Transpo Law

Haystacks Transportation Law Michael Vernon Guerrero Mendiola 2004 Shared under Creative Commons AttributionNonCommercial-ShareAlike 3.0 Philippines license.

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Table of Contents Caltex vs. Sulpicio Lines (GR 131166, 30 September 1999) …......... 1 First Philippine Industrial Corp. vs. CA (GR 125948, 29 December 1998) …......... 4 Arada vs. CA (GR 98243, 1 July 1992) …......... 6 Sabena Belgian World Airlines vs. CA (GR 104685, 14 March 1996) …......... 8 Philippine National Railways (PNR) vs. CA (GR L-55347, 4 October 1985) …......... 11 Eastern Shipping Lines vs. CA (GR 97412, 12 July 1994) …......... 13 Metro Port Services vs. CA (GR L-57582, 24 August 1984) …......... 15 Home Insurance Co. vs. American Steamship Agencies (GR L-25599, 4 April 1968) …......... 16 Lastimosa vs. Doliente …......... [unavailable] National Steel vs. CA (GR 112287, 12 December 1997) …......... 18 De Villata vs. JS Stanley (GR 8154, 20 December 1915) …......... 24 US vs. Quinajon (GR 8686, 30 July 1915) …......... 31 De Guzman vs. CA (GR L-47822, 22 December 1988) …......... 35 Planters Products vs. CA (GR 101503, 15 September 1993) …......... 39 Bascos vs. CA (GR 101089, 7 April 1993) …......... 43 Mendoza vs. PAL (GR L-3678, 29 February 1952) …......... 45 Coastwise Lighterage Corp. vs. CA (GR 114167, 12 July 1995) …......... 49 Benedicto vs. IAC (GR 70876, 19 July 1990) …......... 51 Teja Marketing vs. IAC (GR L-65510, 9 March 1987) …......... 53 BA Finance vs. CA (GR 98275, 13 November 1992) …......... 55 Vargas vs. Langkay …......... [unavailable] Nocum vs. Laguna Tayabas Bus Co. (GR L-23733, 31 October 1969) …......... 57 Tamayo vs. Aquino, et.al. (GR L-12634 & L-12720, 29 May 1959) …......... 60 Erezo vs. Jepte (GR L-9605, 30 September 1957) …......... 62 Zamboanga Transportation Co. vs. CA (GR L-25292, 29 November 1969) …......... 64 Santos vs. Sibog (GR L-26815, 26 May 1981) …......... 66 PAL vs. NLRC (GR L-62961, 2 September 1983) …......... 70 Vasquez vs. CA (GR L-42926, 13 September 1985) …......... 71 Dangwa Transportation vs. CA (GR 95582, 7 October 1991) …......... 73 Delsan Transport Lines vs. CA (GR 127897, 15 November 2001) …......... 76 Loadstar Shipping vs. CA (GR 131621, 28 September 1999) …......... 79 Metro Manila Transit Corporation vs. CA (GR 104408, 21 June 1993) …......... 81 Kapalaran Bus vs. Coronado (GR 85331, 25 August 1989) …......... 86 Trans-Asia Shipping Lines vs. CA (GR 118126, 4 March 1996) …......... 90 Belgian Overseas Chartering and Shipping vs. Philippine First Insurance Co. Inc. (GR 143133, 5 June 2002) …......... 93 Yobido vs. CA (GR 113003, 17 October 1997) …......... 96 Tan Liam Grocery. vs. De La Rama Steamship …......... [unavailable] National Development Co. vs. CA (GR L-49407, 19 August 1988) …......... 99 Ganzon vs. CA (GR L-48757, 30 Mary 1988) …......... 102 Mirasol vs. Robert Dollar Co. (GR 29721, 27 March 1929) …......... 104 Eastern Shipping Lines vs. IAC (GR L-69044, 29 May 1987) …......... 106 Kui Pai & Co. vs. Dollar Steamship Line (GR 30019, 2 March 1929) …......... 112 Compania Maritima vs. Insurance Co. of North America (GR L-18965, 30 October 1964) …......... 114 Government vs. Inchausti (GR 6957, 14 February 1913) …......... 117 Samar Mining Co. vs. Nordeutscher Lloyd (GR L-28673, 23 October 1984) …......... 119 Macam vs. CA (GR 125524, 25 August 1999) …......... 122 Saludo vs. CA (GR 95536, 23 March 1992) …......... 125 Delgado Bros. vs. CA (GR L-15654, 29 December 1960) …......... 134 Eastern Shipping Lines vs. CA (GR 80936, 17 October 1990) …......... 136 Limpangco Sons vs. Yangco Steamship (GR 10283, 25 July 1916) …......... 139

G. Martini Ltd. vs. Macondray & Co. (GR 13972, 28 July 1919) …......... 141 Heirs of de los Santos vs. CA (GR 51165, 21 June 1990) …......... 146 International Department Store vs. Jabellana …......... [unavailable] Compania Maritima vs. CA (GR L-31379, 29 August 1988) …......... 150 HE Heacock vs. Macondray (GR 16598, 3 October 1921) …......... 153 St. Paul Fire & Marine Insurance vs. Macondray (GR L-27795, 25 March 1976) …......... 155 Valenzuela Hardwood and Industrial vs. CA (GR 102316, 30 June 1997) …......... 157 Sweet Line vs. Teves (GR L-37750, 19 May 1978) …......... 161 Eastern and Australian Steamship vs. Great American Insurance (GR L-37604, 23 October 1981) …......... 164 Sea-land Service vs. IAC (GR 75118, 31 August 1987) …......... 165 Aboitiz Shipping vs. CA (GR 89757, 6 August 1990) …......... 170 Everett Steamship Corp. vs. CA (GR 122494, 8 October 1998) …......... 173 Shewaram vs. PAL (GR L-20099, 7 July 1966) …......... 177 Ong Yiu vs. CA (GR L-40597, 29 June 1979) …......... 179 British Airways vs. CA (GR 121824, 29 January 1998) …......... 182 PAL vs. CA (GR 92501, 6 March 1992) …......... 185 Robles vs. Santos …......... [unavailable] Quisumbing vs. CA (GR 50076, 14 September 1990) …......... 187 PanAm World Airways vs. Rapadas (GR 60673, 19 May 1992) …......... 189 PAL vs. CA (GR 120262, 17 July 1997) …......... 193 Baliwag Transit vs. CA (GR 116110, 15 May 1996) …......... 196 Mecenas vs. CA (GR 88052, 14 December 1989) …......... 199 PAL vs. CA (GR L-46558, 31 July 1981) …......... 204 Pilapil vs. CA (GR 52159, 22 December 1989) …......... 208 Fortune Express vs. CA (GR 119756, 18 March 1999) …......... 211 Landingin vs. Pangasinan Transportation (GR L-28014-15, 29 May 1970) …......... 214 California Lines vs. de los Santos (GR L-13254, 30 December 1961) …......... 216 Estrada vs. Consolacion (GR L-40948, 29 June 1976) …......... 217 Lara vs. Valencia (GR L-9907, 30 June 1958) …......... 220 Bayasen vs. CA (GR L-25785, 26 February 1981) …......... 222 Cervantes vs. CA (GR 125138, 2 March 1999) …......... 223 De Gillaco vs. Manila Railroad Co. (GR L-8034, 18 November 1955) …......... 225 Maranan vs. Perez (GR L-2272, 26 June 1967) …......... 227 Lasam vs. Smith (GR 19495, 2 February 1924) …......... 230 Sweet Lines vs. CA (GR L-46340, 28 April 1983) …......... 232 Magboo vs. Bernardo (GR L-16790, 30 April 1963) …......... 234 Isaac vs. AL Ammen Transportation (GR L-9671, 23 August 1957) …......... 235 Sanez vs. Samala …......... [unavailable] Panay Autobus vs. Pastor (GR 47933, 29 July 1942) …......... 238 Del Prado vs. Meralco (GR 29462, 7 March 1929) …......... 238 Cangco vs. Manila Railroad (GR 12191, 14 October 1918) …......... 241 De Guia vs. Manila Electric Railroad & Light Co. (GR 14335, 28 January 1920) …......... 248 Calalas vs. CA (GR 122039, 31 May 2000) …......... 251 Jesusa Vda. De Nueca vs Manila Railroad …......... [unavailable] Light Rail Transit Authority vs. Navidad (GR 145804, 6 February 2003) …......... 253 La Mallorca vs. CA (GR L-20761, 27 July 1966) …......... 256 Aboitiz Shipping Corp. vs. CA (GR 84458, 6 November 1989) …......... 258 Bachelor Express vs. CA (GR 85691, 31 July 1990) …......... 261 Bacarro vs. Castano (HR L-34597, 5 November 1982) …......... 265 Laguna Tayabas Bus vs. Tiongson (GR L-22143, 30 April 1966) …......... 267

Sulpicio Lines vs. CA (GR 113578, 14 July 1995) …......... 269 Fisher vs. Yangco Steamship (GR 8085, 5 November 1914) …......... 272 Fisher vs. Yangco Steamship (GR 8095, 31 March 1915) …......... 280 Maritime Co. of the Philippines vs. CA (GR 47004, 8 March 1989) …......... 282 Gatchalian vs. Delim (GR 56487, 21 October 1991) …......... 284 American Home Assurance vs. CA (GR 94149, 5 May 1992) …......... 288 Eastern Shipping Lines vs. Margarine-Verkaufs-Union GmbH (GR L-31087, 27 September 1979) …......... 290 Magellan Manufacturing Marketing vs. CA (GR 95529, 22 August 1991) …......... 292 Reyma Brokerage vs. Philippine Home Assurance Corp. (GR 93464, 7 October 1991) …......... 296 Keng Hua Paper Products vs. CA (GR 116863, 12 February 1998) …......... 298 Ysmael vs. Barretto (GR 28028, 25 November 1927) …......... 301 Maersk Line vs. CA (GR 94761, 17 May 1993) …......... 304 New Zealand Insurance Co. vs. IAC (GR L-66596, 28 August 1984) …......... 307 Mariano Uy Chaco Sons & Co. vs. Admiral Line (GR 22134, 17 October 1924) …......... 308 Standard Vacuum Oil Co. vs. Luzon Stevedoring Co. (GR L-5203, 18 April 1956) …......... 310 Tan Chiong Sian vs. Inchausti (GR 6092, 8 March 1912) …......... 313 World Fire vs. Macondray …......... [unavailable] Heacock’s Aklam vs. Aboitiz …......... [unavailable] New Zealand Insurance vs. Chua Joy (GR L-7311, 30 September 1955) …......... 318 E. Razon vs, CA (GR L-50242, 21 May 1988) …......... 320 Pernito Arrastre Services vs. Mendoza (GR L-53492, 29 December 1986) …......... 322 Tan Pho vs. Dalamal (GR 45598, 26 April 1939) …......... 327 Baer Senior & Co. vs. La Compania Maritima (GR 1963, 30 April 1906) …......... 328 Lopez vs. Duruelo (GR 29166, 22 October 1928) …......... 330 Philippine Refining v. Jarque (GR 41506, 25 March 1935) …......... 333 McMicking vs. El Banco Espanol-Filipino (GR 5029, 1 April 1909) …......... 334 Ivancich vs. Odlin (GR 924, 1 May 1902) …......... 337 Heath vs. Steamer San Nicolas (GR L-3066, 25 February 1907) …......... 339 Manila Steamship vs. Insa Abdulhaman (GR L-9534, 29 September 1956) …......... 343 Chua Yek Hong vs. IAC (GR L-74811, 30 September 1988) …......... 345 Commissioner vs. US Lines (GR L-16850, 30 May 1962) …......... 348 Madrigal Shipping vs. Ogilve (GR L-8431, 30 October 1958) …......... 350 Garcia vs. Ruiz (GR 923, 16 January 1903) …......... 353 Yaptico vs. Anderson (GR 9366, 1 August 1916) …......... 355 Yu Con vs. Ipil (GR 10195, 29 December 1916) …......... 356 US vs. Steamship “Islas Filipinas” (GR 8746, 30 October 1914) …......... 360 Ohta Development Co. vs. Steamship Pompey (GR 24658, 31 March 1926) …......... 363 Triton Insurance vs. Jose (GR 10381 and 10714, 14 January 1916) …......... 364 USA vs. Steamship Rubi (GR 9235, 17 November 1915) …......... 365 International Harvester Co. in Russia vs. Hamburg-American Line (GR 11515, 29 July 1918) …......... 370 Compagnie Franco-Indochinoise vs. Deutsch Australische Dampschiffs Gesselschaft (GR 11169, 31 March 1917) …......... 374 Guzman vs. William X (GR L-3649, 24 October 1907) …......... 378 US vs. Bacho (GR L-4091, 25 March 1908) …......... 380 Vir-Jen Shipping and Marine Services, NLRC (GR L-58011-12, 20 July 1982) …......... 381 Wallem Phil. Shipping vs. Minister of Labor (GR L-50734-37, 20 February 1981) …......... 387 Abueg vs. San Diego (CA-773-775, 17 December 1946) …......... 390 Murillo vs. Mendoza (GR 46020, 8 December 1938) …......... 392 Macondray vs. Delgado Bros. (GR L-13118, 28 April 1960) …......... 397 Bryan vs. Eastern & Australian SS (GR 9403, 4 November 1914) …......... 398 Puromines Inc. vs. CA (GR 91228, 22 March 1993) …......... 400

Litonjua Shipping vs. National Seamen Board (GR 51910, 10 August 1989) …......... 403 Maritime Agencies & Services vs. CA (GR 77638, 12 July 1990) …......... 406 Ouano vs. CA (GR 95900, 23 July 1992) …......... 411 NFA vs. CA (GR 96453, 4 August 1999) …......... 414 Market Developers vs. IAC (GR 74978, 8 September 1989) …......... 418 Marimperio Compania Naviera vs. CA (GR L-40234, 14 December 1987) …......... 421 O’Farrel vs. Meralco (GR 31222, 29 October 1929) …......... 424 Overseas Factors Inc. vs. South Sea Shipping (GR L-12138, 27 February 1962) …......... 426 Phoenix Assurance Co. Ltd. vs. US Lines GR L-24033, 22 February 1968) …......... 431 Telengtan Bros. & Sons. Vs. CA (GR 110581, 21 September 1994) …......... 434 De la Riva vs. Lizarraga Hermanos (GR L-2464, 7 January 1907) …......... 438 Banco Agricola y Pecuario v. El Dorado Trading …......... [unavailable] PC Ailment v. Macondray …......... [unavailable] Litton v. PNB …......... [unavailable] Oriental Commercial v. La Naviera Filipina …......... [unavailable] Philippine Home Assurance vs. CA (GR 106999, 20 June 1996) …......... 439 A. Magsaysay Inc. vs. Agan (GR L-6393, 31 January 1955) …......... 441 Austria vs. CA (GR 133323, 9 March 2000) …......... 443 Smith Bell vs. CA (GR 56294, 20 May 1991) …......... 445 Manila vs. Atlantic Gulf and Pacific Co. (GR 4510, 19 December 1908) …......... 450 Marine Trading vs. Government (GR 13422, 8 November 1918) …......... 451 A. Urrutia & Co. vs. Baco River Plantation (GR 7675, 25 March 1913) …......... 452 Versoza vs. Lim (GR 20145, 15 November 1923) …......... 458 Government vs. Philippine Steamship Co. (GR 18957, 16 January 1923) …......... 461 Picart vs. Smith (GR L-12219, 15 March 1918) …......... 462 US vs. Smith Bell (GR 1876, 30 September 1905) …......... 464 Philippine Shipping Co. vs. Vergara (GR 1600, 1 June 1906) …......... 465 Chin Guan vs. Compania Maritima (GR 45070, 28 November 1938) …......... 467 Manila Railroad vs. Macondray (GR L-12475, 21 March 1918) …......... 468 Standard Oil Co. of New York vs. Lopez Castelo (GR 13695, 18 October 1921) …......... 470 Jarque vs. Smith Bell (GR 32986, 11 November 1930) …......... 473 Taxicab Operators v. The Board of Transportation [GR L-59234, 30 September 1982] …......... 475 Napocor vs. CA (GR 113103, 13 June 1997) …......... 476 GMCR vs. Bell Telecoms (GR 126496, 30 April 1997) …......... 480 Maceda vs. ERB (GR 95203-05, 18 December 1990) …......... 485 Lagman vs. Manila (GR L-23305, 30 June 1966) …......... 488 Philippine Global Communications vs. Relova (GR L-52819, 2 October 1980) …......... 491 Philippine Global vs. Relova (GR L-60548, 10 November 1986) …......... 492 PLDT vs. NTC (GR 88404, 18 October 1990) …......... 496 RCPI vs. Rodriguez (GR 83768, 28 February 1990) …......... 502 Telefast Communications vs. Castro (GR 73867, 29 February 1988) …......... 505 RCPI vs. CA (GR 79578, 13 March 1991) …......... 507 Zulueta vs. Pan American World Airways (GR L-28589, 8 January 1973); Res. …......... 509 Lopez vs. Pan American World Airways (GR L-22415, 30 March 1966) …......... 516 Pan American World Airways vs. IAC (GR L-70462, 11 August 1988) …......... 521 Luna vs. CA (GR 100374-75, 27 November 1992) …......... 524 Santos vs. Northwest Orient Airlines (GR 101538, 23 June 1992) …......... 526 Tan vs. Northwestern Airlines (GR 135802, 3 March 2000) …......... 532 American Airlines vs. CA (GR 116044-45, 9 March 2000) …......... 533 Yu Eng Cho vs. Pan American World Airways (GR 123560, 27 March 2000) …......... 535 {200-11}

Rizal Surety & Insurance vs. Macondray & Co. (GR L-24064, 29 February 1968) …......... 540 The American Insurance Co. vs. Compania Maritima (GR L-24515, 18 November 1967) …......... 541 Mitsui vs. CA (GR 119571, 11 March 1998) …......... 542 Mayer Steel Pipe vs. CA (GR 124050, 19 June 1997) …......... 544 Barrios vs. Go Thong (GR L-17192, 30 March 1963) …......... 545 Wallace vs. Pujalte Co. (GR 10019, 29 March 1916) …......... 547 Atlantic Gulf & Pacific Co. vs. Uchida Kisen Kaisha (GR 15871, 7 November 1921) …......... 549 Erlanger & Galinger vs. Swedish East Asiatic (GR 10051, 9 March 1916) …......... 552 Pestano vs. Sumayang (GR 139875, 4 December 2000) …......... 561

This collection contains one hundred ninety eight (198) out of two hundred nine (209) assigned cases summarized in this format by Michael Vernon M. Guerrero (as a junior law student) during the First Semester, school year 2004-2005 in the Transportation Law class under Atty. Porfirio Panganiban at the Arellano University School of Law (AUSL). Compiled as PDF, July 2011. Berne Guerrero entered AUSL in June 2002 and eventually graduated from AUSL in 2006. He passed the Philippine bar examinations immediately after (April 2007).

www.berneguerrero.com

Haystacks (Berne Guerrero)

[1], also [173] Caltex vs. Sulpicio Lines (GR 131166, 30 September 1999) First Division, Pardo (J): 3 concur, 1 took no part Facts: MT Vector is a tramping motor tanker owned and operated by Vector Shipping Corporation, which is engaged in the business of transporting fuel products such as gasoline, kerosene, diesel and crude oil. On the other hand, the MV Doña Paz is a passenger and cargo vessel owned and operated by Sulpicio Lines, Inc. plying the route of Manila/ Tacloban/ Catbalogan/ Manila/ Catbalogan/ Tacloban/ Manila, making trips twice a week. On 19 December 1987, motor tanker MT Vector left Limay, Bataan, enroute to Masbate, loaded with 8,800 barrels of petroleum products shipped by Caltex, by virtue of a charter contract between Vector Shipping and Caltex. The next day, the passenger ship MV Doña Paz left the port of Tacloban headed for Manila with a complement of 59 crew members including the master and his officers, and passengers totaling 1,493 as indicated in the Coast Guard Clearance, but possibly carrying an estimated 4,000 passengers. At about 10:30 p.m. of 20 December 1987, the two vessels collided in the open sea within the vicinity of Dumali Point between Marinduque and Oriental Mindoro. All the crewmembers of MV Doña Paz died, while the two survivors from MT Vector claimed that they were sleeping at the time of the incident. Only 24 survived the tragedy after having been rescued from the burning waters by vessels that responded to distress calls. Among those who perished were public school teacher Sebastian Cañezal (47 years old) and his daughter Corazon Cañezal (11 years old), both unmanifested passengers but proved to be on board the vessel. On 22 March 1988, the board of marine inquiry after investigation found that the MT Vector, its registered operator Francisco Soriano, and its owner and actual operator Vector Shipping Corporation, were at fault and responsible for its collision with MV Doña Paz. On 13 February 1989, Teresita and Sotera Cañezal, filed with the RTC Manila, a complaint for “Damages Arising from Breach of Contract of Carriage” against Sulpicio Lines, Inc. Sulpicio, in turn, filed a third party complaint against Francisco Soriano, Vector Shipping Corporation and Caltex (Philippines), Inc. On 15 September 1992, the trial court rendered decision dismissing the third party complaint against Caltex. On appeal to the Court of Appeals interposed by Sulpicio Lines, Inc. (CA-GR CV 39626), on 15 April 1997, the Court of Appeal modified the trial court’s ruling and included petitioner Caltex as one of the those liable for damages. Hence the petition. The Supreme Court granted the petition and set aside the decision of the Court of Appeals, insofar as it held Caltex liable under the third party complaint to reimburse/indemnify Sulpicio Lines, Inc. the damages the latter is adjudged to pay plaintiffs-appellees. The Court affirmed the decision of the Court of Appeals insofar as it orders Sulpicio Lines, Inc. to pay the heirs of Sebastian E. Cañezal and Corazon Cañezal damages as set forth therein. Third-party defendant-appellee Vector Shipping Corporation and Francisco Soriano are held liable to reimburse/indemnify defendant Sulpicio Lines, Inc. whatever damages, attorneys’ fees and costs the latter is adjudged to pay plaintiffs-appellees in the case. 1.

The respective rights and duties of a carrier depends on the nature of the contract of carriage The respective rights and duties of a shipper and the carrier depends not on whether the carrier is public or private, but on whether the contract of carriage is a bill of lading or equivalent shipping documents on the one hand, or a charter party or similar contract on the other. In the case at bar, Caltex and Vector entered into a contract of affreightment, also known as a voyage charter. 2.

Charter party and contract of affreightment defined A charter party is 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 is one by which the owner of a

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ship or other vessel lets the whole or part of her to a merchant or other person for the conveyance of goods, on a particular voyage, in consideration of the payment of freight. 3.

Kinds of contract of affreightment A contract of affreightment may be either time charter, wherein the leased vessel is leased to the charterer for a fixed period of time, or voyage charter, wherein the ship is leased for a single voyage. In both cases, the charter-party provides for the hire of the vessel only, either for a determinate period of time or for a single or consecutive voyage, the ship owner to supply the ship’s store, pay for the wages of the master of the crew, and defray the expenses for the maintenance of the ship. 4.

Charterer’s liability: Bareboat charter vs. Contract of affreightment Under a demise or bareboat charter, the charterer mans the vessel with his own people and becomes, in effect, the owner for the voyage or service stipulated, subject to liability for damages caused by negligence. If the charter is a contract of affreightment, which leaves the general owner in possession of the ship as owner for the voyage, the rights and the responsibilities of ownership rest on the owner. The charterer is free from liability to third persons in respect of the ship. 5.

Categories of charter parties Charter parties fall into three main categories: (1) Demise or bareboat, (2) time charter, (3) voyage

charter. 6.

Bareboat, but not voyage charter, transforms common carrier into private carrier Although a charter party may transform a common carrier into a private one, the same however is not true in a contract of affreightment (Coastwise Lighterage Corp. vs. CA) A public carrier shall remain as such, notwithstanding the charter of the whole or portion of a vessel by one or more persons, provided the charter is limited to the ship only, as in the case of a time-charter or voyage charter. It is only when the charter includes both the vessel and its crew, as in a bareboat or demise that a common carrier becomes private, at least insofar as the particular voyage covering the charter-party is concerned. Indubitably, a ship-owner in a time or voyage charter retains possession and control of the ship, although her holds may, for the moment, be the property of the charterer. (Planters Products vs. CA). In the case at bar, the charter party agreement did not convert the common carrier into a private carrier. The parties entered into a voyage charter, which retains the character of the vessel as a common carrier. 7.

Common carrier defined A common carrier is a person or corporation whose regular business is to carry passengers or property for all persons who may choose to employ and to remunerate him. In the case at bar, MT Vector fits the definition of a common carrier under Article 1732 of the Civil Code (Common carriers are persons, corporations, firms or associations engaged in the business of carrying or transporting passengers for passengers or goods or both, by land, water, or air for compensation, offering their services to the public). 8.

Article 1732, Common carrier, construed Article 1732 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 services on a 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. Article 1733 deliberately refrained from making such distinctions. 9.

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Under Section 3 of the Carriage of Goods by Sea Act, (1) The carrier shall be bound before and at the beginning of the voyage to exercise due diligence to (a) Make the ship seaworthy; (b) Properly man, equip, and supply the ship; among others. Carriers are deemed to warrant impliedly the seaworthiness of the ship. For a vessel to be seaworthy, it must be adequately equipped for the voyage and manned with a sufficient number of competent officers and crew. The failure of a common carrier to maintain in seaworthy condition the vessel involved in its contract of carriage is a clear breach of its duty prescribed in Article 1755 of the Civil Code. 10.

Article 1173 of the New Civil Code Article 1173 of the Civil Code provides that “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 Article 1171 and 2201 paragraph 2, shall apply. If the law does not state the diligence which is to be observed in the performance, that which is expected of a good father of a family shall be required.” 11.

Negligence defined Negligence, as commonly understood, is conduct which naturally or reasonably creates undue risk or harm to others. It may be the failure to observe that degree of care, precaution, and vigilance, which the circumstances justly demand, or the omission to do something which ordinarily regulate the conduct of human affairs, would do (Southeastern College vs. CA). 12. Reason for the applicability of Section 3 COGSA, and Article 1755 NCC to carriers, not shipper and passengers; Ordinary diligence required of shippers The provisions owed their conception to the nature of the business of common carriers. This business is impressed with a special public duty. The public must of necessity rely on the care and skill of common carriers in the vigilance over the goods and safety of the passengers, especially because with the modern development of science and invention, transportation has become more rapid, more complicated and somehow more hazardous. For these reasons, a passenger or a shipper of goods is under no obligation to conduct an inspection of the ship and its crew, the carrier being obliged by law to impliedly warrant its seaworthiness. The charterer of a vessel has no obligation before transporting its cargo to ensure that the vessel it chartered complied with all legal requirements. The duty rests upon the common carrier simply for being engaged in “public service.” The Civil Code demands diligence which is required by the nature of the obligation and that which corresponds with the circumstances of the persons, the time and the place. Because of the implied warranty of seaworthiness, shippers of goods, when transacting with common carriers, are not expected to inquire into the vessel’s seaworthiness, genuineness of its licenses and compliance with all maritime laws. To demand more from shippers and hold them liable in case of failure exhibits nothing but the futility of our maritime laws insofar as the protection of the public in general is concerned. By the same token, passengers cannot be expected to inquire every time they board a common carrier, whether the carrier possesses the necessary papers or that all the carrier’s employees are qualified. Such a practice would be an absurdity in a business where time is always of the essence. Considering the nature of transportation business, passengers and shippers alike customarily presume that common carriers possess all the legal requisites in its operation. In the case at bar, the nature of the obligation of Caltex demands ordinary diligence like any other shipper in shipping his cargoes. 13.

Caltex not liable for damages Caltex and Vector Shipping Corporation had been doing business since 1985, or for about two years before the tragic incident occurred in 1987. Past services rendered showed no reason for Caltex to observe a higher degree of diligence. Clearly, as a mere voyage charterer, Caltex had the right to presume that the ship was seaworthy as even the Philippine Coast Guard itself was convinced of its seaworthiness. All things considered, we find no legal basis to hold petitioner liable for damages.

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[2], also [10] First Philippine Industrial Corp. vs. CA (GR 125948, 29 December 1998) Second Division , Martinez (J): 3 concur Facts: First Philippine Industrial Corporation (FPIC) is a grantee of a pipeline concession under RA 387, as amended, to contract, install and operate oil pipelines. The original pipeline concession was granted in 1967 and renewed by the Energy Regulatory Board in 1992. Sometime in January 1995, FPIC applied for a mayor’s permit with the Office of the Mayor of Batangas City. However, before the mayor’s permit could be issued, the City Treasurer required FPIC to pay a local tax based on its gross receipts for the fiscal year 1993 pursuant to the Local Government Code. The City Treasurer assessed a business tax on the petitioner amounting to P956,076.04 payable in four installments based on the gross receipts for products pumped at GPS-1 for the fiscal year 1993 which amounted to P181,681,151.00. In order not to hamper its operations, FPIC paid the tax under protest in the amount of P239,019.01 for the first quarter of 1993. On 8 March 1994, the City Treasurer denied the protest contending that petitioner cannot be considered engaged in transportation business, thus it cannot claim exemption under Section 133 (j) of the Local Government Code. On 15 June 1994, FPIC filed with the RTC Batangas City a complaint for tax refund with prayer for writ of preliminary injunction against the City of Batangas and Adoracion Arellano in her capacity as City Treasurer (Civil Case 4293). On 3 October 1994, the trial court rendered a decision dismissing the complaint. PFIC assailed the aforesaid decision before the Supreme Court via a petition for review. On 27 February 1995, the Supreme Court referred the case to the Court of Appeals for consideration and adjudication (CA-GR SP 36801). On 29 November 1995, the CA rendered a decision affirming the trial court’s dismissal of petitioner’s complaint. FPIC’s motion for reconsideration was denied on 18 July 1996. Hence, the petition for review on certiorari. At first, the petition was denied due course in a Resolution dated 11 November 1996. FPIC moved for a reconsideration which was granted by the Supreme Court in a Resolution of 22 January 1997. Thus, the petition was reinstated. Finally, the Supreme Court granted the petition, and thus reversed and set aside the decision of the Court of Appeals. 1.

Common Carrier defined (broad definition) A “common carrier” may be defined, broadly, as one who holds himself out to the public as engaged in the business of transporting persons or property from place to place, for compensation, offering his services to the public generally. 2.

Common Carrier defined (Article 1732) Article 1732 of the Civil Code defines a “common carrier” as “any person, corporation, firm or association engaged in the business of carrying or transporting passengers or goods or both, by land, water, or air, for compensation, offering their services to the public.” 3.

Test for determining whether a party is a common carrier of goods a. He must be engaged in the business of carrying goods for others as a public employment, and must hold himself out as ready to engage in the transportation of goods for person generally as a business and not as a casual occupation; b. He must undertake to carry goods of the kind to which his business is confined; c. He must undertake to carry by the method by which his business is conducted and over his established roads; and d. The transportation must be for hire.

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4.

FPIC is a common carrier Based on the definitions and requirements, FPIC is a common carrier. It is engaged in the business of transporting or carrying goods, i.e. petroleum products, for hire as a public employment. It undertakes to carry for all persons indifferently, that is, to all persons who choose to employ its services, and transports the goods by land and for compensation. 5. The fact that FPIC has a limited clientele does not exclude it from the definition of a common carrier Article 1732 of the Civil Code makes no distinction between one whose principal business activity is the carrying of persons or goods or both, and one who does such carrying only as an ancillary activity (in local idiom, as a ‘sideline’). Article 1732 . . . 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 1877 deliberately refrained from making such distinctions. (De Guzman vs. CA) 6.

Common Carrier under Article 1732 coincides neatly with notion of Public Service 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 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.” 7.

Oil pipeline operators are common carriers; Motor vehicle not required The definition of “common carriers” in the Civil Code makes no distinction as to the means of transporting, as long as it is by land, water or air. It does not provide that the transportation of the passengers or goods should be by motor vehicle. In fact, in the United States, oil pipe line operators are considered common carriers. 8.

Pipeline concessionaire as common carrier (RA 387) Under the Petroleum Act of the Philippines (Republic Act 387), FPIC is considered a “common carrier.” Thus, Article 86 thereof provides that “Pipe line concessionaire as common carrier. — A pipe line shall have the preferential right to utilize installations for the transportation of petroleum owned by him, but is obliged to utilize the remaining transportation capacity pro rata for the transportation of such other petroleum as may be offered by others for transport, and to change without discrimination such rates as may have been approved by the Secretary of Agriculture and Natural Resources.” 9.

Petroleum operation regarded as public utility (RA 387) Republic Act 387 also regards petroleum operation as a public utility. Pertinent portion of Article 7 thereof provides “that everything relating to the exploration for and exploitation of petroleum . . . and everything relating to the manufacture, refining, storage, or transportation by special methods of petroleum, is hereby declared to be a public utility.”

Transportation Law, 2004 ( 5 )

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10.

Pipeline concessionaire a common carrier (BIR Ruling 069-83) The Bureau of Internal Revenue likewise considers FPIC a “common carrier.” In BIR Ruling 069-83, it declared that “. . . since (petitioner) is a pipeline concessionaire that is engaged only in transporting petroleum products, it is considered a common carrier under Republic Act No. 387 . . . Such being the case, it is not subject to withholding tax prescribed by Revenue Regulations No. 13-78, as amended.” 11. LGC

FPIC is a common carrier and is thus exempt from the business tax provided in Section 133 (j)

FPIC is a “common carrier” and, therefore, exempt from the business tax as provided for in Section 133 (j), of the Local Government Code. Section 133 (j) provides that “(Common Limitations on the Taxing Powers of Local Government Units) Unless otherwise provided herein, the exercise of the taxing powers of provinces, cities, municipalities, and barangays shall not extend to the levy of the following: xxx (j.) Taxes on the gross receipts of transportation contractors and persons engaged in the transportation of passengers or freight by hire and common carriers by air, land or water, except as provided in this Code.” 12. Non-imposition of business tax against common carriers to prevent duplication of “common carrier’s tax” The legislative intent in excluding from the taxing power of the local government unit the imposition of business tax against common carriers is to prevent a duplication of the so-called “common carrier’s tax.” The legislature thus provided an exception under Section 125 (now Section 137) that a province may impose this tax at a specific rate. In the case at bar, FPIC is already paying 3% common carrier’s tax on its gross sales/earnings under the National Internal Revenue Code. To tax FPIC again on its gross receipts in its transportation of petroleum business would defeat the purpose of the Local Government Code. [3] Arada vs. CA (GR 98243, 1 July 1992) Second Division, Paras (J): 3 concur Facts: Alejandro Arada is the proprietor and operator of the firm South Negros Enterprises which has been organized and established for more than 10 years. It is engaged in the business of small scale shipping as a common carrier, servicing the hauling of cargoes of different corporations and companies with the five vessels it was operating. On 24 March 1982, Arada entered into a contract with San Miguel Corporation (SMC) to safely transport as a common carrier, cargoes of the latter from San Carlos City, Negros Occidental to Mandaue City using one of Arada’s vessels, M/L Maya. On 24 March 1982, Arada thru its crew master, Mr. Vivencio Babao, applied for a clearance with the Philippine Coast Guard for M/L Maya to leave the port of San Carlos City, but due to a typhoon, it was denied clearance by SNI Antonio Prestado PN who was then assigned at San Carlos City Coast Guard Detachment. On 25 March 1982 M/L Maya was given clearance as there was no storm and the sea was calm. Hence, said vessel left for Mandaue City. While it was navigating towards Cebu, a typhoon developed and said vessel was buffeted on all its sides by big waves. Its rudder was destroyed and it drifted for 16 hours although its engine was running. On 27 March 1982 at about 4:00 a.m., the vessel sank with whatever was left of its cargoes. The crew was rescued by a passing pump boat and was brought to Calanggaman Island. Later in the afternoon, they were brought to Palompon, Leyte, where Vivencio Babao filed a marine protest. On the basis of such marine protest, the Board of Marine Inquiry conducted a hearing of the sinking of M/L Maya wherein SMC was duly represented. Said Board made it findings and recommendation dated 7 November 1983, absolving the owner/operator, officers and crew of M/L Maya from any administrative liability. The Board’s report containing its findings and recommendation was then forwarded to the headquarters of the Philippine Coast Guard for appropriate action. On the basis of such report, the Commandant of the Philippine Coast Guard rendered a decision dated 21 December 1984 in SBMI Adm. Case No. 88-82 exonerating the owner/operator officers and crew of the ill-fated M/L Maya from any administrative liability on account of said incident. Transportation Law, 2004 ( 6 )

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On 25 March 1983, SMC filed a complaint in the RTC its first cause of action being for the recovery of the value of the cargoes anchored on breach of contract of carriage. After due hearing, said court rendered a decision dated 18 July 1988, where (1) With respect to the first cause of action, claim of plaintiff is hereby dismissed; (2) Under the second cause of action, defendant must pay plaintiff the sum of P2,000.00; (3) In the third cause of action, the defendant must pay plaintiff the sum of P2,849.20; (4) Since the plaintiff has withheld the payment of P12,997.47 due the defendant, the plaintiff should deduct the amount of P4,849.20 from the P12,997.47 and the balance of P8,148.27 must be paid to the defendant; and (5) Defendant’s counterclaim not having been substantiated by evidence, is likewise dismissed. NO COSTS.” (Orig. Record, pp. 193-195). Thereafter, SMC appealed the decision to the Court of Appeals (CA-GR CV 20597). In its decision promulgated on 8 April 1991, the Court of Appeals reversed the decision of the lower court, and thereupon ordered Arada to pay unto the SMC the amount of P176,824.80 representing the value of the cargo lost on board the ill-fated vessel, M/L Maya, with interest thereon at the legal rate from date of the filing of the complaint on 25 March 1983, until fully paid, and the costs. Hence, the petition for review on certiorari. On 20 November 1991, the Supreme Court gave due course to the petition. Finally, it affirmed the appealed decision. 1.

Common carriers defined Common carriers are persons, corporations, firms or associations engaged in the business of carrying or transporting passengers or goods or both, by land, water or air, for compensation offering their services to the public (Art. 1732 of the New Civil Code). In the case at bar, there is no doubt that Arada was exercising its function as a common carrier when it entered into a contract with SMC to carry and transport the latter’s cargoes. This fact is best supported by the admission of petitioner’s son, Mr. Eric Arada, who testified as the officer-in-charge for operations of South Negros Enterprises in Cebu City. 2.

Duty of common carrier to exercise extraordinary diligence; Fortuitous event A common carrier, both from the nature of its business and for insistent reasons of public policy is burdened by law with the duty of exercising extraordinary diligence not only in ensuring the safety of passengers, but in caring for the goods transported by it. The loss or destruction or deterioration of goods turned over to the common carrier for the conveyance to a designated destination raises instantly a presumption of fault or negligence on the part of the carrier, save only where such loss, destruction or damage arises from extreme circumstances such as a natural disaster or calamity.(Benedicto v. IAC, G.R. No. 70876, July 19, 1990, 187 SCRA 547) 3. Natural disaster must be the proximate and only cause of the loss to exempt common carrier from liability In order that the common carrier may be exempted from responsibility, the natural disaster must have been the proximate and only cause of the loss. However, the common carrier must exercise due diligence to prevent or minimize the loss before, during and after the occurrence of flood, storm or other natural disaster in order that the common carrier may be exempted from liability for the destruction or deterioration of the goods (Article 1739, New Civil Code). 4.

Failure to ascertain the location and direction of typhoon shows negligence Vivencio Babao, the ship’s captain, knew of the impending typhoon on 24 March 1982 when the Philippine Coast Guard denied M/L Maya the issuance of a clearance to sail. Less than 24 hours elapsed since the time of the denial of said clearance and the time a clearance to sail was finally issued on 25 March 1982. Records will show that Babao did not ascertain where the typhoon was headed by the use of his vessel’s barometer and radio. Neither did the captain of the vessel monitor and record the weather conditions everyday Transportation Law, 2004 ( 7 )

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as required by Art. 612 of the Code of Commerce. Had he done so while navigating for 31 hours, he could have anticipated the strong winds and big waves and taken shelter. 5. PAG-ASA’s records as per March 25-27, 1982 on conditions prevailing in the vicinity of Catmon, Cebu As per official records of the Climatological Division of the Philippine Atmospheric, Geophysical and Astronomical Services Administration (PAG-ASA) issued by its Chief of Climatological Division, Primitivo G. Ballan, Jr. as to the weather and sea conditions that prevailed in the vicinity of Catmon, Cebu during the period March 25-27, 1982, the sea conditions on March 25, 1982 were slight to rough and the weather conditions then prevailing during those times were cloudy skies with rainshowers and the small waves grew larger and larger. 6.

Circumstances constitute lack of foresight and minimum vigilance over the cargoes A common carrier is obliged to observe extraordinary diligence and the failure of Babao to ascertain the direction of the storm and the weather condition of the path they would be traversing, constitute lack of foresight and minimum vigilance over its cargoes taking into account the surrounding circumstances of the case. 7.

Carrier’s fault or negligence presumed While the goods are in the possession of the carrier, it is but fair that it exercises extraordinary diligence in protecting them from loss or damage, and if loss occurs, the law presumes that it was due to the carrier’s fault or negligence; that is necessary to protect the interest of the shipper which is at the mercy of the carrier (Art. 1756, Civil Code, Aboitiz Shipping Corporation v. Court of Appeals, G.R. No. 89757, Aug. 6, 1990, 188 SCRA 387). 8.

Crew of M/L Maya did not have the required qualifications The records show that the crew of M/L Maya did not have the required qualifications provided for in PD 97 or the Philippine Merchant Marine Officers Law, all of whom were unlicensed. While it is true that they were given special permit to man the vessel, such permit was issued at the risk and responsibility of the owner. 9. Exoneration from administrative liability does not mean exoneration from liability as common carrier The exoneration made by the Special Board of Marine Inquiry was but with respect to the administrative liability of the “owner/operator, officers and crew of the ill-fated” vessel. It could not have meant exoneration of Arada from liability as a common carrier for his failure to observe extraordinary diligence in the vigilance over the goods it was transporting and for the negligent acts or omissions of his employees. Such is the function of the Court, not the Special Board of Marine Inquiry.” 10.

Jurisdiction of the Board of Marine Inquiry and the Special Board of Marine Inquiry The Philippine Merchant Marine Rules and Regulations particularly Chapter XVI thereof entitled “Marine Investigation and Suspension and Revocation Proceedings” prescribes the Rules governing maritime casualties or accidents, the rules and procedures in administrative investigation of all maritime cases within the jurisdiction or cognizance of the Philippine Coast Guard and the grounds for suspension and revocation of licenses/certificates of marine officers and seamen (1601 — SCOPE); clearly, limiting the jurisdiction of the Board of Marine Inquiry and Special Board of Marine Inquiry to the administrative aspect of marine casualties in so far as it involves the shipowners and officers. [4], also [101] Sabena Belgian World Airlines vs. CA (GR 104685, 14 March 1996) Transportation Law, 2004 ( 8 )

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First Division: Vitug (J): 4 concur Facts: On 21 August 1987, Ma. Paula San Agustin was a passenger on board flight SN 284 of Sabena Belgian World Airlines originating from Casablanca to Brussels, Belgium. She was issued Tag 77143 on her valuables, namely: jewelries valued at $2,350.00; clothes $1,500.00 shoes/bag $150; accessories $75; luggage itself $10.00; or a total of $4,265.00. She stayed overnight in Brussels and her luggage was left on board Flight SN 284. When she arrived at Manila International Airport on 2 September 1987 and immediately submitted her Tag to facilitate the release of her luggage but the luggage was missing. She was advised to accomplish and submitted and filed on the same day. She followed up her claim on 14 September 1987 but the luggage remained to be missing. On 15 September 1987, she filed her formal complaint with the office of Ferge Massed, the airlines’s Local Manager, demanding immediate attention. On 30 September 1987, on the Occasion of San Agustin’s following up her luggage claim, she was furnished copies of the airlines’s telexes with and information that the Brussel’s Office of defendant found the luggage and that they have assured by the airline that it has notified its Manila Office 1987. But unfortunately San Agustin was informed that the luggage was lost for the second time. At the time of the filling of the complaint, the luggage was its content has not been found. San Agustin demanded from the defendant the money value of the luggage and its contents amounting to $4,265.00 or its exchange value, but the airline refused to settle the claim. After trial, the trial court rendered judgment ordering Sabena Belgian World Airlines to pay Ma. Paula San Agustin (a) US$4,265.00 or its legal exchange in Philippine pesos; “(b) P30,000.00 as moral damages; (c) P10,000.00 as exemplary damages; (d) P10,000.00. attorney’s fees; and (e) (t)he cost of the suit. Sabena appealed the decision of the Regional Trial Court to the Court of Appeals. The appellate court, in its decision of 27 February 1992, affirmed in toto the trial court’s judgment. Hence, the petition for review. The Supreme Court affirmed the appealed decision, with costs against Sabena Belgian World Airlines. 1.

Fault or negligence; Rule in contracts and common carriers Fault or negligence consists in the omission of that diligence which is demanded by the nature of an obligation and corresponds with the circumstances of the person, of the time, and of the place. When the source of an obligation is derived from a contract, the mere breach or non-fulfillment of the prestation gives rise to the presumption of fault on the part of the obligor. This rule is not different in the case of common carriers in the carriage of good father of a family but that of “extraordinary” care in the vigilance over the goods. 2.

Extraordinary diligence required on carriers Art. 1733 of the [Civil] Code provides that from the very nature of their business and by reason of public policy, common carriers are bound to observe extraordinary diligence in the vigilance over the goods transported by them. This extraordinary responsibility, according to Art. 1736, lasts from the time the goods are unconditionally placed in the possession of and received by the consignee or person who has the right to receive them. Art 1737 states that the common carrier’s duty to observe extraordinary diligence in the vigilance over the goods transported by them remains in full force and effect even when they are temporarily unloaded or stored in transits.’ And Art. 1735 establishes the presumption that if the goods are lost, destroyed or deteriorate, common carrier are presumed to have been at fault or to have acted negligently, unless they prove that they had observed extraordinary diligence as required in Article 1733. 3.

Exceptions to extraordinary diligence requirement The only exceptions to the foregoing extraordinary responsibility of the common carrier is when the loss, destruction, or deterioration of the goods is due to any of the following causes: (1) Flood, storm, earthquake, lightning, or other natural disaster or calamity; Transportation Law, 2004 ( 9 )

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(2) (3) (4) (5)

Act of the public enemy in war, whether international or civil; Act or omission of the shipper or owner of the goods; The character of the goods or defects in the packing or in the containers; Order or act of excepted causes obtains in the case.

4.

Tort doctrine not a defense in failure to observe extraordinary diligence The rules as to the extraordinary diligence required in carriers remain basically unchanged even when the contract is breached by tort (on the ground that Section 5(c), Article IX, of the General Conditions of Carriage, signed at Warsaw, Poland, on 02 October 1929, as amended by the Hague Protocol of 1955, generally observed by International carriers, stating among other things, that: “Passengers shall not include in his checked baggage, and the carrier may refuse to carry as checked baggage, Fragiles or perishable articles, money, jewelry, precious metals, negotiable papers, securities or other valuable”) although noncontradictory principles on quasi-delict may then be assimilated as also forming part of the governing law. The airline company is not thus entirely off track when it has likewise raised in its defense the tort doctrine cannot support its case. 5.

Proximate cause defined Proximate cause is that which, in natural and continues sequence, unbroken by any efficient intervening cause, produces injury and without which the result would not have occurred. 6.

Proximate legal cause defined The proximate legal cause is that acting first and producing the injury, either immediately or by setting other events in motion, all constituting a natural and continuous chain of events, each having a close causal connection with its immediate predecessors, the final event in the chain immediately affecting the injury as a natural and probable result of the cause which first acted, under such circumstances that the person responsible for the event should, as an ordinarily prudent and intelligent person, have reasonable ground to expect at the moment of his act or default that an injury to some person might probably result therefrom. 7.

Loss of baggage twice shows gross negligence It remained undisputed that San Agustin’s luggage was lost while it was in the custody of Sabena Belgian World Airlines. It was supposed to arrive on the same flight that San Agustin took in returning to Manila on 2 September 1987. On 23 October 1987, she was advised that her luggage had finally been found, with its contents intact; only to be told later that her luggage had been lost for the second time. Thus, Sabena Belgian World Airlines is ultimately guilty of “gross negligence” in the handling of San Agustin’s luggage, for the “loss of said baggage not only once by twice underscore the wanton negligence and lack of care “ on the part of the carrier. 8. Warsaw convention denies the carrier availment of provisions limiting liability if damage is caused by willful misconduct or default The Warsaw Convention denies to the carrier availment “of the provisions which exclude or limit his liability if the damage is caused by his willful; misconduct or by such default on his part as, in accordance with the law of the court seized of the case, is considered to be equivalent to willful misconduct,” or “if the damage is (similarly) caused by any agent of the carrier acting within the scope of his employment.” The Hague Protocol amended the Warsaw Convention by removing the provision that if the airline took all necessary steps to avoid the damage, it could exculpate itself completely, and declaring the stated limits of liability not applicable “if it is proved that the damage resulted from an act or omission of the carrier, its servants or agents, done with intent to cause damage or recklessly and with knowledge that damage would probably result.” The same deletion was effected by the Montreal Agreement of 1966, with the result that a passenger could recover unlimited damages upon proof of wilful misconduct. The Convention does not thus operate as an exclusive enumeration of the instances of an airline’s liability, or as an absolute limit of the extent of that liability. Slight reflection readily leads to the conclusion that it should be deemed a limit of Transportation Law, 2004 ( 10 )

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liability only in those cases where the cause of the death or injury to person, or destruction, loss or damage to property or delay in its transport is not attributable to or attended by any wilful misconduct, bad faith, recklessness or otherwise improper conduct on the part of any official or employee for which the carrier is responsible, and the carrier’ or misconduct of its employees, or for some Particular or exceptional type of damage. (Alitalia vs. IAC) 9. Philippines is country of destination; No error in application of usual rules on extent of recoverable damages beyond the Warsaw limitations There is no error in the preponderant application to the case of the usual rules on the extent of recoverable damages beyond the Warsaw limitations. Under domestic law and jurisprudence (the Philippines being the country of destination), the attendance of gross negligence (given the equivalent of fraud or bad faith) holds the common carrier liable for all damages which can be reasonably attribute, although unforeseen, to the non-performance of the obligation, including moral and exemplary damages. [5] Philippine National Railways (PNR) vs. CA (GR L-55347, 4 October 1985) Second Division, Escolin (J): 3 concur Facts: On 10 September 1972, at about 9:00 p.m., Winifredo Tupang, husband of Rosario Tupang, boarded Train 516 of the Philippine National Railways at Libmanan, Camarines Sur, as a paying passenger bound for Manila. Due to some mechanical defect, the train stopped at Sipocot, Camarines Sur, for repairs, taking some two hours before the train could resume its trip to Manila. Unfortunately, upon passing Iyam Bridge at Lucena, Quezon, Winifredo Tupang fell off the train resulting in his death. The train did not stop despite the alarm raised by the other passengers that somebody fell from the train. Instead, the train conductor, Perfecto Abrazado, called the station agent at Candelaria, Quezon, and requested for verification of the information. Police authorities of Lucena City were dispatched to the Iyam Bridge where they found the lifeless body of Winifredo Tupang. As shown by the autopsy report, Winifredo Tupang died of cardio-respiratory failure due to massive cerebral hemorrhage due to traumatic injury. Tupang was later buried in the public cemetery of Lucena City by the local police authorities. Upon complaint filed by the deceased’s widow, Rosario Tupang, the then CFI Rizal, after trial, held the PNR liable for damages for breach of contract of carriage and ordered it to pay Rosario Tupang the sum of P12,000.00 for the death of Winifredo Tupang, plus P20,000.00 for loss of his earning capacity, and the further sum of P10,000.00 as moral damages, and P2,000.00 as attorney’s fees, and cost. On appeal, the Appellate Court sustained the holding of the trial court that the PNR did not exercise the utmost diligence required by law of a common carrier. It further increased the amount adjudicated by the trial court by ordering PNR to pay the Rosario Tupang an additional sum of P5,000,00 as exemplary damages. Moving for reconsideration of the above decision, the PNR raised for the first time, as a defense, the doctrine of state immunity from suit. The motion was denied. Hence the petition for review. The Supreme Court modified the decision of the appellate court by eliminating therefrom the amounts of P10,000.00 and P5,000.00 adjudicated as moral and exemplary damages, respectively; without costs. 1.

PNR created under RA 4196; PNR may sue and be sued like any other corporation The PNR was created under A 4156, as amended. Section 4 of the said Act provides that “the Philippine National Railways shall have the following powers: (a) To do all such other things and to transact all such business directly or indirectly necessary, incidental or conducive to the attainment of the purpose of the corporation; and (b) Generally, to exercise all powers of a corporation under the Corporation Law.” Under the foregoing section, the PNR has all the powers, the characteristics and attributes of a corporation under the Transportation Law, 2004 ( 11 )

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Corporation Law. PNR may sue and be sued and may be subjected to court processes just like any other corporation. 2.

PNR funds subject to garnishment or execution In Philippine National Railways v. Union de Maquinistas, et al., then Justice Fernando, later Chief Justice, said that the main issue posed in said proceeding, i.e. “whether or not the funds of the Philippine National Railways could be garnished or levied upon on execution”, was resolved in two recent decisions, the Philippine National Bank v. Court of Industrial Relations [81 SCRA 314] and Philippine National Bank v. Hon. Judge Pabalan [83 SCRA 595], where the Court ruled that there was no legal bar to garnishment or execution. The argument based on non-suability of a state allegedly because the funds are governmental in character was unavailing. 3.

Other cases as to garnishment of GOCC funds a. Philippine National Bank v. Court of Industrial Relations: “The premise that the funds could be spoken of as public in character may be accepted in the sense that the People’s Homesite and Housing Corporation was a government-owned entity. It does not follow though that they were exempt from garnishment. “ b. National Shipyard and Steel Corporation v. Court of Industrial Relations: A government-owned and controlled corporation has a personality of its own, distinct and separate from that of the Government.

4. By engaging in a particular business as a corporation, government divests itself pro hac vice of its sovereign character; Doctrine of non-suability cannot be legally set up As held in Manila Hotel Employees Association v. Manila Hotel Co., when the government enters into commercial business, it abandons its sovereign capacity and is to be treated like any other corporation. By engaging in a particular business through the instrumentality of a corporation, the government divests itself pro hac vice of its sovereign character, so as to render the corporation subject to the rules of law governing private corporations. In Prisco v. CIR, it was held that “when the government engages in business, it abdicates part of its sovereign prerogatives and descends to the level of a citizen” In the case at bar, PNR cannot legally set up the doctrine of non-suability as a bar to the Tupang’s suit for damages. 5. PNR has obligation to observe extraordinary diligence in transporting passengers to their destinations PNR has the obligation to transport its passengers to their destinations and to observe extraordinary diligence in doing so. Death or any injury suffered by any of its passengers gives rise to the presumption that it was negligent in the performance of its obligation under the contract of carriage. PNR failed to overthrow such presumption of negligence with clear and convincing evidence, inasmuch as PNR does not deny, (1) that the train boarded by the deceased Winifredo Tupang was so overcrowded that he and many other passengers had no choice but to sit on the open platforms between the coaches of the train, (2) that the train did not even slow down when it approached the Iyam Bridge which was under repair at the time, and (3) that neither did the train stop, despite the alarm raised by other passengers that a person had fallen off the train at Iyam Bridge. 6.

Contributory negligence of Tupang warrants deletion of moral damages While PNR failed to exercise extraordinary diligence as required by law, it appears that the deceased was chargeable with contributory negligence. Since he opted to sit on the open platform between the coaches of the train, he should have held tightly and tenaciously on the upright metal bar found at the side of said platform to avoid falling off from the speeding train. Such contributory negligence, while not exempting the PNR from liability, nevertheless justified the deletion of the amount adjudicated as moral damages. 7.

Award of exemplary damages in the absence of fraud, malice or bad faith Transportation Law, 2004 ( 12 )

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The award of exemplary damages must be set aside. Exemplary damages may be allowed only in cases where the defendant acted in a wanton, fraudulent, reckless, oppressive or malevolent manner. There being no evidence of fraud, malice or bad faith on the part of PNR, the grant of exemplary damages should be discarded. [6], also [51] Eastern Shipping Lines vs. CA (GR 97412, 12 July 1994) En Banc, Vitug (J): 13 concur, 1 took no part Facts: On 4 December 1981, 2 fiber drums of riboflavin were shipped from Yokohama, Japan for delivery vessel “SS Eastern Comet” owned by Eastern Shipping Lines under Bill of Lading YMA-8. The shipment was insured under Mercantile Insurance Company’s Marine Insurance Policy 81/01177 for P36,382,466.38. Upon arrival of the shipment in Manila on 12 December 1981, it was discharged unto the custody of Metro Port Services, Inc. The latter excepted to one drum, said to be in bad order, which damage was unknown to Mercantile Insurance. On 7 January 1982, Allied Brokerage Corporation received the shipment from Metro Port Service, one drum opened and without seal. On January 8 and 14, 1982, Allied Brokerage made deliveries of the shipment to the consignees’ warehouse. The latter excepted to one drum which contained spillages, while the rest of the contents was adulterated/fake. Due to the losses/damage sustained by said drum, the consignee suffered losses totaling P19,032.95, due to the fault and negligence of the shipping company, arrastre operator and broker-forwarder. Claims were presented against them who failed and refused to pay the same. As a consequence of the losses sustained, Mercantile Insurance was compelled to pay the consignee P19,032.95 under the aforestated marine insurance policy, so that it became subrogated to all the rights of action of said consignee against the shipping company, etc. After trial, the trial court rendered judgment (1) ordering the shipping company, the arrastre operator and the broker-forwarder to pay Mercantile Insurance, in solidum, the amount of P19,032.95 with the present legal interest of 12% per annum from October 1, 1982, the date of filing of this complaints, until fully paid (the liability of defendant Eastern Shipping, Inc. shall not exceed US$500 per case or the CIF value of the loss, whichever is lesser, while the liability of defendant Metro Port Service, Inc. shall be to the extent of the actual invoice value of each package, crate box or container in no case to exceed P5,000.00 each, pursuant to Section 6.01 of the Management Contract); P3,000.00 as attorney’s fees, and costs; and dismissing the counterclaims and crossclaim of defendant/cross-claimant Allied Brokerage Corporation. Dissatisfied, Eastern Shipping Lines appealed to the Court of Appeals. The Court of Appeal affirmed in toto the judgment of the court a quo. The Supreme Court partly granted the petition. The Court affirmed the appealed decision with the modification that the legal interest to be paid is 6% on the amount due computed from the decision, dated 3 February 1988, of the court a quo. A 12% interest, in lieu of 6%, shall be imposed on such amount upon finality of this decision until the payment thereof. 1.

Duration of common carrier’s duty to observe requisite diligence 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 (Arts. 1736-1738, Civil Code; Ganzon vs. Court of Appeals, 161 SCRA 646; Kui Bai vs. Dollar Steamship Lines, 52 Phil. 863). 2. Presumption of carrier’s negligence in case of loss, damage of goods; None of the exclusive exceptions can be applied Transportation Law, 2004 ( 13 )

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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 (Art. 1735, Civil Code; Philippine National Railways vs. Court of Appeals, 139 SCRA 87; Metro Port Service vs. Court of Appeals, 131 SCRA 365). There are, of course, exceptional cases when such presumption of fault is not observed but these cases, enumerated in Article 1734 1 of the Civil Code, are exclusive, not one of which can be applied to the case at bar. 3.

The rationale why the carrier and arrastre operator are made liable in solidum In Fireman’s Fund Insurance vs. Metro Port Services (182 SCRA 455), the Court has explained in holding the carrier and the arrastre operator liable in solidum, in the manner that “The legal relationship between the consignee and the arrastre operator is akin to that of a depositor and warehouseman (Lua Kian v. Manila Railroad Co., 19 SCRA 5 [1967]. The relationship between the consignee and the common carrier is similar to that of the consignee and the arrastre operator (Northern Motors, Inc. v. Prince Line, et al., 107 Phil. 253 [1960]). Since it is the duty of the Arrastre to take good care of the goods that are in its custody and to deliver them in good condition to the consignee, such responsibility also devolves upon the Carrier. Both the Arrastre and the Carrier are therefore charged with the obligation to deliver the goods in goods condition to the consignee.” The pronouncement, however, does not imply that the arrastre operator and the customs broker are themselves always and necessarily liable solidarily with the carrier, or vice-versa, nor that attendant facts in a given case may not vary the rule. 4.

First group of cases on variances on the Court’s ruling on legal interest In the cases of the cases of Reformina v. Tomol (1985), Philippine Rabbit Bus Lines v. Cruz (1986), Florendo v. Ruiz (1989) and National Power Corporation v. angas (1992), the basic issue focus on the application of either the 6% (under the Civil Code) or 12% (under the Central Bank Circular) interest per annum. It is easily discernible in these cases that there has been a consistent holding that the Central Bank Circular imposing the 12% interest per annum applies only to loans or forbearance 16 of money, goods or credits, as well as to judgments involving such loan or forbearance of money, goods or credits, and that the 6% interest under the Civil Code governs when the transaction involves the payment of indemnities in the concept of damage arising from the breach of a delay in the performance of obligations in general. Observe, too, that in these cases, a common time frame in the computation of the 6% interest per annum has been applied, i.e., from the time the complaint is filed until the adjudged amount is fully paid. 5.

Second group of cases on variances on the Court’s ruling on legal interest The cases of Malayan Insurance Company v. Manila Port Service (1969), Nakpil and Sons v. Court of Appeals (1988), and American Express International v. Intermediate Appellate Court (1988), did not alter the pronounced rule on the application of the 6% or 12% interest per annum, depending on whether or not the amount involved is a loan or forbearance, on the one hand, or one of indemnity for damage, on the other hand. Unlike, however, the “first group” which remained consistent in holding that the running of the legal interest should be from the time of the filing of the complaint until fully paid, the “second group” varied on the commencement of the running of the legal interest. Malayan held that the amount awarded should bear legal interest from the date of the decision of the court a quo, explaining that “if the suit were for damages, ‘unliquidated and not known until definitely ascertained, assessed and determined by the courts after proof,’ then, interest ‘should be from the date of the decision.’” American Express International v. IAC, introduced a different time frame for reckoning the 6% interest by ordering it to be “computed from the finality of (the) decision until paid.” The Nakpil and Sons case ruled that 12% interest per annum should be imposed from the finality of the decision until the judgment amount is paid. The factual circumstances may have called for different applications, guided by the rule that the courts are vested with discretion, depending on the equities of each case, on the award of interest. 6.

Rules in the determination of legal interests

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a. When an obligation, regardless of its source, i.e., law, contracts, quasi-contracts, delicts or quasidelicts 18 is breached, the contravenor can be held liable for damages. The provisions under Title XVIII on “Damages” of the Civil Code govern in determining the measure of reoverable damages. b. With regard particularly to an award of interest in the concept of actual and compensatory damages, the rate of interest, as well as the accrual thereof, is imposed, as follows: 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 a 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 (Article 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 of 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 of 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. [7] Metro Port Services vs. CA (GR L-57582, 24 August 1984) First Division, Melencio-Herrera (J): 5 concur Facts: Sometime in April 1973, Union Sales Marketing Corporation (UNION) ordered from Union Carbide of Antwerp, Belgium, 99,540 kilograms of Low Density Polyethylene, valued at US $.245 per kilogram or a total purchase price of US $24,417.30, at the conversion rate of P6.848 to a US Dollar. The shipment was packed in 4,000 bags of 25 net kilograms, more or less, for each bag, and was loaded at Antwerp, Belgium, in good order condition on board the “S/S Dingalan Bay”, owned and operated by Universal Shipping Lines, Inc. (CARRIER) and consigned to UNION in Manila. The shipment was covered by a Marine Risk Note issued by Charter Insurance Co. (INSURER) for P212,738.17 against all risks. The CARRIER arrived in Manila on 22 June 1973 and arrastre services were handled by E. Razon, Inc. (ARRASTRE), now called Metro Port Service, Inc. Out of the 4,000 bags, 1,050 bags were received by the consignee UNION in bad order condition. As a consequence of the damage and loss, the INSURER paid UNION the sum of P35,709.11 in full settlement of the claim, and the INSURER became the subrogee of all of UNION’s rights to recover from the parties concerned. On 1 July 1974, the INSURER sued for damages with the then CFI Manila against the CARRIER and the ARRASTRE in the amount of P35,709.11, in addition to exemplary damages and attorney’s fees. In its Decision, the Trial Court ordered (1) the Universal Shipping Lines, Inc., to pay Charter Insurance Co. the amount of P12,285.94 plus 12% interest per annum from July 1, 1974 until full payment thereof; (2) E. Razon Inc. to pay Charter Insurance Co. the amount of P9,763.94 plus 12% interest per annum from July 1, 1974

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until full payment thereof; (3) both Universal Shipping and E. Razon to pay the costs; and (4) both Universal Shipping and E. Razon to pay Charter Insurance, in solidum, P2,000.00 as attorney’s fees. On appeal by the CARRIER and ARRASTRE, the then Court of Appeals, on 23 March 1981, absolved the CARRIER of any and all liability and held the ARRASTRE solely liable. Reconsideration filed by the ARRASTRE was denied by the Appellate Court. The Supreme Court reversed and set aside the appealed judgment of Court of Appeals, and reinstated that of the CFI Manila, Branch XI; without costs. 1.

Only questions of law may be raised in a Petition for Review on Certiorari, exceptions Ordinarily, in a Petition for Review on Certiorari, only questions of law may be raised. The Court has held in a number of cases that findings of fact by the Court of Appeals are, in general, conclusive on the Supreme Court when supported by the evidence on record. The rule is not absolute, however, and allows of exceptions, which the Court finds present in the case at bar in that the appellate court’s findings of facts are contrary to those of the Trial Court and are contradicted by the evidence on record. 2. Appellate Court’s ruling disregards evidence of the CARRIER and ARRASTRE that 619 bags were discharged in bad order condition In absolving the CARRIER, the appellate court completely disregards the evidence of the CARRIER and the ARRASTRE that 619 bags were discharged by the CARRIER to the ARRASTRE in bad order condition, as evidenced by the original and duplicate copies of the Cargo Receipts issued by the CARRIER to the ARRASTRE and signed by their respective representatives. The condition of the 619 bags before the turnover to the ARRASTRE from the CARRIER was loss or spoilage of up to 50%, as reflected in the Survey of Bad Order Cargoes, signed by the CARRIER and ARRASTRE representatives. Accordingly, the Trial Court held the CARRIER liable only for the value of a total of 443 bags, as this is the “evidence of the plaintiff” (INSURER), at 16.8209 kilograms per bag, less than the actual weight of 25 kilograms net per bag due to some recovery of spoilage, or a total liability of P12,285.94. Since 619 bags were discharged from the CARRIER already in bad order condition, it follows that the remaining 431 bags were damaged while in the ARRASTRE’s custody for which it should be held liable. 3.

ARRASTRE’s liability fixed to 351 bags, as INSURER failed to appeal award However, since the Trial Court computed the liability of the ARRASTRE at 351 bags, notwithstanding the ARRASTRE’s admission that “80 bags were not included in the bad order cargo certificate,” and the INSURER did not appeal said award by the Trial Court in its desire to have the case terminated soonest, the INSURER may not, in this appeal, have the judgment modified. The liability of the ARRASTRE for P9,763.94 fixed by the Trial Court is thus in order. [8], also [174] Home Insurance Co. vs. American Steamship Agencies (GR L-25599, 4 April 1968) En Banc, Bengzon JP (J): 7 concur Facts: “Consorcio Pesquero del Peru of South America” shipped freight pre-paid at Chimbate, Peru, 21,740 jute bags of Peruvian fish meal through SS Crowborough, covered by clean bills of lading Numbers 1 and 2, both dated 17 January 1963. The cargo, consigned to San Miguel Brewery, Inc., now San Miguel Corporation, and insured by Home Insurance Company for $202,505, arrived in Manila on 7 March 1963 and was discharged into the lighters of Luzon Stevedoring Company. When the cargo was delivered to consignee San Miguel Brewery, Inc., there were shortages amounting to P12,033.85, causing the latter to lay claims against Luzon Stevedoring Corporation, Home Insurance Company and the American Steamship Agencies, owner

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and operator of SS Crowborough. Because the others denied liability, Home Insurance Company paid the consignee P14,870.71 — the insurance value of the loss, as full settlement of the claim. Having been refused reimbursement by both the Luzon Stevedoring Corporation and American Steamship Agencies, Home Insurance Company, as subrogee to the consignee, filed against them on 6 March 1964 before the CFI Manila a complaint for recovery of P14,870.71 with legal interest, plus attorney’s fees. On 17 November 1965, the CFI, after trial, absolved Luzon Stevedoring Corporation, having found the latter to have merely delivered what it received from the carrier in the same condition and quality, and ordered American Steamship Agencies to pay Home Insurance Co. P14,870.71 with legal interest plus P1,000 attorneys fees. Disagreeing with such judgment, American Steamship Agencies appealed directly to the Supreme Court. The Supreme Court reversed the judgment appealed from, and absolved the American Steamship Agencies from liability to Home Insurance Co.; without costs. 1.

Contents of the bill lading in the present case The bills of lading, covering the shipment of Peruvian fish meal provide at the back thereof that the bills of lading shall be governed by and subject to the terms and conditions of the charter party, if any, otherwise, the bills of lading prevail over all the agreements. On the face of the bills are stamped “Freight prepaid as per charter party. Subject to all terms, conditions and exceptions of charter party dated London, Dec. 13, 1962.” 2.

Charter party in instant case is a Contract of Affreightment A perusal of the charter party referred to shows that while the possession and control of the ship were not entirely transferred to the charterer, the vessel was chartered to its full and complete capacity. Furthermore, the charterer had the option to go north or south or vice-versa, loading, stowing and discharging at its risk and expense. 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.

Source of provisions of Civil Code on common carriers The provisions of our Civil Code on common carriers were taken from Anglo-American law. Under American jurisprudence, a common carrier undertaking to carry a special cargo or chartered to a special person only, becomes a private carrier. As a private carrier, a stipulation exempting the owner from liability for the negligence of its agent is not against public policy, and is deemed valid. Thus, the Civil Code provisions on common carriers (especially Article 1744) should not be applied where the carrier is not acting as such but as a private carrier. In the case at bar, Section 2, paragraph 2 of the charter party – which provides that the owner is liable for loss or damage to the goods caused by personal want of due diligence on its part or its manager to make the vessel in all respects seaworthy and to secure that she be properly manned, equipped and supplied or by the personal act or default of the owner or its manager. Said paragraph, however, exempts the owner of the vessel from any loss or damage or delay arising from any other source, even from the neglect or fault of the captain or crew or some other person employed by the owner on board, for whose acts the owner would ordinarily be liable except for said paragraph – is valid. Such policy has no force where the public at large is not involved, as in the case of a ship totally chartered for the use of a single party. 4. Consignee cannot claim ignorance of charter party, as bills of lading expressly referred to the same; Instance for recovery not present in case In a charter of the entire vessel, the bill of lading issued by the master to the charterer, as shipper, is in fact and legal contemplation merely a receipt and a document of title, not a contract, for the contract is the charter party. The consignee may not claim ignorance of said charter party because the bills of lading expressly referred to the same. Accordingly, the consignees under the bills of lading must likewise abide by the terms of the charter party. And as stated recovery cannot be had thereunder, for loss or damage to the Transportation Law, 2004 ( 17 )

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cargo, against the shipowners, unless the same is due to personal acts or negligence of said owner or its manager, as distinguished from its other agents or employees. In this case, no such personal act or negligence has been proved. [9] Lastimosa vs. Doliente [10] FPIC vs. CA, see [2] [11] National Steel vs. CA (GR 112287, 12 December 1997) Vlasons Shipping vs. CA (GR 112350) Third Division, Panganiban (J): 4 concur Facts: The MV Vlasons I is a vessel which renders tramping service and, as such, does not transport cargo or shipment for the general public. Its services are available only to specific persons who enter into a special contract of charter party with its owner. The ship is a private carrier, and it is in this capacity that its owner, Vlasons Shipping, Inc. (VSA), entered into a contract of affreightment or contract of voyage charter hire with National Steel Corporation (NSC) on 17 July 1974, whereby NSC hired VSI’s vessel, the MV ‘VLASONS I’ to make 1 voyage to load steel products at Iligan City and discharge them at North Harbor, Manila, under the following terms and conditions, viz: “xxx (2) Cargo: Full cargo of steel products of not less than 2,500 MT, 10% more or less at Master’s option. xxx (4) Freight/Payment: P30.00/metric ton, FIOST basis. Payment upon presentation of Bill of Lading within fifteen (15) days. (5) Laydays/Cancelling: July 26, 1974/Aug. 5, 1974. (6) Loading/Discharging Rate: 750 tons per WWDSHINC. (Weather Working Day of 24 consecutive hours, Sundays and Holidays Included). (7) Demurrage/Dispatch: P8,000.00/P4,000.00 per day. xxx (9) Cargo Insurance: Charterer’s and/or Shipper’s must insure the cargoes. Shipowners not responsible for losses/damages except on proven willful negligence of the officers of the vessel. (10) Other terms: (a) All terms/conditions of NONYAZAI C/P [sic] or other internationally recognized Charter Party Agreement shall form part of this Contract. xxx” On August 6, 7 and 8, 1974, in accordance with the Contract of Voyage Charter Hire, the MV ‘VLASONS I’ loaded at NSC’s pier at Iligan City, the NSC’s shipment of 1,677 skids of tinplates and 92 packages of hot rolled sheets or a total of 1,769 packages with a total weight of about 2,481.19 metric tons for carriage to Manila. The shipment was placed in the 3 hatches of the ship. Chief Mate Gonzalo Sabando, acting as agent of the vessel, acknowledged receipt of the cargo on board and signed the corresponding bill of lading, BLPP 0233 on 8 August 1974. The vessel arrived with the cargo at Pier 12, North Harbor, Manila, on 12 August 1974. The following day, when the vessel’s 3 hatches containing the shipment were opened by NSC’s agents, nearly all the skids of tinplates and hot rolled sheets were allegedly found to be wet and rusty. The cargo was discharged and unloaded by stevedores hired by the Charterer. Unloading was completed only on 24 August 1974 after incurring a delay of 11 days due to the heavy rain which interrupted the unloading operations. To determine the nature and extent of the wetting and rusting, NSC called for a survey of the shipment by the Manila Adjusters and Surveyors Company (MASCO). In a letter to the NSC dated 17 March 1975, MASCO made a report of its ocular inspection conducted on the cargo, both while it was still on board the vessel and later at the NDC warehouse in Pureza St., Sta. Mesa, Manila where the cargo was taken and stored. MASCO reported that it found wetting and rusting of the packages of hot rolled sheets and metal covers of the tinplates; that tarpaulin hatch covers were noted torn at various extents; that container/metal casings of the skids were rusting all over. MASCO’s surveyors drew at random samples of bad order packing materials of the tinplates and delivered the same to the MIT Testing Laboratories for analysis. On 31 August 1974, the MIT Testing Laboratories issued Report 1770 which in part, states, “The analysis of bad order samples of packing materials . . . shows that wetting was caused by contact with sea water.” On 6 September 1974, on the basis of Report 1770, NSC filed with VSI its claim for

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damages suffered due to the downgrading of the damaged tinplates in the amount of P941,145.18. Then on 3 October 1974, NSC formally demanded payment of said claim but VSI refused and failed to pay. NSC filed its complaint against VSI on 21 April 1976 (Civil Case 23317) before the CFI of Rizal. The trial court rendered judgment in favor of VSI and against NSC dismissing the complaint with costs against NSC, and ordering NSC to pay VSI on the counterclaim for the sum of P75,000.00 as unpaid freight and P88,000.00 as demurrage with interest at the legal rate on both amounts from April 7, 1976 until the same shall have been fully paid; attorney’s fees and expenses of litigation in the sum of P100,000.00; and cost of suit. On appeal, and on 12 August 1993, the Court of Appeals modified the decision of the trial court by reducing the demurrage from P88,000.00 to P44,000.00 and deleting the award of attorneys fees and expenses of litigation. NSC and VSI filed separate motions for reconsideration. In a Resolution dated 20 October 1993, the appellate court denied both motions. Undaunted, NSC and VSI filed their respective petitions for review before the Supreme Court. On motion of VSI, the Court ordered on 14 February 1994 the consolidation of the petitions. The Supreme Court denied the consolidated petitions; and affirmed the questioned Decision of the Court of Appeals with the modification that the demurrage awarded to VSI is deleted. No pronouncement as to costs. 1.

The term “FIOST”; Paragraph 5 of the NANYOZAI Charter Party The terms ‘F.I.O.S.T.’ which is used in the shipping business is a standard provision in the NANYOZAI Charter Party which stands for ‘Freight In and Out including Stevedoring and Trading’, which means that the handling, loading and unloading of the cargoes are the responsibility of the Charterer. Under Paragraph 5 of the NANYOZAI Charter Party, it states, “Charterers to load, stow and discharge the cargo free of risk and expenses to owners. . . .” 2.

Paragraph 10 of the NANYOZAI Charter Party Under paragraph 10 of the NANYOZAI Charter Party, it is provided that “owners shall, before and at the beginning of the voyage, exercise due diligence to make the vessel seaworthy and properly manned, equipped and supplied and to make the holds and all other parts of the vessel in which cargo is carried, fit and safe for its reception, carriage and preservation. Owners shall not be liable for loss of or damage of the cargo arising or resulting from: unseaworthiness unless caused by want of due diligence on the part of the owners to make the vessel seaworthy, and to secure that the vessel is properly manned, equipped and supplied and to make the holds and all other parts of the vessel in which cargo is carried, fit and safe for its reception, carriage and preservation; . . ; perils, dangers and accidents of the sea or other navigable waters; . . ; wastage in bulk or weight or any other loss or damage arising from inherent defect, quality or vice of the cargo; insufficiency of packing; . . .; latent defects not discoverable by due diligence; any other cause arising without the actual fault or privity of Owners or without the fault of the agents or servants of owners.” 3.

Paragraph 12 of the NANYOZAI Charter Party Paragraph 12 of said NANYOZAI Charter Party also provides that “owners shall not be responsible for split, chafing and/or any damage unless caused by the negligence or default of the master and crew.” 4.

Common carriers defined (Article 1732); Test of common carrier Article 1732 of the Civil Code defines a common carrier as “persons, corporations, firms or associations engaged in the business of carrying or transporting passengers or goods or both, by land, water, or air, for compensation, offering their services to the public.” It has been held that the true test of a common carrier is the carriage of passengers or goods, provided it has space, for all who opt to avail themselves of its transportation service for a fee.

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5.

Private Carrier; Charter party A carrier which does not qualify under the test of a common carrier is deemed a private carrier. “Generally, private carriage is undertaken by special agreement and the carrier does not hold himself out to carry goods for the general public. The most typical, although not the only form of private carriage, is the charter party, a maritime contract by which the charterer, a party other than the shipowner, obtains the use and service of all or some part of a ship for a period of time or a voyage or voyages.” 6. VSI a private carrier; Rights and obligations of VSI and NSC are determined by stipulations in charter party Herein, VSI did not offer its services to the general public. It carried passengers or goods only for those it chose under a “special contract of charter party.” The MV Vlasons I “was not a common but a private carrier.” Consequently, the rights and obligations of VSI and NSC, including their respective liability for damage to the cargo, are determined primarily by stipulations in their contract of private carriage or charter party. 7.

Contract of private carriage; Valenzuela Hardwood vs. CA In Valenzuela Hardwood and Industrial Supply, Inc., vs. Court of Appeals and Seven Brothers Shipping Corporation, the Court ruled that “in a contract of private carriage, the parties may freely stipulate their duties and obligations which perforce would be binding on them. Unlike in a contract involving a common carrier, private carriage does not involve the general public. Hence, the stringent provisions of the Civil Code on common carriers protecting the general public cannot justifiably be applied to a ship transporting commercial goods as a private carrier. Consequently, the public policy embodied therein is not contravened by stipulations in a charter party that lessen or remove the protection given by law in contracts involving common carriers.” 8.

Extent of VSI’s Responsibility and Liability Over NSC’s Cargo From the parties’ Contract of Voyage Charter Hire, dated 17 July 1974, VSI “shall not be responsible for losses except on proven willful negligence of the officers of the vessel.” The NANYOZAI Charter Party, which was incorporated in the parties’ contract of transportation further provided that the shipowner shall not be liable for loss of or damage to the cargo arising or resulting from unseaworthiness, unless the same was caused by its lack of due diligence to make the vessel seaworthy or to ensure that the same was “properly manned, equipped and supplied,” and to “make the holds and all other parts of the vessel in which cargo was carried, fit and safe for its reception, carriage and preservation.” The NANYOZAI Charter Party also provided that “owners shall not be responsible for split, chafing and/or any damage unless caused by the negligence or default of the master or crew.” 9.

Burden of Proof (parties’ agreement) Herein, NSC must prove that the damage to its shipment was caused by VSI’s willful negligence or failure to exercise due diligence in making MV Vlasons I seaworthy and fit for holding, carrying and safekeeping the cargo. Ineluctably, the burden of proof was placed on NSC by the parties’ agreement. 10.

Article 361 of the Code of Commerce Article 361 of the Code of Commerce provides that “Merchandise shall be transported at the risk and venture of the shipper, if the contrary has not been expressly stipulated. Therefore, the damage and impairment suffered by the goods during the transportation, due to fortuitous event, force majeure, or the nature and inherent defect of the things, shall be for the account and risk of the shipper. The burden of proof of these accidents is on the carrier.” 11.

Article 362 of the Code of Commerce Article 362 of the Code of Commerce provides that “The carrier, however, shall be liable for damages arising from the cause mentioned in the preceding article if proofs against him show that they occurred on Transportation Law, 2004 ( 20 )

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account of his negligence or his omission to take the precautions usually adopted by careful persons, unless the shipper committed fraud in the bill of lading, making him to believe that the goods were of a class or quality different from what they really were.” 12.

Private carrier; Shipowner’s obligation governed by Code of Commerce, not Civil Code As the MV Vlasons I was a private carrier, the shipowner’s obligations are governed by the foregoing provisions of the Code of Commerce and not by the Civil Code which, as a general rule, places the prima facie presumption of negligence on a common carrier. 13. Burden of proof in action against private carrier for loss of cargo; Plaintiff entitled to benefit of presumptions and inferences In an action against a private carrier for loss of, or injury to, cargo, the burden is on the plaintiff to prove that the carrier was negligent or unseaworthy, and the fact that the goods were lost or damaged while in the carrier’s custody does not put the burden of proof on the carrier. Since a private carrier is not an insurer but undertakes only to exercise due care in the protection of the goods committed to its care, the burden of proving negligence or a breach of that duty rests on plaintiff and proof of loss of, or damage to, cargo while in the carrier’s possession does not cast on it the burden of proving proper care and diligence on its part or that the loss occurred from an excepted cause in the contract or bill of lading. However, in discharging the burden of proof, plaintiff is entitled to the benefit of the presumptions and inferences by which the law aids the bailor in an action against a bailee, and since the carrier is in a better position to know the cause of the loss and that it was not one involving its liability, the law requires that it come forward with the information available to it, and its failure to do so warrants an inference or presumption of its liability. However, such inferences and presumptions, while they may affect the burden of coming forward with evidence, do not alter the burden of proof which remains on plaintiff, and, where the carrier comes forward with evidence explaining the loss or damage, the burden of going forward with the evidence is again on plaintiff. 14. Burden of proof in action based on shipowner’s warranty of seaworthiness; Where contract of carriage exempts carrier from liability for unseaworthiness not discoverable by due diligence Where the action is based on the shipowner’s warranty of seaworthiness, the burden of proving a breach thereof and that such breach was the proximate cause of the damage rests on plaintiff, and proof that the goods were lost or damaged while in the carrier’s possession does not cast on it the burden of proving seaworthiness. . . . Where the contract of carriage exempts the carrier from liability for unseaworthiness not discoverable by due diligence, the carrier has the preliminary burden of proving the exercise of due diligence to make the vessel seaworthy. 15. Findings of the trial court, subsequently affirmed by the Court of Appeals, binding upon the Supreme Court Where the factual findings of both the trial court and the Court of Appeals coincide, the same are binding on the Supreme Court. The Court stresses that, subject to some exceptional instances, only questions of law — not questions of fact — may be raised before the Supreme Court in a petition for review under Rule 45 of the Rules of Court. Herein, after a thorough review of the case, the Court finds no reason to disturb the lower courts’ factual findings. 16.

MV Vlasons I was seaworthy VSI exercised due diligence to make the ship seaworthy and fit for the carriage of NSC’s cargo of steel and tinplates. This is shown by the fact that it was drydocked and harbored by the Philippine Coast Guard before it proceeded to Iligan City for its voyage to Manila under the contract of voyage charter hire. The vessel’s voyage from Iligan to Manila was the vessel’s first voyage after drydocking. The Philippine Coast Guard Station in Cebu cleared it as seaworthy, fitted and equipped; it met all requirements for trading as cargo vessel.

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17. Due diligence exercised by officers and crew of MV Vlasons I; Use of old tarpaulin an addition to new one used to make hatch waterproof Due diligence was exercised by the officers and the crew of the MV Vlasons I. This was further demonstrated by the fact that, despite encountering rough weather twice, the new tarpaulin did not give way and the ship’s hatches and cargo holds remained waterproof. Herein, the ship used the old tarpaulin, only in addition to the new one used primarily to make the ship’s hatches watertight. The foregoing are clear from the marine protest of the master of the MV Vlasons I, Antonio C. Dumlao, and the deposition of the ship’s boatswain, Jose Pascua, where it was stated that every time the strong winds and big waves caused the first layer of the canvass covering to give way, the new canvass covering still hold on. NSC failed to discharge its burden to show negligence on the part of the officers and the crew of MV Vlasons I, 18. Stevedores of NSC negligent in unloading cargo form ship; Reason for delay in pointing out stevedores’ negligence to NSC It was the stevedores of NSC who were negligent in unloading the cargo from the ship. The stevedores employed only a tent-like material to cover the hatches when strong rains occasioned by a passing typhoon disrupted the loading of the cargo. This tent-like covering, however, was clearly inadequate for keeping rain and seawater away from the hatches of the ship. NSC attempts to discredit the testimony of Vicente Angliongto, an officer of VSI, by questioning his failure to complain immediately about the stevedores’ negligence on the first day of unloading, pointing out that he wrote his letter to NSC only 7 days later. 7 days lapsed because he first called the attention of the stevedores, then the NSC’s representative, about the negligent and defective procedure adopted in unloading the cargo. This series of actions constitutes a reasonable response in accord with common sense and ordinary human experience. Angliongto could not be blamed for calling the stevedores’ attention first and then the NSC’s representative on location before formally informing NSC of the negligence he had observed, because he was not responsible for the stevedores or the unloading operations. In fact, he was merely expressing concern for NSC which was ultimately responsible for the stevedores it had hired and the performance of their task to unload the cargo. 19.

NSC has cause of action against stevedoring company, and not against VSI The fact that NSC actually accepted and proceeded to remove the cargo from the ship during unfavorable weather will not make VSI liable for any damage caused thereby. In passing, it may be noted that the NSC may seek indemnification, subject to the laws on prescription, from the stevedoring company at fault in the discharge operations. 20.

Duty of a stevedore company A stevedore company engaged in discharging cargo has the duty to load the cargo in a prudent manner, and it is liable for injury to, or loss of, cargo caused by its negligence and where the officers and members and crew of the vessel do nothing and have no responsibility in the discharge of cargo by stevedores, the vessel is not liable for loss of, or damage to, the cargo caused by the negligence of the stevedores. 21.

Effect of NSC’s Failure to Insure the Cargo The obligation of NSC to insure the cargo stipulated in the Contract of Voyage Charter Hire is totally separate and distinct from the contractual or statutory responsibility that may be incurred by VSI for damage to the cargo caused by the willful negligence of the officers and the crew of MV Vlasons I . Clearly, therefore, NSC’s failure to insure the cargo will not affect its right, as owner and real party in interest, to file an action against VSI for damages caused by the latter’s willful negligence. Nothing in the charter party would make the liability of VSI for damage to the cargo contingent on or affected in any manner by NSC’s obtaining an insurance over the cargo. 22.

Admissibility of certificates proving seaworthiness; Exhibits 3-9 and 12 inadmissible

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The certificates of seaworthiness offered in evidence by VSI include the (1) Certificate of Inspection of the Philippine Coast Guard at Cebu, (2) Certificate of Inspection from the Philippine Coast Guard, (3) International Load Line Certificate from the Philippine Coast Guard, (4) Coastwise License from the Board of Transportation, and (5) Certificate of Approval for Conversion issued by the Bureau of Customs. Exhibits 3, 4, 5, 6, 7, 8, 9 and 12 are inadmissible, for they have not been properly offered as evidence. Exhibits 3 and 4 are certificates issued by private parties, but they have not been proven by one who saw the writing executed, or by evidence of the genuineness of the handwriting of the maker, or by a subscribing witness. Exhibits 5, 6, 7, 8, 9, and 12 are photocopies, but their admission under the best evidence rule have not been demonstrated. 23.

Exhibit 11 admissible as exception to hearsay rule Herein, Exhibit 11 is admissible under a well-settled exception to the hearsay rule per Section 44 of Rule 130 of the Rules of Court, which provides that “(e)ntries in official records made in the performance of a duty by a public officer of the Philippines, or by a person in the performance of a duty specially enjoined by law, are prima facie evidence of the facts therein stated.” Exhibit 11 is an original certificate of the Philippine Coast Guard in Cebu issued by Lieutenant Junior Grade Noli C. Flores to the effect that “the vessel ‘VLASONS I’, was drydocked and PCG Inspectors were sent on board for inspection. After completion of drydocking and duly inspected by PCG Inspectors, the vessel ‘VLASONS I’, a cargo vessel, is in seaworthy condition, meets all requirements, fitted and equipped for trading as a cargo vessel was cleared by the Philippine Coast Guard and sailed for Cebu Port on July 10, 1974.” (sic) NSC’s Claim, therefore, is obviously misleading and erroneous. 24.

Assailing genuineness of certificate of seaworthiness not sufficient proof of unseaworthiness NSC has the burden of proving that MV Vlasons I was not seaworthy. The vessel was a private carrier and, as such, it did not have the obligation of a common carrier to show that it was seaworthy. Indeed, NSC glaringly failed to discharge its duty of proving the willful negligence of VSI in making the ship seaworthy resulting in damage to its cargo. Assailing the genuineness of the certificate of seaworthiness is not sufficient proof that the vessel was not seaworthy. 25.

Demurrage defined The Court defined demurrage in its strict sense as the compensation provided for in the contract of affreightment for the detention of the vessel beyond the laytime or that period of time agreed on for loading and unloading of cargo. 40 It is given to compensate the shipowner for the nonuse of the vessel. 26.

How laytime runs Laytime runs according to the particular clause of the charter party. If laytime is expressed in “running days,” this means days when the ship would be run continuously, and holidays are not excepted. A qualification of “weather permitting” excepts only those days when bad weather reasonably prevents the work contemplated. 27.

Laytime for four days, and qualified as WWDSHINC, in present case Herein, the contract of voyage charter hire provided for a four-day laytime; it also qualified laytime as WWDSHINC or weather working days Sundays and holidays included. The running of laytime was thus made subject to the weather, and would cease to run in the event unfavorable weather interfered with the unloading of cargo. Consequently, NSC may not be held liable for demurrage as the four-day laytime allowed it did not lapse, having been tolled by unfavorable weather condition in view of the WWDSHINC qualification agreed upon by the parties. Clearly, it was error for the trial court and the Court of Appeals to have found and affirmed respectively that NSC incurred 11 days of delay in unloading the cargo. 28.

Attorney’s fees not justified While VSI was compelled to litigate to protect its rights, such fact by itself will not justify an award of attorney’s fees under Article 2208 of the Civil Code when “no sufficient showing of bad faith would be Transportation Law, 2004 ( 23 )

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reflected in a party’s persistence in a case other than an erroneous conviction of the righteousness of his cause.” Moreover, attorney’s fees may not be awarded to a party for the reason alone that the judgment rendered was favorable to the latter, as this is tantamount to imposing a premium on one’s right to litigate or seek judicial redress of legitimate grievances. [12] De Villata vs. JS Stanley (GR 8154, 20 December 1915) En Banc, Carson (J): 4 concur, 1 concur in result Facts: Joaquin de Villata is the master of SS Vizcaya of the coastwise trade. As such captain, on 6 July 1912, when sailing from the port of Gubat to the port of Legaspi, Philippine Islands, he failed to notify the postmaster of the former port, in advance, of his intended sailing, and therefore failed to carry the mails between said ports. The Collector of Customs (JS Stanley, Acting Insular Collector of Customs) was threatening to suspend or revoke the license of de Villata by reason of said facts, under and by virtue of the terms of Customs Administrative Circular 627. De Villata filed an application for a writ of prohibition directed against the Collector of Customs to restrain him from enforcing Customs Administrative Circular 627 against de Villata. The case was submitted to the Supreme Court upon de Villata’s demurrer to Stanley’s answer to the complaint. The Supreme Court held that the complaint, unless amended, must be dismissed, on the ground that no cause of action is developed by the pleadings. The Court ordered that 20 days thereafter, the complaint be dismissed at the costs of the de Villata unless amended so as to set forth a cause of action, and 10 days thereafter let the record be filed in the archives of original actions in the Supreme Court. 1. Customs Administrative Circular 627 (Prescribing regulations for the transportation of mails on vessels engaged in the Philippine coastwise trade, 24 December 1910) [par 1] Every vessel to which a license is granted under the provisions of section 117 of Act No. 355 to engage in the coastwise trade of the Philippine Islands . . . shall carry mail tendered for transportation in a safe and secure manner, and shall keep the same free from injury by water or otherwise. Masters, owners, or agents of vessels shall give prompt advance notice of the intended sailing thereof to the postmaster at each port of departure in ample time to permit the making up of mails for dispatch. Any changes in such sailings shall also be promptly communicated to the postmaster. [par 2] Mails carried by vessels shall be delivered at ports of call on shore or on a wharf immediately after arrival and prior to the discharge or lading of any cargo, and shall be taken from shore or wharf just before the vessel’s sailing time, except at ports where the postal authorities have arranged for ship-side delivery. [par 3] Each vessel mentioned in the preceding paragraph shall be provided with a lock box having a slot in the top or side thereof to receive letters, papers, or other mail matter delivered on board the vessel after the mails have been closed at the post office for that particular voyage. All mail matter deposited in such box shall be delivered by the master, or his representative, to the postmaster at a port of call where a post office is located. [par 4] The master, owner, agent, or other person in charge of a vessel shall be legally liable for the loss of or damage to mail in his custody, or in the custody of his representatives or agents. [par 5] The license of the master of any vessel engaged in the coastwise trade of the Philippine Islands may be suspended or revoked by the Insular Collector of Customs for failure to comply with or strictly enforce the regulations governing the transportation of mails. [par 6] Postmasters throughout the Islands are requested to promptly report to this office in writing any unnecessary delay in the handling of mails transported by vessels, or failure on the part of masters thereof to comply with the requirements of this circular. [par 7] Philippine customs officers shall give due publicity to the terms of this circular.” 2.

Decree of 4 August 1863 A decree dated 4 August 1863, provided as follows: “In the matter of the investigation made for the application of the provisions now in force relative to the notice to be given in advance to the post office of the Transportation Law, 2004 ( 24 )

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sailings of ships, in the exceptional case of a ship just arrived in port and which has to sail immediately for the convenience of the interests of its owners or consignees, Having considered the ordinances relating to packet boats and other royal orders and superior decrees imposing upon the captain of every ship the duty of giving notice to the postoffice four days in advance at least of the date they are to sail and the port of destination, Considering that the actual application of such provisions might affect in a remarkable way the commercial interests in the very exceptional case spoken of, where the ship just anchored should have to set sail again before the period of four days referred to, The capitamia del puerto, the administracion general de aduanas, comandancia general de carabineros and the administracion general de correos, having been heard, This superior civil government ordains: That when a ship falls within the precise exceptional case raised by the within resolution, its captain shall only be required to give, from the very instant of determining the sailing of the ship, immediate notice to the postoffice stating the day and hour in which the sailing must be made, For the purposes that may be proper, let this decree be communicated to the comandancia general de marina, capitania del puerto de Manila and Cavite and the administracion general de correos, and let same be published in the Gazette for general information. Report to the government of H. M. and file.” (Berriz, Diccionario de la Administracion de Filipinas, 1888, vol. 1, p. 516.) 3.

Decree of 13 January 1876 A later decree dated 13 January 1876, was as follows: “Having considered the consultation made by the comandancia general de marina proposing the amendment of section 7 of the superior decree of December 18, 1868, relative to the duty imposed upon shipowners or consignees of steamers whether national or foreign, plying between this port and the other ports of the Archipelago or China and vice versa, of giving four days’ notice before the day they are to sail, to their great prejudice; and Having considered the reports submitted by the direccion general de administracion civil and the administracion general de correos: Considering the fact that since that superior order was enforced, the fortunate increase of steamers and consequently the frequent repetition of voyages made by them, is evident, and therefore, this circumstance alone would change the object or reason which at that time made it necessary to impose the duty referred to in said section 7. Considering the importance and value at certain times of the prompt clearance of one of its ships to a commercial firm which is at all times worthy of protection by the government. This general government ordains as follows: (1) The period of four days prescribed by section 7 of the superior decree of December 18, 1868, is reduced to two. (2) The shipowners or consignees of steamers, whether national or foreign, plying between this port and the other ports of the archipelago or China, and vice versa, shall give notice to the captain of the port’s before midday, in order that the post office may have immediate notice of the sailing at an hour that may enable it to insert same in the Gazette of next day, and the ship may sail in the afternoon of the day next following. (3) The office of the captain of the port will report daily to the administracion general de correos all ships that at 12 o’clock, noon, may have requested the visita de salida and in the event of there being none a report shall be sent stating that fact. (4) The report of the captain of the port’s office must be at that administracion general before 2 o’clock, p. m., every day. (5) Captains and consignees of ships can in no case request the visita de salida without the period of forty-eight hours intervening between the time they report and the visit, so as to give opportune notice to the administracion de correos. (6) The centro de correos shall send the notices to the Gazette and other newspapers, and shall post them besides on a bulletin board at the door of the postoffice.” (Berriz, Diccionario de la Administracion de Filipinas, 1888, vol. 1, pp. 528, 529.) 4.

Vessels required to carry mails under Spanish sovereignty An examination of its terms leaves little room for doubt that under Spanish sovereignty the Government of these Islands assumed and exercised the right to prescribe reasonable regulations requiring vessels trading in the Philippine Islands to carry the mails and to give due notice of their sailing hours to the postal authorities. Indeed it is a matter of common knowledge that, under the laws and regulations in force at the time of the change of sovereignty, all vessels engaged in the coasting trade were required to carry the mails, and to furnish the postal authorities with due notice of their sailing hours. There is no allegation in the

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pleadings denying the continuance in force of this practice under American sovereignty down to the date of the issuance of the above cited Customs Administrative Circular. 5. Nothing in Philippine Bill of Rights depriving government power to make and enforce regulations There is nothing in the Philippine Bill of Rights which deprived the Philippine Government of the power to make and enforce reasonable regulations of this nature with which it was clothed prior to the enactment of that statute. 6. Regulations and control exercised on vessels licensed to engage in interisland trade not in contravention of Philippine Bill of Rights or US Constitution Vessels licensed to engage in the interisland trade are common carriers; and that as to them, there is an extensive field of regulation and control which may properly be exercised by the state without contravention of the provisions of the Philippine Bill of Rights or the Constitution of the United States; and this notwithstanding the fact that the enforcement of such regulations may tend to restrict their liberty, and to control the free exercise of their discretion in the conduct of their business to a degree and in a form and manner which would not be tolerated under the constitutional guarantees with relation to the private business of a private citizen. 7.

Business of common carriers affected with public interest Common carriers exercise a sort of public office, and have duties to perform in which the public is interested. Their business is, therefore, affected with a public interest, and is subject to public regulation. 8.

As business is of public employment, state may impose reasonable regulations The nature of the business in which they are engaged as a public employment, is such that it is clearly within the power of the state to impose such just and reasonable regulations thereon as in the interest of the public it may deem proper. Of course such regulations must not have the effect of depriving an owner of this property without due process of law, nor of confiscating or appropriating private property without just compensation, nor of limiting or prescribing irrevocably vested rights or privileges lawfully acquired under a charter or franchise. But aside from such constitutional limitations, the determination of the nature and extent of the regulations which should be precribed rests in the hands of the legislator. (New Jersey Steam Nav. Co. vs. Merchants’ Bank, 6 How., 344, 382; Munn vs. Illinois, 94 U. S., 113, 13().) 9.

Power to regulate not power to destroy, limitation not confiscation The power to regulate is not a power to destroy, and limitation is not the equivalent of confiscation. Under pretense of regulating fares and freights the state can not require a railroad corporation to carry persons or property without reward. Nor can it do that which in law amounts to a taking of private property for public use without just compensation, or without due process of law. (Chicago etc. R. Co. v.s. Minnesota, 134 U. S., 418; Minneapolis Eastern R. Co. vs. Minnesota, 134 U. S., 467.) 10. Judicial interference does not occur unless the case presents flagrant attack upon rights and property in guise of regulation The judiciary ought not to interfere with regulations established under legislative sanction unless they are so plainly and palpably unreasonable as to make their enforcement equivalent to the taking of property for public use without such compensation as under all the circumstances is just both to the owner and to the public, that is, judicial interference should never occur unless the case presents, clearly and beyond all doubt, such a flagrant attack upon the rights and property under the guise of regulations as to compel the court to say that the regulations in question will have the effect to deny just compensation for private property taken for the public use. (Chicago etc. R. Co. vs. Well- man, 143 U. S., 339; Smyth vs. Ames, 169 U. S., 466, 524; Henderson Bridge Co. vs. Henderson City, 173 U. S., 592, 614.) “ (Fisher vs. Yangco Steamship Co., 31 Phil. Rep., 1.) Transportation Law, 2004 ( 26 )

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11.

Regulation is reasonable A regulation requiring all coasting vessels licensed to engage in the interisland trade to carry the mails and give prompt advance notice in all cases of intended sailings in ample time to permit dispatch of mails, and of changes of sailing hours, (manifestly with a view to make it possible for the post-office officials to tender mail for transportation at the last practicable moment prior to the hour of departure) is a reasonable regulation, made in the interests of the public, which the state has a right to impose when it grants licenses to the vessels affected thereby. 12. Governments incur considerable expenditures to secure safety of vessels plying in Philippine waters Considerable expenditures of public money have been made in the past and continue to be made annually for the purpose of securing the safety of vessels plying in Philippine waters. To this end lighthouses have been erected; wharfs and docks constructed; and buoys, bells and other warning signals maintained at points of danger. Largely for the purpose of conveying timely warnings of threatening weather to those that go down into the sea in ships, appropriations are made for the support of a Weather Bureau. Coast and geodetic surveys are conducted to keep them informed as to the dangers hidden beneath the treacherous sea. Licensed pilots are provided to insure safe entry into the dangerous ports and harbors throughout the Islands. Maps, charts and general information as to conditions affecting travel by water are kept up to date, and furnished all vessels having need for them. In a word, the Government unhesitatingly spends a considerable part of the public funds wherever and whenever it appears that the safety and even the convenience of the shipping in Philippine waters will be advanced thereby. Can it be fairly contended that a regulation is unreasonable which requires vessels licensed to engage in the interisland trade, in whose behalf the public funds are so lavishly expended, to hold themselves in readiness to carry the public mails when duly tendered for transportation, and to give such reasonable notice of their sailing hours as will insure the prompt dispatch of all mails ready for delivery at the hours thus designated? 13. Regulations only begin to affect business of shipowner when it enters into employment as common carrier It is only when the owner of a vessel enters the quasi-public employment of a common carrier that regulations of this kind begin to affect or control the conduct of his business, and he cannot be heard to complain that he is deprived of his property without due process of law when he elects, of his own free will and accord, to secure a license as a common carrier in Philippine waters, and to engage in a business, one of the conditions of which is that he will comply with such regulations. Under the law in force in these Islands at the time of the change of sovereignty, and of the enactment of the Act of Congress the owners of all licensed coasting vessels were required to comply with regulations of this character, as one of the conditions upon which they were permitted to engage in the quasi-public employment of carriers in the interisland trade. No one is compelled to comply with these regulations unless he voluntarily enters upon the business which they affect, and if he does enter such business he cannot; claim that he is unlawfully deprived, without due process of law, of that which he voluntarily agrees to surrender. 14.

Uniformity of taxes (assuming) If regulations of this kind be regarded as in the nature of a tax upon the vessels affected thereby, the tax cannot be attacked for lack of uniformity so long as it is laid uniformly upon all the members of the class to which it extends. The only limitation upon the authority conferred is uniformity in laying the tax, and uniformity does not require the equal application of the tax to all persons or corporations who may come within its operation, but it is limited to geographical uniformity. 15.

Distinction between “equality” and “uniformity” The distinction between “equality” and “uniformity” in taxation is thus stated in Black on Constitutional Law, page 392, citing Miller, Const., 241: “In practice, therefore, ‘equality’ in taxation means Transportation Law, 2004 ( 27 )

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to be called upon to pay taxes, which taxes shall be strictly proportioned to the relative value of their taxable property. And ‘uniformity’ in taxation means that all taxable articles or kinds of property, of the same class, shall be taxed at the same rate. It does not mean that lands, chattels, securities, incomes, occupations, franchises, privileges, necessities, and luxuries shall all be assessed at the same rate. Different articles may be taxed at different amounts, provided the rate is uniform on the same class everywhere, with all people, and at all times. “ 16.

Power to impose taxes unlimited in force The power to impose taxes is one so unlimited in force and so searching in extent, that the courts scarcely venture to declare that it is sub.iect to any restrictions whatever, except such as rest in the discretion of the authority which exercises it. It reaches to every trade or occupation; to every object of industry, use, or enjoyment; to every species of possession; and it imposes a burden which, in case of failure to discharge it, may be followed by seizure and sale or confiscation of property. No attribute of sovereignty is more pervading, and at no point does the power of the Government affect more constantly and intimately all the relations of life than through the exactions made under it. . . . 17.

Power to tax rests upon necessity, and is inherent in every sovereignty The power to tax rests upon necessity, and is inherent in every sovereignty. The legislature of every free State will possess it under the general grant of legislative power, whether particularly specified in the constitution among the powers to be exercised by it or not. No constitutional government can exist without it, and no arbitrary government without regular and steady taxation could be anything but an oppressive and vexatious despotism, since the only alterative to taxation would be a forced extortion for the needs of government from such persons or objects as the men in power might select as victims. Chief Justice Marshall has said of this power: ‘The power of taxing the people and their property is essential to the very existence of government, and may be legitimately exercised on the objects to which it is applicable to the utmost extent to which the government may choose to carry it. 18.

Security against abuse of power of taxation The only security against the abuse of this power is found in the structure of the government itself. In imposing a tax, the legislature acts upon its constituents. This is, in general, a sufficient security against erroneous and oppressive taxation. The people of a State, therefore, give to their government a right of taxing themselves and their property; and as the exigencies of the government cannot be limited, they prescribe no limits to the exercise of this right, resting confidently on the interest of the legislator, and on the influence of the constituents over their representative, to guard them against its abuse.’ 19.

Scope of power of legislation and taxation The power of legislation, and consequently of taxation, operates on all persons and property belonging to the body politic. This is an original principle, which has its foundation in society itself. It is granted by all for the benefit of all. It resides in the government as part of itself, and need not be reserved where property of any description, or the right to use it in any manner, is granted to individuals or corporate bodies. However absolute the right of an individual may be, it is still in the nature of that right that it must bear a portion of the public burdens, and that portion must be determined by the legislature. This vital power may be abused; but the interest, wisdom, and justice of the representative body, and its relations with its constituents, furnish the only security where there is no express contract against unjust and excessive taxation, as well as against unwise legislation generally. 20.

Judicial department unfit to inquire on degree of taxation It is unfit for the judicial department to inquire what degree of taxation is the legitimate use, and what degree may amount to the abuse, of the power. The judicial cannot prescribe to the legislative department of the government limitations upon the exercise of its acknowledged powers. The power to tax may be exercised oppressively upon persons, but the responsibility of the legislature is not to the courts, but to the people by Transportation Law, 2004 ( 28 )

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whom its members are elected. So if a particular tax bears heavily upon a corporation or a class of corporations, it cannot, for that reason only, be pronounced contrary to the Constitution. (Veazie Bank vs. Fenno, 8 Wall., 533, 548.) 21.

Judicial department charged with duty of enforcing constitution; Separation of powers As a result of our written constitution, it is axiomatic that the judicial department of the government is charged with the solemn duty of enforcing the Constitution, and therefore in cases properly presented, of determining whether a given manifestation of authority has exceed the power conferred by that instrument, no instance is afforded from the foundation of the government where an act, which was within a power conferred, was declared to be repugnant to the Constitution, because it appeared to the judicial mind that the particular exertion of constitutional power was either unwise or unjust. To announce such a principle would amount to declaring that in our constitutional system the judiciary was not only charged with the duty of upholding the Constitution but also with the responsibility of correcting every possible abuse arising from the exercise by the other departments of their conceded authority. So to hold would be to overthrow the entire distinction between the legislative, judicial and executive departments of the government, upon which our system is founded, and would be a mere act of judicial usurpation. (McCray vs. U. S., 195 U. S., 27.) 22.

Presumed intention of Collector in circular The provisions of paragraph I require trading vessels to carry mails tendered for transportation in a safe and secure manner. This does not necessarily require these vessels to accept and to carry mail free of charge. It is only when goods are lawfully tendered that common carriers may be compelled to carry them, and it must be presumed that the author of the circular had in mind a lawful tender of mails when he wrote this paragraph. If a vessels may not be required to carry mail without direct compensation, or a contract providing for such compensation, it must be presumed that the Collector did not intend to require vessels to accept mail without tender of reasonable compensation for such services or provision for payment by contract or otherwise, and that this paragraph was intended merely as a regulation requiring the acceptance of all mail thus lawfully tendered and the safe transportation of such mail when accepted for transportation. 23. No fact or allegation in pleading that Collector of Customs is compelling vessel’s master to carry mail free of charge There is absence of the necessary allegations setting forth that the Collector of Customs has compelled and is threatening to compel the master of the Viscaya to carry mails free of charge. It does not appear from the pleadings, nor in fact, that any attempt has been made or is being made by the Collector to compel the master of the Vizcaya, over his protest, to carry mail without compensation. The allegations of the complaint disclose merely that he threatened to enforce the regulations of the circular requiring the master of the Vizcaya to make provision for the transportation of the mails when tendered, and for the giving of reasonable notice as to sailing hours upon which such tender might be based. 24.

Section 3 of Act 355 Section 3 of Act 355 provides that the customs service shall embrace, among other things, (1) the documenting of vessels built or owned in the Philippine Islands, etc.; (2) the exclusion of foreign vessels from the coastwise trade; (3) the entry and clearance of vessels; (4) the enforcement of such regulation of commerce, foreign and coastwise, as shall be established by competent authority; and (5) the regulation of the carriage of passengers by water and the licensing of vessels therefor. 25.

Section 7 of Act 355 Section 7 of Act 355 provides, in part, as follows: “The Insular Collector shall have general authority throughout the Philippine Islands in all matters embraced within the jurisdiction of the Customs Service.” 26.

Section 19 of Act 355

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Section 19 of Act 355 provides, in part, as follows: “The Insular Collector shall, from time to time, make and promulgate general rules and regulations, not inconsistent withlaw, subject to the approval of the Secretary of Finance and Justice: (1) Directing the manner of execution of the customs law and laws relating to commerce, navigation. and immigration. xxx (7) Prescribing the method of loading and unloading merchandise and the transportation thereof by bonded carriers, railways, vessels, bonded lighters, carts, or otherwise” 27.

Section 73 of Act 355 Section 73 of Act 355 provides as follows: “In the coasting trade, the admeasurement, documenting, enrollment and licensing of vessels built or owned in the Philippine Archipelago and in the making and recording of all documents relating thereto, the Insular Collector shall observe, promulgate, and enforce such orders and regulations respecting the same as have been heretofore or shall hereafter be prescribed by the proper authority. In the absence of such regulations or orders he shall observe and follow the laws of the United States and the regulations of the Treasury Department of the United States so far as the same may be, in his sound judgment, applicable. Certificates of protection shall hereafter be signed by the collector of customs at ports where issued and countersigned by the Insular Collector.” 28.

Section 134 of Act 355 Section 134 of Act 355 is as follows: “The coastwise trade shall be under the general control and supervision of the Insular Collector, and under the direct supervision of collectors of customs at the subports of entry within their respective collection districts.” 29.

Section 1 of Act 780, as amended by Section 1 of Act 1602 Section 1 of Act 780, as amended by section 1 of Act 1602, provides, in part, as follows: “A board is hereby created, to consist of the Insular Collector of Customs, the supervising inspector of hulls and boilers, and assistant inspector of hulls, one person holding an unexpired license as master in the Philippine coastwise trade, and one other competent person, whose duty it shall be to examine and certify for licenses all applicants for licenses as watch officers and engineers upon vessels of the Philippine Islands.” 30.

Section 2 of Act 780 Section 2 of Act 780 is as follows: “Whenever any person applies for license as master, mate, patron, or engineer of a Philippine coastwise vessel it shall be the duty of the Board on Philippine Marine Examinations to make a thorough inquiry as to his character and carefully to examine the applicant, the evidence he presents in support of his application, and such other evidence as it may deem proper or desirable, and if satisfied that his capacity, experience, habits of life, and character are such as to warrant the belief that he can be safely intrusted with the duties and responsibilities of the position for which he makes application, it shall so certify to the Insular Collector of Customs, who shall issue a license authorizing such applicant to act as master, mate, patron, or engineer, as the case may be.” 31.

Section 6 of Act 780 Section 6 of Act 780 is as follows: “Every license authorized to be issued as above set forth shall be operative and in force until July first, nineteen hundred and four, but the Insular Collector of Customs may at any time suspend or revoke any license upon satisfactory proof of misconduct, intemperate habits, incapacity, or inattention to duty on the part of the licensee.” 32.

Section 2 of Act 1025 Section 2 of Act 1025 is as follows: “Upon the expiration of the license authorized to be issued by said Act Numbered Seven Hundred and eighty, the said Board is further authorized and empowered to renew such license from year to year upon due application being made as prescribed in said Act, but each renewal shall be operative for only one year. In case of renewal of license the written examination required by section three of said Act shall not be had but the applicant for renewal shall only be required to submit to an Transportation Law, 2004 ( 30 )

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examination, if deemed necessary by the Board, to test his physical soundness, but the Board is authorized to refuse any application for renewal upon satisfactory evidence of misconduct, intemperate habits, incapacity, or inattention to duty on the part of the licensee and also to revoke any such renewal license, when granted, for the same reasons, or any of them.” 33.

Duties of captain of the port devolved upon Insular Collector of Customs and his subordinates The duties of the captain of the port, as that office formerly existed and as provided in the Spanish laws, now devolve upon the Insular Collector of Customs and his subordinates as he may direct, pursuant to the provisions of section 1 of Act No. 625. Any duties which the captain of the port was required to perform under the decrees and similar regulations issued under the Spanish Administration of the Government of these Islands, devolved upon the Collector of Customs at the date of the promulgation of Circular 627, so far as those decrees and similar regulations continued in force at that time. 34. Insular collector clothed with necessary authority to prepare, promulgate, and enforce Customs Administrative Circular 627 Insofar as Customs Administrative Circular 627 consists of a body of reasonable regulations controlling and prescribing the conduct of vessels licensed to engage in the coastwise trade, and of licensed officers aboard such vessels, with reference to the transportation of mail, the Insular Collector was clothed with the necessary authority at the date of the circular for its preparation, promulgation and enforcement. The circular is, when correctly construed, such a body of reasonable regulations, touching the conduct of coastwise vessels and their officers with reference to the transportation of mails. [13] US vs. Quinajon (GR 8686, 30 July 1915) En Banc, Johnson (J): 4 concur, 1 dissents Facts: Pascual Quinajon and Eugenio Quitoriano, acting as representatives of the Union Obrera, established at the port of Currimao, Ilocos Norte, and engaged by means of virayes as common carriers of passengers and in loading and unloading freight from steamers anchoring at said port, to the shore or to the warehouses, and vice versa, have regularly collected, during the last four years, 6 centavos for each sack of rice loaded or unloaded by said association. Quinajon and Quitoriano, representing the same association, collected from the provincial government of Ilocos Norte 10 centavos for each of the 5,986 sacks of rice which they unloaded from the steamers during the months of June, July, and September, as property belonging to the said government, a price which differed from the usual charge of 6 centavos made to other shippers of said commodity. Quinajon and Quitoriano were charged with a violation of the provisions of Act 98. A complaint was presented in the court of the justice of the peace on 11 November 1912. A preliminary examination was had and Quinajon and Quitoriano were held for trial in the Court of First Instance of the Province of Ilocos Norte. On 17 November 1912, the prosecuting attorney of the Province of Ilocos Norte presented a complaint. Upon that complaint Quinajon and Quitoriano were duly arraigned, tried, found guilty of the crime charged, and sentenced by the Honorable Dionisio Chanco, judge, to pay a fine of $100 (P200) and costs, and to return to the provincial government of the Province of Ilocos Norte the sum of P359.16. From that sentence, Quinajon and Quitoriano appealed to the Supreme Court. The Supreme Court affirmed the judgment of the lower court, with modification. The Court ordered Quinajon and Quitoriano to the Province of Ilocos Norte the sum P239.44, for which sum a judgment is ordered to be entered against them, for which execution may issue when this judgment becomes final, in case the same is not paid. With costs. Transportation Law, 2004 ( 31 )

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1.

Quinajon and Quitoriano collected 6 centavos per package Herein, Quinajon and Quitoriano collected 6 centavos for each package, of whatever kind of merchandise, large or small, heavy or light, from those merchants only with whom they had a special contract. From other merchants, with whom they had not made said special contract, as well as the Province of Ilocos Norte, they collected a different rate. They collected from the Province of Ilocos Norte 10 centavos for each sack of rice which they unloaded from the steamers during the months of June, July, and September. 2.

Simplified facts of the case (1) The defendants, as common carriers, charged and collected from some shippers and merchants, a certain price for each package of merchandise, loaded or unloaded, according to a certain schedule. The prices fixed in the schedule depended upon the size and weight of the package. (2) The defendants entered into a special contract with certain merchants, under and by virtue of the terms of which they charged and collected, for loading and unloading merchandise in said port, the sum of 6 centavos for each package, without reference to its size or weight. 3. Act 98 and Act of Congress of 4 February 1887 are similar; Adoption of interpretation by US Federal courts justified Act 98 was largely borrowed from the Act of Congress of 4 February 1887. The language of the two Acts, so far as they relate to the present case, is practically the same. Said Act of Congress has been construed by the Federal courts of the United States in several decisions. In view of the similarity of the two Acts, we feel justified in adopting the interpretation given by the Federal courts of the United States to said Act of Congress. 4.

Section 1, Act 98 “No person or corporation engaged as a common carrier of passengers or property shall directly or indirectly by any special rate, rebate,, drawback or other device, charge, demand, collect or receive from any person or persons, a greater or less compensation for any service rendered in the transportation of passengers or property on land or water between any points in the Philippine Islands than such common carriers charges, demands, collects or receives from any other person or persons from doing for him a like or contemporaneous service in the transportation of a like kind of traffic under substantially similar circumstances and conditions, and any such unjust discrimination is hereby prohibited and declared to be lawful.” 5.

Section 2, Act of Congress, 4 February 1887 “That if any common carrier subject to the provision of this Act shall, directly, or indirectly, by any special rate, rebate, drawback, or other device, charge, demand, collect, or receive from any person or persons a greater or less compensation for any service rendered, or to be rendered, in the transportation of passengers or property, subject to the provisions of this Act, than it charges, demands, collects, or receives from any person or persons for doing for him or them a like and contemporaneous service in the transportation of a like kind of traffic under substantially similar circumstances and conditions, such common carrier shall be deemed guilty of unjust discrimination, which is hereby prohibited and declared to be unlawful.” 6.

Section 2, Act 98 “It shall be unlawful for any common carrier engaged in the transportation of passengers or property as above set forth to make or give any unnecessary or unreasonable preference or advantage to any particular person, company, firm, corporation or locality, or any particular kind of traffic in any respect whatsoever, or to subject any particular person, company, firm, corporation or locality or any kind of traffic, to any undue or unreasonable prejudice or discrimination is also hereby prohibited and declared to be unlawful.” 7.

Section 3, Act of Congress, 4 February 1887

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“That it shall be unlawful for any common carrier subject to the provision of this Act to make or give any undue or unreasonable preference or advantage to any particular person, company, firm, corporation, or locality, or any particular description of traffic, to any undue or unreasonable prejudice or disadvantage in any respect whatsoever.” 8.

Purpose of Act 98; Scope Act 98 is “An Act to regulate commerce in the Philippine Islands.” Its purpose, so far as it is possible, is to compel common carriers to render to all persons exactly the same or analogous service for exactly the same price, to the end that there may be no unjust advantage or unreasonable discrimination. It applies to persons or corporations engaged as common carriers of passengers or property. 9.

Common Carriers defined A common carrier is a person or corporation whose regular business is to carry passengers or property for all persons who may choose to employ and remunerate him. A common carrier is a person or corporation who undertakes to carry goods or persons for hire. Herein, Quinajon and Quitoriano admit that they are common carriers. 10.

What Act 98 provides and what it prohibits (1) The law provides that no common carrier shall directly or indirectly, by any special rate, rebate, drawback, or other device, charge, demand, collect, or receive from any person or persons, a greater or less compensation for any service rendered in the transportation of passengers or property, between points in the Philippine Islands, than he charges, demands, collects, or receives from any other person or persons, for doing a like or contemporaneous service, under substantially similar conditions or circumstances. (2) The law prohibits any common carrier from making or giving any unnecessary or unreasonable preference or advantage to any particular person, company, firm, corporation or locality, or any particular kind of traffic, or to subject any particular person, company, firm, corporation, or locality, or any particular kind of traffic, to any undue or unreasonable prejudice or discrimination whatsoever. Or simply, (1) The law requires common carriers to carry for all persons, either passengers or property, for exactly the same charge for a like or contemporaneous service in the transportation of like kind of traffic under substantially similar circumstances or conditions. (2) The law prohibits common carriers from subjecting any person, etc., or locality, or any particular kind of traffic, to any undue or unreasonable prejudice or discrimination whatsoever. 11.

What Act 98 does not require, and what it does not prohibit (1) The law does not require that the same charge shall be made for the carrying of passengers or property, unless all the conditions are alike and contemporaneous. (2) It is not believed that the law prohibits the charging of a different rate for the carrying of passengers or property when the actual cost of handling and transporting the same is different. (3) It is not believed that the law intended to require common carriers to carry the same kind of merchandise, even at the same price, under different and unlike conditions and where the actual cost is different. The actual cost of handling and transporting the same quantity of rice, for example, might be different, depending upon the form of the package or other conditions. It would cost more to handle and transport rice packed in open boxes or baskets, for example, than it would to handle and transport the same quantity of rice neatly packed in sacks. It would cost more to handle and transport hemp, when it is unbaled and loose, than it would when it is baled. It might cost more to handle and transport household goods uncrated than when they are crated. (4) It is not believed that the law prohibits the charging of a different price for handling and shipping merchandise when the shipper exercises greater care in preparing the same for shipment, thereby reducing the actual cost of handling and transporting. If the shipper puts his merchandise in a condition which costs less to Transportation Law, 2004 ( 33 )

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handle and transport, he is certainly entitled to a better rate. The difference in the charge to different merchants or shippers must be based upon the actual cost of handling and transporting. (5) The law does not require common carriers to perform different services for the same price, unless the actual cost is the same. It is when the price charged is for the purpose of favoring persons by localities or particular kinds of merchandise, that the law intervenes and prohibits. (6) It is not believed that the law prohibits common carriers from making special rates for the handling and transporting of merchandise, when the same are made for the purpose of increasing their business, and to manage their important interests upon the same principles which are regarded as sound, and adopted in other trades and pursuits. (7) It is not believed that the law requires absolute equality in all cases. Circumstances and conditions may make it injurious to the carrier. Absolute equality, under certain circumstances and conditions, may give some shippers an advantage over others. 12.

The law prohibits favoritism and discrimination It is favoritism and discrimination which the law prohibits. The difference in charge must not be made to favor one merchant, or shipper, or locality, to the disadvantage of another merchant, or shipper, or locality. If the services are alike and contemporaneous, discrimination in the price charged is prohibited. 13.

Merchandise may be alike in kind or quantity but not as to cost of transportation; Example For the purposes of the law, it is not sufficient always to say that merchandise is alike, simply because it is of a like kind or quantity. The quantity, kind, and quality may be exactly the same, and yet not be alike, so far as the cost of transportation is concerned. For example, A and B are each shippers of bananas between the same points. A delivers his bananas to the carrier in separate bundles or bunches, without a wrapper or any kind of protection, while B delivers exactly the same number of bunches of bananas, but they are neatly packed in a few boxes or baskets. It does not require much argument to convince men conversant with the shipping of merchandise, in such a case, that the actual cost of handling and shipping would be different and would, therefore, not be “alike,” although contemporaneous, perhaps. 14. Shipments not rendered unlike because shipment composed of different classes of merchandise; Example Neither is it believed that shipments may be rendered unlike by the fact that the total shipment is composed of different kinds or classes of merchandise. For example, A is a shipper of rice and hemp and B is a shipper of rice alone. Both A and B prepare their rice for shipment in exactly the same form of package. It is not believed that the carrier is permitted, under the law, to carry A’s rice for a less price than he carries B’s rice, simply because A is also a shipper of hemp. 15. Difference in charge of handing may depend on actual cost, actual cost may depend upon quantity; Examples A difference in the charge for handling and transporting may only be made when the difference is based upon actual cost. The actual cost may depend upon quantity. For example, A man who ships freight by the car-load, by reason of the actual cost of handling and shipping, may be entitled, under certain conditions, to a better rate than the man who ships a single article or package of the same class or kind of merchandise. As another example, a train-load of cattle might be shipped from Dagupan to Manila at less cost per head than it would cost to ship just a few head, less than a car-load. 16.

Actual cost depend upon and settled upon proof; Difference in charge must be difference in cost The actual cost of each shipment must necessarily depend upon and be settled by its own proof. This rule, however, does not prohibit the making of general schedules, providing they are made applicable to all. The difference in the charge made by the common carrier cannot be made for the purpose of favoring any person or locality, to the prejudice or disadvantage of another person or locality. A common carrier may discriminate between shippers when the amount of goods shipped by one actually costs less to handle and Transportation Law, 2004 ( 34 )

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transport, but he cannot discriminate upon the ground simply that he carries all of the goods of one shipper, while he does not carry all of the goods of another. The difference in the charge must be the difference in the cost. 17. Common carriers competent to enter into special agreements for handling and transporting merchandise It is competent for a common carrier under the law to enter into special agreements for handling and transporting merchandise, whereby advantage may accrue to individuals, when it is made clearly to appear that by such agreements the common carrier has only its interests and the legitimate increase of its profits in view, and when the consideration given to the individual is for the interest of the common carrier alone, and when the common carrier gives all shippers exactly the same rate, under the same conditions. 18. Law prohibits unjust, undue, and unreasonable discrimination; Circumstances may intervene in determining rate of compensation It is only unjust, undue, and unreasonable discrimination which the law forbids. The law of equality is in force only where the services performed in the different cases are substantially the same, and the circumstances and conditions are similar. Many considerations may properly enter into the agreement for the carriage or shipment rate, such as the quantity carried, its nature, its risks, the expense of carriage at different periods of time, and the like. Numerous circumstances may intervene, which bear upon the cost and expense of transportation, and it is but just to the carrier that he be permitted to take these circumstances into consideration, in determining the rate or amount of his compensation. A question of fact is raised in each case for the courts to decide. 19.

Quinajon and Quitoriano discriminated against the province Herein, there is no pretense that it actually cost more to handle the rice for the province than it did for the merchants with whom the special contracts were made. From the evidence it would seem that there was a clear discrimination made against the province. Discrimination is the thing which is specifically prohibited and punished under the law. 20.

Section 5 of Act 98 Section 5 of Act 98 provides that any person or corporation, who may be damaged by reason of the doing by a common carrier of any matters and things prohibited, shall be entitled to sue for and recover all damages so incurred, etc. 21.

Quinajon and Quitoriano required to return overpayment of P239.44 Quinajon and Quitoriano had a right to charge the provincial government 6 centavos for each sack of rice unloaded. They unloaded for the province 5,986 sacks, for which they charged the sum of P598.60. They had a right to collect 6 centavos, or the sum of P359.16. Quinajon and Quitoriano collected from the province more than they had a right to collect, the difference between P598.60 and P359.16, or P239.44. They should be required to return to the province the excess which they collected, or the sum of P239.44. [14] also [39] De Guzman vs. CA (GR L-47822, 22 December 1988) Third Division, Feliciano (J): 4 concur Facts: Ernesto Cendaña, a junk dealer, was engaged in buying up used bottles and scrap metal in Pangasinan. Upon gathering sufficient quantities of such scrap material, Cendaña would bring such material to Manila for resale. He utilized 2 six-wheeler trucks which he owned for hauling the material to Manila. On the return trip to Pangasinan, Cendaña would load his vehicles with cargo which various merchants wanted delivered to differing establishments in Pangasinan. For that service, Cendaña charged freight rates which were commonly Transportation Law, 2004 ( 35 )

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lower than regular commercial rates. Sometime in November 1970, Pedro de Guzman, a merchant and authorized dealer of General Milk Company (Philippines), Inc. in Urdaneta, Pangasinan, contracted with Cendaña for the hauling of 750 cartons of Liberty filled milk from a warehouse of General Milk in Makati, Rizal, to de Guzman’s establishment in Urdaneta on or before 4 December 1970. Accordingly, on 1 December 1970, Cendaña loaded in Makati the merchandise on to his trucks: 150 cartons were loaded on a truck driven by Cendaña himself; while 600 cartons were placed on board the other truck which was driven by Manuel Estrada, Cendaña ‘s driver and employee. Only 150 boxes of Liberty filled milk were delivered to de Guzman. The other 600 boxes never reached de Guzman, since the truck which carried these boxes was hijacked somewhere along the MacArthur Highway in Paniqui, Tarlac, by armed men who took with them the truck, its driver, his helper and the cargo. On 6 January 1971, de Guzman commenced action against Cendaña in the CFI of Pangasinan, demanding payment of P22,150.00, the claimed value of the lost merchandise, plus damages and attorney’s fees. De Guzman argued that Cendaña, being a common carrier, and having failed to exercise the extraordinary diligence required of him by the law, should be held liable for the value of the undelivered goods. In his Answer, Cendaña denied that he was a common carrier and argued that he could not be held responsible for the value of the lost goods, such loss having been due to force majeure. On 10 December 1975, the trial court rendered a Decision’ finding Cendaña to be a common carrier and holding him liable for the value of the undelivered goods (P22,150.00) as well as for P4,000.00 as damages and P2,000.00 as attorney’s fees. On appeal before the Court of Appeals, Cendaña urged that the trial court had erred in considering him a common carrier; in finding that he had habitually offered trucking services to the public; in not exempting him from liability on the ground of force majeure; and in ordering him to pay damages and attorney’s fees. The Court of Appeals reversed the judgment of the trial court and held that Cendaña had been engaged in transporting return loads of freight “as a casual occupation — a sideline to his scrap iron business” and not as a common carrier. De Guzman came to the Supreme Court by way of a Petition for Review. The Supreme Court denied the Petition for Review on Certiorari; and affirmed the Decision of the Court of Appeals dated 3 August 1977; without pronouncement as to costs. 1.

Common carriers defined; Article 1732 NCC 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.” 2.

Article 1732 NCC makes no distinctions Article 1732 of the Civil Code makes no distinction between one whose principal business activity is the carrying of persons or goods or both, and one who does such carrying only as an ancillary activity (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. Article 1733 deliberately refrained from making such distinctions. 3.

Concept of “common carrier” coincides neatly with the notion of “public service” 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 1416, as amended) which at least partially supplements the law on common carriers set forth in the Civil Code. 4.

Public Service; Section 13, paragraph (b) of the Public Service Act Transportation Law, 2004 ( 36 )

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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. “ 5.

Cendaña a common carrier Cendaña is properly characterized as a common carrier even though he merely “back-hauled” goods for other merchants from Manila to Pangasinan, although such backhauling was done on a periodic or occasional rather than regular or scheduled manner, and even though Cendaña’s principal occupation was not the carriage of goods for others. There is no dispute that Cendaña charged his customers a fee for hauling their goods; that fee frequently fell below commercial freight rates is not relevant. 6.

Certificate of public convenience not requisite for incurring of liability as common carrier A certificate of public convenience is not a requisite for the incurring of liability under the Civil Code provisions governing common carriers. That liability arises the moment a person or firm acts as a common carrier, without regard to whether or not such carrier has also complied with the requirements of the applicable regulatory statute and implementing regulations and has been granted a certificate of public convenience or other franchise. Herein, to exempt Cendaña from the liabilities of a common carrier because he has not secured the necessary certificate of public convenience, would be offensive to sound public policy; that would be to reward private respondent precisely for failing to comply with applicable statutory requirements. 7.

Business of common carrier imbued with public interest The business of a common carrier impinges directly and intimately upon the safety and well being and property of those members of the general community who happen to deal with such carrier. The law imposes duties and liabilities upon common carriers for the safety and protection of those who utilize their services and the law cannot allow a common carrier to render such duties and liabilities merely facultative by simply failing to obtain the necessary permits and authorizations. 8.

Extraordinary diligence required of common carriers Common carriers, “by the nature of their business and for reasons of public policy,” are held to a very high degree of care and diligence (“extraordinary diligence”) in the carriage of goods as well as of passengers. The specific import of extraordinary diligence in the care of goods transported by a common carrier is, according to Article 1733, “further expressed in Articles 1734, 1735 and 1745, numbers 5, 6 and 7” of the Civil Code. 9.

Article 1734 NCC Article 1734 establishes the general rule that common carriers are responsible for the loss, destruction or deterioration of the goods which they carry, “unless the same is due to any of the following causes only: (1) Flood, storm, earthquake, lightning, or other natural disaster or calamity; (2) Act of the public enemy in war, whether international or civil; (3) Act or omission of the shipper or owner of the goods; (4) The character of the goods or defects in the packing or in the containers; and (5) Order or act of competent public authority.” 10.

Enumeration in Article 1734 NCC exclusive; Article 1735 NCC

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It is important to point out that the above list of causes of loss, destruction or deterioration which exempt the common carrier for responsibility therefor, is a closed list. Causes falling outside the foregoing list, even if they appear to constitute a species of force majeure, fall within the scope of Article 1735, which provides that “In all cases other than those mentioned in numbers 1, 2, 3, 4 and 5 of the preceding article, if the goods are lost, destroyed or deteriorated, common carriers are presumed to have been at fault or to have acted negligently, unless they prove that they observed extraordinary diligence as required in Article 1733.” 11. Cendaña presumed at fault; Cendaña, however, not required to retain security guard to ride with truck Applying Articles 1734 and 1735, the hijacking of the carrier’s truck does not fall within any of the 5 categories of exempting causes listed in Article 1734. It would follow that the hijacking of the carrier’s vehicle must be dealt with under the provisions of Article 1735, in other words, that Cendaña as common carrier is presumed to have been at fault or to have acted negligently. This presumption, however, may be overthrown by proof of extraordinary diligence on the part of Cendaña. The standard of extraordinary diligence required Cendaña to retain a security guard to ride with the truck and to engage brigands in a fire fight at the risk of his own life and the lives of the driver and his helper. 12.

Hold uppers of second truck armed Herein, armed men held up the second truck owned by Cendaña which carried de Guzman’s cargo. The record shows that an information for robbery in band was filed in the CFI of Tarlac, Branch 2, in Criminal Case 198 entitled “People of the Philippines v. Felipe Boncorno, Napoleon Presno, Armando Mesina, Oscar Oria and one John Doe.” There, the accused were charged with willfully and unlawfully taking and carrying away with them the second truck, driven by Manuel Estrada and loaded with the 600 cartons of Liberty filled milk destined for delivery at de Guzman’s store in Urdaneta, Pangasinan. The decision of the trial court shows that the accused acted with grave, if not irresistible, threat, violence or force. 3 of the 5 holduppers were armed with firearms. The robbers not only took away the truck and its cargo but also kidnapped the driver and his helper, detaining them for several days and later releasing them in another province (in Zambales). The hijacked truck was subsequently found by the police in Quezon City. The CFI convicted all the accused of robbery, though not of robbery in band. 12. Specific requirements of the duty of extraordinary diligence in the vigilance over the goods carried in the specific context of hijacking or armed robbery; Armed robbery herein is fortuitous event The duty of extraordinary diligence in the vigilance over goods is, under Article 1733, given additional specification not only by Articles 1734 and 1735 but also by Article 1745, numbers 4, 5 and 6, Article 1745 provides in relevant part: “Any of the following or similar stipulations shall be considered unreasonable, unjust and contrary to public policy: xxx (5) that the common carrier shall not be responsible for the acts or omissions of his or its employees; (6) that the common carrier’s liability for acts committed by thieves, or of robbers who do not act with grave or irresistible threat, violence or force, is dispensed with or diminished; and (7) that the common carrier shall not responsible for the loss, destruction or deterioration of goods on account of the defective condition of the car, vehicle, ship, airplane or other equipment used in the contract of carriage.” Under Article 1745 (6), a common carrier is held responsible — and will not be allowed to divest or to diminish such responsibility — even for acts of strangers like thieves or robbers, except where such thieves or robbers in fact acted “with grave or irresistible threat, violence or force.” The limits of the duty of extraordinary diligence in the vigilance over the goods carried are reached where the goods are lost as a result of a robbery which is attended by “grave or irresistible threat, violence or force.” In these circumstances, the occurrence of the loss must reasonably be regarded as quite beyond the control of the common carrier and properly regarded as a fortuitous event. 14.

Common carriers not absolute insurers against all risks of travel and of transport of goods

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Even common carriers are not made absolute insurers against all risks of travel and of transport of goods, and are not held liable for acts or events which cannot be foreseen or are inevitable, provided that they shall have complied with the rigorous standard of extraordinary diligence. [15], also [171] Planters Products vs. CA (GR 101503, 15 September 1993) First Division, Bellosillo (J): 2 concur, 1 on leave, 1 took no part Facts: Planters Products, Inc. (PPI), purchased from Mitsubishi International Corporation of New York, USA, 9,329.7069 metric tons (M/T) of Urea 46% fertilizer which the latter shipped in bulk on 16 June 1974 aboard the cargo vessel M/V “Sun Plum” owned by Kyosei Kisen Kabushiki Kaisha (KKKK) from Kenai, Alaska, USA, to Poro Point, San Fernando, La Union, Philippines, as evidenced by Bill of Lading KP-1 signed by the master of the vessel and issued on the date of departure. On 17 May 1974, or prior to its voyage, a time charter-party on the vessel M/V “Sun Plum” pursuant to the Uniform General Charter was entered into between Mitsubishi as shipper/charterer and KKKK as shipowner, in Tokyo, Japan. Riders to the aforesaid charter-party starting from paragraph 16 to 40 were attached to the pre-printed agreement. Addenda 1, 2, 3 and 4 to the charter-party were also subsequently entered into on the 18th, 20th, 21st and 27th of May 1974, respectively. Before loading the fertilizer aboard the vessel, 4 of her holds were all presumably inspected by the charterer’s representative and found fit to take a load of urea in bulk pursuant to paragraph 16 of the charter-party. After the Urea fertilizer was loaded in bulk by stevedores hired by and under the supervision of the shipper, the steel hatches were closed with heavy iron lids, covered with 3 layers of tarpaulin, then tied with steel bonds. The hatches remained closed and tightly sealed throughout the entire voyage. Upon arrival of the vessel at her port of call on 3 July 1974, the steel pontoon hatches were opened with the use of the vessel’s boom. PPI unloaded the cargo from the holds into its steel-bodied dump trucks which were parked alongside the berth, using metal scoops attached to the ship, pursuant to the terms and conditions of the charter-party (which provided for an FIOS clause). The hatches remained open throughout the duration of the discharge. Each time a dump truck was filled up, its load of Urea was covered with tarpaulin before it was transported to the consignee’s warehouse located some 50 meters from the wharf. Midway to the warehouse, the trucks were made to pass through a weighing scale where they were individually weighed for the purpose of ascertaining the net weight of the cargo. The port area was windy, certain portions of the route to the warehouse were sandy and the weather was variable, raining occasionally while the discharge was in progress. PPI’s warehouse was made of corrugated galvanized iron (GI) sheets, with an opening at the front where the dump trucks entered and unloaded the fertilizer on the warehouse floor. Tarpaulins and GI sheets were placed in-between and alongside the trucks to contain spillages of the fertilizer. It took 11 days for PPI to unload the cargo, from 5 July to 18 July 1974 (except July 12th, 14th and 18th). A private marine and cargo surveyor, Cargo Superintendents Company Inc. (CSCI), was hired by PPI to determine the “outturn” of the cargo shipped, by taking draft readings of the vessel prior to and after discharge. The survey report submitted by CSCI to the consignee (PPI) dated 19 July 1974 revealed a shortage in the cargo of 106.726 M/T and that a portion of the Urea fertilizer approximating 18 M/T was contaminated with dirt. The same results were contained in a Certificate of Shortage/Damaged Cargo dated 18 July 1974 prepared by PPI which showed that the cargo delivered was indeed short of 94.839 M/T and about 23 M/T were rendered unfit for commerce, having been polluted with sand, rust and dirt. Consequently, PPI sent a claim letter dated 18 December 1974 to Soriamont Steamship Agencies (SSA), the resident agent of the carrier, KKKK, for P245,969.31 representing the cost of the alleged shortage in the goods shipped and the diminution in value of that portion said to have been contaminated with dirt. SSA explained that they were not able to respond to the consignee’s claim for payment because, according to them, what they received was just a request for shortlanded certificate and not a formal claim, and that this “request” was denied by them because they “had nothing to do with the discharge of the shipment.”

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On 18 July 1975, PPI filed an action for damages with the Court of First Instance of Manila. The court a quo however sustained the claim of PPI against the carrier for the value of the goods lost or damaged. On appeal, the Court of Appeals reversed the lower court and absolved the carrier from liability for the value of the cargo that was lost or damaged. PPI appealed by way of petition for review. The Supreme Court dismissed the petition; affirmed the assailed decision of the Court of Appeals, which reversed the trial court; and consequently, dismissed Civil Case 98623 of the then CFI, now RTC, of Manila; with costs against PPI. 1.

Charter party defined 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. 2.

Types of charter parties Charter parties are of two types: (a) contract of affreightment which involves the use of shipping space on vessels leased by the owner in part or as a whole, to carry goods for others; and, (b) charter by demise or bareboat charter, by the terms of which the whole vessel is let to the charterer with a transfer to him of its entire command and possession and consequent control over its navigation, including the master and the crew, who are his servants. 3.

Kinds of contract of affreightment 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 shipowner to supply the ship’s stores, pay for the wages of the master and the crew, and defray the expenses for the maintenance of the ship. 4.

Common or public carrier defined; Scope of definition The term “common or public carrier” is defined in Article 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. 5.

Distinction between common or public carrier, and private or special carrier The distinction between a “common or public carrier” and a “private or special carrier” lies in the character of the business, such that if the undertaking is a single transaction, not a part of the general business or occupation, although involving the carriage of goods for a fee, the person or corporation offering such service is a private carrier. 6. Extraordinary diligence required of common carriers (Article 1733); Ordinary diligence required of private carriers Article 1733 of the New Civil Code mandates that common carriers, by reason of the nature of their business, should observe extraordinary diligence in the vigilance over the goods they carry. In the case of private carriers, however, the exercise of ordinary diligence in the carriage of goods will suffice. 7. Common carriers presumed negligent in case of loss, etc. of goods; No presumption in private carriers In case of loss, destruction or deterioration of the goods, common carriers are presumed to have been at fault or to have acted negligently, and the burden of proving otherwise rests on them. On the contrary, no Transportation Law, 2004 ( 40 )

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such presumption applies to private carriers, for whosoever alleges damage to or deterioration of the goods carried has the onus of proving that the cause was the negligence of the carrier. 8.

Kyosei Kisen Kabushiki Kaisha a common carrier, remained as so in charter party Kyosei Kisen Kabushiki Kaisha, in the ordinary course of business, operates as a common carrier, transporting goods indiscriminately for all persons. When PPI chartered the vessel M/V “Sun Plum”, the ship captain, its officers and compliment were under the employ of the shipowner and therefore continued to be under its direct supervision and control. Considering that the steering of the ship, the manning of the decks, the determination of the course of the voyage and other technical incidents of maritime navigation were all consigned to the officers and crew who were screened, chosen and hired by the shipowner, the charterer is a stranger to the crew and to the ship. Thus, a public carrier shall remain as such, notwithstanding the charter of the whole or portion of a vessel by one or more persons, provided the charter is limited to the ship only, as in the case of a time-charter or voyage-charter. Indubitably, a shipowner in a time or voyage charter retains possession and control of the ship, although her holds may, for the moment, be the property of the charterer. 9.

When charter party converts common carrier to private carrier It is only when the charter includes both the vessel and its crew, as in a bareboat or demise that a common carrier becomes private, at least insofar as the particular voyage covering the charter-party is concerned. 10.

Reliance on case of Home Insurance vs. American Steamship misplaced The carrier’s heavy reliance on the case of Home Insurance Co. v. American Steamship Agencies is misplaced for the reason that the meat of the controversy therein was the validity of a stipulation in the charter-party exempting the shipowner from liability for loss due to the negligence of its agent, and not the effects of a special charter on common carriers. 11. American rule as to shipper carrying special cargo not applicable in the Philippines; Stricter interpretation of admiralty laws The rule in the United States that a ship chartered by a single shipper to carry special cargo is not a common carrier, does not find application in Philippine jurisdiction, for the Court has observed that the growing concern for safety in the transportation of passengers and/or carriage of goods by sea requires a more exacting interpretation of admiralty laws, more particularly, the rules governing common carriers. 12.

Observations of Raoul Colinvaux, the learned barrister-at-law “As a matter of principle, it is difficult to find a valid distinction between cases in which a ship is used to convey the goods of one and of several persons. Where the ship herself is let to a charterer, so that he takes over the charge and control of her, the case is different; the shipowner is not then a carrier. But where her services only are let, the same grounds for imposing a strict responsibility exist, whether he is employed by one or many. The master and the crew are in each case his servants, the freighter in each case is usually without any representative on board the ship; the same opportunities for fraud or collussion occur; and the same difficulty in discovering the truth as to what has taken place arises . . .” 13.

Burden of proof in an action for recovery of damages against a common carrier In an action for recovery of damages against a common carrier on the goods shipped, the shipper or consignee should first prove the fact of shipment and its consequent loss or damage while the same was in the possession, actual or constructive, of the carrier. Thereafter, the burden of proof shifts to respondent to prove that he has exercised extraordinary diligence required by law or that the loss, damage or deterioration of the cargo was due to fortuitous event, or some other circumstances inconsistent with its liability. 14. Carrier has sufficiently overcome, by clear and convincing proof, the prima facie presumption of negligence Transportation Law, 2004 ( 41 )

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(1) The master of the carrying vessel, Captain Lee Tae Bo, in his deposition taken on 19 April 1977 before the Philippine Consul and Legal Attache in the Philippine Embassy in Tokyo, Japan, testified that before the fertilizer was loaded, the 4 hatches of the vessel were cleaned, dried and fumigated. After completing the loading of the cargo in bulk in the ship’s holds, the steel pontoon hatches were closed and sealed with iron lids, then covered with 3 layers of serviceable tarpaulins which were tied with steel bonds. The hatches remained close and tightly sealed while the ship was in transit as the weight of the steel covers made it impossible for a person to open without the use of the ship’s boom. (2) It was also shown during the trial that the hull of the vessel was in good condition, foreclosing the possibility of spillage of the cargo into the sea or seepage of water inside the hull of the vessel. When M/V “Sun Plum” docked at its berthing place, representatives of the consignee boarded, and in the presence of a representative of the shipowner, the foreman, the stevedores, and a cargo surveyor representing CSCI, opened the hatches and inspected the condition of the hull of the vessel. The stevedores unloaded the cargo under the watchful eyes of the shipmates who were overseeing the whole operation on rotation basis. Verily, the presumption of negligence on the part of respondent carrier has been efficaciously overcome by the showing of extraordinary zeal and assiduity exercised by the carrier in the care of the cargo. 15.

Period which carrier was to observe degree of diligence; Limitation clause of FIOS meaning The period during which the carrier was to observe the degree of diligence required of it as a public carrier began from the time the cargo was unconditionally placed in its charge after the vessel’s holds were duly inspected and passed scrutiny by the shipper, up to and until the vessel reached its destination and its hull was re-examined by the consignee, but prior to unloading. This is clear from the limitation clause agreed upon by the parties in the Addendum to the standard “GENCON” time charter-party which provided for an F.I.O.S., meaning, that the loading, stowing, trimming and discharge of the cargo was to be done by the charterer, free from all risk and expense to the carrier. Moreover, a shipowner is liable for damage to the cargo resulting from improper stowage only when the stowing is done by stevedores employed by him, and therefore under his control and supervision, not when the same is done by the consignee or stevedores under the employ of the latter. 15.

When common carriers not liable for loss, destruction or deterioration of goods Article 1734 of the New Civil Code provides that common carriers are not responsible for the loss, destruction or deterioration of the goods if caused by the character of the goods or defects in the packaging or in the containers. The Code of Commerce also provides that all losses and deteriorations which the goods may suffer during the transportation by reason of fortuitous event, force majeure, or the inherent defect of the goods, shall be for the account and risk of the shipper, and that proof of these accidents is incumbent upon the carrier. The carrier, nonetheless, shall be liable for the loss and damage resulting from the preceding causes if it is proved, as against him, that they arose through his negligence or by reason of his having failed to take the precautions which usage has established among careful persons. 16.

Characteristics of urea Urea is a chemical compound consisting mostly of ammonia and carbon monoxide compounds which are used as fertilizer. Urea also contains 46% nitrogen and is highly soluble in water. However, during storage, nitrogen and ammonia do not normally evaporate even on a long voyage, provided that the temperature inside the hull does not exceed 80 degrees centigrade. 17.

Expected risks of bulk shipping (1) In unloading fertilizer in bulk with the use of a clamped shell, losses due to spillage during such operation amounting to one percent (1%) against the bill of lading is deemed “normal” or “tolerable.” The primary cause of these spillages is the clamped shell which does not seal very tightly. Also, the wind tends to blow away some of the materials during the unloading process. (2) The dissipation of quantities of fertilizer, or its deterioration in value, is caused either by an extremely high temperature in its place of storage, or when it comes in contact with water. When Urea is drenched in water, either fresh or saline, some of its particles Transportation Law, 2004 ( 42 )

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dissolve. But the salvaged portion which is in liquid form still remains potent and usable although no longer saleable in its original market value. (3) The probability of the cargo being damaged or getting mixed or contaminated with foreign particles was made greater by the fact that the fertilizer was transported in “bulk,” thereby exposing it to the inimical effects of the elements and the grimy condition of the various pieces of equipment used in transporting and hauling it. 18.

Hull of vessel in good condition; Improbable that sea water seep in vessel’s hold It was highly improbable for sea water to seep into the vessel’s holds during the voyage since the hull of the vessel was in good condition and her hatches were tightly closed and firmly sealed, making the M/V “Sun Plum” in all respects seaworthy to carry the cargo she was chartered for. If there was loss or contamination of the cargo, it was more likely to have occurred while the same was being transported from the ship to the dump trucks and finally to the consignee’s warehouse. This may be gleaned from the testimony of the marine and cargo surveyor of CSCI who supervised the unloading. He explained that the 18 M/T of alleged “bad order cargo” as contained in their report to PPI was just an approximation or estimate made by them after the fertilizer was discharged from the vessel and segregated from the rest of the cargo. 19.

Variable weather condition a risk of loss or damage which owner or shipper of goods has to face Herein, it was in the month of July when the vessel arrived port and unloaded her cargo. It rained from time to time at the harbor area while the cargo was being discharged according to the supply officer of PPI, who also testified that it was windy at the waterfront and along the shoreline where the dump trucks passed enroute to the consignee’s warehouse. Bulk shipment of highly soluble goods like fertilizer carries with it the risk of loss or damage; more so, with a variable weather condition prevalent during its unloading. This is a risk the shipper or the owner of the goods has to face. [16] Bascos vs. CA (GR 101089, 7 April 1993) Second Division, Campos Jr. (J): 4 concur Facts: Rodolfo A. Cipriano representing Cipriano Trading Enterprise (CIPTRADE) entered into a hauling contract with Jibfair Shipping Agency Corp. whereby the former bound itself to haul the latter’s 2,000 m/tons of soya bean meal from Magallanes Drive, Del Pan, Manila to the warehouse of Purefoods Corporation in Calamba, Laguna. To carry out its obligation, CIPTRADE, through Rodolfo Cipriano, subcontracted with Estrellita Bascos to transport and to deliver 400 sacks of soya bean meal worth P156,404.00 from the Manila Port Area to Calamba, Laguna at the rate of P50.00 per metric ton. Bascos failed to deliver the said cargo. As a consequence of that failure, Cipriano paid Jibfair Shipping Agency the amount of the lost goods in accordance with the contract. Cipriano demanded reimbursement from Bascos but the latter refused to pay. Eventually, Cipriano filed a complaint for a sum of money and damages with writ of preliminary attachment for breach of a contract of carriage. The trial court granted the writ of preliminary attachment on 17 February 1987. After trial, the trial court rendered a decision, ordering Bascos to pay Cipriano (1) the amount of P156,404.00 for actual damages with legal interest of 12% per cent per annum to be counted from 4 December 1986 until fully paid; (2) the amount of P5,000.00 as and for attorney’s fees; and (3) the costs of the suit. The court further denied the “Urgent Motion To Dissolve/Lift preliminary Attachment” dated 10 March 1987 filed by Bascos for being moot and academic. Bascos appealed to the Court of Appeals (CA-GR CV 25216) but the appellate court affirmed the trial court’s judgment. Hence, the petition for review on certiorari. The Supreme Court dismissed the petition and affirmed the decision of the Court of Appeals.

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1.

Article 1732 NCC defines common carrier Article 1732 of the Civil Code defines a common carrier as “(a) person, corporation or firm, or association 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.” 2.

Test to determine common carrier The test to determine a common carrier is “whether the given undertaking is a part of the business engaged in by the carrier which he has held out to the general public as his occupation rather than the quantity or extent of the business transacted.” 3.

Judicial admissions are conclusive Judicial admissions are conclusive and no evidence is required to prove the same. Herein, Bascos herself has made the admission that she was in the trucking business, offering her trucks to those with cargo to move. 4.

No distinctions in Article 1732 as to common carriers; De Guzman vs. CA In referring to Article 1732 of the Civil Code, it held in De Guzman vs. Court of Appeals that “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 1732 deliberately refrained from making such distinctions.” 5. Factual conclusions of the appellate court conclusive upon the Supreme Court; Court’s role in a petition for review on certiorari Regarding the affidavits (lease agreements) presented by Bascos to the court, both the trial and appellate courts have dismissed them as self-serving. The Supreme Court is bound by the appellate court’s factual conclusions. In a petition for review on certiorari, the court is not to determine the probative value of evidence but to resolve questions of law. 6. Contracts are understood as what the law defines them to be and not what parties call them; Burden of proof Granting that the said evidence were not self-serving, the same were not sufficient to prove that the contract was one of lease. It must be understood that a contract is what the law defines it to be and not what it is called by the contracting parties. Furthermore, Bascos presented no other proof of the existence of the contract of lease. He who alleges a fact has the burden of proving it. 7. Extraordinary diligence; Presumption of negligence; Exceptions in Article 1734; Burden of Proof 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. 8.

Hijacking not included in Article 1734; Article 1745 NCC, Ruling in De Guzman vs. CA

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In De Guzman vs. Court of Appeals, the Court held that hijacking, not being included in the provisions of Article 1734, must be dealt with under the provisions of Article 1735 and thus, the common carrier is presumed to have been at fault or negligent. To exculpate the carrier from liability arising from hijacking, he must prove that the robbers or the hijackers acted with grave or irresistible threat, violence, or force. This is in accordance with Article 1745 of the Civil Code. 9.

Article 1745 (6) NCC Article 1745 of the Civil Code provides that “Any of the following or similar stipulations shall be considered unreasonable, unjust and contrary to public policy; xxx (6) That the common carrier’s liability for acts committed by thieves, or of robbers who do not act with grave or irresistible threat, violences or force, is dispensed with or diminished.” 10.

When armed robbery a force majeure; De Guzman vs. CA “Under Article 1745 (6) above, a common carrier is held responsible — and will not be allowed to divest or to diminish such responsibility — even for acts of strangers like thieves or robbers except where such thieves or robbers in fact acted with grave or irresistible threat, violence or force. We believe and so hold that the limits of the duty of extraordinary diligence in the vigilance over the goods carried are reached where the goods are lost as a result of a robbery which is attended by “grave or irresistible threat, violence or force.” 11.

Grave and irresistible force not shown To establish grave and irresistible force, Bascos presented her accusatory affidavit, Jesus Bascos’ affidavit, and Juanito Morden’s “Salaysay”. However, both the trial court and the Court of Appeals have concluded that these affidavits were not enough to overcome the presumption. (1) Bascos’s affidavit about the hijacking was based on what had been told her by Juanito Morden. It was not a first-hand account. While it had been admitted in court for lack of objection on the part of Cipriano, the lower court had discretion in assigning weight to such evidence. (2) The affidavit of Jesus Bascos did not dwell on how the hijacking took place. (3) While the affidavit of Juanito Morden, the truck helper in the hijacked truck, was presented as evidence in court, he himself was a witness as could be gleaned from the contents of the petition. 12.

Affidavits not considered best evidence if affiants are available as witnesses Affidavits are not considered the best evidence if the affiants are available as witnesses. The subsequent filing of the information for carnapping and robbery against the accused named in said affidavits did not necessarily mean that the contents of the affidavits were true because they were yet to be determined in the trial of the criminal cases. [17], also [117] Mendoza vs. PAL (GR L-3678, 29 February 1952) En Banc, Montemayor (J): 7 concur Facts: In 1948, Jose Mendoza was the owner of the Cita Theater located in the City of Naga, Camarines Sur, where he used to exhibit movie pictures booked from movie producers or film owners in Manila. The fiesta or town holiday of the City of Naga, held on September 17 and 18, yearly, was usually attended by a great many people, mostly from the Bicol region, especially since the Patron Saint Virgin of Peña Francia was believed by many to be miraculous. As a good businessman, he took advantage of these circumstances and decided to exhibit a film which would fit the occasion and have a special attraction and significance to the people attending said fiesta. A month before the holiday, that is to say, August 1948, he contracted with the LVN pictures Inc., a movie producer in Manila for him to show during the town fiesta the Tagalog film entitled “Himala ng Birhen” or Miracle of the Virgin. He made extensive preparations; he had 2,000 posters printed and later distributed not only in the City of Naga but also in the neighboring towns. He also advertised in a weekly of general circulation in the province. The posters and advertisement stated that the film would be Transportation Law, 2004 ( 45 )

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shown in the Cita Theater on the 17th and 18th of September, corresponding to the eve and day of the fiesta itself. In pursuance of the agreement between the LVN Pictures Inc. and Mendoza, the former on September 17th, 1948, delivered to the Philippine Airlines (PAL) whose planes carried passengers and cargo and made regular trips from Manila to the Pili Air Port near Naga, Camarines Sur, a can containing the film “Himala ng Birhen” consigned to the Cita Theater. For this shipment, PAL issued its Air Way Bill 317133. This can of films was loaded on PAL flight 113, the plane arriving at the Air Port at Pili a little after 4:00 p.m. of the same day, September 17th. For reasons not explained by PAL, but which would appear to be the fault of its employees or agents, this can of film was not unloaded at Pili Air Port and it was brought back to Manila. Mendoza who had completed all arrangements for the exhibition of the film beginning in the evening of September 17th, to exploit the presence of the big crowd that came to attend the town fiesta, went to the Air Port and inquired from PAL’s station master there about the can of film. Said station master could not explain why the film was not unloaded and sent several radiograms to his principal in Manila making inquiries and asking that the film be sent to Naga immediately. After investigation and search in the Manila office, the film was finally located the following day, September 18th, and then shipped to the Pili Air Port on September 20th. Mendoza received it and exhibited the film but he had missed his opportunity to realize a large profit as he expected for the people after the fiesta had already left for their towns. To recoup his losses, Mendoza brought this action against the PAL. After trial, the lower court found that because of his failure to exhibit the film “Himala ng Birhen” during the town fiesta, Mendoza suffered damages or rather failed to earn profits in the amount of P3,000.00, but finding the PAL not liable for said damages, dismissed the complaint. The Supreme Court affirmed the decision appealed from; with no pronouncement as to costs. 1.

PAL a debtor in good faith Although PAL was not obligated to load the film on any specified plane or on any particular day, once said can of film was loaded and shipped on one of its planes making the trip to Camarines, then it assumed the obligation to unload it at its point of destination and deliver it to the consignee, and its unexplained failure to comply with this duty constituted negligence. The Court however found that fraud was not involved and that PAL was a debtor in good faith. 2.

A debtor in good faith is liable only for foreseen losses and damages Applying the provisions of Art. 1107 of the Civil Code which provides that losses and damages for which a debtor in good faith is liable are those foreseen, or which might have been foreseen, at the time of constituting the obligation, and which are a necessary consequence of the failure to perform it, the Court held that inasmuch as these damages suffered by Mendoza were not foreseen or could not have been foreseen at the time that PAL accepted the can of film for shipment, for the reason that neither the shipper LVN Pictures Inc. nor the consignee Mendoza had called its attention to the special circumstances attending the shipment and the showing of the film during the town fiesta of Naga, Mendoza may not recover the damages sought. (See Similar case of Daywalt vs. Corporacion de PP Agustinos Recoletos, 39 PHIL 587) 3. Contract of transportation by air may be regarded as commercial; Obvious reason why transport by air not included in Code of Commerce A contract of transportation by air may be regarded as commercial. The reason is that at least in the present case the transportation company (PAL) is a common carrier; besides, air transportation is clearly similar or analogous to land and water transportation. The obvious reason for its non-inclusion in the Code of Commerce was that at the time of its promulgation, transportation by air on a commercial basis was not yet known. In the United States where air transportation has reached its highest development, an airline company engaged in the transportation business is regarded as a common carrier. 4.

When Aircraft Operator is common carrier Transportation Law, 2004 ( 46 )

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“That aircraft and the industry of carriage by aircraft are new is no reason why one in fact employing aircraft as common-carrier vehicles should not be classified as a common carrier and charged with liability as such. There can be no doubt, under the general law of common carriers, that those air lines and aircraft owners engaged in the passenger service on regular schedules on definite routes, who solicit the patronage of the traveling public, advertise schedules for routes, times of leaving, and rates of fare, and make the usual stipulation as to baggage, are common carriers by air. A flying service company which, according to its printed advertising, will take anyone anywhere at any time, though not operating on regular routes or schedules, and basing its charges not on the number of passengers, but on the operating cost of the plane per mile, has been held to be a common carrier. It is not necessary, in order to make one carrying passengers by aircraft a common carrier of passengers that the passengers be carried from one point to another; the status and the liability as a common carrier may exist notwithstanding the passenger’s ticket issued by an airplane carrier of passengers for hire contains a statement that it is not a common carrier, etc., or a stipulation that it is to be held only for its proven negligence. But an airplane owner cannot be classed as a common carrier of passengers unless he undertakes, for hire, to carry all persons who apply for passage indiscriminately as long as there is room and no legal excuse for refusing. “ 5.

Rules and principles applied to other common carrier applicable to carriers by aircraft The principles which govern carriers by other means, such as by railroad or motor bus, govern carriers by aircraft. The rules governing the business of a common carrier by airship or flying machine may be readily assimilated to those applied to other common carriers. 6.

Test to determine common carrier by air The test of whether one is a common carrier by air is whether he holds out that he will carry for hire, so long as he has room, goods of everyone bringing goods to him for carriage, not whether he is carrying as a public employment or whether he carries to a fixed place. 7. Article 358 of the Code of Commerce similar to Article 1101 of the Civil Code, pertaining to ordinary damages or damages in general Art. 358 of the Code of Commerce provides that if there is no period fixed for the delivery of the goods, the carrier shall be bound to forward them in the first shipment of the same or similar merchandise which he may make to the point of delivery, and that upon failure to do so, the damages caused by the delay should be suffered by the carrier. This is a general provision for ordinary damages and is no different from the provisions of the Civil Code, particularly Art. 1101 thereof, providing for the payment of damages caused by the negligence or delay in the fulfillment of one’s obligation. The pertinent provisions regarding damages only treats of ordinary damages or damages in general, not special damages like those suffered by Mendoza. 9.

Order of applicable laws pertaining to commercial transactions Article 2 of the Code of Commerce provides that commercial transactions are to be governed by the provisions of the Code of Commerce, but in the absence of applicable provisions, they will be governed by the usages of commerce generally observed in each place; and in default of both, by those of the Civil Law. In the present case, assuming that the present case involved a commercial transaction, still inasmuch as the special damages claimed finds no applicable provision in the Code of Commerce, neither has it been shown that there are any commercial usages applicable thereto, then in the last analysis, the rules of the civil law would have to come into play. 10.

Chapman vs. Fargo similar In the case of Chapman vs. Fargo, L.R.A. (1918 F) p. 1049, the plaintiff in Troy, New York, delivered motion picture films to Fargo, an express company, consigned and to be delivered to him in Utica. At the time of shipment the attention of the express company was called to the fact that the shipment involved motion picture films to be exhibited in Utica, and that they should be sent to their destination, rush. There was delay in their delivery and it was found that the plaintiff because of his failure to exhibit the film in Utica due to the Transportation Law, 2004 ( 47 )

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delay suffered damages or loss of profits. But the highest court in the State of New York refused to award him special damages. 11.

Means to make common carrier liable for special damages Before defendant could be held to special damages, such as alleged loss of profits on account of delay or failure of delivery, it must have appeared that he had notice at the time of delivery to him of the particular circumstances attending the shipment, and which probably would lead to such special loss if he defaulted. Or, as the rule has been stated in another form, in order to impose on the defaulting party further liability than for damages naturally and directly, i.e., in the ordinary course of things, arising from a breach of contract, such unusual or extraordinary damages must have been brought within the contemplation of the parties as the probable result of a breach at the time of or prior to contracting. Generally, notice then of any special circumstances which will show that the damages to be anticipated from a breach would be enhanced has been held sufficient for this effect.” 12.

Prompt delivery not required of common carriers, unless they previously assume the obligation 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. Said rights and obligations are created by a specific contract entered into by the parties. 13.

Mendoza a party to the contract of transportation LVN Pictures Inc. and Jose Mendoza on one side, and PAL on the other, entered into a contract of transportation. a. One interpretation of said finding is that the LVN Pictures Inc. through previous agreement with Mendoza acted as the latter’s agent. When he negotiated with the LVN Pictures Inc. to rent the film “Himala ng Birhen” and show it during the Naga town fiesta, he most probably authorized and enjoined the Picture Company to ship the film for him on the PAL on September 17th. b. Another interpretation is that even if the LVN Pictures Inc. as consignor of its own initiative, and acting independently of Mendoza for the time being, made Mendoza as consignee, a stranger to the contract if that is possible, nevertheless when he, Mendoza, appeared at the Pili Air Port armed with the copy of the Air Way Bill demanding the delivery of the shipment to him, he thereby made himself a party to the contract of transportation. 14.

Malagarriga in his book Codigo de Comercio Comentado, Vol. I, p. 400 On the possibility of a conflict between the order of the shipper on the one hand and the order of the consignee on the other, as when the shipper orders the shipping company to return or retain the goods shipped while the consignee demands their delivery, the right of the shipper to countermand the shipment terminates when the consignee or legitimate holder of the bill of lading appears with such bill of lading before the carrier and makes himself a party to the contract. Prior to that time, he is stranger to the contract. 15.

A cause of action by a party to the contract of transportation must be founded on its breach The contract of carriage between the LVN Pictures Inc. and PAL contains the stipulations of delivery to Mendoza as consignee (Art. 1257, paragraph 2, of the old Civil Code: Should the contract contain any stipulation in favor of a third person, he may demand its fulfillment, provided he has given notice of his acceptance to the person bound before the stipulation has been revoked). His demand for the delivery of the can of film to him at the Pili Air Port may be regarded as a notice of his acceptance of the stipulation of the delivery in his favor contained in the contract of carriage, such demand being one for the fulfillment of the contract of carriage and delivery. In this case he also made himself a party to the contract, or at least has come to court to enforce it. His cause of action must necessarily be founded on its breach. 16.

Precautions to be made by exhibitor in similar cases

Transportation Law, 2004 ( 48 )

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In situations where failure to exhibit films on a certain day would spell substantial damages or considerable loss of profits, including waste of efforts on preparations and expenses incurred in advertisements, exhibitors, for their security, may either get hold of the films well ahead of the time of exhibition in order to make allowance for any hitch in the delivery, or else enter into a special contract or make a suitable arrangement with the common carrier for the prompt delivery of the films, calling the attention of the carrier to the circumstances surrounding the case and the approximate amount of damages to be suffered in case of delay. [18], also [177] Coastwise Lighterage Corp. vs. CA (GR 114167, 12 July 1995) Third Division, Francisco R. (J): 4 concur Facts: Pag-asa Sales Inc. entered into a contract to transport molasses from the province of Negros to Manila with Coastwise Lighterage Corp., 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 “2 inches wide and 22 inches long”. 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, Philippine General Insurance Company (PhilGen) and against the carrier, Coastwise Lighterage. Coastwise Lighterage denied the claim and it was PhilGen which. paid the consignee, Pag-asa Sales 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 RTC of Manila, seeking to recover the amount of P700,000.00 which it paid to Pag-asa Sales 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 (Branch 35) awarded the amount prayed for by PhilGen, i.e. the principal amount of P700,000.00 plus interest thereon at the legal rate computed from 29 March 1989, the date the complaint was filed until fully paid and another sum of P100,000.00 as attorney’s fees and costs. On Coastwise Lighterage’s appeal to the Court of Appeals, the award was affirmed on 17 December 1993. Hence, the petition for review. The Supreme Court denied the petition, and affirmed the appealed decision. 1. Liability of shipowner in contract of affreightment over vessels, as common carrier, remains in the absence of the stipulation When the charter party contract is one of affreightment over the whole vessels, rather than a demise, the liability of the shipowner for acts or negligence of its captain and crew, would remain in the absence of stipulation. Although a charter party may transform a common carrier into a private one, the same however is not true in a contract of affreightment on account of the distinctions between a contract of affreightment and a bareboat charter. Herein, Pag-asa Sales only leased three of Coastwise Lighterage’s vessels, in order to carry cargo from one point to another, but the possession, command mid navigation of the vessels remained with Coastwise Lighterage. The contract thus entered into with the consignee was one of affreightment. 2.

Demise or bareboat charter of the vessel; Puromines vs. CA 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 charterer mans the vessel with his own people and becomes Transportation Law, 2004 ( 49 )

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the owner pro hac vice, subject to liability to others for damages caused by negligence. To create a demise, the owner of a vessel must completely and exclusively relinquish possession, command and navigation thereof to the charterer anything short of such a complete transfer is a contract of affreightment (time or voyage charter party) or not a charter party all. 3.

Contract of affreightment; Puromines vs. CA A contract of affreightment is one in which the owner of the vessel leases part or all of its space to haul goods for others. It is a contract for special service to be rendered by the owner of the vessel and under such contract the general owner retains the possession, command and navigation of the ship, the charterer or freighter merely having use of the space in the vessel in return for his payment or the charter hire. An owner who retains possession of the ship though the hold is the property of the charterer, remains liable as carrier and must answer for any breach of duty as to the care, loading and unloading of the cargo . . .” 4.

Presumption of negligence 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 is sports are lost, destroyed or deteriorated, applies to Coastwise Lighterage. This presumption, which is overcome only by proof of the exercise of extraordinary diligence, remained unrebutted in the present case. As a common carrier, Coastwise Lighterage is liable for breach of the contract of carriage, having failed to overcome the presumption of negligence with the loss and destruction of goods it transported, by proof of its exercise of extraordinary diligence. 5.

Article 609 of the Code of Commerce Article 609 of the Code of Commerce, which subsidiarily governs common carriers (which are primarily governed by the provisions of the Civil Code) provides that “captains, masters, or patrons of vessels must be Filipinos, have legal capacity to contract in accordance with this code, and prove the skill capacity and qualifications necessary to command and direct the vessel, as established by marine and navigation laws, ordinances or regulations, and must not be disqualified according to the same for the discharge of the duties of the position.” 6. Carrier remised in observance of duties; Unlicensed patron presumes lack of skill and lack of familiarity to usual and safe routes taken by seasoned and authorized ones Far from having rendered service with the greatest skill and outmost foresight, and being free from fault, the carrier was culpably remiss in the observance of its duties. For one, Jesus R. Constantino, the patron of the vessel “Coastwise 9” admitted that he was not licensed. Clearly, Coastwise Lighterage’s embarking on a voyage with an unlicensed patron violates Article 609 of the Code of Commerce. It cannot safely claim to have exercised extraordinary diligence, by placing a person whose navigational skills are questionable, at the helm of the vessel which eventually met the fateful accident. It may also logically, follow that a person without license to navigate, lacks not just the skill to do so, but also the utmost familiarity with the usual and safe routes taken by seasoned and legally authorized ones. Had the patron been licensed he could be presumed to have both the skill and the knowledge that would have prevented the vessel’s hitting the sunken derelict ship that lay on their way to Pier 18. 7.

Article 2207 NCC Article 2207 of the Civil Code provides that “If the plaintiff’s property has been insured, and he has received indemnity from the insurance company for the injury or loses 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 violated the contract.” 8.

Principle of subrogation explained Transportation Law, 2004 ( 50 )

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Article 2207 NCC containing the equitable principle of subrogation has been applied in a long line of cases including Compania Maritima v. Insurance Company of North America; Firesman’s Fund Insurance Company v. Jamilla & Company, Inc., and Pan Malayan Insurance Corporation v. Court of Appeals, wherein the Court explained that “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 private of contract or upon written assignment of, claim. It accrues simply upon payment of the insurance claim by the insurer.” Herein, Coastwise Lighterage was liable for breach of the contract of carriage it entered into with the Pag-asa Sales. However, for the damage sustained by the loss of the cargo which the carrier was transporting, it was not the carrier which paid the value thereof to Pag-asa Sales but the latter’s insurer, PhilGen. Upon payment by insurer PhilGen of the amount of P700,000.00 to Pag-asa Sales, the consignee of the cargo of molasses totally damaged while being transported by Coastwise Lighterage, the former was, subrogated into all the rights which Pag-asa Sales may have had against the carrier, Coastwise Lighterage. [19] Benedicto vs. IAC (GR 70876, 19 July 1990) Third Division, Feliciano (J): 3 concur, 1 took no part Facts: Greenhills Wood Industries Co. Inc., a lumber manufacturing firm with business address at Dagupan City, operates a sawmill in Maddela, Quirino. Sometime in May 1980, Greenhills Wood bound itself to sell and deliver to Blue Star Mahogany, Inc., a company with business operations in Valenzuela, Bulacan 100,000 board feet of sawn lumber with the understanding that an initial delivery would be made on 15 May 1980. To effect its first delivery, Greenhills Wood’s resident manager in Maddela, Dominador Cruz, contracted Virgilio Licuden, the driver of a cargo truck bearing Plate 225 GA TH to transport its sawn lumber to the consignee Blue Star in Valenzuela, Bulacan. This cargo truck was registered in the name of Ma. Luisa Benedicto, the proprietor of Macoven Trucking, a business enterprise engaged in hauling freight, with main office in B.F. Homes, Parañaque. On 15 May 1980, Cruz in the presence and with the consent of driver Licuden, supervised the loading of 7,690 board feet of sawn lumber with invoice value of P16,918.00 aboard the cargo truck. Before the cargo truck left Maddela for Valenzuela, Bulacan, Cruz issued to Licuden Charge Invoices 3259 and 3260 both of which were initialed by the latter at the bottom left corner. The first invoice was for the amount of P11,822.80 representing the value of 5,374 board feet of sawn lumber, while the other set out the amount of P5,095.20 as the value of 2,316 board feet. Cruz instructed Licuden to give the original copies of the 2 invoices to the consignee upon arrival in Valenzuela, Bulacan and to retain the duplicate copies in order that he could afterwards claim the freightage from Greenhills Wood’s Manila office. On 16 May 1980, the Manager of Blue Star called up by long distance telephone Greenhills Wood’ president, Henry Lee Chuy, informing him that the sawn lumber on board the subject cargo truck had not yet arrived in Valenzuela, Bulacan. The latter in turn informed Greenhills Wood’ resident manager in its Maddela sawmill of what had happened. In a letter dated 18 May 1980, Blue Star’s administrative and personnel manager, Manuel R. Bautista, formally informed Greenhills Wood’ president and general manager that Blue Star still had not received the sawn lumber which was supposed to arrive on 15 May 1980 and because of this delay, “they were constrained to look for other suppliers.” On 25 June 1980, after confirming the above with Blue Star and after trying vainly to persuade it to continue with their contract, Greenhills Wood filed Criminal Case 668 against driver Licuden for estafa. Greenhills Wood also filed against Benedicto Civil Case D-5206 for recovery of the value of the lost sawn lumber plus damages before the RTC of Dagupan City. In her answer, Benedicto denied liability alleging that she was a Transportation Law, 2004 ( 51 )

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complete stranger to the contract of carriage, the subject truck having been earlier sold by her to Benjamin Tee, on 28 February 1980 as evidenced by a deed of sale. She claimed that the truck had remained registered in her name notwithstanding its earlier sale to Tee because the latter had paid her only P50,000.00 out of the total agreed price of P68,000.00 However, she averred that Tee had been operating the said truck in Central Luzon from that date (28 February 1980) onwards, and that, therefore, Licuden was Tee’s employee and not hers. On 20 June 1983, based on the finding that petitioner Benedicto was still the registered owner of the subject truck, and holding that Licuden was her employee, the trial court ordered Benedicto to pay the Greenhills Wood, thru its President and General Manager, the amount of P16,016 cost of the sawn lumber loaded on the cargo truck, with legal rate of interest from the filing of the complaint; to pay attorney’s fees in the amount of P2,000.00; and to pay the costs of the suit. On 30 January 1985, upon appeal by Benedicto, the Intermediate Appellate Court affirmed the decision of the trial court in toto. Benedicto moved for reconsideration, without success. Hence, the petition for review. The Supreme Court denied the Petition for Review for lack of merit; and affirmed the Decision of the former IAC dated 30 January 1985; with costs against Benedicto. 1. Registered owner liable for consequences flowing from the operation of the carrier, although the specific vehicle has been transferred to another person; Public Service Law as basis Herein, Benedicto has been holding herself out to the public as engaged in the business of hauling or transporting goods for hire or compensation. Benedicto is, in brief, a common carrier. The prevailing doctrine on common carriers makes the registered owner liable for consequences flowing from the operations of the carrier, even though the specific vehicle involved may already have been transferred to another person. This doctrine rests upon the principle that in dealing with vehicles registered under the Public Service Law, the public has the right to assume that the registered owner is the actual or lawful owner thereof. It would be very difficult and often impossible as a practical matter, for members of the general public to enforce the rights of action that they may have for injuries inflicted by the vehicles being negligently operated if they should be required to prove who the actual owner is. The registered owner is not allowed to deny liability by proving the identity of the alleged transferee. 2.

Conclusive presumption; Registered owner not allowed to prove actual owner Herein, Greenhills Wood is not required to go beyond the vehicle’s certificate of registration to ascertain the owner of the carrier. In this regard, the letter allegedly written by Benjamin Tee admitting that Licuden was his driver, had no evidentiary value not only because Benjamin Tee was not presented in court to testify on this matter but also because of the above doctrine. To permit the ostensible or registered owner to prove who the actual owner is, would be to set at naught the purpose or public policy which infuses that doctrine. 3. Benedicto has the legal security device of chattel mortgage; Retention of registered ownership erroneous Herein, assuming the truth of her story, Benedicto retained registered ownership of the freight truck for her own benefit and convenience, i.e. to secure the payment of the balance of the selling price of the truck. She may have been unaware of the legal security device of chattel mortgage; or she, or her buyer, may have been unwilling to absorb the expenses of registering a chattel mortgage over the truck. In either case, considerations both of public policy and of equity require that she bear the consequences flowing from registered ownership of the subject vehicle. 4. Extraordinary diligence required of common carriers; Presumption of fault or negligence, exceptions A common carrier, both from the nature of its business and for insistent reasons of public policy, is burdened by the law with the duty of exercising extraordinary diligence not only in ensuring the safety of Transportation Law, 2004 ( 52 )

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passengers but also in caring for goods transported by it. The loss or destruction or deterioration of goods turned over to the common carrier for conveyance to a designated destination, raises instantly a presumption of fault or negligence on the part of the carrier, save only where such loss, destruction or damage arises from extreme circumstances such as a natural disaster or calamity or act of the public enemy in time of war, or from an act or omission of the shipper himself or from the character of the goods or their packaging or container. The presumption may be overcome only by proof of extraordinary diligence on the part of the carrier. 5. Common carrier cannot be permitted to escape responsibility by proving prior sale of vehicle; Reason Clearly, to permit a common carrier to escape its responsibility for the passengers or goods transported by it by proving a prior sale of the vehicle or means of transportation to an alleged vendee would be to attenuate drastically the carrier’s duty of extraordinary diligence. It would also open wide the door to collusion between the carrier and the supposed vendee and to shifting liability from the carrier to one without financial capability to respond for the resulting damages. In other words, the thrust of the public policy here involved is as sharp and real in the case of carriage of goods as it is in the transporting of human beings. Herein, to sustain Benedicto’s contention, that is, to require the shipper to go behind a certificate of registration of a public utility vehicle, would be utterly subversive of the purpose of the law and doctrine. 6.

Driver Licuden has implied authority to contract carriage of goods Herein, Greenhills Wood had no reason at all to doubt the authority of Licuden to enter into a contract of carriage on behalf of the registered owner. It appears that, earlier, in the first week of May 1980, Greenhills Wood had contracted Licuden who was then driving the same cargo truck to transport and carry a load of sawn lumber from the Maddela sawmill to Dagupan City. No one came forward to question that contract or the authority of Licuden to represent the owner of the carrier truck. Driver Licuden was entrusted with possession and control of the freight truck by the registered owner (and by the alleged secret owner, for that matter). Driver Licuden, under the circumstances, was clothed with at least implied authority to contract to carry goods and to accept delivery of such goods for carriage to a specified destination. 7. Contract of carriage perfected; Benedicto’s liability to Greenhills Wood fixed, has right to proceed against Tee and Licuden for reimbursement or contribution That the freight to be paid may not have been fixed before loading and carriage, did not prevent the contract of carriage from arising, since the freight was at least determinable if not fixed by the tariff schedules in Benedicto’s main business office. Put in somewhat different terms, driver Licuden is in law regarded as the employee and agent of Benedicto, for whose acts Benedicto must respond. A contract of carriage of goods was shown; the sawn lumber was loaded on board the freight truck; loss or non-delivery of the lumber at Blue Star’s premises in Valenzuela, Bulacan was also proven; and Benedicto has not proven either that she had exercised extraordinary diligence to prevent such loss or non-delivery or that the loss or non-delivery was due to some casualty or force majeure inconsistent with her liability. Benedicto’s liability to Greenhills Wood was thus fixed and complete, without prejudice to her right to proceed against her putative transferee Benjamin Tee and driver Licuden for reimbursement or contribution. [20] Teja Marketing vs. IAC (GR L-65510, 9 March 1987) Second Division, Paras (J): 5 concur, 1 took no part Facts: On 9 May 1975, Pedro N. Nale bought from Teja Marketing (and/or Angel Jaucian) a motorcycle with complete accessories and a sidecar in the total consideration of P8,000.00 as shown by Invoice 144. Out of the total purchase price Nale gave a downpayment of P1,700.00 with a promise that he would pay plaintiff the balance within 60 days. Nale, however, failed to comply with his promise and so upon his own request, the Transportation Law, 2004 ( 53 )

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period of paying the balance was extended to 1 year in monthly installments until January 1976 when he stopped paying anymore. In this particular transaction a chattel mortgage was constituted as a security for the payment of the balance of the purchase price. The motorcycle sold to Nale was first mortgaged to the Teja Marketing by Angel Jaucian though the Teja Marketing and Angel Jaucian are one and the same, because it was made to appear that way only as Nale had no franchise of his own and he attached the unit to Teja Marketing’s MCH Line. The agreement was that Teja Marketing undertake the yearly registration of the motorcycle with the Land Transportation Commission (LTC). Pursuant to the agreement and on 22 February 1976, Nale gave Teja Marketing P90.00, the P8.00 would be for the mortgage fee and the P82.00 for the registration fee of the motorcycle. Teja Marketing, however, failed to register the motorcycle on that year on the ground that Nale failed to comply with some requirements such as the payment of the insurance premiums and the bringing of the motorcycle to the LTC for stenciling. Further, although the ownership of the motorcycle was already transferred to Nale the vehicle was still mortgaged with the consent of Nale to the Rural Bank of Camaligan for the reason that all motorcycle purchased from Teja Marketing on credit was rediscounted with the bank. Teja Marketing made demands for the payment of the motorcycle but just the same Nale failed to comply, thus forcing Teja Marketing to consult a lawyer and file an action for damage before the City Court of Naga in the amount of P546.21 for attorney’s fees and P100.00 for expenses of litigation. Teja Marketing also claimed that as of 20 February 1978, the total account of Nale was already P2,731,05 as shown in a statement of account; includes not only the balance of P1,700.00 but an additional 12% interest per annum on the said balance from 26 January 1976 to 27 February 1978; a 2% service charge; and P546.21 representing attorney’s fees. On his part, Nale did not dispute the sale and the outstanding balance of P1,700.00 still payable to Teja Marketing; but contends that because of this failure of Teja Marketing to comply with his obligation to register the motorcycle, Nale suffered damages when he failed to claim any insurance indemnity which would amount to no less than P15,000.00 for the more than 2 times that the motorcycle figured in accidents aside from the loss of the daily income of P15.00 as boundary fee beginning October 1976 when the motorcycle was impounded by the LTC for not being registered. The City Court rendered judgment in favor of Teja Marketing, dismissing the counterclaim, and ordered Nale to pay Teja Marketing the sum of P1,700.00 representing the unpaid balance of the purchase price with legal rate of interest from the date of the filing of the complaint until the same is fully paid; the sum of P546.21 as attorney’s fees; the sum of P200.00 as expenses of litigation; and the costs. On appeal to the Court of First Instance of Camarines Sur, the decision was affirmed in toto. Nale filed a petition for review with the Intermediate Appellate Court. On 18 July 1983, the appellate court set aside the decision under review on the basis of doctrine of “pari delicto,” and accordingly, dismissed the complaint of Teja Marketing, as well as the counterclaim of Nale; without pronouncements as to costs. Hence, the petition for review was filed by Teja Marketing and/or Angel Jaucian. The Supreme Court dismissed the petition for lack of merit; and affirmed the assailed decision of the Intermediate Appellate Court (now the Court of Appeals); without costs. 1.

Nature of the kabit system Herein, the parties operated under an arrangement, commonly known as the “kabit system” whereby a person who has been granted a certificate of public convenience allows another person who owns motor vehicles to operate under such franchise for a fee. A certificate of public convenience is a special privilege conferred by the government. Abuse of this privilege by the grantees thereof cannot be countenanced. The “kabit system” has been identified as one of the root causes of the prevalence of graft and corruption in the government transportation offices. 2.

Kabit system, although not penalized as a criminal offense, is contrary to public policy

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Although not outrightly penalized as a criminal offense, the kabit system is invariably recognized as being contrary to public policy and, therefore, void and inexistent under Article 1409 of the Civil Code. 3.

Article 1412 NCC It is a fundamental principle that the court will not aid either party to enforce an illegal contract, but will leave both where it finds them. Upon this premise it would be error to accord the parties relief from their predicament. Article 1412 of the Civil Code denies them such aid. It provides that “If the act in which the unlawful or forbidden cause consists does not constitute a criminal offense, the following rules shall be observed: (1) When the fault is on the part of both contracting parties, neither may recover that he has given by virtue of the contract, or demand, the performance of the other’s undertaking.” 4.

Inexistent contract cannot be cured by ratification nor by prescription The defect of inexistence of a contract is permanent and cannot be cured by ratification or by prescription. The mere lapse of time cannot give efficacy to contracts that are null and void. 5.

Ex pacto illicito non oritur actio “‘Ex pacto illicito’ non oritur actio’ (No action arises out of illicit bargain) is the time-honored maxim that must be applied to the parties in the present case. Having entered into an illegal contract, neither can seek relief from the courts, and each must bear the consequences of his acts.” (Lita Enterprises vs. IAC, 129 SCRA 81.) [21] BA Finance vs. CA (GR 98275, 13 November 1992) Third Division, Melo (J): 4 concur Facts: On 6 March 1983, an accident occurred involving BA Finance Corp.’s Isuzu ten-wheeler truck then driven by an employee of Lino Castro, Rogelio Villar y Amera, resulting in triple homicide with multiple physical injuries with damage to property. Neither Lino Castro nor the driver was connected with BA Finance Corp., as the truck was leased by BA Finance to Rock Component Philippines Onc. A criminal suit was filed against Villar. The trial court of Bulacan (Branch 6., RTC Malolos Bulacan) found Villar guilty beyond reasonable doubt of reckless imprudence resulting in triple homicide with multiple physical injuries with damage to property on 16 February 1984. A suit for damages was filed by Carlos Ocampo, et.al., the injured in the accident against driver Villar and BA Finance, inasmuch as the truck was registered in the name of the latter. On 13 October 1988, the trial court rendered a decision (1) ordering Rock Component Philippines Inc., BA Finance and Rogelio Villar y Amare jointly and severally to pay (a) Carlos Ocampo P121,650.00, (b) Moises Ocampo P298,500.00, (c) Nicolas Cruz P154,740.00, and (d) Inocencio Turla, Sr..48,000.00; (2) dismissing the case against Lino Castro; (3) dismissing the third-party complaint against Stronghold; (4) dismissing all the counterclaims of Villar and BA Finance and Stronghold; and (5) ordering Rock to reimburse BA Finance the total amount of P622,890.00 which the latter is adjudged to pay to Ocampo, et. al. The Court of Appeals affirmed the appealed disposition in toto through Justice Rasul, with Justices De Pano, Jr. and Imperial concurring, on practically the same grounds arrived at by the court a quo. Efforts exerted towards re-evaluation of the adverse judgment were futile. Hence, the petition for review on certiorari. The Supreme Court dismissed the petition, and affirmed the decision under review, without special pronouncement as to costs.

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1. Registered owner of CPC liable to public for injuries or damages suffered by passengers or third persons; Basis of doctrine The registered owner of a certificate of public convenience is liable to the public for the injuries or damages suffered by passengers or third persons caused by the operation of said vehicle, even though the same had been transferred to a third person. The principle upon which this doctrine is based is that in dealing with vehicles registered under the Public Service Law, the public has the right to assume or presume that the registered owner is the actual owner thereof, for it would be difficult for the public to enforce the actions that they may have for injuries caused to them by the vehicles being negligently operated if the public should be required to prove who the actual owner is. 2.

Doctrine does not imply that registered owner cannot recover By the doctrine, however, it is not implied that the registered owner may not recover whatever amount he had paid by virtue of his liability to third persons from the person to whom he had actually sold, assigned or conveyed the vehicle. 3.

Registered owner of vehicle primarily responsible to public and third persons Under the same principle the registered owner of any vehicle, even if not used for a public service, should primarily be responsible to the public or to third persons for injuries caused the latter while the vehicle is being driven on the highways or streets. There is a presumption that the owner of the guilty vehicle as he is the registered owner in the Motor Vehicles Office. 4.

Revised Motor Vehicles Law; No vehicle used in public highway unless properly registered The Revised Motor vehicles Law (Act 3992, as amended) provides that no vehicle may be used or operated upon any public highway unless the same is properly registered. It has been stated that the system of licensing and the requirement that each machine must carry a registration number, conspicuously displayed, is one of the precautions taken to reduce the danger of injury to pedestrians and other travellers from the careless management of automobiles, and to furnish a means of ascertaining the identity of persons violating the laws and ordinances, regulating the speed and operation of machines upon the highways. Not only are vehicles to be registered and that no motor vehicles are to be used or operated without being properly registered for the current year, but that dealers in motor vehicles shall furnish the Motor Vehicles Office a report showing the name and address of each purchaser of motor vehicle during the previous month and the manufacturer’s serial number and motor number. (Section 5[c], Act 3992, as amended). 5. Registration required, not as an operative act in which ownership is transferred in vehicles but permit use of vehicle in highways Registration is required not to make said registration the operative act by which ownership in vehicles is transferred, as in land registration cases, because the administrative proceeding of registration does not bear any essential relation to the contract of sale between the parties (Chinchilla vs. Rafael and Verdaguer, 39 Phil. 888), but to permit the use and operation of the vehicle upon any public highway (section 5 [a], Act 3992, as amended). 6.

Main of motor vehicle registration The main aim of motor vehicle registration is to identify the owner so that if any accident happens, or that any damage or injury is caused by the vehicle on the public highways, responsibility therefor can be fixed on a definite individual, the registered owner. Instances are numerous where vehicles running on public highways caused accidents or injuries to pedestrians or other vehicles without positive identification of the owner or drivers, or with very scant means of identification. It is to forestall these circumstances, so inconvenient or prejudicial to the public, that the motor vehicle registration is primarily ordained, in the interest of the determination of persons responsible for damages or injuries caused on public highways.

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7. Court cannot entertain registrant’s defense to avoid liability, as it will thwart the purpose of the statute; Registered not allowed to prove vehicle’s ownership One of the principal purposes of motor vehicles legislation is identification of the vehicle and of the operator, in case of accident; and another is that the knowledge that means of detection are always available may act as a deterrent from lax observance of the law and of the rules of conservative and safe operation. Whatever purpose there may be in these statutes, it is subordinate at the last to the primary purpose of rendering it certain that the violator of the law or of the rules of safety shall not escape because of lack of means to discover him. The purpose of the statute is thwarted, and the displayed number becomes a ‘snare and delusion,’ if an individual or corporation should be allowed to pace a “middleman” between them and the public, and escape liability by the manner in which they recompense their servants. A victim of recklessness on the public highways is usually without means to discover or identify the person actually causing the injury or damage. He has no means other than by a recourse to the registration in the Motor Vehicles Office to determine who is the owner. The protection that the law aims to extend to him would become illusory were the registered owner given the opportunity to escape liability by disproving his ownership. If the policy of the law is to be enforced and carried out, the registered owner should not be allowed to prove the contrary to the prejudice of the person injured, that is, to prove that a third person or another has become the owner, so that he may thereby be relieved of the responsibility to the injured person. 8.

Policy and application of law not harsh The above policy and application of the law may appear quite harsh and would seem to conflict with truth and justice; but actually is not. A registered owner who has already sold or transferred a vehicle has the recourse to a third-party complaint, in the same action brought against him to recover for the damage or injury done, against the vendee or transferee of the vehicle. The inconvenience of the suit is no justification for relieving him of liability; said inconvenience is the price he pays for failure to comply with the registration that the law demands and requires. 9.

Cases of Duavit vs. CA and Duquillo vs. Bayot not applicable The rulings in Duavit vs. Court of Appeals and in Duquillo vs. Bayot is legally unpalatable for the purpose of the present discourse. The vehicles adverted to in the two cases shared a common thread, in that the jeep and the truck were driven in reckless fashion without the consent or knowledge of the respective owners. In the case of Duavit vs. CA, the Court was cognizant of the inculpatory testimony spewed by Sabiniano when he admitted that he took the jeep from the garage of Duavit without the consent or authority of the latter. In the Duquillo case, the defendant therein cannot be held liable for anything because of circumstances which indicated that the truck was driven without the consent or knowledge of the owner thereof. [22] Vargas vs. Langkay [23] Nocum vs. Laguna Tayabas Bus Co. (GR L-23733, 31 October 1969) First Division, Barredo (J): 7 concur, 1 concur in result, 1 reserves vote Facts: Herminio L. Nocum, a passenger in Laguna Tayabas Bus Co.’s Bus 120, which was then making a trip within the barrio of Dita, Municipality of Bay, Laguna, was injured as a consequence of the explosion of firecrackers, contained in a box, loaded in said bus and declared to its conductor as containing clothes and miscellaneous items by a co-passenger.

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Nocum filed a case against Laguna Tayabas Bus for damages. The CFI of Batangas (Civil Case 834) sentenced Laguna Tayabas to pay Nocum the sum of P1,351.00 for actual damages and P500.00 as attorney’s fees, with legal interest from the filing of the complaint plus costs. Laguna Tayabas appealed. The Supreme Court reversed the appealed judgment of the trial court, and dismissed the case, without costs. 1.

Article 1733 NCC Article 1733 of the Civil Code provides that “Common carriers, from the nature of their business and for reasons of public policy, are bound to observe extraordinary diligence in the vigilance over the goods and for the safety of the passengers transported by them, according to all the circumstances of each case. Such extraordinary diligence in the vigilance over the goods is further expressed in articles 1734, 1735, and 1745, Nos. 5, 6, and 7, while the extraordinary diligence for the safety of the passengers is further set forth in articles 1755 and 1756. 2.

Article 1755 NCC Article 1755 of the Civil Code provides that “A common carrier is bound to carry the passengers safely as far as human care and foresight can provide, using the utmost diligence of very cautious persons, with a due regard for all the circumstances. 3.

Article 1756 NCC Article 1756 of the Civil Code provides that “In case of death of or injuries to passengers, common carriers are presumed to have been at fault or to have acted negligently, unless they prove that they observed extraordinary diligence as prescribed in articles 1733 and 1755.” 4.

Article 1733 NCC not too exacting; Carrier not mandated to require opening of baggage Before the box containing the firecrackers were allowed to be loaded in the bus by the conductor, inquiry was made with the passenger carrying the same as to what was in it, since its “opening was folded and tied with abaca.” According to the judge of the lower court, “if proper and rigid inspection were observed by the defendant, the contents of the box could have been discovered and the accident avoided. Refusal by the passenger to have the package opened was no excuse because, as stated by Dispatcher Cornista, employees should call the police if there were packages containing articles against company regulations.” Even it that may be true, the law does not require as much. Article 1733 is not as unbending, for it reasonably qualifies the extraordinary diligence required of common carriers for the safety of the passengers transported by them to be “according to all the circumstances of each case.” “In fact, Article 1755 repeats this same qualification: “A common carrier is bound to carry the passengers safely as far as human care and foresight can provide, using the utmost diligence of very cautious persons, with due regard for all the circumstances.” 5.

Passengers presumed that a passenger that will not take with him anything dangerous While it is true the passengers of Laguna Tayabas’ bus should not be made to suffer for something over which they had no control, fairness demands that in measuring a common carrier’s duty towards its passengers, allowance must be given to the reliance that should be reposed on the sense of responsibility of all the passengers in regard to their common safety. It is to be presumed that a passenger will not take with him anything dangerous to the lives and limbs of his co-passengers, not to speak of his own. 6.

Right to privacy Not to be lightly considered be the right to privacy to which each passenger is entitled. He cannot be subjected to any unusual search, when he protests the innocuousness of his baggage and nothing appears to indicate the contrary, as in the case at bar. In other words, inquiry may be verbally made as to the nature of a passenger’s baggage when such is not outwardly perceptible, but beyond this, constitutional boundaries are already in danger of being transgressed. Calling a policeman to his aid in compelling the passenger to submit to more rigid inspection, after the passenger had already declared that the box contained mere clothes and Transportation Law, 2004 ( 58 )

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other miscellanies, could not have justified invasion of a constitutionally protected domain. Police officers acting without judicial authority secured in the manner provided by law are not beyond the pale of constitutional inhibitions designed to protect individual human rights and liberties. Withal, what must be importantly considered is not so much the infringement of the fundamental sacred rights of the particular passenger involved, but the constant threat any contrary ruling would pose on the right of privacy of all passengers of all common carriers, considering how easily the duty to inspect can be made an excuse for mischief and abuse. 7.

Proper understanding of the service manual issued by Laguna Tayabas When there are sufficient indications that the representations of the passenger regarding the nature of his baggage may not be true, in the interest of the common safety of all, the assistance of the police authorities may be solicited, not necessarily to force the passenger to open his baggage, but to conduct the needed investigation consistent with the rules of propriety and, above all, the constitutional rights of the passenger. It is in this sense that the service manual issued by Laguna Tayabas Bus Co. to its conductors must be understood. 8.

Resort to decisions of foreign jurisdiction similar tot the present one Decisions in other jurisdictions evidently because of the paucity of local precedents squarely in point, emphasize that there is need for evidence of circumstances indicating cause or causes for apprehension that the passenger’s baggage is dangerous and that it is failure of the common carrier’s employee to act in the face of such evidence that constitutes the cornerstone of the common carrier’s liability in cases similar to the present one. 9.

Principle controlling servants of the carrier; Clark vs. Louisville The principle that must control the servants of the carrier in a case is correctly stated in the opinion in the case of Clarke v. Louisville & N.R. Co. (20 Ky L. Rep. 839, 49 S.W. 1120). In that case Clarke was a passenger on the defendant’s train. Another passenger took a quantity of gasoline into the same coach in which Clarke was riding. It ignited and exploded, by reason of which he was severely injured. The trial court peremptorily instructed the jury to find for the defendant. In the opinion, affirming the judgment, it is said: ‘It may be stated briefly, in assuming the liability of a railroad to its passengers for injury done by another passenger, only where the conduct of this passenger had been such before the injury as to induce a reasonably prudent and vigilant conductor to believe that there was reasonable ground to apprehend violence and danger to the other passengers, and in that case asserting it to be the duty of the conductor of the railroad train to use all reasonable means to prevent such injury, and if he neglects this reasonable duty, and injury is done, that then the company is responsible; that otherwise the railroad is not responsible. 10.

Principle controlling servants of the carrier; Gulf vs. Shields as cited in Clark vs. Louisville “The opinion quotes with approval from the case of Gulf, C. & S. F. R. Co. vs. Shields, 9 Tex. Civ. App. 652, 29 S. W. 652, in which case the plaintiff was injured by alcohol which had been carried upon the train by another passenger. In the opinion in that case it is said: ‘It was but a short period of time after the alcohol was spilt when it was set on fire and the accident occurred, and it was not shown that appellant’s employees knew that the jug contained alcohol. In fact, it is not shown that the conductor or any other employee knew that Harris had a jug with him until it fell out of the sack, though the conductor had collected his fare, and doubtless knew that he had the sack on the seat with him. It cannot be successfully denied that Harris had the right as a passenger to carry baggage on the train, and that he had a right to carry it in a sack if he chose to do so. We think it is equally clear that, in the absence of some intimation or circumstance indicating that the sack contained something dangerous to other passengers, it was not the duty of appellant’s conductor or any other employee to open the sack and examine its contents. [Quinn v. Louisville & N. R. Co. 98 Ky. 231, 32 S. W. 742; Wood v. Louisville & N. R. Co. 101 Ky. 703, 42 S. W. 349; Louisville & N. R. Co. v. Vincent, 29 Ky. L. Rep. 1049, 96 S. W. 898; Louisville & N. R. Co. v. Renfro, 142 Ky. 590, 33 L. R. A. (N. S.) 133, 135 S. W. 266] Transportation Law, 2004 ( 59 )

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11.

Explosive or Dangerous Contents Explosive or Dangerous Contents. — A carrier is ordinarily not liable for injuries to passengers from fires or explosions caused by articles brought into its conveyances by other passengers, in the absence of any evidence that the carrier, through its employees, was aware of the nature of the article or had any reason to anticipate danger therefrom. (Bogard v. Illinois C. R Co. 144 Ky. 649, 139 S. W. 855, 36 L. R. A. [N. S.] 337; Clarke v. Louisville & N. R. Co. 101 Ky. 34, 39 S. W. 840, 36 L. R. A. 123 [explosion of can of gasoline]; East Indian R. Co. v. Mukerjee [1901] A. C. [Eng.] 396, 3 B. R. C. 420 — P. C. [explosion of fireworks]; Annotation: 37 L. R. A. [N. S.] 725.) 12.

Extraordinary diligence shown; Ruling on fortuitous event not necessary Since the Court holds that Laguna Tayabas has succeeded in rebutting the presumption of negligence by showing that it has exercised extraordinary diligence for the safety of its passengers, “according to the circumstances of the case”, the Court deemed it unnecessary to rule whether or not there was any fortuitous event in the present case. [24] Tamayo vs. Aquino, et.al. (GR L-12634 & L-12720, 29 May 1959) Also Rayos vs. Tamayo, et. al. En Banc, Labrador (J): 7 concur Facts: While Epifania Gonzales was making a trip aboard truck with Plate TPU-735, it bumped against a culvert on the side of the road in Bugallon, Pangasinan. As a consequence of this accident Epifania Gonzales was thrown away from the vehicle and two pieces of wood embeded in her skull as a result of which she died. The impact of the truck against the culvert was so violent that the roof of the vehicle was ripped off from its body, one fender was smashed and the engine damaged beyond repair. Inocencio Aquino and his children brought an action against Jose G. Tamayo, holder of a certificate of public convenience to operate two trucks for damages for the death of Inocencio’s wife, Epifania Gonzales, while riding aboard Tamayo’s truck. The complaint was for the recovery of P10,000 as actual damages, P10,000 as moral damages, and costs. Upon being summoned, Tamayo answered, alleging that the truck is owned by Silvestre Rayos so he filed a third-party complaint against the latter, alleging that he no longer had any interest whatsoever in the said truck, as he had sold the same before the accident to Rayos. Answering the third-party complaint, Rayos alleged that if any indemnity is due, it should come from Tamayo, because he did not have any transaction with him regarding such sale. The CFI found that the truck with plate TPU-735 was one of the trucks of Tamayo under a certificate of public convenience issued to him; that he had sold it to Rayos in March 1953, but did not inform the Public Service Commission of the sale until 30 June 1953, one month after the accident. On the basis of said facts, the CFI ordered Tamayo and Rayos to pay Aquino jointly and severally the sum of P6,000 as compensatory damages, and another sum of P5,000 as moral damages, with interest, and authorized Tamayo or Rayos, whoever should pay the entire amount, to recover from the other any sum in excess of ½ of the amount ordered to be paid, with interest. The court also dismissed the third-party complaint. Appeal against the above decision was made to the Court of Appeals. This court affirmed the judgment of the CFI in all respects. Tamayo and Rayos filed separate petitions for certiorari before the Supreme Court. The Supreme Court modified the judgment appealed from, in that Tamayo was ordered to pay to Aquino the sum of P6,000 as compensatory damages for the death of the deceased, but that Tamayo has the right to be indemnified by Rayos of the amount he was ordered to pay; with costs against Tamayo and Rayos.

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1.

Registered owner of public service vehicle responsible for damages As held in the cases of Medina vs. Cresencia (99 Phil., 506; 52 Off. Gaz., [11] 4606); Timbol vs. Osias (98 Phil., 432; 52 Off. Gaz. [3] 1392), Montoya vs. Ignacio (94 Phil., 182; 50 Off. Gaz., 108), and Roque vs. Malibay (L-8561, 18 November 1955), the registered owner of a public service vehicle is responsible for damages that may be caused to any of the passengers therein, even if the said vehicle had already been sold, leased or transferred to another person who was, at the time of the accident, actually operating the vehicle. This principle was also reafirmed in the case of Erezo vs. Jepte (102 Phil., 103). 2. Reason why liability imposed upon the registered owner of the vehicle under a certificate of public convenience; Erezo vs. Jepte The reason for the liability imposed upon the registered owner of the vehicle under a certificate of public convenience is that “the law, with its aim and policy in mind, does not relieve him directly of the responsibility that the law fixes and places upon him as an incident or consequence of registration. were a registered owner allowed to evade responsibility by proving who the supposed transferee or owner is, it would be easy for him by collusion with others or otherwise, to escape said responsibility and transfer the same to an indefinite person, or to one who possesses no property with which to respond financially for the damage or injury done. A victim of recklessness on the public highways is usually without means to discover or identify the person actually causing the injury or damage. He has no means other than by a recourse to the registration in the Motor Vehicles Office to determine who is the owner. The protection that the law aims to extend to him would become illusory were the registered owner given the opportunity to escape liability by disproving his ownership. If the policy of the law is to be enforced and carried out, the registered owner should not be allowed to prove the contrary to the prejudice of the person injured, that is, to prove that a third person or another has become the owner, so that he may thereby be relieved of the responsibility to the injured.” 3.

Source of obligation based on breach of contract, rather than quasi-delict The action instituted in the present case is one for breach of contract, for failure Tamayo to carry safety the deceased to her destination. The liability for which he is made responsible, i. e., for the death of the passenger, may not be considered as arising from a quasi-delict. As the registered owner Tamayo and his tranferee Rayos may not be held guilty of tort or a quasi-delict; their responsibility is not solidary as provided in Article 2194 NCC (joint tortfeasors). 4.

Responsibility of the transferee (as agent of the registered owner); Present case As Tamayo is the registered owner of the truck, his responsibility to the public or to any passenger riding in the vehicle or truck must be direct, for the reasons given in the decision in the case of Erezo vs. Jepte. But as the transferee, who operated the vehicle when the passenger died, is the one directly responsible for the accident and death he should in turn be made responsible to the registered owner for what the latter may have been adjudged to pay. In operating the truck without transfer thereof having been approved by the Public Service Commission, the transferee acted merely as agent of the registered owner and should be responsible to him (the registered owner), for any damages that he may cause the latter by his negligence. Further, inspite of the fact that the agreement between Tamayo and Rayos was for Rayos to use the truck in carrying of gasoline, the latter used the same in transporting passengers outside the route covered by the franchise of Tamayo. For this additional reason, the agent or Rayos must be held responsible to the registered owner, to the extent that the latter may suffer damage by reason of the death caused during the accident. 5.

Responsibility of the transferee (as agent of the registered owner); Erezo vs. Jepte In the case of Erezo vs. Jepte, the court held that the registered owner (the defendant appellant therein) is primarily responsible for the damage caused to the vehicle of the plaintiff-appellee, but he (defendant-appellant) has a right to be indemnified by the real or actual owner of the amount that he may be required to pay as damage for the injury caused to the plaintiff-appellant.

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6.

Third party complaint proper; Rule 12 of Rules of Court The procedural means by which the liability of the transferee to the holder of the certificate should be enforced is that indicated in the case of Erezo vs. Jepte. Herein, this procedure was adopted by Tamayo, when he presented third-party complaint against Rayos. The courts should have adjudged the responsibility to make indemnity in accordance therewith. The transferee is liable to indemnify the registered owner for the damages that the latter may be required to pay for the accident, hence the remedy is by third-party complaint (See Rule 12, Rules of Court). 7.

No moral damages due in culpa-contractual; Article 2220 NCC As the responsibility of Tamayo and his agent Rayos is culpa-contractual, no award of moral damages can be given. The law on this matter is expressed in Article 2220 of the Civil Code, which provides that “willful injury to property may be a legal ground for awarding moral damages if the court should find that, under the circumstances, such damages are justly due. The same rule applies to breaches of contract where the defendant acted fraudulently or in bad faith.” 8.

No bad faith on part of Tamayo present to allow award of moral damages The law expressly provides that award of moral damages can be made in a suit for breach of contract only when the defendants acted fraudulently or in bad faith. Herein, the holder of the certificate was not guilty of fraud or bad faith. There appears to be no fraud at all in the transfer. Transfers are prohibited only if made without approval by the Public Service Commission. There may have been a violation of the regulations because Tamayo did not secure a previous authority to transfer from said Commission, but he actually applied for and obtained said permission or approval about a month after the accident. Besides, the truck was transferred to Rayos with the understanding that the same was not to be used as a public convenience, so that insofar as Tamayo is concerned, there could have been no shade or tint of bad faith at all. Consequently, the ground upon which moral damages may be demanded from him does not exist. 9.

No bad faith, only breach of agreement, on part of Rayos There was no fraud or bad faith committed on the part of the transferee or agent either. There may have been a breach of the agreement between Tamayo and Rayos, but this was not the immediate cause of the accident. It was the negligence of the driver. What the law would seem to consider as bad faith which may furnish a ground for the award of moral damages in the present case would be bad faith in the securing and in the execution of the contract and in the enforcement of its terms (Article 1338, Civil Code), or any other kind of deceit which may have been used by both defendants. None can be said to have been present in the present case. There was no bad faith on the part of the agent Rayos, there was negligence of the driver employed by him, but this is certainly not bad faith as contemplated by law. [25] Erezo vs. Jepte (GR L-9605, 30 September 1957) First Division, Labrador (J): 7 concur, 1 concur in result Facts: Aguedo Jepte is the registered owner of a six by six truck bearing plate No. TC-1253. On August 9, 1949, while the same was being driven by Rodolfo Espino y Garcia, it collided with a taxicab at the intersection of San Andres and Dakota Streets, Manila. As the truck went off the street, it hit Ernesto Erezo and another, and the former suffered injuries, as a result of which he died. The driver was prosecuted for homicide through reckless negligence in criminal case 10663 of the CFI Manila. The accused pleaded guilty and was sentenced to suffer imprisonment and to pay the heirs of Ernesto Erezo the sum of P3,000. As the amount of the judgment could not be enforced against him, Gaudioso Erezo, Ernesto’s father, brought the action against the registered owner of the truck, Jepte. Jepte did not deny that at the time of the fatal accident the cargo truck driven by Rodolfo Espino y Garcia was registered in his name. He, however, claims Transportation Law, 2004 ( 62 )

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that the vehicle belonged to the Port Brokerage, of which he was the broker at the time of the accident. The trial court held that as Jepte represented himself to be the owner of the truck and the Motor Vehicles Office, relying on his representation, registered the vehicles in his name, the Government and all persons affected by the representation had the right to rely on his declaration of ownership and registration. It, therefore, held that Jepte is liable because he cannot be permitted to repudiate his own declaration. Hence, the appeal. The Supreme Court affirmed the judgment appealed from, with costs against Jepte. 1. Registered owner of CPC liable to public for injuries and damages suffered by passengers or third person caused by his vehicle’s operation; Rationale of the law; Right of recourse The registered owner of a certificate of public convenience is liable to the public for the injuries or damages suffered by passengers or third persons caused by the operation of said vehicle, even though the same had been transferred to a third person. (Montoya vs. Ignacio, 94 Phil., 182, 50 Off. Gaz., 108; Roque vs. Malibay Transit Inc., 1 G. R. No. L-8561, November 18, 1955; Vda. de Medina vs. Cresencia, 99 Phil., 506, 52 Off. Gaz., [10], 4606.) The principle upon which this doctrine is based is that in dealing with vehicles registered under the Public Service Law, the public has the right to assume or presume that the registered owner is the actual owner thereof, for it would be difficult for the public to enforce the actions that they may have for injuries caused to them by the vehicles being negligently operated if the public should be required to prove who the actual owner is. The doctrine however does not imply that the registered owner may not recover whatever amount he had paid by virtue of his liability to third persons from the person to whom he had actually sold, assigned or conveyed the vehicle. 2. Registered owner of vehicle primary responsible even he was no longer owner of vehicle at time of damage Under the same principle the registered owner of any vehicle, even if not used for a public service, should primarily be responsible to the public or to third persons for injuries caused the latter while the vehicle is being driven on the highways or streets. 3.

Motor Vehicles Registration; System of licensing, Duties of motor vehicle dealers The Revised Motor Vehicles Law (Act No. 3992, as amended) provides that no vehicle may be used or operated upon any public highway unless the same is properly registered. It has been stated that the system of licensing and the requirement that each machine must carry a registration number, conspicuously displayed, is one of the precautions taken to reduce the danger of injury to pedestrians and other travellers from the careless management of automobiles, and to furnish a means of ascertaining the identity of persons violating the laws and ordinances, regulating the speed and operation of machines upon the highways (2 R. C. L. 1176). Not only are vehicles to be registered and that no motor vehicles are to be used or operated without being properly registered for the current year, but that dealers in motor vehicles shall furnish the Motor Vehicles Office a report showing the name and address of each purchaser of motor vehicle during the previous month and the manufacturer’s serial number and motor number. (Section 5 [c], Act No. 3992, as amended.) 4.

Nature of motor vehicle registration Registration is required not to make said registration the operative act by which ownership in vehicles is transferred, as in land registration cases, because the administrative proceeding of registration does not bear any essential relation to the contract of sale between the parties (Chinchilla vs. Rafael and Verdaguer, 39 Phil. 888), but to permit the use and operation of the vehicle upon any public highway (section 5 [a], Act No. 3992, as amended). 5.

Purpose of motor vehicle registration One of the principal purposes of motor vehicles legislation is identification of the vehicle and of the operator, in case of accident; and another is that the knowledge that means of detection are always available may act as a deterrent from lax observance of the law and of the rules of conservative and safe operation. Transportation Law, 2004 ( 63 )

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Whatever purpose there may be in these statutes, it is subordinate at the last to the primary purpose of rendering it certain that the violator of the law or of the rules of safety shall not escape because of lack of means to discover him. The purpose of the statute is thwarted, and the displayed number becomes a “snare and delusion.” No responsible person or corporation could be held liable for the most outrageous acts of negligence, if they should be allowed to place a “middleman” between them and the public, and escape liability by the manner in which they recompense their servants. The motor vehicle registration is primarily ordained, in the interest of the determination of persons responsible for damages or injuries caused on public highways. 6.

Registered owner not allowed to prove actual and real owner The law does not allow the registered owner to prove who the actual and real owner is at the trial. The law, with its aim and policy in mind, does not relieve him directly of the responsibility that the law fixes and places upon him as an incident or consequence of registration. Were a registered owner allowed to evade responsibility by proving who the supposed transferee or owner is, it would be easy for him, by collusion with others or otherwise, to escape said responsibility and transfer the same to an indefinite person, or to one who possesses no property with which to respond financially for the damage or injury done. A victim of recklessness on the public highways is usually without means to discover or identify the person actually causing the injury or damage. He has no means other than by a recourse to the registration in the Motor Vehicles Office to determine who is the owner. The protection that the law aims to extend to him would become illusory were the registered owner given the opportunity to escape liability by disproving his ownership. If the policy of the law is to be enforced and carried out, the registered owner should not be allowed to prove the contrary to the prejudice of the person injured, that is, to prove that a third person or another has become the owner, so that he may thereby be relieved of the responsibility to the injured person. 7.

Application of law not in conflict with truth and justice The policy and application of the law may appear quite harsh and would seem to conflict with truth and justice, but actually is not. A registered owner who has already sold or transferred a vehicle has the recourse to a third-party complaint, in the same action brought against him to recover for the damage or injury done, against the vendee or transferee of the vehicle. The inconvenience of the suit is no justification for relieving him of liability; said inconvenience is the price he pays for failure to comply with the registration that the law demands and requires. 8.

Registered owner primary responsible, with recourse against real or actual owner Herein, Jepte should be held liable to Erezo for the injuries occasioned to the latter because of the negligence of the driver, even if Jepte was no longer the owner of the vehicle at the time of the damage because he had previously sold it to another. The registered owner is primarily responsible for the damage caused to the vehicle of Erezo, but Jepte has a right to be indemnified by the real or actual owner of the amount that he may be required to pay as damage for the injury caused to Erezo. [26] Zamboanga Transportation Co. vs. CA (GR L-25292, 29 November 1969) En Banc, Barredo (J): 7 concur, 2 took no part Facts: In the evening of 13 August 1955, the spouses Ramon and Josefina Dagamanuel boarded a bus at Manicahan, Zamboanga City, to attend a benefit dance at the Bunguiao Elementary School, also in Zamboanga City, where Josefina was a public school teacher. After the dance, the couple boarded the same bus to return to Manicahan. At around 1 a.m. of 14 August 1955, the bus (1955 TPU-1137), and driven by Valeriano Marcos, fell off the road and pinned to death the said spouses and several other passengers.

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Jose Mario Dagamanuel, the only child of the deceased spouses, through his maternal grandmother as guardian ad-litem, Pascuala Julian de Punzalan, instituted an action against Zamboanga Transportation Co., Inc. (Zamtanco) and the Zamboanga Rapids Co., Inc. (Zambraco) for breach of contract of carriage, alleging that the accident was due to the fault and negligence of the driver in operating the bus and due to the negligence of the companies in their supervision of their driver. Dagamanuel asks for actual or compensatory damages in the sum of P40,000, moral damages in the sum of P40,000, exemplary damages in the sum of P20,000, attorney’s fees in the sum of P5,000 and costs. Zamtranco filed a third-party complaint against the driver Marcos. The Zambraco also filed a third-party complaint against the driver. Finding that (1) the Zamtranco and the Zambraco were under one management at the time of the accident; (2) the accident was due to the negligence of the driver who was under their employ; and (3) the sale made by Marcos of his property was done with intent to defraud his creditors, the trial court rendered judgment (1) sentencing the three, jointly and severally, to pay the plaintiff P16,000 for the death of the spouses, P4,000 as exemplary damages, P2,000 as attorney’s fees, and costs; and (2) annulling the deed of sale executed by Marcos. Zamtranco, Zambraco and Marcos appealed. Marcos’ appeal was later dismissed; hence as to him the judgment is already final and executory. The appellate court affirmed the judgment of the trial court with modification as to the award of damages, to wit, (1) P12,000 for the death of the spouses Ramon and Josefina Dagamanuel, (2) P11,520 for the loss of earnings of both spouses, (3) P5,000 as moral damages, and (4) P5,000 as exemplary damages, with costs against Zamtranco and Zambraco. The latter moved for reconsideration, but the same was denied. Hence, the appeal via a petition for certiorari. The Supreme Court affirmed the judgment of the Court of Appeals, with the modification that as to damages, Zamtranco and Zambraco are sentenced to pay jointly and severally no more than the amounts of damages adjudged by the trial court; with no costs in this instance. 1. Application of previous rulings as to liabilities of parties where CPC is transferred not necessary as both owners of bus admit driver was in their employ While it is true that according to previous decisions of the Supreme Court, transfer of a certificate of public convenience to operate a transportation service is not effective and binding insofar as the responsibility of the grantee under the franchise in its relation to the public is concerned, without the approval of the transfer by the Public Service Commission required by the Public Service Act, and that in contemplation of law, the transferor of such certificate continues to be the operator of the service as long as the transfer is not yet approved, and as such operator, he is the one responsible jointly and severally with his driver for damages incurred by passengers or third persons in consequence of injuries or deaths resulting from the operation of such service, the Court does not find any need for applying these rulings to the present case for the simple reason that in their respective third-party complaints, the companies both admitted separately that they are the owners of the bus involved in the incident in question and that Valeriano Marcos, the driver of said bus at the time of said incident, was in their employ. 2.

Zambraco appears to be the registered owner, Zamtranco was in fact the operator There is abundant evidence that although the Zambraco appears to be the registered owner, Zamtranco was in fact the operator. To start with, there is the testimony of Filoteo de los Reyes, principal teacher of Josefina, to the effect that for the trip to and from Bunguiao where the benefit dance was held, he contracted with Zamtranco at Tetuan; that he saw in Bunguiao the bus sent by Zamtranco; and that he paid the fare to the driver of Zamtranco. This testimony was never contradicted by the companies, either by documentary or testimonial evidence. 3. Sale and merger of Zambraco with Zamtranco subject of application with PSC; Zambraco remains registered with Zambraco TPU Bus 1327, which figured in the accident that caused the death of the spouses Ramon Dagamanuel and Josefina Punzalan, was registered in the name of Zambraco in the year 1955. At that time, Transportation Law, 2004 ( 65 )

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the sale and merger of this Zambraco with the Zamtranco was to be the subject of application with the Public Service Commission. Pending such approval, the ill-fated bus was again registered in the name of the Zambraco in the year 1956, according to the testimony given at the trial by Leonardo Galvez, then Acting Registrar of the Motor Vehicle Office in Zamboanga. 4. Previous rulings inapplicable; Registered owners do not seek to pass on liability to the actual operators on the pretext that they had already sold or transferred their units to the latter There is no application of the ruling in the previous cases to the present case. There, the registered owners invariably sought to pass on liability to the actual operators on the pretext that they had already sold or transferred their units to the latter, whereas in the present case, the registered owner, the Zambraco, admits whatever liability it has and vigorously objects to any finding that the actual operator, the Zamtranco, is also liable with it, claiming that as registered owner, it alone should be adjudged liable. We would not inquire into the motive of the Zambraco why instead of sharing whatever liability it has with the Zamtranco, it prefers to shoulder it alone. But the fact stands out in bold relief that although still the registered owner at the time of the accident, it had already sold the vehicle to Zamtranco and the latter was actually operating it. 5. Interest of public requires both registered and actual operators to be solidarily liable with driver For the better protection of the public that both the owner of record and the actual operator, as held by the Court in the past, should be adjudged jointly and severally liable with the driver (see Dizon vs. Octavio, et al., 51 O.G. No. 8, 4059-4061; Castanares vs. Pages, CA-G.R. 21809-R, March 8, 1962; Redado vs. Bautista, CA-G.R. 19295-R, Sept. 19, 1961; Bering vs. Noeth, CA-G.R. 28483-R, April 29, 1965). 6.

Discretion in fixing moral and exemplary damages primarily lay in the trial court The discretion in fixing moral and exemplary damages primarily lay in the trial court and the same should be respected. (Coleongco vs. Claparols, No. L-18616, March 31, 1964). ‘It is well-settled rule that whenever an appeal is taken in a civil case, an appellee who has not himself appealed cannot obtain from the appellate court any affirmative relief other than the ones granted in the decision of the court below. An appellee, who is not appellant, may assign errors in his brief where his purpose is to maintain the judgment on other grounds, but he may not do so if his purpose is to have the judgment modified or reversed, for, in such a case, he must appeal. Herein, Dagamanuel did not appeal and so it was error for the Court of Appeals to award him a relief not granted by the lower court. (Dy, et al. vs. Kuison, L-16654, Nov. 30, 1961). 7. Child of three years cannot feel mental anguish resulting from parent’s death to warrant award of excessive moral damages A child 3-year old, as Dagamanuel herein was when his parents died, cannot yet feel the mental anguish resulting from their death, as to warrant such excessive award of P5,000.00 moral damages. What degree of mental torture could have been possibly endured by a boy of such tender age? The measure of moral damages, if any, must be commensurate with the mental anguish suffered by the heir. (Mercado, et al. vs. Lira, et al., Nos. L-13328-29 and L-13358, Sept. 29, 1961.) 8.

Award of damages by trial court not excessive The judgment of the Court of Appeals in respect to the matter of damages to be more in accordance with the facts, except perhaps, as to the item of moral damages. The Court of Appeals properly interpreted the P16,000 awarded by the trial court as including not only damages for the deceased couple but also the other items of recoverable damages, like compensatory or actual, etc. Thus viewed, the amounts awarded by the trial court cannot be considered excessive. [27] Santos vs. Sibog (GR L-26815, 26 May 1981) Transportation Law, 2004 ( 66 )

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First Division, Melencio-Herrera (J): 3 concur, 1 concur in result, 1 designated to sit in first division, 1 on leave Facts: Vicente U. Vidad was a duly authorized passenger jeepney operator, while Adolfo L. Santos was the owner of a passenger jeep, but he had no certificate of public convenience for the operation of the vehicle as a public passenger jeep. Santos then transferred his jeep to the name of Vidad so that it could be operated under the latter’s certificate of public convenience. In other words, Santos became what is known in ordinary parlance as a kabit operator. For the protection of Santos, Vidad executed a re-transfer document to the former, which was to be a private document presumably to be registered if and when it was decided that the passenger jeep of Santos was to be withdrawn from the kabit arrangement. On 26 April 1963, Abraham Sibug was bumped by a passenger jeepney operated by Vidad and driven by Severo Gragas. As a result thereof, Sibug filed a complaint for damages against Vidad and Gragas with the Court of First Instance of Manila (Branch XVII, then presided by Hon. Arsenio Solidum). On 5 December 1963, a judgment was rendered by the trial court sentencing Vidad and Gragas, jointly and severally, to pay Sibug the sums of P506.20 as actual damages; P3,000.00 as moral damages; P500.00 as attorney’s fees, and costs. On 10 April 1964, the Sheriff of Manila levied on a motor vehicle (PUJ-343-64), registered in the name of Vidad, and scheduled the public auction sale thereof on 8 May 1964. On 11 April 1964, Santos presented a third-party claim with the Sheriff alleging actual ownership of the motor vehicle levied upon, and stating that registration thereof in the name of Vidad was merely to enable Santos to make use of Vidad’s Certificate of Public Convenience. After the third-party complaint was filed, Sibug submitted to the Sheriff a bond issued by the Philippine Surety Insurance Company, to save the Sheriff from liability if he were to proceed with the sale and if Santos’ third-party claim should be ultimately upheld. On 22 April 1964, before the scheduled sale of 8 May 1964, Santos instituted an action for Damages and Injunction with a prayer for Preliminary Mandatory Injunction against Sibug; Vidad; and the Sheriff (Civil Case 56842 of Branch X, of the same CFI of Manila). The complaint was later amended to include the Philippine Surety as a party defendant although its bond had not become effective. No public sale was conducted on 8 May 1964. On 11 May 1964, Branch X issued a Restraining Order enjoining the Sheriff from conducting the public auction sale of the motor vehicle levied upon. On 14 October 1965, Branch X affirmed Santos’ ownership of the jeepney in question based on the evidence adduced, and decreed that the Sibug, Vidad and the Sheriff are enjoined from proceeding with the sale of the vehicle in question and ordering its return to Santos and furthermore sentencing Sibug to pay Santos the sum of P15.00 a day from 10 April 1964 until the vehicle is returned to him, and P500.00 as attorney’s fees as well as the costs. This was subsequently amended on 5 December 1965, upon motion for reconsideration filed by Santos, to include the Philippine Surety as jointly and severally liable with Sibug, provided that the liability of the Philippine Surety shall in no case exceed P6,500.00. The Court further ordered Sibug to pay the Philippine Surety, the same sums it is ordered to pay under the decision.” From the judgment in the Branch X case, Sibug appealed. Meanwhile, Santos moved for immediate execution. Sibug opposed it on the ground that Branch X had no jurisdiction over the Branch XVII case, and that Branch X had no power to interfere by injunction with the judgment of Branch XVII, a Court of concurrent or coordinate jurisdiction. On 13 November 1965, Branch X released an Order authorizing immediate execution on the theory that the Branch X case is “principally an action for the issuance of a writ of prohibition to forbid the Sheriff from selling at public auction property not belonging to the judgment creditor (sic) and there being no attempt in this case to interfere with the judgment or decree of another court of concurrent jurisdiction.” Without waiting for the resolution of his Motion for Reconsideration, Sibug sought relief from the Appellate Court in a Petition for Certiorari with Preliminary Injunction. On 18 November 1965, the Court of Appeals Transportation Law, 2004 ( 67 )

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enjoined the enforcement of the Branch X Decision and the Order of execution issued by said Branch. On 28 September 1966, the Court of Appeals rendered the herein challenged Decision nullifying the judgment rendered in the Branch X Case and permanently restraining Branch X from taking cognizance of the Branch X case filed by Santos. Hence, the petition for review on certiorari filed by Santos on 14 December 1966. The Supreme Court dismissed the petition for review on certiorari filed by Santos, with costs against Santos. 1.

Restraining order wrongfully issued by Branch X Under the provisions of Section 17, Rule 39, the action taken by the Sheriff cannot be restrained by another Court or by another Branch of the same Court. The Sheriff has the right to continue with the public sale on his own responsibility, or he can desist from conducting the public sale unless the attaching creditor files a bond securing him against the third-party claim. But the decision to proceed or not with the public sale lies with him. 2.

Powers of the sheriff; Uy Piaoco vs. Osmena As said in Uy Piaoco vs. Osmeña, 9 Phil. 299, 307, “the powers of the Sheriff involve both discretional power and personal liability.” 3.

Discretional power and personal liability of the sheriff; Planas vs. Madrigal The discretional power and personal liability have been further elucidated in Planas and Verdon vs. Madrigal & Co., et al., 94 Phil. 754, where it was held, “the duty of the Sheriff in connection with the execution and satisfaction of judgment of the court is governed by Rule 39 of the Rules of Court. Section 15 thereof provides for the procedure to be followed where the property levied on execution is claimed by a third person. If the third-party claim is sufficient, the sheriff, upon receiving it, is not bound to proceed with the levy of the property, unless he is given by the judgment creditor an indemnity bond against the claim (Mangaoang vs. Provincial Sheriff, 91 Phil., 368). Of course, the sheriff may proceed with the levy even without the indemnity bond, but in such case he will answer for any damages with his own personal funds (Waite vs. Peterson, et al., 8 Phil., 419; Alzua, et al. vs. Johnson, 21 Phil., 308; Consulta No. 341 de los abogados de Smith, Bell & Co., 48 Phil., 565). And the rule also provides that nothing therein contained shall prevent a third person from vindicating his claim to the property by any proper action (Sec. 15 of Rule 39).” 4. Attaching creditor should furnish bond; If bond not filed, discretion comes in; When sheriff proceeds It appears from the above that if the attaching creditor should furnish an adequate bond, the Sheriff has to proceed with the public auction. When such bond is not filed, then the Sheriff shall decide whether to proceed, or to desist from proceeding, with the public auction. If he decides to proceed, he will incur personal liability in favor of the successful third-party claimant. 5. No court can interfere by injunction judgment of concurrent or coordinate jurisdiction, exceptions; Arabay vs. Salvador The Court, in Arabay, Inc. vs. Hon. Serafin Salvador, succinctly held that “generally, the rule, that no court has authority to interfere by injunction with the judgments or decrees of a concurrent or coordinate jurisdiction having equal power to grant the injunctive relief, is applied in cases, where no third-party claimant is involved, in order to prevent one court from nullifying the judgment or process of another court of the same rank or category, a power which devolves upon the proper appellate court. xxx When the sheriff, acting beyond the bounds of his authority, seizes a stranger’s property, the writ of injunction, which is issued to stop the auction sale of that property, is not an interference with the writ of execution issued by another court because the writ of execution was improperly implemented by the sheriff. Under the writ, he could attach the property of the judgment debtor. He is not authorized to levy upon the property of the third-party claimant (Polaris Marketing Corporation vs. Plan, L-40666, January 22, 1976, 69 SCRA 93, 97; Manila Herald Publishing Co., Inc. vs. Ramos, 88 Phil. 94, 102).” Transportation Law, 2004 ( 68 )

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6. Courts; Jurisdiction; Courts without power to interfere by injunction with judgments or decrees of a court of concurrent jurisdiction (Abiera vs. CA) “No court has power to interfere by injunction with the judgments or decrees of a court of concurrent or coordinate jurisdiction having equal power to grant the relief sought by injunction.” 7. Courts; Jurisdiction; Courts without power to interfere by injunction with judgments or decrees of a court of concurrent jurisdiction; When applicable (Abiera vs. CA) “For this doctrine to apply, the injunction issued by one court must interfere with the judgment or decree issued by another court of equal or coordinate jurisdiction and the relief sought by such injunction must be one which could be granted by the court which rendered the judgment or issued the decree.” 8. Courts; Jurisdiction; Courts without power to interfere by injunction with judgments or decrees of a court of concurrent jurisdiction; Exception; Judgment rendered by another court in favor of a third person who claims property levied upon on execution (Abiera vs. CA) “Under Section 17 of Rule 39 a third person who claims property levied upon on execution may vindicate such claim by action. A judgment rendered in his favor — declaring him to be the owner of the property — would not constitute interference with the powers or processes of the court which rendered the judgment to enforce which the execution was levied. If that be so — and it is so because the property, being that of a stranger, is not subject to levy — then an interlocutory order, such as injunction, upon a claim and prima facie showing of ownership by the claimant, cannot be considered as such interference either.” 9. Execution; Where property levied on claimed by third person; ‘Action’ in section 17, Rule 39 of the Rules of Court, interpreted (Abiera vs. CA) “The right of a person who claims to be the owner of property levied upon on execution to file a third-party claim with the sheriff is not exclusive, and he may file an action to vindicate his claim even if the judgment creditor files an indemnity bond in favor of the sheriff to answer for any damages that may be suffered by the third party claimant. By ‘action’ as stated in the Rule, what is meant is a separate and independent action.” 10. Santos has right to vindicate claim of ownership in a separate action; Interference with sheriff’s custody not an interference with another court’s order of attachment It was appropriate, as a matter of procedure, for Santos, as an ordinary third-party claimant, to vindicate his claim of ownership in a separate action under Section 17 of Rule 39. The judgment rendered in his favor by Branch X , declaring him to be the owner of the property, did not as a basic proposition, constitute interference with the powers or processes of Branch XVII which rendered the judgment, to enforce which the jeepney was levied upon. And this is so because property belonging to a stranger is not ordinarily subject to levy. While it is true that the vehicle in question was in custodia legis, and should not be interfered with without the permission of the proper Court, the property must be one in which the defendant has proprietary interest. Where the Sheriff seizes a stranger’s property, the rule does not apply and interference with his custody is not interference with another Court’s Order of attachment. 11.

Judgment of Branch X legally unpalatable The judgment in the Branch X case appears to be quite legally unpalatable. For instance, since the undertaking furnished to the Sheriff by the Philippine Surety did not become effective for the reason that the jeep was not sold, the public sale thereof having been restrained, there was no reason for promulgating judgment against the Philippine Surety. It has also been noted that the Complaint against Vidad was dismissed. Most important of all, the judgment against Sibug was inequitable. In asserting his rights of ownership to the vehicle in question, Santos candidly admitted his participation in the illegal and pernicious practice in the transportation business known as the kabit system.

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12.

Section 20 (g) of the Public Service Act Section 20 (g) of the Public Service Act, then the applicable law, specifically provided that “it shall be unlawful for any public service or for the owner, lessee or operator thereof, without the approval and authorization of the Commission previously had — (g) to sell, alienate, mortgage, encumber or lease its property, franchise, certificates, privileges, or rights, or any part thereof.” 13. Registered owner/operator and grantee of franchise directly and primarily liable for damages against Sibug Herein, Santos had fictitiously sold the jeepney to Vidad, who had become the registered owner and operator of record at the time of the accident. It is true that Vidad had executed a re-sale to Santos, but the document was not registered. Although Santos, as the kabit, was the true owner as against Vidad, the latter, as the registered owner/operator and grantee of the franchise, is directly and primarily responsible and liable for the damages caused to Sibug, the injured party, as a consequence of the negligent or careless operation of the vehicle. This ruling is based on the principle that the operator of record is considered the operator of the vehicle in contemplation of law as regards the public and third persons even if the vehicle involved in the accident had been sold to another where such sale had not been approved by the then Public Service Commission. 14.

Property levied not “stranger’s” Legally speaking, it was not a “stranger’s property” that was levied upon by the Sheriff pursuant to the judgment rendered by Branch XVII. The vehicle was, in fact, registered in the name of Vidad, one of the judgment debtors. And what is more, the aspect of public service, with its effects on the riding public, is involved. Whatever legal technicalities may be invoked, the Court finds the judgment of the Court of Appeals to be in consonance with justice. The ultimate conclusion of the appellate court, nullifying the Decision of Branch X, permanently enjoining the auction sale, should be upheld. 15.

Kabit cannot be allowed to defeat levy of his vehicle For the same basic reason, as the vehicle here in question was registered in Vidad’s name, the levy on execution against said vehicle should be enforced so that the judgment in the Branch XVII case may be satisfied, notwithstanding the fact that the secret ownership of the vehicle belonged to another. Santos, as the kabit, should not be allowed to defeat the levy on his vehicle and to avoid his responsibilities as a kabit owner for he had led the public to believe that the vehicle belonged to Vidad. This is one way of curbing the pernicious kabit system that facilitates the commission of fraud against the travelling public. 16.

Proper remedy of Santos; Erezo case As indicated in the Erezo case, Santos’ remedy, as the real owner of the vehicle, is to go against Vidad, the actual operator who was responsible for the accident, for the recovery of whatever damages Santos may suffer by reason of the execution. In fact, if Santos, as the kabit, had been impleaded as a party defendant in the Branch XVII case, he should be held jointly and severally liable with Vidad and the driver for damages suffered by Sibug, as well as for exemplary damages. [28] PAL vs. NLRC (GR L-62961, 2 September 1983) First Division, Relova (J): 4 concur Facts: On 3 November 1980, Salvador Gempis, a YS-11 pilot of Philippine Airlines (PAL) with the rank of captain, filed with the Ministry of Labor, National Capital Region, a complaint against PAL for illegal suspension and dismissal. The next day, 4 November 1980, PAL filed with the same office an application for clearance to terminate the employment of Gempis on the grounds of (1) serious misconduct and (2) violation of the liquor ban and company policies. The charge of PAL and Capt. Jaime H. Manzano against Gempis was Transportation Law, 2004 ( 70 )

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“serious misconduct (abuse of authority)” for forcing First Officers A. Barcebal and J. Ranches to drink on 27 February 1980, at 10:30 p.m. at the coffee shop of the Triton Hotel at Cebu, 6 bottles of beer each, within 30 minutes. Unable to consume the bottles of beer within the time limit set by Gempis, the two pilots were ordered to stand erect and were hit on the stomach by Gempis. The petition alleged that “the incident occurred with Gempis’ full knowledge that the 2 affected co-pilots have flight duties the next day with initial assignments as early as 7:10 a.m. and as late as 12:00 p.m. The Labor Arbiter Teodorico Dogelio denied PAL’s application for clearance to terminate Gempis’ services inasmuch as the penalty of 6 months demotion was enough to appear in Gempis’ employment file and ordering PAL to effect Gempis’ immediate reinstatement as YS-11 Captain, with back wages for a period of 6 months corresponding to the position. The National Labor Relations Commission affirmed the decision of the Labor Arbiter on 29 November 1982. The Supreme Court set aside the decision of the NLRC dated 29 November 1982, and approved PAL’s application for clearance to terminate Gempis from employment. 1.

Pilot’s reinstatement grossly unfair as pilot is a risk and liability to the common carrier It would be grossly unfair to order PAL to reinstate him back to his work as pilot. The nature of employment of Gempis necessitates that he should not violate the liquor ban as provided for in the Basic Operations Manual in order to protect not only the interest of the company but the public as well. Gempis is a risk and liability rather than an asset to PAL. Gempis and those persons he abused (F/Os A. Barcebal and J. Ranches) are pilots. The foremost consideration called for by their position as pilots is the safety of the passengers. This is so because the duties of a pilot consist of handling controls of the aircraft and to ensure that the flight is conducted safely and economically. 2.

Due Diligence of a good father of a family in the selection and supervision of its employees The business of Philippine Airlines is such that whenever a passenger dies or is injured the presumption is, it is at fault notwithstanding the fact that it has exercised due diligence of a good father of a family in the selection and supervision of its employees. Thus, extraordinary measures and diligence should be exercised by it for the safety of its passengers and their belongings. Needless to state, a pilot must be sober all the time for he may be called upon to fly a plane even before his regular scheduled hours, otherwise so many lives will be in danger if he is drunk. It would be unjust for an employer like petitioner PAL to be compelled to continue with the employment of a person whose continuance in the service is obviously inimical to its interests. [29] Vasquez vs. CA (GR L-42926, 13 September 1985) First Division, Melencio-Herrera (J): 6 concur Facts: When the interisland vessel MV ‘Pioneer Cebu’ left the Port of Manila in the early morning of 15 May 1966 bound for Cebu, it had on board the spouses Alfonso Vasquez and Filipinas Bagaipo and a 4-year old boy, Mario Marlon Vasquez, among her passengers. The MV ‘Pioneer Cebu’ encountered typhoon ‘Klaring’ and struck a reef on the southern part of Malapascua Island, located somewhere north of the island of Cebu and subsequently sunk. Said passengers were unheard from since then. Pedro Vasquez and Soledad Ortega are the parents of Alfonso Vasquez. Cleto Bagaipo and Agustina Virtudes are the parents of Filipinas Bagaipo. Romeo Vasquez and Maximina Cainay are the parents Mario Marlon Vasquez. Due to the loss of their children, they sued for damages before the CFI of Manila (Civil Case 67139). Filipinas Pioneer Lines Inc. defended on the plea of force majeure, and the extinction of its liability by the actual total loss of the vessel. After proper proceedings, the trial Court awarded damages, ordering Filipinas Pioneer to pay (a) Pedro Vasquez and Soledad Ortega the sums of P15,000.00 for the loss of earning capacity of the deceased Alfonso Vasquez, P2,100.00 for support, and P10,000.00 for moral damages; (b) Transportation Law, 2004 ( 71 )

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Cleto B. Bagaipo and Agustina Virtudes the sum of P17,000.00 for loss of earning capacity of deceased Filipinas Bagaipo, and P10,000.00 for moral damages; and (c) Romeo Vasquez and Maximina Cainay the sum of P10,000.00 by way of moral damages by reason of the death of Mario Marlon Vasquez. On appeal, the appellate court reversed the judgment and absolved Filipinas Pioneer from any and all liability. Hence, the Petition for Review on Certiorari. The Supreme Court reversed the appealed judgment, and reinstated the judgment of the then CFI of Manila (Branch V, Civil Case 67139); without costs. 1. Circumstances of the last voyage of MV Pioneer Cebu came mainly from Filipinas Pioneer Lines The evidence on record as to the circumstances of the last voyage of the MV ‘Pioneer Cebu’ came mainly, if not exclusively, from Filipinas Pioneer Lines. The MV ‘Pioneer Cebu’ was owned and operated by Filipinas Pioneer and used in the transportation of goods and passengers in the interisland shipping. Scheduled to leave the Port of Manila at 9:00 p.m. on 14 May 1966, it actually left port at 5:00 a.m. the following day, 15 May 1966. It had a passenger capacity of 322 including the crew. It undertook the said voyage on a special permit issued by the Collector of Customs inasmuch as, upon inspection, it was found to be without an emergency electrical power system. The special permit authorized the vessel to carry only 260 passengers due to the said deficiency and for lack of safety devices for 322 passengers. A headcount was made of the passengers on board, resulting on the tallying of 168 adults and 20 minors, although the passengers manifest only listed 106 passengers. It has been admitted, however, that the headcount is not reliable inasmuch as it was only done by one man on board the vessel. When the vessel left Manila, its officers were already aware of the typhoon Klaring building up somewhere in Mindanao. There being no typhoon signals on the route from Manila to Cebu, and the vessel having been cleared by the Customs authorities, the MV ‘Pioneer Cebu’ left on its voyage to Cebu despite the typhoon. When it reached Romblon Island, it was decided not to seek shelter thereat, inasmuch as the weather condition was still good. After passing Romblon and while near Jintotolo island, the barometer still indicated the existence of good weather condition continued until the vessel approached Tanguingui island. Upon passing the latter island, however, the weather suddenly changed and heavy rains fell. Fearing that due to zero visibility, the vessel might hit Chocolate island group, the captain ordered a reversal of the course so that the vessel could ‘weather out’ the typhoon by facing the winds and the waves in the open. Unfortunately, at about noontime on 16 May 1966, the vessel struck a reef near Malapascua island, sustained leaks and eventually sunk, bringing with her Captain Floro Yap who was in command of the vessel.” 2.

Requisites for caso fortuito To constitute a caso fortuito that would exempt a person from responsibility, it is necessary that (1) the event must be independent of the human will; (2) the occurrence must render it impossible for the debtor to fulfill the obligation in a normal manner; and that (3) the obligor must be free of participation in, or aggravation of, the injury to the creditor.” In the language of the law, the event must have been impossible to foresee, or if it could be foreseen, must have been impossible to avoid. There must be an entire exclusion of human agency from the cause of injury or loss. 3. Crew failed to observe extraordinary diligence (utmost diligence required of very cautious persons) Herein, while the typhoon was an inevitable occurrence, yet, having been kept posted on the course of the typhoon by weather bulletins at intervals of 6 hours, the captain and crew were well aware of the risk they were taking as they hopped from island to island from Romblon up to Tanguingui. They held frequent conferences, and oblivious of the utmost diligence required of very cautious persons, they decided to take a calculated risk. In so doing, they failed to observe that extraordinary diligence required of them explicitly by law for the safety of the passengers transported by them with due regard for all circumstances and Transportation Law, 2004 ( 72 )

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unnecessarily exposed the vessel and passengers to the tragic mishap. They failed to overcome that presumption of fault or negligence that arises in cases of death or injuries to passengers. 4. Construction of “moot and academic” ruling of the Board of Marine Inquiry; Court disagrees with Board’s conclusion While the Board of Marine Inquiry, which investigated the disaster, exonerated the captain from any negligence, it was because it had considered the question of negligence as “moot and academic,” the captain having “lived up to the true tradition of the profession.” While the Court is bound by the Board’s factual findings, the Court disagreed with its conclusion since it obviously had not taken into account the legal responsibility of a common carrier towards the safety of the passengers involved. 5.

Contention on limited liability rule as per Yangco vs. Laserna With respect to the submission that the total loss of the vessel extinguished its liability pursuant to Article 587 of the Code of Commerce as construed in Yangco vs. Laserna, 73 Phil. 330 [1941], suffice it to state that even in said case, it was held that the liability of a shipowner is limited to the value of the vessel or to the insurance thereon. Despite the total loss of the vessel therefore, its insurance answers for the damages that a shipowner or agent may be held liable for by reason of the death of its passengers. [30] also [104] Dangwa Transportation vs. CA (GR 95582, 7 October 1991) Second Division, Regalado (J): 4 concur Facts: On 25 March 1985 at Marivic, Sapid, Mankayan, Benguet, Theodore M. Lardizabal was driving a passenger bus belonging to Dangwa Transportation Co. in a reckless and imprudent manner and without due regard to traffic rules and regulations and safety to persons and property, it ran over its passenger, Pedrito Cudiamat. However, instead of bringing Pedrito immediately to the nearest hospital, the said driver, in utter bad faith and without regard to the welfare of the victim, first brought his other passengers and cargo to their respective destinations before bringing said victim to the Lepanto Hospital where he expired. On 13 May 1985, Inocencia Cudiamat, Emilia Cudiamat Bandoy, Fernando Cudiamat, Marrieta Cudiamat, Norma Cudiamat, Dante Cudiamat, Samuel Cudiamat and Ligaya Cudiamat (heirs of Pedrito Cudiamat, and represented by Inocencia Cudiamat) filed a complaint for damages against petitioners for the death of Pedrito Cudiamat as a result of a vehicular accident which occurred. On 29 July 1988, the trial court rendered a decision, pronouncing that Pedrito Cudiamat was negligent, which negligence was the proximate cause of his death. Nonetheless, Lardizabal and Dangwa Transportation, in equity, were hereby ordered to pay the heirs of Pedrito Cudiamat the sum of P10,000.00 which approximates the amount Lardizabal and Dangwa Transportation initially offered said heirs for the amicable settlement of the case; without costs. The Cudiamats appealed to the Court of Appeals which, in a decision (CA-GR CV 19504) promulgated on 14 August 1990, set aside the decision of the lower court, and ordered Dangwa and Lardizabal to pay the Cudiamats (1) the sum of P30,000.00 by way of indemnity for death of the victim Pedrito Cudiamat; (2) the sum of P20,000.00 by way of moral damages; (3) the sum of P288,000.00 as actual and compensatory damages; and (4) the costs of the suit. Dangwa’s and Lardizabal’s motion for reconsideration was denied by the Court of Appeals in its resolution dated 4 October 1990. Hence, the petition. The Supreme Court affirmed the challenged judgment and resolution of the Court of Appeals, with modifications. 1.

Factual findings of the Court of Appeals generally final; Exceptions

Transportation Law, 2004 ( 73 )

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It is an established principle that the factual findings of the Court of Appeals as a rule are final and may not be reviewed by this Court on appeal. However, this is subject to settled exceptions, one of which is when the findings of the appellate court are contrary to those of the trial court, in which case a reexamination of the facts and evidence may be undertaken. Herein, the trial court and the Court of Appeals have discordant positions as to who between Dangwa Transportation and the victim is guilty of negligence. Perforce, the Court has had to conduct an evaluation of the evidence in this case for the proper calibration of their conflicting factual findings and legal conclusions. 2.

Findings of the trial court Pedrito Cudiamat was negligent in trying to board a moving vehicle, especially with one of his hands holding an umbrella; and, without having given the driver or the conductor any indication that he wishes to board the bus. Dangwa Transportation can also be found wanting of the necessary diligence. In this connection, it is safe to assume that when the deceased Cudiamat attempted to board the bus, the vehicle’s door was open instead of being closed. This should be so, for it is hard to believe that one would even attempt to board a vehicle (i)n motion if the door of said vehicle is closed. Here lies the defendant’s lack of diligence. Under such circumstances, equity demands that there must be something given to the heirs of the victim to assuage their feelings. This, also considering that initially, the common carrier had made overtures to amicably settle the case. It did offer a certain monetary consideration to the victim’s heirs. 3.

Findings of the appellate court The subject bus was at full stop when the victim Pedrito Cudiamat boarded the same as it was precisely on this instance where a certain Miss Abenoja alighted from the bus. Moreover, the victim did indicate his intention to board the bus when he declared that Pedrito Cudiamat was no longer walking and made a sign to board the bus when the latter was still at a distance from him. It was at the instance when Pedrito Cudiamat was closing his umbrella at the platform of the bus when the latter made a sudden jerk movement as the driver commenced to accelerate the bus. The incident took place due to the gross negligence of the driver in prematurely stepping on the accelerator and in not waiting for the passenger to first secure his seat especially so when we take into account that the platform of the bus was at the time slippery and wet because of a drizzle. The company utterly failed to observe its duty and obligation as common carrier to the end that they should observe extra-ordinary diligence in the vigilance over the goods and for the safety of the passengers transported by them according to the circumstances of each case (Article 1733, New Civil Code). 4. Findings of the appellate court supported by witnesses’ testimony; Deceased not guilty of negligence The Supreme Court finds no reason to disturb the holding of the Court of Appeals. Its findings are supported by the testimony of Dangwa Transportation’s own witnesses, Virginia Abalos, and its the bus conductor, Martin Anglog. The testimonies show that the place of the accident and the place where one of the passengers alighted were both between Bunkhouses 53 and 54, hence the finding of the Court of Appeals that the bus was at full stop when the victim boarded the same is correct. They further confirm the conclusion that the victim fell from the platform of the bus when it suddenly accelerated forward and was run over by the rear right tires of the vehicle, as shown by the physical evidence on where he was thereafter found in relation to the bus when it stopped. Under such circumstances, it cannot be said that the deceased was guilty of negligence. 5.

When bus not in motion; Duty of driver and conductor When the bus is not in motion there is no necessity for a person who wants to ride the same to signal his intention to board. A public utility bus, once it stops, is in effect making a continuous offer to bus riders. Hence, it becomes the duty of the driver and the conductor, every time the bus stops, to do no act that would have the effect of increasing the peril to a passenger while he was attempting to board the same. Herein, the premature acceleration of the bus was a breach of such duty.

Transportation Law, 2004 ( 74 )

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6.

Duty of common carriers of passengers It is the duty of common carriers of passengers, including common carriers by railroad train, streetcar, or motorbus, to stop their conveyances a reasonable length of time in order to afford passengers an opportunity to board and enter, and they are liable for injuries suffered by boarding passengers resulting from the sudden starting up or jerking of their conveyances while they are doing so. 7.

Even assuming bus moving, deceased still not negligent Even assuming that the bus was moving, the act of the victim in boarding the same cannot be considered negligent under the circumstances. It is not negligence per se, or as a matter of law, for one to attempt to board a train or streetcar which is moving slowly. An ordinarily prudent person would have made the attempt to board the moving conveyance under the same or similar circumstances. The fact that passengers board and alight from a slowly moving vehicle is a matter of common experience and both the driver and conductor could not have been unaware of such an ordinary practice. 8.

When contractual obligation of common carrier starts The victim herein, by stepping and standing on the platform of the bus, is already considered a passenger and is entitled to all the rights and protection pertaining to such a contractual relation. Hence, it has been held that the duty which the carrier of passengers owes to its patrons extends to persons boarding the cars as well as to those alighting therefrom. 9.

Diligence required of common carriers 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. A common carrier is bound to carry the passengers safely as far as human care and foresight can provide, using the utmost diligence of very cautious persons, with a due regard for all the circumstances. 10.

Negligence must be proved; Exception in ontract of carriage In an action based on a contract of carriage, the court need not make an express finding of fault or negligence on the part of the carrier in order to hold it responsible to pay the damages sought by the passenger. By the contract of carriage, the carrier assumes the express obligation to transport the passenger to his destination safely and to observe extraordinary diligence with a due regard for all the circumstances, and any injury that might be suffered by the passenger is right away attributable to the fault or negligence of the carrier. This is an exception to the general rule that negligence must be proved, and it is therefore incumbent upon the carrier to prove that it has exercised extraordinary diligence as prescribed in Articles 1733 and 1755 of the Civil Code. 11.

Failure to bring injured immediately to hospital patent proof of negligence The circumstances under which the driver and the conductor failed to bring the gravely injured victim immediately to the hospital for medical treatment is a patent and incontrovertible proof of their negligence. It defies understanding and can even be stigmatized as callous indifference. The evidence shows that after the accident the bus could have forthwith turned at Bunk 56 and thence to the hospital, but its driver instead opted to first proceed to Bunk 70 to allow a passenger to alight and to deliver a refrigerator, despite the serious condition of the victim. 12.

Rule as to amount recoverable in tort The rule is that the amount recoverable by the heirs of a victim of a tort is not the loss of the entire earnings, but rather the loss of that portion of the earnings which the beneficiary would have received. In other words, only net earnings, not gross earnings, are to be considered, that is, the total of the earnings less expenses necessary in the creation of such earnings or income and minus living and other incidental expenses.

Transportation Law, 2004 ( 75 )

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13.

Actual award of damages to be given The deductible living and other expense of the deceased may fairly and reasonably be fixed at P500.00 a month or P6,000.00 a year. In adjudicating the actual or compensatory damages, the appellate court found that the deceased was 48 years old, in good health with a remaining productive life expectancy of 12 years, and then earning P24,000.00 a year. Using the gross annual income as the basis, and multiplying the same by 12 years, it accordingly awarded P288,000. Applying the rule on computation based on the net earnings, said award must be rectified and reduced to P216,000.00. However, in accordance with prevailing jurisprudence, the death indemnity is hereby increased to P50,000.00. [31] Delsan Transport Lines vs. CA (GR 127897, 15 November 2001) Second Division, De Leon Jr. (J): 4 concur Facts: Caltex Philippines entered into a contract of affreightment with Delsan Transport Lines, Inc. for a period of 1 year whereby the said common carrier agreed to transport Caltex’s industrial fuel oil from the Batangas-Bataan Refinery to different parts of the country. Under the contract, petitioner took on board its vessel, MT Maysun, 2,277.314 kiloliters of industrial fuel oil of Caltex to be delivered to the Caltex Oil Terminal in Zamboanga City. The shipment was insured with American Home Assurance Corporation. On 14 August 1986, MT Maysun set sail from Batangas for Zamboanga City. Unfortunately, the vessel sank in the early morning of 16 August 1986 near Panay Gulf in the Visayas taking with it the entire cargo of fuel oil. Subsequently, American Home Assurance paid Caltex the sum of P5,096,635.57 representing the insured value of the lost cargo. Exercising its right of subrogation under Article 2207 of the New Civil Code, American Home Assurance demanded of Delsan Transport the same amount it paid to Caltex. Due to its failure to collect from Delsan Transport despite prior demand, American Home Assurance filed a complaint with the RTC Makati City, Branch 137, for collection of a sum of money. After the trial and upon analyzing the evidence adduced, the trial court rendered a decision on 29 November 1990 dismissing the complaint against Delsan Transport without pronouncement as to cost. The trial court found that the vessel, MT Maysun, was seaworthy to undertake the voyage as determined by the Philippine Coast Guard per Survey Certificate Report M5-016-MH upon inspection during its annual dry-docking and that the incident was caused by unexpected inclement weather condition or force majeure, thus exempting the common carrier from liability for the loss of its cargo. The decision of the trial court, however, was reversed, on appeal, by the Court of Appeals on 16 June 1996, which gave credence to the weather report by the Philippine Atmospheric, Geophysical and Astronomical Services Administration (PAGASA). The subsequent motion for reconsideration of Delsan Transport was denied by the appellate court on 21 January 1997. Hence, the petition for review on certiorari. The Supreme Court denied the instant petition, and affirmed the Decision dated 17 June 1996 of the Court of Appeals; with costs against Delsan Transport. 1.

PAGASA Weather report for 15 August 1986 The weather report issued by the Philippine Atmospheric, Geophysical and Astronomical Services Administration (PAGASA for brevity) showed that from 2:00 o’clock to 8:00 o’clock in the morning on August 16, 1986, the wind speed remained at 10 to 20 knots per hour while the waves measured from .7 to two (2) meters in height only in the vicinity of the Panay Gulf where the subject vessel sank, in contrast to Delsan Transport’s allegation that the waves were 20 feet high. 2. Payment of insured value of lost cargo operates as waiver to enforce term of implied warranty against Caltex, not an automatic admission of vessel’s seaworthiness Transportation Law, 2004 ( 76 )

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The payment made by American Home Assurance for the insured value of the lost cargo operates as waiver of its right to enforce the term of the implied warranty against Caltex under the marine insurance policy. However, the same cannot be validly interpreted as an automatic admission of the vessel’s seaworthiness by American Home Assurance as to foreclose recourse against the petitioner for any liability under its contractual obligation as a common carrier. The fact of payment grants American Home Assurance subrogatory right which enables it to exercise legal remedies that would otherwise be available to Caltex as owner of the lost cargo against the petitioner common carrier. 3.

Right of Subrogation; Article 2207 NCC Article 2207 of the New Civil Code provides that “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.” 4.

Rationale for right of subrogation The right 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 and good conscience ought to pay. It 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 by the insurance company of the insurance claim. Herein, the payment made by the insurer to the assured operates as an equitable assignment to the former of all the remedies which the latter may have against the common carrier. 5.

Diligence required of common carriers; Liability, exception; Presumption of negligence From the nature of their business and for reasons of public policy, common carriers are bound to observe extraordinary diligence in the vigilance over the goods and for the safety of passengers transported by them, according to all the circumstances of each case. In the event of loss, destruction or deterioration of the insured goods, common carriers shall be responsible unless the same is brought about, among others, by flood, storm, earthquake, lightning or other natural disaster or calamity. In all other cases, if the goods are lost, destroyed or deteriorated, common carriers are presumed to have been at fault or to have acted negligently, unless they prove that they observed extraordinary diligence. 6.

Claim of force majeure rebutted by PAGASA report Herein, from the testimonies of Jaime Jarabe and Francisco Berina, captain and chief mate, respectively of the ill-fated vessel, it appears that a sudden and unexpected change of weather condition occurred in the early morning of 16 August 1986; that at around 3:15 a.m. a squall (“unos”) carrying strong winds with an approximate velocity of 30 knots per hour and big waves averaging 18 to 20 feet high, repeatedly buffeted MT Maysun causing it to tilt, take in water and eventually sink with its cargo. This tale of strong winds and big waves by the said officers of Delsan Transport however, was effectively rebutted and belied by the weather report from PAGASA, the independent government agency charged with monitoring weather and sea conditions, showing that from 2:00 to 8:00 a.m. on 16 August 1986, the wind speed remained at 10 to 20 knots per hour while the height of the waves ranged from 0.7 to 2 meters in the vicinity of Cuyo East Pass and Panay Gulf where the subject vessel sank. There was no squall or bad weather or extremely poor sea condition in the vicinity when the said vessel sank. 7.

Ship captain not expected to testify against interest of employer Herein, Delsan Transport’s witnesses, Jaime Jarabe and Francisco Berina, ship captain and chief mate, respectively, of the said vessel, could not be expected to testify against the interest of their employer, the common carrier.

Transportation Law, 2004 ( 77 )

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8. Evidence certificates at time of drydocking and Coast Guard inspection not conclusive as to condition of vessel at the time of commencement of voyage; Seaworthiness not established by certificates Evidence certificates, showing that at the time of dry-docking and inspection by the Philippine Coast Guard the vessel MT Maysun was fit for voyage, do not necessarily take into account the actual condition of the vessel at the time of the commencement of the voyage. At the time of dry-docking and inspection, the ship may have appeared fit. The certificates issued, however, do not negate the presumption of unseaworthiness triggered by an unexplained sinking. Of certificates issued in this regard, authorities are likewise clear as to their probative value. Seaworthiness relates to a vessel’s actual condition. Neither the granting of classification or the issuance of certificates establishes seaworthiness. 9.

Certificates of seaworthiness does not satisfy the vessel owner’s obligation Diligence in securing certificates of seaworthiness does not satisfy the vessel owner’s obligation. Also securing the approval of the shipper of the cargo, or his surveyor, of the condition of the vessel or her stowage does not establish due diligence if the vessel was in fact unseaworthy, for the cargo owner has no obligation in relation to seaworthiness. 10. Exoneration of officers by Board of Marine Inquiry concerns only their administrative liability, not civil liabililty The exoneration of MT Maysun’s officers and crew by the Board of Marine Inquiry merely concerns their respective administrative liabilities. It does not in any way operate to absolve the petitioner common carrier from its civil liability arising from its failure to observe extraordinary diligence in the vigilance over the goods it was transporting and for the negligent acts or omissions of its employees, the determination of which properly belongs to the courts. Herein, Delsan Transport is liable for the insured value of the lost cargo of industrial fuel oil belonging to Caltex for its failure to rebut the presumption of fault or negligence as common carrier occasioned by the unexplained sinking of its vessel, MT Maysun, while in transit. 11. Subrogation receipt merely establish relationship of parties thereto; When right of subrogation accrues The presentation in evidence of the marine insurance policy is not indispensable in this case before the insurer may recover from the common carrier the insured value of the lost cargo in the exercise of its subrogatory right. The subrogation receipt, by itself, is sufficient to establish not only the relationship of the insurer and the assured shipper of the lost cargo of industrial fuel oil, but also the amount paid to settle the insurance claim. The right of subrogation accrues simply upon payment by the insurance company of the insurance claim. 12.

Home Insurance Corp. vs. CA; Liability of a hauler In the absence of proof of stipulations to the contrary, the hauler can be liable only for any damage that occurred from the time it received the cargo until it finally delivered it to the consignee. Ordinarily, it cannot be held responsible for the handling of the cargo before it actually received it. The insurance contract, which was not presented in evidence in that case would have indicated the scope of the insurer’s liability, if any, since no evidence was adduced indicating at what stage in the handling process the damage to the cargo was sustained. 13.

Home Insurance Corp. vs. CA not applicable The presentation of the insurance policy was necessary in the case of Home Insurance Corporation v. CA because the shipment therein (hydraulic engines) passed through several stages with different parties involved in each stage. First, from the shipper to the port of departure; second, from the port of departure to the M/S Oriental Statesman; third, from the M/S Oriental Statesman to the M/S Pacific Conveyor; fourth, from the M/S Pacific Conveyor to the port of arrival; fifth, from the port of arrival to the arrastre operator; sixth, from the arrastre operator to the hauler, Mabuhay Brokerage Co., Inc.; and lastly, from the hauler to the Transportation Law, 2004 ( 78 )

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consignee. Herein, the presentation of the insurance policy is not applicable, for there is no doubt that the cargo of industrial fuel oil belonging to Caltex was lost while on board Delsan Transport’s vessel, MT Maysun, which sank while in transit in the vicinity of Panay Gulf and Cuyo East Pass in the early morning of 16 August 1986. [32] Loadstar Shipping vs. CA (GR 131621, 28 September 1999) First Division, Davide Jr. (CJ): 4 concur Facts: On 19 November 1984, Loadstar Shipping Co. Inc. received on board its M/V “Cherokee” (a) 705 bales of lawanit hardwood; (b) 27 boxes and crates of tilewood assemblies and others; and (c) 49 bundles of mouldings R & W (3) Apitong Bolidenized for shipment. The goods, amounting to P6,067,178, were insured for the same amount with the Manila Insurance Co. (MIC) against various risks including “total loss by total loss of the vessel.” The vessel, in turn, was insured by Prudential Guarantee & Assurance, Inc. (PGAI) for P4 million. On 20 November 1984, on its way to Manila from the port of Nasipit, Agusan del Norte, the vessel, along with its cargo, sank off Limasawa Island. As a result of the total loss of its shipment, the consignee made a claim with Loadstar which, however, ignored the same. As the insurer, MIC paid P6,075,000 to the insured in full settlement of its claim, and the latter executed a subrogation receipt therefor. On 4 February 1985, MIC filed a complaint against Loadstar and PGAI, alleging that the sinking of the vessel was due to the fault and negligence of Loadstar and its employees. It also prayed that PGAI be ordered to pay the insurance proceeds from the loss of the vessel directly to MIC, said amount to be deducted from MIC’s claim from Loadstar. In its answer, Loadstar denied any liability for the loss of the shipper’s goods and claimed that the sinking of its vessel was due to force majeure. PGAI, on the other hand, averred that MIC had no cause of action against it, Loadstar being the party insured. In any event, PGAI was later dropped as a party defendant after it paid the insurance proceeds to Loadstar. On 4 October 1991, the trial court (RTC of Manila, Branch 16, Civil Case 85-29110) rendered judgment in favor of MIC, ordering Loadstar to pay MIC the amount of P6,067,178, with legal interest from the filing of the complaint until fully paid, P8,000 as attorney’s fees, and the costs of the suit. Loadstar elevated the matter to the Court of Appeals, which, however on 30 January 1997, agreed with the trial court and affirmed its decision in toto. Loadstar’s motion for reconsideration was denied on 19 November 1997. Hence, the petition for review on certiorari. The Supreme Court denied the petition and affirmed the challenged decision of the Court of Appeals; with costs against Loadstar. 1. Home Insurance vs. American Steamship, Valenzuela Hardwood vs. CA, and National Steel vs. CA not applicable; No charter party in present case In the 1968 case of Home Insurance Co. v. American Steamship Agencies, Inc., the Court held that a common carrier transporting special cargo or chartering the vessel to a special person becomes a private carrier that is not subject to the provisions of the Civil Code. Any stipulation in the charter party absolving the owner from liability for loss due to the negligence of its agent is void only if the strict policy governing common carriers is upheld. Such policy has no force where the public at large is not involved, as in the case of a ship totally chartered for the use of a single party. The cases of Valenzuela Hardwood and Industrial Supply, Inc. v. Court of Appeals and National Steel Corp. v. Court of Appeals, upheld the Home Insurance doctrine. These cases are not applicable in the present case as the factual settings are different. The records do not disclose that the M/V “Cherokee” undertook to carry a special cargo or was chartered to a special person only. There was no charter party. The bills of lading failed to show any special arrangement, but only a general provision to the effect that the M/V “Cherokee” was a “general cargo carrier.” Further, the bare fact Transportation Law, 2004 ( 79 )

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that the vessel was carrying a particular type of cargo for one shipper, which appears to be purely coincidental, is not reason enough to convert the vessel from a common to a private carrier, especially where it was shown that the vessel was also carrying passengers. 2.

Common Carriers defined; Article 1732 NCC Article 1732 of the Civil Code defines “common carriers” as “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.” 3.

Article 1732 NCC construed; De Guzman vs. CA Article 1732 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. Article 1733 deliberately refrained from making such distinctions. 4.

Issuance of CPC not a prerequisite for a common carrier; De Guzman vs. CA A certificate of public convenience is not a requisite for the incurring of liability under the Civil Code provisions governing common carriers. That liability arises the moment a person or firm acts as a common carrier, without regard to whether or not such carrier has also complied with the requirements of the applicable regulatory statute and implementing regulations and has been granted a certificate of public convenience or other franchise. To exempt the carrier from the liabilities of a common carrier because he has not secured the necessary certificate of public convenience, would be offensive to sound public policy; that would be to reward private respondent precisely for failing to comply with applicable statutory requirements. The business of a common carrier impinges directly and intimately upon the safety and well being and property of those members of the general community who happen to deal with such carrier. The law imposes duties and liabilities upon common carriers for the safety and protection of those who utilize their services and the law cannot allow a common carrier to render such duties and liabilities merely facultative by simply failing to obtain the necessary permits and authorizations. 5.

Vessel not seaworthy as it was not sufficiently manned when it embarked on its voyage The M/V “Cherokee” was not seaworthy when it embarked on its voyage on 19 November 1984. The vessel was not even sufficiently manned at the time. “For a vessel to be seaworthy, it must be adequately equipped for the voyage and manned with a sufficient number of competent officers and crew. The failure of a common carrier to maintain in seaworthy condition its vessel involved in a contract of carriage is a clear breach of its duty prescribed in Article 1755 of the Civil Code.” 6. Doctrine of limited liability does not apply when there was negligence on part of vessel owner or agent The doctrine of limited liability does not apply where there was negligence on the part of the vessel owner or agent. Herein, Loadstar was at fault or negligent in not maintaining a seaworthy vessel and in having allowed its vessel to sail despite knowledge of an approaching typhoon. In any event, it did not sink because of any storm that may be deemed as force majeure, inasmuch as the wind condition in the area where it sank was determined to be moderate. Since it was remiss in the performance of its duties, Loadstar cannot hide behind the “limited liability” doctrine to escape responsibility for the loss of the vessel and its cargo. 7. Stipulations in St. Paul Fire and National Union Fire Insurance cases different from present one; Present stipulations void as contrary to public policy Transportation Law, 2004 ( 80 )

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In the cases of St. Paul Fire & Marine Ins. Co. v. Macondray & Co., Inc., and National Union Fire Insurance v. Stolt-Nielsen Phils., Inc., it was ruled that after paying the claim of the insured for damages under the insurance policy, the insurer is subrogated merely to the rights of the assured, i.e. it can recover only the amount that may, in turn, be recovered by the latter. Since the right of the assured in case of loss or damage to the goods is limited or restricted by the provisions in the bills of lading, a suit by the insurer as subrogee is necessarily subject to the same limitations and restrictions. These cases involved a limitation on the carrier’s liability to an amount fixed in the bill of lading which the parties may enter into, provided that the same was freely and fairly agreed upon (Articles 1749-1750). On the other hand, the stipulation in the present case effectively reduces the common carrier’s liability for the loss or destruction of the goods to a degree less than extraordinary (Articles 1744 and 1745), i.e. the carrier is not liable for any loss or damage to shipments made at “owner’s risk.” Such stipulation is obviously null and void for being contrary to public policy. 8.

Three kinds of stipulations to limit liability, which are void and which are valid Three kinds of stipulations have often been made in a bill of lading. The first is one exempting the carrier from any and all liability for loss or damage occasioned by its own negligence. The second is one providing for an unqualified limitation of such liability to an agreed valuation. And the third is one limiting the liability of the carrier to an agreed valuation unless the shipper declares a higher value and pays a higher rate of freight. According to an almost uniform weight of authority, the first and second kinds of stipulations are invalid as being contrary to public policy, but the third is valid and enforceable. 9.

MIC subrogated to right of shipper Since the stipulation in question is null and void, it follows that when MIC paid the shipper, it was subrogated to all the rights which the latter has against the common carrier, Loadstar. 10.

Action has not yet prescribed; Stipulation reducing 1 year period void Herein, MIC’s cause of action had not yet prescribed at the time it was concerned. Inasmuch as neither the Civil Code nor the Code of Commerce states a specific prescriptive period on the matter, the Carriage of Goods by Sea Act (COGSA) — which provides for a one-year period of limitation on claims for loss of, or damage to, cargoes sustained during transit — may be applied suppletorily to the present case. This one-year prescriptive period also applies to the insurer of the goods. Herein, the period for filing the action for recovery has not yet elapsed. Moreover, a stipulation reducing the one-year period is null and void; it must, accordingly, be struck down. [33] Metro Manila Transit Corporation vs. CA (GR 104408, 21 June 1993) Second Division, Regalado (J): 2 concur, 1 on leave Facts: At about 6:00 a.m. of 28 August 1979, p Nenita Custodio boarded as a paying passenger a public utility jeepney with plate No. D7 305 PUJ Pilipinas 1979, then driven by Agudo Calebag and owned by Victorino Lamayo, bound for her work at Dynetics Incorporated located in Bicutan, Taguig, Metro Manila, where she then worked as a machine operator earning P16.25 a day. While the passenger jeepney was travelling at a fast clip along DBP Avenue, Bicutan, Taguig, Metro Manila another fast moving vehicle, a Metro Manila Transit Corp. (MMTC) bus bearing plate 3Z 307 PUB (Philippines) ’79 driven by Godofredo C. Leonardo was negotiating Honeydew Road, Bicutan, Taguig, Metro Manila bound for its terminal at Bicutan. As both vehicles approached the intersection of DBP Avenue and Honeydew Road they failed to slow down and slacken their speed; neither did they blow their horns to warn approaching vehicles. As a consequence, a collision between them occurred, the passenger jeepney ramming the left side portion of the MMTC bus. The collision impact caused Custodio to hit the front windshield of the passenger jeepney and she was thrown out therefrom, falling onto the pavement unconscious with serious physical injuries. She was Transportation Law, 2004 ( 81 )

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brought to the Medical City Hospital where she regained consciousness only after 1 week. Thereat, she was confined for 24 days, and as a consequence, she was unable to work for 3 ½ months. A complaint for damages was filed by Custodio, who being then a minor was assisted by her parents, against all of therein named defendants following their refusal to pay the expenses incurred by the former as a result of the collision. Said defendants denied all the material allegations in the complaint and pointed an accusing finger at each other as being the party at fault. The reorganized trial court, in its decision of 1 August 1989, found both drivers of the colliding vehicles concurrently negligent for non-observance of appropriate traffic rules and regulations and for failure to take the usual precautions when approaching an intersection. As joint tortfeasors, both drivers (Calebag and Leonardo), as well as Lamayo, were held solidarily liable for damages sustained by Custodio, i.e. (a) the sum of P10,000.00 by way of medical expenses; (b) the sum of P5,000.00 by way of expenses of litigation; (c) the sum of P15,000.00 by way of moral damages; (d) the sum of P2,672.00 by way of loss of earnings; (e) the sum of P5,000.00 by way of exemplary damages; (f) the sum of P6,000.00 by way of attorney’s fees; and (g) costs of suit. MMTC, on the bases of the evidence presented was, however, absolved from liability for the accident. As Custodio’s motion to have that portion of the trial court’s decision absolving MMTC from liability reconsidered having been denied for lack of merit, an appeal was filed by her with appellate court. After consideration of the appropriate pleadings on appeal and finding the appeal meritorious, the Court of Appeals modified the trial court’s decision by holding MMTC solidarily liable with the other defendants for the damages awarded by the trial court because of their concurrent negligence. The Court of Appeals was resolute in its conclusion and denied the motions for reconsideration of Custodio and MMTC in a resolution dated 17 February 1982, thus prompting MMTC to file the present petition. The Supreme Court affirmed the impugned decision of the Court of Appeals. 1.

Filing of petition timely; Section 1, Rule 45 of the Rules of Court The decision of the Court of Appeals, dated 31 October 1991, was received by MMTC on 18 November 1991 and it seasonably filed a motion for the reconsideration thereof on 28 November 1991. Said motion for reconsideration was denied by the court in its resolution dated 17 February 1992, which in turn was received by MMTC on 9 March 1992. Therefore, it had, pursuant to Section 1, Rule 45 of the Rules of Court, 15 days therefrom or up to 24 March 1992 within which to file a petition for review on certiorari. Anticipating, however, that it may not be able to file said petition before the lapse of the reglementary period therefor, MMTC filed a motion on 19 March 1992 for an extension of 30 days to file the present petition, with proof of service of copies thereof to the court and the adverse parties. The Court granted said motion, with the extended period to be counted from the expiration of the reglementary period. Consequently, it had 30 days from 24 March 1992 within which to file its petition, or up to 23 April 1992, and the eventual filing of said petition on 14 April 1992 was well within the period granted by the Court. 2. Reglementary period in a petition for review on certiorari; Effect of motion for reconsideration and motion for extension of time In the case of a petition for review on certiorari from a decision rendered by the Court of Appeals, Section 1, Rule 45 of the Rules of Court, which has long since been clarified in Lacsamana vs. The Hon. Second Special Cases Division of the Intermediate Appellate Court, et al., allows the same to be filed “within 15 days from notice of judgment or of the denial of the motion for reconsideration filed in due time, and paying at the same time the corresponding docket fee.” In other words, in the event a motion for reconsideration is filed and denied, the period of 15 days begins to run all over again from notice of the denial resolution. Otherwise put, if a motion for reconsideration is filed, the reglementary period within which to appeal the decision of the Court of Appeals to the Supreme Court is reckoned from the date the party who intends to appeal received the order denying the motion for reconsideration. Furthermore, a motion for

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extension of time to file a petition for review may be filed with this Court within said reglementary period, paying at the same time the corresponding docket fee. 3.

Factual findings of trial court may be reversed by Court of Appeals Factual findings of the trial court may be reversed by the Court of Appeals, which is vested by law with the power to review both legal and factual issues, if on the evidence of record, it appears that the trial court may have been mistaken, particularly in the appreciation of evidence, which is within the domain of the Court of Appeals. 4.

Findings of facts of Court of Appeals conclusive upon the Supreme Court; Exceptions The general rule laid down in a plethora of cases is that such findings of fact by the Court of Appeals are conclusive upon and beyond the power of review of the Supreme Court. While the findings of fact of the Court of Appeals are entitled to great respect, and even finality at times, that rule is not inflexible and is subject to well established exceptions, to wit: (1) when the conclusion is a finding grounded entirely on speculation, surmises and conjectures; (2) when the inference made is manifestly mistaken, absurd or impossible; (3) where there is grave abuse of discretion; (4) when the judgment is based on a misapprehension of facts; (5) when the findings of fact are conflicting; (6) when the Court of Appeals, in making its findings, went beyond the issues of the case and the same are contrary to the admissions of both appellant and appellee; (7) when the findings of the Court of Appeals are contrary to those of the trial court; (8) when the findings of fact are conclusions without citation of specific evidence on which they are based; (9) when the facts set forth in the petition, as well as in the petitioner’s main and reply briefs, are not disputed by the respondents; and (10) when the findings of fact of the Court of Appeals are premised on the supposed absence of evidence and are contradicted by the evidence on record. 5.

Drivers negligent, jeepney owner solidarily liable There is no dispute as to the finding of concurrent negligence on the part of Calebag, the driver of the passenger jeepney, and Leonardo, the bus driver of MMTC, both of whom were solidarily held liable with Lamayo, the owner of the jeepney, the Court is spared the necessity of determining the sufficiency of evidence establishing the fact of negligence. 6.

Party to prove his own affirmative assertion; Preponderance of evidence in civil cases It is procedurally required for each party in a case to prove his own affirmative assertion by the degree of evidence required by law. In civil cases, the degree of evidence required of a party in order to support his claim is preponderance of evidence, or that evidence adduced by one party which is more conclusive and credible than that of the other party. It is therefore, incumbent on the plaintiff who is claiming a right to prove his case. Corollarily, defendant must likewise prove its own allegation to buttress its claim that it is not liable. In fine, the party, whether plaintiff or defendant, who asserts the affirmative of the issue has the burden of presenting at the trial such amount of evidence required by law to obtain a favorable judgment. It is entirely within each of the parties discretion, consonant with the theory of the case it or he seeks to advance and subject to such procedural strategy followed thereby, to present all available evidence at its or his disposal in the manner which may be deemed necessary and beneficial to prove its or his position, provided only that the same shall measure up to the quantum of evidence required by law. In making proof in its or his case, it is paramount that the best and most complete evidence be formally entered. 7.

Oral evidence without object or documentary evidence not sufficiently persuasive proof While there is no rule which requires that testimonial evidence, to hold sway, must be corroborated by documentary evidence, or even object evidence for that matter, inasmuch as the witnesses’ testimonies dwelt on mere generalities, the Court cannot consider the same as sufficiently persuasive proof that there was observance of due diligence in the selection and supervision of employees. Herein, MMTC’s attempt to prove its diligentissimi patris familias in the selection and supervision of employees through oral evidence must fail

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as it was unable to buttress the same with any other evidence, object or documentary, which might obviate the apparent biased nature of the testimony. 8. MMTC short of required evidentiary quantum; Central Taxicab vs. Ex-Meralco Employees Transportation The evidence for MMTC falls short of the required evidentiary quantum as would convincingly and undoubtedly prove its observance of the diligence of a good father of a family has its precursor in the underlying rationale pronounced in the earlier case of Central Taxicab Corp. vs. Ex-Meralco Employees Transportation Co., et al., set amidst an almost identical factual setting. Therein, it was held that “there is no hard-and-fast rule on the quantum of evidence needed to prove due observance of all the diligence of a good father of a family as would constitute a valid defense to the legal presumption of negligence on the part of an employer or master whose employee has by his negligence, caused damage to another. The failure of the company to produce in court any “record” or other documentary proof tending to establish that it had exercised all the diligence of a good father of a family in the selection and supervision of its drivers and buses, notwithstanding the calls therefor by both the trial court and the opposing counsel, argues strongly against its pretensions. 9. Case covered by Articles 2176 and 2177, in relation to Article 2180, of the Civil Code; Elements of quasi-delicts The present case isy within the coverage of Articles 2176 and 2177, in relation to Article 2180, of the Civil Code provisions on quasi-delicts, as all the elements thereof are present, to wit: (1) damages suffered by the plaintiff, (2) fault or negligence of the defendant or some other person for whose act he must respond, and (3) the connection of cause and effect between fault or negligence of the defendant and the damages incurred by plaintiff. 10.

Article 2180 NCC The pertinent parts of Article 2180 provide that “The obligation imposed by article 2176 is demandable not only for one’s own acts or omissions, but also for those of persons for whom one is responsible. xxx Employers shall be liable for damages caused by their employees and household helpers acting within the scope of their assigned tasks, even though the former are not engaged in any business or industry. xxx The responsibility treated of in this article shall cease when the persons herein mentioned prove that they observed all the diligence of a good father of a family to prevent damage.” 11.

Basis of employer’s vicarious liability The basis of the employer’s vicarious liability has been explained: “The responsibility imposed by this article arises by virtue of a presumption juris tantum of negligence on the part of the persons made responsible under the article, derived from their failure to exercise due care and vigilance over the acts of subordinates to prevent them from causing damage. Negligence is imputed to them by law, unless they prove the contrary. Thus, the last paragraph of the article says that such responsibility ceases if it is proved that the persons who might be held responsible under it exercised the diligence of a good father of a family (diligentissimi patris familias) to prevent damage. It is clear, therefore, that it is not representation, nor interest, nor even the necessity of having somebody else answer for the damages caused by the persons devoid of personality, but it is the non-performance of certain duties of precaution and prudence imposed upon the persons who become responsible by civil bond uniting the actor to them, which forms the foundation of such responsibility.” 12. Diligentissimi patris familias applicable when there is an employer-employee relationship; Diligence of a good father of family under Article 2180 refers to due diligence in selection and supervision of employees The rule is applicable only where there is an employer-employee relationship, although it is not necessary that the employer be engaged in business or industry. Whether or not engaged in any business or Transportation Law, 2004 ( 84 )

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industry, the employer under Article 2180 is liable for torts committed by his employees within the scope of their assigned tasks. But, it is necessary first to establish the employment relationship. Once this is done, the plaintiff must show, to hold the employer liable, that the employee was acting within the scope of his assigned task when the tort complained of was committed. It is only then that the defendant, as employer, may find it necessary to interpose the defense of due diligence in the selection and supervision of employees. The diligence of a good father of a family required to be observed by employers to prevent damages under Article 2180 refers to due diligence in the selection and supervision of employees in order to protect the public. 12.

Presumption that employer negligent when employee causes damage due to his own negligence With the allegation and subsequent proof of negligence against the driver and of an employeremployee relation between him and MMTC, the case is undoubtedly based on a quasi-delict under Article 2180. When the employee causes damage due to his own negligence while performing his own duties, there arises the juris tantum presumption that the employer is negligent, rebuttable only by proof of observance of the diligence of a good father of a family. For failure to rebut such legal presumption of negligence in the selection and supervision of employees, the employer is likewise responsible for damages, the basis of the liability being the relationship of pater familias or on the employer’s own negligence. 13.

Drivers and vehicle owners directly and solidarily liable; Gutierrez vs. Gutierrez As early as the case of Gutierrez vs. Gutierrez, and thereafter, the Court has consistently held that where the injury is due to the concurrent negligence of the drivers of the colliding vehicles, the drivers and owners of the said vehicles shall be primarily, directly and solidarily liable for damages and it is immaterial that one action is based on quasi-delict and the other on culpa contractual, as the solidarity of the obligation is justified by the very nature thereof. 14.

Admonition as to selection of employees; Cambo vs. Camarote The legal obligation of employers to observe due diligence in the selection and supervision of employees is not to be considered as an empty play of words or a mere formalism, as appears to be the fashion of the times, since the non-observance thereof actually becomes the basis of their vicarious liability under Article 2180. On the matter of selection of employees, the case of Cambo vs. Camarote lays down the admonition that “in order that the owner of a vehicle may be considered as having exercised all diligence of a good father of a family, he should not have been satisfied with the mere possession of a professional driver’s license; he should have carefully examined the applicant for employment as to his qualifications, his experience and record of service. These steps the vehicle owner failed to observe; he has therefore, failed to exercise all due diligence required of a good father of a family in the choice or selection of driver.” 15.

Scope of due diligence in supervision of employees Due diligence in the supervision of employees includes the formulation of suitable rules and regulations for the guidance of employees and the issuance of proper instructions intended for the protection of the public and persons with whom the employer has relations through his or its employees and the imposition of necessary disciplinary measures upon employees in case of breach or as may be warranted to ensure the performance of acts indispensable to the business of and beneficial to their employer. To this, the Court adds that actual implementation and monitoring of consistent compliance with said rules should be the constant concern of the employer, acting through dependable supervisors who should regularly report on their supervisory functions. 16.

When defense of due diligence in selection and supervision of employees deemed sufficient In order that the defense of due diligence in the selection and supervision of employees may be deemed sufficient and plausible, it is not enough to emptily invoke the existence of said company guidelines and policies on hiring and supervision. As the negligence of the employee gives rise to the presumption of negligence on the part of the employer, the latter has the burden of proving that it has been diligent not only in the selection of employees but also in the actual supervision of their work. The mere allegation of the Transportation Law, 2004 ( 85 )

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existence of hiring procedures and supervisory policies, without anything more, is decidedly not sufficient to overcome such presumption. 17.

Warning of the Court to employers The Court emphatically reiterates its holding, as a warning to all employers, that “the mere formulation of various company policies on safety without showing that they were being complied with is not sufficient to exempt petitioner from liability arising from negligence of its employees. It is incumbent upon petitioner to show that in recruiting and employing the erring driver the recruitment procedures and company policies on efficiency and safety were followed.” Paying lip-service to these injunctions or merely going through the motions of compliance therewith will warrant stern sanctions from the Court. 18.

Rationale for the requirement of highest possible degree of diligence from common carriers The Court feels it is necessary to stress the following rationale behind these all-important statutory and jurisprudential mandates, for it has been observed that despite its pronouncement in Kapalaran Bus Line vs. Coronado, et al., there has been little improvement in the transport situation in the country: “In requiring the highest possible degree of diligence from common carriers and creating a presumption of negligence against them, the law compels them to curb the recklessness of their drivers. While the immediate beneficiaries of the standard of extraordinary diligence are, of course, the passengers and owners of the cargo carried by a common carrier, they are not the only persons that the law seeks to benefit. For if common carriers carefully observe the statutory standard of extraordinary diligence in respect of their own passengers, they cannot help but simultaneously benefit pedestrians and the owners and passengers of other vehicles who are equally entitled to the safe and convenient use of our roads and highways. The law seeks to stop and prevent the slaughter and maiming of people (whether passengers or not) and the destruction of property (whether freight or not) on our highways by buses, the very size and power of which seem often to inflame the minds of their drivers. . . ..” 19.

No interest due as such has not been prayed in the complaint; Article 2211 NCC The appellate court acted in the exercise of sound discretion when it affirmed the trial court’s award, without requiring the payment of interest thereon as an item of damages just because of delay in the determination thereof, especially since Custodio did not specifically pray therefor in her complaint. Article 2211 of the Civil Code provides that in quasi-delicts, interest as a part of the damages may be awarded in the discretion of the court, and not as a matter of right. There have been no intentional dilatory maneuvers or any special circumstances which would justify that additional award. [34] Kapalaran Bus vs. Coronado (GR 85331, 25 August 1989) Third Division, Feliciano (J): 4 concur Facts: On 2 August 1982, the jeepney driven by Lope Grajera was then coming from Pila, Laguna on its way towards the direction of Sta. Cruz, traversing the old highwayAs the jeepney reached the intersection where there is a traffic sign “yield,” it stopped and cautiously treated the intersection as a “Thru Stop” street, which it is not. The KBL bus, on the other hand, was on its way from Sta. Cruz, Laguna, driven by its regular driver Virgilio Llamoso, on its way towards Manila. The regular itinerary of the KBL bus is through the town proper of Pila, Laguna, but at times it avoids this if a bus is already fully loaded with passengers and can no longer accommodate additional passengers. As the KBL bus neared the intersection, Virgilio Llamoso inquired from his conductor if they could still accommodate passengers and learning that they were already full, he decided to bypass Pila and instead, to proceed along the national highway. Virgilio Llamoso admitted that there was another motor vehicle ahead of him. Atty. Conrado L. Manicad, who was driving a Mustang car coming from the direction of Sta. Cruz and proceeding towards the direction of Manila, stopped at the intersection to give way to the jeepney driven by Grajera. Behind Manicad were two vehicles, a car of his client and another car. Transportation Law, 2004 ( 86 )

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A Laguna Transit bus had just entered the town of Pila ahead of Atty. Manicad. The KBL bus ignored the stopped vehicles of Atty. Manicad and the other vehicles behind Atty. Manicad and overtook both vehicles at the intersection, therefore, causing the accident. The KBL bus appeared to have been travelling at a fast rate of speed because, after the collision, it did not stop; it travelled for another 50 meters and stopped only when it hit an electric post. On 14 September 1982, Kapalaran, apparently believing that the best defense was offense, filed a complaint for damage to property and physical injuries through reckless imprudence against Angel Coronado and Lope Grajera in the Regional Trial Court, Branch 27, Sta. Cruz, Laguna. Coronado and Grajera answered with their own claims (counter-claims) for damages. A third-party complaint and/or a complaint for intervention was also filed in the same case against Kapalaran by jeepney passenger Dionisio Shinyo. On 15 October 1986, after trial, the trial court rendered a judgment in favor of Coronado, Grajera and Shinyo and ordering Kapalaran (a) to pay Angel Coronado the sum of P40,000.00 as compensation for the totally wrecked jeepney, plus the sum of P5,000.00 as attorney’s fees and litigation expenses, and (b) to Dionisio Shinyo the sum of P35,000.00 representing the expenses incurred by said intervenor for his treatment including his car-hire, the further sum of P30,000.00 representing the expenses said defendant will incur for his second operation to remove the intramedulary nail from his femur, the additional sum of P50,000.00 to serve as moral damages for the pain and suffering inflicted on said defendant, plus the sum of P10,000.00 in the concept of exemplary damages to serve as a deterrent to others who, like the plaintiff, may be minded to induce accident victims to perjure themselves in a sworn statement, and the sum of P15,000.00 as attorney’s fees and litigation expenses. From the above judgment, Kapalaran appealed to the Court of Appeals assailing the trial court’s findings on the issue of fault and the award of damages. The Court of Appeals, on 28 June 1988, affirmed the decision of the trial court but modified the award of damages by setting aside the grant of exemplary damages as well as the award of attorney’s fee and litigation expenses made to Dionisio Shinyo. A motion for reconsideration by Kapalaran having been denied by the appellate court on 13 October 1988. Hence, the petition for Review. The Supreme Court denied the Petition for Review on Certiorari for lack of merit and affirmed the Decision of the Court of Appeals, except (1) that the award of exemplary damages to Dionisio Shinyo shall be restored and increased from P10,000.00 to P25,000.00, and (2) that the grant of attorney’s fees and litigation expenses in the sum of P15,000.00 to Dionisio Shinyo shall similarly be restored. Costs against Kapalaran. 1.

General rules as to right-of-way The general rule is that the vehicle on the national highway has the right-of-way as against a feeder road. Another general rule is that the vehicle coming from the right has the right-of-way over the vehicle coming from the left. The general rules on right-of-way may be invoked only if both vehicles approach the intersection at almost the same time. 2.

Supreme Court not a trier of facts It is not the function of the Supreme Court to analyze and weigh evidence presented by the parties all over again and that its jurisdiction is in principle limited to reviewing errors of law that might have been committed by the Court of Appeals. Herein, Kapalaran has made no compelling showing of any misapprehension of facts on the part of the Court of Appeals that would require us to review and overturn the factual findings of that court. On the contrary, examination of the record shows that not only are the conclusions of fact of the Court of Appeals and the trial court on who had acted negligently and was at fault in the collision of their vehicles, amply supported by the evidence of record, but also that Kapalaran’s bus driver was grossly negligent and had acted wantonly and in obvious disregard of the applicable rules on safety on the highway. 3.

Bus driver actually violating traffic rules and regulations, presumed negligent Transportation Law, 2004 ( 87 )

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Kapalaran’s driver had become aware that some vehicles ahead of the bus and travelling in the same direction had already stopped at the intersection obviously to give way either to pedestrians or to another vehicle about to enter the intersection. The bus driver, who was driving at a speed too high to be safe and proper at or near an intersection on the highway, and in any case too high to be able to slow down and stop behind the cars which had preceded it and which had stopped at the intersection, chose to swerve to the left lane and overtake such preceding vehicles, entered the intersection and directly smashed into the jeepney within the intersection. Immediately before the collision, the bus driver was actually violating the following traffic rules and regulations, among others, in the Land Transportation and Traffic Code, RA 4136, as amended. Thus, a legal presumption arose that the bus driver was negligent, a presumption Kapalaran was unable to overthrow. 4.

Section 35(a) of RA 4136, Restriction as to speed Section 35 (a) provides that “any person driving a motor vehicle on a highway shall drive the same at a careful and prudent speed, not greater nor less than is reasonable and proper, having due regard for the traffic, the width of the highway, and or any other condition then and there existing; and no person shall drive any motor vehicle upon a highway at such a speed as to endanger the life, limb and property of any person, nor at a speed greater than will permit him to bring the vehicle to a stop within the assured clear distance ahead.” 5.

Section 41 (a) of RA 4136, Restrictions on overtaking and passing Section 41 (a) provides that “the driver of a vehicle shall not drive to the left side of the center line of a highway in overtaking or passing another vehicle, proceeding in the same direction, unless such left side is clearly visible, and is free of oncoming traffic for a sufficient distance ahead to permit such overtaking or passing to be made in safety.” 6.

Section 41 (c) of RA 4136, Restrictions on overtaking and passing Section 41 (c) provides that “the driver of a vehicle shall not overtake or pass any other vehicle proceeding in the same direction, at any railway grade crossing, or at any intersection of highways, unless such intersection or crossing is controlled by traffic signal, or unless permitted to do so by a watchman or a peace officer, except on a highway having two or more lanes for movement of traffic in one direction where the driver of a vehicle may overtake or pass another vehicle on the right. Nothing in this section shall be construed to prohibit a driver overtaking or passing, upon the right, another vehicle which is making or about to make a left turn. 7.

Jeepney driver has right to assume further vehicles would stop The jeepney driver, seeing the cars closest to the intersection on the opposite side of the highway come to a stop to give way to him, had the right to assume that other vehicles further away and behind the stopped cars would similarly come to a stop and not seek illegally to overtake the stopped vehicles and come careening into the intersection at an unsafe speed. Kapalaran’s bus was still relatively far away from the intersection when the jeepney entered the same; the bus collided head-on into the jeepney because the bus had been going at an excessively high velocity immediately before and at the time of overtaking the stopped cars, and so caught the jeepney within the intersection. 8.

Responsibility of driver to see to it that left lane of road was clear It was the responsibility of the bus driver to see to it, when it overtook the 2 cars ahead which had stopped at the intersection, that the left lane of the road within the intersection and beyond was clear. The point of impact was on the left side of the intersection (the right lane so far as concerns the jeepney coming from the opposite side), which was precisely the lane or side on which the jeepney had a right to be. 9. Driver’s gross negligence raises presumption that Kapalaran guilty of negligence in selection and supervision of employees; Right of recourse Transportation Law, 2004 ( 88 )

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The patent and gross negligence on the part of Kapalaran’s driver raised the legal presumption that Kapalaran as employer was guilty of negligence either in the selection or in the supervision of its bus drivers. Where the employer is held liable for damages, it has of course a right of recourse against its own negligent employee. If Kapalaran was interested in maintaining its right of recourse against or reimbursement from its own driver, it should have appealed from that portion of the trial court’s decision which had failed to hold the bus driver responsible for any damage. Contrary to Kapalaran’s pretense, its liability for the acts and negligence of its bus driver is not “merely subsidiary,” and is not limited to cases where the employee “cannot pay his liability,” nor are Coronado, et. al. compelled first to proceed against the bus driver. The liability of the employer under Article 2180 of the Civil Code is direct and immediate; it is not conditioned upon prior recourse against the negligent employee and a prior showing of the insolvency of such employee. 10.

Award of moral damages in order; Shinyo’s death The award of moral damages against Kapalaran is not only entirely in order; it is also quite modest considering Dionisio Shinyo’s death during the pendency of this petition, a death hastened by, if not directly due to, the grievous injuries sustained by him in the violent collision. 11.

Court entitled to take judicial notice of negligence Kapalaran’s bus driver was grossly and very probably criminally negligent in his reckless disregard of the rights of other vehicles and their passengers and of pedestrians as well. The Court is entitled to take judicial notice of the gross negligence and the appalling disregard of the physical safety and property of others so commonly exhibited today by the drivers of passenger buses and similar vehicles on our highways. 12.

Diligence required of a common carrier The law requires a common carrier to exercise extraordinary diligence in carrying and transporting their 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.” In requiring the highest possible degree of diligence from common carriers and creating a presumption of negligence against them, the law compels them to curb the recklessness of their drivers. 13.

Beneficiaries of standard of extraordinary diligence While the immediate beneficiaries of the standard of extraordinary diligence are, of course, the passengers and owners of cargo carried by a common carrier, they are not the only persons that the law seeks to benefit. For if common carriers carefully observed the statutory standard of extraordinary diligence in respect of their own passengers, they cannot help but simultaneously benefit pedestrians and the owners and passengers of other vehicles who are equally entitled to the safe and convenient use of our roads and highways. The law seeks to stop and prevent the slaughter and maiming of people (whether passengers or not) and the destruction of property (whether freight or not) on our highways by buses, the very size and power of which seem often to inflame the minds of their drivers. 14.

Exemplary damages; Article 2231 NCC Article 2231 of the Civil Code explicitly authorizes the imposition of exemplary damages in cases of quasi-delicts “if the defendant acted with gross negligence.” Herein, the award of exemplary damages by the trial court was quite proper, although granted for the wrong reason, and should not only be restored but augmented. 15. it

Issues not raised may be considered by Court if substantial justice and/or public policy require

Issues which must be resolved if substantial justice is to be rendered to the parties, may and should be considered and decided by the Supreme Court even if those issues had not been explicitly raised by the party affected. Herein, it is not only the demands of substantial justice but also the compelling considerations of public policy noted above, which impel us to the conclusion that the trial court’s award of exemplary damages Transportation Law, 2004 ( 89 )

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was erroneously deleted and must be restored and brought more nearly to the level which public policy and substantial justice require. [35] Trans-Asia Shipping Lines vs. CA (GR 118126, 4 March 1996) Third Division, Davide Jr. (J): 4 concur Facts: Atty. Renato Arroyo, a public attorney, bought a ticket Trans-Asia Shipping Lines Inc., a corporation engaged in inter-island shipping, for the voyage of M/V Asia Thailand vessel to Cagayan de Oro City from Cebu City on 12 November 1991. At around 5:30p.m of the said day, Arroyo boarded the M/V Asia Thailand vessel. At that instance, Arroyo noticed that some repair work were being undertaken on the engine of the vessel. The vessel departed at around 11:00 p.m. with only 1 engine running. After an hour of slow voyage, the vessel stopped near Kawit Island and dropped its anchor thereat. After half an hour of stillness, some passengers demanded that they should be allowed to return to Cebu City for they were no longer willing to continue their voyage to Cagayan de Oro City. The captain acceded [sic] to their request and thus the vessel headed back to Cebu City. At Cebu City, Arroyo, together with the other passengers who requested to be brought back to Cebu City, were allowed to disembark. Thereafter, the vessel proceeded to Cagayan de Oro City. Arroyo, the next day, boarded the M/V Asia Japan for its voyage to Cagayan de Oro City, likewise a vessel of Trans-Asia. On account of the failure of Trans-Asia to transport him to the place of destination on 12 November 1991, Arroyo filed before the trial court a complaint for damages against Trans-Asia. After due trial, the trial court rendered its decision and ruled that the action was only for breach of contract, with Articles 1170, 1172, and 1173 of the Civil Code as applicable law — not Article 2180 of the same Code. The Court dismissed the complaint as it did not appear that Arroyo was left in the Port of Cebu because of the fault, negligence, malice or wanton attitude of Trans-Asia’s employees; and likewise dismissed Trans-Asia’s counterclaim is likewise dismissed it not appearing also that filing of the case by Arroyo was motivated by malice or bad faith. Unsatisfied, Arroyo appealed to the Court of Appeals (CA-GR CV 39901). In its decision of 23 November 1994, the Court of Appeals reversed the trial court’s decision by applying Article 1755 in relation to Articles 2201, 2208, 2217, and 2232 of the Civil Code and, accordingly, awarded (1) P20,000.00 as moral damages; (2) P10,000.00 as exemplary damages; (3) P5,000.00 as attorney’s fees; and (4) Cost of suit. Trans-Asia instituted the petition for review on certiorari. The Supreme Court denied the petition, and affirmed the challenged decision of the Court of Appeals, subject to the modification as to the award for attorney’s fees which is set aside; with costs against Trans-Asia. 1.

Laws applicable Undoubtedly, there was, between Trans-Asia and Arroyo, a contract of common carriage. The laws of primary application then are the provisions on common carriers under Section 4, Chapter 3, Title VIII, Book IV of the Civil Code, while for all other matters not regulated thereby, the Code of Commerce and special laws. 2. Article 1733 NCC, Extraordinary diligence; Article 1755, Utmost diligence of very cautious persons Under Article 1733 of the Civil Code, Trans-Asia was bound to observe extraordinary diligence in ensuring the safety of Arroyo. That meant that Trans-Asia was, pursuant to Article 1755 of the said Code, bound to carry Arroyo safely as far as human care and foresight could provide, using the utmost diligence of very cautious persons, with due regard for all the circumstances. Herein, Trans-Asia failed to discharge this obligation. Transportation Law, 2004 ( 90 )

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3. Vessel was unseaworthy even before voyage began; Unseaworthiness defined, a clear breach of duty of carrier Before commencing the contracted voyage, Trans-Asia undertook some repairs on the cylinder head of one of the vessel’s engines. But even before it could finish these repairs, it allowed the vessel to leave the port of origin on only one functioning engine, instead of two. Moreover, even the lone functioning engine was not in perfect condition as sometime after it had run its course, it conked out. This caused the vessel to stop and remain adrift at sea, thus in order to prevent the ship from capsizing, it had to drop anchor. Plainly, the vessel was unseaworthy even before the voyage began. For a vessel to be seaworthy’, it must be adequately equipped for the voyage and manned with a sufficient number of competent officers and crew. The failure of a common carrier to maintain in seaworthy condition its vessel involved in a contract of carriage is a clear breach of is duty prescribed in Article 1755 of the Civil Code. 4.

Article 1764 NCC; Liability for damages As to its liability for damages, Article 1764 of the Civil Code expressly provides that “Damages in cases comprised in this Section shall be awarded in accordance with Title XVIII of this Book, concerning Damages. Article 2206 shall also apply to the death of a passenger caused by the breach of contract by common carrier. The damages comprised in Title XVIII of the Civil Code are actual or compensatory, moral, nominal, temperate or moderate, liquidated, and exemplary.” 5.

Actual and compensatory damages Actual or compensatory damages represent the adequate compensation for pecuniary loss suffered and for profits the obligee failed to obtain. 6.

Damages resulting in contracts or quasi-contracts In contracts or quasi-contracts, the obligor is liable for all the damages which may be reasonably attributed to the non- performance of the obligation if he is guilty of fraud, bad faith, malice, or wanton attitude. 7.

Moral damages Moral damages include moral suffering, mental anguish, fright, serious anxiety, besmirched reputation, wounded feelings, moral shock, social humiliation, or similar injury. They may be recovered in the cases enumerated in Article 2219 of the Civil Code, likewise, if they are the proximate result of, as herein, Trans-Asia’s breach of the contract of carriage. Anent a breach of a contract of common carriage, moral damages may be awarded if the common carrier acted fraudulently or in bad faith. 8.

Exemplary damages; not a matter of right Exemplary damages are imposed by way of example or correction for the public good, in addition to moral, temperate, liquidated or compensatory damages. In contracts and quasi-contracts, exemplary damages may be awarded if the defendant acted in a wanton fraudulent, reckless, oppressive or malevolent manner. It cannot, however, be considered as a matter of right; the court having to decide whether or not they should be adjudicated. Before the court may consider an award for exemplary damages, the plaintiff must first show that he is entitled to moral, temperate or compensatory damages; but it is not necessary that he prove the monetary value thereof. 9.

Article 1169 not applicable The Court of Appeals did not grant Arroyo actual or compensatory damages, reasoning that no delay was incurred since there was no demand, as required by Article 1169 of the Civil Code. This article, however, finds no application in the case because, as there was in fact no delay in the commencement of the contracted voyage. If any delay was incurred, it was after the commencement of such voyage, more specifically, when

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the voyage was subsequently interrupted when the vessel had to stop near Kawit Island after the only functioning engine conked out. 10. Article 698 of the Code of Commerce applies suppletorily to Article 1766 NCC; Rights and duties of parties arising out of delay As to the rights and duties of the parties strictly arising out of such delay, the Civil Code is silent. However, as correctly pointed out by the petitioner, Article 698 of the Code of Commerce specifically provides for such a situation. It reads “In case a voyage already begun should be interrupted, the passengers shall be obliged to pay the fare in proportion to the distance covered, without right to recover for losses and damages if the interruption is due to fortuitous event or force majeure, but with a right to indemnity if the interruption should have been caused by the captain exclusively. If the interruption should be caused by the disability of the vessel and a passenger should agree to await the repairs, he may not be required to pay any increased price of passage, but his living expenses during the stay shall be for his own account.” This article applies suppletorily pursuant to Article 1766 of the Civil Code. 11. Article 698 of the Code of Commerce must be read with Articles 2199, 2200, 2201, and 2208 in relation to Article 21 NCC; Arroyo not entitled to actual or compensatory damages The cause of the delay or interruption was Trans-Asia’s failure to observe extraordinary diligence. Article 698 must then be read together with Articles 2199, 2200, 2201, and 2208 in relation to Article 21 of the Civil Code. In so reading, it means that Trans-Asia is liable for any pecuniary loss or loss of profits which Arroyo may have suffered by reason thereof. For Arroyo, such would be the loss of income if unable to report to his office on the day he was supposed to arrive were it not for the delay. This, however, assumes that he stayed on the vessel and was with it when it thereafter resumed its voyage; but he did not. As he and some passengers resolved not to complete the voyage, the vessel had to return to its port of origin and allow them to disembark. Arroyo then took Trans-Asia’s other vessel the following day, using the ticket he had purchased for the previous day’s voyage. Any further delay then in Arroyo’s arrival at the port of destination was caused by his decision to disembark. Had he remained on the first vessel, he would have reached his destination at noon of 13 November 1991, thus been able to report to his office in the afternoon. He, therefore, would have lost only the salary for half of a day. But actual or compensatory damages must be proved, which Arroyo failed to do. There is no convincing evidence that he did not receive his salary for 13 November 1991 nor that his absence was not excused. 12.

Trans-Asia is liable for moral and exemplary damages Trans-Asia is liable for moral and exemplary damages. In allowing its unseaworthy M/V Asia Thailand to leave the port of origin and undertake the contracted voyage, with full awareness that it was exposed to perils of the sea, it deliberately disregarded its solemn duty to exercise extraordinary diligence and obviously acted with bad faith and in a wanton and reckless manner. 13. Trans-Asia’s assertion shows lack of genuine concern for safety of passengers; Trans-Asia cannot expect passengers to act in manner it desired Trans-Asia’s assertions that the safety of the vessel and passengers was never at stake because the sea was “calm” in the vicinity where it stopped as faithfully recorded in the vessel’s log book demonstrates beyond cavil Trans-Asia’s lack of genuine concern for the safety of its passengers. It was, perhaps, only providential than the sea happened to be calm. Even so, Trans-Asia should not expect its passengers to act in the manner it desired. The passengers were not stoics; becoming alarmed, anxious, or frightened at the stoppage of a vessel at sea in an unfamiliar zone a nighttime is not the sole prerogative of the faint-hearted. More so in the light of the many tragedies at sea resulting in the loss of lives of hopeless passengers and damage to property simply because common carriers failed in their duty to exercise extraordinary diligence in the performance of their obligations. 14.

Article 2208 NCC Transportation Law, 2004 ( 92 )

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Article 2208 of the Civil Code provides that “ In the absence of stipulation, attorney’ s fees and expenses of litigation, other than judicial costs cannot be recovered except: (1) When exemplary damages are awarded; (2) When the defendant’s act or omission has compelled the plaintiff to litigate with third persons or to incur expenses to protect his interest.” 15.

Award of attorney’s fees not justified Under Article 2208 of the Civil Code, Attorney’s fees are recoverable only in the concept of actual damages, not as moral damages nor judicial costs. Hence, to merit such an award, it is settled that the amount thereof must be proven. Moreover, such must be specifically prayed for and may not be deemed incorporated within a general prayer for “such other relief and remedy as the court may deem just and equitable. The statement that the “plaintiff was forced to litigate in order that he can claim moral and exemplary damages for the suffering he incurred” does not satisfy the benchmark of “factual, legal and equitable justification” needed as basis for an award of attorney’s fees. In sum, for lack of factual and legal basis, the award of attorney’s fees must be deleted. [36], also [78] and [189] Belgian Overseas Chartering and Shipping vs. Philippine First Insurance Co. Inc. (GR 143133, 5 June 2002) Third Division, Panganiban (J): 2 concur, 1 on leave Facts: On 13 June 1990, CMC Trading A.G. shipped on board the M/V ‘Anangel Sky’ at Hamburg, Germany 242 coils of various Prime Cold Rolled Steel sheets for transportation to Manila consigned to the Philippine Steel Trading Corporation. On 28 July 1990, M/V Anangel Sky arrived at the port of Manila and, within the subsequent days, discharged the subject cargo. 4 coils were found to be in bad order (BO Tally sheet 154974). Finding the 4 coils in their damaged state to be unfit for the intended purpose, the consignee Philippine Steel Trading Corporation declared the same as total loss. Despite receipt of a formal demand, Belgian Overseas Chartering and Shipping NV (BOCSNV) and Jardine Davies Transport Services Inc. (JDTSI) refused to submit to the consignee’s claim. Consequently, Philippine First Insurance Co. Inc. (PFIC) paid the consignee P506,086.50, and was subrogated to the latter’s rights and causes of action against BOCSNV and JDTSI. PFCI instituted a complaint for recovery of the amount paid by them, to the consignee as insured. The Regional Trial Court of Makati City (Branch 134) rendered judgment, dismissing the complaint, as well as the defendants’ counterclaim. On appeal, and on 15 July 1998, reversed and set aside the decision of the trial court, and ordered BOCSNV and JDTSI jointly and severally pay PFIC P451,027.32 as actual damages, representing the value of the damaged cargo, plus interest at the legal rate from the time of filing of the complaint on 25 July 1991, until fully paid; attorney’s fees amounting to 20% of the claim, and costs of suit. BOCSNV and JDTSI’s motion for reconsideration was denied. Hence, the petition for review. The Supreme Court partially granted the Petition, and modified the assailed Decision. The Court reduced BOCSNV and JDTSI’s liability is reduced to US$2,000 plus interest at the legal rate of 6% from the time of the filing of the Complaint on 25 July 1991 until the finality of this Decision, and 12% thereafter until fully paid. No pronouncement as to costs. 1. Extraordinary diligence required of common carriers; Period as to when observance of extraordinary responsibility lasts Well-settled is the rule that common carriers, from the nature of their business and for reasons of public policy, are bound to observe extraordinary diligence and vigilance with respect to the safety of the goods and the passengers they transport. Thus, common carriers are required to render service with the Transportation Law, 2004 ( 93 )

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greatest skill and foresight and “to use all reasonable means to ascertain the nature and characteristics of the goods tendered for shipment, and to exercise due care in the handling and stowage, including such methods as their nature requires.” The extraordinary responsibility lasts from the time the goods are unconditionally placed in the possession of and received for transportation by the carrier until they are delivered, actually or constructively, to the consignee or to the person who has a right to receive them. 2.

Rationale why extraordinary diligence required This strict requirement is justified by the fact that, without a hand or a voice in the preparation of such contract, the riding public enters into a contract of transportation with common carriers. Even if it wants to, it cannot submit its own stipulations for their approval. Hence, it merely adheres to the agreement prepared by them. 3.

Common carrier presumed to have been at fault or negligent; Burden of proof Owing to this high degree of diligence required of them, common carriers, as a general rule, are presumed to have been at fault or negligent if the goods they transported deteriorated or got lost or destroyed. That is, unless they prove that they exercised extraordinary diligence in transporting the goods. In order to avoid responsibility for any loss or damage, therefore, they have the burden of proving that they observed such diligence. 4.

When presumption of fault or negligence will not arise; List exclusive The presumption of fault or negligence will not arise if the loss is due to any of the following causes: (1) flood, storm, earthquake, lightning, or other natural disaster or calamity; (2) an act of the public enemy in war, whether international or civil; (3) an act or omission of the shipper or owner of the goods; (4) the character of the goods or defects in the packing or the container; or (5) an order or act of competent public authority. This is a closed list. If the cause of destruction, loss or deterioration is other than the enumerated circumstances, then the carrier is liable therefor. 5.

Prima facie case of fault of negligence Mere proof of delivery of the goods in good order to a common carrier and of their arrival in bad order at their destination constitutes a prima facie case of fault or negligence against the carrier. If no adequate explanation is given as to how the deterioration, the loss or the destruction of the goods happened, the transporter shall be held responsible. Herein, (1) as stated in the Bill of Lading, BOCSNV and JDTSI received the subject shipment in good order and condition in Hamburg, Germany; (2) prior to the unloading of the cargo, an Inspection Report prepared and signed by representatives of both parties showed the steel bands broken, the metal envelopes rust-stained and heavily buckled, and the contents thereof exposed and rusty; (3) Bad Order Tally Sheet 154979 issued by JDTSI, stated that 4 coils were in bad order and condition. Normally, a request for a bad order survey is made in case there is an apparent or a presumed loss or damage; (4) the Certificate of Analysis stated that, based on the sample submitted and tested, the steel sheets found in bad order were wet with fresh water; (5) BOCSNV and JDTSI — in a letter addressed to the Philippine Steel Coating Corporation and dated 12 October 1990 — admitted that they were aware of the condition of the 4 coils found in bad order and condition. All these conclusively prove the fact of shipment in good order and condition and the consequent damage to the 4 coils while in the possession of petitioner, who notably failed to explain why. 6. Common carrier should observe precaution to avoid damage or destruction of the goods entrusted to it for safe carriage and delivery The words “metal envelopes rust stained and slightly dented” were noted on the Bill of Lading; however, there is no showing that BOCSNV and JDTSI exercised due diligence to forestall or lessen the loss. Having been in the service for several years, the master of the vessel should have known at the outset that metal envelopes in the said state would eventually deteriorate when not properly stored while in transit. Equipped with the proper knowledge of the nature of steel sheets in coils and of the proper way of Transportation Law, 2004 ( 94 )

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transporting them, the master of the vessel and his crew should have undertaken precautionary measures to avoid possible deterioration of the cargo. But none of these measures was taken. Having failed to discharge the burden of proving that they have exercised the extraordinary diligence required by law, BOCSNV and JDTSI cannot escape liability for the damage to the 4 coils. 7.

Improper packing does not relieve common carrier from liability per se Even if the fact of improper packing was known to the carrier or its crew or was apparent upon ordinary observation, it is not relieved of liability for loss or injury resulting therefrom, once it accepts the goods notwithstanding such condition. Thus, BOCSNV and JDTSI have not successfully proven the application of any of the exceptions in the present case. 8. Section 3, paragraph 6 COGSA; Notice of claim need not be given at time of receipt if subject of a joint inspection or survey Section 3, paragraph 6 of COGSA provides that the notice of claim need not be given if the state of the goods, at the time of their receipt, has been the subject of a joint inspection or survey. Herein, prior to unloading the cargo, an Inspection Report as to the condition of the goods was prepared and signed by representatives of both parties. 9.

Section 3, paragraph 6 COGSA; Failure to file notice of claim does not bar recovery A failure to file a notice of claim within three days will not bar recovery if it is nonetheless filed within 1 year. This one-year prescriptive period also applies to the shipper, the consignee, the insurer of the goods or any legal holder of the bill of lading. 10.

Claim not barred by prescription as long as 1 year period not lapsed; Loadstar Shipping vs. CA In Loadstar Shipping Co., Inc. v. Court of Appeals, the Court ruled that a claim is not barred by prescription as long as the one-year period has not lapsed. Inasmuch as neither the Civil Code nor the Code of Commerce states a specific prescriptive period on the matter, COGSA — which provides for a one-year period of limitation on claims for loss of, or damage to, cargoes sustained during transit — may be applied suppletorily. 11.

Functions of bill of lading A bill of lading serves two functions. First, it is a receipt for the goods shipped. Second, it is a contract by which three parties — namely, the shipper, the carrier, and the consignee — undertake specific responsibilities and assume stipulated obligations. In a nutshell, the acceptance of the bill of lading by the shipper and the consignee, with full knowledge of its contents, gives rise to the presumption that it constituted a perfected and binding contract. 12.

Limited Liability clause sanctioned by law; Conditions required; Rationale of the rule A stipulation in the bill of lading limiting to a certain sum the common carrier’s liability for loss or destruction of a cargo — unless the shipper or owner declares a greater value — is sanctioned by law. There are, however, two conditions to be satisfied: (1) the contract is reasonable and just under the circumstances, and (2) it has been fairly and freely agreed upon by the parties. The rationale for this rule is to bind the shippers by their agreement to the value (maximum valuation) of their goods. 13. Civil Code does not limit liability of the common carrier to a fixed amount per package; Suppletory application of Code of Commerce and COGSA The Civil Code does not limit the liability of the common carrier to a fixed amount per package. In all matters not regulated by the Civil Code, the right and the obligations of common carriers shall be governed by the Code of Commerce and special laws. Thus, the COGSA, which is suppletory to the provisions of the Civil Code, supplements the latter by establishing a statutory provision limiting the carrier’s liability in the absence of a shipper’s declaration of a higher value in the bill of lading. The provisions on limited liability are as Transportation Law, 2004 ( 95 )

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much a part of the bill of lading as though physically in it and as though placed there by agreement of the parties. 14. The insertion of the words “L/C 90/02447 cannot be the basis for BOCSNV and JDTSI ‘s liability A notation in the Bill of Lading which indicated the amount of the Letter of Credit obtained by the shipper for the importation of steel sheets did not effect a declaration of the value of the goods as required by the bill. That notation was made only for the convenience of the shipper and the bank processing the Letter of Credit. 15. Keng Hua Paper Products vs. CA; Bill of lading separate from other letter of credit arrangements In Keng Hua Paper Products v. Court of Appeals, the Court held that a bill of lading was separate from the Other Letter of Credit arrangements. Therein, the contract of carriage, as stipulated in the bill of lading, must be treated independently of the contract of sale between the seller and the buyer, and the contract of issuance of a letter of credit between the amount of goods described in the commercial invoice in the contract of sale and the amount allowed in the letter of credit will not affect the validity and enforceability of the contract of carriage as embodied in the bill of lading. As the bank cannot be expected to look beyond the documents presented to it by the seller pursuant to the letter of credit, neither can the carrier be expected to go beyond the representations of the shipper in the bill of lading and to verify their accuracy vis-a-vis the commercial invoice and the letter of credit. Thus, the discrepancy between the amount of goods indicated in the invoice and the amount in the bill of lading cannot negate the obligation arising from the contract of transportation. 16. BOCSNV and JDTSI’s liability should be computed based on US$500 per package; Eastern Shipping Line vs. IAC, meaning of package BOCSNV and JDTSI’s liability should be computed based on US$500 per package and not on the per metric ton price declared in the Letter of Credit. In Eastern Shipping Lines, Inc. v. Intermediate Appellate Court, the Court explained the meaning of package, i.e. “when what would ordinarily be considered packages are shipped in a container supplied by the carrier and the number of such units is disclosed in the shipping documents, each of those units and not the container constitutes the ‘package’ referred to in the liability limitation provision of Carriage of Goods by Sea Act.” Herein, considering the ruling in Eastern Shipping Lines and the fact that the Bill of Lading clearly disclosed the contents of the containers, the number of units, as well as the nature of the steel sheets, the 4 damaged coils should be considered as the shipping unit subject to the US$500 limitation. [37] Yobido vs. CA (GR 113003, 17 October 1997) Third Division, Romero (J): 4 concur Facts: On 26 April 1988, spouses Tito and Leny Tumboy and their minor children named Ardee and Jasmin, boarded at Mangagoy, Surigao del Sur, a Yobido Liner bus bound for Davao City. Along Picop Road in Km. 17, Sta. Maria, Agusan del Sur, the left front tire of the bus exploded. The bus fell into a ravine around 3 feet from the road and struck a tree. The incident resulted in the death of 28-year-old Tito Tumboy, and physical injuries to other passengers. On 21 November 1988, a complaint for breach of contract of carriage, damages and attorney’s fees was filed by Leny and her children against Alberta Yobido, the owner of the bus, and Cresencio Yobido, its driver, before the RTC of Davao City. When the Yobidos filed their answer to the complaint, they raised the affirmative defense of caso fortuito. They also filed a third-party complaint against Philippine Phoenix Surety Transportation Law, 2004 ( 96 )

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and Insurance, Inc. This third-party defendant filed an answer with compulsory counterclaim. At the pre-trial conference, the parties agreed to a stipulation of facts. Upon a finding that the third party defendant was not liable under the insurance contract, the lower court dismissed the third party complaint. No amicable settlement having been arrived at by the parties, trial on the merits ensued. On 29 August 1991, the lower court rendered a decision dismissing the action for lack of merit. Dissatisfied, the Tumboys appealed to the Court of Appeals. On 23 August 1993, the Court of Appeals rendered the Decision reversing that of the lower court, ordering the Yobidos to pay the Tumboys the sum of P50,000.00 for the death of Tito Tumboy, P30,000.00 in moral damages, and P7,000.00 for funeral and burial expenses. The Yobidos filed a motion for reconsideration of said decision which was denied on 4 November 1993 by the Court of Appeals. Hence, the petition for review on certiorari. The Supreme Court affirmed the Decision of the Court of Appeals subject to the modification that the Yobidos shall, in addition to the monetary awards therein, be liable for the award of exemplary damages in the amount of P20,000.00; with costs against the Yobidos. 1.

Ruling of the Court of Appeals; Explosion of the tire not in itself a fortuitous event The explosion of the tire is not in itself a fortuitous event. The cause of the blow-out, if due to a factory defect, improper mounting, excessive tire pressure, is not an unavoidable event. On the other hand, there may have been adverse conditions on the road that were unforeseeable and/or inevitable, which could make the blow-out a caso fortuito. The fact that the cause of the blow-out was not known does not relieve the carrier of liability. Owing to the statutory presumption of negligence against the carrier and its obligation to exercise the utmost diligence of very cautious persons to carry the passenger safely as far as human care and foresight can provide, it is the burden of the defendants to prove that the cause of the blow-out was a fortuitous event. It is not incumbent upon the plaintiff to prove that the cause of the blow-out is not caso fortuito. Proving that the tire that exploded is a new Goodyear tire is not sufficient to discharge defendants’ burden. As enunciated in Necesito vs. Paras, the passenger has neither choice nor control over the carrier in the selection and use of its equipment and the good repute of the manufacturer will not necessarily, relieve the carrier from liability. Moreover, there is evidence that the bus was moving fast, and the road was wet and rough. The driver could have explained that the blow out that precipitated the accident that caused the death of the passenger could not have been prevented even if he had exercised due care to avoid the same, but he was not presented as witness. 2.

Factual findings may not be reviewed on appeal by the Supreme Court; Exception The Court did re-examine the facts and evidence because of the inapplicability of the established principle that the factual findings of the Court of Appeals are final and may not be reviewed on appeal by the Supreme Court. This general principle is subject to exceptions such as that the lower court and the Court of Appeals arrived at diverse factual findings. Herein, however, upon such re-examination, the Court found no reason to overturn the findings and conclusions of the Court of Appeals. 3. Carrier not an insurer of safety of its passengers; However, when passenger injured or dies, common carrier presumed negligent As a rule, when a passenger boards a common carrier, he takes the risks incidental to the mode of travel he has taken. After all, a carrier is not an insurer of the safety of its passengers and is not bound absolutely and at all events to carry them safely and without injury. However, when a passenger is injured or dies, while traveling, the law presumes that the common carrier is negligent. 4.

Article 1755 NCC; Diligence required Article 1755 provides that “(a) common carrier is bound to carry the passengers safely as far as human care and foresight can provide, using the utmost diligence of very cautious persons, with a due regard for all the circumstances.” Transportation Law, 2004 ( 97 )

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5.

Article 1756 of the Civil Code; Presumption of negligence Article 1756 of the Civil Code provides that “In case of death or injuries to passengers, common carriers are presumed to have been at fault or to have acted negligently, unless they prove that they observed extraordinary diligence as prescribed in articles 1733 and 1755.” 6.

Culpa contractual; Disputable presumption of negligence, how to overcome In culpa contractual, once a passenger dies or is injured, the carrier is presumed to have been at fault or to have acted negligently. This disputable presumption may only be overcome by evidence that the carrier had observed extraordinary diligence as prescribed by Articles 1733, 1755 and 1756 of the Civil Code or that the death or injury of the passenger was due to a fortuitous event. Consequently, the court need not make an express finding of fault or negligence on the part of the carrier to hold it responsible for damages sought by the passenger. 7.

Characteristics of a fortuitous event A fortuitous event is possessed of the following characteristics: (a) the cause of the unforeseen and unexpected occurrence, or the failure of the debtor to comply with his obligations, must be independent of human will; (b) it must be impossible to foresee the event which constitutes the caso fortuito, or if it can be foreseen, it must be impossible to avoid; (c) the occurrence must be such as to render it impossible for the debtor to fulfill his obligation in a normal manner; and (d) the obligor must be free from any participation in the aggravation of the injury resulting to the creditor. 8.

Article 1174 NCC As Article 1174 provides, no person shall be responsible for a fortuitous event which could not be foreseen, or which, though foreseen, was inevitable. 9.

There must be an entire exclusion of human agency from the cause of injury or loss Herein, the explosion of the new tire may not be considered a fortuitous event. There are human factors involved in the situation. The fact that the tire was new did not imply that it was entirely free from manufacturing defects or that it was properly mounted on the vehicle. Neither may the fact that the tire bought and used in the vehicle is of a brand name noted for quality, resulting in the conclusion that it could not explode within 5 days’ use. Be that as it may, it is settled that an accident caused either by defects in the automobile or through the negligence of its driver is not a caso fortuito that would exempt the carrier from liability for damages. 10.

Common carrier not absolved by force majeure alone, should prove not negligent A common carrier may not be absolved from liability in case of force majeure or fortuitous event alone. The common carrier must still prove that it was not negligent in causing the death or injury resulting from an accident. 11. Contradictory facts as to bus’ speed resolved in favor of liability due to presumption of negligence of carrier The Yobidos proved through the bus conductor, Salce, that the bus was running at “60-50” kilometers per hour only or within the prescribed lawful speed limit. However, they failed to rebut the testimony of Leny Tumboy that the bus was running so fast that she cautioned the driver to slow down. These contradictory facts must, therefore, be resolved in favor of liability in view of the presumption of negligence of the carrier in the law. Coupled with this is the established condition of the road — rough, winding and wet due to the rain. It was incumbent upon the defense to establish that it took precautionary measures considering partially dangerous condition of the road. 12.

Routinary check-ups of vehicle’s parts part of exercise of extraordinary diligence of the carrier Transportation Law, 2004 ( 98 )

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Proof that the tire was new and of good quality is not sufficient proof that it was not negligent. The Yobidos should have shown that it undertook extraordinary diligence in the care of its carrier, such as conducting daily routinary check-ups of the vehicle’s parts. Although it may be impracticable, to require of carriers to test the strength of each and every part of its vehicles before each trip; due regard for the carrier’s obligations toward the traveling public demands adequate periodical tests to determine the condition and strength of those vehicle portions the failure of which may endanger the safety of the passengers. 13.

Failure of carrier to overthrow presumption of negligence makes it liable for damages Having failed to discharge its duty to overthrow the presumption of negligence with clear and convincing evidence, the Yobidos held liable for damages. 14.

Amount of damages for death of passenger Article 1764 in relation to Article 2206 of the Civil Code prescribes the amount of at least P3,000 as damages for the death of a passenger. Under prevailing jurisprudence, the award of damages under Article 2206 has been increased to P50,000.00. 15.

Moral damages Moral damages are generally not recoverable in culpa contractual except when bad faith had been proven. However, the same damages may be recovered when breach of contract of carriage results in the death of a passenger as in the present case. 16.

Exemplary damages Exemplary damages, awarded by way of example or correction for the public good when moral damages are awarded, may likewise be recovered in contractual obligations if the defendant acted in wanton, fraudulent, reckless, oppressive, or malevolent manner. Herein, because the Yobidos failed to exercise the extraordinary diligence required of a common carrier, which resulted in the death of Tito Tumboy, it is deemed to have acted recklessly. As such, the Tumboys shall be entitled to exemplary damages. [38] Tan Liam Grocery. vs. De La Rama Steamship [39] De Guzman vs. CA , see [14] [40] also [48] and [195] National Development Co. vs. CA (GR L-49407, 19 August 1988) Maritime Co. of the Philippines vs. CA (GR L-49469) Second Division, Paras (J): 3 concur Facts: In accordance with a memorandum agreement entered into between National Development Corporation (NDC) and Maritime Corporation of the Philippines Inc. (MCP) on 13 September 1962, NDC as the first preferred mortgagee of three ocean going vessels including one with the name ‘Doña Nati’ appointed MCP as its agent to manage and operate said vessel for and in its behalf and account. Thus, on 28 February 1964 the E. Philipp Corporation of New York loaded on board the vessel ‘Doña Nati’ at San Francisco, California, a total of 1,200 bales of American raw cotton consigned to the order of Manila Banking Corporation, Manila and the People’s Bank and Trust Company acting for and in behalf of the Pan Asiatic Commercial Company, Inc., who represents Riverside Mills Corporation. Also loaded on the same vessel at Tokyo, Japan, were the cargo of Kyokuto Boekui, Kaisa, Ltd., consigned to the order of Manila Banking Corporation consisting of 200 cartons of sodium lauryl sulfate and 10 cases of aluminum foil. En route to Manila the vessel Doña Nati figured in a collision at 6:04 a.m. on 15 April 1964 at Ise Bay, Japan with a Japanese vessel ‘SS Yasushima Maru’ as a result of which 550 bales of aforesaid cargo of American raw Transportation Law, 2004 ( 99 )

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cotton were lost and/or destroyed, of which 535 bales as damaged were landed and sold on the authority of the General Average Surveyor for Y6,045,500 and 15 bales were not landed and deemed lost. The damaged and lost cargoes was worth P344,977.86 which amount, the Development Insurance and Surety Corporation (DISC) as insurer, paid to the Riverside Mills Corporation as holder of the negotiable bills of lading duly endorsed. Also considered totally lost were the aforesaid shipment of Kyokuto, Boekui, Kaisa Ltd., consigned to the order of Manila Banking Corporation, Manila, acting for Guilcon, Manila. The total loss was P19,938.00 which DISC as insurer paid to Guilcon as holder of the duly endorsed bill of lading. Thus, DISC had paid as insurer the total amount of P364,915.86 to the consignees or their successors-in-interest, for the said lost or damaged cargoes. On 22 April 1965, DISC filed before the then Court of First Instance of Manila an action for the recovery of the sum of P364,915.86 plus attorney’s fees of P10,000.00 against NDC and MCP. On 12 November 1969, after DISC and MCP presented their respective evidence, the trial court rendered a decision ordering MCP and NDC to pay jointly and solidarily to DISC the sum of P364,915.86 plus the legal rate of interest to be computed from the filing of the complaint on 22 April 1965, until fully paid and attorney’s fees of P10,000.00. Likewise, in said decision, the trial court granted MCP’s cross-claim against NDC. MCP interposed its appeal on 20 December 1969, while NDC filed its appeal on 17 February 1970 after its motion to set aside the decision was denied by the trial court in its order dated 13 February 1970. On 17 November 1978, the Court of Appeals promulgated its decision affirming in toto the decision of the trial court. Hence, the appeals by certiorari. On 25 July 1979, the Supreme Court ordered the consolidation of the above cases. The Supreme Court denied the subject petitions for lack of merit, and affirmed the assailed decision of the Appellate Court. 1.

Law of country of destination governs liability of common carrier As held in Eastern Shipping Lines Inc. v. IAC (150 SCRA 469-470 [1987]) where it was held under similar circumstances that “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” (Article 1753, Civil Code). Thus, the rule was specifically laid down that for cargoes transported from Japan to the Philippines, the liability of the carrier is governed primarily by the Civil Code and 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 (Article 1766, Civil Code). Hence, the Carriage of Goods by Sea Act, a special law, is merely suppletory to the provisions of the Civil Code. 2.

Actual collision occurring in foreign waters immaterial Herein, it has been established that the goods in question are transported from San Francisco, California and Tokyo, Japan to the Philippines and that they were lost or damaged due to a collision which was found to have been caused by the negligence or fault of both captains of the colliding vessels. Under the above ruling, it is evident that the laws of the Philippines will apply, and it is immaterial that the collision actually occurred in foreign waters, such as Ise Bay, Japan. 3.

Extraordinary diligence required of common carriers; Negligence presumed Under Article 1733 of 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 the goods and for the safety of the passengers transported by them according to all circumstances of each case. Accordingly, under Article 1735 of the same Code, in all cases other than those mentioned is Article 1734 thereof, 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.

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4. Collision does not fall under matters regulated by Civil Code; Application of Article 826 to 839 of the Code of Commerce proper The collision, however, falls among matters not specifically regulated by the Civil Code, so that no reversible error can be found in the lower court’s application to the present case of Articles 826 to 839, Book Three of the Code of Commerce, which deal exclusively with collision of vessels. 5. Articles 826 and 827 of the Code of Commerce; Liability of owner either when imputable to the personnel of the vessel or imputable to both vessels Article 826 of the Code of Commerce provides that where collision is imputable to the personnel of a vessel, the owner of the vessel at fault, shall indemnify the losses and damages incurred after an expert appraisal. But more in point to the instant case is Article 827 of the same Code, which provides that if the collision is imputable to both vessels, each one shall suffer its own damages and both shall be solidarily responsible for the losses and damages suffered by their cargoes. 6.

Primary liability of shipowner on occasion of collision due to fault of captain Under the provisions of the Code of Commerce, particularly Articles 826 to 839, the shipowner or carrier, is not exempt from liability for damages arising from collision due to the fault or negligence of the captain. Primary liability is imposed on the shipowner or carrier in recognition of the universally accepted doctrine that the shipmaster or captain is merely the representative of the owner who has the actual or constructive control over the conduct of the voyage (Yeung Sheng Exchange and Trading Co. v. Urrutia & Co., 12 Phil. 751 [1909]). 7. Code of Commerce applies both to domestic and foreign trade; COGSA does not repeal nor limit Code of Commerce’s application The Code of Commerce applies not only to domestic trade but also foreign trade. Aside from the fact that the Carriage of Goods by Sea Act (Commonwealth Act 65) does not specifically provide for the subject of collision, said Act in no uncertain terms, restricts its application “to all contracts for the carriage of goods by sea to and from Philippine ports in foreign trade.” Under Section 1 thereof, it is explicitly provided that “nothing in this Act shall be construed as repealing any existing provision of the Code of Commerce which is now in force, or as limiting its application.” By such incorporation, it is obvious that said law not only recognizes the existence of the Code of Commerce, but more importantly does not repeal nor limit its application. 8.

DISC a subrogee, has a right of action against MCP Herein, Riverside Mills Corporation and Guilcon, Manila are the holders of the duly endorsed bills of lading covering the shipments in question and an examination of the invoices in particular, shows that the actual consignees of the said goods are the aforementioned companies. Moreover, no less than MCP itself issued a certification attesting to this fact. Accordingly, as it is undisputed that the insurer, DISC paid the total amount of P364,915.86 to said consignees for the loss or damage of the insured cargo, it is evident that DISC has a cause of action to recover (what it has paid) from MCP. 9.

MCP an agent; Agency broad enough to include shipagent in maritime law The Memorandum Agreement of 13 September 1962 shows that NDC appointed MCP as Agent, a term broad enough to include the concept of Ship-agent in Maritime Law. In fact, MCP was even conferred all the powers of the owner of the vessel, including the power to contract in the name of the NDC. Consequently, under the circumstances, MCP cannot escape liability. 10.

Owner and agent of offending vessel liable when both are impleaded It is well settled that both the owner and agent of the offending vessel are liable for the damage done where both are impleaded (Philippine Shipping Co. v. Garcia Vergara, 96 Phil. 281 [1906]); that in case of collision, both the owner and the agent are civilly responsible for the acts of the captain (Yueng Sheng Transportation Law, 2004 ( 101 )

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Exchange and Trading Co. v. Urrutia & Co., supra citing Article 586 of the Code of Commerce; Standard Oil Co. of New York v. Lopez Castelo, 42 Phil. 256, 262 [1921]); that while it is true that the liability of the naviero in the sense of charterer or agent, is not expressly provided in Article 826 of the Code of Commerce, it is clearly deducible from the general doctrine of jurisprudence under the Civil Code but more specially as regards contractual obligations in Article 586 of the Code of Commerce. Moreover, the Court held that both the owner and agent (Naviero) should be declared jointly and severally liable, since the obligation which is the subject of the action had its origin in a tortious act and did not arise from contract (Verzosa and Ruiz, Rementeria y Cia v. Lim, 45 Phil. 423 [1923]). Consequently, the agent, even though he may not be the owner of the vessel, is liable to the shippers and owners of the cargo transported by it, for losses and damages occasioned to such cargo, without prejudice, however, to his rights against the owner of the ship, to the extent of the value of the vessel, its equipment, and the freight (Behn, Meyer Y Co. v. McMicking et al. 11 Phil. 276 [1908]). 11. Value of goods declared in bills of lading, liability of MCP not limited to P200 per package or per bale of raw cotton as stated in paragraph 17 of bill of lading The declared value of the goods was stated in the bills of lading and corroborated no less by invoices offered as evidence during the trial. Besides, common carriers, in the language of the court in Juan Ysmael & Co., Inc. v. Barretto et al., (51 Phil. 90 [1927]) “cannot limit its liability for injury to a less of goods where such injury or loss was caused by its own negligence.” Negligence of the captains of the colliding vessel being the cause of the collision, and the cargoes not being jettisoned to save some of the cargoes and the vessel, the trial court and the Court of Appeals acted correctly in not applying the law on averages (Articles 806 to 818, Code of Commerce). 12.

Action not prescribed; Section 3 (6) The bills of lading issued allow trans-shipment of the cargo, which simply means that the date of arrival of the ship Doña Nati on 18 April 1964 was merely tentative to give allowances for such contingencies that said vessel might not arrive on schedule at Manila and therefore, would necessitate the trans-shipment of cargo, resulting in consequent delay of their arrival. In fact, because of the collision, the cargo which was supposed to arrive in Manila on 18 April 1964 arrived only on June 12, 13, 18, 20 and July 10, 13 and 15, 1964. Hence, had the cargoes in question been saved, they could have arrived in Manila on the said dates. Accordingly, the complaint was filed on 22 April 1965, i.e. long before the lapse of 1 year from the date the lost or damaged cargo “should have been delivered” in the light of Section 3, sub-paragraph (6) of COGSA. [41], also [58] Ganzon vs. CA (GR L-48757, 30 Mary 1988) Second Division, Sarmiento (J): 3 concur Facts: On 28 November 1956, Gelacio Tumambing contracted the services of Mauro B. Ganzon to haul 305 tons of scrap iron from Mariveles, Bataan, to the port of Manila on board the lighter LCT “Batman.” Pursuant to this agreement, Mauro B. Ganzon sent his lighter “Batman” to Mariveles where it docked in 3 feet of water. On 1 December 1956, Gelacio Tumambing delivered the scrap iron to Filomeno Niza, captain of the lighter, for loading which was actually begun on the same date by the crew of the lighter under the captain’s supervision. When about half of the scrap iron was already loaded, Mayor Jose Advincula of Mariveles, Bataan, arrived and demanded P5,000.00 from Gelacio Tumambing. The latter resisted the shakedown and after a heated argument between them, Mayor Jose Advincula drew his gun and fired at Gelacio Tumambing. The gunshot was not fatal but Tumambing had to be taken to a hospital in Balanga, Bataan, for treatment. After sometime, the loading of the scrap iron was resumed. But on 4 December 1956, Acting Mayor Basilio Rub, accompanied by 3 policemen, ordered captain Filomeno Niza and his crew to dump the scrap iron where the lighter was docked. The rest was brought to the compound of NASSCO. Later on Acting Mayor Rub issued a receipt stating that the Municipality of Mariveles had taken custody of the scrap iron. Transportation Law, 2004 ( 102 )

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Tumambing instituted in the CFI of Manila an action against Ganzon for damages based on culpa contractual. The trial court rendered a decision absolving Ganzon from liability. On appeal, however, the appellate court reversed and set aside the decision appealed from, and entered a new one ordering Ganzon to pay Tumambing the sum of P5,895.00 as actual damages, the sum of P5,000.00 as exemplary damages, and the amount of P2,000.00 as attorney’s fees; with costs against Ganzon. Hence, the petition for review on certiorari. The Supreme Court denied the petition, and affirmed the assailed decision of the Court of Appeals; with costs against Ganzon; the decision being immediately executory. 1. By delivery, the scraps are placed in the possession of the common carrier; Contract of carriage perfected; Duties of the carrier By the act of delivery, the scraps were unconditionally placed in the possession and control of the common carrier, and upon their receipt by the carrier for transportation, the contract of carriage was deemed perfected. Consequently, the carrier’s extraordinary responsibility for the loss, destruction, or determination of the goods commenced. Pursuant to Article 1736, such extraordinary responsibility would cease only upon the delivery, actual or constructive, by the carrier to the consignee, or to the person who has a right to receive them. The fact that part of the shipment had not been loaded on board the lighter did not impair the said contract of transportation as the goods remained in the custody and control of the carrier, albeit still unloaded. 2.

Loss not due to any cause enumerated in Article 1734 of the Civil Code Herein, Ganzon has failed to show that the loss of the scraps was due to any of the following causes enumerated in Article 1734 of the Civil Code, namely: (1) Flood, storm, earthquake, lightning, or other natural disaster or calamity; (2) Act of the public enemy in war, whether international or civil; (3) Act or omission of the shipper or owner of the goods; (4) The character of the goods or defects in the packing or in the containers; and (5) Order or act of competent public authority. 3.

Negligence presumed; Burden of proof to prove otherwise Herein, Ganzon is presumed to have been at fault or to have acted negligently. By reason of this presumption, the court is not even required to make an express finding of fault or negligence before it could hold Ganzon answerable for the breach of the contract of carriage. Still, Ganzon could have been exempted from any liability had he been able to prove that he observed extraordinary diligence in the vigilance over the goods in his custody, according to all the circumstances of the case, or that the loss was due to an unforeseen event or to force majeure. As it was, there was hardly any attempt on the part of Ganzon to prove that he exercised such extraordinary diligence. 4. Order by competent authority must be valid, to allow carrier’s absolution from liability as per caso fortuito Before Ganzon could be absolved from responsibility on the ground that he was ordered by competent public authority to unload the scrap iron, it must be shown that Acting Mayor Basilio Rub had the power to issue the disputed order, or that it was lawful, or that it was issued under legal process of authority. The appellee failed to establish this. Indeed, no authority or power of the acting mayor to issue such an order was given in evidence. Neither has it been shown that the cargo of scrap iron belonged to the Municipality of Mariveles. What we have in the record is the stipulation of the parties that the cargo of scrap iron was accumulated by the appellant through separate purchases here and there from private individuals. The fact remains that the order given by the acting mayor to dump the scrap iron into the sea was part of the pressure applied by Mayor Jose Advincula to shakedown Tumambing for P5,000.00. The order of the acting mayor did not constitute valid authority for Ganzon and his representatives to carry out. 5. The intervention of the municipal officials was not of a character that would render impossible the fulfillment by the carrier of its obligation Transportation Law, 2004 ( 103 )

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The intervention of the municipal officials was not of a character that would render impossible the fulfillment by the carrier of its obligation. Herein, Ganzon was not duty bound to obey the illegal order to dump into the sea the scrap iron. Moreover, there is absence of sufficient proof that the issuance of the same order was attended with such force or intimidation as to completely overpower the will of the petitioner’s employees. The mere difficulty in the fulfillment of the obligation is not considered force majeure. The scraps could have been properly unloaded at the shore or at the NASSCO compound, so that after the dispute with the local officials concerned was settled, the scraps could then be delivered in accordance with the contract of carriage. 6. No incompatibility between Civil Code provisions on common carriers and Articles 361 and 362 of the Code of Commerce; Article 1733 NCC modified Article 352 as to degree of diligence required of carrier There is no incompatibility between the Civil Code provisions on common carriers and Articles 361 and 362 of the Code of Commerce which were the basis for the Court’s ruling in Government of the Philippine Islands vs. Ynchausti & Co. and which Ganzon invokes in the petition. For Article 1735 of the Civil Code, conversely stated, means that the shipper will suffer the losses and deterioration arising from the causes enumerated in Article 1734; and in these instances, the burden of proving that damages were caused by the fault or negligence of the carrier rests upon him. However, the carrier must first establish that the loss or deterioration was occasioned by one of the excepted causes or was due to an unforeseen event or to force majeure. Be that as it may, insofar as Article 362 appears to require of the carrier only ordinary diligence, the same is deemed to have been modified by Article 1733 of the Civil Code. 7.

Findings on actual and exemplary damages not disturbed Finding the award of actual and exemplary damages to be proper, the same will not be disturbed by the Supreme Court. Besides, these were not sufficiently controverted by Ganzon. [42] Mirasol vs. Robert Dollar Co. (GR 29721, 27 March 1929) Second Division, Johns (J): 5 concur Facts: Amando Mirasol alleged that he is the owner and consignee of two cases of books shipped in good order and condition at New York, USA, on board Robert Dollar Co.’s steamship President Garfield, for transport and delivery to Mirasol in the City of Manila, all freight charges paid; that the two cases arrived in Manila on 1 September 1927, in bad order and damaged condition, resulting in the total loss of one case and a partial loss of the other; that the loss in one case is P1,630, and the other P700, for which he filed his claims, and Robert Dollar has refused and neglected to pay, giving as its reason that the damage in question “was caused by sea water”; that Mirasol never entered into any contract with the Robert Dollar limiting the latter’s liability as a common carrier, and when he wrote the letter of 3 September 1927, he had not then ascertained the contents of the damaged case, and could not determine their value; that he never intended to ratify or confirm any agreement to limit the liability of the defendant; and that on 9 September 1927, when the other case was found, Mirasol filed a claim for the real damage of the books therein named in the sum of $375. Mirasol prayed for corresponding judgment, with legal interest from the filing of the complaint and costs. For answer, Robert Dollar made a general and specific denial, and as a separate and special defense alleged that the steamship President Garfield at all the times alleged was in all respects seaworthy and properly manned, equipped and supplied, and fit for the voyage; that the damage to Robert Dollar’s merchandise, if any, was not caused through the negligence of the vessel, its master, agent, officers, crew, tackle or appurtenances, nor by reason of the vessel being unseaworthy or improperly manned, “but that such damage, if any, resulted from faults or errors in navigation or in the management of said vessel.” As a second separate and special defense, Robert Dollar alleged that in the bill of lading, it was agreed in writing that Robert Dollar Transportation Law, 2004 ( 104 )

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should not be “held liable for any loss of, or damage to, any of said merchandise resulting from any of the following causes, to wit: Acts of God, perils of the sea or other waters,” and that Mirasol’s damage, if any, was caused by “Acts of God” or “perils of the sea.” As a third special defense, Robert Dollar quoted clause 13 of the bill of lading, in which it is stated that in no case shall it be held liable “for or in respect to said merchandise or property beyond the sum of 250 dollars for any piece package or any article not enclosed in a package, unless a higher value is stated herein and ad valorem freight paid or assessed thereon,” and that there was no other agreement; that on 3 September 1927 Mirasol wrote Robert Dollar a letter which reads “Therefore, I wish to file claim of damage to the meager maximum value that your bills of lading will indemnify me, that is $250 as per condition 13.” As a fourth special defense, Robert Dollar alleged that the damage, if any, was caused by “sea water,” and that the bill of lading exempts defendant from liability for that cause. That damage by “sea water” is a shipper’s risk, and that Robert Dollar is not liable. As a result of the trial upon such issues, the lower court rendered judgment for Mirasol for P2,080, with legal interest thereon from the date of the final judgment, with costs. Both parties appealed. The Supreme Court modified the judgment of the lower court, so as to give Mirasol legal interest on the amount of his judgment from the date of its rendition in the lower court, and in all other respects affirmed, with costs. 1.

Mirasol entitled to P400, not P700, for his Encyclopedia Britannica The evidence shows that with the P400 (not P700 as claimed) which the court allowed, Mirasol could buy a new set of Encyclopedia Britannica which would contain all of the material and subject matter of the one which he lost. 2.

Mirasol entitled to legal interest from date of judgment rendered by lower court Under all of the authorities, Mirasol is entitled to legal interest from the date of his judgment rendered in the lower court and not the date when it becomes final. 3.

Worth of damage sustained by evidence; Manner of proving proper The lower court found that Mirasol’s damage was P2,080, and that finding is sustained by the evidence. There was a total loss of one case and a partial loss of the other, and in the very nature of things, Mirasol could not prove his loss in any other way or manner than he did prove it, and the trial court who heard him testify must have been convinced of the truth of his testimony. 4.

Mirasol not legally bound by clause limiting the carrier’s liability There is no claim or pretense that Mirasol signed the bill of lading or that he knew of its contents at the time it was issued. In that situation he was not legally bound by the clause which purports to limit Robert Dollar’s liability. That question was squarely met and decided by the Supreme Court in banc in Juan Ysmael & Co., vs. Gabino Barretto & Co. (51 Phil., 90; see numerous authorities there cited). 5. Restriction of liability of steamship company against own negligence against public policy; Case of The Kesington applies Restrictions of the liability of a steamship company for its own negligence or failure of duty toward a passenger, being against the public policy enforced by the courts of the United States, will not be upheld, though the ticket was issued and accepted in a foreign country and contained a condition making it subject to the law thereof, which sustain such stipulations. A stipulation in a steamship passenger’s ticket, which compels him to value his baggage, at a certain sum, far less than it is worth, or, in order to have a higher value put upon it, to subject it to the provisions of the Harter Act, by which the carrier would be exempted from all liability therefor from errors in navigation or management of the vessel or other negligence, is unreasonable and in conflict with public policy. An arbitrary limitation of 250 francs for the baggage of any steamship passenger, unaccompanied by any right to increase the amount by adequate and reasonable proportional payment, is void as against public policy. Transportation Law, 2004 ( 105 )

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6. Goods, when delivered to carrier, are under its control and supervision; Burden of proof against damages shifts to carrier Shippers who are forced to ship goods on an ocean liner or any other ship have some legal rights, and when goods are delivered on board ship in good order and condition, and the shipowner delivers them to the shipper in bad order and condition, it then devolves upon the shipowner to both allege and prove that the goods were damaged by reason of some fact which legally exempts him from liability; otherwise, the shipper would be left without any redress, no matter what may have caused the damage. Herein, Robert Dollar having received the two boxes in good condition, its legal duty was to deliver them to Mirasol in the same condition in which it received them. From the time of their delivery to Robert Dollar in New York until they were delivered to Mirasol in Manila, the boxes were under the control and supervision of Robert Dollar and beyond the control of Mirasol. Robert Dollar having admitted that the boxes were damaged while in transit and in its possession, the burden of proof then shifted, and it devolved upon Robert Dollar to both allege and prove that the damage was caused by reason of some fact which exempted it from liability. As to how the boxes were damaged, when or where, was a matter peculiarly and exclusively within the knowledge of Robert Dollar, and in the very nature of things could not be in the knowledge of Mirasol. To require Mirasol to prove as to when and how the damage was caused would force him to call and rely upon the employees of Robert Dollar’s ship, which in legal effect would be to say that he could not recover any damage for any reason. That is not the law. 7.

Article 361 of the Code of Commerce Merchandise shall be transported at the risk and venture of the shipper, if the contrary was not expressly stipulated. Therefore, all damages and impairment suffered by the goods during the transportation, by reason of accident, force majeure, or by virtue of the nature or defect of the articles, shall be for the account and risk of the shipper. The proof of these accidents is incumbent on the carrier.” 8.

Damage by “sea water” not evidence that goods damaged by force majeure; Perils of sea The fact that the cases were damaged by “sea water,” standing alone and within itself, is not evidence that they were damaged by force majeure or for a cause beyond the carrier’s control. The words “perils of the sea” apply to “all kinds of marine casualties, such as shipwreck, foundering, stranding,” and among other things, it is said: “Tempest rocks, shoals, icebergs and other obstacles are within the expression,” and “where the peril is the proximate cause of the loss, the shipowner is excused.” “Something fortuitous and out of the ordinary course is involved in both words ‘peril’ or ‘accident.’” 9.

Government vs. Ynchausti not in point The case of Government of the Philippine Islands vs. Ynchausti & Company (40 Phil., 219) and the present case are very different and, hence, it is not in point. In the present case, there is no claim or pretense that the two cases were not in good order when received on board the ship, and it is admitted that they were in bad order on their arrival at Manila. Hence, they must have been damaged in transit. In the very nature of things, if they were damaged by reason of a tempest, rocks, icebergs, foundering, stranding or the perils of the sea, that would be a matter exclusively within the knowledge of the officers of Robert Dollar’s ship, and in the very nature of things would not be within Mirasol’s knowledge, and upon all of such questions, there is a failure of proof. [43] Eastern Shipping Lines vs. IAC (GR L-69044, 29 May 1987) Eastern Shipping Lines vs. Nisshin Fire and Marine Insurance Co. (GR L-71478) First Division, Melencio-Herrera (J): 4 concur Facts: In GR 69044, sometime in or prior to June 1977, the M/S ASIATICA, a vessel operated by Eastern Shipping Lines loaded at Kobe, Japan for transportation to Manila, 5,000 pieces of calorized lance pipes in 28 Transportation Law, 2004 ( 106 )

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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 Development Insurance and Surety Corporation. In GR 71478, during the same period, the same vessel took on board 128 cartons of garment fabrics and accessories, in 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 Nisshin Fire & Marine Insurance Co., for US$46,583.00, and the 2 cases by 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 Insurers paid the corresponding marine insurance values to the consignees concerned and were thus subrogated unto the rights of the latter as the insured. [GR 69044] On 11 May 1978, Development Insurance, having been subrogated unto the rights of the two insured companies, filed suit against Eastern Shipping 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 116087). Eastern Shipping 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 31 August 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. Eastern Shipping took an appeal to the then Court of Appeals which, on 14 August 1984, affirmed the decision of the trial court. Eastern Shipping filed a petition for review on certiorari. [GR 71478] On 16 June 1978, Nisshin, and Dowa, as subrogees of the insured, filed suit against Eastern Shipping for the recovery of the insured value of the cargo lost with the then Court of First Instance of Manila (Branch II, Civil Case 116151), imputing unseaworthiness of the ship and non-observance of extraordinary diligence by Eastern Shipping. Eastern Shipping 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 15 September 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 Eastern Shipping, the then Court of Appeals on 10 September 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, the petition for review on certiorari by Eastern Shipping. Both Petitions were initially denied for lack of merit. GR 69044 on 16 January 1985 by the First Division, and GR 71478 on 25 September 1985 by the Second Division. Upon Eastern Shipping’s Motion for Reconsideration, however, GR 69044 was given due course on 25 March 1985, and the parties were required to submit their respective Memoranda, which they have done. On the other hand, in GR 71478, Eastern Shipping sought reconsideration of the Resolution denying the Petition for Review and moved for its consolidation with GR 69044, which was then pending resolution with the First Division. The same was granted; the Resolution of the Second Division of 25 September 1985 was set aside and the Petition was given due course. The Supreme Court modified the judgment in GR 69044, in that Eastern Shipping shall pay the Development Insurance the amount of P256,039 for the 28 packages of calorized lance pipes, and P71,540 for the 7 cases of spare parts, with interest at the legal rate from the date of the filing of the Complaint on 13 June 1978, plus P5,000 as attorney’s fees, and the costs. The Court, on the other hand, in GR 71478, affirmed the judgment. 1.

Admission of Eastern Shipping as operator of vessel As a general rule, the facts alleged in a party’s pleading are deemed admissions of that party and binding upon it. 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 Transportation Law, 2004 ( 107 )

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the latter action. Herein, although Eastern Shipping claimed that it is not the operator of the M/S Asiatica but merely a charterer thereof, it, in fact, stated in its petition in GR 69044 that “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.” Eastern Shipping should thus be held bound to said admission. 2.

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. Herein, as the cargoes in question were transported from Japan to the Philippines, the liability of Eastern Shipping is governed primarily by the Civil Code. 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. Thus, the Carriage of Goods by Sea Act, a special law, is suppletory to the provisions of the Civil Code. 3.

Common carriers liable for loss; Natural disaster or calamity an exception 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. 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; xxx” 4.

Fire not a natural disaster or calamity Easter Shipping claims that the loss of the vessel by fire exempts it from liability under the phrase “natural disaster or calamity.” However, fire may not be considered a natural disaster or calamity, 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 lightning or by other natural disaster or calamity. It may even be caused by the actual fault or privity of the carrier. 5.

Construction of Article 1680 as to fire as an extraordinary fortuitous event 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 protective policy towards agriculture. 6. Fire not comprehended within exceptions in Article 1734; Carrier presumed at fault unless it proves otherwise As the peril of fire is not comprehended within the exceptions in Article 1734, 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. Herein, the respective Insurers, as subrogees of the cargo shippers, have proven that the transported goods have been lost. Eastern Shipping has also proven that the loss was caused by fire. The burden then is upon Eastern Shipping to prove that it has exercised the extraordinary diligence required by law. Having failed to discharge the burden of proving that it had exercised the extraordinary diligence required by law, Eastern Shipping cannot escape liability for the loss of the cargo. 7. Natural disaster must be proximate and only cause of the loss, and that carrier has exercised due diligence to prevent or minimize loss 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.” Herein, Eastern Shipping has also failed to establish satisfactorily. Transportation Law, 2004 ( 108 )

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8. Section 4 (2) of COGSA; Relief in COGSA unavailing as Eastern shipping actually at fault due to lack of diligence Section 4(2) of COGSA provides that “Neither the carrier nor the ship shall be responsible for loss or damage arising or resulting from. xxx (b) Fire, unless caused by the actual fault or privity of the carrier. xxx” Herein, 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 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 Eastern Shipping or its servants were negligent in connection therewith. Consequently, the complete defense afforded by the COGSA when loss results from fire is unavailing to Eastern Shipping. 9.

Section 4(5) of COGSA Section 4(5) of the COGSA, 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” 10.

Article 1749 NCC Article 1749 of the New Civil Code also allows the limitations of liability in this wise, “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.” 11. Code

Civil Code does not limit liability of common carrier; COGSA suppletory to provisions of Civil

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. 12.

Eastern Shipping’s liability should not exceed US$500 per package In GR 69044, there is no stipulation in the respective Bills of Lading 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, Eastern Shipping’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.” 13.

Actual liability of Eastern Shipping in GR 69044 In GR 69044, (1) the actual total loss for the 5,000 pieces of calorized lance pipes was P256,039, which was exactly the amount of the insurance coverage by Development Insurance, and the amount affirmed to be paid by the Court. The goods were shipped in 28 packages. 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 Transportation Law, 2004 ( 109 )

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“more than the amount of damage actually sustained.” Consequently, the amount of P256,039 should be upheld. (2) With respect to the 7 cases of spare parts, their actual value was P92,361.75, which is likewise the insured value of the cargo and which amount was affirmed to be paid by the Court. However, multiplying 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 Eastern Shipping for those spare parts, and not P92,361.75. 14.

Actual liability of Eastern Shipping in GR 71478 In GR 71478, in so far as the 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 2 containers and insured with Nisshin, the Appellate Court also limited Eastern Shipping’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. The 128 cartons and not the 2 containers should be considered as the shipping unit. 15.

Mitsui vs. American Export Lines In Mitsui & Co., Ltd. vs. American Export Lines, Inc. 636 F 2d 807 (1981), the consignees of tin ingots and the shipper of floor covering brought action against the vessel owner and operator to recover for loss of ingots and floor covering, which had been shipped in vessel-supplied containers. The U.S. District Court for the Southern District of New York rendered judgment for the plaintiffs, and the defendant appealed. The United States Court of Appeals, Second Division, modified and affirmed holding that: “When what would ordinarily be considered packages are shipped in a container supplied by the carrier and the number of such units is disclosed in the shipping documents, each of those units and not the container constitutes the ‘package’ referred to in liability limitation provision of Carriage of Goods by Sea Act. [Carriage of Goods by Sea Act, 4(5), 46 U.S.C.A. 1304(5)]. Even if language and purposes of Carriage of Goods by Sea Act left doubt as to whether carrier-furnished containers whose contents are disclosed should be treated as packages, the interest in securing international uniformity would suggest that they should not be so treated. [Carriage of Goods by Sea Act, 4(5), 46 U.S.C.A. 1304(5)]. After quoting the statement in Leather’s Best, supra, 451 F 2d at 815, that treating a container as a package is inconsistent with the congressional purpose of establishing a reasonable minimum level of liability [Judge Beeks wrote, 414 F. Supp. at 907]. 16. Courts to construe and apply statute as enacted; Congress alone must be the one to modernize or reconstitute it The approach gives needed recognition to the responsibility of the courts to construe and apply the statute as enacted, however great might be the temptation to ‘modernize’ or reconstitute it by artful judicial gloss. If COGSA’s package limitation scheme suffers from internal illness, Congress alone must undertake the surgery. There is, in this regard, obvious wisdom in the Ninth Circuit’s conclusion in Hartford that technological advancements, whether or not forseeable by the COGSA promulgators, do not warrant a distortion or artificial construction of the statutory term ‘package.’ A ruling that these large reusable metal pieces of transport equipment qualify as COGSA packages — at least where they were carrier-owned and supplied — would amount to just such a distortion. 17.

Individual crates or cartons considered packages although in a carrier’s containers If the individual crates or cartons prepared by the shipper and containing his goods can rightly be considered ‘packages’ standing by themselves, they do not suddenly lose that character upon being showed in a carrier’s container. These containers are likened to detachable stowage compartments of the ship. They simply serve to divide the ship’s overall cargo stowage space into smaller, more serviceable loci. Shippers’

Transportation Law, 2004 ( 110 )

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packages are quite literally ‘stowed’ in the containers utilizing stevedoring practices and materials analogous to those employed in traditional on board stowage. 18.

Yeramex Internation vs. SS Tando (US) In Yeramex International v. S.S. Tando, 1977 A.M.C. 1807 (E.D. Va.), rev’d on other grounds, 595 F 2d 943 (4 Cir. 1979), another district with many maritime cases followed Judge Beeks’ reasoning in Matsushita and similarly rejected the functional economics test. Judge Kellam held that when rolls of polyester goods are packed into cardboard cartons which are then placed in containers, the cartons and not the containers are the packages. 19.

Smithgreyhound vs. M/V Eurygenes (US) The case of Smithgreyhound v. M/V Eurygenes followed the Mitsui test, holding therein “Eurygenes concerned a shipment of stereo equipment packaged by the shipper into cartons which were then placed by the shipper into a carrier-furnished container. The number of cartons was disclosed to the carrier in the bill of lading. Eurygenes followed the Mitsui test and treated the cartons, not the container, as the COGSA packages. However, Eurygenes indicated that a carrier could limit its liability to $500 per container if the bill of lading failed to disclose the number of cartons or units within the container, or if the parties indicated, in clear and unambiguous language, an agreement to treat the container as the package.” 20.

Bill of lading disclosed contents of containers; Mitsui and Eurygenes cases applied Considering that the Bill of Lading clearly disclosed the contents of the containers, the number of cartons or units, as well as the nature of the goods, and applying the ruling in the Mitsui and Eurygenes cases it is clear that the 128 cartons, not the 2 containers should be considered as the shipping unit subject to the $500 limitation of liability. 21. “Say: Two (2) Containers Only” construed; Obscure words or stipulations in contract construed against party who caused obscurity, especially in a contract of adhesion In light of the stipulation in fine print in the dorsal side of the Bill of lading (“[Use of Container] Where the goods receipt of which is acknowledged on the face of this Bill of Lading are not already packed into container[s] at the time of receipt, the Carrier shall be at liberty to pack and carry them in any type of container[s]”), the use of the estimate “Say: Two (2) Containers Only” in the Bill of Lading, means that the goods could probably fit in 2 containers only. It cannot mean that the shipper had furnished the containers for if so, “Two (2) Containers” appearing as the first entry would have sufficed and if there is any ambiguity in the Bill of Lading, it is a cardinal principle in the construction of contracts that the interpretation of obscure words or stipulations in a contract shall not favor the party who caused the obscurity. This applies with even greater force in a contract of adhesion where a contract is already prepared and the other party merely adheres to it, like the Bill of Lading, which is drawn up by the carrier. 22. No Denial of Opportunity to Present Deposition of Its Witnesses (in GR 69044 only); What due process abhors Herein, Eastern Shipping was given full opportunity to present its evidence but it failed to do so. Since after 6 November 1978, to 27 August 1979, not to mention the time from 27 June 1978, when its answer was prepared and filed in Court, until 26 September 1978, when the pre-trial conference was conducted for the last time, Eastern Shipping had more than 9 months to prepare its evidence. Its belated notice to take deposition on written interrogatories of its witnesses in Japan, served upon Development Insurance on August 25th, just two days before the hearing set for August 27th, knowing fully well that it was its undertaking on July 11th that the deposition of the witnesses would be dispensed with if by next time it had not yet been obtained, only proves the lack of merit of Eastern Shipping’s motion for postponement, for which reason it deserves no sympathy from the Court in that regard. Eastern Shipping has told the Court since 16 February 1979, that it was going to take the deposition of its witnesses in Japan. Why did it take until 25 August 1979, or more than 6 months, to prepare its written interrogatories. Only Eastern Shipping itself is to Transportation Law, 2004 ( 111 )

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blame for its failure to adduce evidence in support of its defenses. Thus, Eastern Shipping was afforded ample time to present its side of the case. It cannot complain now that it was denied due process when the Trial Court rendered its Decision on the basis of the evidence adduced. What due process abhors is absolute lack of opportunity to be heard. 23.

Award of Attorney’s Fees 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 GR 69044. The award of P5,000.00 in GR 71478 was affirmed. [44] Kui Pai & Co. vs. Dollar Steamship Line (GR 30019, 2 March 1929) En Banc, Johns (J): 7 concur Facts: Kui Pai & Co. (a limited mercantile partnership) alleged that about 12 April 1927, Mee Hing Chan of Hongkong shipped and delivered to Dollar Steamship (a foreign corporation licensed to do business in the Philippine Islands and engaged in the operation of ocean ships) in Hongkong on board its ship President Taft, goods, wares and merchandise in good order and condition, consigned to Kui Pai; that Dollar Steamshop received and accepted said merchandise, for which it issued the corresponding bill of lading, and agreed to deliver it Kui Pai in Manila. Dollar Steamship failed and neglected to deliver 2 cases of the goods; that Kui Pai has paid all freight charges to Dollar Steamship; that it has repeatedly demanded the delivery of the merchandise, and that it has never been delivered; that as shown by the records of the Manila Terminal Company of Manila, the two packages or cases lost or missing were never landed in Manila from the President Taft; that through such loss and failure to deliver, Kui Pai has been damaged in the sum of P11,734.15, which is the net invoice value of the goods, plus freight and profit, for which demand has been made and payment refused. Kui Pai prays for a corresponding judgment, with interest from April 14,1927, and costs. For answer, Dollar Steamship made a general and specific denial, and as a first special defense alleges that about 14 April 1927, in the City of Manila, Dollar Steamship tendered to Kui Pai “the six identical cases shipped by Mee Hing Chan and covered by the Bill of Lading,” but that Kui Pai accepted and took delivery of only 4, and refused and refuses to accept delivery of the other 2, and in its fourth special defense alleges that at Hongkong on 12 April 1927, when the cases were brought aboard the President Taft, they were measured by the Official Measure’s Office at Hongkong, which certified that the 3 packages contained 68 cubic feet, and that the weight of the 3 packages was 996 pounds only, and that the measurements of the two cases of piece goods described in the certificate, 3/6 by 3/5 by 2/3, specifically refer to the identical two cases now claimed by Kui Pai. Dollar Steamship pleads 11 separate defenses, the substance of which is that it tendered to Kui Pai the identical 6 cases which were placed on board Dollar Steamship’s ship at Hongkong. As a result of the trial upon such issues, the lower court rendered judgment for Dollar Steamship, from which Kui Pai appealed. The Supreme Court affirmed the judgment of the lower court, with costs. 1.

When liability of a carrier begins The liability of the carrier shall begin from the moment he receives the merchandise, in person or through a person entrusted thereto in the place indicated for their reception. (Art. 355, Code of Commerce.) 2.

Liability (responsibility) of a carrier The carrier shall be obliged to deliver the goods transported in the same condition in which, according to the bill of lading, they were at the time of their receipt, without any detriment or impairment, and Transportation Law, 2004 ( 112 )

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should he not do so, he shall be obliged to pay the value of the goods not delivered at the point where they should have been and at the time the delivery should have taken place. (Art. 363, Code of Commerce). 3.

Exceptions to liability by carrier Consequently the law, proceeding on the moral principle of prudent prevention, cut off from the carrier all temptation of pecuniary gain and made him absolutely liable with the exception of causes for which he could not be supposed to be responsible — namely the act of God or the public enemy. (4 R. C. L., 700.) 4.

When liability of a carrier ends The relation of carrier endures from the shipment of the goods until their arrival at their destination, and continues after the arrival of the goods at their destination until they are ready to be delivered at the usual place of delivery, and the owner or consignee has a reasonable opportunity, during the hours when such goods are usually delivered there, of examining them sufficiently to judge from their outward appearance of their identity, and whether they are in proper condition, and to take them away. (4 R. C. L., 548.) 5.

Article 1602 NCC Article 1602 of the Civil Code provides that “Carriers are also liable for the loss of and damage to the things which they receive, unless they prove that the loss or damage arose from a fortuitous event or force majeure.” 6.

Boxes tendered to Kui Pai It is conceded that six boxes or cases consigned to Kui Pai were delivered to Dollar Steamship in Hongkong to be shipped to Manila. It is also conceded that at the time of delivery, the boxes were measured as to their width, length and depth, and that the boxes which Dollar Steamship delivered and tendered to Kui Pai are each exact in their respective measurements with those which Dollar Steamship received on board of its ship in Hongkong, and the trial court found as a fact that the six boxes were originally marked “K. P.,” and that the marks on two of them have been changed. 7.

K. P. markings changed to R. B.; Alteration evident The evidence is clear and convincing that the two identical cases KP 3 and 4 were delivered from hold 9 of the ship on to pier 7 at Manila. These two cases were offered in evidence. On each, the marks appear on three sides of each case; thus there are six separate and distinct marks on these two exhibits. The marks are in green ink or paint. Without the aid of a magnifying glass but by ocular inspection, it is perfectly clear and indisputable that the six letters K have been changed or altered to R and the letters P to B and that the numeral 1 has been placed in front of the numerals 3 and 4 so as to give them the appearance of 13 and 14, but it is to be observed that the numeral 1 is omitted from one of the three sides of each. The changes or alterations in the lettering and the addition of the numeral 1 are very crude, to say the least. The ink or paint used in making the changes is not of the same shade of green as the original letters and numerals. No one can possibly be deceived by the changes or alterations and additions. The court is convinced that the original markings, formerly read KP, 3 and 4 and that they were changed, altered and added to so as to now read RB 13 and 14, except, as previously observed, that the numeral 1 is omitted on one side of each of said cases. 8.

No port of call between Hongkong and Manila; Cargo of ship tallies with bills of lading issued It is a matter of common knowledge that there is no port of call between Hongkong and Manila, and it appears from the records, which are confirmed by the testimony of the checker at the time the ship was unloaded and that of the Manila Terminal Company, that the cargo of the ship exactly tallies with the bills of lading which were issued by Dollar Steamship, as to the number of pieces, boxes or cases in the cargo. That is to say, that the number of pieces of cargo on board the ship, which were to be delivered at Manila, including the two boxes in question, correspond exactly with the number of pieces or cargo found on the ship at the time it was unloaded in Manila. The evidence for Kui Pai shows that the six boxes were placed in hold 9 of the ship in Hongkong, and that upon its arrival in Manila, six boxes of the same cubical contents were taken out Transportation Law, 2004 ( 113 )

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of that same hold. Hence, it must follow that, in the very nature of things, the contents of two of those boxes could not be taken out and replaced with Chinese cigarette papers after Dollar Steamship’s ship left Hongkong and while in transit to Manila, and that the short change artist must have appeared on the scene in Hongkong. [45], also [118] Compania Maritima vs. Insurance Co. of North America (GR L-18965, 30 October 1964) En Banc, Bautista Angelo (J): 10 concur Facts: Sometime in October, 1952, Macleod and Company of the Philippines contracted by telephone the services of the Compañia Maritima, a shipping corporation, for the shipment of 2,645 bales of hemp from the former’s Sasa private pier at Davao City to Manila and for their subsequent transshipment to Boston, Massachusetts, USA on board the S.S. Steel Navigator. This oral contract was later on confirmed by a formal and written booking issued by Macleod’s branch office in Sasa and hand carried to Compañia Maritima’s branch office in Davao in compliance with which the latter sent to Macleod’s private wharf LCT 1023 and 1025 on which the loading of the hemp was completed on 29 October 1952. These two lighters were manned each by a patron and an assistant patron. The patron of both barges issued the corresponding carrier’s receipts and that issued by the patron of Barge 1025. Thereafter, the 2 loaded barges left Macleod’s wharf and proceeded to and moored at the government’s marginal wharf in the same place to await the arrival of the S.S. Bowline Knot belonging to Compañia Maritima on which the hemp was to be loaded. During the night of 29 October 1952, or at the early hours of October 30, LCT 1025 sank resulting in the damage or loss of 1,162 bales of hemp loaded therein. On 30 October 1952, Macleod promptly notified the carrier’s main office in Manila and its branch in Davao advising it of its liability. The damaged hemp was brought to Odell Plantation in Madaum, Davao, for cleaning, washing, reconditioning, and redrying. During the period from November 115, 1952, the carrier’s trucks and lighters hauled from Odell to Macleod at Sasa a total of 2,197.75 piculs of the reconditioned hemp out of the original cargo of 1,162 bales weighing 2,324 piculs, which had a total of P116,835.00. After reclassification, the value of the reconditioned hemp was reduced to P84,887.28, or a loss in value of P31,947.72. Adding to this last amount the sum of P8,863.30 representing Macleod’s expenses in checking, grading, rebaling, and other fees for washing, cleaning and redrying in the amount of P19,610.00, the total loss adds up to P60,421.02. All abaca shipments of Macleod, including the 1,162 bales loaded on the carrier’s LCT 1025, were insured with the Insurance Company of North America against all losses and damages. In due time, Macleod filed a claim for the loss it suffered as above stated with said insurance company, and after the same had been processed, the sum of P64,018.55 was paid, which was noted down in a document which, aside from being a receipt of the amount paid, was a subrogation agreement between Macleod and the insurance company wherein the former assigned to the latter its rights over the insured and damaged cargo. Having failed to recover from the carrier the sum of P60,421.021, which is the only amount supported by receipts, the insurance company instituted the action on 28 October 1953. After trial, the court a quo rendered judgment ordering the carrier to pay the insurance company the sum of P60,421.02, with legal interest thereon from the date of the filing of the complaint until fully paid, and the costs. This judgment was affirmed by the Court of Appeals on 14 December 1960. Hence, the petition for review. The Supreme Court affirmed the decision appealed from, with costs against Compania Maritima. 1.

Contract of carriage exists Herein, Macleod and Company contracted by telephone the services of petitioner to ship the hemp in question from the former’s private pier at Sasa, Davao City, to Manila, to be subsequently transshipped to Boston, Massachusetts, U.S.A., which oral contract was later confirmed by a formal and written booking issued by the shipper’s branch office, Davao City, in virtue of which the carrier sent two of its lighters to Transportation Law, 2004 ( 114 )

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undertake the service. It also appears that the patrons of said lighters were employees of the carrier with due authority to undertake the transportation and to sign the documents that may be necessary therefor so much so that the patron of LCT 1025 signed the receipt covering the cargo of hemp loaded therein. 2.

The fact that the carrier sent its lighters free of charge does not impair the contract of carriage The fact that the carrier sent its lighters free of charge to take the hemp from Macleod’s wharf at Sasa preparatory to its loading unto the ship Bowline Knot does not in any way impair the contract of carriage already entered into between the Carrier and the shipper, for that preparatory steps is but a part and parcel of said contract of carriage. The lighters were merely employed as the first step of the voyage, but once that step was taken and the hemp delivered to the carrier’s employees, the rights and obligations of the parties attached thereby subjecting them to the principles and usages of the maritime law. In other words, there is a complete contract of carriage the consummation of which has already begun: the shipper delivering the cargo to the carrier, and the latter taking possession thereof by placing it on a lighter manned by its authorized employees, under which Macleod became entitled to the privilege secured to him by law for its safe transportation and delivery, and the carrier to the full payment of its freight upon completion of the voyage. 3.

When contract of carriage begins The receipt of goods by the carrier has been said to lie at the foundation of the contract to carry and deliver, and if actually no goods are received there can be no contract. The liability and responsibility of the carrier under a contract for the carriage of goods commence on their actual delivery to, or receipt by, the carrier or an authorized agent and delivery to a lighter in charge of a vessel for shipment on the vessel, where it is the custom to deliver in that way, is a good delivery and binds the vessel receiving the freight, the liability commencing at the time of delivery to the lighter and, similarly, where there is a contract to carry goods from one port to another, and they cannot be loaded directly on the vessel, and lighters are sent by the vessel to bring the goods to it, the lighters are for the time its substitutes, so that the bill of lading is applicable to the goods as soon as they are placed on the lighters.” 4.

Test whether relation of shipper and carrier had been established The test as to whether the relation of shipper and carrier had been established is, had the control and possession of the cotton been completely surrendered by the shipper to the railroad company? Whenever the control and possession of goods passes to the carrier and nothing remains to be done by the shipper, then it can be said with certainty that the relation of shipper and carrier has been established. 5. Knot

Contract of affreightment commenced even if the hemp was not actually loaded on S.S. Bowline

The claim that there can be no contract of affreightment because the hemp was not actually loaded on the ship that was to take it from Davao City to Manila is of no moment, for the delivery of the hemp to the carrier’s lighter is in line with the contract. In fact, the receipt signed by the patron of the lighter that carried the hemp stated that he was receiving the cargo “in behalf of S.S. Bowline Knot in good order and condition. “ 6. Bill of lading not indispensable to creation of contract of carriage; Martin on Philippine Commercial Laws The authorities are to the effect that a bill of lading is not indispensable for the creation of a contract of carriage. Martin (Philippine Commercial Laws, Vol. II, Revised Edition, pp. 12-13) has written that “As to issuance of a bill of lading, although Article, 350 of the Code of Commerce provides that ‘the shipper as well as the carrier of merchandise of goods may mutually demand that a bill of lading be made,’ still, said bill of lading is not indispensable. ‘As regards the form of the contract of carriage it can be said that provided that there is a meeting of the minds and from such meeting arise rights and obligations, there should be no limitations as to form.’ The bill of lading is not essential to the contract, although it may become obligatory by reason of the regulations of railroad companies, or as a condition imposed in the contract by the agreement of Transportation Law, 2004 ( 115 )

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the parties themselves. The bill of lading is juridically a documentary proof of the stipulations and conditions agreed upon by both parties. (Del Viso p. 314-315; Robles vs. Santos, 44 O.G., 2268). In other words, the Code does not demand, as necessary requisite in the contract of transportation, the delivery of the bill of lading to the shipper, but gives right to both the carrier and the shipper to mutually demand of each other the delivery of said bill. (Sp. Sup. Ct. Decision, May 6, 1895).” 7.

Bill of lading not indispensable to creation of contract of carriage; 13 C.J.S., p. 288 The liability of the carrier as common carrier begins with the actual delivery of the goods for transportation, and not merely with the formal execution of a receipt or bill of lading; the issuance of a bill of lading is not necessary to complete delivery and acceptance. Even where it is provided by statute that liability commences with the issuance of the bill of lading, actual delivery and acceptance are sufficient to bind the carrier. 8.

Mishap due to lack of adequate precaution or measures, not due to force majeure The mishap that caused the damage or loss was due, not to force majeure, but to lack of adequate precaution or measures taken by the carrier to prevent the loss. Aside from the fact that the ill-fated barge had cracks on its bottom which admitted sea water in the same manner as rain entered “thru tank manholes,” (barge therefore was not seaworthy); on the night of the nautical accident there was no storm, flood, or other natural disaster or calamity. The report of marine surveyors (R. J. del Pan & Co., Inc.) attributes the sinking of LCT 1025 to the non-watertight conditions of various buoyancy compartments. 9.

What constitutes a storm According to Beaufort’s wind scale, a storm has wind velocities of from 64 to 75 miles per hour; and by Philippine Weather Bureau standards winds should have a velocity of from 55 to 74 miles per hour in order to be classified as a storm (Northern Assurance Co., Ltd. vs. Visayan Stevedore Transportation Co.). Herein, winds of 11 miles per hour, although stronger than the average 4.6 miles per hour then prevailing in Davao on 29 October 1952, cannot be classified as storm. 10. Insurance company subrogated to right of shipper; Carrier cannot set up as a defense any defect in the insurance policy as it was not privy thereto The insurance company can recover from the carrier as assignee of the owner of the cargo for the insurance amount it paid to the latter under the insurance contract. Since the Cargo that was damaged was insured with the insurance company and the latter paid the amount represented by the loss, it is but fair that it be given the right to recover from the party responsible for the loss. The instant case, therefore, is not one between the insured and the insurer, but one between the shipper and the carrier, because the insurance company merely stepped into the shoes of the shipper. And since the shipper has a direct cause of action against the carrier on account of the damage of the cargo, no valid reason is seen why such action cannot be asserted or availed of by the insurance company as a subrogee of the shipper. Nor can the carrier set up as a defense any defect in the insurance policy not only because it is not a privy to it but also because it cannot avoid its liability to the shipper under the contract of carriage which binds it to pay any loss that may be caused to the cargo involved therein. 11. Desistance of the carrier from producing the books of accounts of Odell Plantation implies an admission of the correctness of the statements of accounts contained therein The act of Compania Maritima in waiving its right to have the books of accounts of Odell Plantation presented in Court is tantamount to an admission that the statements contained therein are correct and their verification not necessary because its main defense was that it is not liable for the loss because there was no contract of carriage between it and the shipper and the loss caused, if any, was due to a fortuitous event. Hence, under the carrier’s theory, the correctness of the account representing the loss was not so material as would necessitate the presentation of the books in question. At any rate, even if the books of accounts were not produced, the correctness of the accounts cannot be disputed for the same is supported by the original Transportation Law, 2004 ( 116 )

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documents on which the entries in said books were based which were presented by the shipper as part of its evidence. These documents alone sufficiently establish the award of P60,421.02 made in favor of respondent. 12.

Insurance company has juridical personality to file suit With regard to the question concerning the personality of the insurance company to maintain the action, the Court finds the same of no importance, for the attorney himself of the carrier admitted in open court that it is a foreign corporation doing business in the Philippines with a personality to file the present action. [46] also [- after 158] Government vs. Inchausti (GR 6957, 14 February 1913) First Division, Trent (J): 4 concur Facts: On 3 June 1909, the Government placed aboard Inchausti’s steamer Venus 500 barrels of cement consigned to the district engineer of the Province of Albay, to be shipped to Tabaco, Albay. The cement, when placed aboard the steamer in Manila Bay, was in good order and condition. On arrival of the steamer at the port of Tabaco, Inchausti, through its agents, unloaded the 500 barrels of cement and received a receipt therefor from the consignee stating that the property had been received in good condition. Subsequently thereto (the exact time not alleged in the complaint) the consignee discovered that 42 barrels had been broken open and about half of the cement in each barrel lost, and it is alleged that this loss was due to the careless handling on the part of Inchausti’s agents. There is no allegation in the complaint showing that either the Government or the consignee or anyone else representing them made any complaint or demand on Inchausti at any time prior to the presentation of the complaint, which was filed on 18 February 1911, to be reimbursed for the loss of the cement. The trial court sustained Inchausti’s demurrer. Hence, the appeal by the Government. The Supreme Court affirmed the order appealed from, with costs against the Government. 1.

Article 366 of the Code of Commerce Article 366 of the Code of Commerce reads “within the twenty-four hours following the receipt of the merchandise a claim may be brought against the carrier on account of damage or average found therein on opening the packages, provided that the indications of the damage or average giving rise to the claim cannot be ascertained from the exterior of said packages, in which case said claim would only be admitted on the receipt of the packages. After the periods mentioned have elapsed, or after the transportation charges have been paid, no claim whatsoever shall be admitted against the carrier with regard to the condition in which the goods transported were delivered.” 2.

Article 952 (2) of the Code of Commerce Article 952 (2) of the Code of Commerce reads “the following (actions) shall prescribe after one year: xxx (2) {paragraph 1} The actions relating to the delivery of the cargo in maritime or land transportation or to the indemnity for delays and damages suffered by the goods transported, the period of the prescription to be counted from the day of the delivery of the cargo at the place of its destination, or from the day on which it should have been delivered according to the conditions of its transportation. {paragraph 2} The actions for damages or defaults cannot be brought if at the time of the delivery of the respective shipments or within the twenty-four hours following, when damages which do not appear on the exterior of the packages received are in question, the proper protests or reservations should not have been made.” 3.

Section 67, Act 1792 Section 67 of Act 1792 reads “When public funds or property are shipped from one place to another and the consignee whether an agent of the Government or otherwise shall accomplish the bill of lading or Transportation Law, 2004 ( 117 )

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receipt therefor without notation thereon of a shortage in or damage to the public property covered by such bill of lading, such consignee shall be held for the full amount and value of such public property in default of competent evidence to the contrary satisfactory to the Auditor, a district auditor, or other committee appointed under the provisions of this Act: Provided, That evidence of the opening or tampering with any package of public property shall bind the carrier for any shortage or damage that may appear therein, and when notation is made upon the bill of lading or receipt of such evidence the burden of proof that the shortage or damage occurred after the shipment left the carrier’s possession shall be upon such carrier.” 4.

First paragraph of clause 2 of Article 952 repealed by Section 43 of the Code of Civil Procedure Section 43 of the Code of Civil Procedure relates to the limitation or prescription of civil actions other than for the recovery of real property. Such actions must be brought within the periods therein set forth after the right of action accrues. The first paragraph of clause 2 of article 952 of the Code of Commerce relates to the same matter as that covered by section 43 of Act 190, and may properly be said to have been repealed by said section 43. 5.

Article 366 and last paragraph of clause 2 of Article 952 not repealed Article 366 and the last paragraph of clause 2 of article 952 of the Code of Commerce do not relate to the prescription or limitation of actions. They create conditions precedent to the accruing of the right of action against carriers for damages caused to merchandise, and have not been repealed by section 43. 6. If right action depends upon a condition precedent, he must allege and prove fulfillment or excuse for nonfulfillment If the plaintiff’s right of action depends upon a condition precedent, he must allege and prove the fulfillment of the condition or a legal excuse for its nonfulfillment. And if he omits such allegation his declaration, complaint, or petition will be bad on demurrer. (9 Cyc., 699, and cases cited.) 7.

History of Section 67, Act 1792 Section 67 first appeared as section 23 of Act 215 under the heading of “Transportation of Property,” the title of that Act being “An Act establishing and regulating accountability for public property in the Philippine Archipelago.” The Act as a whole relates solely to the liability of officers of the Government by reason of the possession of Government funds and other property. This Act, including the section in question, went through a series of amendments until the section was finally inserted in its present form in the Accounting Act as section 67. 8.

Changes made by Section 67, Act 1792 Section 67 has made no change whatever in the existing law except with respect to the liability of the consignee as an officer or agent of the Government. A reading of the section that the only part which can by any possibility be construed as affecting the liability of common carriers is that liability of the consignee. The latter part of this section makes the carrier liable for any shortage in any package of public property or any damage thereto upon proof of the opening or tampering with such package, and when a notation is made upon the bill of lading or receipt of such evidence, the burden of proof that the shortage or damage occurred after the shipment left the carrier’s possession is upon the carrier. 8. Liability of carrier due to “opening” of package or “tampering” of goods before the passage of Act 1792 Before the passage of Act 1792, evidence of the “opening” of a package or “tampering” with the goods delivered to him for transportation made the carrier liable for the loss, provided the required notice was given in time. And when the fact that the packages in which goods have been received showed evidence of having been opened or tampered with the time of delivery, and this fact was noted upon the bill of lading, the burden rested upon the carrier to show that, although the package may have been broken at the time of delivery, the contents were intact. Transportation Law, 2004 ( 118 )

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9. Repetition of a part of the existing law cannot be construed to repeal by implication unrepealed parts of the law The mere repetition in the Act or section of a part of the existing law on the subject of the liability of common carriers cannot be construed so as to have the effect of repealing by implication the unrepealed parts of that law in the absence of a clear intention on the part of the Legislature to effect such repeal. 10.

Burden of proof when there is annotation of receipt of goods in bad condition; Prescription The statement that an annotation of the receipt of goods in bad condition on the bill of lading throws the burden of proof on the carrier to show that they were in fact intact and in good condition at the time of delivery does involve as a necessary corollary the proposition that when the goods are received and receipted for as being in good condition, that the shipper can bring an action against the carrier at any time within the 10 years allowed by section 43 of Act 190, within which to sue on an obligation arising from a contract in writing and recover upon proof that the goods, although receipted for as being in good condition, were really received to the Code of Commerce is to give the carrier an opportunity to ascertain whether the claim is a well-founded one before the goods leave his hands with respect to damages which are observable upon the exterior of the goods or of the packages in which they are contained, and before the goods have been consumed or their identity destroyed in cases in which it is alleged that the damage has been discovered after the goods were received by the consignee. 11.

Article 366 of the Code of Commerce applicable to maritime transporation Article 366 of the Code of Commerce is applicable to maritime transportation, as declared in the case of Cordoba vs. Warner, Barnes & Co. (1 Phil. Rep., 7). The court finds no reason for changing the doctrine announced in that case. [47], also [185] Samar Mining Co. vs. Nordeutscher Lloyd (GR L-28673, 23 October 1984) Second Division, Cuevas (J): 4 concur, 1 concur in result, 1 took no part Facts: An importation was made by Samar Mining Co. Inc. of 1 crate Optima welded wedge wire sieves through the M/S Schwabenstein, a vessel owned by Nordeutscher Lloyd, (represented in the Philippines by its agent, C.F. Sharp & Co., Inc.), which shipment is covered by Bill of Lading 18 duly issued to consignee Samar Mining. Upon arrival of the vessel at the port of Manila, the importation was unloaded and delivered in good order and condition to the bonded warehouse of AMCYL. 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 Nordeutscher Lloyd failed to elicit the desired response, Samar Mining 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. Samar Mining filed a suit to enforce payment. Nordeutscher Lloyd and CF Sharp & Co. brought in AMCYL as third party defendant. The trial court rendered judgment in favor of Samar Mining, ordering Nordeutscher Lloyd, et. al. to pay the amount of P1,691.93 plus attorney’s fees and costs. However, the Court stated that Nordeutscher Lloyd, et. al. may recoup whatever they may pay Samar Mining by enforcing the judgment against third party defendant AMCYL which had earlier been declared in default. Nordeutscher Lloyd and CF Sharp & Co. appealed from said decision. The Supreme Court reversed the appealed decision, and dismissed Samar Mining’s complaint; without costs. 1.

Nature of bill of lading The nature of the bill of lading is that it operates both as a receipt for the goods; and more importantly, as a contract to transport and deliver the same as stipulated therein. Being a contract, it is the law Transportation Law, 2004 ( 119 )

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between the parties thereto, who are bound by its terms and conditions provided that these are not contrary to law, morals, good customs, public order and public policy. 2. Goods to be transshipped at “port of discharge from ship” (Manila) to “port of discharge of goods” (Davao) Bill of Lading 18 sets forth in page 2 thereof 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”, 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, “if goods are to be transshipped at port of discharge, show destination under the column for `description of contents.’” 3.

Content of” description of contents” in bill of lading The following words appeared typewritten under the column for “description of contents”: “PORT OF DISCHARGE OF GOODS: DAVAO FREIGHT PREPAID” 4.

Transship defined The word “transship” means “to transfer for further transportation from one ship or conveyance to another.” 5. Extent of carrier’s responsibility or liability in transshipment delineated under Section 1 paragraph 3 and Section 11 of the Bill of Lading The extent of the carrier’s responsibility and/or liability in the transshipment of the goods are spelled out and delineated under Section 1, paragraph 3 of Bill of Lading 18, to wit “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”; and in Section 11 of the same Bill, which provides that “Wherever the carrier or master 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” 6. Validity of stipulations exempting carrier from liability for loss of goods not in its actual custody; Phoenix Assurance Co. vs. US Lines 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 the Court 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. 7.

Applicable law; Law of country of destination Transportation Law, 2004 ( 120 )

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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. 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. 8.

Article 1736 NCC; When responsibility of common carrier lasts Article 1736 of the Civil Code provides that “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.” 9.

Article 1738 NCC; When liability of common carrier operative Article 1738, referred to in Article 1736, provides that “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.” 10.

Article 1738 not applicable Article 1738 finds no applicability to the present case, as it 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. 11.

Article 1736 applicable Article 1736 is applicable to the present case. 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. 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. Herein, the court a quo found that there was actual delivery to the consignee through its duly authorized agent, the carrier. 12. Relationship between Samar Mining and the Nordeutscher Lloyd and Sharp as to the transactions involving transport of goods and transshipment of the same Two undertakings appeared embodied and/or provided for in the Bill of Lading. 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. At the hiatus between these two undertakings of Nordeutscher Lloyd 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 the Nordeutscher Lloyd’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 Nordeutscher Lloyd as carrier to itself as agent of the consignee. Upon such delivery, Nordeutscher Lloyd, as erstwhile carrier, ceases to be responsible for any loss or damage that may befall the goods from that point onwards. 13. Agent not guilty of negligence, deceit or fraud, cannot be held responsible for the failure of the principal to accomplish the object of the agency Even as agent of the consignee, Nordeutscher Lloyd 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 Transportation Law, 2004 ( 121 )

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performed. However, Nordeutscher Lloyd 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. 14.

Article 1884 NCC Article 1884 of the Civil Code provides that “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.” 15.

Article 1889 NCC Article 1889 of the Civil Code provides that “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.” 16.

Article 1892 NCC Article 1892 of the Civil Code provides that “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.” 17.

Article 1909 NCC Article 1909 of the Civil Code provides that “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.” 18. Discharge of goods in Manila and delivery of the same to the bonded warehouse in full accord to stipulations in bill of lading; Carrier not liable for loss of goods In discharging the goods from the ship at the port of Manila, and delivering the same into the custody of AMCYL, the bonded warehouse, the carriers were acting in full accord with the contractual stipulations contained in Bill of Lading 18. The delivery of the goods to AMCYL was part of the carriers’ duty to transship the goods from Manila to their port of destination — Davao. The records fail to reveal proof of negligence, deceit or fraud committed by Nordeutscher Lloyd or by its representative in the Philippines. Neither is there any showing of notorious incompetence or insolvency on the part of AMCYL which acted as appellant’s substitute in storing the goods awaiting transshipment. The actions of the carrier and of its representative in the Philippines being in full faith with the lawful stipulations of Bill of Lading 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. [48] Macam vs. CA (GR 125524, 25 August 1999) Second Division, Bellosillo (J): 3 concur Facts: On 4 April 1989, Benito Macam, doing business under the name and style Ben-Mac Enterprises, shipped on board the vessel Nen Jiang, owned and operated by China Ocean Shipping Co., through local agent Wallem Philippines Shipping, Inc. 3,500 boxes of watermelons valued at US$5,950.00 covered by Bill of Lading HKG 99012 and exported through Letter of Credit HK 1031/30 issued by National Bank of Pakistan, Hongkong and 1,611 boxes of fresh mangoes with a value of US$14,273.46 covered by Bill of Lading HKG 99013 and exported through Letter of Credit HK 1032/30 also issued by Pakistan Bank. The Bills of Lading contained the following pertinent provision: “One of the Bills of Lading must be surrendered duly endorsed in exchange for the goods or delivery order.” The shipment was bound for Hongkong with Pakistan Bank as consignee and Great Prospect Company (GPC) of Kowloon, Hongkong as notify party. On Transportation Law, 2004 ( 122 )

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6 April 1989, per letter of credit requirement, copies of the bills of lading and commercial invoices were submitted to Macam’s depository bank, Consolidated Banking Corporation (SolidBank), which paid Macam in advance the total value of the shipment of US$20,223.46. Upon arrival in Hongkong, the shipment was delivered by Wallem directly to GPC, not to Pakistan Bank, and without the required bill of lading having been surrendered. Subsequently, GPC failed to pay Pakistan Bank such that the latter, still in possession of the original bills of lading, refused to pay Macam through SolidBank. Since SolidBank already pre-paid Macam the value of the shipment, it demanded payment from respondent Wallem through 5 letters but was refused. Macam was thus allegedly constrained to return the amount involved to SolidBank, then demanded payment from Wallem in writing but to no avail. On 25 September 1991, Macam sought collection of the value of the shipment of US$20,223.46 or its equivalent of P546,033.42 from China Ocean Shipping and/or Wallem before the RTC of Manila, based on delivery of the shipment to GPC without presentation of the bills of lading and bank guarantee. On 14 May 1993, the trial court ordered China Ocean Shipping and Wallem to pay, jointly and severally, (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. The Court of Appeals appreciated the evidence in a different manner. Thus, on 13 March 1996, the appellate court set aside the decision of the trial court and dismissed the complaint together with the counterclaims. On 5 July 1996 reconsideration was denied. Hence, the petition for review. The Supreme Court denied the petition; and affirmed the decision of respondent Court of Appeals of 13 March 1996, as well as its resolution of 5 July 1996 denying reconsideration. 1.

Content of telex of 5 April 1989 The telex dated 5 April 1989 conveying Macam’s request read “AS PER SHPR’S REQUEST KINDLY ARRANGE DELIVERY OF A/M SHIPT TO RESPECTIVE CNEES WITHOUT PRESENTATION OF OB/L 2 and bank guarantee since for prepaid ship ofrt charges already fully paid our end.” 2.

Explanation for the delivery without presentation of bills of lading and bank guarantee The shipment was delivered to GPC without presentation of the bills of lading and bank guarantee per request of Macam himself because the shipment consisted of perishable goods. 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. 3.

Allegation of complaint does not deal with misdelivery of cargoes The submission of Macam that “the fact that the shipment was not delivered to the consignee as stated in the Bill of Lading or to a party designated or named by the consignee constitutes a misdelivery thereof” is a deviation from his cause of action before the trial court. It is clear from the allegation in his complaint that it does not deal with misdelivery of the cargoes but of delivery to GPC without the required bills of lading and bank guarantee, i.e. “(6) The goods arrived in Hongkong and were released by the defendant Wallem directly to the buyer/notify party, Great Prospect Company and not to the consignee, the National Bank of Pakistan, Hongkong, without the required bills of lading and bank guarantee for the release of the shipment issued by the consignee of the goods.” 4. Misdelivery never an issue when Macam wrote Wallem for the payment of the value of the cargoes Herein, when Macam wrote Wallem demanding payment of the value of the cargoes, misdelivery of the cargoes did not come into the picture. The letter, in part, states “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 Transportation Law, 2004 ( 123 )

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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.” 5.

Article 1736 NCC Article 1736 of the Civil Code provides that “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.” 6.

When contract of carriage ends; Delivery to party other than actual consignee 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. Herein, 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. The delivery of the cargoes to GPC as buyer/importer which, conformably with Article 1736 had, other than the consignee, the right to receive them was proper. 7.

Effect of telegraphic transfers as to bank guarantee The telex of 5 April 1989 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.” Macam was named therein as shipper and GPC as consignee with respect to Bill of Lading HKG 99012 and HKG 99013. 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, Macam dispenses with the bank guarantee because the goods are already fully paid. 8.

Prior conduct between Macam and GPC as to perishable good; Bill of Lading not presented Macam has been transacting with GPC as buyer/importer for around 2 or 3 years already. When mangoes and watermelons are in season, his shipment to GPC using the facilities of Wallem is twice or thrice a week. The goods are released to GPC. It has been the practice of Macam 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 his several years of business relationship with GPC and Wallem, there was not a single instance when the bill of lading was first presented before the release of the cargoes. 9. On account of perishable goods as cargoes and prepayment by bank, Macam requested release of goods Against Macam’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 Wallem that Macam indeed requested the release of the goods to GPC without presentation of the bills of lading and bank guarantee. 10.

GPC, not Pakistan Bank, is the consignee referred in telex The instruction in the telex of 5 April 1989 was “to deliver the shipment to respective consignees.” The originals of the 2 subject Bills of Lading are still in the possession of the Pakistani Bank. 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 Transportation Law, 2004 ( 124 )

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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 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. 11.

Return of money to bank mere accommodation of SolidBank by Macam Herein, Macam 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 that he merely accommodated SolidBank in order to recover the cost of the shipped cargoes from Wallem. SolidBank initially demanded payment from respondents through 5 letters. SolidBank must have realized the absence of privity of contract between itself and Wallem. That is why Macam conveniently took the cudgels for the bank. [49] Saludo vs. CA (GR 95536, 23 March 1992) Second Division, Regalado (J): 4 concur Facts: After the death of Crispina Galdo Saludo, mother of Aniceto G. Saludo Jr., Maria Salvacion Saludo, Leopoldo G. Saludo, and Saturnino G. Saludo, in Chicago, Illinois, on 23 October 1976, Pomierski and Son Funeral Home of Chicago, made the necessary preparations and arrangements for the shipment of the remains from Chicago to the Philippines. The funeral home had the remains embalmed and secured a permit for the disposition of dead human body on 25 October 1976. Philippine Vice Consul in Chicago, Illinois, Bienvenido M. Llaneta, at 3:00 p.m. on 26 October 1976 at the Pomierski & Son Funeral Home, sealed the shipping case containing a hermetically sealed casket that is airtight and waterproof wherein was contained the remains of Crispina Galdo Saludo. On the same date, 26 October 1976, Pomierski brought the remains to C.M.A.S. (Continental Mortuary Air Services) at the airport (Chicago) which made the necessary arrangements such as flights, transfers, etc.; C.M.A.S. is a national service used by undertakers throughout the nation (U.S.A.), they furnish the air pouch which the casket is enclosed in, and they see that the remains are taken to the proper air freight terminal. C.M.A.S. booked the shipment with PAL thru the carrier’s agent Air Care International, with Pomierski F.H. as the shipper and Mario (Maria) Saludo as the consignee. PAL Airway Bill 079-01180454 Ordinary was issued wherein the requested routing was from Chicago to San Francisco on board TWA Flight 131 of 27 October 1976, and from San Francisco to Manila on board PAL Flight 107 of the same date, and from Manila to Cebu on board PAL Flight 149 of 29 October 1976. In the meantime, Maria Salvacion Saludo and Saturnino Saludo, thru a travel agent, were booked with United Airlines from Chicago to California, and with PAL from California to Manila. She then went to the funeral director of Pomierski Funeral Home who had her mother’s remains and she told the director that they were booked with United Airlines. But the director told her that the remains were booked with TWA flight to California. This upset her, and she and her brother had to change reservations from UA to the TWA flight after she confirmed by phone that her mother’s remains would be on that TWA flight. They went to the airport and watched from the look-out area. She saw no body being brought. So, she went to the TWA counter again, and she was told there was no body on that flight. Reluctantly, they took the TWA flight upon assurance of her cousin, Ani Bantug, that he would look into the matter and inform her about it on the plane or have it radioed to her. But no confirmation from her cousin reached her that her mother was on the West Coast. Upon arrival at San Francisco at about 5:00 p.m., she went to the TWA counter there to inquire about her mother’s remains. She was told they did not know anything about it. She then called Pomierski that her mother’s remains were not at the West Coast terminal, and Pomierski immediately called C.M.A.S., which in a matter of 10 minutes informed him that the remains were on a place to Mexico City, that there were two bodies at the terminal, and somehow they were switched; he relayed this information to Miss Saludo in California; later C.M.A.S. called and told him they were Transportation Law, 2004 ( 125 )

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sending the remains back to California via Texas. The following day, 28 October 1976, the shipment or remains of Crispina Saludo arrived in San Francisco from Mexico on board American Airlines. This shipment was transferred to or received by PAL at 7:45 p.m. This casket bearing the remains of Crispina Saludo, which was mistakenly sent to Mexico and was opened (there), was resealed by Crispin F. Padagas for shipment to the Philippines. The shipment was immediately loaded on PAL flight for Manila that same evening and arrived in Manila on 30 October 1976, a day after its expected arrival on 29 October 1976. In a letter dated 15 December 1976, the counsel of the Saludos informed Trans World Airlines (TWA) of the misshipment and eventual delay in the delivery of the cargo containing the remains of the late Crispina Saludo, and of the discourtesy of its employees to Maria Salvacion Saludo and Saturnino Saludo. In a separate letter on 10 June 1977 addressed to Philippine Airlines (PAL), the Saludos stated that they were holding PAL liable for said delay in delivery and would commence judicial action should no favorable explanation be given. Both TWA and PAL denied liability. A damage suit was filed by the Saludos before the then Court of First Instance, Branch III, Southern Leyte, praying for the award of actual damages of P50,000.00, moral damages of P1,000,000.00, exemplary damages, attorney’s fees and costs of suit. The trial court absolved the two airline companies of liability. The Court of Appeals affirmed the decision of the lower court in toto, and in a subsequent resolution, denied the Saludos’ motion for reconsideration for lack of merit. Hence, the petition for review on certiorari. The Supreme Court affirmed the appealed decision, with the modification that an award or P40,000.00 as and by way of nominal damages is granted in favor of the Saludos to be paid by TWA. 1.

Factual findings of the Court of Appeals binding upon the Supreme Court; Exceptions Only questions of law may be raised in a petition filed in the Supreme Court to review on certiorari the decision of the Court of Appeals. This being so, the factual findings of the Court of Appeals are final and conclusive and cannot be reviewed by the Supreme Court. The rule, however, admits of established exceptions, to wit: (a) where there is grave abuse of discretion; (b) when the finding is grounded entirely on speculations, surmises or conjectures; (c) when the inference made is manifestly mistaken, absurd or impossible; (d) when the judgment of the Court of Appeals was based on a misapprehension of facts; (e) when the factual findings are conflicting; (f) when the Court of Appeals, in making its findings, went beyond the issues of the case and the same are contrary to the admissions of both appellant and appellee; (g) when the Court of Appeals manifestly overlooked certain relevant facts not disputed by the parties and which, if properly considered, would justify a different conclusion; and (h) where the findings of fact of the Court of Appeals are contrary to those of the trial court, or are mere conclusions without citation of specific evidence, or where the facts set forth by the petitioner are not disputed by the respondent, or where the findings of fact of the Court of Appeals are premised on the absence of evidence and are contradicted by the evidence on record. 2.

Distinction between question of law and question of fact; Test to determine A question of law is one which involves a doubt or controversy on what the law is on a certain state of facts; and, a question of fact, contrarily, is one in which there is a doubt or difference as to the truth or falsehood of the alleged facts. One test, it has been held, is whether the appellate court can determine the issue raised without reviewing or evaluating the evidence, in which case it is a question of law, otherwise it will be a question of fact. 3.

Issues warrant second look at facts Since it is the soundness of the inferences or conclusions that may be drawn from the factual issues which are being assayed, the Court finds that the issues raised in the present petition indeed warrant a second look if this litigation is to come to a reasonable denouement. A discussion seriatim of said issues will further

Transportation Law, 2004 ( 126 )

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reveal that the sequence of the events involved is in effect disputed. Likewise to be settled is whether or not the conclusions of the Court of Appeals subject of the review indeed find evidentiary and legal support. 4.

Nature of bill of lading A bill of lading is a written acknowledgment of the receipt of the goods and an agreement to transport and deliver them at a specified place to a person named or on his order. The two-fold character of a bill of lading is all too familiar: it is a receipt as to the quantity and description of the goods shipped and a contract to transport the goods to the consignee or other person therein designated, on the terms specified in such instrument. 5.

Designation of bill of lading immaterial The designation is immaterial. Such instrument may be called a shipping receipt, forwarder’s receipt and receipt for transportation. Freight tickets for bus companies as well as receipts for cargo transported by all forms of transportation, whether by sea or land, fall within the definition. Under the Tariff and Customs Code, a bill of lading includes airway bills of lading. 6.

When bill of lading issued; Inverse order not prohibited by law Since a bill of lading acknowledges receipt of goods to be transported, delivery of the goods to the carrier normally precedes the issuance of the bill; or, to some extent, delivery of the goods and issuance of the bill are regarded in commercial practice as simultaneous acts. However, except as may be prohibited by law, there is nothing to prevent an inverse order of events, that is, the execution of the bill, of lading even prior to actual possession and control by the carrier of the cargo to be transported. There is no law which requires that the delivery of the goods for carriage and the issuance of the covering bill of lading must coincide in point of time or, for that matter, that the former should precede the latter. 7.

Receipt a prima facie evidence of delivery to carrier Ordinarily, a receipt is not essential to a complete delivery of goods to the carrier for transportation but, when issued, is competent and prima facie, but not conclusive, evidence of delivery to the carrier. A bill of lading, when properly executed and delivered to a shipper, is evidence that the carrier has received the goods described therein for shipment. Except as modified by statute, it is a general rule as to the parties to a contract of carriage of goods in connection with which a bill of lading is issued reciting that goods have been received for transportation, that the recital being in essence a receipt alone, is not conclusive, but may be explained, varied or contradicted by parol or other evidence. 8.

Bill of lading vis-à-vis estoppel An airway bill estops the carrier from denying receipt of goods of the quantity and quality described in the bill. However, a bill of lading may contain constituent elements of estoppel and thus become something more than a contract between the shipper and the carrier. However, as between the shipper and the carrier, when no goods have been delivered for shipment no recitals in the bill can estop the carrier from showing the true facts. Between the consignor of goods and a receiving carrier, recitals in a bill of lading as to the goods shipped raise only a rebuttable presumption that such goods were delivered for shipment. As between the consignor and a receiving carrier, the fact must outweigh the recital. 9. PAL

Explanation overcoming presumption that remains were delivered and received by TWA and

Herein, Philippine Vice Consul in Chicago, Illinois, Bienvenido M. Llaneta, at 3:00 p.m. on 26 October 1976 at the Pomierski & Son Funeral Home, sealed the shipping case containing a hermetically sealed casket that is airtight and waterproof wherein was contained the remains of Crispina Galdo Saludo. On the same date, Pomierski brought the remains to C.M.A.S. (Continental Mortuary Air Services) at the airport (Chicago) which made the necessary arrangements such as flights, transfers, etc; C.M.A.S. is a national service used by undertakers throughout the nation (U.S.A.), they furnish the air pouch which the casket is Transportation Law, 2004 ( 127 )

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enclosed in, and they see that the remains are taken to the proper air freight terminal. C.M.A.S. booked the shipment with PAL thru the carrier’s agent Air Care International, with Pomierski F.H. as the shipper and Mario (Maria) Saludo as the consignee. PAL Airway Bill 079- 01180454 Ordinary was issued wherein the requested routing was from Chicago to San Francisco on board TWA Flight 131 of 27 October 1976, and from San Francisco to Manila on board PAL Flight 107 of the same date, and from Manila to Cebu on board PAL Flight 149 of 29 October 1976. 10.

PAL’s explanation On 26 October 1976 the cargo containing the casketed remains of Crispina Saludo was booked for PAL Flight PR-107 leaving San Francisco for Manila on 27 October 1976. PAL Airway Bill 079-01180454 was issued, not as evidence of receipt of delivery of the Cargo on 26 October 1976, but merely as a confirmation of the booking thus made for the San Francisco-Manila flight scheduled on 27 October 1976. Actually, it was not until 28 October 1976 that PAL received physical delivery of the body at San Francisco, as duly evidenced by the Interline Freight Transfer Manifest of the American Airline Freight System and signed for by Virgilio Rosales at 7:45 p.m. on said date. 11. Article 1736 NCC; Period where extraordinary responsibility observed by common carrier; When delivery made Explicit is the rule under Article 1736 of the Civil Code that the extraordinary responsibility of the common carrier begins from the time the goods are delivered to the carrier. This responsibility remains in full force and effect even when they are temporarily unloaded or stored in transit, unless the shipper or owner exercises the right of stoppage in transitu, and terminates only after the lapse of a reasonable time for the acceptance of the goods by the consignee or such other person entitled to receive them. And, there is delivery to the carrier when the goods are ready for and have been placed in the exclusive possession, custody and control of the carrier for the purpose of their immediate transportation and the carrier has accepted them. Where such a delivery has thus been accepted by the carrier, the liability of the common carrier commences eo instanti. 12.

PAL and TWA not liable for switching of caskets prior to their receipt of agreed cargo While the extraordinary diligence statutorily required to be observed by the carrier instantaneously commences upon delivery of the goods thereto, for such duty to commence there must in fact have been delivery of the cargo subject of the contract of carriage; only when such fact of delivery has been unequivocally established can the liability for loss, destruction or deterioration of goods in the custody of the carrier, absent the excepting causes under Article 1734, attach and the presumption of fault of the carrier under Article 1735 be invoked. Herein, the body intended to be shipped as agreed upon was really placed in the possession and control of PAL on 28 October 1976 and it was from that date that TWA and PAL became responsible for the agreed cargo under their undertakings in PAL Airway Bill 079-01180454. Consequently, for the switching of caskets prior thereto which was not caused by them., and subsequent events caused thereby, TWA and PAL cannot be held liable. 13.

TWA without authority, even prohibited, to verify contents of casket When the cargo was received from C.M.A.S. at the Chicago airport terminal for shipment, which was supposed to contain the remains of Crispina Saludo, Air Care International and/or TWA, had no way of determining its actual contents, since the casket was hermetically sealed by the Philippine Vice-Consul in Chicago and in an air pouch of C.M.A.S., to the effect that Air Care International and/or TWA had to rely on the information furnished by the shipper regarding the cargo’s content. Neither could Air Care International and/or TWA open the casket for further verification, since they were not only without authority to do so, but even prohibited. 14.

Pomierski & Son delivered casket to CMAS, and not to TWA

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It was not to TWA, but to C.M.A.S. that the Pomierski & Son Funeral Home delivered the casket containing the remains of Crispina Saludo. TWA would have no knowledge therefore that the remains of Crispina Saludo were not the ones inside the casket that was being presented to it for shipment. TWA would have to rely on the representations of C.M.A.S. The casket was hermetically sealed and also sealed by the Philippine Vice Consul in Chicago. TWA or any airline for that matter would not have opened such sealed casket just for the purpose of ascertaining whose body was inside and to make sure that the remains inside were those of the particular person indicated to be by C.M.A.S. TWA had to accept whatever information was being furnished by the shipper or by the one presenting the casket for shipment.And so as a matter of fact, TWA carried to San Francisco and transferred to defendant PAL a shipment covered by or under PAL Airway Bill 079-ORD-01180454, the airway bill for the shipment of the casketed remains of Crispina Saludo. Only, it turned out later, while the casket was already with PAL, that what was inside the casket was not the body of Crispina Saludo so much so that it had to be withdrawn by C.M.A.S. from PAL. The body of Crispina Saludo had been shipped to Mexico. The casket containing the remains of Crispina Saludo was transshipped from Mexico and arrived in San Francisco the following day on board American Airlines. It was immediately loaded by PAL on its flight for Manila. The foregoing points at C.M.A.S. as the one responsible for the switching or mix-up of the two bodies at the Chicago Airport terminal, and started a chain reaction of the misshipment of the body of Crispina Saludo and a one-day delay in the delivery thereof to its destination. 15. Right of carrier to require good faith on part of persons delivering goods; Right of carrier to know contents when it has reasonable ground to suspect goods are dangerous or of illegal character It is the right of the carrier to require good faith on the part of those persons who deliver goods to be carried, and enter into contracts with it, and inasmuch as the freight may depend on the value of the article to be carried, the carrier ordinarily has the right to inquire as to its value. Ordinarily, too, it is the duty of the carrier to make inquiry as to the general nature of the articles shipped and of their value before it consents to carry them; and its failure to do so cannot defeat the shipper’s right to recovery of the full value of the package if lost, in the absence of showing of fraud or deceit on the part of the shipper. In the absence of more definite information, the carrier has the right to accept shipper’s marks as to the contents of the package offered for transportation and is not bound to inquire particularly about them in order to take advantage of a false classification and where a shipper expressly represents the contents of a package to be of a designated character, it is not the duty of the carrier to ask for a repetition of the statement nor disbelieve it and open the box and see for itself. However, where a common carrier has reasonable ground to suspect that the offered goods are of a dangerous or illegal character, the carrier has the right to know the character of such goods and to insist on an inspection, if reasonable and practical under the circumstances, as a condition of receiving and transporting such goods. 16. Common carrier entitled to fair representation of nature and value of goods to be carried; Right of carrier to conduct an inspection A common carrier is entitled to fair representation of the nature and value of the goods to be carried, with the concomitant right to rely thereon, and further noting at this juncture that a carrier has no obligation to inquire into the correctness or sufficiency of such information. The consequent duty to conduct an inspection thereof arises in the event that there should be reason to doubt the veracity of such representations. Therefore, to be subjected to unusual search, other than the routinary inspection procedure customarily undertaken, there must exist proof that would justify cause for apprehension that the baggage is dangerous as to warrant exhaustive inspection, or even refusal to accept carriage of the same; and it is the failure of the carrier to act accordingly in the face of such proof that constitutes the basis of the common carrier’s liability. 17.

CMAS classified as forwarder, is an agent of the shipper and not of the carrier While the actual participation of CMAS has been sufficiently and correctly established, to hold that it acted as agent for TWA and PAL would be both an inaccurate appraisal and an unwarranted categorization of the legal position it held in the entire transaction. It bears repeating that CMAS was hired to handle all the necessary shipping arrangements for the transportation of the human remains of Crispina Saludo to Manila. Transportation Law, 2004 ( 129 )

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Hence, it was to CMAS that the Pomierski & Son Funeral Home, as shipper, brought the remains of Saludo for shipment, with Maria Saludo as consignee. Thereafter, CMAS booked the shipment with PAL through the carrier’s agent, Air Care International. With its functions, CMAS may accordingly be classified as a forwarder which, by accepted commercial practice, is regarded as an agent of the shipper and not of the carrier. As such, it merely contracts for the transportation of goods by carriers, and has no interest in the freight but receives compensation from the shipper as his agent. 18.

CMAS is actual culprit The facts of the case would point to CMAS as the culprit. Equally telling of the more likely possibility of CMAS’ liability is the Saludos’ letter to and demanding an explanation from CMAS, regarding the statement of TWA and PAL laying the blame on CMAS for the incident, clearly allude to CMAS as the party at fault. This is tantamount to an admission by the Saludos that they consider TWA and PAL without fault, or is at the very least indicative of the fact that the Saludos entertained serious doubts as to whether TWA and PAL were responsible for the unfortunate turn of events. 19. Court cannot grant damages at expense of TWA and PAL; Possible liability of CMAS best deferred to another time and addressed to another forum The Saludos’ grief over the death of their mother was aggravated by the unnecessary inconvenience and anxiety that attended their efforts to bring her body home for a decent burial. But, as much as the Court would like to give them consolation for their undeserved distress, the Court is barred by the inequity of allowing recovery of the damages prayed for by them at the expense of TWA and PAL whose fault or negligence in the very acts imputed to them has not been convincingly and legally demonstrated. Neither was the Court prepared to delve into, much less definitively rule on, the possible liability of CMAS as the evaluation and adjudication of the same is not what is presently at issue and is best deferred to another time and addressed to another forum. 20.

Carrier did not undertake to carry cargo aboard any specified aircraft The carrier did not undertake to carry the cargo aboard any specified aircraft, in view of the condition on the back of the airway bill which provides that “It is agreed that no time is fixed for the completion of carriage hereunder and that Carrier may without notice substitute alternate carriers or aircraft. Carrier assumes no obligation to carry the goods by any specified aircraft or over any particular route or routes or to make connection at any point according to any particular schedule, and Carrier is hereby authorized to select, or deviate from the route or routes of shipment, notwithstanding that the same may be stated on the face hereof. The shipper guarantees payment of all charges and advances.” Hence, when TWA shipped the body on an earlier flight and on a different aircraft, it was acting well within its rights. TWA can use substitute aircraft even without notice and without the assumption of any obligation whatsoever to carry the goods on any specified aircraft is clearly sanctioned by the contract of carriage as specifically provided for under the conditions thereof. 21.

Terms clear, no interpretation needed The terms are clear enough as to preclude the necessity to probe beyond the apparent intendment of the contractual provisions. There is no ambiguity in the terms of the airway bill to warrant the application of the rules on interpretation of contracts and documents. 22.

Interpretation of contracts The hornbook rule on interpretation of contracts consecrates the primacy of the intention of the parties, the same having the force of law between them. When the terms of the agreement are clear and explicit, that they do not justify an attempt to read into any alleged intention of the parties, the terms are to be understood literally just as they appear on the face of the contract. The various stipulations of a contract shall be interpreted together and such a construction is to be adopted as will give effect to all provisions thereof. A contract cannot be construed by parts, but its clauses should be interpreted in relation to one another. The Transportation Law, 2004 ( 130 )

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whole contract must be interpreted or read together in order to arrive at its true meaning. Certain stipulations cannot be segregated and then made to control; neither do particular words or phrases necessarily determine the character of a contract. The legal effect of the contract is not to be determined alone by any particular provision disconnected from all others, but in the ruling intention of the parties as gathered from all the language they have used and from their contemporaneous and subsequent acts. 23. Interpretative rule in Rules of Court applies only if there is inconsistency between written and printed words The interpretative rule in the Rules of Court that written words control printed words in documents may be considered only when there is inconsistency between the written and printed words of the contract. As previously stated, there was no ambiguity in the contract subject of this case that would call for the application of said rule. In any event, the contract has provided for such a situation by explicitly stating that the condition remains effective “notwithstanding that the same (fixed time for completion of carriage, specified aircraft, or any particular route or schedule) may be stated on the face hereof.” Herein, the typewritten specifications of the flight, routes and dates of departures and arrivals on the face of the airway bill does not constitute a special contract which modifies the printed conditions at the back thereof. The typewritten provisions of the contract are to be read and understood subject to and in view of the printed conditions, fully reconciling and giving effect to the manifest intention of the parties to the agreement. 24.

Statement on the face of the airway bill The statement on the face of the airway bill properly and completely reads “Carrier certifies goods described below were received for carriage subject to the Conditions on the reverse hereof the goods then being in apparent good order and condition except as noted hereon.” 25.

Carrier not an insurer against delay in transportation of goods in absence of a special contract 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 property 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 party is disabled from performing it without any default in himself, and has no remedy over, then the law will excuse him, but where the party by 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. 26.

Mendoza vs. PAL; Delayed delivery of air cargo In a similar case of delayed delivery of air cargo under a very similar stipulation contained in the airway bill which reads: “The carrier does not obligate itself to carry the goods by any specified aircraft or on a specified time. Said carrier being hereby authorized to deviate from the route of the shipment without any liability therefore,” the Supreme Court ruled 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. Said rights and obligations are created by a specific contract entered into by the parties (Mendoza vs. PAL, 90 Phil. 836). 27.

Specification of flights does not constitute a special contract To countenance a postulate that the specification of the flights and dates of departures and arrivals constitute a special contract (that would prevail over the printed stipulations at the back of the airway bill) would unduly burden the common carrier for that would have the effect of unilaterally transforming every Transportation Law, 2004 ( 131 )

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single bill of lading or trip ticket into a special contract by the simple expedient of filling it up with the particulars of the flight, trip or voyage, and thereby imposing upon the carrier duties and/or obligations which it may not have been ready or willing to assume had it been timely advised thereof. 28.

Ordinary prudence required of person entering in contract The fact that the challenged condition 5 was printed at the back of the airway bill militate against its binding effect on the Saludos as parties to the contract, for there were sufficient indications on the face of said bill that would alert them to the presence of such additional condition to put them on their guard. Ordinary prudence on the part of any person entering or contemplating to enter into a contract would prompt even a cursory examination of any such conditions, terms and/or stipulations. 29. Acceptance of bill of lading without dissent raises presumption that all terms brought to knowledge of shipper and agreed to by him The acceptance of a bill of lading without dissent raises a presumption that all terms therein were brought to the knowledge of the shipper and agreed to by him, and in the absence of fraud or mistake, he is estopped from thereafter denying that he assented to such terms. This rule applies with particular force where a shipper accepts a bill of lading with full knowledge of its contents, and acceptance, under such circumstances makes it a binding contract. In order that any presumption of assent to a stipulation in a bill of lading limiting the liability of a carrier may arise, it must appear that the clause containing this exemption from liability plainly formed a part of the contract contained in the bill of lading. A stipulation printed on the back of a receipt or bill of lading or on papers attached to such receipt will be quite as effective as if printed on its face, if it is shown that the consignor knew of its terms. Thus, where a shipper accepts a receipt which states that its conditions are to be found on the back, such receipt comes within the general rule, and the shipper is held to have accepted and to be bound by the conditions there to be found. 30.

When contract of adhesion void and unenforceable 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. 31.

Ong Yiu vs. CA; Contracts of adhesion not entirely prohibited The case of Ong Yiu vs. Court of Appeals, et al. instructs that contracts of adhesion are 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. Herein, the Saludos, far from being the weaker party in the situation, duly signified their presumed assent to all terms of the contract through their acceptance of the airway bill and are consequently bound thereby. It cannot be gainsaid that the Saludos were not without several choices as to carriers in Chicago with its numerous airways and airlines servicing the same. 32. Condition serves as insulation to liability when flight routes and schedules change; Changes should be justified Although Condition 5 of the airway bill is binding upon the parties to and fully operative in the present transaction, it does not mean, that the carriers can at all times whimsically seek refuge from liability in the exculpatory sanctuary of Condition 5 or arbitrarily vary routes, flights and schedules to the prejudice of their customers. This condition only serves to insulate the carrier from liability in those instances when changes in routes, flights and schedules are clearly justified by the peculiar circumstances of a particular case, or by general transportation practices, customs and usages, or by contingencies or emergencies in aviation such as weather turbulence, mechanical failure, requirements of national security and the like. And even as it is conceded that specific routing and other navigational arrangements for a trip, flight or voyage, or variations therein, generally lie within the discretion of the carrier in the absence of specific routing instructions or

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directions by the shipper, it is plainly incumbent upon the carrier to exercise its rights with due deference to the rights, interests and convenience of its customers. 33. Common carrier has implicit duty to carry property within reasonable time and guard against delay; Liability of carrier for unreasonable delay A common carrier undertaking to transport property has the implicit duty to carry and deliver it within a reasonable time, absent any particular stipulation regarding time of delivery, and to guard against delay. In case of any unreasonable delay, the carrier shall be liable for damages immediately and proximately resulting from such neglect of duty. Herein, the delay in the delivery of the remains of Crispina Saludo, undeniable and regrettable as it was, cannot be attributed to the fault, negligence or malice of PAL and TWA. 34.

TWA knew urgency of shipment and actually carried the remains on earlier flight Herein, TWA knew of the urgency of the shipment by reason of this notation on the lower portion of the airway bill: “All documents have been certified. Human remains of Cristina (sic) Saludo. Please return bag first available flight to SFO.” Accordingly, TWA took it upon itself to carry the remains of Crispina Saludo on an earlier flight, which it could do under the terms of the airway bill, to make sure that there would be enough time for loading said remains on the transfer flight on board PAL. 35. No showing that personnel treated the Saludos in humiliating or arrogant manner; What constitutes rude or discourteous conduct There was no showing of any humiliating or arrogant manner with which the personnel of both TWA and PAL treated the Saludos. Even their alleged indifference is not clearly established. The initial answer of the TWA personnel at the counter that they did not know anything about the remains, and later, their answer that they have not heard anything about the remains, and the inability of the TWA counter personnel to inform the Saludos of the whereabouts of the remains, cannot be said to be total or complete indifference to the latter. At any rate, it is any rude or discourteous conduct, malfeasance or neglect, the use of abusive or insulting language calculated to humiliate and shame passenger or bad faith by or on the part of the employees of the carrier that gives the passenger an action for damages against the carrier, and none of the above is obtaining in the present case. 36.

Although not in bad faith, actuations of TWA’s employees leave must to be desired The manner in which TWA’s employees dealt with the Saludos was not grossly humiliating, arrogant or indifferent as would assume the proportions of malice or bad faith and lay the basis for an award of the damages claimed. It must however, be pointed out that the lamentable actuations of TWA’s employees leave much to be desired, particularly so in the face of the Saludos’ grief over the death of their mother, exacerbated by the tension and anxiety wrought by the impasse and confusion over the failure to ascertain over an appreciable period of time what happened to her remains. 37. Airline companies admonished to require personnel to be more accommodating towards customers and general public; Contract of carriage different from other contractual relations, and is not a mere contract for transportation but also treatment with courtesy and consideration Airline companies are hereby sternly admonished that it is their duty not only to cursorily instruct but to strictly require their personnel to be more accommodating towards customers, passengers and the general public. After all, common carriers such as airline companies are in the business of rendering public service, which is the primary reason for their enfranchisement and recognition in our law. Because the passengers in a contract of carriage do not contract merely for transportation, they have a right to be treated with kindness, respect, courtesy and consideration. A contract to transport passengers is quite different in kind and degree from any other contractual relation, and generates a relation attended with public duty. The operation of a common carrier is a business affected with public interest and must be directed to serve the comfort and convenience of passengers. Passengers are human beings with human feelings and emotions; they should not be treated as mere numbers or statistics for revenue. Transportation Law, 2004 ( 133 )

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38.

Apathy not legally reprehensible but is morally deplorable Herein, the Saludos were not to be regaled with extra special attention. They were, however, entitled to the understanding and humane consideration called for by and commensurate with the extraordinary diligence required of common carriers, and not the cold insensitivity to their predicament. The airline’s counter personnel were totally helpless about the situation. Common Sense could and should have dictated that they exert a little extra effort in making a more extensive inquiry, by themselves or through their superiors, rather than just shrug off the problem with a callous and uncaring remark that they had no knowledge about it. With all the modern communications equipment readily available to them, which could have easily facilitated said inquiry and which are used as a matter of course by airline companies in their daily operations, their apathetic stance while not legally reprehensible is morally deplorable. 39.

No attribution of discourtesy or indifference against PAL No attribution of discourtesy or indifference has been made against PAL by the Saludos and, in fact, Maria Saludo testified that it was to PAL that they repaired after failing to receive proper attention from TWA. It was from PAL that they received confirmation that their mother’s remains would be on the same flight to Manila with them. 40.

When moral and exemplary damages, or attorney’s fees, awarded Moral damages may be awarded for willful or fraudulent breach of contract or when such breach is attended by malice or bad faith. However, in the absence of strong and positive evidence of fraud, malice or bad faith, said damages cannot be awarded. Neither can, there be an award of exemplary damages nor of attorney’s fees as an item of damages in the absence of proof that defendant acted with malice, fraud or bad faith. 41. faith

Censurable conduct of TWA employees do not approximate dimensions of fraud, malice or good

The censurable conduct of TWA’s employees cannot, however, be said to have approximated the dimensions of fraud, malice or bad faith. It can be said to be more of a lethargic reaction produced and engrained in some people by the mechanically routine nature of their work and a racial or societal culture which stultifies what would have been their accustomed human response to a human need under a former and different ambience. 42.

Award of nominal damages warranted; Articles 2221 and 2222 NCC The facts show that the Saludos’ right to be treated with due courtesy in accordance with the degree of diligence required by law to be exercised by every common carrier was violated by TWA and this entitles them, at least, to nominal damages from TWA alone. Articles 2221 and 2222 of the Civil Code make it clear that nominal damages are not intended for indemnification of loss suffered but for the vindication or recognition of a right violated or invaded. They are recoverable where some injury has been done but the amount of which the evidence fails to show, the assessment of damages being left to the discretion of the court according to the circumstances of the case. In the exercise of the Court’s discretion, the Court find an award of P40,000.00 as nominal damages in favor of the Salufos to be a reasonable amount under the circumstances of the present case. [50] Delgado Bros. vs. CA (GR L-15654, 29 December 1960) Second Division, Bautista Angelo (J): 6 concur Facts: On 17 February 1956, Richard A. Kleeper shipped on board the S. S. President Cleveland at Yokohama, Japan one lift van under bill of lading 82, containing personal and household effects. The ship Transportation Law, 2004 ( 134 )

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arrived in the port of Manila on 22 February 1956 and while the lift van was being unloaded by the gantry crane operated by Delgado Brothers, Inc., it fell on the pier and its contents were spilled and scattered. A survey was made and the result was that Kleeper suffered damages totalling P6,729.50 arising out of the breakage, denting and smashing of the goods. Kleeper brought the action before the CFI Manila to recover the sum of P6,729.50 as damages, plus the sum of P2,000.00 as sentimental value of the damaged goods and attorney’s fees. The trial court, on 5 November 1957, rendered decision ordering the shipping company (American President Lines Ltd.) to pay Kleeper the sum of P6,729.50, value of the goods damaged, plus P600.00 as their sentimental value, with legal interest from the filing of the complaint, and the sum of P1,000.00 as attorney’s fees. The court ordered that, once the judgment is satisfied, co-defendant Delgado Brothers, Inc. should pay the shipping company the same amounts by way of reimbursement. Both Delgado Bros. and American President Lines appealed to the Court of Appeals which affirmed in toto the decision of the trial court. Delgado Brothers, Inc. interposed the present petition for review. The Supreme Court modified the decision appealed from in the sense that Delgado Brothers should not be made liable for the damage caused to the goods in question, without pronouncement as to costs. 1.

Contents of Exhibit 1 RE Gantry crane; American President Lines assumed responsibility The contract entered into between the American President Lines and Delgado Bros. relative to the gantry crane owned by Delgado Bros. reads: “Please furnish us ONE gantry to be used on hatch No. 2 of the S/S PRES. CLEVELAND Reg. from 1300 hrs. to FINISH hrs. on 22 February 1955. We hereby assume full responsibility and liability for damages to cargoes, ship or otherwise arising from use of said crane and we will not hold the Delgado Brothers, Inc. liable or responsible in any way thereof. We hereby agree to pay the corresponding charges for above requested services.” The Court cannot agree with the finding that the phraseology employed in Exhibit 1 would not “induce a conclusion that the American President Lines, Ltd. assumed responsibility for the negligence of the crane operator who was employed by Delgado Brothers, Inc.” and that for that reason the latter should be blamed for the consequence of the negligent act of its operator, because in the Court’s opinion the phraseology thus employed conveys precisely that conclusion. 2.

Clause determinative of the responsibility for the use of the crane The clause determinative of the responsibility for the use of the crane contains two parts, namely: one wherein the shipping company assumes full responsibility for the use of the crane, and the other where said company agreed not to hold the Delgado Brothers, Inc. liable in any way. While it may be admitted that under the first part the carrier may shift responsibility to petitioner when the damage caused arises from the negligence of the crane operator because exemption from responsibility for negligence must be stated in explicit terms, however, it cannot do so under the second part when it expressly agreed to exempt petitioner from liability in any way it may arise, which is a clear case of assumption of responsibility on the part of the carrier contrary to the conclusion reached by the Court of Appeals. 3.

When exemption from liability arising from negligence may be granted In order that exemption from liability arising from negligence may be granted, the contract “must be so clear as to leave no room for the operation of the ordinary rules of liability consecrated by experience and sanctioned by the express provisions of law.” 4.

Manila Railroad vs. La Compania Transatlantica not in point The case of the Manila Railroad Co. vs. La Compañia Trasatlantica, et al., 38 Phil., 875, is not in point. In the latter case, the evidence adduced is not clear as to the exemption of responsibility. Here the contrary appears. Hence, the doctrine therein laid down is not controlling.

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5. Clause 17 of the bill of lading; Shipper or consignee who takes bill of lading becomes bound by all stipulation contained therein Clause 17, printed in red ink that appears on the very face of the bill of lading, reads: “IN ACCEPTING THIS BILL OF LADING the shipper, consignee and owner of the goods agree to be bound by all its stipulations, exceptions, and conditions whether written, printed, or stamped on the front or back hereof, any local customs or privileges to the contrary notwithstanding.” The clause provides that a shipper or consignee who accepts the bill of lading becomes bound by all stipulations contained therein whether on the front or back thereof. The shipper cannot elude its provisions simply because they prejudice him and take advantage of those that are beneficial. Secondly, the fact that the shipper shipped his goods on board the ship of the shipping company and paid the corresponding freight thereon shows that he impliedly accepted the bill of lading which was issued in connection with the shipment in question, and so it may be said that the same is binding upon him as if it has been actually signed by him or by any other person in his behalf. This is more so where it is both the shipper and the consignee of the goods in question. These circumstances take this case out of our ruling in the Mirasol case (invoked by the Court of Appeals) and place it within the doctrine in the case of Mendoza vs. Philippine Air Lines, Inc., 90 Phil., 836. 6. Law of country of destination prevails; If destination is Philippines, COGSA merely suppletory to the provisions of the Code Article 1753 (New Civil Code) provides that the law of the country to which the goods are to be transported shall govern the liability of the common carrier in case of loss, destruction or deterioration. This means the law of the Philippines, or the new Civil Code. Under Article 1766, ‘In all matters not regulated by this Code, the rights and obligations of common carriers shall be governed by the Code of Commerce and by special laws,’ i.e. provisions that govern said rights and obligations (Articles 1736, 1737, and 1738). Therefore, although Section 4(5) of the Carriage of Goods by Sea Act states that the carrier shall not be liable in an amount exceeding $500.00 per package unless the value of the goods had been declared by the shipper and inserted in the bill of lading, said section is merely suppletory to the provisions of the Civil Code. [51] Eastern Shipping Lines vs. CA, see [6] [52] Eastern Shipping Lines vs. CA (GR 80936, 17 October 1990) Third Division, Gutierrez Jr. (J): 3 concur, 1 on leave Facts: On 24 February 1980, the Nanyo Corporation of Kobe, Japan shipped a cargo consisting of 5 packages of supplies and materials for “1200 W x 2500 LMM Apron Feeder and 200 W x 5850 LMM Apron Feeder,” covered by a bill of lading. The cargo was loaded on board the S/S Eastern Adventure destined for Manila. The vessel is operated by Eastern Shipping Lines. The bill of lading was consigned to “Shipper’s Order”, with “Address Arrival Notice to Consolidated Mines Inc. 6799 Ayala Avenue, Makati, Metro Manila, Philippines.” The cargo arrived in Manila on 4 March 1980. A few days later, on the basis of an Undertaking for Delivery of Cargo but without the surrender of the original bill of lading presented by Consolidated Mines (CMI), Eastern Shipping released the shipment in question to CMI. In said guaranty, CMI undertook to indemnify Eastern Shipping “harmless from all demands, claiming liabilities, actions and expenses” About 5 ½ months later, or specifically on 19 August 1980, Eastern Shipping received from Hongkong and Shanghai Bank (HSBC), a letter stating that HSBC holds title to the goods and has possession of the full set of original bills of lading, and that it is unable to locate the cargo and that it appeared that Eastern Shipping has released it to CMI. Considering that there was no reply from Eastern Shipping, HSBC wrote another demand letter through counsel dated 29 October 1980 in contemplation of a legal action against Eastern Shipping should it not make good HSBC’s claim. On 23 December 1980 CMI wrote a letter to HSBC admitting that they received the shipment in question due to a guarantee executed by them, and requested HSBC that legal action be held off for at least 30 days, promising to settle its account with HSBC from the funds it was expecting from Benguet Corporation. On 14 January 1981, Eastern Shipping wrote a reply to HSBC, stating therein that it regrets Transportation Law, 2004 ( 136 )

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releasing the cargo without the consent of HSBC’s client, but that it was constrained to release the same in view of the consignee’s strong representation and guarantee that they will settle their obligation with the bank. Eastern Shipping requested that HSBC advise the former if the consignee be unable to comply with its requirement after 30 days. CMI having failed to fulfill its promise, HSBC filed a complaint before the then CFI of Rizal against Eastern Shipping praying for actual and compensatory damages in the amount of $168,521.16 representing the value of the goods covered by the Bill of Lading, exemplary damage in the amount deemed just by the court and P50,000 attorney’s fees plus expenses of litigation and judicial costs. On 15 August 1981, Eastern Shipping filed a third party complaint against CMI seeking reimbursement from the latter of whatever pecuniary obligations Eastern Shipping may be liable to HSBC, as well as moral damages. During trial, CMI filed a Motion to Stay Action in view of the pendency of involuntary insolvency proceedings commenced against it in the meantime by its creditors which included HSBC. This motion was denied by the trial court. On the basis of the evidence presented by HSBC and Eastern Shipping, as CMI failed to present its evidence, the court on 15 January 1985 rendered judgment in favor HSBC and against Eastern Shipping, ordering the latter to pay the sum of $168,521.16 or its equivalent in Philippine Currency representing the value of the goods covered by the Bill of Lading plus interest thereon from the filing of the complaint, until fully paid; P20,000.00 as and for attorney’s fees and to pay the costs. With respect to the Third Party Complaint, the Court rendered judgment in favor of Eastern Shipping and against the CMI ordering the latter to pay all the liabilities of the former in favor of HSBC consisting of the value of the goods covered by the Bill of Lading in the sum of $168,521.16 or its equivalent in Philippine Currency plus interest from the filing of the third party complaint until fully paid; attorney’s fees of P20,000.00 and to pay the costs. Its motion for reconsideration having been denied, Eastern Shipping appealed to the Court of Appeals. On 30 June 1987, the Court of Appeals rendered the decision affirming the appealed decision in toto. Eastern Shipping filed a motion for reconsideration, but the same was denied on 24 November 1987. Hence, the petition for review. The Supreme Court granted the petition, set aside the decision and order of the Court of Appeals, dismissed the complaint before the trial court for lack of merit but without prejudice to HSBC pursuing its claims against CMI in the proper proceedings. 1.

Bill of lading refer to CMI, not HSBC, as consignee At the outset, the Bill of Lading which was issued by the carrier but contained articles furnished by the Shipper, shows on its face that the Shipment is consigned “TO SHIPPER’S ORDER” with “ADDRESS ARRIVAL NOTICE TO CONSOLIDATED MINES INC. 6799 AYALA AVE. MAKATI, METRO MANILA, PHILIPPINES.” Nowhere did the Bill of Lading refer to HSBC as the consignee or the one to be notified. The foregoing information, without more, in effect makes CMI for all practical intents and purposes the party named and ordered to receive the goods. 2.

Eastern Shipping not expected to look beyond face of bil of lading Eastern Shipping, not being privy to any transaction between HSBC and CMI, cannot be expected to look beyond what is contained on the face of the bill of lading and guess which of the many banks in Metro Manila or some other unrevealed corporation could possibly be the consignee. To consider otherwise would not be sound business practice as Eastern Shipping would be forced to wait for the real owner of the goods to show up, perhaps in vain. The shipment consisted of machinery materials and supplies for a mining company named in the bill of lading. In the absence of contrary instructions or at least knowledge of other facts, the carrier is not ordinarily expected to deliver mining equipment to an unnamed or unknown party lurking for several months.

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3. Nature of Bill of lading; Macondray vs. Acting Commissioner of Customs, Phoenix Assurance vs. US Lines In Macondray and Company Inc. v. Acting Commissioner of Customs (62 SCRA 427 [1975]), it was held that a bill of lading is ordinarily merely a convenient commercial instrument designed to protect the importer or consignee. And in Phoenix Assurance Co., Ltd. v. United States Lines (22 SCRA 674 [1968]), it was held that as a receipt, a bill of lading recites the place and date of shipment, describes the goods as to quantity, weight, dimensions, identification marks, condition, quality and value. 4.

CMI owner of goods in question; Other evidences (1) HSBC expressly admitted in its complaint that “pursuant to the Bill of lading the shipment was issued ‘To Shipper’s Order.’” It never alleged therein that it was the consignee of the shipment in question. Similarly, by HSBC’s own documentary evidence, CMI is the buyer-owner of the shipment. (2) the Buyer referred to in the Certificate issued by the shipper Nanyo Corporation should perforce refer to CMI, as that it certified that the Original Consular Invoice had been airmailed directly to Buyer, and certified that advance copies of Commercial Invoice Packing List and Bill of Lading were airmailed directly to Buyer. (3) HSBC has established by its own documentary evidence, more particularly, the Consular Invoice dated 25 February 1980, issued in Tokyo, Japan by the Foreign Service of the Republic of the Philippines, that the consignee of the shipment in question is CMI. Hence, in view of the admissions of HSBC, exceptional circumstances allow a deviation from the general rule regarding the surrender of the bill of lading. The rule cannot always be absolute. 5.

Section 3, Rule 128, Rules of Court; Admissibility of evidence Section 3, Rule 128, of the Rules of Court provide that “Evidence is admissible when it is relevant to the issue and is not excluded by these rules.” 6.

Section 2, Rule 129, Rules of Court; Judicial admissions Section 2, Rule 129, of the Rules of Court provide that “Admissions made by the parties in the pleadings, or in the course of the trial or other proceedings do not require proof and cannot be contradicted unless previously shown to have been made through palpable mistakes.” 7.

Article 353 of Code of Commerce Assuming that CMI may not be considered consignee, Eastern Shipping cannot be faulted for releasing the goods to CMI under the circumstances, due to its lack of knowledge as to who was the real consignee in view of CMI’s strong representations and letter of undertaking wherein it stated that the bill of lading would be presented later. This is precisely the situation covered by the last paragraph of Article 353 of the Code of Commerce, i.e. “If in case of loss or for any other reason whatsoever, the consignee cannot return upon receiving the merchandise the bill of lading subscribed by the carrier, he shall give said carrier a receipt of the goods delivered this receipt producing the same effects as the return of the bill of lading.” 8.

State Bonding and Insurance vs. Manila Port Service In State Bonding and Ins. Co. Inc. v. Manila Port Service, (11 SCRA 400 [1964]), it was held that the arrival of shipment is deemed admitted by an allegation of delivery to the consignee. 9.

Eastern Shipping in good faith Under the special circumstances of the present case, equity favors Eastern Shipping which proved that it was in good faith while both CMI and HSBC cannot claim the same. While the goods in question were released on 4 March 1980 the records show that HSBC received the original bill of lading, as per testimony of its witness Ederlina Crisostomo, only on April 1980 or long after the goods had been released. This circumstance goes against the claims of HSBC. Thus HSBC in its original demand letter stated, “We are unable to locate the cargo and it would appear that it has been released by you to Consolidated Mines, Inc.” This proves that it had fore-knowledge of the prior release to CMI. And to make things worse, HSBC, despite Transportation Law, 2004 ( 138 )

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CMI’s admission that it received the goods, sued only Eastern Shipping while at the same time claiming for the value of the goods in the involuntary insolvency proceedings of CMI which the Bank itself, together with others, initiated. Only later developments led to the present case. 10.

Article 1736 NCC; Article uses conjunction “or” Article 1736 of the Civil Code of the Philippines which provides that “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.” Herein, HSBC wittingly or unwittingly overlooked the fact that the same article uses the conjunction “or” in reference to whom the goods may be delivered, that is, to the consignee, or to the person who has a right to receive them. 11.

HSBC more negligent party as against Eastern Shipping It becomes more evident that HSBC is the more negligent party as against Eastern Shipping when aside from having allowed CMI to be designed in the bills of lading, as the party to be notified, it allowed the latter to be designated as the consignee in the Consular Invoice, the original of which was directly furnished to CMI by and as certified to by the shipper Nanyo Corporation. With such vast powers, akin to an agent of HSBC, CMI acted within its authority, and even if it acted on its own. 12.

Article 1883 NCC “If an agent acts in his own name, the principal has no right of action against the persons with whom the agent has contracted, neither have such persons against the principal. In such case the agent is the one directly bound in favor of the person with whom he has contracted, as if the transaction were his own, except when the contract involves things belonging to the principal. The provisions of this article shall be understood to be without prejudice to the actions between the principal and agent.” 13.

Bad faith by both HSBC and CMI For almost 6 months from the arrival of the goods HSBC did not do anything to claim the cargo. It could not possibly be left around lying idle when on the face of the bill of lading, there was a named owner to be notified. On the other hand, CMI secured the release of the goods through misrepresentation before Eastern Shipping without settling its account with HSBC and thereafter did not bother to present evidence before the trial court, leaving Eastern Shipping holding an empty bag as it were. These circumstances also prove bad faith on the part of CMI. Under the exceptional circumstances and applying especially strong considerations of equity, Eastern Shipping did not commit any fault sufficient to render it liable to HSBC. On the contrary, it was HSBC and CMI who were obviously in bad faith in dealing with Eastern Shipping. [53] Limpangco Sons vs. Yangco Steamship (GR 10283, 25 July 1916) Second Division, Per Curiam: 3 concur, 1 concur in result, 1 dissent Facts: On 3 August 1913, Limpangco Sons employed Yangco Steamship Co. to tow from Guagua to Manila two cascos loaded with 2,041.80 piculs of sugar, property of Limpanggo Sons, of the value of P11,229.90. On that date the cascos left Guagua towed by the launches Tahimic and Matulin, belonging to Yangco Steamship. When the launches, together with their tows, arrived off the Malabon River, the patron of the launch Matulin, whether of his own motion or whether at the instance of the patrones of the cascos decided to leave the cascos in the Malabon River. The launch Tahimic towed the cascos into the Malabon River and the launch Matulin continued the trip to Manila. The reason why this was done was that, at that time, the weather was threatening, and that there was such a sea on as to make it dangerous for the cascos, heavily loaded as they were, to continue the voyage to Manila. On 8 August 1913, the launch Maturing was in the Malabon River Transportation Law, 2004 ( 139 )

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and the patron talked to the men in charge of the two cascos, which were at that time tied up at Tansa, and told them that on the following day, at daybreak, he would await them of the mouth of the Malabon River, outside the bar, and that, if the weather was then favorable, he would tow them to Manila, It was agreed between the patron of the Matulin and the patrones of the cascos that the latter should move out of the river by means of their tikines or bamboo poles and, thus propelled, proceed to the place where the launch Matulin was to be waiting for them. On the following day, the patron of the Matulin arrived with his launch off the mouth of the Malabon River and anchored outside of the shallows, something like 1,500 meters from the month of the river. In accordance with the agreement with the patron of the Matulin and under his instructions, the crews poled their cascos out of the river following the channel. When they passed the shallow water they were met with high seas and strong winds. The bamboo poles were unavailing, and, finding themselves in danger of being washed ashore and destroyed, they claim they called to the Matulin, which was in plain sight, for help. The patron of the Matulin, they allege, made no effort to assist them and, by reason of the high seas and strong winds, they were driven ashore or on the shoals and their cargoes lost. The patron of the Matulin testified that he was unable to render assistance to the cascos by reason of the shallow water in which they were at the time they were caught by the winds and waves and washed ashore. An action for negligence was filed as a result of the loss of cargo while two cascos were towed from Guagua to Manila. The Supreme Court reversed the judgment of the trial court. 1. Vessel undertaking towage service liable for reasonable care of the tow; Measure, duration, scope A vessel which undertakes a towage service is liable for reasonable care of the tow, and that reasonable care is measured by the dangers and hazards to which the tow is or may be exposed, which it is the duty of the master of the tug to know and to guard against not only by giving proper instructions for the management of the tow, but by watching her when in a dangerous locality, to see that his directions are obeyed. The duty of the tug to a tow is a continuous one from the time service commences until it is completed. Its responsibility includes not only the proper and safe navigation of the tug on the journey, but to furnish safe, sound and reasonable appliances and instrumentalities for the service to be performed, as well as the giving of proper instructions as to the management of the tow; and if the locality in which the tow finds itself at any given time is more than ordinarily dangerous, the tug is held to a proportionately higher degree of care and skill. It is well recognized that in towing a boat built only for the shallow water of an inland stream, such as the cascos are, greater care must necessarily be used when venturing upon an ocean voyage than with a vessel fitted for deep water; and this applies not only in the choice of route, to select the one having the smoothest water and affording shelter in stormy weather, but in the handing of the tow. 2.

Yangco negligent Yangco Steamship directly or through the captain failed in every duty laid upon it by the law. It neglected to furnish suitable appliances and instrumentalities; for the tug itself was unsuitable for the purpose in hand. It is negligence to leave two heavily loaded cascos in Manila Bay at the mercy of weather likely to exist in the month of August for a distance of 1,500 meters with no other motive power than bamboo poles. Also the captain of the Matulin failed to give proper instructions to the tow. If it was negligence not to provide himself with appliances by which the cascos could be protected while passing from the mouth of the river to the launch, it was negligence for him to ask the cascos to move out into the open sea under such circumstances. 3.

Degree of diligence and care required; Extraordinary circumstances Although the law requires the use of only ordinary diligence and care; the law required the exercise of more than ordinary care under the circumstances existing at the time the cascos were lost. The fact of time of time and season and of the probability that in coming out of the river they would be met with wind and wave Transportation Law, 2004 ( 140 )

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and wave and, in their helpless condition, would in all probability, if so met, be driven on the shoals, made the situation of the cascos one of more than ordinary danger; and the tug should be held to a proportionate higher degree of care and skill. 4. God

Qualification to warrant exemption from liability when proximate or immediate cause is Act of

While the captain of the Matulin would not have been responsible for an act of God by which the cascos were lost, it was his duty to foresee what the weather was likely to be, and to take such precautions as were necessary to protect his tow. It was not an act of God by which the cascos were lost; it was the direct result of the failure of the captain of the Matulin to meet the responsibilities which the occasion placed on him. To be exempt from liability because of an act of God the tug must be free from any previous negligence or misconduct by which that loss or damage may have been occasioned. For, although the immediate or proximate cause of the loss in any given instance may have been what is termed an act of God, yet, if the tug unnecessary exposed the two such accident by any culpable act or omission of its own, it is not excused. [54], also [137] and [- after 207] G. Martini Ltd. vs. Macondray & Co. (GR 13972, 28 July 1919) En Banc, Street (J): 7 concur Facts: In September 1916, G. Martini, Ltd. arranged with Macondray & Co. Inc., as agents of the Eastern and Australian Steamship Company, for the shipment of 219 cases or packages of chemical products from Manila, Philippine Islands, to Kobe, Japan. On 15 September 1916 (Friday), Martini applied to Macondray for necessary space on the steamship Eastern, and received a shipping order, which constituted authority for the ship’s officers to receive the cargo aboard. The mate’s receipt did not come to Martini’s hand until Monday night, but as Martini was desirous of obtaining the bills of lading on the Saturday morning preceding in order that he might negotiate them at the bank, a request was made for the delivery of the bills of lading on that day To effectuate this, Martini was required to enter into the written obligation, calling itself a “letter of guarantee.” In conformity with the purpose of this document the bills of lading were issued, and the negotiable copies were, upon the same day, negotiated at the bank by the plaintiff for 90% of the invoice value of the goods. The bills of lading contained on their face, conspicuously stenciled, the words “on deck at shipper’s risks.” The mate’s receipt, received by the plaintiff two days later also bore the notation “on deck at shipper’s risk,” written with pencil, and evidently by the officer who took the cargo on board and signed the receipt. Martini says that upon seeing the stamped “on deck at shipper’s risks”, he at once called the attention of S. Codina thereto, the latter being an employee of the house whose duty it was to attend to all shipments of merchandise and who in fact had entire control of all matters relating to the shipping of the cargo. Letters by Martini, warning Macondray that it would be held liable for loss or damage if the goods were stowed on deck, were dispatched by messenger, and upon receiving it, Macondray called Codina by telephone at about 4.30 p.m. and, referring to the communication just received, told him that Macondray could not accept the cargo for transportation otherwise than on deck and that if Martini were dissatisfied, the cargo could be discharged from the ship. The goods were embarked at Manila on the steamship Eastern and were carried to Kobe on the deck of that ship, on 16 September 1916. Upon arrival at the port of destination it was found that the chemicals comprised in the shipment had suffered damage from the effects of both fresh and salt water. An action was instituted by Martini to recover the amount of the damage thereby occasioned. In the Court of First Instance judgment was rendered in favor of Martini for the sum of P34,997.56, with interest from 24 March 1917, and costs of the proceeding. From this judgment, Macondray appealed. The Supreme Court reversed the judgment appealed from and absolved Macondray from the complaint; with no express pronouncement will be made as to the costs of either instance.

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1.

Damage was caused by water The damage was caused by water, either falling in the form of rain or splashing aboard by the action of wind and waves. 2.

Paragraph 19 of the several bills of lading issued for transportation of the cargo Paragraph 19 of the several bills of lading issued for transportation of the cargo reads “(19) Goods signed for on this bill of lading as carried on deck are entirely at shipper’s risk, whether carried on deck or under hatches, and the steamer is not liable for any loss or damage from any cause whatever. “ 3.

Shipper ordinarily produce mate’s receipt to agents of ship’s company Ordinarily the shipper is supposed to produce the mate’s receipt to the agents of the ship’s company, who thereupon issue the bill of lading to the shipper. When, however, the shipper desires to procure the bill of lading before he obtains the mate’s receipt, it is customary for him to enter into a written obligation, binding himself, among other things, to abide by the terms of the mate’s receipt. Herein, 4.

Contents of the “Letter of Guarantee” The “Letter of Guarantee” dated 16 September 1916, is of the tenor “In consideration of your signing us clean B/L for the undermentioned cargo per above steamer to be shipped on or under deck at ship’s option, for Kobe without production of the mate’s receipt, we hereby guarantee to hold you free from any responsibility by your doing so, and for any expense should the whole or part of the cargo be shut out, or otherwise, and to hand you said mate’s receipt as soon as it reaches us and to abide by all clauses and notations on the same.” 5.

Martini did nothing to discharge cargo In order to get the cargo off certain formalities were necessary which could not be accomplished, as for instance, the return of the mate’s receipt (which had not yet come to Martini’s hands), the securing of a permit from the customs authorities, and the securing of an order of discharge from the steamship company. In view of the fact that Martini did nothing whatever looking towards the discharge of the cargo, not even so much as to notify Macondray that the cargo must come off, the proof relative to the practicability of discharge is inconclusive. If Martini had promptly informed Macondray of their resolve to have the cargo discharged, and the latter had nevertheless permitted the ship to sail without discharging it, there would have been some ground for Martini’s contention that its consent had not been given for the goods to be carried on deck. Needless to say the Court attached no weight to the statement of Codina that he was unable to get Macondray by telephone in order to communicate directions for the discharge of the cargo. 6.

Inferred reasons why Martini allowed cargo to be carried away It is inferable that one reason why Martini allowed the cargo to be carried away without being discharged, was that the bills had been discounted and to stop the shipment would have entailed the necessity of refunding the money which the bank had advanced, with the inconveniences incident thereto. Another reason apparently was that Martini discerned, or thought he discerned the possibility of shifting the risk so as to make it fall upon the ship’s company. 7. Cordina not deceived into signing document; Guaranty permit stowage either on or under deck at ship’s option There was no space in the hold to take the cargo and it was unnecessary to consider whether the chemicals to be shipped were of an explosive or inflammable character, such as to require stowage on deck. By reason of the fact that the cargo had to be carried on deck at all events, if carried at all, the guaranty was so drawn as to permit stowage either on or under deck at the ship’s option; and the attention of Codina must have been drawn to this provision because Macondray refused to issue the bills of lading upon a guaranty signed by Codina upon another form, which contained no such provision. The messenger between the two

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establishments who was sent for the bills of lading accordingly had to make a second trip and go back for a letter of guaranty signed upon the desired form. 8. Martini duly notified as to manner in which cargo was shipped, failed to give necessary instructions manifesting acquiescence Although Martini would have greatly preferred for the cargo to be carried under the hatches, they nevertheless consented for it to go on deck. Codina, if attentive to the interests of his house, must have known from the tenor of the guaranty to which his signature is affixed that Macondray had reserved the right to carry it on deck, and when the bills of lading were delivered to Martini they plainly showed that the cargo would be so carried. Martini was duly affected with notice as to the manner in which the cargo was shipped. No complaint was made until after the bills of lading had been negotiated at the bank. When the manager of Martini first had his attention drawn to the fact that the cargo was being carried on deck, he called Codina to account, and the latter found it to his interest to feign surprise and pretend that he had been deceived by Macondray. Even then there was time to stop the shipment, but Martini failed to give the necessary instructions, thereby manifesting acquiescence in the accomplished fact. Martini must thus be held to have assented to the shipment of the cargo on deck and that they are bound by the bills of lading in the form in which they were issued. 9.

Clean bill of lading and stowage of cargo on deck without consent; The Paragon If a clean bill of lading had been issued and Martini had not consented for the cargo to go on deck, the ship’s company would have been liable for all damage which resulted from the carriage on deck. In the case of The Paragon (1 Ware, 326; 18 Fed. Cas. No. 10708), decided in 1836 in one of the district courts of the United States, it appeared that cargo was shipped from Boston, Massachusetts, to Portland, Maine, upon what is called a clean bill of lading, that is, one in the common form without any memorandum in the margin or on its face showing that the goods are to be carried on deck. It was proved that the shipper had not given his consent for carriage on deck. Nevertheless, the master stowed the goods on deck; and a storm having arisen, it became necessary to jettison them. None of the cargo in the hold was lost. It was thus evident that although the cargo in question was lost by peril of the sea, it would not have been lost except for the fact that it was being carried on deck. It was held that the ship was liable. 10.

The Paragon; Loss by fortuitous event, general average The goods, having been lost by the dangers of the seas, both the master and the vessel are exempted from responsibility within the common exemption in bills of lading; and the goods having been thrown overboard from necessity, and for the safety of the vessel and cargo, as well as the lives of the crew, that it presents a case for a general average or contribution, upon the common principle that when a sacrifice is made for the benefit of all, that the loss shall be shared by all. In every contract of affreightment, losses by the dangers of the seas are excepted from the risks which the master takes upon himself, whether the exception is expressed in the contract or not. The exception is made by the law, and falls within the general principle that no one is responsible for fortuitous events and accidents of major force. Casus fortuitous nemo praestat. 11.

The Paragon; Loss by fortuitous event, exceptions The general law is subject to an exception, that when the inevitable accident is preceded by a fault of the debtor or person bound without which it would not have happened, then he becomes responsible for it. Thus, the master is responsible for the safe and proper stowage of the cargo, and there is no doubt that by the general maritime law he is bound to secure the cargo safely under deck. If the master carries goods on deck without the consent of the shipper, he does it at his own risk. If they are damaged or lost in consequence of their being thus exposed, he cannot protect himself from responsibility by showing that they were damaged or lost by the dangers of the seas. When the shipper consents to his goods being carried on deck, he takes the risk upon himself of these peculiar perils. 12.

Van Horn vs. Taylor; When shipper had no notice of cargo being carried on deck Transportation Law, 2004 ( 143 )

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Van Horn vs. Taylor (2 La. Ann., 587; 46 Am. Dec., 558), was a case where goods stowed on deck were lost in a collision. The court found that the ship carrying these goods was not at fault, and that the shipper had notice of the fact that the cargo was being carried on deck. It was held that the ship was not liable. Said the court: “It is said that the plaintiff’s goods were improperly stowed on deck; that the deck load only was thrown overboard by the collision, the cargo in the hold not being injured. The goods were thus laden with the knowledge and implied approbation of the plaintiff. He was a passenger on board the steamer, and does not appear to have made any objection to the goods being thus carried, though the collision occurred several days after the steamer commenced her voyage.” 13.

The Thomas P. Thorn; Risk of damage to shipper when contract is to carry upon deck In the case of The Thomas P. Thorn (8 Ben., 3; 23 Fed., Cas. No. 13927), decided in the District Court in the State of New York, it appeared that tobacco was received upon a canal boat, with the understanding that it was to be carried on deck, covered with tarpaulins. Upon arrival at its destination it was found damaged by water, for the most part on the top, and evidently as a consequence of rains. At the same time a quantity of malt stowed below deck on the same voyage was uninjured. In discussing the question whether upon a contract to carry on deck, the vessel was liable for the wetting of the tobacco, the court said: “It is manifest that the injury to the tobacco arose simply from the fact that it was carried on deck. The malt, carried below, although an article easily injured, received no damage, and the voyage was performed with usual care, and without disaster. Indeed, there is evidence of a statement by the libelant, that tobacco must of necessity be injured by being carried on deck. But, under a contract to carry upon deck, the risk of any damage resulting from the place of carriage rests upon the shipper, and, without proof of negligence causing the damage, there can be no recovery. Here the evidence shows that all reasonable care was taken of the tobacco during its transportation; that the manner of stowing and covering it was known to and assented to by the shipper; and the inference is warranted that the injury arose, without fault of the carrier, from rain, to which merchandise transported on deck must necessarily be in some degree exposed. Any loss arising from damaged thus occasioned is to be borne by the shipper.” 14. Lawrence vs. Minturn; Goods stowed on deck with consent of shipper jettisoned during storm entitled to general average Lawrence vs. Minturn (17 How [U.S,], 100; 15 L ed., 58), was a case where goods stowed on deck with the consent of the shipper were jettisoned during a storm at sea. In discussing whether this cargo was entitled to general average, the Supreme Court of the United States said: “The maritime codes and writers have recognized the distinction between cargo placed on deck, with the consent of the shipper, and cargo under deck. There is not one of them which gives a recourse against the master, the vessel, or the owners, if the property lost had been placed on deck with the consent of its owner, and they afford very high evidence of the general and appropriate usages, in this particular, of merchants and shipowners. So the courts of this country and England, and the writers on this subject, have treated the owner of goods on deck, with his consent, as not having a claim on the master or owner of the ship in case of jettison. The received law, on the point, is expressed by Chancellor Kent, with his usual precision, in 3 Com., 240: ‘Nor is the carrier in that case (Jettison of deck load) responsible to the owner, unless the goods were stowed on deck without the consent of the owner, or a general custom binding him, and then he would be chargeable with the loss.’” 15. Gould vs. Oliver; Goods loaded on deck with consent of merchant, Merchant has no remedy against shipper or master In Gould vs. Oliver (4 Bing., N. C., 132), decided in the English Court of Common Pleas in 1837, Tindal, C.J., said: “Where the loading on deck has taken place with the consent of the merchant, it is obvious that no remedy against the shipowner or master for a wrongful loading of the goods on deck can exist. The foreign authorities are indeed express; on that point. And the general rule of the English law, that no one can maintain an action for a wrong, where he has consented or contributed to the act which occasioned his loss, leads to the same conclusion.”

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16.

When shipper consents to have goods carried on deck, he takes risks of damage or loss Where the shipper consents to have his goods carried on deck he takes the risks of any damage or loss sustained as a consequence of their being so carried. In the present case it is indisputable that the goods were injured during the voyage and solely as a consequence of their being on deck, instead of in the ship’s hold. The loss must therefore fall on the owner. And this would be true, under the authorities, even though paragraph 19 of the bills of lading had not been made a term of the contract. 17.

When shipowner may be held liable Upon general principle, and momentarily ignoring paragraph 19 of these bills of lading, the ship’s owner might be held liable for any damage directly resulting from a negligent failure to exercise the care properly incident to the carriage of the merchandise on deck. For instance, if it had been improperly placed or secured, and had been swept overboard as a proximate result of such lack of care, the ship would be liable, to the same extent as if the cargo had been deliberately thrown over without justification. So, if it had been shown that, notwithstanding the stowage of these goods on deck, the damage could have been prevented, by the exercise of proper skill and diligence in the discharge of the duties incumbent on the ship, the owner might still be held. 18.

Ship’s company may be liable for damage that may be avoided by use of precaution Supposed that a custom had been proved among mariners to protect deck cargo from the elements by putting a tarpaulin over it; or approaching still more to imaginable conditions, supposed that the persons charged with the duty of transporting the cargo, being cognizant of the probability of damage by water, had negligently and without good reason failed to exercise reasonable care to protect it by covering it with tarpaulins. In such case it could hardly be denied that the ship’s company should be held liable for such damage as might have been avoided by the use of such precaution. 19.

Burden of proof It is incumbent on Martini, if his cause of action is founded on negligence of this character, to allege and prove that the damage suffered was due to failure of the persons in charge of the cargo to use the diligence properly incident to carriage under these conditions. 20.

Clark vs. Barnwell; Onus probandi In Clark vs. Barnwell (12 How. [U.S.], 272; 13 L. ed., 985), the Supreme Court distinguishes with great precision between the situation where the burden of proof is upon the shipowner to prove that the loss resulted from an excepted peril and that where the burden of proof is upon the owner of the cargo to prove that the loss was caused by negligence on the part of the persons employed in the conveyance of the goods. The first two syllabi in Clark vs. Barnwell read as follows: “Where goods are shipped and the usual bill of lading given, ‘promising to deliver them in good order, the dangers of the seas excepted,’ and they are found to be damaged the onus probandi is upon the owners of the vessel, to show that the injury was occasioned by one of the excepted causes. But, although the injury may have been occasioned by one of the excepted causes, yet still the owners of the vessel are responsible if the injury might have been avoided, by the exercise of reasonable skill and attention on the part of the persons employed in the conveyance of the goods. But the onus probandi then becomes shifted upon the shipper, to show the negligence. 21.

Clark vs. Barnwell; Damage due to dampness not the fault of master or owners Notwithstanding the proof was clear that the damage was occasioned by the effect of the humidity and dampness of the vessel, which is one of the dangers of navigation, it was competent for the libelants to show that the shipowner and master might have prevented it by proper skill and diligence in the discharge of their duties; but no such evidence is found in the record. For caught that appears every precaution was taken that is usual or customary, or known to shipmasters, to avoid the damage in question. It is to be attributed exclusively to the dampness of the atmosphere of the vessel, without negligence or fault on the part of the master or owners. Transportation Law, 2004 ( 145 )

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22.

Damage caused by rain and sea water, Macondray not liable Herein, the damage was caused by rain and sea water — the risk of which is inherently incident to carriage on deck — Macondray cannot be held liable. It is not permissible for the court, in the absence of any allegation or proof of negligence, to attribute negligence to the ship’s employees in the matter of protecting the goods from rains and storms. The complaint clearly indicates that the damage done was due to the mere fact of carriage on deck, no other fault or delinquency on the part of anybody being alleged. 23. Paragraph 19 of bills of lading would not protect ship from liability for consequences of negligent acts By the terms of paragraph 19 of the bills of lading, the ship is not to be held liable, in the case of goods signed for as carried on deck, for any loss or damage from any cause whatever. This provision would not have protected the ship from liability for the consequences of negligent acts, if negligence had been alleged and proved. From the discussion in Manila Railroad Co. vs. Compania Transatlantica and Atlantic, Gulf & Pacific Co. (38 Phil. Rep., 875), it may be collected that the carrier would be held liable in such case, notwithstanding the exemption contained in paragraph 19. But however that may be damages certainly cannot be recovered on the ground of negligence, even from a carrier, where negligence is neither alleged nor proved. [55], also [150] Heirs of de los Santos vs. CA (GR 51165, 21 June 1990) First Division, Medialdea (J): 4 concur Facts: On 2 November 1967, Mauricio de los Santos accompanied his common-law wife, Amparo delos Santos, and children, namely: Romeo, Josie, Hernani (10 years old), Abella (7 years old), Maria Lemia (5 years old) and Melany (5 months old), to pier 8, North Harbor, Manila, to board the M/V ‘Mindoro’, owned by Compania Maritima, bound for Aklan. Amparo delos Santos and the aforesaid children brought all their belongings, including household utensils valued at P1,000.00, with the intention of living in Aklan permanently. On the other hand, as to spouses Diego Salim and Teresa Pamatian, Diego brought with him P200 in cash and some belongings, while Teresa brought some cash and personal belongings worth P250. Diego boarded the vessel even if he did not have yet a ticket. As to Ruben Reyes, he brought with him personal belongings and cash in the amount of P2,900. M/V ‘Mindoro’ sailed from pier 8 North Harbor, Manila, at about 6:00 p.m. (should have sailed at 2:00 p.m.) of said day bound for New Washington, Aklan, with many passengers aboard (about 200). Amparo was not included in the manifest as she boarded the boat without ticket, but appeared to have purchased one in the vessel. It appears that said vessel met typhoon ‘Welming’ on the Sibuyan Sea, Aklan, at about 5:00 a.m. of 4 November 1967 causing the death of many of its passengers, including Amparo delos Santos and her children. Other drowned victims include spouses Teresa Pamatian and Diego Salim, and also Felix Reyes Jakusalam. 136 survived the accident, including Ruben Reyes and Eliadora Crisostomo de Justo. Eliandora was able to board a balsa, while Ruben was able to swim to an island and with others, rescued later on and brought to the hospital. A complaint was originally filed on 21 October 1968 and amended on 24 October 1968 by the heirs of Delos Santos and others as pauper litigants against the Compania Maritima, for damages due to the death of several passengers as a result of the sinking of the M/V ‘Mindoro’. The trial court, on 27 March 1974, adjudged the case in favor of Compania Maritima, dismissing the case due to lack of sufficient evidence. Forthwith, Reyes, and the heirs of the Delos Santos(es), Diego Salim, and Teresa Pamatian brought an appeal to the Court of Appeals. The appellate court affirmed the decision on appeal. The Supreme Court reversed the appealed decision, and rendered judgment sentencing Compania Maritima to pay the following: (1) P30,000.00 as indemnity for death to the heirs of each of the victims; (2) P10,000.00 as Transportation Law, 2004 ( 146 )

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moral damages to the heirs of each of the victims; (3) P6,805.00 as actual damages divided among the petitioners as follows: heirs of Amparo Delos Santos and her deceased children, P2,000.00; heirs of Teresa Pamatian, P450.00; heirs of Diego Salem, P400.00; and Ruben Reyes, P2,955.00; (4) P10,000.00 as attorney’s fees; and (5) the costs. 1.

Article 587 of the Code of Commerce Article 587 of the Code of Commerce provides that “The ship agent shall also be civilly liable for indemnities in favor of third persons which may arise from the conduct of the captain in the care of the goods which he loaded on the vessel, but he may exempt himself therefrom by abandoning the vessel with all her equipment’s and the freight it may have earned during the voyage.” 2.

Liability of shipowner or agent confined to which he is entitled as to right to abandon Under Article 587 of the Code of Commerce, a shipowner or agent has the right of abandonment; and by necessary implication, his liability is confined to that which he is entitled as of right to abandon — “the vessel with all her equipment’s and the freight it may have earned during the voyage” (Yangco v. Laserna, et al., 73 Phil. 330, 332). 3.

Article 587 of the Code of Commerce still a good law; Reason Notwithstanding the passage of the New Civil Code, Article 587 of the Code of Commerce is still good law. The reason lies in the peculiar nature of maritime law is which is “exclusively real and hypothecary that operates to limit such liability to the value of the vessel, or to the insurance thereon, if any (Yangco v. Laserna, ibid). This rule is found necessary to offset against the innumerable hazards and perils of a sea voyage and to encourage shipbuilding and marine commerce. 4.

Application of the limited liability doctrine The limited liability doctrine applies not only to the goods but also in all cases like death or injury to passengers wherein the shipowner or agent may properly be held liable for the negligent or illicit acts of the captain (Yangco v. Laserna, ibid). Article 587 speaks only of situations where the fault or negligence is committed solely by the captain. In cases where the shipowner is likewise to be blamed, Article 587 does not apply (see Manila Steamship Co., Inc. v. Abdulhanan, et al., 100 Phil. 32, 38). Such a situation will be covered by the provisions of the New Civil Code on Common Carriers. 5. Extraordinary diligence in vigilance over goods and safety of passengers required of common carriers; Utmost diligence of very cautious persons in carrying passengers; Presumption of fault Owing to the nature of their business and for reasons of public policy, common carriers are tasked to observe extraordinary diligence in the vigilance over the goods and for the safety of its passengers (Article 1733, New Civil Code). Further, 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 a due regard for all the circumstances (Article 1755, New Civil Code). Whenever death or injury to a passenger occurs, common carriers are presumed to have been at fault or to have acted negligently unless they prove that they observed extraordinary diligence as prescribed by Articles 1733 and 1755 (Article 1756, New Civil Code). 6. Modern technology belie contention that Maritima did not have information as to typhoon Welming Modern technology belie Maritima’s contention that it did not have any information about typhoon ‘Welming’ until after the boat was already at sea. The Weather Bureau is now equipped with modern apparatus which enables it to detect any incoming atmospheric disturbances. During the periods of November 1-5, 1967, the Bureau issued a total of 17 warnings or advisories of typhoon ‘Welming’ to shipping companies. Considering the the late departure of the ship at 6:00 p.m. (instead of the scheduled 2:00 p.m. departure) on 2 November 1967, it is highly improbable that the Weather Bureau had not yet issued any

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typhoon bulletin at any time during the day to the shipping companies. Maritima submitted no convincing evidence to show this omission. 7. Ship’s captain aware of typhoon, Maritima duly informed; Maritima displayed lack of foresight and minimum concern for safety of passengers Herein, It cannot be true that he was apprised of the typhoon only at about 11:00 a.m. on 3 November 1967 when the Weather report was transmitted to him from the Weather Bureau at which time he plotted its position. For in his radiogram sent to Maritima’s office in Manila as early as 8:07 a.m. of 3 November 1967, he stated in the concluding portion “still observing weather condition.” thereby implicitly suggesting that he had known even before departure of the unusual weather condition. “ If the captain knew of the typhoon beforehand, it is inconceivable for Maritima to be totally in the dark of ‘Welming.’ In allowing the ship to depart late from Manila despite the typhoon advisories, Maritima displayed lack of foresight and minimum concern for the safety of its passengers taking into account the surrounding circumstances of the case. 8.

Maritima shares equally in ship captain’s negligence While the captain was negligent for overloading the ship, Maritima shares equally in his negligence. While M/V Mindoro was already cleared by the Bureau of Customs and the Coast Guard for departure at 2:00 p.m. the ship’s departure was, however, delayed for 4 hours. Maritima could not account for the delay because it neither checked from the captain the reasons behind the delay nor sent its representative to inquire into the cause of such delay. It was due to this interim that iindeed there is a great probability that unmanifested cargo (such as dump truck, 3 Toyota cars, steel bars, and 6,000 beer cases) and passengers (about 241 more than the authorized 193 passengers) were loaded during the 4 hour interval.” Perchance, a closer supervision could have prevented the overloading of the ship. Maritima could have directed the ship’s captain to immediately depart in view of the fact that as of 11:07 a.m. of 2 November 1967, the typhoon had already attained surface winds of about 240 kilometers per hour. Verily, if it were not for this delay, the vessel could have reached its destination and thereby have avoided the effects of the storm. This conclusion was buttressed by evidence that another ship, M/V Mangaren, an inter island vessel, sailed for New Washington, Aklan on 2 November 1967, ahead of M/V Mindoro and took the same route as the latter but it arrived safely. 9.

Seaworthiness; Necessity of installation of a radar Maritima presents evidence of the seaworthy condition of the ship prior to its departure to prove that it exercised extraordinary diligence in this case. M/V Mindoro was dry-docked for about a month. Necessary repairs were made on the ship. Life saving equipment and navigational instruments were installed. Maritima, however, could not present evidence that it specifically installed a radar which could have allowed the vessel to navigate safely for shelter during a storm. Consequently, the vessel was left at the mercy of ‘Welming’ in the open sea because although it was already in the vicinity of the Aklan river, it was unable to enter the mouth of Aklan River to get into New Washington, Aklan due to darkness and the Floripon Lighthouse at the entrance of the Aklan River was not functioning or could not be seen at all. With the impending threat of ‘Welming,’ an important device such as the radar could have enabled the ship to pass through the river and to safety. 10.

Storms and typhoons not strange occurrences Storms and typhoons are not strange occurrences. In 1967 alone before ‘Welming,’ there were about 17 typhoons that hit the country, the latest of which was typhoon Uring which occurred on October 20-25, which cost so much damage to lives and properties. 11.

Maritima’s negligence proximate cause of sinking of M/V Mindoro Maritima’s lack of extraordinary diligence coupled with the negligence of the captain were the proximate causes of the sinking of M/V Mindoro. Hence, Maritima is liable for the deaths and injury of the victims.

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12.

Trial court generally fix amount of damages; Exceptions Ordinarily, the Supreme Court would remand the case to the trial court for the reception of evidence. Considering however, that the case has been pending for almost 23 years and that since all the evidence had already been presented by both parties and received by the trial court, the Supreme Court resolved to decide the corresponding damages due to petitioners (see Samal v. Court of Appeals, 99 Phil. 230; Del Castillo v. Jaymalin, L-28256, March 17, 1982, 112 SCRA 629). 13.

Amount of damages for the death of passenger caused by breach of contract of carriage Under Article 1764 in relation to Article 2206 of the New Civil Code, the amount of damages for the death of a passenger caused by the breach of contract by a common carrier is at least P3,000.00. The prevailing jurisprudence has increased the amount of P3,000.00 to P30,000.00 (De Lima v. Laguna Tayabas Co., L-35697-99, April 15, 1988, 160 SCRA 70). Consequently, Maritima should pay the civil indemnity of P30,000.00 to the heirs of each of the victims. For mental anguish suffered due to the deaths of their relatives, Maritima should also pay to the heirs the sum of P10,000.00 each as moral damages. 14.

Actual damages In addition, at the time of death, (1) Amparo delos Santos had with her cash in the sum of P1,000.00 and personal belongings valued at P500.00; (2) Teresa Pamatian, cash in the sum of P250.00 and personal belongings worth P200.00; and (3) Diego Salem, cash in the sum of P200.00 and personal belongings valued at P100.00. Likewise, the heirs of Amparo delos Santos and her deceased children incurred transportation and incidental expenses in connection with the trial in the amount of P500.00 while Dominador Salem, son of victim Diego Salem and nephew of victim Teresa Pamatian spent about P100.00 for expenses at the trial. With respect to Reyes, the evidence shows that at the time of the disaster, he had in his possession cash in the sum of P2,900.00 and personal belongings worth P100.00. Further, due to the disaster, Reyes was unable to work for 3 months due to shock and he was earning P9.50 a day or in a total sum of P855.00. He also spent about P100.00 for court expenses. For such losses and incidental expenses at the trial of the case, Maritima should pay the amounts to the petitioners as actual damages. 15. Moral damages not due; Exception to rule that moral damages not recoverable in action based on breach of contract Reyes’ claim for moral damages cannot be granted inasmuch as the same is not recoverable in damage action based on the breach of contract of transportation under Articles 2219 and 2220 of the New Civil Code except (1) where the mishap resulted in the death of a passenger and (2) where it is proved that the carrier was guilty of fraud or bad faith, even if death does not result (Rex Taxicab Co., Inc. v. Bautista, 109 Phil. 712). The exceptions do not apply in the present case since Reyes survived the incident and no evidence was presented to show that Maritima was guilty of bad faith. Mere carelessness of the carrier does not per se constitute or justify an inference of malice or bad faith on its part (Rex Taxicab Co., Inc. v. Bautista, supra). 16.

Exemplary damages not due Anent the claim for exemplary damages, the Court is not inclined to grant the same in the absence of gross or reckless negligence in this case. 17.

Attorney’s fees As regards the claim for attorney’s fees, the records reveal that the petitioners engaged the services of a lawyer and agreed to pay the sum of P3,000.00 each on a contingent basis. In view thereof, The Court finds the sum of P10,000.00 as a reasonable compensation for the legal services rendered. [56] International Department Store vs. Jabellana

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[57] Compania Maritima vs. CA (GR L-31379, 29 August 1988) Third Division, Fernan (J): 4 concur Facts: Vicente E. Concepcion, a civil engineer doing business under the name and style of Consolidated Construction with office address at Room 412, Don Santiago Bldg., Taft Avenue, Manila, had a contract with the Civil Aeronautics Administration (CAA) sometime in 1964 for the construction of the airport in Cagayan de Oro City, Misamis Oriental. Being a Manila-based contractor, Concepcion had to ship his construction equipment to Cagayan de Oro City. Having shipped some of his equipment through Compania Maritima and having settled the balance of P2,628.77 with respect to said shipment, Concepcion negotiated anew with Concepcion, thru its collector, Pacifico Fernandez, on 28 August 1964 for the shipment to Cagayan de Oro City of 1 unit payloader, 4 units 6x6 Reo trucks and 2 pieces of water tanks. He was issued Bill of Lading 113 on the same date upon delivery of the equipment at the Manila North Harbor. These equipment were loaded aboard the MV Cebu in its Voyage 316, which left Manila on 30 August 1964 and arrived at Cagayan de Oro City in the afternoon of 1 September 964. The Reo trucks and water tanks were safely unloaded within a few hours after arrival, but while the payloader was about 2 meters above the pier in the course of unloading, the swivel pin of the heel block of the port block of Hatch 2 gave way, causing the payloader to fall. The payloader was damaged and was thereafter taken to Compania Maritima’s compound in Cagayan de Oro City. On 7 September 1964, Consolidated Construction, thru Concepcion, wrote Compania Maritima to demand a replacement of the payloader which it was considering as a complete loss because of the extent of damage. Consolidated Construction likewise notified Compania Maritima of its claim for damages. Unable to elicit response, the demand was repeated in a letter dated 2 October 1964. Meanwhile, Compania Maritima shipped the payloader to Manila where it was weighed at the San Miguel Corporation. Finding that the payloader weighed 7.5 tons and not 2.5 tons as declared in the Bill of Lading, Compania Maritima denied the claim for damages of Consolidated Construction in its letter dated 7 October 1964, contending that had Concepcion declared the actual weight of the payloader, damage to their ship as well as to his payloader could have been prevented. To replace the damaged payloader, Consolidated Construction in the meantime bought a new one at P45,000.00 from Bormaheco, Inc. on 3 December 1964. On 6 July 1965, Concepcion filed an action for damages against Compania Maritima with the then CFI of Manila (Branch VII, Civil Case 61551), seeking to recover damages in the amount of P41,225.00 allegedly suffered for the period of 97 days that he was not able to employ a payloader in the construction job at the rate of P450.00 a day; P34,000.00 representing the cost of the damaged payloader; P11,000.00 representing the difference between the cost of the damaged payloader and that of the new payloader; P20,000.00 representing the losses suffered by him due to the diversion of funds to enable him to buy a new payloader; P10,000.00 as attorney’s fees; P5,000.00 as exemplary damages; and cost of the suit. After trial, the then CFI dismissed on 24 April 1968 the complaint with costs against Concepcion, stating that the proximate cause of the fall of the payloader was Concepcion’s act or omission in having misrepresented the weight of the payloader as 2.5 tons, which underdeclaration was intended to defraud Compañia Maritima of the payment of the freight charges and which likewise led the Chief Officer of the vessel to use the heel block of hatch 2 in unloading the payloader. From the adverse decision against him, Concepcion appealed to the Court of Appeals which, on 5 December 1965 rendered a decision, reversing the trial court, and ordering Compania Maritima to pay unto Concepcion the sum in damages of P24,652.07 with legal interest from the date the decision shall have become final; and declared the payloader abandoned to Compania Maritima; with costs against the latter. Hence, the petition for review on certiorari.

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The Supreme Court denied the petition; affirmed the decision of the Court of Appeals in all respects with costs against Compania Maritima, and in view of the length of time this case has been pending, ordered that the decision is immediately executory. 1.

Article 1734 (3) NCC Paragraph 3 of Article 1734 of the Civil Code provides that “Common carriers are responsible for the loss, destruction, or deterioration of the goods, unless the same is due to any of the following causes only: xxx “(3) Act or omission of the shipper or owner of the goods.” 2.

General rule under Articles 1735 and 1752 NCC; Negligence presumed The general rule under Articles 1735 and 1752 of the Civil Code is that common carriers are presumed to have been at fault or to have acted negligently in case the goods transported by them are lost, destroyed or had deteriorated. To overcome the presumption of liability for the loss, destruction or deterioration of the goods under Article 1735, the common carriers must prove that they observed extraordinary diligence as required in Article 1733 of the Civil Code. The responsibility of observing extraordinary diligence in the vigilance over the goods is further expressed in Article 1734 of the same Code. 3.

Burden of proof incumbent on common carrier Corollary is the rule that 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. 4.

Rationale for the requirement of extraordinary diligence; Article 1733 NCC Extraordinary diligence is required of common carriers in the vigilance over the goods transported by them by virtue of the nature of their business, which is impressed with a special public duty. Article 1733 of the Civil Code provides that “Common carriers, from the nature of their business and for reason of public policy, are bound to observe extraordinary diligence in the vigilance over the goods and for the safety of the passengers transported by them according to all the circumstances of each case. Such extraordinary diligence in the vigilance over the goods is further expressed in Articles 1734, 1735 and 1745, Nos. 5, 6 and 7…” 5.

Precaution required of common carrier to avoid damage or destruction to goods 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 characteristic of goods tendered for shipment, and to exercise due care in the handling and stowage, including such methods as their nature requires.” Under Article 1736 of the Civil Code, the responsibility to observe extraordinary diligence commences and lasts from the time the goods are unconditionally placed in the possession of, and received by the carrier for transportation until the same are delivered, actually or constructively, by the carrier to the consignee, or to the person who has the right to receive them without prejudice to the provisions of Article 1738. 6. Compania Maritima negligent due to its laxity and carelessness in method to ascertain weight of heavy cargoes Herein, there was laxity and carelessness among Compania Maritima’s crew in their methods of ascertaining the weight of heavy cargoes offered for shipment before loading and unloading them, as is customary among careful persons. The weight submitted by shipper Concepcion as an addendum to the original enumeration of equipment to be shipped was entered into the bill of lading by Compania Maritima, Transportation Law, 2004 ( 151 )

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thru Pacifico Fernandez, a company collector, without seeing the equipment to be shipped. Mr. Mariano Gupana, assistant traffic manager of Maritima Compania, confirmed that the company never checked the information entered in the bill of lading. Worse, the weight of the payloader as entered in the bill of lading was assumed to be correct by Mr. Felix Pisang, Chief Officer of MV Cebu. The weights stated in a bill of lading are prima facie evidence of the amount received and the fact that the weighing was done by another will not relieve the common carrier where it accepted such weight and entered it on the bill of lading. Besides, common carriers can protect themselves against mistakes in the bill of lading as to weight by exercising diligence before issuing the same. 7.

Compania Maritima negligent in using 5-ton capacity lifting apparatus to unload payloader Herein, Compania Maritima failed to take the necessary and adequate precautions for avoiding damage to, or destruction of, the payloader entrusted to it for safe carriage and delivery to Cagayan de Oro City. It used a 5-ton capacity lifting apparatus to lift and unload a visibly heavy cargo like a payloader. Mr. Felix Pisang, Chief Officer of the MV Cebu, took the bill of lading on its face value and presumed the same to be correct by merely “seeing’ it. Acknowledging that there was a “jumbo” in the MV Cebu which has the capacity of lifting 20 to 25 ton cargoes, Mr. Felix Pisang chose not to use it, because according to him, since the ordinary boom has a capacity of 5 tons while the payloader was only 2.5 tons, he did not bother to use the “jumbo” anymore. 8.

Misdeclaration as to weight not an excuse for common carrier to avoid liability Herein, Concepcion’s act of furnishing Compania Maritima with an inaccurate weight of the payloader cannot be used by the latter as an excuse to avoid liability for the damage caused, as the same could have been avoided had the latter utilized the “jumbo” lifting apparatus which has a capacity of lifting 20 to 25 tons of heavy cargoes. It is a fact known to the Chief Officer of MV Cebu that the payloader was loaded aboard the MV Cebu at the Manila North Harbor on 28 August 1964 by means of a terminal crane. Even if Compania Maritima chose not to take the necessary precaution to avoid damage by checking the correct weight of the payloader, extraordinary care and diligence compel the use of the “jumbo” lifting apparatus as the most prudent course for Compania Maritima. 9.

Article 1741; Contributory negligence Article 1741 of the Code provides that “If the shipper or owner merely contributed to the loss, destruction or deterioration of the goods, the proximate cause thereof being the negligence of the common carrier, the latter shall be liable in damages, which however, shall be equitably reduced.” 10.

Contributory negligence of shipper mitigates liability of common carrier While Concepcion’s act of furnishing Compania Maritima with an inaccurate weight of the payloader cannot successfully be used as an excuse by the latter to avoid liability to the damage thus caused, said act constitutes a contributory circumstance to the damage caused on the payloader, which mitigates the liability for damages of the latter. 11.

Award of recoverable amount of damages reduced The conclusion of the Court of Appeals – reducing the recoverable amount of damages by 20% or 1/5 of the value of the payloader, valued at P34,000.00, thereby reducing the recoverable amount at 80% or 4/5 of P34,000.00 or the sum of P27,200.00 – was equitable. Considering that the freight charges for the entire cargoes shipped by Concepcion amounting to P2,318.40 remained unpaid, the same would be deducted from the P27,000.00 plus an additional deduction of P228.63 representing the freight charges for the undeclared weight of 5 tons (difference between 7.5 and 2.5 tons) leaving, therefore, a final recoverable amount of damages of P24,652.97 due to Concepcion. 12. Assignment of errors by appellee only to maintain judgment on other grounds; Appeal required to modify or reverse judgment Transportation Law, 2004 ( 152 )

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It is well-settled that an appellee, who is not an appellant, may assign errors in his brief where his purpose is to maintain the judgment on other grounds, but he may not do so if his purpose is to have the judgment modified or reversed, for, in such case, he must appeal. Herein, since Concepcion did not appeal from the judgment insofar as it limited the award of damages due him, the reduction of 20% or 1/5 of the value of the payloader stands. [58] Ganzon vs. CA, see [41] [59] HE Heacock vs. Macondray (GR 16598, 3 October 1921) Second Division, Johnson (J): 4 concur Facts: On 5 June 1919, HE Heacock caused to be delivered on board the steamship Bolton Castle, then in the harbor of New York, 4 cases of merchandise one of which contained 12 8-day Edmond clocks, properly boxed and marked for transportation to Manila, and paid freight on said clocks from New York to Manila in advance. The said steamship arrived in the port of Manila on or about the 10 September 1919, consigned to Macondray & Co. Inc. as agent and representative of said vessel in said port. Neither the master of said vessel nor Macondray, as its agent, delivered to HE Heacock the 12 8-day Edmond clocks, although demand was made upon them for their delivery. The invoice value of the said 12 8-day Edmond clocks in the city of New York was P22 and the market value of the same in the City of Manila at the time when they should have been delivered to HE Heacock was P420. The case containing the 12 8-day Edmond clocks measured 3 cubic feet, and the freight ton value thereof was $1,480. No greater value than $500 per freight ton was declared by HE Heacock on the clocks, and no ad valorem freight was paid thereon. On 9 October 1919, Macondray tendered to HE Heacock P76.36, the proportionate freight ton value of the aforesaid 12 8-day Edmond clocks, in payment of HE Heacock’s claim, which tender HE Heacock rejected. HE Heacock commenced in the CFi of Manila an action to recover the sum of P420 together with interest thereon. The lower court rendered judgment in favor of HE Heacock against Macondray for the sum of P226.02, this being the invoice value of the clocks in question plus the freight and insurance thereon, with legal interest thereon from 20 November 1919, the date of the complaint, together with costs. From that judgment both parties appealed to the Supreme Court. The Supreme Court affirmed the judgment appealed from, without any finding as to costs. 1.

Contents of the Bill of Lading The bill of lading issued and delivered to HE Heacock by the master of the said steamship Bolton Castle contained, among others, the following clauses: (1) It is mutually agreed that the value of the goods receipted for above does not exceed $500 per freight ton, or, in proportion for any part of a ton, unless the value be expressly stated herein and ad valorem freight paid thereon. xxx (9) Also, that in the event of claims for short delivery of, or damage to, cargo being made, the carrier shall not be liable for more than the net invoice price plus freight and insurance less all charges saved, and any loss or damage for which the carrier may be liable shall be adjusted pro rata on the said basis.” 2.

Three kinds of stipulations often found in a bill of lading Three kinds of stipulations have often been made in a bill of lading. The first is one exempting the carrier from any and all liability for loss or damage occasioned by its own negligence. The second is one providing for an unqualified limitation of such liability to an agreed valuation. And the third is one limiting the liability of the carrier to an agreed valuation unless the shipper declares a higher value and pays a higher rate of freight. According to an almost uniform weight of authority, the first and second kinds of stipulations are invalid as being contrary to public policy, but the third is valid and enforceable.

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3. Authorities supporting invalidity of absolute exemption from liability and unqualified limitation to an agreed valuation The Harter Act (Act of Congress of 13 February 1893), Louisville Ry. Co. vs. Wynn (88 Tenn., 320), and Galt vs. Adams Express Co. (4 McAr., 124; 48 Am. Rep., 742) support the proposition that the first and second stipulations in a bill of lading are invalid which either exempt the carrier from liability for loss or damage occasioned by its negligences or provide for an unqualified limitation of such liability to an agreed valuation. 4.

Hart vs. Pennsylvania RR Co. In the case of Hart vs. Pennsylvania R. R. Co., it was held that “where a contract of carriage, signed by the shipper, is fairly made with a railroad company, agreeing on a valuation of the property carried, with the rate of freight based on the condition that the carrier assumes liability only to the extent of the agreed valuation, even in case of loss or damage by the negligence of the carrier, the contract will be upheld as proper and lawful mode of recurring a due proportion between the amount for which the carrier may be responsible and the freight he receives, and protecting himself against extravagant and fanciful valuations.” 5.

Union Pacific Railway Co. vs. Burke In the case of Union Pacific Railway Co. vs. Burke, the court said: “In many cases, from the decision in Hart vs. Pennsylvania R. R. Co. (112 U. S., 331; 28 L. ed., 717; 5 Sup. Ct. Rep., 151, decided in 1884), to Boston & M. R. Co. vs. Piper (246 U. S., 439; 62 L. ed., 820; 38 Sup. Ct. Rep., 354; Ann. Cas. 1918 E, 469, decided in 1918), it has been declared to be the settled Federal law that if a common carrier gives to a shipper the choice of two rates, the lower of them conditioned upon his agreeing to a stipulated valuation of his property in case of loss, even by the carrier’s negligence, if the shipper makes such a choice, understandingly and freely, and names his valuation, he cannot thereafter recover more than the value which he thus places upon his property As a matter of legal distinction, estoppel is made the basis of this ruling, — that, having accepted the benefit of the lower rate, in common honesty the shipper may not repudiate the conditions on which it was obtained, — but the rule and the effect of it are clearly established.” 6.

Limited Liability of a Carrier, based upon an agreed value, not contrary to public policy A carrier may not, by a valuation agreement with a shipper, limit its liability in case of the loss by negligence of an interstate shipment to less than the real value thereof, unless the shipper is given a choice of rates, based on valuation. A limitation of liability based upon an agreed value to obtain a lower rate does not conflict with any sound principle of public policy; and it is not conformable to plain principle of justice that a shipper may understate value in order to reduce the rate and then recover a larger value in case of loss. 7.

Clauses 1 and 9 falls within third kind of stipulation; Article 1255 NCC A reading of clauses 1 and 9 of the bill of lading clearly shows that the present case falls within the third stipulation, to wit: That a clause in a bill of lading limiting the liability of the carrier to a certain amount unless the shipper declares a higher value and pays a higher rate of freight, is valid and enforceable. This proposition is supported by a uniform lien of decisions of the Supreme Court of the United States rendered both prior and subsequent to the passage of the Harter Act, from the case of Hart vs. Pennsylvania R. R. Co. (decided Nov. 24, 1884; 112 U. S., 331), to the case of the Union Pacific Ry. Co. vs. Burke (decided Feb. 28, 1921, Advance Opinions, 1920-1921, p. 318). Clauses 1 and 9 are not contrary to public order. Article 1255 of the Civil Code provides that “the contracting parties may establish any agreements, terms and conditions they may deem advisable, provided they are not contrary to law, morals or public order.” Said clauses of the bill of lading are, therefore, valid and binding upon the parties thereto. 8. Irreconcilable conflict between Clauses 1 and 9 with regard to the measure of Macondray’s liability Whereas clause 1 contains only an implied undertaking to settle in case of loss on the basis of not exceeding $500 per freight ton, clause 9 contains an express undertaking to settle on the basis of the net Transportation Law, 2004 ( 154 )

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invoice price plus freight and insurance less all charges saved. “Any loss or damage for which the carrier may be liable shall be adjusted pro rata on the said basis,” clause 9 expressly provides. It seems that there is an irreconcilable conflict between the two clauses with regard to the measure of Macondray’s liability. It is difficult to reconcile them without doing violence to the language used and reading exceptions and conditions into the undertaking contained in clause 9 that are not there. 9.

A contract, in case of doubt, be interpreted against the party who drew the contract The bill of lading should be interpreted against the carrier, which drew said contract. “A written contract should, in case of doubt, be interpreted against the party who has drawn the contract.” (6 R. C. L., 854.) It is a well-known principle of construction that ambiguity or uncertainty in an agreement must be construed most strongly against the party causing it. (6 R. C. L., 855.) These rules are applicable to contracts contained in bills of lading. “In construing a bill of lading given by the carrier for the safe transportation and delivery of goods shipped by a consignor, the contract will be construed most strongly against the carrier, and favorably to the consignor, in case of doubt in any matter of construction.” (Alabama, etc. R. R. Co. vs. Thomas, 89 Ala., 294; 18 Am. St. Rep., 119.) [60] St. Paul Fire & Marine Insurance vs. Macondray (GR L-27795, 25 March 1976) Second Division, Antonio (J): 4 concur, 1 on leave, 1 designated to sit in second division Facts: On 29 June 1960, Winthrop Products, Inc., of New York, New York, U.S.A., shipped aboard the SS “Tai Ping”, owned and operated by Wilhelm Wilhelmsen, 218 cartons and drums of drugs and medicine, with the freight prepaid, which were consigned to Winthrop-Steams, Inc., Manila, Philippines. Barber Steamship Lines, Inc., agent of Wilhelm Wilhelmsen issued Bill of Lading 34, in the name of Winthrop Products, Inc. as shipper, with arrival notice in Manila to consignee Winthrop-Stearns, Inc., Manila, Philippines. The shipment was insured by the shipper against loss and/or damage with the St. Paul Fire & Marine Insurance Company under its insurance Special Policy OC-173766 dated 23 June 1960. On 7 August 1960, the SS “Tai Ping” arrived at the Port of Manila and discharged its shipment into the custody of Manila Port Service, the arrastre contractor for the Port of Manila. The said shipment was discharged complete and in good order with the exception of 1 drum and several cartons which were in bad order condition. Because consignee failed to receive the whole shipment and as several cartons of medicine were received in bad order condition, the consignee filed the corresponding claim in the amount of P1,109.67 representing the C.I.F. value of the damaged drum and cartons of medicine with the carrier, and the Manila Port Service. However, both refused to pay such claim. Consequently, the consignee filed its claim with the insurer, St. Paul Fire & Marine Insurance Co., and the insurance company, on the basis of such claim, paid to the consignee the insured value of the lost and damaged goods, including other expenses in connection therewith, in the total amount of $1,134.46. On 5 August 1961, as subrogee of the rights of the shipper and/or consignee, the insurer, St. Paul Fire & Marine Insurance, instituted with the CFI of Manila an action against Macondray & Co., Barber Steamship Lines, Wilhelm Wilhelmsen, Manila Port Service and/or Manila Railroad Company for the recovery of said amount of $1,134.46, plus costs. After due trial, the lower court, on 10 March 1965 rendered judgment ordering Macondray & Co., Inc., Barber Steamship Lines, Inc. and Wilhelm Wilhelmsen to pay to the insurance company, jointly and severally, the sum of P300.00, with legal interest thereon from the filing of the complaint until fully paid, and Manila Railroad Company and Manila Port Service to pay to the insurance company, jointly and severally, the sum of P809.67, with legal interest thereon from the filing of the complaint until fully paid, the costs to be borne by all the defendants. On 12 April 1965, the insurance company, contending that it should recover the amount of $1,134.46, or its equivalent in pesos at the rate of P3.90, instead of P2.00, for every US$1.00, filed a motion for reconsideration, but this was denied by the lower court on 5 May 1965. Hence, the appeal. Transportation Law, 2004 ( 155 )

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The Court of Appeals certified the case to the Supreme Court on the ground that the appeal involves purely questions of law. The Supreme Court affirmed the appealed decision, with costs against the insurance company. 1.

Purpose of the bill of lading; Limited Liability of Carrier The purpose of the bill of lading is to provide for the rights and liabilities of the parties in reference to the contract to carry. The stipulation in the bill of lading limiting the common carrier’s liability to the value of the goods appearing in the bill, unless the shipper or owner declares a greater value, is valid and binding. 2.

Limited Liability clause sanctioned by freedom of parties to stipulate; Requisites for validity This 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. A stipulation fixing or limiting the sum that may be recovered from the carrier on the loss or deterioration of the goods is valid, provided it is (a) reasonable and just under the circumstances, and (b) has been fairly and freely agreed upon. 3.

Liability limited to CIF value of the goods Herein, the liabilities of Macondray, etc. with respect to the lost or damaged shipments are expressly limited to the C.I.F. value of the goods as per contract of sea carriage embodied in the bill of lading, which reads: “Whenever the value of the goods is less than $500 per package or other freight unit, their value in the calculation and adjustment of claims for which the Carrier may be liable shall for the purpose of avoiding uncertainties and difficulties in fixing value be deemed to be the invoice value, plus freight and insurance if paid, irrespective of whether any other value is greater or less. The limitation of liability and other provisions herein shall inure not only to the benefit of the carrier, its agents, servants and employees, but also to the benefit of any independent contractor performing services including stevedoring in connection with the goods covered hereunder.” (Paragraph 17) 4.

Shipper and consignee bound by stipulations It is not pretended that the conditions are unreasonable or were not freely and fairly agreed upon. The shipper and consignee are, therefore, bound by such stipulations since it is expressly stated in the bill of lading that in “accepting this Bill of Lading, the shipper, owner and consignee of the goods, and the holder of the Bill of Lading agree to be bound by all its stipulations, exceptions and conditions, whether written, stamped or printed, as fully as if they were all signed by such shipper, owner, consignee or holder.” It is obviously for this reason that the consignee filed its claim against the Macondray, etc. on the basis of the C.I.F. value of the lost or damaged goods in the aggregate amount of P1,109.67. 5.

Right of subrogation Herein, St. Faul Fire Insurance, as insurer, after paying the claim of the insured for damages under the insurance, is subrogated merely to the rights of the assured. As subrogee, it can recover only the amount that is recoverable by the latter. Since the right of the assured, in case of loss or damage to the goods, is limited or restricted by the provisions in the bill of lading, a suit by the insurer as subrogee necessarily is subject to like limitations and restrictions. The insurer after paying the claim of the insured for damages under the insurance is subrogated merely to the rights of the insured and therefore can necessarily recover only that to what was recoverable by the insured. Upon payment for a total loss of goods insured, the insurance is only subrogated to such rights of action as the assured has against 3rd persons who caused or are responsible for the loss. The right of action against another person, the equitable interest in which passes to the insurer, being only that which the assured has, it follows that if the assured has no such right of action, none passes to the insurer, and if the assured’s right of action is limited or restricted by lawful contract between him and the person sought to be made responsible for the loss, a suit by the insurer, in the right of the assured, is subject to like limitations or restrictions. Transportation Law, 2004 ( 156 )

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6.

Obligation of carrier commenced on date it failed to deliver shipment in good condition The contention of the insurance company – that because of extraordinary inflation, it should be reimbursed for its dollar payments at the rate of exchange on the date of the judgment and not on the date of the loss or damage – is untenable. The obligation of the carrier to pay for the damage commenced on the date it failed to deliver the shipment in good condition to the consignee. Herein, the C.I.F. Manila value of the goods which were lost or damaged, according to the claim of the consignee dated 26 September 1960 is $226.37 (for the pilferage) and $324.33 (shortlanded) or P456.14 and P653.53, respectively. The peso equivalent was based by the consignee on the exchange rate of P2.015 to $1.00 which was the rate existing at that time. The trial court committed no error in adopting the aforesaid rate of exchange. [61] Valenzuela Hardwood and Industrial vs. CA (GR 102316, 30 June 1997) Third Division, Panganiban (J): 4 concur Facts: On 16 January 1984, Valenzuela Hardwood and Industrial Supply, Inc. (VHIS) entered into an agreement with the Seven Brothers whereby the latter undertook to load on board its vessel M/V Seven Ambassador the former’s lauan round logs numbering 940 at the port of Maconacon, Isabela for shipment to Manila. On 20 January 1984, VHIS insured the logs against loss and/or damage with South Sea Surety and Insurance Co., Inc. for P2,000,000.00 and the latter issued its Marine Cargo Insurance Policy 84/24229 for P2,000,000.00 on said date. On 24 January 1984, VHIS gave the check in payment of the premium on the insurance policy to Mr. Victorio Chua. In the meantime, the said vessel M/V Seven Ambassador sank on 25 January 1984 resulting in the loss of VHIS’ insured logs. On 30 January 1984, a check for P5,625.00 to cover payment of the premium and documentary stamps due on the policy was tendered due to the insurer but was not accepted. Instead, the South Sea Surety cancelled the insurance policy it issued as of the date of the inception for non-payment of the premium due in accordance with Section 77 of the Insurance Code. On 2 February 1984, VHIS demanded from South Sea Surety the payment of the proceeds of the policy but the latter denied liability under the policy. VHIS likewise filed a formal claim with Seven Brothers for the value of the lost logs but the latter denied the claim. Raised in the trial court, the Regional Trial Court of Valenzuela, Metro Manila (Branch 171), after due hearing and trial, ordered South Sea Surety to pay VHIS the sum P2,000,000.00 representing the value of the policy of the lost logs with legal interest thereon from the date of demand on 2 February 1984 until the amount is fully paid or in the alternative, Seven Brothers to pay VHIS the amount of P2,000,000.00 representing the value of lost logs plus legal interest from the date of demand on 24 April 1984 until full payment thereof; the reasonable attorney’s fees in the amount equivalent to 5% of the amount of the claim and the costs of the suit. The Court also ordered VHIS to pay Seven Brothers the sum of P230,000.00 representing the balance of the stipulated freight charges; and dismissed the counterclaim of South Sea Surety. Both Seven Brothers and South Sea Surety appealed. The Court of Appeals, on 15 October 1991, affirmed the judgment except as to the liability of Seven Brothers to VHIS. South Sea Surety and VHIS filed separate petitions for review before the Supreme Court. In a Resolution dated 2 June 1995, the Supreme Court denied the petition of South Sea Surety. There the Court found no reason to reverse the factual findings of the trial court and the Court of Appeals that Chua was indeed an authorized agent of South Sea when he received Valenzuela’s premium payment for the marine cargo insurance policy which was thus binding on the insurer. The present decision concerns itself to the petition for review filed by VHIS.

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The Supreme Court denied the petition for its utter failure to show any reversible error on the part of the appellate court, and affirmed the assailed decision. 1.

Validity of Stipulation is Lis Mota The charter party between VHIS and Seven Brothers stipulated that the “owners shall not be responsible for loss, split, short-landing, breakages and any kind of damages to the cargo.” The validity of this stipulation is the lis mota of the present case. 2.

Proximate cause of sinking of M/V Seven Ambassadors The proximate cause of the sinking of M/V Seven Ambassadors resulting in the loss of its cargo was the “snapping of the iron chains and the subsequent rolling of the logs to the portside due to the negligence of the captain in stowing and securing the logs on board the vessel and not due to fortuitous event.” 3.

Article 1745 NCC Article 1745 of the Civil Code provides that “any of the following or similar stipulations shall be considered unreasonable, unjust and contrary to public policy: (1) That the goods are transported at the risk of the owner or shipper; (2) That the common carrier will not be liable for any loss, destruction, or deterioration of the goods; (3) That the common carrier need not observe any diligence in the custody of the goods; (4) That the common carrier shall exercise a degree of diligence less than that of a good father of a family, or of a man of ordinary prudence in the vigilance over the movables transported; (5) That the common carrier shall not be responsible for the acts or omissions of his or its employees; (6) That the common carrier’s liability for acts committed by thieves, or of robbers who do not act with grave or irresistible threat, violence or force, is dispensed with or diminished; (7) That the common carrier is not responsible for the loss, destruction, or deterioration of goods on account of the defective condition of the car, vehicle, ship, airplane or other equipment used in the contract of carriage.” 3. Status of Seven Brothers as a private carrier undisputed; Common carriers provision may not be applied unless expressly stipulated in charter party It is undisputed that Seven Brothers had acted as a private carrier in transporting VHIS’ lauan logs. Thus, Article 1745 and other Civil Code provisions on common carriers may not be applied unless expressly stipulated by the parties in their charter party. Unlike in a contract involving a common carrier, private carriage does not involve the general public. Hence, the stringent provisions of the Civil Code on common carriers protecting the general public cannot justifiably be applied to a ship transporting commercial goods as a private carrier. Consequently, the public policy embodied therein is not contravened by stipulations in a charter party that lessen or remove the protection given by law in contacts involving common carriers. 4.

Parties may stipulate responsibility rests solely on charterer; Article 1306 NCC In a contract of private carriage, the parties may validly stipulate that responsibility for the cargo rests solely on the charterer, exempting the shipowner from liability for loss of or damage to the cargo caused even by the negligence of the ship captain. Pursuant to Article 1306 of the Civil Code, such stipulation is valid because it is freely entered into by the parties and the same is not contrary to law, morals, good customs, public order, or public policy. Indeed, their contract of private carriage is not even a contract of adhesion. In a contract of private carriage, the parties may freely stipulate their duties and obligations which perforce would be binding on them. 5. Home Insurance vs. American Steamship Agencies; Where the reason for the rule ceases, the rule itself does not apply In Home Insurance Co. vs. American Steamship Agencies, Inc., the trial court similarly nullified a stipulation identical to that involved in the present case for being contrary to public policy based on Article 1744 of the Civil Code and Article 587 of the Code of Commerce. Consequently, the trial court held the shipowner liable for damages resulting from the partial loss of the cargo. This Court reversed the trial court Transportation Law, 2004 ( 158 )

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and laid down the well-settled observation and doctrine that “the provisions of our Civil Code on common carriers were taken from Anglo-American law. Under American jurisprudence, a common carrier undertaking to carry a special cargo or chartered to a special person only, becomes a private carrier. As a private carrier, a stipulation exempting the owner from liability for the negligence of its agent is not against public policy, and is deemed valid.“ The Court finds such doctrine reasonable. “The Civil Code provisions on common carriers should not be applied where the carrier is not acting as such but as a private carrier. The stipulation in the charter party absolving the owner from liability for loss due to the negligence of its agent would be void only if the strict public policy governing common carriers is applied. Such policy has no force where the public at large is not involved, as in this case of a ship totally chartered for the use of a single party.” 6. Nature of contract of transportation between public and common carriers; Private charterer not similarly situated as public The general public enters into a contract of transportation with common carriers without a hand or a voice in the preparation thereof. The riding public merely adheres to the contract; even if the public wants to, it cannot submit its own stipulations for the approval of the common carrier. Thus, the law on common carriers extends its protective mantle against one-sided stipulations inserted in tickets, invoices or other documents over which the riding public has no understanding or, worse, no choice. Compared to the general public, a charterer in a contract of private carriage is not similarly situated. It can, and in fact it usually does, enter into a free and voluntary agreement. In practice, the parties in a contract of private carriage can stipulate the carrier’s obligations and liabilities over the shipment which, in turn, determine the price or consideration of the charter. Thus, a charterer, in exchange for convenience and economy, may opt to set aside the protection of the law on common carriers. When the charterer decides to exercise this option, he takes a normal business risk. 7.

Home Insurance case applicable in present case The case of Home Insurance specifically dealt with “the liability of the shipowner for acts or negligence of its captain and crew” and a charter party stipulation which “exempts the owner of the vessel from any loss or damage or delay arising from any other source, even from the neglect or fault of the captain or crew or some other person employed by the owner on board, for whose acts the owner would ordinarily be liable except for said paragraph.” Undoubtedly, Home Insurance is applicable to the present case. 8. Application of American rule reasonable, as held in Home Insurance; Ruling in Home Insurance binding based on doctrine of stare decisis and Article 8 NCC The naked assertion of that the American rule enunciated in Home Insurance is not the rule in the Philippines deserves scant consideration, as the Court there categorically held that said rule was “reasonable” and proceeded to apply it in the resolution of that case. VHIS miserably failed to show such circumstances or arguments which would necessitate a departure from a well-settled rule. Consequently, the ruling in said case remains a binding judicial precedent based on the doctrine of stare decisis and Article 8 of the Civil Code which provides that “judicial decisions applying or interpreting the laws or the Constitution shall form part of the legal system of the Philippines.” 9.

Charter party waives right under Articles 586 and 587, Code of Commerce Whatever rights petitioner may have under Articles 586 and 587 of the Code of Commerce, which confer on the shipper the right to recover damages from the shipowner and ship agent for the acts or conduct of the captain, were waived when it entered into the charter party. 10.

Rights may be waived; Article 6 NCC Article 6 of the Civil Code provides that “rights may be waived, unless the waiver is contrary to law, public order, public policy, morals, or good customs, or prejudicial to a person with a right recognized by law.” As a general rule, patrimonial rights may be waived as opposed to rights to personality and family rights which may not be made the subject of waiver. Herein, being patently and undoubtedly patrimonial, VHIS’s Transportation Law, 2004 ( 159 )

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right conferred under said articles may be waived. This, VHIS did by acceding to the contractual stipulation that it is solely responsible for any damage to the cargo, thereby exempting Seven Brothers from any responsibility for loss or damage thereto. 11.

Article 1170 NCC Article 1170. of the Civil Code 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.” 12.

Article 1173 NCC Article 1173 of the Civil Code provides that “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, shall apply. If the law does not state the diligence which is to be observed in he performance, that which is expected of a good father of a family shall be required.” 13.

Articles 1170 and 1173 not applicable in present case Articles 1170 and 1173 are applicable only to the obligor or the one with an obligation to perform. Herein, Seven Brothers is not an obligor in respect of the cargo, for this obligation to bear the loss was shifted to VHIS by virtue of the charter party. This shifting of responsibility is not void. The provisions cited by VHIS are, therefore, inapplicable to the present case. 14.

Standard of ordinary diligence in private carriage; Article 362 of the Code of Commerce The factual milieu of the present case does not justify the application of the second paragraph of Article 1173 of the Civil Code which prescribes the standard of diligence to be observed in the event the law or the contract is silent. In Herein, Article 362 of the Code of Commerce provides the standard of ordinary diligence for the carriage of goods by a carrier. The standard of diligence under this statutory provision may, however, be modified in a contract or private carriage as VHIS and Seven Brothers had done in their charter party. 15.

Shewaram vs. PAL, and Ysmael vs. Gabino Barreto not applicable; Common carriers The cases of Shewaram and Ysmael both involve a common carrier; thus, they necessarily justify the application of such policy considerations and concomitantly stricter rules. The public policy considerations behind the rigorous treatment of common carriers are absent in the case of private carriers. Hence, the stringent laws applicable to common carriers are not applied to private carriers. 16.

Manila Railroad vs. Compania Transatlantica not applicable; Promise The case of Manila Railroad is inapplicable because the action for damages there does not involve a contract for transportation. Furthermore, the defendant therein made a “promise to use due care in the lifting operations” and, consequently, it was “bound by its undertaking”; besides, the exemption was intended to cover accidents due to hidden defects in the apparatus or other unforseeable occurrences” not caused by its “personal negligence.” This promise was thus construed to make sense together with the stipulation against liability for damages. Herein, Seven Brothers made no such promise. The agreement of the parties to exempt the shipowner from responsibility for any damage to the cargo and place responsibility over the same to VHIS is the lone stipulation considered. 17. Standard Oil of New York vs. Lopez Castelo, Smith vs. Cadwallader Gibson, NT Hashim vs. Rocha, Ohta vs. Steamship, Limpangco Sons vs. Yangco not applicable; Factual milieu Herein, VHIS points to Standard Oil Co. of New York vs. Lopez Costelo, Walter A. Smith & Co. vs. Cadwallader Gibson Lumber Co., N. T . Hashim and Co. vs. Rocha and Co., Ohta Development Co. vs. Steamship “Pompey” and Limpangco Sons vs. Yangco Steamship Co. in support of its contention that the Transportation Law, 2004 ( 160 )

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shipowner be held liable for damages. 40 These however are not on all fours with the present case because they do not involve a similar factual milieu or an identical stipulation in the charter party expressly exempting the shipowner from responsibility for any damage to the cargo. 18. loss

Effect of the South Sea Resolution; Aggrieved party may recover deficient from person causing

As the validity of the questioned charter party stipulation was upheld and as VHIS may not recover from Seven Brother, the issue whether VHIS has a cause of action against Seven Brother as the Court affirmed the liability of South Sea Surety for the loss suffered by VHIS, is moot and academic. It suffices to state that the Resolution of the Court dated 2 June 1995 affirming the liability of South Sea does not, by itself, necessarily preclude VHIS from proceeding against Seven Brother. An aggrieved party may still recover the deficiency from the person causing the loss in the event the amount paid by the insurance company does not fully cover the loss. 19.

Article 2207 NCC Article 2207 of the Civil Code provides that “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.” [62] Sweet Line vs. Teves (GR L-37750, 19 May 1978) Second Division, Santos (J): 3 concur, 1 reserves vote Facts: Atty. Leovigildo Tandog and Rogelio Tiro, a contractor by professions, bought tickets 0011736 and 011737 for Voyage 90 on 31 December 1971 at the branch office of Sweet Line, Inc., a shipping company transporting inter-island passengers and cargoes, at Cagayan de Oro City. Tandog and Tiro were to board Sweet Line’s vessel, M/S “Sweet Hope” bound for Tagbilaran City via the port of Cebu. Upon learning that the vessel was not proceeding to Bohol, since many passengers were bound for Surigao, Tandog and Tiro per advice, went to the branch office for proper relocation to M/S “Sweet Town”. Because the said vessel was already filed to capacity, they were forced to agree “to hide at the cargo section to avoid inspection of the officers of the Philippine Coastguard.” Tandog and Tiro alleged that they were, during the trip,” “exposed to the scorching heat of the sun and the dust coming from the ship’s cargo of corn grits,” and that the tickets they bought at Cagayan de Oro City for Tagbilaran were not honored and they were constrained to pay for other tickets. In view thereof, Tandog and Tiro sued Sweet Line for damages and for breach of contract of carriage in the alleged sum of P110,000.00 before the CFI of Misamis Oriental. Sweet Line moved to dismiss the complaint on the ground of improper venue. The motion was denied by the trial court. Sweet Line moved to reconsider the order of denial, but to no avail. Hence, the petition for prohibition with preliminary injunction. The Supreme Court, in its resolution of 20 November 1973, restrained Judge Teves from proceeding further with the case and required Tandog and Tiro to comment. On 18 January 1974, the Court gave due course to the petition and required Tandog and Tiro to answer. Thereafter, the parties submitted their respective memoranda in support of their respective contentions. The Supreme Court dismissed the petition for prohibition; and lifted and set aside the restraining order issued on 20 November 1973; with costs against Sweet Line.

Transportation Law, 2004 ( 161 )

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1.

Condition printed at back of ticket, as to venue Condition 14 printed at the back of the tickets, reads “It is hereby agreed and understood that any and all actions arising out of the conditions and provisions of this ticket, irrespective of where it is issued, shall be filed in the competent courts in the City of Cebu.” 2.

Valid contract of carriage exists; Ticket best evidence of contract There was a valid contract of carriage entered into by Sweet Line and Tandog and Tiro and that the passage tickets, upon which the latter based their complaint, are the best evidence thereof. All the essential elements of a valid contract, i.e., consent, cause or consideration and object, are present. 3. Ticket issued has all elements of a written contract; Peralta de Guerrero, et al. v. Madrigal Shipping Co., Inc. It is a matter of common knowledge that whenever a passenger boards a ship for transportation from one place to another he is issued a ticket by the shipper which has all the elements of a written contract, Namely: (1) the consent of the contracting parties manifested by the fact that the passenger boards the ship and the shipper consents or accepts him in the ship for transportation; (2) cause or consideration which is the fare paid by the passenger as stated in the ticket; (3) object, which is the transportation of the passenger from the place of departure to the place of destination which are stated in the ticket.” 4.

Contracts of adhesion; Validity determined by peculiar circumstances obtaining in each case With respect to the 14 conditions printed at the back of the passage tickets, these are commonly known as “contracts of adhesion,” the validly and/or enforceability of which will have to be determined by the peculiar circumstances obtaining in each case and the nature of the conditions or terms sought to be enforced. For, “While generally, stipulations in a contract come about after deliberate drafting by the parties thereto, there are certain contracts almost all the provisions of which have been drafted only by one party, usually a corporation. Such contracts are called contracts of adhesion, because the only participation of the party is the signing of his signature or his ‘adhesion’ thereto. Insurance contracts, bills of lading, contracts of sale of lots on the installment plan fall into this category.” 5. Guidelines in determination of validity and/or enforceability of contracts of adhesion; Qua Chee Gan v. Law Union and Rock Insurance Co., and Fieldman Insurance v. Vargas The Court held that “the courts cannot ignore that nowadays, monopolies, cartels and concentration of capital, endowed with overwhelming economic power, manage to impose upon parties dealing with them cunningly prepared ‘agreements that the weaker party may not change one whit, his participation in the ‘agreement’ being reduced to the alternative ‘to take it or leave it,’ labelled since Raymond Saleilles ‘contracts by adherence’ (contracts d’ adhesion) in contrast to those entered into by parties bargaining on an equal footing. Such contracts (of which policies of insurance and international bill of lading are prime examples) obviously call for greater strictness and vigilance on the part of the courts of justice with a view to protecting the weaker party from abuses and imposition, and prevent their becoming traps for the unwary.” 6.

Protection of disadvantaged expressly enjoined by the Civil Code To the same effect and import, and, in recognition of the peculiar character of contracts of this kind, the protection of the disadvantaged is expressly enjoined by the New Civil Code “in all contractual, property or other relations, when one of the parties is at a disadvantage on account of his moral dependence, is ignorance, indigence, mental weakness, tender age and other handicap, the courts must be vigilant for his protection.” 7.

Condition 14 void Considered in the light of the foregoing norms and in the context of circumstances prevailing in the inter-island shipping industry in the country, the Court finds and holds that Condition 14 printed at the back of the passage tickets should be held as void and unenforceable for the reasons that (1) under circumstances Transportation Law, 2004 ( 162 )

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obtaining in the inter-island shipping industry, it is not just and fair to bind passengers to the terms of the conditions printed at the back of the passage tickets, on which Condition 14 is printed in fine letters, and (2) Condition 14 subverts the public policy on transfer of venue of proceedings of this nature, since the same will prejudice rights and interests of innumerable passengers in different parts of the country who, under Condition 14, will have to file suits against Sweet Line only in the City of Cebu. 8.

State of inter-island shipping of public knowledge; Court take judicial notice It is a matter of public knowledge, of which the COurt can take judicial notice, that there is a dearth of and acute shortage in inter-island vessels plying between the country’s several islands, and the facilities they offer leave much to be desired. Thus, even under ordinary circumstances, the piers are congested with passengers and their cargo waiting to be transported, The conditions are even worse at peak and/or the rainy seasons, when passengers literally scramble to secure whatever accommodations may be availed of, even through circuitous routes, and/or at the risk of their safety — their immediate concern, for the moment, being to be able to board vessels with the hope of reaching their destinations. The schedules are — as often as not if not more so — delayed or altered. This was precisely the experience of private respondents when they were relocated to M/S “Sweet Town” from M/S “Sweet Hope” and then allegedly “exposed to the scorching heat of the sun and the dust coming from the ship’s cargo of corn grits,” because even the latter vessel was filled to capacity. 9.

Passengers not expected to examine tickets received from congested counters Under the circumstances, it is hardly just and proper to expect the passengers to examine their tickets received from crowded/congested counters, more often than not during rush hours, for conditions that may be printed thereon, much less charge them with having consented to the conditioner so printed, especially if there are a number of such conditions in fine print. 10. Unlike fine prints in insurance contract, passengers do not have the same chance to examine conditions Condition 14 was prepared solely at the instance of Sweet Line; the passengers had no say in its preparation. Neither did the latter have the opportunity to take the same into account prior to the purchase of their tickets. For, unlike the small print provisions of insurance contracts — the common example of contracts of adherence — which are entered into by the insured in full awareness of said conditions, since the insured is afforded the opportunity to examine and consider the same, passengers of inter-island vessels do not have the same chance, since their alleged adhesion is presumed only from the fact that they purchased the passage tickets. 11. Shipping companies (franchise holders of CPC) possess virtual monopoly over business of transporting passengers Shipping companies are franchise holders of certificates of public convenience and, therefore, possess a virtual monopoly over the business of transporting passengers between the ports covered by their franchise. This being so, shipping companies, engaged in inter-island shipping, have a virtual monopoly of the business of transporting passengers and may thus dictate their terms of passage, leaving passengers with no choice but to buy their tickets and avail of their vessels and facilities. 12.

Judicial notice that bulk of passengers from low-income groups Finally, judicial notice may be taken of the fact that the bulk of those who board these inter-island vessels come from the low-income groups and are less literate, and who have little or no choice but to avail of Sweet Line’s vessels. 13. Condition 14 subversive of public policy on transfers of venue of actions; Rule 4, Section 3, Rules of Court

Transportation Law, 2004 ( 163 )

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Condition 14 is subversive of public policy on transfers of venue of actions. For, although venue may be changed or transferred from one province to another by agreement of the parties in writing pursuant to Rule 4, Section 3, of the Rules of Court, such an agreement will not be held valid where it practically negates the action of the claimants. The philosophy underlying the provisions on transfer of venue of actions is the convenience of Sweet Line as well as his witnesses and to promote the ends of justice. Considering the expense and trouble a passenger residing outside of Cebu City would incur to prosecute a claim in the City of Cebu, he would most probably decide not to file the action at all. The condition will thus defeat, instead of enhance, the ends of justice. Upon the other hand, Sweet Line has branches or offices in the respective ports of call of its vessels and can afford to litigate in any of these places. Hence, the filing of the suit in the CFI of Misamis Oriental will not cause inconvience to, much less prejudice, Sweet Line. 14.

Condition 14 subversive of the public good or interest Public policy is “that principle of the law which holds that no subject or citizen can lawfully do that which has a tendency to be injurious to the public or against the public good.” Under this principle “freedom of contract or private dealing is restricted by law for the good of the public.” Herein, Condition 14, if enforced, will be subversive of the public good or interest, since it will frustrate in meritorious cases, actions of passenger claimants outside of Cebu City, thus placing Sweet Line at a decided advantage over said persons, who may have perfectly legitimate claims against it. The said condition should, therefore, be declared void and unenforceable, as contrary to public policy — to make the courts accessible to all who may have need of their services. [63] Eastern and Australian Steamship vs. Great American Insurance (GR L-37604, 23 October 1981) First Division, De Castro (J): 4 concur, 1 concur in result Facts: On 10 December 1971, the Jackson and Spring (Sydney) Pty. Ltd. shipped from Sydney, Australia, 1 case of impellers for warman pump on board the SS “Chitral,” a vessel owned and operated in the Philippines by Eastern & Australian Steamship Co., Ltd., thru its agent F.E. Zuellig, Inc. under Bill of Lading 31, for delivery to Manila, Philippines in favor of consignee Benguet Consolidated, Inc. The shipment was insured with Great American Insurance, Co. for P35,921.81 against all risks. On 22 December 1971 the SS “Chitral” arrived in Manila but failed to discharge the shipment or any part thereof. Demand was made on Eastern & Australian Steamship and FE Zuellig for the delivery of said shipment, but having failed to make delivery, a claim was presented against them for the value of the shipment. Eastern & Australian Steamship and ZE Zuellig, likewise, failed to make good the claim. As a consequence of the loss of the shipment, Great American Insurance Co. was compelled to pay the consignee P35,921.81. As subrogee, the insurance company filed a complaint dated 20 November 1972 against Eastern & Australian Steamship and FE Zuellig for recovery of the said amount with legal interest and attorney’s fees. The CFI of Manila, on 25 July 1973 (Branch XIII, Civil Case 88985) found Eastern & Australian Steamship and Zuellig liable to Great American Insurance Co. in the amount of $500.00, or its peso equivalent of P3,217.50, with legal interest thereon from 20 November 1972; and to further pay an amount equivalent to 25% thereof by way of damages as and for attorney’s fees. Hence, the petition for review on certiorari. The Supreme Court reversed the decision of the court, and entered another one finding Eastern & Australian Steamship and Zuellig liable to Great American Insurance Co. in the amount of 100 Sterling or its peso equivalent of P1,544.40. Without pronouncement as to costs. 1.

Section 4 (5) of COGSA and Clause 17 of the Bill of Lading not inconsistent There is no inconsistency between Section 4 (5) of the Carriage of Goods by Sea Act and Clause 17 of the Bill of Lading. The first part of the provision of Section 4 (5) of the Carriage of Goods by Sea Act Transportation Law, 2004 ( 164 )

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limits the maximum amount that may be recovered by the shipper in the absence of an agreement as to the nature and value of goods shipped. Said provision does not prescribe the minimum and hence, it could be any amount which is below $500.00. Clause 17 of the questioned Bill of Lading also provides the maximum for which the carrier is liable. It prescribes that the carrier may only be held liable for an amount not more than 100 Sterling which is below the maximum limit required in the Carriage of Goods by Sea Act. Both the Carriage of Goods by Sea Act and Clause 17 of the Bill of Lading allow the payment beyond the respective maximum limit imposed therein, provided that the value of the goods have been declared in the Bill of Lading. 2. Clause 17 cannot be read in the light of second paragraph of Section 4 (5) of COGSA as such would render ineffective the very intent of the law The second paragraph of Section 4 (5) of the Carriage of Goods by Sea Act prescribing the maximum amount shall not be less than $500.00 refers to a situation where there is an agreement other than that set forth in the Bill of Lading providing for a maximum higher than $500.00 per package. Clause 17 of the Bill of Lading should not be read in the light of second paragraph of Section 4 (5) of the Carriage of Goods by Sea Act, for it would render ineffective the very intent of the law setting the sum of $500.00 as the maximum liability of the vessel/carrier, per package, in the absence of a higher valuation of the goods as indicated in the Bill of Lading. By providing that $500.00 is the maximum liability, the law does not disallow an agreement for liability at a lesser amount. Herein, it is apparent that there had been no agreement between the parties, and hence, Clause 17 of the Bill of Lading shall prevail. 3.

Article 1749 NCC Article 1749 of the New Civil Code expressly allows the limitation of the carrier’s liability. It provides that “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.” 4.

Limitation of carrier’s liability valid In the case of Northern Motors, Inc. vs. Prince Line, the court held that the Court “has held as valid and binding a similar provision in a bill of lading limiting the carrier’s liability to a specific amount unless the shipper expressly declares a higher valuation and pays the corresponding rate thereon.” Also in Phoenix Assurance Company vs. Macondray & Co., Inc., the validity of a stipulation limiting the carrier’s liability was reiterated. 5.

Right of carrier to limit liability recognized also in the United States The right of the carrier to limit its liability has been recognized not only in Philippine jurisdiction but also in American jurisprudence. In one case, it was held that “a stipulation in a contract of carriage that the carrier will not be liable beyond a specified amount unless the shipper declares the goods to have a greater value is generally deemed to be valid and will operate to limit the carrier’s liability, even if the loss or damage results from the carrier’s negligence. Pursuant to such provision, where the shipper is silent as to the value of his goods, the carrier’s liability for loss or damage thereto is limited to the amount specified in the contract of carriage and where the shipper states the value of his goods, the carrier’s liability for loss or damage thereto is limited to that amount. Under a stipulation such as this, it is the duty of the shipper to disclose, rather than the carrier’s to demand the true value of the goods and silence on the part of the shipper will be sufficient to limit recovery in case of loss to the amount stated in the contract of carriage.” [64], also [67] Sea-land Service vs. IAC (GR 75118, 31 August 1987) First Division, Narvasa (J): 4 concur

Transportation Law, 2004 ( 165 )

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Facts: On 8 January 1981, Sea-Land Service, Inc., a foreign shipping and forwarding company licensed to do business in the Philippines, received from Seaborne Trading Company in Oakland, California a shipment consigned to Sen Hiap Hing, the business name used by Paulino Cue in the wholesale and retail trade which he operated out of an establishment located on Borromeo and Plaridel Streets, Cebu City. The shipper not having declared the value of the shipment, no value was indicated in the bill of lading. The bill described the shipment only as “8 CTNS on 2 SKIDS-FILES.” Based on volume measurements Sea-land charged the shipper the total amount of US$209.28 for freightage and other charges. The shipment was loaded on board the MS Patriot, a vessel owned and operated by Sea-Land, for discharge at the Port of Cebu. The shipment arrived in Manila on 12 February 1981, and there discharged in Container 310996 into the custody of the arrastre contractor and the customs and port authorities. Sometime between February 13 and 16, 1981, after the shipment had been transferred, along with other cargoes to Container 40158 near Warehouse 3 at Pier 3 in South Harbor, Manila, awaiting trans-shipment to Cebu, it was stolen by pilferers and has never been recovered. On 10 March 1981, Paulino Cue, the consignee, made formal claim upon Sea-Land for the value of the lost shipment allegedly amounting to P179,643.48. Sea-Land offered to settle for US$4,000.00, or its then Philippine peso equivalent of P30,600.00. asserting that said amount represented its maximum liability for the loss of the shipment under the package limitation clause in the covering bill of lading. Cue rejected the offer and thereafter brought suit for damages against Sea-Land in the then Court of First Instance of Cebu, Branch X. Said Court, after trial, rendered judgment in favor of Cue, sentencing Sea-Land to pay him P186,048.00 representing the Philippine currency value of the lost cargo, P55,814.00 for unrealized profit with 1% monthly interest from the filing of the complaint until fully paid, P25,000.00 for attorney’s fees and P2,000.00 as litigation expenses. Sea-Land appealed to the Intermediate Appellate Court. That Court however affirmed the decision of the Trial Court in toto. Sea-Land thereupon filed the present petition for review. The Supreme Court reversed and set aside the Decision of the Intermediate Appellate Court complained of, holding that (1) the stipulation in the questioned bill of lading limiting Sea-Land’s liability for loss of or damage to the shipment covered by said bill to US$500.00 per package is valid and binding on Paulino Cue; (2) Sea-Land is liable in the aggregate amount of US$4,000.00 as there was no question of the fact that the lost shipment consisted of 8 cartons or packages; (3) Sea-Land was discharged of that obligation by paying Cue the sum of P32,000.00, the equivalent in Philippine currency of US$4,000.00 at the conversion rate of P8.00 to $1.00. Costs against Cue. 1. Consignee in bill of lading has right to recover from carrier although document drawn by consignor and carrier In principle, a consignee in a bill of lading has the right to recover from the carrier or shipper for loss of, or damage to, goods being transported under said bill, although that document may have been — as in practice it oftentimes is — drawn up only by the consignor and the carrier without the intervention of the consignee. 2.

Mendoza vs. PAL; When consignee becomes party to contract Therein, even if the LVN Pictures Inc. as consignor of its own initiative, and acting independently of Mendoza for the time being, made Mendoza as consignee, a stranger to the contract if that is possible, nevertheless when he, Mendoza appeared at the Phil Air Port armed with the copy of the Air Way Bill demanding the delivery of the shipment to him, he thereby made himself a party to the contract of transportation. The right of the shipper to countermand the shipment terminates when the consignee or legitimate holder of the bill of lading appears with such bill of lading before the carrier and makes himself a party to the contract. Prior to that time he is a stranger to the contract.

Transportation Law, 2004 ( 166 )

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3. Mendoza vs. PAL; Common carriers not obligated to make prompt delivery, unless such obligation is assumed 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. Said rights and obligations are created by a specific contract entered into by the parties. 4. Mendoza vs. PAL; Article 1357 paragraph 2 of old Civil Code, now Article 1311, second paragraph NCC Article 1257, paragraph 2, of the old Civil Code (now Article 1311, second paragraph) reads “Should the contract contain any stipulation in favor of a third person, he may demand its fulfillment provided he has given notice of his acceptance to the person bound before the stipulation has been revoked.” 5.

Liability of common carrier governed by laws of country of destination Since the liability of a common carrier for loss of or damage to goods transported by it under a contract of carriage is governed by the laws of the country of destination and the goods in question were shipped from the United States to the Philippines, the liability of Sea-Land to the consignee is governed primarily by the Civil Code, and as ordained by the said Code, suppletorily, in all matters not determined thereby, by the Code of Commerce and special laws. One of these suppletory special laws is the Carriage of Goods by Sea Act, U.S. Public Act No. 521 which was made applicable to all contracts for the carriage of goods by sea to and from Philippine ports in foreign trade by Commonwealth Act 65, approved on 22 October 1936. 6.

Section 4 (5) of COGSA Section 4(5) of Commonwealth Act 65, in part, 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 the bill of lading. This declaration, if embodied in the bill of lading, shall be prima facie evidence, but shall not 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” 7.

Clause 22, first paragraph of the long-form bill of lading Clause 22, first paragraph, of the long-form bill of lading customarily issued by Sea-Land to its shipping clients is a virtual copy of the first paragraph of the foregoing provision. It says: “(22) VALUATION. In the event of any loss, damage or delay to or in connection with goods exceeding in actual value $500 per package, lawful money of the United States, or in case of goods not shipped in packages, per customary freight unit, the value of the goods shall be deemed to be $500 per package or per customary freight unit, as the case may be, and the carrier’s liability, if any, shall be determined on the basis of a value of $500 per package or customary freight unit, unless the nature and a higher value shall be declared by the shipper in writing before shipment and inserted in this Bill of Lading.” 8.

Clause 22, second paragraph of the long-form bill of lading And in its second paragraph, the bill states that “If a value higher than $500 shall have been declared in writing by the shipper upon delivery to the carrier and inserted in this bill of lading and extra freight paid, if required and in such case if the actual value of the goods per package or per customary freight unit shall exceed such declared value, the value shall nevertheless be deemed to be declared value and the carrier’s liability, if any, shall not exceed the declared value and any partial loss or damage shall be adjusted pro rata on the basis of such declared value.” Transportation Law, 2004 ( 167 )

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9.

Nothing in Civil Code which prohibits agreements as to limitation of carrier’s liability Article 1766 of the Civil Code expressly subjects the rights and obligations of common carriers to the provisions of the Code of Commerce and of special laws in matters not regulated by said (Civil) Code. There is nothing in the Civil Code which absolutely prohibits agreements between shipper and carrier limiting the latter’s liability for loss of or damage to cargo shipped under contracts of carriage; it is also quite clear that said Code in fact has agreements of such character in contemplation in providing, in its Articles 1749 and 1750. 10.

Article 1749 NCC Article 1749 of the Civil Code provides that “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.” 11.

Article 1750 NCC Article 1750 of the Civil Code provides that “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 fairly and freely agreed upon.” 12. NCC

Nothing in Section 4 (5) of COGSA is repugnant or inconsistent with Articles 1749 and 1750

Nothing contained in section 4(5) of the Carriage of Goods by Sea Act is repugnant to or inconsistent with any of the provisions of the Civil Code. Said section merely gives more flesh and greater specificity to the rather general terms of Article 1719 (without doing any violence to the plain intent thereof) and of Article 1750, to give effect to just agreements limiting carriers’ liability for loss or damage which are freely and fairly entered into. 13.

Limited liability clause valid even without Section 4 (5) of COGSA Even if 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 are nevertheless fully sustainable on the basis alone of the Civil Code provisions. That said stipulation is just and reasonable is arguable from the fact that it echoes Article 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 justice and fairness of that law itself. 14.

Determination of just and reasonable character of stipulation as to liability limitation clause 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. And since the shipper here has not been heard to complaint of having been “rushed,” imposed upon or deceived in any significant way into agreeing to ship the cargo under a bill of lading carrying such a stipulation — in fact, it does not appear that said party has been heard from at all insofar as this dispute is concerned — there is simply no ground for assuming that its agreement thereto was not as the law would require, freely and fairly sought and given. 15. Right of consignee springs from either relation of agency with consignor, or status as a stranger in whose favor some stipulation is made in said contract Herein, Cue had no direct part or intervention in the execution of the contract of carriage between the shipper and the carrier as set forth in the bill of lading in question. As pointed out in Mendoza vs. PAL, the right of a party to recover for loss of a shipment consigned to him under a bill of lading drawn up only by and between the shipper and the carrier, springs from either a relation of agency that may exist between him and the shipper or consignor, or his status as a stranger in whose favor some stipulation is made in said contract, Transportation Law, 2004 ( 168 )

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and who becomes a party thereto when he demands fulfillment of that stipulation, i.e. the delivery of the goods or cargo shipped. 16.

Free agreement not vitiated by fine printed provisions In neither capacity can he assert personally, in bar to any provision of the bill of lading, the alleged circumstance that fair and free agreement to such provision was vitiated by its being in such fine print as to be hardly readable. Parenthetically, it may be observed that in one comparatively recent case where the Court found that a similar package limitation clause was “(printed in the smallest type on the back of the bill of lading,” it nonetheless ruled that the consignee was bound thereby on the strength of authority holding that such provisions on liability limitation are as much a part of a bill of lading as though physically in it and as though placed therein by agreement of the parties. 17.

Agreed limited liability of carrier valid and enforceable There can be no doubt or equivocation about the validity and enforceability of freely-agreed-upon stipulations in a contract of carriage or bill of lading limiting the liability of the carrier to an agreed valuation unless the shipper declares a higher value and inserts it into said contract or bill. This proposition, moreover, rests upon an almost uniform weight of authority. 18.

Clause 13 of Bill of Lading Clause 13 of the bill of lading which expressly authorizes transshipment of the goods at any point in the voyage in these terms: “13. THROUGH CARGO AND TRANSSHIPMENT. The carrier or master, in the exercise of its or his discretion and although transshipment or forwarding of the goods may not have been contemplated or provided for herein, may at port of discharge or any other place whatsoever transship or forward the goods or any part thereof by any means at the risk and expense of the goods and at any time, whether before or after loading on the ship named herein and by any route, whether within or outside the scope of the voyage or beyond the port of discharge or destination of the goods and without notice to the shipper or consignee. The carrier or master may delay such transshipping or forwarding for any reason, including but not limited to awaiting a vessel or other means of transportation whether by the carrier or others.” 19.

Agreements as to transshipment (deviation) recognized by law Clause 13 of the bill of lading obviates the necessity to offer any other justification for off loading the shipment in question in Manila for transshipment to Cebu City, the port of destination stipulated in the bill of lading. Nonetheless, the Court takes note of Sea-Land’s explanation that it only directly serves the Port of Manila from abroad in the usual course of voyage of its carriers, hence its maintenance of arrangements with a local forwarder. Aboitiz and Company, for delivery of its imported cargo to the agreed final point of destination within the Philippines, such arrangements not being prohibited, but in fact recognized, by law. 20.

COGSA applicable up to final port of destination The Carriage of Goods by Sea Act is applicable up to the final port of destination and that the fact that transshipment was made on an interisland vessel did not remove the contract of carriage of goods from the operation of said Act. 21. Provisions of COGSA on package limitation a part of bill of lading although placed actually therein by the parties The provisions of the Carriage of Goods by Sea Act on package limitation [sec. 4(5) of the Act] are as much a part of a bill of lading as though actually placed therein by agreement of the parties. 22.

Cue bound by stipulations in bill of lading Cue, by making claim for loss on the basis of the bill of lading, to all intents and purposes accepted said bill. Having done so, he becomes bound by all stipulations contained therein whether on the front or the Transportation Law, 2004 ( 169 )

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back thereof. He cannot elude its provisions simply because they prejudice him and take advantage of those that are beneficial. Secondly, the fact that he shipped his goods on board the ship of Sea-Land and paid the corresponding freight thereon shows that he impliedly accepted the bill of lading which was issued in connection with the shipment in question, and so it may be said that the same is finding upon him as if it had been actually signed by him or by any other person in his behalf. 23.

Sea-Land’s dollar obligation should be convertible at the rate of P8 to $1 Herein, Cue admits that as early as on 22 April 1981, Sea-Land had offered to settle his claim for US$4,000.00, the limit of said carrier’s liability for loss of the shipment under the bill of lading. Said sum is all that is justly due Cue, it does not appear just or equitable that Sea-Land, which offered that amount in good faith as early as 6 years ago, should, by being made to pay at the current conversion rate of the dollar to the peso, bear for its own account all of the increase in said rate since the time of the offer of settlement. The decision of the Regional Trial Court awarding Cue P186,048.00 as the peso value of the lost shipment is clearly based on a conversion rate of P8.00 to US$1.00, Cue having claimed a dollar value of $23,256.00 for said shipment. All circumstances considered, it is just and fair that Sea-Land’s dollar obligation be convertible at the same rate. [65] Aboitiz Shipping vs. CA (GR 89757, 6 August 1990) First Division, Gancayco (J): 4 concur Facts: On October 28, 1980, the vessel M/V “P. Aboitiz” took on board in Hongkong for shipment to Manila some cargo consisting of 1 20-footer container holding 271 rolls of goods foe apparel covered by Bill of Lading 515-M and 1 40-footer container holding 447 rolls, 10 bulk and 95 cartons of goods for apparel covered by Bill of Landing 505-M. The total value, including invoice value, freightage, customs duties, taxes and similar imports amount to US$39,885 for the first shipment while that of the second shipment amounts to US$94,190.55. Both shipments were consigned to the Philippine Apparel, Inc. and insured with the General Accident Fire and Life Assurance Corporation, Ltd. (GAFLAC). The vessel is owned and operated by Aboitiz Shipping Corporation. On 31 October 1980 on its way to Manila the vessel sunk and it was declared lost with all its cargoes. GAFLAC paid the consignee the amounts US$39,885.85 or P319,086.80 and US$94,190.55 or P753,524.40 for the lost cargo. As GAFLAC was subrogated to all the rights, interests and actions of the consignee against Aboitiz, it filed an action for damages against Aboitiz in the Regional Trial Court of Manila alleging that the loss was due to the fault and negligence of Aboitiz and the master and crew of its vessel in that they did not observe the extraordinary diligence required by law as regards common carriers. After the issues were joined and the trial on the merits a decision was rendered by the trial court on 29 June 1985, ordering Aboitiz to pay GAFLAC actual damages in the sum of P1,072,611.20 plus legal interest from the date of the filing of the complaint on 28 October 1981, until full payment thereof, attorney’s fees in the amount of 20% of the total claim and to pay the costs. Not satisfied therewith, Aboitiz appealed to the Court of Appeals wherein in due course a decision was rendered on 9 March 1989 affirming in toto the appealed decision, with costs against Aboitiz. A motion for reconsideration of said decision filed by Aboitiz was denied in a resolution dated 15 August 1989.. Hence, the petition for review. The Supreme Court dismissed the petition, with costs against Aboitiz. 1.

Finding of administrative bodies not always binding upon the court

Transportation Law, 2004 ( 170 )

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The sinking of the vessel M/V “P. Aboitiz” was the subject of an administrative investigation conducted by the Board of Marine Inquiry (BMI) whereby in a decision dated 26 December 1984, it was found that the sinking of the vessel may be attributed to force majeure on account of a typhoon. The trial court did not err in not giving weight to the finding of the BMI that the vessel sank due to a fortuitous event as findings of administrative bodies are not always binding on courts. This is especially so in the present case where GAFLAC was not a party in the BMI proceedings and which proceeding was not adversary in character. 2.

General rule as to administrative findings of facts As a general rule, administrative findings of facts are not disturbed by the courts when supported by substantial evidence unless it is tainted with unfairness or arbitrariness that would amount to abuse of discretion or lack of jurisdiction. Even in Vasquez vs. Court of Appeals, the Court ruled that it nevertheless disagree with the conclusion of the BMI exonerating the captain from any negligence “since it obviously had not taken into account the legal responsibility of a common carrier towards the security of the passengers involved.” 3. Trial court not informed of parallel administrative investigation being conducted by BMI; GAFLAC cannot be bound by findings and conclusions of BMI The present case was brought to court on 28 October 1981. The trial court was never informed of a parallel administrative investigation that was being conducted by the BMI in any of the pleadings of Aboitiz. It was only on 22 March 1985 when Aboitiz revealed to the trial court the decision of the BMI dated 26 December 1984. The said decision appears to have been rendered over 3 years after the case was brought to court. Said administrative investigation was conducted unilaterally. GAFLAC was not notified or given an opportunity to participate therein. It cannot thereby be bound by said findings and conclusions of the BMI. 4.

Weather condition prevailing under wind force of 10 to 15 knots usual and foreseeable The wind force when the ill-fated ship foundered was 10 to 15 knots. According to the Beau fort Scale (Exhibit “I”), which is admittedly an accurate reference for measuring wind velocity, the wind force of 10 to 15 knots is classified as scale No. 4 and described as ‘moderate breeze,’ small waves, becoming longer, fairly frequent white horses.’ The weather condition prevailing under said wind force is usual and foreseeable. The vessel M/V “Aboitiz” and its cargo were not lost due to fortuitous event or force majeure. 5. Common carrier bound to observe extraordinary diligence (Article 1732 NCC); Presumption of negligence, burden of proof In accordance with Article 1732 of the Civil Code, the common carrier, from the nature of its business and for reasons of public policy, is bound to observe extraordinary diligence in the vigilance over the goods and for the safety of the passengers transported by it according to all the circumstances of each case. While the goods are in the possession of the carrier, it is but fair that it exercise extraordinary diligence in protecting them from loss or damage, and if loss occurs, the law presumes that it was due to the carrier’s fault or negligence; that is necessary to protect the interest of the shipper which is at the mercy of the carrier (Article 17O6, Civil Code; Anuran vs. Puno, 17 SCRA 224; Nocum vs. Laguna Tayabas Bus Co., 30 SCRA 69; Landigan vs. Pangasinan Transportation Company, 88 SCRA 284).” Herein, Aboitiz failed to prove that the loss of the subject cargo was not due to its fault or negligence. 6.

Limited liability clause; Exception While it is true that in the bill of lading there is such stipulation that the liability of the carrier is US$500.00 per package/container/customary freight, there is an exception, that is, when the nature and value of such goods have been declared by the shipper before shipment and inserted in the bill of lading. Herein, the description of the nature and the value of the goods shipped are declared and reflected in the bills of lading. Thus, it is the basis of the liability of the carrier as the actual value of the loss.

Transportation Law, 2004 ( 171 )

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7.

Section 4 (5) COGSA Section 4(5) of the Carriage of Goods by Sea Act provides that “(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 of 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 inserted in the bill of lading. This declaration, if embodied in the bill of lading, shall be prima facie evidence, but shall not 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. Neither the carrier nor the ship shall be responsible in any event for loss or damage to or in connection with the transportation of the goods if the nature or value thereof has been knowingly and fraudulently mis-stated by the shipper in the bill of lading.” 8.

“Container” construed; Noscitur a sociis It is absurd to interpret “container,” as provided in the bill of lading to be valued at US$500.00 each, to refer to the container which is the modern substitute for the hold of the vessel. The package/container contemplated by the law to limit the liability of the carrier should be sensibly related to the unit in which the shipper packed the goods and described them, not a large metal object, functionally a part of the ship, in which the carrier caused them to be contained. Such “container” must be given the same meaning and classification as a “package” and “customary freight unit.” By the rule of noscitur a sociis, the word ‘container’ must be given the same meaning as ‘package’ and ‘customary freight unit’ and therefore cannot possibly refer to modern containers which are used for shipment of goods in bulk. 9. Allied Guarantee Insurance Co. Inc. vs. Aboitiz Shipping Corporation, (CA GR CV 04121, 23 March1987); Limited liability clause must be reasonable and freely agreed upon Generally speaking, a stipulation, limiting the common carrier’s liability to the value of the goods appearing in the bill of lading, unless the shipper or owner declares a greater value, is valid. (Civil Code, Art. 1749). Such stipulation, however, must be reasonable and just under the circumstances and must have been fairly and freely agreed upon. (St. Paul Fire & Marine Insurance Co. vs. Macondray Co., 70 SCRA 122, 126127 (1976) Herein, the goods shipped on the M/V “P. Aboitiz” were insured for P278,530.50, which may be taken as their value. To limit the liability of the carrier to $500.00 would obviously put it in its power to have taken the whole cargo. 10. Ysmael vs .Gabino Barreto; Limitation of liability inapplicable when loss caused by own negligence In Juan Ysmael & Co. vs. Gabino Barreto & Co., 51 Phil. 90 (1927), it was held that a stipulation limiting the carrier’s liability to $500.00 per package of silk when the value of such package was P2,500.00 unless the true value had been declared and the corresponding freight paid was ‘void as against public policy.’ That ruling applies to the present case. By the weight of modern authority, a carrier cannot limit its liability for injury or loss of goods shipped where such injury or loss was caused by its own negligence. (Juan Ysmael & Co. v. Gabino Barreto & Co., supra) Here to limit the liability of Aboitiz Shipping to $500.00 would nullify the policy of the law imposing on common carriers the duty to observe extraordinary diligence in the carriage of goods. 11.

Issuance of execution pending appeal; Filing of supersedeas bond to stay execution The purpose of Section 2, Rule 39, of the Rules of Court would not be achieved or execution pending appeal would not be achieved if insolvency would still be awaited. The remedy is available to petitioner under Section 3 Rule 39 of the Rules of Court but to place insolvency as a condition to issuance of a writ of execution pending appeal would render it illusory and ineffectual. Herein, Aboitiz is facing many law suits arising from said sinking of its vessel involving cargo loss of no less than P50 million, in some cases of which Transportation Law, 2004 ( 172 )

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judgment had been rendered against Aboitiz, and considering that its insurer is now bankrupt, leaving Aboitiz alone to face and answer the suits, which may render any judgment for GAFLAC ineffectual, that the appeal is interposed manifestly for delay and the willingness of GAFLAC to put up a bond certainly are cogent bases for the issuance of an order of execution pending appeal. The statutory undertaking of posting a supersedeas bond will achieve a three-pronged direction of justice, (1) it will cast no doubt on the solvency of the defendant; (2) it will not defeat or render phyrric a just resolution of the case whichever party prevails in the end or in the main case on appeal, since both of their claims are secured by their corresponding bonds; and (3) it will put to equitable operation Sec. 3 Rule 39 of the Revised Rules of Court. 12. Aboitiz vs. CA (GR 88159; 13 November1989); Doctrine of primary administrative jurisdiction not applicable In a similar case for damages arising from the same incident entitled Aboitiz Shipping Corporation vs. Honorable Court of Appeals and Allied Guaranteed Insurance Company, Inc., G.R. No. 88159, the Court in a resolution dated 13 November 1989 dismissed the petition for lack of merit. Therein this Court held in part that the cause of sinking of the vessel was due to its unseaworthiness and the failure of its crew and the master to exercise extraordinary diligence. Therein, the decision and resolution of the appellate court shows that the same took into consideration not only the findings of the lower court but also the findings of the BMI. Thus, the appellate court stated that the decision of the Board was based simply on its finding that the Philippine Coast Guard had certified the vessel to be seaworthy and that it sank because it was exposed later to an oncoming typhoon plotted within the radius where the vessel was positioned. This generalization certainly cannot prevail over the detailed explanation of the trial court in the case as basis for its contrary conclusion. The Court found therein no cogent reason to deviate from the factual findings of the appellate court and rule that the doctrine of primary administrative jurisdiction is not applicable in said case. 13. Aboitiz vs. CA (GR 88159; 13 November1989); Limitation of liability would render inefficacious the extraordinary diligence required by law of common carriers Generally speaking any stipulation, limiting the common carrier’s liability to the value of the goods appearing in the bill of lading, unless the shipper or owner declares a greater value is valid. (Civil Code, Art. 1749) Such stipulation, however, must be reasonable and just under the circumstances and must have been fairly and freely agreed upon. (St. Paul Fire & Marine Insurance Co. v. Macondray & Co., 70 SCRA 122, 126-127 [1976]. Therein, the goods shipped on the M/V ‘P. Aboitiz’ were insured for P278,536.50, which may be taken as their value. To limit the liability of the carrier to $500.00 would obviously put in its power to have taken the whole cargo. In Juan Ysmael & Co. v. Gabino Barretto & Co., 51 Phil. 90 [1927], it was held that a stipulation limiting the carrier’s liability to P300.00 per package of silk, when the value of such package was P2,500.00, unless the true value had been declared and the corresponding freight paid; was void as against public policy. That ruling applies to said case. 14.

Aboitiz vs. CA (GR 88159; 13 November1989) final and executory The motion for reconsideration for the Court’s Resolution in GR 88159 filed by Aboitiz was denied with finality in a resolution dated January 8, 1990. Said resolution of the case had become final and executory, entry of judgment having been made and the records remanded for execution on 22 March 1990. Said case is the law of the case applicable to the present petition. [66] Everett Steamship Corp. vs. CA (GR 122494, 8 October 1998) Second Division, Martinez (J): 4 concur Facts: Hernandez Trading Co. Inc. imported three crates of bus spare parts marked as MARCO C/No. 12, MARCO C/No. 13 and MARCO C/No. 14, from its supplier, Maruman Trading Company, Ltd. (Maruman Trading), a foreign corporation based in Inazawa, Aichi, Japan. The crates were shipped from Nagoya, Japan Transportation Law, 2004 ( 173 )

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to Manila on board “ADELFAEVERETTE,” a vessel owned by Everett Steamship Corporation’s principal, Everett Orient Lines. The said crates were covered by Bill of Lading NGO53MN. Upon arrival at the port of Manila, it was discovered that the crate marked MARCO C/No. 14 was missing. This was confirmed and admitted by Everett Steamship in its letter of 13 January 1992 addressed to Hernandez Trading, which thereafter made a formal claim upon petitioner for the value of the lost cargo amounting to Y 1,552,500.00 Yen, the amount shown in an Invoice MTM-941, dated 14 November 1991. However, Everett Steamship offered to pay Y100,000.00, the maximum amount stipulated under Clause 18 of the covering bill of lading which limits the liability of Everett Steamship. Hernandez Trading rejected the offer and thereafter instituted a suit for collection (Civil Case C-15532), against Everett Shipping before the RTC of Caloocan City (Branch 126). At the pre-trial conference, both parties manifested that they have no testimonial evidence to offer and agreed instead to file their respective memoranda. On 16 July 1993, the trial court rendered judgment in favor of Hernandez Trading, ordering Everett Steamship to pay: (a) Y1,552,500.00; (b) Y20,000.00 or its peso equivalent representing the actual value of the lost cargo and the material and packaging cost; (c) 10% of the total amount as an award for and as contingent attorney’s fees; and (d) to pay the cost of the suit. On appeal, and on 14 June 1995, the Court of Appeals deleted the award of attorney’s fees but affirmed the trial court’s findings with the additional observation that Hernandez Trading can not be bound by the terms and conditions of the bill of lading because it was not privy to the contract of carriage. Everett Steamship filed a petition for review. The Supreme Court reversed and set aside the decision of the Court of Appeals. 1.

Limited liability clause sanctioned by law 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. 2.

Article 1749 NCC Article 1749 of the Civil Code provides that “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.” 3.

Article 1750 NCC Article 1750 of the Civil Code provides that “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.” 4.

Limited liability clause upheld by Court; Sea Land vs. IAC Such limited-liability clause has also been consistently upheld by this Court in a number of cases. Thus, in Sea Land Service, Inc. vs. IAC, the Court ruled that “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 Article 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 . . .” Transportation Law, 2004 ( 174 )

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5.

Conditions for the validity of limited liability clause Pursuant to the 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.” 6.

Contents of bill of lading (clause 18) The bill of lading 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 (Y100,000.00) 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.” 7.

Stipulations are reasonable and just The stipulations are reasonable and just. In the bill of lading, the carrier made it clear that its liability would only be up to Y100,000.00. 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. 8.

Contracts of adhesion not invalid per se; PAL vs. CA As ruled in PAL, Inc. vs. Court of Appeals, the “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.” 9.

Contracts of adhesion; Consent by adhering In Philippine American General Insurance Co., Inc. vs. Sweet Lines, Inc. the Court held that “Ong Yiu vs. Court of Appeals, et al., instructs us that ‘contracts of adhesion wherein one party imposes a readymade form of contract on the other . . . 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. . . Not even an allegation of ignorance of a party excuses non-compliance with the contractual stipulations since the responsibility for ensuring full comprehension of the provisions of a contract of carriage devolves not on the carrier but on the owner, shipper, or consignee as the case may be.” 10.

Contract of adhesion; Ong Yiu vs. CA As further explained in Ong Yiu vs. Court of Appeals, stipulations in contracts of adhesion are valid and binding. While it may be true that the plane ticket was not signed. . ., 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. . . ., 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. 11.

Greater vigilance required of courts when dealing with contracts of adhesion; Article 24 NCC Greater vigilance, however, is required of the courts when dealing with contracts of adhesion in that the said contracts must be carefully scrutinized “in order to shield the unwary (or weaker party) from deceptive schemes contained in ready-made covenants,” such as the bill of lading. The stringent requirement Transportation Law, 2004 ( 175 )

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which the courts are enjoined to observe is in recognition of Article 24 of the Civil Code which mandates that “in all contractual, property or other relations, when one of the parties is at a disadvantage on account of his moral dependence, ignorance, indigence, mental weakness, tender age or other handicap, the courts must be vigilant for his protection.” 12. Shipper extensively engaged in trading business, cannot be said to be ignorant of transactions as to shipment The shipper, Maruman Trading, has been extensively engaged in the trading business. It can not be said to be ignorant of the business transactions it entered into involving the shipment of its goods to its customers. The shipper could not have known, or should know the stipulations in the bill of lading and there it should have declared a higher valuation of the goods shipped. Moreover, Maruman Trading has not been heard to complain that it has been deceived or rushed into agreeing to ship the cargo in Everett Steamship’s vessel. In fact, it was not even impleaded in the case. 13. Consignee may be bound by contract of carriage although not a signatory thereto (Agency); Sea Land vs. IAC In Sea-Land Service, Inc. vs. IAC, the Court held that even if the consignee was not a signatory to the contract of carriage between the shipper and the carrier, the consignee can still be bound by the contract. To begin with, there is no question of the right, in principle, of a consignee in a bill of lading to recover from the carrier or shipper for loss of, or damage to goods being transported under said bill, although that document may have been — as in practice it oftentimes is-drawn up only by the consignor and the carrier without the intervention of the consignee. . . . . . . the right of a party to recover for loss of a shipment consigned to him under a bill of lading drawn up only by and between the shipper and the carrier, springs from either a relation of agency that may exist between him and the shipper or consignor, or his status as stranger in whose favor some stipulation is made in said contract, and who becomes a party thereto when he demands fulfillment of that stipulation, such as the delivery of the goods or cargo shipped. 14. Consignee may be bound by contract of carriage although not a signatory thereto and even if stipulations in fine print; Phoenix Assurance Co. vs. Macondray In neither capacity can he assert personally, in bar to any provision of the bill of lading, the alleged circumstance that fair and free agreement to such provision was vitiated by its being in such fine print as to be hardly readable. Parenthetically, it may be observed that in one comparatively recent case (Phoenix Assurance Company vs. Macondray & Co., Inc., 64 SCRA 15) where the Court found that a similar package limitation clause was “printed in the smallest type on the back of the bill of lading,” it nonetheless ruled that the consignee was bound thereby on the strength of authority holding that such provisions on liability limitation are as much a part of a bill of lading as though physically in it and as though placed therein by agreement of the parties. 15.

Act of consignee that effected acceptance of provisions of contract of carriage When Hernandez Trading formally claimed reimbursement for the missing goods from Everett Steamship and subsequently filed a case against the latter based on the very same bill of lading, the former accepted the provisions of the contract and thereby made itself a party thereto, or at least has come to court to enforce it. Thus, Hernandez Trading cannot now reject or disregard the carrier’s limited liability stipulation in the bill of lading. In other words, Hernandez Trading is bound by the whole stipulations in the bill of lading and must respect the same. 16.

Bill of lading proves carrier unaware of contents, quantity and value of crates The bill of lading confirms the fact that Everett Steamship that it does not know of the contents, quantity and value of “the shipment which consisted of three pre-packed crates described in Bill of Lading NGO-53MN (Cases Spare Parts). To defeat the carrier’s limited liability, Clause 18 of the bill of lading requires that the shipper should have declared in writing a higher valuation of its goods before receipt thereof Transportation Law, 2004 ( 176 )

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by the carrier and insert the said declaration in the bill of lading, with the extra freight paid. These requirements in the bill of lading were never complied with by the shipper, hence, the liability of the carrier under the limited liability clause stands. The commercial Invoice MTM-941 does not in itself sufficiently and convincingly show that Everett Steamship has knowledge of the value of the cargo as contended by Hernandez Trading. [67] Sea-Land Service vs. IAC, see [64] [-], also [234] Shewaram vs. PAL (GR L-20099, 7 July 1966) En Banc, Zaldivar (J): 8 concur Facts: Philippine Airlines (PAL) is a common carrier engaged in air line transportation in the Philippines, offering its services to the public to carry and transport passengers and cargoes from and to different points in the Philippines. Parmanand Shewaram was, on 23 November 1959, a paying passenger with ticket 4-30976, on PAL’s aircraft flight 976/910 from Zamboanga City bound for Manila. On said date, he checked in 3 pieces of baggages — a suitcase and two 2 other pieces, The suitcase was mistagged by PAL’s personnel in Zamboanga City, as I.G.N. (for Iligan) with claim check B-3883, instead of MNL (for Manila). When Shewaram arrived in Manila on the same date, his suitcase did not arrive with his flight because it was sent to Iligan. He made a claim with PAL’s personnel in Manila airport and another suitcase similar to his own which was the only baggage left for that flight, the rest having been claimed and released to the other passengers of said flight, was given to Shewaram for him to take delivery but he did not and refused to take delivery of the same on the ground that it was not his, alleging that all his clothes were white and the National transistor 7 and a Rollflex camera were not found inside the suitcase, and moreover, it contained a pistol which he did not have nor placed inside his suitcase (the suitcase belonged to a certain Del Rosario). After inquiries made by PAL’s personnel in Manila from different airports where the suitcase in question must have been sent, it was found to have reached Iligan and the station agent of the PAL in Iligan caused the same to be sent to Manila for delivery to Mr. Shewaram and which suitcase belonging to Shewaram arrived in Manila airport on 24 November 1959. When Shewaram’s suitcase arrived in Manila, he was informed by Mr. Tomas Blanco, Jr., the acting station agent of the Manila airport of the arrival of his suitcase but of course minus his Transistor Radio 7 and the Rollflex camera. Shewaram made demand for these 2 items or for the value thereof but the same was not complied with by PAL. Before the municipal court of Zamboanga City, Shewaram instituted an action to recover damages suffered by him due to the alleged failure of PAL to observe extraordinary diligence in the vigilance and carriage of his luggage. After trial the municipal court of Zamboanga City rendered judgment ordering PAL to pay Shewaram P373.00 as actual damages, P100.00 as exemplary damages, P150.00 as attorney’s fees, and the costs of the action. PAL appealed to the CFI of Zamboanga City. After hearing the CFI of Zamboanga City modified the judgment of the inferior court by ordering PAL to pay Shewaram only the sum of P373.00 as actual damages, with legal interest from 6 May 1960, and the sum of P150.00 as attorney’s fees, eliminating the award of exemplary damages. From the decision of the CFI of Zamboanga City, PAL appeals to the Supreme Court on a question of law. The Supreme Court affirmed the decision appealed from, with costs against PAL. 1.

Extraordinary diligence required of common carrier PAL is a common carrier. As such common carrier PAL, from the nature of its business and for reasons of public policy, is bound to observe extraordinary diligence in the vigilance over the goods and for the safety of the passengers transported by it according to the circumstances of each case. Herein, The Transportation Law, 2004 ( 177 )

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suitcase of Shewaram was tampered, and the transistor radio and the camera contained therein were lost. As the loss of the transistor radio and the camera of Shewaram, costing P373.00 (The transistor radio costs P197.00 and the camera costs P176.00), was due to the negligence of the employees of PAL, it is clear that PAL should be held liable for the payment of said loss. 2.

Condition of carriage printed at the back of plane ticket stub The conditions of carriage printed at the back of the plane ticket stub, which conditions are embodied in Domestic Tariff Regulations 2, which was filed with the Civil Aeronautics Board. One of those conditions, provides as follows: “The liability, if any, for loss or damage to checked baggage or for delay in the delivery thereof is limited to its value and, unless the passenger declares in advance a higher valuation and pay an additional charge therefor, the value shall be conclusively deemed not to exceed P100.00 for each ticket.” 3.

Article 1750 NCC Article 1750 of the New Civil Code provides that “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 fairly and freely agreed upon.” In accordance with Article 1750 of the New Civil Code, the pecuniary liability of a common carrier may, by contract, be limited to a fixed amount. It is required, however, that the contract must be “reasonable and just under the circumstances and has been fairly and freely agreed upon.” 4. Requirements of Article 1750 must be complied with before common carrier may claim limitation of liability The requirements provided in Article 1750 of the New Civil Code must be complied with before a common carrier can claim a limitation of its pecuniary liability in case of loss, destruction or deterioration of the goods it has undertaken to transport. Herein, the requirements of said article have not been met. It can not be said that Shewaram had actually entered into a contract with PAL, embodying the conditions as printed at the back of the ticket stub that was issued by PAL to Shewaram. The fact that those conditions are printed at the back of the ticket stub in letters so small that they are hard to read would not warrant the presumption that Shewaram was aware of those conditions such that he had “fairly and freely agreed” to those conditions. Inasmuch as passengers do not sign the ticket, much less did Shewaram sign his ticket when he made the flight on 23 November 1959, Shewaram is not, and can not be, bound by the conditions of carriage found at the back of the ticket stub issued to him when he made the flight on PAL’s plane. 5.

Article 1734 NCC Article 1734 of the Civil Code provides that “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, or other natural disaster or calamity; (2) Act of the public enemy in war, whether international or Civil; (3) Act or omission of the shipper or owner of the goods; (4) The character of the goods or defects in the packing or in the containers; and (5) Order or act of competent public authority.” 6.

Article 1735 NCC Article 1735. of the Civil Code provides that “In all cases other than those mentioned in Nos. 1, 2, 3, 4, and 5 of the preceding article, if the goods are lost, destroyed or deteriorated, common carriers are presumed to have been at fault or to have acted negligently, unless they prove that they observed extraordinary diligence as required in Article 1733.” 7.

Carrier cannot limit liability for injury caused by its own negligence In the case of Ysmael and Co. vs. Barretto, 51 Phil. 90, the Court had laid down the rule that the carrier can not limit its liability for injury to or loss of goods shipped where such injury or loss was caused by its own negligence.

Transportation Law, 2004 ( 178 )

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8.

Corpus Juris, volume 10, p. 154; Paragraph 194.6, Reasonableness of Limitation Paragraph 194.6. (Reasonableness of Limitation) provides that “The validity of stipulations limiting the carrier’s liability is to be determined by their reasonableness and their conformity to the sound public policy, in accordance with which the obligations of the carrier to the public are settled. It cannot lawfully stipulate for exemption from liability, unless such exemption is just and reasonable, and unless the contract is freely and fairly made. No contractual limitation is reasonable which is subversive of public policy.” 9. Corpus Juris, volume 10, p. 154; Paragraph 195.7(a), What Limitations of Liability Permissible, Negligence Paragraph 195. 7 (What Limitations of Liability Permissible) provides that “a. Negligence — (1) Rule in America — (a) In Absence of Organic or Statutory Provisions Regulating Subject — aa. Majority Rule. — In the absence of statute, it is settled by the weight of authority in the United States, that whatever limitations against its common-law liability are permissible to a carrier, it cannot limit its liability for injury to or loss of goods shipped, where such injury or loss is caused by its own negligence. This is the common law doctrine and it makes no difference that there is no statutory prohibition against contracts of this character.” 10.

Corpus Juris, volume 10, p. 154; Paragraph 196.bb, Considerations on which Rule Based Paragraph 196.bb (Considerations on which Rule Based) provides that “The rule, it is said, rests on considerations of public policy. The undertaking is to carry the goods, and to relieve the shipper from all liability for loss or damage arising from negligence in performing its contract is to ignore the contract itself. The natural effect of a limitation of liability against negligence is to induce want of care on the part of the carrier in the performance of its duty. The shipper and the common carrier are not on equal terms; the shipper must send his freight by the common carrier, or not at all; he is therefore entirely at the mercy of the carrier unless protected by the higher power of the law against being forced into contracts limiting the carrier’s liability. Such contracts are wanting in the element of voluntary assent.” 11. Corpus Juris, volume 10, p. 154; Paragraph 197.cc, Application and Extent of Rule, Negligence of servants Paragraph 197.cc (Application and Extent of Rule) provides that “(aa) Negligence of Servants. — The rule prohibiting limitation of liability for negligence is often stated as a prohibition of any contract relieving the carrier from loss or damage caused by its own negligence or misfeasance, or that of its servants; and it has bean specifically decided in many cases that no contract limitation will relieve the carrier from responsibility for the negligence, unskillfulness, or carelessness of its employees.’” [68], also [85] Ong Yiu vs. CA (GR L-40597, 29 June 1979) First Division, Melencio-Herrera (J): 5 concur Facts: On 26 August 1967, Augusto B. Ong Yiu was a fare paying passenger of Philippine Air Lines, Inc. (PAL), on board Flight 463-R, from Mactan, Cebu, bound for Butuan City. He was scheduled to attend the trial of Civil Case 1005 and Special Proceedings 1125 in the Court of First Instance, Branch II, set for hearing on August 28-31, 1967. As a passenger, he checked in one piece of luggage, a blue “maleta” for which he was issued Claim Check 2106-R. The plane left Mactan Airport, Cebu, at about 1:00 p.m., and arrived at Bancasi airport, Butuan City, at past 2:00 p.m., of the same day. Upon arrival, Ong Yiu claimed his luggage but it could not be found. According to Ong Yiu, it was only after reacting indignantly to the loss that the matter was attended to by the porter clerk, Maximo Gomez, which, however, the latter denies. At about 3:00 p.m., PAL Butuan, sent a message to PAL, Cebu inquiring about the missing luggage, which message was, in turn, relayed in full to the Mactan Airport teletype operator at 3:45 p.m. It must have been transmitted to Manila immediately, for at 3:59 p.m., PAL Manila wired PAL Cebu advising that the luggage had been overcarried to Manila aboard Flight 156 and that it would be forwarded to Cebu on Flight 345 of the same day. Instructions Transportation Law, 2004 ( 179 )

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were also given that the luggage be immediately forwarded to Butuan City on the first available flight. At 5:00 p.m. of the same afternoon, PAL Cebu sent a message to PAL Butuan that the luggage would be forwarded on Flight 963 the following day, 27 August 1967. However, this message was not received by PAL Butuan as all the personnel had already left since there were no more incoming flights that afternoon. In the meantime, Ong Yiu was worried about the missing luggage because it contained vital documents needed for trial the next day. At 10:00 p.m., Ong Yiu wired PAL Cebu demanding the delivery of his baggage before noon the next day, otherwise, he would hold PAL liable for damages, and stating that PAL’s gross negligence had caused him undue inconvenience, worry, anxiety and extreme embarrassment. This telegram was received by the Cebu PAL supervisor but the latter felt no need to wire Ong Yiu that his luggage had already been forwarded on the assumption that by the time the message reached Butuan City, the luggage would have arrived. Early in the morning of the next day, 27 August 1967, Ong Yiu went to the Bancasi Airport to inquire about his luggage. He did not wait, however, for the morning flight which arrived at 10:00 a.m., and which carried the missing luggage. The porter clerk, Maximo Gomez, paged Ong Yiu, but the latter had already left. A certain Emilio Dagorro, a driver of a “colorum” car, who also used to drive for Ong Yiu, volunteered to take the luggage to Ong Yiu. As Maximo Gomez knew Dagorro to be the same driver used by Ong Yiu whenever the latter was in Butuan City, Gomez took the luggage and placed it on the counter. Dagorro examined the lock, pressed it, and it opened. After calling the attention of Maximo Gomez, the “maleta” was opened, Gomez took a look at its contents, but did not touch them. Dagorro then delivered the “maleta” to Ong Yiu, with the information that the lock was open. Upon inspection, Ong Yiu found that a folder containing certain exhibits, transcripts and private documents in Civil Case No. 1005 and Sp. Procs. No. 1126 were missing, aside from two gift items for his parents-in-law. Ong Yiu refused to accept the luggage. Dagorro returned it to the porter clerk, Maximo Gomez, who sealed it and forwarded the same to PAL Cebu. Meanwhile, Ong Yiu asked for postponement of the hearing of Civil Case 1005 due to loss of his documents, which was granted by the Court. Ong Yiu returned to Cebu City on 28 August 1967. In a letter dated 29 August 1967 addressed to PAL, Cebu, Ong Yiu called attention to his telegram, demanded that his luggage be produced intact, and that he be compensated in the sum of P250,000.00 for actual and moral damages within 5 days from receipt of the letter, otherwise, he would be left with no alternative but to file suit. On 31 August 1967, Messrs. de Leon, Navarsi, and Agustin, all of PAL Cebu, went to Ong Yiu’s office to deliver the “maleta”. In the presence of Mr. Jose Yap and Atty. Manuel Maranga, the contents were listed and receipted for by Ong Yiu. On 5 September 1967, Ong Yiu sent a tracer letter to PAL Cebu inquiring about the results of the investigation which Messrs. de Leon, Navarsi and Agustin had promised to conduct to pinpoint responsibility for the unauthorized opening of the “maleta”. On 13 September 1967, Ong Yiu filed a Complaint against PAL for damages for breach of contract of transportation with the CFI of Cebu (Branch V, Civil Case R-10188), which PAL traversed. After due trial, the lower Court found PAL to have acted in bad faith and with malice and declared petitioner entitled to moral damages in the gum of P80,000.00, exemplary damages of P30,000.00, attorney’s fees of P5,000.00, and costs. Both parties appealed to the Court of Appeals. On 22 August 1974, the Court of Appeals, finding that PAL was guilty only of simple negligence, reversed the judgment of the trial Court granting Ong Yiu moral and exemplary damages, but ordered PAL to pay Ong Yiu the sum of P100.00, the baggage liability assumed by it under the condition of carriage printed at the back of the ticket. Hence, the Petition for Review by Certiorari, filed on 2 May 1975. On 16 July 1975, the Supreme Court gave due course to the Petition. The Supreme Court denied the petition for lack of merit, and affirmed the judgment sought to be reviewed in toto; without costs. 1.

Bad faith defined

Transportation Law, 2004 ( 180 )

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Bad faith means a breach of a known duty through some motive of interest or ill will. It was the duty of PAL to look for Ong Yiu’s luggage which had been miscarried; and PAL exerted due diligence in complying with such duty. PAL had not acted in bad faith. 2.

Failure of PAL Cebu to reply to Ong Yiu’s rush telegram does not indicate bad faith The failure of PAL Cebu to reply to Ong Yiu’s rush telegram is not indicative of bad faith. The telegram was dispatched by petitioner at around 10:00 p.m. of 26 August 1967. The PAL supervisor at Mactan Airport was notified of it only in the morning of the following day. At that time the luggage was already to be forwarded to Butuan City. There was no bad faith in the assumption made by said supervisor that the plane carrying the bag would arrive at Butuan earlier than a reply telegram. Had Ong Yiu waited or caused someone to wait at the Bancasi airport for the arrival of the morning flight, he would have been able to retrieve his luggage sooner. 3.

Article 2217 NCC Article 2217 of the Civil Code provides that “Moral damages include physical suffering, mental anguish, fright, serious anxiety, besmirched reputation, wounded feelings, moral shock, social humiliation, and similar injury. Though incapable of pecuniary computation, moral damages may be recovered if they are the proximate result of the defendant’s wrongful act of omission.” 4.

Article 2220 NCC Article 2220 of the Civil Code provides that “Willful injury to property may be a legal ground for awarding moral damages if the court should find that, under the circumstances, such damages are justly due. The same rule applies to breaches of contract where the defendant acted fraudulently or in bad faith.” 5.

Ong Yiu not entitled to moral damages, nor exemplary damages In the absence of a wrongful act or omission or of fraud or bad faith, Ong Yiu is not entitled to moral damages. Ong Yu is neither entitled to exemplary damages. In contracts, as provided for in Article 2232 of the Civil Code, exemplary damages can be granted if the defendant acted in a wanton, fraudulent, reckless, oppressive, or malevolent manner, which has not been proven in the present case. 6.

Condition of carriage printed at back of plane ticket The pertinent Condition of Carriage printed at the back of the plane ticket reads “8. BAGGAGE LIABILITY . . . The total liability of the Carrier for lost or damaged baggage of the passenger is LIMITED TO P100.00 for each ticket unless a passenger declares a higher valuation in excess of P100.00, but not in excess, however, of a total valuation of P1,000.00 and additional charges are paid pursuant to Carrier’s tariffs.” 7.

Contract of adhesion While it may be true that Ong Yiu had not signed the plane ticket, 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 present case, 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. 8.

Limitation of liability to agreed valuation not contrary to law; Randolph vs. American Airlines And as held in Randolph v. American Airlines, 103 Ohio App. 172, 144 N.E. 2d 878; Rosenchein vs. Trans World Airlines, Inc., 349 S.W. 2d 483, “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.”

Transportation Law, 2004 ( 181 )

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9.

No declaration of greater value nor payment of tariff for value of luggage The liability of PAL for the loss, in accordance with the stipulation written on the back of the ticket is limited to P100.00 per baggage. Ong Yiu not having declared a greater value, and not having called the attention of PAL on its true value and paid the tariff therefor. The validity of the stipulation is not questioned by Ong Yiu. They are printed in reasonably and fairly big letters, and are easily readable. Moreover, Ong Yiu had been a frequent passenger of PAL from Cebu to Butuan City and back, and he, being a lawyer and businessman, must be fully aware of these conditions. Considering, therefore, that Ong Yiu had failed to declare a higher value for his baggage, he cannot be permitted a recovery in excess of P100.00. Besides, passengers are advised not to place valuable items inside their baggage but “to avail of our V-cargo service.” It is likewise to be noted that there is nothing in the evidence to show the actual value of the goods allegedly lost by Ong Yiu. 10.

Technicality yields to the interests of substantial justice On 24 October 1974 or two months after the promulgation of the Decision of the appellate Court, Ong Yiu’s widow filed a Motion for Substitution claiming that Ong Yiu died on 6 January 1974 and that she only came to know of the adverse Decision on 23 October 1974 when Ong Yiu’s law partner informed her that he received copy of the Decision on 28 August 1974. Attached to her Motion was an Affidavit of Ong Yiu’s law partner reciting facts constitutive of excusable negligence. The appellate Court noting that all pleadings had been signed by Ong Yiu himself allowed the widow “to take such steps as she or counsel may deem necessary.” She then filed a Motion for Reconsideration over the opposition of PAL which alleged that the Court of Appeals Decision, promulgated on 22 August 1974, had already become final and executory since no appeal had been interposed therefrom within the reglementary period. Under the circumstances, considering the demise of Ong Yiu himself, who acted as his own counsel, it is best that technicality yields to the interests of substantial justice. Besides, in the last analysis, no serious prejudice has been caused PAL. [69] British Airways vs. CA (GR 121824, 29 January 1998) Third Division, Romero (J): 3 concur, 1 concur in result Facts: On 16 April 1989, GOP Mahtani decided to visit his relatives in Bombay, India. In anticipation of his visit, he obtained the services of a certain Mr. Gumar to prepare his travel plans. The latter, in turn, purchased a ticket from British Airways (BA) where the following itinerary was indicated (Manila [MNL], PR 310Y, 16 April, 1730H, Status OK; Hongkong [HKG] BA 20M, 16 April, 2100H, Status OK; Bombay [BOM], BA 19M, 23 April, 0840H, Status OK; Hongkong [HKG], PR 311 Y; Manila [MNL].” Since BA had no direct flights from Manila to Bombay, Mahtani had to take a flight to Hongkong via Philippine Airlines (PAL), and upon arrival in Hongkong he had to take a connecting flight to Bombay on board BA. Prior to his departure, Mahtani checked in at the PAL counter in Manila his two pieces of luggage containing his clothings and personal effects, confident that upon reaching Hongkong, the same would be transferred to the BA flight bound for Bombay.Unfortunately, when Mahtani arrived in Bombay he discovered that his luggage was missing and that upon inquiry from the BA representatives, he was told that the same might have been diverted to London. After patiently waiting for his luggage for one week, BA finally advised him to file a claim by accomplishing the “Property Irregularity Report.” Back in the Philippines, specifically on 11 June 1990, Mahtani filed his complaint for damages and attorney’s fees against BA and Mr. Gumar before the trial court (Civil Case CEB-9076). After appropriate proceedings and trial, on 4 March 1993, the trial court rendered its decision in favor of Mahtani, ordering BA to pay Mahtani the sum of P7,000.00 for the value of the two (2) suit cases; US$400.00 representing the value of the contents of Mahtani’s luggage; P50,000.00 Pesos for moral and actual damages and 20% of the total amount imposed against BA for attorney’s fees and costs of the action. The Court dismissed BA’s third party complaint against PAL. Transportation Law, 2004 ( 182 )

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Dissatisfied, BA appealed to the Court of Appeals, which however, on 7 September 1995, affirmed the trial court’s findings in toto, with costs against BA. Hence, the appeal by certiorary. The Supreme Court modified the decision of the Court of Appeals, reinstating the third-party complaint filed by British Airways dated 9 November 1990 against Philippine Airlines. No costs. 1.

Nature of airline’s contract of carriage The nature of an airline’s contract of carriage partakes of two types, namely: a contract to deliver a cargo or merchandise to its destination and a contract to transport passengers to their destination. A business intended to serve the travelling public primarily, it is imbued with public interest, hence, the law governing common carriers imposes an exacting standard. Neglect or malfeasance by the carrier’s employees could predictably furnish bases for an action for damages. 2. Culpability of airline for lost damages; Claimant must prove existence of factual basis for damages As in a number of cases, the Court has assessed the airlines’ culpability in the form of damages for breach of contract involving misplaced luggage. In determining the amount of compensatory damages in this kind of cases, it is vital that the claimant satisfactorily prove during the trial the existence of the factual basis of the damages and its causal connection to defendant’s acts. 3. Declaration of higher value needed to recover greater amount; Article 22 (1) of the Warsaw Convention In a contract of air carriage a declaration by the passenger of a higher value is needed to recover a greater amount. Article 22(2) of the Warsaw Convention provides that “In the transportation of checked baggage and goods, the liability of the carrier shall be limited to a sum of 250 francs per kilogram, unless the consignor has made, at the time the package was handed over to the carrier, a special declaration of the value at delivery and has paid a supplementary sum if the case so requires. In that case the carrier will be liable to pay a sum not exceeding the declared sum, unless he proves that the sum is greater than the actual value to the consignor at delivery.” 4.

Carrier not liable for loss of baggage in amount in excess of limits specified in tariff American jurisprudence provides that an air carrier is not liable for the loss of baggage in an amount in excess of the limits specified in the tariff which was filed with the proper authorities, such tariff being binding on the passenger regardless of the passenger’s lack of knowledge thereof or assent thereto. This doctrine is recognized in this jurisdiction. 5.

No blind reliance on adhesion contracts; Benefits of limited liability subject to waiver The Court, however, has ruled against blind reliance on adhesion contracts where the facts and circumstances justify that they should be disregarded. Further, benefits of limited liability are subject to waiver such as when the air carrier failed to raise timely objections during the trial when questions and answers regarding the actual claims and damages sustained by the passenger were asked. Herein, given the foregoing postulates, the inescapable conclusion is that BA had waived the defense of limited liability when it allowed Mahtani to testify as to the actual damages he incurred due to the misplacement of his luggage, without any objection. 6. Right to object actually a mere privilege that can be waived; Objection must be made at earliest opportunity It is a well-settled doctrine that where the proponent offers evidence deemed by counsel of the adverse party to be inadmissible for any reason, the latter has the right to object. However, such right is a mere privilege which can be waived. Necessarily, the objection must be made at the earliest opportunity, lest Transportation Law, 2004 ( 183 )

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silence when there is opportunity to speak may operate as a waiver of objections. Herein, BA has precisely failed in this regard. 7.

Proper time to object; Abrenica vs. Gonda In the early case of Abrenica v. Gonda, that court ruled that “it has been repeatedly laid down as a rule of evidence that a protest or objection against the admission of any evidence must be made at the proper time, and that if not so made it will be understood to have been waived. The proper time to make a protest or objection is when, from the question addressed to the witness, or from the answer thereto, or from the presentation of proof, the inadmissibility of evidence is, or may be inferred.” Herein, to compound matters for BA, its counsel failed not only to interpose a timely objection but even conducted his own cross-examination as well. 8.

Factual findings of trial court entitled to great respect Needless to say, factual findings of the trial court, as affirmed by the Court of Appeals, are entitled to great respect. Herein, since the actual value of the luggage involved appreciation of evidence, a task within the competence of the Court of Appeals, its ruling regarding the amount is assuredly a question of fact, thus, a finding not reviewable by the Supreme Court. 9.

Nature of third party complaint; Firestone Tire Rubber vs. Tempengko The third-party complaint is a procedural device whereby a ‘third party’ who is neither a party nor privy to the act or deed complained of by the plaintiff, may be brought into the case with leave of court, by the defendant, who acts as third-party plaintiff to enforce against such third-party defendant a right for contribution, indemnity, subrogation or any other relief, in respect of the plaintiff’s claim. The third-party complaint is actually independent of and separate and distinct from the plaintiff’s complaint. Were it not for this provision of the Rules of Court, it would have to be filed independently and separately from the original complaint by the defendant against the third-party. But the Rules permit defendant to bring in a third-party defendant or so to speak, to litigate his separate cause of action in respect of plaintiff’s claim against a thirdparty in the original and principal case with the object of avoiding circuitry of action and unnecessary proliferation of law suits and of disposing expeditiously in one litigation the entire subject matter arising from one particular set of facts. 10.

PAL a subcontractor or agent of BA The contract of air transportation was exclusively between Mahtani and BA, the latter merely endorsing the Manila to Hongkong leg of the former’s journey to PAL, as its subcontractor or agent. In fact, the fourth paragraph of the “Conditions of Contracts” of the ticket 32 issued by BA to Mahtani confirms that the contract was one of continuous air transportation from Manila to Bombay (“4. carriage to be performed hereunder by several successive carriers is regarded as a single operation.”) It is undisputed that PAL, in transporting Mahtani from Manila to Hongkong acted as the agent of BA. 11. Agent responsible for any negligence in performance of its function, and liable for damages which principal may suffer It is a well-settled rule that an agent is also responsible for any negligence in the performance of its function and is liable for damages which the principal may suffer by reason of its negligent act. Hence, the Court of Appeals erred when it opined that BA, being the principal, had no cause of action against PAL, its agent or sub-contractor. 12.

Contractual relationship between BA and PAL, both members of the IATA, is one of agency Both BA and PAL are members of the International Air Transport Association (IATA), wherein member airlines are regarded as agents of each other in the issuance of the tickets and other matters pertaining to their relationship. Therefore, herein, the contractual relationship between BA and PAL is one of agency, the former being the principal, since it was the one which issued the confirmed ticket, and the latter the agent. Transportation Law, 2004 ( 184 )

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13.

BA is principal; Pronouncement consistent with Lufthansa vs. CA The pronouncement that BA is the principal is consistent with the ruling in Lufthansa German Airlines v. Court of Appeals. In that case, Lufthansa issued a confirmed ticket to Tirso Antiporda covering five-leg trip aboard different airlines. Unfortunately, Air Kenya, one of the airlines which was to carry Antiporda to a specific destination “bumped” him off. An action for damages was filed against Lufthansa which, however, denied any liability, contending that its responsibility towards its passenger is limited to the occurrence of a mishap on its own line. Consequently, when Antiporda transferred to Air Kenya, its obligation as a principal in the contract of carriage ceased; from there on, it merely acted as a ticketing agent for Air Kenya: In rejecting Lufthansa’s argument, the court ruled that “In the very nature of their contract, Lufthansa is clearly the principal in the contract of carriage with Antiporda and remains to be so, regardless of those instances when actual carriage was to be performed by various carriers. The issuance of confirmed Lufthansa ticket in favor of Antiporda covering his entire five-leg trip aboard successive carriers concretely attest to this.” 14.

Mahtani can sue BA alone, not PAL; PAL however not relieved from liability Since the present petition was based on breach of contract of carriage, Mahtani can only sue BA alone, and not PAL, since the latter was not a party to the contract. However, this is not to say that PAL is relieved from any liability due to any of its negligent acts. In China Air Lines, Ltd. v. Court of Appeals, while not exactly in point, the case, however, illustrates the principle which governs the particular situation. In that case, the Court recognized that a carrier (PAL), acting as an agent of another carrier, is also liable for its own negligent acts or omission in the performance of its duties. 15.

Proceedings in third party complaint in accord with doctrine against multiplicity of suits To deny BA the procedural remedy of filing a third-party complaint against PAL for the purpose of ultimately determining who was primarily at fault as between them, is without legal basis. After all, such proceeding is in accord with the doctrine against multiplicity of cases which would entail receiving the same or similar evidence for both cases and enforcing separate judgments therefor. It must be borne in mind that the purpose of a third-party complaint is precisely to avoid delay and circuity of action and to enable the controversy to be disposed of in one suit. It is but logical, fair and equitable to allow BA to sue PAL for indemnification, if it is proven that the latter’s negligence was the proximate cause of Mahtani’s unfortunate experience, instead of totally absolving PAL from any liability. [70],Eastern Shipping vs. IAC, also [43] [71] PAL vs. CA (GR 92501, 6 March 1992) First Division, Grino-Aquino (J): 2 concur, 1 took no part Facts: At about 5:30 a.m. on 17 April 1985, Isidro Co, accompanied by his wife and son, arrived at the Manila International Airport aboard the airline’s PAL Flight 107 from San Francisco, California, U.S.A. Soon after embarking, Co proceeded to the baggage retrieval area to claim his 9 pieces of checked-in luggage with the corresponding claim checks in his possession. Co found eight of his luggage, but despite diligent search, he failed to locate the 9th luggage, with claim check number 729113. Co’s lost luggage was a Samsonite suitcase measuring about 62 inches in length, worth about US $200.00 and containing various personal effects purchased by Co and his wife during their stay in the United States and similar other items sent by their friends abroad to be given as presents to relatives in the Philippines. Co’s invoices evidencing their purchases show their missing personal effects to be worth US $1,243.01, in addition to the presents entrusted to them by their friends which Co testified to be worth about US $500.00 to US $600.00. Co then immediately notified PAL through its employee, Willy Guevarra, who was then in charge of the PAL claim counter at the airport. Willy Guevarra filled up a printed form known as a Property Irregularity Report, acknowledging one of the Transportation Law, 2004 ( 185 )

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Co’s luggages to be missing, and signed it after asking Co himself to sign the same document. In accordance with his procedure in cases of this nature, Willy Guevarra asked Co to surrender to him the nine claim checks corresponding to the nine luggages, i.e., including the one that was missing. Co, on several occasions, unrelentingly called at PAL’s office in order to pursue his complaint about his missing luggage but to no avail. Thus, on 15 April 1985, Co through his lawyer wrote a demand letter to PA: through Rebecca V. Santos, its manager for Central Baggage Services. On 17 April 1985, Rebecca Santos replied to the demand letter acknowledging ‘that to date we have been unable to locate your client’s baggage despite our careful search” and requesting Co’s counsel to “please extend to him our sincere apologies for the inconvenience he was caused by this unfortunate incident”. Despite the letter, however, PAL never found Co’s missing luggage or paid its corresponding value. On 3 May 1985, Co filed a complaint against PAL for damages. The Regional Trial Court of Pasay City found PAL liable, and rendered judgment on 3 June 1986, sentencing PAL to pay Co the amounts of (1) P42,766.02 by way of actual damages; (2) P20,000.00 by way of exemplary damages; (3) P10,000.00 as attorney’s fees; all in addition to the costs or the suit.” The court also dismissed PAL’s counterclaim for lack of merit. On appeal, and on 19 July 1989, the Court of Appeals affirmed in toto the trial court’s award. Hence, the petition for review. The Supreme Court denied the petition for review for lack of merit; with costs against PAL. 1.

Probative value of PAL’s retrieval report The probative value of PAL’s retrieval report was passed upon by the Regional Trial Court of Pasay City, whose finding was affirmed by the Court of Appeals. Although the passenger should produce his claim tag if he had not surrendered it because there was no baggage received; it would appear that the passenger surrendered all the 9 claim checks corresponding to the 9 luggages, including the one that was missing, to the PAL officer after accomplishing the Property Irregularity Report, and thus, it could not be possible for the passenger to produce the same in court. It is now for the carrier to produce the veracity of their Baggage Retrieval Report by corroborating evidence other than testimonies of their employees. Such document is within the control of PAL and necessarily requires other corroborative evidence. 2.

Purely factual issues not reviewable by the court Assignments of error, which raise purely factual issues, are not reviewable by the Supreme Court (Sec. 2, Rule 45, Rules of Court). The Court reviews only questions of law which must be distinctly set forth in the petition. (Hodges vs. People, 68 Phil. 178.) Whether or not the lost luggage was ever retrieved by the passenger, and whether or not the actual and exemplary damages awarded by the court to him are reasonable, are factual issues which we may not pass upon in the absence of special circumstances requiring a review of the evidence. 3.

Warsaw Convention; Alitalia vs. IAC not applicable In Alitalia vs. IAC (192 SCRA 9, 18, citing Pan American World Airways, Inc. vs. IAC, 164 SCRA 268), the Warsaw Convention limiting the carrier’s liability was applied because of a simple loss of baggage without any improper conduct on the part of the officials or employees of the airline, or other special injury sustained by the passengers. The petitioner therein did not declare a higher value for his luggage, much less did he pay an additional transportation charge. 4.

Law of destination; Samar Mining vs. Nordeutscher Lloyd In Samar Mining Company, Inc. vs. Nordeutscher Lloyd (132 SCRA 529), the Court ruled that “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. 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 Transportation Law, 2004 ( 186 )

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Special Laws.” Herein, since the passenger’s destination was the Philippines, Philippine law governs the liability of the carrier for the loss of the passenger’s luggage. 5.

Article 1733 NCC Article 1733 provides that “Common carriers, from the nature of their business and for reasons of public policy, are bound to observe extraordinary diligence in the vigilance over the goods and for the safety of the passengers transported by them, according to all the circumstances of each case.” 6.

Article 1735 NCC Article 1735 provides that “In all cases other than those mentioned in Nos. 1, 2, 3, 4 and 5 of the preceding article if the goods are lost, destroyed or deteriorated, common carriers are presumed to have been at fault or to have acted negligently, unless they prove that they observed extraordinary diligence as required in article 1733. 7.

Article 1753 NCC Article 1753 provides that “The law of the country to which the goods are to be transported shall govern the liability of the common carrier for their loss, destruction or deterioration.” 8.

No error in disregarding limits of liability under Warsaw Convention Herein, PAL failed to overcome, not only the presumption, but more importantly, Co’s evidence, proving that the carrier’s negligence was the proximate cause of the loss of his baggage. Furthermore, PAL acted in bad faith in faking a retrieval receipt to bail itself out of having to pay Co’s claim. The appellate cout therefore did not err in disregarding the limits of liability under the Warsaw Convention. 9.

Award of exemplary damages and attorney’s fees justified The award of exemplary damages and attorney’s fees to Co was justified. In the cases of Imperial Insurance, Inc. vs. Simon, 122 Phil. 189 and Bert Osmeña and Associates vs. CA, 120 SCRA 396, the appellant was awarded attorney’s fees because of appellee’s failure to satisfy the former’s just and valid demandable claim which forced the appellant to litigate. Likewise, in the case of Phil. Surety and Ins. Co., Inc. vs. Royal Oil Products, 102 Phil. 326, the Court justified the grant of exemplary damages and attorney’s fees for the petitioner’s failure, even refusal, to pay the private respondent’s valid claim. [-], also [133] Robles vs. Santos [72] Quisumbing vs. CA (GR 50076, 14 September 1990) First Division, Narvasa (J): 4 concur Facts: Norberto Quisumbing, Sr. and Gunther Loeffler were among the passengers of PAL’s Fokker ‘Friendship’ PIC-536 plane in its flight of 6 November 1968 which left Mactan City at about 7:30 in the evening with Manila for its destination. After the plane had taken off, Florencio O. Villarin, a Senior NBI Agent who was also a passenger of the said plane, noticed a certain ‘Zaldy,’ a suspect in the killing of Judge Valdez, seated at the front seat near the door leading to the cockpit of the plane. A check by Villarin with the passenger’s ticket in the possession of flight Stewardess Annie Bontigao, who was seated at the last seat right row revealed that ‘Zaldy’ had used the name ‘Cardente,’ one of his aliases known to Villarin. Villarin also came to know from the stewardess that ‘Zaldy had three companions on board the plane. Villarin then scribbled a note addressed to the pilot of the plane requesting the latter to contact NBI duty agents in Manila for the said agents to ask the Director of the NBI to send about 6 NBI agents to meet the plane because the Transportation Law, 2004 ( 187 )

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suspect in the killing of Judge Valdez was on board. The said note was handed by Villarin to the stewardess who in turn gave the same in the pilot. After receiving the note, which was about 15 minutes after take off, the pilot of the plane, Capt. Luis Bonnevie, Jr., came out of the cockpit and sat beside Villarin at the rear portion of the plane and explained that he could not send the message because it would be heard by all ground aircraft stations. Villarin, however, told the pilot of the danger of commission of violent acts on board the plane by the notorious ‘Zaldy and his three companions. While the pilot and Villarin were talking, ‘Zaldy’ and one of his companions walked to the rear and stood behind them. Capt. Bonnevie then stood up and went back to the cockpit. ‘Zaldy’ and his companions returned to their seats, but after a few minutes they moved back to the rear throwing ugly looks at Villarin who, sensing danger, stood up and went back to his original seat across the aisle on the second to the last seat near the window. ‘Zaldy’ and his companion likewise went back to their respective seats in front.’ Soon thereafter an exchange of gunshots ensued between Villarin and ‘Zaldy’ and the latter’s companions. ‘Zaldy’ announced to the passengers and the pilots in the cockpit that it was hold-up and ordered the pilot not to send any SOS. The hold-uppers divested the passengers of their belongings. Specifically, Norberto Quisumbing, Sr. was divested of jewelries and cash in the total amount of P18,650.00 out of which recoveries were made amounting to P4,550.00. Gunther Loeffler was divested of a wrist watch, cash and a wallet in the total amount of P1,700.00. As a result of the incident, Quisumbing, Sr. suffered shock, because a gun had been pointed at him by one of the hold-uppers. Upon landing at the Manila International Airport, Zaldy and his three companions succeeded in escaping. Demands were thereafter made on PAL by Quisumbing and Loeffler “to indemnify them on their loss, but PAL refused averring that it is not liable to them in law or in fact. Quisumbing and Loeffler brought suit against PAL in the CFi of Rizal, to recover the value of the property lost by them to the robbers as well as moral and exemplary damages, attorney’s fees and expenses of litigation. After trial, the CFI rendered judgment dismissing Quisumbing’s and Loeffler’s complaint with costs against them. Quisumbing and Loeffler appealed to the Court of Appeals. The Court affirmed the trial court’s judgment. Insisting that the evidence demonstrates negligence on the part of the PAL crew “occurring before and exposing them to hijacking,” Quisumbing and Loeffler have come up to the Supreme Court praying that the judgments of the trial Court and the Court of Appeals be reversed and another rendered in their favor. The Supreme Court denied the petition, and affirmed the appealed Decision of the Court of Appeals, with costs against Quisumbing and Loeffler. 1.

Modern display of irresistible force by hijackers The hijackers do not board an airplane through a blatant display of firepower and violent fury. Firearms, hand-grenades, dynamite, and explosives are introduced into the airplane surreptitiously and with the utmost cunning and stealth, although there is an occasional use of innocent hostages who will be coldly murdered unless a plane is given to the hijackers’ complete disposal. The objective of modern-day hijackers is to display the irresistible force amounting to force majeure only when it is most effective and that is when the jetliner is winging its way at Himalayan altitudes and ill-advised heroics by either crew or passengers would send the multi-million peso airplane and the priceless lives of all its occupants into certain death and destruction. 2. Security measures may minimize hijackings but may prove ineffective against truly determined hijackers The mandatory use of the most sophisticated electronic detection devices and magnetometers, the imposition of severe penalties, the development of screening procedures, the compilation of hijacker behavioral profiles, the assignment of sky marshals, and the weight of outraged world opinion may have minimized hijackings but all these have proved ineffective against truly determined hijackers. World experience shows that if a group of armed hijackers want to take over a plane in flight, they can elude the Transportation Law, 2004 ( 188 )

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latest combined government and airline industry measures. As our own experience in Zamboanga City illustrates, the use of force to overcome hijackers, results in the death and injury of innocent passengers and crew members. This does not suggest, however, that the Philippine Airlines should not do everything humanly possible to protect passengers from hijackers’ acts. 3. Acts of airline and crew, while complying with requirements of government agencies, cannot be faulted as negligence Where the airline has faithfully complied with the requirements of government agencies and adhered to the established procedures and precautions of the airline industry at any particular time, its failure to take certain steps that a passenger in hindsight believes should have been taken is not the negligence or misconduct which mingles with force majeure as an active and cooperative cause. Herein, the acts of the airline and its crew cannot be faulted as negligence. The hijackers had already shown their willingness to kill one passenger was in fact killed and another survived gunshot wounds. The lives of the rest of the passengers and crew were more important than their properties. Cooperation with the hijackers until they released their hostages at the runway end near the South Superhighway was dictated by the circumstances. 4.

Under the facts, “the highjacking-robbery was force majeure” The evidence does fail to prove any want of diligence on the part of PAL, or that, more specifically, it had failed to comply with applicable regulations or universally accepted and observed procedures to preclude hijacking; and that the particular acts singled out by Quisumbing and Loeffler as supposedly demonstrative of negligence were, in the light of the circumstances of the case, not in truth negligent acts “sufficient to overcome the force majeure nature of the armed robbery.” [73] PanAm World Airways vs. Rapadas (GR 60673, 19 May 1992) Third Division, Gutierrez Jr. (J): 4 concur Facts: On 16 January 1975, Jose K. Rapadas held Passenger Ticket and Baggage Claim Check 026394830084-5 for Pan American World Airways Inc.’s (PanAm) Flight 841 with the route from Guam to Manila. While standing in line to board the flight at the Guam airport, Rapadas was ordered by PanAm’s handcarry control agent to check-in his Samsonite attache case. Rapadas protested pointing to the fact that other co-passengers were permitted to handcarry bulkier baggages. He stepped out of the line only to go back again at the end of it to try if he can get through without having to register his attache case. However, the same man in charge of handcarry control did not fail to notice him and ordered him again to register his baggage. For fear that he would miss the plane if he insisted and argued on personally taking the valise with him, he acceded to checking it in. He then gave his attache case to his brother who happened to be around and who checked it in for him, but without declaring its contents or the value of its contents. He was given a Baggage Claim Tag P-749-713. Upon arriving in Manila on the same date, 16 January 1975, Rapadas claimed and was given all his checked-in baggages except the attache case. Since Rapadas felt ill on his arrival, he sent his son, Jorge Rapadas to request for the search of the missing luggage. PanAm exerted efforts to locate the luggage through the Pan American World Airways-Manila International Airport (PAN AM-MIA) Baggage Service. On 30 January 1975, PanAm required the Rapadas to put the request in writing. Rapadas filled in a Baggage Claim Blank Form. Thereafter, Rapadas personally followed up his claim. For several times, he called up Mr. Panuelos, the head of the Baggage Section of PAN AM. He also sent letters demanding and reminding the petitioner of his claim. Rapadas received a letter from PanAm’s counsel dated 2 August 1975 offering to settle the claim for the sum of $160.00 representing PanAm’s alleged limit of liability for loss or damage to a passenger’s personal property under the contract of carriage between Rapadas and PANAM. Refusing to accept this kind of settlement, Rapadas filed the instant action for damages on 1 October 1975. Rapadas alleged that PanAm discriminated or singled him out in ordering that his luggage be checked in. He Transportation Law, 2004 ( 189 )

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also alleged that PanAm neglected its duty in the handling and safekeeping of his attache case from the point of embarkation in Guam to his destination in Manila. He placed the value of the lost attache case and its contents at US$42,403.90. According to him, the loss resulted in his failure to pay certain monetary obligations, failure to remit money sent through him to relatives, inability to enjoy the fruits of his retirement and vacation pay earned from working in Tonga Construction Company (he retired in August 1974) and inability to return to Tonga to comply with then existing contracts. The lower court ruled in favor of complainant Rapadas after finding no stipulation giving notice to the baggage liability limitation. The court rejected the claim of PanAm that its liability under the terms of the passenger ticket is only up to $160.00. However, it scrutinized all the claims of Rapadas. It discredited insufficient evidence to show discriminatory acts or bad faith on the part of PanAm. The trial court ordered PanAm to pay Rapadas by way of actual damages the equivalent peso value of the amount of $5,228.90 and 100 paengs (Tongan money), nominal damages in the amount of P20,000.00 and attorney’s fees of P5,000.00, and the costs of the suit. The trial court also dismissed PanAm’s counterclaim. On appeal, the Court of Appeals affirmed the trial court decision. Hence, the petition for review. The Supreme Court granted the petition, and reversed and set aside the decision of the Court of Appeals. The Court ordered PanAm to pay Rapadas damages in the amount of US$400.00 or its equivalent in Philippine Currency at the time of actual payment, P10,000.00 in attorney’s fees, and costs of the suit. 1.

Notice of limited liability in airline ticket Herein, there was such a Notice appearing on page two (2) of the airline ticket stating that the Warsaw Convention governs in case of death or injury to a passenger or of loss, damage or destruction to a passenger’s luggage. The Notice states that “If the passenger’s journey involves an ultimate destination or stop in a country other than the country of departure the Warsaw Convention may be applicable and the Convention governs and in most cases limits the liability of carriers for death or personal injury and in respect of loss of or damage to baggage. See also notice headed “Advice to International Passengers on Limitation of Liability.” (The latter notice refers to limited liability for death or personal injury to passengers with proven damages not exceeding US $75,000 per passenger). Furthermore, paragraph 2 of the “Conditions of Contracts” also appearing on page 2 of the ticket states that “(2) Carriage hereunder is subject to the rules and limitations relating to liability established by the Warsaw Convention unless such carriage is not ‘international carriage’ as defined by that Convention.” 2.

Paragraph 2 of Conditions of Contract sufficient notice of applicability of Warsaw limitations Herein, the original of the Passenger Ticket and Baggage Check 026-394830084-5 itself was not presented as evidence as it was among those returned to Mr. Faupula (of the Union Steam Ship Company of New Zealand, Ltd., Tonga; who facilitated the issuance of the tickets on credit). Thus, apart from the evidence offered by the airline, the lower court had no other basis for determining whether or not there was actually a stipulation on the specific amounts PanAm had expressed itself to be liable for loss of baggage. Although the trial court rejected the evidence of the PanAm of a stipulation particularly specifying what amounts it had bound itself to pay for loss of luggage, the Notice and paragraph 2 of the “Conditions of Contract” should be sufficient notice showing the applicability of the Warsaw limitations. 3.

Warsaw Convention, Article 1, paragraph 2 The Warsaw Convention, as amended, specifically provides that it is applicable to international carriage which it defines in Article 1, par. 2 as follows, “(2) For the purposes of this Convention, the expression ‘international carriage’ means any carriage in which, according to the agreement between the parties, the place of departure and the place of destination, whether or not there be a breach in the carriage or a transshipment, are situated either within the territories of two High Contracting Parties or within the territory of a single High Contracting Party if there is an agreed stopping place within the territory of another State, even if that State is not a High Contracting Party. Carriage between two points within the territory of a Transportation Law, 2004 ( 190 )

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single High Contracting Party without an agreed stopping place within the territory of another State is not international carriage for the purposes of this Convention.” (“High Contracting Party” refers to a state which has ratified or adhered to the Convention, or which has not effectively denounced the Convention [Article 40A (1)])” 4.

No detailed notice of baggage liability required; Article 22 (2) of Convention Nowhere in the Warsaw Convention, as amended, is such a detailed notice of baggage liability limitations required. Nevertheless, it should become a common, safe and practical custom among air carriers to indicate beforehand the precise sums equivalent to those fixed by Article 22 (2) of the Convention. 5.

Passenger ticket complies with Article 3, paragraph 1(c) of the Warsaw Convention The Convention governs the availment of the liability limitations where the baggage check is combined with or incorporated in the passenger ticket which complies with the provisions of Article 3, par. 1(c). (Article 4, par. 2) Herein, the baggage check is combined with the passenger ticket in one document of carriage. The passenger ticket complies with Article 3, par. 1(c) which provides: “(1) In respect of the carriage of passengers a ticket shall be delivered containing: xxx (c) a notice to the effect that, if the passenger’s journey involves an ultimate destination or stop in a country other than the country of departure, the Warsaw Convention may be applicable and that the Convention governs and in most cases limits the liability of carriers for death or personal injury and in respect of loss of or damage to baggage.” 6.

Contracts of adhesion; Ong Yiu vs. CA, and PanAm vs. IAC As held in the case of Ong Yiu v. Court of Appeals, supra, and reiterated in Pan American World Airways v. Intermediate Appellate Court (164 SCRA 268 [1988]) that “It (plane ticket) 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. And as held in Randolph v. American Airlines, 103 Ohio App. 172, 144 N.E. 2d 878; Rosenchein v. Trans World Airlines, Inc., 349 S.W. 2d 483, ‘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.’” 7.

Contracts of adhesion not prohibited; Blind reliance not encouraged While contracts of adhesion are not entirely prohibited, neither is a blind reliance on them encouraged. In the face of facts and circumstances showing they should be ignored because of their basically one sided nature, the Court does not hesitate to rule out blind adherence to their terms. (See Sweet Lines, Inc. v. Teves, 83 SCRA 361, 368-369 [1978]) 8.

Passenger expected to be vigilant insofar as his luggage is concerned The provisions in the plane ticket sufficient to govern the limitations of liabilities of the airline for loss of luggage. The passenger, upon contracting with the airline and receiving the plane ticket, was expected to be vigilant insofar as his luggage is concerned. If the passenger fails to adduce evidence to overcome the stipulations, he cannot avoid the application of the liability limitations. Herein, Rapadas actually refused to register the attache case and chose to take it with him despite having been ordered by the PanAm agent to check it in. In attempting to avoid registering the luggage by going back to the line, Rapadas manifested a disregard of airline rules on allowable handcarried baggages. Prudence of a reasonably careful person also dictates that cash and jewelry should be removed from checked-in-luggage and placed in one’s pockets or in a handcarried Manila-paper or plastic envelope. 9. Alleged lack of enough time to make declaration of higher value and payment of charges not a defense The alleged lack of enough time for him to make a declaration of a higher value and to pay the corresponding supplementary charges cannot justify his failure to comply with the requirement that will Transportation Law, 2004 ( 191 )

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exclude the application of limited liability. Had he not wavered in his decision to register his luggage, he could have had enough time to disclose the true worth of the articles in it and to pay the extra charges or remove them from the checked-in-luggage. Moreover, an airplane will not depart meantime that its own employee is asking a passenger to comply with a safety regulation. 10.

No proof of arbitrary behavior; Carrier not liable for discrimination or mistreatment Passengers are also allowed one handcarried bag each provided it conforms to certain prescribed dimensions. If Mr. Rapadas was not allowed to handcarry the lost attache case, it can only mean that he was carrying more than the allowable weight for all his luggages or more than the allowable number of handcarried items or more than the prescribed dimensions for the bag or valise. The evidence on any arbitrary behavior of a Pan Am employee or inexcusable negligence on the part of the carrier is not clear from the petition. Absent such proof, the Court cannot hold the carrier liable because of arbitrariness, discrimination, or mistreatment. 11.

Reason behind limited liability clauses By no means is it suggested that passengers are always bound to the stipulated amounts printed on a ticket, found in a contract of adhesion, or printed elsewhere but referred to in handouts or forms. The Court simply recognize that the reasons behind stipulations on liability limitations arise from the difficulty, if not impossibility, of establishing with a clear preponderance of evidence the contents of a lost valise or suitcase. Unless the contents are declared, it will always be the word of a passenger against that of the airline. If the loss of life or property is caused by the gross negligence or arbitrary acts of the airline or the contents of the lost luggage are proved by satisfactory evidence other than the self-serving declarations of one party, the Court will not hesitate to disregard the fine print in a contract of adhesion. (See Sweet Lines Inc. v. Teves, supra) Otherwise, the Court is constrained to rule that it has to enforce the contract as it is the only reasonable basis to arrive at a just award. 12.

Trial Court’s finding on the amount lost is more of a probability than a proved conclusion The conclusion of the trial court does not arise from the facts. That the attache case was originally handcarried does not beg the conclusion that the amount of $4,750.00 in cash could have been placed inside. It may be noted that out of a claim for US$42,403.90 as the amount lost, the trial court found for only US$5,228.90 and 100 paengs. The court had doubts as to the total claim. 13.

Lost luggage considered as unchecked luggage; $400.00 instead of $160 The lost luggage was declared as weighing around 18 pounds or approximately 8 kilograms. At $20.00 per kilogram, Pan Am offered to pay $160.00 as a higher value was not declared in advance and additional charges were not paid. The Court notes, however, that an amount of $400.00 per passenger is allowed for unchecked luggage. Since the checking-in was against the will of Rapadas, the Court treats the lost bag as partaking of involuntarily and hurriedly checked-in luggage and continuing its earlier status as unchecked luggage. The fair liability under PanAm’s own printed terms is $400.00. 14.

Damages not supported by factual basis Since the trial court ruled out discriminatory acts or bad faith on the part of Pan Am or other reasons warranting damages, there is no factual basis for the grant of P20,000.00 damages. 15.

Warsaw convention does not preclude award of attorney’s fees It is just and equitable for Rapadas to recover expenses for litigation in the amount of P5,000.00. Article 22 (4) of the Warsaw Convention, as amended does not precluded an award of attorney’s fees. That provision states that the limits of liability prescribed in the instrument “shall not prevent the court from awarding, in accordance with its own law, in addition, the whole or part of the court costs and other expenses of litigation incurred by the plaintiff.” The Court, however, raise the award to P10,000.00 considering the resort to the Court of Appeals and the Supreme Court. Transportation Law, 2004 ( 192 )

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[74] PAL vs. CA (GR 120262, 17 July 1997) Second Division, Regalado (J): 2 concur, 1 took no part, 1 on leave Facts: On 23 October 1988, Leovigildo A. Pantejo, then City Fiscal of Surigao City, boarded a PAL plane in Manila and disembarked in Cebu City where he was supposed to take his connecting flight to Surigao City. However, due to typhoon Osang, the connecting flight to Surigao City was cancelled. To accommodate the needs of its stranded passengers, PAL initially gave out cash assistance of P 100.00 and, the next day, P200.00, for their expected stay of 2 days in Cebu. Pantejo requested instead that he be billeted in a hotel at the PAL’s expense because he did not have cash with him at that time, but PAL refused. Thus, Pantejo was forced to seek and accept the generosity of a co-passenger, an engineer named Andoni Dumlao, and he shared a room with the latter at Sky View Hotel with the promise to pay his share of the expenses upon reaching Surigao. On 25 October 1988 when the flight for Surigao was resumed, Pantejo came to know that the hotel expenses of his co-passengers, one Superintendent Ernesto Gonzales and a certain Mrs. Gloria Rocha, an Auditor of the Philippine National Bank, were reimbursed by PAL. At this point, Pantejo informed Oscar Jereza, PAL’s Manager for Departure Services at Mactan Airport and who was in charge of cancelled flights, that he was going to sue the airline for discriminating against him. It was only then that Jereza offered to pay Pantejo P300.00 which, due to the ordeal and anguish he had undergone, the latter declined. Pantejo filed a suit for damages against PAL with the RTC of Surigao City (Branch 30). On 18 March 1991, the trial court rendered judgment, ordering PAL to pay Pantejo P300.00 for actual damages, P150,000.00 as moral damages, P100,000.00 as exemplary damages, P15,000.00 as attorney’s fees, and 6% interest from the time of the filing of the complaint until said amounts shall have been fully paid, plus costs of suit. On appeal, and 29 December 1994, the appellate court affirmed the decision of the court a quo, but with the exclusion of the award of attorney’s fees and litigation expenses. Hence, the appeal by certiorari. The Supreme Court affirmed the challenged judgment of Court of Appeals, subject to the modification regarding the computation of the 6% legal rate of interest on the monetary awards granted therein to Pantejo. 1.

Contract to transport passenger different for any other contractual relation A contract to transport passengers is quite different in kind and degree from any other contractual relation, and this is because of the relation which an air carrier sustains with the public. Its business is mainly with the travelling public. It invites people to avail of the comforts and advantages it offers. The contract of air carriage, therefore, generates a relation attended with a public duty. Neglect or malfeasance of the carrier’s employees naturally could give ground for an action for damages. 2.

Circumstance taken into consideration for lower court to declare bad faith existed In declaring that bad faith existed, the appellate court took into consideration the following factual circumstances: (1) Contrary to PAL’s claim that cash assistance was given instead because of non-availability of rooms in hotels where PAL had existing tie-ups, the evidence shows that Sky View Hotel, where Pantejo was billeted, had plenty of rooms available. (2) It is not true that the P300.00 paid to Ernesto Gonzales, a copassenger of Pantejo, was a refund for his plane ticket, the truth being that it was a reimbursement for hotel and meal expenses. (3) It is likewise not denied that said Gonzales and Pantejo came to know about the reimbursements only because another passenger, Mrs. Rocha, informed them that she was able to obtain the refund for her own hotel expenses. (4) PAL offered to pay P300.00 to Pantejo only after he had confronted the airline’s manager about the discrimination committed against him, which the latter realized was an actionable wrong. (5) Service Voucher 199351, presented by PAL to prove that it gave cash assistance to its passengers, was based merely on the list of passengers already given cash assistance and was purportedly prepared at Transportation Law, 2004 ( 193 )

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around 10:00 A.M. of 23 October 1988. This was 2 hours before Pantejo came to know of the cancellation of his flight to Surigao, hence Pantejo could not have possibly refused the same. 3.

Factual findings of lower courts binding upon the Supreme Court Both the trial court and the Court of Appeals found that PAL acted in bad faith in refusing to provide hotel accommodations for Pantejo or to reimburse him for hotel expenses incurred despite and in contrast to the fact that other passengers were so favored. These factual findings, which are supported by substantial evidence, are binding, final and conclusive upon the Supreme Court absent any reason, and the Court find none, why this settled evidential rule should not apply. 4. Assuming hotel accommodations or cash assistance merely privilege, no reason for discriminatory and prejudicial conduct Assuming arguendo that the hotel accommodations or cash assistance given in case a flight is cancelled is in the nature of an amenity and is merely a privilege that may be extended at its own discretion, but never a right that may be demanded by its passengers, and that the airline passengers have no vested right to the amenities in case a flight is cancelled due to force majeure, what makes PAL liable for damages in the present case and under the facts obtaining herein is its blatant refusal to accord the so-called amenities equally to all its stranded passengers who were bound for Surigao City. No compelling or justifying reason was advanced for such discriminatory and prejudicial conduct. 5. Standard company policy as to cash assistance and hotel accommodations; Testimony relating to said fact It has been sufficiently established that it is PAL’s standard company policy, whenever a flight has been cancelled, to extend to its hapless passengers cash assistance or to provide them accommodations in hotels with which it has existing tie-ups. (1) PAL’s Mactan Airport Manager for departure services, Oscar Jereza, admitted that the PAL has an existing arrangement with hotel to accommodate stranded passengers, and that the hotel bills of Ernesto Gonzales were reimbursed obviously pursuant to that policy. (2) Two witnesses presented by Pantejo, Teresita Azarcon and Nerie Bol, testified that sometime in November, 1988, when their flight from Cebu to Surigao was cancelled, they were billeted at Rajah Hotel for two nights and three days at the expense of PAL. This was never denied by PAL. (3) Ernesto Gonzales, Pantejo’s copassenger on that fateful flight, testified that based on his previous experience hotel accommodations were extended by PAL to its stranded passengers either in Magellan or Rajah Hotels, or even in Cebu Plaza. Thus, the Court views as impressed with dubiety PAL’s present attempt to represent such emergency assistance as being merely ex gratia and not ex debito. 6.

Passengers not duly informed; Inferior quality of service and professionalism While PAL insists that the passengers were duly informed that they would be reimbursed for their hotel expenses, it miserably and significantly failed to explain why the other passengers were given reimbursements while Pantejo was not. Although Gonzales was subsequently given a refund, this was only so because he came to know about it by accident through Mrs. Rocha. PAL could only offer the strained and flimsy pretext that possibly the passengers were not listening when the announcement was made. This is absurd because when Pantejo came to know that his flight had been cancelled, he immediately proceeded to PAL’s office and requested for hotel accommodations. He was not only refused accommodations, but he was not even informed that he may later on be reimbursed for his hotel expenses. This explains why his copassenger, Andoni Dumlao, offered to answer for Pantejo’s hotel bill and the latter promised to pay him when they arrive in Surigao. Had both known that they would be reimbursed by the airline, such arrangement would not have been necessary.Therefore, the refund of hotel expenses was surreptitiously and discriminatorily made by PAL since the same was not made known to everyone, except through word of mouth to a handful of passengers. This is a sad commentary on the quality of service and professionalism of an airline company, which is the country’s flag carrier at that.

Transportation Law, 2004 ( 194 )

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7.

PAL acted in bad faith Herein, PAL acted in bad faith in disregarding its duties as a common carrier to its passengers and in discriminating against Pantejo. It was even oblivious to the fact that Pantejo was exposed to humiliation and embarrassment especially because of his government position and social prominence, which altogether necessarily subjected him to ridicule, shame and anguish. It remains uncontroverted that at the time of the incident, Pantejo was then the City Prosecutor of Surigao City, and that he is a member of the Philippine Jaycee Senate, past Lt. Governor of the Kiwanis Club of Surigao, a past Master of the Mount Diwata Lodge of Free Masons of the Philippines, member of the Philippine National Red Cross, Surigao Chapter, and past Chairman of the Boy Scout of the Philippines, Surigao del Norte Chapter. 8.

Refusal of Pantejo of offered amount justified Herein, Pantejo had every right to make such refusal since it evidently could not meet his needs and that was all that PAL claimed it could offer. His refusal to accept the P300.00 proffered as an afterthought when he threatened suit was justified by his resentment when he belatedly found out that his co-passengers were reimbursed for hotel expenses and he was not. Worse, he would not even have known about it were it not for a co-passenger who verbally told him that she was reimbursed by the airline for hotel and meal expenses. It may even be said that the amounts, the time and the circumstances under which those amounts were offered could not solve the moral wounds inflicted by PAL on Pantejo but even approximated insult added to injury. 9.

Discriminatory act makes PAL liable for moral damages; Alitalia Airways vs. CA The discriminatory act of PAL against Pantejo ineludibly makes the former liable for moral damages under Article 21 in relation to Article 2219 (10) of the Civil Code. As held in Alitalia Airways vs. CA, et al., such inattention to and lack of care by the airline for the interest of its passengers who are entitled to its utmost consideration, particularly as to their convenience, amount to bad faith which entitles the passenger to the award of moral damages. 10.

Purpose of moral damages Moral damages are emphatically not intended to enrich a plaintiff at the expense of the defendant. They are awarded only to allow the former to obtain means, diversion, or amusements that will serve to alleviate the moral suffering he has undergone due to the defendant’s culpable action and must, perforce, be proportional to the suffering inflicted. However, substantial damages do not translate into excessive damages. Herein, except for attorney’s fees and costs of suit, it will be noted that the Courts of Appeals affirmed point by point the factual findings of the lower court upon which the award of damages had been based. 11. Awards for actual, moral and exemplary damages just and equitable; Travelling public should be afforded protection and duties of common carriers enforced Under the peculiar circumstances of the case, the awards for actual, moral and exemplary damages granted in the judgment of the lower court, for the reasons meticulously analyzed and thoroughly explained in its decision, are just and equitable. It is high time that the travelling public is afforded protection and that the duties of common carriers, long detailed in our previous laws and jurisprudence and thereafter collated and specially catalogued in our Civil Code in 1950, be enforced through appropriate sanctions. 12. Interest computed from date of rendition of judgment and not from filing of complaint; Eastern Shipping Lines vs. CA The interest of 6% imposed by the court should be computed from the date of rendition of judgment and not from the filing of the complaint. The rule has been laid down in Eastern Shipping Lines, Inc. vs. Court of Appeals, et al. that “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 Transportation Law, 2004 ( 195 )

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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.” This is because at the time of the filling of the complaint, the amount of the damages to which Pantejo may be entitled remains unliquidated and not known, until it is definitely ascertained, assessed and determined by the court, and only after the presentation of proof thereon. [75] Baliwag Transit vs. CA (GR 116110, 15 May 1996) Second Division, Puno (J): 4 concur Facts: On 31 July 1980, Leticia Garcia, and her 5-year old son, Allan Garcia, boarded Baliwag Transit Bus 2036 bound for Cabanatuan City driven by Jaime Santiago. They took the seat behind the driver. At about 7:30 p.m., in Malimba, Gapan, Nueva Ecija, the bus passengers saw a cargo truck, owned by A & J Trading, parked at the shoulder of the national highway. Its left rear portion jutted to the outer lane, as the shoulder of the road was too narrow to accommodate the whole truck. A kerosene lamp appeared at the edge of the road obviously to serve as a warning device. The truck driver, Julio Recontique, and his helper, Arturo Escala, were then replacing a flat tire. Bus driver Santiago was driving at an inordinately fast speed and failed to notice the truck and the kerosene lamp at the edge of the road. Santiago’s passengers urged him to slow down but he paid them no heed. Santiago even carried animated conversations with his co-employees while driving. When the danger of collision became imminent, the bus passengers shouted “Babangga tayo!”. Santiago stepped on the brake, but it was too late. His bus rammed into the stalled cargo truck. It caused the instant death of Santiago and Escala, and injury to several others. Leticia and Allan Garcia were among the injured passengers. Leticia suffered a fracture in her pelvis and right leg. They rushed her to the provincial hospital in Cabanatuan City where she was given emergency treatment. After 3 days, she was transferred to the National Orthopedic Hospital where she was confined for more than a month. She underwent an operation for partial hip prosthesis. Allan, on the other hand, broke a leg. He was also given emergency treatment at the provincial hospital. Spouses Antonio and Leticia Garcia sued Baliwag Transit, Inc., A & J Trading and Julio Recontique for damages in the RTC of Bulacan. Leticia sued as an injured passenger of Baliwag and as mother of Allan. At the time of the complaint, Allan was a minor, hence, the suit initiated by his parents in his favor. After hearing, the trial court found Baliwag Transit, Inc. liable for having failed to deliver Garcia and her son to their point of destination safely in violation of Garcia’s and Baliwag Transit’s contractual relation; and likewise found A & J and Julio Recontique liable for failure to provide its cargo truck with an early warning device in violation of the Motor Vehicle Law. The trial court ordered Baliwag, A & J Trading and Recontique to pay jointly and severally the Garcia spouses (1) P25,000.00 hospitalization and medication fee, (2) P450,000.00 loss of earnings in eight (8) years, (3) P2,000.00 for the hospitalization of their son Allan Garcia, (4) P50,000.00 moral damages, and (5) P30,000.00 attorney’s fee. On appeal, the Court of Appeals modified the trial court’s Decision by absolving A & J Trading from liability and by reducing the award of attorney’s fees to P10,000.00 and loss of earnings to P300,000.00, respectively. Hence, the petition for certiorari. The Supreme Court affirmed the Decision of the Court of Appeals (CA-GR CV-31246) with the modification reducing the actual damages for hospitalization and medical fees to P5,017.74; without costs. 1.

Duty of a common carrier; Diligence required; Presumption of negligence; Burden of Proof Transportation Law, 2004 ( 196 )

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As a common carrier, Baliwag breached its contract of carriage when it failed to deliver its passengers, Leticia and Allan Garcia to their destination safe and sound. A common carrier is bound to carry its passengers safely as far as human care and foresight can provide, using the utmost diligence of a very cautious person, with due regard for all the circumstances. In a contract of carriage, it is presumed that the common carrier was at fault or was negligent when a passenger dies or is injured. Unless the presumption is rebutted, the court need not even 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 as prescribed in Articles 1733 and 1755 of the Civil Code. 2.

Baliwag did not exercise extraordinary diligence; Driver was reckless The records are bereft of any proof to show that Baliwag exercised extraordinary diligence. On the contrary, the evidence demonstrates its driver’s recklessness. Leticia Garcia testified that the bus was running at a very high speed despite the drizzle and the darkness of the highway. The passengers pleaded for its driver to slow down, but their plea was ignored. Leticia also revealed that the driver was smelling of liquor. She could smell him as she was seated right behind the driver. Another passenger, Felix Cruz testified that immediately before the collision, the bus driver was conversing with a co-employee. All these prove the bus driver’s wanton disregard for the physical safety of his passengers, which makes Baliwag as a common carrier liable for damages under Article 1759 of the Civil Code. 3.

Article 1759, NCC Article 1759 of the Civil Code provides that “Common carriers are liable for the death of or injuries to passengers through the negligence or willfull acts of the former’s employees, although such employees may have acted beyond the scope of their authority or in violation of the orders of the common carriers. This liability of the common carriers do not cease upon proof that they exercised all the diligence of a good father of a family in the selection or supervision of their employees.” 4.

Section 34 (g) of the Land Transportation and Traffic Code Section 34 (g) of the Land Transportation and Traffic Code provides “Lights and reflector when parked or disabled. — Appropriate parking lights or flares visible one hundred meters away shall be displayed at the corner of the vehicle whenever such vehicle is parked on highways or in places that are not well-lighted or, is placed in such manner as to endanger passing traffic. Furthermore, every motor vehicle shall be provided at all times with built-in reflectors or other similar warning devices either pasted, painted or attached at its front and back which shall likewise be visible at night at least one hundred meters away. No vehicle not provided with any of the requirements mentioned in this subsection shall be registered. “ 4.

Use of kerosene lamp a substantial compliance of law as to early warning device Herein, Baliwag cannot evade its liability by insisting that the accident was caused solely by the negligence of A & J Trading and Julio Recontique, for the alleged non use of an early warning device (as testified to by Col. Demetrio dela Cruz, the station commander of Gapan, Nueva Ecija who investigated the incident, and Francisco Romano, the bus conductor). The records do not bear out Baliwag’s contention. Col. dela Cruz and Romano testified that they did not see any early warning device at the scene of the accident. They were referring to the triangular reflectorized plates in red and yellow issued by the Land Transportation Office. However, the evidence shows that Recontique and Ecala placed a kerosene lamp or torch at the edge of the road, near the rear portion of the truck to serve as an early warning device. This substantially complies with Section 34 (g) of the Land Transportation and Traffic Code. The law clearly allows the use not only of an early warning device of the triangular reflectorized plates variety but also parking lights or flares visible 100 meters away. Indeed, Col. dela Cruz himself admitted that a kerosene lamp is an acceptable substitute for the reflectorized plates. No negligence, therefore, may be imputed to A & J Trading and its driver, Recontique. 5.

Testimony of injured passengers and disinterested witnesses against testimony of bus conductor

Transportation Law, 2004 ( 197 )

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The testimonies of injured passengers who may well be considered as disinterested witness appear to be natural and more probable than the testimony given by Francisco Romano who is undoubtedly interested in the outcome of the case, being the conductor of Baliwag Transit Inc. Thus, among the testimonies offered by the witnesses who were present at the scene of the accident, the affirmative testimonies given by the two injured passengers must be upheld and less credence must be given to the testimony of the bus conductor who solely testified that no such early warning device exists. 6.

Testimony supporting parked truck noticed in drizzly and dark night due to kerosene lamp The situation then prevailing at the time of the accident was admittedly drizzly and all dark. This being so, it would be improbable and perhaps impossible on the part of the truck helper without the torch nor the kerosene to remove the flat tires of the truck. Moreover, witness including the bus conductor himself admitted that the passengers shouted, that they are going to bump before the collision which consequently caused the bus driver to apply the brake 3 to 4 meters away from the truck. Again, without the kerosene nor the torch in front of the truck, it would be improbable for the driver, more so the passengers to notice the truck to be bumped by the bus considering the darkness of the place at the time of the accident. 7.

Testimony of investigating officer of little probative value Although that the investigating officer testified that he found no early warning device at the time of his investigation, the Court gives less credence to such testimony insofar as he himself admitted on cross examination that he did not notice the presence of any kerosene lamp at the back of the truck because when he arrived at the scene of the accident, there were already many people surrounding the place. He further admitted that there exists a probability that the lights of the truck may have been smashed by the bus at the time of the accident considering the location of the truck where its rear portion was connected with the front portion of the bus. Investigator’s testimony therefore did not confirm nor deny the existence of such warning device, making his testimony of little probative value. 8. Award of P25,000 as hospitalization and medical fees not supported by evidence; Reduced to P5,017.74 The award of P25,000.00, as hospitalization and medical fees, is not supported by the evidence on record. The Garcias presented receipts but their total amounted only to P5,017.74. To be sure, Leticia testified as to the extra amount spent for her medical needs but without more reliable evidence, her lone testimony cannot justify the award of P25,000.00. To prove actual damages, the best evidence available to the injured party must be presented. The court cannot rely on uncorroborated testimony whose truth is suspect, but must depend upon competent proof that damages have been actually suffered. Thus, herein, the Court reduced the actual damages for medical and hospitalization expenses to P5,017.74. 9.

Award for amount representing lost earnings reasonable The award of P300,000.00 representing Leticia’s lost earnings is reasonable. Before the accident, Leticia was engaged in embroidery, earning P5,000.00 per month. Her injuries forced her to stop working. Considering the nature and extent of her injuries and the length of time it would take her to recover, the Court found it proper that Baliwag should compensate her lost income for 5 years. 10.

Award of moral damages in accord with law The award of moral damages is in accord with law. In a breach of contract of carriage, moral damages are recoverable if the carrier, through its agent, acted fraudulently or in bad faith. The evidence shows the gross negligence of the driver of Baliwag bus which amounted to bad faith. Without doubt, Leticia and Allan experienced physical suffering, mental anguish and serious anxiety by reason of the accident. Leticia underwent an operation to replace her broken hip bone with a metal plate. She was confined at the National Orthopedic Hospital for 45 days. The young Allan was also confined in the hospital for his foot injury. Contrary to the contention of Baliwag, the award of moral damages to Antonio and Leticia Garcia was not in their capacity as parents of Allan. Leticia was given moral damages as an injured party. Allan was also Transportation Law, 2004 ( 198 )

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granted moral damages as an injured party but because of his minority, the award in his favor has to be given to his father who represented him in the suit. 11.

Award of attorney’s fees justified The award of attorney’s fees is justified. The complaint for damages was instituted by the Garcia spouses on 15 December 1982, following the unjustified refusal of Baliwag to settle their claim. The Decision was promulgated by the trial court only on 29 January 1991 or about 9 years later. Numerous pleadings were filed before the trial court, the appellate court and to the Supreme Court. Given the complexity of the case and the amount of damages involved, the award of attorney’s fee for P10,000.00 is just and reasonable. [76] Mecenas vs. CA (GR 88052, 14 December 1989) Third Division, Feliciano (J): 4 concur Facts: At 6:20 a.m. of 22 April 1980, the M/T “Tacloban City,” a barge-type oil tanker of Philippine registry, with a gross tonnage of 1,241.68 tons, owned by the Philippine National Oil Company (PNOC) and operated by the PNOC Shipping and Transport Corporation (PNOC Shipping), having unloaded its cargo of petroleum products, left Amlan, Negros Occidental, and headed towards Bataan. At about 1:00 p.m. of that same day, the M/V “Don Juan,” an inter-island vessel, also of Philippine registry, of 2,391.31 tons gross weight, owned and operated by the Negros Navigation Co., Inc. (Negros Navigation) left Manila bound for Bacolod with 750 passengers listed in its manifest, and a complete set of officers and crew members. At about 10:30 p.m., the “Tacloban City” and the “Don Juan” collided at the Talbas Strait near Maestra de Ocampo Island in the vicinity of the island of Mindoro. When the collision occurred, the sea was calm, the weather fair and visibility good. As a result of this collision, the M/V “Don Juan” sank and hundreds of its passengers perished. Among the ill-fated passengers were the spouses Perfecto Mecenas and Sofia Mecenas, whose bodies were never found despite intensive search by their children, Jose, Romeo, Lilia, Orlando, Violeta (Acervo), Luzviminda, and Ofelia (Javier). On 29 December 1980, the Mecenas filed a complaint in the then Court of First Instance of Quezon City (Civil Case Q-31525), against Negros Navigation and Capt. Roger Santisteban, the captain of the “Don Juan” without, however, impleading either PNOC or PNOC Shipping. The children prayed for actual damages of not less than P100,000.00 as well as moral and exemplary damages in such amount as the Court may deem reasonable to award to them. Another complaint (Civil Case Q-33932), was filed in the same court by Lilia Ciocon claiming damages against Negros Navigation, PNOC and PNOC Shipping for the death of her husband Manuel Ciocon, another of the luckless passengers of the “Don Juan.” Manuel Ciocon’s body, too, was never found. The 2 cases were consolidated and heard jointly by the Regional Trial Court of Quezon City, Branch 82. On 17 July 1986, after trial, the trial court rendered a decision, ordering (a) Negros Navigation and Capt. Santisteban jointly and severally liable to pay the Mecenas, the sum of P400,000.00 for the death of their parents, Perfecto A. Mecenas and Sofia P. Mecenas; to pay the Mecenas the sum of P15,000.00 as and for attorney’s fees; plus costs of the suit; (b) each of Negros Navigation PNOC/PNOC Shipping to pay Ciocon the sum of P100,000.00 for the death of Manuel Ciocon, to pay Ciocon jointly and severally, the sum of P15,000.00 as and for attorney’s fees, plus costs of the suit. Negros Navigation, Capt. Santisteban, PNOC and PNOC Shipping appealed the trial court’s decision to the Court of Appeals. Later, PNOC and PNOC Shipping withdrew their appeal citing a compromise agreement reached by them with Negros Navigation; the Court of Appeals granted the motion by a resolution dated 5 September 1988, subject to the reservation made by Lilia Ciocon that she could not be bound by the compromise agreement and would enforce the award granted her by the trial court. In time, the Court of Appeals rendered a decision dated 26 January 1989, affirming the decision of the lower court with modification with respect to Civil Case 31525, wherein Negros Navigation and Capt. Santisteban are held Transportation Law, 2004 ( 199 )

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jointly and severally liable to pay the Mecenas the amount of P100,000.00 as actual and compensatory damages and P15,000.00 as attorney’s fees and the cost of the suit. The Mecenas filed a petition for review in light of the reduction of the amount of damages awarded. The Supreme Court granted the Petition for Review on Certiorari, reversed and set aside the Decision of the Court of Appeals insofar as it reduced the amount of damages awarded to the Mecenas to P100,000.00; restored the award granted by the trial court and augmented as follows: (a) P126,000.00 for actual damages; (b) P60,000.00 as compensatory damages for wrongful death; (c) P307,000.00 as moral damages; (d) P307,000.00 as exemplary damages making a total of P800,000.00; and (e) P15,000.00 as attorney’s fees. The Court also ordered the Mecenas to pay the additional filing fees properly due and payable in view of the award made, which fees shall be computed by the Clerk of Court of the trial court, and shall constitute a lien upon the judgment awarded; with costs against Negros Navigation and Capt. Santisteban. 1.

Mecenas suit based on breach of contract of carriage, not quasi-delict Both the trial court and the Court of Appeals considered the action (Civil Case Q-31525) brought by the sons and daughters of the deceased Mecenas spouses against Negros Navigation as based on quasi-delict. The action, however, is more appropriately regarded as grounded on contract, the contract of carriage between the Mecenas spouses as regular passengers who paid for their boat tickets and Negros Navigation; the surviving children while not themselves passengers are in effect suing the carrier in representation of their deceased parents. 2. Ciocon suit based on both contract (Negros Navigation) and quasi-delict (PNOC and PNOC Shipping) The suit (Civil Case Q-33932) filed by the widow Lilia Ciocon was correctly treated by the trial and appellate courts as based on contract (vis-a-vis Negros Navigation) and as well on quasi-delict (vis-a-vis PNOC and PNOC Shipping). 3.

Liability of common carrier in action based upon breach of contract of carriage In an action based upon a breach of the contract of carriage, the carrier under our civil law is liable for the death of passengers arising from the negligence or wilful act of the carrier’s employees although such employees may have acted beyond the scope of their authority or even in violation of the instructions of the carrier, which liability may include liability for moral damages. 4.

Article 2232 NCC Article 2332 of the Civil Code provides that “In contracts and quasi-contracts, the court may award exemplary damages if the defendant acted in a wanton, fraudulent, reckless, oppressive or malevolent manner.” 5.

Both vessels at fault The then Commandant of the Philippine Coast Guard, Commodore B.C. Ochoco, in a decision dated 2 March 1981, held that the “Tacloban City” was “primarily and solely [sic] at fault and responsible for the collision.” Initially, the Minister of National Defense upheld the decision of Commodore Ochoco. On Motion for Reconsideration, however, the Minister of National Defense reversed himself and held that both vessels had been at fault. The trial court, after a review of the evidence submitted during the trial, arrived at the same conclusion that the Minister of National Defense had reached that both the “Tacloban City” and the “Don Juan” were at fault in the collision. The trial court found that “M/V Don Juan and Tacloban City became aware of each other’s presence in the area by visual contact at a distance of something like 6 miles from each other. They were fully aware that if they continued on their course, they will meet head on. Don Juan steered to the right; Tacloban City continued its course to the left. There can be no excuse for them not to realize that, with such maneuvers, they will collide. They executed maneuvers inadequate, and too late, to avoid collision.” They are thus equally negligent and are liable for damages. The Court of Appeals, for its part, Transportation Law, 2004 ( 200 )

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reached the same conclusion. There is, therefore, no question that the “Don Juan” was at least as negligent as the M/T “Tacloban City” in the events leading up to the collision and the sinking of the “Don Juan.” 6. Fact pointing to negligence reaching level of recklessness or gross negligence; Captain and crew playing mahjong The report of the Philippine Coast Guard Commandant set out that there had been fault or negligence on the part of Capt. Santisteban and his officers and crew before the collision and immediately after contact of the 2vessels. The decision of Commodore Ochoco said “MS Don Juan’s Master, Capt. Rogelio Santisteban, was playing mahjong before and up to the time of collision. Moreover, after the collision, he failed to institute appropriate measures to delay the sinking of MS Don Juan and to supervise properly the execution of his order of abandonship. As regards the officer on watch, Senior 3rd Mate Rogelio Devera, he admitted that he failed or did not call or inform Capt. Santisteban of the imminent danger of collision and of the actual collision itself . Also, he failed to assist his master to prevent the fast sinking of the ship. The record also indicates that Auxiliary Chief Mate Antonio Labordo displayed laxity in maintaining order among the passengers after the collision.” The behaviour of the captain of the “Don Juan” in this instance — playing mahjong “before and up to the time of collision” — constitutes behaviour that is simply unacceptable on the part of the master of a vessel to whose hands the lives and welfare of at least 750 passengers had been entrusted. 7.

No such thing as “off-duty” hours for master of a vessel Whether or not Capt. Santisteban was “off-duty” or “on-duty” at or around the time of actual collision is quite immaterial; there is, both realistically speaking and in contemplation of law, no such thing as “offduty” hours for the master of a vessel at sea that is a common carrier upon whom the law imposes the duty of extraordinary diligence, i.e. “the duty to carry the passengers safely as far as human care and foresight can provide, using the utmost diligence of very cautious persons, with a due regard for all the circumstances.” The record does not show that was the first or only time that Capt. Santisteban had entertained himself during a voyage by playing mahjong with his officers and passengers; Negros Navigation in permitting, or in failing to discover and correct such behaviour, must be deemed grossly negligent. 8.

Captain failed to maintain seaworthiness of “Don Juan” Capt. Santisteban was also faulted in the Philippine Coast Guard decision for failing after the collision, “to institute appropriate measures to delay the sinking of M/V Don Juan.” This appears to us to be a euphemism for failure to maintain the seaworthiness or the water-tight integrity of the “Don Juan.” The record shows that the “Don Juan” sank within 10 to 15 minutes after initial contact with the “Tacloban City.” While the failure of Capt. Santisteban to supervise his officers and crew in the process of abandoning the ship and his failure to avail of measures to prevent the too rapid sinking of his vessel after collision, did not cause the collision by themselves, such failures doubtless contributed materially to the consequent loss of life and, moreover, were indicative of the kind and level of diligence exercised by Capt. Santisteban in respect of his vessel and his officers and men prior to actual contact between the 2 vessels. The officer-on-watch in the “Don Juan” admitted that he had failed to inform Capt. Santisteban not only of the “imminent danger of collision” but even of “the actual collision itself.” 9.

“Don Juan” carrying more passengers than what it is certified to carry The “Don Juan” was carrying more passengers than she had been certified as allowed to carry. The Certificate of Inspection, dated 27 August 1979, issued by the Philippine Coast Guard Commander at Iloilo City, the Don Juan’s home port, states “Passengers allowed: 810, Total Persons Allowed: 864.” The report of the Philippine Coast Guard stated that the “Don Juan” had been “officially cleared with 878 passengers onboard when she sailed from the port of Manila on 22 April 1980 at about 1:00 p.m.” This head-count of the passengers “did not include the 126 crew members, children below 3 years old and 2 half-paying passengers” which had been counted as one adult passenger. Thus, the total number of persons on board the “Don Juan” on that ill-starred night of 22 April 1980 was 1,004, or 140 persons more than the maximum number that Transportation Law, 2004 ( 201 )

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could be safely carried by the “Don Juan,” per its own Certificate of Inspection. In addition, that only 750 passengers had been listed in its manifest for its final voyage; in other words, at least 128 passengers on board had not even been entered into the “Don Juan’s” manifest. The “Don Juan’s” Certificate of Inspection showed that she carried life boat and life raft accommodations for only 864 persons, the maximum number of persons she was permitted to carry; in other words, she did not carry enough boats and life rafts for all the persons actually on board that tragic night of 22 April 1980. 10.

“Don Juan” grossly negligent The grossness of the negligence of the “Don Juan” is underscored by the facts: (1) The “Don Juan” was more than twice as fast as the “Tacloban City.” The “Don Juan’s” top speed was 17 knots; while that of the “Tacloban City” was 6.3. knots. (2) The “Don Juan” carried the full complement of officers and crew members specified for a passenger vessel of her class. (3) The “Don Juan” was equipped with radar which was functioning that night. (4) The “Don Juan’s” officer on-watch had sighted the “Tacloban City” on his radar screen while the latter was still 4 nautical miles away. Visual confirmation of radar contact was established by the “Don Juan” while the “Tacloban City” was still 2.7 miles away. In the total set of circumstances which existed, the “Don Juan,” had it taken seriously its duty of extraordinary diligence, could have easily avoided the collision with the “Tacloban City.” Indeed, the “Don Juan” might well have avoided the collision even if it had exercised ordinary diligence merely. 11. Rule 18 of the International Rules of the Road are not to be obeyed and construed without regard to all circumstances attendant It is true that the “Tacloban City” failed to follow Rule 18 of the International Rules of the Road which requires 2 power-driven vessels meeting end on or nearly end on each to alter her course to starboard (right) so that each vessel may pass on the port side (left) of the other. The “Tacloban City,” when the 2 vessels were only 0.3 of a mile apart, turned (for the second time) 15x to port side while the “Don Juan” veered hard to starboard. This circumstance, while it may have made the collision immediately inevitable, cannot, however, be viewed in isolation from the rest of the factual circumstances obtaining before and up to the collision. In any case, Rule 18 like all other International Rules of the Road, are not to be obeyed and construed without regard to all the circumstances surrounding a particular encounter between 2 vessels. 12. Route observance of International Rules of Road does not per se relieve vessel from responsibility In ordinary circumstances, a vessel discharges her duty to another by a faithful and literal observance of the Rules of Navigation, and she cannot be held at fault for so doing even though a different course would have prevented the collision. This rule, however, is not to be applied where it is apparent that her captain was guilty of negligence or of a want of seamanship in not perceiving the necessity for, or in so acting as to create such necessity for, a departure from the rule and acting accordingly. In other words, “route observance” of the International Rules of the Road will not relieve a vessel from responsibility if the collision could have been avoided by proper care and skill on her part or even by a departure from the rules. 13.

Intention of “Tacloban City” signaled to “Don Juan” Herein, the “Don Juan” having sighted the “Tacloban City” when it was still a long way off was negligent in failing to take early preventive action and in allowing the 2 vessels to come to such close quarters as to render the collision inevitable when there was no necessity for passing so near to the “Tacloban City” as to create that hazard or inevitability, for the “Don Juan” could choose its own distance. The “Tacloban City,” upon turning hard to port shortly before the moment of collision, signaled its intention to do so by giving 2 short blasts with its horn. The “Don Juan” gave no answering horn blast to signal its own intention and proceeded to turn hard to starboard. 14.

Manchester Development Corp. vs. CA cannot be given retroactive effect

Transportation Law, 2004 ( 202 )

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The Manchester doctrine, which has been modified and clarified in subsequent decision by the Court in Sun Insurance Office, Ltd. (SIOL), et al. v. Asuncion, et al. cannot be applied in the present case so as to work a striking out of that portion of the trial court’s award which could be deemed notionally to constitute an award of moral and exemplary damages. Manchester was promulgated by the Court on 7 May 1987. Circular 7 of the Supreme Court, which embodied the doctrine in Manchester, is dated 24 March 1988. Upon the other hand, the complaint in the present case was filed on 29 December 1980, that is, long before either Manchester or Circular 7 of 24 March 1988 emerged. The decision of the trial court was itself promulgated on 17 July 1986, again, before Manchester and Circular 7 were promulgated. Manchester should not be applied retroactively to the present case where a decision on the merits had already been rendered by the trial court, even though such decision was then under appeal and had not yet reached finality. There is no indication at all that the Mecenas here sought simply to evade payment of the court’s filing fees or to mislead the court in the assessment of the filing fees. In any event, herein, the Court applies Manchester as clarified and amplified by Sun Insurance Office Ltd. (SIOL), by holding that the Mecenas shall pay the additional filing fee that is properly payable given the award specified below, and that such additional filing fee shall constitute a lien upon the judgment. 15.

Disaggregation of original award of damages The amount of damages — compensatory, moral and exemplary — were properly imposable upon Negros Navigation and Capt. Santisteban. The original award of the trial court of P400,000.00 could well have been disaggregated by the trial court and the Court of Appeals in the following manner: (1) actual or compensatory damages proved in the course of trial consisting of actual expenses incurred by petitioners in their search for their parents’ bodies — 126,000.00; (2) actual or compensatory damages in case of wrongful death (P30,000.00 x 2) — P 60,000.00; (3) moral damages — P107,000.00; (4) exemplary damages — P107,000.00; or a total of P400,000.00. 16.

Additional moral damages of P200,000 reasonable Considering that the legitimate children of the deceased spouses Mecenas, are 7 in number and that they lost both father and mother in one fell blow of fate, and considering the pain and anxiety they doubtless experienced while searching for their parents among the survivors and the corpses recovered from the sea or washed ashore, the Court believes that an additional amount of P200,000.00 for moral damages, making a total of P307,000.00 as moral damages, would be quite reasonable. 17.

Judicial notice of dreadful regularity of maritime disasters The Court will take judicial notice of the dreadful regularity with which grievous maritime disasters occur in our waters with massive loss of life. The bulk of our population is too poor to afford domestic air transportation. So it is that notwithstanding the frequent sinking of passenger vessels in our waters, crowds of people continue to travel by sea. 18.

Purpose of exemplary damages; As to common carriers Exemplary damages are designed by our civil law to permit the courts to reshape behaviour that is socially deleterious in its consequence by creating negative incentives or deterrents against such behaviour. In requiring compliance with the standard of extraordinary diligence, a standard which is in fact that of the highest possible degree of diligence, from common carriers and in creating a presumption of negligence against them, the law seeks to compel them to control their employees, to tame their reckless instincts and to force them to take adequate care of human beings and their property. The Court is prepared to use the instruments given to it by the law for securing the ends of law and public policy. One of those instruments is the institution of exemplary damages; one of those ends, of special importance in an archipelagic state like the Philippines, is the safe and reliable carriage of people and goods by sea. Herein, considering the foregoing, an additional award in the amount of P200,000.00 as exemplary damages, making a total award of P307,000.00 as exemplary damages, is quite modest.

Transportation Law, 2004 ( 203 )

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19.

Court may consider and resolve all issues to render substantial justice The Mecenas herein merely asked for the restoration of the P400,000.00 award of the trial court. The Court underscore once more, however, the firmly settled doctrine that the Court may consider and resolve all issues which must be decided in order to render substantial justice to the parties, including issues not explicitly raised by the party affected. In the present case, as in Kapalaran Bus Line v. Coronado, et al., both the demands of substantial justice and the imperious requirements of public policy compel the Court to the conclusion that the trial court’s implicit award of moral and exemplary damages was erroneously deleted and must be restored and augmented and brought more nearly to the level required by public policy and substantial justice. [77] PAL vs. CA (GR L-46558, 31 July 1981) First Division, Guerrero (J): 2 concur, 2 concur in result Facts: On 8 January 1951, Jesus V. Samson flew as co-pilot on a regular flight from Manila to Legaspi with stops at Daet, Camarines Norte and Pili, Camarines Sur, with Captain Delfin Bustamante as commanding pilot of a C-47 plane belonging to Philippine Air Lines, Inc. (PAL). On attempting to land the plane at Daet airport, Capt. Bustamante due to his very slow reaction and poor judgment overshot the airfield and as a result, notwithstanding the diligent efforts of the co-pilot to avert an accident, the airplane crashlanded beyond the runway; that the jolt caused the head of Samson to hit and break through the thick front windshield of the airplane causing him severe brain concussion, wounds and abrasions on the forehead with intense pain and suffering. Thereafter, instead of giving Samson expert and proper medical treatment called for by the nature and severity of his injuries, PAL simply referred him to a company physician, a general medical practitioner, who limited the treatment to the exterior injuries without examining the severe brain concussion of Samson. Several days after the accident, PAL called back Samson to active duty as co-pilot, and inspite of the latter’s repeated request for expert medical assistance, PAL had not given him any. As a consequence of the brain injury sustained by plaintiff from the crash, he had been having periodic dizzy spells and had been suffering from general debility and nervousness. PAL instead of submitting Samson to expert medical treatment, discharged the latter from its employ on 21 December 1953 on grounds of physical disability, thereby causing Samson not only to lose his job but to become physically unfit to continue as aviator due to PAL’s negligence in not giving him the proper medical attention. Jesus filed a complaint against PAL on 1 July 1954, praying for damages in the amount of P180,000.00 representing his unearned income, P50,000.00 as moral damages, P20,000.00 as attorney’s fees and P5,000.00 as expenses, or a total of P255,000.00. On 25 March 1958, PALfiled a Motion to Dismiss on the ground that the complaint is essentially a Workmen’s Compensation claim, stating a cause of action not cognizable within the general jurisdiction of the court. The Motion to Dismiss was denied in the order of 14 April 1958. After the reception of evidence, the trial court rendered on 15 January 1973 its decision ordering PAL to pay Samson P1988,000.00 as unearned income or damages; P50,000.00 for moral damages; P20,000.00 as attorney’s fees and P5,000.00 as expenses of litigation, or a total of P273,000.00; with costs against PAL. PAL appealed the decision to the Court of Appeals. On 18 April 1977, the Court of Appeals rendered its decision affirming the judgment of the lower court but modified the award of damages by imposing legal rate of interest on the P198,000.00 unearned income from the filing of the complaint, citing Section 8, Rule 51 of the Rules of Court. Its motion for reconsideration of the above judgment having been denied, PAL filed a petition for certiorari. The Supreme Court affirmed the judgment of the appellate court with slight modification in that the correct amount of compensatory damages is P204,000.00l with costs against PAL.

Transportation Law, 2004 ( 204 )

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1.

Uncontroverted facts Herein, the following facts are not the subject of controversy: (1) First, that from July 1950 to 21 December 1953, plaintiff was employed with defendant company as a first officer or co-pilot and served in that capacity in defendant’s domestic services; (2) that on January 1951, plaintiff did fly on defendant’s PI-C 94, as first officer or co-pilot, with the late Capt. Delfin Bustamante in command as pilot; that while making a landing at the Daet airport on that date, PI-C 94 did meet an accident as stated above; (3) that at or about the time of the discharge from defendant company, plaintiff had complained of “spells of dizziness,” “headaches” and “nervousness”, by reason of which he was grounded from flight duty. In short, that at that time, or approximately from November 1953 up to the date of his discharge on 21 December 1953, plaintiff was actually physically unfit to discharge his duties as pilot; (4) that plaintiff’s unfitness for flight duty was properly established after a thorough medical examination by competent medical experts. 2. Dizzy spells, headache and general debility of Samson was an after-effect of the crash-landing; Testimony of PAL’s doctors discounted Herein, PAL would imply that Samson suffered only superficial wounds which were treated and not brain injury. It would, by the opinion of its company doctors, Dr. Bernardo and Dr. Reyes, attribute the dizzy spells and headache to organic or as phychosomatic, neurasthenic or psychogenic, which we find outlandishly exaggerated. That Samson’s condition as psychosomatic rather than organic in nature is allegedly confirmed by the fact that on 6 separate occasions after the accident he passed the required CAA physical examination for airman’s certificate. The Court noticed, however, that there were other similar physical examinations conducted by the CAA on the person of Samson the report on which were not presented in evidence. Obviously, only those which suited PAL’s cause were hand-picked and offered in evidence. The Court hesitated to accept the opinion of PAL’s two physicians, considering that Dr. Bernardo admittedly referred to Dr. Reyes because he could not determine the cause of the dizzy spells and headache and the latter admitted that it is extremely hard to be certain of the cause of his dizzy spells, and suggested a possibility that it was due to postraumatic syndrome, evidently due to the injuries suffered by Samson in hitting the forehead against the windshield of the plane during the accident. 3. Dizzy spells, headache and general debility of Samson was an after-effect of the crash-landing; Testimony of Samson’s doctors believed Herein, Dr. Morales, a surgeon, found that blood was coming from Samson’s ears and nose. He testified that Samson was suffering from cerebral concussion as a result of traumatic injury to the brain caused by his head hitting on the windshield of the plane during the crash-landing. Dr. Conrado Aramil, a neurologist and psychiatrist with experience in two hospitals abroad, found abnormality reflected by the electroencephalogram examination in the frontal area on both sides of Samson’s head. The opinion of these two specialist renders unnecessary that of Samson’s wife who is a physician in her own right and because of her relation to Samson, her testimony and opinion may not be discussed, although her testimony is crystallized by the opinions of Dr. Ador Dionisio, Dr. Marquez, Dr. Jose O. Chan, Dr. Yambao and Dr. Sandico. 4. PAL grossly negligent for allowing Capt. Bustamante to fly as first pilot (not co-pilot) notwithstanding that the latter has a tumor of the nasopharynx The imputation of gross negligence by the court to PAL for having allowed Capt. Delfin Bustamante to fly on that fateful day of the accident as the same is duly supported by substantial evidence, clearly established and cited in the decision of said court. The pilot was sick. He admittedly had tumor of the nasopharynx (nose). The spot is very near the brain and the eyes. Tumor on the spot will affect the sinus, the breathing, the eyes which are very near it. No one will certify the fitness to fly a plane of one suffering from the disease. The fact First Pilot Bustamante has a long standing tumor of the Nasopharynx for which reason he was grounded since November 1947 is admitted in the letter of Dr. Bernardo to the Medical Director of the CAA requesting waiver of physical standards. The request for waiver of physical standards is itself a positive proof that the physical condition of Capt. Bustamante is short of the standard set by the CAA. The Deputy Transportation Law, 2004 ( 205 )

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Administrator of the CAA granted the request relying on the representation and recommendation made by Dr. Bernardo. Although the request says that “it is believed that his continuing to fly as a co-pilot does not involve any hazard,” flying as a First Officer entails a very different responsibility than flying as a mere co-pilot. PAL requested the CAA to allow Capt. Bustamante to fly merely as a co-pilot and it is safe to conclude that the CAA approved the request thus allowing Bustamante to fly only as a co-pilot. For having allowed Bustamante to fly as a First Officer on 8 January 1951, PAL is guilty of gross negligence and therefore should be made liable for the resulting accident. 5.

Medical condition of Capt. Bustamante affecting skills in flying Capt. Bustamante used to get treatments from Dr. Sycangco. He used to complain of pain in the face more particularly in the nose which caused him to have sleepless nights. Samson’s observation of the pilot was reported to the Chief Pilot who did nothing about it. Captain Carbonel of PAL corroborated Samson of this matter. The complaint against the slow reaction of the pilot at least proved the observation. The fact that the complaint was not in writing does not detract anything from the seriousness thereof, considering that a miscalculation would not only cause the death of the crew but also of the passengers. One month prior to the crash-landing, when the pilot was preparing to land in Daet, plaintiff warned him that they were not in the vicinity of Daet but above the town of Ligao. The plane hit outside the airstrip. In another instance, the pilot would hit the Mayon Volcano had not plaintiff warned him. These more than prove what plaintiff had complained of. Disregard thereof by defendant is condemnable. 6.

Supreme Court not a trier of facts, cannot enter into a calibration of the evidence It is not the task of the Supreme Court to discharge the functions of a trier of facts much less to enter into a calibration of the evidence, notwithstanding PAL’s wail that the judgment of the appellate court is based entirely on speculations, surmises and conjectures. The Supreme Court is convinced that the lower court’s judgment is supported by strong, clear and substantial evidence. 7. PAL a common carrier; Common carrier required of highest degree of care in discharge of duty and business PAL is a common carrier 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, as defined in Art. 1732, New Civil Code. The law is clear in requiring a common carrier to exercise the highest degree of care in the discharge of its duty and business of carriage and transportation under Arts. 1733, 1755 and 1756 of the New Civil Code. 8.

Article 1733 NCC Article 1733 of the Civil Code provides that “Common carriers, from the nature of their business and for reasons of public policy, are bound to observe extraordinary diligence in the vigilance over the goods and for the safety of the passengers transported by them, according to all the circumstances of each case. Such extraordinary diligence in the vigilance over the goods is further expressed in Articles 1734, and 1745, Nos. 5, 6, and 7, while the extraordinary diligence for the safety of the passengers is further set forth in articles 1755 and 1756.” 9.

Article 1755 NCC Article 1755 of the Civil Code provides that “A common carrier is bound to carry the passenger safely as far as human care and foresight can provide, using the utmost diligence of very cautious persons, with a due regard for all the circumstances.” 10.

Article 1756 NCC Article 1756 of the Civil Code provides that “In case of death of or injuries to passengers, common carriers are presumed to have been at fault or to have acted negligently, unless they prove that they observed extraordinary diligence as prescribed in Articles 1733 and 1755.” Transportation Law, 2004 ( 206 )

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11.

Duty to exercise utmost diligence for passengers and members of the crew The duty to exercise the utmost diligence on the part of common carriers is for the safety of passengers as well as for the members of the crew or the complement operating the carrier, the airplane in the present case. And this must be so for any omission, lapse or neglect thereof will certainly result to the damage, prejudice, nay injuries and even death to all aboard the plane, passengers and crew members alike. 12.

Court affirms award of damages under provision of Articles 1711 and 1712 NCC Having affirmed the gross negligence of PAL in allowing Capt. Delfin Bustamante to fly the plane to Daet on 8 January 1951 whose slow reaction and poor judgment was the cause of the crash-landing of the plane which resulted in Samson hitting his head against the windshield and causing him injuries for which reason PAL terminated his services and employment as pilot after refusing to provide him with the necessary medical treatment of PAL’s periodic spells, headache and general debility produced from said injuries, the Court must necessarily affirm likewise the award of damages or compensation under the provisions of Articles 1711 and 1712 of the New Civil Code. 13.

Article 1711 NCC Article 1711 of the Civil Code provides that “Owners of enterprises and other employers are obliged to pay compensation for the death or injuries to their laborers, workmen, mechanics or other employees, even though the event may have been purely accidental or entirely due to a fortuitous cause, if the death or personal injury arose out of and in the course of the employment. The employer is also liable for compensation if the employee contracts any illness or disease caused by such employment or as the result of the nature of the employment. If the mishap was due to the employee’s own notorious negligence, or voluntary act, or drunkenness, the employer shall not be liable for compensation. When the employee’s lack of due care contributed to his death or injury, the compensation shall be equitably reduced.” 14.

Article 1712 NCC Article 1712 of the Civil Code provides that “If the death or injury is due to the negligence of a fellow-worker, the latter and the employer shall be solidarily liable for compensation. If a fellow-worker’s intentional or malicious act is the only cause of the death or injury, the employer shall not be answerable, unless it should be shown that the latter did not exercise due diligence in the selection or supervision of the plaintiffs fellow-worker.” 15.

Grant of compensatory damages should be P204,000 not P198,000 The grant of compensatory damages to Samson made by the trial court and affirmed by the appellate court by computing his basic salary per annum at P750.00 a month as basic salary and P300.00 a month for extra pay for extra flying time including bonus given in December every year is justified. The correct computation however should be P750 plus P300 x 12 months = P12,600 per annum x 10 years = P126,000.00 (not P120,000.00 as computed by the court a quo). The further grant of increase in the basic pay of the pilots to P12,000 annually for 1964 to 1968 totalling P60,000.00 and another P18,000.00 as bonuses and extra pay for extra flying time at the same rate of P300.00 a month totals P78,000.00. Adding P126,000.00 (1964 to 1968 compensation) makes a grand total of P204,000.00 (not P198,000.00 as originally computed). 16.

Grant of moral damages upheld; Quasi-delict (Article 2219 [2] NCC) The Court approve the grant of moral damages in the sum of P50,000.00 inasmuch as there is bad faith on the part of PAL. The act of PAL in unjustly refusing Samson’s demand for special medical service abroad for the reason that Samson’s deteriorating physical condition was not due to the accident violates the provisions of Article 19 of the Civil Code on human relations “to act with justice, give everyone his due, and observe honesty and good faith.” Under the facts found by the trial court and affirmed by the appellate court and under the law and jurisprudence cited and applied, the grant of moral damages in the amount of P50,000.00 is proper and justified. The fact that Samson suffered physical injuries in the head when the plane Transportation Law, 2004 ( 207 )

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crash-landed due to the negligence of Capt. Bustamante is undeniable. The negligence of the latter is clearly a quasi-delict and therefore Article 2219, (2) New Civil Code is applicable, justifying the recovery of moral damages. 17.

Grant of moral damages upheld; Bad faith or malice (Article 2220 NCC) Even from the standpoint of PAL that there is an employer-employee relationship between it and Samson arising from the contract of employment, Samson is still entitled to moral damages in view of the finding of bad faith or malice by the appellate court, and affirmed by the Supreme Court applying the provisions of Article 2220, New Civil Code which provides that willful injury to property may be a legal ground for awarding moral damages if the court should find that, under the circumstances, such damages are justly due. The same rule applies to breaches of contract where the defendant acted fraudulently or in bad faith. 18.

Grant of moral damages upheld; Bad faith (Article 19 NCC) The justification in the award of moral damages under Article 19 of the New Civil Code on Human Relations which requires that every person must, in the exercise of his rights and in the performance of his duties, act with justice, give everyone his due, and observe honesty and good faith, as applied by appellate court is also well-taken. 19.

Award of attorney’s fees correct With respect to the award of attorney’s fees in the sum of P20,000.00 the same is likewise correct. Samson is entitled to attorney’s fees because he was forced to litigate in order to enforce his valid claim (Ganaban vs. Bayle, 30 SCRA 365; De la Cruz vs. De la Cruz, 22 SCRA 33; and many others); PAL acted in bad faith in refusing Samson’s valid claim (Filipino Pipe Foundry Corporation vs. Central Bank, 23 SCRA 1044); and Samson was dismissed and was forced to go to court to vindicate his right (Nadura vs. Benguet Consolidated, Inc., 5 SCRA 879). 20.

Payment of legal interest from date judicial demand was made by Samson Articles 1169, 2209 and 2212 of the Civil Code govern when interest shall be computed. Thereunder interest begins to accrue upon demand, extrajudicial or judicial. A complaint is a judicial demand (Cabarroguis vs. Vicente, 107 Phil. 340). Under Article 2212 of the Civil Code, interest due shall earn legal interest from the time it is judicially demanded, although the obligation may be silent upon this point.” (CA Resolution, pp. 153-154, Records). The correct amount of compensatory damages upon which legal interest shall accrue from the filing of the complaint is P204,000.00 as herein computed and not P198,000.00. [78] Belgian Chartering vs. PFIC, see [36] [79] De Guzman vs. CA, see [14] [80] Pilapil vs. CA (GR 52159, 22 December 1989) Second Division, Padilla (J): 3 concur, 1 took no part Facts: Jose Pilapil, a paying passenger, boarded Alatco Transportation Co.’s bus bearing number 409 at San Nicolas, Iriga City on 16 September 1971 at about 6:00 P.M. While said bus 409 was in due course negotiating the distance between Iriga City and Naga City, upon reaching the vicinity of the cemetery of the Municipality of Baao, Camarines Sur, on the way to Naga City, an unidentified man, a bystander along said national highway, hurled a stone at the left side of the bus, which hit Pilapil above his left eye. Alatco’s personnel lost no time in bringing Pilapil to the provincial hospital in Naga City where he was confined and treated. Considering that the sight of his left eye was impaired, Pilapil was taken to Dr. Malabanan of Iriga City where he was treated for another week. Since there was no improvement in his left eye’s vision, Pilapil went to V. Luna Hospital, Quezon City where he was treated by Dr. Capulong. Despite the treatment accorded Transportation Law, 2004 ( 208 )

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to him by Dr. Capulong, Pilapil lost partially his left eye’s vision and sustained a permanent scar above the left eye. Thereupon, Pilapil instituted before the CFI of Camarines Sur, Branch I an action for recovery of damages sustained as a result of the stone-throwing incident. After trial, the court a quo rendered judgment ordering the transportation company to pay Pilapil the sum of P10,000.00, representing actual and material damages for causing a permanent scar on the face and injuring the eye-sight of Pilapil; ordering further the transportation company to pay the sum of P5,000.00, to Pilapil as moral and exemplary damages; and ordering furthermore, the transportation company to reimburse Pilapil the sum of P300.00 for his medical expenses and attorney’s fees in the sum of P1,000.00; and to pay the costs. From the judgment, Alatco Transportation appealed to the Court of Appeals (CA-GR 57354-R). On 19 October 1979, the Court of Appeals, in a Special Division of Five, rendered judgment reversing and setting aside the judgment of the court a quo. Hence, the petition to review on certiorari. The Supreme Court affirmed the judgment appealed from. 1. NCC

Diligence required of a common carrier, and presumption of negligence; Articles 1733 and 1755

Under Article 1733 of the Civil Code, common carriers are required to observe extraordinary diligence for the safety of the passenger transported by them, according to all the circumstances of each case. The requirement of extraordinary diligence imposed upon common carriers is restated in Article 1755: “A common carrier is bound to carry the passengers safely as far as human care and foresight can provide, using the utmost diligence of very cautious persons, with due regard for all the circumstances.” Further, in case of death of or injuries to passengers, the law presumes said common carriers to be at fault or to have acted negligently. 2.

Article 1755 NCC Article 1755 of the Civil Code qualifies the duty of extraordinary care, vigilance and precaution in the carriage of passengers by common carriers to only such as human care and foresight can provide. What constitutes compliance with said duty is adjudged with due regard to all the circumstances. 3.

Article 1756 NCC Article 1756 of the Civil Code, in creating a presumption of fault or negligence on the part of the common carrier when its passenger is injured, merely relieves the latter, for the time being, from introducing evidence to fasten the negligence on the former, because the presumption stands in the place of evidence. Being a mere presumption, however, the same is rebuttable by proof that the common carrier had exercised extraordinary diligence as required by law in the performance of its contractual obligation, or that the injury suffered by the passenger was solely due to a fortuitous event. 4.

Intention of the Code Inferring from the law, the intention of the Code Commission and Congress was to curb the recklessness of drivers and operators of common carriers in the conduct of their business. 5.

Common carrier not an insurer of all risks to passenger and goods In consideration of the right granted to it by the public to engage in the business of transporting passengers and goods, a common carrier does not give its consent to become an insurer of any and all risks to passengers and goods. It merely undertakes to perform certain duties to the public as the law imposes, and holds itself liable for any breach thereof. While the law requires the highest degree of diligence from common carriers in the safe transport of their passengers and creates a presumption of negligence against them, it does not, however, make the carrier an insurer of the absolute safety of its passengers. Neither the Transportation Law, 2004 ( 209 )

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law nor the nature of the business of a transportation company makes it an insurer of the passenger’s safety, but that its liability for personal injuries sustained by its passenger rests upon its negligence, its failure to exercise the degree of diligence that the law requires 6.

Presumption of fault or negligence merely a disputable presumption The presumption of fault or negligence against the carrier is only a disputable presumption. It gives in where contrary facts are established proving either that the carrier had exercised the degree of diligence required by law or the injury suffered by the passenger was due to a fortuitous event. Herein, where the injury sustained by Pilapil was in no way due to any defect in the means of transport or in the method of transporting or to the negligent or willful acts of Alatco’s employees, and therefore involving no issue of negligence in its duty to provide safe and suitable cars as well as competent employees, with the injury arising wholly from causes created by strangers over which the carrier had no control or even knowledge or could not have prevented, the presumption is rebutted and the carrier is not and ought not to be held liable. 7. Standard of extraordinary diligence does not determine liability when acts of strangers directly caused the injury While as a general rule, common carriers are bound to exercise extraordinary diligence in the safe transport of their passengers, it would seem that this is not the standard by which its liability is to be determined when intervening acts of strangers directly cause the injury, while the contract of carriage exists. 8.

Article 1763 NCC Article 1763 provides that “a common carrier is responsible for injuries suffered by a passenger on account of the wilful acts or negligence of other passengers or of strangers, if the common carrier’s employees through the exercise of the diligence of a good father of a family could have prevented or stopped the act or omission.” 9.

Article 1763 explained A tort committed by a stranger which causes injury to a passenger does not accord the latter a cause of action against the carrier. The negligence for which a common carrier is held responsible is the negligent omission by the carrier’s employees to prevent the tort from being committed when the same could have been foreseen and prevented by them. Further, under the same provision, it is to be noted that when the violation of the contract is due to the wilful acts of strangers the degree of care essential to be exercised by the common carrier for the protection of its passenger is only that of a good father of a family. 10. Rule of ordinary care and prudence is not exacting to require exercise of doubtful or unreasonable precautions Although the suggested precaution, i.e. mesh-work grills covering windows of the bus, could have prevented the injury complained of, the rule of ordinary care and prudence is not so exacting as to require one charged with its exercise to take doubtful or unreasonable precautions to guard against unlawful acts of strangers. The carrier is not charged with the duty of providing or maintaining vehicles as to absolutely prevent any and all injuries to passengers. Where the carrier uses cars of the most approved type, in general use by others engaged in the same occupation, and exercises a high degree of care in maintaining them in suitable condition, the carrier cannot be charged with negligence in this respect. 11.

Congress’ role Herein, Pilapil contends that it is to the greater interest of the State if a carrier were made liable for such stone-throwing incidents rather than have the bus riding public lose confidence in the transportation system. Sad to say, the court is not in a position to so hold. Such a policy would be better left to the consideration of Congress which is empowered to enact laws to protect the public from the increasing risks and dangers of lawlessness in society.

Transportation Law, 2004 ( 210 )

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[81] Fortune Express vs. CA (GR 119756, 18 March 1999) Second Division, Mendoza (J): 3 concur, 1 abroad on official business Facts: Fortune Express Inc. is a bus company in northern Mindanao. On 18 November 1989, Fortune Express’ bus figured in an accident with a jeepney in Kauswagan, Lanao del Norte, resulting in the death of several passengers of the jeepney, including two Maranaos. Crisanto Generalao, a volunteer field agent of the Constabulary Regional Security Unit (X), conducted an investigation of the accident. He found that the owner of the jeepney was a Maranao residing in Delabayan, Lanao del Norte and that certain Maranaos were planning to take revenge on Fortune Express by burning some of its buses. Generalao rendered a report on his findings to Sgt. Reynaldo Bastasa of the Philippine Constabulary Regional Headquarters at Cagayan de Oro. Upon the instruction of Sgt. Bastasa he went to see Diosdado Bravo, operations manager of petitioner, at its main office in Cagayan de Oro City. Bravo assured him that the necessary precautions to insure the safety of lives and property would be taken. At about 6:45 p.m. on 22 November 1989, 3 armed Maranaos who pretended to be passengers, seized a bus of Fortune Express at Linamon, Lanao del Norte while on its way to Iligan City. Among the passengers of the bus was Atty. Talib Caorong. The leader of the Maranaos, identified as one Bashier Mananggolo, ordered the driver, Godofredo Cabatuan, to stop the bus on the side of the highway. Mananggolo then shot Cabatuan on the arm, which caused him to slump on the steering wheel. Then one of the companions of Mananggolo started pouring gasoline inside the bus, as the other held the passengers at bay with a handgun. Mananggolo then ordered the passengers to get off the bus. The passengers, including Atty. Caorong, stepped out of the bus and went behind the bushes in a field some distance from the highway. However, Atty. Caorong returned to the bus to retrieve something from the overhead rack. At that time, one of the armed men was pouring gasoline on the head of the driver. Cabatuan, who had meantime regained consciousness, heard Atty. Caorong pleading with the armed men to spare the driver as he was innocent of any wrong doing and was only trying to make a living. The armed men were, however, adamant as they repeated their warning that they were going to burn the bus along with its driver. During this exchange between Atty. Caorong and the assailants, Cabatuan climbed out of the left window of the bus and crawled to the canal on the opposite side of the highway. He heard shots from inside the bus. Larry de la Cruz, one of the passengers, saw that Atty. Caorong was hit. Then the bus was set on fire. Some of the passengers were able to pull Atty. Caorong out of the burning bus and rush him to the Mercy Community Hospital in Iligan City, but he died while undergoing operation. Paulie Caorong, the widow of Atty. Caorong, and their minor children Yasser King, Rose Heinni, and Prince Alexander brought a suit for breach of contract of carriage in the Regional Trial Court of Iligan City (Branch VI). In its decision, dated 28 December 1990, the trial court dismissed the complaint, and the corresponding counterclaim; without costs. On appeal, however, and on 29 July 1994, the Court of Appeals reversed the decision of the trial court, and rendered another one ordering Fortune Express to pay the Caorongs (1) P3,399,649.20 as death indemnity; (2) P50,000.00 and P500.00 per appearance as attorney’s fees; and costs against Fortune Express. Hence, the appeal by petition for review on certiorari. The Supreme Court affirmed the decision of the Court of Appeals with modification that Fortune Express is ordered to pay Paulie, Yasser King, Rose Heinni, and Prince Alexander Caorong (1) death indemnity in the amount of P50,000.00; (2) actual damages in the amount of P30,000.00; (3) moral damages in the amount of P100,000.00; (4) exemplary damages in the amount of P100,000.00; (5) attorney’s fees in the amount of P50,000.00; (6) compensation for loss of earning capacity in the amount of P2,121,404.90; and (7) costs of suits.

Transportation Law, 2004 ( 211 )

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1. Article 1763 NCC; Common carrier liable for injuries suffered by passenger on account of willful acts of other passenger Article 1763 of the Civil Code provides that a common carrier is responsible for injuries suffered by a passenger on account of the wilful acts of other passengers, if the employees of the common carrier could have prevented the act through the exercise of the diligence of a good father of a family. 2.

Fortune Express negligent; No precautions was undertaken Herein, it is clear that because of the negligence of Fortune Express’ employees, the seizure of the bus by Mananggolo and his men was made possible. Despite warning by the Philippine Constabulary at Cagayan de Oro that the Maranaos were planning to take revenge on Fortune Express by burning some of its buses and the assurance of petitioner’s operation manager, Diosdado Bravo, that the necessary precautions would be taken, Fortune Express did nothing to protect the safety of its passengers. Had Fortune Express and its employees been vigilant they would not have failed to see that the malefactors had a large quantity of gasoline with them. Under the circumstances, simple precautionary measures to protect the safety of passengers, such as frisking passengers and inspecting their baggages, preferably with non-intrusive gadgets such as metal detectors, before allowing them on board could have been employed without violating the passenger’s constitutional rights. As the Court intimated in Gacal v. Philippine Air Lines, Inc., a common carrier can be held liable for failing to prevent a hijacking by frisking passengers and inspecting their baggages. 3. Article 1174 of the Civil Code (Fortuitous event defined); Yobido vs. CA, when unforeseen event considered a force majeure Article 1174 of the Civil Code defines a fortuitous event as an occurrence which could not be foreseen or which though foreseen, is inevitable. In Yobido v. Court of Appeals, the Court held that to be considered as force majeure, it is necessary that: (1) the cause of the breach of the obligation must be independent of the human will; (2) the event must be either unforeseeable or unavoidable; (3) the occurrence must be such as to tender it impossible for the debtor to fulfill the obligation in a normal manner; and (4) the obligor must be free of participation in, or aggravation of, the injury to the creditor. The absence of any of the requisites mentioned above would prevent the obligor from being excused from liability. 4.

Vasquez vs. CA; Common carrier liable for failure to take necessary precautions In Vasquez v. Court of Appeals, it was held that the common carrier was liable for its failure to take the necessary precautions against an approaching typhoon, of which it was warned, resulting in the loss of the lives of several passengers. The event was foreseeable, and, thus, the second requisite mentioned above was not fulfilled. This ruling applies by analogy to the present case. Herein, despite the report of PC agent Generalao that the Maranaos were going to attack its buses, Fortune Express took no steps to safeguard the lives and properties of its passengers. The seizure of the bus of Fortune Express was foreseeable and, therefore, was not a fortuitous event which would exempt Fortune Express from liability. 5.

Article 1755 NCC Article 1755 of the Civil Code provides that “a common carrier is bound to carry the passengers as far as human care and foresight can provide, using the utmost diligence of very cautious persons, with due regard for all the circumstances.” 6.

Pilapil vs. CA and De Guzman vs. CA do not apply In Pilapil v. Court of Appeals, it was held that a common carrier is not liable for failing to install window grills on its buses to protect passengers from injuries caused by rocks hurled at the bus by lawless elements. On the other hand, in De Guzman v. Court of Appeals, it was ruled that a common carrier is not responsible for goods lost as a result of a robbery which is attended by grave or irresistible threat, violence, or force. It is clear that the cases of Pilapil and De Guzman do not apply to the present case. In Pilapil and De Guzman, the respondents therein were not negligent in failing to take special precautions against threats to the safety of passengers which could not be foreseen, such as tortious or criminal acts of third persons. Herein, Transportation Law, 2004 ( 212 )

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this factor of unforeseeability (the second requisite for an event to be considered force majeure) is lacking, i.e. despite the report of PC agent Generalao that the Maranaos were planning to burn some of petitioner’s buses and the assurance of Fortune Express’ operations manager (Diosdado Bravo) that the necessary precautions would be taken, nothing was really done by Fortune Express to protect the safety of passengers. 7.

Deceased not guilty of contributory negligence, let alone recklessness Herein, Atty. Caorong did not act recklessly. The intended targets of the violence were Fortune Express and its employees, not its passengers. The assailant’s motive was to retaliate for the loss of life of two Maranaos as a result of the collision between Fortune Express’ bus and the jeepney in which the two Maranaos were riding. Mananggolo, the leader of the group which had hijacked the bus, ordered the passengers to get off the bus as they intended to burn it and its driver. The armed men actually allowed Atty. Caorong to retrieve something from the bus. What apparently angered them was his attempt to help the driver of the bus by pleading for his life. He was playing the role of the good Samaritan. Certainly, this act cannot be considered an act of negligence, let alone recklessness. 8. Fortune Express liable for damages (Indemnity for death); Article 1764 in relation to Article 2206 NCC Article 1764 of the Civil Code, in relation to Article 2206 thereof, provides for the payment of indemnity for the death of passengers caused by the breach of contract of carriage by a common carrier. Initially fixed in Article 2206 at P3,000.00, the amount of the said indemnity for death has through the years been gradually increased in view of the declining value of the peso. It is presently fixed at P50,000.00. The Caorongs are entitled to this amount. 9.

Fortune Express liable for damages (Actual damages); Article 2199 NCC Article 2199 of the Civil Code provides that “except as provided by law or by stipulation, one is entitled to an adequate compensation only for such pecuniary loss suffered by him as he has duly proved.” The trial court found that the Caorongs spent P30,000.00 for the wake and burial of Atty. Caorong. Since Fortune Express does not question said finding of the trial court, it is liable to the Caorongs in the said amount as actual damages. 10.

Fortune Express liable for damages (Moral damages); Article 2206 NCC Under Article 2206 of the Civil Code, the “spouse, legitimate and illegitimate descendants and ascendants of the deceased may demand moral damages for mental anguish by reason of the death of the deceased.” The trial court found that Paulie Caorong suffered pain from the death of her husband and worry on how to provide support for their minor children, Yasser King, Rose Heinni, and Prince Alexander. Fortune Express likewise does not question said finding of the trial court. Thus, in accordance with recent decisions of the Court, the Court hold that Fortune Express is liable to the Caorongs in the amount of P100,000.00 as moral damages for the death of Atty. Caorong. 11.

Fortune Express liable for damages (Exemplary damages); Article 2232 NCC Article 2232 of the Civil Code provides that “in contracts and quasi-contracts, the court may award exemplary damages if the defendant acted in a wanton, fraudulent, reckless, oppressive, or malevolent manner.” Herein, Fortune Express acted in a wanton and reckless manner. Despite warning that the Maranaos were planning to take revenge against Fortune Express by burning some of its buses, and contrary to the assurance made by its operations manager that the necessary precautions would be taken, Fortune Express and its employees did nothing to protect the safety of passengers. Under the circumstances, the Court deems it reasonable to award private respondents exemplary damages in the amount of P100,000.00. 12.

Fortune Express liable for damages (Attorney’s fees); Article 2208 NCC

Transportation Law, 2004 ( 213 )

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Pursuant to Article 2208, attorney’s fees may be recovered when exemplary damages are awarded. n the recent case of Sulpicio Lines, Inc. v. Court of Appeals, the Court held an award of P50,000.00 as attorney’s fees to be reasonable. Hence, the Caorongs are entitled to attorney’s fees in that amount. 13. Fortune Express liable for damages (Compensation for loss of earning capacity); Article 1764 in relation to Article 2206 NCC Article 1764 of the Civil Code, in relation to Article 2206 thereof, provides that in addition to the indemnity for death arising from the breach of contract of carriage by a common carrier, the “defendant shall be liable for the loss of the earning capacity of the deceased, and the indemnity shall be paid to the heirs of the latter.” 14.

Formula for computing net earning capacity Life expectancy is equivalent to two thirds (2/3) multiplied by the difference of 80 and the age of the deceased. Herein, Since Atty. Caorong was 37 years old at the time of his death, he had a life expectancy of 28 2/3 more years. His projected gross annual income, computed based on his monthly salary of P11,385.00 23 as a lawyer in the Department of Agrarian Reform at the time of his death, was P148,005.00. Allowing for necessary living expenses of 50% of his projected gross annual income, his total earning capacity amounts to P2,121,404.90. Hence, Fortune Express is liable to the Caorongs in the said amount as compensation for loss of earning capacity. [82] Landingin vs. Pangasinan Transportation (GR L-28014-15, 29 May 1970) En Banc, Villamor (J): 8 concur, 1 on leave Facts: In the morning of 20 April 1963, Leonila Landingin, daughter of Marcelo Landigin and Racquel Bocasas, and Estrella Garcia, daughter of Pedro Garcia and Eufracia Landingin, were among the passengers in the bus driven by Marcelo Oligan and owned and operated by Pantranco on an excursion trip from Dagupan City to Baguio City and back. Upon reaching the uphill point at Camp 8, a sudden snapping or breaking of metal below the floor of the bus was heard, and the bus abruptly stopped, rolling back a few moments later; that as a result, some of the passengers jumped out of the bus, while others stepped down. The driver maneuvered the bus safely to and against the side of the mountain where its rear end was made to rest, ensuring the safety of the many passengers still inside the bus. While the driver was steering the bus towards the mountainside, he advised the passengers not to jump, but to remain seated. Leonila and Estrella were not thrown out of the bus, but that they panicked and jumped out. Leonila and Estrella suffered serious injuries as a result of which Leonila and Estrella died at the hospital on the same day. In connection with the incident, however, the driver had been charged with and convicted of multiple homicide and multiple slight physical injuries on account of the death of Leonila and Estrella and of the injuries suffered by four others. Said criminal case, however, is pending appeal in a higher court. Civil Cases D-1468 and D-1470 were filed by the spouses Landingin and spouses Garcia for damages suffered by them in connection with the death of their respective daughters, Leonila and Estrella, due to the alleged negligence of Pangasinan Transport Co. and Marcelo Oligan and/or breach of contract of carriage. By agreement of the parties, the two cases were tried jointly. On 17 October 1966, the court a quo rendered its decision therein concluding that the accident was caused by a fortuitous event or an act of God brought about by some extra-ordinary circumstances independent of the will of the Pantranco or its employees. The Court thus absolved the defendants from any liability on account of negligence on their part and therefore dismissing the complaints in the two cases. However, it ordered Pantranco to pay to the spouses Marcelo Landingin and Racquel Bocasas in Civil Case D-1468 the amount of P6,500.00; and the amount of P3,500.00 to the spouses Pedro Garcia and Eufracia Landingin in Civil Case D-1470, not in payment of liability because Transportation Law, 2004 ( 214 )

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of any negligence on the part of the defendants but as an expression of sympathy and goodwill. Pantranco appealed. The Supreme Court modified the judgment appealed from, and ordered PANTRANCO to pay the spouses Landingin and spouses Garcia the amounts stated in the judgment appealed from, as damages for breach of contracts, with interest thereon at the legal rate from the date of the filing of the complaints; with costs against PANTRANCO. 1.

PANTRANCO guilty of breach of contract of carriage The argument – the court should not have ordered them to assume any pecuniary liability inasmuch as it has found them to be absolutely free from fault or negligence, and having in fact dismissed the complaints against them – would have been meritorious if not for the fact that PANTRANCO was guilty of breach of contract of carriage. Each of the two complaints averred that two buses, including the one in which the two deceased girls were riding, were hired to transport the excursionist passengers from Dagupan City to Baguio City, and return, and that the said two passengers did not reach destination safely. 2.

Duty of a common carrier As a common carrier, PANTRANCO was duty bound to carry its passengers “safely as far as human care and foresight can provide, using the utmost diligence of very cautious persons, with a due regard for all the circumstances.” (Article 1755, Civil Code.) 3. Pantranco did not measure up to the degree of care and foresight required it under the circumstances The cross-joint of the bus in which the deceased were riding broke, which caused the malfunctioning of the motor, which in turn resulted in panic among some of the passengers. In Lasam vs. Smith (45 Phil. 660), the Court held that an accident caused by defects in the automobile is not a caso fortuito. The rationale of the carrier’s liability is the fact that “the passenger has neither the choice nor control over the carrier in the selection and use of the equipment and appliances in use by the carrier.” (Necesito, et al. vs. Paras, et al., 104 Phil. 75) 4.

Conclusion of “act of God” conjectural and speculative The lower court’s conclusion that “the accident was caused by a fortuitous event or an act of God brought about by some extraordinary circumstances independent of the will of the Pantranco or its employees,” is in large measure conjectural and speculative, and was arrived at without due regard to all the circumstances, as required by Article 1755. 5.

Presumption of negligence when a passenger dies or is injured When a passenger dies or is injured, the presumption is that the common carrier is at fault or that it acted negligently (Article 1756). This presumption is only rebutted by proof on the carrier’s part that it observed the “extraordinary diligence” required in Article 1733 and the “utmost diligence of very cautious persons” required in Article 1755 (Article 1756). 6.

Carrier should give due regard for all circumstances in connection with inspection The lower court considered the presumption rebutted on the strength of Pantranco’s evidence that only the day before the incident, the cross-joint in question was duly inspected and found to be in order. It does not appear, however, that the carrier gave due regard for all the circumstances in connection with the said inspection. The bus in which the deceased were riding was heavily laden with passengers, and it would be traversing mountainous, circuitous and ascending roads. Thus the entire bus, including its mechanical parts, would naturally be taxed more heavily than it would be under ordinary circumstances. The mere fact that the bus was inspected only recently and found to be in order would not exempt the carrier from liability unless it is shown that the particular circumstances under which the bus would travel were also considered. Transportation Law, 2004 ( 215 )

Haystacks (Berne Guerrero)

[83] California Lines vs. de los Santos (GR L-13254, 30 December 1961) First Division, Dizon (J): 7 concur, 2 took no part Facts: In Civil Case 27906 of the CFI of Manila (Branch XVII), Josephine W. Regalado sought to recover from California Lines, Inc., a domestic corporation engaged in the business of operating passenger buses, and/or the Ricalinda Bus, damages and attorney’s fees in the total sum of P28,000.00. The damages were claimed to have been the result of physical injuries sustained by her while on board a passenger bus of the California Lines, Inc. which collided with another belonging to Ricalinda Bus. In its answer to the complaint the California Lines, Inc. interposed a cross-claim against its co-defendant, Ricalinda Bus. Subsequently, upon finding that the Ricalinda Bus had no juridical personality because it was a mere trade name, the California Lines filed a third-party complaint against the owner of the other bus in the accident, Amparo de los Santos, together with her husband, Victor de los Santos, and her driver, Celedonio N. Morta, in order to hold them liable for any amount which Regalado may be entitled to collect upon her complaint. After the hearing of Civil Case 27906 had started, Regalado and de los Santos entered into an amicable settlement, for which reason the trial court dismissed the case on 11 December 1956; without pronouncement as to costs. On 14 January 1957, the California Lines, as defendants and third-party plaintiff, filed a motion for the amendment of the court’s order so as to make the dismissal without prejudice insofar as its third-party complaint was concerned; which was granted by the lower court on 2 February 1956. On 10 April 1957, the California Lines commenced Civil Case 32298 against Amparo de los Santos, Victor de los Santos and Celedonio N. Morta in the CFI of Manila (Branch 1) to recover damages suffered by it as a result of the collision. In their answer filed on 2 May 1957, de los Santos, et. al. alleged that the damages, if at all, caused to California Lines’ bus were due to the recklessness and lack of prudence and precaution of its own driver, and filed a counterclaim therein for moral damages in the sum of P10,000.00, for exemplary or corrective damages in the sum of P5,000.00, for loss of business goodwill of the Ricalinda Bus in the sum of P10,000.00 and for attorney’s fees in the sum of P5,000.00. 5 days thereafter, defendants filed a motion to dismiss the complaint on the ground that there was another action pending between the same parties for the same cause, alleging that the third-party complaint filed by the California Lines in Civil Case 27906 was still pending adjudication in Branch XVII of the CFI of Manila, and that the parties and cause of action therein involved are the same as those in Civil Case 32298. In spite of the opposition filed by the California Lines, the lower court, in its order of 17 July 1957, granted the motion to dismiss the complaint, upon the ground relied upon in support thereof. On 12 August 1957 California Lines filed a motion in Civil Case 27906 for the clarification of the order of dismissal dated 2 February 1957, but the same was denied by the court on the ground that said order was already sufficiently clear. Upon denial of the motion for reconsideration filed by the California Lines on 22 August 1957, said party took the present appeal. The Supreme Court reversed and set aside the order of dismissal appealed from, and remanded the case to the lower court for further proceedings in accordance with law; with costs. 1.

Civil case 27906 dismissed without prejudice Civil Case 27906 was definitely terminated in its entirety by the order of dismissal dated 11 December 1956, as amended by the other issued on 2 February 1956. The former provided for the dismissal of “this case” — meaning all the claims, counterclaims, cross-claims and third-party complaint involved in the case — and this was reiterated in the order of 2 February, which merely made the dismissal of the thirdparty complaint without prejudice. That the whole case was deemed terminated is also clearly inferable from the fact that on 20 August 1957, after unsuccessfully seeking a clarification of the original order of dismissal, California Lines filed a motion to set his third-party complaint for trial, but the court denied the motion.

Transportation Law, 2004 ( 216 )

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2.

Claims by California Lines The pertinent allegations of California Lines’ complaint regarding damages are as follows: (VII) That as a result of the Ricalinda Bus hitting and striking plaintiff’s passenger bus mentioned in paragraph IV hereof, the latter bus was damaged and was brought to N.C. Mercado for repairs, the amount of the damage and value of the repairs being P1,700.00, more or less. (VIII) That because of the damage to said plaintiff’s passenger bus and because of the needed repairs, the said bus was laid up and was not and could not be operated by plaintiff in its regular and ordinary business from 29 August 1955 to 8 October 1955 when the needed repairs on the said bus were finished and completed, as a result of which plaintiff suffered damages, the amount of damages being P35.00 a day, more or less, from 29 August 1955 to 8 October 1955, or a total of P1,435.00, the said sum of P35.00 being the average daily net earning and profit in the operation of said passenger bus by plaintiff. (IX) That as a result of the gross negligence of defendants in the maintenance, supervision and operation of said Ricalinda Bus, the plaintiff is entitled to collect exemplary or corrective damages from defendants.” 3.

Third party complaint actually a cross-claim The third-party complaint was, in reality, a cross-claim because it sought to obtain judgment ordering Amparo de los Santos principally, as owner of the Ricalinda Bus vehicle that collided with the one owned by the California Lines, Inc., to pay to the latter whatever damages it may be sentenced to pay its passenger Josephine W. Regalado. When the California Lines discovered that the Ricalinda Bus was a mere trade name and had no juridical personality, it obtained leave of court to file and actually filed a third-party complaint against Amparo de los Santos, her husband and their driver. These third-party defendants settled the claim of Regalado for damages, thus leaving nothing in this respect to the California Lines to recover from them. 4.

Claim asserted is different from that in third party complaint Whether it was properly a cross-claim or a third-party complaint is of little moment in the decision of the appeal. The fact is that the claim asserted therein was for reimbursement of whatever damages the California Lines might be sentenced to pay its passenger, and it is obvious that said claim is entirely different from, and does not cover nor is it covered by the claim subject matter of Civil Case 32298, namely, recovery of the damages suffered by the California Lines. It is obvious, therefore, that the lower court erred in dismissing the latter case on the ground that there was already another action pending between the same parties upon the same or similar causes of action. [84] Estrada vs. Consolacion (GR L-40948, 29 June 1976) Second Division, Antonio (J): 2 concur, 1 on leave, 1 designated to sit in the second division Facts: On 1 January 1975, Gregorio Estrada’s wife, Simeona Estrada, was a passenger of the AC Jeep (ZE501), owned and operated by Corazon Ramirez Uy and driven by Lucio Galaura, while said jeep was cruising along Claro M. Recto Avenue, heading towards the direction of the Jones Circle, Davao City the driver (Galaura) “without regard for the safety of Estrada’s wife who was among his passengers and without taking the necessary precaution” in accordance with the situation, bumped a Ford pick-up truck; as a consequence of the incident Estrada’s wife sustained a fractured left humerus (pulmonary) embolism and shock due to respiratory failure; she was brought to the San Pedro Hospital where she died. On 14 February 1975, Gregorio Estrada filed a complaint for damages against Uy and Galaura for breach of their obligations as a common carrier, in view of the death of his wife while she was a passenger of the vehicle. Defendants, in their answer, while admitting that Estrada’s wife was a passenger and that she died as a result of the accident, alleged that the proximate and only cause of the accident was the negligence of third persons (the drivers, Danilo Ang and Rodolfo D. Endino, of a Toyota pick-up truck [TRU 221], and a Ford pick-up truck [TRU 420]). Defendants likewise set up a counterclaim for damages by reason of Estrada’s Transportation Law, 2004 ( 217 )

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institution of the clearly unfounded suit against them. On 16 April 1975, defendants filed a motion for summary judgment against Estrada on the ground that there is no genuine issue as to any material fact in the case except as to the amount of damages defendants are seeking from Estrada by way of counterclaim. On 20 May 1975, the CFI of Davao (Civil Case 8739) decreed that defendants have judgment summarily against the Estrada for such amount as may be found due them for damages. A motion for reconsideration of the order was denied 9 June 1975 for lack of merit. Estrada filed a petition for certiorari with prohibition before the Supreme Court. The Supreme Court dismissed the petition for certiorari with prohibition, without special pronouncement as to costs. 1.

Annexes to answer in support of motion for summary judgment In support of the defendant’s motion for summary judgment, certain annexes to the answer were incorporated therein, i.e. (a) The sketch of the accident made by Traffic Investigator J.S. Formeloza of the Davao City Police Department, marked as Annex ‘3’ of the defendants answer. (b) Said investigator’s affidavit detailing his findings upon investigation stating that the pick-up with plate No. T-RU-420 upon reaching the intersection of Recto and Bonifacio Streets collided with the pick-up with plate No. T-RU-221, and that upon impact, the latter pick-up collided with the jeep driven by Lucio Galaura that was coming from the opposite direction; (c) The respective sworn statements of the drivers of the two pick-ups (Danilo Ang and Rodolfo Endino) taken by the Traffic Division of the Davao City Police Department after the accident, marked as Annexes ‘5’ and of the defendants’ answer wherein each driver respectively claimed that he exercised due care but attributed to the other negligence as the cause of the collision; and (d) The sworn statement of defendant driver (Lucio Galaura) of said A. C. Jeep, likewise taken by the Traffic Division of the Davao City Police Department detailing what he did in order to prevent or minimize damages to his vehicle and his passengers, marked as Annex ‘7’ of defendants’ answer. By means of the annexes, Uy and Galaura sought to prove that they were relieved of any liability to petitioner inasmuch as the accident which caused the death of petitioner’s wife “resulted from the negligence of third persons over whom defendants had no supervision or control, namely, the drivers of the two pick-up trucks which collided at the intersection of C. M. Recto Ave. and Bonifacio St., Davao City, as a result of which collision, one of them was deviated from course to the lane where defendants’ A.C.-Jeep was then travelling, where it also collided with the latter.” 2.

Section 2, Rule 34 of the Revised Rules Pursuant to Section 2, Rule 34, of the Revised Rules, “A party against whom a claim, counterclaim, or crossclaim is asserted or a declaratory relief is sought may, at any time, move with supporting affidavits for a summary judgment in his favor as to all or any part thereof.” The defendant who believes that he is untitled to a judgment either on the pleadings or on the basis of extrinsic facts established by affidavits or depositions may move for summary judgment in his favor. In other words, when the moving party is a defending party, his pleadings, depositions or affidavits must show that his defenses or denials arc sufficient to defeat the claimant’s claim. 3.

Summary judgment; Procedure The affidavit submitted by the party moving for summary judgment shall be by persons having personal knowledge of the facts; it shall recite all material facts and show that there is no defense to the cause of actions or that the cause of action has no merits. This motion shall be served on the adverse party at least 10 days prior to the time specified in the hearing. The adverse party may also, prior to said date, serve opposing affidavits The opposing papers, including pleadings, depositions, and affidavits must establish a genuine issue of fact in order to defeat a motion for summary judgment. After hearing, the motion for summary judgment shall be granted if, on the basis of all the papers and proofs submitted, the cause of action or defense shall be established sufficiently to warrant the court as a matter of law in directing judgment in favor of any party. The motion shall be denied if any party shall show facts sufficient to require a trial of any issue of fact other than an issue as to the amount or extent of the damages. Transportation Law, 2004 ( 218 )

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4.

Summary judgment; Purpose This Summary Judgment or Accelerated Judgment is a device for weeding out sham claims or defenses at an early stage of the litigation, thereby avoiding the expense and loss of time involved in a trial. The very object is to separate what is formal or pretended in denial or averment from what is genuine and substantial, so that only the latter may subject a suitor to the burden of a trial. 5.

Motion for summary judgment deals on whether there are triable issues of facts; Test In conducting the hearing, the purpose of the judge is not to try the issue, but merely to determine whether there is a meritorious issue to be tried. Where a motion is made for summary judgment, such motion is not directed to the pleadings and deals only with the question of whether there are triable issues of facts and where such issues exist summary judgment must be denied. Summary judgment should not be granted where is fairly appears that there is a triable issue to be tried. “The Court should not pass, on questions of credibility or weight of evidence, and that the summary judgment procedure ‘should not be perverted to the trial of disputed questions of fact upon affidavits”. The test, therefore, of a motion for summary judgment is — whether the pleadings, affidavits and exhibits in support of the motions are sufficient to overcome the opposing papers and to justify a finding as a matter of law that there is no defense to the action or the claim is clearly meritorious. 6.

Proceedings for summary judgment; Burden of proof In proceedings for summary judgment, the burden of proof is upon the plaintiff to prove the cause of action and to show that the defense is interposed solely for the purpose of delay. After plaintiff’s burden has been discharged, defendant has the burden to show facts sufficient to entitle him to defend. 7.

Duty of carrier under the contract of carriage; Presumption of negligence; Diligence required Under the contract of carriage, Uy and Galaura assumed the express obligation to transport Estrada’s wife to her destination safely and to observe extra ordinary diligence with due regard for all the circumstances, and that any injury suffered by her in the course thereof, is immediately attributable to the negligence of the carrier. To overcome such presumption, it must be shown that the carrier had observed the required extraordinary diligence, which means that the carrier must show the “utmost diligence of very cautious persons as far as human care and foresight can provide”, or that the accident was caused by a fortuitous event. 8.

What constitutes caso fortuito In order to constitute a case fortuito that would exempt a person from responsibility, it is necessary that (1) the event must be independent of the human will; (2) the occurrence must render it impossible for the obligor to fulfill his obligation m a normal manner; and (3) the obligor must be free of a concurrent or contributory fault or negligence. 9.

Purpose of submission of the affidavit; Affidavit prima facie proof, said proof was unrebutted It was precisely because of the legal presumption that once a passenger in the course of travel is injured or does not reach his destination safely, the carrier and the driver are presumed to be at fault, that Uy and Galaura submitted affidavits to prove that the accident which resulted in the death of Estrada’s wife was due to the fault or negligence of the drivers of the two pickup trucks over whom the carrier had no supervision or control. Having, therefore, shown prima facie that the accident was due to a caso fortuito and that the driver was free of concurrent or contributory fault or negligence, it was incumbent upon Estrada to rebut such proof. Having failed to do so, the defense of the carrier that the proximate cause of the accident was a caso fortuito remains unrebuted. 10.

Questions of facts not yet resolved

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Whether a carrier used such reasonable precautions to avoid the accident as would ordinarily be used by careful, prudent persons under like circumstances is a question essentially one of fact and, therefore, ordinarily such issue must be decided at the trial. But where, as herein, Estrada has not submitted opposing affidavits to controvert Uy’s and Galaura’s evidence that the driver of the passenger jeepney was free of contributory fault as he stopped the jeepney to avoid the accident, but in spite of such precaution the accident occurred, the Judge did not, therefore, act arbitrarily in declaring in his Order that “there is no genuine issue to any material fact and no controversial question of fact to be submitted to the trial court.” 11.

Order merely an interlocutory order This was, however, a mere interlocutory order directing that a hearing be conducted for the purpose of ascertaining the amount or the assessment of damages which may be adjudged in favor of the prevailing party. It is a determination of the court of a preliminary point or directing some steps in the proceedings, but not a disposition of the merits. “Upon the rendering of the assessment, the Court shall direct the entry forthwith of the appropriate summary judgment.” 12. Order of judge cannot be considered a judgment, in the absence of any findings of fact and conclusions of law In the absence of any findings of fact and conclusions of law, the order of the Judge cannot be considered a judgment. It has been held that “a trial court in granting summary judgment should file findings of fact and conclusion of law or a memorandum opinion so as to disclose grounds upon which the trial court reached its determination.” In this jurisdiction, pursuant to Section 9 of Article X of the Constitution and the procedural rules, all judgments determining the merits of cases should state clearly and distinctly the facts and the law on which it is based. 13.

Present petition premature There being no judgment, the present petition is, therefore, premature. Certainly, Estrada could move for the setting aside of the Order of 20 May 1975 by the presentation of opposing affidavits showing that, other than the issue as to the amount or extent of damages, there is a genuine issue of fact on the carrier’s liability. [85] Ong Yiu vs. CA, see [68] [86] Lara vs. Valencia (GR L-9907, 30 June 1958) En Banc, Bautista Angelo (J): 7 concur Facts: Demetrio Lara went to the lumber concession of Brigido R. Valencia in Parang, Cotabato upon instructions of his chief in order to classify the logs of defendant which were then ready to be exported and to be loaded on a ship anchored in the port of Parang. It took Lara 6 days to do his work during which he contracted malaria fever and for that reason he evinced a desire to return immediately to Davao. At that time, there was no available bus that could take him back to Davao and so he requested Valencia if he could take him in his own pick-up. Valencia agreed and, together with Lara, other passengers tagged along, most of them were employees of the Government. Valencia merely accommodated them and did not charge them any fee for the service. It was also their understanding that upon reaching barrio Samoay, the passengers would alight and transfer to a bus that regularly makes the trip to Davao but unfortunately there was none available at the time and so the same passengers, including Lara, again requested Valencia to drive them to Davao. Valencia again accommodated them and upon reaching Km. 96, Lara accidentally fell suffering fatal injuries. An action for damages was brought by Lourdes J. Lara, et. al. against Valencia in the CFI of Davao for the death of one Demetrio Lara, Sr. allegedly caused by the negligent act of Valencia. Valencia denied the charge of negligence and set up certain affirmative defenses and a counterclaim. The court after hearing rendered Transportation Law, 2004 ( 220 )

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judgment ordering Valencia to pay Lara, et. al. the following amount: (a) P10,000 as moral damages; (b) P3,000 as exemplary damages; and (c) P1,000 as attorney’s fees, in addition to the costs of action. Both parties appealed to the Supreme Court because the damages claimed in the complaint exceed the sum of P50,000. The Supreme Court reversed the decision appealed from, without pronouncement as to costs. 1. Lara, et. al. merely accommodation passaengers who paid nothing for service; Degree of diligence required of owner of vehicle The deceased, as well as his companions who rode in the pick-up of Valencia, were merely accommodation passengers who paid nothing for the service and so they can be considered as invited guests within the meaning of the law. As accommodation passengers or invited guests, Valencia as owner and driver of the pick-up owes to them merely the duty to exercise reasonable care so that they may be transported safely to their destination. Thus, “The rule is established by the weight of authority that the owner or operator of an automobile owes the duty to an invited guest to exercise reasonable care in its operation, and not unreasonably to expose him to danger and injury by increasing the hazard of travel. This rule, as frequently stated by the courts, is that an owner of an automobile owes a guest the duty to exercise ordinary or reasonable care to avoid injuring him. Since one riding in an automobile is no less a guest because he asked for the privilege of doing so, the same obligation of care is imposed upon the driver as in the case of one expressly invited to ride” Valencia, therefore, is only required to observe ordinary care, and is not in duty bound to exercise extraordinary diligence as required of a common carrier by Philippine law. 2.

Valencia had done what a reasonable prudent man would have done Valencia was not in duty bound to take the deceased in his own pick-up to Davao because from Parang to Cotabato there was a line of transportation that regularly makes trips for the public, and if Valencia agreed to take the deceased in his own car, it was only to accommodate him considering his feverish condition and his request that he be so accommodated. The passengers who rode in the pick-up of Valencia took their respective seats therein at their own choice and not upon indication of Valencia with the particularity that Valencia invited the deceased to sit with him in the front seat but which invitation the deceased declined. The reason for this can only be attributed to his desire to be at the back so that he could sit on a bag and travel in a reclining position because such was more convenient for him due to his feverish condition. All the circumstances thereof clearly indicate that Valencia had done what a reasonable prudent man would have done under the circumstances. 3.

Finding as to speed not supported by evidence; else, speed not unreasonable The finding of the trial court that the pick-up was running at more than 40 kilometers per hour is not supported by evidence. This is a mere surmise made by the trial court considering the time the pick- up left barrio Samoay and the time the accident occurred in relation to the distance covered by the pick-up. And even if this is correct, still we say that such speed is not unreasonable considering that they were travelling on a national road and the traffic then was not heavy. 4.

Injury to passenger has been proximately caused by own negligence The incident may be attributed to lack of care on the part of the deceased considering that the pick-up was open and he was then in crouching position. Indeed the law provides that “A passenger must observe the diligence of a good father of a family to avoid injury to himself” (Article 1761, new Civil Code), which means that if the injury to the passenger has been proximately caused by his own negligence, the carrier cannot be held liable. 5.

Unfortunate happening due to unforeseen accident There is every reason to believe that the unfortunate happening was only due to an unforeseen accident caused by the fact at the time the deceased was half asleep and must have fallen from the pick-up Transportation Law, 2004 ( 221 )

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when it ran into some stones causing it to jerk considering that the road was then bumpy, rough and full of stones. All things considered, the accident occurred not due to the negligence of Valencia but to circumstances beyond his control and so he should be exempt from liability. [87] Bayasen vs. CA (GR L-25785, 26 February 1981) First Division, Fernandez (J): 4 concur Facts: On the morning of 15 August 1963, Saturnino Bayasen, the Rural Health Physician in Sagada, Mountain Province, went to barrio Ambasing to visit a patient. Two nurses from the Saint Theodore’s Hospital in Sagada, viz., Elena Awichen and Dolores Balcita, rode with him in the jeep assigned for the use of the Rural Health Unit as they had requested for a ride to Ambasing. Later, at Ambasing, the girls, who wanted to gather flowers, again asked if they could ride with him up to a certain place on the way to barrio Suyo which he intended to visit anyway. Dr. Bayasen again allowed them to ride, Elena sitting herself between him and Dolores. On the way, at barrio Langtiw, the jeep went over a precipice. About 8 feet below the road, it was blocked by a pine tree. The three, were thrown out of the jeep. Elena was found lying in a creek further below. Among other injuries, she suffered a skull fracture which caused her death. Saturnino Bayasen was charged in December 1963 by the Provincial Fiscal of Mountain Province of the crime of Homicide Thru Reckless Imprudence. After trial, the CFI of Mountain Province (Second Judicial District, Criminal Case 1056) found Bayasen guilty of the charge and sentenced the latter to an indeterminate penalty of 4 Months and 1 Day of arresto mayor as minimum, to 1 Year, 7 Months and 10 Days of prision correccional, as maximum, to indemnify the heirs of the deceased Elena Awichen the amount of P3,000.00 as compensatory damages, and P1,000.00 as fees of the attorney contracted by the said heirs and P1,886.00 for burial expenses of the deceased, and to pay the costs. From this decision, Bayasen appealed to the Court of Appeals, which, on 17 November 1965, affirmed the decision of the trial court with the modifications that the indemnity was increased to P6,000.00; the award of attorney’s fees was set aside; and that the maximum of the prison term was raised to 1 Year, 7 Months, and 17 Days of prision correccional. The motion for reconsideration of Bayasen was denied. Hence, the petition for review on certiorari. The Supreme Court set aside the decision of the Court of Appeals sought to be reviewed, and acquitted Bayasen of the crime charged in the information in Criminal Case 1056 of the CFI of Mountain Province, with costs de oficio. 1.

Prosecution’s evidence not legally sufficient to show accused was negligent in driving his jeep A careful examination of the evidence introduced by the prosecution shows no “legally sufficient” proof that the accused was negligent in driving his jeep. The star witness of the prosecution, Dolores Balcita who was one of the passengers in the jeep, testified that Saturnino Bayasen was driving his jeep moderately just before the accident and categorically stated that she did not know what caused the jeep to fall into the precipice. When asked whether the jeep hit anything before it fell into the precipice, the witness answered that she did not feel any bump or jolt. It is clear from the last part of the testimony of the witness, Dolores Balcita, that there was no conversation between the passengers in the jeep that could have distracted the attention of the accused while driving the jeep. As to the condition of the jeep itself, the same witness testified that she “did not notice anything wrong” with it from the time they drove from Sagada to Ambasing, and from there to the place where the jeep fell off the road. Regarding the road, she said that it was fair enough to drive on, but that it was moist or wet, and the weather was fair, too. As to whether Bayasen was under the influence of liquor at the time of the accident, she testified that he was not. In the light of the testimony of Dolores Balcita, the eyewitness of the accident presented by the prosecution, there is absolutely no evidence on record to show that the accused was negligent in driving his jeep. Transportation Law, 2004 ( 222 )

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2.

Accused’s reason for falling into the precipice Herein, Bayasen testified that before reaching the portion of the road where the jeep fell, he noticed that the rear wheel skidded, while driving from 8 to 10 kilometers per hour; that as a precautionary measure, he directed the jeep towards the side of the mountain, along the side of the mountain, but not touching the mountain; that while doing so, the late Elena Awichen suddenly held the steering wheel and he felt that her foot stepped on his right foot which was pressed then on the accelerator; and that immediately after, the jeep suddenly swerved to the right and went off. 3.

Positive testimony of better credibility than negative or equivocal testimony The testimony of a credible witness that he saw or heard at a particular time and place is more reliable than that of an equally credible witness who with the same opportunities, testifies that he did not see or hear the same thing at the same time and place. Herein, Dolores Balcita “did not see” what Elena Awichen suddenly did, and she “did not feel any movement from (her) side.” These answers of Dolores Balcita are all in the negative and equivocal. They do not deny or preclude the truth of the positive testimony of the accused. Hence, as to the relative weight to be given to the positive and consistent testimony of Bayasen and to the negative and equivocal answers of Dolores Balcita, the former is more worthy of credence. 4.

Testimony of mayor of Sagada, Mountain Province; Jeep in second gear The statement of Dolores Balcita that the accused was driving at moderate speed and not “an unreasonable speed” is bolstered by the testimony of Pablo Lizardo, then mayor of Sagada, Mountain Province, who found the jeep at second gear when he examined it not long after the incident. Such fact shows that Bayasen could not have been driving the jeep at a fast rate of speed. 5.

Proximate cause of tragedy The proximate cause of the tragedy was the skidding of the rear wheels of the jeep and not the “unreasonable speed” of Bayasen because there is no evidence on record to prove or support the finding that Bayasen was driving at “an unreasonable speed”. 6.

Skidding may happen without necessary implying negligence It is a well known physical fact that cars may skid on greasy or slippery roads without fault on account of the manner of handling the car. Skidding means partial or complete loss of control of the car under circumstances not necessarily implying negligence. It may occur without fault. Herein, under the particular circumstances, Bayasen who skidded could not be regarded as negligent, the skidding being an unforeseen event, so that Bayasen had a valid excuse for his departure from his regular course. 7.

Guilt not proven beyond reasonable doubt The negligence of Bayasen has not having been sufficiently established, his guilt of the crime charged has not been proven beyond reasonable doubt. He is, therefore, entitled to acquittal. [88] Cervantes vs. CA (GR 125138, 2 March 1999) Third Division, Purisima (J): 2 concur, 1 on leave, 1 abroad on official business Facts: On 27 March 1989, Philippines Air Lines (PAL) issued to Nicholas Cervantes a round trip plane ticket for Manila-Honolulu-Los Angeles-Honolulu-Manila, which ticket expressly provided an expiry of date of one year from issuance, i.e., until 27 March 1990. The issuance of the said plane ticket was in compliance with a Compromise Agreement entered into between the contending parties in two previous suits (Civil Case 3392 and 3451 before the RTC in Surigao City). On 23 March 1990, 4 days before the expiry date of subject ticket, Cervantes used it. Upon his arrival in Los Angeles on the same day, he immediately booked his Los AngelesTransportation Law, 2004 ( 223 )

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Manila return ticket with the PAL office, and it was confirmed for the 2 April 1990 flight. Upon learning that the same PAL plane would make a stop-over in San Francisco, and considering that he would be there on 2 April 1990, Cervantes made arrangements with PAL for him to board the flight in San Francisco instead of boarding in Los Angeles. On 2 April 1990, when Cervantes checked in at the PAL counter in San Francisco, he was not allowed to board. The PAL personnel concerned marked the following notation on his ticket: “TICKET NOT ACCEPTED DUE EXPIRATION OF VALIDITY.” Aggrieved, Cervantes filed a Complaint for Damages, for breach of contract of carriage before the RTC of Surigao del Norte in Surigao City (Branch 32, Civil Case 3807), but the said complaint was dismissed for lack of merit. On 20 September 1993, Cervantes interposed an appeal to the Court of Appeals, which came out with a Decision, on 25 July 1995, upholding the dismissal of the case. On 22 May 1996, Cervantes came to the Suprame Court via the Petition for Review. The Supreme Court denied the petition, and affirmed in toto the decision of the Court of Appeals dated 25 July 1995; without pronouncement as to costs. 1. Conclusion and findings of facts of lower courts should not be disturbed unless for cogent reasons As a rule, conclusions and findings of fact arrived at by the trial court are entitled to great weight on appeal and should not be disturbed unless for strong and cogent reasons. 2.

Plane ticket expired The plane ticket itself provides that it is not valid after 27 March 1990. It is also stipulated in paragraph 8 of the Conditions of Contract that “this ticket is good for carriage for one year from date of issue, except as otherwise provided in this ticket, in carrier’s tariffs, conditions of carriage, or related regulations. The fare for carriage hereunder is subject to change prior to commencement of carriage. Carrier may refuse transportation if the applicable fare has not been paid.” 3.

Lufthansa vs. Court of Appeals In Lufthansa vs. Court of Appeals, the Tolentinos were issued first class tickets on 3 April 1982, which will be valid until 10 April 1983. On 10 June 1982, they changed their accommodations to economy class but the replacement tickets still contained the same restriction. On 7 May 1983, Tolentino requested that subject tickets be extended, which request was refused by Lufthansa on the ground that the said tickets had already expired. The non-extension of their tickets prompted the Tolentinos to bring a complaint for breach of contract of carriage against the petitioner. In ruling against the award of damages, the Court held that the “ticket constitute the contract between the parties. It is axiomatic that when the terms are clear and leave no doubt as to the intention of the contracting parties, contracts are to be interpreted according to their literal meaning.” 4.

Article 1898; Acts of agent beyond scope of authority does not bind principal Under Article 1898 of the New Civil Code, the acts of an agent beyond the scope of his authority do not bind the principal, unless the latter ratifies the same expressly or impliedly. Furthermore, when the third person knows that the agent was acting beyond his power or authority, the principal cannot be held liable for the acts of the agent. If the said third person is aware of such limits of authority, he is to blame, and is not entitled to recover damages from the agent, unless the latter undertook to secure the principal’s ratification. 5.

Confirmation of flights by PAL’s agents did not extend lifetime of ticket; Absence of authority The confirmation by the PAL’s agents in Los Angeles and San Francisco of Cervantes’ flights did not extend the validity or lifetime of the ticket, as both had no authority to do so. Cervantes knew this from the Transportation Law, 2004 ( 224 )

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very start when he called up the Legal Department of appellee in the Philippines before he left for the USA. He had first hand knowledge that the ticket in question would expire on 27 March 1990 and that to secure an extension, he would have to file a written request for extension at the PAL’s office in the Philippines. Despite this knowledge, Cervantes persisted to use the ticket in question. Since the PAL agents are not privy to the said Agreement and Cervantes knew that a written request to the legal counsel of PAL was necessary, he cannot use what the PAL agents did to his advantage. The said agents acted without authority when they confirmed the flights of Cervantes. 6. Rule 10, Section 5, 1997 Rules of Civil Procedure; Amendment to conform or authorize presentation of evidence Rule 10, Section 5 (Amendment to conform or authorize presentation of evidence) of the 1997 Rules of Civil Procedure provides that “when issues not raised by the pleadings are tried with express or implied consent of the parties, as if they had been raised in the pleadings. Such amendment of the pleadings as may be necessary to cause them to conform to the evidence and to raise these issues may be made upon motion of any party at any time, even after judgment; but failure to amend does not affect the result of the trial of these issues.” 7.

Defense of lack of authority on the part of the PAL employees was not deemed waived Under Rule 9, Section 2 of the Revised Rules of Court, failure of a party to put up defenses in their answer or in a motion to dismiss is a waiver thereof. Herein, although the alleged lack of authority of the PAL employees was neither raised in the answer nor in the motion to dismiss, the records show that the question of whether there was authority on the part of the PAL employees was only acted upon by the trial court when Nicholas Cervantes was presented as a witness and the depositions of the PAL employees, Georgina M. Reyes and Ruth Villanueva, were presented. However, notwithstanding PAL’s failure to raise the defense of lack of authority of the said PAL agents in its answer or in a motion to dismiss, the omission was cured since the said issue was litigated upon, as shown by the testimony of Cervantes in the course of trial. Thus, “when evidence is presented by one party, with the express or implied consent of the adverse party, as to issues not alleged in the pleadings, judgment may be rendered validly as regards the said issue, which shall be treated as if they have been raised in the pleadings. There is implied consent to the evidence thus presented when the adverse party fails to object thereto.” 8.

No moral damages due In awarding moral damages for breach of contract of carriage, the breach must be wanton and deliberately injurious or the one responsible acted fraudulently or with malice or bad faith. Herein, Cervantes knew there was a strong possibility that he could not use the subject ticket, so much so that he bought a backup ticket to ensure his departure. Should there be a finding of bad faith, it should be on Cervantes. What the employees of PAL did was one of simple negligence. No injury resulted on the part of Cervantes because he had a back-up ticket should PAL refuse to accommodate him with the use of subject ticket. 9.

No exemplary damages due Exemplary damages are imposed by way of example or correction for the public good, and the existence of bad faith is established. The wrongful act must be accompanied by bad faith, and an award of damages would be allowed only if the guilty party acted in a wanton, fraudulent, reckless or malevolent manner. Herein, there is no showing that PAL acted in such a manner. The claim for exemplary damages cannot be upheld. [89] De Gillaco vs. Manila Railroad Co. (GR L-8034, 18 November 1955) Second Division, Reyes JBL (J): 7 concur

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Facts: On 1 April 1946, 7:30 a.m., Lt. Tomas Gillaco, husband of Cornelia A. de Gillaco, was a passenger in the early morning train of the Manila Railroad Company from Calamba, Laguna to Manila. When the train reached the Paco Railroad station, Emilio Devesa, a train guard of the Manila Railroad Company assigned in the Manila-San Fernando, La Union Line, happened to be in said station waiting for the same train which would take him to Tutuban Station, where he was going to report for duty. Devesa’s tour of duty on that day was from 9:00 a.m., until the train to which he was assigned reached La Union at 7:00 p.m. of the same day. Devesa had a long standing personal grudge against Tomas Gillaco, same dating back during the Japanese occupation. And because of this personal grudge, Devesa shot Gillaco with the carbine furnished to him by the Manila Railroad Company for his use as such train guard, upon seeing him inside the train coach. Tomas Gillaco died as a result of the would which he sustained from the shot fired by Devesa. Devesa was convicted of homicide by final judgment of the Court of Appeals. Cornelia A. de Gillaco filed an action against the Manila Railroad Company with the CFI Laguna. The trial court sentenced the railroad company to pay P4,000 damages to the de Gillacos, the widow and children of the late Tomas Gillaco shot by an employee of said company. The railroad company appealed. The Supreme Court reversed the judgment appealed from, and dismissed the complaint, without costs. 1.

Obligation to transport passenger safely to destination; Exception: unforeseen event A passenger is entitled to protection from personal violence by the carrier or its agents or employees, since the contract of transportation obligates the carrier to transport a passenger safely to his destination. But under the law of the case, this responsibility extends only to those that the carrier could foresee or avoid through the exercise of the degree of care and diligence required of it. As held in Lasam vs. Smith, that by entering into that contract the carrier bound himself to carry the plaintiff safely and securely to their destination; and that having failed to do so he is liable in damages unless he shows that the failure to fulfill his obligation was due to causes mentioned in article 1105 of the Civil Code, which reads as follows: ‘No one shall be liable for events which could not be foreseen or which, even if foreseen, were inevitable, with the exception of the cases in which the law expressly provides otherwise and those in which the obligation itself imposes such liability.’ “ 2.

Act of Devesa entirely unforeseen by railroad company The act of guard Devesa in shooting passenger Gillaco (because of a personal grudge nurtured against the latter since the Japanese occupation) was entirely unforseeable by the Manila Railroad Co. The latter had no means to ascertain or anticipate that the two would meet, nor could it reasonably foresee every personal rancor that might exist between each one of its many employees and any one of the thousands of eventual passengers riding in its trains. The shooting in question was therefore “caso fortuito” within the definition of article 1105 of the old Civil Code, being both unforeseeable and inevitable under the given circumstances; and pursuant to established doctrine, the resulting breach of Manila Railroad’s contract of safe carriage with the late Tomas Gillaco was excused thereby. 3.

Degree of care and diligence of a common carrier A common carrier is held to a very high degree of care and diligence in the protection of its passengers; but, considering the vast and complex activities of modern rail transportation, to require the railroadcompany that it should guard against all possible misunderstanding between each and every one of its employees and every passenger that might chance to ride in its conveyances at any time, strikes as demanding diligence beyond what human care and foresight can provide. 4.

Liability of a carrier as an insurer not recognized in Philippine Jurisdiction; Civil Code of 1889 The basis of a carrier’s liability was under the old Civil Code of 1889 (which was in force in 1946, when Gillaco was shot), and that it can be inferred from the previous jurisprudence of the Court, the Civil Code of 1889 did not impose absolute liability (Lasam vs. Smith, supra). Although American authorities hold Transportation Law, 2004 ( 226 )

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carriers to be insurers of the safety of their passengers against willful assault and intentional ill-treatment on the part of their servants, it being immaterial that the act should be one of private retribution on the part of the servant, impelled by personal malice toward the passenger, the liability of a carrier as an insurer was not recognized in this jurisdiction. 5. Railroad company guard had no duties to discharge in connection with the transportation of the deceased; No breach of contract of transportation by employee of carrier When the crime took place, the guard Devesa had no duties to discharge in connection with the transportation of the deceased from Calamba to Manila. The stipulation of facts is clear that when Devesa shot and killed Gillaco, Devesa was assigned to guard the Manila-San Fernando (La Union) trains, and he was at Paco Station awaiting transportation to Tutuban, the starting point of the train that he was engaged to guard. In fact, his tour of duty was to start at 9:00 a.m., two hours after the commission of the crime. Devesa was therefore under no obligation to safeguard the passengers of the Calamba-Manila train, where the deceased was riding; and the killing of Gillaco was not done in line of duty. The position of Devesa at the time was that of another would be passenger, a stranger also awaiting transportation, and not that of an employee assigned to discharge any of the duties that the Railroad had assumed by its contract with the deceased. As a result, Devesa’s assault cannot be deemed in law a breach of Gillaco’s contract of transportation by a servant or employee of the carrier. 6.

Rationale why carrier is made responsible by misconduct of employees The only good reason for making the carrier responsible for the misconduct of the servant perpetrated in his own interest, and not in that of his employer, or otherwise within the scope of his employment, is that the servant is clothed with the delegated authority, and charged with the duty by the carrier, to execute his undertaking with the passenger. And it cannot be said that there is any such delegation to the employees at a station with reference to passengers embarking at another or traveling on the train. Of course, this speaks only of the principle which holds a carrier responsible for wrongs done to passengers by servants acting in their own interest, and not in that of the employer. That principle is not the ordinary rule, respondent superior, by which the employer is held responsible only for acts or omissions of the employee in the scope of his employment; but the only reason in our opinion for a broader liability arises from the fact that the servant, in mistreating the passenger wholly for some private purpose of his own, in the very act, violates the contractual obligation of the employer for the performance of which he has put the employee in his place. That reason does not exist where the employee who committed the assault was never in a position in which it became his duty to his employer to represent him in discharging any duty of the latter towards the passenger. The proposition that the carrier clothes every employee engaged in the transportation business with the comprehensive duty of protecting every passenger with whom he may in any way come in contact, and thereby makes himself liable for every assault committed by each servant, without regard to the inquiry whether or not the passenger has come within the sphere of duty of that servant as indicated by the employment, is regarded as not only not sustained by the authorities, but as being unsound and oppressive both to the employer and the employee. [90] Maranan vs. Perez (GR L-2272, 26 June 1967) En Banc, Bengzon JP (J): 7 concur Facts: Rogelio Corachea, on 18 October 1960, was a passenger in a taxicab owned and operated by Pascual Perez when he was stabbed and killed by the driver, Simeon Valenzuela. Valenzuela was prosecuted for homicide in the CFI of Batangas. Found guilty, he was sentenced to suffer imprisonment and to indemnify the heirs of the deceased in the sum of P6,000. Appeal from said conviction was taken to the Court of Appeals.

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On 6 December 1961, while appeal was pending in the Court of Appeals, Antonia Maranan, Rogelio’s mother, filed an action in the CFI of Batangas to recover damages from Perez and Valenzuela for the death of her son. Perez, et. al. asserted that the deceased was killed in self-defense, since he first assaulted the driver by stabbing him from behind. Perez claimed that the death was a caso fortuito for which the carrier was not liable. The court, after trial, found for Maranan and awarded her P3,000 as damages against Perez. The claim against Valenzuela was dismissed. From this ruling, both Maranan and Perez appealed to the Supreme Court, the former asking for more damages and the latter insisting on non-liability. Subsequently, the Court of Appeals affirmed the judgment of conviction earlier mentioned, during the pendency of the herein appeal, and on 19 May 1964, final judgment was entered therein. The Supreme Court affirmed the judgment appealed from with the modification of increasing the award of actual damages in Maranan’s favor to P6,000, plus P3,000 moral damages, with legal interest on both from the filing of the complaint on 6 December 1961 until the whole amount is paid; no costs. 1.

Gilaco case not controlling; Killing made outside scope and course of duty of guilty employee In Gillaco vs. Manila Railroad Co., 97 Phil. 884, it was held that the carrier is under no absolute liability for assaults of its employees upon the passengers. The attendant facts and controlling law of that case and the present one are very different however. In the Gillaco case, the passenger was killed outside the scope and the course of duty of the guilty employee. Herein, the killing was perpetrated by the driver of the very cab transporting the passenger, in whose hands the carrier had entrusted the duty of executing the contract of carriage. In other words, unlike the Gillaco case, the killing of the passenger here took place in the course of duty of the guilty employee and when the employee was acting within the scope of his duties. 2.

Gilaco case not controlling; Case decided under provisions of the Civil Code of 1889 Moreover, the Gillaco case was decided under the provisions of the Civil Code of 1889 which, unlike the present Civil Code, did not impose upon common carriers absolute liability for the safety of passengers against wilful assaults or negligent acts committed by their employees. The death of the passenger in the Gillaco case was truly a fortuitous event which exempted the carrier from liability. It is true that Art. 1105 of the old Civil Code on fortuitous events has been substantially reproduced in Article 1174 of the Civil Code of the Philippines but both articles clearly remove from their exempting effect the case where the law expressly provides for liability in spite of the occurrence of force majeure. And herein significantly lies the statutory difference between the old and present Civil Codes, in the backdrop of the factual situation of the present case, which further accounts for a different result in the Gillaco case. 3. New Civil Code expressly makes common carrier liable for intentional assaults committed by its employees upon its passengers Unlike the old Civil Code, the new Civil Code of the Philippines expressly makes the common carrier liable for intentional assaults committed by its employees upon its passengers, by the wording of Article 1759 which categorically states that “Common carriers are liable for the death of or injuries to passengers although the negligence or wilful acts of the former’s employees, although such employees may have acted beyond the scope of their authority or in violation of the orders of the common carriers.” 4.

Source of provisions on Common Carriers; Basis of carrier’s liability for assaults The Civil Code provisions on the subject of Common Carriers are new and were taken from AngloAmerican Law. There, the basis of the carrier’s liability for assaults on passengers committed by its drivers rests either on (1) the doctrine of respondent superior or (2) the principle that it is the carrier’s implied duty to transport the passenger safely. 5.

Doctrine of respondent superior Transportation Law, 2004 ( 228 )

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Under the Doctrine of Respondent Superior, which is the minority view, the carrier is liable only when the act of the employee is within the scope of his authority and duty. It is not sufficient that the act be within the course of employment only. 6.

Principle of Carrier’s implied duty to transport the passenger safely Under the principle that it is the carrier’s implied duty to transport the passenger safely, upheld by the majority and also by the later cases, it is enough that the assault happens within the course of the employee’s duty. It is no defense for the carrier that the act was done in excess of authority or in disobedience of the carrier’s orders. The carrier’s liability here is absolute in the sense that it practically secures the passengers from assaults committed by its own employees. 7. Article 1759 NCC follows the rule based on the view that it is carrier’s implied duty to transport the passenger safely; Reasons (see Texas Midland R.R. vs. Monroe, 110 Tex. 97, 216 S.W. 388, 389-390 and Haver vs. Central Railroad Co., 43 LRA 84, 85) As can be gleaned from Article 1759, the Civil Code of the Philippines evidently follows the rule based on the view that it is carrier’s implied duty to transport the passenger safely. At least three very cogent reasons underlie this rule: (1) the special undertaking of the carrier requires that it furnish its passenger that full measure of protection afforded by the exercise of the high degree of care prescribed by the law, inter alia from violence and insults at the hands of strangers and other passengers, but above all, from the acts of the carrier’s own servants charged with the passenger’s safety; (2) said liability of the carrier for the servant’s violation of duty to passengers, is the result of the former’s confiding in the servant’s hands the performance of his contract to safely transport the passenger, delegating therewith the duty of protecting the passenger with the utmost care prescribed by law; and (3) as between the carrier and the passenger, the former must bear the risk of wrongful acts or negligence of the carrier’s employees against passengers, since it, and not the passengers, has power to select and remove them. 8.

Carrier’s strict obligation to select its drivers It is the carrier’s strict obligation to select its drivers and similar employees with due regard not only to their technical competence and physical ability, but also, no less important, to their total personality, including their patterns of behavior, moral fibers, and social attitude. 9. Action predicated on breach of contract of carriage where the cab driver was not a party thereto The dismissal of the claim against the driver was correct. Maranan’s action was predicated on breach of contract of carriage and the cab driver was not a party thereto. His civil liability is covered in the criminal case wherein he was convicted by final judgment. 10.

Award of compensatory damages In connection with the award of damages, the lower court granted only P3,000, which is the minimum compensatory damages amount recoverable under Article 1764 in connection with Article 2206 of the Civil Code when a breach of contract results in the passenger’s death. As has been the policy followed by the Court, this minimal award should be increased to P6,000. 11.

No award of actual damages As to other alleged actual damages, the lower court’s finding that Maranan’s evidence thereon was not convincing and should not be disturbed. 12.

Award of moral damages Articles 2206 and 1764 award moral damages in addition to compensatory damages, to the parents of the passenger killed to compensate for the mental anguish they suffered. A claim therefor having been properly made, it becomes the court’s duty to award moral damages. Maranan demands P5,000 as moral Transportation Law, 2004 ( 229 )

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damages; however, in the circumstances, the Court considers P3,000 moral damages, in addition to the P6,000 compensatory damages as sufficient. [91] Lasam vs. Smith (GR 19495, 2 February 1924) First Division, Ostrand (J): 5 concur Facts: On 27 February 1918, Frank Smith Jr. was of San Fernando, La Union, and engaged in the business of carrying passengers for hire from one point to another in the Province of La Union and the surrounding provinces. On the date mentioned, he undertook to convey Honrion Lasam and Joaquina Sanchez-Lasam from San Fernando to Currimao, Ilocos Norte, in a Ford automobile. On leaving San Fernando, the automobile was operated by a licensed chauffeur, but after having reached the town of San Juan, the chauffeur allowed his assistant, Remigio Bueno, to drive the car. Bueno held to driver’s license, but had some experience in driving, and with the exception of some slight engine trouble while passing through the town of Luna, the car functioned well until after the crossing of the Abra River in Tagudin, when defects developed in the steering gear so as to make accurate steering impossible, and after zigzagging for a distance of about half a kilometer, the car left the road and went down a steep embankment. In going over the bank of the road, the automobile was overturned and the spouses pinned down under it. Mr. Lasam escaped with a few contusions and a “dislocated” rib, but his wife, Joaquina Sanchez, received serious injuries, among which was a compound fracture of one of the bones in her left wrist. She also appears to have suffered a nervous breakdown from which she had not fully recovered at the time of the trial. The Spouses brought the action, one and a half year after the occurrence, to recover damages in the sum of P20,000 for physical injuries sustained by them in an automobile accident. The trial court rendered a judgment in their favor for the sum of P1,254.10, with legal interest from the date of the judgment. Both the spouses and Smith appealed, the former maintaining that the damages awarded are insufficient while the latter denies all liability for any damages whatever. The Supreme Court affirmed the judgment appealed from, without costs. 1.

Articles 1101 to 1107 NCC, not Article 1903, applicable The cause of action rests on Smith’s breach of the contract of carriage and that, consequently, articles 1101-1107 of the Civil Code, and not article 1903, are applicable. Herein, the source of Smith’s legal liability is the contract of carriage; the by entering into that contract he bound himself to carry the spouses safely and securely to their destination; and that having failed to do so he is liable in damages unless he shows that the failure to fulfill his obligation was due to causes mentioned in article 1105 of the Civil Code 2.

Cases distinguishing extra-contractual and contractual liabilities Upon the facts stated, the defendant’s liability, if any, is contractual, is well settled by previous decisions of the court, beginning with the case of Rakes vs. Atlantic, Gulf & Pacific Co. (7 Phil., 359), and the distinction between extra-contractual liability and contractual liability has been so ably and exhaustively discussed in various other cases, that nothing further need be said upon that subject. (See Cangco vs. Manila Railroad Co. 38 Phil., 768; Manila Railroad Co. Compania Trasatlantica and Atlantic, Gulf & Pacific Co., 38 Phil., 875; De Guia vs. Manila Electric Railroad & Light ) 3.

Article 1105 NCC Article 1105 reads as “no one shall be liable for events which could not be foreseen or which, even if foreseen, were inevitable, with the exception of the cases in which the law expressly provides otherwise and those in which the obligation itself imposes such liability.”

Transportation Law, 2004 ( 230 )

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4. Caso fortuito, “events which cannot be foreseen and which having been foreseen, are inevitable”; Spanish construction The Spanish authorities regard the language employed as an effort to define the term caso fortuito and hold that the two expressions are synonymous. (Manresa, Comentarios al Co Civil Español, vol. 8, pp. 88 et seq.; Scaevola, Codigo Civil, vol. 19, pp. 526 et seq.) 5.

Article 1105’s antecedent: Law II, Title 33, Partida 7 The antecedent to article 1105 is found in Law 11, Title 33, Partida 7, which defines caso fortuito as “ocasion que acaese por aventura deque non se puede ante ver. E son estos, derrivamientos de casas e fuego que se enciende so ora, e quebrantamiento de navio, fuerca de ladrones. . . . ( 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. . . .)” 6.

Caso fortuito defined; Escriche Escriche defines caso fortuito as “an unexpected event such as floods, torrents, shipwrecks, conflagrations, lightning, compulsion, insurrections, destruction of buildings by unforeseen accidents and other occurrences of a similar nature.” 7.

Caso fortuito defined; Enciclopedia Juridica Espanola In discussing and analyzing the term caso fortuito the Enciclopedia Juridica Española 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 (debtor) must be free from any participation in the aggravation of the injury resulting to the creditor.” (5 Enciclopedia Juridica Española, 309.) 8.

Extraordinary circumstance independent of obligor’s will an essential element of caso fortuito Authorities agree that some extraordinary circumstance independent of the will of the obligor, or of his employees, is an essential element of a caso fortuito. Herein, it is at once apparent that this elements is lacking. It is not suggested that the accident in question was due to an act of God or to adverse road conditions which could not have been foreseen. As far as the record shows, the accident was caused either by defects in the automobile or else through the negligence of its driver. That is not a caso fortuito. 9. Carrier of passenger not an absolute insurer against risks of travel; However, Alba vs. Sociedad Anonima de Tranvias does not apply Neither under the American nor Spanish law is a carrier of passengers an absolute insurer against the risks of travel from which the passenger may protect himself by exercising ordinary care and diligence. The case of Alba vs. Sociedad Anonima de Tranvias, Jurisprudencia Civil, vol. 102, p. 928 affords a good illustration of the application of this principle. In that case Alba, a passenger on a street car, was standing on the platform of the car while it was in motion. The car rounded a curve causing Alba to lose his balance and fall off the platform, sustaining sever injuries. In an action brought by him to recover damages, the supreme court of Spain held that inasmuch as the car at the time of the accident was travelling at a moderate rate of speed and there was no infraction of the regulations, and the plaintiff was exposed to no greater danger than that inherent in that particular mode of travel, the plaintiff could not recover, especially so since he should have been on his guard against a contingency as natural as that of losing his balance to a greater or less extent when the car rounded the curve. Herein, however, the passengers had no means of avoiding the danger or escaping the injury. 10.

Discretion of the court to moderate liability according to circumstances Transportation Law, 2004 ( 231 )

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Although the expenses incurred by the spouses as a result of the accident greatly exceeded the amount of the damages awarded, the courts have “ a discretionary power to moderate the liability according to the circumstances” especially in determining the extent of the liability for losses or damages resulting from negligence in the fulfillment of a contractual obligation. The Court does not think that the evidence is such as to justify in interfering with the discretion of the court below in this respect. Herein, by far the greater part of the damages claimed by the spouses resulted from the fracture of a bone in the left wrist of Joaquina Sanchez and from her objections to having a decaying splinter of the bone refusal to submit to such an operation, a series of infections ensued and which required constant and expensive medical treatment for several years. [92], also [186] Sweet Lines vs. CA (GR L-46340, 28 April 1983) First Division, Melencio-Herrera (J): 5 concur Facts: Micaela B. Quintos, Fr. Jose Bacatan SJ, Marciano Cabras and Andrea Veloso purchased first-class tickets from Sweet Lines Inc. at the latter’s office in Cebu City. They were to board Sweet Lines’ vessel, M/V Sweet Grace, bound for Catbalogan, Western Samar. Instead of departing at the scheduled hour of about midnight on 8 July 1972, the vessel set sail at 3:00 A.M. of 9 July 1972 only to be towed back to Cebu due to engine trouble, arriving there at about 4:00 P.M. on the same day. Repairs having been accomplished, the vessel lifted anchor again on 10 July 1972 at around 8:00 A.M. Instead of docking at Catbalogan, which was the first port of call, the vessel proceeded direct to Tacloban at around 9:00 P.M. of 10 July 1972. Quintos, et. al. had no recourse but to disembark and board a ferryboat to Catbalogan. Hence, a suit for damages for breach of contract of carriage was filed by Quintos, et. al., where the Trial Court (CFI Cebu, Branch VIII) ordered Sweet Lines to pay the former to pay (1) P75,000.00 as moral damages divided as follows: P30,000.00 for Mrs. Micaela B. Quintos, P25,000.00 for Jesuit Father Jose Bacatan; P10,000.00 for Mrs. Andrea Veloso and P10,000.00 for Mike Cabras; (2) P30,000.00 as exemplary or corrective damages; (3) Interest at the legal rate of 6% per annum on the moral and exemplary damages as set forth above from the date of this decision until said damages are fully paid; (4) P5,000.00 as attorney’s fees; and (5) The costs. The court also dismissed the counterclaim. The decision of the trial court was affirmed by the Appellate Court. Hence, the appeal. The Supreme Court modified the judgment appealed from to the effect that Sweet Lines was sentenced to indemnify Quintos, et. al. in the sum of P3,000.00 each, without interest, plus P1,250.00, each, by way of attorney’s fees and litigation expenses; with costs against Sweet Lines. 1.

Article 614, Code of Commerce Article 614 of the Code of Commerce provides that “a captain who, having agreed to make a voyage, fails to fulfill his undertaking, without being prevented by fortuitous event or force majeure, shall indemnify all the losses which his failure may cause, without prejudice to criminal penalties which may be proper.” 2.

Article 698, Code of Commerce Article 698 of the Code of Commerce provides that “in case of interruption of a voyage already begun, the passengers shall only be obliged to pay the fare in proportion to the distance covered, without right to recover damages if the interruption is due to fortuitous event or force majeure, but with a right to indemnity, if the interruption should have been caused by the captain exclusively. If the interruption should be caused by the disability of the vessel, and the passenger should agree to wait for her repairs, he may not be required to pay any increased fare of passage, but his living expenses during the delay shall be for his own account.”

Transportation Law, 2004 ( 232 )

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3.

Fortuitous event not present The crucial factor in Articles 614 and 698 is the existence of a fortuitous event or force majeure. Without it, the right to damages and indemnity exists against a captain who fails to fulfill his undertaking or where the interruption has been caused by the captain exclusively. Herein, there was no fortuitous event or force majeure which prevented the vessel from fulfilling its undertaking of taking private respondents to Catbalogan. In the first place, mechanical defects in the carrier are not considered a caso fortuito that exempts the carrier from responsibility. 4. Arguendo that engine failure is fortuitous event, there was no fortuitous event to bypass a port of call In the second place, even granting arguendo that the engine failure was a fortuitous event, it accounted only for the delay in departure. When the vessel finally left the port of Cebu on 10 July 1972, there was no longer any force majeure that justified by-passing a port of call. The vessel was completely repaired the following day after it was towed back to Cebu. In fact, after docking at Tacloban City, it left the next day for Manila to complete its voyage. 5.

Reason why Catbalogan was bypassed The reason for by-passing the port of Catbalogan was to enable the vessel to catch up with its schedule for the next week. There were 50 passengers for Tacloban compared to 20 passengers for Catbalogan, so that the Catbalogan phase could be scrapped without too much loss for the company. 6.

Conditions in the carrier’s ticket cannot prevail over Articles 614 and 698 The carrier cannot rely on the conditions in small bold print at the back of the ticket reading: “The passenger’s acceptance of this ticket shall be considered as an acceptance of the following conditions: (3) In case the vessel cannot continue or complete the trip for any cause whatsoever, the carrier reserves the right to bring the passenger to his/her destination at the expense of the carrier or to cancel the ticket and refund the passenger the value of his/her ticket; xxx (11) The sailing schedule of the vessel for which this ticket was issued is subject to change without previous notice.” Herein, the carrier did not comply with the same. It did not cancel the ticket nor did it refund the value of the tickets to its affected passengers. Besides, it was not the vessel’s sailing schedule that was involved. The passengers’ complaint is directed not at the delayed departure the next day but at the by-passing of Catbalogan, their destination. Furthermore, the conditions relied upon by the carrrier cannot prevail over Articles 614 and 698 of the Code of Commerce heretofore quoted. 7.

Owner of vessel and shipagent civilly liable for acts of the captain The voyage to Catbalogan was “interrupted” by the captain upon instruction of management. The “interruption” was not due to fortuitous event or for majeure nor to disability of the vessel. Having been caused by the captain upon instruction of management, the passengers’ right to indemnity is evident. The owner of a vessel and the ship agent shall be civilly liable for the acts of the captain. 8.

Bad faith defined Bad faith means a breach of a known duty through some motive or interest or illwill. Self-enrichment or fraternal interest, and not personal illwill, may have been the motive, but it is malice nevertheless. 9.

Bad faith present; Findings of the lower courts as to facts conclusive upon the Supreme Court Both the Trial Court and the Appellate Court found that there was bad faith on the part of the carrier in that: (1) Defendants-appellants did not give notice to plaintiffs-appellees as to the change of schedule of the vessel; (2) Knowing fully well that it would take no less than fifteen hours to effect the repairs of the damaged engine, defendants-appellants instead made announcement of assurance that the vessel would leave within a short period of time, and when plaintiffs-appellees wanted to leave the port and gave up the trip, defendantsappellants’ employees would come and say, ‘we are leaving, already.’ (3) Defendants-appellants did not offer to refund plaintiffs-appellees’ tickets nor provide them with transportation from Tacloban City to Catbalogan. Transportation Law, 2004 ( 233 )

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That finding of bad faith is binding on us, since it is not the function of the Court to analyze and review evidence on this point all over again. 10.

Moral damages due; Award of the lower court excessive Under Article 2220 of the Civil Code, moral damages are justly due in breaches of contract where the defendant acted fraudulently or in bad faith. Herein, however, under the circumstances, the award of moral damages is excessive and accordingly should be reduced to P3,000.00, respectively, for each of the claimants. 11.

Award of attorney’s fees justified The total award of attorney’s fees of P5,000.00 is in order considering that the case has reached the Supreme Court. 12.

Award of exemplary damages at court’s discretion Insofar as exemplary damages are concerned, although there was bad faith, the Court was not inclined to grant them in addition to moral damages. Exemplary damages cannot be recovered as a matter of right; the Court decides whether or not they should be adjudicated. The objective to meet its schedule might have been called for, but the carrier should have taken the necessary steps for the protection of its passengers under its contract of carriage. 13.

Article 2215 (2) NCC inapplicable Article 2215(2) of the Civil Code invoked by the carrier is in-applicable herein. The harm done to private respondents outweighs any benefits they may have derived from being transported to Tacloban instead of being taken to Catbalogan, their destination and the vessel’s first port of call, pursuant to its normal schedule. [94] Magboo vs. Bernardo (GR L-16790, 30 April 1963) En Banc, Makalintal (J): 8 concur, 1 took no part Facts: Urbano and Emilia Magboo are the parents of Cesar Magboo, a child of 8 years old, who lived with them and was under their custody until his death on 24 October 1956 when he was killed in a motor vehicle accident, the fatal vehicle being a passenger jeepney with Plate AC-1963 (56) owned by Delfin Bernardo. At the time of the accident, said passenger jeepney was driven by Conrado Roque. The contract between Roque and Bernardo was that Roque was to pay to Bernardo the sum of P8.00, which he paid to Bernardo, for privilege of driving the jeepney on 24 October 1956, it being their agreement that whatever earnings Roque could make out of the use of the jeepney in transporting passengers from one point to another in the City of Manila would belong entirely to Roque. As a consequence of the accident and as a result of the death of Cesar Magboo in said accident, Roque was prosecuted for homicide thru reckless imprudence before the CDI of Manila (Criminal Case 37736), and that upon arraignment Roque pleaded guilty to the information and was sentenced to 6 months of arresto mayor, with the accessory penalties of the law; to indemnify the heirs of the deceased in the sum of P3,000.00, with subsidiary imprisonment in case of insolvency, and to pay the costs. Pursuant to said judgment Roque served his sentence but he was not able to pay the indemnity because he was insolvent. An action was filed by the spouses Magboo against Bernardo is for enforcement of his subsidiary liability as employer in accordance with Article 103, Revised Penal Code. The trial court (CFI of Manila) ordered Bernardo to pay the spouses P3,000.00 and costs. Bernardo appealed to the Court of Appeals, which certified the case to the Supreme Court on the ground that only questions of law are involved. The Supreme Court affirmed the judgment appealed from, with costs against Bernardo. Transportation Law, 2004 ( 234 )

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1. Boundary system; Employer-Employee relationship exists; NLU vs. Dinglasan as cited in Doce vs. WCC In National Labor Union vs. Dinglasan, 52 O.G. No. 4, 1933, it was held that the features which characterize the “boundary system” — namely, the fact that the driver does not receive a fixed wage but gets only the excess of the amount of fares collected by him over the amount he pays to the jeep-owner, and that the gasoline consumed by the jeep is for the account of the driver — are not sufficient to withdraw the relationship between them from that of the employer and employee. The ruling was subsequently cited and applied in Doce vs. Workmen’s Compensation Commission, L9417, 22 December 1958, which involved the liability of a bus owner for injury compensation to a conductor working under the “boundary system.” 2. Principle applied in negligence cases concerning right of third parties to recover damages for injuries sustained The same principle applies with greater reason in negligence cases concerning the right of third parties to recover damages for injuries sustained. In Montoya vs. Ignacio, L-5868, December 29, 1953, the owner and operator of a passenger jeepney leased it to another, but without the approval of the Public Service Commission. In a subsequent collision a passenger died. The Court ruled that since the lease was made without such approval, which was required by law, the owner continued to be the operator of the vehicle in legal contemplation and as such was responsible for the consequences incident to its operation. The same responsibility was held to attach in a case where the injured party was not a passenger but a third person, who sued on the theory of culpa aquiliana (Timbol vs. Osias, L-7547, April 30, 1955). There is no reason why a different rule should be applied in a subsidiary liability case under Article 103 of the Revised Penal Code. As in the existence of an employer-employee relationship between the owner of the vehicle and the driver. Indeed to exempt from liability the owner of a public vehicle who operates it under the “boundary system” on the ground that he is a mere lessor would be not only to abet flagrant violations of the Public Service Law but also to place the riding public at the mercy of reckless and irresponsible drivers — reckless because the measure of their earnings depends largely upon the number of trips they make and, hence, the speed at which they drive; and irresponsible because most if not all of them are in no position to pay the damages they might cause. (See Erezo vs. Jepte, L-9605, September 30, 1957). 3. Bernardo did not aid Roque in criminal case, cannot escape subsidiary liability as provided by Article 103 RPC With respect to Bernardo’s contention that he was taken unaware by the spontaneous plea of guilt entered by Roque, and that he did not have a chance to prove the innocence of Roque, the Court holds that at this stage, it is already too late to try the criminal case all over again. His allegation that he relied on his belief that Roque would defend himself and they had sufficient proof to show that Roque was not guilty of the crime charged cannot be entertained. He should have taken it to himself to aid in the defense of Roque. Having failed to take this step and the accused having been declared guilty by final judgment of the crime of homicide thru reckless imprudence, there appears no more way for him to escape his subsidiary liability as provided for in Article 103 of the Revised Penal Code. [95] Isaac vs. AL Ammen Transportation (GR L-9671, 23 August 1957) En Banc, Bengzon (J): 9 concur Facts: A. L. Ammen Transportation Co., Inc. is a corporation engaged in the business of transporting passengers by land for compensation in the Bicol provinces and one of the lines it operates is the one connecting Legaspi City, Albay with Naga City, Camarines Sur. One of the buses which Ammen Transportation was operating is Bus 31. On 31 May 1951, Cesar L. Isaac boarded said bus as a passenger paying the required fare from Ligao, Albay bound for Pili, Camarines Sur, but before reaching his destination, Transportation Law, 2004 ( 235 )

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the bus collided with a motor vehicle of the pick-up type coming from the opposite direction, as a result of which Isaac’s left arm was completely severed and the severed portion fell inside the bus. Isaac was rushed to a hospital in Iriga, Camarines Sur where he was given blood transfusion to save his life. After 4 days, he was transferred to another hospital in Tabaco, Albay, where he underwent treatment for 3 months. He was moved later to the Orthopedic Hospital where he was operated on and stayed there for another 2 months. For these services, he incurred expenses amounting to P623.40, excluding medical fees which were paid by Ammen Transporation. As an aftermath, Isaac brought an action against Ammen Transportation for damages alleging that the collision which resulted in the loss of his left arm was mainly due to the gross incompetence and recklessness of the driver of the bus operated by Ammen Transportation and that Ammen Transporation incurred in culpa contractual arising from its non-compliance with its obligation to transport Isaac safely to his destination. Ammen Transportation set up as special defense that the injury suffered by Isaac was due entirely to the fault or negligence of the driver of the pick-up car which collided with the bus driven by its driver and to the contributory negligence of Isaac himself. The court after trial found that the collision occurred due to the negligence of the driver of the pick-up car and not to that of the driver of the bus it appearing that the latter did everything he could to avoid the same but that notwithstanding his efforts, he was not able to avoid it. As a consequence, the court dismissed the complaint, with costs against Isaac. Isaac appealed. The Supreme Court affirmed the decision appealed from, with costs against Isaac. 1.

Article 1733 NCC Article 1733 of the Civil Code provides that “Common carriers, from the nature of their business and for reasons of public policy, are bound to observe extraordinary diligence in the vigilance over the goods and for the safety of the passengers transported by them according to all the circumstances of each case. Such extraordinary diligence in the vigilance over the goods is further expressed in articles 1734, 1735, and 1745, Nos. 5, 6, and 7, while the extraordinary diligence for the safety of the passengers is further set forth in articles 1755 and 1756.” 2.

Article 1755 NCC Article 1755 of the Civil Code provides that “A common carrier is bound to carry the passengers safely as far as human care and foresight can provide, using the utmost diligence of very cautious persons, with a due regard for all the circumstances.” 3.

Article 1756 NCC Article 1756 of the Civil Code provides that “In case of death of or injuries to passengers, common carriers are presumed to have been at fault or to have acted negligently, unless they prove that they observed extraordinary diligence as prescribed in articles 1733 and 1755.” 4.

Rationale for extraordinary diligence requirement for a common carrier The Code Commission, in justifying this extraordinary diligence required of a common carrier, said “A common carrier is bound to carry the passengers safely as far as human care and foresight can provide, using the utmost diligence of very cautious persons, with due regard for all circumstances. This extraordinary diligence required of common carriers is calculated to protect the passengers from the tragic mishaps that frequently occur in connection with rapid modern transportation. This high standard of care is imperatively demanded by the preciousness of human life and by the consideration that every person must in every way be safeguarded against all injury. “ 5.

Principles governing liability of a common carrier From the legal provisions, the following restatement of the principles governing the liability of a common carrier can be made: (1) the liability of a carrier is contractual and arises upon breach of its Transportation Law, 2004 ( 236 )

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obligation. There is breach if it fails to exert extraordinary diligence according to all the circumstances of each case; (2) a carrier is obliged to carry its passenger with the utmost diligence of a very cautious person, having due regard for all the circumstances; (3) a carrier is presumed to be at fault or to have acted negligently in case of death of, or injury to, passengers, it being its duty to prove that it exercised extraordinary diligence; and (4) the carrier is not an insurer against all risks of travel. 6.

Facts; Bus running at moderate speed, swerved to avoid reckless pick-up car Herein, Bus 31, immediately prior to the collision, was running at a moderate speed because it had just stopped at the school zone of Matacong, Polangui, Albay. The pick-up car was at full speed and was running outside of its proper lane. The driver of the bus, upon seeing the manner in which the pick-up was then running, swerved the bus to the very extreme right of the road until its front and rear wheels have gone over the pile of stones or gravel situated on the rampart of the road. Said driver could not move the bus farther right and run over a greater portion of the pile, the peak of which was about 3 feet high, without endangering the safety of his passengers. And notwithstanding all these efforts, the rear left side of the bus was hit by the pick-up car. 7. Coolness and accuracy of judgment required in ordinary circumstances cannot be expected in sudden emergency; Acts of a prudent man in situation done While the position taken by Isaac, i.e. that the driver of the bus should have stopped the bus to allow the other vehicle to pass rather than squeezing between the oncoming pick-up and the pile of gravel, appeals more to the sense of caution that one should observe in a given situation to avoid an accident or mishap, such however can not always be expected from one who is placed suddenly in a predicament where he is not given enough time to take the proper course of action as he should under ordinary circumstances. One who is placed in such a predicament cannot exercise such coolness or accuracy of judgment as is required of him under ordinary circumstances and he cannot therefore be expected to observe the same judgment, care and precaution as in the latter. For this reason, authorities abound where failure to observe the same degree of care that as ordinary prudent man would exercise under ordinary circumstances when confronted with a sudden emergency was held to be warranted and a justification to exempt the carrier from liability. Thus, it was held that “where a carrier’s employee is confronted with a sudden emergency, the fact that he is obliged to act quickly and without a chance for deliberation must be taken into account, and he is not held to the same degree of care that he would otherwise be required to exercise in the absence of such emergency but must exercise only such care as any ordinary prudent person would exercise under like circumstances and conditions, and the failure on his part to exercise the best judgment the case renders possible does not establish lack of care and skill on his part which renders the company, liable. “ Considering all the circumstances, the driver of the bus has done what a prudent man could have done to avoid the collision and this relieves the transport company from liability under the law. 8.

Isaac guilty of contributory negligence Herein, when Isaac boarded the bus in question, he seated himself on the left side thereof resting his left arm on the window sill but with his left elbow outside the window, this being his position in the bus when the collision took place. It is for this reason that the collision resulted in the severance of said left arm from the body of appellant thus doing him a great damage. Had he not placed his left arm on the window sill with a portion thereof protruding outside, perhaps the injury would have been avoided as is the case with the other passengers. It is to be noted that Isaac was the only victim of the collision. It is apparent that Isaac is guilty of contributory negligence. 9.

No recovery due to negligence by passenger Although contributory negligence cannot relieve the carrier of its liability but will only entitle it to a reduction of the amount of damage caused (Article 1762, new Civil Code), this is a circumstance which further militates against the position taken by Isaac in this case. It is the prevailing rule that it is negligence per se for a passenger on a railroad voluntarily or inadvertently to protrude his arm, hand, elbow, or any other Transportation Law, 2004 ( 237 )

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part of his body through the window of a moving car beyond the outer edge of the window or outer surface of the car, so as to come in contact with objects or obstacles near the track, and that no recovery can be had for an injury which but for such negligence would not have been sustained. [96] Sanez vs. Samala [97] Panay Autobus vs. Pastor (GR 47933, 29 July 1942) En Banc, Moran (J): 4 concur Facts: Early in the morning of 11 February 1938, Concepcion Gallopin (+), with her daughter-in-law, Carmen Areda, left Estancia, Iloilo, for the City of Iloilo on truck 408 of Panay Autobus Company, Inc., driven by one Felicisimo Tilos. Gallopin and Areda were seated at the extreme right of the second bench behind the driver’s seat. In the course of transit, Gallopin stretched her right arm beyond the railing of the bus, apparently pointing to her companion the rice fields yonder. This arm was caught and broken by another truck driven by one Francisco Yap coming closely from the opposite direction. Whether Gallopin stretched her right arm at the precise moment that the two buses were about to cross each other or sometime prior thereto, and how close the two busses were to each other, the record does not disclose. Her wrist bled profusely and notwithstanding medical treatment at the Maternity Hospital at Sara and Mission Hospital at Jaro, Iloilo, where she was brought after the accident, she died the following day, undoubtedly as a result of hemorrhage and severe shock. Crisanta, Salome, and Jose, all surnamed Pastor, as heirs of the deceased, instituted in the court below an action against Panay Autobus as owner of truck 408, seeking to recover damages in the sum of P8,200 for the death of their mother. Panay Autobus having been absolved of the complaint, the heirs of Pastor appealed to the Court of Appeals where the judgment of the trial court was reversed and another entered in their favor awarding them damages in the sum of P2,000. Hence, the appeal by certiorari by Panay Autobus. The Supreme Court reversed the judgment, and absolved Panay Autobus, without costs. No negligence on part of Panay Autobus; Act of deceased the proximate cause of injury Driving at an appropriate speed, almost at the middle of a six-meter highway which, at the time of the accident, was without traffic, is not negligence. Independently of the act of the deceased in stretching her right arm beyond the railing of the bus, the manner the bus was driven could not have produced the injury. Petitioner’s driver at the time that the other bus was passing closely from the opposite direction, did not know that the deceased’s arm was extended beyond the railing of the bus. He has the right to assume that all his passengers are taking the usual precaution for their own safety. If, without such knowledge of the position of the deceased and on the assurance of such assumption, the chauffeur drives his bus at a reasonably safe distance from that coming from the opposite direction, and one of his passengers suffers an injury, the negligence cannot be attributed to him. In other words, the act performed by the deceased at the time the accident occurred must be regarded as the proximate cause of the injury. [98] Del Prado vs. Meralco (GR 29462, 7 March 1929) En Banc, Street (J): 5 concur

Transportation Law, 2004 ( 238 )

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Facts: The Manila Electric Company, is engaged in operating street cars in the City of Manila for the conveyance of passengers; and on the morning of 18 November 1925, one Teodorico Florenciano, as Meralco’s motorman, was in charge of car 74 running from east to west on R. Hidalgo Street, the scene of the accident being at a point near the intersection of said street and Mendoza Street. After the car had stopped at its appointed place for taking on and letting off passengers, just east of the intersection, it resumed its course at a moderate speed under the guidance of the motorman. The car had proceeded only a short distance, however, when Ignacio del Prado ran across the street to catch the car, his approach being made from the left. The car was of the kind having entrance and exit at either end, and the movement of del Prado was so timed that he arrived at the front entrance of the car at the moment when the car was passing. Del Prado, upon approaching the car, raised his hand as an indication to the motorman of his desire to board the car, in response to which the motorman eased up a little, without stopping. Upon this, del Prado seized, with his left hand, the front perpendicular handpost, at the same time placing his left foot upon the platform. However, before del Prado’s position had become secure, and even before his raised right foot had reached the platform, the motorman applied the power, with the result that the car gave a slight lurch forward. This sudden impulse to the car caused del Prado’s foot to slip, and his hand was jerked loose from the handpost. He therefore fell to the ground, and his right foot was caught and crushed by the moving car. The next day the member had to be amputated in the hospital. An action was instituted in the CFI of Manila by Ignacio del Prado to recover damages in the amount of P50,000 for personal injuries alleged to have been caused by the negligence of Meralco in the operation of one of its street cars in the City of Manila. Upon hearing the cause the trial court awarded to del Prado the sum of P10,000, as damages, with costs of suit. Meralco appealed. The Supreme Court affirmed the appealed judgment with the modification that the sum to be recovered reduced to P2,500; with costs against Meralco. 1. No obligation on the part of a street railway company to stop cars at points other than appointed for stoppage There is no obligation on the part of a street railway company to stop its cars to let on intending passengers at other points than those appointed for stoppage. It would be impossible to operate a system of street cars if a company engaged in this business were required to stop any and everywhere to take on people who are too indolent, or who imagine themselves to be in too great a hurry, to go to the proper places for boarding the cars. 2.

Duty of the motorman of the car Although the motorman of the car was not bound to stop to let the passenger on, it was his duty to do no act that would have the effect of increasing the passenger’s peril while he was attempting to board the car. The premature acceleration of the car was a breach of this duty. 3.

Nature of relation between a carrier of passengers for hire and its patrons; Duty of the carrier The relation between a carrier of passengers for hire and its patrons is of a contractual nature; and a failure on the part of the carrier to use due care in carrying its passengers safely is a breach of duty (culpa contractual) under articles 1101, 1103, and 1104 of the Civil Code. Furthermore, the duty that the carrier of passengers owes to its patrons extends to persons boarding the cars as well as to those alighting therefrom. 4.

Cangco vs. Manila Railroad; Culpa Contractual The case of Cangco vs. Manila Railroad Co. (38 Phil., 768), supplies an instance of the violation of the duty with respect to a passenger who was getting off of a train. In that case, the plaintiff stepped off of a moving train, while it was slowing down in a station, and at a time when it was too dark for him to see clearly where he was putting his feet. The employees of the company had carelessly left watermelons on the platform at the place where the plaintiff alighted, with the result that his feet slipped and he fell under the car, where Transportation Law, 2004 ( 239 )

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his right arm was badly injured. This court held that the railroad company was liable for breach of positive duty (culpa contractual), and the plaintiff was awarded damages in the amount of P2,500 for the loss of his arm. In the opinion in that case the distinction is clearly drawn between a liability for negligence arising from breach of contractual duty and that arising under articles 1902 and 1903 of the Civil Code (culpa aquiliana). 5. Relevance of distinction between Culpa Contractual and Culpa Aquiliana as to defenses available The distinction between the two sorts of negligence is important in this jurisdiction, for the reason that where liability arises from a mere tort (culpa aquiliana), not involving a breach of positive obligation, an employer, or master, may exculpate