TORRES-MADRID BROKERAGE v. FEB MITSUI MARINE INSURANCE CO., GR No.

194121, 2016-07-
11
Facts:

We resolve the petition for review on certiorari challenging the Court of Appeals' (CA) October
14, 2010 decision in CA-G.R. CV No. 91829. 1chanrobleslaw

The CA affirmed the Regional Trial Court's (RTC) decision in Civil Case No. 01-1596, and found
petitioner Torres-Madrid Brokerage, Inc. (TMBI) and respondent Benjamin P. Manalastas jointly
and solidarily liable to respondent FEB Mitsui Marine Insurance Co., Inc. (Mitsui) for damages
from the loss of transported cargo.

Antecedents

On October 7, 2000, a shipment of various electronic goods from Thailand and Malaysia arrived
at the Port of Manila for Sony Philippines, Inc. (Sony). Previous to the arrival, Sony had engaged
the services of TMBI to facilitate, process, withdraw, and deliver the shipment from the port to
its warehouse in Binan, Laguna.2chanrobleslaw

TMBI - who did not own any delivery trucks - subcontracted the services of Benjamin
Manalastas' company, BMT Trucking Services (BMT), to transport the shipment from the port to
the Binan warehouse.3 Incidentally, TMBI notified Sony who had no objections to the
arrangement.4chanrobleslaw

Four BMT trucks picked up the shipment from the port at about 11:00 a.m. of October 7, 2000.
However, BMT could not immediately undertake the delivery because of the truck ban and
because the following day was a Sunday. Thus, BMT scheduled the delivery on October 9, 2000.

In the early morning of October 9, 2000, the four trucks left BMT's garage for
Laguna.5 However, only three trucks arrived at Sony's Binan warehouse.

At around 12:00 noon, the truck driven by Rufo Reynaldo Lapesura (NSF-391) was found
abandoned along the Diversion Road in Filinvest, Alabang, Muntinlupa City.6 Both the driver
and the shipment were missing.

Later that evening, BMT's Operations Manager Melchor Manalastas informed Victor Torres,
TMBI's General Manager, of the development.7 They went to Muntinlupa together to inspect
the truck and to report the matter to the police.8chanrobleslaw

Victor Torres also filed a complaint with the National Bureau of Investigation (NBI) against
Lapesura for "hijacking." 9 The complaint resulted in a recommendation by the NBI to the
Manila City Prosecutor's Office to prosecute Lapesura for qualified theft.10chanrobleslaw
TMBI notified Sony of the loss through a letter dated October 10, 2000, 11 It also sent BMT a
letter dated March 29, 2001, demanding payment for the lost shipment. BMT refused to pay,
insisting that the goods were "hijacked."

In the meantime, Sony filed an insurance claim with the Mitsui, the insurer of the goods. After
evaluating the merits of the claim, Mitsui paid Sony PHP7,293,386.23 corresponding to the
value of the lost goods.12chanrobleslaw

After being subrogated to Sony's rights, Mitsui sent TMBI a demand letter dated August 30,
2001 for payment of the lost goods. TMBI refused to pay Mitsui's claim. As a result, Mitsui filed
a complaint against TMBI on November 6, 2001,

TMBI, in turn, impleaded Benjamin Manalastas, the proprietor of BMT, as a third-party

defendant. TMBI alleged that BMT's driver, Lapesura, was responsible for the theft/hijacking of
the lost cargo and claimed BMT's negligence as the proximate cause of the loss. TMBI prayed
that in the event it is held liable to Mitsui for the loss, it should be reimbursed by BMT
Issues:
TMBI and BMT are not solidarity liable to Mitsui
BMT is liable to TMBI for breach of their contract of carriage
Ruling:
Common carriers are persons, corporations, firms or associations engaged in the business of
transporting passengers or goods or both, by land, water, or air, for compensation, offering
their services to the public.
they are bound to observe extraordinary diligence in the vigilance over the goods and in the
safety of their passengers.
Despite TMBI's present denials, we find that the delivery of the goods is an integral, albeit
ancillary, part of its brokerage services.
That TMBI does not own trucks and has to subcontract the delivery of its clients' goods, is
immaterial. As long as an entity holds itself to the public for the transport of goods as a
business, it is considered a common carrier regardless of whether it owns the vehicle used or
has to actually hire one.
TMBI's customs brokerage services - including the transport/delivery of the cargo - are available
to anyone willing to pay its fees. Given these circumstances, we find it undeniable that TMBI is
a common carrier.
TMBI should be held responsible for the loss, destruction, or deterioration of the goods it
transports unless it results from:
(1) Flood, storm, earthquake, lightning, or other natural disaster or calamity; (2) Act of the
public enemy in war, whether international or civil;(3) Act of omission of the shipper or owner
of the goods; (4) The character of the goods or defects in the packing or in the containers;(5)
Order or act of competent public authority.[42]
Simply put, the theft or the robbery of the goods is not considered a fortuitous event or a force
majeure. Nevertheless, a common carrier may absolve itself of liability for a resulting loss: (1) if
it proves that it exercised extraordinary diligence in transporting and safekeeping the
goods;[44] or (2) if it stipulated with the shipper/owner of the goods to limit its liability for the
loss, destruction, or deterioration of the goods to a degree less than extraordinary diligence.
De Guzman v. Court of Appeals[47] interpreted Article 1745 to mean that a robbery attended
by "grave or irresistible threat, violence or force" is a fortuitous event that absolves the
common carrier from liability.
Despite the subcontract, TMBI remained responsible for the cargo. Under Article 1736, a
common carrier's extraordinary responsibility over the shipper's goods lasts from the time
these goods are unconditionally placed in the possession of, and received by, the carrier for
transportation, until they are delivered, actually or constructively, by the carrier to the
consignee.
That the cargo disappeared during transit while under the custody of BMT - TMBI's
subcontractor - did not diminish nor terminate TMBFs responsibility over the cargo. Article
1735 of the Civil Code presumes that it was at fault.
Instead of showing that it had acted with extraordinary diligence, TMBI simply argued that it
was not a common carrier bound to observe extraordinary diligence. Its failure to successfully
establish this premise carries with it the presumption of fault or negligence, thus rendering it
liable to Sony/Mitsui for breach of contract.
We disagree with the lower courts" ruling that TMBI and BMT are solidarity liable to Mitsui for
the loss as joint tortfeasors. The ruling was based on Article 2194 of the Civil Code:
Art. 2194. The responsibility of two or more persons who are liable for quasi-delict is solidary.
Notably, TMBI's liability to Mitsui does not stem from a quasi-delict (culpa aquiliana) but from
its breach of contract (culpa contractual). The tie that binds TMBI with Mitsui is contractual,
albeit one that passed on to Mitsui as a result of TMBI's contract of carriage with Sony to which
Mitsui had been subrogated as an insurer who had paid Sony's insurance claim. The legal reality
that results from this contractual tie precludes the application of quasi-delict based Article
2194. A third party may recover from a common carrier for quasi-delict but must prove actual
negligence
We likewise disagree with the finding that BMT is directly liable to Sony/Mitsui for the loss of
the cargo. While it is undisputed that the cargo was lost under the actual custody of BMT
(whose employee is the primary suspect in the hijacking or robbery of the shipment), no direct
contractual relationship existed between Sony/Mitsui and BMT. If at all, Sony/Mitsui's cause of
action against BMT could only arise from quasi-delict, as a third party suffering damage from
the action of another due to the latter's fault or negligence, pursuant to Article 2176 of the Civil
Code
In the present case, Mitsui's action is solely premised on TMBl's breach of contract. Mitsui did
not even sue BMT, much less prove any negligence on its part. If BMT has entered the picture
at all, it 'is because TMBI sued it for reimbursement for the liability that TMBI might incur from
its contract of carriage with Sony/Mitsui. Accordingly, there is no basis to directly hold BMT
liable to Mitsui for quasi-delict.
The cargo was lost after its transfer to BMT's custody based on its contract of carriage with
TMBI. Following Article 1735, BMT is presumed to be at fault. Since BMT failed to prove that it
observed extraordinary diligence in the performance of its obligation to TMBI, it is liable to
TMBI for breach of their contract of carriage. In these lights, TMBI is liable to Sony (subrogated
by Mitsui) for breaching the contract of carriage. In turn, TMBI is entitled to reimbursement
from BMT due to the latter's own breach of its contract of carriage with TMBI.
CATHAY PACIFIC AIRWAYS VS. APOUSES ARNULFO AND EVELYN FUENTEBELLA
GR No. 188283
JULY 20, 2016
Facts:
case... originated from a Complaint[4] for damages filed by respondents Arnulfo and Evelyn
Fuentebella against petitioner Cathay Pacific Airways Ltd
Respondents prayed for a total of PI3 million in damages for the alleged besmirched reputation
and honor, as well as the public embarrassment they had suffered as a result of a series of
involuntary downgrades of their trip from Manila to Sydney via Hong Kong on 25 October 1993
and from Hong Kong to Manila on 2 November 1993.
In 1993, the Speaker of the House authorized Congressmen Arnulfo Fuentebella (respondent
Fuentebella), Alberto Lopez (Cong. Lopez) and Leonardo Fugoso (Cong. Fugoso) to travel on
official business to Sydney, Australia, to confer with their counterparts in the Australian
Parliament from 25 October to 6 November 1993.[8
On 22 October 1993, respondents bought Business Class tickets for Manila to Sydney via Hong
Kong and back.[9] They changed their minds, however, and decided to upgrade to First Class
According to petitioner, on 23 October 1993, one of the passengers called to request that the
booking be divided into two: one for the Spouses Lopez and Spouses Fugoso, and a separate
booking for respondents
Cong. Lopez... admitted that he had called up petitioner, but only to request an upgrade of their
tickets from Business Class to First Class
There was no showing whether the First Class tickets issued to Sps. Lopez and Sps. Fugoso were
open-dated or otherwise, but it appears that they were able to fly First Class on all the
segments of the trip, while respondents were not.
They only discovered that they had not been given First Class seats when they were denied
entry into the First Class lounge
Respondent Fuentebella went back to the check-in counter to demand that they be given First
Class seats or at the very least, access to the First Class Lounge. He recalled that he was treated
by the ground staff in a discourteous, arrogant and rude manner
Montillana admitted that First Class tickets had been issued to respondents, but qualified that
those tickets were open-dated
Upon arrival in the Philippines, respondents demanded a formal apology and payment of
damages from petitioner
The trial court ordered petitioner to pay P5 million as moral damages, P1 million as exemplary
damages, and P500,000 as attorney's fee
The CA affirmed the RTC Decision with the modification that the attorney's fees be reduced to
P100,000

Issues:
The C A found that there were no conditions stated on the face of the tickets; hence,
respondents could not be expected to know that the tickets they were holding were open-
dated and were subject to the availability of seats.[61] It applied the rule on contracts of
adhesion, and construed the terms against petitioner.
There was a breach of contract
There is basis for the award of moral and exemplary damages; however, the amounts were
excessive
Moral and exemplary damages are not ordinarily awarded in breach of contract cases. This
Court has held that damages may be awarded only when the breach is wanton and deliberately
injurious, or the one responsible had acted fraudulently or with malice or bad faith

Ruling:
RULING OF THE COURT
In Air France v. Gillego[68] this Court ruled that in an action based on a breach of contract of
carriage, the aggrieved party does not have to prove that the common carrier was at fault or
was negligent; all that he has to prove is the existence of the contract and the fact of its
nonperformance by the carrier
In FGU Insurance Corporation v. G.P. Sarmiento Trucking Corporation,[73] We recognized the
interests of the injured party in breach of contract cases:
A breach upon the contract confers upon the injured party a valid cause for recovering that
which may have been lost or suffered
According to Montillana, a reservation is deemed confirmed when there is a seat available on
the plane.[74] When asked how a passenger was informed of the confirmation, Montillana
replied that computer records were consulted upon inquiry.[75] By its issuance of First Class
tickets on the same day of the flight in place of Business Class tickets that indicated the
preferred and confirmed flight, petitioner led respondents to believe that their request for an
upgrade had been approved
Petitioner tries to downplay the factual finding that no explanation was given to respondents
with regard to the types of ticket that were issued to them. It ventured that respondents were
seasoned travelers and therefore familiar with the concept of open-dated tickets
In the present case, no evidence was presented to show that respondents were indeed familiar
with the concept of open-dated ticket. In fact, the tickets do not even contain the term "open-
dated."... when
Moral and exemplary damages are not ordinarily awarded in breach of contract cases. This
Court has held that damages may be awarded only when the breach is wanton and deliberately
injurious, or the one responsible had acted fraudulently or with malice or bad faith
However, the award of P5 million as moral damages is excessive, considering that the highest
amount ever awarded by this Court for moral damages in cases involving airlines is
P500,000.[82] As We said in Air France v. Gillego,[83] the mere fact that respondent was a
Congressman should not result in an automatic increase in the moral and exemplary damages."
We find that upon the facts established, the amount of P500,000 as moral damages is
reasonable to obviate the moral suffering that respondents have undergone. With regard to
exemplary damages, jurisprudence shows that P50,000 is sufficient to deter similar acts of bad
faith attributable to airline representatives.
WHEREFORE, the Petition is PARTIALLY GRANTED. The Court of Appeals Decision dated 31
March 2009 in CA-G.R. CV No. 87698 is hereby AFFIRMED with MODIFICATION in that moral
and exemplary damages are hereby reduced to P500,000 and P50,000, respectively. These
amounts shall earn legal interest of 6% per annum from the finality of this Decision until full
payment. SO ORDERED
Principles:
Bad faith is a question of fact that must be proven by clear and convincing evidence
Both the trial and the appellate courts found that petitioner had acted in bad faith. After review
of the records, We find no reason to deviate from their finding.
SULPICIO LINES, INC., v. SESANTE
G.R. No. 172682 July 27, 2016
Liabilities of Common Carriers, the Act of God Doctrine
JUNE 11, 2019

FACTS:
On September 18, 1998, the M/V Princess of the Orient, a passenger vessel owned and
operated by the petitioner, sank near Fortune Island in Batangas. Of the 388 recorded
passengers, 150 were lost. Napoleon Sesante, then a member of the PNP and a lawyer, was one
of the passengers who survived the sinking. He sued the petitioner for breach of contract and
damages.
Sesante alleged in his complaint that the vessel left the Port of Manila during a stormy weather.
Around 11:00 p.m., while at the uppermost deck, he witnessed the strong winds and big waves
pounding the vessel, the passengers panicking, crying for help and frantically scrambling for life
jackets in the absence of the vessel’s officers and crew.
Sesante sustained injuries, and had lost money, jewelry, important documents, police uniforms
and the .45 caliber pistol issued to him by the PNP.
In its defense, the petitioner insisted on the seaworthiness of the M/V Princess of the Orient
due to its having been cleared to sail from the Port of Manila by the proper authorities, and
that the sinking had been due to force majeure.
The RTC rendered its judgment in favor of the Sesante.
Pending its appeal in the CA, Sesante passed away. He was substituted by his heirs.
The CA, in its decision, lowered the award of temperate damages; and held that despite the
seaworthiness of the vessel, the petitioner remained civilly liable because its officers and crew
had been negligent in performing their duties.
Still aggrieved, Sulpicio Lines moved for reconsideration, but the CA denied the motion.
Hence, this appeal.
ISSUES:
Whether or not the petitioner is liable for damages.
Whether or not notification is required before the common carrier becomes liable for lost
belongings that remained in the custody of the passenger.
RULING:
The appeal lacks merit.
1. A contract of carriage generates a relation attended with public duty, neglect or malfeasance
of the carrier’s employees and gives ground for an action for damages.
The liability of common carriers under Article 1759 is demanded by the duty of extraordinary
diligence required of common carriers in safely carrying their passengers.
On the other hand, Article 1756 of the Civil Code lays down the presumption of negligence
against the common carrier in the event of death or injury of its passenger, viz.:
Article 1756. In case of death of or injuries to passengers, common carriers are presumed to
have been at fault or to have acted negligently, unless they prove that they observed
extraordinary diligence.
The presumption of negligence applies so long as there is evidence showing that: (a) a contract
exists between the passenger and the common carrier; and (b) the injury or death took place
during the existence of such contract. In such event, the burden shifts to the common carrier to
prove its observance of extraordinary diligence, and that an unforeseen event or force majeure
had caused the injury.
For a common carrier to be absolved from liability in case of force majeure, it is not enough
that the accident was caused by a fortuitous event. The common carrier must still prove that it
did not contribute to the occurrence of the incident due to its own or its employees’
negligence.
[T]he principle embodied in the act of God doctrine strictly requires that the act must be
occasioned solely by the violence of nature. When the effect is found to be in part the result of
the participation of man, whether due to his active intervention or neglect or failure to act, the
whole occurrence is then humanized and removed from the rules applicable to the acts of God.
In the case at bar, there was miscalculation in judgment on the part of the Captain when he
erroneously navigated the ship at her last crucial moment. x x x
2. With regard to the baggage in possession of passengers, notification is required before the
common carrier becomes liable for lost belongings that remained in the custody of the
passenger.
Article 1754 of the Civil Code does not exempt the common carrier from liability in case of loss,
but only highlights the degree of care required of it depending on who has the custody of the
belongings.
Hence, the law requires the common carrier to observe the same diligence as the hotel keepers
in case the baggage remains with the passenger; otherwise, extraordinary diligence must be
exercised.
Furthermore, the liability of the common carrier attaches even if the loss or damage to the
belongings resulted from the acts of the common carrier’s employees, the only exception being
where such loss or damages is due to force majeure.
 Eastern Shipping Lines, Inc., vs BPI/MS Insurance Corporation
G.R. No. 182864, January 12, 2015

Facts: A complaint for actual damages amounting to US$17,560.48 was filed by herein
respondents against Eastern Shipping Lines, Inc., (ESLI) covering steel subject to its shipment.
Petitioner insisted that it was through the management of the stevedore where the damages
have been incurred. For failure to reach settlement on the legal issues it was submitted to trial
and during the pre-trial several stipulations of facts were admitted. The trial court ruled in favor
of the respondents. ESLI appealed disputing its liability as to the damaged goods and invoking
further the validity of the contents of the bill of lading.

Issue: Whether or not admissions made during the pre-trial as to the validity of the bills of lading
are binding.

Ruling: Yes. Judicial admissions are legally binding on the party making the admissions. Pre-trial
admission in civil cases is one of the instances of judicial admissions explicitly provided for under
Section 7, Rule 18 of the Rules of Court, which mandates that the contents of the pre-trial order
shall control the subsequent course of the action, thereby, defining and limiting the issues to be
tried. In Bayas v. Sandiganbayan, this Court emphasized that:

Once the stipulations are reduced into writing and signed by the parties and their counsels, they
become binding on the parties who made them. They become judicial admissions of the fact or
facts stipulated. Even if placed at a disadvantageous position, a party may not be allowed to
rescind them unilaterally, it must assume the consequences of the disadvantage.

Moreover, in Alfelor v. Halasan, this Court declared that:

A party who judicially admits a fact cannot later challenge that fact as judicial admissions are a
waiver of proof; production of evidence is dispensed with. A judicial admission also removes an
admitted fact from the field of controversy. Consequently, an admission made in the pleadings
cannot be controverted by the party making such admission and are conclusive as to such party,
and all proofs to the contrary or inconsistent therewith should be ignored, whether objection is
interposed by the party or not. The allegations, statements or admissions contained in a pleading
are conclusive as against the pleader. A party cannot subsequently take a position contrary of or
inconsistent with what was pleaded. (Citations omitted)

The admission having been made in a stipulation of facts at pre-trial by the parties, it must be
treated as a judicial admission. Under Section 4, of Rule 129 of the Rules of Court, a judicial
admission requires no proof.