Roman
can be made liable only for his own fault or negligence.
The award of nominal damages in addition to actual damages is untenable.
Nominal damages are adjudicated in order that a right of the plaintiff, which
has been violated or invaded by the defendant, may be vindicated or
recognized, and not for the purpose of indemnifying the plaintiff for any loss
suffered by him.18 It is an established rule that nominal damages cannot co-
exist with compensatory damages.19
WHEREFORE, the assailed decision of the appellate court is AFFIRMED
with MODIFICATION but only in that (a) the award of nominal damages is
DELETED and (b) petitioner Rodolfo Roman is absolved from liability. No
costs.

The law requires common carriers to carry passengers safely using the SO ORDERED.
utmost diligence of very cautious persons with due regard for all
circumstances.5 Such duty of a common carrier to provide safety to its
passengers so obligates it not only during the course of the trip but for so
long as the passengers are within its premises and where they ought to be
in pursuance to the contract of carriage.6 The statutory provisions render a
common carrier liable for death of or injury to passengers (a) through the
negligence or wilful acts of its employees or b) on account of wilful acts or
negligence of other passengers or of strangers if the common carrier’s
employees through the exercise of due diligence could have prevented or
stopped the act or omission.7 In case of such death or injury, a carrier is
presumed to have been at fault or been negligent, and8 by simple proof of
injury, the passenger is relieved of the duty to still establish the fault or
negligence of the carrier or of its employees and the burden shifts upon the
carrier to prove that the injury is due to an unforeseen event or to force
majeure.9 In the absence of satisfactory explanation by the carrier on how
the accident occurred, which petitioners, according to the appellate court,
have failed to show, the presumption would be that it has been at fault, 10 an
exception from the general rule that negligence must be proved. 11

The foundation of LRTA’s liability is the contract of carriage and its

obligation to indemnify the victim arises from the breach of that contract by
reason of its failure to exercise the high diligence required of the common
carrier. In the discharge of its commitment to ensure the safety of
passengers, a carrier may choose to hire its own employees or avail itself of
the services of an outsider or an independent firm to undertake the task. In
either case, the common carrier is not relieved of its responsibilities under
the contract of carriage.

Should Prudent be made likewise liable? If at all, that liability could only be
for tort under the provisions of Article 217612 and related provisions, in
conjunction with Article 2180,13 of the Civil Code. The premise, however, for
the employer’s liability is negligence or fault on the part of the employee.
Once such fault is established, the employer can then be made liable on the
basis of the presumption juris tantum that the employer failed to exercise
diligentissimi patris families in the selection and supervision of its
employees. The liability is primary and can only be negated by showing due
diligence in the selection and supervision of the employee, a factual matter
that has not been shown. Absent such a showing, one might ask further,
how then must the liability of the common carrier, on the one hand, and an
independent contractor, on the other hand, be described? It would be
solidary. A contractual obligation can be breached by tort and when the
same act or omission causes the injury, one resulting in culpa contractual
and the other in culpa aquiliana, Article 219414 of the Civil Code can well
apply.15 In fine, a liability for tort may arise even under a contract, where tort
is that which breaches the contract.16 Stated differently, when an act which
constitutes a breach of contract would have itself constituted the source of a
quasi-delictual liability had no contract existed between the parties, the
contract can be said to have been breached by tort, thereby allowing the
rules on tort to apply.17

Regrettably for LRT, as well as perhaps the surviving spouse and heirs of
the late Nicanor Navidad, this Court is concluded by the factual finding of the
Court of Appeals that "there is nothing to link (Prudent) to the death of
Nicanor (Navidad), for the reason that the negligence of its employee,
Escartin, has not been duly proven x x x." This finding of the appellate court
is not without substantial justification in our own review of the records of the
case.

There being, similarly, no showing that petitioner Rodolfo Roman himself is

guilty of any culpable act or omission, he must also be absolved from
liability. Needless to say, the contractual tie between the LRT and Navidad
 Manila
THIRD DIVISION
G.R. No. 211424 November 26, 2014
DAVAO HOLIDAY TRANSPORT SERVICES CORPORATION, Petitioner,
vs.
SPOUSES EULOGIO and CARMELITA EMPHASIS, Respondents.
RESOLUTION
REYES, J.:
This resolves the Petition for Review1 filed under Rule 45 of the Rules of
Court by Davao Holiday Transport Services Corporation (petitioner) to assail
the Decision2 dated November 20, 2012 and Resolution3 dated January 22,
2014 of the Court of Appeals (CA) in CA-G.R. CV No. 01632-MIN in favor of
Spouses Eulogio and Carmelita Emphasis (spouses Emphasis). The
petitioner was the owner and operator of Holiday Tax.i No. 177 bearing
Plate No. LVX-171, which figured in an accident on October 18, 2003, at
around 12:45 p.m., that caused the death of a 12-year-old boy, Christian
Emphasis (Christian). The taxicab was then being driven by Orlando Tungal
(Tungal) along Airport Road in Davao City when it bumped Christian, who
was then riding a bicycle.
On October 23, 2003, an information for reckless imprudence resulting in
homicide was filed against Tungal. Meanwhile, on March 1, 2004, the
parents of Christian, the spouses Emphasis, filed a separate action for
damages and attorney’s fees arising from the vehicular accident against
both petitioner and Tungal. Upon the parties’ agreement, the two cases
were jointly tried by the Regional Trial Court (RTC) of Davao City, Branch
12.
On June 17, 2008, the RTC rendered its Judgment/Decision. 4 In the criminal
case, Tungal was found guilty beyond reasonable doubt of the crime of
reckless imprudence resulting inhomicide. He was then sentenced to suffer
the indeterminate penalty of two (2) years and four (4) months of prision
correccional in its minimum period as minimum, to four (4) years, nine (9)
months and ten (10) days of prision correccional in its medium period as
maximum. In the civil case, the petitioner and Tungal were ordered to pay
the spouses Emphasis, jointly and severally, the following sums: (1)
₱75,000.00 as civil indemnity; (2) ₱800,000.00 as moral damages; (3)
₱550,000.00 as actual damages; (4) ₱150,000.00 as exemplary damages;
(5) ₱50,000.00 as attorney’s fees; (6) ₱33,455.00 as litigation expenses;
and (7) interest on the foregoing amounts at the rate of 12% per annum
counted from the date of the decision until full payment.
Feeling aggrieved by the RTC decision, the petitioner appealed the
disposition of the civil case to the CA. It argued that it should be absolved of
any liability for damages, as it exercised extraordinary diligence in the
selection and supervision of its drivers, including Tungal.
On November 20, 2012, the CA rendered its Decision5 affirming the RTC’s
ruling that the petitioner was liable for damages. It, however, modified the
amounts of civil indemnity, moral damages and actual damages, resulting in
the following monetary awards: (1) ₱50,000.00 as civil indemnity; (2)
₱200,000.00 as moral damages; (3) ₱365,696.02 as actual damages; (4)
₱150,000.00 as exemplary damages; (5) ₱50,000.00 as attorney’s fees; and
(6) ₱33,455.00 as litigation expenses. The reduction in the awards was
deemed proper, in view of attending circumstances and prevailing
jurisprudence. The petitioner was also ordered to pay interest at the rate of
six percent (6%) from the time of the offense’s commission, then 12% from
the date of finality ofdecision until full payment.
The CA explained that given Tungal’s failure to appeal his conviction, the
decision finding that he caused the accident had become final and
executory. The petitioner was equally liable for damages given its failure to
present sufficient evidence of Tungal’s qualifications, experience, training
and service records as a driver. The self-serving testimony in court of an
employee of the petitioner failed to establish the company’s due diligence in
the selection and supervision of its employees.
The petitioner’s motion for reconsideration was denied by the CA. Hence,
this petition for review.1âwphi1 The Court finds the petition devoid of merit.
Article 2180 of the New Civil Code provides that an obligation for damages
is demandable not only for one’s own acts or omissions, but also for those of
persons for whom he is responsible. Employers, in particular, shall be liable
for the damages caused by their employees acting within the scope of their
assigned tasks. The responsibility of employers shall only cease upon proof
that they observed all the diligence of the good father of a family to prevent
damage.
The CA correctly held that the petitioner, being Tungal’s employer, was
presumed liable to the heirs of Christian after a finding that it was Tungal
who should be faulted for the accident that caused the death of the child. In
Cang v. Cullen,6 the Court emphasized that when an employee causes
damage due to his own negligence while performing his own duties, there
arises the juris tantum presumption that his employer is negligent, rebuttable
only by proof of observance of the diligence of a good father of a family. In
the selection of prospective employees, employers are required to examine
them as to their qualifications, experience and service records. With respect
to the supervision of employees, employers must formulate standard
operating procedures, monitor their implementation and impose disciplinary
measures for breaches thereof. These facts must be shown by concrete
proof, including documentary evidence.7
The petitioner failed in this aspect. There then appears no cogent reason for
the Court to depart from the RTC’s and CA’s observation that the petitioner
failed to establish the modes and measures it adopted to ensure the proper
selection and supervision of Tungal. This makes proper the order upon the
petitioner to compensate the spouses Emphasis for damages. As the CA
pointed out:
In the instant case, save for the self-serving testimony of witness Romero,
Holiday did not present documentary proof of Tungal’s qualification,
experience and service records. Even the result of the actual driving tests
was not presented to be examined by the court a quo. The claim of trainings
and constant monitoring of all their drivers including Tungal are
unsubstantiated.
In addition, Holiday presented no record of Tungal attending those trainings.
There was also no record of their so-called constant monitoring of their
drivers. They claimed having installed radios on every cab they operate for
the purpose of reminding their drivers to drive safely but, no recordings were
ever made to prove such call every now and then. Holiday also failed to
establish that they also monitor speed of its taxi during its daily trips,
considering that it is engaged in transportation business, particularly
delivering people to and from places. For these, We uphold the court a quo’s
finding that Holiday had been negligent in the selection and supervision of
its driver Tungal.8
In light of prevailing rules and jurisprudence, the reckoning date of the 6%
per annum interest on the monetary awardsmust, however, be modified. It
bears emphasis that the damages imposed upon the petitioner, as Tungal’s
employer, were the result of a separate complaint for damages based on a
quasi-delict under Article 2176, in relation to Article 2180, of the New Civil
Code. Consistent with pertinent jurisprudence, the interest on these awards
must be computed from the date whenthe RTC rendered its decision in the
civil case, or on June 17, 2008, as it was at this timethat a quantification of
the damages may be deemed to have been reasonably ascertained.9 The
CA’s increase of the rate of interest to 12% per annum from the date of
finality of judgment must also be rectified. Under Circular No. 799 issued by
the Bangko Sentral ng Pilipinas on June 21, 2013,"[t]he rate of interest for
the loan or forbearance of any money, goodsor credits and the rate allowed
in judgments, in the absence of an express contract as to such rate of
interest, shall be six percent (6%) per annum." From the finality of a
judgment awarding a sum of money until it is satisfied, the award shall be
considered a forbearance of credit, regardless of whether the award in fact
pertained to one.10 To be consistent with the foregoing, the interest on the
monetary awards shall then be fixed at 6% per annum, until the damages
are fully paid.
WHEREFORE, the petition is DENIED. The Decision dated November 20,
2012 and Resolution dated January 22, 2014 of the Court of Appeals in CA-
G.R. CV No. 01632-MIN are AFFIRMED with MODIFICATION in that
petitioner Davao Holiday Transport Services Corporation is ordered to pay
interest on the monetaryawards in favor of the respondents, Spouses
Eulogio and Carmelita Emphasis, at the rate of 6% per annum, to be
computed from June 17, 2008 until full satisfaction.
SO ORDERED.
 FIRST DIVISION
G.R. No. 172682, July 27, 2016
SULPICIO LINES, INC., Petitioner, v. NAPOLEON SESANTE, NOW
SUBSTITUTED BY MARIBEL ATILANO, KRISTEN MARIE, CHRISTIAN
IONE, KENNETH KERRN AND KARISNA KATE, ALL SURNAMED
SESANTE, Respondent.
DECISION
BERSAMIN, J.:
Moral damages are meant to enable the injured party to obtain the means,
diversions or amusements in order to alleviate the moral suffering.
Exemplary damages are designed to permit the courts to reshape behavior
that is socially deleterious in its consequence by creating negative
incentives or deterrents against such behavior.
The Case
This appeal seeks to undo and reverse the adverse decision promulgated
on June 27, 2005,1 whereby the Court of Appeals (CA) affirmed with
modification the judgment of the Regional Trial Court (RTC), Branch 91, in
Quezon City holding the petitioner liable to pay temperate and moral
damages due to breach of contract of carriage.2chanrobleslaw
Antecedents
On September 18, 1998, at around 12:55 p.m., the M/V Princess of the
Orient, a passenger vessel owned and operated by the petitioner, sank near
Fortune Island in Batangas. Of the 388 recorded passengers, 150 were
lost.3 Napoleon Sesante, then a member of the Philippine National Police
(PNP) and a lawyer, was one of the passengers who survived the sinking.
He sued the petitioner for breach of contract and damages.4chanrobleslaw
Sesante alleged in his complaint that the M/V Princess of the Orient left the
Port of Manila while Metro Manila was experiencing stormy weather; that at
around 11:00 p.m., he had noticed the vessel listing starboard, so he had
gone to the uppermost deck where he witnessed the strong winds and big
waves pounding the vessel; that at the same time, he had seen how the
passengers had been panicking, crying for help and frantically scrambling
for life jackets in the absence of the vessel's officers and crew; that sensing
danger, he had called a certain Vency Ceballos through his cellphone to
request him to inform the proper authorities of the situation; that thereafter,
big waves had rocked the vessel, tossing him to the floor where he was
pinned by a long steel bar; that he had freed himself only after another wave
had hit the vessel;5 that he had managed to stay afloat after the vessel had
sunk, and had been carried by the waves to the coastline of Cavite and
Batangas until he had been rescued; that he had suffered tremendous
hunger, thirst, pain, fear, shock, serious anxiety and mental anguish; that he
had sustained injuries,6 and had lost money, jewelry, important documents,
police uniforms and the .45 caliber pistol issued to him by the PNP; and that
because it had committed bad faith in allowing the vessel to sail despite the
storm signal, the petitioner should pay him actual and moral damages of
P500,000.00 and P1,000,000.00, respectively.7chanrobleslaw
In its defense, the petitioner insisted on the seaworthiness of the M/V
Princess of the Orient due to its having been cleared to sail from the Port of
Manila by the proper authorities; that the sinking had been due to force
majeure; that it had not been negligent; and that its officers and crew had
also not been negligent because they had made preparations to abandon
the vessel because they had launched life rafts and had provided the
passengers assistance in that regard.8chanrobleslaw
Decision of the RTC
On October 12, 2001, the RTC rendered its judgment in favor of the
respondent,9 holding as follows:ChanRoblesVirtualawlibrary
WHEREFORE, judgment is hereby rendered in favor of plaintiff Napoleon
Sesante and against defendant Sulpicio Lines, Inc., ordering said defendant
to pay plaintiff:
1. Temperate damages in the amount of P400,000.00;
2. Moral damages in the amount of One Million Pesos
(P1,000,000.00);
3. Costs of suit.
SO ORDERED.10chanroblesvirtuallawlibrary
The RTC observed that the petitioner, being negligent, was liable to Sesante
pursuant to Articles 1739 and 1759 of the Civil Code; that the petitioner had
not established its due diligence in the selection and supervision of the
vessel crew; that the ship officers had failed to inspect the stowage of
cargoes despite being aware of the storm signal; that the officers and crew
of the vessel had not immediately sent a distress signal to the Philippine
Coast Guard; that the ship captain had not called for then "abandon ship"
protocol; and that based on the report of the Board of Marine Inquiry (BMI),
the erroneous maneuvering of the vessel by the captain during the extreme
weather condition had been the immediate and proximate cause of the
sinking.
The petitioner sought reconsideration, but the RTC only partly granted its
motion by reducing the temperate damages from P500,000.00 to
P300,000.00.11chanrobleslaw
Dissatisfied, the petitioner appealed.12 It was pending the appeal in the CA
when Sesante passed away. He was substituted by his
heirs.13chanrobleslaw
Judgment of the CA
On June 27, 2005, the CA promulgated its assailed decision. It lowered the
temperate damages to P120,000.00, which approximated the cost of
Sesante's lost personal belongings; and held that despite the seaworthiness
of the vessel, the petitioner remained civilly liable because its officers and
crew had been negligent in performing their duties. 14chanrobleslaw
Sttill aggrieved, Sulpicio Lines moved for reconsideration, but the CA denied
the motion.15chanrobleslaw
Hence, this appeal.
Issues
The petitioner attributes the following errors to the CA, to
wit:ChanRoblesVirtualawlibrary
I
THE ASSAILED DECISION ERRED IN SUSTAINING THE AWARD OF
MORAL DAMAGES, AS THE INSTANT CASE IS FOR ALLEGED
PERSONAL INJURIES PREDICATED ON BREACH OF CONTRACT OF
CARRIAGE, AND THERE BEING NO PROOF OF BAD FAITH ON THE
PART OF SULPICIO
II
THE ASSAILED DECISION ERRED IN SUSTAINING THE AMOUNT OF
MORAL DAMAGES AWARDED, THE SAME BEING UNREASONABLE,
EXCESSIVE AND UNCONSCIONABLE, AND TRANSLATES TO UNJUST
ENRICHMENT AGAINST SULPICIO
III
THE ASSAILED DECISION ERRED IN SUSTAINING THE AWARD OF
TEMPERATE DAMAGES AS THE SAME CANNOT SUBSTITUTE FOR A
FAILED CLAIM FOR ACTUAL DAMAGES, THERE BEING NO
COMPETENT PROOF TO WARRANT SAID AWARD
IV
THE AWARD OF TEMPERATE DAMAGES IS UNTENABLE AS THE
REQUISITE NOTICE UNDER THE LAW WAS NOT GIVEN TO SULPICIO
IN ORDER TO HOLD IT LIABLE FOR THE ALLEGED LOSS OF
SESANTE'S PERSONAL BELONGINGS
V
THE ASSAILED DECISION ERRED IN SUBSTITUTING THE HEIRS OF
RESPONDENT SESANTE IN THE INSTANT CASE, THE SAME BEING A
PERSONAL ACTION WHICH DOES NOT SURVIVE
VI
THE ASSAILED DECISION ERRED IN APPLYING ARTICLE 1759 OF THE
NEW CIVIL CODE AGAINST SULPICIO SANS A CLEAR-CUT FINDING
OF SULPICIO'S BAD FAITH IN THE INCIDENT16chanroblesvirtuallawlibrary
In other words, to be resolved are the following, namely: (1) Is the complaint
for breach of contract and damages a personal action that does not survive
the death of the plaintiff?; (2) Is the petitioner liable for damages under
Article 1759 of the Civil Code?; and (3) Is there sufficient basis for awarding
moral and temperate damages?
Ruling of the Court
The appeal lacks merit.
I
An action for breach of contract of carriage survives the death of the
plaintiff
The petitioner urges that Sesante's complaint for damages was purely
personal and cannot be transferred to his heirs upon his death. Hence, the
complaint should be dismissed because the death of the plaintiff abates a
personal action.
The petitioner's urging is unwarranted.
Section 16, Rule 3 of the Rules of Court lays down the proper procedure in
the event of the death of a litigant, viz.:ChanRoblesVirtualawlibrary
Section 16. Death of party; duty of counsel. - Whenever a party to a
pending action dies, and the claim is not thereby extinguished, it shall
be the duty of his counsel to inform the court within thirty (30) days after
such death of the fact thereof, and to give the name and address of his legal
representative or representatives. Failure of counsel to comply with his duty
shall be a ground for disciplinary action.
The heirs of the deceased may be allowed to be substituted for the
deceased, without requiring the appointment of an executor or administrator
and the court may appoint a guardian ad litem for the minor heirs.
xxxx
Substitution by the heirs is not a matter of jurisdiction, but a requirement of
due process.17 It protects the right of due process belonging to any party,
that in the event of death the deceased litigant continues to be protected
and properly represented in the suit through the duly appointed legal
representative of his estate.18chanrobleslaw
The application of the rule on substitution depends on whether or not the
action survives the death of the litigant. Section 1, Rule 87 of the Rules of
Court enumerates the following actions that survive the death of a party,
namely: (1) recovery of real or personal property, or an interest from the
estate; (2) enforcement of liens on the estate; and (3) recovery of damages
for an injury to person or property. On the one hand, Section 5, Rule 86 of
the Rules of Court lists the actions abated by death as including: (1) claims
for funeral expenses and those for the last sickness of the decedent; (2)
judgments for money; and (3) all claims for money against the deceased,
arising from contract, express or implied.
A contract of carriage generates a relation attended with public duty, neglect
or malfeasance of the carrier's employees and gives ground for an action for
damages.19 Sesante's claim against the petitioner involved his personal
injury caused by the breach of the contract of carriage. Pursuant to the
aforecited rules, the complaint survived his death, and could be continued
by his heirs following the rule on substitution.
II
The petitioner is liable for breach of contract of carriage
The petitioner submits that an action for damages based on breach of
contract of carriage under Article 1759 of the Civil Code should be read in
conjunction with Article 2201 of the same code; that although Article 1759
only provides for a presumption of negligence, it does not envision
automatic liability; and that it was not guilty of bad faith considering that the
sinking of M/V Princess of the Orient had been due to a fortuitous event, an
exempting circumstance under Article 1174 of the Civil Code.
The submission has no substance.
Article 1759 of the Civil Code does not establish a presumption of
negligence because it explicitly makes the common carrier liable in the
event of death or injury to passengers due to the negligence or fault of the
common carrier's employees. It reads:ChanRoblesVirtualawlibrary
Article 1759. Common carriers are liable for the death or injuries to
passengers through the negligence or willful acts of the former's
employees, although such employees may have acted beyond the scope of
their authority or in violation of the orders of the common carriers.
This liability of the common carriers does not cease upon proof that they
exercised all the diligence of a good father of a family in the selection and
supervision of their employees.
The liability of common carriers under Article 1759 is demanded by the duty
of extraordinary diligence required of common carriers in safely carrying
their passengers.20chanrobleslaw
On the other hand, Article 1756 of the Civil Code lays down the presumption
of negligence against the common carrier in the event of death or injury of
its passenger, viz.:ChanRoblesVirtualawlibrary
Article 1756. In case of death of or injuries to passengers, common carriers
are presumed to have been at fault or to have acted negligently, unless they
prove that they observed extraordinary diligence as prescribed in Articles
1733 and 1755.
Clearly, the trial court is not required to make an express finding of the
common carrier's fault or negligence.21 Even the mere proof of injury
relieves the passengers from establishing the fault or negligence of the
carrier or its employees.22 The presumption of negligence applies so long as
there is evidence showing that: (a) a contract exists between the passenger
and the common carrier; and (b) the injury or death took place during the
existence of such contract.23 In such event, the burden shifts to the common
carrier to prove its observance of extraordinary diligence, and that an
unforeseen event or force majeure had caused the injury.24chanrobleslaw
Sesante sustained injuries due to the buffeting by the waves and
consequent sinking of M/V Princess of the Orient where he was a
passenger. To exculpate itself from liability, the common carrier vouched for
the seaworthiness of M/V Princess of the Orient, and referred to the BMI
report to the effect that the severe weather condition - a force majeure - had
brought about the sinking of the vessel.
The petitioner was directly liable to Sesante and his heirs.
A common carrier may be relieved of any liability arising from a fortuitous
event pursuant to Article 117425cralawred of the Civil Code. But while it may
free a common carrier from liability, the provision still requires exclusion of
human agency from the cause of injury or loss.26 Else stated, for a common
carrier to be absolved from liability in case of force majeure, it is not enough
that the accident was caused by a fortuitous event. The common carrier
must still prove that it did not contribute to the occurrence of the incident due
to its own or its employees' negligence.27 We explained in Schmitz Transport
& Brokerage Corporation v. Transport Venture, Inc.,28 as
follows:ChanRoblesVirtualawlibrary
In order to be considered a fortuitous event, however, (1) the cause of the
unforeseen and unexpected occurrence, or the failure of the debtor to
comply with his obligation, must be independent of human will; (2) it must be
impossible to foresee the event which constitute 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 any manner;
and (4) the obligor must be free from any participation in the aggravation of
the injury resulting to the creditor.
[T]he principle embodied in the act of God doctrine strictly requires that the
act must be occasioned solely by the violence of nature. Human
intervention is to be excluded from creating or entering into the cause
of the mischief. When the effect is found to be in part the result of the
participation of man, whether due to his active intervention or neglect
or failure to act, the whole occurrence is then humanized and removed
from the rules applicable to the acts of God.29 (bold underscoring
supplied for emphasis)
The petitioner has attributed the sinking of the vessel to the storm
notwithstanding its position on the seaworthiness of M/V Princess of the
Orient. Yet, the findings of the BMI directly contradicted the petitioner's
attribution, as follows:ChanRoblesVirtualawlibrary
7. The Immediate and the Proximate Cause of the Sinking
The Captain's erroneous maneuvers of the M/V Princess of the
Orient minutes before she sunk [sic] had caused the accident. It should be
noted that during the first two hours when the ship left North Harbor, she
was navigating smoothly towards Limbones Point. During the same period,
the ship was only subjected to the normal weather stress prevailing at the
time. She was then inside Manila Bar. The waves were observed to be
relatively small to endanger the safety of the ship. It was only when the MV
Princess of the Orient had cleared Limbones Pt. while navigating towards
the direction of the Fortune Island when this agonizing misfortune struck the
ship.
Initially, a list of three degrees was observed. The listing of the ship to her
portside had continuously increased. It was at this point that the captain had
misjudged the situation. While the ship continuously listed to her portside
and was battered by big waves, strong southwesterly winds, prudent
judgement [sic] would dictate that the Captain should have considerably
reduced the ship's speed. He could have immediately ordered the Chief
Engineer to slacken down the speed. Meanwhile, the winds and waves
continuously hit the ship on her starboard side. The waves were at least
seven to eight meters in height and the wind velocity was a[t] 25 knots.
The MV Princess of the Orient being a close-type ship (seven decks, wide
and high superstructure) was vulnerable and exposed to the howling winds
and ravaging seas. Because of the excessive movement, the solid and liquid
cargo below the decks must have shifted its weight to port, which could have
contributed to the tilted position of the ship.
Minutes later, the Captain finally ordered to reduce the speed of the ship to
14 knots. At the same time, he ordered to put ballast water to the starboard-
heeling tank to arrest the continuous listing of the ship. This was an exercise
in futility because the ship was already listing between 15 to 20 degrees to
her portside. The ship had almost reached the maximum angle of her loll. At
this stage, she was about to lose her stability.
Despite this critical situation, the Captain executed several starboard
maneuvers. Steering the course of the Princess to starboard had greatly
added to her tilting. In the open seas, with a fast speed of 14 knots, advance
maneuvers such as this would tend to bring the body of the ship in the
opposite side. In navigational terms, this movement is described as the
centripetal force. This force is produced by the water acting on the side of
the ship away from the center of the turn. The force is considered to act at
the center of lateral resistance which, in this case, is the centroid of the
underwater area of the ship's side away from the center of the turn. In the
case of the Princess, when the Captain maneuvered her to starboard, her
body shifted its weight to port. Being already inclined to an angle of 15
degrees, coupled with the instantaneous movement of the ship, the cargoes
below deck could have completely shifted its position and weight towards
portside. By this time, the ship being ravaged simultaneously by ravaging
waves and howling winds on her starboard side, finally lost her
grip.30chanroblesvirtuallawlibrary
Even assuming the seaworthiness of the MA/ Princess of the Orient, the
petitioner could not escape liability considering that, as borne out by the
aforequoted findings of the BMI, the immediate and proximate cause of the
sinking of the vessel had been the gross negligence of its captain in
maneuvering the vessel.
The Court also notes that Metro Manila was experiencing Storm Signal No.
1 during the time of the sinking.31 The BMI observed that a vessel like the
M/V Princess of the Orient, which had a volume of 13.734 gross tons,
should have been capable of withstanding a Storm Signal No. 1 considering
that the responding fishing boats of less than 500 gross tons had been able
to weather through the same waves and winds to go to the succor of the
sinking vessel and had actually rescued several of the latter's distressed
passengers.32chanrobleslaw
III
The award of moral damages and temperate damages is proper
The petitioner argues that moral damages could be meted against a
common carrier only in the following instances, to wit: (1) in the situations
enumerated by Article 2201 of the Civil Code; (2) in cases of the death of a
passenger; or (3)where there was bad faith on the part of the common
carrier. It contends that none of these instances obtained herein; hence, the
award should be deleted.
We agree with the petitioner that moral damages may be recovered in an
action upon breach of contract of carriage only when: (a) death of a
passenger results, or (b) it is proved that the carrier was guilty of fraud and
bad faith, even if death does not result.33 However, moral damages may be
awarded if the contractual breach is found to be wanton and deliberately
injurious, or if the one responsible acted fraudulently or with malice or bad
faith.34chanrobleslaw
The CA enumerated the negligent acts committed by the officers and crew
of M/V Princess of the Orient, viz.:ChanRoblesVirtualawlibrary
x x x. [W]hile this Court yields to the findings of the said investigation report,
yet it should be observed that what was complied with by Sulpicio Lines
were only the basic and minimal safety standards which would qualify the
vessel as seaworthy. In the same report however it also revealed that the
immediate and proximate cause of the sinking of the M/V Princess of the
Orient was brought by the following: erroneous maneuvering command of
Captain Esrum Mahilum and due to the weather condition prevailing at the
time of the tragedy. There is no doubt that under the circumstances the crew
of the vessel were negligent in manning it. In fact this was clearly
established by the investigation of the Board of Marine Inquiry where it was
found that:ChanRoblesVirtualawlibrary
The Chief Mate, when interviewed under oath, had attested that he was not
able to make stability calculation of the ship vis-a-vis her cargo. He did not
even know the metacentric height (GM) of the ship whether it be positive or
negative.
As cargo officer of the ship, he failed to prepare a detailed report of the
ship's cargo stowage plan.
He likewise failed to conduct the soundings (measurement) of the ballast
tanks before the ship departed from port. He readily presumed that the ship
was full of ballast since the ship was fully ballasted when she left Cebu for
Manila on 16 September 1998 and had never discharge[d] its contents since
that time.
Being the officer-in-charge for emergency situation (sic) like this, he failed to
execute and supervise the actual abandonship (sic) procedure. There was
no announcement at the public address system of abandonship (sic), no
orderly distribution of life jackets and no orderly launching of life rafts. The
witnesses have confirmed this finding on their sworn statements.
There was miscalculation in judgment on the part of the Captain when he
erroneously navigated the ship at her last crucial moment. x x x
To aggravate his case, the Captain, having full command and responsibility
of the MV Princess of the Orient, had failed to ensure the proper execution
of the actual abandoning of the ship.
The deck and engine officers (Second Mate, Third Mate, Chief Engineers,
Second Engineer, Third Engineer and Fourth Engineer), being in charge of
their respective abandonship (sic) post, failed to supervise the crew and
passengers in the proper execution of abandonship (sic) procedure.
The Radio Officer (spark) failed to send the SOS message in the
internationally accepted communication network (VHF Channel 16). Instead,
he used the Single Side Band (SSB) radio in informing the company about
the emergency situation. x x x x35chanroblesvirtuallawlibrary
The aforestated negligent acts of the officers and crew of M/V Princess of
the Orient could not be ignored in view of the extraordinary duty of the
common carrier to ensure the safety of the passengers. The totality of the
negligence by the officers and crew of M/V Princess of the Orient, coupled
with the seeming indifference of the petitioner to render assistance to
Sesante,36 warranted the award of moral damages.
While there is no hard-and-fast rule in determining what is a fair and
reasonable amount of moral damages, the discretion to make the
determination is lodged in the trial court with the limitation that the amount
should not be palpably and scandalously excessive. The trial court then
bears in mind that moral damages are not intended to impose a penalty on
the wrongdoer, or to enrich the plaintiff at the expense of the
defendant.37 The amount of the moral damages must always reasonably
approximate the extent of injury and be proportional to the wrong
committed.38chanrobleslaw
The Court recognizes the mental anguish, agony and pain suffered by
Sesante who fought to survive in the midst of the raging waves of the sea
while facing the immediate prospect of losing his life. His claim for moral and
economic vindication is a bitter remnant of that most infamous tragedy that
left hundreds of families broken in its wake. The anguish and moral
sufferings he sustained after surviving the tragedy would always include the
memory of facing the prospect of his death from drowning, or dehydration,
or being preyed upon by sharks. Based on the established circumstances,
his survival could only have been a miracle wrought by God's grace, by
which he was guided in his desperate swim for the safety of the shore. But
even with the glory of survival, he still had to grapple with not just the
memory of having come face to face with almost certain death, but also with
having to answer to the instinctive guilt for the rest of his days of being
chosen to live among the many who perished in the tragedy.39chanrobleslaw
While the anguish, anxiety, pain and stress experienced by Sesante during
and after the sinking cannot be quantified, the moral damages to be
awarded should at least approximate the reparation of all the consequences
of the petitioner's negligence. With moral damages being meant to enable
the injured party to obtain the means, diversions or amusements in order to
alleviate his moral and physical sufferings,40 the Court is called upon to
ensure that proper recompense be allowed to him, through his heirs. For this
purpose, the amount of P1,000,000.00, as granted by the RTC and affirmed
by the CA, is maintained.
The petitioner contends that its liability for the loss of Sesante's personal
belongings should conform with Article 1754, in relation to Articles 1998,
2000 to 2003 of the Civil Code, which provide:ChanRoblesVirtualawlibrary
Article 1754. The provisions of Articles 1733 to 1753 shall apply to the
passenger's baggage which is not in his personal custody or in that of his
employees. As to other baggage, the rules in Articles 1998 and 2000 to
2003 concerning the responsibility of hotel-keepers shall be applicable.
xxxx
Article 1998. The deposit of effects made by travellers in hotels or inns shall
also be regarded as necessary. The keepers of hotels or inns shall be
responsible for them as depositaries, provided that notice was given to
them, or to their employees, of the effects brought by the guests and that, on
the part of the latter, they take the precautions which said hotel-keepers or
their substitutes advised relative to the care and vigilance of their effects.
xxxx
Article 2000. The responsibility referred to in the two preceding articles shall
include the loss of, or injury to the personal property of the guests caused by
the servants or employees of the keepers of hotels or inns as well as by
strangers; but not that which may proceed from any force majeure. The fact
that travellers are constrained to rely on the vigilance of the keeper of the
hotel or inn shall be considered in determining the degree of care required of
him.
Article 2001. The act of a thief or robber, who has entered the hotel is not
deemed force majeure, unless it is done with the use of arms or through an
irresistible force.
Article 2002. The hotel-keeper is not liable for compensation if the loss is
due to the acts of the guest, his family, servants or visitors, or if the loss
arises from the character of the things brought into the hotel.
Article 2003. The hotel-keeper cannot free himself from responsibility by
posting notices to the effect that he is not liable for the articles brought by
the guest. Any stipulation to the contrary between the hotel-keeper and the
guest whereby the responsibility of the former as set forth in Articles 1998 to
2001 is suppressed or diminished shall be void.
The petitioner denies liability because Sesante's belongings had remained
in his custody all throughout the voyage until the sinking, and he had not
notified the petitioner or its employees about such belongings. Hence,
absent such notice, liability did not attach to the petitioner.
Is notification required before the common carrier becomes liable for lost
belongings that remained in the custody of the passenger?
We answer in the negative.
The rule that the common carrier is always responsible for the passenger's
baggage during the voyage needs to be emphasized. Article 1754 of
the Civil Code does not exempt the common carrier from liability in case of
loss, but only highlights the degree of care required of it depending on who
has the custody of the belongings. Hence, the law requires the common
carrier to observe the same diligence as the hotel keepers in case the
baggage remains with the passenger; otherwise, extraordinary diligence
must be exercised.41 Furthermore, the liability of the common carrier
attaches even if the loss or damage to the belongings resulted from the acts
of the common carrier's employees, the only exception being where such
loss or damages is due to force majeure.42chanrobleslaw
In YHT Realty Corporation v. Court of Appeals,43 we declared the actual
delivery of the goods to the innkeepers or their employees as unnecessary
before liability could attach to the hotelkeepers in the event of loss of
personal belongings of their guests considering that the personal effects
were inside the hotel or inn because the hotelkeeper shall remain
accountable.44 Accordingly, actual notification was not necessary to render
the petitioner as the common carrier liable for the lost personal belongings
of Sesante. By allowing him to board the vessel with his belongings without
any protest, the petitioner became sufficiently notified of such belongings.
So long as the belongings were brought inside the premises of the vessel,
the petitioner was thereby effectively notified and consequently duty-bound
to observe the required diligence in ensuring the safety of the belongings
during the voyage. Applying Article 2000 of the Civil Code, the petitioner
assumed the liability for loss of the belongings caused by the negligence of
its officers or crew. In view of our finding that the negligence of the officers
and crew of the petitioner was the immediate and proximate cause of the
sinking of the M/V Princess of the Orient, its liability for Sesante's lost
personal belongings was beyond question.
The petitioner claims that temperate damages were erroneously awarded
because Sesante had not proved pecuniary loss; and that the CA merely
relied on his self-serving testimony.
The award of temperate damages was proper.
Temperate damages may be recovered when some pecuniary loss has
been suffered but the amount cannot, from the nature of the case, be proven
with certainty.45 Article 222446 of the Civil Code expressly authorizes the
courts to award temperate damages despite the lack of certain proof of
actual damages.47chanrobleslaw
Indubitably, Sesante suffered some pecuniary loss from the sinking of the
vessel, but the value of the loss could not be established with certainty. The
CA, which can try facts and appreciate evidence, pegged the value of the
lost belongings as itemized in the police report at P120,000.00. The
valuation approximated the costs of the lost belongings. In that context, the
valuation of P120,000.00 is correct, but to be regarded as temperate
damages.
In fine, the petitioner, as a common carrier, was required to observe
extraordinary diligence in ensuring the safety of its passengers and their
personal belongings. It being found herein short of the required diligence
rendered it liable for the resulting injuries and damages sustained by
Sesante as one of its passengers.
Should the petitioner be further held liable for exemplary damages?
In contracts and quasi-contracts, the Court has the discretion to award
exemplary damages if the defendant acted in a wanton, fraudulent, reckless,
oppressive, or malevolent manner.48 Indeed, exemplary damages cannot be
recovered as a matter of right, and it is left to the court to decide whether or
not to award them.49 In consideration of these legal premises for the
exercise of the judicial discretion to grant or deny exemplary damages in
contracts and quasi-contracts against a defendant who acted in a wanton,
fraudulent,' reckless, oppressive, or malevolent manner, the Court hereby
awards exemplary damages to Sesante.
First of all, exemplary damages did not have to be specifically pleaded or
proved, because the courts had the discretion to award them for as long as
the evidence so warranted. In Marchan v. Mendoza,50 the Court has
relevantly discoursed:ChanRoblesVirtualawlibrary
x x x. It is argued that this Court is without jurisdiction to adjudicate
this exemplary damages since there was no allegation nor prayer, nor
proof, nor counterclaim of error for the same by the appellees. It is to
be observed however, that in the complaint, plaintiffs "prayed for such
other and further relief as this Court may deem just and equitable."
Now, since the body of the complaint sought to recover damages
against the defendant-carrier wherein plaintiffs prayed for
indemnification for the damages they suffered as a result of the
negligence of said Silverio Marchan who is appellant's employee; and
since exemplary damages is intimately connected with general
damages, plaintiffs may not be expected to single out by express term
the kind of damages they are trying to recover against the defendant's
carrier. Suffice it to state that when plaintiffs prayed in their complaint
for such other relief and remedies that may be availed of under the
premises, in effect, therefore, the court is called upon to exercise and
use its discretion whether the imposition of punitive or exemplary
damages even though not expressly prayed or pleaded in the plaintiffs'
complaint.
x x x It further appears that the amount of exemplary damages need not
be proved, because its determination depends upon the amount of
compensatory damages that may be awarded to the claimant. If the
amount of exemplary damages need not be proved, it need not also be
alleged, and the reason is obvious because it is merely incidental or
dependent upon what the court may award as compensatory damages.
Unless and until this premise is determined and established, what may
be claimed as exemplary damages would amount to a mere surmise or
speculation. It follows as a necessary consequence that the amount of
exemplary damages need not be pleaded in the complaint because the
same cannot be predetermined. One can merely ask that it be
determined by the court if in the use of its discretion the same is
warranted by the evidence, and this is just what appellee has standard of care and circumspection that the law on common carriers
done. (Bold underscoring supplied for emphasis) demanded. Accordingly, we hereby fix the sum of P1,000,000.00 in order to
serve fully the objective of exemplarity among those engaged in the
And, secondly, exemplary damages are designed by our civil law to "permit
business of transporting passengers and cargo by sea. The amount would
the courts to reshape behavior that is socially deleterious in its consequence
not be excessive, but proper. As the Court put it in Pereña v. Zarate:57
by creating negative incentives or deterrents against such behavior."51 The
Anent the P1,000,000.00 allowed as exemplary damages, we should not
nature and purpose for this kind of damages have been well-stated
reduce the amount if only to render effective the desired example for the
in People v. Dalisay,52 to wit:ChanRoblesVirtualawlibrary
public good. As a common carrier, the Perenas needed to be vigorously
Also known as 'punitive' or 'vindictive' damages, exemplary or corrective
reminded to observe their duty to exercise extraordinary diligence to prevent
damages are intended to serve as a deterrent to serious wrong doings,
a similarly senseless accident from happening again. Only by an award of
and as a vindication of undue sufferings and wanton invasion of the
exemplary damages in that amount would suffice to instill in them and others
rights of an injured or a punishment for those guilty of outrageous
similarly situated like them the ever-present need for greater and constant
conduct. These terms are generally, but not always, used interchangeably.
vigilance in the conduct of a business imbued with public interest.58 (Bold
In common law, there is preference in the use of exemplary damages when
underscoring supplied for emphasis)
the award is to account for injury to feelings and for the sense of indignity
and humiliation suffered by a person as a result of an injury that has been WHEREFORE, the Court AFFIRMS the decision promulgated on June 27,
maliciously and wantonly inflicted, the theory being that there should be 2005 with the MODIFICATIONS that: (a) the amount of moral damages is
compensation for the hurt caused by the highly reprehensible conduct of the fixed at P1,000,000.00; (b) the amount of P1,000,000.00 is granted as
defendant - associated with such circumstances as willfulness, wantonness, exemplary damages; and (c) the sum of P120,000.00 is allowed as
malice, gross negligence or recklessness, oppression, insult or fraud or temperate damages, all to be paid to the heirs of the late Napoleon Sesante.
gross fraud - that intensifies the injury. The terms punitive or vindictive In addition, all the amounts hereby awarded shall earn interest of 6% per
damages are often used to refer to those species of damages that may be annum from the finality of this decision until fully paid. Costs of suit to be
awarded against a person to punish him for his outrageous conduct. In paid by the petitioner.
either case, these damages are intended in good measure to deter the
wrongdoer and others like him from similar conduct in the future. (Bold SO ORDERED.chanRoblesvirtualLawlibrary
underscoring supplied for emphasis)
The BMI found that the "erroneous maneuvers" during the ill-fated voyage
by the captain of the petitioner's vessel had caused the sinking. After the
vessel had cleared Limbones Point while navigating towards the direction of
Fortune Island, the captain already noticed the listing of the vessel by three
degrees to the portside of the vessel, but, according to the BMI, he did not
exercise prudence as required by the situation in which his vessel was
suffering the battering on the starboard side by big waves of seven to eight
meters high and strong southwesterly winds of 25 knots. The BMI pointed
out that he should have considerably reduced the speed of the vessel based
on his experience about the vessel - a close-type ship of seven decks, and
of a wide and high superstructure - being vulnerable if exposed to strong
winds and high waves. He ought to have also known that maintaining a high
speed under such circumstances would have shifted the solid and liquid
cargo of the vessel to port, worsening the tilted position of the vessel. It was
only after a few minutes thereafter that he finally ordered the speed to go
down to 14 knots, and to put ballast water to the starboard-heeling tank to
arrest the continuous listing at portside. By then, his moves became an
exercise in futility because, according to the BMI, the vessel was already
listing to her portside between 15 to 20 degrees, which was almost the
maximum angle of the vessel's loll. It then became inevitable for the vessel
to lose her stability.

The BMI concluded that the captain had executed several starboard
maneuvers despite the critical situation of the vessel, and that the
maneuvers had greatly added to the tilting of the vessel. It
observed:ChanRoblesVirtualawlibrary
x x x In the open seas, with a fast speed of 14 knots, advance
maneuvers such as this would tend to bring the body of the ship in the
opposite side. In navigational terms, this movement is described as
the centripetal force. This force is produced by the water acting on the
side of the ship away from the center of the turn. The force is
considered to act at the center of lateral resistance which, in this case,
is the centroid of the underwater area of the ship's side away from the
center of the turn. In the case of the Princess, when the Captain
maneuvered her to starboard, her body shifted its weight to port. Being
already inclined to an angle of 15 degrees, coupled with the
instantaneous movement of the ship, the cargoes below deck could
have completely shifted its position and weight towards portside. By
this time, the ship being ravaged simultaneously by ravaging waves
and howling winds on her starboard side, finally lost her
grip.53chanroblesvirtuallawlibrary
Clearly, the petitioner and its agents on the scene acted wantonly and
recklessly. Wanton and recklessare virtually synonymous in meaning as
respects liability for conduct towards others.54Wanton means characterized
by extreme recklessness and utter disregard for the rights of others; or
marked by or manifesting arrogant recklessness of justice or of rights or
feelings of others.55 Conduct is reckless when it is an extreme departure
from ordinary care, in a situation in which a high degree of danger is
apparent. It must be more than any mere mistake resulting from
inexperience, excitement, or confusion, and more than mere
thoughtlessness or inadvertence, or simple inattention.56chanrobleslaw

The actuations of the petitioner and its agents during the incident attending
the unfortunate sinking of the M/V Princess of the Orient were far below the
 FIRST DIVISION
G.R. No. 167797, June 15, 2015
METRO MANILA TRANSIT CORPORATION, Petitioner, v. REYNALDO
CUEVAS AND JUNNEL CUEVAS, REPRESENTED BY REYNALDO
CUEVAS, Respondents.
DECISION
BERSAMIN, J.:
The registered owner of a motor vehicle whose operation causes injury to
another is legally liable to the latter. But it is error not to allow the registered
owner to recover reimbursement from the actual and present owner by way
of its cross-claim.
Antecedents
Metro Manila Transit Corporation (MMTC) and Mina's Transit Corporation
(Mina's Transit) entered into an agreement to sell dated August 31,
1990,1 whereby the latter bought several bus units from the former at a
stipulated price. They agreed that MMTC would retain the ownership of the
buses until certain conditions were met, but in the meantime Mina's Transit
could operate the buses within Metro Manila.
On October 14, 1994, one of the buses subject of the agreement to sell,
bearing plate number NXM-449-TB-pil 94, hit and damaged a Honda
Motorcycle owned by Reynaldo and driven by Junnel. Reynaldo and Junnel
sued MMTC and Mina's Transit for damages in the Regional Trial Court
(RTC) in Cavite, docketed as Civil Case No. N-6127, pertinently alleging and
praying as follows:chanRoblesvirtualLawlibrary
5. Defendants Metro Manila Transit Corporation and Mina's Transit are
registered joint-owners or operators of an MMTC/Minas Transit passenger
bus with Plate No. NXM-449-TB-pil 94, and is the employers (sic) of the
driver Jessie Rillera y Gaceta.
6. On October 14, 1994, at around 7:45 P.M., while Plaintiff was riding on a
Honda Motocycle, with a companion at the back, along South
Superhighway, in front of Magallanes Supermarket in Makati, Metro Manila,
a few meters away from the approaches of Magallanes Overpass complex,
coming from the South and heading toward the North, the defendants' driver
Jessie Rillera Y Gaceta, driving the MMTC/Mina's Transit Passenger bus
with Plate No. NXM-449-TB-pil 94, heading in the same direction and
following Plaintiffs motorcycle, recklessly and carelessly attempted to
overtake Plaintiffs Motorcycle on the right side of the lane, in the course of
which the said Jessie Rillera side swiped the Plaintiff as the said Jessie
Rillera accelerated speed;
7. As a result, plaintiff Junnel Cuevas and his companion were thrown to the
road and Plaintiffs right leg was severely fractured, and the Honda
Motorcycle owned by plaintiff Reynaldo Cuevas was extensively damaged;
8. Plaintiff Junnel Cuevas and his companion were then brought to the
Philippine General Hospital along Taft Avenue in Manila, where the said
Plaintiff had to undergo several operations on his right leg; but in spite of the
several operations which he had undergone, Plaintiff Junnel Cuevas, even
up to now, is unable to walk on his own without the aid of crutches and is
still scheduled for more operations; a xerox copy of his medical certificate is
hereto attached as Annex A hereof;2chanrobleslaw
xxxx
WHEREFORE, it is most respectfully prayed that after notice and hearing a
judgment be rendered ordering the defendants jointly and severally to pay
Plaintiffs the following sums of money:ChanRoblesVirtualawlibrary
1) P200,000.00 more or less, representing actual medical expenses;
2) P18,940.00 representing the cost of repair of the damaged motorcycle
3) P300,000.00 as moral damage(s)
4) P100,000.00 as exemplary damage(s)
5) P50,000.00 as nominal damage(s)
6) P15,000.00 as litigation expenses
7) P30,000.00 as attorney's fees
8) to pay the cost of the suit.3
In its answer with compulsory counterclaim and cross-claim,4 MMTC denied
liability, and averred that although it retained the ownership of the bus, the
actual operator and employer of the bus driver was Mina's Transit; and that,
in support of its cross-claim against Mina's Transit, a provision in the
agreement to sell mandated Mina's Transport to hold it free from liability
arising from the use and operation of the bus units.5chanrobleslaw
On its part, Mina's Transit contended that it was not liable because: (a) it
exercised due diligence in the selection and supervision of its employees;
(b) its bus driver exercised due diligence; and (c) Junnel's negligence was
the cause of the accident.
Meanwhile, Mina's Transit filed a third-party complaint against its insurer,
Perla Compania de Seguros, Inc. (Perla), seeking reimbursement should it
be adjudged liable, pursuant to its insurance policy issued by Perla with the
following coverage: (a) third-party liability of P50,000.00 as the maximum
amount; and (b) third-party damage to property of P20,000.00 as the
maximum amount.6chanrobleslaw
In its answer to the third-party complaint, Perla denied liability as insurer
because Mina's Transit had waived its recourse by failing to notify Perla of
the incident within one year from its occurrence, as required by Section 384
of the Insurance Code.7 It submitted that even assuming that the claim had
not yet prescribed, its liability should be limited to the maximum of
P50,000.00 for third-party liability and P20,000.00 for third-party
damage.8chanrobleslaw
After trial, the RTC rendered judgment in favor of the respondents on
September 17, 19999 ordering petitioner Metro Manila Transit Corporation
(MMTC) and its co-defendant Mina's Transit Corporation (Mina's Transit) to
pay damages in favor of respondents Reynaldo Cuevas and Junnel Cuevas
to wit:chanRoblesvirtualLawlibrary
WHEREFORE, premises considered, defendants Metro Manila Transit
Corporation and Mina's Transit Corporation are hereby held solidarity liable
for the payment to the plaintiffs of the following:ChanRoblesVirtualawlibrary
a. P115,436.50 as actual damages;
b. P100,000.00 as moral damages
c. P50,000.00 as exemplary damages; and
d. P20,000.00 as attorney's fees.
Costs are also adjudged against defendants.
SO ORDERED.10
The RTC concluded that the proximate cause of the mishap was the
negligence of the bus driver; that following Article 2180 of the Civil Code, his
employers should be solidarity liable; that MMTC and Mina's Transit, being
the joint owners of the bus, were liable; and that the third-party complaint
was dismissed because no evidence was presented to prove it. The RTC,
however, did not rule on the propriety of the cross-claim.
On appeal, the CA affirmed the RTC's decision.11chanrobleslaw
Issue
Hence, this appeal, in which MMTC posits the sole issue of whether or not it
was liable for the injuries sustained by the respondents despite the provision
in the agreement to sell that shielded it from liability.
Ruling of the Court
The appeal is partly meritorious.
MMTC urges the revisit of the registered-owner rule in order to gain
absolution from liability. It contends that although it retained ownership of
the bus at the time of the vehicular accident, the actual operation was
transferred to Mina's Transit; that for it to be held liable for the acts of the
bus driver, the existence of an employer-employee relationship between
them must be established; and that because the bus driver was not its
employee, it was not liable for his negligent act.
The contentions of MMTC cannot persuade.
 motor vehicle causing damage in order that it may be held vicariously liable
In view of MMTC's admission in its pleadings that it had remained the under Article 2180 of the Civil Code. (Citations Omitted)
registered owner of the bus at the time of the incident, it could not escape
Indeed, MMTC could not evade liability by passing the buck to Mina's
liability for the personal injuries and property damage suffered by the
Transit. The stipulation in the agreement to sell did not bind third parties like
Cuevases. This is because of the registered-owner rule, whereby the
the Cuevases, who were expected to simply rely on the data contained in
registered owner of the motor vehicle involved in a vehicular accident could
the registration certificate of the erring bus.
be held liable for the consequences. The registered-owner rule has
remained good law in this jurisdiction considering its impeccable and
Although the registered-owner rule might seem to be unjust towards MMTC,
timeless rationale, as enunciated in the 1957 ruling in Erezo, et al. v.
the law did not leave it without any remedy or recourse. According to Filcar
Jepte,12 where the Court pronounced:chanRoblesvirtualLawlibrary
Transport Services v. Espinas,14 MMTC could recover from Mina's Transit,
Registration is required not to make said registration the operative act by
the actual employer of the negligent driver, under the principle of unjust
which ownership in vehicles is transferred, as in land registration cases,
enrichment, by means of a cross-claim seeking reimbursement of all the
because the administrative proceeding of registration does not bear any
amounts that it could be required to pay as damages arising from the
essential relation to the contract of sale between the parties (Chinchilla vs.
driver's negligence. A cross-claim is a claim by one party against a co-party
Rafael and Verdaguer, 39 Phil. 888), but to permit the use and operation of
arising out of the transaction or occurrence that is the subject matter either
the vehicle upon any public highway (section 5 [a], Act No. 3992, as
of the original action or of a counterclaim therein, and may include a claim
amended.) The main aim of motor vehicle registration is to identify the
that the party against whom it is asserted is or may be liable to the cross-
owner so that if any accident happens, or that any damage or injury is
claimant for all or part of a claim asserted in the action against the cross-
caused by the vehicle on the public highways, responsibility therefor can be
claimant.15chanrobleslaw
fixed on a definite individual, the registered owner. Instances are numerous
where vehicles running on public highways caused accidents or injuries to
MMTC set up its cross-claim against Mina's Transit precisely to ensure that
pedestrians or other vehicles without positive identification of the owner or
Mina's Transit would reimburse whatever liability would be adjudged against
drivers, or with very scant means of identification. It is to forestall these
MMTC. Yet, it is a cause of concern for the Court that the RTC ignored to
circumstances, so inconvenient or prejudicial to the public, that the motor
rule on the propriety of MMTC's cross-claim. Such omission was
vehicle registration is primarily ordained, in the interest of the determination
unwarranted, inasmuch as Mina's Transit did not dispute the cross-claim, or
of persons responsible for damages or injuries caused on public highways.
did not specifically deny the agreement to sell with MMTC, the actionable
"'One of the principal purposes of motor vehicles legislation is identification
document on which the cross-claim was based. Even more telling was the
of the vehicle and of the operator, in case of accident; and another is that
fact that Mina's Transit did not present controverting evidence to disprove
the knowledge that means of detection are always available may act as a
the cross-claim as a matter of course if it was warranted for it to do so.
deterrent from lax observance of the law and of the rules of conservative
Under the circumstances, the RTC should have granted the cross-claim to
and safe operation. Whatever purpose there may be in these statutes, it is
prevent the possibility of a multiplicity of suits, and to spare not only the
subordinate at the last to the primary purpose of rendering it certain that the
MMTC but also the other parties in the case from further expense and
violator of the law or of the rules of safety shall not escape because of lack
bother. Compounding the RTC's uncharacteristic omission was the CA's
of means to discover him.' The purpose of the statute is thwarted, and the
oversight in similarly ignoring the cross-claim. The trial and the appellate
displayed number becomes a 'snare and delusion,' if courts would entertain
courts should not forget that a cross-claim is like the complaint and the
such defenses as that put forward by appellee in this case. No responsible
counterclaim that the court must rule upon.
person or corporation could be held liable for the most outrageous acts of
negligence, if they should be allowed to place a 'middleman' between them
WHEREFORE, the Court AFFIRMS the decision promulgated on June 28,
and the public, and escape liability by the manner in which they recompense
2004 subject to the MODIFICATION that the cross-claim of Metro Manila
their servants." (King vs. Brenham Automobile Co., 145 S.W. 278, 279.)
Transit Corporation against Mina's Transit Corporation is GRANTED,
The Court has reiterated the registered-owner rule in other rulings, like and, ACCORDINGLY, Mina's Transit Corporation is ORDERED to
in Filcar Transport Services v. Espinas,13 to wit:chanRoblesvirtualLawlibrary reimburse to Metro Manila Transit Corporation whatever amounts the latter
x x x It is well settled that in case of motor vehicle mishaps, the registered shall pay to the respondents pursuant to the judgment of the Regional Trial
owner of the motor vehicle is considered as the employer of the Court in Civil Case No. N-6127.
tortfeasor-driver, and is made primarily liable for the tort committed by the
latter under Article 2176, in relation with Article 2180, of the Civil Code. No pronouncement on costs of suit.

In Equitable Leasing Corporation v. Suyom, we ruled that in so far as third SO ORDERED.cralawl

persons are concerned, the registered owner of the motor vehicle is the
employer of the negligent driver, and the actual employer is
considered merely as an agent of such owner.

In that case, a tractor registered in the name of Equitable Leasing

Corporation (Equitable) figured in an accident, killing and seriously injuring
several persons. As part of its defense, Equitable claimed that the tractor
was initially leased to Mr. Edwin Lim under a Lease Agreement, which
agreement has been overtaken by a Deed of Sale entered into by Equitable
and Ecatine Corporation (Ecatine). Equitable argued that it cannot be held
liable for damages because the tractor had already been sold to Ecatine at
the time of the accident and the negligent driver was not its employee but of
Ecatine.

In upholding the liability of Equitable, as registered owner of the tractor, this

Court said that "regardless of sales made of a motor vehicle, the registered
owner is the lawful operator insofar as the public and third persons are
concerned; consequently, it is directly and primarily responsible for the
consequences of its operation." The Court further stated that "[i]n
contemplation of law, the owner/operator of record is the employer of
the driver, the actual operator and employer being considered as
merely its agent." Thus, Equitable, as the registered owner of the tractor,
was considered under the law on quasi delict to be the employer of the
driver, Raul Tutor; Ecatine, Tutor's actual employer, was deemed merely as
an agent of Equitable.

Thus, it is clear that for the purpose of holding the registered owner of the
motor vehicle primarily and directly liable for damages under Article 2176, in
relation with Article 2180, of the Civil Code, the existence of an employer-
employee relationship, as it is understood in labor relations law, is not
required. It is sufficient to establish that Filcar is the registered owner of the
 SECOND DIVISION
[G.R. No. 119756. March 18, 1999]
FORTUNE EXPRESS, INC., petitioner, vs. COURT OF APPEALS, PAULIE
U. CAORONG, and minor children YASSER KING CAORONG,
ROSE HEINNI and PRINCE ALEXANDER, all surnamed
CAORONG, and represented by their mother PAULIE U.
CAORONG, respondents.
DECISION
MENDOZA, J.:
This is an appeal by petition for review on certiorari of the decision,
dated July 29, 1994, of the Court of Appeals, which reversed the decision of
the Regional Trial Court, Branch VI, Iligan City. The aforesaid decision of the
trial court dismissed the complaint of private respondents against petitioner
for damages for breach of contract of carriage filed on the ground that
petitioner had not exercised the required degree of diligence in the operation
of one of its buses. Atty. Talib Caorong, whose heirs are private respondents
herein, was a passenger of the bus and was killed in the ambush involving
said bus.
The facts of the instant case are as follows:
Petitioner is a bus company in northern Mindanao. Private respondent
Paulie Caorong is the widow of Atty. Caorong, while private respondents
Yasser King, Rose Heinni, and Prince Alexander are their minor children.
On November 18, 1989, a bus of petitioner figured in an accident with
a jeepney in Kauswagan, Lanao del Norte, resulting in the death of several
passengers of the jeepney, including two Maranaos. Crisanto Generalao, a
volunteer field agent of the Constabulary Regional Security Unit No. X,
conducted an investigation of the accident. He found that the owner of the
jeepney was a Maranao residing in Delabayan, Lanao del Norte and that
certain Maranaos were planning to take revenge on the petitioner by burning
some of its buses. Generalao rendered a report on his findings to Sgt.
Reynaldo Bastasa of the Philippine Constabulary Regional Hearquarters at
Cagayan de Oro. Upon the instruction of Sgt. Bastasa, he went to see
Diosdado Bravo, operations manager of petitioner, at its main office in
Cagayan de Oro City. Bravo assured him that the necessary precautions to
insure the safety of lives and property would be taken.[1]
At about 6:45 P.M. on November 22, 1989, three armed Maranaos who
pretended to be passengers, seized a bus of petitioner at Linamon, Lanao del
Norte while on its way to Iligan City. Among the passengers of the bus was
Atty. Caorong.The leader of the Maranaos, identified as one Bashier
Mananggolo, ordered the driver, Godofredo Cabatuan, to stop the bus on the
side of the highway. Mananggolo then shot Cabatuan on the arm, which
caused him to slump on the steering wheel.Then one of the companions of
Mananggolo started pouring gasoline inside the bus, as the other held the
passengers at bay with a handgun. Mananggolo then ordered the passengers
to get off the bus. The passengers, including Atty. Caorong, stepped out of
the bus and went behind the bushes in a field some distance from the
highway.[2]
However, Atty. Caorong returned to the bus to retrieve something from
the overhead rack. At that time, one of the armed men was pouring gasoline
on the head of the driver. Cabatuan, who had meantime regained
consciousness, heard Atty. Caorong pleading with the armed men to spare
the driver as he was innocent of any wrong doing and was only trying to make
a living. The armed men were, however, adamant as they repeated their
warning that they were going to burn the bus along with its driver. During this
exchange between Atty. Caorong and the assailants, Cabatuan climbed out
of the left window of the bus and crawled to the canal on the opposite side of
the highway. He heard shots from inside the bus. Larry de la Cruz, one of the
passengers, saw that Atty. Caorong was hit. Then the bus was set on
fire. Some of the passengers were able to pull Atty. Caorong out of the
burning bus and rush him to the Mercy Community Hospital in Iligan City, but
he died while undergoing operation.[3]
The private respondents brought this suit for breach of contract of
carriage in the Regional Trial Court, Branch VI, Iligan City. In his decision,
dated December 28, 1990, the trial court dismissed the complaint, holding as
follows:
The fact that defendant, through Operations Manager Diosdado Bravo, was
informed of the rumors that the Moslems intended to take revenge by
burning five buses of defendant is established since the latter also utilized
Crisanto Generalaos as a witness. Yet despite this information, the plaintiffs
charge, defendant did not take proper precautions. . . . Consequently,
plaintiffs now fault the defendant for ignoring the report. Their position is that
the defendant should have provided its buses with security guards. Does the
law require common carriers to install security guards in its buses for the
protection and safety of its passengers? Is the failure to post guards an
omission of the duty to exercise the diligence of a good father of the family
which could have prevented the killing of Atty. Caorong? To our mind, the
diligence demanded by law does not include the posting of security guards
in buses. It is an obligation that properly belongs to the State. Besides, will
the presence of one or two security guards suffice to deter a determined
assault of the lawless and thus prevent the injury complained of? Maybe so,
but again, perhaps not. In other words, the presence of a security guard is
not a guarantee that the killing of Atty. Caorong would have been definitely
avoided.
.
Accordingly, the failure of defendant to accord faith and credit to the report
of Mr. Generalao and the fact that it did not provide security to its buses
cannot, in the light of the circumstances, be characterized as negligence.
Finally, the evidence clearly shows that the assailants did not have the least
intention of harming any of the passengers. They ordered all the passengers
to alight and set fire on the bus only after all the passengers were out of
danger. The death of Atty. Caorong was an unexpected and unforseen
occurrence over which defendant had no control. Atty. Caorong performed
an act of charity and heroism in coming to the succor of the driver even in
the face of danger. He deserves the undying gratitude of the driver whose
life he saved. No one should blame him for an act of extraordinary charity
and altruism which cost his life.But neither should any blame be laid on the
doorstep of defendant. His death was solely due to the willful acts of the
lawless which defendant could neither prevent nor stop.
.
WHEREFORE, in view of the foregoing, the complaint is hereby
dismissed. For lack of merit, the counter-claim is likewise dismissed. No
cost.[4]
On appeal, however, the Court of Appeals reversed. It held:
In the case at bench, how did defendant-appellee react to the tip or
information that certain Maranao hotheads were planning to burn five of its
buses out of revenge for the deaths of two Maranaos in an earlier collision
involving appellees bus? Except for the remarks of appellees operations
manager that we will have our action . . . . and Ill be the one to settle it
personally, nothing concrete whatsoever was taken by appellee or its
employees to prevent the execution of the threat. Defendant-appellee never
adopted even a single safety measure for the protection of its paying
passengers. Were there available safeguards? Of course, there were: one
was frisking passengers particularly those en route to the area where the
threats were likely to be carried out such as where the earlier accident
occurred or the place of influence of the victims or their locality. If frisking
was resorted to, even temporarily, . . . . appellee might be legally excused
from liability. Frisking of passengers picked up along the route could have
been implemented by the bus conductor; for those boarding at the bus
terminal, frisking could have been conducted by him and perhaps by
additional personnel of defendant-appellee. On hindsight, the handguns and
especially the gallon of gasoline used by the felons all of which were brought
inside the bus would have been discovered, thus preventing the burning of
the bus and the fatal shooting of the victim.
Appellees argument that there is no law requiring it to provide guards on its
buses and that the safety of citizens is the duty of the government, is not
well taken. To be sure, appellee is not expected to assign security guards on
all of its buses; if at all, it has the duty to post guards only on its buses plying
predominantly Maranao areas. As discussed in the next preceding
paragraph, the least appellee could have done in response to the report was
to adopt a system of verification such as frisking of passengers boarding its
buses. Nothing, and to repeat, nothing at all, was done by defendant-
appellee to protect its innocent passengers from the danger arising from the
Maranao threats. It must be observed that frisking is not a novelty as a
safety measure in our society. Sensitive places in fact, nearly all important
places have applied this method of security enhancement.Gadgets and
devices are available in the market for this purpose. It would not have
weighed much against the budget of the bus company if such items were
made available to its personnel to cope up with situations such as the
Maranao threats.
In view of the constitutional right to personal privacy, our pronouncement in
this decision should not be construed as an advocacy of mandatory frisking
in all public conveyances. What we are saying is that given the
circumstances obtaining in the case at bench that: (a) two Maranaos died
because of a vehicular collision involving one of appellees vehicles; (b)
appellee received a written report from a member of the Regional Security
Unit, Constabulary Security Group, that the tribal/ethnic group of the two
deceased were planning to burn five buses of appellee out of revenge; and
(c) appellee did nothing absolutely nothing for the safety of its passengers
travelling in the area of influence of the victims, appellee has failed to
exercise the degree of diligence required of common carriers. Hence,
appellee must be adjudged liable.
WHEREFORE, the decision appealed from is hereby REVERSED and
another rendered ordering defendant-appellee to pay plaintiffs-appellants
the following:
1) P3,399,649.20 as death indemnity;
2) P50,000.00 and P500.00 per appearance as attorneys fees; and
Costs against defendant-appellee.[5]
Hence, this appeal. Petitioner contends:
(A) THAT PUBLIC RESPONDENT ERRED IN REVERSING THE
DECISION OF THE REGIONAL TRIAL COURT DATED
DECEMBER 28, 1990 DISMISSING THE COMPLAINT
AS WELL AS THE COUNTERCLAIM, AND FINDING FOR
PRIVATE RESPONDENTS BY ORDERING PETITIONER
TO PAY THE GARGANTUAN SUM OF P3,449,649.20
PLUS P500.00 PER APPEARANCE AS ATTORNEYS
FEES, AS WELL AS DENYING PETITIONERS MOTION
FOR RECONSIDERATION AND THE SUPPLEMENT TO
SAID MOTION, WHILE HOLDING, AMONG OTHERS,
THAT PETITIONER BREACHED THE CONTRACT OF
CARIAGE BY ITS FAILURE TO EXERCISE THE
REQUIRED DEGREE OF DILIGENCE;
(B) THAT THE ACTS OF THE MARANAO OUTLAWS WERE SO
GRAVE, IRRESISTIBLE, VIOLENT, AND FORCEFUL,
AS TO BE REGARDED AS CASO FORTUITO; AND
(C) THAT PUBLIC RESPONDENT COURT OF APPEALS
SERIOUSLY ERRED IN HOLDING THAT PETITIONER
COULD HAVE PROVIDED ADEQUATE SECURITY IN
PREDOMINANTLY MUSLIM AREAS AS PART OF ITS
DUTY TO OBSERVE EXTRA-ORDINARY DILIGENCE AS
A COMMON CARRIER.
The instant petition has no merit.
First. Petitioners Breach of the Contract of Carriage
Art. 1763 of the Civil Code provides that a common carrier is
responsible for injuries suffered by a passenger on account of the wilful acts
of other passengers, if the employees of the common carrier could have
prevented the act the exercise of the diligence of a good father of a family. In
the present case, it is clear that because of the negligence of petitioners
employees, the seizure of the bus by Mananggolo and his men was made
possible.
Despite warning by the Philippine Constabulary at Cagayan de Oro that
the Maranaos were planning to take revenge on the petitioner by burning
some of its buses and the assurance of petitioners operation manager,
Diosdado Bravo, that the necessary precautions would be taken, petitioner
did nothing to protect the safety of its passengers.
Had petitioner and its employees been vigilant they would not have
failed to see that the malefactors had a large quantity of gasoline with
them. Under the circumstances, simple precautionary measures to protect the
safety of passengers, such as frisking passengers and inspecting their
baggages, preferably with non-intrusive gadgets such as metal detectors,
before allowing them on board could have been employed without violating
the passengers constitutional rights. As this Court intimated in Gacal v.
Philippine Air Lines, Inc.,[6] a common carrier can be held liable for failing to
prevent a hijacking by frisking passengers and inspecting their baggages.
From the foregoing, it is evident that petitioners employees failed to
prevent the attack on one of petitioners buses because they did not exercise
the diligence of a good father of a family. Hence, petitioner should be held
liable for the death of Atty. Caorong.
Second. Seizure of Petitioners Bus not a Case of Force Majeure
The petitioner contends that the seizure of its bus by the armed
assailants was a fortuitous event for which it could not be held liable.
Art. 1174 of the Civil Code defines a fortuitous even as an occurrence
which could not be foreseen or which though foreseen, is inevitable. In Yobido
v. Court of Appeals,[7] we held that to be considered as force majeure, it is
necessary that: (1) the cause of the breach of the obligation must be
independent of the human will; (2) the event must be either unforeseeable or
unavoidable; (3) the occurrence must be such as to render it impossible for
the debtor to fulfill the obligation in a normal manner; and (4) the obligor must
be free of participation in, or aggravation of, the injury to the creditor. The
absence of any of the requisites mentioned above would prevent the obligor
from being excused from liability.
Thus, in Vasquez v. Court of Appeals,[8] it was held that the common
carrier was liable for its failure to take the necessary precautions against an
approaching typhoon, of which it was warned, resulting in the loss of the lives
of several passengers.The event was foreseeable, and, thus, the second
requisite mentioned above was not fulfilled. This ruling applies by analogy to
the present case. Despite the report of PC agent Generalao that the
Maranaos were going to attack its buses, petitioner took no steps to safeguard
the lives and properties of its passengers. The seizure of the bus of the
petitioner was foreseeable and, therefore, was not a fortuitous event which
would exempt petitioner from liability.
Petitioner invokes the ruling in Pilapil v. Court of Appeals[9] and De
Guzman v. Court of Appeals[10] in support of its contention that the seizure of
its bus by the assailants constitutes force majeure. In Pilapil v. Court of
Appeals,[11] it was held that a common carrier is not liable for failing to install
window grills on its buses to protect passengers from injuries caused by rocks
hurled at the bus by lawless elements. On the other hand, in De Guzman v.
Court of Appeals,[12] it was ruled that a common carrier is not responsible for
goods lost as a result of a robbery which is attended by grave or irresistible
threat, violence, or force.
It is clear that the cases of Pilapil and De Guzman do not apply to the
present case. Art. 1755 of the Civil Code provides that a common carrier is
bound to carry the passengers as far as human care and foresight can
provide, using the utmost diligence of very cautious person, with due regard
for all the circumstances. Thus, we held in Pilapil and De Guzman that the
respondents therein were not negligent in failing to take special precautions
against threats to the safety of passengers which could not be foreseen, such
as tortious or criminal acts of third persons. In the present case, this factor of
unforeseeablility (the second requisite for an event to be considered force
majeure) is lacking. As already stated, despite the report of PC agent
Generalao that the Maranaos were planning to burn some of petitioners buses
and the assurance of petitioners operations manager (Diosdado Bravo) that
the necessary precautions would be taken, nothing was really done by
petitioner to protect the safety of passengers.
Third. Deceased not Guilty of Contributory Negligence
 The petitioner contends that Atty. Caorong was guilty of contributory
negligence in returning to the bus to retrieve something. But Atty. Caorong
did not act recklessly. It should be pointed out that the intended targets of the
violence were petitioner and its employees, not its passengers. The
assailants motive was to retaliate for the loss of life of two Maranaos as a
result of the collision between petitioners bus and the jeepney in which the
two Maranaos were riding. Mananggolo, the leader of the group which had
hijacked the bus, ordered the passengers to get off the bus as they intended
to burn it and its driver.The armed men actually allowed Atty. Caorong to
retrieve something from the bus. What apparently angered them was his
attempt to help the driver of the bus by pleading for his life. He was playing
the role of the good Samaritan. Certainly, this act cannot be considered an
act of negligence, let alone recklessness.
his monthly salary of P11,385.00[23] as a lawyer in the Department of Agrarian
Reform at the time of his death, was P148,005.00.[24] allowing for necessary
living expenses of fifty percent (50%)[25]of his projected gross annual income,
his total earning capacity amounts to P2,121,404.90.[26] Hence, the petitioner
is liable to the private respondents in the said amount as compensation for
loss of earning capacity.
WHEREFORE, the decision, dated July 29, 1994, of the Court of
Appeals is hereby AFFIRMED with the MODIFICATION that petitioner
Fortune Express, Inc. is ordered to pay the following amounts to private
respondents Paulie, Yasser King, Rose Heinni, and Prince Alexander
Caorong:
1. death indemnity in the amount of fifty thousand pesos
(P50,000.00);

2. actual damages in the amount of thirty thousand pesos

Fourth. Petitioner Liable to Private Respondents for Damages
(P30,000.00);

3. moral damages in the amount of one hundred thousand

We now consider the question of damages that the heirs of Atty. pesos(P100,000.00);
Caorong, private respondents herein, are entitled to recover from the 4. exemplary damages in the amount of one hundred thousand
petitioner. pesos (P100,000.00);
Indemnity for Death. Art. 1764 of the Civil Code, in relation to Art. 2206
5. attorneys fees in the amount of fifty thousand pesos
thereof, provides for the payment of indemnity for the death of passengers (P50,000.00);
caused by the breached of contract of carriage by a common carrier. Initially
fixed in Art. 2206 at P3,000.00, the amount of the said indemnity for death 6. compensation for loss of earning capacity in the amount of two
has through the years been gradually increased in view of the declining value million one hundred twenty-one thousand four hundred four pesos and
of the peso. It is presently fixed at P50,000.00.[13] Private respondents are ninety centavos (P2,121,404.90); and
entitled to this amount.
7) costs of suits.
Actual damages. Art. 2199 provides that Except as provided by law or
by stipulation, one is entitled to an adequate compensation only for such SO ORDERED.
pecuniary loss suffered by him as he has duly proved. The trial court found
that the private respondents spent P30,000.00 for the wake and burial of Atty.
Caorong.[14] Since petitioner does not question this finding of the trial court, it
is liable to private respondents in the said amount as actual damages.

Moral Damages. Under Art. 2206, the spouse, legitimate and

illegitimate descendants and ascendants of the deceased may demand moral
damages for mental anguish by reason of the death of the deceased. The trial
court found that private respondent Paulie Caorong suffered pain from the
death of her husband and worry on how to provide support for their minor
children, private respondents Yasser King, Rose Heinni, and Prince
Alexander.[15] The petitioner likewise does not question this finding of the trial
court. Thus, in accordance with recent decisions of this Court,[16] we hold that
the petitioner is liable to the private respondents in the amount
of P100,000.00 as moral damages for the death of Atty. Caorong.

Exemplary Damages. Art. 2232 provides that in contracts and quasi-

contracts, the court may award exemplary damages if the defendant acted in
a wanton, fraudulent, reckless, oppressive, or malevolent manner. In the
present case, the petitioner acted in a wanton and reckless manner. Despite
warning that the Maranaos were planning to take revenge against the
petitioner by burning some of its buses, and contrary to the assurance made
by its operations manager that the necessary precautions would be taken, the
petitioner and its employees did nothing to protect the safety of
passengers. Under the circumstances, we deem it reasonable to award
private respondents exemplary damages in the amount of P100,000.00.[17]

Attorneys Fees. Pursuant to Art. 2208, attorneys fees may be

recovered when, as in the instant case, exemplary damages are awarded. In
the recent case of Sulpicio Lines, Inc. v. Court of Appeals,[18] we held an
award of P50,000.00 as attorneys fees to be reasonable. Hence, the private
respondents are entitled to attorneys fees in that amount.

Compensation for Loss of Earning Capacity. Art. 1764 of the Civil Code,
in relation to Art. 2206 thereof, provides that in addition to the indemnity for
death arising from the breach of contract of carriage by a common carrier, the
defendant shall be liable for the loss of the earning capacity of the deceased,
and the indemnity shall be paid to the heirs of the latter. The formula
established in decided cases for computing net earning capacity is as
follows:[19]

Gross Necessary
Net earning = Life x Annual - Living
Capacity Expectancy Income Expenses

Life expectancy is equivalent to two thirds (2/3) multiplied by the

difference of eighty (80) and the age of the deceased.[20] Since Atty. Caorong
was 37 years old at the time of his death,[21] he had a life expectancy of 28
2/3 more years.[22] His projected gross annual income, computed based on
 FIRST DIVISION
G.R. Nos. 66102-04 August 30, 1990
PHILIPPINE RABBIT BUS LINES, INC., petitioner,
vs.
THE HONORABLE INTERMEDIATE APPELLATE COURT AND
CASIANO PASCUA, ET AL., respondents.
Santiago & Santiago for petitioner.
Federico R. Vinluan for private respondents.
MEDIALDEA, J.:
This is a petition for review on certiorari of the decision of the Intermediate
Appellate Court (now Court of Appeals) dated July 29, 1983 in AC-G.R. Nos.
CV-65885, CV-65886 and CV-65887 which reversed the decision of the
Court of First Instance (now Regional Trial Court) of Pangasinan dated
December 27, 1978; and its resolution dated November 28, 1983 denying
the motion for reconsideration.
It is an established principle that the factual findings of the Court of Appeals
are final and may not be reviewed by this Court on appeal. However, this
principle is subject to certain exceptions. One of these is when the findings
of the appellate court are contrary to those of the trial court (see Sabinosa v.
The Honorable Court of Appeals, et al., G.R. No. L-47981, July 24, 1989) in
which case, a re-examination of the facts and evidence may be undertaken.
This is Our task now.
The antecedent facts are as follows:
About 11:00 o'clock in the morning on December 24, 1966, Catalina
Pascua, Caridad Pascua, Adelaida Estomo, Erlinda Meriales, Mercedes
Lorenzo, Alejandro Morales and Zenaida Parejas boarded the jeepney
owned by spouses Isidro Mangune and Guillerma Carreon and driven by
Tranquilino Manalo at Dau, Mabalacat, Pampanga bound for Carmen,
Rosales, Pangasinan to spend Christmas at their respective homes.
Although they usually ride in buses, they had to ride in a jeepney that day
because the buses were full. Their contract with Manalo was for them to pay
P24.00 for the trip. The private respondents' testimonial evidence on this
contractual relationship was not controverted by Mangune, Carreon and
Manalo, nor by Filriters Guaranty Assurance Corporation, Inc., the insurer of
the jeepney, with contrary evidence. Purportedly riding on the front seat with
Manalo was Mercedes Lorenzo. On the left rear passenger seat were
Caridad Pascua, Alejandro Morales and Zenaida Parejas. On the right rear
passenger seat were Catalina Pascua, Adelaida Estomo, and Erlinda
Meriales. After a brief stopover at Moncada, Tarlac for refreshment, the
jeepney proceeded towards Carmen, Rosales, Pangasinan.
Upon reaching barrio Sinayoan, San Manuel, Tarlac, the right rear wheel of
the jeepney was detached, so it was running in an unbalanced position.
Manalo stepped on the brake, as a result of which, the jeepney which was
then running on the eastern lane (its right of way) made a U-turn, invading
and eventually stopping on the western lane of the road in such a manner
that the jeepney's front faced the south (from where it came) and its rear
faced the north (towards where it was going). The jeepney practically
occupied and blocked the greater portion of the western lane, which is the
right of way of vehicles coming from the north, among which was Bus No.
753 of petitioner Philippine Rabbit Bus Lines, Inc. (Rabbit) driven by Tomas
delos Reyes. Almost at the time when the jeepney made a sudden U-turn
and encroached on the western lane of the highway as claimed by Rabbit
and delos Reyes, or after stopping for a couple of minutes as claimed by
Mangune, Carreon and Manalo, the bus bumped from behind the right rear
portion of the jeepney. As a result of the collision, three passengers of the
jeepney (Catalina Pascua, Erlinda Meriales and Adelaida Estomo) died
while the other jeepney passengers sustained physical injuries. What could
have been a festive Christmas turned out to be tragic.
The causes of the death of the three jeepney passengers were as follows (p.
101, Record on Appeal):
The deceased Catalina Pascua suffered the following
injuries, to wit: fracture of the left parietal and temporal
regions of the skull; fracture of the left mandible;
fracture of the right humenous; compound fracture of
the left radious and ullma middle third and lower third;
fracture of the upper third of the right tibia and fillnea;
avulsion of the head, left internal; and multiple
abrasions. The cause of her death was shock,
secondary to fracture and multiple hemorrhage. The
fractures were produced as a result of the hitting of the
victim by a strong force. The abrasions could be
produced when a person falls from a moving vehicles
(sic) and rubs parts of her body against a cement road
pavement. . . .
Erlinda Mariles (sic) sustained external lesions such as
contusion on the left parietal region of the skull;
hematoma on the right upper lid; and abrasions (sic) on
the left knee. Her internal lesions were: hematoma on
the left thorax; multiple lacerations of the left lower lobe
of the lungs; contusions on the left lower lobe of the
lungs; and simple fractures of the 2nd, 3rd, 4th, 5th, 6th,
7th, and 8th ribs, left. The forcible impact of the jeep
caused the above injuries which resulted in her death. .
..
The cause of death of Erlinda or Florida Estomo (also
called as per autopsy of Dr. Panlasiqui was due to
shock due to internal hemorrhage, ruptured spleen and
trauma. . . .
Caridad Pascua suffered physical injuries as follows (p. 101, Record on
Appeal):
. . . lacerated wound on the forehead and occipital
region, hematoma on the forehead, multiple abrasions
on the forearm, right upper arm, back and right leg. . . .
The police investigators of Tacpal and policemen of San Manuel, Tarlac,
Tarlac, upon arrival at the scene of the mishap, prepared a sketch (common
exhibit "K" for private respondents "19" for Rabbit) showing the relative
positions of the two vehicles as well as the alleged point of impact (p. 100,
Record on Appeal):
. . . The point of collision was a cement pave-portion of the
Highway, about six (6) meters wide, with narrow shoulders with
grasses beyond which are canals on both sides. The road was
straight and points 200 meters north and south of the point of
collision are visible and unobstructed. Purportedly, the point of
impact or collision (Exh. "K-4", Pascua on the sketch Exh. "K"-
Pascua) was on the western lane of the highway about 3 feet (or
one yard) from the center line as shown by the bedris (sic), dirt
and soil (obviously from the undercarriage of both vehicles) as
well as paint, marron (sic) from the Rabbit bus and greenish from
the jeepney. The point of impact encircled and marked with the
letter "X" in Exh. "K"-4 Pascua, had a diameter of two meters, the
center of which was about two meters from the western edge of
cement pavement of the roadway. Pictures taken by witness
Bisquera in the course of the investigation showed the relative
positions of the point of impact and center line (Exh. "P"-Pascua)
the back of the Rabbit bus (Exh. "P"-1-Pascua"), the lifeless body
of Catalina Pascua (Exh. "P-2 Pascua"), and the damaged front
part of the Rabbit bus (Exh. "P-3 Pascua"). No skid marks of the
Rabbit bus was found in the vicinity of the collision, before or after
the point of impact. On the other hand, there was a skid mark
about 45 meters long purportedly of the jeepney from the eastern
shoulder of the road south of, and extending up to the point of
impact.
At the time and in the vicinity of the accident, there were no vehicles
following the jeepney, neither were there oncoming vehicles except the bus.
The weather condition of that day was fair.
After conducting the investigation, the police filed with the Municipal Court of
San Manuel, Tarlac, a criminal complaint against the two drivers for Multiple
Homicide. At the preliminary investigation, a probable cause was found with
respect to the case of Manalo, thus, his case was elevated to the Court of
First Instance. However, finding no sufficiency of evidence as regards the
case of delos Reyes, the Court dismissed it. Manalo was convicted and
sentenced to suffer imprisonment. Not having appealed, he served his
sentence.
Complaints for recovery of damages were then filed before the Court of First
Instance of Pangasinan. In Civil Case No. 1136, spouses Casiano Pascua
and Juana Valdez sued as heirs of Catalina Pascua while Caridad Pascua
sued in her behalf. In Civil Case No. 1139, spouses Manuel Millares and Guaranty Insurance Co., jointly and severally with said defendants
Fidencia Arcica sued as heirs of Erlinda Meriales. In Civil Case No. 1140, (Mangune and Carreon) to pay the plaintiffs the amount herein
spouses Mariano Estomo and Dionisia Sarmiento also sued as heirs of above adjudicated in their favor in Civil Case No. 1136 only. All
Adelaida Estomo. the amounts awarded said plaintiff, as set forth in paragraph one
(1) hereinabove;
In all three cases, spouses Mangune and Carreon, Manalo, Rabbit and
delos Reyes were all impleaded as defendants. Plaintiffs anchored their 3) On the cross claim of Phil. Rabbit Bus Lines, Inc. ordering the
suits against spouses Mangune and Carreon and Manalo on their defendant, Isidro Mangune, Guillerma Carreon and Tranquilino
contractual liability. As against Rabbit and delos Reyes, plaintiffs based their Manalo, to pay jointly and severally, cross-claimant Phil. Rabbit
suits on their culpability for a quasi-delict. Filriters Guaranty Assurance Bus Lines, Inc., the amounts of P216.27 as actual damages to its
Corporation, Inc. was also impleaded as additional defendant in Civil Case Bus No. 753 and P2,173.60 for loss of its earning.
No. 1136 only.
All of the above amount, shall bear legal interest from the filing of
For the death of Catalina Pascua, plaintiffs in Civil Case No. 1136 sought to the complaints.
collect the aggregate amount of P70,060.00 in damages, itemized as
follows: P500.00 for burial expenses; P12,000.00 for loss of wages for 24
Costs are adjudged against defendants Mangune, Carreon and
years; P10,000.00 for exemplary damages; P10,000.00 for moral damages;
Manalo and Filriters Guaranty.
and P3,000.00 for attorney's fees. In the same case, plaintiff Caridad
Pascua claimed P550.00 for medical expenses; P240.00 for loss of wages
for two months; P2,000.00 for disfigurement of her face; P3,000.00 for SO ORDERED
physical pain and suffering; P2,500.00 as exemplary damages and
P2,000.00 for attorney's fees and expenses of litigation.
On appeal, the Intermediate Appellate Court reversed the above-quoted
decision by finding delos Reyes negligent, the dispositive portion of which
In Civil Case No. 1139, plaintiffs demanded P500.00 for burial expenses; reads (pp. 55-57, Rollo):
P6,000.00 for the death of Erlinda, P63,000.00 for loss of income;
P10,000.00 for moral damages and P3,000.00 for attorney's fees or total of
P80,000.00. WHEREFORE, PREMISES CONSIDERED, the lower
court's decision is hereby REVERSED as to item No. 3
of the decision which reads:
In Civil Case No. 1140, plaintiffs claimed P500.00 for burial expenses;
P6,000.00 for the death of Adelaide, P56,160.00 for loss of her income or
earning capacity; P10,000.00 for moral damages; and P3,000.00 for 3) On the cross claim of Philippine Rabbit Bus Lines,
attorney's fees. Inc. ordering the defendants Isidro Mangune, Guillerma
Carreon and Tranquilino Manalo, to pay jointly and
severally, the amounts of P216.27 as actual damages
Rabbit filed a cross-claim in the amount of P15,000.00 for attorney's fees to its Bus No. 753 and P2,173.60 for loss of its
and expenses of litigation. On the other hand, spouses Mangune and earnings.
Carreon filed a cross-claim in the amount of P6,168.00 for the repair of the
jeepney and P3,000.00 for its non-use during the period of repairs.
and another judgment is hereby rendered in favor of
plaintiffs-appellants Casiana Pascua, Juan Valdez and
On December 27, 1978, the trial court rendered its decision finding Manalo Caridad Pascua, ordering the Philippine Rabbit Bus
negligent, the dispositive portion of which reads (pp. 113-114, Record on Lines, Inc. and its driver Tomas delos Reyes to pay the
Appeal): former jointly and severally damages in amounts
awarded as follows:
PREMISES CONSIDERED, this Court is of the opinion and so holds:
For the death of Catalina Pascua, the parents and/or
heirs are awarded
1) That defendants Isidro Mangune, Guillerma Carreon and
Civil Case No. 1136 —
Tranquilino Manalo thru their negligence, breached contract of
a) Indemnity for the loss of life — P12,000.00
carriage with their passengers the plaintiffs' and/or their heirs, and
b) Loss of Salaries or earning capacity —
this Court renders judgment ordering said defendants, jointly and
14,000.00
severally, to pay the plaintiffs —
c) Actual damages (burial expenses) —
800.00
a) In Civil Case No. 1136, for the death of Catalina Pascua, to pay d) For moral damages — 10,000.00
her heirs the amounts of P12,000.00 for indemnity for loss of her e) Exemplary damages — 3,000.00
life; P41,760.00 for loss of earnings; P324.40 for actual expenses f) For attorney's fees — 3,000.00
and P2,000.00 for moral damages; —————
Total — P38,200.00 (sic)
For the physical injuries suffered by Caridad Pascua:
b) In the same Civil Case No.1136 for the injuries of Caridad
Civil Case No. 1136
Pascua, to pay her the amounts of P240.00 for loss of wages,
a) Actual damages (hospitalization expenses)
P328.20 for actual expenses and P500.00 for moral damages;
— P550.00
b) Moral damages (disfigurement of the
c) In Civil Case No.1139 for the death of Erlinda Meriales, to pay face and physical suffering — 8,000.00
her heirs (the plaintiffs) the amount of P12,000.00 — for indemnity c) Exemplary damages — 2,000.00
for loss of her life; P622.00 for actual expenses, P60,480.00 for —————
loss of wages or income and P2,000.00 for moral damages; Total — P10,550.00
For the death of Erlinda Arcega Meriales. the parents
and/or heirs:
d) In Civil Case No. 1140, for the death of Erlinda (also called
Civil Case No. 1139
Florida or Adelaida Estomo), to pay her heirs (the plaintiff the a) Indemnity for loss of life — P12,000.00
amount of P12,000.00 for indemnity for the loss of her life; b) Loss of Salary or Earning Capacity —
P580.00 for actual expenses; P53,160.00 for loss of wages or
20,000.00
income and P2,000.00 for moral damages. c) Actual damages (burial expenses) —
500.00
2) The defendant Filriters Guaranty Insurance Co., having d) Moral damages — 15,000.00
contracted to ensure and answer for the obligations of defendants e) Exemplary damages — 15,000.00
Mangune and Carreon for damages due their passengers, this f) Attorney's fees — 3,000.00
Court renders judgment against the said defendants Filriters —————
 Total — P65,500.00
For the death of Florida Sarmiento Estomo:
Civil Case No. 1140
a) Indemnity for loss of life — P12,000.00
b) Loss of Salary or Earning capacity — 20,000.00
c) Actual damages (burial expenses) — 500.00
d) Moral damages — 3,000.00
e) Exemplary damages — 3,000.00
f) Attorney's fees — 3,000.00
—————
Total — P41,500.00
With costs against the Philippine Rabbit Bus Lines, Inc.
SO ORDERED.
The motion for reconsideration was denied. Hence, the present
petition.
The issue is who is liable for the death and physical injuries suffered by the
passengers of the jeepney?
The trial court, in declaring that Manalo was negligent, considered the
following (p. 106, Record on Appeal):
(1) That the unrebutted testimony of his passenger
plaintiff Caridad Pascua that a long ways (sic) before
reaching the point of collision, the Mangune jeepney
was "running fast" that his passengers cautioned driver
Manalo to slow down but did not heed the warning: that
the right rear wheel was detached causing the jeepney
to run to the eastern shoulder of the road then back to
the concrete pavement; that driver Manalo applied the
brakes after which the jeepney made a U-turn (half-turn)
in such a manner that it inverted its direction making it
face South instead of north; that the jeepney stopped on
the western lane of the road on the right of way of the
oncoming Phil. Rabbit Bus where it was bumped by the
latter;
(2) The likewise unrebutted testimony of Police
Investigator Tacpal of the San Manuel (Tarlac) Police
who, upon responding to the reported collission, found
the real evidence thereat indicate in his sketch (Exh. K,
Pascua ), the tracks of the jeepney of defendant
Mangune and Carreon running on the Eastern shoulder
(outside the concrete paved road) until it returned to the
concrete road at a sharp angle, crossing the Eastern
lane and the (imaginary) center line and encroaching
fully into the western lane where the collision took place
as evidenced by the point of impact;
(3) The observation of witness Police Corporal Cacalda
also of the San Manuel Police that the path of the
jeepney they found on the road and indicated in the
sketch (Exh. K-Pascua) was shown by skid marks
which he described as "scratches on the road caused
by the iron of the jeep, after its wheel was removed;"
(4) His conviction for the crime of Multiple Homicide and
Multiple Serious Physical Injuries with Damage to
Property thru Reckless Imprudence by the Court of First
Instance of Tarlac (Exh. 24-Rabbit) upon the criminal
Information by the Provincial Fiscal of Tarlac (Exh. 23-
Rabbit), as a result of the collision, and his commitment
to prison and service of his sentence (Exh. 25-Rabbit)
upon the finality of the decision and his failure to appeal
therefrom; and
(5) The application of the doctrine of res-ipsa
loquitar (sic) attesting to the circumstance that the
collision occured (sic) on the right of way of the Phil.
Rabbit Bus.
The respondent court had a contrary opinion. Applying primarily (1) the
doctrine of last clear chance, (2) the presumption that drivers who bump the
rear of another vehicle guilty and the cause of the accident unless
contradicted by other evidence, and (3) the substantial factor test. concluded
that delos Reyes was negligent.
The misappreciation of the facts and evidence and the misapplication of the
laws by the respondent court warrant a reversal of its questioned decision
and resolution.
We reiterate that "[t]he principle about "the last clear" chance, would call for
application in a suit between the owners and drivers of the two colliding
vehicles. It does not arise where a passenger demands responsibility from
the carrier to enforce its contractual obligations. For it would be inequitable
to exempt the negligent driver of the jeepney and its owners on the ground
that the other driver was likewise guilty of negligence." This was Our ruling
in Anuran, et al. v. Buño et al., G.R. Nos. L-21353 and L-21354, May 20,
1966, 17 SCRA 224. 1 Thus, the respondent court erred in applying said
doctrine.
On the presumption that drivers who bump the rear of another vehicle guilty
and the cause of the accident, unless contradicted by other evidence, the
respondent court said (p. 49, Rollo):
. . . the jeepney had already executed a complete
turnabout and at the time of impact was already facing
the western side of the road. Thus the jeepney
assumed a new frontal position vis a vis, the bus, and
the bus assumed a new role of defensive driving. The
spirit behind the presumption of guilt on one who bumps
the rear end of another vehicle is for the driver following
a vehicle to be at all times prepared of a pending
accident should the driver in front suddenly come to a
full stop, or change its course either through change of
mind of the front driver, mechanical trouble, or to avoid
an accident. The rear vehicle is given the responsibility
of avoiding a collision with the front vehicle for it is the
rear vehicle who has full control of the situation as it is
in a position to observe the vehicle in front of it.
The above discussion would have been correct were it not for the
undisputed fact that the U-turn made by the jeepney was abrupt (Exhibit "K,"
Pascua). The jeepney, which was then traveling on the eastern shoulder,
making a straight, skid mark of approximately 35 meters, crossed the
eastern lane at a sharp angle, making a skid mark of approximately 15
meters from the eastern shoulder to the point of impact (Exhibit "K" Pascua).
Hence, delos Reyes could not have anticipated the sudden U-turn executed
by Manalo. The respondent court did not realize that the presumption was
rebutted by this piece of evidence.
With regard to the substantial factor test, it was the opinion of the
respondent court that (p. 52, Rollo):
. . . It is the rule under the substantial factor test that if
the actor's conduct is a substantial factor in bringing
about harm to another, the fact that the actor neither
foresaw nor should have foreseen the extent of the
harm or the manner in which it occurred does not
prevent him from being liable (Restatement, Torts, 2d).
Here, We find defendant bus running at a fast speed
when the accident occurred and did not even make the
slightest effort to avoid the accident, . . . . The bus
driver's conduct is thus a substantial factor in bringing
about harm to the passengers of the jeepney, not only
because he was driving fast and did not even attempt to
avoid the mishap but also because it was the bus which
was the physical force which brought about the injury
and death to the passengers of the jeepney.
The speed of the bus was calculated by respondent court as follows (pp. 54-
55, Rollo):
According to the record of the case, the bus departed
from Laoag, Ilocos Norte, at 4:00 o'clock A.M. and the
accident took place at approximately around 12:30
P.M., after travelling roughly for 8 hours and 30
minutes. Deduct from this the actual stopover time of
two Hours (computed from the testimony of the driver
 that he made three 40-minute stop-overs), We will have
an actual travelling time of 6 hours and 30 minutes.
Under the circumstances, We calculate that the Laoag-
Tarlac route (365 kms.) driving at an average of 56 km.
per hour would take 6 hours and 30 minutes. Therefore,
the average speed of the bus, give and take 10
minutes, from the point of impact on the highway with
excellent visibility factor would be 80 to 90 kms. per
hour, as this is the place where buses would make up
for lost time in traversing busy city streets.
Still, We are not convinced. It cannot be said that the bus was travelling at a
fast speed when the accident occurred because the speed of 80 to 90
kilometers per hour, assuming such calculation to be correct, is yet within
the speed limit allowed in highways. We cannot even fault delos Reyes for
not having avoided the collision. As aforestated, the jeepney left a skid mark
of about 45 meters, measured from the time its right rear wheel was
detached up to the point of collision. Delos Reyes must have noticed the
perilous condition of the jeepney from the time its right rear wheel was
detached or some 90 meters away, considering that the road was straight
and points 200 meters north and south of the point of collision, visible and
unobstructed. Delos Reyes admitted that he was running more or less 50
kilometers per hour at the time of the accident. Using this speed, delos
Reyes covered the distance of 45 meters in 3.24 seconds. If We adopt the
speed of 80 kilometers per hour, delos Reyes would have covered that
distance in only 2.025 seconds. Verily, he had little time to react to the
situation. To require delos Reyes to avoid the collision is to ask too much
from him. Aside from the time element involved, there were no options
available to him. As the trial court remarked (pp. 107-108, Record on
Appeal):
. . . They (plaintiffs) tried to impress this Court that
defendant de los Reyes, could have taken either of two
options: (1) to swerve to its right (western shoulder) or
(2) to swerve to its left (eastern lane), and thus steer
clear of the Mangune jeepney. This Court does not so
believe, considering the existing exigencies of space
and time.
As to the first option, Phil. Rabbit's evidence is
convincing and unrebutted that the Western shoulder of
the road was narrow and had tall grasses which would
indicate that it was not passable. Even plaintiffs own
evidence, the pictures (Exhs. P and P-2, Pascua) are
mute confirmation of such fact. Indeed, it can be noticed
in the picture (Exh. P-2, Pascua) after the Rabbit bus
came to a full stop, it was tilted to right front side, its
front wheels resting most probably on a canal on a
much lower elevation that of the shoulder or paved
road. It too shows that all of the wheels of the Rabbit
bus were clear of the roadway except the outer left rear
wheel. These observation appearing in said picture
(Exh P-2, Pascua) clearly shows coupled with the
finding the Rabbit bus came to a full stop only five
meters from the point of impact (see sketch, Exh. K-
Pascua) clearly show that driver de los Reyes veered
his Rabbit bus to the right attempt to avoid hitting the
Mangune's jeepney. That it was not successful in fully
clearing the Mangune jeepney as its (Rabbit's) left front
hit said jeepney (see picture Exh. 10-A-Rabbit) must
have been due to limitations of space and time.
Plaintiffs alternatively claim that defendant delos Reyes
of the Rabbit bus could also have swerved to its left
(eastern lane) to avoid bumping the Mangune jeepney
which was then on the western lane. Such a claim is
premised on the hypothesis (sic) that the eastern lane
was then empty. This claim would appear to be good
copy of it were based alone on the sketch
made after the collision. Nonetheless, it loses force it
one were to consider the time element involved, for
moments before that, the Mangune jeepney was
crossing that very eastern lane at a sharp angle. Under
such a situation then, for driver delos Reyes to swerve
to the eastern lane, he would run the greater risk of
running smack in the Mangune jeepney either head on
or broadside.
After a minute scrutiny of the factual matters and duly proven evidence, We
find that the proximate cause of the accident was the negligence of Manalo
and spouses Mangune and Carreon. They all failed to exercise the
precautions that are needed precisely pro hac vice.
In culpa contractual, the moment a passenger dies or is injured, the carrier
is presumed to have been at fault or to have acted negligently, and this
disputable presumption may only be overcome by evidence that he had
observed extra-ordinary diligence as prescribed in Articles 1733, 1755 and
1756 of the New Civil Code 2 or that the death or injury of the passenger
was due to a fortuitous event 3 (Lasam v. Smith, Jr., 45 Phil. 657).
The negligence of Manalo was proven during the trial by the unrebutted
testimonies of Caridad Pascua, Police Investigator Tacpal, Police Corporal
Cacalda, his (Manalo's) conviction for the crime of Multiple Homicide and
Multiple Serious Injuries with Damage to Property thru Reckless
Imprudence, and the application of the doctrine ofres ipsa loquitur
supra. The negligence of spouses Mangune and Carreon was likewise
proven during the trial (p. 110, Record on Appeal):
To escape liability, defendants Mangune and Carreon
offered to show thru their witness Natalio Navarro, an
alleged mechanic, that he periodically checks and
maintains the jeepney of said defendants, the last on
Dec. 23, the day before the collision, which included the
tightening of the bolts. This notwithstanding the right
rear wheel of the vehicle was detached while in transit.
As to the cause thereof no evidence was offered. Said
defendant did not even attempt to explain, much less
establish, it to be one caused by a caso fortuito. . . .
In any event, "[i]n an action for damages against the carrier for his
failure to safely carry his passenger to his destination, an accident
caused either by defects in the automobile or through the
negligence of its driver, is not a caso fortuito which would avoid
the carriers liability for damages (Son v. Cebu Autobus Company,
94 Phil. 892 citing Lasam, et al. v. Smith, Jr., 45 Phil. 657;
Necesito, etc. v. Paras, et al., 104 Phil. 75).
The trial court was therefore right in finding that Manalo and spouses
Mangune and Carreon were negligent. However, its ruling that spouses
Mangune and Carreon are jointly and severally liable with Manalo is
erroneous The driver cannot be held jointly and severally liable with the
carrier in case of breach of the contract of carriage. The rationale behind this
is readily discernible. Firstly, the contract of carriage is between the carrier
and the passenger, and in the event of contractual liability, the carrier is
exclusively responsible therefore to the passenger, even if such breach be
due to the negligence of his driver (see Viluan v. The Court of Appeals, et
al., G.R. Nos. L-21477-81, April 29, 1966, 16 SCRA 742). In other words,
the carrier can neither shift his liability on the contract to his driver nor share
it with him, for his driver's negligence is his. 4 Secondly, if We make the
driver jointly and severally liable with the carrier, that would make the
carrier's liability personal instead of merely vicarious and consequently,
entitled to recover only the share which corresponds to the
driver, 5 contradictory to the explicit provision of Article 2181 of the New Civil
Code. 6
We affirm the amount of damages adjudged by the trial court, except with
respect to the indemnity for loss of life. Under Article 1764 in relation to
Article 2206 of the New Civil Code, the amount of damages for the death of
a passenger is at least three thousand pesos (P3,000.00). The prevailing
jurisprudence has increased the amount of P3,000.00 to P30,000.00 (see
Heirs of Amparo delos Santos, et al. v. Honorable Court of Appeals, et al.,
G.R. No. 51165, June 21, 1990 citing De Lima v. Laguna Tayabas Co., G.R.
Nos. L-35697-99, April 15, 1988, 160 SCRA 70).
ACCORDINGLY, the petition is hereby GRANTED. The decision of the
Intermediate Appellate Court dated July 29, 1983 and its resolution dated
November 28, 1983 are SET ASIDE. The decision of the Court of First
Instance dated December 27, 1978 is REINSTATED MODIFICATION that
only Isidro Mangune, Guillerma Carreon and Filriters Guaranty Assurance
Corporation, Inc. are liable to the victims or their heirs and that the amount
of indemnity for loss of life is increased to thirty thousand pesos
(P30,000.00).
SO ORDERED.
 EN BANC
G.R. No. L-9907 June 30, 1958
LOURDES J. LARA, ET AL., plaintiffs-appellants,
vs.
BRIGIDO R. VALENCIA, defendant-appellant.
Castillo, Cervantes, Occeña, Lozano, Montana, Cunanan, Sison and Castillo
and Eligio G. Lagman for defendant-appellant.
Donato C. Endriga and Emigdio Dakanay for plaintiffs-appellants.
BAUTISTA ANGELO, J.:
This is an action for damages brought by plaintiffs against defendant in the
Court of First Instance of Davao for the death of one Demetrio Lara, Sr.
allegedly caused by the negligent act of defendant. Defendant denied the
charge of negligence and set up certain affirmative defenses and a
counterclaim.
The court after hearing rendered judgment ordering defendant to pay the
plaintiffs the following amount: (a) P10,000 as moral damages; (b) P3,000
as exemplary damages; and (c) P1,000 as attorney's fees, in addition to the
costs of action. Both parties appealed to this Court because the damages
claimed in the complaint exceed the sum of P50,000.
In their appeal, plaintiffs claim that the court a quo erred in disregarding their
claim of P41,400 as actual or compensatory damages and in awarding as
attorneys' fees only the sum of P1,000 instead of P3,000 as agreed upon
between plaintiffs and their counsel. Defendant, on the other hand, disputes
the finding of the court a quo that the oath of Demetrio Lara, Sr. was due to
the negligence of defendant and the portion of the judgment which orders
dependant to pay to plaintiffs moral and exemplary damages as well as
attorneys' fees, said defendant contending that the court should have
declared that the death of Lara was due to unavoidable accident.
The deceased was an inspector of the Bureau of Forestry stationed in
Davao with an annual salary of P1,800. The defendant is engaged in the
business of exporting logs from his lumber concession in Cotabato. Lara
went to said concession upon instructions of his chief to classify the logs of
defendant which were about to be loaded on a ship anchored in the port of
Parang. The work Lara of lasted for six days during which he contracted
malaria fever. In the morning of January 9, 1954, Lara who then in a hurry to
return to Davao asked defendant if he could take him in his pick-up as there
was then no other means of transportation, to which defendant agreed, and
in that same morning the pick-up left Parang bound for Davao taking along
six passengers, including Lara.
The pick-up has a front seat where the driver and two passengers can be
accommodated and the back has a steel flooring enclosed with a steel
walling of 16 to 17 inches tall on the sides and with a 19 inches tall walling at
the back. Before leaving Parang, the sitting arrangement was as follows:
defendant was at the wheel and seated with him in the front seat were Mrs.
Valencia and Nicanor Quinain; on the back of the pick-up were two
improvised benches placed on each side, and seated on the right bench
were Ricardo Alojipan and Antonio Lagahit, and on the left one Bernardo
and Pastor Geronimo. A person by the name of Leoning was seated on a
box located on the left side while in the middle Lara sat on a bag. Before
leaving Parang, defendant invited Lara to sit with him on the front seat but
Lara declined. It was their understanding that upon reaching barrio Samoay,
Cotabato, the passengers were to alight and take a bus bound for Davao,
but when they arrived at that place, only Bernardo alighted and the other
passengers requested defendant to allow them to ride with him up to Davao
because there was then no available bus that they could take in going to
that place. Defendant again accommodated the passengers.
When they continued their trip, the sitting arrangement of the passengers
remained the same, Lara being seated on a bag in the middle with his arms
on a suitcase and his head cove red by a jacket. Upon reaching Km. 96,
barrio Catidtuan, Lara accidentally fell from the pick-up and as a result he
suffered serious injuries. Valencia stopped the pick-up to see what
happened to Lara. He sought the help of the residents of that place and
applied water to Lara but to no avail. They brought Lara to the nearest place
where they could find a doctor and not having found any they took him to St.
Joseph's Clinic of Kidapawan. But when Lara arrived he was already dead.
From there they proceeded to Davao City and immediately notified the local
authorities. An investigation was made regarding the circumstances
surrounding the death of Lara but no criminal action was taken against
defendant.
It should be noted that the deceased went to the lumber concession of
defendant in Parang, Cotabato upon instructions of his chief in order to
classify the logs of defendant which were then ready to be exported and to
be loaded on a ship anchored in the port of Parang. It took Lara six days to
do his work during which he contracted malaria fever and for that reason he
evinced a desire to return immediately to Davao. At that time, there was no
available bus that could take him back to Davao and so he requested the
defendant if he could take him in his own pick-up. Defendant agreed and,
together with Lara, other passengers tagged along, most of them were
employees of the Government. Defendant merely accommodated them and
did not charge them any fee for the service. It was also their understanding
that upon reaching barrio Samoay, the passengers would alight and transfer
to a bus that regularly makes the trip to Davao but unfortunately there was
none available at the time and so the same passengers, including Lara,
again requested the defendant to drive them to Davao. Defendant again
accommodated them and upon reaching Km. 96, Lara accidentally fell
suffering fatal injuries.
It therefore appears that the deceased, as well his companions who rode in
the pick-up of defendant, were merely accommodation passengers who paid
nothing for the service and so they can be considered as invited guests
within the meaning of the law. As accommodation passengers or invited
guests, defendant as owner and driver of the pick-up owes to them merely
the duty to exercise reasonable care so that they may be transported safely
to their destination. Thus, "The rule is established by the weight of authority
that the owner or operator of an automobile owes the duty to an invited
guest to exercise reasonable care in its operation, and not unreasonably to
expose him to danger and injury by increasing the hazard of travel. This
rule, as frequently stated by the courts, is that an owner of an automobile
owes a guest the duty to exercise ordinary or reasonable care to avoid
injuring him. Since one riding in an automobile is no less a guest because
he asked for the privilege of doing so, the same obligation of care is
imposed upon the driver as in the case of one expressly invited to ride" (5
Am. Jur., 626-627). Defendant, therefore, is only required to observe
ordinary care, and is not in duty bound to exercise extraordinary diligence as
required of a common carrier by our law (Articles 1755 and 1756, new Civil
Code).
The question that now arises is: Is there enough evidence to show that
defendant failed to observe ordinary care or diligence in transporting the
deceased from Parang to Davao on the date in question?
The trial court answered the question in the affirmative but in so doing it took
into account only the following facts:
No debe perderse de vista el hecho, que los negocios de
exportacion de trozos del demandado tiene un volumen de
P1,200. Lara era empleado de la Oficina de Montes, asalariado
por el gobierno, no pagado por el demandado para classificar los
trozos exportados; debido a los trabajos de classificacion que
duro 6 dias, en su ultimo dia Lara no durmio toda la noche, al dia
siguiente, Lara fue atacado de malaria, tenia inflamada la cara y
cuerpo, sufria dolores de cabeza con erupciones en la cara y
cuerpo; que en la manana, del dia 2 de enero de 1954, fecha en
que Lara salio de Davao para Parang, en aeroplano para
clasificar los trozos del demandado, el automobil de este condujo
a aquel al aerodromo de Davao.
xxx xxx xxx
El viaje de Cotabato a Davao no es menos de 8 horas, su
carretera esta en malas condiciones, desnivelada, con piedras
salientes y baches, que hacen del vehiculo no estable en su
marcha. Lara estaba enfermo de cierta gravedad, tenia el cuerpo
y cara inflamados, atacado de malaria, con dolores de cabeza y
con erupciones en la cara y cuerpo.
A la vista de estos hechos, el demandado debia de saber que era
sumamente peligroso llevar 5 pasajeros en la parte trasera del
pick-up; particularmente, para la salud de Lara; el permitirlo, el
demandado no ha tomado las precausiones, para evitar un
posible accidente fatal. La negative de Lara de ocupar el asiento
delantero del pick-up no constituye a juicio del Juzgado una
 defensa, pues el demendado conociendo el estado delicado de
salud de Lara, no debio de haber permitido que aquel regrese a
Davao en su pick-up; si querria prestar a aquel un favor, debio de
haver provisto a Lara de un automobil para su regrese a Davao,
ya que el demendado es un millionario; si no podia prestar a
aquel este favor, debio de haver dejado a Lara en Samuay para
coger aquel un camion de pasajero de Cotabato a Davao.

Even if we admit as true the facts found by the trial court, still we find that
the same are not sufficient to show that defendant has failed to take the
precaution necessary to conduct his passengers safely to their place of
destination for there is nothing there to indicate that defendant has acted
with negligence or without taking the precaution that an ordinary prudent
man would have taken under similar circumstances. It should be noted that
Lara went to the lumber concession of defendant in answer to a call of duty
which he was bound to perform because of the requirement of his office and
he contracted the malaria fever in the course of the performance of that
duty. It should also be noted that defendant was not in duty bound to take
the deceased in his own pick-up to Davao because from Parang to Cotabato
there was a line of transportation that regularly makes trips for the public,
and if defendant agreed to take the deceased in his own car, it was only to
accommodate him considering his feverish condition and his request that he
be so accommodated. It should also be noted that the passengers who rode
in the pick-up of defendant took their respective seats therein at their own
choice and not upon indication of defendant with the particularity that
defendant invited the deceased to sit with him in the front seat but which
invitation the deceased declined. The reason for this can only be attributed
to his desire to be at the back so that he could sit on a bag and travel in a
reclining position because such was more convenient for him due to his
feverish condition. All the circumstances therefore clearly indicate that
defendant had done what a reasonable prudent man would have done
under the circumstances.

There is every reason to believe that the unfortunate happening was only
due to an unforeseen accident accused by the fact that at the time the
deceased was half asleep and must have fallen from the pick-up when it ran
into some stones causing it to jerk considering that the road was then
bumpy, rough and full of stones.

The finding of the trial court that the pick-up was running at more than 40
kilometers per hour is not supported by the evidence. This is a mere surmise
made by the trial court considering the time the pick-up left barrio Samoay
and the time the accident occured in relation to the distance covered by the
pick-up. And even if this is correct, still we say that such speed is not
unreasonable considering that they were traveling on a national road and
the traffic then was not heavy. We may rather attribute the incident to lack of
care on the part of the deceased considering that the pick-up was open and
he was then in a crouching position. Indeed, the law provides that "A
passenger must observe the diligence of a good father of a family to avoid
injury to himself" (Article 1761, new Civil Code), which means that if the
injury to the passenger has been proximately caused by his own negligence,
the carrier cannot be held liable.

All things considered, we are persuaded to conclude that the accident

occurred not due to the negligence of defendant but to circumstances
beyond his control and so he should be exempt from liability.

Wherefore, the decision appealed from is reversed, without pronouncement

as to costs.