FIRST DIVISION

[G.R. No. 138334. August 25, 2003]

ESTELA L. CRISOSTOMO, petitioner, vs. the Court of Appeals and CARAVAN TRAVEL
& TOURS INTERNATIONAL, INC., respondents.
DECISION
YNARES-SANTIAGO, J.:
In May 1991, petitioner Estela L. Crisostomo contracted the services of respondent
Caravan Travel and Tours International, Inc. to arrange and facilitate her booking,
ticketing and accommodation in a tour dubbed Jewels of Europe. The package tour
included the countries of England, Holland, Germany, Austria, Liechstenstein,
Switzerland and France at a total cost of P74,322.70. Petitioner was given a 5%
discount on the amount, which included airfare, and the booking fee was also
waived because petitioners niece, Meriam Menor, was respondent companys
ticketing manager.
Pursuant to said contract, Menor went to her aunts residence on June 12, 1991 a
Wednesday to deliver petitioners travel documents and plane tickets. Petitioner,
in turn, gave Menor the full payment for the package tour. Menor then told her to
be at the Ninoy Aquino International Airport (NAIA) on Saturday, two hours before
her flight on board British Airways.
Without checking her travel documents, petitioner went to NAIA on Saturday, June
15, 1991, to take the flight for the first leg of her journey from Manila to Hongkong.
To petitioners dismay, she discovered that the flight she was supposed to take had
already departed the previous day. She learned that her plane ticket was for the
flight scheduled on June 14, 1991. She thus called up Menor to complain.
Subsequently, Menor prevailed upon petitioner to take another tour the British
Pageant which included England, Scotland and Wales in its itinerary. For this tour
package, petitioner was asked anew to pay US$785.00 or P20,881.00 (at the then
prevailing exchange rate of P26.60). She gave respondent US$300 or P7,980.00 as
partial payment and commenced the trip in July 1991.
Upon petitioners return from Europe, she demanded from respondent the
reimbursement of P61,421.70, representing the difference between the sum she
paid for Jewels of Europe and the amount she owed respondent for the British
Pageant tour. Despite several demands, respondent company refused to reimburse
the amount, contending that the same was non-refundable.[1] Petitioner was thus
constrained to file a complaint against respondent for breach of contract of carriage
and damages, which was docketed as Civil Case No. 92-133 and raffled to Branch
59 of the Regional Trial Court of Makati City.
In her complaint,[2] petitioner alleged that her failure to join Jewels of Europe was
due to respondents fault since it did not clearly indicate the departure date on the
plane ticket. Respondent was also negligent in informing her of the wrong flight
schedule through its employee Menor. She insisted that the British Pageant was
merely a substitute for the Jewels of Europe tour, such that the cost of the former
should be properly set-off against the sum paid for the latter.

For its part, respondent company, through its Operations Manager, Concepcion
Chipeco, denied responsibility for petitioners failure to join the first tour. Chipeco
insisted that petitioner was informed of the correct departure date, which was
clearly and legibly printed on the plane ticket. The travel documents were given to
petitioner two days ahead of the scheduled trip. Petitioner had only herself to
blame for missing the flight, as she did not bother to read or confirm her flight
schedule as printed on the ticket.
Respondent explained that it can no longer reimburse the amount paid for Jewels
of Europe, considering that the same had already been remitted to its principal in
Singapore, Lotus Travel Ltd., which had already billed the same even if petitioner did
not join the tour. Lotus European tour organizer, Insight International Tours Ltd.,
determines the cost of a package tour based on a minimum number of projected
participants. For this reason, it is accepted industry practice to disallow refund for
individuals who failed to take a booked tour.[3]
Lastly, respondent maintained that the British Pageant was not a substitute for
the package tour that petitioner missed. This tour was independently procured by
petitioner after realizing that she made a mistake in missing her flight for Jewels of
Europe. Petitioner was allowed to make a partial payment of only US$300.00 for
the second tour because her niece was then an employee of the travel agency.
Consequently, respondent prayed that petitioner be ordered to pay the balance of
P12,901.00 for the British Pageant package tour.
After due proceedings, the trial court rendered a decision,[4] the dispositive part of
which reads:
WHEREFORE, premises considered, judgment is hereby rendered as follows:
1.
Ordering the defendant to return and/or refund to the plaintiff the amount of
Fifty Three Thousand Nine Hundred Eighty Nine Pesos and Forty Three Centavos
(P53,989.43) with legal interest thereon at the rate of twelve percent (12%) per
annum starting January 16, 1992, the date when the complaint was filed;
2.
Ordering the defendant to pay the plaintiff the amount of Five Thousand
(P5,000.00) Pesos as and for reasonable attorneys fees;
3.

Dismissing the defendants counterclaim, for lack of merit; and

4.

With costs against the defendant.

SO ORDERED.[5]
The trial court held that respondent was negligent in erroneously advising petitioner
of her departure date through its employee, Menor, who was not presented as
witness to rebut petitioners testimony. However, petitioner should have verified the
exact date and time of departure by looking at her ticket and should have simply
not relied on Menors verbal representation. The trial court thus declared that
petitioner was guilty of contributory negligence and accordingly, deducted 10%
from the amount being claimed as refund.

Respondent appealed to the Court of Appeals, which likewise found both parties to
be at fault. However, the appellate court held that petitioner is more negligent than
respondent because as a lawyer and well-traveled person, she should have known
better than to simply rely on what was told to her. This being so, she is not entitled
to any form of damages. Petitioner also forfeited her right to the Jewels of Europe
tour and must therefore pay respondent the balance of the price for the British
Pageant tour. The dispositive portion of the judgment appealed from reads as
follows:
WHEREFORE, premises considered, the decision of the Regional Trial Court dated
October 26, 1995 is hereby REVERSED and SET ASIDE. A new judgment is hereby
ENTERED requiring the plaintiff-appellee to pay to the defendant-appellant the
amount of P12,901.00, representing the balance of the price of the British Pageant
Package Tour, the same to earn legal interest at the rate of SIX PERCENT (6%) per
annum, to be computed from the time the counterclaim was filed until the finality of
this decision. After this decision becomes final and executory, the rate of TWELVE
PERCENT (12%) interest per annum shall be additionally imposed on the total
obligation until payment thereof is satisfied. The award of attorneys fees is
DELETED. Costs against the plaintiff-appellee.
SO ORDERED.[6]
Upon denial of her motion for reconsideration,[7] petitioner filed the instant petition
under Rule 45 on the following grounds:
I
It is respectfully submitted that the Honorable Court of Appeals committed a
reversible error in reversing and setting aside the decision of the trial court by ruling
that the petitioner is not entitled to a refund of the cost of unavailed Jewels of
Europe tour she being equally, if not more, negligent than the private respondent,
for in the contract of carriage the common carrier is obliged to observe utmost care
and extra-ordinary diligence which is higher in degree than the ordinary diligence
required of the passenger. Thus, even if the petitioner and private respondent were
both negligent, the petitioner cannot be considered to be equally, or worse, more
guilty than the private respondent. At best, petitioners negligence is only
contributory while the private respondent [is guilty] of gross negligence making the
principle of pari delicto inapplicable in the case;
II
The Honorable Court of Appeals also erred in not ruling that the Jewels of Europe
tour was not indivisible and the amount paid therefor refundable;
III
The Honorable Court erred in not granting to the petitioner the consequential
damages due her as a result of breach of contract of carriage.[8]
Petitioner contends that respondent did not observe the standard of care required of
a common carrier when it informed her wrongly of the flight schedule. She could not
be deemed more negligent than respondent since the latter is required by law to
exercise extraordinary diligence in the fulfillment of its obligation. If she were

negligent at all, the same is merely contributory and not the proximate cause of the
damage she suffered. Her loss could only be attributed to respondent as it was the
direct consequence of its employees gross negligence.
Petitioners contention has no merit.
By definition, a contract of carriage or transportation is one whereby a certain
person or association of persons obligate themselves to transport persons, things,
or news from one place to another for a fixed price.[9] Such person or association
of persons are regarded as carriers and are classified as private or special carriers
and common or public carriers.[10] A common carrier is defined under Article 1732
of the Civil Code as persons, corporations, firms or associations engaged in the
business of carrying or transporting passengers or goods or both, by land, water or
air, for compensation, offering their services to the public.
It is obvious from the above definition that respondent is not an entity engaged in
the business of transporting either passengers or goods and is therefore, neither a
private nor a common carrier. Respondent did not undertake to transport petitioner
from one place to another since its covenant with its customers is simply to make
travel arrangements in their behalf. Respondents services as a travel agency
include procuring tickets and facilitating travel permits or visas as well as booking
customers for tours.
While petitioner concededly bought her plane ticket through the efforts of
respondent company, this does not mean that the latter ipso facto is a common
carrier. At most, respondent acted merely as an agent of the airline, with whom
petitioner ultimately contracted for her carriage to Europe. Respondents obligation
to petitioner in this regard was simply to see to it that petitioner was properly
booked with the airline for the appointed date and time. Her transport to the place
of destination, meanwhile, pertained directly to the airline.
The object of petitioners contractual relation with respondent is the latters service
of arranging and facilitating petitioners booking, ticketing and accommodation in
the package tour. In contrast, the object of a contract of carriage is the
transportation of passengers or goods. It is in this sense that the contract between
the parties in this case was an ordinary one for services and not one of carriage.
Petitioners submission is premised on a wrong assumption.
The nature of the contractual relation between petitioner and respondent is
determinative of the degree of care required in the performance of the latters
obligation under the contract. For reasons of public policy, a common carrier in a
contract of carriage is bound by law to carry passengers as far as human care and
foresight can provide using the utmost diligence of very cautious persons and with
due regard for all the circumstances.[11] As earlier stated, however, respondent is
not a common carrier but a travel agency. It is thus not bound under the law to
observe extraordinary diligence in the performance of its obligation, as petitioner
claims.
Since the contract between the parties is an ordinary one for services, the standard
of care required of respondent is that of a good father of a family under Article 1173
of the Civil Code.[12] This connotes reasonable care consistent with that which an
ordinarily prudent person would have observed when confronted with a similar
situation. The test to determine whether negligence attended the performance of an

obligation is: did the defendant in doing the alleged negligent act use that
reasonable care and caution which an ordinarily prudent person would have used in
the same situation? If not, then he is guilty of negligence.[13]
In the case at bar, the lower court found Menor negligent when she allegedly
informed petitioner of the wrong day of departure. Petitioners testimony was
accepted as indubitable evidence of Menors alleged negligent act since respondent
did not call Menor to the witness stand to refute the allegation. The lower court
applied the presumption under Rule 131, Section 3 (e)[14] of the Rules of Court that
evidence willfully suppressed would be adverse if produced and thus considered
petitioners uncontradicted testimony to be sufficient proof of her claim.
On the other hand, respondent has consistently denied that Menor was negligent
and maintains that petitioners assertion is belied by the evidence on record. The
date and time of departure was legibly written on the plane ticket and the travel
papers were delivered two days in advance precisely so that petitioner could
prepare for the trip. It performed all its obligations to enable petitioner to join the
tour and exercised due diligence in its dealings with the latter.
We agree with respondent.
Respondents failure to present Menor as witness to rebut petitioners testimony
could not give rise to an inference unfavorable to the former. Menor was already
working in France at the time of the filing of the complaint,[15] thereby making it
physically impossible for respondent to present her as a witness. Then too, even if it
were possible for respondent to secure Menors testimony, the presumption under
Rule 131, Section 3(e) would still not apply. The opportunity and possibility for
obtaining Menors testimony belonged to both parties, considering that Menor was
not just respondents employee, but also petitioners niece. It was thus error for the
lower court to invoke the presumption that respondent willfully suppressed evidence
under Rule 131, Section 3(e). Said presumption would logically be inoperative if the
evidence is not intentionally omitted but is simply unavailable, or when the same
could have been obtained by both parties.[16]
In sum, we do not agree with the finding of the lower court that Menors negligence
concurred with the negligence of petitioner and resultantly caused damage to the
latter. Menors negligence was not sufficiently proved, considering that the only
evidence presented on this score was petitioners uncorroborated narration of the
events. It is well-settled that the party alleging a fact has the burden of proving it
and a mere allegation cannot take the place of evidence.[17] If the plaintiff, upon
whom rests the burden of proving his cause of action, fails to show in a satisfactory
manner facts upon which he bases his claim, the defendant is under no obligation to
prove his exception or defense.[18]
Contrary to petitioners claim, the evidence on record shows that respondent
exercised due diligence in performing its obligations under the contract and
followed standard procedure in rendering its services to petitioner. As correctly
observed by the lower court, the plane ticket[19] issued to petitioner clearly
reflected the departure date and time, contrary to petitioners contention. The
travel documents, consisting of the tour itinerary, vouchers and instructions, were
likewise delivered to petitioner two days prior to the trip. Respondent also properly
booked petitioner for the tour, prepared the necessary documents and procured the

plane tickets. It arranged petitioners hotel accommodation as well as food, land

transfers and sightseeing excursions, in accordance with its avowed undertaking.
Therefore, it is clear that respondent performed its prestation under the contract as
well as everything else that was essential to book petitioner for the tour. Had
petitioner exercised due diligence in the conduct of her affairs, there would have
been no reason for her to miss the flight. Needless to say, after the travel papers
were delivered to petitioner, it became incumbent upon her to take ordinary care of
her concerns. This undoubtedly would require that she at least read the documents
in order to assure herself of the important details regarding the trip.
The negligence of the obligor in the performance of the obligation renders him liable
for damages for the resulting loss suffered by the obligee. Fault or negligence of the
obligor consists in his failure to exercise due care and prudence in the performance
of the obligation as the nature of the obligation so demands.[20] There is no fixed
standard of diligence applicable to each and every contractual obligation and each
case must be determined upon its particular facts. The degree of diligence required
depends on the circumstances of the specific obligation and whether one has been
negligent is a question of fact that is to be determined after taking into account the
particulars of each case.[21]
The lower court declared that respondents employee was negligent. This factual
finding, however, is not supported by the evidence on record. While factual findings
below are generally conclusive upon this court, the rule is subject to certain
exceptions, as when the trial court overlooked, misunderstood, or misapplied some
facts or circumstances of weight and substance which will affect the result of the
case.[22]
In the case at bar, the evidence on record shows that respondent company
performed its duty diligently and did not commit any contractual breach. Hence,
petitioner cannot recover and must bear her own damage.
WHEREFORE, the instant petition is DENIED for lack of merit. The decision of the
Court of Appeals in CA-G.R. CV No. 51932 is AFFIRMED. Accordingly, petitioner is
ordered to pay respondent the amount of P12,901.00 representing the balance of
the price of the British Pageant Package Tour, with legal interest thereon at the rate
of 6% per annum, to be computed from the time the counterclaim was filed until the
finality of this Decision. After this Decision becomes final and executory, the rate of
12% per annum shall be imposed until the obligation is fully settled, this interim
period being deemed to be by then an equivalent to a forbearance of credit.[23]
SO ORDERED.
Davide, Jr., C.J., (Chairman), Vitug, Carpio, and Azcuna, JJ., concur.

SECOND DIVISION
[G.R. No. 125948. December 29, 1998]

FIRST PHILIPPINE INDUSTRIAL CORPORATION, petitioner, vs. COURT OF APPEALS,

HONORABLE PATERNO V. TAC-AN, BATANGAS CITY and ADORACION C. ARELLANO, in
her official capacity as City Treasurer of Batangas, respondents.
DECISION
MARTINEZ, J.:
This petition for review on certiorari assails the Decision of the Court of Appeals
dated November 29, 1995, in CA-G.R. SP No. 36801, affirming the decision of the
Regional Trial Court of Batangas City, Branch 84, in Civil Case No. 4293, which
dismissed petitioners' complaint for a business tax refund imposed by the City of
Batangas.
Petitioner is a grantee of a pipeline concession under Republic Act No. 387, as
amended, to contract, install and operate oil pipelines. The original pipeline
concession was granted in 1967[1] and renewed by the Energy Regulatory Board in
1992.[2]
Sometime in January 1995, petitioner applied for a mayor's permit with the Office of
the Mayor of Batangas City. However, before the mayor's permit could be issued,
the respondent City Treasurer required petitioner to pay a local tax based on its
gross receipts for the fiscal year 1993 pursuant to the Local Government Code.[3]
The respondent City Treasurer assessed a business tax on the petitioner amounting
to P956,076.04 payable in four installments based on the gross receipts for products
pumped at GPS-1 for the fiscal year 1993 which amounted to P181,681,151.00. In
order not to hamper its operations, petitioner paid the tax under protest in the
amount of P239,019.01 for the first quarter of 1993.
On January 20, 1994, petitioner filed a letter-protest addressed to the respondent
City Treasurer, the pertinent portion of which reads:
"Please note that our Company (FPIC) is a pipeline operator with a government
concession granted under the Petroleum Act. It is engaged in the business of
transporting petroleum products from the Batangas refineries, via pipeline, to Sucat
and JTF Pandacan Terminals. As such, our Company is exempt from paying tax on
gross receipts under Section 133 of the Local Government Code of 1991 x x x x
"Moreover, Transportation contractors are not included in the enumeration of
contractors under Section 131, Paragraph (h) of the Local Government Code.
Therefore, the authority to impose tax 'on contractors and other independent
contractors' under Section 143, Paragraph (e) of the Local Government Code does
not include the power to levy on transportation contractors.
"The imposition and assessment cannot be categorized as a mere fee authorized
under Section 147 of the Local Government Code. The said section limits the
imposition of fees and charges on business to such amounts as may be
commensurate to the cost of regulation, inspection, and licensing. Hence, assuming
arguendo that FPIC is liable for the license fee, the imposition thereof based on
gross receipts is violative of the aforecited provision. The amount of P956,076.04
(P239,019.01 per quarter) is not commensurate to the cost of regulation, inspection
and licensing. The fee is already a revenue raising measure, and not a mere
regulatory imposition."[4]

On March 8, 1994, the respondent City Treasurer denied the protest contending that
petitioner cannot be considered engaged in transportation business, thus it cannot
claim exemption under Section 133 (j) of the Local Government Code.[5]
On June 15, 1994, petitioner filed with the Regional Trial Court of Batangas City a
complaint[6] for tax refund with prayer for a writ of preliminary injunction against
respondents City of Batangas and Adoracion Arellano in her capacity as City
Treasurer. In its complaint, petitioner alleged, inter alia, that: (1) the imposition and
collection of the business tax on its gross receipts violates Section 133 of the Local
Government Code; (2) the authority of cities to impose and collect a tax on the
gross receipts of "contractors and independent contractors" under Sec. 141 (e) and
151 does not include the authority to collect such taxes on transportation
contractors for, as defined under Sec. 131 (h), the term "contractors" excludes
transportation contractors; and, (3) the City Treasurer illegally and erroneously
imposed and collected the said tax, thus meriting the immediate refund of the tax
paid.[7]
Traversing the complaint, the respondents argued that petitioner cannot be exempt
from taxes under Section 133 (j) of the Local Government Code as said exemption
applies only to "transportation contractors and persons engaged in the
transportation by hire and common carriers by air, land and water." Respondents
assert that pipelines are not included in the term "common carrier" which refers
solely to ordinary carriers such as trucks, trains, ships and the like. Respondents
further posit that the term "common carrier" under the said code pertains to the
mode or manner by which a product is delivered to its destination.[8]
On October 3, 1994, the trial court rendered a decision dismissing the complaint,
ruling in this wise:
"xxx Plaintiff is either a contractor or other independent contractor.
xxx the exemption to tax claimed by the plaintiff has become unclear. It is a rule
that tax exemptions are to be strictly construed against the taxpayer, taxes being
the lifeblood of the government. Exemption may therefore be granted only by clear
and unequivocal provisions of law.
"Plaintiff claims that it is a grantee of a pipeline concession under Republic Act 387,
(Exhibit A) whose concession was lately renewed by the Energy Regulatory Board
(Exhibit B). Yet neither said law nor the deed of concession grant any tax exemption
upon the plaintiff.
"Even the Local Government Code imposes a tax on franchise holders under Sec.
137 of the Local Tax Code. Such being the situation obtained in this case
(exemption being unclear and equivocal) resort to distinctions or other
considerations may be of help:
1.
That the exemption granted under Sec. 133 (j) encompasses only
common carriers so as not to overburden the riding public or commuters with taxes.
Plaintiff is not a common carrier, but a special carrier extending its services and
facilities to a single specific or "special customer" under a "special contract."

2.
The Local Tax Code of 1992 was basically enacted to give more and
effective local autonomy to local governments than the previous enactments, to
make them economically and financially viable to serve the people and discharge
their functions with a concomitant obligation to accept certain devolution of powers,
x x x So, consistent with this policy even franchise grantees are taxed (Sec. 137)
and contractors are also taxed under Sec. 143 (e) and 151 of the Code."[9]
Petitioner assailed the aforesaid decision before this Court via a petition for review.
On February 27, 1995, we referred the case to the respondent Court of Appeals for
consideration and adjudication.[10] On November 29, 1995, the respondent court
rendered a decision[11] affirming the trial court's dismissal of petitioner's complaint.
Petitioner's motion for reconsideration was denied on July 18, 1996.[12]
Hence, this petition. At first, the petition was denied due course in a Resolution
dated November 11, 1996.[13] Petitioner moved for a reconsideration which was
granted by this Court in a Resolution[14] of January 20, 1997. Thus, the petition
was reinstated.
Petitioner claims that the respondent Court of Appeals erred in holding that (1) the
petitioner is not a common carrier or a transportation contractor, and (2) the
exemption sought for by petitioner is not clear under the law.
There is merit in the petition.
A "common carrier" may be defined, broadly, as one who holds himself out to the
public as engaged in the business of transporting persons or property from place to
place, for compensation, offering his services to the public generally.
Article 1732 of the Civil Code defines a "common carrier" as "any person,
corporation, firm or association engaged in the business of carrying or transporting
passengers or goods or both, by land, water, or air, for compensation, offering their
services to the public."
The test for determining whether a party is a common carrier of goods is:
1.
He must be engaged in the business of carrying goods for others as a public
employment, and must hold himself out as ready to engage in the transportation of
goods for person generally as a business and not as a casual occupation;
2.
He must undertake to carry goods of the kind to which his business is
confined;
3.
He must undertake to carry by the method by which his business is
conducted and over his established roads; and
4.

The transportation must be for hire.[15]

Based on the above definitions and requirements, there is no doubt that petitioner
is a common carrier. It is engaged in the business of transporting or carrying goods,
i.e. petroleum products, for hire as a public employment. It undertakes to carry for
all persons indifferently, that is, to all persons who choose to employ its services,
and transports the goods by land and for compensation. The fact that petitioner

has a limited clientele does not exclude it from the definition of a common carrier.
In De Guzman vs. Court of Appeals[16] we ruled that:
"The above article (Art. 1732, Civil Code) makes no distinction between one whose
principal business activity is the carrying of persons or goods or both, and one who
does such carrying only as an ancillary activity (in local idiom, as a 'sideline').
Article 1732 x x x avoids making any distinction between a person or enterprise
offering transportation service on a regular or scheduled basis and one offering such
service on an occasional, episodic or unscheduled basis. Neither does Article 1732
distinguish between a carrier offering its services to the 'general public,' i.e., the
general community or population, and one who offers services or solicits business
only from a narrow segment of the general population. We think that Article 1877
deliberately refrained from making such distinctions.
So understood, the concept of 'common carrier' under Article 1732 may be seen to
coincide neatly with the notion of 'public service,' under the Public Service Act
(Commonwealth Act No. 1416, as amended) which at least partially supplements
the law on common carriers set forth in the Civil Code. Under Section 13, paragraph
(b) of the Public Service Act, 'public service' includes:
'every person that now or hereafter may own, operate, manage, or control in the
Philippines, for hire or compensation, with general or limited clientele, whether
permanent, occasional or accidental, and done for general business purposes, any
common carrier, railroad, street railway, traction railway, subway motor vehicle,
either for freight or passenger, or both, with or without fixed route and whatever
may be its classification, freight or carrier service of any class, express service,
steamboat, or steamship line, pontines, ferries and water craft, engaged in the
transportation of passengers or freight or both, shipyard, marine repair shop, wharf
or dock, ice plant, ice-refrigeration plant, canal, irrigation system gas, electric light
heat and power, water supply and power petroleum, sewerage system, wire or
wireless communications systems, wire or wireless broadcasting stations and other
similar public services.' "(Underscoring Supplied)
Also, respondent's argument that the term "common carrier" as used in Section 133
(j) of the Local Government Code refers only to common carriers transporting goods
and passengers through moving vehicles or vessels either by land, sea or water, is
erroneous.
As correctly pointed out by petitioner, the definition of "common carriers" in the
Civil Code makes no distinction as to the means of transporting, as long as it is by
land, water or air. It does not provide that the transportation of the passengers or
goods should be by motor vehicle. In fact, in the United States, oil pipe line
operators are considered common carriers.[17]
Under the Petroleum Act of the Philippines (Republic Act 387), petitioner is
considered a "common carrier." Thus, Article 86 thereof provides that:
"Art. 86. Pipe line concessionaire as a common carrier. - A pipe line shall have the
preferential right to utilize installations for the transportation of petroleum owned by
him, but is obligated to utilize the remaining transportation capacity pro rata for the
transportation of such other petroleum as may be offered by others for transport,
and to charge without discrimination such rates as may have been approved by the
Secretary of Agriculture and Natural Resources."

Republic Act 387 also regards petroleum operation as a public utility.

portion of Article 7 thereof provides:

Pertinent

"that everything relating to the exploration for and exploitation of petroleum x x and
everything relating to the manufacture, refining, storage, or transportation by
special methods of petroleum, is hereby declared to be a public utility."
(Underscoring Supplied)
The Bureau of Internal Revenue likewise considers the petitioner a "common
carrier." In BIR Ruling No. 069-83, it declared:
"x x x since [petitioner] is a pipeline concessionaire that is engaged only in
transporting petroleum products, it is considered a common carrier under Republic
Act No. 387 x x x. Such being the case, it is not subject to withholding tax
prescribed by Revenue Regulations No. 13-78, as amended."
From the foregoing disquisition, there is no doubt that petitioner is a "common
carrier" and, therefore, exempt from the business tax as provided for in Section 133
(j), of the Local Government Code, to wit:
"Section 133. Common Limitations on the Taxing Powers of Local Government Units.
- Unless otherwise provided herein, the exercise of the taxing powers of provinces,
cities, municipalities, and barangays shall not extend to the levy of the following :
xxx

xxx

xxx

(j)
Taxes on the gross receipts of transportation contractors and persons
engaged in the transportation of passengers or freight by hire and common carriers
by air, land or water, except as provided in this Code."
The deliberations conducted in the House of Representatives on the Local
Government Code of 1991 are illuminating:
"MR. AQUINO (A). Thank you, Mr. Speaker.
Mr. Speaker, we would like to proceed to page 95, line 1. It states : "SEC.121 [now
Sec. 131]. Common Limitations on the Taxing Powers of Local Government Units." x
xx
MR. AQUINO (A.). Thank you Mr. Speaker.
Still on page 95, subparagraph 5, on taxes on the business of transportation. This
appears to be one of those being deemed to be exempted from the taxing powers of
the local government units. May we know the reason why the transportation
business is being excluded from the taxing powers of the local government units?
MR. JAVIER (E.). Mr. Speaker, there is an exception contained in Section 121 (now
Sec. 131), line 16, paragraph 5. It states that local government units may not
impose taxes on the business of transportation, except as otherwise provided in this
code.

Now, Mr. Speaker, if the Gentleman would care to go to page 98 of Book II, one can
see there that provinces have the power to impose a tax on business enjoying a
franchise at the rate of not more than one-half of 1 percent of the gross annual
receipts. So, transportation contractors who are enjoying a franchise would be
subject to tax by the province. That is the exception, Mr. Speaker.
What we want to guard against here, Mr. Speaker, is the imposition of taxes by local
government units on the carrier business. Local government units may impose
taxes on top of what is already being imposed by the National Internal Revenue
Code which is the so-called "common carriers tax." We do not want a duplication of
this tax, so we just provided for an exception under Section 125 [now Sec. 137] that
a province may impose this tax at a specific rate.
MR. AQUINO (A.). Thank you for that clarification, Mr. Speaker. x x x[18]
It is clear that the legislative intent in excluding from the taxing power of the local
government unit the imposition of business tax against common carriers is to
prevent a duplication of the so-called "common carrier's tax."
Petitioner is already paying three (3%) percent common carrier's tax on its gross
sales/earnings under the National Internal Revenue Code.[19] To tax petitioner
again on its gross receipts in its transportation of petroleum business would defeat
the purpose of the Local Government Code.
WHEREFORE, the petition is hereby GRANTED. The decision of the respondent Court
of Appeals dated November 29, 1995 in CA-G.R. SP No. 36801 is REVERSED and SET
ASIDE.
SO ORDERED.
Bellosillo, (Chairman), Puno, and Mendoza, JJ., concur.

THIRD DIVISION
[G.R. No. 150255. April 22, 2005]
SCHMITZ TRANSPORT & BROKERAGE CORPORATION, petitioner, vs. TRANSPORT
VENTURE, INC., INDUSTRIAL INSURANCE COMPANY, LTD., and BLACK SEA SHIPPING
AND DODWELL now INCHCAPE SHIPPING SERVICES, respondents.
DECISION
CARPIO-MORALES, J.:
On petition for review is the June 27, 2001 Decision[1] of the Court of Appeals, as
well as its Resolution[2] dated September 28, 2001 denying the motion for
reconsideration, which affirmed that of Branch 21 of the Regional Trial Court (RTC) of
Manila in Civil Case No. 92-63132[3] holding petitioner Schmitz Transport Brokerage
Corporation (Schmitz Transport), together with Black Sea Shipping Corporation
(Black Sea), represented by its ship agent Inchcape Shipping Inc. (Inchcape), and

Transport Venture (TVI), solidarily liable for the loss of 37 hot rolled steel sheets in
coil that were washed overboard a barge.
On September 25, 1991, SYTCO Pte Ltd. Singapore shipped from the port of
Ilyichevsk, Russia on board M/V Alexander Saveliev (a vessel of Russian registry
and owned by Black Sea) 545 hot rolled steel sheets in coil weighing 6,992,450
metric tons.
The cargoes, which were to be discharged at the port of Manila in favor of the
consignee, Little Giant Steel Pipe Corporation (Little Giant),[4] were insured against
all risks with Industrial Insurance Company Ltd. (Industrial Insurance) under Marine
Policy No. M-91-3747-TIS.[5]
The vessel arrived at the port of Manila on October 24, 1991 and the Philippine Ports
Authority (PPA) assigned it a place of berth at the outside breakwater at the Manila
South Harbor.[6]
Schmitz Transport, whose services the consignee engaged to secure the requisite
clearances, to receive the cargoes from the shipside, and to deliver them to its (the
consignees) warehouse at Cainta, Rizal,[7] in turn engaged the services of TVI to
send a barge and tugboat at shipside.
On October 26, 1991, around 4:30 p.m., TVIs tugboat Lailani towed the barge
Erika V to shipside.[8]
By 7:00 p.m. also of October 26, 1991, the tugboat, after positioning the barge
alongside the vessel, left and returned to the port terminal.[9] At 9:00 p.m., arrastre
operator Ocean Terminal Services Inc. commenced to unload 37 of the 545 coils
from the vessel unto the barge.
By 12:30 a.m. of October 27, 1991 during which the weather condition had become
inclement due to an approaching storm, the unloading unto the barge of the 37 coils
was accomplished.[10] No tugboat pulled the barge back to the pier, however.
At around 5:30 a.m. of October 27, 1991, due to strong waves,[11] the crew of the
barge abandoned it and transferred to the vessel. The barge pitched and rolled with
the waves and eventually capsized, washing the 37 coils into the sea.[12] At 7:00
a.m., a tugboat finally arrived to pull the already empty and damaged barge back to
the pier.[13]
Earnest efforts on the part of both the consignee Little Giant and Industrial
Insurance to recover the lost cargoes proved futile.[14]
Little Giant thus filed a formal claim against Industrial Insurance which paid it the
amount of P5,246,113.11.
Little Giant thereupon executed a subrogation
receipt[15] in favor of Industrial Insurance.
Industrial Insurance later filed a complaint against Schmitz Transport, TVI, and Black
Sea through its representative Inchcape (the defendants) before the RTC of Manila,
for the recovery of the amount it paid to Little Giant plus adjustment fees,
attorneys fees, and litigation expenses.[16]

Industrial Insurance faulted the defendants for undertaking the unloading of the
cargoes while typhoon signal No. 1 was raised in Metro Manila.[17]
By Decision of November 24, 1997, Branch 21 of the RTC held all the defendants
negligent for unloading the cargoes outside of the breakwater notwithstanding the
storm signal.[18] The dispositive portion of the decision reads:
WHEREFORE, premises considered, the Court renders judgment in favor of the
plaintiff, ordering the defendants to pay plaintiff jointly and severally the sum of
P5,246,113.11 with interest from the date the complaint was filed until fully
satisfied, as well as the sum of P5,000.00 representing the adjustment fee plus the
sum of 20% of the amount recoverable from the defendants as attorneys fees plus
the costs of suit. The counterclaims and cross claims of defendants are hereby
DISMISSED for lack of [m]erit.[19]
To the trial courts decision, the defendants Schmitz Transport and TVI filed a joint
motion for reconsideration assailing the finding that they are common carriers and
the award of excessive attorneys fees of more than P1,000,000. And they argued
that they were not motivated by gross or evident bad faith and that the incident
was caused by a fortuitous event. [20]
By resolution of February 4, 1998, the trial court denied the motion for
reconsideration. [21]
All the defendants appealed to the Court of Appeals which, by decision of June 27,
2001, affirmed in toto the decision of the trial court, [22] it finding that all the
defendants were common carriers Black Sea and TVI for engaging in the
transport of goods and cargoes over the seas as a regular business and not as an
isolated transaction,[23] and Schmitz Transport for entering into a contract with
Little Giant to transport the cargoes from ship to port for a fee.[24]
In holding all the defendants solidarily liable, the appellate court ruled that each
one was essential such that without each others contributory negligence the
incident would not have happened and so much so that the person principally liable
cannot be distinguished with sufficient accuracy.[25]
In discrediting the defense of fortuitous event, the appellate court held that
although defendants obviously had nothing to do with the force of nature, they
however had control of where to anchor the vessel, where discharge will take place
and even when the discharging will commence.[26]
The defendants respective motions for reconsideration having been denied by
Resolution[27] of September 28, 2001, Schmitz Transport (hereinafter referred to as
petitioner) filed the present petition against TVI, Industrial Insurance and Black Sea.
Petitioner asserts that in chartering the barge and tugboat of TVI, it was acting for
its principal, consignee Little Giant, hence, the transportation contract was by and
between Little Giant and TVI.[28]
By Resolution of January 23, 2002, herein respondents Industrial Insurance, Black
Sea, and TVI were required to file their respective Comments.[29]

By its Comment, Black Sea argued that the cargoes were received by the consignee
through petitioner in good order, hence, it cannot be faulted, it having had no
control and supervision thereover.[30]
For its part, TVI maintained that it acted as a passive party as it merely received the
cargoes and transferred them unto the barge upon the instruction of petitioner.[31]
In issue then are:
(1) Whether the loss of the cargoes was due to a fortuitous event, independent of
any act of negligence on the part of petitioner Black Sea and TVI, and
(2) If there was negligence, whether liability for the loss may attach to Black Sea,
petitioner and TVI.
When a fortuitous event occurs, Article 1174 of the Civil Code absolves any party
from any and all liability arising therefrom:
ART. 1174. Except in cases expressly specified by the law, or when it is otherwise
declared by stipulation, or when the nature of the obligation requires the
assumption of risk, no person shall be responsible for those events which could not
be foreseen, or which though foreseen, were inevitable.
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.[32]
[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.[33]
The appellate court, in affirming the finding of the trial court that human
intervention in the form of contributory negligence by all the defendants resulted to
the loss of the cargoes,[34] held that unloading outside the breakwater, instead of
inside the breakwater, while a storm signal was up constitutes negligence.[35] It
thus concluded that the proximate cause of the loss was Black Seas negligence in
deciding to unload the cargoes at an unsafe place and while a typhoon was
approaching.[36]
From a review of the records of the case, there is no indication that there was
greater risk in loading the cargoes outside the breakwater. As the defendants
proffered, the weather on October 26, 1991 remained normal with moderate sea
condition such that port operations continued and proceeded normally.[37]
The weather data report,[38] furnished and verified by the Chief of the Climate Data
Section of PAG-ASA and marked as a common exhibit of the parties, states that

while typhoon signal No. 1 was hoisted over Metro Manila on October 23-31, 1991,
the sea condition at the port of Manila at 5:00 p.m. - 11:00 p.m. of October 26, 1991
was moderate. It cannot, therefore, be said that the defendants were negligent in
not unloading the cargoes upon the barge on October 26, 1991 inside the
breakwater.
That no tugboat towed back the barge to the pier after the cargoes were completely
loaded by 12:30 in the morning[39] is, however, a material fact which the appellate
court failed to properly consider and appreciate[40] the proximate cause of the
loss of the cargoes. Had the barge been towed back promptly to the pier, the
deteriorating sea conditions notwithstanding, the loss could have been avoided.
But the barge was left floating in open sea until big waves set in at 5:30 a.m.,
causing it to sink along with the cargoes.[41] The loss thus falls outside the act of
God doctrine.
The proximate cause of the loss having been determined, who among the parties
is/are responsible therefor?
Contrary to petitioners insistence, this Court, as did the appellate court, finds that
petitioner is a common carrier. For it undertook to transport the cargoes from the
shipside of M/V Alexander Saveliev to the consignees warehouse at Cainta, Rizal.
As the appellate court put it, as long as a person or corporation holds [itself] to the
public for the purpose of transporting goods as [a] business, [it] is already
considered a common carrier regardless if [it] owns the vehicle to be used or has to
hire one.[42] That petitioner is a common carrier, the testimony of its own VicePresident and General Manager Noel Aro that part of the services it offers to its
clients as a brokerage firm includes the transportation of cargoes reflects so.
Atty. Jubay: Will you please tell us what [are you] functions x x x as Executive VicePresident and General Manager of said Company?
Mr. Aro: Well, I oversee the entire operation of the brokerage and transport business
of the company. I also handle the various division heads of the company for
operation matters, and all other related functions that the President may assign to
me from time to time, Sir.
Q: Now, in connection [with] your duties and functions as you mentioned, will you
please tell the Honorable Court if you came to know the company by the name Little
Giant Steel Pipe Corporation?
A: Yes, Sir. Actually, we are the brokerage firm of that Company.
Q: And since when have you been the brokerage firm of that company, if you can
recall?
A: Since 1990, Sir.
Q: Now, you said that you are the brokerage firm of this Company. What work or
duty did you perform in behalf of this company?
A: We handled the releases (sic) of their cargo[es] from the Bureau of Customs. We
[are] also in-charged of the delivery of the goods to their warehouses. We also
handled the clearances of their shipment at the Bureau of Customs, Sir.

xxx
Q: Now, what precisely [was] your agreement with this Little Giant Steel Pipe
Corporation with regards to this shipment? What work did you do with this
shipment?
A: We handled the unloading of the cargo[es] from vessel to lighter and then the
delivery of [the] cargo[es] from lighter to BASECO then to the truck and to the
warehouse, Sir.
Q: Now, in connection with this work which you are doing, Mr. Witness, you are
supposed to perform, what equipment do (sic) you require or did you use in order to
effect this unloading, transfer and delivery to the warehouse?
A: Actually, we used the barges for the ship side operations, this unloading [from]
vessel to lighter, and on this we hired or we sub-contracted with [T]ransport
Ventures, Inc. which [was] in-charged (sic) of the barges.
Also, in BASECO
compound we are leasing cranes to have the cargo unloaded from the barge to
trucks, [and] then we used trucks to deliver [the cargoes] to the consignees
warehouse, Sir.
Q: And whose trucks do you use from BASECO compound to the consignees
warehouse?
A: We utilized of (sic) our own trucks and we have some other contracted trucks, Sir.
xxx
ATTY. JUBAY: Will you please explain to us, to the Honorable Court why is it you have
to contract for the barges of Transport Ventures Incorporated in this particular
operation?
A: Firstly, we dont own any barges. That is why we hired the services of another
firm whom we know [al]ready for quite sometime, which is Transport Ventures, Inc.
(Emphasis supplied)[43]
It is settled that under a given set of facts, a customs broker may be regarded as a
common carrier. Thus, this Court, in A.F. Sanchez Brokerage, Inc. v. The Honorable
Court of Appeals,[44] held:
The appellate court did not err in finding petitioner, a customs broker, to be also a
common carrier, as defined under Article 1732 of the Civil Code, to wit,
Art. 1732. Common carriers are persons, corporations, firms or associations
engaged in the business of carrying or transporting passengers or goods or both, by
land, water, or air, for compensation, offering their services to the public.
xxx
Article 1732 does not distinguish between one whose principal business activity is
the carrying of goods and one who does such carrying only as an ancillary activity.
The contention, therefore, of petitioner that it is not a common carrier but a

customs broker whose principal function is to prepare the correct customs

declaration and proper shipping documents as required by law is bereft of merit. It
suffices that petitioner undertakes to deliver the goods for pecuniary consideration.
[45]
And in Calvo v. UCPB General Insurance Co. Inc.,[46] this Court held that as the
transportation of goods is an integral part of a customs broker, the customs broker
is also a common carrier. For to declare otherwise would be to deprive those with
whom [it] contracts the protection which the law affords them notwithstanding the
fact that the obligation to carry goods for [its] customers, is part and parcel of
petitioners business.[47]
As for petitioners argument that being the agent of Little Giant, any negligence it
committed was deemed the negligence of its principal, it does not persuade.
True, petitioner was the broker-agent of Little Giant in securing the release of the
cargoes. In effecting the transportation of the cargoes from the shipside and into
Little Giants warehouse, however, petitioner was discharging its own personal
obligation under a contact of carriage.
Petitioner, which did not have any barge or tugboat, engaged the services of TVI as
handler[48] to provide the barge and the tugboat. In their Service Contract,[49]
while Little Giant was named as the consignee, petitioner did not disclose that it
was acting on commission and was chartering the vessel for Little Giant.[50] Little
Giant did not thus automatically become a party to the Service Contract and was
not, therefore, bound by the terms and conditions therein.
Not being a party to the service contract, Little Giant cannot directly sue TVI based
thereon but it can maintain a cause of action for negligence.[51]
In the case of TVI, while it acted as a private carrier for which it was under no duty
to observe extraordinary diligence, it was still required to observe ordinary diligence
to ensure the proper and careful handling, care and discharge of the carried goods.
Thus, Articles 1170 and 1173 of the Civil Code provide:
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 2202, paragraph 2, shall apply.
If the law or contract 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.
Was the reasonable care and caution which an ordinarily prudent person would have
used in the same situation exercised by TVI?[52]
This Court holds not.

TVIs failure to promptly provide a tugboat did not only increase the risk that might
have been reasonably anticipated during the shipside operation, but was the
proximate cause of the loss. A man of ordinary prudence would not leave a heavily
loaded barge floating for a considerable number of hours, at such a precarious time,
and in the open sea, knowing that the barge does not have any power of its own
and is totally defenseless from the ravages of the sea. That it was nighttime and,
therefore, the members of the crew of a tugboat would be charging overtime pay
did not excuse TVI from calling for one such tugboat.
As for petitioner, for it to be relieved of liability, it should, following Article 1739[53]
of the Civil Code, prove that it exercised due diligence to prevent or minimize the
loss, before, during and after the occurrence of the storm in order that it may be
exempted from liability for the loss of the goods.
While petitioner sent checkers[54] and a supervisor[55] on board the vessel to
counter-check the operations of TVI, it failed to take all available and reasonable
precautions to avoid the loss. After noting that TVI failed to arrange for the prompt
towage of the barge despite the deteriorating sea conditions, it should have
summoned the same or another tugboat to extend help, but it did not.
This Court holds then that petitioner and TVI are solidarily liable[56] for the loss of
the cargoes. The following pronouncement of the Supreme Court is instructive:
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 and related provisions, in conjunction with
Article 2180 of the Civil Code. x x x [O]ne might ask further, how then must the
liability of the common carrier, on 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 of the
Civil Code can well apply. In fine, a liability for tort may arise even under a contract,
where tort is that which breaches the contract. 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.[57]
As for Black Sea, its duty as a common carrier extended only from the time the
goods were surrendered or unconditionally placed in its possession and received for
transportation until they were delivered actually or constructively to consignee Little
Giant.[58]
Parties to a contract of carriage may, however, agree upon a definition of delivery
that extends the services rendered by the carrier. In the case at bar, Bill of Lading
No. 2 covering the shipment provides that delivery be made to the port of

discharge or so near thereto as she may safely get, always afloat.[59] The delivery
of the goods to the consignee was not from pier to pier but from the shipside of
M/V Alexander Saveliev and into barges, for which reason the consignee
contracted the services of petitioner. Since Black Sea had constructively delivered
the cargoes to Little Giant, through petitioner, it had discharged its duty.[60]
In fine, no liability may thus attach to Black Sea.
Respecting the award of attorneys fees in an amount over P1,000,000.00 to
Industrial Insurance, for lack of factual and legal basis, this Court sets it aside.
While Industrial Insurance was compelled to litigate its rights, such fact by itself
does not justify the award of attorneys fees under Article 2208 of the Civil Code.
For no sufficient showing of bad faith would be reflected in a partys persistence in a
case other than an erroneous conviction of the righteousness of his cause.[61] To
award attorneys fees to a party just because the judgment is rendered in its favor
would be tantamount to imposing a premium on ones right to litigate or seek
judicial redress of legitimate grievances.[62]
On the award of adjustment fees: The adjustment fees and expense of divers were
incurred by Industrial Insurance in its voluntary but unsuccessful efforts to locate
and retrieve the lost cargo. They do not constitute actual damages.[63]
As for the court a quos award of interest on the amount claimed, the same calls for
modification following the ruling in Eastern Shipping Lines, Inc. v. Court of
Appeals[64] that when the demand cannot be reasonably established at the time
the demand is made, the interest shall begin to run not from the time the claim is
made judicially or extrajudicially but from the date the judgment of the court is
made (at which the time the quantification of damages may be deemed to have
been reasonably ascertained).[65]
WHEREFORE, judgment is hereby rendered ordering petitioner Schmitz Transport &
Brokerage Corporation, and Transport Venture Incorporation jointly and severally
liable for the amount of P5,246,113.11 with the MODIFICATION that interest at SIX
PERCENT per annum of the amount due should be computed from the promulgation
on November 24, 1997 of the decision of the trial court.
Costs against petitioner.
SO ORDERED.
Panganiban, (Chairman), Sandoval-Gutierrez, Corona, and Garcia, JJ., concur.

THIRD DIVISION
[G.R. No. 147079. December 21, 2004]
A.F. SANCHEZ BROKERAGE INC., petitioners, vs. THE HON. COURT OF APPEALS and
FGU INSURANCE CORPORATION, respondents.
DECISION

CARPIO MORALES, J.:

Before this Court on a petition for Certiorari is the appellate courts Decision[1] of
August 10, 2000 reversing and setting aside the judgment of Branch 133, Regional
Trial Court of Makati City, in Civil Case No. 93-76B which dismissed the complaint of
respondent FGU Insurance Corporation (FGU Insurance) against petitioner A.F.
Sanchez Brokerage, Inc. (Sanchez Brokerage).
On July 8, 1992, Wyeth-Pharma GMBH shipped on board an aircraft of KLM Royal
Dutch Airlines at Dusseldorf, Germany oral contraceptives consisting of 86,800
Blisters Femenal tablets, 14,000 Blisters Nordiol tablets and 42,000 Blisters
Trinordiol tablets for delivery to Manila in favor of the consignee, Wyeth-Suaco
Laboratories, Inc.[2] The Femenal tablets were placed in 124 cartons and the
Nordiol tablets were placed in 20 cartons which were packed together in one (1) LD3
aluminum container, while the Trinordial tablets were packed in two pallets, each of
which contained 30 cartons.[3]
Wyeth-Suaco insured the shipment against all risks with FGU Insurance which issued
Marine Risk Note No. 4995 pursuant to Marine Open Policy No. 138.[4]
Upon arrival of the shipment on July 11, 1992 at the Ninoy Aquino International
Airport (NAIA),[5] it was discharged without exception[6] and delivered to the
warehouse of the Philippine Skylanders, Inc. (PSI) located also at the NAIA for
safekeeping.[7]
In order to secure the release of the cargoes from the PSI and the Bureau of
Customs, Wyeth-Suaco engaged the services of Sanchez Brokerage which had been
its licensed broker since 1984.[8] As its customs broker, Sanchez Brokerage
calculates and pays the customs duties, taxes and storage fees for the cargo and
thereafter delivers it to Wyeth-Suaco.[9]
On July 29, 1992, Mitzi Morales and Ernesto Mendoza, representatives of Sanchez
Brokerage, paid PSI storage fee amounting to P8,572.35 a receipt for which, Official
Receipt No. 016992,[10] was issued. On the receipt, another representative of
Sanchez Brokerage, M. Sison,[11] acknowledged that he received the cargoes
consisting of three pieces in good condition.[12]
Wyeth-Suaco being a regular importer, the customs examiner did not inspect the
cargoes[13] which were thereupon stripped from the aluminum containers[14] and
loaded inside two transport vehicles hired by Sanchez Brokerage.[15]
Among those who witnessed the release of the cargoes from the PSI warehouse
were Ruben Alonso and Tony Akas,[16] employees of Elite Adjusters and Surveyors
Inc. (Elite Surveyors), a marine and cargo surveyor and insurance claim adjusters
firm engaged by Wyeth-Suaco on behalf of FGU Insurance.
Upon instructions of Wyeth-Suaco, the cargoes were delivered to Hizon Laboratories
Inc. in Antipolo City for quality control check.[17] The delivery receipt, bearing No.
07037 dated July 29, 1992, indicated that the delivery consisted of one container
with 144 cartons of Femenal and Nordiol and 1 pallet containing Trinordiol.[18]
On July 31, 1992, Ronnie Likas, a representative of Wyeth-Suaco, acknowledged the
delivery of the cargoes by affixing his signature on the delivery receipt.[19] Upon

inspection, however, he, together with Ruben Alonzo of Elite Surveyors, discovered
that 44 cartons containing Femenal and Nordiol tablets were in bad order.[20] He
thus placed a note above his signature on the delivery receipt stating that 44
cartons of oral contraceptives were in bad order. The remaining 160 cartons of oral
contraceptives were accepted as complete and in good order.
Ruben Alonzo thus prepared and signed, along with Ronnie Likas, a survey
report[21] dated July 31, 1992 stating that 41 cartons of Femenal tablets and 3
cartons of Nordiol tablets were wetted (sic).[22]
The Elite Surveyors later issued Certificate No. CS-0731-1538/92[23] attached to
which was an Annexed Schedule whereon it was indicated that prior to the loading
of the cargoes to the brokers trucks at the NAIA, they were inspected and found to
be in apparent good condition.[24] Also noted was that at the time of delivery to
the warehouse of Hizon Laboratories Inc., slight to heavy rains fell, which could
account for the wetting of the 44 cartons of Femenal and Nordiol tablets.[25]
On August 4, 1992, the Hizon Laboratories Inc. issued a Destruction Report[26]
confirming that 38 x 700 blister packs of Femenal tablets, 3 x 700 blister packs of
Femenal tablets and 3 x 700 blister packs of Nordiol tablets were heavily damaged
with water and emitted foul smell.
On August 5, 1992, Wyeth-Suaco issued a Notice of Materials Rejection[27] of 38
cartons of Femenal and 3 cartons of Nordiol on the ground that they were delivered
to Hizon Laboratories with heavy water damaged (sic) causing the cartons to
sagged (sic) emitting a foul order and easily attracted flies.[28]
Wyeth-Suaco later demanded, by letter[29] of August 25, 1992, from Sanchez
Brokerage the payment of P191,384.25 representing the value of its loss arising
from the damaged tablets.
As the Sanchez Brokerage refused to heed the demand, Wyeth-Suaco filed an
insurance claim against FGU Insurance which paid Wyeth-Suaco the amount of
P181,431.49 in settlement of its claim under Marine Risk Note Number 4995.
Wyeth-Suaco thus issued Subrogation Receipt[30] in favor of FGU Insurance.
On demand by FGU Insurance for payment of the amount of P181,431.49 it paid
Wyeth-Suaco, Sanchez Brokerage, by letter[31] of January 7, 1993, disclaimed
liability for the damaged goods, positing that the damage was due to improper and
insufficient export packaging; that when the sealed containers were opened outside
the PSI warehouse, it was discovered that some of the loose cartons were wet,[32]
prompting its (Sanchez Brokerages) representative Morales to inform the ImportExport Assistant of Wyeth-Suaco, Ramir Calicdan, about the condition of the cargoes
but that the latter advised to still deliver them to Hizon Laboratories where an
adjuster would assess the damage.[33]
Hence, the filing by FGU Insurance of a complaint for damages before the Regional
Trial Court of Makati City against the Sanchez Brokerage.
The trial court, by Decision[34] of July 29, 1996, dismissed the complaint, holding
that the Survey Report prepared by the Elite Surveyors is bereft of any evidentiary
support and a mere product of pure guesswork.[35]

On appeal, the appellate court reversed the decision of the trial court, it holding
that the Sanchez Brokerage engaged not only in the business of customs brokerage
but also in the transportation and delivery of the cargo of its clients, hence, a
common carrier within the context of Article 1732 of the New Civil Code.[36]
Noting that Wyeth-Suaco adduced evidence that the cargoes were delivered to
petitioner in good order and condition but were in a damaged state when delivered
to Wyeth-Suaco, the appellate court held that Sanchez Brokerage is presumed
negligent and upon it rested the burden of proving that it exercised extraordinary
negligence not only in instances when negligence is directly proven but also in
those cases when the cause of the damage is not known or unknown.[37]
The appellate court thus disposed:
IN THE LIGHT OF ALL THE FOREGOING, the appeal of the Appellant is GRANTED.
The Decision of the Court a quo is REVERSED. Another Decision is hereby rendered
in favor of the Appellant and against the Appellee as follows:
1.
The Appellee is hereby ordered to pay the Appellant the principal amount of
P181, 431.49, with interest thereupon at the rate of 6% per annum, from the date of
the Decision of the Court, until the said amount is paid in full;
2.
The Appellee is hereby ordered to pay to the Appellant the amount of
P20,000.00 as and by way of attorneys fees; and
3.

The counterclaims of the Appellee are DISMISSED.[38]

Sanchez Brokerages Motion for Reconsideration having been denied by the

appellate courts Resolution of December 8, 2000 which was received by petitioner
on January 5, 2001, it comes to this Court on petition for certiorari filed on March 6,
2001.
In the main, petitioner asserts that the appellate court committed grave and
reversible error tantamount to abuse of discretion when it found petitioner a
common carrier within the context of Article 1732 of the New Civil Code.
Respondent FGU Insurance avers in its Comment that the proper course of action
which petitioner should have taken was to file a petition for review on certiorari
since the sole office of a writ of certiorari is the correction of errors of jurisdiction
including the commission of grave abuse of discretion amounting to lack or excess
of jurisdiction and does not include correction of the appellate courts evaluation of
the evidence and factual findings thereon.
On the merits, respondent FGU Insurance contends that petitioner, as a common
carrier, failed to overcome the presumption of negligence, it being documented that
petitioner withdrew from the warehouse of PSI the subject shipment entirely in good
order and condition.[39]
The petition fails.
Rule 45 is clear that decisions, final orders or resolutions of the Court of Appeals in
any case, i.e., regardless of the nature of the action or proceedings involved, may

be appealed to this Court by filing a petition for review, which would be but a
continuation of the appellate process over the original case.[40]
The Resolution of the Court of Appeals dated December 8, 2000 denying the motion
for reconsideration of its Decision of August 10, 2000 was received by petitioner on
January 5, 2001. Since petitioner failed to appeal within 15 days or on or before
January 20, 2001, the appellate courts decision had become final and executory.
The filing by petitioner of a petition for certiorari on March 6, 2001 cannot serve as
a substitute for the lost remedy of appeal.
In another vein, the rule is well settled that in a petition for certiorari, the petitioner
must prove not merely reversible error but also grave abuse of discretion amounting
to lack or excess of jurisdiction.
Petitioner alleges that the appellate court erred in reversing and setting aside the
decision of the trial court based on its finding that petitioner is liable for the damage
to the cargo as a common carrier. What petitioner is ascribing is an error of
judgment, not of jurisdiction, which is properly the subject of an ordinary appeal.
Where the issue or question involves or affects the wisdom or legal soundness of
the decision not the jurisdiction of the court to render said decision the same is
beyond the province of a petition for certiorari.[41] The supervisory jurisdiction of
this Court to issue a cert writ cannot be exercised in order to review the judgment of
lower courts as to its intrinsic correctness, either upon the law or the facts of the
case.[42]
Procedural technicalities aside, the petition still fails.
The appellate court did not err in finding petitioner, a customs broker, to be also a
common carrier, as defined under Article 1732 of the Civil Code, to wit:
Art. 1732. Common carriers are persons, corporations, firms or associations
engaged in the business of carrying or transporting passengers or goods or both, by
land, water, or air, for compensation, offering their services to the public.
Anacleto F. Sanchez, Jr., the Manager and Principal Broker of Sanchez Brokerage,
himself testified that the services the firm offers include the delivery of goods to the
warehouse of the consignee or importer.
ATTY. FLORES:
Q: What are the functions of these license brokers, license customs broker?
WITNESS:
As customs broker, we calculate the taxes that has to be paid in cargos, and those
upon approval of the importer, we prepare the entry together for processing and
claims from customs and finally deliver the goods to the warehouse of the importer.
[43]
Article 1732 does not distinguish between one whose principal business activity is
the carrying of goods and one who does such carrying only as an ancillary activity.
[44] The contention, therefore, of petitioner that it is not a common carrier but a

customs broker whose principal function is to prepare the correct customs

declaration and proper shipping documents as required by law is bereft of merit. It
suffices that petitioner undertakes to deliver the goods for pecuniary consideration.
In this light, petitioner as a common carrier is mandated to observe, under Article
1733[45] of the Civil Code, extraordinary diligence in the vigilance over the goods it
transports according to all the circumstances of each case. In the event that the
goods are lost, destroyed or deteriorated, it is presumed to have been at fault or to
have acted negligently, unless it proves that it observed extraordinary diligence.
[46]
The concept of extra-ordinary diligence was explained in Compania Maritima v.
Court of Appeals:[47]
The extraordinary diligence in the vigilance over the goods tendered for shipment
requires the common carrier to know and to follow the required precaution for
avoiding damage to, or destruction of the goods entrusted to it for sale, carriage
and delivery. It requires common carriers to render service with the greatest skill
and foresight and to use all reasonable means to ascertain the nature and
characteristics of goods tendered for shipment, and to exercise due care in the
handling and stowage, including such methods as their nature requires.[48]
In the case at bar, it was established that petitioner received the cargoes from the
PSI warehouse in NAIA in good order and condition;[49] and that upon delivery by
petitioner to Hizon Laboratories Inc., some of the cargoes were found to be in bad
order, as noted in the Delivery Receipt[50] issued by petitioner, and as indicated in
the Survey Report of Elite Surveyors[51] and the Destruction Report of Hizon
Laboratories, Inc.[52]
In an attempt to free itself from responsibility for the damage to the goods,
petitioner posits that they were damaged due to the fault or negligence of the
shipper for failing to properly pack them and to the inherent characteristics of the
goods[53]; and that it should not be faulted for following the instructions of
Calicdan of Wyeth-Suaco to proceed with the delivery despite information conveyed
to the latter that some of the cartons, on examination outside the PSI warehouse,
were found to be wet.[54]
While paragraph No. 4 of Article 1734[55] of the Civil Code exempts a common
carrier from liability if the loss or damage is due to the character of the goods or
defects in the packing or in the containers, the rule is that if the improper packing is
known to the carrier or his employees or is apparent upon ordinary observation, but
he nevertheless accepts the same without protest or exception notwithstanding
such condition, he is not relieved of liability for the resulting damage.[56]
If the claim of petitioner that some of the cartons were already damaged upon
delivery to it were true, then it should naturally have received the cargo under
protest or with reservations duly noted on the receipt issued by PSI. But it made no
such protest or reservation.[57]
Moreover, as observed by the appellate court, if indeed petitioners employees only
examined the cargoes outside the PSI warehouse and found some to be wet, they
would certainly have gone back to PSI, showed to the warehouseman the damage,

and demanded then and there for Bad Order documents or a certification confirming
the damage.[58] Or, petitioner would have presented, as witness, the employees of
the PSI from whom Morales and Domingo took delivery of the cargo to prove that,
indeed, part of the cargoes was already damaged when the container was allegedly
opened outside the warehouse.[59]
Petitioner goes on to posit that contrary to the report of Elite Surveyors, no rain fell
that day. Instead, it asserts that some of the cargoes were already wet on delivery
by PSI outside the PSI warehouse but such notwithstanding Calicdan directed
Morales to proceed with the delivery to Hizon Laboratories, Inc.
While Calicdan testified that he received the purported telephone call of Morales on
July 29, 1992, he failed to specifically declare what time he received the call. As to
whether the call was made at the PSI warehouse when the shipment was stripped
from the airport containers, or when the cargoes were already in transit to Antipolo,
it is not determinable. Aside from that phone call, petitioner admitted that it had no
documentary evidence to prove that at the time it received the cargoes, a part of it
was wet, damaged or in bad condition.[60]
The 4-page weather data furnished by PAGASA[61] on request of Sanchez Brokerage
hardly impresses, no witness having identified it and interpreted the technical terms
thereof.
The possibility on the other hand that, as found by Hizon Laboratories, Inc., the oral
contraceptives were damaged by rainwater while in transit to Antipolo City is more
likely then. Sanchez himself testified that in the past, there was a similar instance
when the shipment of Wyeth-Suaco was also found to be wet by rain.
ATTY. FLORES:
Q: Was there any instance that a shipment of this nature, oral contraceptives, that
arrived at the NAIA were damaged and claimed by the Wyeth-Suaco without any
question?
WITNESS:
A:
Yes sir, there was an instance that one cartoon (sic) were wetted (sic) but
Wyeth-Suaco did not claim anything against us.
ATTY. FLORES:
Q: HOW IS IT?
WITNESS:
A:
We experienced, there was a time that we experienced that there was a
cartoon (sic) wetted (sic) up to the bottom are wet specially during rainy season.
[62]
Since petitioner received all the cargoes in good order and condition at the time
they were turned over by the PSI warehouseman, and upon their delivery to Hizon
Laboratories, Inc. a portion thereof was found to be in bad order, it was incumbent
on petitioner to prove that it exercised extraordinary diligence in the carriage of the

goods. It did not, however. Hence, its presumed negligence under Article 1735 of
the Civil Code remains unrebutted.
WHEREFORE, the August 10, 2000 Decision of the Court of Appeals is hereby
AFFIRMED.
Costs against petitioner.
SO ORDERED.
Panganiban, (Chairman), Sandoval-Gutierrez, and Garcia, JJ., concur.
Corona, J., on leave.
SECOND DIVISION
[G.R. No. 148496. March 19, 2002]
VIRGINES CALVO doing business under the name and style TRANSORIENT
CONTAINER TERMINAL SERVICES, INC., petitioner, vs. UCPB GENERAL INSURANCE
CO., INC. (formerly Allied Guarantee Ins. Co., Inc.) respondent.
DECISION
MENDOZA, J.:
This is a petition for review of the decision,[1] dated May 31, 2001, of the Court of
Appeals, affirming the decision[2] of the Regional Trial Court, Makati City, Branch
148, which ordered petitioner to pay respondent, as subrogee, the amount of
P93,112.00 with legal interest, representing the value of damaged cargo handled by
petitioner, 25% thereof as attorneys fees, and the cost of the suit.
The facts are as follows:
Petitioner Virgines Calvo is the owner of Transorient Container Terminal Services,
Inc. (TCTSI), a sole proprietorship customs broker. At the time material to this case,
petitioner entered into a contract with San Miguel Corporation (SMC) for the transfer
of 114 reels of semi-chemical fluting paper and 124 reels of kraft liner board from
the Port Area in Manila to SMCs warehouse at the Tabacalera Compound,
Romualdez St., Ermita, Manila. The cargo was insured by respondent UCPB General
Insurance Co., Inc.
On July 14, 1990, the shipment in question, contained in 30 metal vans, arrived in
Manila on board M/V Hayakawa Maru and, after 24 hours, were unloaded from the
vessel to the custody of the arrastre operator, Manila Port Services, Inc. From July 23
to July 25, 1990, petitioner, pursuant to her contract with SMC, withdrew the cargo
from the arrastre operator and delivered it to SMCs warehouse in Ermita, Manila.
On July 25, 1990, the goods were inspected by Marine Cargo Surveyors, who found
that 15 reels of the semi-chemical fluting paper were wet/stained/torn and 3 reels
of kraft liner board were likewise torn. The damage was placed at P93,112.00.
SMC collected payment from respondent UCPB under its insurance contract for the
aforementioned amount. In turn, respondent, as subrogee of SMC, brought suit

against petitioner in the Regional Trial Court, Branch 148, Makati City, which, on
December 20, 1995, rendered judgment finding petitioner liable to respondent for
the damage to the shipment.
The trial court held:
It cannot be denied . . . that the subject cargoes sustained damage while in the
custody of defendants. Evidence such as the Warehouse Entry Slip (Exh. E); the
Damage Report (Exh. F) with entries appearing therein, classified as TED and
TSN, which the claims processor, Ms. Agrifina De Luna, claimed to be tearrage at
the end and tearrage at the middle of the subject damaged cargoes respectively,
coupled with the Marine Cargo Survey Report (Exh. H - H-4-A) confirms the fact
of the damaged condition of the subject cargoes. The surveyor[s] report (Exh. H4-A) in particular, which provides among others that:
. . . we opine that damages sustained by shipment is attributable to improper
handling in transit presumably whilst in the custody of the broker . . . .
is a finding which cannot be traversed and overturned.
The evidence adduced by the defendants is not enough to sustain [her] defense
that [she is] are not liable. Defendant by reason of the nature of [her] business
should have devised ways and means in order to prevent the damage to the
cargoes which it is under obligation to take custody of and to forthwith deliver to the
consignee. Defendant did not present any evidence on what precaution [she]
performed to prevent [the] said incident, hence the presumption is that the moment
the defendant accepts the cargo [she] shall perform such extraordinary diligence
because of the nature of the cargo.
. . . .
Generally speaking under Article 1735 of the Civil Code, if the goods are proved to
have been lost, destroyed or deteriorated, common carriers are presumed to have
been at fault or to have acted negligently, unless they prove that they have
observed the extraordinary diligence required by law. The burden of the plaintiff,
therefore, is to prove merely that the goods he transported have been lost,
destroyed or deteriorated. Thereafter, the burden is shifted to the carrier to prove
that he has exercised the extraordinary diligence required by law. Thus, it has been
held that the mere proof of delivery of goods in good order to a carrier, and of their
arrival at the place of destination in bad order, makes out a prima facie case against
the carrier, so that if no explanation is given as to how the injury occurred, the
carrier must be held responsible. It is incumbent upon the carrier to prove that the
loss was due to accident or some other circumstances inconsistent with its liability.
(cited in Commercial Laws of the Philippines by Agbayani, p. 31, Vol. IV, 1989 Ed.)
Defendant, being a customs brother, warehouseman and at the same time a
common carrier is supposed [to] exercise [the] extraordinary diligence required by
law, hence the extraordinary responsibility lasts from the time the goods are
unconditionally placed in the possession of and received by the carrier for
transportation until the same are delivered actually or constructively by the carrier
to the consignee or to the person who has the right to receive the same.[3]
Accordingly, the trial court ordered petitioner to pay the following amounts

1. The sum of P93,112.00 plus interest;

2. 25% thereof as lawyers fee;
3. Costs of suit.[4]
The decision was affirmed by the Court of Appeals on appeal. Hence this petition
for review on certiorari.
Petitioner contends that:
I. THE COURT OF APPEALS COMMITTED SERIOUS AND REVERSIBLE ERROR [IN]
DECIDING THE CASE NOT ON THE EVIDENCE PRESENTED BUT ON PURE SURMISES,
SPECULATIONS AND MANIFESTLY MISTAKEN INFERENCE.
II. THE COURT OF APPEALS COMMITTED SERIOUS AND REVERSIBLE ERROR IN
CLASSIFYING THE PETITIONER AS A COMMON CARRIER AND NOT AS PRIVATE OR
SPECIAL CARRIER WHO DID NOT HOLD ITS SERVICES TO THE PUBLIC.[5]
It will be convenient to deal with these contentions in the inverse order, for if
petitioner is not a common carrier, although both the trial court and the Court of
Appeals held otherwise, then she is indeed not liable beyond what ordinary
diligence in the vigilance over the goods transported by her, would require.[6]
Consequently, any damage to the cargo she agrees to transport cannot be
presumed to have been due to her fault or negligence.
Petitioner contends that contrary to the findings of the trial court and the Court of
Appeals, she is not a common carrier but a private carrier because, as a customs
broker and warehouseman, she does not indiscriminately hold her services out to
the public but only offers the same to select parties with whom she may contract in
the conduct of her business.
The contention has no merit. In De Guzman v. Court of Appeals,[7] the Court
dismissed a similar contention and held the party to be a common carrier, thus
The Civil Code defines common carriers in the following terms:
Article 1732. Common carriers are persons, corporations, firms or associations
engaged in the business of carrying or transporting passengers or goods or both, by
land, water, or air for compensation, offering their services to the public.
The above article makes no distinction between one whose principal business
activity is the carrying of persons or goods or both, and one who does such carrying
only as an ancillary activity . . . Article 1732 also carefully avoids making any
distinction between a person or enterprise offering transportation service on a
regular or scheduled basis and one offering such service on an occasional, episodic
or unscheduled basis. Neither does Article 1732 distinguish between a carrier
offering its services to the general public, i.e., the general community or
population, and one who offers services or solicits business only from a narrow
segment of the general population.
We think that Article 1732 deliberately
refrained from making such distinctions.

So understood, the concept of common carrier under Article 1732 may be seen to
coincide neatly with the notion of public service, under the Public Service Act
(Commonwealth Act No. 1416, as amended) which at least partially supplements
the law on common carriers set forth in the Civil Code. Under Section 13, paragraph
(b) of the Public Service Act, public service includes:
x x x every person that now or hereafter may own, operate, manage, or control in
the Philippines, for hire or compensation, with general or limited clientele, whether
permanent, occasional or accidental, and done for general business purposes, any
common carrier, railroad, street railway, traction railway, subway motor vehicle,
either for freight or passenger, or both, with or without fixed route and whatever
may be its classification, freight or carrier service of any class, express service,
steamboat, or steamship line, pontines, ferries and water craft, engaged in the
transportation of passengers or freight or both, shipyard, marine repair shop, wharf
or dock, ice plant, ice-refrigeration plant, canal, irrigation system, gas, electric light,
heat and power, water supply and power petroleum, sewerage system, wire or
wireless communications systems, wire or wireless broadcasting stations and other
similar public services. x x x [8]
There is greater reason for holding petitioner to be a common carrier because the
transportation of goods is an integral part of her business. To uphold petitioners
contention would be to deprive those with whom she contracts the protection which
the law affords them notwithstanding the fact that the obligation to carry goods for
her customers, as already noted, is part and parcel of petitioners business.
Now, as to petitioners liability, Art. 1733 of the Civil Code provides:
Common carriers, from the nature of their business and for reasons of public policy,
are bound to observe extraordinary diligence in the vigilance over the goods and for
the safety of the passengers transported by them, according to all the
circumstances of each case. . . .
In Compania Maritima v. Court of Appeals,[9] the meaning of extraordinary
diligence in the vigilance over goods was explained thus:
The extraordinary diligence in the vigilance over the goods tendered for shipment
requires the common carrier to know and to follow the required precaution for
avoiding damage to, or destruction of the goods entrusted to it for sale, carriage
and delivery. It requires common carriers to render service with the greatest skill
and foresight and to use all reasonable means to ascertain the nature and
characteristic of goods tendered for shipment, and to exercise due care in the
handling and stowage, including such methods as their nature requires.
In the case at bar, petitioner denies liability for the damage to the cargo. She
claims that the spoilage or wettage took place while the goods were in the
custody of either the carrying vessel M/V Hayakawa Maru, which transported the
cargo to Manila, or the arrastre operator, to whom the goods were unloaded and
who allegedly kept them in open air for nine days from July 14 to July 23, 1998
notwithstanding the fact that some of the containers were deformed, cracked, or
otherwise damaged, as noted in the Marine Survey Report (Exh. H), to wit:
MAXU-2062880

rain gutter deformed/cracked

ICSU-363461-3

left side rubber gasket on door distorted/partly loose

PERU-204209-4

with pinholes on roof panel right portion

TOLU-213674-3

MAXU-201406-0

ICSU-412105-0
loosened.[10]

wood flooring we[t] and/or with signs of water soaked

with dent/crack on roof panel
-

rubber gasket on left side/door panel partly detached

In addition, petitioner claims that Marine Cargo Surveyor Ernesto Tolentino testified
that he has no personal knowledge on whether the container vans were first stored
in petitioners warehouse prior to their delivery to the consignee. She likewise
claims that after withdrawing the container vans from the arrastre operator, her
driver, Ricardo Nazarro, immediately delivered the cargo to SMCs warehouse in
Ermita, Manila, which is a mere thirty-minute drive from the Port Area where the
cargo came from. Thus, the damage to the cargo could not have taken place while
these were in her custody.[11]
Contrary to petitioners assertion, the Survey Report (Exh. H) of the Marine Cargo
Surveyors indicates that when the shipper transferred the cargo in question to the
arrastre operator, these were covered by clean Equipment Interchange Report (EIR)
and, when petitioners employees withdrew the cargo from the arrastre operator,
they did so without exception or protest either with regard to the condition of
container vans or their contents. The Survey Report pertinently reads
Details of Discharge:
Shipment, provided with our protective supervision was noted discharged ex vessel
to dock of Pier #13 South Harbor, Manila on 14 July 1990, containerized onto 30 x
20 secure metal vans, covered by clean EIRs. Except for slight dents and paint
scratches on side and roof panels, these containers were deemed to have [been]
received in good condition.
. . . .
Transfer/Delivery:
On July 23, 1990, shipment housed onto 30 x 20 cargo containers was
[withdrawn] by Transorient Container Services, Inc. . . . without exception.
[The cargo] was finally delivered to the consignees storage warehouse located
at Tabacalera Compound, Romualdez Street, Ermita, Manila from July 23/25, 1990.
[12]
As found by the Court of Appeals:
From the [Survey Report], it [is] clear that the shipment was discharged from the
vessel to the arrastre, Marina Port Services Inc., in good order and condition as
evidenced by clean Equipment Interchange Reports (EIRs). Had there been any
damage to the shipment, there would have been a report to that effect made by the

arrastre operator. The cargoes were withdrawn by the defendant-appellant from the
arrastre still in good order and condition as the same were received by the former
without exception, that is, without any report of damage or loss. Surely, if the
container vans were deformed, cracked, distorted or dented, the defendantappellant would report it immediately to the consignee or make an exception on the
delivery receipt or note the same in the Warehouse Entry Slip (WES). None of these
took place. To put it simply, the defendant-appellant received the shipment in good
order and condition and delivered the same to the consignee damaged. We can
only conclude that the damages to the cargo occurred while it was in the possession
of the defendant-appellant. Whenever the thing is lost (or damaged) in the
possession of the debtor (or obligor), it shall be presumed that the loss (or damage)
was due to his fault, unless there is proof to the contrary. No proof was proffered to
rebut this legal presumption and the presumption of negligence attached to a
common carrier in case of loss or damage to the goods.[13]
Anent petitioners insistence that the cargo could not have been damaged while in
her custody as she immediately delivered the containers to SMCs compound,
suffice it to say that to prove the exercise of extraordinary diligence, petitioner must
do more than merely show the possibility that some other party could be
responsible for the damage. It must prove that it used all reasonable means to
ascertain the nature and characteristic of goods tendered for [transport] and that
[it] exercise[d] due care in the handling [thereof]. Petitioner failed to do this.
Nor is there basis to exempt petitioner from liability under Art. 1734(4), which
provides
Common carriers are responsible for the loss, destruction, or deterioration of the
goods, unless the same is due to any of the following causes only:
. . . .
(4) The character of the goods or defects in the packing or in the containers.
. . . .
For this provision to apply, the rule is that if the improper packing or, in this case,
the defect/s in the container, is/are known to the carrier or his employees or
apparent upon ordinary observation, but he nevertheless accepts the same without
protest or exception notwithstanding such condition, he is not relieved of liability for
damage resulting therefrom.[14] In this case, petitioner accepted the cargo
without exception despite the apparent defects in some of the container vans.
Hence, for failure of petitioner to prove that she exercised extraordinary diligence in
the carriage of goods in this case or that she is exempt from liability, the
presumption of negligence as provided under Art. 1735[15] holds.
WHEREFORE, the decision of the Court of Appeals, dated May 31, 2001, is
AFFIRMED.
SO ORDERED.
Bellosillo, (Chairman), Quisumbing, Buena, and De Leon, Jr., JJ., concur.

THIRD DIVISION
[G.R. No. 112287. December 12, 1997]
NATIONAL STEEL CORPORATION, petitioner, vs. COURT OF APPEALS AND VLASONS
SHIPPING, INC., respondents.
[G.R. No. 112350. December 12, 1997]
VLASONS SHIPPING, INC., petitioner, vs. COURT OF APPEALS AND NATIONAL STEEL
CORPORATION, respondents.
DECISION
PANGANIBAN, J.:
The Court finds occasion to apply the rules on the seaworthiness of a private carrier,
its owners responsibility for damage to the cargo and its liability for demurrage and
attorneys fees. The Court also reiterates the well-known rule that findings of facts
of trial courts, when affirmed by the Court of Appeals, are binding on this Court.
The Case
Before us are two separate petitions for review filed by National Steel Corporation
(NSC) and Vlasons Shipping, Inc. (VSI), both of which assail the August 12, 1993
Decision of the Court of Appeals. [1] The Court of Appeals modified the decision of
the Regional Trial Court of Pasig, Metro Manila, Branch 163 in Civil Case No. 23317.
The RTC disposed as follows:
WHEREFORE, judgment is hereby rendered in favor of defendant and against the
plaintiff dismissing the complaint with cost against plaintiff, and ordering plaintiff to
pay the defendant on the counterclaim as follows:
1. The sum of P75,000.00 as unpaid freight and P88,000.00 as demurrage with
interest at the legal rate on both amounts from April 7, 1976 until the same shall
have been fully paid;
2. Attorneys fees and expenses of litigation in the sum of P100,000.00; and
3. Cost of suit.
SO ORDERED. [2]
On the other hand, the Court of Appeals ruled:
WHEREFORE, premises considered, the decision appealed from is modified by
reducing the award for demurrage to P44,000.00 and deleting the award for
attorneys fees and expenses of litigation. Except as thus modified, the decision is
AFFIRMED. There is no pronouncement as to costs.
SO ORDERED. [3]

The Facts
The MV Vlasons I is a vessel which renders tramping service and, as such, does not
transport cargo or shipment for the general public. Its services are available only to
specific persons who enter into a special contract of charter party with its owner. It
is undisputed that the ship is a private carrier. And it is in this capacity that its
owner, Vlasons Shipping, Inc., entered into a contract of affreightment or contract of
voyage charter hire with National Steel Corporation.
The facts as found by Respondent Court of Appeals are as follows:
(1) On July 17, 1974, plaintiff National Steel Corporation (NSC) as Charterer and
defendant Vlasons Shipping, Inc. (VSI) as Owner, entered into a Contract of Voyage
Charter Hire (Exhibit B; also Exhibit 1) whereby NSC hired VSIs vessel, the MV
VLASONS I to make one (1) voyage to load steel products at Iligan City and
discharge them at North Harbor, Manila, under the following terms and conditions,
viz:
1. x x

xx

x x.

2. Cargo: Full cargo of steel products of not less than 2,500 MT, 10% more or less
at Masters option.
3. x x

xx

xx

4. Freight/Payment: P30.00 /metric ton, FIOST basis. Payment upon presentation

of Bill of Lading within fifteen (15) days.
5. Laydays/Cancelling: July 26, 1974/Aug. 5, 1974.
6. Loading/Discharging Rate: 750 tons per WWDSHINC. (Weather Working Day of
24 consecutive hours, Sundays and Holidays Included).
7. Demurrage/Dispatch: P8,000.00/P4,000.00 per day.
8. x x

xx

xx

9.
Cargo Insurance:
Charterers and/or Shippers must insure the cargoes.
Shipowners not responsible for losses/damages except on proven willful negligence
of the officers of the vessel.
10.
Other terms:(a)
All terms/conditions of NONYAZAI C/P [sic] or other
internationally recognized Charter Party Agreement shall form part of this Contract.
xxx

xxx

x x x

The terms F.I.O.S.T. which is used in the shipping business is a standard provision
in the NANYOZAI Charter Party which stands for Freight In and Out including
Stevedoring and Trading, which means that the handling, loading and unloading of
the cargoes are the responsibility of the Charterer. Under Paragraph 5 of the
NANYOZAI Charter Party, it states, Charterers to load, stow and discharge the cargo
free of risk and expenses to owners. x x x (Underscoring supplied).

Under paragraph 10 thereof, it is provided that (o)wners shall, before and at the
beginning of the voyage, exercise due diligence to make the vessel seaworthy and
properly manned, equipped and supplied and to make the holds and all other parts
of the vessel in which cargo is carried, fit and safe for its reception, carriage and
preservation. Owners shall not be liable for loss of or damage of the cargo arising
or resulting from: unseaworthiness unless caused by want of due diligence on the
part of the owners to make the vessel seaworthy, and to secure that the vessel is
properly manned, equipped and supplied and to make the holds and all other parts
of the vessel in which cargo is carried, fit and safe for its reception, carriage and
preservation; xxx; perils, dangers and accidents of the sea or other navigable
waters; xxx; wastage in bulk or weight or any other loss or damage arising from
inherent defect, quality or vice of the cargo; insufficiency of packing; xxx; latent
defects not discoverable by due diligence; any other cause arising without the
actual fault or privity of Owners or without the fault of the agents or servants of
owners.
Paragraph 12 of said NANYOZAI Charter Party also provides that (o)wners shall not
be responsible for split, chafing and/or any damage unless caused by the
negligence or default of the master and crew.
(2) On August 6, 7 and 8, 1974, in accordance with the Contract of Voyage Charter
Hire, the MV VLASONS I loaded at plaintiffs pier at Iligan City, the NSCs shipment
of 1,677 skids of tinplates and 92 packages of hot rolled sheets or a total of 1,769
packages with a total weight of about 2,481.19 metric tons for carriage to Manila.
The shipment was placed in the three (3) hatches of the ship. Chief Mate Gonzalo
Sabando, acting as agent of the vessel[,] acknowledged receipt of the cargo on
board and signed the corresponding bill of lading, B.L.P.P. No. 0233 (Exhibit D) on
August 8, 1974.
(3) The vessel arrived with the cargo at Pier 12, North Harbor, Manila, on August
12, 1974. The following day, August 13, 1974, when the vessels three (3) hatches
containing the shipment were opened by plaintiffs agents, nearly all the skids of
tinplates and hot rolled sheets were allegedly found to be wet and rusty. The cargo
was discharged and unloaded by stevedores hired by the Charterer. Unloading was
completed only on August 24, 1974 after incurring a delay of eleven (11) days due
to the heavy rain which interrupted the unloading operations. (Exhibit E)
(4) To determine the nature and extent of the wetting and rusting, NSC called for a
survey of the shipment by the Manila Adjusters and Surveyors Company (MASCO).
In a letter to the NSC dated March 17, 1975 (Exhibit G), MASCO made a report of
its ocular inspection conducted on the cargo, both while it was still on board the
vessel and later at the NDC warehouse in Pureza St., Sta. Mesa, Manila where the
cargo was taken and stored. MASCO reported that it found wetting and rusting of
the packages of hot rolled sheets and metal covers of the tinplates; that tarpaulin
hatch covers were noted torn at various extents; that container/metal casings of the
skids were rusting all over. MASCO ventured the opinion that rusting of the
tinplates was caused by contact with SEA WATER sustained while still on board the
vessel as a consequence of the heavy weather and rough seas encountered while
en route to destination (Exhibit F). It was also reported that MASCOs surveyors
drew at random samples of bad order packing materials of the tinplates and
delivered the same to the M.I.T. Testing Laboratories for analysis. On August 31,
1974, the M.I.T. Testing Laboratories issued Report No. 1770 (Exhibit I) which in

part, states, The analysis of bad order samples of packing materials xxx shows that
wetting was caused by contact with SEA WATER.
(5) On September 6, 1974, on the basis of the aforesaid Report No. 1770, plaintiff
filed with the defendant its claim for damages suffered due to the downgrading of
the damaged tinplates in the amount of P941,145.18. Then on October 3, 1974,
plaintiff formally demanded payment of said claim but defendant VSI refused and
failed to pay. Plaintiff filed its complaint against defendant on April 21, 1976 which
was docketed as Civil Case No. 23317, CFI, Rizal.
(6) In its complaint, plaintiff claimed that it sustained losses in the aforesaid
amount of P941,145.18 as a result of the act, neglect and default of the master and
crew in the management of the vessel as well as the want of due diligence on the
part of the defendant to make the vessel seaworthy and to make the holds and all
other parts of the vessel in which the cargo was carried, fit and safe for its
reception, carriage and preservation -- all in violation of defendants undertaking
under their Contract of Voyage Charter Hire.
(7) In its answer, defendant denied liability for the alleged damage claiming that
the MV VLASONS I was seaworthy in all respects for the carriage of plaintiffs
cargo; that said vessel was not a common carrier inasmuch as she was under
voyage charter contract with the plaintiff as charterer under the charter party; that
in the course of the voyage from Iligan City to Manila, the MV VLASONS I
encountered very rough seas, strong winds and adverse weather condition, causing
strong winds and big waves to continuously pound against the vessel and seawater
to overflow on its deck and hatch covers; that under the Contract of Voyage Charter
Hire, defendant shall not be responsible for losses/damages except on proven willful
negligence of the officers of the vessel, that the officers of said MV VLASONS I
exercised due diligence and proper seamanship and were not willfully negligent;
that furthermore the Voyage Charter Party provides that loading and discharging of
the cargo was on FIOST terms which means that the vessel was free of risk and
expense in connection with the loading and discharging of the cargo; that the
damage, if any, was due to the inherent defect, quality or vice of the cargo or to the
insufficient packing thereof or to latent defect of the cargo not discoverable by due
diligence or to any other cause arising without the actual fault or privity of
defendant and without the fault of the agents or servants of defendant;
consequently, defendant is not liable; that the stevedores of plaintiff who
discharged the cargo in Manila were negligent and did not exercise due care in the
discharge of the cargo; and that the cargo was exposed to rain and seawater spray
while on the pier or in transit from the pier to plaintiffs warehouse after discharge
from the vessel; and that plaintiffs claim was highly speculative and grossly
exaggerated and that the small stain marks or sweat marks on the edges of the
tinplates were magnified and considered total loss of the cargo. Finally, defendant
claimed that it had complied with all its duties and obligations under the Voyage
Charter Hire Contract and had no responsibility whatsoever to plaintiff. In turn, it
alleged the following counterclaim:
(a) That despite the full and proper performance by defendant of its obligations
under the Voyage Charter Hire Contract, plaintiff failed and refused to pay the
agreed charter hire of P75,000.00 despite demands made by defendant;
(b) That under their Voyage Charter Hire Contract, plaintiff had agreed to pay
defendant the sum of P8,000.00 per day for demurrage. The vessel was on

demurrage for eleven (11) days in Manila waiting for plaintiff to discharge its cargo
from the vessel. Thus, plaintiff was liable to pay defendant demurrage in the total
amount of P88,000.00.
(c) For filing a clearly unfounded civil action against defendant, plaintiff should be
ordered to pay defendant attorneys fees and all expenses of litigation in the
amount of not less than P100,000.00.
(8) From the evidence presented by both parties, the trial court came out with the
following findings which were set forth in its decision:
(a) The MV VLASONS I is a vessel of Philippine registry engaged in the tramping
service and is available for hire only under special contracts of charter party as in
this particular case.
(b) That for purposes of the voyage covered by the Contract of Voyage Charter Hire
(Exh. 1), the MV VLASONS I was covered by the required seaworthiness
certificates including the Certification of Classification issued by an international
classification society, the NIPPON KAIJI KYOKAI (Exh. 4); Coastwise License from the
Board of Transportation (Exh. 5); International Loadline Certificate from the
Philippine Coast Guard (Exh. 6); Cargo Ship Safety Equipment Certificate also from
the Philippine Coast Guard (Exh. 7); Ship Radio Station License (Exh. 8);
Certificate of Inspection by the Philippine Coast Guard (Exh. 12); and Certificate of
Approval for Conversion issued by the Bureau of Customs (Exh. 9). That being a
vessel engaged in both overseas and coastwise trade, the MV VLASONS I has a
higher degree of seaworthiness and safety.
(c) Before it proceeded to Iligan City to perform the voyage called for by the
Contract of Voyage Charter Hire, the MV VLASONS I underwent drydocking in Cebu
and was thoroughly inspected by the Philippine Coast Guard. In fact, subject
voyage was the vessels first voyage after the drydocking. The evidence shows that
the MV VLASONS I was seaworthy and properly manned, equipped and supplied
when it undertook the voyage. It had all the required certificates of seaworthiness.
(d) The cargo/shipment was securely stowed in three (3) hatches of the ship. The
hatch openings were covered by hatchboards which were in turn covered by two or
double tarpaulins. The hatch covers were water tight. Furthermore, under the
hatchboards were steel beams to give support.
(e) The claim of the plaintiff that defendant violated the contract of carriage is not
supported by evidence. The provisions of the Civil Code on common carriers
pursuant to which there exists a presumption of negligence in case of loss or
damage to the cargo are not applicable. As to the damage to the tinplates which
was allegedly due to the wetting and rusting thereof, there is unrebutted testimony
of witness Vicente Angliongto that tinplates sweat by themselves when packed
even without being in contract (sic) with water from outside especially when the
weather is bad or raining. The rust caused by sweat or moisture on the tinplates
may be considered as a loss or damage but then, defendant cannot be held liable
for it pursuant to Article 1734 of the Civil Case which exempts the carrier from
responsibility for loss or damage arising from the character of the goods x x x. All
the 1,769 skids of the tinplates could not have been damaged by water as claimed
by plaintiff. It was shown as claimed by plaintiff that the tinplates themselves were

wrapped in kraft paper lining and corrugated cardboards could not be affected by
water from outside.
(f) The stevedores hired by the plaintiff to discharge the cargo of tinplates were
negligent in not closing the hatch openings of the MV VLASONS I when rains
occurred during the discharging of the cargo thus allowing rainwater to enter the
hatches. It was proven that the stevedores merely set up temporary tents to cover
the hatch openings in case of rain so that it would be easy for them to resume work
when the rains stopped by just removing the tent or canvas. Because of this
improper covering of the hatches by the stevedores during the discharging and
unloading operations which were interrupted by rains, rainwater drifted into the
cargo through the hatch openings. Pursuant to paragraph 5 of the NANYOSAI [sic]
Charter Party which was expressly made part of the Contract of Voyage Charter
Hire, the loading, stowing and discharging of the cargo is the sole responsibility of
the plaintiff charterer and defendant carrier has no liability for whatever damage
may occur or maybe [sic] caused to the cargo in the process.
(g) It was also established that the vessel encountered rough seas and bad weather
while en route from Iligan City to Manila causing sea water to splash on the ships
deck on account of which the master of the vessel (Mr. Antonio C. Dumlao) filed a
Marine Protest on August 13, 1974 (Exh. 15) which can be invoked by defendant
as a force majeure that would exempt the defendant from liability.
(h) Plaintiff did not comply with the requirement prescribed in paragraph 9 of the
Voyage Charter Hire contract that it was to insure the cargo because it did not. Had
plaintiff complied with the requirement, then it could have recovered its loss or
damage from the insurer. Plaintiff also violated the charter party contract when it
loaded not only steel products, i.e. steel bars, angular bars and the like but also
tinplates and hot rolled sheets which are high grade cargo commanding a higher
freight. Thus plaintiff was able to ship high grade cargo at a lower freight rate.
(I) As regards defendants counterclaim, the contract of voyage charter hire under
paragraph 4 thereof, fixed the freight at P30.00 per metric ton payable to defendant
carrier upon presentation of the bill of lading within fifteen (15) days. Plaintiff has
not paid the total freight due of P75,000.00 despite demands. The evidence also
showed that the plaintiff was required and bound under paragraph 7 of the same
Voyage Charter Hire contract to pay demurrage of P8,000.00 per day of delay in the
unloading of the cargoes. The delay amounted to eleven (11) days thereby making
plaintiff liable to pay defendant for demurrage in the amount of P88,000.00.
Appealing the RTC decision to the Court of Appeals, NSC alleged six errors:
I
The trial court erred in finding that the MV VLASONS I was seaworthy, properly
manned, equipped and supplied, and that there is no proof of willful negligence of
the vessels officers.
II
The trial court erred in finding that the rusting of NSCs tinplates was due to the
inherent nature or character of the goods and not due to contact with seawater.

III
The trial court erred in finding that the stevedores hired by NSC were negligent in
the unloading of NSCs shipment.
IV
The trial court erred in exempting VSI from liability on the ground of force majeure.
V
The trial court erred in finding that NSC violated the contract of voyage charter hire.
VI
The trial court erred in ordering NSC to pay freight, demurrage and attorneys fees,
to VSI.[4]
As earlier stated, the Court of Appeals modified the decision of the trial court by
reducing the demurrage from P88,000.00 to P44,000.00 and deleting the award of
attorneys fees and expenses of litigation. NSC and VSI filed separate motions for
reconsideration. In a Resolution[5] dated October 20, 1993, the appellate court
denied both motions. Undaunted, NSC and VSI filed their respective petitions for
review before this Court. On motion of VSI, the Court ordered on February 14, 1994
the consolidation of these petitions.[6]
The Issues
In its petition[7] and memorandum,[8] NSC raises the following questions of law and
fact:
Questions of Law
1. Whether or not a charterer of a vessel is liable for demurrage due to cargo
unloading delays caused by weather interruption;
2. Whether or not the alleged seaworthiness certificates (Exhibits 3, 4, 5, 6,
7, 8, 9, 11 and 12) were admissible in evidence and constituted evidence of
the vessels seaworthiness at the beginning of the voyages; and
3. Whether or not a charterers failure to insure its cargo exempts the shipowner
from liability for cargo damage.
Questions of Fact
1. Whether or not the vessel was seaworthy and cargo-worthy;
2. Whether or not vessels officers and crew were negligent in handling and caring
for NSCs cargo;
3. Whether or not NSCs cargo of tinplates did sweat during the voyage and, hence,
rusted on their own; and

(4)
Whether or not NSCs stevedores
wetting[/]rusting of NSCs tinplates.

were

negligent

and

caused

the

In its separate petition, [9] VSI submits for the consideration of this Court the
following alleged errors of the CA:
A. The respondent Court of Appeals committed an error of law in reducing the
award of demurrage from P88,000.00 to P44,000.00.
B. The respondent Court of Appeals committed an error of law in deleting the award
of P100,000 for attorneys fees and expenses of litigation.
Amplifying the foregoing, VSI raises the following issues in its memorandum: [10]
I. Whether or not the provisions of the Civil Code of the Philippines on common
carriers pursuant to which there exist[s] a presumption of negligence against the
common carrier in case of loss or damage to the cargo are applicable to a private
carrier.
II. Whether or not the terms and conditions of the Contract of Voyage Charter Hire,
including the Nanyozai Charter, are valid and binding on both contracting parties.
The foregoing issues raised by the parties will be discussed under the following
headings:
1. Questions of Fact
2. Effect of NSCs Failure to Insure the Cargo
3. Admissibility of Certificates Proving Seaworthiness
4. Demurrage and Attorneys Fees.
The Courts Ruling
The Court affirms the assailed Decision of the Court of Appeals, except in respect of
the demurrage.
Preliminary Matter: Common Carrier or Private Carrier?
At the outset, it is essential to establish whether VSI contracted with NSC as a
common carrier or as a private carrier. The resolution of this preliminary question
determines the law, standard of diligence and burden of proof applicable to the
present case.
Article 1732 of the Civil Code defines a common carrier as persons, corporations,
firms or associations engaged in the business of carrying or transporting passengers
or goods or both, by land, water, or air, for compensation, offering their services to
the public. It has been held that the true test of a common carrier is the carriage
of passengers or goods, provided it has space, for all who opt to avail themselves of
its transportation service for a fee. [11] A carrier which does not qualify under the
above test is deemed a private carrier. Generally, private carriage is undertaken
by special agreement and the carrier does not hold himself out to carry goods for

the general public. The most typical, although not the only form of private carriage,
is the charter party, a maritime contract by which the charterer, a party other than
the shipowner, obtains the use and service of all or some part of a ship for a period
of time or a voyage or voyages. [12]
In the instant case, it is undisputed that VSI did not offer its services to the general
public. As found by the Regional Trial Court, it carried passengers or goods only for
those it chose under a special contract of charter party. [13] As correctly
concluded by the Court of Appeals, the MV Vlasons I was not a common but a
private carrier. [14] Consequently, the rights and obligations of VSI and NSC,
including their respective liability for damage to the cargo, are determined primarily
by stipulations in their contract of private carriage or charter party. [15] Recently, in
Valenzuela Hardwood and Industrial Supply, Inc., vs. Court of Appeals and Seven
Brothers Shipping Corporation, [16] the Court ruled:
x x x 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.[17]
Extent of VSIs Responsibility and Liability Over NSCs Cargo
It is clear from the parties Contract of Voyage Charter Hire, dated July 17, 1974,
that VSI shall not be responsible for losses except on proven willful negligence of
the officers of the vessel. The NANYOZAI Charter Party, which was incorporated in
the parties contract of transportation, further provided that the shipowner shall not
be liable for loss of or damage to the cargo arising or resulting from
unseaworthiness, unless the same was caused by its lack of due diligence to make
the vessel seaworthy or to ensure that the same was properly manned, equipped
and supplied, and to make the holds and all other parts of the vessel in which
cargo [was] carried, fit and safe for its reception, carriage and preservation. [18]
The NANYOZAI Charter Party also provided that [o]wners shall not be responsible
for split, chafing and/or any damage unless caused by the negligence or default of
the master or crew.[19]
Burden of Proof
In view of the aforementioned contractual stipulations, NSC must prove that the
damage to its shipment was caused by VSIs willful negligence or failure to exercise
due diligence in making MV Vlasons I seaworthy and fit for holding, carrying and
safekeeping the cargo. Ineluctably, the burden of proof was placed on NSC by the
parties agreement.
This view finds further support in the Code of Commerce which pertinently provides:
Art. 361. Merchandise shall be transported at the risk and venture of the shipper,
if the contrary has not been expressly stipulated.

Therefore, the damage and impairment suffered by the goods during the
transportation, due to fortuitous event, force majeure, or the nature and inherent
defect of the things, shall be for the account and risk of the shipper.
The burden of proof of these accidents is on the carrier.
Art. 362. The carrier, however, shall be liable for damages arising from the cause
mentioned in the preceding article if proofs against him show that they occurred on
account of his negligence or his omission to take the precautions usually adopted by
careful persons, unless the shipper committed fraud in the bill of lading, making him
to believe that the goods were of a class or quality different from what they really
were.
Because the MV Vlasons I was a private carrier, the shipowners obligations are
governed by the foregoing provisions of the Code of Commerce and not by the Civil
Code which, as a general rule, places the prima facie presumption of negligence on
a common carrier. It is a hornbook doctrine that:
In an action against a private carrier for loss of, or injury to, cargo, the burden is on
the plaintiff to prove that the carrier was negligent or unseaworthy, and the fact
that the goods were lost or damaged while in the carriers custody does not put the
burden of proof on the carrier.
Since x x x a private carrier is not an insurer but undertakes only to exercise due
care in the protection of the goods committed to its care, the burden of proving
negligence or a breach of that duty rests on plaintiff and proof of loss of, or damage
to, cargo while in the carriers possession does not cast on it the burden of proving
proper care and diligence on its part or that the loss occurred from an excepted
cause in the contract or bill of lading. However, in discharging the burden of proof,
plaintiff is entitled to the benefit of the presumptions and inferences by which the
law aids the bailor in an action against a bailee, and since the carrier is in a better
position to know the cause of the loss and that it was not one involving its liability,
the law requires that it come forward with the information available to it, and its
failure to do so warrants an inference or presumption of its liability. However, such
inferences and presumptions, while they may affect the burden of coming forward
with evidence, do not alter the burden of proof which remains on plaintiff, and,
where the carrier comes forward with evidence explaining the loss or damage, the
burden of going forward with the evidence is again on plaintiff.
Where the action is based on the shipowners warranty of seaworthiness, the
burden of proving a breach thereof and that such breach was the proximate cause
of the damage rests on plaintiff, and proof that the goods were lost or damaged
while in the carriers possession does not cast on it the burden of proving
seaworthiness. x x x Where the contract of carriage exempts the carrier from
liability for unseaworthiness not discoverable by due diligence, the carrier has the
preliminary burden of proving the exercise of due diligence to make the vessel
seaworthy. [20]
In the instant case, the Court of Appeals correctly found that NSC has not taken the
correct position in relation to the question of who has the burden of proof. Thus, in
its brief (pp. 10-11), after citing Clause 10 and Clause 12 of the NANYOZAI Charter
Party (incidentally plaintiff-appellants [NSCs] interpretation of Clause 12 is not
even correct), it argues that a careful examination of the evidence will show that

VSI miserably failed to comply with any of these obligations as if defendantappellee [VSI] had the burden of proof.[21]
First Issue: Questions of Fact
Based on the foregoing, the determination of the following factual questions is
manifestly relevant: (1) whether VSI exercised due diligence in making MV Vlasons I
seaworthy for the intended purpose under the charter party; (2) whether the
damage to the cargo should be attributed to the willful negligence of the officers
and crew of the vessel or of the stevedores hired by NSC; and (3) whether the
rusting of the tinplates was caused by its own sweat or by contact with seawater.
These questions of fact were threshed out and decided by the trial court, which had
the firsthand opportunity to hear the parties conflicting claims and to carefully
weigh their respective evidence. The findings of the trial court were subsequently
affirmed by the Court of Appeals. Where the factual findings of both the trial court
and the Court of Appeals coincide, the same are binding on this Court. [22] We
stress that, subject to some exceptional instances, [23] only questions of law -- not
questions of fact -- may be raised before this Court in a petition for review under
Rule 45 of the Rules of Court. After a thorough review of the case at bar, we find no
reason to disturb the lower courts factual findings, as indeed NSC has not
successfully proven the application of any of the aforecited exceptions.
Was MV Vlasons I Seaworthy?
In any event, the records reveal that VSI exercised due diligence to make the ship
seaworthy and fit for the carriage of NSCs cargo of steel and tinplates. This is
shown by the fact that it was drydocked and inspected by the Philippine Coast
Guard before it proceeded to Iligan City for its voyage to Manila under the contract
of voyage charter hire. [24] The vessels voyage from Iligan to Manila was the
vessels first voyage after drydocking. The Philippine Coast Guard Station in Cebu
cleared it as seaworthy, fitted and equipped; it met all requirements for trading as
cargo vessel. [25] The Court of Appeals itself sustained the conclusion of the trial
court that MV Vlasons I was seaworthy. We find no reason to modify or reverse this
finding of both the trial and the appellate courts.
Who Were Negligent: Seamen or Stevedores?
As noted earlier, the NSC had the burden of proving that the damage to the cargo
was caused by the negligence of the officers and the crew of MV Vlasons I in making
their vessel seaworthy and fit for the carriage of tinplates. NSC failed to discharge
this burden.
Before us, NSC relies heavily on its claim that MV Vlasons I had used an old and torn
tarpaulin or canvas to cover the hatches through which the cargo was loaded into
the cargo hold of the ship. It faults the Court of Appeals for failing to consider such
claim as an uncontroverted fact [26] and denies that MV Vlasons I was equipped
with new canvas covers in tandem with the old ones as indicated in the Marine
Protest xxx. [27] We disagree.
The records sufficiently support VSIs contention that the ship used the old
tarpaulin, only in addition to the new one used primarily to make the ships
hatches watertight. The foregoing are clear from the marine protest of the master

of the MV Vlasons I, Antonio C. Dumlao, and the deposition of the ships boatswain,
Jose Pascua. The salient portions of said marine protest read:
x x x That the M/V VLASONS I departed Iligan City or or about 0730 hours of
August 8, 1974, loaded with approximately 2,487.9 tons of steel plates and tin
plates consigned to National Steel Corporation; that before departure, the vessel
was rigged, fully equipped and cleared by the authorities; that on or about August
9, 1974, while in the vicinity of the western part of Negros and Panay, we
encountered very rough seas and strong winds and Manila office was advised by
telegram of the adverse weather conditions encountered; that in the morning of
August 10, 1974, the weather condition changed to worse and strong winds and big
waves continued pounding the vessel at her port side causing sea water to overflow
on deck andhatch (sic) covers and which caused the first layer of the canvass
covering to give way while the new canvass covering still holding on;
That the weather condition improved when we reached Dumali Point protected by
Mindoro; that we re-secured the canvass covering back to position; that in the
afternoon of August 10, 1974, while entering Maricaban Passage, we were again
exposed to moderate seas and heavy rains; that while approaching Fortune Island,
we encountered again rough seas, strong winds and big waves which caused the
same canvass to give way and leaving the new canvass holding on;
xxx
xxx [28]

xxx

And the relevant portions of Jose Pascuas deposition are as follows:

Q: What is the purpose of the canvas cover?
A:

So that the cargo would not be soaked with water.

A:

And will you describe how the canvas cover was secured on the hatch opening?

WITNESS
A: It was placed flat on top of the hatch cover, with a little canvas flowing over the
sides and we place[d] a flat bar over the canvas on the side of the hatches and then
we place[d] a stopper so that the canvas could not be removed.
ATTY DEL ROSARIO
Q: And will you tell us the size of the hatch opening? The length and the width of
the hatch opening.
A:

Forty-five feet by thirty-five feet, sir.

x x x
xxx
Q: How was the canvas supported in the middle of the hatch opening?
A:

There is a hatch board.

x x x

ATTY DEL ROSARIO

Q: What is the hatch board made of?
A:

It is made of wood, with a handle.

Q: And aside from the hatch board, is there any other material there to cover the
hatch?
A:

There is a beam supporting the hatch board.

Q: What is this beam made of?

A:

It is made of steel, sir.

Q: Is the beam that was placed in the hatch opening covering the whole hatch
opening?
A:

No, sir.

Q: How many hatch beams were there placed across the opening?
A:

There are five beams in one hatch opening.

ATTY DEL ROSARIO

Q: And on top of the beams you said there is a hatch board. How many pieces of
wood are put on top?
A:

Plenty, sir, because there are several pieces on top of the hatch beam.

Q: And is there a space between the hatch boards?

A:

There is none, sir.

Q: They are tight together?

A:

Yes, sir.

Q: How tight?
A:

Very tight, sir.

Q: Now, on top of the hatch boards, according to you, is the canvas cover. How
many canvas covers?
A:

Two, sir. [29]

That due diligence was exercised by the officers and the crew of the MV Vlasons I
was further demonstrated by the fact that, despite encountering rough weather
twice, the new tarpaulin did not give way and the ships hatches and cargo holds
remained waterproof. As aptly stated by the Court of Appeals, xxx we find no
reason not to sustain the conclusion of the lower court based on overwhelming

evidence, that the MV VLASONS I was seaworthy when it undertook the voyage on
August 8, 1974 carrying on board thereof plaintiff-appellants shipment of 1,677
skids of tinplates and 92 packages of hot rolled sheets or a total of 1,769 packages
from NSCs pier in Iligan City arriving safely at North Harbor, Port Area, Manila, on
August 12, 1974; xxx. [30]
Indeed, NSC failed to discharge its burden to show negligence on the part of the
officers and the crew of MV Vlasons I. On the contrary, the records reveal that it
was the stevedores of NSC who were negligent in unloading the cargo from the ship.
The stevedores employed only a tent-like material to cover the hatches when strong
rains occasioned by a passing typhoon disrupted the unloading of the cargo. This
tent-like covering, however, was clearly inadequate for keeping rain and seawater
away from the hatches of the ship. Vicente Angliongto, an officer of VSI, testified
thus:
ATTY ZAMORA:
Q: Now, during your testimony on November 5, 1979, you stated on August 14 you
went on board the vessel upon notice from the National Steel Corporation in order
to conduct the inspection of the cargo. During the course of the investigation, did
you chance to see the discharging operation?
WITNESS:
A:
Yes, sir, upon my arrival at the vessel, I saw some of the tinplates already
discharged on the pier but majority of the tinplates were inside the hall, all the
hatches were opened.
Q: In connection with these cargoes which were unloaded, where is the place.
A:

At the Pier.

Q: What was used to protect the same from weather?

ATTY LOPEZ:
We object, your Honor, this question was already asked. This particular matter . . .
the transcript of stenographic notes shows the same was covered in the direct
examination.
ATTY ZAMORA:
Precisely, your Honor, we would like to go on detail, this is the serious part of the
testimony.
COURT:
All right, witness may answer.
ATTY LOPEZ:
Q: What was used in order to protect the cargo from the weather?

A:
A base of canvas was used as cover on top of the tin plates, and tents were
built at the opening of the hatches.
Q: You also stated that the hatches were already opened and that there were tents
constructed at the opening of the hatches to protect the cargo from the rain. Now,
will you describe [to] the Court the tents constructed.
A:
The tents are just a base of canvas which look like a tent of an Indian camp
raise[d] high at the middle with the whole side separated down to the hatch, the
size of the hatch and it is soaks [sic] at the middle because of those weather and
this can be used only to temporarily protect the cargo from getting wet by rains.
Q: Now, is this procedure adopted by the stevedores of covering tents proper?
A:
No, sir, at the time they were discharging the cargo, there was a typhoon
passing by and the hatch tent was not good enough to hold all of it to prevent the
water soaking through the canvas and enter the cargo.
Q: In the course of your inspection, Mr. Anglingto [sic], did you see in fact the
water enter and soak into the canvas and tinplates.
A:

Yes, sir, the second time I went there, I saw it.

Q: As owner of the vessel, did you not advise the National Steel Corporation [of]
the procedure adopted by its stevedores in discharging the cargo particularly in this
tent covering of the hatches?
A: Yes, sir, I did the first time I saw it, I called the attention of the stevedores but
the stevedores did not mind at all, so, I called the attention of the representative of
the National Steel but nothing was done, just the same. Finally, I wrote a letter to
them. [31]
NSC attempts to discredit the testimony of Angliongto by questioning his failure to
complain immediately about the stevedores negligence on the first day of
unloading, pointing out that he wrote his letter to petitioner only seven days later.
[32] The Court is not persuaded. Angliongtos candid answer in his aforequoted
testimony satisfactorily explained the delay. Seven days lapsed because he first
called the attention of the stevedores, then the NSCs representative, about the
negligent and defective procedure adopted in unloading the cargo. This series of
actions constitutes a reasonable response in accord with common sense and
ordinary human experience. Vicente Angliongto could not be blamed for calling the
stevedores attention first and then the NSCs representative on location before
formally informing NSC of the negligence he had observed, because he was not
responsible for the stevedores or the unloading operations. In fact, he was merely
expressing concern for NSC which was ultimately responsible for the stevedores it
had hired and the performance of their task to unload the cargo.
We see no reason to reverse the trial and the appellate courts findings and
conclusions on this point, viz:
In the THIRD assigned error, [NSC] claims that the trial court erred in finding that
the stevedores hired by NSC were negligent in the unloading of NSCs shipment.

We do not think so. Such negligence according to the trial court is evident in the
stevedores hired by [NSC], not closing the hatch of MV VLASONS I when rains
occurred during the discharging of the cargo thus allowing rain water and seawater
spray to enter the hatches and to drift to and fall on the cargo. It was proven that
the stevedores merely set up temporary tents or canvas to cover the hatch
openings when it rained during the unloading operations so that it would be easier
for them to resume work after the rains stopped by just removing said tents or
canvass. It has also been shown that on August 20, 1974, VSI President Vicente
Angliongto wrote [NSC] calling attention to the manner the stevedores hired by
[NSC] were discharging the cargo on rainy days and the improper closing of the
hatches which allowed continuous heavy rain water to leak through and drip to the
tinplates covers and [Vicente Angliongto] also suggesting that due to four (4) days
continuos rains with strong winds that the hatches be totally closed down and
covered with canvas and the hatch tents lowered. (Exh 13). This letter was
received by [NSC] on 22 August 1974 while discharging operations were still going
on (Exhibit 13-A). [33]
The fact that NSC actually accepted and proceeded to remove the cargo from the
ship during unfavorable weather will not make VSI liable for any damage caused
thereby. In passing, it may be noted that the NSC may seek indemnification, subject
to the laws on prescription, from the stevedoring company at fault in the discharge
operations. A stevedore company engaged in discharging cargo xxx has the duty
to load the cargo xxx in a prudent manner, and it is liable for injury to, or loss of,
cargo caused by its negligence xxx and where the officers and members and crew
of the vessel do nothing and have no responsibility in the discharge of cargo by
stevedores xxx the vessel is not liable for loss of, or damage to, the cargo caused
by the negligence of the stevedores xxx [34] as in the instant case.
Do Tinplates Sweat?
The trial court relied on the testimony of Vicente Angliongto in finding that xxx
tinplates sweat by themselves when packed even without being in contact with
water from outside especially when the weather is bad or raining xxx. [35] The
Court of Appeals affirmed the trial courts finding.
A discussion of this issue appears inconsequential and unnecessary. As previously
discussed, the damage to the tinplates was occasioned not by airborne moisture but
by contact with rain and seawater which the stevedores negligently allowed to seep
in during the unloading.
Second Issue: Effect of NSCs Failure to Insure the Cargo
The obligation of NSC to insure the cargo stipulated in the Contract of Voyage
Charter Hire is totally separate and distinct from the contractual or statutory
responsibility that may be incurred by VSI for damage to the cargo caused by the
willful negligence of the officers and the crew of MV Vlasons I. Clearly, therefore,
NSCs failure to insure the cargo will not affect its right, as owner and real party in
interest, to file an action against VSI for damages caused by the latters willful
negligence. We do not find anything in the charter party that would make the
liability of VSI for damage to the cargo contingent on or affected in any manner by
NSCs obtaining an insurance over the cargo.
Third Issue: Admissibility of Certificates Proving Seaworthiness

NSCs contention that MV Vlasons I was not seaworthy is anchored on the alleged
inadmissibility of the certificates of seaworthiness offered in evidence by VSI. The
said certificates include the following:
1. Certificate of Inspection of the Philippine Coast Guard at Cebu
2. Certificate of Inspection from the Philippine Coast Guard
3. International Load Line Certificate from the Philippine Coast Guard
4. Coastwise License from the Board of Transportation
5. Certificate of Approval for Conversion issued by the Bureau of Customs. [36]
NSC argues that the certificates are hearsay for not having been presented in
accordance with the Rules of Court. It points out that Exhibits 3, 4 and 11 allegedly
are not written records or acts of public officers; while Exhibits 5, 6, 7, 8, 9, 11
and 12 are not evidenced by official publications or certified true copies as
required by Sections 25 and 26, Rule 132, of the Rules of Court. [37]
After a careful examination of these exhibits, the Court rules that Exhibits 3, 4, 5, 6,
7, 8, 9 and 12 are inadmissible, for they have not been properly offered as
evidence. Exhibits 3 and 4 are certificates issued by private parties, but they have
not been proven by one who saw the writing executed, or by evidence of the
genuineness of the handwriting of the maker, or by a subscribing witness. Exhibits
5, 6, 7, 8, 9, and 12 are photocopies, but their admission under the best evidence
rule have not been demonstrated.
We find, however, that Exhibit 11 is admissible under a well-settled exception to the
hearsay rule per Section 44 of Rule 130 of the Rules of Court, which provides that
(e)ntries in official records made in the performance of a duty by a public officer of
the Philippines, or by a person in the performance of a duty specially enjoined by
law, are prima facie evidence of the facts therein stated. [38] Exhibit 11 is an
original certificate of the Philippine Coast Guard in Cebu issued by Lieutenant Junior
Grade Noli C. Flores to the effect that the vessel VLASONS I was drydocked x x x
and PCG Inspectors were sent on board for inspection x x x. After completion of
drydocking and duly inspected by PCG Inspectors, the vessel VLASONS I, a cargo
vessel, is in seaworthy condition, meets all requirements, fitted and equipped for
trading as a cargo vessel was cleared by the Philippine Coast Guard and sailed for
Cebu Port on July 10, 1974. (sic) NSCs claim, therefore, is obviously misleading
and erroneous.
At any rate, it should be stressed that that NSC has the burden of proving that MV
Vlasons I was not seaworthy. As observed earlier, the vessel was a private carrier
and, as such, it did not have the obligation of a common carrier to show that it was
seaworthy. Indeed, NSC glaringly failed to discharge its duty of proving the willful
negligence of VSI in making the ship seaworthy resulting in damage to its cargo.
Assailing the genuineness of the certificate of seaworthiness is not sufficient proof
that the vessel was not seaworthy.
Fourth Issue: Demurrage and Attorneys Fees

The contract of voyage charter hire provides inter alia:

xxx
xxx

xxx

2. Cargo: Full cargo of steel products of not less than 2,500 MT, 10% more or less
at Masters option.
xxx
xxx

xxx

6. Loading/Discharging Rate : 750 tons per WWDSHINC.

7. Demurrage/Dispatch : P8,000.00/P4,000.00 per day. [39]
The Court defined demurrage in its strict sense as the compensation provided for in
the contract of affreightment for the detention of the vessel beyond the laytime or
that period of time agreed on for loading and unloading of cargo. [40] It is given to
compensate the shipowner for the nonuse of the vessel. On the other hand, the
following is well-settled:
Laytime runs according to the particular clause of the charter party. x x x If
laytime is expressed in running days, this means days when the ship would be run
continuously, and holidays are not excepted. A qualification of weather permitting
excepts only those days when bad weather reasonably prevents the work
contemplated. [41]
In this case, the contract of voyage charter hire provided for a four-day laytime; it
also qualified laytime as WWDSHINC or weather working days Sundays and holidays
included. [42] The running of laytime was thus made subject to the weather, and
would cease to run in the event unfavorable weather interfered with the unloading
of cargo. [43] Consequently, NSC may not be held liable for demurrage as the fourday laytime allowed it did not lapse, having been tolled by unfavorable weather
condition in view of the WWDSHINC qualification agreed upon by the parties.
Clearly, it was error for the trial court and the Court of Appeals to have found and
affirmed respectively that NSC incurred eleven days of delay in unloading the cargo.
The trial court arrived at this erroneous finding by subtracting from the twelve days,
specifically August 13, 1974 to August 24, 1974, the only day of unloading
unhampered by unfavorable weather or rain which was August 22, 1974. Based on
our previous discussion, such finding is a reversible error. As mentioned, the
respondent appellate court also erred in ruling that NSC was liable to VSI for
demurrage, even if it reduced the amount by half.
Attorneys Fees
VSI assigns as error of law the Court of Appeals deletion of the award of attorneys
fees. We disagree. While VSI was compelled to litigate to protect its rights, such
fact by itself will not justify an award of attorneys fees under Article 2208 of the
Civil Code when x x x no sufficient showing of bad faith would be reflected in a
partys persistence in a case other than an erroneous conviction of the
righteousness of his cause x x x. [44] Moreover, attorneys fees may not be
awarded to a party for the reason alone that the judgment rendered was favorable

to the latter, as this is tantamount to imposing a premium on ones right to litigate

or seek judicial redress of legitimate grievances. [45]
Epilogue
At bottom, this appeal really hinges on a factual issue: when, how and who caused
the damage to the cargo? Ranged against NSC are two formidable truths. First,
both lower courts found that such damage was brought about during the unloading
process when rain and seawater seeped through the cargo due to the fault or
negligence of the stevedores employed by it. Basic is the rule that factual findings
of the trial court, when affirmed by the Court of Appeals, are binding on the
Supreme Court. Although there are settled exceptions, NSC has not satisfactorily
shown that this case is one of them. Second, the agreement between the parties -the Contract of Voyage Charter Hire -- placed the burden of proof for such loss or
damage upon the shipper, not upon the shipowner.
Such stipulation, while
disadvantageous to NSC, is valid because the parties entered into a contract of
private charter, not one of common carriage. Basic too is the doctrine that courts
cannot relieve a party from the effects of a private contract freely entered into, on
the ground that it is allegedly one-sided or unfair to the plaintiff. The charter party
is a normal commercial contract and its stipulations are agreed upon in
consideration of many factors, not the least of which is the transport price which is
determined not only by the actual costs but also by the risks and burdens assumed
by the shipper in regard to possible loss or damage to the cargo. In recognition of
such factors, the parties even stipulated that the shipper should insure the cargo to
protect itself from the risks it undertook under the charter party. That NSC failed or
neglected to protect itself with such insurance should not adversely affect VSI,
which had nothing to do with such failure or neglect.
WHEREFORE, premises considered, the instant consolidated petitions are hereby
DENIED. The questioned Decision of the Court of Appeals is AFFIRMED with the
MODIFICATION that the demurrage awarded to VSI is deleted. No pronouncement
as to costs.
SO ORDERED.
Narvasa, C.J., (Chairman), Romero, Melo, and Francisco, JJ., concur.
THIRD DIVISION

LOADSTAR SHIPPING CO., INC.,

Petitioner,

- versus -

G.R. No. 157481

Present:

Quisumbing, J.,
(Chairman),
Carpio,
Carpio Morales, and
Tinga, JJ.

PIONEER ASIA INSURANCE CORP.,

Respondent.
Promulgated:

January 24, 2006

x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x
DECISION
QUISUMBING, J.:
For review on certiorari are (1) the Decision[1] dated October 15, 2002 and (2) the
Resolution[2] dated February 27, 2003, of the Court of Appeals in CA-G.R. CV No.
40999, which affirmed with modification the Decision[3] dated February 15, 1993 of
the Regional Trial Court of Manila, Branch 8 in Civil Case No. 86-37957.
The pertinent facts are as follows:

Petitioner Loadstar Shipping Co., Inc. (Loadstar for brevity) is the registered owner
and operator of the vessel M/V Weasel. It holds office at 1294 Romualdez St., Paco,
Manila.
On June 6, 1984, Loadstar entered into a voyage-charter with Northern Mindanao
Transport Company, Inc. for the carriage of 65,000 bags of cement from Iligan City
to Manila. The shipper was Iligan Cement Corporation, while the consignee in
Manila was Market Developers, Inc.
On June 24, 1984, 67,500 bags of cement were loaded on board M/V Weasel and
stowed in the cargo holds for delivery to the consignee. The shipment was covered
by petitioners Bill of Lading[4] dated June 23, 1984.
Prior to the voyage, the consignee insured the shipment of cement with respondent
Pioneer Asia Insurance Corporation for P1,400,000, for which respondent issued
Marine Open Policy No. MOP-006 dated September 17, 1980, covering all shipments
made on or after September 30, 1980.[5]
At 12:50 in the afternoon of June 24, 1984, M/V Weasel left Iligan City for Manila in
good weather. However, at 4:31 in the morning of June 25, 1984, Captain Vicente C.
Montera, master of M/V Weasel, ordered the vessel to be forced aground.
Consequently, the entire shipment of cement was good as gone due to exposure to
sea water. Petitioner thus failed to deliver the goods to the consignee in Manila.
The consignee demanded from petitioner full reimbursement of the cost of the lost
shipment.
Petitioner, however, refused to reimburse the consignee despite
repeated demands.
Nonetheless, on March 11, 1985, respondent insurance company paid the consignee
P1,400,000 plus an additional amount of P500,000, the value of the lost shipment of
cement. In return, the consignee executed a Loss and Subrogation Receipt in favor
of respondent concerning the latters subrogation rights against petitioner.
Hence, on October 15, 1986, respondent filed a complaint docketed as Civil Case
No. 86-37957, against petitioner with the Regional Trial Court of Manila, Branch 8. It
alleged that: (1) the M/V Weasel was not seaworthy at the commencement of the
voyage; (2) the weather and sea conditions then prevailing were usual and
expected for that time of the year and as such, was an ordinary peril of the voyage
for which the M/V Weasel should have been normally able to cope with; and (3)
petitioner was negligent in the selection and supervision of its agents and
employees then manning the M/V Weasel.
In its Answer, petitioner alleged that no fault nor negligence could be attributed to it
because it exercised due diligence to make the ship seaworthy, as well as properly
manned and equipped. Petitioner insisted that the failure to deliver the subject
cargo to the consignee was due to force majeure. Petitioner claimed it could not be
held liable for an act or omission not directly attributable to it.
On February 15, 1993, the RTC rendered a Decision in favor of respondent, to wit:
WHEREFORE, in view of the foregoing, judgment is hereby rendered in favor of
plaintiff and against defendant Loadstar Shipping Co., Inc. ordering the latter to pay
as follows:

1.
To pay plaintiff the sum of P1,900,000.00 with legal rate of interest per annum
from date of complaint until fully paid;
2.
To pay the sum equal to 25% of the claim as and for attorneys fees and
litigation expenses; and,
3.

To pay the costs of suit.

IT IS SO ORDERED.[6]

The RTC reasoned that petitioner, as a common carrier, bears the burden of proving
that it exercised extraordinary diligence in its vigilance over the goods it
transported. The trial court explained that in case of loss or destruction of the
goods, a statutory presumption arises that the common carrier was negligent unless
it could prove that it had observed extraordinary diligence.
Petitioners defense of force majeure was found bereft of factual basis. The RTC
called attention to the PAG-ASA report that at the time of the incident, tropical
storm Asiang had moved away from the Philippines. Further, records showed that
the sea and weather conditions in the area of Hinubaan, Negros Occidental from
8:00 p.m. of June 24, 1984 to 8:00 a.m. the next day were slight and smooth. Thus,
the trial court concluded that the cause of the loss was not tropical storm Asiang
or any other force majeure, but gross negligence of petitioner.
Petitioner appealed to the Court of Appeals.
In its Decision dated October 15, 2002, the Court of Appeals affirmed the RTC
Decision with modification that Loadstar shall only pay the sum of 10% of the total
claim for attorneys fees and litigation expenses. It ruled,
WHEREFORE, premises considered, the Decision dated February 15, 1993, of the
Regional Trial Court of Manila, National Capital Judicial Region, Branch 8, in Civil
Case No. 86-37957 is hereby AFFIRMED with the MODIFICATION that the appellant
shall only pay the sum of 10% of the total claim as and for attorneys fees and
litigation expenses. Costs against the appellant.
SO ORDERED.[7]
Petitioners Motion for Reconsideration was denied.[8]
The instant petition is anchored now on the following assignments of error:
I
THE HONORABLE COURT OF APPEALS ERRED IN HOLDING THAT PETITIONER IS A
COMMON CARRIER UNDER ARTICLE 1732 OF THE CIVIL CODE.
II
ASSUMING ARGUENDO THAT PETITIONER IS A COMMON CARRIER, THE HONORABLE
COURT OF APPEALS ERRED IN HOLDING THAT THE PROXIMATE CAUSE OF THE LOSS

OF CARGO WAS NOT A FORTUITOUS EVENT BUT WAS ALLEGEDLY DUE TO THE
FAILURE OF PETITIONER TO EXERCISE EXTRAORDINARY DILIGENCE.
III
THE HONORABLE COURT OF APPEALS ERRED IN AFFIRMING THE AWARD BY THE
TRIAL COURT OF ATTORNEYS FEES AND LITIGATION EXPENSES IN FAVOR OF HEREIN
RESPONDENT.[9]
On the first and second issues, petitioner contends that at the time of the voyage
the carriers voyage-charter with the shipper converted it into a private carrier.
Thus, the presumption of negligence against common carriers could not apply.
Petitioner further avers that the stipulation in the voyage-charter holding it free
from liability is valid and binds the respondent. In any event, petitioner insists that
it had exercised extraordinary diligence and that the proximate cause of the loss of
the cargo was a fortuitous event.
With regard to the third issue, petitioner points out that the award of attorneys fees
and litigation expenses appeared only in the dispositive portion of the RTC Decision
with nary a justification. Petitioner maintains that the Court of Appeals thus erred in
affirming the award.
For its part, respondent dismisses as factual issues the inquiry on (1) whether the
loss of the cargo was due to force majeure or due to petitioners failure to exercise
extraordinary diligence; and (2) whether respondent is entitled to recover attorneys
fees and expenses of litigation.
Respondent further counters that the Court of Appeals was correct when it held that
petitioner was a common carrier despite the charter of the whole vessel, since the
charter was limited to the ship only.
Prefatorily, we stress that the finding of fact by the trial court, when affirmed by the
Court of Appeals, is not reviewable by this Court in a petition for review on
certiorari. However, the conclusions derived from such factual finding are not
necessarily pure issues of fact when they are inextricably intertwined with the
determination of a legal issue. In such instances, the conclusions made may be
raised in a petition for review before this Court.[10]
The threshold issues in this case are: (1) Given the circumstances of this case, is
petitioner a common or a private carrier? and (2) In either case, did petitioner
exercise the required diligence i.e., the extraordinary diligence of a common carrier
or the ordinary diligence of a private carrier?
Article 1732 of the Civil Code defines a common carrier as follows:
Article 1732. Common carriers are persons, corporations, firms or
associations engaged in the business of carrying or transporting passengers or
goods or both, by land, water, or air, for compensation, offering their services to the
public.
Petitioner is a corporation engaged in the business of transporting cargo by
water and for compensation, offering its services indiscriminately to the public.
Thus, without doubt, it is a common carrier. However, petitioner entered into a

voyage-charter with the Northern Mindanao Transport Company, Inc. Now, had the
voyage-charter converted petitioner into a private carrier?
We think not. The voyage-charter agreement between petitioner and
Northern Mindanao Transport Company, Inc. did not in any way convert the common
carrier into a private carrier. We have already resolved this issue with finality in
Planters Products, Inc. v. Court of Appeals[11] where we ruled that:
It is therefore imperative that a public carrier shall remain as such, notwithstanding
the charter of the whole or portion of a vessel by one or more persons, provided the
charter is limited to the ship only, as in the case of a time-charter or voyage-charter.
It is only when the charter includes both the vessel and its crew, as in a bareboat or
demise that a common carrier becomes private, at least insofar as the particular
voyage covering the charter-party is concerned. Indubitably, a shipowner in a time
or voyage charter retains possession and control of the ship, although her holds
may, for the moment, be the property of the charterer.[12]
Conformably, petitioner remains a common carrier notwithstanding the existence of
the charter agreement with the Northern Mindanao Transport Company, Inc. since
the said charter is limited to the ship only and does not involve both the vessel and
its crew. As elucidated in Planters Products, its charter is only a voyage-charter, not
a bareboat charter.
As a common carrier, petitioner is required to observe extraordinary diligence in the
vigilance over the goods it transports.[13] When the goods placed in its care are
lost, petitioner is presumed to have been at fault or to have acted negligently.
Petitioner therefore has the burden of proving that it observed extraordinary
diligence in order to avoid responsibility for the lost cargo.[14]
In Compania Maritima v. Court of Appeals,[15] we said:
it is incumbent upon the common carrier to prove that the loss, deterioration or
destruction was due to accident or some other circumstances inconsistent with its
liability.
. . .
The extraordinary diligence in the vigilance over the goods tendered for shipment
requires the common carrier to know and to follow the required precaution for
avoiding damage to, or destruction of the goods entrusted to it for safe carriage and
delivery. It requires common carriers to render service with the greatest skill and
foresight and to use all reasonable means to ascertain the nature and
characteristics of goods tendered for shipment, and to exercise due care in the
handling and stowage, including such methods as their nature requires.[16]
Article 1734 enumerates the instances when a carrier might be exempt from liability
for the loss of the goods. These are:
(1) Flood, storm, earthquake, lightning, or other natural disaster or calamity;
(2) Act of the public enemy in war, whether international or civil;
(3) Act or omission of the shipper or owner of the goods;

(4) The character of the goods or defects in the packing or in the containers; and
(5) Order or act of competent public authority.[17]
Petitioner claims that the loss of the goods was due to a fortuitous event under
paragraph 1. Yet, its claim is not substantiated. On the contrary, we find supported
by evidence on record the conclusion of the trial court and the Court of Appeals that
the loss of the entire shipment of cement was due to the gross negligence of
petitioner.
Records show that in the evening of June 24, 1984, the sea and weather conditions
in the vicinity of Negros Occidental were calm. The records reveal that petitioner
took a shortcut route, instead of the usual route, which exposed the voyage to
unexpected hazard. Petitioner has only itself to blame for its misjudgment.
Petitioner heavily relies on Home Insurance Co. v. American Steamship Agencies,
Inc.[18] and Valenzuela Hardwood and Industrial Supply, Inc. v. Court of Appeals.
[19] The said cases involved a private carrier, not a common carrier. Moreover, the
issue in both cases is not the effect of a voyage-charter on a common carrier, but
the validity of a stipulation absolving the private carrier from liability in case of loss
of the cargo attributable to the negligence of the private carrier.
Lastly, on the third issue, we find consistent with law and prevailing jurisprudence
the Court of Appeals award of attorneys fees and expenses of litigation equivalent
to ten percent (10%) of the total claim. The contract between the parties in this
case contained a stipulation that in case of suit, attorneys fees and expenses of
litigation shall be limited to only ten percent (10%) of the total monetary award.
Given the circumstances of this case, we deem the said amount just and equitable.
WHEREFORE, the petition is DENIED. The assailed Decision dated October 15, 2002
and the Resolution dated February 27, 2003, of the Court of Appeals in CA-G.R. CV
No. 40999, are AFFIRMED.
Costs against petitioner.
SO ORDERED.

FIRST DIVISION
[G.R. No. 149038. April 9, 2003]
PHILIPPINE AMERICAN GENERAL INSURANCE COMPANY, petitioner, vs. PKS SHIPPING
COMPANY, respondent.
DECISION
VITUG, J.:

The petition before the Court seeks a review of the decision of the Court of Appeals
in C.A. G.R. CV No. 56470, promulgated on 25 June 2001, which has affirmed in toto
the judgment of the Regional Trial Court (RTC), Branch 65, of Makati, dismissing the
complaint for damages filed by petitioner insurance corporation against respondent
shipping company.
Davao Union Marketing Corporation (DUMC) contracted the services of respondent
PKS Shipping Company (PKS Shipping) for the shipment to Tacloban City of seventyfive thousand (75,000) bags of cement worth Three Million Three Hundred SeventyFive Thousand Pesos (P3,375,000.00). DUMC insured the goods for its full value
with petitioner Philippine American General Insurance Company (Philamgen). The
goods were loaded aboard the dumb barge Limar I belonging to PKS Shipping. On
the evening of 22 December 1988, about nine oclock, while Limar I was being
towed by respondents tugboat, MT Iron Eagle, the barge sank a couple of miles off
the coast of Dumagasa Point, in Zamboanga del Sur, bringing down with it the
entire cargo of 75,000 bags of cement.
DUMC filed a formal claim with Philamgen for the full amount of the insurance.
Philamgen promptly made payment; it then sought reimbursement from PKS
Shipping of the sum paid to DUMC but the shipping company refused to pay,
prompting Philamgen to file suit against PKS Shipping with the Makati RTC.
The RTC dismissed the complaint after finding that the total loss of the cargo could
have been caused either by a fortuitous event, in which case the ship owner was
not liable, or through the negligence of the captain and crew of the vessel and that,
under Article 587 of the Code of Commerce adopting the Limited Liability Rule,
the ship owner could free itself of liability by abandoning, as it apparently so did,
the vessel with all her equipment and earned freightage.
Philamgen interposed an appeal to the Court of Appeals which affirmed in toto the
decision of the trial court. The appellate court ruled that evidence to establish that
PKS Shipping was a common carrier at the time it undertook to transport the bags
of cement was wanting because the peculiar method of the shipping companys
carrying goods for others was not generally held out as a business but as a casual
occupation. It then concluded that PKS Shipping, not being a common carrier, was
not expected to observe the stringent extraordinary diligence required of common
carriers in the care of goods. The appellate court, moreover, found that the loss of
the goods was sufficiently established as having been due to fortuitous event,
negating any liability on the part of PKS Shipping to the shipper.
In the instant appeal, Philamgen contends that the appellate court has committed a
patent error in ruling that PKS Shipping is not a common carrier and that it is not
liable for the loss of the subject cargo. The fact that respondent has a limited
clientele, petitioner argues, does not militate against respondents being a common
carrier and that the only way by which such carrier can be held exempt for the loss
of the cargo would be if the loss were caused by natural disaster or calamity.
Petitioner avers that typhoon "APIANG" has not entered the Philippine area of
responsibility and that, even if it did, respondent would not be exempt from liability
because its employees, particularly the tugmaster, have failed to exercise due
diligence to prevent or minimize the loss.
PKS Shipping, in its comment, urges that the petition should be denied because
what Philamgen seeks is not a review on points or errors of law but a review of the

undisputed factual findings of the RTC and the appellate court. In any event, PKS
Shipping points out, the findings and conclusions of both courts find support from
the evidence and applicable jurisprudence.
The determination of possible liability on the part of PKS Shipping boils down to the
question of whether it is a private carrier or a common carrier and, in either case, to
the other question of whether or not it has observed the proper diligence (ordinary,
if a private carrier, or extraordinary, if a common carrier) required of it given the
circumstances.
The findings of fact made by the Court of Appeals, particularly when such findings
are consistent with those of the trial court, may not at liberty be reviewed by this
Court in a petition for review under Rule 45 of the Rules of Court.[1] The
conclusions derived from those factual findings, however, are not necessarily just
matters of fact as when they are so linked to, or inextricably intertwined with, a
requisite appreciation of the applicable law. In such instances, the conclusions
made could well be raised as being appropriate issues in a petition for review before
this Court. Thus, an issue whether a carrier is private or common on the basis of
the facts found by a trial court or the appellate court can be a valid and reviewable
question of law.
The Civil Code defines common carriers in the following terms:
Article 1732. Common carriers are persons, corporations, firms or associations
engaged in the business of carrying or transporting passengers or goods or both, by
land, water, or air for compensation, offering their services to the public.
Complementary to the codal definition is Section 13, paragraph (b), of the Public
Service Act; it defines public service to be
x x x every person that now or hereafter may own, operate, manage, or control in
the Philippines, for hire or compensation, with general or limited clientele, whether
permanent, occasional or accidental, and done for general business purposes, any
common carrier, railroad, street railway, subway motor vehicle, either for freight or
passenger, or both, with or without fixed route and whatever may be its
classification, freight or carrier service of any class, express service, steamboat, or
steamship, or steamship line, pontines, ferries and water craft, engaged in the
transportation of passengers or freight or both, shipyard, marine repair shop, wharf
or dock, ice plant, ice refrigeration plant, canal, irrigation system, gas, electric light,
heat and power, water supply and power petroleum, sewerage system, wire or
wireless communication systems, wire or wireless broadcasting stations and other
similar public services. x x x. (Underscoring supplied).
The prevailing doctrine on the question is that enunciated in the leading case of De
Guzman vs. Court of Appeals.[2] Applying Article 1732 of the Code, in conjunction
with Section 13(b) of the Public Service Act, this Court has held:
The above article makes no distinction between one whose principal business
activity is the carrying of persons or goods or both, and one who does such carrying
only as an ancillary activity (in local idiom, as `a sideline). Article 1732 also
carefully avoids making any distinction between a person or enterprise offering
transportation service on a regular or scheduled basis and one offering such service
on an occasional, episodic or unscheduled basis. Neither does Article 1732

distinguish between a carrier offering its services to the `general public, i.e., the
general community or population, and one who offers services or solicits business
only from a narrow segment of the general population. We think that Article 1732
deliberately refrained from making such distinctions.
So understood, the concept of `common carrier under Article 1732 may be seen to
coincide neatly with the notion of `public service, under the Public Service Act
(Commonwealth Act No. 1416, as amended) which at least partially supplements
the law on common carriers set forth in the Civil Code.
Much of the distinction between a common or public carrier and a private or
special carrier lies in the character of the business, such that if the undertaking is
an isolated transaction, not a part of the business or occupation, and the carrier
does not hold itself out to carry the goods for the general public or to a limited
clientele, although involving the carriage of goods for a fee,[3] the person or
corporation providing such service could very well be just a private carrier. A typical
case is that of a charter party which includes both the vessel and its crew, such as
in a bareboat or demise, where the charterer obtains the use and service of all or
some part of a ship for a period of time or a voyage or voyages[4] and gets the
control of the vessel and its crew.[5] Contrary to the conclusion made by the
appellate court, its factual findings indicate that PKS Shipping has engaged itself in
the business of carrying goods for others, although for a limited clientele,
undertaking to carry such goods for a fee. The regularity of its activities in this area
indicates more than just a casual activity on its part.[6] Neither can the concept of a
common carrier change merely because individual contracts are executed or
entered into with patrons of the carrier. Such restrictive interpretation would make
it easy for a common carrier to escape liability by the simple expedient of entering
into those distinct agreements with clients.
Addressing now the issue of whether or not PKS Shipping has exercised the proper
diligence demanded of common carriers, Article 1733 of the Civil Code requires
common carriers to observe extraordinary diligence in the vigilance over the goods
they carry. In case of loss, destruction or deterioration of goods, common carriers
are presumed to have been at fault or to have acted negligently, and the burden of
proving otherwise rests on them.[7]
The provisions of Article 1733,
notwithstanding, common carriers are exempt from liability for loss, destruction, or
deterioration of the goods due to any of the following causes:
(1) Flood, storm, earthquake, lightning, or other natural disaster or calamity;
(2) Act of the public enemy in war, whether international or civil;
(3) Act or omission of the shipper or owner of the goods;
(4) The character of the goods or defects in the packing or in the containers; and
(5) Order or act of competent public authority.[8]
The appellate court ruled, gathered from the testimonies and sworn marine protests
of the respective vessel masters of Limar I and MT Iron Eagle, that there was no way
by which the barges or the tugboats crew could have prevented the sinking of
Limar I. The vessel was suddenly tossed by waves of extraordinary height of six (6)
to eight (8) feet and buffeted by strong winds of 1.5 knots resulting in the entry of

water into the barges hatches. The official Certificate of Inspection of the barge
issued by the Philippine Coastguard and the Coastwise Load Line Certificate would
attest to the seaworthiness of Limar I and should strengthen the factual findings of
the appellate court.
Findings of fact of the Court of Appeals generally conclude this Court; none of the
recognized exceptions from the rule - (1) when the factual findings of the Court of
Appeals and the trial court are contradictory; (2) when the conclusion is a finding
grounded entirely on speculation, surmises, or conjectures; (3) when the inference
made by the Court of Appeals from its findings of fact is manifestly mistaken,
absurd, or impossible; (4) when there is a grave abuse of discretion in the
appreciation of facts; (5) when the appellate court, in making its findings, went
beyond the issues of the case and such findings are contrary to the admissions of
both appellant and appellee; (6) when the judgment of the Court of Appeals is
premised on a misapprehension of facts; (7) when the Court of Appeals failed to
notice certain relevant facts which, if properly considered, would justify a different
conclusion; (8) when the findings of fact are themselves conflicting; (9) when the
findings of fact are conclusions without citation of the specific evidence on which
they are based; and (10) when the findings of fact of the Court of Appeals are
premised on the absence of evidence but such findings are contradicted by the
evidence on record would appear to be clearly extant in this instance.
All given then, the appellate court did not err in its judgment absolving PKS Shipping
from liability for the loss of the DUMC cargo.
WHEREFORE, the petition is denied. No costs.
SO ORDERED.
Davide, Jr., C.J., (Chairman), Ynares-Santiago, Carpio, and Azcuna, JJ., concur.

THIRD DIVISION
[G.R. No. 147246. August 19, 2003]
ASIA LIGHTERAGE AND SHIPPING, INC., petitioner, vs. COURT OF APPEALS and
PRUDENTIAL GUARANTEE AND ASSURANCE, INC., respondents.
DECISION
PUNO, J.:
On appeal is the Court of Appeals May 11, 2000 Decision[1] in CA-G.R. CV No.
49195 and February 21, 2001 Resolution[2] affirming with modification the April 6,
1994 Decision[3] of the Regional Trial Court of Manila which found petitioner liable
to pay private respondent the amount of indemnity and attorney's fees.
First, the facts.
On June 13, 1990, 3,150 metric tons of Better Western White Wheat in bulk, valued
at US$423,192.35[4] was shipped by Marubeni American Corporation of Portland,

Oregon on board the vessel M/V NEO CYMBIDIUM V-26 for delivery to the consignee,
General Milling Corporation in Manila, evidenced by Bill of Lading No. PTD/Man-4.[5]
The shipment was insured by the private respondent Prudential Guarantee and
Assurance, Inc. against loss or damage for P14,621,771.75 under Marine Cargo Risk
Note RN 11859/90.[6]
On July 25, 1990, the carrying vessel arrived in Manila and the cargo was
transferred to the custody of the petitioner Asia Lighterage and Shipping, Inc. The
petitioner was contracted by the consignee as carrier to deliver the cargo to
consignee's warehouse at Bo. Ugong, Pasig City.
On August 15, 1990, 900 metric tons of the shipment was loaded on barge PSTSI III,
evidenced by Lighterage Receipt No. 0364[7] for delivery to consignee. The cargo
did not reach its destination.
It appears that on August 17, 1990, the transport of said cargo was suspended due
to a warning of an incoming typhoon. On August 22, 1990, the petitioner proceeded
to pull the barge to Engineering Island off Baseco to seek shelter from the
approaching typhoon. PSTSI III was tied down to other barges which arrived ahead
of it while weathering out the storm that night. A few days after, the barge
developed a list because of a hole it sustained after hitting an unseen protuberance
underneath the water. The petitioner filed a Marine Protest on August 28, 1990.[8]
It likewise secured the services of Gaspar Salvaging Corporation which refloated the
barge.[9] The hole was then patched with clay and cement.
The barge was then towed to ISLOFF terminal before it finally headed towards the
consignee's wharf on September 5, 1990. Upon reaching the Sta. Mesa spillways,
the barge again ran aground due to strong current. To avoid the complete sinking of
the barge, a portion of the goods was transferred to three other barges.[10]
The next day, September 6, 1990, the towing bits of the barge broke. It sank
completely, resulting in the total loss of the remaining cargo.[11] A second Marine
Protest was filed on September 7, 1990.[12]
On September 14, 1990, a bidding was conducted to dispose of the damaged wheat
retrieved and loaded on the three other barges.[13] The total proceeds from the
sale of the salvaged cargo was P201,379.75.[14]
On the same date, September 14, 1990, consignee sent a claim letter to the
petitioner, and another letter dated September 18, 1990 to the private respondent
for the value of the lost cargo.
On January 30, 1991, the private respondent indemnified the consignee in the
amount of P4,104,654.22.[15] Thereafter, as subrogee, it sought recovery of said
amount from the petitioner, but to no avail.
On July 3, 1991, the private respondent filed a complaint against the petitioner for
recovery of the amount of indemnity, attorney's fees and cost of suit.[16] Petitioner
filed its answer with counterclaim.[17]
The Regional Trial Court ruled in favor of the private respondent. The dispositive
portion of its Decision states:

WHEREFORE, premises considered, judgment is hereby rendered ordering

defendant Asia Lighterage & Shipping, Inc. liable to pay plaintiff Prudential
Guarantee & Assurance Co., Inc. the sum of P4,104,654.22 with interest from the
date complaint was filed on July 3, 1991 until fully satisfied plus 10% of the amount
awarded as and for attorney's fees. Defendant's counterclaim is hereby DISMISSED.
With costs against defendant.[18]
Petitioner appealed to the Court of Appeals insisting that it is not a common carrier.
The appellate court affirmed the decision of the trial court with modification. The
dispositive portion of its decision reads:
WHEREFORE, the decision appealed from is hereby AFFIRMED with modification in
the sense that the salvage value of P201,379.75 shall be deducted from the amount
of P4,104,654.22. Costs against appellant.
SO ORDERED.
Petitioners Motion for Reconsideration dated June 3, 2000 was likewise denied by
the appellate court in a Resolution promulgated on February 21, 2001.
Hence, this petition. Petitioner submits the following errors allegedly committed by
the appellate court, viz:[19]
(1) THE COURT OF APPEALS DECIDED THE CASE A QUO IN A WAY NOT IN ACCORD
WITH LAW AND/OR WITH THE APPLICABLE DECISIONS OF THE SUPREME COURT
WHEN IT HELD THAT PETITIONER IS A COMMON CARRIER.
(2) THE COURT OF APPEALS DECIDED THE CASE A QUO IN A WAY NOT IN ACCORD
WITH LAW AND/OR WITH THE APPLICABLE DECISIONS OF THE SUPREME COURT
WHEN IT AFFIRMED THE FINDING OF THE LOWER COURT A QUO THAT ON THE BASIS
OF THE PROVISIONS OF THE CIVIL CODE APPLICABLE TO COMMON CARRIERS, THE
LOSS OF THE CARGO IS, THEREFORE, BORNE BY THE CARRIER IN ALL CASES EXCEPT
IN THE FIVE (5) CASES ENUMERATED.
(3) THE COURT OF APPEALS DECIDED THE CASE A QUO IN A WAY NOT IN ACCORD
WITH LAW AND/OR WITH THE APPLICABLE DECISIONS OF THE SUPREME COURT
WHEN IT EFFECTIVELY CONCLUDED THAT PETITIONER FAILED TO EXERCISE DUE
DILIGENCE AND/OR WAS NEGLIGENT IN ITS CARE AND CUSTODY OF THE
CONSIGNEES CARGO.
The issues to be resolved are:
(1)

Whether the petitioner is a common carrier; and,

(2)
Assuming the petitioner is a common carrier, whether it exercised
extraordinary diligence in its care and custody of the consignees cargo.
On the first issue, we rule that petitioner is a common carrier.
Article 1732 of the Civil Code defines common carriers as persons, corporations,
firms or associations engaged in the business of carrying or transporting passengers
or goods or both, by land, water, or air, for compensation, offering their services to
the public.

Petitioner contends that it is not a common carrier but a private carrier. Allegedly, it
has no fixed and publicly known route, maintains no terminals, and issues no
tickets. It points out that it is not obliged to carry indiscriminately for any person. It
is not bound to carry goods unless it consents. In short, it does not hold out its
services to the general public.[20]
We disagree.
In De Guzman vs. Court of Appeals,[21] we held that the definition of common
carriers in Article 1732 of the Civil Code makes no distinction between one whose
principal business activity is the carrying of persons or goods or both, and one who
does such carrying only as an ancillary activity. We also did not distinguish between
a person or enterprise offering transportation service on a regular or scheduled
basis and one offering such service on an occasional, episodic or unscheduled basis.
Further, we ruled that Article 1732 does not distinguish between a carrier offering
its services to the general public, and one who offers services or solicits business
only from a narrow segment of the general population.
In the case at bar, the principal business of the petitioner is that of lighterage and
drayage[22] and it offers its barges to the public for carrying or transporting goods
by water for compensation. Petitioner is clearly a common carrier. In De Guzman,
supra,[23] we considered private respondent Ernesto Cendaa to be a common
carrier even if his principal occupation was not the carriage of goods for others, but
that of buying used bottles and scrap metal in Pangasinan and selling these items in
Manila.
We therefore hold that petitioner is a common carrier whether its carrying of goods
is done on an irregular rather than scheduled manner, and with an only limited
clientele. A common carrier need not have fixed and publicly known routes.
Neither does it have to maintain terminals or issue tickets.
To be sure, petitioner fits the test of a common carrier as laid down in Bascos vs.
Court of Appeals.[24] The test to determine a common carrier is whether the given
undertaking is a part of the business engaged in by the carrier which he has held
out to the general public as his occupation rather than the quantity or extent of the
business transacted.[25] In the case at bar, the petitioner admitted that it is
engaged in the business of shipping and lighterage,[26] offering its barges to the
public, despite its limited clientele for carrying or transporting goods by water for
compensation.[27]
On the second issue, we uphold the findings of the lower courts that petitioner
failed to exercise extraordinary diligence in its care and custody of the consignees
goods.
Common carriers are bound to observe extraordinary diligence in the vigilance over
the goods transported by them.[28] They are presumed to have been at fault or to
have acted negligently if the goods are lost, destroyed or deteriorated.[29] To
overcome the presumption of negligence in the case of loss, destruction or
deterioration of the goods, the common carrier must prove that it exercised
extraordinary diligence. There are, however, exceptions to this rule. Article 1734 of
the Civil Code enumerates the instances when the presumption of negligence does
not attach:

Art. 1734. Common carriers are responsible for the loss, destruction, or
deterioration of the goods, unless the same is due to any of the following causes
only:
(1)

Flood, storm, earthquake, lightning, or other natural disaster or calamity;

(2)

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

(3)

Act or omission of the shipper or owner of the goods;

(4)

The character of the goods or defects in the packing or in the containers;

(5)

Order or act of competent public authority.

In the case at bar, the barge completely sank after its towing bits broke, resulting in
the total loss of its cargo. Petitioner claims that this was caused by a typhoon,
hence, it should not be held liable for the loss of the cargo. However, petitioner
failed to prove that the typhoon is the proximate and only cause of the loss of the
goods, and that it has exercised due diligence before, during and after the
occurrence of the typhoon to prevent or minimize the loss.[30] The evidence show
that, even before the towing bits of the barge broke, it had already previously
sustained damage when it hit a sunken object while docked at the Engineering
Island. It even suffered a hole. Clearly, this could not be solely attributed to the
typhoon. The partly-submerged vessel was refloated but its hole was patched with
only clay and cement. The patch work was merely a provisional remedy, not
enough for the barge to sail safely. Thus, when petitioner persisted to proceed with
the voyage, it recklessly exposed the cargo to further damage. A portion of the
cross-examination of Alfredo Cunanan, cargo-surveyor of Tan-Gatue Adjustment Co.,
Inc., states:
CROSS-EXAMINATION BY ATTY. DONN LEE:[31]
x x x
xxx

x x x

q - Can you tell us what else transpired after that incident?

a - After the first accident, through the initiative of the barge owners, they tried to
pull out the barge from the place of the accident, and bring it to the anchor terminal
for safety, then after deciding if the vessel is stabilized, they tried to pull it to the
consignees warehouse, now while on route another accident occurred, now this
time the barge totally hitting something in the course.
q - You said there was another accident, can you tell the court the nature of the
second accident?
a - The sinking, sir.
q - Can you tell the nature . . . can you tell the court, if you know what caused the
sinking?

a - Mostly it was related to the first accident because there was already a whole
(sic) on the bottom part of the barge.
x x x
xxx

x x x

This is not all. Petitioner still headed to the consignees wharf despite knowledge of
an incoming typhoon. During the time that the barge was heading towards the
consignee's wharf on September 5, 1990, typhoon Loleng has already entered the
Philippine area of responsibility.[32] A part of the testimony of Robert Boyd, Cargo
Operations Supervisor of the petitioner, reveals:
DIRECT-EXAMINATION BY ATTY. LEE:[33]
x x x
xxx

x x x

q - Now, Mr. Witness, did it not occur to you it might be safer to just allow the
Barge to lie where she was instead of towing it?
a - Since that time that the Barge was refloated, GMC (General Milling Corporation,
the consignee) as I have said was in a hurry for their goods to be delivered at their
Wharf since they needed badly the wheat that was loaded in PSTSI-3. It was
needed badly by the consignee.
q - And this is the reason why you towed the Barge as you did?
a - Yes, sir.
x x x
xxx

x x x

CROSS-EXAMINATION BY ATTY. IGNACIO:[34]

x x x
xxx

x x x

q And then from ISLOFF Terminal you proceeded to the premises of the GMC?
Am I correct?
a The next day, in the morning, we hired for additional two (2) tugboats as I
have stated.
q-

Despite of the threats of an incoming typhoon as you testified a while ago?

aIt is already in an inner portion of Pasig River. The typhoon would be coming
and it would be dangerous if we are in the vicinity of Manila Bay.
q-

But the fact is, the typhoon was incoming? Yes or no?

a-

Yes.

q And yet as a standard operating procedure of your Company, you have to

secure a sort of Certification to determine the weather condition, am I correct?
a-

Yes, sir.

q-

So, more or less, you had the knowledge of the incoming typhoon, right?

a-

Yes, sir.

q-

And yet you proceeded to the premises of the GMC?

aISLOFF Terminal is far from Manila Bay and anytime even with the typhoon if
you are already inside the vicinity or inside Pasig entrance, it is a safe place to tow
upstream.
Accordingly, the petitioner cannot invoke the occurrence of the typhoon as force
majeure to escape liability for the loss sustained by the private respondent. Surely,
meeting a typhoon head-on falls short of due diligence required from a common
carrier. More importantly, the officers/employees themselves of petitioner admitted
that when the towing bits of the vessel broke that caused its sinking and the total
loss of the cargo upon reaching the Pasig River, it was no longer affected by the
typhoon. The typhoon then is not the proximate cause of the loss of the cargo; a
human factor, i.e., negligence had intervened.
IN VIEW THEREOF, the petition is DENIED. The Decision of the Court of Appeals in
CA-G.R. CV No. 49195 dated May 11, 2000 and its Resolution dated February 21,
2001 are hereby AFFIRMED. Costs against petitioner.
SO ORDERED.
Panganiban, and Sandoval-Gutierrez, JJ., concur.
Corona, and Carpio-Morales, JJ., on official leave.
FIRST DIVISION

G.R. No. 101503 September 15, 1993

PLANTERS PRODUCTS, INC., petitioner,
vs.
COURT OF APPEALS, SORIAMONT STEAMSHIP AGENCIES AND KYOSEI KISEN
KABUSHIKI KAISHA, respondents.
Gonzales, Sinense, Jimenez & Associates for petitioner.
Siguion Reyna, Montecillo & Ongsiako Law Office for private respondents.

BELLOSILLO, J.:

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

carrier into a private one as to negate the civil law presumption of negligence in
case of loss or damage to its cargo?
Planters Products, Inc. (PPI), purchased from Mitsubishi International Corporation
(MITSUBISHI) of New York, U.S.A., 9,329.7069 metric tons (M/T) of Urea 46%
fertilizer which the latter shipped in bulk on 16 June 1974 aboard the cargo vessel
M/V "Sun Plum" owned by private respondent Kyosei Kisen Kabushiki Kaisha (KKKK)
from Kenai, Alaska, U.S.A., to Poro Point, San Fernando, La Union, Philippines, as
evidenced by Bill of Lading No. KP-1 signed by the master of the vessel and issued
on the date of departure.
On 17 May 1974, or prior to its voyage, a time charter-party on the vessel M/V "Sun
Plum" pursuant to the Uniform General Charter 2 was entered into between
Mitsubishi as shipper/charterer and KKKK as shipowner, in Tokyo, Japan. 3 Riders to
the aforesaid charter-party starting from par. 16 to 40 were attached to the preprinted agreement. Addenda Nos. 1, 2, 3 and 4 to the charter-party were also
subsequently entered into on the 18th, 20th, 21st and 27th of May 1974,
respectively.
Before loading the fertilizer aboard the vessel, four (4) of her holds 4 were all
presumably inspected by the charterer's representative and found fit to take a load
of urea in bulk pursuant to par. 16 of the charter-party which reads:
16. . . . At loading port, notice of readiness to be accomplished by certificate from
National Cargo Bureau inspector or substitute appointed by charterers for his
account certifying the vessel's readiness to receive cargo spaces. The vessel's hold
to be properly swept, cleaned and dried at the vessel's expense and the vessel to
be presented clean for use in bulk to the satisfaction of the inspector before
daytime commences. (emphasis supplied)
After the Urea fertilizer was loaded in bulk by stevedores hired by and under the
supervision of the shipper, the steel hatches were closed with heavy iron lids,
covered with three (3) layers of tarpaulin, then tied with steel bonds. The hatches
remained closed and tightly sealed throughout the entire voyage. 5
Upon arrival of the vessel at her port of call on 3 July 1974, the steel pontoon
hatches were opened with the use of the vessel's boom. Petitioner unloaded the
cargo from the holds into its steelbodied dump trucks which were parked alongside
the berth, using metal scoops attached to the ship, pursuant to the terms and
conditions of the charter-partly (which provided for an F.I.O.S. clause). 6 The hatches
remained open throughout the duration of the discharge. 7
Each time a dump truck was filled up, its load of Urea was covered with tarpaulin
before it was transported to the consignee's warehouse located some fifty (50)
meters from the wharf. Midway to the warehouse, the trucks were made to pass
through a weighing scale where they were individually weighed for the purpose of
ascertaining the net weight of the cargo. The port area was windy, certain portions
of the route to the warehouse were sandy and the weather was variable, raining
occasionally while the discharge was in progress. 8 The petitioner's warehouse was
made of corrugated galvanized iron (GI) sheets, with an opening at the front where
the dump trucks entered and unloaded the fertilizer on the warehouse floor.

Tarpaulins and GI sheets were placed in-between and alongside the trucks to
contain spillages of the ferilizer. 9
It took eleven (11) days for PPI to unload the cargo, from 5 July to 18 July 1974
(except July 12th, 14th and 18th). 10 A private marine and cargo surveyor, Cargo
Superintendents Company Inc. (CSCI), was hired by PPI to determine the "outturn"
of the cargo shipped, by taking draft readings of the vessel prior to and after
discharge. 11 The survey report submitted by CSCI to the consignee (PPI) dated 19
July 1974 revealed a shortage in the cargo of 106.726 M/T and that a portion of the
Urea fertilizer approximating 18 M/T was contaminated with dirt. The same results
were contained in a Certificate of Shortage/Damaged Cargo dated 18 July 1974
prepared by PPI which showed that the cargo delivered was indeed short of 94.839
M/T and about 23 M/T were rendered unfit for commerce, having been polluted with
sand, rust and
dirt. 12
Consequently, PPI sent a claim letter dated 18 December 1974 to Soriamont
Steamship Agencies (SSA), the resident agent of the carrier, KKKK, for P245,969.31
representing the cost of the alleged shortage in the goods shipped and the
diminution in value of that portion said to have been contaminated with dirt. 13
Respondent SSA explained that they were not able to respond to the consignee's
claim for payment because, according to them, what they received was just a
request for shortlanded certificate and not a formal claim, and that this "request"
was denied by them because they "had nothing to do with the discharge of the
shipment." 14 Hence, on 18 July 1975, PPI filed an action for damages with the
Court of First Instance of Manila. The defendant carrier argued that the strict public
policy governing common carriers does not apply to them because they have
become private carriers by reason of the provisions of the charter-party. The court a
quo however sustained the claim of the plaintiff against the defendant carrier for
the value of the goods lost or damaged when it ruled thus: 15
. . . Prescinding from the provision of the law that a common carrier is presumed
negligent in case of loss or damage of the goods it contracts to transport, all that a
shipper has to do in a suit to recover for loss or damage is to show receipt by the
carrier of the goods and to delivery by it of less than what it received. After that, the
burden of proving that the loss or damage was due to any of the causes which
exempt him from liability is shipted to the carrier, common or private he may be.
Even if the provisions of the charter-party aforequoted are deemed valid, and the
defendants considered private carriers, it was still incumbent upon them to prove
that the shortage or contamination sustained by the cargo is attributable to the
fault or negligence on the part of the shipper or consignee in the loading, stowing,
trimming and discharge of the cargo. This they failed to do. By this omission,
coupled with their failure to destroy the presumption of negligence against them,
the defendants are liable (emphasis supplied).
On appeal, respondent Court of Appeals reversed the lower court and absolved the
carrier from liability for the value of the cargo that was lost or damaged. 16 Relying
on the 1968 case of Home Insurance Co. v. American Steamship Agencies, Inc., 17
the appellate court ruled that the cargo vessel M/V "Sun Plum" owned by private
respondent KKKK was a private carrier and not a common carrier by reason of the
time charterer-party. Accordingly, the Civil Code provisions on common carriers

which set forth a presumption of negligence do not find application in the case at
bar. Thus
. . . In the absence of such presumption, it was incumbent upon the plaintiffappellee to adduce sufficient evidence to prove the negligence of the defendant
carrier as alleged in its complaint. It is an old and well settled rule that if the
plaintiff, upon whom rests the burden of proving his cause of action, fails to show in
a satisfactory manner the facts upon which he bases his claim, the defendant is
under no obligation to prove his exception or defense (Moran, Commentaries on the
Rules of Court, Volume 6, p. 2, citing Belen v. Belen, 13 Phil. 202).
But, the record shows that the plaintiff-appellee dismally failed to prove the basis of
its cause of action, i.e. the alleged negligence of defendant carrier. It appears that
the plaintiff was under the impression that it did not have to establish defendant's
negligence. Be that as it may, contrary to the trial court's finding, the record of the
instant case discloses ample evidence showing that defendant carrier was not
negligent in performing its obligation . . . 18 (emphasis supplied).
Petitioner PPI appeals to us by way of a petition for review assailing the decision of
the Court of Appeals. Petitioner theorizes that the Home Insurance case has no
bearing on the present controversy because the issue raised therein is the validity
of a stipulation in the charter-party delimiting the liability of the shipowner for loss
or damage to goods cause by want of due deligence on its part or that of its
manager to make the vessel seaworthy in all respects, and not whether the
presumption of negligence provided under the Civil Code applies only to common
carriers and not to private carriers. 19 Petitioner further argues that since the
possession and control of the vessel remain with the shipowner, absent any
stipulation to the contrary, such shipowner should made liable for the negligence of
the captain and crew. In fine, PPI faults the appellate court in not applying the
presumption of negligence against respondent carrier, and instead shifting the onus
probandi on the shipper to show want of due deligence on the part of the carrier,
when he was not even at hand to witness what transpired during the entire voyage.
As earlier stated, the primordial issue here is whether a common carrier becomes a
private carrier by reason of a charter-party; in the negative, whether the shipowner
in the instant case was able to prove that he had exercised that degree of diligence
required of him under the law.
It is said that etymology is the basis of reliable judicial decisions in commercial
cases. This being so, we find it fitting to first define important terms which are
relevant to our discussion.
A "charter-party" is defined as a contract by which an entire ship, or some principal
part thereof, is let by the owner to another person for a specified time or use; 20 a
contract of affreightment by which the owner of a ship or other vessel lets the whole
or a part of her to a merchant or other person for the conveyance of goods, on a
particular voyage, in consideration of the payment of freight; 21 Charter parties are
of two types: (a) contract of affreightment which involves the use of shipping space
on vessels leased by the owner in part or as a whole, to carry goods for others; and,
(b) charter by demise or bareboat charter, by the terms of which the whole vessel is
let to the charterer with a transfer to him of its entire command and possession and
consequent control over its navigation, including the master and the crew, who are
his servants. Contract of affreightment may either be time charter, wherein the

vessel is leased to the charterer for a fixed period of time, or voyage charter,
wherein the ship is leased for a single voyage. 22 In both cases, the charter-party
provides for the hire of vessel only, either for a determinate period of time or for a
single or consecutive voyage, the shipowner to supply the ship's stores, pay for the
wages of the master and the crew, and defray the expenses for the maintenance of
the ship.
Upon the other hand, the term "common or public carrier" is defined in Art. 1732 of
the Civil Code. 23 The definition extends to carriers either by land, air or water
which hold themselves out as ready to engage in carrying goods or transporting
passengers or both for compensation as a public employment and not as a casual
occupation. The distinction between a "common or public carrier" and a "private or
special carrier" lies in the character of the business, such that if the undertaking is a
single transaction, not a part of the general business or occupation, although
involving the carriage of goods for a fee, the person or corporation offering such
service is a private carrier. 24
Article 1733 of the New Civil Code mandates that common carriers, by reason of the
nature of their business, should observe extraordinary diligence in the vigilance
over the goods they carry. 25 In the case of private carriers, however, the exercise
of ordinary diligence in the carriage of goods will suffice. Moreover, in the case of
loss, destruction or deterioration of the goods, common carriers are presumed to
have been at fault or to have acted negligently, and the burden of proving
otherwise rests on them. 26 On the contrary, no such presumption applies to private
carriers, for whosoever alleges damage to or deterioration of the goods carried has
the onus of proving that the cause was the negligence of the carrier.
It is not disputed that respondent carrier, in the ordinary course of business,
operates as a common carrier, transporting goods indiscriminately for all persons.
When petitioner chartered the vessel M/V "Sun Plum", the ship captain, its officers
and compliment were under the employ of the shipowner and therefore continued
to be under its direct supervision and control. Hardly then can we charge the
charterer, a stranger to the crew and to the ship, with the duty of caring for his
cargo when the charterer did not have any control of the means in doing so. This is
evident in the present case considering that the steering of the ship, the manning of
the decks, the determination of the course of the voyage and other technical
incidents of maritime navigation were all consigned to the officers and crew who
were screened, chosen and hired by the shipowner. 27
It is therefore imperative that a public carrier shall remain as such, notwithstanding
the charter of the whole or portion of a vessel by one or more persons, provided the
charter is limited to the ship only, as in the case of a time-charter or voyage-charter.
It is only when the charter includes both the vessel and its crew, as in a bareboat or
demise that a common carrier becomes private, at least insofar as the particular
voyage covering the charter-party is concerned. Indubitably, a shipowner in a time
or voyage charter retains possession and control of the ship, although her holds
may, for the moment, be the property of the charterer. 28
Respondent carrier's heavy reliance on the case of Home Insurance Co. v. American
Steamship Agencies, supra, is misplaced for the reason that the meat of the
controversy therein was the validity of a stipulation in the charter-party exempting
the shipowners from liability for loss due to the negligence of its agent, and not the
effects of a special charter on common carriers. At any rate, the rule in the United

States that a ship chartered by a single shipper to carry special cargo is not a
common carrier, 29 does not find application in our jurisdiction, for we have
observed that the growing concern for safety in the transportation of passengers
and /or carriage of goods by sea requires a more exacting interpretation of
admiralty laws, more particularly, the rules governing common carriers.
We quote with approval the observations of Raoul Colinvaux, the learned barristerat-law 30
As a matter of principle, it is difficult to find a valid distinction between cases in
which a ship is used to convey the goods of one and of several persons. Where the
ship herself is let to a charterer, so that he takes over the charge and control of her,
the case is different; the shipowner is not then a carrier. But where her services only
are let, the same grounds for imposing a strict responsibility exist, whether he is
employed by one or many. The master and the crew are in each case his servants,
the freighter in each case is usually without any representative on board the ship;
the same opportunities for fraud or collusion occur; and the same difficulty in
discovering the truth as to what has taken place arises . . .
In an action for recovery of damages against a common carrier on the goods
shipped, the shipper or consignee should first prove the fact of shipment and its
consequent loss or damage while the same was in the possession, actual or
constructive, of the carrier. Thereafter, the burden of proof shifts to respondent to
prove that he has exercised extraordinary diligence required by law or that the loss,
damage or deterioration of the cargo was due to fortuitous event, or some other
circumstances inconsistent with its liability. 31
To our mind, respondent carrier has sufficiently overcome, by clear and convincing
proof, the prima facie presumption of negligence.
The master of the carrying vessel, Captain Lee Tae Bo, in his deposition taken on 19
April 1977 before the Philippine Consul and Legal Attache in the Philippine Embassy
in Tokyo, Japan, testified that before the fertilizer was loaded, the four (4) hatches of
the vessel were cleaned, dried and fumigated. After completing the loading of the
cargo in bulk in the ship's holds, the steel pontoon hatches were closed and sealed
with iron lids, then covered with three (3) layers of serviceable tarpaulins which
were tied with steel bonds. The hatches remained close and tightly sealed while the
ship was in transit as the weight of the steel covers made it impossible for a person
to open without the use of the ship's boom. 32
It was also shown during the trial that the hull of the vessel was in good condition,
foreclosing the possibility of spillage of the cargo into the sea or seepage of water
inside the hull of the vessel. 33 When M/V "Sun Plum" docked at its berthing place,
representatives of the consignee boarded, and in the presence of a representative
of the shipowner, the foreman, the stevedores, and a cargo surveyor representing
CSCI, opened the hatches and inspected the condition of the hull of the vessel. The
stevedores unloaded the cargo under the watchful eyes of the shipmates who were
overseeing the whole operation on rotation basis. 34
Verily, the presumption of negligence on the part of the respondent carrier has been
efficaciously overcome by the showing of extraordinary zeal and assiduity exercised
by the carrier in the care of the cargo. This was confirmed by respondent appellate
court thus

. . . Be that as it may, contrary to the trial court's finding, the record of the instant
case discloses ample evidence showing that defendant carrier was not negligent in
performing its obligations. Particularly, the following testimonies of plaintiffappellee's own witnesses clearly show absence of negligence by the defendant
carrier; that the hull of the vessel at the time of the discharge of the cargo was
sealed and nobody could open the same except in the presence of the owner of the
cargo and the representatives of the vessel (TSN, 20 July 1977, p. 14); that the
cover of the hatches was made of steel and it was overlaid with tarpaulins, three
layers of tarpaulins and therefore their contents were protected from the weather
(TSN, 5 April 1978, p. 24); and, that to open these hatches, the seals would have to
be broken, all the seals were found to be intact (TSN, 20 July 1977, pp. 15-16)
(emphasis supplied).
The period during which private respondent was to observe the degree of diligence
required of it as a public carrier began from the time the cargo was unconditionally
placed in its charge after the vessel's holds were duly inspected and passed scrutiny
by the shipper, up to and until the vessel reached its destination and its hull was
reexamined by the consignee, but prior to unloading. This is clear from the
limitation clause agreed upon by the parties in the Addendum to the standard
"GENCON" time charter-party which provided for an F.I.O.S., meaning, that the
loading, stowing, trimming and discharge of the cargo was to be done by the
charterer, free from all risk and expense to the carrier. 35 Moreover, a shipowner is
liable for damage to the cargo resulting from improper stowage only when the
stowing is done by stevedores employed by him, and therefore under his control
and supervision, not when the same is done by the consignee or stevedores under
the employ of the latter. 36
Article 1734 of the New Civil Code provides that common carriers are not
responsible for the loss, destruction or deterioration of the goods if caused by the
charterer of the goods or defects in the packaging or in the containers. The Code of
Commerce also provides that all losses and deterioration which the goods may
suffer during the transportation by reason of fortuitous event, force majeure, or the
inherent defect of the goods, shall be for the account and risk of the shipper, and
that proof of these accidents is incumbent upon the carrier. 37 The carrier,
nonetheless, shall be liable for the loss and damage resulting from the preceding
causes if it is proved, as against him, that they arose through his negligence or by
reason of his having failed to take the precautions which usage has established
among careful persons. 38
Respondent carrier presented a witness who testified on the characteristics of the
fertilizer shipped and the expected risks of bulk shipping. Mr. Estanislao Chupungco,
a chemical engineer working with Atlas Fertilizer, described Urea as a chemical
compound consisting mostly of ammonia and carbon monoxide compounds which
are used as fertilizer. Urea also contains 46% nitrogen and is highly soluble in water.
However, during storage, nitrogen and ammonia do not normally evaporate even on
a long voyage, provided that the temperature inside the hull does not exceed eighty
(80) degrees centigrade. Mr. Chupungco further added that in unloading fertilizer in
bulk with the use of a clamped shell, losses due to spillage during such operation
amounting to one percent (1%) against the bill of lading is deemed "normal" or
"tolerable." The primary cause of these spillages is the clamped shell which does
not seal very tightly. Also, the wind tends to blow away some of the materials during
the unloading process.

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

either by an extremely high temperature in its place of storage, or when it comes in
contact with water. When Urea is drenched in water, either fresh or saline, some of
its particles dissolve. But the salvaged portion which is in liquid form still remains
potent and usable although no longer saleable in its original market value.
The probability of the cargo being damaged or getting mixed or contaminated with
foreign particles was made greater by the fact that the fertilizer was transported in
"bulk," thereby exposing it to the inimical effects of the elements and the grimy
condition of the various pieces of equipment used in transporting and hauling it.
The evidence of respondent carrier also showed that it was highly improbable for
sea water to seep into the vessel's holds during the voyage since the hull of the
vessel was in good condition and her hatches were tightly closed and firmly sealed,
making the M/V "Sun Plum" in all respects seaworthy to carry the cargo she was
chartered for. If there was loss or contamination of the cargo, it was more likely to
have occurred while the same was being transported from the ship to the dump
trucks and finally to the consignee's warehouse. This may be gleaned from the
testimony of the marine and cargo surveyor of CSCI who supervised the unloading.
He explained that the 18 M/T of alleged "bar order cargo" as contained in their
report to PPI was just an approximation or estimate made by them after the fertilizer
was discharged from the vessel and segregated from the rest of the cargo.
The Court notes that it was in the month of July when the vessel arrived port and
unloaded her cargo. It rained from time to time at the harbor area while the cargo
was being discharged according to the supply officer of PPI, who also testified that it
was windy at the waterfront and along the shoreline where the dump trucks passed
enroute to the consignee's warehouse.
Indeed, we agree with respondent carrier that bulk shipment of highly soluble goods
like fertilizer carries with it the risk of loss or damage. More so, with a variable
weather condition prevalent during its unloading, as was the case at bar. This is a
risk the shipper or the owner of the goods has to face. Clearly, respondent carrier
has sufficiently proved the inherent character of the goods which makes it highly
vulnerable to deterioration; as well as the inadequacy of its packaging which further
contributed to the loss. On the other hand, no proof was adduced by the petitioner
showing that the carrier was remise in the exercise of due diligence in order to
minimize the loss or damage to the goods it carried.
WHEREFORE, the petition is DISMISSED. The assailed decision of the Court of
Appeals, which reversed the trial court, is AFFIRMED. Consequently, Civil Case No.
98623 of the then Court of the First Instance, now Regional Trial Court, of Manila
should be, as it is hereby DISMISSED.
Costs against petitioner.
SO ORDERED.
Davide, Jr. and Quiason, JJ., concur.
Cruz, J., took no part.

Grio-Aquino, J., is on leave.

THIRD DIVISION
G.R. No. L-47822 December 22, 1988
PEDRO DE GUZMAN, petitioner,
vs.
COURT OF APPEALS and ERNESTO CENDANA, respondents.
Vicente D. Millora for petitioner.
Jacinto Callanta for private respondent.

FELICIANO, J.:
Respondent Ernesto Cendana, a junk dealer, was engaged in buying up used bottles
and scrap metal in Pangasinan. Upon gathering sufficient quantities of such scrap
material, respondent would bring such material to Manila for resale. He utilized two
(2) six-wheeler trucks which he owned for hauling the material to Manila. On the
return trip to Pangasinan, respondent would load his vehicles with cargo which
various merchants wanted delivered to differing establishments in Pangasinan. For
that service, respondent charged freight rates which were commonly lower than
regular commercial rates.
Sometime in November 1970, petitioner Pedro de Guzman a merchant and
authorized dealer of General Milk Company (Philippines), Inc. in Urdaneta,
Pangasinan, contracted with respondent for the hauling of 750 cartons of Liberty
filled milk from a warehouse of General Milk in Makati, Rizal, to petitioner's
establishment in Urdaneta on or before 4 December 1970. Accordingly, on 1
December 1970, respondent loaded in Makati the merchandise on to his trucks: 150
cartons were loaded on a truck driven by respondent himself, while 600 cartons
were placed on board the other truck which was driven by Manuel Estrada,
respondent's driver and employee.
Only 150 boxes of Liberty filled milk were delivered to petitioner. The other 600
boxes never reached petitioner, since the truck which carried these boxes was
hijacked somewhere along the MacArthur Highway in Paniqui, Tarlac, by armed men
who took with them the truck, its driver, his helper and the cargo.
On 6 January 1971, petitioner commenced action against private respondent in the
Court of First Instance of Pangasinan, demanding payment of P 22,150.00, the
claimed value of the lost merchandise, plus damages and attorney's fees. Petitioner
argued that private respondent, being a common carrier, and having failed to
exercise the extraordinary diligence required of him by the law, should be held
liable for the value of the undelivered goods.
In his Answer, private respondent denied that he was a common carrier and argued
that he could not be held responsible for the value of the lost goods, such loss
having been due to force majeure.

On 10 December 1975, the trial court rendered a Decision 1 finding private

respondent to be a common carrier and holding him liable for the value of the
undelivered goods (P 22,150.00) as well as for P 4,000.00 as damages and P
2,000.00 as attorney's fees.
On appeal before the Court of Appeals, respondent urged that the trial court had
erred in considering him a common carrier; in finding that he had habitually offered
trucking services to the public; in not exempting him from liability on the ground of
force majeure; and in ordering him to pay damages and attorney's fees.
The Court of Appeals reversed the judgment of the trial court and held that
respondent had been engaged in transporting return loads of freight "as a casual
occupation a sideline to his scrap iron business" and not as a common carrier.
Petitioner came to this Court by way of a Petition for Review assigning as errors the
following conclusions of the Court of Appeals:
1. that private respondent was not a common carrier;
2. that the hijacking of respondent's truck was force majeure; and
3. that respondent was not liable for the value of the undelivered cargo. (Rollo, p.
111)
We consider first the issue of whether or not private respondent Ernesto Cendana
may, under the facts earlier set forth, be properly characterized as a common
carrier.
The Civil Code defines "common carriers" in the following terms:
Article 1732. Common carriers are persons, corporations, firms or associations
engaged in the business of carrying or transporting passengers or goods or both, by
land, water, or air for compensation, offering their services to the public.
The above article makes no distinction between one whose principal business
activity is the carrying of persons or goods or both, and one who does such carrying
only as an ancillary activity (in local Idiom as "a sideline"). Article 1732 also
carefully avoids making any distinction between a person or enterprise offering
transportation service on a regular or scheduled basis and one offering such service
on an occasional, episodic or unscheduled basis. Neither does Article 1732
distinguish between a carrier offering its services to the "general public," i.e., the
general community or population, and one who offers services or solicits business
only from a narrow segment of the general population. We think that Article 1733
deliberaom making such distinctions.
So understood, the concept of "common carrier" under Article 1732 may be seen to
coincide neatly with the notion of "public service," under the Public Service Act
(Commonwealth Act No. 1416, as amended) which at least partially supplements
the law on common carriers set forth in the Civil Code. Under Section 13, paragraph
(b) of the Public Service Act, "public service" includes:
... every person that now or hereafter may own, operate, manage, or control in the
Philippines, for hire or compensation, with general or limited clientele, whether

permanent, occasional or accidental, and done for general business purposes, any
common carrier, railroad, street railway, traction railway, subway motor vehicle,
either for freight or passenger, or both, with or without fixed route and whatever
may be its classification, freight or carrier service of any class, express service,
steamboat, or steamship line, pontines, ferries and water craft, engaged in the
transportation of passengers or freight or both, shipyard, marine repair shop, wharf
or dock, ice plant,
ice-refrigeration plant, canal, irrigation system, gas, electric light, heat and power,
water supply and power petroleum, sewerage system, wire or wireless
communications systems, wire or wireless broadcasting stations and other similar
public services. ... (Emphasis supplied)
It appears to the Court that private respondent is properly characterized as a
common carrier even though he merely "back-hauled" goods for other merchants
from Manila to Pangasinan, although such back-hauling was done on a periodic or
occasional rather than regular or scheduled manner, and even though private
respondent's principal occupation was not the carriage of goods for others. There is
no dispute that private respondent charged his customers a fee for hauling their
goods; that fee frequently fell below commercial freight rates is not relevant here.
The Court of Appeals referred to the fact that private respondent held no certificate
of public convenience, and concluded he was not a common carrier. This is palpable
error. A certificate of public convenience is not a requisite for the incurring of
liability under the Civil Code provisions governing common carriers. That liability
arises the moment a person or firm acts as a common carrier, without regard to
whether or not such carrier has also complied with the requirements of the
applicable regulatory statute and implementing regulations and has been granted a
certificate of public convenience or other franchise. To exempt private respondent
from the liabilities of a common carrier because he has not secured the necessary
certificate of public convenience, would be offensive to sound public policy; that
would be to reward private respondent precisely for failing to comply with
applicable statutory requirements. The business of a common carrier impinges
directly and intimately upon the safety and well being and property of those
members of the general community who happen to deal with such carrier. The law
imposes duties and liabilities upon common carriers for the safety and protection of
those who utilize their services and the law cannot allow a common carrier to render
such duties and liabilities merely facultative by simply failing to obtain the
necessary permits and authorizations.
We turn then to the liability of private respondent as a common carrier.
Common carriers, "by the nature of their business and for reasons of public policy" 2
are held to a very high degree of care and diligence ("extraordinary diligence") in
the carriage of goods as well as of passengers. The specific import of extraordinary
diligence in the care of goods transported by a common carrier is, according to
Article 1733, "further expressed in Articles 1734,1735 and 1745, numbers 5, 6 and
7" of the Civil Code.
Article 1734 establishes the general rule that common carriers are responsible for
the loss, destruction or deterioration of the goods which they carry, "unless the
same is due to any of the following causes only:
(1) Flood, storm, earthquake, lightning or other natural disaster or calamity;

(2)
(3)
(4)
(5)

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

Act or omission of the shipper or owner of the goods;
The character-of the goods or defects in the packing or-in the containers; and
Order or act of competent public authority.

It is important to point out that the above list of causes of loss, destruction or
deterioration which exempt the common carrier for responsibility therefor, is a
closed list. Causes falling outside the foregoing list, even if they appear to
constitute a species of force majeure fall within the scope of Article 1735, which
provides as follows:
In all cases other than those mentioned in numbers 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. (Emphasis
supplied)
Applying the above-quoted Articles 1734 and 1735, we note firstly that the specific
cause alleged in the instant case the hijacking of the carrier's truck does not
fall within any of the five (5) categories of exempting causes listed in Article 1734. It
would follow, therefore, that the hijacking of the carrier's vehicle must be dealt with
under the provisions of Article 1735, in other words, that the private respondent as
common carrier is presumed to have been at fault or to have acted negligently. This
presumption, however, may be overthrown by proof of extraordinary diligence on
the part of private respondent.
Petitioner insists that private respondent had not observed extraordinary diligence
in the care of petitioner's goods. Petitioner argues that in the circumstances of this
case, private respondent should have hired a security guard presumably to ride with
the truck carrying the 600 cartons of Liberty filled milk. We do not believe, however,
that in the instant case, the standard of extraordinary diligence required private
respondent to retain a security guard to ride with the truck and to engage brigands
in a firelight at the risk of his own life and the lives of the driver and his helper.
The precise issue that we address here relates to the specific requirements of the
duty of extraordinary diligence in the vigilance over the goods carried in the specific
context of hijacking or armed robbery.
As noted earlier, the duty of extraordinary diligence in the vigilance over goods is,
under Article 1733, given additional specification not only by Articles 1734 and 1735
but also by Article 1745, numbers 4, 5 and 6, Article 1745 provides in relevant part:
Any of the following or similar stipulations shall be considered unreasonable, unjust
and contrary to public policy:
xxx xxx xxx
(5) that the common carrier shall not be responsible for the acts or omissions of his
or its employees;
(6) that the common carrier's 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; and

(7) that the common carrier shall 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. (Emphasis supplied)
Under Article 1745 (6) above, a common carrier is held responsible and will not
be allowed to divest or to diminish such responsibility even for acts of strangers
like thieves or robbers, except where such thieves or robbers in fact acted "with
grave or irresistible threat, violence or force." We believe and so hold that the limits
of the duty of extraordinary diligence in the vigilance over the goods carried are
reached where the goods are lost as a result of a robbery which is attended by
"grave or irresistible threat, violence or force."
In the instant case, armed men held up the second truck owned by private
respondent which carried petitioner's cargo. The record shows that an information
for robbery in band was filed in the Court of First Instance of Tarlac, Branch 2, in
Criminal Case No. 198 entitled "People of the Philippines v. Felipe Boncorno,
Napoleon Presno, Armando Mesina, Oscar Oria and one John Doe." There, the
accused were charged with willfully and unlawfully taking and carrying away with
them the second truck, driven by Manuel Estrada and loaded with the 600 cartons
of Liberty filled milk destined for delivery at petitioner's store in Urdaneta,
Pangasinan. The decision of the trial court shows that the accused acted with grave,
if not irresistible, threat, violence or force. 3 Three (3) of the five (5) hold-uppers
were armed with firearms. The robbers not only took away the truck and its cargo
but also kidnapped the driver and his helper, detaining them for several days and
later releasing them in another province (in Zambales). The hijacked truck was
subsequently found by the police in Quezon City. The Court of First Instance
convicted all the accused of robbery, though not of robbery in band. 4
In these circumstances, we hold that the occurrence of the loss must reasonably be
regarded as quite beyond the control of the common carrier and properly regarded
as a fortuitous event. It is necessary to recall that even common carriers are not
made absolute insurers against all risks of travel and of transport of goods, and are
not held liable for acts or events which cannot be foreseen or are inevitable,
provided that they shall have complied with the rigorous standard of extraordinary
diligence.
We, therefore, agree with the result reached by the Court of Appeals that private
respondent Cendana is not liable for the value of the undelivered merchandise
which was lost because of an event entirely beyond private respondent's control.
ACCORDINGLY, the Petition for Review on certiorari is hereby DENIED and the
Decision of the Court of Appeals dated 3 August 1977 is AFFIRMED. No
pronouncement as to costs.
SO ORDERED.
Fernan, C.J., Gutierrez, Jr., Bidin and Cortes, JJ., concur.

THIRD DIVISION

[G.R. No. 152122. July 30, 2003]

CHINA AIRLINES, petitioner, vs. DANIEL CHIOK, respondent.
DECISION
PANGANIBAN, J.:
A common carrier has a peculiar relationship with and an exacting responsibility to
its passengers. For reasons of public interest and policy, the ticket-issuing airline
acts as principal in a contract of carriage and is thus liable for the acts and the
omissions of any errant carrier to which it may have endorsed any sector of the
entire, continuous trip.
The Case
Before the Court is a Petition for Review on Certiorari[1] under Rule 45 of the Rules
of Court, seeking to reverse the August 7, 2001 Decision[2] and the February 7,
2002 Resolution[3] of the Court of Appeals (CA) in CA-GR CV No. 45832. The
challenged Decision disposed as follows:
WHEREFORE, premises considered, the assailed Decision dated July 5, 1991 of
Branch 31, Regional Trial Court, National Capital Judicial Region, Manila, in Civil Case
No. 82-13690, is hereby MODIFIED by deleting that portion regarding defendantsappellants liabilities for the payment of the actual damages amounting to
HK$14,128.80 and US$2,000.00 while all other respects are AFFIRMED. Costs
against defendants-appellants.[4]
The assailed Resolution denied Petitioners Motion for Partial Reconsideration.
The Facts
The facts are narrated by the CA[5] as follows:
On September 18, 1981, Daniel Chiok (hereafter referred to as Chiok) purchased
from China Airlines, Ltd. (CAL for brevity) airline passenger ticket number
297:4402:004:278:5 for air transportation covering Manila-Taipei-Hongkong-Manila.
Said ticket was exclusively endorseable to Philippine Airlines, Ltd. (PAL for brevity).
Subsequently, on November 21, 1981, Chiok took his trip from Manila to Taipei
using [the] CAL ticket. Before he left for said trip, the trips covered by the ticket
were pre-scheduled and confirmed by the former. When he arrived in Taipei, he
went to the CAL office and confirmed his Hongkong to Manila trip on board PAL
Flight No. PR 311. The CAL office attached a yellow sticker appropriately indicating
that his flight status was OK.
When Chiok reached Hongkong, he went to the PAL office and sought to reconfirm
his flight back to Manila. The PAL office confirmed his return trip on board Flight No.
PR 311 and attached its own sticker. On November 24, 1981, Chiok proceeded to
Hongkong International Airport for his return trip to Manila. However, upon reaching
the PAL counter, Chiok saw a poster stating that PAL Flight No. PR 311 was
cancelled because of a typhoon in Manila. He was then informed that all the
confirmed ticket holders of PAL Flight No. PR 311 were automatically booked for its

next flight, which was to leave the next day. He then informed PAL personnel that,
being the founding director of the Philippine Polysterene Paper Corporation, he ha[d]
to reach Manila on November 25, 1981 because of a business option which he ha[d]
to execute on said date.
On November 25, 1981, Chiok went to the airport. Cathay Pacific stewardess Lok
Chan (hereafter referred to as Lok) ha[d] taken and received Chioks plane ticket
and his luggage. Lok called the attention of Carmen Chan (hereafter referred to as
Carmen), PALs terminal supervisor, and informed the latter that Chioks name was
not in the computer list of passengers. Subsequently, Carmen informed Chiok that
his name did not appear in PALs computer list of passengers and therefore could
not be permitted to board PAL Flight No. PR 307.
Meanwhile, Chiok requested Carmen to put into writing the alleged reason why he
was not allowed to take his flight. The latter then wrote the following, to wit: PAL
STAFF CARMEN CHAN CHKD WITH R/C KENNY AT 1005H NO SUCH NAME IN
COMPUTER FOR 311/24 NOV AND 307/25 NOV. The latter sought to recover his
luggage but found only 2 which were placed at the end of the passengers line.
Realizing that his new Samsonite luggage was missing, which contained cosmetics
worth HK$14,128.80, he complained to Carmen.
Thereafter, Chiok proceeded to PALs Hongkong office and confronted PALs
reservation officer, Carie Chao (hereafter referred to as Chao), who previously
confirmed his flight back to Manila. Chao told Chiok that his name was on the list
and pointed to the latter his computer number listed on the PAL confirmation sticker
attached to his plane ticket, which number was R/MN62.
Chiok then decided to use another CAL ticket with No. 297:4402:004:370:5 and
asked Chao if this ticket could be used to book him for the said flight. The latter,
once again, booked and confirmed the formers trip, this time on board PAL Flight
No. PR 311 scheduled to depart that evening. Later, Chiok went to the PAL check-in
counter and it was Carmen who attended to him. As this juncture, Chiok had
already placed his travel documents, including his clutch bag, on top of the PAL
check-in counter.
Thereafter, Carmen directed PAL personnel to transfer counters. In the ensuing
commotion, Chiok lost his clutch bag containing the following, to wit: (a) $2,000.00;
(b) HK$2,000.00; (c) Taipei $8,000.00; (d) P2,000.00; (e) a three-piece set of gold
(18 carats) cross pens valued at P3,500; (f) a Cartier watch worth about P7,500.00;
(g) a tie clip with a garnet birthstone and diamond worth P1,800.00; and (h) a [pair
of] Christian Dior reading glasses. Subsequently, he was placed on stand-by and at
around 7:30 p.m., PAL personnel informed him that he could now check-in.
Consequently, Chiok as plaintiff, filed a Complaint on November 9, 1982 for
damages, against PAL and CAL, as defendants, docketed as Civil Case No. 82-13690,
with Branch 31, Regional Trial Court, National Capital Judicial Region, Manila.
He alleged therein that despite several confirmations of his flight, defendant PAL
refused to accommodate him in Flight No. 307, for which reason he lost the
business option aforementioned. He also alleged that PALs personnel, specifically
Carmen, ridiculed and humiliated him in the presence of so many people. Further,
he alleged that defendants are solidarily liable for the damages he suffered, since
one is the agent of the other.[6]

The Regional Trial Court (RTC) of Manila held CAL and PAL jointly and severally liable
to respondent. It did not, however, rule on their respective cross-claims. It
disposed as follows:
WHEREFORE, judgment is hereby rendered in favor of plaintiff and against the
defendants to jointly and severally pay:
1.
Actual damages in the amount of HK$14,128.80 or its equivalent in
Philippine Currency at the time of the loss of the luggage consisting of cosmetic
products;
2.
US$2,000.00 or its equivalent at the time of the loss of the clutch bag
containing the money;
3.

P200,000.00 by way of moral damages;

4.

P50,000.00 by way of exemplary damages or corrective damages;

5.
Attorney[]s fees equivalent to 10% of the amounts due and demandable
and awarded in favor of the plaintiff; and
6.

The costs of this proceedings.[7]

The two carriers appealed the RTC Decision to the CA.

Ruling of the Court of Appeals
Affirming the RTC, the Court of Appeals debunked petitioners claim that it had
merely acted as an issuing agent for the ticket covering the Hong Kong-Manila leg of
respondents journey. In support of its Decision, the CA quoted a purported ruling of
this Court in KLM Royal Dutch Airlines v. Court of Appeals[8] as follows:
Article 30 of the Warsaw providing that in case of transportation to be performed
by various successive carriers, the passenger can take action only against the
carrier who performed the transportation during which the accident or the delay
occurred presupposes the occurrence of either an accident or delay in the course of
the air trip, and does not apply if the damage is caused by the willful misconduct on
the part of the carriers employee or agent acting within the scope of his
employment.
It would be unfair and inequitable to charge a passenger with automatic knowledge
or notice of a condition which purportedly would excuse the carrier from liability,
where the notice is written at the back of the ticket in letters so small that one has
to use a magnifying glass to read the words. To preclude any doubt that the
contract was fairly and freely agreed upon when the passenger accepted the
passage ticket, the carrier who issued the ticket must inform the passenger of the
conditions prescribed in the ticket or, in the very least, ascertain that the passenger
read them before he accepted the passage ticket. Absent any showing that the
carriers officials or employees discharged this responsibility to the passenger, the
latter cannot be bound by the conditions by which the carrier assumed the role of a
mere ticket-issuing agent for other airlines and limited its liability only to untoward
occurrences in its own lines.

Where the passage tickets provide that the carriage to be performed thereunder by
several successive carriers is to be regarded as a single operation, the carrier
which issued the tickets for the entire trip in effect guaranteed to the passenger
that the latter shall have sure space in the various carriers which would ferry him
through the various segments of the trip, and the ticket-issuing carrier assumes full
responsibility for the entire trip and shall be held accountable for the breach of that
guaranty whether the breach occurred in its own lines or in those of the other
carriers.[9]
On PALs appeal, the appellate court held that the carrier had reneged on its
obligation to transport respondent when, in spite of the confirmations he had
secured for Flight PR 311, his name did not appear in the computerized list of
passengers. Ruling that the airlines negligence was the proximate cause of his
excoriating experience, the appellate court sustained the award of moral and
exemplary damages.
The CA, however, deleted the RTCs award of actual damages amounting to
HK$14,128.80 and US$2,000.00, because the lost piece of luggage and clutch bag
had not actually been checked in or delivered to PAL for transportation to Manila.
On August 28, 2001, petitioner filed a Motion for Partial Reconsideration, contending
that the appellate court had erroneously relied on a mere syllabus of KLM v. CA, not
on the actual ruling therein. Moreover, it argued that respondent was fully aware
that the booking for the PAL sector had been made only upon his request; and that
only PAL, not CAL, was liable for the actual carriage of that segment. Petitioner
likewise prayed for a ruling on its cross-claim against PAL, inasmuch as the latters
employees had acted negligently, as found by the trial court.
Denying the Motion, the appellate court ruled that petitioner had failed to raise any
new matter or issue that would warrant a modification or a reversal of the Decision.
As to the alleged misquotation, the CA held that while the portion it had cited
appeared to be different from the wording of the actual ruling, the variance was
more apparent than real since the difference [was] only in form and not in
substance.[10]
CAL and PAL filed separate Petitions to assail the CA Decision. In its October 3, 2001
Resolution, this Court denied PALs appeal, docketed as GR No. 149544, for failure to
serve the CA a copy of the Petition as required by Section 3, Rule 45, in relation to
Section 5(d) of Rule 56 and paragraph 2 of Revised Circular No. 1-88 of this Court.
PALs Motion for Reconsideration was denied with finality on January 21, 2002.
Only the appeal of CAL[11] remains in this Court.
Issues
In its Memorandum, petitioner raises the following issues for the Courts
consideration:
1.
The Court of Appeals committed judicial misconduct in finding liability against
the petitioner on the basis of a misquotation from KLM Royal Dutch Airlines vs.
Court of Appeals, et al., 65 SCRA 237 and in magnifying its misconduct by denying
the petitioners Motion for Reconsideration on a mere syllabus, unofficial at that.

2.
The Court of Appeals committed an error of law when it did not apply
applicable precedents on the case before it.
3.
The Court of Appeals committed a non sequitur when it did not rule on the
cross-claim of the petitioner.[12]
The Courts Ruling
The Petition is not meritorious.
First Issue:
Alleged Judicial Misconduct
Petitioner charges the CA with judicial misconduct for quoting from and basing its
ruling against the two airlines on an unofficial syllabus of this Courts ruling in KLM
v. CA. Moreover, such misconduct was allegedly aggravated when the CA, in an
attempt to justify its action, held that the difference between the actual ruling and
the syllabus was more apparent than real.[13]
We agree with petitioner that the CA committed a lapse when it relied merely on the
unofficial syllabus of our ruling in KLM v. CA. Indeed, lawyers and litigants are
mandated to quote decisions of this Court accurately.[14] By the same token,
judges should do no less by strictly abiding by this rule when they quote cases that
support their judgments and decisions. Canon 3 of the Code of Judicial Conduct
enjoins them to perform official duties diligently by being faithful to the law and
maintaining their professional competence.
However, since this case is not administrative in nature, we cannot rule on the CA
justices administrative liability, if any, for this lapse. First, due process requires
that in administrative proceedings, the respondents must first be given an
opportunity to be heard before sanctions can be imposed. Second, the present
action is an appeal from the CAs Decision, not an administrative case against the
magistrates concerned. These two suits are independent of and separate from each
other and cannot be mixed in the same proceedings.
By merely including the lapse as an assigned error here without any adequate and
proper administrative case therefor, petitioner cannot expect the imposition of an
administrative sanction.
In the case at bar, we can only determine whether the error in quotation would be
sufficient to reverse or modify the CA Decision.
Applicability of KLM v. CA
In KLM v. CA, the petitioner therein issued tickets to the Mendoza spouses for their
world tour. The tour included a Barcelona-Lourdes route, which was serviced by the
Irish airline Aer Lingus. At the KLM office in Frankfurt, Germany, they obtained a
confirmation from Aer Lingus of their seat reservations on its Flight 861. On the day
of their departure, however, the airline rudely off-loaded them.

When sued for breach of contract, KLM sought to be excused for the wrongful
conduct of Aer Lingus by arguing that its liability for damages was limited only to
occurrences on its own sectors. To support its argument, it cited Article 30 of the
Warsaw Convention, stating that when transportation was to be performed by
various successive carriers, the passenger could take action only against the carrier
that had performed the transportation when the accident or delay occurred.
In holding KLM liable for damages, we ruled as follows:
1.
The applicability insisted upon by the KLM of article 30 of the Warsaw
Convention cannot be sustained. That article presupposes the occurrence of either
an accident or a delay, neither of which took place at the Barcelona airport; what is
here manifest, instead, is that the Aer Lingus, through its manager there, refused to
transport the respondents to their planned and contracted destination.
2.
The argument that the KLM should not be held accountable for the tortious
conduct of Aer Lingus because of the provision printed on the respondents' tickets
expressly limiting the KLM's liability for damages only to occurrences on its own
lines is unacceptable. As noted by the Court of Appeals that condition was printed in
letters so small that one would have to use a magnifying glass to read the words.
Under the circumstances, it would be unfair and inequitable to charge the
respondents with automatic knowledge or notice of the said condition so as to
preclude any doubt that it was fairly and freely agreed upon by the respondents
when they accepted the passage tickets issued to them by the KLM. As the airline
which issued those tickets with the knowledge that the respondents would be flown
on the various legs of their journey by different air carriers, the KLM was chargeable
with the duty and responsibility of specifically informing the respondents of
conditions prescribed in their tickets or, in the very least, to ascertain that the
respondents read them before they accepted their passage tickets. A thorough
search of the record, however, inexplicably fails to show that any effort was exerted
by the KLM officials or employees to discharge in a proper manner this responsibility
to the respondents. Consequently, we hold that the respondents cannot be bound
by the provision in question by which KLM unilaterally assumed the role of a mere
ticket-issuing agent for other airlines and limited its liability only to untoward
occurrences on its own lines.
3.
Moreover, as maintained by the respondents and the Court of Appeals, the
passage tickets of the respondents provide that the carriage to be performed
thereunder by several successive carriers is to be regarded as a single operation,
which is diametrically incompatible with the theory of the KLM that the respondents
entered into a series of independent contracts with the carriers which took them on
the various segments of their trip. This position of KLM we reject. The respondents
dealt exclusively with the KLM which issued them tickets for their entire trip and
which in effect guaranteed to them that they would have sure space in Aer Lingus
flight 861. The respondents, under that assurance of the internationally prestigious
KLM, naturally had the right to expect that their tickets would be honored by Aer
Lingus to which, in the legal sense, the KLM had indorsed and in effect guaranteed
the performance of its principal engagement to carry out the respondents'
scheduled itinerary previously and mutually agreed upon between the parties.
4.
The breach of that guarantee was aggravated by the discourteous and highly
arbitrary conduct of an official of the Aer Lingus which the KLM had engaged to
transport the respondents on the Barcelona-Lourdes segment of their itinerary. It is

but just and in full accord with the policy expressly embodied in our civil law which
enjoins courts to be more vigilant for the protection of a contracting party who
occupies an inferior position with respect to the other contracting party, that the
KLM should be held responsible for the abuse, injury and embarrassment suffered
by the respondents at the hands of a supercilious boor of the Aer Lingus.[15]
In the instant case, the CA ruled that under the contract of transportation, petitioner
-- as the ticket-issuing carrier (like KLM) -- was liable regardless of the fact that PAL
was to perform or had performed the actual carriage. It elucidated on this point as
follows:
By the very nature of their contract, defendant-appellant CAL is clearly liable
under the contract of carriage with [respondent] and remains to be so, regardless of
those instances when actual carriage was to be performed by another carrier. The
issuance of a confirmed CAL ticket in favor of [respondent] covering his entire trip
abroad concretely attests to this. This also serves as proof that defendant-appellant
CAL, in effect guaranteed that the carrier, such as defendant-appellant PAL would
honor his ticket, assure him of a space therein and transport him on a particular
segment of his trip.[16]
Notwithstanding the errant quotation, we have found after careful deliberation that
the assailed Decision is supported in substance by KLM v. CA. The misquotation by
the CA cannot serve as basis for the reversal of its ruling.
Nonetheless, to avert similar incidents in the future, this Court hereby exhorts
members of the bar and the bench to refer to and quote from the official repository
of our decisions, the Philippine Reports, whenever practicable.[17] In the absence
of this primary source, which is still being updated, they may resort to unofficial
sources like the SCRA.[18] We remind them that the Courts ponencia, when used
to support a judgment or ruling, should be quoted accurately.[19]
Second Issue:
Liability of the Ticket-Issuing Airline
We now come to the main issue of whether CAL is liable for damages. Petitioner
posits that the CA Decision must be annulled, not only because it was rooted on an
erroneous quotation, but also because it disregarded jurisprudence, notably China
Airlines v. Intermediate Appellate Court[20] and China Airlines v. Court of Appeals.
[21]
Jurisprudence Supports
CA Decision
It is significant to note that the contract of air transportation was between petitioner
and respondent, with the former endorsing to PAL the Hong Kong-to-Manila segment
of the journey. Such contract of carriage has always been treated in this jurisdiction
as a single operation. This jurisprudential rule is supported by the Warsaw
Convention,[22] to which the Philippines is a party, and by the existing practices of
the International Air Transport Association (IATA).
Article 1, Section 3 of the Warsaw Convention states:

Transportation to be performed by several successive air carriers shall be deemed,

for the purposes of this Convention, to be one undivided transportation, if it has
been regarded by the parties as a single operation, whether it has been agreed
upon under the form of a single contract or of a series of contracts, and it shall not
lose its international character merely because one contract or a series of contracts
is to be performed entirely within a territory subject to the sovereignty, suzerainty,
mandate, or authority of the same High Contracting Party.[23]
Article 15 of IATA-Recommended Practice similarly provides:
Carriage to be performed by several successive carriers under one ticket, or under
a ticket and any conjunction ticket issued therewith, is regarded as a single
operation.
In American Airlines v. Court of Appeals,[24] we have noted that under a general
pool partnership agreement, the ticket-issuing airline is the principal in a contract of
carriage, while the endorsee-airline is the agent.
x x x Members of the IATA are under a general pool partnership agreement wherein
they act as agent of each other in the issuance of tickets to contracted passengers
to boost ticket sales worldwide and at the same time provide passengers easy
access to airlines which are otherwise inaccessible in some parts of the world.
Booking and reservation among airline members are allowed even by telephone and
it has become an accepted practice among them. A member airline which enters
into a contract of carriage consisting of a series of trips to be performed by different
carriers is authorized to receive the fare for the whole trip and through the required
process of interline settlement of accounts by way of the IATA clearing house an
airline is duly compensated for the segment of the trip serviced. Thus, when the
petitioner accepted the unused portion of the conjunction tickets, entered it in the
IATA clearing house and undertook to transport the private respondent over the
route covered by the unused portion of the conjunction tickets, i.e., Geneva to New
York, the petitioner tacitly recognized its commitment under the IATA pool
arrangement to act as agent of the principal contracting airline, Singapore Airlines,
as to the segment of the trip the petitioner agreed to undertake. As such, the
petitioner thereby assumed the obligation to take the place of the carrier originally
designated in the original conjunction ticket. The petitioners argument that it is not
a designated carrier in the original conjunction tickets and that it issued its own
ticket is not decisive of its liability. The new ticket was simply a replacement for the
unused portion of the conjunction ticket, both tickets being for the same amount of
US$ 2,760 and having the same points of departure and destination.
By
constituting itself as an agent of the principal carrier the petitioners undertaking
should be taken as part of a single operation under the contract of carriage
executed by the private respondent and Singapore Airlines in Manila.[25]
Likewise, as the principal in the contract of carriage, the petitioner in British Airways
v. Court of Appeals[26] was held liable, even when the breach of contract had
occurred, not on its own flight, but on that of another airline. The Decision followed
our ruling in Lufthansa German Airlines v. Court of Appeals,[27] in which we had
held that the obligation of the ticket-issuing airline remained and did not cease,
regardless of the fact that another airline had undertaken to carry the passengers to
one of their destinations.

In the instant case, following the jurisprudence cited above, PAL acted as the
carrying agent of CAL. In the same way that we ruled against British Airways and
Lufthansa in the aforementioned cases, we also rule that CAL cannot evade liability
to respondent, even though it may have been only a ticket issuer for the Hong
Kong-Manila sector.
Moral and Exemplary Damages
Both the trial and the appellate courts found that respondent had satisfactorily
proven the existence of the factual basis for the damages adjudged against
petitioner and PAL. As a rule, the findings of fact of the CA affirming those of the
RTC will not be disturbed by this Court.[28] Indeed, the Supreme Court is not a trier
of facts. As a rule also, only questions of law -- as in the present recourse -- may be
raised in petitions for review under Rule 45.
Moral damages cannot be awarded in breaches of carriage contracts, except in the
two instances contemplated in Articles 1764 and 2220 of the Civil Code, which we
quote:
Article 1764. Damages in cases comprised in this Section shall be awarded in
accordance with Title XVIII of this Book, concerning Damages. Article 2206 shall
also apply to the death of a passenger caused by the breach of contract by a
common carrier.
x x x
xxx

x x x

Article 2220. Willful injury to property may be a legal ground for awarding moral
damages if the court should find that, under the circumstances, such damages are
justly due. The same rule applies to breaches of contract where the defendant
acted fraudulently or in bad faith. (Italics supplied)
There is no occasion for us to invoke Article 1764 here. We must therefore
determine if CAL or its agent (PAL) is guilty of bad faith that would entitle
respondent to moral damages.
In Lopez v. Pan American World Airways,[29] we defined bad faith as a breach of a
known duty through some motive of interest or ill will.
In the case at bar, the known duty of PAL was to transport herein respondent from
Hong Kong to Manila. That duty arose when its agent confirmed his reservation for
Flight PR 311,[30] and it became demandable when he presented himself for the
trip on November 24, 1981.
It is true that due to a typhoon, PAL was unable to transport respondent on Flight PR
311 on November 24, 1981. This fact, however, did not terminate the carriers
responsibility to its passengers. PAL voluntarily obligated itself to automatically
transfer all confirmed passengers of PR 311 to the next available flight, PR 307, on
the following day.[31] That responsibility was subsisting when respondent, holding
a confirmed ticket for the former flight, presented himself for the latter.
The records amply establish that he secured repeated confirmations of his PR 311
flight on November 24, 1981. Hence, he had every reason to expect that he would

be put on the replacement flight as a confirmed passenger. Instead, he was

harangued and prevented from boarding the original and the replacement flights.
Thus, PAL breached its duty to transport him. After he had been directed to pay the
terminal fee, his pieces of luggage were removed from the weighing-in counter
despite his protestations.[32]
It is relevant to point out that the employees of PAL were utterly insensitive to his
need to be in Manila on November 25, 1981, and to the likelihood that his business
affairs in the city would be jeopardized because of a mistake on their part. It was
that mistake that had caused the omission of his name from the passenger list
despite his confirmed flight ticket. By merely looking at his ticket and validation
sticker, it is evident that the glitch was the airlines fault. However, no serious
attempt was made by PAL to secure the all-important transportation of respondent
to Manila on the following day. To make matters worse, PAL allowed a group of nonrevenue passengers, who had no confirmed tickets or reservations, to board Flight
PR 307.[33]
Time and time again, this Court has stressed that the business of common carriers
is imbued with public interest and duty; therefore, the law governing them imposes
an exacting standard.[34] In Singson v. Court of Appeals,[35] we said:
x x x [T]he carrier's utter lack of care and sensitivity to the needs of its passengers,
clearly constitutive of gross negligence, recklessness and wanton disregard of the
rights of the latter, [are] acts evidently indistinguishable or no different from fraud,
malice and bad faith. As the rule now stands, where in breaching the contract of
carriage the defendant airline is shown to have acted fraudulently, with malice or in
bad faith, the award of moral and exemplary damages, in addition to actual
damages, is proper.[36] (Italics supplied)
In Saludo v. Court of Appeals,[37] the Court reminded airline companies that due to
the nature of their business, they must not merely give cursory instructions to their
personnel to be more accommodating towards customers, passengers and the
general public; they must require them to be so.
The acts of PALs employees, particularly Chan, clearly fell short of the extraordinary
standard of care that the law requires of common carriers.[38] As narrated in
Chans oral deposition,[39] the manner in which the airline discharged its
responsibility to respondent and its other passengers manifested a lack of the
requisite diligence and due regard for their welfare. The pertinent portions of the
Oral Deposition are reproduced as follows:
Q Now you said that flight PR 311 on 24th November was cancelled due to [a]
typhoon and naturally the passengers on said flight had to be accommodated on
the first flight the following day or the first flight subsequently. [W]ill you tell the
Honorable Deposition Officer the procedure followed by Philippine Airlines in the
handling of passengers of cancelled flight[s] like that of PR 311 which was cancelled
due to [a] typhoon?
A
The procedure will be: all the confirmed passengers from [PR] 311 24th
November [are] automatically transfer[red] to [PR] 307, 25th November[,] as a
protection for all disconfirmed passengers.

Q
Aside from this procedure[,] what do you do with the passengers on the
cancelled flight who are expected to check-in on the flights if this flight is cancelled
or not operating due to typhoon or other reasons[?] In other words, are they not
notified of the cancellation?
A
I think all these passengers were not notified because of a typhoon and
Philippine Airlines Reservation were [sic] not able to call every passenger by phone.
Atty. Fruto:
Q

Did you say were not notified?

I believe they were not, but believe me, I was on day-off.

Atty. Calica:
Q
Per procedure, what should have been done by Reservations Office when a
flight is cancelled for one reason or another?
A
If there is enough time, of course, Reservations Office x x x call[s] up all the
passengers and tell[s] them the reason. But if there [is] no time[,] then the
Reservations Office will not be able to do that.[40]
x x x
xxx

x x x

Q I see. Miss Chan, I [will] show you a ticket which has been marked as Exh. A
and A-1. Will you please go over this ticket and tell the court whether this is the
ticket that was used precisely by Mr. Chiok when he checked-in at [F]light 307, 25
November 81?
A

[Are you] now asking me whether he used this ticket with this sticker?

No, no, no. That was the ticket he used.

Yes, [are you] asking me whether I saw this ticket?

Atty. Fruto: Yes.

A

I believe I saw it.

Q You saw it, O.K. Now of course you will agree with me Miss Chan that this yellow
stub here which has been marked as Exh. A-1-A, show[s] that the status on flight
311, 24th November, is O.K., correct?
A

Yes.

Q
You agree with me. And you will also agree with me that in this ticket of flight
311, on this, another sticker Exh. A-1-B for 24 November is O.K.?
A

May I x x x look at them. Yes, it says O.K. x x x, but [there is] no validation.

Q
O.K. Miss Chan what do you understand by these entries here R bar M N 6 V?
[41]
A

This is what we call a computer reference.

Q
I see. This is a computer reference showing that the name of Mr. Chiok has
been entered in Philippine Airlines computer, and this is his computer number.
A

Yes.

Q
Now you stated in your answer to the procedure taken, that all confirmed
passengers on flight 311, 24 November[,] were automatically transferred to 307 as
a protection for the passengers, correct?
A

Correct.

Q So that since following the O.K. status of Mr. Chioks reservation [on] flight 311,
[he] was also automatically transferred to flight 307 the following day?
A

Should be.

Q
Should be. O.K. Now do you remember how many passengers x x x were
transferred from flight 311, 24 November to flight 307, 25 November 81?
A
I can only give you a very brief idea because that was supposed to be air bus
so it should be able to accommodate 246 people; but how many [exactly], I dont
know.[42]
x x x
xxx

x x x

Q So, between six and eight oclock in the evening of 25 November 81, Mr. Chiok
already told you that he just [came] from the Swire Building where Philippine
Airlines had [its] offices and that he told you that his space for 311 25 November 81
was confirmed?
A

Yes.

That is what he told you. He insisted on that flight?

Yes.

Q
And did you not try to call up Swire Building-- Philippine Airlines and verify
indeed if Mr. Chiok was there?
A
Swire House building is not directly under Philippine Airlines. it is just an agency
for selling Philippine Airlines ticket. And besides around six o clock theyre close[d]
in Central.
Q
So this Swire Building is an agency authorized by Philippine Airlines to issue
tickets for and on behalf of Philippine Airlines and also...
A

Yes.

And also to confirm spaces for and on behalf of Philippine Airlines.

Yes.[43]

Under the foregoing circumstances, we cannot apply our 1989 ruling in China
Airlines v. Intermediate Appellate Court,[44] which petitioner urges us to adopt. In
that case, the breach of contract and the negligence of the carrier in effecting the
immediate flight connection for therein private respondent was incurred in good
faith.[45] Having found no gross negligence or recklessness, we thereby deleted
the award of moral and exemplary damages against it.[46]
This Courts 1992 ruling in China Airlines v. Court of Appeals[47] is likewise
inapplicable. In that case, we found no bad faith or malice in the airlines breach of
its contractual obligation.[48] We held that, as shown by the flow of telexes from
one of the airlines offices to the others, petitioner therein had exercised diligent
efforts in assisting the private respondent change his flight schedule. In the instant
case, petitioner failed to exhibit the same care and sensitivity to respondents
needs.
In Singson v. Court of Appeals,[49] we said:
x x x Although the rule is that moral damages predicated upon a breach of contract
of carriage may only be recoverable in instances where the mishap results in the
death of a passenger, or where the carrier is guilty of fraud or bad faith, there are
situations where the negligence of the carrier is so gross and reckless as to virtually
amount to bad faith, in which case, the passenger likewise becomes entitled to
recover moral damages.
In the present case, we stress that respondent had repeatedly secured
confirmations of his PR 311 flight on November 24, 1981 -- initially from CAL and
subsequently from the PAL office in Hong Kong. The status of this flight was marked
OK on a validating sticker placed on his ticket. That sticker also contained the
entry RMN6V. Ms Chan explicitly acknowledged that such entry was a computer
reference that meant that respondents name had been entered in PALs computer.
Since the status of respondent on Flight PR 311 was OK, as a matter of right
testified to by PALs witness, he should have been automatically transferred to and
allowed to board Flight 307 the following day. Clearly resulting from negligence on
the part of PAL was its claim that his name was not included in its list of passengers
for the November 24, 1981 PR 311 flight and, consequently, in the list of the
replacement flight PR 307. Since he had secured confirmation of his flight -- not
only once, but twice -- by personally going to the carriers offices where he was
consistently assured of a seat thereon -- PALs negligence was so gross and reckless
that it amounted to bad faith.
In view of the foregoing, we rule that moral and exemplary[50] damages were
properly awarded by the lower courts.[51]
Third Issue:
Propriety of the Cross-Claim

We now look into the propriety of the ruling on CALs cross-claim against PAL.
Petitioner submits that the CA should have ruled on the cross-claim, considering
that the RTC had found that it was PALs employees who had acted negligently.
Section 8 of Rule 6 of the Rules of Court reads:
Sec. 8. Cross-claim. - A cross claim is any claim by one party against a co-party
arising out of the transaction or occurrence that is the subject matter either of the
original action or of a counterclaim therein. Such cross-claim may include a claim
that the party against whom it is asserted is or may be liable to the cross-claimant
for all or part of a claim asserted in the action against the cross-claimant.
For purposes of a ruling on the cross-claim, PAL is an indispensable party. In BA
Finance Corporation v. CA,[52] the Court stated:
x x x. An indispensable party is one whose interest will be affected by the courts
action in the litigation, and without whom no final determination of the case can be
had. The partys interest in the subject matter of the suit and in the relief sought
are so inextricably intertwined with the other parties that his legal presence as a
party to the proceeding is an absolute necessity. In his absence there cannot be a
resolution of the dispute of the parties before the court which is effective,
complete, or equitable.
x x x
xxx

x x x

Without the presence of indispensable parties to a suit or proceeding, judgment of

a court cannot attain real finality.
PALs interest may be affected by any ruling of this Court on CALs cross-claim.
Hence, it is imperative and in accordance with due process and fair play that PAL
should have been impleaded as a party in the present proceedings, before this
Court can make a final ruling on this matter.
Although PAL was petitioners co-party in the case before the RTC and the CA,
petitioner failed to include the airline in the present recourse. Hence, the Court has
no jurisdiction over it. Consequently, to make any ruling on the cross-claim in the
present Petition would not be legally feasible because PAL, not being a party in the
present case, cannot be bound thereby.[53]
WHEREFORE, the Petition is DENIED. Costs against petitioner.
SO ORDERED.
Puno, (Chairman), Corona, and Carpio-Morales, JJ., concur.
Sandoval-Gutierrez, J., on official leave.
THIRD DIVISION
G.R. No. 170141

April 22, 2008

JAPAN AIRLINES, petitioner,

vs.
JESUS SIMANGAN, respondent.

DECISION
REYES R.T., J.:
WHEN an airline issues a ticket to a passenger confirmed on a particular flight on a
certain date, a contract of carriage arises, and the passenger has every right to
expect that he would fly on that flight and on that date. If he does not, then the
carrier opens itself to a suit for breach of contract of carriage.1
The power to admit or not an alien into the country is a sovereign act which cannot
be interfered with even by Japan Airlines (JAL).2
In this petition for review on certiorari,3 petitioner JAL appeals the: (1) Decision4
dated May 31, 2005 of the Court of Appeals (CA) ordering it to pay respondent Jesus
Simangan moral and exemplary damages; and (2) Resolution5 of the same court
dated September 28, 2005 denying JAL's motion for reconsideration.
The Facts
In 1991, respondent Jesus Simangan decided to donate a kidney to his ailing cousin,
Loreto Simangan, in UCLA School of Medicine in Los Angeles, California, U.S.A. Upon
request of UCLA, respondent undertook a series of laboratory tests at the National
Kidney Institute in Quezon City to verify whether his blood and tissue type are
compatible with Loreto's.6 Fortunately, said tests proved that respondent's blood
and tissue type were well-matched with Loreto's.7
Respondent needed to go to the United States to complete his preliminary work-up
and donation surgery. Hence, to facilitate respondent's travel to the United States,
UCLA wrote a letter to the American Consulate in Manila to arrange for his visa. In
due time, respondent was issued an emergency U.S. visa by the American Embassy
in Manila.8
Having obtained an emergency U.S. visa, respondent purchased a round trip plane
ticket from petitioner JAL for US$1,485.00 and was issued the corresponding
boarding pass.9 He was scheduled to a particular flight bound for Los Angeles,
California, U.S.A. via Narita, Japan.10
On July 29, 1992, the date of his flight, respondent went to Ninoy Aquino
International Airport in the company of several relatives and friends.11 He was
allowed to check-in at JAL's counter.12 His plane ticket, boarding pass, travel
authority and personal articles were subjected to rigid immigration and security
routines.13 After passing through said immigration and security procedures,
respondent was allowed by JAL to enter its airplane.14
While inside the airplane, JAL's airline crew suspected respondent of carrying a
falsified travel document and imputed that he would only use the trip to the United
States as a pretext to stay and work in Japan.15 The stewardess asked respondent
to show his travel documents. Shortly after, the stewardess along with a Japanese
and a Filipino haughtily ordered him to stand up and leave the plane.16 Respondent
protested, explaining that he was issued a U.S. visa. Just to allow him to board the
plane, he pleaded with JAL to closely monitor his movements when the aircraft stops

over in Narita.17 His pleas were ignored. He was then constrained to go out of the
plane.18 In a nutshell, respondent was bumped off the flight.
Respondent went to JAL's ground office and waited there for three hours. Meanwhile,
the plane took off and he was left behind.19 Afterwards, he was informed that his
travel documents were, indeed, in order.20 Respondent was refunded the cost of his
plane ticket less the sum of US$500.00 which was deducted by JAL.21
Subsequently, respondent's U.S. visa was cancelled.22
Displeased by the turn of events, respondent filed an action for damages against JAL
with the Regional Trial Court (RTC) in Valenzuela City, docketed as Civil Case No.
4195-V-93. He claimed he was not able to donate his kidney to Loreto; and that he
suffered terrible embarrassment and mental anguish.23 He prayed that he be
awarded P3 million as moral damages, P1.5 million as exemplary damages and
P500,000.00 as attorney's fees.24
JAL denied the material allegations of the complaint. It argued, among others, that
its failure to allow respondent to fly on his scheduled departure was due to "a need
for his travel documents to be authenticated by the United States Embassy"25
because no one from JAL's airport staff had encountered a parole visa before.26 It
posited that the authentication required additional time; that respondent was
advised to take the flight the following day, July 30, 1992. JAL alleged that
respondent agreed to be rebooked on July 30, 1992.27
JAL also lodged a counterclaim anchored on respondent's alleged wrongful
institution of the complaint. It prayed for litigation expenses, exemplary damages
and attorney's fees.28
On September 21, 2000, the RTC presided by Judge Floro P. Alejo rendered its
decision in favor of respondent (plaintiff), disposing as follows:
WHEREFORE, judgment is hereby rendered ordering the defendant to pay the
plaintiff the amount of P1,000,000.00 as moral damages, the amount of
P500,000.00 as exemplary damages and the amount of P250,000.00 as attorney's
fees, plus the cost of suit.29
The RTC explained:
In summarily and insolently ordering the plaintiff to disembark while the latter was
already settled in his assigned seat, the defendant violated the contract of carriage;
that when the plaintiff was ordered out of the plane under the pretext that the
genuineness of his travel documents would be verified it had caused him
embarrassment and besmirched reputation; and that when the plaintiff was finally
not allowed to take the flight, he suffered more wounded feelings and social
humiliation for which the plaintiff was asking to be awarded moral and exemplary
damages as well as attorney's fees.
The reason given by the defendant that what prompted them to investigate the
genuineness of the travel documents of the plaintiff was that the plaintiff was not
then carrying a regular visa but just a letter does not appear satisfactory. The
defendant is engaged in transporting passengers by plane from country to country
and is therefore conversant with the travel documents. The defendant should not be
allowed to pretend, to the prejudice of the plaintiff not to know that the travel

documents of the plaintiff are valid documents to allow him entry in the United
States.
The foregoing act of the defendant in ordering the plaintiff to deplane while already
settled in his assigned seat clearly demonstrated that the defendant breached its
contract of carriage with the plaintiff as passenger in bad faith and as such the
plaintiff is entitled to moral and exemplary damages as well as to an award of
attorney's fees.30
Disagreeing with the RTC judgment, JAL appealed to the CA contending that it is not
guilty of breach of contract of carriage, hence, not liable for damages.31 It posited
that it is the one entitled to recover on its counterclaim.32
CA Ruling
In a Decision33 dated May 31, 2005, the CA affirmed the decision of the RTC with
modification in that it lowered the amount of moral and exemplary damages and
deleted the award of attorney's fees. The fallo of the CA decision reads:
WHEREFORE, the appealed Decision is AFFIRMED with MODIFICATION. Appellant
JAPAN AIR LINES is ordered to pay appellee JESUS SIMANGAN the reduced sums, as
follows: Five Hundred Thousand Pesos (P500,000.00) as moral damages, and Two
Hundred Fifty Thousand Pesos (P250,000.00) as exemplary damages. The award of
attorney's fees is hereby DELETED.34
The CA elucidated that since JAL issued to respondent a round trip plane ticket for a
lawful consideration, "there arose a perfected contract between them."35 It found
that respondent was "haughtily ejected"36 by JAL and that "he was certainly
embarrassed and humiliated"37 when, in the presence of other passengers, JAL's
airline staff "shouted at him to stand up and arrogantly asked him to produce his
travel papers, without the least courtesy every human being is entitled to";38 and
that "he was compelled to deplane on the grounds that his papers were fake."39
The CA ratiocinated:
While the protection of passengers must take precedence over convenience, the
implementation of security measures must be attended by basic courtesies.
In fact, breach of the contract of carriage creates against the carrier a presumption
of liability, by a simple proof of injury, relieving the injured passenger of the duty to
establish the fault of the carrier or of his employees; and placing on the carrier the
burden to prove that it was due to an unforeseen event or to force majeure.
That appellee possessed bogus travel documents and that he might stay illegally in
Japan are allegations without substantiation. Also, appellant's attempt to rebook
appellee the following day was too late and did not relieve it from liability. The
damage had been done. Besides, its belated theory of novation, i.e., that appellant's
original obligation to carry appellee to Narita and Los Angeles on July 29, 1992 was
extinguished by novation when appellant and appellant agreed that appellee will
instead take appellant's flight to Narita on the following day, July 30, 1992, deserves
little attention. It is inappropriate at bar. Questions not taken up during the trial
cannot be raised for the first time on appeal.40 (Underscoring ours and citations
were omitted)

Citing Ortigas, Jr. v. Lufthansa German Airlines,41 the CA declared that "(i)n
contracts of common carriage, inattention and lack of care on the part of the carrier
resulting in the failure of the passenger to be accommodated in the class contracted
for amounts to bad faith or fraud which entitles the passengers to the award of
moral damages in accordance with Article 2220 of the Civil Code."42
Nevertheless, the CA modified the damages awarded by the RTC. It explained:
Fundamental in the law on damages is that one injured by a breach of a contract, or
by a wrongful or negligent act or omission shall have a fair and just compensation
commensurate to the loss sustained as consequence of the defendant's act. Being
discretionary on the court, the amount, however, should not be palpably and
scandalously excessive.
Here, the trial court's award of P1,000,000.00 as moral damages appears to be
overblown. No other proof of appellee's social standing, profession, financial
capabilities was presented except that he was single and a businessman. To Us, the
sum of 500,000.00 is just and fair. For, moral damages are emphatically not
intended to enrich a complainant at the expense of the defendant. They are
awarded only to enable the injured party to obtain means, diversion or amusements
that will serve to alleviate the moral suffering he has undergone, by reason of the
defendant's culpable action.
Moreover, the grant of P500,000.00 as exemplary damages needs to be reduced to
a reasonable level. The award of exemplary damages is designed to permit the
courts to mould behavior that has socially deleterious consequences and its
imposition is required by public policy to suppress the wanton acts of the offender.
Hence, the sum of P250,000.00 is adequate under the circumstances.
The award of P250,000.00 as attorney's fees lacks factual basis. Appellee was
definitely compelled to litigate in protecting his rights and in seeking relief from
appellant's misdeeds. Yet, the record is devoid of evidence to show the cost of the
services of his counsel and/or the actual expenses incurred in prosecuting his
action.43 (Citations were omitted)
When JAL's motion for reconsideration was denied, it resorted to the petition at bar.
Issues
JAL poses the following issues I.
WHETHER OR NOT THE COURT OF APPEALS ERRED IN RULING THAT RESPONDENT
WAS ENTITLED TO MORAL DAMAGES, CONSIDERING THAT:
A. JAL WAS NOT GUILTY OF BREACH OF CONTRACT.
B. MORAL DAMAGES MAY BE AWARDED IN BREACH OF CONTRACT CASES ONLY
WHEN THE BREACH IS ATTENDED BY FRAUD OR BAD FAITH. ASSUMING ARGUENDO
THAT JAL WAS GUILTY OF BREACH, JAL DID NOT ACT FRAUDULENTLY OR IN BAD
FAITH AS TO ENTITLE RESPONDENT TO MORAL DAMAGES.

C. THE LAW DISTINGUISHES A CONTRACTUAL BREACH EFFECTED IN GOOD FAITH

FROM ONE ATTENDED BY BAD FAITH.
II.
WHETHER OR NOT THE COURT OF APPEALS ERRED IN RULING THAT RESPONDENT
WAS ENTITLED TO EXEMPLARY DAMAGES CONSIDERING THAT:
A. EXEMPLARY DAMAGES ARE NOT RECOVERABLE IN BREACH OF CONTRACT OF
CARRIAGE UNLESS THE CARRIER IS GUILTY OF WANTON, FRAUDULENT, RECKLESS,
OPPRESSIVE OR MALEVOLENT CONDUCT.
B. ASSUMING ARGUENDO THAT JAL WAS GUILTY OF BREACH, JAL DID NOT ACT IN A
WANTON FRAUDULENT, RECKLESS, OPPRESSIVE OR MALEVOLENT MANNER AS TO
ENTITLE RESPONDENT TO EXEMPLARY DAMAGES.
III.
ASSUMING ARGUENDO THAT RESPONDENT WAS ENTITLED TO AN AWARD OF
DAMAGES, WHETHER OR NOT THE COURT OF APPEALS AWARD OF P750,000 IN
DAMAGES WAS EXCESSIVE AND UNPRECEDENTED.
IV.
WHETHER OR NOT THE COURT OF APPEALS ERRED IN NOT FINDING FOR JAL ON ITS
COUNTERCLAIM.44 (Underscoring Ours)
Basically, there are three (3) issues to resolve here: (1) whether or not JAL is guilty
of contract of carriage; (2) whether or not respondent is entitled to moral and
exemplary damages; and (3) whether or not JAL is entitled to its counterclaim for
damages.
Our Ruling
This Court is not a trier of facts.
Chiefly, the issues are factual. The RTC findings of facts were affirmed by the CA.
The CA also gave its nod to the reasoning of the RTC except as to the awards of
damages, which were reduced, and that of attorney's fees, which was deleted.
We are not a trier of facts. We generally rely upon, and are bound by, the
conclusions on this matter of the lower courts, which are better equipped and have
better opportunity to assess the evidence first-hand, including the testimony of the
witnesses.45
We have repeatedly held that the findings of fact of the CA are final and conclusive
and cannot be reviewed on appeal to the Supreme Court provided they are based
on substantial evidence.46 We have no jurisdiction, as a rule, to reverse their
findings.47 Among the exceptions to this rule are: (a) when the conclusion is a
finding grounded entirely on speculations, surmises or conjectures; (b) when the
inference made is manifestly mistaken, absurd or impossible; (c) where there is

grave abuse of discretion; (d) when the judgment is based on a misapprehension of

facts; (e) when the findings of facts are conflicting; (f) when the CA, in making its
findings, went beyond the issues of the case and the same is contrary to the
admissions of both appellant and appellee.48
The said exceptions, which are being invoked by JAL, are not found here. There is no
indication that the findings of the CA are contrary to the evidence on record or that
vital testimonies of JAL's witnesses were disregarded. Neither did the CA commit
misapprehension of facts nor did it fail to consider relevant facts. Likewise, there
was no grave abuse of discretion in the appreciation of facts or mistaken and absurd
inferences.
We thus sustain the coherent facts as established by the courts below, there being
no sufficient showing that the said courts committed reversible error in reaching
their conclusions.
JAL is guilty of breach of
contract of carriage.
That respondent purchased a round trip plane ticket from JAL and was issued the
corresponding boarding pass is uncontroverted.49 His plane ticket, boarding pass,
travel authority and personal articles were subjected to rigid immigration and
security procedure.50 After passing through said immigration and security
procedure, he was allowed by JAL to enter its airplane to fly to Los Angeles,
California, U.S.A. via Narita, Japan.51 Concisely, there was a contract of carriage
between JAL and respondent.
Nevertheless, JAL made respondent get off the plane on his scheduled departure on
July 29, 1992. He was not allowed by JAL to fly. JAL thus failed to comply with its
obligation under the contract of carriage.
JAL justifies its action by arguing that there was "a need to verify the authenticity of
respondent's travel document."52 It alleged that no one from its airport staff had
encountered a parole visa before.53 It further contended that respondent agreed to
fly the next day so that it could first verify his travel document, hence, there was
novation.54 It maintained that it was not guilty of breach of contract of carriage as
respondent was not able to travel to the United States due to his own voluntary
desistance.55
We cannot agree. JAL did not allow respondent to fly. It informed respondent that
there was a need to first check the authenticity of his travel documents with the
U.S. Embassy.56 As admitted by JAL, "the flight could not wait for Mr. Simangan
because it was ready to depart."57
Since JAL definitely declared that the flight could not wait for respondent, it gave
respondent no choice but to be left behind. The latter was unceremoniously bumped
off despite his protestations and valid travel documents and notwithstanding his
contract of carriage with JAL. Damage had already been done when respondent was
offered to fly the next day on July 30, 1992. Said offer did not cure JAL's default.
Considering that respondent was forced to get out of the plane and left behind
against his will, he could not have freely consented to be rebooked the next day. In
short, he did not agree to the alleged novation. Since novation implies a waiver of

the right the creditor had before the novation, such waiver must be express.58 It
cannot be supposed, without clear proof, that respondent had willingly done away
with his right to fly on July 29, 1992.
Moreover, the reason behind the bumping off incident, as found by the RTC and CA,
was that JAL personnel imputed that respondent would only use the trip to the
United States as a pretext to stay and work in Japan.59
Apart from the fact that respondent's plane ticket, boarding pass, travel authority
and personal articles already passed the rigid immigration and security routines,60
JAL, as a common carrier, ought to know the kind of valid travel documents
respondent carried. As provided in Article 1755 of the New Civil Code: "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."61 Thus, We find untenable JAL's defense of "verification
of respondent's documents" in its breach of contract of carriage.
It bears repeating that the power to admit or not an alien into the country is a
sovereign act which cannot be interfered with even by JAL.62
In an action for breach of contract of carriage, all that is required of plaintiff is to
prove the existence of such contract and its non-performance by the carrier through
the latter's failure to carry the passenger safely to his destination.63 Respondent
has complied with these twin requisites.
Respondent is entitled to moral and exemplary damages and attorney's fees plus
legal interest.
With reference to moral damages, JAL alleged that they are not recoverable in
actions ex contractu except only when the breach is attended by fraud or bad faith.
It is contended that it did not act fraudulently or in bad faith towards respondent,
hence, it may not be held liable for moral damages.
As a general rule, moral damages are not recoverable in actions for damages
predicated on a breach of contract for it is not one of the items enumerated under
Article 2219 of the Civil Code.64 As an exception, such damages are recoverable:
(1) in cases in which the mishap results in the death of a passenger, as provided in
Article 1764, in relation to Article 2206(3) of the Civil Code; and (2) in the cases in
which the carrier is guilty of fraud or bad faith, as provided in Article 2220.65
The acts committed by JAL against respondent amounts to bad faith. As found by
the RTC, JAL breached its contract of carriage with respondent in bad faith. JAL
personnel summarily and insolently ordered respondent to disembark while the
latter was already settled in his assigned seat. He was ordered out of the plane
under the alleged reason that the genuineness of his travel documents should be
verified.
These findings of facts were upheld by the CA, to wit:
x x x he was haughtily ejected by appellant. He was certainly embarrassed and
humiliated when, in the presence of other passengers, the appellant's airline staff
shouted at him to stand up and arrogantly asked him to produce his travel papers,
without the least courtesy every human being is entitled to. Then, he was

compelled to deplane on the grounds that his papers were fake. His protestation of
having been issued a U.S. visa coupled with his plea to appellant to closely monitor
his movements when the aircraft stops over in Narita, were ignored. Worse, he was
made to wait for many hours at the office of appellant only to be told later that he
has valid travel documents.66 (Underscoring ours)
Clearly, JAL is liable for moral damages. It is firmly settled that moral damages are
recoverable in suits predicated on breach of a contract of carriage where it is proved
that the carrier was guilty of fraud or bad faith, as in this case. Inattention to and
lack of care for the interests of its passengers who are entitled to its utmost
consideration, particularly as to their convenience, amount to bad faith which
entitles the passenger to an award of moral damages. What the law considers as
bad faith which may furnish the ground for an award of moral damages would be
bad faith in securing the contract and in the execution thereof, as well as in the
enforcement of its terms, or any other kind of deceit.67
JAL is also liable for exemplary damages as its above-mentioned acts constitute
wanton, oppressive and malevolent acts against respondent. Exemplary damages,
which are awarded by way of example or correction for the public good, may be
recovered in contractual obligations, as in this case, if defendant acted in wanton,
fraudulent, reckless, oppressive, or malevolent manner.68
Exemplary damages are designed by our civil law to permit the courts to reshape
behaviour that is socially deleterious in its consequence by creating negative
incentives or deterrents against such behaviour. In requiring compliance with the
standard of extraordinary diligence, a standard which is, in fact, that of the highest
possible degree of diligence, from common carriers and in creating a presumption of
negligence against them, the law seeks to compel them to control their employees,
to tame their reckless instincts and to force them to take adequate care of human
beings and their property.69
Neglect or malfeasance of the carrier's employees could give ground for an action
for damages. Passengers have a right to be treated by the carrier's employees with
kindness, respect, courtesy and due consideration and are entitled to be protected
against personal misconduct, injurious language, indignities and abuses from such
employees.70
The assessment of P500,000.00 as moral damages and P100,000.00 as exemplary
damages in respondent's favor is, in Our view, reasonable and realistic. This award
is reasonably sufficient to indemnify him for the humiliation and embarrassment he
suffered. This also serves as an example to discourage the repetition of similar
oppressive acts.
With respect to attorney's fees, they may be awarded when defendant's act or
omission has compelled plaintiff to litigate with third persons or to incur expenses to
protect his interest.71 The Court, in Construction Development Corporation of the
Philippines v. Estrella,72 citing Traders Royal Bank Employees Union-Independent v.
National Labor Relations Commission,73 elucidated thus:
There are two commonly accepted concepts of attorney's fees, the so-called
ordinary and extraordinary. In its ordinary concept, an attorney's fee is the
reasonable compensation paid to a lawyer by his client for the legal services he has

rendered to the latter. The basis of this compensation is the fact of his employment
by and his agreement with the client.
In its extraordinary concept, an attorney's fee is an indemnity for damages ordered
by the court to be paid by the losing party in a litigation. The basis of this is any of
the cases provided by law where such award can be made, such as those authorized
in Article 2208, Civil Code, and is payable not to the lawyer but to the client, unless
they have agreed that the award shall pertain to the lawyer as additional
compensation or as part thereof.74
It was therefore erroneous for the CA to delete the award of attorney's fees on the
ground that the record is devoid of evidence to show the cost of the services of
respondent's counsel. The amount is actually discretionary upon the Court so long
as it passes the test of reasonableness. They may be recovered as actual or
compensatory damages when exemplary damages are awarded and whenever the
court deems it just and equitable,75 as in this case.
Considering the factual backdrop of this case, attorney's fees in the amount of
P200,000.00 is reasonably modest.
The above liabilities of JAL in the total amount of P800,000.00 earn legal interest
pursuant to the Court's ruling in Construction Development Corporation of the
Philippines v. Estrella,76 citing Eastern Shipping Lines, Inc. v. Court of Appeals,77 to
wit:
Regarding the imposition of legal interest at the rate of 6% from the time of the
filing of the complaint, we held in Eastern Shipping Lines, Inc. v. Court of Appeals,
that when an obligation, regardless of its source, i.e., law, contracts, quasicontracts, delicts or quasi-delicts is breached, the contravenor can be held liable for
payment of interest in the concept of actual and compensatory damages, subject to
the following rules, to wit 1. When the obligation is breached, and it consists in the payment of a sum of
money, i.e., a loan or forbearance of money, the interest due should be that which
may have been stipulated in writing. Furthermore, the interest due shall itself earn
legal interest from the time it is judicially demanded. In the absence of stipulation,
the rate of interest shall be 12% per annum to be computed from default, i.e., from
judicial or extrajudicial demand under and subject to the provisions of Article 1169
of the Civil Code.
2. When an obligation, not constituting a loan or forbearance of money, is breached,
an interest on the amount of damages awarded may be imposed at the discretion of
the court at the rate of 6% per annum. No interest, however, shall be adjudged on
unliquidated claims or damages except when or until the demand can be
established with reasonable certainty. Accordingly, where the demand is established
with reasonable certainty, the interest shall begin to run from the time the claim is
made judicially or extrajudicially (Art. 1169, Civil Code) but when such certainty
cannot be so reasonably established at the time the demand is made, the interest
shall begin to run only from the date the judgment of the court is made (at which
time the quantification of damages may be deemed to have been reasonably
ascertained). The actual base for the computation of legal interest shall, in any
case, be on the amount finally adjudged.

3. When the judgment of the court awarding a sum of money becomes final and
executory, the rate of legal interest, whether the case falls under paragraph 1 or
paragraph 2, above, shall be 12% per annum from such finality until its satisfaction,
this interim period being deemed to be by then an equivalent to a forbearance of
credit.78 (Emphasis supplied and citations omitted)
Accordingly, in addition to the said total amount of P800,000.00, JAL is liable to pay
respondent legal interest. Pursuant to the above ruling of the Court, the legal
interest is 6% and it shall be reckoned from September 21, 2000 when the RTC
rendered its judgment. From the time this Decision becomes final and executory,
the interest rate shall be 12% until its satisfaction.
JAL is not entitled to its counterclaim for damages.
The counterclaim of JAL in its Answer79 is a compulsory counterclaim for damages
and attorney's fees arising from the filing of the complaint. There is no mention of
any other counter claims.
This compulsory counterclaim of JAL arising from the filing of the complaint may not
be granted inasmuch as the complaint against it is obviously not malicious or
unfounded. It was filed by respondent precisely to claim his right to damages
against JAL. Well-settled is the rule that the commencement of an action does not
per se make the action wrongful and subject the action to damages, for the law
could not have meant to impose a penalty on the right to litigate.80
We reiterate case law that if damages result from a party's exercise of a right, it is
damnum absque injuria.81 Lawful acts give rise to no injury. Walang perhuwisyong
maaring idulot ang paggamit sa sariling karapatan.
During the trial, however, JAL presented a witness who testified that JAL suffered
further damages. Allegedly, respondent caused the publications of his subject
complaint against JAL in the newspaper for which JAL suffered damages.82
Although these additional damages allegedly suffered by JAL were not incorporated
in its Answer as they arose subsequent to its filing, JAL's witness was able to testify
on the same before the RTC.83 Hence, although these issues were not raised by the
pleadings, they shall be treated in all respects as if they had been raised in the
pleadings.
As provided in Section 5, Rule 10 of the Rules of Court, "(w)hen issues not raised by
the pleadings are tried with the express or implied consent of the parties, they shall
be treated in all respects as if they had been raised in the pleadings."
Nevertheless, JAL's counterclaim cannot be granted.
JAL is a common carrier. JAL's business is mainly with the traveling public. It invites
people to avail themselves of the comforts and advantages it offers.84 Since JAL
deals with the public, its bumping off of respondent without a valid reason naturally
drew public attention and generated a public issue.

The publications involved matters about which the public has the right to be
informed because they relate to a public issue. This public issue or concern is a
legitimate topic of a public comment that may be validly published.
Assuming that respondent, indeed, caused the publication of his complaint, he may
not be held liable for damages for it. The constitutional guarantee of freedom of the
speech and of the press includes fair commentaries on matters of public interest.
This is explained by the Court in Borjal v. Court of Appeals,85 to wit:
To reiterate, fair commentaries on matters of public interest are privileged and
constitute a valid defense in an action for libel or slander. The doctrine of fair
comment means that while in general every discreditable imputation publicly made
is deemed false, because every man is presumed innocent until his guilt is judicially
proved, and every false imputation is deemed malicious, nevertheless, when the
discreditable imputation is directed against a public person in his public capacity, it
is not necessarily actionable. In order that such discreditable imputation to a public
official may be actionable, it must either be a false allegation of fact or a comment
based on a false supposition. If the comment is an expression of opinion, based on
established facts, then it is immaterial that the opinion happens to be mistaken, as
long as it might reasonably be inferred from the facts.86 (Citations omitted and
underscoring ours)
Even though JAL is not a public official, the rule on privileged commentaries on
matters of public interest applies to it. The privilege applies not only to public
officials but extends to a great variety of subjects, and includes matters of public
concern, public men, and candidates for office.87
Hence, pursuant to the Borjal case, there must be an actual malice in order that a
discreditable imputation to a public person in his public capacity or to a public
official may be actionable. To be considered malicious, the libelous statements must
be shown to have been written or published with the knowledge that they are false
or in reckless disregard of whether they are false or not.88
Considering that the published articles involve matters of public interest and that its
expressed opinion is not malicious but based on established facts, the imputations
against JAL are not actionable. Therefore, JAL may not claim damages for them.
WHEREFORE, the petition is DENIED. The appealed Decision of the Court of Appeals
is AFFIRMED WITH MODIFICATION. As modified, petitioner Japan Airlines is ordered
to pay respondent Jesus Simangan the following: (1) P500,000.00 as moral
damages; (2) P100,000.00 as exemplary damages; and (3) P200,000.00 as
attorney's fees.
The total amount adjudged shall earn legal interest at the rate of 6% per annum
from the date of judgment of the Regional Trial Court on September 21, 2000 until
the finality of this Decision. From the time this Decision becomes final and
executory, the unpaid amount, if any, shall earn legal interest at the rate of 12% per
annum until its satisfaction.
SO ORDERED.
THIRD DIVISION

G.R. No. 155550

January 31, 2008

NORTHWEST AIRLINES, INC., petitioner,

vs.
STEVEN P. CHIONG, respondent.
DECISION
NACHURA, J.:
Before us is a petition for review on certiorari under Rule 45 of the Rules of Court
seeking the reversal of the Court of Appeals (CA) Decision1 in CA-G.R. CV No.
503082 which affirmed in toto the Regional Trial Court (RTC) Decision3 holding
petitioner Northwest Airlines, Inc. (Northwest) liable for breach of contract of
carriage.
On March 14, 1989, Philimare Shipping and Seagull Maritime Corporation
(Philimare), as the authorized Philippine agent of TransOcean Lines (TransOcean),
hired respondent Steven Chiong as Third Engineer of TransOceans vessel M/V Elbia
at the San Diego, California Port. Under the service crew agreement, Chiong was
guaranteed compensation at a monthly salary of US$440.00 and a monthly
overtime pay of US$220.00, or a total of US$7,920.00 for one year.
Subsequently, on March 27, 1989, Philimare dispatched a Letter of Guarantee to CL
Hutchins & Co., Inc., TransOceans agent at the San Diego Port, confirming Chiongs
arrival thereat in time to board the M/V Elbia which was set to sail on April 1, 1989
(California, United States time). For this purpose, Philimare purchased for Chiong a
Northwest plane ticket for San Diego, California with a departure date of April 1,
1989 from Manila. Ten (10) days before his scheduled departure, Chiong fetched his
entire family from Samar and brought them to Manila to see him off at the airport.
On April 1, 1989, Chiong arrived at the Manila International Airport4 (MIA), at about
6:30 a.m., three (3) hours before the scheduled time of departure. Marilyn Calvo,
Philimares Liaison Officer, met Chiong at the departure gate, and the two
proceeded to the Philippine Coast Guard (PCG) Counter to present Chiongs seaman
service record book for clearance. Thereafter, Chiongs passport was duly stamped,
after complying with government requirements for departing seafarers.
Calvo remained at the PCG Counter while Chiong proceeded to queue at the
Northwest check-in counter. When it was Chiongs turn, the Northwest personnel5
informed him that his name did not appear in the computers list of confirmed
departing passengers. Chiong was then directed to speak to a "man in barong"
standing outside Northwests counters from whom Chiong could allegedly obtain a
boarding pass. Posthaste, Chiong approached the "man in barong" who demanded
US$100.00 in exchange therefor. Without the said amount, and anxious to board the
plane, Chiong queued a number of times at Northwests Check-in Counter and
presented his ticket. However, the Northwest personnel at the counter told him to
simply wait and that he was being a pest.
Frustrated, Chiong went to Calvo at the PCG counter and inquired if she had money
so he could obtain a boarding pass from the "man in barong." Calvo, who already
saw that something was amiss, insisted that Chiongs plane ticket was confirmed
and as such, he could check-in smoothly and board the plane without shelling out

US$100.00 for a boarding pass. Ultimately, Chiong was not allowed to board
Northwest Flight No. 24 bound for San Diego that day and, consequently, was
unable to work at the M/V Elbia by April 1, 1989 (California, U.S.A. time).
It appears that Chiongs name was crossed out and substituted with "W. Costine" in
Northwests Air Passenger Manifest.6
In a letter dated April 3, 1989, Chiongs counsel demanded as recompense: (1) the
amount equivalent to Chiongs salary under the latters Crew Agreement7 with
TransOcean; (2) P15,000.00 for Chiongs expenses in fetching and bringing his
family from Samar to Manila; (3) P500,000.00 as moral damages; and (4)
P500,000.00 as legal fees.8
Northwest demurred. Thus, on May 24, 1989, Chiong filed a Complaint for breach of
contract of carriage before the RTC. Northwest filed a Motion to Dismiss9 the
complaint citing the trial courts lack of jurisdiction over the subject matter of the
case, but the trial court denied the same.10
In its Answer,11 Northwest contradicted the claim that it breached its contract of
carriage with Chiong, reiterating that Chiong had no cause of action against it
because per its records, Chiong was a "no-show" passenger for Northwest Flight No.
24 on April 1, 1989.
In the RTCs Pre-trial Order12 based on the parties respective Pre-trial Briefs,13 the
triable issues were limited to the following:
(a) Whether [Chiong] was bumped-off by [Northwest] from Flight NW 24 or whether
[Chiong] "no-showed" for said flight.
(b) If defendant is found guilty of having breached its contract of carriage with
plaintiff, what damages are awardable to plaintiff and how much.
In the course of proceedings, Northwest, on September 14, 1990, filed a separate
criminal complaint for False Testimony14 against Chiong based on the latters
testimony that he did not leave the Philippines after April 1, 1989 contrary to the
notations in his seaman service record book that he had left the country on April 17,
1989, and returned on October 5 of the same year. Chiong did not participate in the
preliminary investigation; thus, on December 14, 1990, the City Prosecutor of
Manila filed an Information against Chiong with the RTC Manila, Branch 54, docketed
as Criminal Case No. 90-89722.
In the meantime, after a flurry of motions filed by Northwest in the civil case were
denied by the RTC, Northwest filed a Petition for Certiorari before the CA imputing
grave abuse of discretion to the RTC.15 Correlatively, Northwest moved for a
suspension of the proceedings before the trial court. However, both the Petition for
Certiorari and Motion for Suspension of the proceedings were denied by the CA and
RTC, respectively.16
After trial, the RTC rendered a Decision finding preponderance of evidence in favor
of Chiong, and holding Northwest liable for breach of contract of carriage. The RTC
ruled that the evidence adduced by the parties supported the conclusion that
Chiong was deliberately prevented from checking-in and his boarding pass

unjustifiably withheld to accommodate an American passenger by the name of W.

Costine.
The dispositive portion of the RTC decision reads:
WHEREFORE, premises considered, in consideration of all the foregoing, judgment is
hereby rendered, ordering the defendant liable to plaintiff in damages by reason of
the latters inability to take defendants NW Flight No. 24 on April 1, 1989, for the
following amounts:
1) U.S.$8,447.0017 or its peso equivalent at the time of finality of this judgment
with legal interests until fully paid, representing compensatory damages due to
plaintiffs loss of income for one (1) year as a direct result of defendants breach of
contract of carriage;
2) P15,000.00, Philippine Currency, representing plaintiffs actual incurred damages
as a consequence of his failure to avail of defendants Flight No. 24 on April 1, 1989;
3) P200,000.00, Philippine Currency, representing moral damages suffered and
sustained by the plaintiff as a result of defendants breach of contract of carriage;
4) P200,000.00, Philippine Currency, representing exemplary or punitive damages
due to plaintiff from defendant, owing to the latters breach of contract of carriage
with malice and fraud; and
5) P200,000.00, Philippine Currency, for and as attorneys fees, plus costs of suit.
SO ORDERED.
On appeal, the CA affirmed in toto the ruling of the RTC. Identical to the RTCs
findings, those of the CA were as follows: on April 1, 1989, Chiong was at the MIA
three hours before the 10:15 a.m. departure time for Northwest Flight No. 24.
Contrary to Northwests claim that Chiong was a "no-show" passenger, the CA
likewise concluded, as the RTC did, that Chiong was not allowed to check-in and was
not issued a boarding pass at the Northwest check-in counter to accommodate a
certain W. Costine. As for Northwests defense that Chiong had left the country after
April 1, 1989 and worked for M/V Elbia, the CA ruled that Northwests failure to raise
this defense in its Answer or Motion to Dismiss is equivalent to a waiver thereof. The
CA declared that, in any event, Northwest failed to present any evidence to prove
that Chiong had worked under the original crew agreement.
Hence, this recourse.
Northwest ascribes grievous errors to the CA when the appellate court ruled that:
(1) Northwest breached the contract of carriage with Chiong who was present at the
MIA on April 1, 1989 to board Northwests Flight No. 24; (2) As a result of the
breach, Northwest is liable to Chiong for compensatory, actual, moral and
exemplary damages, attorneys fees, and costs of suit; and (3) Northwests Exhibits
"2" and "3," the Flight Manifest and the Passenger Name Record, respectively, were
hearsay evidence and ought to be excluded from the records.
The petition must fail.

We are in complete accord with the common ruling of the lower courts that
Northwest breached the contract of carriage with Chiong, and as such, he is entitled
to compensatory, actual, moral and exemplary damages, attorneys fees and costs
of suit.
Northwest contends that Chiong, as a "no-show" passenger on April 1, 1989,
already defaulted in his obligation to abide by the terms and conditions of the
contract of carriage;18 and thus, Northwest could not have been in breach of its
reciprocal obligation to transport Chiong. In sum, Northwest insists that Chiongs
testimony is a complete fabrication, supposedly demonstrated by the following: (1)
Chiongs seaman service record book reflects that he left the Philippines after April
1, 1989, specifically on April 17, 1989, to board the M/V Elbia, and was discharged
therefrom upon his personal request; (2) the Information filed against Chiong for
False Testimony; and (3) the Flight Manifest and the Passenger Name Record both
indicate that he was a "no-show" passenger.
We are not convinced.
The records reveal that Chiong, as plaintiff in the trial court, satisfied the burden of
proof required in civil cases, i.e., preponderance of evidence. Section 1 of Rule 133
provides:
SECTION 1. Preponderance of evidence, how determined. In civil cases, the party
having the burden of proof must establish his case by a preponderance of evidence.
In determining where the preponderance or superior weight of evidence on the
issues involved lies, the court may consider all the facts and circumstance of the
case, the witnesses manner of testifying, their intelligence, their means and
opportunity of knowing the facts to which they are testifying, the nature of the facts
to which they testify, the probability or improbability of their testimony, their
interest or want of interest, and also their personal credibility so far as the same
may legitimately appear upon the trial. The court may also consider the number of
witnesses, though preponderance is not necessarily with the greater number.
In this regard, the Court notes that, in addition to his testimony, Chiongs evidence
consisted of a Northwest ticket for the April 1, 1989 Flight No. 24, Chiongs passport
and seaman service record book duly stamped at the PCG counter, and the
testimonies of Calvo, Florencio Gomez,19 and Philippine Overseas Employment and
Administration (POEA) personnel who all identified the signature and stamp of the
PCG on Chiongs passport.
We have scoured the records, and found no reason to depart from the well-settled
rule that factual findings of the lower courts deserve the utmost respect and are not
to be disturbed on appeal.20 Indeed, Chiongs Northwest ticket for Flight No. 24 on
April 1, 1989, coupled with the PCG stamps on his passport showing the same date,
is direct evidence that he was present at MIA on said date as he intended to fly to
the United States on board that flight. As testified to by POEA personnel and
officers, the PCG stamp indicates that a departing seaman has passed through the
PCG counter at the airport, surrendered the exit pass, and complied with
government requirements for departing seafarers. Calvo, Philimares liaison officer
tasked to assist Chiong at the airport, corroborated Chiongs testimony on the
latters presence at the MIA and his check-in at the PCG counter without a hitch.
Calvo further testified that she purposely stayed at the PCG counter to confirm that
Chiong was able to board the plane, as it was part of her duties as Philimares

liaison officer, to confirm with their principal, TransOcean in this case, that the
seafarer had left the country and commenced travel to the designated port where
the vessel is docked.21 Thus, she had observed that Chiong was unable to check-in
and board Northwest Flight No. 24, and was actually being given the run-around by
Northwest personnel.
It is of no moment that Chiongs witnesses who all corroborated his testimony on
his presence at the airport on, and flight details for, April 1, 1989, and that he was
subsequently bumped-off are, likewise, employees of Philimare which may have
an interest in the outcome of this case. We intoned in Philippine Airlines, Inc. v.
Court of Appeals,22 thus:
(T)his Court has repeatedly held that a witness relationship to the victim does not
automatically affect the veracity of his or her testimony. While this principle is often
applied in criminal cases, we deem that the same principle may apply in this case,
albeit civil in nature. If a witness relationship with a party does not ipso facto
render him a biased witness in criminal cases where the quantum of evidence
required is proof beyond reasonable doubt, there is no reason why the same
principle should not apply in civil cases where the quantum of evidence is only
preponderance of evidence.
The foregoing documentary and testimonial evidence, taken together, amply
establish the fact that Chiong was present at MIA on April 1, 1989, passed through
the PCG counter without delay, proceeded to the Northwest check-in counter, but
when he presented his confirmed ticket thereat, he was not issued a boarding pass,
and ultimately barred from boarding Northwest Flight No. 24 on that day.
In stark contrast is Northwests bare-faced claim that Chiong was a "no-show"
passenger, and was scheduled to leave the country only on April 17, 1989. As
previously discussed, the records belie this assertion. It is also noteworthy that
Northwest did not present any evidence to support its belated defense that Chiong
departed from the Philippines on April 17, 1989 to work as Third Engineer on board
M/V Elbia under the original crew agreement.
It is true that Chiongs passport and seaman service record book indicate that he
had left the country on April 17, 1989 and come back on October 5 of the same
year. However, this evidence fails to debunk the facts established to have transpired
on April 1, 1989, more particularly, Chiongs presence at the airport and his
subsequent bumping-off by Northwest despite a confirmed ticket. Although initially,
the burden of proof was with Chiong to prove that there was a breach of contract of
carriage, the burden of evidence shifted to Northwest when Chiong adduced
sufficient evidence to prove the facts he had alleged. At that point, Northwest had
the burden of going forward23 to controvert Chiongs prima facie case. As the party
asserting that Chiong was a "no-show" passenger, Northwest then had the burden
of evidence to establish its claim. Regrettably, Northwest failed to do so.
Furthermore, it has not escaped our attention that Northwest, despite the
declaration in its Pre-Trial Brief, did not present as a witness their check-in agent on
that contentious date.24 This omission was detrimental to Northwests case
considering its claim that Chiong did not check-in at their counters on said date. It
simply insisted that Chiong was a "no-show" passenger and totally relied on the
Flight Manifest, which, curiously, showed a horizontal line drawn across Chiongs
name, and the name W. Costine written above it. The reason for the insertion, or for

Chiongs allegedly being a "no-show" passenger, is not even recorded on the

remarks column of the Flight Manifest beside the Passenger Name column. Clearly,
the categorical declaration of Chiong and his other witnesses, coupled with the PCG
stamp on his passport and seaman service record book, prevails over Northwests
evidence, particularly the Flight Manifest. Thus, we are perplexed why, despite the
evidence presented by Chiong, and the RTCs specific order to Northwests counsel
to present the person(s) who prepared the Flight Manifest and Passenger Name
Record for a proper identification of, and to testify on, those documents, Northwest
still insisted on presenting Gonofredo Mendoza and Amelia Meris who were,
admittedly, not competent to testify thereon.25
In its desperate attempt to evade liability for the breach, Northwest claims that
Chiong worked at M/V Elbia when he left the Philippines on April 17, 1989. The
argument was not only belatedly raised, as we have repeatedly stated, but is offtangent.
On this point, we uphold the RTCs and CAs ruling that the failure of Northwest to
raise the foregoing defense in its Motion to Dismiss or Answer constituted a waiver
thereof. Section 1, Rule 9 of the Rules of Court provides:
SECTION 1. Defenses and objections not pleaded. Defenses and objections not
pleaded either in a motion to dismiss or in the answer are deemed waived.
However, when it appears from the pleadings or the evidence on record that the
court has no jurisdiction over the subject matter, that there is another action
pending between the same parties for the same cause, or that the action is barred
by a prior judgment or by statute of limitations, the court shall dismiss the claim.
(Emphasis supplied)
Similarly, Section 8, Rule 15 of the Rules of Court reads:
SECTION 8. Omnibus Motion. Subject to the provisions of section 1 of Rule 9, a
motion attacking a pleading, order, judgment, or proceeding shall include all
objections then available, and all objections not so included shall be deemed
waived.
Moreover, Northwest paints a scenario that ostensibly transpired on a different date.
Even if Chiong left the Philippines on April 17, 1989, it would not necessarily prove
that Chiong was a "no-show" on April 1, 1989. Neither does it negate the already
established fact that Chiong had a confirmed ticket for April 1, 1989, and first
passed through the PCG counter without delay, then reached and was at the
Northwest check-in counters on time for the scheduled flight.
Essentially, Northwest argues that Chiong was a "no-show" passenger on two (2)
separate occasions, March 28 and April 1, 1989 because he was actually scheduled
to depart for the US on April 17, 1989 as ostensibly evidenced by his passport and
seaman record book. Had this new matter alleged been proven by Northwest, it
would prevent or bar recovery by Chiong. Unfortunately, Northwest was
unsuccessful in proving not only the "no-show" claim, but that Chiong, likewise,
worked under the original crew agreement.
Northwest likewise insists now that there is a pending criminal case for False
Testimony against Chiong that a falsified part of Chiongs testimony would indicate
the falsity of his entire testimony, consistent with the "falsus in uno, falsus in

omnibus"26 doctrine. Following Northwests flawed logic, this would invariably lead
to the conclusion that the corroborating testimonies of Chiongs witnesses are also
false.
The legal maxim falsus in uno, falsus in omnibus, cited by Northwest, is not a
positive rule of law and is not strictly applied in this jurisdiction. Before this maxim
can be applied, the witness must be shown to have willfully falsified the truth on
one or more material points. The principle presupposes the existence of a positive
testimony on a material point contrary to subsequent declarations in the testimony.
However, the records show that Chiongs testimony did not contain inconsistencies
on what occurred on April 1, 1989. Yet, Northwest never even attempted to explain
or impugn the evidence that Chiong passed through the PCG counter on April 1,
1989, and that his passport was accordingly stamped, obviously for purposes of his
departure on that day.
As to the criminal case, it is well to note that there is no final determination, as yet,
of Chiongs guilt by the courts. But even if Chiong is adjudged guilty, it will have
little effect on the outcome of this case. As we held in Leyson v. Lawa:27
The testimony of a witness must be considered in its entirety instead of in truncated
parts. The technique in deciphering a testimony is not to consider only its isolated
parts and anchor a conclusion on the basis of said parts. In ascertaining the facts
established by a witness, everything stated by him on direct, cross and redirect
examinations must be calibrated and considered.
It must be stressed that facts imperfectly or erroneously stated in answer to one
question may be supplied or explained as qualified by his answer to other question.
The principle falsus in uno, falsus in omnibus is not strictly applied in this
jurisdiction. The doctrine deals only with the weight of evidence and is not a positive
rule of law, and the same is not an inflexible one of universal application. The
testimony of a witness can be believed as to some facts and disbelieved as to
others:
xxxx
Professor Wigmore gives the following enlightening commentary:
It may be said, once for all, that the maxim is in itself worthless first, in point of
validity, because in one form it merely contains in loose fashion a kernel of truth
which no one needs to be told, and in the others, it is absolutely false as a maxim of
life; and secondly, in point of utility, because it merely tells the jury what they may
do in any event, not what they must do or must not do, and therefore it is a
superfluous form of words. It is also in practice pernicious, first, because there is
frequently a misunderstanding of its proper force, and secondly, because it has
become in the hands of many counsel a mere instrument for obtaining new trials
upon points wholly unimportant in themselves.
From the foregoing disquisition, the ineluctable conclusion is that Northwest
breached its contract of carriage with Chiong.
Time and again, we have declared that a contract of carriage, in this case, air
transport, is primarily intended to serve the traveling public and thus, imbued with
public interest. The law governing common carriers consequently imposes an

exacting standard of conduct. As the aggrieved party, Chiong only had to prove the
existence of the contract and the fact of its non-performance by Northwest, as
carrier, in order to be awarded compensatory and actual damages.
We reiterate that Northwest failed to prove its claim that Chiong worked on M/V
Elbia from April 17 to October 5, 1989 under the original crew agreement.
Accordingly, we affirm the lower courts finding on Chiongs entitlement to actual
and compensatory damages.
We, likewise, uphold the findings of both courts on Northwests liability for moral
and exemplary damages, and attorneys fees.
Under Article 2220 of the Civil Code of the Philippines, an award of moral damages,
in breaches of contract, is in order upon a showing that the defendant acted
fraudulently or in bad faith. Bad faith does not simply connote bad judgment or
negligence.28 It imports a dishonest purpose or some moral obliquity and conscious
doing of a wrong.29 It means breach of a known duty through some motive, interest
or ill will that partakes of the nature of fraud.30 Bad faith is in essence a question of
intention.31
In the case at bench, the courts carefully examined the evidence as to the conduct
and outward acts of Northwest indicative of its inward motive. It is borne out by the
records that Chiong was given the run-around at the Northwest check-in counter,
instructed to deal with a "man in barong" to obtain a boarding pass, and eventually
barred from boarding Northwest Flight No. 24 to accommodate an American, W.
Costine, whose name was merely inserted in the Flight Manifest, and did not even
personally check-in at the counter.32
Under the foregoing circumstances, the award of exemplary damages is also correct
given the evidence that Northwest acted in an oppressive manner towards
Chiong.33
As for the award of attorneys fees, while we recognize that it is sound policy not to
set a premium on the right to litigate,34 we sustain the lower courts award thereof.
Attorneys fees may be awarded when a party is compelled to litigate or incur
expenses to protect his interest,35 or where the defendant acted in gross and
evident bad faith in refusing to satisfy the plaintiffs plainly valid, just and
demandable claim.36 In the case at bench, Northwest deliberately breached its
contract of carriage with Chiong and then repeatedly refused to satisfy Chiongs
valid, just and demandable claim. This unjustified refusal constrained Chiong to not
only lose income under the crew agreement, but to further incur expenses and exert
effort for almost two (2) decades in order to protect his interests and vindicate his
right. Therefore, this Court deems it just and equitable to grant Chiong P200,000.00
as attorneys fees. The award is reasonable in view of the time it has taken for this
case to be resolved.37
Finally, the issue of the exclusion of Northwests Exhibits "2" and "3" need not
detain us long. Suffice it to state that the RTC and CA correctly excluded these
documents as hearsay evidence. We quote with favor the CAs holding thereon,
thus:

As a rule, "entries made at, or near the time of the transactions to which they refer,
by a person deceased, or unable to testify, who was in a position to know the facts
therein stated, may be received as prima facie evidence, if such person made the
entries in his professional capacity or in the performance of a duty and in the
ordinary or regular course of business or duty". [Rule 130, Section 43, Revised Rules
of Court]
Otherwise stated, in order to be admissible as entries in the course of business, it is
necessary that: (a) the person who made the entry must be dead or unable to
testify; (b) the entries were made at or near the time of the transactions to which
they refer; (c) the entrant was in a position to know the facts stated in the entries;
(d) the entries were made in his professional capacity or in the performance of a
duty; and (e) the entries were made in the ordinary or regular course of business or
duty.
Tested by these requirements, we find the manifest and passenger name record to
be mere hearsay evidence. While there is no necessity to bring into court all the
employees who individually made the entries, it is sufficient that the person who
supervised them while they were making the entries testify that the account was
prepared under his supervision and that the entries were regularly entered in the
ordinary course of business. In the case at bench, while MENDOZA was the
supervisor on-duty on April 1, 1989, he has no personal knowledge of the entries in
the manifest since he did not supervise the preparation thereof. More importantly,
no evidence was presented to prove that the employee who made the entries was
dead nor did the defendant-appellant set forth the circumstances that would show
the employees inability to testify.38
WHEREFORE, premises considered, the petition is hereby DENIED. The ruling of the
Court of Appeals in CA-G.R. CV No. 50308 is hereby AFFIRMED. Costs against the
petitioner.
SO ORDERED.

SECOND DIVISION
[G.R. No. 142305. December 10, 2003]
SINGAPORE AIRLINES LIMITED, petitioner, vs. ANDION FERNANDEZ, respondent.
DECISION
CALLEJO, SR., J.:
This is a petition for review on certiorari assailing the Decision[1] of the Court of
Appeals which affirmed in toto the decision[2] of the Regional Trial Court of Pasig
City, Branch 164 in Civil Case No. 60985 filed by the respondent for damages.
The Case for the Respondent
Respondent Andion Fernandez is an acclaimed soprano here in the Philippines and
abroad. At the time of the incident, she was availing an educational grant from the

Federal Republic of Germany, pursuing a Masters Degree in Music majoring in

Voice.[3]
She was invited to sing before the King and Queen of Malaysia on February 3 and 4,
1991. For this singing engagement, an airline passage ticket was purchased from
petitioner Singapore Airlines which would transport her to Manila from Frankfurt,
Germany on January 28, 1991. From Manila, she would proceed to Malaysia on the
next day.[4] It was necessary for the respondent to pass by Manila in order to gather
her wardrobe; and to rehearse and coordinate with her pianist her repertoire for the
aforesaid performance.
The petitioner issued the respondent a Singapore Airlines ticket for Flight No. SQ 27,
leaving Frankfurt, Germany on January 27, 1991 bound for Singapore with onward
connections from Singapore to Manila. Flight No. SQ 27 was scheduled to leave
Frankfurt at 1:45 in the afternoon of January 27, 1991, arriving at Singapore at 8:50
in the morning of January 28, 1991. The connecting flight from Singapore to Manila,
Flight No. SQ 72, was leaving Singapore at 11:00 in the morning of January 28,
1991, arriving in Manila at 2:20 in the afternoon of the same day.[5]
On January 27, 1991, Flight No. SQ 27 left Frankfurt but arrived in Singapore two
hours late or at about 11:00 in the morning of January 28, 1991.
By then, the
aircraft bound for Manila had left as scheduled, leaving the respondent and about
25 other passengers stranded in the Changi Airport in Singapore.[6]
Upon disembarkation at Singapore, the respondent approached the transit counter
who referred her to the nightstop counter and told the lady employee thereat that it
was important for her to reach Manila on that day, January 28, 1991. The lady
employee told her that there were no more flights to Manila for that day and that
respondent had no choice but to stay in Singapore. Upon respondents persistence,
she was told that she can actually fly to Hong Kong going to Manila but since her
ticket was non-transferable, she would have to pay for the ticket. The respondent
could not accept the offer because she had no money to pay for it.[7] Her pleas for
the respondent to make arrangements to transport her to Manila were unheeded.[8]
The respondent then requested the lady employee to use their phone to make a call
to Manila. Over the employees reluctance, the respondent telephoned her mother
to inform the latter that she missed the connecting flight. The respondent was able
to contact a family friend who picked her up from the airport for her overnight stay
in Singapore.[9]
The next day, after being brought back to the airport, the respondent proceeded to
petitioners counter which says: Immediate Attention To Passengers with
Immediate Booking. There were four or five passengers in line. The respondent
approached petitioners male employee at the counter to make arrangements for
immediate booking only to be told: Cant you see I am doing something. She
explained her predicament but the male employee uncaringly retorted: Its your
problem, not ours.[10]
The respondent never made it to Manila and was forced to take a direct flight from
Singapore to Malaysia on January 29, 1991, through the efforts of her mother and
travel agency in Manila. Her mother also had to travel to Malaysia bringing with her
respondents wardrobe and personal things needed for the performance that caused
them to incur an expense of about P50,000.[11]

As a result of this incident, the respondents performance before the Royal Family of
Malaysia was below par. Because of the rude and unkind treatment she received
from the petitioners personnel in Singapore, the respondent was engulfed with fear,
anxiety, humiliation and embarrassment causing her to suffer mental fatigue and
skin rashes. She was thereby compelled to seek immediate medical attention upon
her return to Manila for acute urticaria.[12]
On June 15, 1993, the RTC rendered a decision with the following dispositive portion:
ACCORDINGLY and as prayed for, defendant Singapore Airlines is ordered to pay
herein plaintiff Andion H. Fernandez the sum of:
1.
damages;

FIFTY THOUSAND (P50,000.00) PESOS as compensatory or actual

2.
TWO HUNDRED and FIFTY THOUSAND (P250,000.00) PESOS as moral
damages considering plaintiffs professional standing in the field of culture at home
and abroad;
3.

ONE HUNDRED THOUSAND (P100,000.00) PESOS as exemplary damages;

4.

SEVENTY-FIVE THOUSAND (P75,000.00) PESOS as attorneys fees; and

5.

To pay the costs of suit.

SO ORDERED.[13]
The petitioner appealed the decision to the Court of Appeals.
On June 10, 1998, the CA promulgated the assailed decision finding no reversible
error in the appealed decision of the trial court.[14]
Forthwith, the petitioner filed the instant petition for review, raising the following
errors:
I
THE HONORABLE COURT OF APPEALS ERRED IN AFFIRMING IN TOTO THE DECISION
OF THE TRIAL COURT THAT AWARDED DAMAGES TO RESPONDENT FOR THE
ALLEGED FAILURE OF THE PETITIONER TO EXERCISE EXTRAORDINARY DILIGENCE.
II
THE HONORABLE COURT OF APPEALS ERRED IN HOLDING THAT THE PETITIONER
ACTED IN BAD FAITH.
III
THE HONORABLE COURT OF APPEALS ERRED IN DISMISSING THE PETITIONERS
COUNTERCLAIMS.[15]

The petitioner assails the award of damages contending that it exercised the
extraordinary diligence required by law under the given circumstances. The delay
of Flight No. SQ 27 from Frankfurt to Singapore on January 28, 1991 for more than
two hours was due to a fortuitous event and beyond petitioners control. Inclement
weather prevented the petitioners plane coming from Copenhagen, Denmark to
arrive in Frankfurt on time on January 27, 1991. The plane could not take off from
the airport as the place was shrouded with fog. This delay caused a snowball
effect whereby the other flights were consequently delayed. The plane carrying
the respondent arrived in Singapore two (2) hours behind schedule.[16] The delay
was even compounded when the plane could not travel the normal route which was
through the Middle East due to the raging Gulf War at that time. It had to pass
through the restricted Russian airspace which was more congested.[17]
Under these circumstances, petitioner therefore alleged that it cannot be faulted for
the delay in arriving in Singapore on January 28, 1991 and causing the respondent
to miss her connecting flight to Manila.
The petitioner further contends that it could not also be held in bad faith because its
personnel did their best to look after the needs and interests of the passengers
including the respondent. Because the respondent and the other 25 passengers
missed their connecting flight to Manila, the petitioner automatically booked them
to the flight the next day and gave them free hotel accommodations for the night.
It was respondent who did not take petitioners offer and opted to stay with a family
friend in Singapore.
The petitioner also alleges that the action of the respondent was baseless and it
tarnished its good name and image earned through the years for which, it was
entitled to damages in the amount of P1,000,000; exemplary damages of
P500,000; and attorneys fees also in the amount of P500,000.[18]
The petition is barren of merit.
When an airline issues a ticket to a passenger, confirmed for a particular flight on a
certain date, a contract of carriage arises. The passenger then has every right to
expect that he be transported on that flight and on that date. If he does not, then
the carrier opens itself to a suit for a breach of contract of carriage.[19]
The contract of air carriage is a peculiar one. Imbued with public interest, the law
requires common carriers to carry the passengers safely as far as human care and
foresight can provide, using the utmost diligence of very cautious persons with due
regard for all the circumstances.[20] In an action for breach of contract of carriage,
the aggrieved party does not have to prove that the common carrier was at fault or
was negligent. All that is necessary to prove is the existence of the contract and
the fact of its non-performance by the carrier.[21]
In the case at bar, it is undisputed that the respondent carried a confirmed ticket for
the two-legged trip from Frankfurt to Manila: 1) Frankfurt-Singapore; and 2)
Singapore-Manila. In her contract of carriage with the petitioner, the respondent
certainly expected that she would fly to Manila on Flight No. SQ 72 on January 28,
1991. Since the petitioner did not transport the respondent as covenanted by it on
said terms, the petitioner clearly breached its contract of carriage with the
respondent. The respondent had every right to sue the petitioner for this breach.

The defense that the delay was due to fortuitous events and beyond petitioners
control is unavailing. In PAL vs. CA,[22] we held that:
.... Undisputably, PALs diversion of its flight due to inclement weather was a
fortuitous event. Nonetheless, such occurrence did not terminate PALs contract
with its passengers. Being in the business of air carriage and the sole one to
operate in the country, PAL is deemed to be equipped to deal with situations as in
the case at bar. What we said in one case once again must be stressed, i.e., the
relation of carrier and passenger continues until the latter has been landed at the
port of destination and has left the carriers premises. Hence, PAL necessarily would
still have to exercise extraordinary diligence in safeguarding the comfort,
convenience and safety of its stranded passengers until they have reached their
final destination...
...
...If the cause of non-fulfillment of the contract is due to a fortuitous event, it has
to be the sole and only cause (Art. 1755 C.C., Art. 1733 C.C.). Since part of the
failure to comply with the obligation of common carrier to deliver its passengers
safely to their destination lay in the defendants failure to provide comfort and
convenience to its stranded passengers using extraordinary diligence, the cause of
non-fulfillment is not solely and exclusively due to fortuitous event, but due to
something which defendant airline could have prevented, defendant becomes liable
to plaintiff.
Indeed, in the instant case, petitioner was not without recourse to enable it to fulfill
its obligation to transport the respondent safely as scheduled as far as human care
and foresight can provide to her destination. Tagged as a premiere airline as it
claims to be and with the complexities of air travel, it was certainly well-equipped to
be able to foresee and deal with such situation. The petitioners indifference and
negligence by its absence and insensitivity was exposed by the trial court, thus:
(a)
Under Section 9.1 of its Traffic Manual (Exhibit 4) flights can be delayed to
await the uplift of connecting cargo and passengers arriving on a late in-bound
flight As adverted to by the trial court,Flight SQ-27/28 maybe delayed for
about half an hour to transfer plaintiff to her connecting flight. As pointed out
above, delay is normal in commercial air transportation (RTC Decision, p. 22); or
(b)
Petitioner airlines could have carried her on one of its flights bound for
Hongkong and arranged for a connecting flight from Hongkong to Manila all on the
same date. But then the airline personnel who informed her of such possibility told
her that she has to pay for that flight. Regrettably, respondent did not have
sufficient funds to pay for it. (TSN, 30 March 1992, pp.8-9; RTC Decision, pp. 22-23)
Knowing the predicament of the respondent, petitioner did not offer to shoulder the
cost of the ticket for that flight; or
(c)
As noted by the trial court from the account of petitioners witness, Bob
Khkimyong, that a passenger such as the plaintiff could have been accommodated
in another international airline such as Lufthansa to bring the plaintiff to Singapore
early enough from Frankfurt provided that there was prior communication from that
station to enable her to catch the connecting flight to Manila because of the
urgency of her business in Manila(RTC Decision, p. 23)

The petitioners diligence in communicating to its passengers the consequences of

the delay in their flights was wanting. As elucidated by the trial court:
It maybe that delay in the take off and arrival of commercial aircraft could not be
avoided and may be caused by diverse factors such as those testified to by
defendants pilot. However, knowing fully well that even before the plaintiff
boarded defendants Jumbo aircraft in Frankfurt bound for Singapore, it has already
incurred a delay of two hours. Nevertheless, defendant did not take the trouble of
informing plaintiff, among its other passengers of such a delay and that in such a
case, the usual practice of defendant airline will be that they have to stay overnight
at their connecting airport; and much less did it inquire from the plaintiff and the
other 25 passengers bound for Manila whether they are amenable to stay overnight
in Singapore and to take the connecting flight to Manila the next day. Such
information should have been given and inquiries made in Frankfurt because even
the defendant airlines manual provides that in case of urgency to reach his or her
destination on the same date, the head office of defendant in Singapore must be
informed by telephone or telefax so as the latter may make certain arrangements
with other airlines in Frankfurt to bring such a passenger with urgent business to
Singapore in such a manner that the latter can catch up with her connecting flight
such as S-27/28 without spending the night in Singapore[23]
The respondent was not remiss in conveying her apprehension about the delay of
the flight when she was still in Frankfurt. Upon the assurance of petitioners
personnel in Frankfurt that she will be transported to Manila on the same date, she
had every right to expect that obligation fulfilled. She testified, to wit:
Q: Now, since you were late, when the plane that arrived from Frankfurt was late,
did you not make arrangements so that your flight from Singapore to Manila would
be adjusted?
A:
I asked the lady at the ticket counter, the one who gave the boarding pass in
Frankfurt and I asked her, Since my flight going to Singapore would be late, what
would happen to my Singapore-Manila flight? and then she said, Dont worry,
Singapore Airlines would be responsible to bring you to Manila on the same date.
And then they have informed the name of the officer, or whatever, that our flight is
going to be late.[24]
When a passenger contracts for a specific flight, he has a purpose in making that
choice which must be respected. This choice, once exercised, must not be impaired
by a breach on the part of the airline without the latter incurring any liability.[25] For
petitioners failure to bring the respondent to her destination, as scheduled, we find
the petitioner clearly liable for the breach of its contract of carriage with the
respondent.
We are convinced that the petitioner acted in bad faith. Bad faith means a breach
of known duty through some motive of interest or ill will. Self-enrichment or
fraternal interest, and not personal ill will, may well have been the motive; but it is
malice nevertheless.[26] Bad faith was imputed by the trial court when it found that
the petitioners employees at the Singapore airport did not accord the respondent
the attention and treatment allegedly warranted under the circumstances. The lady
employee at the counter was unkind and of no help to her. The respondent further
alleged that without her threats of suing the company, she was not allowed to use
the companys phone to make long distance calls to her mother in Manila. The male

employee at the counter where it says: Immediate Attention to Passengers with

Immediate Booking was rude to her when he curtly retorted that he was busy
attending to other passengers in line.
The trial court concluded that this
inattentiveness and rudeness of petitioners personnel to respondents plight was
gross enough amounting to bad faith. This is a finding that is generally binding
upon the Court which we find no reason to disturb.
Article 2232 of the Civil Code provides that in a contractual or quasi-contractual
relationship, exemplary damages may be awarded only if the defendant had acted
in a wanton, fraudulent, reckless, oppressive or malevolent manner. In this case,
petitioners employees acted in a wanton, oppressive or malevolent manner. The
award of exemplary damages is, therefore, warranted in this case.
WHEREFORE, the Petition is DENIED.
AFFIRMED.

The Decision of the Court of Appeals is

SO ORDERED.
Puno, (Chairman), Quisumbing, Austria-Martinez, and Tinga, JJ., concur.

SECOND DIVISION
[G.R. No. 127897. November 15, 2001]
DELSAN TRANSPORT LINES, INC., petitioner, vs. THE HON. COURT OF APPEALS and
AMERICAN HOME ASSURANCE CORPORATION, respondents.
DECISION
DE LEON, JR., J.:
Before us is a petition for review on certiorari of the Decision[1] of the Court of
Appeals in CA-G.R. CV No. 39836 promulgated on June 17, 1996, reversing the
decision of the Regional Trial Court of Makati City, Branch 137, ordering petitioner to
pay private respondent the sum of Five Million Ninety-Six Thousand Six Hundred
Thirty-Five Pesos and Fifty-Seven Centavos (P5,096,635.57) and costs and the
Resolution[2] dated January 21, 1997 which denied the subsequent motion for
reconsideration.
The facts show that Caltex Philippines (Caltex for brevity) entered into a contract of
affreightment with the petitioner, Delsan Transport Lines, Inc., for a period of one
year whereby the said common carrier agreed to transport Caltexs industrial fuel oil
from the Batangas-Bataan Refinery to different parts of the country. Under the
contract, petitioner took on board its vessel, MT Maysun, 2,277.314 kiloliters of
industrial fuel oil of Caltex to be delivered to the Caltex Oil Terminal in Zamboanga
City. The shipment was insured with the private respondent, American Home
Assurance Corporation.
On August 14, 1986, MT Maysun set sail from Batangas for Zamboanga City.
Unfortunately, the vessel sank in the early morning of August 16, 1986 near Panay
Gulf in the Visayas taking with it the entire cargo of fuel oil.

Subsequently, private respondent paid Caltex the sum of Five Million Ninety-Six
Thousand Six Hundred Thirty-Five Pesos and Fifty-Seven Centavos (P5,096,635.57)
representing the insured value of the lost cargo. Exercising its right of subrogation
under Article 2207 of the New Civil Code, the private respondent demanded of the
petitioner the same amount it paid to Caltex.
Due to its failure to collect from the petitioner despite prior demand, private
respondent filed a complaint with the Regional Trial Court of Makati City, Branch
137, for collection of a sum of money. After the trial and upon analyzing the
evidence adduced, the trial court rendered a decision on November 29, 1990
dismissing the complaint against herein petitioner without pronouncement as to
cost. The trial court found that the vessel, MT Maysun, was seaworthy to undertake
the voyage as determined by the Philippine Coast Guard per Survey Certificate
Report No. M5-016-MH upon inspection during its annual dry-docking and that the
incident was caused by unexpected inclement weather condition or force majeure,
thus exempting the common carrier (herein petitioner) from liability for the loss of
its cargo.[3]
The decision of the trial court, however, was reversed, on appeal, by the Court of
Appeals. The appellate court gave credence to the weather report issued by the
Philippine Atmospheric, Geophysical and Astronomical Services Administration
(PAGASA for brevity) which showed that from 2:00 oclock to 8:00 oclock in the
morning on August 16, 1986, the wind speed remained at 10 to 20 knots per hour
while the waves measured from .7 to two (2) meters in height only in the vicinity of
the Panay Gulf where the subject vessel sank, in contrast to herein petitioners
allegation that the waves were twenty (20) feet high. In the absence of any
explanation as to what may have caused the sinking of the vessel coupled with the
finding that the same was improperly manned, the appellate court ruled that the
petitioner is liable on its obligation as common carrier[4] to herein private
respondent insurance company as subrogee of Caltex. The subsequent motion for
reconsideration of herein petitioner was denied by the appellate court.
Petitioner raised the following assignments of error in support of the instant petition,
[5] to wit:
I
THE COURT OF APPEALS ERRED IN REVERSING THE DECISION OF THE REGIONAL
TRIAL COURT.
II
THE COURT OF APPEALS ERRED AND WAS NOT JUSTIFIED IN REBUTTING THE LEGAL
PRESUMPTION THAT THE VESSEL MT MAYSUN WAS SEAWORTHY.
III
THE COURT OF APPEALS ERRED IN NOT APPLYING THE DOCTRINE OF THE SUPREME
COURT IN THE CASE OF HOME INSURANCE CORPORATION V. COURT OF APPEALS.
Petitioner Delsan Transport Lines, Inc. invokes the provision of Section 113 of the
Insurance Code of the Philippines, which states that in every marine insurance upon

a ship or freight, or freightage, or upon any thing which is the subject of marine
insurance there is an implied warranty by the shipper that the ship is seaworthy.
Consequently, the insurer will not be liable to the assured for any loss under the
policy in case the vessel would later on be found as not seaworthy at the inception
of the insurance. It theorized that when private respondent paid Caltex the value of
its lost cargo, the act of the private respondent is equivalent to a tacit recognition
that the ill-fated vessel was seaworthy; otherwise, private respondent was not
legally liable to Caltex due to the latters breach of implied warranty under the
marine insurance policy that the vessel was seaworthy.
The petitioner also alleges that the Court of Appeals erred in ruling that MT Maysun
was not seaworthy on the ground that the marine officer who served as the chief
mate of the vessel, Francisco Berina, was allegedly not qualified. Under Section 116
of the Insurance Code of the Philippines, the implied warranty of seaworthiness of
the vessel, which the private respondent admitted as having been fulfilled by its
payment of the insurance proceeds to Caltex of its lost cargo, extends to the
vessels complement. Besides, petitioner avers that although Berina had merely a
2nd officers license, he was qualified to act as the vessels chief officer under
Chapter IV(403), Category III(a)(3)(ii)(aa) of the Philippine Merchant Marine Rules
and Regulations. In fact, all the crew and officers of MT Maysun were exonerated in
the administrative investigation conducted by the Board of Marine Inquiry after the
subject accident.[6]
In any event, petitioner further avers that private respondent failed, for unknown
reason, to present in evidence during the trial of the instant case the subject marine
cargo insurance policy it entered into with Caltex. By virtue of the doctrine laid
down in the case of Home Insurance Corporation vs. CA,[7] the failure of the private
respondent to present the insurance policy in evidence is allegedly fatal to its claim
inasmuch as there is no way to determine the rights of the parties thereto.
Hence, the legal issues posed before the Court are:
I
Whether or not the payment made by the private respondent to Caltex for the
insured value of the lost cargo amounted to an admission that the vessel was
seaworthy, thus precluding any action for recovery against the petitioner.
II
Whether or not the non-presentation of the marine insurance policy bars the
complaint for recovery of sum of money for lack of cause of action.
We rule in the negative on both issues.
The payment made by the private respondent for the insured value of the lost
cargo operates as waiver of its (private respondent) right to enforce the term of the
implied warranty against Caltex under the marine insurance policy. However, the
same cannot be validly interpreted as an automatic admission of the vessels
seaworthiness by the private respondent as to foreclose recourse against the
petitioner for any liability under its contractual obligation as a common carrier. The
fact of payment grants the private respondent subrogatory right which enables it to
exercise legal remedies that would otherwise be available to Caltex as owner of the

lost cargo against the petitioner common carrier.[8] Article 2207 of the New Civil
Code provides that:
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.
The right of subrogation has its roots in equity. It is designed to promote and to
accomplish justice and is the mode which equity adopts to compel the ultimate
payment of a debt by one who in justice and good conscience ought to pay.[9] It is
not dependent upon, nor does it grow out of, any privity of contract or upon written
assignment of claim. It accrues simply upon payment by the insurance company of
the insurance claim.[10] Consequently, the payment made by the private
respondent (insurer) to Caltex (assured) operates as an equitable assignment to the
former of all the remedies which the latter may have against the petitioner.
From the nature of their business and for reasons of public policy, common carriers
are bound to observe extraordinary diligence in the vigilance over the goods and for
the safety of passengers transported by them, according to all the circumstances of
each case.[11] In the event of loss, destruction or deterioration of the insured
goods, common carriers shall be responsible unless the same is brought about,
among others, by flood, storm, earthquake, lightning or other natural disaster or
calamity.[12] In all other cases, 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.[13]
In order to escape liability for the loss of its cargo of industrial fuel oil belonging to
Caltex, petitioner attributes the sinking of MT Maysun to fortuitous event or force
majeure. From the testimonies of Jaime Jarabe and Francisco Berina, captain and
chief mate, respectively of the ill-fated vessel, it appears that a sudden and
unexpected change of weather condition occurred in the early morning of August
16, 1986; that at around 3:15 oclock in the morning a squall (unos) carrying
strong winds with an approximate velocity of 30 knots per hour and big waves
averaging eighteen (18) to twenty (20) feet high, repeatedly buffeted MT Maysun
causing it to tilt, take in water and eventually sink with its cargo.[14] This tale of
strong winds and big waves by the said officers of the petitioner however, was
effectively rebutted and belied by the weather report[15] from the Philippine
Atmospheric, Geophysical and Astronomical Services Administration (PAGASA), the
independent government agency charged with monitoring weather and sea
conditions, showing that from 2:00 oclock to 8:00 oclock in the morning on August
16, 1986, the wind speed remained at ten (10) to twenty (20) knots per hour while
the height of the waves ranged from .7 to two (2) meters in the vicinity of Cuyo
East Pass and Panay Gulf where the subject vessel sank. Thus, as the appellate
court correctly ruled, petitioners vessel, MT Maysun, sank with its entire cargo for
the reason that it was not seaworthy. There was no squall or bad weather or
extremely poor sea condition in the vicinity when the said vessel sank.
The appellate court also correctly opined that the petitioners witnesses, Jaime
Jarabe and Francisco Berina, ship captain and chief mate, respectively, of the said

vessel, could not be expected to testify against the interest of their employer, the
herein petitioner common carrier.
Neither may petitioner escape liability by presenting in evidence certificates[16]
that tend to show that at the time of dry-docking and inspection by the Philippine
Coast Guard, the vessel MT Maysun, was fit for voyage. These pieces of evidence
do not necessarily take into account the actual condition of the vessel at the time of
the commencement of the voyage. As correctly observed by the Court of appeals:
At the time of dry-docking and inspection, the ship may have appeared fit. The
certificates issued, however, do not negate the presumption of unseaworthiness
triggered by an unexplained sinking. Of certificates issued in this regard, authorities
are likewise clear as to their probative value, (thus):
Seaworthiness relates to a vessels actual condition. Neither the granting of
classification or the issuance of certificates establishes seaworthiness. (2-A Benedict
on Admiralty, 7-3, Sec. 62)
And also:
Authorities are clear that diligence in securing certificates of seaworthiness does not
satisfy the vessel owners obligation. Also securing the approval of the shipper of
the cargo, or his surveyor, of the condition of the vessel or her stowage does not
establish due diligence if the vessel was in fact unseaworthy, for the cargo owner
has no obligation in relation to seaworthiness. (Ibid.)[17]
Additionally, the exoneration of MT Maysuns officers and crew by the Board of
Marine Inquiry merely concerns their respective administrative liabilities. It does
not in any way operate to absolve the petitioner common carrier from its civil
liability arising from its failure to observe extraordinary diligence in the vigilance
over the goods it was transporting and for the negligent acts or omissions of its
employees, the determination of which properly belongs to the courts.[18] In the
case at bar, petitioner is liable for the insured value of the lost cargo of industrial
fuel oil belonging to Caltex for its failure to rebut the presumption of fault or
negligence as common carrier[19] occasioned by the unexplained sinking of its
vessel, MT Maysun, while in transit.
Anent the second issue, it is our view and so hold that the presentation in evidence
of the marine insurance policy is not indispensable in this case before the insurer
may recover from the common carrier the insured value of the lost cargo in the
exercise of its subrogatory right. The subrogation receipt, by itself, is sufficient to
establish not only the relationship of herein private respondent as insurer and
Caltex, as the assured shipper of the lost cargo of industrial fuel oil, but also the
amount paid to settle the insurance claim. The right of subrogation accrues simply
upon payment by the insurance company of the insurance claim.[20]
The presentation of the insurance policy was necessary in the case of Home
Insurance Corporation v. CA[21] (a case cited by petitioner) because the shipment
therein (hydraulic engines) passed through several stages with different parties
involved in each stage. First, from the shipper to the port of departure; second,
from the port of departure to the M/S Oriental Statesman; third, from the M/S
Oriental Statesman to the M/S Pacific Conveyor; fourth, from the M/S Pacific
Conveyor to the port of arrival; fifth, from the port of arrival to the arrastre operator;

sixth, from the arrastre operator to the hauler, Mabuhay Brokerage Co., Inc. (private
respondent therein); and lastly, from the hauler to the consignee. We emphasized
in that case that in the absence of proof of stipulations to the contrary, the hauler
can be liable only for any damage that occurred from the time it received the cargo
until it finally delivered it to the consignee. Ordinarily, it cannot be held responsible
for the handling of the cargo before it actually received it. The insurance contract,
which was not presented in evidence in that case would have indicated the scope of
the insurers liability, if any, since no evidence was adduced indicating at what
stage in the handling process the damage to the cargo was sustained.
Hence, our ruling on the presentation of the insurance policy in the said case of
Home Insurance Corporation is not applicable to the case at bar. In contrast, there
is no doubt that the cargo of industrial fuel oil belonging to Caltex, in the case at
bar, was lost while on board petitioners vessel, MT Maysun, which sank while in
transit in the vicinity of Panay Gulf and Cuyo East Pass in the early morning of
August 16, 1986.
WHEREFORE, the instant petition is DENIED. The Decision dated June 17, 1996 of
the Court of Appeals in CA-G.R. CV No. 39836 is AFFIRMED. Costs against the
petitioner.
SO ORDERED.
Bellosillo, (Chairman), Mendoza, Quisumbing, and Buena, JJ., concur.

FIRST DIVISION
[G.R. No. 159636. November 25, 2004]
VICTORY LINER, INC., petitioner, vs. ROSALITO GAMMAD, APRIL ROSSAN P. GAMMAD,
ROI ROZANO P. GAMMAD and DIANA FRANCES P. GAMMAD, respondents.
DECISION
YNARES-SANTIAGO, J.:
Assailed in this petition for review on certiorari is the April 11, 2003 decision[1] of
the Court of Appeals in CA-G.R. CV No. 63290 which affirmed with modification the
November 6, 1998 decision[2] of the Regional Trial Court of Tuguegarao, Cagayan,
Branch 5 finding petitioner Victory Liner, Inc. liable for breach of contract of carriage
in Civil Case No. 5023.
The facts as testified by respondent Rosalito Gammad show that on March 14, 1996,
his wife Marie Grace Pagulayan-Gammad,[3] was on board an air-conditioned
Victory Liner bus bound for Tuguegarao, Cagayan from Manila. At about 3:00 a.m.,
the bus while running at a high speed fell on a ravine somewhere in Barangay
Baliling, Sta. Fe, Nueva Vizcaya, which resulted in the death of Marie Grace and
physical injuries to other passengers.[4]
On May 14, 1996, respondent heirs of the deceased filed a complaint[5] for
damages arising from culpa contractual against petitioner. In its answer,[6] the

petitioner claimed that the incident was purely accidental and that it has always
exercised extraordinary diligence in its 50 years of operation.
After several re-settings,[7] pre-trial was set on April 10, 1997.[8] For failure to
appear on the said date, petitioner was declared as in default.[9] However, on
petitioners motion[10] to lift the order of default, the same was granted by the trial
court.[11]
At the pre-trial on May 6, 1997, petitioner did not want to admit the proposed
stipulation that the deceased was a passenger of the Victory Liner Bus which fell on
the ravine and that she was issued Passenger Ticket No. 977785. Respondents, for
their part, did not accept petitioners proposal to pay P50,000.00.[12]
After respondent Rosalito Gammad completed his direct testimony, crossexamination was scheduled for November 17, 1997[13] but moved to December 8,
1997,[14] because the parties and the counsel failed to appear. On December 8,
1997, counsel of petitioner was absent despite due notice and was deemed to have
waived right to cross-examine respondent Rosalito.[15]
Petitioners motion to reset the presentation of its evidence to March 25, 1998[16]
was granted. However, on March 24, 1998, the counsel of petitioner sent the court
a telegram[17] requesting postponement but the telegram was received by the trial
court on March 25, 1998, after it had issued an order considering the case
submitted for decision for failure of petitioner and counsel to appear.[18]
On November 6, 1998, the trial court rendered its decision in favor of respondents,
the dispositive portion of which reads:
WHEREFORE, premises considered and in the interest of justice, judgment is hereby
rendered in favor of the plaintiffs and against the defendant Victory Liner,
Incorporated, ordering the latter to pay the following:
1.

Actual Damages -------------------- P 122,000.00

2.

Death Indemnity ---------------------

3.

Exemplary and Moral Damages----- 400,000.00

4.

Compensatory Damages ---------- 1,500,000.00

5.

Attorneys Fees ------------ 10% of the total amount granted

6.

Cost of the Suit.

50,000.00

SO ORDERED.[19]
On appeal by petitioner, the Court of Appeals affirmed the decision of the trial court
with modification as follows:
[T]he Decision dated 06 November 1998 is hereby MODIFIED to reflect that the
following are hereby adjudged in favor of plaintiffs-appellees:
1.

Actual Damages in the amount of P88,270.00;

2.

Compensatory Damages in the amount of P1,135,536,10;

3.

Moral and Exemplary Damages in the amount of P400,000.00; and

4.
Attorneys fees equivalent to 10% of the sum of the actual, compensatory,
moral, and exemplary damages herein adjudged.
The court a quos judgment of the cost of the suit against defendant-appellant is
hereby AFFIRMED.
SO ORDERED.[20]
Represented by a new counsel, petitioner on May 21, 2003 filed a motion for
reconsideration praying that the case be remanded to the trial court for crossexamination of respondents witness and for the presentation of its evidence; or in
the alternative, dismiss the respondents complaint.[21] Invoking APEX Mining, Inc.
v. Court of Appeals,[22] petitioner argues, inter alia, that the decision of the trial
court should be set aside because the negligence of its former counsel, Atty.
Antonio B. Paguirigan, in failing to appear at the scheduled hearings and move for
reconsideration of the orders declaring petitioner to have waived the right to crossexamine respondents witness and right to present evidence, deprived petitioner of
its day in court.
On August 21, 2003, the Court of Appeals denied petitioners motion for
reconsideration.[23]
Hence, this petition for review principally based on the fact that the mistake or
gross negligence of its counsel deprived petitioner of due process of law. Petitioner
also argues that the trial courts award of damages were without basis and should
be deleted.
The issues for resolution are: (1) whether petitioners counsel was guilty of gross
negligence; (2) whether petitioner should be held liable for breach of contract of
carriage; and (3) whether the award of damages was proper.
It is settled that the negligence of counsel binds the client. This is based on the rule
that any act performed by a counsel within the scope of his general or implied
authority is regarded as an act of his client. Consequently, the mistake or
negligence of counsel may result in the rendition of an unfavorable judgment
against the client. However, the application of the general rule to a given case
should be looked into and adopted according to the surrounding circumstances
obtaining. Thus, exceptions to the foregoing have been recognized by the court in
cases where reckless or gross negligence of counsel deprives the client of due
process of law, or when its application will result in outright deprivation of the
clients liberty or property or where the interests of justice so require, and accord
relief to the client who suffered by reason of the lawyers gross or palpable mistake
or negligence.[24]
The exceptions, however, are not present in this case. The record shows that Atty.
Paguirigan filed an Answer and Pre-trial Brief for petitioner. Although initially
declared as in default, Atty. Paguirigan successfully moved for the setting aside of
the order of default. In fact, petitioner was represented by Atty. Paguirigan at the

pre-trial who proposed settlement for P50,000.00. Although Atty. Paguirigan failed
to file motions for reconsideration of the orders declaring petitioner to have waived
the right to cross-examine respondents witness and to present evidence, he
nevertheless, filed a timely appeal with the Court of Appeals assailing the decision
of the trial court. Hence, petitioners claim that it was denied due process lacks
basis.
Petitioner too is not entirely blameless. Prior to the issuance of the order declaring
it as in default for not appearing at the pre-trial, three notices (dated October 23,
1996,[25] January 30, 1997,[26] and March 26, 1997,[27]) requiring attendance at
the pre-trial were sent and duly received by petitioner. However, it was only on
April 27, 1997, after the issuance of the April 10, 1997 order of default for failure to
appear at the pre-trial when petitioner, through its finance and administrative
manager, executed a special power of attorney[28] authorizing Atty. Paguirigan or
any member of his law firm to represent petitioner at the pre-trial. Petitioner is
guilty, at the least, of contributory negligence and fault cannot be imputed solely on
previous counsel.
The case of APEX Mining, Inc., invoked by petitioner is not on all fours with the case
at bar. In APEX, the negligent counsel not only allowed the adverse decision against
his client to become final and executory, but deliberately misrepresented in the
progress report that the case was still pending with the Court of Appeals when the
same was dismissed 16 months ago.[29] These circumstances are absent in this
case because Atty. Paguirigan timely filed an appeal from the decision of the trial
court with the Court of Appeals.
In Gold Line Transit, Inc. v. Ramos,[30] the Court was similarly confronted with the
issue of whether or not the client should bear the adverse consequences of its
counsels negligence. In that case, Gold Line Transit, Inc. (Gold Line) and its lawyer
failed to appear at the pre-trial despite notice and was declared as in default. After
the plaintiffs presentation of evidence ex parte, the trial court rendered decision
ordering Gold Line to pay damages to the heirs of its deceased passenger. The
decision became final and executory because counsel of Gold Line did not file any
appeal. Finding that Goldline was not denied due process of law and is thus bound
by the negligence of its lawyer, the Court held as follows
This leads us to the question of whether the negligence of counsel was so gross and
reckless that petitioner was deprived of its right to due process of law. We do not
believe so. It cannot be denied that the requirements of due process were observed
in the instant case. Petitioner was never deprived of its day in court, as in fact it was
afforded every opportunity to be heard. Thus, it is of record that notices were sent
to petitioner and that its counsel was able to file a motion to dismiss the complaint,
an answer to the complaint, and even a pre-trial brief. What was irretrievably lost by
petitioner was its opportunity to participate in the trial of the case and to adduce
evidence in its behalf because of negligence.
In the application of the principle of due process, what is sought to be safeguarded
against is not the lack of previous notice but the denial of the opportunity to be
heard. The question is not whether petitioner succeeded in defending its rights and
interests, but simply, whether it had the opportunity to present its side of the
controversy. Verily, as petitioner retained the services of counsel of its choice, it
should, as far as this suit is concerned, bear the consequences of its choice of a

faulty option. Its plea that it was deprived of due process echoes on hollow ground
and certainly cannot elicit approval nor sympathy.
To cater to petitioners arguments and reinstate its petition for relief from judgment
would put a premium on the negligence of its former counsel and encourage the
non-termination of this case by reason thereof. This is one case where petitioner has
to bear the adverse consequences of its counsels act, for a client is bound by the
action of his counsel in the conduct of a case and he cannot thereafter be heard to
complain that the result might have been different had his counsel proceeded
differently. The rationale for the rule is easily discernible. If the negligence of
counsel be admitted as a reason for opening cases, there would never be an end to
a suit so long as a new counsel could be hired every time it is shown that the prior
counsel had not been sufficiently diligent, experienced or learned.[31]
Similarly, in Macalalag v. Ombudsman,[32] a Philippine Postal Corporation employee
charged with dishonesty was not able to file an answer and position paper. He was
found guilty solely on the basis of complainants evidence and was dismissed with
forfeiture of all benefits and disqualification from government service. Challenging
the decision of the Ombudsman, the employee contended that the gross negligence
of his counsel deprived him of due process of law. In debunking his contention, the
Court said
Neither can he claim that he is not bound by his lawyers actions; it is only in case
of gross or palpable negligence of counsel when the courts can step in and accord
relief to a client who would have suffered thereby. If every perceived mistake, failure
of diligence, lack of experience or insufficient legal knowledge of the lawyer would
be admitted as a reason for the reopening of a case, there would be no end to
controversy. Fundamental to our judicial system is the principle that every litigation
must come to an end. It would be a clear mockery if it were otherwise. Access to the
courts is guaranteed, but there must be a limit to it.
Viewed vis--vis the foregoing jurisprudence, to sustain petitioners argument that it
was denied due process of law due to negligence of its counsel would set a
dangerous precedent. It would enable every party to render inutile any adverse
order or decision through the simple expedient of alleging gross negligence on the
part of its counsel. The Court will not countenance such a farce which contradicts
long-settled doctrines of trial and procedure.[33]
Anent the second issue, petitioner was correctly found liable for breach of contract
of carriage. A common carrier is bound to carry its passengers safely as far as
human care and foresight can provide, using the utmost diligence of very cautious
persons, with due regard to all the circumstances. In a contract of carriage, it is
presumed that the common carrier was at fault or was negligent when a passenger
dies or is injured. Unless the presumption is rebutted, the court need not even make
an express finding of fault or negligence on the part of the common carrier. This
statutory presumption may only be overcome by evidence that the carrier exercised
extraordinary diligence.[34]
In the instant case, there is no evidence to rebut the statutory presumption that the
proximate cause of Marie Graces death was the negligence of petitioner. Hence,
the courts below correctly ruled that petitioner was guilty of breach of contract of
carriage.

Nevertheless, the award of damages should be modified.

Article 1764[35] in relation to Article 2206[36] of the Civil Code, holds the common
carrier in breach of its contract of carriage that results in the death of a passenger
liable to pay the following: (1) indemnity for death, (2) indemnity for loss of earning
capacity, and (3) moral damages.
In the present case, respondent heirs of the deceased are entitled to indemnity for
the death of Marie Grace which under current jurisprudence is fixed at P50,000.00.
[37]
The award of compensatory damages for the loss of the deceaseds earning
capacity should be deleted for lack of basis. As a rule, documentary evidence
should be presented to substantiate the claim for damages for loss of earning
capacity. By way of exception, damages for loss of earning capacity may be
awarded despite the absence of documentary evidence when (1) the deceased is
self-employed earning less than the minimum wage under current labor laws, and
judicial notice may be taken of the fact that in the deceaseds line of work no
documentary evidence is available; or (2) the deceased is employed as a daily wage
worker earning less than the minimum wage under current labor laws.[38]
In People v. Oco,[39] the evidence presented by the prosecution to recover
damages for loss of earning capacity was the bare testimony of the deceaseds wife
that her husband was earning P8,000.00 monthly as a legal researcher of a private
corporation. Finding that the deceased was neither self-employed nor employed as
a daily-wage worker earning less than the minimum wage under the labor laws
existing at the time of his death, the Court held that testimonial evidence alone is
insufficient to justify an award for loss of earning capacity.
Likewise, in People v. Caraig,[40] damages for loss of earning capacity was not
awarded because the circumstances of the 3 deceased did not fall within the
recognized exceptions, and except for the testimony of their wives, no documentary
proof about their income was presented by the prosecution. Thus
The testimonial evidence shows that Placido Agustin, Roberto Raagas, and Melencio
Castro Jr. were not self-employed or employed as daily-wage workers earning less
than the minimum wage under the labor laws existing at the time of their death.
Placido Agustin was a Social Security System employee who received a monthly
salary of P5,000. Roberto Raagas was the President of Sinclair Security and Allied
Services, a family owned corporation, with a monthly compensation of P30,000.
Melencio Castro Jr. was a taxi driver of New Rocalex with an average daily earning of
P500 or a monthly earning of P7,500. Clearly, these cases do not fall under the
exceptions where indemnity for loss of earning capacity can be given despite lack of
documentary evidence. Therefore, for lack of documentary proof, no indemnity for
loss of earning capacity can be given in these cases. (Emphasis supplied)
Here, the trial court and the Court of Appeals computed the award of compensatory
damages for loss of earning capacity only on the basis of the testimony of
respondent Rosalito that the deceased was 39 years of age and a Section Chief of
the Bureau of Internal Revenue, Tuguergarao District Office with a salary of
P83,088.00 per annum when she died.[41] No other evidence was presented. The

award is clearly erroneous because the deceaseds earnings does not fall within the
exceptions.
However, the fact of loss having been established, temperate damages in the
amount of P500,000.00 should be awarded to respondents. Under Article 2224 of
the Civil Code, temperate or moderate damages, which are more than nominal but
less than compensatory damages, may be recovered when the court finds that
some pecuniary loss has been suffered but its amount can not, from the nature of
the case, be proved with certainty.
In Pleno v. Court of Appeals,[42] the Court sustained the trial courts award of
P200,000.00 as temperate damages in lieu of actual damages for loss of earning
capacity because the income of the victim was not sufficiently proven, thus
The trial court based the amounts of damages awarded to the petitioner on the
following circumstances:

As to the loss or impairment of earning capacity, there is no doubt that Pleno is an

ent[re]preneur and the founder of his own corporation, the Mayon Ceramics
Corporation. It appears also that he is an industrious and resourceful person with
several projects in line, and were it not for the incident, might have pushed them
through. On the day of the incident, Pleno was driving homeward with geologist
Longley after an ocular inspection of the site of the Mayon Ceramics Corporation.
His actual income however has not been sufficiently established so that this Court
cannot award actual damages, but, an award of temperate or moderate damages
may still be made on loss or impairment of earning capacity. That Pleno sustained a
permanent deformity due to a shortened left leg and that he also suffers from
double vision in his left eye is also established. Because of this, he suffers from
some inferiority complex and is no longer active in business as well as in social life.
In similar cases as in Borromeo v. Manila Electric Railroad Co., 44 Phil 165; Coriage,
et al. v. LTB Co., et al., L-11037, Dec. 29, 1960, and in Araneta, et al. v. Arreglado, et
al., L-11394, Sept. 9, 1958, the proper award of damages were given.

We rule that the lower courts awards of damages are more consonant with the
factual circumstances of the instant case. The trial courts findings of facts are clear
and well-developed. Each item of damages is adequately supported by evidence on
record.
Article 2224 of the Civil Code was likewise applied in the recent cases of People v.
Singh[43] and People v. Almedilla,[44] to justify the award of temperate damages in
lieu of damages for loss of earning capacity which was not substantiated by the
required documentary proof.
Anent the award of moral damages, the same cannot be lumped with exemplary
damages because they are based on different jural foundations.[45] These damages
are different in nature and require separate determination.[46] In culpa contractual
or breach of contract, moral damages may be recovered when the defendant acted
in bad faith or was guilty of gross negligence (amounting to bad faith) or in wanton
disregard of contractual obligations and, as in this case, when the act of breach of

contract itself constitutes the tort that results in physical injuries. By special rule in
Article 1764 in relation to Article 2206 of the Civil Code, moral damages may also
be awarded in case the death of a passenger results from a breach of carriage.[47]
On the other hand, exemplary damages, which are awarded by way of example or
correction for the public good may be recovered in contractual obligations if the
defendant acted in wanton, fraudulent, reckless, oppressive, or malevolent manner.
[48]
Respondents in the instant case should be awarded moral damages to compensate
for the grief caused by the death of the deceased resulting from the petitioners
breach of contract of carriage. Furthermore, the petitioner failed to prove that it
exercised the extraordinary diligence required for common carriers, it is presumed
to have acted recklessly.[49] Thus, the award of exemplary damages is proper.
Under the circumstances, we find it reasonable to award respondents the amount of
P100,000.00 as moral damages and P100,000.00 as exemplary damages. These
amounts are not excessive.[50]
The actual damages awarded by the trial court reduced by the Court of Appeals
should be further reduced.
In People v. Duban,[51] it was held that only
substantiated and proven expenses or those that appear to have been genuinely
incurred in connection with the death, wake or burial of the victim will be
recognized. A list of expenses (Exhibit J),[52] and the contract/receipt for the
construction of the tomb (Exhibit F)[53] in this case, cannot be considered
competent proof and cannot replace the official receipts necessary to justify the
award. Hence, actual damages should be further reduced to P78,160.00,[54] which
was the amount supported by official receipts.
Pursuant to Article 2208[55] of the Civil Code, attorneys fees may also be
recovered in the case at bar where exemplary damages are awarded. The Court
finds the award of attorneys fees equivalent to 10% of the total amount adjudged
against petitioner reasonable.
Finally, in Eastern Shipping Lines, Inc. v. Court of Appeals,[56] it was held that when
an obligation, regardless of its source, i.e., law, contracts, quasi-contracts, delicts or
quasi-delicts is breached, the contravenor can be held liable for payment of interest
in the concept of actual and compensatory damages, subject to the following rules,
to wit
1.
When the obligation is breached, and it consists in the payment of a sum of
money, i.e., a loan or forbearance of money, the interest due should be that which
may have been stipulated in writing. Furthermore, the interest due shall itself earn
legal interest from the time it is judicially demanded. In the absence of stipulation,
the rate of interest shall be 12% per annum to be computed from default, i.e., from
judicial or extrajudicial demand under and subject to the provisions of Article 1169
of the Civil Code.
2.
When an obligation, not constituting a loan or forbearance of money, is
breached, an interest on the amount of damages awarded may be imposed at the
discretion of the court at the rate of 6% per annum. No interest, however, shall be
adjudged on unliquidated claims or damages except when or until the demand can
be established with reasonable certainty. Accordingly, where the demand is
established with reasonable certainty, the interest shall begin to run from the time
the claim is made judicially or extrajudicially (Art. 1169, Civil Code) but when such

certainty cannot be so reasonably established at the time the demand is made, the
interest shall begin to run only from the date the judgment of the court is made (at
which time the quantification of damages may be deemed to have been reasonably
ascertained). The actual base for the computation of legal interest shall, in any
case, be on the amount finally adjudged.
3.
When the judgment of the court awarding a sum of money becomes final and
executory, the rate of legal interest, whether the case falls under paragraph 1 or
paragraph 2, above, shall be 12% per annum from such finality until its satisfaction,
this interim period being deemed to be by then an equivalent to a forbearance of
credit. (Emphasis supplied).
In the instant case, petitioner should be held liable for payment of interest as
damages for breach of contract of carriage. Considering that the amounts payable
by petitioner has been determined with certainty only in the instant petition, the
interest due shall be computed upon the finality of this decision at the rate of 12%
per annum until satisfaction, per paragraph 3 of the aforecited rule.[57]
WHEREFORE, in view of all the foregoing, the petition is partially granted. The April
11, 2003 decision of the Court of Appeals in CA-G.R. CV No. 63290, which modified
the decision of the Regional Trial Court of Tuguegarao, Cagayan in Civil Case No.
5023, is AFFIRMED with MODIFICATION. As modified, petitioner Victory Liner, Inc., is
ordered to pay respondents the following: (1) P50,000.00 as indemnity for the death
of Marie Grace Pagulayan-Gammad; (2) P100,000.00 as moral damages; (3)
P100,000.00 as exemplary damages; (4) P78,160.00 as actual damages; (5)
P500,000.00 as temperate damages; (6) 10% of the total amount as attorneys fees;
and the costs of suit.
Furthermore, the total amount adjudged against petitioner shall earn interest at the
rate of 12% per annum computed from the finality of this decision until fully paid.
SO ORDERED.
Quisumbing, Carpio, and Azcuna, JJ., concur.
Davide, Jr., C.J., (Chairman), on official leave.
THIRD DIVISION
LEA MER INDUSTRIES, INC.,
Petitioner,

G.R. No. 161745

Present
Panganiban, J.,

- versus -

Chairman,
Sandoval-Gutierrez,
Corona,

Carpio Morales, and

Garcia, JJ
Promulgated:

MALAYAN INSURANCE CO., INC.,*

Respondent.

September 30, 2005

x -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- x
DECISION
PANGANIBAN, J.:
Common carriers are bound to observe extraordinary diligence in their vigilance
over the goods entrusted to them, as required by the nature of their business and
for reasons of public policy. Consequently, the law presumes that common carriers
are at fault or negligent for any loss or damage to the goods that they transport. In
the present case, the evidence submitted by petitioner to overcome this
presumption was sorely insufficient.
The Case
Before us is a Petition for Review[1] under Rule 45 of the Rules of Court, assailing
the October 9, 2002 Decision[2] and the December 29, 2003 Resolution[3] of the
Court of Appeals (CA) in CA-GR CV No. 66028. The challenged Decision disposed as
follows:
WHEREFORE, the appeal is GRANTED. The December 7, 1999 decision of the
Regional Trial Court of Manila, Branch 42 in Civil Case No. 92-63159 is hereby
REVERSED and SET ASIDE. [Petitioner] is ordered to pay the [herein respondent]
the value of the lost cargo in the amount of P565,000.00. Costs against the [herein
petitioner].[4]
The assailed Resolution denied reconsideration.
The Facts
Ilian Silica Mining entered into a contract of carriage with Lea Mer Industries, Inc.,
for the shipment of 900 metric tons of silica sand valued at P565,000.[5] Consigned
to Vulcan Industrial and Mining Corporation, the cargo was to be transported from
Palawan to Manila. On October 25, 1991, the silica sand was placed on board Judy
VII, a barge leased by Lea Mer.[6] During the voyage, the vessel sank, resulting in
the loss of the cargo.[7]
Malayan Insurance Co., Inc., as insurer, paid Vulcan the value of the lost cargo.[8]
To recover the amount paid and in the exercise of its right of subrogation, Malayan
demanded reimbursement from Lea Mer, which refused to comply. Consequently,
Malayan instituted a Complaint with the Regional Trial Court (RTC) of Manila on
September 4, 1992, for the collection of P565,000 representing the amount that
respondent had paid Vulcan.[9]
On October 7, 1999, the trial court dismissed the Complaint, upon finding that the
cause of the loss was a fortuitous event.[10] The RTC noted that the vessel had
sunk because of the bad weather condition brought about by Typhoon Trining. The
court ruled that petitioner had no advance knowledge of the incoming typhoon, and
that the vessel had been cleared by the Philippine Coast Guard to travel from
Palawan to Manila.[11]

Ruling of the Court of Appeals

Reversing the trial court, the CA held that the vessel was not seaworthy when
it sailed for Manila. Thus, the loss of the cargo was occasioned by petitioners fault,
not by a fortuitous event.[12]
Hence, this recourse.[13]
The Issues
Petitioner states the issues in this wise:

A.
Whether or not the survey report of the cargo surveyor, Jesus Cortez, who had
not been presented as a witness of the said report during the trial of this case
before the lower court can be admitted in evidence to prove the alleged facts cited
in the said report.
B.
Whether or not the respondent, Court of Appeals, had validly or legally
reversed the finding of fact of the Regional Trial Court which clearly and
unequivocally held that the loss of the cargo subject of this case was caused by
fortuitous event for which herein petitioner could not be held liable.
C.
Whether or not the respondent, Court of Appeals, had committed serious
error and grave abuse of discretion in disregarding the testimony of the witness
from the MARINA, Engr. Jacinto Lazo y Villegal, to the effect that the vessel Judy VII
was seaworthy at the time of incident and further in disregarding the testimony of
the PAG-ASA weather specialist, Ms. Rosa Barba y Saliente, to the effect that
typhoon Trining did not hit Metro Manila or Palawan.[14]
In the main, the issues are as follows: (1) whether petitioner is liable for the
loss of the cargo, and (2) whether the survey report of Jesus Cortez is admissible in
evidence.
The Courts Ruling
The Petition has no merit.
First Issue:
Liability for Loss of Cargo
Question of Fact
The resolution of the present case hinges on whether the loss of the cargo
was due to a fortuitous event. This issue involves primarily a question of fact,
notwithstanding petitioners claim that it pertains only to a question of law. As a
general rule, questions of fact may not be raised in a petition for review.[15] The
present case serves as an exception to this rule, because the factual findings of the
appellate and the trial courts vary.[16] This Court meticulously reviewed the
records, but found no reason to reverse the CA.
Rule on Common Carriers

Common carriers are persons, corporations, firms or associations engaged in

the business of carrying or transporting passengers or goods, or both -- by land,
water, or air -- when this service is offered to the public for compensation.[17]
Petitioner is clearly a common carrier, because it offers to the public its business of
transporting goods through its vessels.[18]
Thus, the Court corrects the trial courts finding that petitioner became a
private carrier when Vulcan chartered it.[19] Charter parties are classified as
contracts of demise (or bareboat) and affreightment, which are distinguished as
follows:
Under the demise or bareboat charter of the vessel, the charterer will generally be
considered as owner for the voyage or service stipulated. The charterer mans the
vessel with his own people and becomes, in effect, the owner pro hac vice, subject
to liability to others for damages caused by negligence. To create a demise, the
owner of a vessel must completely and exclusively relinquish possession, command
and navigation thereof to the charterer; anything short of such a complete transfer
is a contract of affreightment (time or voyage charter party) or not a charter party
at all.[20]
The distinction is significant, because a demise or bareboat charter indicates a
business undertaking that is private in character. [21] Consequently, the rights and
obligations of the parties to a contract of private carriage are governed principally
by their stipulations, not by the law on common carriers.[22]
The Contract in the present case was one of affreightment, as shown by the fact
that it was petitioners crew that manned the tugboat M/V Ayalit and controlled the
barge Judy VII.[23] Necessarily, petitioner was a common carrier, and the pertinent
law governs the present factual circumstances.
Extraordinary Diligence Required
Common carriers are bound to observe extraordinary diligence in their
vigilance over the goods and the safety of the passengers they transport, as
required by the nature of their business and for reasons of public policy.[24]
Extraordinary diligence requires rendering service with the greatest skill and
foresight to avoid damage and destruction to the goods entrusted for carriage and
delivery.[25]
Common carriers are presumed to have been at fault or to have acted negligently
for loss or damage to the goods that they have transported.[26] This presumption
can be rebutted only by proof that they observed extraordinary diligence, or that
the loss or damage was occasioned by any of the following causes:[27]
(1)

Flood, storm, earthquake, lightning, or other natural disaster or calamity;

(2)

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

(3)

Act or omission of the shipper or owner of the goods;

(4)

The character of the goods or defects in the packing or in the containers;

(5)

Order or act of competent public authority.[28]

Rule on Fortuitous Events

Article 1174 of the Civil Code provides that no person shall be responsible for
a fortuitous event which could not be foreseen, or which, though foreseen, was
inevitable. Thus, if the loss or damage was due to such an event, a common
carrier is exempted from liability.
Jurisprudence defines the elements of a fortuitous event as follows: (a) the cause
of the unforeseen and unexpected occurrence, or the failure of the debtors to
comply with their obligations, must have been independent of human will; (b) the
event that constituted the caso fortuito must have been impossible to foresee or, if
foreseeable, impossible to avoid; (c) the occurrence must have been such as to
render it impossible for the debtors to fulfill their obligation in a normal manner; and
(d) the obligor must have been free from any participation in the aggravation of the
resulting injury to the creditor.[29]
To excuse the common carrier fully of any liability, the fortuitous event must have
been the proximate and only cause of the loss.[30] Moreover, it should have
exercised due diligence to prevent or minimize the loss before, during and after the
occurrence of the fortuitous event.[31]

Loss in the Instant Case

There is no controversy regarding the loss of the cargo in the present case.
As the common carrier, petitioner bore the burden of proving that it had exercised
extraordinary diligence to avoid the loss, or that the loss had been occasioned by a
fortuitous event -- an exempting circumstance.
It was precisely this circumstance that petitioner cited to escape liability. Lea Mer
claimed that the loss of the cargo was due to the bad weather condition brought
about by Typhoon Trining.[32] Evidence was presented to show that petitioner had
not been informed of the incoming typhoon, and that the Philippine Coast Guard
had given it clearance to begin the voyage.[33] On October 25, 1991, the date on
which the voyage commenced and the barge sank, Typhoon Trining was allegedly
far from Palawan, where the storm warning was only Signal No. 1.[34]
The evidence presented by petitioner in support of its defense of fortuitous event
was sorely insufficient. As required by the pertinent law, it was not enough for the
common carrier to show that there was an unforeseen or unexpected occurrence. It
had to show that it was free from any fault -- a fact it miserably failed to prove.
First, petitioner presented no evidence that it had attempted to minimize or prevent
the loss before, during or after the alleged fortuitous event.[35] Its witness, Joey A.
Draper, testified that he could no longer remember whether anything had been
done to minimize loss when water started entering the barge.[36] This fact was
confirmed during his cross-examination, as shown by the following brief exchange:
Atty. Baldovino, Jr.:

Other than be[a]ching the barge Judy VII, were there other precautionary
measure[s] exercised by you and the crew of Judy VII so as to prevent the los[s] or
sinking of barge Judy VII?
xx

xxx

xxx

Atty. Baldovino, Jr.:

Your Honor, what I am asking [relates to the] action taken by the officers and crew
of tugboat Ayalit and barge Judy VII
x x x to prevent the sinking of barge Judy VII?
xxx

xxx

xxx

Court:
Mr. witness, did the captain of that tugboat give any instruction on how to save the
barge Judy VII?
Joey Draper:
I can no longer remember sir, because that happened [a] long time
ago.[37]
Second, the alleged fortuitous event was not the sole and proximate cause of the
loss. There is a preponderance of evidence that the barge was not seaworthy when
it sailed for Manila.[38] Respondent was able to prove that, in the hull of the barge,
there were holes that might have caused or aggravated the sinking.[39] Because
the presumption of negligence or fault applied to petitioner, it was incumbent upon
it to show that there were no holes; or, if there were, that they did not aggravate
the sinking.
Petitioner offered no evidence to rebut the existence of the holes. Its witness,
Domingo A. Luna, testified that the barge was in tip-top or excellent condition,[40]
but that he had not personally inspected it when it left Palawan.[41]
The submission of the Philippine Coast Guards Certificate of Inspection of Judy VII,
dated July 31, 1991, did not conclusively prove that the barge was seaworthy.[42]
The regularity of the issuance of the Certificate is disputably presumed.[43] It could
be contradicted by competent evidence, which respondent offered. Moreover, this
evidence did not necessarily take into account the actual condition of the vessel at
the time of the commencement of the voyage.[44]
Second Issue:
Admissibility of the Survey Report
Petitioner claims that the Survey Report[45] prepared by Jesus Cortez, the
cargo surveyor, should not have been admitted in evidence. The Court partly
agrees. Because he did not testify during the trial,[46] then the Report that he had
prepared was hearsay and therefore inadmissible for the purpose of proving the
truth of its contents.

The Survey Report Not the Sole Evidence

The facts reveal that Cortezs Survey Report was used in the testimonies of
respondents witnesses -- Charlie M. Soriano; and Federico S. Manlapig, a cargo
marine surveyor and the vice-president of Toplis and Harding Company.[47] Soriano
testified that the Survey Report had been used in preparing the final Adjustment
Report conducted by their company.[48] The final Report showed that the barge
was not seaworthy because of the existence of the holes. Manlapig testified that he
had prepared that Report after taking into account the findings of the surveyor, as
well as the pictures and the sketches of the place where the sinking occurred.[49]
Evidently, the existence of the holes was proved by the testimonies of the
witnesses, not merely by Cortez Survey Report.
Rule on Independently
Relevant Statement
That witnesses must be examined and presented during the trial,[50] and
that their testimonies must be confined to personal knowledge is required by the
rules on evidence, from which we quote:
Section 36.
Testimony generally confined to personal knowledge; hearsay
excluded. A witness can testify only to those facts which he knows of his personal
knowledge; that is, which are derived from his own perception, except as otherwise
provided in these rules.[51]
On this basis, the trial court correctly refused to admit Jesus Cortezs
Affidavit, which respondent had offered as evidence.[52] Well-settled is the rule
that, unless the affiant is presented as a witness, an affidavit is considered hearsay.
[53]
An exception to the foregoing rule is that on independently relevant statements.
A report made by a person is admissible if it is intended to prove the tenor, not the
truth, of the statements.[54] Independent of the truth or the falsity of the
statement given in the report, the fact that it has been made is relevant. Here, the
hearsay rule does not apply.[55]
In the instant case, the challenged Survey Report prepared by Cortez was
admitted only as part of the testimonies of respondents witnesses. The referral to
Cortezs Report was in relation to Manlapigs final Adjustment Report. Evidently, it
was the existence of the Survey Report that was testified to. The admissibility of
that Report as part of the testimonies of the witnesses was correctly ruled upon by
the trial court.
At any rate, even without the Survey Report, petitioner has already failed to
overcome the presumption of fault that applies to common carriers.
WHEREFORE, the Petition is DENIED and the assailed Decision and Resolution are
AFFIRMED. Costs against petitioner.
SO ORDERED.

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 CAG.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)
2)

1)

Actual damages of P44,830.00;

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 plaintiffsappellees, 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
PETITIONERS ARE LIABLE FOR THE DEATH OF NICANOR NAVIDAD, JR.

THAT

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.

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.
Davide, Jr., C.J., (Chairman), Ynares-Santiago, Carpio and Azcuna, JJ., concur.
THIRD DIVISION
[G.R. No. 136048. January 23, 2001]
JOSE BARITUA and JB LINE, petitioners, vs. NIMFA DIVINA MERCADER in her capacity
and as guardian of DARWIN, GIOVANNI, RODEL and DENNIS, all surnamed
MERCADER; LEONIDA Vda. de MERCADER on her behalf and on behalf of her minor
child MARY JOY MERCADER; SHIRLEY MERCADER DELA CRUZ; MARIA THERESA
MERCADER-GARCIA; DANILO MERCADER; JOSE DANTE MERCADER; and JOSEFINA
MERCADER, respondents.
DECISION
PANGANIBAN, J.:
The Manchester ruling requiring the payment of docket and other fees as a
condition for the acquisition of jurisdiction has no retroactive effect and applies only
to cases filed after its finality.
The Case
Before us is a Petition for Review under Rule 45 of the Rules of Court, assailing the
April 17, 1998 Decision[1] and the October 28, 1998 Resolution[2] of the Court of
Appeals (CA) in CA-GR CV No. 40772. The decretal portion of said Decision reads as
follows:

WHEREFORE, upon all the foregoing premises considered, the DECISION appealed
from is AFFIRMED with the MODIFICATION that the loss of earnings of the late
Dominador Mercader is reduced to P798,000.00.[3]
The assailed Resolution denied petitioners Motion for Reconsideration.
The Court of Appeals sustained the Decision of the Regional Trial Court (RTC) of
Laoang, Northern Samar (Branch 21). Except for the modification of the loss of
earnings, it affirmed all the monetary damages granted by the trial court to
respondents. The decretal portion of the assailed RTC Decision reads as follows:[4]
WHEREFORE, on preponderance of evidence, judgment is for [herein respondents]
and against [herein petitioners], ordering the latter to pay the former:
(a) As compensatory damages for the death of Dominador Mercader -- P50,000.00;
(b) For the loss of earnings of the late Dominador Mercader -- P1,660,000.00, more
or less, based on the average life span of 75 years from the time of his death who
earned a net income of P5,000.00 monthly out of his business;
(c) Actual damages of P30,000.00 receipted purchases of goods in Manila;
P5,750.00 for the first class coffin and a 15-day wake services evidenced by a
receipt marked Exh. D; [P]850.00 for the 50 x 60 headstone, receipt marked Exh.
E and P1,590.00 -- Deed of Absolute Sale of a burial lot, marked Exh. F;
(d) 25% of whatever amount is collected by [respondents] from [petitioners] but no
less than P50,000.00 plus P1,000.00 per hearing by way of attorneys fees;
(e) As moral damages -- P50,000.00;
(f) As exemplary damages -- P30,000.00; and
(g) To pay the costs.
The Facts
The antecedents of the case are succinctly summarized by the Court of Appeals in
this wise:
The original complaint was filed against JB Lines, Inc. [Petitioner JB Lines, Inc.] filed
a motion to dismiss complaint, to strike out false-impertinent matters therefrom,
and/or for bill of particulars on the primary grounds that [respondents] failed to
implead Jose Baritua as an indispensable party and that the cause of action is a suit
against a wrong and non-existent party. [Respondents] filed an opposition to the
said motion and an amended complaint.
In an Order dated December 11, 1984 the trial court denied the aforesaid motion
and admitted the amended complaint of [respondents] impleading Jose Baritua and
alleged the following:
(10) The late Dominador Mercader is a [b]usinessman mainly engaged in the buy
and sell of dry goods in Laoang, N. Samar. He buys his goods from Manila and

bring[s] them to Laoang, Northern Samar for sale at his store located in the said
locality;
(11) Sometime on March 16, 1983, the late Dominador Mercader boarded
[petitioners] bus No. 142 with Plate No. 484 EU at [petitioners] Manila
Station/terminal, bound for Brgy. Rawis, Laoang Northern Samar as a paying
passenger;
(12) At that time, Dominador Mercader had with him as his baggage, assorted
goods (i.e. long pants, short pants, dusters, etc.) which he likewise loaded in
[petitioners] bus;
(13) The late Dominador Mercader was not able to reach his destination considering
that on March 17, 1983 at Beily (Bugco) Bridge, Barangay Roxas, Mondragon,
Northern Samar, while he was on board [petitioners] bus no. 142 with Plate No. 484
EU, the said bus fell into the river as a result of which the late Dominador Mercader
died. x x x.
(14) The accident happened because [petitioners] driver negligently and recklessly
operated the bus at a fast speed in wanton disregard of traffic rules and regulations
and the prevailing conditions then existing that caused [the] bus to fall into the
river.
[Respondents] then filed a motion to declare [petitioners] in default which motion
was opposed by [petitioners]. [Respondents] withdrew the said motion prompting
the trial court to cancel the scheduled hearing of the said motion to declare
[petitioners] in default in an Order dated January 23, 1985.
In its answer, [petitioners] denied specifically all the material allegations in the
complaint and alleged the following:
2. The alleged person of Dominador Mercader did not board bus 142 at
[petitioners] Manila station/terminal x x x as a (supposed paying passenger). There
is even no statement in the complaint that Dominador Mercader (if it were true that
he was a passenger of bus 142 at the [petitioners] Manila station/terminal) was
issued any passenger-freight ticket conformably with law and practice. It is a fact of
public knowledge that, in compliance with existing rules and laws, [Petitioner]
Baritua, as a public utility operator, issues, thru his conductors, in appropriate
situations, to a true passenger, the familiar and known passenger and freight ticket
which reads in part:
NOTICE
Baggage carried at owners risk x x x liability on prepaid freight otherwise declared.
xxx

xxx

Whole Fare Paid P ______________

Declared value ____________ x x x.
Description of Freight _____________________________

xxx

Signature of Owner.
3. It is also a fact of public knowledge that [Petitioner] Baritua does not have any
Manila station/terminal, because what he has is a Pasay city station.
4. [Petitioner] Baritua had no prior knowledge that, on or about March 17, 1983,
and/or previous thereto, the Bugko Bailey Bridge (across Catarman-Laoang road) in
Barangay Roxas, Mondragon, Northern Samar, was in virtual dilapida[ted] and
dangerous condition, in a state of decay and disrepair, thus calling for the
concerned government and public officials performance of their coordinative and
joint duties and responsibilities, to repair, improve and maintain that bridge, in good
and reasonably safe condition, but, far from performing or complying with said
subject duties and responsibilities, the adverted officials concerned, without just
cause, not only failed and neglected to cause such needed repair, improvement and
maintenance of the Bugko Bailey Bridge, on or prior to March 17, 1983, but also
failed, and neglected to either close the Bugko Bridge to public use and travel,
and/or to put appropriate warning and cautionary signs, for repair, improvement,
maintenance, and safety purposes.
So that, as
a proximate and direct
consequence of the aggregate officials nonfeasance, bad faith, negligence, serious
inefficiency, and callous indifference to public safety, that Bugko Bridge collapsed
inward and caved in ruin, on that March 17, 1983, while Barituas bus 142 was
cautiously and prudently passing and travelling across the said bridge, as a result of
which the bus fell into the river and sea waters, despite the exercise and
compliance by Baritua and his driver of their duties in the matter of their requisite
degree of diligence, caution and prudence, Baritua also exercised and complied with
the requisite duty of diligence, care, and prudence in the selection and supervision
over his driver, contrary to the baseless imputation in paragraphs 14 and 20 of the
original and amended complaints. Moreover, Baritua and his driver did not violate
any traffic rule and regulation, contrary to plaintiffs insinuation.
5. Furthermore, [Petitioner] Baritua and his driver have no causative connection
with the alleged death of Dominador Mercader who, according to a reliable source,
was already seriously suffering from a lingering illness even prior to his alleged
demise. Baritua also learned lately, and so it is herein alleged that Dominador
Mercader contributed considerably, to, and/or provided the proximate and direct
cause of his own death, hence, he himself is to be blamed for whatever may have
happened to him or for whatever may have been sustained by his supposed heirs,
vis--vis the suit against the wrong party.
6. Baritua and his driver, as earlier stated, did not commit any actionable breach of
contract with the alleged Dominador Mercader or the latters supposed heirs.
7. There is no factual nor any legal basis for plaintiffs proffered claims for damages.
II. AFFIRMATIVE DEFENSES
8. Based on the preceding averments, plaintiffs have neither a cause nor a right of
action against [Petitioner] Baritua and his driver.
8.1. The allegation that supposedly the x x x [p]laintiffs are the compulsory heirs of
the late DOMINADOR MERCADER x x x (par. 8, complaint) is too vague and too
broad, as the subject allegation is a bare and pure conclusionary averment

unaccompanied by the requisite statement of ultimate facts constitutive of a cause

or right of action.
8.2. Even assuming arguendo, without however conceding, plaintiffs statement of a
cause of action, the complaint is nonetheless replete with false and impertinent
matters which fit the rule on striking out pleadings or parts thereof. To mention only
a glaring few:
8.2.a. The allegation on exemplary damages x x x is impertinent and immaterial in
the complaint against a supposed employer. For, even theoretically assuming,
without however admitting a negligent act-omission on the part of a driver,
nevertheless, in such a hypothetical situation, the causative negligence, if any there
was, is personal to the wrongdoer, i.e., the employee-driver, to the exclusion of the
employer.
8.2.b. The allegation on supposed minimum life of 75 years and on he expects to
earn no less than P1,680,000.00 x x x is false, a pure hyperbole, and bereft of
factual and legal basis. Besides, what jurisprudential rule refers to is only net
earning. The law abhors a claim, akin to plaintiffs allegation, which is manifestly
speculative, as it may not exist at all. Furthermore, the questioned allegation in the
plaintiffs original and amended complaints is not preceded by the requisite
statement of definitive facts, nor of any specific fact, which could possibly afford a
rational basis for a reasonable expectation of supposed earning that could be lost,
or impaired.
8.2.c. Likewise, the allegations that allegedly x x x the late Dominador Mercader
boarded x x x Bus No. 142 x x x and that supposedly the latter had a baggage x x x
containing drygoods x x x in which case [petitioners have] to pay the value thereof
in such amount as may be proven by [respondents] in court during the trial x x x,
apart from being false, are offensive to the rule on concise statement of ultimate
facts. The assailed allegations also contravene Interim Rule 11, (i)f any demand is
for damages in a civil action the amount thereof must be specifically alleged. In
consequence of this averment, [respondents] have not yet paid the correct docket
fee, for which reason, [respondents] case may be dismissed on that ground alone.
8.3. In violation also of the same Interim Rule 11, regarding the requisite definitive
amount of claim, the allegation on the supposed funeral expense x x x does not also
indicate any specific amount. So with the averment on supposed moral damage
which may not be warranted because of absence of allegation of fraud or bad faith,
if any, there was, apart from want of causative connection with the defendant.
8.4. The allegation in paragraph 15 of the original and amended complaint is also a
pure conclusionary averment, without a factual premise.
9. [Petitioner] JB LINE, impleaded in the amended complaint, is merely a business
name and sole proprietorship of defendant Baritua. As such, JB Line is not a
juridical person, nor an entity authorized by law to sue and be sued, hence, it
cannot legally be a party to any action. With this averment, correlated with that in
paragraphs 4-5 hereof, [respondents] amended complaint is essentially a suit
against a wrong party.[5]
The RTC, after due trial, rendered the aforesaid assailed Decision.

Ruling of the Court of Appeals

As earlier stated, the Court of Appeals affirmed the trial courts award of monetary
damages in favor of respondents, except the amount of Dominador Mercaders lost
earnings, which it reduced to P798,000. It held that petitioners failed to rebut the
presumption that in the event a passenger died or was injured, the carrier had acted
negligently. Petitioners, it added, presented no sufficient proof that they had
exercised extraordinary diligence.
Hence, this Petition.[6]
The Issues
In their Memorandum, petitioners submit the following issues for our consideration:
I
Did the honorable Court of Appeals (CA) gravely abuse its discretion when it allowed
to pass sub silencio the trial courts failure to rule frontally on petitioners plea for a
bill of particulars, and ignored the nature of respondents prayer in the complaint
pleading for an award of -a) P12,000.00 -- representing the death compensation;
b) An amount to be proven in court, representing actual damages;
c) P1,660,000.00 or more as may be proven during the trial, by way of loss of
earnings;
d) An amount to be proven in court as and by way of funeral expenses;
e) An amount to be proven during the trial, representing moral damages;
f) An amount to be determined by this Honorable Court, representing exemplary
damages;
g) An amount equivalent to 25% of whatever amount the plaintiffs would be able to
collect from the defendant but in no case less than P50,000.00 plus an additional
amount of P1,000.00 per hearing as and by way of Attorneys fees;
II
Did the CA also ignore the fact that the trial court was not paid the correct amount
of the docket and other lawful fees; hence, without jurisdiction over the original and
amended complaints or over the subject matter of the case;
III
Did the CA likewise arbitrarily disregard petitioners constitutional right to
procedural due process and fairness when it ignored and thrust aside their right to
present evidence and to expect that their evidence will be duly considered and
appreciated; and

IV
In awarding excessive and extravagant damages, did the CA and the trial court
adhere to the rule that their assailed decision must state clearly and distinctly the
facts and the laws on which they are based?[7]
Distilling the alleged errors cited above, petitioners raise two main issues for our
consideration: (1) whether the CA erred in holding that the RTC had jurisdiction over
the subject matter of the case, and (2) whether the CA disregarded petitioners
procedural rights.
The Courts Ruling
The Petition is devoid of merit.
First Issue: Jurisdiction
Petitioners contend that since the correct amounts of docket and other lawful fees
were not paid by respondents, then the trial court did not acquire jurisdiction over
the subject matter of the case.
The Court, in Manchester Development Corporation v. CA,[8] held that [t]he court
acquires jurisdiction over any case only upon the payment of the prescribed docket
fee. An amendment of the complaint or similar pleading will not thereby vest
jurisdiction in the court, much less the payment of the docket fee based on the
amounts sought in the amended pleading. x x x.
Generally, the jurisdiction of a court is determined by the statute in force at the
commencement of the action,[9] unless such statute provides for its retroactive
application.[10] Once the jurisdiction of a court attaches, it continues until the case
is finally terminated.[11] The trial court cannot be ousted therefrom by subsequent
happenings or events, although of a character that would have prevented
jurisdiction from attaching in the first instance.[12]
The Manchester ruling, which became final in 1987, has no retroactive application
and cannot be invoked in the subject Complaint filed in 1984. The Court explicitly
declared:
To put a stop to this irregularity, henceforth all complaints, petitions, answers and
other similar pleadings should specify the amount of damages being prayed for not
only in the body of the pleading but also in the prayer, and said damages shall be
considered in the assessment of the filing fees in any case. Any pleading that fails
to comply with this requirement shall not be accepted nor admitted, or shall
otherwise be expunged from the record.[13] (emphasis supplied)
Second Issue: Petitioners Procedural Rights
Motion for a Bill of Particulars
Petitioners argue that the Court of Appeals erred when it passed sub silencio on the
trial courts failure to rule frontally on their plea for a bill of particulars.

We are not impressed. It must be noted that petitioners counsel manifested in

open court his desire to file a motion for a bill of particulars. The RTC gave him ten
days from March 12, 1985 within which to do so.[14] He, however, filed the
aforesaid motion only on April 2, 1985 or eleven days past the deadline set by the
trial court.[15] Moreover, such motion was already moot and academic because,
prior to its filing, petitioners had already filed their answer and several other
pleadings to the amended Complaint. Section 1, Rule 12 of the Rules of Court,
provides:
Section 1. When applied for; purpose. -- Before responding to a pleading, a party
may move for a more definite statement or for a bill of particulars of any matter
which is not averred with sufficient definiteness or particularity to enable him
properly to prepare his responsive pleading. If the pleading is a reply, the motion
must be filed within ten (10) days from service thereof. Such motion shall point out
the defects complained of, the paragraphs wherein they are contained, and the
details desired.[16] (emphasis supplied)
Petitioners Right to Adduce Evidence
Petitioners also argue that their right to present evidence was violated by the CA,
because it did not consider their contention that the trial judges who heard the case
were biased and impartial. Petitioners contend, as they did before the CA, that
Judge Tomas B. Noynay based his Decision on certain chosen partial testimonies of
[respondents] witnesses x x x. They further maintain that Judge Fortunato
Operario, who initially handled the case, questioned some witnesses in an
overzealous manner and assum[ed] the dual role of magistrate and advocate.[17]
These arguments are not meritorious. First, judges cannot be expected to rely on
the testimonies of every witness. In ascertaining the facts, they determine who are
credible and who are not. In doing so, they consider all the evidence before them.
In other words, the mere fact that Judge Noynay based his decision on the
testimonies of respondents witnesses does not necessarily mean that he did not
consider those of petitioners. Second, we find no sufficient showing that Judge
Operario was overzealous in questioning the witnesses. His questions merely
sought to clarify their testimonies. In all, we reject petitioners contention that their
right to adduce evidence was violated.
Alleged Failure to State Clearly the Facts and the Law
We are not convinced by petitioners contention, either, that both the trial and the
appellate courts failed to state clearly and distinctly the facts and the law involved
in the case. As can be gleaned from their Decisions, both courts clearly laid down
their bases for awarding monetary damages to respondents.
Both the RTC and the CA found that a contract of carriage existed between
petitioners and Dominador Mercader when he boarded Bus No. 142 in Pasay City on
March 16, 1983. Petitioners failed to transport him to his destination, because the
bus fell into a river while traversing the Bugko Bailey Bridge. Although he survived
the fall, he later died of asphyxia secondary to drowning.
We agree with the findings of both courts that petitioners failed to observe
extraordinary diligence[18] that fateful morning. It must be noted that a common
carrier, by the nature of its business and for reasons of public policy, is bound to

carry passengers safely as far as human care and foresight can provide. It is
supposed to do so by using the utmost diligence of very cautious persons, with due
regard for all the circumstances.[19] In case of death or injuries to passengers, it is
presumed to have been at fault or to have acted negligently, unless it proves that it
observed extraordinary diligence as prescribed in Articles 1733 and 1755[20] of the
Civil Code.
We sustain the ruling of the CA that petitioners failed to prove that they had
observed extraordinary diligence.
First, petitioners did not present evidence on the skill or expertise of the driver of
Bus No. 142 or the condition of that vehicle at the time of the incident.
Second, the bus was overloaded at the time.
standing when the incident occurred.[21]

In fact, several individuals were

Third, the bus was overspeeding. Its conductor testified that it had overtaken
several buses before it reached the Bugko Bailey Bridge.[22] Moreover, prior to
crossing the bridge, it had accelerated and maintained its speed towards the bridge.
[23]
We therefore believe that there is no reason to overturn the assailed CA Decision,
which affirmed that of the RTC. It is a well-settled rule that the trial courts factual
findings, when affirmed by the appellate court, are conclusive and binding, if they
are not tainted with arbitrariness or oversight of some fact or circumstance of
significance and influence.[24] As clearly discussed above, petitioners have not
presented sufficient ground to warrant a deviation from this rule.
Finally, we cannot fault the appellate court in its computation of the damages and
lost earnings, since it effectively computed only net earnings in accordance with
existing jurisprudence.[25]
WHEREFORE, the Petition is hereby DENIED, and the assailed Decision AFFIRMED.
Costs against petitioners.
SO ORDERED.
Melo, (Chairman), Vitug, Gonzaga-Reyes, and Sandoval-Gutierrez, JJ., concur.
THIRD DIVISION
[G.R. No. 118664. August 7, 1998]
JAPAN AIRLINES, petitioner, vs. THE COURT OF APPEALS ENRIQUE AGANA, MARIA
ANGELA NINA AGANA, ADALIA B. FRANCISCO and JOSE MIRANDA, respondents.
DECISION
ROMERO, J.:
Before us is an appeal by certiorari filed by petitioner Japan Airlines, Inc. (JAL)
seeking the reversal of the decision of the Court of Appeals,[1] which affirmed with
modification the award of damages made by the trial court in favor of herein private

respondents Enrique Agana, Maria Angela Nina Agana, Adelia Francisco and Jose
Miranda.
On June 13, 1991, private respondent Jose Miranda boarded JAL flight No. JL 001 in
San Francisco, California bound for Manila. Likewise, on the same day private
respondents Enrique Agana, Maria Angela Nina Agana and Adelia Francisco left Los
Angeles, California for Manila via JAL flight No. JL 061. As an incentive for travelling
on the said airline, both flights were to make an overnight stopover at Narita, Japan,
at the airlines expense, thereafter proceeding to Manila the following day.
Upon arrival at Narita, Japan on June 14, 1991, private respondents were billeted at
Hotel Nikko Narita for the night. The next day, private respondents, on the final leg
of their journey, went to the airport to take their flight to Manila. However, due to
the Mt. Pinatubo eruption, unrelenting ashfall blanketed Ninoy Aquino International
Airport (NAIA), rendering it inaccessible to airline traffic.
Hence, private
respondents trip to Manila was cancelled indefinitely.
To accommodate the needs of its stranded passengers, JAL rebooked all the Manilabound passengers on flight No. 741 due to depart on June 16, 1991 and also paid for
the hotel expenses for their unexpected overnight stay. On June 16, 1991, much to
the dismay of the private respondents, their long anticipated flight to Manila was
again cancelled due to NAIAs indefinite closure. At this point, JAL informed the
private respondents that it would no longer defray their hotel and accommodation
expense during their stay in Narita.
Since NAIA was only reopened to airline traffic on June 22, 1991, private
respondents were forced to pay for their accommodations and meal expenses from
their personal funds from June 16 to June 21, 1991. Their unexpected stay in Narita
ended on June 22, 1991 when they arrived in Manila on board JL flight No. 741.
Obviously, still reeling from the experience, private respondents, on July 25, 1991,
commenced an action for damages against JAL before the Regional Trial Court of
Quezon City, Branch 104.[2] To support their claim, private respondents asserted
that JAL failed to live up to its duty to provide care and comfort to its stranded
passengers when it refused to pay for their hotel and accommodation expenses
from June 16 to 21, 1991 at Narita, Japan. In other words, they insisted that JAL was
obligated to shoulder their expenses as long as they were still stranded in Narita.
On the other hand, JAL denied this allegation and averred that airline passengers
have no vested right to these amenities in case a flight is cancelled due to force
majeure.
On June 18, 1992, the trial court rendered its judgment in favor of private
respondents holding JAL liable for damages, viz.:
WHEREFORE, judgment is rendered in favor of plaintiffs ordering the defendant
Japan Airlines to pay the plaintiffs Enrique Agana, Adalia B. Francisco and Maria
Angela Nina Agana the sum of One million Two Hundred forty-six Thousand Nine
Hundred Thirty-Six Pesos (P1,246,936.00) and Jose Miranda the sum of Three
Hundred Twenty Thousand Six Hundred sixteen and 31/100 (P320,616.31) as actual,
moral and exemplary damages and pay attorneys fees in the amount of Two
Hundred Thousand Pesos (P200,000.00), and to pay the costs of suit.

Undaunted, JAL appealed the decision before the Court of Appeals, which, however,
with the exception of lowering the damages awarded affirmed the trial courts
finding,[3] thus:
Thus, the award of moral damages should be as it is hereby reduced to
P200,000.00 for each of the plaintiffs, the exemplary damages to P300,000.00 and
the attorneys fees to P100,000.00 plus the costs.
WHEREFORE, with the foregoing Modification, the judgment appealed from is hereby
AFFIRMED in all other respects.
JAL filed a motion for reconsideration which proved futile and unavailing.[4]
Failing in its bid to reconsider the decision, JAL has now filed this instant petition.
The issue to be resolved is whether JAL, as a common carrier has the obligation to
shoulder the hotel and meal expenses of its stranded passengers until they have
reached their final destination, even if the delay were caused by force majeure.
To begin with, there is no dispute that the Mt. Pinatubo eruption prevented JAL from
proceeding to Manila on schedule. Likewise, private respondents concede that such
event can be considered as force majeure since their delayed arrival in Manila was
not imputable to JAL.[5]
However, private respondents contend that while JAL cannot be held responsible for
the delayed arrival in Manila, it was nevertheless liable for their living expenses
during their unexpected stay in Narita since airlines have the obligation to ensure
the comfort and convenience of its passengers. While we sympathize with the
private respondents plight, we are unable to accept this contention.
We are not unmindful of the fact that in a plethora of cases we have consistently
ruled that a contract to transport passengers is quite different in kind and degree
from any other contractual relation. It is safe to conclude that it is a relationship
imbued with public interest. Failure on the part of the common carrier to live up to
the exacting standards of care and diligence renders it liable for any damages that
may be sustained by its passengers. However, this is not to say that common
carriers are absolutely responsible for all injuries or damages even if the same were
caused by a fortuitous event. To rule otherwise would render the defense of force
majeure, as an exception from any liability, illusory and ineffective.
Accordingly, there is no question that when a party is unable to fulfill his obligation
because of force majeure, the general rule is that he cannot be held liable for
damages for non-performance.[6] Corollarily, when JAL was prevented from
resuming its flight to Manila due to the effects of Mt. Pinatubo eruption, whatever
losses or damages in the form of hotel and meal expenses the stranded passengers
incurred, cannot be charged to JAL. Yet it is undeniable that JAL assumed the hotel
expenses of respondents for their unexpected overnight stay on June 15, 1991.
Admittedly, to be stranded for almost a week in a foreign land was an exasperating
experience for the private respondents. To be sure, they underwent distress and
anxiety during their unanticipated stay in Narita, but their predicament was not due
to the fault or negligence of JAL but the closure of NAIA to international flights.
Indeed, to hold JAL, in the absence of bad faith or negligence, liable for the

amenities of its stranded passengers by reason of a fortuitous event is too much of

a burden to assume.
Furthermore, it has been held that airline passengers must take such risks incident
to the mode of travel.[7] In this regard, adverse weather conditions or extreme
climatic changes are some of the perils involved in air travel, the consequences of
which the passenger must assume or expect. After all, common carriers are not the
insurer of all risks.[8]
Paradoxically, the Court of Appeals, despite the presence of force majeure, still
ruled against JAL relying in our decision in PAL v. Court of Appeals,[9] thus:
The position taken by PAL in this case clearly illustrates its failure to grasp the
exacting standard required by law. Undisputably, PALs diversion of its flight due to
inclement weather was a fortuitous event. Nonetheless, such occurrence did not
terminate PALs contract with its passengers. Being in the business of air carriage
and the sole one to operate in the country, PAL is deemed equipped to deal with
situations as in the case at bar. What we said in one case once again must be
stressed, i.e., the relation of carrier and passenger continues until the latter has
been landed at the port of destination and has left the carriers premises. Hence,
PAL necessarily would still have to exercise extraordinary diligence in safeguarding
the comfort, convenience and safety of its stranded passengers until they have
reached their final destination. On this score, PAL grossly failed considering the
then ongoing battle between government forces and Muslim rebels in Cotabato City
and the fact that the private respondent was a stranger to the place.
The reliance is misplaced. The factual background of the PAL case is different from
the instant petition. In that case there was indeed a fortuitous event resulting in the
diversion of the PAL flight. However, the unforeseen diversion was worsened when
private respondents (passenger) was left at the airport and could not even hitch a
ride in a Ford Fiera loaded with PAL personnel,[10] not to mention the apparent
apathy of the PAL station manager as to the predicament of the stranded
passengers.[11] In light of these circumstances, we held that if the fortuitous event
was accompanied by neglect and malfeasance by the carriers employees, an action
for damages against the carrier is permissible.
Unfortunately, for private
respondents, none of these conditions are present in the instant petition.
We are not prepared, however, to completely absolve petitioner JAL from any
liability. It must be noted that private respondents bought tickets from the United
States with Manila as their final destination. While JAL was no longer required to
defray private respondents living expenses during their stay in Narita on account of
the fortuitous event, JAL had the duty to make the necessary
arrangements to
transport private respondents on the first available connecting flight to Manila.
Petitioner JAL reneged on its obligation to look after the comfort and convenience of
its passengers when it declassified private respondents from transit passengers to
new passengers as a result of which private respondents were obliged to make
the necessary arrangements themselves for the next flight to Manila. Private
respondents were placed on the waiting list from June 20 to June 24. To assure
themselves of a seat on an available flight, they were compelled to stay in the
airport the whole day of June 22, 1991 and it was only at 8:00 p.m. of the aforesaid
date that they were advised that they could be accommodated in said flight which
flew at about 9:00 a.m. the next day.

We are not oblivious to the fact that the cancellation of JAL flights to Manila from
June 15 to June 21, 1991 caused considerable disruption in passenger booking and
reservation. In fact, it would be unreasonable to expect, considering NAIAs closure,
that JAL flight operations would be normal on the days affected. Nevertheless, this
does not excuse JAL from its obligation to make the necessary arrangements to
transport private respondents on its first available flight to Manila. After all, it had a
contract to transport private respondents from the United States to Manila as their
final destination.
Consequently, the award of nominal damages is in order. Nominal damages are
adjudicated in order that a right of a plaintiff, which has been violated or invaded by
the defendant, may be vindicated or recognized and not for the purpose of
indemnifying any loss suffered by him.[12] The court may award nominal damages
in every obligation arising from any source enumerated in Article 1157, or in every
case where any property right has been invaded.[13]
WHEREFORE, in view of the foregoing, the decision of the Court of Appeals dated
December 22, 1993 is hereby MODIFIED. The award of actual, moral and exemplary
damages is hereby DELETED. Petitioner JAL is ordered to pay each of the private
respondents nominal damages in the sum of P100,000.00 each including attorneys
fees of P50,000.00 plus costs.
SO ORDERED.
Narvasa, C.J. (Chairman), Kapunan and Purisima, JJ. concur.

SECOND DIVISION
[G.R. No. 111127. July 26, 1996]
MR. & MRS. ENGRACIO FABRE, JR.* and PORFIRIO CABIL, petitioners, vs. COURT OF
APPEALS, THE WORD FOR THE WORLD CHRISTIAN FELLOWSHIP, INC., AMYLINE
ANTONIO, JOHN RICHARDS, GONZALO GONZALES, VICENTE V. QUE, JR., ICLI
CORDOVA, ARLENE GOJOCCO, ALBERTO ROXAS CORDERO, RICHARD BAUTISTA,
JOCELYN GARCIA, YOLANDA CORDOVA, NOEL ROQUE, EDWARD TAN, ERNESTO
NARCISO, ENRIQUETA LOCSIN, FRANCIS NORMAN O. LOPEZ, JULIUS CAESAR GARCIA,
ROSARIO MA. V. ORTIZ, MARIETTA C. CLAVO, ELVIE SENIEL, ROSARIO MARA-MARA,
TERESITA REGALA, MELINDA TORRES, MARELLA MIJARES, JOSEFA CABATINGAN,
MARA NADOC, DIANE MAYO, TESS PLATA, MAYETTE JOCSON, ARLENE Y. MORTIZ, LIZA
MAYO, CARLOS RANARIO, ROSAMARIA T. RADOC and BERNADETTE FERRER,
respondents.
DECISION
MENDOZA, J.:
This is a petition for review on certiorari of the decision of the Court of Appeals[1] in
CA-GR No. 28245, dated September 30, 1992, which affirmed with modification the
decision of the Regional Trial Court of Makati, Branch 58, ordering petitioners jointly
and severally to pay damages to private respondent Amyline Antonio, and its
resolution which denied petitioners motion for reconsideration for lack of merit.

Petitioners Engracio Fabre, Jr. and his wife were owners of a 1982 model Mazda
minibus. They used the bus principally in connection with a bus service for school
children which they operated in Manila. The couple had a driver, Porfirio J. Cabil,
whom they hired in 1981, after trying him out for two weeks. His job was to take
school children to and from the St. Scholasticas College in Malate, Manila.
On November 2, 1984 private respondent Word for the World Christian Fellowship
Inc. (WWCF) arranged with petitioners for the transportation of 33 members of its
Young Adults Ministry from Manila to La Union and back in consideration of which
private respondent paid petitioners the amount of P3,000.00.
The group was scheduled to leave on November 2, 1984, at 5:00 oclock in the
afternoon. However, as several members of the party were late, the bus did not
leave the Tropical Hut at the corner of Ortigas Avenue and EDSA until 8:00 oclock in
the evening. Petitioner Porfirio Cabil drove the minibus.
The usual route to Caba, La Union was through Carmen, Pangasinan. However, the
bridge at Carmen was under repair, so that petitioner Cabil, who was unfamiliar with
the area (it being his first trip to La Union), was forced to take a detour through the
town of Ba-ay in Lingayen, Pangasinan. At 11:30 that night, petitioner Cabil came
upon a sharp curve on the highway, running on a south to east direction, which he
described as siete. The road was slippery because it was raining, causing the bus,
which was running at the speed of 50 kilometers per hour, to skid to the left road
shoulder. The bus hit the left traffic steel brace and sign along the road and
rammed the fence of one Jesus Escano, then turned over and landed on its left side,
coming to a full stop only after a series of impacts. The bus came to rest off the
road. A coconut tree which it had hit fell on it and smashed its front portion.
Several passengers were injured. Private respondent Amyline Antonio was thrown
on the floor of the bus and pinned down by a wooden seat which came off after
being unscrewed. It took three persons to safely remove her from this position. She
was in great pain and could not move.
The driver, petitioner Cabil, claimed he did not see the curve until it was too late.
He said he was not familiar with the area and he could not have seen the curve
despite the care he took in driving the bus, because it was dark and there was no
sign on the road. He said that he saw the curve when he was already within 15 to
30 meters of it. He allegedly slowed down to 30 kilometers per hour, but it was too
late.
The Lingayen police investigated the incident the next day, November 3, 1984. On
the basis of their finding they filed a criminal complaint against the driver, Porfirio
Cabil. The case was later filed with the Lingayen Regional Trial Court. Petitioners
Fabre paid Jesus Escano P1,500.00 for the damage to the latters fence. On the
basis of Escanos affidavit of desistance the case against petitioners Fabre was
dismissed.
Amyline Antonio, who was seriously injured, brought this case in the RTC of Makati,
Metro Manila. As a result of the accident, she is now suffering from paraplegia and
is permanently paralyzed from the waist down. During the trial she described the
operations she underwent and adduced evidence regarding the cost of her
treatment and therapy. Immediately after the accident, she was taken to the

Nazareth Hospital in Ba-ay, Lingayen.

As this hospital was not adequately
equipped, she was transferred to the Sto. Nio Hospital, also in the town of Ba-ay,
where she was given sedatives. An x-ray was taken and the damage to her spine
was determined to be too severe to be treated there. She was therefore brought to
Manila, first to the Philippine General Hospital and later to the Makati Medical
Center where she underwent an operation to correct the dislocation of her spine.
In its decision dated April 17, 1989, the trial court found that:
No convincing evidence was shown that the minibus was properly checked for travel
to a long distance trip and that the driver was properly screened and tested before
being admitted for employment. Indeed, all the evidence presented have shown
the negligent act of the defendants which ultimately resulted to the accident
subject of this case.
Accordingly, it gave judgment for private respondents holding:
Considering that plaintiffs Word for the World Christian Fellowship, Inc. and Ms.
Amyline Antonio were the only ones who adduced evidence in support of their claim
for damages, the Court is therefore not in a position to award damages to the other
plaintiffs.
WHEREFORE, premises considered, the Court hereby renders judgment against
defendants Mr. & Mrs. Engracio Fabre, Jr. and Porfirio Cabil y Jamil pursuant to
articles 2176 and 2180 of the Civil Code of the Philippines and said defendants are
ordered to pay jointly and severally to the plaintiffs the following amount:
1) P93,657.11 as compensatory and actual damages;
2) P500,000.00 as the reasonable amount of loss of earning capacity of plaintiff
Amyline Antonio;
3) P20,000.00 as moral damages;
4) P20,000.00 as exemplary damages; and
5) 25% of the recoverable amount as attorneys fees;
6) Costs of suit.
SO ORDERED.
The Court of Appeals affirmed the decision of the trial court with respect to Amyline
Antonio but dismissed it with respect to the other plaintiffs on the ground that they
failed to prove their respective claims. The Court of Appeals modified the award of
damages as follows:
1) P93,657.11 as actual damages;
2) P600,000.00 as compensatory damages;
3) P50,000.00 as moral damages;

4) P20,000.00 as exemplary damages;

5) P10,000.00 as attorneys fees; and
6) Costs of suit.
The Court of Appeals sustained the trial courts finding that petitioner Cabil failed to
exercise due care and precaution in the operation of his vehicle considering the
time and the place of the accident. The Court of Appeals held that the Fabres were
themselves presumptively negligent. Hence, this petition. Petitioners raise the
following issues:
I.

WHETHER OR NOT PETITIONERS WERE NEGLIGENT.

II. WHETHER OR NOT PETITIONERS WERE LIABLE FOR THE INJURIES SUFFERED BY
PRIVATE RESPONDENTS.
III. WHETHER OR NOT DAMAGES CAN BE AWARDED AND IN THE POSITIVE, UP TO
WHAT EXTENT.
Petitioners challenge the propriety of the award of compensatory damages in the
amount of P600,000.00. It is insisted that, on the assumption that petitioners are
liable, an award of P600,000.00 is unconscionable and highly speculative. Amyline
Antonio testified that she was a casual employee of a company called Suaco,
earning P1,650.00 a month, and a dealer of Avon products, earning an average of
P1,000.00 monthly. Petitioners contend that as casual employees do not have
security of tenure, the award of P600,000.00, considering Amyline Antonios
earnings, is without factual basis as there is no assurance that she would be
regularly earning these amounts.
With the exception of the award of damages, the petition is devoid of merit.
First, it is unnecessary for our purpose to determine whether to decide this case on
the theory that petitioners are liable for breach of contract of carriage or culpa
contractual or on the theory of quasi delict or culpa aquiliana as both the Regional
Trial Court and the Court of Appeals held, for although the relation of passenger and
carrier is contractual both in origin and nature, nevertheless the act that breaks
the contract may be also a tort.[2] In either case, the question is whether the bus
driver, petitioner Porfirio Cabil, was negligent.
The finding that Cabil drove his bus negligently, while his employer, the Fabres, who
owned the bus, failed to exercise the diligence of a good father of the family in the
selection and supervision of their employee is fully supported by the evidence on
record. These factual findings of the two courts we regard as final and conclusive,
supported as they are by the evidence. Indeed, it was admitted by Cabil that on the
night in question, it was raining, and, as a consequence, the road was slippery, and
it was dark. He averred these facts to justify his failure to see that there lay a sharp
curve ahead. However, it is undisputed that Cabil drove his bus at the speed of 50
kilometers per hour and only slowed down when he noticed the curve some 15 to
30 meters ahead.[3] By then it was too late for him to avoid falling off the road.
Given the conditions of the road and considering that the trip was Cabils first one
outside of Manila, Cabil should have driven his vehicle at a moderate speed. There
is testimony[4] that the vehicles passing on that portion of the road should only be

running 20 kilometers per hour, so that at 50 kilometers per hour, Cabil was running
at a very high speed.
Considering the foregoing the fact that it was raining and the road was slippery,
that it was dark, that he drove his bus at 50 kilometers an hour when even on a
good day the normal speed was only 20 kilometers an hour, and that he was
unfamiliar with the terrain, Cabil was grossly negligent and should be held liable for
the injuries suffered by private respondent Amyline Antonio.
Pursuant to Arts. 2176 and 2180 of the Civil Code his negligence gave rise to the
presumption that his employers, the Fabres, were themselves negligent in the
selection and supervision of their employee.
Due diligence in selection of employees is not satisfied by finding that the applicant
possessed a professional drivers license. The employer should also examine the
applicant for his qualifications, experience and record of service.[5] Due diligence in
supervision, on the other hand, requires the formulation of rules and regulations for
the guidance of employees and the issuance of proper instructions as well as actual
implementation and monitoring of consistent compliance with the rules.[6]
In the case at bar, the Fabres, in allowing Cabil to drive the bus to La Union,
apparently did not consider the fact that Cabil had been driving for school children
only, from their homes to the St. Scholasticas College in Metro Manila.[7] They had
hired him only after a two-week apprenticeship. They had tested him for certain
matters, such as whether he could remember the names of the children he would
be taking to school, which were irrelevant to his qualification to drive on a long
distance travel, especially considering that the trip to La Union was his first. The
existence of hiring procedures and supervisory policies cannot be casually invoked
to overturn the presumption of negligence on the part of an employer.[8]
Petitioners argue that they are not liable because (1) an earlier departure (made
impossible by the congregations delayed meeting) could have averted the mishap
and (2) under the contract, the WWCF was directly responsible for the conduct of
the trip. Neither of these contentions hold water. The hour of departure had not
been fixed. Even if it had been, the delay did not bear directly on the cause of the
accident. With respect to the second contention, it was held in an early case that:
[A] person who hires a public automobile and gives the driver directions as to the
place to which he wishes to be conveyed, but exercises no other control over the
conduct of the driver, is not responsible for acts of negligence of the latter or
prevented from recovering for injuries suffered from a collision between the
automobile and a train, caused by the negligence either of the locomotive engineer
or the automobile driver.[9]
As already stated, this case actually involves a contract of carriage. Petitioners, the
Fabres, did not have to be engaged in the business of public transportation for the
provisions of the Civil Code on common carriers to apply to them. As this Court has
held:[10]
Art. 1732. Common carriers are persons, corporations, firms or associations
engaged in the business of carrying or transporting passengers or goods or both, by
land, water, or air for compensation, offering their services to the public.

The above article makes no distinction between one whose principal business
activity is the carrying of persons or goods or both, and one who does such carrying
only as an ancillary activity (in local idiom, as a sideline). Article 1732 also
carefully avoids making any distinction between a person or enterprise offering
transportation service on a regular or scheduled basis and one offering such service
on an occasional, episodic or unscheduled basis. Neither does Article 1732
distinguish between a carrier offering its services to the general public, i.e., the
general community or population, and one who offers services or solicits business
only from a narrow segment of the general population. We think that Article 1732
deliberately refrained from making such distinctions.
As common carriers, the Fabres were bound to exercise extraordinary diligence for
the safe transportation of the passengers to their destination. This duty of care is
not excused by proof that they exercised the diligence of a good father of the family
in the selection and supervision of their employee. As Art. 1759 of the Code
provides:
Common carriers are liable for the death of or injuries to passengers through the
negligence or wilful 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.
The same circumstances detailed above, supporting the finding of the trial court
and of the appellate court that petitioners are liable under Arts. 2176 and 2180 for
quasi delict, fully justify finding them guilty of breach of contract of carriage under
Arts. 1733, 1755 and 1759 of the Civil Code.
Secondly, we sustain the award of damages in favor of Amyline Antonio. However,
we think the Court of Appeals erred in increasing the amount of compensatory
damages because private respondents did not question this award as inadequate.
[11] To the contrary, the award of P500,000.00 for compensatory damages which
the Regional Trial Court made is reasonable considering the contingent nature of her
income as a casual employee of a company and as distributor of beauty products
and the fact that the possibility that she might be able to work again has not been
foreclosed. In fact she testified that one of her previous employers had expressed
willingness to employ her again.
With respect to the other awards, while the decisions of the trial court and the Court
of Appeals do not sufficiently indicate the factual and legal basis for them, we find
that they are nevertheless supported by evidence in the records of this case.
Viewed as an action for quasi delict, this case falls squarely within the purview of
Art. 2219(2) providing for the payment of moral damages in cases of quasi delict.
On the theory that petitioners are liable for breach of contract of carriage, the award
of moral damages is authorized by Art. 1764, in relation to Art. 2220, since Cabils
gross negligence amounted to bad faith.[12] Amyline Antonios testimony, as well
as the testimonies of her father and co-passengers, fully establish the physical
suffering and mental anguish she endured as a result of the injuries caused by
petitioners negligence.

The award of exemplary damages and attorneys fees was also properly made.
However, for the same reason that it was error for the appellate court to increase
the award of compensatory damages, we hold that it was also error for it to increase
the award of moral damages and reduce the award of attorneys fees, inasmuch as
private respondents, in whose favor the awards were made, have not appealed.[13]
As above stated, the decision of the Court of Appeals can be sustained either on the
theory of quasi delict or on that of breach of contract. The question is whether, as
the two courts below held, petitioners, who are the owners and driver of the bus,
may be made to respond jointly and severally to private respondent. We hold that
they may be. In Dangwa Trans. Co. Inc. v. Court of Appeals,[14] on facts similar to
those in this case, this Court held the bus company and the driver jointly and
severally liable for damages for injuries suffered by a passenger. Again, in Bachelor
Express, Inc. v. Court of Appeals[15] a driver found negligent in failing to stop the
bus in order to let off passengers when a fellow passenger ran amuck, as a result of
which the passengers jumped out of the speeding bus and suffered injuries, was
held also jointly and severally liable with the bus company to the injured
passengers.
The same rule of liability was applied in situations where the negligence of the
driver of the bus on which plaintiff was riding concurred with the negligence of a
third party who was the driver of another vehicle, thus causing an accident. In
Anuran v. Buo,[16] Batangas Laguna Tayabas Bus Co. v. Intermediate Appellate
Court,[17] and Metro Manila Transit Corporation v. Court of Appeals,[18] the bus
company, its driver, the operator of the other vehicle and the driver of the vehicle
were jointly and severally held liable to the injured passenger or the latters heirs.
The basis of this allocation of liability was explained in Viluan v. Court of Appeals,
[19] thus:
Nor should it make any difference that the liability of petitioner [bus owner] springs
from contract while that of respondents [owner and driver of other vehicle] arises
from quasi-delict. As early as 1913, we already ruled in Gutierrez vs. Gutierrez, 56
Phil. 177, that in case of injury to a passenger due to the negligence of the driver of
the bus on which he was riding and of the driver of another vehicle, the drivers as
well as the owners of the two vehicles are jointly and severally liable for damages.
Some members of the Court, though, are of the view that under the circumstances
they are liable on quasi-delict.[20]
It is true that in Philippine Rabbit Bus Lines, Inc. v. Court of Appeals[21] this Court
exonerated the jeepney driver from liability to the injured passengers and their
families while holding the owners of the jeepney jointly and severally liable, but that
is because that case was expressly tried and decided exclusively on the theory of
culpa contractual. As this Court there explained:
The trial court was therefore right in finding that Manalo [the driver] and spouses
Mangune and Carreon [the jeepney owners] 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. L21477-81, April 29, 1966, 16 SCRA 742) . . .[22]
As in the case of BLTB, private respondents in this case and her co-plaintiffs did not
stake out their claim against the carrier and the driver exclusively on one theory,
much less on that of breach of contract alone. After all, it was permitted for them to
allege alternative causes of action and join as many parties as may be liable on
such causes of action[23] so long as private respondent and her co-plaintiffs do not
recover twice for the same injury. What is clear from the cases is the intent of the
plaintiff there to recover from both the carrier and the driver, thus justifying the
holding that the carrier and the driver were jointly and severally liable because their
separate and distinct acts concurred to produce the same injury.
WHEREFORE, the decision of the Court of Appeals is AFFIRMED with MODIFICATION
as to the award of damages. Petitioners are ORDERED to PAY jointly and severally
the private respondent Amyline Antonio the following amounts:
1) P93,657.11 as actual damages;
2) P500,000.00 as the reasonable amount of loss of earning capacity of plaintiff
Amyline Antonio;
3) P20,000.00 as moral damages;
4) P20,000.00 as exemplary damages;
5) 25% of the recoverable amount as attorneys fees; and
6) costs of suit.
SO ORDERED.
Regalado, (Chairman), Romero, Puno, and Torres, Jr., JJ., concur.

SECOND DIVISION
[G.R. No. 138060. September 1, 2004]
WILLIAM TIU, doing business under the name and style of D Rough Riders, and
VIRGILIO TE LAS PIAS petitioners, vs. PEDRO A. ARRIESGADO, BENJAMIN CONDOR,
SERGIO PEDRANO and PHILIPPINE PHOENIX SURETY AND INSURANCE, INC.,
respondents.
DECISION
CALLEJO, SR., J.:
This is a petition for review on certiorari under Rule 45 of the Rules of Court from
the Decision[1] of the Court of Appeals in CA-G.R. CV No. 54354 affirming with
modification the Decision[2] of the Regional Trial Court, 7th Judicial Region, Cebu

City, Branch 20, in Civil Case No. CEB-5963 for breach of contract of carriage,
damages and attorneys fees, and the Resolution dated February 26, 1999 denying
the motion for reconsideration thereof.
The following facts are undisputed:
At about 10:00 p.m. of March 15, 1987, the cargo truck marked Condor Hollow
Blocks and General Merchandise bearing plate number GBP-675 was loaded with
firewood in Bogo, Cebu and left for Cebu City. Upon reaching Sitio Aggies, Poblacion,
Compostela, Cebu, just as the truck passed over a bridge, one of its rear tires
exploded. The driver, Sergio Pedrano, then parked along the right side of the
national highway and removed the damaged tire to have it vulcanized at a nearby
shop, about 700 meters away.[3] Pedrano left his helper, Jose Mitante, Jr. to keep
watch over the stalled vehicle, and instructed the latter to place a spare tire six
fathoms away[4] behind the stalled truck to serve as a warning for oncoming
vehicles. The trucks tail lights were also left on. It was about 12:00 a.m., March 16,
1987.
At about 4:45 a.m., D Rough Riders passenger bus with plate number PBP-724
driven by Virgilio Te Laspias was cruising along the national highway of Sitio
Aggies, Poblacion, Compostela, Cebu. The passenger bus was also bound for Cebu
City, and had come from Maya, Daanbantayan, Cebu. Among its passengers were
the Spouses Pedro A. Arriesgado and Felisa Pepito Arriesgado, who were seated at
the right side of the bus, about three (3) or four (4) places from the front seat.
As the bus was approaching the bridge, Laspias saw the stalled truck, which was
then about 25 meters away.[5] He applied the breaks and tried to swerve to the left
to avoid hitting the truck. But it was too late; the bus rammed into the trucks left
rear. The impact damaged the right side of the bus and left several passengers
injured. Pedro Arriesgado lost consciousness and suffered a fracture in his right
colles.[6] His wife, Felisa, was brought to the Danao City Hospital. She was later
transferred to the Southern Island Medical Center where she died shortly thereafter.
[7]
Respondent Pedro A. Arriesgado then filed a complaint for breach of contract of
carriage, damages and attorneys fees before the Regional Trial Court of Cebu City,
Branch 20, against the petitioners, D Rough Riders bus operator William Tiu and his
driver, Virgilio Te Laspias on May 27, 1987. The respondent alleged that the
passenger bus in question was cruising at a fast and high speed along the national
road, and that petitioner Laspias did not take precautionary measures to avoid the
accident.[8] Thus:
6. That the accident resulted to the death of the plaintiffs wife, Felisa Pepito
Arriesgado, as evidenced by a Certificate of Death, a xerox copy of which is hereto
attached as integral part hereof and marked as ANNEX A, and physical injuries to
several of its passengers, including plaintiff himself who suffered a COLLES
FRACTURE RIGHT, per Medical Certificate, a xerox copy of which is hereto attached
as integral part hereof and marked as ANNEX B hereof.
7. That due to the reckless and imprudent driving by defendant Virgilio Te Laspias
of the said Rough Riders passenger bus, plaintiff and his wife, Felisa Pepito
Arriesgado, failed to safely reach their destination which was Cebu City, the

proximate cause of which was defendant-drivers failure to observe utmost diligence

required of a very cautious person under all circumstances.
8. That defendant William Tiu, being the owner and operator of the said Rough
Riders passenger bus which figured in the said accident, wherein plaintiff and his
wife were riding at the time of the accident, is therefore directly liable for the breach
of contract of carriage for his failure to transport plaintiff and his wife safely to their
place of destination which was Cebu City, and which failure in his obligation to
transport safely his passengers was due to and in consequence of his failure to
exercise the diligence of a good father of the family in the selection and supervision
of his employees, particularly defendant-driver Virgilio Te Laspias.[9]
The respondent prayed that judgment be rendered in his favor and that the
petitioners be condemned to pay the following damages:
1). To pay to plaintiff, jointly and severally, the amount of P30,000.00 for the death
and untimely demise of plaintiffs wife, Felisa Pepito Arriesgado;
2). To pay to plaintiff, jointly and severally, the amount of P38,441.50, representing
actual expenses incurred by the plaintiff in connection with the death/burial of
plaintiffs wife;
3). To pay to plaintiff, jointly and severally, the amount of P1,113.80, representing
medical/hospitalization expenses incurred by plaintiff for the injuries sustained by
him;
4). To pay to plaintiff, jointly and severally, the amount of P50,000.00 for moral
damages;
5). To pay to plaintiff, jointly and severally, the amount of P50,000.00 by way of
exemplary damages;
6). To pay to plaintiff, jointly and severally, the amount of P20,000.00 for attorneys
fees;
7). To pay to plaintiff, jointly and severally, the amount of P5,000.00 for litigation
expenses.
PLAINTIFF FURTHER PRAYS FOR SUCH OTHER RELIEFS AND REMEDIES IN LAW AND
EQUITY.[10]
The petitioners, for their part, filed a Third-Party Complaint[11] on August 21, 1987
against the following: respondent Philippine Phoenix Surety and Insurance, Inc.
(PPSII), petitioner Tius insurer; respondent Benjamin Condor, the registered owner
of the cargo truck; and respondent Sergio Pedrano, the driver of the truck. They
alleged that petitioner Laspias was negotiating the uphill climb along the national
highway of Sitio Aggies, Poblacion, Compostela, in a moderate and normal speed. It
was further alleged that the truck was parked in a slanted manner, its rear portion
almost in the middle of the highway, and that no early warning device was
displayed. Petitioner Laspias promptly applied the brakes and swerved to the left
to avoid hitting the truck head-on, but despite his efforts to avoid damage to
property and physical injuries on the passengers, the right side portion of the bus
hit the cargo trucks left rear. The petitioners further alleged, thus:

5. That the cargo truck mentioned in the aforequoted paragraph is owned and
registered in the name of the third-party defendant Benjamin Condor and was left
unattended by its driver Sergio Pedrano, one of the third-party defendants, at the
time of the incident;
6. That third-party defendant Sergio Pedrano, as driver of the cargo truck with
marked (sic) Condor Hollow Blocks & General Merchandise, with Plate No. GBP675 which was recklessly and imprudently parked along the national highway of
Compostela, Cebu during the vehicular accident in question, and third-party
defendant Benjamin Condor, as the registered owner of the cargo truck who failed
to exercise due diligence in the selection and supervision of third-party defendant
Sergio Pedrano, are jointly and severally liable to the third-party plaintiffs for
whatever liability that may be adjudged against said third-party plaintiffs or are
directly liable of (sic) the alleged death of plaintiffs wife;
7. That in addition to all that are stated above and in the answer which are intended
to show reckless imprudence on the part of the third-party defendants, the thirdparty plaintiffs hereby declare that during the vehicular accident in question, thirdparty defendant was clearly violating Section 34, par. (g) of the Land Transportation
and Traffic Code

10. That the aforesaid passenger bus, owned and operated by third-party plaintiff
William Tiu, is covered by a common carrier liability insurance with Certificate of
Cover No. 054940 issued by Philippine Phoenix Surety and Insurance, Inc., Cebu City
Branch, in favor of third-party plaintiff William Tiu which covers the period from July
22, 1986 to July 22, 1987 and that the said insurance coverage was valid, binding
and subsisting during the time of the aforementioned incident (Annex A as part
hereof);
11. That after the aforesaid alleged incident, third-party plaintiff notified third-party
defendant Philippine Phoenix Surety and Insurance, Inc., of the alleged incident
hereto mentioned, but to no avail;
12. That granting, et arguendo et arguendi, if herein third-party plaintiffs will be
adversely adjudged, they stand to pay damages sought by the plaintiff and
therefore could also look up to the Philippine Phoenix Surety and Insurance, Inc., for
contribution, indemnification and/or reimbursement of any liability or obligation that
they might [be] adjudged per insurance coverage duly entered into by and between
third-party plaintiff William Tiu and third-party defendant Philippine Phoenix Surety
and Insurance, Inc.;[12]
The respondent PPSII, for its part, admitted that it had an existing contract with
petitioner Tiu, but averred that it had already attended to and settled the claims of
those who were injured during the incident.[13] It could not accede to the claim of
respondent Arriesgado, as such claim was way beyond the scheduled indemnity as
contained in the contract of insurance. [14]
After the parties presented their respective evidence, the trial court ruled in favor of
respondent Arriesgado. The dispositive portion of the decision reads:

WHEREFORE, in view of the foregoing, judgment is hereby rendered in favor of

plaintiff as against defendant William Tiu ordering the latter to pay the plaintiff the
following amounts:
1 - The sum of FIFTY THOUSAND PESOS (P50,000.00) as moral damages;
2 - The sum of FIFTY THOUSAND PESOS (P50,000.00) as exemplary damages;
3 - The sum of THIRTY-EIGHT THOUSAND FOUR HUNDRED FORTY-ONE PESOS
(P38,441.00) as actual damages;
4 - The sum of TWENTY THOUSAND PESOS (P20,000.00) as attorneys fees;
5 - The sum of FIVE THOUSAND PESOS (P5,000.00) as costs of suit;
SO ORDERED.[15]
According to the trial court, there was no dispute that petitioner William Tiu was
engaged in business as a common carrier, in view of his admission that D Rough
Rider passenger bus which figured in the accident was owned by him; that he had
been engaged in the transportation business for 25 years with a sole proprietorship;
and that he owned 34 buses. The trial court ruled that if petitioner Laspias had not
been driving at a fast pace, he could have easily swerved to the left to avoid hitting
the truck, thus, averting the unfortunate incident. It then concluded that petitioner
Laspias was negligent.
The trial court also ruled that the absence of an early warning device near the place
where the truck was parked was not sufficient to impute negligence on the part of
respondent Pedrano, since the tail lights of the truck were fully on, and the vicinity
was well lighted by street lamps.[16] It also found that the testimony of petitioner
Tiu, that he based the selection of his driver Laspias on efficiency and in-service
training, and that the latter had been so far an efficient and good driver for the past
six years of his employment, was insufficient to prove that he observed the
diligence of a good father of a family in the selection and supervision of his
employees.
After the petitioners motion for reconsideration of the said decision was denied, the
petitioners elevated the case to the Court of Appeals on the following issues:
I
WHETHER THIRD PARTY DEFENDANT SERGIO PEDRANO WAS RECKLESS AND
IMPRUDENT WHEN HE PARKED THE CARGO TRUCK IN AN OBLIQUE MANNER;
II WHETHER THE THIRD PARTY DEFENDANTS ARE JOINTLY AND SEVERALLY LIABLE
DIRECTLY TO PLAINTIFF-APPELLEE OR TO DEFENDANTS-APPELLANTS FOR
WHATEVER LIABILITY THAT MAY BE ADJUDGED TO THE SAID DEFENDANTSAPPELLANTS;
III
WHETHER DEFENDANT-APPELLANT VIRGILIO TE LASPIAS WAS GUILTY OF
GROSS NEGLIGENCE;
IV WHETHER DEFENDANT-APPELLANT WILLIAM TIU HAD EXERCISED THE DUE
DILIGENCE OF A GOOD FATHER OF A FAMILY IN THE SELECTION AND SUPERVISION
OF HIS DRIVERS;

V GRANTING FOR THE SAKE OF ARGUMENT THAT DEFENDANT-APPELLANT WILLIAM

TIU IS LIABLE TO PLAINTIFF-APPELLEE, WHETHER THERE IS LEGAL AND FACTUAL
BASIS IN AWARDING EXCESSIVE MORAL DAMAGES, EX[E]MPLARY DAMAGES,
ATTORNEYS FEES AND LITIGATION EXPENSES TO PLAINTIFF-APPELLEE;
VI
WHETHER THIRD PARTY DEFENDANT PHILIPPINE PHOENIX SURETY AND
INSURANCE, INC. IS LIABLE TO DEFENDANT- APPELLANT WILLIAM TIU.[17]
The appellate court rendered judgment affirming the trial courts decision with the
modification that the awards for moral and exemplary damages were reduced to
P25,000. The dispositive portion reads:
WHEREFORE, the appealed Decision dated November 6, 1995 is hereby MODIFIED
such that the awards for moral and exemplary damages are each reduced to
P25,000.00 or a total of P50,000.00 for both. The judgment is AFFIRMED in all other
respects.
SO ORDERED.[18]
According to the appellate court, the action of respondent Arriesgado was based not
on quasi-delict but on breach of contract of carriage. As a common carrier, it was
incumbent upon petitioner Tiu to prove that extraordinary diligence was observed in
ensuring the safety of passengers during transportation. Since the latter failed to do
so, he should be held liable for respondent Arriesgados claim. The CA also ruled
that no evidence was presented against the respondent PPSII, and as such, it could
not be held liable for respondent Arriesgados claim, nor for contribution,
indemnification and/or reimbursement in case the petitioners were adjudged liable.
The petitioners now come to this Court and ascribe the following errors committed
by the appellate court:
I. THE HONORABLE COURT OF APPEALS ERRED IN NOT DECLARING RESPONDENTS
BENJAMIN CONDOR AND SERGIO PEDRANO GUILTY OF NEGLIGENCE AND HENCE,
LIABLE TO RESPONDENT PEDRO A. ARRIESGADO OR TO PETITIONERS FOR
WHATEVER LIABILITY THAT MAY BE ADJUDGED AGAINST THEM.
II. THE HONORABLE COURT OF APPEALS ERRED IN FINDING PETITIONERS GUILTY OF
NEGLIGENCE AND HENCE, LIABLE TO RESPONDENT PEDRO A. ARRIESGADO.
III. THE HONORABLE COURT OF APPEALS ERRED IN FINDING PETITIONER WILLIAM
TIU LIABLE FOR EXEMPLARY DAMAGES, ATTORNEYS FEES AND LITIGATION
EXPENSES.
IV.THE HONORABLE COURT OF APPEALS ERRED IN NOT FINDING RESPONDENT
PHILIPPINE PHOENIX SURETY AND INSURANCE, INC. LIABLE TO RESPONDENT PEDRO
A. ARRIESGADO OR TO PETITIONER WILLIAM TIU.[19]
According to the petitioners, the appellate court erred in failing to appreciate the
absence of an early warning device and/or built-in reflectors at the front and back of
the cargo truck, in clear violation of Section 34, par. (g) of the Land Transportation
and Traffic Code. They aver that such violation is only a proof of respondent
Pedranos negligence, as provided under Article 2185 of the New Civil Code. They

also question the appellate courts failure to take into account that the truck was
parked in an oblique manner, its rear portion almost at the center of the road. As
such, the proximate cause of the incident was the gross recklessness and
imprudence of respondent Pedrano, creating the presumption of negligence on the
part of respondent Condor in supervising his employees, which presumption was not
rebutted. The petitioners then contend that respondents Condor and Pedrano should
be held jointly and severally liable to respondent Arriesgado for the payment of the
latters claim.
The petitioners, likewise, aver that expert evidence should have been presented to
prove that petitioner Laspias was driving at a very fast speed, and that the CA
could not reach such conclusion by merely considering the damages on the cargo
truck. It was also pointed out that petitioner Tiu presented evidence that he had
exercised the diligence of a good father of a family in the selection and supervision
of his drivers.
The petitioners further allege that there is no legal and factual basis to require
petitioner Tiu to pay exemplary damages as no evidence was presented to show
that the latter acted in a fraudulent, reckless and oppressive manner, or that he had
an active participation in the negligent act of petitioner Laspias.
Finally, the petitioners contend that respondent PPSII admitted in its answer that
while it had attended to and settled the claims of the other injured passengers,
respondent Arriesgados claim remained unsettled as it was beyond the scheduled
indemnity under the insurance contract. The petitioners argue that said respondent
PPSII should have settled the said claim in accordance with the scheduled indemnity
instead of just denying the same.
On the other hand, respondent Arriesgado argues that two of the issues raised by
the petitioners involved questions of fact, not reviewable by the Supreme Court: the
finding of negligence on the part of the petitioners and their liability to him; and the
award of exemplary damages, attorneys fees and litigation expenses in his favor.
Invoking the principle of equity and justice, respondent Arriesgado pointed out that
if there was an error to be reviewed in the CA decision, it should be geared towards
the restoration of the moral and exemplary damages to P50,000 each, or a total of
P100,000 which was reduced by the Court of Appeals to P25,000 each, or a total of
only P50,000.
Respondent Arriesgado also alleged that respondents Condor and Pedrano, and
respondent Phoenix Surety, are parties with whom he had no contract of carriage,
and had no cause of action against. It was pointed out that only the petitioners
needed to be sued, as driver and operator of the ill-fated bus, on account of their
failure to bring the Arriesgado Spouses to their place of destination as agreed upon
in the contract of carriage, using the utmost diligence of very cautious persons with
due regard for all circumstances.
Respondents Condor and Pedrano point out that, as correctly ruled by the Court of
Appeals, the proximate cause of the unfortunate incident was the fast speed at
which petitioner Laspias was driving the bus owned by petitioner Tiu. According to
the respondents, the allegation that the truck was not equipped with an early
warning device could not in any way have prevented the incident from happening. It
was also pointed out that respondent Condor had always exercised the due
diligence required in the selection and supervision of his employees, and that he

was not a party to the contract of carriage between the petitioners and respondent
Arriesgado.
Respondent PPSII, for its part, alleges that contrary to the allegation of petitioner
Tiu, it settled all the claims of those injured in accordance with the insurance
contract. It further avers that it did not deny respondent Arriesgados claim, and
emphasizes that its liability should be within the scheduled limits of indemnity
under the said contract. The respondent concludes that while it is true that
insurance contracts are contracts of indemnity, the measure of the insurers liability
is determined by the insureds compliance with the terms thereof.
The Courts Ruling
At the outset, it must be stressed that this Court is not a trier of facts.[20] Factual
findings of the Court of Appeals are final and may not be reviewed on appeal by this
Court, except when the lower court and the CA arrived at diverse factual findings.
[21] The petitioners in this case assail the finding of both the trial and the appellate
courts that petitioner Laspias was driving at a very fast speed before the bus
owned by petitioner Tiu collided with respondent Condors stalled truck. This is
clearly one of fact, not reviewable by the Court in a petition for review under Rule
45.[22]
On this ground alone, the petition is destined to fail.
However, considering that novel questions of law are likewise involved, the Court
resolves to examine and rule on the merits of the case.
Petitioner Laspias
Was negligent in driving
The Ill-fated bus
In his testimony before the trial court, petitioner Laspias claimed that he was
traversing the two-lane road at Compostela, Cebu at a speed of only forty (40) to
fifty (50) kilometers per hour before the incident occurred.[23] He also admitted
that he saw the truck which was parked in an oblique position at about 25 meters
before impact,[24] and tried to avoid hitting it by swerving to the left. However,
even in the absence of expert evidence, the damage sustained by the truck[25]
itself supports the finding of both the trial court and the appellate court, that the D
Rough Rider bus driven by petitioner Laspias was traveling at a fast pace. Since he
saw the stalled truck at a distance of 25 meters, petitioner Laspias had more than
enough time to swerve to his left to avoid hitting it; that is, if the speed of the bus
was only 40 to 50 kilometers per hour as he claimed. As found by the Court of
Appeals, it is easier to believe that petitioner Laspias was driving at a very fast
speed, since at 4:45 a.m., the hour of the accident, there were no oncoming
vehicles at the opposite direction. Petitioner Laspias could have swerved to the left
lane with proper clearance, and, thus, could have avoided the truck.[26] Instinct, at
the very least, would have prompted him to apply the breaks to avert the
impending disaster which he must have foreseen when he caught sight of the
stalled truck. As we had occasion to reiterate:

A man must use common sense, and exercise due reflection in all his acts; it is his
duty to be cautious, careful and prudent, if not from instinct, then through fear of
recurring punishment. He is responsible for such results as anyone might foresee
and for acts which no one would have performed except through culpable abandon.
Otherwise, his own person, rights and property, and those of his fellow beings,
would ever be exposed to all manner of danger and injury.[27]
We agree with the following findings of the trial court, which were affirmed by the
CA on appeal:
A close study and evaluation of the testimonies and the documentary proofs
submitted by the parties which have direct bearing on the issue of negligence, this
Court as shown by preponderance of evidence that defendant Virgilio Te Laspias
failed to observe extraordinary diligence as a driver of the common carrier in this
case. It is quite hard to accept his version of the incident that he did not see at a
reasonable distance ahead the cargo truck that was parked when the Rough Rider
[Bus] just came out of the bridge which is on an (sic) [more] elevated position than
the place where the cargo truck was parked. With its headlights fully on, defendant
driver of the Rough Rider was in a vantage position to see the cargo truck ahead
which was parked and he could just easily have avoided hitting and bumping the
same by maneuvering to the left without hitting the said cargo truck. Besides, it is
(sic) shown that there was still much room or space for the Rough Rider to pass at
the left lane of the said national highway even if the cargo truck had occupied the
entire right lane thereof. It is not true that if the Rough Rider would proceed to pass
through the left lane it would fall into a canal considering that there was much
space for it to pass without hitting and bumping the cargo truck at the left lane of
said national highway. The records, further, showed that there was no incoming
vehicle at the opposite lane of the national highway which would have prevented
the Rough Rider from not swerving to its left in order to avoid hitting and bumping
the parked cargo truck. But the evidence showed that the Rough Rider instead of
swerving to the still spacious left lane of the national highway plowed directly into
the parked cargo truck hitting the latter at its rear portion; and thus, the (sic)
causing damages not only to herein plaintiff but to the cargo truck as well.[28]
Indeed, petitioner Laspias negligence in driving the bus is apparent in the records.
By his own admission, he had just passed a bridge and was traversing the highway
of Compostela, Cebu at a speed of 40 to 50 kilometers per hour before the collision
occurred. The maximum speed allowed by law on a bridge is only 30 kilometers per
hour.[29] And, as correctly pointed out by the trial court, petitioner Laspias also
violated Section 35 of the Land Transportation and Traffic Code, Republic Act No.
4136, as amended:
Sec. 35. Restriction as to speed. (a) Any person driving a motor vehicle on a
highway shall drive the same at a careful and prudent speed, not greater nor less
than is reasonable and proper, having due regard for the traffic, the width of the
highway, and or any other condition then and there existing; and no person shall
drive any motor vehicle upon a highway at such speed as to endanger the life, limb
and property of any person, nor at a speed greater than will permit him to bring the
vehicle to a stop within the assured clear distance ahead.[30]
Under Article 2185 of the Civil Code, a person driving a vehicle is presumed
negligent if at the time of the mishap, he was violating any traffic regulation.[31]

Petitioner Tiu failed to

Overcome the presumption
Of negligence against him as
One engaged in the business
Of common carriage
The rules which common carriers should observe as to the safety of their
passengers are set forth in the Civil Code, Articles 1733,[32] 1755[33] and 1756.
[34] In this case, respondent Arriesgado and his deceased wife contracted with
petitioner Tiu, as owner and operator of D Rough Riders bus service, for
transportation from Maya, Daanbantayan, Cebu, to Cebu City for the price of
P18.00.[35] It is undisputed that the respondent and his wife were not safely
transported to the destination agreed upon. In actions for breach of contract, only
the existence of such contract, and the fact that the obligor, in this case the
common carrier, failed to transport his passenger safely to his destination are the
matters that need to be proved.[36] This is because under the said contract of
carriage, the petitioners assumed the express obligation to transport the
respondent and his wife to their destination safely and to observe extraordinary
diligence with due regard for all circumstances.[37] Any injury suffered by the
passengers in the course thereof is immediately attributable to the negligence of
the carrier.[38] Upon the happening of the accident, the presumption of negligence
at once arises, and it becomes the duty of a common carrier to prove that he
observed extraordinary diligence in the care of his passengers.[39] It must be
stressed that in requiring the highest possible degree of diligence from common
carriers and in creating a presumption of negligence against them, the law compels
them to curb the recklessness of their drivers.[40]
While evidence may be submitted to overcome such presumption of negligence, it
must be shown that the carrier observed the required extraordinary diligence, which
means that the carrier must show the utmost diligence of very cautious persons as
far as human care and foresight can provide, or that the accident was caused by
fortuitous event.[41] As correctly found by the trial court, petitioner Tiu failed to
conclusively rebut such presumption. The negligence of petitioner Laspias as
driver of the passenger bus is, thus, binding against petitioner Tiu, as the owner of
the passenger bus engaged as a common carrier.[42]
The Doctrine of
Last Clear Chance
Is Inapplicable in the
Case at Bar
Contrary to the petitioners contention, the principle of last clear chance is
inapplicable in the instant case, as it only applies in a suit between the owners and
drivers of 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 and its owner on the ground that the

other driver was likewise guilty of negligence.[43] The common law notion of last
clear chance permitted courts to grant recovery to a plaintiff who has also been
negligent provided that the defendant had the last clear chance to avoid the
casualty and failed to do so. Accordingly, it is difficult to see what role, if any, the
common law of last clear chance doctrine has to play in a jurisdiction where the
common law concept of contributory negligence as an absolute bar to recovery by
the plaintiff, has itself been rejected, as it has been in Article 2179 of the Civil Code.
[44]
Thus, petitioner Tiu cannot escape liability for the death of respondent Arriesgados
wife due to the negligence of petitioner Laspias, his employee, on this score.
Respondents Pedrano and
Condor were likewise
Negligent
In Phoenix Construction, Inc. v. Intermediate Appellate Court,[45] where therein
respondent Dionisio sustained injuries when his vehicle rammed against a dump
truck parked askew, the Court ruled that the improper parking of a dump truck
without any warning lights or reflector devices created an unreasonable risk for
anyone driving within the vicinity, and for having created such risk, the truck driver
must be held responsible. In ruling against the petitioner therein, the Court
elucidated, thus:
In our view, Dionisios negligence, although later in point of time than the truck
drivers negligence, and therefore closer to the accident, was not an efficient
intervening or independent cause. What the petitioners describe as an intervening
cause was no more than a foreseeable consequence of the risk created by the
negligent manner in which the truck driver had parked the dump truck. In other
words, the petitioner truck driver owed a duty to private respondent Dionisio and
others similarly situated not to impose upon them the very risk the truck driver had
created. Dionisios negligence was not that of an independent and overpowering
nature as to cut, as it were, the chain of causation in fact between the improper
parking of the dump truck and the accident, nor to sever the juris vinculum of
liability.

We hold that private respondent Dionisios negligence was only contributory, that
the immediate and proximate cause of the injury remained the truck drivers lack
of due care.[46]
In this case, both the trial and the appellate courts failed to consider that
respondent Pedrano was also negligent in leaving the truck parked askew without
any warning lights or reflector devices to alert oncoming vehicles, and that such
failure created the presumption of negligence on the part of his employer,
respondent Condor, in supervising his employees properly and adequately. As we
ruled in Poblete v. Fabros:[47]
It is such a firmly established principle, as to have virtually formed part of the law
itself, that the negligence of the employee gives rise to the presumption of

negligence on the part of the employer. This is the presumed negligence in the
selection and supervision of employee. The theory of presumed negligence, in
contrast with the American doctrine of respondeat superior, where the negligence of
the employee is conclusively presumed to be the negligence of the employer, is
clearly deducible from the last paragraph of Article 2180 of the Civil Code which
provides that the responsibility therein mentioned shall cease if the employers
prove that they observed all the diligence of a good father of a family to prevent
damages. [48]
The petitioners were correct in invoking respondent Pedranos failure to observe
Article IV, Section 34(g) of the Rep. Act No. 4136, which provides:
(g) Lights when parked or disabled. Appropriate parking lights or flares visible one
hundred meters away shall be displayed at a corner of the vehicle whenever such
vehicle is parked on highways or in places that are not well-lighted or is placed in
such manner as to endanger passing traffic.
The manner in which the truck was parked clearly endangered oncoming traffic on
both sides, considering that the tire blowout which stalled the truck in the first place
occurred in the wee hours of the morning. The Court can only now surmise that the
unfortunate incident could have been averted had respondent Condor, the owner of
the truck, equipped the said vehicle with lights, flares, or, at the very least, an early
warning device.[49] Hence, we cannot subscribe to respondents Condor and
Pedranos claim that they should be absolved from liability because, as found by the
trial and appellate courts, the proximate cause of the collision was the fast speed at
which petitioner Laspias drove the bus. To accept this proposition would be to
come too close to wiping out the fundamental principle of law that a man must
respond for the foreseeable consequences of his own negligent act or omission.
Indeed, our law on quasi-delicts seeks to reduce the risks and burdens of living in
society and to allocate them among its members. To accept this proposition would
be to weaken the very bonds of society.[50]
The Liability of
Respondent PPSII
as Insurer
The trial court in this case did not rule on the liability of respondent PPSII, while the
appellate court ruled that, as no evidence was presented against it, the insurance
company is not liable.
A perusal of the records will show that when the petitioners filed the Third-Party
Complaint against respondent PPSII, they failed to attach a copy of the terms of the
insurance contract itself. Only Certificate of Cover No. 054940[51] issued in favor of
Mr. William Tiu, Lahug, Cebu City signed by Cosme H. Boniel was appended to the
third-party complaint. The date of issuance, July 22, 1986, the period of insurance,
from July 22, 1986 to July 22, 1987, as well as the following items, were also
indicated therein:
SCHEDULED VEHICLE
MODEL

MAKE
TYPE OF BODY
COLOR
BLT FILE NO.

Isuzu Forward
Bus
blue mixed

PLATE NO. PBP-724

SERIAL/CHASSIS NO. SER450-1584124
MOTOR NO. 677836
AUTHORIZED CAPACITY 50
UNLADEN WEIGHT 6Cyls. Kgs.
SECTION 1/11
*LIMITS OF LIABILITY P50,000.00
PREMIUMS PAID
A. THIRD PARTY LIABILITY
B. PASSENGER LIABILITY

Per Person P12,000.00

Per Accident P50,000
P540.0052
In its Answer53 to the Third-Party Complaint, the respondent PPSII admitted the
existence of the contract of insurance, in view of its failure to specifically deny the
same as required under then Section 8(a), Rule 8 of the Rules of Court,54 which
reads:
Sec. 8. How to contest genuineness of such documents. When an action or defense
is founded upon a written instrument copied in or attached to the corresponding
pleading as provided in the preceding section, the genuineness and due execution
of the instrument shall be deemed admitted unless the adverse party, under oath,
specifically denies them, and sets forth what he claims to be the facts; but the
requirement of an oath does not apply when the adverse party does not appear to
be a party to the instrument or when compliance with an order for inspection of the
original instrument is refused.
In fact, respondent PPSII did not dispute the existence of such contract, and
admitted that it was liable thereon. It claimed, however, that it had attended to and
settled the claims of those injured during the incident, and set up the following as
special affirmative defenses:
Third party defendant Philippine Phoenix Surety and Insurance, Inc. hereby
reiterates and incorporates by way of reference the preceding paragraphs and
further states THAT:8. It has attended to the claims of Vincent Canales, Asuncion Batiancila and Neptali
Palces who sustained injuries during the incident in question. In fact, it settled
financially their claims per vouchers duly signed by them and they duly executed
Affidavit[s] of Desistance to that effect, xerox copies of which are hereto attached
as Annexes 1, 2, 3, 4, 5, and 6 respectively;
9. With respect to the claim of plaintiff, herein answering third party defendant
through its authorized insurance adjuster attended to said claim. In fact, there were
negotiations to that effect. Only that it cannot accede to the demand of said
claimant considering that the claim was way beyond the scheduled indemnity as
per contract entered into with third party plaintiff William Tiu and third party
defendant (Philippine Phoenix Surety and Insurance, Inc.). Third party Plaintiff
William Tiu knew all along the limitation as earlier stated, he being an old hand in
the transportation business; 55
Considering the admissions made by respondent PPSII, the existence of the
insurance contract and the salient terms thereof cannot be dispatched. It must be
noted that after filing its answer, respondent PPSII no longer objected to the
presentation of evidence by respondent Arriesgado and the insured petitioner Tiu.

Even in its Memorandum56 before the Court, respondent PPSII admitted the
existence of the contract, but averred as follows:
Petitioner Tiu is insisting that PPSII is liable to him for contribution, indemnification
and/or reimbursement. This has no basis under the contract. Under the contract,
PPSII will pay all sums necessary to discharge liability of the insured subject to the
limits of liability but not to exceed the limits of liability as so stated in the contract.
Also, it is stated in the contract that in the event of accident involving indemnity to
more than one person, the limits of liability shall not exceed the aggregate amount
so specified by law to all persons to be indemnified.57
As can be gleaned from the Certificate of Cover, such insurance contract was issued
pursuant to the Compulsory Motor Vehicle Liability Insurance Law. It was expressly
provided therein that the limit of the insurers liability for each person was P12,000,
while the limit per accident was pegged at P50,000. An insurer in an indemnity
contract for third party liability is directly liable to the injured party up to the extent
specified in the agreement but it cannot be held solidarily liable beyond that
amount.58 The respondent PPSII could not then just deny petitioner Tius claim; it
should have paid P12,000 for the death of Felisa Arriesgado,59 and respondent
Arriesgados hospitalization expenses of P1,113.80, which the trial court found to
have been duly supported by receipts. The total amount of the claims, even when
added to that of the other injured passengers which the respondent PPSII claimed to
have settled,60 would not exceed the P50,000 limit under the insurance agreement.
Indeed, the nature of Compulsory Motor Vehicle Liability Insurance is such that it is
primarily intended to provide compensation for the death or bodily injuries suffered
by innocent third parties or passengers as a result of the negligent operation and
use of motor vehicles. The victims and/or their dependents are assured of
immediate financial assistance, regardless of the financial capacity of motor vehicle
owners.61 As the Court, speaking through Associate Justice Leonardo A.
Quisumbing, explained in Government Service Insurance System v. Court of
Appeals:62
However, although the victim may proceed directly against the insurer for
indemnity, the third party liability is only up to the extent of the insurance policy
and those required by law. While it is true that where the insurance contract
provides for indemnity against liability to third persons, and such persons can
directly sue the insurer, the direct liability of the insurer under indemnity contracts
against third party liability does not mean that the insurer can be held liable in
solidum with the insured and/or the other parties found at fault. For the liability of
the insurer is based on contract; that of the insured carrier or vehicle owner is
based on tort.
Obviously, the insurer could be held liable only up to the extent of what was
provided for by the contract of insurance, in accordance with the CMVLI law. At the
time of the incident, the schedule of indemnities for death and bodily injuries,
professional fees and other charges payable under a CMVLI coverage was provided
for under the Insurance Memorandum Circular (IMC) No. 5-78 which was approved
on November 10, 1978. As therein provided, the maximum indemnity for death was
twelve thousand (P12,000.00) pesos per victim. The schedules for medical expenses
were also provided by said IMC, specifically in paragraphs (C) to (G).63
Damages to be

Awarded
The trial court correctly awarded moral damages in the amount of P50,000 in favor
of respondent Arriesgado. The award of exemplary damages by way of example or
correction of the public good,64 is likewise in order. As the Court ratiocinated in
Kapalaran Bus Line v. Coronado:65
While the immediate beneficiaries of the standard of extraordinary diligence are,
of course, the passengers and owners of cargo carried by a common carrier, they
are not the only persons that the law seeks to benefit. For if common carriers
carefully observed the statutory standard of extraordinary diligence in respect of
their own passengers, they cannot help but simultaneously benefit pedestrians and
the passengers of other vehicles who are equally entitled to the safe and
convenient use of our roads and highways. The law seeks to stop and prevent the
slaughter and maiming of people (whether passengers or not) on our highways and
buses, the very size and power of which seem to inflame the minds of their drivers.
Article 2231 of the Civil Code explicitly authorizes the imposition of exemplary
damages in cases of quasi-delicts if the defendant acted with gross negligence.
66
The respondent Pedro A. Arriesgado, as the surviving spouse and heir of Felisa
Arriesgado, is entitled to indemnity in the amount of P50,000.00.67
The petitioners, as well as the respondents Benjamin Condor and Sergio Pedrano
are jointly and severally liable for said amount, conformably with the following
pronouncement of the Court in Fabre, Jr. vs. Court of Appeals:68
The same rule of liability was applied in situations where the negligence of the
driver of the bus on which plaintiff was riding concurred with the negligence of a
third party who was the driver of another vehicle, thus causing an accident. In
Anuran v. Buo, Batangas Laguna Tayabas Bus Co. v. Intermediate Appellate Court,
and Metro Manila Transit Corporation v. Court of Appeals, the bus company, its
driver, the operator of the other vehicle and the driver of the vehicle were jointly
and severally held liable to the injured passenger or the latters heirs. The basis of
this allocation of liability was explained in Viluan v. Court of Appeals, thus:
Nor should it make difference that the liability of petitioner [bus owner] springs
from contract while that of respondents [owner and driver of other vehicle] arises
from quasi-delict. As early as 1913, we already ruled in Gutierrez vs. Gutierrez, 56
Phil. 177, that in case of injury to a passenger due to the negligence of the driver of
the bus on which he was riding and of the driver of another vehicle, the drivers as
well as the owners of the two vehicles are jointly and severally liable for damages.
Some members of the Court, though, are of the view that under the circumstances
they are liable on quasi-delict.69
IN LIGHT OF ALL THE FOREGOING, the petition is PARTIALLY GRANTED. The Decision
of the Court of Appeals is AFFIRMED with MODIFICATIONS:
(1) Respondent Philippine Phoenix Surety and Insurance, Inc. and petitioner William
Tiu are ORDERED to pay, jointly and severally, respondent Pedro A. Arriesgado the
total amount of P13,113.80;

(2) The petitioners and the respondents Benjamin Condor and Sergio Pedrano are
ORDERED to pay, jointly and severally, respondent Pedro A. Arriesgado P50,000.00
as indemnity; P26,441.50 as actual damages; P50,000.00 as moral damages;
P50,000.00 as exemplary damages; and P20,000.00 as attorneys fees.
SO ORDERED.
Austria-Martinez, (Acting Chairman), Tinga, and Chico-Nazario, JJ., concur.
Puno J., (Chairman), on official leave.
SECOND DIVISION
G.R. No. L-44627 December 14, 1978
LUCIA S. PAJARITO, petitioner,
vs.
HON. ALBERTO V. SEERIS, Presiding Judge of Branch II, Court of First Instance of
Zamboanga; JOSELITO AIZON, and FELIPE AIZON, respondents.
Geronimo Pajarito for petitioner.
Dominador L. Natividad for private respondents,

ANTONIO, J.:
Original special civil action for certiorari.
Private respondent Joselito Aizon was charged before the Court of First Instance of
Zamboanga City, Branch 11 (respondent Judge Alberto V. Seneris, presiding), with
Double Homicide Through Reckless Imprudence or a violation of Section 48 of
Republic Act No. 4136. The pertinent portion of the Information reads as follows:
That on or about May 9, 1975, in the City of Zamboanga, Philippines, and within the
jurisdiction of this Honorable Court, the above-named accused, being then the
driver of an Isuzu Passenger Bus bearing Plate No. SB-511 owned and operated by
FELIPE AIZON, operating on the public road, and without taking the necessary
precautions, considering the width, traffic, visibility, grades, crossing, curvatures,
and other conditions of the road, so as to avoid accident to persons or damage to
properties, did then and there, through reckless and fast driving, caused the said
Isuzu Passenger Bus to turn turtle, as a result of which, the persons of MYRNA
PAJARITO DE SAN LUIS and MUSA BARING, both passengers on board the said Isuzu
passenger bus sustained injuries on their persons which caused their death.
(Emphasis supplied.)
Upon arraignment, said respondent entered a plea of guilty. In view of said plea, the
court rendered judgment convicting him of the offense charged and sentencing him
"to indemnify the heirs of the late Myrna Pajarito de San Luis the amount of
P12,000.00 ... ."

After the judgment had become final and executory, a Writ of Execution was issued
against Joselito Aizon for the indemnity of P12,000.00, but the same was returned
unsatisfied because of his insolvency. Whereupon, petitioner Lucia S. Pajarito,
mother of the late Myrna Pajarito de San Luis, filed with the court a quo a motion for
the issuance of Subsidiary Writ of Execution and served a copy thereof to private
respondent Felipe Aizon, employer of Joselito Aizon as alleged in the Information.
Felipe Aizon opposed the motion on the grounds, to wit: (1) that he is not the
employer of Joselito Aizon, the vehicle in question having been sold already to Isaac
Aizon, father of Joselito, but that the deed of transfer has not been executed
because the full price has not yet been paid; and (2) that in case of insolvency,
Joselito has to suffer subsidiary imprisonment to satisfy the judgment insofar as the
indemnity is concerned.
The court denied petitioner's motion for Subsidiary Writ of Execution on the ground
that Felipe Aizon, alleged employer of Joselito, was not a party in the aforesaid
criminal case. Said the court:
It is therefore, the well considered opinion of this Court that a separate civil action
must be filed by movant Lucia S. Pajarito against Felipe Aizon in order to enforce the
subsidiary liability of the latter under Article 103 of the Revised Penal Code, as
amended.
Petitioner moved for reconsideration of the foregoing ruling, but the same was
denied. Hence, this petition.
Petitioner contends that the enforcement of tile subsidiary liability under Article 103
of the Revised Penal Code may be filled under the same criminal case, under which
the subsidiary liability was granted; that respondent Felipe Aizon, alleged employer
of Joselito Aizon, was given his day in court, as he was furnished a copy of the
motion for issuance of the Subsidiary Writ of Execution, to which he filed his
opposition; and that, although not made a party in the criminal case, the employer,
Felipe Aizon, should have taken active participation in the defense of his employee,
Joselito Aizon.
On the other hand, respondents, in their Comment to the petition which We
consider their Answer, maintain that to enforce the subsidiary liability under Article
103 of the Revised Penal Code, as amended, a separate civil action must be filed
against the employer because under our present judicial system, before one could
be held subsidiary liable, he should be made a party defendant to the action, which
in this case is not legally feasible because respondent Felipe Aizon was not accused
together with Joselito Aizon in Criminal Case No. 512 (1313) for Double Homicide
Through Reckless Imprudence.
Obviously, the question to be considered here is whether the subsidiary civil liability
established in Articles 102 and 103 of the Revised Penal Code may be enforced in
the same criminal case where the award was made, or in a separate civil action.
Under Article 100 of the Revised Penal Code, a person criminally liable for a felony is
also civilly liable. As a consequence, the institution of the criminal action carries
with it the institution of the civil action arising therefrom, except when there is a
separate civil action or reservation of the latter on the part of the complainant. As
explained in Ramcar, Incorporated v. De Leon: 1 "When no civil action is expressly
instituted, according to subsection (a) of section 1 of Rule 107, it shall be impliedly
jointly instituted with the criminal action.' That means as if two actions are joined in

one as twins, each one complete with the same completeness as any of the two
normal persons composing a twin. It means that the civil action may be tried and
prosecuted, with all the ancillary processes provided by law."
Pursuant to Article 103, in relation to Article 102, of the Revised Penal Code, an
employer may be subsidiary liable for the employee's civil liability in a criminal
action when: (1) the employer is engaged in any kind of industry; (2) the employee
committed the offense in the discharge of his duties; and (3) he is insolvent and has
not satisfied his civil liability. 2 The subsidiary civil liability of the employer,
however, arises only after conviction of the employee in the criminal case. In
Martinez v. Barredo, 3 this Court ruled that a judgment of conviction sentencing a
defendant employee to pay an indemnity in the absence of any collusion between
the defendant and the offended party, is conclusive upon the employer in an action
for the enforcement of the latter's subsidiary liability.
... The stigma of a criminal conviction surpasses in effect and implications mere civil
liability. Common sense dictates that a finding of guilt in a criminal case in which
proof beyond reasonable doubt is necessary, should not be nullified in a subsequent
civil action requiring only preponderance of evidence to support a judgment, unless
those who support the contrary rule should also hold that an absolution in a civil
case will operate to automatically set aside the verdict against the defendant in the
criminal case. It is anomalous, to say the least, to suppose that the driver, excelling
'Dr Jekyll and Mr. Hyde', could be guilty of reckless negligence in so far as his
obligation to pay indemnity is concerned, and at the same time could be free from
any blame when said indemnity is sought to be collected mom his employer,
although the right to the indemnity arose from and was based on one and the same
act of the driver.
The employer cannot be said to have been deprived of his day in court, because the
situation before us is not one wherein the employer is sued for a primary liability
under article 1903 of the Civil Code, but one in which enforcement is sought of a
subsidiary civil liability incident to and dependent upon his driver's criminal
negligence which is a proper issue to be tried and decided only in a criminal action.
In other words, the employer becomes ipso facto subsidiarily liable upon his driver's
conviction and upon proof of the latter's insolvency, in the same way that acquittal
wipes out not only the employee's primary civil liability but also his employer's
subsidiary liability for such criminal negligence. (Almelda et al. vs. Abaroa, 8 Phil.,
178, affirmed in 218 U.S., 476, 54 Law ed., 1116; Wise & Co. vs. Larion, 45 Phil. 314,
320; Francisco us. Onrubia, 46 Phil., 327; Province of Ilocos Sur us. Tolentino, G.R.
No. 34186, 56 Phil. 829; Moran, Comments on the Rules of Court, Vol. II, p. 403)
It is high time that the employer exercised the greatest care in selecting his
employees, taking real and deep interest in their welfare; intervening in any
criminal action brought against them by reason of or as a result of the performance
of their duties, if only in the way of giving them the benefit of counsel; and
consequently doing away with the practice of leaving them to their fates. If these be
done, the American rule requiring notice on the part of the employer shall have
been satisfied. (At pp. 3-4)
In Miranda v. Malate Garage & Taxicab, Inc., 4 this Court further amplified the rule
that the decision convicting the employee is binding and conclusive upon the
employer, "not only with regard to (the latter's) civil liability but also with regard to
its amount because the liability of an employer cannot be separated but follows that

of his employee. That is why the law says that his liability is subsidiary (Article 103,
Revised Penal Code). To allow an employer to dispute the civil liability fixed in the
criminal case would be to amend, nullify, or defeat a final judgment rendered by a
competent court." And this Court, in Miranda, further explained that the employer is
in substance and in effect a party to the criminal case, considering the subsidiary
liability imposed upon him by law.
It is true that an employer, strictly speaking, is not a party to the criminal case
instituted against his employee, but in substance and in effect he is considering the
subsidiary liability imposed upon him by law. It is his concern, as well as of his
employee, to see to it that his interest be protected in the criminal case by taking
virtual participation in the defense of his employee. He cannot leave him to his own
fate because his failure is also his. And if because of his indifference or inaction the
employee is convicted and damages are awarded against him, he cannot later be
heard to complain, if brought to court, for the enforcement of his subsidiary liability,
that he was not given his day in court . (At p. 675. Emphasis supplied.)
The conclusiveness upon the employer of the judgment of conviction sentencing the
employee to pay civil indemnity, for the enforcement of the employer's subsidiary
civil liability under Article 103 was again reiterated in Manalo and Salvador v. Robles
Transportation Company, Inc., 5 where the Court ruled that the sheriff's return
submitted in evidence in the action against the employer, Robles Transportation
Company, Inc., showing that the two writs of execution were not satisfied because
of the insolvency of the driver, is a prima facie evidence of the employee's
insolvency. Similarly, this Court ruled that the defendant's insolvency may be
proven by the certificate of the Director of Prisons that the employee is serving
subsidiary imprisonment; 6 or by the certificate of the sheriff that the employee has
not satisfied his pecuniary liability and that no properties have been found
registered in his name. 7
Considering that the judgment of conviction, sentencing a defendant employee to
pay an indemnity under Articles 102 and 103 of the Revised Penal Code, is
conclusive upon the employer not only with regard to the latter's civil liability but
also with regard to its amount, this Court stated in Rotea, 8 that in the action to
enforce the employer's subsidiary liability, the court has no other function than to
render decision based upon the indemnity awarded in the criminal case and has no
power to amend or modify it even if in its opinion an error has been committed in
the decision.
In view of the foregoing principles, and considering that Felipe Aizon does not deny
that he was the registered operator of the bus but only claims now that he sold the
bus to the father of the accused, it would serve no important purpose to require
petitioner to file a separate and independent action against the employer for the
enforcement of the latter's subsidiary civil liability. Under the circumstances, it
would not only prolong the litigation but would require the heirs of the deceased
victim to incur unnecessary expenses. At any rate, the proceeding for the
enforcement of the subsidiary civil liability may be considered as part of the
proceeding for the execution of the judgment. A case in which an execution has
been issued is regarded as still pending so that all proceedings on the execution are
proceedings in the suit. 9 There is no question that the court which rendered the
judgment has a general supervisory control over its process of execution, and this
power carries with it the right to determine every question of fact and law which
may be involved in the execution.

The validity of the claim of Felipe Aizon that he is no longer the owner and operator
of the in fated bus as he sold it already to Isaac Aizon, father of the accused Joselito
Aizon, is a matter that could be litigated and resolved in the same criminal case. In
support of his opposition to the motion of the complainant, served upon him, for the
purpose of the enforcement of his subsidiary liability Felipe Aizon may adduce all
the evidence necessary for that purpose. Indeed, the enforcement of the employer's
subsidiary civil liability may be conveniently litigated within the same proceeding
because the execution of the judgment is a logical and integral part of the case
itself. This would certainly facilitate the application of justice to the rival claims of
the contending parties. "The purpose of procedure", observed this Court in Manila
Railroad Co. v. Attorney General, 10 "is not to thwart justice. Its proper aim is to
facilitate the application of justice to the rival claims of the contending parties. It
was created not to hinder and delay but to facilitate and promote the administration
of justice." In proceedings to apply justice, it is the duty of the courts "to assist the
parties in obtaining just, speedy, and inexpensive determination" of their rival
claims. Thus, the Rules require that they should be liberally construed "to promote
their object and to assist the parties in obtaining just, speedy, and inexpensive
determination of every action and proceeding." 11
WHEREFORE, the Orders of respondent Court in Criminal Case No. 512 (1313) dated
July 27, 1976 and August 14, 1976 are hereby set aside. The Court a quo is directed
to hear and decide in the same proceeding the subsidiary liability of the alleged
owner and operator of the passenger bus. Costs against private respondents.
Fernando (Chairman), Aquino, Concepcion, Jr. and Santos, JJ., concur.

Separate Opinions

BARREDO, J., concurring:

I concur, but to make matters clearer, I must add that the only issues open at the
hearing to be held by the court a quo are: (1) whether or not Felipe Aizon was the
owner of the vehicle driven by the convicted accused, Joselito Aizon, or, whether or
not he was the employer of said accused at the time of the commission of the
offense on May 9, 1975, and (2) whether or not said Joselito Aizon is insolvent. As
stated in the main opinion, the judgment in the criminal case is conclusive upon the
employer not only with regard to his civil liability but also with regard to its amount
which is that found in the judgment of conviction. In other words, what is to be
decided by the trial court is not strictly speaking the subsidiary liability of the
employer, Felipe Aizon, for the judgment in the criminal case is deemed to include
that liability, but only the two issues related to it that I have mentioned.

Separate Opinions
BARREDO, J., concurring:
I concur, but to make matters clearer, I must add that the only issues open at the
hearing to be held by the court a quo are: (1) whether or not Felipe Aizon was the
owner of the vehicle driven by the convicted accused, Joselito Aizon, or, whether or
not he was the employer of said accused at the time of the commission of the
offense on May 9, 1975, and (2) whether or not said Joselito Aizon is insolvent. As
stated in the main opinion, the judgment in the criminal case is conclusive upon the
employer not only with regard to his civil liability but also with regard to its amount
which is that found in the judgment of conviction. In other words, what is to be
decided by the trial court is not strictly speaking the subsidiary liability of the
employer, Felipe Aizon, for the judgment in the criminal case is deemed to include
that liability, but only the two issues related to it that I have mentioned.

THIRD DIVISION
[G.R. No. 120553. June 17, 1997]
PHILTRANCO SERVICE ENTERPRISES, INC. and ROGACIONES MANILHIG, petitioner,
vs. COURT OF APPEALS and HEIRS OF THE LATE RAMON ACUESTA, respondents.
DECISION
DAVIDE, JR., J.:
The petitioners interposed this appeal by way of a petition for review under Rule 45
of the Rules of Court from the 31 January 1995 Decision of the Court of Appeals in
CA-G.R. CV No. 41140[1] affirming the 22 January 1993[2] Decision of Branch 31 of
the Regional Trial Court, Calbayog City, in Civil Case No. 373, which ordered the
petitioners to pay the private respondents damages as a result of a vehicular
accident.
Civil Case No. 373 was an action against herein petitioners for damages instituted
by the heirs of Ramon A. Acuesta, namely, Gregorio O. Acuesta; Julio O. Acuesta;
Ramon O. Acuesta, Jr.; Baltazar O. Acuesta; Rufino O. Acuesta; Maximo O. Acuesta;
Neri O. Acuesta; Iluminada O. Acuesta; Rosario Acuesta-Sanz; and Pamfilo O.
Acuesta. Atty. Julio O. Acuesta also appeared as counsel for the plaintiffs (herein
private respondents).[3] The private respondents alleged that the petitioners were
guilty of gross negligence, recklessness, violation of traffic rules and regulations,
abandonment of victim, and attempt to escape from a crime.
To support their allegations, the private respondents presented eight witnesses. On
10 February 1992, after the cross-examination of the last witness, the private
respondents counsel made a reservation to present a ninth witness. The case was
then set for continuation of the trial on 30 and 31 March 1992. Because of the nonappearance of the petitioners counsel, the 30 March 1992 hearing was cancelled.

The next day, private respondents counsel manifested that he would no longer
present the ninth witness. He thereafter made an oral offer of evidence and rested
the case. The trial court summarized private respondents evidence in this wise:
[I]n the early morning of March 24, 1990, about 6:00 o'clock, the victim Ramon A.
Acuesta was riding in his easy rider bicycle (Exhibit O), along the Gomez Street of
Calbayog City. The Gomez Street is along the side of Nijaga Park. On the
Magsaysay Blvd., also in Calbayog City, defendant Philtranco Service Enterprises,
Inc. (Philtranco for brevity) Bus No. 4025 with plate No. EVA-725 driven by
defendant Rogasiones Manilhig y Dolira was being pushed by some persons in order
to start its engine. The Magsaysay Blvd. runs perpendicular to Gomez St. and the
said Philtranco bus 4025 was heading in the general direction of the said Gomez
Street. Some of the persons who were pushing the bus were on its back, while the
others were on the sides. As the bus was pushed, its engine started thereby the
bus continued on its running motion and it occurred at the time when Ramon A.
Acuesta who was still riding on his bicycle was directly in front of the said bus. As
the engine of the Philtranco bus started abruptly and suddenly, its running motion
was also enhanced by the said functioning engine, thereby the subject bus bumped
on the victim Ramon A. Acuesta who, as a result thereof fell and, thereafter, was run
over by the said bus. The bus did not stop although it had already bumped and ran
[sic] over the victim; instead, it proceeded running towards the direction of the
Rosales Bridge which is located at one side of the Nijaga Park and towards one end
of the Gomez St., to which direction the victim was then heading when he was
riding on his bicycle. P/Sgt. Yabao who was then jogging thru the Gomez Street and
was heading and meeting the victim Ramon A. Acuesta as the latter was riding on
his bicycle, saw when the Philtranco bus was being pushed by some passengers,
when its engine abruptly started and when the said bus bumped and ran over the
victim. He approached the bus driver defendant Manilhig herein and signalled to
him to stop, but the latter did not listen. So the police officer jumped into the bus
and introducing himself to the driver defendant as policeman, ordered the latter to
stop. The said defendant driver stopped the Philtranco bus near the Nijaga Park and
Sgt. Yabao thereafter, told the driver to proceed to the Police Headquarter which
was only 100 meters away from Nijaga Park because he was apprehensive that the
said driver might be harmed by the relatives of the victim who might come to the
scene of the accident. Then Sgt. Yabao cordoned the scene where the vehicular
accident occurred and had P/Cpl. Bartolome Bagot, the Traffic Investigator, conduct
an investigation and make a sketch of the crime scene. Sgt. Yambao Yabao was
only about 20 meters away when he saw the bus of defendant Philtranco bumped
[sic] and [sic] ran over the victim. From the place where the victim was actually
bumped by the bus, the said vehicle still had run to a distance of about 15 meters
away.[4]
For their part, the petitioners filed an Answer[5] wherein they alleged that petitioner
Philtranco exercised the diligence of a good father of a family in the selection and
supervision of its employees, including petitioner Manilhig who had excellent record
as a driver and had undergone months of rigid training before he was hired.
Petitioner Manilhig had always been a prudent professional driver, religiously
observing traffic rules and regulations. In driving Philtranco's buses, he exercised
the diligence of a very cautious person.
As might be expected, the petitioners had a different version of the incident. They
alleged that in the morning of 24 March 1990, Manilhig, in preparation for his trip
back to Pasay City, warmed up the engine of the bus and made a few rounds within

the city proper of Calbayog. While the bus was slowly and moderately cruising
along Gomez Street, the victim, who was biking towards the same direction as the
bus, suddenly overtook two tricycles and swerved left to the center of the road. The
swerving was abrupt and so sudden that even as Manilhig applied the brakes and
blew the bus horn, the victim was bumped from behind and run over by the bus. It
was neither willful nor deliberate on Manilhig's part to proceed with the trip after his
bus bumped the victim, the truth being that when he looked at his rear-view
window, he saw people crowding around the victim, with others running after his
bus. Fearing that he might be mobbed, he moved away from the scene of the
accident and intended to report the incident to the police. After a man boarded his
bus and introduced himself as a policeman, Manilhig gave himself up to the custody
of the police and reported the accident in question.
The petitioners further claimed that it was the negligence of the victim in overtaking
two tricycles, without taking precautions such as seeing first that the road was
clear, which caused the death of the victim. The latter did not even give any signal
of his intention to overtake. The petitioners then counterclaimed for P50,000 as and
for attorney's fees; P1 million as moral damages; and P50,000 for litigation
expenses.
However, the petitioners were not able to present their evidence, as they were
deemed to have waived that right by the failure of their counsel to appear at the
scheduled hearings on 30 and 31 March 1992. The trial court then issued an
Order[6] declaring the case submitted for decision. Motions for the reconsideration
of the said Order were both denied.
On 22 January 1992, the trial court handed down a decision ordering the petitioners
to jointly and severally pay the private respondents the following amounts:
1) P55, 615.72 as actual damages;
2) P200,000 as death indemnity for the death of the victim Ramon A. Acuesta;
3) P1 million as moral damages;
4) P500,000 by way of exemplary damages;
5) P50,000 as attorneys fees; and
6) the costs of suit.[7]
Unsatisfied with the judgment, the petitioners appealed to the Court of Appeals
imputing upon the trial court the following errors:
(1) in preventing or barring them from presenting their evidence;
(2) in finding that petitioner Manilhig was at fault;
(3) in not finding that Ramon was the one at fault and his own fault caused, or at
least contributed to, his unfortunate accident;
(4) in awarding damages to the private respondents; and

(5) in finding that petitioner Philtranco was solidarily liable with Manilhig for
damages.[8]
In its decision of 31 January 1995, the Court of Appeals affirmed the decision of the
trial court. It held that the petitioners were not denied due process, as they were
given an opportunity to present their defense. The records show that they were
notified of the assignment of the case for 30 and 31 March 1992. Yet, their counsel
did not appear on the said dates. Neither did he file a motion for postponement of
the hearings, nor did he appeal from the denial of the motions for reconsideration of
the 31 March 1992 Order of the trial court. The petitioners have thereby waived
their right to present evidence. Their expectation that they would have to object
yet to a formal offer of evidence by the private respondents was misplaced, for it
was within the sound discretion of the court to allow oral offer of evidence.
As to the second and third assigned errors, the respondent court disposed as
follows:
... We cannot help but accord with the lower court's finding on appellant Manilhig's
fault. First, it is not disputed that the bus driven by appellant Manilhig was being
pushed at the time of the unfortunate happening. It is of common knowledge and
experience that when a vehicle is pushed to a jump-start, its initial movement is far
from slow. Rather, its movement is abrupt and jerky and it takes a while before the
vehicle attains normal speed. The lower court had thus enough basis to conclude,
as it did, that the bumping of the victim was due to appellant Manilhig's actionable
negligence and inattention. Prudence should have dictated against jump-starting
the bus in a busy section of the city. Militating further against appellants' posture
was the fact that the precarious pushing of subject bus to a jumpstart was done
where the bus had to take a left turn, thereby making the move too risky to take.
The possibility that pedestrians on Gomez Street, where the bus turned left and the
victim was biking, would be unaware of a vehicle being pushed to a jumpstart, was
too obvious to be overlooked. Verily, contrary to their bare arguments, there was
gross negligence on the part of appellants.
The doctrine of last clear chance theorized upon by appellants, is inapplicable under
the premises because the victim, who was bumped from behind, obviously, did not
of course anticipate a Philtranco bus being pushed from a perpendicular street.
The respondent court sustained the awards of moral and exemplary damages and of
attorneys fees, for they are warranted under Articles 2206, 2231, and 2208(1),
respectively, of the Civil Code. Anent the solidary liability of petitioner Philtranco,
the same finds support in Articles 2180 and 2194 of the said Code. The defense
that Philtranco exercised the diligence of a good father of a family in the selection
and supervision of its employees crumbles in the face of the gross negligence of its
driver, which caused the untimely death of the victim.
Their motion for reconsideration having been denied, the petitioners came to us
claiming that the Court of Appeals gravely erred
I
...IN HOLDING THAT PETITIONERS WAIVED THEIR RIGHT TO PRESENT THEIR
EVIDENCE, AND THAT PETITIONERS WERE NOT DENIED DUE PROCESS.

II
...IN APPLYING ART. 2194, INSTEAD OF ART. 2180, OF THE CIVIL CODE, AND IN
HOLDING THAT PETITIONER PHILTRANCO CAN NOT INVOKE THE DEFENSE OF
DILIGENCE OF A GOOD FATHER OF A FAMILY.
III
...IN AWARDING DAMAGES TO RESPONDENTS AND/OR IN NOT FINDING THE TRIAL
COURT'S AWARD OF DAMAGES EXCESSIVE.
We resolved to give due course to the petition and required the parties to submit
their respective memoranda after due consideration of the allegations, issues, and
arguments adduced in the petition, the comment thereon by the private
respondents, and the reply to the comment filed by the petitioners. The petitioners
filed their memorandum in due time; while the private respondents filed theirs only
on 3 January 1997, after their counsel was fined in the amount of P1,000 for failure
to submit the required memorandum.
The first imputed error is without merit. The petitioners and their counsel, Atty. Jose
Buban, were duly notified in open court of the order of the trial court of 10 February
1992 setting the case for hearing on 30 and 31 March 1992.[9] On both dates
neither the petitioners nor their counsel appeared.
In his motion for
reconsideration,[10] Atty. Buban gave the following reasons for his failure to appear
on the said hearings:
1. That when this case was called on March 27, 1992, counsel was very much
indisposed due to the rigors of a very hectic campaign as he is a candidate for City
Councilor of Tacloban; he wanted to leave for Calbayog City, but he was seized with
slight fever on the morning of said date; but then, during the last hearing, counsel
was made to understand that plaintiffs would formally offer their exhibits in writing,
for which reason, counsel for defendants waited for a copy of said formal offer, but
counsel did not receive any copy as counsel for plaintiffs opted to formally offer
their exhibits orally in open court;
2. That counsel for defendants, in good faith believed that he would be given
reasonable time within which to comment on the formal offer in writing, only to
know that counsel for plaintiffs orally offered their exhibits in open court and that
the same were admitted by the Honorable Court; and that when this case was
called on March 30 and 31, 1992, the undersigned counsel honestly believed that
said schedule would be cancelled, pending on the submission of the comments
made by the defendants on the formal offer; but it was not so, as the exhibits were
admitted in open court.[11]
In its order of 26 May 1992, the trial court denied the motion, finding it to be
"devoid of meritorious basis," as Atty. Buban could have filed a motion for
postponement.[12] Atty. Buban then filed a motion to reconsider[13] the order of
denial, which was likewise denied by the trial court in its order of 12 August 1992.
[14] Nothing more was done by the petitioners after receipt of the order of 12
August 1992. A perusal of the first and second motions for reconsideration
discloses absence of any claim that the petitioners have meritorious defenses.
Clearly, therefore, the trial court committed no error in declaring the case submitted
for decision on the basis of private respondent's evidence.

The second imputed error is without merit either.

Civil Case No. 373 is an action for damages based on quasi-delict[15] under Article
2176 and 2180 of the Civil Code against petitioner Manilhig and his employer,
petitioner Philtranco, respectively. These articles pertinently provide:
ART. 2176. Whoever by act or omission causes damage to another, there being
fault or negligence, is obliged to pay for the damage done. Such fault or
negligence, if there is no pre-existing contractual relation between the parties, is
called a quasi-delict and is governed by the provisions of this Chapter.
ART. 2180. The obligation imposed by Article 2176 is demandable not only for one's
own acts or omissions, but also for those of persons for whom one is responsible.
...
The owners and managers of an establishment or enterprise are likewise
responsible for damages caused by their employees in the service of the branches
in which the latter are employed or on the occasion of their functions.
Employers shall be liable for the damages caused by their employees and
household helpers acting within the scope of their assigned tasks even though the
former are not engaged in any business or industry.
...
The responsibility treated of in this article shall cease when the persons herein
mentioned prove that they observed all the diligence of a good father of a family to
prevent damage.
We have consistently held that the liability of the registered owner of a public
service vehicle, like petitioner Philtranco,[16] for damages arising from the tortious
acts of the driver is primary, direct, and joint and several or solidary with the driver.
[17] As to solidarity, Article 2194 expressly provides:
ART. 2194. The responsibility of two or more persons who are liable for a quasidelict is solidary.
Since the employer's liability is primary, direct and solidary, its only recourse if the
judgment for damages is satisfied by it is to recover what it has paid from its
employee who committed the fault or negligence which gave rise to the action
based on quasi-delict. Article 2181 of the Civil Code provides:
ART. 2181. Whoever pays for the damage caused by his dependents or employees
may recover from the latter what he has paid or delivered in satisfaction of the
claim.
There is, however, merit in the third imputed error.
The trial court erroneously fixed the "death indemnity" at P200,000. The private
respondents defended the award in their Opposition to the Motion for
Reconsideration by saying that "[i]n the case of Philippine Airlines, Inc. vs. Court of

Appeals, 185 SCRA 110, our Supreme Court held that the award of damages for
death is computed on the basis of the life expectancy of the deceased." In that
case, the "death indemnity" was computed by multiplying the victim's gross annual
income by his life expectancy, less his yearly living expenses. Clearly then, the
"death indemnity" referred to was the additional indemnity for the loss of earning
capacity mentioned in Article 2206(1) of the Civil Code, and not the basic indemnity
for death mentioned in the first paragraph thereof. This article provides as follows:
ART. 2206. The amount of damages for death caused by a crime or quasi-delict
shall be at least three thousand pesos, even though there may have been
mitigating circumstances. In addition:
(1) 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; such indemnity
shall in every case be assessed and awarded by the court, unless the deceased on
account of permanent physical disability not caused by the defendant, had no
earning capacity at the time of his death;
(2) If the deceased was obliged to give support according to the provisions of
article 291, the recipient who is not an heir called to the decedent's inheritance by
the law of testate or intestate succession, may demand support from the person
causing the death, for a period of not exceeding five years, the exact duration to be
fixed by the court;
(3) 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.
We concur with petitioners view that the trial court intended the award of
"P200,000.00 as death indemnity" not as compensation for loss of earning capacity.
Even if the trial court intended the award as indemnity for loss of earning capacity,
the same must be struck out for lack of basis. There is no evidence on the victim's
earning capacity and life expectancy.
Only indemnity for death under the opening paragraph of Article 2206 is due, the
amount of which has been fixed by current jurisprudence at P50,000.[18]
The award of P1 million for moral damages to the heirs of Ramon Acuesta has no
sufficient basis and is excessive and unreasonable. This was based solely on the
testimony of one of the heirs, Atty. Julio Acuesta, contained in his "Direct
Testimony... As Plaintiff, conducted by Himself,"[19] to wit:
Q. What was your feeling or reaction as a result of the death of your father Ramon
A. Acuesta?
A.
We, the family members, have suffered much from wounded feelings, moral
shock, mental anguish, sleepless nights, to which we are entitled to moral damages
at the reasonable amount of ONE MILLION (P1,000,000.00) PESOS or at the sound
discretion of this Hon. Court."
Since the other heirs of the deceased did not take the witness stand, the trial court
had no basis for its award of moral damages to those who did not testify thereon.

Moral damages are emphatically not intended to enrich a plaintiff at the expense of
the defendant. They are awarded only to allow the former to obtain means,
diversion, or amusements that will serve to alleviate the moral suffering he has
undergone due to the defendant's culpable action and must, perforce, be
proportional to the suffering inflicted.[20] In light of the circumstances in this case,
an award of P50,000 for moral damages is in order.
The award of P500,000 for exemplary damages is also excessive. In quasi-delicts,
exemplary damages may be awarded if the party at fault acted with gross
negligence.[21] The Court of Appeals found that there was gross negligence on the
part of petitioner Manilhig.[22] Under Article 2229 of the Civil Code, exemplary
damages are imposed by way of example or correction for the public good, in
addition to the moral, temperate, liquidated, or compensatory damages.
Considering its purpose, it must be fair and reasonable in every case and should not
be awarded to unjustly enrich a prevailing party. In the instant case, an award of
P50,000 for the purpose would be adequate, fair, and reasonable.
Finally, the award of P50,000 for attorney's fees must be reduced. The general rule
is that attorney's fees cannot be recovered as part of damages because of the
policy that no premium should be placed on the right to litigate.[23] Stated
otherwise, the grant of attorney's fees as part of damages is the exception rather
than the rule, as counsel's fees are not awarded every time a party prevails in a
suit.[24] Such attorney's fees can be awarded in the cases enumerated in Article
2208 of the Civil Code, and in all cases it must be reasonable. In the instant case,
the counsel for the plaintiffs is himself a co-plaintiff; it is then unlikely that he
demanded from his brothers and sisters P100,000 as attorney's fees as alleged in
the complaint and testified to by him.[25] He did not present any written contract
for his fees. He is, however, entitled to a reasonable amount for attorney's fees,
considering that exemplary damages are awarded. Among the instances mentioned
in Article 2208 of the Civil Code when attorney's fees may be recovered is "(1) when
exemplary damages are awarded." Under the circumstances in this case, an award
of P25,000 for attorney's fees is reasonable.
The petitioners did not contest the award for actual damages fixed by the trial
court. Hence, such award shall stand.
IN VIEW OF THE FOREGOING, the petition is hereby partly granted and the
challenged decision of CA-G.R. CV No. 41140 is AFFIRMED, subject to modifications
as to the damages awarded, which are reduced as follows:
(a) Death indemnity, from P200,000 to P50,000;
(b) Moral damages, from P1 million to P50,000;
(c) Exemplary damages, from P500,000 to P50,000; and
(d) Attorney's fees, from P50,000 to P25,000.
No pronouncements as to costs in this instance.
SO ORDERED.
Narvasa, C.J., (Chairman), Melo, and Panganiban, JJ., concur.

Francisco, J., On Leave.