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FIRST DIVISION When a man and woman driving together as husband and wife, but they are

not married, or their marriage is void from the beginning, the property
G.R. No. L-50127-28 March 30, 1979 acquired by either or both of them through their work or industry or their
wages and salaries shall be governed by the rules on co-ownership.
VICTOR JUANIZA, Heirs of Josefa P. Leus etc., et al., plaintiffs and appellees,
vs. Rosalia Arroyo then filed her appeal with the Court of Appeals which, as previously stated,
EUGENIO JOSE, THE ECONOMIC INSURANCE COMPANY, INC., and ROSALIA certified the same to Us, the question raised being purely legal as may be seen from the lone
ARROYO, defendants and appellants. assigned error as follows:

Victoriano O. Javier and Ricardo A. Fabros, Jr. for appellees. The lower court erred in holding defendant-appellant Rosalia Arroyo liable 'for
damages resulting from the death and physical injuries suffered by the
passengers' of the jeepney registered in the name of Eugenio Jose, on the
Luis Viscocho and Francisco E. Rodrigo, Jr. for appellants. erroneous theory that Eugenio Jose and Rosalia Arroyo, having lived
together as husband and wife, without the benefit of marriage, are co-
DE CASTRO, J.: owners of said jeepney. (p. 2, Appellant's Brief).

This case was certified by the Court of Appeals to this Court on the ground that the questions The issues thus to be resolved are as follows: (1) whether or not Article 144 of the Civil Code is
raised in the appeal of the decision of the Court of First Instance of Laguna are purely applicable in a case where one of the parties in a common-law relationship is incapacitated to
questions of law. marry, and (2) whether or not Rosalia who is not a registered owner of the jeepney can be held
jointly and severally liable for damages with the registered owner of the same.
Eugenio Jose was the registered owner and operator of the passenger jeepney involved in an
accident of collision with a freight train of the Philippine National Railways that took place on It has been consistently ruled by this Court that the co-ownership contemplated in Article 144 of
November 23, 1969 which resulted in the death to seven (7) and physical injuries to five (5) of the Civil Code requires that the man and the woman living together must not in any way be
its passengers. At the time of the accident, Eugenio Jose was legally married to Socorro incapacitated to contract marriage. (Camporedondo vs. Aznar, L-11483, February 4, 1958, 102
Ramos but had been cohabiting with defendant-appellant, Rosalia Arroyo, for sixteen (16) Phil. 1055, 1068; Osmeña vs. Rodriguez, 54 OG 5526; Malajacan vs. Rubi, 42 OG 5576).
years in a relationship akin to that of husband and wife. Since Eugenio Jose is legally married to Socorro Ramos, there is an impediment for him to
contract marriage with Rosalia Arroyo. Under the aforecited provision of the Civil Code, Arroyo
In the resulting cages for damages filed in the Court of First Instance of Laguna, decision was cannot be a co-owner of the jeepney. The jeepney belongs to the conjugal partnership of Jose
rendered, the dispositive part of which reads as follows: and his legal wife. There is therefore no basis for the liability of Arroyo for damages arising from
the death of, and physical injuries suffered by, the passengers of the jeepney which figured in
the collision.
(4) In Civil Case No. SP-867 ordering defendants Eugenio Jose and Rosalia
Arroyo jointly and severally to pay plaintiff Victor Juaniza the sum of
P1,600.00 plus legal interest from date of complaint until fully paid and costs Rosalia Arroyo, who is not the registered owner of the jeepney can neither be liable for
of suit; damages caused by its operation. It is settled in our jurisprudence that only the registered
owner of a public service vehicle is responsible for damages that may arise from consequences
incident to its operation, or maybe caused to any of the passengers therein. (De Peralta vs.
(5) In Civil Case No. SP-872, ordering defendants Eugenio Jose and Rosalia Mangusang, L-18110, July 31, 1964, 11 SCRA 598; Tamayo vs. Aquino, L-12634 and L-12720,
Arroyo jointly and severally to pay the respective heirs of the deceased May 29, 1959; Roque vs. Malibay Transit, L-8561, November 18,1955; Montoya vs. Ignacio, L-
Josefa P. Leus, Fausto Retrita, Nestor del Rosario Añonuevo and Arceli de la 5868, December 29, 1953).
Cueva in the sum of P12,000.00 for the life of each of said deceased, with
legal interest from date of complaint, and costs of suit. (pp. 47-48, Rello).
WHEREFORE, in view of the foregoing, Rosalia Arroyo is hereby declared free from any
liability for damages and the appealed decision is hereby modified accordingly. No costs.
Motion for reconsideration was filed by Rosalia Arroyo praying that the decision be
reconsidered insofar as it condemns her to pay damages jointly and severally with her co-
Teehankee (Chairman), Makasiar, Fernandez, Guerrero, and Melencio-Herrera, JJ., concur.
defendant, but was denied. The lower court based her liability on the provision of Article 144 of
the Civil Code which reads:
THIRD DIVISION On 10 December 1975, the trial court rendered a Decision 1 finding private respondent to be a
common carrier and holding him liable for the value of the undelivered goods (P 22,150.00) as
G.R. No. L-47822 December 22, 1988 well as for P 4,000.00 as damages and P 2,000.00 as attorney's fees.

PEDRO DE GUZMAN, petitioner, On appeal before the Court of Appeals, respondent urged that the trial court had erred in
vs. considering him a common carrier; in finding that he had habitually offered trucking services to
COURT OF APPEALS and ERNESTO CENDANA, respondents. 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.
Vicente D. Millora for petitioner.
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
Jacinto Callanta for private respondent. 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
FELICIANO, J.: of the Court of Appeals:

Respondent Ernesto Cendana, a junk dealer, was engaged in buying up used bottles and scrap 1. that private respondent was not a common carrier;
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 2. that the hijacking of respondent's truck was force majeure; and
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 3. that respondent was not liable for the value of the undelivered cargo.
commonly lower than regular commercial rates. (Rollo, p. 111)

Sometime in November 1970, petitioner Pedro de Guzman a merchant and authorized dealer We consider first the issue of whether or not private respondent Ernesto Cendana may, under
of General Milk Company (Philippines), Inc. in Urdaneta, Pangasinan, contracted with the facts earlier set forth, be properly characterized as a common carrier.
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. The Civil Code defines "common carriers" in the following terms:
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 Article 1732. Common carriers are persons, corporations, firms or
were placed on board the other truck which was driven by Manuel Estrada, respondent's driver associations engaged in the business of carrying or transporting passengers
and employee. or goods or both, by land, water, or air for compensation, offering their
services to the public.
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 above article makes no distinction between one whose principal business activity is the
the MacArthur Highway in Paniqui, Tarlac, by armed men who took with them the truck, its carrying of persons or goods or both, and one who does such carrying only as
driver, his helper and the cargo. 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
On 6 January 1971, petitioner commenced action against private respondent in the Court of scheduled basis and one offering such service on an occasional, episodic or unscheduled
First Instance of Pangasinan, demanding payment of P 22,150.00, the claimed value of the lost basis. Neither does Article 1732 distinguish between a carrier offering its services to the
merchandise, plus damages and attorney's fees. Petitioner argued that private respondent, "general public," i.e., the general community or population, and one who offers services or
being a common carrier, and having failed to exercise the extraordinary diligence required of solicits business only from a narrow segment of the general population. We think that Article
him by the law, should be held liable for the value of the undelivered goods. 1733 deliberaom making such distinctions.

In his Answer, private respondent denied that he was a common carrier and argued that he So understood, the concept of "common carrier" under Article 1732 may be seen to coincide
could not be held responsible for the value of the lost goods, such loss having been due neatly with the notion of "public service," under the Public Service Act (Commonwealth Act No.
to force majeure. 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 Article 1734 establishes the general rule that common carriers are responsible for the loss,
in the Philippines, for hire or compensation, with general or limited clientele, destruction or deterioration of the goods which they carry, "unless the same is due to any of the
whether permanent, occasional or accidental, and done for general business following causes only:
purposes, any common carrier, railroad, street railway, traction railway,
subway motor vehicle, either for freight or passenger, or both, with or without (1) Flood, storm, earthquake, lightning or other natural disaster or calamity;
fixed route and whatever may be its classification, freight or carrier service of (2) Act of the public enemy in war, whether international or civil;
any class, express service, steamboat, or steamship line, pontines, ferries (3) Act or omission of the shipper or owner of the goods;
and water craft, engaged in the transportation of passengers or freight or (4) The character-of the goods or defects in the packing or-in the containers; and
both, shipyard, marine repair shop, wharf or dock, ice plant, (5) Order or act of competent public authority.
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 It is important to point out that the above list of causes of loss, destruction or deterioration
other similar public services. ... (Emphasis supplied) 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:
It appears to the Court that private respondent is properly characterized as a common carrier
even though he merely "back-hauled" goods for other merchants from Manila to Pangasinan,
although such back-hauling was done on a periodic or occasional rather than regular or In all cases other than those mentioned in numbers 1, 2, 3, 4 and 5 of the
scheduled manner, and even though private respondent's principal occupation was not the preceding article, if the goods are lost, destroyed or deteriorated, common
carriage of goods for others. There is no dispute that private respondent charged his customers carriers are presumed to have been at fault or to have acted negligently,
a fee for hauling their goods; that fee frequently fell below commercial freight rates is not unless they prove that they observed extraordinary diligence as required in
relevant here. Article 1733. (Emphasis supplied)

The Court of Appeals referred to the fact that private respondent held no certificate of public Applying the above-quoted Articles 1734 and 1735, we note firstly that the specific cause
convenience, and concluded he was not a common carrier. This is palpable error. A certificate alleged in the instant case — the hijacking of the carrier's truck — does not fall within any of the
of public convenience is not a requisite for the incurring of liability under the Civil Code five (5) categories of exempting causes listed in Article 1734. It would follow, therefore, that the
provisions governing common carriers. That liability arises the moment a person or firm acts as hijacking of the carrier's vehicle must be dealt with under the provisions of Article 1735, in other
a common carrier, without regard to whether or not such carrier has also complied with the words, that the private respondent as common carrier is presumed to have been at fault or to
requirements of the applicable regulatory statute and implementing regulations and has been have acted negligently. This presumption, however, may be overthrown by proof of
granted a certificate of public convenience or other franchise. To exempt private respondent extraordinary diligence on the part of 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 Petitioner insists that private respondent had not observed extraordinary diligence in the care of
respondent precisely for failing to comply with applicable statutory requirements. The business petitioner's goods. Petitioner argues that in the circumstances of this case, private respondent
of a common carrier impinges directly and intimately upon the safety and well being and should have hired a security guard presumably to ride with the truck carrying the 600 cartons of
property of those members of the general community who happen to deal with such carrier. Liberty filled milk. We do not believe, however, that in the instant case, the standard of
The law imposes duties and liabilities upon common carriers for the safety and protection of extraordinary diligence required private respondent to retain a security guard to ride with the
those who utilize their services and the law cannot allow a common carrier to render such truck and to engage brigands in a firelight at the risk of his own life and the lives of the driver
duties and liabilities merely facultative by simply failing to obtain the necessary permits and and his helper.
authorizations.
The precise issue that we address here relates to the specific requirements of the duty of
We turn then to the liability of private respondent as a common carrier. extraordinary diligence in the vigilance over the goods carried in the specific context of
hijacking or armed robbery.
Common carriers, "by the nature of their business and for reasons of public policy" 2 are held to
a very high degree of care and diligence ("extraordinary diligence") in the carriage of goods as As noted earlier, the duty of extraordinary diligence in the vigilance over goods is, under Article
well as of passengers. The specific import of extraordinary diligence in the care of goods 1733, given additional specification not only by Articles 1734 and 1735 but also by Article 1745,
transported by a common carrier is, according to Article 1733, "further expressed in Articles numbers 4, 5 and 6, Article 1745 provides in relevant part:
1734,1735 and 1745, numbers 5, 6 and 7" of the Civil Code.
Any of the following or similar stipulations shall be considered unreasonable, unjust and
contrary to public policy:
xxx xxx xxx SO ORDERED.

(5) that the common carrier shall not be responsible for the acts or omissions of his or its Fernan, C.J., Gutierrez, Jr., Bidin and Cortes, JJ., concur.
employees;

(6) that the common carrier's liability for acts committed by thieves, or of robbers who
donot act with grave or irresistible threat, violence or force, is dispensed with or diminished;
and

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

Under Article 1745 (6) above, a common carrier is held responsible — and will not be allowed
to divest or to diminish such responsibility — even for acts of strangers like thieves or
robbers, except where such thieves or robbers in fact acted "with grave or irresistible threat,
violence or force." We believe and so hold that the limits of the duty of extraordinary diligence in
the vigilance over the goods carried are reached where the goods are lost as a result of a
robbery which is attended by "grave or irresistible threat, violence or force."

In the instant case, armed men held up the second truck owned by private respondent which
carried petitioner's cargo. The record shows that an information for robbery in band was filed in
the Court of First Instance of Tarlac, Branch 2, in Criminal Case No. 198 entitled "People of the
Philippines v. Felipe Boncorno, Napoleon Presno, Armando Mesina, Oscar Oria and one John
Doe." There, the accused were charged with willfully and unlawfully taking and carrying away
with them the second truck, driven by Manuel Estrada and loaded with the 600 cartons of
Liberty filled milk destined for delivery at petitioner's store in Urdaneta, Pangasinan. The
decision of the trial court shows that the accused acted with grave, if not irresistible, threat,
violence or force.3 Three (3) of the five (5) hold-uppers were armed with firearms. The robbers
not only took away the truck and its cargo but also kidnapped the driver and his helper,
detaining them for several days and later releasing them in another province (in Zambales).
The hijacked truck was subsequently found by the police in Quezon City. The Court of First
Instance convicted all the accused of robbery, though not of robbery in band. 4

In these circumstances, we hold that the occurrence of the loss must reasonably be regarded
as quite beyond the control of the common carrier and properly regarded as a fortuitous event.
It is necessary to recall that even common carriers are not made absolute insurers against all
risks of travel and of transport of goods, and are not held liable for acts or events which cannot
be foreseen or are inevitable, provided that they shall have complied with the rigorous standard
of extraordinary diligence.

We, therefore, agree with the result reached by the Court of Appeals that private respondent
Cendana is not liable for the value of the undelivered merchandise which was lost because of
an event entirely beyond private respondent's control.

ACCORDINGLY, the Petition for Review on certiorari is hereby DENIED and the Decision of
the Court of Appeals dated 3 August 1977 is AFFIRMED. No pronouncement as to costs.
EN BANC All abaca shipments of Macleod, including the 1,162 bales loaded on the carrier's LCT No.
1025, were insured with the Insurance Company of North America against all losses and
G.R. No. L-18965 October 30, 1964 damages. In due time, Macleod filed a claim for the loss it suffered as above stated with said
insurance company, and after the same had been processed, the sum of P64,018.55 was paid,
which was noted down in a document which aside from being a receipt of the amount paid, was
COMPAÑIA MARITIMA, petitioner, a subrogation agreement between Macleod and the insurance company wherein the former
vs. assigned to the latter its rights over the insured and damaged cargo. Having failed to recover
INSURANCE COMPANY OF NORTH AMERICA, respondent. from the carrier the sum of P60,421.02, which is the only amount supported by receipts, the
insurance company instituted the present action on October 28, 1953. After trial, the court a
Rafael Dinglasan for petitioner. quo rendered judgment ordering the carrier to pay the insurance company the sum of
Ozaeta Gibbs & Ozaeta for respondent. P60,421.02, with legal interest thereon from the date of the filing of the complaint until fully
paid, and the costs. This judgment was affirmed by the Court of Appeals on December 14,
BAUTISTA ANGELO, J.: 1960. Hence, this petition for review.

Sometime in October, 1952, Macleod and Company of the Philippines contracted by telephone The issues posed before us are: (1) Was there a contract of carriage between the carrier and
the services of the Compañia Maritima, a shipping corporation, for the shipment of 2,645 bales the shipper even if the loss occurred when the hemp was loaded on a barge owned by the
of hemp from the former's Sasa private pier at Davao City to Manila and for their subsequent carrier which was loaded free of charge and was not actually loaded on the S.S. Bowline Knot
transhipment to Boston, Massachusetts, U.S.A. on board the S.S. Steel Navigator. This oral which would carry the hemp to Manila and no bill of lading was issued therefore?; (2) Was the
contract was later on confirmed by a formal and written booking issued by Macleod's branch damage caused to the cargo or the sinking of the barge where it was loaded due to a fortuitous
office in Sasa and handcarried to Compañia Maritima's branch office in Davao in compliance event, storm or natural disaster that would exempt the carrier from liability?; (3) Can respondent
with which the latter sent to Macleod's private wharf LCT Nos. 1023 and 1025 on which the insurance company sue the carrier under its insurance contract as assignee of Macleod in spite
loading of the hemp was completed on October 29, 1952. These two lighters were manned of the fact that the liability of the carrier as insurer is not recognized in this jurisdiction?; (4) Has
each by a patron and an assistant patron. The patrons of both barges issued the corresponding the Court of Appeals erred in regarding Exhibit NNN-1 as an implied admission by the carrier of
carrier's receipts and that issued by the patron of Barge No. 1025 reads in part: the correctness and sufficiency of the shipper's statement of accounts contrary to the burden of
proof rule?; and (5) Can the insurance company maintain this suit without proof of its
personality to do so?
Received in behalf of S.S. Bowline Knot in good order and condition from MACLEOD
AND COMPANY OF PHILIPPINES, Sasa Davao, for transhipment at Manila onto S.S.
Steel Navigator. 1. This issue should be answered in the affirmative. As found by the Court of Appeals, Macleod
and Company contracted by telephone the services of petitioner to ship the hemp in question
from the former's private pier at Sasa, Davao City, to Manila, to be subsequently transhipped to
FINAL DESTINATION: Boston. Boston, Massachusetts, U.S.A., which oral contract was later confirmed by a formal and written
booking issued by the shipper's branch office, Davao City, in virtue of which the carrier sent two
Thereafter, the two loaded barges left Macleod's wharf and proceeded to and moored at the of its lighters to undertake the service. It also appears that the patrons of said lighters were
government's marginal wharf in the same place to await the arrival of the S.S. Bowline Knot employees of the carrier with due authority to undertake the transportation and to sign the
belonging to Compañia Maritima on which the hemp was to be loaded. During the night of documents that may be necessary therefor so much so that the patron of LCT No. 1025 signed
October 29, 1952, or at the early hours of October 30, LCT No. 1025 sank, resulting in the the receipt covering the cargo of hemp loaded therein as follows: .
damage or loss of 1,162 bales of hemp loaded therein. On October 30, 1952, Macleod promptly
notified the carrier's main office in Manila and its branch in Davao advising it of its liability. The Received in behalf of S.S. Bowline Knot in good order and condition from MACLEOD
damaged hemp was brought to Odell Plantation in Madaum, Davao, for cleaning, washing, AND COMPANY OF PHILIPPINES, Sasa Davao, for transhipment at Manila onto S.S.
reconditioning, and redrying. During the period from November 1-15, 1952, the carrier's trucks Steel Navigator.
and lighters hauled from Odell to Macleod at Sasa a total of 2,197.75 piculs of the
reconditioned hemp out of the original cargo of 1,162 bales weighing 2,324 piculs which had a
total value of 116,835.00. After reclassification, the value of the reconditioned hemp was FINAL DESTINATION: Boston.
reduced to P84,887.28, or a loss in value of P31,947.72. Adding to this last amount the sum of
P8,863.30 representing Macleod's expenses in checking, grading, rebating, and other fees for The fact that the carrier sent its lighters free of charge to take the hemp from Macleod's wharf
washing, cleaning and redrying in the amount of P19.610.00, the total loss adds up to at Sasa preparatory to its loading onto the ship Bowline Knot does not in any way impair the
P60,421.02. contract of carriage already entered into between the carrier and the shipper, for that
preparatory step is but part and parcel of said contract of carriage. The lighters were merely
employed as the first step of the voyage, but once that step was taken and the hemp delivered
to the carrier's employees, the rights and obligations of the parties attached thereby subjecting Robles vs. Santos, 44 O.G. 2268). In other words, the Code does not demand, as
them to the principles and usages of the maritime law. In other words, here we have a complete necessary requisite in the contract of transportation, the delivery of the bill of lading to
contract of carriage the consummation of which has already begun: the shipper delivering the the shipper, but gives right to both the carrier and the shipper to mutually demand of
cargo to the carrier, and the latter taking possession thereof by placing it on a lighter manned each other the delivery of said bill. (Sp. Sup. Ct. Decision, May 6, 1895). (Martin,
by its authorized employees, under which Macleod became entitled to the privilege secured to Philippine Commercial Laws, Vol. II, Revised Edition, pp. 12-13)
him by law for its safe transportation and delivery, and the carrier to the full payment of its
freight upon completion of the voyage. The liability of the carrier as common carrier begins with the actual delivery of the
goods for transportation, and not merely with the formal execution of a receipt or bill of
The receipt of goods by the carrier has been said to lie at the foundation of the lading; the issuance of a bill of lading is not necessary to complete delivery and
contract to carry and deliver, and if actually no goods are received there can be no acceptance. Even where it is provided by statute that liability commences with the
such contract. The liability and responsibility of the carrier under a contract for the issuance of the bill of lading, actual delivery and acceptance are sufficient to bind the
carriage of goods commence on their actual delivery to, or receipt by, the carrier or an carrier. (13 C.J.S., p. 288)
authorized agent. ... and delivery to a lighter in charge of a vessel for shipment on the
vessel, where it is the custom to deliver in that way, is a good delivery and binds the 2. Petitioner disclaims responsibility for the damage of the cargo in question shielding itself
vessel receiving the freight, the liability commencing at the time of delivery to the behind the claim of force majeure or storm which occurred on the night of October 29, 1952.
lighter. ... and, similarly, where there is a contract to carry goods from one port to But the evidence fails to bear this out.
another, and they cannot be loaded directly on the vessel and lighters are sent by the
vessel to bring the goods to it, the lighters are for the time its substitutes, so that the
bill of landing is applicable to the goods as soon as they are placed on the lighters. (80 Rather, it shows that the mishap that caused the damage or loss was due, not to force majeure,
C.J.S., p. 901, emphasis supplied) but to lack of adequate precautions or measures taken by the carrier to prevent the loss as may
be inferred from the following findings of the Court of Appeals:
... The test as to whether the relation of shipper and carrier had been established is,
Had the control and possession of the cotton been completely surrendered by the Aside from the fact that, as admitted by appellant's own witness, the ill-fated barge
shipper to the railroad company? Whenever the control and possession of goods had cracks on its bottom (pp. 18-19, t.s.n., Sept. 13, 1959) which admitted sea water
passes to the carrier and nothing remains to be done by the shipper, then it can be in the same manner as rain entered "thru tank man-holes", according to the patron of
said with certainty that the relation of shipper and carrier has been established. LCT No. 1023 (exh. JJJ-4) — conclusively showing that the barge was not seaworthy
Railroad Co. v. Murphy, 60 Ark. 333, 30 S.W. 419, 46 A. St. Rep. 202; Pine Bluff & — it should be noted that on the night of the nautical accident there was no storm,
Arkansas River Ry. v. MaKenzie, 74 Ark. 100, 86 S.W. 834; Matthews & Hood v. St. flood, or other natural disaster or calamity. Certainly, winds of 11 miles per hour,
L., I.M. & S.R. Co., 123 Ark. 365, 185 S.W. 461, L.R.A. 1916E, 1194. (W.F. Bogart & although stronger than the average 4.6 miles per hour then prevailing in Davao on
Co., et al. v. Wade, et al., 200 S.W. 148). October 29, 1952 (exh. 5), cannot be classified as storm. For according to Beaufort's
wind scale, a storm has wind velocities of from 64 to 75 miles per hour; and by
Philippine Weather Bureau standards winds should have a velocity of from 55 to 74
The claim that there can be no contract of affreightment because the hemp was not actually miles per hour in order to be classified as storm (Northern Assurance Co., Ltd. vs.
loaded on the ship that was to take it from Davao City to Manila is of no moment, for, as Visayan Stevedore Transportation Co., CA-G.R. No. 23167-R, March 12, 1959).
already stated, the delivery of the hemp to the carrier's lighter is in line with the contract. In fact,
the receipt signed by the patron of the lighter that carried the hemp stated that he was receiving
the cargo "in behalf of S.S. Bowline Knot in good order and condition." On the other hand, the The Court of Appeals further added: "the report of R. J. del Pan & Co., Inc., marine surveyors,
authorities are to the effect that a bill of lading is not indispensable for the creation of a contract attributes the sinking of LCT No. 1025 to the 'non-water-tight conditions of various buoyancy
of carriage. compartments' (exh. JJJ); and this report finds confirmation on the above-mentioned admission
of two witnesses for appellant concerning the cracks of the lighter's bottom and the entrance of
the rain water 'thru manholes'." We are not prepared to dispute this finding of the Court of
Bill of lading not indispensable to contract of carriage. — As to the issuance of a bill of Appeals.
lading, although article 350 of the Code of Commerce provides that "the shipper as
well as the carrier of merchandise or goods may mutua-lly demand that a bill of lading
is not indispensable. As regards the form of the contract of carriage it can be said that 3. There can also be no doubt that the insurance company can recover from the carrier as
provided that there is a meeting of the minds and from such meeting arise rights and assignee of the owner of the cargo for the insurance amount it paid to the latter under the
obligations, there should be no limitations as to form." The bill of lading is not essential insurance contract. And this is so because since the cargo that was damaged was insured with
to the contract, although it may become obligatory by reason of the regulations of respondent company and the latter paid the amount represented by the loss, it is but fair that it
railroad companies, or as a condition imposed in the contract by the agreement of the be given the right to recover from the party responsible for the loss. The instant case, therefore,
parties themselves. The bill of lading is juridically a documentary proof of the is not one between the insured and the insurer, but one between the shipper and the carrier,
stipulations and conditions agreed upon by both parties. (Del Viso, pp. 314-315; because the insurance company merely stepped into the shoes of the shipper. And since the
shipper has a direct cause of action against the carrier on account of the damage of the cargo, 5. Finally, with regard to the question concerning the personality of the insurance company to
no valid reason is seen why such action cannot be asserted or availed of by the insurance maintain this action, we find the same of no importance, for the attorney himself of the carrier
company as a subrogee of the shipper. Nor can the carrier set up as a defense any defect in admitted in open court that it is a foreign corporation doing business in the Philippines with a
the insurance policy not only because it is not a privy to it but also because it cannot avoid its personality to file the present action.
liability to the shipper under the contract of carriage which binds it to pay any loss that may be
caused to the cargo involved therein. Thus, we find fitting the following comments of the Court WHEREFORE, the decision appealed from is affirmed, with costs against petitioner.
of Appeals:
Bengzon, C.J., Concepcion, Reyes, J.B.L., Barrera, Paredes, Dizon, Regala, Makalintal,
It was not imperative and necessary for the trial court to pass upon the question of Bengzon, J.P. and Zaldivar JJ., concur.
whether or not the disputed abaca cargo was covered by Marine Open Cargo Policy
No. MK-134 isued by appellee. Appellant was neither a party nor privy to this
insurance contract, and therefore cannot avail itself of any defect in the policy which
may constitute a valid reason for appellee, as the insurer, to reject the claim of
Macleod, as the insured. Anyway, whatever defect the policy contained, if any, is
deemed to have been waived by the subsequent payment of Macleod's claim by
appellee. Besides, appellant is herein sued in its capacity as a common carrier, and
appellee is suing as the assignee of the shipper pursuant to exhibit MM. Since, as
above demonstrated, appellant is liable to Macleod and Company of the Philippines
for the los or damage to the 1,162 bales of hemp after these were received in good
order and condition by the patron of appellant's LCT No. 1025, it necessarily follows
that appellant is likewise liable to appellee who, as assignee of Macleod, merely
stepped into the shoes of and substi-tuted the latter in demanding from appellant the
payment for the loss and damage aforecited.

4. It should be recalled in connection with this issue that during the trial of this case the carrier
asked the lower court to order the production of the books of accounts of the Odell Plantation
containing the charges it made for the loss of the damaged hemp for verification of its
accountants, but later it desisted therefrom on the claim that it finds their production no longer
necessary. This desistance notwithstanding, the shipper however pre-sented other documents
to prove the damage it suffered in connection with the cargo and on the strength thereof the
court a quo ordered the carrier to pay the sum of P60,421.02. And after the Court of Appeals
affirmed this award upon the theory that the desistance of the carrier from producing the books
of accounts of Odell Plantation implies an admission of the correctness of the statements of
accounts contained therein, petitioner now contends that the Court of Appeals erred in basing
the affirmance of the award on such erroneous interpretation.

There is reason to believe that the act of petitioner in waiving its right to have the books of
accounts of Odell Plantation presented in court is tantamount to an admission that the
statements contained therein are correct and their verification not necessary because its main
defense here, as well as below, was that it is not liable for the loss because there was no
contract of carriage between it and the shipper and the loss caused, if any, was due to a
fortuitous event. Hence, under the carrier's theory, the correctness of the account representing
the loss was not so material as would necessitate the presentation of the books in question. At
any rate, even if the books of accounts were not produced, the correctness of the accounts
cannot now be disputed for the same is supported by the original documents on which the
entries in said books were based which were presented by the shipper as part of its evidence.
And according to the Court of Appeals, these documents alone sufficiently establish the award
of P60,412.02 made in favor of respondent.
SECOND DIVISION was broken and the damage rendered it unserviceable. Demands both oral and written were made by
plaintiff against the defendant for the reimbursement of the value of the damaged microwave oven, and
transportation charges paid by plaintiff to defendant company. But these demands fell on deaf ears.

[G.R. No. 119706. March 14, 1996] On September 25, 1990, plaintiff Gilda C. Mejia filed the instant action for damages against defendant in
the lower court.

In its answer, defendant Airlines alleged inter alia, by way of special and affirmative defenses, that the
PHILIPPINE AIRLINES, INC., petitioner, vs. COURT OF APPEALS and GILDA C. court has no jurisdiction over the case; that plaintiff has no valid cause of action against defendant since
MEJIA, respondents. it acted only in good faith and in compliance with the requirements of the law, regulations, conventions
and contractual commitments; and that defendant had always exercised the required diligence in the
selection, hiring and supervision of its employees.[4]
DECISION
REGALADO, J.: What had theretofore transpired at the trial in the court a quo is narrated as follows:

This is definitely not a case of first impression. The incident which eventuated in the present Plaintiff Gilda Mejia testified that sometime on January 27, 1990, she took defendants plane from San
controversy is a drama of common contentious occurrence between passengers and carriers Francisco, U.S.A. for Manila, Philippines (Exh. F). Amongst her baggages (sic) was a slightly used
whenever loss is sustained by the former. Withal, the exposition of the factual ambience and the microwave oven with the brand name Sharp under PAL Air Waybill No. 0-79-1013008-3 (Exh. A).
legal precepts in this adjudication may hopefully channel the assertiveness of passengers and When shipped, defendants office at San Francisco inspected it. It was in good condition with its front
the intransigence of carriers into the realization that at times a bad extrajudicial compromise could glass intact. She did not declare its value upon the advice of defendants personnel at San Francisco.
be better than a good judicial victory.
Assailed in this petition for review is the decision of respondent Court of Appeals in CA- When she arrived in Manila, she gave her sister Concepcion C. Dio authority to claim her baggag(e)
G.R. CV No. 42744[1] which affirmed the decision of the lower court[2] finding petitioner Philippine (Exh. G) and took a connecting flight for Bacolod City.
Air Lines, Inc. (PAL) liable as follows:
When Concepcion C. Dino claimed the baggag(e) (Exh. B) with defendant, then with the Bureau of
ACCORDINGLY, judgment is hereby rendered ordering defendant Philippine Air Lines, Inc., to pay Customs, the front glass of the microwave oven was already broken and cannot be repaired because of
plaintiff Gilda C. Mejia: the danger of radiation. They demanded from defendant thru Atty. PacoP30,000.00 for the damages
although a brand new one costs P40,000.00, but defendant refused to pay.
(1) P30,000.00 by way of actual damages of the microwave oven;
Hence, plaintiff engaged the services of counsel. Despite demand (Exh. E) by counsel, defendant still
refused to pay.
(2) P10,000.00 by way of moral damages;
The damaged oven is still with defendant. Plaintiff is engaged in (the) catering and restaurant
(3) P20,000.00 by way of exemplary damages; business. Hence, the necessity of the oven.Plaintiff suffered sleepless nights when defendant refused to
pay her (for) the broken oven and claims P 10,000.00 moral damages, P20,000.00exemplary damages,
(4) P10,000.00 as attorneys fee; P10,000.00 attorneys fees plus P300.00 per court appearance and P15,000.00 monthly loss of income in
her business beginning February, 1990.
all in addition to the costs of the suit.
Defendant Philippine Airlines thru its employees Rodolfo Pandes and Vicente Villaruz posited that
plaintiffs claim was not investigated until after the filing of the formal claim on August 13, 1990 (Exh. 6
Defendants counterclaim is hereby dismissed for lack of merit. [3]
also Exh. E). During the investigations, plaintiff failed to submit positive proof of the value of the
The facts as found by respondent Court of Appeals are as follows: cargo. Hence her claim was denied.

On January 27, 1990, plaintiff Gilda C. Mejia shipped thru defendant, Philippine Airlines, one (1) unit Also plaintiffs claim was filed out of time under paragraph 12, a(1) of the Air Waybill (Exh. A,
microwave oven, with a gross weight of 33 kilograms from San Francisco, U.S.A. to Manila, Philippines. also Exh. 1) which provides: (a) the person entitled to delivery must make a complaint to the carrier in
Upon arrival, however, of said article in Manila, Philippines, plaintiff discovered that its front glass door writing in case: (1) of visible damage to the goods, immediately after discovery of the damage and at the
latest within 14 days from the receipt of the goods.[5]
As stated at the outset, respondent Court of Appeals similarly ruled in favor of private Counsel for private respondent refutes these arguments by saying that due to her
respondent by affirming in full the trial courts judgment in Civil Case No. 6210, with costs against eagerness to ship the microwave oven to Manila, private respondent assented to the terms and
petitioner.[6] Consequently, petitioner now impugns respondent appellate courts ruling insofar as conditions of the contract without any opportunity to question or change its terms which are
it agrees with (1) the conclusions of the trial court that since the air waybill is a contract of practically on a take-it-or-leave-it basis, her only participation therein being the affixation of her
adhesion, its provisions should be strictly construed against herein petitioner; (2) the finding of signature.Further, reliance on the Fieldmens insurance case is misplaced since it is not the
the trial court that herein petitioners liability is not limited by the provisions of the air waybill; and ambiguity or obscurity of the stipulation that renders necessary the strict interpretation of a
(3) the award by the trial court to private respondent of moral and exemplary damages, attorneys contract of adhesion against the drafter, but the peculiarity of the transaction wherein one party,
fees and litigation expenses. normally a corporation, drafts all the provisions of the contract without any participation
whatsoever on the part of the other party other than affixment of signature.[11]
The trial court relied on the ruling in the case of Fieldmens Insurance Co., Inc. vs. Vda.
De Songco, et al.[7] in finding that the provisions of the air waybill should be strictly construed A review of jurisprudence on the matter reveals the consistent holding of the Court that
against petitioner. More particularly, the court below stated its findings thus: contracts of adhesion are not invalid per se and that it has on numerous occasions upheld the
binding effect thereof.[12] As explained in Ong Yiu vs. Court of Appeals, et al., supra:
In this case, it is seriously doubted whether plaintiff had read the printed conditions at the back of the Air
Waybill (Exh. 1), or even if she had, if she was given a chance to negotiate on the conditions for loading x x x. Such provisions have been held to be a part of the contract of carriage, and valid and binding upon
her microwave oven. Instead she was advised by defendants employee at San Francisco, U.S.A., that the passenger regardless of the latters lack of knowledge or assent to the regulation. It is what is known
there is no need to declare the value of her oven since it is not brand new. Further, plaintiff testified that as a contract of adhesion, in regards which it has been said that contracts of adhesion wherein one party
she immediately submitted a formal claim for P30,000.00 with defendant. But their claim was referred imposes a ready-made form of contract on the other, as the plane ticket in the case at bar, are contracts
from one employee to another th(e)n told to come back the next day, and the next day, until she was not entirely prohibited. The one who adheres to the contract is in reality free to reject it entirely; if he
referred to a certain Atty. Paco. When they got tired and frustrated of coming without a settlement of adheres, he gives his consent. x x x, a contract limiting liability upon an agreed valuation does not offend
their claim in sight, they consulted a lawyer who demanded from defendant on August 13, 1990 (Exh. E, against the policy of the law forbidding one from contracting against his own negligence.
an[d] Exh.6).
As rationalized in Saludo, Jr. vs. Court of Appeals, et al., supra:
The conclusion that inescapably emerges from the above findings of fact is to concede it with
credence. x x x.[8] x x x, it should be borne in mind that a contract of adhesion may be struck down as void and
unenforceable, for being subversive of public policy, only when the weaker party is imposed upon in
Respondent appellate court approved said findings of the trial court in this manner: dealing with the dominant bargaining party and is reduced to the alternative of taking it or leaving it,
completely deprived of the opportunity to bargain on equal footing. x x x.
We cannot agree with defendant-appellants above contention. Under our jurisprudence, the Air Waybill
is a contract of adhesion considering that all the provisions thereof are prepared and drafted only by the but subject to the caveat that
carrier (Sweet Lines v. Teves, 83 SCRA 361). The only participation left of the other party is to affix his
signature thereto (BPI Credit Corporation vs. Court of Appeals, 204 SCRA 601; Saludo, Jr. vs. C.A., 207 x x x. Just because we have said that Condition No. 5 of the airway bill is binding upon the parties to and
SCRA 498; Maersk vs. Court of Appeals, 222 SCRA 108, among the recent cases). In the earlier case of fully operative in this transaction, it does not mean, and let this serve as fair warning to respondent
Angeles v. Calasanz, 135 SCRA 323, the Supreme Court ruled that the terms of a contract (of adhesion) carriers, that they can at all times whimsically seek refuge from liability in the exculpatory sanctuary of
must be interpreted against the party who drafted the same. x x x.[9] said Condition No. 5 x x x.

Petitioner airlines argues that the legal principle enunciated in Fieldmens Insurance does The peculiar nature of such contracts behooves the Court to closely scrutinize the factual
not apply to the present case because the provisions of the contract involved here are neither milieu to which the provisions are intended to apply. Thus, just as consistently and unhesitatingly,
ambiguous nor obscure. The front portion of the air waybill contains a simple warning that the but without categorically invalidating such contracts, the Court has construed obscurities and
shipment is subject to the conditions of the contract on the dorsal portion thereof regarding the ambiguities in the restrictive provisions of contracts of adhesion strictly albeit not unreasonably
limited liability of the carrier unless a higher valuation is declared, as well as against the drafter thereof when justified in light of the operative facts and surrounding
the reglementary period within which to submit a written claim to the carrier in case of damage circumstances.[13]
or loss to the cargo. Granting that the air waybill is a contract of adhesion, it has been ruled by
the Court that such contracts are not entirely prohibited and are in fact binding regardless of We find nothing objectionable about the lower courts reliance upon
whether or not respondent herein read the provisions thereof. Having contracted the services of the Fieldmens Insurance case, the principles wherein squarely apply to the present petition. The
petitioner carrier instead of other airlines, private respondent in effect negotiated the terms of the parallelism between the aforementioned case and this one is readily apparent for, just as in the
contract and thus became bound thereby.[10] instant case, it is the binding effect of the provisions in a contract of adhesion (an insurance policy
in FieldmensInsurance) that is put to test.
A judicious reading of the case reveals that what was pivotal in the judgment of liability declared and a supplementary charge paid. Inasmuch as no such declaration was made by
against petitioner insurance company therein, and necessarily interpreting the provisions of the private respondent, as she admitted during cross-examination, the liability of petitioner, if any,
insurance policy as ineffective, was the finding that the representations made by the agent of the should be limited to 28 kilograms multiplied by US$20, or $560. Moreover, the validity of these
insurance company rendered it impossible to comply with the conditions of the contract in conditions has been upheld in the leading case of Ong Yiu vs. Court of Appeals, et al., supra, and
question, rather than the mere ambiguity of its terms. The extended pronouncements regarding subsequent cases, for being a mere reiteration of the limitation of liability under the. Warsaw
strict construction of ambiguous provisions in an adhesion contract against its drafter, which Convention, which treaty has the force and effect of law. [16]
although made by the Court as an aside but has perforce evolved into a judicial tenet over time,
was actually an incidental statement intended to emphasize the duty of the court to protect the It is additionally averred that since private respondent was merely advised, not ordered, that
weaker, as against the more dominant, party to a contract, as well as to prevent the iniquitous she need not declare a higher value for her cargo, the final decision of refraining from making
situation wherein the will of one party is imposed upon the other in the course of negotiation. such a declaration fell on private respondent and should not put the petitioner in estoppel from
invoking its limited liability.[17]
Thus, there can be no further question as to the validity of the terms of the air waybill, even
if the same constitutes a contract of adhesion. Whether or not the provisions thereof particularly In refutation, private respondent explains that the reason for the absence of a declaration
on the limited liability of the carrier are binding on private respondent in this instance must be of a higher value was precisely because petitioners personnel in San Francisco, U.S.A. advised
determined from the facts and circumstances involved vis-a-vis the nature of the provisions her not to declare the value of her cargo, which testimony has not at all been rebutted by
sought to be enforced, taking care that equity and fair play should characterize the transaction petitioner. This being so, petitioner is estopped from faulting private respondent for her failure to
under review. declare the value of the microwave oven.[18]

On petitioners insistence that its liability for the damage to private respondents microwave The validity of provisions limiting the liability of carriers contained in bills of lading have been
oven, if any, should be limited by the provisions of the air waybill, the lower court had this to say: consistently upheld for the following reason:

By and large, defendants evidence is anchored principally on plaintiffs alleged failure to comply with x x x. The stipulation in the bill of lading limiting the common carriers liability to the value of goods
paragraph 12, a(1) (Exh. 1-C-2) of the Air waybill (Exh. A, also Exh. 1), by filing a formal claim appearing in the bill, unless the shipper or owner declares a greater value, is valid and binding. The
immediately after discovery of the damage. Plaintiff filed her formal claim only on August 13, limitation of the carriers liability is sanctioned by the freedom of the contracting parties to establish such
1990 (Exh. 6, also Exh. E). And, failed to present positive proof on the value of the damaged microwave stipulations, clauses, terms, or conditions as they may deem convenient, provided they are not contrary to
oven. Hence, the denial of her claim. law, morals, good customs and public policy. x x x.[19]

This Court has misgivings about these pretensions of defendant. However, the Court has likewise cautioned against blind reliance on adhesion contracts
where the facts and circumstances warrant that they should be disregarded. [20]
xxx xxx xxx In the case at bar, it will be noted that private respondent signified an intention to declare
the value of the microwave oven prior to shipment, but was explicitly advised against doing so
Finally, the Court finds no merit to defendants contention that under the Warsaw Convention, its liability by PALs personnel in San Francisco, U.S.A., as borne out by her testimony in court:
if any, cannot exceed U.S. $20.00 based on weight as plaintiff did not declare the contents of her baggage xxx xxx xxx
nor pay additional charges before the flight.[14]
Q Did you declare the value of the shipment?
The appellate court declared correct the non-application by the trial court of the limited A No. I was advised not to.
liability of therein defendant-appellant under the Conditions of the Contract contained in the air
waybill , based on the ruling in Cathay Pacific Airways, Ltd. vs. Court of Appeals, et al.,[15] which Q Who advised you?
substantially enunciates the rule that while the Warsaw Convention has the force and effect of
law in the Philippines, being a treaty commitment by the government and as a signatory thereto, A At the PAL Air Cargo.[21]
the same does not operate as an exclusive enumeration of the instances when a carrier shall be
It cannot be denied that the attention of PAL through its personnel in San Francisco was
liable for breach of contract or as an absolute limit of the extent of liability, nor does it preclude
sufficiently called to the fact that private respondents cargo was highly susceptible to breakage
the operation of the Civil Code or other pertinent laws.
as would necessitate the declaration of its actual value. Petitioner had all the opportunity to check
[22]
Petitioner insists that both respondent court and the trial court erred in finding that the condition and manner of packing prior to acceptance for shipment, as well as during the
petitioners liability, if any, is not limited by the provisions of the air waybill, for, as evidence of the preparation of the air waybill by PALs Acceptance Personnel based on information supplied by
[23]
contract of carriage between petitioner and private respondent, it substantially states that the the shipper, and to reject the cargo if the contents or the packing did not meet the companys
shipper certifies to the correctness of the entries contained therein and accepts that the carriers required specifications. Certainly, PAL could not have been otherwise prevailed upon to merely
liability is limited to US$20 per kilogram of goods lost, damaged or destroyed unless a value is accept the cargo.
While Vicente Villaruz, officer-in-charge of the PAL Import Section at the time of incident, WITNESS
posited that there may have been inadequate and improper packing of the cargo,[24] which by
itself could be a ground for refusing carriage of the goods presented for shipment, he nonetheless No, I cannot show.
admitted on cross-examination that private respondents cargo was accepted by PAL in its San ATTY. VINCO
Francisco office:
Now, can you show any document that would suggest that there was
ATTY. VINCO insufficient pac(k)aging on this particular baggage from abroad?
So that, be that as it may, my particular concern is that, it is the PAL personnel WITNESS
that accepts the baggage?
No, sir.[25]
WITNESS
In response to the trial courts questions during the trial, he also stated that while the
Yes, sir. passengers declaration regarding the general or fragile character of the cargo is to a certain
ATTY. VINCO extent determinative of its classification, PAL nevertheless has and exercises discretion as to the
manner of handling required by the nature of the cargo it accepts for carriage. He further opined
Also, if he comes from abroad like in this particular case, it is the PAL personnel that the microwave oven was only a general, not a fragile, cargo which did not require any special
who accepts the baggage? handling.[26]
WITNESS There is no absolute obligation on the part of a carrier to accept a cargo. Where a common
carrier accepts a cargo for shipment for valuable consideration, it takes the risk of delivering it in
Yes, sir. good condition as when it was loaded. And if the fact of improper packing is known to the carrier
ATTY. VINCO or its personnel, or apparent upon observation but it accepts the goods notwithstanding such
condition, it is not relieved of liability for loss or injury resulting therefrom.[27]
And the PAL personnel may or may not accept the baggage?
The acceptance in due course by PAL of private respondents cargo as packed and its
WITNESS advice against the need for declaration of its actual value operated as an assurance to private
respondent that in fact there was no need for such a declaration.Petitioner can hardly be faulted
Yes, sir. for relying on the representations of PALs own personnel.
ATTY. VINCO In other words, private respondent Mejia could and would have complied with the conditions
stated in the air waybill, i.e., declaration of a higher value and payment of supplemental
According to what is stated as in the acceptance of the cargo, it is to the best
transportation charges, entitling her to recovery of damages beyond the stipulated limit of US$20
interest of the airlines, that is, he want(s) also that the airlines would be free from
per kilogram of cargo in the event of loss or damage, had she not been effectively prevented from
any liability. Could that be one of the grounds for not admitting a baggage?
doing so upon the advice of PALs personnel for reasons best known to themselves.
WITNESS
As pointed out by private respondent, the aforestated facts were not denied by PAL in any
Safety is number one (I) of its pleadings nor rebutted by way of evidence presented in the course of the trial, and thus in
effect it judicially admitted that such an advice was given by its personnel in San
xxx xxx xxx Francisco, U.S.A. Petitioner, therefore, is estopped from blaming private respondent for not
declaring the value of the cargo shipped and which would have otherwise entitled her to recover
ATTY. VINCO a higher amount of damages. The Courts bidding in the Fieldmens Insurance case once again
So, this baggage was accepted and admitted in San Francisco? rings true:

WITNESS x x x. As estoppel is primarily based on the doctrine of good faith and the avoidance of harm that will
Yes, sir. befall an innocent party due to its injurious reliance, the failure to apply it in this case would result in
gross travesty of justice.
ATTY. VINCO
And you could not show any document to the Court that would suggest that this We likewise uphold the lower courts finding that private respondent complied with the
baggage was denied admittance by your office at San Francisco? requirement for the immediate filing of a formal claim for damages as required in the air waybill
or, at least, we find that there was substantial compliance therewith.
Private respondent testified that she authorized her sister, Concepcion Dio, to claim her So, what did you do, did you make a report or did you tell Atty. Paco of your
cargo consisting of a microwave oven since the former had to take a connecting flight scouting around for a possible replacement?
to Bacolod City on the very same afternoon of the day of her arrival. [28] As
instructed, Concepcion Dio promptly proceeded to PALs Import Section the next day to claim the WITNESS
oven. Upon discovering that the glass door was broken, she immediately filed a claim by way of I did call him back at his office. I made a telephone call.
the baggage freight claim[29] on which was duly annotated the damage sustained by the oven.[30]
ATTY. VINCO
Her testimony relates what took place thereafter:
And what answer did Atty. Paco make after you have reported back to him?
ATTY. VINCO
WITNESS
So, after that inspection, what did you do?
They told me that they were going to process the claim based on the price that I
WITNESS gave them but there was no definite result.
After that annotation placed by Mr. Villaruz, I went home and I followed it up the ATTY. VINCO
next day with the Clerk of PAL cargo office.
How many times did you go and see Atty. Paco regarding the claim of your
ATTY. VINCO sister?
What did the clerk tell you? WITNESS
WITNESS I made one personal visit and several follow-up calls. With Atty. Paco, I made
She told me that the claim was being processed and I made several phone calls one phone call but I made several phone calls with his secretary or the clerk at
after that. I started my follow-ups February up to June 1990. PAL cargo office and I was trying to locate him but unfortunately, he was always
out of his office.[31]
ATTY. VINCO
PAL claims processor, Rodolfo Pandes,* confirmed having received the baggage freight
And what results did those follow-ups produce? claim on January 30, 1990[32] and the referral to and extended pendency of the private
respondents claim with the office of Atty. Paco, to wit:
WITNESS
ATTY. VINCO:
All they said (was) that the document was being processed, that they were
waiting for Atty. Paco to report to the office and they could refer the matter to Q And you did instruct the claimant to see the Claim Officer of the company, right?
Atty. Paco.
WITNESS:
ATTY. VINCO
A Yes, sir.
Who is this Atty. Paco?
ATTY. VINCO:
WITNESS
Q And the Claim Officer happened to be Atty. Paco?
He was the one in-charge of approving our claim.
WITNESS:
ATTY. VINCO
A Yes, sir.
Were you able to see Atty. Paco?
ATTY. VINCO:
WITNESS
Q And you know that the plaintiff thru her authorized representative Concepcion Dio,
Yes, sir. I personally visited Atty. Paco together with my auntie who was a former who is her sister had many times gone to Atty. Paco, in connection with this claim
PAL employee. of her sister?
xxx xxx xxx WITNESS:
ATTY. VINCO A Yes, sir.
ATTY. VINCO: laws.[37] The provisions therein contained, specifically on the limitation of carriers liability, are
operative in the Philippines but only in appropriate situations.
Q As a matter of fact even when the complaint was already filed here in Court the
claimant had continued to call about the settlement of her claim with Atty. Paco, Petitioner ascribes ultimate error in the award of moral exemplary damages and attorneys
is that correct? fees in favor of private respondent in that other than the statement of the trial court that petitioner
acted in bad faith in denying private respondents claim, which was affirmed by the Court of
xxx xxx xxx Appeals, there is no evidence on record that the same is true. The denial of private respondents
WITNESS: claim was supposedly in the honest belief that the same had prescribed, there being no timely
formal claim filed; and despite having been given an opportunity to submit positive proof of the
A Yes, sir. value of the damaged microwave oven, no such proof was submitted.Petitioner insists that its
failure to deliver the oven in the condition in which it was shipped could hardly be considered as
ATTY. VINCO. amounting to bad faith.[38]
Q You know this fact because a personnel saw you in one of the pre-trial here when Private respondent counters that petitioners failure to deliver the microwave oven in the
this case was heard before the sala of Judge Moscardon, is that correct? condition in which it was received can be describe as gross negligence amounting to bad faith,
on the further consideration that it failed to prove that it exercised the extraordinary diligence
WITNESS:
required by law, and that no explanation whatsoever was given as to why the front glass of the
A Yes. oven was broken.[39]

ATTY. VINCO: The trial court justified its award of actual, moral and exemplary damages, and attorneys
fees in favor of private respondent in this wise:
Q In other words, the plaintiff rather had never stop(ped) in her desire for your
company to settle this claim, right?
Since the plaintiffs baggage destination was the Philippines, Philippine law governs the liability of the
WITNESS defendant for damages for the microwave oven.

A Yes, sir.[33] The provisions of the New Civil Code on common carriers are Article(s) 1733, 1735 and 1753 x x x.
Considering the abovementioned incidents and private respondent Mejias own zealous
efforts in following up the claim,[34] it was clearly not her fault that the letter of demand for xxx xxx xxx
damages could only be filed, after months of exasperating follow-up of the claim, on August 13,
1990.[35] If there was any failure at all to file the formal claim within the prescriptive period In this case, defendant failed to overcome, not only the presumption but more importantly, plaintiffs
contemplated in the air waybill, this was largely because of PALs own doing, the consequences evidence that defendants negligence was the proximate cause of the damages of the microwave
of which cannot, in all fairness, be attributed to private respondent. oven. Further, plaintiff has established that defendant acted in bad faith when it denied the formers claim
Even if the claim for damages was conditioned on the timely filing of a formal claim, under on the ground that the formal claim was filed beyond the period as provided in paragraph 12 (a-1)
Article 1186 of the Civil Code that condition was deemed fulfilled, considering that the collective (Exh. 1-C-2) of the Air Waybill (Exh. 1, also Exh A), when actually, Concepcion Dio, sister of plaintiff
[40]
action of PALs personnel in tossing around the claim and leaving it unresolved for an indefinite has immediately filed the formal claim upon discovery of the damage.
period of time was tantamount to voluntarily preventing its fulfillment. On grounds of equity, the
filing of the baggage freight claim, which sufficiently informed PAL of the damage sustained by Respondent appellate court was in full agreement with the trial courts finding of bad faith
private respondents cargo, constituted substantial compliance with the requirement in the on the part of petitioner as a basis for the award of the aforestated damages, declaring that:
contract for the filing of a formal claim.
As to the last assigned error, a perusal of the facts and law of the case reveals that the lower courts award
All told, therefore, respondent appellate court did not err in ruling that the provision on
of moral and exemplary damages, attorneys fees and costs of suit to plaintiff-appellee is in accordance
limited liability is not applicable in this case. We, however, note in passing that while the facts
and circumstances of this case do not call for the direct application of the provisions of the with current laws and jurisprudence on the matter. Indeed, aside from the fact that defendant-appellant
Warsaw Convention, it should be stressed that, indeed, recognition of the Warsaw Convention acted in bad faith in breaching the contract and in denying plaintiffs valid claim for damages, plaintiff-
does not preclude the operation of the Civil Code and other pertinent laws in the determinationappelleeunderwent profound distress, sleepless nights, and anxiety upon knowledge of her damaged
of the extent of liability of the common carrier.[36] microwave oven in possession of defendant-appellant, entitling her to the award of moral and exemplary
damages (Cathay Pacific Airways, Ltd. vs. C.A., supra; Arts. 2219 & 2221, New Civil Code), and
The Warsaw Convention, being a treaty to which the Philippines is a signatory, is as much certainly plaintiff-appellants unjust refusal to comply with her valid demand for payment, thereby also
a part of Philippine law as the Civil Code, Code of Commerce and other municipal special entitling her to reasonable attorneys fees [Art. 2208 (2) and (11), id.].[41]
It will be noted that petitioner never denied that the damage to the microwave oven was entreaties for settlement of her claim for damages belies petitioners pretension that there was no
sustained while the same was in its custody. The possibility that said damage was due to causes bad faith on its part. This unprofessional indifference of PALspersonnel despite full and actual
beyond the control of PAL has effectively been ruled out since the entire process in handling of knowledge of the damage to private respondents cargo, just to be exculpated from liability on
the cargo - from the unloading thereof from the plane, the towing and transfer to the PAL pure technicality and bureaucratic subterfuge, smacks of willful misconduct and insensitivity to a
warehouse, the transfer to the Customs examination area, and its release thereafter to the passengers plight tantamount to bad faith [46] and renders unquestionable petitioners liability for
shipper - was done almost exclusively by, and with the intervention or, at the very least, under damages. In sum, there is no reason to disturb the findings of the trial court in this case, especially
the direct supervision of a responsible PAL personnel.[42] with its full affirmance by respondent Court of Appeals.
The very admissions of PAL, through Vicente Villaruz of its Import Section, as follows: On this note, the case at bar goes into the annals of our jurisprudence after six years and
recedes into the memories of our legal experience as just another inexplicable inevitability. We
ATTY. VINCO will never know exactly how many man-hours went into the preparation, litigation and adjudication
So that, you now claim, Mr. Witness, that from the time the cargo was unloaded of this simple dispute over an oven, which the parties will no doubt insist they contested as a
from the plane until the time it reaches the Customs counter where it was matter of principle. One thing, however, is certain. As long as the first letter in principle is
inspected, all the way, it was the PAL personnel who did all these things? somehow outplaced by the peso sign, the courts will always have to resolve similar controversies
although mutual goodwill could have dispensed with judicial recourse.
WITNESS
IN VIEW OF ALL OF THE FOREGOING, the assailed judgment of respondent Court of
Yes, however, there is also what we call the Customs storekeeper and the Appeals is AFFIRMED in toto.
Customs guard along with the cargo.
SO ORDERED.
ATTY. VINCO
Romero, Puno, and Mendoza, JJ., concur.
You made mention about a locator?
WITNESS
Yes, sir.
ATTY. VINCO
This locator, is he an employee of the PAL or the Customs?
WITNESS
He is a PAL employee.[43]
lead to the inevitable conclusion that whatever damage may have been sustained by the cargo
is due to causes attributable to PALs personnel or, at all events, under their responsibility.
Moreover, the trial court underscored the fact that petitioner was not able to overcome the
statutory presumption of negligence in Article 1735 which, as a common carrier, it was laboring
under in case of loss, destruction or deterioration of goods, through proper showing of the
exercise of extraordinary diligence. Neither did it prove that the damage to the microwave oven
was because of any of the excepting causes under Article 1734, all of the same Code. Inasmuch
as the subject item was received in apparent good condition, no contrary notation or exception
having been made on the air waybill upon its acceptance for shipment, the fact that it was
delivered with a broken glass door raises the presumption that PALs personnel were negligent
in the carriage and handling of the cargo.[44]
Furthermore, there was glaringly no attempt what so ever on the part of petitioner to explain
the cause of the damage to the oven. The unexplained cause of damage to private respondents
cargo constitutes gross carelessness or negligence which by itself justifies the present award of
damages.[45] The equally unexplained and inordinate delay in acting on the claim upon referral
thereof to the claims officer, Atty. Paco, and the noncommittal responses to private respondents
FIRST DIVISION that petitioner's bill of lading expressly contained "an agreement to the contrary," i.e. for the
application of the York-Antwerp Rules which provide for respondent's fun recovery of the
G.R. No. L-31087 September 27, 1979 damage loss.

EASTERN SHIPPING LINES, INC., petitioner, The Court finds no error and upholds the lower court's ruling sustaining respondent's damage
vs. claim although the amount thereof did not exceed 5% of respondent's interest in the cargo and
MARGARINE-VERKAUFS-UNION GmbH, respondent. would have been barred by the cited article of the Commerce Code. We hold that the lower
court correctly ruled the cited codal article to be "not applicable in this particular case for the
reason that the bill of lading (Exhibit "F") contains "an agreement to the contrary" for it is
Ross, Salcedo, Del Rosario, Bito & Misa for petitioner. expressly provided in the last sentence of the first paragraph (Exhibit "1-A") that "In case of
average, same shall be adjusted according to York-Antwerp Rules of 1950." The insertion of
Lichauco Picazo & Agcaoili for respondent. said condition is expressly authorized by Commonwealth Act No. 65 which has adopted in toto
the U.S. Carriage of Goods by Sea Act. Now, it has not been shown that said rules limit the
TEEHANKEE, Acting C.J.: recovery of damage to cases within a certain percentage or proportion that said damage may
bear to claimant's interest either in the vessel or cargo as provided in Article 848 of the Code of
Commerce On the contrary, Rule 3 of said York-Antwerp Rules expressly states that "Damage
The Court affirms the appealed judgment holding petitioner liable under the terms of its own bill done to a ship and cargo, or either of them, by water or otherwise, including damage by
of lading for the damage suffered by respondent's copra cargo on board petitioner's vessel, but breaching or scuttling a burning ship, in extinguishing a fire on board the ship, shall be made
sets aside the award of attorney's fees to respondent-plaintiff for lack of any statement or good as general average. ... "
reason in the lower court's judgment that would justify the award.
There is a clear and irreconcilable inconsistency between the York-Antwerp Rules expressly
Respondent corporation, a West German corporation not engaged in business in the adopted by the parties as their contract under the bill of lading which sustains respondent's
Philippines, was the consignee of 500 long tons of Philippine copra in bulk with a total value of claim and the codal article cited by petitioner which would bar the same. Furthermore, as
US$ 108,750.00 shipped from Cebu City on board petitioner's (a Philippine corporation) vessel, correctly contended by respondent, what is here involved is a contract of adhesion as
the SS "EASTERN PLANET" for discharge at Hamburg, Germany. Petitioner's bill of lading for embodied in the printed bill of lading issued by petitioner for the shipment to which respondent
the cargo provided as follows: as the consignee merely adhered, having no choice in the matter, and consequently, any
ambiguity therein must be construed against petitioner as the author.
... Except as otherwise stated herein and in - the Charter Party, this contract
shag be governed by the laws of the Flag of the Ship carrying the goods. In We find, however, petitioner's second and only other assignment of error against the award of
case of average, same shall be adjusted according to York-Antwerp Rules of attorney's fees of US$ 250.00 to be well taken. The text of the lower court's decision stated no
1950. justification nor reason for the award of attorney's fees and should therefore be disallowed. As
restated in Buan vs. Camaganacan 2 , the general rule is that it is contrary to sound public
While the vessel was off Gibraltar, a fire broke out aboard the and caused water damage to the policy to place a penalty on the right to litigate nor should attorney's fees be awarded everytime
copra shipment in the amount of US$ 591.38. Petitioner corporation rejected respondent's a party wins a lawsuit. Hence, Article 2208 of the Civil Code provides that "in the absence of
claim for payment of the and respondent filed on June 18, 1966 in the Manila court of first stipulation, attorney's fees and expenses of litigation, other than judicial costs, cannot be
instance its complaint against petitioner as defendant for recovery of the same and US$ 250.00 recovered," save for the eleven exceptions therein expressly provided.
- attorney's fees and expenses of litigation.
Insofar as the present case is concerned, the lower court made no finding that it falls within any
After trial, the lower court rejected petitioner's defense that did not exceed 5% of respondent's of the exceptions that would justify the award for attorney's fees, such as gross and evident bad
interest in the cargo it was not liable under Philippine Law for the damage which I rendered faith in refusing to satisfy a plainly valid, just and demandable claim. Even under the broad
judgment on April 25, 1969 "ordering the defendant, Eastern Shipping Lines, Inc. to pay to the eleventh exception of the cited article which allows the imposition of attorney's fees "in any
plaintiff, Margarine-Verkaufs-Union GMBH, the sum of US$ 591.38, with interest at the legal other case where the court deems it just and equitable that attorney's fees and expenses of
rate from the date of the filing of the complaint until fully paid, plus US$ 250.00 as attorney's litigation should be recovered," the Court stressed in Buan, supra, that "the conclusion must be
fees and the costs of the suit." borne out by findings of facts and law. What is just and equitable in a given case is not a mere
matter of feeling but of demonstration .... Hence, the exercise of judicial discretion in the award
of attorney's fees under Article 2208 (11) of the Civil Code demands a factual, legal or equitable
In this review on questions of law, petitioner reiterates as its first assignment t of error its
justification upon the basis of which the court exercises its discretion. Without such a
submittal that Article 848 of the Code of Commerce 1 which would bar claims for averages not
justification, the award is a conclusion without a premise, its basis being improperly left to
exceeding 5% of the claimant's interest should be applied rather than the lower court's ruling
speculation and conjecture." The summary award of counsel's fees made in the appealed
judgment must therefore be set aside.

A final observation. The appealed judgment ordered petitioner to pay respondent the sum of
US$591.38 with interest at the legal rate (which we hold to be the rate of six [6%] per cent
under Article 2209 of the Civil Code in force at the time of the judgment of April 25, 1969) from
the filing of the complaint on June 18, 1966 until fully paid. Petitioner did not appeal from nor
question this portion of the judgment requiring that it pay respondent-creditor the damage claim
with interest in U.S. currency (with reference to the general rule of discharging obligations in
Philippine currency measured at the prevailing rate of exchange 3 ). Consequently, we find no
necessity to make any further pronouncement thereon. We merely affirm the judgment in U.S.
currency in favor of respondent corporation, a foreign corporation not engaged in business
herein, in view of petitioner's acquiescence therein and view the judgment as one wherein the
lower court sentenced petitioner to pay and remit to respondent as a non-resident foreign
corporation the amount due under the judgment in U S. currency.

ACCORDINGLY, the appealed judgment is hereby affirmed with the modification that the award
of attorney's fees is set aside. With costs against petitioner.

Makasiar, Fernandez, Guerrero, De Castro and Melencio-Herrera, JJ., concur.

#Footnotes

1 The text reads: "Article 848. Claims for averages shall not be admitted if
they do not exceed 5 per cent of the interest which the claimant may have in
the vessel or in the cargo if it be gross average, and I per cent of the goods
damaged if particular average, deducting in both cases the expenses of
appraisal, unless there is an agreement to the contrary."

2 16 SCRA 321 (1966), per Reyes, J.B.L., J. (retired).

3 Cf. Art. 1249, Civil Code, and related Acts such as R.A. No. 529, etc.
SECOND DIVISION
[G.R. No. 125524. August 25, 1999]
BENITO MACAM doing business under the name and style BEN-MAC ENTERPRISES, petitioner, DECISION
vs. COURT OF APPEALS, CHINA OCEAN SHIPPING CO., and/or WALLEM
PHILIPPINES SHIPPING, INC., respondents. BELLOSILLO, J.:

On 4 April 1989 petitioner Benito Macam, doing business under the name and style Ben-Mac
sYNOPSIS Enterprises, shipped on board the vessel Nen Jiang, owned and operated by respondent China Ocean
Shipping Co., through local agent respondent Wallem Philippines Shipping, Inc. (hereinafter WALLEM),
Petitioner is doing business as exporter of fresh fruits. In one transaction, respondent Wallem 3,500 boxes of watermelons valued at US$5,950.00 covered by Bill of Lading No. HKG 99012 and
delivered the shipment directly to Great Prospect Company (GPC) and not to Pakistan Bank, which is the exported through Letter of Credit No. HK 1031/30 issued by National Bank of Pakistan, Hongkong
consignee bank and without the required bill of lading having been surrendered. Subsequently, GPC failed (hereinafter PAKISTAN BANK) and 1,611 boxes of fresh mangoes with a value of US$14,273.46 covered
to pay Pakistan Bank such that the latter, still in possession of the original bills of lading, refused to pay
by Bill of Lading No. HKG 99013 and exported through Letter of Credit No. HK 1032/30 also issued by
petitioner through, Solidbank. Since Solidbank already prepaid petitioner the value of the shipment, it PAKISTAN BANK. The Bills of Lading contained the following pertinent provision: "One of the Bills of
demanded payment from respondent Wallem but was refused. Petitioner was thus constrained to return the Lading must be surrendered duly endorsed in exchange for the goods or delivery order." [1] The shipment
amount involved to Solidbank, then demanded payment from Wallem in writing, but to no avail. Petitioner was bound for Hongkong with PAKISTAN BANK as consignee and Great Prospect Company of Kowloon,
sought collection of the value of the shipment from respondents before the Regional Trial Court of Manila. Hongkong (hereinafter GPC) as notify party.
Respondents counterclaimed for attorneys fees and costs of suit. The trial court ordered respondents to pay
jointly and severally the amount of the shipment plus legal interest and attorneys fees and costs. The On 6 April 1989, per letter of credit requirement, copies of the bills of lading and commercial
counterclaims were dismissed for lack of merit. Respondent Court of Appeals appreciated the evidence in invoices were submitted to petitioner's depository bank, Consolidated Banking Corporation (hereinafter
a different manner. It set aside the decision of the trial court and dismissed the complaint together with the SOLIDBANK), which paid petitioner in advance the total value of the shipment of US$20,223.46.
counterclaims. Reconsideration was denied. The real issue herein is whether respondents are liable to
petitioner for releasing the goods to GPC without the bills of lading or bank guarantee. Upon arrival in Hongkong, the shipment was delivered by respondent WALLEM directly to GPC,
not to PAKISTAN BANK, and without the required bill of lading having been surrendered. Subsequently,
According to the Supreme Court, since the subject shipment consisted of perishable goods and GPC failed to pay PAKISTAN BANK such that the latter, still in possession of the original bills of lading,
Solidbank pre-paid the full amount of the value thereof, it is not hard to believe the claim of respondent refused to pay petitioner through SOLIDBANK. Since SOLIDBANK already pre-paid petitioner the value
Wallem that petitioner indeed requested the release of the goods to GPC without presentation of the bills of the shipment, it demanded payment from respondent WALLEM through five (5) letters but was
of lading and bank guarantee. Respondent Court analyzed the telex of petitioner in its entirety and correctly refused. Petitioner was thus allegedly constrained to return the amount involved to SOLIDBANK, then
arrived at the conclusion that the demanded payment from respondent WALLEM in writing but to no avail.
consignee referred to was not Pakistan Bank but GPC. Petitioner also failed to substantiate his claim On 25 September 1991 petitioner sought collection of the value of the shipment of US$20,223.46 or
that he returned to Solidbank the full amount of the value of the cargoes. In view of petitioners utter failure its equivalent of P546,033.42 from respondents before the Regional Trial Court of Manila, based on
to establish the liability of respondents over the cargoes, no reversible error was committed by respondent delivery of the shipment to GPC without presentation of the bills of lading and bank guarantee.
court in ruling against him. The petition was denied.
Respondents contended that the shipment was delivered to GPC without presentation of the bills of
SYLLABUS lading and bank guarantee per request of petitioner himself because the shipment consisted of perishable
goods. The telex dated 5 April 1989 conveying such request read -
CIVIL LAW; TRANSPORTATION; COMMON CARRIERS; DURATION OF
EXTRAORDINARY RESPONSIBILITY; CASE AT BAR.- Article 1736 of the Civil Code
provides -Art. 1736. The extraordinary responsibility of the common carriers lasts from the time the AS PER SHPRS REQUEST KINDLY ARRANGE DELIVERY OF A/M SHIPT TO RESPECTIVE CNEES
[2]
goods are unconditionally placed in the possession of and received by the carrier for transportation WITHOUT PRESENTATION OF OB/L and bank guarantee since for prepaid shipt ofrt charges
[3]
until the same are delivered, actually or constructively, by the carrier to the consignee, or to the already fully paid our end x x x x
person who has a right to receive them, without prejudice to the provisions of Article 1738. The
Court emphasizes that the extraordinary responsibility of the common carriers lasts until actual or Respondents explained that it is a standard maritime practice, when immediate delivery is of the
constructive delivery of the cargoes to the consignee or to the person who has a right to receive essence, for the shipper to request or instruct the carrier to deliver the goods to the buyer upon arrival at
them. PAKISTAN BANK was indicated in the bills of lading as consignee whereas Great Prospect the port of destination without requiring presentation of the bill of lading as that usually takes time. As
Company (GPC) was the notify party. However, in the export invoices GPC was clearly named as proof thereof, respondents apprised the trial court that for the duration of their two-year business
buyer/importer. Petitioner also referred to GPC as such in his demand letter to respondent Wallem relationship with petitioner concerning similar shipments to GPC deliveries were effected without
and in his complaint before the trial court. This premise draws the Court to conclude that the delivery presentation of the bills of lading.[4] Respondents advanced next that the refusal of PAKISTAN BANK to
of the cargoes to GPC as buyer/importer which, conformably with Art. 1736 had, other than the pay the letters of credit to SOLIDBANK was due to the latter's failure to submit a Certificate of Quantity
consignee, the right to receive them was proper. and Quality. Respondents counterclaimed for attorneys fees and costs of suit.
On 14 May 1993 the trial court ordered respondents to pay, jointly and severally, the following without the necessary bank guarantee. We were further informed that the consignee of the goods,
amounts: (1) P546,033.42 plus legal interest from 6 April 1989 until full payment; (2) P10,000.00 as National Bank of Pakistan, Hongkong, did not release or endorse the original bills of lading. As a result
attorney's fees; and, (3) the costs. The counterclaims were dismissed for lack of merit.[5] The trial court thereof, neither the consignee, National Bank of Pakistan, Hongkong, nor the importer, Great Prospect
opined that respondents breached the provision in the bill of lading requiring that "one of the Bills of Company, Hongkong, paid our client for the goods x x x x[11]
Lading must be surrendered duly endorsed in exchange for the goods or delivery order," when they released
the shipment to GPC without presentation of the bills of lading and the bank guarantee that should have At any rate, we shall dwell on petitioners submission only as a prelude to our discussion on the
been issued by PAKISTAN BANK in lieu of the bills of lading. The trial court added that the shipment imputed liability of respondents concerning the shipped goods. Article 1736 of the Civil Code provides -
should not have been released to GPC at all since the instruction contained in the telex was to arrange
delivery to the respective consignees and not to any party. The trial court observed that the only role of
GPC in the transaction as notify party was precisely to be notified of the arrival of the cargoes in Hongkong Art. 1736. The extraordinary responsibility of the common carriers lasts from the time the goods are
so it could in turn duly advise the consignee. 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 a right
Respondent Court of Appeals appreciated the evidence in a different manner. According to it, as to receive them, without prejudice to the provisions of article 1738. [12]
established by previous similar transactions between the parties, shipped cargoes were sometimes actually
delivered not to the consignee but to notify party GPC without need of the bills of lading or bank We emphasize that the extraordinary responsibility of the common carriers lasts until actual or
guarantee.[6] Moreover, the bills of lading were viewed by respondent court to have been properly constructive delivery of the cargoes to the consignee or to the person who has a right to receive
superseded by the telex instruction and to implement the instruction, the delivery of the shipment must be them. PAKISTAN BANK was indicated in the bills of lading as consignee whereas GPC was the notify
to GPC, the real importer/buyer of the goods as shown by the export invoices, [7] and not to PAKISTAN party. However, in the export invoices GPC was clearly named as buyer/importer. Petitioner also referred
BANK since the latter could very well present the bills of lading in its possession; likewise, if it were the to GPC as such in his demand letter to respondent WALLEM and in his complaint before the trial
PAKISTAN BANK to which the cargoes were to be strictly delivered it would no longer be proper to court. This premise draws us to conclude that the delivery of the cargoes to GPC as buyer/importer which,
require a bank guarantee. Respondent court noted that besides, GPC was listed as a consignee in the telex. It conformably with Art. 1736 had, other than the consignee, the right to receive them[13] was proper.
observed further that the demand letter of petitioner to respondents never complained of misdelivery of
goods. Lastly, respondent court found that petitioners claim of having reimbursed the amount involved to The real issue is whether respondents are liable to petitioner for releasing the goods to GPC without
SOLIDBANK was unsubstantiated. Thus, on 13 March 1996 respondent court set aside the decision of the the bills of lading or bank guarantee.
trial court and dismissed the complaint together with the counterclaims.[8] On 5 July 1996 reconsideration
was denied.[9] Respondents submitted in evidence a telex dated 5 April 1989 as basis for delivering the cargoes to
GPC without the bills of lading and bank guarantee. The telex instructed delivery of various shipments to
Petitioner submits that the fact that the shipment was not delivered to the consignee as stated in the the respective consignees without need of presenting the bill of lading and bank guarantee per the
bill of lading or to a party designated or named by the consignee constitutes a misdelivery respective shippers request since for prepaid shipt ofrt charges already fully paid. Petitioner was named
thereof. Moreover, petitioner argues that from the text of the telex, assuming there was such an instruction, therein as shipper and GPC as consignee with respect to Bill of Lading Nos. HKG 99012 and HKG
the delivery of the shipment without the required bill of lading or bank guarantee should be made only to 99013. Petitioner disputes the existence of such instruction and claims that this evidence is self-serving.
the designated consignee, referring to PAKISTAN BANK.
From the testimony of petitioner, we gather that he has been transacting with GPC as buyer/importer
We are not persuaded. The submission of petitioner that the fact that the shipment was not delivered for around two (2) or three (3) years already. When mangoes and watermelons are in season, his shipment
to the consignee as stated in the Bill of Lading or to a party designated or named by the consignee to GPC using the facilities of respondents is twice or thrice a week. The goods are released to GPC. It has
constitutes a misdelivery thereof is a deviation from his cause of action before the trial court. It is clear been the practice of petitioner to request the shipping lines to immediately release perishable cargoes such
from the allegation in his complaint that it does not deal with misdelivery of the cargoes but of delivery to as watermelons and fresh mangoes through telephone calls by himself or his people. In transactions covered
GPC without the required bills of lading and bank guarantee - by a letter of credit, bank guarantee is normally required by the shipping lines prior to releasing the
goods. But for buyers using telegraphic transfers, petitioner dispenses with the bank guarantee because the
6. The goods arrived in Hongkong and were released by the defendant Wallem directly to the goods are already fully paid. In his several years of business relationship with GPC and respondents, there
buyer/notify party, Great Prospect Company and not to the consignee, the National Bank of Pakistan, was not a single instance when the bill of lading was first presented before the release of the cargoes. He
Hongkong, without the required bills of lading and bank guarantee for the release of the shipment issued admitted the existence of the telex of 3 July 1989 [14] containing his request to deliver the shipment to the
by the consignee of the goods x x x x [10] consignee without presentation of the bill of lading but not the telex of 5 April 1989 because he could
not remember having made such request.
Even going back to an event that transpired prior to the filing of the present case or when petitioner Consider pertinent portions of petitioners testimony -
wrote respondent WALLEM demanding payment of the value of the cargoes, misdelivery of the cargoes
did not come into the picture - Q: Are you aware of any document which would indicate or show that your request to the defendant
Wallem for the immediate release of your fresh fruits, perishable goods, to Great Prospect
without the presentation of the original Bill of Lading?
We are writing you on behalf of our client, Ben-Mac Enterprises who informed us that Bills of Lading
No. 99012 and 99013 with a total value of US$20,223.46 were released to Great Prospect, Hongkong
A: Yes, by telegraphic transfer, which means that it is fully paid. And I requested the immediate release Q: So everytime you made a shipment on perishable goods you let your people to call? (sic)
of the cargo because there was immediate payment.
A: Not everytime, sir.
Q And you are referring, therefore, to this copy Telex release that you mentioned where your
Companys name appears Ben-Mac? Q: You did not make this request in writing?

Atty. Hernandez: Just for the record, Your Honor, the witness is showing a Bill of Lading referring to A: No, sir. I think I have no written request with Wallem x x x x[18]
SKG (sic) 93023 and 93026 with Great Prospect Company. Against petitioners claim of not remembering having made a request for delivery of subject cargoes
Atty. Ventura: to GPC without presentation of the bills of lading and bank guarantee as reflected in the telex of 5 April
1989 are damaging disclosures in his testimony. He declared that it was his practice to ask the shipping
Q: Is that the telegraphic transfer? lines to immediately release shipment of perishable goods through telephone calls by himself or his people.
He no longer required presentation of a bill of lading nor of a bank guarantee as a condition to releasing
A: Yes, actually, all the shippers partially request for the immediate release of the goods when they the goods in case he was already fully paid. Thus, taking into account that subject shipment consisted of
are perishable. I thought Wallem Shipping Lines is not neophyte in the business. As far as LC is perishable goods and SOLIDBANK pre-paid the full amount of the value thereof, it is not hard to believe
concerned, Bank guarantee is needed for the immediate release of the goods x x x x [15] the claim of respondent WALLEM that petitioner indeed requested the release of the goods to GPC without
Q: Mr. Witness, you testified that it is the practice of the shipper of the perishable goods to ask the presentation of the bills of lading and bank guarantee.
shipping lines to release immediately the shipment.Is that correct? The instruction in the telex of 5 April 1989 was to deliver the shipment to respective consignees.
A: Yes, sir. And so petitioner argues that, assuming there was such an instruction, the consignee referred to was
PAKISTAN BANK. We find the argument too simplistic. Respondent court analyzed the telex in its
Q: Now, it is also the practice of the shipper to allow the shipping lines to release the perishable goods entirety and correctly arrived at the conclusion that the consignee referred to was not PAKISTAN BANK
to the importer of goods without a Bill of Lading or Bank guarantee? but GPC -

A: No, it cannot be without the Bank Guarantee.


There is no mistake that the originals of the two (2) subject Bills of Lading are still in the possession of
Atty. Hernandez: the Pakistani Bank. The appealed decision affirms this fact. Conformably, to implement the said telex
instruction, the delivery of the shipment must be to GPC, the notify party or real importer/buyer of the
Q: Can you tell us an instance when you will allow the release of the perishable goods by the shipping goods and not the Pakistani Bank since the latter can very well present the original Bills of Lading in its
lines to the importer without the Bank guarantee and without the Bill of Lading? possession. Likewise, if it were the Pakistani Bank to whom the cargoes were to be strictly delivered, it
will no longer be proper to require a bank guarantee as a substitute for the Bill of Lading. To construe
A: As far as telegraphic transfer is concerned.
otherwise will render meaningless the telex instruction. After all, the cargoes consist of perishable fresh
Q: Can you explain (to) this Honorable Court what telegraphic transfer is? fruits and immediate delivery thereof to the buyer/importer is essentially a factor to reckon with. Besides,
GPC is listed as one among the several consignees in the telex (Exhibit 5-B) and the instruction in the
A: Telegraphic transfer, it means advance payment that I am already fully paid x x x x telex was to arrange delivery of A/M shipment (not any party) to respective consignees without
presentation of OB/L and bank guarantee x x x x[19]
Q: Mr. Macam, with regard to Wallem and to Great Prospect, would you know and can you recall that
any of your shipment was released to Great Prospect by Wallem through telegraphic transfer?
Apart from the foregoing obstacles to the success of petitioners cause, petitioner failed to substantiate
A: I could not recall but there were so many instances sir. his claim that he returned to SOLIDBANK the full amount of the value of the cargoes. It is not far-fetched
to entertain the notion, as did respondent court, that he merely accommodated SOLIDBANK in order to
Q: Mr. Witness, do you confirm before this Court that in previous shipments of your goods through recover the cost of the shipped cargoes from respondents. We note that it was SOLIDBANK which initially
Wallem, you requested Wallem to release immediately your perishable goods to the buyer? demanded payment from respondents through five (5) letters. SOLIDBANK must have realized the
A: Yes, that is the request of the shippers of the perishable goods x x x x[16] absence of privity of contract between itself and respondents. That is why petitioner conveniently took the
cudgels for the bank.
Q: Now, Mr. Macam, if you request the Shipping Lines for the release of your goods immediately even
without the presentation of OBL, how do you course it? In view of petitioners utter failure to establish the liability of respondents over the cargoes, no
reversible error was committed by respondent court in ruling against him.
A: Usually, I call up the Shipping Lines, sir x x x x[17]
WHEREFORE, the petition is DENIED. The decision of respondent Court of Appeals of 13 March
Q: You also testified you made this request through phone calls. Who of you talked whenever you made 1996 dismissing the complaint of petitioner Benito Macam and the counterclaims of respondents China
such phone call? Ocean Shipping Co. and/or Wallem Philippines Shipping, Inc., as well as its resolution of 5 July 1996
denying reconsideration, is AFFIRMED.
A: Mostly I let my people to call, sir. (sic)
G.R. No. 47004 March 8, 1989 This judgment of the Appellate Tribunal was in turn appealed by Maritime Company. To that
MARITIME COMPANY OF THE PHILIPPINES, petitioner, Court Maritime Co. attributes the following errors, in a bid to have its judgment reversed by
vs. this Court, viz:
COURT OF APPEALS and RIZAL SURETY & INSURANCE CO., respondents.
FIRST DIVISION 1) holding that it was a ship agent under the Code of Commerce instead of merely an agent
Rafael Dinglasan for petitioner. under the Civil Code;
Carlos, Ibarra & Valdez for private respondent.
2) not holding that under the Bill of Lading sued upon, Rizal Surety had no cause of action
NARVASA, J.: against either impleaded defendant;

In the Court of First Instance of Manila, Rizal Surety & Insurance Co. (hereafter, simply Rizal 3) not holding that the collision between the SS Doña Nati and the M/V Yasushima Maru
Surety) sued the National Development Company (NDC) and Maritime Co. of the Philippines which caused the loss of the insured goods was due solely to the fault or negligence of the
(hereafter simply Maritime Co.) for the recovery of a sum of money paid by it as insurer for the complement of the Yasushima Maru, as well as the character of the goods themselves and
value of goods lost in transit on board vessel known as the SS Doña Nati . 1 After due the defect in their packing, and
proceedings and trial, the complainant was "dismissed with costs against plaintiff ." 2 The Trial
Court's judgment was founded upon the following findings and conclusions, to wit:
4) not holding that Rizal Surety's cause of action was barred by prescription as well as
Stipulation No. 19 of the Bill of Lading.
1. Rizal Surety 'was the insurer of 800 packages of PVC compound loaded on the SS Doña
Nati at Yokohama and consigned to the Acme Electrical Manufacturing Company."
The evidence establishes that NDC had appointed petitioner Maritime Co., as its agent to
manage and operate three vessels owned by it, including the SS Doña Nati for and in its behalf
2. " The SS Doña Nati was owned by the National Development Company whereas he and account, and for a determinable period (i.e., until full reimbursement of all moneys
Maritime Company of the Philippines was its Agent. This appears indubitably in the Bill of advanced and/or full relief from or payment of all guarantees made by Maritime Co. for account
Lading. Exhibit D." of the vessels). Under their written agreement, Maritime Co. was bound to "provision and
victual" the SS Doña Nati and the other two vessels, and to render a complete report of the
3. The goods were never delivered to the consignee (Acme Electrical, etc., supra) so that x operations of the vessels within 60 days after conclusion of each voyage; it was also authorized
x (Rizal) as Insurer, paid x x (said) consignee the sum of P38,758.50." to appoint sub-agents at any ports or places that it might deem necessary, remaining however
responsible to the shipowner (NDC) for the timely and satisfactory performance of said sub-
4. The cause of the non-delivery of the goods, from the evidence presented by both agents. These facts preponderantly demonstrate the character of Maritime Co. as ship agent
Defendants is that in Nagoya Bay, while the SS Doña Nati was being piloted by a Japanese under the Code of Commerce, a ship agent, accordingly to that Code, being "the person
pilot, the SS Doña Nati was rammed by M/V Yasushima Maru, causing damage to the hull entrusted with provisioning or representing the vessel in the port in which it may be found." 6
of the SS Doña Nati and the resultant flooding of the holds damaged beyond repair the
goods of the consignee in question." Maritime Co. however insists that it was not the ship agent of NDC in Japan but "the Fuji Asano
Co., Ltd., which supplied her with provisions, and represented her therein and which issued the
5. There is no doubt that under our Code of Commerce, it would be the vessel at fault in this bill of lading for the owner NDC The claim is belied by the bill of lading referred to. 7 The
collision, that would be responsible for the damage to the cargo. And the evidence of both letterhead of the bill of lading is in two (2) parts, and is printed in the following manner:
Defendants, which has not been rebutted, is that the M/V Yasushima Maru was at fault in
the collision, so that the cause of action of plaintiff should be directed to the owners of the PHILIPPINE NATIONAL LINES
negligent vessel. However, as Plaintiff has brought this action in good faith, attorney's fees NATIONAL DEVELOPMENT COMPANY
are not recoverable." MARITIME COMPANY OF THE PHILIPPINES
AGENT
Rizal Surety elevated the case to the Court of Appeals. 3 That Court found merit in its PHILIPPINES-HONGKONG, JAPAN, U.S. PACIFIC
appeal. It thus rendered judgment, 4setting aside that of the Trial Court and 'ordering COAST-GULF PORTS
defendants-appellees (NDC and Maritime Co.) jointly and severally to pay jointly and HONGKONG-COSMOS DEVELOPMENT COMPANY
severally to plaintiff-appellant (Rizal Surety) the sum of P38,758.50 with legal rate of interest * JAPAN-FUJI ASANO KAIUN CO, LTD.
from the filing of the complaint ." 5 * U.S.A-NORTH AMERICAN MARITIME AGENCIES
As will be observed, in what may be described as the main letterhead, Maritime Co. is indicated Under the established facts, and in accordance with Article 1734 above mentioned, petitioner
as "Agent" for the (1) Philippines, (2) "Hongkong, (3) Japan, and the (4) U.S. Pacific Coast-Gulf Maritime Co. and NDC, as "common carriers," are liable to Acme for "the loss, destruction or
Ports. Underneath this main letterhead is a sort of secondary sub-head: "Hongkong-Cosmos deterioration of the goods," and may be relieved of responsibility if the loss, etc., "is due to any
Development Company; Japan-Fuji ASANO Kaiun Co., Ltd., U.SA-North American Maritime of the following causes only: 15
Agencies." The necessary connotation is that the firms thus named are sub-agents or
secondary representatives of Maritime Co., Fuji ASANO Kaiun Co., Ltd., particularly, being the 1. Flood, storm, earthquakes, lightning or other natural disaster or calamity;
representative of NDC and Maritime Co. in Japan, as distinguished from the Maritime Co.,
which is described as AGENT not only in Japan but also in other places: the Philippines,
Hongkong, U.S. Pacific Coast, and the Gulf Ports. Moreover, the bill shows on its face that it 2. Act of the public enemy in war, whether international or civil;
was issued 'FOR THE MASTER' by "Maritime Company of the Philippines, Agent."
3. Act or omission of the shipper or owner of the goods;
Equally unacceptable is the contention that Acme Electrical Manufacturing, Manila," was not
the consignee of the goods described in the bill of lading and therefore, payment to it for the 4. The character of the goods or defects in the packing or in the containers;
loss of said goods did not operate to make Rizal Surety its subrogee. The contention is in the
first place belied by the bill of lading which states that if the goods are "consigned to the 5. Order or act of competent public authority.'
Shipper's Order"-and the bill is so consigned: "to the order of China Banking Corporation,
Manila, or assigns"-the "Acme Electrical Manufacturing, Manila," shall be notified. This shows,
in the context of the other documents hereafter adverted to, that Acme was the importer and Since none of the specified absolutory causes is present, the carrier's liability is palpable.
China Banking Corporation the financing agency. The contention is also confuted by the
Commercial Invoice of the shipper 8 which recites that it was "by order and for account of The petitioner's other claim that the loss of the goods was due entirely to the fault of the
Messrs. Acme Electrical Manufacturing, Manila" that the 800 bags of PVC compound were Japanese vessel, Yasushima Maru, which rammed into the Doña Nati cannot be sustained.
shipped from Yokohama to Manila. It is also disaproved by the fact that it was Acme that The Appellate Tribunal found, as a fact, after a review and study of the evidence, that the Doña
insured the goods with Rizal Surety and the latter did insure them 9 on the strength of the Nati "did not exercise even due diligence to avoid the collision.' In line with the familiar axiom
former's Marine Risk Note, 10 long before the goods were lost at sea, and it was Acme, thru its that factual conclusions of the Court of Appeals are conclusive and may not be reviewed, the
broker, that claimed the proceeds for the loss. 11 The contention is finally discredited by petitioners attempt to shift the blame to the Japanese vessel is futile. Having failed to exercise
Maritime Co.'s own certification which states that the "800 packages of PVC Compound ... extraordinary diligence to avoid any loss of life and property, as commanded by law, not having
consigned to Acme Electrical Manufacturing was 'carried away' to sea as a result of the in fact exercised "even due diligence to avoid the collision,' it must be held responsible for the
accident and same was unrecovered .. . 12 loss of the goods in question. Besides, as remarked by the Court of Appeals, "the principal
cause of action is not derived from a maritime collision, but rather, from a contract of carriage,
There is thus no question of the entitlement of Acme Electrical Manufacturing to the proceeds as evidenced by the bill of lading."
of the insurance against loss of the goods in question, nor about the fact that it did receive such
proceeds from the Rizal Surety, as insurer, which made payment upon due ascertainment of WHEREFORE, the Decision of the Court of Appeals subject of the petition for review is
the actuality of the loss. The legal effect is inescapable. Rizal Surety was subrogated to Acme's AFFIRMED, with costs against petitioner.
rights against the shipowner and the ship agent arising from the loss of the goods. 13
Cruz, Gancayco, Griño-Aquino and Medialdea, JJ., concur.
Now, according to the Court of Appeals, Acme's rights are to be determined by the Civil Code,
not the Code of Commerce. This conclusion derives from Article 1753 of the Civil Code to the
effect that it is the "law of the country to which the goods are to be transported (which) shall
govern the liability of the common carrier for their loss, destruction or deterioration." It is only in
"matters not regulated by x x (the Civil) Code," according to Article 1766, that "the rights and
obligations of common carriers shall be governed by the Code of Commerce and by special
laws." Since there are indeed specific provisions regulating the matter of such liability in the
Civil Code, these being embodied in Article 1734, as well as prescribing the period of
prescription of actions, it follows that the Code of Commerce, or the Carriage of Goods by Sea
Act, has no relevancy in the determination of the carrier's liability in the instant case.
In American President Lines v. Klepper, 14 for instance, we ruled that in view of said Articles
1753 and 1766, the provisions of the Carriage of Goods by Sea Act are merely suppletory to
the Civil Code.
FIRST DIVISION the aforesaid children. It appears also that Teresa Pamatian and Diego Salim, who were
also passengers also drowned. Plaintiff Ruben Reyes was one of the survivors. 'The
G.R. No. L-51165 June 21, 1990 plaintiffs presented the birth and death certificates of Amparo delos Santos and the children
HEIRS OF AMPARO DE LOS SANTOS, HEIRS OF ERNANIE DELOS SANTOS, HEIRS OF (Exhs. 1, I-1, J, J-1, K, K-1, L, L-1, 0 to S, pp. 180 to 194 rec.). They also presented copies
AMABELLA DELOS SANTOS, HEIRS OF LENNY DELOS SANTOS, HEIRS OF MELANY of the manifest of passengers of the M/V 'Mindoro' on November 2,1967 (Exhs. B & C, pp.
DELOS SANTOS, HEIRS OF TERESA PAMATIAN, HEIRS OF DIEGO SALEM, AND RUBEN 163 to 161 rec.).
REYES, petitioners,
vs. Eliadora Crisostomo de Justo, one of the survivors, corroborated the testimony of Mauricio
HONORABLE COURT OF APPEALS AND COMPANIA MARITIMA, respondents. delos Santos that he accompanied Amparo delos Santos and her children to the port to
Severino Z. Macavinta, Jr. for petitioners. board the M/V Mindoro. She is a cousin of Amparo delos Santos' husband. According to
Dinglasan Law Office for private respondent. her, when she boarded the second deck of the vessel, she saw about 200 persons therein.
She tried to see whether she could be accommodated in the third deck or first deck
because the second deck was very crowded. She admitted that she was not included in the
MEDIALDEA. J.: manifest because she boarded the boat without a ticket, but she purchased one in the
vessel. She testified further that the boat was not able to reach its destination due to its
sinking. During the typhoon before the vessel sunk, she was able to board a 'balsa'.
This petition for review on certiorari seeks to set aside the decision of the Court of Appeals in
CA-G.R. No. 58118-R affirming the decision in Civil Case No. 74593 of the then Court of First
Instance (now Regional Trial Court), Branch XI, Manila which dismissed the petitioners' claim Ruben Reyes, the other survivor, declared that he paid for his ticket before boarding the
for damages against Compania Maritima for the injury to and death of the victims as a result of M/V Mindoro. At that time he had with him personal belongings and cash all in the amount
the sinking of M/V Mindoro on November 4, 1967. of P2,900.00. It appears that Felix Reyes Jakusalem, Teresa Pamatian and Amparo delos
Santos drowned during the sinking of the vessel. He was able to swim on (sic) an island
and was with the others, rescued later on and brought to the hospital. The survivors were
The trial court found the antecedent facts to be as follows: then taken ashore (Exh. M, p. 188, rec.).

This is a complaint originally filed on October 21, 1968 (p. 1, rec.) and Dominador Salim declared that Teresa Pamatian, his aunt and Diego Salim, his father,
amended on October 24, 1968 (p. 16 rec.) by the heirs of Delos Santos and drowned along with the sinking of the M/V Mindoro. Tins witness declared that he
others as pauper litigants against the Compania Maritima, for damages due accompanied both his father and his aunt to the pier to board the boat and at the time
to the death of several passengers as a result of the sinking of the vessel of Teresa Pamatian was bringing cash and personal belongings of about P250.00 worth. His
defendant, the M/V 'Mindoro', on November 4, 1967. father brought with him P200.00 in cash plus some belongings. He admitted that when his
father boarded the vessel he did not have yet a ticket.
There is no dispute in the record that the M/V 'Mindoro' sailed from pier 8
North Harbor, Manila, on November 2,1967 at about 2:00 (should have been The plaintiffs further submitted in evidence a copy of a Radiogram stating among other
6:00 p.m.) in the afternoon bound for New Washington, Aklan, with many things that the MN Mindoro was loaded also with 3,000 cases of beer, one dump truck and
passengers aboard. It appears that said vessel met typhoon 'Welming' on the 292 various goods (Exhs. D and D-1, p. 162 rec).
Sibuyan Sea, Aklan, at about 5:00 in the morning of November 4, 1967
causing the death of many of its passengers, although about 136 survived.
In alleging negligence on the part of the vessel, plaintiffs introduced in evidence a letter sent
to the Department of Social Welfare concerning the resurvey of the M/V Mindoro victims
Mauricio delos Santos declared that on November 2, 1967 he accompanied (Exh. F, p. 169 rec.) and a telegram to the Social Welfare Administration (Exh. G, p. 170
his common-law wife, Amparo delos Santos, and children, namely: Romeo, rec.), a resurvey of the M/V 'Mindoro' victims (Exh. H, p. 171 rec.), a complete list of the M/V
Josie, Hernani, who was 10 years old, Abella, 7 years old, Maria Lemia, 5 'Mindoro' victims (Exhs. H-1 to H-8, pp. 172179 rec.), a certified true copy of the Special
years old and Melany, 5 months old, to pier 8, North Harbor, Manila, to board Permit to the Compania Maritima issued by the Bureau of Customs limiting the vessel to
the M/V Mindoro 'bound for Aklan. It appears that Amparo delos Santos and only 193 passengers (Exh. X, p. 318 rec.).
the aforesaid children brought all their belongings, including household
utensils valued at P 1,000.00, with the intention of living in Aklan
permanently. It appears that in a decision of the Board of Marine Inquiry, dated February 2, 1970, it was
found that the captain and some officers of the crew were negligent in operating the vessel
and imposed upon them a suspension and/or revocation of their license certificates. It
As already stated, the boat met typhoon 'Welming' and due to the strong waves it sank appears, however, that this decision cannot be executed against the captain who perished
causing the drowning of many passengers among whom were Amparo delos Santos and all with the vessel (Exhs. E, E-1, E-1-A, E-2 to E-9, pp. 163- 168 rec.).
Upon agreement of the parties, the plaintiffs also introduced in evidence the transcript of On the basis of these facts, the trial court sustained the position of private respondent
stenographic notes of the testimony of Boanerjes Prado before Branch I of this Court (Exh. Compania Maritima (Maritima, for short) and issued a decision on March 27, 1974, to wit:
U, pp. 203-220) and that of Felimon Rebano in the same branch (Exh. V, pp. 225-260 rec.).
WHEREFORE, the Court finds that in view of lack of sufficient evidence, the
The defendant alleges that no negligence was ever established and, in fact, the shipowners case be, as it is hereby DISMISSED.
and their officers took all the necessary precautions in operating the vessel. Furthermore,
the loss of lives as a result of the drowning of some passengers, including the relatives of For lack of evidence, the counterclaim is also hereby DISMISSED.
the herein plaintiff, was due to force majeure because of the strong typhoon 'Welming.' It
appears also that there was a note of marine protest in connection with the sinking of the
vessel as substantiated by affidavits (Exhs. 3, 3-A, 3-B, 3-C, 3-D, 3-E, 3-F and 3-G rec.). On IT IS SO ORDERED. (Records, p. 474)
this score Emer Saul, member of the PC Judge Advocate General's Office, brought to Court
records of this case which were referred to their office by the Board of Marine Inquiry. Forthwith, the petitioners' heirs and Reyes brought an appeal to the Court of Appeals. As earlier
According to him the decision referred to by the plaintiffs was appealed to the Department mentioned, the appellate court affirmed the decision on appeal. While it found that there was
of National Defense, although he did not know the result of the appeal. At any rate, he knew concurring negligence on the part of the captain which must be imputable to Maritima, the
that the Department of National Defense remanded the case to the Board of Marine Inquiry Court of Appeals ruled that Maritima cannot be held liable in damages based on the principle of
for further investigation. In the second indorsement signed by Efren I. Plana, limited liability of the shipowner or ship agent under Article 587 of the Code of Commerce.
Undersecretary of National Defense, it is stated, among other things, that the hearings of
the Board of Marine Inquiry wherein the Philippine Coast Guard made the decision lacked The heirs and Reyes now come to Us with the following assignment of errors:
the necessary quorum as required by Section 827 of the Tariff and Customs Code.
Moreover, the decision of the Commandant of the Philippine Coast Guard relied principally
on the findings reached by the Board of Officers after an ex-parte investigation especially in ERROR I
those aspects unfavorable to the captain (Exh. 1, folder of exhibits).
THE HONORABLE RESPONDENT COURT OF APPEALS ERRED IN NOT
It appears also that there were findings and recommendations made by the Board of Marine CONCENTRATING TO (sic) THE PROVISION OF LAW IN THE NEW CIVIL CODE AS
Inquiry, dated March 5, 1968, recommending among other things that the captain of the M/V EXPRESSED) IN, —
'Mindoro,' Felicito Irineo, should be exonerated. Moreover, Captain Irineo went down with
the vessel and his lips are forever sealed and could no longer defend himself. This body Art. 1766. In all matters not regulated by this Code, the rights and obligations of common
also found that the ship's compliment (sic) and crew were all complete and the vessel was carriers shall be governed by the Code of Commerce and by special laws.
in seaworthy condition. If the M/V Mindoro' sank, it was through force majeure (Exhs. 2 & 2-
A, folder of exhibits).
ERROR II

Defendant also introduced in evidence the transcripts of stenographic notes of the


RESPONDENT COURT OF APPEALS ERRED IN NOT REVERSING THE DECISION OF THE
testimony of Francisco Punzalan, marine officer, as well as of Abelardo F. Garcia, Harbor
LOWER COURT OF ORIGIN AFTER FINDING A SERIES OF FAULTS AND NEGLIGENCE
Pilot in Zamboanga City, in Civil Case No. Q-12473 of Branch XXVIII, Court of First
AND IN NOT ORDERING ITS CO-RESPONDENT COMPANIA MARITIMA TO PAY THE
Instance of Rizal, Quezon City Branch (Exhs. 3-H & 10-H, folder of exhibits), and of Arturo
DAMAGES IN ACCORDANCE WITH THE LAW.
Ilagan, boat captain, in Civil Case No. Q-1 5962 of Branch V, of the same Court (Exh. 9
folder of exhibits).
ERROR III
It appears that five other vessels left the pier at Manila on November 2, 1967, aside from
the M/V Mindoro' (Exhs 4 & 4-A). A certification of the Weather Bureau indicated the place THE HONORABLE RESPONDENT COURT OF APPEALS ERRED TO NOTE, OBSERVE
of typhoon 'Welming' on November 2, 1967 (Exh. 6). A certification of the shipyard named AND COMPREHEND THAT ART. 587 OF THE CODE OF COMMERCE IS ONLY FOR THE
El Varadero de Manila stated among other things that the M/V 'Mindoro' was dry-docked GOODS WHICH THE VESSEL CARRIED AND DO NOT INCLUDE PERSONS. (Rollo, p. 8)
from August 25 to September 6, 1967 and was found to be in a seaworthy condition (Exh.
5), and that the said M/V 'Mindoro' was duly inspected by the Bureau of Customs (Exhs. 7, The petition has merit. At the outset, We note that there is no dispute as to the finding of the
7-A & 7-B). Another certification was introduced stating among other things that the Bureau captain's negligence in the mishap. The present controversy centers on the questions of
of Customs gave a clearance to the M/V 'Mindoro' after inspection (Exh. 8 folder of Maritima's negligence and of the application of Article 587 of the Code of Commerce. The said
exhibits). (CFI Decision, Records, pp. 468-471) article provides:
Art. 587. The ship agent shall also be civilly liable for indemnities in favor of its center was at 103 N 131.4 E, it had attained surface winds of about 240
third persons which may arise from the conduct of the captain in the care of kilometers per hour. ... (Exh. Z, p. 131, Index of Exhibits, p. 11 5, Emphasis
the goods which he loaded on the vessel, but he may exempt himself supplied).
therefrom by abandoning the vessel with all her equipments and the freight it
may have earned during the voyage. Considering the above report and the evidence on record showing the late departure of the ship
at 6:00 p.m. (instead of the scheduled 2:00 p.m. departure) on November 2, 1967, We find it
Under this provision, a shipowner or agent has the right of abandonment; and by necessary highly improbable that the Weather Bureau had not yet issued any typhoon bulletin at any time
implication, his liability is confined to that which he is entitled as of right to abandon-"the vessel during the day to the shipping companies. Maritima submitted no convincing evidence to show
with all her equipments and the freight it may have earned during the voyage" (Yangco v. this omission. It's evidence showing the Weather Bureau's forecast of November 3, 1967 is not
Laserna, et al., 73 Phil. 330, 332). Notwithstanding the passage of the New Civil Code, Article persuasive. It merely indicated the weather bulletin of that day. Nowhere could We find any
587 of the Code of Commerce is still good law. The reason lies in the peculiar nature of statement therein from the Weather Bureau that it had not issued any forecast on November I
maritime law which is 94 exclusively real and hypothecary that operates to limit such liability to and 2, 1967 (Exh. 6, Records, p. 257). Significantly, the appellate court found that the ship's
the value of the vessel, or to the insurance thereon, if any (Yangco v. Laserna, Ibid). As captain through his action showed prior knowledge of the typhoon. The court said:
correctly stated by the appellate court, "(t)his rule is found necessary to offset against the
innumerable hazards and perils of a sea voyage and to encourage shipbuilding and marine ... It cannot be true that he was apprised of the typhoon only at about 11:00
commerce. (Decision, Rollo, p. 29). Contrary to the petitioners' supposition, the limited liability o'clock the following morning on November 3, 1967 when the Weather report
doctrine applies not only to the goods but also in all cases like death or injury to passengers was transmitted to him from the Weather Bureau at which time he plotted its
wherein the shipowner or agent may properly be held liable for the negligent or illicit acts of the position. For in his radiogram sent to defendant-appellee's office in Manila as
captain (Yangco v. Laserna, Ibid). It must be stressed at this point that Article 587 speaks only early as 8:07 in the morning of November 3, 1967 (Exh. D) he states in the
of situations where the fault or negligence is committed solely by the captain. In cases where concluding portion 'still observing weather condition.' thereby implicitly
the shipowner is likewise to be blamed, Article 587 does not apply (see Manila Steamship Co., suggesting that he had known even before departure of the unusual weather
Inc. v. Abdulhanan, et al., 100 Phil. 32, 38). Such a situation will be covered by the provisions condition. ... (Decision, Rollo, p. 26)
of the New Civil Code on Common Carriers. Owing to the nature of their business and for
reasons of public policy, common carriers are tasked to observe extraordinary diligence in the
vigilance over the goods and for the safety of its passengers (Article 1733, New Civil Code). If the captain knew of the typhoon beforehand, it is inconceivable for Maritima to be totally in
Further, they are bound to carry the passengers safely as far as human care and foresight can the dark of 'Welming.' In allowing the ship to depart late from Manila despite the typhoon
provide, using the utmost diligence of very cautious persons, with a due regard for all the advisories, Maritima displayed lack of foresight and minimum concern for the safety of its
circumstances (Article 1755, New Civil Code). Whenever death or injury to a passenger occurs, passengers taking into account the surrounding circumstances of the case.
common carriers are 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 While We agree with the appellate court that the captain was negligent for overloading the ship,
(Article 1756, New Civil Code). We, however, rule that Maritima shares equally in his negligence. We find that while M/V
Mindoro was already cleared by the Bureau of Customs and the Coast Guard for departure at
Guided by the above legal provisions, We painstakingly reviewed the records of the case and 2:00 p.m. the ship's departure was, however, delayed for four hours. Maritima could not
found imprints of Maritima's negligence which compel Us to reverse the conclusion of the account for the delay because it neither checked from the captain the reasons behind the delay
appellate court. nor sent its representative to inquire into the cause of such delay. It was due to this interim that
the appellate court noted that "(i)ndeed there is a great probability that unmanifested cargo
(such as dump truck, 3 toyota cars, steel bars, and 6,000 beer cases) and passengers (about
Maritima claims that it did not have any information about typhoon 'Welming' until after the boat 241 more than the authorized 193 passengers) were loaded during the four (4) hour interval"
was already at sea. Modem technology belie such contention. The Weather Bureau is now (Decision, p. 13, Rollo, p. 26). Perchance, a closer supervision could have prevented the
equipped with modern apparatus which enables it to detect any incoming atmospheric overloading of the ship. Maritima could have directed the ship's captain to immediately depart in
disturbances. In his summary report on tropical cyclone 'Welming' which occurred within the view of the fact that as of 11:07 in the morning of November 2, 1967, the typhoon had already
Philippine Area of Responsibility, Dr. Roman L. Kintanar, Weather Bureau Director, stated that attained surface winds of about 240 kilometers per hour. As the appellate court stated, '(v)erily,
during the periods of November 15, 1967, the Bureau issued a total of seventeen (17) warnings if it were not for have reached (its) destination and this delay, the vessel could thereby have
or advisories of typhoon 'Welming' to shipping companies. Additionally, he reported that: avoided the effects of the storm" (Decision, Rollo p. 26). This conclusion was buttressed by
evidence that another ship, M/V Mangaren, an interisland vessel, sailed for New Washington,
By 11:15 a.m. of November lst, or in less than twenty four hours, the storm Aklan on November 2, 1967, ahead of M/V Mindoro and took the same route as the latter but it
intensified into a typhoon. It was by then located at 8.7 N 137.3 E with sea arrived safely (Exh. BB-2, Index of Exhibits, pp. 143-144 and Exh. 4-A, Ibid, p. 254).
level pressure of 978 millibars, an eye diameter of about 18.53 kilometers
and a maximum surface wind of 139 kilometers per hour. "As it moved along
in the open sea, it intensified further and by 11.07 a.m. of November 2, when
Maritima presents evidence of the seaworthy condition of the ship prior to its departure to prove Pamatian spent about P100.00 for expenses at the trial. With respect to petitioner Reyes, the
that it exercised extraordinary diligence in this case. M/V Mindoro was drydocked for about a evidence shows that at the time of the disaster, he had in his possession cash in the sum of
month. Necessary repairs were made on the ship. Life saving equipment and navigational P2,900.00 and personal belongings worth P100.00. Further, due to the disaster, Reyes was
instruments were installed. unable to work for three months due to shock and he was earning P9.50 a day or in a total sum
of P855.00. Also, he spent about P100.00 for court expenses. For such losses and incidental
While indeed it is true that all these things were done on the vessel, Maritima, however, could expenses at the trial of this case, Maritima should pay the aforestated amounts to the
not present evidence that it specifically installed a radar which could have allowed the vessel to petitioners as actual damages.
navigate safely for shelter during a storm. Consequently, the vessel was left at the mercy of
''Welming' in the open sea because although it was already in the vicinity of the Aklan river, it Reyes' claim for moral damages cannot be granted inasmuch as the same is not recoverable in
was unable to enter the mouth of Aklan River to get into New Washington, Aklan due to damage action based on the breach of contract of transportation under Articles 2219 and 2220
darkness and the Floripon Lighthouse at the entrance of the Aklan River was not functioning or of the New Civil Code except (1) where the mishap resulted in the death of a passenger and (2)
could not be seen at all (Exh. 3-H, Index of Exhibits, p. 192-195; see also Exh. 2-A, Ibid, p. where it is proved that the carrier was guilty of fraud or bad faith, even if death does not result
160). Storms and typhoons are not strange occurrences. In 1967 alone before 'Welming,' there (Rex Taxicab Co., Inc. v. Bautista, 109 Phil. 712). The exceptions do not apply in this case
were about 17 typhoons that hit the country (Exh. M, Index of Exhibits, p. 115), the latest of since Reyes survived the incident and no evidence was presented to show that Maritima was
which was typhoon Uring which occurred on October 20-25, which cost so much damage to guilty of bad faith. Mere carelessness of the carrier does not per se constitute or justify an
lives and properties. With the impending threat of 'Welming,' an important device such as the inference of malice or bad faith on its part (Rex Taxicab Co., Inc. v. Bautista, supra).
radar could have enabled the ship to pass through the river and to safety.
Anent the claim for exemplary damages, We are not inclined to grant the same in the absence
The foregoing clearly demonstrates that Maritima's lack of extraordinary diligence coupled with of gross or reckless negligence in this case.
the negligence of the captain as found by the appellate court were the proximate causes of the
sinking of M/V Mindoro. As regards the claim for attorney's fees, the records reveal that the petitioners engaged the
services of a lawyer and agreed to pay the sum of P 3,000.00 each on a contingent basis (see
Hence, Maritima is liable for the deaths and injury of the victims. amount of With the above TSN'S, July 21, 1971, p. 24; November 3, 1971, pp. 18 and 29). In view hereof, We find the
finding, We now come to the damages due to the petitioners. Ordinarily, We would remand the sum of P 10,000.00 as a reasonable compensation for the legal services rendered.
case to the trial court for the reception of evidence. Considering however, that this case has
been pending for almost twenty-three (23) years now and that since all the evidence had ACCORDINGLY, the appealed decision is hereby REVERSED and judgment is hereby
already been presented by both parties and received by the trial court, We resolve to decide rendered sentencing the private respondent to pay the following: (1) P30,000.00 as indemnity
the corresponding damages due to petitioners (see Samal v. Court of Appeals, 99 Phil. 230; for death to the heirs of each of the victims; (2) P10,000.00 as moral damages to the heirs of
Del Castillo v. Jaymalin, L-28256, March 17, 1982, 112 SCRA 629). each of the victims; (3) P6,805.00 as actual damages divided among the petitioners as follows:
heirs of Amparo Delos Santos and her deceased children, P2,000.00; heirs of Teresa
In their complaint filed with the Court of First Instance, petitioners prayed for moral, actual and Pamatian, P450.00; heirs of Diego Salem, P400.00; and Ruben Reyes, P2,955.00; (4)
exemplary damages, as well as for attorney's fees plus costs. P10,000.00 as attorney's fees; and (5) the costs.

Under Article 1764 in relation to Article 2206 of the New Civil Code, the amount of damages for SO ORDERED.
the death of a passenger caused by the breach of contract by a common carrier is at least
three thousand pesos (P3,000.00). The prevailing jurisprudence has increased the amount of Narvasa (Chairman), Cruz, Gancayco and Griño-Aquino, JJ., concur.
P3,000.00 to P30,000.00 (De Lima v. Laguna Tayabas Co., L-35697-99, April 15, 1988, 160
SCRA 70). Consequently, Maritima should pay the civil indemnity of P30,000.00 to the heirs of
each of the victims. For mental anguish suffered due to the deaths of their relatives, Maritima
should also pay to the heirs the sum of P10,000.00 each as moral damages.

In addition, it was proven at the trial that at the time of death, (1) Amparo delos Santos had with
her cash in the sum of P1,000.00 and personal belongings valued at P500.00; (2) Teresa
Pamatian, cash in the sum of P250.00 and personal belongings worth P200.00; and (3) Diego
Salem, cash in the sum of P200.00 and personal belongings valued at P100.00. Likewise, it
was established that the heirs of Amparo delos Santos and her deceased children incurred
transportation and incidental expenses in connection with the trial of this case in the amount of
P500.00 while Dominador Salem, son of victim Diego Salem and nephew of victim Teresa
SECOND DIVISION On January 20, 1986, the PNOC and petitioner Negros Navigation Co., Inc. entered into a
compromise agreement whereby petitioner assumed full responsibility for the payment and
satisfaction of all claims arising out of or in connection with the collision and releasing the PNOC
and the PNOC/STC from any liability to it. The agreement was subsequently held by the trial
court to be binding upon petitioner, PNOC and PNOC/STC. Private respondents did not join in
[G.R. No. 110398. November 7, 1997]
the agreement.
After trial, the court rendered judgment on February 21, 1991, the dispositive portion of
which reads as follows:
NEGROS NAVIGATION CO., INC., petitioner, vs. THE COURT OF APPEALS, RAMON
MIRANDA, SPS. RICARDO and VIRGINIA DE LA VICTORIA, respondents. WHEREFORE, in view of the foregoing, judgment is hereby rendered in favor of the plaintiffs, ordering
all the defendants to pay jointly and severally to the plaintiffs damages as follows:
DECISION
To Ramon Miranda:
MENDOZA, J.:
P42,025.00 for actual damages;
This is a petition for review on certiorari of the decision of the Court of Appeals affirming
with modification the Regional Trial Courts award of damages to private respondents for the
death of relatives as a result of the sinking of petitioners vessel. P152,654.55 as compensatory damages for loss of earning capacity of his wife;

In April of 1980, private respondent Ramon Miranda purchased from the Negros Navigation P90,000.00 as compensatory damages for wrongful death of three (3) victims;
Co., Inc. four special cabin tickets (#74411, 74412, 74413 and 74414) for his wife, daughter, son
and niece who were going to Bacolod City to attend a family reunion. The tickets were for Voyage
No. 457-A of the M/V Don Juan, leaving Manila at 1:00 p.m. on April 22, 1980. P300,000.00 as moral damages;

The ship sailed from the port of Manila on schedule. P50,000.00 as exemplary damages, all in the total amount of P634,679.55; and
At about 10:30 in the evening of April 22, 1980, the Don Juan collided off the Tablas Strait
in Mindoro, with the M/T Tacloban City, an oil tanker owned by the Philippine National Oil P40,000.00 as attorneys fees.
Company (PNOC) and the PNOC Shipping and Transport Corporation (PNOC/STC). As a result,
the M/V Don Juan sank. Several of her passengers perished in the sea tragedy. The bodies of To Spouses Ricardo and Virginia de la Victoria:
some of the victims were found and brought to shore, but the four members of private
respondents families were never found.
P12,000.00 for actual damages;
Private respondents filed a complaint on July 16, 1980 in the Regional Trial Court of Manila,
Branch 34, against the Negros Navigation, the Philippine National Oil Company (PNOC), and the P158,899.00 as compensatory damages for loss of earning capacity;
PNOC Shipping and Transport Corporation (PNOC/STC), seeking damages for the death of
Ardita de la Victoria Miranda, 48, Rosario V. Miranda, 19, Ramon V. Miranda, Jr., 16, and Elfreda
de la Victoria, 26. P30,000.00 as compensatory damages for wrongful death;

In its answer, petitioner admitted that private respondents purchased ticket numbers 74411, P100,000.00 as moral damages;
74412, 74413 and 74414; that the ticket numbers were listed in the passenger manifest; and that
the Don Juan left Pier 2, North Harbor, Manila on April 22, 1980 and sank that night after being
rammed by the oil tanker M/T Tacloban City, and that, as a result of the collision, some of the P20,000.00 as exemplary damages, all in the total amount of P320,899.00; and
passengers of the M/V Don Juan died. Petitioner, however, denied that the four relatives of
private respondents actually boarded the vessel as shown by the fact that their bodies were never P15,000.00 as attorneys fees.
recovered. Petitioner further averred that the Don Juan was seaworthy and manned by a full and
competent crew, and that the collision was entirely due to the fault of the crew of the On appeal, the Court of Appeals[1] affirmed the decision of the Regional Trial Court with
M/T Tacloban City.
modification
1. Ordering and sentencing defendants-appellants, jointly and severally, to pay and Elfreda de la Victoria on the ship and that he talked with them. He knew Mrs. Miranda who
plaintiff-appellee Ramon Miranda the amount of P23,075.00 as actual damages was his teacher in the grade school. He also knew Elfreda who was his childhood friend and
instead of P42,025.00; townmate. Ramirez said he was with Mrs. Miranda and her children and niece from 7:00 p.m.
until 10:00 p.m. when the collision happened and that he in fact had dinner with them. Ramirez
2. Ordering and sentencing defendants-appellants, jointly and severally, to pay said he and Elfreda stayed on the deck after dinner and it was there where they were jolted by
plaintiff-appellee Ramon Miranda the amount of P150,000.00, instead the collision of the two vessels. Recounting the moments after the collision, Ramirez testified that
of P90,000.00, as compensatory damages for the death of his wife and two Elfreda ran to fetch Mrs. Miranda. He escorted her to the room and then tried to go back to the
children; deck when the lights went out. He tried to return to the cabin but was not able to do so because
3. Ordering and sentencing defendants-appellants, jointly and severally, to pay it was dark and there was a stampede of passengers from the deck.
plaintiffs-appellees Dela Victoria spouses the amount of P50,000.00, instead Petitioner casts doubt on Ramirez testimony, claiming that Ramirez could not have talked
of P30,000.00, as compensatory damages for the death of their daughter Elfreda with the victims for about three hours and not run out of stories to tell, unless Ramirez had a
Dela Victoria; storehouse of stories. But what is incredible about acquaintances thrown together on a long
Hence this petition, raising the following issues: journey staying together for hours on end, in idle conversation precisely to while the hours away?

(1) whether the members of private respondents families were actually passengers of Petitioner also points out that it took Ramirez three (3) days before he finally contacted
the Don Juan; private respondent Ramon Miranda to tell him about the fate of his family. But it is not improbable
that it took Ramirez three days before calling on private respondent Miranda to tell him about the
(2) whether the ruling in Mecenas v. Court of Appeals,[2] finding the crew members of last hours of Mrs. Miranda and her children and niece, in view of the confusion in the days
petitioner to be grossly negligent in the performance of their duties, is binding in following the collision as rescue teams and relatives searched for survivors.
this case;
Indeed, given the facts of this case, it is improper for petitioner to even suggest that private
(3) whether the total loss of the M/V Don Juan extinguished petitioners liability; and respondents relatives did not board the ill-fated vessel and perish in the accident simply because
their bodies were not recovered.
(4) whether the damages awarded by the appellate court are excessive, unreasonable
and unwarranted. Second. In finding petitioner guilty of negligence and in failing to exercise the extraordinary
diligence required of it in the carriage of passengers, both the trial court and the appellate court
First. The trial court held that the fact that the victims were passengers of the M/V Don relied on the findings of this Court in Mecenas v. Intermediate Appellate Court,[4] which case was
Juan was sufficiently proven by private respondent Ramon Miranda, who testified that he brought for the death of other passengers. In that case it was found that although the proximate
purchased tickets numbered 74411, 74412, 74413, and 74414 at P131.30 each from the Makati cause of the mishap was the negligence of the crew of the M/T Tacloban City, the crew of the Don
office of petitioner for Voyage No. 47-A of the M/V Don Juan, which was leaving Manila on April Juan was equally negligent as it found that the latters master, Capt. Rogelio Santisteban, was
22, 1980. This was corroborated by the passenger manifest (Exh. E) on which the numbers of playing mahjong at the time of collision, and the officer on watch, Senior Third Mate Rogelio De
the tickets and the names of Ardita Miranda and her children and Elfreda de la Victoria appear. Vera, admitted that he failed to call the attention of Santisteban to the imminent danger facing
them. This Court found that Capt. Santisteban and the crew of the M/V Don Juan failed to take
Petitioner contends that the purchase of the tickets does not necessarily mean that the
steps to prevent the collision or at least delay the sinking of the ship and supervise the
alleged victims actually took the trip.Petitioner asserts that it is common knowledge that
abandoning of the ship.
passengers purchase tickets in advance but do not actually use them.Hence, private respondent
should also prove the presence of the victims on the ship. The witnesses who affirmed that the Petitioner Negros Navigation was found equally negligent in tolerating the playing of
victims were on the ship were biased and unreliable. mahjong by the ship captain and other crew members while on board the ship and failing to keep
the M/V Don Juan seaworthy so much so that the ship sank within 10 to 15 minutes of its impact
This contention is without merit. Private respondent Ramon Miranda testified that he
with the M/T Tacloban City.
personally took his family and his niece to the vessel on the day of the voyage and stayed with
them on the ship until it was time for it to leave. There is no reason he should claim members of In addition, the Court found that the Don Juan was overloaded. The Certificate of
his family to have perished in the accident just to maintain an action. People do not normally lie Inspection, dated August 27, 1979, issued by the Philippine Coast Guard Commander at Iloilo
about so grave a matter as the loss of dear ones. It would be more difficult for private respondents City stated that the total number of persons allowed on the ship was 864, of whom 810 are
to keep the existence of their relatives if indeed they are alive than it is for petitioner to show the passengers, but there were actually 1,004 on board the vessel when it sank, 140 persons more
contrary. Petitioners only proof is that the bodies of the supposed victims were not among those than the maximum number that could be safely carried by it.
recovered from the site of the mishap. But so were the bodies of the other passengers reported
missing not recovered, as this Court noted in the Mecenas[3] case. Taking these circumstances together, and the fact that the M/V Don Juan, as the faster and
better-equipped vessel, could have avoided a collision with the PNOC tanker, this Court held that
Private respondent Mirandas testimony was corroborated by Edgardo Ramirez. Ramirez even if the Tacloban City had been at fault for failing to observe an internationally-recognized
was a seminarian and one of the survivors of the collision. He testified that he saw Mrs. Miranda
rule of navigation, the Don Juan was guilty of contributory negligence. Through Justice Feliciano, precedents and do not disturb what has been settled.) Where, as in this case, the same questions
this Court held: relating to the same event have been put forward by parties similarly situated as in a previous
case litigated and decided by a competent court, the rule of stare decisis is a bar to any attempt
The grossness of the negligence of the Don Juan is underscored when one considers the foregoing to relitigate the same issue.[6] In Woulfe v. Associated Realties Corporation,[7] the Supreme Court
circumstances in the context of the following facts: Firstly, the Don Juan was more than twice as fast as of New Jersey held that where substantially similar cases to the pending case were presented
the Tacloban City. The Don Juans top speed was 17 knots; while that of the Tacloban City was 6.3. and applicable principles declared in prior decisions, the court was bound by the principle of stare
knots. Secondly, the Don Juan carried the full complement of officers and crew members specified for a decisis. Similarly, in State ex rel. Tollinger v. Gill,[8] it was held that under the doctrine of stare
passenger vessel of her class. Thirdly, the Don Juan was equipped with radar which was functioning that decisis a ruling is final even as to parties who are strangers to the original proceeding and not
night. Fourthly, the Don Juans officer on-watch had sighted the Tacloban City on his radar screen while bound by the judgment under the res judicata doctrine. The Philadelphia court expressed itself
the latter was still four (4) nautical miles away. Visual confirmation of radar contact was established by in this wise: Stare decisis simply declares that, for the sake of certainty, a conclusion reached in
the Don Juan while the Tacloban City was still 2.7 miles away. In the total set of circumstances which one case should be applied to those which follow, if the facts are substantially the same, even
existed in the instant case, the Don Juan, had it taken seriously its duty of extraordinary diligence, could though the parties may be different.[9] Thus, in J. M. Tuason v. Mariano, supra, this Court relied
have easily avoided the collision with the Tacloban City.Indeed, the Don Juan might well have avoided on its rulings in other cases involving different parties in sustaining the validity of a land title on
the collision even if it had exercised ordinary diligence merely. the principle of stare decisis et non quieta movere.
Indeed, the evidence presented in this case was the same as those presented in
It is true that the Tacloban City failed to follow Rule 18 of the International Rules of the Road which the Mecenas case, to wit:
requires two (2) power-driven vessels meeting end on or nearly end on each to alter her course to
starboard (right) so that each vessel may pass on the port side (left) of the other.The Tacloban City, when Document Mecenas case This case
the two (2) vessels were only three-tenths (0.3) of a mile apart, turned (for the second time) 15o to port
side while the Don Juan veered hard to starboard. . . . [But] route observance of the International Rules of
the Road will not relieve a vessel from responsibility if the collision could have been avoided by proper Decision of Commandant Exh. 10[10] Exh. 11-B-NN/X
care and skill on her part or even by a departure from the rules. Phil. Coast Guard in BMI Case
No. 415-80 dated 3/26/81
In the petition at bar, the Don Juan having sighted the Tacloban City when it was still a long way off was
negligent in failing to take early preventive action and in allowing the two (2) vessels to come to such Decision of the Minister Exh. 11[11] Exh. ZZ
close quarters as to render the collision inevitable when there was no necessity for passing so near to the of National Defense dated 3/12/82
Tacloban City as to create that hazard or inevitability, for the Don Juan could choose its own distance. It
is noteworthy that the Tacloban City, upon turning hard to port shortly before the moment of collision, Resolution on the motion Exh. 13[12] Exh. AAA
signalled its intention to do so by giving two (2) short blasts with its horn. The Don Juan gave no for reconsideration of the (private respondents)
answering horn blast to signal its own intention and proceeded to turn hard to starboard. decision of the Minister of
National Defense dated 7/24/84
We conclude that Capt. Santisteban and Negros Navigation are properly held liable for gross negligence
in connection with the collision of the Don Juan and Tacloban City and the sinking of the Don Juan Certificate of inspection Exh. 1-A[13] Exh. 19-NN
leading to the death of hundreds of passengers. . . .[5] dated 8/27/79

Petitioner criticizes the lower courts reliance on the Mecenas case, arguing that, although Certificate of Stability Exh. 6-A[14] Exh. 19-D-NN
this case arose out of the same incident as that involved in Mecenas, the parties are different dated 12/16/76
and trial was conducted separately. Petitioner contends that the decision in this case should be
based on the allegations and defenses pleaded and evidence adduced in it or, in short, on the Nor is it true that the trial court merely based its decision on the Mecenas case. The trial
record of this case. court made its own independent findings on the basis of the testimonies of witnesses, such as
The contention is without merit. What petitioner contends may be true with respect to the Senior Third Mate Rogelio de Vera, who incidentally gave substantially the same testimony on
merits of the individual claims against petitioner but not as to the cause of the sinking of its ship petitioners behalf before the Board of Marine Inquiry. The trial court agreed with the conclusions
on April 22, 1980 and its liability for such accident, of which there can only be one of the then Minister of National Defense finding both vessels to be negligent.
truth. Otherwise, one would be subscribing to the sophistry: truth on one side of the Pyrenees, Third. The next issue is whether petitioner is liable to pay damages notwithstanding the total
falsehood on the other! loss of its ship. The issue is not one of first impression. The rule is well-entrenched in our
Adherence to the Mecenas case is dictated by this Courts policy of maintaining stability in jurisprudence that a shipowner may be held liable for injuries to passengers notwithstanding the
jurisprudence in accordance with the legal maxim stare decisis et non quieta movere (Follow past
exclusively real and hypothecary nature of maritime law if fault can be attributed to the school teacher at 65, hence her loss of earning capacity should be reckoned up to 17.33 years
shipowner.[15] only.
In Mecenas, this Court found petitioner guilty of negligence in (1) allowing or tolerating the The accepted formula for determining life expectancy is 2/3 multiplied by (80 minus the age
ship captain and crew members in playing mahjong during the voyage, (2) in failing to maintain of the deceased). It may be that in the Philippines the age of retirement generally is 65 but, in
the vessel seaworthy and (3) in allowing the ship to carry more passengers than it was allowed calculating the life expectancy of individuals for the purpose of determining loss of earning
to carry. Petitioner is, therefore, clearly liable for damages to the full extent. capacity under Art. 2206(1) of the Civil Code, it is assumed that the deceased would have earned
income even after retirement from a particular job. In this case, the trial court took into account
Fourth. Petitioner contends that, assuming that the Mecenas case applies, private the fact that Mrs. Miranda had a masters degree and a good prospect of becoming principal of
respondents should be allowed to claim only P43,857.14 each as moral damages because in the school in which she was teaching. There was reason to believe that her income would have
the Mecenas case, the amount of P307,500.00 was awarded to the seven children of the increased through the years and she could still earn more after her retirement, e.g., by becoming
Mecenas couple. Under petitioners formula, Ramon Miranda should receive P43,857.14, while a consultant, had she not died. The gross earnings which Mrs. Miranda could reasonably be
the De la Victoria spouses should receive P97,714.28. expected to earn were it not for her untimely death was, therefore, correctly computed by the trial
Here is where the principle of stare decisis does not apply in view of differences in the court to be P218,077.92 (given a gross annual income of P10,224.00 and life expectancy of
personal circumstances of the victims.For that matter, differentiation would be justified even if 21.33 years).
private respondents had joined the private respondents in the Mecenascase. The doctrine of Petitioner contends that from the amount of gross earnings, 60% should be deducted as
stare decisis works as a bar only against issues litigated in a previous case. Where the issue necessary living expenses, not merely 30% as the trial court allowed. Petitioner contends that
involved was not raised nor presented to the court and not passed upon by the court in the 30% is unrealistic, considering that Mrs. Mirandas earnings would have been subject to taxes,
previous case, the decision in the previous case is not stare decisis of the question presently social security deductions and inflation.
presented.[16] The decision in the Mecenas case relates to damages for which petitioner was
liable to the claimants in that case. We agree with this contention. In Villa-Rey Transit, Inc. v. Court of Appeals,[23] the Court
allowed a deduction of P1,184.00 for living expenses from the P2,184.00 annual salary of the
In the case at bar, the award of P300,000.00 for moral damages is reasonable considering victim, which is roughly 54.2% thereof. The deceased was 29 years old and a training assistant
the grief petitioner Ramon Miranda suffered as a result of the loss of his entire family. As a matter in the Bacnotan Cement Industries. In People v. Quilaton,[24] the deceased was a 26-year old
of fact, three months after the collision, he developed a heart condition undoubtedly caused by laborer earning a daily wage. The court allowed a deduction of P120,000.00 which was 51.3% of
the strain of the loss of his family. The P100,000.00 given to Mr. and Mrs. de la Victoria is likewise his annual gross earnings of P234,000.00. In People v. Teehankee,[25] the court allowed a
reasonable and should be affirmed. deduction of P19,800.00, roughly 42.4% thereof from the deceaseds annual salary
As for the amount of civil indemnity awarded to private respondents, the appellate courts of P46,659.21. The deceased, Maureen Hultman, was 17 years old and had just received her
award of P50,000.00 per victim should be sustained. The amount of P30,000.00 formerly set first paycheck as a secretary. In the case at bar, we hold that a deduction of 50% from Mrs.
in De Lima v. Laguna Tayabas Co.,[17] Heirs of Amparo delos Santos v. Court of Mirandas gross earnings (P218,077.92) would be reasonable, so that her net earning capacity
Appeals,[18] and Philippine Rabbit Bus Lines, Inc. v. Intermediate Appellate Court[19] as should be P109,038.96. There is no basis for supposing that her living expenses constituted a
benchmark was subsequently increased to P50,000.00 in the case of Sulpicio Lines, Inc. v. Court smaller percentage of her gross income than the living expenses in the decided cases. To hold
of Appeals,[20] which involved the sinking of another interisland ship on October 24, 1988. that she would have used only a small part of her income for herself, a larger part going to the
support of her children would be conjectural and unreasonable.
We now turn to the determination of the earning capacity of the victims. With respect to
Ardita Miranda, the trial court awarded damages computed as follows: [21] As for Elfreda de la Victoria, the trial court found that, at the time of her death, she was 26
years old, a teacher in a private school in Malolos, Bulacan, earning P6,192.00 per
annum. Although a probationary employee, she had already been working in the school for two
In the case of victim Ardita V. Miranda whose age at the time of the accident was 48 years, her life years at the time of her death and she had a general efficiency rating of 92.85% and it can be
expectancy was computed to be 21.33 years, and therefore, she could have lived up to almost 70 years presumed that, if not for her untimely death, she would have become a regular teacher. Hence,
old. Her gross earnings for 21.33 years based on P10,224.00 per annum, would her loss of earning capacity is P111,456.00, computed as follows:
be P218,077.92. Deducting therefrom 30% as her living expenses, her net earnings would
be P152,654.55, to which plaintiff Ramon Miranda is entitled to compensatory damages for the loss of
earning capacity of his wife. In considering 30% as the living expenses of Ardita Miranda, the Court net earning capacity (x) = life expectancy x [ gross annual income less reasonable & necessary living
takes into account the fact that plaintiff and his wife were supporting their daughter and son who were expenses (50%) ]
both college students taking Medicine and Law respectively.
x = [ 2 (80-26) ] x [P6,192.00 - P3,096.00]
In accordance with the ruling in Villa-Rey Transit, Inc. v. Court of Appeals,[22] we think the life
expectancy of Ardita Miranda was correctly determined to be 21.33 years, or up to age 3
69. Petitioner contends, however, that Mrs. Miranda would have retired from her job as a public
= 36 x 3,096.00 WHEREFORE, the decision of the Court of Appeals is AFFIRMED with modification and
petitioner is ORDERED to pay private respondents damages as follows:
= P111,456.00
To private respondent Ramon Miranda:
On the other hand, the award of actual damages in the amount of P23,075.00 was
determined by the Court of Appeals on the basis of receipts submitted by private P23,075.00 for actual damages;
respondents. This amount is reasonable considering the expenses incurred by private
respondent Miranda in organizing three search teams to look for his family, spending for P109,038.96 as compensatory damages for loss of earning capacity of his wife;
transportation in going to places such as Batangas City and Iloilo, where survivors and the bodies
of other victims were found, making long distance calls, erecting a monument in honor of the four
victims, spending for obituaries in the Bulletin Today and for food, masses and novenas. P150,000.00 as compensatory damages for wrongful death of three (3) victims;

Petitioners contention that the expenses for the erection of a monument and other expenses P300,000.00 as moral damages;
for memorial services for the victims should be considered included in the indemnity for death
awarded to private respondents is without merit. Indemnity for death is given to compensate for
violation of the rights of the deceased, i.e., his right to life and physical integrity.[26] On the other P300,000.00 as exemplary damages, all in the total amount of P882,113.96; and
hand, damages incidental to or arising out of such death are for pecuniary losses of the
beneficiaries of the deceased. P40,000.00 as attorneys fees.
As for the award of attorneys fees, we agree with the Court of Appeals that the amount
of P40,000.00 for private respondent Ramon Miranda and P15,000.00 for the de la Victoria To private respondents Spouses Ricardo and Virginia de la Victoria:
spouses is justified. The appellate court correctly held:
P12,000.00 for actual damages;
The Mecenas case cannot be made the basis for determining the award for attorneys fees. The award
would naturally vary or differ in each case. While it is admitted that plaintiff-appellee Ramon Miranda P111,456.00 as compensatory damages for loss of earning capacity;
who is himself a lawyer, represented also plaintiffs-appellees Dela Victoria spouses, we note that
separate testimonial evidence were adduced by plaintiff-appellee Ramon Miranda (TSN, February 26, P50,000.00 as compensatory damages for wrongful death;
1982, p. 6) and plaintiffs-appellees spouses Dela Victoria (TSN, August 13, 1981, p. 43). Considering the
amount of work and effort put into the case as indicated by the voluminous transcripts of stenographic
notes, we find no reason to disturb the award of P40,000.00 for plaintiff-appellee Ramon Miranda P100,000.00 as moral damages;
and P15,000.00 for plaintiffs-appellees Dela Victoria spouses.[27]
P100,000.00 as exemplary damages, all in the total amount of P373,456.00; and
The award of exemplary damages should be increased to P300,000.00 for Ramon Miranda
and P100,000.00 for the de la Victoria spouses in accordance with our ruling in P15,000.00 as attorneys fees.
the Mecenas case:
Petitioners are further ordered to pay costs of suit.
Exemplary damages are designed by our civil law to permit the courts to reshape behaviour that is
socially deleterious in its consequence by creating negative incentives or deterrents against such In the event the Philippine National Oil Company and/or the PNOC Shipping and Transport
behaviour. In requiring compliance with the standard of extraordinary diligence, a standard which is in Corporation pay or are required to pay all or a portion of the amounts adjudged, petitioner Negros
fact that of the highest possible degree of diligence, from common carriers and in creating a presumption Navigation Co., Inc. shall reimburse either of them such amount or amounts as either may have
of negligence against them, the law seeks to compel them to control their employees, to tame their paid, and in the event of failure of Negros Navigation Co., Inc., to make the necessary
reckless instincts and to force them to take adequate care of human beings and their property. The Court reimbursement, PNOC and/or PNOC/STC shall be entitled to a writ of execution without need of
will take judicial notice of the dreadful regularity with which grievous maritime disasters occur in our filing another action.
waters with massive loss of life. The bulk of our population is too poor to afford domestic air
SO ORDERED.
transportation. So it is that notwithstanding the frequent sinking of passenger vessels in our waters,
crowds of people continue to travel by sea. This Court is prepared to use the instruments given to it by Regalado, (Chairman), and Puno, JJ., concur.
the law for securing the ends of law and public policy. One of those instruments is the institution of
exemplary damages; one of those ends, of special importance in an archipelagic state like the Philippines,
is the safe and reliable carriage of people and goods by sea.[28]
THIRD DIVISION entered into between SIP and GACET, Inc., placing the supervision and
G.R. No. L-62441 December 14, 1987 management of the aforementioned vessels in the hands of GACET, Inc.,
BANK OF THE PHILIPPINE ISLANDS, as Successor to Peoples Bank and Trust which was to run for a period of six (6) months, renewable at the will of the
Company, petitioner, parties, without however, terminating the booking agency of interocean
vs. Shipping Corporation.
BENJAMIN PINEDA, doing business under the name and style of PIONEER IRON
WORKS, respondent. The said Management Contract stipulates, among others, that —

The agent GACET may not borrow money for the


BIDIN, J.: husbanding of vessels "without special authority" from the
appellant bank (5 [f])
This is a Petition for Review on certiorari, seeking the reversal of the Decision of the First
Division 1 of the Court of Appeals in CA- G.R. No. 66365-R entitled "Benjamin Pineda, etc., All office records required as well as books of accounts"
plaintiff-appellee vs. Southern Industrial Projects Inc., Bacong Shipping Company, S.A. Gacet shall "be available for inspection" by the appellant bank
Inc., Interocean Shipping Corporation and Peoples Bank and Trust Co., defendant-appellant, " and "may at any time temporarily take possession of such
affirming the decision of the trial court, the dispositive portion of which reads: records and books to make a complete audit" (5 [h])

Wherefore, the appealed decision being in accordance with the law and the The appellant bank may-obtain copies of documents from
evidence, the same is hereby affirmed, with proportionate cost against any or all of GACET's booking agents pertaining to
appellant. transactions entered into by said booking agents" (5 (h))
[1]);
The facts of this case as found by the Court of Appeals are as follows:
The appellant bank has the right "(t)o inquire and obtain
Southern Industrial Project, Inc. (SIP for short) is a corporation the majority information, by telephone, or otherwise such data as the
stockholder of which is the Concon Family. Bacong Shipping Company, S.A. name of the shippers, nature of cargo, destination of cargo,
(Bacong, for short) is a Panamanian corporation organized to operate freight rates, etc. " (5 (h)) [2]); and,
vessels purchased by SIP under Panamanian Flag and its president is
Gregorio A. Concon. The appellant bank has the right "(t)o check on remittances
made by shipper to the booking agent" etc. (5)[3]).
SIP and/or Bacong purchased the vessels SS "Southern Comet," SS
"Southern Express" and SS "Southern Hope," thru financing furnished by Likewise, under the terms of said Management Contract, the Peoples Bank
defendant Peoples Bank and Trust Company, now the Bank of the Philippine and Trust Company was designated as depository of all revenues coming
Islands. To secure the payment of whatever amounts maybe disbursed for from the operation of the subject vessels thereby enabling it to control all
the aforesaid purpose, the said vessels were mortgaged to Peoples Bank expenses of GACET, Inc., since they win all be drawn against said deposit.
and Trust Company. For the operation of the said vessels, these were placed
under the booking agency of defendant Interocean Shipping Corporation,
with the undertaking that the freight revenues from their charter and During the period comprising March 16, 1967 and August 25, 1967, GACET
operation shall be deposited with the Trust Department of Peoples Bank and and Interocean in performing their obligations under said Management
Trust Company and that disbursements made therefrom shall be covered by Contract, contracted the services of herein plaintiff-appellee, Benjamin
vouchers bearing the approval of SIP. Pineda doing business under the name and style "Pioneer Iron Works," to
carry out repairs, fabrication and installation of necessary parts in said
vessels in order to make them seaworthy and in good working operation.
As Peoples Bank and Trust Company and SIP were not satisfied with the Accordingly, repairs on the vessels were made. Labor and materials supplied
amount of revenues being deposited with the said Bank, it being suggested in connection therewith, amounted to P 84,522.70, P 18,141.75 of which was
that diversions thereof were being made, Gregorio A. Concon of SIP and/or advanced by Interocean, thereby leaving a balance of P 62,095.95. For this
Bacong and Roman Azanza of Peoples Bank and Trust Company, organized balance, Interocean issued three checks (Exhibit I) and the third one for P
S.A. Gacet, Inc. to manage and supervise the operation of the vessels with 17,377.57 (Exh. J). When these checks were however presented to the
Ezekiel P. Toeg as the manager thereof. Accordingly, on August 15, 1966, a
Management Contract (Exh. A., Exh. 1-SIP and Exh. 3-Peoples Bank) was
drawee, Peoples Bank and Trust Company, they were dishonored as That Southern Hope" and "SS Southern Express" in the
defendant Interocean stopped payment thereon (Exhs. H-2,I-2 & J-2). sum of THREE MILLION THIRTY EIGHT THOUSAND
PESOS (P 3,038,000.00), Philippine currency shall be
Meanwhile and by reason of the inability of SIP and/or Bacong to pay their applied on account of their mortgage obligations, as they
mortgage indebtedness which was past due since 1964, the mortgagee appear on the books of the BANK, and whatever amount
Peoples Bank and Trust Company threatened to foreclose the mortgage on remains outstanding after application (or set off) is hereby
said vessels. In order to avoid the inconvenience and expense of imminent acknowledged to be owed to the BANK and shall be
foreclosure proceedings, SIP and/or Bacong sold said vessels to Peoples payable with interest at the rate of 12170 per annum." That
Bank by way of dacion en pago. The sale is evidenced by three (3) deeds of part (sic) from the foregoing SOUTHERN and/or BACONG
sale all dated January 19, 1968 (Exhs. C, D, & E). Immediately preceding the have authorized the BANK to pay certain expenses,
execution of said deeds of sale, SIP, Bacong and Peoples Bank executed a accounts of charges in connection with the sold vessels,
"Confirmation of Obligation" (Exh. "B") whereby SIP and Bacong (1) the principal items being those listed below." (These are
acknowledged being indebted to defendant bank, the payment of which the accounts listed above). "It is agreed that this is not a
indebtedness was secured by chattel mortgages on said vessels, (2) agreed final or complete listing and the above expenses shall be
to sell and convey to defendant bank the aforementioned vessels by subject to final adjustment after verification of the amounts
separate deed of sale for the total purchase price of P 3,038,000.00 to be actually paid or advanced by the BANK under the said
applied as partial payment on account of their mortgage indebtedness; and authority from SOUTHERN and/or BACONG. It is further
(3) expressly recognized that after such application, a substantial balance will agreed that these expenses shall also be subject to the
still remain unpaid and owing by SIP and Bacong which remaining balance terms of condition No. 1 above." (Those enclosed in
they have agreed to confirm and pay to the bank on demand with 12% parenthesis are supplied).
interest per annum. Likewise, listed in the "Confirmation of Obligation" were
some of the accounts acknowledged and confirmed by the parties to be On October 1, 1968, plaintiff instituted the present action (Civil Case No.
outstanding at the time, in connection with the subject vessels as follows- 74379) before the Court of First Instance of Manila, seeking to recover from
SIP, GACET, Interocean and the Peoples Bank and 'Trust Company the
a) Accrued Salaries and allotments........................ P180,687.04 principal sum of P62,095.92 with interests thereon from the respective dates
of each repair order until the same is fully paid, which amount was allegedly
the total unpaid balance of the cost of repairs, fabrication and installation of
b) National Shipyard ......................................................31,068.57 necessary parts carried out by the said plaintiff on the aforenamed vessels.

c) Pioneer Iron Works : ..................................................82,877.57 Answering the complaint, defendants Peoples Bank and Trust Co., now Bank
of P.I. and Southern Industrial Projects, Inc. (SIP) alleged that the
d) Pacific Engineering Corporation .............................152,094.85 abovementioned claim is the personal responsibility of Interocean Shipping
Corporation and/or Gacet, Inc. and deny liability thereof Defendant Bacong
e) Esso Standard Eastern Account ..........................1,693,913.25 Shipping Company, S.A. (Bacong on its part denies knowledge of the
obligation claiming it did not have any transaction whatsoever with the
plaintiff while defendant Interocean Shipping Corporation and GACET, Inc.
f) Cost of bailing out of the vessels also deny liability contending that the obligation being lien on the vessels
upon which services and repairs were made by the plaintiff, defendant
in Japan crews, salaries, etc.................................... Peoples Bank & Trust Co., now Bank of P.I., being the ultimate owners
328,692.50 thereof should be the one liable therefor.

TOTAL.................................................................. P 2,954 After trial, the court a quo rendered judgment the dispositive portion of which
833,34 reads as follows —

The Deed of "Confirmation of Obligation" also provides WHEREFORE, in view of the foregoing, judgment is
hereby rendered ordering defendants Southern Industrial
Projects, Inc. and Peoples Bank and Trust Company, now
That Southern and/or Bacong acknowledge that the total
Bank of P.I., to pay plaintiff Benjamin Pineda doing
purchase price of "TSS Southern Comet,
business under the name and style of Pioneer Iron Works,
jointly and severally, the amount of P62,095.92, with legal following exceptions; (1) when the conclusion is a finding grounded entirely on speculation,
rate of interest thereon from the date of the filing of the surmises or conjectures (Joaquin vs. Navarro, 93 Phil. 257); (2) when the inference made is
complaint, attorney's fees in the amount of P10,000.00, manifestly mistaken, absurd or impossible (Luna vs. Linatok 74 Phil. 15); (3) where there is a
and the costs of the suit. The complaint is dismissed grave abuse of discretion (Buyco vs. People, 51 O.G. 2927); (4) when the judgment is based
against defendants Interocean Shipping Corporation and on a misapprehension of facts (Cruz vs. Sosing, L-4875, November 27, 1953; (5) when the
Gacet, Inc. findings of fact are conflicting (Casica vs. Villaseca, L-9590, April 30, 1957); and (6) when the
Court of Appeals, in making its findings, went beyond the issues of the case and the same is
SO ORDERED. contrary to the admissions of both appellant and appellee (Evangelista vs. Alto Surety & Ins.
Co., L-11139, April 23, 1958; Ramos vs. Pepsi Cola, L-22533, February 9, 1967, 19 SCRA
289)." (cited in Manlapaz vs. Court of Appeals, 147 SCRA 236 [1987]; Tolentino vs. de Jesus,
From the foregoing decision, defendants Bank of P.I. and Southern Industrial Projects, Inc. 56 SCRA 167 [1974]; Carolina Industries, Inc. vs. CMS Stock Brokerage, Inc., et al., 97 SCRA
appealed to the Court of Appeals but the latter, finding the aforequoted decision to be in 734 [1980]; Manero vs. Court of Appeals, 102 SCRA 317 [1981]; Moran, Jr. vs. Court of
accordance with law and the evidence, affirmed the same, Hence, this petition. Appeals, supra Sacay vs. Sandiganbayan, 142 SCRA 593 [1983]; Director of Lands vs.
Funtillar, et al., supra)
Petitioner raised the following assignment of errors:
The petitioner argued that the findings of the lower court are contrary to, and are not supported
I. The Intermediate Appellate Court erred in affirming the findings of the lower court that by the evidence.
petitioner, in purchasing the vessels, assumed the obligations of Southern Industrial Projects,
Inc. and/or Bacong Shipping Company. There is no question that at the time subject obligation was incurred, the vessels were owned
by defendant Southern industrial Projects, Inc. although mortgaged to People's Bank and Trust
II. The Intermediate Appellate Court erred in affirming the ruling of the lower court that Company. Hence, the former as owner is liable for the costs of repairs made on the vessels.
petitioner is liable to private respondent when the same was based on an erroneous On the other hand, Interocean Shipping Corporation and S.A. Gacet undeniably mere agents of
interpretation of the "confirmation of obligation" in relation to the deeds of sale of the vessels. the owner, a disclosed principal, cannot be held liable for repairs made on the vessels to keep
them in good running condition in order to earn revenue, there being no showing that said
III. The findings of the lower court as affirmed by the Intermediate Appellate Court that private agents exceeded their authority.
respondent had a valid and subsisting repairer's lien is contrary to law as well as the rulings set
forth by this Honorable Court. Ultimately therefore, the issue which remains is, whether or not People's Bank, now Bank of
P.I. being the purchaser of said vessels, is jointly and severally liable for the outstanding
IV. The Intermediate Appellate Court erred in not holding that the lower court has no jurisdiction balance of said repairs, admittedly a lien on the properties in question.
over the subject matter of the action or suit which seeks to enforce a statutory lien under
paragraph 5 of Article 2241 of the Civil Code of the Philippines. It appears that Bank of P.I. seeks shelter in a deed of "Confirmation of Obligation" entered into
between buyer and seller before the execution of a deed of sale between them. Buyer, Bank of
As correctly pointed out by the Court of Appeals in its decision, the various assigned errors boil P.I., maintains that it has the option of whether or not to pay the obligations listed thereunder,
down to the issue of who should be liable for the cost of repairs undertaken on the subject one of which is the repairs undertaken by private respondent, as inferred from the phrase that
vessels. the owner of the vessels merely authorized petitioner bank to pay certain expenses and
charges in connection with said vessels. The latter stressed the fact that nowhere in said deed
was the bank placed under obligation to pay any of the listed indebtedness of the owner.
Petitioner raised the following questions: (1) whether the findings of the lower court are
supported by facts and evidence; and (2) whether or not petitioner is liable to respondent on the
basis of the "Confirmation of Obligation. " The cardinal rule in the interpretation of contracts is to the effect that the intention of the
contracting parties should always prevail because their will has the force of law between them
(Kasilag vs. Rodriguez, et al., 69 Phil. 217 [1939]; Sec. 10, Rule 130 of the New Rules of
The general rule is that findings of facts of the Court of Appeals are not subject to review by the Court). Thus, in order to judge the intention of the contracting parties, regard must be had
Supreme Court. (Alaras vs. Court of Appeals, 64 SCRA 671; Perido vs. Perido, 13 SCRA 97: principally to their acts both contemporaneous and subsequent to the contract (Atlantic Gulf Co.
Mendoza vs. Court of Appeals, 84 SCRA 67; Manlapaz vs. Court of Appeals, 147 SCRA 236 vs. Insular Government, 10 Phil. 166 [1908]), "the circumstances under which it was made,
[1987]; Baniqued vs. Court of Appeals, 127 SCRA 50 [1984]; Moran vs. Court of Appeals, 133 including the situation of the subject thereof and of the parties to it, may be shown, so that the
SCRA 88 [1984]; Collector of Customs vs. Court of Appeals, 137 SCRA 3 [1985]; Espiritu vs. judge may be placed in the position of those whose language he is to interpret." (Sec. 11, Rule
Court of Appeals, 137 SCRA 50 [1985]; Premier Insurance & Surety Corp. vs. Intermediate 130 of the New Rules of Court). It has been held that once this intention of the parties has been
Appellate Court, et al., 141 SCRA 423 [1986]: Director of Lands vs. Funtillar, 142 SCRA 57 ascertained, it becomes an integral part of the contract as though it has been originally
[1986]; Republic vs. Intermediate Appellate Court, 144 SCRA 705 [1986]: subject to the
expressed therein in unequivocal terms (Nielson & Co., Inc. vs. Lepanto Consolidated Mining It will be observed that the deed of "Confirmation of Obligation" is but a part or a corollary to the
Co., 18 SCRA 1040 [19661). Likewise, well settled is the fact that in construing a writing deeds of sale of the three vessels. In fact, specific reference thereto was made by said deeds
particularly a written agreement, the reason behind the circumstances surrounding its execution of sale as to the settlement of obligations, among which are the repairs in question. Said
are of paramount importance to place the interpreter in the situation of the parties concerned at provision in the deeds of sale reads:
the time the writing was executed (Vicente Gotamco Hermanos vs. Shotwell 38 SCRA 107
[1971]), Any amount or amounts that the Bank has voluntarily paid and/or has been
compelled to pay, or hereafter will voluntarily and/or will be compelled to pay
It is undisputed that S.A. Gacet, Inc., the managing corporation, is only a creation of Gregorio for any encumbrance, claim, lien or particular average in order to save the
A. Concon of Southern Industrial Projects, Inc. and of Roman Azanza of People's Bank and vessel from any legal seizure or suits by third parties, and for any repair,
Trust Company obviously for the protection of their respective interests on the properties in supplies, provisions, accrued salaries and allotment of crew, cost of bailing
question, after both expressed dissatisfaction with the amount of revenue being deposited with out of the vessel, and any other expenses or accounts of the said vessel,
the said bank which suggests that diversions thereof were being made. Thus, although it was shall be for the account of Southern and/or Bacong in accordance with their
SIP and GACET which entered into the Management Contract, it was expressly stipulated agreement preceding this conveyance executed on January 19, 1968 ...
thereunder, among others, that GACET may not borrow money for the husbanding of vessels
without special authority from the petitioner bank. In addition, all office records were required to It will be observed that the above stipulation interpreted together with the deed of "Confirmation
be subject to inspection and complete audit by the latter, including all remittances made by the of Obligation" leaves no room for doubt that while the bank may indeed pay certain obligations
Shipper to the booking agent. Otherwise stated, petitioner was already in control of the vessels voluntarily or by choice, there are those that the Bank will be compelled to pay to save the
as early as August 15, 1966, the date the Management Contract was signed (Decision, CA G.R vessel from any legal seizure or suits by third parties. In other words, the primary purpose of
No. 66365-R), (Rollo, p. 28). In fact, the contract itself for the repairs of the vessels which is the contracts is the protection of the vessels. Among them are liens on the same under which
now the bone of contention, was entered into by GACET and INTEROCEAN with private the obligation to private respondent properly belongs.
respondent Benjamin Pineda with the approval of petitioner Bank. This lends credence to the
claim of Pineda that he was led to believe that he will be paid the corresponding amount for the
repairs, as in fact he was paid with checks which were later dishonored. However, petitioner contends that assuming that such obligations are liens on said vessels,
they are deemed to have been waived and discharged when respondent released and
delivered said vessels to GACET and/or Interocean which ordered said repairs prior to their
The records show that SIP incurred debts by reason of these vessels not only here in the sale and conveyance to petitioner (Rollo, p. 117).
Philippines but also in Japan, notably ESSO Standard Eastern which attached said vessels in
Japan. As admitted by Gregorio A. Concon, fourteen banks were after the assets of the
corporation. Under this distressed financial condition and with People's Bank also threatening Such contention is untenable.
to foreclose the mortgages on these vessels, SIP decided to sell the vessels to People's Bank
(Record on Appeal, pp. 55-56). But a deed of "Confirmation of Obligation" was first entered into It will be recalled that private respondent was paid the sum of P18,141.75 and for the balance
between SIP and/or Bacong Shipping and People's Bank, confirming and acknowledging the of P62,095.95 Interocean issued three checks. Under the circumstances, private respondent
obligations outstanding at the time, among which is the obligation to private respondent in the has no basis or necessity at that time to exercise his right of retention under Art. 1731 of the
amount corresponding to the repairs in question. Civil Code. The fact that later said checks were dishonored, as correctly argued by private
respondent, cannot give validity to petitioner's argument that the former has waived or
Petitioner however insists on its theory based on a separate interpretation of the deed of abandoned his liens on the vessels. To pursue such view would put a premium on an act of
"Confirmation of Obligation" that on the authority granted thereunder by the seller (the previous deception which led private respondent to believe that he will be fully paid. Furthermore, when
owner), responsibility to pay the listed obligation was not compulsory or mandatory (Record on the checks were dishonored, it was impossible for private respondent to enforce his lien
Appeal, pp. 59- 60). because the vessels were already in Japan, outside the territorial jurisdiction of the Philippine
courts (Brief for Plaintiff-Appellee, p. 19, Rollo, p. 128).
Other fundamental rules in the interpretation of contracts no less important than those already
indicated are to the effect that where the terms are doubtful, the various stipulations of a In view of the foregoing facts, it was aptly stated by the trial court and affirmed by the Court of
contract shall be interpreted together, attributing to the doubtful ones that sense which may Appeals that when the parties executed the deed of "Confirmation of Obligation" they really
result from all of them taken jointly (Art. 1374, Civil Code), and if some stipulation of any intended to confirm and acknowledge the existing obligations for the purpose of the buyer
contract should admit of several meanings, it shall be understood as having that import which is assuming liability therefor and charging them to the seller after proper accounting, verification
most adequate to render it effectual (Art. 1373, Civil Code) and the words which may have and set offs have been made. Indeed, there is merit in the trial court's view that if there was no
different significations shall be understood in that which is most in keeping with the nature and intention on the part of People's Bank (now Bank of P.I., to assume responsibility y for these
object of the contract (Art. 1375, Civil Code). The reason for these rules is that it must be obligations at the time of the sale of the si it vessels, there is no sense in executing said Deed
presumed that the parties had intended an effective act and not one that is impracticable or of Confirmation together with the deeds of sale and the stipulations thereunder would be
illusory (Caguioa Comments and Cases on Civil Law, p. 592,1983 Ed.). pointless (Record on Appeal, pp. 61-62, Annex "C", Rollo, P. 33).
Finally, it is indisputable that the repairs made on the vessels ultimately redounded to the
benefit of the new owner for without said repairs, those vessels would not be seaworthy. Under
Art. 2142 of the Civil Code, such acts "give rise to the juridical relation of quasi-contract to the
end that no one shall be unjustly enriched or benefited at the expense of another."

WHEREFORE, the petition is Denied and the decision appealed from is hereby AFFIRMED.

SO ORDERED.

Gutierrez, Jr., Feliciano and Cortes, JJ., concur.

Fernan, J., took no part.


THIRD DIVISION which it entered into with the consignee, Pag-asa Sales, Inc. Corollarily, if it were in fact
transformed into a private carrier, did it exercise the ordinary diligence to which a private carrier
G.R. No. 114167 July 12, 1995 is in turn bound? Second, whether or not the insurer was subrogated into the rights of the
COASTWISE LIGHTERAGE CORPORATION, petitioner, consignee against the carrier, upon payment by the insurer of the value of the consignee's
vs. goods lost while on board one of the carrier's vessels.
COURT OF APPEALS and the PHILIPPINE GENERAL INSURANCE
COMPANY, respondents. On the first issue, petitioner contends that the RTC and the Court of Appeals erred in finding
RESOLUTION that it was a common carrier. It stresses the fact that it contracted with Pag-asa Sales, Inc. to
transport the shipment of molasses from Negros Oriental to Manila and refers to this contract
FRANCISCO, R., J.: as a "charter agreement". It then proceeds to cite the case of Home Insurance Company vs.
American Steamship Agencies, Inc.2 wherein this Court held: ". . . a common carrier
This is a petition for review of a Decision rendered by the Court of Appeals, dated December undertaking to carry a special cargo or chartered to a special person only becomes a private
17, 1993, affirming Branch 35 of the Regional Trial Court, Manila in holding that herein carrier."
petitioner is liable to pay herein private respondent the amount of P700,000.00, plus legal
interest thereon, another sum of P100,000.00 as attorney's fees and the cost of the suit. Petitioner's reliance on the aforementioned case is misplaced. In its entirety, the conclusions of
the court are as follows:
The factual background of this case is as follows:
Accordingly, the charter party contract is one of affreightment over the whole
Pag-asa Sales, Inc. entered into a contract to transport molasses from the province of Negros vessel, rather than a demise. As such, the liability of the shipowner for acts or
to Manila with Coastwise Lighterage Corporation (Coastwise for brevity), using the latter's negligence of its captain and crew, would remain in the absence of
dumb barges. The barges were towed in tandem by the tugboat MT Marica, which is likewise stipulation.3
owned by Coastwise.
The distinction between the two kinds of charter parties (i.e. bareboat or demise and contract of
Upon reaching Manila Bay, while approaching Pier 18, one of the barges, "Coastwise 9", struck affreightment) is more clearly set out in the case of Puromines, Inc. vs. Court of
an unknown sunken object. The forward buoyancy compartment was damaged, and water Appeals,4 wherein we ruled:
gushed in through a hole "two inches wide and twenty-two inches long"1 As a consequence, the
molasses at the cargo tanks were contaminated and rendered unfit for the use it was intended. Under the demise or bareboat charter of the vessel, the charterer will
This prompted the consignee, Pag-asa Sales, Inc. to reject the shipment of molasses as a total generally be regarded as the owner for the voyage or service stipulated. The
loss. Thereafter, Pag-asa Sales, Inc. filed a formal claim with the insurer of its lost cargo, herein charterer mans the vessel with his own people and becomes the owner pro
private respondent, Philippine General Insurance Company (PhilGen, for short) and against the hac vice, subject to liability to others for damages caused by negligence. To
carrier, herein petitioner, Coastwise Lighterage. Coastwise Lighterage denied the claim and it create a demise, the owner of a vessel must completely and exclusively
was PhilGen which paid the consignee, Pag-asa Sales, Inc., the amount of P700,000.00, relinquish possession, command and navigation thereof to the
representing the value of the damaged cargo of molasses. charterer, anything short of such a complete transfer is a contract of
affreightment (time or voyage charter party) or not a charter party at all.
In turn, PhilGen then filed an action against Coastwise Lighterage before the Regional Trial
Court of Manila, seeking to recover the amount of P700,000.00 which it paid to Pag-asa Sales, On the other hand a contract of affreightment is one in which the owner of the
Inc. for the latter's lost cargo. PhilGen now claims to be subrogated to all the contractual rights vessel leases part or all of its space to haul goods for others. It is a contract
and claims which the consignee may have against the carrier, which is presumed to have for special service to be rendered by the owner of the vessel and under such
violated the contract of carriage. contract the general owner retains the possession, command and navigation
of the ship, the charterer or freighter merely having use of the space in the
The RTC awarded the amount prayed for by PhilGen. On Coastwise Lighterage's appeal to the vessel in return for his payment of the charter hire. . . . .
Court of Appeals, the award was affirmed.
. . . . An owner who retains possession of the ship though the hold is the
Hence, this petition. property of the charterer, remains liable as carrier and must answer for any
breach of duty as to the care, loading and unloading of the cargo. . . .
There are two main issues to be resolved herein. First, whether or not petitioner Coastwise
Lighterage was transformed into a private carrier, by virtue of the contract of affreightment
Although a charter party may transform a common carrier into a private one, the same however Clearly, petitioner Coastwise Lighterage's embarking on a voyage with an unlicensed patron
is not true in a contract of affreightment on account of the aforementioned distinctions between violates this rule. It cannot safely claim to have exercised extraordinary diligence, by placing a
the two. person whose navigational skills are questionable, at the helm of the vessel which eventually
met the fateful accident. It may also logically, follow that a person without license to navigate,
Petitioner admits that the contract it entered into with the consignee was one of lacks not just the skill to do so, but also the utmost familiarity with the usual and safe routes
affreightment.5 We agree. Pag-asa Sales, Inc. only leased three of petitioner's vessels, in order taken by seasoned and legally authorized ones. Had the patron been licensed, he could be
to carry cargo from one point to another, but the possession, command and navigation of the presumed to have both the skill and the knowledge that would have prevented the vessel's
vessels remained with petitioner Coastwise Lighterage. hitting the sunken derelict ship that lay on their way to Pier 18.

Pursuant therefore to the ruling in the aforecited Puromines case, Coastwise Lighterage, by the As a common carrier, petitioner is liable for breach of the contract of carriage, having failed to
contract of affreightment, was not converted into a private carrier, but remained a common overcome the presumption of negligence with the loss and destruction of goods it transported,
carrier and was still liable as such. by proof of its exercise of extraordinary diligence.

The law and jurisprudence on common carriers both hold that the mere proof of delivery of On the issue of subrogation, which petitioner contends as inapplicable in this case, we once
goods in good order to a carrier and the subsequent arrival of the same goods at the place of more rule against the petitioner. We have already found petitioner liable for breach of the
destination in bad order makes for a prima facie case against the carrier. contract of carriage it entered into with Pag-asa Sales, Inc. However, for the damage sustained
by the loss of the cargo which petitioner-carrier was transporting, it was not the carrier which
paid the value thereof to Pag-asa Sales, Inc. but the latter's insurer, herein private respondent
It follows then that the presumption of negligence that attaches to common carriers, once the PhilGen.
goods it transports are lost, destroyed or deteriorated, applies to the petitioner. This
presumption, which is overcome only by proof of the exercise of extraordinary diligence,
remained unrebutted in this case. Article 2207 of the Civil Code is explicit on this point:

The records show that the damage to the barge which carried the cargo of molasses was Art. 2207. If the plaintiffs property has been insured, and he has received
caused by its hitting an unknown sunken object as it was heading for Pier 18. The object turned indemnity from the insurance company for the injury or loss arising out of the
out to be a submerged derelict vessel. Petitioner contends that this navigational hazard was the wrong or breach of contract complained of, the insurance company shall be
efficient cause of the accident. Further it asserts that the fact that the Philippine Coastguard subrogated to the rights of the insured against the wrongdoer or the person
"has not exerted any effort to prepare a chart to indicate the location of sunken derelicts within who violated the contract. . . .
Manila North Harbor to avoid navigational accidents" 6 effectively contributed to the happening
of this mishap. Thus, being unaware of the hidden danger that lies in its path, it became This legal provision containing the equitable principle of subrogation has been applied in a long
impossible for the petitioner to avoid the same. Nothing could have prevented the event, line of cases including Compania Maritima v. Insurance Company of North America;7 Fireman's
making it beyond the pale of even the exercise of extraordinary diligence. Fund Insurance Company v. Jamilla & Company, Inc.,8 and Pan Malayan Insurance
Corporation v. Court of Appeals,9 wherein this Court explained:
However, petitioner's assertion is belied by the evidence on record where it appeared that far
from having rendered service with the greatest skill and utmost foresight, and being free from Article 2207 of the Civil Code is founded on the well-settled principle of
fault, the carrier was culpably remiss in the observance of its duties. subrogation. If the insured property is destroyed or damaged through the
fault or negligence of a party other than the assured, then the insurer, upon
Jesus R. Constantino, the patron of the vessel "Coastwise 9" admitted that he was not licensed. payment to the assured will be subrogated to the rights of the assured to
The Code of Commerce, which subsidiarily governs common carriers (which are primarily recover from the wrongdoer to the extent that the insurer has been obligated
governed by the provisions of the Civil Code) provides: to pay. Payment by the insurer to the assured operated as an equitable
assignment to the former of all remedies which the latter may have against
the third party whose negligence or wrongful act caused the loss. The right of
Art. 609. — Captains, masters, or patrons of vessels must be Filipinos, have subrogation is not dependent upon, nor does it grow out of, any privity of
legal capacity to contract in accordance with this code, and prove the skill contract or upon written assignment of claim. It accrues simply upon payment
capacity and qualifications necessary to command and direct the vessel, as of the insurance claim by the insurer.
established by marine and navigation laws, ordinances or regulations, and
must not be disqualified according to the same for the discharge of the duties
of the position. . . . Undoubtedly, upon payment by respondent insurer PhilGen of the amount of P700,000.00 to
Pag-asa Sales, Inc., the consignee of the cargo of molasses totally damaged while being
transported by petitioner Coastwise Lighterage, the former was subrogated into all the rights
which Pag-asa Sales, Inc. may have had against the carrier, herein petitioner Coastwise
Lighterage.

WHEREFORE, premises considered, this petition is DENIED and the appealed decision
affirming the order of Branch 35 of the Regional Trial Court of Manila for petitioner Coastwise
Lighterage to pay respondent Philippine General Insurance Company the "principal amount of
P700,000.00 plus interest thereon at the legal rate computed from March 29, 1989, the date the
complaint was filed until fully paid and another sum of P100,000.00 as attorney's fees and
costs"10 is likewise hereby AFFIRMED

SO ORDERED.

Feliciano, Romero, Melo and Vitug, JJ., concur.


THIRD DIVISION all events which cannot be foreseen or are inevitable.The law only requires the exercise of due
[G.R. No. 96453. August 4, 1999] diligence on the part of the charterer to scout or look for a berthing space.
NATIONAL FOOD AUTHORITY, ROSELINDA GERALDEZ, RAMON SARGAN and ADELINA
A. YAP, petitioners, vs. THE HON. COURT OF APPEALS AND HONGFIL SHIPPING 3. ID.; ID.; ID.; ID.; DEADFREIGHT; DEFINED; THE LIABILITY FOR THE DEADFREIGHT
CORPORATION,respondents. IS ON THE CHARTERER; CASE AT BAR.- Under the law, the cargo not loaded is considered
as deadfreight. It is the amount paid by or recoverable from a charterer of a ship for the portion of
the ship's capacity the latter contracted for but failed to occupy. Explicit and succint is the law that
the liability for deadfreight is on the charterer. The law in point is Article 680 of the Code of
SYNOPSIS commerce, which provides: "Art. 680. A charterer who does not complete the full cargo he bound
himself to ship shall pay the freightage of the amount he fails to ship, if the captain does not take
This is a petition for review on certiorari of the decision of the Court of Appeals which affirmed the other freight to complete the load of the vessel, in which case the first charterer shall pay the
decision of branch 165 of the Regional Trial Court of Pasig City in Civil Case No. 55892 entitled "Hongfil difference, should there be any."Petitioners anchor their stance on the phrase "200,000 bags, more
Shipping Corporation vs. National Food Authority (NFA),"Roselinda Geraldez, Ramon Sargan and or less," which, according to them, meant more than 200,000 or less than 200,000 bags. As what was
Adelina Yap," ordering the National Food Authority to pay plainfiff's claim for demurrage and actually unloaded was less than 200,000 bags, NFA should only pay for the freight therefor and not
deadfreight. In this case, petitioners raised as issues: (1) whether or not petitioners can be held liable for for 200,000 bags; petitioners contend. Petitioners' contention is untenable. The words "more or less"
deadfreight; (2) Whether or not petitioners can be held liable for demurrage; (3) Whether or not personal when used in relation to quantity or distance, are words of safety and caution, intended to cover some
civil liability may attach to the officers of the NFA. slight or unimportant inaccuracy. It allows an adjustment to the demands of circumstances which do
The Court found the petition not meritorious. In particular, the Court ruled that the evidence on not weaken or destroy the statements of distance and quantity when no other guides are available. In
record showed that there was communication from NFA Administrator Emil Ong to Oscar Sanchez, fact, it is further disclosed by the evidence that there was a communication from NFA Administrator
Manager of Hongfil Shipping Corporation stating clearly that the vessel M/V CHARLIE/DIANE was Emil Ong to Oscar Sanchez, Manager of Hongfil Shipping Corporation, stating clearly that the vessel
chartered to load 200,000.00 bags corn grains from Cagayan de Oro to Manila at P7.30 per 50 kg./bag. It M/V CHARLIE/DIANE was chartered to "load our 200,000 bags of corn grains from Cagayan de
is thus decisively clear that the letter of agreement covered 200,000 bags corn grains but only 166,798 bags Oro to Manila at P7.30 per 50 kg./bag." Therefrom, it can be gleaned unerringly that the charter
were unloaded at the Port of Manila.Consequently, shut-out load or deadfreight of 33,201 bags at P7.30 party was to transport 200,000 bags of corn grains. It is thus decisively clear that the letter of
per bag or P242,367.30 should be paid by NFA to Hongfil. Anent the issue of demurrage, the NFA can not agreement covered 200,000 bags of corn grains but only 166,798 bags were unloaded at the Port of
be held for demurrage for the delay because the delay sued upon was still within the reasonable time Manila. Consequently, shut-out load or deadfreight of 33,201 bags at P7.30 per bag or P242,367.30
embraced in the stipulation of customary quick dispatch. On the issue of whether personal civil liability should be paid by NFA to Hongfil Shipping Corporation.
may attach to the officers of NFA, the Court ruled in the negative. A careful perusal of the contract litigated 4. ID.; ID.; ID.; ID.; DEMURRAGE; DEFINED; SHIPPER OR CHARTERER IS LIABLE FOR
upon revealed that the petitioners, as officers of NFA, did not bind themselves to be personally liable nor THE PAYMENT OF DEMURRAGE CLAIMS WHEN HE EXCEEDS THE PERIOD FOR
did they ink any undertaking that should NFA fail to pay Hongfil, they would be personally liable. Hongfil LOADING OR UNLOADING AS AGREED UPON OR THE AGREED LAYDAYS; CASE
has not cited any provision of law under which the officers of NFA are liable under the contract entered AT BAR.- Demurrage is the sum fixed in a charter party as a renumeration to the owner of the ship
into. Accordingly, the challenged decision of the Court of Appeals was affirmed with modification that for the detention of his vessel beyond the number of days allowed by the charter party for loading or
herein petitioner was ordered to pay Hongfil the amount of P242,367.30 for deadfreight. The award of unloading or for sailing. Liability for demurrage, using the word in its strict technical sense, exists
P1,152,687.50 for demurrage was deleted and set aside for lack of proper basis. only when expressly stipulated in the contract. Shipper or charterer is liable for the payment of
SYLLABUS demurrage claims when he exceeds the period for loading or unloading as agreed upon or the agreed
"laydays". The period for such may or may not be stipulated in the contract. A charter party may
1. COMMERCIAL LAW; MARITIME LAW; CHARTER PARTY; CONTRACT OF either provide for a fixed laydays or contain general or indefinite words such as "customary quick
AFFREIGHTMENT; DEFINED.- It bears stressing that subject Letter of Agreement is considered dispatch" or "as fast as the steamer can load."
a Charter Party. A charter party is classified into (1) "bareboat" or "demise" charter and (2) contract
of affreightment. Subject contract is one of affreightment, whereby the owner of the vessel leases 5. ID.; ID.; ID.; ID.; ID.; DELAY IN LOADING, TO BE DEEMED AS A DEMURRAGE, RUNS
part or all of its space to haul goods for others. It is a contract for special service to be rendered by AGAINST THE CHARTERER AS SOON AS THE VESSEL IS DETAINED FOR
the owner of the vessel. Under such contract the ship owner retains the possession, command and UNREASONABLE LENGTH OF TIME FROM THE ARRIVAL OF THE VESSEL; CASE
navigation of the ship, the charterer or freighter merely having use of the space in the vessel in return AT BAR.- Delay in loading or unloading, to be deemed as a demurrage, runs against the charterer
for his payment of the charter hire. as soon as the vessel is detained for an unreasonable length of time from the arrival of the vessel
because no available berthing space was provided for the vessel due to the negligence of the charterer
2. ID.; ID.; ID.; ID.; THE LAW ONLY REQUIRES THE EXERCISE OF DUE DILIGENCE ON or by reason of circumstances caused by the fault of the charterer. In the present case, charterer NFA
THE PART OF THE CHARTERER TO SCOUT OR LOOK FOR A BERTHING SPACE; could not be held liable for demurrage for the delay resulting from the aforementioned
CASE AT BAR. - In a contract of affreightment, the shipper or charterer merely contracts a vessel circumstances. The provision "Laydays: Customary Quick Dispatch" invoked by Hongfil is
to carry its cargo with the corresponding duty to provide for the berthing space for the loading or unavailing as a basis for requiring the charterer to pay for demurrage absent convincing proof that
unloading. Charterer is merely required to exercise ordinary diligence in ensuring that a berthing the time for the loading or unloading in question was beyond the "reasonable time" within the
space be made available for the vessel. The charterer does not make itself an absolute insurer against
contemplation of the charter party. Here, the Court holds that the delay sued upon was still within 5. Discharging Port : One Safe Berth at North Harbor, Manila
the "reasonable time" embraced in the stipulation of "Customary Quick Dispatch."
6. COMMERCIAL LAW; CORPORATION LAW; OBLIGATIONS INCURRED OR 6. Laydays (Loading and Unloading): : Customary Quick Dispatch (CQD)
CONTRACTED BY THE OFFICERS ACTING AS CORPORATE AGENTS ARE NOT
THEIRS BUT THE DIRECT ACCOUNTABILITY OF THE CORPORATIONS THEY 7. Demurrage/Dispatch : None
REPRESENT; EXCEPTIONS THEREOF; CASE AT BAR.- In the case of MAM Realty vs.
NLRC the Court held that a corporation, being a juridical entity, may act only through its officers, 8. Freight Rate : Seven Pesos 30/100 (P7.30) per bar or a total of P1,460,000.00 based
directors and employees. Obligations incurred or contracted by them, acting as such corporate on out-turn weight at 50 kilos per bag
agents, are not theirs but the direct accountability of the corporation they represent.The exceptions
wherein personal civil liability may attach to a corporate officer are: 1. When directors and trustees
or, in appropriate cases, the officers of a corporation - a. vote for or assent to patently unlawful acts 9. Payment of Freight : Loading - 25% upon completion of loading; 25% upon commence-
of the corporation; b. act in bad faith or with gross negligence in directing the corporate affairs; c. ment of discharge and balance 15 days
are guilty of conflict of interest to the prejudice of the corporation, its stockholders or members, and after presentation of complete billing
other persons. 2. When a director or officer has consented to the issuance of watered stocks, or who. documents subject to usual accounting
Having knowledge thereof, did not forthwith file with the corporate secretary his written objection auditing regulations and procedures.
thereto. 3. When a director, trustee or officer has contractually agreed or stipulated to hold himself
personally and solidarily liable with the corporation. 4. When a director, trustee or officer is made, NFA sent Hongfil a Letter of Advice that its (Hongfil) vessel should proceed to Cagayan de
by specific provision of law, personally liable for his corporate action." The present case under Oro City. On February 6, 1987, M/V DIANE/CHARLIE of Hongfil arrived in Cagayan de Oro City
scrutiny does not fall under any of such exceptions. A careful perusal of the contract litigated upon 1500 hours. Hongfil notified the Provincial Manager of NFA in Cagayan de Oro, Eduardo A.
reveals that the petitioners, as officer of NFA, did not bind themselves to be personally liable nor did Mercado, of its said vessels readiness to load and the latter received the said notification on
they ink any undertaking that should NFA fail to pay Hongfil's claims, they would be personally February 9, 1987.[4]
liable. Hongfil has not cited any provision of law under which the officers of NFA are liable under
the contract entered into. A certification of charging rate was then issued by Gold City Integrated Port Services, Inc.
(INPORT), the arrastre firm in Cagayan de Oro City, which certified that it would take them
(INPORT) seven (7) days, eight (8) hours and forty-three (43) minutes[5] to load the 200,000 bags
DECISION of NFA corn grains.
PURISIMA, J.: On February 10, 1987, loading on the vessel commenced and was terminated on March 4,
1987. As there was a strike staged by the arrastre workers and in view of the refusal of the striking
At bar is a Petition for Review on Certiorari under Rule 45 of the Revised Rules of Court of stevedores to attend to their work, the loading of said corn grains took twenty-one (21) days,
the Decision,[1] of the Court of Appeals which affirmed the decision of Branch 165 of the Regional fifteen hours (15) and eighteen (18) minutes to finish.
Trial Court, Pasig City in Civil Case No. 55892, entitled Hongfil Shipping Corporation vs. National
Food Authority, Roselinda Geraldez, Ramon Sargan and Adelina A. Yap, [2] ordering the National On March 6, 1987, the NFA Provincial Manager allowed MV CHARLIE/DIANE to depart for
Food Authority to pay plaintiffs claim for demurrage and deadfreight. the Port of Manila. On March 11, 1987, the vessel arrived at the Port of Manila and a certification
of discharging rate was issued at the instance of Hongfil, stating that it would take twelve (12)
The facts that matter are undisputed. days, six (6) hours and twenty-two (22) minutes to discharge the 200, 000 bags of corn grains.
National Food Authority (NFA), thru its officers then, Emil Ong, Roselinda Geraldez, Ramon Unfortunately, unloading only commenced on March 15, 1987 and was completed on April
Sargan and Adelina A. Yap, entered into a Letter of Agreement for Vessel /Barge Hire [3] with 7, 1987. It took a total period of twenty (20) days, fourteen (14) hours and thirty-three (33) minutes
Hongfil Shipping Corporation (Hongfil) for the shipment of 200,000 bags of corn grains from to finish the unloading, due to the unavailability of a berthing space for M/V CHARLIE/DIANE.
Cagayan de Oro City to Manila, under the following terms and conditions, to wit:
After the discharging was completed, NFA paid Hongfil the amount of P1,006,972.11
covering the shipment of corn grains.Thereafter, Hongfil sent its billing to NFA, claiming payment
1. Name of Vessel/Barge : MV CHARLIE/DIANE for freight covering the shut-out load or deadfreight as well as demurrage, allegedly sustained
during the loading and unloading of subject shipment of corn grains.
2. Cargo : Corn grains in bag
When NFA refused to pay the amount reflected in the billing, Hongfil brought an action
against NFA and its officers for recovery of deadfreight and demurrage, docketed as Civil Case
3. Quantity : Two Hundred Thousand bags, more or less No. 55892 before Branch 165 of the Regional Trial Court in Pasig City.

4. Loading Port : One Safe Berth at Cagayan de Oro Port


On February 29, 1989, after trial, the Regional Trial Court handed down its decision[6] in vessel. Under such contract the ship owner retains the possession, command and navigation of
favor of Hongfil and against NFA and its officers, disposing thus: the ship, the charterer or freighter merely having use of the space in the vessel in return for his
payment of the charter hire.[7]
IN VIEW OF THE FOREGOING, the Court hereby renders judgment in favor of plaintiff and Anent the first issue, petitioners contend that the respondent corporation is not entitled to
against the defendants, ordering: deadfreight as the contract itself limited their liability. Section 7 of the Letter Agreement for
Vessel/Barge Hire provided a freight rate of Seven and 30/100 (P7.30) Pesos per bag or a total
1. defendant National Food Authority, and the public defendants, to pay the plaintiff the of P1,460,000 based on out-turn weight of 50 kilos per bag.
following:
The Court of Appeals, however, held that since the charter of MV CHARLIE/DIANE was for
the whole vessel, and inasmuch as the vessel may no longer accept any other cargo without the
a) P242,367.30, in and as payment of the deadfreight or unloaded cargo; and consent of the charterer NFA, the latter is liable to pay the total amount of P1,460,000.00 based
on 200,000 bags, at the rate of P7.30 per bag; in accordance with the Letter of Agreement for
B) P1,152,687.50, in and as payment as of demurrage claim; Vessel/Barge Hire which stipulated:
xxx xxx xxx
2. defendants to pay plaintiff, jointly and severally the amount of P50,000.00, for and as
attorneys fees; and
2. Cargo : Corn Grains in Bags
3. Expenses of litigation or the costs of this suit.
3. Quantity : Two Hundred Thousand Bags, more or less
The counterclaim of defendants are hereby dismissed for lack of merit.
xxx xxx xxx
SO ORDERED.
7. Freight Rate : Seven Pesos 30/100 (P7.30) per bag or a total of P1,460,000.00 based
on out-turn weight at 50 kilos per bag.
On appeal, the Court of Appeals affirmed with modification the judgment by deleting (Exh. A)
therefrom the award of attorneys fees.
Undaunted, petitioners have come to this Court via the instant petition for review under Rule The submission of petitioners is unsustainable. They theorize that what should be paid for
45 of the Revised Rules of Court, raising as issues: was what was actually unloaded and not the number of bags of corn grains NFA contracted to
load.
I
Under the law, the cargo not loaded is considered as deadfreight. It is the amount paid by
WHETHER OR NOT PETITIONERS CAN BE HELD LIABLE FOR DEADFREIGHT; or recoverable from a charterer of a ship for the portion of the ships capacity the latter contracted
for but failed to occupy.[8] Explicit and succinct is the law that the liability for deadfreight is on the
charterer. The law in point is Article 680 of the Code of Commerce, which provides:
II
Art. 680. A charterer who does not complete the full cargo he bound himself to ship shall pay
WHETHER OR NOT PETITIONERS CAN BE HELD LIABLE FOR DEMURRAGE; AND the freightage of the amount he fails to ship, if the captain does not take other freight to
complete the load of the vessel, in which case the first charterer shall pay the difference, should
III there be any.

WHETHER OR NOT PERSONAL CIVIL LIABILITY MAY ATTACH TO THE OFFICERS OF Petitioners anchor their stance on the phrase 200,000 bags, more or less, which, according
NFA. to them, meant more than 200,000 or less than 200,000 bags. As what was actually unloaded
was less than 200,000 bags, NFA should only to pay for the freight therefor and not for 200,000
It bears stressing that subject Letter of Agreement is considered a Charter Party. A charter bags; petitioners contend.
party is classified into (1) bareboat or demise charter and (2) contract of affreightment. Subject Petitioners contention is untenable. The words more or less when used in relation to
contract is one of affreightment, whereby the owner of the vessel leases part or all of its space quantity or distance, are words of safety and caution, intended to cover some slight or
to haul goods for others. It is a contract for special service to be rendered by the owner of the
unimportant inaccuracy. It allows an adjustment to the demands of circumstances which do not or unloading or for sailing.[12] Liability for demurrage, using the word in its strict technical sense,
weaken or destroy the statements of distance and quantity when no other guides are available. [9] exists only when expressly stipulated in the contract.[13]
In fact, it is further disclosed by the evidence that there was a communication from NFA Shipper or charterer is liable for the payment of demurrage claims when he exceeds the
Administrator Emil Ong to Oscar Sanchez, Manager of Hongfil Shipping Corporation, stating period for loading or unloading as agreed upon or the agreed laydays. The period for such may
clearly that the vessel M/V CHARLIE/DIANE was chartered to load our 200,000 bags corn or may not be stipulated in the contract.[14] A charter party may either provide for a fixed laydays
grains from Cagayan de Oro to Manila at P7.30 per 50 kg./bag.[10] Therefrom, it can be or contain general or indefinite words such as customary quick dispatch or as fast as the steamer
gleaned unerringly that the charter party was to transport 200,000 bags of corn grains. can load.
It is thus decisively clear that the letter of agreement covered 200,000 bags of corn grains In the case under scrutiny, the charter party provides merely for a general or indefinite words
but only 166,798 bags were unloaded at the Port of Manila. Consequently, shut-out load or of customary quick dispatch.
deadfreight of 33,201 bags at P7.30 per bag or P242,367.30 should be paid by NFA to Hongfil
Shipping Corporation. The stipulation Laydays (Loading and Unloading): Customary Quick Dispatch implies that
loading and unloading of the cargo should be within a reasonable period of time. Due diligence
On the second issue of whether or not petitioner is liable for the payment of demurrage, should be exercised according to the customs and usages of the port or ports of call. The
petitioners theorize that NFA is not liable for the payment of demurrage since the Letter of circumstances obtaining at the time of loading and unloading are to be taken into account in the
Agreement for Vessel/Barge Hire expressly stipulated Demurrage/Dispatch: NONE. determination of Customary Quick Dispatch.[15]
The Court of Appeals, however, adjudged petitioners liable for demurrage, ratiocinating What is a reasonable time depends on the existing as opposed to normal circumstances,
thus: at the port of loading and the custom of the port. [16]
While what was certified to by the arrastre did not tally with the actual period of loading and
As regards the claim for demurrage, the letter of agreement between the parties does not unloading, it appears that the cause of delay was not imputable to either of the parties. The cause
contain any provision for the amount of demurrage, which is the sum fixed by the contract of of delay during the loading was the strike staged by the crew of the arrastre operator, and the
carriage, or which is allowed, as remuneration to the owner of the ship for the detention of his unavailability of a berthing space for the vessel during the unloading. The lack of a berthing space
vessel beyond the number of days allowed by the charter party for loading or unloading or for was understandable under the circumstances since the North Harbor in Manila, where the
sailing (Agbayani, Commercial Laws of the Philippines, Vol. IV, 1983 ed, p. 243). Nonetheless, unloading took place, is a large port but there was congestion due to the number of ships or
despite the absence of an express provision on demurrage in the agreement, such demurrage vessels which were all waiting to dock.
may be demanded under the law. Article 656 of the Code of Commerce provides:
Delay in loading or unloading, to be deemed as a demurrage, runs against the charterer as
Article 656. If in the charter party the time in which the loading or unloading are to take place is soon as the vessel is detained for an unreasonable length of time from the arrival of the vessel
not stated, the usages of the port where these acts are to take place shall be observed. After because no available berthing space was provided for the vessel due to the negligence of the
the stipulated customary period has passed, and there is no express provision in the charter charterer or by reason of circumstances caused by the fault of the charterer.
party fixing the indemnity for delay, the Captain shall be entitled to demand demurrage for the In the present case, charterer NFA could not be held liable for demurrage for the delay
lay days and extra lay days which may have elapsed in loading and unloading.(underscoring resulting from the aforementioned circumstances. The provision Laydays: Customary Quick
supplied) Dispatch invoked by Hongfil is unavailing as a basis for requiring the charterer to pay for
demurrage absent convincing proof that the time for the loading or unloading in question was
While the right to demand demurrage is vested in the captain of the vessel, the said right may beyond the reasonable time within the contemplation of the charter party. Here, the Court holds
very well be exercised by the shipowner appellee which is the principal of the captain. that the delay sued upon was still within the reasonable time embraced in the stipulation of
Customary Quick Dispatch.
Moreover, while the causes of delay may not be wholly attributable to appellant NFA (except In a contract of affreightment, the shipper or charterer merely contracts a vessel to carry its
the old and defective bags or sacks used), the same may not also be blamed on appellee cargo with the corresponding duty to provide for the berthing space for the loading or
Hongfil (except the allegedly defective munkcrane). unloading. Charterer is merely required to exercise ordinary diligence in ensuring that a berthing
space be made available for the vessel. The charterer does not make itself an absolute insurer
Incidentally , the Office of the Government Corporate Counsel, in its Opinion No. 130, series of against all events which cannot be foreseen or are inevitable. The law only requires the exercise
1987, dated December 9, 1987, which is of persuasive force, opined that appellant NFA is of due diligence on the part of the charterer to scout or look for a berthing space.
liable for both deadfreight and demurrage (Exhs. O and P). [11]
Furthermore, considering that subject contract of affreightment contains an express
provision Demurrage/Dispatch: NONE, the same left the parties with no other recourse but to
Demurrage is the sum fixed in a charter party as a renumeration to the owner of the ship apply the literal meaning of such stipulation. The cardinal rule is that where, as in this case, the
for the detention of his vessel beyond the number of days allowed by the charter party for loading
terms of the contract are clear and leave no doubt over the intention of the contracting parties, moral obliquity and conscious doing of wrong. It means a breach of a known duty through some
the literal meaning of its stipulations is controlling.[17] motive or interest or ill-will; it partakes of the nature of fraud.[22]
The provision Demurrage/Dispatch: NONE can be interpreted as a waiver by Hongfil of the As regards the deletion by the Court of Appeals of the attorneys fees awarded below, the
right to claim for demurrages.Waiver is a renunciation of what has been established in favor of same is upheld, absent any factual and legal basis therefor.
one or for his benefit, because he prejudices nobody thereby; if he suffers loss, he is the one to
blame.[18] As Hongfil freely entered into subject charter party which providing for WHEREFORE, the decision of the Court of Appeals, dated November 29, 1990, in CA G.R.
Demurrage/Dispatch: NONE, it cannot escape the inevitable consequence of its inability to CV No. 21243 is hereby AFFIRMED with MODIFICATION. Petitioner NFA is ordered to pay
collect demurrage. Well-settled is the doctrine that a contract between parties which is not Hongfil Shipping Corporation the amount of P242,367.30 for deadfreight. The award
contrary to law, morals, good customs, public order or public policy, is the law binding on both of of P1,152,687.50 for demurrage is deleted and set aside for lack of proper basis.
them.[19] Petitioners Roselinda Geraldez, Ramon Sargan and Adelina A. Yap are absolved of any
On the issue of whether personal civil liability may attach to the officers of NFA, the court liability to the respondent corporation.
rules in the negative. No pronouncement as to costs.
In the case of MAM Realty vs. NLRC,[20] the Court held that a corporation, being a juridical SO ORDERED.
entity, may act only through its officers, directors and employees. Obligations incurred or
contracted by them, acting as such corporate agents, are not theirs but the direct accountability Melo, (Chairman), Vitug, Panganiban, and Gonzaga-Reyes, JJ., concur.
of the corporation they represent.
The exceptions wherein personal civil liability may attach to a corporate officer are:
1. When directors and trustees or, in appropriate cases, the officers of a corporation-
a. vote for or assent to patently unlawful acts of the corporation;
b. act in bad faith or with gross negligence in directing the corporate
affairs;
c. are guilty of conflict of interest to the prejudice of the corporation, its
stockholders or members, and other persons.
2. When a director or officer has consented to the issuance of watered stocks, or who,
having knowledge thereof, did not forth with file with the corporate secretary his
written objection thereto.
3. When a director, trustee or officer has contractually agreed or stipulated to hold
himself personally and solidarily liable with the corporation.
4. When a director, trustee or officer is made, by specific provision of law, personally
liable for his corporate action.[21] (italics supplied)
The present case under scrutiny does not fall under any of such exceptions. A careful
perusal of the contract litigated upon reveals that the petitioners, as officers of NFA, did not bind
themselves to be personally liable nor did they ink any undertaking that should NFA fail to pay
Hongfils claims, they would be personally liable. Hongfil has not cited any provision of law under
which the officers of NFA are liable under the contract entered into.
What is more, there is nothing on record to show that the petitioner-officers acted in bad
faith or were guilty of gross negligence, to warrant personal liability. Neither the trial court nor the
Court of Appeals found of bad faith or gross negligence on the part of the said officers of NFA.
Bad faith or negligence is a question of fact and is evidentiary. It has been held that bad
faith does not simply mean bad judgment or negligence; it imparts a dishonest purpose or some
FIRST DIVISION 3. ID.; ID.; ID.; CONTRACT OF AFFREIGHTMENT; CATEGORIES.- A contract of affreightment
may be either time charter, wherein the leased 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 period of time or for a single
or consecutive voyage, the Ship owner to supply the ships store, pay for the wages of the master of
[G.R. No. 131166. September 30, 1999]
the crew, and defray the expenses for the maintenance of the ship.
4. ID.; ID.; ID.; ID.; WHERE CHARTER IS ONE OF AFFREIGHTMENT, CHARTERER FREE
FROM LIABILITY TO THIRD PERSONS.- If the charter is a contract of affreightment, which
CALTEX (PHILIPPINES), INC. petitioner, vs. SULPICIO LINES, INC., GO SIOC SO, ENRIQUE leaves the general owner in possession of the ship as owner for the voyage, the rights and the
S. GO, EUSEBIO S. GO, CARLOS S. GO, VICTORIANO S. GO, DOMINADOR S. GO, responsibilities of ownership rest on the owner. The charterer is free from liability to third persons
RICARDO S. GO, EDWARD S. GO, ARTURO S. GO, EDGAR S. GO, EDMUND S. GO, in respect of the ship.
FRANCISCO SORIANO, VECTOR SHIPPING CORPORATION, TERESITA G.
5. ID.; ID.; COMMON CARRIER; REMAINS AS SUCH NOTWITHSTANDING CHARTER OF
CAEZAL AND SOTERA E. CAEZAL, respondents. WHOLE OR PORTION OF VESSEL.- In this case, the charter party agreement did not convert
the common carrier into a private carrier. The parties entered into a voyager charter, which retains
the character of the vessel as a common carrier. In Planters Products, Inc. vs. Court of Appeals, we
SYNOPSIS said: It is therefore imperative that a public carrier shall remain as such, notwithstanding the charter
of the whole or portion of a vessel by one or more persons, provided the charter is limited to the ship
On December 19, 1987, the MV Doa Paz, a passenger ship bound for Manila colided with motor only, as in the case of a time-charter or voyage charter. It is only when the charter includes both the
tanker MT Vector. MT Vector carried on board oil products owned by Caltex by virtue of a charter contract. vessel and its crew, as in a bareboat or demise that a common carrier becomes private, at least insofar
Numerous people died in that accident including public school teacher Sebastian Caezal and his 11 year as the particular voyage covering the charter-party is concerned. Indubitably, a ship-owner in a time
old daughter. In 1989, Caezals wife and mother filed a complaint for Damages arising from Breach of or voyage charter retains possession and control of the ship, although her holds may, for the moment,
Contract of Carriage against Sulpicio Lines, Inc. Sulpicio Lines, in turn, filed a third party complaint be the property of the charterer. Later, we ruled in Coastwise Lighterage Corporation vs. Court of
against Vector Shipping, Inc. and Caltex Phils. The trial court rendered decision against Sulpicio Lines and Appeals. Although a charter party may transform a common carrier into a private one, the same
dismissed the third-party complaint. On appeal, the Court of Appeals modified the trial courts ruling and however is not true in a contract of affreightment xxx
held Vector Shipping Co. and Caltex Phils., Inc., equally liable. Hence, this petition.
6. ID.; ID.; ID.; SEAWORTHINESS, IMPLIEDLY WARRANTED.- A common carrier is a person or
Caltex Phils. and Vector entered into a contract of affreightment also known as a voyage charter. In corporation whose regular business is to carry passenger or property for all persons who may choose
a voyage charter, the charter party provides for the hire of the vessel only, the ship owner to supply the to employ and to remunerate him. MT Vector fits the definition of a common carrier under Article
ships store, pay for the wages of the master of the crew, and defray the expenses for the maintenance of 1732 of the Civil Code. Thus, the carriers are deemed to warrant impliedly the seaworthiness of the
the ship. If the charter is a contract of affreightment, which leaves the general owner in possession of the ship. For a vessel to be seaworthy, it must be adequately equipped for the voyage and manned with
ship as owner for the voyage, the rights and the responsibilities of ownership rest on the owner. The a sufficient number of competent officers and crew. The failure of a common carrier to maintain in
Charterer is free from liability to third persons in respect of the ship. seaworthy condition the vessel involved in its contract of carriage is a clear breach of its duty
The charterer of a vessel has no obligation before transporting all legal requirements. The duty rests prescribed in Article 1755 of the Civil Code. The provisions owed their conception to the nature of
upon the common carrier simply for being engaged in public service. the business of common carriers. This business is impressed with a special public duty. The public
must of necessity rely on the care and skill of common carriers in the vigilance over the goods and
SYLLABUS safety of the passengers, especially because with the modern development of science and invention,
transportation has become more rapid, more complicated and somehow more hazardous. For these
1. COMMERCIAL LAW; TRANSPORTATION; CONTRACT OF CARRIAGE; RESPECTIVE reasons, a passenger or a shipper of goods is under no obligation to conduct an inspection of the ship
RIGHTS AND DUTIES OF PARTIES, HOW DETERMINED.- The respective rights and duties and its crew, the carrier being obliged by law to impliedly warrant its seaworthiness.
of a shipper and the carrier depends not on whether the carrier is public or private, but on whether
the contract of carriage is a bill of lading or equivalent shipping documents on the one hand, or a 7. ID.; ID.; ID.; NEGLIGENCE, CONSTRUED.- In Southeastern College, Inc. vs. Court of
charter party or similar contract on the other. Appeals, we said that negligence, as commonly understood, is conduct which naturally or reasonably
creates undue risk or harm to others. It may be the failure to observe that degree of care, precaution,
2. ID.; ID.; ID.; CHARTER PARTY DIFFERENTIATED FROM CONTRACT OF and vigilance, which the circumstances justly demand, or the omission to do something which
AFFREIGHTMENT.- A charter party is a contract by which an entire ship, or some principal part ordinarily regulate the conduct of human affairs, would do.
thereof, is let by the owner to another person for a specified time or use; a contract of affreightment
is one by which the owner of a ship or other vessel lets the whole or part of her to a merchant or other 8. ID.; ID.; ID.; ID.; CHARTERER WITH NO OBLIGATION TO ENSURE VESSEL COMPLIED
person for the conveyance of goods, on a particular voyage, in consideration of the payment of WITH ALL LEGAL REQUIREMENTS.- The charterer of a vessel has no obligation before
freight. transporting its cargo to ensure that the vessel it chartered complied with all legal requirements. The
duty rests upon the common carrier simply for being engaged in public service. The Civil Code
demands diligence which is required by the nature of the obligation and that which corresponds with At about 10:30 p.m. of December 20, 1987, the two vessels collided in the open sea within the
the circumstances of the persons, the time and the place. Hence, considering the nature of the vicinity of Dumali Point between Marinduque and Oriental Mindoro. All the crewmembers of MV Doa
obligation between Caltex and MT Vector, the liability as found by the Court of Appeals is without Paz died, while the two survivors from MT Vector claimed that they were sleeping at the time of the
basis. incident.
9. ID.; ID.; ID.; ID.; ID.; CASE AT BAR.- The relationship between the parties in this case is governed The MV Doa Paz carried an estimated 4,000 passengers; many indeed, were not in the passenger
by special laws. Because of the implied warranty of seaworthiness, shippers of goods, when manifest. Only 24 survived the tragedy after having been rescued from the burning waters by vessels that
transacting with common carriers, are not expected to inquire into the vessels seaworthiness, responded to distress calls.[5] Among those who perished were public school teacher Sebastian Caezal (47
genuineness of its licenses and compliance with all maritime laws. To demand more from shippers years old) and his daughter Corazon Caezal (11 years old), both unmanifested passengers but proved to be
and hold them liable in case of failure exhibits nothing but the futility of our maritime laws insofar on board the vessel.
as the protection of the public in general is concerned. By the same token, we cannot expect
passengers to inquire every time they board a common carrier, whether the carrier possesses the On March 22, 1988, the board of marine inquiry in BMI Case No. 653-87 after investigation found
necessary papers or that all the carriers employees are qualified. Such a practice would be an that the MT Vector, its registered operator Francisco Soriano, and its owner and actual operator Vector
absurdity in a business where time is always of the essence. Considering the nature of transportation Shipping Corporation, were at fault and responsible for its collision with MV Doa Paz.[6]
business, passengers and shippers alike customarily presume that common carriers possess all the On February 13, 1989, Teresita Caezal and Sotera E. Caezal, Sebastian Caezals wife and mother
legal requisites in its operation. Thus, the nature of the obligation of Caltex demands ordinary respectively, filed with the Regional Trial Court, Branch 8, Manila, a complaint for Damages Arising from
diligence like any other shipper in shipping his cargoes. Breach of Contract of Carriage against Sulpicio Lines, Inc. (hereafter Sulpicio). Sulpicio, in turn, filed a
third party complaint against Francisco Soriano, Vector Shipping Corporation and Caltex (Philippines),
Inc. Sulpicio alleged that Caltex chartered MT Vector with gross and evident bad faith knowing fully well
that MT Vector was improperly manned, ill-equipped, unseaworthy and a hazard to safe navigation; as a
DECISION result, it rammed against MV Doa Paz in the open sea setting MT Vectors highly flammable cargo ablaze.
PARDO, J.: On September 15, 1992, the trial court rendered decision dismissing the third party complaint against
petitioner. The dispositive portion reads:
Is the charterer of a sea vessel liable for damages resulting from a collision between the chartered
vessel and a passenger ship? WHEREFORE, judgement is hereby rendered in favor of plaintiffs and against defendant-3rd party
plaintiff Sulpicio Lines, Inc., to wit:
When MT Vector left the port of Limay, Bataan, on December 19, 1987 carrying petroleum products
of Caltex (Philippines), Inc. (hereinafter Caltex) no one could have guessed that it would collide with MV
Doa Paz, killing almost all the passengers and crew members of both ships, and thus resulting in one of the 1. For the death of Sebastian E. Caezal and his 11-year old daughter Corazon G. Caezal, including loss of
countrys worst maritime disasters. future earnings of said Sebastian, moral and exemplary damages, attorneys fees, in the total amount of P
1,241,287.44 and finally;
The petition before us seeks to reverse the Court of Appeals decision [1]holding petitioner jointly
liable with the operator of MT Vector for damages when the latter collided with Sulpicio Lines, Inc.s
2. The statutory costs of the proceedings.
passenger ship MV Doa Paz.
The facts are as follows: Likewise, the 3rd party complaint is hereby DISMISSED for want of substantiation and with costs
against the 3rd party plaintiff.
On December 19, 1987, motor tanker MT Vector left Limay, Bataan, at about 8:00 p.m., enroute to
[2]
Masbate, loaded with 8,800 barrels of petroleum products shipped by petitioner Caltex. MT Vector is a
tramping motor tanker owned and operated by Vector Shipping Corporation, engaged in the business of IT IS SO ORDERED.
transporting fuel products such as gasoline, kerosene, diesel and crude oil. During that particular voyage,
the MT Vector carried on board gasoline and other oil products owned by Caltex by virtue of a charter DONE IN MANILA, this 15th day of September 1992.
contract between them.[3]
On December 20, 1987, at about 6:30 a.m., the passenger ship MV Doa Paz left the port of Tacloban ARSENIO M. GONONG
headed for Manila with a complement of 59 crew members including the master and his officers, and
passengers totaling 1,493 as indicated in the Coast Guard Clearance. [4] The MV Doa Paz is a passenger Judge[7]
and cargo vessel owned and operated by Sulpicio Lines, Inc. plying the route of Manila/ Tacloban/
Catbalogan/ Manila/ Catbalogan/ Tacloban/ Manila, making trips twice a week.
On appeal to the Court of Appeals interposed by Sulpicio Lines, Inc., on April 15, 1997, the Court First: The charterer has no liability for damages under Philippine Maritime laws.
of Appeal modified the trial courts ruling and included petitioner Caltex as one of the those liable for
damages. Thus: The respective rights and duties of a shipper and the carrier depends not on whether the carrier is
public or private, but on whether the contract of carriage is a bill of lading or equivalent shipping documents
on the one hand, or a charter party or similar contract on the other.[9]
WHEREFORE, in view of all the foregoing, the judgment rendered by the Regional Trial Court is hereby
MODIFIED as follows: Petitioner and Vector entered into a contract of affreightment, also known as a voyage charter. [10]
A charter party is a contract by which an entire ship, or some principal part thereof, is let by the
WHEREFORE, defendant Sulpicio Lines, Inc., is ordered to pay the heirs of Sebastian E. Caezal and owner to another person for a specified time or use; a contract of affreightment is one by which the owner
Corazon Caezal: of a ship or other vessel lets the whole or part of her to a merchant or other person for the conveyance of
goods, on a particular voyage, in consideration of the payment of freight. [11]
1. Compensatory damages for the death of Sebastian E.Caezal and Corazon Caezal the total amount of
ONE HUNDRED THOUSAND PESOS (P100,000); A contract of affreightment may be either time charter, wherein the leased 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 period of time
2. Compensatory damages representing the unearned income of Sebastian E. Caezal, in the total amount or for a single or consecutive voyage, the ship owner to supply the ships store, pay for the wages of the
of THREE HUNDRED SIX THOUSAND FOUR HUNDRED EIGHTY (P306,480.00) PESOS; master of the crew, and defray the expenses for the maintenance of the ship.[12]

3. Moral damages in the amount of THREE HUNDRED THOUSAND PESOS (P 300,000.00); Under a demise or bareboat charter on the other hand, the charterer mans the vessel with his own
people and becomes, in effect, the owner for the voyage or service stipulated, subject to liability for
damages caused by negligence.
4. Attorneys fees in the concept of actual damages in the amount of FIFTY THOUSAND PESOS (P
50,000.00); If the charter is a contract of affreightment, which leaves the general owner in possession of the ship
as owner for the voyage, the rights and the responsibilities of ownership rest on the owner. The charterer
5. Costs of the suit. is free from liability to third persons in respect of the ship. [13]
Second : MT Vector is a common carrier
Third party defendants Vector Shipping Co. and Caltex (Phils.), Inc. are held equally liable under the
third party complaint to reimburse/indemnify defendant Sulpicio Lines, Inc. of the above-mentioned Charter parties fall into three main categories: (1) Demise or bareboat, (2) time charter, (3) voyage
damages, attorneys fees and costs which the latter is adjudged to pay plaintiffs, the same to be shared half charter. Does a charter party agreement turn the common carrier into a private one? We need to answer
by Vector Shipping Co. (being the vessel at fault for the collision) and the other half by Caltex (Phils.), this question in order to shed light on the responsibilities of the parties.
Inc. (being the charterer that negligently caused the shipping of combustible cargo aboard an
In this case, the charter party agreement did not convert the common carrier into a private carrier. The
unseaworthy vessel).
parties entered into a voyage charter, which retains the character of the vessel as a common carrier.

SO ORDERED. In Planters Products, Inc. vs. Court of Appeals,[14] we said:

JORGE S. IMPERIAL It is therefore imperative that a public carrier shall remain as such, notwithstanding the charter of the
whole or portion of a vessel by one or more persons, provided the charter is limited to the ship only, as in
the case of a time-charter or voyage charter. It is only when the charter includes both the vessel and its
Associate Justice
crew, as in a bareboat or demise that a common carrier becomes private, at least insofar as the particular
voyage covering the charter-party is concerned. Indubitably, a ship-owner in a time or voyage charter
WE CONCUR: retains possession and control of the ship, although her holds may, for the moment, be the property of the
charterer.
RAMON U. MABUTAS. JR. PORTIA ALIO HERMACHUELOS
Later, we ruled in Coastwise Lighterage Corporation vs. Court of Appeals: [15]
Associate Justice Associate Justice[8]
Although a charter party may transform a common carrier into a private one, the same however is not
Hence, this petition. true in a contract of affreightment xxx

We find the petition meritorious.


A common carrier is a person or corporation whose regular business is to carry passengers or property to conduct an inspection of the ship and its crew, the carrier being obliged by law to impliedly warrant its
for all persons who may choose to employ and to remunerate him. [16] MT Vector fits the definition of a seaworthiness.
common carrier under Article 1732 of the Civil Code. In Guzman vs. Court of Appeals,[17] we ruled:
This aside, we now rule on whether Caltex is liable for damages under the Civil Code.
The Civil Code defines common carriers in the following terms:
Third: Is Caltex liable for damages under the Civil Code?
Article 1732. Common carriers are persons, corporations, firms or associations engaged in the business We rule that it is not.
of carrying or transporting passengers for passengers or goods or both, by land, water, or air for
compensation, offering their services to the public. Sulpicio argues that Caltex negligently shipped its highly combustible fuel cargo aboard an
unseaworthy vessel such as the MT Vector when Caltex:
The above article makes no distinction between one whose principal business activity is the carrying of 1. Did not take steps to have M/T Vectors certificate of inspection and coastwise license
persons or goods or both, and one who does such carrying only as an ancillary activity (in local idiom, as renewed;
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 services on a 2. Proceeded to ship its cargo despite defects found by Mr. Carlos Tan of Bataan Refinery
an occasional, episodic or unscheduled basis. Neither does Article 1732 distinguish between a carrier Corporation;
offering its services to the general public, i.e., the general community or population, and one who offers
3. Witnessed M/T Vector submitting fake documents and certificates to the Philippine Coast
services or solicits business only from a narrow segment of the general population. We think that Article
Guard.
1733 deliberately refrained from making such distinctions.
Sulpicio further argues that Caltex chose MT Vector to transport its cargo despite these deficiencies:
It appears to the Court that private respondent is properly characterized as a common carrier even though
1. The master of M/T Vector did not posses the required Chief Mate license to command and
he merely back-hauled goods for other merchants from Manila to Pangasinan, although such backhauling
navigate the vessel;
was done on a periodic, occasional rather than regular or scheduled manner, and even though
respondents principal occupation was not the carriage of goods for others. There is no dispute that 2. The second mate, Ronaldo Tarife, had the license of a Minor Patron, authorized to navigate
private respondent charged his customers a fee for hauling their goods; that the fee frequently fell below only in bays and rivers when the subject collision occurred in the open sea;
commercial freight rates is not relevant here.
3. The Chief Engineer, Filoteo Aguas, had no license to operate the engine of the vessel;
Under the Carriage of Goods by Sea Act : 4. The vessel did not have a Third Mate, a radio operator and a lookout; and

Sec. 3. (1) The carrier shall be bound before and at the beginning of the voyage to exercise due diligence 5. The vessel had a defective main engine.[20]
to - As basis for the liability of Caltex, the Court of Appeals relied on Articles 20 and 2176 of the Civil
Code, which provide:
(a) Make the ship seaworthy;
(b) Properly man, equip, and supply the ship; Article 20. - Every person who contrary to law, willfully or negligently causes damage to another, shall
indemnify the latter for the same.
xxx xxx xxx
Article 2176. - Whoever by act or omission causes damage to another, there being fault or negligence, is
Thus, the carriers are deemed to warrant impliedly the seaworthiness of the ship. For a vessel to be
obliged to pay for the damage done.Such fault or negligence, if there is no pre-existing contractual
seaworthy, it must be adequately equipped for the voyage and manned with a sufficient number of
relation between the parties, is called a quasi-delict and is governed by the provisions of this Chapter.
competent officers and crew. The failure of a common carrier to maintain in seaworthy condition the
vessel involved in its contract of carriage is a clear breach of its duty prescribed in Article 1755 of the Civil
Code.[18] And what is negligence?

The provisions owed their conception to the nature of the business of common carriers. This business The Civil Code provides:
is impressed with a special public duty. The public must of necessity rely on the care and skill of common
carriers in the vigilance over the goods and safety of the passengers, especially because with the modern Article 1173. The fault or negligence of the obligor consists in the omission of that diligence which is
development of science and invention, transportation has become more rapid, more complicated and required by the nature of the obligation and corresponds with the circumstances of the persons, of the
somehow more hazardous.[19] For these reasons, a passenger or a shipper of goods is under no obligation time and of the place. When negligence shows bad faith, the provisions of Article 1171 and 2201
paragraph 2, shall apply.
If the law does not state the diligence which is to be observed in the performance, that which is expected A: We did not insist on getting a copy of the C.I. from Mr. Abalos on the first place, because of our
of a good father of a family shall be required. long business relation, we trust Mr. Abalos and the fact that the vessel was able to sail indicates
that the documents are in order. xxx[25]
In Southeastern College, Inc. vs. Court of Appeals,[21] we said that negligence, as commonly On cross examination -
understood, is conduct which naturally or reasonably creates undue risk or harm to others. It may be the
failure to observe that degree of care, precaution, and vigilance, which the circumstances justly demand, Atty. Sarenas: This being the case, and this being an admission by you, this Certificate of Inspection
or the omission to do something which ordinarily regulate the conduct of human affairs, would do. has expired on December 7. Did it occur to you not to let the vessel sail on that day because of
the very approaching date of expiration?
The charterer of a vessel has no obligation before transporting its cargo to ensure that the vessel it
chartered complied with all legal requirements. The duty rests upon the common carrier simply for being Apolinar Ng: No sir, because as I said before, the operation Manager assured us that they were able
engaged in public service.[22] The Civil Code demands diligence which is required by the nature of the to secure a renewal of the Certificate of Inspection and that they will in time submit us a copy.[26]
obligation and that which corresponds with the circumstances of the persons, the time and the place.Hence,
considering the nature of the obligation between Caltex and MT Vector, the liability as found by the Court Finally, on Mr. Ngs redirect examination:
of Appeals is without basis. Atty. Poblador: Mr. Witness, were you aware of the pending expiry of the Certificate of Inspection
The relationship between the parties in this case is governed by special laws. Because of the implied in the coastwise license on December 7, 1987.What was your assurance for the record that this
warranty of seaworthiness,[23]shippers of goods, when transacting with common carriers, are not expected document was renewed by the MT Vector?
to inquire into the vessels seaworthiness, genuineness of its licenses and compliance with all maritime Atty. Sarenas: xxx
laws. To demand more from shippers and hold them liable in case of failure exhibits nothing but the futility
of our maritime laws insofar as the protection of the public in general is concerned. By the same token, we Atty. Poblador: The certificate of Inspection?
cannot expect passengers to inquire every time they board a common carrier, whether the carrier possesses
the necessary papers or that all the carriers employees are qualified. Such a practice would be an absurdity A: As I said, firstly, we trusted Mr. Abalos as he is a long time business partner; secondly, those three
in a business where time is always of the essence. Considering the nature of transportation business, years, they were allowed to sail by the Coast Guard. That are some that make me believe that
passengers and shippers alike customarily presume that common carriers possess all the legal requisites in they in fact were able to secure the necessary renewal.
its operation.
Q: If the Coast Guard clears a vessel to sail, what would that mean?
Thus, the nature of the obligation of Caltex demands ordinary diligence like any other shipper in
Atty. Sarenas: Objection.
shipping his cargoes.
Court: He already answered that in the cross examination to the effect that if it was allowed, referring
A cursory reading of the records convinces us that Caltex had reasons to believe that MT Vector
to MV Vector, to sail, where it is loaded and that it was scheduled for a destination by the Coast
could legally transport cargo that time of the year.
Guard, it means that it has Certificate of Inspection extended as assured to this witness by
Atty. Poblador: Mr. Witness, I direct your attention to this portion here containing the entries here Restituto Abalos. That in no case MV Vector will be allowed to sail if the Certificate of
under VESSELS DOCUMENTS Inspection is, indeed, not to be extended. That was his repeated explanation to the cross-
examination. So, there is no need to clarify the same in the re-direct examination.[27]
1. Certificate of Inspection No. 1290-85, issued December 21, 1986, and Expires December 7,
1987, Mr. Witness, what steps did you take regarding the impending expiry of the C.I. or Caltex and Vector Shipping Corporation had been doing business since 1985, or for about two years
the Certificate of Inspection No. 1290-85 during the hiring of MT Vector? before the tragic incident occurred in 1987. Past services rendered showed no reason for Caltex to observe
a higher degree of diligence.
Apolinar Ng: At the time when I extended the Contract, I did nothing because the tanker has a valid
C.I. which will expire on December 7, 1987 but on the last week of November, I called the Clearly, as a mere voyage charterer, Caltex had the right to presume that the ship was seaworthy as
attention of Mr. Abalos to ensure that the C.I. be renewed and Mr. Abalos, in turn, assured me even the Philippine Coast Guard itself was convinced of its seaworthiness. All things considered, we find
they will renew the same. no legal basis to hold petitioner liable for damages.

Q: What happened after that? As Vector Shipping Corporation did not appeal from the Court of Appeals decision, we limit our
ruling to the liability of Caltex alone.However, we maintain the Court of Appeals ruling insofar as Vector
A: On the first week of December, I again made a follow-up from Mr. Abalos, and said they were is concerned .
going to send me a copy as soon as possible, sir.[24]
WHEREFORE, the Court hereby GRANTS the petition and SETS ASIDE the decision of the Court
xxx xxx xxx of Appeals in CA-G. R. CV No. 39626, promulgated on April 15, 1997, insofar as it held Caltex liable
under the third party complaint to reimburse/indemnify defendant Sulpicio Lines, Inc. the damages the
Q: What did you do with the C.I.? latter is adjudged to pay plaintiffs-appellees. The Court AFFIRMS the decision of the Court of Appeals
insofar as it orders Sulpicio Lines, Inc. to pay the heirs of Sebastian E. Caezal and Corazon Caezal damages
as set forth therein. Third-party defendant-appellee Vector Shipping Corporation and Francisco Soriano
are held liable to reimburse/indemnify defendant Sulpicio Lines, Inc. whatever damages, attorneys fees
and costs the latter is adjudged to pay plaintiffs-appellees in the case.
No costs in this instance.
SO ORDERED.
Davide, Jr., C.J., (Chairman), Kapunan, and Ynares-Santiago, JJ., concur.
Puno, J., took no part due to close relation with a party.