[G.R. No. L-47822. December 22, 1988.

]
PEDRO DE GUZMAN, petitioner, vs. COURT OF APPEALS and
ERNESTO CENDAA, respondents.

periodic or occasional rather than regular or scheduled manner, and

even though private respondent's principal occupation was not the
carriage of goods for others. There is no dispute that private
respondent charged his customers a fee for hauling their goods; that
fee frequently fell below commercial freight rates is not relevant here.

SYLLABUS
1. CIVIL CODE; COMMON CARRIERS; ARTICLE 1732, DEFINITION
UNDER ARTICLE 1732 OF THE CODE. The Civil Code defines
"common carriers" in the following terms: "Article 1732. Common
carriers are persons, corporations, firms or associations engaged in
the business of carrying or transporting passengers or goods or both,
by land, water, or air for compensation, offering their services to the
public." The above article makes no distinction between one
whose principal business activity is the carrying of persons or goods or
both, and one who does such carrying only as an ancillary activity (in
local idiom, as "a sideline"). Article 1732 also carefully avoids making
any distinction between a person or enterprise offering transportation
service on a regular or scheduled basis and one offering such service
on an occasional, episodic or unscheduled basis. Neither does Article
1732 distinguish between a carrier offering its services to the "general
public," i.e., the general community or population, and one who offers
services or solicits business only from a narrow segment of the
general population. We think that Article 1733 deliberately refrained
from making such distinctions.
2. ID.; ID.; ID.; LAW ON COMMON CARRIERS SUPPLEMENTED BY
THE PUBLIC SERVICE ACT; SCOPE OF PUBLIC SERVICE. So
understood, the concept of "common carrier" under Article 1732 may
be seen to coincide neatly with the notion of "public service," under the
Public Service Act (Commonwealth Act No. 1416, as amended) which
at least partially supplements the law on common carriers set forth in
the Civil Code. Under Section 13, paragraph (b) of the Public Service
Act, "public service" includes: ". . . every person that now or hereafter
may own, operate, manage, or control in the Philippines, for hire or
compensation, with general or limited clientele, whether permanent,
occasional or accidental, and done for general business purposes, any
common carrier, railroad, street railway, traction railway, subway motor
vehicle, either for freight or passenger, or both, with or without fixed
route and whatever may be its classification, freight or carrier
service of any class, express service, steamboat, or steamship line,
pontines,
ferries
and
water
craft,
engaged
in
the
transportation of passengers or freight or both, shipyard, marine repair
shop, wharf or dock, ice plant, ice-refrigeration plant, canal, irrigation
system, gas, electric light, heat and power, water supply and power
petroleum, sewerage system, wire or wireless communications
systems, wire or wireless broadcasting stations and other similar
public services . . ." (Emphasis supplied) It appears to the Court that
private respondent is properly characterized as a common carrier
even though he merely "back-hauled" goods for other merchants from
Manila to Pangasinan, although such backhauling was done on a

3. ID.; ID.; ID.; ID.; CERTIFICATE OF PUBLIC CONVENIENCE; NOT

A REQUISITE FOR INCURRING LIABILITY AS A COMMON
CARRIER; NATURE OF THE BUSINESS OF A COMMON CARRIER.
The Court of Appeals referred to the fact that private respondent
held no certificate of public convenience, and concluded he was not a
common carrier. This is palpable error. A certificate of public
convenience is not a requisite for the incurring of liability under the
Civil Code provisions governing common carriers. That liability arises
the moment a person or firm acts as a common carrier, without regard
to whether or not such carrier has also complied with the
requirements of the applicable regulatory statute and implementing
regulations and has been granted a certificate of public convenience
or other franchise. To exempt private respondent from the
liabilities of a common carrier because he has not secured the
necessary certificate of public convenience, would be offensive to
sound public policy; that would be to reward private respondent
precisely for failing to comply with applicable statutory requirements.
The business of a common carrier impinges directly and intimately
upon the safety and well being and property of those members of the
general community who happen to deal with such carrier. The law
imposes duties and liabilities upon common carriers for the safety and
protection of those who utilize their services and the law cannot allow
a common carrier to render such duties and liabilities merely
facultative by simply failing to obtain the necessary permits and
authorizations.

the common carrier for responsibility therefor, is a closed list. Causes

falling outside the foregoing list, even if they appear to constitute a
species of force majeure, fall within the scope of Article 1735, which
provides as follows: "In all cases other than those mentioned in
numbers 1, 2, 3, 4 and 5 of the preceding article, if the goods are lost,
destroyed or deteriorated, common carriers are presumed to have
been at fault or to have acted negligently, unless they prove that they
observed extraordinary diligence as required in Article 1733."
(Emphasis supplied)
6. ID.; ID.; ID.; ID.; COMMON CARRIER'S ARE NOT ABSOLUTE
INSURERS AGAINST ALL RISKS; NO LIABILITY ATTACHES IN
CASE OF FORTUITOUS EVENTS. Under Article 1745 (6) above, a
common carrier is held responsible and will not be allowed to divest
or to diminish such responsibility even for acts of strangers like
thieves or robbers, except where such thieves or robbers in fact acted
"with grave or irresistible threat, violence or force." We believe and so
hold that the limits of the duty of extraordinary diligence in the
vigilance over the goods carried are reached where the goods are lost
as a result of a robbery which is attended by "grave or irresistible
threat, violence or force." In these circumstances, we hold that the
occurrence of the loss must reasonably be regarded as quite beyond
the control of the common carrier and properly regarded as a
fortuitous event. It is necessary to recall that even common carriers
are not made absolute insurers against all risks of travel
and of transport of goods, and are not held liable for acts or events
which cannot be foreseen or are inevitable, provided that they shall
have complied with the rigorous standard of extraordinary diligence.
DECISION
FELICIANO, J p:

4. ID.; ID.; DEGREE OF DILIGENCE REQUIRED OF, COMMON

CARRIERS. Common carriers, "by the nature of their business and
for reasons of public policy," are held to a very high degree of care and
diligence ("extraordinary diligence") in the carriage of goods as well
as of passengers. The specific import of extraordinary diligence in the
care of goods transported by a common carrier is, according to Article
1733, "further expressed in Articles 1734, 1735 and 1745, numbers 5,
6 and 7" of the Civil Code.
5. ID.; ID.; ID.; LIABILITY OF COMMON CARRIERS. Article 1734
establishes the general rule that common carriers are responsible for
the loss, destruction or deterioration of the goods which they carry,
"unless the same is due to any of the following causes only: (1) Flood,
storm, earthquake, lightning, or other natural disaster or calamity; (2)
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." It is important to point out that the
above list of causes of loss, destruction or deterioration which exempt

Respondent Ernesto Cendaa, a junk dealer, was engaged in buying

up used bottles and scrap metal in Pangasinan. Upon gathering
sufficient quantities of such scrap material, respondent would bring
such material to Manila for resale. He utilized two (2) six-wheeler
trucks which he owned for hauling the material to Manila. On the
return trip to Pangasinan, respondent would load his vehicles with
cargo which various merchants wanted delivered to differing
establishments in Pangasinan. For that service, respondent charged
freight rates which were commonly lower than regular commercial
rates.
Sometime in November 1970, petitioner Pedro de Guzman, a
merchant and authorized dealer of General Milk Company
(Philippines), Inc. in Urdaneta, Pangasinan, contracted with
respondent for the hauling of 750 cartons of Liberty filled milk from a
warehouse of General Milk in Makati, Rizal, to petitioner's
establishment in Urdaneta on or before 4 December 1970.
Accordingly, on 1 December 1970, respondent loaded in Makati the

merchandise on to his trucks: 150 cartons were loaded on a truck

driven by respondent himself; while 600 cartons were placed on board
the other truck which was driven by Manuel Estrada, respondent's
driver and employee.
Only 150 boxes of Liberty filled milk were delivered to petitioner. The
other 600 boxes never reached petitioner, since the truck which
carried these boxes was hijacked somewhere along the MacArthur
Highway in Paniqui, Tarlac, by armed men who took with them the
truck, its driver, his helper and the cargo.
On 6 January 1971, petitioner commenced action against private
respondent in the Court of First Instance of Pangasinan, demanding
payment of P22,150.00, the claimed value of the lost merchandise,
plus damages and attorney's fees. Petitioner argued that private
respondent, being a common carrier, and having failed to exercise the
extraordinary diligence required of him by the law, should be held
liable for the value of the undelivered goods.
In his Answer, private respondent denied that he was a common
carrier and argued that he could not be held responsible for the
value of the lost goods, such loss having been due to force majeure.
On 10 December 1975, the trial court rendered a Decision' finding
private respondent to be a common carrier and holding him liable for
the value of the undelivered goods (P22,150.00) as well as for
P4,000.00 as damages and P2,000.00 as attorney's fees.
On appeal before the Court of Appeals, respondent urged that the
trial court had erred in considering him a common carrier; in finding
that he had habitually offered trucking services to the public; in not
exempting him from liability on the ground of force majeure; and in
ordering him to pay damages and attorney's fees.
The Court of Appeals reversed the judgment of the trial court and held
that respondent had been engaged in transporting return
loads of freight "as a casual occupation a sideline to his scrap iron
business" and not as a common carrier.
Petitioner came to this Court by way of a Petition for Review assigning
as errors the following conclusions of the Court of Appeals:
1. that private respondent was not a common carrier;
2. that the hijacking of respondent's truck was force majeure; and
3. that respondent was not liable for the value of the undelivered
cargo. (Rollo, p. 111)
We consider first the issue of whether or not private respondent
Ernesto Cendaa may, under the facts earlier set forth, be properly
characterized as a common carrier.

The Civil Code defines "common carriers" in the following terms:

"Article 1732. Common carriers are persons, corporations, firms or
associations engaged in the business of carrying or transporting
passengers or goods or both, by land, water, or air for compensation,
offering their services to the public."
The above article makes no distinction between one
whose principal business activity is the carrying of persons or goods or
both, and one who does such carrying only as an ancillary activity (in
local idiom, as "a sideline"). Article 1732 also carefully avoids making
any distinction between a person or enterprise offering transportation
service on a regular or scheduled basis and one offering such service
on an occasional, episodic or unscheduled basis. Neither does Article
1732 distinguish between a carrier offering its services to the "general
public," i.e., the general community or population, and one who offers
services or solicits business only from a narrow segment of the
general population. We think that Article 1733 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 . . ." (Emphasis supplied)

The Court of Appeals referred to the fact that private respondent held
no certificate of public convenience, and concluded he was not a
common carrier. This is palpable error. A certificate of public
convenience is not a requisite for the incurring of liability under the
Civil Code provisions governing common carriers. That liability arises
the moment a person or firm acts as a common carrier, without regard
to whether or not such carrier has also complied with the
requirements of the applicable regulatory statute and implementing
regulations and has been granted a certificate of public convenience
or other franchise. To exempt private respondent from the
liabilities of a common carrier because he has not secured the
necessary certificate of public convenience, would be offensive to
sound public policy; that would be to reward private respondent
precisely for failing to comply with applicable statutory requirements.
The business of a common carrier impinges directly and intimately
upon the safety and well being and property of those members of the
general community who happen to deal with such carrier. The law
imposes duties and liabilities upon common carriers for the safety and
protection of those who utilize their services and the law cannot allow
a common carrier to render such duties and liabilities merely
facultative by simply failing to obtain the necessary permits and
authorizations.
We turn then to the liability of private respondent as a common carrier.
Common carriers, "by the nature of their business and for
reasons of public policy," are held to a very high degree of care and
diligence ("extraordinary diligence") in the carriage of goods as well
as of passengers. The specific import of extraordinary diligence in the
care of goods transported by a common carrier is, according to Article
1733, "further expressed in Articles 1734, 1735 and 1745, numbers 5,
6 and 7" of the Civil Code.
Article 1734 establishes the general rule that common carriers are
responsible for the loss, destruction or deterioration of the goods
which they carry, "unless the same is due to any of the following
causes only:
(1) Flood, storm, earthquake, lightning, or other natural disaster or
calamity;
(2) Act of the public enemy in war, whether international or civil;

It appears to the Court that private respondent is properly

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

(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."

It is important to point out that the above list of causes of loss,

destruction or deterioration which exempt the common carrier for
responsibility therefor, is a closed list. Causes falling outside the
foregoing list, even if they appear to constitute a species of force
majeure, fall within the scope of Article 1735, which provides as
follows:

(5) that the common carrier shall not be responsible for the acts or
omissions of his or its employees;

the value of the undelivered merchandise which was lost

because of an event entirely beyond private respondent's control.

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

ACCORDINGLY, the Petition for Review on Certiorari is hereby

DENIED and the Decision of the Court of Appeals dated 3 August
1977 is AFFIRMED. No pronouncement as to costs.SO ORDERED.

"In all cases other than those mentioned in numbers 1, 2, 3, 4 and

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

(7) that the common carrier shall not responsible for the loss,
destruction or deterioration of goods on account of the defective
condition of the car, vehicle, ship, airplane or other equipment used in
the contract of carriage." (Emphasis supplied)

Applying the above-quoted Articles 1734 and 1735, we note firstly that
the specific cause alleged in the instant case the hijacking of the
carrier's truck - does not fall within any of the five (5)
categories of exempting causes listed in Article 1734. It would follow,
therefore, that the hijacking of the carrier's vehicle must be dealt with
under the provisions of Article 1735, in other words, that the private
respondent as common carrier is presumed to have been at fault or to
have acted negligently. This presumption, however, may be
overthrown by proof of extraordinary diligence on the part of private
respondent.
Petitioner insists that private respondent had not observed
extraordinary diligence in the care of petitioner's goods. Petitioner
argues that in the circumstances of this case, private respondent
should have hired a security guard presumably to ride with the truck
carrying the 600 cartons of Liberty filled milk. We do not believe,
however, that in the instant case, the standard of extraordinary
diligence required private respondent to retain a security guard to ride
with the truck and to engage brigands in a fire fight at the risk of his
own life and the lives of the driver and his helper.
The precise issue that we address here relates to the specific
requirements of the duty of extraordinary diligence in the vigilance
over the goods carried in the specific context of hijacking or armed
robbery.
As noted earlier, the duty of extraordinary diligence in the vigilance
over goods is, under Article 1733, given additional specification not
only by Articles 1734 and 1735 but also by Article 1745, numbers 4, 5
and 6, Article 1745 provides in relevant part:
"Any of the following or similar stipulations shall be considered
unreasonable, unjust and contrary to public policy:

Under Article 1745 (6) above, a common carrier is held responsible

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

xxx xxx xxx

We,
therefore,
agree
with
the
result
reached
by
the Court of Appeals that private respondent Cendaa is not liable for

[G.R. No. 148496. March 19, 2002.]

VIRGINES CALVO doing
business under the name
and style TRANSORIENT
CONTAINER TERMINAL
SERVICES,
INC., petitioner, vs. UCPB G
ENERAL INSURANCE CO.,
INC. (formerly Allied
Guarantee Ins. Co.,
Inc.) respondent.
SYNOPSIS
Petitioner, Virgines Calvo is the owner of
Transorient Container Terminal Services,
Inc., a sole proprietorship customs broker,

was held liable by the RTC and the CA for

the damage; and that improper packing of

has no merit. In De Guzman v. Court of

damages to the cargo handled by

the goods could be a basis to exempt

Appeals, the Court dismissed a similar

petitioner. On appeal, petitioner contended

petitioner from liability, but petitioner

contention and held the party to be a

that: she is not liable beyond what ordinary

accepted the cargo without exception

common carrier, . . . as defined in Article

diligence in the vigilance over the goods

despite the apparent defects in some of the

1732 of the Civil Code. . . . There is greater

transported by her would require because

container vans.

reason for holding petitioner to be a

her company is not a common carrier but a

private or special carrier; and that the cargo
could not have been damaged while in her
custody as she immediately delivered the
containers to SMC's compound.
The Supreme Court upheld the assailed
decision on appeal, ruling: that petitioner is
a common carrier because the
transportation of goods is an integral part
of her business: that as such, she is bound
to observe extraordinary diligence in the
carriage of goods; that to prove
extraordinary diligence, petitioner must do
more than merely show the possibility that
some other party could be responsible for

common carrier because the transportation

SYLLABUS
1. CIVIL LAW; COMMON CARRIERS;
CUSTOMS BROKER AND
WAREHOUSEMAN AS COMMON
CARRIER; CASE AT BAR. Petitioner
contends that contrary to the findings of the
trial court and the Court of Appeals, she is
not a common carrier but a private carrier
because, as a customs broker and
warehouseman, she does not
indiscriminately hold her services out to the
public but only offers the same to select
parties with whom she may contract in the
conduct of her business. The contention

of goods is an integral part of her business.

To uphold petitioners' contention would be
to deprive those with whom she contracts
the protection which the law affords them
notwithstanding the fact that the obligation
to carry goods for her customers, as
already noted, is part and parcel of
petitioner's business.
2. ID.; ID.; ID.; PROOF OF THE
EXERCISE OF EXTRAORDINARY
DILIGENCE IN THE CARRIAGE OF
GOODS; CASE AT BAR. Anent
petitioner's insistence that the cargo could
not have been damaged while in her

custody as she immediately delivered the

damage resulting therefrom. In this case,

P93,112.00 with legal interest, representing

containers to SMC's compound, suffice it to

petitioner accepted the cargo without

the value of damaged cargo handled by

say that to prove the exercise of

exception despite the apparent defects in

petitioner, 25% thereof as attorney's fees,

extraordinary diligence, petitioner must do

some of the container vans. Hence, for

and the cost of the suit.

more than merely show the possibility that

failure of petitioner to prove that she

some other party could be responsible for

exercised extraordinary diligence in the

the damage. It must prove that it used "all

carriage of goods in this case or that she is

Petitioner Virgines Calvo is the owner of

reasonable means to ascertain the nature

exempt from liability, the presumption of

Transorient Container Terminal Services,

and characteristic of goods tendered for

negligence as provided under Art. 1735

Inc. (TCTSI), a sole proprietorship customs

[transport] and that [it] exercise[d] due care

holds.

broker. At the time material to this case,

petitioner entered into a contract with San

in the handling [thereof]." Petitioner failed

to do this. Nor is there basis to exempt
petitioner from liability under Art.
1734(4), . . . For this provision to apply, the
rule is that if the improper packing or, in this

The facts are as follows:

DECISION

Miguel Corporation (SMC) for the transfer

of 114 reels of semi-chemical fluting paper
and 124 reels of kraft liner board from the

MENDOZA, J :
p

Port Area in Manila to SMC's warehouse at

the Tabacalera Compound, Romualdez St.,

case, the defect/s in the container, is/are

This is a petition for review of the

known to the carrier or his employees or

decision, dated May 31, 2001, of the Court

apparent upon ordinary observation, but he

of Appeals, affirming the decision of the

nevertheless accepts the same without

Regional Trial Court, Makati City, Branch

protest or exception notwithstanding such

148, which ordered petitioner to pay

On July 14, 1990, the shipment in question,

condition, he is not relieved of liability for

respondent, as subrogee, the amount of

contained in 30 metal vans, arrived in

Ermita, Manila. The cargo was insured by

respondent UCPB General Insurance Co.,
Inc.

Manila on board "M/V Hayakawa Maru"

City, which, on December 20, 1995,

Report (Exh. "H" "H-4-A")

and, after 24 hours, were unloaded from

rendered judgment finding petitioner liable

confirms the fact of the

the vessel to the custody of the arrastre

to respondent for the damage to the

damaged condition of the

operator, Manila Port Services, Inc. From

shipment.

subject cargoes. The

July 23 to July 25, 1990, petitioner,

pursuant to her contract with SMC,

The trial court held:

withdrew the cargo from the arrastre

It cannot be denied . . . that the

operator and delivered it to SMC's

subject cargoes sustained

warehouse in Ermita, Manila. On July 25,

damage while in the custody of

1990, the goods were inspected by Marine

defendants. Evidence such as

Cargo Surveyors, who found that 15 reels

the Warehouse Entry Slip (Exh.

of the semi-chemical fluting paper were

"E"); the Damage Report (Exh.

"wet/stained/torn" and 3 reels of kraft liner

"F") with entries appearing

board were likewise torn. The damage was

therein, classified as "TED" and

placed at P93,112.00.

"TSN", which the claims

SMC collected payment from

respondent UCPB under its insurance
contract for the aforementioned amount. In
turn, respondent, as subrogee of SMC,
brought suit against petitioner in the
Regional Trial Court, Branch 148, Makati

surveyor[s'] report (Exh. "H-4A") in particular, which provides

among others that:
" . . . we
opine that
damages
sustained by
shipment is
attributable to
improper handling
in transit

processor, Ms. Agrifina De

presumably whilst

Luna, claimed to be tearrage at

in the custody of

the end and tearrage at the

the broker . . . ."

middle of the subject damaged

cargoes respectively, coupled

is a finding which cannot be traversed and

with the Marine Cargo Survey

overturned.

The evidence adduced by the

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

xxx xxx xxx

Generally speaking
under Article 1735 of the Civil
Code, if the goods are proved
to have been lost, destroyed or
deteriorated, common carriers
are presumed to have been at
fault or to have acted
negligently, unless they prove
that they have observed the
extraordinary diligence required
by law. The burden of the
plaintiff, therefore, is to prove
merely that the goods he
transported have been lost,
destroyed or deteriorated.
Thereafter, the burden is shifted

proof of delivery of goods in

good order to a carrier, and of
their arrival at the place of
destination in bad order, makes
out a prima facie case against
the carrier, so that if no
explanation is given as to how
the injury occurred, the carrier
must be held responsible. It is
incumbent upon the carrier to
prove that the loss was due to
accident or some other
circumstances inconsistent with
its liability." (cited inCommercial
Laws of the Philippines by
Agbayani, p. 31, Vol. IV, 1989
Ed.)

to the carrier to prove that he

Defendant, being a customs

has exercised the extraordinary

brother, warehouseman and at

diligence required by law. Thus,

the same time a common

it has been held that the mere

carrier is supposed [to] exercise

[the] extraordinary diligence

The decision was affirmed by the Court of

COMMITTED

required by law, hence the

Appeals on appeal. Hence this petition for

SERIOUS AND

extraordinary responsibility

review on certiorari.

REVERSIBLE ERROR

lasts from the time the goods

are unconditionally placed in
the possession of and received
by the carrier for transportation
until the same are delivered
actually or constructively by the
carrier to the consignee or to
the person who has the right to
receive the same.

Accordingly, the trial court

ordered petitioner to pay the
following amounts

Petitioner contends that:

I. THE COURT OF

COMMON CARRIER
AND NOT AS

COMMITTED

PRIVATE OR

SERIOUS AND

SPECIAL CARRIER

REVERSIBLE ERROR

WHO DID NOT HOLD

[IN] DECIDING THE

ITS SERVICES TO

CASE NOT ON THE

THE PUBLIC.

EVIDENCE
PRESENTED BUT ON
PURE SURMISES,
SPECULATIONS AND
MANIFESTLY

interest;

MISTAKEN

3. Costs of suit.

PETITIONER AS A

APPEALS

1. The sum of P93,112.00 plus

2. 25% thereof as lawyer's fee;

IN CLASSIFYING THE

INFERENCE.
II. THE COURT OF
APPEALS

It will be convenient to deal with these

contentions in the inverse order, for if
petitioner is not a common carrier, although
both the trial court and the Court of
Appeals held otherwise, then she is indeed
not liable beyond what ordinary diligence in
the vigilance over the goods transported by
her, would require. Consequently, any
damage to the cargo she agrees to

transport cannot be presumed to have

"Article 1732. Common

offering transportation service

been due to her fault or negligence.

carriers are persons,

on a regular or scheduled

corporations, firms or

basis and one offering such

associations engaged in

service on an occasional,

the business of carrying

episodic or unscheduled

or transporting

basis. Neither does Article

passengers or goods or

1732 distinguish between a

both, by land, water, or

carrier offering its services to

air for compensation,

the "general public," i.e., the

offering their services to

general community or

the public."

population, and one who offers

Petitioner contends that contrary to the

findings of the trial court and the Court of
Appeals, she is not a common carrier but a
private carrier because, as a customs
broker and warehouseman, she does not
indiscriminately hold her services out to the
public but only offers the same to select
parties with whom she may contract in the
conduct of her business.
The contention has no merit. In De
Guzman v. Court of Appeals, the Court
dismissed a similar contention and held the
party to be a common carrier, thus

The above article makes no

distinction between one
whose principal business
activity is the carrying of
persons or goods or both, and
one who does such carrying

services or solicits business

only from a narrow segment of
the general population. We
think that Article 1732
deliberately refrained from
making such distinctions.

The Civil Code defines

only as an ancillary activity . . .

So understood, the concept of

"common carriers" in the

Article 1732 also carefully

"common carrier" under Article

following terms:

avoids making any distinction

1732 may be seen to coincide

between a person or enterprise

neatly with the notion of "public

service," under the Public

purposes, any common

electric light, heat and

Service Act (Commonwealth

carrier, railroad, street

power, water supply and

Act No. 1416, as amended)

railway, traction railway,

power petroleum,

which at least partially

subway motor vehicle,

sewerage system, wire

supplements the law on

either for freight or

or wireless

common carriers set forth in the

passenger, or both, with

communications

Civil Code. Under Section 13,

or without fixed route

systems, wire or wireless

paragraph (b) of the Public

and whatever may be its

broadcasting stations

Service Act, "public service"

classification, freight or

and other similar public

includes:

carrier service of any

services. . . . "

". . . 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

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, icerefrigeration plant, canal,
irrigation system, gas,

There is greater reason for holding

petitioner to be a common carrier because
the transportation of goods is an integral
part of her business. To uphold petitioner's
contention would be to deprive those with
whom she contracts the protection which
the law affords them notwithstanding the
fact that the obligation to carry goods for
her customers, as already noted, is part
and parcel of petitioner's business.

Now, as to petitioner's liability, Art. 1733 of

precaution for avoiding damage

the goods were unloaded and who

the Civil Code provides:

to, or destruction of the goods

allegedly kept them in open air for nine

entrusted to it for sale, carriage

days from July 14 to July 23, 1998

and delivery. It requires

notwithstanding the fact that some of the

common carriers to render

containers were deformed, cracked, or

service with the greatest skill

otherwise damaged, as noted in the Marine

and foresight and "to use all

Survey Report (Exh. H), to wit:

Common carriers, from the

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

In Compania Maritima v. Court of

Appeals, the meaning of "extraordinary
diligence in the vigilance over goods" was
explained thus:

reasonable means to ascertain

the nature and characteristic of
goods tendered for shipment,
and to exercise due care in the
handling and stowage,
including such methods as their
nature requires."

MAXU-2062880 - rain gutter deformed/cracked

ICSU-363461-3 - left side rubber gasket on door distorted/partly loose
PERU-204209-4 - with pinholes on roof panel right portion
TOLU-213674-3 - wood flooring we[t] and/or with signs of water
soaked
MAXU-201406-0 - with dent/crack on roof panel
ICSU-412105-0 - rubber gasket on left side/door panel partly detached
loosened.

In the case at bar, petitioner denies liability

for the damage to the cargo. She claims

In addition, petitioner claims that Marine

The extraordinary diligence in

that the "spoilage or wettage" took place

Cargo Surveyor Ernesto Tolentino testified

the vigilance over the goods

while the goods were in the custody of

that he has no personal knowledge on

tendered for shipment requires

either the carrying vessel "M/V Hayakawa

whether the container vans were first

the common carrier to know

Maru," which transported the cargo to

stored in petitioner's warehouse prior to

and to follow the required

Manila, or the arrastre operator, to whom

their delivery to the consignee. She

likewise claims that after withdrawing the

container vans from the arrastre operator,
her driver, Ricardo Nazarro, immediately
delivered the cargo to SMC's warehouse in
Ermita, Manila, which is a mere thirtyminute drive from the Port Area where the
cargo came from. Thus, the damage to the
cargo could not have taken place while
these were in her custody.

Details of Discharge:
Shipment, provided with our

[The cargo] was finally

noted discharged ex vessel to

delivered to the consignee's

dock of Pier #13 South Harbor,

storage warehouse located at

Manila on 14 July 1990,

Tabacalera Compound,

containerized onto 30' x 20'

Romualdez Street, Ermita,

secure metal vans, covered by

Manila from July 23/25, 1990.

clean EIRs. Except for slight

dents and paint scratches on

Survey Report (Exh. H) of the Marine

side and roof panels, these

Cargo Surveyors indicates that when the

containers were deemed to

shipper transferred the cargo in question to

have [been] received in good

the arrastre operator, these were covered

condition.

(EIR) and, when petitioner's employees

xxx xxx xxx

withdrew the cargo from the arrastre

Transfer/Delivery:

operator, they did so without exception or

On July 23, 1990, shipment

protest either with regard to the condition of

housed onto 30' x 20' cargo

container vans or their contents. The

containers was [withdrawn] by

Survey Report pertinently reads

Inc. . . . without exception.

protective supervision was

Contrary to petitioner's assertion, the

by clean Equipment Interchange Report

Transorient Container Services,

As found by the Court of Appeals:

From the [Survey Report], it [is]
clear that the shipment was
discharged from the vessel to
the arrastre, Marina Port
Services Inc., in good order
and condition as evidenced by
clean Equipment Interchange
Reports (EIRs). Had there been
any damage to the shipment,
there would have been a report
to that effect made by the

arrastre operator. The cargoes

delivered the same to the

containers to SMC's compound, suffice it to

were withdrawn by the

consignee damaged. We can

say that to prove the exercise of

defendant-appellant from the

only conclude that the damages

extraordinary diligence, petitioner must do

arrastre still in good order and

to the cargo occurred while it

more than merely show the possibility that

condition as the same were

was in the possession of the

some other party could be responsible for

received by the former without

defendant-appellant. Whenever

the damage. It must prove that it used "all

exception, that is, without any

the thing is lost (or damaged) in

reasonable means to ascertain the nature

report of damage or loss.

the possession of the debtor (or

and characteristic of goods tendered for

Surely, if the container vans

obligor), it shall be presumed

[transport] and that [it] exercise[d] due care

were deformed, cracked,

that the loss (or damage) was

in the handling [thereof]." Petitioner failed

distorted or dented, the

due to his fault, unless there is

to do this.

defendant-appellant would

proof to the contrary. No proof

report it immediately to the

was proffered to rebut this legal

consignee or make an

presumption and the

exception on the delivery

presumption of negligence

receipt or note the same in the

attached to a common carrier in

Warehouse Entry Slip (WES).

case of loss or damage to the

None of these took place. To

goods.

put it simply, the defendantappellant received the shipment

in good order and condition and

Anent petitioner's insistence that the cargo

could not have been damaged while in her
custody as she immediately delivered the

Nor is there basis to exempt petitioner from

liability under Art. 1734(4), which provides

Common carriers are

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

xxx xxx xxx

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

exempt from liability, the presumption of

Petitioner was contracted as carrier by a

negligence as provided under Art.

corporation from Portland, Oregon to

1735 holds.

deliver a cargo to the consignee's

WHEREFORE, the decision of the Court of

Appeals, dated May 31, 2001, is
AFFIRMED. SO ORDERED.

warehouse at Pasig City. The cargo,

however, never reached the consignee as
the barge that carried the cargo sank

For this provision to apply, the rule is that if

completely, resulting in damage to the

the improper packing or, in this case, the

cargo. Private respondent, as insurer,

defect/s in the container, is/are known to

the carrier or his employees or apparent

[G.R. No. 147246. August 19, 2003.]

indemnified the consignee for the lost

cargo and thus, as subrogee, sought

upon ordinary observation, but he

ASIA LIGHTERAGE AND

recovery from petitioner. Both the

nevertheless accepts the same without

SHIPPING,

trial court and the appellate court ruled in

protest or exception notwithstanding such

INC., petitioner, vs. COURT

favor of private respondent.

condition, he is not relieved of liability for

OF APPEALS and

damage resulting therefrom. In this case,

PRUDENTIAL

The Court ruled in favor of private

petitioner accepted the cargo without

GUARANTEE AND

exception despite the apparent defects in

ASSURANCE,

some of the container vans. Hence, for

INC., respondents.

failure of petitioner to prove that she

exercised extraordinary diligence in the
carriage of goods in this case or that she is

SYNOPSIS

respondent. Whether or not petitioner is a

common carrier, the Court ruled in the
affirmative. The principal
business of petitioner is
that of lighterage and drayage, offering its
barges to the public, although for limited
clientele, for carrying or transporting goods

by water for compensation. Whether or not

offering their services to the public.

unscheduled basis. Further, we ruled that

petitioner failed to exercise extraordinary

Petitioner contends that it is not a common

Article 1732 does not distinguish between

diligence in its care and custody of the

carrier but a private carrier. Allegedly, it has

a carrier offering its services to the general

consignee's goods, the Court also ruled in

no fixed and publicly known route,

public, and one who offers services or

the affirmative. The barge completely sank

maintains no terminals, and issues no

solicits business only from a narrow

after its towing bits broke, resulting in the

tickets. It points out that it is not obliged to

segment of the general population.

loss of the cargo. Petitioner failed to prove

carry indiscriminately for any person. It is

that the typhoon was the proximate and

not bound to carry goods unless it

only cause of the loss and that it has

consents. In short, it does not hold out its

exercised due diligence before, during and

services to the general public. In De

after the occurrence.

Guzman vs. Court of Appeals, we held that

the definition of common carriers in Article

SYLLABUS
1. CIVIL LAW; SPECIAL CONTRACTS;
COMMON CARRIERS; DEFINITION;
ELUCIDATED. Article 1732 of the Civil
Code defines common carriers as persons,
corporations, firms or associations
engaged in the business of carrying or
transporting passengers or goods or both,
by land, water, or air, for compensation..

1732 of the Civil Code makes no distinction

between one whose principal business
activity is the carrying of persons or goods
or both, and one who does such carrying
only as an ancillary activity. We also did not
distinguish between a person or enterprise
offering transportation service on a regular
or scheduled basis and one offering such
service on an occasional, episodic or

2. ID.; ID.; ID.; HOW DETERMINED.

Petitioner is a common carrier whether its
carrying of goods is done on an irregular
rather than scheduled manner, and with an
only limited clientele. A common carrier
need not have fixed and publicly known
routes. Neither does it have to maintain
terminals or issue tickets. To be sure,
petitioner fits the test of a common carrier
as laid down
in Bascos vs. Court of Appeals. The test to
determine a common carrier is "whether
the given undertaking is a part of the
business engaged in by the carrier which
he has held out to the general public as his

occupation rather than the quantity or

case of loss, destruction or

(5) Order or act of competent public

extent of the business transacted." In the

deterioration of the goods,

authority.

case at bar, the petitioner admitted that it is

deterioration of the goods, the common

engaged in the business of shipping

carrier must prove that it exercised

and lighterage, offering its barges to the

extraordinary diligence. There are,

public, despite its limited clientele for

however, exceptions to this rule. Article

carrying or transporting goods by water for

1734 of the Civil Code enumerates the

compensation.

instances when the

3. ID.; ID.; ID.; REQUIRED TO OBSERVE

EXTRAORDINARY DILIGENCE;
PRESUMPTION OF NEGLIGENCE IN
CASE OF LOSS, DESTRUCTION OR
DETERIORATION OFGOODS;
EXCEPTIONS. Common carriers are
bound to observe extraordinary diligence in
the vigilance over the goods transported by
them. They are presumed to have been at
fault or to have acted negligently if the
goods are lost, destroyed or deteriorated.
To overcome the
presumption of negligence in the

presumption of negligence does not attach:

Art. 1734. Common carriers are
responsible for the loss, destruction, or
deterioration of the goods, unless the same
is due to any of the following causes only:
(1) Flood, storm, earthquake, lightning, or
other natural disaster or calamity; (2)
Act of the public enemy in war, whether
international or civil; (3) Act or
omission of the shipper or owner of the
goods; (4) The character of the goods or
defects in the packing or in the containers;

4. ID.; ID.; ID.; ID.; ID.; ID.; TYPHOON;

NOT APPRECIATED IN THE
ABSENCE OF PROOF THAT IT WAS THE
PROXIMATE AND ONLY CAUSE OF LOSS
AND DUE DILIGENCE EXERCISED
BEFORE, DURING AND AFTER THE
TYPHOON. In the case at bar, the barge
completely sank after its towing bits broke,
resulting in the total loss of its cargo.
Petitioner claims that this was caused by a
typhoon, hence, it should not be held liable
for the loss of the cargo. However,
petitioner failed to prove that the typhoon is
the proximate and only cause of the
loss of the goods, and that it has exercised
due diligence before, during and after the
occurrence of the typhoon to prevent or
minimize the loss. The evidence show that,
even before the towing bits of the barge

broke, it had already previously sustained

with modification the April 6, 1994

On July 25, 1990, the carrying vessel

damage when it hit a sunken object while

Decision of the Regional

arrived in Manila and the cargo was

docked at the Engineering Island. It even

Trial Court of Manila which found petitioner

transferred to the custody of the

suffered a hole. Clearly, this could not be

liable to pay private respondent the

petitioner Asia Lighterage and Shipping,

solely attributed to the typhoon. The partly-

amount of indemnity and attorney's fees.

Inc. The petitioner was contracted by the

submerged vessel was refloated but its

hole was patched with only clay and

First, the facts.

cement. The patch work was merely a

On June 13, 1990, 3,150 metric

provisional remedy, not enough for the

tons of Better Western White Wheat in

barge to sail safely. Thus, when petitioner

bulk, valued at US$423,192.35 was

persisted to proceed with the voyage, it

shipped by Marubeni American

recklessly exposed the cargo to further

Corporation of Portland, Oregon on board

damage.

the vessel M/V NEO CYMBIDIUM V-26 for

delivery to the consignee, General Milling
DECISION

PUNO, J :
p

On appeal is the Court of Appeals' May 11,

2000 Decision in CA-G.R. CV No. 49195
and February 21, 2001 Resolution affirming

consignee as carrier to deliver the cargo to

consignee's warehouse at Bo. Ugong,
Pasig City.
On August 15, 1990, 900 metric tons of the
shipment was loaded on barge PSTSI III,
evidenced by Lighterage Receipt No.
0364 for delivery to consignee. The cargo
did not reach its destination.

Corporation in Manila, evidenced by

It appears that on August 17, 1990, the

Bill of Lading No. PTD/Man-4. The

transport of said cargo was suspended due

shipment was insured by the private

to a warning of an incoming typhoon. On

respondent Prudential Guarantee and

August 22, 1990, the petitioner proceeded

Assurance, Inc. against loss or damage for

to pull the barge to Engineering Island off

P14,621,771.75 under Marine Cargo Risk

Baseco to seek shelter from the

Note RN 11859/90.

approaching typhoon. PSTSI III was tied

down to other barges which arrived

The next day, September 6, 1990, the

as subrogee, it sought recovery of said

ahead of it while weathering out the storm

towing bits of the barge broke. It sank

amount from the petitioner, but to no avail.

that night. A few days after, the barge

completely, resulting in the total loss of the

developed a list because of a hole it

remaining cargo. A second Marine Protest

sustained after hitting an unseen

was filed on September 7, 1990.

protruberance underneath the water. The

petitioner filed a Marine Protest on August
28, 1990. It likewise secured the
services of Gaspar Salvaging Corporation
which refloated the barge. The hole was
then patched with clay and cement.
The barge was then towed to ISLOFF
terminal before it finally headed towards the
consignee's wharf on September 5, 1990.
Upon reaching the Sta. Mesa spillways, the
barge again ran aground due to strong
current. To avoid the complete

On July 3, 1991, the private respondent

filed a complaint against the petitioner for
recovery of the amount of indemnity,

On September 14, 1990, a bidding was

attorney's fees and cost of suit. Petitioner

conducted to dispose of the damaged

filed its answer with counterclaim.

wheat retrieved and loaded on the three

other barges. The total proceeds from the
sale of the salvaged cargo was
P201,379.75.
On the same date, September 14, 1990,
consignee sent a claim letter to the
petitioner, and another letter dated
September 18, 1990 to the private
respondent for the value of the lost cargo.

The Regional Trial Court ruled in

favor of the private respondent. The
dispositive portion of its Decision states:
WHEREFORE, premises
considered, judgment is hereby
rendered ordering
defendant Asia Lighterage &
Shipping, Inc. liable to pay
plaintiff Prudential Guarantee &

sinking of the barge, a portion of the goods

On January 30, 1991, the private

Assurance Co., Inc. the

was transferred to three other barges.

respondent indemnified the consignee in

sum of P4,104,654.22 with

the amount of P4,104,654.22. Thereafter,

interest from the date complaint

was filed on July 3, 1991 until

fully satisfied plus 10% of the

against appellant. SO

PETITIONER IS A

amount awarded as and for

ORDERED.

COMMON CARRIER.

attorney's fees. Defendant's

counterclaim is hereby
DISMISSED. With costs
against defendant.

Petitioner appealed to
the Court of Appeals insisting that it is not a
common carrier. The
appellate court affirmed the decision of the
trial court with modification. The dispositive
portion of its decision reads:
WHEREFORE, the decision
appealed from is hereby
AFFIRMED with modification in
the sense that the salvage
value of P201,379.75 shall be
deducted from the amount
of P4,104,654.22. Costs

Petitioner's Motion for Reconsideration

(2) THE COURT OF APPEA

dated June 3, 2000 was likewise denied by

LS DECIDED THE

the appellate court in a Resolution

CASE A QUO IN A

promulgated on February 21, 2001.

WAY NOT IN

Hence, this petition. Petitioner submits the

following errors allegedly committed by the
appellate court, viz:
(1) THE COURT OF APPEA

ACCORD WITH LAW

AND/OR WITH THE
APPLICABLE
DECISIONS OF THE
SUPREME COURT W

LS DECIDED THE

HEN IT AFFIRMED

CASE A QUO IN A

THE

WAY NOT IN

FINDING OF THE

ACCORD WITH LAW

LOWER COURT A

AND/OR WITH THE

QUO THAT ON THE

APPLICABLE

BASIS OF THE

DECISIONS OF THE

PROVISIONS OF THE

SUPREME COURT W

CIVIL CODE

HEN IT HELD THAT

APPLICABLE TO
COMMON

CARRIERS, "THE

TO EXERCISE DUE

business of carrying or transporting

LOSS OF THE

DILIGENCE AND/OR

passengers or goods or both, by land,

CARGO IS,

WAS NEGLIGENT IN

water, or air, for compensation, offering

THEREFORE,

ITS CARE AND

their services to the public.

BORNE BY THE

CUSTODY OF THE

CARRIER IN ALL

CONSIGNEE'S

CASES EXCEPT IN

CARGO.

THE FIVE (5) CASES

ENUMERATED."
(3) THE COURT OF APPEA
LS DECIDED THE

The issues to be resolved are:

(1) Whether the petitioner is a common
carrier; and,

Petitioner contends that it is not a common

carrier but a private carrier. Allegedly, it has
no fixed and publicly known route,
maintains no terminals, and issues no
tickets. It points out that it is not obliged to
carry indiscriminately for any person. It is
not bound to carry goods unless it

CASE A QUO IN A

(2) Assuming the petitioner is a common

consents. In short, it does not hold out its

WAY NOT IN

carrier, whether it exercised extraordinary

services to the general public.

ACCORD WITH LAW

diligence in its care and custody of the

AND/OR WITH THE

consignee's cargo.

APPLICABLE

On the first issue, we rule that petitioner is

DECISIONS OF THE

a common carrier.

SUPREME COURT W
HEN IT EFFECTIVELY
CONCLUDED THAT
PETITIONER FAILED

We disagree.
In De Guzman vs. Court of Appeals, we
held that the definition of common
carriers in Article 1732 of the Civil Code

Article 1732 of the Civil Code defines

makes no distinction between one whose

common carriers as persons, corporations,

principal business activity is the

firms or associations engaged in the

carrying of persons or goods or both, and

one who does such carrying only as an

his principal occupation was not the

occupation rather than the quantity or

ancillary activity. We also did not

carriage of goods for others, but

extent of the business transacted." In the

distinguish between a person or enterprise

that of buying used bottles and scrap metal

case at bar, the petitioner admitted that it is

offering transportation service on a regular

in Pangasinan and selling these items in

engaged in the business of shipping

or scheduled basis and one offering such

Manila.

and lighterage, offering its barges to the

service on an occasional, episodic or

unscheduled basis. Further, we ruled that
Article 1732 does not distinguish between
a carrier offering its services to the general
public, and one who offers services or
solicits business only from a narrow
segment of the general population.
In the case at bar, the principal
business of the petitioner is
that of lighterage and drayage and it offers
its barges to the public for carrying or
transporting goods by water for
compensation. Petitioner is clearly a
common carrier. In De Guzman, supra, we
considered private respondent Ernesto
Cendaa to be a common carrier even if

We therefore hold that petitioner is a

common carrier whether its
carrying of goods is done on an irregular

public, despite its limited clientele for

carrying or transporting goods by water for
compensation.

rather than scheduled manner, and with an

On the second issue, we uphold the

only limited clientele. A common carrier

findings of the lower courts that petitioner

need not have fixed and publicly known

failed to exercise extraordinary diligence in

routes. Neither does it have to maintain

its care and custody of the consignee's

terminals or issue tickets.

goods.

To be sure, petitioner fits the test of a

Common carriers are bound to observe

common carrier as laid down

extraordinary diligence in the vigilance over

in Bascos vs. Court of Appeals. The test to

the goods transported by them. They are

determine a common carrier is "whether

presumed to have been at fault or to have

the given undertaking is a part of the

acted negligently if the goods are lost,

business engaged in by the carrier which

destroyed or deteriorated. To overcome the

he has held out to the general public as his

presumption of negligence in the

case of loss, destruction or deterioration of

(2) Act of the public

it should not be held liable for the

the goods, the common carrier must prove

enemy in war,

loss of the cargo. However, petitioner failed

that it exercised extraordinary diligence.

whether

to prove that the typhoon is the proximate

There are, however, exceptions to this rule.

international or

and only cause of the loss of the goods,

Article 1734 of the Civil Code enumerates

civil;

and that it has exercised due diligence

the instances when the

presumption of negligence does not attach:

(3) Act or omission of the

shipper or

Art. 1734. Common carriers are

owner of the

responsible for the loss,

goods;

destruction, or
deterioration of the goods,
unless the same is due to
any of the following causes
only:
(1) Flood, storm,
earthquake,
lightning, or other
natural disaster or
calamity;

before, during and after the

occurrence of the typhoon to prevent or
minimize the loss. The evidence show that,
even before the towing bits of the barge
broke, it had already previously sustained

(4) The character of the

damage when it hit a sunken object while

goods or defects

docked at the Engineering Island. It even

in the packing or

suffered a hole. Clearly, this could not be

in the containers;

solely attributed to the typhoon. The partly-

(5) Order or

submerged vessel was refloated but its

act of competent

hole was patched with only clay and

public authority.

cement. The patch work was merely a

In the case at bar, the barge completely

sank after its towing bits broke, resulting in
the total loss of its cargo. Petitioner claims
that this was caused by a typhoon, hence,

provisional remedy, not enough for the

barge to sail safely. Thus, when petitioner
persisted to proceed with the voyage, it
recklessly exposed the cargo to further

damage. A portion of the cross-

tried to pull it to the

whole (sic) on the

examination of Alfredo Cunanan, cargo-

consignee's warehouse,

bottom part of the barge.

surveyor of Tan-Gatue Adjustment Co.,

now while on route

Inc., states:

another accident

CROSS-EXAMINATION BY
ATTY. DONN LEE:
xxx xxx xxx
q Can you tell us what else
transpired after that
incident?
a After the first accident,
through the
initiative of the barge

occurred, now this time

the barge totally hitting
something in the course.
q You said there was another

This is not all. Petitioner still headed to the

consignee's wharf despite knowledge of an
incoming typhoon. During the time that the
barge was heading towards the
consignee's wharf on September 5, 1990,

accident, can you tell

typhoon "Loleng" has already entered the

the court nature of the

Philippine area of responsibility. A

second accident?

part of the testimony of Robert Boyd, Cargo

a The sinking, sir.

q Can you tell the nature . . .

owners, they tried to pull

can you tell the court, if

out the barge from the

you know what caused

place of the accident,

the sinking?

and bring it to the anchor

xxx xxx xxx

a Mostly it was related to the

Operations Supervisor of the petitioner,

reveals:
DIRECT-EXAMINATION BY
ATTY. LEE:
xxx xxx xxx
q Now, Mr. Witness, did it not

terminal for safety, then

first accident because

occur to you it might be

after deciding if the

there was already a

safer to just allow the

vessel is stabilized, they

Barge to lie where she

was instead of towing it?
a Since that time that the Barge
was refloated, GMC

CROSS-EXAMINATION BY
ATTY. IGNACIO:
xxx xxx xxx

Terminal you proceeded

Corporation, the

to the premises of the

consignee) as I have

GMC? Am I correct?

their goods to be
delivered at their Wharf
since they needed badly
the wheat that was
loaded in PSTSI-3. It

Bay.
q But the fact is, the typhoon
was incoming? Yes or

q And then from ISLOFF

(General Milling

said was in a hurry for

the vicinity of Manila

a The next day, in the morning,

no?
a Yes.
q And yet as a standard
operating

we hired for additional

procedure of your

two (2) tugboats as I

Company, you have to

have stated.

secure a

q Despite of the threats of an

sort of Certification to

was needed badly by the

incoming typhoon as you

determine the weather

consignee.

testified a while ago?

condition, am I correct?

q And this is the reason why

a It is already in an inner

a Yes, sir.

you towed the Barge as

portion of Pasig River.

q So, more or less, you had the

you did?

The typhoon would be

knowledge of the

coming and it would be

incoming typhoon, right?

a Yes, sir.
xxx xxx xxx

dangerous if we are in

a Yes, sir.

q And yet you proceeded to the

premises of the GMC?
a ISLOFF Terminal is far from
Manila Bay and anytime
even with the typhoon if
you are already inside

the total loss of the cargo upon reaching

PATERNO V. TAC-AN,

the Pasig River, it was no longer affected

BATANGAS CITY and

by the typhoon. The typhoon then is not the

ADORACION C.

proximate cause of the loss of the cargo; a

ARELLANO, in her official

human factor, i.e., negligence had

capacity as City

intervened.

Treasurer of Batangas, res

the vicinity or inside

IN VIEW THEREOF, the petition is

Pasig entrance, it is a

DENIED. The

safe place to tow

Decision of the Court of Appeals in CA-

upstream.

G.R. CV No. 49195 dated May 11, 2000

Accordingly, the petitioner cannot invoke

the occurrence of the typhoon as force
majeure to escape liability for the loss

and its Resolution dated February 21, 2001

are hereby AFFIRMED. Costs against
petitioner. SO ORDERED.

pondents.
SYLLABUS
1. CIVIL LAW; TRANSPORTATION;
COMMON CARRIER; DEFINED;
APPLICATION IN CASE AT BAR. A
"common carrier" may be defined, broadly,

sustained by the private respondent.

as one who holds himself out to the public

Surely, meeting a typhoon head-on falls

as engaged in the business of transporting

short of due diligence required from a

common carrier. More importantly, the
officers/employees themselves of petitioner
admitted that when the towing bits of the
vessel broke that caused its sinking and

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

FIRST PHILIPPINE INDUST
RIAL CORPORATION, petiti
oner, vs. COURT OF APPE
ALS, HONORABLE

persons or property from place to place, for

compensation, offering his services to the
public generally. Article 1732 of the Civil
Code defines a "common carrier" as "any
person, corporation, firm or association
engaged in the business of carrying or

transporting passengers or goods or both,

goods,i.e., petroleum products, for hire as a

petitioner is considered a "common carrier."

by land, water, or air, for compensation,

public employment. It undertakes to carry

Thus, Article 86 thereof provides that:

offering their services to the public." The

for all persons indifferently, that is, to all

"Article 86. Pipe line concessionaire as

test for determining whether a party is a

persons who choose to employ its services

common carrier. A pipe line shall have

common carrier of goods is: 1. He must be

and transports the goods by land and for

the preferential right to utilize installations

engaged in the business of carrying goods

compensation. The fact that petitioner has

for the transportation of petroleum owned

for others as a public employment, and

a limited clientele does not exclude it from

by him, but is obligated to utilize the

must hold himself out as ready to engage

the definition of a common carrier. As

remaining transportation capacity pro

in the transportation of goods for person

correctly pointed out by petitioner, the

rata for the transportation of such other

generally as a business and not as a

definition of "common carrier" in the Civil

petroleum as may be offered by others for

casual occupation; 2. He must undertake to

Code makes no distinction as to the

transport and to charge without

carry goods of the kind to which his

means of transporting, as long as it is by

discrimination such rates as may have

business is confined; 3. He must undertake

land, water or air. It does not provide that

been approved by the

to carry by the method by which his

the transportation of the passengers or

Secretary of Agriculture and Natural

business is conducted and over his

goods should be by motor vehicle. In fact,

Resources." Republic Act 387 also regards

established roads: and 4. The

in the United Sates, oil pipe line operators

petroleum operation as a public utility.

transportation must be for hire. Based on

are considered common carriers.

Pertinent portion of Article 7 thereof

the above definitions and requirements,

there is no doubt that petitioner is a
common carrier. It is engaged in the
business of transporting or carrying

2. TAXATION; WHEN COMMON CARRIER

MAY BE EXEMPT FROM BUSINESS TAX;
CASE AT BAR. Under the Petroleum
Act of the Philippines (Republic Act 387),

provides: "that everything relating to the

exploration for and
exploitation of petroleum . . . and
everything relating to the manufacturer,

refining, storage or transportation by

Unless otherwise provided herein, the

dismissed petitioners' complaint for a

special methods of petroleum, is hereby

exercise of the taxing powers of provinces,

business tax refund imposed by the City of

declared to be a public utility." The

cities, municipalities, and barangays shall

Batangas.

Bureau of Internal Revenue likewise

not extend to the levy of the following: . . .

considers the petitioner a "common

(j) Taxes on the gross

carrier." The BIR Ruling No. 069-83, it

receipts of transportation contractors and

declared: " . . . since [petitioner] is a

persons engaged in the

pipeline concessionaire that is engaged

transportation of passengers or freight by

only in transporting petroleum products, it

hire and common carriers by air, land or

is considered a common carrier

water except as provided in this Code.

under Republic Act No. 387 . . .. Such

being the case, it is not subject to
withholding tax prescribed by Revenue
Regulations No. 13-78 as amended." From
the foregoing disquisition there is no doubt

DECISION

Petitioner is a grantee of a pipeline

concession under Republic Act No. 387, as
amended, to contract, install and operate
oil pipelines. The original pipeline
concession was granted in 1967 and
renewed by the Energy Regulatory Board
in 1992.
Sometime in January 1995, petitioner
applied for a mayor's permit with the
Office of the Mayor of Batangas City.

MARTINEZ, J :
p

that petitioner is a "common carrier" and,

This petition for review on certiorari assails

therefore, exempt from the business tax as

the Decision of the Court of Appeals dated

provided for in Section 133 (j) of the Local

November 29, 1995, in CA-G.R. SP No.

Government Code, to wit: "Section

36801, affirming the decision of the

133. Common Limitations on the Taxing

Regional Trial Court of Batangas City,

Power of Local Government Units.

Branch 84, in Civil Case No. 4293, which

However, before the mayor's permit could

be issued, the respondent City Treasurer
required petitioner to pay a local tax based
on its gross receipts for the fiscal year 1993
pursuant to the Local Government Code.
The respondent City Treasurer assessed a
business tax on the petitioner amounting to

P956,076.04 payable in four installments

pipeline, to Sucat and JTF

"The imposition and

based on the gross receipts for products

Pandacan Terminals. As such,

assessment cannot be

pumped at GPS-1 for the fiscal year 1993

our Company is exempt from

categorized as a mere fee

which amounted to P181,681,151.00. In

paying tax on gross receipts

authorized under Section

order not to hamper its operations,

under Section 133 of the Local

147 of the Local Government

petitioner paid the tax under protest in the

Government Code of 1991 . . .

Code. The said section limits

amount of P239,019.01 for

the first quarter of 1993.

"Moreover, Transportation
contractors are not included in

On January 20, 1994, petitioner filed a

the enumeration of contractors

letter-protest addressed to the respondent

under Section 131, Paragraph

City Treasurer, the pertinent

(h) of the Local Government

portion of which reads:

Code. Therefore, the authority

"Please note that our Company

(FPIC) is a pipeline operator
with a government concession
granted under the Petroleum
Act. It is engaged in the
business of transporting
petroleum products from the
Batangas refineries, via

to impose tax on contractors

and other independent
contractors' under Section 143,
Paragraph (e) of the Local
Government Code does not
include the power to levy on
transportation contractors.

the imposition of fees and

charges on business to such
amounts as may be
commensurate to the
cost of regulation, inspection,
and licensing. Hence,
assuming arguendo that FPIC
is liable for the license fee, the
imposition thereof based on
gross receipts is violative of the
aforecited provision. The
amount of P956,076.04
(P239,019.01 per quarter) is
not commensurate to the
cost of regulation, inspection

and licensing. The fee is

Local Government Code; (2) the

pipelines are not included in the term

already a revenue raising

authority of cities to impose and collect a

"common carrier" which refers solely to

measure, and not a mere

tax on the gross receipts of "contractors

ordinary carriers such as trucks, trains,

regulatory imposition."

and independent contractors" under Sec.

ships and the like. Respondents further

141(e) and 151 does not include the

posit that the term "common carrier" under

authority to collect such taxes on

the said code pertains to the mode or

transportation contractors for, as defined

manner by which a product is delivered to

under Sec. 131 (h), the term "contractors"

its destination.

On March 8, 1994, the respondent City

Treasurer denied the protest contending
that petitioner cannot be considered
engaged in transportation business, thus it
cannot claim exemption under Section 133
(j) of the Local Government Code.

excludes transportation contractors; and,

(3) the City Treasurer illegally and
erroneously imposed and collected the said

On June 15, 1994, petitioner filed with the

tax, thus meriting the immediate

Regional Trial Court of Batangas City a

refund of the tax paid.

complaint for tax refund with prayer for

writ of preliminary injunction against
respondents City of Batangas and
Adoracion Arellano in her capacity as City
Treasurer. In its complaint, petitioner
alleged, inter alia, that: (1) the imposition
and collection of the business tax on its
gross receipts violates Section 133 of the

Traversing the complaint, the respondents

argued that petitioner cannot be exempt

On October 3, 1994, the

trial court rendered a decision dismissing
the complaint, ruling in this wise:
". . . Plaintiff is either a
contractor or other independent
contractor.

from taxes under Section 133 (j) of the

. . . the exemption to tax

Local Government Code as said exemption

claimed by the plaintiff has

applies only to "transportation contractors

become unclear. It is a rule that

and persons engaged in the transportation

tax exemptions are to be strictly

by hire and common carriers by air, land

construed against the taxpayer,

and water." Respondents assert that

taxes being the lifeblood of the

government. Exemption may

(exemption being unclear and

"special

therefore be granted only by

equivocal) resort to distinctions

customer" under

clear and unequivocal

or other considerations may

a "special

provisions of law.

be of help:

contract."

"Plaintiff claims that it is a

1. That the exemption

2. The Local Tax

grantee of a pipeline

granted under

Code of 1992 was

concession under Republic Act

Sec. 133 (j)

basically enacted

387, (Exhibit A) whose

encompasses

to give more and

concession was lately renewed

only common

effective local

by the Energy Regulatory

carriers so as not

autonomy to local

Board (Exhibit B). Yet neither

to overburden the

governments than

said law nor the

riding public or

the previous

deed of concession grant any

commuters with

enactments, to

tax exemption upon the plaintiff.

taxes. Plaintif is

make them

not a common

economically and

carrier, but a

financially viable

special carrier

to serve the

extending its

people and

services and

discharge their

facilities to a

functions with a

single specific or

concomitant

"Even the Local Government

Code imposes a tax on
franchise holders under Sec.
137 of the Local Tax Code.
Such being the situation
obtained in this case

obligation to

respondent court rendered a

A "common carrier" may be defined,

accept certain

decision affirming the trial court's

broadly, as one who holds himself out to

devolution of

dismissal of petitioner's complaint.

the public as engaged in the

powers, . . . So,

Petitioner's motion for reconsideration was

business of transporting persons or

consistent with

denied on July 18, 1996.

property from place to place, for

this policy even

franchise
grantees are
taxed (Sec. 137)
and contractors
are also taxed
under Sec. 143
(e) and 151 of the
Code."

Petitioner assailed the aforesaid decision

before this Court via a petition for review.
On February 27, 1995, we referred the
case to the
respondent Court of Appeals for
consideration and adjudication. On
November 29, 1995, the

Hence, this petition. At first, the petition

was denied due course in a Resolution

compensation, offering his services to the

public generally.

dated November 11, 1996. Petitioner

Article 1732 of the Civil Code defines a

moved for a reconsideration which was

"common carrier" as "any

granted by this Court in a

person, corporation, firm or association

Resolution of January 22, 1997. Thus, the

engaged in the business of carrying or

petition was reinstated.

transporting passengers or goods or both,

Petitioner claims that the

respondent Court of Appeals erred in

by land, water, or air, for compensation,

offering their services to the public."

holding that (1) the petitioner is not a

The test for determining whether a party is

common carrier or a transportation

a common carrier of goods is:

contractor, and (2) the exemption sought

for by petitioner is not clear under the law.
There is merit in the petition.

1. He must be engaged in
the
business of carrying
goods for others as a

public employment,

Based on the above definitions and

carrying only as an ancillary

and must hold himself

requirements, there is no doubt that

activity (in local idiom, as a

out as ready to engage

petitioner is a common carrier. It is

'sideline'). Article

in the

engaged in the business of transporting or

1732 . . . avoids making any

transportation of goods

carrying goods,i.e. petroleum products, for

distinction between a person or

for person generally as

hire as a public employment. It undertakes

enterprise ofering

a business and not as

to carry for all persons indifferently, that is,

transportation service on a

a casual occupation;

to all persons who choose to employ its

regular or scheduled basis and

services, and transports the goods by land

one ofering such service on an

and for compensation. The fact that

occasional, episodic or

petitioner has a limited clientele does not

unscheduled basis. Neither

exclude it from the definition of a common

does Article 1732 distinguish

carrier. In De

between a carrier ofering its

Guzman vs. Court of Appeals we ruled

services to the 'general

that:

public,' i.e., the general

2. He must undertake to
carry goods of the kind
to which his business
is confined;
3. He must undertake to
carry by the method by
which his business is
conducted and over
his established roads;
and
4. The transportation must
be for hire.

"The above article (Art. 1732,

Civil Code) makes no
distinction between one whose
principal business activity is the
carrying of persons or goods or
both, and one who does such

community or population, and

one who ofers services or
solicits business only from a
narrow segment of the general
population. We think that
Article 1877 deliberately

refrained from making such

for hire or

craft, engaged in the

distinctions.

compensation, with

transportation of passen

general or limited

gers or freight or both,

clientele, whether

shipyard, marine repair

permanent, occasional

shop, wharf or dock, ice

or accidental, and done

plant, ice-refrigeration

for general business

plant, canal, irrigation

purposes, any common

system gas, electric light

carrier, railroad, street

heat and power, water

railway, traction railway,

supply and power

subway motor vehicle,

petroleum, sewerage

either for freight or

system, wire or wireless

passenger, or both, with

communications

or without fixed route

systems, wire or wireless

and whatever may be its

broadcasting stations

classification, freight or

and other similar public

carrier service of any

services." (Emphasis

class, express service,

supplied)

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,

steamboat, or steamship
line, pontines, ferries
and water

Also, respondent's argument that the term

"common carrier" as used in Section 133
(j) of the Local Government Code refers

only to common carriers transporting goods

the preferential right to utilize

and everything relating to the

and passengers through moving vehicles

installations for the

manufacture, refining, storage,

or vessels either by land, sea or water, is

transportation of petroleum

or transportation by special

erroneous.

owned by him, but is obliged to

methods of petroleum, is

utilize the remaining

hereby declared to be a public

transportation capacity pro rata

utility." (Emphasis Supplied)

As correctly pointed out by petitioner, the

definition of "common carriers" in the Civil
Code makes no distinction as to the
means of transporting, as long as it is by
land, water or air. It does not provide that
the transportation of the passengers or
goods should be by motor vehicle. In fact,
in the United States, oil pipe line operators
are considered common carriers.
Under the Petroleum Act of the Philippines
(Republic Act 387), petitioner is considered
a "common carrier." Thus, Article 86
thereof provides that:
"Art. 86. Pipe line
concessionaire as common
carrier. A pipe line shall have

for the transportation of such

other petroleum as may be
offered by others for transport,
and to change without
discrimination such rates as
may have been approved by
the Secretary of Agriculture and
Natural Resources."

Republic Act 387 also regards petroleum

operation as a public utility. Pertinent
portion of Article 7 thereof provides:

The Bureau of Internal Revenue likewise

considers the petitioner a "common
carrier." In BIR Ruling No. 069-83, it
declared:
". . . since (petitioner) is a
pipeline concessionaire that is
engaged only in transporting
petroleum products, it is
considered a common carrier
under Republic Act No. 387 . . .
Such being the case, it is not

"that everything relating to the

subject to withholding tax

exploration for and

prescribed by Revenue

exploitation of petroleum . . .

Regulations No. 13-78, as

persons engaged

the Taxing Powers of Local

amended."

in the

Government Units." . . .

transportation of p

From the foregoing disquisition, there is no

assengers or

doubt that petitioner is a "common carrier"

freight by hire and

and, therefore, exempt from the business

common carriers

tax as provided for in Section 133 (j),of the

by air, land or

Local Government Code, to wit:

water, except as

"Sec. 133. Common Limitations

provided in this

on the Taxing Powers of Local

Government Units. Unless
otherwise provided herein, the
exercise of the taxing powers of
provinces, cities, municipalities,

Code."

The deliberations conducted in the

House of Representatives on the Local
Government Code of 1991 are illuminating:

MR. AQUINO (A.). Thank you

Mr. Speaker.
Still on page 95, subparagraph
5, on taxes on the
business of transportation. This
appears to be one of those
being deemed to be exempted
from the taxing powers of the
local government units. May we
know the reason why the
transportation business is

and barangays shall not extend

"MR. AQUINO (A). Thank you,

being excluded from the taxing

to the levy of the following:

Mr. Speaker.

powers of the local government

xxx xxx xxx

(j.) Taxes on the gross
receipts of transp
ortation
contractors and

Mr. Speaker, we would like to

units?

proceed to page 95, line 1. It

MR. JAVIER (E.). Mr. Speaker,

states: "SEC. 121 (now Sec.

there is an exception contained

131). Common Limitations on

in Section 121 (now Sec. 131),

line 16, paragraph 5. It states

that local government units may

What we want to guard against

It is clear that the legislative intent in

not impose taxes on the

here, Mr. Speaker is the

excluding from the taxing power of the local

business of transportation,

imposition of taxes by local

government unit the imposition of business

except as otherwise provided in

government units on the carrier

tax against common carriers is to prevent a

this code.

business. Local government

duplication of the so-called "common

units may impose taxes on

carrier's tax."

Now, Mr. Speaker, if the

Gentleman would care to go to
page 98 of Book II, one can
see there that provinces have
the power to impose a tax on
business enjoying a franchise
at the rate of not more than
one-half of 1 percent of the
gross annual receipts. So,
transportation contractors who
are enjoying a franchise would
be subject to tax by the

top of what is already being

imposed by the National
Internal Revenue Code which is
the so-called "common carriers
tax." We do not want a
duplication of this tax, so we
just provided for an
exception under Section 125
(now Section 137) that a
province may impose this tax at
a specific rate.

province. That is the exception,

MR. AQUINO (A.). Thank you

Mr. Speaker.

for that clarification,

Mr. Speaker. . . .

Petitioner is already paying three (3%)

percent common carrier's tax on its gross
sales/earnings under the National Internal
Revenue Code. To tax petitioner again on
its gross receipts in its
transportation of petroleum business would
defeat the purpose of the Local
Government Code.
WHEREFORE, the petition is hereby
GRANTED. The decision of the
respondent Court of Appeals dated
November 29, 1995 in CA-G.R. SP No.
36801 is REVERSED and SET ASIDE. SO
ORDERED.

bringing down the entire cargo of 75,000

trial court or the appellate court can be a

bags of cement. DUMC filed a formal claim

valid and reviewable question of law.

for the entire amount of insurance, to which

Contrary to the conclusion made by the

PHILIPPINE AMERICAN GE

Philamgen promptly paid. Philamgen then

appellate court, its factual findings

NERAL INSURANCE

sought a reimbursement of the amount it

indicated that PKS engaged itself in the

COMPANY, petitioner, vs. P

paid to DUMC but the PKS refused to pay,

business of carrying goods for others,

KS SHIPPING

which prompted Philamgen to file a suit

although for a limited clientele, undertaking

COMPANY, respondent.

against PKS. The trial court, finding the

to carry such goods for a fee. Hence, the

cause of the loss to be through fortuitous

Court found PKS to be a common carrier.

event, dismissed the complaint filed.

However, the Court also found

Philamgen interposed an appeal to the

that PKS exercised the proper diligence

Court of Appeals which affirmed in toto the

demanded of a common carrier. The

decision of the trial court. In this appeal

factual findings of the appellate court were

before the Supreme Court, Philamgen

strengthened by the Certificate of

Davao Union Marketing Corporation

contended that the appellate court

Inspection of the barge issued by

(DUMC) contracted the services of

committed patent error in ruling that PKS is

the Philippine Coastguard and the

respondent PKS shipping company (PKS)

not a common carrier and it is not liable for

Coastwise Load Line Certificate, which

to transport its 75,000 bags of cement.

the loss of the subject cargo.

attested to the seaworthiness of the vessel

[G.R. No. 149038. April 9, 2003.]

Gerard M. Linsangan for petitioner.

Arthur D. Lim for respondent.
SYNOPSIS

DUMC insured the full amount of the goods

with the petitioner insurance company
(Philamgen). Ironically, the barge sank

According to the Supreme Court, the issue

of whether a carrier is private or common
carrier on the basis of facts found by the

involved in this case. Hence, the Court

found no error in the judgment made by the

appellate court in absolving PKS from

limited clientele, whether permanent,

in the leading case of De Guzman vs.

liability for the loss of the DUMC cargo.

occasional or accidental, and done for

Court of Appeals. Applying Article 1732 of

general business purposes, any common

the Code, in conjunction with Section 13(b)

carrier, railroad, street railway, subway

of the Public Service Act, this Court has

motor vehicle, either for freight or

held: "The above article makes no

passenger, or both, with or without fixed

distinction between one

route and whatever may be its

whose principal business activity is the

classification, freight or carrier service of

carrying of persons or goods or both, and

any class, express service, steamboat, or

one who does such carrying only as

steamship, or steamship line, pontines,

an ancillary activity (in local idiom, as 'a

ferries and water craft, engaged in the

sideline'). Article 1732 also carefully avoids

transportation of passengers or freight or

making any distinction between a person or

both, shipyard, marine repair shop, wharf

enterprise offering transportation service

or dock, ice plant, ice refrigeration plant,

on a regular or scheduled basis and one

canal, irrigation system, gas, electric light,

offering such service on an occasional,

heat and power, water supply and power

episodic or unscheduled basis. Neither

petroleum, sewerage system, wire or

does Article 1732 distinguish between a

wireless communication systems, wire or

carrier offering its services to the 'general

wireless broadcasting stations and other

public,' i.e., the general community or

similar public services. . . . . "The prevailing

population, and one who offers services or

doctrine on the question is that enunciated

solicits business only from a narrow

SYLLABUS
1. CIVIL LAW; TRANSPORTATION;
COMMON CARRIERS; DEFINED AND
CONSTRUED. 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 ". . . every person that
now or hereafter may own, operate,
manage, or control in the Philippines, for
hire or compensation, withgeneral or

segment of the general population. We

for the general public or to a limited

proving otherwise rests on them. The

think that Article 1732 deliberately refrained

clientele, although involving the carriage of

provisions of Article 1733, notwithstanding,

from making such distinctions. "So

goods for a fee, the person or corporation

common carriers are exempt from liability

understood, the concept of 'common

providing such service could very well be

for loss, destruction, or deterioration of the

carrier' under Article 1732 may be seen to

just a private carrier. A typical case is that

goods due to any of the following causes:

coincide neatly with the notion of 'public

of a charter party which includes both the

(1) Flood, storm, earthquake, lightning, or

service,' under the Public Service Act

vessel and its crew, such as in a bareboat

other natural disaster or calamity; (2) Act of

(Commonwealth Act No. 1416, as

or demise, where the charterer obtains the

the public enemy in war, whether

amended) which at least partially

use and service of all or some part of a

international or civil; (3) Act or omission of

supplements the law on common carriers

ship for a period of time or a voyage or

the shipper or owner of the goods; (4) The

set forth in the Civil Code."

voyages and gets the control of the vessel

character of the goods or defects in the

and its crew.

packing or in the containers; and (5) Order

2. ID.; ID.; ID.; COMMON OR PUBLIC

or act of competent public authority.

CARRIER DISTINGUISHED FROM

3. ID.; ID.; ID.; PRESUMED TO BEAT

PRIVATE OR SPECIAL CARRIER.

FAULT OR TO HAVE ACTED

4. REMEDIAL LAW; EVIDENCE;

Much of the distinction between a

NEGLIGENTLY IN CASE OF LOSS,

FINDINGS OF FACTS OF THE COURT

"common or public carrier" and a "private or

DESTRUCTION OR DETERIORATION OF

OF APPEALS; CONCLUSIVE UPON THE

special carrier" lies in the character of the

GOODS UNDER ITS CARE; EXCEPTION.

SUPREME COURT; EXCEPTIONS.

business, such that if the undertaking is an

In case of loss, destruction or

Findings of fact of the Court of Appeals

isolated transaction, not a part of the

deterioration of goods, common carriers

generally conclude this Court; none of the

business or occupation, and the carrier

are presumed to have been at fault or to

recognized exceptions from the rule (1)

does not hold itself out to carry the goods

have acted negligently, and the burden of

when the factual findings of the Court of

Appeals and the trial court are

citation of the specific evidence on which

corporation against respondent shipping

contradictory; (2) when the conclusion is a

they are based; and (10) when the findings

company.

finding grounded entirely on speculation,

of fact of the Court of Appeals are

surmises, or conjectures; (3) when the

premised on the absence of evidence but

inference made by the Court of Appeals

such findings are contradicted by the

from its findings of fact is manifestly

evidence on record would appear to be

mistaken, absurd, or impossible; (4) when

clearly extant in this instance.

there is a grave abuse of discretion in the

DECISION

appellate court, in making its findings, went

findings are contrary to the admissions of

respondent PKS Shipping Company

(PKS Shipping) for the shipment to
Tacloban City of seventy-five thousand
Million Three Hundred Seventy-Five
Thousand Pesos (P3,375,000.00). DUMC

VITUG, J :
p

both appellant and appellee; (6) when the

The petition before the Court seeks a

judgment of the Court of Appeals is

review of the decision of the Court of

premised on a misapprehension of facts;

Appeals in C.A. G.R. CV No. 56470,

(7) when the Court of Appeals failed to

promulgated on 25 June 2001, which has

notice certain relevant facts which, if

affirmed in totothe judgment of the

properly considered, would justify a

Regional Trial Court (RTC), Branch 65, of

different conclusion; (8) when the findings

Makati, dismissing the complaint for

of fact are themselves conflicting; (9) when

damages filed by petitioner insurance

the findings of fact are conclusions without

(DUMC) contracted the services of

(75,000) bags of cement worth Three

appreciation of facts; (5) when the

beyond the issues of the case and such

Davao Union Marketing Corporation

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 o'clock, while Limar I was being
towed by respondent's 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

did, the vessel with all her equipment and

liability on the part of PKS Shipping to the

the entire cargo of 75,000 bags of cement.

earned freightage.

shipper.

DUMC filed a formal claim with Philamgen

Philamgen interposed an appeal to the

In the instant appeal, Philamgen contends

for the full amount of the insurance.

Court of Appeals which affirmed in toto the

that the appellate court has committed a

Philamgen promptly made payment; it then

decision of the trial court. The appellate

patent error in ruling that PKS Shipping is

sought reimbursement from PKS Shipping

court ruled that evidence to establish that

not a common carrier and that it is not

of the sum paid to DUMC but the shipping

PKS Shipping was a common carrier at the

liable for the loss of the subject cargo. The

company refused to pay, prompting

time it undertook to transport the bags of

fact that respondent has a limited clientele,

Philamgen to file suit against PKS Shipping

cement was wanting because the peculiar

petitioner argues, does not militate against

with the Makati RTC.

method of the shipping company's carrying

respondent's being a common carrier and

goods for others was not generally held out

that the only way by which such carrier can

as a business but as a casual occupation.

be held exempt for the loss of the cargo

It then concluded that PKS Shipping, not

would be if the loss were caused by natural

being a common carrier, was not expected

disaster or calamity. Petitioner avers that

to observe the stringent extraordinary

typhoon "APIANG" has not entered

diligence required of common carriers in

the Philippine area of responsibility and

the care of goods. The appellate court,

that, even if it did, respondent would not be

moreover, found that the loss of the goods

exempt from liability because its

was sufficiently established as having been

employees, particularly the tugmaster, have

due to fortuitous event, negating any

failed to exercise due diligence to prevent

The RTC dismissed the complaint after

finding that the total loss of the cargo could
have been caused either by a fortuitous
event, in which case the ship owner was
not liable, or through the negligence of the
captain and crew of the vessel and that,
under Article 587 of the Code of
Commerce adopting the "Limited Liability
Rule," the ship owner could free itself of
liability by abandoning, as it apparently so

or minimize the loss.

PKS Shipping, in its comment, urges that

The findings of fact made by the Court of

"Article 1732. Common carriers

the petition should be denied because what

Appeals, particularly when such findings

are persons, corporations, firms

Philamgen seeks is not a review on points

are consistent with those of the trial court,

or associations engaged in the

or errors of law but a review of the

may not at liberty be reviewed by this Court

business of carrying or

undisputed factual findings of the RTC and

in a petition for review under Rule 45 of the

transporting passengers or

the appellate court. In any

Rules of Court. The conclusions derived

goods or both, by land, water,

event, PKS Shipping points out, the

from those factual findings, however, are

or air for compensation, offering

findings and conclusions of both courts find

not necessarily just matters of fact as when

their services to the public."

support from the evidence and applicable

they are so linked to, or inextricably

jurisprudence.

intertwined with, a requisite appreciation of

The determination of possible liability on

the part of PKS Shipping boils down to the
question of whether it is a private carrier or
a common carrier and, in either case, to the
other question of whether or not it has
observed the proper diligence (ordinary, if a
private carrier, or extraordinary, if a
common carrier) required of it given the
circumstances.

the applicable law. In such instances, the

conclusions made could well be raised as
being appropriate issues in a petition for
review before this Court. Thus, an issue
whether a carrier is private or common on
the basis of the facts found by a trial court
or the appellate court can be a valid and
reviewable question of law.

Complementary to the codal definition

is Section 13, paragraph (b), of the
Public Service Act; it defines "public
service" to be
". . . 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

The Civil Code defines "common carriers"

permanent, occasional or

in the following terms:

accidental, and done for

general business purposes,

any common carrier, railroad,

systems, wire or wireless

between a person or enterprise

street railway, subway motor

broadcasting stations and other

offering transportation service

vehicle, either for freight or

similar public services. . . ..

on a regular or scheduled

passenger, or both, with or

(Emphasis supplied)."

basis and 'one offering such

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

The prevailing doctrine on the question is

that enunciated in the leading case of De
Guzman vs. Court of Appeals. 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

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

vessel and its crew, such as in a bareboat

Addressing now the issue of whether or

service,' under the Public

or demise, where the charterer obtains the

not PKS Shipping has exercised the proper

Service Act (Commonwealth

use and service of all or some part of a

diligence demanded of common

Act No. 1416, as amended)

ship for a period of time or a voyage or

carriers, Article 1733 of the Civil Code

which at least partially

voyages and gets the control of the vessel

requires common carriers to observe

supplements the law on

and its crew. Contrary to the conclusion

extraordinary diligence in the vigilance over

common carriers set forth in the

made by the appellate court, its factual

the goods they carry. In case of loss,

Civil Code."

findings indicate that PKS Shipping has

destruction or deterioration of goods,

engaged itself in the business of carrying

common carriers are presumed to have

goods for others, although for a limited

been at fault or to have acted negligently,

clientele, undertaking to carry such goods

and the burden of proving otherwise rests

for a fee. The regularity of its activities in

on them. The provisions of Article 1733,

this area indicates more than just a casual

notwithstanding, common carriers are

activity on its part. Neither can the concept

exempt from liability for loss, destruction, or

of a common carrier change merely

deterioration of the goods due to any of the

because individual contracts are executed

following causes:

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, 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

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.

(1) Flood, storm, earthquake,

lightning, or other
natural disaster or
calamity;

(2) Act of the public enemy in

eight (8) feet and buffeted by strong winds

appreciation of facts; (5) when the

war, whether

of 1.5 knots resulting in the entry of water

appellate court, in making its findings, went

international or civil;

into the barge's hatches. The official

beyond the issues of the case and such

Certificate of Inspection of the barge issued

findings are contrary to the admissions of

by the Philippine Coastguard and the

both appellant and appellee; (6) when the

Coastwise Load Line Certificate would

judgment of the Court of Appeals is

attest to the seaworthiness of Limar I and

premised on a misapprehension of facts;

should strengthen the factual findings of

(7) when the Court of Appeals failed to

the appellate court.

notice certain relevant facts which, if

(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.

Findings of fact of the Court of Appeals

generally conclude this Court; none of the
recognized exceptions from the rule (1)
when the factual findings of the Court of

The appellate court ruled, gathered from

Appeals and the trial court are

the testimonies and sworn marine protests

contradictory; (2) when the conclusion is a

of the respective vessel masters of Limar

finding grounded entirely on speculation,

I and MT Iron Eagle, that there was no way

surmises, or conjectures; (3) when the

by which the barge's or the tugboat's crew

inference made by the Court of Appeals

could have prevented the sinking of Limar

from its findings of fact is manifestly

I. The vessel was suddenly tossed by

mistaken, absurd, or impossible; (4) when

waves of extraordinary height of six (6) to

there is a grave abuse of discretion in the

properly considered, would justify a

different conclusion; (8) when the findings
of fact are themselves conflicting; (9) when
the findings of fact are conclusions without
citation of the specific evidence on which
they are based; and (10) when the findings
of fact of the Court of Appeals are
premised on the absence of evidence but
such findings are contradicted by the
evidence on record would appear to be
clearly extant in this instance.

All given then, the appellate court did not

err in its judgment absolving PKS Shipping
from liability for the loss of the DUMC
cargo.

BERSAMIN, J :

decreed them jointly and severally liable

The operator of a school bus service is a

common carrier in the eyes of the law. He
is bound to observe extraordinary diligence

WHEREFORE, the petition is DENIED. No

in the conduct of his business. He is

costs. SO ORDERED.

presumed to be negligent when death

occurs to a passenger. His liability may

[G.R. No. 157917. August 29, 2012.]

SPOUSES

TEODORO and

NANETTE
PEREA, petitioners, vs.

their 15-year old son, Aaron John L. Zarate

(Aaron), then a high school student of Don
Bosco Technical Institute (Don Bosco).

capacity even if the deceased passenger

The Pereas were engaged in the business

may only be an unemployed high school

of

student at the time of the accident.

respective residences in Paraaque City to

The Case

TERESITA

ZARATE,

Teodoro and Nanette Perea (Pereas)

NATIONAL

appeal the adverse decision promulgated

RAILWAYS, and the COURT

on November 13, 2002, by which the Court

OF APPEALS, respondents.

of Appeals (CA) affirmed with modification

the decision rendered on December 3,

DECISION

Teresita Zarate (Zarates) for the death of

Antecedents

By petition for review on certiorari, Spouses

PHILIPPINE

their co-defendant, to Spouses Nicolas and

include indemnity for loss of earning

SPOUSES NICOLAS and

L.

with Philippine National Railways (PNR),

1999 by the Regional Trial Court (RTC),

Branch 260, in Paraaque City that had

transporting

students

from

their

Don Bosco in Pasong Tamo, Makati City,

and back. In their business, the Pereas
used a KIA Ceres Van (van) with Plate No.
PYA 896, which had the capacity to
transport 14 students at a time, two of
whom would be seated in the front beside
the driver, and the others in the rear, with
six students on either side. They employed
Clemente Alfaro (Alfaro) as driver of the
van.

In June 1996, the Zarates contracted the

construction

parked

was about 50 meters away from the

Pereas to transport Aaron to and from

passenger jeepneys, and the railroad

passenger bus and the van, Alano applied

Don Bosco. On August 22, 1996, as on

crossing in the narrow path had no railroad

the ordinary brakes of the train. He applied

previous school days, the van picked Aaron

warning signs, or watchmen, or other

the emergency brakes only when he saw

up around 6:00 a.m. from the Zarates'

responsible persons manning the crossing.

that

residence. Aaron took his place on the left

In fact, the bamboo barandilla was up,

passenger bus successfully crossed the

side of the van near the rear door. The van,

leaving the railroad crossing open to

railroad tracks, but the van driven by Alfaro

with its air-conditioning unit turned on and

traversing motorists.

did not. The train hit the rear end of the

the stereo playing loudly, ultimately carried

all the 14 student riders on their way to Don
Bosco. Considering that the students were
due at Don Bosco by 7:15 a.m., and that
they were already running late because of
the heavy vehicular traffic on the South
Superhighway, Alfaro took the van to an
alternate route at about 6:45 a.m. by
traversing the narrow path underneath the
Magallanes Interchange that was then
commonly used by Makati-bound vehicles
as a short cut into Makati. At the time, the
narrow path was marked by piles of

materials

and

At about the time the van was to traverse

the railroad crossing, PNR Commuter No.
302 (train), operated by Jhonny Alano
(Alano),

was

Magallanes

in

the

vicinity

Interchange

of

the

travelling

northbound. As the train neared the

railroad crossing, Alfaro drove the van

collision

was

imminent.

The

van, and the impact threw nine of the 12

students in the rear, including Aaron, out of
the van. Aaron landed in the path of the
train, which dragged his body and severed
his head, instantaneously killing him. Alano
fled the scene on board the train, and did
not wait for the police investigator to arrive.

eastward across the railroad tracks, closely

Devastated by the early and unexpected

tailing a large passenger bus. His view of

death of Aaron, the Zarates commenced

the oncoming train was blocked because

this action for damages against Alfaro, the

he overtook the passenger bus on its left

Pereas, PNR and Alano. The Pereas

side. The train blew its horn to warn

and PNR filed their respective answers,

motorists of its approach. When the train

with cross-claims against each other, but

residence

in

carrier Kia Ceres

Alfaro could not be served with summons.

Paraaque to his

van of spouses

school at the Don

Perea,

then

Bosco

driven

and

At the pre-trial, the parties stipulated on the

facts and issues, viz.:
A. FACTS:
(1) That spouses Zarate
were

the

legitimate parents
of Aaron John L.
Zarate;

Technical

Institute in Makati

operated by the

City;

latter's

(3) During the effectivity

of the contract of
carriage

and

the

Zarate

engaged

the

services

of

spouses

Perea

thereof,

Aaron,

the minor son of

spouses

Zarate

died in connection

for the adequate

with

and

vehicular/train

safe

transportation

former
son

of

the

spouses'
from

their

collision

which

occurred

while

Aaron was riding

the

zed

driver

Clemente Alfaro,
which van collided
with the train of

implementation

(2) Spouses

carriage

in

employee/authori

contracted

PNR, at around
6:45

A.M.

of

August 22, 1996,

within the vicinity
of the Magallanes
Interchange

in

Makati City, Metro

Manila,
Philippines;

(4) At the time of the

(6) At the material time,

(8) The site commonly

countless number

used for railroad

the

of Makati bound

crossing

subject site of the

public utility and

motorists was not

vehicular/train

private

in fact intended by

vehicular/train
collision,

vehicles

by

collision

was

used on a daily

the

railroad

crossing

basis the site of

operator

used by motorists

the collision as an

railroad

for crossing the

alternative

route

at the time of the

railroad tracks;

and short-cut to

vehicular collision;

(5) During the said time

of

the

Makati;

(9) PNR

(7) The train driver or

railroad

the

collision,

scene

Zarate;

the

were no appropria

incident on board

te

the

and

safety

commuter

warning signs and

train

railings at the site

without waiting for

commonly

the

for
crossing;

used
railroad

involved

investigator;

police

the

demand letter of

operator left the

of

crossing

received

vehicular/train
there

for

(10) PNR

spouses

refused

to

acknowledge any
liability

for

vehicular/train
collision;

the

(11) The

eventual

closure

of

the

railroad

crossing

or

not

negligence which

defendant-driver

may be attributed

of the van is, in

to

alleged by PNR

the

Alfaro;

was an internal

of his functions,

arrangement

liable

between
former

and

performance

for

the

negligence

its

constituting

the

project contractor;

proximate

and

of the vehicular

(12) The

site

of

the

vehicular/train
collision

was

within the vicinity

or less than 100

B. ISSUES

(1) Whether

cause

collision,
resulted

which
in

the

death of plaintiff
spouses' son;

defendant

Magallanes

spouses

station of PNR.

being
employer
defendant

(3) Whether

or

Philippine
National Railways
being the operator
of

the

railroad

system is liable
for negligence in
failing to provide

the
of
Alfaro

are liable for any

safety

warning signs and

railings

Perea

not

defendant

adequate

(2) Whether or not the

meters from the

defendant

area

in

the

commonly

used by motorists
for

railroad

crossings,
constituting

the

proximate

cause

(5) Whether

or

not

spouses are civilly

of the vehicular

defendants

liable

collision

which

spouses are liable

accidental

the

for actual, moral

of

Zarate;

resulted

in

death

of

the

damages,

plaintiff

spouses'

exemplary

son;

damages,

(4) Whether

or

not

defendant
spouses
are

breach

of

(8) Whether

John

or

not

defendant

PNR
grossly

defendants

operating

the

for

spouses

commuter

train

the

Teodorico

of

carriage

with

plaintiff-spouses
failing

Aaron

was

to

Nanette

not

death

in

Perea

or

the

negligent

contract

in

attorney's fees;
(6) Whether

liable

and

for

and
Perea

involved

in

the

accident,

in

observed

the

allowing

or

diligence

of

tolerating

the

employers

and

motoring public to

provide adequate

school

bus

cross,

and

operators;

safe

transportation for
the latter's son;

(7) Whether

or

defendant-

failure
not

and
to

its

install

safety devices or
equipment at the
site

of

the

accident for the

(10) Whether

protection of the

defendant

public;

should

(9) Whether

or

defendant

not
PNR

should be made
to

reimburse

defendant
spouses for any
and

whatever

amount the latter

may

be

answerable

held
or

not

The Zarates' claim against the Pereas

PNR

was upon breach of the contract of carriage

pay

for the safe transport of Aaron; but that

directly

against PNR was based on quasi-delict

or

plaintiffs

and fully on the

amounts claimed
by the latter in
their Complaint by
reason

of

its

gross negligence;

by making sure that Alfaro had been issued

liable

the collision; that their own son had taken

to

the van daily; and that Teodoro Perea had

in

of

actual, moral and

by

exemplary

the

damages

action;

in the selection and supervision of Alfaro,

involved in any vehicular accident prior to

spouses

of

the diligence of a good father of the family

defendant PNR is

be ordered to pay

reason

evidence to show that they had exercised

a driver's license and had not been

or

defendants

plaintiffs

In their defense, the Pereas adduced

not

(11) Whether

which they may

favor

under Article 2176, Civil Code.

for

and

attorney's fees.

sometimes accompanied Alfaro in the van's

trips transporting the students to school.
For its part, PNR tended to show that the
proximate cause of the collision had been
the reckless crossing of the van whose
driver had not first stopped, looked and

listened; and that the narrow path traversed

(4) Moral

by the van had not been intended to be a

amount of (Php)4,000,000.00;

railroad crossing for motorists.

damages

in

The Court a quo erred in:

(5) Exemplary damages in the

Ruling of the RTC

1. In

amount of Php1,000,000.00;
(6) Attorney's

its decision, disposing:

amount of Php200,000.00; and

premises

considered, judgment is hereby

rendered in favor of the plaintiff
and against the defendants
ordering them to jointly and
severally pay the plaintiffs as
follows:

fees

in

the

and

cooperative

motion
gross

that

the
of

the

Pereas and PNR had caused the collision

that led to the death of Aaron; and that the

(1) (for) the death of Aaron

damages awarded to the Zarates were not

Php50,000.00;

excessive, but based on the established

(2) Actual

circumstances.

damages

in

the

amount of Php100,000.00;

Philippine

severally

appellants

for

negligence

defendant-

liable

together with defendant-

On June 29, 2000, the RTC denied the

reconsideration, reiterating

the

National Railways jointly

(7) Cost of suit. SO ORDERED.

Pereas'

finding

appellant

On December 3, 1999, the RTC rendered

WHEREFORE,

PNR assigned the following errors, to wit:

the

The CA's Ruling

spouses

Teodorico and Nanette

Perea and defendantappellant

Clemente

Alfaro to pay plaintiffsappellees for the death

of

Aaron

Zarate

and

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

(3) For the loss of earning

Both the Pereas and PNR appealed

witnesses

capacity Php2,109,071.00;

(C.A.-G.R. CV No. 68916).

overwhelming

despite

documentary
on

record,

evidence
supporting

the case of defendantsappellants

driver primarily responsible for

Court,

the incident.

Paraaque

The

Philippine

trial

court

erred

The

to the RTC, namely:

trial

awarding

court

damages

in

in

form of deceased's loss of

defendants-appellants jointly

earning

and severally liable for actual,

absence of sufficient basis for

moral

such an award.

and

exemplary

damages and attorney's fees

to P2,500,000.00;
award

the

The CA upheld the award for the loss of

earning

capacity,

taking

Laguna Tayabas Bus Company and Manila

in

findings of the RTC, but limited the moral

Railroad Company, wherein the Court gave

dismissing the cross-claim of

damages to P2,500,000.00; and deleted

the heirs of Cariaga a sum representing the

the

Pereas

the attorney's fees because the RTC did

loss of the deceased's earning capacity

Philippine

not state the factual and legal bases, to wit:

despite Cariaga being only a medical

against

court

appellants
the

erred

National Railways and in not

holding the latter and its train

WHEREFORE,
considered,

the

the

Fees

promulgated its decision, affirming the

trial

2002,

Attorney's

the

is Deleted. SO ORDERED.

Aaron's

13,

for

and

cognizance of the ruling in Cariaga v.

The

November

in

reduced

CA

with the other defendants.

On

capacity

the

to P59,502.76; Moral

Damages is

the

The trial court erred in finding

City

award of Actual Damages is

reduced

erred

of

the modification that

and attorney's fees.

The Pereas ascribed the following errors

260

is AFFIRMED with

in

awarding excessive damages

National Railways.

Branch

premises

student at the time of the fatal incident.

assailed

Applying the formula adopted in the

Decision of the Regional Trial

American Expectancy Table of Mortality:

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

P2,189,664.30 was deducted to finally

dismissing their cross-

life expectancy

arrive at P2,161,500.00 as net income.

claim against the latter.

the CA determined the life expectancy

Due to Aaron's computed net income

of Aaron to be 39.3 years upon

turning out to be higher than the amount

reckoning his life expectancy from age

claimed

of 21 (the age when he would have

P2,109,071.00, the amount expressly

graduated from college and started

prayed for by them, was granted.

by

the

Zarates,

only

II. The lower court erred in

affirming the trial court's
decision

of

damages

for

awarding
loss

of

earning capacity of a

working for his own livelihood) instead

On April 4, 2003, the CA denied the

minor who was only a

of 15 years (his age when he died).

Pereas' motion for reconsideration.

high school student at

Considering that the nature of his work

and his salary at the time of Aaron's
death were unknown, it used the
prevailing

minimum

wage

of

P280.00/day to compute Aaron's gross

annual

salary

to

be

P110,716.65,

the time of his death in

Issues
In this appeal, the Pereas list the following
as the errors committed by the CA, to wit:
I. The lower court erred when it
upheld the trial court's

inclusive of the thirteenth month pay.

decision

Multiplying this annual salary by Aaron's

petitioners

life expectancy of 39.3 years, his gross

severally liable to pay

income

to

damages with Philippine

his

National Railways and

would

P4,351,164.30,

aggregate
from

which

estimated expenses in the sum of

holding

the

jointly

and

the absence of sufficient

basis for such an award.
III. The lower court erred in not
reducing
amount

further
of

awarded,

the

damages
assuming

petitioners are liable at

all.

Ruling
The petition has no merit.

1.

son travel to and from school on a daily

public use, the exact nature of the

Were the Pereas and PNR jointly

basis; and that Teodoro Perea himself

operation of a school bus service has not

and severally liable for damages?

sometimes

been finally settled. This is the occasion to

The

Zarates

brought

this

action

for

recovery of damages against both the

Pereas and the PNR, basing their claim
against the Pereas on breach of contract
of carriage and against the PNR on quasi-

accompanied

Alfaro

in

transporting the passengers to and from

school. The RTC gave scant consideration
to such defense by regarding such defense
as inappropriate in an action for breach of
contract of carriage.

lay the matter to rest.

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

from

one

place

to

another,

gratuitously or for hire. The carrier is

We find no adequate cause to differ from

classified either as a private/special carrier

the conclusions of the lower courts that the

or as a common/public carrier. A private

Pereas operated as a common carrier;

carrier is one who, without making the

and that their standard of care was

activity a vocation, or without holding

We concur with the CA.

extraordinary diligence, not the ordinary

himself or itself out to the public as ready to

To start with, the Pereas' defense was

diligence of a good father of a family.

act for all who may desire his or its

that they exercised the diligence of a good

Although in this jurisdiction the operator of

father of the family in the selection and

a school bus service has been usually

supervision of Alfaro, the van driver, by

regarded as a private carrier, primarily

seeing to it that Alfaro had a driver's license

because he only caters to some specific or

and that he had not been involved in any

privileged individuals, and his operation is

vehicular accident prior to the fatal collision

neither open to the indefinite public nor for

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

with the train; that they even had their own

services,

undertakes, by

special

agreement in a particular instance only, to

transport goods or persons from one place
to another either gratuitously or for hire.
The provisions on ordinary contracts of
the Civil

Code govern

the

contract

of

private carriage. The diligence required of a

private carrier is only ordinary, that is, the

"Public use" is the same as

owner to give to the general

diligence of a good father of the family. In

"use

The

public. It is not enough that the

contrast, a common carrier is a person,

essential feature of the public

general prosperity of the public

corporation, firm or association engaged in

use is not confined to privileged

is promoted. Public use is not

the business of carrying or transporting

individuals, but is open to the

synonymous

passengers or goods or both, by land,

indefinite

this

interest. The true criterion by

water, or air, for compensation, ofering

indefinite or unrestricted quality

which to judge the character of

such services to the public. Contracts of

that gives it its public character.

the use is whether the public

common carriage are governed by the

In determining whether a use is

may enjoy it by right or only by

provisions on common carriers of the Civil

public, we must look not only to

permission.

Code, the Public Service Act, and other

the character of the business to

special laws relating to transportation. A

be

common carrier is required to observe

proposed mode of doing it. If

extraordinary diligence, and is presumed to

the use is merely optional with

be at fault or to have acted negligently in

the

case

of

benefit is merely incidental, it is

passengers, or the death or injuries to

not a public use, authorizing the

passengers.

exercise of the jurisdiction of

of

the

loss

of

the

effects

In relation to common carriers, the Court

defined public use in the following terms
in United States v. Tan Piaco, viz.:

by

done,

the

public".

public.

but

owners,

It

also

or

the

is

to

the

public

the public utility commission.

There must be, in general, a
right which the law compels the

with

public

In De Guzman v. Court of Appeals, the

Court noted that Article 1732 of the Civil
Code avoided any distinction between a
person

or

an

enterprise

offering

transportation on a regular or an isolated

basis; and has not distinguished a carrier
offering his services to the general public,
that

is,

the

general

community

or

population, from one offering his services

only to a narrow segment of the general
population.

Nonetheless, the concept of a common

without

route

and

Court has considered as common carriers

carrier embodied in Article 1732 of the Civil

whatever

be

its

pipeline operators, custom brokers and

Code coincides neatly with the notion

classification, freight or carrier

warehousemen, and barge operators even

of public

service of any class, express

if they had limited clientle.

service under

the Act,

which

fixed
may

supplements the law on common carriers

service,

found in the Civil Code. Public service,

steamship line, pontines, ferries

according to Section 13, paragraph (b) of

and water craft, engaged in the

the Public Service Act, includes:

transportation of passengers or

. . . every person that now or

hereafter may own, operate,
manage,

or

Philippines,

control
for

in

the

hire

or

compensation, with general or

limited

clientle,

permanent

or

whether

occasional,

and done for the general

business

purposes,

any

common carrier, railroad, street

railway, traction railway, subway

steamboat,

or

freight or both, shipyard, marine

repair

shop,

ice-refrigeration

plant, canal, irrigation system,

gas, electric light, heat and
power, water supply and power
petroleum, sewerage system,
wire

or

wireless

communications systems, wire

or

wireless

broadcasting

stations and other similar public

services. . . . .

DH

As all the foregoing indicate, the true test

for a common carrier is not the quantity or
extent of the business actually transacted,
or

the number and

character

of

the

conveyances used in the activity, but

whether the undertaking is a part of the
activity engaged in by the carrier that he
has held out to the general public as his
business or occupation. If the undertaking
is a single transaction, not a part of the
general business or occupation engaged
in, as advertised and held out to the
general public, the individual or the entity
rendering such service is a private, not a
common, carrier. The question must be

motor vehicle, either for freight

Given the breadth of the aforequoted

determined

by

the

character

of

the

or passenger, or both, with or

characterization of a common carrier, the

business actually carried on by the carrier,

not by any secret intention or mental

The common carrier's standard of care and

stand. No device, whether by stipulation,

reservation it may entertain or assert when

vigilance as to the safety of the passengers

posting of notices, statements on tickets, or

charged with the duties and obligations that

is defined by law. Given the nature of the

otherwise, may dispense with or lessen the

the law imposes.

business and for reasons of public policy,

responsibility of the common carrier as

the common carrier is bound "to observe

defined under Article 1755 of the Civil

extraordinary diligence in the vigilance over

Code.

Applying these considerations to the case

before us, there is no question that the
Pereas as the operators of a school bus
service were: (a) engaged in transporting
passengers generally as a business, not
just

as

casual

occupation; (b) undertaking

to

carry

passengers over established roads by the

method

by

which

the

business

was

conducted; and (c) transporting students

for a fee. Despite catering to a limited
clientle, the Pereas operated as a
common

carrier

because

they

held

themselves out as a ready transportation

indiscriminately

to

the

students

of

particular school living within or near where

they operated the service and for a fee.

EHTISC

the goods and for the safety of the

passengers transported by them, according
to all the circumstances of each case."
Article 1755 of the Civil Code specifies that
the common carrier should "carry the
passengers safely as far as human care
and foresight can provide, using the utmost
diligence of very cautious persons, with a

And, secondly, the Pereas have not

presented

any

compelling

defense

or

reason by which the Court might now

reverse the CA's findings on their liability.
On the contrary, an examination of the
records shows that the evidence fully
supported the findings of the CA.

due regard for all the circumstances." To

As earlier stated, the Pereas, acting as a

successfully fend off liability in an action

common carrier, were already presumed to

upon the death or injury to a passenger,

be negligent at the time of the accident

the common carrier must prove his or its

because death had occurred to their

observance of that extraordinary diligence;

passenger. The presumption of negligence,

otherwise, the legal presumption that he or

being a presumption of law, laid the burden

it was at fault or acted negligently would

of evidence on their shoulders to establish

that they had not been negligent. It was the

reason why the RTC treated this defense of

risks. Compounding his lack of care was

law no less that required them to prove

the Pereas as inappropriate in this action

that loud music was playing inside the air-

their observance of extraordinary diligence

for breach of contract of carriage.

conditioned van at the time of the accident.

in seeing to the safe and secure carriage of

the passengers to their destination. Until
they did so in a credible manner, they stood
to be held legally responsible for the death
of Aaron and thus to be held liable for all
the natural consequences of such death.

HCTDIS

The Pereas were liable for the death of

Aaron despite the fact that their driver
might have acted beyond the scope of his
authority or even in violation of the orders
of the common carrier. In this connection,
the records showed their driver's actual

There is no question that the Pereas did

negligence. There was a showing, to begin

not overturn the presumption of their

with, that their driver traversed the railroad

negligence by credible evidence. Their

tracks at a point at which the PNR did not

defense of having observed the diligence of

permit motorists going into the Makati area

a good father of a family in the selection

to cross the railroad tracks. Although that

and supervision of their driver was not

point had been used by motorists as a

legally sufficient. According to Article 1759

shortcut into the Makati area, that fact

of the Civil Code, their liability as a

alone did not excuse their driver into taking

common carrier did not cease upon proof

that route. On the other hand, with his

that they exercised all the diligence of a

familiarity with that shortcut, their driver

good father of a family in the selection and

was fully aware of the risks to his

supervision of their employee. This was the

passengers but he still disregarded the

The loudness most probably reduced his

ability to hear the warning horns of the
oncoming train to allow him to correctly
appreciate the lurking dangers on the
railroad tracks. Also, he sought to overtake
a passenger bus on the left side as both
vehicles traversed the railroad tracks. In so
doing, he lost his view of the train that was
then coming from the opposite side of the
passenger bus, leading him to miscalculate
his chances of beating the bus in their
race, and of getting clear of the train. As a
result, the bus avoided a collision with the
train but the van got slammed at its rear,
causing the fatality. Lastly, he did not slow
down or go to a full stop before traversing
the railroad tracks despite knowing that his
slackening of speed and going to a full stop

were in observance of the right of way at

The test by which to determine the

negligence in a given case is

railroad tracks as defined by the traffic laws

existence of negligence in a particular case

not determined by reference to

and regulations. He thereby violated a

has been aptly stated in the leading case

the personal judgment of the

specific traffic regulation on right of way, by

of Picart v. Smith, thuswise:

actor in the situation before

virtue

of

which

he

was

immediately

presumed to be negligent.

The test by which to determine

the existence of negligence in a

The omissions of care on the part of the

particular case may be stated

van driver constituted negligence, which,

as follows: Did the defendant

according

in

to Layugan

v.

Intermediate

doing

the

alleged

him. The law considers what

would

be

reckless,

blameworthy, or negligent in
the

man

of

ordinary

intelligence

and

prudence

and determines liability by

Appellate Court, is "the omission to do

negligent

something which a reasonable man, guided

reasonable care and caution

by those considerations which ordinarily

which an ordinarily prudent

The question as to what

regulate the conduct of human affairs,

person would have used in

would constitute the conduct

would do, or the doing of something which

the same situation? If not,

of a prudent man in a given

a prudent and reasonable man would not

then

situation must of course be

do, or as Judge Cooley defines it, '(t)he

negligence. The law here in

always

failure to observe for the protection of the

effect

standard

light of human experience

interests of another person, that degree of

supposed to be supplied by the

and in view of the facts

care, precaution, and vigilance which the

imaginary

the

involved

circumstances justly demand, whereby

discreet paterfamilias of

the

case.

such other person suffers injury.'"

Roman law. The existence of

he

act

is

adopts

use

guilty

the

conduct

of

that

of

that.

determined

in

the

Abstract

in

the

particular
speculation

cannot here be of much value

this

tracks at a point not allowed for a motorist's

always

crossing despite being fully aware of the

the

necessary before negligence

grave harm to be thereby caused to his

are

can be held to exist. Stated in

passengers; and when he disregarded the

before them or known to

these

proper

foresight of harm to his passengers by

them. They are not, and are

criterion for determining the

overtaking the bus on the left side as to

not

be,

existence of negligence in a

leave himself blind to the approach of the

future.

given case is this: Conduct is

oncoming train that he knew was on the

Hence they can be expected

said to be negligent when a

opposite side of the bus.

to take care only when there

prudent man in the position

is something before them to

of the tortfeasor would have

suggest or warn of danger.

foreseen

Could a prudent man, in the

harmful

case

sufficiently

but this much can be profitably

suggestion

said: Reasonable men govern

prevision,

their

conduct

by

circumstances

which

supposed

omniscient

under

of

to
the

consideration,

born

of

is

terms,

the

that
to

an

another
probable

effect
was
to

foresee harm as a result of the

warrant his foregoing the

course actually pursued? If so,

conduct or guarding against

it was the duty of the actor to

its consequences. (Emphasis

take

supplied)

precautions

to

guard

against that harm. Reasonable

foresight of harm, followed
by

the

ignoring

of

the

SDHTEC

Unrelenting, the Pereas cite Phil. National

Railways

v.

Intermediate

Appellate

Court, where the Court held the PNR solely

liable for the damages caused to a
passenger bus and its passengers when its
train hit the rear end of the bus that was
then traversing the railroad crossing. But
the circumstances of that case and this one
share no similarities. In Philippine National

Pursuant to the Picart v. Smith test of

Railways

negligence, the Pereas' driver was entirely

Court, no evidence

negligent when he traversed the railroad

negligence was adduced against the owner

v.

Intermediate
of

Appellate
contributory

of the bus. Instead, it was the owner of the

or in the alternative, in respect to or arising

permanent

bus

of

out of the accident, and questions of fact

vehicles or pedestrians from crossing

extraordinary diligence by preponderant

and of law were common as to the

there. The RTC observed that the fact that

evidence. Also, the records are replete with

Zarates. Although the basis of the right to

a crossing guard had been assigned to

the showing of negligence on the part of

relief of the Zarates (i.e., breach of contract

man that point from 7 a.m. to 5 p.m. was a

both the Pereas and the PNR. Another

of carriage) against the Pereas was

good indicium that the PNR was aware of

distinction is that the passenger bus

distinct from the basis of the Zarates' right

the risks to others as well as the need to

in Philippine

National

to relief against the PNR (i.e., quasi-delict

control the vehicular and other traffic there.

Intermediate

Appellate

under

Verily, the Pereas and the PNR were joint

who

proved

the

exercise

Railways
Court

v.
was

Article

2176, Civil

Code),

they

traversing the dedicated railroad crossing

nonetheless could be held jointly and

when it was hit by the train, but the

severally liable by virtue of their respective

Pereas' school van traversed the railroad

negligence combining to cause the death

tracks at a point not intended for that

of Aaron. As to the PNR, the RTC rightly

purpose.

found the PNR also guilty of negligence

At any rate, the lower courts correctly held

both the Pereas and the PNR "jointly and
severally" liable for damages arising from
the death of Aaron. They had been
impleaded in the same complaint as
defendants against whom the Zarates had
the right to relief, whether jointly, severally,

safety

barriers

to

prevent

tortfeasors.
2.
Was the indemnity for loss of
Aaron's earning capacity proper?

despite the school van of the Pereas

The RTC awarded indemnity for loss of

traversing the railroad tracks at a point not

Aaron's

dedicated by the PNR as a railroad

agreeing with the RTC on the liability, the

crossing for pedestrians and motorists,

CA modified the amount. Both lower courts

because the PNR did not ensure the safety

took into consideration that Aaron, while

of others through the placing of crossbars,

only a high school student, had been

signal lights, warning signs, and other

enrolled in one of the reputable schools in

earning

capacity.

Although

the Philippines and that he had been a

the indemnity for victim Jussi Leino's loss

physician,

normal and able-bodied child prior to his

of earning capacity as a pilot for being

computation of Aaron's earning capacity

death. The basis for the computation of

speculative due to his having graduated

was premised on him being a lowly

Aaron's earning capacity was not what he

from high school at the International School

minimum wage earner despite his being

would have become or what he would have

in Manila only two years before the

then enrolled at a prestigious high school

wanted to be if not for his untimely death,

shooting, and was at the time of the

like Don Bosco in Makati, a fact that would

but the minimum wage in effect at the time

shooting only enrolled in the first semester

have likely ensured his success in his later

of

RTC's

at the Manila Aero Club to pursue his

years in life and at work.

computation of Aaron's life expectancy rate

ambition to become a professional pilot.

was not reckoned from his age of 15 years

That meant, according to the Court, that he

at the time of his death, but on 21 years,

was for all intents and purposes only a high

his age when he would have graduated

school graduate.

his

death.

Moreover,

the

from college.

account

by

the

lower

courts

to

be

reasonable and fully warranted.

First

of

all,

careful

perusal

of

the Teehankee, Jr. case shows that the

situation there of Jussi Leino was not akin
to that of Aaron here. The CA and the RTC

for loss of earning capacity was speculative

were not speculating that Aaron would be

and

some highly-paid professional, like a pilot

They

cited People

v.

Teehankee, Jr., where the Court deleted

(or,

for

that

lawyer).

Instead,

the

And, secondly, the fact that Aaron was then

without a history of earnings should not be
taken against his parents and in favor of
cost Aaron his life and his right to work and

Yet, the Pereas submit that the indemnity

unfounded.

the defendants whose negligence not only

We reject the Pereas' submission.

We find the considerations taken into

or

matter,

an

engineer,

earn money, but also deprived his parents

of their right to his presence and his
services as well. Our law itself states that
the loss of the earning capacity of the
deceased shall be the liability of the guilty
party in favor of the heirs of the deceased,
and shall in every case be assessed and
awarded by the court "unless the deceased

on account of permanent physical disability

could have finished the medical course and

Were the amounts of damages

not

defendant,

would have passed the medical board

excessive?

had no earning capacity at the time of his

examinations in due time, and that he could

The Pereas plead for the reduction of the

death." Accordingly, we emphatically hold

have possibly earned a modest income as

moral and exemplary damages awarded to

in favor of the indemnification for Aaron's

a medical practitioner. Also, in People v.

the Zarates in the respective amounts of

loss of earning capacity despite him having

Sanchez, the Court opined that murder and

P2,500,000.00 and P1,000,000.00 on the

been unemployed, because compensation

rape victim Eileen Sarmienta and murder

ground that such amounts were excessive.

of this nature is awarded not for loss of

victim Allan Gomez could have easily

time or earnings but for loss of the

landed

deceased's power or ability to earn money.

graduated in due time, and that their jobs

The moral damages of P2,500,000.00 were

would probably pay them high monthly

really just and reasonable under the

salaries from P10,000.00 to P15,000.00

established circumstances of this case

upon

earning

because they were intended by the law to

capacities were computed at rates higher

assuage the Zarates' deep mental anguish

than the minimum wage at the time of their

over their son's unexpected and violent

deaths due to their being already senior

death, and their moral shock over the

agriculture students of the University of the

senseless accident. That amount would not

Philippines in Los Baos, the country's

be too much, considering that it would help

leading

the Zarates obtain the means, diversions or

caused

by

the

This favorable treatment of the Zarates'

claim is not unprecedented. In Cariaga v.
Laguna Tayabas Bus Company and Manila
Railroad Company, fourth-year medical
student

Edgardo

Carriaga's

earning

capacity, although he survived the accident

but his injuries rendered him permanently
incapacitated, was computed to be that of
the physician that he dreamed to become.
The Court considered his scholastic record
sufficient to justify the assumption that he

good-paying

their

jobs

graduation.

educational

had

Their

institution

they

in

The plea is unwarranted.

amusements that would alleviate their

agriculture.
3.

suffering for the loss of their child. At any

rate, reducing the amount as excessive

WHEREFORE, we DENY the petition for

THE HEIRS OF SABINIANO

might prove to be an injustice, given the

review on certiorari; AFFIRM the decision

INGUITO, FELIPE PUSA,

passage of a long time from when their

promulgated

ABUNDIO GALON, ISIDRO

mental anguish was inflicted on them on

and ORDER the petitioners to pay the

CELETARIA, GILBERT

August 22, 1996.

costs of suit. SO ORDERED.

GONZAGA, HENRY

Anent

the

P1,000,000.00

allowed

on

November

13,

CABIGAS, RAFAEL

as

exemplary damages, we should not reduce

the amount if only to render effective the

MACAIRAN, ROGELIO
[G.R. No. 141716. July 4, 2002.]

desired example for the public good. As a

SAN MIGUEL CORPORATI

common carrier, the Pereas needed to be

ON, petitioner, vs. HEIRS O

vigorously reminded to observe their duty

F SABINIANO INGUITO,

to

and JULIUS

exercise

extraordinary

diligence

2002;

to

prevent a similarly senseless accident from

OUANO, respondents.

happening again. Only by an award of

exemplary damages in that amount would
suffice to instill in them and others similarly
situated like them the ever-present need for
greater and constant vigilance in the
conduct of a business imbued with public
interest.

[G.R. No. 142025. July 4, 2002.]

JULIUS C.

MORENO, PETER
ABAYON, SIMEON
ASENTISTA, NORMAN
LOON, EUGENIO
GESTOPA, CHRISTOPHER
SAVELLON, GEORGE
BASILGO, RAMIL PABAYO,
FLAVIANO WABENA,
NESTOR
GESTOPA, respondents.

OUANO, petitioner, vs. THE

COURT OF APPEALS, SAN

DECISION

MIGUEL CORPORATION
and

YNARES-SANTIAGO, J :
p

San Miguel Corporation entered into a

the accurate or approximate

function, CHARTERER shall

Time Charter Party Agreement with Julius

description of the particulars

immediately notify

Ouano, doing business under the name

and capacities of the vessel

OWNER of this fact;

and style J. Ouano Marine Services. Under

and her equipment:

the terms of the agreement, SMC chartered

the M/V Doa Roberta owned by Julius

xxx xxx xxx.

xxx xxx xxx.

9. There shall be no employer-

Ouano for a period of two years, from June

2. That for and in

employee relations between the

1, 1989 to May 31, 1991, for the purpose of

consideration of the premises

OWNER and/or its vessel's

transporting SMC's beverage products

hereinafter stipulated, the

crew on one hand and the

from its Mandaue City plant to various

OWNER hereby lets, demises

CHARTERER on the other. The

points in Visayas and Mindanao. Pertinent

and the CHARTERER hereby

crew of the vessel shall

portions of the Time Charter Party

hires the use and service ofthe

continue to be under the

Agreement state:

aforementioned vessel;

employ, control and

1. OWNER [i.e., Ouano]

xxx xxx xxx

warrants ownership, title and

4. OWNER warrants that the

interest over the vessel DOA

vessel is seaworthy and in

ROBERTA and represents that

proper, useful and operational

on the date the vessel is placed

condition and in the event that

at CHARTERER's

CHARTERER finds any defect

[i.e., San Miguel Corporation]

in the vessel with regards to its

disposal the following shall be

working order, condition and

supervision of the OWNER.

Consequently, damage or loss
that may be attributable to the
crew, including loss of the
vessel used shall continue to
be the responsibility of, and
shall be borne, by the OWNER;
the OWNER further covenants

to hold the CHARTERER free

11. The OWNER shall be

bottles were never opened after

from all claims and liabilities

responsible to and shall

it left the Plant;

arising out of the acts of the

indemnify the CHARTERER for

crew and the condition of the

damages and losses arising

vessel;

from the incompetence and/or

10. The OWNER shall

undertake to pay all
compensation of all the vessel's
crew, including the benefits,
premia and protection in
accordance with the
provisions of the New Labor
Code and other applicable laws
and decrees and the rules and
regulations promulgated by
competent authorities as well
as all of the SSS premium.
Thus, it is understood that the
crew of the vessel shall and
always remain the
employees of the OWNER;

negligence of, and/or the failure

to observe the required extraordinary diligence by the crew.
It shall be automatically liable to
the CHARTERER for short

xxx xxx xxx.

On November 11, 1990, during the

term of the charter, SMC issued sailing
orders to the Master of the M/V Doa
Roberta, Captain Sabiniano Inguito,
instructing him as follows:
1. Sail for Opol, Cagayan

landed shipment and wrong

0500H Nov. 12, 1990, or

levels, the value of which shall

as soon as

be withheld from the OWNER's

loading of FGS is

collectibles with the

completed, with load:

CHARTERER. However, in the

case of wrong levels,
CHARTERER shall immediately

SEE BILL OF LADING

2. You are expected to arrive

reimburse OWNER after the

Opol 0900H Nov. 13,

former's laboratory shall be

1990.

able to determine that the

3. You are expected to depart

Opol 0900H Nov. 14,

1990, or as soon as

BON VOYAGE AND GOOD

At 7:00 a.m., November 12, 1990, one hour

loading of empties is

LUCK.

after the M/V Doa Roberta departed from

completed, back to
Mandaue.
4. You are expected to arrive

In accordance with the sailing orders,

Captain Inguito obtained the necessary
sailing clearance from the Philippine Coast

Mandaue 1300H Nov.

Guard. Loading of the cargo on the

15, 1990.

M/V Doa Roberta was completed at 8:30

5. In case you need cash

advance, send your
request thru radio
addressed to us for
needed authority.
6. Maintain communications
and keep us
posted of your
developments.
7. Observe weather condition,

p.m. of November 11, 1990. However, the

vessel did not leave Mandaue City until
6:00 a.m. of the following day, November
12, 1990.
Meanwhile, at 4:00 a.m. of November 12,
1990, typhoon Ruping was spotted 570
kilometers east-southeast of Borongan,
Samar, moving west-northwest at 22
kilometers per hour in the general
direction of Eastern Visayas. The typhoon
had maximum sustained winds of 240

exercise utmost

kilometers per hour near the center with

precautionary measures.

gustiness of up to 280 kilometers per hour.

Mandaue City and while it was abeam

Cawit Island off Cebu, SMC Radio
Operator Rogelio P. Moreno contacted
Captain Inguito through the radio and
advised him to take shelter. Captain Inguito
replied that they will proceed since the
typhoon was far away from them, and that
the winds were in their favor.
At 2:00 p.m., while the vessel was two
kilometers abeam Boljoon Point, Moreno
again communicated with Captain Inguito
and advised him to take shelter. The
captain responded that they can
manage. Hearing this, Moreno immediately
tried to get in touch with Rico Ouano to tell
him that Captain Inguito did not heed their
advice. However, Rico Ouano was
out of his office, so Moreno left the
message with the secretary.

Moreno again contacted Captain Inguito at

Roberta but he failed to get in touch with

At 2:30 a.m. of November 13, 1990, the

4:00 p.m. of November 12, 1990. By then

anyone in the vessel.

M/V Doa Roberta sank. Out of the 25

the vessel was already 9.5 miles

southeast of Balicasag Island heading
towards Sulauan Point. The sky was cloudy
with south westerly winds and the sea was
choppy. Moreno reiterated the advice and
pointed out that it will be difficult to take
shelter after passing Balicasag Island

At 1:15 a.m., November 13, 1990, Captain

Inguito called Moreno over the radio and
requested him to contact Rico Ouano,
son of Julius Ouano, because they needed

officers and crew on board the vessel, only

five survived, namely, Fernando Bucod,
Rafael Macairan, Chenito Sugabo, Ramil
Pabayo and Gilbert Gonzaga.

a helicopter to rescue them. The vessel

On November 24, 1990, shipowner Julius

was about 20 miles west of Sulauan Point.

Ouano, in lieu of the captain who perished

in the sea tragedy, filed a Marine Protest.

because they were approaching an open

Upon being told by SMC's radio operator,

sea. Still, the captain refused to heed his

Rico Ouano turned on his radio and read

The heirs of the deceased captain and

advice.

the distress signal from Captain Ingiuto.

crew, as well as the survivors, of the ill-

When he talked to the captain, the latter

fated M/V Doa Roberta filed a complaint

requested for a helicopter to rescue

for tort against San Miguel Corporation and

them. Rico Ouano talked to the Chief

Julius Ouano, docketed as Civil Case No.

Engineer who informed him that they can

2472-L of the Regional Trial Court of Lapu-

no longer stop the water from coming into

Lapu City, Branch 27.

At 8:00 p.m., the vessel was 38 miles

southeast of Balicasag Island. Westsouthwest winds were prevailing. At 10:00
p.m., the M/V Doa Roberta was 25 miles
approaching Sulauan Point. Moments later,
power went out in Moreno's office and
resumed at 11:40 p.m. He immediately
made a series of calls to the M/V Doa

the vessel because the crew members

were feeling dizzy from the petroleum
fumes.

Julius Ouano filed an answer with crossclaim, alleging that the proximate
cause of the loss of the vessel and its
officers and crew was the fault and

negligence of SMC, which had complete

members. SMC interposed counterclaims

height of super typhoon

control and disposal of the vessel as

against Ouano for the value of the cargo

"Ruping" and as such said

charterer and which issued the sailing

lost in the sea tragedy.

defendant is hereby ordered

order for its departure despite being

forewarned of the impending typhoon.
Thus, he prayed that SMC indemnify him
for the cost of the vessel and the
unrealized rentals and earnings thereof.
In its answer to the complaint and answer
to the cross-claim, SMC countered that it
was Ouano who had the control,
supervision and responsibilities over the

After trial, the court a quo rendered

judgment finding that the proximate
cause of the loss of the M/V Doa Roberta
was attributable to SMC. Thus, it
disposed of the case as follows:
WHEREFORE, PREMISES
CONSIDERED, judgment is
hereby rendered:

navigation of the vessel. This

1. Declaring

notwithstanding, and despite his

defendant San Miguel Corporati

knowledge of the incoming typhoon, Ouano

on and its acts or omissions as

never bothered to initiate contact with his

having produced the proximate

vessel. Contrary to his allegation, SMC

cause which resulted in the

argued that the proximate cause of the

death of the crew

sinking was Ouano's breach of his

members of M/V Doa Roberta

obligation to provide SMC with a seaworthy

at past midnight of November

vessel duly manned by competent crew

12, 1990 during the

and sentenced to pay to

the heirs of the deceased crew
members the following sum[s]
plus 12% per annum from the
filing of the Complaint:
A. For loss of life . . .
P50,000.00 each of the
deceased crew
members,
namely: Sabiniano Inguit
o, Felipe Pusa, Abundio
Galon, Isidro Celetaria,
Henry Cabigas, Pedro
Abayon, Simeon
Asentista, Norman Loon,
Leonardo Presbitero,
Renato Suscano,
Antonio Du, George

Basilgo, Isagani

3. Galon, Abundio P

9. Presbitero, Leonardo P

Dayondon;

825,000 (50% x

460,000 (50% x P

P1,650,000)

920,000)

based on life expectancy

4. Celetaria, Isidro P

10. Suscano, Renato P

less 50% representing

600,000 (50% x

460,000 (50% x P

estimated living

P1,200,000)

920,000)

5. Cabigas, Henry P

11. Du, Antonio P 480,000

930,000 (50% x

(50% x P 960,000)

B. For loss of earnings

expenses except for the

apprentices as they were
presumed at the
time of their deaths to be

P1,860,000)

dependent on their

6. Abayon, Pedro P

parents:

660,000 (50% x

Name Total
loss of earnings
1. Sabiniano,
Inguito (sic) P1,740,000
(50% x P3,480,000)
2. Pusa, Felipe P1,200,000
(50% x P2,400,000)

P1,320,000)
7. Asentista, Simeon P
500,000 (50% x
P1,000,000)

12. Basilgo, George P

120,000 (Apprentice)
13. Dayondon, Isagani P
120,000 (Ditto)

8. Loon, Norman P

550,000 (50% x

P1,100,000)

in the

less 50% for operating

sum of P500,000.00;

expenses and taxes)

Total: P8,645,000
C. P300,000.00 for
moral damages and
P200,000.00 for
exemplary damages for
the heirs of each of the
deceased crew
members of the

2. Under the crossclaim of defendant,

Ouano, San Miguel Corporation
is further ordered and

to May 31, 1991 as

stipulated in the Charter
Party Agreement;

sentenced to pay defendant

3) P21,000,000.00 for

cross-claimant Engr. Julius C.

unrealized

Ouano the total

earnings of M/V Doa

sum of P32,893,300.00 plus

Roberta based on the

12% per annum from the

expected additional

filing of his crossclaim, broken

lifetime of the vessel

down as follows:

estimated at seven (7)

M/V Doa Roberta

1) P9.8 million for the

named in the Amended

value of the total

Complaint including

loss of the vessel

survivor Gilbert

M/V Doa Roberta;

Gonzaga;

from November 19, 1990

2) P1,833,300.00 for

D. To pay plaintiffs'

unrealized rental

counsel attorney's fees

earnings (P3,666,600.00

years (42,000,000.00
less 50% for operating
expenses and taxes);
4) P250,000.00 for and
as attorney's fees and
P10,000.00 as
expenses of litigation;

3. The counter-claims against

On December 10, 1998, the

crew of M/V Doa

plaintiffs and the cross-

Court of Appeals rendered the decision

Roberta.

claim of defendant San Miguel

subject of the instant petitions for review, to

Corporation against defendant

wit:

Engr. Julius C. Ouano are

hereby dismissed for
lack of merit.

each of the deceased

WHEREFORE, judgment is

officers and crew, in the

hereby rendered, modifying the

amount awarded by the

decision appealed from,

trial court.

With costs against

declaring defendant-

defendant San Miguel Corporati

appellants San Miguel Corporat

on. SO ORDERED.

ion and Julian C. Ouano jointly

Both SMC and Ouano appealed to the

Court of Appeals, docketed as CA-G.R. CV
No. 48296. SMC argued that as mere
charterer, it did not have control of the
vessel and that the proximate cause of the
loss of the vessel and its cargo was the

b. Loss of earning; for

and severally liable to plaintiffsappellees, except to

the heirs of Capt. Sabiniano Ing
uito, for the following reduced
amounts:
a. P50,000.00 death indemnity

negligence of the ship captain. For his part,

(loss of life) for

Ouano complained of the reduced

each of the deceased

damages awarded to him by the trial court.

officers and

c. P100,000.00 moral damages

and P50,000.00
exemplary damages for
each deceased officer
and crew members,
including Gilbert
Gonzaga.
d. P300,000.00 attorney's fees
to plaintiffs-appellees.
e. The counterclaims of defendantsappellants against

plaintiffs-appellees are

THE UNDISPUTED FACT

THE PROXIMATE

dismissed.

THAT:

CAUSE OF THE

f. The cross-

A. SMC HAS NO LEGAL OR

claims of defendants-

CONTRACTUAL DUTY

appellants SMC and

TO INFORM OUANO

Julius Ouano against

ABOUT THE

each other are likewise

SITUATION OF THE

dismissed.

VESSEL.

g. Costs against defendants-

B. EVEN WITHOUT SUCH

appellants. SO

DUTY, SMC

ORDERED.

NEVERTHELESS

SMC and Ouano filed separate motions for

reconsideration, which were denied by the
Court of Appeals for lack of merit.
Petitioner SMC, in G.R. No. 141716, raises
the following arguments:
I.
SMC COULD NOT BE A
TORTFEASOR CONSIDERING

LOSS OF THE VESSEL

WAS INGUITO'S
FAILURE TO HEED
SMC'S ADVICE TO
TAKE SHELTER, AND
INGUITO WAS AN
EMPLOYEE OF OUANO
AND NOT OF SMC.
II.

EXERCISED THE

UNDER THE CHARTER,

NECESSARY

OUANO WAS RESPONSIBLE

DEGREE OF PRUDENC

AND UNDERTOOK TO

E BY INFORMING

INDEMNIFY SMC FOR ALL

OUANO ABOUT

DAMAGES ARISING FROM

INGUITO'S REFUSAL

THE NEGLIGENCE OF HIS

TO TAKE SHELTER.

CREW, PARTICULARLY

C. THE COURT OF APPEALS

ITSELF FOUND THAT

INGUITO.

Meanwhile, petitioner Ouano, in G.R. No.

master of the ill-fated M/V Doa

actions of SMC constituted the

142025, anchors his petition on the

Roberta, was legally and in fact

proximate cause of the sinking

following assignment of errors:

an agent/servant of SMC

and loss of the vessel and the

demise charterer as correctly

death of most of its crew

characterized by the Trial Court

members

First Error
The Court of Appeals

Third Error

Fourth Error

and/or grave

The Court of Appeals

The Court of Appeals

abuse of discretion in not

committed serious error of law

committed serious error of law

finding that the Charter Party

and/or grave

and/or grave

between SMC and Ouano is

abuse of discretion in

abuse of discretion in finding

legally and in fact a demise

completely disregarding or

Ouano at fault in the

charter, an issue raised by

suppressing the

sinking of M/V Doa Roberta

petitioner from the very start in

findings of fact of the Trial Court

against the evidence on record

the Trial Court

on the issues of possession

which is largely undisputed

committed serious error of law

Second Error
The Court of Appeals
committed serious error of law
and/or grave
abuse of discretion in not
finding that Capt. Inguito,

and control of M/V Doa

Roberta by SMC and its actions
relating thereto as demise
charterer/owner pro hac
vice which led to the tragedy
and in not declaring that said

Fifth Error
The Court of Appeals
committed serious error of law
and/or grave
abuse of discretion insofar as it
failed to find and declare

respondent SMC's tort or

claims of private

for the transportation of goods or persons

negligence as the proximate

respondents heirs of Sabiniano

from one port to another.

cause which resulted in the

Inguito, et al. and SMC under

sinking and total

the well-established principle in

loss of M/V Doa Roberta as

Maritime Law that the owner's

well as the death of its officers

liability sinks with the vessel.

and crew members and

correspondingly in not awarding
to petitioner Ouano the
sums of money as awarded by
the Trial Court in the dispositive

The two petitions were consolidated.

In deciding the cases at bar, the
Court of Appeals correctly resolved the
issues with an initial discussion of the

A charter party may either be a (1)

bareboat or demise charter or (2)
contract of affreightment. Under a demise
or bareboat charter, the charterer mans the
vessel with his own people and becomes,
in effect, the owner of the ship for the
voyage or service stipulated, subject to
liability for damages caused by negligence.

definition and kinds of charter parties.

In a contract of affreightment, on the other

Preliminarily, a charter party is a contract

hand, the owner of the vessel leases part

by virtue of which the owner or the

or all of its space to haul goods for others.

agent of a vessel binds himself to transport

It is a contract for special service to be

In any event, the

merchandise or persons for a fixed price. It

rendered by the owner of the vessel. Under

Court of Appeals committed

has also been defined as a contract by

such contract the ship owner retains the

serious error of law and/or

virtue of which the owner or the

possession, command and

grave abuse of discretion in not

agent of the vessel leases for a certain

navigation of the ship, the charterer or

declaring and holding petitioner

price the whole or a portion of the vessel

freighter merely having use of the space in

part of its decision dated 10

December 1998.
Sixth Error

Ouano not liable for the

the vessel in return for his payment of the

charter hire. Otherwise put, a

If the charter is a contract of affreightment,

crew of the vessel shall

contract of affreightment is one by which

which leaves the general owner in

continue to be under the

the owner of a ship or other vessel lets the

possession of the ship as owner for the

employ, control and

whole or part of her to a merchant or other

voyage, the rights and the

supervision of the OWNER.

person for the conveyance of goods, on a

responsibilities of ownership rest on the

Consequently, damage or loss

particular voyage, in consideration of the

owner. The charterer is free from liability to

that may be attributable to the

payment of freight.

third persons in respect of the ship.

crew, including loss of the

A contract of affreightment may be either

We concur with the findings of the

time charter, wherein the leased vessel is

Court of Appeals that the charter party in

leased to the charterer for a fixed

these cases was a

period of time, or voyage charter, wherein

contract of affreightment, contrary to

the ship is leased for a single voyage. In

petitioner Ouano's protestation that it was a

both cases, the charterer provides for the

demise charter, as shown by the following

hire of the vessel only, either for a

stipulations in the Time Charter Party

determinate period of time or for a single or

Agreement:

consecutive voyage, the ship owner to

supply the ship's store, pay for the
wages of the master of the crew, and
defray the expenses for the
maintenance of the ship.

9. There shall be no employeremployee relations between the

OWNER and/or its vessel's
crew on one hand and the
CHARTERER on the other. The

vessel used shall continue to

be the responsibility of, and
shall be borne, by the OWNER;
the OWNER further covenants
to hold the CHARTERER free
from all claims and liabilities
arising out of the acts of the
crew and the condition of the
vessel;
10. The OWNER shall
undertake to pay all
compensation of all the vessel's
crew, including the benefits,
premia and protection in

accordance with the

short landed shipment and

Under the foregoing definitions, as well as

provisions of the New Labor

wrong levels, the value of which

the clear terms of the Charter Party

Code and other applicable laws

shall be withheld from the

Agreement between the parties, the

and decrees and the rules and

OWNER's collectibles with the

charterer, SMC, should be free from liability

regulations promulgated by

CHARTERER. However, in the

for any loss or damage sustained during

competent authorities as well

case of wrong levels,

the voyage, unless it be shown that the

as all of the SSS premium.

CHARTERER shall immediately

same was due to its fault or negligence.

Thus, it is understood that the

reimburse OWNER after the

crew of the vessel shall and

former's laboratory shall be

always remain the

able to determine that the

employees of the OWNER;

bottles were never opened after

11. The OWNER shall be

it left the Plant;

The evidence does not show that SMC or

its employees were amiss in their duties.
The facts indubitably establish that SMC's
Radio Operator, Rogelio P. Moreno, who
was tasked to monitor every shipment of its

responsible to and shall

It appearing that Ouano was the

cargo, contacted Captain Inguito as early

indemnify the CHARTERER for

employer of the captain and crew of the

as 7:00 a.m., one hour after the M/V Doa

damages and losses arising

M/V Doa Roberta during the term of the

Roberta departed from Mandaue, and

from the incompetence and/or

charter, he therefore had command and

advised him to take shelter from

negligence of, and/or the failure

control over the vessel. His son, Rico

typhoon Ruping. This advice was reiterated

to observe the required

Ouano, even testified that during the period

at 2:00 p.m. At that point, Moreno

extraordinary diligence by the

that the vessel was under charter to SMC,

thought of calling Ouano's son, Rico, but

crew. It shall be automatically

the Captain thereof had control of the

failed to find him. At 4:00 p.m., Moreno

liable to the CHARTERER for

navigationof all voyages.

again advised Captain Inguito to take

shelter and stressed the

specifically, Ouano expressly warranted in

cause of the sinking of the vessel was the

danger of venturing into the open sea. The

the Time Charter Party that his vessel was

negligence of Captain Sabiniano Inguito,

Captain insisted that he can handle the

seaworthy.

thus:

situation.

For a vessel to be seaworthy, it must be

It appears that the proximate

That evening, Moreno tried in vain to

adequately equipped for the voyage and

cause of the sinking of the

contact the captain. Later at 1:15 a.m.,

manned with a sufficient

vessel was the gross

Captain Inguito himself radioed a distress

number of competent officers and

failure of the captain of the

signal and asked that the same be relayed

crew. Seaworthiness is defined as the

vessel to observe due care and

to Rico Ouano.

sufficiency of the vessel in materials,

to heed SMC's advices to take

construction, equipment, officers, men, and

shelter. Gilbert Gonsaga, Chief

outfit, for the trade or service in which it is

Engineer of Doa Roberta,

employed. It includes the fitness of a ship

testified that the ship sank at

for a particular voyage with reference to its

2:30 in the early

physical and mechanical condition, the

morning of November 13th. On

extent of its fuel and provisions supply, the

the other hand, from the time

quality of its officers and crew, and its

the vessel left the

adaptability for the time of voyage

port of Mandaue at six o'clock

proposed.

in the morning, Exh "15 SMC",

In contrast to the care exercised by

Moreno, Rico Ouano tried to communicate
with the captain only after receiving the
S.O.S. message. Neither Ouano nor his
son was available during the entire time
that the vessel set out and encountered
foul weather. Considering that the charter
was a contract of affreightment, the
shipowner had the clear duty to ensure the
safe carriage and arrival of goods

In the assailed decision, the

transported on board its vessels. More

Court of Appeals found that the proximate

Exh "16 SMC", Exh "17 SMC"

and Exh "18 SMC" would show
that Captain SabinianoInguito

was able to contact the radio

instead, proceeded with the

But he waited until the vessel

operator of SMC. He was fully

voyage.

was already in distress at 1:15

apprised of typhoon "Ruping"

and its strength. Due diligence
dictates that at any time before
the vessel was in distress, he
should have taken shelter in
order to safeguard the vessel
and its crew. Gonsaga testified
that at 7:00 a.m. of November
12, 1990, he was able to talk to
the captain and inquired from
him what the message
was of the radio
operator of SMC. The captain
answered that they would take
shelter in Tagbilaran if the wind
would grow stronger. But
Gonsaga was surprised when
they did not take shelter and,

Gonsaga further testified that at

7:00 in the
evening of November 12, 1990,
he went up to the office of the
captain when the wind was
getting stronger and asked him,
"What is this captain, the wind
is already very strong and the
waves are very big, what is the
message of SMC?" The captain
plotted the position of the
typhoon and said that the
typhoon is still very far per the
data supplied by SMC.
It is very clear that
Captain Sabiniano Inguito had
sufficient time within which to
secure his men and the vessel.

in the early
morning of November 13m,
1990 to seek help in saving his
men and the vessel. In any
event, Capt. Inguito had full
control and responsibility,
whether to follow a sailing order
or to take shelter when already
at sea. In fact, there was an
incident when a sailing order
was issued by SMC to Inguito
but he decided not to proceed
with the voyage because of a
tropical storm.

The foregoing factual conclusions are

binding on us. Settled is the rule that
findings of fact of the Court of Appeals are
conclusive and are not reviewable by this
Court, unless the case falls under

any of the recognized exceptions, such as:

findings of fact of the Court of Appeals are

Ouano miserably failed to overcome the

(1) when the conclusion is a finding

premised on the supposed

presumption of his negligence. He failed to

grounded entirely on speculation, surmises

absence of evidence and contradicted by

present proof that he exercised the due

and conjectures; (2) when the inference

the evidence on record. None of these

diligence of a bonus paterfamilias in the

made is manifestly mistaken, absurd or

exceptions obtain in the case at bar.

selection and supervision of the

impossible; (3) where there is a grave

abuse of discretion; (4) when the judgment
is based on a misapprehension of facts; (5)
when the findings of fact are conflicting; (6)
when the Court of Appeals, in making its
findings, went beyond the issues of the
case and the same is contrary to the
admissions of both appellant and appellee;
(7) when the findings are contrary to
those of the trial court; (8) when the
findings of fact are conclusions without
citation of specific evidence on which they
are based; (9) when the facts set forth in
the petition as well as in the petitioners'
main and reply briefs are not disputed by
the respondents; and (10) when the

We likewise agree with the

Court of Appeals that Ouano is vicariously
liable for the negligent acts of his
employee, Captain Inguito. Under Articles
2176 and 2180 of the Civil Code, owners

captain of the M/V Doa Roberta. Hence,

he is vicariously liable for the loss of lives
and property occasioned by the
lack of care and negligence of his
employee.

and managers are responsible for

However, we cannot sustain the appellate

damages caused by the negligence of a

court's finding that SMC was likewise liable

servant or an employee, the master or

for the losses. The contention that it was

employer is presumed to be negligent

the issuance of the sailing order by SMC

either in the selection or in the

which was the proximate cause of the

supervision of that employee. This

sinking is untenable. The fact that there

presumption may be overcome only by

was an approaching typhoon is of no

satisfactorily showing that the employer

moment. It appears that on one previous

exercised the care and the diligence of a

occasion, SMC issued a sailing order to the

good father of a family in the selection and

captain of the M/V Doa Roberta, but the

the supervision of its employee.

vessel cancelled its voyage due to

typhoon. Likewise, it appears from the

crew of the M/V Doa Roberta, except

PLANTERS PRODUCTS,

records that SMC issued the sailing order

Captain Sabiniano Inguito, death indemnity

INC., petitioner, vs. COURT

on November 11, 1990, before typhoon

in the amount of P50,000.00 and damages

OF APPEALS,

"Ruping" was first spotted at 4:00

for loss of earnings in the amounts

SORIAMONT STEAMSHIP

a.m. of November 12, 1990.

awarded by the trial court. Further, Julius

AGENCIES AND KYOSEI

C. Ouano is ordered to pay each deceased

KISEN KABUSHIKI

officer and crew members, except

KAISHA,respondents..

Consequently, Ouano should answer for

the loss of lives and damages suffered by
the heirs of the officers and crew members
who perished on board the M/V Doa
Roberta, except Captain Sabiniano Inguito.
The award of damages granted by the
Court of Appeals is affirmed only against
Ouano, who should also indemnify SMC for
the cost of the lost cargo, in the total
amount of P10,278,542.40.

Captain Sabiniano Inguito, including Gilbert

Gonzaga, P100,000.00 as moral damages,
P50,000.00 as exemplary damages and
P300,000.00 as attorney's fees. Finally,
Julius C. Ouano is ordered to

each of the deceased officers and

Does a charter-party between a shipowner

sums of P10,278,542.40 as actual

and a charterer transform a common

damages. SO ORDERED.

carrier into a private one as to negate the

civil law presumption of negligence in case
of loss or damage to its cargo?

decision of the Court of Appeals in CAfollows: Julius C. Ouano is ordered to pay

BELLOSILLO, J :

pay San Miguel Corporation the

WHEREFORE, in view of the foregoing, the

G.R. CV No. 48296 is MODIFIED as

DECISION

[G.R. No. 101503. September 15, 1993.]

Planters Products, Inc. (PPI), purchased

from Mitsubishi International Corporation
(MITSUBISHI) of New York, U.S.A.,
9,329.7069 metric tons (M/T) of Urea 46%

fertilizer which the latter shipped in bulk on

20th, 21st and 27th of May 1974,

clean for use in bulk to the

16 June 1974 aboard the cargo vessel

respectively.

satisfaction of the inspector

M/V "Sun Plum" owned by private

respondent Kyosei Kisen Kabushiki Kaisha
(KKKK) from Kenai, Alaska, U.S.A., to Poro
Point, San Fernando, La Union,
Philippines, as evidenced by Bill of Lading
No. KP-1 signed by the master of the
vessel and issued on the date of departure.
On 17 May 1974, or prior to its voyage, a
time charter-party on the vessel M/V "Sun
Plum" pursuant to the Uniform General
Charter 2 was entered into between
Mitsubishi as shipper/charterer and KKKK
as shipowner, in Tokyo, Japan. 3 Riders to
the aforesaid charter-party starting from
par. 16 to 40 were attached to the preprinted agreement. Addenda Nos. 1, 2, 3
and 4 to the charter-party were also
subsequently entered into on the 18th,

Before loading the fertilizer aboard the

vessel, four (4) of her holds were all
presumably inspected by the charterer's

before daytime
commences" (emphasis
supplied).

representative and found fit to take a

After the Urea fertilizer was loaded in bulk

load of urea in bulk pursuant to par.

by stevedores hired by and under the

16 of the charter-party which reads:

supervision of the shipper, the steel

"16. . . . At loading port,

notice of readiness to be
accomplished by certificate
from National Cargo Bureau
inspector or substitute

hatches were closed with heavy iron lids,

covered with three (3) layers of tarpaulin,
then tied with steel bonds. The hatches
remained closed and tightly sealed
throughout the entire voyage.

appointed by charterers for his

Upon arrival of the vessel at her port of call

account certifying the vessel's

on 3 July 1974, the steel pontoon hatches

readiness to receive cargo

were opened with the use of the vessel's

spaces. The vessel's hold to be

boom. Petitioner unloaded the cargo from

properly swept, cleaned and

the holds into its steel-bodied dump trucks

dried at the vessel's expense

which were parked alongside the berth,

and the vessel to be presented

using metal scoops attached to the ship,

pursuant to the terms and conditions of the

opening at the front where the dump trucks

results were contained in a

charter-party (which provided for an

entered and unloaded the fertilizer on the

Certificate of Shortage/Damaged Cargo

F.I.O.S. clause). The hatches remained

warehouse floor. Tarpaulins and GI sheets

dated 18 July 1974 prepared by PPI

open throughout the duration of the

were placed in-between and alongside the

which showed that the cargo delivered

discharge.

trucks to contain spillages of the fertilizer.

was indeed short of 94.839 M/T and

Each time a dump truck was filled up, its

It took eleven (11) days for PPI to

about 23 M/T were rendered unfit for

commerce, having been polluted with

load of Urea was covered with tarpaulin

unload the cargo, from 5 July to 18 July

before it was transported to the

1974 (except July 12th, 14th and

consignee's warehouse located some fifty

18th). A private marine and cargo

Consequently, PPI sent a claim letter dated

(50) meters from the wharf. Midway to the

surveyor, Cargo Superintendents

18 December 1974 to Soriamont

warehouse, the trucks were made to pass

Company Inc. (CSCI), was hired by PPI

Steamship Agencies (SSA), the resident

through a weighing scale where they were

to determine the "outturn" of the cargo

agent of the carrier, KKKK, for P245,969.31

individually weighed for the purpose of

shipped, by taking draft readings of the

representing the cost of the alleged

ascertaining the net weight of the cargo.

vessel prior to and after discharge. The

shortage in the goods shipped and the

The port area was windy, certain

survey report submitted by CSCI to the

diminution in value of that portion said to

portions of the route to the warehouse were

consignee (PPI) dated 19 July 1974

have been contaminated with dirt.

sandy and the weather was variable,

revealed a shortage in the

Respondent SSA explained that they were

raining occasionally while the discharge

cargo of 106.726 M/T and that a

not able to respond to the consignee's

was in progress. The petitioner's

portion of the Urea fertilizer

claim for payment because, according to

warehouse was made of corrugated

approximating 18 M/T was

them, what they received was just a

galvanized iron (GI) sheets, with an

contaminated with dirt. The same

request for shortlanded certificate and not

sand, rust and dirt.

a formal claim, and that this "request" was

recover for loss or damage is to

loading, stowing, trimming and

denied by them because they "had nothing

show receipt by the

discharge of the cargo. This

to do with the discharge of the shipment."

carrier of the goods and

they failed to do. By this

Hence, on 18 July 1975, PPI filed an action

delivery by it of less than what

omission, coupled with their

for damages with the Court of First

it received. After that, the

failure to destroy the

Instance of Manila. The defendant carrier

burden of proving that the loss

presumption of negligence

argued that the strict public policy

or damage was due to

against them, the defendants

governing common carriers does not apply

any of the causes which

are liable" (italics supplied).

to them because they have become private

exempt him from liability is

carriers by reason of the provisions of the

shifted to the carrier, common

charter-party. The court a quo however

or private he may be. Even if

sustained the claim of the plaintiff against

the provisions of the charter-

the defendant carrier for the value of the

party aforequoted are deemed

goods lost or damaged when it ruled thus:

valid, and the defendants

". . . Prescinding from the

provision of the law that a
common carrier is presumed
negligent in case of loss or
damage of the goods it
contracts to transport, all that a
shipper has to do in a suit to

considered private carriers, it

was still incumbent upon them
to prove that the shortage or
contamination sustained by the
cargo is attributable to the fault
or negligence on the part of the
shipper or consignee in the

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

forth a presumption of negligence do not

citing Belen v. Belen, 13 Phil.

Petitioner PPI appeals to us by way of a

find application in the case at bar. Thus

202).

petition for review assailing the

". . . In the absence of such

"But, the record shows that the

presumption, it was incumbent

plaintiff-appellee dismally failed

upon the plaintif-appellee to

to prove the basis of its

adduce sufficient evidence to

cause of action, i.e., the alleged

prove the negligence of the

negligence of defendant carrier.

defendant carrier as alleged in

It appears that the plaintiff was

its complaint. It is an old and

under the impression that it did

well settled rule that if the

not have to establish

plaintiff, upon whom rests the

defendant's negligence. Be that

burden of proving his

as it may, contrary to the

cause of action, fails to show in

trial court's finding, the

a satisfactory manner the facts

record ofthe instant case

upon which he bases his claim,

discloses ample evidence

the defendant is under no

showing that defendant carrier

obligation to prove his

was not negligent in performing

exception or defense

its obligations . . ." (emphasis

(Moran, Commentaries on the

supplied).

Rules of Court, Volume 6, p. 2,

decision of the Court of Appeals. Petitioner

theorizes that the Home Insurance case
has no bearing on the present controversy
because the issue raised therein is the
validity of a stipulation in the charter-party
delimiting the liability of the shipowner for
loss or damage to goods caused by
want of due diligence on its part or
that of its manager to make the vessel
seaworthy in all respects, and not whether
the presumption of negligence provided
under the Civil Code applies only to
common carriers and not to private
carriers. Petitioner further argues that since
the possession and control of the vessel
remain with the shipowner, absent any
stipulation to the contrary, such shipowner
should be made liable for the
negligence of the captain and crew. In fine,

PPI faults the appellate court in not

fitting to first define important terms which

control over its navigation, including the

applying the presumption of negligence

are relevant to our discussion.

master and the crew, who are his servants.

against respondent carrier, and instead

shifting the onus probandi on the shipper to
show want of due diligence on the
part of the carrier, when he was not even at
hand to witness what transpired during the
entire voyage.

A "charter-party" is defined as a contract by

which an entire ship, or some principal part
thereof, is let by the owner to another
person for a specified time or use; a
contract of affreightment by which the
owner of a ship or other vessel lets the

Contract of affreightment may either be

time charter, wherein the vessel is leased
to the charterer for a fixed period of time, or
voyage charter, wherein the ship is leased
for a single voyage. In both cases, the
charter-party provides for the hire of the
vessel only, either for a determinate

As earlier stated, the primordial issue here

whole or a part of her to a merchant or

is whether a common carrier becomes a

other person for the conveyance of goods,

private carrier by reason of a charter-party;

on a particular voyage, in

in the negative, whether the shipowner in

consideration of the payment of freight;

the instant case was able to prove that he

Charter parties are of two types: (a)

had exercised that degree of diligence

contract of affreightment which involves the

required of him under the law.

use of shipping space on vessels leased by

Upon the other hand, the term "common or

the owner in part or as a whole, to carry

public carrier" is defined in Art. 1732 of the

goods for others; and, (b) charter by

Civil Code. The definition extends to

It is said that etymology is the

demise or bareboat charter, by the

carriers either by land, air or water which

basis of reliable judicial decisions in

terms of which the whole vessel is let to the

hold themselves out as ready to engage in

commercial cases. This being so, we find it

charterer with a transfer to him of its entire

carrying goods or transporting passengers

command and possession and consequent

or both for compensation as a public

period of time or for a single or consecutive

voyage, the shipowner to supply the ship's
stores, pay for the wages of the master and
the crew, and defray the expenses for the
maintenance of the ship.

employment and not as a casual

or to have acted negligently, and the

means in doing so. This is evident in the

occupation. The distinction between a

burden of proving otherwise rests on

present case considering that the

"common or public carrier" and a "private or

them. On the contrary, no such

steering of the ship, the manning of the

special carrier" lies in the character of the

presumption applies to private carriers, for

decks, the determination of the

business, such that if the undertaking is a

whosoever alleges damage to or

course of the voyage and other technical

single transaction, not a part of the general

deterioration of the goods carried has the

incidents of maritime navigation were all

business or occupation, although involving

onus of proving that the cause was the

consigned to the officers and crew who

the carriage of goods for a fee, the person

negligence of the carrier.

were screened, chosen and hired by the

or corporation offering such service is a

private carrier.

It is not disputed that respondent carrier, in

shipowner.

the ordinary course of business, operates

It is therefore imperative that a public

Article 1733 of the New Civil Code

as a common carrier, transporting goods

carrier shall remain as such,

mandates that common carriers, by

indiscriminately for all persons. When

notwithstanding the charter of the whole or

reason of the nature of their business,

petitioner chartered the vessel M/V "Sun

portion of a vessel by one or more persons,

should observe extraordinary diligence in

Plum", the ship captain, its officers and

provided the charter is limited to the ship

the vigilance over the goods they carry. In

compliment were under the employ of the

only, as in the case of a time-charter or

the case of private carriers, however, the

shipowner and therefore continued to be

voyage-charter. It is only when the charter

exercise of ordinary diligence in the

under its direct supervision and control.

includes both the vessel and its crew, as in

carriage of goods will suffice. Moreover, in

Hardly then can we charge the charterer, a

a bareboat or demise that a common

case of loss, destruction or

stranger to the crew and to the ship, with

carrier becomes private, at least insofar as

deterioration of the goods, common

the duty of caring for his cargo when the

the particular voyage covering the charter-

carriers are presumed to have been at fault

charterer did not have any control of the

party is concerned. Indubitably, a

shipowner in a time or voyage charter

exacting interpretation of admiralty laws,

is employed by one or many.

retains possession and control of the ship,

more particularly, the rules governing

The master and the crew are in

although her holds may, for the moment, be

common carriers.

each case his servants, the

the property of the charterer.

We quote with approval the

Respondent carrier's heavy reliance on the

observations of Raoul Colinvaux, the

case of Home Insurance Co. v. American

learned barrister-at-law

Steamship Agencies, supra, is misplaced

for the reason that the meat of the
controversy therein was the validity of a
stipulation in the charter-party exempting
the shipowner from liability for loss due to
the negligence of its agent, and not the
effects of a special charter on common
carriers. At any rate, the rule in the United
States that a ship chartered by a single
shipper to carry special cargo is not a
common carrier, does not find application in
our jurisdiction, for we have observed that
the growing concern for safety in the
transportation of passengers and/or
carriage of goods by sea requires a more

"As a matter of principle, it is

difficult to find a valid distinction
between cases in which a ship
is used to convey the
goods of one and of several
persons. Where the ship herself
is let to a charterer, so that he
takes over the charge and
control of her, the case is
different; the shipowner is not
then a carrier. But where her
services only are let, the same
grounds for imposing a strict
responsibility exist, whether he

freighter in each case is usually

without any representative on
board the ship; the same
opportunities for fraud or
collusion occur; and the same
difficulty in discovering the truth
as to what has taken place
arises . . ."

In an action for recovery of damages

against a common carrier on the goods
shipped, the shipper or consignee should
first prove the fact of shipment and its
consequent loss or damage while the same
was in the possession, actual or
constructive, of the carrier. Thereafter, the
burden of proof shifts to respondent to
prove that he has exercised extraordinary
diligence required by law or that the loss,

damage or deterioration of the cargo was

layers of serviceable tarpaulins which

shipmates who were overseeing the whole

due to fortuitous event, or some other

were tied with steel bonds. The hatches

operation on rotation basis.

circumstances inconsistent with its liability.

remained close and tightly sealed while

To our mind, respondent carrier has

sufficiently overcome, by clear and
convincing proof, the prima
facie presumption of negligence.
The master of the carrying vessel,
Captain Lee Tae Bo, in his deposition
taken on 19 April 1977 before the
Philippine Consul and Legal Attache in
the Philippine Embassy in Tokyo,
Japan, testified that before the fertilizer
was loaded, the four (4) hatches of the
vessel were cleaned, dried and
fumigated. After completing the
loading of the cargo in bulk in the ship's
holds, the steel pontoon hatches were
closed and sealed with iron lids, then
covered with three (3)

the ship was in transit as the

weight of the steel covers made it
impossible for a person to open without
the use of the ship's boom.

Verily, the presumption of negligence on

the part of respondent carrier has been
efficaciously overcome by the
showing of extraordinary zeal and assiduity
exercised by the carrier in the care of the

It was also shown during the trial that the

cargo. This was confirmed by respondent

hull of the vessel was in good condition,

appellate court thus

foreclosing the possibility of spillage of the

cargo into the sea or seepage of water
inside the hull of the vessel. When
M/V "Sun Plum" docked at its berthing
place, representatives of the consignee
boarded, and in the presence of a
representative of the shipowner, the
foreman, the stevedores, and a cargo
surveyor representing CSCI, opened the
hatches and inspected the condition of the
hull of the vessel. The stevedores unloaded
the cargo under the watchful eyes of the

". . . Be that as it may, contrary

to the trial court's finding, the
record of the instant case
discloses ample evidence
showing that defendant carrier
was not negligent in performing
its obligations. Particularly, the
following testimonies of plaintiffappellee's own witnesses
clearly show
absence of negligence by the

defendant carrier; that the

The period during which private respondent

therefore under his control and supervision,

hull of the vessel at the

was to observe the degree of diligence

not when the same is done by the

time of the discharge of the

required of it as a public carrier began from

consignee or stevedores under the

cargo was sealed and nobody

the time the cargo was unconditionally

employ of the latter.

could open the same except in

placed in its charge after the vessel's holds

the presence of the

were duly inspected and passed scrutiny by

owner of the cargo and the

the shipper, up to and until the vessel

representatives of the vessel

reached its destination and its hull was re-

(TSN, 20 July 1977, p. 14); that

examined by the consignee, but prior to

the cover of the hatches was

unloading. This is clear from the limitation

made of steel and it was

clause agreed upon by the parties in the

overlaid with tarpaulins, three

Addendum to the standard "GENCON"

layers of tarpaulins and

time charter-party which provided for an

therefore their contents were

F.I.O.S., meaning, that the loading,

protected from the weather

stowing, trimming and discharge of the

(TSN, 5 April 1978, p. 24); and,

cargo was to be done by the charterer, free

that to open these hatches, the

from all risk and expense to the

seals would have to be broken,

carrier. Moreover, a shipowner is liable for

all the seals were found to be

damage to the cargo resulting from

intact (TSN, 20 July 1977, pp.

improper stowage only when the stowing is

15-16)" (italics supplied).

done by stevedores employed by him, and

Article 1734 of the New Civil Code provides

that common carriers are not responsible
for the loss, destruction or
deterioration of the goods if caused by the
character of the goods or defects in the
packaging or in the containers. The
Code of Commerce also provides that all
losses and deteriorations which the goods
may suffer during the transportation by
reason of fortuitous event, force
majeure, or the inherent defect of the
goods, shall be for the account and
risk of the shipper, and that proof of these
accidents is incumbent upon the
carrier. The carrier, nonetheless, shall be
liable for the loss and damage resulting
from the preceding causes if it is proved, as

against him, that they arose through his

use of a clamped shell, losses due to

The probability of the cargo being

negligence or by reason of his having failed

spillage during such operation amounting

damaged or getting mixed or contaminated

to take the precautions which usage has

to one percent (1%) against the

with foreign particles was made greater by

established among careful persons.

bill of lading is deemed "normal" or

the fact that the fertilizer was transported in

"tolerable." The primary cause of these

"bulk," thereby exposing it to the inimical

spillages is the clamped shell which does

effects of the elements and the grimy

not seal very tightly. Also, the wind tends to

condition of the various

blow away some of the materials during the

pieces of equipment used in transporting

unloading process.

and hauling it.

with Atlas Fertilizer, described Urea as a

The dissipation of quantities of fertilizer, or

The evidence of respondent carrier also

chemical compound consisting

its deterioration in value, is caused either

showed that it was highly improbable for

mostly of ammonia and carbon monoxide

by an extremely high temperature in its

sea water to seep into the vessel's holds

compounds which are used as fertilizer.

place of storage, or when it comes in

during the voyage since the hull of the

Urea also contains 46% nitrogen and is

contact with water. When Urea is drenched

vessel was in good condition and her

highly soluble in water. However, during

in water, either fresh or saline, some of its

hatches were tightly closed and firmly

storage, nitrogen and ammonia do not

particles dissolve. But the salvaged portion

sealed, making the M/V "Sun Plum" in all

normally evaporate even on a long voyage,

which is in liquid form still remains potent

respects seaworthy to carry the cargo she

provided that the temperature inside the

and usable although no longer saleable in

was chartered for. If there was loss or

hull does not exceed eighty (80) degrees

its original market value.

contamination of the cargo, it was more

Respondent carrier presented a witness

who testified on the characteristics of the
fertilizer shipped and the expected
risks of bulk shipping. Mr. Estanislao
Chupungco, a chemical engineer working

centigrade. Mr. Chupungco further added

likely to have occurred while the same was

that in unloading fertilizer in bulk with the

being transported from the ship to the

dump trucks and finally to the consignee's

Indeed, we agree with respondent carrier

reversed the trial court, is AFFIRMED.

warehouse. This may be gleaned from the

that bulk shipment of highly soluble goods

Consequently, Civil Case No. 98623of the

testimony of the marine and cargo

like fertilizer carries with it the risk of loss or

then Court of the First Instance, now

surveyor of CSCI who supervised the

damage. More so, with a variable weather

Regional Trial Court, of Manila should be,

unloading. He explained that the 18

condition prevalent during its unloading, as

as it is hereby, DISMISSED.

M/T of alleged "bad order cargo" as

was the case at bar. This is a risk the

contained in their report to PPI was just an

shipper or the owner of the goods has to

approximation or estimate made by

face. Clearly, respondent carrier has

them after the fertilizer was discharged

sufficiently proved the inherent

from the vessel and segregated from the

character of the goods which makes it

rest of the cargo.

highly vulnerable to deterioration; as well

The Court notes that it was in the

month of July when the vessel arrived port
and unloaded her cargo. It rained from time
to time at the harbor area while the cargo
was being discharged according to the
supply officer of PPI, who also testified that
it was windy at the waterfront and along the

Costs against petitioner. SO ORDERED.

[G.R. No. 149019. August 15, 2006.]

as the inadequacy of its packaging which

DELSAN TRANSPORT

further contributed to the loss. On the other

LINES,

hand, no proof was adduced by the

INC., petitioner, vs. AMERIC

petitioner showing that the carrier was

AN HOME ASSURANCE

remiss in the exercise of due diligence in

CORPORATION, responden

order to minimize the loss or damage to the

t.

goods it carried.

shoreline where the dump trucks passed

WHEREFORE, the petition is DISMISSED.

enroute to the consignee's warehouse.

The assailed
decision of the Court of Appeals, which

DECISION

GARCIA, J :
p

By this petition for review

on certiorari under Rule 45 of the Rules of
Court, petitioner Delsan Transport Lines,
Inc. (Delsan hereafter) assails and seeks to

business in the Philippines through its

discharging of the diesel oil started at

agent, the American-International

about 1:30 PM of the same day. However,

Underwriters, Inc. (Phils.). It is engaged,

at about 10:30 PM, the discharging had to

among others, in insuring cargoes for

be stopped on account of the discovery

transportation within the Philippines.

that the port bow mooring of the vessel was

set aside the Decision, dated July 16,

On August 5, 1984, Delsan received on

2001, of the Court of Appeals (CA) in CA-

board MT Larusan a shipment consisting of

G.R. CV No. 40951 affirming an earlier

1,986.627 k/l Automotive Diesel Oil (diesel

decision of the Regional Trial Court (RTC)

oil) at the Bataan Refinery Corporation for

of Manila, Branch IX, in two separate

transportation and delivery to the bulk

complaints for damages docketed as Civil

depot in Bacolod City of Caltex Phils., Inc.

Case No. 85-29357 and Civil Case No. 85-

(Caltex), pursuant to a Contract of

30559.

Afreightment. The shipment was insured by

The facts:

respondent AHAC against all risks under

Inland Floater Policy No. AH-IF64-

Delsan is a domestic corporation which

1011549P and Marine Risk Note No. 34-

owns and operates the vessel MT Larusan.

5093-6.

On the other hand,

respondent American Home Assurance
Corporation (AHAC for brevity) is a foreign
insurance company duly licensed to do

intentionally cut or stolen by unknown

persons. Because there was nothing
holding it, the vessel drifted westward,
dragged and stretched the flexible rubber
hose attached to the riser, broke the elbow
into pieces, severed completely the rubber
hose connected to the tanker from the main
delivery line at sea bed level and ultimately
caused the diesel oil to spill into the sea. To
avoid further spillage, the vessel's crew
tried water flushing to clear the line of the
diesel oil but to no avail. In the meantime,
the shore tender, who was waiting for the

On August 7, 1984, the shipment arrived in

completion of the water flushing, was

Bacolod City. Immediately thereafter,

surprised when the tanker signaled a "red

unloading operations commenced. The

light" which meant stop pumping. Unaware

of what happened, the shore tender,

As a result of spillage and backflow of

caused by the backflow. It likewise prayed

thinking that the vessel would, at any time,

diesel oil, Caltex sought recovery of the

that it be awarded the amount of

resume pumping, did not shut the storage

loss from Delsan, but the latter refused to

P1,939,575.37 for damages and

tank gate valve. As all the gate valves

pay. As insurer, AHAC paid Caltex the sum

reasonable attorney's fees. As

remained open, the diesel oil that was

of P479,262.57 for spillage, pursuant to

counterclaim in both cases, AHAC prayed

earlier discharged from the vessel into the

Marine Risk Note No. 34-5093-6, and

for attorney's fees in the amount of

shore tank back flowed. Due to non-

P1,939,575.37 for backflow of the diesel oil

P200,000.00 and P500.00 for every court

availability of a pump boat, the vessel could

pursuant to Inland Floater Policy No. AH-

appearance.

not send somebody ashore to inform the

1F64-1011549P.

people at the depot about what happened.

After almost an hour, a gauger and an
assistant surveyor from the Caltex's Bulk
Depot Office boarded the vessel. It was
only then that they found out what had
happened. Thereafter, the duo immediately
went ashore to see to it that the shore tank
gate valve was closed. The loss of diesel
oil due to spillage was placed at 113.788 k/l
while some 435,081 k/l thereof back flowed
from the shore tank.

Since the cause of action in both cases

On February 19, 1985, AHAC, as Caltex's

arose out of the same incident and involved

subrogee, instituted Civil Case No. 85-

the same issues, the two were

29357 against Delsan before the Manila

consolidated and assigned to Branch 9 of

RTC, Branch 9, for loss caused by the

the court.

spillage. It likewise prayed that it be

indemnified for damages suffered in the
amount of P652,432.57 plus legal interest
thereon.

On August 31, 1989, the trial court

rendered its decision in favor of AHAC
holding Delsan liable for the loss of the
cargo for its negligence in its duty as a

Also, on May 5, 1985, in the Manila RTC,

common carrier. Dispositively, the decision

Branch 31, AHAC instituted Civil Case No.

reads:

85-30559 against Delsan for the loss

WHEREFORE, judgment is

until fully

to pay

hereby rendered:

paid and

plaintiff the

satisfied;

sum of

and

P479,262.5

A). In Civil Case No. 8530559:

(2) Ordering

(1) Ordering the

defendant

defendant

to pay

(petitioner

plaintiff the

Delsan) to

sum of

pay plaintiff

P10,000.00

(responden

as and for

t AHAC)

attorney's

the sum of

fees.

P1,939,575
.37 with

7 with
interest
thereon at
the legal
rate from
February 6,
1985 until
fully paid
and
satisfied;

SDH

For lack of merit, the

ETI

interest

counterclaim is hereby

thereon at

dismissed.

the legal
rate from
November
21, 1984

(2) Ordering
defendant

B). In Civil Case No. 8529357:

(1) Ordering
defendant

to pay
plaintiff the
sum of
P5,000.00

as and for

depot had not been completed at the time

Principally, Delsan insists that the CA

attorney's

the losses occurred, there was no reason

committed reversible error in ruling that

fees.

to imply that there was actual delivery of

Article 1734 of the Civil Code cannot

the cargo to Caltex, the consignee. We

exculpate it from liability for the loss of the

quote the fallo of the CA decision:

subject cargo and in not applying the rule

For lack of merit, the

counterclaim is hereby
dismissed.
Costs against the defendant.
SO ORDERED.

WHEREFORE, premises
considered, the appealed
Decision of the Regional Trial
Court of Manila, Branch 09 in

In time, Delsan appealed to the CA

Civil Case Nos. 85-29357 and

whereat its recourse was docketed as CA-

85-30559 is hereby AFFIRMED

G.R. CV No. 40951.

with a modification that

In the herein challenged decision, the CA

affirmed the findings of the trial court. In so
ruling, the CA declared that Delsan failed to
exercise the extraordinary diligence of a

attorney's fees awarded in Civil

Case Nos. 85-29357 and 8530559 are hereby DELETED.
SO ORDERED.

on contributory negligence against Caltex,

the shipper-owner of the cargo, and in not
taking into consideration the fact that the
loss due to backflow occurred when the
diesel oil was already completely delivered
to Caltex.
We are not persuaded.
In resolving this appeal, the Court
reiterates the oft-stated doctrine that factual
findings of the CA, affirmatory of those of
the trial court, are binding on the Court

good father of a family in the handling of its

Delsan is now before the Court raising

unless there is a clear showing that such

cargo. Applying Article 1736 of the Civil

substantially the same issues proffered

findings are tainted with arbitrariness,

Code, the CA ruled that since the

before the CA.

capriciousness or palpable error.

discharging of the diesel oil into Caltex bulk

Delsan would have the Court absolve it

instances when the presumption of

5) Order or act of competent

from liability for the loss of its cargo on two

negligence does not attach:

public authority.

grounds. First, the loss through spillage

was partly due to the contributory
negligence of Caltex; and Second, the loss
through backflow should not be borne
by Delsan because it was already delivered
to Caltex's shore tank.
Common carriers are bound to observe
extraordinary diligence in the vigilance over
the goods transported by them. They are
presumed to have been at fault or to have

Art. 1734. Common carriers are

Both the trial court and the CA uniformly

responsible for the loss,

ruled that Delsan failed to prove its claim

destruction, or deterioration of

that there was a contributory negligence on

the goods, unless the same is

the part of the owner of the goods

due to any of the following

Caltex. We see no reason to depart

causes only:

therefrom. As aptly pointed out by the CA, it

1) Flood storm, earthquake,

lightning, or other natural
disaster or calamity;

had been established that the proximate

cause of the spillage and backflow of the
diesel oil was due to the severance of the
port bow mooring line of the vessel and the

acted negligently if the goods are lost,

2) Act of the public enemy in

failure of the shore tender to close the

destroyed or deteriorated. To overcome the

war, whether international or

storage tank gate valve even as a check on

presumption of negligence in case of loss,

civil;

the drain cock showed that there was still a

destruction or deterioration of the goods,

3) Act or omission of the

product on the pipeline. To the two courts

the common carrier must prove that it

shipper or owner of the goods;

below, the actuation of the gauger and the

exercised extraordinary diligence. There

are, however, exceptions to this rule. Article
1734 of the Civil Code enumerates the

4) The character of the goods

or defects in the packing or in
the containers;

escort surveyor, both personnel from the

Caltex Bulk Depot, negates the allegation
that Caltex was remiss in its duties. As we
see it, the crew of the vessel should have

promptly informed the shore tender that the

To be sure, Delsan, as the owner of the

the cargo to the consignee. Delsan is

port mooring line was cut off.

vessel, was obliged to prove that the loss

straining the issue by insisting that when

However, Delsan did not do so on the lame

was caused by one of the excepted causes

the diesel oil entered into the tank of Caltex

excuse that there was no available banca.

if it were to seek exemption from

on shore, there was legally, at that

As it is, Delsan's personnel signaled a "red

responsibility. Unfortunately, it miserably

moment, a complete delivery thereof to

light" which was not a sufficient warning

failed to discharge this burden by the

Caltex. To be sure, the extraordinary

because such signal only meant that the

required quantum of proof.

responsibility of common carrier lasts from

pumping of diesel oil had been finished.

Neither did the blowing of whistle suffice
considering the distance of more than 2
kilometers between the vessel and the
Caltex Bulk Depot, aside from the fact that
it was not the agreed signal. Had the
gauger and the escort surveyor from Caltex
Bulk Depot not gone aboard the vessel to
make inquiries, the shore tender would
have not known what really happened. The
crew of the vessel should have exerted
utmost effort to immediately inform the
shore tender that the port bow mooring line
was severed.

Delsan's argument that it should not be

held liable for the loss of diesel oil due to
backflow because the same had already
been actually and legally delivered to
Caltex at the time it entered the shore tank
holds no water. It had been settled that the
subject cargo was still in the custody
of Delsan because the discharging thereof
has not yet been finished when the
backflow occurred. Since the discharging of
the cargo into the depot has not yet been
completed at the time of the spillage when
the backflow occurred, there is no reason
to imply that there was actual delivery of

the time the goods are unconditionally

placed in the possession of, and received
by, the carrier for transportation until the
same are delivered, actually or
constructively, by the carrier to the
consignee, or to a person who has the right
to receive them. The discharging of oil
products to Caltex Bulk Depot has not yet
been finished, Delsan still has the duty to
guard and to preserve the cargo. The
carrier still has in it the responsibility to
guard and preserve the goods, a duty
incident to its having the goods
transported.

To recapitulate, common carriers, from the

damage to its cargo was caused by one of

PINE FIRSTINSURANCE

nature of their business and for reasons of

the excepted causes if it were to seek

CO., INC., respondent.

public policy, are bound to observe

exemption from responsibility. Having failed

extraordinary diligence in vigilance over the

to do so, Delsan must bear the

goods and for the safety of the passengers

consequences.

transported by them, according to all the

circumstances of each case. The mere
proof of delivery of goods in good order to
the carrier, and their arrival in the place of
destination in bad order, make out a prima

DTIACH

WHEREFORE, petition is DENIED and the

assailed decision of the CA is
AFFIRMED in toto.
Cost against petitioner. SO ORDERED.

occurred, the carrier must be held

accident or some other circumstances

inconsistent with its liability.

aside the Decision of the Regional Trial

Court of Makati City, and ordered them to
pay actual damages representing the value

Petitioners claimed that the loss or the

[G.R. No. 143133. June 5, 2002.]
BELGIAN OVERSEAS
CHARTERING AND
SHIPPING N.V. and

All told, Delsan, being a common carrier,

JARDINE DAVIES

should have exercised extraordinary

TRANSPORT SERVICES,

diligence in the performance of its duties.

INC., petitioners, vs. PHILIP

Consequently, it is obliged to prove that the

Court of Appeals which reversed and set

by them, plus interest and attorneys fees.

explanation is given as to how the injury

carrier to prove that the loss was due to

Petitioners assailed the decision of the

of the damaged four (4) coils transported

facie case against the carrier, so that if no

responsible. It is incumbent upon the

SYNOPSIS

deterioration of the goods shipped was due

to pre-shipment damage. They cited the
notation "metal envelopes rust stained and
slightly dented" printed on the Bill of Lading
as evidence that the character of the goods
or defect in the packing or the containers
was the proximate cause of the damage.
They averred that they exercised due

diligence and foresight required by law to

the said state would eventually deteriorate

THEM; RATIONALE FOR THE STRICT

prevent any damage/loss to said shipment.

when not properly stored while in transit.

REQUIREMENT. Well-settled is the rule

Equipped with the proper knowledge of the

that common carriers, from the nature of

nature of steel sheets in coils and of the

their business and for reasons of public

proper way of transporting them, the

policy, are bound to observe extraordinary

master of the vessel and his crew should

diligence and vigilance with respect to the

have undertaken precautionary measures

safety of the goods and the passengers

to avoid possible deterioration of the cargo.

they transport. Thus, common carriers are

But none of these measures was taken.

required to render service with the greatest

Having failed to discharge the burden of

skill and foresight and "to use all

proving that they have exercised the

reason[a]ble means to ascertain the nature

extraordinary diligence required by law,

and characteristics of the goods tendered

petitioners cannot escape liability for the

for shipment, and to exercise due care in

damage to the four coils.

the handling and stowage, including such

In affirming the decision of the Court of

Appeals but with modification with respect
to the extent of petitioners' liability, the
Supreme Court held that the petitioners
failed to rebut the prima facie presumption
of negligence. They failed to prove that
they observed the extraordinary diligence
and precaution, which the law requires a
common carrier to know and to follow to
avoid damage to or destruction of the
goods entrusted to it for safe carriage and
delivery. True, the words "metal envelopes
rust stained and slightly dented" were
noted on the Bill of Lading; however, there
was no showing that petitioners exercised
due diligence to forestall or lessen the loss.
Having been in the service for several
years, the master of the vessel should have
known at the outset that metal envelopes in

methods as their nature requires." The

SYLLABUS
1. CIVIL LAW; COMMON CARRIERS;
BOUND TO OBSERVE EXTRAORDINARY
DILIGENCE AND VIGILANCE WITH
RESPECT TO SAFETY OF THE GOODS
AND PASSENGERS TRANSPORTED BY

extraordinary responsibility lasts from the

time the goods are unconditionally placed
in the possession of and received for
transportation by the carrier until they are
delivered, actually or constructively, to the
consignee or to the person who has a right

to receive them. This strict requirement is

goods. In order to avoid responsibility for

4. ID.; ID.; ID.; ID.; CHARACTER OF THE

justified by the fact that, without a hand or a

any loss or damage, therefore, they have

GOODS OR DEFECTS IN THE PACKING;

voice in the preparation of such contract,

the burden of proving that they observed

ELUCIDATED; NOT PRESENT IN CASE

the riding public enters into a contract of

such diligence.

AT BAR. In their attempt to escape

transportation with common carriers. Even

if it wants to, it cannot submit its own
stipulations for their approval. Hence, it
merely adheres to the agreement prepared
by them.

3. ID.; ID.; ID.; EXCEPTIONS. The

presumption of fault or negligence will not
arise if the loss is due to any of the
following causes: (1) flood, storm,
earthquake, lightning, or other natural

2. ID.; ID.; PRIMA FACIE PRESUMPTION

disaster or calamity; (2) an act of the public

OF NEGLIGENCE; BURDEN OF

enemy in war, whether international or civil;

PROVING OBSERVANCE OF

(3) an act or omission of the shipper or

EXTRAORDINARY DILIGENCE LIES ON

owner of the goods; (4) the character of the

COMMON CARRIERS. Owing to this

goods or defects in the packing or the

high degree of diligence required of them,

container; or (5) an order or act of

common carriers, as a general rule, are

competent public authority. This is a closed

presumed to have been at fault or negligent

list. If the cause of destruction, loss or

if the goods they transported deteriorated

deterioration is other than the enumerated

or got lost or destroyed. That is, unless

circumstances, then the carrier is liable

they prove that they exercised

therefor.

extraordinary diligence in transporting the

liability, petitioners further contend that they

are exempted from liability under Article
1734(4) of the Civil Code. They cite the
notation "metal envelopes rust stained and
slightly dented" printed on the Bill of Lading
as evidence that the character of the goods
or defect in the packing or the containers
was the proximate cause of the damage.
We are not convinced. From the evidence
on record, it cannot be reasonably
concluded that the damage to the four coils
was due to the condition noted on the Bill
of Lading. The aforecited exception refers
to cases when goods are lost or damaged
while in transit as a result of the natural
decay of perishable goods or the
fermentation or evaporation of substances

liable therefor, the necessary and natural

6. ID.; ID.; PETITIONERS FAILED TO

were in bad order and condition. Normally,

wear of goods in transport, defects in

OBSERVE EXTRAORDINARY DILIGENCE

a request for a bad order survey is made in

packages in which they are shipped, or the

AND PRECAUTION IN TRANSPORTING

case there is an apparent or a presumed

natural propensities of animals. None of

THE GOODS IN CASE AT BAR. That

loss or damage. Fourth, the Certificate of

these is present in the instant case.

petitioners failed to rebut the prima

Analysis stated that, based on the sample

facie presumption of negligence is revealed

submitted and tested, the steel sheets

in the case at bar by a review of the

found in bad order were wet with fresh

records and more so by the evidence

water. Fifth, petitioners in a letter

adduced by respondent.First, as stated in

addressed to the Philippine Steel Coating

the Bill of Lading, petitioners received the

Corporation and dated October 12, 1990

subject shipment in good order and

admitted that they were aware of the

condition in Hamburg, Germany. Second,

condition of the four coils found in bad

prior to the unloading of the cargo, an

order and condition. These facts were

Inspection Report prepared and signed by

confirmed by Ruperto Esmerio, head

representatives of both parties showed the

checker of BM Santos Checkers Agency.

steel bands broken, the metal envelopes

All these conclusively prove the fact of

rust-stained and heavily buckled, and the

shipment in good order and condition and

contents thereof exposed and

the consequent damage to the four coils

rusty. Third, Bad Order Tally Sheet No.

while in the possession of petitioner, who

154979 issued by Jardine Davies Transport

notably failed to explain why. Further,

Services, Inc., stated that the four coils

petitioners failed to prove that they

5. ID.; ID.; SHALL BE HELD

RESPONSIBLE ABSENT ADEQUATE
EXPLANATION AS TO HOW THE
DETERIORATION, LOSS OR
DESTRUCTION OF GOODS HAPPENED.
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, the loss or the destruction
of the goods happened, the transporter
shall be held responsible.

observed the extraordinary diligence and

of transporting them, the master of the

successfully proven the application of any

precaution which the law requires a

vessel and his crew should have

of the exceptions in the present case.

common carrier to know and to follow to

undertaken precautionary measures to

avoid damage to or destruction of the

avoid possible deterioration of the cargo.

goods entrusted to it for safe carriage and

But none of these measures was taken.

delivery.

Having failed to discharge the burden of

7. ID.; ID.; MUST EXERCISE DUE

DILIGENCE TO FORESTALL OR LESSEN
THE LOSS; CASE AT BAR. True, the
words "metal envelopes rust stained and

proving that they have exercised the

extraordinary diligence required by law,
petitioners cannot escape liability for the
damage to the four coils.

9. COMMERCIAL LAW; CARRIAGE OF

GOODS BY SEA ACT; SECTION 3,
PARAGRAPH 6 THEREOF; NOTICE OF
CLAIM NEED NOT BE GIVEN IF STATE
OF THE GOODS, AT THE TIME OF
THEIR RECEIPT, HAS BEEN THE
SUBJECT OF A JOINT INSPECTION OR
SURVEY. Petitioners claim that pursuant

slightly dented" were noted on the Bill of

8. ID.; ID.; NOT RELIEVED OF LIABILITY

to Section 3, paragraph 6 of the Carriage of

Lading; however, there is no showing that

FOR LOSS IF IT ACCEPTS THE GOODS

Goods by Sea Act (COGSA), respondent

petitioners exercised due diligence to

NOTWITHSTANDING DEFECTS IN

should have filed its Notice of Loss within

forestall or lessen the loss. Having been in

PACKING. Even if the fact of improper

three days from delivery. They assert that

the service for several years, the master of

packing was known to the carrier or its

the cargo was discharged on July 31, 1990,

the vessel should have known at the outset

crew or was apparent upon ordinary

but that respondent filed its Notice of Claim

that metal envelopes in the said state

observation, it is not relieved of liability for

only on September 18, 1990. We are not

would eventually deteriorate when not

loss or injury resulting therefrom, once it

persuaded. First, the above-cited provision

properly stored while in transit. Equipped

accepts the goods notwithstanding such

of COGSA provides that the notice of claim

with the proper knowledge of the nature of

condition. Thus, petitioners have not

need not be given if the state of the goods,

steel sheets in coils and of the proper way

at the time of their receipt, has been the

subject of a joint inspection or survey. As

Co., Inc. v. Court of Appeals, we ruled that

a contract by which three parties

stated earlier, prior to unloading the cargo,

a claim is not barred by prescription as long

namely, the shipper, the carrier, and the

an Inspection Report as to the condition of

as the one-year period has not lapsed.

consignee undertake specific

the goods was prepared and signed by

Thus, in the words of the ponente, Chief

responsibilities and assume stipulated

representatives of both parties.

Justice Hilario G. Davide, Jr.: "Inasmuch as

obligations. In a nutshell, the acceptance of

the neither the Civil Code nor the Code of

the bill of lading by the shipper and the

Commerce states a specific prescriptive

consignee, with full knowledge of its

10. ID.; ID.; ID.; ONE-YEAR

period on the matter, the Carriage of Goods

contents, gives rise to the presumption that

PRESCRIPTIVE PERIOD; FAILURE TO

by Sea Act (COGSA) which provides for

it constituted a perfected and binding

FILE NOTICE OF CLAIM WITHIN THREE

a one-year period of limitation on claims for

contract.

DAYS WILL NOT BAR RECOVERY IF IT IS

loss of, or damage to, cargoes sustained

NONETHELESS FILED WITHIN ONE

during transit may be applied

YEAR; CASE AT BAR. As stated in

suppletorily to the case at bar." In the

Section 3, paragraph 6 of the Carriage of

present case, the cargo was discharged on

Goods by Sea Act a failure to file a notice

July 31, 1990, while the Complaint was

of claim within three days will not bar

filed by respondent on July 25, 1991, within

recovery if it is nonetheless filed within one

the one-year prescriptive period.

year. This one-year prescriptive period also

applies to the shipper, the consignee, the
insurer of the goods or any legal holder of
the bill of lading. In Loadstar Shipping

EASCDH

12. ID.; ID.; ID.; STIPULATION LIMITING

COMMON CARRIERS LIABILITY TO A
CERTAIN SUM, UNLESS OWNER
DECLARES A GREATER VALUE IS
SANCTIONED BY LAW; CONDITIONS;
RATIONALE. A stipulation in the bill of
lading limiting to a certain sum the common

11. ID.; ID.; LIABILITY LIMITATION; BILL

carrier's liability for loss or destruction of a

OF LADING; FUNCTIONS. A bill of

cargo unless the shipper or owner

lading serves two functions. First, it is a

declares a greater value is sanctioned

receipt for the goods shipped. Second, it is

by law. There are, however, two conditions

to be satisfied: (1) the contract is

the carrier's liability in the absence of a

obtained by the shipper for the importation

reasonable and just under the

shipper's declaration of a higher value in

of steel sheets did not effect a declaration

circumstances, and (2) it has been fairly

the bill of lading. The provisions on limited

of the value of the goods as required by the

and freely agreed upon by the parties. The

liability are as much a part of the bill of

bill. That notation was made only for the

rationale for, this rule is to bind the shippers

lading as though physically in it and as

convenience of the shipper and the bank

by their agreement to the value (maximum

though placed there by agreement of the

processing the Letter of Credit. In Keng

valuation) of their goods.

parties. In the case before us, there was no

Hua Paper Products v. Court of Appeals,

stipulation in the Bill of Lading limiting the

we held that a bill of lading was separate

carrier's liability. Neither did the shipper

from the Other Letter of Credit

declare a higher valuation of the goods to

arrangements. We ruled thus: "(T)he

be shipped. This fact notwithstanding, the

contract of carriage, as stipulated in the bill

insertion of the words "L/C No. 90/02447

of lading in the present case, must be

cannot be the basis for petitioners' liability.

treated independently of the contract of

13. ID.; ID.; ID.; PART OF THE BILL OF

LADING AS THOUGH PHYSICALLY IN IT
AND AGREED UPON BY THE PARTIES;
CASE AT BAR. It is to be noted,
however, that the Civil Code does not limit
the liability of the common carrier to a fixed
amount per package. In all matters not

14. ID.; ID.; ID.; COMMON CARRIERS'

regulated by the Civil Code, the right and

OBLIGATION ARISING FROM

the obligations of common carriers shall be

CONTRACT OF TRANSPORTATION NOT

governed by the Code of Commerce and

NEGATED BY DISCREPANCY BETWEEN

special laws. Thus, the COGSA, which is

AMOUNT INDICATED IN INVOICE AND

suppletory to the provisions of the Civil

AMOUNT IN BILL OF LADING. A

Code, supplements the latter by

notation in the Bill of Lading which

establishing a statutory provision limiting

indicated the amount of the Letter of Credit

sale between the seller and the buyer, and

the contract of issuance of a letter of credit
between the amount of goods described in
the commercial invoice in the contract of
sale and the amount allowed in the letter of
credit will not affect the validity and
enforceability of the contract of carriage as
embodied in the bill of lading. As the bank

cannot be expected to look beyond the

what would ordinarily be considered

Proof of the delivery of goods in good order

documents presented to it by the seller

packages are shipped in a container

to a common carrier and of their arrival in

pursuant to the letter of credit, neither can

supplied by the carrier and the number of

bad order at their destination

the carrier be expected to go beyond the

such units is disclosed in the shipping

constitutes prima facie fault or negligence

representations of the shipper in the bill of

documents, each of those units and not the

on the part of the carrier. If no adequate

lading and to verify their accuracy vis--

container constitutes the 'package' referred

explanation is given as to how the loss, the

vis the commercial invoice and the letter of

to in the liability limitation provision

destruction or the deterioration of the

credit. Thus, the discrepancy between the

of Carriage of Goods by Sea Act."

goods happened, the carrier shall be held

amount of goods indicated in the invoice

Considering, therefore, the ruling

liable therefor.

and the amount in the bill of lading cannot

in Eastern Shipping Lines and the fact that

negate petitioner's obligation to private

the Bill of Lading clearly disclosed the

respondent arising from the contract of

contents of the containers, the number of

transportation."

units, as well as the nature of the steel

15. ID.; ID.; ID.; TERM "PACKAGE,"

EXPLAINED; CASE AT BAR.
Petitioners' liability should be computed

sheets, the four damaged coils should be

considered as the shipping unit subject to
the US$500 limitation.

based on US$500 per package and not on

the per metric ton price declared in the

DECISION

Letter of Credit. In Eastern Shipping Lines,

Inc. v. Intermediate Appellate Court we
explained the meaning of package: "When

PANGANIBAN, J :
p

Statement of the Case

Before us is a Petition for Review under
Rule 45 of the Rules of Court, assailing the
July 15, 1998 Decision and the May 2,
2000 Resolution of the Court of Appeals
(CA) in CA-G.R. CV No. 53571. The
decretal portion of the Decision reads as
follows:
"WHEREFORE, in the light of
the foregoing disquisition, the
decision appealed from is

hereby REVERSED and SET

(Branch 134), which had disposed as

M/V Anangel Sky arrived at the

ASIDE. Defendants-appellees

follows:

port of Manila and, within the

are ORDERED to jointly and

"WHEREFORE, in view of the

severally pay plaintiffs-

foregoing, judgment is hereby

appellants the following:

rendered, dismissing the

'1) FOUR Hundred Fifty-One Thousand

complaint, as well as

Twenty-Seven Pesos and 32/100

defendant's counterclaim."

(P451,027.32) as actual damages,

representing the value of the damaged cargo,
plus interest at the legal rate from the time of
filing of the complaint on July 25, 1991, until
fully paid;

The Facts

subsequent days, discharged

the subject cargo. Four (4) coils
were found to be in bad order
B.O. Tally sheet No. 154974.
Finding the four (4) coils in their
damaged state to be unfit for
the intended purpose, the

The factual antecedents of the case are

consignee Philippine Steel

summarized by the Court of Appeals in this

Trading Corporation declared

wise:

the same as total loss.

"On June 13, 1990, CMC

"Despite receipt of a formal

Trading A.G. shipped on board

demand, defendants-appellees

the M/V 'Anangel Sky' at

refused to submit to the

'3) Costs of suit."'

Hamburg, Germany 242 coils of

consignee's claim.

The assailed Resolution denied petitioner's

various Prime Cold Rolled Steel

Consequently, plaintiff-

Motion for Reconsideration.

sheets for transportation to

appellant paid the consignee

Manila consigned to

five hundred six thousand

the Philippine Steel Trading

eighty six & 50/100 pesos

Corporation. On July 28, 1990,

(P506,086.50), and was

'2) Attorney's fees amounting to 20% of the

claim; and

The CA reversed the Decision of the

Regional Trial Court (RTC) of Makati City

subrogated to the latter's rights

appellees argued that their

and causes of action against

liability, if there be any, should

In reversing the trial court, the CA ruled

defendants-appellees.

not exceed the limitations of

that petitioners were liable for the loss or

Subsequently, plaintiff-appellant

liability provided for in the bill of

the damage of the goods shipped, because

instituted this complaint for

lading and other pertinent laws.

they had failed to overcome the

recovery of the amount paid by

Finally, defendants-appellees

presumption of negligence imposed on

them, to the consignee as

averred that, in any event, they

common carriers.

insured.

exercised due diligence and

"Impugning the propriety of the

suit against them, defendantsappellees imputed that the
damage and/or loss was due to

foresight required by law to

prevent any damage/loss to
said shipment."

Ruling of the Trial Court

The CA further held as inadequately

proven petitioners' claim that the loss or the
deterioration of the goods was due to preshipment damage. It likewise opined that
the notation "metal envelopes rust stained

pre-shipment damage, to the

The RTC dismissed the Complaint because

and slightly dented" placed on the Bill of

inherent nature, vice or defect

respondent had failed to prove its claims

Lading had not been the proximate cause

of the goods, or to perils,

with the quantum of proof required by law.

of the damage to the four (4) coils.

It likewise debunked petitioners'

As to the extent of petitioners' liability, the

counterclaim, because respondent's suit

CA held that the package limitation under

was not manifestly frivolous or primarily

COGSA was not applicable, because the

intended to harass them.

words "L/C No. 90/02447" indicated that a

danger and accidents of the

sea, or to insufficiency of
packing thereof, or to the act or
omission of the shipper of the
goods or their representatives.
In addition thereto, defendants-

Ruling of the Court of Appeals

higher valuation of the cargo had been

declared by the shipper. The CA, however,

required notice of loss within

2. Whether the notice of loss was timely

affirmed the award of attorney's fees.

the time required by law;

filed

Hence, this Petition.

III

Issues

"Whether or not a notation in

In their Memorandum, petitioners raise the

the bill of lading at the time of

following issues for the Court's

loading is sufficient to show

consideration:

pre-shipment damage and to

exempt herein defendants from

IV

presenting only one witness

is applicable
This Court's Ruling
The Petition is partly meritorious.
First Issue:
Proof of Negligence

liability;

"Whether or not plaintiff by

3. Whether the package limitation of liability

Petitioners contend that the presumption of

fault imposed on common carriers should

who has never seen the subject

"Whether or not the "PACKAGE

not be applied on the basis of the lone

shipment and whose testimony

LIMITATION" of liability under

testimony offered by private respondent.

is purely hearsay is sufficient to

Section 4 (5) of COGSA is

The contention is untenable.

pave the way for the

applicable to the case at bar."

applicability of Article 1735 of

the Civil Code;
II
"Whether or not the
consignee/plaintiff filed the

Well-settled is the rule that common

In sum, the issues boil down to three:

carriers, from the nature of their business

1. Whether petitioners have overcome the

and for reasons of public policy, are bound

presumption of negligence of a common

to observe extraordinary diligence and

carrier

vigilance with respect to the safety of the

goods and the passengers they

transport. Thus, common carriers are

stipulations for their approval. Hence, it

international or civil; (3) an act or omission

required to render service with the greatest

merely adheres to the agreement prepared

of the shipper or owner of the goods; (4)

skill and foresight and "to use all

by them.

the character of the goods or defects in the

reason[a]ble means to ascertain the nature

and characteristics of the goods tendered
for shipment, and to exercise due care in
the handling and stowage, including such
methods as their nature requires." The
extraordinary responsibility lasts from the
time the goods are unconditionally placed
in the possession of and received for
transportation by the carrier until they are
delivered, actually or constructively, to the
consignee or to the person who has a right
to receive them.
This strict requirement is justified by the
fact that, without a hand or a voice in the
preparation of such contract, the riding
public enters into a contract of
transportation with common carriers. Even
if it wants to, it cannot submit its own

Owing to this high degree of diligence

required of them, common carriers, as a
general rule, are presumed to have been at
fault or negligent if the goods they
transported deteriorated or got lost or
destroyed. That is, unless they prove that

packing or the container; or (5) an order or

act of competent public authority. This is a
closed list. If the cause of destruction, loss
or deterioration is other than the
enumerated circumstances, then the carrier
is liable therefor.

they exercised extraordinary diligence in

Corollary to the foregoing, mere proof of

transporting the goods. In order to avoid

delivery of the goods in good order to a

responsibility for any loss or damage,

common carrier and of their arrival in bad

therefore, they have the burden of proving

order at their destination constitutes a

that they observed such diligence.

prima facie case of fault or negligence

However, the presumption of fault or

negligence will not arise if the loss is due to
any of the following causes: (1) flood,
storm, earthquake, lightning, or other
natural disaster or calamity; (2) an act of
the public enemy in war, whether

against the carrier. If no adequate

explanation is given as to how the
deterioration, the loss or the destruction of
the goods happened, the transporter shall
be held responsible.

That petitioners failed to rebut the prima

a request for a bad order survey is made in

what company you are

facie presumption of negligence is revealed

case there is an apparent or a presumed

connected?

in the case at bar by a review of the

loss or damage.

records and more so by the evidence

adduced by respondent.

Fourth, the Certificate of Analysis stated

that, based on the sample submitted and

First, as stated in the Bill of Lading,

tested, the steel sheets found in bad order

petitioners received the subject shipment in

were wet with fresh water.

good order and condition in Hamburg,

A. BM Santos Checkers
Agency, sir.
Q. How is BM Santos Checkers
Agency related or
connected with

Fifth, petitioners in a letter addressed to

defendant Jardine

the Philippine Steel Coating Corporation

Davies Transport

Second, prior to the unloading of the cargo,

and dated October 12, 1990 admitted

Services?

an Inspection Report prepared and signed

that they were aware of the condition of the

by representatives of both parties showed

four coils found in bad order and condition.

Germany.

the steel bands broken, the metal

envelopes rust-stained and heavily
buckled, and the contents thereof exposed
and rusty.
Third, Bad Order Tally Sheet No.
154979 issued by Jardine Davies Transport
Services, Inc., stated that the four coils
were in bad order and condition. Normally,

These facts were confirmed by Ruperto

Esmerio, head checker of BM Santos
Checkers Agency. Pertinent portions of his
testimony are reproduced hereunder:
"Q. Mr. Esmerio, you mentioned
that you are a Head
Checker. Will you inform
the Honorable Court with

A. It is the company who

contracts the checkers,
sir.
Q. You mentioned that you are
a Head Checker, will you
inform this Honorable
Court your duties and
responsibilities?

A. I am the representative of
BM Santos on board the
vessel, sir, to supervise
the discharge of
cargoes.
xxx xxx xxx
Q. On or about August 1, 1990,

A. Yes, sir, I was there.

xxx xxx xxx
Q. Based on your inspection
since you were also
present at that time, will
you inform this
Honorable Court the

condition of the steel

sheets.
COURT:
Let the witness answer.
A. The scrap of the cargoes is
broken already and the
rope is loosen and the

were you still connected

condition or the

or employed with BM

appearance of the bad

Santos as a Head

order cargoes that were

Checker?

unloaded from the

All these conclusively prove the fact of

MV/ANANGEL SKY?

shipment in good order and condition and

A. Yes, sir.
Q. And, on or about that date,
do you recall having

ATTY. MACAMAY:
Objection, Your Honor, I think

attended the discharging

the document itself

and inspection of cold

reflects the condition of

steel sheets in coil on

the cold steel sheets and

board the MV/AN

the best evidence is the

ANGEL SKY?

document itself, Your

Honor that shows the

cargoes are dent on the

sides."

the consequent damage to the four coils

while in the possession of petitioner, who
notably failed to explain why.
Further, petitioners failed to prove that they
observed the extraordinary diligence and
precaution which the law requires a
common carrier to know and to follow to
avoid damage to or destruction of the

goods entrusted to it for safe carriage and

extraordinary diligence required by law,

the fermentation or evaporation of

delivery.

petitioners cannot escape liability for the

substances liable therefor, the necessary

damage to the four coils.

and natural wear of goods in transport,

True, the words "metal envelopes rust

stained and slightly dented" were noted on

In their attempt to escape liability,

the Bill of Lading; however, there is no

petitioners further contend that they are

showing that petitioners exercised due

exempted from liability under Article

diligence to forestall or lessen the

1734(4) of the Civil Code. They cite the

loss. Having been in the service for several

notation "metal envelopes rust stained and

years, the master of the vessel should have

slightly dented" printed on the Bill of Lading

known at the outset that metal envelopes in

as evidence that the character of the goods

the said state would eventually deteriorate

or defect in the packing or the containers

when not properly stored while in transit.

was the proximate cause of the damage.

Equipped with the proper knowledge of the

We are not convinced.

nature of steel sheets in coils and of the

proper way of transporting them, the
master of the vessel and his crew should
have undertaken precautionary measures
to avoid possible deterioration of the cargo.
But none of these measures was taken.
Having failed to discharge the burden of
proving that they have exercised the

defects in packages in which they are

shipped, or the natural propensities of
animals. None of these is present in the
instant case.

Further, even if the fact of improper packing

was known to the carrier or its crew or was
apparent upon ordinary observation, it is
not relieved of liability for loss or injury
resulting therefrom, once it accepts the

From the evidence on record, it cannot be

goods notwithstanding such

reasonably concluded that the damage to

condition. Thus, petitioners have not

the four coils was due to the condition

successfully proven the application of any

noted on the Bill of Lading. The aforecited

of the aforecited exceptions in the present

exception refers to cases when goods are

case.

lost or damaged while in transit as a result

of the natural decay of perishable goods or

Second Issue:
Notice of Loss

Petitioners claim that pursuant to

days will not bar recovery if it is

of, or damage to, cargoes

Section 3, paragraph 6 of the Carriage

nonetheless filed within one year. This one-

sustained during transit may

of Goods by Sea Act (COGSA),

year prescriptive period also applies to the

be applied suppletorily to the

respondent should have filed its Notice

shipper, the consignee, the insurer of the

case at bar."

of Loss within three days from delivery.

goods or any legal holder of the bill of

They assert that the cargo was

lading.

discharged on July 31, 1990, but that

respondent filed its Notice of Claim only
on September 18, 1990.

discharged on July 31, 1990, while the

In Loadstar Shipping Co., Inc. v. Court of

Complaint was filed by respondent on July

Appeals, we ruled that a claim is not barred

25, 1991, within the one-year prescriptive

by prescription as long as the one-year

period.

We are not persuaded. First, the above-

period has not lapsed. Thus, in the words

cited provision of COGSA provides that the

of the ponente, Chief Justice Hilario G.

notice of claim need not be given if the

Davide Jr.:

state of the goods, at the time of their

receipt, has been the subject of a joint
inspection or survey. As stated earlier, prior
to unloading the cargo, an Inspection
Report as to the condition of the goods was
prepared and signed by representatives of
both parties.
Second, as stated in the same provision, a
failure to file a notice of claim within three

In the present case, the cargo was

Third Issue:
Package Limitation

"Inasmuch as neither the Civil

Assuming arguendo they are liable for

Code nor the Code of

respondent's claims, petitioners contend

Commerce states a specific

that their liability should be limited to

prescriptive period on the

US$500 per package as provided in the Bill

matter, the Carriage of Goods

of Lading and by Section 4(5) of COGSA.

by Sea Act (COGSA) which

On the other hand, respondent argues that

provides for a one-year period

Section 4(5) of COGSA is inapplicable,

of limitation on claims for loss

because the value of the subject shipment

was declared by petitioners beforehand, as

declares a greater value is sanctioned

shipper's declaration of a higher value in

evidenced by the reference to and the

by law. There are, however, two conditions

the bill of lading. The provisions on limited

insertion of the Letter of Credit or "L/C No.

to be satisfied: (1) the contract is

liability are as much a part of the bill of

90/02447" in the said Bill of Lading.

reasonable and just under the

lading as though physically in it and as

circumstances, and (2) it has been fairly

though placed there by agreement of the

and freely agreed upon by the parties. The

parties.

A bill of lading serves two functions. First, it

is a receipt for the goods shipped. Second,
it is a contract by which three parties
namely, the shipper, the carrier, and the
consignee undertake specific

rationale for this rule is to bind the shippers

by their agreement to the value (maximum
valuation) of their goods.

In the case before us, there was no

stipulation in the Bill of Lading limiting the
carrier's liability. Neither did the shipper

responsibilities and assume stipulated

It is to be noted, however, that the Civil

declare a higher valuation of the goods to

obligations. In a nutshell, the acceptance of

Code does not limit the liability of the

be shipped. This fact notwithstanding, the

the bill of lading by the shipper and the

common carrier to a fixed amount per

insertion of the words "L/C No. 90/02447

consignee, with full knowledge of its

package. In all matters not regulated by the

cannot be the basis for petitioners' liability.

contents, gives rise to the presumption that

Civil Code, the right and the obligations of

it constituted a perfected and binding

common carriers shall be governed by the

contract.

Code of Commerce and special

Further, a stipulation in the bill of lading

limiting to a certain sum the common
carrier's liability for loss or destruction of a
cargo unless the shipper or owner

laws. Thus, the COGSA, which is

suppletory to the provisions of the Civil
Code, supplements the latter by
establishing a statutory provision limiting
the carrier's liability in the absence of a

First, a notation in the Bill of Lading which

indicated the amount of the Letter of Credit
obtained by the shipper for the importation
of steel sheets did not efect a declaration
of the value of the goods as required by the
bill. That notation was made only for the

convenience of the shipper and the bank

carriage as embodied in the bill

US$500 per package and not on the per

processing the Letter of Credit.

of lading. As the bank cannot

metric ton price declared in the Letter of

be expected to look beyond the

Credit. In Eastern Shipping

documents presented to it by

Lines, Inc. v. Intermediate Appellate

the seller pursuant to the letter

Court, we explained the meaning

of credit, neither can the carrier

of package:

Second, in Keng Hua Paper Products v.

Court of Appeals, we held that a bill of
lading was separate from the Other Letter
of Credit arrangements. We ruled, thus:
"(T)he contract of carriage, as
stipulated in the bill of lading in
the present case, must be
treated independently of the
contract of sale between the
seller and the buyer, and the
contract of issuance of a letter
of credit between the amount of
goods described in the
commercial invoice in the
contract of sale and the amount
allowed in the letter of credit will
not affect the validity and
enforceability of the contract of

be expected to go beyond the

representations of the shipper
in the bill of lading and to verify
their accuracy vis--vis the
commercial invoice and the
letter of credit. Thus, the
discrepancy between the
amount of goods indicated in
the invoice and the amount in
the bill of lading cannot negate
petitioner's obligation to private
respondent arising from the
contract of transportation."

In the light of the foregoing, petitioners'

liability should be computed based on

"When what would ordinarily be

considered packages are
shipped in a container supplied
by the carrier and the number
of such units is disclosed in the
shipping documents, each of
those units and not the
container constitutes the
'package' referred to in the
liability limitation provision
of Carriage of Goods by Sea
Act."

Considering, therefore, the ruling

in Eastern Shipping Lines and the fact that

the Bill of Lading clearly disclosed the

CENTRAL SHIPPING COM

natural disaster comprehended in the law.

contents of the containers, the number of

PANY,

Given the known weather condition

units, as well as the nature of the steel

INC., petitioner, vs. INSURA

prevailing during the voyage, the manner of

sheets, the four damaged coils should be

NCE COMPANY OF NORTH

stowage employed by the carrier was

considered as the shipping unit subject to

AMERICA, respondent.

insufficient to secure the cargo from the

the US$500 limitation.

WHEREFORE, the Petition is partly

rolling action of the sea. The carrier took a

DECISION

granted and the assailed Decision

MODIFIED. Petitioners' liability is reduced
to US$2,000 plus interest at the legal rate
of six percent from the time of the filing of
the Complaint on July 25, 1991 until the
finality of this Decision, and 12 percent
thereafter until fully paid. No
pronouncement as to costs. SO
ORDERED.

[G.R. No. 150751. September 20, 2004.]

PANGANIBAN, J :

calculated risk in improperly securing the

cargo. Having lost that risk, it cannot now
disclaim any liability for the loss.

A common carrier is presumed to be at

fault or negligent. It shall be liable for the
loss, destruction or deterioration of its
cargo, unless it can prove that the sole and
proximate cause of such event is one of the
causes enumerated in Article 1734 of the
Civil Code, or that it exercised

The Case
Before the Court is a Petition for
Review under Rule 45 of the Rules of
Court, seeking to reverse and set aside the
March 23, 2001 Decision of the Court of
Appeals (CA) in CA-GR CV No. 48915.
The assailed Decision disposed as follows:

extraordinary diligence to prevent or

"WHEREFORE, the decision of

minimize the loss. In the present case, the

the Regional Trial Court of

weather condition encountered by

Makati City, Branch 148 dated

petitioner's vessel was not a "storm" or a

August 4, 1994 is hereby

MODIFIED in so far as the

Manila for delivery to Alaska

increased to 15 degrees, the

award of attorney's fees is

Lumber Co., Inc.

ship captain ordered his men to

DELETED. The decision is

AFFIRMED in all other
respects."

"The cargo was insured for

P3,000,000.00 against total
loss under [respondent's]

The CA denied petitioner's Motion for

Marine Cargo Policy No.

Reconsideration in its November 7, 2001

MCPB-00170.

Resolution.

"On July 25, 1990, upon

The Facts

completion of loading of the

The factual antecedents, summarized by

cargo, the vessel left Palawan

the trial court and adopted by the appellate

and commenced the voyage to

court, are as follows:

Manila.

"On July 25, 1990 at Puerto

"At about 0125 hours on July

Princesa, Palawan, the

26, 1990, while enroute to

[petitioner] received on board

Manila, the vessel listed about

its vessel, the

10 degrees starboardside, due

M/V 'Central Bohol', 376 pieces

to the shifting of logs in the

[of] Philippine Apitong Round

hold.

Logs and undertook to

"At about 0128 hours, after the

transport said shipment to

listing of the vessel had

abandon ship and at about

0130 hours of the same day the
vessel completely sank. Due to
the sinking of the vessel, the
cargo was totally lost.
"[Respondent] alleged that the
total loss of the shipment was
caused by the fault and
negligence of the [petitioner]
and its captain and as direct
consequence thereof the
consignee suffered damage in
the sum of P3,000,000.00.
"The consignee, Alaska
Lumber Co. Inc., presented a
claim for the value of the
shipment to the [petitioner] but
the latter failed and refused to

settle the claim, hence

"It raised as its main defense

respondent and found that the latter was

[respondent], being the insurer,

that the proximate and only

entitled to be subrogated to the rights of the

paid said claim and now seeks

cause of the sinking of its

insured. The court a quo disposed as

to be subrogated to all the

vessel and the loss of its cargo

follows:

rights and actions of the

was a natural disaster, a

consignee as against the

tropical storm which neither

[petitioner].

[petitioner] nor the captain of its

"[Petitioner], while admitting the

vessel could have foreseen."

"WHEREFORE, premises
considered, judgment is hereby
rendered in favor of the
[respondent] and against the

sinking of the vessel,

The RTC was unconvinced that the sinking

[petitioner] ordering the latter to

interposed the defense that the

of M/V Central Bohol had been caused by

pay the following:

vessel was fully manned, fully

the weather or any other caso fortuito. It

equipped and in all respects

noted that monsoons, which were common

seaworthy; that all the logs

occurrences during the months of July to

were properly loaded and

December, could have been foreseen and

secured; that the vessel's

provided for by an ocean-going vessel.

master exercised due diligence

Applying the rule of presumptive fault or

to prevent or minimize the loss

negligence against the carrier, the trial

before, during and after the

court held petitioner liable for the loss of

occurrence of the storm.

the cargo. Thus, the RTC deducted the

salvage value of the logs in the amount of
P200,000 from the principal claim of

1) the amount of
P2,800,000.00
with legal interest
thereof from the
filing of this
complaint up to
and until the
same is fully paid;
2) P80,000.00 as and for
attorney's fees;

3) Plus costs of suit."

Ruling of the Court of Appeals

The CA affirmed the trial court's finding that
the southwestern monsoon encountered by
the vessel was not unforeseeable. Given

held that the Certificates of Inspection and

determination of whether the carrier

Drydocking were not conclusive proofs

observed extraordinary diligence in

thereof. In order to consider a vessel to be

protecting the cargo it was transporting was

seaworthy, it must be fit to meet the perils

a function of the courts, not of the BMI.

of the sea.

The CA concluded that the doctrine of

the season of rains and monsoons, the

Found untenable was petitioner's

limited liability was not applicable, in view

ship captain and his crew should have

insistence that the trial court should have

of petitioner's negligence particularly its

anticipated the perils of the sea. The

given greater weight to the factual findings

improper stowage of the logs.

appellate court further held that the

of the Board of Marine Inquiry (BMI) in the

weather disturbance was not the sole and

investigation of the Marine Protest filed by

proximate cause of the sinking of the

the ship captain, Enriquito Cahatol. The CA

vessel, which was also due to the

further observed that what petitioner had

In its Memorandum, petitioner submits the

concurrent shifting of the logs in the hold

presented to the court a quo were mere

following issues for our consideration:

that could have resulted only from improper

excerpts of the testimony of Captain

stowage. Thus, the carrier was held

Cahatol given during the course of the

responsible for the consequent loss of or

proceedings before the BMI, not the actual

damage to the cargo, because its own

findings and conclusions of the agency.

negligence had contributed thereto.

Citing Arada v. CA, it said that findings of

The CA found no merit in petitioner's

assertion of the vessel's seaworthiness. It

the BMI were limited to the administrative

liability of the owner/operator, officers and
crew of the vessel. However, the

Hence, this Petition.

Issues

"(i) Whether or not the weather

disturbance which
caused the sinking of the
vessel
M/V Central Bohol was a
fortuitous event.

giving credence to the

was such natural disaster or whether

investigation report

factual finding of the

petitioner was partly to blame for failing to

prepared by Claimsmen

Board of Marine Inquiry

exercise due diligence in the prevention of

Adjustment Corporation

(BMI), an independent

that loss.

is hearsay evidence

government agency

under Section 36, Rule

tasked to conduct

130 of the Rules of

inquiries on maritime

Court.

accidents.

First Issue:

"(vi) Whether or not the

Liability for Lost Cargo

"(ii) Whether or not the

"(iii) Whether or not the finding

The Court's Ruling

The Petition is devoid of merit.

of the Court of Appeals

Doctrine of Limited

From the nature of their business and for

that 'the logs in the hold

Liability is applicable to

reasons of public policy, common carriers

shifted and such shifting

the case at bar."

are bound to observe extraordinary

could only be due to

improper stowage' has a
valid and factual basis.
"(iv) Whether or not

The issues boil down to two: (1) whether

the carrier is liable for the loss of the cargo;
and (2) whether the doctrine of limited
liability is applicable. These issues involve

M/V Central Bohol is

a determination of factual questions of

seaworthy.

whether the loss of the cargo was due to

"(v) Whether or not the Court of

Appeals erred in not

the occurrence of a natural disaster; and if

so, whether its sole and proximate cause

diligence over the goods they transport,

according to all the circumstances of each
case. In the event of loss, destruction or
deterioration of the insured goods, common
carriers are responsible; that is, unless they
can prove that such loss, destruction or
deterioration was brought about among
others by "flood, storm, earthquake,
lightning or other natural disaster or

calamity." In all other cases not specified

reviewed on appeal only under exceptional

The Note of Marine Protest, which the

under Article 1734 of the Civil Code,

circumstances such as, among others,

captain of the vessel issued under oath,

common carriers are presumed to have

when the inference is manifestly

stated that he and his crew encountered a

been at fault or to have acted negligently,

mistaken, the judgment is based on a

southwestern monsoon about 2200 hours

unless they prove that they observed

misapprehension of facts, or the CA

on July 25, 1990, and another monsoon

extraordinary diligence.

manifestly overlooked certain relevant and

about 2400 hours on July 26, 1990. Even

undisputed facts that, if properly

petitioner admitted in its Answer that the

considered, would justify a different

sinking of M/V Central Bohol had been

conclusion.

caused by the strong southwest

In the present case, petitioner disclaims

responsibility for the loss of the cargo by
claiming the occurrence of a "storm" under
Article 1734(1). It attributes the sinking of

In the present case, petitioner has not

its vessel solely to the weather condition

given the Court sufficient cogent reasons to

between 10:00 p.m. on July 25, 1990 and

disturb the conclusion of the CA that the

1:25 a.m. on July 26, 1990.

weather encountered by the vessel was not

At the outset, it must be stressed that only

questions of law may be raised in a petition
for review on certiorari under Rule 45 of the
Rules of Court. Questions of fact are not
proper subjects in this mode of appeal, for
"[t]he Supreme Court is not a trier of
facts." Factual findings of the CA may be

monsoon. Having made such factual

representation, it cannot now be allowed to
retreat and claim that the southwestern
monsoon was a "storm."

a "storm" as contemplated by Article

The pieces of evidence with respect to the

1734(1). Established is the fact that

weather conditions encountered by the

between 10:00 p.m. on July 25, 1990 and

vessel showed that there was a

1:25 a.m. on July 26,

southwestern monsoon at the time.

1990, M/V Central Boholencountered a

Normally expected on sea voyages,

southwestern monsoon in the course of its

however, were such monsoons, during

voyage.

which strong winds were not unusual. Rosa

S. Barba, weather specialist of the

Philippine Atmospheric Geophysical and

around force 7 to 8 on the Beaufort Scale.

the injury could have been avoided by

Astronomical Services Administration

Consequently, the strong winds

human precaution.

(PAGASA), testified that a thunderstorm

accompanying the southwestern monsoon

might occur in the midst of a southwest

could not be classified as a "storm." Such

monsoon. According to her, one did occur

winds are the ordinary vicissitudes of a sea

between 8:00 p.m. on July 25, 1990, and 2

voyage.

a.m. on July 26, 1990, as recorded by the

Hence, if a common carrier fails to exercise

due diligence or that ordinary care that
the circumstances of the particular case
demand to prevent or minimize the loss

Even if the weather encountered by the

before, during and after the occurrence of

ship is to be deemed a natural disaster

the natural disaster, the carrier shall be

Nonetheless, to our mind it would not be

under Article 1739 of the Civil Code,

deemed to have been negligent. The loss

sufficient to categorize the weather

petitioner failed to show that such natural

or injury is not, in a legal sense, due to a

condition at the time as a "storm" within the

disaster or calamity was the proximate and

natural disaster under Article 1734(1).

absolutory causes enumerated in the law.

only cause of the loss. Human agency

Significantly, no typhoon was observed

must be entirely excluded from the cause of

within the Philippine area of responsibility

injury or loss. In other words, the damaging

during that period.

effects blamed on the event or

PAGASA Weather Bureau.

According to PAGASA, a storm has a wind

force of 48 to 55 knots, equivalent to 55 to
63 miles per hour or 10 to 11 in the
Beaufort Scale. The second mate of the
vessel stated that the wind was blowing

phenomenon must not have been caused,

contributed to, or worsened by the
presence of human participation. The
defense of fortuitous event or natural
disaster cannot be successfully made when

We also find no reason to disturb the CA's

finding that the loss of the vessel was
caused not only by the southwestern
monsoon, but also by the shifting of the
logs in the hold. Such shifting could been
due only to improper stowage. The
assailed Decision stated:
"Notably, in Master Cahatol's
account, the vessel

encountered the first

pangyayari, maari mo

naririnig ko ang malakas

southwestern monsoon at

bang isalaysay ang

na agos ng tubig-dagat

about 1[0]:00 in the evening.

naganap na paglubog sa

na pumapasok sa loob

The monsoon was coupled with

barkong

ng bodega ng barko;

heavy rains and rough seas yet

M/V Central Bohol?

agad bumalik ako kay

the vessel withstood the

onslaught. The second
monsoon attack occurred at
about 12:00 midnight. During
this occasion, the master 'felt'
that the logs in the hold shifted,
prompting him to order second
mate Percival Dayanan to look
at the bodega. Complying with
the captain's order, 2nd mate
Percival Dayanan found that
there was seawater in the
bodega. 2nd mate Dayanan's
account was:
'14.T Kung inyo pong
natatandaan ang mga

'S Opo, noong ika-26 ng Julio

1990 humigit kumulang
alas 1:20 ng umaga (dst)
habang kami ay
nagnanabegar
patungong Maynila sa
tapat ng Cadlao Island
at Cauayan Island sakop
ng El Nido, Palawan,
inutusan ako ni Captain
Enriquito Cahatol na
tingnan ko ang
bodega; nang ako ay
nasa bodega, nakita ko
ang loob nang bodega
na maraming tubig at

Captain Enriquito
Cahatol at sinabi ko ang
malakas na pagpasok
ng tubig-dagat sa loob
nang bodega ng barko
na ito ay naka-tagilid
humigit kumulang sa 020
degrees, nag-order si
Captain Cahatol na
standby engine at
tinawag ang lahat ng
mga officials at mga
crew nang maipon
kaming lahat ang barko
ay naka-tagilid at ito ay
tuloy-tuloy ang

pagtatagilid na ang ilan

evening and the other at

the logs not shifted, the ship could have

sa mga officials ay naka-

around 12 o'clock midnight.

survived and reached at least the port of El

hawak na sa barandilla

Both disturbances were

Nido. In fact, there was another motor

ng barko at di-nagtagal

coupled with waves and heavy

launch that had been buffeted by the same

sumigaw nang

rains, yet, the vessel endured

weather condition within the same area, yet

ABANDO[N] SHIP si

the first and not the second.

it was able to arrive safely at El Nido.

Captain Cahatol at kami

Why? The reason is plain. The

ay nagkanya-kanya nang

vessel felt the strain during the

talunan at languyan sa

second onslaught because the

dagat na malakas ang

logs in the bodega shifted and

alon at nang ako ay

there were already seawater

lumingon sa barko ito ay

that seeped inside."

di ko na nakita.'

In its Answer, petitioner categorically

admitted the allegation of respondent in
paragraph 5 of the latter's Complaint "[t]hat
at about 0125 hours on 26 July 1990, while
enroute to Manila, the M/V 'Central Bohol'
listed about 10 degrees starboardside, due

The above conclusion is supported by the

to the shifting of logs in the hold." Further

"Additionally, [petitioner's] own

fact that the vessel proceeded through the

petitioner averred that "[t]he vessel, while

witnesses, boatswain Eduardo

first southwestern monsoon without any

navigating through this second

Vias Castro and oiler

mishap, and that it began to list only during

southwestern monsoon, was under

Frederick Perena, are one in

the second monsoon immediately after the

extreme stress. At about 0125 hours, 26

saying that the vessel

logs had shifted and seawater had entered

July 1990, a thud was heard in the cargo

encountered two weather

the hold. In the hold, the sloshing of tons of

hold and the logs therein were felt to have

disturbances, one at around 10

water back and forth had created pressures

shifted. The vessel thereafter immediately

o'clock to 11 o'clock in the

that eventually caused the ship to sink. Had

listed by ten (10) degrees starboardside."

Yet, petitioner now claims that the CA's

side by side, there were unavoidable

arrangement of the logs did not rule out the

conclusion was grounded on mere

clearances between them owing to their

possibility of their shifting. By force of

speculations and conjectures. It alleges

round shape. Those loaded on deck were

gravity, those on top of the pile would

that it was impossible for the logs to have

lashed together several times across by

naturally roll towards the bottom of the ship.

shifted, because they had fitted exactly in

cable wire, which had a diameter of 60

the hold from the port to the starboard side.

millimeters, and were secured from

After carefully studying the records, we are

starboard to port.

The adjuster's Report, which was heavily

relied upon by petitioner to strengthen its
claim that the logs had not shifted, stated

inclined to believe that the logs did indeed

It is obvious, as a matter of common sense,

that "the logs were still properly lashed by

shift, and that they had been improperly

that the manner of stowage in the lower

steel chains on deck." Parenthetically, this

loaded.

hold was not sufficient to secure the logs in

statement referred only to those loaded on

the event the ship should roll in heavy

deck and did not mention anything about

weather. Notably, they were of different

the condition of those placed in the lower

lengths ranging from 3.7 to 12.7

hold. Thus, the finding of the surveyor that

meters. Being clearly prone to shifting, the

the logs were still intact clearly pertained

round logs should not have been stowed

only to those lashed on deck.

According to the boatswain's testimony, the

logs were piled properly, and the entire
shipment was lashed to the vessel by cable
wire. The ship captain testified that out of
the 376 pieces of round logs, around 360
had been loaded in the lower hold of the
vessel and 16 on deck. The logs stored in
the lower hold were not secured by cable
wire, because they fitted exactly from floor
to ceiling. However, while they were placed

with nothing to hold them securely in place.

Each pile of logs should have been lashed
together by cable wire, and the wire
fastened to the side of the hold.
Considering the strong force of the wind
and the roll of the waves, the loose

The evidence indicated that strong

southwest monsoons were common
occurrences during the month of July.
Thus, the officers and crew
of M/V Central Bohol should have

reasonably anticipated heavy rains, strong

been caused by the fault or negligence of

HE NETHERLANDS INSUR

winds and rough seas. They should then

the ship captain and the crew, as shown by

ANCE CO. (PHILIPPINES),

have taken extra precaution in stowing the

the improper stowage of the cargo of logs.

INC., respondent.

logs in the hold, in consonance with their

"Closer supervision on the part of the

duty of observing extraordinary diligence in

shipowner could have prevented this fatal

safeguarding the goods. But the carrier

miscalculation." As such, the shipowner

took a calculated risk in improperly

was equally negligent. It cannot escape

securing the cargo. Having lost that risk, it

liability by virtue of the limited liability rule.

DECISION

BRION, J :
p

cannot now escape responsibility for the

For our resolution is the petition for review

loss.

on certiorari filed

by

petitioners Regional Container Lines

of

Second Issue:
Doctrine of Limited Liability
The doctrine of limited liability under Article
587 of the Code of Commerce is not
applicable to the present case. This rule
does not apply to situations in which the

WHEREFORE, the Petition is DENIED,

and the assailed Decision and Resolution
AFFIRMED. Costs against petitioner.

Singapore (RCL) and

EDSA

Agency (EDSA Shipping) to annul and set

aside the decision and

SO ORDERED.

Shipping
resolution

of the Court of Appeals (CA) dated May 26,

|

2004 and May 10, 2005, respectively, in

[G.R. No. 168151. September 4, 2009.]

loss or the injury is due to the concurrent

CA-G.R. CV No. 76690.

negligence of the shipowner and the

REGIONAL CONTAINER LI

RCL is a foreign corporation based in

captain. It has already been established

NES (RCL) OF SINGAPORE

Singapore.

that the sinking of M/V Central Bohol had

and

in the Philippines through its agent, EDSA

EDSA

SHIPPING

AGENCY, petitioners, vs. T

It

does

business

Shipping, a domestic corporation organized

and

existing

under

Philippine

laws.

Eagle

in

its

Respondent Netherlands Insurance

6105660

Company

As the cargo

(Philippines),

Refrigerated Container No.

with

Seal

No.

13223.

was

highly

plugged to the power terminal of the pier to

keep

its

temperature

constant.

Fidel

Rocha (Rocha),

Vice-President

for

Marines

Inc. (Netherlands Insurance) is likewise a

perishable, the inside of the container had

Operations

domestic corporation engaged in themarine

to be kept at a temperature of 0 Celsius.

Corporation,

underwriting business.

Pacific

surveyors, conducted a protective survey

FACTUAL ANTECEDENTS
The pertinent facts, based on the records
are summarized below.
On October 20, 1995, 405 cartons of
Epoxy Molding Compound were consigned
to be shipped from Singapore to Manila for
Temic

Telefunken

Microelectronics

Philippines (Temic). U-Freight Singapore

PTE

Ltd. (U-Freight

Singapore),

forwarding agent based in Singapore,

contracted the services of Pacific Eagle
Lines

PTE.

Ltd.(Pacific

Eagle) to

Eagle

then

of

Adjustment

accompanied

of the cargo.

board the M/V Piya Bhum, a vessel owned

on the temperature

by RCL, with which Pacific Eagle had a slot

reading was constant from October 18,

charter agreement. RCL duly issued its

1995 to October 25, 1995 at 0 Celsius.

own Bill of Lading in favor of Pacific Eagle.

However, at midnight of October 25, 1995

insure the cargo

against

loss

and

damage, Netherlands Insurance issued a

Marine Open Policy in favor of Temic, as
shown by MPO-21-05081-94 and Marine
Risk Note MRN-21 14022, to cover all
losses/damages to the shipment.
On

October

25,
in

1995, the M/V Piya

transport the subject cargo. The cargo was

Bhum docked

Manila.

After

packed, stored, and sealed by Pacific

unloading the refrigerated container, it was

when the cargo

found

that

two

loaded the refrigerated container on

To

They

by

based

chart, the temperature

had

already

been

unloaded from the ship the temperature

fluctuated with a reading of 33 Celsius.
Rocha believed the fluctuation was caused
by the burnt

condenser

fan

motor

1995,

Temic

of the refrigerated container.

On

November

9,

received the shipment. It found the cargo

completely damaged. Temic filed a claim
for

cargo

loss

against Netherlands Insurance,

with

1997 to implead EDSA Shipping, RCL,

The defendants

claims

Eagle Liner Shipping Agencies, U-Freight

for the damage caused to the cargo, citing

documents. The Netherlands Insurance

Singapore, and U-Ocean (Phils.), Inc. (U-

several

paid

Ocean), as additional defendants. A third

Insurance's

under the terms of the Marine Open Policy.

amended

Specifically, RCL and EDSA Shipping

Temic

impleading Pacific Eagle in substitution of

denied

Eagle Liner Shipping Agencies.

of the cargo; they attributed any negligence

supporting
Temic the sum
then

of

executed

subrogation

P1,036,497.00
a

receipt

loss
in

and
favor

of Netherlands Insurance.

TMS

complaint

filed

its

was

answer

later

made,

to the original

Seven months from delivery of the cargo or

complaint. RCL and EDSA Shipping filed

on June 4, 1996, Netherlands Insurance

their

filed

compulsory

complaint

for

subrogation

of

answers

with

cross-claim

counterclaim

and

to the second

insurance settlement with the Regional Trial

amended complaint. U-Ocean likewise filed

Court,

an answer with compulsory counterclaim

Branch

5,

Manila,

against

"the unknown owner of M/V Piya Bhum"

and

and TMS Ship Agencies (TMS), the latter

of the case, U-Ocean, jointly with U-Freight

thought to be the local agent of M/V Piya

Singapore,

Bhum'sunknown owner. The complaint was

compulsory

counterclaim.

docketed as Civil Case No. 96-78612.

Eagle

TMS

Netherlands Insurance
amended the complaint on January 17,

cross-claim.

and

filed

During the pendency

another
filed

answer
Only
their

to the third amended complaint.

with

Pacific
answers

that

all

disclaimed

reasons

why

claims

must

negligence
may

to

Netherland
be

rejected.

in the transport

have

of the shipment

liability

caused the loss

their

co-defendants.

They likewise asserted that no valid

subrogation exists, as the payment made
by Netherlands Insurance to the consignee
was invalid. By way of affirmative defenses,
RCL

and

EDSA

Shipping

that the Netherlands Insurance

averred
has

no

cause of action, and is not the real party-ininterest, and that the claim is barred by
laches/prescription.
After Netherlands Insurance had made its
formal offer of evidence, the defendants
including RCL and EDSA Shipping sought

leave of court to file their respective

Netherlands Insurance

motions to dismiss based on demurrer to

appealed the order of dismissal to the CA.

evidence.

On

As

evidence.
RCL and EDSA Shipping, in their motion,
insisted that Netherlands Insurance had (1)
failed to prove any valid subrogation, and
(2) failed to establish that any negligence
on their part or that the loss was sustained
while the cargo was in their custody.

May

26,

seasonably

2004, the CA

disposed

of the appeal as follows:

WHEREFORE,

in

view

of the foregoing, the dismissal

of the complaint

against

defendants Regional Contain

er Lines and Its local agent,
EDSA Shipping Agency, is

down an Order dismissing Civil Case No.

REVERSED

96-78612

ASIDE. The dismissal

demurrer

to

and

SET

of the complaint

there was valid subrogation, the defendants

against the other defendants is

could not be held liable for the loss or

AFFIRMED.

damage,

as

Section 1, Rule 33 of the 1997

ended

at the time

respective

liabilities

of the discharge

Rules

of

Pursuant

Civil

to

Procedure,

of the cargo from the ship at the Port of

defendants Regional Container

Manila.

Lines

and

present

such,

EDSA

r Lines and EDSA Shipping

Agency

Shipping

Agency are deemed to have

are

ordered

to

reimburse plaintiff in the sum

of

P1,036,497.00

with

interest from date hereof until

fully paid.

DIESHT

No costs.
SO

evidence. The trial court ruled that while

their

to

defendants Regional Containe

On May 22, 2002, the trial court handed

on

waived the right

ORDERED.

[Emphasis

supplied.]

The CA dismissed Netherland

Insurance's complaint against the other
defendants after finding that the claim
had already been barred by
prescription.

Having been found liable for the damage

for the safety of the passengers

to the cargo, RCL and EDSA Shipping filed

transported by them according

earthquake,

a motion for reconsideration, but the CA

to all the circumstances of each

lightning, or other

maintained its original conclusions.

case.

natural disaster or

The sole

Such

issue

for

our

resolution

extraordinary

1)

Flood,

storm,

calamity;

diligence

is whether the CA correctly held RCL

in the vigilance over the goods

and EDSA Shipping liable as common

is further expressed in articles

enemy

carriers

1734, 1735, and 1745, Nos. 5,

whether

6,

international

under the theory

of

presumption of negligence.

by the following

case

is

governed

provisions

of the Civil

Code:
ART. 1733. Common carriers,
from the nature

of

their

business and for reasons of

public policy, are bound to
observe
diligence
over

7,

while the extraordinary

THE COURT'S RULING

The present

and

2)

extraordinary
in the vigilance
the goods and

diligence

for

the safety

of the passengers is further set

3)

destruction,
of the goods,

or

for the loss,

deterioration

unless the same

is due to any of the following

causes only:

in

Act

of

war,

or

omission

of the shipper

or

owner

ART. 1734. Common carriers

responsible

of the public

civil;

forth in articles 1755 and 1756.

are

Act

of the goods;
4)

The character
of the goods

or

defects
in the packing

or

in the containers;

5)

Order

or

act

of

authority.

transportation until the same

2, 3, 4 and 5 of the preceding

article, if the goods are lost,
or

common

deteriorated,

carriers

are

presumed to have been at

or

to

negligently,
prove

that

are

by the carrier

and

received

that those mentioned in Nos. 1,

fault

of,

competent public

ART. 1735.In all cases other

destroyed,

in the possession

delivered,

actually

for

or

constructively, by the carrier

to the consignee,

or

to the person who has a right

to

them, without

receive

prejudice

to the provisions of

articles 1738.

thereafter to remove them or

otherwise dispose of them.
ART.

1742.Even

destruction,

or

deterioration

of the goods should be caused

by the character

of the goods,

or the faulty

nature

of the packing

or

carrier must exercise due

acted

ART. 1738. The extraordinary

diligence

unless

they

liability of the common carrier

lessen the loss.

observed

continues to be operative even

extraordinary

diligence

as

required by article 1733.

ART. 1736. The extraordinary
responsibility of the common
carrier

lasts

from the time the goods

unconditionally

during the time the goods

stored

are

placed

in

are

warehouse

of the carrier at the place of

destination, until the consignee
has been advised of the arrival
of the goods
reasonable

of the

containers, the common

have

they

if the loss,

and

has

had

opportunity

In Central

to

Shipping

forestall

or

Company,

Inc. v.

Insurance Company of North America, we

reiterated the rules

for the liability

of

common carrier for lost or damaged cargo

as follows:
(1)Common
bound

carriers
to

are

observe

extraordinary diligence

over the goods

they

(3)In all other cases not

transport, according to

specified under Article

after the same was already discharged

all the circumstances

1734 of the Civil Code,

from the vessel and was under the custody

of each case;

common carriers are

of the arrastre

presumed

have

(International Container Terminal Services,

been at fault or to have

Inc. or ICTSI), RCL and EDSA Shipping

acted

negligently,

posit that the presumption of negligence

unless they observed

provided in Article 1735 of the Civil Code

extraordinary

should not apply. What applies in this case

diligence.

is Article 1734, particularly paragraphs 3

(2)In the event

of

loss,

destruction,

or

deterioration
of the insured

goods,

common carriers are

responsible,

unless

they can prove that

In the present

such loss, destruction,

Shipping

or

for the loss or damage to the goods in

deterioration

brought

about

was
by,

question.

case,

to

of the damage

disclaim
They

of the damage

storm,

was the "fluctuation

lightning,
natural

or
disaster

calamity"; and

other
or

in the reefer

and

any

responsibility

contend

among others, "flood,

earthquake,

RCL

that the cause

to
van",

EDSA

the cargo

of the temperature
which

fluctuation

occurred after the cargo had already been

to the cargo

occurred

operator

and 4 thereof, which exempts the carrier

from

liability

for

loss

or

damage

to the cargo when it is caused either by an

act

or

omission

of the shipper

or

by the character of the goods or defects

in the packing or in the containers. Thus,
RCL

and

EDSA

Shipping

seek

to

lay the blame at the feet of other parties.

discharged from the vessel; no fluctuation,

We do not find the arguments of RCL

they point out, arose when the cargo was

and EDSA Shipping meritorious.

still on board M/V Piya Bhum. As the cause

A common carrier is presumed to have

by law over the goods they transported.

RCL and EDSA Shipping could have

been negligent if it fails to prove that it

Indeed,

evidence

offered evidence before the trial court to

exercised

showing

that the fluctuation

show that the damage to the condenser fan

extraordinary

vigilance

over the goods

it

there

is

sufficient

of the temperature

did not occur: (1) while the cargo was in

transported. When the goods shipped are

in the refrigerated container van,

either lost or arrived in damaged condition,

recorded

a presumption arises against the carrier of

occurred after the

its failure to observe that diligence, and

discharged

was

constructively to the consignee. They could

there need not be an express finding of

already under the custody of the arrastre

have presented proof to show that they

negligence to hold it liable.

operator, ICTSI. This evidence, however,

exercised extraordinary care and diligence

does not disprove that the condenser fan

in the handling of the goods, but they opted

to

To

overcome the presumption

negligence, the common

carrier

of
must

establish by adequate proof that it

exercised

extraordinary

diligence

over the goods. It must do more than

merely show that some other party
could be responsible for the damage.
In the present

case,

RCL

and

EDSA

Shipping failed to prove that they did

exercise that degree of diligence required

in the temperature
cargo

from the vessel

which

had
and

as

transit; (2) while they were in the act of

chart,

discharging it from the vessel; or (3) while

been

caused the fluctuation

they

were

file

delivering

evidence. As the order

of the temperature
in the refrigerated container

was

not

demurrer

was

it

actually

or

demurrer

to

granting

their

reversed

on

being

appeal, the CA correctly ruled that they

unloaded from the ship. It is settled in

are deemed to have waived their right to

maritime law jurisprudence that cargoes

present evidence, and the presumption

while being unloaded generally remain

of negligence must stand.

damaged

while the cargo

under the custody

was

of the carrier; RCL

and EDSA Shipping failed to dispute this.

It is for this reason as well that we find RCL

and EDSA Shipping's claim that the loss or
damage to the cargo was caused by a

defect in the packing or in the containers.

Appeals dated May 26, 2004 in CA-G.R.

from Mandaue City to Bislig, Surigao del

To

CV

Sur. The ship sunk, and petitioner paid the

exculpate

itself

from

liability

No.

76690

is AFFIRMED IN

for the loss/damage to the cargo under any

TOTO. Costs against the petitioners.

of the causes, the common

ORDERED.

carrier

is

SO

amount insured to San Miguel Corporation.

Petitioner sued respondent for collection to

burdened to prove any of the causes in

recover the amount it paid on the insured

Article 1734 of the Civil Code claimed by it

cargo. The trial court rendered judgment in

by

preponderance

If the carrier

of

evidence.

succeeds, the burden

of

evidence is shifted to the shipper to prove

that the carrier is negligent. RCL and EDSA
Shipping, however, failed to satisfy this
standard of evidence and in fact offered no
evidence at all on this point; a reversal of a
dismissal based on a demurrer to evidence
bars the defendant

from

presenting

evidence supporting its allegations.

on certiorari filed

by the Regional Container Lines

Singapore

and

Agency. The decision

EDSA

of
Shipping

of the Court

THE PHILIPPINE AMERICA

N GENERAL INSURANCE
CO.,
INC., petitioner, vs. MCG MA
RINE SERVICES, INC. and
DOROTEO
GAERLAN, respondents.
SYNOPSIS

WHEREFORE, we DENY the petition for

review

[G.R. No. 135645. March 8, 2002.]

of

Petitioner insurance company insured the

cargo belonging to San Miguel Corporation
and loaded on M/V Peatheray Patrick-G,
owned by respondents, to be transported

favor of petitioner finding respondents

solidarily liable for the loss. The Court of
Appeals, in rendering its decision reversing
the judgment of the trial court, relied on the
findings of the Board of Marine Inquiry that
the loss of the cargo was due solely to the
attendance of strong winds and huge
waves, a fortuitous event, which caused the
vessel to accumulate water, tilt to the port
side and to eventually keel over.
Common carriers are required to observe
extraordinary diligence in the vigilance over
the goods transported by them and are
presumed to be at fault or negligent if the
goods are lost, destroyed or damaged. This

presumption does not arise where the

and for the safety of the passengers

goods or defects in the packing or in the

proximate and only cause of the loss is a

transported by them. Owing to this high

containers; (5) Order or act of competent

fortuitous event. In the case at bar, the

degree of diligence required of them,

public authority.

Court of Appeals did not err in relying on

common carriers, as a general rule, are

the factual findings, supported by

presumed to have been at fault or negligent

substantial evidence, of the Board of

if the goods transported by them are lost,

Marine Inquiry, an administrative body

destroyed or if the same deteriorated.

which is an expert in matters concerning

marine casualties. The assailed decision of
the Court of Appeals was affirmed.
SYLLABUS
1. CIVIL LAW; OBLIGATIONS AND
CONTRACTS; COMMON CARRIERS;
PRESUMED AT FAULT OR NEGLIGENT
IF GOODS TRANSPORTED ARE LOST,
DESTROYED OR DAMAGED. Common
carriers, from the nature of their business
and for reasons of public policy, are
mandated to observe extraordinary
diligence in the vigilance over the goods

3. ID.; ID.; ID.; ID.; FORTUITOUS EVENT;

MUST BE THE PROXIMATE AND ONLY
CAUSE OF THE LOSS. In order that a
common carrier may be absolved from

2. ID.; ID.; ID.; ID.; WHEN PRESUMPTION

liability where the loss, destruction or

DOES NOT ARISE. However, this

deterioration of the goods is due to a

presumption of fault or negligence does not

natural disaster or calamity, it must further

arise in the cases enumerated under

be shown that such natural disaster or

Article 1734 of the Civil Code: Common

calamity was the proximate and only cause

carriers are responsible for the loss,

of the loss; there must be "an entire

destruction, or deterioration of the goods,

exclusion of human agency from the cause

unless the same is due to any of the

of the injury of the loss."

following causes only: (1) Flood, storm,

earthquake, lightning or other natural
disaster or calamity; (2) Act of the public
enemy in war, whether international or civil;
(3) Act or omission of the shipper or owner
of the goods; (4) The character of the

4. ID.; ID.; ID.; ID.; DILIGENCE

REQUIRED IN NATURAL DISASTER TO
PREVENT OR MINIMIZE LOSS.
Moreover, even in cases where a natural
disaster is the proximate and only cause of

the loss, a common carrier is still required

cause of the unforeseen and unexpected

Bislig, Surigao del Sur. Thus, he could not

to exercise due diligence to prevent or

occurrence, or the failure of the debtor to

be expected to have foreseen the

minimize loss before, during and after the

comply with his obligations, must be

unfavorable weather condition that awaited

occurrence of the natural disaster, for it to

independent of human will; (b) it must be

the vessel in Cortes, Surigao del Sur. It

be exempt from liability under the law for

impossible to foresee the event which

was the presence of the strong winds and

the loss of the goods. If a common carrier

constitutes the caso fortuito, or if it can be

enormous waves which caused the vessel

fails to exercise due diligence or that

foreseen, it must be impossible to avoid; (c)

to list, keel over, and consequently lose the

ordinary care which the circumstances of

the occurrence must be such as to render it

cargo contained therein. The appellate

the particular case demand to preserve

impossible for the debtor to fulfill his

court likewise found that there was no

and protect the goods carried by it on the

obligation in a normal manner; and (d) the

negligence on the part of the crew of the

occasion of a natural disaster, it will be

obligor must be free from any participation

M/V Peatheray Patrick-G.

deemed to have been negligent, and the

in the aggravation of the injury resulting to

loss will not be considered as having been

the creditor. . . .

due to a natural disaster under Article

1734(1).

DECISION

6. ID.; ID.; ID.; ID.; LOSS OF CARGO IN

CASE AT BAR CAUSED BY FORTUITOUS

5. ID.; ID.; ID.; ID.; FORTUITOUS EVENT,

EVENT. In the case at bar, it was

DEFINED. A fortuitous event has been

adequately shown that before the

defined as one which could not be

M/V Peatheray Patrick-G left the port of

foreseen, or which though foreseen, is

Mandaue City, the Captain confirmed with

inevitable. An event is considered fortuitous

the Coast Guard that the weather condition

if the following elements concur: . . . (a) the

would permit the safe travel of the vessel to

KAPUNAN, J :
p

This petition for review seeks the reversal

of the Decision, dated September 23, 1998,
of the Court of Appeals in CA-G.R. CV No.
43915, which absolved private
respondents MCG Marine Services, Inc.

and Doroteo Gaerlan of any liability

The following day, March 3, 1987,

listing and subsequent sinking of the vessel

regarding the loss of the cargo belonging to

M/V Peatheray Patrick-G listed and

was the shifting of ballast water from

San Miguel Corporation due to the sinking

subsequently sunk off Cawit Point, Cortes,

starboard to portside. The said shifting of

of the M/V Peatheray Patrick-G owned by

Surigao del Sur. As a consequence thereof,

ballast water allegedly affected the stability

Gaerlan with MCG Marine Services, Inc. as

the cargo belonging to San Miguel

of the M/V Peatheray Patrick-G.

agent.

Corporation was lost.

On March 1, 1987, San Miguel Corporation

Subsequently, San Miguel Corporation

Corporation the full amount of

insured several beer bottle cases with an

claimed the amount of its loss from

P5,836,222.80 pursuant to the terms of

aggregate value of P5,836,222.80 with

petitioner.

their insurance contract.

petitioner Philippine American General

IEDHAT

Thereafter, petitioner paid San Miguel

Upon petitioner's request, on March 18,

On November 3, 1987, petitioner as

1987, Mr. Eduardo Sayo, a surveyor from

subrogee of San Miguel Corporation filed

the Manila Adjusters and Surveyors Co.,

with the Regional Trial Court (RTC) of

went to Taganauan Island, Cortes, Surigao

Makati City a case for collection against

del Sur where the vessel was cast ashore,

private respondents to recover the amount

After having been cleared by the Coast

to investigate the circumstances

it paid to San Miguel Corporation for the

Guard Station in Cebu the previous day,

surrounding the loss of the cargo. In his

loss of the latter's cargo.

the vessel left the port of Mandaue City for

report, Mr. Sayo stated that the vessel was

Bislig, Surigao del Sur on March 2, 1987.

structurally sound and that he did not see

The weather was calm when the vessel

any damage or crack thereon. He

started its voyage.

concluded that the proximate cause of the

Insurance Company. The cargo were

loaded on board the M/V Peatheray
Patrick-G to be transported from Mandaue
City to Bislig, Surigao del Sur.

Meanwhile, the Board of Marine Inquiry

conducted its own investigation of the
sinking of the M/V Peatheray Patrick-G to
determine whether or not the captain and

crew of the vessel should be held

Private respondents appealed the trial

INQUIRY, APPELLATE COURT

responsible for the incident. On May 11,

court's decision to the Court of Appeals.

DECIDED THE CASE AT BAR

1989, the Board rendered its decision

On September 23, 1998, the appellate

NOT IN ACCORD WITH LAW

exonerating the captain and crew of the ill-

court issued the assailed Decision, which

OR WITH THE APPLICABLE

fated vessel for any administrative liability.

reversed the ruling of the RTC. It held that

DECISIONS OF THE

It found that the cause of the sinking of the

private respondents could not be held liable

HONORABLE COURT;

vessel was the existence of strong winds

for the loss of San Miguel Corporation's

and enormous waves in Surigao del Sur, a

cargo because said loss occurred as a

fortuitous event that could not have been

consequence of a fortuitous event, and that

IN REVERSING THE TRIAL

foreseen at the time the M/V Peatheray

such fortuitous event was the proximate

COURT'S DECISION, THE

Patrick-G left the port of Mandaue City. It

and only cause of the loss.

APPELLATE COURT

was further held by the Board that said

fortuitous event was the proximate and only
cause of the vessel's sinking.
On April 15, 1993, the RTC of Makati City,

Petitioner thus filed the present petition,

contending that:

(B)

GRAVELY ERRED IN
CONTRADICTING AND IN
DISTURBING THE FINDINGS

(A)

Branch 134, promulgated its Decision

IN REVERSING AND

finding private respondents solidarily liable

SETTING ASIDE THE

for the loss of San Miguel Corporation's

DECISION OF RTC BR. 134

cargo and ordering them to pay petitioner

OF MAKATI CITY ON THE

the full amount of the lost cargo plus legal

BASIS OF THE FINDINGS OF

interest, attorney's fees and costs of suit.

THE BOARD OF MARINE

OF THE FORMER;

(C)
THE APPELLATE COURT
GRAVELY ERRED IN
REVERSING THE DECISION

OF THE TRIAL COURT AND

destruction, or deterioration of

In order that a common carrier may be

IN DISMISSING THE

the goods, unless the same is

absolved from liability where the loss,

COMPLAINT.

due to any of the following

destruction or deterioration of the goods is

causes only:

due to a natural disaster or calamity, it must

Common carriers, from the nature of their

business and for reasons of public policy,

(1) Flood, storm, earthquake,

are mandated to observe extraordinary

lightning or other natural

diligence in the vigilance over the goods

disaster or calamity;

and for the safety of the passengers

transported by them. Owing to this high
degree of diligence required of them,
common carriers, as a general rule, are
presumed to have been at fault or negligent

(2) Act of the public enemy in

war, whether
international or civil;
(3) Act or omission of the

further be shown that such natural disaster

or calamity was the proximate
and only cause of the loss; there must be
"an entire exclusion of human agency from
the cause of the injury or the loss."
Moreover, even in cases where a natural
disaster is the proximate and only cause of
the loss, a common carrier is still required

if the goods transported by them are lost,

shipper or owner of the

to exercise due diligence to prevent or

destroyed or if the same deteriorated.

goods;

minimize loss before, during and after the

However, this presumption of fault or

(4) The character of the goods

occurrence of the natural disaster, for it to

negligence does not arise in the cases

or defects in the packing

be exempt from liability under the law for

enumerated under Article 1734 of the Civil

or in the containers;

the loss of the goods. If a common carrier

Code:

(5) Order or act of competent

Common carriers are
responsible for the loss,

public authority.

fails to exercise due diligence or that

ordinary care which the circumstances of
the particular case demand to preserve
and protect the goods carried by it on the

occasion of a natural disaster, it will be

The parties do not dispute that on the day

Evidence shows that when

deemed to have been negligent, and the

the M/V Peatheray Patrick-G sunk, said

"LCT Peatheray Patrick-G" left

loss will not be considered as having been

vessel encountered strong winds and huge

the port of Mandawe, Cebu for

due to a natural disaster under Article

waves ranging from six to ten feet in height.

Bislig, Surigao del Sur on

1734(1).

The vessel listed at the port side and

March 2, 1987, the Captain had

eventually sunk at Cawit Point, Cortes,

observed the fair atmospheric

Surigao del Sur.

condition of the area of the pier

In the case at bar, the issues may be

narrowed down to whether the loss of the
cargo was due to the occurrence of a

The Court of Appeals, citing the decision of

natural disaster, and if so, whether such

the Board of Marine Inquiry in the

natural disaster was the sole and proximate

administrative case against the vessel's

cause of the loss or whether private

crew (BMI-646-87), found that the loss of

respondents were partly to blame for failing

the cargo was due solely to the existence

to exercise due diligence to prevent the

of a fortuitous event, particularly the

loss of the cargo.

presence of strong winds and huge waves

at Cortes, Surigao del Sur on March 3,
1987:

and confirmed this good

weather condition with the
Coast Guard Detachment of
Mandawe City. However, on
March 3, 1987 at about 10:00
o'clock in the evening, when the
vessel had already passed
Surigao Strait, the vessel
started to experience waves as
high as 6 to 7 feet and that the

xxx xxx xxx

Northeasterly wind was blowing

III. WHAT WAS THE

at about five (5) knot velocity. At

PROXIMATE CAUSE OF

about 11:00 o'clock P.M. when

SINKING?

the vessel was already about

4.5 miles off Cawit Point,

cargo pump. The suction valves

the wing tanks indicating that

Cortes, Surigao del Sur, the

to the said tanks of port side

the amount of the ingress of

vessel was discovered to be

were opened in order to suck or

sea water was greater in

listing 15 degrees to port side

draw out any amount of water

volume than that was being

and that the strength of the

that entered into the tanks. The

discharged by the pump.

wind had increased to 15 knots

suction pressure of the pump

Considering therefore, the

and the waves were about ten

had drawn out sea water in

location of the suspected

(10) feet high [Ramilo TSN 10-

large quantity indicating

source of the ingress of sea

27-87 p. 32). Immediately

therefore, that a leak or crack

water which was a crack or

thereafter, emergency

had developed in the hull as the

hole at the bottom hull below

measures were taken by the

vessel was continuously batted

the buoyancy tank's port side

crew. The officers had

and pounded by the huge

which was not accessible (sic)

suspected that a leak or crack

waves. Bailing out of the water

for the crew to check or control

might had developed at the

through the pump was done

the flow of sea water into the

bottom hull particularly below

continuously in an effort of the

said tank. The accumulation of

one or two of the empty wing

crew to prevent the vessel from

sea water aggravated by the

tanks at port side serving as

sinking. But then efforts were in

continuous pounding, rolling

buoyancy tanks resulting in

vain. The vessel still continued

and pitching of the vessel

ingress of sea water in the

to list even more despite the

against huge waves and strong

tanks was confirmed when the

continuous pumping and

northeasterly wind, the Captain

Captain ordered to use the

discharging of sea water from

then had no other recourse

except to order abandonship to

foreseen, or which though foreseen, is

of the injury resulting to the

save their lives.

inevitable. An event is considered fortuitous

creditor. . . .

The presence of a crack in the ill-fated

if the following elements concur:

In the case at bar, it was adequately shown

vessel through which water seeped in was

. . . (a) the cause of the

that before the M/V Peatheray Patrick-G left

confirmed by the Greutzman Divers who

unforeseen and unexpected

the port of Mandaue City, the Captain

were commissioned by the private

occurrence, or the failure of the

confirmed with the Coast Guard that the

respondents to conduct an underwater

debtor to comply with his

weather condition would permit the safe

survey and inspection of the vessel to

obligations, must be

travel of the vessel to Bislig, Surigao del

determine the cause and circumstances of

independent of human will; (b)

Sur. Thus, he could not be expected to

its sinking. In its report, Greutzman Divers

it must be impossible to foresee

have foreseen the unfavorable weather

stated that "along the port side platings, a

the event which constitutes

condition that awaited the vessel in Cortes,

small hole and two separate cracks were

the caso fortuito, or if it can be

Surigao del Sur. It was the presence of the

found at about midship."

foreseen, it must be impossible

strong winds and enormous waves which

to avoid; (c) the occurrence

caused the vessel to list, keel over, and

must be such as to render it

consequently lose the cargo contained

impossible for the debtor to

therein. The appellate court likewise found

fulfill his obligation in a normal

that there was no negligence on the part of

manner; and (d) the obligor

the crew of the M/V Peatheray Patrick-G,

must be free from any

citing the following portion of the decision

participation in the aggravation

of the Board of Marine Inquiry:

The findings of the Board of Marine Inquiry

indicate that the attendance of strong winds
and huge waves while the M/V Peatheray
Patrick-G was sailing through Cortes,
Surigao del Norte on March 3, 1987 was
indeed fortuitous. A fortuitous event has
been defined as one which could not be

I. WAS LCT PEATHERAY

equipment was also operating

Patron who had been in

PATRICK-G SEAWORTHY

satisfactorily up to the time

command of the vessel for

WHEN SHE LEFT THE PORT

when the engine room was

more than three (3) years from

OF MANDAWE, CEBU AND AT

heavily floaded (sic) with sea

July 1984 up to the time of

THE TIME OF SINKING?

water. Further, the vessel had

sinking March 3, 1987. His

undergone emergency

Chief Mate Mr. Mariano Alalin

drydocking and repair before

also a licensed Major Patron

the accident occurred (sic) on

had been the Chief Mate of

November 9, 1986 at Trigon

"LCT Peatheray Patrick-G" for

Shipyard, San Fernando, Cebu

one year and three months at

as shown by the billing for the

the time of the accident. Further

Drydocking and Repair and

Chief Mate Alalin had

certificate of Inspection No.

commanded a tanker vessel

2588-86 issued by

named M/T Mercedes of MGM

the Philippine coast Guard on

Corporation for almost two (2)

December 5, 1986 which

years from 1983-1985 (Alalin

expired on November 8, 1987.

TSN-4-13-88 pp. 32-33).

the stoppage of engines. The

LCT Peatheray Patrick-G was

That the vessel was granted

vessel was also equipped with

skippered by Mr. Manuel P.

SOLAS clearance by

operating generator pumps for

Ramilo, competent and

the Philippine Coast Guard on

emergency cases. This

experienced licensed Major

March 1, 1987 to depart from

Evidence clearly shows that the

vessel was propelled with three
(3) diesel engines of 250 BHP
each or a total of 750 BHP. It
had three (3) propellers which
were operating satisfactorily
from the time the vessel left the
port of Mandawe up to the time
when the hull on the double
bottom tank was heavily
floaded (sic) by uncontrollable
entry of sea water resulting in

Mandawe City for Bislig,

the owner to provide a

investigation of the circumstances

Surigao del Sur as evidenced

competent master and a crew

surrounding the sinking of the vessel and

by a certification issued to D.C.

adequate in number and

the loss of its cargo in order to determine

Gaerlan Oil Products by Coast

competent for their duty and

their responsibility, if any. The results of its

Guard Station Cebu dated

equal in disposition and

investigation as embodied in its decision on

December 23, 1987.

seamanship to the ordinary in

the administrative case clearly indicate that

that calling. (Ralph 299 F-52,

the loss of the cargo was due solely to

1924 AMC 942).

attendance of strong winds and huge

(American President 2td v. Ren

waves which caused the vessel to

Fen Fed 629. AMC 1723 LCA 9

accumulate water, tilt to the port side and to

CAL 1924).

eventually keel over. There was thus no

Based on the foregoing

circumstances, "LCT Peatheray
Patrick-G" should be
considered seaworthy vessel at
the time she undertook that
fateful voyage on March 2,

Overloading was also eliminated as a

1987.

possible cause of the sinking of the

vessel, as the evidence showed that its
freeboard clearance was substantially

To be seaworthy, a vessel must

greater than the authorized freeboard

not only be staunch and fit in

clearance.

the hull for the voyage to be

undertaken but also must be
properly equipped and for that
purpose there is a duty upon

Although the Board of Marine Inquiry ruled

error on the part of the Court of Appeals in

relying on the factual findings of the Board
of Marine Inquiry, for such factual findings,
being supported by substantial evidence
are persuasive, considering that said
administrative body is an expert in matters
concerning marine casualties.

only on the administrative liability of the

Since the presence of strong winds and

captain and crew of the M/V Peatheray

enormous waves at Cortes, Surigao del

Patrick-G, it had to conduct a thorough

Sur on March 3, 1987 was shown to be the

proximate and only cause of the sinking of

the M/V Peatheray Patrick-G and the loss
of the cargo belonging to San Miguel
Corporation, private respondents cannot be
held liable for the said loss.

PANGANIBAN, J :
p

Common carriers are bound to observe

extraordinary diligence in their vigilance
over the goods entrusted to them, as
required by the nature of their business and

WHEREFORE, the assailed Decision of the

for reasons of public policy. Consequently,

Court of Appeals is hereby AFFIRMED and

the law presumes that common carriers are

the petition is hereby DENIED. SO

at fault or negligent for any loss or damage

ORDERED.

to the goods that they transport. In the

present case, the evidence submitted by
petitioner to overcome this presumption
was sorely insufficient.

[G.R. No. 161745. September 30, 2005.]

The Case

"WHEREFORE, the appeal

is GRANTED. The December
7, 1999 decision of the
Regional Trial Court of Manila,
Branch 42 in Civil Case No. 9263159 is hereby REVERSED
and SET ASIDE. [Petitioner] is
ordered to pay the [herein
respondent] the value of the
lost cargo in the amount of
P565,000.00. Costs against the
[herein petitioner]."

The assailed Resolution denied

reconsideration.

LEA MER INDUSTRIES,

Before us is a Petition for Review under

INC., petitioner, vs. MALAY

Rule 45 of the Rules of Court, assailing the

AN INSURANCE CO.,

October 9, 2002 Decision and the

Ilian Silica Mining entered into a contract of

INC., respondent.

December 29, 2003 Resolution of the

carriage with Lea Mer Industries, Inc., for

Court of Appeals (CA) in CA-GR CV No.

the shipment of 900 metric tons of silica

66028. The challenged Decision disposed

sand valued at P565,000. Consigned to

as follows:

Vulcan Industrial and Mining Corporation,

DECISION

The Facts

the cargo was to be transported from

event. The RTC noted that the vessel had

Jesus Cortez, who had not

Palawan to Manila. On October 25, 1991,

sunk because of the bad weather condition

been presented as a witness of

the silica sand was placed on board Judy

brought about by Typhoon Trining. The

the said report during the trial

VII, a barge leased by Lea Mer. During the

court ruled that petitioner had no advance

of this case before the lower

voyage, the vessel sank, resulting in the

knowledge of the incoming typhoon, and

court can be admitted in

loss of the cargo.

that the vessel had been cleared by the

evidence to prove the alleged

Philippine Coast Guard to travel from

facts cited in the said report.

Malayan Insurance Co., Inc., as insurer,

paid Vulcan the value of the lost cargo. To
recover the amount paid and in the

Palawan to Manila.
Ruling of the Court of Appeals

"B. Whether or not the

respondent, Court of Appeals,

exercise of its right of subrogation, Malayan

Reversing the trial court, the CA held that

had validly or legally reversed

demanded reimbursement from Lea Mer,

the vessel was not seaworthy when it

the finding of fact of the

which refused to comply.

sailed for Manila. Thus, the loss of the

Regional Trial Court which

Consequently, Malayan instituted a

cargo was occasioned by petitioner's fault,

clearly and unequivocally held

Complaint with the Regional Trial Court

not by a fortuitous event.

that the loss of the cargo

(RTC) of Manila on September 4, 1992, for

the collection of P565,000 representing the
amount that respondent had paid Vulcan.
On October 7, 1999, the trial court

Hence, this recourse.

The Issues
Petitioner states the issues in this wise:

subject of this case was caused

by fortuitous event for which
herein petitioner could not be
held liable.

dismissed the Complaint, upon finding that

"A. Whether or not the survey

"C. Whether or not the

the cause of the loss was a fortuitous

report of the cargo surveyor,

respondent, Court of Appeals,

had committed serious error

and grave abuse of discretion in
disregarding the testimony of
the witness from the MARINA,
Engr. Jacinto Lazo y Villegal, to

The Petition has no merit.

First Issue:
Liability for Loss of Cargo
Question of Fact

engaged in the business of carrying or

transporting passengers or goods, or both
by land, water, or air when this
service is offered to the public for
compensation. Petitioner is clearly a

the effect that the vessel 'Judy

The resolution of the present case hinges

common carrier, because it offers to the

VII' was seaworthy at the time

on whether the loss of the cargo was due

public its business of transporting goods

of incident and further in

to a fortuitous event. This issue involves

through its vessels.

disregarding the testimony of

primarily a question of fact, notwithstanding

the PAG-ASA weather

petitioner's claim that it pertains only to a

specialist, Ms. Rosa Barba y

question of law. As a general rule,

Saliente, to the effect that

questions of fact may not be raised in a

typhoon 'Trining' did not hit

petition for review. The present case serves

Metro Manila or Palawan."

as an exception to this rule, because the

In the main, the issues are as follows: (1)

whether petitioner is liable for the loss of
the cargo, and (2) whether the survey
report of Jesus Cortez is admissible in

factual findings of the appellate and the trial

The Court's Ruling

finding that petitioner became a private

carrier when Vulcan chartered it. Charter
parties are classified as contracts of
demise (or bareboat) and affreightment,
which are distinguished as follows:

courts vary. This Court meticulously

"Under the demise or bareboat

reviewed the records, but found no reason

charter of the vessel, the

to reverse the CA.

charterer will generally be

Rule on Common Carriers

evidence.

Thus, the Court corrects the trial court's

Common carriers are persons,

corporations, firms or associations

considered as owner for the

voyage or service stipulated.
The charterer mans the vessel

with his own people and

their stipulations, not by the law on

Common carriers are presumed to have

becomes, in effect, the

common carriers.

been at fault or to have acted negligently

owner pro hac vice, subject to

liability to others for damages
caused by negligence. To
create a demise, the owner of a
vessel must completely and
exclusively relinquish
possession, command and
navigation thereof to the
charterer; anything short of

The Contract in the present case was one

of affreightment, as shown by the fact that
it was petitioner's crew that manned the
tugboat M/V Ayalit and controlled the
barge Judy VII. Necessarily, petitioner was
a common carrier, and the pertinent law
governs the present factual circumstances.
Extraordinary Diligence Required

for loss or damage to the goods that they

have transported. This presumption can be
rebutted only by proof that they observed
extraordinary diligence, or that the loss or
damage was occasioned by any of the
following causes:
"(1) Flood, storm, earthquake,
lightning, or other natural
disaster or calamity;

such a complete transfer is a

Common carriers are bound to

contract of affreightment (time

observe extraordinary diligence in their

or voyage charter party) or not

vigilance over the goods and the safety of

war, whether

a charter party at all."

the passengers they transport, as required

international or civil;

The distinction is significant, because a

demise or bareboat charter indicates a
business undertaking that is private in
character. Consequently, the rights and
obligations of the parties to a contract of
private carriage are governed principally by

by the nature of their business and for

"(2) Act of the public enemy in

"(3) Act or omission of the

reasons of public policy. Extraordinary

shipper or owner of the

diligence requires rendering service with

goods;

the greatest skill and foresight to avoid

damage and destruction to the goods
entrusted for carriage and delivery.

"(4) The character of the goods

or defects in the packing
or in the containers;

"(5) Order or act of competent

render it impossible for the debtors to fulfill

fortuitous event an exempting

public authority."

their obligation in a normal manner; and (d)

circumstance.

Rule on Fortuitous Events

Article 1174 of the Civil Code provides that
"no person shall be responsible for a

the obligor must have been free from any

participation in the aggravation of the
resulting injury to the creditor.

It was precisely this circumstance that

petitioner cited to escape
liability. Lea Mer claimed that the loss of

fortuitous event which could not be

To excuse the common carrier fully of any

the cargo was due to the bad weather

foreseen, or which, though foreseen, was

liability, the fortuitous event must have

condition brought about by Typhoon

inevitable." Thus, if the loss or damage was

been the proximate and only cause of the

Trining. Evidence was presented to show

due to such an event, a common carrier is

loss. Moreover, it should have exercised

that petitioner had not been informed of the

exempted from liability.

due diligence to prevent or minimize the

incoming typhoon, and that the Philippine

loss before, during and after the

Coast Guard had given it clearance to

occurrence of the fortuitous event.

begin the voyage. On October 25, 1991,

Jurisprudence defines the elements of a

"fortuitous event" as follows: (a) the cause
of the unforeseen and unexpected

Loss in the Instant Case

the date on which the voyage commenced

and the barge sank, Typhoon Trining was

occurrence, or the failure of the debtors to

There is no controversy regarding the loss

comply with their obligations, must have

of the cargo in the present case. As the

been independent of human will; (b) the

common carrier, petitioner bore the burden

event that constituted the caso fortuito must

of proving that it had exercised

have been impossible to foresee or, if

extraordinary diligence to avoid the loss, or

The evidence presented by petitioner in

foreseeable, impossible to avoid; (c) the

that the loss had been occasioned by a

support of its defense of fortuitous event

occurrence must have been such as to

allegedly far from Palawan, where the

storm warning was only "Signal No. 1."

was sorely insufficient. As required by the

pertinent law, it was not enough for the

measure[s] exercised by

instruction on how to

common carrier to show that there was an

you and the crew of Judy

save the barge Judy VII?

unforeseen or unexpected occurrence. It

VII so as to prevent the

had to show that it was free from any fault

los[s] or sinking of barge

a fact it miserably failed to prove.

Judy VII?

First, petitioner presented no evidence that

it had attempted to minimize or prevent the
loss before, during or after the alleged
fortuitous event. Its witness, Joey A.

Atty. Baldovino, Jr.:

Your Honor, what I am asking

remember whether anything had been

done to minimize loss when water started
entering the barge. This fact was confirmed
during his cross-examination, as shown by
the following brief exchange:

there other
precautionary

because that happened

[a] long time ago."

Second, the alleged fortuitous event was

not the sole and proximate cause of the

[relates to the] action

loss. There is a preponderance of evidence

taken by the officers and

that the barge was not seaworthy when it

crew of tugboat Ayalit

sailed for Manila. Respondent was able to

and barge Judy VII . . .

prove that, in the hull of the barge, there

to prevent the sinking of

were holes that might have caused or

barge Judy VII?

aggravated the sinking. Because the

xxx xxx xxx

"Atty. Baldovino, Jr.:

barge Judy VII, were

I can no longer remember sir,

xxx xxx xxx

Draper, testified that he could no longer

Other than be[a]ching the

Joey Draper:

presumption of negligence or fault applied

to petitioner, it was incumbent upon it to

Court:

show that there were no holes; or, if there

Mr. witness, did the captain of

that tugboat give any

were, that they did not aggravate the

sinking.

Petitioner offered no evidence to rebut the

Petitioner claims that the Survey

seaworthy because of the existence of the

existence of the holes. Its witness,

Report prepared by Jesus Cortez, the

holes. Manlapig testified that he had

Domingo A. Luna, testified that the barge

cargo surveyor, should not have been

prepared that Report after taking into

was in "tip-top" or excellent condition, but

admitted in evidence. The Court partly

account the findings of the surveyor, as

that he had not personally inspected it

agrees. Because he did not testify during

well as the pictures and the sketches of the

when it left Palawan.

the trial, then the Report that he had

place where the sinking occurred.

prepared was hearsay and therefore

Evidently, the existence of the holes was

inadmissible for the purpose of proving the

proved by the testimonies of the witnesses,

truth of its contents.

not merely by Cortez' Survey Report.

The submission of the Philippine Coast

Guard's Certificate of Inspection of Judy
VII, dated July 31, 1991, did not
conclusively prove that the barge was

The Survey Report Not the Sole

Rule on Independently

seaworthy. The regularity of the issuance of

Evidence

Relevant Statement

the Certificate is disputably presumed. It

The facts reveal that Cortez's Survey

That witnesses must be examined and

could be contradicted by competent

Report was used in the testimonies of

presented during the trial, and that their

evidence, which respondent offered.

respondent's witnesses Charlie M.

testimonies must be confined to personal

Moreover, this evidence did not necessarily

Soriano; and Federico S. Manlapig, a cargo

knowledge is required by the rules on

take into account the actual condition of the

marine surveyor and the vice-president of

evidence, from which we quote:

vessel at the time of the commencement of

Toplis and Harding Company. Soriano

the voyage.

testified that the Survey Report had been

Second Issue:

Admissibility of the Survey Report

used in preparing the final Adjustment

Report conducted by their company. The
final Report showed that the barge was not

"Section 36. Testimony

generally confined to personal
knowledge; hearsay excluded.
A witness can testify only to

those facts which he knows of

In the instant case, the challenged Survey

his personal knowledge; that is,

Report prepared by Cortez was admitted

which are derived from his own

only as part of the testimonies of

perception, except as otherwise

respondent's witnesses. The referral to

provided in these rules."

Cortez's Report was in relation to

On this basis, the trial court correctly

refused to admit Jesus Cortez's Affidavit,
which respondent had offered as
evidence. Well-settled is the rule that,
unless the affiant is presented as a
witness, an affidavit is considered hearsay.
An exception to the foregoing rule is that on
"independently relevant statements." A
report made by a person is admissible if it
is intended to prove the tenor, not the truth,

Manlapig's final Adjustment Report.

Evidently, it was the existence of the
Survey Report that was testified to. The
admissibility of that Report as part of the
testimonies of the witnesses was correctly
ruled upon by the trial court.
At any rate, even without the Survey
Report, petitioner has already failed to
overcome the presumption of fault that
applies to common carriers.

of the statements. Independent of the truth

WHEREFORE, the Petition is DENIED and

or the falsity of the statement given in the

the assailed Decision and Resolution are

report, the fact that it has been made is

AFFIRMED. Costs against petitioner. SO

relevant. Here, the hearsay rule does not

ORDERED.

apply.

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

FGU INSURANCE
CORPORATION, petitioner,
vs.
THE COURT OF APPEALS,
SAN MIGUEL
CORPORATION, and
ESTATE OF ANG GUI,
represented, by LUCID,
JULIAN, and JAIME, all
surnamed ANG, and CO
TO, respondents.
[G.R. No. 140704. March 31, 2005.]
ESTATE OF ANG GUI,
Represented by LUCID,
JULIAN and JAIME, all
surnamed ANG, and CO
TO, petitioners, vs. THE
HONORABLE COURT OFA

PPEALS, SAN MIGUEL

decision of the Regional

3) With cost against

CORP.,

Trial Court of Cebu City, Branch 22. The

defendants.

and FGU INSURANCE

dispositive

CORP., respondents.

portion of the Court of Appeals decision

1) Ordering third-party

reads:
DECISION

For the Third-Party Complaint:

WHEREFORE, for all the

foregoing, judgment is hereby

defendant FGU Insurance

Company to pay and reimburse
defendants the

CHICO-NAZARIO, J :

rendered as follows:

Before Us are two separate Petitions for

1) Ordering defendants to pay

review assailing the

plaintiff the

Decision of the Court of Appeals in CA-

sum of P1,346,197.00 and an

G.R. CV No. 49624 entitled, "San Miguel

interest of 6% per annum to be

Corporation, Plaintiff-

reckoned from the filing of this

Appellee versus Estate of Ang Gui,

case on October 2, 1990;

represented by Lucio, Julian and Jaime, all

2) Ordering defendants to pay

surnamed Ang, and Co To, Defendants-

were operated as common carriers. Since

plaintiff the sum of P25,000.00

Appellants, Third-Party

the D/B Lucio had no engine of its own, it

for attorney's fees and an

Plaintiffs versus FGUInsurance

could not maneuver by itself and had to be

additional sum of P10,000.00

Corporation, Third-Party Defendant-

towed by a tugboat for it to move from one

as litigation expenses;

place to another.

Appellant," which affirmed in toto the

amount of P632,700.00.

The Facts
Evidence shows that Anco Enterprises
Company (ANCO), a partnership between
Ang Gui and Co To, was engaged in the
shipping business. It owned the M/T ANCO
tugboat and the D/B Lucio barge which

On 23 September 1979, San Miguel

Sales Office, Estancia, Iloilo, while the

Sales Supervisor, Fernando Macabuag,

Corporation (SMC) shipped from Mandaue

consignee for the cargoes covered by

requested ANCO's representative to

City, Cebu, on board the D/B Lucio, for

Bill of Lading No. 2 was SMC's BMD-San

transfer the barge to a safer place because

towage by M/T ANCO, the following

Jose Beer Sales Office, San Jose, Antique.

the vessel might not be able to withstand

cargoes:

The D/B Lucio was towed by the M/T

the big waves.

Bill of Lading

ANCO all the way from Mandaue City to

ANCO's representative did not heed the

No. Shipment Destination

San Jose, Antique. The vessels arrived at

request because he was confident that the

San Jose, Antique, at about one o'clock in

barge could withstand the waves. This,

the afternoon of 30 September 1979. The

notwithstanding the fact that at that time,

tugboat M/T ANCO left the barge

only the M/T ANCO was left at the

immediately after reaching San Jose,

wharf of San Jose, Antique, as all other

Antique.

vessels already left the wharf to seek

1 25,000 cases Pale

Pilsen Estancia, Iloilo
350 cases Cerveza
Negra Estancia, Iloilo

When the barge and tugboat arrived at San

2 15,000 cases Pale Pilsen San

Jose, Antique, in the afternoon of 30

Jose, Antique

September 1979, the clouds over the area

200 cases Cerveza Negra San

Jose, Antique

were dark and the waves were already big.

The arrastre workers unloading the

shelter. With the waves growing bigger and

bigger, only Ten Thousand Seven Hundred
Ninety (10,790) cases of beer were
discharged into the custody of the arrastre
operator.

cargoes of SMC on board the D/B Lucio

At about ten to eleven o'clock in the

The consignee for the cargoes covered by

began to complain about their difficulty in

evening of 01 October 1979, the

Bill of Lading No. 1 was SMC's Beer

unloading the cargoes. SMC's District

crew of D/B Lucio abandoned the vessel

Marketing Division (BMD)-Estancia Beer

because the barge's rope attached to the

Breach of Contract of Carriage and

ANCO admitted that the cases of beer Pale

wharf was cut off by the big waves. At

Damages against ANCO for the

Pilsen and Cerveza Negra mentioned in

around midnight, the barge run aground

amount of One Million Three Hundred

the complaint were indeed loaded on the

and was broken and the cargoes of beer in

Forty-Six Thousand One Hundred Ninety-

vessel belonging to ANCO. It claimed

the barge were swept away.

Seven Pesos (P1,346,197.00) plus interest,

however that it had an agreement with

litigation expenses and Twenty-Five

SMC that ANCO would not be liable for any

Percent (25%) of the total claim as

losses or damages resulting to the cargoes

attorney's fees.

by reason of fortuitous event. Since the

As a result, ANCO failed to deliver to

SMC's consignee Twenty-Nine Thousand
Two Hundred Ten (29,210) cases of Pale
Pilsen and Five Hundred Fifty (550)

Upon Ang Gui's death, ANCO, as a

cases of Cerveza Negra. The value per

partnership, was dissolved hence, on 26

case of Pale Pilsen was Forty-Five Pesos

January 1993, SMC filed a second

and Twenty Centavos (P45.20). The

amended complaint which was admitted by

value of a case of Cerveza Negra was

the Court impleading the surviving partner,

Forty-Seven Pesos and Ten Centavos

Co To and the Estate of Ang Gui

(P47.10), hence, SMC's claim against

represented by Lucio, Julian and Jaime, all

ANCO amounted to One Million Three

surnamed Ang. The substituted defendants

Hundred Forty-Six Thousand One Hundred

adopted the original answer with

Ninety-Seven Pesos (P1,346,197.00).

counterclaim of ANCO "since the

As a consequence of the incident, SMC

filed a complaint for

substantial allegations of the original

complaint and the amended complaint are
practically the same."

cases of beer Pale Pilsen and Cerveza

Negra were lost by reason of a storm, a
fortuitous event which battered and sunk
the vessel in which they were loaded, they
should not be held liable. ANCO further
asserted that there was an agreement
between them and SMC to insure the
cargoes in order to recover indemnity in
case of loss. Pursuant to that agreement,
the cargoes to the extent of Twenty
Thousand (20,000) cases was insured
with FGU Insurance Corporation (FGU) for
the total amount of Eight Hundred Fifty-

Eight Thousand Five Hundred Pesos

were lost and/or destroyed. According to

to FGU, it is only liable under the policy to

(P858,500.00) per Marine Insurance Policy

ANCO, the loss of said cargoes occurred

Third-party Plaintiff ANCO and/or Plaintiff

No. 29591.

as a result of risks insured against in the

SMC in case of any of the following:

Subsequently, ANCO, with leave of court,

filed a Third-Party Complaint against FGU,
alleging that before the vessel of ANCO left
for San Jose, Antique with the cargoes
owned by SMC, the cargoes, to the
extent of Twenty Thousand (20,000) cases,
were insured with FGU for a total
amount of Eight Hundred Fifty-Eight
Thousand Five Hundred Pesos

insurance policy and during the existence

and lifetime of said insurance policy. ANCO
went on to assert that in the remote

a) total loss of the entire

shipment;

possibility that the court will order ANCO to

b) loss of any case as a

pay SMC's claim, the third-party defendant

result of the

corporation should be held liable to

sinking of the vessel;

indemnify or reimburse ANCO whatever

or

amounts, or damages, it may be required

to pay to SMC.

c) loss as a result of the

vessel being on fire.

(P858,500.00) under Marine Insurance

In its answer to the Third-Party complaint,

Furthermore, FGU alleged that the

Policy No. 29591. ANCO further alleged

third-party defendant FGU admitted the

Third-Party Plaintiff ANCO and Plaintiff

that on or about 02 October 1979, by

existence of the Insurance Policy under

SMC failed to exercise ordinary

reason of very strong winds and heavy

Marine Cover Note No. 29591 but

diligence or the diligence of a good

waves brought about by a passing typhoon,

maintained that the alleged loss of the

father of the family in the care and

the vessel run aground near the

cargoes covered by the said insurance

supervision of the cargoes insured to

vicinity of San Jose, Antique, as a

policy cannot be attributed directly or

prevent its loss and/or destruction.

result of which, the vessel was totally

indirectly to any of the risks insured against

wrecked and its cargoes owned by SMC

in the said insurance policy. According

Third-Party defendant FGU prayed for the

was broken and the beer

there was partial loss of only

dismissal of the Third-Party Complaint and

cargoes on the said barge were

P1,346,197.00, the assured

asked for actual, moral, and exemplary

swept away. It is the

shall bear 53% of the loss . .

damages and attorney's fees.

sense of this Court that the risk

[Emphasis ours]

The trial court found that while the cargoes

were indeed lost due to fortuitous event,

insured against was the

cause of the loss.

there was failure on ANCO's part, through

their representatives, to observe the
degree of diligence required that would
exonerate them from liability. The
trial court thus held the Estate of Ang Gui
and Co To liable to SMC for the
amount of the lost shipment. With respect

xxx xxx xxx

Since the total cargo was

The appellate court affirmed in toto the

decision of the lower court and denied the
motion for reconsideration and the
supplemental motion for reconsideration.

40,550 cases which had a total

amount of P1,833,905.00 and
the amount of the policy was
only for

Hence, the petitions.

The Issues

P858,500.00, defendants as

In G.R. No. 137775, the grounds for review

assured, therefore, were

raised by petitioner FGU can be

considered co-insurers of third

summarized into two: 1) Whether or not

party defendant FGU Insurance

respondent Court of Appeals committed

Corporation to the

grave abuse of discretion in

. . . Evidence is to the effect

extent of 975,405. 00

holding FGU liable under the insurance

that the D/B Lucio, on which the

value of the cargo.

contract considering the circumstances

cargo insured, run-aground and

Consequently, inasmuch as

surrounding the loss of the cargoes; and 2)

to the Third-Party complaint, the court a

quo found FGU liable to bear Fifty-Three
Percent (53%) of the amount of the lost
cargoes. According to the trial court:

Whether or not the

Ruling of the Court

parties; 3) the former judgment must be a

Court of Appeals committed an error of law

First, we shall endeavor to dispose of the

judgment or order on the merits; and

in holding that the doctrine of res

common issue raised by both petitioners in

4) there must be between the first and

judicata applies in the instant case.

their respective petitions for review, that is,

second action identity of parties,

In G.R. No. 140704, petitioner

whether or not the doctrine of res

identity of subject matter, and

Estate of Ang Gui and Co To assail the

judicata applies it the instant case.

identity of causes of action.

decision of the appellate court based on

It is ANCO's contention that the decision in

There is no question that the first three

the following assignments of error: 1)

Civil Case No. R-19341, which was

elements of res judicata as enumerated

The Court of Appeals committed grave

decided in its favor, constitutes res

above are indeed satisfied by the decision

abuse of discretion in affirming the

judicata with respect to the issues raised in

in Civil Case No. R-19341. However, the

findings of the lower court that the

the case at bar.

doctrine is still inapplicable due to the

negligence of the crewmembers of the D/B

Lucio was the proximate cause of the
loss of the cargoes; and 2) The
respondent court acted with grave
abuse of discretion when it ruled that the
appeal was without merit despite the fact
that said court had accepted the decision in
Civil Case No. R-19341, as affirmed by
the Court of Appeals and the
Supreme Court, as res judicata.

The contention is without merit. There can

be no res judicata as between Civil Case
No. R-19341 and the case at bar. In order

absence of the last essential

requisite of identity of parties, subject
matter and causes of action.

for res judicata to be made applicable in a

The parties in Civil Case No. R-19341 were

case, the following essential requisites

ANCO as plaintiff and FGU as defendant

must be present: 1) the former judgment

while in the instant case, SMC is the

must be final; 2) the former judgment must

plaintiff and the Estate of Ang Gui

have been rendered by a court having

represented by Lucio, Julian and Jaime, all

jurisdiction over the subject matter and the

surnamed Ang and Co To as defendants,

with the latter, merely impleading FGU as

covering the vessel D/B Lucio, while the

already passed upon by

third-party defendant.

instant case is an action for Breach

a court of competent jurisdiction in a former

of Contract of Carriage and Damages filed

judgment, in another action between the

by SMC against ANCO based on

same parties based on a different claim or

Bill of Lading No. 1 and No. 2, with

cause of action. The judgment in the prior

defendant ANCO seeking reimbursement

action operates as estoppel only as to

from FGU under Insurance Policy No. MA-

those matters in issue or points

58486, should the former be held liable to

controverted, upon the

pay SMC.

determination of which the finding or

The subject matter of Civil Case No. R19341 was the insurance contract entered
into by ANCO, the owner of the vessel,
with FGU covering the vessel D/B Lucio,
while in the instant case, the subject
matter of litigation is the loss of the
cargoes of SMC, as shipper, loaded in the
D/B Lucio and the resulting failure of ANCO

Moreover, the subject matter of the third-

to deliver to SMC's consignees the lost

party complaint against FGU in this case is

cargo. Otherwise stated, the controversy in

different from that in Civil Case No. R-

the first case involved the rights and

19341. In the latter, ANCO was

liabilities of the shipowner vis--

suing FGU for the insurance contract over

vis that of the insurer, while the present

the vessel while in the former, the third-

case involves the rights and liabilities of the

party complaint arose from the insurance

shipper vis--vis that of the shipowner.

contract covering the cargoes on board the

Specifically, Civil Case No. R-19341 was

D/B Lucio.

an action for Specific Performance and

Damages based on FGU Marine Hull
Insurance Policy No. VMF-MH-13519

The doctrine of res judicata precludes the

re-litigation of a particular fact or issue

judgment was rendered. If a particular point

or question is in issue in the second action,
and the judgment will depend on the
determination of that particular point or
question, a former judgment between the
same parties or their privies will be final
and conclusive in the second if that same
point or question was in issue and
adjudicated in the first suit.
Since the case at bar arose from the same
incident as that involved in Civil Case No.
R-19341, only findings with respect to

matters passed upon by the court in the

crewmembers of the D/B Lucio being the

Supreme Court cannot review such

former judgment are conclusive in the

cause of the loss of the cargoes owned by

findings on appeal, especially when they

disposition of the instant case. A careful

SMC.

are borne out by the records or are based

perusal of the decision in Civil Case No. R19341 will reveal that the pivotal issues
resolved by the lower court, as affirmed by
both the Court of Appeals and the
Supreme Court, can be summarized into

Therefore, based on the foregoing

discussion, we are reversing the
findings of the Court of Appeals that there
is res judicata.

on substantial evidence. As held in the

case of Donato v. Court of Appeals, in this
jurisdiction, it is a fundamental and settled
rule that findings of fact by the
trial court are entitled to great weight on

three legal conclusions: 1) that the D/B

Anent ANCO's first

appeal and should not be disturbed unless

Lucio before and during the voyage was

assignment of error, i.e., the

for strong and cogent reasons because the

seaworthy; 2) that there was proper

appellate court committed error in

trial court is in a better position to examine

notice of loss made by ANCO within the

concluding that the negligence of ANCO's

real evidence, as well as to observe the

reglementary period; and 3) that the vessel

representatives was the proximate

demeanor of the witnesses while testifying

D/B Lucio was a constructive total loss.

causeof the loss, said issue is a

in the case.

Said decision, however, did not pass upon

the issues raised in the instant case.
Absent therein was any discussion
regarding the liability of ANCO for the
loss of the cargoes. Neither did the
lower court pass upon the issue of the
alleged negligence of the

question of fact assailing the lower court's

appreciation of evidence on the negligence
or lack thereof of the crewmembers of the
D/B Lucio. As a rule,
findings of fact of lower courts, particularly
when affirmed by the appellate court, are
deemed final and conclusive. The

It is not the function of this Court to analyze

or weigh evidence all over again, unless
there is a showing that the findings of the
lower court are totally devoid of support or
are glaringly erroneous as to constitute
palpable error or grave abuse of discretion.

A careful study of the records shows no

fact that as the two vessels arrived at the

representing the defendant

cogent reason to fault the findings of the

port of San Jose, Antique, signs of the

could have placed D/B Lucio in

lower court, as sustained by the

impending storm were already manifest. As

a very safe location before they

appellate court, that ANCO's

stated by the lower court, witness Mr.

left knowing or sensing at that

representatives failed to exercise the

Anastacio Manilag testified that the captain

time the coming ofa typhoon.

extraordinary degree of diligence required

or patron of the tugboat M/T ANCO left the

The presence of big waves and

by the law to exculpate them from liability

barge D/B Lucio immediately after it

dark clouds could have warned

for the loss of the cargoes.

reached San Jose, Antique, despite the

the patron or captain of M/T

fact that there were already big waves and

ANCO to insure the

the area was already dark. This is

safety of D/B Lucio including its

corroborated by defendants' own witness,

cargo. D/B Lucio being a barge,

Mr. Fernando Macabueg.

without its engine, as the patron

First, ANCO admitted that they failed to

deliver to the designated consignee the
Twenty Nine Thousand Two Hundred Ten
(29,210) cases of Pale Pilsen and Five
Hundred Fifty (550) cases of Cerveza
Negra.

The trial court continued:

At that precise moment, since it

Second, it is borne out in the

is the duty of the defendant to

testimony of the witnesses on record that

exercise and observe

the barge D/B Lucio had no engine of its

extraordinary diligence in the

own and could not maneuver by itself. Yet,

vigilance over the cargo of the

the patron of ANCO's tugboat M/T ANCO

plaintiff, the patron or

left it to fend for itself notwithstanding the

captain of M/T ANCO,

or captain of M/T ANCO knew,

could not possibly maneuver by
itself. Had the patron or
captain of M/T ANCO, the
representative of the
defendants observed
extraordinary diligence in
placing the D/B Lucio in a safe
place, the loss to the

cargo of the plaintiff could not

vessels were transferred and temporarily

have occurred. In short,

moved to Malandong, 5 kilometers from the

therefore, defendants through

wharf where the barge remained. Clearly,

their representatives, failed to

the transferred vessels were definitely safer

observe the degree of diligence

in Malandong than at the port of San Jose,

required of them under the

Antique, at that particular time, a fact which

provision of Art. 1733 of the

petitioners failed to dispute.

Civil Code of the Philippines.

The Civil Code provides:

Art. 1733. Common carriers,
from the nature of their
business and for
reasons of public policy are
bound to observe extraordinary
diligence in the vigilance over

ANCO's arguments boil down to the claim

the goods and for the

Petitioners Estate of Ang Gui and Co To, in

that the loss of the cargoes was caused by

safety of the passengers

their Memorandum, asserted that the

the typhoon Sisang, a fortuitous event

transported by them, according

contention of respondents SMC

(caso fortuito), and there was no fault or

to all the circumstances of each

and FGU that "the crewmembers of D/B

negligence on their part. In fact, ANCO

case.

Lucio should have left port at the

claims that their crewmembers exercised

onset of the typhoon is like advising the fish

due diligence to prevent or minimize the

to jump from the frying pan into the fire and

loss of the cargoes but their efforts proved

an advice that borders on madness."

no match to the forces unleashed by the

The argument does not persuade. The

records show that the D/B Lucio was the
only vessel left at San Jose, Antique,
during the time in question. The other

typhoon which, in petitioners' own words

was, by any yardstick, a natural calamity, a

Such extraordinary diligence in

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

fortuitous event, an act of God, the

Art. 1734. Common carriers are

consequences of which petitioners could

responsible for the loss,

not be held liable for.

destruction, or

deterioration of the goods,

that the common carrier may be

managed to transfer to another place, a

unless the same is due to

exempted from liability for the

circumstance which prompted SMC's

any of the following causes

loss, destruction, or

District Sales Supervisor to request that the

only:

deterioration of the goods . . .

D/B Lucio be likewise transferred, but to no

(Emphasis supplied)

avail. The D/B Lucio had no engine and

(1) Flood, storm, earthquake,

lightning, or other natural

Caso fortuito or force majeure (which in law

disaster or calamity;

are identical insofar as they exempt an

xxx xxx xxx

obligor from liability) by definition, are

extraordinary events not foreseeable or

could not maneuver by itself. Even if

ANCO's representatives wanted to transfer
it, they no longer had any means to do so
as the tugboat M/T ANCO has already
departed, leaving the barge to its own

Art. 1739. In order that the

avoidable, events that could not be

common carrier may be

foreseen, or which though foreseen, were

exempted from responsibility,

inevitable. It is therefore not enough that

the natural disaster must have

the event should not have been foreseen or

been the proximate and only

anticipated, as is commonly believed but it

While the loss of the cargoes was

cause of the loss. However, the

must be one impossible to foresee or to

admittedly caused by the typhoon Sisang,

common carrier must exercise

avoid.

a natural disaster, ANCO could not escape

due diligence to prevent or

minimize loss before, during
and after the
occurrence of flood, storm, or
other natural disaster in order

In this case, the calamity which caused the

loss of the cargoes was not unforeseen nor
was it unavoidable. In fact, the other
vessels in the port of San Jose, Antique,

devices. The captain of the tugboat should

have had the foresight not to leave the
barge alone considering the pending storm.

liability to respondent SMC. The records

clearly show the failure of petitioners'
representatives to exercise the
extraordinary degree of diligence mandated
by law. To be exempted from responsibility,

the natural disaster should have been the

Therefore, as correctly pointed out by the

One of the purposes for taking out

proximate and only cause of the loss.

appellate court, there was blatant

insurance is to protect the insured against

There must have been no contributory

negligence on the part of M/T ANCO's

the consequences of his own negligence

negligence on the part of the common

crewmembers, first in leaving the engine-

and that of his agents. Thus, it is a basic

carrier. As held in the case of Limpangco

less barge D/B Lucio at the mercy of the

rule in insurance that the carelessness and

Sons v. Yangco Steamship Co.:

storm without the assistance of the tugboat,

negligence of the insured or his agents

and again in failing to heed the

constitute no defense on the part of the

request of SMC's representatives to have

insurer. This rule however presupposes

the barge transferred to a safer place, as

that the loss has occurred due to causes

was done by the other vessels in the port;

which could not have been prevented by

thus, making said blatant negligence the

the insured, despite the exercise of due

proximate cause of the loss of the cargoes.

diligence.

occasioned. For, although the

We now come to the issue of whether or

The question now is whether there is a

immediate or proximate

not FGU can be held liable under the

certain degree of negligence on the

cause of the loss in any given

insurance policy to reimburse ANCO for the

part of the insured or his agents that will

instance may have been what

loss of the cargoes despite the findings of

deprive him the right to recover under the

is termed an act of God, yet, if

the respondent court that such loss was

insurance contract. We say there is.

the tug unnecessarily exposed

occasioned by the blatant negligence of the

However, to what extent such negligence

the two to such accident by any

latter's employees.

must go in order to exonerate the insurer

. . . To be exempt from liability

because of an act of God, the
tug must be free from any
previous negligence or
misconduct by which that loss
or damage may have been

culpable act or omission of its

from liability must be evaluated in

own, it is not excused.

light of the circumstances surrounding each

case. When evidence show that the

insurer from such

recover for a loss

insured's negligence or recklessness is so

liability. [Emphasis ours]

occasioned by their own

gross as to be sufficient to constitute a

willful act, the insurer must be exonerated.
In the case of Standard Marine Ins. Co. v.
Nome Beach L. & T. Co., the United States
Supreme Court held that:

xxx xxx xxx

In the case of Williams v. New
England Insurance Co., 3 Cliff.
244, Fed. Cas. No. 17,731, the
owners of an insured vessel

The ordinary negligence of the

attempted to put her across the

insured and his agents has long

bar at Hatteras Inlet. She struck

been held as a part of the risk

on the bar and was wrecked.

which the insurer takes upon

The master knew that the

himself, and the

depth of water on the bar was

existence of which, where it is

such as to make the attempted

the proximate cause of the loss,

passage dangerous. Judge

does not absolve the insurer

Clifford held that, under the

from liability. But willful

circumstances, the loss was not

exposure, gross negligence,

within the protection of the

negligence amounting to

policy, saying:

misconduct, etc., have often

been held to release the

wrongful acts are hardly

necessary, as the
proposition involves an
elementary
principle of universal
application. Losses may
be recovered by the
insured, though remotely
occasioned by the
negligence or
misconduct of the
master or crew, if
proximately caused by
the perils insured
against, because such
mistakes and negligence
are incident to navigation

Authorities to prove that

and constitute a

persons insured cannot

part of the perils which

those who engage in

constitute a part of the perils that the

weather. Negligence was

such adventures are

insurer is obliged to incur, such negligence

likewise exhibited by the

obliged to incur; but it

or recklessness must not be of such gross

defendants-appellants'

was never supposed

character as to amount to misconduct or

representative who did not

that the insured could

wrongful acts; otherwise, such negligence

heed Macabuag's request that

recover indemnity for a

shall release the insurer from liability under

the barge be moved to a more

loss occasioned by his

the insurance contract.

secure place. The prudent thing

own wrongful act or by

that of any agent for
whose conduct he was
responsible. [Emphasis
ours]

From the above-mentioned decision, the

United States Supreme Court has made a
distinction between ordinary negligence
and gross negligence or negligence
amounting to misconduct and its effect on
the insured's right to recover under the
insurance contract. According to the Court,
while mistake and negligence of the master
or crew are incident to navigation and

In the case at bar, both the trial court and

the appellate court had concluded from the
evidence that the crewmembers of both the
D/B Lucio and the M/T ANCO were
blatantly negligent. To wit:
There was blatant
negligence on the part of the
employees of defendantsappellants when the patron
(operator) of the tug boat
immediately left the barge at
the San Jose, Antique wharf
despite the looming bad

to do, as was done by the other

sea vessels at San Jose,
Antique during the time in
question, was to transfer the
vessel to a safer wharf The
negligence of the defendantsappellants is proved by the fact
that on 01 October 1979, the
only simple vessel left at the
wharf in San Jose was the D/B
Lucio. [Emphasis ours]

As stated earlier, this Court does not find

any reason to deviate from the conclusion
drawn by the lower court, as sustained by

the Court of Appeals, that ANCO's

MODIFICATION dismissing the third-party

its case with a preponderance of evidence.

representatives had failed to exercise

complaint. SO ORDERED.

Assailed as well is the Resolution of the

extraordinary diligence required of common

carriers in the shipment of SMC's cargoes.
Such blatant negligence being the
proximate cause of the loss of the cargoes
amounting to One Million Three Hundred
Forty-Six Thousand One Hundred NinetySeven Pesos (P1,346,197.00)
This Court, taking into account the

||

[G.R. No. 140349. June 29, 2005.]

INC., petitioner, vs. FIRST L

EPANTO-TAISHO
INSURANCE
CORPORATION, responden
t.

THE FACTS
On 25 February 1992, Taiyo Yuden
Philippines, Inc. (owner of the goods) and
Delbros, Inc. (shipper) entered into a
contract, evidenced by Bill of Lading No.
CEB/SIN-008/92 issued by the latter in
favor of the owner of the goods, for

DECISION

negligence of ANCO's employees

is of such gross character that it amounts

Motion for Reconsideration.

SULPICIO LINES,

circumstances present in the instant case,

concludes that the blatant

Court of Appeals denying petitioner's

Delbros, Inc. to transport a shipment of

goods consisting of three (3) wooden

CHICO-NAZARIO, J :

crates containing one hundred thirty-six

exonerate FGU from liability under the

Before Us is a Petition for Review

compound on board the V Singapore V20

insurance contract.

on Certiorari assailing the Decision of the

from Cebu City to Singapore in favor of the

to a wrongful act which must

WHEREFORE, premises considered, the

Decision of the Court of Appeals dated 24
February 1999 is hereby AFFIRMED with

Court of Appeals reversing the Decision of

the Regional Trial Court (RTC) of Manila,
Branch XIV, dismissing the complaint for
damages for failure of the plaintiff to prove

(136) cartons of inductors and LC

consignee, Taiyo Yuden Singapore Pte,

Ltd.

For the carriage of said shipment from

of the goods sought payment from

against Delbros, Inc. and herein petitioner-

Cebu City to Manila, Delbros, Inc. engaged

respondent First Lepanto-Taisho Insurance

carrier. On 05 February 1993, petitioner-

the services of the vessel M/V Philippine

Corporation (insurer) under a marine

carrier filed its Answer with Counterclaim.

Princess, owned and operated by petitioner

insurance policy issued to the former.

Delbros, Inc. filed on 15 April 1993 its

Sulpicio Lines, Inc. (carrier). The vessel

Respondent-insurer paid the claim less

Answer with Counterclaim and Cross-

arrived at the North Harbor, Manila, on 24

thirty-five percent (35%) salvage value or

claim, alleging that assuming the contents

February 1992.

P194,220.31.

of the crate in question were truly in bad

During the unloading of the shipment, one

The payment of the insurance claim of the

crate containing forty-two (42) cartons

owner of the goods by the respondent-

dropped from the cargo hatch to the pier

insurer subrogated the latter to whatever

apron. The owner of the goods examined

right or legal action the owner of the goods

Petitioner-carrier filed its Answer to

the dropped cargo, and upon an alleged

may have against Delbros, Inc. and

Delbros, Inc.'s cross-claim asserting that it

finding that the contents of the crate were

petitioner-carrier, Sulpicio Lines, Inc. Thus,

observed extraordinary diligence in the

no longer usable for their intended

respondent-insurer then filed claims for

handling, storage and general care of the

purpose, they were rejected as a total loss

reimbursement from Delbros, Inc. and

shipment and that subsequent inspection

and returned to Cebu City.

petitioner-carrier Sulpicio Lines, Inc. which

of the shipment by the Manila Adjusters

were subsequently denied.

and Surveyors Company showed that the

The owner of the goods filed a claim with

herein petitioner-carrier for the recovery of

On 04 November 1992, respondent-insurer

the value of the rejected cargo which was

filed a suit for damages docketed as Civil

refused by the latter. Thereafter, the owner

Case No. 92-63337 with the trial court

order, fault is with herein petitioner-carrier

which was responsible for the unloading of
the crates.

contents of the third crate that had fallen

were found to be in apparent sound
condition, except that "2 cello bags each of
50 pieces ferri inductors No. LC FL

112270K-60 (c) were unaccounted for and

to Third Party carriers and

shipment at the compound

missing as per packaging list."

shipping lines (Exhibit A-J).

of Sulpicio Lines. He prepared

After hearing, the trial court dismissed the

The check was paid and

complaint for damages as well as the

delivered to the assured as

counterclaim filed by therein

evidenced by the check

defendant Sulpicio Lines, Inc. and the

voucher and the subrogation

On cross-examination, he said

cross-claim filed by Delbros, Inc. According

receipt.

that two cartons were torn at

to the RTC:

On cross-examination by

The plaintiff has failed to prove

counsel for the Sulpicio Lines,

its case. The first witness for

he said that their company paid

the plaintiff merely testified

the claim less 35% salvage

about the payment of the claim

value based on the adjuster

based on the documents

report. This testimony is

accompanying the claim which

hearsay.

were the Packing List,

Commercial Invoices, Bill of
Lading, Claims Statement,
Marine Policies, Survey Report,
Marine Risk Note, and the letter

The second witness for the

plaintiff, Arturo Valdez, testified,
among others, that he, together
with a co-surveyor and a
representative of Sulpicio Lines
had conducted a survey of the

a survey report (Exhibits G and

G-1) and took a picture of
shipment (Exhibit G-2).

the sides with top portion flaps

opened and the 41 cartons
were properly sealed and in
good order conditions. Two
cartons were already opened
and slightly damaged. He
merely looked at them but did
not conduct an inspection of the
contents. What he was referring
to as slightly damaged were the
cartons only and not the
contents.

From the foregoing evidence, it

the lower court, the decretal portion of

wooden crate which fell was

is apparent that the plaintiff had

which reads:

damaged such that this

failed to prove its case with a

preponderance of evidence.
xxx xxx xxx
WHEREFORE, in view of the
foregoing considerations,
judgment is hereby rendered
dismissing the Complaint,
defendant Sulpicio Lines'
counterclaim and defendant
Delbros Inc.'s cross-claim.

A Motion for Reconsideration was then filed

by herein respondent-insurer and
subsequently denied by the trial court in an
Order dated 07 February 1995 on the

WHEREFORE, the appeal is

granted. The decision appealed
from is REVERSED.
Defendants-appellees Delbros
and Sulpicio Lines are hereby
ordered to pay, jointly and
severally, plaintiff-appellant the
sum of P194,220.31
representing actual damages,
plus legal interest counted from
the filing of the complaint until
fully paid.

The appellate court disposed of the issues

in the case in this wise:

particular crate was not

anymore sent to Singapore and
was instead shipped back to
Cebu from Manila. Upon
examination, it was found that
two (2) cartons of the forty-two
(42) cartons contained in this
crate were externally damaged.
They were torn at the sides and
their top portions or flaps were
open. These facts were
admitted by all the parties.
Defendant-appellees, however,
insist that it was only the
external packaging that was

ground that it did not raise any new issue.

Furthermore, the evidence

damaged, and that there was

Thus, respondent-insurer instituted an

shows that one of the three

no actual damage to the goods

appeal with the Court of Appeals, which

crates fell during the unloading

such that would make them

reversed the dismissal of the complaint by

at the pier in Manila. The

liable to the shipper. This theory

is erroneous. When the goods

state. They were no longer fit to

Lines cannot exculpate itself

are placed at a common

be sent to Singapore.

from liability because it failed to

carrier's possession for delivery

to a specified consignee, they
are in good order and condition
and are supposed to be
transported and delivered to the
consignee in the same state. In
the case herein, the goods
were received by defendantappellee Delbros in Cebu
properly packed in cardboard
cartons and then placed in
wooden crates, for delivery to
the consignee in Singapore.
However, before the shipment
reached Singapore (while it
was in Manila) one crate and 2
cartons contained therein were
not anymore in their original

xxx xxx xxx

As We have already found,
there is damage suffered by the
goods of the shipper. This
consists in the destruction of
one wooden crate and the
tearing of two of the cardboard
boxes therein rendering then
unfit to be sent to Singapore.
Defendant-appellee Sulpicio Lin

prove that it exercised due

diligence in the selection and
supervision of its employees to
prevent the damage.

On 21 June 1999, herein petitioner-carrier

filed its Motion for Reconsideration of the
decision of the Court of Appeals which was
subsequently denied in a Resolution dated
13 October 1999. Hence, the instant
petition.

es admits that this crate fell

During the pendency of the appeal before

while it was being unloaded at

this Court, Delbros, Inc. filed a

the Manila pier. Falling of the

manifestation stating that its appeal filed

crate was negligence on the

before this Court had been dismissed for

part of defendant-

being filed out of time and thus the case as

appellee Sulpicio Lines under

against it was declared closed and

the doctrine of res ipsa loquitur.

terminated. As a consequence, it paid in

Defendant-appellee Sulpicio

full the amount of the damages awarded by

the appellate court to the respondent-

which dismissal is

A perusal of the records will show,

insurer. Before this Court, Delbros, Inc.

already final.

however, that in a Resolution dated 13

prays for reimbursement, contribution, or

indemnity from its co-defendant, herein
petitioner-carrier Sulpicio Lines, Inc. for
whatever it had paid to respondent-insurer
in consonance with the decision of the
appellate court declaring both Delbros, Inc.
and petitioner-carrier Sulpicio Lines, Inc.
jointly and severally liable.
ISSUES
Petitioner-carrier raises the following issues
in its petition:

2. The Court of Appeals erred

in not dismissing the
appeal for failure of
appellant to comply with
the technical

(7) copies of the questioned decision within

five (5) days from notice. Said Resolution
was properly complied with.
As a rule, the right to appeal is a statutory

of Court.

right and one who seeks to avail of that

RULING OF THE COURT

We shall first address the procedural issue
raised by petitioner-carrier, Sulpicio Lines,
dismissed the appeal for failure of

in not holding that the

respondent-insurer to attach a copy of the

trial court justly and

decision of the trial court to its appellant's

correctly dismissed the

brief in violation of Rule 44, Section 13(h)

complaint

of the Rules of Civil Procedure.

against Sulpicio Lines,

herein respondent-insurer to submit seven

requirement of the Rules

Inc. that the Court of Appeals should have

1. The Court of Appeals erred

August 1996, the Court of Appeals required

right must comply with the manner required

by the pertinent rules for the perfection of
an appeal. Nevertheless, this Court has
allowed the filing of an appeal upon
subsequent compliance with the
requirements imposed by law, where a
strict application of the technical rules will
impair the proper administration of justice.
As enunciated by the Court in the case
of Jaro v. Court of Appeals:

There is ample jurisprudence

We see no error, therefore, on the part of

from its vessel. Neither is it impugned that

holding that the subsequent

the Court of Appeals when it gave due

upon inspection, it was found that two (2)

and substantial compliance of

course to the appeal after respondent-

cartons were torn on the side and the top

an appellant may call for the

insurer had submitted copies of the RTC

flaps were open and that two (2) cello

relaxation of the rules of

decision, albeit belatedly.

bags, each of 50 pieces ferri inductors,

procedure. In CusiHernandez vs. Diaz [336 SCRA

113] and Piglas-Kamao vs.
National Labor Relations
Commission [357 SCRA 640],
we ruled that the subsequent
submission of the missing
documents with the motion for
reconsideration amounts to
substantial compliance. The
reasons behind the failure of
the petitioners in these two
cases to comply with the
required attachments were no
longer scrutinized.

We now come to the substantial issues

were missing from the cargo.

alleged by petitioner-carrier. The pivotal

Petitioner-carrier contends that its liability, if

question to be considered in the resolution

any, is only to the extent of the cargo

of this issue is whether or not, based on the

damage or loss and should not include the

evidence presented during the trial, the

lack of fitness of the shipment for transport

owner of the goods, respondent-insurer's

to Singapore due to the damaged packing.

predecessor-in-interest, did incur damages,

This is erroneous. Petitioner-carrier seems

and if so, whether or not petitioner-carrier is

to be labor under the misapprehension that

liable for the same.

a distinction must be made between the

It cannot be denied that the shipment

sustained damage while in the custody of
petitioner-carrier. It is not disputed that one
of the three (3) crates did fall from the
cargo hatch to the pier apron while
petitioner-carrier was unloading the cargo

cargo packaging and the contents of the

cargo. According to it, damage to the
packaging is not tantamount to damage to
the cargo. It must be stressed that in the
case at bar, the damage sustained by the
packaging of the cargo while in petitionercarrier's custody resulted in its unfitness to

be transported to its consignee in

can provide, using the utmost

cargo.Under Articles 1735 and 1752 of the

Singapore. Such failure to ship the cargo to

diligence of a very cautious person, with

Civil Code, common carriers are presumed

its final destination because of the ruined

due regard to all circumstances." The

to have been at fault or to have acted

packaging, indeed, resulted in damages on

extraordinary diligence in the vigilance over

negligently in case the goods transported

the part of the owner of the goods.

the goods tendered for shipment requires

by them are lost, destroyed or had

the common carrier to know and to follow

deteriorated. To overcome the presumption

the required precaution for avoiding the

of liability for loss, destruction or

damage to, or destruction of, the goods

deterioration of goods under Article

entrusted to it for safe carriage and

1735, the common carrier must prove that

delivery. It requires common carriers to

they observed extraordinary diligence as

render service with the greatest skill and

required in Article 1733 of the Civil Code.

The falling of the crate during the unloading

is evidence of petitioner-carrier's
negligence in handling the cargo. As a
common carrier, it is expected to observe
extraordinary diligence in the handling of
goods placed in its possession for
transport. The standard of extraordinary
diligence imposed upon common carriers is
considerably more demanding than the
standard of ordinary diligence, i.e., the
diligence of a
good paterfamilias established in respect of

foresight and "to use all reasonable means

to ascertain the nature and characteristic of
goods tendered for shipment, and to
exercise due care in the handling and
stowage, including such methods as their
nature requires."

the ordinary relations between members of

Thus, when the shipment suffered

society. A common carrier is bound to

damages as it was being unloaded,

transport its cargo and its passengers

petitioner-carrier is presumed to have been

safely "as far as human care and foresight

negligent in the handling of the damaged

Petitioner-carrier miserably failed to adduce

any shred of evidence of the required
extraordinary diligence to overcome the
presumption that it was negligent in
transporting the cargo.
Coming now to the issue of the extent of
petitioner-carrier's liability, it is undisputed
that respondent-insurer paid the owner of
the goods under the insurance policy the

amount of P194,220.31 for the alleged

rights of the other in relation to a debt or

exculpate itself from liability because it

damages the latter has incurred. Neither is

claim, including its remedies or

failed to prove that it exercised

there dispute as to the fact that Delbros,

securities. The rights to which the subrogee

extraordinary diligence.

Inc. paid P194,220.31 to respondent-

succeeds are the same as, but not greater

insurer in satisfaction of the whole amount

than, those of the person for whom he is

of the judgment rendered by the Court of

substituted, that is, he cannot acquire any

Appeals. The question then is: To what

claim, security or remedy the subrogor did

extent is Sulpicio Lines, Inc., as common

not have. In other words, a subrogee

carrier, liable for the damages suffered by

cannot succeed to a right not possessed by

the owner of the goods?

the subrogor. A subrogee in effect steps

As stated in the manifestation filed by

into the shoes of the insured and can

Delbros, Inc., however, respondent-insurer

recover only if the insured likewise could

had already been paid the full amount

have recovered.

granted by the Court of Appeals, hence, it

Upon respondent-insurer's payment of the

alleged amount of loss suffered by the
insured (the owner of the goods), the

Hence, we uphold the ruling of the

appellate court that herein petitioner-carrier
is liable to pay the amount paid by
respondent-insurer for the damages
sustained by the owner of the goods.

will be tantamount to unjust enrichment for

insurer is entitled to be subrogated pro

As found by the Court of Appeals, there

tantoto any right of action which the insured

was damage suffered by the goods which

may have against the common carrier

consisted in the destruction of one wooden

whose negligence or wrongful act caused

crate and the tearing of two (2) cardboard

With respect to Delbros, Inc.'s prayer

the loss. Subrogation is the substitution of

boxes therein which rendered them unfit to

contained in its manifestation that, in case

one person in the place of another with

be sent to Singapore. The falling of the

the decision in the instant case be adverse

reference to a lawful claim or right, so that

crate was negligence on the part

to petitioner-carrier, a pronouncement as to

he who is substituted succeeds to the

of Sulpicio Lines, Inc. for which it cannot

the matter of reimbursement,

respondent-insurer to again recover

damages from herein petitioner-carrier.

indemnification or contribution in favor of

and

DEOGRACIAS

B.

passengers' baggage compartment were

Delbros, Inc. be included in the decision,

SAVELLANO, petitioners, vs

stolen. Consequently, petitioners filed a

this Court will not pass upon said issue

case for damages which was decided by

since Delbros, Inc. has no personality

AIRLINES, respondent.

NORTHWEST

the trial court in their favor. On appeal, the

before this Court, it not being a party to the

Court of Appeals reversed the decision of

instant case. Notwithstanding, this shall not

The Law Firm of Raymundo A. Armovit for

bar any action Delbros, Inc. may institute

petitioners.

against petitioner-carrier Sulpicio Lines,

Inc. with respect to the damages the latter
is liable to pay.

The Supreme Court ruled that the change

Quisumbing Torres for respondent.

assailed Decision of the Court of Appeals

dated 26 May 1999 and its Resolution
dated 13 October 1999 are hereby
AFFIRMED. No costs. SO ORDERED.

"may alter or omit stopping places shown in

Petitioners were passengers of respondent

airline and their contract of carriage with
the latter was for the San FranciscoTokyo(Narita)-Manila

flights.

Petitioners

claimed, however, that this itinerary was not

followed when the aircraft used for the first

[G.R. No. 151783. July 8, 2003.]

segment of the journey developed engine

trouble. Petitioners likewise claimed that

VICTORINO

of petitioners' flight itinerary does not fall

under the situation covered by the phrase

SYNOPSIS

WHEREFORE, premises considered, the

the trial court. Hence, this petition.

SAVELLANO,

the contents of their baggage which was

VIRGINIA B. SAVELLANO

not allowed to be placed inside the

the ticket in case of necessity." A case of

necessity must first be proven. The burden
of proving it necessarily fell on respondent.
This responsibility it failed to discharge.
Respondent failed to show a case of
necessity for changing the stopping place
from Tokyo to Los Angeles and Seoul.
Thus, respondent committed a breach of
the contract of carriage. However, the
Court ruled that moral damages cannot be
awarded in the case at bar because of the

absence of bad faith, ill will, malice or

BETWEEN THE PARTIES; CASE AT BAR.

your-leave to stopping places that they

wanton conduct on the part of respondent.

A contract is the law between the

have not been previously notified of, much

Neither are exemplary damages proper in

parties. Thus, in determining whether

less agreed to or been prepared for.

the present case because respondent has

petitioners' rights were violated, we must

Substituting aircrafts

not been proven to have acted in a wanton,

look into its provisions, which are printed

notice

fraudulent,

reckless,

is

or

entirely

carriers without
different

from

oppressive

or

on the airline ticket. Condition 9 in the

changing stopping places or connecting

Nevertheless,

the

agreement states that a ". . . [c]arrier may

cities without notice.

to

without notice substitute alternate carriers

are

or aircraft, and may alter or omit stopping

recoverable if no actual, substantial or

places shown on the ticket in case of

specific damages were shown to have

necessity. . . ." After an examination of the

resulted from the breach, as in the case at

conditions printed on the airline ticket, we

bar. The Court also held that the claim for

find nothing there authorizing Northwest to

the alleged lost items from the baggage of

decide unilaterally, after the distressed

petitioners cannot prosper because they

flight landed in Seattle, what other stopping

failed to give timely notice of the loss to

places petitioners should take and when

respondent.

they should fly. True, Condition 9 on the

malevolent
Court

manner.

awarded

petitioners.

nominal

Nominal

damages

damages

ticket allowed respondent to substitute

SYLLABUS
1. CIVIL

LAW;

OBLIGATIONS

alternate carriers or aircraft without notice.

AND

CONTRACTS; A CONTRACT IS THE LAW

However, nothing there permits shuttling

passengers without so much as a by

cEAIHa

2. ID.; ID.; CONTRACT OF ADHESION;

SHOULD BE CONSTRUED AGAINST THE
PARTY

THAT

CAUSED

ITS

PREPARATION; CASE AT BAR. The

ambiguities in the contract, being one of
adhesion, should be construed against the
party that caused its preparation in this
case, respondent. Since the conditions
enumerated on the ticket do not specifically
allow it to change stopping places or to fly
the passengers to alternate connecting
cities without consulting them, then it must
be construed to mean that such unilateral
change was not permitted.

3. ID.; ID.; CONTRACT OF CARRIAGE;

also be that there were other carriers that

BAD FAITH; CASE AT BAR. Petitioners

BREACHED IN CASE AT BAR. [T]he

could have accommodated them for these

have failed to show convincingly that they

change in petitioners' flight itinerary does

sectors of their journey, and whose route

were rerouted by respondent to Los

not fall under the situation covered by the

they might have preferred to the more

Angeles and Seoul because of malice,

phrase "may alter or omit stopping places

circuitous one unilaterally chosen for them

profit motive or self-interest. Good faith is

shown on the ticket in case of necessity." A

by respondent. In the absence of evidence

presumed, while bad faith is a matter of

case of necessity must first be proven. The

as to the actual situation, the Court is hard

fact that needs to be proved by the party

burden of proving it necessarily fell on

pressed to determine if there was a "case

alleging it. In the absence of bad faith, ill

respondent. This responsibility it failed to

of necessity" sanctioning the alteration of

will, malice or wanton conduct, respondent

discharge. Northwest failed to show a

the Tokyo stopping place in the case of

cannot be held liable for moral damages.

"case of necessity" for changing the

petitioners. Thus, we hold that in the

Article 2219 of the Civil Code enumerates

stopping place from Tokyo to Los Angeles

absence of a demonstrated necessity

the instances in which moral damages may

and Seoul. It is a fact that some of the

thereof and their rerouting to Los Angeles

be awarded. In a breach of contract, such

passengers

flight

and Seoul as stopping places without their

damages are not awarded if the defendant

(Narita)

consent, respondent committed a breach of

is not shown to have acted fraudulently or

the contract of carriage.

with malice or bad faith. Insufficient to

continued
connecting

on
on

the
to

place.

the

distressed
Tokyo
No

explanation

whatsoever was given to petitioners as to

why they were not similarly allowed to do
so. It may be that the Northwest connecting
flight from Seattle to Tokyo to Manila could
no longer accommodate them. Yet it may

4. ID.; DAMAGES; MORAL DAMAGES;

CANNOT BE AWARDED IN BREACH OF
CONTRACT IF DEFENDANT IS NOT
SHOWN

TO

HAVE

ACTED

FRAUDULENTLY OR WITH MALICE OR

warrant the award of moral damages is the

fact that complainants suffered economic
hardship,

or

that

they

experienced mental anxiety.

worried

and

5. REMEDIAL

EVIDENCE;

6. CIVIL LAW; DAMAGES; EXEMPLARY

Northwest employees' normal workload,

CREDIBILITY; FACTUAL FINDINGS OF

DAMAGES; AWARDED IF DEFENDANT

was difficult to satisfy perfectly. We cannot

THE

ACTED

find

COURT

LAW;
OF

SUPPORTED

APPEALS

WANTON,

liable

for

exemplary

MALEVOLENT MANNER. The Civil

to consult with the passengers beforehand.

AND CONCLUSIVE AND MAY NOT BE

Code provides that "[i]n contracts and

REVIEWED ON APPEAL; EXCEPTION;

quasi-contracts,

PRESENT IN CASE AT BAR. As a

exemplary damages if the defendant acted

general rule, the factual findings of the CA

in

when supported by substantial evidence on

oppressive,

record are final and conclusive and may not

Respondent has not been proven to have

be reviewed on appeal. An exception to this

acted in that manner. At most, it can only

rule is when the lower court and the CA

be found guilty of having acted without first

arrive at different factual findings. In this

considering and weighing all other possible

case, the trial court found the presence of

courses of actions it could have taken, and

bad faith and hence awarded moral and

without consulting petitioners and securing

exemplary damages; while the CA found

their consent to the new stopping places.

none and hence deleted the award of

The unexpected and sudden requirement

damages.

now

of having to arrange the connecting flights

behooved to review the basis for sustaining

of every single person in the distressed

the award or deletion of damages.

plane in just a few hours, in addition to the

is

OPPRESSIVE

respondent

EVIDENCE ON RECORD ARE FINAL

Court

RECKLESS,

FRAUDULENT,

damages for its imperfection of neglecting

the

SUBSTANTIAL

IN

OR

Thus,

BY

WHEN

wanton,
or

the

court

may award

fraudulent,

reckless,

malevolent

manner."

7. ID.;

ID.;

RECOVERABLE

NOMINAL
IF

NO

DAMAGES;
ACTUAL,

SUBSTANTIAL OR SPECIFIC DAMAGES

ARE

SHOWN

TO

HAVE

RESULTED

FROM THE BREACH OF CONTRACT;

CASE AT BAR. Nominal damages are
recoverable if no actual, substantial or
specific damages were shown to have
resulted from the breach. The amount of
such damages is addressed to the sound
discretion of the court, taking into account
the relevant circumstances. In the present
case, we must consider that petitioners
suffered the inconveniences of having to
wake up early after a bad night and having
to miss breakfast; as well as the fact that

they were business class passengers.

WARSAW CONVENTION, APPLIED IN

the Rules Relating to International Carriage

They paid more for better service; thus,

CASE AT BAR. A claim for the alleged

by Air (Warsaw Convention) state: "Article

rushing them and making them miss their

lost items from the baggage of petitioners

26 (1) Receipt by the person entitled to

small comforts was not a trivial thing. We

cannot prosper, because they failed to give

delivery of luggage or goods without

also consider their social and official status.

timely notice of the loss to respondent. The

complaint is prima facie evidence that the

Victorino Savellano was a former mayor,

Conditions printed on the airline ticket

same

regional trial court judge and chairman of

plainly read: "2. Carriage hereunder is

condition and in accordance with the

the Commission on Elections. Virginia B.

subject to the rules and limitations relating

document of carriage. (2) In case of

Savellano was the president of five rural

to liability established by the Warsaw

damage, the person entitled to delivery

banks, and Deogracias Savellano was then

Convention unless such carriage is not

must complain to the carrier forthwith after

the incumbent vice governor of Ilocos Sur.

'International carriage' as defined by that

the discovery of the damage, and, at the

Hence, it will be proper to grant one

Convention. . . . "7. Checked baggage will

latest, within three days from the date of

hundred fifty thousand pesos as nominal

be delivered to bearer of the baggage

receipt in the case of luggage and seven

damages to each of them, in order to

check. In case of damage to baggage

days from date of receipt in the case of

vindicate and recognize their right to be

moving

transportation

goods. In the case of delay the complaint

notified

complaint must be made in writing to

must be made at the latest within fourteen

carrier forthwith after discovery of damage,

days from the date on which the luggage or

and at the latest, within 7 days from receipt;

goods have been placed at his disposal. (3)

in case of delay, complaint must be made

Every complaint must be made in writing

within 21 days from date the baggage was

upon the document of carriage or by

delivered. . . ." The pertinent provisions of

separate notice in writing dispatched within

and

consulted

before

their

contracted stopping place was changed.

8. POLITICAL

LAW;

INTERNATIONAL

LAW; WARSAW CONVENTION; RULES

AND

LIMITATIONS

LIABILITY

RELATING

ESTABLISHED

BY

TO
THE

in

international

have

been

delivered

in

good

the times aforesaid. (4) Failing complaint

be awarded without proof of the carrier's

"WHEREFORE, the judgment

within the times aforesaid, no action shall

bad faith, ill will, malice or wanton conduct.

of July 29, 1994 is hereby

lie against the carrier, save in the case of

Neither will actual damages be granted in

REVERSED and SET ASIDE

fraud on his part."

the absence of convincing and timely proof

and

of loss. But nominal damages may be

DISMISSING

allowed under the circumstances in the

Complaint. No pronouncement

case herein.

as to costs."

DECISION

The Case

another

rendered
[petitioners']

On the other hand, the dispositive portion

Before the Court is a Petition for Review

of

under Rule 45 of the Rules of Court,

Decision that was reversed by the CA

When, as a result of engine malfunction, a

seeking to set aside the June 29, 2001

disposed thus:

commercial airline is unable to ferry its

Decision of the Court of Appeals (CA) in

passengers on the original contracted

"WHEREFORE,

CA-GR CV No. 47165. The dispositive part

route, it nonetheless has the duty of

considered, decision is hereby

of the Decision reads:

rendered

in

plaintiffs

and

PANGANIBAN, J :
p

fulfilling its responsibility of carrying them to

their contracted destination on the most
convenient route possible. Failing in this, it
cannot

just

unilaterally

shuttle

them,

without their consent, to other routes or

the

Regional

Trial

Court

premises

favor

of

the

against

the

defendant, sentencing the latter

to

pay to

the

former,

the

following amounts:

stopping places outside of the contracted

1. P500,000.00

sectors. However, moral damages cannot

damages;

as

actual

(RTC)

2. P3,000,000.00

as

moral

damages;

The facts of the case are summarized by

Airlines

the CA as follows:

Business

3. P500,000.00 as exemplary

"[Petitioner] Victorino Savellano

damages; and

(Savellano) was a Cabugao,

4. P500,000.00

as attorney's

fees;
"All such sums shall bear legal
interest, i.e., 6% per annum
pursuant to Article 2209 of the
Civil

Code

(Reformina

vs.

Tomol, 139 SCRA 260) from

the date of the filing of the
complaint until fully paid. Costs
against the . . . Northwest
Airlines, Inc.
"[Respondent's] counterclaim is
ordered dismissed, for lack of
merit."

The Facts

Ilocos Sur mayor for many

terms, former Chairman of the

(NW)

Flight

Class,

bound

27,
for

Manila, Philippines using the

NW round-trip tickets which
were issued at [respondent's]
Manila ticketing office.

Commission on Elections and

"[Petitioners] were expected to

Regional

arrive at the Ninoy Aquino

judge.

Trial

His

Court

wife,

(RTC)

[Petitioner]

International

Airport

(NAIA),

Virginia is a businesswoman

Manila on October 29, 1991

and

rural

(Manila time) or after twelve

The

(12) hours of travel.

banks

operates
in

several

Ilocos

Sur.

couple's . . . son [Petitioner]

Deogracias was, at the time [of]
the incident subject of the case,
the Vice-Governor of Ilocos Sur.
"On

October

airborne

for

approximately two and one-half

(2 1/2) hours or at about 4:15
p.m. of the same day, October
27, 1991 (Seattle, USA time),

around 1:45 p.m., [petitioners]

NW Flight 27's pilot made an

departed from San Francisco,

emergency landing in Seattle

USA

after announcing that a fire had

board

1991,

being

at

on

27,

"After

Northwest

started in one of the plane's

were awakened by a phone call

"On account of the 'engine

engines.

from [respondent's] personnel

failure' of the plane, [petitioner]

who advised them to be at the

Virginia

Seattle Airport by 7:00 a.m.

nervousness. On getting wind

(Seattle time) the following day,

of information that they were

October

for

'bumped off', she took 'valium'

departure. To reach the airport

to calm her nerves and 'cough

on time, the NW shuttle bus

syrup' for the fever and colds

fetched

she had developed during the

"[Petitioners]

and

the

other

passengers proceeded to Gate

8 of the Seattle Airport where
they were instructed to go
home to Manila the next day,
'using

the

same

boarding

passes with the same seating

arrangements.'
"[Respondent's]
thereafter

them

1991,

early,

making

them skip the 6:30 a.m. hotel

breakfast.

shuttle
brought

bus
all

passengers to the Seattle Red

Lion Hotel where they were
billeted by, and at the expense
of [respondent].
"[Petitioners]

28,

who

were

travelling as a family were

assigned one room at the hotel.
At around 12:00 midnight, they

developed

trip.
"When [petitioners] reached the

"Prior to leaving the hotel,

Seattle Airport, [respondent's]

however, [petitioners] met at the

ground

lobby Col. Roberto Delfin, a

advised them that instead of

Filipino co-passenger who was

flying to Manila they would have

also travelling Business Class,

to board NW Flight 94, a DC-10

who informed them that he and

plane, bound for a 3-hour flight

some passengers were leaving

to Los Angeles for a connecting

the next day, October 29, 1991,

flight

on board the same plane with

[Petitioner] Savellano insisted

the same itinerary.

theirs was a direct flight to

stewardess belatedly

to

Manila.

When

Manila,

the

female

ground

were not padlocked as they

carousel, they discovered that

stewardess just told them to

were

the

hurry up as they were the last

zippers were 'not allowed' to be

handcarried items which were

passengers to board.

placed inside the passengers'

not allowed to be placed inside

baggage compartments of the

the

plane

compartment

"In Los Angeles, [petitioners]

and

the

became

other

passengers

confused

for

while

merely closed

by

an

by

arrogant

NW

ground stewardess.
"On [petitioners'] arrival at the

which

Seoul-

NAIA, Manila where they saw

was

Col. Delfin and his wife as well

posted for a Manila flight. It was

as the other passengers of the

only after they complained to

distressed

the NW personnel that the latter

them

'finally changed the board to

Seattle on October 28, 1991,

include Manila.'

left Seattle on October 29,

Bangkok

flight,

a
none

"Before boarding NW Flight 23

for

Manila

[petitioners]

via

Seoul,

encountered

flight

passengers'

baggage

had

been

ransacked and the contents

'there was a sort of a board'

announced

would-have-been

who

[petitioners]

unlike

who

left

1991, they were teased for

taking the longer and tiresome
route to the Philippines.
[petitioners]

thereof stolen. Virginia

was

later to claim having lost her

diamond

earrings

costing

P300,000.00, two (2) Perry Gan

shoes worth US$250.00, four
(4) watches costing US$40.00
each, two (2) pieces of Tag
Heuer watch and three (3)
boxes

of

Elizabeth

Arden

[perfumes]. Deogracias, on the

other hand, claimed to have lost
two (2) pairs of Cole Haan

another problem. Their three

"When

claimed

small handcarried items which

their luggage at the baggage

shoes which he bought for his

wife, and the clothes, camera,

personal computer, and jeans

Manila. Their only complaint is

Los Angeles and Los Angeles

he bought for his children.

that

to Seoul enroute to Manila

"By letter of November 22,

1991,

[petitioners]

counsel

through

demanded

[respondent]

the

from

amount

of

they

suffered

inconvenience,

which took off on October 28,

embarrassment,

and

humiliation for taking a longer

route.

1991.
"The

subpoena duces

tecum was

served

on

P3,000,000.00 as damages for

"During the trial, the [RTC], on

December 1, 1993 but was not

what they claimed to be the

motion of [petitioners], issued

complied

humiliation and inconvenience

on

[respondent], it proffering that

they suffered in the hands of its

subpoena duces

its

personnel.

tecum directing [respondent] to

retains documents only for one

not accede to the demand,

submit

year

however, impelling [petitioners]

manifest of the distressed flight

to file a case for damages at

from San Francisco to Tokyo on

the RTC of Cabugao, Ilocos Sur

October

passengers' manifest of the

subject

[Respondent]

of

the

did

present

appeal.
"[Petitioners] concede that they
were not downgraded in any of
the flights on their way home to

October

the

27,

29,

1993

passengers'

1991,

the

same distressed plane from

Seattle to Tokyo which took off
on October 29, 1991, and the
passenger

manifest

of

the

substitute plane from Seattle to

with,

Minneapolis

after

however,

head

which

they

by

office

are

destroyed.
". . . Branch 24 of the RTC of
Cabugao, Ilocos Sur rendered
judgment

in

favor

of

[petitioners] . . . .
"In granting moral and actual
damages to [petitioners], the
[RTC]

credited

[petitioners']

claim that they were excluded

award of moral and exemplary damages.

as it is odd why no receipts for

from the Seattle-Tokyo-Manila

Neither did it find any reason to grant

alleged

flight to accommodate several

attorney's fees.

valuable pasalubongs including

Japanese passengers bound

for Japan. And as basis of its
award

of

actual

damages

arising from the allegedly lost

articles contained in the wouldhave-been

handcarried

[luggage], the [RTC], passing

on the lack of receipts covering
the same, took judicial notice of
the Filipinos' practice of often
bringing

home pasalubong for

friends and relatives."

Ruling of the Court of Appeals

purchases

Tag Huer watches, camera and

It further ruled:

personal

"[Petitioners'] testimonial

by any other evidence at all. It

is odd and even contrary to
human

experience

for

[petitioner] Virginia not to have

from

unlocked small luggage

an
after

such luggage was not allowed

to

be

placed

passenger's

inside

were

Thus, even the trial court's award of

actual damages was reversed by the
appellate court.
Hence this Petition.

taken out a P300,000.00 pair of

earrings

computer

presented . . . ."

claim of losses is unsupported

diamond

for

the

baggage

Issues
In their appeal, petitioners ask this Court to
rule on these issues:
".

petitioners'

[W]hether

or

not

discriminatory

The CA ruled that petitioners had failed to

compartment, given the ease

bump-off from NW Flight No.

show respondent's bad faith, negligence or

with which it could have been

0027 on 28 October 1991 (not

malice in transporting them via the Seattle-

done as the small luggage was

the diversion of the distressed

Los Angeles-Seoul-Manila route. Hence, it

merely closed by zipper. Just

plane

held that there was no basis for the RTC's

to

Seattle

the

day

before, i.e. NW Flight 27 on 27

constitutes

segment of the journey developed engine

places shown on the ticket in case of

breach by respondent airline of

trouble. Petitioners stress that they are

necessity. . . . ."

its air-carriage contract?

questioning, not the cancellation of the

October

1991)

original itinerary, but its substitution, which

they allegedly had not contracted for or
"And if so, whether or not

agreed to. They insist that, like the other

petitioners

to

passengers of the distressed flight, they

actual, moral and exemplary

had the right to be placed on Flight 27,

damages

which had a connecting flight from Japan to

attorney's

fees

are

entitled

including

as

Manila. They add that in being treated

consequence?"

differently and shabbily, they were being

discriminated against.

The Court's Ruling

The Petition is partly meritorious.

Breach of Contract
contract

of

carriage

with

Northwest was for the San Francisco-Tokyo

(Narita)-Manila

flights

scheduled

for

October 27, 1991. This itinerary was not

followed when the aircraft used for the first

is

the

respondent allegedly treated petitioners like

puppets that could be shuttled to Manila via
Los Angeles and Seoul without their
consent. Undeniably, it did not take the
time to explain how it would be meeting its
contractual obligation to transport them to
their final destination. Its employees merely
hustled

the

confused

petitioners

into

boarding one plane after another without

the

giving the latter a choice from other

whether

courses of action that were available. It

petitioners' rights were violated, we must

unilaterally decided on the most expedient

look into its provisions, which are printed

way for them to reach their final destination.

parties. Thus,

First Issue:

Petitioners'

contract

The basis of the Complaint was the way

in

law

between

determining

on the airline ticket. Condition 9 in the

agreement states that a ". . . [c]arrier may
without notice substitute alternate carriers
or aircraft, and may alter or omit stopping

Passengers' Consent
After an examination of the conditions
printed on the airline ticket, we find nothing
there authorizing Northwest to decide

unilaterally,

after

the

distressed

flight

the passengers to alternate connecting

that

landed in Seattle, what other stopping

cities without consulting them, then it must

connecting points thereafter without their

places petitioners should take and when

be construed to mean that such unilateral

consent.

they should fly. True, Condition 9 on the

change was not permitted.

ticket allowed respondent to substitute

alternate carriers or aircraft without notice.
However, nothing there permits shuttling
passengers without so much as a by
your-leave to stopping places that they
have not been previously notified of, much
less agreed to or been prepared for.
Substituting aircrafts
notice

is

entirely

or

carriers without
different

from

changing stopping places or connecting

cities without notice.
The ambiguities in the contract, being one
of adhesion, should be construed against
the party that caused its preparation in
this case, respondent. Since the conditions
enumerated on the ticket do not specifically
allow it to change stopping places or to fly

Proof of Necessity of Alteration

of

shuttling

petitioners

to other

Northwest failed to show a "case of

necessity" for changing the stopping place

Furthermore, the change in petitioners'

from Tokyo to Los Angeles and Seoul. It is

flight itinerary does not fall under the

a fact that some of the passengers on the

situation covered by the phrase "may alter

distressed flight continued on to the Tokyo

or omit stopping places shown on the ticket

(Narita) connecting place. No explanation

in case of necessity." A case of necessity

whatsoever was given to petitioners as to

must first be proven. The burden of proving

why they were not similarly allowed to do

it necessarily fell on respondent. This

so. It may be that the Northwest connecting

responsibility it failed to discharge.

flight from Seattle to Tokyo to Manila could

Petitioners do not question the stop in

Seattle, so we will not delve into this matter.
The airplane engine trouble that developed
during the flight bound for Tokyo from San
Francisco definitely merited the "necessity"
of landing the plane at some place for
repair in this case, Seattle but not

no longer accommodate them. Yet it may

also be that there were other carriers that
could have accommodated them for these
sectors of their journey, and whose route
they might have preferred to the more
circuitous one unilaterally chosen for them
by respondent.

In the absence of evidence as to the actual

are guilty of fraud, negligence,

reasonably attributed to the

situation, the Court is hard pressed to

or delay and those who in any

non-performance

determine

of

manner contravene the tenor

obligation."

necessity" sanctioning the alteration of the

thereof are liable for damages."

Tokyo stopping place in the case of

(Italics supplied)

if

there

was

"case

petitioners. Thus, we hold that in the

of

the

As a general rule, the factual findings of the

CA

when

supported

by

substantial

"Art. 2201. In contracts and

evidence on record are final and conclusive

quasi-contracts, the damages

and may not be reviewed on appeal. An

for which the obligor who acted

exception to this rule is when the lower

in good faith is liable shall be

court and the CA arrive at different factual

those that are the natural and

findings. In this case, the trial court found

probable consequences of the

the presence of bad faith and hence

Second Issue:

breach of the obligation, and

awarded moral and exemplary damages;

Damages

which the parties have foreseen

while the CA found none and hence

or

deleted the award of damages. Thus, the

absence of a demonstrated necessity

thereof and their rerouting to Los Angeles
and Seoul as stopping places without their
consent, respondent committed a breach of
the contract of carriage.

Being guilty of a breach of their contract,

respondent may be held liable for damages
suffered by petitioners in accordance with

could

foreseen

have
at

the

reasonably
time

the

obligation was constituted."

Court is now behooved to review the basis

for sustaining the award or deletion of
damages.

Articles 1170 and 2201 of the Civil Code,

"In case of fraud, bad faith,

which state:

malice or wanton attitude, the

Petitioners

obligor shall be responsible for

discrimination,

all damages which may be

malevolence to respondent. We are not

"Art. 1170. Those who in the

performance of their obligations

impute

oppression,

recklessness

and

convinced.

There

persuasive

Japanese passengers, petitioners failed to

having been confirmed, first-class tickets

evidence that they were maliciously singled

present convincing evidence to back this

were subsequently issued in their favor.

out to fly the Seattle-Los Angeles-Seoul-

allegation. In the absence of convincing

Mistakenly, however, defendant's agent

Manila

evidence, we cannot find respondent guilty

cancelled the reservation. But expecting

of bad faith.

other

route.

It

is

no

appears

that

the

passengers of the distressed flight were

randomly divided into two groups. One
group was made to take the Tokyo-Manila
flight; and the other, the Los AngelesSeoul-Manila flight. The selection of who
was to take which flight was handled via
the computer reservation system, which
took into account only the passengers' final
destination.

by

sincere

motives

to

get

petitioners to their final destination by

whatever was the most expeditious course
in its judgment, if not in theirs. Though
they

claim

Petitioners cite the cases of Lopez v. Pan

American World Airways, Zulueta v. Pan
American World Airways, Inc. and Ortigas
Jr. v. Lufthansa German Airlines to support
for

moral

and

exemplary

damages.

The records show that respondent was

impelled

supervisor

Rulings Not Applicable

claim

that

they

were

not

accommodated on Flight 27 from Seattle to

Tokyo because respondent had taken on

before

the

flight

scheduled a month later, the reservations

Lopez, Zulueta and Ortigas

their

cancellations

In Lopez, Honorable Fernando Lopez, then

an incumbent senator and former Vice
President of the Philippines together
with his wife, his daughter and his son-inlaw made first-class reservations with
the Pan American World Airways on its
Tokyo-San Francisco flight. The reservation

decided

to

withhold

the

information from them, with the result that

upon

arrival

discovered

in
they

accommodations.

Tokyo,
had

the
no

Thus,

Lopezes
first-class

they

were

compelled to take the tourist class, just so

the senator could be on time for his
pressing

engagements

in

the

United

States.
In the light of these facts, the Court held
there was a breach of the contract of
carriage. The failure of the defendant to
inform the plaintiffs on time that their
reservations for the first class had long
been cancelled was considered as the

element of bad faith entitling them to moral

followed, and the pilot went to the extent of

next

damages

referring

therefor

for

the

contractual

breach.

to

the

Zuluetas

as

proper

supposedly

arrangements
been

made

monkeys."

his

already, when in truth such was not the

placed them in a predicament that enabled

"belligerent" attitude, Rafael Zulueta was

case. In justifying the award of moral and

the company to keep them as their

intentionally off-loaded and left at Wake

exemplary damages, the Court explained:

passengers in the tourist class. Thus, the

Island with the prospect of being stranded

defendant was able to retain the business

there for a week, with malice aforethought.

and to promote its self-interest at the

The

expense of embarrassment, discomfort and

P500,000.00

humiliation on their part.

P200,000.00 as exemplary damages and

home to Manila from Honolulu via a Pan-

Court

awarded

to

as

moral

for

had

The

According to the Court, such omission had

In Zulueta, the passenger was coming

Subsequently,

"those

stop.

the

Zuluetas
damages,

P75,000.00 as attorney's fees, apart from

the actual damages of P5,502.85.

". . . [W]hen it comes to

contracts of common carriage,
inattention and lack of care on
the part of the carrier resulting
in the failure of the passenger
to be accommodated in the
class contracted for amounts to

American flight. The plane had a stopover

In Ortigas, Francisco Ortigas Jr. had a

bad faith or fraud which entitles

at Wake Island, where Rafael Zulueta went

confirmed and validated first-class ticket for

the passenger to the award of

down to relieve himself. At flight time, he

Lufthansa's Flight No. 646. His reserved

moral damages in accordance

could not be located immediately. Upon

first-class seat was, however, given to a

with Article 2220 of the Civil

being

Belgian. As a result, he was forced to take

Code. But in the instant case,

between him and the Pan-Am employees.

economy

the breach appears to be of

One of them remonstrated: "What in the

Lufthansa succeeded in keeping him as a

graver

hell do you think you are? Get on that

passenger by assuring him that he would

preference given to the Belgian

plane." An exchange of angry words

be given first-class accommodation at the

passenger over plaintiff was

found,

an

altercation

ensued

class

on

the

same

flight.

nature,

since

the

done willfully and in wanton

entrepreneurial motive or self-interest as

or that they worried and experienced

disregard of plaintiff's rights and

in Lopez or

mental anxiety.

his dignity as a human being

in Zulueta and Ortigas.

and as a Filipino, who may not

failed to show convincingly that they were

be discriminated against with

rerouted by respondent to Los Angeles and

impunity."

Seoul because of malice, profit motive or

To summarize, in Lopez despite sufficient

time one month to inform the
passengers of what had happened to their

with

ill

will

as

Petitioners

have

self-interest. Good faith is presumed, while

bad faith is a matter of fact that needs to be
proved by the party alleging it.

Neither are exemplary damages proper in

the present case. The Civil Code provides
that "[i]n contracts and quasi-contracts, the
court may award exemplary damages if the
defendant acted in a wanton, fraudulent,
reckless,

oppressive,

or

malevolent

manner." Respondent has not been proven

booking, the airline agent intentionally

In the absence of bad faith, ill will, malice

to have acted in that manner. At most, it

withheld

them.

or wanton conduct, respondent cannot be

can only be found guilty of having acted

In Zulueta, the passenger was deliberately

held liable for moral damages. Article 2219

without first considering and weighing all

off-loaded after being gravely insulted

of the Civil Code enumerates the instances

other possible courses of actions it could

during an altercation. And in Ortigas, the

in which moral damages may be awarded.

have

passenger was intentionally downgraded in

In a breach of contract, such damages are

petitioners and securing their consent to

favor of a European.

not awarded if the defendant is not shown

the new stopping places.

These

that

cases

information

are

different

from

from

and

inapplicable to the present case. Here,

there is no showing that the breach of
contract

was

done

with

the

same

to have acted fraudulently or with malice or

bad faith. Insufficient to warrant the award
of

moral

damages

is

the

fact

that

complainants suffered economic hardship,

taken,

and

without

consulting

The unexpected and sudden requirement

of having to arrange the connecting flights
of every single person in the distressed
plane in just a few hours, in addition to the

Northwest employees' normal workload,

every obligation arising from

trivial thing. We also consider their social

was difficult to satisfy perfectly. We cannot

any

in

and official status. Victorino Savellano was

find

exemplary

Article 1157, or in every case

a former mayor, regional trial court judge

damages for its imperfection of neglecting

where any property right has

and chairman of the Commission on

to consult with the passengers beforehand.

been invaded."

Elections. Virginia B. Savellano was the

respondent

liable

for

source

enumerated

Nevertheless, herein petitioners will not be

Nominal damages are recoverable if no

totally deprived of compensation. Nominal

actual, substantial or specific damages

damages may be awarded as provided by

were shown to have resulted from the

the Civil Code, from which we quote:

breach. The amount of such damages is

"Art. 2221. Nominal damages

are adjudicated in order that a
right of the plaintiff, which has

addressed to the sound discretion of the

court, taking into account the relevant
circumstances.

president
Deogracias

or recognized, and not for the

having to wake up early after a bad night

purpose of indemnifying the

and having to miss breakfast; as well as the

plaintiff for any loss suffered by

fact

him."

passengers. They paid more for better

in

the

right to be notified and consulted before

changed.

damages

then

order to vindicate and recognize their

petitioners suffered the inconvenience of

nominal

was

and

as nominal damages to each of them, in

defendant, may be vindicated

award

Savellano

banks,

hundred fifty thousand pesos (P150,000)

their

"Art. 2222. The court may

rural

Hence, it will be proper to grant one

In the present case, we must consider that

they

five

incumbent vice governor of Ilocos Sur.

been violated or invaded by the

that

of

were

business

class

service; thus, rushing them and making

them miss their small comforts was not a

contracted

stopping

place

was

A claim for the alleged lost items from the

baggage of petitioners cannot prosper,
because they failed to give timely notice of
the loss to respondent. The Conditions
printed on the airline ticket plainly read:

"2. Carriage
subject

to

hereunder
the

rules

is
and

limitations relating to liability

established

by

Convention

the

Warsaw

unless

such

carriage is not 'International

21 days from date the baggage

of

was delivered. . . . ."

luggage and seven days from

The pertinent provisions of the Rules

Relating to International Carriage by Air
(Warsaw Convention) state:

Convention.

1. Receipt

"7. Checked baggage will be

to

bearer

of

the

baggage check. In case of

damage to baggage moving in
international

transportation

complaint must be made in

writing to carrier forthwith after
discovery of damage, and at
the latest, within 7 days from
receipt;

in

case

the

of

delay,

complaint must be made within

or

goods

without

person

complaint

is prima facie evidence that the

same have been delivered in
good

condition

and

in

accordance with the document

of carriage.

person entitled to delivery must

complain to the carrier forthwith
the

case

of

date of receipt in the case of

goods. In the case of delay the
complaint must be made at the

or goods have been placed at

his disposal.
3. Every complaint must be
made

in

writing

upon

the

document of carriage or by
separate

notice

in

writing

dispatched within the times

aforesaid.

2. In case of damage, the

after

the

the date on which the luggage

entitled to delivery of luggage

xxx xxx xxx

delivered

by

in

latest within fourteen days from

"Article 26

carriage' as defined by that

receipt

discovery

of

the

damage, and, at the latest,

within three days from the date

4. Failing complaint within the

times aforesaid, no action shall
lie against the carrier, save in
the case of fraud on his part."

After allegedly finding that their luggage

had been ransacked, petitioners never
lodged a complaint with any Northwest
airport personnel. Neither did they mention
the alleged loss of their valuables in their
November 22, 1991 demand letter. Hence,
in accordance with the parties' contract of
carriage, no claim can be heard or
admitted against respondent with respect
to alleged damage to or loss of petitioners'
baggage.

[G.R. No. L-47822. December 22, 1988.]

PEDRO DE
GUZMAN, petitioner, vs. CO
URT OF APPEALS and
ERNESTO
CENDAA, respondents.
SYLLABUS
1. CIVIL CODE; COMMON CARRIERS;
ARTICLE 1732, DEFINITION UNDER

WHEREFORE,

the

Petition

is

hereby

ARTICLE 1732 OF THE CODE. The

PARTIALLY GRANTED, and the assailed

Civil Code defines "common carriers" in the

Decision

following terms: "Article 1732. Common

MODIFIED.

Respondent

is

ORDERED to pay one hundred fifty

carriers are persons, corporations, firms or

thousand pesos (P150,000) to each of the

associations engaged in the business of

three petitioners as nominal damages. No.

carrying or transporting passengers or

pronouncement

goods or both, by land, water, or air for

ORDERED.

as

to

costs.

SO

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.

compensation, offering their services to the

2. ID.; ID.; ID.; LAW ON COMMON

public." The above article makes no

CARRIERS SUPPLEMENTED BY THE

distinction between one

PUBLIC SERVICE ACT; SCOPE OF

PUBLIC SERVICE. So understood, the

any class, express service, steamboat, or

respondent's principal occupation was not

concept of "common carrier" under Article

steamship line, pontines, ferries and water

the carriage of goods for others. There is

1732 may be seen to coincide neatly with

craft, engaged in the transportation of

no dispute that private respondent charged

the notion of "public service," under the

passengers or freight or both, shipyard,

his customers a fee for hauling their goods;

Public Service Act (Commonwealth Act No.

marine repair shop, wharf or dock, ice

that fee frequently fell below commercial

1416, as amended) which at least partially

plant, ice-refrigeration plant, canal,

freight rates is not relevant here.

supplements the law on common carriers

irrigation system, gas, electric light, heat

set forth in the Civil Code. Under Section

and power, water supply and power

13, paragraph (b) of the Public Service Act,

petroleum, sewerage system, wire or

"public service" includes: ". . . every person

wireless communications systems, wire or

that now or hereafter may own, operate,

wireless broadcasting stations and other

manage, or control in the Philippines, for

similar public services . . ." (Emphasis

hire or compensation, with general or

supplied) It appears to the Court that

limited clientele, whether permanent,

private respondent is properly

occasional or accidental, and done for

characterized as a common carrier even

general business purposes, any common

though he merely "back-hauled" goods for

carrier, railroad, street railway, traction

other merchants from Manila to

railway, subway motor vehicle, either for

Pangasinan, although such backhauling

freight or passenger, or both, with or

was done on a periodic or occasional

without fixed route and whatever may be its

rather than regular or scheduled manner,

classification, freight or carrier service of

and even though private

3. ID.; ID.; ID.; ID.; CERTIFICATE OF

PUBLIC CONVENIENCE; NOT A
REQUISITE FOR INCURRING LIABILITY
AS A COMMON CARRIER; NATURE OF
THE BUSINESS OF A COMMON
CARRIER. The Court of Appeals
referred to the fact that private respondent
held no certificate of public convenience,
and concluded he was not a common
carrier. This is palpable error. A certificate
of public convenience is not a requisite for
the incurring of liability under the Civil Code
provisions governing common carriers.
That liability arises the moment a person or
firm acts as a common carrier, without

regard to whether or not such carrier has

their services and the law cannot allow a

general rule that common carriers are

also complied with the requirements of the

common carrier to render such duties and

responsible for the loss, destruction or

applicable regulatory statute and

liabilities merely facultative by simply failing

deterioration of the goods which they carry,

implementing regulations and has been

to obtain the necessary permits and

"unless the same is due to any of the

granted a certificate of public convenience

authorizations.

following causes only: (1) Flood, storm,

or other franchise. To exempt private

respondent from the liabilities of a common
carrier because he has not secured the
necessary certificate of public
convenience, would be offensive to sound
public policy; that would be to reward
private respondent precisely for failing to
comply with applicable statutory
requirements. The business of a common
carrier impinges directly and intimately
upon the safety and well being and
property of those members of the general
community who happen to deal with such
carrier. The law imposes duties and

4. ID.; ID.; DEGREE OF DILIGENCE

REQUIRED OF, COMMON CARRIERS.
Common carriers, "by the nature of their
business and for reasons of public policy,"
are held to a very high degree of care and
diligence ("extraordinary diligence") in the
carriage of goods as well as of passengers.
The specific import of extraordinary
diligence in the care of goods transported
by a common carrier is, according to Article
1733, "further expressed in Articles 1734,
1735 and 1745, numbers 5, 6 and 7" of the
Civil Code.

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." It is important
to point out that the above list of causes of
loss, destruction or deterioration which
exempt the common carrier for
responsibility therefor, is a closed list.
Causes falling outside the foregoing list,
even if they appear to constitute a species

liabilities upon common carriers for the

5. ID.; ID.; ID.; LIABILITY OF COMMON

of force majeure, fall within the scope of

safety and protection of those who utilize

CARRIERS. Article 1734 establishes the

Article 1735, which provides as follows: "In

all cases other than those mentioned in

believe and so hold that the limits of the

numbers 1, 2, 3, 4 and 5 of the preceding

duty of extraordinary diligence in the

article, if the goods are lost, destroyed or

vigilance over the goods carried are

deteriorated, common carriers are

reached where the goods are lost as a

presumed to have been at fault or to have

result of a robbery which is attended by

acted negligently, unless they prove that

"grave or irresistible threat, violence or

they observed extraordinary diligence as

force." In these circumstances, we hold that

required in Article 1733." (Emphasis

the occurrence of the loss must reasonably

supplied)

be regarded as quite beyond the control of

6. ID.; ID.; ID.; ID.; COMMON CARRIER'S

ARE NOT ABSOLUTE INSURERS
AGAINST ALL RISKS; NO LIABILITY
ATTACHES IN CASE OF FORTUITOUS
EVENTS. Under Article 1745 (6) above,
a common carrier is held responsible
and will not be allowed to divest or to
diminish such responsibility even for
acts of strangers like thieves or
robbers, except where such thieves or

the common carrier and properly regarded

as a fortuitous event. It is necessary to
recall that even common carriers are not
made absolute insurers against all risks of
travel and of transport of goods, and are
not held liable for acts or events which
cannot be foreseen or are inevitable,
provided that they shall have complied with

Respondent Ernesto Cendaa, a junk

dealer, was engaged in buying up used
bottles and scrap metal in Pangasinan.
Upon gathering sufficient quantities of such
scrap material, respondent would bring
such material to Manila for resale. He
utilized two (2) six-wheeler trucks which he
owned for hauling the material to Manila.
On the return trip to Pangasinan,
respondent would load his vehicles with
cargo which various merchants wanted
delivered to differing establishments in
Pangasinan. For that service, respondent
charged freight rates which were commonly
lower than regular commercial rates.

the rigorous standard of extraordinary

Sometime in November 1970, petitioner

diligence.

Pedro de Guzman, a merchant and

authorized dealer of General Milk Company

robbers in fact acted "with grave or

irresistible threat, violence or force." We

FELICIANO, J :

DECISION

(Philippines), Inc. in Urdaneta, Pangasinan,

contracted with respondent for the hauling

On 6 January 1971, petitioner commenced

holding him liable for the value of the

of 750 cartons of Liberty filled milk from a

action against private respondent in the

undelivered goods (P22,150.00) as well as

warehouse of General Milk in Makati, Rizal,

Court of First Instance of Pangasinan,

for P4,000.00 as damages and P2,000.00

to petitioner's establishment in Urdaneta on

demanding payment of P22,150.00, the

as attorney's fees.

or before 4 December 1970. Accordingly,

claimed value of the lost merchandise, plus

on 1 December 1970, respondent loaded in

damages and attorney's fees. Petitioner

Makati the merchandise on to his trucks:

argued that private respondent, being a

150 cartons were loaded on a truck driven

common carrier, and having failed to

by respondent himself; while 600 cartons

exercise the extraordinary diligence

were placed on board the other truck which

required of him by the law, should be held

was driven by Manuel Estrada,

liable for the value of the undelivered

respondent's driver and employee.

goods.

Only 150 boxes of Liberty filled milk were

In his Answer, private respondent denied

delivered to petitioner. The other 600 boxes

that he was a common carrier and argued

never reached petitioner, since the truck

that he could not be held responsible for

which carried these boxes was hijacked

the value of the lost goods, such loss

somewhere along the MacArthur Highway

having been due to force majeure.

in Paniqui, Tarlac, by armed men who took

with them the truck, its driver, his helper
and the cargo.

On appeal before the Court of Appeals,

respondent urged that the trial court had
erred in considering him a common carrier;
in finding that he had habitually offered
trucking services to the public; in not
exempting him from liability on the ground
of force majeure; and in ordering him to pay
damages and attorney's fees.
The Court of Appeals reversed the
judgment of the trial court and held that
respondent had been engaged in
transporting return loads of freight "as a
casual occupation a sideline to his scrap

On 10 December 1975, the trial court

iron business" and not as a common

rendered a Decision' finding private

carrier.

respondent to be a common carrier and

Petitioner came to this Court by way of a

The Civil Code defines "common carriers"

an occasional, episodic or unscheduled

Petition for Review assigning as errors the

in the following terms:

basis. Neither does Article 1732 distinguish

following conclusions of the Court of

Appeals:

"Article 1732. Common carriers

are persons, corporations, firms

1. that private respondent was

or associations engaged in the

not a common carrier;

business of carrying or

2. that the hijacking of

respondent's truck was force
majeure; and
3. that respondent was not
liable for the value of the
undelivered cargo. (Rollo, p.
111)

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

We consider first the issue of whether or

only as an ancillary activity (in local idiom,

not private respondent Ernesto Cendaa

as "a sideline"). Article 1732 also carefully

may, under the facts earlier set forth, be

avoids making any distinction between a

properly characterized as a common

person or enterprise offering transportation

carrier.

service on a regular or scheduled

basis and one offering such service on

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 narrowsegment 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

freight or both, shipyard, marine

respondent's principal occupation was not

hereafter may own, operate,

repair shop, wharf or dock, ice

the carriage of goods for others. There is

manage, or control in the

plant, ice-refrigeration plant,

no dispute that private respondent charged

Philippines, for hire or

canal, irrigation system, gas,

his customers a fee for hauling their goods;

compensation, with general or

electric light, heat and power,

that fee frequently fell below commercial

limited clientele, whether

water supply and power

freight rates is not relevant here.

permanent, occasional or

petroleum, sewerage system,

accidental, and done for

wire or wireless

general business purposes,

communications systems, wire

any common carrier, railroad,

or wireless broadcasting

street railway, traction railway,

stations and other similar public

subway motor vehicle, either for

services . . ." (Emphasis

freight or passenger, or both,

supplied)

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

The Court of Appeals referred to the fact

that private respondent held no certificate
of public convenience, and concluded he
was not a common carrier. This is palpable
error. A certificate of public convenience is
not a requisite for the incurring of liability
under the Civil Code provisions governing

It appears to the Court that private

common carriers. That liability arises the

respondent is properly characterized as a

moment a person or firm acts as a

common carrier even though he merely

common carrier, without regard to whether

"back-hauled" goods for other merchants

or not such carrier has also complied with

from Manila to Pangasinan, although such

the requirements of the applicable

backhauling was done on a periodic or

regulatory statute and implementing

occasional rather than regular or scheduled

regulations and has been granted a

manner, and even though private

certificate of public convenience or other

franchise. To exempt private respondent

We turn then to the liability of private

(1) Flood, storm, earthquake,

from the liabilities of a common carrier

respondent as a common carrier.

lightning, or other natural

because he has not secured the necessary

certificate of public convenience, would be
offensive to sound public policy; that would
be to reward private respondent precisely
for failing to comply with applicable
statutory requirements. The business of a
common carrier impinges directly and
intimately upon the safety and well being

Common carriers, "by the nature of their

disaster or calamity;

business and for reasons of public policy,"

(2) Act of the public enemy in

are held to a very high degree of care and

war, whether international or

diligence ("extraordinary diligence") in the

civil;

carriage of goods as well as of passengers.

The specific import of extraordinary
diligence in the care of goods transported

(3) Act or omission of the

shipper or owner of the goods;

by a common carrier is, according to Article

(4) The character of the goods

1733, "further expressed in Articles 1734,

or defects in the packing or in

1735 and 1745, numbers 5, 6 and 7" of the

the containers; and

Civil Code.

(5) Order or act of competent

safety and protection of those who utilize

Article 1734 establishes the general rule

public authority."

their services and the law cannot allow a

that common carriers are responsible for

It is important to point out that the above

common carrier to render such duties and

the loss, destruction or deterioration of the

list of causes of loss, destruction or

liabilities merely facultative by simply failing

goods which they carry, "unless the same

deterioration which exempt the common

to obtain the necessary permits and

is due to any of the following causes only:

carrier for responsibility therefor, is a

and property of those members of the

general community who happen to deal
with such carrier. The law imposes duties
and liabilities upon common carriers for the

authorizations.

closed list. Causes falling outside the

foregoing list, even if they appear to

constitute a species of force majeure,

would follow, therefore, that the hijacking of

brigands in a fire fight at the risk of his own

fall within the scope of Article 1735,

the carrier's vehicle must be dealt with

life and the lives of the driver and his

which provides as follows:

under the provisions of Article 1735, in

helper.

"In all cases other than those

other words, that the private respondent as

mentioned in numbers 1, 2, 3,

common carrier is presumed to have been

4 and 5 of the preceding article,

at fault or to have acted negligently. This

if the goods are lost, destroyed

presumption, however, may be overthrown

or deteriorated, common

by proof of extraordinary diligence on the

carriers are presumed to have

part of private respondent.

been at fault or to have acted

Petitioner insists that private respondent

negligently, unless they prove

had not observed extraordinary diligence in

that they observed

the care of petitioner's goods. Petitioner

extraordinary diligence as

argues that in the circumstances of this

required in Article 1733."

case, private respondent should have hired

(Emphasis supplied)

a security guard presumably to ride with

The precise issue that we address here

relates to the specific requirements of the
duty of extraordinary diligence in the
vigilance over the goods carried in the
specific context of hijacking or armed
robbery.
As noted earlier, the duty of extraordinary
diligence in the vigilance over goods is,
under Article 1733, given additional
specification not only by Articles 1734 and
1735 but also by Article 1745, numbers 4,
5 and 6, Article 1745 provides in relevant

Applying the above-quoted Articles 1734

the truck carrying the 600 cartons of

and 1735, we note firstly that the specific

Liberty filled milk. We do not believe,

cause alleged in the instant case the

however, that in the instant case, the

"Any of the following or similar

hijacking of the carrier's truck - does not fall

standard of extraordinary diligence required

stipulations shall be considered

within any of the five (5) categories of

private respondent to retain a security

unreasonable, unjust and

exempting causes listed in Article 1734. It

guard to ride with the truck and to engage

contrary to public policy:

part:

xxx xxx xxx

(5) that the
common carrier shall not
be responsible for the
acts or omissions of his
or its employees;

deterioration of goods on

"grave or irresistible threat, violence or

account of the defective

force."

condition of the car,

vehicle, ship, airplane or
other equipment used in
the contract of carriage."
(Emphasis supplied)

(6) that the

for acts committed by

Under Article 1745 (6) above, a common

thieves, or

carrier is held responsible and will not

of robbers who

be allowed to divest or to diminish such

do not act with grave or

responsibility even for acts of strangers

irresistible threat,

like thieves or robbers, except where such

violence or force, is

thieves or robbers in fact acted "with grave

dispensed with or

or irresistible threat, violence or force." We

diminished; and

believe and so hold that the limits of the

common carrier shall not

responsible for the loss,
destruction or

second truck owned by private respondent

which carried petitioner's cargo. The record
shows that an information for robbery in
band was filed in the Court of First Instance
of Tarlac, Branch 2, in Criminal Case No.

common carrier's liability

(7) that the

In the instant case, armed men held up the

duty of extraordinary diligence in the

vigilance over the goods carried are
reached where the goods are lost as a
result of a robbery which is attended by

198 entitled "People of the Philippines v.

Felipe Boncorno, Napoleon Presno,
Armando Mesina, Oscar Oria and one
John Doe." There, the accused were
charged with willfully and unlawfully taking
and carrying away with them the second
truck, driven by Manuel Estrada and loaded
with the 600 cartons of Liberty filled milk
destined for delivery at petitioner's store in
Urdaneta, Pangasinan. The decision of the
trial court shows that the accused acted
with grave, if not irresistible, threat,
violence or force. Three (3) of the five (5)

hold-uppers were armed with firearms. The

they shall have complied with the rigorous

COURT OF APPEALS,

robbers not only took away the truck and its

standard of extraordinary diligence.

LENY TUMBOY, ARDEE

cargo but also kidnapped the driver and his

helper, detaining them for several days and
later releasing them in another province (in
Zambales). The hijacked truck was
subsequently found by the police in
Quezon City. The Court of First Instance
convicted all the accused of robbery,
though not of robbery in band.
In these circumstances, we hold that the
occurrence of the loss must reasonably be
regarded as quite beyond the control of the
common carrier and properly regarded as a
fortuitous event. It is necessary to recall
that even common carriers are not made
absolute insurers against all risks of travel
and of transport of goods, and are not held
liable for acts or events which cannot be
foreseen or are inevitable, provided that

We, therefore, agree with the result

reached by the Court of Appeals that
private respondent Cendaa is not liable
for the value of the undelivered
merchandise which was lost because of an
event entirely beyond private respondent's
control.

TUMBOY and JASMIN

TUMBOY, respondents.
SYNOPSIS
On April 26, 1988, spouses Tito and Leny
Tumboy and their minor children, Ardee
and Jasmin, boarded at Mangagoy,

ACCORDINGLY, the Petition for Review on

Surigao del Sur, a Yobido bus bound for

Certiorari is hereby DENIED and the

Davao City. Along Picop road in Km. 17,

Decision of the Court of Appeals dated 3

Sta. Maria, Agusan del Sur, the left front

August 1977 is AFFIRMED. No

tire of the bus suddenly exploded. The bus

pronouncement as to costs. SO

fell into a ravine around three (3) feet from

ORDERED.

the road and struck a tree which resulted in

||

[G.R. No. 113003. October 17, 1997.]

ALBERTA YOBIDO and
CRESENCIO
YOBIDO, petitioners, vs.

the death of Tito Tumboy and physical

injuries to other passengers. Thereafter, a
complaint for breach of contract of carriage,
damages and attorney's fees was filed by
Leny and her children against Alberta
Yobido, the owner of the bus, and

Cresencio Yobido, its driver in the Regional

settled that an accident caused either by

constitutes the caso fortuito, or if it can be

Trial Court of Davao City. After trial, the

defects in the automobile or through the

foreseen, it must be impossible to avoid; (c)

lower court rendered a decision dismissing

negligence of its driver is not a caso

the occurrence must be such as to render it

the action for lack of merit. Respondents

fortuito that would exempt the carrier from

impossible for the debtor to fulfill his

appealed to the Court of Appeals. On

liability for damages. Accordingly, the

obligation in a normal manner; and (d) the

August 23, 1993, respondent court

challenged decision is affirmed subject to

obligor must be free from any participation

rendered a decision reversing that of the

modification that petitioners shall

in the aggravation of the injury resulting to

lower court. In this instant petition,

additionally pay herein, respondents

the creditor. As Article 1174 provides, no

petitioners assert that the tire blowout that

P20,000.00 as exemplary damages.

person shall be responsible for a fortuitous

caused the death of Tito Tumboy was

a caso fortuito and herein respondent court
misapprehended the facts of the case,
therefore, its findings cannot be considered
final which shall bind the Court.
The Supreme Court ruled that there is no
reason to overturn the findings and
conclusions of the Court of Appeals.
Petitioners' contention that they are
exempted from liability because the tire
blowout was a fortuitous event that could
not have been foreseen, must fail. It is

event which could not be foreseen, or

SYLLABUS
1. CIVIL LAW; OBLIGATIONS AND
CONTRACTS; FORTUITOUS EVENT;
CHARACTERISTICS THEREOF. A
fortuitous event is possessed of the
following characteristics: (a) the cause of
the unforeseen and unexpected
occurrence, or the failure of the debtor to
comply with his obligations must be
independent of human will; (b) it must be
impossible to foresee the event which

which, though foreseen was inevitable. In

other words, there must be an entire
exclusion of human agency from the cause
of injury or loss.
2. ID.; COMMON CARRIER; WHEN A
PASSENGER IS INJURED OR DIES
WHILE TRAVELLING, THE LAW
PRESUMES THAT THE COMMON
CARRIER IS NEGLIGENT. When a
passenger boards a common carrier, he
takes the risks incidental to the mode of

travel he has taken. After all, a carrier is not

Code or that the death or injury of the

quality, resulting in the conclusion that it

an insurer of the safety of its passengers

passenger was due to a fortuitous event.

could not explode within five days' use. Be

and is not bound absolutely and at all

Consequently, the court need not make an

that as it may, it is settled that an accident

events to carry them safely and without

express finding of fault or negligence on

caused either by defects in the automobile

injury. However, when a passenger is

the part of the carrier to hold it responsible

or through the negligence of its driver is not

injured or dies while travelling, the law

for damages sought by the passenger.

a caso fortuito that would exempt the

presumes that the common carrier is

negligent. . . . Article 1755 provides that
"(a) common carrier is bound to carry the
passengers safely as far as human care
and foresight can provide, using the utmost
diligence of very cautious persons, with a
due regard for all the circumstances."
Accordingly, the culpa contractual, once a
passenger dies or is injured the carrier is
presumed to have been at fault or to have
acted negligently. This disputable
presumption may only be overcome by
evidence that the carrier had observed
extraordinary diligence as prescribed by
Articles 1733, 1755 and 1756 of the Civil

3. ID.; ID.; AN ACCIDENT CAUSED

carrier from liability for damages.

EITHER BY DEFECTS IN THE

4. ID.; ID.; PROOF THAT THE TIRE WAS

AUTOMOBILE OR THROUGH THE

NEW AND OF GOOD QUALITY IS NOT

NEGLIGENCE OF ITS DRIVER IS NOT

SUFFICIENT PROOF THAT PETITIONER

A CASO FORTUITO THAT WOULD

IS NOT NEGLIGENT. It was incumbent

EXEMPT THE CARRIER FROM LIABILITY

upon the defense to establish that it took

FOR DAMAGES. The explosion of the

precautionary measures considering

new tire may not be considered a fortuitous

partially dangerous condition of the road.

event. There are human factors involved in

As stated above, proof that the tire was

the situation. The fact that the tire was new

new and of good quality is not sufficient

did not imply that it was entirely free from

proof that it was not negligent. Petitioners

manufacturing defects or that it was

should have shown that it undertook

properly mounted on the vehicle. Neither

extraordinary diligence in the care of its

may the fact that the tire bought and used

carrier such as conducting daily routinary

in the vehicle is of a brand name noted for

check-ups of the vehicle's parts. As the late

Justice J.B.L. Reyes said: "It may be

they failed to rebut the testimony of Leny

7. ID.; ID.; ID.; MORAL DAMAGES;

impracticable, as appellee argues, to

Tumboy that the bus was running so fast

RECOVERABLE WHEN THERE IS A

require of carriers to test the strength of

that she cautioned the driver to slow down.

BREACH OF CONTRACT OF CARRIAGE

each and every part of its vehicles before

These contradictory facts must, therefore,

RESULTING IN THE DEATH OF A

each trip, but we are of the opinion that a

be resolved in favor of liability in view of the

PASSENGER. Moral damages are

due regard for the carrier's obligations

presumption of negligence of the carrier in

generally not recoverable in culpa

toward the traveling public demands

the law.

contractual except when bad faith had been

adequate periodical tests to determine the

condition and strength of those vehicle
portions the failure of which may endanger
the safety of the passengers."

6. ID.; ID.; DAMAGES; FOR THE DEATH

OF A PASSENGER, THE HEIRS ARE
ENTITLED TO P50,000.00. Having
failed to discharge its duty to overthrow the

proven. However, the same damages may

be recovered when breach of contract of
carriage results in the death of a
passenger, as in this case.

5. ID.; ID.; PRESENCE OF

presumption of negligence with clear and

8. ID.; ID.; EXEMPLARY DAMAGES;

CONTRADICTORY FACTS MUST BE

convincing evidence, petitioners are hereby

RESPONDENTS ARE ENTITLED TO

RESOLVED IN FAVOR OF LIABILITY IN

held liable for damages. Article 1764 in

P20,000.00 AS EXEMPLARY DAMAGES

VIEW OF THE PRESUMPTION OF

relation to Article 2206 of the Civil Code

BECAUSE PETITIONER IS DEEMED TO

NEGLIGENCE OF THE CARRIER IN THE

prescribes the amount of at least three

HAVE ACTED RECKLESSLY.

LAW; CASE AT BAR. It is interesting to

thousand pesos as damages for the death

Exemplary damages, awarded by way of

note that petitioners proved through the bus

of a passenger. Under prevailing

example or correction for the public good

conductor, Salce, that the bus was running

jurisprudence, the award of damages under

when moral damages are awarded, may

at "60-50" kilometers per hour only within

Article 2206 has been increased to fifty

likewise be recovered in contractual

the prescribed lawful speed limit. However,

thousand pesos (P50,000.00).

obligations if the defendant acted in

wanton, fraudulent, reckless, oppressive, or

On April 26, 1988, spouses Tito and Leny

fortuito. They also filed a third-party

malevolent manner. Because petitioners

Tumboy and their minor children named

complaint against Philippine Phoenix

failed to exercise the extraordinary

Ardee and Jasmin, boarded at Mangagoy,

Surety and Insurance, Inc. This third-party

diligence required of a common carrier,

Surigao del Sur, a Yobido Liner bus bound

defendant filed an answer with compulsory

which resulted in the death of Tito Tumboy,

for Davao City. Along Picop Road in Km.

counterclaim. At the pre-trial conference,

it is deemed to have acted recklessly. As

17, Sta. Maria, Agusan del Sur, the left

the parties agreed to a stipulation of facts.

such, private respondents shall be entitled

front tire of the bus exploded. The bus fell

to exemplary damages in the amount of

into a ravine around three (3) feet from the

P20,000.00.

road and struck a tree. The incident

resulted in the death of 28-year-old Tito
DECISION

ROMERO, J :
p

In this petition for review on certiorari of the

decision of the Court of Appeals, the issue
is whether or not the explosion of a newly
installed tire of a passenger vehicle is a
fortuitous event that exempts the carrier
from liability for the death of a passenger.

Tumboy, and physical injuries to other

passengers.
On November 21, 1988, a complaint for
breach of contract of carriage, damages
and attorney's fees was filed by Leny and
her children against Alberta Yobido, the
owner of the bus, and Cresencio Yobido, its
driver, before the Regional Trial Court of
Davao City. When the defendants therein
filed their answer to the complaint, they
raised the affirmative defense of caso

Upon a finding that the third party

defendant was not liable under the
insurance contract, the lower court
dismissed the third party complaint. No
amicable settlement having been arrived at
by the parties, trial on the merits ensued.
The plaintiffs asserted that violation of the
contract of carriage between them and the
defendants was brought about by the
driver's failure to exercise the diligence
required of the carrier in transporting
passengers safely to their place of
destination. According to Leny Tumboy, the
bus left Mangagoy at 3:00 o'clock in the

afternoon. The winding road it traversed

exploded was a "brand new tire" that he

the La Mallorca and Pampanga Bus

was not cemented and was wet due to the

mounted on the bus on April 21, 1988 or

Co. v. De Jesus that a tire blowout is "a

rain; it was rough with crushed rocks. The

only five (5) days before the incident. The

mechanical defect of the conveyance or a

bus which was full of passengers had

Yobido Liner secretary, Minerva Fernando,

fault in its equipment which was easily

cargoes on top. Since it was "running fast,"

bought the new Goodyear tire from Davao

discoverable if the bus had been subjected

she cautioned the driver to slow down but

Toyo Parts on April 20, 1988 and she was

to a more thorough or rigid check-up before

he merely stared at her through the mirror.

present when it was mounted on the bus by

it took to the road that morning" is

At around 3:30 p.m., in Trento, she heard

Salce. She stated that all driver applicants

inapplicable to this case. It reasoned out

something explode and immediately, the

in Yobido Liner underwent actual driving

that in said case, it was found that the

bus fell into a ravine.

tests. before they were employed.

blowout was caused by the established fact

Defendant Cresencio Yobido underwent

that the inner tube of the left front tire "was

such test and submitted his professional

pressed between the inner circle of the left

driver's license and clearances from the

wheel and the rim which had slipped out of

barangay, the fiscal and the police.

the wheel." In this case, however, "the

For their part, the defendants tried to

establish that the accident was due to a
fortuitous event. Abundio Salce, who was
the bus conductor when the incident
happened, testified that the 42-seater bus

On August 29, 1991, the lower court

was not full as there were only 32

rendered a decision dismissing the action

passengers, such that he himself managed

for lack of merit. On the issue of whether or

to get a seat. He added that the bus was

not the tire blowout was a caso fortuito, it

running at a speed of "60 to 50" and that it

found that "the falling of the bus to the cliff

was going slow because of the zigzag

was a result of no other outside factor than

road. He affirmed that the left front tire that

the tire blow-out." It held that the ruling in

cause of the explosion remains a mystery

until at present." As such, the court added,
the tire blowout was "a caso fortuito which
is completely an extraordinary
circumstance independent of the will" of the
defendants who should be relieved of
"whatever liability the plaintiffs may have

suffered by reason of the explosion

excessive tire pressure, is not

fortuitous event. It is not

pursuant to Article 1174 of the Civil Code."

an unavoidable event. On the

incumbent upon the plaintiff to

other hand, there may have

prove that the cause of the

been adverse conditions on the

blow-out is not caso fortuito.

Dissatisfied, the plaintiffs appealed to the

Court of Appeals. They ascribed to the
lower court the following errors: (a) finding
that the tire blowout was a caso fortuito; (b)
failing to hold that the defendants did not
exercise utmost and/or extraordinary
diligence required of carriers under Article
1755 of the Civil Code, and (c) deciding the
case contrary to the ruling in Juntilla
v. Fontanar, and Necesito v. Paras.
On August 23, 1993, the Court of Appeals
rendered the Decision reversing that of the
lower court. It held that:

road that were unforeseeable

and/or inevitable, which could
make the blow-out a caso
fortuito. The fact that the cause
of the blow-out was not known
does not relieve the carrier of
liability. Owing to the statutory
presumption of negligence
against the carrier and its
obligation to exercise the
utmost diligence of very
cautious persons to carry the

"To Our mind, the explosion of

passenger safely as far as

the tire is not in itself a

human care and foresight can

fortuitous event. The cause of

provide, it is the burden of the

the blow-out, if due to a factory

defendants to prove that the

defect, improper mounting,

cause of the blow-out was a

Proving that the tire that exploded is a new

Goodyear tire is not sufficient to discharge
defendants' burden. As enunciated in Necesito
vs. Paras, the passenger has neither choice
nor control over the carrier in the selection and
use of its equipment and the good repute of
the manufacturer will not necessarily, relieve
the carrier from liability.
Moreover, there is
evidence that the bus was
moving fast, and the road was
wet and rough. The driver could
have explained that the blow
out that precipitated the
accident that caused the death
of Tito Tumboy could not have

been prevented even if he had

asserting the position that the tire blowout

reason to overturn the findings and

exercised due care to avoid the

that caused the death of Tito Tumboy was

conclusions of the Court of Appeals.

same, but he was not

a caso fortuito. Petitioners claim further that

presented as witness."

the Court of Appeals, in ruling contrary to

The Court of Appeals thus disposed of the

that of the lower court, misapprehended

appeal as follows:

facts and, therefore, its findings of fact

"WHEREFORE, the judgment

of the court a quo is set aside
and another one entered

cannot be considered final which shall bind

this Court. Hence, they pray that this Court
review the facts of the case.

As a rule, when a passenger boards a

common carrier, he takes the risks
incidental to the mode of travel he has
taken. After all, a carrier is not an insurer of
the safety of its passengers and is not
bound absolutely and at all events to carry
them safely and without injury. However,

ordering defendants to pay

The Court did re-examine the facts and

when a passenger is injured or dies, while

plaintiffs the sum of P50,000.00

evidence in this case because of the

traveling, the law presumes that the

for the death of Tito Tumboy,

inapplicability of the established principle

common carrier is negligent. Thus, the Civil

P30,000.00 in moral damages,

that the factual findings of the Court of

Code provides:

and P7,000.00 for funeral and

Appeals are final and may not be reviewed

burial expenses.

on appeal by this Court. This general

SO ORDERED."

principle is subject to exceptions such as

the one present in this case, namely, that

The defendants filed a motion for

the lower court and the Court of Appeals

reconsideration of said decision which was

arrived at diverse factual findings. However,

denied on November 4, 1993 by the Court

upon such re-examination, we found no

of Appeals. Hence, the instant petition

"Art. 1756. In case of death or

injuries to passengers, common
carriers are presumed to have
been at fault or to have acted
negligently, unless they prove
that they observed
extraordinary diligence as

prescribed in articles 1733 and

hold it responsible for damages sought by

provides, no person shall be responsible

1755."

the passenger.

for a fortuitous event which could not be

foreseen, or which, though foreseen, was

Article 1755 provides that "(a) common

In view of the foregoing, petitioners'

carrier is bound to carry the passengers

contention that they should be exempt from

safely as far as human care and foresight

liability because the tire blowout was no

can provide, using the utmost diligence of

more than a fortuitous event that could not

very cautious persons, with a due regard

have been foreseen, must fail. A fortuitous

Under the circumstances of this case, the

for all the circumstances." Accordingly,

event is possessed of the following

explosion of the new tire may not be

in culpa contractual, once a passenger dies

characteristics: (a) the cause of the

considered a fortuitous event. There are

or is injured, the carrier is presumed to

unforeseen and unexpected occurrence, or

human factors involved in the situation. The

have been at fault or to have acted

the failure of the debtor to comply with his

fact that the tire was new did not imply that

negligently. This disputable presumption

obligations, must be independent of human

it was entirely free from manufacturing

may only be overcome by evidence that the

will; (b) it must be impossible to foresee the

defects or that it was properly mounted on

carrier had observed extraordinary

event which constitutes the caso fortuito, or

the vehicle. Neither may the fact that the

diligence as prescribed by Articles 1733,

if it can be foreseen, it must be impossible

tire bought and used in the vehicle is of a

1755 and 1756 of the Civil Code or that the

to avoid; (c) the occurrence must be such

brand name noted for quality, resulting in

death or injury of the passenger was due to

as to render it impossible for the debtor to

the conclusion that it could not explode

a fortuitous event. Consequently, the court

fulfill his obligation in a normal manner; and

within five days' use. Be that as it may, it is

need not make an express finding of fault

(d) the obligor must be free from any

settled that an accident caused either by

or negligence on the part of the carrier to

participation in the aggravation of the injury

defects in the automobile or through the

resulting to the creditor. As Article 1174

negligence of its driver is not a caso

inevitable. In other words, there must be an

entire exclusion of human agency from the
cause of injury or loss.

fortuito that would exempt the carrier from

the jeepney driver to

the law. Coupled with this is the established

liability for damages.

compensate for any conditions

condition of the road rough, winding and

liable to cause accidents. The

wet due to the rain. It was incumbent upon

sudden blowing-up, therefore,

the defense to establish that it took

could have been caused by too

precautionary measures considering

much air pressure injected into

partially dangerous condition of the road.

the tire coupled by the fact that

As stated above, proof that the tire was

the jeepney was overloaded

new and of good quality is not sufficient

and speeding at the time of the

proof that it was not negligent. Petitioners

accident."

should have shown that it undertook

Moreover, a common carrier may not be

absolved from liability in case of force
majeure or fortuitous event alone. The
common carrier must still prove that it was
not negligent in causing the death or injury
resulting from an accident. This Court has
had occasion to state:

It is interesting to note that petitioners

extraordinary diligence in the care of its

carrier, such as conducting daily routinary

"While it may be true that the

proved through the bus conductor, Salce,

tire that blew-up was still good

that the bus was running at "60-50"

because the grooves & the tire

kilometers per hour only or within the

were still visible, this fact alone

prescribed lawful speed limit. However,

"It may be impracticable, as

does not make the explosion of

they failed to rebut the testimony of Leny

appellee argues, to require of

the tire a fortuitous event. No

Tumboy that the bus was running so fast

carriers to test the strength of

evidence was presented to

that she cautioned the driver to slow down.

each and every part of its

show that the accident was due

These contradictory facts must, therefore,

vehicles before each trip; but

to adverse road conditions or

be resolved in favor of liability in view of the

we are of the opinion that a due

that precautions were taken by

presumption of negligence of the carrier in

regard for the carrier's

check-ups of the vehicle's parts. As the late

Justice J.B.L. Reyes said:

obligations toward the traveling

Moral damages are generally not

the modification that petitioners shall, in

public demands adequate

recoverable in culpa contractual except

addition to the monetary awards therein, be

periodical tests to determine the

when bad faith had been proven. However,

liable for the award of exemplary damages

condition and strength of those

the same damages may be recovered

in the amount of P20,000.00. Costs against

vehicle portions the failure of

when breach of contract of carriage results

petitioners. SO ORDERED.

which may endanger the safety

in the death of a passenger, as in this case.

of the passengers."

Exemplary damages, awarded by way of

Having failed to discharge its duty to

overthrow the presumption of negligence
with clear and convincing evidence,
petitioners are hereby held liable for
damages.Article 1764 in relation to Article
2206 of the Civil Code prescribes the
amount of at least three thousand pesos as
damages for the death of a passenger.
Under prevailing jurisprudence, the award
of damages under Article 2206 has been
increased to fifty thousand pesos
(P50,000.00).

example or correction for the public good

when moral damages are awarded, may
likewise be recovered in contractual
obligations if the defendant acted in
wanton, fraudulent, reckless, oppressive, or
malevolent manner. Because petitioners
failed to exercise the extraordinary
diligence required of a common carrier,
which resulted in the death of Tito Tumboy,

[G.R. No. 145044. June 12, 2008.]

PHILIPPINE CHARTER INS
URANCE
CORPORATION, petitioner,
vs. NEPTUNE ORIENT
LINES/OVERSEAS
AGENCY

SERVICES,

INC.,respondents.

it is deemed to have acted recklessly. As

DECISION

such, private respondents shall be entitled

to exemplary damages.
WHEREFORE, the Decision of the Court of
Appeals is hereby AFFIRMED subject to

AZCUNA, J :
p

This is a petition for review on certiorari of

The said cargoes were loaded in Container

of the cargoes in the amount of P228,085,

the Resolution of the Court of Appeals (CA)

No. IEAU-4592750 in good condition under

which claim was fully satisfied by PCIC.

in CA-G.R. CV No. 52855 promulgated on

Bill

April

Fukuyama insured the shipment against all

13,

2000

granting

respondents'

of

Lading

No.

HKG-0396180.

Subrogation Receipt to petitioner PCIC for

motion for reconsideration dated March 9,

risks

2000. The Resolution held respondents

petitioner Philippine Charter Insurance

liable for damages to petitioner subject to

Corporation (PCIC) under Marine Cargo

the limited-liability provision in the bill of

Policy No. RN55581 in the amount of

PCIC

lading.

P228,085.

reimbursement of the entire amount it paid

The facts are as follows:

with

On February 17, 1994, Fukuyama issued a

During the course of the voyage, the

On September 30, 1993, L.T. Garments

Manufacturing Corp. Ltd. shipped from

container with the cargoes fell overboard

Hong Kong three sets of warp yarn on

Thus,

returnable

respondent Overseas Agency Services,

beams

aboard

demanded

from

respondents

to Fukuyama, but respondents refused

payment.

wrote

letter

agent

Regional Trial Court (RTC) of Manila,

Branch 35.

M/V Baltimar

Orion,

and

of Neptune Orient Lines in Manila, and

Respondents

delivery

Fukuyama

Manufacturing

claimed for the value of the lost cargoes.

Compulsory Counterclaim denying liability.

Corporation (Fukuyama) of No. 7 Jasmin

However, Overseas Agency ignored the

They alleged that during the voyage, the

Street, AUV Subdivision, Metro Manila.

claim. Hence, Fukuyama sought payment

vessel encountered strong winds and

from its insurer, PCIC, for the insured value

heavy seas making the vessel pitch and

to

the

to

Inc.

transport

Agency),

for damages against respondents with the

respondent Neptune Orient Lines' vessel,

for

(Overseas

recover its losses from respondents.

On March 21, 1994, PCIC filed a complaint

and was lost.

Fukuyama

the latter to be subrogated in its right to

filed

an

Answer

with

roll, which caused the subject container

with

the

cargoes

Respondents

to

fall

contended

overboard.

17, 1994 of HK$55,000.00 or

Fukuyama. Costs against the

that

the

appellants.

the

sum

of

P228,085.00,

occurrence was a fortuitous event which

whichever is lower, with costs

exempted them from any liability, and that

against the defendants.

their liability, if any, should not exceed

US$500 or the limit of liability in the bill of
lading, whichever is lower.
In a Decision dated January 12, 1996, the
RTC held that respondents, as common
carrier, failed to prove that they observed

the Decision of the CA arguing, among

Respondents' motion for reconsideration

others,

was denied by the RTC in an Order dated

US$1,500 or US$500 per package under

February 19, 1996.

the limited liability provision of the Carriage

Respondents appealed the RTC Decision

to the CA.
In a Decision promulgated on February 15,

prevent loss of the subject cargoes in

2000, the CA affirmed the RTC Decision

accordance with the pertinent provisions of

with modification, thus:

the Civil Code. The dispositive portion of

WHEREFORE,

the Decision reads:

decision is hereby MODIFIED.

rendered
defendants,

judgment

is

ordering

the

jointly

and

severally, to pay the plaintiff the

Peso equivalent as of February

the

assailed

Appellants Neptune and

Overseas are hereby ordered to
pay

that

their

liability

was

only

of Goods by Sea Act (COGSA).

In its Resolution dated April 13, 2000, the

the required extraordinary diligence to

WHEREFORE,

Respondents moved for reconsideration of

jointly

appellee

and

severally

PCIC P228,085.00,

representing the amount it paid

CA

found

respondents

the
to

said
be

argument

meritorious.

of
The

dispositive portion of the Resolution reads:

WHEREFORE, the motion is
partly granted in the sense that
appellants shall be liable to pay
appellee PCIC the value of the
three packages lost computed
at the rate of US$500 per
package

or

US$1,500.00.

total

of

Hence, this petition raising this lone issue:

THE COURT OF APPEALS
ERRED

IN

AWARDING

RESPONDENTS

DAMAGES

SUBJECT TO THE US$500

PER PACKAGE LIMITATION.

Petitioner contends that the CA erred in

awarding damages to respondents subject

the abrogation of respondents' rights under

shipment

the contract and COGSA including the

overboard while in the

US$500 per package limitation. Hence,

custody

of

respondents cannot invoke the benefit of

defendants

and

the US$500 per package limitation and the

never recovered; it was

CA erred in considering the limitation and

part of the LCL cargoes

modifying its decision accordingly.

packed by defendants in

the vessel committed a "quasi deviation"

support the new allegation of facts by

which is a breach of the contract of

petitioner regarding the intentional throwing

carriage

overboard of the subject cargoes and quasi

The

that

petitioner stated:

shipment during the voyage to Manila for its

petitioner's Complaint before the RTC,

conducted, we noted that Capt.

own benefit or preservation based on a

petitioner alleged as follows:

S.L. Halloway, Master of MV

2.03 In

the

course

of the subject cargoes. According to

maritime

petitioner, the breach of contract resulted in

Hongkong

the

investigation

Note of Protest in the City of

of

voyage

Manila subject

From

"BALTIMAR ORION" filed a

xxx xxx xxx

Adjustment Corporation, which firm was

in

Moreover, the same Survey Report cited by

deviation.

tasked by petitioner to investigate the loss

notes

the voyage.

overboard the container with the subject

Survey Report conducted by Mariner's

Court

were

that fell overboard during

The facts as found by the RTC do not

it intentionally threw

the

container IEAU-4592750

The contention lacks merit.

to the US$500 per package limitation since

when

fell

the
from
to

Manila, and was notarized on

06 October 1993.

Based on Note of Protest, copy

3100789,

attached

IEAU-4592750,

hereto

for

your

reference, carrier vessel sailed

containerized onto 40 feet LCL

(no.

Apparently, at the time the

vessel [was] sailing at about
2400 hours of 2nd October
1993, she encountered winds
and seas such as to cause
occasional moderate to heavy
pitching and rolling deeply at
times. At 0154 hours, same

degrees, 29 minutes North,

Long. 115 degrees, 49 minutes
(4)
were

40

lost/fell

overboard. The numbers of

these containers are NUSU-

and fell

during heavy weather is an

of voyage, high winds and

heavy seas were encountered
causing the ship to roll and
pitch heavily. The course and
speed was altered to ease
motion of the vessel, causing
delay and loss of time on the
voyage.

"Actual Total Loss".

The records show that the subject cargoes

fell overboard the ship and petitioner
should not vary the facts of the case on
appeal. This Court is not a trier of facts,
and, in this case, the factual finding of the
RTC and the CA, which is supported by the
evidence on record, is conclusive upon this
Court.

xxx xxx xxx

day, while in position Lat. 20

IEAU-4592750)

overboard the subject vessel

Furthermore, during the course

for Manila.

ft. containers

NUSU-

xxx xxx xxx

1993 carrying containers bound

four

Returnable Beams which were

4515404.

from Hongkong on 1st October

East,

TPHU-5262138,

As regards the issue on the limited liability

SURVEYORS REMARKS:

of respondents, the Court upholds the

In

decision of the CA.

view

of

the

foregoing

incident, we are of the opinion

Since the subject cargoes were lost while

that the shipment of 3 cases of

being transported by respondent common

Various

carrier

Warp

Yarn

on

from

Hong

Kong

to

the

Philippines, Philippine law applies pursuant

The pertinent provisions of the Civil Code

for the carriage of goods by sea to and

to the Civil Code which provides:

applicable to this case are as follows:

from Philippine ports

Art.

1753. The

law

of

the

Art. 1749. A stipulation that the

liability

foreign

provides:

country to which the goods are

common

is

Neither the carrier nor the ship

to be transported shall govern

limited to the value of the goods

shall in any event be or become

the liability of the common

appearing in the bill of lading,

liable for any loss or damage to

carrier for their loss, destruction

unless the shipper or owner

or

or deterioration.

declares a greater value, is

transportation of goods in an

binding.

amount exceeding $500 per

Art. 1766. In all matters not

carrier's

in

regulated by this Code, the

Art. 1750. A contract fixing the

rights

of

sum that may be recovered by

and

obligations

common

carriers

shall

be

the owner or shipper for the

governed

by

Code

of

loss,

the

Commerce and by special laws.

The rights and obligations of respondent

common carrier are thus governed by the
provisions of the Civil Code, and the
COGSA, which is a special law, applies
suppletorily.

destruction,

or

deterioration of the goods is

valid, if it is reasonable and just
under the circumstances, and
has

been

fairly

and

freely

agreed upon.

In addition, Sec. 4, paragraph (5) of the

COGSA, which is applicable to all contracts

in

connection

with

the

package lawful money of the

United States, or in case of
goods not shipped in packages,
per customary freight unit, or
the equivalent of that sum in
other

currency,

unless

the

nature and value of such goods

have been declared by the
shipper before shipment and
inserted in the bill of lading.
This declaration, if embodied in
the bill of lading shall be prima

trade,

facie evidence, but shall be

in this Bill of Lading and the

A stipulation in the bill of lading

conclusive on the carrier.

Shipper has paid additional

limiting the common carrier's

charges on such declared

liability for loss or destruction of

value. . . .

a cargo to a certain sum,

In this case, Bill of Lading No. 0396180

stipulates:
Neither the Carrier nor the
vessel

shall

in

any

event

become liable for any loss of or

damage to or in connection with
the transportation of Goods in
an amount exceeding US$500
(which

is

the

package

or

shipping unit limitation under

U.S. COGSA) per package or
in the case of Goods not

The bill of lading submitted in evidence by

petitioner did not show that the shipper in
Hong Kong declared the actual value of the
goods as insured by Fukuyama before
shipment and that the said value was

unless the shipper or owner

declares a greater value, is
sanctioned by law, particularly
Articles 1749 and 1750 of the
Civil Code which provide:

inserted in the Bill of Lading, and so no

'Art. 1749. A stipulation

additional charges were paid. Hence, the

that

stipulation in the bill of lading that the

carrier's liability is limited

carrier's liability shall not exceed US$500

to the value of the goods

per package applies.

appearing in the bill of

the

lading,

common

unless

the

per

Such stipulation in the bill of lading limiting

customary

respondents' liability for the loss of the

freight, unless the nature and

subject cargoes is allowed under Art. 1749

value of such Goods have

of the Civil Code, and Sec. 4, paragraph

been declared by the Shipper

(5) of the COGSA. Everett Steamship

'Art.

before shipment and inserted

Corporation v. Court of Appeals held:

fixing the sum that may

shipped

in

shipping

unit

packages
or

shipper

or

owner

declares a greater value,

is binding.'
1750. A

contract

be

recovered

by

the

the liability limitation clause in

limitation by the simple and

owner or shipper for the

the bill of lading here are

surely

loss,

or

nevertheless fully sustainable

expedient

the

on the basis alone of the cited

nature

goods is valid, if it is

Civil Code Provisions. That said

shipment in the bill of lading.'

reasonable

just

stipulation

the

reasonable is arguable from the

circumstances, and has

fact that it echoes Art. 1750

been fairly and freely

itself in providing a limit to

agreed upon.'

liability only if a greater value is

destruction,

deterioration

of

and

under

Such limited-liability clause has

also been consistently upheld
by this court in a number of
cases.

Thus,

in Sea-Land

Service, Inc. vs. Intermediate

Appellate Court, we ruled:
'It seems clear that even if said
section 4 (5) of the Carriage of
Goods by Sea Act did not exist,
the validity and binding effect of

is

just

and

not declared for the shipment in

the bill of lading. To hold
otherwise

would

amount

to

questioning the justness and

fairness of the law itself. . . . But
over

and

consideration,

above
the

just

that

far

from
of

and

onerous

declaring
value

of

the
the

The CA, therefore, did not err in holding

respondents

liable

for

damages

to

petitioner subject to the US$500 per

package limited liability provision in the
bill of lading.
WHEREFORE, the petition is DENIED. The
Resolution of the Court of Appeals in CAG.R. CV No. 52855 promulgated on April
13, 2000 is hereby AFFIRMED.
Costs against petitioner. SO ORDERED.

and

reasonable character of such

stipulation is implicit in it giving
the shipper or owner the option
of avoiding accrual of liability

[G.R. No. 162104. September 15, 2009.]

R TRANSPORT

liable to respondent for damages for

bus hit a tree and a house due to the fast

CORPORATION,

physical injuries sustained by respondent

and reckless driving of the bus driver,

represented by its

due to a vehicular accident.

Johnny Merdiquia. Respondent sustained

owner/President RIZALINA
LAMZON, petitioner, vs.

The facts are as follows:

physical injuries as a result of the vehicular

accident. He was brought by an

Petitioner R Transport Corporation,

unidentified employee of petitioner to the

represented by its owner and president,

Baliuag District Hospital, where respondent

Rizalina Lamzon, is a common carrier

was diagnosed to have sustained a

engaged in operating a bus line

"laceration frontal area, with fracture of the

transporting passengers to Gapan, Nueva

right humerus", or the bone that extends

Ecija from Cubao, Quezon City and back.

from the shoulder to the elbow of the right

At about 3:00 a.m. of January 27, 1995,

arm. Respondent underwent an operation

This is a petition for review on certiorari of

respondent Eduardo Pante rode petitioner's

for the fracture of the right humerus per

the Decision dated October 7, 2003 of the

R.L. Bus Liner with Plate Number CVW-

Certification dated February 17, 1995

Court of Appeals in CA-G.R. CV No.

635 and Body Number 94810 in Cubao,

issued by Dr. Virginia C. Cabling of the

76170, and its Resolution dated February

Quezon City bound for Gapan, Nueva

Baliuag District Hospital.

5, 2004, denying petitioner's motion for

Ecija. Respondent paid the sum of P48.00

reconsideration. The Court of Appeals

The hospital's Statement of Account

for his fare, and he was issued bus ticket

affirmed the Decision of the Regional Trial

showed that respondent's operation and

number 555401.

confinement cost P22,870.00. Respondent

While traveling along the Doa Remedios

also spent P8,072.60 for his medication.

Trinidad Highway in Baliuag, Bulacan, the

He was informed that he had to undergo a

EDUARDO
PANTE, respondent.

DECISION

PERALTA, J :
p

Court (RTC) of Gapan City, Branch 35,

dated January 26, 2002, holding petitioner

second operation after two years of rest.

On March 14, 1995, respondent filed a

Six years later, on October 24, 2001,

He was unemployed for almost a year after

Complaint for damages against petitioner

respondent's direct examination was

his first operation because Goldilocks,

with the RTC of Gapan City, Branch 35

concluded. His cross-examination was

where he worked as a production crew,

(trial court) for the injuries he sustained as

reset to December 5, 2001 due to the

refused to accept him with his disability as

a result of the vehicular accident.

absence of petitioner and its counsel. It

he could not perform his usual job.

In its Answer, petitioner put up the defense

By way of initial assistance, petitioner gave

that it had always exercised the diligence of

respondent's wife, Analiza P. Pante, the

a good father of a family in the selection

sum of P7,000.00, which was spent for the

and supervision of its employees, and that

stainless steel instrument used in his

the accident was a force majeure for which

fractured arm.

it should not be held liable.

After the first operation, respondent

At the pre-trial on October 4, 1995,

demanded from petitioner, through its

petitioner was declared in default, which

manager, Michael Cando, the full payment

was reconsidered by the trial court on

or reimbursement of his medical and

December 12, 1995 upon finding that

hospitalization expenses, but petitioner

petitioner had earlier filed a Motion to

refused payment.

Transfer Date of Hearing. Trial was first set

Four years later, respondent underwent a

second operation. He spent P15,170.00 for
medical and hospitalization expenses.

on February 26, 1996, and from then on

trial was postponed several times on
motion of petitioner.

was again reset to January 23, 2002 upon

petitioner's motion. On January 23, 2002,
petitioner, through its new counsel, asked
for another postponement on the ground
that he was not ready. Hence, the crossexamination of respondent was reset to
March 13, 2002.
On March 13, 2002, petitioner was
declared to have waived its right to crossexamine respondent due to the absence of
petitioner and its counsel, and respondent
was allowed to offer his exhibits within five
days. Petitioner's motion for
reconsideration dated April 4, 2002 was
denied on May 7, 2002.

In the hearing of June 19, 2002, petitioner

3.) P50,000.00 as

trial court ruled that since petitioner failed

was declared to have waived its right to

exemplary

to dispute said presumption despite the

present evidence on motion of

damages;

many opportunities given to it, such

respondent's counsel in view of the

unexplained absence of petitioner and its

4.) Twenty-five percent

counsel despite prior notice. The case was

declared submitted for decision.

(25%) of the total

Petitioner appealed the decision of the trial

of which shall

court to the Court of Appeals.

constitute a lien

On June 26, 2002, the trial court rendered

as contingent fee

a Decision, the dispositive portion of which

of plaintiff's

reads:

counsel.
WHEREFORE, premises
considered, judgment is hereby
rendered finding the plaintiffs to
be entitled to damages and
ordering defendants to [pay]:
1.) P39,112.60 as actual
damages;
2.) P50,000.00 as moral
damages;

presumption of negligence stands.

In its Decision dated October 7, 2003, the

Court of Appeals affirmed the decision of
the trial court, the dispositive portion of
which reads:

So ordered.

WHEREFORE, for lack of

The trial court held that the provisions of

merit, the appeal is DENIED

the Civil Code on common carriers govern

and the Decision appealed from

this case. Article 1756 of the Civil Code

is AFFIRMED in toto. With

states that "[i]n case of death of or injuries

double costs against the

to passengers, common carriers are

appellant.

presumed to have been at fault or to have

acted negligently, unless they prove that
they observed extraordinary diligence as
prescribed by Articles 1733 and 1755". The

Petitioner's motion for reconsideration was

denied for lack of merit in the Resolution of
the Court of Appeals dated February 5,
2004.

Hence, petitioner filed this petition raising

IN AFFIRMING IN TOTO THE

The main issue is whether or not petitioner

the following issues:

DECISION OF THE

is liable to respondent for damages.

I
THE HONORABLE COURT OF
APPEALS, TENTH DIVISION
GRAVELY ERRED IN NOT
GIVING DUE COURSE TO
THE DEFENDANTAPPELLANT'S MOTION FOR
RECONSIDERATION OF THE

REGIONAL TRIAL COURT OF

GAPAN CITY, BRANCH 35,
PARTICULARLY IN
AWARDING DAMAGES TO
THE RESPONDENT
WITHOUT PRESENTING ANY
SUBSTANTIAL EVIDENCE.
III

The Court affirms the decision of the Court

of Appeals that petitioner is liable for
damages.
Under the Civil Code, common carriers, like
petitioner bus company, from the nature of
their business and for reasons of public
policy, are bound to observe extraordinary
diligence for the safety of the passengers

DECISION PROMULGATED

THE HONORABLE COURT OF

transported by them, according to all the

ON OCTOBER 7, 2003,

APPEALS, TENTH DIVISION,

circumstances of each case. They are

THEREBY DEPRIVING

IN AFFIRMING IN TOTO THE

bound to carry the passengers safely as far

PETITIONER'S

DECISION OF THE

as human care and foresight can provide,

FUNDAMENTAL RIGHT TO

REGIONAL TRIAL COURT OF

using the utmost diligence of very cautious

DUE PROCESS.

GAPAN CITY, BRANCH 35,

persons, with due regard for all the

HAS COMMITTED GRAVE

circumstances.

II
THE HONORABLE COURT OF
APPEALS, TENTH DIVISION
FURTHER GRAVELY ERRED

AND REVERSIBLE ERROR IN

ITS FINDING OF FACTS AND
APPLICATION OF [THE] LAW.

Article 1756 of the Civil Code states that

"[i]n case of death of or injuries to
passengers, common carriers are

presumed to have been at fault or to have

its bus driver, failed to observe

Petitioner cannot complain that it was

acted negligently, unless they prove that

extraordinary diligence, and was, therefore,

denied due process when the trial court

they observed extraordinary diligence as

negligent in transporting the passengers of

waived its right to present evidence,

prescribed by Articles 1733 and 1755".

the bus safely to Gapan, Nueva Ecija on

because it only had itself to blame for its

January 27, 1995, since the bus bumped a

failure to attend the hearing scheduled for

tree and a house, and caused physical

reception of its evidence on June 19, 2002.

injuries to respondent. Article 1759 of the

The trial court stated, thus:

Further, Article 1759 of the Civil Code

provides that "[c]ommon carriers are
liable for the death or injury to
passengers through the negligence or
willful acts of the former's
employees, although such employees may
have acted beyond the scope of their
authority or in violation of the orders of the
common carriers. This liability of the
common carriers does not cease upon
proof that they exercised all the
diligence of a good father of a family in
the selection and supervision of their
employees".

Civil Code explicitly states that the common

carrier is liable for the death or injury to
passengers through the negligence or
willful acts of its employees, and that such
liability does not cease upon proof that the
common carrier exercised all the diligence
of a good father of a family in the selection
and supervision of its employees. Hence,
even if petitioner was able to prove that it
exercised the diligence of a good father of
the family in the selection and supervision
of its bus driver, it is still liable to

In this case, the testimonial evidence of

respondent for the physical injuries he

respondent showed that petitioner, through

sustained due to the vehicular accident.

It is noteworthy to state that

during the course of the
proceeding of this case,
defendant (petitioner) and its
counsel hardly appeared in
court and only made
innumerable motions to reset
the hearings to the point that
this case . . . dragged [on] for
seven years from its filing up to
the time that it has been
submitted for decision. And for
the unexplained absence of
counsel for defendant in the

hearing set last June 19, 2002

The Court of Appeals has the discretion to

As cited by the Court of Appeals in its

despite repeated resetting,

deny petitioner's motion for reconsideration

Decision, Jarco Marketing Corporation v.

upon motion of the counsel for

since it found that there was no cogent

Court of Appeals awarded actual damages

plaintiff (respondent), Atty.

reason to warrant reconsideration of its

for hospitalization expenses that was

Ireneo Romano, its right to

Decision dated October 7, 2003. According

evidenced by a statement of account

present its evidence was

to the appellate court, it had already

issued by the Makati Medical Center.

considered waived.

considered, if not squarely ruled upon, the

Hence, the statement of account is

arguments raised in petitioner's motion for

admissible evidence of hospital expenses

reconsideration.

incurred by respondent.

denied due process when the records of

Moreover, petitioner contends that the

Petitioner also contends that the award of

the case showed that he was amply given

Court of Appeals erred in affirming the

moral damages is not proper, because it is

the opportunity to present his evidence,

decision of the trial court, which awarded

not recoverable in actions for damages

which he, however, waived. There is no

actual damages in the amount of

predicated on breach of the contract of

denial of due process where a party was

P22,870.00 based on the statement of

transportation under Articles 2219 and

given an opportunity to be heard.

account issued by the Baliuag District

2220 of the Civil Code.

In Silverio, Sr. v. Court of Appeals, the

Court held that petitioner therein was not

Next, petitioner contends that the Court of

Appeals erred in denying its motion for
reconsideration of the appellate court's
Decision dated October 7, 2003.
The contention is unmeritorious.

Hospital and not based on an official

receipt. Petitioner argues that the

The Court is not persuaded.

statement of account is not the best

The Court of Appeals correctly sustained

evidence.

the award of moral damages,

HCSEIT

The contention is without merit.

citing Spouses Ong v. Court of

Appeals, which awarded moral damages to

paying passengers, who suffered physical

right humerus" due to the vehicular

defendant acted in a wanton, fraudulent,

injuries on board a bus that figured in an

accident. He underwent an operation for

reckless, oppressive or malevolent manner.

accident. Spouses Ong held that a person

the fracture of the bone extending from the

In this case, respondent's testimonial

is entitled to the integrity of his body and if

shoulder to the elbow of his right arm. After

evidence showed that the bus driver,

that integrity is violated, damages are due

a few years of rest, he had to undergo a

Johnny Merdiquia, was driving the bus very

and assessable. Thus, the usual practice is

second operation. Respondent, therefore,

fast in a reckless, negligent and imprudent

to award moral damages for physical

suffered physical pain, mental anguish and

manner; hence, the bus hit a tree and a

injuries sustained. In Spouses Ong, the

anxiety as a result of the vehicular

house along the highway in Baliuag,

Court awarded moral damages in the

accident. Hence, the award of moral

Bulacan. The award of exemplary damages

amount of P50,000.00 to a passenger who

damages in the amount of P50,000.00 is

is, therefore, proper. The award of

was deemed to have suffered mental

proper.

exemplary damages is justified to serve as

anguish and anxiety because her right arm

could not function in a normal manner.
Another passenger, who suffered injuries
on his left chest, right knee, right arm and
left eye, was awarded moral damages in
the amount of P30,000.00 for the mental

Petitioner likewise contends that the award

of exemplary damages is improper,

an example or as a correction for the public

good.

because it did not act in a wanton,

Further, the Court affirms the award of

fraudulent, reckless, oppressive or

attorney's fees to respondent's counsel.

malevolent manner.

The Court notes that respondent filed his

Complaint for damages on March 14, 1995

anxiety and anguish he suffered from the

The contention is without merit.

accident.

Article 2232 of the Civil Code states that

by the trial court to respondent's counsel

In this case, respondent sustained a

"[i]n contracts and quasi-contracts, the

was a contingent fee of 25 percent of the

"laceration frontal area, with fracture of the

court may award exemplary damages if the

total amount of damages, which shall

as pauper-litigant. The award of legal fees

constitute a lien on the total amount

failed to object to the presentation of the

vs. COURT OF APPEALS

awarded. The said award was affirmed by

evidence.

and SPOUSES MANUEL S.

the Court of Appeals. Twenty-five percent

of the total damages is equivalent to
P34,778.15. The award of legal fees is
commensurate to the effort of respondent's
counsel, who attended to the case in the
trial court for seven years, and who finally
helped secure redress for the injury
sustained by respondent after 14 years.

WHEREFORE, the petition is DENIED. The

Decision of the Court of Appeals in CAG.R. CV No. 76170, dated October 7,
2003, and its Resolution dated February 5,
2004, are hereby AFFIRMED. Petitioner R
Transport Corporation is ordered to pay
respondent Eduardo Pante P39,112.60 as
actual damages; P50,000.00 as moral

Lastly, petitioner contends that the medical

damages; and P50,000.00 as exemplary

certificate presented in evidence is without

damages. Twenty-five percent (25%) of the

probative value since respondent failed to

total amount shall constitute a lien as

present as witness Dr. Virginia Cabling to

contingent fee of respondent's counsel.

affirm the content of said medical

certificate.

certificate is admissible since petitioner

BUNCIO, Minors DEANNA

R. BUNCIO and NIKOLAI R.
BUNCIO, assisted by their
Father, MANUEL S.
BUNCIO, and JOSEFA
REGALADO, represented
by her Attorney-in-Fact,
MANUEL S.
BUNCIO, respondents.

DECISION

Costs against petitioner. SO ORDERED.

CHICO-NAZARIO, J :
p

The contention lacks merit. The Court of

Appeals correctly held that the medical

BUNCIO and AURORA R.

[G.R. No. 123238. September 22, 2008.]

Before Us is a Petition for

Review on Certiorari under Rule 45 of the

PHILIPPINE AIRLINES,

Rules of Court seeking to set aside the

INCORPORATED, petitioner,

Decision, dated 20 December 1995, of the

Court of Appeals in CA-G.R. CV No. 26921

two plane tickets, petitioner agreed to

On 3 May 1980, Deanna and Nikolai

which affirmed in toto the Decision, dated 2

transport Deanna and Nikolai on 2 May

arrived at the San Francisco Airport.

April 1990, of the Quezon City Regional

1980 from Manila to San Francisco,

However, the staff of United Airways 996

Trial Court (RTC), Branch 90, in Civil Case

California, United States of America (USA),

refused to take aboard Deanna and Nikolai

No. Q-33893.

through one of its planes, Flight 106.

for their connecting flight to Los Angeles

Petitioner also agreed that upon the arrival

because petitioner's personnel in San

of Deanna and Nikolai in San Francisco

Francisco could not produce the indemnity

Sometime before 2 May 1980, private

Airport on 3 May 1980, it would again

bond accomplished and submitted by

respondents spouses Manuel S. Buncio

transport the two on that same day through

private respondents. The said indemnity

and Aurora R. Buncio purchased from

a connecting flight from San Francisco,

bond was lost by petitioner's personnel

petitioner Philippine Airlines, Incorporated,

California, USA, to Los Angeles, California,

during the previous stop-over of Flight 106

two plane tickets for their two minor

USA, via another airline, United Airways

in Honolulu, Hawaii. Deanna and Nikolai

children, Deanna R. Buncio (Deanna), then

996. Deanna and Nikolai then will be met

were then left stranded at the San

9 years of age, and Nikolai R. Buncio

by their grandmother, Mrs. Josefa

Francisco Airport. Subsequently, Mr. Edwin

(Nikolai), then 8 years old. Since Deanna

Regalado (Mrs. Regalado), at the Los

Strigl (Strigl), then the Lead Traffic Agent of

and Nikolai will travel as unaccompanied

Angeles Airport on their scheduled arrival

petitioner in San Francisco, California,

minors, petitioner required private

on 3 May 1980.

USA, took Deanna and Nikolai to his

The undisputed facts are as follows:

respondents to accomplish, sign and

submit to it an indemnity bond. Private
respondents complied with this
requirement. For the purchase of the said

On 2 May 1980, Deanna and Nikolai

boarded Flight 106 in Manila.

residence in San Francisco where they

stayed overnight.
Meanwhile, Mrs. Regalado and several
relatives waited for the arrival of Deanna

and Nikolai at the Los Angeles Airport.

that day, Deanna and Nikolai arrived at the

and Nikolai were not able to take their

When United Airways 996 landed at the

Los Angeles Airport where they were met

connecting flight from San Francisco to Los

Los Angeles Airport and its passengers

by Mrs. Regalado. Petitioner's personnel

Angeles as scheduled because the

disembarked, Mrs. Regalado sought

had previously informed Mrs. Regalado of

required indemnity bond was lost on

Deanna and Nikolai but she failed to find

the late arrival of Deanna and Nikolai on 4

account of the gross negligence and

them. Mrs. Regalado asked a stewardess

May 1980.

malevolent conduct of petitioner's

of the United Airways 996 if Deanna and

Nikolai were on board but the stewardess
told her that they had no minor passengers.
Mrs. Regalado called private respondents
and informed them that Deanna and Nikolai
did not arrive at the Los Angeles Airport.
Private respondents inquired about the
location of Deanna and Nikolai from
petitioner's personnel, but the latter replied

AHTICD

On 17 July 1980, private respondents,

through their lawyer, sent a letter to
petitioner demanding payment of 1 million
pesos as damages for the gross
negligence and inefficiency of its
employees in transporting Deanna and
Nikolai. Petitioner did not heed the
demand.

personnel. As a consequence thereof,

Deanna and Nikolai were stranded in San
Francisco overnight, thereby exposing them
to grave danger. This dilemma caused
Deanna, Nikolai, Mrs. Regalado and
private respondents to suffer serious
anxiety, mental anguish, wounded feelings,
and sleepless nights. Private respondents
prayed the RTC to render judgment

that they were still verifying their

On 20 November 1981, private

ordering petitioner: (1) to pay Deanna and

whereabouts.

respondents filed a complaint for damages

Nikolai P100,000.00 each, or a total of

against petitioner before the RTC. Private

P200,000.00, as moral damages; (2) to pay

respondents impleaded Deanna, Nikolai

private respondents P500,000.00 each, or

and Mrs. Regalado as their co-plaintiffs.

a total of P1,000,000.00, as moral

Private respondents alleged that Deanna

damages; (3) to pay Mrs. Regalado

On the morning of 4 May 1980, Strigl took

Deanna and Nikolai to San Francisco
Airport where the two boarded a Western
Airlines plane bound for Los Angeles. Later

P100,000.00 as moral damages; (4) to pay

connecting flight of Deanna and Nikolai to

attorney's fees and costs of suit. In sum,

Deanna, Nikolai, Mrs. Regalado and

Los Angeles possible. Further, Deanna and

the RTC ordered petitioner: (1) to pay

private respondents P50,000.00 each, or a

Nikolai were not left unattended from the

Deanna and Nikolai P50,000.00 each as

total of P250,000.00 as exemplary

time they were stranded in San Francisco

moral damages and P25,000.00 each as

damages; and (5) to pay attorney's fees

until they boarded Western Airlines for a

exemplary damages; (2) to pay private

equivalent to 25% of the total amount of

connecting flight to Los Angeles. Petitioner

respondent Aurora R. Buncio, as mother of

damages mentioned plus costs of suit.

asked the RTC to dismiss the complaint

Deanna and Nikolai, P75,000.00 as moral

based on the foregoing averments.

damages; (3) to pay Mrs. Regalado, as

In its answer to the complaint, petitioner

grandmother of Deanna and Nikolai,

admitted that Deanna and Nikolai were not

After trial, the RTC rendered a Decision on

allowed to take their connecting flight to

2 April 1990 holding petitioner liable for

Los Angeles and that they were stranded in

damages for breach of contract of carriage.

San Francisco. Petitioner, however, denied

It ruled that petitioner should pay moral

that the loss of the indemnity bond was

damages for its inattention and lack of care

caused by the gross negligence and

for the welfare of Deanna and Nikolai

malevolent conduct of its personnel.

which, in effect, amounted to bad faith, and

Petitioner averred that it always exercised

for the agony brought by the incident to

the diligence of a good father of the family

private respondents and Mrs. Regalado. It

in the selection, supervision and control of

also held that petitioner should pay

its employees. In addition, Deanna and

exemplary damages by way of example or

ACCORDINGLY, judgment is

Nikolai were personally escorted by Strigl,

correction for the public good under Article

hereby rendered:

and the latter exerted efforts to make the

2229 and 2232 of the Civil Code, plus

P30,000.00 as moral damages; and (4) to

pay an amount of P38,250.00 as attorney's
fees and the costs of suit. Private
respondent Manuel S. Buncio was not
awarded damages because his court
testimony was disregarded, as he failed to
appear during his scheduled crossexamination. The dispositive portion of the
RTC Decision reads:

1. Ordering defendant

fees and also the costs of the

THE COURT OF APPEALS

Philippines Airlines, Inc. to pay

suit.

ERRED IN SUSTAINING THE

Deanna R. Buncio and Nikolai

R. Buncio the amount of
P50,000.00 each as moral
damages; and the amount of
P25,000.00 each as exemplary
damages;

DTESIA

2. Ordering said defendant to

pay the amount of P75,000.00
to Aurora R. Buncio, mother of
Deanna and Nikolai, as moral
damages; and the amount of

Petitioner appealed to the Court of

Appeals. On 20 December 1995, the
appellate court promulgated its Decision
affirming in toto the RTC Decision, thus:

Deanna and Nikolai, as moral

damages; and
3. Ordering said defendant to
pay P38,250.00 as attorney's

DAMAGES.
III.
THE COURT OF APPEALS

WHEREFORE, the decision

ERRED IN SUSTAINING THE

appealed is hereby

RTC AWARD OF ATTORNEY'S

AFFIRMED in toto and the

FEES AND ORDER FOR

instant appeal DISMISSED.

PAYMENT OF COSTS.

Petitioner filed the instant petition before us

Anent the first assigned error, petitioner

assigning the following errors:

maintains that moral damages may be

P30,000.00 to Josefa
Regalado, grandmother of

RTC AWARD OF EXEMPLARY

I.

awarded in a breach of contract of air

carriage only if the mishap results in death

THE COURT OF APPEALS

of a passenger or if the carrier acted

ERRED IN SUSTAINING THE

fraudulently or in bad faith, that is, by

RTC AWARD OF MORAL

breach of a known duty through some

DAMAGES.

motive of interest or ill will, some dishonest

II.

purpose or conscious doing of wrong; if

there was no finding of fraud or bad faith on

its part; if, although it lost the indemnity

mere carelessness of the carrier does not

the latter. Under this contract, petitioner

bond, there was no finding that such loss

per se constitute or justify an inference of

obliged itself (1) to transport Deanna and

was attended by ill will, or some motive of

malice or bad faith.

Nikolai, as unaccompanied minors, on 2

interest, or any dishonest purpose; and if

May 1980 from Manila to San Francisco

there was no finding that the loss was

through one of its planes, Flight 106; and

When an airline issues a ticket to a

(2) upon the arrival of Deanna and Nikolai

passenger, confirmed for a particular flight

in San Francisco Airport on 3 May 1980, to

on a certain date, a contract of carriage

transport them on that same day from San

arises. The passenger has every right to

Francisco to Los Angeles via a connecting

expect that he be transported on that flight

flight on United Airways 996. As it was,

and on that date, and it becomes the

petitioner failed to transport Deanna and

airline's obligation to carry him and his

Nikolai from San Francisco to Los Angeles

luggage safely to the agreed destination

on the day of their arrival at San Francisco.

without delay. If the passenger is not so

The staff of United Airways 996 refused to

transported or if in the process of

take aboard Deanna and Nikolai for their

transporting, he dies or is injured, the

connecting flight to Los Angeles because

carrier may be held liable for a breach of

petitioner's personnel in San Francisco

contract of carriage.

could not produce the indemnity bond

USA; and that even though it was negligent

Private respondents and petitioner entered

accomplished and submitted by private

in overlooking the indemnity bond, there

into a contract of air carriage when the

respondents. Thus, Deanna and Nikolai

was still no liability on its part because

former purchased two plane tickets from

were stranded in San Francisco and were

deliberate, intentional or consciously done.

Petitioner also claims that it cannot be
entirely blamed for the loss of the indemnity
bond; that during the stop-over of Flight
106 in Honolulu, Hawaii, USA, it gave the
indemnity bond to the immigration office
therein as a matter of procedure; that the
indemnity bond was in the custody of the
said immigration office when Flight 106 left
Honolulu, Hawaii, USA; that the said
immigration office failed to return the
indemnity bond to petitioner's personnel
before Flight 106 left Honolulu, Hawaii,

forced to stay there overnight. It was only

In Singson v. Court of Appeals, we ruled

Flight 106, since it was required for the San

on the following day that Deanna and

that a carrier's utter lack of care for and

Francisco-Los Angeles connecting flight of

Nikolai were able to leave San Francisco

sensitivity to the needs of its passengers

Deanna and Nikolai. Petitioner's personnel

and arrive at Los Angeles via another

constitutes gross negligence and is no

lost the indemnity bond during the stop-

airline, Western Airlines. Clearly then,

different from fraud, malice or bad faith.

over of Flight 106 in Honolulu, Hawaii.

petitioner breached its contract of carriage

Likewise, in Philippine Airlines, Inc. v.

Thus, Deanna and Nikolai were not allowed

with private respondents.

Court of Appeals, we held that a carrier's

to take their connecting flight.

In breach of contract of air carriage, moral

damages may be recovered where (1) the
mishap results in the death of a passenger;
or (2) where the carrier is guilty of fraud or
bad faith; or (3) where the negligence of
the carrier is so gross and reckless as
to virtually amount to bad faith.
Gross negligence implies a want or
absence of or failure to exercise even slight
care or diligence, or the entire absence of
care. It evinces a thoughtless disregard of
consequences without exerting any effort to
avoid them.

inattention to, and lack of care for, the

interest of its passengers who are entitled
to its utmost consideration, particularly as
to their convenience, amount to bad faith
and entitles the passenger to an award of
moral damages.

Evidently, petitioner was fully aware that

Deanna and Nikolai would travel as
unaccompanied minors and, therefore,
should be specially taken care of
considering their tender age and delicate
situation. Petitioner also knew well that the

It was established in the instant case that

indemnity bond was required for Deanna

since Deanna and Nikolai would travel as

and Nikolai to make a connecting flight

unaccompanied minors, petitioner required

from San Francisco to Los Angeles, and

private respondents to accomplish, sign

that it was its duty to produce the indemnity

and submit to it an indemnity bond. Private

bond to the staff of United Airways 996 so

respondents complied with this

that Deanna and Nikolai could board the

requirement. Petitioner gave a copy of the

connecting flight. Yet, despite knowledge of

indemnity bond to one of its personnel on

the foregoing, it did not exercise utmost

care in handling the indemnity bond

diligence in handling the indemnity bond.

return the indemnity bond to petitioner's

resulting in its loss in Honolulu, Hawaii.

Clearly, the negligence of petitioner was so

personnel before Flight 106 left Honolulu,

This was the proximate cause why Deanna

gross and reckless that it amounted to bad

Hawaii, deserves scant consideration. It

and Nikolai were not allowed to take the

faith.

was petitioner's obligation to ensure that it

connecting flight and were thus stranded

overnight in San Francisco. Further,
petitioner discovered that the indemnity
bond was lost only when Flight 106 had
already landed in San Francisco Airport
and when the staff of United Airways 996
demanded the indemnity bond. This only
manifests that petitioner did not check or
verify if the indemnity bond was in its
custody before leaving Honolulu, Hawaii for
San Francisco.
The foregoing circumstances reflect
petitioner's utter lack of care for and
inattention to the welfare of Deanna and
Nikolai as unaccompanied minor
passengers. They also indicate petitioner's
failure to exercise even slight care and

It is worth emphasizing that petitioner, as a

common carrier, is bound by law to
exercise extraordinary diligence and utmost
care in ensuring for the safety and welfare
of its passengers with due regard for all the
circumstances. The negligent acts of
petitioner signified more than inadvertence
or inattention and thus constituted a radical
departure from the extraordinary standard
of care required of common carriers.
Petitioner's claim that it cannot be entirely
blamed for the loss of the indemnity bond
because it gave the indemnity bond to the
immigration office of Honolulu, Hawaii, as a
matter of procedure during the stop-over,
and the said immigration office failed to

had the indemnity bond in its custody

before leaving Honolulu, Hawaii for San
Francisco. Petitioner should have asked for
the indemnity bond from the immigration
office during the stop-over instead of partly
blaming the said office later on for the loss
of the indemnity bond. Petitioner's
insensitivity on this matter indicates that it
fell short of the extraordinary care that the
law requires of common carriers.
Petitioner, nonetheless, insists that the
following circumstances negate gross
negligence on its part: (1) Strigl requested
the staff of United Airways 996 to allow
Deanna and Nikolai to board the plane
even without the indemnity bond; (2) Strigl
took care of the two and brought them to

his house upon refusal of the staff of the

awarded only if it is proven that the plaintiff

or malevolent manner. In addition, Article

United Airways 996 to board Deanna and

is entitled to moral damages. Petitioner

2234 thereof states that the plaintiff must

Nikolai; (3) private respondent Aurora R.

contends that since there was no proof that

show that he is entitled to moral damages

Buncio and Mrs. Regalado were duly

private respondents were entitled to moral

before he can be awarded exemplary

informed of Deanna and Nikolai's

damages, then they are also not entitled to

damages

predicament; and (4) Deanna and Nikolai

exemplary damages.

were able to make a connecting

flight via an alternative airline, Western
Airlines. We do not agree. It was
petitioner's duty to provide assistance to
Deanna and Nikolai for the inconveniences
of delay in their transportation. These
actions are deemed part of their obligation
as a common carrier, and are hardly
anything to rave about.
Apropos the second and third assigned
error, petitioner argues that it was not liable
for exemplary damages because there was
no wanton, fraudulent, reckless,
oppressive, or malevolent manner on its
part. Further, exemplary damages may be

As we have earlier found, petitioner

Petitioner also contends that no premium

breached its contract of carriage with

should be placed on the right to litigate;

private respondents, and it acted recklessly

that an award of attorney's fees and order

and malevolently in transporting Deanna

of payment of costs must be justified in the

and Nikolai as unaccompanied minors and

text of the decision; that such award cannot

in handling their indemnity bond. We have

be imposed by mere conclusion without

also ascertained that private respondents

supporting explanation; and that the RTC

are entitled to moral damages because

decision does not provide any justification

they have sufficiently established

for the award of attorney's fees and order

petitioner's gross negligence which

of payment of costs.

amounted to bad faith. This being the case,

Article 2232 of the Civil Code provides that

exemplary damages may be awarded in a

the award of exemplary damages is

warranted.

breach of contract if the defendant acted in

Current jurisprudence instructs that in

a wanton, fraudulent, reckless, oppressive

awarding attorney's fees, the trial court

must state the factual, legal, or equitable

Since we have already resolved that the

excessive as to indicate that it was the

justification for awarding the same, bearing

RTC and Court of Appeals were correct in

result of prejudice or corruption on the part

in mind that the award of attorney's fees is

awarding moral and exemplary damages,

of the trial court. Simply put, the amount of

the exception, not the general rule, and it is

we shall now determine whether their

damages must be fair, reasonable and

not sound public policy to place a penalty

corresponding amounts were proper.

proportionate to the injury suffered.

on the right to litigate; nor should attorney's

The RTC and the Court of Appeals ordered

fees be awarded every time a party wins a

lawsuit. The matter of attorney's fees

The purpose of awarding moral damages is

cannot be dealt with only in the dispositive

to enable the injured party to obtain means,

portion of the decision. The text of the

diversion or amusement that will serve to

decision must state the reason behind the

alleviate the moral suffering he has

award of attorney's fees. Otherwise, its

undergone by reason of defendant's

award is totally unjustified.

culpable action. On the other hand, the aim

In the instant case, the award of attorney's

fees was merely cited in the dispositive

of awarding exemplary damages is to deter

serious wrongdoings.

petitioner to pay Deanna and Nikolai

P50,000.00 each as moral damages. This
amount is reasonable considering the
harrowing experience they underwent at
their tender age and the danger they were
exposed to when they were stranded in
San Francisco. Both of them testified that
they were afraid and were not able to eat
and sleep during the time they were

portion of the RTC decision without the

Article 2216 of the Civil Code provides that

stranded in San Francisco. Likewise, the

RTC stating any legal or factual basis for

assessment of damages is left to the

award of P25,000.00 each to Deanna and

said award. Hence, the Court of Appeals

discretion of the court according to the

Nikolai as exemplary damages is fair so as

erred in sustaining the RTC's award of

circumstances of each case. This

to deter petitioner and other common

attorney's fees.

discretion is limited by the principle that the

carriers from committing similar or other

amount awarded should not be palpably

serious wrongdoings.

ATDHSC

Both courts also directed petitioner to pay

first time, did not arrive at the Los Angeles

and executory, the rate of legal interest,

private respondent Aurora R. Buncio

Airport. Mrs. Regalado testified that she

whether it is a loan/forbearance of money

P75,000.00 as moral damages. This is

was seriously worried when Deanna and

or not, shall be 12% per annum from such

equitable and proportionate considering the

Nikolai did not arrive in Los Angeles on 3

finality until its satisfaction,

serious anxiety and mental anguish she

May 1980, and she was hurt when she saw

this interim period being deemed to be then

experienced as a mother when Deanna

the two crying upon arriving in Los Angeles

equivalent to a forbearance of credit.

and Nikolai were not allowed to take the

on 4 May 1980. The omission of award of

connecting flight as scheduled and the fact

damages to private respondent Manuel S.

that they were stranded in a foreign country

Buncio was proper for lack of basis. His

and in the company of strangers. Private

court testimony was rightly disregarded by

respondent Aurora R. Buncio testified that

the RTC because he failed to appear in his

she was very fearful for the lives of Deanna

scheduled cross-examination.

and Nikolai when they were stranded in

San Francisco, and that by reason thereof
she suffered emotional stress and
experienced upset stomach. Also, the
award of P30,000.00 as moral damages to
Mrs. Regalado is appropriate because of
the serious anxiety and wounded feelings
she felt as a grandmother when Deanna
and Nikolai, whom she was to meet for the

In the instant case, petitioner's obligation

arose from a contract of carriage and not
from a loan or forbearance of money. Thus,
an interest of 6% per annum should be
imposed on the damages awarded, to be
computed from the time of the extra-judicial

On another point, we held in Eastern

demand on 17 July 1980 up to the finality

Shipping Lines, Inc. v. Court of

of this Decision. In addition, the interest

Appeals, that when an obligation, not

shall become 12% per annum from the

constituting a loan or forbearance of money

finality of this Decision up to its satisfaction.

is breached, an interest on the amount of

damages awarded may be imposed at the
rate of 6% per annum. We further declared
that when the judgment of the court
awarding a sum of money becomes final

Finally, the records show that Mrs.

Regalado died on 1 March 1995 at the age
of 74, while Deanna passed away on 8
December 2003 at the age of 32. This

being the case, the foregoing award of

damages plus interests in their favor should
be given to their respective heirs.

[G.R. No. 122039. May 31, 2000.]

EICSDT

WHEREFORE, the Petition is PARTLY

GRANTED. The Decision of the Court of
Appeals, dated 20 December 1995, in CAG.R. CV No. 26921, is hereby AFFIRMED
with the following MODIFICATIONS: (1) the
award of attorney's fees is deleted; (2) an
interest of 6% per annum is imposed on the
damages awarded, to be computed from
17 July 1980 up to the finality of this
Decision; and (3) an interest of 12% per
annum is also imposed from the finality of
this Decision up to its satisfaction. The
damages and interests granted in favor of
deceased Mrs. Regalado and deceased
Deanna are hereby awarded to their
respective heirs. Costs against petitioner.
SO ORDERED.

Salva as third-party defendant and

absolved Calalas of liability, holding that it
was the driver of the Isuzu truck who was

VICENTE

responsible for the accident. It took

CALALAS, petitioner, vs.

cognizance of another case (Civil Case No.

COURT OF APPEALS,

3490), filed by Calalas against Salva and

ELIZA JUJEURCHE

Verena for quasi-delict, in which Branch 37

SUNGA and FRANCISCO

of the same court held Salva and his driver

SALVA, respondents.

Verena jointly liable to Calalas for the

damage to his jeepney. On appeal, the

SYNOPSIS
Sunga filed a complaint for damages
against Calalas, alleging violation of the
contract of carriage by the former in failing
to exercise the diligence required of him as
a common carrier. Calalas, on the other
hand, filed a third-party complaint against
Francisco Salva, the owner of the Isuzu
truck that bumped their passenger jeepney.
The lower court rendered judgment against

Court of Appeals reversed the ruling of the

lower court on the ground that Sunga's
cause of action was based on a contract of
carriage, not quasi-delict, and that the
common carrier failed to exercise the
diligence required under the Civil Code.
The appellate court dismissed the thirdparty complaint against Salva and
adjudged Calalas liable for damages to
Sunga. Hence, this petition.

It is immaterial that the proximate cause of

Appeals was, affirmed, with the

Consequently, in quasi-delict, the

the collision between the jeepney and the

modification that the award of moral

negligence or fault should be clearly

truck was the negligence of the truck driver.

damages was deleted.

established because it is the basis of the

The doctrine of proximate cause is

applicable only in actions for quasi-delict,
not in actions involving breach of contract.
In the case at bar, upon the happening of
the accident, the presumption of
negligence at once arose, and it became
the duty of petitioner to prove that he had
observed extraordinary diligence in the
care of his passengers. The fact that
Sunga was seated in an "extension seat"
placed her in a peril greater than that to
which the other passengers were exposed.
Therefore, not only was petitioner unable to
overcome the presumption of negligence
imposed on him for the injury sustained by
Sunga, but also, the evidence showed he
was actually negligent in transporting
passengers. The decision of the Court of

action, whereas in breach of contract, the

SYLLABUS
1. CIVIL LAW; TORTS AND DAMAGES;
QUASI-DELICT AND BREACH OF
CONTRACT; DISTINGUISHED; CASE AT
BAR. The issue in Civil Case No. 3490
was whether Salva and his driver Verena
were liable for quasi-delict for the damage
caused to petitioner's jeepney. On the other
hand, the issue in this case is whether
petitioner is liable on his contract of
carriage. The first, quasi-delict, also known
as culpa aquiliana or culpa extra
contractual, has as its source the
negligence of the tortfeasor. The second,
breach of contract or culpa contractual, is
premised upon the negligence in the
performance of a contractual obligation.

action can be prosecuted merely by proving

the existence of the contract and the fact
that the obligor, in this case the common
carrier, failed to transport his passenger
safely to his destination. In case of death or
injuries to passengers, Art. 1756 of the
Civil Code provides that common carriers
are presumed to have been at fault or to
have acted negligently unless they prove
that they observed extraordinary diligence
as defined in Arts. 1733 and 1755 of the
Code. This provision necessarily shifts to
the common carrier the burden of proof.
2. ID.; ID.; ID.; DOCTRINE OF
PROXIMATE CAUSE; NOT APPLICABLE
IN ACTIONS INVOLVING BREACH OF
CONTRACT; RATIONALE. The doctrine

of proximate cause is applicable only in

A caso fortuito is an event which could

such damages are recoverable: (1) in

actions for quasi-delict, not in actions

not be foreseen, or which, though foreseen,

cases in which the mishap results in the

involving breach of contract. The doctrine is

was inevitable. This requires that the

death of a passenger, as provided in Art.

a device for imputing liability to a person

following requirements be present: (a) the

1764, in relation to Art. 2206 (3) of the Civil

where there is no relation between him and

cause of the breach is independent of the

Code; and (2) in the cases in which the

another party. In such a case, the

debtor's will; (b) the event is unforeseeable

carrier is guilty of fraud or bad faith, as

obligation is created by law itself. But,

or unavoidable; (c) the event is such as to

provided in Art. 2220.

where there is a pre-existing contractual

render it impossible for the debtor to fulfill

relation between the parties, it is the

his obligation in a normal manner, and (d)

parties themselves who create the

the debtor did not take part in causing the

obligation, and the function of the law is

injury to the creditor. Petitioner should have

merely to regulate the relation thus created.

foreseen the danger of parking his jeepney

Insofar as contracts of carriage are

with its body protruding two meters into the

This is a petition for review on certiorari of

concerned, some aspects regulated by the

highway.

the decision of the Court of Appeals, dated

Civil Code are those respecting the

diligence required of common carriers with
regard to the safety of passengers as well
as the presumption of negligence in cases
of death or injury to passengers.

4. ID.; DAMAGES; MORAL DAMAGES;

WHEN IT MAY BE RECOVERED. As a
general rule, moral damages are not
recoverable in actions for damages
predicated on a breach of contract for it is

3. ID.; ID.; ID.; CASO FORTUITO;

not one of the items enumerated under Art.

DEFINED; REQUIREMENTS THEREOF.

2219 of the Civil Code. As an exception,

DECISION

MENDOZA, J :
p

March 31, 1991, reversing the contrary

decision of the Regional Trial Court, Branch
36, Dumaguete City, and awarding
damages instead to private respondent
Eliza Jujeurche Sunga as plaintiff in an
action for breach of contract of carriage.

The facts, as found by the Court of

bumped the left rear portion of the jeepney.

third-party complaint against Francisco

Appeals, are as follows:

As a result, Sunga was injured. She

Salva, the owner of the Isuzu truck.

At 10 o'clock in the morning of August 23,

1989, private respondent Eliza Jujeurche
G. Sunga, then a college freshman
majoring in Physical Education at the
Siliman University, took a passenger
jeepney owned and operated by petitioner
Vicente Calalas. As the jeepney was filled
to capacity of about 24 passengers, Sunga
was given by the conductor an "extension
seat," a wooden stool at the back of the
door at the rear end of the vehicle.
On the way to Poblacion Sibulan, Negros
Occidental, the jeepney stopped to let a
passenger off. As she was seated at the
rear of the vehicle, Sunga gave way to the
outgoing passenger. Just as she was doing
so, an Isuzu truck driven by Iglecerio
Verena and owned by Francisco Salva

sustained a fracture of the "distal third of

the left tibia-fibula with severe necrosis of
the underlying skin." Closed reduction of
the fracture, long leg circular casting, and
case wedging were done under sedation.
Her confinement in the hospital lasted from
August 23 to September 7, 1989. Her
attending physician, Dr. Danilo V. Oligario,
an orthopedic surgeon, certified she would
remain on a cast for a period of three
months and would have to ambulate in
crutches during said period.
On October 9, 1989, Sunga filed a
complaint for damages against Calalas,
alleging violation of the contract of carriage
by the former in failing to exercise the
diligence required of him as a common
carrier. Calalas, on the other hand, filed a

The lower court rendered judgment,

against Salva as third-party defendant and
absolved Calalas of liability, holding that it
was the driver of the Isuzu truck who was
responsible for the accident. It took
cognizance of another case (Civil Case No.
3490), filed by Calalas against Salva and
Verena, for quasi-delict, in which Branch 37
of the same court held Salva and his driver
Verena jointly liable to Calalas for the
damage to his jeepney.
On appeal to the Court of Appeals, the
ruling of the lower court was reversed on
the ground that Sunga's cause of action
was based on a contract of carriage,
notquasi-delict, and that the common
carrier failed to exercise the diligence
required under the Civil Code. The

appellate court dismissed the third-party

complaint against Salva and adjudged
Calalas liable for damages to Sunga. The
dispositive portion of its decision reads:
WHEREFORE, the decision
appealed from is hereby
REVERSED and SET ASIDE,
and another one is entered
ordering defendant-appellee
Vicente Calalas to pay plaintiffappellant:

(5) to pay the costs.

SO ORDERED.

Hence, this petition. Petitioner contends

that the ruling in Civil Case No. 3490 that
the negligence of Verena was the
proximate cause of the accident negates
his liability and that to rule otherwise would
be to make the common carrier an insurer
of the safety of its passengers. He
contends that the bumping of the jeepney
by the truck owned by Salva was a caso

(1) P50,000.00 as actual and

fortuito. Petitioner further assails the award

compensatory damages;

of moral damages to Sunga on the ground

(2) P50,000.00 as moral

that it is not supported by evidence.

therefore, the principle of res judicata does

not apply.
Nor are the issues in Civil Case No. 3490
and in the present case the same. The
issue in Civil Case No. 3490 was whether
Salva and his driver Verena were liable
forquasi-delict for the damage caused to
petitioner's jeepney. On the other hand, the
issue in this case is whether petitioner is
liable on his contract of carriage. The
first,quasi-delict, also known as culpa
aquiliana or culpa extra contractual, has as
its source the negligence of the tortfeasor.
The second, breach of contract or culpa
contractual, is premised upon the

damages;

The petition has no merit.

negligence in the performance of a

(3) P10,000.00 as attorney's

The argument that Sunga is bound by the

contractual obligation.

fees; and

ruling in Civil Case No. 3490 finding the

(4) P1,000.00 as expenses of

litigation; and

driver and the owner of the truck liable

for quasi-delict ignores the fact that she
was never a party to that case and,

Consequently, in quasi-delict, the

negligence or fault should be clearly

established because it is the basis of the

collision between the jeepney and the truck

of death or injury to passengers. It

action, whereas in breach of contract, the

was the negligence of the truck driver. The

provides:

action can be prosecuted merely by proving

doctrine of proximate cause is applicable

the existence of the contract and the fact

only in actions for quasi-delict, not in

that the obligor, in this case the common

actions involving breach of contract. The

carrier, failed to transport his passenger

doctrine is a device for imputing liability to a

safely to his destination. In case of death or

person where there is no relation between

injuries to passengers, Art. 1756 of the

him and another party. In such a case, the

Civil Code provides that common carriers

obligation is created by law itself. But,

are presumed to have been at fault or to

where there is a pre-existing contractual

have acted negligently unless they prove

relation between the parties, it is the

that they observed extraordinary diligence

parties themselves who create the

as defined in Arts. 1733 and 1755 of the

obligation, and the function of the law is

Code. This provision necessarily shifts to

merely to regulate the relation thus

Such extraordinary diligence in

the common carrier the burden of proof.

created. Insofar as contracts of carriage

the vigilance over the goods is

are concerned, some aspects regulated by

further expressed in Articles

the Civil Code are those respecting the

1734, 1735, and 1746, Nos. 5,

diligence required of common carriers with

6, and 7, while the

regard to the safety of passengers as well

extraordinary diligence for the

as the presumption of negligence in cases

safety of the passengers is

There is, thus, no basis for the contention

that the ruling in Civil Case No. 3490,
finding Salva and his driver Verena liable
for the damage to petitioner's jeepney,
should be binding on Sunga. It is
immaterial that the proximate cause of the

ARTICLE 1733. Common

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

further set forth in Articles 1755

In the case at bar, upon the happening of

the Land Transportation and Traffic Code,

and 1756.

the accident, the presumption of

which provides:

ARTICLE 1755. A common

carrier is bound to carry the
passengers safely as far as
human care and foresight can

negligence at once arose, and it became

the duty of petitioner to prove that he had to
observe extraordinary diligence in the care
of his passengers.

SECTION 54. Obstruction of

Traffic. No person shall drive
his motor vehicle in such a
manner as to obstruct or

provide, using the utmost

Now, did the driver of jeepney carry Sunga

impede the passage of any

diligence of very cautious

"safely as far as human care and foresight

vehicle, nor, while discharging

persons, with due regard for all

could provide, using the utmost diligence of

or taking on passengers or

the circumstances.

very cautious persons, with due regard for

loading or unloading freight,

all the circumstances" as required by Art.

obstruct the free passage of

1755? We do not think so. Several factors

other vehicles on the highway.

ARTICLE 1756. In case of

death of or injuries to
passengers, common carriers

militate against petitioner's contention.

Second, it is undisputed that petitioner's

are presumed to have been at

First, as found by the Court of Appeals, the

driver took in more passengers than the

fault or to have acted

jeepney was not properly parked, its rear

allowed seating capacity of the jeepney, a

negligently, unless they prove

portion being exposed about two meters

violation of 32(a) of the same law. It

that they observed

from the broad shoulders of the highway,

provides:

extraordinary diligence as

and facing the middle of the highway in a

prescribed by Articles 1733 and

diagonal angle. This is a violation of

1755.

the R.A. No. 4136, as amended, or

Exceeding registered capacity.

No person operating any
motor vehicle shall allow more

passengers or more freight or

drowning by boarding an overloaded ferry.

and without basis in law. We find this

cargo in his vehicle than its

This is also true of petitioner's contention

contention well taken.

registered capacity.

that the jeepney being bumped while it was

The fact that Sunga was seated in an

"extension seat" placed her in a peril

improperly parked constitutes caso

fortuito. A caso fortuito is an event which

In awarding moral damages, the Court of

Appeals stated:

could not be foreseen, or which, though

Plaintiff-appellant at the time of

foreseen, was inevitable. This requires that

the accident was a first-year

the following requirements be present: (a)

college student in that school

the cause of the breach is independent of

year 1989-1990 at the Siliman

the debtor's will; (b) the event is

University, majoring in Physical

unforeseeable or unavoidable; (c) the event

Education. Because of the

is such as to render it impossible for the

injury, she was not able to

debtor to fulfill his obligation in a normal

enroll in the second semester

We find it hard to give serious thought to

manner, and (d) the debtor did not take part

of that school year. She testified

petitioner's contention that Sunga's taking

in causing the injury to the

that she had no more intention

an "extension seat" amounted to an implied

creditor. Petitioner should have foreseen

of continuing with her

assumption of risk. It is akin to arguing that

the danger of parking his jeepney with its

schooling, because she could

the injuries to the many victims of the

body protruding two meters into the

not walk and decided not to

tragedies in our seas should not be

highway.

pursue her degree, major in

greater than that to which the other

passengers were exposed. Therefore, not
only was petitioner unable to overcome the
presumption of negligence imposed on him
for the injury sustained by Sunga, but also,
the evidence shows he was actually
negligent in transporting passengers.

compensated merely because those

passengers assumed a greater risk of

Finally, petitioner challenges the award of

moral damages alleging that it is excessive

Physical Education "because of

my leg which has a defect

Code, she is entitled to recover

performance of the contract of carriage.

already."

moral damages in the sum of

Sunga's contention that petitioner's

P50,000.00, which is fair, just

admission in open court that the driver of

and reasonable.

the jeepney failed to assist her in going to a

Plaintiff-appellant likewise
testified that even while she

nearby hospital cannot be construed as an

was under confinement, she

As a general rule, moral damages are not

cried in pain because of her

recoverable in actions for damages

injured left foot. As a result of

predicated on a breach of contract for it is

her injury, the Orthopedic

not one of the items enumerated under Art.

Surgeon also certified that she

2219 of the Civil Code. As an exception,

has "residual bowing of the

such damages are recoverable: (1) in

fracture side." She likewise

cases in which the mishap results in the

decided not to further pursue

death of a passenger, as provided in Art.

Physical Education as her

1764, in relation to Art. 2206(3) of the Civil

WHEREFORE, the decision of the Court of

major subject, because "my left

Code; and (2) in the cases in which the

Appeals, dated March 31, 1995, and its

leg . . . has a defect already."

carrier is guilty of fraud or bad faith, as

resolution, dated September 11, 1995, are

provided in Art. 2220.

AFFIRMED, with the MODIFICATION that

Those are her physical pains

and moral sufferings, the

In this case, there is no legal basis for

inevitable bedfellows of the

awarding moral damages since there was

injuries that she suffered.

no factual finding by the appellate court

Under Article 2219 of the Civil

that petitioner acted in bad faith in the

admission of bad faith. The fact that it was

the driver of the Isuzu truck who took her to
the hospital does not imply that petitioner
was utterly indifferent to the plight of his
injured passenger. If at all, it is merely
implied recognition by Verena that he was
the one at fault for the accident.

the award of moral damages is DELETED.

SO ORDERED.

[G.R. No. 159636. November 25, 2004.]

VICTORY LINER,
INC., petitioner, vs.
ROSALITO GAMMAD,
APRIL ROSSAN P.
GAMMAD, ROI ROZANO P.
GAMMAD and DIANA
FRANCES P.
GAMMAD,respondents.

DECISION

Tuguegarao, Cagayan, Branch 5 finding

accidental and that it has always exercised

petitioner Victory Liner, Inc. liable for

extraordinary diligence in its 50 years of

breach of contract of carriage in Civil Case

operation.

No. 5023.
The facts as testified by respondent

on April 10, 1997. For failure to appear on

Rosalito Gammad show that on March 14,

the said date, petitioner was declared as in

1996, his wife Marie Grace Pagulayan-

default. However, on petitioner's motion to

Gammad, was on board an air-conditioned

lift the order of default, the same was

Victory Liner bus bound for Tuguegarao,

granted by the trial court.

Cagayan from Manila. At about 3:00 a.m.,

the bus while running at a high speed fell
on a ravine somewhere in Barangay
Baliling, Sta. Fe, Nueva Vizcaya, which

YNARES-SANTIAGO, J :
p

Assailed in this petition for review

After several re-settings, pre-trial was set

resulted in the death of Marie Grace and

physical injuries to other passengers.

At the pre-trial on May 6, 1997, petitioner

did not want to admit the proposed
stipulation that the deceased was a
passenger of the Victory Liner Bus which
fell on the ravine and that she was issued
Passenger Ticket No. 977785.

on certiorari is the April 11, 2003

On May 14, 1996, respondent heirs of the

Respondents, for their part, did not accept

decision of the Court of Appeals in CA-

deceased filed a complaint for damages

petitioner's proposal to pay P50,000.00.

G.R. CV No. 63290 which affirmed with

arising from culpa contractual against

modification the November 6, 1998

petitioner. In its answer, the petitioner

decision of the Regional Trial Court of

claimed that the incident was purely

After respondent Rosalito Gammad

completed his direct testimony, crossexamination was scheduled for November

17, 1997 but moved to December 8, 1997,

WHEREFORE, premises

because the parties and the counsel failed

considered and in the interest

of the total

to appear. On December 8, 1997, counsel

of justice, judgment is hereby

amount granted

of petitioner was absent despite due notice

rendered in favor of the

and was deemed to have waived right to

plaintiffs and against the

cross-examine respondent Rosalito.

defendant Victory Liner,

Petitioner's motion to reset the presentation

of its evidence to March 25, 1998 was
granted. However, on March 24, 1998, the

5. Attorney's Fees 10%

6. Cost of the Suit.

SO ORDERED.

Incorporated, ordering the latter

On appeal by petitioner, the Court of

to pay the following:

Appeals affirmed the decision of the trial

1. Actual

court with modification as follows:

counsel of petitioner sent the court a

Damages P122,0

[T]he Decision dated 06

telegram requesting postponement but the

00.00

November 1998 is hereby

telegram was received by the trial court on

March 25, 1998, after it had issued an
order considering the case submitted for
decision for failure of petitioner and counsel
to appear.
On November 6, 1998, the trial court
rendered its decision in favor of
respondents, the dispositive portion of
which reads:

2. Death
Indemnity 50,000.
00
3. Exemplary and Moral
Damages 400,00
0.00
4. Compensatory
Damages 1,500,0
00.00

MODIFIED to reflect that the

following are hereby adjudged
in favor of plaintiffs-appellees:
1. Actual Damages in the
amount of P88,270.00;
2. Compensatory Damages in
the amount of
P1,135,536,10;

complaint. Invoking APEX Mining, Inc. v.

damages were without basis and should be

Damages in the amount

Court of Appeals, petitioner argues, inter

deleted.

of P400,000.00; and

alia, that the decision of the trial court

3. Moral and Exemplary

4. Attorney's fees equivalent to

10% of the sum of the
actual, compensatory,
moral, and exemplary
damages herein
adjudged.

should be set aside because the

negligence of its former counsel, Atty.
Antonio B. Paguirigan, in failing to appear
at the scheduled hearings and move for
reconsideration of the orders declaring
petitioner to have waived the right to cross-

The issues for resolution are: (1) whether

petitioner's counsel was guilty of gross
negligence; (2) whether petitioner should
be held liable for breach of contract of
carriage; and (3) whether the award of
damages was proper.

examine respondents' witness and right to

It is settled that the negligence of counsel

The court a quo's judgment of

present evidence, deprived petitioner of its

binds the client. This is based on the rule

the cost of the suit against

day in court.

that any act performed by a counsel within

defendant-appellant is hereby
AFFIRMED. SO ORDERED.

Represented by a new counsel, petitioner

on May 21, 2003 filed a motion for
reconsideration praying that the case be
remanded to the trial court for crossexamination of respondents' witness and
for the presentation of its evidence; or in
the alternative, dismiss the respondents'

On August 21, 2003, the Court of Appeals

denied petitioner's motion for
reconsideration.

the scope of his general or implied

authority is regarded as an act of his client.
Consequently, the mistake or negligence of
counsel may result in the rendition of an

Hence, this petition for review principally

unfavorable judgment against the client.

based on the fact that the mistake or gross

However, the application of the general rule

negligence of its counsel deprived

to a given case should be looked into and

petitioner of due process of law. Petitioner

adopted according to the surrounding

also argues that the trial court's award of

circumstances obtaining. Thus, exceptions

to the foregoing have been recognized by

the orders declaring petitioner to have

Paguirigan or any member of his law firm to

the court in cases where reckless or gross

waived the right to cross-examine

represent petitioner at the pre-trial.

negligence of counsel deprives the client of

respondents' witness and to present

Petitioner is guilty, at the least, of

due process of law, or when its application

evidence, he nevertheless, filed a timely

contributory negligence and fault cannot be

will result in outright deprivation of the

appeal with the Court of Appeals assailing

imputed solely on previous counsel.

client's liberty or property or where the

the decision of the trial court. Hence,

interests of justice so require, and accord

petitioner's claim that it was denied due

relief to the client who suffered by reason of

process lacks basis.

the lawyer's gross or palpable mistake or

The case of APEX Mining, Inc., invoked by

petitioner is not on all fours with the case at
bar. In APEX, the negligent counsel not

Petitioner too is not entirely blameless.

only allowed the adverse decision against

Prior to the issuance of the order declaring

his client to become final and executory,

The exceptions, however, are not present in

it as in default for not appearing at the pre-

but deliberately misrepresented in the

this case. The record shows that Atty.

trial, three notices (dated October 23,

progress report that the case was still

Paguirigan filed an Answer and Pre-trial

1996, January 30, 1997, and March 26,

pending with the Court of Appeals when

Brief for petitioner. Although initially

1997, ) requiring attendance at the pre-trial

the same was dismissed 16 months

declared as in default, Atty. Paguirigan

were sent and duly received by petitioner.

ago. These circumstances are absent in

successfully moved for the setting aside of

However, it was only on April 27, 1997,

this case because Atty. Paguirigan timely

the order of default. In fact, petitioner was

after the issuance of the April 10, 1997

filed an appeal from the decision of the trial

represented by Atty. Paguirigan at the pre-

order of default for failure to appear at the

court with the Court of Appeals.

trial who proposed settlement for

pre-trial when petitioner, through its finance

P50,000.00. Although Atty. Paguirigan

and administrative manager, executed a

failed to file motions for reconsideration of

special power of attorney authorizing Atty.

negligence.

In Gold Line Transit, Inc. v. Ramos, the

Court was similarly confronted with the

issue of whether or not the client should

process of law. We do not

In the application of the

bear the adverse consequences of its

believe so. It cannot be denied

principle of due process, what

counsel's negligence. In that case, Gold

that the requirements of due

is sought to be safeguarded

Line Transit, Inc. (Gold Line) and its lawyer

process were observed in the

against is not the lack of

failed to appear at the pre-trial despite

instant case. Petitioner was

previous notice but the denial of

notice and was declared as in default. After

never deprived of its day in

the opportunity to be heard.

the plaintiff's presentation of evidence ex

court, as in fact it was afforded

The question is not whether

parte, the trial court rendered decision

every opportunity to be heard.

petitioner succeeded in

ordering Gold Line to pay damages to the

Thus, it is of record that notices

defending its rights and

heirs of its deceased passenger. The

were sent to petitioner and that

interests, but simply, whether it

decision became final and executory

its counsel was able to file a

had the opportunity to present

because counsel of Gold Line did not file

motion to dismiss the

its side of the controversy.

any appeal. Finding that Goldline was not

complaint, an answer to the

Verily, as petitioner retained the

denied due process of law and is thus

complaint, and even a pre-trial

services of counsel of its

bound by the negligence of its lawyer, the

brief. What was irretrievably lost

choice, it should, as far as this

Court held as follows

by petitioner was its opportunity

suit is concerned, bear the

to participate in the trial of the

consequences of its choice of a

case and to adduce evidence in

faulty option. Its plea that it was

its behalf because of

deprived of due process

negligence.

echoes on hollow ground and

This leads us to the question of

whether the negligence of
counsel was so gross and
reckless that petitioner was
deprived of its right to due

certainly cannot elicit approval

easily discernible. If the

deprived him of due process of law. In

nor sympathy.

negligence of counsel be

debunking his contention, the Court said

To cater to petitioner's
arguments and reinstate its
petition for relief from judgment
would put a premium on the
negligence of its former counsel
and encourage the nontermination of this case by
reason thereof. This is one

admitted as a reason for

opening cases, there would
never be an end to a suit so
long as a new counsel could be
hired every time it is shown that
the prior counsel had not been
sufficiently diligent, experienced
or learned.

Neither can he claim that he is

not bound by his lawyer's
actions; it is only in case of
gross or palpable negligence of
counsel when the courts can
step in and accord relief to a
client who would have suffered
thereby. If every perceived

case where petitioner has to

Similarly, in Macalalag v. Ombudsman, a

mistake, failure of diligence,

bear the adverse

Philippine Postal Corporation employee

lack of experience or

consequences of its counsel's

charged with dishonesty was not able to file

insufficient legal knowledge of

act, for a client is bound by the

an answer and position paper. He was

the lawyer would be admitted

action of his counsel in the

found guilty solely on the basis of

as a reason for the reopening

conduct of a case and he

complainant's evidence and was dismissed

of a case, there would be no

cannot thereafter be heard to

with forfeiture of all benefits and

end to controversy.

complain that the result might

disqualification from government service.

Fundamental to our judicial

have been different had his

Challenging the decision of the

system is the principle that

counsel proceeded differently.

Ombudsman, the employee contended that

every litigation must come to an

The rationale for the rule is

the gross negligence of his counsel

end. It would be a clear

mockery if it were otherwise.

human care and foresight can provide,

Nevertheless, the award of damages

Access to the courts is

using the utmost diligence of very cautious

should be modified.

guaranteed, but there must be

persons, with due regard to all the

a limit to it.

circumstances. In a contract of carriage, it

Viewed vis--vis the foregoing

jurisprudence, to sustain petitioner's
argument that it was denied due process of
law due to negligence of its counsel would
set a dangerous precedent. It would enable
every party to render inutile any adverse
order or decision through the simple
expedient of alleging gross negligence on
the part of its counsel. The Court will not

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

Article 1764 in relation to Article 2206 of

the Civil Code, holds the common carrier in
breach of its contract of carriage that
results in the death of a passenger liable to
pay the following: (1) indemnity for death,
(2) indemnity for loss of earning capacity,
and (3) moral damages.

statutory presumption may only be

In the present case, respondent heirs of the

overcome by evidence that the carrier

deceased are entitled to indemnity for the

exercised extraordinary diligence.

death of Marie Grace which under current

jurisprudence is fixed at P50,000.00.

countenance such a farce which

In the instant case, there is no evidence to

contradicts long-settled doctrines of trial

rebut the statutory presumption that the

The award of compensatory damages for

and procedure.

proximate cause of Marie Grace's death

the loss of the deceased's earning capacity

was the negligence of petitioner. Hence,

should be deleted for lack of basis. As a

the courts below correctly ruled that

rule, documentary evidence should be

petitioner was guilty of breach of contract of

presented to substantiate the claim for

carriage.

damages for loss of earning capacity. By

Anent the second issue, petitioner was

correctly found liable for breach of contract
of carriage. A common carrier is bound to
carry its passengers safely as far as

way of exception, damages for loss of

earning capacity may be awarded despite

existing at the time of his death, the Court

of their death. Placido Agustin

the absence of documentary evidence

held that testimonial evidence alone is

was a Social Security System

when (1) the deceased is self-employed

insufficient to justify an award for loss of

employee who received a

earning less than the minimum wage under

earning capacity.

monthly salary of P5,000.

current labor laws, and judicial notice may

be taken of the fact that in the deceased's
line of work no documentary evidence is
available; or (2) the deceased is employed
as a daily wage worker earning less than
the minimum wage under current labor
laws.
In People v. Oco, the evidence presented
by the prosecution to recover damages for
loss of earning capacity was the bare
testimony of the deceased's wife that her
husband was earning P8,000.00 monthly
as a legal researcher of a private
corporation. Finding that the deceased was
neither self-employed nor employed as a
daily-wage worker earning less than the
minimum wage under the labor laws

Likewise, in People v. Caraig, damages for

loss of earning capacity was not awarded
because the circumstances of the 3
deceased did not fall within the recognized
exceptions, and except for the testimony of
their wives, no documentary proof about
their income was presented by the
prosecution. Thus
The testimonial evidence
shows that Placido Agustin,
Roberto Raagas, and Melencio
Castro Jr. were not selfemployed or employed as dailywage workers earning less than
the minimum wage under the
labor laws existing at the time

Roberto Raagas was the

President of Sinclair Security
and Allied Services, a family
owned corporation, with a
monthly compensation of
P30,000. Melencio Castro Jr.
was a taxi driver of New
Rocalex with an average daily
earning of P500 or a monthly
earning of P7,500. Clearly,
these cases do not fall under
the exceptions where indemnity
for loss of earning capacity can
be given despite lack of
documentary evidence.
Therefore, for lack of
documentary proof, no

indemnity for loss of earning

Civil Code, temperate or moderate

capacity, there is no

capacity can be given in these

damages, which are more than nominal but

doubt that Pleno is an

cases. (Emphasis supplied)

less than compensatory damages, may be

ent[re]preneur and the

recovered when the court finds that some

founder of his own

pecuniary loss has been suffered but its

corporation, the Mayon

amount can not, from the nature of the

Ceramics Corporation. It

case, be proved with certainty.

appears also that he is

Here, the trial court and the Court of

Appeals computed the award of
compensatory damages for loss of earning
capacity only on the basis of the testimony
of respondent Rosalito that the deceased

In Pleno v. Court of Appeals, the Court

was 39 years of age and a Section Chief of

sustained the trial court's award of

the Bureau of Internal Revenue,

P200,000.00 as temperate damages in lieu

Tuguegarao District Office with a salary of

of actual damages for loss of earning

P83,088.00 per annum when she died. No

capacity because the income of the victim

other evidence was presented. The award

was not sufficiently proven, thus

is clearly erroneous because the

deceased's earnings does not fall within
the exceptions.
However, the fact of loss having been
established, temperate damages in the
amount of P500,000.00 should be awarded
to respondents. Under Article 2224 of the

The trial court based the

amounts of damages awarded
to the petitioner on the following
circumstances:
xxx xxx xxx
"As to the loss or
impairment of earning

an industrious and
resourceful person with
several projects in line,
and were it not for the
incident, might have
pushed them through.
On the day of the
incident, Pleno was
driving homeward with
geologist Longley after
an ocular inspection of
the site of the Mayon
Ceramics Corporation.
His actual income

however has not been

social life. In similar

damages is adequately

sufficiently established

cases as in Borromeo v.

supported by evidence on

so that this Court cannot

Manila Electric Railroad

record.

award actual damages,

Co., 44 Phil

but, an award of

165; Coriage, et al. v.

temperate or moderate

LTB Co., et al., L-11037,

damages may still be

Dec. 29, 1960, and

made on loss or

in Araneta, et al. v.

impairment of earning

Arreglado, et al., L-

capacity. That Pleno

11394, Sept. 9, 1958,

sustained a permanent

the proper award of

deformity due to a

damages were given."

shortened left leg and

that he also suffers from
double vision in his left
eye is also established.
Because of this, he
suffers from some
inferiority complex and is
no longer active in
business as well as in

xxx xxx xxx

Article 2224 of the Civil Code was likewise

applied in the recent cases of People v.
Singh and People v. Almedilla, to justify
the award of temperate damages in lieu of
damages for loss of earning capacity which
was not substantiated by the required
documentary proof.

SEHDIC

Anent the award of moral damages, the

same cannot be lumped with exemplary
damages because they are based on

We rule that the lower court's

different jural foundations. These damages

awards of damages are more

are different in nature and require separate

consonant with the factual

determination. In culpa contractual or

circumstances of the instant

breach of contract, moral damages may be

case. The trial court's findings

recovered when the defendant acted in bad

of facts are clear and well-

faith or was guilty of gross negligence

developed. Each item of

(amounting to bad faith) or in wanton

disregard of contractual obligations and, as

that it exercised the extraordinary diligence

replace the official receipts necessary to

in this case, when the act of breach of

required for common carriers, it is

justify the award. Hence, actual damages

contract itself constitutes the tort that

presumed to have acted recklessly. Thus,

should be further reduced to

results in physical injuries. By special rule

the award of exemplary damages is proper.

P78,160.00, which was the amount

in Article 1764 in relation to Article 2206 of

Under the circumstances, we find it

supported by official receipts.

the Civil Code, moral damages may also

reasonable to award respondents the

be awarded in case the death of a

amount of P100,000.00 as moral damages

passenger results from a breach of

and P100,000.00 as exemplary damages.

carriage. On the other hand, exemplary

These amounts are not excessive. 50

damages, which are awarded by way of

example or correction for the public good
may be recovered in contractual obligations
if the defendant acted in wanton,
fraudulent, reckless, oppressive, or
malevolent manner.

Pursuant to Article 2208 of the Civil Code,

attorney's fees may also be recovered in
the case at bar where exemplary damages
are awarded. The Court finds the award of

The actual damages awarded by the trial

attorney's fees equivalent to 10% of the

court reduced by the Court of Appeals

total amount adjudged against petitioner

should be further reduced. In People v.

reasonable.

Duban, it was held that only substantiated

and proven expenses or those that appear
to have been genuinely incurred in

Respondents in the instant case should be

connection with the death, wake or burial of

awarded moral damages to compensate for

the victim will be recognized. A list of

the grief caused by the death of the

expenses (Exhibit "J"), and the

deceased resulting from the petitioner's

contract/receipt for the construction of the

breach of contract of carriage.

tomb (Exhibit "F") in this case, cannot be

Furthermore, the petitioner failed to prove

considered competent proof and cannot

Finally, in Eastern Shipping Lines, Inc. v.

Court of Appeals, it was held that when an
obligation, regardless of its source, i.e.,
law, contracts, quasi-contracts, delicts or
quasi-delicts is breached, the contravenor
can be held liable for payment of interest in
the concept of actual and compensatory

damages, subject to the following rules, to

2. When an obligation, not

reasonably established at the

wit

constituting a loan or

time the demand is made, the

forbearance of money, is

interest shall begin to run only

breached, an interest on the

from the date the judgment of

amount of damages awarded

the court is made (at which

may be imposed at the

time the quantification of

discretion of the court at the

damages may be deemed to

rate of 6% per annum. No

have been reasonably

interest, however, shall be

ascertained). The actual base

adjudged on unliquidated

for the computation of legal

claims or damages except

interest shall, in any case, be

when or until the demand can

on the amount finally adjudged.

1. When the obligation is

breached, and it consists in the
payment of a sum of money,
i.e., a loan or forbearance of
money, the interest due should
be that which may have been
stipulated in writing.
Furthermore, the interest due
shall itself earn legal interest
from the time it is judicially
demanded. In the absence of
stipulation, the rate of interest
shall be 12% per annum to be
computed from default, i.e.,
from judicial or extrajudicial
demand under and subject to
the provisions of Article 1169 of
the Civil Code.

be established with reasonable

certainty. Accordingly, where
the demand is established with
reasonable certainty, the
interest shall begin to run from
the time the claim is made
judicially or extrajudicially (Art.
1169, Civil Code) but when
such certainty cannot be so

3. When the judgment of the

court awarding a sum of money
becomes final and executory,
the rate of legal interest,
whether the case falls under
paragraph 1 or paragraph 2,
above, shall be 12% per
annum from such finality until
its satisfaction, this interim

period being deemed to be by

5023, is AFFIRMED with MODIFICATION.

BACHELOR EXPRESS,

then an equivalent to a

As modified, petitioner Victory Liner, Inc., is

INCORPORATED, and

forbearance of credit.

ordered to pay respondents the following:

CRESENCIO

(Emphasis supplied).

(1) P50,000.00 as indemnity for the death

RIVERA, petitioners, vs. TH

of Marie Grace Pagulayan-Gammad; (2)

E HONORABLE COURT OF

P100,000.00 as moral damages; (3)

APPEALS (Sixth Division),

P100,000.00 as exemplary damages; (4)

RICARDO BETER, SERGIA

P78,160.00 as actual damages; (5)

BETER, TEOFILO

P500,000.00 as temperate damages; (6)

RAUTRAUT and ZOETERA

10% of the total amount as attorneys fees;

RAUTRAUT, respondents.

In the instant case, petitioner should be

held liable for payment of interest as
damages for breach of contract of carriage.
Considering that the amounts payable by
petitioner has been determined with
certainty only in the instant petition, the
interest due shall be computed upon the

and the costs of suit.

finality of this decision at the rate of

Furthermore, the total amount adjudged

12% per annum until satisfaction, per

against petitioner shall earn interest at the

paragraph 3 of the aforecited rule.

rate of 12% per annum computed from the

WHEREFORE, in view of all the foregoing,

the petition is partially granted. The April

GUTIERREZ, JR., J :
p

finality of this decision until fully paid. SO

This is a petition for review of the decision

ORDERED.

of the Court of Appeals which reversed and

set aside the order of the Regional Trial

11, 2003 decision of the Court of Appeals

Court, Branch I, Butuan City dismissing the

in CA-G.R. CV No. 63290, which modified

private respondents' complaint for

the decision of the Regional Trial Court of

Tuguegarao, Cagayan in Civil Case No.

DECISION

[G.R. No. 85691. July 31, 1990.]

collection of "a sum of money" and finding

the petitioners solidarily liable for damages

in the total amount of One Hundred Twenty

stopped, passengers Ornominio Beter and

passengers safely to their respective

Thousand Pesos (P120,000.00). The

Narcisa Rautraut were found lying down

places of destination except Ornominio

petitioners also question the appellate

the road, the former already dead as a

Beter and Narcisa Rautraut who jumped off

court's resolution denying a motion for

result of head injuries and the latter also

the bus without the knowledge and

reconsideration.

suffering from severe injuries which caused

consent, much less, the fault of the driver

her death later. The passenger-assailant

and conductor and the defendants in this

alighted from the bus and ran toward the

case; the defendant corporation had

bushes but was killed by the police.

exercised due diligence in the choice of its

Thereafter, the heirs of Ornomino Beter

employees to avoid as much as possible

and Narcisa Rautraut, private respondents

accidents; the incident on August 1, 1980

herein (Ricardo Beter and Sergia Beter are

was not a traffic accident or vehicular

the parents of Ornominio while Teofilo

accident, it was an incident or event very

The evidence shows that the bus came

Rautraut and Zoetera [should be Zotera]

much beyond the control of the defendants;

from Davao City on its way to Cagayan de

Rautraut are the parents of Narcisa) filed a

defendants were not parties to the incident

Oro City passing Butuan City; that while at

complaint for "sum of money" against

complained of as it was an act of a third

Tabon-Tabon, Butuan City, the bus picked

Bachelor Express, Inc. its alleged owner

party who is not in any way connected with

up a passenger; that about fifteen (15)

Samson Yasay, and the driver Rivera.

the defendants and of which the latter have

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.

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

In their answer, the petitioners denied

liability for the death of Ornominio Beter
and Narcisa Rautraut. They alleged that ". .
. the driver was able to transport his

no control and supervision; . . ." (Rollo, pp.

112-113).

After due trial, the trial court issued an

indemnity and attorney's fees;

The petitioners opine that answers to these

order dated August 8, 1985 dismissing the

and,

questions are material to arrive at "a fair,

complaint.

2) To the heirs of Narcisa

Upon appeal however, the trial court's

Rautraut, the amount of Forty

decision was reversed and set aside. The

Five Thousand Pesos

dispositive portion of the decision of the

(P45,000.00) for straight death

Court of Appeals states:

indemnity, moral damages and

"WHEREFORE, the Decision

appealed from is REVERSED

They claim that the assailed decision is

based on a misapprehension of facts and
its conclusion is grounded on speculation,
surmises or conjectures.

attorney's fees. Costs against

As regards the proximate cause of the

appellees." (Rollo, pp. 71-72)

death of Ornominio Beter and Narcisa

and SET ASIDE and a new one

The petitioners now pose the following

entered finding the appellees

questions:

jointly and solidarily liable to

just and equitable judgment." (Rollo, p. 5)

Rautraut, the petitioners maintain that it

was the act of the passenger who ran
amuck and stabbed another passenger of

"What was the proximate cause

the bus. They contend that the stabbing

of the whole incident? Why

incident triggered off the commotion and

were the passengers on board

panic among the passengers who pushed

1) To the heirs of Ornominio

the bus panicked (sic) and why

one another and that "presumably out of

Beter, the amount of Seventy

were they shoving one

fear and moved by that human instinct of

Five Thousand Pesos

another? Why did Narcisa

self-preservation Beter and Rautraut

(P75,000.00) in loss of

Rautraut and Ornominio Beter

jumped off the bus while the bus was still

earnings and support, moral

jump off from the running bus?"

running resulting in their untimely death.'

pay the plaintiffs-appellants the

following amounts:

damages, straight death

(Rollo, p. 6) Under these circumstances,

the petitioners asseverate that they were

The liability, if any, of the petitioners is

passengers transported by

not negligent in the performance of their

anchored on culpa contractual or breach of

them, according to all the

duties and that the incident was completely

contract of carriage. The applicable

circumstances of each case.

and absolutely attributable to a third

provisions of law under the New Civil Code

person, the passenger who ran amuck, for

are as follows:

without his criminal act, Beter and Rautraut

could not have been subjected to fear and
shock which compelled them to jump off
the running bus. They argue that they
should not be made liable for damages
arising from acts of third persons over
whom they have no control or supervision.
Furthermore, the petitioners maintain that
the driver of the bus, before, during and
after the incident was driving cautiously
giving due regard to traffic rules, laws and
regulations. The petitioners also argue that
they are not insurers of their passengers as
ruled by the trial court.

"ART. 1732. Common carriers

are persons, corporations, firms
or associations engaged in the
business of carrying or
transporting passengers or
goods or both by land, water, or
air, for compensation, offering
their services to the public.
"ART. 1733. Common carriers,
from the nature of their
business and for reasons of
public policy, are bound to
observe extraordinary diligence
in the vigilance over the goods
and for the safety of the

xxx xxx xxx

"ART. 1755. A common carrier
is bound to carry the
passengers safely as far as
human care and foresight can
provide, using the utmost
diligence of very cautious
persons, with a due regard for
all the circumstances.
"ART. 1756. In case of death of
or injuries to passengers,
common carriers are presumed
to have been at fault or to have
acted negligently, unless they
prove that they observed
extraordinary diligence as

prescribed in Articles 1733 and

extraordinary diligence in accordance with

otherwise declared by

1755."

Articles 1733 and 1755 of the New Civil

stipulations, or when the nature

Code.

of the obligation requires the

There is no question that Bachelor

assumption of risk, no person

Express, Inc. is a common carrier. Hence,

Bachelor Express, Inc. denies liability for

from the nature of its business and for

the death of Beter and Rautraut on its

reasons of public policy Bachelor Express,

posture that the death of the said

Inc. is bound to carry its passengers safely

passengers was caused by a third person

as far as human care and foresight can

who was beyond its control and

provide using the utmost diligence of very

supervision. In effect, the petitioner, in

The above - mentioned provision was

cautious persons, with a due regard for all

order to overcome the presumption of fault

substantially copied from Article 1105 of

the circumstances.

or negligence under the law, states that the

the old Civil Code which states"

In the case at bar, Ornominio Beter and

Narcisa Rautraut were passengers of a bus
belonging to petitioner Bachelor Express,
Inc. and, while passengers of the bus,
suffered injuries which caused their death.

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.

shall be responsible for those

events which could not be
foreseen, or which though
foreseen, were inevitable."

"No one shall be liable for

events which could not be
foreseen or which, even if
foreseen, were inevitable, with
the exception of the cases in

Consequently, pursuant to Article 1756 of

Article 1174 of the present Civil Code

which the law expressly

the Civil Code, petitioner Bachelor Express,

states:

provides otherwise and those in

Inc. is presumed to have acted negligently

unless it can prove that it had observed

"Except in cases expressly

specified by law, or when it is

which the obligation itself

imposes liability."

In the case of Lasam v. Smith (45 Phil. 657

puede ante ver. E son estos,

In discussing and analyzing the

[1924]), we defined "events" which cannot

derrivamientos de casas e

term caso fortuito the

be foreseen and which, having been

fuego que enciende a so ora, e

Enciclopedia Juridica Espaola

foreseen, are inevitable in the following

quebrantamiento de navio,

says: 'In a legal sense and,

manner:

fuerca de ladrones.' (An event

consequently, also in relation to

that takes place by incident and

contracts, a caso fortuito

could not have been foreseen.

presents the following essential

Examples of this are

characteristics: (1 ) The cause

destruction of houses,

of the unforeseen and

unexpected fire, shipwreck,

unexpected occurrence, or of

violence of robbers. . . .)

the failure of the debtor to

". . . The Spanish authorities

regard the language employed
as an effort to define the term
'caso fortuito' and hold that the
two expressions are
synonymous. (Manresa
Comentarios al Codigo Civil

Escriche defines caso fortuito

Espaol, vol. 8, pp. 88 et seq.;

as an unexpected event or act

Scaevola, Codigo Civil, vol. 19,

of God which could neither be

pp. 526 et seq.)

foreseen nor resisted, such as

The antecedent to Article 1105

is found in Law II, Title 33,
Partida 7, which defines caso
fortuito as 'ocasion que acaese
por aventura de que non se

floods, torrents, shipwrecks,

conflagrations, lightning,
compulsion, insurrections,
destruction of buildings by
unforeseen accidents and other
occurrences of a similar nature.

comply with his obligation, must

be independent of the human
will. (2) It must be impossible to
foresee the event which
constitutes the caso fortuito, or
if it can be foreseen, it must be
impossible to avoid. (3) The
occurrence must be such as to
render it impossible for the
debtor to fulfill his obligation in

a normal manner. And (4) the

bus by passengers Beter and Rautraut

inasmuch as such loss

obligor (debtor) must be free

causing them fatal injuries. The sudden act

and damage were the

from any participation in the

of the passenger who stabbed another

result of a fortuitous event

aggravation of the injury

passenger in the bus is within the context

or force majeure, and

resulting to the creditor. (5

of force majeure.

there was no negligence

Enciclopedia Juridica
Espaola, 309)

However, in order that a common carrier

may be absolved from liability in case

As will be seen, these

of force majeure, it is not enough that the

authorities agree that some

accident was caused by force majeure. The

extraordinary circumstance

common carrier must still prove that it was

independent of the will of the

not negligent in causing the injuries

obligor, or of his employees, is

resulting from such accident. Thus, as early

an essential element of a caso

as 1912, we ruled:

fortuito. . . ."

"From all the foregoing, it

The running amuck of the passenger was

is concluded that the

the proximate cause of the incident as it

defendant is not liable for

triggered off a commotion and panic among

the loss and damage of

the passengers such that the passengers

the goods shipped on the

started running to the sole exit shoving

lorcha Pilar by the

each other resulting in the falling off the

Chinaman, Ong Bien Sip,

or lack of care and

diligence on the part of
the defendant company or
its agents." (Tan Chiong
Sian v. Inchausti & Co., 22
Phil. 152 [1912] Emphasis
supplied).

This principle was reiterated in a more

recent case, Batangas Laguna Tayabas
Co. v. Intermediate Appellate Court (167
SCRA 379 [1988]), wherein we ruled:
". . . [F]or their defense of force
majeure or act of God to
prosper the accident must be
due to natural causes
and exclusively without human

intervention." (Emphasis

two deceased could have fallen

the bus by passing through the

supplied)

off the bus when their own

window.

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.
In this regard the trial court and the
appellate court arrived at conflicting factual
findings.
The trial court found the following facts:
"The parties presented

witnesses testified that when

the commotion ensued inside
the bus, the passengers
pushed and shoved each other
towards the door apparently in
order to get off from the bus
through the door. But the
passengers also could not pass
through the door because
according to the evidence the
door was locked.

It is the prevailing rule and

settled jurisprudence that
transportation companies are
not insurers of their
passengers. The evidence on
record does not show that
defendants' personnel were
negligent in their duties. The
defendants' personnel have
every right to accept
passengers absent any

conflicting evidence as to how

On the other hand, the Court is

manifestation of violence or

the two deceased Narcisa

inclined to give credence to the

drunkenness. If and when such

Rautruat and Ornominio Beter

evidence adduced by the

passengers harm other

met their deaths.

defendants that when the

passengers without the

commotion ensued inside the

knowledge of the transportation

bus, the two deceased

company's personnel, the latter

panicked and, in state of shock

should not be faulted." (Rollo,

and fear, they jumped off from

pp. 46-47)

However, from the evidence

adduced by the plaintiffs, the
Court could not see why the

A thorough examination of the records,

that the defendant common

son fall from the bus as the

however, show that there are material facts

carrier is not liable for the death

door was forced open by the

ignored by the trial court which were

of the said passengers which it

force of the onrushing

discussed by the appellate court to arrive at

implicitly attributed to the

passengers.

a different conclusion. These

unforeseen acts of the

circumstances show that the petitioner

unidentified passenger who

common carrier was negligent in the

went amuck.

provision of safety precautions so that its

Pedro Collango, on the other

hand, testified that he shut the
door after the last passenger

There is nothing in the record to

had boarded the bus. But he

support the conclusion that the

had quite conveniently

solitary door of the bus was

neglected to say that when the

locked as to prevent the

passengers had panicked, he

"A critical eye must be

passengers from passing

himself panicked and had gone

accorded the lower court's

through. Leonila Cullano,

to open the door. Portions of

conclusions of fact in its tersely

testifying for the defense,

the testimony of Leonila

written ratio decidendi. The

clearly stated that the

Cullano, quoted below, are

lower court concluded that the

conductor opened the door

illuminating:

door of the bus was closed;

when the passengers were

secondly, the passengers,

shouting that the bus stop while

specifically the two deceased,

they were in a state of panic.

jumped out of the window. The

Sergia Beter categorically

lower court therefore concluded

stated that she actually saw her

passengers may be transported safely to

their destinations. The appellate court
states:

'xxx xxx xxx

Q When you said the conductor
opened the door, the

door at the front or rear

sounded (sic). The

Cullano as the sole

portion of the bus?

conductor panicked

uninterested eyewitness of the

because the passengers

entire episode. Instead we find

were shouting 'stop,

Pedro Collango's testimony to

stop'. The conductor

be infused by bias and fraught

opened the bus.'"

with inconsistencies, if not

A Front door.
Q And these two persons
whom you said alighted,
where did they pass, the
fron(t) door or rear door?
A Front door.
xxx xxx xxx
(Tsn., p. 4, Aug. 8, 1984)
xxx xxx xxx
Q What happened after there

(Tsn., p. 3, August 8,
1984).
Accordingly, there is no reason
to believe that the deceased
passengers jumped from the

Q So what happened to the

bus?

alighted through the door. The

testimony of Pedro Collango, as

a passenger who was

xxx xxx xxx

possible for them to have

rear portion of the bus?

I noticed that there was

he testified:

passengers inside your

lower court's reliance on the

occurred, I stood up and

veracity. On direct examination,

window when it was entirely

was a commotion at the

A When the commotion

notably unreliable for lack of

the conductor and employee of

the common carrier, is
unjustified, in the light of the
clear testimony of Leonila

A Some of the passengers

jumped out of the
window.
COURT:
Q While the bus was in motion?

A Yes, your Honor, but the

Let the witness answer.

At such speed of not less than

speed was slow because

Estimate only, the

30 to 40 miles . . ., or about 48

we have just picked up a

conductor experienced.

to 65 kilometers per hour, the

passenger.
Atty. Gambe:
Q You said that at the time of
the incident the bus was
running slow because
you have just picked up
a passenger. Can you
estimate what was your
speed at that time?.
Atty. Calo:
No basis, your Honor, he
is neither a driver nor a
conductor.
COURT:

Witness:
Not less than 30 to
40 miles.
COURT:
Kilometers or
miles?

speed of the bus could scarcely

be considered slow considering
that according to Collango
himself, the bus had just come
from a full stop after picking a
passenger (Tsn, p. 4, id.) and
that the bus was still on its
second or third gear (Tsn., p.

A Miles.

12, id.).

Atty. Gambe:

In the light of the foregoing, the

Q That is only your estimate by

your experience?
A Yes, sir, estimate.
(Tsn., pp. 4-5, Oct. 17,
1983).

negligence of the common

carrier, through its employees,
consisted of the lack of
extraordinary diligence required
of common carriers, in
exercising vigilance and utmost
care of the safety of its
passengers, exemplified by the

driver's belated stop and the

Considering the factual findings of the

extraordinary diligence in transporting

reckless opening of the doors

Court of Appeals the bus driver did not

safely the passengers to their destinations

of the bus while the same was

immediately stop the bus at the height of

as warranted by law. (See Batangas

travelling at an appreciably fast

the commotion; the bus was speeding from

Laguna Tayabas Co. v. Intermediate

speed. At the same time, the

a full stop; the victims fell from the bus door

Appellate Court, supra).

common carrier itself

when it was opened or gave way while the

acknowledged, through its

bus was still running; the conductor

administrative officer, Benjamin

panicked and blew his whistle after people

Granada, that the bus was

had already fallen off the bus; and the bus

commissioned to travel and

was not properly equipped with doors in

take on passengers and the

accordance with law it is clear that the

public at large, while equipped

petitioners have failed to overcome the

with only a solitary door for a

presumption of fault and negligence found

bus its size and loading

in the law governing common carriers.

capacity, in contravention of
rules and regulations provided
for under the Land
Transportation and Traffic
Code (RA 4136 as amended.)"
(Rollo, pp. 23-26)

The petitioners also contend that the

private respondents failed to show to the
court that they are the parents of
Ornominio Beter and Narcisa Rautraut
respectively and therefore have no legal
personality to sue the petitioners. This
argument deserves scant consideration.
We find this argument a belated attempt on
the part of the petitioners to avoid liability

The petitioners' argument that the

for the deaths of Beter and Rautraut. The

petitioners "are not insurers of their

private respondents were identified as the

passengers" deserves no merit in view of

parents of the victims by witnesses during

the failure of the petitioners to prove that

the trial and the trial court recognized them

the deaths of the two passengers were

as such. The trial court dismissed the

exclusively due to force majeure and not to

complaint solely on the ground that the

the failure of the petitioners to observe

petitioners were not negligent.

Finally, the amount of damages awarded to

determining the award of

of years on the basis of which

the heirs of Beter and Rautraut by the

damages, namely: 1) life

the damages shall be

appellate court is supported by the

expectancy (considering the

computed; and (2) the rate at

evidence. The appellate court stated:

state of health of the deceased

which the losses sustained by

and the mortality tables are

the heirs should be fixed.

"Ornominio Beter was 32 years

of age at the time of his death,
single, in good health and
rendering support and service
to his mother. As far as Narcisa
Rautraut is concerned, the only
evidence adduced is to the

deemed conclusive) and loss of

earning capacity; (2) pecuniary
loss, loss of support and
service; and (3) moral and
mental suffering (Alcantara, et
el. v. Surro, et al., 93 Phil. 470).

As the formula adopted in the

case of Davila v. Philippine Air
Lines, 49 SCRA 497, at the age
of 30 one's normal life
expectancy is 33 1/3 years
based on the American

effect that at her death, she

In the case of People v. Daniel

Expectancy Table of Mortality

was 23 years of age, in good

(No. L-66551, April 25, 1985,

(2/3 x 80-32). By taking into

health and without visible

136 SCRA 92, at page 104),

account the pace and nature of

means of support.

the High Tribunal, reiterating

the life of a carpenter, it is

the rule in Villa Rey Transit,

reasonable to make allowances

Inc. v. Court of Appeals(31

for these circumstances and

SCRA 511), stated that the

reduce the life expectancy of

amount of loss of earning

the deceased Ornominio Beter

capacity is based mainly on two

to 25 years (People v.

factors, namely, (1) the number

Daniel, supra). To fix the rate of

In accordance with Art. 1764 in

conjunction with Art. 2206 of
the Civil Code, and established
jurisprudence, several factors
may be considered in

losses it must be noted that Art.

daily wage carpenter which is

pursuant to Article 2206

2206 refers to gross earnings

seasonal, it is safe to assume

(People v. Daniel, supra). For

less necessary living expenses

that he shall have worked for

damages for their moral and

of the deceased, in other

twenty (20) days a month at

mental anguish, his heirs are

words, only net earnings are to

Twenty Five Pesos (P25.00) a

entitled to the reasonable sum

be considered (People v.

day or Five Hundred Pesos

of P10,000.00 as an exception

Daniel, supra; Villa Rey Transit,

(P500.00) a month. Annually,

to the general rule against

Inc. v. Court of Appeals, supra).

his income would amount to Six

moral damages in case of

Thousand Pesos (P6,000.00)

breach of contract rule Art.

or One Hundred Fifty Thousand

2200 (Necesito v. Paras, 104

Pesos (P150,000.00) for twenty

Phil. 75). As attorney's fees,

five years. Deducting therefrom

Beter's heirs are entitled to

his necessary expenses, his

P5,000.00. All in all, the

heirs would be entitled to Thirty

plaintiff-appellants Ricardo and

Thousand Pesos (P30,000.00)

Sergia Beter as heirs of their

representing loss of support

son Ornominio are entitled to

and service (P150,000.00 less

an indemnity of Seventy Five

P120,000.00). In addition, his

Thousand Pesos (P75,000.00).

Applying the foregoing rules

with respect to Ornominio
Beter, it is both just and
reasonable, considering his
social standing and position, to
fix the deductible, living and
incidental expenses at the sum
of Four Hundred Pesos
(P400.00) a month, or Four
Thousand Eight Hundred
Pesos (P4,800.00) annually. As
to his income, considering the
irregular nature of the work of a

heirs are entitled to Thirty

Thousand Pesos (P30,000.00)
as straight death indemnity

In the case of Narcisa Rautraut,

her heirs are entitled to a
straight death indemnity of

Thirty Thousand Pesos

LIGHT RAIL TRANSIT

payment of the fare). Junelito Escartin, the

(P30,000.00), to moral

AUTHORITY & RODOLFO

security guard assigned to the area,

damages in the amount of Ten

ROMAN, petitioners, vs.

approached Navidad. A misunderstanding

Thousand Pesos (P10,000.00)

MARJORIE NAVIDAD,

or an altercation between the two

and Five Thousand Pesos

Heirs of the Late NICANOR

apparently ensued that led to a fist fight. At

(P5,000.00) as attorneys fees,

NAVIDAD & PRUDENT

the exact moment that Navidad fell, an LRT

or a total of Forty Five

SECURITY

train, operated by petitioner Rodolfo

Thousand Pesos (P45,000.00)

AGENCY, respondents.

Roman, was coming in. Navidad was

struck by the moving train, and he was

as total indemnity for her death

in the absence of any evidence

Office of the Government Corporate

killed instantaneously. Private respondent

that she had visible means of

Counsel for petitioners.

Marjorie Navidad, the widow of Nicanor,

support." (Rollo, pp. 30-31)

Mario F. Estayan for Prudent Security

WHEREFORE, the instant petition is

DISMISSED. The questioned decision
dated May 19, 1988 and the resolution
dated August 1, 1988 of the Court of
Appeals are AFFIRMED. SO ORDERED.
|

Agency.
Arias Law Offices for M. Navidad and the
Heirs of Navidad.
SYNOPSIS
On 14 October 1993, Nicanor Navidad,

[G.R. No. 145804. February 6, 2003.]

then drunk, entered the EDSA LRT station

after purchasing a "token" (representing

along with her children, filed a complaint for

damages against Junelito Escartin, Rodolfo
Roman, the LRTA, the Metro Transit
Organization, Inc. and Prudent Security
Agency for the death of her husband. The
trial court ruled in favor of private
respondent by awarding actual, moral and
compensatory damages. Prudent Security
Agency appealed to the Court of Appeals.
The appellate court exonerated Prudent

from any liability for the death of Nicanor

it could only be for tort under the provisions

also for the reason that the contractual tie

and instead held LRTA and Roman jointly

of Article 2176 and related provisions, in

between the LRT and Navidad is not itself a

and severally liable. In exempting Prudent

conjunction with Article 2180, of the Civil

juridical relation between the latter and

from liability, the appellate court stressed

Code. In the absence of satisfactory

Roman; thus, Roman can be made liable

that there was nothing to link the security

explanation by the carrier on how the

only for his own fault or negligence. The

agency to the death of Navidad. It ruled

accident occurred, which petitioners,

Court also ruled that the award of nominal

that Navidad failed to show that Escartin

according to the appellate court, have

damages, in addition to actual damages, is

inflicted fist blows upon the victim and the

failed to show, the presumption would be

untenable stressing that nominal damages

evidence merely established the fact of

that it has been at fault, an exception from

are adjudicated in order that a right of the

death of Navidad by reason of his having

the general rule that negligence must be

plaintiff, which has been violated or

been hit by the train owned and managed

proved. Regrettably for LRT, as well as the

invaded by the defendant, may be

by the LRTA and operated at the time by

surviving spouse and heirs of the late

vindicated or recognized, and not for the

Roman. The appellate court faulted

Nicanor Navidad, the Court is concluded by

purpose of indemnifying the plaintiff for any

petitioners for their failure to present expert

the factual finding of the Court of Appeals

loss suffered by him. It is also an

evidence to establish the fact that the

that there was nothing to link Prudent to the

established rule that nominal damages

application of emergency brakes could not

death of Nicanor Navidad, for the reason

cannot co-exist with compensatory

have stopped the train. Hence, the present

that the negligence of its employee,

damages.

petition for review.

Escartin, has not been duly proven. The

IcTEaC

The Supreme Court affirmed the decision

of the Court of Appeals. If there is any
liability that could be attributed to Prudent,

Court also absolved petitioner Rodolfo

Roman, there being no showing that he is
guilty of any culpable act or omission and

SYLLABUS
1.CIVIL LAW; COMMON CARRIERS;
LIABILITY FOR DEATH OR INJURY TO

PASSENGERS. The law requires

negligent, and by simple proof of injury, the

contract of carriage and its obligation to

common carriers to carry passengers

passenger is relieved of the duty to still

indemnify the victim arises from the breach

safely using the utmost diligence of very

establish the fault or negligence of the

of that contract by reason of its failure to

cautious persons with due regard for all

carrier or of its employees and the burden

exercise the high diligence required of the

circumstances. Such duty of a common

shifts upon the carrier to prove that the

common carrier. In the discharge of its

carrier to provide safety to its passengers

injury is due to an unforeseen event or

commitment to ensure the safety of

so obligates it not only during the course of

to force majeure. In the absence of

passengers, a carrier may choose to hire

the trip but for so long as the passengers

satisfactory explanation by the carrier on

its own employees or avail itself of the

are within its premises and where they

how the accident occurred, which

services of an outsider or an independent

ought to be in pursuance to the contract of

petitioners, according to the appellate

firm to undertake the task. In either case,

carriage. The statutory provisions render a

court, have failed to show, the presumption

the common carrier is not relieved of its

common carrier liable for death of or injury

would be that it has been at fault, an

responsibilities under the contract of

to passengers (a) through the negligence

exception from the general rule that

carriage. Should Prudent be made likewise

or willful acts of its employees or b) on

negligence must be proved.

liable? If at all, that liability could only be for

account of willful acts or negligence of

other passengers or of strangers if the
common carrier's employees through the
exercise of due diligence could have
prevented or stopped the act or omission.
In case of such death or injury, a carrier is
presumed to have been at fault or been

2.ID.; EXTRA CONTRACTUAL

OBLIGATIONS; QUASI-DELICTS; AN
EMPLOYER CANNOT BE HELD LIABLE
FOR DAMAGES ABSENT PROOF OF
FAULT OR NEGLIGENCE ON THE PART
OF ITS EMPLOYEE; CASE AT BAR.
The foundation of LRTA's liability is the

tort under the provisions of Article 2176

and related provisions, in conjunction with
Article 2180, of the Civil Code. The
premise, however, for the employer's
liability is negligence or fault on the part of
the employee. Once such fault is
established, the employer can then be

made liable on the basis of the

differently, when an act which constitutes a

or omission, he must also be absolved from

presumption juris tantum that the employer

breach of contract would have itself

liability. Needless to say, the contractual tie

failed to exercise diligentissimi patris

constituted the source of a quasi-delictual

between the LRT and Navidad is not itself a

familias in the selection and supervision of

liability had no contract existed between

juridical relation between the latter and

its employees. The liability is primary and

the parties, the contract can be said to

Roman; thus, Roman can be made liable

can only be negated by showing due

have been breached by tort, thereby

only for his own fault or negligence.

diligence in the selection and supervision

allowing the rules on tort to apply.

of the employee, a factual matter that has

Regrettably for LRT, as well as perhaps the

not been shown. Absent such a showing,

surviving spouse and heirs of the late

one might ask further, how then must the

Nicanor Navidad, this Court is concluded

liability of the common carrier, on the one

by the factual finding of the Court of

hand, and an independent contractor, on

Appeals that "there is nothing to link

the other hand, be described? It would be

(Prudent) to the death of Nicanor

solidary. A contractual obligation can be

(Navidad), for the reason that the

breached by tort and when the same act or

negligence of its employee, Escartin, has

omission causes the injury, one resulting

not been duly proven . . . ." This finding of

in culpa contractual and the other in culpa

the appellate court is not without

aquiliana, Article 2194 of the Civil Code

substantial justification in our own review of

can well apply. In fine, a liability for tort may

the records of the case. There being,

arise even under a contract, where tort is

similarly, no showing that petitioner Rodolfo

that which breaches the contract. Stated

Roman himself is guilty of any culpable act

3.ID.; DAMAGES; AWARD OF NOMINAL

DAMAGES IN ADDITION TO ACTUAL
DAMAGES IS UNTENABLE; NOMINAL
DAMAGES CANNOT CO-EXIST WITH
COMPENSATORY DAMAGES. The
award of nominal damages in addition to
actual damages is untenable. Nominal
damages are adjudicated in order that a
right of the plaintiff, which has been
violated or invaded by the defendant, may
be vindicated or recognized, and not for the
purpose of indemnifying the plaintiff for any
loss suffered by him. It is an established
rule that nominal damages cannot co-exist
with compensatory damages.

ISAcHD

DECISION

LRT station after purchasing a "token"

Navidad, along with her children, filed a

(representing payment of the fare). While

complaint for damages against Junelito

Navidad was standing on the platform near

Escartin, Rodolfo Roman, the LRTA, the

the LRT tracks, Junelito Escartin, the

Metro Transit Organization, Inc. (Metro

The case before the Court is an appeal

security guard assigned to the area

Transit), and Prudent for the death of her

from the decision and resolution of the

approached Navidad. A misunderstanding

husband. LRTA and Roman filed a

Court of Appeals, promulgated on 27 April

or an altercation between the two

counterclaim against Navidad and a cross-

2000 and 10 October 2000, respectively, in

apparently ensued that led to a fist fight. No

claim against Escartin and Prudent.

CA-G.R. CV No. 60720, entitled "Marjorie

evidence, however, was adduced to

Prudent, in its answer, denied liability and

Navidad and Heirs of the Late Nicanor

indicate how the fight started or who,

averred that it had exercised due diligence

Navidad vs. Rodolfo Roman, et al.," which

between the two, delivered the first blow or

in the selection and supervision of its

has modified the decision of 11 August

how Navidad later fell on the LRT tracks. At

security guards.

1998 of the Regional Trial Court, Branch

the exact moment that Navidad fell, an LRT

266, Pasig City, exonerating Prudent

train, operated by petitioner Rodolfo

Security Agency (Prudent) from liability and

Roman, was coming in. Navidad was

finding Light Rail Transit Authority (LRTA)

struck by the moving train, and he was

and Rodolfo Roman liable for damages on

killed instantaneously.

VITUG, J :
p

account of the death of Nicanor Navidad.

On 14 October 1993, about half an hour
past seven o'clock in the evening, Nicanor
Navidad, then drunk, entered the EDSA

The LRTA and Roman presented their

evidence while Prudent and Escartin,
instead of presenting evidence, filed a
demurrer contending that Navidad had
failed to prove that Escartin was negligent
in his assigned task. On 11 August 1998,

On 08 December 1994, the widow of

Nicanor, herein respondent Marjorie

the trial court rendered its decision; it

adjudged:

"WHEREFORE, judgment is

"b)Moral damages of

hereby rendered in favor of the

plaintiffs and against the
defendants Prudent Security

P50,000.00;
"c)Attorney's fees of
P20,000;

and Junelito Escartin ordering

the latter to pay jointly and

"d)Costs of suit.

"WHEREFORE, the assailed

judgment is hereby MODIFIED,
by exonerating the appellants
from any liability for the death
of Nicanor Navidad, Jr. Instead,
appellees Rodolfo Roman and

severally the plaintiffs the

"The complaint against

the Light Rail Transit Authority

following:

defendants LRTA and Rodolfo

(LRTA) are held liable for his

Roman are dismissed for lack

death and are hereby directed

of merit.

to pay jointly and severally to

"a)1)Actual damages of
P44,830.00;
2)Compensatory
damages of
P443,520.00;
3)Indemnity for
the death of
Nicanor
Navidad in
the sum of
P50,000.00;

"The compulsory counterclaim

of LRTA and Roman are
likewise dismissed."

Prudent appealed to the Court of Appeals.

the plaintiffs-appellees, the

following amounts:
a)P44,830.00 as actual
damages;

On 27 August 2000, the appellate court

b)P50,000.00 as nominal

promulgated its now assailed decision

damages;

exonerating Prudent from any liability for

the death of Nicanor Navidad and, instead,
holding the LRTA and Roman jointly and
severally liable thusly:

c)P50,000.00 as moral
damages;
d)P50,000.00 as indemnity for
the death of the deceased; and

e)P20,000.00 as and for

application of emergency brakes could not

FOR THE DEATH OF

attorney's fees."

have stopped the train.

NICANOR NAVIDAD, JR.

The appellate court ratiocinated that while

The appellate court denied petitioners'

the deceased might not have then as yet

motion for reconsideration in its resolution

boarded the train, a contract of carriage

of 10 October 2000.

theretofore had already existed when the

victim entered the place where passengers
were supposed to be after paying the fare
and getting the corresponding token

In their present recourse, petitioners recite

IN FINDING THAT RODOLFO

alleged errors on the part of the appellate

ROMAN IS AN EMPLOYEE OF

court; viz:

LRTA."
"I.

the court stressed that there was nothing to

THE HONORABLE COURT OF

link the security agency to the death of

APPEALS GRAVELY ERRED

Navidad. It said that Navidad failed to show

BY DISREGARDING THE

that Escartin inflicted fist blows upon the

FINDINGS OF FACTS BY THE

victim and the evidence merely established

TRIAL COURT.

his having been hit by the train owned and

THE HONORABLE COURT OF

APPEALS GRAVELY ERRED

therefor. In exempting Prudent from liability,

the fact of death of Navidad by reason of

"III.

"II.

Petitioners would contend that the

appellate court ignored the evidence and
the factual findings of the trial court by
holding them liable on the basis of a
sweeping conclusion that the presumption
of negligence on the part of a common
carrier was not overcome. Petitioners
would insist that Escartin's assault upon

managed by the LRTA and operated at the

THE HONORABLE COURT OF

Navidad, which caused the latter to fall on

time by Roman. The appellate court faulted

APPEALS GRAVELY ERRED

the tracks, was an act of a stranger that

petitioners for their failure to present expert

IN FINDING THAT

could not have been foreseen or prevented.

evidence to establish the fact that the

PETITIONERS ARE LIABLE

The LRTA would add that the appellate

court's conclusion on the existence of an

business and for reasons of public policy, is

extraordinary diligence as

employer-employee relationship between

burdened with the duty of exercising utmost

prescribed in Articles 1733 and

Roman and LRTA lacked basis because

diligence in ensuring the safety of

1755."

Roman himself had testified being an

passengers. The Civil Code, governing the

employee of Metro Transit and not of the

liability of a common carrier for death of or

LRTA.

injury to its passengers, provides:

"Article 1759.Common carriers

are liable for the death of or
injuries to passengers through

Respondents, supporting the decision of

"Article 1755.A common carrier

the negligence or willful acts of

the appellate court, contended that a

is bound to carry the

the former's employees,

contract of carriage was deemed created

passengers safely as far as

although such employees may

from the moment Navidad paid the fare at

human care and foresight can

have acted beyond the scope of

the LRT station and entered the premises

provide, using the utmost

their authority or in violation of

of the latter, entitling Navidad to all the

diligence of very cautious

the orders of the common

rights and protection under a contractual

persons, with a due regard for

carriers.

relation, and that the appellate court had

all the circumstances.

correctly held LRTA and Roman liable for

"This liability of the common

"Article 1756.In case of death

carriers does not cease upon

of or injuries to passengers,

proof that they exercised all the

common carriers are presumed

diligence of a good father of a

to have been at fault or to have

family in the selection and

Law and jurisprudence dictate that a

acted negligently, unless they

supervision of their

common carrier, both from the nature of its

prove that they observed

employees."

the death of Navidad in failing to exercise

extraordinary diligence imposed upon a
common carrier.

"Article 1763.A common carrier

provisions render a common carrier liable

presumption would be that it has been at

is responsible for injuries

for death of or injury to passengers (a)

fault, an exception from the general rule

suffered by a passenger on

through the negligence or wilful acts of its

that negligence must be proved.

account of the willful acts or

employees or b) on account of wilful acts

negligence of other passengers

or negligence of other passengers or of

or of strangers, if the common

strangers if the common carrier's

carrier's employees through the

employees through the exercise of due

exercise of the diligence of a

diligence could have prevented or stopped

good father of a family could

the act or omission. 7 In case of such death

have prevented or stopped the

or injury, a carrier is presumed to have

act or omission."

been at fault or been negligent, and by

The law requires common carriers to carry

passengers safely using the utmost
diligence of very cautious persons with due
regard for all circumstances. Such duty of a
common carrier to provide safety to its
passengers so obligates it not only during
the course of the trip but for so long as the
passengers are within its premises and
where they ought to be in pursuance to the
contract of carriage. The statutory

simple proof of injury, the passenger is

relieved of the duty to still establish the fault
or negligence of the carrier or of its
employees and the burden shifts upon the
carrier to prove that the injury is due to an
unforeseen event or to force majeure. In
the absence of satisfactory explanation by

The foundation of LRTA's liability is the

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

the carrier on how the accident occurred,

Should Prudent be made likewise liable? If

which petitioners, according to the

at all, that liability could only be for tort

appellate court, have failed to show, the

under the provisions of Article 2176 and

related provisions, in conjunction with

omission causes the injury, one resulting

not been duly proven . . . ." This finding of

Article 2180, of the Civil Code. The

in culpa contractual and the other in culpa

the appellate court is not without

premise, however, for the employer's

aquiliana, Article 2194 of the Civil Code

substantial justification in our own review of

liability is negligence or fault on the part of

can well apply. In fine, a liability for tort may

the records of the case.

the employee. Once such fault is

arise even under a contract, where tort is

established, the employer can then be

that which breaches the contract. Stated

made liable on the basis of the

differently, when an act which constitutes a

presumption juris tantum that the employer

breach of contract would have itself

failed to exercise diligentissimi patris

constituted the source of a quasi-delictual

familias in the selection and supervision of

liability had no contract existed between

its employees. The liability is primary and

the parties, the contract can be said to

can only be negated by showing due

have been breached by tort, thereby

diligence in the selection and supervision

allowing the rules on tort to apply.

of the employee, a factual matter that has

not been shown. Absent such a showing,
one might ask further, how then must the
liability of the common carrier, on the one
hand, and an independent contractor, on
the other hand, be described? It would be
solidary. A contractual obligation can be
breached by tort and when the same act or

Regrettably for LRT, as well as perhaps the

surviving spouse and heirs of the late
Nicanor Navidad, this Court is concluded
by the factual finding of the Court of
Appeals that "there is nothing to link
(Prudent) to the death of Nicanor
(Navidad), for the reason that the
negligence of its employee, Escartin, has

There being, similarly, no showing that

petitioner Rodolfo Roman himself is guilty
of any culpable act or omission, he must
also be absolved from liability. Needless to
say, the contractual tie between the LRT
and Navidad is not itself a juridical relation
between the latter and Roman; thus,
Roman can be made liable only for his own
fault or negligence.
The award of nominal damages in addition
to actual damages is untenable. Nominal
damages are adjudicated in order that a
right of the plaintiff, which has been
violated or invaded by the defendant, may
be vindicated or recognized, and not for the
purpose of indemnifying the plaintiff for any

loss suffered by him. It is an established

TRADING, AND JULIO

the court need not even make an express

rule that nominal damages cannot co-exist

RECONTIQUE, respondents.

finding of fault or negligence on the part of

with compensatory damages.

WHEREFORE, the assailed decision of the
appellate court is AFFIRMED with
MODIFICATION but only in that (a) the
award of nominal damages is DELETED
and (b) petitioner Rodolfo Roman is
absolved from liability. No costs. SO
ORDERED.

the common carrier. This statutory

SYLLABUS
1. CIVIL LAW; CONTRACTS; SPECIAL
CONTRACTS; COMMON CARRIERS;
LIABILITY FOR DAMAGES;
ESTABLISHED IN CASE AT BAR. 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

[G.R. No. 116110. May 15, 1996.]

BALIWAG TRANSIT,
INC., petitioner, vs. COURT
OF APPEALS, SPOUSES
ANTONIO GARCIA &
LETICIA GARCIA, A & J

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. 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,

presumption may only be overcome by

evidence that the carrier exercised
extraordinary diligence as prescribed in
Articles 1733 and 1755 of the Civil
Code.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.
Leticia also revealed that the driver was
smelling of liquor. She could smell him as
she was seated right behind the driver.
Another passenger, Felix Cruz testified that
immediately before the collision, the bus

driver was conversing with a co-employee.

testified that they did not see any early

times with built-in reflectors or other similar

All these prove the bus driver's wanton

warning device at the scene of the

warning devices either pasted, painted or

disregard for the physical safety of his

accident. They were referring to the

attached at its front and back which shall

passengers, which make Baliwag as a

triangular reflectorized plates in red and

likewise be visible at night at least one

common carrier liable for damages under

yellow issued by the Land Transportation

hundred meters away. No vehicle not

Article 1759 of the Civil Code.

Office. However, the evidence shows that

provided with any of the requirements

Recontique and Ecala placed a kerosene

mentioned in this subsection shall be

lamp or torch at the edge of the road, near

registered." Baliwag's argument that the

the rear portion of the truck to serve as an

kerosene lamp or torch does not

early warning device. This substantially

substantially comply with the law is

complies with Section 34(g) of the Land

untenable. The aforequoted law clearly

Transportation and Traffic Code, to wit:

allows the use not only of an early warning

"(g) lights and reflector when parked or

device of the triangular reflectorized plates

disabled. Appropriate parking lights or

variety but also parking lights or flares

flares visible one hundred meters away

visible one hundred meters away. Indeed,

shall be displayed at the corner of the

Col. dela Cruz himself admitted that a

vehicle whenever such vehicle is parked on

kerosene lamp is an acceptable substitute

highways or in places that are not well-

for the reflectorized plates. No negligence,

lighted or, is placed in such manner as to

therefore, may be imputed to A & J Trading

endanger passing traffic. Furthermore,

and its driver, Recontique.

2. ID.; ID.; ID.; ID.; LAND

TRANSPORTATION AND TRAFFIC
CODE; SECTION 34(g) THEREOF;
SUBSTANTIALLY COMPLIED WITH IN
CASE AT BAR. 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 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.
The records do not bear out Baliwag's
contention. Col. dela Cruz and Romano

every motor vehicle shall be provided at all

3. ID.; DAMAGES; TO PROVE ACTUAL

damages for medical and hospitalization

This is a petition for certiorari to review the

DAMAGES, THE BEST EVIDENCE

expenses to P5,017.74.

Decision of the Court of Appeals in CA-

AVAILABLE TO THE PARTIES MUST BE

PRESENTED. 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
proved actual damages, the best evidence
available to the injured party must be
presented. The court cannot rely on

4. ID.; ID.; MORAL DAMAGES;

RECOVERABLE IF THE CARRIER
THROUGH ITS AGENT, ACTED

of the spouses Antonio and Leticia Garcia

for breach of contract of carriage.

FRAUDULENTLY OR IN BAD FAITH.

The records show that on July 31, 1980,

The award of moral damages is in accord

Leticia Garcia, and her five-year old son,

with law. In a breach of contract of carriage,

Allan Garcia, boarded Baliwag Transit Bus

moral damages are recoverable if the

No. 2036 bound for Cabanatuan City driven

carrier, through its agent, acted fraudulently

by Jaime Santiago. They took the seat

or bad faith. The evidence shows the gross

behind the driver.

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.

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, as the shoulder of
the road was too narrow to accommodate

uncorroborated testimony whose truth is

DECISION

suspect, but must depend upon competent

the whole truck. A kerosene lamp appeared

at the edge of the road obviously to serve

proof that damages have been actually

suffered. Thus, we reduce the actual

G.R. CV-31246 awarding damages in favor

PUNO, J :
p

as a warning device. The truck driver, Julio

Recontique, and his helper, Arturo Escala,

Leticia suffered a fracture in her

Baliwag, A & J Trading and

were then replacing a flat tire. The truck is

pelvis and right leg. They rushed her to

Recontique disclaimed responsibility for

owned by respondent A & J Trading.

the provincial hospital in Cabanatuan

the mishap. Baliwag alleged that the

City where she was given emergency

accident was caused solely by the fault

treatment. After three days, she was

and negligence of A & J Trading and its

transferred to the National Orthopedic

driver, Recontique. Baliwag charged

Hospital where she was confined for

that Recontique failed to place an early

more than a month. She underwent an

warning device at the corner of the

operation for partial hip prosthesis.

disabled cargo truck to warn oncoming

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. Santiago even
carried animated conversations with his

Allan, on the other hand, broke a

vehicles. On the other hand, A & J

co-employees while driving. When the

leg. He was also given emergency

Trading and Recontique alleged that the

danger of collision became imminent,

treatment at the provincial hospital.

accident was the result of the

the bus passengers shouted "Babangga

Spouses Antonio and Leticia

negligence and reckless driving of

Santiago, bus driver of Baliwag.

tayo!". Santiago stepped on the brake,

Garcia sued Baliwag Transit, Inc., A & J

but it was too late. His bus rammed into

Trading and Julio Recontique for

the stalled cargo truck. It caused the

damages in the Regional Trial Court of

instant death of Santiago and Escala,

Bulacan. Leticia sued as an injured

and injury to several others. Leticia and

passenger of Baliwag and as mother of

"In view thereof, the Court

Allan Garcia were among the injured

Allan. At the time of the complaint, Allan

holds that both defendants

passengers.

was a minor, hence, the suit initiated by

should be held liable; the

his parents in his favor.

defendant Baliwag Transit, Inc.

After hearing, the trial court found

all the defendants liable, thus:
xxx xxx xxx

for having failed to deliver the

On appeal, the Court of Appeals modified

plaintiff and her son to their

the trial court's Decision by absolving A & J

point of destination safely in

Trading from liability and by reducing the

breached its contract of carriage when it

violation of plaintiff's and

award of attorney's fees to P10,000.00 and

failed to deliver its passengers, Leticia

defendant Baliwag Transit's

loss of earnings to P300,000.00,

and Allan Garcia to their destination

contractual relation.

respectively.

safe and sound. A common carrier is

The defendant A & J and Julio

Baliwag filed the present petition for review

bound to carry its passengers safely as

Recontique for failure to provide

raising the following issues:

far as human care and foresight can

its cargo truck with an early

warning device in violation of
the Motor Vehicle Law."

"1. Did the Court of Appeals err

in absolving A & J Trading from
liability and holding Baliwag

The trial court ordered Baliwag, A & J

solely liable for the injuries

Trading and Recontique to pay jointly and

suffered by Leticia and Allan

severally the Garcia spouses the following:

Garcia in the accident?

(1) P25,000.00 hospitalization and

medication fee, (2) P450,000.00 loss of
earnings in eight (8) years, (3) P2,000.00
for the hospitalization of their son Allan
Garcia, (4) P50,000.00 moral damages,
and (5) P30,000.00 attorney's fee.

I
As a common carrier, Baliwag

provide, using the utmost diligence of a

very cautious person, with due regard
for all the circumstances. In a contract
of carriage, it is presumed that the
common carrier was at fault or was
negligent when a passenger dies or is
injured. Unless the presumption is

2. Is the amount of damages

rebutted, the court need not even make

awarded by the Court of

an express finding of fault or negligence

Appeals to the Garcia spouses

on the part of the common carrier.This

correct?"

statutory presumption may only be

We affirm the factual findings of

the Court of Appeals.

overcome by evidence that the carrier

exercised extraordinary diligence as

prescribed in Articles 1733 and 1755 of

makes Baliwag as a common carrier

the Civil Code.

liable for damages under Article 1759 of

by insisting that the accident was

theCivil Code:

caused solely by the negligence of A &

The records are bereft of any

Baliwag cannot evade its liability

proof to show that Baliwag exercised

"Art. 1759. Common carriers

J Trading and Julio Recontique. It harps

extraordinary diligence. On the contrary,

are liable for the death of or

on their alleged non use of an early

the evidence demonstrates its driver's

injuries to passengers through

warning device as testified to by Col.

recklessness. Leticia Garcia testified

the negligence or willful acts of

Demetrio dela Cruz, the station

that the bus was running at a very high

the former's employees,

commander of Gapan, Nueva Ecija who

speed despite the drizzle and the

although such employees may

investigated the incident, and Francisco

darkness of the highway. The

have acted beyond the scope of

Romano, the bus conductor.

passengers pleaded for its driver to slow

their authority or in violation of

down, but their plea was ignored. Leticia

the orders of the common

Baliwag's contention. Col. dela Cruz

also revealed that the driver was

carriers.

and Romano testified that they did not

smelling of liquor. She could smell him

as she was seated right behind the
driver. Another passenger, Felix Cruz
testified that immediately before the
collision, the bus driver was conversing
with a co-employee. All these prove the
bus driver's wanton disregard for the
physical safety of his passengers, which

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."

The records do not bear out

see any early warning device at the

scene of the accident. They were
referring to the triangular reflectorized
plates in red and yellow issued by the
Land Transportation Office. However,
the evidence shows that 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

which shall likewise be visible

Anent this factual issue, the

early warning device. This substantially

at night at least one hundred

analysis of evidence made by the Court

complies with Section 34 (g) of the Land

meters away. No vehicle not

of Appeals deserves our

Transportation and Traffic Code, to wit:

provided with any of the

concurrence, viz:

"(g) Lights and reflector when

requirements mentioned in this

parked or disabled.

subsection shall be registered.

Appropriate parking lights or

(Emphasis supplied)"

flares visible one hundred

Baliwag's argument that the

xxx xxx xxx

"In the case at bar, both the
injured passengers of the
Baliwag involved in the accident

meters away shall be displayed

kerosene lamp or torch does not

testified that they saw some

at the corner of the vehicle

substantially comply with the law is

sort of kerosene or a torch on

whenever such vehicle is

untenable. The aforequoted law clearly

the rear portion of the truck

parked on highways or in

allows the use not only of an early

before the accident. Baliwag

places that are not well-lighted

warning device of the triangular

Transit's conductor attempted to

or, is placed in such manner as

reflectorized plates variety but also

defeat such testimony by

to endanger passing traffic.

parking lights or flares visible one

declaring that he noticed no

Furthermore, every motor

hundred meters away. Indeed, Col. dela

early warning device in front of

vehicle shall be provided at all

Cruz himself admitted that a kerosene

the truck

times with built-in reflectors or

lamp is an acceptable substitute for the

other similar warning devices

reflectorized plates. No negligence,

either pasted, painted or

therefore, may be imputed to A & J

attached at its front and back

Trading and its driver, Recontique.

Among the testimonies offered

by the witnesses who were
present at the scene of the

accident, we rule to uphold the

the time of the accident was

bumped by the bus considering

affirmative testimonies given by

admittedly drizzly and all dark.

the darkness of the place at the

the two injured passengers and

This being so, it would be

time of the accident.

give less credence to the

improbable and perhaps

testimony of the bus conductor

impossible on the part of the

who solely testified that no such

truck helper without the torch

early warning device exists.

nor the kerosene to remove the

The testimonies of injured

passengers who may well be
considered as disinterested
witness appear to be natural
and more probable than the
testimony given by Francisco
Romano who is undoubtedly
interested in the outcome of the
case, being the conductor of
the defendant-appellant
Baliwag Transit Inc.
It must be borne in mind that
the situation then prevailing at

flat tires of the truck. Moreover,

witness including the bus
conductor himself admitted that
the passengers shouted, that
they are going to bump before
the collision which
consequently caused the bus
driver to apply thebrake 3 to 4
meters away from the truck.
Again, without the kerosene nor
the torch in front of the truck, it
would be improbable for the
driver, more so the passengers
to notice the truck to be

xxx xxx xxx

While it is true that the
investigating officer testified
that he found no early warning
device at the time of his
investigation, We rule to give
less credence to such
testimony insofar as he himself
admitted on cross examination
that he did not notice the
presence of any kerosene lamp
at the back of the truck
because when he arrived at the
scene of the accident, there
were already many people
surrounding the place (TSN,
Aug. 22, 1989, p. 13). He
further admitted that there

exists a probability that the

fees. The award of P25,000.00 is not

Leticia's lost earnings. Before the

lights of the truck may have

supported by the evidence on record.

accident, Leticia was engaged in

been smashed by the bus at

The Garcias presented receipts marked

embroidery, earning P5,000.00 per

the time of the

as Exhibits "B-1" to "B-42" but their total

month. Her injuries forced her to stop

accident considering the

amounted only to P5,017.74. To be

working. Considering the nature and

location of the truck where its

sure, Leticia testified as to the extra

extent of her injuries and the length of

rear portion was connected

amount spent for her medical needs but

time it would take her to recover, we find

with the front portion of the bus

without more reliable evidence, her lone

it proper that Baliwag should

(TSN, March 29, 1985, pp. 11-

testimony cannot justify the award of

compensate her lost income for five (5)

13). Investigator's testimony

P25,000.00. To prove actual damages,

years.

therefore did not confirm nor

the best evidence available to the

deny the existence of such

injured party must be presented. The

damages is in accord with law. In a

warning device, making his

court cannot rely on uncorroborated

breach of contract of carriage, moral

testimony of little probative

testimony whose truth is suspect, but

damages are recoverable if the carrier,

value."

must depend upon competent proof that

through its agent, acted fraudulently or

damages have been actually

in bad faith. The evidence shows the

suffered. Thus, we reduce the actual

gross negligence of the driver of

damages for medical and hospitalization

Baliwag bus which amounted to bad

expenses to P5,017.74.

faith. Without doubt, Leticia and Allan

II
We now review the amount of
damages awarded to the Garcia
spouses.
First, the propriety of the amount
awarded as hospitalization and medical

Second, we find as reasonable

the award of P300,000.00 representing

Third, the award of moral

experienced physical suffering, mental

anguish and serious anxiety by reason

of the accident. Leticia underwent an

Garcia spouses on December 15, 1982,

operation to replace her broken hip

following the unjustified refusal of

bone with a metal plate. She was

Baliwag to settle their claim. The

confined at the National Orthopedic

Decision was promulgated by the trial

Hospital for 45 days. The young Allan

court only on January 29, 1991 or about

was also confined in the hospital for his

nine years later. Numerous pleadings

foot injury. Contrary to the contention of

were filed before the trial court, the

Baliwag, the decision of the trial court

appellate court and to this Court. Given

as affirmed by the Court of Appeals

the complexity of the case and the

awarded moral damages to Antonio and

amount of damages involved, 25 the

Leticia Garcia not in their capacity as

award of attorney's fee for P10,000.00 is

parents of Allan. Leticia was given moral

just and reasonable.

damages as an injured party. Allan was

IN VIEW WHEREOF, the

[G.R. No. 119756. March 18, 1999.]

FORTUNE EXPRESS,
INC., petitioner, vs. COURT
OF APPEALS, PAULIE U.
CAORONG, and minor
children YASSER KING
CAORONG, ROSE HEINNI
and PRINCE ALEXANDER,
all surnamed CAORONG,
and represented by their
mother PAULIE U.
CAORONG, respondents.

also granted moral damages as an

Decision of the respondent Court of

injured party but because of his

Appeals in CA-G.R. CV-31246 is

minority, the award in his favor has to be

AFFIRMED with the MODIFICATION

given to his father who represented him

Petitioner Fortune Express, Inc. is a bus

reducing the actual damages for

in the suit.

company in Northern Mindanao. On

hospitalization and medical fees to

November 18, 1989, one of its buses

P5,017.74. No costs. SO ORDERED.

collided with a jeepney owned by a

Finally, we find the award of

SYNOPSIS

attorney's fees justified. The complaint

Maranao which resulted in the death of

for damages was instituted by the

several passengers of the jeepney

including two Maranaos. In relation thereto,

Court of Appeals reversed the decision of

the necessary precautions would be taken,

the Philippine Constabulary of Cagayan de

the trial court.

petitioner did nothing to protect the safety

Oro warned the petitioner, through its

operations manager Diosdado Bravo, that

Hence, this petition for review.

of its passengers. Had petitioner and its

employees been vigilant, they would not

the Maranaos were planning to take

Article 1763 of the Civil Code provides that

have failed to see that the malefactors had

revenge on the petitioner by burning some

a common carrier is responsible for injuries

a large quantity of gasoline with them.

of its buses. Bravo assured them that the

suffered by a passenger on account of the

Under the circumstances, simple

necessary precautions to ensure the safety

wilful acts of other passengers, if the

precautionary measures to protect the

of lives and properties of the passengers

employees of the common carrier could

safety of passengers, such as frisking

would be taken. On November 22, 1989,

have prevented the act through the

passengers and inspecting their baggages,

three armed Maranaos who pretended to

exercise of the diligence of a good father of

preferably with non-intrusive gadgets such

be passengers, seized and burned the bus

a family. In the present case, it is clear that

as metal detectors, before allowing them on

of the petitioner at Linamon, Lanao del

because of the negligence of petitioner's

board could have been employed without

Norte while on its way to Iligan City which

employees, the seizure of the bus by

violating the passenger's constitutional

resulted in the death one of its passengers,

Manggolo and his men was made possible.

rights.

Atty. Talib Caorong. Thus the heirs of Atty.

Despite warning by the Philippine

Caorong filed before the Regional Trial

Constabulary at Cagayan de Oro that the

Court, Branch VI, Iligan City a complaint for

Maranaos were planning to take revenge

damages for breach of contract of carriage

on the petitioner by burning some of its

against the petitioner. The trial court

buses and the assurance of petitioner's

dismissed the complaint. However, the

operations manager, Diosdado Bravo, that

The decision of the Court of Appeals was

AFFIRMED.
SYLLABUS

1. CIVIL LAW; OBLIGATIONS AND

some of its buses and the assurance of

though foreseen, is inevitable. In Yobido

CONTRACTS; COMMON CARRIER;

petitioner's operation manager, Diosdado

v. Court of Appeals, we held that to be

RESPONSIBLE FOR INJURIES

Bravo, that the necessary precautions

considered as force majeure, it is

SUFFERED BY PASSENGER ON

would be taken, petitioner did nothing to

necessary that: (1) the cause of the breach

ACCOUNT OF WILFUL ACTS OF OTHER

protect the safety of its passengers. Had

of the obligation must be independent of

PASSENGERS. Art. 1763 of the Civil

petitioner and its employees been vigilant

the human will; (2) the event must be either

Code provides that a common carrier is

they would not have failed to see that the

unforeseeable or unavoidable; (3) the

responsible for injuries suffered by a

malefactors had a large quantity of

occurrence must be such as to render it

passenger on account of the wilful acts of

gasoline with them. Under the

impossible for the debtor to fulfill the

other passengers, if the employees of the

circumstances, simple precautionary

obligation in a normal manner; and (4) the

common carrier could have prevented the

measures to protect the safety of

obligor must be free of participation in, or

act through the exercise of the diligence of

passengers, such as frisking passengers

aggravation of, the injury to the creditor.

a good father of a family.

and inspecting their baggages, preferably

The absence of any of the requisites

with non-intrusive gadgets such as metal

mentioned above would prevent the obligor

detectors, before allowing them on board

from being excused from liability.

cdasia

2. ID.; ID.; ID.; CASE AT BAR. In the

present case, it is clear that because of the
negligence of petitioner's employees, the
seizure of the bus by Mananggolo and his

could have been employed without violating

the passenger's constitutional rights.

4. ID.; ID.; ID.; NOT PRESENT IN CASE

AT BAR. Thus, in Vasquez v. Court of

men was made possible. Despite warning

3. ID.; ID.; FORTUITOUS EVENT;

Appeals, it was held that the common

by the Philippine Constabulary at Cagayan

DEFINED. Art. 1174 of the Civil Code

carrier was liable for its failure to take

de Oro that the Maranaos were planning to

defines a fortuitous event as an occurrence

necessary precautions against an

take revenge on the petitioner by burning

which could not be foreseen or which

approaching typhoon, of which it was

warned, resulting in the loss of the lives of

were petitioner and its employee, not its

of indemnity for the death of passengers

several passengers. The event was

passengers. The assailant's motive was to

caused by the breach of contract of

foreseeable, and, thus, the second

retaliate for the loss of life of two Maranaos

carriage by a common carrier. Initially fixed

requisite mentioned above was not fulfilled.

as a result of the collision between

in Art. 2206 at P3,000.00, the amount of

This ruling applies by analogy to the

petitioner's bus and the jeepney in which

the said indemnity for death has through

present case. Despite the report of PC

the two Maranaos were riding.

the years been gradually increased in view

agent Generalao that the Maranaos were

Mananggolo, the leader of the group which

of the declining value of the peso. It is

going to attack its buses, petitioner took no

had hijacked the bus, ordered the

presently fixed at P50,000.00. Private

steps to safeguard the lives and properties

passengers to get off the bus as they

respondents are entitled to this amount.

of its passengers. The seizure of the bus of

intended to burn it and its driver. The

the petitioner was foreseeable and,

armed men actually allowed Atty. Caorong

therefore, was not a fortuitous event which

to retrieve something from the bus. What

would exempt petitioner from liability.

apparently angered them was his attempt

5. ID.; ID.; DAMAGES; DECEASED NOT

GUILTY OF CONTRIBUTORY
NEGLIGENCE. The petitioner contends
that Atty. Caorong was guilty of contributory
negligence in returning to the bus to

to help the driver of the bus by pleading for

his life. He was playing the role of the good
Samaritan. Certainly, this act cannot be
considered an act of negligence, let alone
recklessness.

7. ID.; ID.; ID.; ACTUAL DAMAGES. Art.

2199 provides that "except as provided by
law or by stipulation, one is entitled to an
adequate compensation only for such
pecuniary loss suffered by him as he has
duly proved." The trial court found that the
private respondents spent P30,000.00 for
the wake and burial of Atty. Caorong. Since
petitioner does not question this finding of

retrieve something. But Atty. Caorong did

6. ID.; ID.; ID.; INDEMNITY FOR DEATH.

the trial court, it is liable to private

not act recklessly. It should be pointed out

Art. 1764 of the Civil Code, in relation to

respondents in the said amount as actual

that the intended targets of the violence

Art. 2206 thereof, provides for the payment

damages.

8. ID.; ID.; ID.; MORAL DAMAGES.

quasi-contracts, the court may award

recovered when, as in the instant case,

Under Art. 2206, the "spouse, legitimate

exemplary damages if the defendant acted

exemplary damages are awarded. In the

and illegitimate descendants and

in a wanton, fraudulent, reckless,

recent case of Sulpicio Lines, Inc. v. Court

ascendants of the deceased may demand

oppressive, or malevolent manner." In the

of Appeals, we held an award of

moral damages for mental anguish by

present case, the petitioner acted in a

P50,000.00 as attorney's fees to be

reason of the death of the deceased." The

wanton and reckless manner. Despite

reasonable. Hence, the private

trial court found that private respondent

warning that the Maranaos were planning

respondents are entitled to attorney's fees

Paulie Caorong suffered pain from the

to take revenge against the petitioner by

in that amount.

death of her husband and worry on how to

burning some of its buses, and contrary to

provide support for their minor children,

the assurance made by its operations

private respondents Yasser King, Rose

manager that the necessary precautions

Heinni, and Prince Alexander. The

would be taken, the petitioner and its

petitioner likewise does not question this

employees did nothing to protect the safety

finding of the trial court. Thus, in

of passengers. Under the circumstances,

accordance with recent decisions of this

we deem it reasonable to award private

Court, we hold that the petitioner is liable to

respondents exemplary damages in the

the private respondents in the amount of

amount of P100,000.00.

P100,000.00 as moral damages for the

11. ID.; ID.; ID.; COMPENSATION FOR

LOSS OF EARNING CAPACITY. Art.
1764 of the Civil Code, in relation to Art.
2206 thereof, provides that in addition to
the indemnity for death arising from the
breach of contract of carriage by a common
carrier, the "defendant shall be liable for the
loss of the earning capacity of the
deceased, and the indemnity shall be paid

10. ID.; ID.; ID.; ATTORNEY'S FEES MAY

to the heirs of the latter." The formula

BE RECOVERED WHEN EXEMPLARY

established in decided cases for computing

9. ID.; ID.; ID.; EXEMPLARY DAMAGES.

DAMAGES ARE AWARDED. Pursuant

net earning capacity is as follows: Net

Art. 2232 provides that "in contracts and

to Art. 2208, attorney's fees may be

Earning Capacity = Life Expectancy x

death of Atty. Caorong.

[Gross Annual Income - Necessary Living

degree of diligence in the operation of one

He found that the owner of the jeepney was

Expenses]. Life expectancy is equivalent to

of its buses. Atty. Talib Caorong, whose

a Maranao residing in Delabayan, Lanao

two thirds (2/3) multiplied by the difference

heirs are private respondents herein, was a

del Norte and that certain Maranaos were

of eighty (80) and the age of the

passenger of the bus and was killed in the

planning to take revenge on the petitioner

deceased.

ambush involving said bus.

by burning some of its buses. Generalao

IcESDA

The facts of the instant case are as follows:

DECISION

MENDOZA, J :
p

This is an appeal by petition for review

on certiorari of the decision, dated July 29,
1994, of the Court of Appeals, which
reversed the decision of the Regional Trial
Court, Branch VI, Iligan City. The aforesaid
decision of the trial court dismissed the
complaint of private respondents against
petitioner for damages for breach of
contract of carriage filed on the ground that
petitioner had not exercised the required

rendered a report on his findings to Sgt.

Reynaldo Bastasa of the Philippine

Petitioner is a bus company in northern

Constabulary Regional Headquarters at

Mindanao. Private respondent Paulie

Cagayan de Oro. Upon the instruction of

Caorong is the widow of Atty. Caorong,

Sgt. Bastasa he went to see Diosdado

while private respondents Yasser King,

Bravo, operations manager of petitioner, at

Rose Heinni, and Prince Alexander are

its main office in Cagayan de Oro City.

their minor children.

Bravo assured him that the necessary

On November 18, 1989, a bus of petitioner

precautions to insure the safety of lives and

figured in an accident with a jeepney in

property would be taken.

Kauswagan, Lanao del Norte, resulting in

At about 6:45 P.M. on November 22, 1989,

the death of several passengers of the

three armed Maranaos who pretended to

jeepney, including two Maranaos. Crisanto

be passengers, seized a bus of petitioner

Generalao, a volunteer field agent of the

at Linamon, Lanao del Norte while on its

Constabulary Regional Security Unit No. X,

way to Iligan City. Among the passengers

conducted an investigation of the accident.

of the bus was Atty. Caorong. The leader of

the Maranaos, identified as one Bashier

Caorong pleading with the armed men to

Regional Trial Court, Branch VI, Iligan City.

Mananggolo, ordered the driver, Godofredo

spare the driver as he was innocent of any

In its decision, dated December 28, 1990,

Cabatuan, to stop the bus on the side of

wrong doing and was only trying to make a

the trial court dismissed the complaint,

the highway. Mananggolo then shot

living. The armed men were, however,

holding as follows:

Cabatuan on the arm, which caused him to

adamant as they repeated their warning

slump on the steering wheel. Then one of

that they were going to burn the bus along

the companions of Mananggolo started

with its driver. During this exchange

pouring gasoline inside the bus, as the

between Atty. Caorong and the assailants,

other held the passengers at bay with a

Cabatuan climbed out of the left window of

handgun. Mananggolo then ordered the

the bus and crawled to the canal on the

passengers to get off the bus. The

opposite side of the highway. He heard

passengers, including Atty. Caorong,

shots from inside the bus. Larry de la Cruz,

stepped out of the bus and went behind the

one of the passengers, saw that Atty.

bushes in a field some distance from the

Caorong was hit. Then the bus was set on

highway.

fire. Some of the passengers were able to

However, Atty. Caorong returned to the bus

to retrieve something from the overhead
rack. At that time, one of the armed men
was pouring gasoline on the head of the

pull Atty. Caorong out of the burning bus

and rush him to the Mercy Community
Hospital in Iligan City, but he died while
undergoing operation.

The fact that defendant,

through Operations Manager
Diosdado Bravo, was informed
of the "rumors" that the
Moslems intended to take
revenge by burning five buses
of defendant is established
since the latter also utilized
Crisanto Generalao as a
witness. Yet despite this
information, the plaintiffs
charge, defendant did not take
proper precautions . . . .
Consequently, plaintiffs now
fault the defendant for ignoring

driver. Cabatuan, who had meantime

The private respondents brought this suit

the report. Their position is that

regained consciousness, heard Atty.

for breach of contract of carriage in the

the defendant should have

provided its buses with security

of? Maybe so, but again,

passengers to alight and set

guards. Does the law require

perhaps not. In other words, the

fire on the bus only after all the

common carriers to install

presence of a security guard is

passengers were out of danger.

security guards in its buses for

not a guarantee that the killing

The death of Atty. Caorong was

the protection and safety of its

of Atty. Caorong would have

an unexpected and unforeseen

passengers? Is the failure to

been definitely avoided.

occurrence over which

post guards an omission of the

duty to "exercise the diligence
of a good father of the family"
which could have prevented the
killing of Atty. Caorong? To our
mind, the diligence demanded
by law does not include the
posting of security guards in
buses. It is an obligation that
properly belongs to the State.

xxx xxx xxx

Accordingly, the failure of
defendant to accord faith and
credit to the report of Mr.
Generalao and the fact that it
did not provide security to its
buses cannot, in the light of the
circumstances, be
characterized as negligence.

defendant had no control. Atty.

Caorong performed an act of
charity and heroism in coming
to the succor of the driver even
in the face of danger. He
deserves the undying gratitude
of the driver whose life he
saved. No one should blame
him for an act of extraordinary
charity and altruism which cost

Besides, will the presence of

Finally, the evidence clearly

his life. But neither should any

one or two security guards

shows that the assailants did

blame be laid on the doorstep

suffice to deter a determined

not have the least intention of

of defendant. His death was

assault of the lawless and thus

harming any of the passengers.

solely due to the willful acts of

prevent the injury complained

They ordered all the

the lawless which defendant

could neither prevent nor stop.

will have our action . . . and I'll

temporarily, . . . appellee might

be the one to settle it

be legally excused from liability.

personally," nothing concrete

Frisking of passengers picked

whatsoever was taken by

up along the route could have

appellee or its employees to

been implemented by the bus

prevent the execution of the

conductor; for those boarding at

threat. Defendant-appellee

the bus terminal, frisking could

never adopted even a single

have been conducted by him

On appeal, however, the Court of Appeals

safety measure for the

and perhaps by additional

reversed. It held:

protection of its paying

personnel of defendant-

passengers. Were there

appellee. On hindsight, the

available safeguards? Of

handguns and especially the

course, there were: one was

gallon of gasoline used by the

frisking passengers particularly

felons all of which were brought

those en route to the area

inside the bus would have been

where the threats were likely to

discovered, thus preventing the

be carried out such as where

burning of the bus and the fatal

the earlier accident occurred or

shooting of the victim.

xxx xxx xxx

WHEREFORE, in view of the
foregoing, the complaint is
hereby dismissed. For lack of
merit, the counter-claim is
likewise dismissed. No cost.

In the case at bench, how did

defendant-appellee react to the
tip or information that certain
Maranao hotheads were
planning to burn five of its
buses out of revenge for the
deaths of two Maranaos in an
earlier collision involving
appellee's bus? Except for the
remarks of appellee's
operations manager that "we

the place of influence of the

victims or their locality. If
frisking was resorted to, even

Appellee's argument that there

is no law requiring it to provide
guards on its buses and that

the safety of citizens is the duty

that frisking is not a novelty as

circumstances obtaining in the

of the government, is not well

a safety measure in our society.

case at bench that: (a) two

taken. To be sure, appellee is

Sensitive places in fact,

Maranaos died because of a

not expected to assign security

nearly all important places

vehicular collision involving one

guards on all of its buses; if at

have applied this method of

of appellee's vehicles; (b)

all, it has the duty to post

security enhancement. Gadgets

appellee received a written

guards only on its buses plying

and devices are available in the

report from a member of the

predominantly Maranao areas.

market for this purpose. It

Regional Security Unit,

As discussed in the next

would not have weighed much

Constabulary Security Group,

preceding paragraph, the least

against the budget of the bus

that the tribal/ethnic group of

appellee could have done in

company if such items were

the two deceased were

response to the report was to

made available to its personnel

planning to burn five buses of

adopt a system of verification

to cope up with situations such

appellee out of revenge; and (c)

such as the frisking of

as the "Maranao threats."

appellee did nothing

passengers boarding its buses.

Nothing, and to repeat, nothing
at all, was done by defendantappellee to protect its innocent
passengers from the danger
arising from the "Maranao
threats." It must be observed

prcd

In view of the constitutional

right to personal privacy, our
pronouncement in this decision
should not be construed as an
advocacy of mandatory frisking
in all public conveyances. What
we are saying is that given the

absolutely nothing for the

safety of its passengers
travelling in the area of
influence of the victims,
appellee has failed to exercise
the degree of diligence required
of common carriers. Hence,

appellee must be adjudged

ERRED IN

AS WELL AS

liable.

REVERSING THE

DENYING

DECISION OF THE

PETITIONER'S

REGIONAL TRIAL

MOTION FOR

WHEREFORE, the decision

COURT DATED

RECONSIDERATION

appealed from is hereby

DECEMBER 28, 1990

AND THE

REVERSED and another

DISMISSING THE

SUPPLEMENT TO

rendered ordering defendant-

COMPLAINT AS

SAID MOTION,

appellee to pay plaintiffs-

WELL AS THE

WHILE HOLDING,

appellants the following:

COUNTERCLAIM,

AMONG OTHERS,

1) P3,399,649.20 as death

AND FINDING FOR

THAT PETITIONER

indemnity;

PRIVATE

BREACHED THE

RESPONDENTS BY

CONTRACT OF

ORDERING

CARRIAGE BY ITS

PETITIONER TO PAY

FAILURE TO

THE GARGANTUAN

EXERCISE THE

Costs against defendant-

SUM OF

REQUIRED DEGREE

appellee.

P3,449,649.20 PLUS

OF DILIGENCE;

xxx xxx xxx

2) P50,000.00 and P500.00 per

appearance as attorney's fees;
and

Hence, this appeal. Petitioner contends:

(A) THAT PUBLIC
RESPONDENT

P500.00 PER
APPEARANCE AS
ATTORNEY'S FEES,

(B) THAT THE ACTS OF

THE MARANAO
OUTLAWS WERE SO

GRAVE,

DILIGENCE AS A

on the petitioner by burning some of its

IRRESISTIBLE,

COMMON CARRIER.

buses and the assurance of petitioner's

VIOLENT, AND
FORCEFUL, AS TO

The instant petition has no merit.

operation manager, Diosdado Bravo, that

the necessary precautions would be taken,

BE REGARDED

First. Petitioner's Breach of the Contract of

petitioner did nothing to protect the safety

AS CASO FORTUITO;

Carriage

of its passengers.

AND

Art. 1763 of the Civil Code provides that a

Had petitioner and its employees been

(C) THAT PUBLIC

common carrier is responsible for injuries

vigilant they would not have failed to see

RESPONDENT

suffered by a passenger on account of the

that the malefactors had a large quantity of

COURT OF APPEALS

wilful acts of other passengers, if the

gasoline with them. Under the

SERIOUSLY ERRED

employees of the common carrier could

circumstances, simple precautionary

IN HOLDING THAT

have prevented the act through the

measures to protect the safety of

PETITIONER COULD

exercise of the diligence of a good father of

passengers, such as frisking passengers

HAVE PROVIDED

a family. In the present case, it is clear that

and inspecting their baggages, preferably

ADEQUATE

because of the negligence of petitioner's

with non-intrusive gadgets such as metal

SECURITY IN

employees, the seizure of the bus by

detectors, before allowing them on board

PREDOMINANTLY

Mananggolo and his men was made

could have been employed without violating

MUSLIM AREAS AS

possible.

the passenger's constitutional rights. As

PART OF ITS DUTY

Despite warning by the Philippine

this Court intimated in Gacal v. Philippine

TO OBSERVE

Constabulary at Cagayan de Oro that the

Air Lines, Inc., a common carrier can be

EXTRA-ORDINARY

Maranaos were planning to take revenge

held liable for failing to prevent a hijacking

by frisking passengers and inspecting their

as force majeure, it is necessary that: (1)

above was not fulfilled. This ruling applies

baggages.

the cause of the breach of the obligation

by analogy to the present case. Despite the

must be independent of the human will; (2)

report of PC agent Generalao that the

the event must be either unforeseeable or

Maranaos were going to attack its buses,

unavoidable; (3) the occurrence must be

petitioner took no steps to safeguard the

such as to render it impossible for the

lives and properties of its passengers. The

debtor to fulfill the obligation in a normal

seizure of the bus of the petitioner was

manner; and (4) the obligor must be free of

foreseeable and, therefore, was not a

participation in, or aggravation of, the injury

fortuitous event which would exempt

to the creditor. The absence of any of the

petitioner from liability.

From the foregoing, it is evident that

petitioner's employees failed to prevent the
attack on one of petitioner's buses because
they did not exercise the diligence of a
good father of a family. Hence, petitioner
should be held liable for the death of Atty.
Caorong.
Second. Seizure of Petitioner's Bus not a

requisites mentioned above would prevent

Case of Force Majeure

the obligor from being excused from

The petitioner contends that the seizure of

liability.

its bus by the armed assailants was a

Thus, in Vasquez v. Court of Appeals, it

contention that the seizure of its bus by the

fortuitous event for which it could not be

was held that the common carrier was

assailants constitutes force majeure.

held liable.

liable for its failure to take the necessary

In Pilapil v. Court of Appeals, it was held

Art. 1174 of the Civil Code defines a

precautions against an approaching

that a common carrier is not liable for

fortuitous event as an occurrence which

typhoon, of which it was warned, resulting

failing to install window grills on its buses to

could not be foreseen or which though

in the loss of the lives of several

protect passengers from injuries caused by

foreseen, is inevitable. In Yobido v. Court

passengers. The event was foreseeable,

rocks hurled at the bus by lawless

of Appeals, we held that to be considered

and, thus, the second requisite mentioned

elements. On the other hand, in De

Petitioner invokes the ruling in Pilapil

v. Court of Appeals and De Guzman
v. Court of Appeals in support of its

Guzman v. Court of Appeals, it was ruled

an event to be considered force majeure) is

loss of life of two Maranaos as a result of

that a common carrier is not responsible for

lacking. As already stated, despite the

the collision between petitioner's bus and

goods lost as a result of a robbery which is

report of PC agent Generalao that the

the jeepney in which the two Maranaos

attended by grave or irresistible threat,

Maranaos were planning to burn some of

were riding. Mananggolo, the leader of the

violence, or force.

petitioner's buses and the assurance of

group which had hijacked the bus, ordered

petitioner's operations manager (Diosdado

the passengers to get off the bus as they

Bravo) that the necessary precautions

intended to burn it and its driver. The

would be taken, nothing was really done by

armed men actually allowed Atty. Caorong

petitioner to protect the safety of

to retrieve something from the bus. What

passengers.

apparently angered them was his attempt

It is clear that the cases of Pilapil and De

Guzman do not apply to the present
case. Art. 1755 of the Civil Code provides
that "a common carrier is bound to carry
the passengers as far as human care and
foresight can provide, using the utmost

Third. Deceased not Guilty of Contributory

diligence of very cautious persons, with

Negligence

due regard for all the circumstances."

Thus, we held in Pilapil and De
Guzman that the respondents therein were
not negligent in failing to take special
precautions against threats to the safety of
passengers which could not be foreseen,
such as tortious or criminal acts of third
persons. In the present case, this factor of
unforeseeability (the second requisite for

to help the driver of the bus by pleading for

his life. He was playing the role of the good
Samaritan. Certainly, this act cannot be

The petitioner contends that Atty. Caorong

considered an act of negligence, let alone

was guilty of contributory negligence in

recklessness.

returning to the bus to retrieve something.

But Atty. Caorong did not act recklessly. It
should be pointed out that the intended

Fourth. Petitioner Liable to Private

Respondents for Damages

targets of the violence were petitioner and

We now consider the question of damages

its employees, not its passengers. The

that the heirs of Atty. Caorong, private

assailant's motive was to retaliate for the

respondents herein, are entitled to recover

respondents spent P30,000.00 for the

the private respondents in the amount of

from the petitioner.

wake and burial of Atty. Caorong. Since

P100,000.00 as moral damages for the

petitioner does not question this finding of

death of Atty. Caorong.

Indemnity for Death. Art. 1764 of the Civil

Code, in relation to Art. 2206 thereof,
provides for the payment of indemnity for
the death of passengers caused by the

the trial court, it is liable to private

respondents in the said amount as actual
damages.

Exemplary Damages. Art. 2232 provides

that "in contracts and quasi-contracts, the
court may award exemplary damages if the

breach of contract of carriage by a common

Moral Damages. Under Art. 2206, the

defendant acted in a wanton, fraudulent,

carrier. Initially fixed in Art. 2206 at

"spouse, legitimate and illegitimate

reckless, oppressive, or malevolent

P3,000.00, the amount of the said

descendants and ascendants of the

manner." In the present case, the petitioner

indemnity for death has through the years

deceased may demand moral damages for

acted in a wanton and reckless manner.

been gradually increased in view of the

mental anguish by reason of the death of

Despite warning that the Maranaos were

declining value of the peso. It is presently

the deceased." The trial court found that

planning to take revenge against the

fixed at P50,000.00. Private respondents

private respondent Paulie Caorong suffered

petitioner by burning some of its buses,

are entitled to this amount.

pain from the death of her husband and

and contrary to the assurance made by its

worry on how to provide support for their

operations manager that the necessary

minor children, private respondents Yasser

precautions would be taken, the petitioner

King, Rose Heinni, and Prince

and its employees did nothing to protect the

Alexander. The petitioner likewise does not

safety of passengers. Under the

question this finding of the trial court. Thus,

circumstances, we deem it reasonable to

in accordance with recent decisions of this

award private respondents exemplary

Court, we hold that the petitioner is liable to

damages in the amount of P100,000.00.

Actual Damages. Art. 2199 provides that

"except as provided by law or by
stipulation, one is entitled to an adequate
compensation only for such pecuniary loss
suffered by him as he has duly proved."
The trial court found that the private

Attorney's Fees. Pursuant to Art. 2208,

attorney's fees may be recovered when, as

cases for computing net earning capacity is

amount as compensation for loss of

as follows:

earning capacity.

Gross Necessary

cdlex

WHEREFORE, the decision, dated July 29,

in the instant case, exemplary damages

Net Earning = Life x Annual Living

1994, of the Court of Appeals is hereby

are awarded. In the recent case of Sulpicio

Capacity Expectancy Income Expenses

AFFIRMED with the MODIFICATION that

Lines, Inc. v. Court of Appeals, we held an

petitioner Fortune Express, Inc. is ordered

award of P50,000.00 as attorney's fees to

Life expectancy is equivalent to two thirds

to pay the following amounts to private

be reasonable. Hence, the private

(2/3) multiplied by the difference of eighty

respondents Paulie, Yasser King, Rose

respondents are entitled to attorney's fees

(80) and the age of the deceased. Since

Heinni, and Prince Alexander Caorong:

in that amount.

Atty. Caorong was 37 years old at the time

Compensation for Loss of Earning

Capacity. Art. 1764 of the Civil Code, in
relation to Art. 2206 thereof, provides that
in addition to the indemnity for death
arising from the breach of contract of
carriage by a common carrier, the
"defendant shall be liable for the loss of the
earning capacity of the deceased, and the
indemnity shall be paid to the heirs of the
latter." The formula established in decided

of his death, he had a life expectancy of 28

2/3 more years. His projected gross annual

1. death indemnity in the amount of fifty

thousand pesos (P50,000.00);

income, computed based on his monthly

2. actual damages in the amount of thirty

salary of P11,385.00 as a lawyer in the

thousand pesos (P30,000.00);

Department of Agrarian Reform at the time

of his death, was P148,005.00. Allowing for
necessary living expenses of fifty percent
(50%) of his projected gross annual
income, his total earning capacity amounts
to P2,121,404.90. Hence, the petitioner is
liable to the private respondents in the said

3. moral damages in the amount of one

hundred thousand pesos (P100,000.00);
4. exemplary damages in the amount of
one hundred thousand pesos
(P100,000.00);

5. attorney's fees in the amount of fifty

1. REMEDIAL LAW; CIVIL PROCEDURE;

valid excuse for its failure to bring to court

thousand pesos (P50,000.00);

MOTIONS, RULE 22, SEC. 4 REVISED

the witnesses mentioned in said motion nor

RULES OF COURT APPLICABLE TO

exerted efforts to bring the "other

MOTION FOR OTHER HEARING DATES.

witnesses" or to take or submit their

Rule 22, Sec. 4, referring to motions "to

depositions, justify the denial by the trial

postpone trial" applies with equal force to

judge of said motion.

6. compensation for loss of earning

capacity in the amount of two million one
hundred twenty-one thousand four hundred
four pesos and ninety centavos
(P2,121,404.90); and
7. costs of suits. SO ORDERED.

motions like the one under consideration

wherein defendant PANAM moves that it be
grantedadditional hearing dates about two
months from Oct. 20, 1966 to present its
other witnesses or their depositions.
Hence, the latter can be granted only upon

[G.R. No. L-28589. February 29, 1972.]

RAFAEL ZULUETA, ET
AL., plaintifs-appellee, vs. P

showing of the materiality of the evidence

expected to be obtained and that due
diligence has been used to procure it.

3. CIVIL. LAW; CONTRACTS; COMMON

CARRIERS, BREACH OF CONTRACT;
RIGHT OF PASSENGER TO DAMAGES;
DELIBERATE ACT OF CARRIER IN
LEAVING PASSENGER. It is urged that
plaintiff is, at most, entitled to actual
damages only, because he was the first to
commit a breach of contract, for having
gone over 200 yards away from the

AN AMERICAN WORLD

2. ID.; ID.; ID.; ID.; DENIAL OF MOTION,

terminal where he could not expect to be

AIRWAYS, INC., defendant-

JUSTIFIED. That defendant PANAM

paged. But PANAM has not pointed out

appellant.

knew, as early as August 2, 1966 that its

what part of the contract has been violated

turn to present evidence would take place

thereby, apart from the fact that the award

as agreed upon about two and a half

for damages made in the decision

months later; that it has not offered any

appealed from was due, not to PANAM's

SYLLABUS

failure to so page the plaintiff, but to the

5. ID.; ID.; ID.; ID.; RIGHT TO MORAL

PANAM's employees; Miss Zulueta's

former's deliberate act of leaving at Wake

AND EXEMPLARY DAMAGES. The

having suffered shame and embarrassment

Island, and the embarrassment and

rude and rough reception plaintiff's receive

for the treatment received by her parents at

humiliation caused to him and his family in

at the hands of the airline officers; the

the airport all justify an award for moral

the presence of many other person.

abusive language and highly scornful

damages.

4. ID.; ID.; ID.; ID.; ID.; NO

CONTRIBUTORY NEGLIGENCE IN
INSTANT CASE. The failure of the
plaintiff to reboard the plane within the time
announced before the passengers
debarked therefrom did not constitute
contributory negligence for he had actually
shown up before the plane had taken off.
Despite this appearance, he was
nevertheless off-loaded intentionally and
with malice aforethought, for his
"belligerent" attitude; for his having dared
to answer the captain after being referred
to as one of "three monkeys"; and for his
categorical refusal to have his bags opened
without a search warrant.

reference to them as "monkeys" by one of

PANAM's employees; the unfriendly
attitude; the ugly stares and unkind
remarks to which they were subjected; their
being cordoned by men in uniform as if
they were subjected; their being cordoned
by men in uniform as if they were criminals;
the airline officials' refusal to allow Mr.
Zulueta to board the plane on the pretext
that he was hiding a bomb in his luggage
and their arbitrary and high-handed
decision, to leave him in Wake; Mrs.
Zulueta's having suffered a nervous
breakdown for which she was hospitalized
as a result of the insults and humiliations to
which they were exposed by the conduct of

6. ID.; ID.; ID.; ID.; ID.; REDUCTIONS IN

INSTANT CASE. To some extent,
plaintiff had contributed to the gravity of the
situation because of the extreme
belligerance with which he had reacted on
the occasion. Although PANAM agents had
taken an arrogant and over-bearing attitude
towards him, just the same, there is every
reason to believe that, in all probability,
things would not have turned out as bad as
they became had plaintiff not allowed
himself, in a way, to be dragged to the level
or plane on which PANAM's personnel had
placed themselves. In view of this
circumstance the Court deems it proper
that the moral and exemplary damages

aside from the attorney's fees awarded by

without being joined by her husband, as a

the husband must be joined as a party, by

the lower court, should be reduced.

result of a separation de facto between

reason only of his relations of affinity with

them, Mrs. Zulueta filed a motion to dismiss

her.

7. ID.; ID.; ID.; ID.; RIGHT TO MORAL

DAMAGES; FACTORS CONSIDERED.
It has been held that the discretion in fixing
moral damages lies in the trial court.
Among the factors courts take into account
in assessing moral damages are the
professional, social, political and financial
standing of the offended parties on one
hand, and the business and financial
position of the offender on the other.
8. ID.; PERSONS AND FAMILY
RELATIONS; SUITS AGAINST HUSBAND
AND WIFE; REAL PARTY IN INTEREST;
ART. 113, (2) CIVIL CODE OF THE
PHILIPPINES, NOT APPLICABLE IN
INSTANT CASE. Relying on Art. 113(2)
of the Civil Code of the Philippines which
permits the filing of a suit by the wife

the case insofar as she is concerned, after

a settlement of all her differences with
PANAM. Said provision cannot possibly
apply to a case, like the one at bar, in
which the husband is the main party in

DECISION

CONCEPCION, J :
p

interest, both as the person aggrieved and

Appeal, taken by defendant Pan American

as the administrator of the original

World Airways, Inc., from a decision of the

partnership.

Court of First Instance of Rizal, sentencing

9. ID.; ID.; ID.; ART. 113 (2) CIVIL CODE

OF THE PHILIPPINES. The suit
contemplated in Art. 113 of the Civil Code
of the Philippines, pursuant to which "the
husband must be joined in all suits by or
against the wife except . . . (2) if they have
in fact been separated for at least one
year", is one in which the wife is the real
party either plaintiff or defendant in
interest, and, in which, without being so,

said defendant to pay herein plaintiff

Rafael Zulueta, Telly Albert Zulueta and
Carolinda Zulueta "the sum of
P5,502.85, as actual damages; plus the
further sum of P1,000,000.00 as moral
damages; the further sum of P400,000.00
as exemplary damages; and attorney's fees
in the sum of P100,000.00," with the costs
against said defendant, hereinafter referred
to as PANAM, for the sake of brevity.

It is not disputed that, on October 23, 1964,

which His Honor, the Trial Judge,

announcing system and I was not paged."

the spouses Rafael Zulueta and Telly

considered properly as "an admission

At this point, the decision appealed from

Albert Zulueta hereinafter referred to as

that there was roughness, only

has the following to say:

plaintiff and Mrs. Zulueta, respectively

the degree thereof is in dispute." In any

as well as their daughter, Carolinda Zulueta

event, plaintiff testified that, having found

hereinafter referred to as Miss Zulueta

the need to relieve himself, he went to the

were passengers aboard a PANAM

men's comfort room at the terminal

plane, on Flight No. 841-23, from Honolulu

building, but found it full of soldiers, in view

to Manila, the first leg of which was Wake

of which he walked down the beach some

Island. As the plane landed on said Island,

100 yards away.

the passengers were advised that they

could disembark for a stopover of about 30
minutes. Shortly before reaching that place,
the flight was, according to the plaintiffs,
"very rough." Testifying for PANAM, its
purser, Miss Schmitz, asserted, however,
that it was "very calm"; but her notes,
Exhibit 7 prepared, upon the request of
Captain Zentner, on account of the incident
involved in this case state that there was
"unusually small amount of roughness,"

"(1) Plaintiffs were

on their way to the plane
in order to board it, but
defendant's employees
Kenneth Sitton,
defendant's airport
manager, according to

Meanwhile, the flight was called and when

plaintiffs; Wayne

the passengers had boarded the plane,

Pendleton, defendant's

plaintiff's absence was noticed. The take-

airport customer service

off was, accordingly, delayed and a search

supervisor, according to

for him was conducted by Mrs. Zulueta,

defendant - stopped them

Miss Zulueta and other persons. Minutes

at the gate. This is what

later, plaintiff was seen walking back from

the report of Wayne

the beach towards the terminal. Heading

Pendleton, the airport

towards the ramp of the plane, plaintiff

customer service

remarked, "You people almost made me

supervisor, says:

miss your flight. You have a defective

"'. . . I made

captain of the flight

"(2) Thereafter, one

no comment to the

standing on the

of defendant's employees

passenger but

ramp, midway

Mr. Sitton, according to

turned and led the

between the gate

plaintiffs; Mr. Pendleton,

group toward the

and the aircraft,

according to defendants

ramp. Just as we

and talking with the

asked plaintiffs to turn

reached the

senior maintenance

over their baggage claim

boarding gate, Mr.

supervisor and

checks. Plaintiffs did so,

Zulueta spoke to

several other

handing him four (4) claim

me for the first time

persons. The

checks.

saying, 'You people

captain motioned

almost made me

for me to join him

miss your flight.

which I

You have a

did, indicating to

defective

the Zulueta family

announcing system

that they should

and I was not

wait for a moment

paged.'

at the gate.'

"'I was about

Exh. 5

"(3) However, only

three (3) bags were
located and segregated
from the rest of the
passenger's luggage. The
items handcarried by
plaintiffs, except for
plaintiff's (overcoat) were
also brought down. These

to make some reply

handcarried items,

when I noticed the

however, were not opened

or inspected; later,

plaintiffs open the bags

plaintiffs Mrs. Zulueta and

(actually, they were

Miss Zulueta were

closed, but not locked)

permitted to reboard the

and allow defendant's

plane with their

employees to inspect

handcarried luggage; and

them. Plaintiff Rafael

when the plane took off,

Zulueta refused and

about two and a half hours

warned that defendant

later, it carried plaintiff's

could open the bags only

fourth bag, his overcoat

by force and at its peril of

and the handcarried

a law suit.

luggage.

"(4) Once three

bags had been identified,
and while the search was
going on for the fourth
bag, Mr. Sitton,
defendant's airport
manager, demanded that

"(5) Mr. Sitton,

"'Mr. Zulueta:
Passenger aboard
flight 84123
Honolulu/Manila
Sir:
We are forced to
offload you from
flight 84123 due to
the fact that you
have refused to
open your checked

defendant's manager, then

baggage for

told plaintiff that he would

Inspection as

not be allowed to proceed

requested.

to Manila or board the

plane and handed Zulueta
the following letters:
"'24 October 1964
Wake Island

During your stay on

Wake Island, which
will be for a
minimum of one
week, you will be

charged $13.30 per

"The departure of

"(8) Upon arrival at

day for each

the plane was delayed for

Manila, Mrs. Zulueta

member of your

about two hours.

demanded of defendant's

party.
K. Sitton
Airport Manager,
Wake Island
Pan American
World Airways, Inc.'
Exh. D.
"(6) All this
happened in plain view
and within earshot of the
other passengers on the
plane, many of whom
were Filipinos who knew
plaintiffs;

"(7) Though
originally all three plaintiffs
had been off loaded,
plaintiff requested that his
wife and daughter be
permitted to continue with
the flight. This was
allowed but they were
required to leave the three
bags behind.
Nevertheless, the plane

Manila office that it reroute plaintiff Rafael

Zulueta to Manila at the
earliest possible time, by
the fastest route, and at its
expense; defendant
refused; so plaintiffs were
forced to pay for his ticket
and to send him money as
he was without funds.
"(9) On October 27,

did fly with the plaintiff's

1964, plaintiff Zulueta

fourth bag; it was found

finally arrived at Manila,

among all other

after spending two nights

passengers' luggage

at Wake, going back to

flown to Manila upon the

Honolulu, and from

plane's arrival here.

Honolulu flying thru Tokyo

to Manila.

wife and after he was found at the beach

and (7) "in not granting defendant's

21, 1964, plaintiffs

and his intention to be left behind at Wake

counterclaim of attorney's fees and

demanded that defendant

was temporarily thwarted he did everything

expenses of litigation."

reimburse them in the

calculated to compel Pan American

sum of P1,505,502.85 for

personnel to leave him behind"; (4) "in

damages; but defendants

accepting as true plaintiff Rafael Zulueta's

refused to do so; hence

claim of what occurred when he arrived at

this action."

the terminal after he was found at the

"(10) On December

In its brief, PANAM maintains that the trial

court erred: (1) "in not granting defendant
additional hearing dates (not a
postponement) for the presentation of its
other witnesses"; (2) "in assuming it to be
true that the reason plaintiff Rafael Zulueta
did not come aboard when the passengers
were reboarded was that he had gone to
the beach to relieve himself"; (3) "in not
holding that the real reason why plaintiff
Rafael Zulueta did not reboard the plane,
when the announcement to do so was
made, was that he had a quarrel with his

beach"; (5) "in not holding that the captain

was entitled to an explanation for Zulueta's

PANAM's first assignment of error refers to

the denial of its motion, dated October 20,
1966, that it "be granted other hearing
dates about two months from today so as
to be able to present defendant's other
witnesses or their depositions."

failure to reboard and not having received a

It appears that the complaint in this case

reasonable explanation and because of

was filed on September 30, 1965. It was

Zulueta's irrational behavior and refusal to

amended on December 1, 1965, and again

have his bags examined, the captain had

on April 14, 1966. PANAM answered the

the right and duty to leave Zulueta behind";

second amended complaint on May 6,

(6) "in condemning the defendant to pay

1966. After a pre-trial conference, held on

plaintiffs P5,502.85 as actual damages

May 28, 1966, the case was set for hearing

plus the further sum of P1,000,000.00 as

on June 1, 2 and 3, 1966. By subsequent

moral damages, and the further sum of

agreement of the parties, the hearing was,

P400,000.00 as exemplary damages, and

on June 3, 1966, reset for August 1, 2 and

attorneys' fees in the sum of P100,000.00";

3, 1966. Plaintiffs rested their case on

August 2, 1966, whereupon it was agreed

counsel announced that his witnesses were

hearing dates about two months from today

that PANAM's witnesses would be

Marshall Stanley Ho, Kenneth Sitton,

so as to be able to present defendant's

presented "at a later date," months later,

Michael Thomas, Wayne S. Pendleton,

other witnesses or their depositions." Upon

because they would "come from far-flung

Capt. Robert Zentner and Miss Carol

denial of this motion, PANAM made an

places like Wake Island, San Francisco,

Schmitz.

offer of the testimony it expected from one

Seattle and it will take time to arrange for

their coming here." Accordingly the case
was reset for October 17, 18 and 19, 1966,
at 8: 30 a.m. On motion of the plaintiffs, the
trial scheduled for October 17 was
cancelled, without any objection on the part
of PANAM; but, to offset said action,
additional hearings were set for October 18
and 19, in the afternoon, apart from those
originally set in the morning of these dates.
Before the presentation of PANAM's
evidence, in the morning of October 18,
1966, plaintiffs' counsel asked for the
names of the former's witnesses, so that
those not on the witness stand could be
excluded from the courtroom. PANAM's

The defense then proceeded to introduce

the testimony of said witnesses, and
consumed therefor the morning and
afternoon of October 18 and the morning of
October 19. Upon the conclusion, that

Edgardo Gavino, an unnamed

meteorologist, either Sue Welby and/or
Helga Schley, and John C. Craig, Ida V.
Pomeroy, Herman Jaffe, Gerry Cowles and
Col. Nilo de Guia.

morning, of the testimony of the last

His Honor, the Trial Judge, did not commit

witness for the defense, its counsel asked

a reversible error in denying said motion of

that it "be given an opportunity to present

October 20, 1966. PANAM knew, as early

our other witnesses who are not present

as August 2, 1966, that its turn to present

today, at the convenience of the Court."

evidence would take place, as agreed

The motion was denied, but, said counsel

upon, about two (2) months and a half later,

sought a reconsideration and the court

or on October 17, 18 and 19, 1966.

gave PANAM a last chance to present its

PANAM has not offered any valid excuse

"other witnesses" the next day, October 20.

for its failure to bring to court the witnesses

Instead of doing so, PANAM filed a written

mentioned in said motion, despite the

motion reiterating its prayer for "other

assurance given by its counsel, on August

2, 1966, that the defense would "spare no

official records, no turbulence in the flight

the remarks made by the plaintiff to Mrs.

effort to bring them here," or, if they could

from San Francisco to Honolulu, on which

Zulueta and Miss Zulueta when they and

not be brought due to circumstances

the testimony of Carol Schmitz had

other members of the searching party

beyond PANAM's control, to "submit their

touched; (2) that Ida V. Pomeroy and John

found him in the early morning of October

deposition." The records do not show

C. Craig would say that the passengers

23, 1964 - were merely cumulative in

thatany such effort to bring the

were advised not to go beyond the terminal

nature.

aforementioned witnesses had been

and that the stopover would be for about 30

exerted. The defense has not even tried to

minutes only, on which duration of the

explain why the deposition of said

stopover Miss Schmitz had, also testified,

witnesses was not taken. What is worse,

as she could have similarly testified on said

the proffered explanation that the six (6)

advice, had it been given; (3) that either

persons who testified for the defense were

Helga Schley or Sue Welby would narrate

4. Requisites of motion to

believed, by defense counsel, to be enough

the sympathy with which Mrs. Zulueta was

postpone trial for absence

for the three (3) days of October set for the

allegedly treated during the flight from

of evidence. A motion

reception of his evidence indicates

Wake Island to Manila, which is not

to postpone a trial on the

that no effort whatsoever had been made

particularly relevant or material in the case

ground of absence can be

either to bring the "other witnesses" or to

at bar; (4) that Herman Jaffe, Gerry Cowles

granted only upon affidavit

take and submit their depositions.

and Nilo de Guia were, also, expected to

showing the materiality of

corroborate the testimony of Capt. Zentner;

evidence expected to be

and (5) that Edgardo Gavino was expected

obtained, and that due

to corroborate Michael Thomas regarding

diligence has been used

Besides, the testimony allegedly expected

of said other witnesses for the defense
namely: (1) that there was, according to

Then, again, PANAM did not comply with

section 4 of Rule 22 of the Rules of Court,
reading:
"SEC.

to procure it. But if the

Island because he had quarreled with his

underscores the artificious nature of

adverse party admits the

wife, as contended by PANAM's counsel.

PANAM's contention.

facts to be given in

Fourthly, there is absolutely no direct

evidence, even if he
objects or reserves the
right to object to their
admissibility, the trial must
not be postponed."

Although this provision refers to motions "to

postpone trial," it applies with equal force to
motions like the one under consideration,
there being no plausible reason to
distinguish between the same and a motion
for postponement owing to the "absence of
evidence."

The latter contention, however, is utterly

devoid of merit. To begin with, plaintiff's
testimony about what he did upon reaching
the beach is uncontradicted. Secondly,
other portions of his testimony such as,
for instance, that the flight was somewhat
rough, shortly before reaching Wake
Island; that there were quite a number of
soldiers in the plane and, later, in the
terminal building; that he did not voluntarily
remain in Wake Island, but was "off-loaded"
by PANAM's agent therein are borne out

The second, third and fourth assignments

by the very evidence for the defense.

of error are interrelated. They refer to the

Thirdly, PANAM's efforts to show that

question whether the reason why plaintiff

plaintiff had decided to remain in the Island

went to the beach was to relieve himself, as

because he had quarreled with Mrs.

testified to by him, or to remain in Wake

Zulueta which is ridiculous merely

evidence about said alleged quarrel.

Nobody testified about it. Counsel for the
defense has, in effect, merely concluded
that there must have been such quarrel
because, when the searching party located
plaintiff, he according to Stanley Ho
was "shouting in a loud tone of voice"
not at his wife, but "towards his wife and
daughter," who headed said party and to
which the words spoken were addressed,
according to plaintiff. Capt. Zentner said
that plaintiff was "angry with them" Mrs.
Zulueta and Miss Zulueta who
Michael Thomas affirmed were saying "I
am sorry, I am sorry"; whereas, Wayne S.
Pendleton declared that Gavino told him
that this "seems to stem from a domestic
issue" between Mr. and Mrs. Zulueta.

Surely, this alleged surmise, not even by

had resumed its flight to Manila, thereby

concern over the situation; that the "man"

Pendleton, but by Gavino who was not

exposing his presence to the full view of

said he was with the State Department;

placed on the witness stand cannot be

those who were looking for him.

that he, his wife and their children, who

taken as competent evidence that plaintiff

had quarreled with his wife, apart from the
circumstance that such quarrel if it took
place and there is absolutely no evidence
or ofer to prove that anything had
transpired between husband and wife
before reaching Wake Island which may
suggest a misunderstanding between them
does not warrant jumping at the
conclusion that plaintiff had decided to
remain in the Island, for he would gain

Then, again, the words uttered by him as

he saw the search party and approached
the plane "You people almost made me
miss your flight. You have a defective
announcing system and I was not paged"
and the "belligerent" manner
according to Captain Zentner in which
he said it revealed his feeling of distress at
the thought that the plane could have left
without him.

were on board the aircraft, would not want

to continue the flight unless the missing
person was found; that the "man"
expressed fear of a "bomb," a word he
used reluctantly, because he knew it is
violative of a Federal law when said at the
wrong time; that when plaintiff came,
Zentner asked him. "why did you not want
to get on the airplane?"; that plaintiff then
became "very angry" and spoke to him "in
a way I have not been spoken to in my

The second, third and fourth assignments

whole adult life"; that the witness explained:

of error are thus clearly untenable.

"I am Captain of the aircraft and it is my

going to the beach was to hide from Mrs.

In connection with the fifth assignment of

duty to see to the flight's safety"; that he

and Miss Zulueta and PANAM's personnel,

error, PANAM's witness, Captain Zentner,

(Zentner) then told Wayne Pendleton

so that he may be left in the Island, he,

testified that, while he was outside the

PANAM's Customer Service Supervisor

surely, would not have walked back from

plane, waiting for the result of the search, a

to get plaintiff's "bags off the plane to

the beach to the terminal, before the plane

"man" approached him and expressed

verify . . . about the bomb"; that PANAM's

nothing thereby.
Needless to say, if plaintiff's purpose in

airport manager (K. Sitton) "got three bags

know the informant's name. Neither did the

The trial court did not believe the testimony

of Mr. Zulueta"; that his fourth bag could

captain know whether the informant was

of Captain Zentner and rejected the theory

not be located despite a thorough search;

really working for or in the State

of the defense, for the following reasons:

that believing that it must have been left

Department. In other words, there was

behind, in Honolulu, "we took off"; and that

nothing absolutely nothing to justify

he (Zentner) would not have done so had

the belief that the luggage of the missing

he thought it was still aboard.

person should be searched, in order to

The lower court did not err in giving no

credence to this testimony.
Indeed, Captain Zentner did not explain
why he seemingly assumed that the
alleged apprehension of his informant was
justified. He did not ask the latter whether
he knew anything in particular about
plaintiff herein, although some members of
the crew would appear to have a notion
that plaintiff is an impresario. Plaintiff
himself intimated to them that he was well
known to the U.S. State Department.
Apparently, Captain Zentner did not even

ascertain whether there was a bomb in it;

that, otherwise, his presence in the aircraft
would be inimical to its safety; and that,
consequently, he should be off-loaded.

"(1) The defendant

had contracted to
transport plaintiff from
Honolulu to Manila. It was
its legal obligation to do
so, and it could be
excused from complying
with the obligation only, if

In fact, PANAM has not given the name of

the passenger had

that "man" of the State Department.

refused to continue with

Neither has the defense tried to explain

the trip or it had become

such omission. Surely, PANAM's records

legally or physically

would have disclosed the identity of said

impossible, without the

"man," if he were not a mere figment of the

carrier's fault, to transport

imagination. The list of passengers has

him.

been marked as Exh. A, and yet PANAM

has not pointed out who among them is the
aforementioned "man".

"(2) In this case, it

is plain that Zulueta was

desirous of continuing with

passenger or luggage to

10). In a later report,

the trip. Although

continue the flight.

Zentner admitted, 'The

defendant's witnesses

However, Capt. Zentner

decision to leave Mr.

claim that Zulueta refused

admitted on his testimony

Zulueta and his locked

to board the plane, its own

that 'his drunkenness . . .

luggage in Wake was

evidence belies this claim.

was of no consequence in

mine and mine alone.'

The letter, Exh. 'D', shows

my report; (it) . . . had

(Exh. 9). Defendant's

that it was defendant who

nothing to do with his

airport customer service

off-loaded Zulueta; not

being belligerent and

supervisor, W.S.

Zulueta who resisted from

unfriendly in his attitude

Pendleton, reported that:

continuing the trip. In his

towards me and the rest of

testimony before the

the members of the crew.'

Court, Capt. Zentner,

The written report of Capt.

defendant's pilot, said that

Zentner made in transit

if a passenger voluntarily

from Wake to Manila

left the plane, the term

'intimated he might

used would be

possibly continue;' but

'desistance,' but the term

'due to drinking,

'off-load' means that it is

belligerent attitude, he

the decision of the

was off-loaded along with

Captain not to allow the

his locked bags.' (Exh.

"'After the
search for Mr.
Zulueta had
continued for
almost 20 minutes
and it was apparent
that he was not to
be found in the
terminal building or
immediate vicinity, I
proceeded to the

parking lot and

walking somewhat

ramp. Just as we

picked up my jeep

ahead of the

reached the

to continue the

others. Mr. Gavino

boarding gate, Mr.

search in more

remarked to me

Zulueta spoke to

remote areas. Just

privately that the

me for the first time

as I was getting

trouble seemed to

saying, 'You people

underway, a small

have stemmed from

almost made me

group of persons

some domestic

miss your flight.

approached from

difference between

You have a

the direction of the

the passenger and

defective

beach and a voice

his wife who was

announcing system

called out that the

not at his side and

and was not

passenger had

returning with him

paged.'

been found. Having

to the gate.

parked the jeep

again, I walked
toward the group
and was met by
PAA fleetserviceman E.
Gavino who was

"'On hearing
Mr. Gavino's
remark, I made no
comment to the
passenger but
turned and led the
group toward the

Exh. 5.
"Evidently, these could not
have been the words of a
man who refused to board
the plane.
"(3) There was no
legal or physical

impossibility for defendant

employees really believed

to transport plaintiff

that Zulueta had planted a

twenty minutes

Zulueta from Wake to

bomb in one of the bags

later while an

Manila, as it had

they would not have flown

attempt was being

contracted to do.

on until they had made

made to locate

Defendant claims that the

sure that the fourth bag

another piece of

safety of its craft and of

had been left behind at

Mr. Zulueta's

the other passengers

Honolulu or until enough

luggage, his

demanded that it inspect

time had lapsed for the

daughter, Carolinda

Zulueta's luggage and

bomb to have been

approached her

when he refused to allow

exploded, since

father and wanted

inspection that it had no

presumably it had to have

to get some clothes

recourse but to leave him

been set to go off before

from one of the

behind. The truth is that,

they reached Manila.

suitcases. Mr.

knowing that of plaintiff's

four pieces of luggage,
one could still have been
as it was aboard,
defendant's plane still flew
on to Manila. Surely, if the
defendant's pilot and

"At any rate, it was

quite evident that Zulueta
had nothing to hide; for
the report of defendant's
witness, Mr. Stanley L. E.
Ho, U.S. Marshall on
Wake, has this to say:

"'About

Zulueta asked the

undersigned if it
was alright if he
opened the
suitcases and get
the necessary
clothes. To this I

stated he was free

for, as the Captain

what they call it, as

to open his luggage

admitted in his testimony,

soon as they

and obtain

he did so because he

arrived there, there

whatever he

knew that it would be a

was a man who

needed. Mr.

week before another

subsequently

Zulueta opened a

plane would come in for

identified himself as

suitcase and took

Manila (t.s.n., 18 Oct.

Kenneth Sitton. He

the dress for her

1966, pp. 59-62) when

identified himself as

then boarded the

plaintiff did come, he was

the Airport

aircraft.'

met and treated roughly

Manager of Wake

by defendant's manager

Island. He did not

Sitton. Here is what

ask me what

Zulueta testified to:

happened, was I

Exh. 2B.
"(4) What is evident
to the Court is that
defendant acted in a
manner deliberately
calculated to humiliate
and shame plaintiffs.
Although the plane was
held up to wait for plaintiff

"'Q. When
you saw your wife
and daughter what
happened? A.
Then I started
going towards the
airplane. At the
ramp, I do not know

sick, he looked at
me and said, what
in the hell do you
think you are? Get
on that plane. Then
I said, what right
have you to talk to
me that way, I am a

paying passenger,

I said, 'I don't have

he brought three

Do not treat me

to get on that

baggages and said,

this. And this

plane.' After a

open them up. I

started the

prolonged

said, to begin with,

altercation, and

discussion, he said,

there is one

then he said, do

give me your

baggage missing

you know you held

baggage tags and I

and that missing

up the plane? And I

gave him four

bag is my bag.

answered, this is

baggage tickets or

Then I said you

not my fault, I was

tags. I did not

cannot make me

sick. Did it not

realize what he was

open these

occur to you to ask

up to until finally, I

baggages unless

me how I feel; then

saw people coming

you are United

he said get on that

down the airplane

States customs

plane.

and police cars

authorities and

arrived and people

when I arrive in the

were coming down

Philippines they

the ramp. I gave

can be opened by

him the four

the Philippine

baggage tags and

Customs

a few minutes late,

authorities. But an

"'Q. What
happened? A.
we started
discussing kept
saying, 'You get on
that plane' and then

Airport Manager

open this bag but

and said 'open the

cannot make me

give me a search

bag' and I said,

open my bags

warrant and then I

show the warrant of

unless you do

asked, who is the

arrest and do all

exactly the same

Chief of Police, and

the checking and

thing to all the

he said, 'I am the

the discussion kept

passengers. Open

Chief of Police,'

on going, and

the bags of all the

then I said how can

finally, I said, look,

other passengers

you be the Chief of

my fourth bag is

and I will open my

Police and Airport

missing and he

bag.

Manager and then

said, 'I don't give a

he started to talk

damn.' People at

about double

the time were

compensation and

surrounding us and

by this time we

staring at us and

were both

also the

quarreling and he

passengers. My

was shouting and

wife and daughter

so with me. Then

all along had been

there was a man

made to sit on a

who came around

railing and this man

"'Q. What
did he say: A.
He just kept on
saying, open your
bag, and I drew up
my hands and said,
if you want, you
open yourself or
give me a search
warrant and I shall

screaming and

and handcarried

further stated, your

looking at my wife

items of my wife

wife and daughter

and daughter. Then

and daughter ever

can continue their

he said, will you

offered to bring

flight but you will

pull these three

back these items to

not go to this flight

monkeys out of

the plane, until I

and we will charge

here? And then I

demanded that one

you $13.30 a day.

said, will you send

of the defendants

Then I said, who

my wife and

should help my wife

are you to tell all

daughter up to the

and daughter which

these things, and

plane which he did.

he did. And then

he answered, I am

However, they have

one man told me,

the manager. I said,

come down in their

because you

put it in writing,

slippers and when

refused to open

then left and in a

they were allowed

your bag, 'we shall

few minutes he

to return to the

hold you here in

came back and

plane none of the

Wake Island.' And

handed me this

defendant's

then I asked, are

letter (witness

personnel who had

we under arrest?

referring to Exhibit

brought down the

and the man

D).'

overcoats, shoes

answered, no. And

 t.s.n., August 1,
1966, pp. 15-21.
"Anyone in Zulueta's
position would have
reached the same way if
he had had a sense of
dignity. Evidently, angered
by Zulueta's reaction,
irked by the delay he had
caused them, defendant's
employees decided to
teach him a lesson by
forcing him to open his

Zulueta what his character

the supervisor that

and reputation are, before

Zulueta was 'the

demanding that he open

impresario'; but they

the bags; if it had done so,

persisted in their

Miss Schmitz, the purser,

demands.

and Col. Villamor would

have vouched for
plaintiffs; for Miss Schmitz
believed she had flown
before with the Zuluetas
and they had been very
nice people.
"(b) Worse,

"(c) Defendant
never identified the
alleged State Department
men who reportedly
approached the Captain
and expressed fear about
a bomb, nor did they
confront him if he

bags when there was no

defendant's manager

existed with Mr. Zulueta

justifiable reason to do so:

Sitton admits that Zulueta

despite Mr. Zulueta's

had told him who he was

request.

"(a) Defendant did

not make any attempt to
inquire from any
passenger or even the
crew who knew Mr.

and his social position in

Manila; still he insisted
that the bags be opened.
Moreover, some
passengers had informed

"(d) Defendant did

not take any steps to put
the luggage off-loaded far
from its passengers and

plane, a strange

"(f) Defendant's

allow Zulueta to continue

procedure if it really

manager himself took

unless he opened and

believed the luggage

Zulueta and his off-loaded

allowed inspection of the

contained a bomb;

bags, in his own car, from

bags by them;

"(e) Defendant
continued with the flight
knowing one bag
Zulueta's bag himself
had not been located and
without verifying from

the terminal building to the

hotel, which is also
inconsistent with a serious
belief that the luggages
contained a bomb;
"(g) Defendant

"(h) Defendant
completely changed his
tone and behavior towards
the Zuluetas after the
plane had arrived at
Manila and the Captain

Honolulu if the bag had

knew that while Zulueta's

learned that its Manila

been found there, nor

bags were on the ground,

manager, Mr.

even advising Honolulu

he had opened one of

Oppenheimer, was a

that a bag possibly

them with the permission

friend of Zulueta;

containing a bomb had

and in the presence of the

been left there, again an

U.S. Marshall in order to

inexplicable procedure if

enable his daughter to get

they sincerely believed

a dress from the bag;

that Zulueta had planted a

nothing suspicious was

bomb;

seen; still, defendant

insisted on refusing to

"(i) Meantime, the

attitude of Pan American
towards the Zuluetas
caused other passengers
to resent Zulueta (See
reports of Stewardesses

and of Captain Zentner,

subject of stares, remarks

witness, U.S. Marshall Ho,

Exhs. 7, 8, 9 and 10).

and whispered comments

who said that:

'Many passengers were

from the passengers and

angry towards the

other persons around the

'missing passenger,' says

plane.

Miss Schmitz's report. 'A

few inquisitive PA
(passengers) one
woman quite rudely stared
once we were airborne
and left Mr. Zulueta
behind . . . anyway I told
the woman to sit down
so did Helga so did the
man near her,' saw Miss
Schmitz's personal notes.
This confirms the
testimony of plaintiffs that,
all the while the search
and discussions were
going on, they were the

"'Ten
minutes later, Mr.
Zulueta asked if he

"(j) Defendant did

could talk to his

not allow plaintiff Zulueta

wife who was

to board the plane at all,

aboard the aircraft.

even though it was aware

I then accompanied

that some of his personal

him and as we got

belongings, such as his

to the ramp, we

overcoat were on the

met Mr. Sitton who

plane. Plaintiffs so

stated he would

testified; and though

summon Mrs.

defendant's witness Mr.

Zulueta from the

Sitton denied it, claiming

aircraft. Mr. Sitton

that plaintiff was always

summoned Mrs.

free to board the plane,

Zulueta and she

this denial is belied by the

met her husband at

report of defendant's own

the foot of the

ramp. Mr. Zulueta

then asked his wife

acknowledge any

breach of contract, for having gone over

and himself to

obligation to transport Mr.

200 yards away from the terminal, where

which I replied I

Zulueta back to Manila

he could not expect to be paged. But,

was not concerned

and forcing Mrs. Zulueta

PANAM has not pointed out what part of

what he had to say.'

to send her husband

the contract has been violated thereby,

$100.00 for pocket money

apart from the fact that the award for

and pay for his fare from

damages made in the decision appealed

Wake to Manila, thru

from was due, not to PANAM's failure to so

Honolulu and Tokyo."

page the plaintiff, but to the former's

Exh. 2-B.
"(k) Finally, to add
further humiliation and
heap indignity on plaintiffs,
when Mrs. Zulueta arrived
at Manila and appealed to
defendant's Manila
manager, Mr.

Upon a review of the record, We are

satisfied that the foregoing findings of His
Honor, the Trial Judge, are supported by a
preponderance of the evidence.

deliberate act of leaving him at Wake

Island, and the embarrassment and
humiliation caused to him and his family in
the presence of many other persons. Then,
also, considering the flat nature of the

Oppenheimer, to see to it

The last two (2) assignments of error are

terrain in Wake Island, and the absence of

that her husband got back

mere consequences of those already

buildings and structures, other than the

as soon as possible and

disposed of, and, hence, need no extended

terminal and a modest "hotel," as well as

was made as comfortable

discussion.

plaintiff's need of relieving himself, he had

It is urged, however, that plaintiff is, at

to find a place beyond the view of the

most, entitled to actual damages only,

people and near enough the sea to wash

because he was the first to commit a

himself up before going back to the plane.

as possible, at
defendant's expense, Mr.
Oppenheimer refused to

It is next argued that plaintiff was, also,

Zentner) said: "what in the hell do you think

guilty of contributory negligence for failure

you are?" in a way he had "not been

quasi-contracts, the

to reboard the plane within the 30 minutes

spoken to" in his "whole adult life," in the

damages for which the

announced before the passengers

presence of the passengers and other

obligor who acted in good

debarked therefrom. This might have

PANAM employees; for having responded

faith is liable shall be

justified a reduction of the damages, had

to a command of either Zentner or Sitton to

those that are the natural

plaintiff been unwittingly left by the plane,

open his (plaintiff's) bags, with a

and probable

owing to the negligence of PANAM

categorical refusal and a challenge for

consequences of the

personnel, or even, perhaps, wittingly, if he

Zentner or Sitton to open the bags without

breach of the obligation,

could not be found before the plane's

a search warrant therefor, thereby making

and which the parties

departure. It does not, and can not have

manifest the lack of authority of the

have foreseen or could

such justification in the case at bar, plaintiff

aforementioned representative of PANAM

have reasonably foreseen

having shown up before the plane had

to issue said command and exposing him

at the time the obligation

taken off, and he having been off-

to ridicule before said passengers and

was constituted.

loaded intentionally and with malice

employees. Besides, PANAM's own

aforethought, for his "belligerent" attitude,

witness and employee, Wayne Pendleton,

according to Captain Zentner; for having

testified that the plane could not take off at

dared despite his being one of "three

4:30, as scheduled, because "we were still

monkeys," the term used by Captain

waiting for two (2) local passengers."

Zentner to refer to the Zulueta family to

answer him back when he (Captain

Article 2201 of our Civil Code reads:

"In contracts and

"In case of fraud,

bad faith, malice or
wanton attitude, the
obligor shall be
responsible for all
damages which may be
reasonably attributed to

the non-performance of

they exercised all the

"ART. 2217. Moral damages

the obligation."

diligence of a good father

include physical suffering,

of a family in the selection

mental anguish, fright, serious

and supervision of their

anxiety, besmirched reputation,

employees."

wounded feelings, moral shock,

This responsibility applies to common

carriers. Pursuant to Article 1759 of the
same Code:
"ART.
1759. Common carriers
are liable for the death of
or injuries to passengers
through the negligence or

Referring now to the specific amounts to

damages due to plaintiffs herein, We note
that the sum of P5,502.85 awarded to them
as actual damages is not seriously
disputed by PANAM.

willful acts of the former's

As regards the moral and exemplary

employees, although such

damages claimed by the plaintiffs, our Civil

employees may have

Code provides:

acted beyond the scope of

their authority or in
violation of the orders of
the common carriers.

"ART. 21. Any person who

wilfully causes loss or injury to
another in a manner that is
contrary to morals, good

"This liability of the

customs or public policy shall

common carriers does not

compensate the latter for the

cease upon proof that

damage."

social humiliation, and similar

injury. Though incapable of
pecuniary computation, moral
damages may be recovered if
they are the proximate result of
the defendant's wrongful act or
omission."
"ART. 2229. Exemplary or
corrective damages are
imposed, by way of example or
correction for the public good,
in addition to the moral,
temperate liquidated or
compensatory damages."

"ART. 2232. In contracts and

employees (who turning to Mrs. Zulueta

airport all these justify an award for

quasi-contracts, the court may

and Miss Zulueta remarked, "will you pull

moral damages resulting from mental

award exemplary damages if

these three monkeys out of here?"); the

anguish, serious anxiety, wounded feelings,

the defendant acted in a

unfriendly attitude, the ugly stares and

moral shock, and social humiliation thereby

wanton, fraudulent, reckless,

unkind remarks to which plaintiffs were

suffered by plaintiffs.

oppressive, or malevolent

subjected, and their being cordoned by

manner."

men in uniform as if they were criminals,

The records amply establish plaintiffs' right

to recover both moral and exemplary
damages. Indeed, the rude and rough
reception plaintiff received at the hands of
Sitton or Captain Zentner when the latter
met him at the ramp ("what in the hell do
you think you are? Get on that plane"); the
menacing attitude of Zentner or Sitton and
the supercilious manner in which he had
asked plaintiff to open his bags ("open your
bag," and when told that a fourth bag was
missing, "I don't give a damn"); the abusive
language and highly scornful reference to
plaintiffs as monkeys by one of PANAM's

while plaintiff was arguing with Sitton; the

airline officials' refusal to allow plaintiff to
board the plane on the pretext that he was
hiding a bomb in his luggage and their
arbitrary and high-handed decision to leave
him in Wake; Mrs. Zulueta's having
suffered a nervous breakdown for which
she was hospitalized as a result of the
embarrassment, insults and humiliations to
which plaintiffs were exposed by the
conduct of PANAM's employees; Miss
Zulueta's having suffered shame,
humiliation and embarrassment for the
treatment received by her parents at the

"The relation
between carrier and
passenger involves
special and peculiar
obligations and duties,
differing in kind and
degree, from those of
almost every other legal or
contractual relation. On
account of the peculiar
situation of the parties the
law implies a promise and
imposes upon the carrier
the corresponding duty of
protection and courteous
treatment. Therefore, the

carrier is under the

public duty. Neglect or

conduct on the part of

absolute duty of protecting

malfeasance of the

employees towards a

his passengers from

carrier's employees

passenger gives the latter

assault or insult by himself

naturally could give

an action for damages

or his servants."

ground for an action for

against the carrier."

"A contract to
transport passengers is

damages.
"Passengers do not

"A carrier of
passengers is as much

quite different in kind and

contract merely for

bound to protect them

degree from any other

transportation. They have

from humiliation and insult

contractual relation. And

a right to be treated by the

as from physical injury. . . .

this, because of the

carrier's employees with

It is held in nearly all

relation which an air-

kindness, respect,

jurisdictions, if not

carrier sustains with the

courtesy and due

universally, that a carrier

public. Its business is

consideration. They are

is liable to a passenger for

mainly with the travelling

entitled to be protected

humiliation and mental

public. It invites people to

against personal

suffering caused by

avail of the comforts and

misconduct, injurious

abusive or insulting

advantages it offers. The

language, indignities and

language directed at such

contract of air carriage,

abuses from such

passenger by an

therefore, generates a

employees. So it is, that

employee of the carrier."

relation attended with a

any rude or discourteous

from abusive language by

and justified by the circumstances. It has

conductor uses language

the carrier's agents, or by

been held that the discretion in fixing moral

to a passenger which is

others if under such

damages lies in the trial court. Among the

calculated to insult,

circumstances that the

factors courts take into account in

humiliate, or wound the

carrier's agents should

assessing moral damages are the

feelings of a person of

have known about it and

professional, social, political and financial

ordinary feelings and

prevented it. Some of the

standing of the offended parties on one

sensibilities, the carrier is

courts have mentioned the

hand, and the business and financial

liable, because the

implied duty of the carrier,

position of the offender on the other.

contract of carriage

arising out of the contract

impliedly stipulates for

of carriage, not to insult

decent, courteous, and

the passenger, or permit

respectful treatment, at

him to be insulted, and

hands of the carrier's

even where no mention is

employees."

made of this basis for

"Where a

"The general rule

that a carrier owes to a
passenger the highest
degree of care has been

liability, it is apparent that

it is the ground upon
which recovery is
allowed."

In comparatively recent cases in this

jurisdiction, also involving breach of
contract of air carriage, this Court awarded
the amount of P25,000, where plaintiff, a
first-class passenger in an Air France plane
from Manila to Rome was, in Bangkok,
forced by the manager of the airline
company to leave his first class
accommodation after he was already
seated because there was a white man

held to include the duty to

The question is whether the award of

who, the manager alleged, had a "better

protect the passenger

P1,000,000 as moral damages was proper

right" to the seat ; the amount of P200,000,

where plaintiffs, upon confirmation of their

cases had the agents of the carrier acted

unknown to PANAM's agents were such

reservation in defendant airline's flight from

with the degree of malice or bad faith of

as to put him in no mood to be

Tokyo to San Francisco were issued first

those of PANAM in the case at bar, or

understanding of the shortcomings of

class tickets, but upon arrival in Tokyo were

caused to the offended passengers a

others; and that said PANAM agents

informed that there was no accommodation

mental suffering arising from injuries to

should have first inquired, with an open

for them in the first class compartment and

feelings, fright and shock due to abusive,

mind, about the cause of his delay, instead

told they could not go unless they took the

rude and insulting language used by the

of assuming that he was at fault and of

tourist class in both of which cases the

carrier's employees in the presence and

taking an arrogant and overbearing

Court found the airline companies to have

within the hearing of others, comparable to

attitude, as if they were dealing with an

acted in bad faith, or in a wanton, reckless

that caused by PANAM's employees to

inferior. Just the same, there is every

and oppressive manner, justifying likewise

plaintiffs herein.

reason to believe that, in all probability,

the award of exemplary damages.

To some extent, however, plaintiff had

things would not have turned out as bad as

they became had he not allowed himself, in

None of the passengers involved in said

contributed to the gravity of the situation

cases was, however, off-loaded, much less

because of the extreme belligerence with

in a place as barren and isolated as Wake

which he had reacted on the occasion. We

Island, with the prospect of being stranded

do not overlook the fact that he justly

there for a week. The aforementioned

believed he should uphold and defend his

In view of this circumstance, We feel that

passengers were merely constrained to

dignity and that of the people of this

the moral and exemplary damages

take a tourist or third class accommodation

country; that the discomfort, the difficulties,

collectible by the plaintiffs should be

in lieu of the first class passage they were

and, perhaps, the ordeal through which he

reduced to one-half of the amounts

entitled to. Then, also, in none of said

had gone to relieve himself which were

awarded by the lower court, that is, to

a way, to be dragged to the level or plane

on which PANAM's personnel had placed
themselves.

P500,000 for moral damages, and

the off-loading of plaintiff Rafael Zulueta,

the advisability of denying her motion to

P200,000 for exemplary damages, aside

the husband and administrator of the

dismiss, for her own protection.

from the attorney's fees which should,

conjugal partnership, with the funds of

likewise, be reduced to P75,000.

which the PANAM had been paid under

On April 22, 1971, Mrs. Zulueta filed a

motion alleging that she had, for more than
two (2) years, been actually living
separately from her husband, plaintiff
Rafael Zulueta, and that she had decided
to settle separately with PANAM and had
reached a full and complete settlement of
all her differences with said defendant, and
praying, accordingly, that this case be
dismissed insofar as she is concerned.
Required to comment on said motion,
PANAM expressed no objection thereto.

said contract; that the action was filed by

the plaintiffs as a family and the lower court
had awarded damages to them as such
family; that, although PANAM had
questioned the award of damages, it had
not raised the question whether the lower
court should have specified what portion of
the award should go to each plaintiff; that
although Mr. and Mrs. Zulueta had, for
sometime, been living separately, this has
been without judicial approval; that Mrs.
Zulueta may not, therefore, bind the
conjugal partnership or settle this case

Upon the other hand, plaintiff prayed that

separately; and that the sum given by

the motion be denied, upon the ground that

PANAM to Mrs. Zulueta is believed to be

the case at bar is one for damages for

P50,000, which is less than 3-1/2% of the

breach of a contract of carriage, owing to

award appealed from, thereby indicating

Pursuant to a resolution, dated June 10,

1971, deferring action on said motion to
dismiss until the case is considered on the
merits. We now hold that the motion should
be, as it is hereby denied. Indeed, "(t)he
wife cannot bind the conjugal partnership
without the husband's consent, except in
cases provided by law," and it has not been
shown that this is one of the cases so
provided. Article 113 of our Civil Code,
pursuant to which " (t)he husband must be
joined in all suits by or against the wife,
except: . . . (2) If they have in fact been
separated for at least one year . . ."
relied upon by PANAM does not warrant
the conclusion drawn therefrom by the
latter. Obviously the suit contemplated in
subdivision (2) of said Article 113 is one in
which the wife is the real party either

plaintiff or defendant in interest, and, in

attorney's fees, apart from P5,502.85 as

which, without being so, the husband must

actual damages, and without prejudice to

be joined as a party, by reason only of his

deducting the aforementioned sum of

relation of affinity with her. Said provision

P50,000 already paid to Mrs. Zulueta, the

cannot possibly apply to a case, like the

decision appealed from is hereby affirmed

one at bar, in which the husband is the

in all other respects, with the costs against

main party in interest, both as the person

said defendant.

and paid the amount due to the latter,

under the contract, with funds of the
conjugal partnership, the damages
recoverable for breach of such contract
belongs to said partnership.

[G.R. No. 162467. May 8, 2009.]

is

petition

for

review

on certiorari 1 under Rule 45 of the 1997

Rules of Civil Procedure of the 29 October
2003 Decision of the Court of Appeals and
the 26 February 2004 Resolution of the

AND

The facts of the case are not disputed.

Del Monte Philippines, Inc. (Del Monte)

BROKERAGE

contracted petitioner Mindanao Terminal

SERVICE,

and Brokerage Service, Inc. (Mindanao

INC., petitioner, vs.

Terminal), a stevedoring company, to load

PHOENIX

and stow a shipment of 146,288 cartons of

ASSURANCE

COMPANY

OF

YORK/MCGEE

plaintiffs shall recover from defendant, Pan

INC.,respondent.

&

NEW

fresh green Philippine bananas and 15,202

CO.,

cartons of fresh pineapples belonging to

Del Monte Fresh Produce International, Inc.
(Del Monte Produce) into the cargo hold of

American World Airways, Inc., the sums of

exemplary damages, and P75,000 as

us

TERMINAL

MINDANAO

Modified, as above stated, in the sense that

P500,000 as moral damages, P200,000 as

Before

reconsideration.

of the conjugal partnership. Moreover, he

into the contract of carriage with PANAM

same court denying petitioner's motion for

principally aggrieved and as administrator

having acted in this capacity in entering

TINGA, J :

DECISION

the vessel M/V Mistrau. The vessel was

docked at the port of Davao City and the

goods were to be transported by it to the

report, it was stated that 16,069 cartons of

was to load the cargoes on board the M/V

port of Inchon, Korea in favor of consignee

the banana shipment and 2,185 cartons of

Mistrau under the direction and supervision

Taegu Industries, Inc. Del Monte Produce

the pineapple shipment were so damaged

of the ship's officers, who would not have

insured the shipment under an "open cargo

that they no longer had commercial value.

accepted the cargoes on board the vessel

policy" with private respondent Phoenix

Assurance

Company

of

New

York

(Phoenix), a non-life insurance company,

and private respondent McGee & Co. Inc.
(McGee), the underwriting manager/agent
of Phoenix.

Del Monte Produce filed a claim under the

open cargo policy for the damages to its
shipment.

McGee's

Marine

Claims

Insurance Adjuster evaluated the claim and

recommended that payment in the amount
of $210,266.43 be made. A check for the

Mindanao Terminal loaded and stowed the

recommended amount was sent to Del

cargoes

Monte Produce; the latter then issued a

aboard

the M/V

Mistrau. The

vessel set sail from the port of Davao City

subrogation

and arrived at the port of Inchon, Korea. It

McGee.

was then discovered upon discharge that

some of the cargo was in bad condition.
The Marine Cargo Damage Surveyor of
Incok Loss and Average Adjuster of Korea,
through its representative Byeong Yong
Ahn (Byeong), surveyed the extent of the
damage of the shipment. In a survey

receipt to

Phoenix

and

TCaAHI

and signed the foreman's report unless

they were properly arranged and tightly
secured to withstand voyage across the
open

seas.

Accordingly,

Mindanao

Terminal cannot be held liable for whatever

happened to the cargoes after it had
loaded and stowed them. Moreover, citing
the survey report, it was found by the RTC
that the cargoes were damaged on account
of

typhoon

which M/V

Mistrau had

encountered during the voyage. It was

Phoenix and McGee instituted an action for

further held that Phoenix and McGee had

damages against Mindanao Terminal in the

no cause of action against Mindanao

Regional Trial Court (RTC) of Davao City,

Terminal

Branch 12. After trial, the RTC, in a

services were contracted by Del Monte, a

decision dated 20 October 1999, held that

distinct

the only participation of Mindanao Terminal

Produce, had no contract with the assured

because
corporation

the
from

latter,
Del

whose
Monte

Del Monte Produce. The RTC dismissed

argument that the damage in the cargoes

stowage of the cargoes onboard M/V

the

was the result of improper stowage by

Mistraumaking it liable for damages; and,

counterclaim of Mindanao Terminal in the

Mindanao

on

whether Phoenix and McGee has a cause

amount of P83,945.80 as actual damages

Mindanao Terminal, as the stevedore of the

of action against Mindanao Terminal under

and P100,000.00 as attorney's fees. The

cargo, the duty to exercise extraordinary

Article 2176 of the Civil Code on quasi-

actual

as

diligence in loading and stowing the

delict.

reimbursement for the expenses incurred

cargoes. It further held that even with the

questions have to be answered: first,

by Mindanao Terminal's lawyer in attending

absence

whether Phoenix and McGee have a cause

the hearings in the case wherein he had to

between Mindanao Terminal and Del Monte

of

travel all the way from Metro Manila to

Produce, the cause of action of Phoenix

second, whether Mindanao Terminal, as a

Davao City.

and McGee could be based on quasi-delict

stevedoring company, is under obligation to

under Article 2176 of the Civil Code.

observe the same extraordinary degree of

complaint

and

damages

awarded

were

awarded

the

Phoenix and McGee appealed to the Court

Terminal.

of

It

imposed

contractual

relationship

of Appeals. The appellate court reversed

Mindanao Terminal filed a motion for

and set aside the decision of the RTC in its

reconsideration, which

29 October 2003 decision. The same court

Appeals

ordered Mindanao Terminal to pay Phoenix

2004 resolution.

and

petition for review.

McGee

"the

total

amount

of

$210,265.45 plus legal interest from the

filing of the complaint until fully paid and
attorney's fees of 20% of the claim". It
sustained

Phoenix's

and

McGee's

denied

in

the
its

Hence,

Court
26
the

of

February
present

Mindanao Terminal raises two issues in the

case at bar, namely: whether it was
careless and negligent in the loading and

To

action

resolve

against

the

petition,

Mindanao

three

Terminal;

diligence in the conduct of its business as

required by law for common carriers and
warehousemen; and

third,

whether

Mindanao Terminal observed the degree of

diligence required by law of a stevedoring
company.
We agree with the Court of Appeals that
the complaint filed by Phoenix and McGee
against Mindanao Terminal, from which the

present case has arisen, states a cause of

cargoes belonging to Del Monte Produce.

acted merely as a labor provider in the

action. The present action is based on

Despite

contractual

case at bar. There is no specific provision

quasi-delict, arising from the negligent and

relationship between Del Monte Produce

of law that imposes a higher degree of

careless

the

and Mindanao Terminal, the allegation of

diligence than ordinary diligence for a

cargoes belonging to Del Monte Produce.

negligence on the part of the defendant

stevedoring company or one who is

Even assuming that both Phoenix and

should be sufficient to establish a cause of

charged only with the loading and stowing

McGee have only been subrogated in the

action arising from quasi-delict.

of cargoes. It was neither alleged nor

loading

and

stowing

of

rights of Del Monte Produce, who is not a

party to the contract of service between
Mindanao Terminal and Del Monte, still the
insurance carriers may have a cause of

the

absence

of

The resolution of the two remaining issues

is determinative of the ultimate result of this
case.

TCcIaA

proven

by

Mindanao

Phoenix

and

Terminal

was

McGee

that

bound

by

contractual stipulation to observe a higher

degree of diligence than that required of a

action in light of the Court's consistent

Article 1173 of the Civil Code is very clear

good father of a family. We therefore

ruling that the act that breaks the contract

that if the law or contract does not state the

conclude

may be also a tort. In fine, a liability for tort

degree of diligence which is to be observed

Mindanao

may arise even under a contract, where tort

in the performance of an obligation then

observe ordinary diligence only in loading

is that which breaches the contract. In the

that which is expected of a good father of a

and stowing the cargoes of Del Monte

present case, Phoenix and McGee are not

family

Produce aboard M/V Mistrau.

suing for damages for injuries arising from

required. Mindanao Terminal, a stevedoring

the breach of the contract of service but

company which was charged with the

from the alleged negligent manner by

loading and stowing the cargoes of Del

which Mindanao Terminal handled the

Monte Produce aboard M/V Mistrau, had

or

ordinary

diligence

shall

be

that

following

Terminal

Article

was

1173,

required

to

The Court of Appeals erred when it cited

the case of Summa Insurance Corporation
v. CA and Port Service Inc. in imposing a
higher degree of diligence, on Mindanao

Terminal

in

loading

and

stowing

the

When Semirara inspected the shipment at

under Article 1733 of the Civil

cargoes. The case of Summa Insurance

house, it discovered that the bundle of PC

Code and Section 3(b) of the

Corporation v. CA, which involved the issue

8 U blades was missing. From those facts,

Warehouse

of whether an arrastre operator is legally

the Court observed:

respectively. Being

liable for the loss of a shipment in its

custody and the extent of its liability, is
inapplicable to the factual circumstances of
the case at bar. Therein, a vessel owned by
the National Galleon Shipping Corporation
(NGSC) arrived at Pier 3, South Harbor,
Manila, carrying a shipment consigned to
the order of Caterpillar Far East Ltd. with
Semirara Coal Corporation (Semirara) as
"notify party". The shipment, including a
bundle of PC 8 U blades, was discharged
from the vessel to the custody of the private
respondent, the exclusive arrastre operator
at the South Harbor. Accordingly, three
good-order cargo receipts were issued by
NGSC, duly signed by the ship's checker
and a representative of private respondent.

custodian

. . . The relationship therefore

between

the

that

goods

and to turn them over to the

existing

consignee

the

take good care of the goods

examined. This relationship is

to

the

arrastre operator's duty is to

the arrastre operator must be

akin

of

Law,

discharged from a vessel, an

between the consignee and

much

Receipts

party

or

entitled

to

their

possession. (Emphasis

owner of shipped goods and

supplied)

the common carrier, or that

between a depositor and a
warehouseman.
performance

In
of

obligations, an

the
its
arrastre

operator should observe the

same degree of diligence as
that required of a common
carrier

and

warehouseman as enunciated

There is a distinction between an arrastre

and a stevedore. Arrastre, a Spanish word
which

refers

to

hauling

of

cargo,

comprehends the handling of cargo on the

wharf or between the establishment of the
consignee or shipper and the ship's tackle.
The responsibility of the arrastre operator

lasts until the delivery of the cargo to the

warehouseman for it does not store goods

if the evidence touching a disputed fact is

consignee.

usually

for profit. The loading and stowing of

equally balanced, or if it does not produce

performed by longshoremen. On the other

cargoes would not have a far reaching

a just, rational belief of its existence, or if it

hand, stevedoring refers to the handling of

public ramification as that of a common

leaves the mind in a state of perplexity, the

the cargo in the holds of the vessel or

carrier and a warehouseman; the public is

party holding the affirmative as to such fact

between the ship's tackle and the holds of

adequately protected by our laws on

must fail.

the

the

contract and on quasi-delict. The public

stevedore ends upon the loading and

policy considerations in legally imposing

stowing of the cargo in the vessel.

upon

vessel.

The

The

service

is

responsibility

of

It is not disputed that Mindanao Terminal

was performing purely stevedoring function
while

the

private

respondent

in

the Summa case was performing arrastre

common

warehouseman

carrier

higher

or

degree

of

diligence is not present in a stevedoring

outfit which mainly provides labor in loading
and stowing of cargoes for its clients.

ACaTIc

We adopt the findings of the RTC, which

are not disputed by Phoenix and McGee.
The Court of Appeals did not make any
new findings of fact when it reversed the
decision of the trial court. The only
participation of Mindanao Terminal was to
load the cargoes on board M/V Mistrau. It

function. In the present case, Mindanao

In the third issue, Phoenix and McGee

was not disputed by Phoenix and McGee

Terminal, as a stevedore, was only charged

failed

of

that the materials, such as ropes, pallets,

with the loading and stowing of the cargoes

evidence that

had

and cardboards, used in lashing and

from the pier to the ship's cargo hold; it was

acted negligently. Where the evidence on

rigging the cargoes were all provided

never the custodian of the shipment of Del

an issue of fact is in equipoise or there is

by M/V Mistrau and these materials meets *

Monte Produce. A stevedore is not a

any doubt on which side the evidence

industry standard.

common carrier for it does not transport

preponderates the party having the burden

goods or passengers; it is not akin to a

of proof fails upon that issue. That is to say,

to

prove

by

preponderance

Mindanao

Terminal

It was further established that Mindanao

Terminal and concurred in by the Chief

stow the shipments of fresh banana and

Terminal loaded and stowed the cargoes of

Officer of M/V Mistrau after they were

pineapple of Del Monte Produce aboard

Del

satisfied that the cargoes were properly

the M/V Mistrau. How and where it should

loaded.

load and stow a shipment in a vessel is

Monte

Produce

aboard

the M/V

Mistrau in accordance with the stowage

plan, a guide for the area assignments of
the goods in the vessel's hold, prepared by
Del Monte Produce and the officers of M/V
Mistrau. The loading and stowing was done
under the direction and supervision of the
ship officers. The vessel's officer would
order the closing of the hatches only if the
loading was done correctly after a final
inspection. The said ship officers would not
have accepted the cargoes on board the
vessel if they were not properly arranged
and tightly secured to withstand the voyage
in open seas. They would order the
stevedore to rectify any error in its loading
and stowing. A foreman's report, as proof
of work done on board the vessel, was
prepared by the checkers of Mindanao

Phoenix and McGee relied heavily on the

deposition of Byeong Yong Ahn and on the
survey

report of

the

damage

to

the

cargoes. Byeong, whose testimony was

refreshed by the survey report, found that
the cause of the damage was improper
stowage due to the manner the cargoes
were arranged such that there were no
spaces between cartons, the use of
cardboards as support system, and the use
of small rope to tie the cartons together but
not by the negligent conduct of Mindanao
Terminal

in

loading

and

stowing

the

cargoes. As admitted by Phoenix and

McGee in their Comment before us, the
latter is merely a stevedoring company
which was tasked by Del Monte to load and

wholly dependent on the shipper and the

officers of the vessel. In other words, the
work of the stevedore was under the
supervision of the shipper and officers of
the vessel. Even the materials used for
stowage, such as ropes, pallets, and
cardboards, are provided for by the vessel.
Even the survey report found that it was
because of the boisterous stormy weather
due to the typhoon Seth, as encountered
by M/V Mistrau during its voyage, which
caused the shipments in the cargo hold to
collapse, shift and bruise in extensive
extent. Even the deposition of Byeong was
not supported by the conclusion in the
survey report that:
CAUSE OF DAMAGE

xxx xxx xxx

From the above facts and our
survey results, we are of the
opinion that damage occurred
aboard

the

carrying

vessel

during

sea

transit,

being

caused by ship's heavy rolling

and pitching under boisterous
weather

while

proceeding

from 1600 hrs on 7th October

to 0700 hrs on 12th October,
1994 as described in the sea
protest.

However, the Court finds no basis for the

Manila. But there is no showing that

award of attorney's fees in favor of

Phoenix and McGee made a false claim

petitioner. None of the circumstances

against Mindanao Terminal resulting in the

enumerated in Article 2208 of the Civil

protracted trial of the case necessitating

Code exists. The present case is clearly

the incurrence of expenditures.

not an unfounded civil action against the

plaintiff as there is no showing that it was
instituted for the mere purpose of vexation
or injury. It is not sound public policy to set
a premium to the right to litigate where
such right is exercised in good faith, even if
erroneously. Likewise, the RTC erred in
awarding P83,945.80 actual damages to
Mindanao

Terminal.

Although

actual

aE

WHEREFORE, the petition is GRANTED.

The decision of the Court of Appeals in CAG.R. CV No. 66121 is SET ASIDE and the
decision of the Regional Trial Court of
Davao City, Branch 12 in Civil Case No.
25,311.97

is

hereby REINSTATED

MINUS the awards of P100,000.00 as

attorney's fees and P83,945.80 as actual
damages.SO ORDERED.

As it is clear that Mindanao Terminal had

expenses were incurred by Mindanao

duly exercised the required degree of

Terminal in relation to the trial of this case

diligence in loading and stowing the

in Davao City, the lawyer of Mindanao

cargoes, which is the ordinary diligence of

Terminal incurred expenses for plane fare,

a good father of a family, the grant of the

hotel accommodations and food, as well as

BRITISH AIRWAYS, petition

petition is in order.

other miscellaneous expenses, as he

er, vs. COURT OF APPEAL

attended the trials coming all the way from

S, GOP MAHTANI, and

[G.R. No. 121824. January 29, 1998.]

PHILIPPINE

might have been diverted to London. After

The Court of Appeals' ruling regarding the

AIRLINES, respondents.

waiting for his luggage for one week,

actual value of the luggage is a

petitioner finally advised him to file a claim.

question of fact, a finding not reviewable by

Back in the Philippines, private respondent

the Supreme Court. The Court cannot

filed with the trial court his complaint for

agree with the dismissal of the third-

damages and attorney's fees against

complaint. The contractual relationship

petitioner. Petitioner contends that that

between petitioner and respondent PAL is

private respondent did not have a

one of agency, the former being the

cause of action against it. Petitioner

principal, since it was the one which issued

likewise filed a third-party complaint

the confirmed ticket, and the latter the

against respondent PAL as the non-

agent. Since the instant petition was based

transfer of his luggage was due to the

on breach of contract of carriage, private

latter's late arrival in Hongkong.

respondent can only sue petitioner alone,

Respondent PAL disclaimed any liability.

and not respondent PAL, since the latter

The trial court rendered its decision in

was not a party to the contract. However,

favor of the private respondent. The third-

respondent PAL is not relieved from any

party complaint against third-party

liability due to any ofits negligent acts. It is

defendant PAL was dismissed for

but logical, fair and equitable to allow

lack of cause of action. Petitioner appealed

petitioner to sue respondent PAL for

to the Court of Appeals which, however,

indemnification, if it is proven that the

affirmed the trial court's findings in toto.

latter's negligence was the proximate

SYNOPSIS
Private respondent decided to visit his
relative in Bombay, India. Since petitioner
had no direct flights from Manila to
Bombay, private respondent had to take a
flight to Hongkong via PAL, and upon
arrival in Hongkong he had to take a
connecting flight to Bombay on board the
petitioner. Prior to his departure, private
respondent checked in at respondent PAL's
counter in Manila his two pieces of luggage
confident that upon reaching Hongkong,
the same would be transferred to the
petitioner's flight bound for Bombay. When
private respondent arrived in Bombay he
discovered that his luggage was missing
and that upon inquiry from the petitioner's
representative, he was told that the same

cause of private respondent's unfortunate

2. ID.; ID.; ID.; DAMAGES,

4. ID.; ID.; ID.; LIABILITY NOT LIMITED

experience, instead of totally absolving

LIABILITY OF AIRLINE FOR MISPLACED

BY ARTICLE 22(1) OF THE WARSAW

respondent PAL from any liability.

LUGGAGE. In the instant case, it is

CONVENTION. Admittedly, in a

apparent that the contract of carriage was

contract of air carriage a declaration by the

between Mahtani and BA. Moreover, it is

passenger ofa higher value is needed to

indubitable that his luggage never arrived

recover a greater amount. (Article

in Bombay on time. Therefore, as in a

22[1] of the Warsaw Convention). American

number of cases we have assessed the

jurisprudence provides that an air carrier is

airlines' culpability in the form of damages

not liable for the loss of baggage in an

for breach of contract involving misplaced

amount in excess of the limits specified in

luggage.

the tariff which was filed with the proper

SYLLABUS
1. CIVIL LAW; COMMON CARRIERS;
AIRLINE'S CONTRACT OF CARRIAGE;
TYPES. The nature of an airline's
contract of carriage partakes of two types,
namely: a contract to deliver a cargo or
merchandise to its destination and a
contract to transport passengers to their
destination. A business intended to serve
the travelling public primarily, it is imbued
with public interest, hence, the law
governing common carriers imposes an
exacting standard. Neglect or malfeasance
by the carrier's employees could
predictably furnish bases for an action for
damages.

cDTCIA

3. ID.; ID.; ID.; ID.; ID.; CLAIMANT MUST

SATISFACTORILY PROVE
EXISTENCE OF FACTUAL BASIS. In
determining the amount of compensatory
damages in this kindof cases, it is vital that
the claimant satisfactorily prove during the
trial the existence of the factual basis of the
damages and its causal connection to
defendant's acts.

authorities, such tariff being binding on the

passenger regardless of the passenger's
lack of knowledge thereof or assent
thereto. This doctrine is recognized in this
jurisdiction. Notwithstanding the foregoing,
we have, nevertheless, ruled against blind
reliance on adhesion contracts where the
facts and circumstances justify that they
should be disregarded.

5. ID.; ID.; ID.; BENEFITS OF LIMITED

the earliest opportunity, lest silence when

question of fact, thus, a finding not

LIABILITY, SUBJECT TO WAIVER; CASE

there is opportunity to speak may operate

reviewable by thisCourt.

AT BAR. Benefits of limited liability are

as a waiver of objections. BA has precisely

subject to waiver such as when the air

failed in this regard. To compound matters

carrier failed to raise timely objections

for BA, its counsel failed, not only to

during the trial when questions and

interpose a timely objection, but even

answers regarding the actual claims and

conducted his own cross-examination as

damages sustained by the passenger were

well.

asked. Given the foregoing postulates, the

inescapable conclusion is that BA had
waived the defense of limited liability when
it allowed Mahtani to testify as to the actual
damages he incurred due to the
misplacement of his luggage, without any
objection. It is a well-settled doctrine that
where the proponent offers evidence
deemed by counsel ofthe adverse party to
be inadmissible for any reason, the latter
has the right to object. However, such right
is a mere privilege which can be waived.
Necessarily, the objection must be made at

7. ID.; ACTIONS; THIRD-PARTY

COMPLAINT, NATURE. In Firestone
Tire and Rubber Company of the
Philippines v. Tempengko, we expounded
on the nature of a third-party complaint
thus: "The third-party complaint is,

6. REMEDIAL LAW; EVIDENCE; FACTUAL

therefore, a procedural device whereby a

FINDINGS OF THE TRIAL COURT,

'third party' who is neither a party nor privy

AFFIRMED BY

to the act or deed complained of by the

THE COURT OF APPEALS, ENTITLED

plaintiff may be brought into the case with

TO GREAT RESPECT. Needless to say,

leave of court, by the defendant who acts

factual findings of the trial court, as

as third-party plaintiff to enforce against

affirmed by the Court of Appeals, are

such third-party defendant a right for

entitled to great respect. Since the actual

contribution, indemnity, subrogation or any

value of the luggage involved

other relief, in respect of the plaintiff's

appreciation ofevidence, a task within the

claim. The third-party complaint is actually

competence of the Court of Appeals, its

independent of and separate and distinct

ruling regarding the amount is assuredly a

from the plaintiff's complaint. Were it not for

this provision of the Rules of Court, it would

have to be filed independently and

contract of air transportation was

have been cognizant of the well-settled rule

separately from the original complaint by

exclusively between Mahtani and BA, the

that an agent is also responsible for any

the defendant against the third-party. But

latter merely endorsing the Manila to

negligence in the performance of its

the Rules permit defendant to bring in a

Hongkong leg of the former's journey to

function and is liable for damages which

third-party defendant or so to speak, to

PAL, as its subcontractor or agent. In fact,

the principal may suffer by reason of its

litigate his separate cause of action in

the fourth paragraph of the

negligent act. Hence,

respect of plaintiff's claim against a third

"Conditions of Contracts" of the ticket

the Court of Appeals erred when it opined

party in the original and principal case with

issued by BA to Mahtani confirms that the

that BA, being the principal, had no

the object of avoiding circuitry of action and

contract was one of continuous air

cause ofaction against PAL, its agent or

unnecessary proliferation of law suits

transportation from Manila to Bombay.

sub-contractor. Also, it is worth mentioning

and of disposing expeditiously in one

"4. . . . carriage to be performed hereunder

that both BA and PAL are members of the

litigation the entire subject matter arising

by several successive carriers is regarded

International Air Transport Association

from one particular set of facts.

as a single operation." Prescinding from

(IATA), wherein member airlines are

the above discussion, it is undisputed that

regarded as agents of each other in the

PAL, in transporting Mahtani from Manila to

issuance of the tickets and other matters

Hongkong, acted as the agent of BA.

pertaining to their relationship. Therefore,

8. CIVIL LAW; COMMON CARRIERS;

AIRLINE'S CONTRACT OF CARRIAGE;
CARRIAGE PERFORMED BY
SUCCESSIVE CARRIER, REGARDED AS

9. ID.; ID.; ID.; ID.; ID.; AGENT

SINGLE OPERATION; CARRIER ISSUING

RESPONSIBLE FOR ANY NEGLIGENCE

TICKET CONSIDERED THE PRINCIPAL

AND LIABLE FOR DAMAGES WHICH

WHILE THE OTHERS ARE SUB-

THE PRINCIPAL MAY SUFFER.

CONTRACTORS OR AGENTS. The

Parenthetically, the Court ofAppeals should

in the instant case, the contractual

relationship between BA and PAL is
one of agency, the former being the
principal, since it was the one which issued
the confirmed ticket, and the latter the

agent.
10. REMEDIAL LAW; ACTIONS; THIRDPARTY COMPLAINT; PROCEDURAL
REMEDY AVAILABLE TO PRINCIPAL
CARRIER FOR CLAIMS FILED BY
PASSENGER FOR LOSS OFLUGGAGE IN
AGENT CARRIER. Since the instant
petition was based on
breach of contract of carriage, Mahtani can
only sue BA alone, and not PAL, since the
latter was not a party to the contract.
However, this is not to say that PAL is
relieved from any liability due to any of its
negligent acts. In China Air Lines,
Ltd. v. Court ofAppeals, while not exactly in
point, the case, however, illustrates the
principle which governs this particular
situation. In that case, we recognized that
a carrier (PAL), acting as an
agent of another carrier, is also liable for its
own negligent acts or omission in the

DECISION

performance of its duties. Accordingly, to

deny BA the procedural remedy of filing a
third-party complaint against PAL for the
purpose of ultimately determining who was

ROMERO, J :
p

primarily at fault as between them, is

In this appeal by certiorari,

without legal basis. After all, such

petitioner British Airways (BA) seeks to set

proceeding is in accord with the doctrine

aside the

against multiplicity of cases which would

decision of respondent Court of Appeals pr

entail receiving the same or similar

omulgated on September 7, 1995, which

evidence for both cases and enforcing

affirmed the award of damages and

separate judgments therefor. It must be

attorney's fees made by the Regional

borne in mind that the purpose of a third-

Trial Court of Cebu, 7th Judicial Region,

party complaint is precisely to avoid delay

Branch 7, in favor of private respondent

and circuity of action and to enable the

GOP Mahtani as well as the dismissal of its

controversy to be disposed of in one suit. It

third-party complaint against Philippine

is but logical, fair and equitable to allow BA

Airlines (PAL).

to sue PAL for indemnification, if it is

The material and relevant facts are as

proven that the latter's negligence was the

follows:

proximate cause of Mahtani's unfortunate

experience, instead of totally absolving PAL
from any liability.

IHaCDE

prLL

On April 16, 1989, Mahtani decided to visit

his relatives in Bombay, India. In
anticipation of his visit, he obtained the

services of a certain Mr. Gumar to prepare

Prior to his departure, Mahtani checked in

BA and Mr. Gumar before the trial court,

his travel plans. The latter, in turn,

at the PAL counter in Manila his two

docketed as Civil Case No. CEB-9076.

purchased a ticket from BA where the

pieces of luggage containing his clothings

following itinerary was indicated:

and personal effects, confident that upon

CARRIER FLIGHT DATE TIME ST

ATUS
"MANILA MNL PR 310Y 16

reaching Hongkong, the same would be

transferred to the BA flight bound for
Bombay.

On September 4, 1990, BA filed its answer

with counter claim to the complaint raising,
as special and affirmative defenses, that
Mahtani did not have a cause of action
against it. Likewise, on November 9, 1990,

Unfortunately, when Mahtani arrived in

BA filed a third-party complaint against PAL

Bombay he discovered that his luggage

alleging that the reason for the non-

was missing and that upon inquiry from the

transfer of the luggage was due to the

BA representatives, he was told that the

latter's late arrival in Hongkong, thus

BOMBAY BOM BA 19M 23

same might have been diverted to London.

leaving hardly any time for the proper

APR. 0840 OK

After patiently waiting for his luggage for

transfer of Mahtani's luggage to the BA

one week, BA finally advised him to file a

aircraft bound for Bombay.

APR. 1730 OK
HONGKONG HKG BA 20M 16
APR. 2100 OK

HONGKONG HKG PR 311Y

MANILA MNL"

Since BA had no direct flights from Manila

to Bombay, Mahtani had to take a flight to
Hongkong via PAL, and upon arrival in
Hongkong he had to take a connecting
flight to Bombay on board BA.

claim by accomplishing the "Property

Irregularity Report."

On February 25, 1991, PAL filed its answer

to the third-party complaint, wherein it

Back in the Philippines, specifically on

disclaimed any liability, arguing that there

June 11, 1990, Mahtani filed his complaint

was, in fact, adequate time to transfer the

for damages and attorney's fees against

luggage to BA facilities in Hongkong.

Furthermore, the transfer of the luggage to

Hongkong authorities should be considered

damages and twenty percent

costs against defendant-

as transfer to BA.

(20%) of the total amount

appellant. SO ORDERED."

After appropriate proceedings and trial, on

March 4, 1993, the trial court rendered its
decision in favor of Mahtani, the dispositive
portion of which reads as follows:
"WHEREFORE, premises
considered, judgment is
rendered for the plaintiff and
against the defendant for which
defendant is ordered to pay
plaintiff the sum of Seven
Thousand (P7,000.00) Pesos
for the value of the two (2) suit
cases; Four Hundred U.S.
($400.00) Dollars representing
the value of the
contents of plaintiff's luggage;
Fifty Thousand (P50,000.00)
Pesos for moral and actual

imposed against the defendant

for attorney's fees and
costs of this action.
The Third-Party Complaint
against third-party defendant
Philippine Airlines is
DISMISSED for
lack of cause of action.
SO ORDERED."

BA is now before us seeking the

reversal of the Court of Appeals' decision.
In essence, BA assails the
award of compensatory damages and
attorney's fees, as well as the
dismissal of its third-party complaint
against PAL.
Regarding the first assigned issue, BA
asserts that the award of compensatory

Dissatisfied, BA appealed to

damages in the separate sum of P7,000.00

the Court of Appeals, which however,

for the loss of Mahtani's two

affirmed the trial court's findings. Thus:

pieces ofluggage was without basis since

"WHEREFORE, in view of all

the foregoing considerations,
finding the Decision appealed

Mahtani in his complaint stated the

following as the value of his personal
belongings:

from to be in accordance with

"8. On said travel, plaintiff took

law and evidence, the same is

with him the following items and

hereby AFFIRMEDin toto, with

its corresponding value, to wit:

1. personal

$400 per passenger for

Therefore, as in a number of cases we

belonging P10,000.00

unchecked baggage."

have assessed the airlines' culpability in

2. gifts for his parents and

Before we resolve the issues raised by BA,

relatives $5,000.00"

it is needful to state that the nature of an

the form of damages for breach of contract

involving misplaced luggage.

Moreover, he failed to declare a higher

airline's contract of carriage partakes of two

In determining the

valuation with respect to his luggage, a

types, namely: a contract to deliver a cargo

amount of compensatory damages in this

condition provided for in the ticket, which

or merchandise to its destination and a

kind of cases, it is vital that the claimant

reads:

contract to transport passengers to their

satisfactorily prove during the trial the

destination. A business intended to serve

existence of the factual basis of the

the travelling public primarily, it is imbued

damages and its causal connection to

with public interest, hence, the law

defendant's acts.

"Liability for loss, delay, or

damage to baggage is limited
unless a higher value is
declared in advance and
additional charges are paid:

governing common carriers imposes an

exacting standard. Neglect or malfeasance
by the carrier's employees could

1. For most international travel

predictably furnish bases for an action for

(including domestic

damages.

corporations of international
journeys) the liability limit is
approximately U.S. $9.07 per
pound (U.S. $20.00) per kilo for
checked baggage and U.S.

In the instant case, it is apparent that the

contract of carriage was between Mahtani
and BA. Moreover, it is indubitable that his
luggage never arrived in Bombay on time.

In this regard, the trial court granted the

following award as compensatory
damages:
"Since plaintiff did not declare
the value of the contents in his
luggage and even failed to
show receipts of the alleged
gifts for the members of his
family in Bombay, the most that

can be expected for

Considering the facts of the case, we

so requires. In that case the

compensation of his lost

cannot assent to such specious argument.

carrier will be liable to pay a

luggage (2 suit cases) is

Twenty U.S. Dollars ($20.00)
per kilo, or a combined
value of Four Hundred
($400.00) U.S. Dollars for
Twenty kilos representing the
contents plus Seven Thousand

Admittedly, in a contract of air carriage a

declaration by the passenger of a higher
value is needed to recover a greater
amount. Article 22(1) of the Warsaw
Convention, provides as follows:
"xxx xxx xxx

sum not exceeding the declared

sum, unless he proves that the
sum is greater than the actual
value to the consignor at
delivery."

American jurisprudence provides that an air

carrier is not liable for the loss of baggage

(P7,000.00) Pesos representing

(2) In the

the purchase price of the two

in an amount in excess of the limits

transportation of checked

(2) suit cases."

specified in the tariff which was filed with

baggage and goods, the

the proper authorities, such tariff being

However, as earlier stated, it is the

liability of the carrier shall be

binding on the passenger regardless of the

position of BA that there should have been

limited to a sum of 250 francs

passenger's lack of knowledge thereof or

no separate award for the luggage and the

per kilogram, unless the

assent thereto. This doctrine is recognized

contents thereof since Mahtani failed to

consignor has made, at the

in this jurisdiction.

declare a separate higher valuation for the

time the package was handed

luggage, and therefore, its liability is

over to the carrier, a special

limited, at most, only to the amount stated

declaration of the value at

in the ticket.

delivery and has paid a

supplementary sum if the case

Notwithstanding the foregoing, we have,

pertinent transcript of stenographic

nevertheless, ruled against blind reliance

notes ofMahtani's direct testimony:

on adhesion contracts where the facts and

circumstances justify that they should be
disregarded.
In addition, we have held that

Q: How much are you going to

ask from this court?
A: P100,000.00.

A: The court expenses and

attorney's fees is 30%."

Indeed, it is a well-settled doctrine that

where the proponent offers evidence
deemed by counsel of the adverse party to
be inadmissible for any reason, the latter

benefits of limited liability are subject to

Q: What else?

has the right to object. However, such right

waiver such as when the air carrier failed to

A: Exemplary damages.

is a mere privilege which can be waived.

raise timely objections during the trial when

questions and answers regarding the
actual claims and damages sustained by
the passenger were asked.
Given the foregoing postulates, the
inescapable conclusion is that BA had
waived the defense of limited liability when
it allowed Mahtani to testify as to the actual
damages he incurred due to the
misplacement of his luggage, without any
objection. In this regard, we quote the

Q: How much?
A: P100,000.00.
Q: What else?
A: The things I lost, $5,000.00

Necessarily, the objection must be made at

the earliest opportunity, lest silence when
there is opportunity to speak may operate
as a waiver of objections. BA has precisely
failed in this regard.

for the gifts I lost and my

personal belongings,

To compound matters for BA, its counsel

P10,000.00.

failed, not only to interpose a timely

Q: What about the filing of this

case?

objection, but even conducted his own

cross-examination as well. In the early
case ofAbrenica v. Gonda, we ruled that:

". . . (I)t has been repeatedly

a task within the

boarded the PAL plane from

laid down as a rule of evidence

competence of the Court of Appeals, its

Manila to Hongkong, PAL was

that a protest or objection

ruling regarding the amount is assuredly a

merely acting as a

against the admission of any

question of fact, thus, a finding not

subcontractor or agent of BA.

evidence must be made at the

reviewable by this Court.

This is shown by the fact that in

proper time, and that if not so

made it will be understood to
have been waived. The proper
time to make a protest or
objection is when, from the
question addressed to the
witness, or from the answer
thereto, or from the
presentation of proof, the

As to the issue of the dismissal of BA's

third-party complaint against PAL,
the Court of Appeals justified its ruling in
this wise, and we quote:
"Lastly, we sustain the
trial court's ruling dismissing
appellant's third-party
complaint against PAL.

inadmissibility of evidence is, or

The contract of air

may be inferred."

transportation in this case

Needless to say, factual findings of the

pursuant to the ticket issued by

trial court, as affirmed by

appellant to plaintiff-appellee

the Court of Appeals, are entitled to great

was exclusively between the

respect. Since the actual value of the

plaintiff Mahtani and defendant-

luggage involved appreciation of evidence,

appellant BA. When plaintiff

the ticket issued by appellant to

plaintiff-appellee, it is
specifically provided on the
"Conditions of Contract,"
paragraph 4 thereof that:
4. . . . carriage to be
performed hereunder by
several successive
carriers is regarded as a
single operation.
The rule that carriage by plane
although performed by
successive carriers is regarded
as a single operation and that
the carrier issuing the

passenger's ticket is considered

party plaintiff to enforce against

original and principal case with

the principal party and the other

such third-party defendant a

the object of avoiding

carrier merely subcontractors or

right for contribution, indemnity,

circuitry of action and

agent, is a settled issue."

subrogation or any other relief,

unnecessary proliferation oflaw

in respect of the plaintiff's claim.

suits and of disposing

The third-party complaint is

expeditiously in one litigation

actually independent of and

the entire subject matter arising

separate and distinct from the

from one particular set of facts."

We cannot agree with the dismissal of the

third-complaint.
In Firestone Tire and Rubber
Company of the
Philippines v. Tempengko, we expounded
on the nature of a third-party complaint
thus:

plaintiff's complaint. Were it not

for this provision of the
Rules of Court, it would have to
be filed independently and

"The third-party complaint is,

separately from the original

therefore, a procedural device

complaint by the defendant

whereby a 'third party' who is

against the third-party. But the

neither a party nor privy to the

Rules permit defendant to bring

act or deed complained of by

in a third-party defendant or so

the plaintiff, may be brought

to speak, to litigate his separate

into the case with

cause ofaction in

leave of court, by the

respect of plaintiff's claim

defendant, who acts as third-

against a third-party in the

Undeniably, for the loss of his luggage;

Mahtani is entitled to damages from BA, in
view of their contract of carriage. Yet, BA
adamantly disclaimed its liability and
instead imputed it to PAL which the latter
naturally denies. In other words, BA and
PAL are blaming each other for the
incident.
In resolving this issue, it is worth observing
that the contract of air transportation was
exclusively between Mahtani and BA, the
latter merely endorsing the Manila to

Hongkong leg of the former's journey to

function and is liable for damages which

Our pronouncement that BA is the principal

PAL, as its subcontractor or agent. In fact,

the principal may suffer by reason of its

is consistent with our ruling in Lufthansa

the fourth paragraph of the

negligent act. Hence,

German Airlines v. Court of Appeals. In

"Conditions of Contracts" of the

the Court of Appeals erred when it opined

that case, Lufthansa issued a confirmed

ticket issued by BA to Mahtani confirms

that BA, being the principal, had no

ticket to Tirso Antiporda covering five-leg

that the contract was one of continuous air

cause of action against PAL, its agent or

trip aboard different airlines. Unfortunately,

transportation from Manila to Bombay.

sub-contractor.

Air Kenya, one of the airlines which was to

carry Antiporda to a specific destination

"4. . . . carriage to be performed

Also, it is worth mentioning that both BA

hereunder by several

and PAL are members of the International

successive carriers is regarded

Air Transport Association (IATA), wherein

An action for damages was filed against

as a single operation."

member airlines are regarded as

Lufthansa which, however, denied any

agentsof each other in the issuance of the

liability, contending that its responsibility

tickets and other matters pertaining to their

towards its passenger is limited to the

relationship. Therefore, in the instant case,

occurrence of a mishap on its own line.

the contractual relationship between BA

Consequently, when Antiporda transferred

and PAL is one of agency, the former being

to Air Kenya, its obligation as a principal in

Parenthetically,

the principal, since it was the one which

the contract of carriage ceased; from there

the Court of Appeals should have been

issued the confirmed ticket, and the latter

on, it merely acted as a ticketing agent for

cognizant of the well-settled rule that an

the agent.

Air Kenya:

Prescinding from the above discussion, it is

undisputed that PAL, in transporting
Mahtani from Manila to Hongkong acted as
the agent of BA.

agent is also responsible for any

negligence in the performance of its

"bumped" him off.

In rejecting Lufthansa's argument, we

latter was not a party to the contract.

separate judgments therefor. It must be

ruled:

However, this is not to say that PAL is

borne in mind that the purpose of a third-

relieved from any liability due to any of its

party complaint is precisely to avoid delay

negligent acts. In China Air Lines,

and circuity of action and to enable the

Ltd. v. Court of Appeals, while not exactly

controversy to be disposed of in one suit. It

in point, the case, however, illustrates the

is but logical, fair and equitable to allow BA

principle which governs this particular

to sue PAL for indemnification, if it is

situation. In that case, we recognized that a

proven that the latter's negligence was the

carrier (PAL), acting as an agent of another

proximate cause of Mahtani's unfortunate

carrier, is also liable for its own negligent

experience, instead of totally absolving PAL

acts or omission in the performance of its

from any liability.

"In the very nature of their

contract, Lufthansa is clearly
the principal in the
contract of carriage with
Antiporda and remains to be
so, regardless of those
instances when actual carriage
was to be performed by various
carriers. The
issuance of confirmed

duties.

WHEREFORE, in view of the foregoing, the

Lufthansa ticket in

Accordingly, to deny BA the procedural

decision of the Court of Appeals in CA-

favor of Antiporda covering his

remedy of filing a third-party complaint

G.R. CV No. 43309 dated September 7,

entire five-leg trip aboard

against PAL for the purpose of ultimately

1995 is hereby MODIFIED, reinstating the

successive carriers concretely

determining who was primarily at fault as

third-party complaint filed

attest to this."

between them, is without legal basis. After

by British Airways dated November 9, 1990

all, such proceeding is in accord with the

against Philippine Airlines. No costs. SO

doctrine against multiplicity of cases which

ORDERED.

Since the instant petition was based on

breach of contract of carriage, Mahtani can
only sue BA alone, and not PAL, since the

would entail receiving the same or similar

evidence for both cases and enforcing

[G.R. Nos. 116044-45. March 9, 2000.]

AMERICAN
AIRLINES, petitioner, vs.
COURT OF APPEALS,
HON. BERNARDO LL.
SALAS and DEMOCRITO
MENDOZA, respondents.
SYNOPSIS
Private respondent purchased from
Singapore Airlines in Manila conjunction
tickets from Singapore Airlines for nine
cities in different countries with New York
as the final destination. In Geneva, private
respondent bought from petitioner a ticket
in exchange for the unused conjunction
ticket for a one-way ticket from Geneva to
New York. However, because of the
embarrassment and mental anguish he
suffered in Geneva when he was prevented

by petitioner's security officer from boarding

Appeals. Hence, this petition. Meanwhile,

the plane, detained for about an hour and

the security officer of petitioner

allowed to board the plane only after all the

subsequently appeared before the

other passengers have boarded, private

Philippine consul and answered the cross-

respondent filed an action for damages

interrogatories of private respondent.

against petitioner in Cebu. Petitioner

moved to dismiss on the ground of
improper venue and that the ticket issued
by petitioner in Geneva was a separate and
distinct contract of carriage from that
entered into by the private respondent with
Singapore Airlines in Manila. When its
motion was denied, petitioner presented a
deposition of its security officer taken in
Geneva. The trial court ruled that under the
pool partnership agreement among the
IATA members, including Singapore
Airlines and American Airlines, the
members act as agents of each other in the
issuance of tickets. This decision was
affirmed on appeal by the Court of

cCEAHT

A contract of carriage although performed

by different carriers under a series of airline
tickets constitutes a single operation as
members of the IATA act as agents of each
other in the issuance of tickets and that the
number of tickets issued does not detract
from the oneness of the contract of
carriage as long as the parties regard the
contract as a single operation. Thus,
petitioner tacitly recognized its commitment
when it accepted the unused portion of the
conjunction tickets, entered it in the IATA
clearing house and undertook to transport
the private respondent over the route
covered by the unused portion of the
conjunction tickets.

Venue is deemed waived when a party

force and effect of law in this country

2. ID.; OBLIGATIONS AND CONTRACTS;

assailing the same presented evidence

applies to all international transportation of

CONTRACT OF CARRIAGE; MEMBERS

before the trial court.

persons, baggage or goods performed by

OF IATA UNDER GENERAL POOL

an aircraft gratuitously or for hire. As

PARTNERSHIP AGREEMENT;

enumerated in the Preamble of the

CONTRACT OF CARRIAGE IN CASE AT

Convention, one of the objectives is "to

BAR, ALTHOUGH PERFORMED BY

regulate in a uniform manner the conditions

DIFFERENT CARRIERS UNDER A

of international transportation by air." The

SERIES OF AIRLINE TICKETS,

contract of carriage entered into by the

CONSTITUTES A SINGLE OPERATION.

private respondent with Singapore Airlines,

The contract of carriage between the

and subsequently with the petitioner, to

private respondent and Singapore Airlines

transport him to nine cities in different

although performed by different carriers

1. CIVIL LAW; TRANSPORTATION;

countries with New York as the final

under a series of airline tickets, including

WARSAW CONVENTION; HAS FORCE

destination is a contract of international

that issued by the petitioner, constitutes a

AND EFFECT OF LAW IN COUNTRIES

transportation and the provisions of the

single operation. Members of the IATA are

LIKE THE PHILIPPINES WHICH ARE

Convention automatically apply and

under a general pool partnership

PARTIES THERETO; CONVENTION

exclusively govern the rights and liabilities

agreement wherein they act as agent of

APPLIES TO INTERNATIONAL

of the airline and its passengers. This

each other in the issuance of tickets to

TRANSPORTATION. The Warsaw

includes Section 28 (1) which enumerates

contracted passengers to boost ticket sales

Convention to which the Republic of the

the four places where an action for

worldwide and at the same time provide

Philippines is a party and which has the

damages may be brought.

passengers easy access to airlines which

The subsequent appearance of petitioner's

security officer to answer the crossinterrogatories of private respondent
constitute full compliance with the
requisites of the right of private respondent
to cross-examine the petitioner's witnesses.
SYLLABUS

are otherwise inaccessible in some parts of

ACT AS AGENT OF PRINCIPAL

liability. The new ticket was simply a

the world. Booking and reservation among

CONTRACTING AIRLINE; CASE AT BAR.

replacement for the unused portion of the

airline members are allowed even by

Thus, when the petitioner accepted the

conjunction ticket, both tickets being for the

telephone and it has become an accepted

unused portion of the conjunction tickets,

same amount of US$2,760 and having the

practice among them. A member airline

entered it in the IATA clearing house and

same points of departure and destination.

which enters into a contract of carriage

undertook to transport the private

By constituting itself as an agent of the

consisting of a series of trips to be

respondent over the route covered by the

principal carrier the petitioner's undertaking

performed by different carriers is

unused portion of the conjunction

should be taken as part of a single

authorized to receive the fare for the whole

tickets, i.e., Geneva to New York, the

operation under the contract of carriage

trip and through the required process of

petitioner tacitly recognized its commitment

executed by the private respondent and

interline settlement of accounts by way of

under the IATA pool arrangement to act as

Singapore Airlines in Manila.

the IATA clearing house an airline is duly

agent of the principal contracting airline,

compensated for the segment of the trip

Singapore Airlines, as to the segment of

serviced.

the trip the petitioner agreed to undertake.

3. ID.; ID.; ID.; ID.; ACCEPTANCE BY

ANOTHER AIRLINE OF UNUSED
PORTION OF CONJUNCTION TICKET
AND UNDERTAKING TO TRANSPORT
PASSENGER OVER ROUTE COVERED
BY UNUSED TICKET, TACIT
RECOGNITION OF COMMITMENT TO

As such, the petitioner thereby assumed

the obligation to take the place of the
carrier originally designated in the original
conjunction ticket. The petitioner's
argument that it is not a designated carrier
in the original conjunction tickets and that it
issued its own ticket is not decisive of its

4. ID.; ID.; ID.; ID.; ID.; NUMBER OF

TICKETS ISSUED DOES NOT DETRACT
FROM ONENESS OF CONTRACT OF
CARRIAGE; PURPOSE. The quoted
provision of the Warsaw Convention Art.
1(3) clearly states that a contract of air
transportation is taken as a single
operation whether it is founded on a single
contract or a series of contracts. The
number of tickets issued does not detract

from the oneness of the contract of

business of the carrier wherein the contract

stricken off the record for failure of the said

carriage as long as the parties regard the

was made, is therefore, Manila, and

security officer to appear before the

contract as a single operation. The evident

Philippine courts are clothed with

Philippine consul in Geneva to answer the

purpose underlying this Article is to

jurisdiction over this case. We note that

cross-interrogatories filed by the private

promote international air travel by

while this case was filed in Cebu and not in

respondent does not have to be resolved.

facilitating the procurement of a series of

Manila the issue of venue is no longer an

The subsequent appearance of the said

contracts for air transportation through a

issue as the petitioner is deemed to have

security officer before the Philippine consul

single principal and obligating different

waived it when it presented evidence

in Geneva on September 19, 1994 and the

airlines to be bound by one contract of

before the trial court.

answer to the cross-interrogatories

transportation. Petitioner's acquiescence to

take the place of the original designated
carrier binds it under the contract of
carriage entered into by the private
respondent and Singapore Airlines in
Manila.

6. CONSTITUTIONAL LAW; BILL OF

RIGHTS; RIGHT TO CROSS-EXAMINE
WITNESS; COMPLIED WITH BY
SUBSEQUENT APPEARANCE OF
WITNESS BEFORE PHILIPPINE CONSUL
AND ANSWER TO CROSS-

5. REMEDIAL LAW; MOTION TO

INTERROGATORIES TRANSMITTED TO

DISMISS; WRONG VENUE; WAIVED

TRIAL COURT. The issue raised in SP

WHERE PARTY PRESENTED

No. 31452 which is whether or not the trial

EVIDENCE. The third option of the

court committed grave abuse of discretion

plaintiff under Art. 28 (1) of the Warsaw

in ordering the deposition of the petitioner's

Convention e.g., to sue in the place of

security officer taken in Geneva to be

propounded by the private respondent was

transmitted to the trial court by the
Philippine consul in Geneva on September
23, 1994 should be deemed as full
compliance with the requisites of the right
of the private respondent to cross-examine
the petitioner's witness. The deposition
filed by the petitioner should be reinstated
as part of the evidence and considered
together with the answer to the crossinterrogatories.

DECISION

GONZAGA-REYES, J :
p

Before us is a petition for review of the

decision dated December 24, 1993
rendered by the Court of Appeals in the
consolidated cases docketed as CA-G.R.
SP nos. 30946 and 31452
entitled American Airlines vs. The
Presiding Judge Branch 8 of the Regional
Trial Court of Cebu and Democrito
Mendoza, petitions for certiorari and
prohibition. In SP no. 30946, the petitioner
assails the trial court's order denying the
petitioner's motion to dismiss the action for
damages filed by the private respondent for
lack of jurisdiction under Section 28 (1) of
the Warsaw Convention; and in SP No.
31452 the petitioner challenges the validity
of the trial court's order striking off the

record the deposition of the petitioner's

straight to New York and in the absence of

security officer taken in Geneva,

a direct flight under his conjunction tickets

Switzerland for failure of the said security

from Geneva to New York, the private

officer to answer the cross interrogatories

respondent on June 7, 1989 exchanged the

propounded by the private respondent.

unused portion of the conjunction ticket for

The sole issue raised in SP No. 30946 is

the questioned jurisdiction of the Regional
Trial Court of Cebu to take cognizance of
the action for damages filed by the private
respondent against herein petitioner in view
of Art 28 (1) of the Warsaw Convention. It

a one-way ticket from Geneva to New York

from the petitioner airline. Petitioner issued
its own ticket to the private respondent in
Geneva and claimed the value of the
unused portion of the conjunction ticket
from the IATA clearing house in Geneva.

is undisputed that the private respondent

In September 1989, private respondent

purchased from Singapore Airlines in

filed an action for damages before the

Manila conjunction tickets for Manila -

regional trial court of Cebu for the alleged

Singapore - Athens - Larnaca - Rome-

embarrassment and mental anguish he

Turin - Zurich - Geneva - Copenhagen -

suffered at the Geneva Airport when the

New York. The petitioner was not a

petitioner's security officers prevented him

participating airline in any of the segments

from boarding the plane, detained him for

in the itinerary under the said conjunction

about an hour and allowed him to board the

tickets. In Geneva the petitioner decided to

plane only after all the other passengers

forego his trip to Copenhagen and to go

have boarded. The petitioner filed a motion

to dismiss for lack of jurisdiction of

the plaintiff under the Warsaw

petitioner asserts that the Philippines is

Philippine courts to entertain the said

Convention i.e. the action may be brought

neither the domicile nor the principal place

proceedings under Art. 28 (1) of the

in the place where the contract was

of business of the defendant airline; nor is

Warsaw Convention. The trial court denied

perfected and where the airline has a place

it the place of destination. As regards the

the motion. The order of denial was

of business, is applicable. Hence this

third option of the plaintiff, the petitioner

elevated to the Court of Appeals which

petition assailing the order upholding the

contends that since the Philippines is not

affirmed the ruling of the trial court. Both

jurisdiction of Philippine courts over the

the place where the contract of carriage

the trial and the appellate courts held that

instant action.

was made between the parties herein,

the suit may be brought in the Philippines

under the pool partnership agreement
among the IATA members, which include
Singapore Airlines and American Airlines,

Both parties filed simultaneous memoranda

pursuant to the resolution of this Court
giving due course to the petition.

Philippine courts do not have jurisdiction

over this action for damages. The issuance
of petitioner's own ticket in Geneva in
exchange for the conjunction ticket issued

wherein the members act as agents of

The petitioner's theory is as follows: Under

by Singapore Airlines for the final leg of the

each other in the issuance of tickets to

Art 28 (1) of the Warsaw convention an

private respondent's trip gave rise to a

those who may need their services. The

action for damages must be brought at the

separate and distinct contract of carriage

contract of carriage perfected in Manila

option of the plaintiff either before the court

from that entered into by the private

between the private respondent and

of the 1) domicile of the carrier; 2) the

respondent with Singapore Airlines in

Singapore Airlines binds the petitioner as

carrier's principal place of business; 3) the

Manila. Petitioner lays stress on the fact

an agent of Singapore Airlines and

place where the carrier has a place of

that the plane ticket for a direct flight from

considering that the petitioner has a place

business through which the contract was

Geneva to New York was purchased by the

of business in Manila, the third option of

made; 4) the place of destination. The

private respondent from the petitioner by

"exchange and cash" which signifies that

agent" does not apply herein, as neither

the incident at the pre-departure area of

the contract of carriage with Singapore

Singapore Airlines nor the petitioner issued

the Geneva airport and not during the

Airlines was terminated and a second

a ticket to the private respondent covering

process of embarking nor disembarking

contract was perfected. Moreover, the

the route of the other. Since the conjunction

from the carrier and that security officers of

second contract of carriage cannot be

tickets issued by Singapore Airlines do not

the petitioner airline acted in bad faith.

deemed to have been an extension of the

include the route covered by the ticket

Accordingly, this case is released from the

first as the petitioner airline is not a

issued by the petitioner, the petitioner

terms of the Convention. Private

participating airline in any of the

airline submits that it did not act as an

respondent argues that assuming that the

destinations under the first contract. The

agent of Singapore Airlines.

convention applies, his trip to nine cities in

petitioner claims that the private

respondent's argument that the petitioner is
bound under the IATA Rules as agent of
the principal airline is irrelevant and the
alleged bad faith of the airline does not
remove the case from the applicability of
the Warsaw Convention. Further, the IATA
Rule cited by the private respondent which
is admittedly printed on the ticket issued by
the petitioner to him which states, "An air
carrier issuing a ticket for carriage over the
lines of another carrier does so only as its

Private respondent controverts the

applicability of the Warsaw Convention in
this case. He posits that under Article 17 of
the Warsaw Convention a carrier may be
held liable for damages if the "accident"
occurred on board the airline or in the
course of "embarking or disembarking"
from the carrier and that under Article 25
(1) thereof the provisions of the convention
will not apply if the damage is caused by
the "willful misconduct" of the carrier. He
argues that his cause of action is based on

different countries performed by different

carriers under the conjunction tickets
issued in Manila by Singapore Airlines is
regarded as a single transaction; as such
the final leg of his trip from Geneva to New
York with the petitioner airline is part and
parcel of the original contract of carriage
perfected in Manila. Thus, the third option
of the plaintiff under Art. 28 (1) e.g., where
the carrier has a place of business through
which the contract of carriage was made,
applies herein and the case was properly

filed in the Philippines. The private

The Warsaw Convention to which the

enumerates the four places where an

respondent seeks affirmance of the ruling

Republic of the Philippines is a party and

action for damages may be brought.

of the lower courts that the petitioner acted

which has the force and effect of law in this

as an agent of Singapore Airlines under the

country applies to all international

IATA Rules and as an agent of the principal

transportation of persons, baggage or

carrier the petitioner may be held liable

goods performed by an aircraft gratuitously

under the contract of carriage perfected in

or for hire. As enumerated in the Preamble

Manila, citing the judicial admission made

of the Convention, one of the objectives is

by the petitioner that it claimed the value of

"to regulate in a uniform manner the

the unused portion of the private

conditions of international transportation by

respondent's conjunction tickets from the

air". The contract of carriage entered into

IATA Clearing House in Geneva where the

by the private respondent with Singapore

accounts of both airlines are respectively

Airlines, and subsequently with the

credited and debited. Accordingly, the

petitioner, to transport him to nine cities in

petitioner cannot now deny the contract of

different countries with New York as the

agency with Singapore Airlines after it

final destination is a contract of

honored the conjunction tickets issued by

international transportation and the

the latter.

provisions of the Convention automatically

The petition is without merit.

apply and exclusively govern the rights and

liabilities of the airline and its passengers.
This includes Section 28 (1) which

The threshold issue of jurisdiction of

Philippine courts under Art. 28 (1) must
first be resolved before any
pronouncements may be made on the
liability of the carrier thereunder. The
objections raised by the private respondent
that this case is released from the terms of
the Convention because the incident on
which this action is predicated did not occur
in the process of embarking and
disembarking from the carrier under Art
17. and that the employees of the
petitioner airline acted with malice and bad
faith under Art. 25 (1) pertain to the merits
of the case which may be examined only if
the action has first been properly
commenced under the rules on jurisdiction
set forth in Art. 28 (1).

Art. (28) (1) of the Warsaw Convention

The question is whether the contract of

purposes of this convention, to

states:

transportation between the petitioner and

be one undivided

the private respondent would be

transportation, if it has been

considered as a single operation and part

regarded by the parties as a

of the contract of transportation entered

single operation, whether it has

into by the latter with Singapore Airlines in

been agreed upon under the

Manila.

form of a single contract or a

ARTICLE 28 (1) An action for

damages must be brought at
the option of the plaintiff, in the
territory of one of the High
Contracting Parties, either
before the court of the domicile

Petitioner disputes the ruling of the lower

of the carrier or of his principal

court that it is. Petitioner's main argument

place of business or where he

is that the issuance of a new ticket in

has a place of business through

Geneva created a contract of carriage

which the contract has been

separate and distinct from that entered by

made, or before the court at the

the private respondent in Manila.

place of destination.

There is no dispute that petitioner

issued the ticket in Geneva which was
neither the domicile nor the principal
place of business of petitioner nor the
respondent's place of destination.

We find the petitioner's argument without

merit.

series of contracts, and it shall

not lose its international
character merely because one
contract or series of contracts is
to be performed entirely within
the territory subject of the
sovereignty, suzerainty,
mandate or authority of the
same High Contracting Party."

Art 1(3) of the Warsaw Convention which

The contract of carriage between the

states:

private respondent and Singapore Airlines

"Transportation to be performed

although performed by different carriers

by several successive carriers

under a series of airline tickets, including

shall be deemed, for the

that issued by the petitioner, constitutes a

single operation. Members of the IATA are

accepted the unused portion of the

conjunction ticket, both tickets being for the

under a general pool partnership

conjunction tickets, entered it in the IATA

same amount of US$ 2,760 and having the

agreement wherein they act as agent of

clearing house and undertook to transport

same points of departure and

each other in the issuance of tickets to

the private respondent over the route

destination. By constituting itself as an

contracted passengers to boost ticket sales

covered by the unused portion of the

agent of the principal carrier the petitioner's

worldwide and at the same time provide

conjunction tickets, i.e., Geneva to New

undertaking should be taken as part of a

passengers easy access to airlines which

York, the petitioner tacitly recognized its

single operation under the contract of

are otherwise inaccessible in some parts of

commitment under the IATA pool

carriage executed by the private

the world. Booking and reservation among

arrangement to act as agent of the

respondent and Singapore Airlines in

airline members are allowed even by

principal contracting airline, Singapore

Manila.

telephone and it has become an accepted

Airlines, as to the segment of the trip the

practice among them. A member airline

petitioner agreed to undertake. As such,

which enters into a contract of carriage

the petitioner thereby assumed the

consisting of a series of trips to be

obligation to take the place of the carrier

performed by different carriers is

originally designated in the original

authorized to receive the fare for the whole

conjunction ticket. The petitioner's

trip and through the required process of

argument that it is not a designated carrier

interline settlement of accounts by way of

in the original conjunction tickets and that it

the IATA clearing house an airline is duly

issued its own ticket is not decisive of its

compensated for the segment of the trip

liability. The new ticket was simply a

serviced. Thus, when the petitioner

replacement for the unused portion of the

The quoted provision of the Warsaw

Convention Art. 1(3) clearly states that a
contract of air transportation is taken as a
single operation whether it is founded on a
single contract or a series of contracts. The
number of tickets issued does not detract
from the oneness of the contract of
carriage as long as the parties regard the
contract as a single operation. The evident
purpose underlying this Article is to
promote international air travel by

facilitating the procurement of a series of

The issue raised in SP No. 31452 which is

the petitioner should be reinstated as part

contracts for air transportation through a

whether or not the trial court committed

of the evidence and considered together

single principal and obligating different

grave abuse of discretion in ordering the

with the answer to the cross-

airlines to be bound by one contract of

deposition of the petitioner's security officer

interrogatories.

transportation. Petitioner's acquiescence to

taken in Geneva to be stricken off the

take the place of the original designated

record for failure of the said security officer

carrier binds it under the contract of

to appear before the Philippine consul in

carriage entered into by the private

Geneva to answer the cross-interrogatories

respondent and Singapore Airlines in

filed by the private respondent does not

Manila.

have to be resolved. The subsequent

The third option of the plaintiff under Art. 28

(1) of the Warsaw Convention e.g., to sue
in the place of business of the carrier
wherein the contract was made, is
therefore, Manila, and Philippine courts are
clothed with jurisdiction over this case. We
note that while this case was filed in Cebu
and not in Manila the issue of venue is no
longer an issue as the petitioner is deemed
to have waived it when it presented
evidence before the trial court.

appearance of the said security officer

before the Philippine consul in Geneva on
September 19, 1994 and the answer to the
cross-interrogatories propounded by the

WHEREFORE, the judgment of the

appellate court in CA-G.R. SP No. 30946 is
affirmed. The case is ordered remanded to
the court of origin for further proceedings.
The decision of the appellate court in CAG.R. SP. No. 31452 is set aside. The
deposition of the petitioner's security officer
is reinstated as part of the evidence. SO
ORDERED.

private respondent was transmitted to the

trial court by the Philippine consul in
Geneva on September 23, 1994 should be
deemed as full compliance with the

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

requisites of the right of the private

CHINA AIRLINES, petitioner

respondent to cross-examine the

, vs.

petitioner's witness. The deposition filed by

DANIEL CHIOK, respondent

SYNOPSIS
Petitioner China Airlines (CAL) issued
tickets to respondent for his Manila-TaipeiHongkong-Manila tour. Said ticket was
exclusively endorseable to
Philippine Airlines, Ltd. (PAL). In Taipei,
petitioner CAL confirmed respondent's
Hongkong to Manila trip on board PAL
Flight No. PR 311. In Hongkong, the PAL
office likewise confirmed respondent's
return trip to Manila on board Flight No. PR
311. On November 24, 1981, the day of the
departure, PAL was unable to transport
respondent on Flight PR 311 due to
typhoon. However, PAL informed that all
the confirmed passengers of PR311 were
automatically booked to the next available
flight, PR 307, on the following day.
However, on November 25, respondent
was harangued and prevented from

boarding PR 307 because his name did not

Among others, petitioner claimed that it had

appear from the computerized passenger

merely acted as an issuing agent for the

list despite his confirmed flight tickets.

ticket covering the Hongkong-Manila leg of

Thus, PAL's refusal to accommodate the

respondent's journey. It argued that only

respondent in Flight No. 307 resulted in the

PAL was liable for the actual carriage of

loss of the business option which

that segment.

respondent has to execute on that day.

Consequently, respondent filed a complaint
for damages against petitioner CAL and
PAL before the Regional Trial Court (RTC)
of Manila. The RTC, after due trial, ruled in
favor of the respondent and found
petitioner and PAL jointly and severally
liable to respondent for the payment of
actual, moral, and exemplary damages and
attorney's fees. The Court of Appeals
affirmed the RTC but with modification
deleting the award of actual damages.
Hence, this petition for review on certiorari.

In denying the petition, the Supreme Court

ruled that petitioner cannot evade liability to
respondent. even though it may have been
only a ticket issuer for the HongKongManila sector. Although the contract of air
transportation was between petitioner and
respondent, with the former endorsing to
PAL the Hongkong-to-Manila segment of
the journey, such contract of carriage has
always been treated in this jurisdiction as a
single operation. According to the Court,
for reasons of public interest and policy, the
ticket-issuing airline acts as principal in a
contract of carriage and is thus liable for
the acts and the omissions of any errant

carrier to which it may have endorsed any

judges should do no less by strictly abiding

THEREOF HAD OCCURRED NOT ON ITS

sector of the entire, continuous trip. The

by this rule when they quote cases that

OWN FLIGHT BUT ON THAT OF

Court likewise affirmed the award of moral

support their judgments and decisions.

ANOTHER AIRLINE. It is significant to

and exemplary damages. Both the trial and

Canon 3 of the Code of Judicial Conduct

note that the contract of air transportation

appellate courts found that the respondent

enjoins them to perform official duties

was between petitioner and respondent,

had satisfactorily proven the existence of

diligently by being faithful to the law and

with the former endorsing to PAL the Hong

the factual basis for the damages adjudged

maintaining their professional competence.

Kong-to-Manila segment of the journey.

against petitioner CAL and PAL.

To avert similar incidents in the future, this

Such contract of carriage has always been

Court hereby exhorts members of the bar

treated in this jurisdiction as a single

and the bench to refer to and quote from

operation. This jurisprudential rule is

the official repository of our decisions,

supported by the Warsaw Convention, to

the Philippine Reports, whenever

which the Philippines is a party, and by the

practicable. In the absence of this primary

existing practices of the International Air

source, which is still being updated, they

Transport Association (IATA).

may resort to unofficial sources like the

In American Airlines v. Court of Appeals,

SCRA.

we have noted that under a general pool

HSIDTE

SYLLABUS
1. JUDICIAL ETHICS; JUDGES;
ENJOINED TO QUOTE DECISION OF
THE SUPREME COURT ACCURATELY
WHEN USED TO SUPPORT
JUDGMENT/RULING IN A CASE. We
agree with petitioner that the CA committed
a lapse when it relied merely on the
unofficial syllabus of our ruling
in KLM v. CA. Indeed, lawyers and litigants
are mandated to quote decisions of this
Court accurately. By the same token,

2. COMMERCIAL LAW; COMMON

CARRIERS; CONTRACT OF CARRIAGE;
TICKET-ISSUING AIRLINE ACTS AS
PRINCIPAL IN THE CONTRACT AND IS
LIABLE EVEN WHEN THE BREACH

partnership agreement, the ticket-issuing

airline is the principal in a contract of
carriage, while the endorsee-airline is the
agent. Likewise, as the principal in the
contract of carriage, the petitioner in British

Airways v. Court of Appeals was held

3. CIVIL CODE; DAMAGES; MORAL AND

airline is shown to have acted fraudulently,

liable, even when the breach of contract

EXEMPLARY DAMAGES; AWARD

with malice or in bad faith, the award of

had occurred, not on its own flight, but on

THEREOF IS PROPER WHERE CARRIER

moral and exemplary damages, in addition

that of another airline. The Decision

IN BREACHING THE CONTRACT OF

to actual damages, is proper."

followed our ruling in Lufthansa

CARRIAGE IS SHOWN TO HAVE ACTED

German Airlines v. Court of Appeals, in

FRAUDULENTLY, WITH MALICE OR IN

which we had held that the obligation of the

BAD FAITH. Time and time again, this

ticket-issuing airline remained and did not

Court has stressed that the business of

cease, regardless of the fact that another

common carriers is imbued with public

airline had undertaken to carry the

interest and duty; therefore, the law

passengers to one of their destinations. In

governing them imposes an exacting

the instant case, following the

standard. In Singson v. Court of Appeals,

jurisprudence cited above, PAL acted as

we said: ". . . [T]he carrier's utter lack of

the carrying agent of CAL. In the same way

care and sensitivity to the needs of its

that we ruled against British Airways and

passengers, clearly constitutive of gross

Lufthansa in the aforementioned cases, we

negligence, recklessness and wanton

also rule that CAL cannot evade liability to

disregard of the rights of the latter, [are]

respondent, even though it may have been

acts evidently indistinguishable or no

only a ticket issuer for the Hong Kong-

different from fraud, malice and bad faith.

Manila sector.

As the rule now stands, where in breaching

IHDCcT

the contract of carriage the defendant

4. ID.; ID.; ID.; CASE AT BAR. The acts

of PAL's employees particularly Chan,
clearly fell short of the extraordinary
standard of care that the law requires of
common carriers. As narrated in Chan's
oral deposition, the manner in which the
airline discharged its responsibility to
respondent and its other passengers
manifested a lack of the requisite diligence
and due regard for their welfare. . . .. We
stress that respondent had repeatedly
secured confirmations of his PR 311 flight
on November 24, 1981 initially from CAL
and subsequently from the PAL office in
Hong Kong. The status of this flight was
marked "OK" on a validating sticker placed
on his ticket. That sticker also contained

the entry "RMN6V." Ms. Chan explicitly

view of the foregoing, we rule that moral

For purposes of a ruling on the cross-

acknowledged that such entry was a

and exemplary damages were properly

claim, PAL is an indispensable party. In BA

computer reference that meant that

awarded by the lower courts.

Finance Corporation v. CA, the Court

respondent's name had been entered in

PAL's computer. Since the status of
respondent on Flight PR 311 was "OK," as
a matter of right testified to by PAL's
witness, he should have been automatically
transferred to and allowed to board Flight
307 the following day. Clearly resulting from
negligence on the part of PAL was its claim
that his name was not included in its list of
passengers for the November 24, 1981 PR
311 flight and, consequently, in the list of
the replacement flight PR 307. Since he
had secured confirmation of his flight not
only once, but twice by personally going
to the carrier's offices where he was
consistently assured of a seat thereon

5. REMEDIAL LAW; EVIDENCE;

FINDINGS OF FACT OF THE COURT OF
APPEALS AFFIRMING THOSE OF THE
REGIONAL TRIAL COURT WILL NOT BE
DISTURBED. Both the trial and the
appellate courts found that respondent had
satisfactorily proven the existence of the
factual basis for the damages adjudged
against petitioner and PAL. As a rule, the
findings of fact of the CA affirming those of
the RTC will not be disturbed by this Court.
Indeed, the Supreme Court is not a trier of
facts. As a rule also, only questions of law
as in the present recourse may be
raised in petitions for review under Rule 45.

stated: ". . . . An indispensable party is one

whose interest will be affected by the
court's action in the litigation, and without
whom no final determination of the case
can be had. The party's interest in the
subject matter of the suit and in the relief
sought are so inextricably intertwined with
the other parties that his legal presence as
a party to the proceeding is an absolute
necessity. In his absence there cannot be a
resolution of the dispute of the parties
before the court which is effective,
complete, or equitable. . . . "Without the
presence of indispensable parties to a suit
or proceeding, judgment of a court cannot
attain real finality." PAL's interest may be

PAL's negligence was so gross and

6. ID.; ACTIONS; PARTIES;

affected by any ruling of this Court on

reckless that it amounted to bad faith. In

INDISPENSABLE PARTY; ELUCIDATED.

CAL's cross-claim. Hence, it is imperative

and in accordance with due process and

ticket-issuing airline acts as principal in a

MODIFIED by deleting that

fair play that PAL should have been

contract of carriage and is thus liable for

portion regarding defendants-

impleaded as a party in the present

the acts and the omissions of any errant

appellants' liabilities for the

proceedings, before this Court can make a

carrier to which it may have endorsed any

payment of the actual damages

final ruling on this matter. Although PAL

sector of the entire, continuous trip.

amounting to HK$14,128.80

was petitioner's co-party in the case before

the RTC and the CA, petitioner failed to
include the airline in the present recourse.
Hence, the Court has no jurisdiction over it.
Consequently, to make any ruling on the
cross-claim in the present Petition would
not be legally feasible because PAL, not
being a party in the present case, cannot
be bound thereby.
DECISION
PANGANIBAN, J :
p

and US$2,000.00 while all

The Case

other respects are AFFIRMED.

Before the Court is a Petition for Review on

Costs against defendants-

Certiorari 1 under Rule 45 of the Rules of

appellants."

Court, seeking to reverse the August 7,

2001 Decision 2 and the February 7, 2002

The assailed Resolution denied Petitioner's

Resolution 3 of the Court of Appeals (CA)

Motion for Partial Reconsideration.

in CA-GR CV No. 45832. The challenged

Decision disposed as follows:
"WHEREFORE, premises
considered, the assailed
Decision dated July 5, 1991 of

A common carrier has a peculiar

Branch 31, Regional Trial

relationship with and an exacting

Court, National Capital Judicial

responsibility to its passengers. For

Region, Manila, in Civil Case

reasons of public interest and policy, the

No. 82-13690, is hereby

The Facts
The facts are narrated by the CA as
follows:
"On September 18, 1981,
Daniel Chiok (hereafter referred
to as Chiok) purchased
from China Airlines, Ltd. (CAL
for brevity) airline passenger
ticket number

297:4402:004:278:5 for air

appropriately indicating that his

311 were automatically booked

transportation covering Manila-

flight status was OK.

for its next flight, which was to

Taipei-Hongkong-Manila. Said
ticket was exclusively
endorseable to
Philippine Airlines, Ltd. (PAL for
brevity).

"When Chiok reached

Hongkong, he went to the PAL
office and sought to reconfirm
his flight back to Manila. The
PAL office confirmed his return

leave the next day. He then

informed PAL personnel that,
being the founding director of
the Philippine Polysterene
Paper Corporation, he ha[d] to
reach Manila on November 25,

"Subsequently, on November

trip on board Flight No. PR 311

21, 1981, Chiok took his trip

and attached its own sticker.

from Manila to Taipei using [the]

On November 24,

CAL ticket. Before he left for

1981, Chiok proceeded to

said trip, the trips covered by

Hongkong International Airport

"On November 25,

the ticket were pre-scheduled

for his return trip to Manila.

1981, Chiok went to the airport.

and confirmed by the former.

However, upon reaching the

Cathay Pacific stewardess Lok

When he arrived in Taipei, he

PAL counter, Chiok saw a

Chan (hereafter referred to as

went to the CAL office and

poster stating that PAL Flight

Lok) ha[d] taken and

confirmed his Hongkong to

No. PR 311 was cancelled

received Chiok's plane ticket

Manila trip on board PAL Flight

because of a typhoon in

and his luggage. Lok called the

No. PR 311. The CAL office

Manila. He was then informed

attention of Carmen Chan

attached a yellow sticker

that all the confirmed ticket

(hereafter referred to as

holders of PAL Flight No. PR

Carmen), PAL's terminal

1981 because of a business

option which he ha[d] to
execute on said date.

supervisor, and informed the

luggage but found only 2 which

ticket, which number was

latter that Chiok's name was

were placed at the end of the

'R/MN62'.

not in the computer list of

passengers line. Realizing that

passengers. Subsequently,

his new Samsonite luggage

Carmen informed Chiok that his

was missing, which contained

name did not appear in PAL's

cosmetics worth

computer list of passengers

HK$14,128.80, he complained

and therefore could not be

to Carmen.

permitted to board PAL Flight

"Chiok then decided to use

another CAL ticket with No.
297:4402:004:370:5 and asked
Chao if this ticket could be used
to book him for the said flight.
The latter, once again, booked

"Thereafter, Chiok proceeded to

and confirmed the former's trip

PAL's Hongkong office and

this time on board PAL Flight

"Meanwhile, Chiok requested

confronted PAL's reservation

No. PR 311 scheduled to

Carmen to put into writing the

officer, Carie Chao (hereafter

depart that evening.

alleged reason why he was not

referred to as Chao), who

Later, Chiok went to the PAL

allowed to take his flight. The

previously confirmed his flight

check-in counter and it was

latter then wrote the following,

back to Manila. Chao

Carmen who attended to him.

to wit: 'PAL STAFF CARMEN

told Chiok that his name was

As this juncture, Chiok had

CHAN CHKD WITH R/C

on the list and pointed to the

already placed his travel

KENNY AT 1005H NO SUCH

latter his computer number

documents, including his clutch

NAME IN COMPUTER FOR

listed on the PAL confirmation

bag, on top of the PAL check-in

311/24 NOV AND 307/25 NOV,'

sticker attached to his plane

counter.

No. PR 307.

The latter sought to recover his

"Thereafter, Carmen directed

"Consequently, Chiok as

defendants are solidarily liable

PAL personnel to transfer

plaintiff, filed a Complaint on

for the damages he suffered,

counters. In the ensuing

November 9, 1982 for

since one is the agent of the

commotion, Chiok lost his

damages, against PAL and

other."

clutch bag containing the

CAL, as defendants, docketed

following, to wit: (a) $2,000.00;

as Civil Case No. 82-13690,

(b) HK$2,000.00; (c) Taipei

with Branch 31, Regional Trial

$8,000.00; (d) P2,000.00; (e) a

Court, National Capital Judicial

three-piece set of gold (18

Region, Manila.

carats) cross pens valued at

P3,500; (f) a Cartier watch
worth about P7,500.00; (g) a tie
clip with a garnet birthstone and
diamond worth P1,800.00; and
(h) a [pair of] Christian Dior
reading glasses. Subsequently,
he was placed on stand-by and
at around 7:30 p.m., PAL
personnel informed him that he
could now check-in.

"He alleged therein that despite

several confirmations of his
flight, defendant PAL refused to
accommodate him in Flight No.
307, for which reason he lost
the business option
aforementioned. He also
alleged that PAL's personnel,
specifically Carmen, ridiculed
and humiliated him in the
presence of so many people.
Further, he alleged that

The Regional Trial Court (RTC) of Manila

held CAL and PAL jointly and severally
liable to respondent. It did not, however,
rule on their respective cross-claims. It
disposed as follows:
"WHEREFORE, judgment is
hereby rendered in favor of
plaintiff and against the
defendants to jointly and
severally pay:
1. Actual damages in the
amount of
HK$14,128.80 or
its equivalent in
Philippine
Currency at the

time of the loss of

5. Attorney[']s fees

the luggage

equivalent to 10%

consisting of

of the amounts

cosmetic

due and

products;

demandable and
awarded in favor

2. US$2,000.00 or its

of the plaintiff;

equivalent at the

and

time of the loss of

the clutch bag

6. The costs of this

containing the
money;
3. P200,000.00 by way
of moral
damages;

proceedings."

The two carriers appealed the RTC

Decision to the CA.
Ruling of the Court of Appeals

of this Court in KLM Loyal Dutch Airlines v.

Court of Appeals 8 as follows:
"Article 30 of the Warsaw
providing that in case of
transportation to be performed
by various successive carriers,
the passenger can take action
only against the carrier who
performed the transportation
during which the accident or the
delay occurred presupposes
the occurrence of either an
accident or delay in the course
of the air trip, and does not

Affirming the RTC, the Court of Appeals

apply if the damage is caused

debunked petitioner's claim that it had

by the willful misconduct on the

exemplary

merely acted as an issuing agent for the

part of the carrier's employee or

damages or

ticket covering the Hong Kong-Manila leg of

agent acting within the scope of

corrective

respondent's journey. In support of its

his employment.

damages;

Decision, the CA quoted a purported ruling

4. P50,000.00 by way of

"It would be unfair and

the passage ticket. Absent any

have sure space in the various

inequitable to charge a

showing that the carrier's

carriers which would ferry him

passenger with automatic

officials or employees

through the various segments

knowledge or notice of a

discharged this responsibility to

of the trip, and the ticket-issuing

condition which purportedly

the passenger, the latter cannot

carrier assumes full

would excuse the carrier from

be bound by the conditions by

responsibility for the entire trip

liability, where the notice is

which the carrier assumed the

and shall be held accountable

written at the back of the ticket

role of a mere ticket-issuing

for the breach of that guaranty

in letters so small that one has

agent for other airlines and

whether the breach occurred in

to use a magnifying glass to

limited its liability only to

its own lines or in those of the

read the words. To preclude

untoward occurrences in its

other carriers."

any doubt that the contract was

own lines.

fairly and freely agreed upon

when the passenger accepted
the passage ticket, the carrier
who issued the ticket must
inform the passenger of the
conditions prescribed in the
ticket or, in the very least,
ascertain that the passenger
read them before he accepted

On PAL's appeal, the appellate court held

"Where the passage tickets

that the carrier had reneged on its

provide that the carriage to be

obligation to transport respondent when, in

performed thereunder by

spite of the confirmations he had secured

several successive carriers 'is

for Flight PR 311, his name did not appear

to be regarded as a single

in the computerized list of passengers.

operation,' the carrier which

Ruling that the airline's negligence was the

issued the tickets for the entire

proximate cause of his excoriating

trip in effect guaranteed to the

experience, the appellate court sustained

passenger that the latter shall

the award of moral and exemplary

of that segment. Petitioner likewise prayed

Petition as required by Section 3, Rule 45,

damages.

for a ruling on its cross-claim against PAL,

in relation to Section 5(d) of Rule 56 and

inasmuch as the latter's employees had

paragraph 2 of Revised Circular No. 1-88

acted negligently, as found by the trial

of this Court. PAL's Motion for

court.

Reconsideration was denied with finality on

The CA, however, deleted the RTC's award

of actual damages amounting to
HK$14,128.80 and US$2,000.00, because

January 21, 2002.

the lost piece of luggage and clutch bag

Denying the Motion, the appellate court

had not actually been "checked in" or

ruled that petitioner had failed to raise any

Only the appeal of CAL remains in this

delivered to PAL for transportation to

new matter or issue that would warrant a

Court.

Manila.

modification or a reversal of the Decision.

As to the alleged misquotation, the CA held
that while the portion it had cited appeared

Issues
In its Memorandum, petitioner raises the
following issues for the Court's

On August 28, 2001, petitioner filed a

to be different from the wording of the

Motion for Partial Reconsideration,

actual ruling, the variance was "more

contending that the appellate court had

apparent than real since the difference

"1. The Court of Appeals

erroneously relied on a mere syllabus

[was] only in form and not in substance."

committed judicial misconduct

of KLM v. CA, not on the actual ruling

therein. Moreover, it argued that
respondent was fully aware that the
booking for the PAL sector had been made
only upon his request; and that only PAL,
not CAL, was liable for the actual carriage

CAL and PAL filed separate Petitions to

assail the CA Decision. In its October 3,
2001 Resolution, this Court denied PAL's
appeal, docketed as GR No. 149544, for
failure to serve the CA a copy of the

consideration:

in finding liability against the

petitioner on the basis of a
misquotation from KLM Royal
Dutch Airlines vs. Court of
Appeals, et al., 65 SCRA 237
and in magnifying its

misconduct by denying the

ruling against the two airlines on an

However, since this case is not

petitioner's Motion for

unofficial syllabus of this Court's ruling

administrative in nature, we cannot rule on

Reconsideration on a mere

in KLM v. CA. Moreover, such misconduct

the CA justices' administrative liability, if

syllabus, unofficial at that.

was allegedly aggravated when the CA, in

any, for this lapse. First, due process

an attempt to justify its action, held that the

requires that in administrative proceedings,

difference between the actual ruling and

the respondents must first be given an

the syllabus was "more apparent than real."

opportunity to be heard before sanctions

"2. The Court of Appeals

committed an error of law when
it did not apply applicable
precedents on the case before

We agree with petitioner that the CA

it.

committed a lapse when it relied merely on

"3. The Court of Appeals

committed a non sequitur when
it did not rule on the cross-claim
of the petitioner."

The Court's Ruling

The Petition is not meritorious.
First Issue:
Alleged Judicial Misconduct
Petitioner charges the CA with judicial
misconduct for quoting from and basing its

the unofficial syllabus of our ruling

in KLM v. CA. Indeed, lawyers and litigants
are mandated to quote decisions of this
Court accurately. By the same token,
judges should do no less by strictly abiding

can be imposed. Second, the present

action is an appeal from the CA's Decision,
not an administrative case against the
magistrates concerned. These two suits
are independent of and separate from each
other and cannot be mixed in the same
proceedings.

by this rule when they quote cases that

By merely including the lapse as an

support their judgments and

assigned error here without any adequate

decisions. Canon 3 of the Code of Judicial

and proper administrative case therefor,

Conduct enjoins them to perform official

petitioner cannot expect the imposition of

duties diligently by being faithful to the law

an administrative sanction.

and maintaining their professional

competence.

In the case at bar, we can only determine

its argument, it cited Article 30 of the

manager there, refused to

whether the error in quotation would be

Warsaw Convention, stating that when

transport the respondents to

sufficient to reverse or modify the CA

transportation was to be performed by

their planned and contracted

Decision.

various successive carriers, the passenger

destination.

Applicability of KLM v. CA
In KLM v. CA, the petitioner therein issued
tickets to the Mendoza spouses for their

could take action only against the carrier

that had performed the transportation when
the accident or delay occurred.

"2. The argument that the KLM

should not be held accountable
for the tortious conduct of Aer

world tour. The tour included a Barcelona-

In holding KLM liable for damages, we

Lingus because of the provision

Lourdes route, which was serviced by the

ruled as follows:

printed on the respondents'

Irish airline Aer Lingus. At the KLM office in

"1. The applicability insisted

Frankfurt, Germany, they obtained a

upon by the KLM of article 30

confirmation from Aer Lingus of their seat

of the Warsaw Convention

reservations on its Flight 861. On the day

cannot be sustained. That

of their departure, however, the airline

article presupposes the

rudely off-loaded them.

occurrence of either an

When sued for breach of contract, KLM

accident or a delay, neither of

sought to be excused for the wrongful

which took place at the

conduct of Aer Lingus by arguing that its

Barcelona airport; what is here

liability for damages was limited only to

manifest, instead, is that the

occurrences on its own sectors. To support

Aer Lingus, through its

tickets expressly limiting the

KLM's liability for damages only
to occurrences on its own lines
is unacceptable. As noted by
the Court of Appeals that
condition was printed in letters
so small that one would have to
use a magnifying glass to read
the words. Under the
circumstances, it would be
unfair and inequitable to charge
the respondents with automatic

knowledge or notice of the said

search of the record, however,

thereunder by several

condition so as to preclude any

inexplicably fails to show that

successive carriers 'is to be

doubt that it was fairly and

any effort was exerted by the

regarded as a single operation,'

freely agreed upon by the

KLM officials or employees to

which is diametrically

respondents when they

discharge in a proper manner

incompatible with the theory of

accepted the passage tickets

this responsibility to the

the KLM that the respondents

issued to them by the KLM. As

respondents. Consequently, we

entered into a series of

the airline which issued those

hold that the respondents

independent contracts with the

tickets with the knowledge that

cannot be bound by the

carriers which took them on the

the respondents would be flown

provision in question by which

various segments of their trip.

on the various legs of their

KLM unilaterally assumed the

This position of KLM we reject.

journey by different air carriers,

role of a mere ticket-issuing

The respondents dealt

the KLM was chargeable with

agent for other airlines and

exclusively with the KLM which

the duty and responsibility of

limited its liability only to

issued them tickets for their

specifically informing the

untoward occurrences on its

entire trip and which in effect

respondents of conditions

own lines.

guaranteed to them that they

prescribed in their tickets or, in

the very least, to ascertain that
the respondents read them
before they accepted their
passage tickets. A thorough

"3. Moreover, as maintained by

the respondents and the Court
of Appeals, the passage tickets
of the respondents provide that
the carriage to be performed

would have sure space in Aer

Lingus flight 861. The
respondents, under that
assurance of the internationally
prestigious KLM, naturally had

the right to expect that their

expressly embodied in our civil

"By the very nature of their

tickets would be honored by

law which enjoins courts to be

contract, defendant-appellant

Aer Lingus to which, in the legal

more vigilant for the protection

CAL is clearly liable under the

sense, the KLM had indorsed

of a contracting party who

contract of carriage with

and in effect guaranteed the

occupies an inferior position

[respondent] and remains to be

performance of its principal

with respect to the other

so, regardless of those

engagement to carry out the

contracting party, that the KLM

instances when actual carriage

respondents' scheduled

should be held responsible for

was to be performed by another

itinerary previously and

the abuse, injury and

carrier. The issuance of a

mutually agreed upon between

embarrassment suffered by the

confirmed CAL ticket in favor of

the parties.

respondents at the hands of a

[respondent] covering his entire

supercilious boor of the Aer

trip abroad concretely attests to

Lingus."

this. This also serves as proof

"4. The breach of that

guarantee was aggravated by
the discourteous and highly

In the instant case, the CA ruled that under

arbitrary conduct of an official

the contract of transportation, petitioner

of the Aer Lingus which the

as the ticket-issuing carrier (like KLM)

KLM had engaged to transport

was liable regardless of the fact that PAL

the respondents on the

was to perform or had performed the actual

Barcelona-Lourdes segment of

carriage. It elucidated on this point as

their itinerary, it is but just and

follows:

in full accord with the policy

that defendant-appellant CAL,

in effect guaranteed that the
carrier, such as defendantappellant PAL would honor his
ticket, assure him of a space
therein and transport him on a
particular segment of his trip."

Notwithstanding the errant quotation, we

Liability of the Ticket-Issuing Airline

have found after careful deliberation that

We now come to the main issue of whether

International Air Transport Association

the assailed Decision is supported in

CAL is liable for damages. Petitioner posits

(IATA).

substance by KLM v. CA. The misquotation

that the CA Decision must be annulled, not

by the CA cannot serve as basis for the

Article 1, Section 3 of the Warsaw

only because it was rooted on an

reversal of its ruling.

Convention states:

erroneous quotation, but also because it

Nonetheless, to avert similar incidents in

disregarded jurisprudence,

the future, this Court hereby exhorts

notably China Airlines v. Intermediate

members of the bar and the bench to refer

Appellate Court and China Airlines v. Court

to and quote from the official repository of

of Appeals

our decisions, the Philippine Reports,

whenever practicable. In the absence of
this primary source, which is still being
updated, they may resort to unofficial
sources like the SCRA. We remind them
that the Court's ponencia, when used to
support a judgment or ruling, should be
quoted accurately.

Second Issue:

Jurisprudence Supports CA Decision

party, and by the existing practices of the

"Transportation to be performed
by several successive air
carriers shall be deemed, for
the purposes of this
Convention, to be one
undivided transportation, if it

It is significant to note that the contract of

has been regarded by the

air transportation was between petitioner

parties as a single operation,

and respondent, with the former endorsing

whether it has been agreed

to PAL the Hong Kong-to-Manila segment

upon under the form of a single

of the journey. Such contract of carriage

contract or of a series of

has always been treated in this jurisdiction

contracts, and it shall not lose

as a single operation. This jurisprudential

its international character

rule is supported by the Warsaw

merely because one contract or

Convention, to which the Philippines is a

a series of contracts is to be

performed entirely within a

". . . Members of the IATA are

to receive the fare for the whole

territory subject to the

under a general pool

trip and through the required

sovereignty, suzerainty,

partnership agreement wherein

process of interline settlement

mandate, or authority of the

they act as agent of each other

of accounts by way of the IATA

same High Contracting Party."

in the issuance of tickets to

clearing house an airline is duly

contracted passengers to boost

compensated for the segment

ticket sales worldwide and at

of the trip serviced. Thus, when

the same time provide

the petitioner accepted the

passengers easy access

unused portion of the

to airlines which are otherwise

conjunction tickets, entered it in

inaccessible in some parts of

the IATA clearing house and

the world. Booking and

undertook to transport the

reservation among airline

private respondent over the

members are allowed even by

route covered by the unused

In American Airlines v. Court of

telephone and it has become

portion of the conjunction

Appeals, we have noted that under a

and accepted practice among

tickets, i.e., Geneva to New

general pool partnership agreement, the

them. A member airline which

York, the petitioner tacitly

ticket-issuing airline is the principal in a

enters into a contract of

recognized its commitment

contract of carriage, while the endorsee-

carriage consisting of a series

under the IATA pool

airline is the agent.

of trips to be performed by

arrangement to act as agent of

different carriers is authorized

the principal contracting airline,

Article 15 of IATA-Recommended Practice

similarly provides:
"Carriage to be performed by
several successive carriers
under one ticket, or under a
ticket and any conjunction ticket
issued therewith, is regarded as
a single operation."

Singapore Airlines, as to the

the principal carrier the

In the instant case, following the

segment of the trip the

petitioner's undertaking should

jurisprudence cited above, PAL acted as

petitioner agreed to undertake.

be taken as part of a single

the carrying agent of CAL. In the same way

As such, the petitioner thereby

operation under the contract of

that we ruled against British Airways and

assumed the obligation to take

carriage executed by the private

Lufthansa in the aforementioned cases, we

the place of the carrier

respondent and

also rule that CAL cannot evade liability to

originally designated in the

Singapore Airlines in Manila."

respondent, even though it may have been

original conjunction ticket. The

petitioner's argument that it is
not a designated carrier in the
original conjunction tickets and
that it issued its own ticket is
not decisive of its liability. The
new ticket was simply a
replacement for the unused
portion of the conjunction ticket,
both tickets being for the same
amount of US$2,760 and
having the same points of
departure and destination. By
constituting itself as an agent of

Likewise, as the principal in the contract of

carriage, the petitioner in British Airways v.
Court of Appeals was held liable, even

only a ticket issuer for the Hong KongManila sector.

Moral and Exemplary Damages

when the breach of contract had occurred,

Both the trial and the appellate courts

not on its own flight, but on that of another

found that respondent had satisfactorily

airline. The Decision followed our ruling

proven the existence of the factual basis for

in Lufthansa German Airlines v. Court of

the damages adjudged against petitioner

Appeals, in which we had held that the

and PAL. As a rule, the findings of fact of

obligation of the ticket-issuing airline

the CA affirming those of the RTC will not

remained and did not cease, regardless of

be disturbed by this Court. Indeed, the

the fact that another airline had undertaken

Supreme Court is not a trier of facts. As a

to carry the passengers to one of their

rule also, only questions of law as in the

destinations.

present recourse may be raised in

petitions for review under Rule 45.

Moral damages cannot be awarded in

damages are justly due. The

demandable when he presented himself for

breaches of carriage contracts, except in

same rule applies to breaches

the trip on November 24, 1981.

the two instances contemplated in Articles

of contract where the

1764 and 2220 of the Civil Code, which we

defendant acted fraudulently or

quote:

in bad faith." (Emphasis

"Article 1764. Damages in

supplied)

It is true that due to a typhoon, PAL was

unable to transport respondent on Flight
PR 311 on November 24, 1981. This fact,
however, did not terminate the carrier's

cases comprised in this Section

There is no occasion for us to invoke

responsibility to its passengers. PAL

shall be awarded in accordance

Article 1764 here. We must therefore

voluntarily obligated itself to automatically

with Title XVIII of this Book,

determine if CAL or its agent (PAL) is guilty

transfer all confirmed passengers of PR

concerning Damages. Article

of bad faith that would entitle respondent to

311 to the next available flight, PR 307, on

2206 shall also apply to the

moral damages.

the following day. That responsibility was

death of a passenger caused

by the breach of contract by a
common carrier.
xxx xxx xxx

In Lopez v. Pan American World

Airways, we defined bad faith as a breach
of a known duty through some motive of
interest or ill will.

"Article 2220. Willful injury to

In the case at bar, the known duty of PAL

property may be a legal ground

was to transport herein respondent from

for awarding moral damages if

Hong Kong to Manila. That duty arose

the court should find that, under

when its agent confirmed his reservation

the circumstances, such

for Flight PR 311, and it became

subsisting when respondent, holding a

confirmed ticket for the former flight,
presented himself for the latter.
The records amply establish that he
secured repeated confirmations of his PR
311 flight on November 24, 1981. Hence,
he had every reason to expect that he
would be put on the replacement flight as a
confirmed passenger. Instead, he was

harangued and prevented from boarding

the following day. To make matters worse,

faith. As the rule now stands,

the original and the replacement flights.

PAL allowed a group of non-revenue

where in breaching the contract

Thus, PAL breached its duty to transport

passengers, who had no confirmed tickets

of carriage the defendant airline

him. After he had been directed to pay the

or reservations, to board Flight PR 307.

is shown to have acted

terminal fee, his pieces of luggage were

removed from the weighing-in counter
despite his protestations.

fraudulently, with malice or in

Time and time again, this Court has

bad faith, the award of moral

stressed that the business of common

and exemplary damages, in

carriers is imbued with public interest and

addition to actual damages, is

It is relevant to point out that the employees

duty; therefore, the law governing them

of PAL were utterly insensitive to his need

imposes an exacting

to be in Manila on November 25, 1981, and

standard. In Singson v. Court of

In Saludo v. Court of Appeals, the Court

to the likelihood that his business affairs in

Appeals, we said:

reminded airline companies that due to the

the city would be jeopardized because of a

mistake on their part. It was that mistake
that had caused the omission of his name
from the passenger list despite his
confirmed flight ticket. By merely looking at
his ticket and validation sticker, it is evident
that the glitch was the airline's fault.
However, no serious attempt was made by
PAL to secure the all-important
transportation of respondent to Manila on

". . . [T]he carrier's utter lack of

care and sensitivity to the
needs of its passengers, clearly
constitutive of gross
negligence, recklessness and
wanton disregard of the rights

proper." (Emphasis supplied)

nature of their business, they must not

merely give cursory instructions to their
personnel to be more accommodating
towards customers, passengers and the
general public; they must require them to
be so.

of the latter, [are] acts evidently

The acts of PAL's employees, particularly

indistinguishable or no diferent

Chan, clearly fell short of the extraordinary

from fraud, malice and bad

standard of care that the law requires of

common carriers. As narrated in Chan's

Philippine Airlines in the

expected to check-in on

oral deposition, the manner in which the

handling of passengers

the flights if this flight is

airline discharged its responsibility to

of cancelled flight[s] like

cancelled or not

respondent and its other passengers

that of PR 311 which

operating due to typhoon

manifested a lack of the requisite diligence

was cancelled due to [a]

or other reasons[?] In

and due regard for their welfare. The

typhoon?

other words, are they not

pertinent portions of the Oral Deposition

are reproduced as follows:
"Q Now you said that flight PR

A The procedure will be: all the

confirmed passengers
from [PR] 311 24th

notified of the
cancellation?
A I think all these passengers

311 on 24th November

November [are]

were not notified

was cancelled due to [a]

automatically

because of a typhoon

typhoon and naturally

transfer[red] to [PR] 307,

and

the passengers on said

25th November[,] as a

Philippine Airlines Reser

flight had to be

protection for all

vation were [sic] not able

accommodated on the

disconfirmed

to call every passenger

first flight the following

passengers.

by phone.

day or the first flight

subsequently. [W]ill you
tell the Honorable
Deposition Officer the
procedure followed by

Q Aside from this procedure[,]

what do you do with the
passengers on the
cancelled flight who are

Atty. Fruto:
Q Did you say "were not
notified?'

A I believe they were not, but

"Q I see. Miss Chan, I [will]

believe me, I was on

show you a ticket which

day-off.

has been marked as

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

A I believe I saw it.

Q You saw it, O.K. Now of
course you will agree

Exh. A and A-1. Will you

with me Miss Chan that

please go over this ticket

this yellow stub here

and tell the court

which has been marked

whether this is the ticket

as Exh. A-1-A, show[s]

that was used precisely

that the status on flight

by Mr. Chiok when he

311, 24th November, is

checked-in at [F]light

O.K., correct?

307, 25 November '81?

A [Are you] now asking me
whether he used this
ticket with this sticker?
Q No, no, no. That was the
ticket he used.
A Yes, [are you] asking me
whether I saw this ticket?
Atty. Fruto: Yes.

A Yes.
Q You agree with me. And you
will also agree with me
that in this ticket of flight
311, on this, another
sticker Exh. A-1-B for 24
November is O.K.?
A May I . . . look at them. Yes, it
says O.K. . . .; but [there
is] no validation.

Q O.K. Miss Chan what do you

were automatically

A I can only give you a very

understand by these

transferred to 307 as a

brief idea because that

entries here R bar M N

protection for the

was supposed to be air

6 V?

passengers, correct?

bus so it should be able

A This is what we call a

computer reference.
Q I see. This is a computer

A Correct.
Q So that since following the
O.K. status of

to accommodate 246
people; but how many
[exactly], I don't know."
xxx xxx xxx

reference showing that

Mr. Chiok's reservation

the name of

[on] flight 311, [he] was

Mr. Chiok has been

also automatically

o'clock in the evening of

entered in Philippine

transferred to flight 307

25 November '81,

Airline's computer, and

the following day?

Mr. Chiok already told

this is his computer

number.

A Should be.
Q Should be. O.K. Now do you

A Yes.

"Q So, between six and eight

you that he just [came]

from the Swire Building
where

remember how many

PhilippineAirlines had

passengers . . . were

[its] offices and that he

answer to the procedure

transferred from flight

told you that his space

taken, that all confirmed

311, 24 November to

for 311 25 November 81

passengers on flight

flight 307, 25 November

was confirmed?

311, 24 November[,]

81?

Q Now you stated in your

A Yes.
Q That is what he told you. He

Philippine Airlines to

award of moral and exemplary damages

issue tickets for and on

against it.

behalf of

insisted on that flight?

Philippine Airlines and

A Yes.

also . . .

Q And did you not try to call up

Swire Building
Philippine Airlines and
verify indeed if
Mr. Chiok was there?
A Swire House building is not

This Court's 1992 ruling in China Airlines v.

Court of Appeals is likewise inapplicable. In
that case, we found no bad faith or malice
in the airline's breach of its contractual

A Yes.
Q And also to confirm spaces
for and on behalf of
Philippine Airlines.
A Yes."

obligation. We held that, as shown by the

flow of telexes from one of the airline's
offices to the others, petitioner therein had
exercised diligent efforts in assisting the
private respondent change his flight

directly under

Under the foregoing circumstances, we

schedule. In the instant case, petitioner

Philippine Airlines. It is

cannot apply our 1989 ruling

failed to exhibit the same care and

just an agency for selling

in China Airlines v. Intermediate Appellate

sensitivity to respondent's needs.

Philippine Airlines ticket.

Court, which petitioner urges us to adopt.

In Singson v. Court of Appeals, we said:

And besides around six

In that case, the breach of contract and the

o'clock they're close[d] in

negligence of the carrier in effecting the

Central.

immediate flight connection for therein

Q So this Swire Building is an

agency authorized by

private respondent was incurred in good

faith. Having found no gross negligence or
recklessness, we thereby deleted the

". . . Although the rule is that

moral damages predicated
upon a breach of contract of
carriage may only be
recoverable in instances where

the mishap results in the death

respondent's name had been entered in

In view of the foregoing, we rule that moral

of a passenger, or where the

PAL's computer.

and exemplary damages were properly

carrier is guilty of fraud or bad

faith, there are situations where
the negligence of the carrier is
so gross and reckless as to
virtually amount to bad faith, in
which case, the passenger
likewise becomes entitled to
recover moral damages."

Since the status of respondent on Flight

awarded by the lower courts.

PR 311 was "OK," as a matter of right

Third Issue:

testified to by PAL's witness, he should

Propriety of the Cross-Claim

have been automatically transferred to and

allowed to board Flight 307 the following
day. Clearly resulting from negligence on
the part of PAL was its claim that his name
was not included in its list of passengers for

We now look into the propriety of the ruling

on CAL's cross-claim against PAL.
Petitioner submits that the CA should have
ruled on the cross-claim, considering that
the RTC had found that it was PAL's

In the present case, we stress that

the November 24, 1981 PR 311 flight and,

respondent had repeatedly secured

consequently, in the list of the replacement

confirmations of his PR 311 flight on

flight PR 307. Since he had secured

Section 8 of Rule 6 of the Rules of Court

November 24, 1981 initially from CAL

confirmation of his flight not only once,

reads:

and subsequently from the PAL office in

but twice by personally going to the

"Sec. 8. Cross-claim. A

Hong Kong. The status of this flight was

carrier's offices where he was consistently

cross claim is any claim by one

marked "OK" on a validating sticker placed

assured of a seat thereon PAL's

party against a co-party arising

on his ticket. That sticker also contained

negligence was so gross and reckless that

out of the transaction or

the entry "RMN6V." Ms Chan explicitly

it amounted to bad faith.

occurrence that is the subject

employees who had acted negligently.

acknowledged that such entry was a

matter either of the original

computer reference that meant that

action or of a counterclaim

therein. Such cross-claim may

with the other parties that his

Although PAL was petitioner's co-party in

include a claim that the party

legal presence as a party to the

the case before the RTC and the CA,

against whom it is asserted is

proceeding is an absolute

petitioner failed to include the airline in the

or may be liable to the cross-

necessity. In his absence there

present recourse. Hence, the Court has no

claimant for all or part of a

cannot be a resolution of the

jurisdiction over it. Consequently, to make

claim asserted in the action

dispute of the parties before the

any ruling on the cross-claim in the present

against the cross-claimant."

court which is effective,

Petition would not be legally feasible

complete, or equitable.

because PAL, not being a party in the

For purposes of a ruling on the cross-claim,

PAL is an indispensable party. In BA
Finance Corporation v. CA, the Court
stated:

present case, cannot be bound thereby.

xxx xxx xxx

WHEREFORE, the Petition is DENIED.

"Without the presence of

Costs against petitioner. SO ORDERED.

indispensable parties to a suit

". . .. An indispensable party is

or proceeding, judgment of a

one whose interest will be

court cannot attain real finality."

affected by the court's action in

the litigation, and without whom
no final determination of the
case can be had. The party's
interest in the subject matter of
the suit and in the relief sought
are so inextricably intertwined

|||

CATHAY PACIFIC

PAL's interest may be affected by any

ruling of this Court on CAL's cross-claim.
Hence, it is imperative and in accordance
with due process and fair play that PAL
should have been impleaded as a party in
the present proceedings, before this Court
can make a final ruling on this matter.

[G.R. No. 150843. March 14, 2003.]

DSAEIT

AIRWAYS,
LTD., petitioner, vs.
SPOUSES DANIEL
VAZQUEZ and MARIA
LUISA MADRIGAL
VAZQUEZ, respondents.

SYNOPSIS

the Business Class; and moreover, they

passengers, like the Vazquezes. The

were going to discuss business matters

trial court found for the Vazquezes and

Earnshaw Vazquez and Maria Luisa

during the flight. Dr. Vazquez continued

awarded them damages. On appeal by

Madrigal Vazquez are frequent flyers of

to refuse, so the ground stewardess told

the petitioner, the Court of Appeals

petitioner Cathay Pacific Airways, Ltd.,

them that if they would not avail

deleted the award for exemplary

and are Gold Card members of its

themselves of the privilege, they would

damages; and it reduced the awards for

Marco Polo Club. The Vazquezes,

not be allowed to take the flight.

moral and nominal damages for each of

together with their maid and two friends,

Eventually, after talking to his two

the Vazquezes to P250,000 and

Pacita Cruz and Josefina Vergel de

friends, Dr. Vazquez gave in. Upon their

P50,000, respectively, and the

Dios, went to Hongkong for pleasure

return to Manila, the Vazquezes

attorney's fees and litigation expenses

and business. For their return flight to

instituted before the Regional Trial Court

to P50,000 for both of them. Hence this

Manila, they were booked on Cathay's

of Makati City an action for damages

petition.

Flight CX-905 Business Class Section.

against Cathay. In its answer, Cathay

When boarding time was announced, a

alleged that it is a practice among

granted the petition. According to the

ground attendant approached Dr.

commercial airlines to upgrade

Court, the Vazquezes should have been

Vazquez and told him that the

passengers to the next better class of

consulted first whether they wanted to

Vazquezes' accommodations were

accommodation, whenever an

avail themselves of the privilege or

upgraded to First Class. Dr. Vazquez

opportunity arises, such as when a

would consent to a change of seat

refused the upgrade, reasoning that it

certain section is fully booked. Priority in

accommodation before their seat

would not look nice for them as hosts to

upgrading is given to its frequent flyers,

assignments were given to other

travel in First Class and their guests, in

who are considered favored

passengers. Normally, one would

Respondents-spouses Dr. Daniel

The Supreme Court partly

appreciate and accept an upgrading, for

or deceitful machination or through

whereby one agrees to give something or

it would mean a better accommodation.

willful concealment of material facts.

render some service to another for a

But, whatever their reason was and

The attendant was honest in telling

consideration. There is no contract unless

however odd it might be, the Vazquezes

them that their seats were already given

the following requisites concur: (1) consent

had every right to decline the upgrade

to other passengers and the Business

of the contracting parties; (2) an object

and insist on the Business Class

Class Section was fully booked. The

certain which is the subject of the contract;

accommodation they had booked for

attendant might have failed to consider

and (3) the cause of the obligation which is

and which was designated in their

the remedy of offering the First. Class

established. Undoubtedly, a contract of

boarding passes. They clearly waived

seats to other passengers. But, the

carriage existed between Cathay and the

their priority or preference when they

Court found no bad faith in her failure to

Vazquezes. They voluntarily and freely

asked that other passengers be given

do so, even if that amounted to an

gave their consent to an agreement whose

the upgrade. It should not have been

exercise of poor judgment. The Court

object was the transportation of the

imposed on them over their vehement

set aside and deleted the award of

Vazquezes from Manila to Hong Kong and

objection. By insisting on the upgrade,

moral damages and attorney's fees and

back to Manila, with seats in the Business

Cathay breached its contract of carriage

reduced the award for nominal damages

Class Section of the aircraft, and whose

with the Vazquezes. The Court,

to P5,000.

cause or consideration was the fare paid by

however, was not convinced that the

upgrading or the breach of contract was
attended by fraud or bad faith. The
Vazquezes were not induced to agree to
the upgrading through insidious words

the Vazquezes to Cathay. The only

SYLLABUS
1. CIVIL LAW; CONTRACTS; BREACH OF
CONTRACT; DEFINED. A contract is a
meeting of minds between two persons

problem is the legal effect of the upgrading

of the seat accommodation of the
Vazquezes. Did it constitute a breach of
contract? Breach of contract is defined as

the "failure without legal reason to comply

Business Class was overbooked in that

passengers. Normally, one would

with the terms of a contract." It is also

there were more passengers than the

appreciate and accept an upgrading, for it

defined as the "[f]ailure, without legal

number of seats. Thus, the seat

would mean a better accommodation. But,

excuse, to perform any promise which

assignments of the Vazquezes were given

whatever their reason was and however

to waitlisted passengers, and the

odd it might be, the Vazquezes had every

Vazquezes, being members of the Marco

right to decline the upgrade and insist on

Polo Club, were upgraded from Business

the Business Class accommodation they

Class to First Class. We note that in all

had booked for and which was designated

their pleadings, the Vazquezes never

in their boarding passes. They clearly

denied that they were members of Cathay's

waived their priority or preference when

Marco Polo Club. They knew that as

they asked that other passengers be given

members of the Club, they had priority for

the upgrade. It should not have been

upgrading of their seat accommodation at

imposed on them over their vehement

no extra cost when an opportunity arises.

objection. By insisting on the upgrade,

But, just like other privileges, such priority

Cathay breached its contract of carriage

could be waived. The Vazquezes should

with the Vazquezes.

forms the whole or part of the contract."

acIASE

2. ID.; ID.; ID.; BY INSISTING ON THE

UPGRADE, PETITIONER BREACHED ITS
CONTRACT OF CARRIAGE WITH THE
RESPONDENTS. The contract between
the parties was for Cathay to transport the
Vazquezes to Manila on a Business Class
accommodation in Flight CX-905. After
checking-in their luggage at the Kai Tak
Airport in Hong Kong, the Vazquezes were
given boarding cards indicating their seat
assignments in the Business Class
Section. However, during the boarding
time, when the Vazquezes presented their
boarding passes, they were informed that
they had a seat change from Business
Class to First Class. It turned out that the

have been consulted first whether they

wanted to avail themselves of the privilege
or would consent to a change of seat
accommodation before their seat
assignments were given to other

3. ID.; ID.; NO PROOF OF FRAUD OR

BAD FAITH ON THE PART OF
PETITIONER AIRLINE'S EMPLOYEE.
Bad faith and fraud are allegations of fact
that demand clear and convincing proof.

They are serious accusations that can be

the nature of fraud. We find no persuasive

to by Mr. Robson, the First Class Section is

so conveniently and casually invoked, and

proof of fraud or bad faith in this case. The

better than the Business Class Section in

that is why they are never presumed. They

Vazquezes were not induced to agree to

terms of comfort, quality of food, and

amount to mere slogans or mudslinging

the upgrading through insidious words or

service from the cabin crew; thus, the

unless convincingly substantiated by

deceitful machination or through willful

difference in fare between the First Class

whoever is alleging them. Fraud has been

concealment of material facts. Upon

and Business Class at that time was $250.

defined to include an inducement through

boarding, Ms. Chiu told the Vazquezes that

Needless to state, an upgrading is for the

insidious machination. Insidious

their accommodations were upgraded to

better condition and, definitely, for the

machination refers to a deceitful scheme or

First Class in view of their being Gold Card

benefit of the passenger.

plot with an evil or devious purpose. Deceit

members of Cathay's Marco Polo Club.

exists where the party, with intent to

She was honest in telling them that their

deceive, conceals or omits to state material

seats were already given to other

facts and, by reason of such omission or

passengers and the Business Class

concealment, the other party was induced

Section was fully booked. Ms. Chiu might

to give consent that would not otherwise

have failed to consider the remedy of

have been given. Bad faith does not simply

offering the First Class seats to other

connote bad judgment or negligence; it

passengers. But, we find no bad faith in her

imports a dishonest purpose or some moral

failure to do so, even if that amounted to an

obliquity and conscious doing of a wrong, a

exercise of poor judgment. Neither was the

breach of a known duty through some

transfer of the Vazquezes effected for

motive or interest or ill will that partakes of

some evil or devious purpose. As testified

4. CIVIL LAW; DAMAGES; MORAL

DAMAGES; NOT APPLICABLE IN CASE
AT BAR; AIRLINE NOT SHOWN TO HAVE
ACTED FRAUDULENTLY OR IN BAD
FAITH. Moral damages include physical
suffering, mental anguish, fright, serious
anxiety, besmirched reputation, wounded
feelings, moral shock, social humiliation,
and similar injury. Although incapable of
pecuniary computation, moral damages
may be recovered if they are the proximate
result of the defendant's wrongful act or

omission. Thus, case law establishes the

and probable consequences of the breach

exemplary damages that the act of the

following requisites for the award of moral

of the obligation which the parties had

offender must be accompanied by bad faith

damages: (1) there must be an injury

foreseen or could have reasonably

or done in wanton, fraudulent or malevolent

clearly sustained by the claimant, whether

foreseen. In such a case the liability does

manner. Such requisite is absent in this

physical, mental or psychological; (2) there

not include moral and exemplary damages.

case. Moreover, to be entitled thereto the

must be a culpable act or omission

In this case, we have ruled that the breach

claimant must first establish his right to

factually established; (3) the wrongful act or

of contract of carriage, which consisted in

moral, temperate, or compensatory

omission of the defendant is the proximate

the involuntary upgrading of the

damages. Since the Vazquezes are not

cause of the injury sustained by the

Vazquezes' seat accommodation, was not

entitled to any of these damages, the

claimant; and (4) the award for damages is

attended by fraud or bad faith. The Court of

award for exemplary damages has no legal

predicated on any of the cases stated in

Appeals' award of moral damages has,

basis. And where the awards for moral and

Article 2219 of the Civil Code. Moral

therefore, no leg to stand on.

exemplary damages are eliminated, so

damages predicated upon a breach of

contract of carriage may only be
recoverable in instances where the carrier
is guilty of fraud or bad faith or where the
mishap resulted in the death of a
passenger. Where in breaching the
contract of carriage the airline is not shown
to have acted fraudulently or in bad faith,
liability for damages is limited to the natural

5. ID.; ID.; EXEMPLARY DAMAGES;

must the award for attorney's fees.

REQUISITE THAT THE ACT OF THE

6. ID.; ID.; NOMINAL DAMAGES;

OFFENDER WAS ACCOMPANIED BY

REDUCED. The most that can be

BAD FAITH OR DONE IN WANTON,

adjudged in favor of the Vazquezes for

FRAUDULENT OR MALEVOLENT

Cathay's breach of contract is an award for

MANNER, ABSENT IN CASE AT BAR.

nominal damages under Article 2221 of the

The deletion of the award for exemplary

Civil Code. Worth noting is the fact that in

damages by the Court of Appeals is

Cathay's Memorandum filed with this

correct. It is a requisite in the grant of

Court, it prayed only for the deletion of the

award for moral damages. It deferred to the

Vazquezes by upgrading their Business

Cathay is a common carrier engaged in the

Court of Appeals' discretion in awarding

Class accommodation to First Class

business of transporting passengers and

nominal damages; thus: As far as the

because of their valued status as Marco

goods by air. Among the many routes it

award of nominal damages is concerned,

Polo members, we reduce the award for

services is the Manila-Hongkong-Manila

petitioner respectfully defers to the

nominal damages to P5,000.

course. As part of its marketing strategy,

EIAaDC

Honorable Court of Appeals' discretion.

Aware as it is that somehow, due to the
resistance of respondents-spouses to the
normally-appreciated gesture of petitioner
to upgrade their accommodations,

Cathay accords its frequent flyers

DECISION

DAVIDE, JR., C.J :

p

membership in its Marco Polo Club. The

members enjoy several privileges, such as
priority for upgrading of booking without
any extra charge whenever an opportunity

petitioner may have disturbed the

Is an involuntary upgrading of an airline

arises. Thus, a frequent flyer booked in the

respondents-spouses' wish to be with their

passenger's accommodation from one

Business Class has priority for upgrading to

companions (who traveled to Hong Kong

class to a more superior class at no extra

First Class if the Business Class Section is

with them) at the Business Class on their

cost a breach of contract of carriage that

fully booked.

flight to Manila. Petitioner regrets that in its

would entitle the passenger to an award of

desire to provide the respondents-spouses

damages? This is a novel question that has

with additional amenities for the one and

to be resolved in this case.

one-half (1 1/2) hour flight to Manila,

unintended tension ensued. Nonetheless,
considering, that the breach was intended
to give more benefit and advantage to the

Respondents-spouses Dr. Daniel

Earnshaw Vazquez and Maria Luisa
Madrigal Vazquez are frequent flyers of

The facts in this case, as found by the

Cathay and are Gold Card members of its

Court of Appeals and adopted by petitioner

Marco Polo Club. On 24 September 1996,

Cathay Pacific Airways, Ltd., (hereinafter

the Vazquezes, together with their maid

Cathay) are as follows:

and two friends Pacita Cruz and Josefina

Vergel de Dios, went to Hongkong for

to the ground stewardess, who in turn

Ms. Chiu consulted her supervisor, who

pleasure and business.

inserted it into an electronic machine

told her to handle the situation and

reader or computer at the gate. The ground

convince the Vazquezes to accept the

stewardess was assisted by a ground

upgrading. Ms. Chiu informed the latter that

attendant by the name of Clara Lai Han

the Business Class was fully booked, and

Chiu. When Ms. Chiu glanced at the

that since they were Marco Polo Club

computer monitor, she saw a message that

members they had the priority to be

there was a "seat change" from Business

upgraded to the First Class. Dr. Vazquez

Class to First Class for the Vazquezes.

continued to refuse, so Ms. Chiu told them

For their return flight to Manila on 28

September 1996, they were booked on
Cathay's Flight CX-905, with departure time
at 9:20 p.m. Two hours before their time of
departure, the Vazquezes and their
companions checked in their luggage at
Cathay's check-in counter at Kai Tak
Airport and were given their respective

Ms. Chiu approached Dr. Vazquez and told

boarding passes, to wit, Business Class

him that the Vazquezes' accommodations

boarding passes for the Vazquezes and

were upgraded to First Class. Dr. Vazquez

their two friends, and Economy Class for

refused the upgrade, reasoning that it

their maid. They then proceeded to the

would not look nice for them as hosts to

Business Class passenger lounge.

travel in First Class and their guests, in the

When boarding time was announced, the

Vazquezes and their two friends went to
Departure Gate No. 28, which was
designated for Business Class passengers.
Dr. Vazquez presented his boarding pass

that if they would not avail themselves of

the privilege, they would not be allowed to
take the flight. Eventually, after talking to
his two friends, Dr. Vazquez gave in. He
and Mrs. Vazquez then proceeded to the
First Class Cabin.

Business Class; and moreover, they were

Upon their return to Manila, the Vazquezes,

going to discuss business matters during

in a letter of 2 October 1996 addressed to

the flight. He also told Ms. Chiu that she

Cathay's Country Manager, demanded that

could have other passengers instead

they be indemnified in the amount of

transferred to the First Class Section.

P1million for the "humiliation and

Taken aback by the refusal for upgrading,

embarrassment" caused by its employees.

They also demanded "a written apology

P500,000 as exemplary or corrective

compartment. Because he was not

from the management of Cathay, preferably

damages; and P250,000 as attorney's fees.

assisted by any of the crew in putting up his

a responsible person with a rank of no less

than the Country Manager, as well as the
apology from Ms. Chiu" within fifteen days
from receipt of the letter.

In their complaint, the Vazquezes alleged

that when they informed Ms. Chiu that they
preferred to stay in Business Class, Ms.
Chiu "obstinately, uncompromisingly and in

luggage, his bilateral carpal tunnel

syndrome was aggravated, causing him
extreme pain on his arm and wrist. The
Vazquezes also averred that they "belong
to the uppermost and absolutely top elite of

In his reply of 14 October 1996, Mr. Larry

a loud, discourteous and harsh voice

Yuen, the assistant to Cathay's Country

threatened" that they could not board and

Manager Argus Guy Robson, informed the

leave with the flight unless they go to First

Vazquezes that Cathay would investigate

Class, since the Business Class was

the incident and get back to them within a

overbooked. Ms. Chiu's loud and stringent

week's time.

shouting annoyed, embarrassed, and

In its answer, Cathay alleged that it is a

humiliated them because the incident was

practice among commercial airlines to

witnessed by all the other passengers

upgrade passengers to the next better

waiting for boarding. They also claimed that

class of accommodation, whenever an

they were unjustifiably delayed to board the

opportunity arises, such as when a certain

plane, and when they were finally permitted

section is fully booked. Priority in upgrading

to get into the aircraft, the forward storage

is given to its frequent flyers, who are

compartment was already full. A flight

considered favored passengers like the

stewardess instructed Dr. Vazquez to put

Vazquezes. Thus, when the Business

his roll-on luggage in the overhead storage

Class Section of Flight CX-905 was fully

On 8 November 1996, after Cathay's failure

to give them any feedback within its selfimposed deadline, the Vazquezes instituted
before the Regional Trial Court of Makati
City an action for damages against Cathay,
praying for the payment to each of them the
amounts of P250,000 as temperate
damages; P500,000 as moral damages;

both Philippine Society and the Philippine

financial community, [and that] they were
among the wealthiest persons in the
Philippine[s]."

booked, Cathay's computer sorted out the

she politely informed Dr. Vazquez of such

P300,000 as attorney's fees and litigation

names of favored passengers for

fact and explained that the upgrading was

expenses.

involuntary upgrading to First Class. When

in recognition of their status as Cathay's

Ms. Chiu informed the Vazquezes that they

valued passengers. Finally, after talking to

were upgraded to First Class, Dr. Vazquez

their guests, the Vazquezes eventually

During the trial, Dr. Vazquez testified to

refused. He then stood at the entrance of

decided to take the First Class

support the allegations in the complaint.

the boarding apron, blocking the queue of

accommodation.

His testimony was corroborated by his two

passengers from boarding the plane, which

inconvenienced other passengers. He
shouted that it was impossible for him and
his wife to be upgraded without his two
friends who were traveling with them.
Because of Dr. Vazquez's outburst, Ms.
Chiu thought of upgrading the traveling
companions of the Vazquezes. But when
she checked the computer, she learned
that the Vazquezes' companions did not
have priority for upgrading. She then tried
to book the Vazquezes again to their
original seats. However, since the Business
Class Section was already fully booked,

Cathay also asserted that its employees at

the Hong Kong airport acted in good faith in
dealing with the Vazquezes; none of them

friends who were with him at the time of the

incident, namely, Pacita G. Cruz and
Josefina Vergel de Dios.

shouted, humiliated, embarrassed, or

For its part, Cathay presented documentary

committed any act of disrespect against

evidence and the testimonies of Mr. Yuen;

them (the Vazquezes). Assuming that there

Ms. Chiu; Norma Barrientos, Comptroller of

was indeed a breach of contractual

its retained counsel; and Mr. Robson. Yuen

obligation, Cathay acted in good faith,

and Robson testified on Cathay's policy of

which negates any basis for their claim for

upgrading the seat accommodation of its

temperate, moral, and exemplary damages

Marco Polo Club members when an

and attorney's fees. Hence, it prayed for the

opportunity arises. The upgrading of the

dismissal of the complaint and for payment

Vazquezes to First Class was done in good

of P100,000 for exemplary damages and

faith; in fact, the First Class Section is

definitely much better than the Business

Class in terms of comfort, quality of food,

nothing happened until Cathay received a

and service from the cabin crew. They also

copy of the complaint in this case. For her

the amount of

testified that overbooking is a widely

part, Ms. Chiu denied that she shouted or

P100,000.00 for

accepted practice in the airline industry and

used foul or impolite language against the

each plaintiff;

is in accordance with the International Air

Vazquezes. Ms. Barrientos testified on the

Transport Association (IATA) regulations.

amount of attorney's fees and other

Airlines overbook because a lot of

litigation expenses, such as those for the

passengers do not show up for their flight.

taking of the depositions of Yuen and Chiu.

With respect to Flight CX-905, there was no

overall overbooking to a degree that a
passenger was bumped off or downgraded.
Yuen and Robson also stated that the

In its decision of 19 October 1998, the trial

court found for the Vazquezes and decreed
as follows:

demand letter of the Vazquezes was

WHEREFORE, finding

immediately acted upon. Reports were

preponderance of evidence to

gathered from their office in Hong Kong

sustain the instant complaint,

and immediately forwarded to their counsel

judgment is hereby rendered in

Atty. Remollo for legal advice. However,

favor of plaintiffs Vazquez

Atty. Remollo begged off because his

spouses and against defendant

services were likewise retained by the

Cathay Pacific Airways, Ltd.,

Vazquezes; nonetheless, he undertook to

ordering the latter to pay each

solve the problem in behalf of Cathay. But

plaintiff the following:

a) Nominal damages in

b) Moral damages in the

amount of
P2,000,000.00 for
each plaintiff;
c) Exemplary damages
in the amount of
P5,000,000.00 for
each plaintiff;
d) Attorney's fees and
expenses of
litigation in the
amount of
P1,000,000.00 for
each plaintiff; and
e) Costs of suit.

SO ORDERED.

According to the trial court, Cathay offers

various classes of seats from which
passengers are allowed to choose
regardless of their reasons or motives,
whether it be due to budgetary constraints
or whim. The choice imposes a clear
obligation on Cathay to transport the
passengers in the class chosen by them.

On appeal by the petitioners, the Court of

meant to be discourteous to, Dr. Vazquez,

Appeals, in its decision of 24 July

although it might seemed that way to the

2001, deleted the award for exemplary

latter, who was a member of the elite in

damages; and it reduced the awards for

Philippine society and was not therefore

moral and nominal damages for each of the

used to being harangued by anybody. Ms.

Vazquezes to P250,000 and P50,000,

Chiu was a Hong Kong Chinese whose

respectively, and the attorney's fees and

fractured Chinese was difficult to

litigation expenses to P50,000 for both of

understand and whose manner of speaking

them.

might sound harsh or shrill to Filipinos

The carrier cannot, without exposing itself

The Court of Appeals ratiocinated that by

to liability, force a passenger to involuntarily

upgrading the Vazquezes to First Class,

change his choice. The upgrading of the

Cathay novated the contract of carriage

Vazquezes' accommodation over and

without the former's consent. There was a

above their vehement objections was due

breach of contract not because Cathay

to the overbooking of the Business Class. It

overbooked the Business Class Section of

was a pretext to pack as many passengers

Flight CX-905 but because the latter

as possible into the plane to maximize

pushed through with the upgrading despite

Cathay's revenues. Cathay's actuations in

the objections of the Vazquezes.

this case displayed deceit, gross

negligence, and bad faith, which entitled
the Vazquezes to awards for damages.

because of cultural differences. But the

Court of Appeals did not find her to have
acted with deliberate malice, deceit, gross
negligence, or bad faith. If at all, she was
negligent in not offering the First Class
accommodations to other passengers.
Neither can the flight stewardess in the
First Class Cabin be said to have been in
bad faith when she failed to assist Dr.
Vazquez in lifting his baggage into the

However, the Court of Appeals was not

overhead storage bin. There is no proof

convinced that Ms. Chiu shouted at, or

that he asked for help and was refused

even after saying that he was suffering

absque injuria, which is damage without

damages and attorney's fees in view of the

from "bilateral carpal tunnel syndrome."

injury, damage or injury inflicted without

breach of contract committed by Cathay for

Anent the delay of Yuen in responding to

injustice, loss or damage without violation

transferring them from the Business Class

the demand letter of the Vazquezes, the

of a legal right, or a wrong done to a man

to First Class Section without prior notice or

Court of Appeals found it to have been

for which the law provides no remedy.

consent and over their vigorous objection.

sufficiently explained.

Cathay also invokes our decision inUnited

They likewise argue that the issuance of

Airlines, Inc. v. Court of Appeals where we

passenger tickets more than the seating

recognized that, in accordance with the

capacity of each section of the plane is in

Civil Aeronautics Board's Economic

itself fraudulent, malicious and tainted with

Regulation No. 7, as amended, an

bad faith.

The Vazquezes and Cathay separately filed

motions for a reconsideration of the
decision, both of which were denied by the
Court of Appeals.

overbooking that does not exceed ten

Cathay seasonably filed with us this

percent cannot be considered deliberate

petition in this case. Cathay maintains that

and done in bad faith. We thus deleted in

the award for moral damages has no basis,

that case the awards for moral and

since the Court of Appeals found that there

exemplary damages, as well as attorney's

was no "wanton, fraudulent, reckless and

fees, for lack of proof of overbooking

oppressive" display of manners on the part

exceeding ten percent or of bad faith on the

of its personnel; and that the breach of

part of the airline carrier.

contract was not attended by fraud, malice,

or bad faith. If any damage had been
suffered by the Vazquezes, it was damnum

On the other hand, the Vazquezes assert

that the Court of Appeals was correct in
granting awards for moral and nominal

The key issues for our consideration are

whether (1) by upgrading the seat
accommodation of the Vazquezes from
Business Class to First Class Cathay
breached its contract of carriage with the
Vazquezes; (2) the upgrading was tainted
with fraud or bad faith; and (3) the
Vazquezes are entitled to damages.
We resolve the first issue in the affirmative.

A contract is a meeting of minds between

the Vazquezes. Did it constitute a breach of

given boarding cards indicating their seat

two persons whereby one agrees to give

contract?

assignments in the Business Class

something or render some service to

another for a consideration. There is no
contract unless the following requisites
concur: (1) consent of the contracting
parties; (2) an object certain which is the
subject of the contract; and (3) the cause of
the obligation which is

Breach of contract is defined as the "failure

without legal reason to comply with the
terms of a contract." It is also defined as
the "[f]ailure, without legal excuse, to
perform any promise which forms the
whole or part of the contract."

Section. However, during the boarding

time, when the Vazquezes presented their
boarding passes, they were informed that
they had a seat change from Business
Class to First Class. It turned out that the
Business Class was overbooked in that
there were more passengers than the

established. Undoubtedly, a contract of

In previous cases, the breach of contract of

number of seats. Thus, the seat

carriage existed between Cathay and the

carriage consisted in either the bumping off

assignments of the Vazquezes were given

Vazquezes. They voluntarily and freely

of a passenger with confirmed reservation

to waitlisted passengers, and the

gave their consent to an agreement whose

or the downgrading of a passenger's seat

Vazquezes, being members of the Marco

object was the transportation of the

accommodation from one class to a lower

Polo Club, were upgraded from Business

Vazquezes from Manila to Hong Kong and

class. In this case, what happened was the

Class to First Class.

back to Manila, with seats in the Business

reverse. The contract between the parties

Class Section of the aircraft, and whose

was for Cathay to transport the Vazquezes

cause or consideration was the fare paid by

to Manila on a Business Class

the Vazquezes to Cathay.

accommodation in Flight CX-905. After

The only problem is the legal effect of the

upgrading of the seat accommodation of

checking-in their luggage at the Kai Tak

Airport in Hong Kong, the Vazquezes were

We note that in all their pleadings, the

Vazquezes never denied that they were
members of Cathay's Marco Polo Club.
They knew that as members of the Club,
they had priority for upgrading of their seat
accommodation at no extra cost when an

opportunity arises. But, just like other

objection. By insisting on the upgrade,

intent to deceive, conceals or omits to state

privileges, such priority could be waived.

Cathay breached its contract of carriage

material facts and, by reason of such

The Vazquezes should have been

with the Vazquezes.

omission or concealment, the other party

consulted first whether they wanted to avail

themselves of the privilege or would
consent to a change of seat
accommodation before their seat
assignments were given to other

We are not, however, convinced that the

upgrading or the breach of contract was

was induced to give consent that would not

otherwise have been given.

attended by fraud or bad faith. Thus, we

Bad faith does not simply connote bad

resolve the second issue in the negative.

judgment or negligence; it imports a

dishonest purpose or some moral obliquity

passengers. Normally, one would

Bad faith and fraud are allegations of fact

appreciate and accept an upgrading, for it

that demand clear and convincing proof.

would mean a better accommodation. But,

They are serious accusations that can be

whatever their reason was and however

so conveniently and casually invoked, and

odd it might be, the Vazquezes had every

that is why they are never presumed. They

right to decline the upgrade and insist on

amount to mere slogans or mudslinging

We find no persuasive proof of fraud or bad

the Business Class accommodation they

unless convincingly substantiated by

faith in this case. The Vazquezes were not

had booked for and which was designated

whoever is alleging them.

induced to agree to the upgrading through

in their boarding passes. They clearly

Fraud has been defined to include an

waived their priority or preference when

inducement through insidious machination.

they asked that other passengers be given

Insidious machination refers to a deceitful

the upgrade. It should not have been

scheme or plot with an evil or devious

imposed on them over their vehement

purpose. Deceit exists where the party, with

and conscious doing of a wrong, a breach

of a known duty through some motive or
interest or ill will that partakes of the nature
of fraud.

insidious words or deceitful machination or

through willful concealment of material
facts. Upon boarding, Ms. Chiu told the
Vazquezes that their accommodations
were upgraded to First Class in view of

their being Gold Card members of Cathay's

We are not persuaded by the Vazquezes'

designed to cover only honest

Marco Polo Club. She was honest in telling

argument that the overbooking of the

mistakes on the part of the

them that their seats were already given to

Business Class Section constituted bad

carriers and excludes deliberate

other passengers and the Business Class

faith on the part of Cathay. Section 3 of the

and willful acts of non-

Section was fully booked. Ms. Chiu might

Economic Regulation No. 7 of the Civil

accommodation. Provided,

have failed to consider the remedy of

Aeronautics Board, as amended, provides:

however, that overbooking not

offering the First Class seats to other

passengers. But, we find no bad faith in her
failure to do so, even if that amounted to an
exercise of poor judgment.

Sec 3. Scope. This

regulation shall apply to every
Philippine and foreign air carrier
with respect to its operation of

exceeding 10% of the seating

capacity of the aircraft shall not
be considered as a deliberate
and willful act of nonaccommodation.

Neither was the transfer of the Vazquezes

flights or portions of flights

effected for some evil or devious purpose.

originating from or terminating

It is clear from this section that an

As testified to by Mr. Robson, the First

at, or serving a point within the

overbooking that does not exceed ten

Class Section is better than the Business

territory of the Republic of the

percent is not considered deliberate and

Class Section in terms of comfort, quality of

Philippines insofar as it denies

therefore does not amount to bad

food, and service from the cabin crew;

boarding to a passenger on a

faith. Here, while there was admittedly an

thus, the difference in fare between the

flight, or portion of a flight

overbooking of the Business Class, there

First Class and Business Class at that time

inside or outside the

was no evidence of overbooking of the

was $250. Needless to state, an upgrading

Philippines, for which he holds

plane beyond ten percent, and no

is for the better condition and, definitely, for

confirmed reserved space.

passenger was ever bumped off or was

the benefit of the passenger.

Furthermore, this Regulation is

refused to board the aircraft.

Now we come to the third issue on

injury. Although incapable of pecuniary

passenger. Where in breaching the

damages.

computation, moral damages may be

contract of carriage the airline is not shown

recovered if they are the proximate result of

to have acted fraudulently or in bad faith,

the defendant's wrongful act or

liability for damages is limited to the natural

omission. Thus, case law establishes the

and probable consequences of the breach

following requisites for the award of moral

of the obligation which the parties had

damages: (1) there must be an injury

foreseen or could have reasonably

Article 2220. Willful injury to

clearly sustained by the claimant, whether

foreseen. In such a case the liability does

property may be a legal ground

physical, mental or psychological; (2) there

not include moral and exemplary damages.

for awarding moral damages if

must be a culpable act or omission

the court should find that, under

factually established; (3) the wrongful act or

the circumstances, such

omission of the defendant is the proximate

damages are justly due. The

cause of the injury sustained by the

same rule applies to breaches

claimant; and (4) the award for damages is

of contract where the defendant

predicated on any of the cases stated

acted fraudulently or in bad

in Article 2219 of the Civil Code.

The Court of Appeals awarded each of the

Vazquezes moral damages in the amount
of P250,000. Article 2220 of the Civil Code
provides:

faith.

Moral damages predicated upon a breach

Moral damages include physical suffering,

of contract of carriage may only be

mental anguish, fright, serious anxiety,

recoverable in instances where the carrier

besmirched reputation, wounded feelings,

is guilty of fraud or bad faith or where the

moral shock, social humiliation, and similar

mishap resulted in the death of a

In this case, we have ruled that the breach

of contract of carriage, which consisted in
the involuntary upgrading of the
Vazquezes' seat accommodation, was not
attended by fraud or bad faith. The Court of
Appeals' award of moral damages has,
therefore, no leg to stand on.
The deletion of the award for exemplary
damages by the Court of Appeals is
correct. It is a requisite in the grant of
exemplary damages that the act of the

offender must be accompanied by bad faith

right of the plaintiff, which has

spouses to the normally-

or done in wanton, fraudulent or malevolent

been violated or invaded by the

appreciated gesture of

manner. Such requisite is absent in this

defendant, may be vindicated

petitioner to upgrade their

case. Moreover, to be entitled thereto the

or recognized, and not for the

accommodations, petitioner

claimant must first establish his right to

purpose of indemnifying the

may have disturbed the

moral, temperate, or compensatory

plaintiff for any loss suffered by

respondents-spouses' wish to

damages. Since the Vazquezes are not

him.

be with their companions (who

entitled to any of these damages, the

award for exemplary damages has no legal
basis. And where the awards for moral and
exemplary damages are eliminated, so
must the award for attorney's fees.
The most that can be adjudged in favor of
the Vazquezes for Cathay's breach of
contract is an award for nominal damages
under Article 2221 of the Civil Code, which
reads as follows:
Article 2221 of the Civil Code provides:
Article 2221. Nominal damages
are adjudicated in order that a

Worth noting is the fact that in Cathay's

Memorandum filed with this Court, it prayed
only for the deletion of the award for moral
damages. It deferred to the Court of
Appeals' discretion in awarding nominal
damages; thus:
As far as the award of nominal
damages is concerned,
petitioner respectfully defers to
the Honorable Court of
Appeals' discretion. Aware as it
is that somehow, due to the
resistance of respondents-

traveled to Hong Kong with

them) at the Business Class on
their flight to Manila. Petitioner
regrets that in its desire to
provide the respondentsspouses with additional
amenities for the one and onehalf (1 1/2) hour flight to Manila,
unintended tension ensued.

Nonetheless, considering, that the

breach was intended to give more
benefit and advantage to the Vazquezes
by upgrading their Business Class
accommodation to First Class because

of their valued status as Marco Polo

attorney's fees but were

The well-entrenched

members, we reduce the award for

awarded P2 million; they did not

principle is that the grant

nominal damages to P5,000.

ask for nominal damages but

of moral damages

Before writing finis to this decision, we find

were awarded P200,000.00. It

depends upon the

it well-worth to quote the apt observation of

is as if the lower court went on

discretion of the court

the Court of Appeals regarding the awards

a rampage, and why it acted

based on the

adjudged by the trial court:

that way is beyond all tests of

circumstances of each

reason. In fact the

case. This discretion is

excessiveness of the total

limited by the principle

award invites the suspicion that

that the amount awarded

it was the result of "prejudice or

should not be palpably

corruption on the part of the

and scandalously

trial court."

excessive as to indicate

We are not amused but

alarmed at the lower court's
unbelievable alacrity, bordering
on the scandalous, to award
excessive amounts as
damages. In their complaint,

that it was the result of

appellees asked for P1 million

The presiding judge of the

as moral damages but the

lower court is enjoined to

lower court awarded P4 million;

hearken to the Supreme

they asked for P500,000.00 as

Court's admonition in Singson

exemplary damages but the

vs. CA (282 SCRA 149 [1997]),

and in Alitalia Airways vs.

lower court cavalierly awarded

where it said:

CA (187 SCRA 763 [1990],

a whooping P10 million; they

asked for P250,000.00 as

prejudice or corruption
on the part of the trial
court . . .

where it was held:

Nonetheless, we agree

We adopt as our own this observation of

AIRWAYS, defendant-

with the injunction

the Court of Appeals.

appellant.

expressed by the Court

of Appeals that
passengers must not
prey on international
airlines for damage
awards, like "trophies in
a safari." After all neither
the social standing nor
prestige of the
passenger should
determine the extent to

WHEREFORE, the instant petition is

hereby partly GRANTED. The Decision of
the Court of Appeals of 24 July 2001 in CAG.R. CV No. 63339 is hereby MODIFIED,
and as modified, the awards for moral
damages and attorney's fees are set aside
and deleted, and the award for nominal
damages is reduced to P5,000.

DSCIEa

these social indicators.

ACCOMMODATIONS; CASE AT BAR.

Plaintiffs made first class reservations with
defendant in its Tokyo-San Francisco flight.
The reservations having been confirmed,

ORDERED.

in favor of plaintiffs. Through mistake,

however, defendant's agents cancelled the
said reservations. Expecting that some
cancellations of bookings would be made

done, since the dignity

him and not conferred by

TO PROVIDE FIRST CLASS

first class tickets were subsequently issued

because of a wrong

is a quality inherent in

1. CASHIERS; BREACH OF CONTRACT

No pronouncement on costs. SO

which he would suffer

affronted in the individual

SYLLABUS

[G.R. No. L-22415. March 30, 1966.]

before the flight time, the reservations

supervisor decided to withhold from

FERNANDO LOPEZ, ET

plaintiffs the information that their

AL., plaintifs-appellants, vs.

reservations had been cancelled. Upon

PAN AMERICAN WORLD

arrival in Tokyo, defendant informed

plaintiffs that there was no accommodation

for them in the first class, stating that they

its flight and foreclosing on their chances to

such, contrary to what is rightfully to be

could not go unless they take the tourist

seek the services of other airlines that may

expected from the contractual undertaking.

class. Due to pressing engagements in the

have been able to afford them first class

United States, plaintiffs were constrained to

accommodations. All the same, in legal

take the flight as tourist passengers, but

contemplation such conduct already

they did so under protest. Query: Whether

amounts to action in bad faith.

defendant acted in bad faith in the breach

of its contract with plaintiffs. Held: In so
misleading plaintiffs into purchasing first
class tickets in the conviction that they had
confirmed reservations for the same, when
in fact they had none, defendant wilfully
and knowingly placed itself into the position
of having to breach its aforesaid contracts
with plaintiffs should there be no lastminute cancellation by other passengers
before flight time, as it turned out in this
case. Such actuation of defendant may
indeed have been prompted by nothing
more than the promotion of its self interest
in holding on the plaintiffs as passengers in

3. ID.; ID.; RATIONALE BEHIND

EXEMPLARY OR CORRECTIVE
DAMAGES. The rationable behind
exemplary or corrective rationale is, as the

2. ID.; ID.; MORAL DAMAGES

name implies, to provide an example or

RECOVERABLE. - As a proximate result of

correction for public good. Defendant

defendant's breach in bad faith of its

having breached its contracts in bad faith,

contracts with plaintiffs, the latter suffered

the court may award exemplary damages

social humiliation, wounded feelings,

in addition to moral damages. (Articles

serious anxiety and mental anguish. For

2229, 2232, New Civil Code). In view of its

plaintiffs were travelling with first class

nature, it should be imposed in such an

tickets issued by defendant and yet they

amount as to sufficiently and effectively

were given only the tourist class. At stop-

deter similar breach of contracts in the

overs, they were expected to be among the

future by defendant or other airlines.

first-class passengers by those awaiting to

welcome them, only to be found among the
tourist passengers. It may not be
humiliating to travel as tourist passengers;
it is humiliating to be compelled to travel as

4. ATTORNEY'S FEES; WHEN WRITTEN

CONTRACT FOR ATTORNEY'S
SERVICES SHALL CONTROL THE
AMOUNT TO BE PAID THEREFORE. A

written contract for attorney's services shall

upon all questions involved (Sec. 17,

Senator Lopez and his party. The total fare

control the amount to be paid therefor

par. 3[5], Judiciary Act).

of P9,444 for all of them was fully paid

unless found by the court to be

unconscionable or unreasonable. A
consideration of the subject matter of the
present controversy, of the professional
standing the attorney for plaintiffsappellants, and of the extent of the service
rendered by him, shows that the amount
provided for in the written agreement is
reasonable.

DECISION

BENGZON, J.P., J :
p

Plaintiffs and defendants appeal

from a decision of the Court of First

Stated briefly the facts not in dispute are as

before the tickets were issued.

follows. Reservations for first class

As scheduled Senator Lopez and party left

accommodations in Flight No. 2 of Pan

Manila by Northwest Airlines on May 24,

American World Airways hereinafter

1960, arriving in Tokyo at 5:30 P.M. of that

otherwise called PAN AM from Tokyo to

day. As soon as they arrived Senator Lopez

San Francisco on May 24, 1960 were made

requested Minister Busuego of the

with PAN AM on March 29, 1960, by "Your

Philippine Embassy to contact PAN AM's

Travel Guide" agency, specifically, by Delfin

Tokyo office regarding their first class

Faustino, for then Senator Fernando

accommodations for that evening's flight.

Lopez, his wife Maria J. Lopez, his son-in-

For the given reason that the first class

law Alfredo Montelibano, Jr., and his

seats therein were all booked up, however,

daughter Mrs. Alfredo Montelibano, Jr.

PAN AM's Tokyo office informed Minister

(Milagros Lopez Montelibano). PAN AM's

Busuego that PAN AM could not

San Francisco head office confirmed the

accommodate Senator Lopez and party in

reservations on March 31, 1960.

that trip as first class passengers. Senator

Instance of Rizal. Since the value in

First class tickets for the abovementioned

controversy exceeds P200,000 the

flight were subsequently issued by PAN AM

appeals were taken directly to this Court

on May 21 and 23, 1960, in favor of

Lopez thereupon gave their first class

tickets to Minister Busuego for him to show
the same to PAN AM's Tokyo office, but the
latter firmly reiterated that there was no

accommodation for them in the first class,

Suit for damages was thereafter filed by

and defendant's amended supplemental

stating that they could not go in that flight

Senator Lopez and party against PAN AM

answer, on July 10, 1962.

unless they took the tourist class therein.

on June 2, 1960 in the Court of First

Due to pressing engagements awaiting

Senator Lopez and his wife in the United
States he had to attend a business
conference in San Francisco the next day
and she had to undergo a medical checkup in Mayo Clinic, Rochester, Minnesota,
on May 28, 1960 and needed three days
rest before that in San Francisco
Senator Lopez and party were constrained
to take PAN AM's flight from Tokyo to San
Francisco as tourist passengers. Senator

Instance of Rizal. Alleging breach of

contracts in bad faith by defendant,
plaintiffs asked for P500,000 actual and
moral damages, P100,000 exemplary
damages P25,000 attorney's fees, plus
costs. PAN AM filed its answer on June 22,

After trial which took twenty-two (22)

days ranging from November 25, 1960 to
January 5, 1963 the Court of First
Instance rendered its decision on
November 13, 1963, the dispositive portion
stating:

1960, asserting that its failure to provide

"In view of the foregoing

first class accommodations to plaintiffs was

considerations, judgment is

due to honest error of its employees. It also

hereby rendered in favor of the

interposed a counterclaim for attorney's

plaintiffs and against the

fees of P25,000.

defendant, which is accordingly

Lopez however made it clear, as indicated

Subsequently, further pleadings were filed,

in his letter to PAN AM's Tokyo office on

thus: plaintiffs' answer to the counterclaim,

that date (Exh. A), that they did so "under

on July 25, 1960; plaintiffs' reply attached

protest" and without prejudice to further

to motion for its admittance, on December

action against the airline.

2, 1961; defendant's supplemental answer,

on March 8, 1962; plaintiff's reply to
supplemental answer, on March 10, 1962;

ordered to pay the plaintiffs the

following (a) P100,000.00 as
moral damages: (b) P20,000.00
as exemplary damage; (c)
P25,000.00 as attorney's fees,
and the costs of this action.
"So ordered."

Plaintiffs however, on November 21, 1963,

complaint until paid; and (c)

Anent the issue of bad faith the record

moved for reconsideration of said

P25,000.00 as attorney's fees,

shows the respective contentions of the

judgment, asking that moral damages be

and the costs of this action."

parties as follows.

"So ordered."

According to plaintiffs, defendant acted in

increased to P400,000 and that six per cent

(6%) interest per annum on the amount of
the award be granted. And defendant

It is from said judgment, as thus

opposed the same. Acting thereon the trial

reconsidered, that both parties have

court issued an order on December 14,

appealed.

1963, reconsidering the dispositive part of

Defendants, as stated, has from the start

its decision to read as follows:

admitted that it breached its contracts with

"In view of the foregoing

considerations, judgment is
hereby rendered in favor of the
plaintiffs and against the
defendant, which is accordingly
ordered to pay the plaintiffs the
following (a) P150,000.00 as
moral damages; (b) P25,000.00
as exemplary damages; with
legal interest on both from the
date of the filing of the

plaintiffs to provide them with first class

accommodations in its Tokyo-San
Francisco flight of May 24, 1960. In its
appeal, however, it takes issue with the
finding of the court a quo that it acted in
bad faith in the breach of said contracts.
Plaintiffs, on the other hand, raise
questions on the amount of damages
awarded in their favor, seeking that the
same be increased to a total of P650,000.

bad faith because it deliberately refused to

comply with its contract to provide first
class accommodations to plaintiffs, out of
racial prejudice against Orientals. And in
support of its contention that what was
done to plaintiffs is an oft-repeated practice
of defendant, evidence was adduced
relating to two previous instances of
alleged racial discrimination by defendant
against Filipinos in favor of "white"
passengers. Said previous occasions are
what allegedly happened to (1) Benito
Jalbuena and (2) Cenon S. Cervantes and
his wife.
And from plaintiffs' evidence this is what
allegedly happened. Jalbuena bought a

first class ticket from PAN AM on April 13,

tickets, which they had previously

(Exh. 3) referring to 2 Lopez , 2

1960; he confirmed it on April 15, 1960 as

confirmed, because their seats in first class

Montelibanos and 1 Rufino and the second

to the Tokyo-Hongkong flight of April 20,

were given to "passengers from London."

page (Exh. 4) referring to 3 Rufinos. On

1960; PAN AM similarly confirmed it on

April 20, 1960. At the airport, he and
another Oriental Mr. Tung were asked
to step aside while other passengers

Against the foregoing, however,

defendant's evidence would seek to
establish its theory of honest mistake, thus:

April 18, 1960 "Your Travel Guide" agency

cancelled the reservations of the Rufinos.
A telex message was thereupon sent on
that date to PAN AM's head office at San

including "white" passengers boarded

The first class reservations of Senator

Francisco by Mariano Herranz, PAN AM's

PAN AM's plane. Then PAN AM officials

Lopez and party were made on March 29,

reservations employee at its office in

told them that one of them had to stay

1960 together with those of four members

Escolta, Manila, (Annex A-Acker's to Exh.

behind. Since Mr. Tung was going all the

of the Rufino family, for a total of eight (8)

6). In said message, however, Herranz

way to London, Jalbuena was chosen to be

seats, as shown in their joint reservation

mistakenly cancelled all the seats that had

left behind. PAN AM's officials could only

card (Exh. 1). Subsequently, on March 30,

been reserved, that is, including those of

explain by saying there was "some

1960, two other Rufinos secured

Senator Lopez and party.

mistake." Jalbuena thereafter wrote PAN

reservations and were given a separate

AM to protest the incident (Exh. B).

reservation card (Exh. 2). A new

As to Cenon S. Cervantes it would appear

that in Flight No. 6 of PAN AM on
September 29, 1958 from Bangkok to
Hongkong, he and his wife had to take
tourist class, although they had first class

reservation card consisting of two pages

(Exh. 3 and 4) was then made for the
original group of eight passengers, namely,
Senator Lopez and party and four
members of the Rufino family, the first page

The next day April 1960 Herranz

discovered his mistake, upon seeing the
reservation card newly prepared by his coemployee Pedro Asensi for Senator Lopez
and party to the exclusion of the Rufinos
(Exh. 5). It was then that Herranz sent
another telex wire to the San Francisco

head office, stating his error and asking for

its other office in the Manila Hotel, and

May 20, 1960 addressed to PAN AM's

the reinstatement of the four (4) first class

confirmed the reservations of Senator

offices at San Francisco, New York

seats reserved for Senator Lopez and party

Lopez and party.

(Idlewild Airport), Tokyo and Hongkong,

(Annex A-Velasco's to Exh. 6). San

Francisco head office replied on April 22,
1960 that Senator Lopez and party are
waitlisted and that said office is unable to
reinstate them (Annex B- Velasco's to Exh.
6).

PAN AM's reservations supervisor, Alberto

Jose, discovered Herranz's mistake after
"Your Travel Guide" phoned on May 18,
1960 to state that Senator Lopez and party
were going to depart as scheduled.
Accordingly, Jose sent a telex wire on that

asking all-out assistance towards restoring

the cancelled spaces and for report of
cancellations at their end (Annex D-Acker's
to Exh. 6). San Francisco head office
reiterated on May 20, 1960 that it could not
reinstate the spaces and referred Jose to
the Tokyo and Hongkong offices (Exh. 8).

Since the flight involved was still more than

date to PAN AM's head office at San

a month away and confident that

Francisco to report the error and asked

reinstatement would be made, Herranz

said office to continue holding the

forgot the matter and told no one about it

reservations of Senator Lopez and party

except his co-employee, either Armando

(Annex B Acker's to Exh. 6). Said message

Expecting that some cancellations of

Davila or Pedro Asensi or both of them

was reiterated by Jose in his telex wire of

bookings would be made before the flight

(Tsn., 123-124, 127, Nov. 17, 1961).

May 19, 1960 (Annex C-Acker's to Exh. 6).

time, Jose decided to withhold from

San Francisco head office replied on May

Senator Lopez and party, or their agent,

19, 1960 that it regrets being unable to

the information that their reservations had

confirm Senator Lopez and party for the

been cancelled.

Subsequently, on April 27, 1960, Armando

Davila, PAN AM's reservations employee
working in the same Escolta office as
Herranz, phoned PAN AM's ticket sellers at

reason that the flight was solidly booked

(Exh. 7). Jose sent a third telex wire on

Also on May 20 the Tokyo office of PAN AM

wired Jose stating it will do everything
possible (Exh. 9).

Armando Davila having previously

knowingly placed itself into the position of

or fraternal interest, and not personal ill will,

confirmed Senator Lopez and party's first

having to breach its aforesaid contracts

may well have been the motive, but it is

class reservations to PAN AM's ticket

with plaintiffs should there be no last-

malice nevertheless."

sellers at its Manila Hotel office, the latter

minute cancellation by other passengers

sold and issued in their favor the

before flight time, as it turned out in this

corresponding first class tickets on the 21st

case. Such actuation of defendant may

and 23rd of May, 1960.

indeed have been prompted by nothing

From the foregoing evidence of defendant it

is in effect admitted that defendant
through its agents first cancelled
plaintiffs' reservations by mistake and
thereafter deliberately and
intentionally withheld from plaintiffs or their
travel agent the fact of said cancellation,
letting them go on believing that their first
class reservations stood valid and
confirmed. In so misleading plaintiffs into
purchasing first class tickets in the
conviction that they had confirmed
reservations for the same, when in fact
they had none, defendant wilfully and

more than the promotion of its self- interest

in holding on to Senator Lopez and party
as passengers in its flight and foreclosing
on their chances to seek the services of
other airlines that may have been able to
afford them first class accommodations. All
the same, in legal contemplation such
conduct already amounts to action in bad
faith. For bad faith means a breach of a
known duty through some motive
of interest or ill will (Spiegel vs. Reacon

As of May 18, 1960 defendant's

reservations supervisor Alberto Jose knew
that plaintiff's reservations had been
cancelled. As of May 20 he knew that the
San Francisco head office stated with
finality that it could not reinstate plaintiff'
cancelled reservations. And yet said
reservations supervisor made the
"decision" to use his own word to
withhold the information from the plaintiffs.
Said Alberto Jose in his testimony:
"Q Why did you not notify
them?
"A Well, you see, sir, in my

Participations (8 NE 2d 895, 907). As

fifteen (15) years of

stated in Kammvs. Flink, 113 N.J.L. 582,

service with the air

175 A. 62, 99 A.L.R. 1, 7: "Self-enrichment

lines business my

experience is that

therefore, missed

Montelibano were

even if the flights

their connections.

accommodated.

are solidly booked

This experience of

Well, I fully realize

months in advance,

mine, coupled with

now the gravity of

usually the flight

that wire from

my decision in not

departs with plenty

Tokyo that they

advising Senator

of empty seats both

would do

and Mrs. Lopez,

on the first class

everything possible

Mr. and Mrs.

and tourist class.

prompted me to

Montelibano nor

This is due to late

withhold the

their agents about

cancellation of

information, but

the erroneous

passengers, or

unfortunately,

cancellation and for

because

instead of the first

which I would like

passengers do not

class seat that I

them to know that I

show up in the

was hoping for and

am very sorry.

airport, and it was

which I anticipated

our hope others

only the tourists

come in from

class was open on

another flight and,

which Senator and

therefore, are

Mrs. Lopez, Mr.

delayed and,

and Mrs.

xxx xxx xxx

"Q So it was not your duty
to notify Sen.
Lopez and parties
that their

reservations had

At the time plaintiffs bought their tickets,

promoted the employee who cancelled

been cancelled

defendant, therefore, in breach of its known

plaintiffs' reservations and told them

since May 18,

duty, made plaintiffs believe that their

nothing about it. The record shows that

1960?

reservations had not been cancelled. An

said employee Mariano Herranz was

additional indication of this is the fact that

not subjected to investigation and

upon the face of the two tickets of record,

suspension by defendant but instead was

namely, the ticket issued to Alfredo

given a reward in the form of an increase of

Montelibano, Jr. on May 21, 1960 (Exh. 22)

salary in June of the following year (Tsn.,

and that issued to Mrs. Alfredo

86-88, Nov. 20, 1961).

"A As I said before it was

my duty. It was my
duty but as I said
again with respect
to that duty I have
the power to make
a decision or use
my discretion and
judgment whether I
should go ahead
and tell the
passenger about
the cancellation."
(Tsn., pp. 17-19,
28- 29, March 15,
1962.)

Montelibano, Jr., on May 23, 1960 (Exh.

23), the reservation status is stated as
"OK". Such willful non-disclosure of the
cancellation or pretense that the
reservations for plaintiffs stood and not
simply the erroneous cancellation itself
is the factor to which is attributable the
breach of the resulting contracts. And, as
above-stated, in this respect defendant
clearly acted in bad faith.

At any rate, granting all the mistakes

advanced by the defendant, there would at
least be negligence so gross and reckless
as to amount to malice or bad faith
(Fores vs.Miranda, L-12163, March 4,
1959; Necesito vs. Paras, L-10605-06,
June 30, 1958). Firstly, notwithstanding
entries in the reservation cards (Exhs. 1 &
3) that the reservations cancelled are those
of the Rufinos only, Herranz made the

As if to further emphasize its bad faith on

mistake, after reading said entries, of

the matter, defendant subsequently

sending a wire cancelling all the

reservations, including those of Senator

And, finally, non one among defendant's

damages are recoverable in breach of

Lopez and party (Tsn., pp. 103-108 Nov.

agents notified Senator Lopez and party

contracts where the defendant acted

17, 1961). Secondly, after sending a wire to

that their reservations had been cancelled,

fraudulently or in bad faith (Art. 2220, New

San Francisco head office on April 19,

a precaution that could have averted their

Civil Code). Second, in addition to moral

1960 stating his error and asking for

entering with defendant into contracts that

damages, exemplary or corrective

reinstatement, Herranz simply forgot about

the latter had already placed beyond its

damages may be imposed by way of

the matter. Notwithstanding the reply of

power to perform.

example or correction for the public good,

San Francisco head office in April 22, 1960

that it cannot reinstate Senator Lopez and
party (Annex B-Velasco's to Exh. 6), it was
assumed and taken for granted that
reinstatement would be made. Thirdly,
Armando Davila confirmed plaintiff's
reservation in a phone call on April 27,
1960 to defendant's ticket sellers, when at
the time it appeared in plaintiffs' reservation
card (Exh. 5) that they were only wait-listed
passengers. Fourthly, defendant's ticket

Accordingly, there being a clear admission

in defendant's evidence of facts amounting
to bad faith on its part in regard to the
breach of its contracts with plaintiffs, it
becomes unnecessary to further discuss
the evidence adduced by plaintiffs to
establish defendant's bad faith. For what is
admitted in the course of the trial does not
need to be proved (Sec. 2, Rule 129, Rules
of Court).

sellers issued plaintiffs' tickets on May 21

Addressing ourselves now to the question

and 23, 1960, without first checking their

of damages, it is well to state at the outset

reservations just before issuing said tickets.

these rules and principles. First, moral

in breach of contract where the defendant

acted in a wanton, fraudulent, reckless,
oppressive or malevolent manner (Articles
2229, 2232, New Civil Code). And, third, a
written contract for an attorney's services
shall control the amount to be paid therefor
unless found by the court to be
unconscionable or unreasonable (Sec. 24,
Rule 138, Rules of Court).
First, then, as to moral damages. As a
proximate result of defendant's breach in
bad faith of its contracts with plaintiff's the
latter suffered social humiliation, wounded
feelings, serious anxiety and mental

anguish. For plaintiffs were travelling with

should the Senate sit as impeachment

Although Senator Lopez stated that "she

first class tickets issued-by defendant and

Tribunal. And he was former Vice-President

was quite well" (Tsn., p. 22, Nov. 25, 1960)

yet they were given only the tourist class.

of the Philippines. Senator Lopez was

he obviously meant relatively well, since

At stop-overs, they were expected to be

going to the United States to attend a

the rest of his statement is that two months

among the first-class passengers by those

private business conference of the

before, she was attacked by severe flu and

awaiting to welcome them, only to be found

Binalbangan-Isabela Sugar Company; but

lost 10 pounds of weight and that she was

among the tourist passengers. It may not

his aforesaid rank and position were by no

advised by Dr. Sison to go to the United

be humiliating to travel as tourist

means left behind, and in fact he had a

States as soon as possible for medical

passengers; it is humiliating to be

second engagement awaiting him in the

check-up and relaxation (Ibid.) In fact,

compelled to travel as such, contrary to

United States; a banquet tendered by

Senator Lopez stated, as shown a few

what is rightfully to be expected from the

Filipino friends in his honor as Senate

pages after in the transcript of his

contractual undertaking.

President Pro Tempore (Tsn., pp. 14-15,

testimony, that Mrs. Lopez was sick when

Nov. 25, 1960). For the moral damages

she left the Philippines:

Senator Lopez was then Senate

President Pro Tempore. International
carriers like defendant know the prestige of

sustained by him, therefore, an award of

P100,000,000 is appropriate.

"A. Well, my wife really felt

very bad during the

such an office. For the Senate is not only

Mrs. Maria J. Lopez, as wife of Senator

entire trip from

the Upper Chamber of the Philippine

Lopez, shared his prestige and therefore

Tokyo to San

Congress, but the nation's treaty-ratifying

his humiliation. In addition, she suffered

Francisco. In the

body. It may also be mentioned that in his

physical discomfort during the 13-hour trip

first place, she was

aforesaid Office Senator Lopez was in a

(5 hours from Tokyo to Honolulu and 8

sick when we left

position to preside in impeachment cases

hours from Honolulu to San Francisco).

the Philippines, and

then with that

first class and tourist class the fact

too obvious to be recounted, is in fact

discomfort which

that the seating spaces in the tourist

the reason for the former's existence,

she [experienced]

class are quite narrower than in first

and is recognized by the airline in

or suffered during

class, there being six seats to a row in

charging a higher fare for it and by the

that evening, it was

the former as against four to a row in

passengers in paying said higher rate.

her worst

the latter, and that in tourist class there

Accordingly, considering the totality of

experience. I

is very little space for reclining in view of

her suffering and humiliation, an award

myself, who was

the closer distance between rows (Tsn.,

to Mrs. Maria J. Lopez of P50,000.00 for

not sick, could not

p. 24, Nov. 25, 1960), will suffice to

moral damages will be reasonable.

sleep because of

show that the aforesaid passenger

Mr. and Mrs. Alfredo Montelibano, Jr., were

the discomfort."

indeed experienced physical suffering

traveling as immediate members of the

(Tsn., pp. 27-28,

during the trip. Added to this, of course,

family of Senator Lopez. They formed part

Nov. 25, 1960).

was the painful thought that she was

of the Senator's party as shown also by the

deprived by defendant after having

reservation cards of PAN AM. As such they

paid for and expected the same of

likewise shared his prestige and

the most suitable place for her, the first

humiliation. Although defendant contends

class, where evidently the best of

that a few weeks before the flight they had

everything would have been given her,

asked their reservations to be changed

the best seat, service, food and

from first class to tourist class which did

treatment. Such difference in comfort

not materialize due to alleged full booking

between first class and tourist class is

in the tourist class the same does not

It is not hard to see that in her condition

then a physical discomfort sustained for
thirteen hours may well be considered a
physical suffering. And even without
regard to the noise and trepidation
inside the plane which defendant
contends, upon the strength of expert
testimony, to be practically the same in

mean they suffered no shame in having to

breached its contracts in bad faith, the

Court of First Instance, and an additional

take tourist class during the flight. For by

court, as stated earlier, may award

sum of P25,000.00 in the event the case is

that time they had already been made to

exemplary damages in addition to moral

appealed to the Supreme Court. As said

pay for first class seats and therefore to

damages (Articles 2229, 2232, New Civil

earlier, a written contract for attorney's

expect first class accommodations. As

Code).

services shall control the amount to be paid

stated, it is one thing to take the tourist

class by free choice; a far different thing to
be compelled to take it notwithstanding
having paid for first class seats. Plaintiffsappellants now ask P37,500.00 each for
the two but we note that in their motion for
reconsideration filed in the court a quo,they
were satisfied with P25,000.00 each for

In view of its nature, it should be imposed

in such an amount as to sufficiently and
effectively deter similar breach of contracts
in the future by defendant or other airlines.
In this light, we find it just to award
P75,000.00 as exemplary or corrective
damages.

therefor unless found by the court to be

unconscionable or unreasonable. A
consideration of the subject matter of the
present controversy, of the professional
standing of the attorney for plaintiffsappellants, and of the extent of the
services rendered by him, shows that said
amount provided for in the written

said persons. (Record on Appeal, p. 102)

Now, as to attorney's fees, the record

agreement is reasonable. Said lawyer

For their social humiliation, therefore, the

shows a written contract of services

whose prominence in the legal profession

award to them of P25,000.00 is

executed on June 1, 1960 (Exh. F)

is well known studied the case, prepared

reasonable.

whereunder plaintiffs-appellants engaged

and filed the complaint, conferred with

the services of their counsel Atty.

witnesses, analyzed documentary

Vicente J, Francisco and agreed to pay

evidence, personally appeared at the trial

the sum of P25,000.00 as attorney's fees

of the case in twenty-two days, during a

upon the termination of the case in the

period of three years, prepared four sets of

The rationale behind exemplary or

corrective damages is, as the name
implies, to provide an example or correction
for public good. Defendant having

cross-interrogatories for deposition taking,

And further considering the present rate of

date of the amended decision of the

prepared several memoranda and the

exchange and the terms at which the

court a quo, until said damages are fully

motion for reconsideration, filed a joint

amount of damages awarded would

paid; (4) P50,000.00 as attorney's fees;

record on appeal with defendant, filed a

approximately be in U.S. dollars, this Court

and (5) the costs. Counterclaim dismissed.

brief for plaintiffs as appellants consisting

is all the more of the view that said award

So ordered.

of 45 printed pages and a brief for plaintiffs

is proper and reasonable.

as appellees consisting of 265 printed

pages. And we are further convinced of its
reasonableness because defendant's

Wherefore, the judgments appealed from is

hereby modified so as to award in favor of

[G.R. No. 123560. March 27, 2000.]

plaintiffs and against defendants, the

SPOUSES YU ENG CHO

following: (1) P200,000.00 as moral

and FRANCISCO TAO

damages, divided among plaintiffs, thus:

YU, petitioners, vs. PAN

P100,000.00 for Senate President Pro

AMERICAN WORLD

Tempore Fernando Lopez; P50,000.00 for

AIRWAYS, INC., TOURIST

In concluding, let it be stressed that the

his wife Maria J. Lopez P25,000.00 for his

WORLD SERVICES, INC.,

amount of damages awarded in this appeal

son-in-law Alfredo Montelibano, Jr. and

JULIETA CANILAO and

has been determined by adequately

P25,000.00 for his daughter Mrs. Alfredo

CLAUDIA

considering the official, political, social, and

Montelibano, Jr.; (2) P75,000.00 as

TAGUNICAR, respondents.

financial standing of the offended parties

exemplary or corrective damages; (3)

on one hand, and the business and

interest at the legal rate of 6% per annum

financial position of the offender on the

on the moral and exemplary damages

other (Domingding vs. Ng. 55 O. G. 10).

afore-stated, from December 14, 1963, the

counsel likewise valued at P50,000.00 the

proper compensation for his services
rendered to defendant in the trial court and
on appeal.

SYNOPSIS

Petitioners bought Pan Am plane tickets for

petitioners actual, moral and exemplary

representation or on behalf of another, with

Hongkong, Tokyo, San Francisco, U.S.A.

damages. The decision was a summary of

the consent or authority of the latter. It

from respondent Tagunicar who

the testimonies of the witnesses and the

cannot be proved by affidavits nor by

represented herself an agent of respondent

documentary evidence presented by the

declarations of the agent alone; an airline

Tourist World Services, Inc. (TWSI). Only

parties. It did not state nor substantiate the

company cannot be held liable for

the San Francisco-New York passage was

factual and legal bases for holding

damages for its failure to transport

confirmed, while that of Tokyo-San

respondents jointly and severally liable. On

unconfirmed passengers and whose

Francisco was still "on request." Tagunicar

appeal, the appellate court reversed the

names were not listed in the passenger

later confirmed the second leg of the flight

decision of the trial court. It found that

manifest; an independent travel agent is

after calling respondent Canilao of TWSI

Tagunicar was not an agent or

liable for misrepresenting to passengers

and attached confirmation stickers on the

representative of Pan Am, hence, Pan Am

that their tickets have been confirmed.

tickets. In Tokyo, petitioners were informed

cannot be held liable for her actions. It

However, it may be mitigated where the

by Pan Am that their names were not in the

deleted the award of actual damages for

latter were aware of the risk involved when

manifest. They took a ticket for Taiwan but

lack of proof. Hence, this petition.

they decided to proceed with the trip; and

in Taipei they were forced to return to

Manila because of lack of available flights.
Thus, the action for damages against
respondents. The trial court rendered
judgment finding respondents, except
Canilao, jointly and severally liable to
petitioners. They were ordered to pay

The Supreme Court held that affidavits are

inferior to the testimonies given in court
and in case of conflict between statements
in the affidavit and testimonial declarations,
the latter command greater weight; in
agency, a person binds himself to render
some service or to do something in

that decisions, under the due process

clause of the Constitution, must clearly and
distinctly the facts and the law on which it is
based. The appealed decision was
affirmed.
SYLLABUS

1. CONSTITUTIONAL LAW; BILL OF

presented by the parties. It did not distinctly

latter. The elements of agency are: (1)

RIGHTS; PROVISION THAT DECISIONS

and clearly set forth, nor substantiate, the

consent, express or implied, of the parties

MUST CLEARLY AND DISTINCTLY STATE

factual and legal bases for holding

to establish the relationship; (2) the object

FACTS AND LAW ON WHICH IT IS

respondents TWSI, Pan Am and Tagunicar

is the execution of a juridical act in relation

BASED, A DUE PROCESS

jointly and severally liable. In Del Mundo

to a third person; (3) the agent acts as a

REQUIREMENT. Once more, we stress

vs. CA, et al. where the trial court, after

representative and not for himself; (4) the

that nothing less than Section 14 of Article

summarizing the conflicting asseverations

agent acts within the scope of his authority.

VIII of the Constitution requires that "no

of the parties, disposed of the kernel issue

It is a settled rule that persons dealing with

decision shall be rendered by any court

in just two (2) paragraphs. For failing to

an assumed agent are bound at their peril,

without expressing therein clearly and

explain clearly and well the factual and

if they would hold the principal liable, to

distinctly the facts and the law on which it is

legal bases of its award of moral damages,

ascertain not only the fact of agency but

based." This is demanded by the due

we set it aside in said case. In the case at

also the nature and extent of authority, and

process clause of the Constitution.

bar, the decision of the trial court leaves

in case either is controverted, the burden of

much to be desired both in form and

proof is upon them to establish it.

2. ID.; ID.; ID.; NOT COMPLIED WITH

WHERE COURT'S FINDINGS OF FACT

substance.

4. REMEDIAL LAW; EVIDENCE;

WERE BUT A SUMMARY OF

3. CIVIL LAW; OBLIGATIONS AND

AFFIDAVITS; ALMOST ALWAYS

TESTIMONIES OF WITNESSES AND

CONTRACTS; AGENCY; ELEMENTS.

INCOMPLETE AND INACCURATE.

DOCUMENTARY EVIDENCE OF

By the contract of agency, a person binds

Affidavits, being taken ex parte, are almost

PARTIES. The trial court' finding of facts

himself to render some service or to do

always incomplete and often inaccurate,

is but a summary of the testimonies of the

something in representation or on behalf of

sometimes from partial suggestion, or for

witnesses and the documentary evidence

another, with the consent or authority of the

want of suggestion and inquiries. Their

infirmity as a species of evidence is a

exists, it is the latter who have the burden

INTO DAMAGES. Mere refusal to

matter of judicial experience and are thus

of evidence to prove their allegation, failing

accede to the passenger's wishes does not

considered inferior to the testimony given in

in which, their claim must necessarily fail.

necessarily translate into damages in the

court. Further, affidavits are not complete

reproductions of what the declarant has in
mind because they are generally prepared
by the administering officer and the affiant
simply signs them after the same have
been read to her.

6. REMEDIAL LAW; EVIDENCE;

TESTIMONIAL DECLARATIONS
COMMAND GREATER WEIGHT THAN
STATEMENTS MADE IN AFFIDAVITS.
We stress that respondent Tagunicar
categorically denied in open court that she

absence of bad faith. The settled rule is

that the law presumes good faith such that
any person who seeks to be awarded
damages due to acts of another has the
burden of proving that the latter acted in
bad faith or with ill motive.

5. CIVIL LAW; OBLIGATIONS AND

is a duly authorized agent of TWSI, and

8. ID.; ID.; ID.; ID.; PRESUMPTION OF

CONTRACTS; AGENCY; CANNOT BE

declared that she is an independent travel

GOOD FAITH, NOT OVERCOME IN CASE

ESTABLISHED BY MERE

agent. We have consistently ruled that in

AT BAR. In the case at bar, we find the

DECLARATIONS OF AGENT ALONE.

case of conflict between statements in the

evidence presented by petitioners

The declarations of the agent alone are

affidavit and testimonial declarations, the

insufficient to overcome the presumption of

generally insufficient to establish the fact or

latter command greater weight.

good faith. They have failed to show any

extent of his authority. In addition, as

between the negative allegation of
respondents Canilao and Tagunicar that
neither is an agent nor principal of the
other, and the affirmative allegation of
petitioners that an agency relationship

7. CIVIL LAW; OBLIGATIONS AND

CONTRACTS; CONTRACT OF
CARRIAGE; MERE REFUSAL TO
ACCEDE TO PASSENGER'S WISHES
DOES NOT NECESSARILY TRANSLATE

wanton, malevolent or reckless misconduct

imputable to respondent Pan Am in its
refusal to accommodate petitioners in its
Tokyo-San Francisco flight. Pan Am could
not have acted in bad faith because
petitioners did not have confirmed tickets

and more importantly, they were not in the

10. ID.; ID.; ID.; ID.; AIRLINE NOT LIABLE

that he repeatedly tried to follow up on the

passenger manifest.

WHERE PASSENGERS WERE

confirmation of their tickets with Pan Am

UNCONFIRMED; CASE AT BAR. In the

because he doubted the confirmation made

case at bar, petitioners' ticket were on "RQ"

by respondent Tagunicar. This is clear

status. They were not confirmed

proof that petitioners knew that they might

passengers and their names were not

be bumped off at Tokyo when they decided

listed in the passenger manifest. In other

to proceed with the trip. Aware of this risk,

words, this is not a case where Pan Am

petitioners exerted efforts to confirm their

bound itself to transport petitioners and

tickets in Manila, then in Hongkong, and

thereafter reneged on its obligation. Hence,

finally in Tokyo. Resultantly, we find the

respondent airline cannot be held liable for

modification as to the amount of damages

damages.

awarded just and equitable under the

9. ID.; ID.; ID.; REFUSING TO

ACCOMMODATE PASSENGER WITH
CONFIRMED TICKET RENDERS AIRLINE
LIABLE FOR DAMAGES. In not a few
cases, this Court did not hesitate to hold an
airline liable for damages for having acted
in bad faith in refusing to accommodate a
passenger who had a confirmed ticket and
whose name appeared in the passenger
manifest. In Ortigas Jr. v. Lufthansa
German Airlines Inc., we ruled that there

11. ID.; DAMAGES;

was a valid and binding contract between

MISREPRESENTATION OF STATUS OF

the airline and its passenger after finding

TICKETS CONSTITUTES BAD FAITH.

that validating sticker on the passenger's

Undoubtedly, respondent Tagunicar should

ticket had the letters "O.K." appearing in

be liable for having acted in bad faith in

the 'Res. Status' box which means "space

misrepresenting to petitioners that their

confirmed" and that the ticket is confirmed

tickets have been confirmed. Her

or validated.

culpability, however, was properly

mitigated. Petitioner Yu Eng Cho testified

circumstances.

CaESTA

DECISION

PUNO, J :
p

This petition for review seeks a reversal of

the 31 August 1995 Decision and 11
January 1998 Resolution of the Court of

Appeals holding private respondent

The destination[s] are

confirmation of the Tokyo-San

Claudia Tagunicar solely liable for moral

Hongkong, Tokyo, San

Francisco segment of the trip.

and exemplary damages and attorney's

Francisco, U.S.A., for the

After calling up Canilao of

fees, and deleting the trial court's award for

amount of P25,000.00 per

TWSI, defendant Tagunicar told

actual damages.

computation of said defendant

plaintiffs that their flight is now

Claudia Tagunicar (Exhs. C &

confirmed all the way.

C-1). The purpose of this trip is

Thereafter, she attached the

to go to Fairfield, New Jersey,

confirmation stickers on the

U.S.A. to buy two (2) lines of

plane tickets (Exhs. A & B).

The facts as found by the trial court are as

follows:

cdll

"Plaintiff Yu Eng Cho is the

owner of Young Hardware Co.
and Achilles Marketing. In
connection with [this] business,
he travels from time to time to
Malaysia, Taipei and
Hongkong. On July 10, 1976,
plaintiffs bought plane tickets
(Exhs. A & B) from defendant
Claudia Tagunicar who
represented herself to be an
agent of defendant Tourist
World Services, Inc. (TWSI).

infrared heating system

processing textured plastic
article (Exh. K).

"A few days before the

scheduled flight of plaintiffs,
their son, Adrian Yu, called the

"On said date, only the passage

Pan Am office to verify the

from Manila to Hongkong, then

status of the flight. According to

to Tokyo, were confirmed.

said Adrian Yu, a personnel of

[PAA] Flight 002 from Tokyo to

defendant Pan Am told him

San Francisco was on "RQ"

over the phone that plaintiffs'

status, meaning "on request."

booking[s] are confirmed.

Per instruction of defendant

Claudia Tagunicar, plaintiffs
returned after a few days for the

"On July 23, 1978, plaintiffs left

for Hongkong and stayed there

for five (5) days. They left

United States within 72 hours.

agreement was for him to

Hongkong for Tokyo on July 28,

Plaintiffs paid for these tickets.

inspect the equipment and

1978. Upon their arrival in

Tokyo, they called up Pan-Am
office for reconfirmation of their
flight to San Francisco. Said
office, however, informed them
that their names are not in the
manifest. Since plaintiffs were
supposed to leave on the 29th
of July, 1978, and could not
remain in Japan for more than
72 hours, they were
constrained to agree to accept
airline tickets for Taipei instead,
per advise of JAL officials. This
is the only option left to them
because Northwest Airlines
was then on strike, hence, there
was no chance for the plaintiffs
to obtain airline seats to the

"Upon reaching Taipei, there

were no flight[s] available for
plaintiffs, thus, they were forced
to return back to Manila on
August 3, 1978, instead of
proceeding to the United
States. [Japan] Air Lines (JAL)

make final arrangement[s] with

the said company not later than
August 7, 1978. From this
business transaction, plaintiff
Yu Eng Cho expected to realize
a profit of P300,000.00 to
P400,000.00."

refunded the plaintiffs the

"[A] scrutiny of defendants'

difference of the price for

respective evidence reveals the

Tokyo-Taipei [and] Tokyo-San

following:

Francisco (Exhs. I & J) in the

total amount of P2,602.00.

"Plaintiffs, who were intending

to go to the United States, were

"In view of their failure to reach

referred to defendant Claudia

Fairfield, New Jersey, Radiant

Tagunicar, an independent

Heat Enterprises, Inc. cancelled

travel solicitor, for the purchase

Yu Eng Cho's option to buy the

of their plane tickets. As such

two lines of infra-red heating

travel solicitor, she helps in the

system (Exh. K). The

processing of travel papers like

passport, plane tickets, booking

her a check in the amount of

Tokyo San Francisco PA002 7-

of passengers and some

P25,000.00 only for the two

29-78 1930/1640hrs

assistance at the airport. She is

round trip tickets. Out of this

known to defendants Pan-Am,

transaction, Tagunicar received

TWSI/Julieta Canilao, because

a 7% commission and 1%

she has been dealing with them

commission for defendant

in the past years. Defendant

TWSI.

Tagunicar advised plaintiffs to

take Pan-Am because
Northwest Airlines was then on
strike and plaintiffs are passing
Hongkong, Tokyo, then San
Francisco and Pan-Am has a
flight from Tokyo to San
Francisco. After verifying from

LexLib

Pan-Am tickets, as long as it is

flight. When the two (2) tickets

Pan-Am tickets from defendant

(Exhs. A & B) were issued to

Julieta Canilao with the

plaintiffs, the letter "RQ"

following schedules:

appears below the printed word

Origin Destination Airline Date

Time/Travel

78 1135/1325hrs

C-1). Plaintiffs, however, gave

although the tickets issued are

purchased the two round-trip

Canilao, she informed plaintiffs

discount of P738.95 (Exhs. C,

out of Manila, is allowed,

in connection with a Pan-Am

Manila Hongkong CX900 7-23-

P25,093.93 giving them a

in this case it is Cathay Pacific

Defendant Claudia Tagunicar

defendant TWSI, thru Julieta

that the fare would be

The use of another airline, like

"status" for the flights from

Tokyo to San Francisco which
means "under request," (Exh.
3-A, 4-A Pan-Am). Before the
date of the scheduled

Hongkong Tokyo CS500 7-28-

departure, defendant Tagunicar

78 1615/2115hrs

received several calls from the

plaintiffs inquiring about the
status of their bookings.

Tagunicar in turn called up

2-B TWSI) to the tickets. These

(Exh. M) prepared by the

TWSI/Canilao to verify; and if

stickers came from TWSI.

lawyer.

Defendant Tagunicar alleges

Defendants TWSI/Canilao

that it was only in the first week

denied having confirmed the

of August, 1978 that she

Tokyo-San Francisco segment

learned from Adrian Yu, son of

of plaintiffs' flight because

"Defendant Tagunicar claims

plaintiffs, that the latter were not

flights then were really tight

that on July 13, 1978, a few

able to take the flight from

because of the on-going strike

days before the scheduled

Tokyo to San Francisco, U.S.A.

at Northwest Airlines.

flight, plaintiff Yu Eng Cho

After a few days, said Adrian Yu

Defendant Claudia Tagunicar is

personally went to her office,

came over with a gentleman

very much aware that [said]

pressing her about their flight.

and a lady, who turned out to

particular segment was not

She called up defendant Julieta

be a lawyer and his secretary.

confirmed, because on the very

Canilao, and the latter told her

Defendant Tagunicar claims

day of plaintiffs' departure,

"o sige Claudia, confirm na."

that plaintiffs were asking for

Tagunicar called up TWSI from

She even noted this in her

her help so that they could file

the airport; defendant Canilao

index card (Exh. L), that it was

an action against Pan-Am.

asked her why she attached

Julieta who confirmed the

Because of plaintiffs' promise

stickers on the tickets when in

booking (Exh. L-1). It was then

she will not be involved, she

fact that portion of the flight was

that she allegedly attached the

agreed to sign the affidavit

not yet confirmed. Neither

Canilao would answer that the

bookings are not yet confirmed,
she would relate that to the
plaintiffs.

confirmation stickers (Exhs. 2,

TWSI nor Pan-Am confirmed

the flight and never authorized

American World Airways, Inc. (Pan Am),

sum of P200,000.00 as actual

defendant Tagunicar to attach

Tourist World Services, Inc. (TWSI), Julieta

damages, minus P2,602.00

the confirmation stickers. In

Canilao (Canilao), and Claudia Tagunicar

already refunded to the

fact, the confirmation stickers

(Tagunicar) for expenses allegedly incurred

plaintiffs; P200,000.00 as moral

used by defendant Tagunicar

such as costs of tickets and hotel

damages; P100,000.00 as

are stickers exclusively for use

accommodations when petitioners were

exemplary damages; an

of Pan-Am only. Furthermore, if

compelled to stay in Hongkong and then in

amount equivalent to 20% of

it is the travel agency that

Tokyo by reason of the non-confirmation of

the award for and as attorney's

confirms the booking, the IATA

their booking with Pan-Am. In a Decision

fees, plus the sum of

number of said agency should

dated November 14, 1991, the Regional

P30,000.00 as litigation

appear on the validation or

Trial Court of Manila, Branch 3, held the

expenses.

confirmation stickers. The IATA

defendants jointly and severally liable,

number that appears on the

except defendant Julieta Canilao, thus:

stickers attached to plaintiffs'

tickets (Exhs. A & B) is 2-820770 (Exhs. 1, 1-A TWSI),
when in fact TWSI's IATA
number is 2-83-0770 (Exhs. 5,
5-A TWSI)."

"WHEREFORE, judgment is
hereby rendered for the
plaintiffs and ordering
defendants Pan American
World Airways, Inc., Tourist
World Services, Inc. and

A complaint for damages was filed by

Claudia Tagunicar, jointly and

petitioners against private respondents Pan

severally, to pay plaintiffs the

Defendants' counterclaims are

hereby dismissed for lack of
merit. SO ORDERED."

Only respondents Pan Am and Tagunicar

appealed to the Court of Appeals. On 11
August 1995, the appellate court rendered
judgment modifying the amount of
damages awarded, holding private
respondent Tagunicar solely liable therefor,

and absolving respondents Pan Am and

The award of actual damages

1. the Court of Appeals, in

TWSI from any and all liability, thus:

is hereby DELETED.

reversing the decision of the

"PREMISES CONSIDERED,
the decision of the Regional
Trial Court is hereby SET
ASIDE and a new one entered
declaring appellant Tagunicar
solely liable for:

SO ORDERED."

trial court, misapplied the ruling

prcd

In so ruling, respondent court found that

Tagunicar is an independent travel solicitor
and is not a duly authorized agent or
representative of either Pan Am or TWSI. It
held that their business transactions are

1) Moral damages in the

not sufficient to consider Pan Am as the

amount of

principal, and Tagunicar and TWSI as its

P50,000.00;

agent and sub-agent, respectively. It further

2) Exemplary damages
in the amount of
P25,000.00; and
3) Attorney's fees in the

held that Tagunicar was not authorized to

confirm the bookings of, nor issue
validation stickers to, herein petitioners and
hence, Pan Am and TWSI cannot be held
responsible for her actions. Finally, it

in Nicos Industrial Corporation

vs. Court of Appeals, et al. [206
SCRA 127]; and
2. the findings of the Court of
Appeals that petitioners' ticket
reservations in question were
not confirmed and that there is
no agency relationship among
PAN-AM, TWSI and Tagunicar
are contrary to the judicial
admissions of PAN-AM, TWSI
and Tagunicar and likewise
contrary to the findings of fact
of the trial court.

amount of

deleted the award for actual damages for

P10,000.00 plus

lack of proof.

We affirm.

Hence this petition based on the following

I. The first issue deserves scant

assignment of errors:

consideration. Petitioners contend that

costs of suit.

contrary to the ruling of the Court of

"On the basis of the foregoing

and clearly set forth, nor substantiate, the

Appeals, the decision of the trial court

facts, the Court is constrained

factual and legal bases for holding

conforms to the standards of an ideal

to conclude that defendant Pan-

respondents TWSI, Pan Am and Tagunicar

decision set in Nicos Industrial

Am is the principal, and

jointly and severally liable. In Del Mundo

Corporation, et al. vs. Court of Appeals, et

defendants TWSI and

vs. CA, et al. where the trial court, after

al., as "that which, with welcome economy

Tagunicar, its authorized agent

summarizing the conflicting asseverations

of words, arrives at the factual findings,

and sub-agent, respectively.

of the parties, disposed of the kernel issue

reaches the legal conclusions, renders its

Consequently, defendants Pan-

in just two (2) paragraphs, we held:

ruling and, having done so, ends." It is

Am, TWSI and Claudia

averred that the trial court's decision

Tagunicar should be held jointly

contains a detailed statement of the

and severally liable to plaintiffs

relevant facts and evidence adduced by the

for damages. Defendant Julieta

parties which thereafter became the bases

Canilao, who acted in her

for the court's conclusions.

official capacity as Office

A careful scrutiny of the decision rendered

by the trial court will show that after
narrating the evidence of the parties, it

Manager of defendant TWSI

should not be held personally
liable."

"It is understandable that

courts, with their heavy dockets
and time constraints, often find
themselves with little to spare in
the preparation of decisions to
the extent most desirable. We
have thus pointed out that
judges might learn to
synthesize and to simplify their

proceeded to dispose of the case with a

The trial court's finding of facts is but a

pronouncements. Nevertheless,

one-paragraph generalization, to wit:

summary of the testimonies of the

concisely written such as they

witnesses and the documentary evidence

may be, decisions must still

presented by the parties. It did not distinctly

distinctly and clearly express, at

least in minimum essence, its

II. Petitioners assert that Tagunicar is a

representation or on behalf of another, with

factual and legal bases."

sub-agent of TWSI while TWSI is a duly

the consent or authority of the latter. The

authorized ticketing agent of Pan Am.

elements of agency are: (1) consent,

Proceeding from this premise, they contend

express or implied, of the parties to

that TWSI and Pan Am should be held

establish the relationship; (2) the object is

liable as principals for the acts of

the execution of a juridical act in relation to

Tagunicar. Petitioners stubbornly insist that

a third person; (3) the agent acts as a

the existence of the agency relationship

representative and not for himself; (4) the

has been established by the judicial

agent acts within the scope of his

admissions allegedly made by respondents

authority. It is a settled rule that persons

herein, to wit: (1) the admission made by

dealing with an assumed agent are bound

Pan Am in its Answer that TWSI is its

at their peril, if they would hold the principal

authorized ticket agent; (2) the affidavit

liable, to ascertain not only the fact of

executed by Tagunicar where she admitted

agency but also the nature and extent of

that she is a duly authorized agent of

authority, and in case either is

TWSI; and (3) the admission made by

controverted, the burden of proof is upon

Canilao that TWSI received commissions

them to establish it.

For failing to explain clearly and well the

factual and legal bases of its award of
moral damages, we set it aside in said
case. Once more, we stress that nothing
less than Section 14 of Article VIII of the
Constitution requires that "no decision shall
be rendered by any court without
expressing therein clearly and distinctly the
facts and the law on which it is based."
This is demanded by the due process
clause of the Constitution. In the case at
bar, the decision of the trial court leaves
much to be desired both in form and
substance. Even while said decision
infringes the Constitution, we will not
belabor this infirmity and rather examine

from ticket sales made by Tagunicar.

In the case at bar, petitioners rely on the

the sufficiency of the evidence submitted

We do not agree. By the contract of

affidavit of respondent Tagunicar where

by the petitioners.

agency, a person binds himself to render

she stated that she is an authorized agent

some service or to do something in

of TWSI. This affidavit, however, has weak

prcd

probative value in light of respondent

by Adrian Yu who testified that Atty.

suit against you we cannot get anything

Tagunicar's testimony in court to the

Acebedo brought his notarial seal and

from you." This purported admission of

contrary. Affidavits, being taken ex parte,

notarized the affidavit of the same day. The

respondent Tagunicar cannot be used by

are almost always incomplete and often

circumstances under which said affidavit

petitioners to prove their agency

inaccurate, sometimes from partial

was prepared put in doubt petitioners' claim

relationship. At any rate, even if such

suggestion, or for want of suggestion and

that it was executed voluntarily by

affidavit is to be given any probative value,

inquiries. Their infirmity as a species of

respondent Tagunicar. It appears that the

the existence of the agency relationship

evidence is a matter of judicial experience

affidavit was prepared and was based on

cannot be established on its sole basis.

and are thus considered inferior to the

the answers which respondent Tagunicar

The declarations of the agent alone are

testimony given in court. Further, affidavits

gave to the questions propounded to her by

generally insufficient to establish the fact or

are not complete reproductions of what the

Atty. Acebedo. They never told her that the

extent of his authority. In addition, as

declarant has in mind because they are

affidavit would be used in a case to be filed

between the negative allegation of

generally prepared by the administering

against her. They even assured her that

respondents Canilao and Tagunicar that

officer and the affiant simply signs them

she would not be included as defendant if

neither is an agent nor principal of the

after the same have been read to

she agreed to execute the

other, and the affirmative allegation of

her. Respondent Tagunicar testified that

affidavit. Respondent Tagunicar was

petitioners that an agency relationship

her affidavit was prepared and typewritten

prevailed upon by petitioners' son and their

exists, it is the latter who have the burden

by the secretary of petitioners' lawyer, Atty.

lawyer to sign the affidavit despite her

of evidence to prove their allegation, failing

Acebedo, who both came with Adrian Yu,

objection to the statement therein that she

in which, their claim must necessarily fail.

son of petitioners, when the latter went to

was an agent of TWSI. They assured her

see her at her office. This was confirmed

that "it is immaterial" and that "if we file a

We stress that respondent Tagunicar

categorically denied in open court that she

is a duly authorized agent of TWSI, and

commission either by TWSI or Pan Am. On

petitioners. The real motive of petitioners in

declared that she is an independent travel

the contrary, Tagunicar testified that when

suing Pan Am appears in its Amended

agent. We have consistently ruled that in

she pays TWSI, she already deducts in

Complaint that "[d]efendants TWSI,

case of conflict between statements in the

advance her commission and merely gives

Canilao and Tagunicar may not be

affidavit and testimonial declarations, the

the net amount to TWSI. From all sides of

financially capable of paying plaintiffs the

latter command greater weight.

the legal prism, the transaction is simply a

amounts herein sought to be recovered,

contract of sale wherein Tagunicar buys

and in such event, defendant Pan Am,

airline tickets from TWSI and then sells it at

being their ultimate principal, is primarily

a premium to her clients.

and/or subsidiarily liable to pay said

As further proofs of agency, petitioners call

our attention to TWSI's Exhibits "7", "7-A",
and "8" which show that Tagunicar and
TWSI received sales commissions from

III. Petitioners included respondent Pan Am

Pan Am. Exhibit "7" is the Ticket Sales

in the complaint on the supposition that

Report submitted by TWSI to Pan Am

since TWSI is its duly authorized agent,

reflecting the commissions received by

and respondent Tagunicar is an agent of

TWSI as an agent of Pan Am. Exhibit "7-

TWSI, then Pan Am should also be held

A" is a listing of the routes taken by

responsible for the acts of respondent

passengers who were audited to TWSI's

Tagunicar. Our disquisitions above show

sales report. Exhibit "8" is a receipt issued

that this contention lacks factual and legal

by TWSI covering the payment made by

bases. Indeed, there is nothing in the

Tagunicar for the tickets she bought from

records to show that respondent Tagunicar

TWSI. These documents cannot justify the

has been employed by Pan Am as its

deduction that Tagunicar was paid a

agent, except the bare allegation of

amounts to plaintiffs." This lends credence

to respondent Tagunicar's testimony that
she was persuaded to execute an affidavit
implicating respondents because
petitioners knew they would not be able to
get anything of value from her. In the past,
we have warned that this Court will not
tolerate an abuse of the judicial process by
passengers in order to pry on international
airlines for damage awards, like "trophies in
a safari."

This meritless suit against Pan Am

immediately called up

becomes more glaring with petitioners'

Pan Am office in Tokyo

cannot stay there for

inaction after they were bumped off in

to reconfirm my flight,

more than 72 hours.

Tokyo. If petitioners were of the honest

but they told me that our

belief that Pan Am was responsible for the

names were not listed in

misfortune which beset them, there is no

the manifest, so next

evidence to show that they lodged a protest

morning, very early in

with Pan Am's Tokyo office immediately

the morning I went to the

after they were refused passage for the

airport, Pan Am office in

flight to San Francisco, or even upon their

the airport to verify and

arrival in Manila. The testimony of

they told me the same

petitioner Yu Eng Cho in this regard is of

and we were not allowed

little value, viz.:

to leave.

"Atty. Jalandoni: . . .
q Upon arrival at the Tokyo
airport, what did you do
if any in connection with
your schedule[d] trip?
a I went to the Hotel, Holiday
Inn and from there I

q You were scheduled to be in

Tokyo for how long Mr.
Yu?
a We have to leave the next day
29th.
q In other words, what was your
status as a passenger?

a Transient passengers. We

xxx xxx xxx

q As a consequence of the fact
that you claimed that the
Pan Am office in Tokyo
told you that your names
were not in the manifest,
what did you do, if any?
a I ask[ed] them if I can go
anywhere in the States?
They told me I can go to
LA via Japan Airlines
and I accepted it.
q Do you have the tickets with
you that they issued for
Los Angeles?

a It was taken by the Japanese

a I am so much scared and

a Because there is no chance

Airlines instead they

worried, so the

for us to go to the United

issue[d] me a ticket to

Japanese Airlines

States within 72 hours

Taipei.

advised us to go to

because during that time

Taipei and I accepted it.

Northwest Airlines [was]

xxx xxx xxx

q Were you able to take the trip
to Los Angeles via Pan

xxx xxx xxx

q Why did you accept the

Am tickets that was

Japan Airlines offer for

issued to you in lieu of

you to go to Taipei?

the tickets to San

Francisco?
a No, sir.
q Why not?
a The Japanese Airlines said
that there were no more
available seats.
q And as a consequence of

on strike so the seats

are very scarce. So they
advised me better left
(sic) before the 72 hours
otherwise you will have
trouble with the
Japanese immigration.

llcd

q As a consequence of that you

were force[d] to take the
trip to Taipei?
a Yes, sir." (italics supplied)

It grinds against the grain of human

experience that petitioners did not insist

that, what did you do, if

that they be allowed to board, considering

any?

that it was then doubly difficult to get seats

because of the ongoing Northwest Airlines

evidence presented by petitioners

sticker on the passenger's ticket had the

strike. It is also perplexing that petitioners

insufficient to overcome the presumption of

letters "O.K." appearing in the 'Res. Status'

readily accepted whatever the Tokyo office

good faith. They have failed to show any

box which means "space confirmed" and

had to offer as an alternative. Inexplicably

wanton, malevolent or reckless misconduct

that the ticket is confirmed or validated.

too, no demand letter was sent to

imputable to respondent Pan Am in its

In Pan American World Airways Inc. v. IAC,

respondents TWSI and Canilao. Nor was a

refusal to accommodate petitioners in its

et al. where a would-be-passenger had the

demand letter sent to respondent Pan Am.

Tokyo-San Francisco flight. Pan Am could

necessary ticket, baggage claim and

To say the least, the motive of petitioners in

not have acted in bad faith because

clearance from immigration all clearly

suing Pan Am is suspect.

petitioners did not have confirmed tickets

showing that she was a confirmed

and more importantly, they were not in the

passenger and included in the passenger

passenger manifest.

manifest and yet was denied

We hasten to add that it is not sufficient to

prove that Pan Am did not allow petitioners
to board to justify petitioners' claim for

In not a few cases, this Court did not

damages. Mere refusal to accede to the

hesitate to hold an airline liable for

passenger's wishes does not necessarily

damages for having acted in bad faith in

translate into damages in the absence of

refusing to accommodate a passenger who

bad faith. The settled rule is that the law

had a confirmed ticket and whose name

presumes good faith such that any person

appeared in the passenger manifest.

who seeks to be awarded damages due to

In Ortigas Jr. v. Lufthansa German Airlines

acts of another has the burden of proving

Inc. we ruled that there was a valid and

that the latter acted in bad faith or with ill

binding contract between the airline and its

motive. In the case at bar, we find the

passenger after finding that validating

accommodation in said flight, we awarded

damages. In Armovit, et al. v. CA, et
al., we upheld the award of damages
made against an airline for gross
negligence committed in the issuance of
tickets with erroneous entries as to the time
of flight. In Alitalia Airways v. CA, et al., we
held that when airline issues a ticket to a
passenger confirmed on a particular flight,
on a certain date, a contract of carriage

arises, and the passenger has every right

mean a confirmation but only a request.

were never confirmed for good reasons: (1)

to expect that he would fly on that flight and

JAL Traffic Supervisor explained that it

The persistent calls made by respondent

on that date. If he does not, then the carrier

would have been different if what was

Tagunicar to Canilao, and those made by

opens itself to a suit for breach of contract

written on the stub were the letter "ok" in

petitioners at the Manila, Hongkong and

of carriage. And finally, an award of

which case the petitioner would have been

Tokyo offices of Pan Am, are eloquent

damages was held proper in the case

assured of a seat on said flight. But in this

indications that petitioners knew that their

of Zalamea, et al. v. CA, et al. where a

case, the petitioner was more of a wait-

tickets have not been confirmed. For, as

confirmed passenger included in the

listed passenger than a regularly booked

correctly observed by Pan Am, why would

manifest was denied accommodation in

passenger."

one continually try to have one's ticket

such flight.

LLphil

In the case at bar, petitioners' ticket were

On the other hand, the respondent airline

on "RQ" status. They were not confirmed

in Sarreal, Sr. v. Japan Airlines

passengers and their names were not

Co., Ltd., was held not liable for damages

listed in the passenger manifest. In other

where the passenger was not allowed to

words, this is not a case where Pan Am

board the plane because his ticket had not

bound itself to transport petitioners and

been confirmed. We ruled that "[t]he stub

thereafter reneged on its obligation. Hence,

that the lady employee put on the

respondent airline cannot be held liable for

petitioner's ticket showed among other

damages.

coded items, under the column "status" the

letters "RQ" which was understood to
mean "Request." Clearly, this does not

confirmed if it had already been confirmed?

(2) The validation stickers which
respondent Tagunicar attached to
petitioners' tickets were those intended for
the exclusive use of airline companies. She
had no authority to use them. Hence, said
validation stickers, wherein the word "OK"
appears in the status box, are not valid and
binding. (3) The names of petitioners do
not appear in the passenger manifest. (4)

IV. We hold that respondent Court of

Respondent Tagunicar's "Exhibit 1" shows

Appeals correctly ruled that the tickets

that the status of the San Francisco-New

York segment was "Ok", meaning it was

really did not confirm the bookings of

because he doubted the confirmation made

confirmed, but that the status of the Tokyo-

petitioners, respondent Canilao pointed out

by respondent Tagunicar. This is clear

San Francisco segment was still "on

that the validation stickers which

proof that petitioners knew that they might

request." (5) Respondent Canilao testified

respondent Tagunicar attached to the

be bumped off at Tokyo when they decided

that on the day that petitioners were to

tickets of petitioners had IATA No. 2-82-

to proceed with the trip. Aware of this risk,

depart for Hongkong, respondent

0770 stamped on it, whereas the IATA

petitioners exerted efforts to confirm their

Tagunicar called her from the airport asking

number of TWSI is 28-30770.

tickets in Manila, then in Hongkong, and

for confirmation of the Tokyo-San Francisco

flight, and that when she told respondent
Tagunicar that she should not have allowed
petitioners to leave because their tickets
have not been confirmed, respondent
Tagunicar merely said "Bahala na." This
was never controverted nor refuted by
respondent Tagunicar. (6) To prove that it

Undoubtedly, respondent Tagunicar should

be liable for having acted in bad faith in
misrepresenting to petitioners that their
tickets have been confirmed. Her

finally in Tokyo. Resultantly, we find the

modification as to the amount of damages
awarded just and equitable under the
circumstances.

culpability, however, was properly

WHEREFORE, the decision appealed from

mitigated. Petitioner Yu Eng Cho testified

is hereby AFFIRMED. Cost against

that he repeatedly tried to follow up on the

petitioners. SO ORDERED.

confirmation of their tickets with Pan Am