1

Republic of the Philippines

SUPREME COURT
Manila
SECOND DIVISION

G.R. No. 122494 October 8, 1998
EVERETT STEAMSHIP CORPORATION, petitioner,
vs.
COURT OF APPEALS and HERNANDEZ TRADING CO. INC., respondents.
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 and MARCO 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 vessel owned by petitioner's 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 attorney's fees; and (d) to pay the cost of the suit. The trial court ruled:
Considering defendant's 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 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 attorney's fees but affirmed the trial court's
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.
xxx xxx xxx
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.
2

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 carrier's 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 carrier's 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 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 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
carrier's 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 shipper's 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 court's 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:
. . . 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 .
. . are contracts not entirely prohibited. The one who adheres to the contract is in
reality free to reject it entirely; if the 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 . . ., 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 latter's 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. . . ., 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)
3

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
petitioner's 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
onsignee. . . . .
. . . 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 through
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. (Emphasis 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 carrier's 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 . . ., 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 petitioner's contention. To defeat the carrier's 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 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.








4




SECOND DIVISION


MOF COMPANY, INC., G.R. No. 172822
Petitioner,
Present:

CARPIO,
*
J., Chairperson,
- versus - LEONARDO-DE CASTRO,
**

BRION,
DEL CASTILLO, and
ABAD, JJ.
SHIN YANG BROKERAGE
CORPORATION, Promulgated:
Respondent. December 18, 2009
x - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - x


D E C I S I O N


DEL CASTILLO, J.:

The necessity of proving lies with the person who sues.

The refusal of the consignee named in the bill of lading to pay the freightage on the claim that it is not privy
to the contract of affreightment propelled the shipper to sue for collection of money, stressing that its sole evidence,
the bill of lading, suffices to prove that the consignee is bound to pay. Petitioner now comes to us by way of Petition for
Review on Certiorari
[1]
under Rule 45 praying for the reversal of the Court of Appeals' (CA) judgment that dismissed its
action for sum of money for insufficiency of evidence.


Factual Antecedents

On October 25, 2001, Halla Trading Co., a company based in Korea, shipped to Manila secondhand cars
and other articles on board the vessel Hanjin Busan 0238W. The bill of lading covering the shipment, i.e., Bill of Lading
No. HJSCPUSI14168303,
[2]
which was prepared by the carrier Hanjin Shipping Co., Ltd. (Hanjin), named respondent Shin
Yang Brokerage Corp. (Shin Yang) as the consignee and indicated that payment was on a Freight Collect basis, i.e.,
that the consignee/receiver of the goods would be the one to pay for the freight and other charges in the total amount
ofP57,646.00.
[3]


The shipment arrived in Manila on October 29, 2001. Thereafter, petitioner MOF Company, Inc. (MOF),
Hanjins exclusive general agent in the Philippines, repeatedly demanded the payment of ocean freight, documentation
fee and terminal handling charges from Shin Yang. The latter, however, failed and refused to pay contending that it did
not cause the importation of the goods, that it is only the Consolidator of the said shipment, that the ultimate
consignee did not endorse in its favor the original bill of lading and that the bill of lading was prepared without its
consent.

Thus, on March 19, 2003, MOF filed a case for sum of money before
the Metropolitan Trial Court of Pasay City (MeTC Pasay) which was docketed as Civil Case No. 206-03 and raffled to
Branch 48. MOF alleged that Shin Yang, a regular client, caused the importation and shipment of the goods and
assured it that ocean freight and other charges would be paid upon arrival of the goods inManila. Yet, after Hanjin's
compliance, Shin Yang unjustly breached its obligation to pay. MOF argued that Shin Yang, as the named consignee in
the bill of lading, entered itself as a party to the contract and bound itself to the Freight Collect arrangement. MOF
thus prayed for the payment of P57,646.00 representing ocean freight, documentation fee and terminal handling
charges as well as damages and attorneys fees.

Claiming that it is merely a consolidator/forwarder and that Bill of Lading No. HJSCPUSI14168303 was not
endorsed to it by the ultimate consignee, Shin Yang denied any involvement in shipping the goods or in promising to
shoulder the freightage. It asserted that it never authorized Halla Trading Co. to ship the articles or to have its name
included in the bill of lading. Shin Yang also alleged that MOF failed to present supporting documents to prove that it
was Shin Yang that caused the importation or the one that assured payment of the shipping charges upon arrival of the
goods in Manila.

Ruling of the Metropolitan Trial Court

5

On June 16, 2004, the MeTC of Pasay City, Branch 48 rendered its Decision
[4]
in favor of MOF. It ruled that Shin
Yang cannot disclaim being a party to the contract of affreightment because:

x x x it would appear that defendant has business transactions with plaintiff. This is
evident from defendants letters dated 09 May 2002 and 13 May 2002 (Exhibits 1 and 2,
defendants Position Paper) where it requested for the release of refund of container deposits
x x x. [In] the mind of the Court, by analogy, a written contract need not be necessary; a
mutual understanding [would suffice]. Further, plaintiff would have not included the name of
the defendant in the bill of lading, had there been no prior agreement to that effect.

In sum, plaintiff has sufficiently proved its cause of action against the defendant
and the latter is obliged to honor its agreement with plaintiff despite the absence of a written
contract.
[5]


The dispositive portion of the MeTC Decision reads:

WHEREFORE, premises considered, judgment is hereby rendered in favor of plaintiff
and against the defendant, ordering the latter to pay plaintiff as follows:

1. P57,646.00 plus legal interest from the date of demand until fully paid,
2. P10,000.00 as and for attorneys fees and
3. the cost of suit.

SO ORDERED.
[6]



Ruling of the Regional Trial Court

The Regional Trial Court (RTC) of Pasay City, Branch 108 affirmed in toto the Decision of the MeTC. It held that:

MOF and Shin Yang entered into a contract of affreightment which Blacks Law
Dictionary defined as a contract with the ship owner to hire his ship or part of it, for the
carriage of goods and generally take the form either of a charter party or a bill of lading.

The bill of lading contain[s] the information embodied in the contract.

Article 652 of the Code of Commerce provides that the charter party must be in
writing; however, Article 653 says: If the cargo should be received without charter party
having been signed, the contract shall be understood as executed in accordance with what
appears in the bill of lading, the sole evidence of title with regard to the cargo for determining
the rights and obligations of the ship agent, of the captain and of the charterer. Thus, the
Supreme Court opined in the Market Developers, Inc. (MADE) vs. Honorable Intermediate
Appellate Court and Gaudioso Uy, G.R. No. 74978, September 8, 1989, this kind of contract
may be oral. In another case, Compania Maritima vs. Insurance Company of North America,
12 SCRA 213 the contract of affreightment by telephone was recognized where the oral
agreement was later confirmed by a formal booking.

x x x x

Defendant is liable to pay the sum of P57,646.00, with interest until fully paid,
attorneys fees of P10,000.00 [and] cost of suit.

Considering all the foregoing, this Court affirmsin toto the decision of the Court a quo.

SO ORDERED.
[7]


Ruling of the Court of Appeals

Seeing the matter in a different light, the CA dismissed MOFs complaint and refused to award any form of
damages or attorneys fees. It opined that MOF failed to substantiate its claim that Shin Yang had a hand in the
importation of the articles to the Philippines or that it gave its consent to be a consignee of the subject goods. In
its March 22, 2006 Decision,
[8]
the CA said:

This Court is persuaded [that except] for the Bill of Lading, respondent has not presented
any other evidence to bolster its claim that petitioner has entered [into] an agreement of
affreightment with respondent, be it verbal or written. It is noted that the Bill of Lading was
prepared by Hanjin Shipping, not the petitioner. Hanjin is the principal while respondent is the
formers agent. (p. 43, rollo)

The conclusion of the court a quo, which was upheld by the RTC Pasay City, Branch 108
xxx is purely speculative and conjectural. A court cannot rely on speculations, conjectures or
guesswork, but must depend upon competent proof and on the basis of the best evidence
obtainable under the circumstances. Litigation cannot be properly resolved by suppositions,
deductions or even presumptions, with no basis in evidence, for the truth must have to be
determined by the hard rules of admissibility and proof (Lagon vs. Hooven Comalco Industries,
Inc. 349 SCRA 363).

While it is true that a bill of lading serves two (2) functions: first, it is a receipt for the
goods shipped; second, it is a contract by which three parties, namely, the shipper, the carrier
and the consignee who undertake specific responsibilities and assume stipulated obligations
(Belgian Overseas Chartering and Shipping N.V. vs. Phil. First Insurance Co., Inc., 383 SCRA 23),
x x x if the same is not accepted, it is as if one party does not accept the contract. Said the
Supreme Court:

A bill of lading delivered and accepted constitutes the
contract of carriage[,] even though not signed, because the
acceptance of a paper containing the terms of a proposed contract
generally constitutes an acceptance of the contract and of all its
terms and conditions of which the acceptor has actual or
constructive notice (Keng Hua Paper Products Co., Inc. vs. CA, 286
SCRA 257).

In the present case, petitioner did not only [refuse to] accept the bill of lading, but it
likewise disown[ed] the shipment x x x. [Neither did it] authorize Halla Trading Company or
anyone to ship or export the same on its behalf.

6

It is settled that a contract is upheld as long as there is proof of consent, subject matter
and cause (Sta. Clara Homeowners Association vs. Gaston, 374 SCRA 396). In the case at bar,
there is not even any iota of evidence to show that petitioner had given its consent.

He who alleges a fact has the burden of proving it and a
mere allegation is not evidence (Luxuria Homes Inc. vs. CA, 302
SCRA 315).

The 40-footer van contains goods of substantial value. It is highly improbable for
petitioner not to pay the charges, which is very minimal compared with the value of the
goods, in order that it could work on the release thereof.

For failure to substantiate its claim by preponderance of evidence, respondent has not
established its case against petitioner.
[9]


Petitioners filed a motion for reconsideration but it was denied in a Resolution
[10]
dated May 25, 2006. Hence, this
petition for review on certiorari.

Petitioners Arguments

In assailing the CAs Decision, MOF argues that the factual findings of both the MeTC and RTC are entitled to great
weight and respect and should have bound the CA. It stresses that the appellate court has no justifiable reason to
disturb the lower courts judgments because their conclusions are well-supported by the evidence on record.

MOF further argues that the CA erred in labeling the findings of the lower courts as purely speculative and
conjectural. According to MOF, the bill of lading, which expressly stated Shin Yang as the consignee, is the best
evidence of the latters actual participation in the transportation of the goods. Such document, validly entered, stands
as the law among the shipper, carrier and the consignee, who are all bound by the terms stated therein. Besides, a
carriers valid claim after it fulfilled its obligation cannot just be rejected by the named consignee upon a simple denial
that it ever consented to be a party in a contract of affreightment, or that it ever participated in the preparation of the
bill of lading. As against Shin Yangs bare denials, the bill of lading is the sufficient preponderance of evidence required
to prove MOFs claim. MOF maintains that Shin Yang was the one that supplied all the details in the bill of lading and
acquiesced to be named consignee of the shipment on a Freight Collect basis.

Lastly, MOF claims that even if Shin Yang never gave its consent, it cannot avoid its obligation to pay,
because it never objected to being named as the consignee in the bill of lading and that it only protested when the
shipment arrived in the Philippines, presumably due to a botched transaction between it and Halla Trading
Co. Furthermore, Shin Yangs letters asking for the refund of container deposits highlight the fact that it was aware of
the shipment and that it undertookpreparations for the intended release of the shipment.

RespondentsArguments

Echoing the CA decision, Shin Yang insists that MOF has no evidence to prove that it consented to take part in the
contract of affreightment. Shin Yang argues that MOF miserably failed to present any evidence to prove that it was the
one that made preparations for the subject shipment, or that it is an actual shipping practice that
forwarders/consolidators as consignees are the ones that provide carriers details and information on the bills of lading.

Shin Yang contends that a bill of lading is essentially a contract between the shipper and the carrier and
ordinarily, the shipper is the one liable for the freight charges. A consignee, on the other hand, is initially a stranger to
the bill of lading and can be liable only when the bill of lading specifies that the charges are to be paid by the
consignee. This liability arises from either a) the contract of agency between the shipper/consignor and the consignee;
or b) the consignees availment of the stipulation pour autrui drawn up by and between the shipper/ consignor and
carrier upon the consignees demand that the goods be delivered to it. Shin Yang contends that the fact that its name
was mentioned as the consignee of the cargoes did not make it automatically liable for the freightage because it never
benefited from the shipment. It never claimed or accepted the goods, it was not the shippers agent, it was not aware
of its designation as consignee and the original bill of lading was never endorsed to it.

Issue

The issue for resolution is whether a consignee, who is not a signatory to the bill of lading, is bound by the
stipulations thereof. Corollarily, whether respondent who was not an agent of the shipper and who did not make any
demand for the fulfillment of the stipulations of the bill of lading drawn in its favor is liable to pay the corresponding
freight and handling charges.
7


Our Ruling

Since the CA and the trial courts arrived at different conclusions, we are constrained to depart from the general
rule that only errors of law may be raised in a Petition for Review on Certiorariunder Rule 45 of the Rules of Court and
will review the evidence presented.
[11]


The bill of lading is oftentimes drawn up by the shipper/consignor and the carrier without the intervention of the
consignee. However, the latter can be bound by the stipulations of the bill of lading when a) there is a relation of
agency between the shipper or consignor and the consignee or b) when the consignee demands fulfillment of the
stipulation of the bill of lading which was drawn up in its favor.
[12]


In KengHuaPaper Products Co., Inc. v. Court of Appeals,
[13]
we held that once the bill of lading is received by
the consignee who does not object to any terms or stipulations contained therein, it constitutes as an acceptance of the
contract and of all of its terms and conditions, of which the acceptor has actual or constructive notice.

In Mendoza v. Philippine Air Lines, Inc.,
[14]
the consignee sued the carrier for damages but nevertheless
claimed that he was never a party to the contract of transportation and was a complete stranger thereto. In
debunking Mendozas contention, we held that:

x x x First, he insists that the articles of the Code of Commerce should be applied; that he
invokes the provisions of said 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 Pili 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 a consignee. [Mendoza made himself a party to the contract of
transportaion when he appeared at the Pili Air Port armed with the copy of the Air Way Bill
(Exh. 1) demanding the delivery of the shipment to him.] 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 bill 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 Pili 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.
[15]
(Emphasis Ours)

In sum, a consignee, although not a signatory to the contract of carriage between the shipper and the carrier,
becomes a party to the contract by reason of either a) the relationship of agency between the consignee and the
shipper/ consignor; b) the unequivocal acceptance of the bill of lading delivered to the consignee, with full knowledge
of its contents or c) availment of the stipulation pour autrui, i.e., when the consignee, a third person, demands before
the carrier the fulfillment of the stipulation made by the consignor/shipper in the consignees favor, specifically the
delivery of the goods/cargoes shipped.
[16]


In the instant case, Shin Yang consistently denied in all of its pleadings that it authorized Halla Trading, Co.
to ship the goods on its behalf; or that it got hold of the bill of lading covering the shipment or that it demanded the
8

release of the cargo. Basic is the rule in evidence that the burden of proof lies upon him who asserts it, not upon him
who denies, since, by the nature of things, he who denies a fact cannot produce any proof of it.
[17]
Thus, MOF has the
burden to controvert all these denials, it being insistent that Shin Yang asserted itself as the consignee and the one that
caused the shipment of the goods to thePhilippines.

In civil cases, the party having the burden of proof must establish his case by preponderance of
evidence,
[18]
which means evidence which is of greater weight, or more convincing than that which is offered in
opposition to it.
[19]
Here, MOF failed to meet the required quantum of proof. Other than presenting the bill of lading,
which, at most, proves that the carrier acknowledged receipt of the subject cargo from the shipper and that the
consignee named is to shoulder the freightage, MOF has not adduced any other credible evidence to strengthen its
cause of action. It did not even present any witness in support of its allegation that it was Shin Yang which furnished all
the details indicated in the bill of lading and that Shin Yang consented to shoulder the shipment costs. There is also
nothing in the records which would indicate that Shin Yang was an agent of Halla Trading Co. or that it exercised any act
that would bind it as a named consignee. Thus, the CA correctly dismissed the suit for failure of petitioner to establish
its cause against respondent.

WHEREFORE, the petition is DENIED. The assailed Decision of the Court of Appeals dated March 22,
2006 dismissing petitioners complaint and the Resolution datedMay 25, 2006denying the motion for reconsideration
are AFFIRMED.

SO ORDERED.








Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 95582 October 7, 1991
DANGWA TRANSPORTATION CO., INC. and THEODORE LARDIZABAL y MALECDAN, petitioners,
vs.
COURT OF APPEALS, INOCENCIA CUDIAMAT, EMILIA CUDIAMAT BANDOY, FERNANDO CUDLAMAT,
MARRIETA CUDIAMAT, NORMA CUDIAMAT, DANTE CUDIAMAT, SAMUEL CUDIAMAT and LIGAYA
CUDIAMAT, all Heirs of the late Pedrito Cudiamat represented by Inocencia Cudiamat, respondents.
Francisco S. Reyes Law Office for petitioners.
Antonio C. de Guzman for private respondents.

REGALADO, J.:p
On May 13, 1985, private respondents filed a complaint 1 for damages against petitioners for the death
of Pedrito Cudiamat as a result of a vehicular accident which occurred on March 25, 1985 at Marivic,
Sapid, Mankayan, Benguet. Among others, it was alleged that on said date, while petitioner Theodore M.
Lardizabal was driving a passenger bus belonging to petitioner corporation in a reckless and imprudent
manner and without due regard to traffic rules and regulations and safety to persons and property, it ran
over its passenger, Pedrito Cudiamat. However, instead of bringing Pedrito immediately to the nearest
hospital, the said driver, in utter bad faith and without regard to the welfare of the victim, first brought
his other passengers and cargo to their respective destinations before banging said victim to the Lepanto
Hospital where he expired.
On the other hand, petitioners alleged that they had observed and continued to observe the
extraordinary diligence required in the operation of the transportation company and the supervision of
the employees, even as they add that they are not absolute insurers of the safety of the public at large.
Further, it was alleged that it was the victim's own carelessness and negligence which gave rise to the
subject incident, hence they prayed for the dismissal of the complaint plus an award of damages in their
favor by way of a counterclaim.
On July 29, 1988, the trial court rendered a decision, effectively in favor of petitioners, with this decretal
portion:
IN VIEW OF ALL THE FOREGOING, judgment is hereby pronounced that Pedrito
Cudiamat was negligent, which negligence was the proximate cause of his death.
Nonetheless, defendants in equity, are hereby ordered to pay the heirs of Pedrito
Cudiamat the sum of P10,000.00 which approximates the amount defendants
initially offered said heirs for the amicable settlement of the case. No costs.
SO ORDERED. 2
9

Not satisfied therewith, private respondents appealed to the Court of Appeals which, in a decision 3 in
CA-G.R. CV No. 19504 promulgated on August 14, 1990, set aside the decision of the lower court, and
ordered petitioners to pay private respondents:
1. The sum of Thirty Thousand (P30,000.00) Pesos by way of indemnity for death
of the victim Pedrito Cudiamat;
2. The sum of Twenty Thousand (P20,000.00) by way of moral damages;
3. The sum of Two Hundred Eighty Eight Thousand (P288,000.00) Pesos as actual
and compensatory damages;
4. The costs of this suit. 4
Petitioners' motion for reconsideration was denied by the Court of Appeals in its resolution dated
October 4, 1990,5 hence this petition with the central issue herein being whether respondent court
erred in reversing the decision of the trial court and in finding petitioners negligent and liable for the
damages claimed.
It is an established principle that the factual findings of the Court of Appeals as a rule are final and may
not be reviewed by this Court on appeal. However, this is subject to settled exceptions, one of which is
when the findings of the appellate court are contrary to those of the trial court, in which case a
reexamination of the facts and evidence may be undertaken. 6
In the case at bar, the trial court and the Court of Appeal have discordant positions as to who between
the petitioners an the victim is guilty of negligence. Perforce, we have had to conduct an evaluation of
the evidence in this case for the prope calibration of their conflicting factual findings and legal
conclusions.
The lower court, in declaring that the victim was negligent, made the following findings:
This Court is satisfied that Pedrito Cudiamat was negligent in trying to board a
moving vehicle, especially with one of his hands holding an umbrella. And, without
having given the driver or the conductor any indication that he wishes to board the
bus. But defendants can also be found wanting of the necessary diligence. In this
connection, it is safe to assume that when the deceased Cudiamat attempted to
board defendants' bus, the vehicle's door was open instead of being closed. This
should be so, for it is hard to believe that one would even attempt to board a
vehicle (i)n motion if the door of said vehicle is closed. Here lies the defendant's
lack of diligence. Under such circumstances, equity demands that there must be
something given to the heirs of the victim to assuage their feelings. This, also
considering that initially, defendant common carrier had made overtures to
amicably settle the case. It did offer a certain monetary consideration to the
victim's heirs. 7
However, respondent court, in arriving at a different opinion, declares that:
From the testimony of appellees'own witness in the person of Vitaliano Safarita, it
is evident that the subject bus was at full stop when the victim Pedrito Cudiamat
boarded the same as it was precisely on this instance where a certain Miss
Abenoja alighted from the bus. Moreover, contrary to the assertion of the
appellees, the victim did indicate his intention to board the bus as can be seen
from the testimony of the said witness when he declared that Pedrito Cudiamat
was no longer walking and made a sign to board the bus when the latter was still
at a distance from him. It was at the instance when Pedrito Cudiamat was closing
his umbrella at the platform of the bus when the latter made a sudden jerk
movement (as) the driver commenced to accelerate the bus.
Evidently, the incident took place due to the gross negligence of the appellee-
driver in prematurely stepping on the accelerator and in not waiting for the
passenger to first secure his seat especially so when we take into account that the
platform of the bus was at the time slippery and wet because of a drizzle. The
defendants-appellees utterly failed to observe their duty and obligation as
common carrier to the end that they should observe extra-ordinary diligence in
the vigilance over the goods and for the safety of the passengers transported by
them according to the circumstances of each case (Article 1733, New Civil Code). 8
After a careful review of the evidence on record, we find no reason to disturb the above holding of the
Court of Appeals. Its aforesaid findings are supported by the testimony of petitioners' own witnesses.
One of them, Virginia Abalos, testified on cross-examination as follows:
Q It is not a fact Madam witness, that at bunkhouse 54, that
is before the place of the incident, there is a crossing?
A The way going to the mines but it is not being pass(ed) by
the bus.
Q And the incident happened before bunkhouse 56, is that
not correct?
A It happened between 54 and 53 bunkhouses. 9
The bus conductor, Martin Anglog, also declared:
Q When you arrived at Lepanto on March 25, 1985, will you
please inform this Honorable Court if there was anv unusual
incident that occurred?
A When we delivered a baggage at Marivic because a person
alighted there between Bunkhouse 53 and 54.
Q What happened when you delivered this passenger at this
particular place in Lepanto?
A When we reached the place, a passenger alighted and I
signalled my driver. When we stopped we went out because I
saw an umbrella about a split second and I signalled again
the driver, so the driver stopped and we went down and we
10

saw Pedrito Cudiamat asking for help because he was lying
down.
Q How far away was this certain person, Pedrito Cudiamat,
when you saw him lying down from the bus how far was
he?
A It is about two to three meters.
Q On what direction of the bus was he found about three
meters from the bus, was it at the front or at the back?
A At the back, sir. 10 (Emphasis supplied.)
The foregoing testimonies show that the place of the accident and the place where one of the
passengers alighted were both between Bunkhouses 53 and 54, hence the finding of the Court of
Appeals that the bus was at full stop when the victim boarded the same is correct. They further confirm
the conclusion that the victim fell from the platform of the bus when it suddenly accelerated forward
and was run over by the rear right tires of the vehicle, as shown by the physical evidence on where he
was thereafter found in relation to the bus when it stopped. Under such circumstances, it cannot be said
that the deceased was guilty of negligence.
The contention of petitioners that the driver and the conductor had no knowledge that the victim would
ride on the bus, since the latter had supposedly not manifested his intention to board the same, does
not merit consideration. When the bus is not in motion there is no necessity for a person who wants to
ride the same to signal his intention to board. A public utility bus, once it stops, is in effect making a
continuous offer to bus riders. Hence, it becomes the duty of the driver and the conductor, every time
the bus stops, to do no act that would have the effect of increasing the peril to a passenger while he was
attempting to board the same. The premature acceleration of the bus in this case was a breach of such
duty. 11
It is the duty of common carriers of passengers, including common carriers by railroad train, streetcar, or
motorbus, to stop their conveyances a reasonable length of time in order to afford passengers an
opportunity to board and enter, and they are liable for injuries suffered by boarding passengers resulting
from the sudden starting up or jerking of their conveyances while they are doing so. 12
Further, even assuming that the bus was moving, the act of the victim in boarding the same cannot be
considered negligent under the circumstances. As clearly explained in the testimony of the aforestated
witness for petitioners, Virginia Abalos, th bus had "just started" and "was still in slow motion" at the
point where the victim had boarded and was on its platform. 13
It is not negligence per se, or as a matter of law, for one attempt to board a train or streetcar which is
moving slowly. 14 An ordinarily prudent person would have made the attempt board the moving
conveyance under the same or similar circumstances. The fact that passengers board and alight from
slowly moving vehicle is a matter of common experience both the driver and conductor in this case could
not have been unaware of such an ordinary practice.
The victim herein, by stepping and standing on the platform of the bus, is already considered a
passenger and is entitled all the rights and protection pertaining to such a contractual relation. Hence, it
has been held that the duty which the carrier passengers owes to its patrons extends to persons
boarding cars as well as to those alighting therefrom. 15
Common carriers, from the nature of their business and reasons of public policy, are bound to observe
extraordina diligence for the safety of the passengers transported by the according to all the
circumstances of each case. 16 A common carrier is bound to carry the passengers safely as far as human
care and foresight can provide, using the utmost diligence very cautious persons, with a due regard for
all the circumstances. 17
It has also been repeatedly held that in an action based on a contract of carriage, the court need not
make an express finding of fault or negligence on the part of the carrier in order to hold it responsible to
pay the damages sought by the passenger. By contract of carriage, the carrier assumes the express
obligation to transport the passenger to his destination safely and observe extraordinary diligence with a
due regard for all the circumstances, and any injury that might be suffered by the passenger is right away
attributable to the fault or negligence of the carrier. This is an exception to the general rule that
negligence must be proved, and it is therefore incumbent upon the carrier to prove that it has exercised
extraordinary diligence as prescribed in Articles 1733 and 1755 of the Civil Code. 18
Moreover, the circumstances under which the driver and the conductor failed to bring the gravely
injured victim immediately to the hospital for medical treatment is a patent and incontrovertible proof of
their negligence. It defies understanding and can even be stigmatized as callous indifference. The
evidence shows that after the accident the bus could have forthwith turned at Bunk 56 and thence to the
hospital, but its driver instead opted to first proceed to Bunk 70 to allow a passenger to alight and to
deliver a refrigerator, despite the serious condition of the victim. The vacuous reason given by
petitioners that it was the wife of the deceased who caused the delay was tersely and correctly confuted
by respondent court:
... The pretension of the appellees that the delay was due to the fact that they had
to wait for about twenty minutes for Inocencia Cudiamat to get dressed deserves
scant consideration. It is rather scandalous and deplorable for a wife whose
husband is at the verge of dying to have the luxury of dressing herself up for about
twenty minutes before attending to help her distressed and helpless husband. 19
Further, it cannot be said that the main intention of petitioner Lardizabal in going to Bunk 70 was to
inform the victim's family of the mishap, since it was not said bus driver nor the conductor but the
companion of the victim who informed his family thereof. 20 In fact, it was only after the refrigerator
was unloaded that one of the passengers thought of sending somebody to the house of the victim, as
shown by the testimony of Virginia Abalos again, to wit:
Q Why, what happened to your refrigerator at that
particular time?
A I asked them to bring it down because that is the nearest
place to our house and when I went down and asked
somebody to bring down the refrigerator, I also asked
somebody to call the family of Mr. Cudiamat.
COURT:
11

Q Why did you ask somebody to call the family of Mr.
Cudiamat?
A Because Mr. Cudiamat met an accident, so I ask somebody
to call for the family of Mr. Cudiamat.
Q But nobody ask(ed) you to call for the family of Mr.
Cudiamat?
A No sir. 21
With respect to the award of damages, an oversight was, however, committed by respondent Court of
Appeals in computing the actual damages based on the gross income of the victim. The rule is that the
amount recoverable by the heirs of a victim of a tort is not the loss of the entire earnings, but rather the
loss of that portion of the earnings which the beneficiary would have received. In other words, only net
earnings, not gross earnings, are to be considered, that is, the total of the earnings less expenses
necessary in the creation of such earnings or income and minus living and other incidental expenses. 22
We are of the opinion that the deductible living and other expense of the deceased may fairly and
reasonably be fixed at P500.00 a month or P6,000.00 a year. In adjudicating the actual or compensatory
damages, respondent court found that the deceased was 48 years old, in good health with a remaining
productive life expectancy of 12 years, and then earning P24,000.00 a year. Using the gross annual
income as the basis, and multiplying the same by 12 years, it accordingly awarded P288,000. Applying
the aforestated rule on computation based on the net earnings, said award must be, as it hereby is,
rectified and reduced to P216,000.00. However, in accordance with prevailing jurisprudence, the death
indemnity is hereby increased to P50,000.00. 23
WHEREFORE, subject to the above modifications, the challenged judgment and resolution of respondent
Court of Appeals are hereby AFFIRMED in all other respects.
SO ORDERED.









Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION

G.R. No. 114061 August 3, 1994
KOREAN AIRLINES CO., LTD., petitioner,
vs.
COURT OF APPEALS and JUANITO C. LAPUZ, respondents.
G.R. No. 113842 August 3, 1994
JUANITO C. LAPUZ, petitioner,
vs.
COURT OF APPEALS and KOREAN AIRLINES CO., LTD., respondents.
M.A. Aguinaldo and Associates for Korean Airlines Co., Ltd.
Camacho and Associates for Juanito Lapuz.

CRUZ, J.:
Sometime in 1980, Juanito C. Lapuz, an automotive electrician, was contracted for employment in
Jeddah, Saudi Arabia, for a period of one year through Pan Pacific Overseas Recruiting Services, Inc.
Lapuz was supposed to leave on November 8, 1980, via Korean Airlines. Initially, he was "wait-listed,"
which meant that he could only be accommodated if any of the confirmed passengers failed to show up
at the airport before departure. When two of such passengers did not appear, Lapuz and another person
by the name of Perico were given the two unclaimed seats.
According to Lapuz, he was allowed to check in with one suitcase and one shoulder bag at the check-in
counter of KAL. He passed through the customs and immigration sections for routine check-up and was
cleared for departure as Passenger No. 157 of KAL Flight No. KE 903. Together with the other passengers,
he rode in the shuttle bus and proceeded to the ramp of the KAL aircraft for boarding. However, when
he was at the third or fourth rung of the stairs, a KAL officer pointed to him and shouted "Down! Down!"
He was thus barred from taking the flight. When he later asked for another booking, his ticket was
canceled by KAL. Consequently, he was unable to report for his work in Saudi Arabia within the
stipulated 2-week period and so lost his employment.
KAL, on the other hand, alleged that on November 8, 1980, Pan Pacific Recruiting Services Inc.
coordinated with KAL for the departure of 30 contract workers, of whom only 21 were confirmed and 9
were wait-listed passengers. The agent of Pan Pacific, Jimmie Joseph, after being informed that there
was a possibility of having one or two seats becoming available, gave priority to Perico, who was one of
12

the supervisors of the hiring company in Saudi Arabia. The other seat was won through lottery by Lapuz.
However, only one seat became available and so, pursuant to the earlier agreement that Perico was to
be given priority, he alone was allowed to board.
After trial, the Regional Trial Court of Manila, Branch 30,
1
adjudged KAL liable for damages, disposing as
follows:
WHEREFORE, in view of the foregoing consideration, judgment is hereby rendered
sentencing the defendant Korean Air Lines to pay plaintiff Juanito C. Lapuz the
following:
1. The amount of TWO HUNDRED SEVENTY-TWO THOUSAND ONE HUNDRED SIXTY
(P272,160.00) PESOS as actual/compensatory damages, with legal interest thereon
from the date of the filing of the complaint until fully paid.
2. The sum of TWENTY-FIVE THOUSAND (P25,000.00) PESOS as and for attorney's
fees; and
3. The costs of suit.
The case is hereby dismissed with respect to defendant Pan Pacific Overseas
Recruiting Services, Inc.
The counterclaims and cross-claim of defendant Korean Air Lines Co., Ltd. are
likewise dismissed.
On appeal, this decision was modified by the Court of Appeals 2 as follows:
WHEREFORE, in view of all the foregoing, the appealed judgment is
hereby AFFIRMED with the following modifications: the amount of
actual damages and compensatory damages is reduced to P60,000.00
and defendant-appellant is hereby ordered to pay plaintiff-appellant
the sum of One Hundred Thousand Pesos (P100,000.00) by way of
moral and exemplary damages, at 6% interest per annum from the date
of the filing of the Complaint until fully paid.
KAL and Lapuz filed their respective motions for reconsideration, which were both denied for lack of
merit. Hence, the present petitions for review which have been consolidated because of the identity of
the parties and the similarity of the issues.
In G. R. No. 114061, KAL assails the decision of the appellate court on the following grounds:
1. That the Court of Appeals erred in concluding that petitioner
committed a breach of contract of carriage notwithstanding lack of
proper, competent and sufficient evidence of the existence of such
contract.
2. That the Court of Appeals erred in not according the proper
evidentiary weight to some evidence presented and the fact that
private respondent did not have any boarding pass to prove that he
was allowed to board and to prove that his airline ticket was confirmed.
3. That the Court of Appeals erred in concluding that the standby
passenger status of private respondent Lapuz was changed to a
confirmed status when his name was entered into the passenger
manifest.
4. That the Court of Appeals abused its discretion in awarding moral
and exemplary damages in the amount of P100,000.00 in favor of
private respondent notwithstanding its lack of basis and private
respondent did not state such amount in his complaint nor had private
respondent proven the said damages.
5. That the Court of Appeals erred in dismissing the counterclaims.
6. That the Court of Appeals erred in dismissing the counterclaim of
petitioner against Pan Pacific.
7. That the Court of Appeals erred in ruling that the 6% per annum legal
interest on the judgment shall be computed from the filing of the
complaint.
In G. R. No. 113842, Lapuz seeks: (a) the setting aside of the decision of the Court of Appeals insofar as it
modifies the award of damages; b) actual and compensatory damages in the sum equivalent to 5 years'
loss of earnings based on the petitioner's monthly salary of 1,600 Saudi rials at the current conversion
rate plus the cost of baggage and personal belongings worth P2,000 and the service fee of P3,000 paid to
the recruiting agency, all with legal interest from the filing of the complaint until fully paid; c) moral
damages of not less than P1 million and exemplary damages of not less than P500,000.00, both with
interest at 6% per annum from the filing of the complaint; and d) attorney's fees in the sum equivalent to
30% of the award of damages.
It is evident that the issues raised in these petitions relate mainly to the correctness of the factual
findings of the Court of Appeals and the award of damages. The Court has consistently affirmed that the
findings of fact of the Court of Appeals and the other lower courts are as a rule binding upon it, subject
to certain exceptions. As nothing in the record indicates any of such exceptions, the factual conclusions
of the appellate court must be affirmed.
The status of Lapuz as standby passenger was changed to that of a confirmed passenger when his name
was entered in the passenger manifest of KAL for its Flight No. KE 903. His clearance through
immigration and customs clearly shows that he had indeed been confirmed as a passenger of KAL in that
flight. KAL thus committed a breach of the contract of carriage between them when it failed to bring
Lapuz to his destination.
This Court has held that a contract to transport passengers is different in kind and degree from any other
contractual relation.
3
The business of the carrier is mainly with the traveling public. It invites people to
avail themselves of the comforts and advantages it offers. The contract of air carriage generates a
relation attended with a public duty. Passengers have the right to be treated by the carrier's employees
13

with kindness, respect, courtesy and due consideration. They are entitled to be protected against
personal misconduct, injurious language, indignities and abuses from such employees.
4
So it is that any
discourteous conduct on the part of these employees toward a passenger gives the latter an action for
damages against the carrier.
The breach of contract was aggravated in this case when, instead of courteously informing Lapuz of his
being a "wait-listed" passenger, a KAL officer rudely shouted "Down! Down!" while pointing at him, thus
causing him embarrassment and public humiliation.
KAL argues that "the evidence of confirmation of a chance passenger status is not through the entry of
the name of a chance passenger in the passenger manifest nor the clearance from the Commission on
Immigration and Deportation, because they are merely means of facilitating the boarding of a chance
passenger in case his status is confirmed." We are not persuaded.
The evidence presented by Lapuz shows that he had indeed checked in at the departure counter, passed
through customs and immigration, boarded the shuttle bus and proceeded to the ramp of KAL's aircraft.
In fact, his baggage had already been loaded in KAL's aircraft, to be flown with him to Jeddah. The
contract of carriage between him and KAL had already been perfected when he was summarily and
insolently prevented from boarding the aircraft.
KAL's allegation that the respondent court abused its discretion in awarding moral and exemplary
damages is also not tenable.
The Court of Appeals granted moral and exemplary damages because:
The findings of the court a quo that the defendant-appellant has
committed breach of contract of carriage in bad faith and in wanton,
disregard of plaintiff-appellant's rights as passenger laid the basis and
justification of an award for moral damages.
x x x x
In the instant case, we find that defendant-appellant Korean Air Lines
acted in a wanton, fraudulent, reckless, oppressive or malevolent
manner when it "bumped off" plaintiff-appellant on November 8, 1980,
and in addition treated him rudely and arrogantly as a "patay gutom na
contract worker fighting Korean Air Lines," which clearly shows malice
and bad faith, thus entitling plaintiff-appellant to moral damages.
x x x x
Considering that the plaintiff-appellant's entitlement to moral damages
has been fully established by oral and documentary evidence,
exemplary damages may be awarded. In fact, exemplary damages may
be awarded, even though not so expressly pleaded in the complaint
(Kapoe vs. Masa, 134 SCRA 231). By the same token, to provide an
example for the public good, an award of exemplary damages is also
proper (Armovit vs. Court of Appeals, supra).
On the other hand, Lapuz's claim that the award of P100,000.00 as moral and exemplary damages is
inadequate is not acceptable either. His prayer for moral damages of not less than P1 million and
exemplary damages of not less than P500,000.00 is overblown.
The well-entrenched principle is that moral damages depend upon the discretion of the court based on
the circumstances of each case.
5
This discretion is limited by the principle that the "amount awarded
should not be palpably and scandalously excessive" as to indicate that it was the result of prejudice or
corruption on the part of the trial court.
6
Damages are not intended to enrich the complainant at the
expense of the defendant. They are awarded only to alleviate the moral suffering that the injured party
had undergone by reason of the defendant's culpable action.
7
There is no hard-and-fast rule in the
determination of what would be a fair amount of moral damages since each case must be governed by
its own peculiar facts.
A review of the record of this case shows that the injury suffered by Lapuz is not so serious or extensive
as to warrant an award of P1.5 million. The assessment of P100,000 as moral and exemplary damages in
his favor is, in our view, reasonable and realistic.
Lapuz likewise claims that the respondent court could not rule upon the propriety of the award of actual
damages because it had not been assigned as an error by KAL. Not so. The rule is that only errors
specifically assigned and properly argued in the brief will be considered except errors affecting
jurisdiction over the subject matter and plain as well as clerical errors.
8
But this is not without
qualification for, as the Court held in Vda. de Javellana vs. Court of Appeals:
9

. . . [T]he Court is clothed with ample authority to review matters, even
if they are not assigned as errors in their appeal, if it finds that their
consideration is necessary in arriving at a just decision of the case.
A similar pronouncement was made in Baquiran vs. Court of Appeals
10
in this wise:
Issues, though not specifically raised in the pleading in the appellate
court, may, in the interest of justice, be properly considered by said
court in deciding a case, if they are questions raised in the trial court
and are matters of record having some bearing on the issue submitted
which the parties failed to raise or the lower court ignored.
The Court of Appeals was therefore justified in decreasing the award of actual damages even if the issue
was not assigned as an error by KAL. Consideration of this question was necessary for the just and
complete resolution of the present case. Furthermore, there was enough evidence to warrant the
reduction of the original award, as the challenged decision correctly observed:
A perusal of the plaintiff-appellant's contract of employment shows
that the effectivity of the contract is for only one year, renewable every
year for five years. Although plaintiff-appellant intends to renew his
contract, such renewal will still be subject to his foreign employer.
Plaintiff-appellant had not yet started working with his foreign
employer, hence, there can be no basis as to whether his contract will
be renewed by his foreign employer or not. Thus, the damages
representing the loss of earnings of plaintiff-appellant in the renewal of
the contract of employment is at most speculative. Damages may not
be awarded on the basis of speculation or conjecture (Gachalian vs.
14

Delim, 203 SCRA 126). Hence, defendant-appellant's liability is limited
to the one year contract only. Plaintiff-appellant is, therefore, entitled
only to his lost earnings for one year, i.e., P60,000.00, which is 1/5 of
P300,000.00, the total amount of actual damages, representing lost
earnings for five years prayed for in the Complaint.
Plaintiff-appellant's contention that in computing his lost earnings, the
current rate of the Saudi Rial to the Philippine Peso at the time of
payment should be used, is untenable, considering that in his
Complaint, plaintiff-appellant has quantified in Philippine Peso his lost
earnings for five years.
We disagree with the respondent court, however, on the date when the legal interest should commence
to run. The rule is that the legal interest of six percent (6%) on the amounts adjudged in favor of Lapuz
should resume from the time of the rendition of the trial court's decision instead of November 28, 1980,
the date of the filing of the complaint.
On this matter, the Court has held:
If suit were for payment of a definite sum of money, the contention
might be tenable. However, if it is for damages, unliquidated and not
known until definitely ascertained, assessed and determined by the
courts after proof, interest should be from the date of the decision. 11
x x x x
The obligation to pay interest on a sum filed in a judgment exists from
the date of the sentence, when so declared; for until the net amount of
the debtor's liability has been determined, he cannot he considered
delinquent in the fulfillment of his obligation to pay the debt with
interest thereon.
12

Finally, we find that the respondent court did not err in sustaining the trial court's dismissal of KAL's
counterclaim against Pan Pacific Overseas Recruiting Services Inc., whose responsibility ended with the
confirmation by KAL of Lapuz as its passenger in its Flight No. 903.
This is still another case of the maltreatment of our overseas contract workers, this time by the airline
supposed to bring the passenger to his foreign assignment. Our OCW's sacrifice much in seeking
employment abroad, where they are deprived of the company of their loved ones, the direct protection
of our laws, and the comfort of our own native culture and way of life. This Court shall exert every effort
to vindicate their rights when they are abused and shall accord them the commensurate reparation of
their injuries consistent with their dignity and worth as members of the working class.
WHEREFORE, the appealed judgment is AFFIRMED, but with the modification that the legal interest on
the damages awarded to private respondent should commence from the date of the decision of the trial
court on November 14, 1990. The parties shall bear their own costs.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
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.
D E C I S I O N
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 oclock in the evening, Nicanor Navidad, then drunk,
entered the EDSA LRT station after purchasing a "token" (representing payment of the fare). While
Navidad was standing on the platform near the LRT tracks, Junelito Escartin, the security guard assigned
to the area approached Navidad. A misunderstanding or an altercation between the two apparently
ensued that led to a fist fight. No evidence, however, was adduced to indicate how the fight started or
who, between the two, delivered the first blow or how Navidad later fell on the LRT tracks. At the exact
moment that Navidad fell, an LRT train, operated by petitioner Rodolfo Roman, was coming in. Navidad
was struck by the moving train, and he was killed instantaneously.
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;
15

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) Attorneys 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 attorneys 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 Escartins
assault upon Navidad, which caused the latter to fall on the tracks, was an act of a stranger that could
not have been foreseen or prevented. The LRTA would add that the appellate courts conclusion on the
existence of an employer-employee relationship between Roman and LRTA lacked basis because Roman
himself had testified being an employee of Metro Transit and not of the LRTA.
Respondents, supporting the decision of the appellate court, contended that a contract of carriage was
deemed created from the moment Navidad paid the fare at the LRT station and entered the premises of
the latter, entitling Navidad to all the rights and protection under a contractual relation, and that the
appellate court had correctly held LRTA and Roman liable for the death of Navidad in failing to exercise
extraordinary diligence imposed upon a common carrier.
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 formers 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."
16

"Article 1763. A common carrier is responsible for injuries suffered by a passenger on account of the
willful acts or negligence of other passengers or of strangers, if the common carriers employees through
the exercise of the diligence of a good father of a family could have prevented or stopped the act or
omission."
The law requires common carriers to carry passengers safely using the 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 carriers 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, and
8
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 LRTAs liability is the contract of carriage and its obligation to indemnify the victim
arises from the breach of that contract by reason of its failure to exercise the high diligence required of
the common carrier. In the discharge of its commitment to ensure the safety of passengers, a carrier
may choose to hire its own employees or avail itself of the services of an outsider or an independent firm
to undertake the task. In either case, the common carrier is not relieved of its responsibilities under the
contract of carriage.
Should Prudent be made likewise liable? If at all, that liability could only be for tort under the provisions
of Article 2176
12
and related provisions, in conjunction with Article 2180,
13
of the Civil Code. The
premise, however, for the employers liability is negligence or fault on the part of the employee. Once
such fault is established, the employer can then be made liable on the basis of the presumption juris
tantum that the employer failed to exercise diligentissimi patris families in the selection and supervision
of its employees. The liability is primary and can only be negated by showing due diligence in the
selection and supervision of the employee, a factual matter that has not been shown. Absent such a
showing, one might ask further, how then must the liability of the common carrier, on the one hand, and
an independent contractor, on the other hand, be described? It would be solidary. A contractual
obligation can be breached by tort and when the same act or omission causes the injury, one resulting in
culpa contractual and the other in culpa aquiliana, Article 2194
14
of the Civil Code can well apply.
15
In
fine, a liability for tort may arise even under a contract, where tort is that which breaches the
contract.
16
Stated differently, when an act which constitutes a breach of contract would have itself
constituted the source of a quasi-delictual liability had no contract existed between the parties, the
contract can be said to have been breached by tort, thereby allowing the rules on tort to apply.
17

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 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.
SO ORDERED.