G.R. No.
146018 June 25, 2003 "Shortly thereafter, Feliciana Legaspi filed a claim, with [respondent],
EDGAR COKALIONG SHIPPING LINES, INC., Petitioner,
vs.
UCPB GENERAL INSURANCE COMPANY, INC., Respondent.
DECISION
PANGANIBAN, J.:
The liability of a common carrier for the loss of goods may, by
stipulation in the bill of lading, be limited to the value declared by the
shipper. On the other hand, the liability of the insurer is determined
by the actual value covered by the insurance policy and the insurance
premiums paid therefor, and not necessarily by the value declared in
the bill of lading.
The Case
Before the Court is a Petition for Review1 under Rule 45 of the Rules
of Court, seeking to set aside the August 31, 2000 Decision2 and the
November 17, 2000 Resolution3 of the Court of Appeals4 (CA) in CA-
GR SP No. 62751. The dispositive part of the Decision reads:
"IN THE LIGHT OF THE FOREGOING, the appeal is GRANTED.
The Decision appealed from is REVERSED. [Petitioner] is hereby
condemned to pay to [respondent] the total amount of ₱148,500.00,
with interest thereon, at the rate of 6% per annum, from date of this
Decision of the Court. [Respondent’s] claim for attorney’s fees
[is] DISMISSED. [Petitioner’s] counterclaims are DISMISSED."5
The assailed Resolution denied petitioner’s Motion for
Reconsideration.
On the other hand, the disposition of the Regional Trial
Court’s6 Decision,7 which was later reversed by the CA, states:
"WHEREFORE, premises considered, the case is hereby DISMISSED
for lack of merit.
"No cost."8
The Facts
The facts of the case are summarized by the appellate court in this
wise:
"Sometime on December 11, 1991, Nestor Angelia delivered to the
Edgar Cokaliong Shipping Lines, Inc. (now Cokaliong Shipping
Lines), [petitioner] for brevity, cargo consisting of one (1) carton of
Christmas décor and two (2) sacks of plastic toys, to be transported on
board the M/V Tandag on its Voyage No. T-189 scheduled to depart
from Cebu City, on December 12, 1991, for Tandag, Surigao del Sur.
[Petitioner] issued Bill of Lading No. 58, freight prepaid, covering
the cargo. Nestor Angelia was both the shipper and consignee of the
cargo valued, on the face thereof, in the amount of ₱6,500.00. Zosimo
Mercado likewise delivered cargo to [petitioner], consisting of two (2)
cartons of plastic toys and Christmas decor, one (1) roll of floor mat
and one (1) bundle of various or assorted goods for transportation
thereof from Cebu City to Tandag, Surigao del Sur, on board the said
vessel, and said voyage. [Petitioner] issued Bill of Lading No.
59 covering the cargo which, on the face thereof, was valued in the
amount of ₱14,000.00. Under the Bill of Lading, Zosimo Mercado
was both the shipper and consignee of the cargo.
"On December 12, 1991, Feliciana Legaspi insured the cargo, covered
by Bill of Lading No. 59, with the UCPB General Insurance Co.,
Inc., [respondent] for brevity, for the amount of ₱100,000.00
‘against all risks’ under Open Policy No. 002/9 1/254 for which she
was issued, by [respondent], Marine Risk Note No. 18409 on said
date. She also insured the cargo covered by Bill of Lading No. 58,
with [respondent], for the amount of ₱50,000.00, under Open Policy
No. 002/9 1/254 on the basis of which [respondent] issued Marine
Risk Note No. 18410 on said date.
"When the vessel left port, it had thirty-four (34) passengers and
assorted cargo on board, including the goods of Legaspi. After the
vessel had passed by the Mandaue-Mactan Bridge, fire ensued in the
engine room, and, despite earnest efforts of the officers and crew of
the vessel, the fire engulfed and destroyed the entire vessel resulting
in the loss of the vessel and the cargoes therein. The Captain filed the
required Marine Protest.
for the value of the cargo insured under Marine Risk Note No.
18409 and covered by Bill of Lading No. 59. She submitted, in
support of her claim, a Receipt, dated December 11, 1991,
purportedly signed by Zosimo Mercado, and Order Slips purportedly
signed by him for the goods he received from Feliciana Legaspi valued
in the amount of ₱110,056.00. [Respondent] approved the claim of
Feliciana Legaspi and drew and issued UCPB Check No. 612939,
dated March 9, 1992, in the net amount of ₱99,000.00, in settlement of
her claim after which she executed a Subrogation Receipt/Deed,
for said amount, in favor of [respondent]. She also filed a claim for the
value of the cargo covered by Bill of Lading No. 58. She submitted to
[respondent] a Receipt, dated December 11, 1991 and Order Slips,
purportedly signed by Nestor Angelia for the goods he received from
Feliciana Legaspi valued at ₱60,338.00. [Respondent] approved her
claim and remitted to Feliciana Legaspi the net amount of ₱49,500.00,
after which she signed a Subrogation Receipt/Deed, dated March
9, 1992, in favor of [respondent].
"On July 14, 1992, [respondent], as subrogee of Feliciana Legaspi,
filed a complaint anchored on torts against [petitioner], with the
Regional Trial Court of Makati City, for the collection of the total
principal amount of ₱148,500.00, which it paid to Feliciana Legaspi
for the loss of the cargo, praying that judgment be rendered in its
favor and against the [petitioner] as follows:
‘WHEREFORE, it is respectfully prayed of this Honorable Court that
after due hearing, judgment be rendered ordering [petitioner] to pay
[respondent] the following.
1. Actual damages in the amount of ₱148,500.00 plus
interest thereon at the legal rate from the time of filing of
this complaint until fully paid;
2. Attorney’s fees in the amount of ₱10,000.00; and
3. Cost of suit.
‘[Respondent] further prays for such other reliefs and remedies as this
Honorable Court may deem just and equitable under the premises.’
"[Respondent] alleged, inter alia, in its complaint, that the cargo
subject of its complaint was delivered to, and received by, [petitioner]
for transportation to Tandag, Surigao del Sur under ‘Bill of Ladings,’
Annexes ‘A’ and ‘B’ of the complaint; that the loss of the cargo was due
to the negligence of the [petitioner]; and that Feliciana Legaspi had
executed Subrogation Receipts/Deeds in favor of [respondent] after
paying to her the value of the cargo on account of the Marine Risk
Notes it issued in her favor covering the cargo.
"In its Answer to the complaint, [petitioner] alleged that: (a)
[petitioner] was cleared by the Board of Marine Inquiry of any
negligence in the burning of the vessel; (b) the complaint stated no
cause of action against [petitioner]; and (c) the shippers/consignee had
already been paid the value of the goods as stated in the Bill of
Lading and, hence, [petitioner] cannot be held liable for the loss of
the cargo beyond the value thereof declared in the Bill of Lading.
"After [respondent] rested its case, [petitioner] prayed for and was
allowed, by the Court a quo, to take the depositions of Chester
Cokaliong, the Vice-President and Chief Operating Officer of
[petitioner], and a resident of Cebu City, and of Noel Tanyu, an officer
of the Equitable Banking Corporation, in Cebu City, and a resident of
Cebu City, to be given before the Presiding Judge of Branch 106 of the
Regional Trial Court of Cebu City. Chester Cokaliong and Noel Tanyu
did testify, by way of deposition, before the Court and declared inter
alia, that: [petitioner] is a family corporation like the Chester
Marketing, Inc.; Nestor Angelia had been doing business with
[petitioner] and Chester Marketing, Inc., for years, and incurred an
account with Chester Marketing, Inc. for his purchases from said
corporation; [petitioner] did issue Bills of Lading Nos. 58 and 59 for
the cargo described therein with Zosimo Mercado and Nestor Angelia
as shippers/consignees, respectively; the engine room of the M/V
Tandag caught fire after it passed the Mandaue/Mactan Bridge
resulting in the total loss of the vessel and its cargo; an investigation
was conducted by the Board of Marine Inquiry of the Philippine Coast
Guard which rendered a Report, dated February 13, 1992 absolving
[petitioner] of any responsibility on account of the fire, which Report
of the Board was approved by the District Commander of the
Philippine Coast Guard; a few days after the sinking of the vessel, a
representative of the Legaspi Marketing filed claims for the values of
the goods under Bills of Lading Nos. 58 and 59 in behalf of the
shippers/consignees, Nestor Angelia and Zosimo Mercado; [petitioner]
was able to ascertain, from the shippers/consignees and the
representative of the Legaspi Marketing that the cargo covered
by Bill of Lading No. 59 was owned by Legaspi Marketing and
consigned to Zosimo Mercado while that covered by Bill of Lading
No. 58 was purchased by Nestor Angelia from the Legaspi Marketing;
that [petitioner] approved the claim of Legaspi Marketing for the
value of the cargo under Bill of Lading No. 59 and remitted to
Legaspi Marketing the said amount under Equitable Banking
Corporation Check No. 20230486 dated August 12, 1992, in the
amount of ₱14,000.00 for which the representative of the Legaspi
Marketing signed Voucher No. 4379, dated August 12, 1992, for the
said amount of ₱14,000.00 in full payment of claims under Bill of
Lading No. 59; that [petitioner] approved the claim of Nestor Angelia
in the amount of ₱6,500.00 but that since the latter owed Chester
Marketing, Inc., for some purchases, [petitioner] merely set off the
amount due to Nestor Angelia under Bill of Lading No. 58 against
his account with Chester Marketing, Inc.; [petitioner] lost/[misplaced]
the original of the check after it was received by Legaspi Marketing,
hence, the production of the microfilm copy by Noel Tanyu of the
Equitable Banking Corporation; [petitioner] never knew, before
settling with Legaspi Marketing and Nestor Angelia that the cargo
under both Bills of Lading were insured with [respondent], or that
Feliciana Legaspi filed claims for the value of the cargo with
[respondent] and that the latter approved the claims of Feliciana
Legaspi and paid the total amount of ₱148,500.00 to her; [petitioner]
came to know, for the first time, of the payments by [respondent] of
the claims of Feliciana Legaspi when it was served with the summons
and complaint, on October 8, 1992; after settling his claim, Nestor
Angelia x x x executed the Release and Quitclaim, dated July 2,
1993, and Affidavit, dated July 2, 1993 in favor of [respondent];
hence, [petitioner] was absolved of any liability for the loss of the
cargo covered by Bills of Lading Nos. 58 and 59; and even if it was,
its liability should not exceed the value of the cargo as stated in
the Bills of Lading.
"[Petitioner] did not anymore present any other witnesses on its
evidence-in-chief. x x x"9 (Citations omitted)
Ruling of the Court of Appeals
The CA held that petitioner had failed "to prove that the fire which
consumed the vessel and its cargo was caused by something other
than its negligence in the upkeep, maintenance and operation of the
vessel."10
Petitioner had paid ₱14,000 to Legaspi Marketing for the cargo
covered by Bill of Lading No. 59. The CA, however, held that the
payment did not extinguish petitioner’s obligation to respondent,
because there was no evidence that Feliciana Legaspi (the insured)
was the owner/proprietor of Legaspi Marketing. The CA also pointed
out the impropriety of treating the claim under Bill of Lading No. 58 --
covering cargo valued therein at ₱6,500 -- as a setoff against Nestor
Angelia’s account with Chester Enterprises, Inc.
Finally, it ruled that respondent "is not bound by the valuation of the
cargo under the Bills of Lading, x x x nor is the value of the cargo
under said Bills of Lading conclusive on the [respondent]. This is so
because, in the first place, the goods were insured with the
[respondent] for the total amount of ₱150,000.00, which amount may
be considered as the face value of the goods."11
Hence this Petition.12
Issues
Petitioner raises for our consideration the following alleged errors of
the CA:
"I
"The Honorable Court of Appeals erred, granting arguendo that
petitioner is liable, in holding that petitioner’s liability should be
based on the ‘actual insured value’ of the goods and not from actual
valuation declared by the shipper/consignee in the bill of lading.
"II
"The Court of Appeals erred in not affirming the findings of the
Philippine Coast Guard, as sustained by the trial court a quo, holding
that the cause of loss of the aforesaid cargoes under Bill of Lading
Nos. 58 and 59 was due to force majeure and due diligence was
[exercised] by petitioner prior to, during and immediately after the
fire on [petitioner’s] vessel.
"III
"The Court of Appeals erred in not holding that respondent UCPB
General Insurance has no cause of action against the petitioner."13
In sum, the issues are: (1) Is petitioner liable for the loss of the goods?
(2) If it is liable, what is the extent of its liability?
This Court’s Ruling
The Petition is partly meritorious.
First Issue:
Liability for Loss
Petitioner argues that the cause of the loss of the goods, subject of this
case, was force majeure. It adds that its exercise of due diligence was
adequately proven by the findings of the Philippine Coast Guard.
We are not convinced. The uncontroverted findings of the Philippine
Coast Guard show that the M/V Tandag sank due to a fire, which
resulted from a crack in the auxiliary engine fuel oil service tank.
Fuel spurted out of the crack and dripped to the heating exhaust
manifold, causing the ship to burst into flames. The crack was located
on the side of the fuel oil tank, which had a mere two-inch gap from
the engine room walling, thus precluding constant inspection and care
by the crew.
Having originated from an unchecked crack in the fuel oil service
tank, the fire could not have been caused by force majeure. Broadly
speaking, force majeure generally applies to a natural accident, such
as that caused by a lightning, an earthquake, a tempest or a public
enemy.14 Hence, fire is not considered a natural disaster or calamity.
In Eastern Shipping Lines, Inc. v. Intermediate Appellate Court,15 we
explained:
"x x x. This must be so as it arises almost invariably from some act of
man or by human means. It does not fall within the category of an act
of God unless caused by lighting or by other natural disaster or
calamity. It may even be caused by the actual fault or privity of the
carrier.
"Article 1680 of the Civil Code, which considers fire as an
extraordinary fortuitous event refers to leases or rural lands where a
reduction of the rent is allowed when more than one-half of the fruits
have been lost due to such event, considering that the law adopts a
protective policy towards agriculture.
"As the peril of fire is not comprehended within the exceptions in
Article 1734, supra, Article 1735 of the Civil Code provides that in all
cases other than those mentioned in Article 1734, the common carrier
shall be presumed to have been at fault or to have acted negligently,
unless it proves that it has observed the extraordinary diligence
required by law."
Where loss of cargo results from the failure of the officers of a vessel to
inspect their ship frequently so as to discover the existence of cracked
parts, that loss cannot be attributed to force majeure, but to the
negligence of those officials.16
The law provides that a common carrier is presumed to have been
negligent if it fails to prove that it exercised extraordinary vigilance
over the goods it transported. Ensuring the seaworthiness of the
vessel is the first step in exercising the required vigilance. Petitioner
did not present sufficient evidence showing what measures or acts it
had undertaken to ensure the seaworthiness of the vessel. It failed to
show when the last inspection and care of the auxiliary engine fuel oil
service tank was made, what the normal practice was for its
maintenance, or some other evidence to establish that it had exercised
extraordinary diligence. It merely stated that constant inspection and
care were not possible, and that the last time the vessel was dry-
docked was in November 1990. Necessarily, in accordance with Article
173517 of the Civil Code, we hold petitioner responsible for the loss of
the goods covered by Bills of Lading Nos. 58 and 59.
Second Issue:
Extent of Liability
Respondent contends that petitioner’s liability should be based on the
actual insured value of the goods, subject of this case. On the other
hand, petitioner claims that its liability should be limited to the value
declared by the shipper/consignee in the Bill of Lading.
The records18 show that the Bills of Lading covering the lost goods
contain the stipulation that in case of claim for loss or for damage to
the shipped merchandise or property, "[t]he liability of the common
carrier x x x shall not exceed the value of the goods as appearing in
the bill of lading."19 The attempt by respondent to make light of this
stipulation is unconvincing. As it had the consignees’ copies of the
Bills of Lading,20 it could have easily produced those copies, instead of
relying on mere allegations and suppositions. However, it presented
mere photocopies thereof to disprove petitioner’s evidence showing the
existence of the above stipulation.
A stipulation that limits liability is valid21 as long as it is not against
public policy. In Everett Steamship Corporation v. Court of
Appeals,22 the Court stated:
"A stipulation in the bill of lading limiting the common carrier’s
liability for loss or destruction of a cargo to a certain sum, unless the
shipper or owner declares a greater value, is sanctioned by law,
particularly Articles 1749 and 1750 of the Civil Code which provides:
‘Art. 1749. A stipulation that the common carrier’s liability is limited
to the value of the goods appearing in the bill of lading, unless the
shipper or owner declares a greater value, is binding.’
‘Art. 1750. A contract fixing the sum that may be recovered by the
owner or shipper for the loss, destruction, or deterioration of the goods
is valid, if it is reasonable and just under the circumstances, and has
been freely and fairly agreed upon.’
"Such limited-liability clause has also been consistently upheld by this
Court in a number of cases. Thus, in Sea-Land Service, Inc. vs.
Intermediate Appellate Court, we ruled:
‘It seems clear that even if said section 4 (5) of the Carriage of Goods
by Sea Act did not exist, the validity and binding effect of the liability
limitation clause in the bill of lading here are nevertheless fully
sustainable on the basis alone of the cited Civil Code Provisions. That
said stipulation is just and reasonable is arguable from the fact that it
echoes Art. 1750 itself in providing a limit to liability only if a greater
value is not declared for the shipment in the bill of lading. To hold
otherwise would amount to questioning the justness and fairness of
the law itself, and this the private respondent does not pretend to do.
But over and above that consideration, the just and reasonable
character of such stipulation is implicit in it giving the shipper or
owner the option of avoiding accrual of liability limitation by the
simple and surely far from onerous expedient of declaring the nature
and value of the shipment in the bill of lading.’
"Pursuant to the afore-quoted provisions of law, it is required that the
stipulation limiting the common carrier’s liability for loss must be
‘reasonable and just under the circumstances, and has been freely and
fairly agreed upon.
"The bill of lading subject of the present controversy specifically
provides, among others:
’18. All claims for which the carrier may be liable shall be adjusted
and settled on the basis of the shipper’s net invoice cost plus freight
and insurance premiums, if paid, and in no event shall the carrier be
liable for any loss of possible profits or any consequential loss.
‘The carrier shall not be liable for any loss of or any damage to or in
any connection with, goods in an amount exceeding One Hundred
Thousand Yen in Japanese Currency (¥100,000.00) or its equivalent
in any other currency per package or customary freight unit
(whichever is least) unless the value of the goods higher than this
amount is declared in writing by the shipper before receipt of the goods
by the carrier and inserted in the Bill of Lading and extra freight is
paid as required.’
"The above stipulations are, to our mind, reasonable and
just.1avvphi1 In the bill of lading, the carrier made it clear that its
liability would only be up to One Hundred Thousand (Y100,000.00)
Yen. However, the shipper, Maruman Trading, had the option to
declare a higher valuation if the value of its cargo was higher than the
limited liability of the carrier. Considering that the shipper did not
declare a higher valuation, it had itself to blame for not complying
with the stipulations." (Italics supplied)
In the present case, the stipulation limiting petitioner’s liability is not
contrary to public policy. In fact, its just and reasonable character is
evident. The shippers/consignees may recover the full value of the
goods by the simple expedient of declaring the true value of the
shipment in the Bill of Lading. Other than the payment of a higher
freight, there was nothing to stop them from placing the actual value
of the goods therein. In fact, they committed fraud against the
common carrier by deliberately undervaluing the goods in their Bill of
Lading, thus depriving the carrier of its proper and just transport
fare.
Concededly, the purpose of the limiting stipulation in the Bill of
Lading is to protect the common carrier. Such stipulation obliges the
shipper/consignee to notify the common carrier of the amount that the
latter may be liable for in case of loss of the goods. The common
carrier can then take appropriate measures -- getting insurance, if
needed, to cover or protect itself. This precaution on the part of the
carrier is reasonable and prudent. Hence, a shipper/consignee that
undervalues the real worth of the goods it seeks to transport does not
only violate a valid contractual stipulation, but commits a fraudulent
act when it seeks to make the common carrier liable for more than the
amount it declared in the bill of lading.
Indeed, Zosimo Mercado and Nestor Angelia misled petitioner by
undervaluing the goods in their respective Bills of Lading. Hence,
petitioner was exposed to a risk that was deliberately hidden from it,
and from which it could not protect itself.
It is well to point out that, for assuming a higher risk (the alleged
actual value of the goods) the insurance company was paid the correct
higher premium by Feliciana Legaspi; while petitioner was paid a fee
lower than what it was entitled to for transporting the goods that had
been deliberately undervalued by the shippers in the Bill of Lading.
Between the two of them, the insurer should bear the loss in excess of
the value declared in the Bills of Lading. This is the just and equitable
solution.
In Aboitiz Shipping Corporation v. Court of Appeals,23 the description
of the nature and the value of the goods shipped were declared and
reflected in the bill of lading, like in the present case. The Court
therein considered this declaration as the basis of the carrier’s
liability and ordered payment based on such amount. Following this
ruling, petitioner should not be held liable for more than what was
declared by the shippers/consignees as the value of the goods in the
bills of lading.
We find no cogent reason to disturb the CA’s finding that Feliciana
Legaspi was the owner of the goods covered by Bills of Lading Nos. 58
and 59. Undoubtedly, the goods were merely consigned to Nestor
Angelia and Zosimo Mercado, respectively; thus, Feliciana Legaspi or
her subrogee (respondent) was entitled to the goods or, in case of loss,
to compensation therefor. There is no evidence showing that
petitioner paid her for the loss of those goods. It does not even claim to
have paid her.
On the other hand, Legaspi Marketing filed with petitioner a claim for
the lost goods under Bill of Lading No. 59, for which the latter
subsequently paid ₱14,000. But nothing in the records convincingly
shows that the former was the owner of the goods. Respondent was,
however, able to prove that it was Feliciana Legaspi who owned those
goods, and who was thus entitled to payment for their loss. Hence, the
claim for the goods under Bill of Lading No. 59 cannot be deemed to
have been extinguished, because payment was made to a person who
was not entitled thereto.
With regard to the claim for the goods that were covered by Bill of
Lading No. 58 and valued at ₱6,500, the parties have not convinced us
to disturb the findings of the CA that compensation could not validly
take place. Thus, we uphold the appellate court’s ruling on this point.
WHEREFORE, the Petition is hereby PARTIALLY GRANTED. The
assailed Decision is MODIFIED in the sense that petitioner
is ORDERED to pay respondent the sums of ₱14,000 and ₱6,500,
which represent the value of the goods stated in Bills of Lading Nos.
59 and 58, respectively. No costs.
G.R. No. L-69044 May 29, 1987
EASTERN SHIPPING LINES, INC., petitioner,
vs.
INTERMEDIATE APPELLATE COURT and DEVELOPMENT
INSURANCE & SURETY CORPORATION, respondents.
No. 71478 May 29, 1987
EASTERN SHIPPING LINES, INC., petitioner,
vs.
THE NISSHIN FIRE AND MARINE INSURANCE CO., and
DOWA FIRE & MARINE INSURANCE CO., LTD., respondents.
MELENCIO-HERRERA, J.:
These two cases, both for the recovery of the value of cargo insurance,
arose from the same incident, the sinking of the M/S ASIATICA when
it caught fire, resulting in the total loss of ship and cargo.
The basic facts are not in controversy:
In G.R. No. 69044, sometime in or prior to June, 1977, the M/S
ASIATICA, a vessel operated by petitioner Eastern Shipping Lines,
Inc., (referred to hereinafter as Petitioner Carrier) loaded at Kobe,
Japan for transportation to Manila, 5,000 pieces of calorized lance
pipes in 28 packages valued at P256,039.00 consigned to Philippine
Blooming Mills Co., Inc., and 7 cases of spare parts valued at
P92,361.75, consigned to Central Textile Mills, Inc. Both sets of goods
were insured against marine risk for their stated value with
respondent Development Insurance and Surety Corporation.
In G.R. No. 71478, during the same period, the same vessel took on
board 128 cartons of garment fabrics and accessories, in two (2)
containers, consigned to Mariveles Apparel Corporation, and two
cases of surveying instruments consigned to Aman Enterprises and
General Merchandise. The 128 cartons were insured for their stated
value by respondent Nisshin Fire & Marine Insurance Co., for US
$46,583.00, and the 2 cases by respondent Dowa Fire & Marine
Insurance Co., Ltd., for US $11,385.00.
Enroute for Kobe, Japan, to Manila, the vessel caught fire and sank,
resulting in the total loss of ship and cargo. The respective respondent
Insurers paid the corresponding marine insurance values to the
consignees concerned and were thus subrogated unto the rights of the
latter as the insured.
G.R. NO. 69044
On May 11, 1978, respondent Development Insurance & Surety
Corporation (Development Insurance, for short), having been
subrogated unto the rights of the two insured companies, filed suit
against petitioner Carrier for the recovery of the amounts it had paid
to the insured before the then Court of First instance of Manila,
Branch XXX (Civil Case No. 6087).
Petitioner-Carrier denied liability mainly on the ground that the loss
was due to an extraordinary fortuitous event, hence, it is not liable
under the law.
On August 31, 1979, the Trial Court rendered judgment in favor of
Development Insurance in the amounts of P256,039.00 and
P92,361.75, respectively, with legal interest, plus P35,000.00 as
attorney's fees and costs. Petitioner Carrier took an appeal to the then
Court of Appeals which, on August 14, 1984, affirmed.
Petitioner Carrier is now before us on a Petition for Review on
Certiorari.
G.R. NO. 71478
On June 16, 1978, respondents Nisshin Fire & Marine Insurance Co.
NISSHIN for short), and Dowa Fire & Marine Insurance Co., Ltd.
(DOWA, for brevity), as subrogees of the insured, filed suit against
Petitioner Carrier for the recovery of the insured value of the cargo
lost with the then Court of First Instance of Manila, Branch 11 (Civil
Case No. 116151), imputing unseaworthiness of the ship and non-
observance of extraordinary diligence by petitioner Carrier.
Petitioner Carrier denied liability on the principal grounds that the
fire which caused the sinking of the ship is an exempting
circumstance under Section 4(2) (b) of the Carriage of Goods by Sea
Act (COGSA); and that when the loss of fire is established, the burden
of proving negligence of the vessel is shifted to the cargo shipper.
On September 15, 1980, the Trial Court rendered judgment in favor of
NISSHIN and DOWA in the amounts of US $46,583.00 and US
$11,385.00, respectively, with legal interest, plus attorney's fees of
P5,000.00 and costs. On appeal by petitioner, the then Court of
Appeals on September 10, 1984, affirmed with modification the Trial
Court's judgment by decreasing the amount recoverable by DOWA to
US $1,000.00 because of $500 per package limitation of liability under
the COGSA.
Hence, this Petition for Review on certiorari by Petitioner Carrier.
Both Petitions were initially denied for lack of merit. G.R. No. 69044
on January 16, 1985 by the First Division, and G. R. No. 71478 on
September 25, 1985 by the Second Division. Upon Petitioner Carrier's
Motion for Reconsideration, however, G.R. No. 69044 was given due
course on March 25, 1985, and the parties were required to submit
their respective Memoranda, which they have done.
On the other hand, in G.R. No. 71478, Petitioner Carrier sought
reconsideration of the Resolution denying the Petition for Review and
moved for its consolidation with G.R. No. 69044, the lower-numbered
case, which was then pending resolution with the First Division. The
same was granted; the Resolution of the Second Division of September
25, 1985 was set aside and the Petition was given due course.
At the outset, we reject Petitioner Carrier's claim that it is not the
operator of the M/S Asiatica but merely a charterer thereof. We note
that in G.R. No. 69044, Petitioner Carrier stated in its Petition:
There are about 22 cases of the "ASIATICA" pending in various courts
where various plaintiffs are represented by various counsel
representing various consignees or insurance companies. The common
defendant in these cases is petitioner herein, being the operator of
said vessel. ... 1
Petitioner Carrier should be held bound to said admission. As a
general rule, the facts alleged in a party's pleading are deemed
admissions of that party and binding upon it. 2 And an admission in
one pleading in one action may be received in evidence against the
pleader or his successor-in-interest on the trial of another action to
which he is a party, in favor of a party to the latter action. 3
The threshold issues in both cases are: (1) which law should govern —
the Civil Code provisions on Common carriers or the Carriage of
Goods by Sea Act? and (2) who has the burden of proof to show
negligence of the carrier?
On the Law Applicable
The law of the country to which the goods are to be transported
governs the liability of the common carrier in case of their loss,
destruction or deterioration. 4 As the cargoes in question were
transported from Japan to the Philippines, the liability of Petitioner
Carrier is governed primarily by the Civil Code. 5 However, in all
matters not regulated by said Code, the rights and obligations of
common carrier shall be governed by the Code of Commerce and by
special laws. 6 Thus, the Carriage of Goods by Sea Act, a special law,
is suppletory to the provisions of the Civil Code. 7
On the Burden of Proof
Under the Civil Code, common carriers, from the nature of their
business and for reasons of public policy, are bound to observe
extraordinary diligence in the vigilance over goods, according to all
the circumstances of each case. 8Common carriers are responsible for
the loss, destruction, or deterioration of the goods unless the same is
due to any of the following causes only:
(1) Flood, storm, earthquake, lightning or other natural disaster or
calamity;
xxx xxx xxx 9
Petitioner Carrier claims that the loss of the vessel by fire exempts it
from liability under the phrase "natural disaster or calamity. "
However, we are of the opinion that fire may not be considered a
natural disaster or calamity. This must be so as it arises almost
invariably from some act of man or by human means. 10 It does not
fall within the category of an act of God unless caused by
lightning 11 or by other natural disaster or calamity. 12 It may even
be caused by the actual fault or privity of the carrier. 13
Article 1680 of the Civil Code, which considers fire as an
extraordinary fortuitous event refers to leases of rural lands where a
reduction of the rent is allowed when more than one-half of the fruits
have been lost due to such event, considering that the law adopts a
protection policy towards agriculture. 14
As the peril of the fire is not comprehended within the exception in
Article 1734, supra, Article 1735 of the Civil Code provides that all
cases than those mention in Article 1734, the common carrier shall be
presumed to have been at fault or to have acted negligently, unless it
proves that it has observed the extraordinary deligence required by
law.
In this case, the respective Insurers. as subrogees of the cargo
shippers, have proven that the transported goods have been lost.
Petitioner Carrier has also proved that the loss was caused by fire.
The burden then is upon Petitioner Carrier to proved that it has
exercised the extraordinary diligence required by law. In this regard,
the Trial Court, concurred in by the Appellate Court, made the
following Finding of fact:
The cargoes in question were, according to the witnesses defendant
placed in hatches No, 2 and 3 cf the vessel, Boatswain Ernesto
Pastrana noticed that smoke was coming out from hatch No. 2 and
hatch No. 3; that where the smoke was noticed, the fire was already
big; that the fire must have started twenty-four 24) our the same was
noticed; that carbon dioxide was ordered released and the crew was
ordered to open the hatch covers of No, 2 tor commencement of fire
fighting by sea water: that all of these effort were not enough to
control the fire.
Pursuant to Article 1733, common carriers are bound to extraordinary
diligence in the vigilance over the goods. The evidence of the
defendant did not show that extraordinary vigilance was observed by
the vessel to prevent the occurrence of fire at hatches numbers 2 and
3. Defendant's evidence did not likewise show he amount of diligence
made by the crew, on orders, in the care of the cargoes. What appears
is that after the cargoes were stored in the hatches, no regular
inspection was made as to their condition during the voyage.
Consequently, the crew could not have even explain what could have
caused the fire. The defendant, in the Court's mind, failed to
satisfactorily show that extraordinary vigilance and care had been
made by the crew to prevent the occurrence of the fire. The defendant,
as a common carrier, is liable to the consignees for said lack of
deligence required of it under Article 1733 of the Civil Code. 15
Having failed to discharge the burden of proving that it had exercised
the extraordinary diligence required by law, Petitioner Carrier cannot
escape liability for the loss of the cargo.
And even if fire were to be considered a "natural disaster" within the
meaning of Article 1734 of the Civil Code, it is required under Article
1739 of the same Code that the "natural disaster" must have been the
"proximate and only cause of the loss," and that the carrier has
"exercised due diligence to prevent or minimize the loss before, during
or after the occurrence of the disaster. " This Petitioner Carrier has
also failed to establish satisfactorily.
Nor may Petitioner Carrier seek refuge from liability under the
Carriage of Goods by Sea Act, It is provided therein that:
Sec. 4(2). Neither the carrier nor the ship shall be responsible for loss
or damage arising or resulting from
(b) Fire, unless caused by the actual fault or privity of the carrier.
xxx xxx xxx
In this case, both the Trial Court and the Appellate Court, in effect,
found, as a fact, that there was "actual fault" of the carrier shown by
"lack of diligence" in that "when the smoke was noticed, the fire was
already big; that the fire must have started twenty-four (24) hours
before the same was noticed; " and that "after the cargoes were stored
in the hatches, no regular inspection was made as to their condition
during the voyage." The foregoing suffices to show that the
circumstances under which the fire originated and spread are such as
to show that Petitioner Carrier or its servants were negligent in
connection therewith. Consequently, the complete defense afforded by
the COGSA when loss results from fire is unavailing to Petitioner
Carrier.
On the US $500 Per Package Limitation:
Petitioner Carrier avers that its liability if any, should not exceed US
$500 per package as provided in section 4(5) of the COGSA, which
reads:
(5) Neither the carrier nor the ship shall in any event be or become
liable for any loss or damage to or in connection with the
transportation of goods in an amount exceeding $500 per package
lawful money of the United States, or in case of goods not shipped in
packages, per customary freight unit, or the equivalent of that sum in
other currency, unless the nature and value of such goods have been
declared by the shipper before shipment and inserted in bill of lading.
This declaration if embodied in the bill of lading shall be prima facie
evidence, but all be conclusive on the carrier.
By agreement between the carrier, master or agent of the carrier, and
the shipper another maximum amount than that mentioned in this
paragraph may be fixed: Provided, That such maximum shall not be
less than the figure above named. In no event shall the carrier be
Liable for more than the amount of damage actually sustained.
xxx xxx xxx
Article 1749 of the New Civil Code also allows the limitations of
liability in this wise:
Art. 1749. A stipulation that the common carrier's liability as limited
to the value of the goods appearing in the bill of lading, unless the
shipper or owner declares a greater value, is binding.
It is to be noted that the Civil Code does not of itself limit the liability
of the common carrier to a fixed amount per package although the
Code expressly permits a stipulation limiting such liability. Thus, the
COGSA which is suppletory to the provisions of the Civil Code, steps
in and supplements the Code by establishing a statutory provision
limiting the carrier's liability in the absence of a declaration of a
higher value of the goods by the shipper in the bill of lading. The
provisions of the Carriage of Goods by.Sea Act on limited liability are
as much a part of a bill of lading as though physically in it and as
much a part thereof as though placed therein by agreement of the
parties. 16
In G.R. No. 69044, there is no stipulation in the respective Bills of
Lading (Exhibits "C-2" and "I-3") 1 7 limiting the carrier's liability for
the loss or destruction of the goods. Nor is there a declaration of a
higher value of the goods. Hence, Petitioner Carrier's liability should
not exceed US $500 per package, or its peso equivalent, at the time of
payment of the value of the goods lost, but in no case "more than the
amount of damage actually sustained."
The actual total loss for the 5,000 pieces of calorized lance pipes was
P256,039 (Exhibit "C"), which was exactly the amount of the
insurance coverage by Development Insurance (Exhibit "A"), and the
amount affirmed to be paid by respondent Court. The goods were
shipped in 28 packages (Exhibit "C-2") Multiplying 28 packages by
$500 would result in a product of $14,000 which, at the current
exchange rate of P20.44 to US $1, would be P286,160, or "more than
the amount of damage actually sustained." Consequently, the
aforestated amount of P256,039 should be upheld.
With respect to the seven (7) cases of spare parts (Exhibit "I-3"), their
actual value was P92,361.75 (Exhibit "I"), which is likewise the
insured value of the cargo (Exhibit "H") and amount was affirmed to
be paid by respondent Court. however, multiplying seven (7) cases by
$500 per package at the present prevailing rate of P20.44 to US $1
(US $3,500 x P20.44) would yield P71,540 only, which is the amount
that should be paid by Petitioner Carrier for those spare parts, and
not P92,361.75.
In G.R. No. 71478, in so far as the two (2) cases of surveying
instruments are concerned, the amount awarded to DOWA which was
already reduced to $1,000 by the Appellate Court following the
statutory $500 liability per package, is in order.
In respect of the shipment of 128 cartons of garment fabrics in two (2)
containers and insured with NISSHIN, the Appellate Court also
limited Petitioner Carrier's liability to $500 per package and affirmed
the award of $46,583 to NISSHIN. it multiplied 128 cartons
(considered as COGSA packages) by $500 to arrive at the figure of
$64,000, and explained that "since this amount is more than the
insured value of the goods, that is $46,583, the Trial Court was correct
in awarding said amount only for the 128 cartons, which amount is
less than the maximum limitation of the carrier's liability."
We find no reversible error. The 128 cartons and not the two (2)
containers should be considered as the shipping unit.
In Mitsui & Co., Ltd. vs. American Export Lines, Inc. 636 F 2d 807 In this case, the Bill of Lading (Exhibit "A") disclosed the following
(1981), the consignees of tin ingots and the shipper of floor covering data:
brought action against the vessel owner and operator to recover for
loss of ingots and floor covering, which had been shipped in vessel — 2 Containers
supplied containers. The U.S. District Court for the Southern District
of New York rendered judgment for the plaintiffs, and the defendant (128) Cartons)
appealed. The United States Court of Appeals, Second Division,
modified and affirmed holding that: Men's Garments Fabrics and Accessories Freight Prepaid

When what would ordinarily be considered packages are shipped in a Say: Two (2) Containers Only.
container supplied by the carrier and the number of such units is
Considering, therefore, that the Bill of Lading clearly disclosed the
disclosed in the shipping documents, each of those units and not the
contents of the containers, the number of cartons or units, as well as
container constitutes the "package" referred to in liability limitation
the nature of the goods, and applying the ruling in
provision of Carriage of Goods by Sea Act. Carriage of Goods by Sea
the Mitsui and Eurygenes cases it is clear that the 128 cartons, not the
Act, 4(5), 46 U.S.C.A.& 1304(5).
two (2) containers should be considered as the shipping unit subject to
Even if language and purposes of Carriage of Goods by Sea Act left the $500 limitation of liability.
doubt as to whether carrier-furnished containers whose contents are
True, the evidence does not disclose whether the containers involved
disclosed should be treated as packages, the interest in securing
herein were carrier-furnished or not. Usually, however, containers are
international uniformity would suggest that they should not be so
provided by the carrier. 19 In this case, the probability is that they
treated. Carriage of Goods by Sea Act, 4(5), 46 U.S.C.A. 1304(5).
were so furnished for Petitioner Carrier was at liberty to pack and
... After quoting the statement in Leather's Best, supra, 451 F 2d at carry the goods in containers if they were not so packed. Thus, at the
815, that treating a container as a package is inconsistent with the dorsal side of the Bill of Lading (Exhibit "A") appears the following
congressional purpose of establishing a reasonable minimum level of stipulation in fine print:
liability, Judge Beeks wrote, 414 F. Supp. at 907 (footnotes omitted):
11. (Use of Container) Where the goods receipt of which is
Although this approach has not completely escaped criticism, there is, acknowledged on the face of this Bill of Lading are not already packed
nonetheless, much to commend it. It gives needed recognition to the into container(s) at the time of receipt, the Carrier shall be at liberty
responsibility of the courts to construe and apply the statute as to pack and carry them in any type of container(s).
enacted, however great might be the temptation to "modernize" or
The foregoing would explain the use of the estimate "Say: Two (2)
reconstitute it by artful judicial gloss. If COGSA's package limitation
Containers Only" in the Bill of Lading, meaning that the goods could
scheme suffers from internal illness, Congress alone must undertake
probably fit in two (2) containers only. It cannot mean that the
the surgery. There is, in this regard, obvious wisdom in the Ninth
shipper had furnished the containers for if so, "Two (2) Containers"
Circuit's conclusion in Hartford that technological advancements,
appearing as the first entry would have sufficed. and if there is any
whether or not forseeable by the COGSA promulgators, do not
ambiguity in the Bill of Lading, it is a cardinal principle in the
warrant a distortion or artificial construction of the statutory term
construction of contracts that the interpretation of obscure words or
"package." A ruling that these large reusable metal pieces of transport
stipulations in a contract shall not favor the party who caused the
equipment qualify as COGSA packages — at least where, as here,
obscurity. 20 This applies with even greater force in a contract of
they were carrier owned and supplied — would amount to just such a
adhesion where a contract is already prepared and the other party
distortion.
merely adheres to it, like the Bill of Lading in this case, which is
Certainly, if the individual crates or cartons prepared by the shipper draw. up by the carrier. 21
and containing his goods can rightly be considered "packages"
On Alleged Denial of Opportunity to Present Deposition of Its
standing by themselves, they do not suddenly lose that character upon
Witnesses: (in G.R. No. 69044 only)
being stowed in a carrier's container. I would liken these containers to
detachable stowage compartments of the ship. They simply serve to
Petitioner Carrier claims that the Trial Court did not give it sufficient
divide the ship's overall cargo stowage space into smaller, more
time to take the depositions of its witnesses in Japan by written
serviceable loci. Shippers' packages are quite literally "stowed" in the
interrogatories.
containers utilizing stevedoring practices and materials analogous to
those employed in traditional on board stowage.
We do not agree. petitioner Carrier was given- full opportunity to
present its evidence but it failed to do so. On this point, the Trial
In Yeramex International v. S.S. Tando,, 1977 A.M.C. 1807 (E.D. Va.)
Court found:
rev'd on other grounds, 595 F 2nd 943 (4 Cir. 1979), another district
with many maritime cases followed Judge Beeks' reasoning in
xxx xxx xxx
Matsushita and similarly rejected the functional economics test.
Judge Kellam held that when rolls of polyester goods are packed into Indeed, since after November 6, 1978, to August 27, 1979, not to
cardboard cartons which are then placed in containers, the cartons mention the time from June 27, 1978, when its answer was prepared
and not the containers are the packages. and filed in Court, until September 26, 1978, when the pre-trial
conference was conducted for the last time, the defendant had more
xxx xxx xxx
than nine months to prepare its evidence. Its belated notice to take
deposition on written interrogatories of its witnesses in Japan, served
The case of Smithgreyhound v. M/V Eurygenes, 18 followed the
upon the plaintiff on August 25th, just two days before the hearing set
Mitsui test:
for August 27th, knowing fully well that it was its undertaking on
July 11 the that the deposition of the witnesses would be dispensed
Eurygenes concerned a shipment of stereo equipment packaged by the
with if by next time it had not yet been obtained, only proves the lack
shipper into cartons which were then placed by the shipper into a
of merit of the defendant's motion for postponement, for which reason
carrier- furnished container. The number of cartons was disclosed to
it deserves no sympathy from the Court in that regard. The defendant
the carrier in the bill of lading. Eurygenes followed the Mitsui test and
has told the Court since February 16, 1979, that it was going to take
treated the cartons, not the container, as the COGSA
the deposition of its witnesses in Japan. Why did it take until August
packages. However, Eurygenes indicated that a carrier could limit its
25, 1979, or more than six months, to prepare its written
liability to $500 per container if the bill of lading failed to disclose the
interrogatories. Only the defendant itself is to blame for its failure to
number of cartons or units within the container, or if the parties
adduce evidence in support of its defenses.
indicated, in clear and unambiguous language, an agreement to treat
the container as the package.
xxx xxx xxx 22
(Admiralty Litigation in Perpetuum: The Continuing Saga of Package
Petitioner Carrier was afforded ample time to present its side of the
Limitations and Third World Delivery Problems by Chester D. Hooper
case. 23 It cannot complain now that it was denied due process when
& Keith L. Flicker, published in Fordham International Law Journal,
the Trial Court rendered its Decision on the basis of the evidence
Vol. 6, 1982-83, Number 1) (Emphasis supplied)
adduced. What due process abhors is absolute lack of opportunity to
be heard. 24
On the Award of Attorney's Fees:
Petitioner Carrier questions the award of attorney's fees. In both
cases, respondent Court affirmed the award by the Trial Court of
attorney's fees of P35,000.00 in favor of Development Insurance in
G.R. No. 69044, and P5,000.00 in favor of NISSHIN and DOWA in
G.R. No. 71478.
Courts being vested with discretion in fixing the amount of attorney's
fees, it is believed that the amount of P5,000.00 would be more
reasonable in G.R. No. 69044. The award of P5,000.00 in G.R. No.
71478 is affirmed.
WHEREFORE, 1) in G.R. No. 69044, the judgment is modified in that
petitioner Eastern Shipping Lines shall pay the Development
Insurance and Surety Corporation the amount of P256,039 for the
twenty-eight (28) packages of calorized lance pipes, and P71,540 for
the seven (7) cases of spare parts, with interest at the legal rate from
the date of the filing of the complaint on June 13, 1978, plus P5,000 as
attorney's fees, and the costs.
2) In G.R.No.71478,the judgment is hereby affirmed.
G.R. No. 135377 October 7, 2003
DSR-SENATOR LINES AND C.F. SHARP AND COMPANY,
INC., petitioners,
vs.
FEDERAL PHOENIX ASSURANCE CO., INC., respondent.
DECISION
SANDOVAL-GUTIERREZ, J.:
Before us is a petition for review on certiorari1 assailing the
Decision2 dated June 5, 1998 of the Court of Appeals in CA-G.R. CV
No. 50833 which affirmed the Decision of the Regional Trial Court
(RTC), Manila City, Branch 16, in Civil Case No. 94-69699, "Federal
Phoenix Assurance Company, Inc. vs. DSR-Senator Lines and C.F.
Sharp & Co., Inc.," for damages arising from the loss of cargo while in
transit.
Berde Plants, Inc. (Berde Plants) delivered 632 units of artificial trees
to C.F. Sharp and Company, Inc. (C.F. Sharp), the General Ship
Agent of DSR-Senator Lines, a foreign shipping corporation, for
transportation and delivery to the consignee, Al-Mohr International
Group, in Riyadh, Saudi Arabia. C.F. Sharp issued International Bill
of Lading No. SENU MNL-265483 for the cargo with an invoice value
of $34,579.60. Under the Bill of Lading, the port of discharge for the
cargo was at the Khor Fakkan port and the port of delivery was
Riyadh, Saudi Arabia, via Port Dammam. The cargo was loaded in
M/S "Arabian Senator."
Federal Phoenix Assurance Company, Inc. (Federal Phoenix
Assurance) insured the cargo against all risks in the amount of
₱941,429.61.4
On June 7, 1993, M/S "Arabian Senator" left the Manila South Harbor
for Saudi Arabia with the cargo on board. When the vessel arrived in
Khor Fakkan Port, the cargo was reloaded on board DSR-Senator
Lines’ feeder vessel, M/V "Kapitan Sakharov," bound for Port
Dammam, Saudi Arabia. However, while in transit, the vessel and all
its cargo caught fire.
On July 5, 1993, DSR-Senator Lines informed Berde Plants that M/V
"Kapitan Sakharov" with its cargo was gutted by fire and sank on or
about July 4, 1993. On December 16, 1993, C.F. Sharp issued a
certification to that effect.
Consequently, Federal Phoenix Assurance paid Berde Plants
₱941,429.61 corresponding to the amount of insurance for the cargo.
In turn Berde Plants executed in its favor a "Subrogation
Receipt"5 dated January 17, 1994.
On February 8, 1994, Federal Phoenix Assurance sent a letter to C.F.
Sharp demanding payment of ₱941,429.61 on the basis of the
Subrogation Receipt. C.F. Sharp denied any liability on the ground
that such liability was extinguished when the vessel carrying the
cargo was gutted by fire.
Thus, on March 11, 1994, Federal Phoenix Assurance filed with the
RTC, Branch 16, Manila a complaint for damages against DSR-
Senator Lines and C.F. Sharp, praying that the latter be ordered to
pay actual damages of ₱941,429.61, compensatory damages of
₱100,000.00 and costs.
On August 22, 1995, the RTC rendered a Decision in favor of Federal
Phoenix Assurance, the dispositive portion of which reads:
"WHEREFORE, premises considered, judgment is hereby rendered in
favor of plaintiff and against the defendants who are hereby ordered
jointly and severally to pay plaintiff:
I. The amount of ₱941,439.61 (should be ₱941,429.616 ) with
legal interest of 6% per annum from the date of the letter of
demand of February 8, 1993 (EXH. L) and 12% per annum
from the date the judgment becomes final and executory
until its satisfaction (Eastern Shipping Lines vs. Court of
Appeals, G.R. No. 97412, July 12, 1994);
II. The amount of ₱15,000.00 by way of reasonable
attorney’s fees; and
III. To pay costs.
"The counterclaim of defendants is DISMISSED.
"SO ORDERED."7
On appeal, the Court of Appeals rendered a Decision dated June 5,
1998, affirming the RTC Decision, thus:
"In the present recourse, the appellant carrier was presumed to have
acted negligently for the fire that gutted the feeder vessel and the
consequent loss or destruction of the cargo. Hence, the appellant
carrier is liable for appellee’s claim under the New Civil Code of the
Philippines.
"Contrary to C.F. Sharp and Co., Inc.’s pose, its liability as ship agent
continued and remained until the cargo was delivered to the
consignee. The status of the appellant as ship agent subsisted and its
liability as a ship agent was co-terminous with and subsisted as long
as the cargo was not delivered to the consignee under the terms of the
Bill of Lading.
"IN LIGHT OF ALL THE FOREGOING, the appeal of the appellants
is DISMISSED. The Decision appealed from is affirmed. With costs
against the appellants.
"SO ORDERED."8
On September 7, 1998, the Court of Appeals denied the motion for
reconsideration of DSR-Senator Lines and C.F. Sharp, prompting
them to file with this Court the instant petition.
We find the petition bereft of merit.
Article 1734 of the Civil Code provides:
"Art. 1734. Common carriers are responsible for the loss, destruction,
or deterioration of the goods, unless the same is due to any of the
following causes only:
(1)Flood, storm, earthquake, lightning, or other natural
disaster or calamity;
(2) Act of the public enemy in war, whether international or
civil;
(3) Act or omission of the shipper or owner of the goods;
(4) The character of the goods or defects in the packing or in
the containers;
(5) Order or act of competent public authority."
Fire is not one of those enumerated under the above provision which
exempts a carrier from liability for loss or destruction of the cargo.
In Eastern Shipping Lines, Inc. vs. Intermediate Appellate Court,9 we
ruled that since the peril of fire is not comprehended within the
exceptions in Article 1734, then the common carrier shall be
presumed to have been at fault or to have acted negligently, unless it
proves that it has observed the extraordinary diligence required by
law.
Even if fire were to be considered a natural disaster within the
purview of Article 1734, it is required under Article 173910 of the same
Code that the natural disaster must have been the proximate and only
cause of the loss, and that the carrier has exercised due diligence to
prevent or minimize the loss before, during or after the occurrence of
the disaster.
We have held that a common carrier’s duty to observe the requisite
diligence in the shipment of goods lasts from the time the articles are
surrendered to or unconditionally placed in the possession of, and
received by, the carrier for transportation until delivered to or until
the lapse of a reasonable time for their acceptance by the person
entitled to receive them. When the goods shipped either are lost or
arrive in damaged condition, a presumption arises against the carrier
of its failure to observe that diligence, and there need not be an
express finding of negligence to hold it liable.11 1awphi1.néts
Common carriers are obliged to observe extraordinary diligence in the
vigilance over the goods transported by them. Accordingly, they are
presumed to have been at fault or to have acted negligently if the
goods are lost, destroyed or deteriorated. There are very few instances
when the presumption of negligence does not attach and these
instances are enumerated in Article 1734. In those cases where the
presumption is applied, the common carrier must prove that it
exercised extraordinary diligence in order to overcome the
presumption.12
Respondent Federal Phoenix Assurance raised the presumption of
negligence against petitioners. However, they failed to overcome it by
sufficient proof of extraordinary diligence.
WHEREFORE, the instant petition is DENIED. The assailed Decision
of the Court of Appeals dated June 5, 1998, in CA-G.R. CV No. 50833
is hereby AFFIRMED.
G.R. No. 116940 June 11, 1997
THE PHILIPPINE AMERICAN GENERAL INSURANCE
COMPANY, INC., petitioner,
vs.
COURT OF APPEALS and FELMAN SHIPPING
LINES, respondents.
BELLOSILLO, J.:
This case deals with the liability, if any, of a shipowner for loss of
cargo due to its failure to observe the extraordinary diligence required
by Art. 1733 of the Civil Code as well as the right of the insurer to be
subrogated to the rights of the insured upon payment of the insurance
claim.
On 6 July 1983 Coca-Cola Bottlers Philippines, Inc., loaded on board
"MV Asilda," a vessel owned and operated by respondent Felman
Shipping Lines (FELMAN for brevity), 7,500 cases of 1-liter Coca-Cola
softdrink bottles to be transported from Zamboanga City to Cebu City
for consignee Coca-Cola Bottlers Philippines, Inc., Cebu.1 The
shipment was insured with petitioner Philippine American General
Insurance Co., Inc. (PHILAMGEN for brevity), under Marine Open
Policy No. 100367-PAG.
"MV Asilda" left the port of Zamboanga in fine weather at eight
o'clock in the evening of the same day. At around eight forty-five the
following morning, 7 July 1983, the vessel sank in the waters of
Zamboanga del Norte bringing down her entire cargo with her
including the subject 7,500 cases of 1-liter Coca-Cola softdrink bottles.
On 15 July 1983 the consignee Coca-Cola Bottlers Philippines, Inc.,
Cebu plant, filed a claim with respondent FELMAN for recovery of
damages it sustained as a result of the loss of its softdrink bottles that
sank with "MV Asilda." Respondent denied the claim thus prompting
the consignee to file an insurance claim with PHILAMGEN which
paid its claim of P755,250.00.
Claiming its right of subrogation PHILAMGEN sought recourse
against respondent FELMAN which disclaimed any liability for the
loss. Consequently, on 29 November 1983 PHILAMGEN sued the
shipowner for sum of money and damages.
In its complaint PHILAMGEN alleged that the sinking and total loss
of "MV Asilda" and its cargo were due to the vessel's unseaworthiness
as she was put to sea in an unstable condition. It further alleged that
the vessel was improperly manned and that its officers were grossly
negligent in failing to take appropriate measures to proceed to a
nearby port or beach after the vessel started to list.
On 15 February 1985 FELMAN filed a motion to dismiss based on the
affirmative defense that no right of subrogation in favor of
PHILAMGEN was transmitted by the shipper, and that, in any event,
FELMAN had abandoned all its rights, interests and ownership over
"MV Asilda" together with her freight and appurtenances for the
purpose of limiting and extinguishing its liability under Art. 587 of
the Code of Commerce.2
On 17 February 1986 the trial court dismissed the complaint of
PHILAMGEN. On appeal the Court of Appeals set aside the dismissal
and remanded the case to the lower court for trial on the merits.
FELMAN filed a petition for certiorari with this Court but it was
subsequently denied on 13 February 1989.
On 28 February 1992 the trial court rendered judgment in favor of
FELMAN.3 It ruled that "MV Asilda" was seaworthy when it left the
port of Zamboanga as confirmed by certificates issued by the
Philippine Coast Guard and the shipowner's surveyor attesting to its
seaworthiness. Thus the loss of the vessel and its entire shipment
could only be attributed to either a fortuitous event, in which case, no
liability should attach unless there was a stipulation to the contrary,
or to the negligence of the captain and his crew, in which case, Art.
587 of the Code of Commerce should apply.
The lower court further ruled that assuming "MV Asilda" was
unseaworthy, still PHILAMGEN could not recover from FELMAN
since the assured (Coca-Cola Bottlers Philippines, Inc.) had breached
its implied warranty on the vessel's seaworthiness. Resultantly, the
payment made by PHILAMGEN to the assured was an undue, wrong
and mistaken payment. Since it was not legally owing, it did not give
PHILAMGEN the right of subrogation so as to permit it to bring an
action in court as a subrogee.
On 18 March 1992 PHILAMGEN appealed the decision to the Court of
Appeals. On 29 August 1994 respondent appellate court rendered
judgment finding "MV Asilda" unseaworthy for being top-heavy as
2,500 cases of Coca-Cola softdrink bottles were improperly stowed on
deck. In other words, while the vessel possessed the necessary Coast
Guard certification indicating its seaworthiness with respect to the
structure of the ship itself, it was not seaworthy with respect to the
cargo. Nonetheless, the appellate court denied the claim of
PHILAMGEN on the ground that the assured's implied warranty of
seaworthiness was not complied with. Perfunctorily, PHILAMGEN
was not properly subrogated to the rights and interests of the shipper.
Furthermore, respondent court held that the filing of notice of
abandonment had absolved the shipowner/agent from liability under
the limited liability rule.
The issues for resolution in this petition are: (a) whether "MV Asilda"
was seaworthy when it left the port of Zamboanga; (b) whether the
limited liability under Art. 587 of the Code of Commerce should apply;
and, (c) whether PHILAMGEN was properly subrogated to the rights
and legal actions which the shipper had against FELMAN, the
shipowner.
"MV Asilda" was unseaworthy when it left the port of Zamboanga. In
a joint statement, the captain as well as the chief mate of the vessel
confirmed that the weather was fine when they left the port of
Zamboanga. According to them, the vessel was carrying 7,500 cases of
1-liter Coca-Cola softdrink bottles, 300 sacks of seaweeds, 200 empty
CO2 cylinders and an undetermined quantity of empty boxes for fresh
eggs. They loaded the empty boxes for eggs and about 500 cases of
Coca-Cola bottles on deck.4 The ship captain stated that around four
o'clock in the morning of 7 July 1983 he was awakened by the officer
on duty to inform him that the vessel had hit a floating log. At that
time he noticed that the weather had deteriorated with strong
southeast winds inducing big waves. After thirty minutes he observed
that the vessel was listing slightly to starboard and would not correct
itself despite the heavy rolling and pitching. He then ordered his crew
to shift the cargo from starboard to portside until the vessel was
balanced. At about seven o'clock in the morning, the master of the
vessel stopped the engine because the vessel was listing dangerously
to portside. He ordered his crew to shift the cargo back to starboard.
The shifting of cargo took about an hour afterwhich he rang the
engine room to resume full speed.
At around eight forty-five, the vessel suddenly listed to portside and
before the captain could decide on his next move, some of the cargo on
deck were thrown overboard and seawater entered the engine room
and cargo holds of the vessel. At that instance, the master of the
vessel ordered his crew to abandon ship. Shortly thereafter, "MV
Asilda" capsized and sank. He ascribed the sinking to the entry of
seawater through a hole in the hull caused by the vessel's collision
with a partially submerged log.5
The Elite Adjusters, Inc., submitted a report regarding the sinking of
"MV Asilda." The report, which was adopted by the Court of Appeals,
reads —
vessel. This liability however can be limited through abandonment of
the vessel, its equipment and freightage as provided in Art. 587.
Nonetheless, there are exceptional circumstances wherein the ship
agent could still be held answerable despite the abandonment, as
where the loss or injury was due to the fault of the shipowner and the
captain.9 The international rule is to the effect that the right of
abandonment of vessels, as a legal limitation of a shipowner's liability,
does not apply to cases where the injury or average was occasioned by
the shipowner's own fault. 10 It must be stressed at this point that Art.
587 speaks only of situations where the fault or negligence is
committed solely by the captain. Where the shipowner is likewise to
be blamed, Art. 587 will not apply, and such situation will be covered
by the provisions of the Civil Code on common carrier. 11

We found in the course of our investigation that a

It was already established at the outset that the sinking of "MV
reasonable explanation for the series of lists
Asilda" was due to its unseaworthiness even at the time of its
experienced by the vessel that eventually led to
departure from the port of Zamboanga. It was top-heavy as an
her capsizing and sinking, was that the vessel
excessive amount of cargo was loaded on deck. Closer supervision on
was top-heavy which is to say that while the vessel
the part of the shipowner could have prevented this fatal
may not have been overloaded, yet the distribution
miscalculation. As such, FELMAN was equally negligent. It cannot
or stowage of the cargo on board was done in such
therefore escape liability through the expedient of filing a notice of
a manner that the vessel was in top-heavy
abandonment of the vessel by virtue of Art. 587 of the Code of
condition at the time of her departure and which
Commerce.
condition rendered her unstable and unseaworthy
for that particular voyage.
Under Art 1733 of the Civil Code, "(c)ommon carriers, from the nature
of their business and for reasons of public policy, are bound to observe
In this connection, we wish to call attention to the
extraordinary diligence in the vigilance over the goods and for the
fact that this vessel was designed as a fishing
safety of the passengers transported by them, according to all the
vessel . . . and it was not designed to carry a
circumstances of each case . . ." In the event of loss of goods, common
substantial amount or quantity of cargo on deck.
carriers are presumed to have acted negligently. FELMAN, the
Therefore, we believe strongly that had her cargo
shipowner, was not able to rebut this presumption.
been confined to those that could have been
accommodated under deck, her stability would not
have been affected and the vessel would not have In relation to the question of subrogation, respondent appellate court
been in any danger of capsizing, even given the found "MV Asilda" unseaworthy with reference to the cargo and
prevailing weather conditions at that time of therefore ruled that there was breach of warranty of seaworthiness
sinking. that rendered the assured not entitled to the payment of is claim
under the policy. Hence, when PHILAMGEN paid the claim of the
bottling firm there was in effect a "voluntary payment" and no right of
But from the moment that the vessel was utilized
subrogation accrued in its favor. In other words, when PHILAMGEN
to load heavy cargo on its deck, the vessel was
paid it did so at its own risk.
rendered unseaworthy for the purpose of carrying
the type of cargo because the weight of the deck
cargo so decreased the vessel's metacentric height It is generally held that in every marine insurance policy the assured
as to cause it to become unstable. impliedly warrants to the assurer that the vessel is seaworthy and
such warranty is as much a term of the contract as if expressly
written on the face of the policy. 12 Thus Sec. 113 of the Insurance
Finally, with regard to the allegation that the
Code provides that "(i)n every marine insurance upon a ship or
vessel encountered big waves, it must be pointed
freight, or freightage, or upon anything which is the subject of marine
out that ships are precisely designed to be able to
insurance, a warranty is implied that the ship is seaworthy." Under
navigate safely even during heavy weather and
Sec. 114, a ship is "seaworthy when reasonably fit to perform the
frequently we hear of ships safely and successfully
service, and to encounter the ordinary perils of the voyage,
weathering encounters with typhoons and
contemplated by the parties to the policy." Thus it becomes the
although they may sustain some amount of
obligation of the cargo owner to look for a reliable common carrier
damage, the sinking of ship during heavy weather
which keeps its vessels in seaworthy condition. He may have no
is not a frequent occurrence and is not likely to
control over the vessel but he has full control in the selection of the
occur unless they are inherently unstable and
common carrier that will transport his goods. He also has full
unseaworthy . . . .
discretion in the choice of assurer that will underwrite a particular
venture.
We believe, therefore, and so hold that
the proximate cause of the sinking of the M/V
We need not belabor the alleged breach of warranty of seaworthiness
"Asilda" was her condition of unseaworthiness
by the assured as painstakingly pointed out by FELMAN to stress
arising from her having been top-heavy when she
that subrogation will not work in this case. In policies where the law
departed from the Port of Zamboanga. Her having
will generally imply a warranty of seaworthiness, it can only be
capsized and eventually sunk was bound to
excluded by terms in writing in the policy in the clearest
happen and was therefore in the category of an
language. 13 And where the policy stipulates that the seaworthiness of
inevitable occurrence (emphasis supplied).6
the vessel as between the assured and the assurer is admitted, the
question of seaworthiness cannot be raised by the assurer without
We subscribe to the findings of the Elite Adjusters, Inc., and the Court showing concealment or misrepresentation by the assured. 14
of Appeals that the proximate cause of the sinking of "MV Asilda" was
its being top-heavy. Contrary to the ship captain's allegations,
The marine policy issued by PHILAMGEN to the Coca-Cola bottling
evidence shows that approximately 2,500 cases of softdrink bottles
firm in at least two (2) instances has dispensed with the usual
were stowed on deck. Several days after "MV Asilda" sank, an
warranty of worthiness. Paragraph 15 of the Marine Open Policy No.
estimated 2,500 empty Coca-Cola plastic cases were recovered near
100367-PAG reads "(t)he liberties as per Contract of Affreightment
the vicinity of the sinking. Considering that the ship's hatches were
the presence of the Negligence Clause and/or Latent Defect Clause in
properly secured, the empty Coca-Cola cases recovered could have
the Bill of Lading and/or Charter Party and/or Contract of
come only from the vessel's deck cargo. It is settled that carrying a
Affreightment as between the Assured and the Company shall not
deck cargo raises the presumption of unseaworthiness unless it can be
prejudice the insurance. The seaworthiness of the vessel as between
shown that the deck cargo will not interfere with the proper
the Assured and the Assurers is hereby admitted."15
management of the ship. However, in this case it was established that
"MV Asilda" was not designed to carry substantial amount of cargo on
deck. The inordinate loading of cargo deck resulted in the decrease of The same clause is present in par. 8 of the Institute Cargo Clauses
the vessel's metacentric height 7 thus making it unstable. The strong (F.P.A.) of the policy which states "(t)he seaworthiness of the vessel as
winds and waves encountered by the vessel are but the ordinary between the Assured and Underwriters in hereby admitted . . . ." 16
vicissitudes of a sea voyage and as such merely contributed to its
already unstable and unseaworthy condition.
The result of the admission of seaworthiness by the assurer
PHILAMGEN may mean one or two things: (a) that the warranty of
On the second issue, Art. 587 of the Code of Commerce is not the seaworthiness is to be taken as fulfilled; or, (b) that the risk of
applicable to the case at bar.8 Simply put, the ship agent is liable for unseaworthiness is assumed by the insurance company. 17 The
the negligent acts of the captain in the care of goods loaded on the insertion of such waiver clauses in cargo policies is in recognition of
the realistic fact that cargo owners cannot control the state of the
vessel. Thus it can be said that with such categorical waiver,
PHILAMGEN has accepted the risk of unseaworthiness so that if the
ship should sink by unseaworthiness, as what occurred in this case,
PHILAMGEN is liable.
Having disposed of this matter, we move on to the legal basis for
subrogation. PHILAMGEN's action against FELMAN is squarely
sanctioned by Art. 2207 of the Civil Code which provides:
Art. 2207. If the plaintiff's property has been
insured, and he has received indemnity from the
insurance company for the injury or loss arising
out of the wrong or breach of contract complained
of, the insurance company shall be subrogated to
the rights of the insured against the wrongdoer or
the person who has violated the contract. If the
amount paid by the insurance company does not
fully cover the injury or loss, the aggrieved party
shall be entitled to recover the deficiency from the
person causing the loss or injury.
In Pan Malayan Insurance Corporation v. Court of Appeals, 18 we said
that payment by the assurer to the assured operates as an equitable
assignment to the assurer of all the remedies which the assured may
have against the third party whose negligence or wrongful act caused
the loss. The right of subrogation is not dependent upon, nor does it
grow out of any privity of contract or upon payment by the insurance
company of the insurance claim. It accrues simply upon payment by
the insurance company of the insurance claim.
The doctrine of subrogation has its roots in equity. It is designed to
promote and to accomplish justice and is the mode which equity
adopts to compel the ultimate payment of a debt by one who in justice,
equity and good conscience ought to pay. 19 Therefore, the payment
made by PHILAMGEN to Coca-Cola Bottlers Philippines, Inc., gave
the former the right to bring an action as subrogee against FELMAN.
Having failed to rebut the presumption of fault, the liability of
FELMAN for the loss of the 7,500 cases of 1-liter Coca-Cola softdrink
bottles is inevitable.
WHEREFORE, the petition is GRANTED. Respondent FELMAN
SHIPPING LINES is ordered to pay petitioner PHILIPPINE
AMERICAN GENERAL INSURANCE CO., INC., Seven Hundred
Fifty-five Thousand Two Hundred and Fifty Pesos (P755,250.00) plus
legal interest thereon counted from 29 November 1983, the date of
judicial demand, pursuant to Arts. 2212 and 2213 of the Civil Code. 20
SO ORDERED.
G.R. No. 108897 October 2, 1997
SARKIES TOURS PHILIPPINES, INC., petitioner,
vs.
HONORABLE COURT OF APPEALS (TENTH DIVISION), DR.
ELINO G. FORTADES, MARISOL A. FORTADES and FATIMA
MINERVA A. FORTADES, respondents.
ROMERO, J.:
This petition for review is seeking the reversal of the decision of the
Court of Appeals in CA-G.R. CV No. 18979 promulgated on January
13, 1993, as well as its resolution of February 19, 1993, denying
petitioner's motion for reconsideration for being a mere rehash of the
arguments raised in the appellant's brief.
The case arose from a damage suit filed by private respondents Elino,
Marisol, and Fatima Minerva, all surnamed Fortades, against
petitioner for breach of contract of carriage allegedly attended by bad
faith.
On August 31, 1984, Fatima boarded petitioner's De Luxe Bus No. 5
in Manila on her way to Legazpi City. Her brother Raul helped her
load three pieces of luggage containing all of her optometry review
books, materials and equipment, trial lenses, trial contact lenses,
passport and visa, as well as her mother Marisol's U.S. immigration
(green) card, among other important documents and personal
belongings. Her belongings were kept in the baggage compartment of
the bus, but during a stopover at Daet, it was discovered that only one
bag remained in the open compartment. The others, including
Fatima's things, were missing and might have dropped along the way.
Some of the passengers suggested retracing the route of the bus to try
to recover the lost items, but the driver ignored them and proceeded to
Legazpi City.
Fatima immediately reported the loss to her mother who, in turn,
went to petitioner's office in Legazpi City and later at its head office in
Manila. Petitioner, however, merely offered her P1,000.00 for each
piece of luggage lost, which she turned down. After returning to Bicol,
disappointed but not defeated, mother and daughter asked assistance
from the radio stations and even from Philtranco bus drivers who
plied the same route on August 31st. The effort paid off when one of
Fatima's bags was recovered. Marisol further reported the incident to
the National Bureau of Investigation's field office in Legazpi City and
to the local police.
On September 20, 1984, respondents, through counsel, formally
demanded satisfaction of their complaint from petitioner. In a letter
dated October 1, 1984, the latter apologized for the delay and said
that "(a) team has been sent out to Bicol for the purpose of recovering
or at least getting the full detail"1 of the incident.
After more than nine months of fruitless waiting, respondents decided
to file the case below to recover the value of the remaining lost items,
as well as moral and exemplary damages, attorney's fees and
expenses of litigation. They claimed that the loss was due to
petitioner's failure to observe extraordinary diligence in the care of
Fatima's luggage and that petitioner dealt with them in bad faith
from the start. Petitioner, on the other hand, disowned any liability
for the loss on the ground that Fatima allegedly did not declare any
excess baggage upon boarding its bus.
On June 15, 1988, after trial on the merits, the court a quo adjudged
the case in favor of respondents, viz.:
PREMISES CONSIDERED, judgment is hereby rendered in
favor of the plaintiffs (herein respondents) and against the
herein defendant Sarkies Tours Philippines, Inc., ordering
the latter to pay to the former the following sums of money,
to wit:
1. The sum of P30,000.00 equivalent to the value of the
personal belongings of plaintiff Fatima Minerva Fortades,
etc. less the value of one luggage recovered;
2. The sum of P90,000.00 for the transportation expenses, as
well as moral damages;
3. The sum of P10,000.00 by way of exemplary damages;
4. The sum of P5,000.00 as attorney's fees; and
5. The sum of P5,000.00 as litigation expenses or a total of
One Hundred Forty Thousand (P140,000.00) Pesos.
to be paid by herein defendant Sarkies Tours Philippines,
Inc. to the herein plaintiffs within 30 days from receipt of
this Decision.
SO ORDERED.
On appeal, the appellate court affirmed the trial court's judgment, but
deleted the award of moral and exemplary damages. Thus,
WHEREFORE, premises considered, except as above
modified, fixing the award for transportation expenses at
P30,000.00 and the deletion of the award for moral and
exemplary damages, the decision appealed from is
AFFIRMED, with costs against defendant-appellant.
SO ORDERED.
Its motion for reconsideration was likewise rejected by the Court of
Appeals, so petitioner elevated its case to this Court for a review.
After a careful scrutiny of the records of this case, we are convinced
that the trial and appellate courts resolved the issues judiciously
based on the evidence at hand.
Petitioner claims that Fatima did not bring any piece of luggage with
her, and even if she did, none was declared at the start of the trip. The
documentary and testimonial evidence presented at the trial,
however, established that Fatima indeed boarded petitioner's De Luxe
Bus No. 5 in the evening of August 31, 1984, and she brought three
pieces of luggage with her, as testified by her brother Raul,2 who
helped her pack her things and load them on said bus. One of the bags
was even recovered by a Philtranco bus driver. In its letter dated
October 1, 1984, petitioner tacitly admitted its liability by apologizing
to respondents and assuring them that efforts were being made to
recover the lost items.
The records also reveal that respondents went to great lengths just to
salvage their loss. The incident was reported to the police, the NBI,
and the regional and head offices of petitioner. Marisol even sought
the assistance of Philtranco bus drivers and the radio stations. To
expedite the replacement of her mother's lost U.S. immigration
documents, Fatima also had to execute an affidavit of loss.3 Clearly,
they would not have gone through all that trouble in pursuit of a
fancied loss.
Fatima was not the only one who lost her luggage. Apparently, other
passengers had suffered a similar fate: Dr. Lita Samarista testified
that petitioner offered her P1,000.00 for her lost baggage and she
accepted it;4 Carleen Carullo-Magno lost her chemical engineering
review materials, while her brother lost abaca products he was
transporting to Bicol.5
Petitioner's receipt of Fatima's personal luggage having been thus
established, it must now be determined if, as a common carrier, it is
responsible for their loss. Under the Civil Code, "(c)ommon carriers,
from the nature of their business and for reasons of public policy, are
bound to observe extraordinary diligence in the vigilance over the
goods . . . transported by them,"6 and this liability "lasts from the time
the goods are unconditionally placed in the possession of, and received
by the carrier for transportation until the same are delivered, actually
or constructively, by the carrier to . . . the person who has a right to
receive them,"7 unless the loss is due to any of the excepted causes
under Article 1734 thereof.8
The cause of the loss in the case at bar was petitioner's negligence in
not ensuring that the doors of the baggage compartment of its bus
were securely fastened. As a result of this lack of care, almost all of
the luggage was lost, to the prejudice of the paying passengers. As the
Court of Appeals correctly observed:
. . . . Where the common carrier accepted its passenger's
baggage for transportation and even had it placed in the
vehicle by its own employee, its failure to collect the freight
charge is the common carrier's own lookout. It is responsible
for the consequent loss of the baggage. In the instant case,
defendant appellant's employee even helped Fatima
Minerva Fortades and her brother load the
luggages/baggages in the bus' baggage compartment,
without asking that they be weighed, declared, receipted or
paid for (TSN, August 4, 1986, pp. 29, 34, 54, 57, 70;
December 23, 1987, p. 35). Neither was this required of the
other passengers (TSN, August 4, 1986, p. 104; February 5,
1988; p. 13).
Finally, petitioner questions the award of actual damages to
respondents. On this point, we likewise agree with the trial and
appellate courts' conclusions. There is no dispute that of the three
pieces of luggage of Fatima, only one was recovered. The other two
contained optometry books, materials, equipment, as well as vital
documents and personal belongings. Respondents had to shuttle
between Bicol and Manila in their efforts to be compensated for the
loss. During the trial, Fatima and Marisol had to travel from the
United States just to be able to testify. Expenses were also incurred in
reconstituting their lost documents. Under these circumstances, the
Court agrees with the Court of Appeals in awarding P30,000.00 for
the lost items and P30,000.00 for the transportation expenses, but
disagrees with the deletion of the award of moral and exemplary
damages which, in view of the foregoing proven facts, with negligence
and bad faith on the fault of petitioner having been duly established,
should be granted to respondents in the amount of P20,000.00 and
P5,000.00, respectively.
WHEREFORE, the assailed decision of the Court of Appeals dated
January 13, 1993, and its resolution dated February 19, 1993, are
hereby AFFIRMED with the MODIFICATION that petitioner is
ordered to pay respondents an additional P20,000.00 as moral
damages and P5,000.00 as exemplary damages. Costs against
petitioner.
G.R. No. 114167 July 12, 1995
COASTWISE LIGHTERAGE CORPORATION, petitioner,
vs.
COURT OF APPEALS and the PHILIPPINE GENERAL
INSURANCE COMPANY, respondents.
RESOLUTION
FRANCISCO, R., J.:
This is a petition for review of a Decision rendered by the Court of
Appeals, dated December 17, 1993, affirming Branch 35 of the
Regional Trial Court, Manila in holding that herein petitioner is liable
to pay herein private respondent the amount of P700,000.00, plus
legal interest thereon, another sum of P100,000.00 as attorney's fees
and the cost of the suit.
The factual background of this case is as follows:
Pag-asa Sales, Inc. entered into a contract to transport molasses from
the province of Negros to Manila with Coastwise Lighterage
Corporation (Coastwise for brevity), using the latter's dumb barges.
The barges were towed in tandem by the tugboat MT Marica, which is
likewise owned by Coastwise.
Upon reaching Manila Bay, while approaching Pier 18, one of the
barges, "Coastwise 9", struck an unknown sunken object. The forward
buoyancy compartment was damaged, and water gushed in through a
hole "two inches wide and twenty-two inches long"1 As a consequence,
the molasses at the cargo tanks were contaminated and rendered
unfit for the use it was intended. This prompted the consignee, Pag-
asa Sales, Inc. to reject the shipment of molasses as a total loss.
Thereafter, Pag-asa Sales, Inc. filed a formal claim with the insurer of
its lost cargo, herein private respondent, Philippine General
Insurance Company (PhilGen, for short) and against the carrier,
herein petitioner, Coastwise Lighterage. Coastwise Lighterage denied
the claim and it was PhilGen which paid the consignee, Pag-asa Sales,
Inc., the amount of P700,000.00, representing the value of the
damaged cargo of molasses.
In turn, PhilGen then filed an action against Coastwise Lighterage
before the Regional Trial Court of Manila, seeking to recover the
amount of P700,000.00 which it paid to Pag-asa Sales, Inc. for the
latter's lost cargo. PhilGen now claims to be subrogated to all the
contractual rights and claims which the consignee may have against
the carrier, which is presumed to have violated the contract of
carriage.
The RTC awarded the amount prayed for by PhilGen. On Coastwise
Lighterage's appeal to the Court of Appeals, the award was affirmed.
Hence, this petition.
There are two main issues to be resolved herein. First, whether or not
petitioner Coastwise Lighterage was transformed into a private
carrier, by virtue of the contract of affreightment which it entered into
with the consignee, Pag-asa Sales, Inc. Corollarily, if it were in fact
transformed into a private carrier, did it exercise the ordinary
diligence to which a private carrier is in turn bound? Second, whether
or not the insurer was subrogated into the rights of the consignee
against the carrier, upon payment by the insurer of the value of the
consignee's goods lost while on board one of the carrier's vessels.
On the first issue, petitioner contends that the RTC and the Court of
Appeals erred in finding that it was a common carrier. It stresses the
fact that it contracted with Pag-asa Sales, Inc. to transport the
shipment of molasses from Negros Oriental to Manila and refers to
this contract as a "charter agreement". It then proceeds to cite the
case of Home Insurance Company vs. American Steamship Agencies,
Inc.2 wherein this Court held: ". . . a common carrier undertaking to
carry a special cargo or chartered to a special person only becomes a
private carrier."
Petitioner's reliance on the aforementioned case is misplaced. In its
entirety, the conclusions of the court are as follows:
Accordingly, the charter party contract is one of
affreightment over the whole vessel, rather than a
demise. As such, the liability of the shipowner for
acts or negligence of its captain and crew, would
remain in the absence of stipulation.3
The distinction between the two kinds of charter parties (i.e. bareboat
or demise and contract of affreightment) is more clearly set out in the
case of Puromines, Inc. vs. Court of Appeals,4 wherein we ruled:
Under the demise or bareboat charter of the
vessel, the charterer will generally be regarded as
 the owner for the voyage or service stipulated. The according to the same for the discharge of the
charterer mans the vessel with his own people and duties of the position. . . .
becomes the owner pro hac vice, subject to liability
to others for damages caused by negligence. To
Clearly, petitioner Coastwise Lighterage's embarking on a voyage
create a demise, the owner of a vessel must
with an unlicensed patron violates this rule. It cannot safely claim to
completely and exclusively relinquish possession,
have exercised extraordinary diligence, by placing a person whose
command and navigation thereof to the
navigational skills are questionable, at the helm of the vessel which
charterer, anything short of such a complete
eventually met the fateful accident. It may also logically, follow that a
transfer is a contract of affreightment (time or
person without license to navigate, lacks not just the skill to do so, but
voyage charter party) or not a charter party at all.
also the utmost familiarity with the usual and safe routes taken by
seasoned and legally authorized ones. Had the patron been licensed,
On the other hand a contract of affreightment is he could be presumed to have both the skill and the knowledge that
one in which the owner of the vessel leases part or would have prevented the vessel's hitting the sunken derelict ship
all of its space to haul goods for others. It is a that lay on their way to Pier 18.
contract for special service to be rendered by the
owner of the vessel and under such contract the
As a common carrier, petitioner is liable for breach of the contract of
general owner retains the possession, command
carriage, having failed to overcome the presumption of negligence
and navigation of the ship, the charterer or
with the loss and destruction of goods it transported, by proof of its
freighter merely having use of the space in the
exercise of extraordinary diligence.
vessel in return for his payment of the charter
hire. . . . .
On the issue of subrogation, which petitioner contends as inapplicable
in this case, we once more rule against the petitioner. We have
. . . . An owner who retains possession of the ship
already found petitioner liable for breach of the contract of carriage it
though the hold is the property of the charterer,
entered into with Pag-asa Sales, Inc. However, for the damage
remains liable as carrier and must answer for any
sustained by the loss of the cargo which petitioner-carrier was
breach of duty as to the care, loading and
transporting, it was not the carrier which paid the value thereof to
unloading of the cargo. . . .
Pag-asa Sales, Inc. but the latter's insurer, herein private respondent
PhilGen.
Although a charter party may transform a common carrier into a
private one, the same however is not true in a contract of
Article 2207 of the Civil Code is explicit on this point:
affreightment on account of the aforementioned distinctions between
the two.
Art. 2207. If the plaintiffs property has been
insured, and he has received indemnity from the
Petitioner admits that the contract it entered into with the consignee
insurance company for the injury or loss arising
was one of affreightment.5 We agree. Pag-asa Sales, Inc. only leased
out of the wrong or breach of contract complained
three of petitioner's vessels, in order to carry cargo from one point to
of, the insurance company shall be subrogated to
another, but the possession, command and navigation of the vessels
the rights of the insured against the wrongdoer or
remained with petitioner Coastwise Lighterage.
the person who violated the contract. . . .

Pursuant therefore to the ruling in the aforecited Puromines case,

Coastwise Lighterage, by the contract of affreightment, was not
converted into a private carrier, but remained a common carrier and
was still liable as such.
The law and jurisprudence on common carriers both hold that the
mere proof of delivery of goods in good order to a carrier and the
subsequent arrival of the same goods at the place of destination in bad
order makes for a prima facie case against the carrier.
It follows then that the presumption of negligence that attaches to
common carriers, once the goods it transports are lost, destroyed or
deteriorated, applies to the petitioner. This presumption, which is
overcome only by proof of the exercise of extraordinary diligence,
remained unrebutted in this case.
The records show that the damage to the barge which carried the
cargo of molasses was caused by its hitting an unknown sunken object
as it was heading for Pier 18. The object turned out to be a submerged
derelict vessel. Petitioner contends that this navigational hazard was
the efficient cause of the accident. Further it asserts that the fact that
the Philippine Coastguard "has not exerted any effort to prepare a
chart to indicate the location of sunken derelicts within Manila North
Harbor to avoid navigational accidents"6 effectively contributed to the
happening of this mishap. Thus, being unaware of the hidden danger
that lies in its path, it became impossible for the petitioner to avoid
the same. Nothing could have prevented the event, making it beyond
the pale of even the exercise of extraordinary diligence.
However, petitioner's assertion is belied by the evidence on record
where it appeared that far from having rendered service with the
greatest skill and utmost foresight, and being free from fault, the
carrier was culpably remiss in the observance of its duties.
Jesus R. Constantino, the patron of the vessel "Coastwise 9" admitted
that he was not licensed. The Code of Commerce, which subsidiarily
governs common carriers (which are primarily governed by the
provisions of the Civil Code) provides:
This legal provision containing the equitable principle of subrogation
has been applied in a long line of cases including Compania Maritima
v. Insurance Company of North America;7 Fireman's Fund Insurance
Company v. Jamilla & Company, Inc.,8 and Pan Malayan Insurance
Corporation v. Court of Appeals,9 wherein this Court explained:
Article 2207 of the Civil Code is founded on the
well-settled principle of subrogation. If the insured
property is destroyed or damaged through the
fault or negligence of a party other than the
assured, then the insurer, upon payment to the
assured will be subrogated to the rights of the
assured to recover from the wrongdoer to the
extent that the insurer has been obligated to
pay. Payment by the insurer to the assured
operated as an equitable assignment to the former
of all remedies which the latter may have against
the third party whose negligence or wrongful act
caused the loss. The right of subrogation is not
dependent upon, nor does it grow out of, any
privity of contract or upon written assignment of
claim. It accrues simply upon payment of the
insurance claim by the insurer.
Undoubtedly, upon payment by respondent insurer PhilGen of the
amount of P700,000.00 to Pag-asa Sales, Inc., the consignee of the
cargo of molasses totally damaged while being transported by
petitioner Coastwise Lighterage, the former was subrogated into all
the rights which Pag-asa Sales, Inc. may have had against the carrier,
herein petitioner Coastwise Lighterage.
WHEREFORE, premises considered, this petition is DENIED and the
appealed decision affirming the order of Branch 35 of the Regional
Trial Court of Manila for petitioner Coastwise Lighterage to pay
respondent Philippine General Insurance Company the "principal
amount of P700,000.00 plus interest thereon at the legal rate
computed from March 29, 1989, the date the complaint was filed until
fully paid and another sum of P100,000.00 as attorney's fees and
costs"10 is likewise hereby AFFIRMED

Art. 609. — Captains, masters, or patrons of

G.R. No. 171468 August 24, 2011
vessels must be Filipinos, have legal capacity to
contract in accordance with this code, and prove
the skill capacity and qualifications necessary to NEW WORLD INTERNATIONAL DEVELOPMENT (PHILS.),
command and direct the vessel, as established by INC., Petitioner,
marine and navigation laws, ordinances or vs.
regulations, and must not be disqualified NYK-FILJAPAN SHIPPING CORP., LEP PROFIT
INTERNATIONAL, INC. (ORD), LEP INTERNATIONAL
PHILIPPINES, INC., DMT CORP., ADVATECH INDUSTRIES,
INC., MARINA PORT SERVICES, INC., SERBROS CARRIER
CORPORATION, and SEABOARD-EASTERN INSURANCE CO.,
INC., Respondents.
x - - - - - - - - - - - - - - - - - - - - - - -x
G.R. No. 174241
NEW WORLD INTERNATIONAL DEVELOPMENT (PHILS.),
INC., Petitioner,
vs.
SEABOARD-EASTERN INSURANCE CO., INC., Respondent.
DECISION
ABAD, J.:
These consolidated petitions involve a cargo owner’s right to recover
damages from the loss of insured goods under the Carriage of Goods
by Sea Act and the Insurance Code.
The Facts and the Case
Petitioner New World International Development (Phils.), Inc. (New
World) bought from DMT Corporation (DMT) through its agent,
Advatech Industries, Inc. (Advatech) three emergency generator sets
worth US$721,500.00.
DMT shipped the generator sets by truck from Wisconsin, United
States, to LEP Profit International, Inc. (LEP Profit) in Chicago,
Illinois. From there, the shipment went by train to Oakland,
California, where it was loaded on S/S California Luna V59, owned
and operated by NYK Fil-Japan Shipping Corporation (NYK) for
delivery to petitioner New World in Manila. NYK issued a bill of
lading, declaring that it received the goods in good condition.
NYK unloaded the shipment in Hong Kong and transshipped it to S/S
ACX Ruby V/72 that it also owned and operated. On its journey to
Manila, however, ACX Ruby encountered typhoon Kadiang whose
captain filed a sea protest on arrival at the Manila South Harbor on
October 5, 1993 respecting the loss and damage that the goods on
board his vessel suffered.
Marina Port Services, Inc. (Marina), the Manila South Harbor
arrastre or cargo-handling operator, received the shipment on October
7, 1993. Upon inspection of the three container vans separately
carrying the generator sets, two vans bore signs of external damage
while the third van appeared unscathed. The shipment remained at
Pier 3’s Container Yard under Marina’s care pending clearance from
the Bureau of Customs. Eventually, on October 20, 1993 customs
authorities allowed petitioner’s customs broker, Serbros Carrier
Corporation (Serbros), to withdraw the shipment and deliver the same
to petitioner New World’s job site in Makati City.
An examination of the three generator sets in the presence of
petitioner New World’s representatives, Federal Builders (the project
contractor) and surveyors of petitioner New World’s insurer,
Seaboard–Eastern Insurance Company (Seaboard), revealed that all
three sets suffered extensive damage and could no longer be repaired.
For these reasons, New World demanded recompense for its loss from
respondents NYK, DMT, Advatech, LEP Profit, LEP International
Philippines, Inc. (LEP), Marina, and Serbros. While LEP and NYK
acknowledged receipt of the demand, both denied liability for the loss.
Since Seaboard covered the goods with a marine insurance policy,
petitioner New World sent it a formal claim dated November 16, 1993.
Replying on February 14, 1994, Seaboard required petitioner New
World to submit to it an itemized list of the damaged units, parts, and
accessories, with corresponding values, for the processing of the claim.
But petitioner New World did not submit what was required of it,
insisting that the insurance policy did not include the submission of
such a list in connection with an insurance claim. Reacting to this,
Seaboard refused to process the claim.
On October 11, 1994 petitioner New World filed an action for specific
performance and damages against all the respondents before the
Regional Trial Court (RTC) of Makati City, Branch 62, in Civil Case
94-2770.
On August 16, 2001 the RTC rendered a decision absolving the
various respondents from liability with the exception of NYK. The
RTC found that the generator sets were damaged during transit while
in the care of NYK’s vessel, ACX Ruby. The latter failed, according to
the RTC, to exercise the degree of diligence required of it in the face of
a foretold raging typhoon in its path.
The RTC ruled, however, that petitioner New World filed its claim
against the vessel owner NYK beyond the one year provided under the
Carriage of Goods by Sea Act (COGSA). New World filed its complaint
on October 11, 1994 when the deadline for filing the action (on or
before October 7, 1994) had already lapsed. The RTC held that the
one-year period should be counted from the date the goods were
delivered to the arrastre operator and not from the date they were
delivered to petitioner’s job site.1
As regards petitioner New World’s claim against Seaboard, its
insurer, the RTC held that the latter cannot be faulted for denying the
claim against it since New World refused to submit the itemized list
that Seaboard needed for assessing the damage to the shipment.
Likewise, the belated filing of the complaint prejudiced Seaboard’s
right to pursue a claim against NYK in the event of subrogation.
On appeal, the Court of Appeals (CA) rendered judgment on January
31, 2006,2 affirming the RTC’s rulings except with respect to
Seaboard’s liability. The CA held that petitioner New World can still
recoup its loss from Seaboard’s marine insurance policy, considering
a) that the submission of the itemized listing is an unreasonable
imposition and b) that the one-year prescriptive period under the
COGSA did not affect New World’s right under the insurance policy
since it was the Insurance Code that governed the relation between
the insurer and the insured.
Although petitioner New World promptly filed a petition for review of
the CA decision before the Court in G.R. 171468, Seaboard chose to
file a motion for reconsideration of that decision. On August 17, 2006
the CA rendered an amended decision, reversing itself as regards the
claim against Seaboard. The CA held that the submission of the
itemized listing was a reasonable requirement that Seaboard asked of
New World. Further, the CA held that the one-year prescriptive
period for maritime claims applied to Seaboard, as insurer and
subrogee of New World’s right against the vessel owner. New World’s
failure to comply promptly with what was required of it prejudiced
such right.
Instead of filing a motion for reconsideration, petitioner instituted a
second petition for review before the Court in G.R. 174241, assailing
the CA’s amended decision.
The Issues Presented
The issues presented in this case are as follows:
a) In G.R. 171468, whether or not the CA erred in affirming
the RTC’s release from liability of respondents DMT,
Advatech, LEP, LEP Profit, Marina, and Serbros who were
at one time or another involved in handling the shipment;
and
b) In G.R. 174241, 1) whether or not the CA erred in ruling
that Seaboard’s request from petitioner New World for an
itemized list is a reasonable imposition and did not violate
the insurance contract between them; and 2) whether or not
the CA erred in failing to rule that the one-year COGSA
prescriptive period for marine claims does not apply to
petitioner New World’s prosecution of its claim against
Seaboard, its insurer.
The Court’s Rulings
In G.R. 171468 --
Petitioner New World asserts that the roles of respondents DMT,
Advatech, LEP, LEP Profit, Marina and Serbros in handling and
transporting its shipment from Wisconsin to Manila collectively
resulted in the damage to the same, rendering such respondents
solidarily liable with NYK, the vessel owner.
But the issue regarding which of the parties to a dispute incurred
negligence is factual and is not a proper subject of a petition for
review on certiorari. And petitioner New World has been unable to
make out an exception to this rule.3Consequently, the Court will not
disturb the finding of the RTC, affirmed by the CA, that the generator
sets were totally damaged during the typhoon which beset the vessel’s
voyage from Hong Kong to Manila and that it was her negligence in
continuing with that journey despite the adverse condition which
caused petitioner New World’s loss.
That the loss was occasioned by a typhoon, an exempting cause under NYK and the others. Ultimately, the fault for the delayed court suit
Article 1734 of the Civil Code, does not automatically relieve the could be brought to Seaboard’s doorstep.
common carrier of liability. The latter had the burden of proving that
the typhoon was the proximate and only cause of loss and that it
Section 241 of the Insurance Code provides that no insurance
exercised due diligence to prevent or minimize such loss before,
company doing business in the Philippines shall refuse without just
during, and after the disastrous typhoon.4 As found by the RTC and
cause to pay or settle claims arising under coverages provided by its
the CA, NYK failed to discharge this burden.
policies. And, under Section 243, the insurer has 30 days after proof of
loss is received and ascertainment of the loss or damage within which
In G.R. 174241 -- to pay the claim. If such ascertainment is not had within 60 days from
receipt of evidence of loss, the insurer has 90 days to pay or settle the
claim. And, in case the insurer refuses or fails to pay within the
One. The Court does not regard as substantial the question of
prescribed time, the insured shall be entitled to interest on the
reasonableness of Seaboard’s additional requirement of an itemized
proceeds of the policy for the duration of delay at the rate of twice the
listing of the damage that the generator sets suffered. The record
ceiling prescribed by the Monetary Board.
shows that petitioner New World complied with the documentary
requirements evidencing damage to its generator sets.
Notably, Seaboard already incurred delay when it failed to settle
petitioner New World’s claim as Section 243 required. Under Section
The marine open policy that Seaboard issued to New World was an
244, a prima facie evidence of unreasonable delay in payment of the
all-risk policy. Such a policy insured against all causes of conceivable
claim is created by the failure of the insurer to pay the claim within
loss or damage except when otherwise excluded or when the loss or
the time fixed in Section 243.
damage was due to fraud or intentional misconduct committed by the
insured. The policy covered all losses during the voyage whether or
not arising from a marine peril.5 Consequently, Seaboard should pay interest on the proceeds of the
policy for the duration of the delay until the claim is fully satisfied at
the rate of twice the ceiling prescribed by the Monetary Board. The
Here, the policy enumerated certain exceptions like unsuitable
term "ceiling prescribed by the Monetary Board" means the legal rate
packaging, inherent vice, delay in voyage, or vessels unseaworthiness,
of interest of 12% per annum provided in Central Bank Circular 416,
among others.6 But Seaboard had been unable to show that petitioner
pursuant to Presidential Decree 116.9 Section 244 of the Insurance
New World’s loss or damage fell within some or one of the enumerated
Code also provides for an award of attorney’s fees and other expenses
exceptions.
incurred by the assured due to the unreasonable withholding of
payment of his claim.
What is more, Seaboard had been unable to explain how it could not
verify the damage that New World’s goods suffered going by the
In Prudential Guarantee and Assurance, Inc. v. Trans-Asia Shipping
documents that it already submitted, namely, (1) copy of the
Lines, Inc.,10 the Court regarded as proper an award of 10% of the
Supplier’s Invoice KL2504; (2) copy of the Packing List; (3) copy of the
insurance proceeds as attorney’s fees. Such amount is fair considering
Bill of Lading 01130E93004458; (4) the Delivery of Waybill Receipts
the length of time that has passed in prosecuting the
1135, 1222, and 1224; (5) original copy of Marine Insurance Policy
claim.11 Pursuant to the Court’s ruling in Eastern Shipping Lines, Inc.
MA-HO-000266; (6) copies of Damage Report from Supplier and
v. Court of Appeals,12 a 12% interest per annum from the finality of
Insurance Adjusters; (7) Consumption Report from the Customs
judgment until full satisfaction of the claim should likewise be
Examiner; and (8) Copies of Received Formal Claim from the
imposed, the interim period equivalent to a forbearance of
following: a) LEP International Philippines, Inc.; b) Marina Port
credit.1avvphi1
Services, Inc.; and c) Serbros Carrier Corporation.7 Notably,
Seaboard’s own marine surveyor attended the inspection of the
generator sets. Petitioner New World is entitled to the value stated in the policy
which is commensurate to the value of the three emergency generator
sets or US$721,500.00 with double interest plus attorney’s fees as
Seaboard cannot pretend that the above documents are inadequate
discussed above.
since they were precisely the documents listed in its insurance
policy.8 Being a contract of adhesion, an insurance policy is construed
strongly against the insurer who prepared it. The Court cannot read a WHEREFORE, the Court DENIES the petition in G.R. 171468 and
requirement in the policy that was not there. AFFIRMS the Court of Appeals decision of January 31, 2006 insofar
as petitioner New World International Development (Phils.), Inc. is
not allowed to recover against respondents DMT Corporation,
Further, it appears from the exchanges of communications between
Advatech Industries, Inc., LEP International Philippines, Inc., LEP
Seaboard and Advatech that submission of the requested itemized
Profit International, Inc., Marina Port Services, Inc. and Serbros
listing was incumbent on the latter as the seller DMT’s local agent.
Carrier Corporation.
Petitioner New World should not be made to suffer for Advatech’s
shortcomings.
With respect to G.R. 174241, the Court GRANTS the petition and
REVERSES and SETS ASIDE the Court of Appeals Amended
Two. Regarding prescription of claims, Section 3(6) of the COGSA
Decision of August 17, 2006. The Court DIRECTS Seaboard-Eastern
provides that the carrier and the ship shall be discharged from all
Insurance Company, Inc. to pay petitioner New World International
liability in case of loss or damage unless the suit is brought within one
Development (Phils.), Inc. US$721,500.00 under Policy MA-HO-
year after delivery of the goods or the date when the goods should
000266, with 24% interest per annum for the duration of delay in
have been delivered.
accordance with Sections 243 and 244 of the Insurance Code and
attorney’s fees equivalent to 10% of the insurance proceeds. Seaboard
But whose fault was it that the suit against NYK, the common carrier, shall also pay, from finality of judgment, a 12% interest per annum on
was not brought to court on time? The last day for filing such a suit the total amount due to petitioner until its full satisfaction.
fell on October 7, 1994. The record shows that petitioner New World
filed its formal claim for its loss with Seaboard, its insurer, a remedy
G.R. No. L-26700 May 15, 1969
it had the right to take, as early as November 16, 1993 or about 11
months before the suit against NYK would have fallen due.
MALAYAN INSURANCE CO., INC., plaintiff-appellee,
vs.
In the ordinary course, if Seaboard had processed that claim and paid
MANILA PORT SERVICE and MANILA RAILROAD
the same, Seaboard would have been subrogated to petitioner New
CO., defendants-appellants.
World’s right to recover from NYK. And it could have then filed the
suit as a subrogee. But, as discussed above, Seaboard made an
unreasonable demand on February 14, 1994 for an itemized list of the San Juan, Africa and Benedicto for plaintiff-appellee.
damaged units, parts, and accessories, with corresponding values Corporate Legal Counsel D. F. Macaranas and Jose P. Guzman for
when it appeared settled that New World’s loss was total and when defendants-appellants.
the insurance policy did not require the production of such a list in the
event of a claim.
SANCHEZ, J.:

Besides, when petitioner New World declined to comply with the

In a suit for recovery of money arising out of short delivery and
demand for the list, Seaboard against whom a formal claim was
pilferage of goods — which came into the Philippines under four
pending should not have remained obstinate in refusing to process
importations — while in the possession of the Manila Port Service,
that claim. It should have examined the same, found it
judgment was rendered by the City Court of Manila against
unsubstantiated by documents if that were the case, and formally
defendants. The latter appealed. In the Court of First Instance of
rejected it. That would have at least given petitioner New World a
Manila, the case came up for decision upon a stipulation of
clear signal that it needed to promptly file its suit directly against
facts. 1 Judgment was thereafter rendered sentencing defendants to
pay plaintiff "the sum of P1,447.51 with legal interest thereon from
the date the complaint was filed on December 28, 1962, until full
payment is made, plus the sum of P200 by way of attorney's fees" and
the costs.
Defendants appealed on points of law.
On December 31, 1961, the "Pioneer Ming" arrived at the imported
from the United States a shipment of 343 cartons and two crates of
electrical surface raceways and fittings. This was placed on board the
SS "Pioneer Ming". On December 31, 1961, the "Pioneer Ming" arrived
at the port of Manila and discharged the shipment into the custody of
the Manila Port Service. One carton was pilfered of its contents while
six cartons were not delivered. Plaintiff's loss arising therefrom is the
subject of the first cause of action.
On November 29, 1961, Brunette Shoe Factory imported from the
United States three cases upper leather carried on board the same SS
"Pioneer Ming" in that same voyage. SS "Pioneer Ming" discharged
the cargo into the custody of the Manila Port Service. The leather
delivered was short of 111-¾ square feet. This is covered by plaintiff's
second cause of action.
For the third cause of action, plaintiff's case is predicated upon the
facts following: On November 27, 1961, Dupro (Philippines), Inc.
imported from the United States 18 cases of auto parts shipped on
board the SS "Pioneer Ming". This vessel arrived in Manila on
December 28, 1961. The shipment was discharged into the custody of
the Manila Port Service. One case of that shipment was pilfered of its
contents. Loss was occasioned to plaintiff.
The fourth cause of action refers to a shipment of 15 cases black
umbrella cloth imported by Chua Luan and Co., Inc. from Japan on
September 7, 1962, per SS "Narra" which arrived in Manila on
September 15, 1962. The shipment was discharged into the custody of
the Manila Port Service. It turned out, however, that two cases of the
shipment were pilfered of contents resulting in loss to the consignee.
Having paid for the losses to the different importers upon covering
insurance policies, plaintiff became the subrogee of the consignees.
1. It is now futile for defendants to pass on liability to the carriers
which are not parties to this action. Paragraph 7 of the Stipulation of
Facts will stop them. It reads: "VII. That the goods were discharged
complete into the custody of the defendant." Not that the stipulation
stands alone. Defendants in their brief 2 categorically state that the
opinion of the lower court "that the shipments in question were
discharged into the custody of the defendant Manila Port Service
complete with respect to quantity, is not disputed."
But defendants argue that the fact that the shipments were received
by defendant Manila Port Service complete, does not mean that the
goods were received in "good order". Defendants miss the point. This
is immaterial. Because plaintiff's claim is for short delivery and
pilferage. 3
Consequently, liability cannot be shifted to the carriers.
2. Seizing upon the trial court's finding that there is "no proof that
said shortages or damages with respect to the said goods were due to
the negligence of the defendant, Manila Port Service", 4 defendants
now put forth disclaimer of liability.
We start with the presumption in Article 1265 of the Civil Code that
whenever "the thing is lost in the possession of the debtor, it shall be
presumed that the loss was due to his fault, unless there is proof to
the contrary." As early as 1907, this Court held that under Article
1183 of the Spanish Civil Code (Article 1265 of the new Code), "the
burden of explanation of the loss rested upon the depositary and
under article 1769 [of the Spanish Civil Code — now Article 1981 of
the new Civil Code], the fault is presumed to be his." 5 It has been said
that the legal relationship created between the consignee and the
arrastre operator "is sufficiently akin to that existing between the
consignee or owner of shipped goods and the common carrier or that
between a depositor and the warehouseman." 6 And, as custodian of
the goods discharged from the vessel, it is the duty of the arrastre
operator to take good care of the goods and turn them over to the
party entitled to their possession. 7 It would seem quite elementary
that since the care to be used in the safekeeping of the goods rests
peculiarly within the knowledge of the Manila Port Service, it is
incumbent upon said defendant to prove that the losses were not due
to its negligence or that of its employees.
Because there is no proof that the losses occurred either without
defendants' fault or by reason of caso fortuito, defendants are liable. 8
3. Nor will defendants escape liability by pleading that no claim was
filed within 15 days from "the date of discharge of the last package
from the carrying vessel", 9 a condition precedent to recovery, as set
forth in the said Section 15 of the Management Contract. It is correct
to say that there is no proof of the date of discharge of each of the four
shipments. But then, there is no necessity for such proof. There is the
fact that provisional claims on each of the shipments were filed well
within the 15-day period following the arrival of each of the vessels.
Naturally, those claims were presented within 15 days from the date
of delivery. The sufficiency of these provisional claims is not
challenged. And although the provisional claims do not specify the
value of the goods lost and were not accompanied by supporting
papers, the jurisprudence is that such claims substantially fulfill the
requirement. 10
4. Defendants' next point is that they are not liable for the sum
P1,447.51 adjudged in the decision below. They say that their
admission in paragraph VI of the Stipulation of Facts was delimited
by the words "if any" recoverable.11lawphi1.ñetParagraph VI of the
Stipulation of Facts reads:
VI. That the value of the alleged claims recoverable, if any, by the
plaintiff from the defendants is as follows:
1. P355.00 — First cause of action
2. P66.92 — Second cause of action
3. P25.59 — Third cause of action
4. P1,000.00 — Fourth cause of action.
Since the value of each claim is admitted and considering that
plaintiff is entitled thereto as earlier expressed in this opinion and
upon the terms of the stipulation just quoted, the lower court was
correct in sentencing defendants to pay the total amount therein
stated. 12
5. Defendants next question the award of legal interest from the date
the complaint was filed until full payment is made. 13 They also object
to the award of attorneys' fees. 14
Interest upon an obligation which calls for the payment of money,
absent a stipulation, is the legal rate. Such interest normally is
allowable from the date of demand, judicial or extrajudicial. 15 The
trial court opted for judicial demand as the starting point.
But then upon the provisions of Article 2213 of the Civil Code, interest
"cannot be recovered upon unliquidated claims or damages, except
when the demand can be established with reasonable certainty." And
as was held by this Court in Rivera vs. Perez, L-6998, February 29,
1956, if the suit were for damages, "unliquidated and not known until
definitely ascertained, assessed and determined by the courts after
proof (Montilla v. Corporacion de P. P. Agustinos, 25 Phil. 447;
Lichauco v. Guzman, 38 Phil. 302)", then, interest "should be from the
date of the decision."
Defendants are correct in that Article 2213 of the Civil Code and the
ruling in Rivera vs. Perez should govern the present case. The total of
plaintiff's unliquidated claim for the value of the undelivered goods, as
set forth in its complaint, amounted to P3,947.20. This demand was
not established in its totality. It was not definitely ascertained.
Indeed, plaintiff settled for an amount (P1,447.51) very much less
than that demanded — in fact less than fifty percent (50%) of the
claim. This amount of P1,447.51 was not known until definitely
agreed upon in the stipulation of facts. Said stipulation was entered
into in lieu of proof. These are the facts which place the present case
within the coverage of the rule set forth in Article 2213 of the Civil
Code and elaborated in Rivera vs. Perez. For which reason, interest
should start from the date of the decision.
No reason exists why we should disturb the award of attorneys' fees.
The court's authority to grant such attorneys' fees is well within the
compass of Article 2208(11) of the Civil Code providing that attorneys'
fees may be recovered in "any other case where the court deems it just
and equitable."
FOR THE REASONS GIVEN, the judgment under review is hereby
modified in the sense that the amount of P1,447.51 shall bear legal
interest from the date of the decision below. Thus modified, the
judgment under review is affirmed in all other respects.
G.R. No. 186312 June 29, 2010
SPOUSES DANTE CRUZ and LEONORA CRUZ, Petitioners,
vs.
SUN HOLIDAYS, INC., Respondent.
DECISION
CARPIO MORALES, J.:
Spouses Dante and Leonora Cruz (petitioners) lodged a Complaint on
January 25, 20011 against Sun Holidays, Inc. (respondent) with the
Regional Trial Court (RTC) of Pasig City for damages arising from the
death of their son Ruelito C. Cruz (Ruelito) who perished with his wife
on September 11, 2000 on board the boat M/B Coco Beach III that
capsized en route to Batangas from Puerto Galera, Oriental Mindoro
where the couple had stayed at Coco Beach Island Resort (Resort)
owned and operated by respondent.
The stay of the newly wed Ruelito and his wife at the Resort from
September 9 to 11, 2000 was by virtue of a tour package-contract with
respondent that included transportation to and from the Resort and
the point of departure in Batangas.
Miguel C. Matute (Matute),2 a scuba diving instructor and one of the
survivors, gave his account of the incident that led to the filing of the
complaint as follows:
Matute stayed at the Resort from September 8 to 11, 2000. He was
originally scheduled to leave the Resort in the afternoon of September
10, 2000, but was advised to stay for another night because of strong
winds and heavy rains.
On September 11, 2000, as it was still windy, Matute and 25 other
Resort guests including petitioners’ son and his wife trekked to the
other side of the Coco Beach mountain that was sheltered from the
wind where they boarded M/B Coco Beach III, which was to ferry
them to Batangas.
Shortly after the boat sailed, it started to rain. As it moved farther
away from Puerto Galera and into the open seas, the rain and wind
got stronger, causing the boat to tilt from side to side and the captain
to step forward to the front, leaving the wheel to one of the crew
members.
The waves got more unwieldy. After getting hit by two big waves
which came one after the other, M/B Coco Beach III capsized putting
all passengers underwater.
The passengers, who had put on their life jackets, struggled to get out
of the boat. Upon seeing the captain, Matute and the other passengers
who reached the surface asked him what they could do to save the
people who were still trapped under the boat. The captain replied
"Iligtas niyo na lang ang sarili niyo" (Just save yourselves).
Help came after about 45 minutes when two boats owned by Asia
Divers in Sabang, Puerto Galera passed by the capsized M/B Coco
Beach III. Boarded on those two boats were 22 persons, consisting of
18 passengers and four crew members, who were brought to Pisa
Island. Eight passengers, including petitioners’ son and his wife, died
during the incident.
At the time of Ruelito’s death, he was 28 years old and employed as a
contractual worker for Mitsui Engineering & Shipbuilding Arabia,
Ltd. in Saudi Arabia, with a basic monthly salary of $900.3
Petitioners, by letter of October 26, 2000,4 demanded indemnification
from respondent for the death of their son in the amount of at least
₱4,000,000.
Replying, respondent, by letter dated November 7, 2000,5 denied any
responsibility for the incident which it considered to be a fortuitous
event. It nevertheless offered, as an act of commiseration, the amount
of ₱10,000 to petitioners upon their signing of a waiver.
As petitioners declined respondent’s offer, they filed the Complaint, as
earlier reflected, alleging that respondent, as a common carrier, was
guilty of negligence in allowing M/B Coco Beach III to sail
notwithstanding storm warning bulletins issued by the Philippine
Atmospheric, Geophysical and Astronomical Services Administration
(PAGASA) as early as 5:00 a.m. of September 11, 2000.6
In its Answer,7 respondent denied being a common carrier, alleging
that its boats are not available to the general public as they only ferry
Resort guests and crew members. Nonetheless, it claimed that it
exercised the utmost diligence in ensuring the safety of its passengers;
contrary to petitioners’ allegation, there was no storm on September
11, 2000 as the Coast Guard in fact cleared the voyage; and M/B Coco
Beach III was not filled to capacity and had sufficient life jackets for
its passengers. By way of Counterclaim, respondent alleged that it is
entitled to an award for attorney’s fees and litigation expenses
amounting to not less than ₱300,000.
Carlos Bonquin, captain of M/B Coco Beach III, averred that the
Resort customarily requires four conditions to be met before a boat is
allowed to sail, to wit: (1) the sea is calm, (2) there is clearance from
the Coast Guard, (3) there is clearance from the captain and (4) there
is clearance from the Resort’s assistant manager.8 He added that M/B
Coco Beach III met all four conditions on September 11, 2000, 9 but a
subasco or squall, characterized by strong winds and big waves,
suddenly occurred, causing the boat to capsize.10
By Decision of February 16, 2005,11 Branch 267 of the Pasig RTC
dismissed petitioners’ Complaint and respondent’s Counterclaim.
Petitioners’ Motion for Reconsideration having been denied by Order
dated September 2, 2005,12 they appealed to the Court of Appeals.
By Decision of August 19, 2008,13 the appellate court denied
petitioners’ appeal, holding, among other things, that the trial court
correctly ruled that respondent is a private carrier which is only
required to observe ordinary diligence; that respondent in fact
observed extraordinary diligence in transporting its guests on board
M/B Coco Beach III; and that the proximate cause of the incident was
a squall, a fortuitous event.
Petitioners’ Motion for Reconsideration having been denied by
Resolution dated January 16, 2009,14 they filed the present Petition
for Review.15
Petitioners maintain the position they took before the trial court,
adding that respondent is a common carrier since by its tour package,
the transporting of its guests is an integral part of its resort business.
They inform that another division of the appellate court in fact held
respondent liable for damages to the other survivors of the incident.
Upon the other hand, respondent contends that petitioners failed to
present evidence to prove that it is a common carrier; that the Resort’s
ferry services for guests cannot be considered as ancillary to its
business as no income is derived therefrom; that it exercised
extraordinary diligence as shown by the conditions it had imposed
before allowing M/B Coco Beach III to sail; that the incident was
caused by a fortuitous event without any contributory negligence on
its part; and that the other case wherein the appellate court held it
liable for damages involved different plaintiffs, issues and evidence.16
The petition is impressed with merit.
Petitioners correctly rely on De Guzman v. Court of Appeals17 in
characterizing respondent as a common carrier.
The Civil Code defines "common carriers" in the following terms:
Article 1732. Common carriers are persons, corporations, firms or
associations engaged in the business of carrying or transporting
passengers or goods or both, by land, water, or air for compensation,
offering their services to the public.
The above article makes no distinction between one whose principal
business activity is the carrying of persons or goods or both, and one
who does such carrying only as an ancillary activity (in local idiom, as
"a sideline"). Article 1732 also carefully avoids making any distinction
between a person or enterprise offering transportation service on
a regular or scheduled basis and one offering such service on
an occasional, episodic or unscheduled basis. Neither does Article
1732 distinguish between a carrier offering its services to the "general
public," i.e., the general community or population, and one who offers
services or solicits business only from a narrow segment of the general
population. We think that Article 1733 deliberately refrained from
making such distinctions.
So understood, the concept of "common carrier" under Article 1732
may be seen to coincide neatly with the notion of "public service,"
under the Public Service Act (Commonwealth Act No. 1416, as
amended) which at least partially supplements the law on common
carriers set forth in the Civil Code. Under Section 13, paragraph (b) of
the Public Service Act, "public service" includes:
. . . every person that now or hereafter may own, operate, manage, or
control in the Philippines, for hire or compensation, with general or
limited clientele, whether permanent, occasional or accidental, and
done for general business purposes, any common carrier, railroad,
street railway, traction railway, subway motor vehicle, either for
freight or passenger, or both, with or without fixed route and
whatever may be its classification, freight or carrier service of any
class, express service, steamboat, or steamship line, pontines, ferries
and water craft, engaged in the transportation of passengers or
freight or both, shipyard, marine repair shop, wharf or dock, ice plant,
ice-refrigeration plant, canal, irrigation system, gas, electric light,
heat and power, water supply and power petroleum, sewerage system,
wire or wireless communications systems, wire or wireless
broadcasting stations and other similar public services . . .18 (emphasis
and underscoring supplied.)
Indeed, respondent is a common carrier. Its ferry services are so
intertwined with its main business as to be properly considered
ancillary thereto. The constancy of 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. It would be imprudent to suppose that it
provides said services at a loss. The Court is aware of the practice of
beach resort operators offering tour packages to factor the
transportation fee in arriving at the tour package price. That guests
who opt not to avail of respondent’s ferry services pay the same
amount is likewise inconsequential. These guests may only be deemed
to have overpaid.
As De Guzman instructs, 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.
Under the Civil Code, common carriers, from the nature of their
business and for reasons of public policy, are bound to observe
extraordinary diligence for the safety of the passengers transported by
them, according to all the circumstances of each case.19 They are
bound to carry the passengers safely as far as human care and
foresight can provide, using the utmost diligence of very cautious
persons, with due regard for all the circumstances.20
When a passenger dies or is injured in the discharge of a contract of
carriage, it is presumed that the common carrier is at fault or
negligent. In fact, there is even no need for the court to make an
express finding of fault or negligence on the part of the common
carrier. This statutory presumption may only be overcome by evidence
that the carrier exercised extraordinary diligence.21
Respondent nevertheless harps on its strict compliance with the
earlier mentioned conditions of voyage before it allowed M/B Coco
Beach III to sail on September 11, 2000. Respondent’s position does
not impress.
The evidence shows that PAGASA issued 24-hour public weather
forecasts and tropical cyclone warnings for shipping on September 10
and 11, 2000 advising of tropical depressions in Northern Luzon
which would also affect the province of Mindoro.22 By the testimony of
Dr. Frisco Nilo, supervising weather specialist of PAGASA, squalls
are to be expected under such weather condition.23
A very cautious person exercising the utmost diligence would thus not
brave such stormy weather and put other 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.
Respondent’s insistence that the incident was caused by a fortuitous
event does not impress either.
The elements of a "fortuitous event" are: (a) the cause of the
unforeseen and unexpected occurrence, or the failure of the debtors to
comply with their obligations, must have been independent of human
will; (b) the event that constituted the caso fortuito must have been
impossible to foresee or, if foreseeable, impossible to avoid; (c) the
occurrence must have been such as to render it impossible for the
debtors to fulfill their obligation in a normal manner; and (d) the
obligor must have been free from any participation in the aggravation
of the resulting injury to the creditor.24
To fully free a common carrier from any liability, the fortuitous event
must have been the proximate and only causeof the loss. And it should
have exercised due diligence to prevent or minimize the loss before,
during and after the occurrence of the fortuitous event.25
Respondent cites the squall that occurred during the voyage as the
fortuitous event that overturned M/B Coco Beach III. As reflected
above, however, the occurrence of squalls was expected under the
weather condition of September 11, 2000. Moreover, evidence shows
that M/B Coco Beach III suffered engine trouble before it capsized and
sank.26 The incident was, therefore, not completely free from human
intervention.
The Court need not belabor how respondent’s evidence likewise fails
to demonstrate that it exercised due diligence to prevent or minimize
the loss before, during and after the occurrence of the squall.
Article 176427 vis-à-vis Article 220628 of the Civil Code holds the
common carrier in breach of its contract of carriage that results in the
death of a passenger liable to pay the following: (1) indemnity for
death, (2) indemnity for loss of earning capacity and (3) moral
damages.
Petitioners are entitled to indemnity for the death of Ruelito which is
fixed at ₱50,000.29
As for damages representing unearned income, the formula for its
computation is:
Net Earning Capacity = life expectancy x (gross annual income -
reasonable and necessary living expenses).
Life expectancy is determined in accordance with the formula:
2 / 3 x [80 — age of deceased at the time of death]30
The first factor, i.e., life expectancy, is computed by applying the
formula (2/3 x [80 — age at death]) adopted in the American
Expectancy Table of Mortality or the Actuarial of Combined
Experience Table of Mortality.31
The second factor is computed by multiplying the life expectancy by
the net earnings of the deceased, i.e., the total earnings less expenses
necessary in the creation of such earnings or income and less living
and other incidental expenses.32 The loss is not equivalent to the
entire earnings of the deceased, but only such portion as he would
have used to support his dependents or heirs. Hence, to be deducted
from his gross earnings are the necessary expenses supposed to be
used by the deceased for his own needs.33
In computing the third factor – necessary living expense, Smith Bell
Dodwell Shipping Agency Corp. v. Borja34teaches that when, as in this
case, there is no showing that the living expenses constituted the
smaller percentage of the gross income, the living expenses are fixed
at half of the gross income.
Applying the above guidelines, the Court determines Ruelito's life
expectancy as follows:
Life expectancy 2/3 x [80 - age of deceased at the time of
= death]
2/3 x [80 - 28]
2/3 x [52]
Life expectancy
35
=
Documentary evidence shows that Ruelito was earning a basic
monthly salary of $90035 which, when converted to Philippine peso
applying the annual average exchange rate of $1 = ₱44 in
2000,36 amounts to ₱39,600. Ruelito’s net earning capacity is thus
computed as follows:
Net Earning = life expectancy x (gross annual income -
Capacity reasonable and necessary living expenses).
= 35 x (₱475,200 - ₱237,600)
= 35 x (₱237,600)
Net Earning
= ₱8,316,000
Capacity
Respecting the award of moral damages, since respondent common
carrier’s breach of contract of carriage resulted in the death of
petitioners’ son, following Article 1764 vis-à-vis Article 2206 of the
Civil Code, petitioners are entitled to moral damages.
Since respondent failed to prove that it exercised the extraordinary
diligence required of common carriers, it is presumed to have acted
recklessly, thus warranting the award too of exemplary damages,
which are granted in contractual obligations if the defendant acted in
a wanton, fraudulent, reckless, oppressive or malevolent manner.37
Under the circumstances, it is reasonable to award petitioners the
amount of ₱100,000 as moral damages and ₱100,000 as exemplary
damages.381avvphi1
Pursuant to Article 220839 of the Civil Code, attorney's fees may also
be awarded where exemplary damages are awarded. The Court finds
that 10% of the total amount adjudged against respondent is
reasonable for the purpose.
Finally, Eastern Shipping Lines, Inc. v. Court of Appeals40 teaches
that when an obligation, regardless of its source, i.e., law, contracts,
quasi-contracts, delicts or quasi-delicts is breached, the contravenor
can be held liable for payment of interest in the concept of actual and
compensatory damages, subject to the following rules, to wit —
1. When the obligation is breached, and it consists in the
payment of a sum of money, i.e., a loan or forbearance of
money, the interest due should be that which may have been
stipulated in writing. Furthermore, the interest due shall
itself earn legal interest from the time it is judicially
demanded. In the absence of stipulation, the rate of interest
shall be 12% per annum to be computed from default, i.e.,
from judicial or extrajudicial demand under and subject to
the provisions of Article 1169 of the Civil Code.
2. When an obligation, not constituting a loan or forbearance
of money, is breached, an interest on the amount of damages
awarded may be imposed at the discretion of the court at the
rate of 6% per annum. No interest, however, shall be
adjudged on unliquidated claims or damages except when or
until the demand can be established with reasonable
certainty. Accordingly, where the demand is established
with reasonable certainty, the interest shall begin to run
from the time the claim is made judicially or extrajudicially
(Art. 1169, Civil Code) but when such certainty cannot be so
reasonably established at the time the demand is made, the
interest shall begin to run only from the date the judgment
of the court is made (at which time the quantification of
damages may be deemed to have been reasonably
ascertained). The actual base for the computation of legal
interest shall, in any case, be on the amount finally
adjudged.
3. When the judgment of the court awarding a sum of money
becomes final and executory, the rate of legal interest,
whether the case falls under paragraph 1 or paragraph 2,
above, shall be 12% per annum from such finality until its
satisfaction, this interim period being deemed to be by then
an equivalent to a forbearance of credit. (emphasis
supplied).
Since the amounts payable by respondent have been determined with
certainty only in the present petition, the interest due shall be
computed upon the finality of this decision at the rate of 12% per
annum until satisfaction, in accordance with paragraph number 3 of
the immediately cited guideline in Easter Shipping Lines, Inc.
WHEREFORE, the Court of Appeals Decision of August 19, 2008 is
REVERSED and SET ASIDE. Judgment is rendered in favor of
petitioners ordering respondent to pay petitioners the following: (1)
₱50,000 as indemnity for the death of Ruelito Cruz; (2) ₱8,316,000 as
indemnity for Ruelito’s loss of earning capacity; (3) ₱100,000 as moral
damages; (4) ₱100,000 as exemplary damages; (5) 10% of the total
amount adjudged against respondent as attorneys fees; and (6) the
costs of suit.
The total amount adjudged against respondent shall earn interest at
the rate of 12% per annum computed from the finality of this decision
until full payment.
G.R. No. 119706 March 14, 1996
PHILIPPINE AIRLINES, INC., petitioner,
vs.
COURT OF APPEALS and GILDA C. MEJIA, respondents.
REGALADO, J.:p
This is definitely not a case of first impression. The incident which
eventuated in the present controversy is a drama of common
contentious occurrence between passengers and carriers whenever
loss is sustained by the former. Withal, the exposition of the factual
ambience and the legal precepts in this adjudication may hopefully
channel the assertiveness of passengers and the intransigence of
carriers into the realization that at times a bad extrajudicial
compromise could be better than a good judicial victory.
Assailed in this petition for review is the decision of respondent Court
of Appeals in CA-G.R. CV No. 427441 which affirmed the decision of
the lower court 2 finding petitioner Philippine Air Lines, Inc. (PAL)
liable as follows:
ACCORDINGLY, judgment is hereby rendered
ordering defendant Philippine Air Lines, Inc., to
pay plaintiff Gilda C. Mejia:
(1) P30,000.00 by way of actual damages of the
microwave oven;
(2) P10,000.00 by way of moral damages;
(3) P20,000.00 by way of exemplary damages;
(4) P10,000.00 as attorney's fee;
all in addition to the costs of the suit.
Defendant's counterclaim is hereby dismissed for
lack of merit.3
The facts as found by respondent Court of Appeals are as follows:
On January 27, 1990, plaintiff Gilda C. Mejia
shipped thru defendant, Philippine Airlines, one
(1) unit microwave oven, with a gross weight of 33
kilograms from San Francisco, U.S.A. to Manila,
Philippines. Upon arrival, however, of said article
in Manila, Philippines, plaintiff discovered that its
front glass door was broken and the damage
rendered it unserviceable. Demands both oral and
written were made by plaintiff against the
defendant for the reimbursement of the value of
the damaged microwave oven, and transportation
charges paid by plaintiff to defendant company.
But these demands fell on deaf ears.
On September 25, 1990, plaintiff Gilda C. Mejia
filed the instant action for damages against
defendant in the lower court.
In its answer, defendant Airlines alleged inter
alia, by way of special and affirmative defenses,
that the court has no jurisdiction over the case;
that plaintiff has no valid cause of action against
defendant since it acted only in good faith and in
compliance with the requirements of the law,
regulations, conventions and contractual
commitments; and that defendant had always
exercised the required diligence in the selection,
hiring and supervision of its employees.4
What had theretofore transpired at the trial in the court a quo is
narrated as follows:
Plaintiff Gilda Mejia testified that sometime on
January 27, 1990, she took defendant's plane from
San Francisco, U.S.A. for Manila, Philippines
(Exh. "F"). Amongst her baggages (sic) was a
slightly used microwave oven with the brand name
"Sharp" under PAL Air Waybill No. 0-79-1013008-
3 (Exh. "A"). When shipped, defendant's office at
San Francisco inspected it. It was in good
condition with its front glass intact. She did not
 declare its value upon the advice of defendant's
personnel at San Francisco.
When she arrived in Manila, she gave her sister
Concepcion C. Diño authority to claim her
baggag(e) (Exh. "G") and took a connecting flight
for Bacolod City.
When Concepcion C. Diño claimed the baggag(e)
(Exh. "B") with defendant, then with the Bureau of
Customs, the front glass of the microwave oven
was already broken and cannot be repaired
because of the danger of radiation. They demanded
from defendant thru Atty. Paco P30,000.00 for the
damages although a brand new one costs
P40,000.00, but defendant refused to pay.
Hence, plaintiff engaged the services of counsel.
Despite demand (Exh. "E") by counsel, defendant
still refused to pay.
The damaged oven is still with defendant. Plaintiff
is engaged in (the) catering and restaurant
business. Hence, the necessity of the oven.
Plaintiff suffered sleepless nights when defendant
refused to pay her (for) the broken oven and claims
P10,000.00 moral damages, P20,000.00 exemplary
damages, P10,000.00 attorney's fees plus P300.00
per court appearance and P15,000.00 monthly loss
of income in her business beginning February,
1990.
Defendant Philippine Airlines thru its employees
Rodolfo Pandes and Vicente Villaruz posited that
plaintiff's claim was not investigated until after
the filing of the formal claim on August 13, 1990
(Exh. "6" also Exh. "E"). During the investigations,
plaintiff failed to submit positive proof of the value
of the cargo. Hence her claim was denied.
Also plaintiff's claim was filed out of time under
paragraph 12, a (1) of the Air Waybill (Exh. "A",
also Exh. "1") which provides: "(a) the person
entitled to delivery must make a complaint to the
carrier in writing in case: (1) of visible damage to
the goods, immediately after discovery of the
damage and at the latest within 14 days from the
receipt of the goods. 5
As stated at the outset, respondent Court of Appeals similarly ruled in
favor of private respondent by affirming in full the trial court's
judgment in Civil Case No. 6210, with costs against
petitioner.6 Consequently, petitioner now impugns respondent
appellate court's ruling insofar as it agrees with (1) the conclusions of
the trial court that since the air waybill is a contract of adhesion, its
provisions should be strictly construed against herein petitioner; (2)
the finding of the trial court that herein petitioner's liability is not
limited by the provisions of the air waybill; and (3) the award by the
trial court to private respondent of moral and exemplary damages,
attorney's fees and litigation expenses.
The trial court relied on the ruling in the case of Fieldmen's Insurance
Co., Inc. vs. Vda. De Songco, et al.7 in finding that the provisions of the
air waybill should be strictly construed against petitioner. More
particularly, the court below stated its findings thus:
In this case, it is seriously doubted whether
plaintiff had read the printed conditions at the
back of the Air Waybill (Exh. "1"), or even if she
had, if she was given a chance to negotiate on the
conditions for loading her microwave oven. Instead
she was advised by defendant's employee at San
Francisco, U.S.A., that there is no need to declare
the value of her oven since it is not brand new.
Further, plaintiff testified that she immediately
submitted a formal claim for P30,000.00 with
defendant. But their claim was referred from one
employee to another th(e)n told to come back the
next day, and the next day, until she was referred
to a certain Atty. Paco. When they got tired and
frustrated of coming without a settlement of their
claim in sight, they consulted a lawyer who
demanded from defendant on August 13, 1990
(Exh. "E", an[d] Exh. "6").
The conclusion that inescapably emerges from the
above findings of fact is to concede it with
credence. . . . .8
Respondent appellate court approved said findings of the trial court in
this manner:
We cannot agree with defendant-appellant's above
contention. Under our jurisprudence, the Air
Waybill is a contract of adhesion considering that
all the provisions thereof are prepared and drafted
only by the carrier (Sweet Lines v. Teves, 83 SCRA
361). The only participation left of the other party
is to affix his signature thereto (BPI Credit
Corporation vs. Court of Appeals, 204 SCRA 601;
Saludo, Jr. vs. C.A., 207 SCRA 498; Maersk vs.
Court of Appeals, 222 SCRA 108, among the recent
cases). In the earlier case of Angeles v. Calasanz,
135 SCRA 323, the Supreme Court ruled that "the
terms of a contract [of adhesion] must be
interpreted against the party who drafted the
same." . . . .9
Petitioner airlines argues that the legal principle enunciated
in Fieldmen's Insurance does not apply to the present case because
the provisions of the contract involved here are neither ambiguous nor
obscure. The front portion of the air waybill contains a simple warning
that the shipment is subject to the conditions of the contract on the
dorsal portion thereof regarding the limited liability of the carrier
unless a higher valuation is declared, as well as the reglementary
period within which to submit a written claim to the carrier in case of
damage or loss to the cargo. Granting that the air waybill is a contract
of adhesion, it has been ruled by the Court that such contracts are not
entirely prohibited and are in fact binding regardless of whether or
not respondent herein read the provisions thereof. Having contracted
the services of petitioner carrier instead of other airlines, private
respondent in effect negotiated the terms of the contract and thus
became bound thereby. 10
Counsel for private respondent refutes these arguments by saying
that due to her eagerness to ship the microwave oven to Manila,
private respondent assented to the terms and conditions of the
contract without any opportunity to question or change its terms
which are practically on a "take-it-or-leave-it" basis, her only
participation therein being the affixation of her signature. Further,
reliance on the Fieldmen's Insurance case is misplaced since it is not
the ambiguity or obscurity of the stipulation that renders necessary
the strict interpretation of a contract of adhesion against the drafter,
but the peculiarity of the transaction wherein one party, normally a
corporation, drafts all the provisions of the contract without any
participation whatsoever on the part of the other party other than
affixment of signature. 11
A review of jurisprudence on the matter reveals the consistent holding
of the Court that contracts of adhesion are not invalid per se and that
it has on numerous occasions upheld the binding effect thereof. 12 As
explained in Ong Yiu vs. Court of Appeals, et al., supra:
. . . . Such provisions have been held to be a part of
the contract of carriage, and valid and binding
upon the passenger regardless of the latter's lack
of knowledge or assent to the regulation. It is what
is known as a contract of "adhesion," in regards
which it has been said that contracts of adhesion
wherein one party imposes a ready-made form of
contract on the other, as the plane ticket in the
case at bar, are contracts not entirely prohibited.
The one who adheres to the contract is in reality
free to reject it entirely; if he adheres, he gives his
consent. . . , a contract limiting liability upon an
agreed valuation does not offend against the policy
of the law forbidding one from contracting against
his own negligence.
As rationalized in Saludo, Jr. vs. Court of Appeals, et al., supra:
. . . , it should be borne in mind that a contract of
adhesion may be struck down as void and
unenforceable, for being subversive of public
policy, only when the weaker party is imposed
upon in dealing with the dominant bargaining
party and is reduced to the alternative of taking it
or leaving it, completely deprived of the
opportunity to bargain on equal footing. . . . .
but subject to the caveat that —
 . . . . Just because we have said that Condition No.
5 of the airway bill is binding upon the parties to
and fully operative in this transaction, it does not
mean, and let this serve as fair warning to
respondent carriers, that they can at all times
whimsical seek refuge from liability in the
exculpatory sanctuary of said Condition No. 5 . . . .
The peculiar nature of such contracts behooves the Court to closely
scrutinize the factual milieu to which the provisions are intended to
apply. Thus, just as consistently and unhesitatingly, but without
categorically invalidating such contracts, the Court has construed
obscurities and ambiguities in the restrictive provisions of contracts of
adhesion strictly albeit not unreasonably against the drafter thereof
when justified in light of the operative facts and surrounding
circumstances. 13
We find nothing objectionable about the lower court's reliance upon
the Fieldmen's Insurance case, the principles wherein squarely apply
to the present petition. The parallelism between the aforementioned
case and this one is readily apparent for, just as in the instant case, it
is the binding effect of the provisions in a contract of adhesion (an
insurance policy in Fieldmen's Insurance) that is put to test.
A judicious reading of the case reveals that what was pivotal in the
judgment of liability against petitioner insurance company therein,
and necessarily interpreting the provisions of the insurance policy as
ineffective, was the finding that the representations made by the
agent of the insurance company rendered it impossible to comply with
the conditions of the contract in question, rather than the mere
ambiguity of its terms. The extended pronouncements regarding strict
construction of ambiguous provisions in an adhesion contract against
its drafter, which although made by the Court as an aside but has
perforce evolved into a judicial tenet over time, was actually an
incidental statement intended to emphasize the duty of the court to
protect the weaker, as against the more dominant, party to a contract,
as well as to prevent the iniquitous situation wherein the will of one
party is imposed upon the other in the course of negotiation.
Thus, there can be no further question as to the validity of the terms
of the air waybill, even if the same constitutes a contract of adhesion.
Whether or not the provisions thereof particularly on the limited
liability of the carrier are binding on private respondent in this
instance must be determined from the facts and circumstances
involved vis-a-vis the nature of the provisions sought to be enforced,
taking care that equity and fair play should characterize the
transaction under review.
On petitioner's insistence that its liability for the damage to private
respondent's microwave oven, if any, should be limited by the
provisions of the air waybill, the lower court had this to say:
By and large, defendant's evidence is anchored
principally on plaintiff's alleged failure to comply
with paragraph 12, a(1) (Exh. "1-C-2") of the Air
waybill (Exh. "A," also Exh. "1"), by filing a formal
claim immediately after discovery of the damage.
Plaintiff filed her formal claim only on August 13,
1990 (Exh. "6", also Exh. "E"). And, failed to
present positive proof on the value of the damaged
microwave oven. Hence, the denial of her claim.
This Court has misgivings about these pretensions
of defendant.
xxx xxx xxx
Finally, the Court finds no merit to defendant's
contention that under the Warsaw Convention, its
liability if any, cannot exceed U.S. $20.00 based on
weight as plaintiff did not declare the contents of
her baggage nor pay additional charges before the
flight. 14
The appellate court declared correct the non-application by the trial
court of the limited liability of therein defendant-appellant under the
"Conditions of the Contract" contained in the air waybill, based on the
ruling in Cathay Pacific Airways, Ltd. vs. Court of Appeals, et
al., 15 which substantially enunciates the rule that while the Warsaw
Convention has the force and effect of law in the Philippines, being a
treaty commitment by the government and as a signatory thereto, the
same does not operate as an exclusive enumeration of the instances
when a carrier shall be liable for breach of contract or as an absolute
limit of the extent of liability, nor does it preclude the operation of the
Civil Code or other pertinent laws.
Petitioner insists that both respondent court and the trial court erred
in finding that petitioner's liability, if any, is not limited by the
provisions of the air waybill, for, as evidence of the contract of
carriage between petitioner and private respondent, it substantially
states that the shipper certifies to the correctness of the entries
contained therein and accepts that the carrier's liability is limited to
US $20 per kilogram of goods lost, damaged or destroyed unless a
value is declared and a supplementary charge paid. Inasmuch as no
such declaration was made by private respondent, as she admitted
during cross-examination, the liability of petitioner, if any, should be
limited to 28 kilograms multiplied by US $20, or $560. Moreover, the
validity of these conditions has been upheld in the leading case of Ong
Yiu vs. Court of Appeals, et al., supra, and subsequent cases, for being
a mere reiteration of the limitation of liability under the Warsaw
Convention, which treaty has the force and effect of law. 16
It is additionally averred that since private respondent was merely
advised, not ordered, that she need not declare a higher value for her
cargo, the final decision of refraining from making such a declaration
fell on private respondent and should not put the petitioner in
estoppel from invoking its limited liability.17
In refutation, private respondent explains that the reason for the
absence of a declaration of a higher value was precisely because
petitioner's personnel in San Francisco, U.S.A. advised her not to
declare the value of her cargo, which testimony has not at all been
rebutted by petitioner. This being so, petitioner is estopped from
faulting private respondent for her failure to declare the value of the
microwave oven. 18
The validity of provisions limiting the liability of carriers contained in
bills of lading have been consistently upheld for the following reason:
. . . . The stipulation in the bill of lading limiting
the common carrier's liability to the value of goods
appearing in the bill, unless the shipper or owner
declares a greater value, is valid and binding. The
limitation of the carrier's liability is sanctioned by
the freedom of the contracting parties to establish
such stipulations, clauses, terms, or conditions as
they may deem convenient, provided they are not
contrary to law, morals, good customs and public
policy. . . . . 19
However, the Court has likewise cautioned against blind
reliance on adhesion contracts where the facts and
circumstances warrant that they should be disregarded. 20
In the case at bar, it will be noted that private respondent signified an
intention to declare the value of the microwave oven prior to
shipment, but was explicitly advised against doing so by PAL's
personnel in San Francisco, U.S.A., as borne out by her testimony in
court:
xxx xxx xxx
Q Did you declare the value of
the shipment?
A No. I was advised not to.
Q Who advised you?
A At the PAL Air Cargo. 21
It cannot be denied that the attention of PAL through its personnel in
San Francisco was sufficiently called to the fact that private
respondent's cargo was highly susceptible to breakage as would
necessitate the declaration of its actual value. Petitioner had all the
opportunity to check the condition and manner of packing prior to
acceptance for shipment, 22 as well as during the preparation of the air
waybill by PAL's Acceptance Personnel based on information supplied
by the shipper, 23 and to reject the cargo if the contents or the packing
did not meet the company's required specifications. Certainly, PAL
could not have been otherwise prevailed upon to merely accept the
cargo.
While Vicente Villaruz, officer-in-charge of the PAL Import Section at
the time of incident, posited that there may have been inadequate and
improper packing of the cargo, 24 which by itself could be a ground for
refusing carriage of the goods presented for shipment, he nonetheless
admitted on cross-examination that private respondent's cargo was
accepted by PAL in its San Francisco office:
 ATTY. VINCO ATTY. VINCO

So that, be So, this

that as it baggage
may, my was
particular accepted
concern is and
that, it is admitted in
the PAL San
personnel Francisco?
that accepts
the
WITNESS
baggage?

Yes, sir.
WITNESS

ATTY. VINCO
Yes, sir.

And you
ATTY. VINCO
could not
show any
Also, if he document
comes from to the Court
abroad like that would
in this suggest
particular that this
case, it is baggage
the PAL was denied
personnel admittance
who accepts by your
the office at
baggage? San
Francisco?
WITNESS
WITNESS
Yes, sir.
No, I
cannot
ATTY. VINCO
show.

And the
ATTY. VINCO
PAL
personnel
may or may Now, can
not accept you show
the any
baggage? document
that would
suggest
WITNESS
that there
was
Yes, sir. insufficient
pac(k)aging
ATTY. VINCO on this
particular
baggage
According from
to what is abroad?
stated as in
the
acceptance WITNESS
of the
cargo, it is No, sir. 25
to the best
interest of
In response to the trial court's questions during the trial, he also
the airlines,
stated that while the passenger's declaration regarding the general or
that is, he
fragile character of the cargo is to a certain extent determinative of its
want(s) also
classification, PAL nevertheless has and exercises discretion as to the
that the
manner of handling required by the nature of the cargo it accepts for
airlines
carriage. He further opined that the microwave oven was only a
would be
general, not a fragile, cargo which did not require any special
free from
handling. 26
any
liability.
Could that There is no absolute obligation on the part of a carrier to accept a
be one of cargo. Where a common carrier accepts a cargo for shipment for
the grounds valuable consideration, it takes the risk of delivering it in good
for not condition as when it was loaded. And if the fact of improper packing is
admitting a known to the carrier or its personnel, or apparent upon observation
baggage? but it accepts the goods notwithstanding such condition, it is not
relieved of liability for loss or injury resulting therefrom. 27
WITNESS
The acceptance in due course by PAL of private respondent's cargo as
packed and its advice against the need for declaration of its actual
Safety is
value operated as an assurance to private respondent that in fact
number one
there was no need for such a declaration. Petitioner can hardly be
(1)
faulted for relying on the representations of PAL's own personnel.

xxx xxx xxx

In other words, private respondent Mejia could and would have up to June
complied with the conditions stated in the air waybill, i.e., declaration 1990.
of a higher value and payment of supplemental transportation
charges, entitling her to recovery of damages beyond the stipulated
ATTY. VINCO
limit of US $20 per kilogram of cargo in the event of loss or damage,
had she not been effectively prevented from doing so upon the advice
of PAL's personnel for reasons best known to themselves. And what
results did
those
As pointed out by private respondent, the aforestated facts were not
follow-ups
denied by PAL in any of its pleadings nor rebutted by way of evidence
produce?
presented in the course of the trial, and thus in effect it judicially
admitted that such an advice was given by its personnel in San
Francisco, U.S.A. Petitioner, therefore, is estopped from blaming WITNESS
private respondent for not declaring the value of the cargo shipped
and which would have otherwise entitled her to recover a higher All they
amount of damages. The Court's bidding in the Fieldmen's said (was)
Insurance case once again rings true: that the
document
. . . As estoppel is primarily based on the doctrine was being
of good faith and the avoidance of harm that will processed,
befall an innocent party due to its injurious that they
reliance, the failure to apply it in this case would were
result in gross travesty of justice. waiting for
Atty. Paco
to report to
We likewise uphold the lower court's finding that private respondent
the office
complied with the requirement for the immediate filing of a formal
and they
claim for damages as required in the air waybill or, at least, we find
could refer
that there was substantial compliance therewith.
the matter
to Atty.
Private respondent testified that she authorized her sister, Paco.
Concepcion Diño, to claim her cargo consisting of a microwave oven
since the former had to take a connecting flight to Bacolod City on the
ATTY. VINCO
very same afternoon of the day of her arrival. 28 As instructed,
Concepcion Diño promptly proceeded to PAL's Import Section the next
day to claim the oven. Upon discovering that the glass door was Who is this
broken, she immediately filed a claim by way of the baggage freight Atty. Paco?
claim 29 on which was duly annotated the damage sustained by the
oven. 30 WITNESS

Her testimony relates what took place thereafter: He was the

one in-
ATTY. VINCO charge of
approving
our claim.
So, after
that
inspection, ATTY. VINCO
what did
you do? Were you
able to see
WITNESS Atty. Paco?

After that WITNESS

annotation
placed by Yes, sir. I
Mr. personally
Villaruz, I visited
went home Atty. Paco
and I together
followed it with my
up the next auntie who
day with was a
the Clerk of former PAL
PAL cargo employee.
office.

xxx xxx xxx

ATTY. VINCO

ATTY. VINCO
What did
the clerk
tell you? So, what
did you do,
did you
WITNESS make a
report or
She told me did you tell
that the Atty. Paco
claim was of your
being scouting
processed around for
and I made a possible
several replacemen
phone calls t?
after that. I
started my WITNESS
follow-ups
February
 I did call A Yes, sir.
him back at
his office. I
ATTY. VINCO:
made a
telephone
call. Q And the Claim Officer
happened to be Atty. Paco?
ATTY. VINCO
WITNESS:
And what
answer did A Yes, sir.
Atty. Paco
make after ATTY. VINCO:
you have
reported
back to Q And you know that the
him? plaintiff thru her authorized
representative Concepcion
Diño, who is her sister had
WITNESS many times gone to Atty. Paco,
in connection with this claim of
They told her sister?
me that
they were WITNESS:
going to
process the
claim based A Yes, sir.
on the price
that I gave ATTY. VINCO:
them but
there was
no definite Q As a matter of fact even
result. when the complaint was
already filed here in Court the
claimant had continued to call
ATTY. VINCO about the settlement of her
claim with Atty. Paco, is that
How many correct?
times did
you go and xxx xxx xxx
see Atty.
Paco
regarding WITNESS:
the claim of
your sister? A Yes, sir.

WITNESS ATTY. VINCO:

I made one Q You know this fact because a

personal personnel saw you in one of the
visit and pre-trial here when this case
several was heard before the sala of
follow-up Judge Moscardon, is that
calls. With correct?
Atty. Paco,
I made one
phone call WITNESS:
but I made
several A Yes.
phone calls
with his
ATTY. VINCO:
secretary or
the clerk at
PAL cargo Q In other words, the plaintiff
office and I rather had never stop(ped) in
was trying her desire for your company to
to locate settle this claim, right?
him but
unfortunate
WITNESS:
ly, he was
always out
of his A Yes, sir. 33
office. 31
Considering the abovementioned incidents and private respondent
PAL claims processor, Rodolfo Pandes, * confirmed having received Mejia's own zealous efforts in following up the claim, 34 it was clearly
the baggage freight claim on January 30, 1990 32 and the referral to not her fault that the letter of demand for damages could only be filed,
and extended pendency of the private respondent's claim with the after months of exasperating follow-up of the claim, on August 13,
office of Atty. Paco, to wit: 1990. 35 If there was any failure at all to file the formal claim within
the prescriptive period contemplated in the air waybill, this was
largely because of PAL's own doing, the consequences of which cannot,
ATTY. VINCO:
in all fairness, be attributed to private respondent.

Q And you did instruct the

claimant to see the Claim
Officer of the company, right?
WITNESS:
Even if the claim for damages was conditioned on the timely filing of a
formal claim, under Article 1186 of the Civil Code that condition was
deemed fulfilled, considering that the collective action of PAL's
personnel in tossing around the claim and leaving it unresolved for an
indefinite period of time was tantamount to "voluntarily preventing
its fulfillment." On grounds of equity, the filing of the baggage freight
claim, which sufficiently informed PAL of the damage sustained by unjust refusal to comply with her valid demand for
private respondent's cargo, constituted substantial compliance with payment, thereby also entitling her to reasonable
the requirement in the contract for the filing of a formal claim. attorney's fees [Art. 2208 (2) and (11), id.]. 41

All told, therefore, respondent appellate court did not err in ruling
that the provision on limited liability is not applicable in this case.
We, however, note in passing that while the facts and circumstances
of this case do not call for the direct application of the provisions of
the Warsaw Convention, it should be stressed that, indeed,
recognition of the Warsaw Convention does not preclude the operation
of the Civil Code and other pertinent laws in the determination of the
extent of liability of the common carrier. 36
The Warsaw Convention, being a treaty to which the Philippines is a
signatory, is as much a part of Philippine law as the Civil Code, Code
of Commerce and other municipal special laws. 3 7 The provisions
therein contained, specifically on the limitation of carrier's liability,
are operative in the Philippines but only in appropriate situations.
It will be noted that petitioner never denied that the damage to the
microwave oven was sustained while the same was in its custody. The
possibility that said damage was due to causes beyond the control of
PAL has effectively been ruled out since the entire process in handling
of the cargo — from the unloading thereof from the plane, the towing
and transfer to the PAL warehouse, the transfer to the Customs
examination area, and its release thereafter to the shipper — was
done almost exclusively by, and with the intervention or, at the very
least, under the direct supervision of a responsible PAL personnel. 42
The very admissions of PAL, through Vicente Villaruz of its Import
Section, as follows:
ATTY. VINCO

Petitioner ascribes ultimate error in the award of moral and

So that, you
exemplary damages and attorney's fees in favor of private respondent
now claim,
in that other than the statement of the trial court that petitioner
Mr.
acted in bad faith in denying private respondent's claim, which was
Witness,
affirmed by the Court of Appeals, there is no evidence on record that
that from
the same is true. The denial of private respondent's claim was
the time
supposedly in the honest belief that the same had prescribed, there
the cargo
being no timely formal claim filed; and despite having been given an
was
opportunity to submit positive proof of the value of the damaged
unloaded
microwave oven, no such proof was submitted. Petitioner insists that
from the
its failure to deliver the oven in the condition in which it was shipped
plane until
could hardly be considered as amounting to bad faith. 38
the time it
reaches the
Private respondent counters that petitioner's failure to deliver the Customs
microwave oven in the condition in which it was received can be counter
described as gross negligence amounting to bad faith, on the further where it
consideration that it failed to prove that it exercised the extraordinary was
diligence required by law, and that no explanation whatsoever was inspected,
given as to why the front glass of the oven was broken. 39 all the way,
it was the
PAL
The trial court justified its award of actual, moral and exemplary
personnel
damages, and attorney's fees in favor of private respondent in this
who did all
wise:
these
things?
Since the plaintiff's baggage destination was the
Philippines, Philippine law governs the liability of
WITNESS
the defendant for damages for the microwave oven.

Yes,
The provisions of the New Civil Code on common
however,
carriers are Article(s) 1733, 1735 and 1753 . . . .
there is also
what we
xxx xxx xxx call the
Customs
In this case, defendant failed to overcome, not only storekeeper
the presumption but more importantly, plaintiff's and the
evidence that defendant's negligence was the Customs
proximate cause of the damages of the microwave guard along
oven. Further plaintiff has established that with the
defendant acted in bad faith when it denied the cargo.
former's claim on the ground that the formal claim
was filed beyond the period as provided in ATTY. VINCO
paragraph 12 (a-1) (Exh. "1-C-2") of the Air
Waybill (Exh. "1", also Exh. "A"), when actually,
You made
Concepcion Diño, sister of plaintiff has
mention
immediately filed the formal claim upon discovery
about a
of the damage. 40
locator?

Respondent appellate court was in full agreement with the trial

WITNESS
court's finding of bad faith on the part of petitioner as a basis for the
award of the aforestated damages, declaring that:
Yes, sir.
As to the last assigned error, a perusal of the facts
and law of the case reveals that the lower court's ATTY. VINCO
award of moral and exemplary damages,
attorney's fees and costs of suit to plaintiff-
This
appellee is in accordance with current laws and
locator, is
jurisprudence on the matter. Indeed, aside from
he an
the fact that defendant-appellant acted in bad
employee of
faith in breaching the contract and in denying
the PAL or
plaintiff's valid claim for damages, plaintiff-
the
appellee underwent profound distress, sleepless
Customs?
nights, and anxiety upon knowledge of her
damaged microwave oven in possession of
defendant-appellant, entitling her to the award of WITNESS
moral and exemplary damages (Cathay Pacific
Airways, Ltd. vs. C.A., supra; Arts. 2219 & 2221,
New Civil Code), and certainly plaintiff-appellant's
 He is a PAL
employee. 43
lead to the inevitable conclusion that whatever damage may
have been sustained by the cargo is due to causes
attributable to PAL's personnel or, at all events, under their
responsibility.
Moreover, the trial court underscored the fact that petitioner was not
able to overcome the statutory presumption of negligence in Article
1735 which, as a common carrier, it was laboring under in case of loss,
destruction or deterioration of goods, through proper showing of the
exercise of extraordinary diligence. Neither did it prove that the
damage to the microwave oven was because of any of the excepting
causes under Article 1734, all of the same Code. Inasmuch as the
subject item was received in apparent good condition, no contrary
notation or exception having been made on the air waybill upon its
acceptance for shipment, the fact that it was delivered with a broken
glass door raises the presumption that PAL's personnel were
negligent in the carriage and handling of the cargo. 44
Furthermore, there was glaringly no attempt whatsoever on the part
of petitioner to explain the cause of the damage to the oven. The
unexplained cause of damage to private respondent's cargo constitutes
gross carelessness or negligence which by itself justifies the present
award of damages. 45 The equally unexplained and inordinate delay in
acting on the claim upon referral thereof to the claims officer, Atty.
Paco, and the noncommittal responses to private respondent's
entreaties for settlement of her claim for damages belies petitioner's
pretension that there was no bad faith on its part. This unprofessional
indifference of PAL's personnel despite full and actual knowledge of
the damage to private respondent's cargo, just to be exculpated from
liability on pure technicality and bureaucratic subterfuge, smacks of
willful misconduct and insensitivity to a passenger's plight
tantamount to bad faith 46 and renders unquestionable petitioner's
liability for damages. In sum, there is no reason to disturb the
findings of the trial court in this case, especially with its full
affirmance by respondent Court of Appeals.
On this note, the case at bar goes into the annals of our jurisprudence
after six years and recedes into the memories of our legal experience
as just another inexplicable inevitability. We will never know exactly
how many man-hours went into the preparation, litigation and
adjudication of this simple dispute over an oven, which the parties
will no doubt insist they contested as a matter of principle. One thing,
however, is certain. As long as the first letter in "principle" is
somehow outplaced by the peso sign, the courts will always have to
resolve similar controversies although mutual goodwill could have
dispensed with judicial recourse.
IN VIEW OF ALL OF THE FOREGOING, the assailed judgment of
respondent Court of Appeals is AFFIRMED in toto.
G.R. No. 162467 May 8, 2009
MINDANAO TERMINAL AND BROKERAGE SERVICE,
INC. Petitioner,
vs.
PHOENIX ASSURANCE COMPANY OF NEW YORK/MCGEE &
CO., INC., Respondent.
DECISION
TINGA, J.:
Before us is a petition for review on certiorari1 under Rule 45 of the
1997 Rules of Civil Procedure of the 29 October 20032 Decision of the
Court of Appeals and the 26 February 2004 Resolution3 of the same
court denying petitioner’s motion for reconsideration.
The facts of the case are not disputed.
Del Monte Philippines, Inc. (Del Monte) contracted petitioner
Mindanao Terminal and Brokerage Service, Inc. (Mindanao
Terminal), a stevedoring company, to load and stow a shipment of
146,288 cartons of fresh green Philippine bananas and 15,202 cartons
of fresh pineapples belonging to Del Monte Fresh Produce
International, Inc. (Del Monte Produce) into the cargo hold of the
vessel M/V Mistrau. The vessel was docked at the port of Davao City
and the goods were to be transported by it to the port of Inchon, Korea
in favor of consignee Taegu Industries, Inc. Del Monte Produce
insured the shipment under an "open cargo policy" with private
respondent Phoenix Assurance Company of New York (Phoenix), a
non-life insurance company, and private respondent McGee & Co. Inc.
(McGee), the underwriting manager/agent of Phoenix.4
Mindanao Terminal loaded and stowed the cargoes aboard the M/V
Mistrau. The vessel set sail from the port of Davao City and arrived at
the port of Inchon, Korea. It was then discovered upon discharge that
some of the cargo was in bad condition. The Marine Cargo Damage
Surveyor of Incok Loss and Average Adjuster of Korea, through its
representative Byeong Yong Ahn (Byeong), surveyed the extent of the
damage of the shipment. In a survey report, it was stated that 16,069
cartons of the banana shipment and 2,185 cartons of the pineapple
shipment were so damaged that they no longer had commercial
value.5
Del Monte Produce filed a claim under the open cargo policy for the
damages to its shipment. McGee’s Marine Claims Insurance Adjuster
evaluated the claim and recommended that payment in the amount of
$210,266.43 be made. A check for the recommended amount was sent
to Del Monte Produce; the latter then issued a subrogation receipt6 to
Phoenix and McGee.
Phoenix and McGee instituted an action for damages7 against
Mindanao Terminal in the Regional Trial Court (RTC) of Davao City,
Branch 12. After trial, the RTC,8 in a decision dated 20 October 1999,
held that the only participation of Mindanao Terminal was to load the
cargoes on board the M/V Mistrau under the direction and
supervision of the ship’s officers, who would not have accepted the
cargoes on board the vessel and signed the foreman’s report unless
they were properly arranged and tightly secured to withstand voyage
across the open seas. Accordingly, Mindanao Terminal cannot be held
liable for whatever happened to the cargoes after it had loaded and
stowed them. Moreover, citing the survey report, it was found by the
RTC that the cargoes were damaged on account of a typhoon
which M/V Mistrau had encountered during the voyage. It was
further held that Phoenix and McGee had no cause of action against
Mindanao Terminal because the latter, whose services were
contracted by Del Monte, a distinct corporation from Del Monte
Produce, had no contract with the assured Del Monte Produce. The
RTC dismissed the complaint and awarded the counterclaim of
Mindanao Terminal in the amount of ₱83,945.80 as actual damages
and ₱100,000.00 as attorney’s fees.9 The actual damages were
awarded as reimbursement for the expenses incurred by Mindanao
Terminal’s lawyer in attending the hearings in the case wherein he
had to travel all the way from Metro Manila to Davao City.
Phoenix and McGee appealed to the Court of Appeals. The appellate
court reversed and set aside10 the decision of the RTC in its 29
October 2003 decision. The same court ordered Mindanao Terminal to
pay Phoenix and McGee "the total amount of $210,265.45 plus legal
interest from the filing of the complaint until fully paid and attorney’s
fees of 20% of the claim."11 It sustained Phoenix’s and McGee’s
argument that the damage in the cargoes was the result of improper
stowage by Mindanao Terminal. It imposed on Mindanao Terminal, as
the stevedore of the cargo, the duty to exercise extraordinary diligence
in loading and stowing the cargoes. It further held that even with the
absence of a contractual relationship between Mindanao Terminal
and Del Monte Produce, the cause of action of Phoenix and McGee
could be based on quasi-delict under Article 2176 of the Civil Code.12
Mindanao Terminal filed a motion for reconsideration,13 which the
Court of Appeals denied in its 26 February 200414 resolution. Hence,
the present petition for review.
Mindanao Terminal raises two issues in the case at bar, namely:
whether it was careless and negligent in the loading and stowage of
the cargoes onboard M/V Mistrau making it liable for damages; and,
whether Phoenix and McGee has a cause of action against Mindanao
Terminal under Article 2176 of the Civil Code on quasi-delict. To
resolve the petition, three questions have to be answered: first,
whether Phoenix and McGee have a cause of action against Mindanao
Terminal; second, whether Mindanao Terminal, as a stevedoring
company, is under obligation to observe the same extraordinary
degree of diligence in the conduct of its business as required by law for
common carriers15 and warehousemen;16 and third, whether Mindanao
Terminal observed the degree of diligence required by law of a
stevedoring company.
We agree with the Court of Appeals that the complaint filed by
Phoenix and McGee against Mindanao Terminal, from which the
present case has arisen, states a cause of action. The present action is
based on quasi-delict, arising from the negligent and careless loading
and stowing of the cargoes belonging to Del Monte Produce. Even
assuming that both Phoenix and McGee have only been subrogated in
the rights of Del Monte Produce, who is not a party to the contract of
service between Mindanao Terminal and Del Monte, still the
insurance carriers may have a cause of action in light of the Court’s
consistent ruling that the act that breaks the contract may be also a
tort.17 In fine, a liability for tort may arise even under a contract,
where tort is that which breaches the contract18 . In the present case,
Phoenix and McGee are not suing for damages for injuries arising
from the breach of the contract of service but from the alleged
negligent manner by which Mindanao Terminal handled the cargoes
belonging to Del Monte Produce. Despite the absence of contractual
relationship between Del Monte Produce and Mindanao Terminal, the
allegation of negligence on the part of the defendant should be
sufficient to establish a cause of action arising from quasi-delict.19
The resolution of the two remaining issues is determinative of the
ultimate result of this case.
Article 1173 of the Civil Code is very clear that if the law or contract
does not state the degree of diligence which is to be observed in the
performance of an obligation then that which is expected of a good
father of a family or ordinary diligence shall be required. Mindanao
Terminal, a stevedoring company which was charged with the loading
and stowing the cargoes of Del Monte Produce aboard M/V Mistrau,
had acted merely as a labor provider in the case at bar. There is no
specific provision of law that imposes a higher degree of diligence than
ordinary diligence for a stevedoring company or one who is charged
only with the loading and stowing of cargoes. It was neither alleged
nor proven by Phoenix and McGee that Mindanao Terminal was
bound by contractual stipulation to observe a higher degree of
diligence than that required of a good father of a family. We therefore
conclude that following Article 1173, Mindanao Terminal was
required to observe ordinary diligence only in loading and stowing the
cargoes of Del Monte Produce aboard M/V Mistrau.
imposing a higher degree of diligence,21 on Mindanao Terminal in
loading and stowing the cargoes. The case of Summa Insurance
Corporation v. CA, which involved the issue of whether an arrastre
operator is legally liable for the loss of a shipment in its custody and
the extent of its liability, is inapplicable to the factual circumstances
of the case at bar. Therein, a vessel owned by the National Galleon
Shipping Corporation (NGSC) arrived at Pier 3, South Harbor,
Manila, carrying a shipment consigned to the order of Caterpillar Far
East Ltd. with Semirara Coal Corporation (Semirara) as "notify
party." The shipment, including a bundle of PC 8 U blades, was
discharged from the vessel to the custody of the private respondent,
the exclusive arrastre operator at the South Harbor. Accordingly,
three good-order cargo receipts were issued by NGSC, duly signed by
the ship's checker and a representative of private respondent. When
Semirara inspected the shipment at house, it discovered that the
bundle of PC8U blades was missing. From those facts, the Court
observed:
x x x The relationship therefore between the consignee and the
arrastre operator must be examined. This relationship is much akin
to that existing between the consignee or owner of shipped goods and
the common carrier, or that between a depositor and a
warehouseman[22 ]. In the performance of its obligations, an arrastre
operator should observe the same degree of diligence as that
required of a common carrier and a warehouseman as
enunciated under Article 1733 of the Civil Code and Section 3(b) of the
Warehouse Receipts Law, respectively. Being the custodian of the
goods discharged from a vessel, an arrastre operator's duty is
to take good care of the goods and to turn them over to the
party entitled to their possession. (Emphasis supplied)23
There is a distinction between an arrastre and a stevedore.24 Arrastre,
a Spanish word which refers to hauling of cargo, comprehends the
handling of cargo on the wharf or between the establishment of the
consignee or shipper and the ship's tackle. The responsibility of the
arrastre operator lasts until the delivery of the cargo to the consignee.
The service is usually performed by longshoremen. On the other hand,
stevedoring refers to the handling of the cargo in the holds of the
vessel or between the ship's tackle and the holds of the vessel. The
responsibility of the stevedore ends upon the loading and stowing of
the cargo in the vessel.1avvphi1
It is not disputed that Mindanao Terminal was performing purely
stevedoring function while the private respondent in the Summa case
was performing arrastre function. In the present case, Mindanao
Terminal, as a stevedore, was only charged with the loading and
stowing of the cargoes from the pier to the ship’s cargo hold; it was
never the custodian of the shipment of Del Monte Produce. A
stevedore is not a common carrier for it does not transport goods or
passengers; it is not akin to a warehouseman for it does not store
goods for profit. The loading and stowing of cargoes would not have a
far reaching public ramification as that of a common carrier and a
warehouseman; the public is adequately protected by our laws on
contract and on quasi-delict. The public policy considerations in
legally imposing upon a common carrier or a warehouseman a higher
degree of diligence is not present in a stevedoring outfit which mainly
provides labor in loading and stowing of cargoes for its clients.
In the third issue, Phoenix and McGee failed to prove by
preponderance of evidence25 that Mindanao Terminal had acted
negligently. Where the evidence on an issue of fact is in equipoise or
there is any doubt on which side the evidence preponderates the party
having the burden of proof fails upon that issue. That is to say, if the
evidence touching a disputed fact is equally balanced, or if it does not
produce a just, rational belief of its existence, or if it leaves the mind
in a state of perplexity, the party holding the affirmative as to such
fact must fail.261avvphi1
We adopt the findings27 of the RTC,28 which are not disputed by
Phoenix and McGee. The Court of Appeals did not make any new
findings of fact when it reversed the decision of the trial court. The
only participation of Mindanao Terminal was to load the cargoes on
board M/V Mistrau.29 It was not disputed by Phoenix and McGee that
the materials, such as ropes, pallets, and cardboards, used in lashing
and rigging the cargoes were all provided by M/V Mistrau and these
materials meets industry standard.30
It was further established that Mindanao Terminal loaded and stowed
the cargoes of Del Monte Produce aboard the M/V Mistrau in
accordance with the stowage plan, a guide for the area assignments of
the goods in the vessel’s hold, prepared by Del Monte Produce and the
officers of M/V Mistrau.31 The loading and stowing was done under
the direction and supervision of the ship officers. The vessel’s officer
would order the closing of the hatches only if the loading was done
correctly after a final inspection.32 The said ship officers would not
have accepted the cargoes on board the vessel if they were not
properly arranged and tightly secured to withstand the voyage in open
seas. They would order the stevedore to rectify any error in its loading
and stowing. A foreman’s report, as proof of work done on board the
vessel, was prepared by the checkers of Mindanao Terminal and
concurred in by the Chief Officer of M/V Mistrau after they were
satisfied that the cargoes were properly loaded.33
Phoenix and McGee relied heavily on the deposition of Byeong Yong
Ahn34 and on the survey report35 of the damage to the cargoes.
Byeong, whose testimony was refreshed by the survey report,36 found
that the cause of the damage was improper stowage 37 due to the
manner the cargoes were arranged such that there were no spaces
between cartons, the use of cardboards as support system, and the use
of small rope to tie the cartons together but not by the negligent
conduct of Mindanao Terminal in loading and stowing the cargoes. As
admitted by Phoenix and McGee in their Comment38 before us, the
latter is merely a stevedoring company which was tasked by Del
Monte to load and stow the shipments of fresh banana and pineapple
of Del Monte Produce aboard the M/V Mistrau. How and where it
should load and stow a shipment in a vessel is wholly dependent on
the shipper and the officers of the vessel. In other words, the work of
the stevedore was under the supervision of the shipper and officers of
the vessel. Even the materials used for stowage, such as ropes,
pallets, and cardboards, are provided for by the vessel. Even the
survey report found that it was because of the boisterous stormy
weather due to the typhoon Seth, as encountered by M/V
Mistrau during its voyage, which caused the shipments in the cargo
hold to collapse, shift and bruise in extensive extent.39 Even the
deposition of Byeong was not supported by the conclusion in the
survey report that:
CAUSE OF DAMAGE
xxx
From the above facts and our survey results, we are of the opinion
that damage occurred aboard the carrying vessel during sea transit,
being caused by ship’s heavy rolling and pitching under boisterous
weather while proceeding from 1600 hrs on 7th October to 0700 hrs on
12th October, 1994 as described in the sea protest.40
As it is clear that Mindanao Terminal had duly exercised the required
degree of diligence in loading and stowing the cargoes, which is the
ordinary diligence of a good father of a family, the grant of the petition
is in order.
However, the Court finds no basis for the award of attorney’s fees in
favor of petitioner.lawphil.net None of the circumstances enumerated
in Article 2208 of the Civil Code exists. The present case is clearly not
an unfounded civil action against the plaintiff as there is no showing
that it was instituted for the mere purpose of vexation or injury. It is
not sound public policy to set a premium to the right to litigate where
such right is exercised in good faith, even if erroneously. 41 Likewise,
the RTC erred in awarding ₱83,945.80 actual damages to Mindanao
Terminal. Although actual expenses were incurred by Mindanao
Terminal in relation to the trial of this case in Davao City, the lawyer
of Mindanao Terminal incurred expenses for plane fare, hotel
accommodations and food, as well as other miscellaneous expenses, as
he attended the trials coming all the way from Manila. But there is no
showing that Phoenix and McGee made a false claim against
Mindanao Terminal resulting in the protracted trial of the case
necessitating the incurrence of expenditures.42
WHEREFORE, the petition is GRANTED. The decision of the Court
of Appeals in CA-G.R. CV No. 66121 is SET ASIDE and the decision of
the Regional Trial Court of Davao City, Branch 12 in Civil Case No.
25,311.97 is hereby REINSTATED MINUS the awards of
₱100,000.00 as attorney’s fees and ₱83,945.80 as actual damages.
G.R. No. 84680 February 5, 1996
SUMMA INSURANCE CORPORATION, petitioner,
vs.
COURT OF APPEALS and METRO PORT SERVICE,
INC., respondents.
DECISION
PANGANIBAN, J.:
Is an arrastre operator legally liable for the loss of a shipment in its
custody? If so, what is the extent of its liability? These are the two
questions that this Court faced in this petition for review
on certiorari of the Decision1 of the Court of Appeals2 in CA-G.R. No.
CV 04964 promulgated on April 27, 1988, which affirmed with
modification the decision of the Court of First Instance of Manila in
Civil Case No. 82-13988, ordering petitioner to pay private respondent
a sum of money, with legal interest, attorney's fees and the costs of
the suit.
The Facts
On November 22, 1981, the S/S "Galleon Sapphire", a vessel owned by
the National Galleon Shipping Corporation (NGSC), arrived at Pier 3,
South Harbor, Manila, carrying a shipment consigned to the order of
Caterpillar Far East Ltd. with Semirara Coal Corporation (Semirara)
as "notify party". The shipment, including a bundle of PC 8 U blades,
was covered by marine insurance under Certificate No. 82/012-FEZ
issued by petitioner and Bill of Lading No. SF/MLA 1014. The
shipment was discharged from the vessel to the custody of private
respondent, formerly known as E. Razon, Inc., the exclusive arrastre
operator at the South Harbor. Accordingly, three good-order cargo
receipts were issued by NGSC, duly signed by the ship's checker and a
representative of private respondent.
On February 24, 1982, the forwarder, Sterling International
Brokerage Corporation, withdrew the shipment from the pier and
loaded it on the barge "Semirara 8104". The barge arrived at its port
of destination, Semirara Island, on March 9, 1982. When Semirara
inspected the shipment at its warehouse, it discovered that the bundle
of PC8U blades was missing.
On March 15, 1982, private respondent issued a short-landed
certificate-stating that the bundle of PC8U blades was already
missing when it received the shipment from the NGSC vessel.
Semirara then filed with petitioner, private respondent and NGSC its
claim for P280,969.68, the alleged value of the lost bundle.
On September 29, 1982, petitioner paid Semirara the invoice value of
the lost shipment. Semirara thereafter executed a release of claim and
subrogation receipt. Consequently, petitioner filed its claims with
NGSC and private respondent but it was unsuccessful.
Petitioner then filed a complaint (Civil Case No. 8213988) with the
Regional Trial Court, Branch XXIV, Manila, against NGSC and
private respondent for collection of a sum of money, damages and
attorney's fees.
On August 2, 1984, the trial court rendered a decision absolving
NGSC from any liability but finding private respondent liable to
petitioner. The dispositive portion of the decision reads as follows:
PREMISES CONSIDERED, judgment is hereby rendered
ordering defendant Metro Port Service, Inc. to pay plaintiff
Summa Insurance Corporation the sum of P280,969.68 with
legal interest from November 22, 1982, the date of the filing
of the complaint, until full payment, and attorney's fees in
the sum of P20,000.00, with costs of suit.
The complaint as against defendant National Galleon
Shipping Corporation and the counterclaim interposed by
said defendant are hereby dismissed. (Rollo, p. 32).
In resolving the issue as to who had custody of the shipment when it
was lost, the trial court relied more on the good-order cargo receipts
issued by NGSC than on the short-landed certificate issued by private
respondent. The trial court held:
As between the aforementioned two documentary exhibits,
the Court is more inclined to give credence to the cargo
receipts. Said cargo receipts were signed by a checker of
defendant NGSC and a representative of Metro Port. It is
safe to presume that the cargo receipts accurately describe
the quantity and condition of the shipment when it was
discharged from the vessel. Metro Port's representative
would not have signed the cargo receipts if only four (4)
packages were discharged from the vessel and given to the
possession and custody of the arrastre operator. Having
been signed by its representative, the Metro Port is bound
by the contents of the cargo receipts.
On the other hand, the Metro Port's shortlanded certificate
could not be given much weight considering that, as
correctly argued by counsel for defendant NGSC, it was
issued by Metro Port alone and was not countersigned by
the representatives of the shipping company and the
consignee. Besides, the certificate was prepared by Atty.
Servillano V. Dolina, Second Deputy General Manager of
Metro Port, and there is no proof on record that he was
present at the time the subject shipment was unloaded from
the vessel and received by the arrastre operator. Moreover,
the shortlanded certificate bears the date of March 15, 1982,
more than three months after the discharge of the cargo
from the carrying vessel.
Neither could the Court give probative value to the marine
report (Exhibit "J", also Exhibit "l"-Razon). The attending
surveyor who attended the unloading of the shipment did
not take the witness stand to testify on said report.
Although Transnational Adjustment Co.'s general manager,
Mariano C. Remorin, was presented as a witness, his
testimony is not competent because he was not present at
the time of the discharge of the cargo.
Under the foregoing considerations, the Court finds that the
one (1) bundle of PC8U blade in question was not lost while
the cargo was in the custody of the carrying vessel.
Considering that the missing bundle was discharged from
the vessel unto the custody of defendant arrastre operator
and considering further that the consignee did not receive
this cargo from the arrastre operator, it is safe to conclude
from these facts that said missing cargo was lost while same
was in the possession and control of defendant Metro Port.
Defendant Metro Port has not introduced competent
evidence to prove that the loss was not due to its fault or
negligence. Consequently, only the Metro Port must answer
for the value of the missing cargo. Defendant NGSC is
absolved of any liability for such loss.
On appeal, the Court of Appeals modified the decision of the trial
court and reduced private respondent's liability to P3,500.00 as
follows3 :
WHEREFORE, the judgment appealed from is MODIFIED
in that defendant Metro Port Service, Inc., is ordered to pay
plaintiff Summa Insurance Corporation:
(1) the sum of P3,500.00, with legal interest from November
22, 1982, until fully paid; and
(2) the sum of P7,000.00, as and for attorney's fees.
Costs against defendant Metro Port Service, Inc.
Petitioner moved for reconsideration of the said decision but the Court
of Appeals denied the same. Hence, the instant petition.
The Issues
The issues brought by the parties could be stated as follows:
(1) Is the private respondent legally liable for the loss of the
shipment in question?
(2) If so, what is the extent of its liability?
The First Issue: Liability for Loss of Shipment
Petitioner was subrogated to the rights of the consignee. The
relationship therefore between the consignee and the arrastre
operator must be examined. This relationship is much akin to that
existing between the consignee or owner of shipped goods and the
common carrier, or that between a depositor and a warehouseman 4 .
In the performance of its obligations, an arrastre operator should
observe the same degree of diligence as that required of a common
carrier and a warehouseman as enunciated under Article 1733 of the
Civil Code and Section 3(8) of the Warehouse Receipts Law,
respectively. Being the custodian of the goods discharged from a
vessel, an arrastre operator's duty is to take good care of the goods
and to turn them over to the party entitled to their possession.
In this case, it has been established that the shipment was lost while
in the custody of private respondent. We find private respondent
liable for the loss. This is an issue of fact determined by the trial court
and respondent Court, which is not reviewable in a petition under
Rule 45 of the Rules of Court.
The Second Issue: Extent of Liability
In the performance of its job, an arrastre operator is bound by the
management contract it had executed with the Bureau of Customs.
However, a management contract, which is a sort of a stipulation pour
autrui within the meaning of Article 1311 of the Civil Code, is also
binding on a consignee because it is incorporated in the gate pass and
delivery receipt which must be presented by the consignee before
delivery can be effected to5 .The insurer, as successor-in-interest of the
consignee, is likewise bound by the management contract6 . Indeed,
upon taking delivery of the cargo, a consignee (and necessarily its
successor-in-interest) tacitly accepts the provisions of the
management contract, including those which are intended to limit the
liability of one of the contracting parties, the arrastre operator. 7
However, a consignee who does not avail of the services of the arrastre
operator is not bound by the management contract8 . Such an
exception to the rule does not obtain here as the consignee did in fact
accept delivery of the cargo from the arrastre operator.
Section 1, Article VI of the Management Contract between private
respondent and the Bureau of Customs9 provides:
1. Responsibility and Liability for Losses and Damages The
CONTRACTOR shall, at its own expense handle all
merchandise in the piers and other designated places and at
its own expense perform all work undertaken by it
hereunder diligently and in a skillful workmanlike and
efficient manner; that the CONTRACTOR shall be solely
responsible as an independent CONTRACTOR, and hereby
agrees to accept liability and to promptly pay to the
steamship company, consignee, consignor or other interested
party or parties for the loss, damage, or non-delivery of
cargoes to the extent of the actual invoice value of each
package which in no case shall be more than Three
Thousand Five Hundred Pesos (P3,500.00) for each package
unless the value of the importation is otherwise specified or
manifested or communicated in writing together with the
invoice value and supported by a certified packing list to the
CONTRACTOR by the interested party or parties before the
discharge of the goods, as well as all damage that may be
suffered on account of loss, damage, or destruction of any
merchandise while in custody or under the control of the
CONTRACTOR in any pier, shed, warehouse, facility or
other designated place under the supervision of the
BUREAU, . . . (Emphasis supplied).
Interpreting a similar provision in the management contract between
private respondent's predecessor, E. Razon, Inc. and the Bureau of
Customs, the Court said in E. Razon Inc. vs. Court of Appeals 10 :
Indeed, the provision in the management contract regarding
the declaration of the actual invoice value "before the arrival
of the goods" must be understood to mean a declaration
before the arrival of the goods in the custody of the arrastre
operator, whether it be done long before the landing of the
shipment at port, or immediately before turn-over thereof to
the arrastre operator's custody. What is essential is
knowledge beforehand of the extent of the risk to be
undertaken by the arrastre operator, as determined by the
value of the property committed to its care that it may
define its responsibility for loss or damage to such cargo and
to ascertain compensation commensurate to such risk
assumed . . . .
In the same case, the Court added that the advance notice of the
actual invoice of the goods entrusted to the arrastre operator is "for
the purpose of determining its liability, that it may obtain
compensation commensurable to the risk it assumes, (and) not for the
purpose of determining the degree of care or diligence it must exercise
as a depository or warehouseman" 11 since the arrastre operator
should not discriminate between cargoes of substantial and small
values, nor exercise care and caution only for the handling of goods
announced to it beforehand to be of sizeable value, for that would be
spurning the public service nature of its business.
On the same provision limiting the arrastre operator's liability, the
Court held in Northern Motors, Inc. v. Prince Line12:
Appellant claims that the above quoted provision is null and
void, as it limits the liability of appellee for the loss,
destruction or damage of any merchandise, to P500.00 per
package, contending that to sustain the validity of the
limitation would be to encourage acts of conversion and
unjust enrichment on the part of the arrastre operator.
Appellant, however, overlooks the fact that the limitation of
appellee's liability under said provision, is not absolute or
unqualified, for if the value of the merchandise is specified
or manifested by the consignee, and the corresponding
arrastre charges are paid on the basis of the declared value,
the limitation does not apply. Consequently, the questioned
provision is neither unfair nor abitrary, as contended,
because the consignee has it in his hands to hold, if he so
wishes, the arrastre operator responsible for the full value of
his merchandise by merely specifying it in any of the various
documents required of him, in clearing the merchandise
from the customs. For then, the appellee arrastre operator,
by reasons of the payment to it of a commensurate charge
based on the higher declared value of the merchandise,
could and should take extraordinary care of the special or
valuable cargo. In this manner, there would be mutuality.
What would, indeed, be unfair and arbitrary is to hold the
arrastre operator liable for the full value of the merchandise
after the consignee has paid the arrastre charges only (on) a
basis much lower than the true value of the goods.
In this case, no evidence was offered by petitioner proving the amount
of arrastre fees paid to private respondent so as to put the latter on
notice of the value of the cargo. While petitioner alleged that prior to
the loss of the package, its value had been relayed to private
respondent through the documents the latter had processed,
petitioner does not categorically state that among the submitted
documents were the pro forma invoice value and the certified packing
list. Neither does petitioner pretend that these two documents were
prerequisites to the issuance of a permit to deliver or were
attachments thereto. Even the permit to deliver, upon which
petitioner anchors its arguments, may not be considered by the Court
because it was not identified and formally offered in evidence 13 .
In civil cases, the burden of proof is on the party who would be
defeated if no evidence is given on either side. Said party must
establish his case by a preponderance of evidence, which means that
the evidence as a whole adduced by one side is superior to that of the
other 14 . Petitioner having asserted the affirmative of the issue in this
case, it should have presented evidence required to obtain a favorable
judgment.
On the other hand, on top of its denial that it had received the invoice
value and the packing list before the discharge of the shipment,
private respondent was able to prove that it was apprised of the value
of the cargo only after its discharge from the vessel, ironically through
petitioner's claim for the lost package to which were attached the
invoice and packing list. All told, petitioner failed to convince the
Court that the requirement of the management contract had been
complied with to entitle it to recover the actual invoice value of the
lost shipment.
Anent the attorney 's fees, we find the award to be proper considering
that the acts and omissions of private respondent have compelled
petitioner to litigate or incur expenses to protect its rights 15 .
However, as to the amount of the award, we find no reason to re-
examine the appellate court's determination thereon in view of the
amount of the principal obligation. Otherwise, we would be
disregarding the doctrine that discretion, when well exercised, should
not be disturbed.
WHEREFORE, the petition for review on certiorari is DENIED and
the decision of the Court of Appeals is AFFIRMED. Costs against
petitioner.
G.R. No. 125524 August 25, 1999
BENITO MACAM doing business under the name and style
BEN-MAC ENTERPRISES, petitioner,
vs.
COURT OF APPEALS, CHINA OCEAN SHIPPING CO., and/or
WALLEM PHILIPPINES SHIPPING, INC.,respondents.
BELLOSILLO, J.: transactions between the parties, shipped cargoes were sometimes
actually delivered not to the consignee but to notify party GPC
without need of the bills of lading or bank guarantee.6 Moreover, the
On 4 April 1989 petitioner Benito Macam, doing business under the
bills of lading were viewed by respondent court to have been properly
name and style Ben-Mac Enterprises, shipped on board the vessel Nen
superseded by the telex instruction and to implement the instruction,
Jiang, owned and operated by respondent China Ocean Shipping Co.,
the delivery of the shipment must be to GPC, the real importer/buyer
through local agent respondent Wallem Philippines Shipping, Inc.
of the goods as shown by the export invoices,7 and not to PAKISTAN
(hereinafter WALLEM), 3,500 boxes of watermelons valued at
BANK since the latter could very well present the bills of lading in its
US$5,950.00 covered by Bill of Lading No. HKG 99012 and exported
possession; likewise, if it were the PAKISTAN BANK to which the
through Letter of Credit No. HK 1031/30 issued by National Bank of
cargoes were to be strictly delivered it would no longer be proper to
Pakistan, Hongkong (hereinafter PAKISTAN BANK) and 1,611 boxes
require a bank guarantee. Respondent court noted that besides, GPC
of fresh mangoes with a value of US$14,273.46 covered by Bill of
was listed as a consignee in the telex. It observed further that the
Lading No. HKG 99013 and exported through Letter of Credit No. HK
demand letter of petitioner to respondents never complained of
1032/30 also issued by PAKISTAN BANK. The Bills of Lading
misdelivery of goods. Lastly, respondent court found that petitioner's
contained the following pertinent provision: "One of the Bills of
claim of having reimbursed the amount involved to SOLIDBANK was
Lading must be surrendered duly endorsed in exchange for the goods
unsubstantiated. Thus, on 13 March 1996 respondent court set aside
or delivery order.1 The shipment was bound for Hongkong with
the decision of the trial court and dismissed the complaint together
PAKISTAN BANK as consignee and Great Prospect Company of
with the counterclaims.8 On 5 July 1996 reconsideration was denied.9
Kowloon, Hongkong (hereinafter GPC) as notify party.

Petitioner submits that the fact that the shipment was not delivered
On 6 April 1989, per letter of credit requirement, copies of the bills of
to the consignee as stated in the bill of lading or to a party designated
lading and commercial invoices were submitted to petitioner's
or named by the consignee constitutes a misdelivery thereof.
depository bank, Consolidated Banking Corporation (hereinafter
Moreover, petitioner argues that from the text of the telex, assuming
SOLIDBANK), which paid petitioner in advance the total value of the
there was such an instruction, the delivery of the shipment without
shipment of US$20,223.46.1âwphi1.nêt
the required bill of lading or bank guarantee should be made only to
the designated consignee, referring to PAKISTAN BANK.
Upon arrival in Hongkong, the shipment was delivered by respondent
WALLEM directly to GPC, not to PAKISTAN BANK, and without the
We are not persuaded. The submission of petitioner that "the fact that
required bill of lading having been surrendered. Subsequently, GPC
the shipment was not delivered to the consignee as stated in the Bill
failed to pay PAKISTAN BANK such that the latter, still in
of Lading or to a party designated or named by the consignee
possession of the original bills of lading, refused to pay petitioner
constitutes a misdelivery thereof" is a deviation from his cause of
through SOLIDBANK. Since SOLIDBANK already pre-paid
action before the trial court. It is clear from the allegation in his
petitioner the value of the shipment, it demanded payment from
complaint that it does not deal with misdelivery of the cargoes but of
respondent WALLEM through five (5) letters but was refused.
delivery to GPC without the required bills of lading and bank
Petitioner was thus allegedly constrained to return the amount
guarantee —
involved to SOLIDBANK, then demanded payment from respondent
WALLEM in writing but to no avail.
6. The goods arrived in Hongkong and were released by the
defendant Wallem directly to the buyer/notify party, Great
On 25 September 1991 petitioner sought collection of the value of the
Prospect Company and not to the consignee, the National
shipment of US$20,223.46 or its equivalent of P546,033.42 from
Bank of Pakistan, Hongkong, without the required bills of
respondents before the Regional Trial Court of Manila, based on
lading and bank guarantee for the release of the shipment
delivery of the shipment to GPC without presentation of the bills of
issued by the consignee of the goods . . . .10
lading and bank guarantee.

Respondents contended that the shipment was delivered to GPC
without presentation of the bills of lading and bank guarantee per
request of petitioner himself because the shipment consisted of
perishable goods. The telex dated 5 April 1989 conveying such request
read —
AS PER SHPR'S REQUEST KINDLY ARRANGE
DELIVERY OF A/M SHIPT TO RESPECTIVE CNEES
WITHOUT PRESENTATION OF OB/L2 and bank
guarantee since for prepaid shipt ofrt charges already fully
paid our end . . . .3
Respondents explained that it is a standard maritime practice, when
immediate delivery is of the essence, for the shipper to request or
instruct the carrier to deliver the goods to the buyer upon arrival at
the port of destination without requiring presentation of the bill of
lading as that usually takes time. As proof thereof, respondents
apprised the trial court that for the duration of their two-year
business relationship with petitioner concerning similar shipments to
GPC deliveries were effected without presentation of the bills of
lading.4 Respondents advanced next that the refusal of PAKISTAN
BANK to pay the letters of credit to SOLIDBANK was due to the
latter's failure to submit a Certificate of Quantity and Quality.
Respondents counterclaimed for attorney's fees and costs of suit.
On 14 May 1993 the trial court ordered respondents to pay, jointly
and severally, the following amounts: (1) P546,033.42 plus legal
interest from 6 April 1989 until full payment; (2) P10,000.00 as
attorney's fees; and, (3) the costs. The counterclaims were dismissed
for lack of merit.5 The trial court opined that respondents breached
the provision in the bill of lading requiring that "one of the Bills of
Lading must be surrendered duly endorsed in exchange for the goods
or delivery order," when they released the shipment to GPC without
presentation of the bills of lading and the bank guarantee that should
have been issued by PAKISTAN BANK in lieu of the bills of lading.
The trial court added that the shipment should not have been released
to GPC at all since the instruction contained in the telex was to
arrange delivery to the respective consignees and not to any party.
The trial court observed that the only role of GPC in the transaction
as notify party was precisely to be notified of the arrival of the cargoes
in Hongkong so it could in turn duly advise the consignee.
Respondent Court of Appeals appreciated the evidence in a different
manner. According to it, as established by previous similar
Even going back to an event that transpired prior to the filing of the
present case or when petitioner wrote respondent WALLEM
demanding payment of the value of the cargoes, misdelivery of the
cargoes did not come into the picture —
We are writing you on behalf of our client, Ben-Mac
Enterprises who informed us that Bills of Lading No. 99012
and 99013 with a total value of US$20,223.46 were released
to Great Prospect, Hongkong without the necessary bank
guarantee. We were further informed that the consignee of
the goods, National Bank of Pakistan, Hongkong, did not
release or endorse the original bills of lading. As a result
thereof, neither the consignee, National Bank of Pakistan,
Hongkong, nor the importer, Great Prospect Company,
Hongkong, paid our client for the goods . . . .11
At any rate, we shall dwell on petitioner's submission only as a
prelude to our discussion on the imputed liability of respondents
concerning the shipped goods. Article 1736 of the Civil Code provides
—
Art. 1736. The extraordinary responsibility of the common
carriers lasts from the time the goods are unconditionally
placed in the possession of, and received by the carrier for
transportation until the same are delivered, actually or
constructively, by the carrier to the consignee, or to the
person who has a right to receive them, without prejudice to
the provisions of article 1738.12
We emphasize that the extraordinary responsibility of the common
carriers lasts until actual or constructive delivery of the cargoes to the
consignee or to the person who has a right to receive them. PAKISTAN
BANK was indicated in the bills of lading as consignee whereas GPC
was the notify party. However, in the export invoices GPC was clearly
named as buyer/importer. Petitioner also referred to GPC as such in
his demand letter to respondent WALLEM and in his complaint
before the trial court. This premise draws us to conclude that the
delivery of the cargoes to GPC as buyer/importer which, conformably
with Art. 1736 had, other than the consignee, the right to receive
them14 was proper.
The real issue is whether respondents are liable to petitioner for
releasing the goods to GPC without the bills of lading or bank
guarantee.
Respondents submitted in evidence a telex dated 5 April 1989 as basis
for delivering the cargoes to GPC without the bills of lading and bank
guarantee. The telex instructed delivery of various shipments to the
respective consignees without need of presenting the bill of lading and
bank guarantee per the respective shipper's request since "for prepaid
shipt ofrt charges already fully paid." Petitioner was named therein as
shipper and GPC as consignee with respect to Bill of Lading Nos.
HKG 99012 and HKG 99013. Petitioner disputes the existence of such
instruction and claims that this evidence is self-serving.
From the testimony of petitioner, we gather that he has been
transacting with GPC as buyer/importer for around two (2) or three
(3) years already. When mangoes and watermelons are in season, his
shipment to GPC using the facilities of respondents is twice or thrice a
week. The goods are released to GPC. It has been the practice of
petitioner to request the shipping lines to immediately release
perishable cargoes such as watermelons and fresh mangoes through
telephone calls by himself or his "people." In transactions covered by a
letter of credit, bank guarantee is normally required by the shipping
lines prior to releasing the goods. But for buyers using telegraphic
transfers, petitioner dispenses with the bank guarantee because the
goods are already fully paid. In his several years of business
relationship with GPC and respondents, there was not a single
instance when the bill of lading was first presented before the release
of the cargoes. He admitted the existence of the telex of 3 July 1989
containing his request to deliver the shipment to the consignee
without presentation of the bill of lading15 but not the telex of 5 April
1989 because he could not remember having made such request.
Consider pertinent portions of petitioner's testimony —
Q: Are you aware of any document which would indicate or
show that your request to the defendant Wallem for the
immediate release of your fresh fruits, perishable goods, to
Great Prospect without the presentation of the original Bill
of Lading?
A: Yes, by telegraphic transfer, which means that it is fully
paid. And I requested immediate release of the cargo
because there was immediate payment.
Q: And you are referring, therefore, to this copy Telex
release that you mentioned where your Company's name
appears Ben-Mac?
Atty. Hernandez: Just for the record, Your Honor,
the witness is showing a Bill of Lading referring to
SKG (sic) 93023 and 93026 with Great Prospect
Company.
Atty. Ventura:
Q: Is that the telegraphic transfer?
A: Yes, actually, all the shippers partially request for the
immediate release of the goods when they are perishable. I
thought Wallem Shipping Lines is not neophyte in the
business. As far as LC is concerned, Bank guarantee is
needed for the immediate release of the goods . . . .15
Q: Mr. Witness, you testified that if is the practice of the
shipper of the perishable goods to ask the shipping lines to
release immediately the shipment. Is that correct?
A: Yes, sir.
Q: Now, it is also the practice of the shipper to allow the
shipping lines to release the perishable goods to the
importer of goods without a Bill of Lading or Bank
guarantee?
A: No, it cannot be without the Bank Guarantee.
Atty. Hernandez:
Q: Can you tell us an instance when you will allow the
release of the perishable goods by the shipping lines to the
importer without the Bank guarantee and without the Bill
of Lading?
A: As far as telegraphic transfer is concerned.
Q: Can you explain (to) this Honorable Court what
telegraphic transfer is?
A: Telegraphic transfer, it means advance payment that I
am already fully paid . . . .
Q: Mr. Macam, with regard to Wallem and to Great
Prospect, would you know and can you recall that any of
your shipment was released to Great Prospect by Wallem
through telegraphic transfer?
A: I could not recall but there were so many instances sir.
Q: Mr. Witness, do you confirm before this Court that in
previous shipments of your goods through Wallem, you
requested Wallem to release immediately your perishable
goods to the buyer?
A: Yes, that is the request of the shippers of the perishable
goods . . . .16
Q: Now, Mr. Macam, if you request the Shipping Lines for
the release of your goods immediately even without the
presentation of OBL, how do you course it?
A: Usually, I call up the Shipping Lines, sir . . . .17
Q: You also testified you made this request through phone
calls. Who of you talked whenever you made such phone
call?
A: Mostly I let my people to call, sir. (sic)
Q: So everytime you made a shipment on perishable goods
you let your people to call? (sic)
A: Not everytime, sir.
Q: You did not make this request in writing?
A: No, sir. I think I have no written request with Wallem . . .
.18
Against petitioner's claim of "not remembering" having made a
request for delivery of subject cargoes to GPC without presentation of
the bills of lading and bank guarantee as reflected in the telex of 5
April 1989 are damaging disclosures in his testimony. He declared
that it was his practice to ask the shipping lines to immediately
release shipment of perishable goods through telephone calls by
himself or his "people." He no longer required presentation of a bill of
lading nor of a bank guarantee as a condition to releasing the goods in
case he was already fully paid. Thus, taking into account that subject
shipment consisted of perishable goods and SOLIDBANK pre-paid the
full amount of the value thereof, it is not hard to believe the claim of
respondent WALLEM that petitioner indeed requested the release of
the goods to GPC without presentation of the bills of lading and bank
guarantee.
The instruction in the telex of 5 April 1989 was "to deliver the
shipment to respective consignees." And so petitioner argues that,
assuming there was such an instruction, the consignee referred to was
PAKISTAN BANK. We find the argument too simplistic. Respondent
court analyzed the telex in its entirety and correctly arrived at the
conclusion that the consignee referred to was not PAKISTAN BANK
but GPC —
There is no mistake that the originals of the two (2) subject
Bills of Lading are still in the possession of the Pakistani
Bank. The appealed decision affirms this fact. Conformably,
to implement the said telex instruction, the delivery of the
shipment must be to GPC, the notify party or real
importer/buyer of the goods and not the Pakistani Bank
since the latter can very well present the original Bills of
Lading in its possession. Likewise, if it were the Pakistani
Bank to whom the cargoes were to be strictly delivered, it
will no longer be proper to require a bank guarantee as a
substitute for the Bill of Lading. To construe otherwise will
render meaningless the telex instruction. After all, the
cargoes consist of perishable fresh fruits and immediate
delivery thereof to the buyer/importer is essentially a factor
to reckon with. Besides, GPC is listed as one among the
several consignees in the telex (Exhibit 5-B) and the
instruction in the telex was to arrange delivery of A/M
 shipment (not any party) to respective consignees without
presentation of OB/L and bank guarantee . . . .20
Apart from the foregoing obstacles to the success of petitioner's cause,
petitioner failed to substantiate his claim that he returned to
SOLIDBANK the full amount of the value of the cargoes. It is not far-
fetched to entertain the notion, as did respondent court, that he
merely accommodated SOLIDBANK in order to recover the cost of the
shipped cargoes from respondents. We note that it was SOLIDBANK
which initially demanded payment from respondents through five (5)
letters. SOLIDBANK must have realized the absence of privity of
contract between itself and respondents. That is why petitioner
conveniently took the cudgels for the bank.
In view of petitioner's utter failure to establish the liability of
respondents over the cargoes, no reversible error was committed by
respondent court in ruling against him.
WHEREFORE, the petition is DENIED. The decision of respondent
Court of Appeals of 13 March 1996 dismissing the complaint of
petitioner Benito Macam and the counterclaims of respondents China
Ocean Shipping Co. and/or Wallem Philippines Shipping, Inc., as well
as its resolution of 5 July 1996 denying reconsideration, is
AFFIRMED.1âwphi1.nêt
G.R. No. L-28673 October 23, 1984
SAMAR MINING COMPANY, INC., plaintiff-appellee,
vs.
NORDEUTSCHER LLOYD and C.F. SHARP & COMPANY,
INC., defendants-appellants.
CUEVAS, J.:ñé+.£ªwph!1
This is an appeal taken directly to Us on certiorari from the decision
of the defunct Court of First Instance of Manila, finding defendants
carrier and agent, liable for the value of goods never delivered to
plaintiff consignee. The issue raised is a pure question of law, which
is, the liability of the defendants, now appellants, under the bill of
lading covering the subject shipment.
The case arose from an importation made by plaintiff, now appellee,
SAMAR MINING COMPANY, INC., of one (1) crate Optima welded
wedge wire sieves through the M/S SCHWABENSTEIN a vessel
owned by defendant-appellant NORDEUTSCHER LLOYD,
(represented in the Philippines by its agent, C.F. SHARP & CO.,
INC.), which shipment is covered by Bill of Lading No. 18 duly issued
to consignee SAMAR MINING COMPANY, INC. Upon arrival of the
aforesaid vessel at the port of Manila, the aforementioned importation
was unloaded and delivered in good order and condition to the bonded
warehouse of AMCYL. 1 The goods were however never delivered to,
nor received by, the consignee at the port of destination — Davao.
When the letters of complaint sent to defendants failed to elicit the
desired response, consignee herein appellee, filed a formal claim for
P1,691.93, the equivalent of $424.00 at the prevailing rate of exchange
at that time, against the former, but neither paid. Hence, the filing of
the instant suit to enforce payment. Defendants-appellants brought in
AMCYL as third party defendant.
The trial court rendered judgment in favor of plaintiff, ordering
defendants to pay the amount of P1,691.93 plus attorney's fees and
costs. However, the Court stated that defendants may recoup
whatever they may pay plaintiff by enforcing the judgment against
third party defendant AMCYL which had earlier been declared in
default. Only the defendants appealed from said decision.
The issue at hand demands a close scrutiny of Bill of Lading No. 18
and its various clauses and stipulations which should be examined in
the light of pertinent legal provisions and settled jurisprudence. This
undertaking is not only proper but necessary as well because of the
nature of the bill of lading which operates both as a receipt for the
goods; and more importantly, as a contract to transport and deliver
the same as stipulated therein. 2 Being a contract, it is the law
between the parties thereto 3 who are bound by its terms and
conditions 4 provided that these are not contrary to law, morals, good
customs, public order and public policy. 5
Bill of Lading No. 18 sets forth in page 2 thereof 6 that one (1) crate of
Optima welded wedge wire sieves was received by the carrier
NORDEUTSCHER LLOYD at the "port of loading" which is Bremen,
Germany, while the freight had been prepaid up to the port of
destination or the "port of discharge of goods in this case, Davao, the
carrier undertook to transport the goods in its vessel, M/S
SCHWABENSTEIN only up to the "port of discharge from ship-
Manila. Thereafter, the goods were to be transshipped by the carrier
to the port of destination or "port of discharge of goods The stipulation
is plainly indicated on the face of the bill which contains the following
phrase printed below the space provided for the port of discharge from
ship", thus: têñ.£îhqwâ£
if goods are to be transshipped at port of
discharge, show destination under the column for
"description of contents" 7
As instructed above, the following words appeared typewritten under
the column for "description of contents": têñ.£îhqwâ£
PORT OF DISCHARGE OF GOODS: DAVAO
FREIGHT PREPAID 8
It is clear, then, that in discharging the goods from the ship at the
port of Manila, and delivering the same into the custody of AMCYL,
the bonded warehouse, appellants were acting in full accord with the
contractual stipulations contained in Bill of Lading No. 18. The
delivery of the goods to AMCYL was part of appellants' duty to
transship the goods from Manila to their port of destination-Davao.
The word "transship" means: têñ.£îhqwâ£
to transfer for further transportation from one
ship or conveyance to another 9
The extent of appellant carrier's responsibility and/or liability in the
transshipment of the goods in question are spelled out and delineated
under Section 1, paragraph 3 of Bill of Lading No. 18, to
wit: têñ.£îhqwâ£
The carrier shall not be liable in any capacity
whatsoever for any delay, loss or damage occurring
before the goods enter ship's tackle to be loaded
or after the goods leave ship's tackle to be
discharged, transshipped or forwarded ...
(Emphasis supplied)
and in Section 11 of the same Bill, which provides: têñ.£îhqwâ£
Whenever the carrier or m aster may deem it
advisable or in any case where the goods are
placed at carrier's disposal at or consigned to a
point where the ship does not expect to load or
discharge, the carrier or master may, without
notice, forward the whole or any part of the goods
before or after loading at the original port of
shipment, ... This carrier, in making arrangements
for any transshipping or forwarding vessels or
means of transportation not operated by this
carrier shall be considered solely the forwarding
agent of the shipper and without any other
responsibility whatsoever even though the freight
for the whole transport has been collected by him.
... Pending or during forwarding or transshipping
the carrier may store the goods ashore or afloat
solely as agent of the shipper and at risk and
expense of the goods and the carrier shall not be
liable for detention nor responsible for the acts,
neglect, delay or failure to act of anyone to whom
the goods are entrusted or delivered for storage,
handling or any service incidental thereto
(Emphasis supplied) 10
Defendants-appellants now shirk liability for the loss of the subject
goods by claiming that they have discharged the same in full and good
condition unto the custody of AMCYL at the port of discharge from
ship — Manila, and therefore, pursuant to the aforequoted stipulation
(Sec. 11) in the bill of lading, their responsibility for the cargo had
ceased. 11
We find merit in appellants' stand. The validity of stipulations in bills
of lading exempting the carrier from liability for loss or damage to the
goods when the same are not in its actual custody has been upheld by
Us in PHOENIX ASSURANCE CO., LTD. vs. UNITED STATES
LINES, 22 SCRA 674 (1968). Said case matches the present
controversy not only as to the material facts but more importantly, as
to the stipulations contained in the bill of lading concerned. As if to
underline their awesome likeness, the goods in question in both cases
were destined for Davao, but were discharged from ship in Manila, in
accordance with their respective bills of lading.
The stipulations in the bill of lading in the PHOENIX case which are
substantially the same as the subject stipulations before Us,
provides: têñ.£îhqwâ£
The carrier shall not be liable in any capacity
whatsoever for any loss or damage to the goods
while the goods are not in its actual custody. (Par.
2, last subpar.)
xxx xxx xxx
The carrier or master, in making arrangements
with any person for or in connection with all
transshipping or forwarding of the goods or the
use of any means of transportation or forwarding
of goods not used or operated by the carrier, shall
be considered solely the agent of the shipper and
consignee and without any other responsibility
whatsoever or for the cost thereof ... (Par. 16). 12
Finding the above stipulations not contrary to law, morals, good
customs, public order or public policy, We sustained their
validity 13 Applying said stipulations as the law between the parties
in the aforecited case, the Court concluded that: têñ.£îhqwâ£
... The short form Bill of Lading ( ) states in no
uncertain terms that the port of discharge of the
cargo is Manila, but that the same was to be
transshipped beyond the port of discharge to
Davao City. Pursuant to the terms of the long form
Bill of Lading ( ), appellee's responsibility as a
common carrier ceased the moment the goods were
unloaded in Manila and in the matter of
transshipment, appellee acted merely as an agent
of the shipper and consignee. ... (Emphasis
supplied) 14
Coming now to the case before Us, We hold, that by the authority of
the above pronouncements, and in conformity with the pertinent
provisions of the New Civil Code, Section 11 of Bill of Lading No. 18
and the third paragraph of Section 1 thereof are valid stipulations
between the parties insofar as they exempt the carrier from liability
for loss or damage to the goods while the same are not in the latter's
actual custody.
The liability of the common carrier for the loss, destruction or
deterioration of goods transported from a foreign country to the
Philippines is governed primarily by the New Civil Code. 15 In all
matters not regulated by said Code, the rights and obligations of
common carriers shall be governed by the Code of Commerce and by
special laws. 16 A careful perusal of the provisions of the New Civil
Code on common carriers (Section 4, Title VIII, Book IV) directs our
attention to Article 1736 thereof, which reads: têñ.£îhqwâ£
Article 1736. The extraordinary responsibility of
the common carrier lasts from the time the goods
are unconditionally placed in the possession of,
and received by the carrier for transportation until
the same are delivered, actually or constructively,
by the carrier to the consignee, or to the person
who has a right to receive them, without prejudice
to the provisions of article 1738.
Article 1738 referred to in the foregoing provision runs
thus: têñ.£îhqwâ£
Article 1738. The extraordinary liability of the
common carrier continues to be operative even
during the time the goods are stored in a
warehouse of the carrier at the place of
destination, until the consignee has been advised
of the arrival of the goods and has had reasonable
opportunity thereafter to remove them or
otherwise dispose of them.
There is no doubt that Art. 1738 finds no applicability to the instant
case. The said article contemplates a situation where the goods had
already reached their place of destination and are stored in the
warehouse of the carrier. The subject goods were still awaiting
transshipment to their port of destination, and were stored in the
warehouse of a third party when last seen and/or heard of. However,
Article 1736 is applicable to the instant suit. Under said article, the
carrier may be relieved of the responsibility for loss or damage to the
goods upon actual or constructive delivery of the same by the carrier
to the consignee, or to the person who has a right to receive them. In
sales, actual delivery has been defined as the ceding of corporeal
possession by the seller, and the actual apprehension of corporeal
possession by the buyer or by some person authorized by him to
receive the goods as his representative for the purpose of custody or
disposal. 17 By the same token, there is actual delivery in contracts
for the transport of goods when possession has been turned over to the
consignee or to his duly authorized agent and a reasonable time is
given him to remove the goods. 18 The court a quo found that there
was actual delivery to the consignee through its duly authorized
agent, the carrier.
It becomes necessary at this point to dissect the complex relationship
that had developed between appellant and appellee in the course of
the transactions that gave birth to the present suit. Two undertakings
appeared embodied and/or provided for in the Bill of Lading 19 in
question. The first is FOR THE TRANSPORT OF GOODS from
Bremen, Germany to Manila. The second, THE TRANSSHIPMENT
OF THE SAME GOODS from Manila to Davao, with appellant acting
as agent of the consignee. 20 At the hiatus between these two
undertakings of appellant which is the moment when the subject
goods are discharged in Manila, its personality changes from that of
carrier to that of agent of the consignee. Thus, the character of
appellant's possession also changes, from possession in its own name
as carrier, into possession in the name of consignee as the latter's
agent. Such being the case, there was, in effect, actual delivery of the
goods from appellant as carrier to the same appellant as agent of the
consignee. Upon such delivery, the appellant, as erstwhile carrier,
ceases to be responsible for any loss or damage that may befall the
goods from that point onwards. This is the full import of Article 1736,
as applied to the case before Us.
But even as agent of the consignee, the appellant cannot be made
answerable for the value of the missing goods, It is true that the
transshipment of the goods, which was the object of the agency, was
not fully performed. However, appellant had commenced said
performance, the completion of which was aborted by circumstances
beyond its control. An agent who carries out the orders and
instructions of the principal without being guilty of negligence, deceit
or fraud, cannot be held responsible for the failure of the principal to
accomplish the object of the agency, 21This can be gleaned from the
following provisions of the New Civil Code on the obligations of the
agent: têñ.£îhqwâ£
Article 1884. The agent is bound by his acceptance
to carry out the agency, and is liable for the
damages which, through his non-performance, the
principal may suffer.
xxx xxx xxx
Article 1889. The agent shall be liable for damages
if, there being a conflict between his interests and
those of the principal, he should prefer his own.
Article 1892. The agent may appoint a substitute if
the principal has not prohibited him from doing so;
but he shall be responsible for the acts of the
substitute:
(1) When he was not given the power to appoint
one;
(2) When he was given such power but without
designating the person and the person appointed
was notoriously incompetent or insolvent.
xxx xxx xxx
Article 1909. The agent is responsible not only for
fraud, but also for negligence which shall be
judged with more or less rigor by the courts,
according to whether the agency was or was not
for a compensation.
The records fail to reveal proof of negligence, deceit or fraud
committed by appellant or by its representative in the Philippines.
Neither is there any showing of notorious incompetence or insolvency
on the part of AMCYT, which acted as appellant's substitute in
storing the goods awaiting transshipment.
The actions of appellant carrier and of its representative in the
Philippines being in full faith with the lawful stipulations of Bill of
Lading No. 18 and in conformity with the provisions of the New Civil
Code on common carriers, agency and contracts, they incur no liability
for the loss of the goods in question.
WHEREFORE, the appealed decision is hereby REVERSED. Plaintiff-
appellee's complaint is hereby DISMISSED.
G.R. No. L-36481-2 October 23, 1982
AMPARO C. SERVANDO, CLARA UY BICO, plaintiffs-appellees,
vs.
PHILIPPINE STEAM NAVIGATION CO., defendant-appellant.
Zoilo de la Cruz, Jr. & Associate for plaintiff-appellee Amparo
Servando.
Benedicto, Sumbingco & Associate for appellee Clara Uy Bico.
Ross, Salcedo, del Rosario, Bito & Misa for defendant-appellant.
ESCOLIN, J.:
This appeal, originally brought to the Court of Appeals, seeks to set
aside the decision of the Court of First Instance of Negros Occidental
in Civil Cases Nos. 7354 and 7428, declaring appellant Philippine
Steam Navigation liable for damages for the loss of the appellees'
cargoes as a result of a fire which gutted the Bureau of Customs'
warehouse in Pulupandan, Negros Occidental.
The Court of Appeals certified the case to Us because only pure
questions of law are raised therein.
The facts culled from the pleadings and the stipulations submitted by
the parties are as follows:
On November 6, 1963, appellees Clara Uy Bico and Amparo Servando
loaded on board the appellant's vessel, FS-176, for carriage from
Manila to Pulupandan, Negros Occidental, the following cargoes, to
wit:
Clara Uy Bico —
1,528 cavans of rice valued
at P40,907.50;
Amparo Servando —
44 cartons of colored paper,
toys and general merchandise
valued at P1,070.50;
as evidenced by the corresponding bills of lading issued by the
appellant. 1
Upon arrival of the vessel at Pulupandan, in the morning of
November 18, 1963, the cargoes were discharged, complete and in
good order, unto the warehouse of the Bureau of Customs. At about
2:00 in the afternoon of the same day, said warehouse was razed by a
fire of unknown origin, destroying appellees' cargoes. Before the fire,
however, appellee Uy Bico was able to take delivery of 907 cavans of
rice 2 Appellees' claims for the value of said goods were rejected by the
appellant.
On the bases of the foregoing facts, the lower court rendered a
decision, the decretal portion of which reads as follows:
WHEREFORE, judgment is rendered as follows:
1. In case No. 7354, the defendant is hereby
ordered to pay the plaintiff Amparo C. Servando
the aggregate sum of P1,070.50 with legal interest
thereon from the date of the filing of the complaint
until fully paid, and to pay the costs.
2. In case No. 7428, the defendant is hereby
ordered to pay to plaintiff Clara Uy Bico the
aggregate sum of P16,625.00 with legal interest
thereon from the date of the filing of the complaint
until fully paid, and to pay the costs.
Article 1736 of the Civil Code imposes upon common carriers the duty
to observe extraordinary diligence from the moment the goods are
unconditionally placed in their possession "until the same are
delivered, actually or constructively, by the carrier to the consignee or
to the person who has a right to receive them, without prejudice to the
provisions of Article 1738. "
The court a quo held that the delivery of the shipment in question to
the warehouse of the Bureau of Customs is not the delivery
contemplated by Article 1736; and since the burning of the warehouse
occurred before actual or constructive delivery of the goods to the
appellees, the loss is chargeable against the appellant.
It should be pointed out, however, that in the bills of lading issued for
the cargoes in question, the parties agreed to limit the responsibility
of the carrier for the loss or damage that may be caused to the
shipment by inserting therein the following stipulation:
Clause 14. Carrier shall not be responsible for loss
or damage to shipments billed 'owner's risk' unless
such loss or damage is due to negligence of carrier.
Nor shall carrier be responsible for loss or damage
caused by force majeure, dangers or accidents of
the sea or other waters; war; public enemies; . . .
fire . ...
We sustain the validity of the above stipulation; there is nothing
therein that is contrary to law, morals or public policy.
Appellees would contend that the above stipulation does not bind
them because it was printed in fine letters on the back-of the bills of
lading; and that they did not sign the same. This argument overlooks
the pronouncement of this Court in Ong Yiu vs. Court of Appeals,
promulgated June 29, 1979, 3 where the same issue was resolved in
this wise:
While it may be true that petitioner had not
signed the plane ticket (Exh. '12'), he is
nevertheless bound by the provisions thereof.
'Such provisions have been held to be a part of the
contract of carriage, and valid and binding upon
the passenger regardless of the latter's lack of
knowledge or assent to the regulation'. It is what
is known as a contract of 'adhesion', in regards
which it has been said that contracts of adhesion
wherein one party imposes a ready made form of
contract on the other, as the plane ticket in the
case at bar, are contracts not entirely prohibited.
The one who adheres to the contract is in reality
free to reject it entirely; if he adheres, he gives his
consent." (Tolentino, Civil Code, Vol. IV, 1962 Ed.,
p. 462, citing Mr. Justice J.B.L. Reyes, Lawyer's
Journal, Jan. 31, 1951, p. 49).
Besides, the agreement contained in the above quoted Clause 14 is a
mere iteration of the basic principle of law written in Article 1 1 7 4 of
the Civil Code:
Article 1174. Except in cases expressly specified by
the law, or when it is otherwise declared by
stipulation, or when the nature of the obligation
requires the assumption of risk, no person shall be
responsible for those events which could not be
foreseen, or which, though foreseen, were
inevitable.
Thus, where fortuitous event or force majeure is the immediate and
proximate cause of the loss, the obligor is exempt from liability for
non-performance. The Partidas, 4 the antecedent of Article 1174 of the
Civil Code, defines 'caso fortuito' as 'an event that takes place by
accident and could not have been foreseen. Examples of this are
destruction of houses, unexpected fire, shipwreck, violence of robbers.'
In its dissertation of the phrase 'caso fortuito' the Enciclopedia
Juridicada Espanola 5 says: "In a legal sense and, consequently, also
in relation to contracts, a 'caso fortuito' presents the following
essential characteristics: (1) the cause of the unforeseen and
unexpected occurrence, or of the failure of the debtor to comply with
his obligation, must be independent of the human will; (2) it must be
impossible to foresee the event which constitutes the 'caso fortuito', or
if it can be foreseen, it must be impossible to avoid; (3) the occurrence
must be such as to render it impossible for the debtor to fulfill his
obligation in a normal manner; and (4) the obligor must be free from
any participation in the aggravation of the injury resulting to the
creditor." In the case at bar, the burning of the customs warehouse
was an extraordinary event which happened independently of the will
of the appellant. The latter could not have foreseen the event.
There is nothing in the record to show that appellant carrier ,incurred
in delay in the performance of its obligation. It appears that appellant
had not only notified appellees of the arrival of their shipment, but
had demanded that the same be withdrawn. In fact, pursuant to such
demand, appellee Uy Bico had taken delivery of 907 cavans of rice
before the burning of the warehouse.
Nor can the appellant or its employees be charged with negligence.
The storage of the goods in the Customs warehouse pending
withdrawal thereof by the appellees was undoubtedly made with their
knowledge and consent. Since the warehouse belonged to and was
maintained by the government, it would be unfair to impute
negligence to the appellant, the latter having no control whatsoever
over the same.
The lower court in its decision relied on the ruling laid down in Yu
Biao Sontua vs. Ossorio 6, where this Court held the defendant liable
for damages arising from a fire caused by the negligence of the
defendant's employees while loading cases of gasoline and petroleon
products. But unlike in the said case, there is not a shred of proof in
the present case that the cause of the fire that broke out in the
Custom's warehouse was in any way attributable to the negligence of
the appellant or its employees. Under the circumstances, the
appellant is plainly not responsible.
WHEREFORE, the judgment appealed from is hereby set aside. No
costs.
G.R. No. 94761 May 17, 1993
MAERSK LINE, petitioner,
vs.
COURT OF APPEALS AND EFREN V. CASTILLO, doing
business under the name and style of Ethegal
Laboratories, respondents.
Bito, Lozada, Ortega & Castillo for petitioner.
Humberto A. Jambora for private respondent.
BIDIN, J.:
Petitioner Maersk Line is engaged in the transportation of goods by
sea, doing business in the Philippines through its general agent
Compania General de Tabacos de Filipinas.
Private respondent Efren Castillo, on the other hand, is the proprietor
of Ethegal Laboratories, a firm engaged in the manutacture of
pharmaceutical products.
On November 12, 1976, private respondent ordered from Eli Lilly. Inc.
of Puerto Rico through its (Eli Lilly, Inc.'s) agent in the Philippines,
Elanco Products, 600,000 empty gelatin capsules for the manufacture
of his pharmaceutical products. The capsules were placed in six (6)
drums of 100,000 capsules each valued at US $1,668.71.
Through a Memorandum of Shipment (Exh. "B"; AC GR CV No.10340,
Folder of Exhibits, pp. 5-6), the shipper Eli Lilly, Inc. of Puerto Rico
advised private respondent as consignee that the 600,000 empty
gelatin capsules in six (6) drums of 100,000 capsules each, were
already shipped on board MV "Anders Maerskline" under Voyage No.
7703 for shipment to the Philippines via Oakland, California. In said
Memorandum, shipper Eli Lilly, Inc. specified the date of arrival to be
April 3, 1977.
For reasons unknown, said cargo of capsules were mishipped and
diverted to Richmond, Virginia, USA and then transported back
Oakland, Califorilia. The goods finally arrived in the Philippines on
June 10, 1977 or after two (2) months from the date specified in the
memorandum. As a consequence, private respondent as consignee
refused to take delivery of the goods on account of its failure to arrive
on time.
Private respondent alleging gross negligence and undue delay in the
delivery of the goods, filed an action before the court a quo for
rescission of contract with damages against petitioner and Eli Lilly,
Inc. as defendants.
Denying that it committed breach of contract, petitioner alleged in its
that answer that the subject shipment was transported in accordance
with the provisions of the covering bill of lading and that its liability
under the law on transportation of good attaches only in case of loss,
destruction or deterioration of the goods as provided for in Article
1734 of Civil Code (Rollo, p. 16).
Defendant Eli Lilly, Inc., on the other hand, filed its answer with
compulsory and cross-claim. In its cross-claim, it alleged that the
delay in the arrival of the the subject merchandise was due solely to
the gross negligence of petitioner Maersk Line.
The issues having been joined, private respondent moved for the
dismissal of the complaint against Eli Lilly, Inc.on the ground that the
evidence on record shows that the delay in the delivery of the
shipment was attributable solely to petitioner.
Acting on private respondent's motion, the trial court dismissed the
complaint against Eli Lilly, Inc. Correspondingly, the latter withdraw
its cross-claim against petitioner in a joint motion dated December 3,
1979.
After trial held between respondent and petitioner, the court a
quo rendered judgment dated January 8, 1982 in favor of respondent
Castillo, the dispositive portion of which reads:
IN VIEW OF THE FOREGOING, this Court
believe (sic) and so hold (sic) that there was a
breach in the performance of their obligation by
the defendant Maersk Line consisting of their
negligence to ship the 6 drums of empty Gelatin
Capsules which under their own memorandum
shipment would arrive in the Philippines on April
3, 1977 which under Art. 1170 of the New Civil
Code, they stood liable for damages.
Considering that the only evidence presented by
the defendant Maersk line thru its agent the
Compania de Tabacos de Filipinas is the testimony
of Rolando Ramirez who testified on Exhs. "1" to
"5" which this Court believe (sic) did not change
the findings of this Court in its decision rendered
on September 4, 1980, this Court hereby renders
judgment in favor of the plaintiff Efren Castillo as
against the defendant Maersk Line thru its agent,
the COMPANIA GENERAL DE TABACOS DE
FILIPINAS and ordering:
(a) Defendant to pay the plaintiff Efren V. Castillo
the amount of THREE HUNDRED SIXTY NINE
THOUSAND PESOS, (P369,000.00) as unrealized
profit;.
(b) Defendant to pay plaintiff the sum of TWO
HUNDRED THOUSAND PESOS (P200,000.00),
as moral damages;
(c) Defendant to pay plaintiff the sum of TEN
THOUSAND PESOS (P10,000.00) as exemplary
damages;
(d) Defendant to pay plaintiff the sum of ELEVEN
THOUSAND SIX HUNDRED EIGHTY PESOS
AND NINETY SEVEN CENTAVOS (P11,680.97)
as cost of credit line; and
(e) Defendant to pay plaintiff the sum of FIFTY
THOUSAND PESOS (P50,000.00), as attorney's
fees and to pay the costs of suit.
That the above sums due to the plaintiff will bear
the legal rate of interest until they are fully paid
from the time the case was filed.
SO ORDERED. (AC-GR CV No. 10340, Rollo, p.
15).
On appeal, respondent court rendered its decision dated August 1,
1990 affirming with modifications the lower court's decision as
follows:
WHEREFORE, the decision appealed from is
affirmed with a modification, and, as modified, the
judgment in this case should read as follows:
 Judgment is hereby rendered ordering defendant-
appellant Maersk Line to pay plaintiff-appellee (1)
compensatory damages of P11,680.97 at 6%
annual interest from filing of the complaint until
fully paid, (2) moral damages of P50,000.00, (3)
exemplary damages of P20,000,00, (3) attorney's
fees, per appearance fees, and litigation expenses
of P30,000.00, (4) 30% of the total damages
awarded except item (3) above, and the costs of
suit.
SO ORDERED. (Rollo, p. 50)
In its Memorandum, petitioner submits the following "issues" for
resolution of the court :
I
Whether or not the respondent Court of Appeals
committed an error when it ruled that a
defendant's cross-claim against a co-defendant
survives or subsists even after the dismissal of the
complaint against defendant-cross claimant.
II
Whether or not respondent Castillo is entitled to
damages resulting from delay in the delivery of the
shipment in the absence in the bill of lading of a
stipulation on the period of delivery.
III
Whether or not the respondent appellate court
erred in awarding actual, moral and exemplary
damages and attorney's fees despite the absence of
factual findings and/or legal bases in the text of
the decision as support for such awards.
IV
Whether or not the respondent Court of Appeals
committed an error when it rendered an
ambiguous and unexplained award in the
dispositive portion of the decision which is not
supported by the body or the text of the decision.
(Rollo, pp.94-95).
With regard to the first issue raised by petitioner on whether or not a
defendant's cross-claim against co-defendant (petitioner herein)
survives or subsists even after the dismissal of the complaint against
defendant-cross-claimant (petitioner herein), we rule in the negative.
Apparently this issue was raised by reason of the declaration made by
respondent court in its questioned decision, as follows:
Re the first assigned error: What should be
rescinded in this case is not the "Memorandum of
Shipment" but the contract between appellee and
defendant Eli Lilly (embodied in three documents,
namely: Exhs. A, A-1 and A-2) whereby the former
agreed to buy and the latter to sell those six drums
of gelatin capsules. It is by virtue of the cross-claim
by appellant Eli Lilly against defendant Maersk
Line for the latter's gross negligence in diverting
the shipment thus causing the delay and damage to
appellee that the trial court found appellant
Maersk Line liable. . . .
xxx xxx xxx
Re the fourth assigned error: Appellant Maersk
Line's insistence that appellee has no cause of
action against it and appellant Eli Lilly because
the shipment was delivered in good order and
condition, and the bill of lading in question
contains "stipulations, exceptions and conditions"
Maersk Line's liability only to the "loss,
destruction or deterioration," indeed, this issue of
lack of cause of action has already been considered
in our foregoing discussion on the second assigned
error, and our resolution here is still that appellee
has a cause of action against appellant Eli Lilly.
Since the latter had filed a cross-claim against
appellant Maersk Line, the trial court committed
no error, therefore, in holding the latter appellant
ultimately liable to appellee. (Rollo, pp. 47-50;
Emphasis supplied)
Reacting to the foregoing declaration, petitioner submits that its
liability is predicated on the cross-claim filed its co-defendant Eli
Lilly, Inc. which cross-claim has been dismissed, the original
complaint against it should likewise be dismissed. We disagree. It
should be recalled that the complaint was filed originally against Eli
Lilly, Inc. as shipper-supplier and petitioner as carrier. Petitioner
being an original party defendant upon whom the delayed shipment is
imputed cannot claim that the dismissal of the complaint against Eli
Lilly, Inc. inured to its benefit.
Respondent court, erred in declaring that the trial court based
petitioner's liability on the cross-claim of Eli Lilly, Inc. As borne out
by the record, the trial court anchored its decision on petitioner's
delay or negligence to deliver the six (6) drums of gelatin capsules
within a reasonable time on the basis of which petitioner was held
liable for damages under Article 1170 of the New Civil Code which
provides that those who in the performance of their obligations are
guilty of fraud, negligence, or delay and those who in any manner
contravene the tenor thereof, are liable for damages.
Nonetheless, petitioner maintains that it cannot be held for damages
for the alleged delay in the delivery of the 600,000 empty gelatin
capsules since it acted in good faith and there was no special contract
under which the carrier undertook to deliver the shipment on or
before a specific date (Rollo, p. 103).
On the other hand, private respondent claims that during the period
before the specified date of arrival of the goods, he had made several
commitments and contract of adhesion. Therefore, petitioner can be
held liable for the damages suffered by private respondent for the
cancellation of the contracts he entered into.
We have carefully reviewed the decisions of respondent court and the
trial court and both of them show that, in finding petitioner liable for
damages for the delay in the delivery of goods, reliance was made on
the rule that contracts of adhesion are void. Added to this, the lower
court stated that the exemption against liability for delay is against
public policy and is thus, void. Besides, private respondent's action is
anchored on Article 1170 of the New Civil Code and not under the law
on Admiralty (AC-GR CV No. 10340, Rollo, p. 14).
The bill of lading covering the subject shipment among others, reads:
6. GENERAL
(1) The Carrier does not undertake that the goods
shall arive at the port of discharge or the place of
delivery at any particular time or to meet any
particular market or use and save as is provided in
clause 4 the Carrier shall in no circumstances be
liable for any direct, indirect or consequential loss
or damage caused by delay. If the Carrier should
nevertheless be held legally liable for any such
direct or indirect or consequential loss or damage
caused by delay, such liability shall in no event
exceed the freight paid for the transport covered
by this Bill of Lading. (Exh. "1-A"; AC-G.R. CV No.
10340, Folder of Exhibits, p. 41)
It is not disputed that the aforequoted provision at the back of the bill
of lading, in fine print, is a contract of adhesion. Generally, contracts
of adhesion are considered void since almost all the provisions of these
types of contracts are prepared and drafted only by one party, usually
the carrier (Sweet Lines v. Teves, 83 SCRA 361 [1978]). The only
participation left of the other party in such a contract is the affixing of
his signature thereto, hence the term "Adhesion" (BPI Credit
Corporation v. Court of Appeals, 204 SCRA 601 [1991]; Angeles v.
Calasanz, 135 SCRA 323 [1985]).
Nonetheless, settled is the rule that bills of lading are contracts not
entirely prohibited (Ong Yiu v. Court of Appeals, et al., 91 SCRA 223
[1979]; Servando, et al. v. Philippine Steam Navigation Co., 117 SCRA
832 [1982]). One who adheres to the contract is in reality free to reject
it in its entirety; if he adheres, he gives his consent (Magellan
Manufacturing Marketing Corporation v. Court of Appeals, et al., 201
SCRA 102 [1991]).
In Magellan, (supra), we ruled:
 It is a long standing jurisprudential rule that a bill
of lading operates both as a receipt and as contract
to transport and deliver the same a therein
stipulated. As a contract, it names the parties,
which includes the consignee, fixes the route,
destination, and freight rates or charges, and
stipulates the rights and obligations assumed by
the parties. Being a contract, it is the law between
the parties who are bound by its terms and
conditions provided that these are not contrary to
law, morals, good customs, public order and public
policy. A bill of lading usually becomes effective
upon its delivery to and acceptance by the
shipper. It is presumed that the stipulations of the
bill were, in the absence of fraud, concealment or
improper conduct, known to the shipper, and he is
generally bound by his acceptance whether he
reads the bill or not. (Emphasis supplied)
However, the aforequoted ruling applies only if such contracts will not
create an absurd situation as in the case at bar. The questioned
provision in the subject bill of lading has the effect of practically
leaving the date of arrival of the subject shipment on the sole
determination and will of the carrier.
While it is true that common carriers are not obligated by law to carry
and to deliver merchandise, and persons are not vested with the right
to prompt delivery, unless such common carriers previously assume
the obligation to deliver at a given date or time (Mendoza v.
Philippine Air Lines, Inc., 90 Phil. 836 [1952]), delivery of shipment or
cargo should at least be made within a reasonable time.
In Saludo, Jr. v. Court of Appeals (207 SCRA 498 [1992]) this Court
held:
The oft-repeated rule regarding a carrier's liability
for delay is that in the absence of a special
contract, a carrier is not an insurer against delay
in transportation of goods. When a common carrier
undertakes to convey goods, the law implies a
contract that they shall be delivered at destination
within a reasonable time, in the absence, of any
agreement as to the time of delivery. But where a
carrier has made an express contract to transport
and deliver properly within a specified time, it is
bound to fulfill its contract and is liable for any
delay, no matter from what cause it may have
arisen. This result logically follows from the well-
settled rule that where the law creates a duty or
charge, and the default in himself, and has no
remedy over, then his own contract creates a duty
or charge upon himself, he is bound to make it
good notwithstanding any accident or delay by
inevitable necessity because he might have
provided against it by contract. Whether or not
there has been such an undertaking on the part of
the carrier is to be determined from the
circumstances surrounding the case and by
application of the ordinary rules for the
interpretation of contracts.
An examination of the subject bill of lading (Exh. "1"; AC GR CV No.
10340, Folder of Exhibits, p. 41) shows that the subject shipment was
estimated to arrive in Manila on April 3, 1977. While there was no
special contract entered into by the parties indicating the date of
arrival of the subject shipment, petitioner nevertheless, was very well
aware of the specific date when the goods were expected to arrive as
indicated in the bill of lading itself. In this regard, there arises no
need to execute another contract for the purpose as it would be a mere
superfluity.
In the case before us, we find that a delay in the delivery of the goods
spanning a period of two (2) months and seven (7) days falls was
beyond the realm of reasonableness. Described as gelatin capsules for
use in pharmaceutical products, subject shipment was delivered to,
and left in, the possession and custody of petitioner-carrier for
transport to Manila via Oakland, California. But through petitioner's
negligence was mishipped to Richmond, Virginia. Petitioner's
insitence that it cannot be held liable for the delay finds no merit.
Petition maintains that the award of actual, moral and exemplary
dames and attorney's fees are not valid since there are no factual
findings or legal bases stated in the text of the trial court's decision to
support the award thereof.
Indeed, it is settled that actual and compensataory damages requires
substantial proof (Capco v. Macasaet. 189 SCRA 561 [1990]). In the
case at bar, private respondent was able to sufficiently prove through
an invoice (Exh. 'A-1'), certification from the issuer of the letter of
credit (Exh.'A-2') and the Memorandum of Shipment (Exh. "B"), the
amount he paid as costs of the credit line for the subject goods.
Therefore, respondent court acted correctly in affirming the award of
eleven thousand six hundred eighty pesos and ninety seven centavos
(P11,680.97) as costs of said credit line.
As to the propriety of the award of moral damages, Article 2220 of the
Civil Code provides that moral damages may be awarded in "breaches
of contract where the defendant acted fraudulently or in bad faith"
(Pan American World Airways v. Intermediate Appellate Court, 186
SCRA 687 [1990]).
In the case before us, we that the only evidence presented by
petitioner was the testimony of Mr. Rolando Ramirez, a claims
manager of its agent Compania General de Tabacos de Filipinas, who
merely testified on Exhs. '1' to '5' (AC-GR CV No. 10340, p. 2) and
nothing else. Petitioner never even bothered to explain the course for
the delay, i.e. more than two (2) months, in the delivery of subject
shipment. Under the circumstances of the case, we hold that
petitioner is liable for breach of contract of carriage through gross
negligence amounting to bad faith. Thus, the award of moral damages
if therefore proper in this case.
In line with this pronouncement, we hold that exemplary damages
may be awarded to the private respondent. In contracts, exemplary
damages may be awarded if the defendant acted in a wanton,
fraudulent, reckless, oppresive or malevolent manner. There was
gross negligence on the part of the petitioner in mishiping the subject
goods destined for Manila but was inexplicably shipped to Richmond,
Virginia, U.S.A. Gross carelessness or negligence contitutes wanton
misconduct, hence, exemplary damages may be awarded to the
aggrieved party (Radio Communication of the Phils., Inc. v. Court of
Appeals, 195 SCRA 147 [1991]).
Although attorney's fees are generally not recoverable, a party can be
held lible for such if exemplary damages are awarded (Artice 2208,
New Civil Code). In the case at bar, we hold that private respondent is
entitled to reasonable attorney`s fees since petitioner acte with gross
negligence amounting to bad faith.
However, we find item 4 in the dispositive portion of respondent
court`s decision which awarded thirty (30) percent of the total
damages awarded except item 3 regarding attorney`s fees and
litigation expenses in favor of private respondent, to be unconsionable,
the same should be deleted.
WHEREFORE, with the modification regarding the deletion of item 4
of respondent court`s decision, the appealed decision is is hereby
AFFIRMED in all respects.
G.R. No. 143008 June 10, 2002
SMITH BELL DODWELL SHIPPING AGENCY
CORPORATION, petitioner,
vs.
CATALINO BORJA and INTERNATIONAL TO WAGE AND
TRANSPORT CORPORATION, respondents.
PANGANIBAN, J.:
The owner or the person in possession and control of a vessel is liable
for all natural and proximate damages caused to persons and property
by reason of negligence in its management or navigation. The liability
for the loss of the earning capacity of the deceased is fixed by taking
into account the net income of the victim at the time of death -- of the
incident in this case -- and that person's probable life
expectancy.1âwphi1.nêt
The Case
Before us is a Petition for Review on Certiorari under Rule 45 of the
Rules of Court, challenging the March 6, 2000 Decision1 and the April
25, 2000 Resolution2 of the Court of Appeals3 (CA) in CA-GR CV No.
57470. The assailed Decision disposed as follows:
"WHEREFORE, premises considered, the instant appeal is
hereby DENIED. The questioned decision of the lower court
is hereby AFFIRMED in toto. No pronouncement as to
costs."4
Reconsideration was denied in the assailed Resolution.
 The Facts
The facts of the case are set forth by the CA as follows:
"It appears that on September 23, 1987, Smith Bell [herein
petitioner] filed a written request with the Bureau of
Customs for the attendance of the latter's inspection team
on vessel M/T King Family which was due to arrive at the
port of Manila on September 24, 1987.
"Said vessel contained 750 metric tons of alkyl benzene and
methyl methacrylate monomer.
"On the same day, Supervising Customs Inspector Manuel
Ma. D. Nalgan instructed [Respondent Catalino Borja] to
board said vessel and perform his duties as inspector upon
the vessel's arrival until its departure. At that time, [Borja]
was a customs inspector of the Bureau of Customs receiving
a salary of P31,188.25 per annum.
"At about 11 o'clock in the morning on September 24, 1987,
while M/T King Family was unloading chemicals unto two
(2) barges [--] ITTC 101 and CLC-1002 [--] owned by
[Respondent] ITTC, a sudden explosion occurred setting the
vessels afire. Upon hearing the explosion, [Borja], who was
at that time inside the cabin preparing reports, ran outside
to check what happened. Again, another explosion was
heard.
"Seeing the fire and fearing for his life, [Borja] hurriedly
jumped over board to save himself. However, the [water]
[was] likewise on fire due mainly to the spilled chemicals.
Despite the tremendous heat, [Borja] swam his way for one
(1) hour until he was rescued by the people living in the
squatters' area and sent to San Juan De Dios Hospital.
"After weeks of intensive care at the hospital, his attending
physician diagnosed [Borja] to be permanently disabled due
to the incident. [Borja] made demands against Smith Bell
and ITTC for the damages caused by the explosion.
However, both denied liabilities and attributed to each other
negligence."5
The trial court6 (RTC) ruled in favor of Respondent Borja and held
petitioner liable for damages and loss of income. The RTC disposed as
follows:
"WHEREFORE, premises considered, judgment is hereby
rendered ordering [Petitioner] Smith Bell Dodwell
[S]hipping Agency Corporation to pay [Borja]:
1. The amount of P495,360.00 as actual damages
for loss of earning capacity:
2. The amount of P100,000.00 for moral damages;
and
3. The amount of P50,000.00 for and as reasonable
attorney's fees.
"The cross-claim of [Petitioner] Smith Bell Dodwell Shipping
Agency Corporation against co-defendant International
Towage and Transport Corporation and the latter's
counterclaim against [Borja] and cross-claim with
compulsory counterclaim against Smith Bell are hereby
ordered dismissed."7
Ruling of the Court of Appeals
Affirming the trial court, the CA rejected the plea of petitioner that it
be exonerated from liability for Respondent Borja's injuries. Contrary
to the claim of petitioner that no physical evidence was shown to
prove that the explosion had originated from its vessel, the CA held
that the fire had originated from M/T King Family. This conclusion
was amply supported by the testimonies of Borja and Eulogio
Laurente (the eyewitness of International Towage and Transport
Corporation or ITTC) as well as by the investigation conducted by the
Special Board of Marine Inquiry and affirmed by the secretary of the
Department of National Defense. On the other hand, the RTC, which
the CA sustained, had not given probative value to the evidence of
petitioner, whose sole eyewitness had not shown up for cross-
examination.
Hence, this Petition.8
The Issues
In its Memorandum,9 petitioner raises the following issues:
"1. Whether petitioner should be held liable for the injuries
of Respondent Catalino Borja.
"2. Whether Respondent ITTC should be held liable for the
injuries of Respondent Catalino Borja.
"3. Assuming without admitting that Respondent Catalino
Borja is entitled to damages, whether Respondent Borja is
entitled to the amount of damages awarded to him by the
trial court."10
Simply put, these issues can be summed up in these two questions: (1)
Who, if any, is liable for Borja's injuries? (2) What is the proper
amount of liability?
This Court's Ruling
The Petition is partly meritorious.
First Issue:
Responsibility for Injuries
Petitioner avers that both lower courts labored under a
misapprehension of the facts. It claims that the documents adduced in
the RTC conclusively revealed that the explosion that caused the fire
on M/T King Family had originated from the barge ITTC-101, a
conclusion based on three grounds. First, the Survey Report (Exh.
"10") dated October 21, 1987 submitted by the Admiral Surveyors and
Adjusters, Inc., showed that no part of M/T King Family sustained
any sharp or violent damage that would otherwise be observed if
indeed an explosion had occurred on it. On the other hand, the fact
that the vessel sustained cracks on its shell plating was noted in two
Survey Reports from Greutzman Divers Underwater Specialist, dated
October 6, 1987 (Exh. "11"), and during the underwater inspection on
the sunken barge ITTC-101.
Second, external fire damage on the hull of M/T King
Family indicated that the fire had started from outside the vessel and
from ITTC-101. The port side of the vessel to which the ITTC barge
was tied was completely gutted by fire, while the starboard side to
which the barge CLC-1002 was tied sustained only slight fire damage.
Third, testimonial evidence proved that the explosion came from the
barge of the ITTC and not from its vessel. Security Guard Vivencio
Estrella testified that he had seen the sudden explosion of monomer
on the barge with fire that went up to about 60 meters. Third Mate
Choi Seong Hwan and Second Mate Nam Bang Choun of M/T King
Family narrated that while they were discharging the chemicals, they
saw and heard an explosion from the barge ITTC-101. Chief Security
Guard Reynaldo Patron, in turn, testified that he was 7 to 10 meters
away from the barge when he heard the explosion from the port side
of M/T King Family and saw the barge already on fire.
We are not persuaded. Both the RTC and the CA ruled that the fire
and the explosion had originated from petitioner's vessel. Said the
trial court:
"The attempts of [Petitioner] Smith Bell to shift the blame
on x x x ITTC were all for naught. First, the testimony of its
alleged eyewitness was stricken off the record for his failure
to appear for cross-examination (p. 361, Record). Second, the
documents offered to prove that the fire originated from
barge ITTC-101 were all denied admission by the [c]ourt for
being, in effect, hearsay (pp. 335 and 362). x x x Thus, there
is nothing in the record to support [petitioner's] contention
that the fire and explosion originated from barge ITTC-
101."11
We find no cogent reason to overturn these factual findings. Nothing
is more settled in jurisprudence than that this Court is bound by the
factual findings of the Court of Appeals when these are supported by
substantial evidence and are not under any of the exceptions
in Fuentes v. Court of Appeals;12 more so, when such findings affirm
those of the trial court.13 Verily, this Court reviews only issues of law.
Negligence is conduct that creates undue risk of harm to another. It is
the failure to observe that degree of care, precaution and vigilance
that the circumstances justly demand, whereby that other person
suffers injury.14Petitioner's vessel was carrying chemical cargo -- alkyl
benzene and methyl methacrylate monomer.15 While knowing that
their vessel was carrying dangerous inflammable chemicals, its
officers and crew failed to take all the necessary precautions to
prevent an accident. Petitioner was, therefore, negligent.
The three elements of quasi delict are: (a) damages suffered by the
plaintiff, (b) fault or negligence of the defendant, and (c) the
connection of cause and effect between the fault or negligence of the
defendant and the damages inflicted on the plaintiff.16 All these
elements were established in this case. Knowing fully well that it was
carrying dangerous chemicals, petitioner was negligent in not taking
all the necessary precautions in transporting the cargo.
As a result of the fire and the explosion during the unloading of the
chemicals from petitioner's vessel, Respondent Borja suffered the
following damage: and injuries: "(1) chemical burns of the face and
arms; (2) inhalation of fumes from burning chemicals; (3) exposure to
the elements [while] floating in sea water for about three (3) hours; (4)
homonymous hemianopsia or blurring of the right eye [which was of]
possible toxic origin; and (5) [c]erebral infract with neo-
vascularization, left occipital region with right sided headache and the
blurring of vision of right eye."17
Hence, the owner or the person in possession and control of a vessel
and the vessel are liable for all natural and proximate damage caused
to persons and property by reason of negligent management or
navigation.18
Second Issue:
Amount of Liability
Petitioner insists that Borja is not entitled to the full amount of
damages awarded by the lower courts. It disputes the use of his gross
earning as basis for the computation of the award for loss of earning
capacity. Both courts, in computing the value of such loss, used the
remaining years of the victim as a government employee and the
amount he had been receiving per annum at the time of the incident.
Counsel for Respondent Borja, on the other hand, claims that
petitioner had no cause to complain, because the miscomputation had
ironically been in its favor. The multiplier used in the computation
was erroneously based on the remaining years in government service,
instead of the life expectancy, of the victim. Borja's counsel also points
out that the award was based on the former's meager salary in 1987,
or about 23 years ago when the foreign exchange was still P14 to $1.
Hence, the questioned award is consistent with the primary purpose
of giving what is just, moral and legally due the victim as the
aggrieved party.
Both parties have a point. In determining the reasonableness of the
damages awarded under Article 1764 in conjunction with Article 2206
of the Civil Code, the factors to be considered are: (1) life expectancy
(considering the health of the victim and the mortality table which is
deemed conclusive) and loss of earning capacity; (b) pecuniary loss,
loss of support and service; and (c) moral and mental sufferings. 19 The
loss of earning capacity is based mainly on the number of years
remaining in the person's expected life span. In turn, this number is
the basis of the damages that shall be computed and the rate at which
the loss sustained by the heirs shall be fixed.20
The formula for the computation of loss of earning capacity is as
follows:21
Counsel for Respondent Borja is also correct in saying that life
expectancy should not be based on the retirement age of government
employees, which is pegged at 65. In Negros Navigation Co, Inc. v.
CA,25 the Court resolved that in calculating the life expectancy of an
individual for the purpose of determining loss of earning capacity
under Article 2206(1) of the Civil Code, it is assumed that the
deceased would have earned income even after retirement from a
particular job.1âwphi1.nêt
Respondent Borja should not be situated differently just because he
was a government employee. Private employees, given the retirement
packages provided by their companies, usually retire earlier than
government employees; yet, the life expectancy of the former is not
pegged at 65 years.
Petitioner avers that Respondent Borja died nine years after the
incident and, hence, his life expectancy of 80 years should yield to the
reality that he was only 59 when he actually died.
We disagree. The Court uses the American Experience/Expectancy
Table of Mortality or the Actuarial or Combined Experience Table of
Mortality, which consistently pegs the life span of the average Filipino
at 80 years, from which it extrapolates the estimated income to be
earned by the deceased had he or she not been killed. 26
Respondent Borja's demise earlier than the estimated life span is of
no moment. For purposes of determining loss of earning capacity, life
expectancy remains at 80. Otherwise, the computation of loss of
earning capacity will never become final, being always subject to the
eventuality of the victim's death. The computation should not change
even if Borja lived beyond 80 years. Fair is fair.
Based on the foregoing discussion, the award for loss of earning
capacity should be computed as follows:
Loss of earning capacity = [2 (80-50)] x [(P2,752x12)-16,512]
3
= P330,240
Having been duly proven, the moral damages and attorney's fees
awarded are justified under the Civil Code's Article 2219, paragraph
2; and Article 2208, paragraph 11, respectively.
WHEREFORE, the Petition is PARTLY GRANTED. The assailed
Decision is AFFIRMED with the
following MODIFICATIONS: petitioner is ordered to pay the heirs of
the victim damages in the amount of P320,240 as loss of earning
capacity, moral damages in the amount of P100,000, plus
another P50,000 as attorney's fees. Costs against petitioner.
G.R. No. 120027 April 21, 1999
EDNA A. RAYNERA, for herself and on behalf of the minors
RIANNA and REIANNE RAYNERA, petitioners,
vs.
FREDDIE HICETA and JIMMY ORPILLA, respondents.

Net earning capacity = Life expectancy x [Gross

Annual Income - Living Expenses (50% of gross annual
income)], where life expectancy = 2/3 (80 - the age of
the deceased).22
Petitioner is correct in arguing that it is net income (or gross income
less living expenses) which is to be used in the computation of the
award for loss of income. Villa Rey Transit v. Court of
Appeals23 explained that "the amount recoverable is not the loss of the
entire earning, but rather the loss of that portion of the earnings
which the beneficiary would have received." Hence, in fixing the
amount of the said damages, the necessary expenses of the deceased
should be deducted from his earnings.
PARDO, J.:
The case is a petition for review certiorari of the decision of the Court
of Appeals, 1 reversing that of the Regional Trial Court, Branch 45,
Manila. 2
The rule is well-settled that factual findings of the Court of Appeals
are generally considered final and may not be reviewed on appeal.
However, this principle admits of certain exceptions, among which is
when the findings of the appellate court are contrary to those of the
trial court, a re-examination of the facts and evidence may be
undertaken. 3 This case falls under the cited exception.

In other words, only net earnings, not gross earnings, are to be The antecedent facts are as follows:
considered; that is, the total of the earnings less expenses necessary in
the creation of such earnings or income, less living and other
Petitioner Edna A. Raynera was the widow of Reynaldo Raynera and
incidental expenses. When there is no showing that the living
the mother and legal guardian of the minors Rianna and Reianne,
expenses constituted a smaller percentage of the gross income, we fix
both surnamed Raynera. Respondents Freddie Hiceta and Jimmy
the living expenses at half of the gross income. To hold that one would
Orpilla were the owner and driver, respectively, of an Isuzu truck-
have used only a small part of the income, with the larger part going
trailer with plate No. NXC 848, involved in the accident.1âwphi1.nêt
to the support of one's children, would be conjectural and
unreasonable.24
On March 23, 1989, at about 2:00 in the morning, Reynaldo Raynera
was on his way home. He was riding a motorcycle traveling on the
southbound lane of East Service Road, Cupang, Muntinlupa. The
Isuzu truck was travelling ahead of him at 20 to 30 kilometers per
hour. 4 The truck was loaded with two (2) metal sheets extended on
both sides, two (2) feet on the left and three (3) feet on the right. There
were two (2) pairs of red lights, about 35 watts each, on both sides of
the metal plates. 5 The asphalt road was not well lighted.
At some point on the road, Reynaldo Raynera crashed his motorcycle
into the left rear portion of the truck trailer, which was without tail
lights. Due to the collision, Reynaldo sustained head injuries and
truck helper Geraldino D.
Lutelo 6 rushed him to the Parañaque Medical Center. Upon arrival at
the hospital, the attending physician, Dr. Marivic
Aguirre, 7 pronounced Reynaldo Raynera dead on arrival.
At the time of his death, Reynaldo was manager of the Engineering
Department, Kawasaki Motors (Phils.) Corporation. He was 32 years
old, had a life expectancy of sixty five (65) years, and an annual net
earnings of not less than seventy three thousand five hundred
(P73,500.00) pesos, 8 with a potential increase in annual net earnings
of not less than ten percent (10%) of his salary. 9
On May 12, 1989, the heirs of the deceased demanded 10 from
respondents payment of damages arising from the death of Reynaldo
Raynera as a result of the vehicular accident. The respondents refused
to pay the claims.
On September 13, 1989, petitioners filed with the Regional Trial
Court, Manila 11 a complaint12 for damages against respondents owner
and driver of the Isuzu truck.
In their complaint against respondents, petitioners sought recovery of
damages for the death of Reynaldo Raynera caused by the negligent
operation of the truck-trailer at nighttime on the highway, without
tail lights.
In their answer filed on April 4, 1990, respondents alleged that the
truck was travelling slowly on the service road, not parked improperly
at a dark portion of the road, with no tail lights, license plate and
early warning device.
At the trial, petitioners presented Virgilio Santos. He testified that at
about 1.00 and 2:00 in the morning of March 23, 1989, he and his wife
went to Alabang, market, on board a tricycle. They passed by the
service road going south, and saw a parked truck trailer, with its hood
open and without tail lights. They would have bumped the truck but
the tricycle driver was quick in avoiding a collision. The place was
dark, and the truck had no early warning device to alert passing
motorists. 13
On the other hand, respondents presented truck helper Geraldino
Lucelo. 14 He testified that at the time the incident happened, the
truck was slowly traveling at approximately 20 to 30 kilometers per
hour. Another employee of respondents, auto-mechanic Rogoberto
Reyes, 15 testified that at about 3:00 in the afternoon of March 22,
1989, with the help of Lucelo, he installed two (2) pairs of red lights,
about 30 to 40 watts each, on both sides of the steel plates. 16 On his
part, traffic investigation officer Cpl. Virgilio del Monte 17 admitted
that these lights were visible at a distance of 100 meters.
On December 19, 1991, the trial court rendered decision in favor of
petitioners. It found respondents Freddie Hiceta and Jimmy Orpilla
negligent in view of these circumstances: (1) the truck trailer had no
license plate and tail lights; (2) there were only two pairs of red lights,
50 watts 18 each, on both sides of the steel plates; and (3) the truck
trailer was improperly parked in a dark area.
The trial court held that respondents' negligence was the immediate
and proximate cause of Reynaldo Raynera's death, for which they are
jointly and severally liable to pay damages to petitioners. The trial
court also held that the victim was himself negligent, although this
was insufficient to overcome respondents' negligence. The trial court
applied the doctrine of contributory negligence 19 and reduced the
responsibility of respondents by 20% on account of the victim's own
negligence.
The dispositive portion of the lower court's decision reads as follows:
All things considered, the Court is of the opinion
that it is fair and reasonable to fix the living and
other expenses of the deceased the sum of
P54,000.00 a year or about P4,500.00 a month
(P150.00 p/d) and that, consequently, the loss or
damage sustained by the plaintiffs may be
estimated at P1,674,000.00 for the 31 years of
Reynaldo Raynera's life expectancy.
Taking into account the cooperative negligence of
the deceased Reynaldo Raynera, the Court
believes that the demand of substantial justice are
satisfied by allocating the damages on 80-20 ratio.
Thus, P1,337,200.00 shall be paid by the
defendants with interest thereon, at the legal rate,
from date of decision, as damages for the loss of
earnings. To this sum, the following shall be
added:
(a)
P33,412.00,
actually
spent for
funeral
services,
interment
and
memorial
lot;
(b) P20,000.00 as attorney's fees;
(c) cost of suit.
SO ORDERED. 20
On January 10, 1992, respondents Hiceta and Orpilla appealed to the
Court of Appeals. 21
After due proceedings, on April 28, 1995, the Court of Appeals
rendered decision setting aside the appealed decision. The appellate
court held that Reynaldo Raynera's bumping into the left rear portion
of the truck was the proximate cause or his death, 22 and
consequently, absolved respondents from liability.
Hence, this petitition for review on certiorari.
In this petition, the heirs of Reynaldo Raynera contend that the
appellate court erred in: (1) overturning the trial court's finding that
respondents' negligent operation of the Isuzu truck was the proximate
cause of the victim's death; (2) applying the doctrine of last clear
chance; (3) setting aside the trial court's award of actual and
compensatory damages.
The issues presented are (a) whether respondents were negligent, and
if so, (b) whether such negligence was the proximate cause of the
death of Reynaldo Raynera.
Petitioners maintain that the proximate cause of Reynaldo Raynera's
death was respondents' negligence in operating the truck trailer on
the highway without tail lights and license plate.
The Court finds no reason to disturb the factual findings of the Court
of Appeals.
"Negligence is the omission to do something which a reasonable man,
guided by those considerations which ordinarily regulate the conduct
of human affairs, would do, or the doing of something, which a
prudent and reasonable man would not do." 23
Proximate cause is "that cause, which, in natural and continous
sequence, unbroken by any efficient intervening cause, produces the
injury, and without which the result would not have occured." 24
During the trial, it was established that the truck had no tail lights.
The photographs taken of the scene of the accident showed that there
were no tail lights of license plates installed on the Isuzu truck.
Instead, what were installed were two (2) pairs of lights on top of the
steel plates, and one (1) pair of lights in front of the truck. With
regard to the rear of the truck, the photos taken and the sketch in the
spot report proved that there were no tail lights.
Despite the absence of tail lights and license plate, respondents truck
was visible in the highway. It was traveling at a moderate speed,
approximately 20 to 30 kilometers per hour. It used the service road,
instead of the highway, because the cargo they were hauling posed a
danger to passing motorists. In compliance with the Land
Transportation Traffic Code (Republic Act No. 4136)" 25 respondents
installed 2 pairs of lights on top of the steel plates, as the vehicle's
cargo load extended beyond the bed or body thereof.
We find that the direct cause of the accident was the negligence of the
victim. Traveling behind the truck, he had the responsibility of
avoiding bumping the vehicle in front of him. He was in control of the
situation. His motorcycle was equipped with headlights to enable him
to see what was in front of him. He was traversing the service road
where the prescribed speed limit was less than that in the highway.
Traffic investigator Cpl. Virgilio del Monte testified that two pairs of
50-watts bulbs were on top of the steel plates, 26which were visible
from a distance of 100 meters . 27 Virgilio Santos admitted that from
the tricycle where he was on board, he saw the truck and its cargo of
iron plates from a distance of ten (10) meters. 28 In light of these
circumstances, an accident could have been easily avoided, unless the
victim had been driving too fast and did not exercise dues care and
prudence demanded of him under the circumstances.
Virgilio Santos' testimony strengthened respondents' defense that it
was the victim who was reckless and negligent in driving his
motorcycle at high speed. The tricycle where Santos was on board was
not much different from the victim's motorcycle that figured in the
accident. Although Santos claimed the tricycle almost bumped into
the improperly parked truck, the tricycle driver was able to void
hitting the truck.
It has been said that drivers of vehicles "who bump the rear of
another vehicle" are presumed to be "the cause of the accident, unless
contradicted by other evidence". 29 The rationale behind the
presumption is that the driver of the rear vehicle has full control of
the situation as he is in a position to observe the vehicle in front of
him.
We agree with the Court of Appeals that the responsibility to avoid
the collision with the front vehicle lies with the driver of the rear
vehicle.
Consequently, no other person was to blame but the victim himself
since he was the one who bumped his motorcycle into the rear of the
Isuzu truck. He had the last clear chance of avoiding the accident.
WHEREFORE, we DENY the petition for review on certiorari and
AFFIRM the decision of the Court of Appeals in CA-G.R. CV No.
35895, dismissing the amended complaint in Civil Case No. 89-50355,
Regional Trial Court, Branch 45, Manila.1âwphi1.nêt
.R. No. 97626 March 14, 1997
PHILIPPINE BANK OF COMMERCE, now absorbed by
PHILIPPINE COMMERCIAL INTERNATIONAL BANK,
ROGELIO LACSON, DIGNA DE LEON, MARIA ANGELITA
PASCUAL, et al., petitioners,
vs.
THE COURT OF APPEALS, ROMMEL'S MARKETING CORP.,
represented by ROMEO LIPANA, its President & General
Manager, respondents.
HERMOSISIMA, JR., J.:
Challenged in this petition for review is the Decision dated February
28, 19911 rendered by public respondent Court of Appeals which
affirmed the Decision dated November 15, 1985 of the Regional Trial
Court, National Capital Judicial Region, Branch CLX (160), Pasig
City, in Civil Case No. 27288 entitled "Rommel's Marketing
Corporation, etc. v. Philippine Bank of Commerce, now absorbed by
Philippine Commercial and Industrial Bank."
The case stemmed from a complaint filed by the private respondent
Rommel's Marketing Corporation (RMC for brevity), represented by
its President and General Manager Romeo Lipana, to recover from the
former Philippine Bank of Commerce (PBC for brevity), now absorbed
by the Philippine Commercial International Bank, the sum of
P304,979.74 representing various deposits it had made in its current
account with said bank but which were not credited to its account, and
were instead deposited to the account of one Bienvenido Cotas,
allegedly due to the gross and inexcusable negligence of the petitioner
bank.
RMC maintained two (2) separate current accounts, Current Account
Nos. 53-01980-3 and 53-01748-7, with the Pasig Branch of PBC in
connection with its business of selling appliances.
In the ordinary and usual course of banking operations, current
account deposits are accepted by the bank on the basis of deposit slips
prepared and signed by the depositor, or the latter's agent or
representative, who indicates therein the current account number to
which the deposit is to be credited, the name of the depositor or
current account holder, the date of the deposit, and the amount of the
deposit either in cash or checks. The deposit slip has an upper portion
or stub, which is detached and given to the depositor or his agent; the
lower portion is retained by the bank. In some instances, however, the
deposit slips are prepared in duplicate by the depositor. The original
of the deposit slip is retained by the bank, while the duplicate copy is
returned or given to the depositor.
From May 5, 1975 to July 16, 1976, petitioner Romeo Lipana claims to
have entrusted RMC funds in the form of cash totalling P304,979.74
to his secretary, Irene Yabut, for the purpose of depositing said funds
in the current accounts of RMC with PBC. It turned out, however,
that these deposits, on all occasions, were not credited to RMC's
account but were instead deposited to Account No. 53-01734-7 of
Yabut's husband, Bienvenido Cotas who likewise maintains an
account with the same bank. During this period, petitioner bank had,
however, been regularly furnishing private respondent with monthly
statements showing its current accounts balances. Unfortunately, it
had never been the practice of Romeo Lipana to check these monthly
statements of account reposing complete trust and confidence on
petitioner bank.
Irene Yabut's modus operandi is far from complicated. She would
accomplish two (2) copies of the deposit slip, an original and a
duplicate. The original showed the name of her husband as depositor
and his current account number. On the duplicate copy was written
the account number of her husband but the name of the account
holder was left blank. PBC's teller, Azucena Mabayad, would,
however, validate and stamp both the original and the duplicate of
these deposit slips retaining only the original copy despite the lack of
information on the duplicate slip. The second copy was kept by Irene
Yabut allegedly for record purposes. After validation, Yabut would
then fill up the name of RMC in the space left blank in the duplicate
copy and change the account number written thereon, which is that of
her husband's, and make it appear to be RMC's account number, i.e.,
C.A. No. 53-01980-3. With the daily remittance records also prepared
by Ms. Yabut and submitted to private respondent RMC together with
the validated duplicate slips with the latter's name and account
number, she made her company believe that all the while the amounts
she deposited were being credited to its account when, in truth and in
fact, they were being deposited by her and credited by the petitioner
bank in the account of Cotas. This went on in a span of more than one
(1) year without private respondent's knowledge.
Upon discovery of the loss of its funds, RMC demanded from
petitioner bank the return of its money, but as its demand went
unheeded, it filed a collection suit before the Regional Trial Court of
Pasig, Branch 160. The trial court found petitioner bank negligent
and ruled as follows:
WHEREFORE, judgment is hereby rendered
sentencing defendant Philippine Bank of
Commerce, now absorbed by defendant Philippine
Commercial & Industrial Bank, and defendant
Azucena Mabayad to pay the plaintiff, jointly and
severally, and without prejudice to any criminal
action which may be instituted if found warranted:
1. The sum of P304,979.72, representing plaintiffs
lost deposit, plus interest thereon at the legal rate
from the filing of the complaint;
2. A sum equivalent to 14% thereof, as exemplary
damages;
3. A sum equivalent to 25% of the total amount
due, as and for attorney's fees; and
4. Costs.
Defendants' counterclaim is hereby dismissed for
lack of merit.2
On appeal, the appellate court affirmed the foregoing decision with
modifications, viz:
WHEREFORE, the decision appealed from herein
is MODIFIED in the sense that the awards of
exemplary damages and attorney's fees specified
therein are eliminated and instead, appellants are
ordered to pay plaintiff, in addition to the
 principal sum of P304,979.74 representing
plaintiff's lost deposit plus legal interest thereon
from the filing of the complaint, P25,000.00
attorney's fees and costs in the lower court as well
as in this Court.3
Hence, this petition anchored on the following grounds:
1) The proximate cause of the loss is the
negligence of respondent Rommel Marketing
Corporation and Romeo Lipana in entrusting cash
to a dishonest employee.
2) The failure of respondent Rommel Marketing
Corporation to cross-check the bank's statements
of account with its own records during the entire
period of more than one (1) year is the proximate
cause of the commission of subsequent frauds and
misappropriation committed by Ms. Irene Yabut.
3) The duplicate copies of the deposit slips
presented by respondent Rommel Marketing
Corporation are falsified and are not proof that the
amounts appearing thereon were deposited to
respondent Rommel Marketing Corporation's
account with the bank,
4) The duplicate copies of the deposit slips were
used by Ms. Irene Yabut to cover up her
fraudulent acts against respondent Rommel
Marketing Corporation, and not as records of
deposits she made with the bank.4
The petition has no merit.
Simply put, the main issue posited before us is: What is the proximate
cause of the loss, to the tune of P304,979.74, suffered by the private
respondent RMC — petitioner bank's negligence or that of private
respondent's?
Petitioners submit that the proximate cause of the loss is the
negligence of respondent RMC and Romeo Lipana in entrusting cash
to a dishonest employee in the person of Ms. Irene Yabut. 5 According
to them, it was impossible for the bank to know that the money
deposited by Ms. Irene Yabut belong to RMC; neither was the bank
forewarned by RMC that Yabut will be depositing cash to its account.
Thus, it was impossible for the bank to know the fraudulent design of
Yabut considering that her husband, Bienvenido Cotas, also
maintained an account with the bank. For the bank to inquire into the
ownership of the cash deposited by Ms. Irene Yabut would be
irregular. Otherwise stated, it was RMC's negligence in entrusting
cash to a dishonest employee which provided Ms. Irene Yabut the
opportunity to defraud RMC.6
Private respondent, on the other hand, maintains that the proximate
cause of the loss was the negligent act of the bank, thru its teller Ms.
Azucena Mabayad, in validating the deposit slips, both original and
duplicate, presented by Ms. Yabut to Ms. Mabayad, notwithstanding
the fact that one of the deposit slips was not completely accomplished.
Negligence is the omission to do something which a reasonable man,
guided by those considerations which ordinarily regulate the conduct
of human affairs, would do, or the doing of something which a prudent
and reasonable man would do. The seventy-eight (78)-year-old, yet
still relevant, case of Picart v. Smith,8 provides the test by which to
determine the existence of negligence in a particular case which may
be stated as follows: Did the defendant in doing the alleged negligent
act use that reasonable care and caution which an ordinarily prudent
person would have used in the same situation? If not, then he is guilty
of negligence. The law here in effect adopts the standard supposed to
be supplied by the imaginary conduct of the discreet paterfamilias of
the Roman law. The existence of negligence in a given case is not
determined by reference to the personal judgment of the actor in the
situation before him. The law considers what would be reckless,
blameworthy, or negligent in the man of ordinary intelligence and
prudence and determines liability by that.
Applying the above test, it appears that the bank's teller, Ms. Azucena
Mabayad, was negligent in validating, officially stamping and signing
all the deposit slips prepared and presented by Ms. Yabut, despite the
glaring fact that the duplicate copy was not completely accomplished
contrary to the self-imposed procedure of the bank with respect to the
proper validation of deposit slips, original or duplicate, as testified to
by Ms. Mabayad herself, thus:
Q: Now, as teller of PCIB,
Pasig Branch, will you please
tell us Mrs. Mabayad your
important duties and
functions?
A: I accept current and savings
deposits from depositors and
encashments.
Q: Now in the handling of
current account deposits of
bank clients, could you tell us
the procedure you follow?
A: The client or depositor or the
authorized representative
prepares a deposit slip by
filling up the deposit slip with
the name, the account number,
the date, the cash breakdown, if
it is deposited for cash, and the
check number, the amount and
then he signs the deposit slip.
Q: Now, how many deposit
slips do you normally require
in accomplishing current
account deposit, Mrs.
Mabayad?
A: The bank requires only one
copy of the deposit although
some of our clients prepare the
deposit slip in duplicate.

We sustain the private respondent. Q: Now in accomplishing

current account deposits from
Our law on quasi-delicts states: your clients, what do you issue
to the depositor to evidence the
deposit made?
Art. 2176. Whoever by act or omission causes
damage to another, there being fault or negligence,
is obliged to pay for the damage done. Such fault A: We issue or we give to the
or negligence, if there is no pre-existing clients the depositor's stub as a
contractual relation between the parties, is called receipt of the deposit.
a quasi-delict and is governed by the provisions of
this Chapter. Q: And who prepares the
deposit slip?
There are three elements of a quasi-delict: (a) damages suffered by the
plaintiff; (b) fault or negligence of the defendant, or some other person A: The depositor or the
for whose acts he must respond; and (c) the connection of cause and authorized representative sir?
effect between the fault or negligence of the defendant and the
damages incurred by the plaintiff.7
Q: Where does the depositor's
stub comes (sic) from Mrs.
In the case at bench, there is no dispute as to the damage suffered by Mabayad, is it with the deposit
the private respondent (plaintiff in the trial court) RMC in the slip?
amount of P304,979.74. It is in ascribing fault or negligence which
caused the damage where the parties point to each other as the
A: The depositor's stub is
culprit.
connected with the deposit slip
or the bank's copy. In a deposit
 slip, the upper portion is the
depositor's stub and the lower
portion is the bank's copy, and
you can detach the bank's copy
from the depositor's stub by
tearing it sir.
Q: Now what do you do upon
presentment of the deposit slip
by the depositor or the
depositor's authorized
representative?
A: We see to it that the deposit
slip9 is properly accomplished
and then we count the money
and then we tally it with the
deposit slip sir.
Q: Now is the depositor's stub
which you issued to your clients
validated?
A: Yes, sir. 10 [Emphasis ours]
Clearly, Ms. Mabayad failed to observe this very important
procedure. The fact that the duplicate slip was not
compulsorily required by the bank in accepting deposits
should not relieve the petitioner bank of responsibility. The
odd circumstance alone that such duplicate copy lacked one
vital information — that of the name of the account holder
— should have already put Ms. Mabayad on guard. Rather
than readily validating the incomplete duplicate copy, she
should have proceeded more cautiously by being more
probing as to the true reason why the name of the account
holder in the duplicate slip was left blank while that in the
original was filled up. She should not have been so naive in
accepting hook, line and sinker the too shallow excuse of Ms.
Irene Yabut to the effect that since the duplicate copy was
only for her personal record, she would simply fill up the
blank space later on. 11 A "reasonable man of ordinary
prudence" 12 would not have given credence to such
explanation and would have insisted that the space left
blank be filled up as a condition for validation.
Unfortunately, this was not how bank teller Mabayad
proceeded thus resulting in huge losses to the private
respondent.
Negligence here lies not only on the part of Ms. Mabayad but also on
the part of the bank itself in its lackadaisical selection and
supervision of Ms. Mabayad. This was exemplified in the testimony of
Mr. Romeo Bonifacio, then Manager of the Pasig Branch of the
petitioner bank and now its Vice-President, to the effect that, while he
ordered the investigation of the incident, he never came to know that
blank deposit slips were validated in total disregard of the bank's
validation procedures, viz:
Q: Did he ever tell you that one
of your cashiers affixed the
stamp mark of the bank on the
deposit slips and they
validated the same with the
machine, the fact that those
deposit slips were unfilled up,
is there any report similar to
that?
A: No, it was not the cashier
but the teller.
Q: The teller validated the
blank deposit slip?
A: No it was not reported.
Q: You did not know that any
one in the bank tellers or
cashiers validated the blank
deposit slip?
A: I am not aware of that.
Q: It is only now that you are
aware of that?
A: Yes, sir. 13
Prescinding from the above, public respondent Court of Appeals aptly
observed:
xxx xxx xxx
It was in fact only when he testified in this case in
February, 1983, or after the lapse of more than
seven (7) years counted from the period when the
funds in question were deposited in plaintiff's
accounts (May, 1975 to July, 1976) that bank
manager Bonifacio admittedly became aware of
the practice of his teller Mabayad of validating
blank deposit slips. Undoubtedly, this is gross,
wanton, and inexcusable negligence in the
appellant bank's supervision of its employees. 14
It was this negligence of Ms. Azucena Mabayad, coupled by the
negligence of the petitioner bank in the selection and supervision of
its bank teller, which was the proximate cause of the loss suffered by
the private respondent, and not the latter's act of entrusting cash to a
dishonest employee, as insisted by the petitioners.
Proximate cause is determined on the facts of each case upon mixed
considerations of logic, common sense, policy and precedent. 15 Vda. de
Bataclan v. Medina, 16 reiterated in the case of Bank of the
Phil. Islands v. Court of Appeals, 17 defines proximate cause as "that
cause, which, in natural and continuous sequence, unbroken by any
efficient intervening cause, produces the injury, and without which
the result would not have occurred. . . ." In this case, absent the act of
Ms. Mabayad in negligently validating the incomplete duplicate copy
of the deposit slip, Ms. Irene Yabut would not have the facility with
which to perpetrate her fraudulent scheme with impunity. Apropos,
once again, is the pronouncement made by the respondent appellate
court, to wit:
. . . . Even if Yabut had the fraudulent intention to
misappropriate the funds entrusted to her by
plaintiff, she would not have been able to deposit
those funds in her husband's current account, and
then make plaintiff believe that it was in the
latter's accounts wherein she had deposited them,
had it not been for bank teller Mabayad's aforesaid
gross and reckless negligence. The latter's
negligence was thus the proximate, immediate and
efficient cause that brought about the loss claimed
by plaintiff in this case, and the failure of plaintiff
to discover the same soon enough by failing to
scrutinize the monthly statements of account
being sent to it by appellant bank could not have
prevented the fraud and misappropriation which
Irene Yabut had already completed when she
deposited plaintiff's money to the account of her
husband instead of to the latter's accounts. 18
Furthermore, under the doctrine of "last clear chance" (also referred
to, at times as "supervening negligence" or as "discovered peril"),
petitioner bank was indeed the culpable party. This doctrine, in
essence, states that where both parties are negligent, but the
negligent act of one is appreciably later in time than that of the other,
or when it is impossible to determine whose fault or negligence should
be attributed to the incident, the one who had the last clear
opportunity to avoid the impending harm and failed to do so is
chargeable with the consequences thereof. 19Stated differently, the
rule would also mean that an antecedent negligence of a person does
not preclude the recovery of damages for the supervening negligence
of, or bar a defense against liability sought by another, if the latter,
who had the last fair chance, could have avoided the impending harm
by the exercise of due diligence. 20Here, assuming that private
respondent RMC was negligent in entrusting cash to a dishonest
employee, thus providing the latter with the opportunity to defraud
the company, as advanced by the petitioner, yet it cannot be denied
that the petitioner bank, thru its teller, had the last clear opportunity
to avert the injury incurred by its client, simply by faithfully
observing their self-imposed validation procedure.
At this juncture, it is worth to discuss the degree of diligence ought to
be exercised by banks in dealing with their clients.
The New Civil Code provides:
Art. 1173. The fault or negligence of the obligor
consists in the omission of that diligence which is
required by the nature of the obligation and
corresponds with the circumstances of the persons,
 of the time and of the place. When negligence
shows bad faith, the provisions of articles 1171
and 2201, paragraph 2, shall apply.
If the law or contract does not state the diligence
which is to be observed in the performance, that
which is expected of a good father of a family shall
be required. (1104a)
In the case of banks, however, the degree of diligence required is more
than that of a good father of a family. Considering the fiduciary
nature of their relationship with their depositors, banks are duty
bound to treat the accounts of their clients with the highest degree of
care. 21
As elucidated in Simex International (Manila), Inc. v. Court of
Appeals, 22 in every case, the depositor expects the bank to treat his
account with the utmost fidelity, whether such account consists only
of a few hundred pesos or of millions. The bank must record every
single transaction accurately, down to the last centavo, and as
promptly as possible. This has to be done if the account is to reflect at
any given time the amount of money the depositor can dispose as he
sees fit, confident that the bank will deliver it as and to whomever he
directs. A blunder on the part of the bank, such as the failure to duly
credit him his deposits as soon as they are made, can cause the
depositor not a little embarrassment if not financial loss and perhaps
even civil and criminal litigation.
The point is that as a business affected with public interest and
because of the nature of its functions, the bank is under obligation to
treat the accounts of its depositors with meticulous care, always
having in mind the fiduciary nature of their relationship. In the case
before us, it is apparent that the petitioner bank was remiss in that
duty and violated that relationship.
Petitioners nevertheless aver that the failure of respondent RMC to
cross-check the bank's statements of account with its own records
during the entire period of more than one (1) year is the proximate
cause of the commission of subsequent frauds and misappropriation
committed by Ms. Irene Yabut.
We do not agree.
While it is true that had private respondent checked the monthly
statements of account sent by the petitioner bank to RMC, the latter
would have discovered the loss early on, such cannot be used by the
petitioners to escape liability. This omission on the part of the private
respondent does not change the fact that were it not for the wanton
and reckless negligence of the petitioners' employee in validating the
incomplete duplicate deposit slips presented by Ms. Irene Yabut, the
loss would not have occurred. Considering, however, that the fraud
was committed in a span of more than one (1) year covering various
deposits, common human experience dictates that the same would not
have been possible without any form of collusion between Ms. Yabut
and bank teller Mabayad. Ms. Mabayad was negligent in the
performance of her duties as bank teller nonetheless. Thus, the
petitioners are entitled to claim reimbursement from her for whatever
they shall be ordered to pay in this case.
The foregoing notwithstanding, it cannot be denied that, indeed,
private respondent was likewise negligent in not checking its monthly
statements of account. Had it done so, the company would have been
alerted to the series of frauds being committed against RMC by its
secretary. The damage would definitely not have ballooned to such an
amount if only RMC, particularly Romeo Lipana, had exercised even a
little vigilance in their financial affairs. This omission by RMC
amounts to contributory negligence which shall mitigate the damages
that may be awarded to the private respondent 23 under Article 2179
of the New Civil Code, to wit:
. . . When the plaintiff's own negligence was the
immediate and proximate cause of his injury, he
cannot recover damages. But if his negligence was
only contributory, the immediate and proximate
cause of the injury being the defendant's lack of
due care, the plaintiff may recover damages, but
the courts shall mitigate the damages to be
awarded.
In view of this, we believe that the demands of substantial
justice are satisfied by allocating the damage on a 60-40
ratio. Thus, 40% of the damage awarded by the respondent
appellate court, except the award of P25,000.00 attorney's
fees, shall be borne by private respondent RMC; only the
balance of 60% needs to be paid by the petitioners. The
award of attorney's fees shall be borne exclusively by the
petitioners.
WHEREFORE, the decision of the respondent Court of Appeals is
modified by reducing the amount of actual damages private
respondent is entitled to by 40%. Petitioners may recover from Ms.
Azucena Mabayad the amount they would pay the private respondent.
Private respondent shall have recourse against Ms. Irene Yabut. In all
other respects, the appellate court's decision is AFFIRMED.
G.R. No. 115024 February 7, 1996
MA. LOURDES VALENZUELA, petitioner,
vs.
COURT OF APPEALS, RICHARD LI and ALEXANDER
COMMERCIAL, INC., respondents.
x-x-x-x-x-x-x-x-x-x-x-x-x-x-x-x-x-x-x-x-x-x-x-x-x-x-x-x-x-x-x-x-x
G.R. No. 117944 February 7, 1996
RICHARD LI, petitioner,
vs.
COURT OF APPEALS and LOURDES
VALENZUELA, respondents.
DECISION
KAPUNAN, J.:
These two petitions for review on certiorari under Rule 45 of the
Revised Rules of Court stem from an action to recover damages by
petitioner Lourdes Valenzuela in the Regional Trial Court of Quezon
City for injuries sustained by her in a vehicular accident in the early
morning of June 24, 1990. The facts found by the trial court are
succinctly summarized by the Court of Appeals below:
This is an action to recover damages based on quasi-delict,
for serious physical injuries sustained in a vehicular
accident.
Plaintiff's version of the accident is as follows: At around
2:00 in the morning of June 24, 1990, plaintiff Ma. Lourdes
Valenzuela was driving a blue Mitsubishi lancer with Plate
No. FFU 542 from her restaurant at Marcos highway to her
home at Palanza Street, Araneta Avenue. She was
travelling along Aurora Blvd. with a companion, Cecilia
Ramon, heading towards the direction of Manila. Before
reaching A. Lake Street, she noticed something wrong with
her tires; she stopped at a lighted place where there were
people, to verify whether she had a flat tire and to solicit
help if needed. Having been told by the people present that
her rear right tire was flat and that she cannot reach her
home in that car's condition, she parked along the sidewalk,
about 1-1/2 feet away, put on her emergency lights, alighted
from the car, and went to the rear to open the trunk. She
was standing at the left side of the rear of her car pointing
to the tools to a man who will help her fix the tire when she
was suddenly bumped by a 1987 Mitsubishi Lancer driven
by defendant Richard Li and registered in the name of
defendant Alexander Commercial, Inc. Because of the
impact plaintiff was thrown against the windshield of the
car of the defendant, which was destroyed, and then fell to
the ground. She was pulled out from under defendant's car.
Plaintiff's left leg was severed up to the middle of her thigh,
with only some skin and sucle connected to the rest of the
body. She was brought to the UERM Medical Memorial
Center where she was found to have a "traumatic
amputation, leg, left up to distal thigh (above knee)". She
was confined in the hospital for twenty (20) days and was
eventually fitted with an artificial leg. The expenses for the
hospital confinement (P120,000.00) and the cost of the
artificial leg (P27,000.00) were paid by defendants from the
car insurance.
In her complaint, plaintiff prayed for moral damages in the
amount of P1 million, exemplary damages in the amount of
P100,000.00 and other medical and related expenses
amounting to a total of P180,000.00, including loss of
expected earnings.
Defendant Richard Li denied that he was negligent. He was
on his way home, travelling at 55 kph; considering that it
was raining, visibility was affected and the road was wet.
Traffic was light. He testified that he was driving along the
 inner portion of the right lane of Aurora Blvd. towards the
direction of Araneta Avenue, when he was suddenly
confronted, in the vicinity of A. Lake Street, San Juan, with
a car coming from the opposite direction, travelling at 80
kph, with "full bright lights". Temporarily blinded, he
instinctively swerved to the right to avoid colliding with the
oncoming vehicle, and bumped plaintiff's car, which he did
not see because it was midnight blue in color, with no
parking lights or early warning device, and the area was
poorly lighted. He alleged in his defense that the left rear
portion of plaintiff's car was protruding as it was then "at a
standstill diagonally" on the outer portion of the right lane
towards Araneta Avenue (par. 18, Answer). He confirmed
the testimony of plaintiff's witness that after being bumped
the car of the plaintiff swerved to the right and hit another
car parked on the sidewalk. Defendants counterclaimed for
damages, alleging that plaintiff was reckless or negligent, as
she was not a licensed driver.
The police investigator, Pfc. Felic Ramos, who prepared the
vehicular accident report and the sketch of the three cars
involved in the accident, testified that the plaintiff's car was
"near the sidewalk"; this witness did not remember whether
the hazard lights of plaintiff's car were on, and did not
notice if there was an early warning device; there was a
street light at the corner of Aurora Blvd. and F. Roman,
about 100 meters away. It was not mostly dark, i.e. "things
can be seen" (p. 16, tsn, Oct. 28, 1991).
A witness for the plaintiff, Rogelio Rodriguez, testified that
after plaintiff alighted from her car and opened the trunk
compartment, defendant's car came approaching very fast
ten meters from the scene; the car was "zigzagging". The
rear left side of plaintiff's car was bumped by the front right
portion of defendant's car; as a consequence, the plaintiff's
car swerved to the right and hit the parked car on the
sidewalk. Plaintiff was thrown to the windshield of
defendant's car, which was destroyed, and landed under the
car. He stated that defendant was under the influence of
liquor as he could "smell it very well" (pp. 43, 79, tsn, June
17, 1991).
After trial, the lower court sustained the plaintiff's submissions and
found defendant Richard Li guilty of gross negligence and liable for
damages under Article 2176 of the Civil Code. The trial court likewise
held Alexander Commercial, Inc., Li's employer, jointly and severally
liable for damages pursuant to Article 2180. It ordered the defendants
to jointly and severally pay the following amounts:
1. P41,840.00, as actual damages, representing the
miscellaneous expenses of the plaintiff as a result of her
severed left leg;
2. The sums of (a) P37,500.00, for the unrealized profits
because of the stoppage of plaintiff's Bistro La Conga
restaurant three (3) weeks after the accident on June 24,
1990; (b) P20,000.00, a month, as unrealized profits of the
plaintiff in her Bistro La Conga restaurant, from August,
1990 until the date of this judgment and (c) P30,000.00, a
month for unrealized profits in plaintiff's two (2) beauty
salons from July, 1990 until the date of this decision;
3. P1,000,000.00, in moral damages;
4. P50,000.00, as exemplary damages;
5. P60,000.00, as reasonable attorney's fees; and
6. Costs.
As a result of the trial court's decision, defendants filed an Omnibus
Motion for New Trial and for Reconsideration, citing testimony in
Criminal Case O.C. No. 804367 (People vs. Richard Li), tending to
show that the point of impact, as depicted by the pieces of glass/debris
from the parties' cars, appeared to be at the center of the right lane of
Aurora Blvd. The trial court denied the motion. Defendants forthwith
filed an appeal with the respondent Court of Appeals. In a Decision
rendered March 30, 1994, the Court of Appeals found that there was
"ample basis from the evidence of record for the trial court's finding
that the plaintiff's car was properly parked at the right, beside the
sidewalk when it was bumped by defendant's car."1 Dismissing the
defendants' argument that the plaintiff's car was improperly parked,
almost at the center of the road, the respondent court noted that
evidence which was supposed to prove that the car was at or near
center of the right lane was never presented during the trial of the
case.2 The respondent court furthermore observed that:
Defendant Li's testimony that he was driving at a safe speed
of 55 km./hour is self serving; it was not corroborated. It was
in fact contradicted by eyewitness Rodriguez who stated
that he was outside his beerhouse located at Aurora
Boulevard after A. Lake Street, at or about 2:00 a.m. of June
24, 1990 when his attention was caught by a beautiful lady
(referring to the plaintiff) alighting from her car and
opening the trunk compartment; he noticed the car of
Richard Li "approaching very fast ten (10) meters away from
the scene"; defendant's car was zigzagging", although there
were no holes and hazards on the street, and "bumped the
leg of the plaintiff" who was thrown against the windshield
of defendant's care, causing its destruction. He came to the
rescue of the plaintiff, who was pulled out from under
defendant's car and was able to say "hurting words" to
Richard Li because he noticed that the latter was under the
influence of liquor, because he "could smell it very well" (p.
36, et. seq., tsn, June 17, 1991). He knew that plaintiff
owned a beerhouse in Sta. Mesa in the 1970's, but did not
know either plaintiff or defendant Li before the accident.
In agreeing with the trial court that the defendant Li was liable for
the injuries sustained by the plaintiff, the Court of Appeals, in its
decision, however, absolved the Li's employer, Alexander Commercial,
Inc. from any liability towards petitioner Lourdes Valenzuela and
reduced the amount of moral damages to P500,000.00. Finding
justification for exemplary damages, the respondent court allowed an
award of P50,000.00 for the same, in addition to costs, attorney's fees
and the other damages. The Court of Appeals, likewise, dismissed the
defendants' counterclaims.3
Consequently, both parties assail the respondent court's decision by
filing two separate petitions before this Court. Richard Li, in G.R. No.
117944, contends that he should not be held liable for damages
because the proximate cause of the accident was Ma. Lourdes
Valenzuela's own negligence. Alternatively, he argues that in the
event that this Court finds him negligent, such negligence ought to be
mitigated by the contributory negligence of Valenzuela.
On the other hand, in G.R. No. 115024, Ma. Lourdes Valenzuela
assails the respondent court's decision insofar as it absolves
Alexander Commercial, Inc. from liability as the owner of the car
driven by Richard Li and insofar as it reduces the amount of the
actual and moral damages awarded by the trial court.4
As the issues are intimately related, both petitions are hereby
consolidated.
It is plainly evident that the petition for review in G.R. No. 117944
raises no substantial questions of law. What it, in effect, attempts to
have this Court review are factual findings of the trial court, as
sustained by the Court of Appeals finding Richard Li grossly negligent
in driving the Mitsubishi Lancer provided by his company in the early
morning hours of June 24, 1990. This we will not do. As a general
rule, findings of fact of the Court of Appeals are binding and
conclusive upon us, and this Court will not normally disturb such
factual findings unless the findings of fact of the said court are
palpably unsupported by the evidence on record or unless the
judgment itself is based on a misapprehension of facts.5
In the first place, Valenzuela's version of the incident was fully
corroborated by an uninterested witness, Rogelio Rodriguez, the
owner-operator of an establishment located just across the scene of
the accident. On trial, he testified that he observed a car being driven
at a "very fast" speed, racing towards the general direction of Araneta
Avenue.6 Rodriguez further added that he was standing in front of his
establishment, just ten to twenty feet away from the scene of the
accident, when he saw the car hit Valenzuela, hurtling her against the
windshield of the defendant's Mitsubishi Lancer, from where she
eventually fell under the defendant's car. Spontaneously reacting to
the incident, he crossed the street, noting that a man reeking with the
smell of liquor had alighted from the offending vehicle in order to
survey the incident.7 Equally important, Rodriguez declared that he
observed Valenzuela's car parked parallel and very near the
sidewalk,8 contrary to Li's allegation that Valenzuela's car was close to
the center of the right lane. We agree that as between Li's "self-
serving" asseverations and the observations of a witness who did not
even know the accident victim personally and who immediately gave a
statement of the incident similar to his testimony to the investigator
immediately after the incident, the latter's testimony deserves greater
weight. As the court emphasized:
The issue is one of credibility and from Our own
examination of the transcript, We are not prepared to set
aside the trial court's reliance on the testimony of Rodriguez
negating defendant's assertion that he was driving at a safe
speed. While Rodriguez drives only a motorcycle, his
perception of speed is not necessarily impaired. He was
 subjected to cross-examination and no attempt was made to
question .his competence or the accuracy of his statement
that defendant was driving "very fast". This was the same
statement he gave to the police investigator after the
incident, as told to a newspaper report (Exh. "P"). We see no
compelling basis for disregarding his testimony.
The alleged inconsistencies in Rodriguez' testimony are not
borne out by an examination of the testimony. Rodriguez
testified that the scene of the accident was across the street
where his beerhouse is located about ten to twenty feet away
(pp. 35-36, tsn, June 17, 1991). He did not state that the
accident transpired immediately in front of his
establishment. The ownership of the Lambingan se
Kambingan is not material; the business is registered in the
name of his mother, but he explained that he owns the
establishment (p. 5, tsn, June 20, 1991). Moreover, the
testimony that the streetlights on his side of Aurora
Boulevard were on the night the accident transpired (p. 8) is
not necessarily contradictory to the testimony of Pfc. Ramos
that there was a streetlight at the corner of Aurora
Boulevard and F. Roman Street (p. 45, tsn, Oct. 20, 1991).
With respect to the weather condition, Rodriguez testified
that there was only a drizzle, not a heavy rain and the rain
has stopped and he was outside his establishment at the
time the accident transpired (pp. 64-65, tsn, June 17, 1991).
This was consistent with plaintiff's testimony that it was no
longer raining when she left Bistro La Conga (pp. 10-11, tsn,
April 29, 1991). It was defendant Li who stated that it was
raining all the way in an attempt to explain why he was
travelling at only 50-55 kph. (p. 11, tsn, Oct. 14, 1991). As to
the testimony of Pfc. Ramos that it was raining, he arrived
at the scene only in response to a telephone call after the
accident had transpired (pp. 9-10, tsn, Oct. 28, 1991). We
find no substantial inconsistencies in Rodriguez's testimony
that would impair the essential integrity of his testimony or
reflect on his honesty. We are compelled to affirm the trial
court's acceptance of the testimony of said eyewitness.
Against the unassailable testimony of witness Rodriguez we note that
Li's testimony was peppered with so many inconsistencies leading us
to conclude that his version of the accident was merely adroitly
crafted to provide a version, obviously self-serving, which would
exculpate him from any and all liability in the incident. Against
Valenzuela's corroborated claims, his allegations were neither backed
up by other witnesses nor by the circumstances proven in the course
of trial. He claimed that he was driving merely at a speed of 55 kph.
when "out of nowhere he saw a dark maroon lancer right in front of
him, which was (the) plaintiff's car". He alleged that upon seeing this
sudden "apparition" he put on his brakes to no avail as the road was
slippery.9
One will have to suspend disbelief in order to give credence to Li's
disingenuous and patently self-serving asseverations. The average
motorist alert to road conditions will have no difficulty applying the
brakes to a car traveling at the speed claimed by Li. Given a light
rainfall, the visibility of the street, and the road conditions on a
principal metropolitan thoroughfare like Aurora Boulevard, Li would
have had ample time to react to the changing conditions of the road if
he were alert - as every driver should be - to those conditions. Driving
exacts a more than usual toll on the senses. Physiological "fight or
flight" 10 mechanisms are at work, provided such mechanisms were
not dulled by drugs, alcohol, exhaustion, drowsiness, etc.11 Li's failure
to react in a manner which would have avoided the accident could
therefore have been only due to either or both of the two factors: 1)
that he was driving at a "very fast" speed as testified by Rodriguez;
and 2) that he was under the influence of alcohol.12 Either factor
working independently would have diminished his responsiveness to
road conditions, since normally he would have slowed down prior to
reaching Valenzuela's car, rather than be in a situation forcing him to
suddenly apply his brakes. As the trial court noted (quoted with
approval by respondent court):
Secondly, as narrated by defendant Richard Li to the San
Juan Police immediately after the incident, he said that
while driving along Aurora Blvd., out of nowhere he saw a
dark maroon lancer right in front of him which was
plaintiff's car, indicating, again, thereby that, indeed, he
was driving very fast, oblivious of his surroundings and the
road ahead of him, because if he was not, then he could not
have missed noticing at a still far distance the parked car of
the plaintiff at the right side near the sidewalk which had
its emergency lights on, thereby avoiding forcefully bumping
at the plaintiff who was then standing at the left rear edge
of her car.
Since, according to him, in his narration to the San Juan
Police, he put on his brakes when he saw the plaintiff's car
in front of him, but that it failed as the road was wet and
slippery, this goes to show again, that, contrary to his claim,
he was, indeed, running very fast. For, were it otherwise, he
could have easily completely stopped his car, thereby
avoiding the bumping of the plaintiff, notwithstanding that
the road was wet and slippery. Verily, since, if, indeed, he
was running slow, as he claimed, at only about 55
kilometers per hour, then, inspite of the wet and slippery
road, he could have avoided hitting the plaintiff by the mere
expedient or applying his brakes at the proper time and
distance.
It could not be true, therefore, as he now claims during his
testimony, which is contrary to what he told the police
immediately after the accident and is, therefore, more
believable, that he did not actually step on his brakes but
simply swerved a little to the right when he saw the on-
coming car with glaring headlights, from the opposite
direction, in order to avoid it.
For, had this been what he did, he would not have bumped
the car of the plaintiff which was properly parked at the
right beside the sidewalk. And, it was not even necessary for
him to swerve a little to the right in order to safely avoid a
collision with the on-coming car, considering that Aurora
Blvd. is a double lane avenue separated at the center by a
dotted white paint, and there is plenty of space for both cars,
since her car was running at the right lane going towards
Manila on the on-coming car was also on its right lane going
to Cubao.13
Having come to the conclusion that Li was negligent in driving his
company-issued Mitsubishi Lancer, the next question for us to
determine is whether or not Valenzuela was likewise guilty of
contributory negligence in parking her car alongside Aurora
Boulevard, which entire area Li points out, is a no parking zone.
We agree with the respondent court that Valenzuela was not guilty of
contributory negligence.
Contributory negligence is conduct on the part of the injured party,
contributing as a legal cause to the harm he has suffered, which falls
below the standard to which he is required to conform for his own
protection.14 Based on the foregoing definition, the standard or act to
which, according to petitioner Li, Valenzuela ought to have conformed
for her own protection was not to park at all at any point of Aurora
Boulevard, a no parking zone. We cannot agree.
Courts have traditionally been compelled to recognize that an actor
who is confronted with an emergency is not to be held up to the
standard of conduct normally applied to an individual who is in no
such situation. The law takes stock of impulses of humanity when
placed in threatening or dangerous situations and does not require
the same standard of thoughtful and reflective care from persons
confronted by unusual and oftentimes threatening conditions.15
Under the "emergency rule" adopted by this Court in Gan vs. Court of
Appeals,16 an individual who suddenly finds himself in a situation of
danger and is required to act without much time to consider the best
means that may be adopted to avoid the impending danger, is not
guilty of negligence if he fails to undertake what subsequently and
upon reflection may appear to be a better solution, unless the
emergency was brought by his own negligence.17
Applying this principle to a case in which the victims in a vehicular
accident swerved to the wrong lane to avoid hitting two children
suddenly darting into the street, we held, in Mc Kee vs. Intermediate
Appellate Court,18 that the driver therein, Jose Koh, "adopted the best
means possible in the given situation" to avoid hitting the children.
Using the "emergency rule" the Court concluded that Koh, in spite of
the fact that he was in the wrong lane when the collision with an
oncoming truck occurred, was not guilty of negligence.19
While the emergency rule applies to those cases in which reflective
thought, or the opportunity to adequately weigh a threatening
situation is absent, the conduct which is required of an individual in
such cases is dictated not exclusively by the suddenness of the event
which absolutely negates thoroughful care, but by the over-all nature
of the circumstances. A woman driving a vehicle suddenly crippled by
a flat tire on a rainy night will not be faulted for stopping at a point
which is both convenient for her to do so and which is not a hazard to
other motorists. She is not expected to run the entire boulevard in
search for a parking zone or turn on a dark street or alley where she
would likely find no one to help her. It would be hazardous for her not
to stop and assess the emergency (simply because the entire length of
Aurora Boulevard is a no-parking zone) because the hobbling vehicle
would be both a threat to her safety and to other motorists. In the
instant case, Valenzuela, upon reaching that portion of Aurora
Boulevard close to A. Lake St., noticed that she had a flat tire. To
avoid putting herself and other motorists in danger, she did what was
best under the situation. As narrated by respondent court: "She
stopped at a lighted place where there were people, to verify whether
she had a flat tire and to solicit help if needed. Having been told by
the people present that her rear right tire was flat and that she
cannot reach her home she parked along the sidewalk, about 1 1/2 feet
away, behind a Toyota Corona Car."20 In fact, respondent court noted,
Pfc. Felix Ramos, the investigator on the scene of the accident
confirmed that Valenzuela's car was parked very close to the
sidewalk.21 The sketch which he prepared after the incident showed
Valenzuela's car partly straddling the sidewalk, clear and at a
convenient distance from motorists passing the right lane of Aurora
Boulevard. This fact was itself corroborated by the testimony of
witness Rodriguez.22
Under the circumstances described, Valenzuela did exercise the
standard reasonably dictated by the emergency and could not be
considered to have contributed to the unfortunate circumstances
which eventually led to the amputation of one of her lower
extremities. The emergency which led her to park her car on a
sidewalk in Aurora Boulevard was not of her own making, and it was
evident that she had taken all reasonable precautions.
Obviously in the case at bench, the only negligence ascribable was the
negligence of Li on the night of the accident. "Negligence, as it is
commonly understood is conduct which creates an undue risk of harm
to others."23 It is the failure to observe that degree of care, precaution,
and vigilance which the circumstances justly demand, whereby such
other person suffers injury.24 We stressed, in Corliss vs. Manila
Railroad Company,25 that negligence is the want of care required by
the circumstances.
The circumstances established by the evidence adduced in the court
below plainly demonstrate that Li was grossly negligent in driving his
Mitsubishi Lancer. It bears emphasis that he was driving at a fast
speed at about 2:00 A.M. after a heavy downpour had settled into a
drizzle rendering the street slippery. There is ample testimonial
evidence on record to show that he was under the influence of liquor.
Under these conditions, his chances of effectively dealing with
changing conditions on the road were significantly lessened. As
Presser and Keaton emphasize:
[U]nder present day traffic conditions, any driver of an
automobile must be prepared for the sudden appearance of
obstacles and persons on the highway, and of other vehicles
at intersections, such as one who sees a child on the curb
may be required to anticipate its sudden dash into the
street, and his failure to act properly when they appear may
be found to amount to negligence.26
Li's obvious unpreparedness to cope with the situation confronting
him on the night of the accident was clearly of his own making.
We now come to the question of the liability of Alexander Commercial,
Inc. Li's employer. In denying liability on the part of Alexander
Commercial, the respondent court held that:
There is no evidence, not even defendant Li's testimony,
that the visit was in connection with official matters. His
functions as assistant manager sometimes required him to
perform work outside the office as he has to visit buyers and
company clients, but he admitted that on the night of the
accident he came from BF Homes Paranaque he did not
have "business from the company" (pp. 25-26, ten, Sept. 23,
1991). The use of the company car was partly required by
the nature of his work, but the privilege of using it for non-
official business is a "benefit", apparently referring to the
fringe benefits attaching to his position.
Under the civil law, an employer is liable for the negligence
of his employees in the discharge of their respective duties,
the basis of which liability is not respondeat superior, but
the relationship of pater familias, which theory bases the
liability of the master ultimately on his own negligence and
not on that of his servant (Cuison v. Norton and Harrison
Co., 55 Phil. 18). Before an employer may be held liable for
the negligence of his employee, the act or omission which
caused damage must have occurred while an employee was
in the actual performance of his assigned tasks or duties
(Francis High School vs. Court of Appeals, 194 SCRA 341).
In defining an employer's liability for the acts done within
the scope of the employee's assigned tasks, the Supreme
Court has held that this includes any act done by an
employee, in furtherance of the interests of the employer or
for the account of the employer at the time of the infliction of
the injury or damage (Filamer Christian Institute vs.
Intermediate Appellate Court, 212 SCRA 637). An employer
is expected to impose upon its employees the necessary
discipline called for in the performance of any act
"indispensable to the business and beneficial to their
employer" (at p. 645).
In light of the foregoing, We are unable to sustain the trial
court's finding that since defendant Li was authorized by
the company to use the company car "either officially or
socially or even bring it home", he can be considered as
using the company car in the service of his employer or on
the occasion of his functions. Driving the company car was
not among his functions as assistant manager; using it for
non-official purposes would appear to be a fringe benefit, one
of the perks attached to his position. But to impose liability
upon the employer under Article 2180 of the Civil Code,
earlier quoted, there must be a showing that the damage
was caused by their employees in the service of the employer
or on the occasion of their functions. There is no evidence
that Richard Li was at the time of the accident performing
any act in furtherance of the company's business or its
interests, or at least for its benefit. The imposition of
solidary liability against defendant Alexander Commercial
Corporation must therefore fail.27
We agree with the respondent court that the relationship in question
is not based on the principle of respondeat superior, which holds the
master liable for acts of the servant, but that of pater familias, in
which the liability ultimately falls upon the employer, for his failure
to exercise the diligence of a good father of the family in the selection
and supervision of his employees. It is up to this point, however, that
our agreement with the respondent court ends. Utilizing the bonus
pater familias standard expressed in Article 2180 of the Civil
Code, 28 we are of the opinion that Li's employer, Alexander
Commercial, Inc. is jointly and solidarily liable for the damage caused
by the accident of June 24, 1990.
First, the case of St. Francis High School vs. Court of Appeals29 upon
which respondent court has placed undue reliance, dealt with the
subject of a school and its teacher's supervision of students during an
extracurricular activity. These cases now fall under the provision on
special parental authority found in Art. 218 of the Family Code which
generally encompasses all authorized school activities, whether inside
or outside school premises.
Second, the employer's primary liability under the concept of pater
familias embodied by Art 2180 (in relation to Art. 2176) of the Civil
Code is quasi-delictual or tortious in character. His liability is relieved
on a showing that he exercised the diligence of a good father of the
family in the selection and supervision of its employees. Once
evidence is introduced showing that the employer exercised the
required amount of care in selecting its employees, half of the
employer's burden is overcome. The question of diligent supervision,
however, depends on the circumstances of employment.
Ordinarily, evidence demonstrating that the employer has exercised
diligent supervision of its employee during the performance of the
latter's assigned tasks would be enough to relieve him of the liability
imposed by Article 2180 in relation to Article 2176 of the Civil Code.
The employer is not expected to exercise supervision over either the
employee's private activities or during the performance of tasks either
unsanctioned by the former or unrelated to the employee's tasks. The
case at bench presents a situation of a different character, involving a
practice utilized by large companies with either their employees of
managerial rank or their representatives.
It is customary for large companies to provide certain classes of their
employees with courtesy vehicles. These company cars are either
wholly owned and maintained by the company itself or are subject to
various plans through which employees eventually acquire their
vehicles after a given period of service, or after paying a token
amount. Many companies provide liberal "car plans" to enable their
managerial or other employees of rank to purchase cars, which, given
the cost of vehicles these days, they would not otherwise be able to
purchase on their own.
Under the first example, the company actually owns and maintains
the car up to the point of turnover of ownership to the employee; in
the second example, the car is really owned and maintained by the
employee himself. In furnishing vehicles to such employees, are
companies totally absolved of responsibility when an accident
involving a company-issued car occurs during private use after normal
office hours?
Most pharmaceutical companies, for instance, which provide cars
under the first plan, require rigorous tests of road worthiness from
their agents prior to turning over the car (subject of company
maintenance) to their representatives. In other words, like a good
father of a family, they entrust the company vehicle only after they
are satisfied that the employee to whom the car has been given full
use of the said company car for company or private purposes will not
be a threat or menace to himself, the company or to others. When a
company gives full use and enjoyment of a company car to its
employee, it in effect guarantees that it is, like every good father,
satisfied that its employee will use the privilege reasonably and
responsively.
In the ordinary course of business, not all company employees are
given the privilege of using a company-issued car. For large
companies other than those cited in the example of the preceding
paragraph, the privilege serves important business purposes either
related to the image of success an entity intends to present to its
clients and to the public in general, or - for practical and utilitarian
reasons - to enable its managerial and other employees of rank or its
sales agents to reach clients conveniently. In most cases, providing a
company car serves both purposes. Since important business
transactions and decisions may occur at all hours in all sorts of
situations and under all kinds of guises, the provision for the
unlimited use of a company car therefore principally serves the
business and goodwill of a company and only incidentally the private
purposes of the individual who actually uses the car, the managerial
employee or company sales agent. As such, in providing for a company
car for business use and/or for the purpose of furthering the
company's image, a company owes a responsibility to the public to see
to it that the managerial or other employees to whom it entrusts
virtually unlimited use of a company issued car are able to use the
company issue capably and responsibly.
In the instant case, Li was an Assistant Manager of Alexander
Commercial, Inc. In his testimony before the trial court, he admitted
that his functions as Assistant Manager did not require him to
scrupulously keep normal office hours as he was required quite often
to perform work outside the office, visiting prospective buyers and
contacting and meeting with company clients. 30 These meetings,
clearly, were not strictly confined to routine hours because, as a
managerial employee tasked with the job of representing his company
with its clients, meetings with clients were both social as well as
work-related functions. The service car assigned to Li by Alexander
Commercial, Inc. therefore enabled both Li - as well as the corporation
- to put up the front of a highly successful entity, increasing the
latter's goodwill before its clientele. It also facilitated meeting
between Li and its clients by providing the former with a convenient
mode of travel.
Moreover, Li's claim that he happened to be on the road on the night
of the accident because he was coming from a social visit with an
officemate in Paranaque was a bare allegation which was never
corroborated in the court below. It was obviously self-serving.
Assuming he really came from his officemate's place, the same could
give rise to speculation that he and his officemate had just been from
a work-related function, or they were together to discuss sales and
other work related strategies.
In fine, Alexander Commercial, inc. has not demonstrated, to our
satisfaction, that it exercised the care and diligence of a good father of
the family in entrusting its company car to Li. No allegations were
made as to whether or not the company took the steps necessary to
determine or ascertain the driving proficiency and history of Li, to
whom it gave full and unlimited use of a company car.31 Not having
been able to overcome the burden of demonstrating that it should be
absolved of liability for entrusting its company car to Li, said
company, based on the principle of bonus pater familias, ought to be
jointly and severally liable with the former for the injuries sustained
by Ma. Lourdes Valenzuela during the accident.
Finally, we find no reason to overturn the amount of damages
awarded by the respondent court, except as to the amount of moral
damages. In the case of moral damages, while the said damages are
not intended to enrich the plaintiff at the expense of a defendant, the
award should nonetheless be commensurate to the suffering inflicted.
In the instant case we are of the opinion that the reduction in moral
damages from an amount of P1,000,000.00 to P800,000,00 by the
Court of Appeals was not justified considering the nature of the
resulting damage and the predictable sequelae of the injury.
As a result of the accident, Ma. Lourdes Valenzuela underwent a
traumatic amputation of her left lower extremity at the distal left
thigh just above the knee. Because of this, Valenzuela will forever be
deprived of the full ambulatory functions of her left extremity, even
with the use of state of the art prosthetic technology. Well beyond the
period of hospitalization (which was paid for by Li), she will be
required to undergo adjustments in her prosthetic devise due to the
shrinkage of the stump from the process of healing.
These adjustments entail costs, prosthetic replacements and months
of physical and occupational rehabilitation and therapy. During her
lifetime, the prosthetic devise will have to be replaced and re-adjusted
to changes in the size of her lower limb effected by the biological
changes of middle-age, menopause and aging. Assuming she reaches
menopause, for example, the prosthetic will have to be adjusted to
respond to the changes in bone resulting from a precipitate decrease
in calcium levels observed in the bones of all post-menopausal women.
In other words, the damage done to her would not only be permanent
and lasting, it would also be permanently changing and adjusting to
the physiologic changes which her body would normally undergo
through the years. The replacements, changes, and adjustments will
require corresponding adjustive physical and occupational therapy.
All of these adjustments, it has been documented, are painful.
The foregoing discussion does not even scratch the surface of the
nature of the resulting damage because it would be highly speculative
to estimate the amount of psychological pain, damage and injury
which goes with the sudden severing of a vital portion of the human
body. A prosthetic device, however technologically advanced, will only
allow a reasonable amount of functional restoration of the motor
functions of the lower limb. The sensory functions are forever lost. The
resultant anxiety, sleeplessness, psychological injury, mental and
physical pain are inestimable.
As the amount of moral damages are subject to this Court's discretion,
we are of the opinion that the amount of P1,000,000.00 granted by the
trial court is in greater accord with the extent and nature of the injury
- physical and psychological - suffered by Valenzuela as a result of Li's
grossly negligent driving of his Mitsubishi Lancer in the early
morning hours of the accident.
WHEREFORE, PREMISES CONSIDERED, the decision of the Court
of Appeals is modified with the effect of REINSTATING the judgment
of the Regional Trial Court.
G.R. No. 119197 May 16, 1997
TABACALERA INSURANCE CO., PRUDENTIAL GUARANTEE
& ASSURANCE, INC., and NEW ZEALAND INSURANCE CO.,
LTD., petitioners,
vs.
NORTH FRONT SHIPPING SERVICES, INC., and COURT OF
APPEALS, respondents.
BELLOSILLO, J.:
TABACALERA INSURANCE CO., Prudential Guarantee &
Assurance, Inc., and New Zealand Insurance Co., Ltd., in this petition
for review on certiorari, assail the 22 December 1994 decision of the
Court of Appeals and its Resolution of 16 February 1995 which
affirmed the 1 June 1993 decision of the Regional Trial Court
dismissing their complaint for damages against North Front Shipping
Services, Inc.
On 2 August 1990, 20,234 sacks of corn grains valued at
P3,500,640.00 were shipped on board North Front 777, a vessel owned
by North Front Shipping Services, Inc. The cargo was consigned to
Republic Flour Mills Corporation in Manila under Bill of Lading No.
001 1 and insured with the herein mentioned insurance companies.
The vessel was inspected prior to actual loading by representatives of
the shipper and was found fit to carry the merchandise. The cargo was
covered with tarpaulins and wooden boards. The hatches were sealed
and could only be opened by representatives of Republic Flour Mills
Corporation.
The vessel left Cagayan de Oro City on 2 August 1990 and arrived
Manila on 16 August 1990. Republic Flour Mills Corporation was
advised of its arrival but it did not immediately commence the
unloading operations. There were days when unloading had to be
stopped due to variable weather conditions and sometimes for no
apparent reason at all. When the cargo was eventually unloaded there
was a shortage of 26.333 metric tons. The remaining merchandise was
already moldy, rancid and deteriorating. The unloading operations
were completed on 5 September 1990 or twenty (20) days after the
arrival of the barge at the wharf of Republic Flour Mills Corporation
in Pasig City.
Precision Analytical Services, Inc., was hired to examine the corn
grains and determine the cause of deterioration. A Certificate of
Analysis was issued indicating that the corn grains had 18.56%
moisture content and the wetting was due to contact with salt water.
The mold growth was only incipient and not sufficient to make the
corn grains toxic and unfit for consumption. In fact the mold growth
could still be arrested by drying.
Republic Flour Mills Corporation rejected the entire cargo and
formally demanded from North Front Shipping Services, Inc.,
payment for the damages suffered by it. The demands however were
unheeded. The insurance companies were perforce obliged to pay
Republic Flour Mills Corporation P2,189,433.40.
By virtue of the payment made by the insurance companies they were
subrogated to the rights of Republic Flour Mills Corporation. Thusly,
they lodged a complaint for damages against North Front Shipping
Services, Inc., claiming that the loss was exclusively attributable to
the fault and negligence of the carrier. The Marine Cargo Adjusters
hired by the insurance companies conducted a survey and found
cracks in the bodega of the barge and heavy concentration of molds on
the tarpaulins and wooden boards. They did not notice any seals in
the hatches. The tarpaulins were not brand new as there were patches
on them, contrary to the claim of North Front Shipping Services, Inc.,
thus making it possible for water to seep in. They also discovered that
the bulkhead of the barge was rusty.
North Front Shipping Services, Inc., averred in refutation that it
could not be made culpable for the loss and deterioration of the cargo
as it was never negligent. Captain Solomon Villanueva, master of the
vessel, reiterated that the barge was inspected prior to the actual
loading and was found adequate and seaworthy. In addition, they
were issued a permit to sail by the Coast Guard. The tarpaulins were
doubled and brand new and the hatches were properly sealed. They
did not encounter big waves hence it was not possible for water to
seep in. He further averred that the corn grains were farm wet and
not properly dried when loaded.
The court below dismissed the complaint and ruled that the contract
entered into between North Front Shipping Services, Inc., and
Republic Flour Mills Corporation was a charter-party agreement. As
such, only ordinary diligencein the care of goods was required of
North Front Shipping Services, Inc. The inspection of the barge by the
shipper and the representatives of the shipping company before actual
loading, coupled with the Permit to Sail issued by the Coast Guard,
sufficed to meet the degree of diligence required of the carrier.
On the other hand, the Court of Appeals ruled that as a common
carrier required to observe a higher degree of diligence North
Front 777 satisfactorily complied with all the requirements hence was
issued a Permit to Sail after proper inspection. Consequently, the
complaint was dismissed and the motion for reconsideration rejected.
The charter-party agreement between North Front Shipping Services,
Inc., and Republic Flour Mills Corporation did not in any way convert
the common carrier into a private carrier. We have already resolved
this issue with finality in Planters Products, Inc. v. Court of
Appeals 2 thus —
A "charter-party" is defined as a contract by which
an entire ship, or some principal part thereof, is let
by the owner to another person for a specified time
or use; a contract of affreightment by which the
owner of a ship or other vessel lets the whole or a
part of her to a merchant or other person for the
conveyance of goods, on a particular voyage, in
consideration of the payment of freight . . .
Contract of affreightment may either be time
charter, wherein the vessel is leased to the
charterer for a fixed period of time, or voyage
charter, wherein the ship is leased for a single
voyage. In both cases, the charter-party provides
for the hire of the vessel only, either for a
determinate period of time or for a single or
consecutive voyage, the ship owner to supply the
ship's store, pay for the wages of the master of the
crew, and defray the expenses for the maintenance
of the ship.
Upon the other hand, the term "common or public
carrier" is defined in Art. 1732 of the Civil Code.
The definition extends to carriers either by land,
air or water which hold themselves out as ready to
engage in carrying goods or transporting
passengers or both for compensation as a public
employment and not as a casual occupation . . .
It is therefore imperative that a public carrier shall
remain as such, notwithstanding the charter of the
whole or portion of a vessel by one or more persons,
provided the charter is limited to the shin only, as
in the case of a time-charter or voyage-
charter (emphasis supplied).
North Front Shipping Services, Inc., is a corporation engaged in the
business of transporting cargo and offers its services indiscriminately
to the public. It is without doubt a common carrier. As such it is
required to observe extraordinary diligence in its vigilance over the
goods it transports. 3 When goods placed in its care are lost or
damaged, the carrier is presumed to have been at fault or to have
acted negligently. 4 North Front Shipping Services, Inc., therefore has
the burden of proving that it observed extraordinary diligence in order
to avoid responsibility for the lost cargo.
North Front Shipping Services, Inc., proved that the vessel was
inspected prior to actual loading by representatives of the shipper and
was found fit to take a load of corn grains. They were also
issued Permit to Sail by the Coast Guard. The master of the vessel
testified that the corn grains were farm wet when loaded. However,
this testimony was disproved by the clean bill of lading issued by
North Front Shipping Services, Inc., which did not contain a notation
that the corn grains were wet and improperly dried. Having been in
the service since 1968, the master of the vessel would have known at
the outset that corn grains that were farm wet and not properly dried
would eventually deteriorate when stored in sealed and hot
compartments as in hatches of a ship. Equipped with this knowledge,
the master of the vessel and his crew should have undertaken
precautionary measures to avoid or lessen the cargo's possible
deterioration as they were presumed knowledgeable about the nature
of such cargo. But none of such measures was taken.
In Compania Maritima v. Court of Appeals 5 we ruled —
. . . Mere proof of delivery of the goods in good
order to a common carrier, and of their arrival at
the place of destination in bad order, makes
out prima facie case against the common carrier,
so that if no explanation is given as to how the
loss, deterioration or destruction of the goods
occurred, the common carrier must be held
responsible. Otherwise stated, it is incumbent
upon the common carrier to prove that the loss,
deterioration or destruction was due to accident or
some other circumstances inconsistent with its
liability . . .
The extraordinary diligence in the vigilance over
the goods tendered for shipment requires the
common carrier to know and to follow the required
precaution for avoiding damage to, or destruction
of the goods entrusted to it for safe carriage and
delivery. It requires common carriers to render
service with the greatest skill and foresight and "to
use all reasonable means to ascertain the nature
and characteristics of goods tendered for shipment,
and to exercise due care in the handling and
stowage, including such methods as their nature
requires" (emphasis supplied).
In fine, we find that the carrier failed to observe the
required extraordinary diligence in the vigilance over the goods placed
in its care. The proofs presented by North Front Shipping Services,
Inc., were insufficient to rebut the prima facie presumption of private
respondent's negligence, more so if we consider the evidence adduced
by petitioners.
It is not denied by the insurance companies that the vessel was indeed
inspected before actual loading and that North Front 777 was issued
a Permit to Sail. They proved the fact of shipment and its consequent
loss or damage while in the actual possession of the carrier. Notably,
the carrier failed to volunteer any explanation why there was spoilage
and how it occurred. On the other hand, it was shown during the trial
that the vessel had rusty bulkheads and the wooden boards and
tarpaulins bore heavy concentration of molds. The tarpaulins used
were not new, contrary to the claim of North Front Shipping Services,
Inc., as there were already several patches on them, hence, making it
highly probable for water to enter.
Laboratory analysis revealed that the corn grains were contaminated
with salt water. North Front Shipping Services, Inc., failed to rebut
all these arguments. It did not even endeavor to establish that the
loss, destruction or deterioration of the goods was due to the following:
(a) flood, storm, earthquake, lightning, or other natural disaster or
calamity; (b) act of the public enemy in war, whether international or
civil; (c) act or omission of the shipper or owner of the goods; (d) the
character of the goods or defects in the packing or in the containers;
(e) order or act of competent public authority. 6 This is a closed list. If
the cause of destruction, loss or deterioration is other than the
enumerated circumstances, then the carrier is rightly liable therefor.
However, we cannot attribute the destruction, loss or deterioration of
the cargo solely to the carrier. We find the consignee Republic Flour
Mills Corporation guilty of contributory negligence. It was seasonably
notified of the arrival of the barge but did not immediately start the
unloading operations. No explanation was proffered by the consignee
as to why there was a delay of six (6) days. Had the unloading been
commenced immediately the loss could have been completely avoided
or at least minimized. As testified to by the chemist who analyzed the
corn samples, the mold growth was only at its incipient stage and
could still be arrested by drying. The corn grains were not yet toxic or
unfit for consumption. For its contributory negligence, Republic Flour
Mills Corporation should share at least 40% of the loss. 7
WHEREFORE, the Decision of the Court of Appeals of 22 December
1994 and its Resolution of 16 February 1995 are REVERSED and SET
ASIDE. Respondent North Front Shipping Services, Inc., is ordered to
pay petitioners Tabacalera Insurance Co., Prudential Guarantee &
Assurance, Inc., and New Zealand Insurance Co. Ltd., P1,313,660.00
which is 60% of the amount paid by the insurance companies to
Republic Flour Mills Corporation, plus interest at the rate of 12% per
annum from the time this judgment becomes final until full payment.
G.R. No. 161833. July 8, 2005
PHILIPPINE CHARTER INSURANCE
CORPORATION, Petitioners,
vs.
UNKNOWN OWNER OF THE VESSEL M/V "NATIONAL
HONOR," NATIONAL SHIPPING CORPORATION OF THE
PHILIPPINES and INTERNATIONAL CONTAINER
SERVICES, INC., Respondents.
DECISION
CALLEJO, SR., J.:
This is a petition for review under Rule 45 of the 1997 Revised Rules
of Civil Procedure assailing the Decision1dated January 19, 2004 of
the Court of Appeals (CA) in CA-G.R. CV No. 57357 which affirmed
the Decision dated February 17, 1997 of the Regional Trial Court
(RTC) of Manila, Branch 37, in Civil Case No. 95-73338.
The Antecedent
On November 5, 1995, J. Trading Co. Ltd. of Seoul, Korea, loaded a
shipment of four units of parts and accessories in the port of Pusan,
Korea, on board the vessel M/V "National Honor," represented in the
Philippines by its agent, National Shipping Corporation of the
Philippines (NSCP). The shipment was for delivery to Manila,
Philippines. Freight forwarder, Samhwa Inter-Trans Co., Ltd., issued
Bill of Lading No. SH94103062 in the name of the shipper consigned
to the order of Metropolitan Bank and Trust Company with arrival
notice in Manila to ultimate consignee Blue Mono International
Company, Incorporated (BMICI), Binondo, Manila.
NSCP, for its part, issued Bill of Lading No. NSGPBSML5125653 in
the name of the freight forwarder, as shipper, consigned to the order
of Stamm International Inc., Makati, Philippines. It is provided
therein that:
12. This Bill of Lading shall be prima facie evidence of the receipt of
the Carrier in apparent good order and condition except as, otherwise,
noted of the total number of Containers or other packages or units
enumerated overleaf. Proof to the contrary shall be admissible when
this Bill of Lading has been transferred to a third party acting in good
faith. No representation is made by the Carrier as to the weight,
contents, measure, quantity, quality, description, condition, marks,
numbers, or value of the Goods and the Carrier shall be under no
responsibility whatsoever in respect of such description or particulars.
13. The shipper, whether principal or agent, represents and warrants
that the goods are properly described, marked, secured, and packed
and may be handled in ordinary course without damage to the goods,
ship, or property or persons and guarantees the correctness of the
particulars, weight or each piece or package and description of the
goods and agrees to ascertain and to disclose in writing on shipment,
any condition, nature, quality, ingredient or characteristic that may
cause damage, injury or detriment to the goods, other property, the
ship or to persons, and for the failure to do so the shipper agrees to be
liable for and fully indemnify the carrier and hold it harmless in
respect of any injury or death of any person and loss or damage to
cargo or property. The carrier shall be responsible as to the
correctness of any such mark, descriptions or representations. 4
The shipment was contained in two wooden crates, namely, Crate No.
1 and Crate No. 2, complete and in good order condition, covered by
Commercial Invoice No. YJ-73564 DTD5 and a Packing List.6 There
were no markings on the outer portion of the crates except the name
of the consignee.7 Crate No. 1 measured 24 cubic meters and weighed
3,620 kgs. It contained the following articles: one (1) unit Lathe
Machine complete with parts and accessories; one (1) unit Surface
Grinder complete with parts and accessories; and one (1) unit Milling
Machine complete with parts and accessories. On the flooring of the
wooden crates were three wooden battens placed side by side to
support the weight of the cargo. Crate No. 2, on the other hand,
measured 10 cubic meters and weighed 2,060 kgs. The Lathe Machine
was stuffed in the crate. The shipment had a total invoice value of
US$90,000.00 C&F Manila.8 It was insured for ₱2,547,270.00 with the
Philippine Charter Insurance Corporation (PCIC) thru its general
agent, Family Insurance and Investment Corporation,9 under Marine
Risk Note No. 68043 dated October 24, 1994.10
The M/V "National Honor" arrived at the Manila International
Container Terminal (MICT) on November 14, 1995. The International
Container Terminal Services, Incorporated (ICTSI) was furnished
with a copy of the crate cargo list and bill of lading, and it knew the
contents of the crate.11 The following day, the vessel started
discharging its cargoes using its winch crane. The crane was operated
by Olegario Balsa, a winchman from the ICTSI,12 the exclusive
arrastre operator of MICT.
Denasto Dauz, Jr., the checker-inspector of the NSCP, along with the
crew and the surveyor of the ICTSI, conducted an inspection of the
cargo.13 They inspected the hatches, checked the cargo and found it in
apparent good condition.14 Claudio Cansino, the stevedore of the
ICTSI, placed two sling cables on each end of Crate No. 1.15 No sling
cable was fastened on the mid-portion of the crate. In Dauz’s
experience, this was a normal procedure.16 As the crate was being
hoisted from the vessel’s hatch, the mid-portion of the wooden flooring
suddenly snapped in the air, about five feet high from the vessel’s
twin deck, sending all its contents crashing down hard,17 resulting in
extensive damage to the shipment.
BMICI’s customs broker, JRM Incorporated, took delivery of the cargo
in such damaged condition.18 Upon receipt of the damaged shipment,
BMICI found that the same could no longer be used for the intended
purpose. The Mariners’ Adjustment Corporation hired by PCIC
conducted a survey and declared that the packing of the shipment was
considered insufficient. It ruled out the possibility of taxes due to
insufficiency of packing. It opined that three to four pieces of cable or
wire rope slings, held in all equal setting, never by-passing the center
of the crate, should have been used, considering that the crate
contained heavy machinery.19
BMICI subsequently filed separate claims against the NSCP,20 the
ICTSI,21 and its insurer, the PCIC,22 for US$61,500.00. When the
other companies denied liability, PCIC paid the claim and was issued
a Subrogation Receipt23 for ₱1,740,634.50.
On March 22, 1995, PCIC, as subrogee, filed with the RTC of Manila,
Branch 35, a Complaint for Damages24against the "Unknown owner of
the vessel M/V National Honor," NSCP and ICTSI, as defendants.
PCIC alleged that the loss was due to the fault and negligence of the
defendants. It prayed, among others –
WHEREFORE, it is respectfully prayed of this Honorable Court that
judgment be rendered ordering defendants to pay plaintiff, jointly or
in the alternative, the following:
1. Actual damages in the amount of ₱1,740,634.50 plus legal interest
at the time of the filing of this complaint until fully paid;
2. Attorney’s fees in the amount of ₱100,000.00;
3. Cost of suit.25
ICTSI, for its part, filed its Answer with Counterclaim and Cross-
claim against its co-defendant NSCP, claiming that the loss/damage of
the shipment was caused exclusively by the defective material of the
wooden battens of the shipment, insufficient packing or acts of the
shipper.
At the trial, Anthony Abarquez, the safety inspector of ICTSI, testified
that the wooden battens placed on the wooden flooring of the crate
was of good material but was not strong enough to support the weight
of the machines inside the crate. He averred that most stevedores did
not know how to read and write; hence, he placed the sling cables only
on those portions of the crate where the arrow signs were placed, as in
the case of fragile cargo. He said that unless otherwise indicated by
arrow signs, the ICTSI used only two cable slings on each side of the
crate and would not place a sling cable in the mid-section.26 He
declared that the crate fell from the cranes because the wooden batten
in the mid-portion was broken as it was being lifted.27 He concluded
that the loss/damage was caused by the failure of the shipper or its
packer to place wooden battens of strong materials under the flooring
of the crate, and to place a sign in its mid-term section where the sling
cables would be placed.
The ICTSI adduced in evidence the report of the R.J. Del Pan & Co.,
Inc. that the damage to the cargo could be attributed to insufficient
packing and unbalanced weight distribution of the cargo inside the
crate as evidenced by the types and shapes of items found. 28
The trial court rendered judgment for PCIC and ordered the
complaint dismissed, thus:
WHEREFORE, the complaint of the plaintiff, and the respective
counterclaims of the two defendants are dismissed, with costs against
the plaintiff.
SO ORDERED.29
According to the trial court, the loss of the shipment contained in
Crate No. 1 was due to the internal defect and weakness of the
materials used in the fabrication of the crates. The middle wooden
batten had a hole (bukong-bukong). The trial court rejected the
certification30 of the shipper, stating that the shipment was properly
packed and secured, as mere hearsay and devoid of any evidentiary
weight, the affiant not having testified.
Not satisfied, PCIC appealed31 to the CA which rendered judgment on
January 19, 2004 affirming in toto the appealed decision, with
this fallo –
WHEREFORE, the decision of the Regional Trial Court of Manila,
Branch 35, dated February 17, 1997, is AFFIRMED.
SO ORDERED.32
The appellate court held, inter alia, that it was bound by the finding
of facts of the RTC, especially so where the evidence in support
thereof is more than substantial. It ratiocinated that the loss of the
shipment was due to an excepted cause – "[t]he character of the goods
or defects in the packing or in the containers" and the failure of the
shipper to indicate signs to notify the stevedores that extra care
should be employed in handling the shipment.33 It blamed the shipper
for its failure to use materials of stronger quality to support the heavy
machines and to indicate an arrow in the middle portion of the cargo
where additional slings should be attached.34 The CA concluded that
common carriers are not absolute insurers against all risks in the
transport of the goods.35
Hence, this petition by the PCIC, where it alleges that:
I.
THE COURT OF APPEALS COMMITTED SERIOUS ERROR OF
LAW IN NOT HOLDING THAT RESPONDENT COMMON
CARRIER IS LIABLE FOR THE DAMAGE SUSTAINED BY THE
SHIPMENT IN THE POSSESSION OF THE ARRASTRE
OPERATOR.
II.
THE COURT OF APPEALS COMMITTED SERIOUS ERROR OF
LAW IN NOT APPLYING THE STATUTORY PRESUMPTION OF
FAULT AND NEGLIGENCE IN THE CASE AT BAR.
III.
THE COURT OF APPEALS GROSSLY MISCOMPREHENDED THE
FACTS IN FINDING THAT THE DAMAGE SUSTAINED BY THE
[SHIPMENT] WAS DUE TO ITS DEFECTIVE PACKING AND NOT
TO THE FAULT AND NEGLIGENCE OF THE RESPONDENTS.36
The petitioner asserts that the mere proof of receipt of the shipment
by the common carrier (to the carrier) in good order, and their arrival
at the place of destination in bad order makes out a prima facie case
against it; in such case, it is liable for the loss or damage to the cargo
absent satisfactory explanation given by the carrier as to the exercise
of extraordinary diligence. The petitioner avers that the shipment was
sufficiently packed in wooden boxes, as shown by the fact that it was
accepted on board the vessel and arrived in Manila safely. It
emphasizes that the respondents did not contest the contents of the
bill of lading, and that the respondents knew that the manner and
condition of the packing of the cargo was normal and barren of
defects. It maintains that it behooved the respondent ICTSI to place
three to four cables or wire slings in equal settings, including the
center portion of the crate to prevent damage to the cargo:
… [A] simple look at the manifesto of the cargo and the bill of lading
would have alerted respondents of the nature of the cargo consisting
of thick and heavy machinery. Extra-care should have been made and
extended in the discharge of the subject shipment. Had the
respondent only bothered to check the list of its contents, they would
have been nervous enough to place additional slings and cables to
support those massive machines, which were composed almost
entirely of thick steel, clearly intended for heavy industries. As
indicated in the list, the boxes contained one lat[h]e machine, one
milling machine and one grinding machine-all coming with complete
parts and accessories. Yet, not one among the respondents were
cautious enough. Here lies the utter failure of the respondents to
observed extraordinary diligence in the handling of the cargo in their
custody and possession, which the Court of Appeals should have
readily observed in its appreciation of the pertinent facts. 37
The petitioner posits that the loss/damage was caused by the
mishandling of the shipment by therein respondent ICTSI, the
arrastre operator, and not by its negligence.
The petitioner insists that the respondents did not observe
extraordinary diligence in the care of the goods. It argues that in the
performance of its obligations, the respondent ICTSI should observe
the same degree of diligence as that required of a common carrier
under the New Civil Code of the Philippines. Citing Eastern Shipping
Lines, Inc. v. Court of Appeals,38 it posits that respondents are liable
in solidum to it, inasmuch as both are charged with the obligation to
deliver the goods in good condition to its consignee, BMICI.
Respondent NSCP counters that if ever respondent ICTSI is adjudged
liable, it is not solidarily liable with it. It further avers that the
"carrier cannot discharge directly to the consignee because cargo
discharging is the monopoly of the arrastre." Liability, therefore, falls
solely upon the shoulder of respondent ICTSI, inasmuch as the
discharging of cargoes from the vessel was its exclusive responsibility.
Besides, the petitioner is raising questions of facts, improper in a
petition for review on certiorari.39
Respondent ICTSI avers that the issues raised are factual, hence,
improper under Rule 45 of the Rules of Court. It claims that it is
merely a depository and not a common carrier; hence, it is not obliged
to exercise extraordinary diligence. It reiterates that the loss/damage
was caused by the failure of the shipper or his packer to place a sign
on the sides and middle portion of the crate that extra care should be
employed in handling the shipment, and that the middle wooden
batten on the flooring of the crate had a hole. The respondent asserts
that the testimony of Anthony Abarquez, who conducted his
investigation at the site of the incident, should prevail over that of
Rolando Balatbat. As an alternative, it argues that if ever adjudged
liable, its liability is limited only to ₱3,500.00 as expressed in the
liability clause of Gate Pass CFS-BR-GP No. 319773.
The petition has no merit.
The well-entrenched rule in our jurisdiction is that only questions of
law may be entertained by this Court in a petition for review on
certiorari. This rule, however, is not ironclad and admits certain
exceptions, such as when (1) the conclusion is grounded on
speculations, surmises or conjectures; (2) the inference is manifestly
mistaken, absurd or impossible; (3) there is grave abuse of discretion;
(4) the judgment is based on a misapprehension of facts; (5) the
findings of fact are conflicting; (6) there is no citation of specific
evidence on which the factual findings are based; (7) the findings of
absence of facts are contradicted by the presence of evidence on
record; (8) the findings of the Court of Appeals are contrary to those of
the trial court; (9) the Court of Appeals manifestly overlooked certain
relevant and undisputed facts that, if properly considered, would
justify a different conclusion; (10) the findings of the Court of Appeals
are beyond the issues of the case; and (11) such findings are contrary
to the admissions of both parties.40
We have reviewed the records and find no justification to warrant the
application of any exception to the general rule.
We agree with the contention of the petitioner that common carriers,
from the nature of their business and for reasons of public policy, are
mandated to observe extraordinary diligence in the vigilance over the
goods and for the safety of the passengers transported by them,
according to all the circumstances of each case.41 The Court has
defined extraordinary diligence in the vigilance over the goods as
follows:
The extraordinary diligence in the vigilance over the goods tendered
for shipment requires the common carrier to know and to follow the
required precaution for avoiding damage to, or destruction of the
goods entrusted to it for sale, carriage and delivery. It requires
common carriers to render service with the greatest skill and foresight
and "to use all reasonable means to ascertain the nature and
characteristic of goods tendered for shipment, and to exercise due care
in the handling and stowage, including such methods as their nature
requires."42
The common carrier’s duty to observe the requisite diligence in the
shipment of goods lasts from the time the articles are surrendered to
or unconditionally placed in the possession of, and received by, the
carrier for transportation until delivered to, or until the lapse of a
reasonable time for their acceptance, by the person entitled to receive
them.43 When the goods shipped are either lost or arrive in damaged
condition, a presumption arises against the carrier of its failure to
observe that diligence, and there need not be an express finding of
negligence to hold it liable.44 To overcome the presumption of
negligence in the case of loss, destruction or deterioration of the goods,
the common carrier must prove that it exercised extraordinary
diligence.45
However, under Article 1734 of the New Civil Code, the presumption
of negligence does not apply to any of the following causes:
1. Flood, storm, earthquake, lightning or other natural disaster or
calamity;
2. Act of the public enemy in war, whether international or civil;
3. Act or omission of the shipper or owner of the goods;
wooden battens gave way and collapsed (TSN, Sept. 26, 1996, pp. 20-
24).
Crate No. 1 was provided by the shipper of the machineries in Seoul,
Korea. There is nothing in the record which would indicate that
defendant ICTSI had any role in the choice of the materials used in
fabricating this crate. Said defendant, therefore, cannot be held as
blame worthy for the loss of the machineries contained in Crate No.
1.50
The CA affirmed the ruling of the RTC, thus:
The case at bar falls under one of the exceptions mentioned in Article
1734 of the Civil Code, particularly number (4) thereof, i.e., the
character of the goods or defects in the packing or in the containers.
The trial court found that the breakage of the crate was not due to the
fault or negligence of ICTSI, but to the inherent defect and weakness
of the materials used in the fabrication of the said crate.
Upon examination of the records, We find no compelling reason to
depart from the factual findings of the trial court.
It appears that the wooden batten used as support for the flooring was
not made of good materials, which caused the middle portion thereof
to give way when it was lifted. The shipper also failed to indicate
signs to notify the stevedores that extra care should be employed in
handling the shipment.
Claudio Cansino, a stevedore of ICTSI, testified before the court their
duties and responsibilities:
"Q: With regard to crates, what do you do with the crates?
A: Everyday with the crates, there is an arrow drawn where the sling
is placed, Ma’am.
Q: When the crates have arrows drawn and where you placed the
slings, what do you do with these crates?

A: A sling is placed on it, Ma’am.

4. The character of the goods or defects in the packing or in the
containers;
Q: After you placed the slings, what do you do with the crates?
5. Order or act of competent public authority.
A: After I have placed a sling properly, I ask the crane (sic) to haul it,
Ma’am.
It bears stressing that the enumeration in Article 1734 of the New
Civil Code which exempts the common carrier for the loss or damage
to the cargo is a closed list.46 To exculpate itself from liability for the …
loss/damage to the cargo under any of the causes, the common carrier
is burdened to prove any of the aforecited causes claimed by it by a Q: Now, what, if any, were written or were marked on the crate?
preponderance of evidence. If the carrier succeeds, the burden of
evidence is shifted to the shipper to prove that the carrier is
negligent.47 A: The thing that was marked on the cargo is an arrow just like of a
chain, Ma’am.

"Defect" is the want or absence of something necessary for

completeness or perfection; a lack or absence of something essential to Q: And where did you see or what parts of the crate did you see those
completeness; a deficiency in something essential to the proper use for arrows?
the purpose for which a thing is to be used.48 On the other hand,
inferior means of poor quality, mediocre, or second rate.49 A thing may A: At the corner of the crate, Ma’am.
be of inferior quality but not necessarily defective. In other words,
"defectiveness" is not synonymous with "inferiority."
Q: How many arrows did you see?

In the present case, the trial court declared that based on the record,
the loss of the shipment was caused by the negligence of the petitioner A: Four (4) on both sides, Ma’am.
as the shipper:
…
The same may be said with respect to defendant ICTSI. The breakage
and collapse of Crate No. 1 and the total destruction of its contents Q: What did you do with the arrows?
were not imputable to any fault or negligence on the part of said
defendant in handling the unloading of the cargoes from the carrying
A: When I saw the arrows, that’s where I placed the slings, Ma’am.
vessel, but was due solely to the inherent defect and weakness of the
materials used in the fabrication of said crate.
…
The crate should have three solid and strong wooden batten placed
side by side underneath or on the flooring of the crate to support the Q: Now, did you find any other marks on the crate?
weight of its contents. However, in the case of the crate in dispute,
although there were three wooden battens placed side by side on its
A: Nothing more, Ma’am.
flooring, the middle wooden batten, which carried substantial volume
of the weight of the crate’s contents, had a knot hole or "bukong-
bukong," which considerably affected, reduced and weakened its Q: Now, Mr. Witness, if there are no arrows, would you place slings on
strength. Because of the enormous weight of the machineries inside the parts where there are no arrows?
this crate, the middle wooden batten gave way and collapsed. As the
combined strength of the other two wooden battens were not sufficient A: You can not place slings if there are no arrows, Ma’am."
to hold and carry the load, they too simultaneously with the middle
Appellant’s allegation that since the cargo arrived safely from the port
of [P]usan, Korea without defect, the fault should be attributed to the
arrastre operator who mishandled the cargo, is without merit. The
cargo fell while it was being carried only at about five (5) feet high
above the ground. It would not have so easily collapsed had the cargo
been properly packed. The shipper should have used materials of
stronger quality to support the heavy machines. Not only did the
shipper fail to properly pack the cargo, it also failed to indicate an
arrow in the middle portion of the cargo where additional slings
should be attached. At any rate, the issue of negligence is factual in
nature and in this regard, it is settled that factual findings of the
lower courts are entitled to great weight and respect on appeal, and,
in fact, accorded finality when supported by substantial evidence.51

We agree with the trial and appellate courts.

The petitioner failed to adduce any evidence to counter that of

respondent ICTSI. The petitioner failed to rebut the testimony of
Dauz, that the crates were sealed and that the contents thereof could
not be seen from the outside.52While it is true that the crate contained
machineries and spare parts, it cannot thereby be concluded that the
respondents knew or should have known that the middle wooden
batten had a hole, or that it was not strong enough to bear the weight
of the shipment.

There is no showing in the Bill of Lading that the shipment was in good
order or condition when the carrier received the cargo, or that the three
wooden battens under the flooring of the cargo were not defective or
insufficient or inadequate. On the other hand, under Bill of Lading No.
NSGPBSML512565 issued by the respondent NSCP and accepted by the
petitioner, the latter represented and warranted that the goods were
properly packed, and disclosed in writing the "condition, nature, quality
or characteristic that may cause damage, injury or detriment to the
goods." Absent any signs on the shipment requiring the placement of a
sling cable in the mid-portion of the crate, the respondent ICTSI was not
obliged to do so.

The statement in the Bill of Lading, that the shipment was in

apparent good condition, is sufficient to sustain a finding of absence of
defects in the merchandise. Case law has it that such statement will
create a prima faciepresumption only as to the external condition and
not to that not open to inspection.53

IN LIGHT OF ALL THE FOREGOING, the petition is DENIED for

lack of merit.