UNSWORTH TRANSPORT INTERNATIONAL (PHILS.), INC., vs.

COURT OF APPEALS and PIONEER INSURANCE AND SURETY

CORPORATION
FACTS
On August 31, 1992, the shipper Sylvex Purchasing Corporation
delivered to UTI a shipment of 27 drums of various raw materials for
pharmaceutical manufacturing. UTI issued Bill of Lading No.
C320/C15991-2,[5] covering the aforesaid shipment. The subject shipment
was insured with private respondent Pioneer Insurance and Surety
Corporation in favor of Unilab against all risks in the amount
of P1,779,664.77 under and by virtue of Marine Risk Note Number MC
RM UL 0627 92[6] and Open Cargo Policy No. HO-022-RIU.
On the same day that the bill of lading was issued, the shipment was
loaded in a sealed 1x40 container van, boarded on APLs vessel M/V
Pres. Jackson, Voyage 42, and transshipped to APLs M/V Pres. Taft[8] for
delivery to petitioner in favor of the consignee United Laboratories, Inc.
(Unilab).
On October 6, 1992, petitioner received the said shipment in its
warehouse after it stamped the Permit to Deliver Imported
Goods[9] procured by the Champs Customs Brokerage. Oceanica Cargo
Marine Surveyors Corporation (OCMSC) conducted a stripping survey of
the shipment located in petitioners warehouse. The survey results stated:
2-pallets STC 40 bags Dried Yeast, both in good order condition and
properly sealed
19- steel drums STC Vitamin B Complex Extract, all in good order
condition and properly sealed
1-steel drum STC Vitamin B Complex Extra[ct] with cut/hole on side, with
approx. spilling of 1%[11]
On October 15, 1992, the arrastre Jardine Davies Transport Services,
Inc. (Jardine) issued Gate Pass No. 7614. The materials were noted to be
complete and in good order in the gate pass. [14]On the same day, the
shipment arrived in Unilabs warehouse and was immediately surveyed by
an independent surveyor, J.G. Bernas Adjusters & Surveyors, Inc. (J.G.
Bernas). The Report stated:
1-p/bag torn on side contents partly spilled
1-s/drum #7 punctured and retaped on bottom side content
lacking
5-drums shortship/short delivery
On November 7, 1992, Unilab filed a formal claim[17] for the damage
against private respondent and UTI. On November 20, 1992, UTI denied
liability on the basis of the gate pass issued by Jardine that the goods
were in complete and good condition; while private respondent paid the
claimed amount on March 23, 1993.
On February 22, 2001, the RTC decided in favor of private respondent
and against APL (American President Lines, Ltd.), UTI and petitioner. On
appeal, the CA affirmed the RTC decision on April 29, 2004.
Petitioner admits that it is a forwarder but disagrees with the CAs
conclusion that it is a common carrier. It also questions the appellate
courts findings that it failed to establish that it exercised extraordinary or
ordinary diligence in the vigilance over the subject shipment. As to the
damages allegedly suffered by private respondent, petitioner counters
that they were not sufficiently proven.
ISSUES
WHETHER OR NOT PETITIONER UTI IS A COMMON
CARRIER.
WHETHER OR NOT PETITIONER UTI EXERCISED THE
REQUIRED ORDINARY DILIGENCE.
WON PETITIONERS LIABILITY SHOULD BE LIMITED TO
$500 PURSUANT TO THE PACKAGE LIMITATION RULE.
RULING
The petition is partly meritorious.
1. Admittedly, petitioner is a freight forwarder. The term freight forwarder"
refers to a firm holding itself out to the general public (other than as a

pipeline, rail, motor, or water carrier) to provide transportation of property

for compensation and, in the ordinary course of its business, (1) to
assemble and consolidate, or to provide for assembling and
consolidating, shipments, and to perform or provide for break-bulk and
distribution operations of the shipments; (2) to assume responsibility for
the transportation of goods from the place of receipt to the place of
destination; and (3) to use for any part of the transportation a carrier
subject to the federal law pertaining to common carriers.[23]
A freight forwarders liability is limited to damages arising from its own
negligence, including negligence in choosing the carrier; however, where
the forwarder contracts to deliver goods to their destination instead
of merely arranging for their transportation, it becomes liable as a
common carrier for loss or damage to goods. A freight forwarder
assumes the responsibility of a carrier, which actually executes the
transport, even though the forwarder does not carry the merchandise
itself.[24]
It is undisputed that UTI issued a bill of lading in favor of Unilab. Pursuant
thereto, petitioner undertook to transport, ship, and deliver the 27 drums
of raw materials for pharmaceutical manufacturing to the consignee.
A bill of lading is a written acknowledgement of the receipt of goods and
an agreement to transport and to deliver them at a specified place to a
person named or on his or her order.[25] It operates both as a receipt
and as a contract. It is a receipt for the goods shipped and a contract to
transport and deliver the same as therein stipulated. As a receipt, it
recites the date and place of shipment, describes the goods as to
quantity, weight, dimensions, identification marks, condition, quality, and
value. As a contract, it names the contracting parties, which include the
consignee; fixes the route, destination, and freight rate or charges; and
stipulates the rights and obligations assumed by the parties.[26]
Undoubtedly, UTI is liable as a common carrier. Common carriers,
as a general rule, are presumed to have been at fault or negligent if
the goods they transported deteriorated or got lost or destroyed.
That is, unless they prove that they exercised extraordinary
diligence in transporting the goods. In order to avoid responsibility for
any loss or damage, therefore, they have the burden of proving that they
observed such diligence.[27] Mere proof of delivery of the goods in good
order to a common carrier and of their arrival in bad order at their
destination constitutes a prima facie case of fault or negligence against
the carrier. If no adequate explanation is given as to how the
deterioration, loss, or destruction of the goods happened, the transporter
shall be held responsible.[28]
2. Petitioner failed to rebut the prima facie presumption of negligence in
the carriage of the subject shipment. Petitioner failed to prove that it
observed the extraordinary diligence and precaution which the law
requires a common carrier to exercise and to follow in order to
avoid damage to or destruction of the goods entrusted to it for safe
carriage and delivery.
3. However, we affirm the applicability of the Package Limitation Rule
under the COGSA, contrary to the RTC and the CAs findings.
It is to be noted that the Civil Code does not limit the liability of the
common carrier to a fixed amount per package. In all matters not
regulated by the Civil Code, the rights and obligations of common carriers
are governed by the Code of Commerce and special laws. Thus, the
COGSA supplements the Civil Code by establishing a provision limiting
the carriers liability in the absence of a shippers declaration of a higher
value in the bill of lading.
In the present case, the shipper did not declare a higher valuation of the
goods to be shipped. Petitioners liability should be limited to $500 per
steel drum. In this case, as there was only one drum lost, private
respondent is entitled to receive only $500 as damages for the loss. In
addition to said amount, as aptly held by the trial court, an interest rate of
6% per annum should also be imposed, plus 25% of the total sum as
attorneys fees.

PHILIPPINE AMERICAN GENERAL INSURANCE COMPANY vs. PKS

SHIPPING COMPANY
FACTS
Davao Union Marketing Corporation (DUMC) contracted the services of
respondent PKS Shipping Company (PKS Shipping) for the shipment to
Tacloban City of seventy-five thousand (75,000) bags of cement worth
Three Million Three Hundred Seventy-Five 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.
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.
ISSUES
WON PKS SHIPPING IS A PRIVATE CARRIER OR A COMMON
CARRIER. WHAT IS ITS LIABILITY?
WON IT HAS OBSERVED THE PROPER DILIGENCE (ORDINARY, IF A
PRIVATE CARRIER, OR EXTRAORDINARY, IF A COMMON CARRIER)
REQUIRED OF IT GIVEN THE CIRCUMSTANCES.
RULING
1. 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.
2. 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.

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. All
given then, the appellate court did not err in its judgment absolving PKS
Shipping from liability for the loss of the DUMC cargo.

LOURDES J. LARA, ET AL. vs. BRIGIDO R. VALENCIA

FACTS
The deceased was an inspector of the Bureau of Forestry stationed in
Davao. The defendant is engaged in the business of exporting logs from
his lumber concession in Cotabato. Lara went to said concession upon
instructions of his chief to classify the logs of defendant which were about
to be loaded on a ship anchored in the port of Parang. The work Lara of
lasted for six days during which he contracted malaria fever.
At that time, there was no available bus that could take him back to
Davao and so he requested the defendant if he could take him in his own
pick-up. Defendant agreed and, together with Lara, other passengers
tagged along, most of them were employees of the Government.
Defendant merely accommodated them and did not charge them any fee
for the service. It was also their understanding that upon reaching barrio
Samoay, the passengers would alight and transfer to a bus that regularly
makes the trip to Davao but unfortunately there was none available at the
time and so the same passengers, including Lara, again requested the
defendant to drive them to Davao. Defendant again accommodated them
and upon reaching Km. 96, Lara accidentally fell suffering fatal injuries.
It therefore appears that the deceased, as well his companions who rode
in the pick-up of defendant, were merely accommodation passengers
who paid nothing for the service and so they can be considered as invited
guests within the meaning of the law. As accommodation passengers or
invited guests, defendant as owner and driver of the pick-up owes to
them merely the duty to exercise reasonable care so that they may be
transported safely to their destination. Thus, "The rule is established by
the weight of authority that the owner or operator of an automobile owes
the duty to an invited guest to exercise reasonable care in its operation,
and not unreasonably to expose him to danger and injury by increasing
the hazard of travel. This rule, as frequently stated by the courts, is that
an owner of an automobile owes a guest the duty to exercise ordinary or
reasonable care to avoid injuring him. Since one riding in an automobile
is no less a guest because he asked for the privilege of doing so, the
same obligation of care is imposed upon the driver as in the case of one
expressly invited to ride" (5 Am. Jur., 626-627). Defendant, therefore, is
only required to observe ordinary care, and is not in duty bound to
exercise extraordinary diligence as required of a common carrier by our
law (Articles 1755 and 1756, new Civil Code).
ISSUE
WON the defendant failed to observe ordinary care or diligence in
transporting the deceased from Parang to Davao on the date in
question.
RULING

NO. Even if we admit as true the facts found by the trial court, still we find
that the same are not sufficient to show that defendant has failed to take
the precaution necessary to conduct his passengers safely to their place
of destination for there is nothing there to indicate that defendant has
acted with negligence or without taking the precaution that an ordinary
prudent man would have taken under similar circumstances. It should be
noted that Lara went to the lumber concession of defendant in answer to
a call of duty which he was bound to perform because of the requirement
of his office and he contracted the malaria fever in the course of the
performance of that duty. It should also be noted that defendant was not
in duty bound to take the deceased in his own pick-up to Davao because
from Parang to Cotabato there was a line of transportation that regularly
makes trips for the public, and if defendant agreed to take the deceased
in his own car, it was only to accommodate him considering his feverish
condition and his request that he be so accommodated. It should also be
noted that the passengers who rode in the pick-up of defendant took their
respective seats therein at their own choice and not upon indication of
defendant with the particularity that defendant invited the deceased to sit
with him in the front seat but which invitation the deceased declined. The
reason for this can only be attributed to his desire to be at the back so
that he could sit on a bag and travel in a reclining position because such
was more convenient for him due to his feverish condition. All the
circumstances therefore clearly indicate that defendant had done what a
reasonable prudent man would have done under the circumstances.
There is every reason to believe that the unfortunate happening was only
due to an unforeseen accident accused by the fact that at the time the
deceased was half asleep and must have fallen from the pick-up when it
ran into some stones causing it to jerk considering that the road was then
bumpy, rough and full of stones.
The finding of the trial court that the pick-up was running at more than 40
kilometers per hour is not supported by the evidence. This is a mere
surmise made by the trial court considering the time the pick-up left barrio
Samoay and the time the accident occured in relation to the distance
covered by the pick-up. And even if this is correct, still we say that such
speed is not unreasonable considering that they were traveling on a
national road and the traffic then was not heavy. We may rather attribute
the incident to lack of care on the part of the deceased considering that
the pick-up was open and he was then in a crouching position. Indeed,
the law provides that "A passenger must observe the diligence of a good
father of a family to avoid injury to himself" (Article 1761, new Civil Code),
which means that if the injury to the passenger has
been proximately caused by his own negligence, the carrier cannot be
held liable.
All things considered, we are persuaded to conclude that the accident
occurred not due to the negligence of defendant but to circumstances
beyond his control and so he should be exempt from liability.

On the evening of that same day, 22 April 1980, at about 10:30 o'clock,
the "Tacloban City" and the "Don Juan" collided at the Talbas Strait near
Maestra de Ocampo Island in the vicinity of the island of Mindoro. When
the collision occurred, the sea was calm, the weather fair and visibility
good. As a result of this collision, the M/V "Don Juan" sank and hundreds
of its passengers perished. Among the ill-fated passengers were the
parents of petitioners, the spouses Perfecto Mecenas and Sofia
Mecenas, whose bodies were never found despite intensive search by
petitioners.
On 29 December 1980, petitioners filed a complaint in the then Court- of
First Instance of Quezon City against private respondents Negros
Navigation and Capt. Roger Santisteban, the captain of the "Don Juan"
without, however, impleading either PNOC or PNOC Shipping. Petitioners
prayed for actual damages of not less than P100,000.00 as well as moral
and exemplary damages in such amount as the Court may deem
reasonable to award to them. Another complaint was filed in the same
court by Lilia Ciocon claiming damages against Negros Navigation,
PNOC and PNOC Shipping for the death of her husband Manuel Ciocon.
Negros Navigation, Capt. Santisteban, PNOC and PNOC Shipping
appealed the trial court's decision to the Court of Appeals. Later, PNOC
and PNOC Shipping withdrew their appeal citing a compromise
agreement reached by them with Negros Navigation; the Court of
Appeals granted the motion by a resolution dated 5 September 1988,
subject to the reservation made by Lilia Ciocon that she could not be
bound by the compromise agreement and would enforce the award
granted her by the trial court.
ISSUE
WON Negros Navigation and Capt. Santisteban were grossly
negligent during the events which culminated in the collision with
"Tacloban City" and the sinking of the "Don Juan" and the resulting
heavy loss of lives. (Consequently, WON petitioners were entitled to
award of moral and exemplary damages.)
RULING

JOSE P. MECENAS, ROMEO P. MECENAS, LILIA P. MECENAS,

ORLANDO P. MECENAS, VIOLETA M. ACERVO, LUZVIMINDA P.
MECENAS;
and
OFELIA
M.
JAVIER
vs.
HON. COURT OF APPEALS, CAPT. ROGER SANTISTEBAN and
NEGROS NAVIGATION CO., INC.,
FACTS
At 6:20 o'clock in the morning of 22 April 1980, the M/T "Tacloban City," a
barge-type oil tanker of Philippine registry owned by the Philippine
National Oil Company (PNOC) and operated by the PNOC Shipping and
Transport Corporation (PNOC Shipping), having unloaded its cargo of
petroleum products, left Amlan, Negros Occidental, and headed towards
Bataan. At about 1:00 o'clock in the afternoon of that same day, the M/V
"Don Juan," an interisland vessel, also of Philippine registry owned and
operated by the Negros Navigation Co., Inc. (Negros Navigation) left
Manila bound for Bacolod with seven hundred fifty (750) passengers
listed in its manifest, and a complete set of officers and crew members.

We begin by noting that both the trial court and the Court of Appeals
considered the action brought by the sons and daughters of the
deceased Mecenas spouses against Negros Navigation as based on
quasi-delict. We believed that action is more appropriately regarded
as grounded on contract, the contract of carriage between the Mecenas
spouses as regular passengers who paid for their boat tickets and
Negros Navigation; the surviving children while not themselves
passengers are in effect suing the carrier in representation of their
deceased parents. 3 Thus, the suit filed by the widow Lilia Ciocon was
correctly treated by the trial and appellate courts as based on contract
(vis-a-vis Negros Navigation) and as well on quasi-delict (vis-a-vis PNOC
and PNOC Shipping). In an action based upon a breach of the contract of
carriage, the carrier under our civil law is liable for the death of
passengers arising from the negligence or willful act of the carrier's
employees although such employees may have acted beyond the scope
of their authority or even in violation of the instructions of the
carrier, 4which liability may include liability for moral damages. 5 It follows
that petitioners would be entitled to moral damages so long as the
collision with the "Tacloban City" and the sinking of the "Don Juan"
were caused or attended by negligence on the part of private
respondents.
In respect of the petitioners' claim for exemplary damages, it is only
necessary to refer to Article 2232 of the Civil Code:
Article 2332. In contracts and quasi-contracts, the court may exemplary
damages if the defendant acted in a wanton, fraudulent, reckless,
oppressive or malevolent manner. 6
Thus, whether petitioners are entitled to exemplary damages as
claimed must depend upon whether or not private respondents
acted recklessly, that is, with gross negligence.
Our own review of the record in the case at bar requires us to
answer this in the affirmative.
We believe that the behaviour of the captain of the "Don Juan" in tills
instance-playing mahjong "before and up to the time of collision
constitutes behaviour that is simply unacceptable on the part of the
master of a vessel to whose hands the lives and welfare of at least seven
hundred fifty (750) passengers had been entrusted. Whether or not Capt.
Santisteban was "off-duty" or "on-duty" at or around the time of actual

collision is quite immaterial; there is, both realistically speaking and in

contemplation of law, no such thing as "off-duty" hours for the master of a
vessel at sea that is a common carrier upon whom the law imposes the
duty of extraordinary diligence[t]he duty 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. 14

WHEREFORE, the Petition for Review on certiorari is hereby GRANTED

and the Decision of the Court of Appeals insofar as it redurce the amount
of damages awarded to petitioners to P100,000.00 is hereby REVERSED
and SET ASIDE. The award granted by the trial court is hereby
RESTORED and AUGMENTED as follows:
(a) P 126,000.00 for actual damages;
(b) P 60,000.00 as compensatory damages for wrongful death;
(c) P 307,000.00 as moral damages;

The record does not show that was the first or only time that Capt.
Santisteban had entertained himself during a voyage by playing mahjong
with his officers and passengers; Negros Navigation in permitting, or in
failing to discover and correct such behaviour, must be deemed grossly
negligent.
Capt. Santisteban was also faulted in the Philippine Coast Guard
decision for failing after the collision, "to institute appropriate measures to
delay the sinking of M/V Don Juan." This appears to us to be a
euphemism for failure to maintain the sea-worthiness or the water-tight
integrity of the "Don Juan." The record shows that the "Don Juan" sank
within ten (10) to fifteen (15) minutes after initial contact with the
"Tacloban City. 15 While the failure of Capt. Santisteban to supervise his
officers and crew in the process of abandoning the ship and his failure to
avail of measures to prevent the too rapid sinking of his vessel after
collision, did not cause the collision by themselves, such failures
doubtless contributed materially to the consequent loss of life and,
moreover, were indicative of the kind and level of diligence exercised by
Capt. Santisteban in respect of his vessel and his officers and men prior
to actual contact between the two (2) vessels. The officer-on-watch in the
"Don Juan" admitted that he had failed to inform Capt. Santisteban not
only of the "imminent danger of collision" but even of "the actual collision
itself "
There is also evidence that the "Don Juan" was carrying more
passengers than she had been certified as allowed to carry. The total
number of persons on board the "Don Juan" on that ill-starred night of 22
April 1 980 was 1,004, or 140 persons more than the maximum lumber
that could be safely carried by the "Don Juan," per its own Certificate of
Inspection. 18 We note in addition, that only 750 passengers had been
listed in its manifest for its final voyage; in other words, at least 128
passengers on board had not even been entered into the "Don Juan's"
manifest. The "Don Juan's" Certificate of Inspection showed that she
carried life boat and life raft accommodations for only 864 persons, the
maximum number of persons she was permitted to carry; in other words,
she did not carry enough boats and life rafts for all the persons actually
on board that tragic night of 22 April 1980.
We hold that under these circumstances, a presumption of gross
negligence on the part of the vessel (her officers and crew) and of its
ship-owner arises; this presumption was never rebutted by Negros
Navigation.
We conclude that Capt. Santisteban and Negros Navigation are properly
held liable for gross negligence in connection with the collision of the
"Don Juan" and "Tacloban City" and the sinking of the "Don Juan" leading
to the death of hundreds of passengers. We find no necessity for passing
upon the degree of negligence or culpability properly attributable to
PNOC and PNOC Shipping or the master of the "Tacloban City," since
they were never impleaded here.
The Court is aware that petitioners here merely asked for the restoration
of the P 400.000.00 award of the trial court. We underscore once more,
however, the firmly settled doctrine that this Court may consider and
resolved all issues which must be decided in order to render substantial
justice to the parties, including issues not explicity raised by the party
affected. In the case at bar, as in Kapalaran Bus Line v. Coronado, et
al., 30 both the demands of sustantial justice and the imperious
requirements of public policy compel us to the conclusion that the trial
court's implicit award of moral and exemplary damages was erronoeusly
deledted and must be restored and augmented and brought more nearely
to the level required by public policy and substantial justice.

(d) P 307,000.00 as exemplary damages making a total of P 800,000.00;

and
(e) P 15,000.00 as attorney's fees

CLEMENTE BRIAS vs. THE PEOPLE OF THE PHILIPPINES and

HONORABLE COURT OF APPEALS
FACTS
The evidence of the prosecution tends to show that in the afternoon of
January 6, 1957, Juanito Gesmundo bought a train ticket at the railroad
station in Tagkawayan, Quezon for his 55-year old mother Martina Bool
and his 3-year old daughter Emelita Gesmundo, who were bound for
Barrio Lusacan, Tiaong, same province. At about 2:00 p.m., Train No. 522
left Tagkawayan with the old woman and her granddaughter among the
passengers. At Hondagua the train's complement were relieved, with
Victor Millan taking over as engineman, Clemente Brias as conductor,
and Hermogenes Buencamino as assistant conductor. Upon approaching
Barrio Lagalag in Tiaong at about 8:00 p.m. of that same night, the train
slowed down and the conductor shouted 'Lusacan', 'Lusacan'.
Thereupon, the old woman walked towards the left front door facing the
direction of Tiaong, carrying the child with one hand and holding her
baggage with the other. When Martina and Emelita were near the door,
the train suddenly picked up speed. As a result the old woman and the
child stumbled and they were seen no more. Next morning, the Tiaong
police received a report that two corpses were found along the railroad
tracks at Barrio Lagalag.
The Court of First Instance of Quezon convicted defendant-appellant
Clemente Brias for double homicide thru reckless imprudence but
acquitted Hermogenes Buencamino and Victor Millan.
Court of Appeals affirmed the judgment of the lower court. During the
pendency of the criminal prosecution in the Court of First Instance of
Quezon, the heirs of the deceased victims filed with the same court, a
separate civil action for damages against the Manila Railroad Company.
ISSUE
WON PETITIONER WAS NEGLIGENT UNDER THE FACTS AS FOUND
BY THE COURT.

RULING
YES. It is a matter of common knowledge and experience about common
carriers like trains and buses that before reaching a station or flagstop
they slow down and the conductor announces the name of the place. It is
also a matter of common experience that as the train or bus slackens its
speed, some passengers usually stand and proceed to the nearest exit,
ready to disembark as the train or bus comes to a full stop. This is
especially true of a train because passengers feel that if the train
resumes its run before they are able to disembark, there is no way to stop
it as a bus may be stopped.
It was negligence on the conductor's part to announce the next flag stop
when said stop was still a full three minutes ahead. As the respondent

Court of Appeals correctly observed, "the appellant's announcement was

premature and erroneous.
That the announcement was premature and erroneous is shown by the
fact that immediately after the train slowed down, it unexpectedly
accelerated to full speed. Petitioner-appellant failed to show any reason
why the train suddenly resumed its regular speed. The announcement
was made while the train was still in Barrio Lagalag.
The proximate cause of the death of the victims was the premature and
erroneous announcement of petitioner' appelant Brias. This
announcement prompted the victims to stand and proceed to the nearest
exit. Without said announcement, the victims would have been safely
seated in their respective seats when the train jerked as it picked up
speed. The connection between the premature and erroneous
announcement of petitioner-appellant and the deaths of the victims is
direct and natural, unbroken by any intervening efficient causes.
Petitioner-appellant also argues that it was negligence per se for Martina
Bool to go to the door of the coach while the train was still in motion and
that it was this negligence that was the proximate cause of their deaths.
We have carefully examined the records and we agree with the
respondent court that the negligence of petitioner-appellant in
prematurely and erroneously announcing the next flag stop was the
proximate cause of the deaths of Martina Bool and Emelita Gesmundo.
Any negligence of the victims was at most contributory and does not
exculpate the accused from criminal liability.

HERMINIO L. NOCUM vs. LAGUNA TAYABAS BUS COMPANY

FACTS
Appeal of the Laguna Tayabas Bus Co., defendant in the Court below,
from a judgment of the said court (Court of First Instance of Batangas) in

its Civil Case No. 834, wherein appellee Herminio L. Nocum was plaintiff,
sentencing appellant to pay appellee the sum of P1,351.00 for actual
damages and P500.00 as attorney's fees with legal interest from the filing
of the complaint plus costs. Appellee, who was a passenger in appellant's
Bus No. 120 then making a trip within the barrio of Dita, Municipality of
Bay, Laguna, was injured as a consequence of the explosion of
firecrackers, contained in a box, loaded in said bus and declared to its
conductor as containing clothes and miscellaneous items by a copassenger.
ISSUE
WON the appellant (Laguna Tayabas Bus Company) did not observe
the extraordinary or utmost diligence of a very cautious person
required by the law for common carriers.
RULING
NO.
It is undisputed that before the box containing the firecrackers were
allowed to be loaded in the bus by the conductor, inquiry was made with
the passenger carrying the same as to what was in it, since its
"opening ... was folded and tied with abaca." (Decision p. 16, Record on
Appeal.) According to His Honor, "if proper and rigid inspection were
observed by the defendant, the contents of the box could have been
discovered and the accident avoided. Refusal by the passenger to have
the package opened was no excuse because, as stated by Dispatcher
Cornista, employees should call the police if there were packages
containing articles against company regulations." That may be true, but it
is Our considered opinion that the law does not require as much. Article
1733 is not as unbending as His Honor has held, for it reasonably
qualifies the extraordinary diligence required of common carriers for the
safety of the passengers transported by them to be "according to all the
circumstances of each case." In fact, Article 1755 repeats this same
qualification: "A common carrier is bound to carry the passengers safely
as far as human care and foresight can provide, using the utmost
diligence of very cautious persons, with due regard for all the
circumstances."
In this particular case before Us, it must be considered that while it is true
the passengers of appellant's bus should not be made to suffer for
something over which they had no control, as enunciated in the decision
of this Court cited by His Honor,1 fairness demands that in measuring a
common carrier's duty towards its passengers, allowance must be given
to the reliance that should be reposed on the sense of responsibility of all
the passengers in regard to their common safety. It is to be presumed
that a passenger will not take with him anything dangerous to the lives
and limbs of his co-passengers, not to speak of his own. Not to be lightly
considered must be the right to privacy to which each passenger is
entitled. He cannot be subjected to any unusual search, when he protests
the innocuousness of his baggage and nothing appears to indicate the
contrary, as in the case at bar. In other words, inquiry may be verbally
made as to the nature of a passenger's baggage when such is not
outwardly perceptible, but beyond this, constitutional boundaries are
already in danger of being transgressed. Calling a policeman to his aid,
as suggested by the service manual invoked by the trial judge, in
compelling the passenger to submit to more rigid inspection, after the
passenger had already declared that the box contained mere clothes and
other miscellaneous, could not have justified invasion of a constitutionally
protected domain. Police officers acting without judicial authority secured
in the manner provided by law are not beyond the pale of constitutional
inhibitions designed to protect individual human rights and liberties.
Withal, what must be importantly considered here is not so much the
infringement of the fundamental sacred rights of the particular passenger
herein involved, but the constant threat any contrary ruling would pose on

the right of privacy of all passengers of all common carriers, considering

how easily the duty to inspect can be made an excuse for mischief and
abuse. Of course, when there are sufficient indications that the
representations of the passenger regarding the nature of his baggage
may not be true, in the interest of the common safety of all, the
assistance of the police authorities may be solicited, not necessarily to
force the passenger to open his baggage, but to conduct the needed
investigation consistent with the rules of propriety and, above all, the
constitutional rights of the passenger. It is in this sense that the
mentioned service manual issued by appellant to its conductors must be
understood.
Appellant further invokes Article 1174 of the Civil Code which relieves all
obligors, including, of course, common carriers like appellant, from the
consequence of fortuitous events. The court a quo held that "the breach
of contract (in this case) was not due to fortuitous event and that,
therefore, the defendant is liable in damages." Since We hold that
appellant has succeeded in rebutting the presumption of negligence by
showing that it has exercised extraordinary diligence for the safety of its
passengers, "according to the circumstances of the (each) case", We
deem it unnecessary to rule whether or not there was any fortuitous event
in this case.

BATANGAS LAGUNA TAYABAS BUS COMPANY & ARMANDO PON

vs. INTERMEDIATE APPELLATE COURT, THE HEIRS OF PAZ VDA.
DE PAMFILO, THE HEIRS OF NORMA NERI, and BAYLON SALES
and NENA VDA. DE ROSALES
FACTS
The collision between Bus No. 1046 of the Batangas Laguna Tayabas
Bus Company (BLTB, for brevity) driven by Armando Pon and Bus No.
404 of Superlines Transportation Company (Superlines, for brevity)
driven by Ruben Dasco took place at the highway traversing Barangay
Isabong, Tayabas, Quezon in the afternoon of August 11, 1978, which
collision resulted in the death of Aniceto Rosales, Francisco Pamfilo and
Romeo Neri and in several injuries to Nena Rosales (wife of Anecito) and
Baylon Sales, all passengers of the BLTB Bus No. 1046. The evidence
shows that as BLTB Bus No. 1046 was negotiating the bend of the
highway, it tried to overtake a Ford Fiera car just as Bus No. 404 of
Superlines was coming from the opposite direction. Seeing thus,
Armando Pon (driver of the BLTB Bus) made a belated attempt to slacken
the speed of his bus and tried to return to his proper lane. It was an
unsuccessful try as the two (2) buses collided with each other.
Nena Vda. de Rosales and Baylon Sales and the surviving heirs of the
deceased Francisco Pamfilo, Aniceto Rosales and Romeo Neri instituted
separate cases in the Court of First Instance of Marinduque against BLTB
and Superlines together with their respective drivers praying for
damages, attorney's fees and litigation expenses plus costs. Criminal
cases against the drivers of the two buses were filed in the Court of First
Instance of Quezon.
Defendants BLTB and Superlines, together with their drivers Pon and
Dasco, denied liability by claiming that they exercised due care and
diligence and shifted the fault, against each other.
It is argued by petitioners that if the intention of private respondents were
to file an action based on culpa contractual or breach of contract of
carriage, they could have done so by merely impleading BLTB and its
driver Pon. As it was in the trial court, private respondents filed an action
against all the defendants basing their action on culpa aquiliana or tort.
ISSUE
WON THE ACTIONS OF PRIVATE RESPONDENTS ARE BASED
ON CULPA CONTRACTUAL
RULING
Petitioners' contentions deserve no merit. A reading of the respondent
court's decision shows that it anchored petitioners' liability both on culpa
contractual and culpa aquiliana.
It is settled that the proximate cause of the collision resulting in the death
of three and injuries to two of the passengers of BLTB was the sole
negligence of the driver of the BLTB Bus, who recklessly operated and
drove said bus in a lane where overtaking is not allowed by Traffic Rules
and Regulations. Such negligence and recklessness is binding against
petitioner BLTB, more so when we consider the fact that in an action
based on a contract of carriage, the court need not make an express

finding of fault or negligence on the part of the carrier in order to hold it

responsible for the payment of the damages sought by the passenger. By
the contract of carriage, the carrier BLTB assumed the express obligation
to transport the passengers to their destination safely and to observe
extraordinary diligence with a due regard for all the circumstances, and
any injury that might be suffered by its passengers is right away
attributable to the fault or negligence of the carrier (Art. 1756, New Civil
Code).
As ruled by the CA: It is well settled that a driver abandoning his proper
lane for the purpose of overtaking another vehicle in ordinary situation
has the duty to see that the road is clear and not to proceed if he cannot
do so in safety (People v. Enriquez, 40 O.G. No. 5, 984).
... Before attempting to pass the vehicle ahead, the rear driver must see
that the road is clear and if there is no sufficient room for a safe passage,
or the driver ahead does not turn out so as to afford opportunity to pass,
or if, after attempting to pass, the driver of the overtaking vehicle finds
that he cannot make the passage in safety, the latter must slacken his
speed so as to avoid the danger of a collision, even bringing his car to a
stop if necessary. (3-4 Huddy Encyclopedia of Automobile Law, Sec. 212,
p. 195).
The above rule becomes more particularly applicable in this case when
the overtaking took place on an ascending curved highway divided into
two lanes by a continuous yellow line. Appellant Pon should have
remembered that:
When a motor vehicle is approaching or rounding a curve there is special
necessity for keeping to the right side of the road and the driver has not
the right to drive on the left hand side relying upon having time to turn to
the right if a car is approaching from the opposite direction comes into
view. (42 C.J. 42 906).
Unless there is proof to the contrary, it is presumed that a person driving
a motor vehicle has been negligent if at the time of the mishap, he was
violating any traffic regulation. (Art. 2165, Civil Code).
In failing to observe these simple precautions, BLTB's driver undoubtedly
failed to act with the diligence demanded by the circumstances.
_______
Petitioners also contend that "a common carrier is not an absolute insurer
against all risks of travel and are not liable for acts or accidents which
cannot be foreseen or inevitable and that responsibility of a common
carrier for the safety of its passenger prescribed in Articles 1733 and
1755 of the New Civil Code is not susceptible of a precise and definite
formulation." (p. 13, Rollo) Petitioners' contention holds no water because
they had totally failed to point out any factual basis for their defense
of force majeure in the light of the undisputed fact that the cause of the
collision was the sole negligence and recklessness of petitioner Armando
Pon. For the defense of force majeure or act of God to prosper the
accident must be due to natural causes and exclusively without human
intervention.
LIABILITY OF THE APPELLANTS (APPELLATE COURT as affirmed
by the SC)
For his own negligence in recklessly driving the truck owned by his
employer, appellant Armando Pon is primarily liable (Article 2176, Civil
Code).

On the other hand the liability of Pon's employer, appellant BLTB, is also
primary, direct and immediate in view of the fact that the death of or
injuries to its passengers was through the negligence of its employee
(Marahan v. Mendoza, 24 SCRA 888, 894), and such liability does not
cease even upon proof that BLTB had exercised all the diligence of a
good father of a family in the selection and supervision of its employees
(Article 1759, Civil Code).
The common carrier's liability for the death of or injuries to its passengers
is based on its contractual obligation to carry its passengers safely to
their destination. That obligation is so serious that the Civil Code requires
"utmost diligence of very cautious person (Article 1755, Civil Code). They
are presumed to have been at fault or to have acted negligently unless
they prove that they have observed extraordinary diligence" (Article 1756,
Civil Code). In the present case, the appellants have failed to prove
extraordinary diligence. Indeed, this legal presumption was confirmed by
the fact that the bus driver of BLTB was negligent. It must follow that both
the driver and the owner must answer for injuries or death to its
passengers.
The liability of BLTB is also solidarily with its driver (Viluan v. Court of
Appeals, 16 SCRA 742, 747) even though the liability of the driver springs
from quasi delict while that of the bus company from contract. (pp. 17-19,
Rollo)
PHILIPPINE AIRLINES, INC. vs. COURT OF APPEALS and PEDRO
ZAPATOS
FACTS
On 25 November 1976, private respondent filed a complaint for damages
for breach of contract of carriage 2against Philippine Airlines, Inc. (PAL).
According to him, on 2 August 1976, he was among the twenty-one (21)
passengers of PAL Flight 477 that took off from Cebu bound for Ozamiz
City. The routing of this flight was Cebu-Ozamiz-Cotabato. While on flight
and just about fifteen (15) minutes before landing at Ozamiz City, the pilot
received a radio message that the airport was closed due to heavy rains
and inclement weather and that he should proceed to Cotabato City
instead.
Upon arrival at Cotabato City, the PAL Station Agent informed the
passengers of their options to return to Cebu on flight 560 of the same
day and thence to Ozamiz City on 4 August 1975, or take the next flight
to Cebu the following day, or remain at Cotabato and take the next
available flight to Ozamiz City on 5 August 1975. 3 The Station Agent
likewise informed them that Flight 560 bound for Manila would make a
stop-over at Cebu to bring some of the diverted passengers; that there
were only six (6) seats available as there were already confirmed
passengers for Manila; and, that the basis for priority would be the checkin sequence at Cebu.
Private respondent chose to return to Cebu but was not accommodated
because he checked-in as passenger No. 9 on Flight 477. He insisted on
being given priority over the confirmed passengers in the
accommodation, but the Station Agent refused private respondent's
demand explaining that the latter's predicament was not due to PAL's
own doing but to be a force majeure. 4
Private respondent was left at the airport and could not even hitch a ride
in the Ford Fiera loaded with PAL personnel. 6 PAL neither provided
private respondent with transportation from the airport to the city proper
nor food and accommodation for his stay in Cotabato City.
The following day, private respondent purchased a PAL ticket to Iligan
City. He informed PAL personnel that he would not use the free ticket
because he was filing a case against PAL. 7 In Iligan City, private

respondent hired a car from the airport to Kolambugan, Lanao del Norte,
reaching Ozamiz City by crossing the bay in a launch. 8 His personal
effects including the camera, which were valued at P2,000.00 were no
longer recovered.
On 13 January 1977, PAL filed its answer denying that it unjustifiably
refused to accommodate private respondent. 9 It alleged that there was
simply no more seat for private respondent on Flight 560 since there
were only six (6) seats available and the priority of accommodation on
Flight 560 was based on the check-in sequence in Cebu.
PAL vigorously maintains that private respondent's principal cause of
action was its alleged denial of private respondent's demand for priority
over the confirmed passengers on Flight 560. Likewise, PAL points out
that the complaint did not impute to PAL neglect in failing to attend to the
needs of the diverted passengers; and, that the question of negligence
was not and never put in issue by the pleadings or proved at the trial.
Contrary to the above arguments, private respondent's amended
complaint touched on PAL's indifference and inattention to his
predicament.
With regard to the award of damages affirmed by the appellate court, PAL
argues that the same is unfounded. It asserts that it should not be
charged with the task of looking after the passengers' comfort and
convenience because the diversion of the flight was due to a fortuitous
event, and that if made liable, an added burden is given to PAL which is
over and beyond its duties under the contract of carriage. It submits that
granting arguendo that negligence exists, PAL cannot be liable in
damages in the absence of fraud or bad faith; that private respondent
failed to apprise PAL of the nature of his trip and possible business
losses; and, that private respondent himself is to be blamed for
unreasonably refusing to use the free ticket which PAL issued.

While we find PAL remiss in its duty of extending utmost care to private
respondent while being stranded in Cotabato City, there is no sufficient
basis to conclude that PAL failed to inform him about his nonaccommodation on Flight 560, or that it was inattentive to his queries
relative thereto.
Admittedly, private respondent's insistence on being given priority in
accommodation was unreasonable considering the fortuitous event and
that there was a sequence to be observed in the booking, i.e., in the
order the passengers checked-in at their port of origin. His intransigence
in fact was the main cause for his having to stay at the airport longer than
was necessary.
Anent the plaint that PAL employees were disrespectful and inattentive
toward private respondent, the records are bereft of evidence to support
the same. Thus, the ruling of respondent Court of Appeals in this regard
is without basis. 27 On the contrary, private respondent was attended to
not only by the personnel of PAL but also by its Manager."
WHEREFORE the decision appealed from is AFFIRMED with
modification however that the award of moral damages of Fifty Thousand
Pesos (P50,000.00) is reduced to Ten Thousand Pesos (P10,000.00)
while the exemplary damages of Ten Thousand Pesos (P10,000.00) is
also reduced to Five Thousand Pesos (P5,000.00). The award of actual
damages in the amount Five Thousand Pesos (P5,000.00) representing
business losses occasioned by private respondent's being stranded in
Cotabato City is deleted.

ISSUE
WON PAL WAS NEGLIGENT IN CARING FOR ITS STRANDED
PASSENGERS

RULING
The contract of air carriage is a peculiar one. Being 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.
The position taken by PAL in this case clearly illustrates its failure to
grasp the exacting standard required by law. Undisputably, PAL's
diversion of its flight due to inclement weather was a fortuitous event.
Nonetheless, such occurrence did not terminate PAL's 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 carrier's
premises. 22 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.

CONRADA VDA. DE ABETO, CARMELO ABETO, CECILIA ABETO,

CONCEPCION ABETO, MARIA ABETO, ESTELA ABETO, PERLA
ABETO, PATRIA ABETO and ALBERTO ABETO vs. PHILIPPINE AIR
LINES, INCORPORATED
FACTS
Plaintiff's evidence shows that about 5:30 in the afternoon of November
23, 1960, Judge Quirico Abeto, with the necessary tickets, boarded the
Philippine Air Lines' PI-C133 plane at the Mandurriao Airport, Iloilo City
for Manila. He was listed as the No. 18 passenger in its Load Manifest
(Exhibit A). The plane which would then take two hours from Iloilo to

Manila did not reach its destination and the next day there was news that
the plane was missing. After three weeks, it was ascertained that the
plane crashed at Mt. Baco, Province of Mindoro. All the passengers,
including Judge Abeto, must have been killed instantly and their remains
were scattered all over the area. Among the articles recovered on the site
of the crash was a leather bag with the name "Judge Quirico Abeto."
When defendant-appellant would not hear demands for settlement of
damages, plaintiffs-appellees were compelled to hire counsel for the
institution and prosecution of this case.
Defendant-appellant tried to prove that the plane crash at Mt. Baco was
beyond the control of the pilot. The plane at the time of the crash was
airworthy for the purpose of conveying passengers across the country as
shown by the certificate of airworthiness issued by the Civil Aeronautics
Administration (CAA). There was navigational error but no negligence or
malfeasance on the part of the pilot.
Further, deviation from its prescribed route was due to the bad weather
conditions between Mt. Baco and Romblon and strong winds which
caused the plane to drift to Mt. Baco. Under the circumstances, appellant
argues that the crash was a fortuitous event and, therefore, defendantappellant cannot be held liable under the provisions of Article 1174 of the
New Civil Code. Besides, appellant tried to prove that it had exercised all
the cares, skill and diligence required by law on that particular flight in
question.
ISSUE
WON THE DEFENDANT IS LIABLE FOR VIOLATION OF ITS
CONTRACT OF CARRIAGE.

RULING
The provisions of the Civil Code on this question of liability are clear and
explicit. Article 1733 binds common carriers, "from the nature of their
business and by reasons of public policy, ... to observe extraordinary
diligence in the vigilance ... for the safety of the passengers transported
by them according to all the circumstances of each case." Article 1755
establishes the standard of care required of a common carrier, which is,
"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." Article 1756 fixes the burden of proof by
providing that "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 extra-ordinary diligence as
prescribed in Articles 1733 and 1755." Lastly, Article 1757 states that "the
responsibility of a common carrier for the safety of passengers ... cannot
be dispensed with or lessened by stipulation, by the posting of notices, by
statements on tickets, or otherwise."
The prescribed airway of plane PI-C133 that afternoon of November 23,
1960, with Capt. de Mesa, as the pilot, was Iloilo-Romblon-Manila,
denominated as airway "Amber l," and the prescribed elevation of the
flight was 6,000 ft. The fact is, the plane did not take the designated route
because it was some 30 miles to the west when it crashed at Mt. Baco.
According to defendant's witness, Ramon A. Pedroza, Administrative
Assistant of the Philippine Air Lines, Inc., this tragic crash would have not
happened had the pilot continued on the route indicated.
At any rate, in the absence of a satisfactory explanation by appellant as
to how the accident occurred, the presumption is, it is at fault.

In an action based on a contract of carriage, the court need not make an

express finding of fault or negligence on the part of the carrier in order to
hold it responsible to pay the damages sought for by the passenger. By
the contract of carriage, the carrier assumes the express obligation to
transport the passenger to his destination safely and to observe
extraordinary diligence with a due regard for all the circumstances, and
any injury that might be suffered by the passenger is right away
attributable to the fault or negligence of the carrier (Art. 1756, New Civil
Code). This is an exception to the general rule that negligence must be
proved. (Batangas Transportation Company vs. Caguimbal, 22 SCRA
171.)

Wyeth executed its annual contract of carriage with Reputable. It turned

out, however, that the contract was not signed by Wyeths
representative/s.4 Nevertheless, it was admittedly signed by Reputables
representatives, the terms thereof faithfully observed by the parties and,
as previously stated, the same contract of carriage had been annually
executed by the parties every year since 1989.
The contract also required Reputable to secure an insurance policy on
Wyeths goods.7 Thus, on February 11, 1994, Reputable signed a Special
Risk Insurance Policy (SR Policy) with petitioner Malayan for the amount
of P1,000,000.00.
On October 6, 1994, during the effectivity of the Marine Policy and SR
Policy, Reputable received from Wyeth 1,000 boxes of Promil infant
formula worth P2,357,582.70 to be delivered by Reputable to Mercury
Drug Corporation in Libis, Quezon City. Unfortunately, on the same date,
the truck carrying Wyeths products was hijacked by about 10 armed
men. They threatened to kill the truck driver and two of his helpers should
they refuse to turn over the truck and its contents to the said highway
robbers. The hijacked truck was recovered two weeks later without its
cargo.
On March 8, 1995, Philippines First, after due investigation and
adjustment, and pursuant to the Marine Policy, paid Wyeth P2,133,257.00
as indemnity. Philippines First then demanded reimbursement from
Reputable, having been subrogated to the rights of Wyeth by virtue of the
payment. The latter, however, ignored the demand.
Consequently, Philippines First instituted an action for sum of money
against Reputable on August 12, 1996.8 In its complaint, Philippines First
stated that Reputable is a "private corporation engaged in the business of
a common carrier." In its answer,9 Reputable claimed that it is a private
carrier. It also claimed that it cannot be made liable under the contract of
carriage with Wyeth since the contract was not signed by Wyeths
representative and that the cause of the loss was force majeure, i.e., the
hijacking incident.
Reputable impleaded Malayan as third-party defendant in an effort to
collect the amount covered in the SR Policy. According to Reputable, "it
was validly insured with Malayan for P1,000,000.00 with respect to the
lost products under the latters Insurance Policy No. SR-0001-02577
effective February 1, 1994 to February 1, 1995" and that the SR Policy
covered the risk of robbery or hijacking.10

MALAYAN INSURANCE CO., INC. vs. PHILIPPINES FIRST

INSURANCE CO., INC. and REPUTABLE FORWARDER SERVICES,
INC.

Disclaiming any liability, Malayan argued, among others, that under

Section 5 of the SR Policy, the insurance does not cover any loss or
damage to property which at the time of the happening of such loss or
damage is insured by any marine policy and that the SR Policy expressly
excluded third-party liability.

FACTS
ISSUES
Since 1989, Wyeth Philippines, Inc. (Wyeth) and respondent Reputable
Forwarder Services, Inc. (Reputable) had been annually executing a
contract of carriage, whereby the latter undertook to transport and deliver
the formers products to its customers, dealers or salesmen.3
On November 18, 1993, Wyeth procured Marine Policy No. MAR 13797
(Marine Policy) from respondent Philippines First Insurance Co., Inc.
(Philippines First) to secure its interest over its own products. Philippines
First thereby insured Wyeths nutritional, pharmaceutical and other
products usual or incidental to the insureds business while the same
were being transported or shipped in the Philippines.

1) Whether Reputable is a private carrier;

2) Whether Reputable is strictly bound by the stipulations in its
contract of carriage with Wyeth, such that it should be liable for any
risk of loss or damage, for any cause whatsoever, including that due
to theft or robbery and other force majeure;
3) Whether the RTC and CA erred in rendering "nugatory" Sections
5 and Section 12 of the SR Policy; and

4) Whether Reputable should be held solidarily liable with Malayan

for the amount of P998,000.00 due to Philippines First.

rendering inapplicable said provisions in the SR Policy, the CA ruled in

this wise:

RULING

Since Sec. 5 calls for Malayans complete absolution in case the other
insurance would be sufficient to cover the entire amount of the loss, it is
in direct conflict with Sec. 12 which provides only for a pro-rated
contribution between the two insurers. Being the later provision, and
pursuant to the rules on interpretation of contracts, Sec. 12 should
therefore prevail.

1. Reputable is a private carrier. Well-entrenched in jurisprudence is the

rule that factual findings of the trial court, especially when affirmed by the
appellate court, are accorded the highest degree of respect and
considered conclusive between the parties, save for certain exceptional
and meritorious circumstances, none of which are present in this case. 18
Malayan relies on the alleged judicial admission of Philippines First in its
complaint that Reputable is a common carrier. Consequently, pursuant to
Article 1745(6) of the Civil Code, the liability of Reputable for the loss of
Wyeths goods should be dispensed with, or at least diminished.
In this case, the pleader or the plaintiff who alleged that Reputable is a
common carrier was Philippines First. It cannot, by any stretch of
imagination, be made conclusive as against Reputable whose nature of
business is in question. It should be stressed that Philippines First is not
privy to the SR Policy between Wyeth and Reputable; rather, it is a mere
subrogee to the right of Wyeth to collect from Reputable under the terms
of the contract of carriage. Philippines First is not in any position to make
any admission, much more a definitive pronouncement, as to the nature
of Reputables business and there appears no other connection between
Philippines First and Reputable which suggests mutual familiarity
between them. Moreover, records show that the alleged judicial
admission of Philippines First was essentially disputed by Reputable
when it stated in paragraphs 2, 4, and 11 of its answer that it is actually a
private or special carrier. The settled rule is that mere allegation is not
proof.
Under Article 1732 of the Civil Code, common carriers are persons,
corporations, firms, or associations engaged in the business of carrying
or transporting passenger or goods, or both by land, water or air for
compensation, offering their services to the public. On the other hand, a
private carrier is one wherein the carriage is generally undertaken by
special agreement and it does not hold itself out to carry goods for the
general public.28 A common carrier becomes a private carrier when it
undertakes to carry a special cargo or chartered to a special person
only.29 For all intents and purposes, therefore, Reputable operated as a
private/special carrier with regard to its contract of carriage with Wyeth.

2. Reputable is bound by the terms of the contract of carriage. The extent

of a private carriers obligation is dictated by the stipulations of a contract
it entered into, provided its stipulations, clauses, terms and conditions are
not contrary to law, morals, good customs, public order, or public policy.
"The Civil Code provisions on common carriers should not be applied
where the carrier is not acting as such but as a private carrier. Public
policy governing common carriers has no force where the public at large
is not involved."30
Thus, being a private carrier, the extent of Reputables liability is fully
governed by the stipulations of the contract of carriage, one of which is
that it shall be liable to Wyeth for the loss of the goods/products due to
any and all causes whatsoever, including theft, robbery and other force
majeure while the goods/products are in transit and until actual delivery to
Wyeths customers, salesmen and dealers.

3. Malayan refers to Section 5 of its SR Policy as an "over insurance

clause" and to Section 12 as a "modified other insurance clause". 32 In

The intention of both Reputable and Malayan should be given effect as

against the wordings of Sec. 12 of their contract, as it was intended by
the parties to operate only in case of double insurance, or where the
benefits of the policies of both plaintiff-appellee and Malayan should
pertain to Reputable alone. But since the court a quo correctly ruled that
there is no double insurance in this case inasmuch as Reputable was not
privy thereto, and therefore did not stand to benefit from the policy issued
by plaintiff-appellee in favor of Wyeth, then Malayans stand should be
rejected.
To rule that Sec. 12 operates even in the absence of double insurance
would work injustice to Reputable which, despite paying premiums for a
P1,000,000.00 insurance coverage, would not be entitled to recover said
amount for the simple reason that the same property is covered by
another insurance policy, a policy to which it was not a party to and much
less, from which it did not stand to benefit. Plainly, this unfair situation
could not have been the intention of both Reputable and Malayan in
signing the insurance contract in question.
Section 5 is actually the other insurance clause (also called "additional
insurance" and "double insurance"). In this case, similar to Condition No.
3 in Geagonia, Section 5 does not provide for the nullity of the SR Policy
but simply limits the liability of Malayan only up to the excess of the
amount that was not covered by the other insurance policy. In interpreting
the "other insurance clause" in Geagonia, the Court ruled that the
prohibition applies only in case of double insurance. The Court ruled that
in order to constitute a violation of the clause, the other insurance must
be upon same subject matter, the same interest therein, and the same
risk. Thus, even though the multiple insurance policies involved were all
issued in the name of the same assured, over the same subject matter
and covering the same risk, it was ruled that there was no violation of the
"other insurance clause" since there was no double insurance.
Section 12 of the SR Policy, on the other hand, is the over insurance
clause. More particularly, it covers the situation where there is over
insurance due to double insurance. In such case, Section 15 provides
that Malayan shall "not be liable to pay or contribute more than its ratable
proportion of such loss or damage." This is in accord with the principle of
contribution provided under Section 94(e) of the Insurance Code,37 which
states that "where the insured is over insured by double insurance, each
insurer is bound, as between himself and the other insurers, to contribute
ratably to the loss in proportion to the amount for which he is liable under
his contract."
Clearly, both Sections 5 and 12 presuppose the existence of a double
insurance. The pivotal question that now arises is whether there is double
insurance in this case such that either Section 5 or Section 12 of the SR
Policy may be applied.
By the express provision of Section 93 of the Insurance Code, double
insurance exists where the same person is insured by several insurers
separately in respect to the same subject and interest. The requisites in
order for double insurance to arise are as follows:38
1. The person insured is the same;

2. Two or more insurers insuring separately;

3. There is identity of subject matter;
4. There is identity of interest insured; and
5. There is identity of the risk or peril insured against.
In the present case, while it is true that the Marine Policy and the SR
Policy were both issued over the same subject matter, i.e. goods
belonging to Wyeth, and both covered the same peril insured against, it
is, however, beyond cavil that the said policies were issued to two
different persons or entities. It is undisputed that Wyeth is the recognized
insured of Philippines First under its Marine Policy, while Reputable is the
recognized insured of Malayan under the SR Policy. The fact that
Reputable procured Malayans SR Policy over the goods of Wyeth
pursuant merely to the stipulated requirement under its contract of
carriage with the latter does not make Reputable a mere agent of Wyeth
in obtaining the said SR Policy.
Therefore, even though the two concerned insurance policies were
issued over the same goods and cover the same risk, there arises no
double insurance since they were issued to two different persons/entities
having distinct insurable interests. Necessarily, over insurance by double
insurance cannot likewise exist. Hence, as correctly ruled by the RTC and
CA, neither Section 5 nor Section 12 of the SR Policy can be applied.

4. Reputable is not solidarily liable with Malayan. There is solidary liability

only when the obligation expressly so states, when the law so provides or
when the nature of the obligation so requires.
In Heirs of George Y. Poe v. Malayan lnsurance Company., lnc., 42 the
Court ruled that:
Where the insurance contract provides for indemnity against liability to
third persons, the liability of the insurer is direct and such third persons
can directly sue the insurer. The direct liability of the insurer under
indemnity contracts against third party[- ]liability does not mean, however,
that the insurer can be held solidarily liable with the insured and/or the
other parties found at fault, since they are being held liable under different
obligations. The liability of the insured carrier or vehicle owner is based
on tort, in accordance with the provisions of the Civil Code; while that of
the insurer arises from contract, particularly, the insurance
policy:43 (Citation omitted and emphasis supplied)
Suffice it to say that Malayan's and Reputable's respective liabilities arose
from different obligations- Malayan's is based on the SR Policy while
Reputable's is based on the contract of carriage.

LOADMASTERS CUSTOMS SERVICES, INC. VS. GLODEL

BROKERAGE
CORPORATION and
R&B
INSURANCE
CORPORATION
FACTS
On August 28, 2001, R&B Insurance issued Marine Policy No. MN00105/2001 in favor of Columbia to insure the shipment of 132 bundles of
electric copper cathodes against All Risks.
Columbia engaged the services of Glodel for the release and withdrawal
of the cargoes from the pier and the subsequent delivery to its
warehouses/plants. Glodel, in turn, engaged the services of Loadmasters
for the use of its delivery trucks to transport the cargoes to Columbias
warehouses/plants in Bulacan and Valenzuela City.
The goods were loaded on board twelve (12) trucks owned by
Loadmasters, driven by its employed drivers and accompanied by its
employed truck helpers. Of the six (6) trucks en route to Balagtas,
Bulacan, however, only five (5) reached the destination. One (1) truck,
loaded with 11 bundles or 232 pieces of copper cathodes, failed to deliver
its cargo.

Later on, the said truck, an Isuzu with Plate No. NSD-117, was recovered
but without the copper cathodes. Because of this incident, Columbia filed
with R&B Insurance a claim for insurance indemnity in the amount
of P1,903,335.39. R&B Insurance, thereafter, filed a complaint for
damages against both Loadmasters and Glodel.
ISSUES
WON GLODEL AND LOADMASTERS ARE COMMON CARRIERS.
WON PETITIONER LOADMASTERS CAN BE HELD LIABLE TO
RESPONDENT GLODEL DESPITE THE FACT THAT GLODEL DID
NOT FILE A CROSS-CLAIM AGAINST LOADMASTERS
WON LOADMASTERS CAN BE LEGALLY CONSIDERED AS AN
AGENT OF RESPONDENT GLODEL
RULING
Subrogation is the substitution of one person in the place of another with
reference to a lawful claim or right, so that he who is substituted
succeeds to the rights of the other in relation to a debt or claim, including
its remedies or securities. [9] Doubtless, R&B Insurance is subrogated to
the rights of the insured to the extent of the amount it paid the consignee
under the marine insurance. As subrogee of the rights and interest of the
consignee, R&B Insurance has the right to seek reimbursement from
either Loadmasters or Glodel or both for breach of contract and/or tort.
1. YES. Under Article 1732 of the Civil Code, common carriers are
persons, corporations, firms, or associations engaged in the business of
carrying or transporting passenger or goods, or both by land, water or air
for compensation, offering their services to the public.
Based on the aforecited definition, Loadmasters is a common carrier
because it is engaged in the business of transporting goods by land,
through its trucking service. It is a common carrier as distinguished from
a private carrier wherein the carriage is generally undertaken by special
agreement and it does not hold itself out to carry goods for the general
public.[10]The distinction is significant in the sense that 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.[11]
In the present case, there is no indication that the undertaking in the
contract between Loadmasters and Glodel was private in
character. There is no showing that Loadmasters solely and exclusively
rendered services to Glodel. In fact, Loadmasters admitted that it is a
common carrier.[12]
In the same vein, Glodel is also considered a common carrier within the
context of Article 1732. In its Memorandum,[13] it states that it is a
corporation duly organized and existing under the laws of the Republic of
the Philippines and is engaged in the business of customs brokering.
Loadmasters and Glodel, being both common carriers, are mandated
from the nature of their business and for reasons of public policy, to
observe the extraordinary diligence in the vigilance over the goods
transported by them according to all the circumstances of such case, as
required by Article 1733 of the Civil Code. When the Court speaks of
extraordinary diligence, it is that extreme measure of care and caution
which persons of unusual prudence and circumspection observe for
securing and preserving their own property or rights. [15] This exacting
standard imposed on common carriers in a contract of carriage of goods
is intended to tilt the scales in favor of the shipper who is at the mercy of
the common carrier once the goods have been lodged for shipment.
[16]
Thus, in case of loss of the goods, the common carrier is presumed to
have been at fault or to have acted negligently.[17] This presumption of
fault or negligence, however, may be rebutted by proof that the common
carrier has observed extraordinary diligence over the goods.
LIABILITY OF GLODEL AND LOADMASTERS: Premises considered,
the Court is of the view that both Loadmasters and Glodel are jointly and
severally liable to R & B Insurance for the loss of the subject
cargo. Under Article 2194 of the New Civil Code, the responsibility of two
or more persons who are liable for a quasi-delict is solidary.
It is not disputed that the subject cargo was lost while in the custody of
Loadmasters whose employees (truck driver and helper) were

instrumental in the hijacking or robbery of the shipment. As employer,

Loadmasters should be made answerable for the damages caused by its
employees who acted within the scope of their assigned task of delivering
the goods safely to the warehouse.
Whenever an employees negligence causes damage or injury to another,
there instantly arises a presumption juris tantum that the employer failed
to exercise diligentissimi patris families in the selection (culpa in
eligiendo) or supervision (culpa in vigilando) of its employees.[20] To avoid
liability for a quasi-delict committed by its employee, an employer must
overcome the presumption by presenting convincing proof that he
exercised the care and diligence of a good father of a family in the
selection and supervision of his employee.[21] In this regard, Loadmasters
failed.
Glodel is also liable because of its failure to exercise extraordinary
diligence. It failed to ensure that Loadmasters would fully comply with the
undertaking to safely transport the subject cargo to the designated
destination. It should have been more prudent in entrusting the goods to
Loadmasters by taking precautionary measures, such as providing
escorts to accompany the trucks in delivering the cargoes. Glodel should,
therefore, be held liable with Loadmasters. Its defense of force majeure is
unavailing.
2. Undoubtedly, Glodel has a definite cause of action against
Loadmasters for breach of contract of service as the latter is primarily
liable for the loss of the subject cargo. In this case, however, it cannot
succeed in seeking judicial sanction against Loadmasters because the
records disclose that it did not properly interpose a cross-claim against
the latter. Glodel did not even pray that Loadmasters be liable for any and
all claims that it may be adjudged liable in favor of R&B Insurance. Under
the Rules, a compulsory counterclaim, or a cross-claim, not set up shall
be barred.[25] Thus, a cross-claim cannot be set up for the first time on
appeal.
3. At this juncture, the Court clarifies that there exists no principal-agent
relationship between Glodel and Loadmasters, as erroneously found by
the CA. Article 1868 of the Civil Code provides: By the contract of agency
a person binds himself to render some service or to do something in
representation or on behalf of another, with the consent or authority of the
latter.The elements of a contract of agency are: (1) consent, express or
implied, of the parties to establish the relationship; (2) the object is the
execution of a juridical act in relation to a third person; (3) the agent acts
as a representative and not for himself; (4) the agent acts within the
scope of his authority.[22]
Accordingly, there can be no contract of agency between the
parties. Loadmasters never represented Glodel. Neither was it ever
authorized to make such representation. It is a settled rule that the basis
for agency is representation, that is, the agent acts for and on behalf of
the principal on matters within the scope of his authority and said acts
have the same legal effect as if they were personally executed by the
principal. On the part of the principal, there must be an actual intention to
appoint or an intention naturally inferable from his words or actions, while
on the part of the agent, there must be an intention to accept the
appointment and act on it.[23] Such mutual intent is not obtaining in this
case.
SPOUSES DANTE CRUZ and LEONORA CRUZ vs. SUN HOLIDAYS,
INC.
FACTS
Spouses Dante and Leonora Cruz (petitioners) lodged a Complaint
against Sun Holidays, Inc. for damages arising from the death of their son
Ruelito C. Cruz (Ruelito) who perished with his wife on September 11,
2000 on board the boat M/B Coco Beach III that capsized en route to
Batangas from Puerto Galera, Oriental Mindoro where the couple had
stayed at Coco Beach Island Resort (Resort) owned and operated by
respondent.
The stay of the newly wed Ruelito and his wife at the Resort from
September 9 to 11, 2000 was by virtue of a tour package-contract with
respondent that included transportation to and from the Resort and the
point of departure in Batangas.
On September 11, 2000, as it was still windy, Matute and 25 other Resort
guests including petitioners son and his wife trekked to the other side of
the Coco Beach mountain that was sheltered from the wind where they
boarded M/B Coco Beach III, which was to ferry them to Batangas.

Shortly after the boat sailed, it started to rain. As it moved farther away
from Puerto Galera and into the open seas, the rain and wind got
stronger, causing the boat to tilt from side to side and the captain to step
forward to the front, leaving the wheel to one of the crew members.
The waves got more unwieldy. After getting hit by two big waves which
came one after the other, M/B Coco Beach III capsized putting all
passengers underwater.
Help came after about 45 minutes when two boats owned by Asia Divers
in Sabang, Puerto Galera passed by the capsized M/B Coco Beach III.
Boarded on those two boats were 22 persons, consisting of 18
passengers and four crew members, who were brought to Pisa Island.
Eight passengers, including petitioners son and his wife, died during the
incident.
Petitioners allege that respondent, as a common carrier, was guilty of
negligence in allowing M/B Coco Beach III to sail notwithstanding storm
warning bulletins issued by the Philippine Atmospheric, Geophysical and
Astronomical Services Administration (PAGASA) as early as 5:00 a.m. of
September 11, 2000.6
In its Answer,7 respondent denied being a common carrier, alleging that
its boats are not available to the general public as they only ferry Resort
guests and crew members. Nonetheless, it claimed that it exercised the
utmost diligence in ensuring the safety of its passengers; contrary to
petitioners allegation, there was no storm on September 11, 2000 as the
Coast Guard in fact cleared the voyage; and M/B Coco Beach III was not
filled to capacity and had sufficient life jackets for its passengers.
ISSUES
WON RESPONDENT IS A COMMON CARRIER.
WON RESPONDENT WAS GUILTY OF NEGLIGENCE, THUS, IN
BREACH OF ITS CONTRACT OF CARRIAGE
RULING
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 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 . . .18 (emphasis and underscoring supplied.)

Indeed, respondent is a common carrier. Its ferry services are so

intertwined with its main business as to be properly considered ancillary
thereto. The constancy of respondents ferry services in its resort
operations is underscored by its having its own Coco Beach boats. And
the tour packages it offers, which include the ferry services, may be
availed of by anyone who can afford to pay the same. These services are
thus available to the public.
That respondent does not charge a separate fee or fare for its ferry
services is of no moment. It would be imprudent to suppose that it
provides said services at a loss. The Court is aware of the practice of
beach resort operators offering tour packages to factor the transportation
fee in arriving at the tour package price. That guests who opt not to avail
of respondents ferry services pay the same amount is likewise
inconsequential. These guests may only be deemed to have overpaid.
2. Under the Civil Code, common carriers, from the nature of their
business and for reasons of public policy, are bound to observe
extraordinary diligence for the safety of the passengers transported by
them, according to all the circumstances of each case.19 They are bound
to carry the passengers safely as far as human care and foresight can
provide, using the utmost diligence of very cautious persons, with due
regard for all the circumstances.20
When a passenger dies or is injured in the discharge of a contract of
carriage, it is presumed that the common carrier is at fault or negligent. In
fact, there is even no need for the court to 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.
The evidence shows that PAGASA issued 24-hour public weather
forecasts and tropical cyclone warnings for shipping on September 10
and 11, 2000 advising of tropical depressions in Northern Luzon which
would also affect the province of Mindoro.22 By the testimony of Dr. Frisco
Nilo, supervising weather specialist of PAGASA, squalls are to be
expected under such weather condition.23
A very cautious person exercising the utmost diligence would thus not
brave such stormy weather and put other peoples lives at risk. The
extraordinary diligence required of common carriers demands that they
take care of the goods or lives entrusted to their hands as if they were
their own. This respondent failed to do.
Respondents insistence that the incident was caused by a fortuitous
event does not impress either.
To fully free a common carrier from any liability, the fortuitous event must
have been the proximate and only cause of the loss. And it should have
exercised due diligence to prevent or minimize the loss before, during
and after the occurrence of the fortuitous event.
WHEREFORE, the Court of Appeals Decision of August 19, 2008 is
REVERSED and SET ASIDE. Judgment is rendered in favor of
petitioners ordering respondent to pay petitioners the following:
(1) P50,000 as indemnity for the death of Ruelito Cruz; (2) P8,316,000 as
indemnity for Ruelitos loss of earning capacity; (3) P100,000 as moral
damages; (4) P100,000 as exemplary damages; (5) 10% of the total
amount adjudged against respondent as attorneys fees; and (6) the costs
of suit. The total amount adjudged against respondent shall earn interest
at the rate of 12% per annum computed from the finality of this decision
until full payment.
BALIWAG TRANSIT, INC. vs. COURT OF APPEALS, SPOUSES
ANTONIO GARCIA & LETICIA GARCIA, A & J TRADING, AND JULIO
RECONTIQUE
FACTS
Leticia Garcia, and her five-year old son, Allan Garcia, boarded Baliwag
Transit Bus No. 2036 bound for Cabanatuan City driven by Jaime
Santiago. They took the seat behind the driver.
At about 7:30 in the evening, in Malimba, Gapan, Nueva Ecija, the bus
passengers saw a cargo truck parked at the shoulder of the national
highway. Its left rear portion jutted to the outer lane, the shoulder of the
road was too narrow to accommodate the whole truck. A kerosene lamp
appeared at the edge of the road obviously to serve as a warning
device. The truck driver, Julio Recontique, and his helper, Arturo Escala,

were then replacing a flat tire. The truck is owned by respondent A & J
Trading.
Bus driver Santiago was driving at an inordinately fast speed and failed to
notice the truck and the kerosene lamp at the edge of the
road. Santiago's passengers urged him to slow down but he paid them no
heed.
His bus rammed into the stalled cargo truck. It caused the instant death
of Santiago and Escala, and injury to several others. Leticia and Allan
Garcia were among the injured passengers. Leticia suffered a fracture in
her pelvis and right leg. Allan, on the other hand, broke a leg.
Spouses Antonio and Leticia Garcia sued Baliwag Transit, Inc., A & J
Trading and Julio Recontique for damages.
Baliwag, A & J Trading and Recontique disclaimed responsibility for the
mishap. Baliwag alleged that the accident was caused solely by the fault
and negligence of A & J Trading and its driver, Recontique. Baliwag
charged that Recontigue failed to place an early warning device at the
corner of the disabled cargo truck to warn oncoming vehicles. [6] On the
other hand, A & J Trading and Recontique alleged that the accident was
the result of the negligence and reckless driving of Santiago, bus driver of
Baliwag.
On appeal, the Court of Appeals modified the trial court's Decision by
absolving A & J Trading from liability and by reducing the award of
attorney's fees to P10,000.00 and loss of earnings to P300,000.00,
respectively.

ISSUES
WON BALIWAG IS SOLELY LIABLE FOR THE INJURIES SUFFERED
BY LETICIA AND ALLAN GARCIA
WON THE AMOUNT OF DAMAGES AWARDED BY THE COURT OF
APPEALS TO THE GARCIA SPOUSES CORRECT

driver. Another passenger, Felix Cruz testified that immediately before the
collision, the bus driver was conversing with a co-employee. [15] All these
prove the bus driver's wanton disregard for the physical safety of his
passengers, which makes Baliwag as a common carrier liable for
damages under Article 1759 of the Civil Code:
Art. 1759. Common carriers are liable for the death of or injuries to
passengers through the negligence or willfull acts of the former's
employees, although such employees may have acted beyond the scope
of their authority or in violation of the orders of the common carriers.
This liability of the common carriers do not cease upon proof that they
exercised all the diligence of a good father of a family in the selection or
supervision of their employees.
Baliwag cannot evade its liability by insisting that the accident was
caused solely by the negligence of A & J Trading and Julio Recontique. It
harps on their alleged non use of an early warning device as testified to
by Col. Demetrio dela Cruz, the station commander of Gapan, Nueva
Ecija who investigated the incident, and Francisco Romano, the bus
conductor. Recontique and Ecala placed a kerosene lamp or torch at the
edge of the road, near the rear portion of the truck to serve as an early
warning device.[17] This substantially complies with Section 34 (g) of the
Land Transportation and Traffic Code. No negligence, therefore, may be
imputed to A & J Trading and its driver, Recontique.

2. First, the propriety of the amount awarded as hospitalization and

medical fees. The award of P25,000.00 is not supported by the evidence
on record. The Garcias presented receipts marked as Exhibits B-1 to B
42 but their total amounted only to P5,017.74. To be sure, Leticia testified
as to the extra amount spent for her medical needs but without more
reliable evidence, her lone testimony cannot justify the award of
P25,000.00. To prove actual damages, the best evidence available to the
injured party must be presented.
Second, we find as reasonable the award of P300,000.00 representing
Leticia's lost earnings. Before the accident, Leticia was engaged in
embroidery, earning P5,000.00 per month.[21] Her injuries forced her to
stop working. Considering the nature and extent of her injuries and the
length of time it would take her to recover,[22] we find it proper that Baliwag
should compensate her lost income for five (5) years.[23]

RULING
1. YES. As a common carrier, Baliwag breached its contract of carriage
when it failed to deliver its passengers, Leticia and Allan Garcia to their
destination safe and sound. A common carrier is bound to carry its
passengers safely as far as human care and foresight can provide, using
the utmost diligence of a very cautious person, with due regard for all the
circumstances.[11] 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 as prescribed in Articles
1733 and 1755 of the Civil Code.[12]
The records are bereft of any proof to show that Baliwag exercised
extraordinary diligence. On the contrary, the evidence demonstrates its
driver's recklessness. Leticia Garcia testified that the bus was running at
a very high speed despite the drizzle and the darkness of the
highway. The passengers pleaded for its driver to slow down, but their
plea was ignored.[13] Leticia also revealed that the driver was smelling of
liquor.[14] She could smell him as she was seated right behind the

Third, the award of moral damages is in accord with law. In a breach of

contract of carriage, moral damages are recoverable if the carrier,
through its agent, acted fraudulently or in bad faith. [24]The evidence shows
the gross negligence of the driver of Baliwag bus which amounted to bad
faith. Without doubt, Leticia and Allan experienced physical suffering,
mental anguish and serious anxiety by reason of the accident. Leticia
underwent an operation to replace her broken hip bone with a metal
plate. She was confined at the National Orthopedic Hospital for 45
days. The young Allan was also confined in the hospital for his foot
injury. Contrary to the contention of Baliwag, the decision of the trial court
as affirmed by the Court of Appeals awarded moral damages to Antonio
and Leticia Garcia not in their capacity as parents of Allan. Leticia was
given moral damages as an injured party. Allan was also granted moral
damages as an injured party but because of his minority, the award in his
favor has to be given to his father who represented him in the suit.
Finally, we find the award of attorney's fees justified. The complaint for
damages was instituted by the Garcia spouses on December 15, 1982,
following the unjustified refusal of Baliwag to settle their claim. The
Decision was promulgated by the trial court only on January 29, 1991 or
about nine years later. Numerous pleadings were filed before the trial

court, the appellate court and to this Court. Given the complexity of the
case and the amount of damages involved,[25] the award of attorney's fee
for P10,000.00 is just and reasonable.

to pay P1,000,000.00 as moral damages, P500,000.00 as exemplary

damages and P250,000.00 as attorneys fees.
According to CAI, one of the conditions attached to their contract of
carriage is the non-transferability and non-refundability of the subject
tickets.
ISSUES
WON A PRINCIPAL-AGENT RELATIONSHIP EXISTS BETWEEN CAI
AND HOLIDAY TRAVEL
WON CAI IS LIABLE FOR THE FAULT OR NEGLIGENCE OF
HOLIDAY TRAVELS EMPLOYEES CONSIDERING THAT HOLIDAY
TRAVEL IS CAIS AGENT
WON SPOUSES VILORIA ARE ENTITLED FOR A REFUND

SPOUSES FERNANDO and LOURDES VILORIA vs. CONTINENTAL

AIRLINES, INC.

WON CAI IS JUSTIFIED IN INSISTING THAT THE SUBJECT TICKETS

ARE NON-TRANSFERABLE
RULING

FACTS
On or about July 21, 1997 and while in the United States, Fernando
purchased for himself and his wife, Lourdes, two (2) round trip airline
tickets from San Diego, California to Newark, New Jersey on board
Continental Airlines. Fernando purchased the tickets at US$400.00 each
from a travel agency called Holiday Travel and was attended to by a
certain Margaret Mager (Mager). Per the tickets, Spouses Viloria were
scheduled to leave for Newark on August 13, 1997 and return to San
Diego on August 21, 1997.
Subsequently, Fernando requested Mager to reschedule their flight to
Newark to an earlier date or August 6, 1997. Mager informed him that
flights to Newark via Continental Airlines were already fully booked and
offered the alternative of a round trip flight via Frontier Air. Fernando
opted to request for a refund. Mager, however, denied his request as the
subject tickets are non-refundable and the only option that Continental
Airlines can offer is the re-issuance of new tickets within one (1) year
from the date the subject tickets were issued. Fernando decided to
reserve two (2) seats with Frontier Air.
As he was having second thoughts on traveling via Frontier Air, Fernando
went to the Greyhound Station where he saw an Amtrak station nearby.
Fernando made inquiries and was told that there are seats available and
he can travel on Amtrak anytime and any day he pleased. Fernando then
purchased two (2) tickets for Washington, D.C.
From Amtrak, Fernando went to Holiday Travel and confronted Mager
with the Amtrak tickets, telling her that she had misled them into buying
the Continental Airlines tickets by misrepresenting that Amtrak was
already fully booked. Fernando reiterated his demand for a refund but
Mager was firm in her position that the subject tickets are non-refundable.
Continental Micronesia denied Fernandos request for a refund and
advised him that he may take the subject tickets to any Continental
ticketing location for the re-issuance of new tickets within two (2) years
from the date they were issued.
Fernando went to Continentals ticketing office at Ayala Avenue, Makati
City to have the subject tickets replaced by a single round trip ticket to
Los Angeles, California under his name. Therein, Fernando was informed
that Lourdes ticket was non-transferable, thus, cannot be used for the
purchase of a ticket in his favor. He was also informed that a round trip
ticket to Los Angeles was US$1,867.40 so he would have to pay what will
not be covered by the value of his San Diego to Newark round trip ticket.
On September 8, 2000, Spouses Viloria filed a complaint against CAI,
praying that CAI be ordered to refund the money they used in the
purchase of the subject tickets with legal interest from July 21, 1997 and

1. YES.

The essential elements of agency are: (1) there is consent,

express or implied of the parties to establish the relationship; (2) the
object is the execution of a juridical act in relation to a third person; (3)
the agent acts as a representative and not for himself, and (4) the agent
acts within the scope of his authority.
Contrary to the findings of the CA, all the elements of an agency exist in
this case. The first and second elements are present as CAI does not
deny that it concluded an agreement with Holiday Travel, whereby
Holiday Travel would enter into contracts of carriage with third persons on
CAIs behalf. The third element is also present as it is undisputed that
Holiday Travel merely acted in a representative capacity and it is CAI and
not Holiday Travel who is bound by the contracts of carriage entered into
by Holiday Travel on its behalf. The fourth element is also present
considering that CAI has not made any allegation that Holiday Travel
exceeded the authority that was granted to it. In fact, CAI consistently
maintains the validity of the contracts of carriage that Holiday Travel
executed with Spouses Viloria and that Mager was not guilty of any
fraudulent misrepresentation. That CAI admits the authority of Holiday
Travel to enter into contracts of carriage on its behalf is easily discernible
from its February 24, 1998 and March 24, 1998 letters, where it impliedly
recognized the validity of the contracts entered into by Holiday Travel with
Spouses Viloria. When Fernando informed CAI that it was Holiday Travel
who issued to them the subject tickets, CAI did not deny that Holiday
Travel is its authorized agent.
Prior to Spouses Vilorias filing of a complaint against it, CAI never
refuted that it gave Holiday Travel the power and authority to conclude
contracts of carriage on its behalf. As clearly extant from the records, CAI
recognized the validity of the contracts of carriage that Holiday Travel
entered into with Spouses Viloria and considered itself bound with
Spouses Viloria by the terms and conditions thereof; and this constitutes
an unequivocal testament to Holiday Travels authority to act as its agent.
This Court cannot therefore allow CAI to take an altogether different
position and deny that Holiday Travel is its agent without condoning or
giving imprimatur to whatever damage or prejudice that may result from
such denial or retraction to Spouses Viloria, who relied on good faith on
CAIs acts in recognition of Holiday Travels authority. Estoppel is
primarily based on the doctrine of good faith and the avoidance of harm
that will befall an innocent party due to its injurious reliance, the failure to
apply it in this case would result in gross travesty of justice. 20 Estoppel
bars CAI from making such denial.
It is undisputed that CAI and not Holiday Travel who is the party to the
contracts of carriage executed by Holiday Travel with third persons who
desire to travel via Continental Airlines, and this conclusively indicates the
existence of a principal-agent relationship. That the principal is bound by
all the obligations contracted by the agent within the scope of the

authority granted to him is clearly provided under Article 1910 of the Civil
Code and this constitutes the very notion of agency.
2. An examination of this Courts pronouncements in China Air Lines will
reveal that an airline company is not completely exonerated from any
liability for the tort committed by its agents employees. A prior
determination of the nature of the passengers cause of action is
necessary. If the passengers cause of action against the airline company
is premised on culpa aquiliana or quasi-delict for a tort committed by the
employee of the airline companys agent, there must be an independent
showing that the airline company was at fault or negligent or has
contributed to the negligence or tortuous conduct committed by the
employee of its agent. The mere fact that the employee of the airline
companys agent has committed a tort is not sufficient to hold the airline
company liable. There is no vinculum juris between the airline company
and its agents employees and the contractual relationship between the
airline company and its agent does not operate to create a juridical tie
between the airline company and its agents employees. Article 2180 of
the Civil Code does not make the principal vicariously liable for the tort
committed by its agents employees and the principal-agency
relationship per se does not make the principal a party to such tort;
hence, the need to prove the principals own fault or negligence.
On the other hand, if the passengers cause of action for damages
against the airline company is based on contractual breach or culpa
contractual, it is not necessary that there be evidence of the airline
companys fault or negligence. As this Court previously stated in China
Air Lines and reiterated in Air France vs. Gillego,24 in an action based on
a 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 he
has to prove is the existence of the contract and the fact of its nonperformance by the carrier.
Spouses Vilorias cause of action on the basis of Magers alleged
fraudulent misrepresentation is clearly one of tort or quasi-delict, there
being no pre-existing contractual relationship between them. Therefore, it
was incumbent upon Spouses Viloria to prove that CAI was equally at
fault.
However, the records are devoid of any evidence by which CAIs alleged
liability can be substantiated. Apart from their claim that CAI must be held
liable for Magers supposed fraud because Holiday Travel is CAIs agent,
Spouses Viloria did not present evidence that CAI was a party or had
contributed to Magers complained act either by instructing or authorizing
Holiday Travel and Mager to issue the said misrepresentation.
It is incumbent upon Spouses Viloria to prove that CAI exercised control
or supervision over Mager by preponderant evidence. The existence of
control or supervision cannot be presumed and CAI is under no obligation
to prove its denial or nugatory assertion.
Therefore, without a modicum of evidence that CAI exercised control over
Holiday Travels employees or that CAI was equally at fault, no liability
can be imposed on CAI for Magers supposed misrepresentation.

3. Even on the assumption that CAI may be held liable for the acts of
Mager, still, Spouses Viloria are not entitled to a refund. Magers
statement cannot be considered a causal fraud that would justify the
annulment of the subject contracts that would oblige CAI to
indemnify Spouses Viloria and return the money they paid for the
subject tickets.
After meticulously poring over the records, this Court finds that the fraud
alleged by Spouses Viloria has not been satisfactorily established as
causal in nature to warrant the annulment of the subject contracts. In fact,
Spouses Viloria failed to prove by clear and convincing evidence that
Magers statement was fraudulent. Specifically, Spouses Viloria failed to
prove that (a) there were indeed available seats at Amtrak for a trip to
New Jersey on August 13, 1997 at the time they spoke with Mager on
July 21, 1997; (b) Mager knew about this; and (c) that she purposely
informed them otherwise.

As CAI correctly pointed out and as Fernando admitted, it was possible

that during the intervening period of three (3) weeks from the time
Fernando purchased the subject tickets to the time he talked to said
Amtrak employee, other passengers may have cancelled their bookings
and reservations with Amtrak, making it possible for Amtrak to
accommodate them. Indeed, the existence of fraud cannot be proved by
mere speculations and conjectures. Fraud is never lightly inferred; it is
good faith that is. Under the Rules of Court, it is presumed that "a person
is innocent of crime or wrong" and that "private transactions have been
fair and regular."35 Spouses Viloria failed to overcome this presumption.
4. In its March 24, 1998 letter, CAI stated that non-refundable tickets
may be used as a form of payment toward the purchase of another
Continental ticket for $75.00, per ticket, reissue fee ($50.00, per ticket, for
tickets purchased prior to October 30, 1997).
Clearly, there is nothing in the above-quoted section of CAIs letter from
which the restriction on the non-transferability of the subject tickets can
be inferred. In fact, the words used by CAI in its letter supports the
position of Spouses Viloria, that each of them can use the ticket under
their name for the purchase of new tickets whether for themselves or for
some other person.
Moreover, as CAI admitted, it was only when Fernando had expressed
his interest to use the subject tickets for the purchase of a round trip
ticket between Manila and Los Angeles that he was informed that he
cannot use the ticket in Lourdes name as payment.
Contrary to CAIs claim, that the subject tickets are non-transferable
cannot be implied from a plain reading of the provision printed on the
subject tickets stating that [t]o the extent not in conflict with the foregoing
carriage and other services performed by each carrier are subject to: (a)
provisions contained in this ticket, x x x (iii) carriers conditions of carriage
and related regulations which are made part hereof (and are available on
application at the offices of carrier) x x x. As a common carrier whose
business is imbued with public interest, the exercise of extraordinary
diligence requires CAI to inform Spouses Viloria, or all of its passengers
for that matter, of all the terms and conditions governing their contract of
carriage. CAI is proscribed from taking advantage of any ambiguity in the
contract of carriage to impute knowledge on its passengers of and
demand compliance with a certain condition or undertaking that is not
clearly stipulated. Since the prohibition on transferability is not written on
the face of the subject tickets and CAI failed to inform Spouses Viloria
thereof, CAI cannot refuse to apply the value of Lourdes ticket as
payment for Fernandos purchase of a new ticket.
While CAIs refusal to allow Fernando to use the value of Lourdes ticket
as payment for the purchase of a new ticket is unjustified as the nontransferability of the subject tickets was not clearly stipulated, it cannot,
however be considered substantial. The endorsability of the subject
tickets is not an essential part of the underlying contracts and CAIs
failure to comply is not essential to its fulfillment of its undertaking to
issue new tickets upon Spouses Vilorias surrender of the subject tickets.
This Court takes note of CAIs willingness to perform its principal
obligation and this is to apply the price of the ticket in Fernandos name to
the price of the round trip ticket between Manila and Los Angeles. CAI
was likewise willing to accept the ticket in Lourdes name as full or partial
payment as the case may be for the purchase of any ticket, albeit under
her name and for her exclusive use. In other words, CAIs willingness to
comply with its undertaking under its March 24, 1998 cannot be doubted,
albeit tainted with its erroneous insistence that Lourdes ticket is nontransferable.
LIABILITIES:
The records of this case demonstrate that both parties were equally in
default; hence, none of them can seek judicial redress for the cancellation
or resolution of the subject contracts and they are therefore bound to their
respective obligations thereunder. As the 1st sentence of Article 1192
provides:
Art. 1192. In case both parties have committed a breach of
the obligation, the liability of the first infractor shall be

equitably tempered by the courts. If it cannot be determined

which of the parties first violated the contract, the same shall
be deemed extinguished, and each shall bear his own
damages. (emphasis supplied)
Therefore, CAIs liability for damages for its refusal to accept Lourdes
ticket for the purchase of Fernandos round trip ticket is offset by Spouses
Vilorias liability for their refusal to pay the amount, which is not covered
by the subject tickets. Moreover, the contract between them remains,
hence, CAI is duty bound to issue new tickets for a destination chosen by
Spouses Viloria upon their surrender of the subject tickets and Spouses
Viloria are obliged to pay whatever amount is not covered by the value of
the subject tickets.

wilful assaults or negligent acts committed by their employees. The death

of the passenger in the Gillaco case was truly a fortuitous event which
exempted the carrier from liability.
Unlike the old Civil Code, the new Civil Code of the Philippines expressly
makes the common carrier liable for intentional assaults committed by its
employees upon its passengers, by the wording of Art. 1759 which
categorically states that
Common carriers are liable for the death of or injuries to
passengers through the negligence or willful acts of the
former's employees, although such employees may have acted
beyond the scope of their authority or in violation of the orders
of the common carriers.
The Civil Code provisions on the subject of Common Carriers1 are new
and were taken from Anglo-American Law.2 There, the basis of the
carrier's liability for assaults on passengers committed by its drivers rests
either on (1) the doctrine of respondeat superior or (2) the principle that it
is the carrier's implied duty to transport the passenger safely.3

ANTONIA MARANAN vs.PASCUAL PEREZ, ET AL.,

FACTS
Rogelio Corachea, on October 18, 1960, was a passenger in a taxicab
owned and operated by Pascual Perez when he was stabbed and killed
by the driver, Simeon Valenzuela.
Valenzuela was prosecuted for homicide in the Court of First Instance of
Batangas. Found guilty, he was sentenced to suffer imprisonment and to
indemnify the heirs of the deceased in the sum of P6,000. Appeal from
said conviction was taken to the Court of Appeals.
While appeal was pending in the Court of Appeals, Antonia Maranan,
Rogelio's mother, filed an action in the Court of First Instance of Batangas
to recover damages from Perez and Valenzuela for the death of her son.
Defendants asserted that the deceased was killed in self-defense, since
he first assaulted the driver by stabbing him from behind. Defendant
Perez further claimed that the death was a caso fortuito for which the
carrier was not liable.
Defendant-appellant relies solely on the ruling enunciated in Gillaco v.
Manila Railroad Co., 97 Phil. 884, that the carrier is under no absolute
liability for assaults of its employees upon the passengers.
The attendant facts and controlling law of that case and the one at bar
are very different however. In the Gillaco case, the passenger was killed
outside the scope and the course of duty of the guilty employee.
ISSUE
WON DEFENDANT CARRIER IS LIABLE PURSUANT TO ARTICLE
1759 OF THE CIVIL CODE
RULING
YES.
Now here, the killing was perpetrated by the driver of the very cab
transporting the passenger, in whose hands the carrier had entrusted the
duty of executing the contract of carriage. In other words, unlike
the Gillaco case, the killing of the passenger here took place in the
course of duty of the guilty employee and when the employee was acting
within the scope of his duties.
Moreover, the Gillaco case was decided under the provisions of the Civil
Code of 1889 which, unlike the present Civil Code, did not impose upon
common carriers absolute liability for the safety of passengers against

Under the first, which is the minority view, the carrier is liable only when
the act of the employee is within the scope of his authority and duty. It is
not sufficient that the act be within the course of employment only.4
Under the second view, upheld by the majority and also by the later
cases, it is enough that the assault happens within the course of the
employee's duty. It is no defense for the carrier that the act was done in
excess of authority or in disobedience of the carrier's orders.5 The
carrier's liability here is absolute in the sense that it practically secures
the passengers from assaults committed by its own employees.6
As can be gleaned from Art. 1759, the Civil Code of the Philippines
evidently follows the rule based on the second view. At least three very
cogent reasons underlie this rule.
Accordingly, it is the carrier's strict obligation to select its drivers and
similar employees with due regard not only to their technical competence
and physical ability, but also, no less important, to their total personality,
including their patterns of behavior, moral fibers, and social attitude.
Applying this stringent norm to the facts in this case, therefore, the lower
court rightly adjudged the defendant carrier liable pursuant to Art. 1759 of
the Civil Code. The dismissal of the claim against the defendant driver
was also correct. Plaintiff's action was predicated on breach of contract of
carriage7 and the cab driver was not a party thereto. His civil liability is
covered in the criminal case wherein he was convicted by final judgment.

nor could it reasonably foresee every personal rancor that might exist
between each one of its many employees and any one of the thousands
of eventual passengers riding in its trains. The shooting in question was
therefore "caso fortuito" within the definition of article 105 of the old Civil
Code, being both unforeseeable and inevitable under the given
circumstances; and pursuant to established doctrine, the resulting breach
of appellant's contract of safe carriage with the late Tomas Gillaco was
excused thereby.
No doubt that a common carrier is held to a very high degree of care and
diligence in the protection of its passengers; but, considering the vast and
complex activities of modern rail transportation, to require of appellant
that it should guard against all possible misunderstanding between each
and every one of its employees and every passenger that might chance
to ride in its conveyances at any time, strikes us as demanding diligence
beyond what human care and foresight can provide.

CORNELIA A. DE GILLACO, ET AL., vs. MANILA RAILROAD

COMPANY
FACTS
Lieut. Tomas Gillaco, husband of the plaintiff, was a passenger in the
early morning train of the Manila Railroad Company from Calamba,
Laguna to Manila. When the train reached the Paco Railroad station,
Emilio Devesa, a train guard of the Manila Railroad Company assigned in
the Manila-San Fernando, La Union Line, happened to be in said station
waiting for the same train which would take him to Tutuban Station,
where he was going to report for duty. Emilio Devesa had a long standing
personal grudge against Tomas Gillaco. Because of this, Devesa shot
Gillaco with the carbine furnished to him by the Manila Railroad Company
for his use as such train guard, upon seeing him inside the train coach.
Gillaco died as a result of the would which he sustained from the shot
fired by Devesa. Devesa was convicted with homicide.
Appellant's contention is that, on the foregoing facts, no liability attaches
to it as employer of the killer, Emilio Devesa; that it is not responsible
subsidiary ex delicto, under Art. 103 of the Revised Penal Code, because
the crime was not committed while the slayer was in the actual
performance of his ordinary duties and service; nor is it responsible ex
contractu, since the complaint did not aver sufficient facts to establish
such liability, and no negligence on appellant's party was shown.
ISSUE
WON LIABILITY ATTACHES AS AGAINST MANILA RAILROAD
COMPANY
RULING
NO.
There can be no quarrel with the principle that a passenger is entitled to
protection from personal violence by the carrier or its agents or
employees, since the contract of transportation obligates the carrier to
transport a passenger safely to his destination. But under the law of the
case, this responsibility extends only to those that the carrier could
foresee or avoid through the exercise of the degree of car and diligence
required of it.
The act of guard Devesa in shooting passenger Gillaco (because of a
personal grudge nurtured against the latter since the Japanese
occupation) was entirely unforeseeable by the Manila Railroad Co. The
latter had no means to ascertain or anticipate that the two would meet,

Another very important consideration that must be borne in mind is that,

when the crime took place, the guard Devesa had no duties to discharge
in connection with the transportation of the deceased from Calamba to
Manila. The stipulation of facts is clear that when Devesa shot and killed
Gillaco, Devesa was assigned to guard the Manila-San Fernando (La
Union) trains, and he was at Paco Station awaiting transportation to
Tutuban, the starting point of the train that he was engaged to guard. In
fact, his tour of duty was to start at 9:00 a.m., two hours after the
commission of the crime. Devesa was therefore under no obligation to
safeguard the passenger of the Calamba-Manila train, where the
deceased was riding; and the killing of Gillaco was not done in line of
duty. The position of Devesa at the time was that of another would be
passenger, a stranger also awaiting transportation, and not that of an
employee assigned to discharge any of the duties that the Railroad had
assumed by its contract with the deceased. As a result, Devesa's assault
cannot be deemed in law a breach of Gillaco's contract of transportation
by a servant or employee of the carrier.

RULING
Bachelor Express, Inc. denies liability for the death of Beter and Rautraut
on its posture that the death of the said passengers was caused by a
third person who was beyond its control and supervision. In effect, the
petitioner, in order to overcome the presumption of fault or negligence
under the law, states that the vehicular incident resulting in the death of
passengers Beter and Rautraut was caused by force majeure or caso
fortuito over which the common carrier did not have any control.
The running amuck of the passenger was the proximate cause of the
incident as it triggered off a commotion and panic among the passengers
such that the passengers started running to the sole exit shoving each
other resulting in the falling off the bus by passengers Beter and Rautraut
causing them fatal injuries. The sudden act of the passenger who
stabbed another passenger in the bus is within the context of force
majeure.
However, in order that a common carrier may be absolved from liability in
case of force majeure, it is not enough that the accident was caused
by force majeure. The common carrier must still prove that it was not
negligent in causing the injuries resulting from such accident. Therefore,
the next question to be determined is whether or not the petitioner's
common carrier observed extraordinary diligence to safeguard the
lives of its passengers.

BACHELOR EXPRESS, INCORPORATED, and CRESENCIO RIVERA

vs. THE HONORABLE COURT OF APPEALS (Sixth Division),
RICARDO BETER, SERGIA BETER, TEOFILO RAUTRAUT and
ZOETERA RAUTRAUT
FACTS
On August 1, 1980, Bus No. 800 owned by Bachelor Express, Inc. and
driven by Cresencio Rivera was the situs of a stampede which resulted in
the death of passengers Ornominio Beter and Narcisa Rautraut.
The evidence shows that the bus came from Davao City on its way to
Cagayan de Oro City passing Butuan City; that while at Tabon-Tabon,
Butuan City, the bus picked up a passenger; that about fifteen (15)
minutes later, a passenger at the rear portion suddenly stabbed a PC
soldier which caused commotion and panic among the passengers; that
when the bus stopped, passengers Ornominio Beter and Narcisa
Rautraut were found lying down the road, the former already dead as a
result of head injuries and the latter also suffering from severe injuries
which caused her death later. The passenger assailant alighted from the
bus and ran toward the bushes but was killed by the police. Thereafter,
the heirs of Ornominio Beter and Narcisa Rautraut, private respondents
herein (Ricardo Beter and Sergia Beter are the parents of Ornominio
while Teofilo Rautraut and Zoetera [should be Zotera] Rautraut are the
parents of Narcisa) filed a complaint for "sum of money" against Bachelor
Express, Inc. its alleged owner Samson Yasay and the driver Rivera.
Petitioners denied liability for the death of Ornominio Beter and Narcisa
Rautraut. They alleged that ... the driver was able to transport his
passengers safely to their respective places of destination except
Ornominio Beter and Narcisa Rautraut who jumped off the bus without
the knowledge and consent, much less, the fault of the driver and
conductor and the defendants in this case; the defendant corporation had
exercised due diligence in the choice of its employees to avoid as much
as possible accidents; the incident on August 1, 1980 was not a traffic
accident or vehicular accident; it was an incident or event very much
beyond the control of the defendants; defendants were not parties to the
incident complained of as it was an act of a third party who is not in any
way connected with the defendants and of which the latter have no
control and supervision; ..."
ISSUE
WON petitioner's common carrier observed extraordinary diligence
to safeguard the lives of its passengers.

A thorough examination of the records, however, show that there are

material facts ignored by the trial court which were discussed by the
appellate court to arrive at a different conclusion. These circumstances
show that the petitioner common carrier was negligent in the provision of
safety precautions so that its passengers may be transported safely to
their destinations.
Considering the factual findings of the Court of Appeals-the bus driver did
not immediately stop the bus at the height of the commotion; the bus was
speeding from a full stop; the victims fell from the bus door when it was
opened or gave way while the bus was still running; the conductor
panicked and blew his whistle after people had already fallen off the bus;
and the bus was not properly equipped with doors in accordance with
law-it is clear that the petitioners have failed to overcome the
presumption of fault and negligence found in the law governing common
carriers.
The petitioners' argument that the petitioners "are not insurers of their
passengers" deserves no merit in view of the failure of the petitioners to
prove that the deaths of the two passengers were exclusively due
to force majeureand not to the failure of the petitioners to observe
extraordinary diligence in transporting safely the passengers to their
destinations as warranted by law. (See Batangas Laguna Tayabas Co. v.
Intermediate Appellate Court,supra).

weather become worse as the wind increased in intensity and the waves
were likewise increased in size and force; that due to the rough condition
of the sea the anchor chains of the Snapper' and the four barges broke
one by one and as a consequence thereof they were drifted and were
finally dashed against the rocks a hole was opened in the hull of the
Snapper', which ultimately caused it to sink, while the barge No. L-522
was so badly damaged that the gasoline it had on board leaked out; and
that the Tamban arrived at the place after the gasoline had already leaked
out.
ISSUE
WON DEFENDANT HAD PROVEN THAT ITS FAILURE TO DELIVER
THE GASOLINE TO ITS PLACE OF DESTINATION IS DUE TO
ACCIDENT OR FORCE MAJEURE OR TO A CAUSE BEYOND ITS
CONTROL
RULING

COMPANIA MARITIMA VS. CA

-----STANDARD VACUUM OIL COMPANY,
STEVEDORING CO., INC., defendant

plaintiff,

vs.

LUZON

FACTS
Plantiff entered into a contract with defendant to transport between the
ports of Manila and Nin Bay, Sangay, Iloilo, 2,916.44 barrels of bulk
gasoline belonging to plaintiff. The gasoline was delivered in accordance
with the contract but defendant failed to transport it to its place of
destination and so plaintiff brought his action in the Court of First Instance
of Manila to recover the sum of P75,578.50 as damages.
Defendant, in its answer, pleaded that its failure to deliver the gasoline
was due to fortuitous event or caused by circumstances beyond its
control and not to its fault or negligence or that of any of its employees.
Pursuant to an agreement had between the parties, defendant's barge
No. L-522 was laden with gasoline belonging to the plaintiff to be
transported from Manila to the Port of Iloilo; that early in the morning of
February 2, 1947, defendant's tugboat "Snapper" picked up the barge
outside the breakwater; that the barge was placed behind the tugboat, it
being connected to the latter by a tow rope ten inches in circumstances;
that behind the barge, three other barges were likewise placed, one laden
with some cargo while the other two containing hardly any cargo at all;
that the weather was good when on that day the tugboat with its tow
started on its voyage; that the weather remained good on February 3,
1947, when it passed Santiago Point in Batangas; that at about 3:00
o'clock in the morning of February 4, 1947, the engine of the tugboat
came to a dead stop; that the engineer on board the tugboat found out
that the trouble was due to a broken idler; that a message was then sent
to the defendant's radio station in Manila informing its official of the
engine trouble; that upon the receipt of the message the defendant called
up several shipping companies in Manila to find out if they had any
vessels in the vicinity where the "Snapper' had stalled but sais companies
replied in the negative; that thereupon the defendant redioed its tugboat
Tamban' which was docked at Batangas, ordering it to proceed to the
place where the Snapper' was; that at about 6:00 o'clock in the same
morning of February 4, 1947, the master of the Snapper' attempted to
cast anchor but the water areas around Elefante Island were so deep that
the anchor did not touch bottom; that in the afternoon of the same day the

It appears that the tugboat "Snapper" was acquired by defendant from

the foreign Liquidation Commission. It was a surplus property. It was a
deep-sea tugboat that had been in the service of the United States Armed
Forces prior to its purchase by the Luzon Stevedoring Co. The tugboat
was put into operation without first submitting it to an overhaul in a drydock. It also appears that this tugboat had previously made several trips
and each time it had to obtain a special permit from the Bureau of
Customs because it had never been dry-dock and did not have complete
equipment to be able to obtain the permanent permit. The special permits
that were issued by said Bureau specifically state that they were issued
"pending submission of plans and load line certificate, including test and
final inspection of equipment." It futher appears that, when the tugboat
was inspected by the Bureau of Customs on October 18, 1946, it found it
to be inadequately equipped and so the Bureau required defendant to
provide it with the requisite equipment but it was never able to complete
it. The fact that the tugboat was a surplus property, has not been drydocked, and was not provided with the requisite equipment to make it
seaworthy, shows that defendant did not use reasonable diligence in
putting the tugboat in such a condition as would make its use safe for
operation. It is true, as defendant contends, that there were then no drydock facilities in the Philippines, but this does not mean that they could
not be obtained elsewhere. It being a surplus property, a dry-dock
inspection was a must to put the tugboat in a sea going condition. It may
also be true , as contended, that the deficiency in the equipment was due
to the fact that no such equipment was available at the time, but this did
not justify defendant in putting such tugboat in business even if
unequipped merely to make a profit. Nor could the fact that the tugboat
was given a special permit by the Bureau of Customs to make the trip
relieve defendant from liability.
Let us now come to the efforts exerted by defendant in extending help to
the tugboat when it was notified of the breakage of the idler. The
evidence shows that the idler was broken at about 3:00 o'clock in the
morning of February 4, 1947. Within a few minutes, a massage was sent
to defendant by radio informing it of the engine trouble. The weather was
good until 12:00 o'clock noon when the wind started to blow. According to
defendant, since it received the message, it called up different shipping
lines in Manila asking them if they had any vessel in the vicinity where the
"Snapper" stalled but, unfortunately, none was available at the time,and
as its tug "Tamban" was then docked in Batangas, Batangas, which was
nearest to the place, it radioed said tug to go to the aid of the "Snapper".
Accordingly, the tug "Tamban" set sail from Batangas for the rescue only
to return to secure a map of the vicinity where the "Snapper" had stalled,
which entailed a delay of two hours. In the meantime, the captain of the
"Snapper" attempted to cast anchor. The water areas off Elefante Island
were deep and the anchor would not touch bottom. Then the sea became
rough and the waves increased in size and force and notwithstanding the
efforts of the crew to prevent the tug from drifting away, the force of the
wind and the violence of the waves dashed the tug and the barges
against the rocks. The tug developed a hole in her hull and sank. The
barge carrying the gasoline was so badly damaged that the gasoline
leaked out. The tug "Tamban" was finally able to locate the "Snapper" but
it was too late.
The foregoing acts only serve to emphasize that the efforts made by
defeandant fall short of that diligence and precaution that are demanded
by the situation to save the tugboat and the barge it was towing from
disaster for it appears that more than twenty-four hours had elapsed

befora the tug "Tamban" showed up to extend help. The delay was
caused not so much because of the lack of available ships in the vicinity
where the "Snapper" stalled but because defendant did not have in
readiness any tugboat sufficient in tonnage and equipment to attend to
the rescue. The tug "Tamban" that was ordered to extend help was fully
inadequate for the purpose. It was a small vessel that was authorized to
operate only within Manila Bay and did not even have any map of the
Visayan Islands. A public utility that is engaged in sea transportation even
for a limited service with a fleet of 140 tugboats should have a competent
tug to rush for towing or repairs in the event of untoward happening
overseas. If defendant had only such a tug ready for such an emergency,
this disaster would not have happened. Defendant could have avoided
sending a poorly equipped tug whic, as it is to be expected, failed to do
job.

While the breaking of the idler may be due to an accident, or to

something unexpected, the cause of the disaster which resulted in the
loss of the gasoline can only be attributed to the negligence or lack of
precaution to avert it on the part of defendant. Defendant had enough
time to effectuate the rescue if it had only a competent tug for the
purpose because the weather was good from 3:00 o'clock a.m. to 12:00
o'clock noon of February 4, 1947 and it was only in the afternoon that the
wind began to blow with some intensity,1 but failed to do so because of
that shortcoming. The loss of the gasoline certainly cannot be said to be
due to force majeure or unforeseen event but to the failure of defendant
to extend adequate and proper help. Considering these circumstances,
and those we have discussed elsewhere, we are persuaded to conclude
that defendant has failed to established that it is exempt from liability
under the law.