Commercial Law Review

Atty. Zarah Villanueva-Castro

TRANSPORTATION LAW CASES

1. Pereña vs Nicolas, G.R. No. 157917, August 29, 2012

DOCTRINE: Civil Law – Common Carrier – Private School Transport are Common Carriers
Torts and Damages – Heirs of a high school student may be awarded damages for loss income

FACTS: In June 1996, Nicolas and Teresita Zarate contracted Teodoro and Nanette Pereña to transport
their (Zarate’s) son, Aaron Zarate, to and from school. The Pereñas were owners of a van being used for
private school transport. At about 6:45am of August 22, 1996, the driver of the said private van, Clemente
Alfaro, while the children were on board including Aaron, decided to take a short cut in order to avoid
traffic. The usual short cut was a railroad crossing of the Philippine National Railway (PNR). Alfaro saw
that the barandilla (the pole used to block vehicles crossing the railway) was up which means it was okay
to cross. He then tried to overtake a bus. However, there was in fact an oncoming train but Alfaro no longer
saw the train as his view was already blocked by the bus he was trying to overtake. The bus was able to
cross unscathed but the van’s rear end was hit. During the collision, Aaron, was thrown off the van. His
body hit the railroad tracks and his head was severed. He was only 15 years old. It turns out that Alfaro
was not able to hear the train honking from 50 meters away before the collision because the van’s stereo
was playing loudly. The Zarates sued PNR and the Pereñas (Alfaro became at-large). Their cause of action
against PNR was based on quasi-delict. Their cause of action against the Pereñas was based on breach
of contract of common carriage. In their defense, the Pereñas invoked that as private carriers they were not
negligent in selecting Alfaro as their driver as they made sure that he had a driver’s license and that he was
not involved in any accident prior to his being hired. In short, they observed the diligence of a good father
in selecting their employee.

PNR also disclaimed liability as they insist that the railroad crossing they placed there was not meant for
railroad crossing (really, that’s their defense!).

The RTC ruled in favor of the Zarates. The Court of Appeals affirmed the RTC. In the decision of the RTC
and the CA, they awarded damages in favor of the Zarates for the loss of earning capacity of their dead
son.

The Pereñas appealed. They argued that the award was improper as Aaron was merely a high school
student, hence, the award of such damages was merely speculative. They cited the case of People vs
Teehankee where the Supreme Court did not award damages for the loss of earning capacity despite the
fact that the victim there was enrolled in a pilot school.

ISSUES: Whether or not the defense of due diligence of a good father by the Pereñas is untenable.

HELD: Yes.

Defense of Due Diligence of a Good Father

This defense is not tenable in this case. The Pereñas are common carriers. They are not merely private
carriers. (Prior to this case, the status of private transport for school services or school buses is not well
settled as to whether or not they are private or common carriers – but they were generally regarded as
private carriers). Private transport for schools are common carriers. The Pereñas, as the operators of a
school bus service were: (a) engaged in transporting passengers generally as a business, not just as a
casual occupation; (b) undertaking to carry passengers over established roads by the method by which the
business was conducted; and (c) transporting students for a fee. Despite catering to a limited clientèle, the
Pereñas operated as a common carrier because they held themselves out as a ready transportation
indiscriminately to the students of a particular school living within or near where they operated the service
and for a fee.

Although in this jurisdiction the operator of a school bus service has been usually regarded as a private
carrier, primarily because he only caters to some specific or privileged individuals, and his operation is
neither open to the indefinite public nor for public use, the exact nature of the operation of a school bus
service has not been finally settled. This is the occasion to lay the matter to rest.

A carrier is a person or corporation who undertakes to transport or convey goods or persons from one place
to another, gratuitously or for hire. The carrier is classified either as a private/special carrier or as a
common/public carrier. A private carrier is one who, without making the activity a vocation, or without
holding himself or itself out to the public as ready to act for all who may desire his or its services, undertakes,
by special agreement in a particular instance only, to transport goods or persons from one place to another
either gratuitously or for hire. The provisions on ordinary contracts of the Civil Code govern the contract of
private carriage. The diligence required of a private carrier is only ordinary, that is, the diligence of a good
father of the family. In contrast, a common carrier is a person, corporation, firm or association engaged in
the business of carrying or transporting passengers or goods or both, by land, water, or air, for
compensation, offering such services to the public. Contracts of common carriage are governed by the
provisions on common carriers of the Civil Code, the Public Service Act, and other special laws relating to
transportation. A common carrier is required to observe extraordinary diligence, and is presumed to be at
fault or to have acted negligently in case of the loss of the effects of passengers, or the death or injuries to
passengers.

Being a common carrier, what is required of the Pereñas is not mere diligence of a good father. What is
specifically required from them by law is extraordinary diligence – a fact which they failed to prove in court.
Verily, their obligation as common carriers did not cease upon their exercise of diligently choosing Alfaro
as their employee.

2. Heirs of Ochoa vs G&S Transport, G.R. No. 170071, March 29, 2011

FACTS: It appears that sometime in the evening of March 10, 1995, at the Manila Domestic Airport,
the late Jose Marcial K. Ochoa boarded and rode a taxicab with Plate No. PKR-534, a passenger
vehicle for hire owned and operated by defendant corporation under the business name "Avis
Coupon Taxi" (Avis) and driven by its employee and authorized driver Bibiano Padilla, Jr. on his way
home to Teacher’s Village, Diliman, Quezon City. At about 11:00 p.m., the taxicab was cruising along
EDSA, in front of Camp Aguinaldo in Quezon City at high speed. While going up the Boni Serrano
(Santolan) fly-over, it overtook another cab driven by Pablo Clave and tried to pass another vehicle, a
ten-wheeler cargo truck. Because of the narrow space between the left side railing of the fly-over and
the ten-wheeler truck, the Avis cab was unable to pass and because of its speed, its driver (Padilla)
was unable to control it. To avoid colliding with the truck, Padilla turned the wheel to the left causing
his taxicab to ram the railing throwing itself off the fly-over and fell on the middle surface of EDSA
below. The forceful drop of the vehicle on the floor of the road broke and split it into two parts. Both
driver Padilla and passenger Jose Marcial K. Ochoa were injured and rushed to the hospital. At the
East Avenue Medical Center, Ochoa was not as lucky as Padilla who was alive. He was declared
dead on arrival from the accident. The death certificate issued by the Office of the Civil Registrar of
Quezon City cited the cause of his death as vehicular accident. The heirs alleged that G & S, as a
common carrier, is under legal obligation to observe and exercise extraordinary diligence in
transporting its passengers to their destination safely and securely. However, G & S failed to observe
and exercise this extraordinary diligence because its employee failed to transport Jose Marcial to his
destination safely. They averred that G & S is liable to them for having breached the contract of
common carriage. As an alternative cause of action, they asserted that G & S is likewise liable for
damages based on quasi-delict pursuant to Article 2180 in relation to Article 2176of the Civil Code.
The heirs thus prayed for G & S to pay them actual damages, moral damages,

Ruling of the Regional Trial Court

On December 27, 2001, the trial court rendered a Decision finding the vehicular mishap not caused
by a fortuitous event but by the negligence of Padilla. It likewise found the evidence adduced by G &
S to show that it exercised the diligence of a good father of a family in the selection and supervision
of its employees as insufficient. Hence, the trial court declared G & S civilly liable to the heirs.

Ruling of the Court of Appeals

In this case, the CA noted that Padilla failed to employ reasonable foresight, diligence and care
needed to exempt G & S from liability for Jose Marcial’s death. Said court also quoted pertinent
portions of the MTC decision convicting Padilla of reckless imprudence resulting in homicide to
negate G & S’ claim that the proximate cause of the accident was the fault of the driver of the delivery
van who allegedly hit the right side of the taxicab. And just like the trial court, the CA found insufficient
the evidence adduced by G & S to support its claim that it exercised due diligence in the selection
and supervision of its employees.

ISSUE: W/N G & S could be held liable even if it claimed that it exercised due diligence in the
selection and supervision of its employees.

HELD:

In this case, the said three issues boil down to the determination of the following questions: What is
the proximate cause of the death of Jose Marcial? Is the testimony of prosecution witness Clave
credible? Did G & S exercise the diligence of a good father of a family in the selection and
supervision of its employees? Suffice it to say that these are all questions of fact which require this
Court to inquire into the probative value of the evidence presented before the trial court. As we have
consistently held, "[t]his Court is not a trier of facts. It is not a function of this court to analyze or weigh
evidence. When we give due course to such situations, it is solely by way of exception. Such
exceptions apply only in the presence of extremely meritorious circumstances." Here, we note that
although G & S enumerated in its Consolidated Memorandum the exceptions to the rule that a
petition for review on certiorari should only raise questions of law, it nevertheless did not point out
under what exception its case falls. And, upon review of the records of the case, we are convinced
that it does not fall under any. Hence, we cannot proceed to resolve said issues and disturb the
findings and conclusions of the CA with respect thereto.

There is a contract of carriage between G & S and Jose Marcial

What is clear from the records is that there existed a contract of carriage between G & S, as the
owner and operator of the Avis taxicab, and Jose Marcial, as the passenger of said vehicle. As a
common carrier, G & S "is bound to carry [Jose Marcial] safely as far as human care and foresight
can provide, using the utmost diligence of very cautious persons, with due regard for all the
circumstances." However, Jose Marcial was not able to reach his destination safely as he died during
the course of the travel. "In a contract of carriage, it is presumed that the common carrier is at fault or
is negligent when a passenger dies or is injured. In fact, there is even no need for the court to make
an express finding of fault or negligence on the part of the common carrier. This statutory
presumption may only be overcome by evidence that the carrier exercised extraordinary diligence."
Unfortunately, G & S miserably failed to overcome this presumption. Both the trial court and the CA
found that the accident which led to Jose Marcial’s death was due to the reckless driving and gross
negligence of G & S’ driver, Padilla, thereby holding G & S liable to the heirs of Jose Marcial for
breach of contract of carriage.
 The acquittal of Padilla in the criminal case is immaterial to the instant case for breach of contract

This thus now leaves us with the remaining issue raised by G & S, that is, whether the CA gravely
erred in not taking note of the fact that Padilla has already been acquitted of the crime of reckless
imprudence resulting in homicide, a charge which arose from the same incident subject of this case.

Article 31 of the Civil Code provides, viz:

When the civil action is based on an obligation not arising from the act or omission complained of as
a felony, such civil action may proceed independently of the criminal proceedings and regardless of
the result of the latter.

In this case, the action filed by the heirs is primarily for the recovery of damages arising from breach
of contract of carriage allegedly committed by G & S. Clearly, it is an independent civil action arising
from contract which is separate and distinct from the criminal action for reckless imprudence resulting
in homicide filed by the heirs against Padilla by reason of the same incident. Hence, regardless of
Padilla’s acquittal or conviction in said criminal case, same has no bearing in the resolution of the
present case.

3. MOF Company, Inc. vs. Shin Yang Brokerage Corporation, G.R. No. 172822, December 18,
2009

DOCTRINE: The refusal of the consignee named in the bill of lading to pay the freightage on the claim that it is not
privy to the contract of affreightment propelled the shipper to sue for collection of money, stressing that its sole
evidence, the bill of lading, suffices to prove that the consignee is bound to pay.

FACTS: On October 25, 2001, Halla Trading Co., a company based in Korea, shipped to Manilasecondhand cars
and other articles on board the vessel Hanjin Busan 0238W. The bill of lading covering the shipment, i.e., Bill of
Lading No. HJSCPUSI14168303, which was prepared by the carrier Hanjin Shipping Co., Ltd. (Hanjin), named
respondent Shin Yang Brokerage Corp. (Shin Yang) as the consignee and indicated that payment was on a Freight
Collect basis, i.e., that the consignee/receiver of the goods would be the one to pay for the freight and other charges
in the total amount of P57,646.00. The shipment arrived in Manila on October 29, 2001. Thereafter, petitioner MOF
Company, Inc. (MOF), Hanjins exclusive general agent in the Philippines, repeatedly demanded the payment of
ocean freight, documentation fee and terminal handling charges from Shin Yang.The latter, however, failed and
refused to pay contending that it did not cause the importation of the goods, that it is only the Consolidator of the
said shipment, that the ultimate consignee did not endorse in its favor the original bill of lading and that the bill of
lading was prepared without its consent. Thus, on March 19, 2003, MOF filed a case for sum of money before
the MetropolitanTrial Court of Pasay City (MeTC Pasay) which was docketed as Civil Case No. 206-03 and raffled
to Branch 48. MOF alleged that Shin Yang, a regular client, caused the importation and shipment of the goods and
assured it that ocean freight and other charges would be paid upon arrival of the goods in Manila. Yet, after Hanjin's
compliance, Shin Yang unjustly breached its obligation to pay. MOF argued that Shin Yang, as the named
consignee in the bill of lading, entered itself as a party to the contract and bound itself to the Freight Collect
arrangement. MOF thus prayed for the payment of P57,646.00 representing ocean freight, documentation fee and
terminal handling charges as well as damages and attorneys fees.
Ruling of the Metropolitan Trial Court
It ruled that Shin Yang cannot disclaim being a party to the contract of affreightment because:

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

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

Ruling of the Regional Trial Court

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

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

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

Article 652 of the Code of Commerce provides that the charter party must be in writing; however, Article
653 says: If the cargo should be received without charter party having been signed, the contract shall be
understood as executed in accordance with what appears in the bill of lading, the sole evidence of title
with regard to the cargo for determining the rights and obligations of the ship agent, of the captain and
of the charterer.

Ruling of the Court of Appeals

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

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

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

In the present case, petitioner did not only [refuse to] accept the bill of lading, but it likewise disown[ed]
the shipment x x x. [Neither did it] authorize Halla Trading Company or anyone to ship or export the
same on its behalf.
 It is settled that a contract is upheld as long as there is proof of consent, subject matter and cause (Sta.
Clara Homeowners Association vs. Gaston, 374 SCRA 396). In the case at bar, there is not even any
iota of evidence to show that petitioner had given its consent.

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

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

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

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

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

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

In the instant case, Shin Yang consistently denied in all of its pleadings that it authorized Halla Trading, Co.
to ship the goods on its behalf; or that it got hold of the bill of lading covering the shipment or that it demanded
the release of the cargo. Basic is the rule in evidence that the burden of proof lies upon him who asserts it,
not upon him who denies, since, by the nature of things, he who denies a fact cannot produce any proof of
it. Thus, MOF has the burden to controvert all these denials, it being insistent that Shin Yang asserted itself
as the consignee and the one that caused the shipment of the goods to the Philippines.

4. Cruz vs Sun Holidays, 622 SCRA 389, G.R. No. 186312, June 29, 2010

DOCTRINE: The constancy of respondent’s ferry services in its resort operations is underscored by its
having its own Coco Beach boats. And the tour packages it offers, which include the ferry services, may
be availed of by anyone who can afford to pay the same. These services are thus available to the public.
That respondent does not charge a separate fee or fare for its ferry services is of no moment.

FACTS: In 2000 newly weds Ruelito and his wife brought a package tour contract from Sun Holidays. The
tour was scheduled from September 911, 2016 inclusive of transportation to and from the resort. On the
last day, due to heavy rains the day before and heavy winds, the couple along with other guests trekked
to the other side of the beach where they boarded M/B Coco Beach III. Shortly after the boat sailed, it
started to rain and when the reached the open seas the wind got stronger causing the boat to tilt from
side to side and eventually capsized putting all passengers underwater. Ruelito and his wife perished
from the accident which, prompted his parents to filed a complaint for damages against Sun Holidays
alleging that the latter failed to observed extraordinary diligence as common carrier in allowing the boat to
sail despite a storm warning. Sun Holidays denied responsibility claiming that they are not a common
carrier hence they are only required to observe ordinary diligence and the accident was due to a
fortuitous event.

ISSUE: W/N Sun Holidays is a common carrier within the ambit of the law hence liable for damages.

HELD: YES. Article 1732 of the Civil Code defining “common carriers” has deliberately refrained from
making distinctions on whether the carrying of persons or goods is the carrier’s principal business,
whether it is offered on a regular basis, or whether it is offered to the general public. The intent of the law
is thus to not consider such distinctions. Otherwise, there is no telling how many other distinctions may be
concocted by unscrupulous businessmen engaged in the carrying of persons or goods in order to avoid
the legal obligations and liabilities of common carriers. The evidence shows that PAGASA issued 24-hour
public weather forecasts and tropical cyclone warnings for shipping on September 10 and 11, 2000
advising of tropical depressions in Northern Luzon, which would also affect the province of Mindoro. By
the testimony of Dr. Frisco Nilo, supervising weather specialist of PAGASA, squalls are to be expected
under such weather condition. A very cautious person exercising the utmost diligence would thus not
brave such stormy weather and put other people’s lives at risk. The extraordinary diligence required of
common carriers demands that they take care of the goods or lives entrusted to their hands as if they
were their own. This respondent failed to do.

5. Crisostomo vs. CA, G.R. No. 138334, 409 SCRA 528, August 25, 2003

DOCTRINE: A travel agency is not an entity engaged in the business of transporting passengers or
goods, and is therefore neither a private nor a common carrier. It goes without saying that a travel agency
is not required by law to exercise extraordinary diligence.

FACTS: Petitioner contracted the services of respondent Caravan Travel and Tours International, Inc. to
arrange and facilitate her booking, ticketing and accommodation in a tour dubbed Jewels of Europe.
Pursuant to said contract, the travel documents and plane tickets were delivered to the petitioner who in
turn gave the full payment for the package tour on June 12, 1991. Without checking her travel documents,
petitioner went to NAIA on Saturday, June 15, 1991, to take the flight for the first leg of her journey from
Manila to Hongkong. To petitioner’s dismay, she discovered that the flight she was supposed to take had
already departed the previous day. She learned that her plane ticket was for the flight scheduled on June
14, 1991. She thus called up Menor to complain. Subsequently, Menor prevailed upon petitioner to take
another tour- the British Pageant. Upon petitioner’s return from Europe, she demanded from respondent
the reimbursement of the difference between the sum she paid for Jewels of Europe and the amount she
owed respondent for the British Pageant tour.

Petitioner filed a complaint against respondent for breach of contract of carriage and damages alleging that
her failure to join Jewels of Europe was due to respondent’s fault since it did not clearly indicate the
departure date on the plane, failing to observe the standard of care required of a common carrier when it
informed her wrongly of the flight schedule. For its part, respondent company, denied responsibility for
petitioner’s failure to join the first tour, insisting that petitioner was informed of the correct departure date,
which was clearly and legibly printed on the plane ticket. The travel documents were given to petitioner two
days ahead of the scheduled trip. Respondent further contend that petitioner had only herself to blame for
missing the flight, as she did not bother to read or confirm her flight schedule as printed on the ticket.

ISSUE: Whether or not Caravan Travel & Tours International Inc. is negligent in the fulfilment of its
obligation to petitioner Crisostomo thus granting to the petitioner the consequential damages due her as a
result of breach of contract of carriage.

HELD: Contention of petitioner has no merit. A contract of carriage or transportation is one whereby a
certain person or association of persons obligate themselves to transport persons, things, or news from
one place to another for a fixed price. Such person or association of persons are regarded as carriers and
are classified as private or special carriers and common or public carriers. Respondent is not an entity
engaged in the business of transporting either passengers or goods and is therefore, neither a private nor
a common carrier. Respondent did not undertake to transport petitioner from one place to another since
its covenant with its customers is simply to make travel arrangements in their behalf. Respondent’s
services as a travel agency include procuring tickets and facilitating travel permits or visas as well as
booking customers for tours.

The object of petitioner’s contractual relation with respondent is the service of arranging and facilitating
petitioners booking, ticketing and accommodation in the package tour. In contrast, the object of a contract
of carriage is the transportation of passengers or goods. It is in this sense that the contract between the
parties in this case was an ordinary one for services and not one of carriage. Since the contract between
the parties is an ordinary one for services, the standard of care required of respondent is that of a good
father of a family under Article 1173 of the Civil Code. The evidence on record shows that respondent
exercised due diligence in performing its obligations under the contract and followed standard procedure in
rendering its services to petitioner. As correctly observed by the lower court, the plane ticket issued to
petitioner clearly reflected the departure date and time, contrary to petitioner’s contention. The travel
documents, consisting of the tour itinerary, vouchers and instructions, were likewise delivered to petitioner
two days prior to the trip. Respondent also properly booked petitioner for the tour, prepared the necessary
documents and procured the plane tickets. It arranged petitioner’s hotel accommodation as well as food,
land transfers and sightseeing excursions, in accordance with its avowed undertaking. The evidence on
record shows that respondent company performed its duty diligently and did not commit any contractual
breach. Hence, petitioner cannot recover and must bear her own damage.

6. UCPB Gen Insurance vs. Aboitiz Shipping, G.R. No. 168433

FACTS: On June 1991, 3 units of waste water treatment plant with accessories were purchased by San
Miguel Corp from Super Max Engineering. The goods came from Charleston, USA and arrived in port of
Manila on board MV Scandutch Star. From Manila it was transported to Cebu on board of Aboitiz
Supercon II. In Cebu, with clearance from the Bureau of Customs, the goods were delivered and received
by San Miguel at its plant site. It was then discovered that the motor of the unit was damaged. Pursuant
to the insurance agreement, UCPB General Insurance paid San Miguel P1,703,381.40 representing the
value of the damaged unit. In turn, San Miguel executed a subrogation form in favor of UCPB. Then,
UCPB filed a complaint on Kuly 1992 as subrogee of San Miguel seeking to recover from Aboitiz. Aboitiz
moved to admit East Asiatic Co. as general agent of DAMCO Intermodal System. RTC held Aboitiz, East
Asiatic and DAMCO solidarily liable. CA reversed the decision of the RTC and ruled that UCPBs right of
action did not accrue because UCPB failed to file a formal notice within 24 hours from the damaged. In a
memorandum, UCPB asserts that the claim requirement does not apply to cases concerning damages to
the merchandise had already been known to the carrier. UCPB revealed that the damage to the cargo
was found upon discharge from the foreign carrier witnessed by the carrier’s representative who signed
the request for bad order survey and the turnover of bad order cargoes. This knowledge, UCPB argues,
dispenses with the need to give the carrier a formal notice of claim. Incidentally, the carrier’s
representative mentioned by UCPB as present at the time the merchandise was unloaded was in fact a
representative of respondent Eagle Express Lines (Eagle Express). UCPB further claims that the issue of
the applicability of Art. 366 of the Code of Commerce was never raised before the trial court and should,
therefore, not have been considered by the CA. Eagle Express, in its Memorandum dated February 7,
2007, asserts that it cannot be held liable for the damage to the merchandise as it acted merely as a
freight forwarders agent in the transaction. It allegedly facilitated the transhipment of the cargo from
Manila to Cebu but represented the interest of the cargo owner, and not the carriers. Aboitiz, on the other
hand, points out, in its Memorandum dated March 29, 2007, that it obviously cannot be held liable for the
damage to the cargo which, by UCPBs admission, was incurred not during transhipment to Cebu on
board one of Aboitizs vessels, but was already existent at the time of unloading in Manila. Aboitiz also
argues that Art. 366 of the Code of Commerce is applicable and serves as a condition precedent to the
accrual of UCPBs cause of action against it.

ISSUE: Whether any of the remaining parties may still be held liable by UCPB.
HELD: UCPB obviously made a gross misrepresentation to the Court when it claimed that the issue
regarding the applicability of the Code of Commerce, particularly the 24-hour formal claim rule, was not
raised as an issue before the trial court. The appellate court, therefore, correctly looked into the validity of
the arguments raised by Eagle Express, Aboitiz and Pimentel Customs on this point after the trial court
had so ill-advisedly centered its decision merely on the matter of extraordinary diligence. Interestingly
enough, UCPB itself has revealed that when the shipment was discharged and opened at the ICTSI in
Manila in the presence of an Eagle Express representative, the cargo had already been found damaged.
In fact, a request for bad order survey was then made and a turnover survey of bad order cargoes was
issued, pursuant to the procedure in the discharge of bad order cargo. The shipment was then repacked
and transhipped from Manila to Cebu on board MV Aboitiz Supercon II. When the cargo was finally
received by SMC at its Mandaue City warehouse, it was found in bad order, thereby confirming the
damage already uncovered in Manila.

We have construed the 24-hour claim requirement as a condition precedent to the accrual of a right of
action against a carrier for loss of, or damage to, the goods. The shipper or consignee must allege and
prove the fulfilment of the condition. Otherwise, no right of action against the carrier can accrue in favor of
the former.

The shipment in this case was received by SMC on August 2, 1991. However, as found by the Court of
Appeals, the claims were dated October 30, 1991, more than three (3) months from receipt of the
shipment and, at that, even after the extent of the loss had already been determined by SMCs surveyor.
The claim was, therefore, clearly filed beyond the 24-hour time frame prescribed by Art. 366 of the Code
of Commerce. Petition was denied. CA's decision was affirmed.

7. PCI Leasing and Finance vs UCPB Gen Insurance, G.R. No. 162267, July 4, 2008

DOCTRINE: The registered owner

FACTS: On October 19, 1990 at about 10:30 p.m., a Mitsubishi Lancer car with Plate Number PHD-
206 owned by United Coconut Planters Bank was traversing the Laurel Highway, Barangay Balintawak,
Lipa City. The car was insured with plantiff-appellee [UCPB General Insurance Inc.], then driven by
Flaviano Isaac with Conrado Geronimo, the Asst. Manager of said bank, was hit and bumped by an 18-
wheeler Fuso Tanker Truck with Plate No. PJE-737 and Trailer Plate No. NVM-133, owned by
defendants-appellants PCI Leasing & Finance, Inc. allegedly leased to and operated by defendant-
appellant Superior Gas & Equitable Co., Inc. (SUGECO) and driven by its employee, defendant
appellant Renato Gonzaga. The impact caused heavy damage to the Mitsubishi Lancer car resulting in
an explosion of the rear part of the car. The driver and passenger suffered physical injuries. However,
the driver defendant-appellant Gonzaga continued on its [sic] way to its [sic] destination and did not
bother to bring his victims to the hospital. Plaintiff-appellee paid the assured UCPB the amount of
P244,500.00 representing the insurance coverage of the damaged car.As the 18-wheeler truck is
registered under the name of PCI Leasing, repeated demands were made by plaintiff-appellee for the
payment of the aforesaid amounts. However, no payment was made. PCI Leasing and Finance, Inc.,
(petitioner) interposed the defense that it could not be held liable for the collision, since the driver of the
truck, Gonzaga, was not its employee, but that of its co-defendant Superior Gas & Equitable Co., Inc.
(SUGECO). In fact, it was SUGECO, and not petitioner, that was the actual operator of the truck,
pursuant to a Contract of Lease signed by petitioner and SUGECO. Petitioner, however, admitted that
it was the owner of the truck in question. After trial, the RTC rendered judgment in favor of UCPB
General Insurance and ordered PCI Leasing and Gonzaga, to pay jointly and severally UCPB. CA
affirmed RTC.

ISSUE:

(1) Whether PCI Leasing, as registered owner of a motor vehicle that figured in a quasi-delict may be
held liable, jointly and severally, with the driver thereof, for the damages caused to third parties.
 (2) Whether PCI Leasing, as a financing company, is absolved from liability by the enactment of
Republic Act (R.A.) No. 8556, or the Financing Company Act of 1998.

HELD:

1. YES. The principle of holding the registered owner of a vehicle liable for quasi-delicts resulting
from its use is well-established in jurisprudence.

As explained in the case of Erezo v. Jepte, thus:

Registration is required not to make said registration the operative act by which ownership in
vehicles is transferred, as in land registration cases, because the administrative proceeding of
registration does not bear any essential relation to the contract of sale between the parties
(Chinchilla vs. Rafael and Verdaguer, 39 Phil. 888), but to permit the use and operation of the
vehicle upon any public highway (section 5 [a], Act No. 3992, as amended.) The main aim of
motor vehicle registration is to identify the owner so that if any accident happens, or that any
damage or injury is caused by the vehicle on the public highways, responsibility therefor can be
fixed on a definite individual, the registered owner. Instances are numerous where vehicles
running on public highways caused accidents or injuries to pedestrians or other vehicles without
positive identification of the owner or drivers, or with very scant means of identification. It is to
forestall these circumstances, so inconvenient or prejudicial to the public, that the motor vehicle
registration is primarily ordained, in the interest of the determination of persons responsible for
damages or injuries caused on public highways.

2. NO. The new law, R.A. No. 8556, notwithstanding developments in foreign jurisdictions, do not
supersede or repeal the law on compulsory motor vehicle registration. No part of the law expressly
repeals Section 5(a) and (e) of R.A. No. 4136, as amended, otherwise known as the Land
Transportation and Traffic Code. Thus, the rule remains the same: a sale, lease, or financial lease, for
that matter, that is not registered with the Land Transportation Office, still does not bind third persons who are
aggrieved in tortious incidents, for the latter need only to rely on the public registration of a motor vehicle as
conclusive evidence of ownership. A lease such as the one involved in the instant case is an encumbrance in
contemplation of law, which needs to be registered in order for it to bind third parties. Under this policy, the evil
sought to be avoided is the exacerbation of the suffering of victims of tragic vehicular accidents in not being able to
identify a guilty party. A contrary ruling will not serve the ends of justice. The failure to register a lease, sale, transfer
or encumbrance, should not benefit the parties responsible, to the prejudice of innocent victims.

8. Singapore Airlines vs Andion Fernandez, G.R. No. 142305

DOCTRINE: Passenger gets damages for delay in flight

FACTS: Respondent Andion Fernandez is an acclaimed soprano here in the Philippines and abroad. At the
time of the incident, she was availing an educational grant from the Federal Republic of Germany, pursuing
a Masters Degree in Music majoring in Voice. She was invited to sing before the King and Queen
of Malaysia on February 3 and 4, 1991. For this singing engagement, an airline passage ticket was
purchased from petitioner Singapore Airlines which would transport her
to Manila from Frankfurt, Germany on January 28, 1991. From Manila, she would proceed to Malaysia on
the next day. It was necessary for the respondent to pass by Manila in order to gather her wardrobe; and
to rehearse and coordinate with her pianist her repertoire for the aforesaid performance. SAL issued the
respondent a Singapore Airlines ticket for Flight No. SQ 27, leaving Frankfurt, Germany on January 27,
1991 bound for Singapore with onward connections from Singapore to Manila. Flight No. SQ 27 was
scheduled to leave Frankfurt at 1:45 in the afternoon of January 27, 1991, arriving at Singapore at 8:50 in
the morning of January 28, 1991. The connecting flight from Singapore to Manila, Flight No. SQ 72, was
leaving Singapore at 11:00 in the morning of January 28, 1991, arriving in Manila at 2:20 in the afternoon
of the same day. On January 27, 1991, Flight No. SQ 27 left Frankfurt but arrived in Singapore two hours
late or at about 11:00in the morning of January 28, 1991. By then, the aircraft bound for Manila had left as
scheduled, leaving the respondent and about 25 other passengers stranded in
the Changi Airport in Singapore. Upon disembarkation at Singapore, the respondent approached the
transit counter who referred her to the nightstop counter and told the lady employee thereat that it was
important for her to reach Manila on that day, January 28, 1991. The lady employee told her that there were
no more flights to Manila for that day and that respondent had no choice but to stay in Singapore. Upon
respondents persistence, she was told that she can actually fly to Hong Kong going to Manila but since her
ticket was non-transferable, she would have to pay for the ticket. The respondent could not accept the offer
because she had no money to pay for it. Her pleas for the respondent to make arrangements to transport
her to Manila were unheeded.
The next day, after being brought back to the airport, the respondent proceeded to petitioners counter
which says: Immediate Attention To Passengers with Immediate Booking. There were four or five
passengers in line. The respondent approached petitioners male employee at the counter to make
arrangements for immediate booking only to be told: Cant you see I am doing something. She explained
her predicament but the male employee uncaringly retorted: Its your problem, not ours.
The respondent never made it to Manila and was forced to take a direct flight
from Singapore to Malaysia on January 29, 1991, through the efforts of her mother and travel agency
in Manila. Her mother also had to travel to Malaysia bringing with her respondents wardrobe and personal
things needed for the performance that caused them to incur an expense of about P50,000.
RTC Manila ordered SAL to pay Andion Fernandez P50K actual damages, P250K moral, P100k
exemplary, P75k attorney’s fees and costs of suit. CA affirmed RTC.
ISSUE: W/N Singapore Airlines committed a breach of contract of carriage.
HELD: YES. When an airline issues a ticket to a passenger, confirmed for a particular flight on a certain
date, a contract of carriage arises. The passenger then has every right to expect that he be transported
on that flight and on that date. If he does not, then the carrier opens itself to a suit for a breach of contract
of carriage.[19]

The contract of air carriage is a peculiar one. Imbued with public interest, the law requires common
carriers to carry the passengers safely as far as human care and foresight can provide, using the utmost
diligence of very cautious persons with due regard for all the circumstances.[20] In an action for breach of
contract of carriage, the aggrieved party does not have to prove that the common carrier was at fault or
was negligent. All that is necessary to prove is the existence of the contract and the fact of its non-
performance by the carrier.

In the case at bar, it is undisputed that the respondent carried a confirmed ticket for the two-legged trip
from Frankfurt to Manila: 1) Frankfurt-Singapore; and 2) Singapore-Manila. In her contract of carriage with
the petitioner, the respondent certainly expected that she would fly to Manila on Flight No. SQ 72 on
January 28, 1991. Since the petitioner did not transport the respondent as covenanted by it on said terms,
the petitioner clearly breached its contract of carriage with the respondent. The respondent had every
right to sue the petitioner for this breach. The defense that the delay was due to fortuitous events and
beyond petitioners control is unavailing.

9. Japan Airlines vs. Asuncion, G.R. No. 161730, 449 SCRA 544, January 28, 2005

FACTS: On March 27, 1992, respondents Michael and Jeanette Asuncion left Manila on board Japan
Airlines’ (JAL) Flight 742 bound for Los Angeles. Their itinerary included a stop-over in Narita and an
overnight stay at Hotel Nikko Narita. Upon arrival at Narita, Mrs. Noriko Etou-Higuchi of JAL endorsed
their applications for shore pass and directed them to the Japanese immigration official. A shore pass is
required of a foreigner aboard a vessel or aircraft who desires to stay in the neighborhood of the port of
call for not more than 72 hours. During their interview, the Japanese immigration official noted that
Michael appeared shorter than his height as indicated in his passport. Because of this inconsistency,
respondents were denied shore pass entries and were brought instead to the Narita Airport Rest House
where they were billeted overnight. Mr. Atsushi Takemoto of the International Service Center (ISC), the
agency tasked by Japan’s Immigration Department to handle passengers who were denied shore pass
entries, brought respondents to the Narita Airport Rest House where they stayed overnight until their
departure the following day for Los Angeles. Respondents were charged US$400.00 each for their
accommodation, security service and meals. On December 12, 1992, respondents filed a complaint for
damages claiming that JAL did not fully apprise them of their travel requirements and that they were
rudely and forcibly detained at Narita Airport.

ISSUE: Whether or not JAL is liable of breach of contract of carriage.

HELD: NO. The court finds that JAL did not breach its contract of carriage with respondents. It may be
true that JAL has the duty to inspect whether its passengers have the necessary travel documents,
however, such duty does not extend to checking the veracity of every entry in these documents. JAL
could not vouch for the authenticity of a passport and the correctness of the entries therein. The power to
admit or not an alien into the country is a sovereign act which cannot be interfered with even by JAL. This
is not within the ambit of the contract of carriage entered into by JAL and herein respondents. As such,
JAL should not be faulted for the denial of respondents’ shore pass applications. In the Respondents
claim that petitioner breached its contract of carriage when it failed to explain to the immigration
authorities that they had overnight vouchers at the Hotel Nikko Narita. They imputed that JAL did not
exhaust all means to prevent the denial of their shore pass entry applications. JAL or any of its
representatives have no authority to interfere with or influence the immigration authorities. The most that
could be expected of JAL is to endorse respondents’ applications, which Mrs. Higuchi did immediately
upon their arrival in Narita. Moral damages may be recovered in cases where one willfully causes injury to
property, or in cases of breach of contract where the other party acts fraudulently or in bad faith.
Exemplary damages are imposed by way of example or correction for the public good, when the party to
a contract acts in wanton, fraudulent, oppressive or malevolent manner. Attorney’s fees are allowed when
exemplary damages are awarded and when the party to a suit is compelled to incur expenses to protect
his interest.[17] There being no breach of contract nor proof that JAL acted in wanton, fraudulent or
malevolent manner, there is no basis for the award of any form of damages. Neither should JAL be held
liable to reimburse respondents the amount of US$800.00. It has been sufficiently proven that the amount
pertained to ISC, an agency separate and distinct from JAL, in payment for the accommodations provided
to respondents. The payments did not in any manner accrue to the benefit of JAL. However, we find that
the Court of Appeals correctly dismissed JAL’s counterclaim for litigation expenses, exemplary damages
and attorney’s fees. The action was filed by respondents in utmost good faith and not manifestly frivolous.
Respondents honestly believed that JAL breached its contract. A person’s right to litigate should not be
penalized by holding him liable for damages. This is especially true when the filing of the case is to
enforce what he believes to be his rightful claim against another although found to be erroneous.

10. Maranan vs. Perez, G.R. No. L-22272, June 26, 1967

FACTS: Rogelio Corachea, on October 18, 1960, was a passenger in a taxicab owned and operated by
Pascual Perez when he was stabbed and killed by the driver, Simeon Valenzuela. Valenzuela was
prosecuted for homicide in the Court of First Instance of Batangas. Found guilty, he was sentenced to
suffer imprisonment and to indemnify the heirs of the deceased in the sum of P6,000. Appeal from said
conviction was taken to the Court of Appeals. On December 6 1961, while appeal was pending in the
Court of Appeals, Antonia Maranan, Rogelio's mother, filed an action in the Court of First Instance of
Batangas to recover damages from Perez and Valenzuela for the death of her son. Defendants asserted
that the deceased was killed in self-defense, since he first assaulted the driver by stabbing him from
behind. Defendant Perez further claimed that the death was a caso fortuito for which the carrier was not
liable. The court a quo, after trial, found for the plaintiff and awarded her P3,000 as damages against
defendant Perez. The claim against defendant Valenzuela was dismissed. From this ruling, both plaintiff
and defendant Perez appealed to this Court, the former asking for more damages and the latter insisting
on non-liability. Subsequently, the Court of Appeals affirmed the judgment of conviction earlier mentioned,
during the pendency of the herein appeal, and on May 19, 1964, final judgment was entered therein.

ISSUE: W/N the common carrier is liable for the death of the victim committed by its employee during the
contract of carriage.

HELD: YES.

Defendant-appellant relies solely on the ruling enunciated in Gillaco v. Manila Railroad Co., 97 Phil. 884,
that the carrier is under no absolute liability for assaults of its employees upon the passengers. The
attendant facts and controlling law of that case and the one at bar are very different however. In the
Gillaco case, the passenger was killed outside the scope and the course of duty of the guilty employee.

Now here, the killing was perpetrated by the driver of the very cab transporting the passenger, in whose
hands the carrier had entrusted the duty of executing the contract of carriage. In other words, unlike the
Gillaco case, the killing of the passenger here took place in the course of duty of the guilty employee and
when the employee was acting within the scope of his duties. Moreover, the Gillaco case was decided
under the provisions of the Civil Code of 1889 which, unlike the present Civil Code, did not impose upon
common carriers absolute liability for the safety of passengers against wilful assaults or negligent acts
committed by their employees. The death of the passenger in the Gillaco case was truly a fortuitous event
which exempted the carrier from liability. Unlike the old Civil Code, the new Civil Code of the Philippines
expressly makes the common carrier liable for intentional assaults committed by its employees upon its
passengers, by the wording of Art. 1759 which categorically states that

Common carriers are liable for the death of or injuries to passengers through the negligence or willful
acts of the former's employees, although such employees may have acted beyond the scope of their
authority or in violation of the orders of the common carriers.

11. Compania Maritima vs CA, G.R. No. 31379, August 29, 1988

DOCTRINE: In that sense, therefore, private respondent's act of furnishing petitioner with an inaccurate
weight of the payloader upon being asked by petitioner's collector, cannot be used by said petitioner as
an excuse to avoid liability for the damage caused. Said act constitutes a contributory circumstance to the
damage caused on the payloader, which mitigates the liability for damages of petitioner.

FACTS: Private respondent Vicente E. Concepcion, a civil engineer doing business under the name and
style of Consolidated Construction, had a contact with the Civil Aeronautics Administration (CAA)
sometime in 1964 for the construction of the airport in Cagayan de Oro City, Misamis Oriental. Being a
Manila-based contractor, Vicente E. Concepcion had to ship his construction equipment to Cagayan de
Oro city. Having shipped some of his equipment through petitioner and having settled the balance of
P2,628.77 with respect to said shipment, Concepcion negotiated anew with petitioner, thru its collector,
Pacifico Fernandez, on August 28, 1964 for the shipment to Cagayan de Oro City of one (1) unit
payloader, four (4) units 6x6 Reo trucks and two (2) pieces of water tanks. He was issued Bill of Lading
113 on the same date upon delivery of the equipment at the Manila North Harbor. These equipment were
loaded aboard the MV Cebu in its Voyage No. 316, which left Manila on August 30, 1964 and arrived at
Cagayan de Oro City in the afternoon of September 1, 1964. The Reo trucks and water tanks were safely
unloaded within a few hours after arrival, but while the payloader was about two (2) meters above the pier
in the course of unloading, the swivel pin of the heel block of the port block of Hatch No. 2 gave way,
causing the payloader to fall. The payloader was damaged and was thereafter taken to petitioner's
compound in Cagayan de Oro City. On September 7, 1964, Consolidated Construction, thru Vicente E.
Concepcion, wrote Compañia Maritima to demand a replacement of the payloader which it was
considering as a complete loss because of the extent of damage.[4] Consolidated Construction likewise
notified petitioner of its claim for damages. Unable to elicit response, the demand was repeated in a letter
dated October 2, 1964.
Meanwhile, petitioner shipped the payloader to Manila where it was weighed at the San Miguel
Corporation. Finding that the payloader weighed 7.5 tons and not 2.5 tons as declared in the Bill of
Lading, petitioner denied the claim for damages of Consolidated Construction in its letter dated October 7,
1964, contending that had Vicente E. Concepcion declared the actual weight of the payloader, damage to
their ship as well as to his payloader could have been prevented.

ISSUE: Whether or not the act of private respondent Vicente E. Concepcion in furnishing petitioner
Compañia Maritima with an inaccurate weight of 2.5 tons instead of the payloader's actual weight of 7.5
tons was the proximate and only cause of the damage on the Oliver Payloader OC-12 when it fell while
being unloaded by petitioner's crew, as would absolutely exempt petitioner from liability for damages
under paragraph 3 of Article 1734 of the Civil Code

HELD: The weights stated in a bill of lading are prima facie evidence of the amount received and the fact
that the weighing was done by another will not relieve the common carrier where it accepted such weight
and entered it on the bill of lading.

Besides, common carriers can protect themselves against mistakes in the bill of lading as to weight by
exercising diligence before issuing the same. While petitioner has proven that private respondent
Concepcion did furnish it with an inaccurate weight of the payloader, petitioner is nonetheless liable, for
the damage caused to the machinery could have been avoided by the exercise of reasonable skill and
attention on its part in overseeing the unloading of such a heavy equipment.

Evidence on record sufficiently show that the crew of petitioner had been negligent in the performance of
its obligation by reason of their having failed to take the necessary precaution under the circumstances
which usage has established among careful persons, more particularly its Chief Officer, Mr. Felix Pisang,
who is tasked with the over-all supervision of loading and unloading heavy cargoes and upon whom rests
the burden of deciding as to what particular winch the unloading of the payloader should be undertaken.
While it was his duty to determine the weight of heavy cargoes before accepting them. Mr. Felix Pisang
took the bill of lading on its face value and presumed the same to be correct by merely "seeing" it.
Acknowledging that there was a "jumbo" in the MV Cebu which has the capacity of lifting 20 to 25 ton
cargoes, Mr. Felix Pisang chose not to use it, because according to him, since the ordinary boom has a
capacity of 5 tons while the payloader was only 2.5 tons, he did not bother to use the "jumbo" anymore.

In that sense, therefore, private respondent's act of furnishing petitioner with an inaccurate weight of the
payloader upon being asked by petitioner's collector, cannot be used by said petitioner as an excuse to
avoid liability for the damage caused, as the same could have been avoided had petitioner utilized the
"jumbo" lifting apparatus which has a capacity of lifting 20 to 25 tons of heavy cargoes. It is a fact known
to the Chief Officer of MV Cebu that the payloader was loaded aboard the MV Cebu at the Manila North
Harbor on August 28, 1964 by means of a terminal crane. Even if petitioner chose not to take the
necessary precaution to avoid damage by checking the correct weight of the payloader, extraordinary
care and diligence compel the use of the "jumbo" lifting apparatus as the most prudent course for
petitioner.

While the act of private respondent in furnishing petitioner with an inaccurate weight of the payloader
cannot successfully be used as an excuse by petitioner to avoid liability to the damage thus caused, said
act constitutes a contributory circumstance to the damage caused on the payloader, which mitigates the
liability for damages of petitioner in accordance with Article 1741 of the Civil Code, to wit:

Art. 1741. If the shipper or owner merely contributed to the loss, destruction or deterioration
of the goods, the proximate cause thereof being the negligence of the common carrier, the latter
shall be liable in damages, which however, shall be equitably reduced.

12. Sulpicio Lines vs. Curso, 615 SCRA 575, G.R. No. 157009, March 17, 2010
DOCTRINE: Moral damages may be recovered in an action upon breach of contract of carriage only
when: (a) where death of a passenger results, or (b) it is proved that the carrier was guilty of fraud and
bad faith, even if death does not result. Article 2206 of the Civil Code entitles the descendants,
ascendants, illegitimate children, and surviving spouse of the deceased passenger to demand moral
damages for mental anguish by reason of the death of the deceased.

FACTS: On October 23, 1988, Dr.Curso boarded at the port of Manila the MV Doña Marilyn, an inter-
island vessel owned and operated by petitioner Sulpicio Lines, Inc., bound for Tacloban City.
Unfortunately, the MV Doña Marilyn sank in the afternoon of October 24, 1988 while at sea due to the
inclement sea and weather conditions brought about by Typhoon Unsang. The body of Dr.Curso was not
recovered, along with hundreds of other passengers of the ill-fated vessel. At the time of his death,
Dr.Curso was 48 years old, and employed as a resident physician at the Naval District Hospital in Naval,
Biliran. He had a basic monthly salary of P3,940 and would have retired from government service by
December 20, 2004 at the age of 65. Respondents (surviving bros and sis of Dr. Curso) sued petitioner in
the RTC to claim damages based on breach of CoC by sea, averring that petitioner had acted negligently
in transporting Dr. Curso and the other passengers. They stated, among others, that their parents had
predeceased Dr. Curso, who died single and without issue and that, as such, they were Dr.Curso’s
surviving heirs and successors in interest entitled to recover moral and other damages. RTC dismissed
the complaint due to the following reasons: (1) the sinking of the vessel was due to force majeure; (2) the
officers of the MV Doña Marilyn had acted with the diligence required of a common carrier; (3) the sinking
of the vessel and the death of its passengers, including Dr.Curso, could not have been avoided; (4) there
was no basis to consider the MV Doña Marilyn not seaworthy at the time of the voyage; (5) the findings of
the Special Board of Marine Inquiry (SBMI) constituted to investigate the disaster absolved the petitioner,
its officers, and crew of any negligence and administrative liability; and (6) the respondents failed to prove
their claim for damages. CA reversed RTC’s ruling. It found inadequate proof to show that Sulpicio Lines,
Inc., or its officers and crew, had exercised the required degree of diligence to acquit the Sulpicio Lines of
liability since (1) the court finds inadequate explanation why the officers of the M.V. Doña Marilyn had not
apprised themselves of the weather reports on the approach of typhoon "Unsang" which had the power of
a signal no. 3 cyclone, bearing upon the general direction of the path of the M.V. Doña Marilyn; (2) there
was no account of the acts and decision of the crew of the ill-fated ship. It does not appear what occurred
during that time, or what weather reports were received and acted upon by the ship captain; (3) the
fitness of the ship for the voyage is of doubtful character since at the first sign of bad weather, the ship’s
hydraulic system failed and had to be repaired mid-voyage, making the vessel a virtual derelict amidst a
raging storm at sea. CA ordered Sulpicio Lines to pay plaintiff heirs of Dr.Curso indemnity for the latter’s
death, loss of earning capacity, moral damages and costs of suit. Sulpicio appealed the said decision due
to CA’s decision to award the surviving brothers and sisters of the late Dr. Cenon moral damages among
others.

ISSUE: Are the surviving brothers and sisters of a passenger of a vessel that sinks during a voyage
entitled to recover moral damages from the vessel owner as common carrier? NO

RULING: As a general rule, moral damages are not recoverable in actions for damages predicated on a
breach of contract, unless there is fraud or bad faith. As an exception, moral damages may be awarded in
case of breach of contract of carriage that results in the death of a passenger, in accordance with Article
1764, in relation to Article 2206 (3), of the Civil Code, which provide:

Article 1764. Damages in cases comprised in this Section shall be awarded in accordance with
Title XVIII of this Book, concerning Damages. Article 2206 shall also apply to the death of a
passenger caused by the breach of contract by a common carrier.

Article 2206. The amount of damages for death caused by a crime or quasi-delict shall be at least
three thousand pesos, even though there may have been mitigating circumstances. In addition:

xxx
 (3) The spouse, legitimate and illegitimate descendants and ascendants of the deceased may
demand moral damages for mental anguish by reason of the death of the deceased.

Verily, the omission from Article 2206 (3) of the brothers and sisters of the deceased passenger reveals
the legislative intent to exclude them from the recovery of moral damages for mental anguish by reason of
the death of the deceased. Thus, the CA erred in awarding moral damages to the
respondents.Essentially, the purpose of moral damages is indemnity or reparation, that is, to enable the
injured party to obtain the means, diversions, or amusements that will serve to alleviate the moral
suffering he has undergone by reason of the tragic event. According to Villanueva v. Salvador, the
conditions for awarding moral damages are: (a) there must be an injury, whether physical, mental, or
psychological, clearly substantiated by the claimant; (b) there must be a culpable act or omission factually
established; (c) the wrongful act or omission of the defendant must be the proximate cause of the injury
sustained by the claimant; and (d) the award of damages is predicated on any of the cases stated in
Article 2219 of the Civil Code.

To be entitled to moral damages, the respondents must have a right based upon law. It is true that under
Article 1003 of the Civil Code they succeeded to the entire estate of the late Dr.Curso in the absence of
the latter’s descendants, ascendants, illegitimate children, and surviving spouse. However, they were not
included among the persons entitled to recover moral damages, as enumerated in Article 2219 of the Civil
Code. Article 2219 circumscribes the instances in which moral damages may be awarded. The said
provision does not include succession in the collateral line as a source of the right to recover moral
damages.

In fine, moral damages may be recovered in an action upon breach of contract of carriage only when: (a)
where death of a passenger results, or (b) it is proved that the carrier was guilty of fraud and bad faith,
even if death does not result. Article 2206 of the Civil Code entitles the descendants, ascendants,
illegitimate children, and surviving spouse of the deceased passenger to demand moral damages for
mental anguish by reason of the death of the deceased.

13. Edna Diago Lhuillier vs. British Airways, G.R. No. 171092, March 15, 2010

DOCTRINE: Under Article 28(1) of the Warsaw Convention, the plaintiff may bring the action for damages
before –

1. The court where the carrier is domiciled;

2. The court where the carrier has its principal place of business;

3. The court where the carrier has an establishment by which the contract has been made; or

4. The court of the place of destination.

Jurisdiction is a power introduced for the public good, on account of the necessity of dispensing justice.
(Justice Del Castillo’s take away.

FACTS: Petitioner Edna Diago Lhuillier took British Airways’ flight from London, United Kingdom to Rome,
Italy. Once on board, she allegedly requested Julian Halliday (Halliday), one of the respondent’s flight
attendants, to assist her in placing her hand-carried luggage in the overhead bin. However, Halliday
allegedly refused to help and assist her, and even sarcastically remarked that "If I were to help all 300
passengers in this flight, I would have a broken back!" Petitioner further alleged that when the plane was
about to land in Rome, Italy, another flight attendant, Nickolas Kerrigan (Kerrigan), singled her out from
among all the passengers in the business class section to lecture on plane safety. Allegedly, Kerrigan
made her appear to the other passengers to be ignorant, uneducated, stupid, and in need of lecturing on
the safety rules and regulations of the plane. Affronted, petitioner assured Kerrigan that she knew the
plane’s safety regulations being a frequent traveler. Thereupon, Kerrigan allegedly thrust his face a mere
few centimeters away from that of the petitioner and menacingly told her that "We don’t like your attitude."
Upon arrival in Rome, petitioner complained to respondent’s ground manager and demanded an apology.
However, the latter declared that the flight stewards were "only doing their job." Thus, petitioner filed a
complaint before the RTC of Makati for damages praying that respondent be ordered to pay P5M as
moral damages, P2M as nominal damages, P1M as exemplary damages, P300K as attorney’s fees,
P200K as litigation expenses, and cost of the suit. Summons, together with a copy of the complaint, was
served on the respondent through Violeta Echevarria, General Manager of Euro-Philippine Airline
Services, Inc. Respondent by way of special appearance through counsel, filed a Motion to Dismiss on
grounds of lack of jurisdiction over the case and over the person of the respondent. Respondent alleged
that only the courts of London, United Kingdom or Rome, Italy, have jurisdiction over the complaint for
damages pursuant to the Warsaw Convention, Article 28(1). Likewise, it was alleged that the case must
be dismissed OTG of lack of jurisdiction because the summons was erroneously served on Euro-
Philippine Airline Services which is not its resident agent in the PI. RTC issued an order requiring
petitioner to file her comment/opposition on the MTD. Instead of doing so, petitioner filed an Urgent Ex-
Parte Motion to Admit Formal Amendment to the Complaint and Issuance of Alias Summon. She alleged
that upon verification with the SEC, she found that the resident agent of respondent in the PI is Alonzo Q.
Ancheta. RTC of Makati City granted respondents’ MTD.

ISSUE/S:

1. W/N Philippine Court’s have jurisdiction over a tortuous conduct committed against a Filipino citizen
and resident by airline personnel of a foreign carrier travelling beyond the territorial limit of any foreign
country and is thus outside the ambit of the WC? NO

2. W/N respondent air carrier of passengers in filing its MTD may be deemed as having in fact and law
submitted itself to the jurisdiction of the lower court? NO

HELD:

1. The Warsaw Convention is a treaty commitment voluntarily assumed by the Philippine government
and, as such, has the force and effect of law in this country. The Warsaw Convention applies because the
air travel, where the alleged tortuous conduct occurred, was between the United Kingdom and Italy, which
are both signatories to the Warsaw Convention.

Article 1 of the Warsaw Convention provides:

1. This Convention applies to all international carriage of persons, luggage or goods performed by aircraft
for reward. It applies equally to gratuitous carriage by aircraft performed by an air transport undertaking.

2. For the purposes of this Convention the expression "international carriage" means any carriage in
which, according to the contract made by the parties, the place of departure and the place of destination,
whether or not there be a break in the carriage or a transhipment, are situated either within the territories
of two High Contracting Parties, or within the territory of a single High Contracting Party, if there is an
agreed stopping place within a territory subject to the sovereignty, suzerainty, mandate or authority of
another Power, even though that Power is not a party to this Convention. A carriage without such an
agreed stopping place between territories subject to the sovereignty, suzerainty, mandate or authority of
the same High Contracting Party is not deemed to be international for the purposes of this Convention.

Thus, when the place of departure and the place of destination in a contract of carriage are situated within
the territories of two High Contracting Parties, said carriage is deemed an "international carriage". The
High Contracting Parties referred to herein were the signatories to the Warsaw Convention and those
which subsequently adhered to it.
In the case at bench, petitioner’s place of departure was London, United Kingdom while her place of
destination was Rome, Italy. Both the United Kingdom and Italy signed and ratified the Warsaw
Convention. As such, the transport of the petitioner is deemed to be an "international carriage" within the
contemplation of the Warsaw Convention. Since the Warsaw Convention applies in the instant case, then
the jurisdiction over the subject matter of the action is governed by the provisions of the Warsaw
Convention.

Under Article 28(1) of the Warsaw Convention, the plaintiff may bring the action for damages before –

1. The court where the carrier is domiciled;

2. The court where the carrier has its principal place of business;

3. The court where the carrier has an establishment by which the contract has been made; or

4. The court of the place of destination.

In this case, it is not disputed that respondent is a British corporation domiciled in London, United
Kingdom with London as its principal place of business. Hence, under the first and second jurisdictional
rules, the petitioner may bring her case before the courts of London in the United Kingdom. In the
passenger ticket and baggage check presented by both the petitioner and respondent, it appears that the
ticket was issued in Rome, Italy. Consequently, under the third jurisdictional rule, the petitioner has the
option to bring her case before the courts of Rome in Italy. Finally, both the petitioner and respondent
aver that the place of destination is Rome, Italy, which is properly designated given the routing presented
in the said passenger ticket and baggage check. Accordingly, petitioner may bring her action before the
courts of Rome, Italy. Thus, the RTC of Makati correctly ruled that it DOES NOT have jurisdiction over the
case filed by petitioner.

The SC has also cited various cases showing that tortuous conduct as ground for petitioner’s complaint is
within the purview of Warsaw Convention. It is thus settled that allegations of tortious conduct committed
against an airline passenger during the course of the international carriage do not bring the case outside
the ambit of the Warsaw Convention.

2. Respondent, in seeking remedies from the trial court through special appearance of counsel, is not
deemed to have voluntarily submitted itself to the jurisdiction of the trial court. Sec. 20, Rule 14 of the
Revised Rules of Civil Procedure clearly provides that the defendant’s voluntary appearance in the action
shall be equivalent to service of summons. The inclusion in a motion to dismiss of other grounds aside
from lack of jurisdiction over the person of the defendant shall not be deemed a voluntary appearance.
Thus, a defendant who files a motion to dismiss, assailing the jurisdiction of the court over his person,
together with other grounds raised therein, is not deemed to have appeared voluntarily before the court.
What the rule on voluntary appearance – the first sentence of the above-quoted rule – means is that the
voluntary appearance of the defendant in court is without qualification, in which case he is deemed to
have waived his defense of lack of jurisdiction over his person due to improper service of summons.

14. Ramos vs. China Southern Airlines Co., Ltd., G.R. No. 213418, September 21, 2016

FACTS: On 7 August 2003, petitioners purchased five China Southern Airlines roundtrip plane tickets
from Active Travel Agency for $985.00. It is provided in their itineraries that petitioners will be leaving
Manila on 8 August 2003 at 0900H and will be leaving Xiamen on 12 August 2003 at 1920H. On their way
back to the Manila, however, petitioners were prevented from taking their designated flight despite the
fact that earlier that day an agent from Active Tours informed them that their bookings for China Southern
Airlines 1920H flight are confirmed. The refusal came after petitioners already checked in all their
baggages and were given the corresponding claim stubs and after they had paid the terminal fees.
According to the airlines' agent with whom they spoke at the airport, petitioners were merely chance
passengers but they may be allowed to join the flight if they are willing to pay an additional 500 Renminbi
(RMB) per person. When petitioners refused to defray the additional cost, their baggages were offloaded
from the plane and China Southern Airlines 1920H flight then left Xiamen International Airport without
them. Because they have business commitments waiting for them in Manila, petitioners were constrained
to rent a car that took them to Chuan Chio Station where they boarded the train to Hongkong. Upon
reaching Hong Kong, petitioners purchased new plane tickets from Philippine Airlines (PAL) that flew
them back to Manila. Upon arrival in Manila, petitioners went to Active Travel to inform them of their
unfortunate fate with China Southern Airlines. In their effort to avoid lawsuit, Active Travel offered to
refund the price of the plane tickets but petitioners refused to accept the offer. Petitioners then went to
China Southern Airlines to demand for the reimbursement of their airfare and travel expenses in the
amount of P87,375.00. When the airline refused to accede to their demand, petitioners initiated an action
for damages before the RTC of Manila against China Southern Airlines and Active Travel.

China Southern Airlines denied liability by alleging that petitioners were not confirmed passengers of the
airlines but were merely chance passengers. According to the airlines, it was specifically provided in the
issued tickets that petitioners are required to re-confirm all their bookings at least 72 hours before their
scheduled time of departures but they failed to do so which resulted in the automatic cancellation of their
bookings.

RTC rendered a Decision in favor of the petitioners and ordered China Southern Airlines to pay damages
in the amount of P692,000.00

1. The sum of [P]62,000.00 as actual damages;

2. The sum of [P]300,000.00 as moral damages;

3. The sum of [P]300,000.00 as exemplary damages; and

4. The sum of [P]30,000.00 for attorney's fees.

CA modified the RTC Decision by deleting the award for moral and exemplary damages. According to the
appellate court, petitioners failed to prove that China Southern Airlines' breach of contractual obligation
was attended with bad faith. The disquisition of the CA reads:

"xxx. Where in breaching the contract, the defendant is not shown to have acted fraudulently or in bad
faith, liability for damages is limited to the natural and probable consequences of the breach of the
obligation and which the parties had foreseen or could reasonably have foreseen; and in that case, such
liability would not include liability for moral and exemplary damages.

ISSUE: W/N the CA erred in deleting the awards of moral and exemplary damages, a departure from
established doctrines that passengers who are bumped-off are entitled to the aforesaid damages.

HELD:

A contract of carriage, in this case, air transport, is intended to serve the traveling public and thus, imbued
with public interest. The law governing common carriers consequently imposes an exacting standard of
conduct, viz:

"1755 of the New Civil Code. A common carrier is bound to carry passengers safely as far as human care
and foresight can provide, using the utmost diligence of very cautious persons, with due regard for all the
circumstances."

When an airline issues a ticket to a passenger confirmed on a particular flight, on a certain date, a
contract of carriage arises, and the passenger has every right to expect that he would fly on that flight and
on that date. If that does not happen, then the carrier opens itself to a suit for breach of contract of
carriage. In an action based on a breach of contract of carriage, the aggrieved party does not have to
prove that the common carrier was at fault or was negligent. All he has to prove is the existence of the
contract and the fact of its non-performance by the carrier, through the latter's failure to carry the
passenger to its destination.

It is beyond question in the case at bar that petitioners had an existing contract of air carriage with China
Southern Airlines as evidenced by the airline tickets issued by Active Travel. When they showed up at the
airport and after they went through the routine security check including the checking in of their luggage
and the payment of the corresponding terminal fees, petitioners were not allowed by China Southern
Airlines to board on the plane. The airlines' claim that petitioners do not have confirmed reservations
cannot be given credence by the Court. The petitioners were issued two-way tickets with itineraries
indicating the date and time of their return flight to Manila. These are binding contracts of carriage. China
Southern Airlines allowed petitioners to check in their luggage and issued the necessary claim stubs
showing that they were part of the flight. It was only after petitioners went through all the required check-
in procedures that they were informed by the airlines that they were merely chance passengers. Airlines
companies do not, as a practice, accept pieces of luggage from passengers without confirmed
reservations. Quite tellingly, all the foregoing circumstances lead us to the inevitable conclusion that
petitioners indeed were bumped off from the flight. The prologue shapes the body of the petitioners'
rights, that is, that they are entitled to damages, actual, moral and exemplary. There is no doubt that
petitioners are entitled to actual or compensatory damages. Both the RTC and the CA uniformly held that
there was a breach of contract committed by China Southern Airlines when it failed to deliver petitioners
to their intended destination, a factual finding that we do not intend to depart from in the absence of
showing that it is unsupported by evidence. As the aggrieved parties, petitioners had satisfactorily proven
the existence of the contract and the fact of its non-performance by China Southern Airlines; the
concurrence of these elements called for the imposition of actual or compensatory damages.

With respect to moral damages, the following provision of the New Civil Code is instructive:

Article 2220. Willful injury to property may be a legal ground for awarding moral damages if the court
should find that, under the circumstances, such damages are justly due. The same rule applies to
breaches of contract where the defendant acted fraudulently or in bad faith.

Bad faith does not simply connote bad judgment or negligence. It imports dishonest purpose or some
moral obliquity and conscious doing of a wrong. It means breach of a known duty through some motive,
interest or ill will that partakes the nature of fraud. Bad faith is in essence a question of intention.

In Japan Airlines v. Simangan,[29] the Court took the occasion to expound on the meaning of bad faith in
a breach of contract of carriage that merits the award of moral damages:

"Clearly, JAL is liable for moral damages. It is firmly settled that moral damages are recoverable in suits
predicated on breach of a contract of carriage where it is proved that the carrier was guilty of fraud or bad
faith, as in this case. Inattention to and lack of care for the interests of its passengers who are entitled to
its utmost consideration, particularly as to their convenience, amount to bad faith which entitles the
passenger to an award of moral damages. What the law considers as bad faith which may furnish the
ground for an award of moral damages would be bad faith in securing the contract and in the execution
thereof, as well as in the enforcement of its terms, or any other kind of deceit."

Applying the foregoing yardstick in the case at bar, We find that the airline company acted in bad faith in
insolently bumping petitioners off the flight after they have completed all the pre-departure routine. Bad
faith is evident when the ground personnel of the airline company unjustly and unreasonably refused to
board petitioners to the plane which compelled them to rent a car and take the train to the nearest airport
where they bought new sets of plane tickets from another airline that could fly them home. Petitioners
have every reason to expect that they would be transported to their intended destination after they had
checked in their luggage and had gone through all the security checks. Instead, China Southern Airlines
offered to allow them to join the flight if they are willing to pay additional cost; this amount is on top of the
purchase price of the plane tickets. The requirement to pay an additional fare was insult upon injury. It is
an aggravation of the breach of contract. Undoubtedly, petitioners are entitled to the award of moral
damages. The purpose of awarding moral damages is to enable the injured party to obtain means,
diversion or amusement that will serve to alleviate the moral suffering [that] he has undergone by reason
of defendant['s] culpable action. China Southern Airlines is also liable for exemplary damages as it acted
in a wantonly oppressive manner as succinctly discussed above against the petitioners. Exemplary
damages which are awarded by way of example or correction for the public good, may be recovered in
contractual obligations, as in this case, if defendant acted in wanton, fraudulent, reckless, oppressive or
malevolent manner.

We find adequate the amount of P300,000.00 each for moral and exemplary damages imposed by the
trial court.

15. Sulpicio Lines, Inc. vs. Sesante, 798 SCRA 459, G.R. No. 172682, July 27, 2016

FACTS: On September 18, 1998, at around 12:55 p.m., the M/V Princess of the Orient, a passenger
vessel owned and operated by the petitioner, sank near Fortune Island in Batangas. Of the 388 recorded
passengers, 150 were lost. Napoleon Sesante, then a member of the Philippine National Police (PNP)
and a lawyer, was one of the passengers who survived the sinking. He sued the petitioner for breach of
contract and damages. Sesante alleged in his complaint that the M/V Princess of the Orient left the Port
of Manila while Metro Manila was experiencing stormy weather; that at around 11:00 p.m., he had noticed
the vessel listing starboard, so he had gone to the uppermost deck where he witnessed the strong winds
and big waves pounding the vessel; that at the same time, he had seen how the passengers had been
panicking, crying for help and frantically scrambling for life jackets in the absence of the vessel's officers
and crew; that sensing danger, he had called a certain Veney Ceballos through his cellphone to request
him to inform the proper authorities of the situation; that thereafter, big waves had rocked the vessel,
tossing him to the floor where he was pinned by a long steel bar; that he had freed himself only after
another wave had hit the vessel;5 that he had managed to stay afloat after the vessel had sunk, and had
been carried by the waves to the coastline of Cavite and Batangas until he had been rescued; that he had
suffered tremendous hunger, thirst, pain, fear, shock, serious anxiety and mental anguish; that he had
sustained injuries,6 and had lost money, jewelry, important documents, police uniforms and the .45 caliber
pistol issued to him by the PNP; and that because it had committed bad faith in allowing the vessel to sail
despite the storm signal, the petitioner should pay him actual and moral damages of ₱500,000.00 and
₱l,000,000.00, respectively.7

In its defense, the petitioner insisted on the seaworthiness of the M/V Princess of the Orient due to its
having been cleared to sail from the Port of Manila by the proper authorities; that the sinking had been
due to force majeure; that it had not been negligent; and that its officers and crew had also not been
negligent because they had made preparations to abandon the "'vessel because they had launched life
rafts and had provided the passengers assistance in that regard.8

Decision of the RTC

RTC observed that the petitioner, being negligent, was liable to Sesante pursuant to Articles 1739 and
1759 of the Civil Code; that the petitioner had not established its due diligence in the selection and
supervision of the vessel crew; that the ship officers had failed to inspect the stowage of cargoes despite
being aware of the storm signal; that the officers and crew of the vessel had not immediately sent a
distress signal to the Philippine Coast Guard; that the ship captain had not called for then "abandon ship"
protocol; and that based on the report of the Board of Marine Inquiry (BMI), the erroneous maneuvering of
the vessel by the captain during the extreme weather condition had been the immediate and proximate
cause of the sinking.

Judgment of the CA
It lowered the temperate damages to ₱120,000.00, which approximated the cost of Sesante's lost
personal belongings; and held that despite the seaworthiness of the vessel, the petitioner remained civilly
liable because its officers and crew had been negligent in performing their duties.

ISSUES:

(1) Is the complaint for breach of contract and damages a personal action that does not survive the death
of the plaintiff?;

(2) Is the petitioner liable for damages under Article 1759 of the Civil Code?; and

HELD:

1. An action for breach of contract of carriage survives the death of the plaintiff

Section 16, Rule 3 of the Rules of Court lays down the proper procedure in the event of the death of a
litigant, viz.:

Section 16. Death of party; duty of counsel. - Whenever a party to a pending action dies,
and the claim is not thereby extinguished, it shall be the duty of his counsel to inform the
court within thirty (30) days after such death of the fact thereof, and to give the name and
address of his legal representative or representatives. Failure of counsel to comply with
his duty shall be a ground for disciplinary action.

The heirs of the deceased may be allowed to be substituted for the deceased, without
requiring the appointment of an executor or administrator and the court may appoint a
guardian ad litem for the minor heirs.

xxxx

Substitution by the heirs is not a matter of jurisdiction, but a requirement of due process. It protects the
right of due process belonging to any party, that in the event of death the deceased litigant continues to
be protected and properly represented in the suit through the duly appointed legal representative of his
estate.

The application of the rule on substitution depends on whether or not the action survives the death of the
litigant. Section 1, Rule 87 of the Rules of Court enumerates the following actions that survive the death
of a party, namely: (1) recovery of real or personal property, or an interest from the estate; (2)
enforcement of liens on the estate; and (3) recovery of damages for an injury to person or property. On
the one hand, Section 5, Rule 86 of the Rules of Court lists the actions abated by death as including: (1)
claims for funeral expenses and those for the last sickness of the decedent; (2) judgments for money; and
(3) all claims for money against the deceased, arising from contract, express or implied.

A contract of carriage generates a relation attended with public duty, neglect or malfeasance of the
carrier's employees and gives ground for an action for damages. Sesante's claim against the petitioner
involved his personal injury caused by the breach of the contract of carriage. Pursuant to the aforecited
rules, the complaint survived his death, and could be continued by his heirs following the rule on
substitution.

2. The petitioner is liable for breach of contract of carriage

The petitioner submits that an action for damages based on breach of contract of carriage under Article
1759 of the Civil Code should be read in conjunction with Article 2201 of the same code; that although
Article 1759 only provides for a presumption of negligence, it does not envision automatic liability; and
that it was not guilty of bad faith considering that the sinking of M/V Princess of the Orient had been due
to a fortuitous event, an exempting circumstance under Article 1174 of the Civil Code.

The submission has no substance.

Article 1759 of the Civil Code does not establish a presumption of negligence because it explicitly makes
the common carrier liable in the event of death or injury to passengers due to the negligence or fault of
the common carrier's employees. It reads:

Article 1759. Common carriers are liable for the death or injuries to passengers through
the negligence or willful acts of the former's employees, although such employees may
have acted beyond the scope of their authority or in violation of the orders of the common
earners.

This liability of the common carriers does not cease upon proof that they exercised all the
diligence of a good father of a family in the selection and supervision of their employees.

The liability of common carriers under Article 1759 is demanded by the duty of extraordinary diligence
required of common carriers in safely carrying their passengers.20

On the other hand, Article 1756 of the Civil Code lays down the presumption of negligence against the
common carrier in the event of death or injury of its passenger, viz.:

Article 1756. In case of death of or injuries to passengers, common carriers are

presumed to have been at fault or to have acted negligently, unless they prove that they
observed extraordinary diligence as prescribed in Articles 1733 and 1755.

Clearly, the trial court is not required to make an express finding of the common carrier's fault or
negligence. Even the mere proof of injury relieves the passengers from establishing the fault or
negligence of the carrier or its employees. The presumption of negligence applies so long as there is
evidence showing that: (a) a contract exists between the passenger and the common carrier; and (b) the
injury or death took place during the existence of such contract. In such event, the burden shifts to the
common carrier to prove its observance of extraordinary diligence, and that an unforeseen event or force
majeure had caused the injury.

Sesante sustained injuries due to the buffeting by the waves and consequent sinking of M/V Princess of
the Orient where he was a passenger. To exculpate itself from liability, the common carrier vouched for
the seaworthiness of M/V Princess of the Orient, and referred to the BMI report to the effect that the
severe weather condition - a force majeure – had brought about the sinking of the vessel.

The petitioner was directly liable to Sesante and his heirs.

A common carrier may be relieved of any liability arising from a fortuitous event pursuant to Article 1174of
the Civil Code. But while it may free a common carrier from liability, the provision still requires exclusion of
human agency from the cause of injury or loss. Else stated, for a common carrier to be absolved from
liability in case of force majeure, it is not enough that the accident was caused by a fortuitous event. The
common carrier must still prove that it did not contribute to the occurrence of the incident due to its own or
its employees' negligence.

16. Torres-Madrid Brokerage vs. FEB Mitsu Marine Insurance & Manalastas, G.R. No. 194121,
July 11, 2016
DOCTRINE: A brokerage may be considered a common carrier if it also undertakes to deliver the goods
for its customers. Whose principal business is the preparation of the correct customs declaration and the
proper shipping documents - is still considered a common carrier if it also undertakes to deliver the goods
for its customers. The law does not distinguish between one whose principal business activity is the
carrying of goods and one who undertakes this task only as an ancillary activity.

FACTS: Sony Philippines, Inc. (Sony) engaged the services of Torres-Madrid Brokerage, Inc. (TMBI) to
facilitate, process, withdraw, and deliver a shipment of various electronics good from the Port of Manila to
its warehouse in Binan,Laguna. TMBI did not own any delivery trucks; hence, it subcontracted the
services of Benjamin Manalastas’ BMT Trucking Services (BMT) to transport said shipment from the port
to Sony’s warehouse. Four BMT trucks picked up the shipment from the port. However, only three trucks
arrived at Sony’s warehouse. The fourth truck was found abandoned along the Diversion Road in
Filinvest, Alabang, Muntinlupa City. Both the driver and the shipment were missing. TMBI notified Sony of
the loss through a letter, and also sent BMT a letter dated March 29, 2001, demanding payment for the
lost shipment. BMT refused to pay, insisting that the goods were "hijacked." In the meantime, Sony filed
an insurance claim with the Mitsui, the insurer of the goods. After evaluating the merits of the claim, Mitsui
paid Sony PHP7,293,386.23 corresponding to the value of the lost goods. After being subrogated to
Sony’s rights, Mitsui sent TMBI a demand letter dated August 30, 2001 for payment of the lost goods.
TMBI refused to pay Mitsui’s claim. As a result, Mitsui filed a complaint against TMBI on November 6,
2001, TMBI, in turn, impleaded Benjamin Manalastas, the proprietor of BMT, as a third-party defendant.
TMBI alleged that BMT’s driver, Lapesura, was responsible for the theft/hijacking of the lost cargo and
claimed BMT’s negligence as the proximate cause of the loss. TMBI prayed that in the event it is held
liable to Mitsui for the loss, it should be reimbursed by BMT.At the trial, it was revealed that BMT and
TMBI have been doing business with each other since the early 80’s. It also came out that there had been
a previous hijacking incident involving Sony’s cargo in 1997, but neither Sony nor its insurer filed a
complaint against BMT or TMBI. On August 5, 2008, the RTC found TMBI and Benjamin Manalastas
jointly and solidarily liable to pay Mitsui PHP 7,293,386.23 as actual damages, attorney’s fees equivalent
to 25% of the amount claimed, and the costs of the suit.

The RTC held that TMBI and Manalastas were common carriers and had acted negligently.

On October 14, 2010, the CA affirmed the RTC’s decision but reduced the award of attorney’s fees to
PHP 200,000. The CA held: (1) that "hijacking" is not necessarily a fortuitous event because the term
refers to the general stealing of cargo during transit;15 (2) that TMBI is a common carrier engaged in the
business of transporting goods for the general public for a fee;16 (3) even if the "hijacking" were a
fortuitous event, TMBI’s failure to observe extraordinary diligence in overseeing the cargo and adopting
security measures rendered it liable for the loss;17 and (4) even if TMBI had not been negligent in the
handling, transport and the delivery of the shipment, TMBI still breached its contractual obligation to Sony
when it failed to deliver the shipment.

ISSUES:

1. W/N a brokerage may be considered as common carrier

2. W/N the said hijacking of Sony’s shipment was attended by force or intimidation.
3.

HELD:

1. YES. A brokerage may be considered a common carrier if it also undertakes to deliver the goods
for its customers.

Common carriers are persons, corporations, firms or associations engaged in the business of transporting
passengers or goods or both, by land, water, or air, for compensation, offering their services to the public.
By the nature of their business and for reasons of public policy, they are bound to observe extraordinary
diligence in the vigilance over the goods and in the safety of their passengers.

In A.F. Sanchez Brokerage Inc. v. Court of Appeals, we held that a customs broker – whose principal
business is the preparation of the correct customs declaration and the proper shipping documents – is still
considered a common carrier if it also undertakes to deliver the goods for its customers. The law does not
distinguish between one whose principal business activity is the carrying of goods and one who
undertakes this task only as an ancillary activity. This ruling has been reiterated in Schmitz Transport &
Brokerage Corp. v. Transport Venture, Inc., Loadmasters Customs Services, Inc. v. Glodel Brokerage
Corporation, and Westwind Shipping Corporation v. UCPB General Insurance Co., Inc.

Despite TMBI’s present denials, we find that the delivery of the goods is an integral, albeit ancillary, part
of its brokerage services. TMBI admitted that it was contracted to facilitate, process, and clear the
shipments from the customs authorities, withdraw them from the pier, then transport and deliver them to
Sony’s warehouse in Laguna.

Lastly, TMBI’s customs brokerage services – including the transport/delivery of the cargo – are available
to anyone willing to pay its fees. Given these circumstances, we find it undeniable that TMBI is a common
carrier.

Consequently, TMBI should be held responsible for the loss, destruction, or deterioration of the goods it
transports unless it results from:

(1) Flood, storm, earthquake, lightning, or other natural disaster or calamity;

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

(3) Act of omission of the shipper or owner of the goods;

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

(5) Order or act of competent public authority.

For all other cases - such as theft or robbery – a common carrier is presumed to have been at fault or to
have acted negligently, unless it can prove that it observed extraordinary diligence.

Simply put, the theft or the robbery of the goods is not considered a fortuitous event or a force majeure.
Nevertheless, a common carrier may absolve itself of liability for a resulting loss: (1) if it proves that it
exercised extraordinary diligence in transporting and safekeeping the goods; or (2) if it stipulated with the
shipper/owner of the goods to limit its liability for the loss, destruction, or deterioration of the goods to a
degree less than extraordinary diligence.

However, a stipulation diminishing or dispensing with the common carrier’s liability for acts committed by
thieves or robbers who do not act with grave or irresistible threat, violence, or force is void under Article
1745 of the Civil Code for being contrary to public policy.

In the present case, the shipper, Sony, engaged the services of TMBI, a common carrier, to facilitate the
release of its shipment and deliver the goods to its warehouse. In turn, TMBI subcontracted a portion of
its obligation – the delivery of the cargo – to another common carrier, BMT.

Despite the subcontract, TMBI remained responsible for the cargo. Under Article 1736, a common
carrier’s extraordinary responsibility over the shipper’s goods lasts from the time these goods are
unconditionally placed in the possession of, and received by, the carrier for transportation, until they are
delivered, actually or constructively, by the carrier to the consignee.
That the cargo disappeared during transit while under the custody of BMT – TMBI’s subcontractor – did
not diminish nor terminate TMBI’s responsibility over the cargo. Article 1735 of the Civil Code presumes
that it was at fault.

Instead of showing that it had acted with extraordinary diligence, TMBI simply argued that it was not a
common carrier bound to observe extraordinary diligence. Its failure to successfully establish this premise
carries with it the presumption of fault or negligence, thus rendering it liable to Sony/Mitsui for breach of
contract.

2. Specifically, TMBI’s current theory – that the hijacking was attended by force or intimidation – is
untenable.

First, TMBI alleged in its Third Party Complaint against BMT that Lapesura was responsible for hijacking
the shipment.49 Further, Victor Torres filed a criminal complaint against Lapesura with the NBI.50 These
actions constitute direct and binding admissions that Lapesura stole the cargo. Justice and fair play
dictate that TMBI should not be allowed to change its legal theory on appeal.

Second, neither TMBI nor BMT succeeded in substantiating this theory through evidence. Thus, the
theory remained an unsupported allegation no better than speculations and conjectures. The CA
therefore correctly disregarded the defense of force majeure.

3. TMBI and BMT are not solidarily liable to Mitsui

We disagree with the lower courts’ ruling that TMBI and BMT are solidarily liable to Mitsui for the loss as
joint tortfeasors. The ruling was based on Article 2194 of the Civil Code:

Art. 2194. The responsibility of two or more persons who are liable for quasi-delict is solidary.

Notably, TMBI’s liability to Mitsui does not stem from a quasi-delict (culpa aquiliana) but from its breach of
contract (culpa contractual). The tie that binds TMBI with Mitsui is contractual, albeit one that passed on
to Mitsui as a result of TMBI’s contract of carriage with Sony to which Mitsui had been subrogated as an
insurer who had paid Sony’s insurance claim. The legal reality that results from this contractual tie
precludes the application of quasi-delict based Article 2194.

4. A third party may recover from a common carrier for quasi-delict but must prove actual
negligence

We likewise disagree with the finding that BMT is directly liable to Sony/Mitsui for the loss of the cargo.
While it is undisputed that the cargo was lost under the actual custody of BMT (whose employee is the
primary suspect in the hijacking or robbery of the shipment), no direct contractual relationship existed
between Sony/Mitsui and BMT. If at all, Sony/Mitsui’s cause of action against BMT could only arise from
quasi-delict, as a third party suffering damage from the action of another due to the latter’s fault or
negligence, pursuant to Article 2176 of the Civil Code.

In the present case, Mitsui’s action is solely premised on TMBI’s breach of contract. Mitsui did not even
sue BMT, much less prove any negligence on its part. If BMT has entered the picture at all, it is because
TMBI sued it for reimbursement for the liability that TMBI might incur from its contract of carriage with
Sony/Mitsui. Accordingly, there is no basis to directly hold BMT liable to Mitsui for quasi-delict.
 5. BMT is liable to TMBI for breach of their contract of carriage

We do not hereby say that TMBI must absorb the loss. By subcontracting the cargo delivery to BMT,
TMBI entered into its own contract of carriage with a fellow common carrier. The cargo was lost after its
transfer to BMT' s custody based on its contract of carriage with TMBI. Following Article 1735, BMT is
presumed to be at fault. Since BMT failed to prove that it observed extraordinary diligence in the
performance of its obligation to TMBI, it is liable to TMBI for breach of their contract of carriage.

In these lights, TMBI is liable to Sony (subrogated by Mitsui) for breaching the contract of carriage. In tum,
TMBI is entitled to reimbursement from BMT due to the latter's own breach of its contract of carriage with
TMBI. The proverbial buck stops with BMT who may either: (a) absorb the loss, or (b) proceed after its
missing driver, the suspected culprit, pursuant to Article 2181.

17. LTFRB vs. G.V. Florida Transport, G.R. No. 213088, June 28, 2017

FACTS: Around 7:20 in the morning of February 7, 2014, a vehicular accident occurred at Sitio Paggang,
Barangay Talubin, Bontoc, Mountain Province involving a public utility bus coming from Sampaloc,
Manila, bound for Poblacion Bontoc and bearing a "G.V. Florida" body mark with License Plate No. TXT-
872. The mishap claimed the lives of fifteen (15) passengers and injured thirty-two (32) others.

An initial investigation report, which came from the Department of Transportation and Communications of
the Cordillera Administrative Region (DOTC-CAR), showed that based on the records of the Land
Transportation Office (LTO) and herein petitioner, License Plate No. TXT-872 actually belongs to a
different bus owned by and registered under the name of a certain Norberto Cue, Sr. (Cue) under
Certificate of Public Convenience (CPC) Case No. 2007-0407 and bears engine and chassis numbers
LX004564 and KN2EAM12PK004452, respectively; and that the bus involved in the accident is not duly
authorized to operate as a public transportation.

As a result, Dagupan Bus was also ordered to submit an Answer on the DOTC-CAR Incident Report,
particularly, to explain why the bus involved in the above accident, which is registered in its name, was
sporting the name "G.V. Florida" at the time of the accident.

Subsequently, Dagupan Bus filed its Answer claiming that: it is not the owner of the bus which was
involved in the accident; the owner is G.V. Florida; Dagupan Bus entered into a Memorandum of
Agreement with G.V. Florida, which, among others, facilitated the exchange of its CPC covering the
Cagayan route for the CPC of Florida covering the Bataan route; and the subsequent registration of the
subject bus in the name of Dagupan Bus is a mere preparatory act on the part of G.V. Florida to
substitute the old authorized units of Dagupan Bus plying the Cagayan route which are being operated
under the abovementioned CPC which has been exchanged with G. V. Florida.

Respondent alleged that: it, indeed, bought Cue's CPC and the ten public utility buses operating under
the said CPC, including the one which bears License Plate No. TXT-872; since Cue's buses were already
old and dilapidated, and not wanting to stop its operations to the detriment of the riding public, it replaced
these buses with new units using the License Plates attached to the old buses, pending approval by
petitioner of the sale and transfer of Cue's CPC in its favor; and it exercised utmost good faith in deciding
to dispatch the ill-fated bus notwithstanding the absence of prior adequate compliance with the
requirements that will constitute its operation legal.

ISSUE: Does the LTFRB have the power to suspend the fleet of a public utility that violates the law, to the
damage of the public?

HELD: Yes.
In the present case, respondent is guilty of several violations of the law, to wit: lack of petitioner's
approval of the sale and transfer of the CPC which respondent bought from Cue; operating the ill-fated
bus under its name when the same is registered under the name of Dagupan Bus Co., Inc.; attaching a
vehicle license plate to the ill-fated bus when such plate belongs to a different bus owned by Cue; and
operating the subject bus under the authority of a different CPC. What makes matters worse is that
respondent knowingly and blatantly committed these violations. How then can respondent claim good
faith under these circumstances?

Respondent, nonetheless, insists that it is unreasonable for petitioner to suspend the operation of 186
buses covered by its 28 CPCs, considering that only one bus unit, covered by a single CPC, was involved
in the subject accident.

It bears to note that the suspension of respondent's 28 CPCs is not only because of the findings of
petitioner that the ill-fated bus was not roadworthy. Rather, and more importantly, the suspension of the
28 CPCs was also brought about by respondent's wanton disregard and obstinate defiance of the
regulations issued by petitioner, which is tantamount to a willful and contumacious refusal to comply with
the requirements of law or of the orders, rules or regulations issued by petitioner and which is punishable,
under the law, by suspension or revocation of any of its CPCs.

The Court agrees with petitioner that its power to suspend the CPCs issued to public utility vehicles
depends on its assessment of the gravity of the violation, the potential and actual harm to the public, and
the policy impact of its own actions. In this regard, the Court gives due deference to petitioner's exercise
of its sound administrative discretion in applying its special knowledge, experience and expertise to
resolve respondent's case.

Indeed, the law gives to the LTFRB (previously known, among others, as Public Service Commission or
Board of Transportation) ample power and discretion to decree or refuse the cancellation of a certificate
of public convenience issued to an operator as long as there is evidence to support its action. 11 As held
by this Court in a long line of cases, 12 it was even intimated that, in matters of this nature so long as the
action is justified, this Court will not substitute its discretion for that of the regulatory agency which, in this
case, is the LTFRB.

18. Nostradamus Villanueva vs. Priscilla R. Domingo and Leandro Luis R. Domingo, G.R. No.
144274, September 20, 2004

FACTS: Priscilla R. Domingo is the registered owner of a silver Mitsubishi Lancer Car with Leandro Luis
R. Domingo as authorized driver. Nostradamus Villanueva was then the registered "owner" of a green
Mitsubishi Lancer following a green traffic light. Priscilla Domingo's silver Lancer car then driven by [co-
respondent] Leandro Luis R. Domingo was cruising at moderate speed. Suddenly, a green Mitsubishi
Lancer driven by Renato Dela Cruz Ocfemia darted directly into the path of NDW 781 '91 thereby hitting
and bumping its left front portion. Renato dela Cruz Ocfemia was driving with expired license and positive
for alcoholic breath. Nostradamus Villanueva claimed that he was no longer the owner of the car at the
time of the mishap because it was swapped with a Pajero owned by Albert Jaucian/Auto Palace Car
Exchange. Auto Palace Car Exchange represented by Albert Jaucian claimed that he was not the
registered owner of the car. Moreover, it could not be held subsidiary liable as employer of Ocfemia
because the latter was off-duty as utility employee at the time of the incident.

ISSUE: May the registered owner of a motor vehicle be held liable for damages arising from a vehicular
accident involving his motor vehicle while being operated by the employee of its buye without the buyer’s
consent and knowledge?
HELD: Yes. The Court has consistently ruled that the registered owner of any vehicle is directly and
primarily responsible to the public and third persons while it is being operated. The rationale behind such
doctrine was explained way back in 1957 in Erezo vs. Jepte:

The principle upon which this doctrine is based is that in dealing with vehicles registered under
the Public Service Law, the public has the right to assume or presume that the registered owner
is the actual owner thereof, for it would be difficult for the public to... enforce the actions that they
may have for injuries caused to them by the vehicles being negligently operated if the public
should be required to prove who the actual owner is.

We do not imply by his doctrine, however, that the registered owner may not recover whatever amount he
had paid by virtue of his liability to third persons from the person to whom he had actually sold, assigned
or conveyed the vehicle. Under the same principle the registered owner of any vehicle, even if not used
for a public service, should primarily be responsible to the public or to third persons for injuries caused the
latter while the vehicle is being driven on the highways or streets. The Revised Motor Vehicle Law (Act
No. 3992, as amended) provides that no vehicle may be used or operated upon any public highway
unless the same is property registered. Registration is required not to make said registration the operative
act by which ownership in vehicles is transferred but to permit the use and operation of the vehicle upon
any public highway. The main aim of motor vehicle registration is to identify the owner so... that if any
accident happens, or that any damage or injury is caused by the vehicle on the public highways,
responsibility therefore can be fixed on a definite individual, the registered owner. Whether the driver is
authorized or not by the actual owner is irrelevant to determining the liability of the registered owner who
the law holds primarily and directly responsible for any accident, injury or death caused by the operation
of the... vehicle in the streets and highways. To require the driver of the vehicle to be authorized by the
actual owner before the registered owner can be held accountable is to defeat the very purpose why
motor vehicle legislations are enacted in the first place.

19. Central Shipping Company, Inc. vs Insurance Company of North America, G.R. No. 150751,
September 20, 2004

FACTS: On July 25, 1990 at Puerto Princesa, Palawan, the petitioner received on board its vessel, the
M/V Central Bohol, 376 pieces of Round Logs and undertook to transport said shipment to Manila for
delivery to Alaska Lumber Co., Inc. The cargo is insured for P3, 000, 000.00 against total lost under
respondents Marine Cargo Policy. After loading the logs, the vessel starts its voyage. After few hours of
the trip, the ship tilts 10 degrees to its side, due to the shifting of the logs in the hold. It continues to tilt
causing the captain and the crew to abandon ship. The ship sank. Respondent alleged that the loss is
due to the negligence and fault of the captain. While petitioner contends that the happening is due to
monsoons which is unforeseen or casa fortuito.

ISSUE: Whether or not petitioner is liable for the loss of cargo?

HELD: From the nature of their business and for reasons of public policy, common carriers are bound to
observe extraordinary diligence over the goods they transport, according to all the circumstances of each
case. In the event of loss, destruction or deterioration of the insured goods, common carriers are
responsible; that is, unless they can prove that such loss, destruction or deterioration was brought about -
- among others -- by "flood, storm, earthquake, lightning or other natural disaster or calamity." In all other
cases not specified under Article 1734 of the Civil Code, common carriers are presumed to have been at
fault or to have acted negligently, unless they prove that they observed extraordinary diligence. The
contention of the petitioner that the loss is due to casa fortuito exempting them from liability is untenable.
Petitioner failed to show that such natural disaster or calamity was the proximate and only cause of the
loss. Human agency must be entirely excluded from the cause of injury or loss. In other words, the
damaging effects blamed on the event or phenomenon must not have been caused, contributed to, or
worsened by the presence of human participation. The defense of fortuitous event or natural disaster
cannot be successfully made when the injury could have been avoided by human precaution. The
monsoon is not the proximate cause of the sinking but is due to the improper stowage of logs. The logs
were not secured by cable wires, causing the logs to shift and later on the sinking the ship. This shows
that they did not exercise extraordinary diligence, making them liable for such loss.

20. Phil-Nippon Kyoei, Corp. vs. Gudelosao, 796 SCRA 508, G.R. No. 181375, July 13, 2016

FACTS: Phil-Nippon Kyoei, Corp. a domestic shipping corporation purchased a "Ro-Ro" passenger/cargo
vessel "MV Mahlia" in Japan in February 2003. For the vessel's one month conduction voyage from
Japan to the Philippines, petitioner, as local principal, and Top Ever Marine Management Maritime Co.,
Ltd. (TMCL), as foreign principal, hired Edwin C. Gudelosao, Virgilio A. Tancontian, and six other
crewmembers. They were hired through the local manning agency of TMCL, Top Ever Marine
Management Philippine Corporation (TEMMPC). TEMMPC, through their president and general manager,
Capt. Oscar Orbeta (Capt. Orbeta), and the eight crewmembers signed separate contracts of
employment. Petitioner secured a Marine Insurance Policy (Maritime Policy No. 00001) from SSSICI over
the vessel for P10,800,000.00 against loss, damage, and third party liability or expense, arising from the
occurrence of the perils of the sea for the voyage of the vessel from Onomichi, Japan to Batangas,
Philippines. This Marine Insurance Policy included Personal Accident Policies for the eight crewmembers
for P3,240,000.00 each in case of accidental death or injury. On February 24, 2003, while still within
Japanese waters, the vessel sank due to extreme bad weather condition. Only Chief Engineer Nilo
Macasling survived the incident while the rest of the crewmembers, including Gudelosao and Tancontian,
perished.

Respondents, as heirs and beneficiaries of Gudelosao and Tancontian, filed separate complaints for
death benefits and other damages against peti... tioner, TEMMPC, Capt. Orbeta, TMCL, and SSSICI, with
the Arbitration Branch of the National Labor Relations Commission (NLRC).

Labor Arbiter: Magat rendered a Decision finding solidary liability among petitioner, TEMMPC, TMCL and
Capt. Orbeta. The LA also found SSSICI liable to the respondents for the proceeds of the Personal
Accident Policies and attorney's fees. The LA, however, ruled that the liability of petitioner shall be
deemed extinguished only upon SSSICI's payment of the insurance proceeds.

NLRC: On appeal, the NLRC modified the LA Decision in a Resolution. The NLRC absolved petitioner,
TEMMPC and TMCL and Capt. Orbeta from any liability based on the limited liability rule. It, however,
affirmed SSSICI's liability after finding that the Personal Accident Policies answer for the death benefit
claims under the Philippine Overseas Employment Administration Standard Employment Contract
(POEA-SEC).

CA: The CA found that the NLRC erred when it ruled that the obligation of petitioner, TEMMPC and
TMCL for the payment of death benefits under the POEA-SEC was ipso facto transferred to SSSICI upon
the death of the seafarers. TEMMPC and TMCL cannot raise the defense of the total loss of the ship
because its liability under POEA-SEC is separate and distinct from the liability of the shipowner. To
disregard the contract, which has the force of law between the parties, would defeat the purpose of the
Labor Code and the rules and regulations issued by the Department of Labor and Employment (DOLE) in
setting the minimum terms and conditions of employment for the protection of Filipino seamen. The CA
noted that the benefits being claimed are not dependent upon whether there is total loss of the vessel,
because the liability attaches even if the vessel did not sink. Thus, it was error for the NLRC to absolve
TEMMPC and TMCL on the basis of the limited liability rule.

Significantly though, the CA ruled that petitioner is not liable under the POEA-SEC, but by virtue of its
being a shipowner. Thus, petitioner is liable for the injuries to passengers even without a determination of
its fault or negligence. It is for this reason that petitioner obtained insurance from SSSICI - to protect itself
against the consequences of a total loss of the vessel caused by the perils of the sea. Consequently,
SSSICI's liability as petitioner's insurer directly arose from the contract of insurance against liability. The
CA then ordered that petitioner's liability will only be extinguished upon payment by SSSICI of the
insurance proceeds.

ISSUE: Whether the doctrine of real and hypothecary nature of maritime law (also known as the limited
liability rule) applies in favor of petitioner.

HELD: Doctrine of limited liability is not applicable to claims under POEA-SEC.

Article 837 applies the limited liability rule in cases of collision. Meanwhile, Articles 587 and 590
embody the universal principle of limited liability in all cases wherein the shipowner or agent may be
properly held liable for the negligent or illicit acts of the captain. These articles precisely intend to limit
the liability of the shipowner or agent to the value of the vessel, its appurtenances and freightage
earned in the voyage, provided that the owner or agent abandons the vessel.

When the vessel is totally lost, in which case abandonment is not required because there is no vessel
to abandon, the liability of the shipowner or agent for damages is extinguished. Nonetheless, the
limited liability rule is not absolute and is without exceptions. It does not apply in cases: (1) where the
injury or death to a passenger is due either to the fault of the shipowner, or to the concurring
negligence of the shipowner and the captain; (2) where the vessel is insured; and (3) in workmen's
compensation claims.

In Abueg v. San Diego,... we ruled that the limited liability rule found in the Code of Commerce is
inapplicable in a liability created by statute to compensate employees and laborers, or the heirs and
dependents, in cases of injury received by or inflicted upon them while engaged in the performance of
their work or employment, to wit:

The real and hypothecary nature of the liability of the shipowner or agent embodied in the provisions
of the Maritime Law, Book III, Code of Commerce, had its origin in the prevailing conditions of the
maritime trade and sea voyages during the medieval ages, attended by innumerable hazards and
perils. To offset against these adverse conditions and to encourage shipbuilding and maritime
commerce, it was deemed necessary to confine the liability of the owner or agent arising from the
operation of a ship to the vessel, equipment, and freight, or insurance, if any, so that if the shipowner
or agent abandoned the ship, equipment, and freight, his liability was extinguished.

But the provisions of the Code of Commerce invoked by appellant have no room in the application of
the Workmen's Compensation Act which seeks to improve, and aims at the amelioration of, the
condition of laborers and employees. It is not the liability for the damage or loss of the cargo or injury
to, or death of, a passenger by or through the misconduct of the captain or master of the ship; nor the
liability for the loss of the ship as a result of collision; nor the responsibility for wages of the crew, but
a liability created by a statute to compensate employees and laborers in cases of injury received by or
inflicted upon them, while engaged in the performance of their work or employment, or the heirs and
dependents of such laborers and employees in the event of death caused by their employment.

We see no reason why the above doctrine should not apply here.

Thus, the claim for death benefits under the POEA-SEC is the same species as the workmen's
compensation claims under the Labor Code - both of which belong to a different realm from that of
Maritime Law. Therefore, the limited liability rule does not apply to petitioner's liability under the
POEA-SEC.