G.R. No.
157917 August 29, 2012 At about the time the van was to traverse the railroad crossing, PNR Commuter No. 302
SPOUSES TEODORO1 and NANETTE PERENA, Petitioners,
vs.
SPOUSES TERESITA PHILIPPINE NICOLAS and L. ZARATE, NATIONAL
RAILWAYS, and the COURT OF APPEALS Respondents.
DECISION
BERSAMIN, J.:
The operator of a. school bus service is a common carrier in the eyes of the law. He is bound
to observe extraordinary diligence in the conduct of his business. He is presumed to be
negligent when death occurs to a passenger. His liability may include indemnity for loss of
earning capacity even if the deceased passenger may only be an unemployed high school
student at the time of the accident.
The Case
By petition for review on certiorari, Spouses Teodoro and Nanette Perefia (Perefias) appeal
the adverse decision promulgated on November 13, 2002, by which the Court of Appeals
(CA) affirmed with modification the decision rendered on December 3, 1999 by the Regional
Trial Court (RTC), Branch 260, in Parañaque City that had decreed them jointly and
severally liable with Philippine National Railways (PNR), their co-defendant, to Spouses
Nicolas and Teresita Zarate (Zarates) for the death of their 15-year old son, Aaron John L.
Zarate (Aaron), then a high school student of Don Bosco Technical Institute (Don Bosco).
Antecedents
The Pereñas were engaged in the business of transporting students from their respective
residences in Parañaque City to Don Bosco in Pasong Tamo, Makati City, and back. In their
business, the Pereñas used a KIA Ceres Van (van) with Plate No. PYA 896, which had the
capacity to transport 14 students at a time, two of whom would be seated in the front beside
the driver, and the others in the rear, with six students on either side. They employed
Clemente Alfaro (Alfaro) as driver of the van.
In June 1996, the Zarates contracted the Pereñas to transport Aaron to and from Don Bosco.
On August 22, 1996, as on previous school days, the van picked Aaron up around 6:00 a.m.
from the Zarates’ residence. Aaron took his place on the left side of the van near the rear
door. The van, with its air-conditioning unit turned on and the stereo playing loudly,
ultimately carried all the 14 student riders on their way to Don Bosco. Considering that the
students were due at Don Bosco by 7:15 a.m., and that they were already running late because
of the heavy vehicular traffic on the South Superhighway, Alfaro took the van to an alternate
route at about 6:45 a.m. by traversing the narrow path underneath the Magallanes
Interchange that was then commonly used by Makati-bound vehicles as a short cut into
Makati. At the time, the narrow path was marked by piles of construction materials and
parked passenger jeepneys, and the railroad crossing in the narrow path had no railroad
warning signs, or watchmen, or other responsible persons manning the crossing. In fact, the
bamboo barandilla was up, leaving the railroad crossing open to traversing motorists.
(train), operated by Jhonny Alano (Alano), was in the vicinity of the Magallanes Interchange
travelling northbound. As the train neared the railroad crossing, Alfaro drove the van
eastward across the railroad tracks, closely tailing a large passenger bus. His view of the
oncoming train was blocked because he overtook the passenger bus on its left side. The train
blew its horn to warn motorists of its approach. When the train was about 50 meters away
from the passenger bus and the van, Alano applied the ordinary brakes of the train. He
applied the emergency brakes only when he saw that a collision was imminent. The
passenger bus successfully crossed the railroad tracks, but the van driven by Alfaro did not.
The train hit the rear end of the van, and the impact threw nine of the 12 students in the rear,
including Aaron, out of the van. Aaron landed in the path of the train, which dragged his
body and severed his head, instantaneously killing him. Alano fled the scene on board the
train, and did not wait for the police investigator to arrive.
Devastated by the early and unexpected death of Aaron, the Zarates commenced this action
for damages against Alfaro, the Pereñas, PNR and Alano. The Pereñas and PNR filed their
respective answers, with cross-claims against each other, but Alfaro could not be served with
summons.
At the pre-trial, the parties stipulated on the facts and issues, viz:
A. FACTS:
(1)) That spouses Zarate were the legitimate parents of Aaron John L. Zarate;
(2)) Spouses Zarate engaged the services of spouses Pereña for the adequate and
safe transportation carriage of the former spouses' son from their residence in
Parañaque to his school at the Don Bosco Technical Institute in Makati City;
(3)) During the effectivity of the contract of carriage and in the implementation
thereof, Aaron, the minor son of spouses Zarate died in connection with a
vehicular/train collision which occurred while Aaron was riding the contracted
carrier Kia Ceres van of spouses Pereña, then driven and operated by the latter's
employee/authorized driver Clemente Alfaro, which van collided with the train of
PNR, at around 6:45 A.M. of August 22, 1996, within the vicinity of the Magallanes
Interchange in Makati City, Metro Manila, Philippines;
(4)) At the time of the vehicular/train collision, the subject site of the
vehicular/train collision was a railroad crossing used by motorists for crossing the
railroad tracks;
(5)) During the said time of the vehicular/train collision, there were no appropriate
and safety warning signs and railings at the site commonly used for railroad
crossing;
(6)) At the material time, countless number of Makati bound public utility and
private vehicles used on a daily basis the site of the collision as an alternative route
and short-cut to Makati;
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 (7)) The train driver or operator left the scene of the incident on board the
commuter train involved without waiting for the police investigator;
(8)) The site commonly used for railroad crossing by motorists was not in fact
intended by the railroad operator for railroad crossing at the time of the vehicular
collision;
(9)) PNR received the demand letter of the spouses Zarate;
(10)0) PNR refused to acknowledge any liability for the vehicular/train collision;
(11)) The eventual closure of the railroad crossing alleged by PNR was an internal
arrangement between the former and its project contractor; and
(12)) The site of the vehicular/train collision was within the vicinity or less than
100 meters from the Magallanes station of PNR.
B. ISSUES
(1) Whether or not defendant-driver of the van is, in the performance of his
functions, liable for negligence constituting the proximate cause of the vehicular
collision, which resulted in the death of plaintiff spouses' son;
(2) Whether or not the defendant spouses Pereña being the employer of defendant
Alfaro are liable for any negligence which may be attributed to defendant Alfaro;
(3) Whether or not defendant Philippine National Railways being the operator of
the railroad system is liable for negligence in failing to provide adequate safety
warning signs and railings in the area commonly used by motorists for railroad
crossings, constituting the proximate cause of the vehicular collision which
resulted in the death of the plaintiff spouses' son;
(4) Whether or not defendant spouses Pereña are liable for breach of the contract
of carriage with plaintiff-spouses in failing to provide adequate and safe
transportation for the latter's son;
(5) Whether or not defendants spouses are liable for actual, moral damages,
exemplary damages, and attorney's fees;
(6) Whether or not defendants spouses Teodorico and Nanette Pereña observed
the diligence of employers and school bus operators;
(7) Whether or not defendant-spouses are civilly liable for the accidental death of
Aaron John Zarate;
(8) Whether or not defendant PNR was grossly negligent in operating the
commuter train involved in the accident, in allowing or tolerating the motoring
public to cross, and its failure to install safety devices or equipment at the site of
the accident for the protection of the public;
(9) Whether or not defendant PNR should be made to reimburse defendant
spouses for any and whatever amount the latter may be held answerable or which
they may be ordered to pay in favor of plaintiffs by reason of the action;
(10) Whether or not defendant PNR should pay plaintiffs directly and fully on the
amounts claimed by the latter in their Complaint by reason of its gross negligence;
(11) Whether or not defendant PNR is liable to defendants spouses for actual,
moral and exemplary damages and attorney's fees.2
The Zarates’ claim against the Pereñas was upon breach of the contract of carriage for the
safe transport of Aaron; but that against PNR was based on quasi-delict under Article 2176,
Civil Code.
In their defense, the Pereñas adduced evidence to show that they had exercised the diligence
of a good father of the family in the selection and supervision of Alfaro, by making sure that
Alfaro had been issued a driver’s license and had not been involved in any vehicular accident
prior to the collision; that their own son had taken the van daily; and that Teodoro Pereña
had sometimes accompanied Alfaro in the van’s trips transporting the students to school.
For its part, PNR tended to show that the proximate cause of the collision had been the
reckless crossing of the van whose driver had not first stopped, looked and listened; and that
the narrow path traversed by the van had not been intended to be a railroad crossing for
motorists.
Ruling of the RTC
On December 3, 1999, the RTC rendered its decision,3 disposing:
WHEREFORE, premises considered, judgment is hereby rendered in favor of the plaintiff
and against the defendants ordering them to jointly and severally pay the plaintiffs as
follows:
(1) (for) the death of Aaron- Php50,000.00;
(2) Actual damages in the amount of Php100,000.00;
(3) For the loss of earning capacity- Php2,109,071.00;
(4) Moral damages in the amount of Php4,000,000.00;
(5) Exemplary damages in the amount of Php1,000,000.00;
(6) Attorney’s fees in the amount of Php200,000.00; and
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 (7) Cost of suit.
SO ORDERED.
On June 29, 2000, the RTC denied the Pereñas’ motion for reconsideration,4 reiterating that
the cooperative gross negligence of the Pereñas and PNR had caused the collision that led to
the death of Aaron; and that the damages awarded to the Zarates were not excessive, but
based on the established circumstances.
The CA’s Ruling
Both the Pereñas and PNR appealed (C.A.-G.R. CV No. 68916).
PNR assigned the following errors, to wit:5
The Court a quo erred in:
1. In finding the defendant-appellant Philippine National Railways jointly and
severally liable together with defendant-appellants spouses Teodorico and Nanette
Pereña and defendant-appellant Clemente Alfaro to pay plaintiffs-appellees for the
death of Aaron Zarate and damages.
2. In giving full faith and merit to the oral testimonies of plaintiffs-appellees
witnesses despite overwhelming documentary evidence on record, supporting the
case of defendants-appellants Philippine National Railways.
The Pereñas ascribed the following errors to the RTC, namely:
The trial court erred in finding defendants-appellants jointly and severally liable for actual,
moral and exemplary damages and attorney’s fees with the other defendants.
The trial court erred in dismissing the cross-claim of the appellants Pereñas against the
Philippine National Railways and in not holding the latter and its train driver primarily
responsible for the incident.
The trial court erred in awarding excessive damages and attorney’s fees.
The trial court erred in awarding damages in the form of deceased’s loss of earning capacity
in the absence of sufficient basis for such an award.
On November 13, 2002, the CA promulgated its decision, affirming the findings of the RTC,
but limited the moral damages to ₱ 2,500,000.00; and deleted the attorney’s fees because
the RTC did not state the factual and legal bases, to wit:6
WHEREFORE, premises considered, the assailed Decision of the Regional Trial Court,
Branch 260 of Parañaque City is AFFIRMED with the modification that the award of Actual
Damages is reduced to ₱ 59,502.76; Moral Damages is reduced to ₱ 2,500,000.00; and the
award for Attorney’s Fees is Deleted.
SO ORDERED.
The CA upheld the award for the loss of Aaron’s earning capacity, taking cognizance of the
ruling in Cariaga v. Laguna Tayabas Bus Company and Manila Railroad Company,7 wherein
the Court gave the heirs of Cariaga a sum representing the loss of the deceased’s earning
capacity despite Cariaga being only a medical student at the time of the fatal incident.
Applying the formula adopted in the American Expectancy Table of Mortality:–
2/3 x (80 - age at the time of death) = life expectancy
the CA determined the life expectancy of Aaron to be 39.3 years upon reckoning his life
expectancy from age of 21 (the age when he would have graduated from college and started
working for his own livelihood) instead of 15 years (his age when he died). Considering that
the nature of his work and his salary at the time of Aaron’s death were unknown, it used the
prevailing minimum wage of ₱ 280.00/day to compute Aaron’s gross annual salary to be ₱
110,716.65, inclusive of the thirteenth month pay. Multiplying this annual salary by Aaron’s
life expectancy of 39.3 years, his gross income would aggregate to ₱ 4,351,164.30, from which
his estimated expenses in the sum of ₱ 2,189,664.30 was deducted to finally arrive at P
2,161,500.00 as net income. Due to Aaron’s computed net income turning out to be higher
than the amount claimed by the Zarates, only ₱ 2,109,071.00, the amount expressly prayed
for by them, was granted.
On April 4, 2003, the CA denied the Pereñas’ motion for reconsideration.8
Issues
In this appeal, the Pereñas list the following as the errors committed by the CA, to wit:
I. The lower court erred when it upheld the trial court’s decision holding the petitioners
jointly and severally liable to pay damages with Philippine National Railways and dismissing
their cross-claim against the latter.
II. The lower court erred in affirming the trial court’s decision awarding damages for loss of
earning capacity of a minor who was only a high school student at the time of his death in
the absence of sufficient basis for such an award.
III. The lower court erred in not reducing further the amount of damages awarded, assuming
petitioners are liable at all.
Ruling
The petition has no merit.
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1.
Were the Pereñas and PNR jointly
and severally liable for damages?
The Zarates brought this action for recovery of damages against both the Pereñas and the
PNR, basing their claim against the Pereñas on breach of contract of carriage and against the
PNR on quasi-delict.
The RTC found the Pereñas and the PNR negligent. The CA affirmed the findings.
We concur with the CA.
To start with, the Pereñas’ defense was that they exercised the diligence of a good father of
the family in the selection and supervision of Alfaro, the van driver, by seeing to it that Alfaro
had a driver’s license and that he had not been involved in any vehicular accident prior to
the fatal collision with the train; that they even had their own son travel to and from school
on a daily basis; and that Teodoro Pereña himself sometimes accompanied Alfaro in
transporting the passengers to and from school. The RTC gave scant consideration to such
defense by regarding such defense as inappropriate in an action for breach of contract of
carriage.
We find no adequate cause to differ from the conclusions of the lower courts that the Pereñas
operated as a common carrier; and that their standard of care was extraordinary diligence,
not the ordinary diligence of a good father of a family.
Although in this jurisdiction the operator of a school bus service has been usually regarded
as a private carrier,9primarily because he only caters to some specific or privileged
individuals, and his operation is neither open to the indefinite public nor for public use, the
exact nature of the operation of a school bus service has not been finally settled. This is the
occasion to lay the matter to rest.
A carrier is a person or corporation who undertakes to transport or convey goods or persons
from one place to another, gratuitously or for hire. The carrier is classified either as a
private/special carrier or as a common/public carrier.10 A private carrier is one who, without
making the activity a vocation, or without holding himself or itself out to the public as ready
to act for all who may desire his or its services, undertakes, by special agreement in a
particular instance only, to transport goods or persons from one place to another either
gratuitously or for hire.11 The provisions on ordinary contracts of the Civil Code govern the
contract of private carriage.The diligence required of a private carrier is only ordinary, that
is, the diligence of a good father of the family. In contrast, a common carrier is a person,
corporation, firm or association engaged in the business of carrying or transporting
passengers or goods or both, by land, water, or air, for compensation, offering such services
to the public.12 Contracts of common carriage are governed by the provisions on common
carriers of the Civil Code, the Public Service Act,13 and other special laws relating to
transportation. A common carrier is required to observe extraordinary diligence, and is
presumed to be at fault or to have acted negligently in case of the loss of the effects of
passengers, or the death or injuries to passengers.14
In relation to common carriers, the Court defined public use in the following terms in United
States v. Tan Piaco,15viz:
"Public use" is the same as "use by the public". The essential feature of the public use is not
confined to privileged individuals, but is open to the indefinite public. It is this indefinite or
unrestricted quality that gives it its public character. In determining whether a use is public,
we must look not only to the character of the business to be done, but also to the proposed
mode of doing it. If the use is merely optional with the owners, or the public benefit is merely
incidental, it is not a public use, authorizing the exercise of the jurisdiction of the public
utility commission. There must be, in general, a right which the law compels the owner to
give to the general public. It is not enough that the general prosperity of the public is
promoted. Public use is not synonymous with public interest. The true criterion by which to
judge the character of the use is whether the public may enjoy it by right or only by
permission.
In De Guzman v. Court of Appeals,16 the Court noted that Article 1732 of the Civil Code
avoided any distinction between a person or an enterprise offering transportation on a
regular or an isolated basis; and has not distinguished a carrier offering his services to the
general public, that is, the general community or population, from one offering his services
only to a narrow segment of the general population.
Nonetheless, the concept of a common carrier embodied in Article 1732 of the Civil Code
coincides neatly with the notion of public service under the Public Service Act, which
supplements the law on common carriers found in the Civil Code. Public service, according
to Section 13, paragraph (b) of the Public Service Act, includes:
x x x every person that now or hereafter may own, operate, manage, or control in the
Philippines, for hire or compensation, with general or limited clientèle, whether permanent
or occasional, and done for the 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, 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. x x x.17
Given the breadth of the aforequoted characterization of a common carrier, the Court has
considered as common carriers pipeline operators,18 custom brokers and
warehousemen,19 and barge operators20 even if they had limited clientèle.
As all the foregoing indicate, the true test for a common carrier is not the quantity or extent
of the business actually transacted, or the number and character of the conveyances used in
the activity, but whether the undertaking is a part of the activity engaged in by the carrier
that he has held out to the general public as his business or occupation. If the undertaking is
a single transaction, not a part of the general business or occupation engaged in, as
advertised and held out to the general public, the individual or the entity rendering such
service is a private, not a common, carrier. The question must be determined by the
character of the business actually carried on by the carrier, not by any secret intention or
mental reservation it may entertain or assert when charged with the duties and obligations
that the law imposes.21
Applying these considerations to the case before us, there is no question that the Pereñas as
the operators of a school bus service were: (a) engaged in transporting passengers generally
4
as a business, not just as a casual occupation; (b) undertaking to carry passengers over
established roads by the method by which the business was conducted; and (c) transporting
students for a fee. Despite catering to a limited clientèle, the Pereñas operated as a common
carrier because they held themselves out as a ready transportation indiscriminately to the
students of a particular school living within or near where they operated the service and for
a fee.
The common carrier’s standard of care and vigilance as to the safety of the passengers is
defined by law. Given the nature of the business and for reasons of public policy, the common
carrier is 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."22 Article 1755 of the Civil Code specifies that the common carrier should "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." To successfully fend
off liability in an action upon the death or injury to a passenger, the common carrier must
prove his or its observance of that extraordinary diligence; otherwise, the legal presumption
that he or it was at fault or acted negligently would stand.23 No device, whether by stipulation,
posting of notices, statements on tickets, or otherwise, may dispense with or lessen the
responsibility of the common carrier as defined under Article 1755 of the Civil Code. 24
And, secondly, the Pereñas have not presented any compelling defense or reason by which
the Court might now reverse the CA’s findings on their liability. On the contrary, an
examination of the records shows that the evidence fully supported the findings of the CA.
As earlier stated, the Pereñas, acting as a common carrier, were already presumed to be
negligent at the time of the accident because death had occurred to their passenger.25 The
presumption of negligence, being a presumption of law, laid the burden of evidence on their
shoulders to establish that they had not been negligent.26 It was the law no less that required
them to prove their observance of extraordinary diligence in seeing to the safe and secure
carriage of the passengers to their destination. Until they did so in a credible manner, they
stood to be held legally responsible for the death of Aaron and thus to be held liable for all
the natural consequences of such death.
There is no question that the Pereñas did not overturn the presumption of their negligence
by credible evidence. Their defense of having observed the diligence of a good father of a
family in the selection and supervision of their driver was not legally sufficient. According to
Article 1759 of the Civil Code, their liability as a common carrier did not cease upon proof
that they exercised all the diligence of a good father of a family in the selection and
supervision of their employee. This was the reason why the RTC treated this defense of the
Pereñas as inappropriate in this action for breach of contract of carriage.
The Pereñas were liable for the death of Aaron despite the fact that their driver might have
acted beyond the scope of his authority or even in violation of the orders of the common
carrier.27 In this connection, the records showed their driver’s actual negligence. There was
a showing, to begin with, that their driver traversed the railroad tracks at a point at which
the PNR did not permit motorists going into the Makati area to cross the railroad tracks.
Although that point had been used by motorists as a shortcut into the Makati area, that fact
alone did not excuse their driver into taking that route. On the other hand, with his
familiarity with that shortcut, their driver was fully aware of the risks to his passengers but
he still disregarded the risks. Compounding his lack of care was that loud music was playing
inside the air-conditioned van at the time of the accident. The loudness most probably
reduced his ability to hear the warning horns of the oncoming train to allow him to correctly
appreciate the lurking dangers on the railroad tracks. Also, he sought to overtake a passenger
bus on the left side as both vehicles traversed the railroad tracks. In so doing, he lost his view
of the train that was then coming from the opposite side of the passenger bus, leading him
to miscalculate his chances of beating the bus in their race, and of getting clear of the train.
As a result, the bus avoided a collision with the train but the van got slammed at its rear,
causing the fatality. Lastly, he did not slow down or go to a full stop before traversing the
railroad tracks despite knowing that his slackening of speed and going to a full stop were in
observance of the right of way at railroad tracks as defined by the traffic laws and
regulations.28He thereby violated a specific traffic regulation on right of way, by virtue of
which he was immediately presumed to be negligent.29
The omissions of care on the part of the van driver constituted negligence,30 which, according
to Layugan v. Intermediate Appellate Court,31 is "the omission to do something which a
reasonable man, guided by those considerations which ordinarily regulate the conduct of
human affairs, would do, or the doing of something which a prudent and reasonable man
would not do,32 or as Judge Cooley defines it, ‘(t)he failure to observe for the protection of
the interests of another person, that degree of care, precaution, and vigilance which the
circumstances justly demand, whereby such other person suffers injury.’"33
The test by which to determine the existence of negligence in a particular case has been aptly
stated in the leading case of Picart v. Smith,34 thuswise:
The test by which to determine the existence of negligence in a particular case may be stated
as follows: Did the defendant in doing the alleged negligent act use that reasonable care and
caution which an ordinarily prudent person would have used in the same situation? If not,
then he is guilty of negligence. The law here in effect adopts the standard supposed to be
supplied by the imaginary conduct of the discreet paterfamilias of the Roman law. The
existence of negligence in a given case is not determined by reference to the personal
judgment of the actor in the situation before him. The law considers what would be reckless,
blameworthy, or negligent in the man of ordinary intelligence and prudence and determines
liability by that.
The question as to what would constitute the conduct of a prudent man in a given situation
must of course be always determined in the light of human experience and in view of the
facts involved in the particular case. Abstract speculation cannot here be of much value but
this much can be profitably said: Reasonable men govern their conduct by the circumstances
which are before them or known to them. They are not, and are not supposed to be,
omniscient of the future. Hence they can be expected to take care only when there is
something before them to suggest or warn of danger. Could a prudent man, in the case under
consideration, foresee harm as a result of the course actually pursued? If so, it was the duty
of the actor to take precautions to guard against that harm. Reasonable foresight of harm,
followed by the ignoring of the suggestion born of this prevision, is always necessary before
negligence can be held to exist. Stated in these terms, the proper criterion for determining
the existence of negligence in a given case is this: Conduct is said to be negligent when a
prudent man in the position of the tortfeasor would have foreseen that an effect harmful to
another was sufficiently probable to warrant his foregoing the conduct or guarding against
its consequences. (Emphasis supplied)
Pursuant to the Picart v. Smith test of negligence, the Pereñas’ driver was entirely negligent
when he traversed the railroad tracks at a point not allowed for a motorist’s crossing despite
being fully aware of the grave harm to be thereby caused to his passengers; and when he
disregarded the foresight of harm to his passengers by overtaking the bus on the left side as
5
to leave himself blind to the approach of the oncoming train that he knew was on the opposite Yet, the Pereñas submit that the indemnity for loss of earning capacity was speculative and
side of the bus. unfounded.1âwphi1 They cited People v. Teehankee, Jr.,37 where the Court deleted the
indemnity for victim Jussi Leino’s loss of earning capacity as a pilot for being speculative
due to his having graduated from high school at the International School in Manila only two
Unrelenting, the Pereñas cite Phil. National Railways v. Intermediate Appellate
years before the shooting, and was at the time of the shooting only enrolled in the first
Court,35 where the Court held the PNR solely liable for the damages caused to a passenger
semester at the Manila Aero Club to pursue his ambition to become a professional pilot. That
bus and its passengers when its train hit the rear end of the bus that was then traversing the
meant, according to the Court, that he was for all intents and purposes only a high school
railroad crossing. But the circumstances of that case and this one share no similarities. In
graduate.
Philippine National Railways v. Intermediate Appellate Court, no evidence of contributory
negligence was adduced against the owner of the bus. Instead, it was the owner of the bus
who proved the exercise of extraordinary diligence by preponderant evidence. Also, the We reject the Pereñas’ submission.
records are replete with the showing of negligence on the part of both the Pereñas and the
PNR. Another distinction is that the passenger bus in Philippine National Railways v.
First of all, a careful perusal of the Teehankee, Jr. case shows that the situation there of Jussi
Intermediate Appellate Court was traversing the dedicated railroad crossing when it was hit
Leino was not akin to that of Aaron here. The CA and the RTC were not speculating that
by the train, but the Pereñas’ school van traversed the railroad tracks at a point not intended
Aaron would be some highly-paid professional, like a pilot (or, for that matter, an engineer,
for that purpose.
a physician, or a lawyer). Instead, the computation of Aaron’s earning capacity was premised
on him being a lowly minimum wage earner despite his being then enrolled at a prestigious
At any rate, the lower courts correctly held both the Pereñas and the PNR "jointly and high school like Don Bosco in Makati, a fact that would have likely ensured his success in his
severally" liable for damages arising from the death of Aaron. They had been impleaded in later years in life and at work.
the same complaint as defendants against whom the Zarates had the right to relief, whether
jointly, severally, or in the alternative, in respect to or arising out of the accident, and
And, secondly, the fact that Aaron was then without a history of earnings should not be taken
questions of fact and of law were common as to the Zarates.36 Although the basis of the right
against his parents and in favor of the defendants whose negligence not only cost Aaron his
to relief of the Zarates (i.e., breach of contract of carriage) against the Pereñas was distinct
life and his right to work and earn money, but also deprived his parents of their right to his
from the basis of the Zarates’ right to relief against the PNR (i.e., quasi-delict under Article
presence and his services as well. Our law itself states that the loss of the earning capacity of
2176, Civil Code), they nonetheless could be held jointly and severally liable by virtue of their
the deceased shall be the liability of the guilty party in favor of the heirs of the deceased, and
respective negligence combining to cause the death of Aaron. As to the PNR, the RTC rightly
shall in every case be assessed and awarded by the court "unless the deceased on account of
found the PNR also guilty of negligence despite the school van of the Pereñas traversing the
permanent physical disability not caused by the defendant, had no earning capacity at the
railroad tracks at a point not dedicated by the PNR as a railroad crossing for pedestrians and
time of his death."38 Accordingly, we emphatically hold in favor of the indemnification for
motorists, because the PNR did not ensure the safety of others through the placing of
Aaron’s loss of earning capacity despite him having been unemployed, because
crossbars, signal lights, warning signs, and other permanent safety barriers to prevent
compensation of this nature is awarded not for loss of time or earnings but for loss of the
vehicles or pedestrians from crossing there. The RTC observed that the fact that a crossing
deceased’s power or ability to earn money.39
guard had been assigned to man that point from 7 a.m. to 5 p.m. was a good indicium that
the PNR was aware of the risks to others as well as the need to control the vehicular and
other traffic there. Verily, the Pereñas and the PNR were joint tortfeasors. This favorable treatment of the Zarates’ claim is not unprecedented. In Cariaga v. Laguna
Tayabas Bus Company and Manila Railroad Company,40 fourth-year medical student
Edgardo Carriaga’s earning capacity, although he survived the accident but his injuries
2.
rendered him permanently incapacitated, was computed to be that of the physician that he
Was the indemnity for loss of
dreamed to become. The Court considered his scholastic record sufficient to justify the
Aaron’s earning capacity proper?
assumption that he could have finished the medical course and would have passed the
medical board examinations in due time, and that he could have possibly earned a modest
The RTC awarded indemnity for loss of Aaron’s earning capacity. Although agreeing with income as a medical practitioner. Also, in People v. Sanchez,41 the Court opined that murder
the RTC on the liability, the CA modified the amount. Both lower courts took into and rape victim Eileen Sarmienta and murder victim Allan Gomez could have easily landed
consideration that Aaron, while only a high school student, had been enrolled in one of the good-paying jobs had they graduated in due time, and that their jobs would probably pay
reputable schools in the Philippines and that he had been a normal and able-bodied child them high monthly salaries from ₱ 10,000.00 to ₱ 15,000.00 upon their graduation. Their
prior to his death. The basis for the computation of Aaron’s earning capacity was not what earning capacities were computed at rates higher than the minimum wage at the time of their
he would have become or what he would have wanted to be if not for his untimely death, but deaths due to their being already senior agriculture students of the University of the
the minimum wage in effect at the time of his death. Moreover, the RTC’s computation of Philippines in Los Baños, the country’s leading educational institution in agriculture.
Aaron’s life expectancy rate was not reckoned from his age of 15 years at the time of his death,
but on 21 years, his age when he would have graduated from college.
3.
Were the amounts of damages excessive?
We find the considerations taken into account by the lower courts to be reasonable and fully
warranted.

6
The Pereñas plead for the reduction of the moral and exemplary damages awarded to the
Zarates in the respective amounts of ₱ 2,500,000.00 and ₱ 1,000,000.00 on the ground that
such amounts were excessive.

The plea is unwarranted.

The moral damages of ₱ 2,500,000.00 were really just and reasonable under the established
circumstances of this case because they were intended by the law to assuage the Zarates’
deep mental anguish over their son’s unexpected and violent death, and their moral shock
over the senseless accident. That amount would not be too much, considering that it would
help the Zarates obtain the means, diversions or amusements that would alleviate their
suffering for the loss of their child. At any rate, reducing the amount as excessive might prove
to be an injustice, given the passage of a long time from when their mental anguish was
inflicted on them on August 22, 1996.

Anent the ₱ 1,000,000.00 allowed as exemplary damages, we should not reduce the amount
if only to render effective the desired example for the public good. As a common carrier, the
Pereñas needed to be vigorously reminded to observe their duty to exercise extraordinary
diligence to prevent a similarly senseless accident from happening again. Only by an award
of exemplary damages in that amount would suffice to instill in them and others similarly
situated like them the ever-present need for greater and constant vigilance in the conduct of
a business imbued with public interest.

WHEREFORE, we DENY the petition for review on certiorari; AFFIRM the decision
promulgated on November 13, 2002; and ORDER the petitioners to pay the costs of suit.

SO ORDERED.

7
G.R. No. 170071 March 9, 2011
HEIRS OF JOSE MARCIAL K. OCHOA namely: RUBY B. OCHOA, MICAELA B.
OCHOA and JOMAR B. OCHOA, Petitioners,
vs.
G & S TRANSPORT CORPORATION, Respondent.
x - - - - - - - - - - - - - - - - - - - - - - -x
G.R. No. 170125
G & S TRANSPORT CORPORATION, Petitioner,
vs.
HEIRS OF JOSE MARCIAL K. OCHOA namely: RUBY B. OCHOA, MICAELA B.
OCHOA and JOMAR B. OCHOA, Respondents.
DECISION
DEL CASTILLO, J.:
An accident which claimed the life of a passenger is the root of these two petitions - one
brought before us by the common carrier and the other by the heirs of the deceased.
These consolidated Petitions for Review on Certiorari assail the Court of Appeals’ (CA)
Decision1 dated June 29, 2005 in CA-G.R. CV No. 75602 which affirmed with modification
the December 21, 2001 Decision and March 5, 2002 Order of the trial court. Likewise
assailed is the Resolution2 dated October 12, 2005 denying the parties’ respective Motions
for Reconsideration thereto.
Factual Antecedents
Jose Marcial K. Ochoa (Jose Marcial) died on the night of March 10, 1995 while on board an
Avis taxicab owned and operated by G & S Transport Corporation (G & S), a common carrier.
As narrated by the trial court, the circumstances attending Jose Marcial’s death are as
follows:
It appears that sometime in the evening of March 10, 1995, at the Manila Domestic Airport,
the late Jose Marcial K. Ochoa boarded and rode a taxicab with Plate No. PKR-534, a
passenger vehicle for hire owned and operated by defendant corporation under the business
name "Avis Coupon Taxi" (Avis) and driven by its employee and authorized driver Bibiano
Padilla, Jr. on his way home to Teacher’s Village, Diliman, Quezon City.
At about 11:00 p.m., the taxicab was cruising along Epifanio delos Santos Avenue [EDSA],
in front of Camp Aguinaldo in Quezon City at high speed. While going up the Boni Serrano
(Santolan) fly-over, it overtook another cab driven by Pablo Clave and tried to pass another
vehicle, a ten-wheeler cargo truck. Because of the narrow space between the left side railing
of the fly-over and the ten-wheeler truck, the Avis cab was unable to pass and because of its
speed, its driver (Padilla) was unable to control it. To avoid colliding with the truck, Padilla
turned the wheel to the left causing his taxicab to ram the railing throwing itself off the fly-
over and fell on the middle surface of EDSA below. The forceful drop of the vehicle on the
floor of the road broke and split it into two parts. Both driver Padilla and passenger Jose
Marcial K. Ochoa were injured and rushed to the hospital. At the East Avenue Medical
Center, Ochoa was not as lucky as Padilla who was alive. He was declared dead on arrival
from the accident. The death certificate issued by the Office of the Civil Registrar of Quezon
City cited the cause of his death as vehicular accident.3
On May 13, 1999, Jose Marcial’s wife, Ruby Bueno Ochoa, and his two minor children,
Micaela B. Ochoa and Jomar B. Ochoa (the heirs), through counsel, sent G & S a
letter4 demanding that the latter indemnify them for Jose Marcial’s death, his loss of earning
capacity, and funeral expenses in the total amount of ₱15,000,000.00. As G & S failed to
heed the same, the heirs filed a Complaint5 for Damages before the Regional Trial Court
(RTC) of Pasig City which was raffled to Branch 164 of said court.
The heirs alleged that G & S, as a common carrier, is under legal obligation to observe and
exercise extraordinary diligence in transporting its passengers to their destination safely and
securely. However, G & S failed to observe and exercise this extraordinary diligence because
its employee failed to transport Jose Marcial to his destination safely. They averred that G &
S is liable to them for having breached the contract of common carriage. As an alternative
cause of action, they asserted that G & S is likewise liable for damages based on quasi-delict
pursuant to Article 21806 in relation to Article 2176 7 of the Civil Code. The heirs thus prayed
for G & S to pay them actual damages, moral damages, exemplary damages, and attorney’s
fees and expenses of litigation.
In its Answer With Compulsory Counterclaims,8 G & S claimed that Jose Marcial boarded
an Avis taxicab driven by its employee, Bibiano Padilla (Padilla), at the Domestic Airport to
bring him to Teacher’s Village in Quezon City. While passing the Santolan fly-over, however,
the Avis taxicab was bumped by an on-rushing delivery van at the right portion causing the
taxicab to veer to the left, ram through the left side of the railings of the fly-over and fall to
the center of the island below. The taxicab was split into two and Jose Marcial was thrown
10 meters away. G & S posited that the proximate cause of Jose Marcial’s death is a
fortuitous event and/or the fault or negligence of the driver of the delivery van that hit the
taxicab. It likewise claimed that it exercised the diligence required of a good father of a family
in the selection and supervision of its employees including Padilla. By way of compulsory
counterclaim, G & S sought to recover from the heirs the amount of ₱300,000.00 as
attorney’s fees and costs of suit.
Ruling of the Regional Trial Court
On December 27, 2001, the trial court rendered a Decision9 finding the vehicular mishap not
caused by a fortuitous event but by the negligence of Padilla. It likewise found the evidence
adduced by G & S to show that it exercised the diligence of a good father of a family in the
selection and supervision of its employees as insufficient. Hence, the trial court declared G
& S civilly liable to the heirs. However, for lack of receipts or any proof of funeral expenses
and other actual damages, the trial court denied the heirs’ claim for actual damages. It also
denied them moral and exemplary damages for lack of legal basis. The dispositive portion of
said Decision reads:
WHEREFORE, defendant is hereby adjudged guilty of breach of contract of carriage and is
ordered to pay plaintiffs the following amounts:
8
 1. ₱50,000.00 as civil indemnity for the death of deceased Jose Marcial K. Ochoa;
2. ₱6,537,244.96 for the loss of earning capacity of the deceased;
3. ₱100,00.00 for attorney’s fees;
4. And the cost of litigation.
SO ORDERED.10
G & S filed a Notice of Appeal11 while the heirs filed a Motion for Partial
Reconsideration.12 The heirs averred that they are entitled to moral damages pursuant to
Article 176413 in relation to Article 2206(3)14 of the Civil Code. They also cited applicable
jurisprudence providing that moral damages are recoverable in a damage suit predicated
upon a breach of contract of carriage where the mishap results in the death of the passenger.
With respect to their claim for exemplary damages, the heirs relied upon Article 2232 of the
Civil Code which 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. And, since Padilla was declared by the trial court to have been grossly
negligent in driving the taxicab, the heirs claimed that they are likewise entitled to exemplary
damages.
After G & S filed its Opposition (To Plaintiffs’ Motion for Partial Reconsideration),15 the trial
court issued an Order16on March 5, 2002. It found merit in the heirs’ Motion for Partial
Reconsideration and thus declared them entitled to moral and exemplary damages, viz:
WHEREFORE, the decision dated December 27, 2001 is hereby modified so as to order
defendant Corporation to pay plaintiffs the amount of P300,000.00 as moral damages and
P50,000.00 as exemplary damages. The dispositive portion of said decision is hereby
amended to read as follows:
‘WHEREFORE, defendant is hereby adjudged guilty of breach of contract of carriage and is
ordered to pay plaintiffs the following amounts:
1. ₱50,000.00 as civil indemnity for the death of the deceased Jose Marcial K.
Ochoa;
2. ₱6,537,244.96 for the loss of earning capacity of the deceased.
3. ₱300,000.00 as moral damages;
4. ₱50,000.00 as exemplary damages;
5. ₱100,000.00 for attorney’s fees;
6. And the costs of litigation.’
SO ORDERED.17
Because of this, G & S filed another Notice of Appeal18 and same was given due course by the
trial court in an Order19 dated April 23, 2002.
Ruling of the Court of Appeals
Before the CA, G & S continued to insist that it exercised the diligence of a good father of the
family in the selection and supervision of its employees. It averred that it has been carrying
out not only seminars for its drivers even before they were made to work, but also periodic
evaluations for their performance. Aside from these, it has also been conducting monthly
check-up of its automobiles and has regularly issued rules regarding the conduct of its
drivers. G & S claimed that it was able to establish a good name in the industry and maintain
a clientele.
In an effort to build up Padilla’s character as an experienced and careful driver, G & S averred
that: (1) before G & S employed Padilla, he was a delivery truck driver of Inter Island Gas
Service for 11 years; (2) Padilla has been an employee of G & S from 1989 to 1996 and during
said period, there was no recorded incident of his being a negligent driver; (3) despite his
qualifications, G & S still required Padilla to submit an NBI clearance, driver’s license and
police clearance; (4) Padilla’s being a good driver-employee was manifest in his years of
service with G & S, as in fact, he has received congratulatory messages from the latter as
shown by the inter-office memos dated August 23, 1990 and February 1, 1993; and that (5)
Padilla attended a seminar at the Pope Pius Center sometime in December 1999 as part of
the NAIA Taxi Operation Program.
G & S also argued that the proximate cause of Jose Marcial’s death is a fortuitous event
and/or the fault or negligence of another and not of its employee. According to G & S, the
collision was totally unforeseen since Padilla had every right to expect that the delivery van
would just overtake him and not hit the right side of the taxicab. Therefore, what transpired
was beyond Padilla’s control. There was no negligence on his part but on the part of the
driver of the delivery van. For this reason, G & S opined that it was not liable to the heirs.
On the other hand, the heirs maintained that Padilla was grossly negligent in driving the Avis
taxicab on the night of March 10, 1995. They claimed that Padilla, while running at a very
high speed, acted negligently when he tried to overtake a ten-wheeler truck at the foot of the
fly-over. This forced him to swerve to the left and as a consequence, the Avis taxicab hit the
center of the railing and was split into two upon hitting the ground. The manner by which
Padilla drove the taxicab clearly showed that he acted without regard to the safety of his
passenger.
The heirs also averred that in order for a fortuitous event to exempt one from liability, it is
necessary that he has committed no negligence or conduct that may have occasioned the
loss. Thus, to be exempt from liability for the death of Jose Marcial on this ground, G & S
must clearly show that the proximate cause of the casualty was entirely independent of
human will and that it was impossible to avoid. And since in the case at bar it was Padilla’s
inexcusable poor judgment, utter lack of foresight and extreme negligence which were the
immediate and proximate causes of the accident, same cannot be considered to be due to a
fortuitous event. This is bolstered by the fact that the court trying the case for criminal
negligence arising from the same incident convicted Padilla for said charge.20
9
At any rate, the heirs contended that regardless of whether G & S observed due diligence in
the selection of its employees, it should nonetheless be held liable for the death of Jose
Marcial pursuant to Article 1759 of the Civil Code which provides:
ART. 1759 – Common carriers are liable for the death of or injuries to passengers through
the negligence or willful acts of the former’s employees, although such employees may have
acted beyond the scope of their authority or in violation of the orders of the common carriers.
This liability of the common carriers does not cease upon proof that they exercised all the
diligence of a good father of a family in the selection and supervision of their employees.
In sum, the heirs prayed that the appeal be dismissed for lack of merit and the assailed
Decision and Order of the trial court be affirmed in toto.
In a Decision21 dated June 29, 2005, the CA ruled in favor of the heirs. The appellate court
gave weight to their argument that in order for a fortuitous event to exempt one from
liability, it is necessary that he committed no negligence or misconduct that may have
occasioned the loss. In this case, the CA noted that Padilla failed to employ reasonable
foresight, diligence and care needed to exempt G & S from liability for Jose Marcial’s death.
Said court also quoted pertinent portions of the MTC decision convicting Padilla of reckless
imprudence resulting in homicide to negate G & S’ claim that the proximate cause of the
accident was the fault of the driver of the delivery van who allegedly hit the right side of the
taxicab. And just like the trial court, the CA found insufficient the evidence adduced by G &
S to support its claim that it exercised due diligence in the selection and supervision of its
employees.
With respect to the award of ₱6,537,244.96 for Jose Marcial’s loss of earning capacity, the
CA declared the same unwarranted. It found the Certification22 issued by Jose Marcial’s
employer, the United States Agency for International Development (USAID) through its
Chief of Human Resources Division Jonas Cruz (Cruz), as self-serving, unreliable, and
biased. While said certification states that Jose Marcial was earning an annual salary of
₱450,844.49 at the time of his untimely demise, the CA noted that same is unsupported by
competent evidence such as income tax returns or receipts. This is in view of the ruling
in People v. Ereño23 where it was held that "there must be unbiased proof of the deceased’s
average income." Anent moral damages, the CA found the award of ₱300,000.00 excessive
and thus reduced the same to ₱200,000.00 as to make it proportionate to the award of
exemplary damages which is ₱50,000.00. The dispositive portion of said Decision reads:
WHEREFORE, the assailed Decision dated December 27, 2001 and Order dated March 5,
2002 are AFFIRMED with the following MODIFICATION: appellant is ordered to pay
appellees the sum of ₱50,000.00 as civil indemnity for the death of the deceased Jose
Marcial K. Ochoa, ₱200,000.00 as moral damages, ₱50,000.00 as exemplary damages,
₱100,000.00 for attorney’s fees and the costs of litigation. The trial court’s award of
₱6,537,244.96 for the loss of earning capacity of the deceased is DELETED for lack of basis.
SO ORDERED.
Both parties moved for reconsideration24 but the CA denied their respective motions for
reconsideration in a Resolution25 dated October 12, 2005.
Hence, G & S and the heirs filed their respective Petitions for Review on Certiorari before
this Court. The heirs’ petition was docketed as G.R. No. 170071 and that of G & S as G.R. No.
170125. These petitions were later consolidated pursuant to this Court’s Resolution of
November 21, 2005.26
G.R. No. 170125
G & S anchors its petition on the following grounds:
I. THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN NOT RULING THAT
THE PROXIMATE CAUSE OF DEATH OF MR. JOSE MARCIAL K. OCHOA WAS A
FORTUITOUS EVENT AND/OR WAS DUE TO THE FAULT OR NEGLIGENCE OF
ANOTHER AND SHOULD THUS EXEMPT THE PETITIONER FROM LIABILITY.
II. THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN NOT TAKING NOTE
OF THE FACT THAT THE PETITIONER’S EMPLOYEE HAD BEEN ACQUITTED OF THE
CRIME OF RECKLESS IMPRUDENCE RESULTING (IN) HOMICIDE.
III. THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN UPHOLDING THE
TESTIMONY OF A WITNESS WHO SURFACED MONTHS AFTER THE INCIDENT
WHILE DISREGARDING THAT OF AN EYEWITNESS WHO WAS PRESENT AT THE
TIME AND PLACE OF THE ACCIDENT.
IV. THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN NOT RULING THAT
THE PETITIONER EXERCISED THE DILIGENCE OF A GOOD FATHER OF A FAMILY IN
THE SELECTION AND SUPERVISION OF ITS EMPLOYEES PARTICULARLY MR.
BIBIANO PADILLA.27
G & S reiterates its arguments that the proximate cause of the accident is a fortuitous event
and/or the negligence of the driver of the delivery van which bumped the right portion of its
taxicab and, that it exercised the diligence of a good father of a family in the selection and
supervision of its employees. It faults the CA when it overlooked the fact that the MTC
Decision convicting Padilla of reckless imprudence has already been reversed on appeal by
the RTC with Padilla having been accordingly acquitted of the crime charged. Moreover, it
claims that the appellate court erred in according respect to the testimony of the lone
prosecution witness, Pablo Clave (Clave), when it concluded that Padilla was driving
negligently at the time of the accident. It asserts that Clave is not a credible witness and so
is his testimony. Thus, G & S prays that the assailed CA Decision and Resolution be reversed
and set aside.
On the other hand, the heirs posit that the determination of the issues raised by G & S
necessarily entails a re-examination of the factual findings which this Court cannot do in this
petition for review on certiorari. At any rate, they maintain that the trial court itself is
convinced of Clave’s credibility. They stress the settled rule that the evaluation of the
credibility of witnesses is a matter that particularly falls within the authority of the trial court
because it had the opportunity to observe the demeanor of the witnesses on the stand.
The heirs assert that fortuitous event was not the proximate cause of the mishap. They point
out that as correctly found by the trial court, Padilla was running at an extremely high speed.
This was why the impact was so strong when the taxicab rammed the fly-over railings and
10
was split into two when it hit the ground. Also, while it is true that the MTC Decision in the
criminal case for reckless imprudence has been reversed by the RTC, this does not excuse G
& S from its liability to the heirs because its liability arises from its breach of contract of
carriage and from its negligence in the selection and supervision of its employees. Also, since
the acquittal of Padilla is based on reasonable doubt, same does not in any way rule out his
negligence as this may merely mean that the prosecution failed to meet the requisite
quantum of evidence to sustain his conviction. Therefore, G & S cannot bank on said
acquittal to disprove its liability.
G.R. No. 170071
The heirs, on the other hand, advance the following grounds in support of their petition:
THE COURT OF APPEALS MANIFESTLY AND GRAVELY ERRED IN COMPLETELY
DELETING THE TRIAL COURT’S AWARD FOR THE LOSS OF EARNING CAPACITY OF
THE DECEASED.
THE COURT OF APPEALS MANIFESTLY AND GRAVELY ERRED IN REDUCING THE
TRIAL COURT’S AWARD FOR MORAL DAMAGES.28
The focal point of the heirs’ petition is the CA’s deletion of the award of ₱6,537,244.96 for
Jose Marcial’s loss of earning capacity as well as the reduction of the award of moral damages
from ₱300,000.00 to ₱200,000.00.
The heirs aver that the appellate court gravely erred in relying upon Ereño as said case is not
on all fours with the present case. They contend that in Ereño, this Court disallowed the
award for loss of income because the only proof presented was a handwritten statement of
the victim’s spouse stating the daily income of the deceased as a self-employed fish vendor.
The heirs argue that the reason why this Court declared said handwritten statement as self-
serving is because the one who prepared it, the deceased’s wife, was also the one who would
directly and personally benefit from such an award.29 This cannot be said in the case at bar
since the same bias and personal interest cannot be attributed to Jose Marcial’s employer,
the USAID. Unlike in Ereño, USAID here does not stand to be benefited by an award for Jose
Marcial’s loss of earning capacity. Clearly, the Certification issued by it is far from being self-
serving. At any rate, the heirs contend that Ereño has already been superseded by Pleyto v.
Lomboy30where this Court held that in awarding damages for loss of earning capacity, "mere
testimonial evidence suffices to establish a basis for which the court can make a fair and
reasonable estimate of the loss of earning capacity". In addition, the heirs point out that the
authenticity and accuracy of said Certification was neither questioned by G & S nor
discredited by any controverting evidence. In fact, its admission by the trial court was not
even assigned by G & S as an error in their appeal before the CA.
As to the reduction of moral damages, the heirs claim that since the CA agreed with the
factual circumstances of the case as found by the trial court, there is therefore no reason for
it to alter the award of damages arising from such factual circumstances. They aver that the
CA may only modify the damages awarded by the trial court when it is excessive and
scandalous as held in Meneses v. Court of Appeals.31 Here, they claim that the award of
moral damages in the amount of ₱300,000.00 cannot be considered as excessive and
unreasonable but only commensurate to the sufferings caused by the incident to a wife who
became a young widow at the age of 33 and to two minor children who lost a father.
Moreover, the heirs aver that the CA should not have reduced the award of moral damages
just to make said amount proportionate to the exemplary damages awarded. This is because
there is no such rule which dictates that the amount of moral damages should be
proportionate to that of the exemplary damages. The heirs pray that the assailed CA Decision
and Resolution be reversed and set aside insofar as they deleted the award for loss of earning
capacity and reduced the award for moral damages.
For its part, G & S avers that the Certification issued by USAID is self-serving because the
USAID officer who issued it has not been put on the witness stand to validate the contents
thereof. Moreover, said Certification was not supported by competent evidence such as
income tax returns and receipts. G & S likewise finds the reduction of the award of moral
damages appropriate in view of the settled rule that moral damages are not meant to enrich
the complainant at the expense of the defendant. Hence, it prays that the petition be
dismissed for lack of merit.
Our Ruling
We shall first tackle the issues raised by G & S in its petition.
The first, third and fourth issues raised by G & S involve questions of fact
We have reviewed said issues and we find that the determination of the first, third and fourth
issues raised entails re-examination of the evidence presented because they all involve
questions of fact. In Microsoft Corporation v. Maxicorp, Inc.,32 we held that:
Once it is clear that the issue invites a review of the evidence presented, the question posed
is one of fact. If the query requires a re-evaluation of the credibility of witnesses, or the
existence or relevance of surrounding circumstances and their relation to each other, the
issue in that query is factual. Our ruling in Paterno v. Paterno is illustrative on this point:
Such questions as whether certain items of evidence should be accorded probative value or
weight, or rejected as feeble or spurious, or whether or not the proof on one side or the other
are clear and convincing and adequate to establish a proposition in issue, are without doubt
questions of fact. Whether or not the body of proofs presented by a party, weighed and
analyzed in relation to contrary evidence submitted by adverse party, may be said to be
strong, clear and convincing; whether or not certain documents presented by one side should
be accorded full faith and credit in the face of protests as to their spurious character by the
other side; whether or not inconsistencies in the body of proofs of a party are of such a gravity
as to justify refusing to give said proofs weight – all these are issues of fact. (Citations
omitted)
In this case, the said three issues boil down to the determination of the following
questions: What is the proximate cause of the death of Jose Marcial? Is the testimony of
prosecution witness Clave credible? Did G & S exercise the diligence of a good father of a
family in the selection and supervision of its employees? Suffice it to say that these are all
questions of fact which require this Court to inquire into the probative value of the evidence
presented before the trial court. As we have consistently held, "[t]his Court is not a trier of
facts. It is not a function of this court to analyze or weigh evidence. When we give due course
to such situations, it is solely by way of exception. Such exceptions apply only in the presence
of extremely meritorious circumstances."33 Here, we note that although G & S enumerated
in its Consolidated Memorandum 34 the exceptions35 to the rule that a petition for review
11
on certiorarishould only raise questions of law, it nevertheless did not point out under what
exception its case falls. And, upon review of the records of the case, we are convinced that it
does not fall under any. Hence, we cannot proceed to resolve said issues and disturb the
findings and conclusions of the CA with respect thereto. As we declared in Diokno v.
Cacdac:36
It is aphoristic that a re-examination of factual findings cannot be done through a petition
for review on certiorariunder Rule 45 of the Rules of Court because as earlier stated, this
Court is not a trier of facts; it reviews only questions of law. The Supreme Court is not duty-
bound to analyze and weigh again the evidence considered in the proceedings below. This is
already outside the province of the instant Petition for Certiorari. [Citations omitted.]
There is a contract of carriage between G & S and Jose Marcial
What is clear from the records is that there existed a contract of carriage between G & S, as
the owner and operator of the Avis taxicab, and Jose Marcial, as the passenger of said vehicle.
As a common carrier, G & S "is bound to carry [Jose Marcial] safely as far as human care and
foresight can provide, using the utmost diligence of very cautious persons, with due regard
for all the circumstances."37 However, Jose Marcial was not able to reach his destination
safely as he died during the course of the travel. "In a contract of carriage, it is presumed that
the common carrier is at fault or is negligent when a passenger dies or is injured. In fact,
there is even no need for the court to make an express finding of fault or negligence on the
part of the common carrier. This statutory presumption may only be overcome by evidence
that the carrier exercised extraordinary diligence."38 Unfortunately, G & S miserably failed
to overcome this presumption. Both the trial court and the CA found that the accident which
led to Jose Marcial’s death was due to the reckless driving and gross negligence of G & S’
driver, Padilla, thereby holding G & S liable to the heirs of Jose Marcial for breach of contract
of carriage.
The acquittal of Padilla in the criminal case is immaterial to the instant case for breach of
contract
This thus now leaves us with the remaining issue raised by G & S, that is, whether the CA
gravely erred in not taking note of the fact that Padilla has already been acquitted of the
crime of reckless imprudence resulting in homicide, a charge which arose from the same
incident subject of this case.
Article 31 of the Civil Code provides, viz:
When the civil action is based on an obligation not arising from the act or omission
complained of as a felony, such civil action may proceed independently of the criminal
proceedings and regardless of the result of the latter.
Thus, in Cancio, Jr. v. Isip,39 we declared:
In the instant case, it must be stressed that the action filed by petitioner is an independent
civil action, which remains separate and distinct from any criminal prosecution based on the
same act. Not being deemed instituted in the criminal action based on culpa criminal, a
ruling on the culpability of the offender will have no bearing on said
independent civil action based on an entirely different cause of action, i.e.,
culpa contractual." (Emphasis supplied; Citations omitted.)
In this case, the action filed by the heirs is primarily for the recovery of damages arising from
breach of contract of carriage allegedly committed by G & S. Clearly, it is an independent
civil action arising from contract which is separate and distinct from the criminal action for
reckless imprudence resulting in homicide filed by the heirs against Padilla by reason of the
same incident. Hence, regardless of Padilla’s acquittal or conviction in said criminal case,
same has no bearing in the resolution of the present case. There was therefore no error on
the part of the CA when it resolved this case without regard to the fact that Padilla has already
been acquitted by the RTC in the criminal case. Moreover, while the CA quoted some
portions of the MTC Decision in said criminal case, we however find that those quoted
portions were only meant to belie G & S’ claim that the proximate cause of the accident was
the negligence of the driver of the delivery van which allegedly hit the Avis taxicab. Even
without those quoted portions, the appellate court’s ultimate finding that it was Padilla’s
negligence which was the proximate cause of the mishap would still be the same. This is
because the CA has, in fact, already made this declaration in the earlier part of its assailed
Decision. The fact that the MTC Decision from which the subject quoted portions were lifted
has already been reversed by the RTC is therefore immaterial.
In view of the foregoing, we deny G & S’ petition for lack of merit.
The denial by the CA of the heirs’ claim for lost earnings is unwarranted
Going now to the petition filed by the heirs, we note at the outset that the issues of whether
the CA erred in deleting the award for loss of earning capacity and in reducing the award for
moral damages made by the trial court likewise raise questions of fact as they "involve an
examination of the probative value of the evidence presented by the parties".40 However, we
find that the heirs’ case falls under one of the exceptions because the findings of the CA
conflict with the findings of the RTC.41 Since the heirs properly raised the conflicting findings
of the lower courts, it is proper for this Court to resolve such contradiction.42
In Ereño, we denied the claim for loss of income because the handwritten estimate of the
deceased’s daily income as a self-employed vendor was not supported by competent evidence
like income tax returns or receipts. This was in view of the rule that compensation for lost
income is in the nature of damages and as such requires due proof of damages suffered. We
reiterated this rule in People v. Yrat43 where we likewise denied the same claim because the
only evidence presented to show that the deceased was earning ₱50,000.00 a month was the
testimony of the wife. There we stated that for lost income due to death, there must be
unbiased proof of the deceased’s average income. Self-serving, hence, unreliable statement
is not enough. In People v. Caraig,44 we declared that "documentary evidence should be
presented to substantiate the claim for damages for loss of earning capacity. By way of
exception, damages therefor may be awarded despite the absence of documentary evidence,
provided that there is testimony that the victim was either (1) self-employed earning less
than the minimum wage under current labor laws, and judicial notice may be taken of the
fact that in the victim’s line of work no documentary evidence is available; or (2) employed
as a daily-wage worker earning less than the minimum wage under current labor laws".
However, we subsequently ruled in Pleyto v. Lomboy45 that "failure to present documentary
evidence to support a claim for loss of earning capacity of the deceased need not be fatal to
its cause. Testimonial evidence suffices to establish a basis for which the court can make a
fair and reasonable estimate of the loss of earning capacity". Hence, we held as sufficient to
establish a basis for an estimate of damages for loss of earning capacity the testimony of the
12
victim’s widow that her husband was earning a monthly income of ₱8,000.00. Later, gross annual income on his pay slip from the Philippine National Police. Hence, we uphold
in Victory Liner, Inc. v. Gammad,46 after finding that the deceased’s earnings does not fall the trial court’s award for Jose Marcial’s loss of earning capacity.
within the exceptions laid down in Caraig, we deleted the award for compensatory damages
for loss of earning capacity as same was awarded by the lower courts only on the basis of the While the trial court applied the formula generally used by the courts to determine net
husband’s testimony that the deceased was 39 years of age and a Section Chief of the Bureau earning capacity which is, to wit:
of Internal Revenue with a salary of ₱83,088.00 per annum at the time of her death. This
same rule was also applied in the 2008 case of Licyayo v. People.47
Net Earning Capacity = life expectancy* x (gross annual income - reasonable living
expenses),53
In all of the cases mentioned except for Ereño, the sole basis for the claim for loss of earning
capacity were the testimonies of the claimants. This is not the case here. Just like
*Life expectancy = 2/3 (80 – age of the deceased)
in Ereño where the testimony of the mother of the deceased was accompanied by a
handwritten estimate of her daughter’s alleged income as a fish vendor, the testimony of
Jose Marcial’s wife that he was earning around ₱450,000.00 a year was corroborated by a we, however, find incorrect the amount of ₱6,537, 244.96 arrived at. The award should be
Certification issued by the USAID. However in Ereño, we declared as self-serving the ₱6,611,634.59 as borne out by the following computation:
handwritten estimate submitted by the mother hence we denied the claim for such award.
Based on said ruling, the CA in this case deleted the award for lost income after it found the
USAID Certification to be self-serving and unreliable. 2 (80-3654)
Net earning capacity = x 450,844.4955-50%56
We disagree. The CA sweepingly concluded that the USAID Certification is self-serving and 3
unreliable without elaborating on how it was able to arrive at such a conclusion. A research
on USAID reveals that it is the "principal [United States] agency to extend assistance to 88
countries recovering from disaster, trying to escape poverty, and engaging in democratic = x 225,422.25
reforms."48 It is an "independent federal government agency that receives over-all foreign 3
policy guidance from the Secretary of the State [of the United States]."49 Given this
background, it is highly improbable that such an agency will issue a certification containing = 29.33 x 225,422.25
unreliable information regarding an employee’s income. Besides, there exists a presumption
that official duty has been regularly performed.50 Absent any showing to the contrary, it is = ₱6, 611,634.59
presumed that Cruz, as Chief of Human Resources Division of USAID, has regularly
performed his duty relative to the issuance of said certification and therefore, the correctness
of its contents can be relied upon. This presumption remains especially so where the The award of moral damages should be modified
authenticity, due execution and correctness of said certification have not been put in issue
either before the trial court or the CA. As to its being self-serving, our discussion on "self- While we deemed it proper to modify the amount of moral damages awarded by the trial
serving evidence" in Heirs of Pedro Clemeña y Zurbano v. Heirs of Irene B. Bien51 is court as discussed below, we nevertheless agree with the heirs that the CA should not have
enlightening, viz: pegged said award in proportion to the award of exemplary damages. Moral and exemplary
damages are based on different jural foundations.57 They are different in nature and require
‘Self-serving evidence,’ perhaps owing to its descriptive formulation, is a concept much separate determination.58 The amount of one cannot be made to depend on the other.
misunderstood. Not infrequently, the term is employed as a weapon to devalue and discredit
a party's testimony favorable to his cause. That, it seems, is the sense in which petitioners In Victory Liner Inc. v. Gammad59 we awarded ₱100,000.00 by way of moral damages to
are using it now. This is a grave error. "Self-serving evidence" is not to be taken literally to
the husband and three children of the deceased, a 39-year old Section Chief of the Bureau of
mean any evidence that serves its proponent's interest. The term, if used with any legal
Internal Revenue, to compensate said heirs for the grief caused by her death. This is
sense, refers only to acts or declarations made by a party in his own interest at
pursuant to the provisions of Articles 1764 and 2206(3) which provide:
some place and time out of court x x x. (Citations omitted; emphasis supplied.)

Art. 1764. Damages in cases comprised in this Section shall be awarded in accordance with
Verily, the USAID certification cannot be said to be self-serving because it does not refer to
Title XVIII of this Book, concerning Damages. Articles 2206 shall also apply to the death of
an act or declaration made out of court by the heirs themselves as parties to this case.1awphi1
a passenger caused by the breach of contract by a common carrier.

Clearly, the CA erred in deleting the award for lost income on the ground that the USAID
Art. 2206. x x x
Certification supporting such claim is self-serving and unreliable. On the contrary, we find
said certification sufficient basis for the court to make a fair and reasonable estimate of Jose
Marcial’s loss of earning capacity just like in Tamayo v. Señora52where we based the victim’s (3) The spouse, legitimate and illegitimate descendants and the ascendants of the deceased
may demand moral damages for mental anguish by reason of the death of the deceased.

13
Here, there is no question that the heirs are likewise entitled to moral damages pursuant to
the above provisions, considering the mental anguish suffered by them by reason of Jose
Marcial’s untimely death, as can be deduced from the following testimony of his wife Ruby:
Atty. Suarez:
Q: How would you describe Jose Marcial Ochoa?
(Ruby) A: My husband was a very loving husband, faithful husband, a very [good]
provider[.] I depended on him so much financially [and] emotionally[.] He was
practically my life then.
Q: How is he as a father?
A: A very good father, he is very committed to Micaela[. H]e has always time for
her[. H]e is a family man, so it’s really a great [loss] to me and to Micaela.
Q: What was your reaction upon learning of your husband’s death?
A: Immediately after I learned of his death, I tried very hard to keep a clear mind
for my little girl, she was 3 ½ and she could not grasp what death is, so I found [it]
so hard to explain to her [at] that time what happened [e]specially [because] she
just talked to her father from the airport telling her that he is coming home, tapos
hindi na pala.
Q: How did it affect you?
A: It was a painful struggle everyday just to get up and move on when someone
who [you] really really love and [who] is important to you … it is very hard to move
on and [it is even] harder to move on [when] I found out that I was pregnant with
my second child, parang tinabunan ka [ng] lahat eh[. I]t’s [too] hard to find
happiness, you’re pregnant, when you know wala naman talagang father yung bata
later on x x x
xxxx
Q: How did this affect your family?
A: Yung effect kay Micaela, she [used] to be a gregarious child, yung happy ganyan,
but nung wala na yong father niya that time, [during] graduation ng nursery that
time naging very very [quiet] siya, so a lot of emotional support from my own
family was given to her at the time para makacope-up siya sa loss kasi she is very
close to the father.
Q: Financially, how did it affect you?
A: I had to make do of what was left by my husband, I couldn’t also work so much
at the time because I was….and hirap eh, I cannot find enthusiasm in what I do,
tapos pregnant pa ako, and hirap talaga.
Q: How else did it affect you?
A: We had to move houses like we used to live in Quezon City at (the) time of his
death, tapos kinuha kami ni Gorjie my brother-in-law sa compound nila para
hindi… [to] support us emotionally (at that time) kasi nga I was pregnant and then
I also decided to move (to make it easy for me) to adjust yung lifestyle ng mga bata,
because I cannot cope [here] financially on my own[. N]ahihirapan na ako dito
because the living expenses here are quite high compared sa probinsiya so I
decided to move.
Q: If you would assign that pain and suffering that you suffered as a result of the
death of your husband, what will be the monetary consideration?
A: I struggled with that kasi….I can honestly say no amount of money can ever
repay the [loss] that my children suffered, future nila yan eh, and my son was not
given a chance to get to know his father, so I cannot imagine kung ano yung
sinasabi n’yong amount that will compensate the suffering that I have to go
through and my children will go through, ‘yon and mahirap bayaran.60
Under this circumstance, we thus find as sufficient and "somehow proportional to and in
approximation of the suffering inflicted"61 an award of moral damages in an amount similar
to that awarded in Victory which is ₱100,000.00.
From the above discussion, we, thus, partly grant the heirs’ petition.
WHEREFORE, the petition for review on certiorari in G.R. No. 170071 is PARTLY
GRANTED while the petition in G.R. No. 170125 is DENIED. The assailed Decision and
Resolution dated June 29, 2005 and October 12, 2005 of the Court of Appeals in CA-G.R.
CV No. 75602 are AFFIRMED with the MODIFICATIONS that G & S is ordered to pay the
heirs of Jose Marcial K. Ochoa the sum of ₱6,611,634.59 for loss of earning capacity of the
deceased and ₱100,000.00 as moral damages.
SO ORDERED.
14
G.R. No. 172822 Petitioner, involvement in shipping the goods or in promising to shoulder the freightage. It asserted
that it never authorized Halla Trading Co. to ship the articles or to have its name included in
the bill of lading. Shin Yang also alleged that MOF failed to present supporting documents
MOF COMPANY, INC., Petitioner,
to prove that it was Shin Yang that caused the importation or the one that assured payment
vs.
of the shipping charges upon arrival of the goods in Manila.
SHIN YANG BROKERAGE CORPORATION Respondent.

Ruling of the Metropolitan Trial Court

DECISION

On June 16, 2004, the MeTC of Pasay City, Branch 48 rendered its Decision4 in favor of
DEL CASTILLO, J.:
MOF. It ruled that Shin Yang cannot disclaim being a party to the contract of affreightment
because:
The necessity of proving lies with the person who sues.
x x x it would appear that defendant has business transactions with plaintiff. This is evident
The refusal of the consignee named in the bill of lading to pay the freightage on the claim from defendant’s letters dated 09 May 2002 and 13 May 2002 (Exhibits "1" and "2",
that it is not privy to the contract of affreightment propelled the shipper to sue for collection defendant’s Position Paper) where it requested for the release of refund of container deposits
of money, stressing that its sole evidence, the bill of lading, suffices to prove that the x x x. [In] the mind of the Court, by analogy, a written contract need not be necessary; a
consignee is bound to pay. Petitioner now comes to us by way of Petition for Review mutual understanding [would suffice]. Further, plaintiff would have not included the name
on Certiorari1 under Rule 45 praying for the reversal of the Court of Appeals' (CA) judgment of the defendant in the bill of lading, had there been no prior agreement to that effect.
that dismissed its action for sum of money for insufficiency of evidence.
In sum, plaintiff has sufficiently proved its cause of action against the defendant and the
Factual Antecedents latter is obliged to honor its agreement with plaintiff despite the absence of a written
contract.5
On October 25, 2001, Halla Trading Co., a company based in Korea, shipped to Manila
secondhand cars and other articles on board the vessel Hanjin Busan 0238W. The bill of The dispositive portion of the MeTC Decision reads:
lading covering the shipment, i.e., Bill of Lading No. HJSCPUSI14168303,2 which was
prepared by the carrier Hanjin Shipping Co., Ltd. (Hanjin), named respondent Shin Yang
WHEREFORE, premises considered, judgment is hereby rendered in favor of plaintiff and
Brokerage Corp. (Shin Yang) as the consignee and indicated that payment was on a "Freight
against the defendant, ordering the latter to pay plaintiff as follows:
Collect" basis, i.e., that the consignee/receiver of the goods would be the one to pay for the
freight and other charges in the total amount of ₱57,646.00.3
1. ₱57,646.00 plus legal interest from the date of demand until fully paid,
The shipment arrived in Manila on October 29, 2001. Thereafter, petitioner MOF Company,
Inc. (MOF), Hanjin’s exclusive general agent in the Philippines, repeatedly demanded the 2. ₱10,000.00 as and for attorney’s fees and
payment of ocean freight, documentation fee and terminal handling charges from Shin Yang.
The latter, however, failed and refused to pay contending that it did not cause the
3. the cost of suit.
importation of the goods, that it is only the Consolidator of the said shipment, that the
ultimate consignee did not endorse in its favor the original bill of lading and that the bill of
lading was prepared without its consent. SO ORDERED.6

Thus, on March 19, 2003, MOF filed a case for sum of money before the Metropolitan Trial
Court of Pasay City (MeTC Pasay) which was docketed as Civil Case No. 206-03 and raffled
to Branch 48. MOF alleged that Shin Yang, a regular client, caused the importation and
shipment of the goods and assured it that ocean freight and other charges would be paid
upon arrival of the goods in Manila. Yet, after Hanjin's compliance, Shin Yang unjustly
breached its obligation to pay. MOF argued that Shin Yang, as the named consignee in the
bill of lading, entered itself as a party to the contract and bound itself to the "Freight Collect"
arrangement. MOF thus prayed for the payment of ₱57,646.00 representing ocean freight,
documentation fee and terminal handling charges as well as damages and attorney’s fees.
Ruling of the Regional Trial Court
The Regional Trial Court (RTC) of Pasay City, Branch 108 affirmed in toto the Decision of
the MeTC. It held that:
MOF and Shin Yang entered into a contract of affreightment which Black’s Law Dictionary
defined as a contract with the ship owner to hire his ship or part of it, for the carriage of
goods and generally take the form either of a charter party or a bill of lading.

Claiming that it is merely a consolidator/forwarder and that Bill of Lading No. The bill of lading contain[s] the information embodied in the contract.
HJSCPUSI14168303 was not endorsed to it by the ultimate consignee, Shin Yang denied any

15
Article 652 of the Code of Commerce provides that the charter party must be in writing;
however, Article 653 says: "If the cargo should be received without charter party having been
signed, the contract shall be understood as executed in accordance with what appears in the
bill of lading, the sole evidence of title with regard to the cargo for determining the rights
and obligations of the ship agent, of the captain and of the charterer". Thus, the Supreme
Court opined in the Market Developers, Inc. (MADE) vs. Honorable Intermediate Appellate
Court and Gaudioso Uy, G.R. No. 74978, September 8, 1989, this kind of contract may be
oral. In another case, Compania Maritima vs. Insurance Company of North America, 12
SCRA 213 the contract of affreightment by telephone was recognized where the oral
agreement was later confirmed by a formal booking.
xxxx
Defendant is liable to pay the sum of ₱57,646.00, with interest until fully paid, attorney’s
fees of ₱10,000.00 [and] cost of suit.
Considering all the foregoing, this Court affirms in toto the decision of the Court a quo.
SO ORDERED.7
Ruling of the Court of Appeals
Seeing the matter in a different light, the CA dismissed MOF’s complaint and refused to
award any form of damages or attorney’s fees. It opined that MOF failed to substantiate its
claim that Shin Yang had a hand in the importation of the articles to the Philippines or that
it gave its consent to be a consignee of the subject goods. In its March 22, 2006 Decision,8 the
CA said:
This Court is persuaded [that except] for the Bill of Lading, respondent has not presented
any other evidence to bolster its claim that petitioner has entered [into] an agreement of
affreightment with respondent, be it verbal or written. It is noted that the Bill of Lading was
prepared by Hanjin Shipping, not the petitioner. Hanjin is the principal while respondent is
the former’s agent. (p. 43, rollo)
The conclusion of the court a quo, which was upheld by the RTC Pasay City, Branch 108 xxx
is purely speculative and conjectural. A court cannot rely on speculations, conjectures or
guesswork, but must depend upon competent proof and on the basis of the best evidence
obtainable under the circumstances. Litigation cannot be properly resolved by suppositions,
deductions or even presumptions, with no basis in evidence, for the truth must have to be
determined by the hard rules of admissibility and proof (Lagon vs. Hooven Comalco
Industries, Inc. 349 SCRA 363).
While it is true that a bill of lading serves two (2) functions: first, it is a receipt for the goods
shipped; second, it is a contract by which three parties, namely, the shipper, the carrier and
the consignee who undertake specific responsibilities and assume stipulated obligations
(Belgian Overseas Chartering and Shipping N.V. vs. Phil. First Insurance Co., Inc., 383 SCRA
23), x x x if the same is not accepted, it is as if one party does not accept the contract. Said
the Supreme Court:
"A bill of lading delivered and accepted constitutes the contract of carriage[,] even though
not signed, because the acceptance of a paper containing the terms of a proposed contract
generally constitutes an acceptance of the contract and of all its terms and conditions of
which the acceptor has actual or constructive notice" (Keng Hua Paper Products Co., Inc. vs.
CA, 286 SCRA 257).
In the present case, petitioner did not only [refuse to] accept the bill of lading, but it likewise
disown[ed] the shipment x x x. [Neither did it] authorize Halla Trading Company or anyone
to ship or export the same on its behalf.
It is settled that a contract is upheld as long as there is proof of consent, subject matter and
cause (Sta. Clara Homeowner’s Association vs. Gaston, 374 SCRA 396). In the case at bar,
there is not even any iota of evidence to show that petitioner had given its consent.
"He who alleges a fact has the burden of proving it and a mere allegation is not evidence"
(Luxuria Homes Inc. vs. CA, 302 SCRA 315).
The 40-footer van contains goods of substantial value. It is highly improbable for petitioner
not to pay the charges, which is very minimal compared with the value of the goods, in order
that it could work on the release thereof.
For failure to substantiate its claim by preponderance of evidence, respondent has not
established its case against petitioner.9
Petitioners filed a motion for reconsideration but it was denied in a Resolution10 dated May
25, 2006. Hence, this petition for review on certiorari.
Petitioner’s Arguments
In assailing the CA’s Decision, MOF argues that the factual findings of both the MeTC and
RTC are entitled to great weight and respect and should have bound the CA. It stresses that
the appellate court has no justifiable reason to disturb the lower courts’ judgments because
their conclusions are well-supported by the evidence on record.
MOF further argues that the CA erred in labeling the findings of the lower courts as purely
‘speculative and conjectural’. According to MOF, the bill of lading, which expressly stated
Shin Yang as the consignee, is the best evidence of the latter’s actual participation in the
transportation of the goods. Such document, validly entered, stands as the law among the
shipper, carrier and the consignee, who are all bound by the terms stated therein. Besides, a
carrier’s valid claim after it fulfilled its obligation cannot just be rejected by the named
consignee upon a simple denial that it ever consented to be a party in a contract of
affreightment, or that it ever participated in the preparation of the bill of lading. As against
Shin Yang’s bare denials, the bill of lading is the sufficient preponderance of evidence
required to prove MOF’s claim. MOF maintains that Shin Yang was the one that supplied all
the details in the bill of lading and acquiesced to be named consignee of the shipment on a
‘Freight Collect’ basis.
Lastly, MOF claims that even if Shin Yang never gave its consent, it cannot avoid its
obligation to pay, because it never objected to being named as the consignee in the bill of
16
lading and that it only protested when the shipment arrived in the Philippines, presumably
due to a botched transaction between it and Halla Trading Co. Furthermore, Shin Yang’s
letters asking for the refund of container deposits highlight the fact that it was aware of the
shipment and that it undertook preparations for the intended release of the shipment.
Respondent’s Arguments
Echoing the CA decision, Shin Yang insists that MOF has no evidence to prove that it
consented to take part in the contract of affreightment. Shin Yang argues that MOF
miserably failed to present any evidence to prove that it was the one that made preparations
for the subject shipment, or that it is an ‘actual shipping practice’ that
forwarders/consolidators as consignees are the ones that provide carriers details and
information on the bills of lading.
Shin Yang contends that a bill of lading is essentially a contract between the shipper and the
carrier and ordinarily, the shipper is the one liable for the freight charges. A consignee, on
the other hand, is initially a stranger to the bill of lading and can be liable only when the bill
of lading specifies that the charges are to be paid by the consignee. This liability arises from
either a) the contract of agency between the shipper/consignor and the consignee; or b) the
consignee’s availment of the stipulation pour autrui drawn up by and between the shipper/
consignor and carrier upon the consignee’s demand that the goods be delivered to it. Shin
Yang contends that the fact that its name was mentioned as the consignee of the cargoes did
not make it automatically liable for the freightage because it never benefited from the
shipment. It never claimed or accepted the goods, it was not the shipper’s agent, it was not
aware of its designation as consignee and the original bill of lading was never endorsed to it.
Issue
The issue for resolution is whether a consignee, who is not a signatory to the bill of lading, is
bound by the stipulations thereof. Corollarily, whether respondent who was not an agent of
the shipper and who did not make any demand for the fulfillment of the stipulations of the
bill of lading drawn in its favor is liable to pay the corresponding freight and handling
charges.
Our Ruling
Since the CA and the trial courts arrived at different conclusions, we are constrained to
depart from the general rule that only errors of law may be raised in a Petition for Review on
Certiorari under Rule 45 of the Rules of Court and will review the evidence presented.11
The bill of lading is oftentimes drawn up by the shipper/consignor and the carrier without
the intervention of the consignee. However, the latter can be bound by the stipulations of the
bill of lading when a) there is a relation of agency between the shipper or consignor and the
consignee or b) when the consignee demands fulfillment of the stipulation of the bill of
lading which was drawn up in its favor.12
In Keng Hua Paper Products Co., Inc. v. Court of Appeals,13 we held that once the bill of
lading is received by the consignee who does not object to any terms or stipulations
contained therein, it constitutes as an acceptance of the contract and of all of its terms and
conditions, of which the acceptor has actual or constructive notice.1avvphi1
In Mendoza v. Philippine Air Lines, Inc.,14 the consignee sued the carrier for damages but
nevertheless claimed that he was never a party to the contract of transportation and was a
complete stranger thereto. In debunking Mendoza’scontention, we held that:
x x x First, he insists that the articles of the Code of Commerce should be applied; that he
invokes the provisions of said Code governing the obligations of a common carrier to make
prompt delivery of goods given to it under a contract of transportation. Later, as already said,
he says that he was never a party to the contract of transportation and was a complete
stranger to it, and that he is now suing on a tort or a violation of his rights as a stranger
(culpa aquiliana). If he does not invoke the contract of carriage entered into with the
defendant company, then he would hardly have any leg to stand on. His right to prompt
delivery of the can of film at the Pili Air Port stems and is derived from the contract of
carriage under which contract, the PAL undertook to carry the can of film safely and to
deliver it to him promptly. Take away or ignore that contract and the obligation to carry and
to deliver and right to prompt delivery disappear. 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. In the present
case, the findings of the trial court which as already stated, are accepted by the
parties and which we must accept are to the effect that the LVN Pictures Inc.
and Jose Mendoza on one side, and the defendant company on the other,
entered into a contract of transportation (p. 29, Rec. on Appeal). 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. 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 a consignee. [Mendoza made himself a party to the contract of
transportaion when he appeared at the Pili Air Port armed with the copy of the
Air Way Bill (Exh. 1) demanding the delivery of the shipment to him.] The very
citation made by appellant in his memorandum supports this view. Speaking of 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, Malagarriga in his
book Codigo de Comercio Comentado, Vol. 1, p. 400, citing a decision of the Argentina Court
of Appeals on commercial matters, cited by Tolentino in Vol. II of his book entitled
'Commentaries and Jurisprudence on the Commercial Laws of the Philippines' p. 209, says
that 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.
Still another view of this phase of the case is that contemplated in Art. 1257,
paragraph 2, of the old Civil Code (now Art. 1311, second paragraph) which
reads thus:
‘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.'
17
Here, the contract of carriage between the LVN Pictures Inc. and the defendant
carrier contains the stipulations of delivery to Mendoza as consignee. 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 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.15(Emphasis Ours)

In sum, a consignee, although not a signatory to the contract of carriage between the shipper
and the carrier, becomes a party to the contract by reason of either a) the relationship of
agency between the consignee and the shipper/ consignor; b) the unequivocal acceptance of
the bill of lading delivered to the consignee, with full knowledge of its contents or c)
availment of the stipulation pour autrui, i.e., when the consignee, a third person, demands
before the carrier the fulfillment of the stipulation made by the consignor/shipper in the
consignee’s favor, specifically the delivery of the goods/cargoes shipped.16

In the instant case, Shin Yang consistently denied in all of its pleadings that it authorized
Halla Trading, Co. to ship the goods on its behalf; or that it got hold of the bill of lading
covering the shipment or that it demanded the release of the cargo. Basic is the rule in
evidence that the burden of proof lies upon him who asserts it, not upon him who denies,
since, by the nature of things, he who denies a fact cannot produce any proof of it.17 Thus,
MOF has the burden to controvert all these denials, it being insistent that Shin Yang asserted
itself as the consignee and the one that caused the shipment of the goods to the Philippines.

In civil cases, the party having the burden of proof must establish his case by preponderance
of evidence,18 which means evidence which is of greater weight, or more convincing than that
which is offered in opposition to it.19 Here, MOF failed to meet the required quantum of
proof. Other than presenting the bill of lading, which, at most, proves that the carrier
acknowledged receipt of the subject cargo from the shipper and that the consignee named is
to shoulder the freightage, MOF has not adduced any other credible evidence to strengthen
its cause of action. It did not even present any witness in support of its allegation that it was
Shin Yang which furnished all the details indicated in the bill of lading and that Shin Yang
consented to shoulder the shipment costs. There is also nothing in the records which would
indicate that Shin Yang was an agent of Halla Trading Co. or that it exercised any act that
would bind it as a named consignee. Thus, the CA correctly dismissed the suit for failure of
petitioner to establish its cause against respondent.

WHEREFORE, the petition is DENIED. The assailed Decision of the Court of Appeals dated
March 22, 2006 dismissing petitioner’s complaint and the Resolution dated May 25, 2006
denying the motion for reconsideration are AFFIRMED.

SO ORDERED.

18
G.R. No. 186312 June 29, 2010
SPOUSES DANTE CRUZ and LEONORA CRUZ, Petitioners,
vs.
SUN HOLIDAYS, INC., Respondent.
DECISION
CARPIO MORALES, J.:
Spouses Dante and Leonora Cruz (petitioners) lodged a Complaint on January 25,
20011 against Sun Holidays, Inc. (respondent) with the Regional Trial Court (RTC) of Pasig
City for damages arising from the death of their son Ruelito C. Cruz (Ruelito) who perished
with his wife on September 11, 2000 on board the boat M/B Coco Beach III that capsized en
route to Batangas from Puerto Galera, Oriental Mindoro where the couple had stayed at Coco
Beach Island Resort (Resort) owned and operated by respondent.
The stay of the newly wed Ruelito and his wife at the Resort from September 9 to 11, 2000
was by virtue of a tour package-contract with respondent that included transportation to and
from the Resort and the point of departure in Batangas.
Miguel C. Matute (Matute),2 a scuba diving instructor and one of the survivors, gave his
account of the incident that led to the filing of the complaint as follows:
Matute stayed at the Resort from September 8 to 11, 2000. He was originally scheduled to
leave the Resort in the afternoon of September 10, 2000, but was advised to stay for another
night because of strong winds and heavy rains.
On September 11, 2000, as it was still windy, Matute and 25 other Resort guests including
petitioners’ son and his wife trekked to the other side of the Coco Beach mountain that was
sheltered from the wind where they boarded M/B Coco Beach III, which was to ferry them
to Batangas.
Shortly after the boat sailed, it started to rain. As it moved farther away from Puerto Galera
and into the open seas, the rain and wind got stronger, causing the boat to tilt from side to
side and the captain to step forward to the front, leaving the wheel to one of the crew
members.
The waves got more unwieldy. After getting hit by two big waves which came one after the
other, M/B Coco Beach III capsized putting all passengers underwater.
The passengers, who had put on their life jackets, struggled to get out of the boat. Upon
seeing the captain, Matute and the other passengers who reached the surface asked him what
they could do to save the people who were still trapped under the boat. The captain replied
"Iligtas niyo na lang ang sarili niyo" (Just save yourselves).
Help came after about 45 minutes when two boats owned by Asia Divers in Sabang, Puerto
Galera passed by the capsized M/B Coco Beach III. Boarded on those two boats were 22
persons, consisting of 18 passengers and four crew members, who were brought to Pisa
Island. Eight passengers, including petitioners’ son and his wife, died during the incident.
At the time of Ruelito’s death, he was 28 years old and employed as a contractual worker for
Mitsui Engineering & Shipbuilding Arabia, Ltd. in Saudi Arabia, with a basic monthly salary
of $900.3
Petitioners, by letter of October 26, 2000,4 demanded indemnification from respondent for
the death of their son in the amount of at least ₱4,000,000.
Replying, respondent, by letter dated November 7, 2000,5 denied any responsibility for the
incident which it considered to be a fortuitous event. It nevertheless offered, as an act of
commiseration, the amount of ₱10,000 to petitioners upon their signing of a waiver.
As petitioners declined respondent’s offer, they filed the Complaint, as earlier reflected,
alleging that respondent, as a common carrier, was guilty of negligence in allowing M/B Coco
Beach III to sail notwithstanding storm warning bulletins issued by the Philippine
Atmospheric, Geophysical and Astronomical Services Administration (PAGASA) as early as
5:00 a.m. of September 11, 2000.6
In its Answer,7 respondent denied being a common carrier, alleging that its boats are not
available to the general public as they only ferry Resort guests and crew members.
Nonetheless, it claimed that it exercised the utmost diligence in ensuring the safety of its
passengers; contrary to petitioners’ allegation, there was no storm on September 11, 2000 as
the Coast Guard in fact cleared the voyage; and M/B Coco Beach III was not filled to capacity
and had sufficient life jackets for its passengers. By way of Counterclaim, respondent alleged
that it is entitled to an award for attorney’s fees and litigation expenses amounting to not
less than ₱300,000.
Carlos Bonquin, captain of M/B Coco Beach III, averred that the Resort customarily requires
four conditions to be met before a boat is allowed to sail, to wit: (1) the sea is calm, (2) there
is clearance from the Coast Guard, (3) there is clearance from the captain and (4) there is
clearance from the Resort’s assistant manager.8 He added that M/B Coco Beach III met all
four conditions on September 11, 2000,9 but a subasco or squall, characterized by strong
winds and big waves, suddenly occurred, causing the boat to capsize.10
By Decision of February 16, 2005,11 Branch 267 of the Pasig RTC dismissed petitioners’
Complaint and respondent’s Counterclaim.
Petitioners’ Motion for Reconsideration having been denied by Order dated September 2,
2005,12 they appealed to the Court of Appeals.
By Decision of August 19, 2008,13 the appellate court denied petitioners’ appeal, holding,
among other things, that the trial court correctly ruled that respondent is a private carrier
which is only required to observe ordinary diligence; that respondent in fact observed
extraordinary diligence in transporting its guests on board M/B Coco Beach III; and that the
proximate cause of the incident was a squall, a fortuitous event.
19
Petitioners’ Motion for Reconsideration having been denied by Resolution dated January 16,
2009,14 they filed the present Petition for Review.15
Petitioners maintain the position they took before the trial court, adding that respondent is
a common carrier since by its tour package, the transporting of its guests is an integral part
of its resort business. They inform that another division of the appellate court in fact held
respondent liable for damages to the other survivors of the incident.
Upon the other hand, respondent contends that petitioners failed to present evidence to
prove that it is a common carrier; that the Resort’s ferry services for guests cannot be
considered as ancillary to its business as no income is derived therefrom; that it exercised
extraordinary diligence as shown by the conditions it had imposed before allowing M/B Coco
Beach III to sail; that the incident was caused by a fortuitous event without any contributory
negligence on its part; and that the other case wherein the appellate court held it liable for
damages involved different plaintiffs, issues and evidence.16
The petition is impressed with merit.
Petitioners correctly rely on De Guzman v. Court of Appeals 17 in characterizing respondent
as a common carrier.
The Civil Code defines "common carriers" in the following terms:
Article 1732. Common carriers are persons, corporations, firms or associations engaged in
the business of carrying or transporting passengers or goods or both, by land, water, or air
for compensation, offering their services to the public.
The above article makes no distinction between one whose principal business activity is the
carrying of persons or goods or both, and one who does such carrying only as an ancillary
activity (in local idiom, as "a sideline"). Article 1732 also carefully avoids making any
distinction between a person or enterprise offering transportation service on a regular or
scheduled basis and one offering such service on an occasional, episodic or unscheduled
basis. Neither does Article 1732 distinguish between a carrier offering its services to
the "general public," i.e., the general community or population, and one who offers services
or solicits business only from a narrow segment of the general population. We think that
Article 1733 deliberately refrained from making such distinctions.
So understood, the concept of "common carrier" under Article 1732 may be seen to coincide
neatly with the notion of "public service," under the Public Service Act (Commonwealth Act
No. 1416, as amended) which at least partially supplements the law on common carriers set
forth in the Civil Code. Under Section 13, paragraph (b) of the Public Service Act, "public
service" includes:
. . . every person that now or hereafter may own, operate, manage, or control in the
Philippines, for hire or compensation, with general or limited clientele, whether permanent,
occasional or accidental, and done for general business purposes, any common carrier,
railroad, street railway, traction railway, subway motor vehicle, either for freight or
passenger, or both, with or without fixed route and whatever may be its classification, freight
or carrier service of any class, express service, steamboat, or steamship line, pontines, ferries
and water craft, engaged in the transportation of passengers or freight or both, shipyard,
marine repair shop, wharf or dock, ice plant, ice-refrigeration plant, canal, irrigation system,
gas, electric light, heat and power, water supply and power petroleum, sewerage system, wire
or wireless communications systems, wire or wireless broadcasting stations and other
similar public services . . .18 (emphasis and underscoring supplied.)
Indeed, respondent is a common carrier. Its ferry services are so intertwined with its main
business as to be properly considered ancillary thereto. The constancy of respondent’s ferry
services in its resort operations is underscored by its having its own Coco Beach boats. And
the tour packages it offers, which include the ferry services, may be availed of by anyone who
can afford to pay the same. These services are thus available to the public.
That respondent does not charge a separate fee or fare for its ferry services is of no moment.
It would be imprudent to suppose that it provides said services at a loss. The Court is aware
of the practice of beach resort operators offering tour packages to factor the transportation
fee in arriving at the tour package price. That guests who opt not to avail of respondent’s
ferry services pay the same amount is likewise inconsequential. These guests may only be
deemed to have overpaid.
As De Guzman instructs, Article 1732 of the Civil Code defining "common carriers" has
deliberately refrained from making distinctions on whether the carrying of persons or goods
is the carrier’s principal business, whether it is offered on a regular basis, or whether it is
offered to the general public. The intent of the law is thus to not consider such distinctions.
Otherwise, there is no telling how many other distinctions may be concocted by
unscrupulous businessmen engaged in the carrying of persons or goods in order to avoid the
legal obligations and liabilities of common carriers.
Under the Civil Code, common carriers, from the nature of their business and for reasons of
public policy, are bound to observe extraordinary diligence for the safety of the passengers
transported by them, according to all the circumstances of each case.19 They are bound to
carry the passengers safely as far as human care and foresight can provide, using the utmost
diligence of very cautious persons, with due regard for all the circumstances.20
When a passenger dies or is injured in the discharge of a contract of carriage, it is presumed
that the common carrier is at fault or negligent. In fact, there is even no need for the court
to make an express finding of fault or negligence on the part of the common carrier. This
statutory presumption may only be overcome by evidence that the carrier exercised
extraordinary diligence.21
Respondent nevertheless harps on its strict compliance with the earlier mentioned
conditions of voyage before it allowed M/B Coco Beach III to sail on September 11, 2000.
Respondent’s position does not impress.
The evidence shows that PAGASA issued 24-hour public weather forecasts and tropical
cyclone warnings for shipping on September 10 and 11, 2000 advising of tropical depressions
in Northern Luzon which would also affect the province of Mindoro.22 By the testimony of
Dr. Frisco Nilo, supervising weather specialist of PAGASA, squalls are to be expected under
such weather condition.23
A very cautious person exercising the utmost diligence would thus not brave such stormy
weather and put other people’s lives at risk. The extraordinary diligence required of common
20
carriers demands that they take care of the goods or lives entrusted to their hands as if they
were their own. This respondent failed to do.
Respondent’s insistence that the incident was caused by a fortuitous event does not impress
either.
The second factor is computed by multiplying the life expectancy by the net earnings of the
deceased, i.e., the total earnings less expenses necessary in the creation of such earnings or
income and less living and other incidental expenses.32 The loss is not equivalent to the entire
earnings of the deceased, but only such portion as he would have used to support his
dependents or heirs. Hence, to be deducted from his gross earnings are the necessary
expenses supposed to be used by the deceased for his own needs.33

The elements of a "fortuitous event" are: (a) the cause of the unforeseen and unexpected
In computing the third factor – necessary living expense, Smith Bell Dodwell Shipping
occurrence, or the failure of the debtors to comply with their obligations, must have been
Agency Corp. v. Borja34teaches that when, as in this case, there is no showing that the living
independent of human will; (b) the event that constituted the caso fortuito must have been
expenses constituted the smaller percentage of the gross income, the living expenses are
impossible to foresee or, if foreseeable, impossible to avoid; (c) the occurrence must have
fixed at half of the gross income.
been such as to render it impossible for the debtors to fulfill their obligation in a normal
manner; and (d) the obligor must have been free from any participation in the aggravation
of the resulting injury to the creditor.24 Applying the above guidelines, the Court determines Ruelito's life expectancy as follows:

To fully free a common carrier from any liability, the fortuitous event must have been
the proximate and only causeof the loss. And it should have exercised due diligence to Life expectancy = 2/3 x [80 - age of deceased at the time of death]
prevent or minimize the loss before, during and after the occurrence of the fortuitous event.25 2/3 x [80 - 28]
2/3 x [52]

Respondent cites the squall that occurred during the voyage as the fortuitous event that Life expectancy = 35
overturned M/B Coco Beach III. As reflected above, however, the occurrence of squalls was
expected under the weather condition of September 11, 2000. Moreover, evidence shows
that M/B Coco Beach III suffered engine trouble before it capsized and sank.26 The incident
Documentary evidence shows that Ruelito was earning a basic monthly salary of
was, therefore, not completely free from human intervention.
$90035 which, when converted to Philippine peso applying the annual average exchange rate
of $1 = ₱44 in 2000,36 amounts to ₱39,600. Ruelito’s net earning capacity is thus computed
The Court need not belabor how respondent’s evidence likewise fails to demonstrate that it as follows:
exercised due diligence to prevent or minimize the loss before, during and after the
occurrence of the squall.
Net Earning = life expectancy x (gross annual income - reasonable and
Article 176427 vis-à-vis Article 220628 of the Civil Code holds the common carrier in breach Capacity necessary living expenses).
of its contract of carriage that results in the death of a passenger liable to pay the following: = 35 x (₱475,200 - ₱237,600)
(1) indemnity for death, (2) indemnity for loss of earning capacity and (3) moral damages. = 35 x (₱237,600)

Petitioners are entitled to indemnity for the death of Ruelito which is fixed at ₱50,000.29 Net Earning
= ₱8,316,000
Capacity

As for damages representing unearned income, the formula for its computation is:
Respecting the award of moral damages, since respondent common carrier’s breach of
Net Earning Capacity = life expectancy x (gross annual income - reasonable and necessary contract of carriage resulted in the death of petitioners’ son, following Article 1764 vis-à-vis
living expenses). Article 2206 of the Civil Code, petitioners are entitled to moral damages.

Life expectancy is determined in accordance with the formula: Since respondent failed to prove that it exercised the extraordinary diligence required of
common carriers, it is presumed to have acted recklessly, thus warranting the award too of
exemplary damages, which are granted in contractual obligations if the defendant acted in a
2 / 3 x [80 — age of deceased at the time of death]30 wanton, fraudulent, reckless, oppressive or malevolent manner.37

The first factor, i.e., life expectancy, is computed by applying the formula (2/3 x [80 — age
Under the circumstances, it is reasonable to award petitioners the amount of ₱100,000 as
at death]) adopted in the American Expectancy Table of Mortality or the Actuarial of
moral damages and ₱100,000 as exemplary damages.381avvphi1
Combined Experience Table of Mortality.31

21
Pursuant to Article 220839 of the Civil Code, attorney's fees may also be awarded where SO ORDERED.
exemplary damages are awarded. The Court finds that 10% of the total amount adjudged
against respondent is reasonable for the purpose.

Finally, Eastern Shipping Lines, Inc. v. Court of Appeals40 teaches that when an obligation,
regardless of its source, i.e., law, contracts, quasi-contracts, delicts or quasi-delicts is
breached, the contravenor can be held liable for payment of interest in the concept of actual
and compensatory damages, subject to the following rules, to wit —

1. When the obligation is breached, and it consists in the payment of a sum of

money, i.e., a loan or forbearance of money, the interest due should be that which
may have been stipulated in writing. Furthermore, the interest due shall itself earn
legal interest from the time it is judicially demanded. In the absence of stipulation,
the rate of interest shall be 12% per annum to be computed from default, i.e., from
judicial or extrajudicial demand under and subject to the provisions of Article 1169
of the Civil Code.

2. When an obligation, not constituting a loan or forbearance of money, is

breached, an interest on the amount of damages awarded may be imposed at the
discretion of the court at the rate of 6% per annum. No interest, however, shall be
adjudged on unliquidated claims or damages except when or until the demand can
be established with reasonable certainty. Accordingly, where the demand is
established with reasonable certainty, the interest shall begin to run from the time
the claim is made judicially or extrajudicially (Art. 1169, Civil Code) but when such
certainty cannot be so reasonably established at the time the demand is made, the
interest shall begin to run only from the date the judgment of the court is made (at
which time the quantification of damages may be deemed to have been reasonably
ascertained). The actual base for the computation of legal interest shall, in any
case, be on the amount finally adjudged.

3. When the judgment of the court awarding a sum of money becomes final and
executory, the rate of legal interest, whether the case falls under paragraph 1 or
paragraph 2, above, shall be 12% per annum from such finality until its satisfaction,
this interim period being deemed to be by then an equivalent to a forbearance of
credit. (emphasis supplied).

Since the amounts payable by respondent have been determined with certainty only in the
present petition, the interest due shall be computed upon the finality of this decision at the
rate of 12% per annum until satisfaction, in accordance with paragraph number 3 of the
immediately cited guideline in Easter Shipping Lines, Inc.

WHEREFORE, the Court of Appeals Decision of August 19, 2008 is REVERSED and SET
ASIDE. Judgment is rendered in favor of petitioners ordering respondent to pay petitioners
the following: (1) ₱50,000 as indemnity for the death of Ruelito Cruz; (2) ₱8,316,000 as
indemnity for Ruelito’s loss of earning capacity; (3) ₱100,000 as moral damages; (4)
₱100,000 as exemplary damages; (5) 10% of the total amount adjudged against respondent
as attorneys fees; and (6) the costs of suit.

The total amount adjudged against respondent shall earn interest at the rate of 12% per
annum computed from the finality of this decision until full payment.

22
G.R. No. 144274 September 20, 2004
NOSTRADAMUS VILLANUEVA, petitioner,
vs.
PRISCILLA R. DOMINGO and LEANDRO LUIS R. DOMINGO, respondents.
DECISION
CORONA, J.:
This is a petition to review the decision1 of the Court of Appeals in CA-G.R. CV No. 52203
affirming in turn the decision of the trial court finding petitioner liable to respondent for
damages. The dispositive portion read:
WHEREFORE, the appealed decision is hereby AFFIRMED except the award of
attorney’s fees including appearance fees which is DELETED.
SO ORDERED.2
The facts of the case, as summarized by the Court of Appeals, are as follows:
[Respondent] Priscilla R. Domingo is the registered owner of a silver Mitsubishi
Lancer Car model 1980 bearing plate No. NDW 781 ’91 with [co-respondent]
Leandro Luis R. Domingo as authorized driver. [Petitioner] Nostradamus
Villanueva was then the registered "owner" of a green Mitsubishi Lancer bearing
Plate No. PHK 201 ’91.
On 22 October 1991 at about 9:45 in the evening, following a green traffic light,
[respondent] Priscilla Domingo’s silver Lancer car with Plate No. NDW 781 ’91
then driven by [co-respondent] Leandro Luis R. Domingo was cruising along the
middle lane of South Superhighway at moderate speed from north to south.
Suddenly, a green Mitsubishi Lancer with plate No. PHK 201 ’91 driven by Renato
Dela Cruz Ocfemia darted from Vito Cruz Street towards the South Superhighway
directly into the path of NDW 781 ’91 thereby hitting and bumping its left front
portion. As a result of the impact, NDW 781 ’91 hit two (2) parked vehicles at the
roadside, the second hitting another parked car in front of it.
Per Traffic Accident Report prepared by Traffic Investigator Pfc. Patrocinio N.
Acido, Renato dela Cruz Ocfemia was driving with expired license and positive for
alcoholic breath. Hence, Manila Assistant City Prosecutor Oscar A. Pascua
recommended the filing of information for reckless imprudence resulting to (sic)
damage to property and physical injuries.
The original complaint was amended twice: first, impleading Auto Palace Car
Exchange as commercial agent and/or buyer-seller and second, impleading Albert
Jaucian as principal defendant doing business under the name and style of Auto
Palace Car Exchange.
Except for Ocfemia, all the defendants filed separate answers to the complaint.
[Petitioner] Nostradamus Villanueva claimed that he was no longer the owner of
the car at the time of the mishap because it was swapped with a Pajero owned by
Albert Jaucian/Auto Palace Car Exchange. For her part, Linda Gonzales declared
that her presence at the scene of the accident was upon the request of the actual
owner of the Mitsubishi Lancer (PHK 201 ’91) [Albert Jaucian] for whom she had
been working as agent/seller. On the other hand, Auto Palace Car Exchange
represented by Albert Jaucian claimed that he was not the registered owner of the
car. Moreover, it could not be held subsidiary liable as employer of Ocfemia
because the latter was off-duty as utility employee at the time of the incident.
Neither was Ocfemia performing a duty related to his employment.3
After trial, the trial court found petitioner liable and ordered him to pay respondent actual,
moral and exemplary damages plus appearance and attorney’s fees:
WHEREFORE, judgment is hereby rendered for the plaintiffs, ordering
Nostradamus Villanueva to pay the amount of ₱99,580 as actual damages,
₱25,000.00 as moral damages, ₱25,000.00 as exemplary damages and attorney’s
fees in the amount of ₱10,000.00 plus appearance fees of ₱500.00 per hearing
with legal interest counted from the date of judgment. In conformity with the law
on equity and in accordance with the ruling in First Malayan Lending and Finance
Corporation vs. Court of Appeals (supra), Albert Jaucian is hereby ordered to
indemnify Nostradamus Villanueva for whatever amount the latter is hereby
ordered to pay under the judgment.
SO ORDERED.4
The CA upheld the trial court’s decision but deleted the award for appearance and attorney’s
fees because the justification for the grant was not stated in the body of the decision. Thus,
this petition for review which raises a singular issue:
MAY THE REGISTERED OWNER OF A MOTOR VEHICLE BE HELD LIABLE
FOR DAMAGES ARISING FROM A VEHICULAR ACCIDENT INVOLVING HIS
MOTOR VEHICLE WHILE BEING OPERATED BY THE EMPLOYEE OF ITS
BUYER WITHOUT THE LATTER’S CONSENT AND KNOWLEDGE?5
Yes.
We have consistently ruled that the registered owner of any vehicle is directly and primarily
responsible to the public and third persons while it is being operated.6 The rationale behind
such doctrine was explained way back in 1957 in Erezo vs. Jepte7:
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. How would the
public or third persons know against whom to enforce their rights in case of subsequent
transfers of the vehicles? We do not imply by his doctrine, however, that the registered owner
23
may not recover whatever amount he had paid by virtue of his liability to third persons from violator of the law or of the rules of safety shall not escape because of lack of means to
the person to whom he had actually sold, assigned or conveyed the vehicle. discover him. The purpose of the statute is thwarted, and the displayed number becomes a
"share and delusion," if courts would entertain such defenses as that put forward by appellee
in this case. No responsible person or corporation could be held liable for the most
Under the same principle the registered owner of any vehicle, even if not used for
outrageous acts of negligence, if they should be allowed to pace a "middleman" between them
a public service, should primarily be responsible to the public or to third persons
and the public, and escape liability by the manner in which they recompense servants. (King
for injuries caused the latter while the vehicle is being driven on the highways or
vs. Brenham Automobile Co., Inc. 145 S.W. 278, 279.)
streets. The members of the Court are in agreement that the defendant-appellant
should be held liable to plaintiff-appellee for the injuries occasioned to the latter
because of the negligence of the driver, even if the defendant-appellant was no With the above policy in mind, the question that defendant-appellant poses is: should not
longer the owner of the vehicle at the time of the damage because he had the registered owner be allowed at the trial to prove who the actual and real owner is, and in
previously sold it to another. What is the legal basis for his (defendant-appellant’s) accordance with such proof escape or evade responsibility by and lay the same on the person
liability? actually owning the vehicle? We hold with the trial court that the law does not allow him to
do so; 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
There is a presumption that the owner of the guilty vehicle is the defendant-appellant as he
registration. Were a registered owner allowed to evade responsibility by proving who the
is the registered owner in the Motor Vehicles Office. Should he not be allowed to prove the
supposed transferee or owner is, it would be easy for him, by collusion with others or
truth, that he had sold it to another and thus shift the responsibility for the injury to the real
otherwise, to escape said responsibility and transfer the same to an indefinite person, or to
and actual owner? The defendant holds the affirmative of this proposition; the trial court
one who possesses no property with which to respond financially for the damage or injury
held the negative.
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
The Revised Motor Vehicle Law (Act No. 3992, as amended) provides that no vehicle may be a recourse to the registration in the Motor Vehicles Office to determine who is the owner.
used or operated upon any public highway unless the same is property registered. It has been The protection that the law aims to extend to him would
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
become illusory were the registered owner given the opportunity to escape liability by
danger of injury to pedestrians and other travelers from the careless management of
disproving his ownership. If the policy of the law is to be enforced and carried out, the
automobiles. And to furnish a means of ascertaining the identity of persons violating the
registered owner should not be allowed to prove the contrary to the prejudice of the person
laws and ordinances, regulating the speed and operation of machines upon the highways (2
injured, that is, to prove that a third person or another has become the owner, so that he may
R.C.L. 1176). Not only are vehicles to be registered and that no motor vehicles are to be used
thereby be relieved of the responsibility to the injured person.
or operated without being properly registered for the current year, but that dealers in motor
vehicles shall furnish thee 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 The above policy and application of the law may appear quite harsh and would seem to
number and motor number. (Section 5(c), Act No. 3992, as amended.) conflict with truth and justice. We do not think it is so. 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
Registration is required not to make said registration the operative act by which ownership
transferee of the vehicle. The inconvenience of the suit is no justification for relieving him of
in vehicles is transferred, as in land registration cases, because the administrative
liability; said inconvenience is the price he pays for failure to comply with the registration
proceeding of registration does not bear any essential relation to the contract of sale between
that the law demands and requires.
the parties (Chinchilla vs. Rafael and Verdaguer, 39 Phil. 888), but to permit the use and
operation of the vehicle upon any public highway (section 5 [a], Act No. 3992, as amended).
The main aim of motor vehicle registration is to identify the owner so that if any accident In synthesis, we hold that the registered owner, the defendant-appellant herein, is primarily
happens, or that any damage or injury is caused by the vehicle on the public highways, responsible for the damage caused to the vehicle of the plaintiff-appellee, but he (defendant-
responsibility therefore can be fixed on a definite individual, the registered owner. Instances appellant) has a right to be indemnified by the real or actual owner of the amount that he
are numerous where vehicles running on public highways caused accidents or injuries to may be required to pay as damage for the injury caused to the plaintiff-appellant.8
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
Petitioner insists that he is not liable for damages since the driver of the vehicle at the time
prejudicial to the public, that the motor vehicle registration is primarily ordained, in the
of the accident was not an authorized driver of the new (actual) owner of the vehicle. He
interest of the determination of persons responsible for damages or injuries caused on public
claims that the ruling in First Malayan Leasing and Finance Corporation vs. CA9 implies
highways:
that to hold the registered owner liable for damages, the driver of the vehicle must have been
authorized, allowed and permitted by its actual owner to operate and drive it. Thus, if the
One of the principal purposes of motor vehicles legislation is identification of the vehicle and vehicle is driven without the knowledge and consent of the actual owner, then the registered
of the operator, in case of accident; and another is that the knowledge that means of owner cannot be held liable for damages.
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
24
He further argues that this was the underlying theory behind Duavit vs. CA10 wherein the
court absolved the registered owner from liability after finding that the vehicle was virtually
stolen from the owner’s garage by a person who was neither authorized nor employed by the
owner. Petitioner concludes that the ruling in Duavit and not the one in First
Malayan should be applicable to him.
Petitioner’s argument lacks merit. Whether the driver is authorized or not by the actual
owner is irrelevant to determining the liability of the registered owner who the law holds
primarily and directly responsible for any accident, injury or death caused by the operation
of the vehicle in the streets and highways. To require the driver of the vehicle to be authorized
by the actual owner before the registered owner can be held accountable is to defeat the very
purpose why motor vehicle legislations are enacted in the first place.
Furthermore, there is nothing in First Malayan which even remotely suggests that the driver
must be authorized before the registered owner can be held accountable. In First Malayan,
the registered owner, First Malayan Corporation, was held liable for damages arising from
the accident even if the vehicle involved was already owned by another party:
This Court has consistently ruled that regardless of who the actual owner is of a
motor vehicle might be, the registered owner is the operator of the same with
respect to the public and third persons, and as such, directly and primarily
responsible for the consequences of its operation. In contemplation of law, the
owner/operator of record is the employer of the driver, the actual operator and
employer being considered merely as his agent (MYC-Agro-Industrial
Corporation vs. Vda. de Caldo, 132 SCRA 10, citing Vargas vs. Langcay, 6 SCRA
174; Tamayo vs. Aquino, 105 Phil. 949).
latter. He testified further that Duavit even filed charges against him for the theft
of the jeep but which Duavit did not push through as his (Sabiano’s) parents
apologized to Duavit on his behalf.12
As correctly pointed out by the CA, the Duavit ruling is not applicable to petitioner’s case
since the circumstance of unauthorized use was not present. He in fact voluntarily delivered
his car to Albert Jaucian as part of the downpayment for a vehicle he purchased from
Jaucian. Thus, he could not claim that the vehicle was stolen from him since he voluntarily
ceded possession thereof to Jaucian. It was the latter, as the new (actual) owner, who could
have raised the defense of theft to prove that he was not liable for the acts of his employee
Ocfemia. Thus, there is no reason to apply the Duavit ruling to this case.
The ruling in First Malayan has been reiterated in BA Finance Corporation vs. CA13 and
more recently in Aguilar, Sr. vs. Commercial Savings Bank.14 In BA Finance, we held the
registered owner liable even if, at the time of the accident, the vehicle was leased by another
party and was driven by the lessee’s employee. In Aguilar, the registered owner-bank
answered for damages for the accident even if the vehicle was being driven by the Vice-
President of the Bank in his private capacity and not as an officer of the Bank, as claimed by
the Bank. We find no reason to deviate from these decisions.
The main purpose of vehicle registration is the easy identification of the owner who can be
held responsible for any accident, damage or injury caused by the vehicle. Easy identification
prevents inconvenience and prejudice to a third party injured by one who is unknown or
unidentified. To allow a registered owner to escape liability by claiming that the driver was
not authorized by the new (actual) owner results in the public detriment the law seeks to
avoid.

‘We believe that it is immaterial whether or not the driver was actually Finally, the issue of whether or not the driver of the vehicle during the accident was
employed by the operator of record. It is even not necessary to prove who authorized is not at all relevant to determining the liability of the registered owner. This must
the actual owner of the vehicle and the employer of the driver is. Granting be so if we are to comply with the rationale and principle behind the registration requirement
that, in this case, the father of the driver is the actual owner and that he under the motor vehicle law.
is the actual employer, following the well-settled principle that the
operator of record continues to be the operator of the vehicle in
WHEREFORE, the petition is hereby DENIED. The January 26, 2000 decision of the
contemplation of law, as regards the public and third person, and as such
Court of Appeals is AFFIRMED.
is responsible for the consequences incident to its operation, we must
hold and consider such owner-operator of record as the employer, in
contemplation of law, of the driver. And, to give effect to this policy of SO ORDERED.
law as enunciated in the above cited decisions of this Court, we must now
extend the same and consider the actual operator and employer as the
agent of the operator of record.’11

Contrary to petitioner’s position, the First Malayan ruling is applicable to him since the case
involves the same set of facts ― the registered owner had previously sold the vehicle to
someone else and was being driven by an employee of the new (actual) owner. Duavit is
inapplicable since the vehicle there was not transferred to another; the registered and the
actual owner was one and the same person. Besides, in Duavit, the defense of the registered
owner, Gilberto Duavit, was that the vehicle was practically stolen from his garage by Oscar
Sabiano, as affirmed by the latter:

Defendant Sabiano, in his testimony, categorically admitted that he took the jeep
from the garage of defendant Duavit without the consent and authority of the

25
G.R. No. 168433 February 10, 2009
UCPB GENERAL INSURANCE CO., INC., Petitioner,
vs.
ABOITIZ SHIPPING CORP. EAGLE EXPRESS LINES, DAMCO INTERMODAL
SERVICES, INC., and PIMENTEL CUSTOMS BROKERAGE CO., Respondents.
DECISION
TINGA, J.:
UCPB General Insurance Co., Inc. (UCPB) assails the Decision1 of the Court of Appeals dated
October 29, 2004, which reversed the Decision2 dated November 29, 1999 of the Regional
Trial Court of Makati City, Branch 146, and its Resolution3 dated June 14, 2005, which
denied UCPB’s motion for reconsideration.
The undisputed facts, culled from the assailed Decision, are as follows:
On June 18, 1991, three (3) units of waste water treatment plant with accessories were
purchased by San Miguel Corporation (SMC for brevity) from Super Max Engineering
Enterprises, Co., Ltd. of Taipei, Taiwan. The goods came from Charleston, U.S.A. and arrived
at the port of Manila on board MV "SCANDUTCH STAR". The same were then transported
to Cebu on board MV "ABOITIZ SUPERCON II". After its arrival at the port of Cebu and
clearance from the Bureau of Customs, the goods were delivered to and received by SMC at
its plant site on August 2, 1991. It was then discovered that one electrical motor of DBS Drive
Unit Model DE-30-7 was damaged.
Pursuant to an insurance agreement, plaintiff-appellee paid SMC the amount of
₱1,703,381.40 representing the value of the damaged unit. In turn, SMC executed a
Subrogation Form dated March 31, 1992 in favor of plaintiff-appellee.
Consequently, plaintiff-appellee filed a Complaint on July 21, 1992 as subrogee of SMC
seeking to recover from defendants the amount it had paid SMC.
On September 20, 1994, plaintiff-appellee moved to admit its Amended Complaint whereby
it impleaded East Asiatic Co. Ltd. (EAST for brevity) as among the defendants for being the
"general agent" of DAMCO. In its Order dated September 23, 1994, the lower court admitted
the said amended complaint.
Upon plaintiff-appellee’s motion, defendant DAMCO was declared in default by the lower
court in its Order dated January 6, 1995.
In the meantime, on January 25, 1995, defendant EAST filed a Motion for Preliminary
Hearing on its affirmative defenses seeking the dismissal of the complaint against it on the
ground of prescription, which motion was however denied by the court a quo in its Order
dated September 1, 1995. Such denial was elevated by defendant EAST to this Court through
a Petition for Certiorari on October 30, 1995 in CA G.R. SP No. 38840. Eventually, this Court
issued its Decision dated February 14, 1996 setting aside the lower court’s assailed order of
denial and further ordering the dismissal of the complaint against defendant EAST. Plaintiff-
appellee moved for reconsideration thereof but the same was denied by this Court in its
Resolution dated November 8, 1996. As per Entry of Judgment, this Court’s decision
ordering the dismissal of the complaint against defendant EAST became final and executory
on December 5, 1996.
Accordingly, the court a quo noted the dismissal of the complaint against defendant EAST
in its Order dated December 5, 1997. Thus, trial ensued with respect to the remaining
defendants.
On November 29, 1999, the lower court rendered its assailed Decision, the dispositive
portion of which reads:
WHEREFORE, all the foregoing premises considered, judgment is hereby rendered
declaring DAMCO Intermodal Systems, Inc., Eagle Express Lines, Inc. and defendant
Aboitiz Shipping solidarily liable to plaintiff-subrogee for the damaged shipment and orders
them to pay plaintiff jointly and severally the sum of ₱1,703,381.40.
No costs.
SO ORDERED.
Not convinced, defendants-appellants EAGLE and ABOITIZ now come to this Court through
their respective appeals x x x4
The appellate court, as previously mentioned, reversed the decision of the trial court and
ruled that UCPB’s right of action against respondents did not accrue because UCPB failed to
file a formal notice of claim within 24 hours from (SMC’s) receipt of the damaged
merchandise as required under Art. 366 of the Code of Commerce. According to the Court
of Appeals, the filing of a claim within the time limitation in Art. 366 is a condition precedent
to the accrual of a right of action against the carrier for the damages caused to the
merchandise.
In its Memorandum5 dated February 8, 2007, UCPB asserts that the claim requirement
under Art. 366 of the Code of Commerce does not apply to this case because the damage to
the merchandise had already been known to the carrier. Interestingly, UCPB makes this
revelation: "x x x damage to the cargo was found upon discharge from the foreign carrier
onto the International Container Terminal Services, Inc. (ICTSI) in the presence of the
carrier’s representative who signed the Request for Bad Order Survey6 and the Turn Over of
Bad Order Cargoes.7 On transshipment, the cargo was already damaged when loaded on
board the inter-island carrier."8 This knowledge, UCPB argues, dispenses with the need to
give the carrier a formal notice of claim. Incidentally, the carrier’s representative mentioned
by UCPB as present at the time the merchandise was unloaded was in fact a representative
of respondent Eagle Express Lines (Eagle Express).
UCPB claims that under the Carriage of Goods by Sea Act (COGSA), notice of loss need not
be given if the condition of the cargo has been the subject of joint inspection such as, in this
case, the inspection in the presence of the Eagle Express representative at the time the cargo
was opened at the ICTSI.
26
UCPB further claims that the issue of the applicability of Art. 366 of the Code of Commerce
was never raised before the trial court and should, therefore, not have been considered by
the Court of Appeals.
Eagle Express, in its Memorandum9 dated February 7, 2007, asserts that it cannot be held
liable for the damage to the merchandise as it acted merely as a freight forwarder’s agent in
the transaction. It allegedly facilitated the transshipment of the cargo from Manila to Cebu
but represented the interest of the cargo owner, and not the carrier’s. The only reason why
the name of the Eagle Express representative appeared on the Permit to Deliver Imported
Goods was that the form did not have a space for the freight forwarder’s agent, but only for
the agent of the shipping line. Moreover, UCPB had previously judicially admitted that upon
verification from the Bureau of Customs, it was East Asiatic Co., Ltd. (East Asiatic),
regarding whom the original complaint was dismissed on the ground of prescription, which
was the real agent of DAMCO Intermodal Services, Inc. (DAMCO), the ship owner.
Eagle Express argues that the applicability of Art. 366 of the Code of Commerce was properly
raised as an issue before the trial court as it mentioned this issue as a defense in its Answer
to UCPB’s Amended Complaint. Hence, UCPB’s contention that the question was raised for
the first time on appeal is incorrect.
Aboitiz Shipping Corporation (Aboitiz), on the other hand, points out, in its
Memorandum10 dated March 29, 2007, that it obviously cannot be held liable for the damage
to the cargo which, by UCPB’s admission, was incurred not during transshipment to Cebu
on
board one of Aboitiz’s vessels, but was already existent at the time of unloading in Manila.
Aboitiz also argues that Art. 366 of the Code of Commerce is applicable and serves as a
condition precedent to the accrual of UCPB’s cause of action against it.lawphil.net
The Memorandum11 dated June 3, 2008, filed by Pimentel Customs Brokerage Co. (Pimentel
Customs), is also a reiteration of the applicability of Art. 366 of the Code of Commerce.
It should be stated at the outset that the issue of whether a claim should have been made by
SMC, or UCPB as SMC’s subrogee, within the 24-hour period prescribed by Art. 366 of the
Code of Commerce was squarely raised before the trial court.
In its Answer to Amended Complaint12 dated May 10, 1993, Eagle Express averred, thus:
The amended complaint states no cause of action under the provisions of the Code of
Commerce and the terms of the bill of lading; consignee made no claim against herein
defendant within twenty four (24) hours following the receipt of the alleged cargo regarding
the condition in which said cargo was delivered; however, assuming arguendo that the
damage or loss, if any, could not be ascertained from the outside part of the shipment,
consignee never made any claim against herein defendant at the time of receipt of said cargo;
herein defendant learned of the alleged claim only upon receipt of the complaint.13
Likewise, in its Answer14 dated September 21, 1992, Aboitiz raised the defense that UCPB
did not file a claim with it and that the complaint states no cause of action.
UCPB obviously made a gross misrepresentation to the Court when it claimed that the issue
regarding the applicability of the Code of Commerce, particularly the 24-hour formal claim
rule, was not raised as an issue before the trial court. The appellate court, therefore, correctly
looked into the validity of the arguments raised by Eagle Express, Aboitiz and Pimentel
Customs on this point after the trial court had so ill-advisedly centered its decision merely
on the matter of extraordinary diligence.
Interestingly enough, UCPB itself has revealed that when the shipment was discharged and
opened at the ICTSI in Manila in the presence of an Eagle Express representative, the cargo
had already been found damaged. In fact, a request for bad order survey was then made and
a turnover survey of bad order cargoes was issued, pursuant to the procedure in the
discharge of bad order cargo. The shipment was then repacked and transshipped from
Manila to Cebu on board MV Aboitiz Supercon II. When the cargo was finally received by
SMC at its Mandaue City warehouse, it was found in bad order, thereby confirming the
damage already uncovered in Manila.15
In charging Aboitiz with liability for the damaged cargo, the trial court condoned UCPB’s
wrongful suit against Aboitiz to whom the damage could not have been attributable since
there was no evidence presented that the cargo was further damaged during its
transshipment to Cebu. Even by the exercise of extraordinary diligence, Aboitiz could not
have undone the damage to the cargo that had already been there when the same was
shipped on board its vessel.
That said, it is nonetheless necessary to ascertain whether any of the remaining parties may
still be held liable by UCPB. The provisions of the Code of Commerce, which apply to
overland, river and maritime transportation, come into play.
Art. 366 of the Code of Commerce states:
Art. 366. Within twenty-four hours following the receipt of the merchandise, the claim
against the carrier for damage or average which may be found therein upon opening the
packages, may be made, provided that the indications of the damage or average which gives
rise to the claim cannot be ascertained from the outside part of such packages, in which case
the claim shall be admitted only at the time of receipt.
After the periods mentioned have elapsed, or the transportation charges have been paid, no
claim shall be admitted against the carrier with regard to the condition in which the goods
transported were delivered.1avvphi1
The law clearly requires that the claim for damage or average must be made within 24 hours
from receipt of the merchandise if, as in this case, damage cannot be ascertained merely from
the outside packaging of the cargo.
In Philippine Charter Insurance Corporation v. Chemoil Lighterage
Corporation,16 petitioner, as subrogee of Plastic Group Phil., Inc. (PGP), filed suit against
respondent therein for the damage found on a shipment of chemicals loaded on board
respondent’s barge. Respondent claimed that no timely notice in accordance with Art. 366
of the Code of Commerce was made by petitioner because an employee of PGP merely made
a phone call to respondent’s Vice President, informing the latter of the contamination of the
27
cargo. The Court ruled that the notice of claim was not timely made or relayed to respondent
in accordance with Art. 366 of the Code of Commerce.
The requirement to give notice of loss or damage to the goods is not an empty formalism.
The fundamental reason or purpose of such a stipulation is not to relieve the carrier from
just liability, but reasonably to inform it that the shipment has been damaged and that it is
charged with liability therefor, and to give it an opportunity to examine the nature and extent
of the injury. This protects the carrier by affording it an opportunity to make an investigation
of a claim while the matter is still fresh and easily investigated so as to safeguard itself from
false and fraudulent claims.17
We have construed the 24-hour claim requirement as a condition precedent to the accrual
of a right of action against a carrier for loss of, or damage to, the goods. The shipper or
consignee must allege and prove the fulfillment of the condition. Otherwise, no right of
action against the carrier can accrue in favor of the former.18
The shipment in this case was received by SMC on August 2, 1991. However, as found by the
Court of Appeals, the claims were dated October 30, 1991, more than three (3) months from
receipt of the shipment and, at that, even after the extent of the loss had already been
determined by SMC’s surveyor. The claim was, therefore, clearly filed beyond the 24-hour
time frame prescribed by Art. 366 of the Code of Commerce.
But what of the damage already discovered in the presence of Eagle Express’s representative
at the time the shipment was discharged in Manila? The Request for Bad Order Survey and
Turn Over Survey of Bad Order Cargoes, respectively dated June 17, 1999 and June 28, 1991,
evince the fact that the damage to the cargo was already made known to Eagle Express and,
possibly, SMC, as of those dates.
Sec. 3(6) of the COGSA provides a similar claim mechanism as the Code of Commerce but
prescribes a period of three (3) days within which notice of claim must be given if the loss or
damage is not apparent. It states:
UCPB, however, is ambivalent as to which party Eagle Express represented in the
transaction. By its own manifestation, East Asiatic, and not Eagle Express, acted as the agent
through which summons
and court notices may be served on DAMCO. It would be unjust to hold that Eagle Express’s
knowledge of the damage to the cargo is such that it served to preclude or dispense with the
24-hour notice to the carrier required by Art. 366 of the Code of Commerce. Neither did the
inspection of the cargo in which Eagle Express’s representative had participated lead to the
waiver of the written notice under the Sec. 3(6) of the COGSA. Eagle Express, after all, had
acted as the agent of the freight consolidator, not that of the carrier to whom the notice
should have been made.
At any rate, the notion that the request for bad order survey and turn over survey of bad
cargoes signed by Eagle Express’s representative is construable as compliant with the notice
requirement under Art. 366 of the Code of Commerce was foreclosed by the dismissal of the
complaint against DAMCO’s representative, East Asiatic.
As regards respondent Pimentel Customs, it is sufficient to acknowledge that it had no
participation in the physical handling, loading and delivery of the damaged cargo and
should, therefore, be absolved of liability.
Finally, UCPB’s misrepresentation that the applicability of the Code of Commerce was not
raised as an issue before the trial court warrants the assessment of double costs of suit
against it.
WHEREFORE, the petition is DENIED. The Decision of the Court of Appeals in CA-G.R. CV
No. 68168, dated October 29, 2004 and its Resolution dated June 14, 2005 are AFFIRMED.
Double costs against petitioner.
SO ORDERED.

Sec. 3(6). Unless notice of loss or damage and the general nature of such loss or damage be
given in writing to the carrier or his agent at the port of discharge or at the time of the
removal of the goods into the custody of the person entitled to delivery thereof under the
contract of carriage, such removal shall be prima facie evidence of the delivery by the carrier
of the goods as descibed in the bill of lading. If the loss or damage is not apparent, the notice
must be given within three days of the delivery.

Said notice of loss or damage may be endorsed upon the receipt of the goods given by the
person taking delivery thereof.

The notice in writing need not be given if the state of the goods has at the time of their receipt
been the subject of joint survey or inspection.

UCPB seizes upon the last paragraph which dispenses with the written notice if the state of
the goods has been the subject of a joint survey which, in this case, was the opening of the
shipment in the presence of an Eagle Express representative. It should be noted at this point
that the applicability of the above-quoted provision of the COGSA was not raised as an issue
by UCPB before the trial court and was only cited by UCPB in its Memorandum in this case.
28
G.R. No. 162267 July 4, 2008
PCI LEASING AND FINANCE, INC., petitioner,
vs.
UCPB GENERAL INSURANCE CO., INC., respondent.
DECISION
AUSTRIA-MARTINEZ, J.:
Before the Court is a Petition for Review on Certiorari under Rule 45 of the Rules of Court,
seeking a reversal of the Decision1 of the Court of Appeals (CA) dated December 12, 2003
affirming with modification the Decision of the Regional Trial Court (RTC) of Makati City
which ordered petitioner and Renato Gonzaga (Gonzaga) to pay, jointly and severally,
respondent the amount of P244,500.00 plus interest; and the CA Resolution2 dated
February 18, 2004 denying petitioner's Motion for Reconsideration.
The facts, as found by the CA, are undisputed:
On October 19, 1990 at about 10:30 p.m., a Mitsubishi Lancer car with Plate
Number PHD-206 owned by United Coconut Planters Bank was traversing the
Laurel Highway, Barangay Balintawak, Lipa City. The car was insured with
plantiff-appellee [UCPB General Insurance Inc.], then driven by Flaviano Isaac
with Conrado Geronimo, the Asst. Manager of said bank, was hit and bumped by
an 18-wheeler Fuso Tanker Truck with Plate No. PJE-737 and Trailer Plate No.
NVM-133, owned by defendants-appellants PCI Leasing & Finance, Inc. allegedly
leased to and operated by defendant-appellant Superior Gas & Equitable Co., Inc.
(SUGECO) and driven by its employee, defendant appellant Renato Gonzaga.
The impact caused heavy damage to the Mitsubishi Lancer car resulting in an
explosion of the rear part of the car. The driver and passenger suffered physical
injuries. However, the driver defendant-appellant Gonzaga continued on its [sic]
way to its [sic] destination and did not bother to bring his victims to the hospital.
Plaintiff-appellee paid the assured UCPB the amount of P244,500.00 representing
the insurance coverage of the damaged car.
As the 18-wheeler truck is registered under the name of PCI Leasing, repeated
demands were made by plaintiff-appellee for the payment of the aforesaid
amounts. However, no payment was made. Thus, plaintiff-appellee filed the
instant case on March 13, 1991.3
PCI Leasing and Finance, Inc., (petitioner) interposed the defense that it could not be held
liable for the collision, since the driver of the truck, Gonzaga, was not its employee, but that
of its co-defendant Superior Gas & Equitable Co., Inc. (SUGECO).4 In fact, it was SUGECO,
and not petitioner, that was the actual operator of the truck, pursuant to a Contract of Lease
signed by petitioner and SUGECO.5 Petitioner, however, admitted that it was the owner of
the truck in question.6
After trial, the RTC rendered its Decision dated April 15, 1999,7 the dispositive portion of
which reads:
WHEREFORE, premises considered, judgment is hereby rendered in favor of
plaintiff UCPB General Insurance [respondent], ordering the defendants PCI
Leasing and Finance, Inc., [petitioner] and Renato Gonzaga, to pay jointly and
severally the former the following amounts: the principal amount of P244,500.00
with 12% interest as of the filing of this complaint until the same is
paid; P50,000.00 as attorney's fees; and P20,000.00 as costs of suit.
SO ORDERED.8
Aggrieved by the decision of the trial court, petitioner appealed to the CA.
In its Decision dated December 12, 2003, the CA affirmed the RTC's decision, with certain
modifications, as follows:
WHEREFORE, the appealed decision dated April 15, 1999 is hereby AFFIRMED
with modification that the award of attorney's fees is hereby deleted and the rate
of interest shall be six percent (6%) per annum computed from the time of the filing
of the complaint in the trial court until the finality of the judgment. If the adjudged
principal and the interest remain unpaid thereafter, the interest rate shall be
twelve percent (12%) per annum computed from the time the judgment becomes
final and executory until it is fully satisfied.
SO ORDERED.9
Petitioner filed a Motion for Reconsideration which the CA denied in its Resolution dated
February 18, 2004.
Hence, herein Petition for Review.
The issues raised by petitioner are purely legal:
Whether petitioner, as registered owner of a motor vehicle that figured in a quasi-
delict may be held liable, jointly and severally, with the driver thereof, for the
damages caused to third parties.
Whether petitioner, as a financing company, is absolved from liability by the
enactment of Republic Act (R.A.) No. 8556, or the Financing Company Act of 1998.
Anent the first issue, the CA found petitioner liable for the damage caused by the collision
since under the Public Service Act, if the property covered by a franchise is transferred or
leased to another without obtaining the requisite approval, the transfer is not binding on the
Public Service Commission and, in contemplation of law, the grantee continues to be
responsible under the franchise in relation to the operation of the vehicle, such as damage
or injury to third parties due to collisions.10
29
Petitioner claims that the CA's reliance on the Public Service Act is misplaced, since the said
law applies only to cases involving common carriers, or those which have franchises to
operate as public utilities. In contrast, the case before this Court involves a private
commercial vehicle for business use, which is not offered for service to the general public.11
Petitioner's contention has partial merit, as indeed, the vehicles involved in the case at bar
are not common carriers, which makes the Public Service Act inapplicable.
However, the registered owner of the vehicle driven by a negligent driver may still be held
liable under applicable jurisprudence involving laws on compulsory motor vehicle
registration and the liabilities of employers for quasi-delicts under the Civil Code.
The principle of holding the registered owner of a vehicle liable for quasi-delicts resulting
from its use is well-established in jurisprudence. Erezo v. Jepte,12 with Justice Labrador
as ponente, wisely explained the reason behind this principle, thus:
Registration is required not to make said registration the operative act by which
ownership in vehicles is transferred, as in land registration cases, because the
administrative proceeding of registration does not bear any essential relation to
the contract of sale between the parties (Chinchilla vs. Rafael and Verdaguer, 39
Phil. 888), but to permit the use and operation of the vehicle upon any public
highway (section 5 [a], Act No. 3992, as amended.) The main aim of motor vehicle
registration is to identify the owner so that if any accident happens, or that any
damage or injury is caused by the vehicle on the public highways, responsibility
therefor can be fixed on a definite individual, the registered owner. Instances are
numerous where vehicles running on public highways caused accidents or injuries
to pedestrians or other vehicles without positive identification of the owner or
drivers, or with very scant means of identification. It is to forestall these
circumstances, so inconvenient or prejudicial to the public, that the motor vehicle
registration is primarily ordained, in the interest of the determination of persons
responsible for damages or injuries caused on public highways.
"'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 courts would entertain such defenses as that put forward
by appellee in this case. 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." (King
vs. Brenham Automobile Co., 145 S.W. 278, 279.)
With the above policy in mind, the question that defendant-appellant poses is:
should not the registered owner be allowed at the trial to prove who the actual and
real owner is, and in accordance with such proof escape or evade responsibility and
lay the same on the person actually owning the vehicle? We hold with the trial court
that the law does not allow him to do so; 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.
The above policy and application of the law may appear quite harsh and would
seem to conflict with truth and justice. We do not think it is so. 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.
In synthesis, we hold that the registered owner, the defendant-appellant herein, 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.13
The case is still good law and has been consistently cited in subsequent cases.14 Thus, there
is no good reason to depart from its tenets.
For damage or injuries arising out of negligence in the operation of a motor vehicle, the
registered owner may be held civilly liable with the negligent driver either 1) subsidiarily, if
the aggrieved party seeks relief based on a delict or crime under Articles 100 and 103 of the
Revised Penal Code; or 2) solidarily, if the complainant seeks relief based on a quasi-
delict under Articles 2176 and 2180 of the Civil Code. It is the option of the plaintiff whether
to waive completely the filing of the civil action, or institute it with the criminal action, or
file it separately or independently of a criminal action;15 his only limitation is that he cannot
recover damages twice for the same act or omission of the defendant.16
In case a separate civil action is filed, the long-standing principle is that the registered owner
of a motor vehicle is primarily and directly responsible for the consequences of its operation,
including the negligence of the driver, with respect to the public and all third persons.17 In
contemplation of law, the registered owner of a motor vehicle is the employer of its driver,
with the actual operator and employer, such as a lessee, being considered as merely the
owner's agent.18 This being the case, even if a sale has been executed before a tortious
30
incident, the sale, if unregistered, has no effect as to the right of the public and third persons
to recover from the registered owner.19 The public has the right to conclusively presume that
the registered owner is the real owner, and may sue accordingly.20
In the case now before the Court, there is not even a sale of the vehicle involved, but a mere
lease, which remained unregistered up to the time of the occurrence of the quasi-delict that
gave rise to the case. Since a lease, unlike a sale, does not even involve a transfer of title or
ownership, but the mere use or enjoyment of property, there is more reason, therefore, in
this instance to uphold the policy behind the law, which is to protect the unwitting public
and provide it with a definite person to make accountable for losses or injuries suffered in
vehicular accidents.21 This is and has always been the rationale behind compulsory motor
vehicle registration under the Land Transportation and Traffic Code and similar laws, which,
as early as Erezo, has been guiding the courts in their disposition of cases involving motor
vehicular incidents. It is also important to emphasize that such principles apply to all
vehicles in general, not just those offered for public service or utility.22
The Court recognizes that the business of financing companies has a legitimate and
commendable purpose.23 In earlier cases, it considered a financial lease or financing lease a
legal contract,24 though subject to the restrictions of the so-called Recto Law or Articles 1484
and 1485 of the Civil Code.25 In previous cases, the Court adopted the statutory definition of
a financial lease or financing lease, as:
[A] mode of extending credit through a non-cancelable lease contract under which
the lessor purchases or acquires, at the instance of the lessee, machinery,
equipment, motor vehicles, appliances, business and office machines, and other
movable or immovable property in consideration of the periodic payment by the
lessee of a fixed amount of money sufficient to amortize at least seventy (70%) of
the purchase price or acquisition cost, including any incidental expenses and a
margin of profit over an obligatory period of not less than two (2) years during
which the lessee has the right to hold and use the leased property, x x x but with no
obligation or option on his part to purchase the leased property from the owner-
lessor at the end of the lease contract. 26
Petitioner presented a lengthy discussion of the purported trend in other jurisdictions, which
apparently tends to favor absolving financing companies from liability for the consequences
of quasi-delictual acts or omissions involving financially leased property.27 The petition adds
that these developments have been legislated in our jurisdiction in Republic Act (R.A.) No.
8556,28 which provides:
Section 12. Liability of lessors. - Financing companies shall not be liable for loss,
damage or injury caused by a motor vehicle, aircraft, vessel, equipment, machinery
or other property leased to a third person or entity except when the motor vehicle,
aircraft, vessel, equipment or other property is operated by the financing company,
its employees or agents at the time of the loss, damage or injury.1avvphi1
Petitioner's argument that the enactment of R.A. No. 8556, especially its addition of the new
Sec. 12 to the old law, is deemed to have absolved petitioner from liability, fails to convince
the Court.
These developments, indeed, point to a seeming emancipation of financing companies from
the obligation to compensate claimants for losses suffered from the operation of vehicles
covered by their lease. Such, however, are not applicable to petitioner and do not exonerate
it from liability in the present case.
The new law, R.A. No. 8556, notwithstanding developments in foreign jurisdictions, do not
supersede or repeal the law on compulsory motor vehicle registration. No part of the law
expressly repeals Section 5(a) and (e) of R.A. No. 4136, as amended, otherwise known as the
Land Transportation and Traffic Code, to wit:
Sec. 5. Compulsory registration of motor vehicles. - (a) All motor vehicles
and trailer of any type used or operated on or upon any highway of the Philippines
must be registered with the Bureau of Land Transportation (now the Land
Transportation Office, per Executive Order No. 125, January 30, 1987, and
Executive Order No. 125-A, April 13, 1987) for the current year in accordance with
the provisions of this Act.
xxxx
(e) Encumbrances of motor vehicles. - Mortgages, attachments, and other
encumbrances of motor vehicles, in order to be valid against third
parties must be recorded in the Bureau (now the Land Transportation Office).
Voluntary transactions or voluntary encumbrances shall likewise be properly
recorded on the face of all outstanding copies of the certificates of registration of
the vehicle concerned.
Cancellation or foreclosure of such mortgages, attachments, and other
encumbrances shall likewise be recorded, and in the absence of such cancellation,
no certificate of registration shall be issued without the corresponding notation of
mortgage, attachment and/or other encumbrances.
x x x x (Emphasis supplied)
Neither is there an implied repeal of R.A. No. 4136. As a rule, repeal by implication is
frowned upon, unless there is clear showing that the later statute is so irreconcilably
inconsistent and repugnant to the existing law that they cannot be reconciled and made to
stand together.29 There is nothing in R.A. No. 4136 that is inconsistent and incapable of
reconciliation.
Thus, the rule remains the same: a sale, lease, or financial lease, for that matter, that is not
registered with the Land Transportation Office, still does not bind third persons who are
aggrieved in tortious incidents, for the latter need only to rely on the public registration of a
motor vehicle as conclusive evidence of ownership.30 A lease such as the one involved in the
instant case is an encumbrance in contemplation of law, which needs to be registered in
order for it to bind third parties.31 Under this policy, the evil sought to be avoided is the
exacerbation of the suffering of victims of tragic vehicular accidents in not being able to
identify a guilty party. A contrary ruling will not serve the ends of justice. The failure to
register a lease, sale, transfer or encumbrance, should not benefit the parties responsible, to
the prejudice of innocent victims.
The non-registration of the lease contract between petitioner and its lessee precludes the
former from enjoying the benefits under Section 12 of R.A. No. 8556.
31
This ruling may appear too severe and unpalatable to leasing and financing companies, but
the Court believes that petitioner and other companies so situated are not entirely left
without recourse. They may resort to third-party complaints against their lessees or whoever
are the actual operators of their vehicles. In the case at bar, there is, in fact, a provision in
the lease contract between petitioner and SUGECO to the effect that the latter shall
indemnify and hold the former free and harmless from any "liabilities, damages, suits, claims
or judgments" arising from the latter's use of the motor vehicle.32 Whether petitioner would
act against SUGECO based on this provision is its own option.

The burden of registration of the lease contract is minuscule compared to the chaos that may
result if registered owners or operators of vehicles are freed from such responsibility.
Petitioner pays the price for its failure to obey the law on compulsory registration of motor
vehicles for registration is a pre-requisite for any person to even enjoy the privilege of putting
a vehicle on public roads.

WHEREFORE, the petition is DENIED. The Decision dated December 12, 2003 and
Resolution dated February 18, 2004 of the Court of Appeals are AFFIRMED.

Costs against petitioner.

SO ORDERED.

32
G.R. No. 142305 December 10, 2003 The respondent then requested the lady employee to use their phone to make a call to
Manila. Over the employees’ reluctance, the respondent telephoned her mother to inform
the latter that she missed the connecting flight. The respondent was able to contact a family
SINGAPORE AIRLINES LIMITED, petitioner,
friend who picked her up from the airport for her overnight stay in Singapore.9
vs.
ANDION FERNANDEZ, respondent.
The next day, after being brought back to the airport, the respondent proceeded to
petitioner’s counter which says: "Immediate Attention To Passengers with Immediate
DECISION
Booking." There were four or five passengers in line. The respondent approached petitioner’s
male employee at the counter to make arrangements for immediate booking only to be told:
CALLEJO, SR., J.: "Can’t you see I am doing something." She explained her predicament but the male employee
uncaringly retorted: "It’s your problem, not ours."10
This is a petition for review on certiorari assailing the Decision1 of the Court of Appeals which
affirmed in toto the decision2 of the Regional Trial Court of Pasig City, Branch 164 in Civil The respondent never made it to Manila and was forced to take a direct flight from Singapore
Case No. 60985 filed by the respondent for damages. to Malaysia on January 29, 1991, through the efforts of her mother and travel agency in
Manila. Her mother also had to travel to Malaysia bringing with her respondent’s wardrobe
The Case for the Respondent and personal things needed for the performance that caused them to incur an expense of
about P50,000.11

Respondent Andion Fernandez is an acclaimed soprano here in the Philippines and abroad.
At the time of the incident, she was availing an educational grant from the Federal Republic As a result of this incident, the respondent’s performance before the Royal Family of
of Germany, pursuing a Master’s Degree in Music majoring in Voice.3 Malaysia was below par. Because of the rude and unkind treatment she received from the
petitioner’s personnel in Singapore, the respondent was engulfed with fear, anxiety,
humiliation and embarrassment causing her to suffer mental fatigue and skin rashes. She
She was invited to sing before the King and Queen of Malaysia on February 3 and 4, 1991. was thereby compelled to seek immediate medical attention upon her return to Manila for
For this singing engagement, an airline passage ticket was purchased from petitioner "acute urticaria."12
Singapore Airlines which would transport her to Manila from Frankfurt, Germany on
January 28, 1991. From Manila, she would proceed to Malaysia on the next day.4 It was
necessary for the respondent to pass by Manila in order to gather her wardrobe; and to On June 15, 1993, the RTC rendered a decision with the following dispositive portion:
rehearse and coordinate with her pianist her repertoire for the aforesaid performance.
ACCORDINGLY and as prayed for, defendant Singapore Airlines is ordered to pay herein
The petitioner issued the respondent a Singapore Airlines ticket for Flight No. SQ 27, leaving plaintiff Andion H. Fernandez the sum of:
Frankfurt, Germany on January 27, 1991 bound for Singapore with onward connections from
Singapore to Manila. Flight No. SQ 27 was scheduled to leave Frankfurt at 1:45 in the 1. FIFTY THOUSAND (P50,000.00) PESOS as compensatory or actual damages;
afternoon of January 27, 1991, arriving at Singapore at 8:50 in the morning of January 28,
1991. The connecting flight from Singapore to Manila, Flight No. SQ 72, was leaving
2. TWO HUNDRED and FIFTY THOUSAND (P250,000.00) PESOS as moral
Singapore at 11:00 in the morning of January 28, 1991, arriving in Manila at 2:20 in the
damages considering plaintiff’s professional standing in the field of culture at
afternoon of the same day.5
home and abroad;

On January 27, 1991, Flight No. SQ 27 left Frankfurt but arrived in Singapore two hours late
3. ONE HUNDRED THOUSAND (P100,000.00) PESOS as exemplary damages;
or at about 11:00 in the morning of January 28, 1991. By then, the aircraft bound for Manila
had left as scheduled, leaving the respondent and about 25 other passengers stranded in the
Changi Airport in Singapore.6 4. SEVENTY-FIVE THOUSAND (P75,000.00) PESOS as attorney’s fees; and

Upon disembarkation at Singapore, the respondent approached the transit counter who 5. To pay the costs of suit.
referred her to the nightstop counter and told the lady employee thereat that it was
important for her to reach Manila on that day, January 28, 1991. The lady employee told her
SO ORDERED.13
that there were no more flights to Manila for that day and that respondent had no choice but
to stay in Singapore. Upon respondent’s persistence, she was told that she can actually fly to
Hong Kong going to Manila but since her ticket was non-transferable, she would have to pay The petitioner appealed the decision to the Court of Appeals.
for the ticket. The respondent could not accept the offer because she had no money to pay
for it.7 Her pleas for the respondent to make arrangements to transport her to Manila were On June 10, 1998, the CA promulgated the assailed decision finding no reversible error in
unheeded.8 the appealed decision of the trial court.14

33
Forthwith, the petitioner filed the instant petition for review, raising the following errors:
I
THE HONORABLE COURT OF APPEALS ERRED IN AFFIRMING IN TOTO THE
DECISION OF THE TRIAL COURT THAT AWARDED DAMAGES TO RESPONDENT FOR
THE ALLEGED FAILURE OF THE PETITIONER TO EXERCISE EXTRAORDINARY
DILIGENCE.
II
THE HONORABLE COURT OF APPEALS ERRED IN HOLDING THAT THE PETITIONER
ACTED IN BAD FAITH.
III
THE HONORABLE COURT OF APPEALS ERRED IN DISMISSING THE PETITIONER’S
COUNTERCLAIMS.15
The petitioner assails the award of damages contending that it exercised the extraordinary
diligence required by law under the given circumstances. The delay of Flight No. SQ 27 from
Frankfurt to Singapore on January 28, 1991 for more than two hours was due to a fortuitous
event and beyond petitioner’s control. Inclement weather prevented the petitioner’s plane
coming from Copenhagen, Denmark to arrive in Frankfurt on time on January 27, 1991. The
plane could not take off from the airport as the place was shrouded with fog. This delay
caused a "snowball effect" whereby the other flights were consequently delayed. The plane
carrying the respondent arrived in Singapore two (2) hours behind schedule.16 The delay was
even compounded when the plane could not travel the normal route which was through the
Middle East due to the raging Gulf War at that time. It had to pass through the restricted
Russian airspace which was more congested.17
Under these circumstances, petitioner therefore alleged that it cannot be faulted for the delay
in arriving in Singapore on January 28, 1991 and causing the respondent to miss her
connecting flight to Manila.
The petitioner further contends that it could not also be held in bad faith because its
personnel did their best to look after the needs and interests of the passengers including the
respondent. Because the respondent and the other 25 passengers missed their connecting
flight to Manila, the petitioner automatically booked them to the flight the next day and gave
them free hotel accommodations for the night. It was respondent who did not take
petitioner’s offer and opted to stay with a family friend in Singapore.
The petitioner also alleges that the action of the respondent was baseless and it tarnished its
good name and image earned through the years for which, it was entitled to damages in the
amount of ₱1,000,000; exemplary damages of ₱500,000; and attorney’s fees also in the
amount of ₱500,000.18
The petition is barren of merit.
When an airline issues a ticket to a passenger, confirmed for a particular flight on a certain
date, a contract of carriage arises. The passenger then has every right to expect that he be
transported on that flight and on that date. If he does not, then the carrier opens itself to a
suit for a breach of contract of carriage.19
The contract of air carriage is a peculiar one. Imbued with public interest, the law requires
common carriers to carry the passengers safely as far as human care and foresight can
provide, using the utmost diligence of very cautious persons with due regard for all the
circumstances.20 In an action for breach of contract of carriage, the aggrieved party does not
have to prove that the common carrier was at fault or was negligent. All that is necessary to
prove is the existence of the contract and the fact of its non-performance by the carrier.21
In the case at bar, it is undisputed that the respondent carried a confirmed ticket for the two-
legged trip from Frankfurt to Manila: 1) Frankfurt-Singapore; and 2) Singapore-Manila. In
her contract of carriage with the petitioner, the respondent certainly expected that she would
fly to Manila on Flight No. SQ 72 on January 28, 1991. Since the petitioner did not transport
the respondent as covenanted by it on said terms, the petitioner clearly breached its contract
of carriage with the respondent. The respondent had every right to sue the petitioner for this
breach. The defense that the delay was due to fortuitous events and beyond petitioner’s
control is unavailing. In PAL vs. CA,22 we held that:
.... Undisputably, PAL’s diversion of its flight due to inclement weather was a fortuitous
event. Nonetheless, such occurrence did not terminate PAL’s contract with its passengers.
Being in the business of air carriage and the sole one to operate in the country, PAL is deemed
to be equipped to deal with situations as in the case at bar. What we said in one case once
again must be stressed, i.e., the relation of carrier and passenger continues until the latter
has been landed at the port of destination and has left the carrier’s premises. Hence, PAL
necessarily would still have to exercise extraordinary diligence in safeguarding the comfort,
convenience and safety of its stranded passengers until they have reached their final
destination...
...
"...If the cause of non-fulfillment of the contract is due to a fortuitous event, it has to be the
sole and only cause (Art. 1755 C.C., Art. 1733 C.C.). Since part of the failure to comply with
the obligation of common carrier to deliver its passengers safely to their destination lay in
the defendant’s failure to provide comfort and convenience to its stranded passengers using
extraordinary diligence, the cause of non-fulfillment is not solely and exclusively due to
fortuitous event, but due to something which defendant airline could have prevented,
defendant becomes liable to plaintiff."
Indeed, in the instant case, petitioner was not without recourse to enable it to fulfill its
obligation to transport the respondent safely as scheduled as far as human care and foresight
can provide to her destination. Tagged as a premiere airline as it claims to be and with the
complexities of air travel, it was certainly well-equipped to be able to foresee and deal with
such situation. The petitioner’s indifference and negligence by its absence and insensitivity
was exposed by the trial court, thus:
(a) Under Section 9.1 of its Traffic Manual (Exhibit 4) "…flights can be delayed to
await the uplift of connecting cargo and passengers arriving on a late in-bound
flight…" As adverted to by the trial court,…"Flight SQ-27/28 maybe delayed for
34
 about half an hour to transfer plaintiff to her connecting flight. As pointed out When a passenger contracts for a specific flight, he has a purpose in making that choice
above, delay is normal in commercial air transportation" (RTC Decision, p. 22); or which must be respected. This choice, once exercised, must not be impaired by a breach on
the part of the airline without the latter incurring any liability.25 For petitioner’s failure to
bring the respondent to her destination, as scheduled, we find the petitioner clearly liable
(b) Petitioner airlines could have carried her on one of its flights bound for
for the breach of its contract of carriage with the respondent.
Hongkong and arranged for a connecting flight from Hongkong to Manila all on
the same date. But then the airline personnel who informed her of such possibility
told her that she has to pay for that flight. Regrettably, respondent did not have We are convinced that the petitioner acted in bad faith.1âwphi1 Bad faith means a breach of
sufficient funds to pay for it. (TSN, 30 March 1992, pp.8-9; RTC Decision, pp. 22- known duty through some motive of interest or ill will. Self-enrichment or fraternal interest,
23) Knowing the predicament of the respondent, petitioner did not offer to and not personal ill will, may well have been the motive; but it is malice nevertheless.26 Bad
shoulder the cost of the ticket for that flight; or faith was imputed by the trial court when it found that the petitioner’s employees at the
Singapore airport did not accord the respondent the attention and treatment allegedly
warranted under the circumstances. The lady employee at the counter was unkind and of no
(c) As noted by the trial court from the account of petitioner’s witness, Bob
help to her. The respondent further alleged that without her threats of suing the company,
Khkimyong, that "a passenger such as the plaintiff could have been accommodated
she was not allowed to use the company’s phone to make long distance calls to her mother
in another international airline such as Lufthansa to bring the plaintiff to
in Manila. The male employee at the counter where it says: "Immediate Attention to
Singapore early enough from Frankfurt provided that there was prior
Passengers with Immediate Booking" was rude to her when he curtly retorted that he was
communication from that station to enable her to catch the connecting flight to
busy attending to other passengers in line. The trial court concluded that this inattentiveness
Manila because of the urgency of her business in Manila…(RTC Decision, p. 23)
and rudeness of petitioner’s personnel to respondent’s plight was gross enough amounting
to bad faith. This is a finding that is generally binding upon the Court which we find no
The petitioner’s diligence in communicating to its passengers the consequences of the delay reason to disturb.
in their flights was wanting. As elucidated by the trial court:
Article 2232 of the Civil Code provides that in a contractual or quasi-contractual
It maybe that delay in the take off and arrival of commercial aircraft could not be avoided relationship, exemplary damages may be awarded only if the defendant had acted in a
and may be caused by diverse factors such as those testified to by defendant’s pilot. However, "wanton, fraudulent, reckless, oppressive or malevolent manner." In this case, petitioner’s
knowing fully well that even before the plaintiff boarded defendant’s Jumbo aircraft in employees acted in a wanton, oppressive or malevolent manner. The award of exemplary
Frankfurt bound for Singapore, it has already incurred a delay of two hours. Nevertheless, damages is, therefore, warranted in this case.
defendant did not take the trouble of informing plaintiff, among its other passengers of such
a delay and that in such a case, the usual practice of defendant airline will be that they have
WHEREFORE, the Petition is DENIED. The Decision of the Court of Appeals is AFFIRMED.
to stay overnight at their connecting airport; and much less did it inquire from the plaintiff
and the other 25 passengers bound for Manila whether they are amenable to stay overnight
in Singapore and to take the connecting flight to Manila the next day. Such information SO ORDERED.
should have been given and inquiries made in Frankfurt because even the defendant airline’s
manual provides that in case of urgency to reach his or her destination on the same date, the
head office of defendant in Singapore must be informed by telephone or telefax so as the
latter may make certain arrangements with other airlines in Frankfurt to bring such a
passenger with urgent business to Singapore in such a manner that the latter can catch up
with her connecting flight such as S-27/28 without spending the night in Singapore…23

The respondent was not remiss in conveying her apprehension about the delay of the flight
when she was still in Frankfurt. Upon the assurance of petitioner’s personnel in Frankfurt
that she will be transported to Manila on the same date, she had every right to expect that
obligation fulfilled. She testified, to wit:

Q: Now, since you were late, when the plane that arrived from Frankfurt was late, did you
not make arrangements so that your flight from Singapore to Manila would be adjusted?

A: I asked the lady at the ticket counter, the one who gave the boarding pass in Frankfurt
and I asked her, "Since my flight going to Singapore would be late, what would happen to
my Singapore-Manila flight?" and then she said, "Don’t worry, Singapore Airlines would be
responsible to bring you to Manila on the same date." And then they have informed the name
of the officer, or whatever, that our flight is going to be late.24

35
G.R. No. 161730 January 28, 2005
JAPAN AIRLINES, petitioner,
vs.
MICHAEL ASUNCION and JEANETTE ASUNCION, respondents.
DECISION
YNARES-SANTIAGO, J.:
This petition for review seeks to reverse and set aside the October 9, 2002 decision1 of the
Court of Appeals and its January 12, 2004 resolution,2 which affirmed in toto the June 10,
1997 decision of the Regional Trial Court of Makati City, Branch 61 in Civil Case No. 92-
3635.3
On March 27, 1992, respondents Michael and Jeanette Asuncion left Manila on board Japan
Airlines’ (JAL) Flight 742 bound for Los Angeles. Their itinerary included a stop-over in
Narita and an overnight stay at Hotel Nikko Narita. Upon arrival at Narita, Mrs. Noriko
Etou-Higuchi of JAL endorsed their applications for shore pass and directed them to the
Japanese immigration official.4 A shore pass is required of a foreigner aboard a vessel or
aircraft who desires to stay in the neighborhood of the port of call for not more than 72 hours.
During their interview, the Japanese immigration official noted that Michael appeared
shorter than his height as indicated in his passport. Because of this inconsistency,
respondents were denied shore pass entries and were brought instead to the Narita Airport
Rest House where they were billeted overnight.
The immigration official also handed Mrs. Higuchi a Notice 5 where it was stated that
respondents were to be "watched so as not to escape".
Mr. Atsushi Takemoto of the International Service Center (ISC), the agency tasked by
Japan’s Immigration Department to handle passengers who were denied shore pass entries,
brought respondents to the Narita Airport Rest House where they stayed overnight until
their departure the following day for Los Angeles. Respondents were charged US$400.00
each for their accommodation, security service and meals.
On December 12, 1992, respondents filed a complaint for damages6 claiming that JAL did
not fully apprise them of their travel requirements and that they were rudely and forcibly
detained at Narita Airport.
JAL denied the allegations of respondents. It maintained that the refusal of the Japanese
immigration authorities to issue shore passes to respondents is an act of state which JAL
cannot interfere with or prevail upon. Consequently, it cannot impose upon the immigration
authorities that respondents be billeted at Hotel Nikko instead of the airport resthouse.7
On June 10, 1997, the trial court rendered its decision, the dispositive portion of which reads:
WHEREFORE PREMISES CONSIDERED, judgment is hereby rendered in favor of plaintiffs
ordering defendant JAL to pay plaintiffs as follows:
1. the sum of US$800.00 representing the expenses incurred at the Narita Airport
with interest at 12% per annum from March 27, 1992 until the sum is fully paid;
2. the sum of P200,000.00 for each plaintiff as moral damages;
3. the amount of P100,000.00 for each plaintiff as exemplary damages;
4. the amount of P100,000.00 as attorney’s fees; and
5. costs of suit.
SO ORDERED.8
The trial court dismissed JAL’s counterclaim for litigation expenses, exemplary damages and
attorney’s fees.
On October 9, 2002, the Court of Appeals affirmed in toto the decision of the trial court. Its
motion for reconsideration having been denied,9 JAL now files the instant petition.
The basic issue for resolution is whether JAL is guilty of breach of contract.
Under Article 1755 of the Civil Code, a common carrier such as JAL is bound to carry its
passengers safely as far as human care and foresight can provide, using the utmost diligence
of very cautious persons, with due regard for all the circumstances. When an airline issues a
ticket to a passenger, confirmed for a particular flight on a certain date, a contract of carriage
arises. The passenger has every right to expect that he be transported on that flight and on
that date and it becomes the carrier’s obligation to carry him and his luggage safely to the
agreed destination.10 If the passenger is not so transported or if in the process of transporting
he dies or is injured, the carrier may be held liable for a breach of contract of carriage.11
We find that JAL did not breach its contract of carriage with respondents. It may be true that
JAL has the duty to inspect whether its passengers have the necessary travel documents,
however, such duty does not extend to checking the veracity of every entry in these
documents. JAL could not vouch for the authenticity of a passport and the correctness of the
entries therein. The power to admit or not an alien into the country is a sovereign act which
cannot be interfered with even by JAL. This is not within the ambit of the contract of carriage
entered into by JAL and herein respondents. As such, JAL should not be faulted for the
denial of respondents’ shore pass applications.
Prior to their departure, respondents were aware that upon arrival in Narita, they must
secure shore pass entries for their overnight stay. Respondents’ mother, Mrs. Imelda
Asuncion, insisted though that Ms. Linda Villavicencio of JAL assured her that her children
would be granted the passes.12 This assertion was satisfactorily refuted by Ms. Villavicencio’s
testimony during the cross examination, to wit:
ATTY. GONZAGA:
36
 Q I will show to you Exh. 9 which is the TIM and on page 184 hereof, particularly To reiterate, JAL or any of its representatives have no authority to interfere with or influence
number 10, and I quote, "Those holding tickets with confirmed seats and other the immigration authorities. The most that could be expected of JAL is to endorse
documents for their onward journey and continuing their journey to a third respondents’ applications, which Mrs. Higuchi did immediately upon their arrival in Narita.
country provided that they obtain an indorsement with an application of shore
pass or transit pass from the airline ground personnel before clearing the
As Mrs. Higuchi stated during her deposition:
immigration formality?"

ATTY. QUIMBO
WITNESS:

Q: Madam Witness, what assistance did you give, if any, to the plaintiffs during
A Yes, Sir.
this interview?

Q Did you tell this provision to Mrs. Asuncion?

A: No, I was not present during their interview. I cannot assist.

A Yes, Sir. I did.

Q: Why not?

Q Are you sure?

A: It is forbidden for a civilian personnel to interfere with the Immigration agent’s
duties.14
A Yes, Sir.
….
Q Did you give a copy?
Q: During the time that you were in that room and you were given this notice for
A No, Sir, I did not give a copy but verbally I explained to her the procedure they you to sign, did you tell the immigration agent that Michael and Jeanette Asuncion
have to undergo when they get to narita airport. should be allowed to stay at the Hotel Nikko Narita because, as passengers of JAL,
and according to the plaintiff, they had vouchers to stay in that hotel that night?
….
A: No, I couldn’t do so.
Q And you read the contents of this [TIM]?
Q: Why not?
A No, Sir, I did not read it to her but I explained to her the procedure that each
passenger has to go through before when they get to narita airport before they line A: This notice is evidence which shows the decision of immigration authorities. It
up in the immigration counter. shows there that the immigration inspector also designated Room 304 of the
Narita Airport Resthouse as the place where the passengers were going to wait for
their outbound flight.1awphi1.nét I cannot interfere with that decision.15
Q In other words, you told Mrs. Asuncion the responsibility of securing shore
passes bears solely on the passengers only?
Mrs. Higuchi did all she could to assist the respondents. Upon being notified of the denial of
respondents’ applications, Mrs. Higuchi immediately made reservations for respondents at
A Yes, Sir.
the Narita Airport Rest House which is really more a hotel than a detention house as claimed
by respondents.16
Q That the airline has no responsibility whatsoever with regards (sic) to the
application for shore passes?
More importantly, nowhere in respondent Michael’s testimony did he state categorically that
Mrs. Higuchi or any other employee of JAL treated them rudely or exhibited improper
A Yes, Sir.13 behavior throughout their stay. We therefore find JAL not remiss in its obligations as a
common carrier.1awphi1.nét
Next, respondents claimed that petitioner breached its contract of carriage when it failed to
explain to the immigration authorities that they had overnight vouchers at the Hotel Nikko Moral damages may be recovered in cases where one willfully causes injury to property, or
Narita. They imputed that JAL did not exhaust all means to prevent the denial of their shore in cases of breach of contract where the other party acts fraudulently or in bad faith.
pass entry applications. Exemplary damages are imposed by way of example or correction for the public good, when
the party to a contract acts in wanton, fraudulent, oppressive or malevolent manner.
37
Attorney’s fees are allowed when exemplary damages are awarded and when the party to a
suit is compelled to incur expenses to protect his interest.17 There being no breach of contract
nor proof that JAL acted in wanton, fraudulent or malevolent manner, there is no basis for
the award of any form of damages.

Neither should JAL be held liable to reimburse respondents the amount of US$800.00. It
has been sufficiently proven that the amount pertained to ISC, an agency separate and
distinct from JAL, in payment for the accommodations provided to respondents. The
payments did not in any manner accrue to the benefit of JAL.

However, we find that the Court of Appeals correctly dismissed JAL’s counterclaim for
litigation expenses, exemplary damages and attorney’s fees. The action was filed by
respondents in utmost good faith and not manifestly frivolous. Respondents honestly
believed that JAL breached its contract. A person’s right to litigate should not be penalized
by holding him liable for damages. This is especially true when the filing of the case is to
enforce what he believes to be his rightful claim against another although found to be
erroneous.18

WHEREFORE, in view of the foregoing, the instant petition is PARTLY GRANTED. The
October 9, 2002 decision of the Court of Appeals and its January 12, 2004 resolution in CA-
G.R. CV No. 57440, are REVERSED and SET ASIDE insofar as the finding of breach on the
part of petitioner and the award of damages, attorney’s fees and costs of the suit in favor of
respondents is concerned. Accordingly, there being no breach of contract on the part of
petitioner, the award of actual, moral and exemplary damages, as well as attorney’s fees and
costs of the suit in favor of respondents Michael and Jeanette Asuncion, is DELETED for
lack of basis. However, the dismissal for lack of merit of petitioner’s counterclaim for
litigation expenses, exemplary damages and attorney’s fees, is SUSTAINED. No
pronouncement as to costs.

SO ORDERED.

38
G.R. No. L-22272 June 26, 1967
ANTONIA MARANAN, plaintiff-appellant,
vs.
PASCUAL PEREZ, ET AL., defendants.
PASCUAL PEREZ, defendant appellant.
Pedro Panganiban for plaintiff-appellant.
Magno T. Bueser for defendant-appellant.
BENGZON, J.P., J.:
Rogelio Corachea, on October 18, 1960, was a passenger in a taxicab owned and operated by
Pascual Perez when he was stabbed and killed by the driver, Simeon Valenzuela.
Valenzuela was prosecuted for homicide in the Court of First Instance of Batangas. Found
guilty, he was sentenced to suffer imprisonment and to indemnify the heirs of the deceased
in the sum of P6,000. Appeal from said conviction was taken to the Court of
Appeals.1äwphï1.ñët
On December 6 1961, while appeal was pending in the Court of Appeals, Antonia Maranan,
Rogelio's mother, filed an action in the Court of First Instance of Batangas to recover
damages from Perez and Valenzuela for the death of her son. Defendants asserted that the
deceased was killed in self-defense, since he first assaulted the driver by stabbing him from
behind. Defendant Perez further claimed that the death was a caso fortuito for which the
carrier was not liable.
The court a quo, after trial, found for the plaintiff and awarded her P3,000 as damages
against defendant Perez. The claim against defendant Valenzuela was dismissed. From this
ruling, both plaintiff and defendant Perez appealed to this Court, the former asking for more
damages and the latter insisting on non-liability. Subsequently, the Court of Appeals
affirmed the judgment of conviction earlier mentioned, during the pendency of the herein
appeal, and on May 19, 1964, final judgment was entered therein. (Rollo, p. 33).
Defendant-appellant relies solely on the ruling enunciated in Gillaco v. Manila Railroad Co.,
97 Phil. 884, that the carrier is under no absolute liability for assaults of its employees upon
the passengers. The attendant facts and controlling law of that case and the one at bar are
very different however. In the Gillaco case, the passenger was killed outside the scope and
the course of duty of the guilty employee. As this Court there found:
x x x 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 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 can not be deemed in law a breach of Gillaco's contract of
transportation by a servant or employee of the carrier. . . . (Emphasis supplied)
Now here, the killing was perpetrated by the driver of the very cab transporting the
passenger, in whose hands the carrier had entrusted the duty of executing the contract of
carriage. In other words, unlike the Gillaco case, the killing of the passenger here took place
in the course of duty of the guilty employee and when the employee was acting within the
scope of his duties.
Moreover, the Gillaco case was decided under the provisions of the Civil Code of 1889 which,
unlike the present Civil Code, did not impose upon common carriers absolute liability for
the safety of passengers against wilful assaults or negligent acts committed by their
employees. The death of the passenger in the Gillaco case was truly a fortuitous event which
exempted the carrier from liability. It is true that Art. 1105 of the old Civil Code on fortuitous
events has been substantially reproduced in Art. 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 before Us, which further accounts for a different result in the Gillaco case.
Unlike the old Civil Code, the new Civil Code of the Philippines expressly makes the common
carrier liable for intentional assaults committed by its employees upon its passengers, by the
wording of Art. 1759 which categorically states that
Common carriers are liable for the death of or injuries to passengers through the
negligence or willful acts of the former's employees, although such employees may
have acted beyond the scope of their authority or in violation of the orders of the
common carriers.
The Civil Code provisions on the subject of Common Carriers1 are new and were taken from
Anglo-American Law.2There, the basis of the carrier's liability for assaults on passengers
committed by its drivers rests either on (1) the doctrine of respondeat superior or (2) the
principle that it is the carrier's implied duty to transport the passenger safely.3
Under the first, 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.4
Under the second view, 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.5 The
carrier's liability here is absolute in the sense that it practically secures the passengers from
assaults committed by its own employees.6
As can be gleaned from Art. 1759, the Civil Code of the Philippines evidently follows the rule
based on the second view. At least three very cogent reasons underlie this rule. As explained
in Texas Midland R.R. v. Monroe, 110 Tex. 97, 216 S.W. 388, 389-390, and Haver v. Central
Railroad Co., 43 LRA 84, 85: (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
39
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 formers 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.

Accordingly, 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.

Applying this stringent norm to the facts in this case, therefore, the lower court rightly
adjudged the defendant carrier liable pursuant to Art. 1759 of the Civil Code. The dismissal
of the claim against the defendant driver was also correct. Plaintiff's action was predicated
on breach of contract of carriage7 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.

In connection with the award of damages, the court a quo granted only P3,000 to plaintiff-
appellant. This is the minimum compensatory damages amount recoverable under Art. 1764
in connection with Art. 2206 of the Civil Code when a breach of contract results in the
passenger's death. As has been the policy followed by this Court, this minimal award should
be increased to P6,000. As to other alleged actual damages, the lower court's finding that
plaintiff's evidence thereon was not convincing,8 should not be disturbed. Still, Arts. 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.9 Plaintiff
demands P5,000 as moral damages; however, in the circumstances, We consider P3,000
moral damages, in addition to the P6,000 damages afore-stated, as sufficient. Interest upon
such damages are also due to plaintiff-appellant. 10

Wherefore, with the modification increasing the award of actual damages in plaintiff's favor
to P6,000, plus P3,000.00 moral damages, with legal interest on both from the filing of the
complaint on December 6, 1961 until the whole amount is paid, the judgment appealed from
is affirmed in all other respects. No costs. So ordered.

40
G.R. No. L-31379 August 29, 1988
COMPAÑIA MARITIMA, petitioner,
vs.
COURT OF APPEALS and VICENTE CONCEPCION, respondents.
Rafael Dinglasan for petitioner.
Benjamin J. Molina for private respondent.
FERNAN, C.J.:
Petitioner Compañia Maritima seeks to set aside through this petition for review on
certiorari the decision 1 of the Court of Appeals dated December 5, 1965, adjudging petitioner
liable to private respondent Vicente E. Concepcion for damages in the amount of P24,652.97
with legal interest from the date said decision shall have become final, for petitioner's failure
to deliver safely private respondent's payloader, and for costs of suit. The payloader was
declared abandoned in favor of petitioner.
The facts of the case are as follows:
Private respondent 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, Vicente E. Concepcion had to ship his construction
equipment to Cagayan de Oro City. Having shipped some of his equipment through
petitioner and having settled the balance of P2,628.77 with respect to said shipment,
Concepcion negotiated anew with petitioner, thru its collector, Pacifico Fernandez, on
August 28, 1964 for the shipment to Cagayan de Oro City of one (1) unit payloader, four (4)
units 6x6 Reo trucks and two (2) pieces of water tanks. He was issued Bill of Lading 113 on
the same date upon delivery of the equipment at the Manila North Harbor. 2
These equipment were loaded aboard the MV Cebu in its Voyage No. 316, which left Manila
on August 30, 1964 and arrived at Cagayan de Oro City in the afternoon of September 1,
1964. The Reo trucks and water tanks were safely unloaded within a few hours after arrival,
but while the payloader was about two (2) meters above the pier in the course of unloading,
the swivel pin of the heel block of the port block of Hatch No. 2 gave way, causing the
payloader to fall. 3 The payloader was damaged and was thereafter taken to petitioner's
compound in Cagayan de Oro City.
On September 7, 1964, Consolidated Construction, thru Vicente E. Concepcion, wrote
Compañia Maritima to demand a replacement of the payloader which it was considering as
a complete loss because of the extent of damage. 4 Consolidated Construction likewise
notified petitioner of its claim for damages. Unable to elicit response, the demand was
repeated in a letter dated October 2, 1964. 5
Meanwhile, petitioner shipped the payloader to Manila where it was weighed at the San
Miguel Corporation. Finding that the payloader weighed 7.5 tons and not 2.5 tons as
declared in the B-111 of Lading, petitioner denied the claim for damages of Consolidated
Construction in its letter dated October 7, 1964, contending that had Vicente E. Concepcion
declared the actual weight of the payloader, damage to their ship as well as to his payloader
could have been prevented. 6
To replace the damaged payloader, Consolidated Construction in the meantime bought a
new one at P45,000.00 from Bormaheco Inc. on December 3, 1964, and on July 6, 1965.,
Vicente E. Concepcion filed an action for damages against petitioner with the then Court of
First Instance of Manila, Branch VII, docketed as Civil Case No. 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; Pl 1, 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. 7
After trial, the then Court of First Instance of Manila, Branch VII, dismissed on April 24,
1968 the complaint with costs against therein plaintiff, herein private respondent Vicente E.
Concepcion, stating that the proximate cause of the fall of the payloader was Vicente E.
Concepcion's act or omission in having misrepresented the weight of the payloader as 2.5
tons instead of its true weight of 7.5 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 No. 2 in unloading the payloader. 8
From the adverse decision against him, Vicente E. Concepcion appealed to the Court of
Appeals which, on December 5, 1965 rendered a decision, the dispositive portion of which
reads:
IN VIEW WHEREOF, judgment must have to be as it is hereby reversed;
defendant is condemned to pay unto plaintiff the sum in damages of
P24,652.07 with legal interest from the date the present decision shall
have become final; the payloader is declared abandoned to defendant;
costs against the latter. 9
Hence, the instant petition.
The principal issue in the instant case is whether or not the act of private respondent Vicente
E. Concepcion in furnishing petitioner Compañia Maritima with an inaccurate weight of 2.5
tons instead of the payloader's actual weight of 7.5 tons was the proximate and only cause of
the damage on the Oliver Payloader OC-12 when it fell while being unloaded by petitioner's
crew, as would absolutely exempt petitioner from liability for damages under paragraph 3 of
Article 1734 of the Civil Code, which provides:
41
 Art. 1734. Common carriers are responsible for the loss, destruction, or
deterioration of the goods, unless the same is due to any of the following
causes only:
xxx xxx xxx
(3) Act or omission of the shipper or owner of the goods.
Petitioner claims absolute exemption under this provision upon the reasoning that private
respondent's act of furnishing it with an inaccurate weight of the payloader constitutes
misrepresentation within the meaning of "act or omission of the shipper or owner of the
goods" under the above- quoted article. It likewise faults the respondent Court of Appeals
for reversing the decision of the trial court notwithstanding that said appellate court also
found that by representing the weight of the payloader to be only 2.5 tons, private
respondent had led petitioner's officer to believe that the same was within the 5 tons capacity
of the heel block of Hatch No. 2. Petitioner would thus insist that the proximate and only
cause of the damage to the payloader was private respondent's alleged misrepresentation of
the weight of the machinery in question; hence, any resultant damage to it must be borne by
private respondent Vicente E. Concepcion.
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, the article invoked by petitioner to
avoid liability for damages.
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. 10 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.
In the instant case, We are not persuaded by the proferred explanation of petitioner alleged
to be the proximate cause of the fall of the payloader while it was being unloaded at the
Cagayan de Oro City pier. Petitioner seems to have overlooked the extraordinary diligence
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.
Thus, Article 1733 of the Civil Code provides:
Art. 1733. 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, ...
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."11 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.
Where, as in the instant case, petitioner, upon the testimonies of its own crew, 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 cannot be
reasonably concluded that the damage caused to the payloader was due to the alleged
misrepresentation of private respondent Concepcion as to the correct and accurate weight
of the payloader. As found by the respondent Court of Appeals, the fact is that petitioner
used a 5-ton capacity lifting apparatus to lift and unload a visibly heavy cargo like a
payloader. Private respondent has, likewise, sufficiently established the laxity and
carelessness of petitioner'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.
It must be noted that the weight submitted by private respondent Concepcion appearing at
the left-hand portion of Exhibit 8 12 as an addendum to the original enumeration of
equipment to be shipped was entered into the bill of lading by petitioner, thru Pacifico
Fernandez, a company collector, without seeing the equipment to be shipped.13 Mr. Mariano
Gupana, assistant traffic manager of petitioner, confirmed in his testimony that the company
never checked the information entered in the bill of lading. 14 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. 15
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. 16 Besides, common carriers can
protect themselves against mistakes in the bill of lading as to weight by exercising diligence
before issuing the same. 17
While petitioner has proven that private respondent Concepcion did furnish it with an
inaccurate weight of the payloader, petitioner is nonetheless liable, for the damage caused
to the machinery could have been avoided by the exercise of reasonable skill and attention
on its part in overseeing the unloading of such a heavy equipment. And circumstances clearly
show that the fall of the payloader could have been avoided by petitioner's crew. Evidence
on record sufficiently show that the crew of petitioner had been negligent in the performance
of its obligation by reason of their having failed to take the necessary precaution under the
circumstances which usage has established among careful persons, more particularly its
Chief Officer, Mr. Felix Pisang, who is tasked with the over-all supervision of loading and
unloading heavy cargoes and upon whom rests the burden of deciding as to what particular
42
winch the unloading of the payloader should be undertaken. 18 While it was his duty to appeal from the judgment insofar as it limited the award of damages due him, the reduction
determine the weight of heavy cargoes before accepting them. Mr. Felix Pisang took the bill of 20% or 1/5 of the value of the payloader stands.
of lading on its face value and presumed the same to be correct by merely "seeing"
it. 19 Acknowledging that there was a "jumbo" in the MV Cebu which has the capacity of lifting
WHEREFORE, in view of the foregoing, the petition is DENIED. The decision of the Court
20 to 25 ton cargoes, Mr. Felix Pisang chose not to use it, because according to him, since
of Appeals is hereby AFFIRMED in all respects with costs against petitioner. In view of the
the ordinary boom has a capacity of 5 tons while the payloader was only 2.5 tons, he did not
length of time this case has been pending, this decision is immediately executory.
bother to use the "jumbo" anymore. 20

In that sense, therefore, private respondent's act of furnishing petitioner with an inaccurate
weight of the payloader upon being asked by petitioner's collector, cannot be used by said
petitioner as an excuse to avoid liability for the damage caused, as the same could have been
avoided had petitioner utilized the "jumbo" lifting apparatus which has a capacity of lifting
20 to 25 tons of heavy cargoes. It is a fact known to the Chief Officer of MV Cebu that the
payloader was loaded aboard the MV Cebu at the Manila North Harbor on August 28, 1964
by means of a terminal crane. 21 Even if petitioner chose not to take the necessary precaution
to avoid damage by checking the correct weight of the payloader, extraordinary care and
diligence compel the use of the "jumbo" lifting apparatus as the most prudent course for
petitioner.

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

Art. 1741. If the shipper or owner merely contributed to the loss,

destruction or deterioration of the goods, the proximate cause thereof
being the negligence of the common carrier, the latter shall be liable in
damages, which however, shall be equitably reduced.

We find equitable the conclusion of the Court of Appeals reducing the recoverable amount
of damages by 20% or 1/5 of the value of the payloader, which at the time the instant case
arose, was 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. Considering that the freight charges for the entire
cargoes shipped by private respondent 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
private respondent Concepcion.

Notwithstanding the favorable judgment in his favor, private respondent assailed the Court
of Appeals' decision insofar as it limited the damages due him to only P24,652.97 and the
cost of the suit. Invoking the provisions on damages under the Civil Code, more particularly
Articles 2200 and 2208, private respondent further seeks additional damages allegedly
because the construction project was delayed and that in spite of his demands, petitioner
failed to take any steps to settle his valid, just and demandable claim for damages.

We find private respondent's submission erroneous. 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. 22 Since private respondent did not

43
G.R. No. 157009 March 17, 2010
SULPICIO LINES, INC., Petitioner,
vs.
DOMINGO E. CURSO, LUCIA E. CURSO, MELECIO E. CURSO, SEGUNDO E.
CURSO, VIRGILIO E. CURSO, DIOSDADA E. CURSO, and CECILIA E.
CURSO, Respondents.
DECISION
BERSAMIN, J.:
Are the surviving brothers and sisters of a passenger of a vessel that sinks during a voyage
entitled to recover moral damages from the vessel owner as common carrier?
This is the question presented in the appeal taken by the common carrier from the reversal
by the Court of Appeals (CA) of the decision of the Regional Trial Court (RTC) dismissing
the complaint for various damages filed by the surviving brothers and sisters of the late Dr.
Cenon E. Curso upon a finding that force majeure had caused the sinking. The CA awarded
moral and other damages to the surviving brothers and sisters.
Antecedents
On October 23, 1988, Dr. Curso boarded at the port of Manila the MV Doña Marilyn, an
inter-island vessel owned and operated by petitioner Sulpicio Lines, Inc., bound for
Tacloban City. Unfortunately, the MV Doña Marilyn sank in the afternoon of October 24,
1988 while at sea due to the inclement sea and weather conditions brought about by
Typhoon Unsang. The body of Dr. Curso was not recovered, along with hundreds of other
passengers of the ill-fated vessel. At the time of his death, Dr. Curso was 48 years old, and
employed as a resident physician at the Naval District Hospital in Naval, Biliran. He had a
basic monthly salary of ₱3,940.00, and would have retired from government service by
December 20, 2004 at the age of 65.
On January 21, 1993, the respondents, allegedly the surviving brothers and sisters of Dr.
Curso, sued the petitioner in the RTC in Naval, Biliran to claim damages based on breach of
contract of carriage by sea, averring that the petitioner had acted negligently in transporting
Dr. Curso and the other passengers. They stated, among others, that their parents had
predeceased Dr. Curso, who died single and without issue; and that, as such, they were Dr.
Curso’s surviving heirs and successors in interest entitled to recover moral and other
damages.1 They prayed for judgment, as follows: (a) compensatory damages of
₱1,924,809.00; (b) moral damages of ₱100,000.00; (c) exemplary or corrective damages in
the amount deemed proper and just; (d) expenses of litigation of at least ₱50,000.00; (e)
attorney’s fees of ₱50,000.00; and (f) costs of suit.
The petitioner denied liability, insisting that the sinking of the vessel was due to force
majeure (i.e., Typhoon Unsang), which exempted a common carrier from liability. It averred
that the MV Doña Marilyn was seaworthy in all respects, and was in fact cleared by the
Philippine Coast Guard for the voyage; and that after the accident it conducted intensive
search and rescue operations and extended assistance and aid to the victims and their
families.
Ruling of the RTC
On July 28, 1995, the RTC dismissed the complaint upon its finding that the sinking of the
vessel was due to force majeure. The RTC concluded that the officers of the MV Doña
Marilyn had acted with the diligence required of a common carrier; that the sinking of the
vessel and the death of its passengers, including Dr. Curso, could not have been avoided;
that there was no basis to consider the MV Doña Marilyn not seaworthy at the time of the
voyage; that the findings of the Special Board of Marine Inquiry (SBMI) constituted to
investigate the disaster absolved the petitioner, its officers, and crew of any negligence and
administrative liability; and that the respondents failed to prove their claim for damages.
Ruling of the CA
The respondents appealed to the CA, contending that the RTC erred: (a) in considering itself
barred from entertaining the case by the findings of fact of the SBMI in SBMI-ADM Case No.
08-88; (b) in not holding that the petitioner was negligent and did not exercise the required
diligence and care in conducting Dr. Curso to his destination; (c) in not finding that the
MV Doña Marilyn was unseaworthy at the time of its sinking; and (d) in not awarding
damages to them.2
In its decision dated September 16, 2002,3 the CA held and disposed:
Based on the events described by the appellee’s witness, the Court found inadequate proof
to show that Sulpicio Lines, Inc., or its officers and crew, had exercised the required degree
of diligence to acquit the appellee of liability.
In the first place, the court finds inadequate explanation why the officers of the M.V. Doña
Marilyn had not apprised themselves of the weather reports on the approach of typhoon
"Unsang" which had the power of a signal no. 3 cyclone, bearing upon the general direction
of the path of the M.V. Doña Marilyn. If the officers and crew of the Doña Marilyn had indeed
been adequately monitoring the strength and direction of the typhoon, and had acted
promptly and competently to avoid the same, then such a mishap would not have occurred.
Furthermore, there was no account of the acts and decision of the crew of the ill-fated ship
from 8:00 PM on October 23, 1988 when the Chief Mate left his post until 4:00 AM the next
day when he resumed duty. It does not appear what occurred during that time, or what
weather reports were received and acted upon by the ship captain. What happened during
such time is important in determining what information about the typhoon was gathered
and how the ship officers reached their decision to just change course, and not take shelter
while a strong typhoon was approaching.
Furthermore, the Court doubts the fitness of the ship for the voyage, since at the first sign of
bad weather, the ship’s hydraulic system failed and had to be repaired mid-voyage, making
the vessel a virtual derelict amidst a raging storm at sea. It is part of the appellee’s
extraordinary diligence as a common carrier to make sure that its ships can withstand the
forces that bear upon them during a voyage, whether they be the ordinary stress of the sea
during a calm voyage or the rage of a storm. The fact that the stud bolts in the ships hydraulic
system gave way while the ship was at sea discredits the theory that the appellee exercised
due diligence in maintaining the seaworthy condition of the M.V. Doña Marilyn. xxx.4
44
xxx
Aside from these, the defendant must compensate the plaintiffs for moral damages that they
suffered as a result of the negligence attending the loss of the M.V. Doña Marilyn. Plaintiffs,
have established that they took great pains to recover, in vain, the body of their brother, at
their own cost, while suffering great grief due to the loss of a loved one. Furthermore,
Plaintiffs were unable to recover the body of their brother. Moral damages worth
₱100,000.00 is proper.
WHEREFORE, premises considered, the appealed decision of the RTC of Naval, Biliran,
Branch 16, rendered in Civil Case No. B-0851, is hereby SET ASIDE. In lieu thereof,
judgment is hereby rendered, finding the defendant-appellee Sulpicio Lines, Inc, to have
been negligent in transporting the deceased Cenon E. Curso who was on board the ill-fated
M.V. Doña Marilyn, resulting in his untimely death. Defendant-appellee is hereby ordered
to pay the plaintiffs heirs of Cenon E. Curso the following:
(1) Death indemnity in the amount of ₱50,000.00;
(2) Loss of Earning Capacity in the amount of ₱504,241.20;
(3) Moral Damages in the amount of ₱100,000.00.
(4) Costs of the suit.5
Hence, this appeal, in which the petitioner insists that the CA committed grievous errors in
holding that the respondents were entitled to moral damages as the brothers and sisters of
the late Dr. Curso; that the CA thereby disregarded Article 1764 and Article 2206 of the Civil
Code, and the ruling in Receiver for North Negros Sugar Co., Inc. v. Ybañez,6 whereby the
Supreme Court disallowed the award of moral damages in favor of the brothers and sisters
of a deceased passenger in an action upon breach of a contract of carriage.7
Issues
The petitioner raises the following issues:
ARE THE BROTHERS AND SISTERS OF A DECEASED PASSENGER IN A CASE OF
BREACH OF CONTRACT OF CARRIAGE ENTITLED TO AN AWARD OF MORAL
DAMAGES AGAINST THE CARRIER?
ASSUMING (THAT) THEY ARE ENTITLED TO CLAIM MORAL DAMAGES, SHOULD THE
AWARD BE GRANTED OR GIVEN TO THE BROTHER OR SISTER NOTWITHSTANDING
(THE) LACK OF EVIDENCE AS REGARDS HIS OR HER PERSONAL SUFFERING?
Ruling
The petition is meritorious.
As a general rule, moral damages are not recoverable in actions for damages predicated on
a breach of contract, unless there is fraud or bad faith.8 As an exception, moral damages may
be awarded in case of breach of contract of carriage that results in the death of a
passenger,9 in accordance with Article 1764, in relation to Article 2206 (3), of the Civil Code,
which provide:
Article 1764. Damages in cases comprised in this Section shall be awarded in accordance
with Title XVIII of this Book, concerning Damages. Article 2206 shall also apply to the death
of a passenger caused by the breach of contract by a common carrier.
Article 2206. The amount of damages for death caused by a crime or quasi-delict shall be at
least three thousand pesos, even though there may have been mitigating circumstances. In
addition:
(1) 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; such indemnity shall in
every case be assessed and awarded by the court, unless the deceased on account
of permanent physical disability not caused by the defendant, had no earning
capacity at the time of his death;
(2) If the deceased was obliged to give support according to the provisions of article
291, the recipient who is not an heir called to the decedent's inheritance by the law
of testate or intestate succession, may demand support from the person causing
the death, for a period not exceeding five years, the exact duration to be fixed by
the court;
(3) The spouse, legitimate and illegitimate descendants and ascendants of the
deceased may demand moral damages for mental anguish by reason of the death
of the deceased.
The foregoing legal provisions set forth the persons entitled to moral damages. The omission
from Article 2206 (3) of the brothers and sisters of the deceased passenger reveals the
legislative intent to exclude them from the recovery of moral damages for mental anguish by
reason of the death of the deceased. Inclusio unius est exclusio alterius.10 The solemn power
and duty of the courts to interpret and apply the law do not include the power to correct the
law by reading into it what is not written therein.11 Thus, the CA erred in awarding moral
damages to the respondents.
The petitioner has correctly relied on the holding in Receiver for North Negros Sugar
Company, Inc. v. Ybañez,12 to the effect that in case of death caused by quasi-delict, the
brother of the deceased was not entitled to the award of moral damages based on Article
2206 of the Civil Code.
Essentially, the purpose of moral damages is indemnity or reparation, that is, to enable the
injured party to obtain the means, diversions, or amusements that will serve to alleviate the
moral suffering he has undergone by reason of the tragic event. According to Villanueva v.
Salvador,13 the conditions for awarding moral damages are: (a) there must be an injury,
whether physical, mental, or psychological, clearly substantiated by the claimant; (b) there
must be a culpable act or omission factually established; (c) the wrongful act or omission of
the defendant must be the proximate cause of the injury sustained by the claimant; and (d)
45
the award of damages is predicated on any of the cases stated in Article 2219 of the Civil
Code.
To be entitled to moral damages, the respondents must have a right based upon law. It is
true that under Article 100314 of the Civil Code they succeeded to the entire estate of the late
Dr. Curso in the absence of the latter’s descendants, ascendants, illegitimate children, and
surviving spouse. However, they were not included among the persons entitled to recover
moral damages, as enumerated in Article 2219 of the Civil Code, viz:
Article 2219. Moral damages may be recovered in the following and analogous cases:
entitles the descendants, ascendants, illegitimate children, and surviving spouse of the
deceased passenger to demand moral damages for mental anguish by reason of the death of
the deceased.17
WHEREFORE, the petition for review on certiorari is granted, and the award made to the
respondents in the decision dated September 16, 2002 of the Court of Appeals of moral
damages amounting to ₱100,000.00 is deleted and set aside.
SO ORDERED.

(1) A criminal offense resulting in physical injuries;

(2) Quasi-delicts causing physical injuries;

(3) Seduction, abduction, rape or other lascivious acts;

(4) Adultery or concubinage;

(5) Illegal or arbitrary detention or arrest;

(6) Illegal search;

(7) Libel, slander or any other form of defamation;

(8) Malicious prosecution;

(9) Acts mentioned in article 309;

(10) Acts and actions referred to in articles 21, 26, 27, 28, 29, 30, 32, 34 and 35.

The parents of the female seduced, abducted, raped or abused referred to in No. 3 of this
article, may also recover moral damages.

The spouse, descendants, ascendants and brothers and sisters may bring the action
mentioned in No. 9 of this article, in the order named.1avvphi1

Article 2219 circumscribes the instances in which moral damages may be awarded. The
provision does not include succession in the collateral line as a source of the right to recover
moral damages. The usage of the phrase analogous cases in the provision means simply that
the situation must be held similar to those expressly enumerated in the law in
question15 following the ejusdem generis rule. Hence, Article 1003 of the Civil Code is not
concerned with recovery of moral damages.

In fine, moral damages may be recovered in an action upon breach of contract of carriage
only when: (a) where death of a passenger results, or (b) it is proved that the carrier was
guilty of fraud and bad faith, even if death does not result.16 Article 2206 of the Civil Code
46
G.R. No. 171092 March 15, 2010
EDNA DIAGO LHUILLIER, Petitioner,
vs.
BRITISH AIRWAYS, Respondent.
DECISION
DEL CASTILLO, J.:
Jurisdictio est potestas de publico introducta cum necessitate juris dicendi. Jurisdiction is a
power introduced for the public good, on account of the necessity of dispensing justice.1
Factual Antecedents
On April 28, 2005, petitioner Edna Diago Lhuillier filed a Complaint2 for damages against
respondent British Airways before the Regional Trial Court (RTC) of Makati City. She alleged
that on February 28, 2005, she took respondent’s flight 548 from London, United Kingdom
to Rome, Italy. Once on board, she allegedly requested Julian Halliday (Halliday), one of the
respondent’s flight attendants, to assist her in placing her hand-carried luggage in the
overhead bin. However, Halliday allegedly refused to help and assist her, and even
sarcastically remarked that "If I were to help all 300 passengers in this flight, I would have
a broken back!"
Petitioner further alleged that when the plane was about to land in Rome, Italy, another
flight attendant, Nickolas Kerrigan (Kerrigan), singled her out from among all the
passengers in the business class section to lecture on plane safety. Allegedly, Kerrigan made
her appear to the other passengers to be ignorant, uneducated, stupid, and in need of
lecturing on the safety rules and regulations of the plane. Affronted, petitioner assured
Kerrigan that she knew the plane’s safety regulations being a frequent traveler. Thereupon,
Kerrigan allegedly thrust his face a mere few centimeters away from that of the petitioner
and menacingly told her that "We don’t like your attitude."
Upon arrival in Rome, petitioner complained to respondent’s ground manager and
demanded an apology. However, the latter declared that the flight stewards were "only doing
their job."
Thus, petitioner filed the complaint for damages, praying that respondent be ordered to pay
₱5 million as moral damages, ₱2 million as nominal damages, ₱1 million as exemplary
damages, ₱300,000.00 as attorney’s fees, ₱200,000.00 as litigation expenses, and cost of
the suit.
On May 16, 2005, summons, together with a copy of the complaint, was served on the
respondent through Violeta Echevarria, General Manager of Euro-Philippine Airline
Services, Inc.3
On May 30, 2005, respondent, by way of special appearance through counsel, filed a Motion
to Dismiss4 on grounds of lack of jurisdiction over the case and over the person of the
respondent. Respondent alleged that only the courts of London, United Kingdom or Rome,
Italy, have jurisdiction over the complaint for damages pursuant to the Warsaw
Convention,5 Article 28(1) of which provides:
An action for damages must be brought at the option of the plaintiff, either before the court
of domicile of the carrier or his principal place of business, or where he has a place of
business through which the contract has been made, or before the court of the place of
destination.
Thus, since a) respondent is domiciled in London; b) respondent’s principal place of
business is in London; c) petitioner bought her ticket in Italy (through Jeepney Travel S.A.S,
in Rome);6 and d) Rome, Italy is petitioner’s place of destination, then it follows that the
complaint should only be filed in the proper courts of London, United Kingdom or Rome,
Italy.
Likewise, it was alleged that the case must be dismissed for lack of jurisdiction over the
person of the respondent because the summons was erroneously served on Euro-Philippine
Airline Services, Inc. which is not its resident agent in the Philippines.
On June 3, 2005, the trial court issued an Order requiring herein petitioner to file her
Comment/Opposition on the Motion to Dismiss within 10 days from notice thereof, and for
respondent to file a Reply thereon.7 Instead of filing a Comment/Opposition, petitioner filed
on June 27, 2005, an Urgent Ex-Parte Motion to Admit Formal Amendment to the
Complaint and Issuance of Alias Summons.8 Petitioner alleged that upon verification with
the Securities and Exchange Commission, she found out that the resident agent of
respondent in the Philippines is Alonzo Q. Ancheta. Subsequently, on September 9, 2005,
petitioner filed a Motion to Resolve Pending Incident and Opposition to Motion to Dismiss.9
Ruling of the Regional Trial Court
On October 14, 2005, the RTC of Makati City, Branch 132, issued an Order10 granting
respondent’s Motion to Dismiss. It ruled that:
The Court sympathizes with the alleged ill-treatment suffered by the plaintiff. However, our
Courts have to apply the principles of international law, and are bound by treaty stipulations
entered into by the Philippines which form part of the law of the land. One of this is the
Warsaw Convention. Being a signatory thereto, the Philippines adheres to its stipulations
and is bound by its provisions including the place where actions involving damages to
plaintiff is to be instituted, as provided for under Article 28(1) thereof. The Court finds no
justifiable reason to deviate from the indicated limitations as it will only run counter to the
provisions of the Warsaw Convention. Said adherence is in consonance with the comity of
nations and deviation from it can only be effected through proper denunciation as
enunciated in the Santos case (ibid). Since the Philippines is not the place of domicile of the
defendant nor is it the principal place of business, our courts are thus divested of jurisdiction
over cases for damages. Neither was plaintiff’s ticket issued in this country nor was her
destination Manila but Rome in Italy. It bears stressing however, that referral to the court of
proper jurisdiction does not constitute constructive denial of plaintiff’s right to have access
to our courts since the Warsaw Convention itself provided for jurisdiction over cases arising
from international transportation. Said treaty stipulations must be complied with in good
faith following the time honored principle of pacta sunt servanda.
47
The resolution of the propriety of service of summons is rendered moot by the Court’s want
of jurisdiction over the instant case.
WHEREFORE, premises considered, the present Motion to Dismiss is hereby GRANTED
and this case is hereby ordered DISMISSED.
Petitioner filed a Motion for Reconsideration but the motion was denied in an Order11 dated
January 4, 2006.
Petitioner now comes directly before us on a Petition for Review on Certiorari on pure
questions of law, raising the following issues:
Issues
I. WHETHER X X X PHILIPPINE COURTs HAVE JURISDICTION OVER A TORTIOUS
CONDUCT COMMITTED AGAINST A FILIPINO CITIZEN AND RESIDENT BY AIRLINE
PERSONNEL OF A FOREIGN CARRIER TRAVELLING BEYOND THE TERRITORIAL
LIMIT OF ANY FOREIGN COUNTRY; AND THUS IS OUTSIDE THE AMBIT OF THE
WARSAW CONVENTION.
II. WHETHER x x x RESPONDENT AIR CARRIER OF PASSENGERS, IN FILING ITS
MOTION TO DISMISS BASED ON LACK OF JURISDICTION OVER THE SUBJECT
MATTER OF THE CASE AND OVER ITS PERSON MAY BE DEEMED AS HAVING IN FACT
AND IN LAW SUBMITTED ITSELF TO THE JURISDICTION OF THE LOWER COURT,
ESPECIALLY SO, WHEN THE VERY LAWYER ARGUING FOR IT IS HIMSELF THE
RESIDENT AGENT OF THE CARRIER.
Petitioner’s Arguments
Petitioner argues that her cause of action arose not from the contract of carriage, but from
the tortious conduct committed by airline personnel of respondent in violation of the
provisions of the Civil Code on Human Relations. Since her cause of action was not
predicated on the contract of carriage, petitioner asserts that she has the option to pursue
this case in this jurisdiction pursuant to Philippine laws.
Respondent’s Arguments
In contrast, respondent maintains that petitioner’s claim for damages fell within the ambit
of Article 28(1) of the Warsaw Convention. As such, the same can only be filed before the
courts of London, United Kingdom or Rome, Italy.
Our Ruling
The petition is without merit.
The Warsaw Convention has the force and effect of law in this country.
It is settled that the Warsaw Convention has the force and effect of law in this country.
In Santos III v. Northwest Orient Airlines,12 we held that:
The Republic of the Philippines is a party to the Convention for the Unification of Certain
Rules Relating to International Transportation by Air, otherwise known as the Warsaw
Convention. It took effect on February 13, 1933. The Convention was concurred in by the
Senate, through its Resolution No. 19, on May 16, 1950. The Philippine instrument of
accession was signed by President Elpidio Quirino on October 13, 1950, and was deposited
with the Polish government on November 9, 1950. The Convention became applicable to the
Philippines on February 9, 1951. On September 23, 1955, President Ramon Magsaysay
issued Proclamation No. 201, declaring our formal adherence thereto, "to the end that the
same and every article and clause thereof may be observed and fulfilled in good faith by the
Republic of the Philippines and the citizens thereof."
The Convention is thus a treaty commitment voluntarily assumed by the Philippine
government and, as such, has the force and effect of law in this country.13
The Warsaw Convention applies because the air travel, where the alleged tortious conduct
occurred, was between the United Kingdom and Italy, which are both signatories to the
Warsaw Convention.
Article 1 of the Warsaw Convention provides:
1. This Convention applies to all international carriage of persons, luggage or goods
performed by aircraft for reward. It applies equally to gratuitous carriage by
aircraft performed by an air transport undertaking.
2. For the purposes of this Convention the expression "international carriage"
means any carriage in which, according to the contract made by the parties, the
place of departure and the place of destination, whether or not there be a break in
the carriage or a transhipment, are situated either within the territories of two
High Contracting Parties, or within the territory of a single High Contracting Party,
if there is an agreed stopping place within a territory subject to the sovereignty,
suzerainty, mandate or authority of another Power, even though that Power is not
a party to this Convention. A carriage without such an agreed stopping place
between territories subject to the sovereignty, suzerainty, mandate or authority of
the same High Contracting Party is not deemed to be international for the purposes
of this Convention. (Emphasis supplied)
Thus, when the place of departure and the place of destination in a contract of carriage are
situated within the territories of two High Contracting Parties, said carriage is deemed an
"international carriage". The High Contracting Parties referred to herein were the
signatories to the Warsaw Convention and those which subsequently adhered to it.14
In the case at bench, petitioner’s place of departure was London, United Kingdom while her
place of destination was Rome, Italy.15 Both the United Kingdom16 and Italy17 signed and
ratified the Warsaw Convention. As such, the transport of the petitioner is deemed to be an
"international carriage" within the contemplation of the Warsaw Convention.
48
Since the Warsaw Convention applies in the instant case, then the jurisdiction over the
subject matter of the action is governed by the provisions of the Warsaw Convention.
Under Article 28(1) of the Warsaw Convention, the plaintiff may bring the action for
damages before –
1. the court where the carrier is domiciled;
2. the court where the carrier has its principal place of business;
3. the court where the carrier has an establishment by which the contract has been
made; or
4. the court of the place of destination.
In this case, it is not disputed that respondent is a British corporation domiciled in London,
United Kingdom with London as its principal place of business. Hence, under the first and
second jurisdictional rules, the petitioner may bring her case before the courts of London in
the United Kingdom. In the passenger ticket and baggage check presented by both the
petitioner and respondent, it appears that the ticket was issued in Rome, Italy. Consequently,
under the third jurisdictional rule, the petitioner has the option to bring her case before the
courts of Rome in Italy. Finally, both the petitioner and respondent aver that the place of
destination is Rome, Italy, which is properly designated given the routing presented in the
said passenger ticket and baggage check. Accordingly, petitioner may bring her action before
the courts of Rome, Italy. We thus find that the RTC of Makati correctly ruled that it does
not have jurisdiction over the case filed by the petitioner.
Santos III v. Northwest Orient Airlines18 applies in this case.
Petitioner contends that Santos III v. Northwest Orient Airlines19 cited by the trial court is
inapplicable to the present controversy since the facts thereof are not similar with the instant
case.
We are not persuaded.
In Santos III v. Northwest Orient Airlines,20 Augusto Santos III, a resident of the Philippines,
purchased a ticket from Northwest Orient Airlines in San Francisco, for transport between
San Francisco and Manila via Tokyo and back to San Francisco. He was wait-listed in the
Tokyo to Manila segment of his ticket, despite his prior reservation. Contending that
Northwest Orient Airlines acted in bad faith and discriminated against him when it canceled
his confirmed reservation and gave his seat to someone who had no better right to it, Augusto
Santos III sued the carrier for damages before the RTC. Northwest Orient Airlines moved to
dismiss the complaint on ground of lack of jurisdiction citing Article 28(1) of the Warsaw
Convention. The trial court granted the motion which ruling was affirmed by the Court of
Appeals. When the case was brought before us, we denied the petition holding that under
Article 28(1) of the Warsaw Convention, Augusto Santos III must prosecute his claim in the
United States, that place being the (1) domicile of the Northwest Orient Airlines; (2)
principal office of the carrier; (3) place where contract had been made (San Francisco); and
(4) place of destination (San Francisco).21
We further held that Article 28(1) of the Warsaw Convention is jurisdictional in character.
Thus:
A number of reasons tends to support the characterization of Article 28(1) as a jurisdiction
and not a venue provision. First, the wording of Article 32, which indicates the places where
the action for damages "must" be brought, underscores the mandatory nature of Article
28(1). Second, this characterization is consistent with one of the objectives of the
Convention, which is to "regulate in a uniform manner the conditions of international
transportation by air." Third, the Convention does not contain any provision prescribing
rules of jurisdiction other than Article 28(1), which means that the phrase "rules as to
jurisdiction" used in Article 32 must refer only to Article 28(1). In fact, the last sentence of
Article 32 specifically deals with the exclusive enumeration in Article 28(1) as "jurisdictions,"
which, as such, cannot be left to the will of the parties regardless of the time when the damage
occurred.
xxxx
In other words, where the matter is governed by the Warsaw Convention, jurisdiction takes
on a dual concept. Jurisdiction in the international sense must be established in accordance
with Article 28(1) of the Warsaw Convention, following which the jurisdiction of a particular
court must be established pursuant to the applicable domestic law. Only after the question
of which court has jurisdiction is determined will the issue of venue be taken up. This second
question shall be governed by the law of the court to which the case is submitted.22
Contrary to the contention of petitioner, Santos III v. Northwest Orient Airlines23 is
analogous to the instant case because (1) the domicile of respondent is London, United
Kingdom;24 (2) the principal office of respondent airline is likewise in London, United
Kingdom;25 (3) the ticket was purchased in Rome, Italy;26 and (4) the place of destination is
Rome, Italy.27 In addition, petitioner based her complaint on Article 217628 of the Civil Code
on quasi-delict and Articles 1929 and 2130 of the Civil Code on Human Relations. In Santos
III v. Northwest Orient Airlines,31Augusto Santos III similarly posited that Article 28 (1) of
the Warsaw Convention did not apply if the action is based on tort. Hence, contrary to the
contention of the petitioner, the factual setting of Santos III v. Northwest Orient
Airlines32 and the instant case are parallel on the material points.
Tortious conduct as ground for the petitioner’s complaint is within the purview of the
Warsaw Convention.
Petitioner contends that in Santos III v. Northwest Orient Airlines,33 the cause of action was
based on a breach of contract while her cause of action arose from the tortious conduct of
the airline personnel and violation of the Civil Code provisions on Human Relations.34 In
addition, she claims that our pronouncement in Santos III v. Northwest Orient
Airlines35 that "the allegation of willful misconduct resulting in a tort is insufficient to
exclude the case from the comprehension of the Warsaw Convention," is more of an obiter
dictum rather than the ratio decidendi.36 She maintains that the fact that said acts occurred
aboard a plane is merely incidental, if not irrelevant.37
We disagree with the position taken by the petitioner. Black defines obiter dictum as "an
opinion entirely unnecessary for the decision of the case" and thus "are not binding as
precedent."38 In Santos III v. Northwest Orient Airlines,39 Augusto Santos III categorically
49
put in issue the applicability of Article 28(1) of the Warsaw Convention if the action is based
on tort.
In the said case, we held that the allegation of willful misconduct resulting in a tort is
insufficient to exclude the case from the realm of the Warsaw Convention. In fact, our ruling
that a cause of action based on tort did not bring the case outside the sphere of the Warsaw
Convention was our ratio decidendi in disposing of the specific issue presented by Augusto
Santos III. Clearly, the contention of the herein petitioner that the said ruling is an obiter
dictum is without basis.
Relevant to this particular issue is the case of Carey v. UnitedAirlines,40where the passenger
filed an action against the airline arising from an incident involving the former and the
airline’s flight attendant during an international flight resulting to a heated exchange which
included insults and profanity. The United States Court of Appeals (9th Circuit) held that
the "passenger's action against the airline carrier arising from alleged confrontational
incident between passenger and flight attendant on international flight was governed
exclusively by the Warsaw Convention, even though the incident allegedly involved
intentional misconduct by the flight attendant."41
In Bloom v. Alaska Airlines,42 the passenger brought nine causes of action against the airline
in the state court, arising from a confrontation with the flight attendant during an
international flight to Mexico. The United States Court of Appeals (9th Circuit) held that the
"Warsaw Convention governs actions arising from international air travel and provides the
exclusive remedy for conduct which falls within its provisions." It further held that the said
Convention "created no exception for an injury suffered as a result of intentional
conduct" 43 which in that case involved a claim for intentional infliction of emotional distress.
It is thus settled that allegations of tortious conduct committed against an airline passenger
during the course of the international carriage do not bring the case outside the ambit of the
Warsaw Convention.
Respondent, in seeking remedies from the trial court through special appearance of counsel,
is not deemed to have voluntarily submitted itself to the jurisdiction of the trial court.
Petitioner argues that respondent has effectively submitted itself to the jurisdiction of the
trial court when the latter stated in its Comment/Opposition to the Motion for
Reconsideration that "Defendant [is at a loss] x x x how the plaintiff arrived at her erroneous
impression that it is/was Euro-Philippines Airlines Services, Inc. that has been making a
special appearance since x x x British Airways x x x has been clearly specifying in all the
pleadings that it has filed with this Honorable Court that it is the one making a special
appearance."44
In refuting the contention of petitioner, respondent cited La Naval Drug Corporation v.
Court of Appeals45 where we held that even if a party "challenges the jurisdiction of the court
over his person, as by reason of absence or defective service of summons, and he also invokes
other grounds for the dismissal of the action under Rule 16, he is not deemed to be in
estoppel or to have waived his objection to the jurisdiction over his person."46
This issue has been squarely passed upon in the recent case of Garcia v.
Sandiganbayan,47 where we reiterated our ruling in La Naval Drug Corporation v. Court of
Appeals48 and elucidated thus:
Special Appearance to Question a Court’s Jurisdiction Is Not
Voluntary Appearance
The second sentence of Sec. 20, Rule 14 of the Revised Rules of Civil Procedure clearly
provides:
Sec. 20. Voluntary appearance. – The defendant’s voluntary appearance in the action shall
be equivalent to service of summons. The inclusion in a motion to dismiss of other grounds
aside from lack of jurisdiction over the person of the defendant shall not be deemed a
voluntary appearance.
Thus, a defendant who files a motion to dismiss, assailing the jurisdiction of the court over
his person, together with other grounds raised therein, is not deemed to have appeared
voluntarily before the court. What the rule on voluntary appearance – the first sentence of
the above-quoted rule – means is that the voluntary appearance of the defendant in court is
without qualification, in which case he is deemed to have waived his defense of lack of
jurisdiction over his person due to improper service of summons.
The pleadings filed by petitioner in the subject forfeiture cases, however, do not show that
she voluntarily appeared without qualification. Petitioner filed the following pleadings in
Forfeiture I: (a) motion to dismiss; (b) motion for reconsideration and/or to admit answer;
(c) second motion for reconsideration; (d) motion to consolidate forfeiture case with plunder
case; and (e) motion to dismiss and/or to quash Forfeiture I. And in Forfeiture II: (a) motion
to dismiss and/or to quash Forfeiture II; and (b) motion for partial reconsideration.
The foregoing pleadings, particularly the motions to dismiss, were filed by petitioner solely
for special appearance with the purpose of challenging the jurisdiction of the SB over her
person and that of her three children. Petitioner asserts therein that SB did not acquire
jurisdiction over her person and of her three children for lack of valid service of summons
through improvident substituted service of summons in both Forfeiture I and Forfeiture II.
This stance the petitioner never abandoned when she filed her motions for reconsideration,
even with a prayer to admit their attached Answer Ex Abundante Ad Cautelam dated January
22, 2005 setting forth affirmative defenses with a claim for damages. And the other
subsequent pleadings, likewise, did not abandon her stance and defense of lack of
jurisdiction due to improper substituted services of summons in the forfeiture cases.
Evidently, from the foregoing Sec. 20, Rule 14 of the 1997 Revised Rules on Civil Procedure,
petitioner and her sons did not voluntarily appear before the SB constitutive of or equivalent
to service of summons.
Moreover, the leading La Naval Drug Corp. v. Court of Appeals applies to the instant case.
Said case elucidates the current view in our jurisdiction that a special appearance before the
court––challenging its jurisdiction over the person through a motion to dismiss even if the
movant invokes other grounds––is not tantamount to estoppel or a waiver by the movant of
his objection to jurisdiction over his person; and such is not constitutive of a voluntary
submission to the jurisdiction of the court.1avvphi1
50
Thus, it cannot be said that petitioner and her three children voluntarily appeared before the
SB to cure the defective substituted services of summons. They are, therefore, not estopped
from questioning the jurisdiction of the SB over their persons nor are they deemed to have
waived such defense of lack of jurisdiction. Consequently, there being no valid substituted
services of summons made, the SB did not acquire jurisdiction over the persons of petitioner
and her children. And perforce, the proceedings in the subject forfeiture cases, insofar as
petitioner and her three children are concerned, are null and void for lack of jurisdiction.
(Emphasis supplied)

In this case, the special appearance of the counsel of respondent in filing the Motion to
Dismiss and other pleadings before the trial court cannot be deemed to be voluntary
submission to the jurisdiction of the said trial court. We hence disagree with the contention
of the petitioner and rule that there was no voluntary appearance before the trial court that
could constitute estoppel or a waiver of respondent’s objection to jurisdiction over its person.

WHEREFORE, the petition is DENIED. The October 14, 2005 Order of the Regional Trial
Court of Makati City, Branch 132, dismissing the complaint for lack of jurisdiction, is
AFFIRMED.

SO ORDERED.

51
G.R. No. 213418, September 21, 2016 suit.12chanrobleslaw

In their Answer,13 China Southern Airlines denied liability by alleging that petitioners were
ALFREDO S.RAMOS, CONCHITA S. RAMOS, BENJAMIN B. RAMOS, NELSON
not confirmed passengers of the airlines but were merely chance passengers. According to
T. RAMOS AND ROBINSON T. RAMOS, Petitioners, v. CHINA SOUTHERN
the airlines, it was specifically provided in the issued tickets that petitioners are required to
AIRLINES CO. LTD., Respondent.
re-confirm all their bookings at least 72 hours before their scheduled time of departures but
they failed to do so which resulted in the automatic cancellation of their bookings.
DECISION
The RTC then proceeded with the reception of evidence after the pre-trial conference.
PEREZ, J.:
On 23 March 2009, the RTC rendered a Decision14 in favor of the petitioners and ordered
Chkia Southern Airlines to pay damages in the amount of P692,000.00, broken down as
For resolution of the Court is this Petition for Review on Certiorari1 filed by petitioners follows:ChanRoblesVirtualawlibrary
Alfredo S. Ramos, Conchita S. Ramos, Benjamin B. Ramos, Nelson T. Ramos and Robinson "WHEREFORE, judgment is hereby rendered ordering the defendant [China Southern
T. Ramos, seeking to reverse and set aside the Decision2 dated 19 March 2013 and Airlines] to pay [petitioners]:
Resolution3 dated 9 July 2014 of the Court of Appeals (CA) in CA-G.R. CV. No. 94561. The
assailed decision and resolution affirmed with modification the 23 March 2009 Decision4 of chanRoblesvirtualLawlibrary1. The sum of [P]62,000.00 as actual damages;
the Regional Trial Court (RTC) of Manila, Branch 36, which ordered respondent China
Southern Airlines to pay petitioners the amount of P692,000.00, representing the amount 2. The sum of [P]300,000.00 as moral damages;
of damages and attorney's fees. On appeal, the appellate court affirmed the award of actual
damages but deleted the order for payment of moral and exemplary damages in the amount 3. The sum of [P]300,000.00 as exemplary damages; and cralawlawlibrary
of P600,000.00.5chanrobleslaw
4. The sum of [P]30,000.00 for attorney's fees.
The Facts
The defendants' counterclaim against plaintiffs are [hereby] dismissed for insufficiency of
On 7 August 2003, petitioners purchased five China Southern Airlines roundtrip plane evidence [enough] to sustain the damages claimed."15chanroblesvirtuallawlibrary
tickets from Active Travel Agency for $985.00.6 It is provided in their itineraries that On appeal, however, the CA modified the RTC Decision by deleting the award for moral and
petitioners will be leaving Manila on 8 August 2003 at 0900H and will be leaving Xiamen exemplary damages. According to the appellate court, petitioners failed to prove that China
on 12 August 2003 at 1920H.7 Nothing eventful happened during petitioners' flight going to Southern Airlines' breach of contractual obligation was attended with bad faith.16 The
Xiamen as they were able to successfully board the plane which carried them to Xiamen disquisition of the CA reads:ChanRoblesVirtualawlibrary
International Airport. On their way back to the Manila, however, petitioners were prevented "xxx. Where in breaching the contract, the defendant is not shown to have acted fraudulently
from taking their designated flight despite the fact that earlier that day an agent from Active or in bad faith, liability for damages is limited to the natural and probable consequences of
Tours informed them that their bookings for China Southern Airlines 1920H flight are the breach of the obligation and which the parties had foreseen or could reasonably have
confirmed.8 The refusal came after petitioners already checked in all their baggages and were foreseen; and in that case, such liability would not include liability for moral and exemplary
given the corresponding claim stubs and after they had paid the terminal fees. According to damages.
the airlines' agent with whom they spoke at the airport, petitioners were merely chance
passengers but they may be allowed to join the flight if they are willing to pay an additional In this case, We are not persuaded that [China Southern Airlines] breach of contractual
500 Renminbi (RMB) per person. When petitioners refused to defray the additional cost, obligation had been attended by bad faith or malice or gross negligence amounting to bad
their baggages were offloaded from the plane and China Southern Airlines 1920H flight then faith. On the contrary, it appears that despite [petitioner's] failure to "re-confirm" their
left Xiamen International Airport without them.9 Because they have business commitments bookings, [China Southern Airlines] exerted diligent efforts to comply with its obligation to
waiting for them in Manila, petitioners were constrained to rent a car that took them to [petitioners]. If at the outset, [China Southern Airlines] simply did not intend to comply with
Chuan Chio Station where they boarded the train to Hongkong.10 Upon reaching Hong Kong, its promise to transport [petitioners] back to Manila, it would not have taken the trouble of
petitioners purchased new plane tickets from Philippine Airlines (PAL) that flew them back proposing that the latter could still board the plane as "chance passengers" provided [that]
to Manila.11chanrobleslaw they will pay the necessary pay and penalties.

Upon arrival in Manila, petitioners went to Active Travel to inform them of their unfortunate
fate with China Southern Airlines. In their effort to avoid lawsuit, Active Travel offered to
refund the price of the plane tickets but petitioners refused to accept the offer. Petitioners
then went to China Southern Airlines to demand for the reimbursement of their airfare and
travel expenses in the amount of P87,375.00. When the airline refused to accede to their
demand, petitioners initiated an action for damages before the RTC of Manila against China
Southern Airlines and Active Travel. In their Complaint docketed as Civil Case No. 04-
109574, petitioners sought for the payment of the amount of P87,375.00 as actual damages,
P500,000.00 as moral damages, P500,000.00 as exemplary damages and cost of the
Thus, We believe and so hold that the damages recoverable by [petitioners] are limited to
the peso value of the PAL ticket they had purchased for their return flight from Xiamen, plus
attorney's fees, in the amount of [P]30,000.00, considering that [petitioners] were
ultimately compelled to litigate their claim[s] against [China Southern
Airlines]."17chanroblesvirtuallawlibrary
Since China Southern, Airlines' refusal to let petitioners board the plane was not attended
by bad faith, the appellate court decided not to award petitioners moral and exemplary
damages. The CA disposed in this wise:ChanRoblesVirtualawlibrary

52
"WHEREFORE, premises considered, the instant appeal is
hereby AFFIRMED with MODIFICATION in that the award of moral and exemplary
damages are hereby DELETED."18chanroblesvirtuallawlibrary
Dissatisfied, petitioners timely interposed a Motion for Partial Reconsideration which was
partially granted by the CA in a Resolution19 dated 9 July 2014, to
wit:ChanRoblesVirtualawlibrary
"ACCORDINGLY, the instant Motion is PARTIALLY GRANTED. The Decision dated
19 March 2013 rendered by this Court in CA-G.R. CV No. 94561 is hereby MODIFIED in
that [China Southern Airlines] is ORDERED to pay [petitioners] interest of 6% per
annum on the P62,000.00 as actual damages from the finality of this Court's Decision until
the same is fully satisfied."20chanroblesvirtuallawlibrary
Unflinching, petitioners elevated the matter before the Court by filing the instant Petition
for Review on Certiorari assailing the CA Decision and Resolution on the following
grounds:ChanRoblesVirtualawlibrary
The Issues
I.
THE COURT OF APPEALS COMMITTED GRAVE AND SERIOUS ERROR WHEN IT
DELETED THE AWARDS OF MORAL AND EXEMPLARY DAMAGES, A DEPARTURE
FROM ESTABLISHED DOCTRINES THAT PASSENGERS WHO ARE BUMPED-OFF ARE
ENTITLED TO MORAL AND EXEMPLARY DAMAGES;
I.
THE COURT OF APPEALS COMMITTED GRAVE AND SERIOUS ERROR WHEN IT
DECLARED THAT BUMPING OFF OF THE PETITIONERS WAS NOT ATTENDED BY BAD
FAITH AND MALICE CONTRARY TO THE FINDINGS OF THE LOWER COURT;
III.
THE COURT OF APPEALS COMMITTED GRAVE AND SERIOUS ERROR WHEN IT HELD
THAT THE LEGAL INTEREST COMMENCE ONLY FROM THE FINALITY OF THE
DECISION INSTEAD OF FROM THE DATE OF EXTRA-JUDICIAL DEMAND ON 18
AUGUST 2003.21chanroblesvirtuallawlibrary
The Court's Ruling
We resolve to grant the petition.
A contract of carriage, in this case, air transport, is intended to serve the traveling public and
thus, imbued with public interest.22 The law governing common carriers consequently
imposes an exacting standard of conduct,23viz:ChanRoblesVirtualawlibrary
"1755 of the New Civil Code. A common carrier is bound to carry passengers safely as far as
human care and foresight can provide, using the utmost diligence of very cautious persons,
with due regard for all the circumstances."
When an airline issues a ticket to a passenger confirmed on a particular flight, on a certain
date, a contract of carriage arises, and the passenger has every right to expect that he would
fly on that flight and on that date. If that does not happen, then the carrier opens itself to a
suit for breach of contract of carriage.24 In an action based on a breach of contract of carriage,
the aggrieved party does not have to prove that the common carrier was at fault or was
negligent.25cralawred All he has to prove is the existence of the contract and the fact of its
non-performance by the carrier, through the latter's failure to carry the passenger to its
destination.26chanrobleslaw
It is beyond question in the case at bar that petitioners had an existing contract of air carriage
with China Southern Airlines as evidenced by the airline tickets issued by Active Travel.
When they showed up at the airport and after they went through the routine security check
including the checking in of their luggage and the payment of the corresponding terminal
fees, petitioners were not allowed by China Southern Airlines to board on the plane. The
airlines' claim that petitioners do not have confirmed reservations cannot be given credence
by the Court. The petitioners were issued two-way tickets with itineraries indicating the date
and time of their return flight to Manila. These are binding contracts of carriage.27China
Southern Airlines allowed petitioners to check in their luggage and issued the necessary
claim stubs showing that they were part of the flight. It was only after petitioners went
through all the required check-in procedures that they were informed by the airlines that
they were merely chance passengers. Airlines companies do not, as a practice, accept pieces
of luggage from passengers without confirmed reservations. Quite tellingly, all the foregoing
circumstances lead us to the inevitable conclusion that petitioners indeed were bumped off
from the flight. We cannot from the records of this case deduce the true reason why the
airlines refused to board petitioners back to Manila. What we can be sure of is the
unacceptability of the proffered reason that rightfully gives rise to the claim for damages.
The prologue shapes the body of the petitioners' rights, that is, that they are entitled to
damages, actual, moral and exemplary.
There is no doubt that petitioners are entitled to actual or compensatory damages. Both the
RTC and the CA uniformly held that there was a breach of contract committed by China
Southern Airlines when it failed to deliver petitioners to their intended destination, a factual
finding that we do not intend to depart from in the absence of showing that it is unsupported
by evidence. As the aggrieved parties, petitioners had satisfactorily proven the existence of
the contract and the fact of its non-performance by China Southern Airlines; the concurrence
of these elements called for the imposition of actual or compensatory damages.
With respect to moral damages, the following provision of the New Civil Code is
instructive:ChanRoblesVirtualawlibrary
Article 2220. Willful injury to property may be a legal ground for awarding moral damages
if the court should find that, under the circumstances, such damages are justly due. The same
rule applies to breaches of contract where the defendant acted fraudulently or in bad faith.
Bad faith does not simply connote bad judgment or negligence. It imports dishonest purpose
or some moral obliquity and conscious doing of a wrong. It means breach of a known duty
through some motive, interest or ill will that partakes the nature of fraud. Bad faith is in
essence a question of intention.28chanrobleslaw
In Japan Airlines v. Simangan,29 the Court took the occasion to expound on the meaning of
bad faith in a breach of contract of carriage that merits the award of moral
damages:ChanRoblesVirtualawlibrary
"Clearly, JAL is liable for moral damages. It is firmly settled that moral damages are
recoverable in suits predicated on breach of a contract of carriage where it is proved that the
carrier was guilty of fraud or bad faith, as in this case. Inattention to and lack of care for the
interests of its passengers who are entitled to its utmost consideration, particularly as to
their convenience, amount to bad faith which entitles the passenger to an award of moral
damages. What the law considers as bad faith which may furnish the ground for an award of
moral damages would be bad faith in securing the contract and in the execution thereof, as
well as in the enforcement of its terms, or any other kind of deceit."
Applying the foregoing yardstick in the case at bar, We find that the airline company acted
in bad faith in insolently bumping petitioners off the flight after they have completed all the
pre-departure routine. Bad faith is evident when the ground personnel of the airline
53
company unjustly and unreasonably refused to board petitioners to the plane which
compelled them to rent a car and take the train to the nearest airport where they bought new
sets of plane tickets from another airline that could fly them home. Petitioners have every
reason to expect that they would be transported to their intended destination after they had
checked in their luggage and had gone through all the security checks. Instead, China
Southern Airlines offered to allow them to join the flight if they are willing to pay additional
cost; this amount is on top of the purchase price of the plane tickets. The requirement to pay
an additional fare was insult upon injury. It is an aggravation of the breach of contract.
Undoubtedly, petitioners are entitled to the award of moral damages. The purpose of
awarding moral damages is to enable the injured party to obtain means, diversion or
amusement that will serve to alleviate the moral suffering [that] he has undergone by reason
of defendant['s] culpable action.30chanrobleslaw

China Southern Airlines is also liable for exemplary damages as it acted in a wantonly
oppressive manner as succinctly discussed above against the petitioners. Exemplary
damages which are awarded by way of example or correction for the public good, may be
recovered in contractual obligations, as in this case, if defendant acted in wanton, fraudulent,
reckless, oppressive or malevolent manner.31chanrobleslaw

Article 2216 of the Civil Code provides that assessment of damages is left to the discretion of
the court according to the circumstances of each case. This discretion is limited by the
principle that the amount awarded should not be palpably excessive as to indicate that it was
the result of prejudice or corruption on the part of the trial court. Simply put, the amount of
damages must be fair, reasonable and proportionate to the injury suffered.32 With fairness
as the benchmark, We find adequate the amount of P300,000.00 each for moral and
exemplary damages imposed by the trial court.

The last issue is the reckoning point of the 6% interest on the money judgment. Following
this Court's ruling in Nacar v. Gallery Frames,33 we agree with the petitioners that the 6%
rate of interest per annum shall be reckoned from the date of their extrajudicial demand on
18 August 2003 until the date of finality of this judgment. The total amount shall thereafter
earn interest at the rate of six percent (6%) per annum from such finality of judgment until
its satisfaction.

WHEREFORE, premises considered, the petition is GRANTED. The Court

hereby AWARDS petitioners the following amounts:ChanRoblesVirtualawlibrary

(a) P62,000.00 as actual damages, with 6% interest per annum from date of
extrajudicial demand on 18 August 2003 until finality of this judgment, and the
total amount to thereafter earn interest at 6% per annum from finality of
judgment until full satisfaction;

(b) P300,000.00 as moral damages; and

(c) P300,000.00 as exemplary damages.

SO ORDERED.chanRoblesvirtualL

54
July 27, 2016
G.R. No. 172682
SULPICIO LINES, INC., Petitioner
vs.
NAPOLEON SESANTE, NOW SUBSTITUTED BY MARIBEL ATILANO,
KRISTEN MARIE, CHRISTIAN IONE, KENNETH KERRN AND KARISNA
KATE, ALL SURNAMED SESANTE, Respondents
DECISION
BERSAMIN, J.:
Moral damages are meant to enable the injured party to obtain the means, diversions or
amusements in order to alleviate the moral suffering. Exemplary damages are designed to
permit the courts to reshape behavior that is socially deleterious in its consequence by
creating negative incentives or deterrents against such behavior.
The Case
This appeal seeks to undo and reverse the adverse decision promulgated on June 27,
2005,1 whereby the Court of Appeals (CA) affirmed with modification the judgment of the
Regional Trial Court (RTC), Branch 91, in Quezon City holding the petitioner liable to pay
temperate and moral damages due to breach of contract of carriage.2
Antecedents
On September 18, 1998, at around 12:55 p.m., the M/V Princess of the Orient, a passenger
vessel owned and operated by the petitioner, sank near Fortune Island in Batangas. Of the
388 recorded passengers, 150 were lost.3Napoleon Sesante, then a member of the Philippine
National Police (PNP) and a lawyer, was one of the passengers who survived the sinking. He
sued the petitioner for breach of contract and damages.4
Sesante alleged in his complaint that the M/V Princess of the Orient left the Port of Manila
while Metro Manila was experiencing stormy weather; that at around 11:00 p.m., he had
noticed the vessel listing starboard, so he had gone to the uppermost deck where he
witnessed the strong winds and big waves pounding the vessel; that at the same time, he had
seen how the passengers had been panicking, crying for help and frantically scrambling for
life jackets in the absence of the vessel's officers and crew; that sensing danger, he had called
a certain Veney Ceballos through his cellphone to request him to inform the proper
authorities of the situation; that thereafter, big waves had rocked the vessel, tossing him to
the floor where he was pinned by a long steel bar; that he had freed himself only after another
wave had hit the vessel;5 that he had managed to stay afloat after the vessel had sunk, and
had been carried by the waves to the coastline of Cavite and Batangas until he had been
rescued; that he had suffered tremendous hunger, thirst, pain, fear, shock, serious anxiety
and mental anguish; that he had sustained injuries,6and had lost money, jewelry, important
documents, police uniforms and the .45 caliber pistol issued to him by the PNP; and that
because it had committed bad faith in allowing the vessel to sail despite the storm signal, the
petitioner should pay him actual and moral damages of ₱500,000.00 and ₱l,000,000.00,
respectively.7
In its defense, the petitioner insisted on the seaworthiness of the M/V Princess of the Orient
due to its having been cleared to sail from the Port of Manila by the proper authorities; that
the sinking had been due to force majeure; that it had not been negligent; and that its officers
and crew had also not been negligent because they had made preparations to abandon the
"'vessel because they had launched life rafts and had provided the passengers assistance in
that regard.8
Decision of the RTC
On October 12, 2001, the RTC rendered its judgment in favor of the respondent,9 holding as
follows:
WHEREFORE, judgment is hereby rendered in favor of plaintiff Napoleon Sesante and
against defendant Sulpicio Lines, Inc., ordering said defendant to pay plaintiff:
1. Temperate damages in the amount of ₱400,000.00;
2. Moral damages in the amount of One Million Pesos (₱l ,000,000.00);
3. Costs of suit.
SO ORDERED.10
The RTC observed that the petitioner, being negligent, was liable to Sesante pursuant to
Articles 1739 and 1759 of the Civil Code; that the petitioner had not established its due
diligence in the selection and supervision of the vessel crew; that the ship officers had failed
to inspect the stowage of cargoes despite being aware of the storm signal; that the officers
and crew of the vessel had not immediately sent a distress signal to the Philippine Coast
Guard; that the ship captain had not called for then "abandon ship" protocol; and that based
on the report of the Board of Marine Inquiry (BMI), the erroneous maneuvering of the vessel
by the captain during the extreme weather condition had been the immediate and proximate
cause of the sinking.
The petitioner sought reconsideration, but the RTC only partly granted its motion by
reducing the temperate damages from ₱500,000.00 to ₱300,000.00.11
Dissatisfied, the petitioner appealed.12 It was pending the appeal in the CA when Sesante
passed away. He was substituted by his heirs.13
Judgment of the CA
On June 27, 2005, the CA promulgated its assailed decision. It lowered the temperate
damages to ₱120,000.00, which approximated the cost of Sesante's lost personal
belongings; and held that despite the seaworthiness of the vessel, the petitioner remained
civilly liable because its officers and crew had been negligent in performing their duties.14
55
Sttill aggrieved, Sulpicio Lines moved for reconsideration, but the CA denied the motion.15
Hence, this appeal.
Issues
The petitioner attributes the following errors to the CA, to wit:
I
THE ASSAILED DECISION ERRED IN SUSTAINING THE AWARD OF MORAL
DAMAGES, AS THE INSTANT CASE IS FOR ALLEGED PERSONAL INJURIES
PREDICATED ON BREACH OF CONTRACT OF CARRIAGE, AND THERE BEING NO
PROOF OF BAD FAITH ON THE PART OF SULPICIO
II
THE ASSAILED DECISION ERRED IN SUSTAINING THE AMOUNT OF MORAL
DAMAGES AWARDED, THE SAME BEING UNREASONABLE, EXCESSIVE AND
UNCONSCIONABLE, AND TRANSLATES TO UNJUST ENRICHMENT AGAINST
SULPICIO
III
THE ASSAILED DECISION ERRED IN SUSTAINING THE AWARD OF TEMPERATE
DAMAGES AS THE SAME CANNOT SUBSTITUTE FOR A FAILED CLAIM FOR ACTUAL
DAMAGES, THERE BEING NO COMPETENT PROOF TO WARRANT SAID AWARD
IV
THE AWARD OF TEMPERATE DAMAGES IS UNTENABLE AS THE REQUISITE NOTICE
UNDER THE LAW WAS NOT GIVEN TO SULPICIO IN ORDER TO HOLD IT LIABLE FOR
THE ALLEGED LOSS OF SESANTE'S PERSONAL BELONGINGS
V
THE ASSAILED DECISION ERRED IN SUBSTITUTING THE HEIRS OF RESPONDENT
SESANTE IN THE INST ANT CASE, THE SAME BEING A PERSONAL ACTION WHICH
DOES NOT SURVIVE
VI
THE ASSAILED DECISION ERRED IN APPLYING ARTICLE 1759 OF THE NEW CIVIL
CODE AGAINST SULPICIO SANS A CLEAR-CUT FINDING OF SULPICIO'S BAD FAITH
IN THE INCIDENT16
In other words, to be resolved are the following, namely: (1) Is the complaint for breach of
contract and damages a personal action that does not survive the death of the
plaintiff?; (2) Is the petitioner liable for damages under Article 1759 of the Civil
Code?; and (3) Is there sufficient basis for awarding moral and temperate damages?
Ruling of the Court
The appeal lacks merit.
I
An action for breach of contract of carriage
survives the death of the plaintiff
The petitioner urges that Sesante's complaint for damages was purely personal and cannot
be transferred to his heirs upon his death. Hence, the complaint should be dismissed because
the death of the plaintiff abates a personal action.
The petitioner's urging is unwarranted.
Section 16, Rule 3 of the Rules of Court lays down the proper procedure in the event of the
death of a litigant, viz.:
Section 16. Death of party; duty of counsel. - Whenever a party to a pending action
dies, and the claim is not thereby extinguished, it shall be the duty of his counsel to
inform the court within thirty (30) days after such death of the fact thereof, and to give the
name and address of his legal representative or representatives. Failure of counsel to comply
with his duty shall be a ground for disciplinary action.
The heirs of the deceased may be allowed to be substituted for the
deceased, without requiring the appointment of an executor or administrator and the court
may appoint a guardian ad litem for the minor heirs.
xxxx
Substitution by the heirs is not a matter of jurisdiction, but a requirement of due process.17 It
protects the right of due process belonging to any party, that in the event of death the
deceased litigant continues to be protected and properly represented in the suit through the
duly appointed legal representative of his estate.18
The application of the rule on substitution depends on whether or not the action survives the
death of the litigant. Section 1, Rule 87 of the Rules of Court enumerates the following
actions that survive the death of a party, namely: (1) recovery of real or personal property,
or an interest from the estate; (2) enforcement of liens on the estate; and (3) recovery of
damages for an injury to person or property. On the one hand, Section 5, Rule 86 of the Rules
of Court lists the actions abated by death as including: (1) claims for funeral expenses and
56
those for the last sickness of the decedent; (2) judgments for money; and (3) all claims for
money against the deceased, arising from contract, express or implied.
A contract of carriage generates a relation attended with public duty, neglect or malfeasance
of the carrier's employees and gives ground for an action for damages.19 Sesante's claim
against the petitioner involved his personal injury caused by the breach of the contract of
carriage. Pursuant to the aforecited rules, the complaint survived his death, and could be
continued by his heirs following the rule on substitution.
II
The petitioner is liable for
breach of contract of carriage
The petitioner submits that an action for damages based on breach of contract of carriage
under Article 1759 of the Civil Code should be read in conjunction with Article 2201 of the
same code; that although Article 1759 only provides for a presumption of negligence, it does
not envision automatic liability; and that it was not guilty of bad faith considering that the
sinking of M/V Princess of the Orient had been due to a fortuitous event, an exempting
circumstance under Article 1174 of the Civil Code.
The submission has no substance.
Article 1759 of the Civil Code does not establish a presumption of negligence because it
explicitly makes the common carrier liable in the event of death or injury to passengers due
to the negligence or fault of the common carrier's employees. It reads:
Article 1759. Common carriers are liable for the death or injuries to passengers
through the negligence or willful acts of the former's employees, although such
employees may have acted beyond the scope of their authority or in violation of the orders
of the common earners.
This liability of the common carriers does not cease upon proof that they exercised all the
diligence of a good father of a family in the selection and supervision of their employees.
The liability of common carriers under Article 1759 is demanded by the duty of extraordinary
diligence required of common carriers in safely carrying their passengers.20
On the other hand, Article 1756 of the Civil Code lays down the presumption of negligence
against the common carrier in the event of death or injury of its passenger, viz.:
Article 1756. In case of death of or injuries to passengers, common carriers are presumed to
have been at fault or to have acted negligently, unless they prove that they observed
extraordinary diligence as prescribed in Articles 1733 and 1755.
Clearly, the trial court is not required to make an express finding of the common carrier's
fault or negligence.21 Even the mere proof of injury relieves the passengers from establishing
the fault or negligence of the carrier or its employees.22 The presumption of negligence
applies so long as there is evidence showing that: (a) a contract exists between the passenger
and the common carrier; and (b) the injury or death took place during the existence of such
contract.23 In such event, the burden shifts to the common carrier to prove its observance of
extraordinary diligence, and that an unforeseen event or force majeure had caused the
injury.24
Sesante sustained injuries due to the buffeting by the waves and consequent sinking of M/V
Princess of the Orient where he was a passenger. To exculpate itself from liability, the
common carrier vouched for the seaworthiness of M/V Princess of the Orient, and referred
to the BMI report to the effect that the severe weather condition - a force majeure – had
brought about the sinking of the vessel.
The petitioner was directly liable to Sesante and his heirs.
A common carrier may be relieved of any liability arising from a fortuitous event pursuant
to Article 117425 of the Civil Code. But while it may free a common carrier from liability, the
provision still requires exclusion of human agency from the cause of injury or loss.26 Else
stated, for a common carrier to be absolved from liability in case of force majeure, it is not
enough that the accident was caused by a fortuitous event. The common carrier must still
prove that it did not contribute to the occurrence of the incident due to its own or its
employees' negligence.27 We explained in Schmitz Transport & Brokerage Corporation v.
Transport Venture, Inc.,28 as follows:
In order to be considered a fortuitous event, however, (1) the cause of the unforeseen and
unexpected occurrence, or the failure of the debtor to comply with his obligation, must be
independent of human will; (2) it must be impossible to foresee the event which constitute
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 any manner;
and (4) the obligor must be free from any participation in the aggravation of the injury
resulting to the creditor.
[T]he principle embodied in the act of God doctrine strictly requires that the act must be
occasioned solely by the violence of nature. Human intervention is to be
excluded from creating or entering into the cause of the mischief. When the
effect is found to be in part the result of the participation of man, whether due
to his active intervention or neglect or failure to act, the whole occurrence is
then humanized and removed from the rules applicable to the acts of
God.29 (bold underscoring supplied for emphasis)
The petitioner has attributed the sinking of the vessel to the storm notwithstanding its
position on the seaworthiness of M/V Princess of the Orient.1âwphi1 Yet, the findings of the
BMI directly contradicted the petitioner's attribution, as follows:
7. The Immediate and the Proximate Cause of the Sinking
The Captain's erroneous maneuvers of the MIV Princess of the Orient minutes before she
sunk [sic] had caused the accident. It should be noted that during the first two hours when
the ship left North Harbor, she was navigating smoothly towards Limbones Point. During
the same period, the ship was only subjected to the normal weather stress prevailing at the
time. She was then inside Manila Bar. The waves were observed to be relatively small to
endanger the safety of the ship. It was only when the MV Princess of the Orient had cleared
57
Limbones Pt. while navigating towards the direction of the Fortune Island when this
agonizing misfortune struck the ship.
Initially, a list of three degrees was observed. The listing of the ship to her portside had
continuously increased. It was at this point that the captain had misjudged the situation.
While the ship continuously listed to her portside and was battered by big waves, strong
southwesterly winds, prudent judgement [sic] would dictate that the Captain should have
considerably reduced the ship's speed. He could have immediately ordered the Chief
Engineer to slacken down the speed. Meanwhile, the winds and waves continuously hit the
ship on her starboard side. The waves were at least seven to eight meters in height and the
wind velocity was a[t] 25 knots. The MV Princess of the Orient being a close-type ship (seven
decks, wide and high superstructure) was vulnerable and exposed to the howling winds and
ravaging seas. Because of the excessive movement, the solid and liquid cargo below the decks
must have shifted its weight to port, which could have contributed to the tilted position of
the ship.
Minutes later, the Captain finally ordered to reduce the speed of the ship to 14 knots. At the
same time, he ordered to put ballast water to the starboard-heeling tank to arrest the
continuous listing of the ship. This was an exercise in futility because the ship was already
listing between 15 to 20 degrees to her portside. The ship had almost reached the maximum
angle of her loll. At this stage, she was about to lose her stability.
Despite this critical situation, the Captain executed several starboard maneuvers. Steering
the course of the Princess to starboard had greatly added to her tilting. In the open seas, with
a fast speed of 14 knots, advance maneuvers such as this would tend to bring the body of the
ship in the opposite side. In navigational terms, this movement is described as the
centripetal force. This force is produced by the water acting on the side of the ship away from
the center of the turn. The force is considered to act at the center of lateral resistance which,
in this case, is the centroid of the underwater area of the ship's side away from the center of
the turn. In the case of the Princess, when the Captain maneuvered her to starboard, her
body shifted its weight to port. Being already inclined to an angle of 15 degrees, coupled with
the instantaneous movement of the ship, the cargoes below deck could have completely
shifted its position and weight towards portside. By this time, the ship being ravaged
simultaneously by ravaging waves and howling winds on her starboard side, finally lost her
grip.30
Even assuming the seaworthiness of the M/VPrincess of the Orient, the petitioner could not
escape liability considering that, as borne out by the aforequoted findings of the BMI, the
immediate and proximate cause of the sinking of the vessel had been the gross negligence of
its captain in maneuvering the vessel.
The Court also notes that Metro Manila was experiencing Storm Signal No. 1 during the time
of the sinking.31 The BMI observed that a vessel like the M/V Princess of the Orient, which
had a volume of 13.734 gross tons, should have been capable of withstanding a Storm Signal
No. I considering that the responding fishing boats of less than 500 gross tons had been able
to weather through the same waves and winds to go to the succor of the sinking vessel and
had actually rescued several of the latter's distressed passengers.32
III
The award of moral damages and
temperate damages is proper
The petitioner argues that moral damages could be meted against a common carrier only in
the following instances, to wit: (1) in the situations enumerated by Article 2201 of the Civil
Code; (2) in cases of the death of a passenger; or (3)where there was bad faith on the part of
the common carrier. It contends that none of these instances obtained herein; hence, the
award should be deleted.
We agree with the petitioner that moral damages may be recovered in an action upon breach
of contract of carriage only when: (a) death of a passenger results, or (b) it is proved that the
carrier was guilty of fraud and bad faith, even if death does not result.33 However, moral
damages may be awarded if the contractual breach is found to be wanton and deliberately
injurious, or if the one responsible acted fraudulently or with malice or bad faith.34
The CA enumerated the negligent acts committed by the officers and crew of M/V Princess
of the Orient, viz.:
x x x. [W]hile this Court yields to the findings of the said investigation report, yet it should
be observed that what was complied with by Sulpicio Lines were only the basic and minimal
safety standards which would qualify the vessel as seaworthy. In the same report however it
also revealed that the immediate and proximate cause of the sinking of the M/V Princess of
the Orient was brought by the following: erroneous maneuvering command of Captain
Esrum Mahilum and due to the weather condition prevailing at the time of the tragedy. There
is no doubt that under the circumstances the crew of the vessel were negligent in manning
it. In fact this was clearly established by the investigation of the Board of Marine Inquiry
where it was found that:
The Chief Mate, when interviewed under oath, had attested that he was not able to make
stability calculation of the ship vis-à-vis her cargo. He did not even know the metacentric
height (GM) of the ship whether it be positive or negative.
As cargo officer of the ship, he failed to prepare a detailed report of the ship's cargo stowage
plan.
He likewise failed to conduct the soundings (measurement) of the ballast tanks before the
ship departed from port. He readily presumed that the ship was full of ballast since the ship
was fully ballasted when she left Cebu for Manila on 16 September 1998 and had never
discharge[d] its contents since that time.
Being the officer-in-charge for emergency situation (sic) like this, he failed to execute and
supervise the actual abandonship (sic) procedure. There was no announcement at the public
address system of abandonship (sic), no orderly distribution of life jackets and no orderly
launching of life rafts. The witnesses have confirmed this finding on their sworn statements.
There was miscalculation in judgment on the part of the Captain when he erroneously
navigated the ship at her last crucial moment.x x x
58
To aggravate his case, the Captain, having full command and responsibility of the MV
Princess of the Orient, had failed to ensure the proper execution of the actual abandoning of
the ship.
The deck and engine officers (Second Mate, Third Mate, Chief Engineers, Second Engineer,
Third Engineer and Fourth Engineer), being in charge of their respective abandonship (sic)
post, failed to supervise the crew and passengers in the proper execution of abandonship
(sic) procedure.
The Radio Officer (spark) failed to send the SOS message in the internationally accepted
communication network (VHF Channel 16). Instead, he used the Single Side Band (SSB)
radio in informing the company about the emergency situation. x x x x35
The aforestated negligent acts of the officers and crew of M/V Princess of the Orient could
not be ignored in view of the extraordinary duty of the common carrier to ensure the safety
of the passengers. The totality of the negligence by the officers and crew of M/V Princess of
the Orient, coupled with the seeming indifference of the petitioner to render assistance to
Sesante,36 warranted the award of moral damages.
While there is no hard-and-fast rule in determining what is a fair and reasonable amount of
moral damages, the discretion to make the determination is lodged in the trial court with the
limitation that the amount should not be palpably and scandalously excessive. The trial court
then bears in mind that moral damages are not intended to impose a penalty on the
wrongdoer, or to enrich the plaintiff at the expense of the defendant.37 The amount of the
moral damages must always reasonably approximate the extent of injury and be
proportional to the wrong committed.38
The Court recognizes the mental anguish, agony and pain suffered by Sesante who fought to
survive in the midst of the raging waves of the sea while facing the immediate prospect of
losing his life. His claim for moral and economic vindication is a bitter remnant of that most
infamous tragedy that left hundreds of families broken in its wake. The anguish and moral
sufferings he sustained after surviving the tragedy would always include the memory of
facing the prospect of his death from drowning, or dehydration, or being preyed upon by
sharks. Based on the established circumstances, his survival could only have been a miracle
wrought by God's grace, by which he was guided in his desperate swim for the safety of the
shore. But even with the glory of survival, he still had to grapple with not just the memory of
having come face to face with almost certain death, but also with having to answer to the
instinctive guilt for the rest of his days of being chosen to live among the many who perished
in the tragedy.39
While the anguish, anxiety, pain and stress experienced by Sesante during and after the
sinking cannot be quantified, the moral damages to be awarded should at least approximate
the reparation of all the consequences of the petitioner's negligence. With moral damages
being meant to enable the injured party to obtain the means, diversions or amusements in
order to alleviate his moral and physical sufferings,40 the Court is called upon to ensure that
proper recompense be allowed to him, through his heirs. For this purpose, the amount of
₱l,000,000.00, as granted by the RTC and affirmed by the CA, is maintained.
The petitioner contends that its liability for the loss of Sesante' s personal belongings should
conform with A1iicle 1754, in relation to Articles 1998, 2000 to 2003 of the Civil Code, which
provide:
Article 1754. The provisions of Articles 1733 to 1753 shall apply to the passenger's baggage
which is not in his personal custody or in that of his employees. As to other baggage, the
rules in Articles 1998 and 2000 to 2003 concerning the responsibility of hotel-keepers shall
be applicable.
xxxx
Article 1998. The deposit of effects made by travellers in hotels or inns shall also be regarded
as necessary. The keepers of hotels or inns shall be responsible for them as depositaries,
provided that notice was given to them, or to their employees, of the effects brought by the
guests and that, on the part of the latter, they take the precautions which said hotel-keepers
or their substitutes advised relative to the care and vigilance of their effects.
xxxx
Article 2000. The responsibility referred to in the two preceding articles shall include the
loss of, or injury to the personal property of the guests caused by the servants or employees
of the keepers of hotels or inns as well as by strangers; but not that which may proceed from
any force majeure. The fact that travellers are constrained to rely on the vigilance of the
keeper of the hotel or inn shall be considered in determining the degree of care required of
him.
Article 2001. The act of a thief or robber, who has entered the hotel is not deemed force
majeure, unless it is done with the use of arms or through an irresistible force.
Article 2002. The hotel-keeper is not liable for compensation if the loss is due to the acts of
the guest, his family, servants or visitors, or if the loss arises from the character of the things
brought into the hotel.
Article 2003. The hotel-keeper cannot free himself from responsibility by posting notices to
the effect that he is not liable for the articles brought by the guest. Any stipulation to the
contrary between the hotel-keeper and the guest whereby the responsibility of the former as
set forth in Articles 1998 to 2001 is suppressed or diminished shall be void.
The petitioner denies liability because Sesante' s belongings had remained in his custody all
throughout the voyage until the sinking, and he had not notified the petitioner or its
employees about such belongings. Hence, absent such notice, liability did not attach to the
petitioner.
Is notification required before the common carrier becomes liable for lost belongings that
remained in the custody of the passenger?
We answer in the negative.
The rule that the common carrier is always responsible for the passenger's baggage during
the voyage needs to be emphasized. Article 1754 of the Civil Code does not exempt the
common carrier from liability in case of loss, but only highlights the degree of care required
of it depending on who has the custody of the belongings. Hence, the law requires the
common carrier to observe the same diligence as the hotel keepers in case the baggage
59
remains with the passenger; otherwise, extraordinary diligence must be
exercised.41 Furthermore, the liability of the common carrier attaches even if the loss or
damage to the belongings resulted from the acts of the common carrier's employees, the only
exception being where such loss or damages is due to force majeure.42
In YHT Realty Corporation v. Court of Appeals,43we declared the actual delivery of the
goods to the innkeepers or their employees as unnecessary before liability could attach to
the hotelkeepers in the event of loss of personal belongings of their guests considering that
the personal effects were inside the hotel or inn because the hotelkeeper shall remain
accountable.44 Accordingly, actual notification was not necessary to render the petitioner as
the common carrier liable for the lost personal belongings of Sesante. By allowing him to
board the vessel with his belongings without any protest, the petitioner became sufficiently
notified of such belongings. So long as the belongings were brought inside the premises of
the vessel, the petitioner was thereby effectively notified and consequently duty-bound to
observe the required diligence in ensuring the safety of the belongings during the voyage.
Applying Article 2000 of the Civil Code, the petitioner assumed the liability for loss of the
belongings caused by the negligence of its officers or crew. In view of our finding that the
negligence of the officers and crew of the petitioner was the immediate and proximate cause
of the sinking of the M/V Princess of the Orient, its liability for Sesante' s lost personal
belongings was beyond question.
The petitioner claims that temperate damages were erroneously awarded because Sesante
had not proved pecuniary loss; and that the CA merely relied on his self-serving testimony.
The award of temperate damages was proper.
Temperate damages may be recovered when some pecuniary loss has been suffered but the
amount cannot, from the nature of the case, be proven with certainty.45 Article 222446 of
the Civil Code expressly authorizes the courts to award temperate damages despite the lack
of certain proof of actual damages.47
Indubitably, Sesante suffered some pecuniary loss from the sinking of the vessel, but the
value of the loss could not be established with certainty. The CA, which can try facts and
appreciate evidence, pegged the value of the lost belongings as itemized in the police report
at P120,000.00. The valuation approximated the costs of the lost belongings. In that context,
the valuation of ₱120,000.00 is correct, but to be regarded as temperate damages.
In fine, the petitioner, as a common carrier, was required to observe extraordinary diligence
in ensuring the safety of its passengers and their personal belongings. It being found herein
short of the required diligence rendered it liable for the resulting injuries and damages
sustained by Sesante as one of its passengers.
Should the petitioner be further held liable for exemplary damages?
In contracts and quasi-contracts, the Court has the discretion to award exemplary damages
if the defendant acted in a wanton, fraudulent, reckless, oppressive, or malevolent
manner.48 Indeed, exemplary damages cannot be recovered as a matter of right, and it is left
to the court to decide whether or not to award them.49 In consideration of these legal
premises for the exercise of the judicial discretion to grant or deny exemplary damages in
contracts and quasi-contracts against a defendant who acted in a wanton, fraudulent,
reckless, oppressive, or malevolent manner, the Court hereby awards exemplary damages to
Sesante.
First of all, exemplary damages did not have to be specifically pleaded or proved, because
the courts had the discretion to award them for as long as the evidence so warranted.
In Marchan v. Mendoza,50 the Court has relevantly discoursed:
x x x. It is argued that this Court is without jurisdiction to adjudicate this
exemplary damages since there was no allegation nor prayer, nor proof, nor
counterclaim of error for the same by the appellees. It is to be observed
however, that in the complaint, plaintiffs "prayed for such other and further
relief as this Court may deem just and equitable." Now, since the body of the
complaint sought to recover damages against the defendant-carrier wherein
plaintiffs prayed for indemnification for the damages they suffered as a result
of the negligence of said Silverio Marchan who is appellant's employee; and
since exemplary damages is intimately connected with general damages,
plaintiffs may not be expected to single out by express term the kind of damages
they arc trying to recover against the defendant's carrier. Suffice it to state that
when plaintiffs prayed in their complaint for such other relief and remedies
that may be availed of under the premises, in effect, therefore, the court is
called upon to exercise and use its discretion whether the imposition of
punitive or exemplary damages even though not expressly prayed or pleaded in
the plaintiffs' complaint."
x x x It further appears that the amount of exemplary damages need not be
proved, because its determination depends upon the amount of compensatory
damages that may be awarded to the claimant. If the amount of exemplary
damages need not be proved, it need not also be alleged, and the reason is
obvious because it is merely incidental or dependent upon what the court may
award as compensatory damages. Unless and until this premise is determined
and established, what may be claimed as exemplary damages would amount to
a mere surmise or speculation. It follows as a necessary consequence that the
amount of exemplary damages need not be pleaded in the complaint because
the same cannot be predetermined. One can merely ask that it be determined
by the court if in the use of its discretion the same is warranted by the evidence,
and this is just what appellee has done. (Bold underscoring supplied for emphasis)
And, secondly, exemplary damages are designed by our civil law to "permit the courts to
reshape behavior that is socially deleterious in its consequence by creating negative
incentives or deterrents against such behavior. "51 The nature and purpose for this kind of
damages have been well-stated in People v. Dalisay,52to wit:
Also known as 'punitive' or 'vindictive' damages, exemplary or corrective damages are
intended to serve as a deterrent to serious wrong doings, and as a vindication
of undue sufferings and wanton invasion of the rights of an injured or a
punishment for those guilty of outrageous conduct. These terms are generally, but
not always, used interchangeably. In common law, there is preference in the use of
exemplary damages when the award is to account for injury to feelings and for the sense of
indignity and humiliation suffered by a person as a result of an injury that has been
maliciously and wantonly inflicted, the theory being that there should be compensation for
the hurt caused by the highly reprehensible conduct of the defendant - associated with such
circumstances as willfulness, wantonness, malice, gross negligence or recklessness,
60
oppression, insult or fraud or gross fraud - that intensifies the injury. The terms punitive or
vindictive damages are often used to refer to those species of damages that may be awarded
against a person to punish him for his outrageous conduct. In either case, these
damages arc intended in good measure to deter the wrongdoer and others like
him from similar conduct in the future. (Bold underscoring supplied for emphasis)
The BMI found that the "erroneous maneuvers" during the ill-fated voyage by the captain of
the petitioner's vessel had caused the sinking. After the vessel had cleared Limbones Point
while navigating towards the direction of Fortune Island, the captain already noticed the
listing of the vessel by three degrees to the portside of the vessel, but, according to the BMI,
he did not exercise prudence as required by the situation in which his vessel was suffering
the battering on the starboard side by big waves of seven to eight meters high and strong
southwesterly winds of 25 knots. The BMI pointed out that he should have considerably
reduced the speed of the vessel based on his experience about the vessel - a close-type ship
of seven decks, and of a wide and high superstructure - being vulnerable if exposed to strong
winds and high waves. He ought to have also known that maintaining a high speed under
such circumstances would have shifted the solid and liquid cargo of the vessel to port,
worsening the tilted position of the vessel. It was only after a few minutes thereafter that he
finally ordered the speed to go down to 14 knots, and to put ballast water to the starboard-
heeling tank to arrest the continuous listing at portside. By then, his moves became an
exercise in futility because, according to the BMI, the vessel was already listing to her
portside between 15 to 20 degrees, which was almost the maximum angle of the vessel's loll.
It then became inevitable for the vessel to lose her stability.
The actuations of the petitioner and its agents during the incident attending the unfortunate
sinking of the M/V Princess of the Orient were far below the standard of care and
circumspection that the law on common carriers demanded. Accordingly, we hereby fix the
sum of ₱l ,000,000.00 in order to serve fully the objective of exemplarity among those
engaged in the business of transporting passengers and cargo by sea. The amount would not
be excessive, but proper. As the Court put it in Pereria v. Zarate:57
Anent the ₱1,000,000.00 allowed as exemplary damages, we should not reduce the amount
if only to render effective the desired example for the public good. As a common carrier, the
Pereñas needed to be vigorously reminded to observe their duty to exercise extraordinary
diligence to prevent a similarly senseless accident from happening again. Only by an award
of exemplary damages in that amount would suffice to instill in them and others similarly
situated like them the ever-present need for greater and constant vigilance in the conduct of
a business imbued with public interest.58 (Bold underscoring supplied for emphasis)
WHEREFORE, the Court AFFIRMS the decision promulgated on June 27, 2005 with
the MODIFICATIONS that: (a) the amount of moral damages is fixed at
₱l,000,000.00; (b) the amount of ₱l,000,000.00 is granted as exemplary damages; and (c)
the sum of ₱l20,000.00 is allowed as temperate damages, all to be paid to the heirs of the
late Napoleon Sesante. In addition, all the amounts hereby awarded shall earn interest of
6% per annum from the finality of this decision until fully paid. Costs of suit to be paid by
the petitioner.

The BMI concluded that the captain had executed several starboard maneuvers despite the SO ORDERED.
critical situation of the vessel, and that the maneuvers had greatly added to the tilting of the
vessel. It observed:

x x x In the open seas, with a fast speed of 14 knots, advance maneuvers such as
this would tend to bring the body of the ship in the opposite side. In
navigational terms, this movement is described as the centripetal force. This
force is produced by the water acting on the side of the ship away from the
center of the turn. The force is considered to act at the center of lateral
resistance which, in this case, is the centroid of the underwater area of the
ship's side away from the center of the turn. In the case of the Princess, when
the Captain maneuvered her to starboard, her body shifted its weight to port.
Being already inclined to an angle of 15 degrees, coupled with the instantaneous
movement of the ship, the cargoes below deck could have completely shifted its
position and weight towards portside. By this time, the ship being ravaged
simultaneously by ravaging waves and howling winds on her starboard side,
finally lost her grip.53

Clearly, the petitioner and its agents on the scene acted wantonly and
recklessly. Wanton and reckless are virtually synonymous in meaning as respects liability
for conduct towards others.54 Wanton means characterized by extreme recklessness and
utter disregard for the rights of others; or marked by or manifesting arrogant recklessness
of justice or of rights or feelings of others.55 Conduct is reckless when it is an extreme
departure from ordinary care, in a situation in which a high degree of danger is apparent. It
must be more than any mere mistake resulting from inexperience, excitement, or confusion,
and more than mere thoughtlessness or inadvertence, or simple inattention.56

61
G.R. No. 194121
TORRES-MADRID BROKERAGE, INC., Petitioner
vs.
FEB MITSUI MARINE INSURANCE CO., INC. and BENJAMIN P. MANALAST
AS, doing business under the name of BMT TRUCKING SERVICES, Respondents
DECISION
BRION, J.:
We resolve the petition for review on certiorari challenging the Court
Appeals' (CA) October 14, 2010 decision in CA-G.R. CV No. 91829.1
The CA affirmed the Regional Trial Court's (RTC) decision in Civil Case No. 01-1596, and
found petitioner Torres-Madrid Brokerage, Inc. (TMBI) and respondent Benjamin P.
Manalastas jointly and solidarily liable to respondent FEB Mitsui Marine Insurance Co.,
Inc. (Mitsui) for damages from the loss of transported cargo.
Antecedents
On October 7, 2000, a shipment of various electronic goods from Thailand and Malaysia
arrived at the Port of Manila for Sony Philippines, Inc. (Sony). Previous to the arrival, Sony
had engaged the services of TMBI to facilitate, process, withdraw, and deliver the shipment
from the port to its warehouse in Biñan, Laguna.2
TMBI – who did not own any delivery trucks – subcontracted the services of Benjamin
Manalastas’ company, BMT Trucking Services (BMT), to transport the shipment from the
port to the Biñan warehouse.3 Incidentally, TMBI notified Sony who had no objections to the
arrangement.4
Four BMT trucks picked up the shipment from the port at about 11:00 a.m. of October 7,
2000. However, BMT could not immediately undertake the delivery because of the truck ban
and because the following day was a Sunday. Thus, BMT scheduled the delivery on October
9, 2000.
In the early morning of October 9, 2000, the four trucks left BMT’s garage for
Laguna.5 However, only three trucks arrived at Sony’s Biñan warehouse.
At around 12:00 noon, the truck driven by Rufo Reynaldo Lapesura (NSF-391) was found
abandoned along the Diversion Road in Filinvest, Alabang, Muntinlupa City.6 Both the
driver and the shipment were missing.
Later that evening, BMT’s Operations Manager Melchor Manalastas informed Victor Torres,
TMBI’s General Manager, of the development.7 They went to Muntinlupa together to inspect
the truck and to report the matter to the police.8
Victor Torres also filed a complaint with the National Bureau of Investigation (NBI) against
Lapesura for "hijacking."9The complaint resulted in a recommendation by the NBI to the
Manila City Prosecutor’s Office to prosecute Lapesura for qualified theft.10
TMBI notified Sony of the loss through a letter dated October 10, 2000.11 It also sent BMT a
letter dated March 29, 2001, demanding payment for the lost shipment. BMT refused to pay,
insisting that the goods were "hijacked."
In the meantime, Sony filed an insurance claim with the Mitsui, the insurer of the goods.
After evaluating the merits of the claim, Mitsui paid
Sony PHP7,293,386.23 corresponding to the value of the lost goods.12
of
After being subrogated to Sony’s rights, Mitsui sent TMBI a demand letter dated August 30,
2001 for payment of the lost goods. TMBI refused to pay Mitsui’s claim. As a result, Mitsui
filed a complaint against TMBI on November 6, 2001,
TMBI, in turn, impleaded Benjamin Manalastas, the proprietor of BMT, as a third-party
defendant. TMBI alleged that BMT’s driver, Lapesura, was responsible for the
theft/hijacking of the lost cargo and claimed BMT’s negligence as the proximate cause of the
loss. TMBI prayed that in the event it is held liable to Mitsui for the loss, it should be
reimbursed by BMT.
At the trial, it was revealed that BMT and TMBI have been doing business with each other
since the early 80’s. It also came out that there had been a previous hijacking incident
involving Sony’s cargo in 1997, but neither Sony nor its insurer filed a complaint against
BMT or TMBI.13
On August 5, 2008, the RTC found TMBI and Benjamin Manalastas jointly and solidarily
liable to pay Mitsui PHP 7,293,386.23 as actual damages, attorney’s fees equivalent to 25%
of the amount claimed, and the costs of the suit.14 The RTC held that TMBI and Manalastas
were common carriers and had acted negligently.
Both TMBI and BMT appealed the RTC’s verdict.
TMBI denied that it was a common carrier required to exercise extraordinary diligence. It
maintains that it exercised the diligence of a good father of a family and should be absolved
of liability because the truck was "hijacked" and this was a fortuitous event.
BMT claimed that it had exercised extraordinary diligence over the lost shipment, and
argued as well that the loss resulted from a fortuitous event.
On October 14, 2010, the CA affirmed the RTC’s decision but reduced the award of attorney’s
fees to PHP 200,000.
The CA held: (1) that "hijacking" is not necessarily a fortuitous event because the term refers
to the general stealing of cargo during transit;15 (2) that TMBI is a common carrier engaged
in the business of transporting goods for the general public for a fee;16 (3) even if the
"hijacking" were a fortuitous event, TMBI’s failure to observe extraordinary diligence in
overseeing the cargo and adopting security measures rendered it liable for the loss;17 and (4)
62
even if TMBI had not been negligent in the handling, transport and the delivery of the
shipment, TMBI still breached its contractual obligation to Sony when it failed to deliver the
shipment.18
TMBI disagreed with the CA’s ruling and filed the present petition on December 3, 2010.
The Arguments
TMBI’s Petition
TMBI insists that the hijacking of the truck was a fortuitous event. It contests the CA’s
finding that neither force nor intimidation was used in the taking of the cargo. Considering
Lapesura was never found, the Court should not discount the possibility that he was a victim
rather than a perpetrator.19
TMBI denies being a common carrier because it does not own a single truck to transport its
shipment and it does not offer transport services to the public for compensation.20 It
emphasizes that Sony knew TMBI did not have its own vehicles and would subcontract the
delivery to a third-party.
Further, TMBI now insists that the service it offered was limited to the processing of
paperwork attendant to the entry of Sony’s goods. It denies that delivery of the shipment was
a part of its obligation.21
TMBI solely blames BMT as it had full control and custody of the cargo when it was
lost.22 BMT, as a common carrier, is presumed negligent and should be responsible for the
loss.
BMT’s Comment
BMT insists that it observed the required standard of care.23 Like the petitioner, BMT
maintains that the hijacking was a fortuitous event – a force majeure – that exonerates it
from liability.24 It points out that Lapesura has never been seen again and his fate remains a
mystery. BMT likewise argues that the loss of the cargo necessarily showed that the taking
was with the use of force or intimidation.25
If there was any attendant negligence, BMT points the finger on TMBI who failed to send a
representative to accompany the shipment.26 BMT further blamed TMBI for the latter’s
failure to adopt security measures to protect Sony’s cargo.27
Mitsui’s Comment
Mitsui counters that neither TMBI nor BMT alleged or proved during the trial that the taking
of the cargo was accompanied with grave or irresistible threat, violence, or force.28 Hence,
the incident cannot be considered "force majeure" and TMBI remains liable for breach of
contract.
Mitsui emphasizes that TMBI’s theory – that force or intimidation must have been used
because Lapesura was never found – was only raised for the first time before this Court.29 It
also discredits the theory as a mere conjecture for lack of supporting evidence.
Mitsui adopts the CA’s reasons to conclude that TMBI is a common carrier. It also points out
Victor Torres’ admission during the trial that TMBI’s brokerage service includes the eventual
delivery of the cargo to the consignee.30
Mitsui invokes as well the legal presumption of negligence against TMBI, pointing out that
TMBI simply entrusted the cargo to BMT without adopting any security measures despite:
(1) a previous hijacking incident when TMBI lost Sony’s cargo; and (2) TMBI’s knowledge
that the cargo was worth more than 10 million pesos.31
Mitsui affirms that TMBI breached the contract of carriage through its negligent handling of
the cargo, resulting in its loss.
The Court’s Ruling
A brokerage may be considered a
common carrier if it also undertakes to
deliver the goods for its customers
Common carriers are persons, corporations, firms or associations engaged in the business
of transporting passengers or goods or both, by land, water, or air, for compensation,
offering their services to the public.32 By the nature of their business and for reasons of public
policy, they are bound to observe extraordinary diligence in the vigilance over the goods and
in the safety of their passengers.33
In A.F. Sanchez Brokerage Inc. v. Court of Appeals,34we held that a customs broker – whose
principal business is the preparation of the correct customs declaration and the proper
shipping documents – is still considered a common carrier if it also undertakes to deliver the
goods for its customers. The law does not distinguish between one whose principal business
activity is the carrying of goods and one who undertakes this task only as an ancillary
activity.35 This ruling has been reiterated in Schmitz Transport & Brokerage Corp. v.
Transport Venture, Inc.,36Loadmasters Customs Services, Inc. v. Glodel Brokerage
Corporation,37and Westwind Shipping Corporation v. UCPB General Insurance Co., Inc.38
Despite TMBI’s present denials, we find that the delivery of the goods is an integral, albeit
ancillary, part of its brokerage services. TMBI admitted that it was contracted to facilitate,
process, and clear the shipments from the customs authorities, withdraw them from the pier,
then transport and deliver them to Sony’s warehouse in Laguna.39
Further, TMBI’s General Manager Victor Torres described the nature of its services as
follows:
ATTY. VIRTUDAZO: Could you please tell the court what is the nature of the business of
[TMBI]?
63
Witness MR. Victor Torres of Torres Madrid: We are engaged in customs brokerage
business. We acquire the release documents from the Bureau of Customs and eventually
deliver the cargoes to the consignee’s warehouse and we are engaged in that kind of
business, sir.40
That TMBI does not own trucks and has to subcontract the delivery of its clients’ goods, is
immaterial. As long as an entity holds itself to the public for the transport of goods as a
business, it is considered a common carrier regardless of whether it owns the vehicle used
or has to actually hire one.41
Lastly, TMBI’s customs brokerage services – including the transport/delivery of the cargo –
are available to anyone willing to pay its fees. Given these circumstances, we find it
undeniable that TMBI is a common carrier.
Consequently, TMBI should be held responsible for the loss, destruction, or deterioration of
the goods it transports unless it results from:
(1) Flood, storm, earthquake, lightning, or other natural disaster or calamity;
(2) Act of the public enemy in war, whether international or civil;
(3) Act of omission of the shipper or owner of the goods;
(4) The character of the goods or defects in the packing or in the containers;
(5) Order or act of competent public authority.42
For all other cases - such as theft or robbery – a common carrier is presumed to have
been at fault or to have acted negligently, unless it can prove that it observed extraordinary
diligence.43
Simply put, the theft or the robbery of the goods is not considered a fortuitous event or
a force majeure. Nevertheless, a common carrier may absolve itself of liability for a resulting
loss: (1) if it proves that it exercised extraordinary diligence in transporting and safekeeping
the goods;44 or (2) if it stipulated with the shipper/owner of the goods to limit its liability for
the loss, destruction, or deterioration of the goods to a degree less than extraordinary
diligence.45
However, a stipulation diminishing or dispensing with the common carrier’s liability for acts
committed by thieves or robbers who do not act with grave or irresistible threat, violence, or
force is void under Article 1745 of the Civil Code for being contrary to public
policy.46 Jurisprudence, too, has expanded Article 1734’s five exemptions. De Guzman v.
Court of Appeals47 interpreted Article 1745 to mean that a robbery attended by "grave or
irresistible threat, violence or force" is a fortuitous event that absolves the common carrier
from liability.
In the present case, the shipper, Sony, engaged the services of TMBI, a common carrier, to
facilitate the release of its shipment and deliver the goods to its warehouse. In turn, TMBI
subcontracted a portion of its obligation – the delivery of the cargo – to another common
carrier, BMT.
Despite the subcontract, TMBI remained responsible for the cargo. Under Article 1736, a
common carrier’s extraordinary responsibility over the shipper’s goods lasts from the time
these goods are unconditionally placed in the possession of, and received by, the carrier for
transportation, until they are delivered, actually or constructively, by the carrier
to the consignee.48
That the cargo disappeared during transit while under the custody of BMT – TMBI’s
subcontractor – did not diminish nor terminate TMBI’s responsibility over the cargo. Article
1735 of the Civil Code presumes that it was at fault.
Instead of showing that it had acted with extraordinary diligence, TMBI simply argued that
it was not a common carrier bound to observe extraordinary diligence. Its failure to
successfully establish this premise carries with it the presumption of fault or negligence, thus
rendering it liable to Sony/Mitsui for breach of contract.
Specifically, TMBI’s current theory – that the hijacking was attended by force or intimidation
– is untenable.
First, TMBI alleged in its Third Party Complaint against BMT that Lapesura was responsible
for hijacking the shipment.49 Further, Victor Torres filed a criminal complaint against
Lapesura with the NBI.50 These actions constitute direct and binding admissions that
Lapesura stole the cargo. Justice and fair play dictate that TMBI should not be allowed to
change its legal theory on appeal.
Second, neither TMBI nor BMT succeeded in substantiating this theory through evidence.
Thus, the theory remained an unsupported allegation no better than speculations and
conjectures. The CA therefore correctly disregarded the defense of force majeure.
TMBI and BMT are not solidarily liable
to Mitsui
We disagree with the lower courts’ ruling that TMBI and BMT are solidarily liable to Mitsui
for the loss as joint tortfeasors. The ruling was based on Article 2194 of the Civil Code:
Art. 2194. The responsibility of two or more persons who are liable for quasi-delict is
solidary.
Notably, TMBI’s liability to Mitsui does not stem from a quasi-delict (culpa aquiliana) but
from its breach of contract (culpa contractual). The tie that binds TMBI with Mitsui is
contractual, albeit one that passed on to Mitsui as a result of TMBI’s contract of carriage with
Sony to which Mitsui had been subrogated as an insurer who had paid Sony’s insurance
claim. The legal reality that results from this contractual tie precludes the application of
quasi-delict based Article 2194.
64
A third party may recover from a WHEREFORE, the Court hereby ORDERS petitioner TorresMadrid Brokerage, Inc. to
common carrier for quasi-delict but must pay the respondent FEB Mitsui Marine Insurance Co", Inc. the following:
prove actual negligence
a. Actual damages in the amount of PHP 7,293,386.23 plus legal interest from the time the
We likewise disagree with the finding that BMT is directly liable to Sony/Mitsui for the loss complaint was filed until it is fully paid;
of the cargo. While it is undisputed that the cargo was lost under the actual custody of BMT
(whose employee is the primary suspect in the hijacking or robbery of the shipment), no
b. Attorney's foes in the amount of PHP 200,000.00; and
direct contractual relationship existed between Sony/Mitsui and BMT. If at all,
Sony/Mitsui’s cause of action against BMT could only arise from quasi-delict, as a third party
suffering damage from the action of another due to the latter’s fault or negligence, pursuant c. Costs of suit.
to Article 2176 of the Civil Code.51
Respondent Benjamin P. Manalastas is in turn ORDERED to REIMBURSE Torres-
We have repeatedly distinguished between an action for breach of contract (culpa Madrid Brokerage, Inc. of the above-mentioned amounts.
contractual) and an action for quasi-delict (culpa aquiliana).
SO ORDERED.
In culpa contractual, the plaintiff only needs to establish the existence of the contract and
the obligor’s failure to perform his obligation. It is not necessary for the plaintiff to prove or
even allege that the obligor’s non-compliance was due to fault or negligence because Article
1735 already presumes that the common carrier is negligent. The common carrier can only
free itself from liability by proving that it observed extraordinary diligence. It cannot
discharge this liability by shifting the blame on its agents or servants.52

On the other hand, the plaintiff in culpa aquiliana must clearly establish the defendant’s
fault or negligence because this is the very basis of the action.53 Moreover, if the injury to the
plaintiff resulted from the act or omission of the defendant’s employee or servant, the
defendant may absolve himself by proving that he observed the diligence of a good father of
a family to prevent the damage.54

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

BMT is liable to TMBI for breach of their

contract of carriage

We do not hereby say that TMBI must absorb the loss. By subcontracting the cargo delivery
to BMT, TMBI entered into its own contract of carriage with a fellow common carrier.

The cargo was lost after its transfer to BMT' s custody based on its contract of carriage with
TMBI. Following Article 1735, BMT is presumed to be at fault. Since BMT failed to prove
that it observed extraordinary diligence in the performance of its obligation to TMBI, it is
liable to TMBI for breach of their contract of carriage.

In these lights, TMBI is liable to Sony (subrogated by Mitsui) for breaching the contract of
carriage. In tum, TMBI is entitled to reimbursement from BMT due to the latter's own breach
of its contract of carriage with TMBI. The proverbial buck stops with BMT who may either:
(a) absorb the loss, or (b) proceed after its missing driver, the suspected culprit, pursuant to
Article 2181.55
65
June 28, 2017
G.R. No. 213088
LAND TRANSPORTATION FRANCHISING AND REGULATORY BOARD
(LTFRB), Petitioner
vs.
G.V. FLORIDA TRANSPORT, INC., Respondent
DECISION
PERALTA, J.:
Before the Court is a petition for review on certiorari seeking the reversal and setting aside
of the Decision 1 of the Court of Appeals (CA), dated June 26, 2014 in CA-G.R. SP No. 134772.
The pertinent factual and procedural antecedents of the case are as follows:
Around 7:20 in the morning of February 7, 2014, a vehicular accident occurred at Sitio
Paggang, Barangay Talubin, Bontoc, Mountain Province involving a public utility bus
coming from Sampaloc, Manila, bound for Poblacion Bontoc and bearing a "G.V. Florida"
body mark with License Plate No. TXT-872. The mishap claimed the lives of fifteen (15)
passengers and injured thirty-two (32) others.
An initial investigation report, which came from the Department of Transportation and
Communications of the Cordillera Administrative Region (DOTC-CAR), showed that based
on the records of the Land Transportation Office (LTO) and herein petitioner, License Plate
No. TXT-872 actually belongs to a different bus owned by and registered under the name of
a certain Norberto Cue, Sr. (Cue) under Certificate of Public Convenience (CPC) Case No.
2007-0407 and bears engine and chassis numbers LX004564 and KN2EAM12PK004452,
respectively; and that the bus involved in the accident is not duly authorized to operate as a
public transportation.
Thus, on the same day of the accident, herein petitioner, pursuant to its regulatory powers,
immediately issued an Order2 preventively suspending, for a period not exceeding thirty (30)
days, the operations of ten (10) buses of Cue under its CPC Case No. 2007-0407, as well as
respondent's entire fleet of buses, consisting of two hundred and twenty-eight (228) units,
under its twenty-eight (28) CPCs. In the same Order, respondent and Cue were likewise
directed to comply with the following:
1. Inspection and determination of road worthiness of the authorized PUB unit of
respondents-operators bringing the said buses to the Motor Vehicle Inspection Service
(MVIS) of the Land Transportation Office, together with the authorized representatives of
the Board;
2. Undergo Road Safety Seminar of respondents-operators' drivers and conductors to be
conducted or scheduled by the Board and/or its authorized seminar provider;
3. Compulsory Drug Testing of the respondents-operators' drivers and conductors to be
conducted by authorized/accredited agency of the Department of Health and the Land
Transportation Office;
4. Submit the Certificates of Registration and latest LTO Official Receipts of the units,
including the names of the respective drivers and conductors; and
5. Submit the video clippings of roadworthiness inspection, Road Safety Seminar and Drug
Testing. 3
Furthermore, respondent and Cue were ordered to show cause why their respective CPCs
should not be suspended, canceled or revoked due to the said accident.
Thereafter, in its Incident Report dated February 12, 2014, the DOTC-CAR stated, among
others: that the License Plate Number attached to the ill-fated bus was indeed TXT-872,
which belongs to a different unit owned by Cue; that the wrecked bus had actual engine and
chassis numbers DE12T-601104BD and KTP1011611C,4 respectively; that, per registration
records, the subject bus was registered as "private" on April 4, 2013 with issued License Plate
No. UDO 762; and that the registered owner is Dagupan Bus Co., Inc. (Dagupan Bus) while
the previous owner is herein respondent bus company.
As a result, Dagupan Bus was also ordered to submit an Answer on the DOTC-CAR Incident
Report, particularly, to explain why the bus involved in the above accident, which is
registered in its name, was sporting the name "G.V. Florida" at the time of the accident.
Subsequently, Dagupan Bus filed its Answer claiming that: it is not the owner of the bus
which was involved in the accident; the owner is G.V. Florida; Dagupan Bus entered into a
Memorandum of Agreement with G.V. Florida, which, among others, facilitated the
exchange of its CPC covering the Cagayan route for the CPC of Florida covering the Bataan
route; and the subsequent registration of the subject bus in the name of Dagupan Bus is a
mere preparatory act on the part of G.V. Florida to substitute the old authorized units of
Dagupan Bus plying the Cagayan route which are being operated under the abovementioned
CPC which has been exchanged with G. V. Florida.
On the other hand, Cue filed his Position Paper contending that: License Plate No. TXT-872
was issued by the LTO to one among ten public utility buses under CPC No. 2007-040i issued
to him as operator of the Mountain Province Cable Tours; the application for the extension
of the validity of the said CPC is pending with petitioner; the subject CPC, together with all
authorized units, had been sold to G.V. Florida in September 2013; and thereafter, Cue
completely ceded the operation and maintenance of the subject buses in favor of G.R.
Florida.
In its Position Paper, herein respondent alleged that: it, indeed, bought Cue's CPC and the
ten public utility buses operating under the said CPC, including the one which bears License
Plate No. TXT-872; since Cue's buses were already old and dilapidated, and not wanting to
stop its operations to the detriment of the riding public, it replaced these buses with new
units using the License Plates attached to the old buses, pending approval by petitioner of
the sale and transfer of Cue's CPC in its favor; and it exercised utmost good faith in deciding
to dispatch the ill-fated bus notwithstanding the absence of prior adequate compliance with
the requirements that will constitute its operation legal.
66
On March 14, 2014, herein petitioner rendered its Decision canceling Cue's CPC No. 2007-
0407 and suspending the operation of respondent's 186 buses under 28 of its CPCs for a
period of six (6) months. Pertinent portions of the dispositive portion of the said Decision
read as follows:
WHEREFORE, premises considered and by virtue of Commonwealth Act 146 (otherwise
known as "The Public Service Law"), as amended, and Executive Order No. 202, the Board
hereby ORDERS that:
a. The Certificate of Public Convenience of respondentoperator NORBERTO M. CUE, SR.
under Case No. 2007- 0407, now under the beneficial ownership of respondentoperator G.V.
FLORIDA TRANSPORT, INC., be CANCELLED and REVERTED to the State. Therefore,
upon receipt of this Decision, respondent-operator G.V. FLORIDA TRANSPORT, INC. is
hereby directed to CEASE and DESIST from operating the Certificate of Public Convenience
under Case No. 2007-0407 involving ten (10) authorized units, to wit:
xxxx
b. Upon finality of this Decision, the above-mentioned for hire plates of respondent-operator
NORBERTO M. CUE, SR. are hereby ordered DESTRUCTED (sic) and DESTROYED prior
to their turn over to the Land Transportation Office (LTO).
xxxx
c. All existing Certificates of Public Convenience of respondent-operator G.V. FLORIDA
TRANSPORT, INC. under case numbers listed under case numbers listed below are hereby
SUSPENDED for a period of SIX (6) MONTHS commencing from March 11, 2014, which is
the lapse of the 30-day preventive suspension order issued by this Board, to wit:
xxxx
[d.] During the period of suspension of its CPCs and as a condition for the lifting thereof,
respondent-operator G.V. FLORIDA TRANSPORT, INC. must comply with the following:
1. All its authorized drivers must secure the National Competency III issued by the Technical
Education and Skills Development Authority (TESDA)
2. All its conductors must secure Conductor's License from the Land Transportation Office
(LTO);
3. Submit all its authorized units that have not undergone inspection and determination of
roadworthiness to the Motor Vehicle Inspection Service of the LTO, together with the
authorized representatives of the Board; and
4. Compulsory Drug Testing of all its authorized drivers and conductors to be conducted by
the authorized accredited agency of the Department of Health and the Land Transportation
Office at least thirty (30) days before the expiration of its suspension.
[e.] The Show Cause Order issued against respondent-operator DAGUPAN BUS CO.,
INC. is hereby SET ASIDE.
The Information Systems Management Division (ISMD) is also directed to make proper
recording of this Decision for future reference against subject vehicles and respondents-
operators. During the period of suspension of its CPCs, respondent-operator G.V. FLORIDA
TRANSPORT, INC. is allowed to confirm its authorized units subject to submission of all
requirements for confirmation.
The Law Enforcement Unit of this Board, the Land Transportation Office
(LTO), the Metro Manila Development Authority (MMDA), the Philippine
National Police-Highway Patrol Group (PNP-HPG), and other authorized traffic
enforcement agencies are hereby ordered to APPREHEND and IMPOUND the said
vehicles, if found operating.
SO ORDERED.6
Respondent then filed with the CA a petition for certiorari under Rule 65 of the Rules of
Court, with prayer for the issuance of a preliminary mandatory injunction, assailing
petitioner's above Decision.
On June 26, 2014, the CA promulgated its questioned Decision, disposing as follows:
WHEREFORE, the instant petition is PARTIALLY GRANTED. The Decision dated March
14, 2014 of the Land Transportation Franchising and Regulatory Board is MODIFIED as
follows:
1. The Order canceling and reverting to the State of the Certificate of Public Convenience of
operator Cue under Case No. 2007-0407, under the beneficial ownership of petitioner G.V.
Florida Transport, Inc. is AFFIRMED;
2. The penalty of suspension for a period of six (6) months against all existing 28 Certificates
of Public Convenience of petitioner G.V. Florida, Transport, Inc., is REVERSED and SET
ASIDE;
3. The condition set forth in the Decision for the lifting of the penalty of suspension is
DELETED; and
4. The order to apprehend and impound petitioner G.V. Florida Transport, Inc.'s 186
authorized bus units under the 28 CPCs if found operating is RECALLED
Accordingly, petitioner G.V. Florida Transport, Inc. prayer for mandatory injunctive relief is
hereby GRANTED. The Land Transportation and Franchising Regulatory Board is hereby
ordered to immediately LIFT the order of suspension and RETURN or CAUSE the RETURN
of the confiscated license plates of petitioner G.V. Florida Transport, Inc.'s 186 authorized
bus units under its 28 Certificates of Public Convenience without need of further order from
this Court. Said Office is further DIRECTED to submit its Compliance within five (5) days
from receipt thereof.
67
SO ORDERED.7
Hence, the present petition grounded on a lone issue, to wit:
DOES THE LTFRB HAVE THE POWER TO SUSPEND THE FLEET OF A PUBLIC UTILITY
THAT VIOLATES THE LAW, TO THE DAMAGE OF THE PUBLIC?8
The main issue brought before this Court is whether or not petitioner is justified in
suspending respondent's 28 CPCs for a period of six (6) months. In other words, is the
suspension within the powers of the LTFRB to impose and is it reasonable?
Petitioner contends that it is vested by law with jurisdiction to regulate the operation of
public utilities; that under Section 5(b) of Executive Order No. 202 (E. 0. 202),9 it is
authorized "[t]o issue, amend, revise, suspend or cancel Certificates of Public Convenience
or permits authorizing the operation of public land transportation services provided by
motorized vehicles, and to prescribe the appropriate terms and conditions therefor;" and
that petitioner's authority to impose the penalty of suspension of CPCs of bus companies
found to have committed violations of the law is broad and is consistent with its mandate
and regulatory capability.
On the other hand, respondent, in its Comment to the present Petition, contends that the
suspension of its 28 CPCs is tantamount to an outright confiscation of private property
without due process of law; and that petitioner cannot simply ignore respondent's property
rights on the pretext of promoting public safety. Respondent insists that the penalty imposed
by petitioner is not commensurate to the infraction it had committed.
The Court rules in favor of petitioner.
Section 16(n) of Commonwealth Act. No. 146, otherwise known as the Public Service
Act, provides:
Section 16. Proceedings of the Commission, upon notice and hearing. - The Commission
shall have power, upon proper notice and hearing in accordance with the rules and
provisions of this Act, subject to the limitations and exceptions mentioned and saving
provisions to the contrary:
xxxx
(n) To suspend or revoke any certificate issued under the provisions of this Act whenever the
holder thereof has violated or willfully and contumaciously refused to comply with any order
rule or regulation of the Commission or any provision of this Act: Provided, That the
Commission, for good cause, may prior to the hearing suspend for a period not to exceed
thirty days any certificate or the exercise of any right or authority issued or granted under
this Act by order of the Commission, whenever such step shall in the judgment of the
Commission be necessary to avoid serious and irreparable damage or inconvenience to the
public or to private interests.
xxxx
Also, Section 5(b) of E.O. 202 states:
Sec. 5. Powers and Functions of the Land Transportation Franchising and Regulatory Board.
The Board shall have the following powers and functions:
Also, Section 5(b) of E.O. 202 states:
Sec. 5. Powers and Functions of the Land Transportation Franchising and Regulatory Board.
The Board shall have the following powers and functions:
xxxx
b. To issue, amend, revise, suspend or cancel Certificates of Public Convenience or permits
authorizing the operation of public land transportation services provided by motorized
vehicles, and to prescribe the appropriate terms and conditions therefor;
xxxx
In the present case, respondent is guilty of several violations of the law, to wit: lack of
petitioner's approval of the sale and transfer of the CPC which respondent bought from Cue;
operating the ill-fated bus under its name when the same is registered under the name of
Dagupan Bus Co., Inc.; attaching a vehicle license plate to the ill-fated bus when such plate
belongs to a different bus owned by Cue; and operating the subject bus under the authority
of a different CPC. What makes matters worse is that respondent knowingly and blatantly
committed these violations. How then can respondent claim good faith under these
circumstances?
Respondent, nonetheless, insists that it is unreasonable for petitioner to suspend the
operation of 186 buses covered by its 28 CPCs, considering that only one bus unit, covered
by a single CPC, was involved in the subject accident.
The Court is not persuaded. It bears to note that the suspension of respondent's 28 CPCs is
not only because of the findings of petitioner that the ill-fated bus was not
roadworthy. 10 Rather, and more importantly, the suspension of the 28 CPCs was also
brought about by respondent's wanton disregard and obstinate defiance of the regulations
issued by petitioner, which is tantamount to a willful and contumacious refusal to comply
with the requirements of law or of the orders, rules or regulations issued by petitioner and
which is punishable, under the law, by suspension or revocation of any of its CPCs.
The Court agrees with petitioner that its power to suspend the CPCs issued to public utility
vehicles depends on its assessment of the gravity of the violation, the potential and actual
harm to the public, and the policy impact of its own actions. In this regard, the Court gives
due deference to petitioner's exercise of its sound administrative discretion in applying its
special knowledge, experience and expertise to resolve respondent's case.
Indeed, the law gives to the LTFRB (previously known, among others, as Public Service
Commission or Board of Transportation) ample power and discretion to decree or refuse the
cancellation of a certificate of public convenience issued to an operator as long as there is
evidence to support its action. 11 As held by this Court in a long line of cases, 12 it was even
68
intimated that, in matters of this nature so long as the action is justified, this Court will not
substitute its discretion for that of the regulatory agency which, in this case, is the LTFRB.
Moreover, the Court finds the ruling in Rizal Light & Ice Co., Inc. v. The Municipality of
Morang, Rizal and The Public Service Commission, 13 instructive, to wit:
xxxx
It should be observed that Section 16(n) of Commonwealth Act No. 146, as amended, confers
upon the Commission ample power and discretion to order the cancellation and revocation
of any certificate of public convenience issued to an operator who has violated, or has
willfully and contumaciously refused to comply with, any order, rule or regulation of the
Commission or any provision of law. What matters is that there is evidence to support the
action of the Commission. In the instant case, as shown by the evidence, the contumacious
refusal of the petitioner since 1954 to comply with the directives, rules and regulations of the
Commission, its violation of the conditions of its certificate and its incapability to comply
with its commitment as shown by its inadequate service, were the circumstances that
warranted the action of the Commission in not merely imposing a fine but in revoking
altogether petitioner's certificate. To allow petitioner to continue its operation would be to
sacrifice public interest and convenience in favor of private interest.
A grant of a certificate of public convenience confers no property rights but is a mere license
or privilege, and such privilege is forfeited when the grantee fails to comply with his
commitments behind which lies the paramount interest of the public, for public necessity
cannot be made to wait, nor sacrificed for private convenience. (Collector of Internal
Revenue v. Estate of F. P. Buan, et al., L-11438 and Santiago Sambrano, et al. v. PSC, et al.,
L-11439 & L- 11542-46, July 31, 1958)
(T)he Public Service Commission, . . . has the power to specify and define the terms and
conditions upon which the public utility shall be operated, and to make reasonable rules and
regulations for its operation and the compensation which the utility shall receive for its
services to the public, and for any failure to comply with such rules and regulations or the
violation of any of the terms and conditions for which the license was granted, the
Commission has ample power to enforce the provisions of the license or even to revoke it,
for any failure or neglect to comply with any of its terms and provisions. x xx x x x14
Respondent likewise contends that, in suspending its 28 CPCs, the LTFRB acted in reckless
disregard of the property rights of respondent as a franchise holder, considering that it has
put in substantial investments amounting to hundreds of millions in running its operations.
In this regard, the Court's ruling in the case of Luque v. Villegas 15 is apropos:
xxxx
Contending that they possess valid and subsisting certificates of public convenience, the
petitioning public services aver that they acquired a vested right to operate their public utility
vehicles to and from Manila as appearing in their said respective certificates of public
convenience.
Petitioner's argument pales on the face of the fact that the very nature of a certificate of
public convenience is at cross purposes with the concept of vested rights. To this day, the
accepted view, at least insofar as the State is concerned, is that "a certificate of public
convenience constitutes neither a franchise nor a contract, confers no property right, and is
a mere license or privilege." The holder of such certificate does not acquire a property right
in the route covered thereby. Nor does it confer upon the holder any proprietary right or
interest of franchise in the public highways. Revocation of this certificate deprives him of no
vested right. Little reflection is necessary to show that the certificate of public convenience
is granted with so many strings attached. New and additional burdens, alteration of the
certificate, and even revocation or annulment thereof is reserved to the State.
We need but add that the Public Service Commission, a government agency vested by law
with "jurisdiction, supervision, and control over all public services and their franchises,
equipment, and other properties" is empowered, upon proper notice and hearing, amongst
others: (1) "[t]o amend, modify or revoke at any time a certificate issued under the provisions
of this Act [Commonwealth Act 146, as amended], whenever the facts and circumstances on
the strength of which said certificate was issued have been misrepresented or materially
changed"; and (2) "[t]o suspend or revoke any certificate issued under the provisions of this
Act whenever the holder thereof has violated or wilfully and contumaciously refused to
comply with any order, rule or regulation of the Commission or any provision of this
Act: Provided, That the Commission, for good cause, may prior to the hearing suspend for a
period not to exceed thirty days any certificate or the exercise of any right or authority issued
or granted under this Act by order of the Commission, whenever such step shall in the
judgment of the Commission be necessary to avoid serious and irreparable damage or
inconvenience to the public or to private interests."
Jurisprudence echoes the rule that the Commission is authorized to make reasonable rules
and regulations for the operation of public services and to enforce them. In reality, all
certificates of public convenience issued are subject to the condition that all public services
"shall observe and comply [with] ... all the rules and regulations of the Commission relative
to" the service. To further emphasize the control imposed on public services, before any
public service can "adopt, maintain, or apply practices or measures, rules, or regulations to
which the public shall be subject in its relation with the public service," the Commission's
approval must first be had.
And more. Public services must also reckon with provincial resolutions and municipal
ordinances relating to the operation of public utilities within the province or municipality
concerned. The Commission can require compliance with these provincial resolutions or
municipal ordinances.
Illustrative of the lack of "absolute, complete, and unconditional" right on the part of public
services to operate because of the delimitations and restrictions which circumscribe the
privilege afforded a certificate of public convenience is the following from the early (March
31, 1915) decision of this Court in Fisher vs. Yangco Steamship Company, 31 Phil. 1, 18-19:
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
of public regulation. (New Jersey Steam Nav. Co. vs. Merchants Banks, 6 How. 344, 382;
Munn vs. Illinois, 94 U.S. 113, 130.) Indeed, this right of regulation is so far beyond question
that it is well settled that the power of the state to exercise legislative control over railroad
companies and other carriers 'in all respects necessary to protect the public against danger,
injustice and oppression' may be exercised through boards of commissioners. (New York,
etc. R. Co. vs. Bristol, 151 U.S. 556, 571; Connecticut, etc. R. Co. vs. Woodruff, 153 U.S. 689.).
69
xxxx
.... The right to enter the public employment as a common carrier and to offer one's services
to the public for hire does not carry with it the right to conduct that business as one pleases,
without regard to the interests of the public and free from such reasonable and just
regulations as may be prescribed for the protection of the public from the reckless or careless
indifference of the carrier as to the public welfare and for the prevention of unjust and
unreasonable discrimination of any kind whatsoever in the performance of the carrier's
duties as a servant of the public.
Business of certain kinds, including the business of a common carrier, holds such a peculiar
relation to the public interest that there is superinduced upon it the right of public
regulation. (Budd vs. New York, 143 U.S. 517, 533.) When private property is "affected with
a public interest it ceases to be Juris privati only." Property becomes clothed with a public
interest when used in a manner to make it of public consequence and affect the community
at large. "When, therefore, one devotes his property to a use in which the public has an
interest, he, in effect, grants to the public an interest in that use, and must submit to be
controlled by the public for the common good, to the extent of the interest he has thus
created. He may withdraw his grant by discontinuing the use, but so long as he maintains
the use he must submit to control." (Munn vs. Illinois, 94 U.S. 113; Georgia R. & Bkg. Co. vs.
Smith, 128 U.S. 174; Budd vs. New York, 143 U.S. 517; Louisville, etc. Ry. Co. vs. Kentucky,
161 U.S. 677, 695.).
imposed by petitioner upon all holders of CPCs. Thus, the Court finds nothing irregular in
petitioner's imposition of the penalty of sixmonths suspension of the operations of
respondent's 28 CPCs. In other words, petitioner did not commit grave abuse of discretion
in imposing the questioned penalty.
Lastly, the suspension of respondent's CPCs finds relevance in light of the series of accidents
met by different bus units owned by different operators in recent events. This serves as a
reminder to all operators of public utility vehicles that their franchises and CPCs are mere
privileges granted by the government. As such, they are sternly warned that they should
always keep in mind that, as common carriers, they bear the responsibility of exercising
extraordinary diligence in the transportation of their passengers. Moreover, they should
conscientiously comply with the requirements of the law in the conduct of their operations,
failing which they shall suffer the consequences of their own actions or inaction.
WHEREFORE, the instant petition is GRANTED. The Decision of the Court of Appeals,
dated June 26, 2014 in CA-GR. SP No. 134772, is REVERSED and SET ASIDE. The March
14, 2014 Decision of the Land Transportation Franchising and Regulatory Board
is REINSTATED.
SO ORDERED.

The foregoing, without more, rejects the vested rights theory espoused by petitioning bus
operators.

x x x16

Neither is the Court convinced by respondent's contention that the authority given to
petitioner, under the abovequoted Section 16(n) of the Public Service Act does not mean that
petitioner is given the power to suspend the entire operations of a transport company.
Respondent must be reminded that, as quoted above, the law clearly states that petitioner
has the power "[t]o suspend or revoke any certificate issued under the provisions of [the
Public Service Act] whenever the holder thereof has violated or willfully and
contumaciously refused to comply with any order rule or regulation of the
Commission or any provision of this Act x x x" This Court has held that when the
context so indicates, the word "any" may be construed to mean, and indeed it has been
frequently used in its enlarged and Plural sense as meaning "all " "all or every" "each " "each
one of all " ' ' ' ' ' "every" without limitation; indefinite number or quantity, an indeterminate
unit or number of units out of many or all, one or more as the case may be, several,
some. 17 Thus, in the same vein, the Merriam-Webster Dictionary defines the word "any" as
"one, some, or all indiscriminately of whatever quantity"; "used to indicate a maximum or
whole"; "unmeasured or unlimited in amount, number, or extent." 18 Hence, under the above
definitions, petitioner undoubtedly wields authority, under the law, to suspend not only one
but all of respondent's CPCs if warranted, which is proven to be the case here.

As to whether or not the penalty imposed by petitioner is reasonable, respondent appears to

trivialize the effects of its deliberate and shameless violations of the law. Contrary to its
contention, this is not simply a case of one erring bus unit. Instead, the series or combination
of violations it has committed with respect to the ill-fated bus is indicative of its design and
intent to blatantly and maliciously defy the law and disregard, with impunity, the regulations

70
G.R. No. 150751 September 20, 2004
CENTRAL SHIPPING COMPANY, INC., petitioner,
vs.
INSURANCE COMPANY OF NORTH AMERICA, respondent.
DECISION
PANGANIBAN, J.:
A common carrier is presumed to be at fault or negligent. It shall be liable for the loss,
destruction or deterioration of its cargo, unless it can prove that the sole and proximate cause
of such event is one of the causes enumerated in Article 1734 of the Civil Code, or that it
exercised extraordinary diligence to prevent or minimize the loss. In the present case, the
weather condition encountered by petitioner’s vessel was not a "storm" or a natural disaster
comprehended in the law. Given the known weather condition prevailing during the voyage,
the manner of stowage employed by the carrier was insufficient to secure the cargo from the
rolling action of the sea. The carrier took a calculated risk in improperly securing the cargo.
Having lost that risk, it cannot now disclaim any liability for the loss.
The Case
Before the Court is a Petition for Review1 under Rule 45 of the Rules of Court, seeking to
reverse and set aside the March 23, 2001 Decision2 of the Court of Appeals (CA) in CA-GR
CV No. 48915. The assailed Decision disposed as follows:
"WHEREFORE, the decision of the Regional Trial Court of Makati City, Branch
148 dated August 4, 1994 is hereby MODIFIED in so far as the award of attorney’s
fees is DELETED. The decision is AFFIRMED in all other respects."3
The CA denied petitioner’s Motion for Reconsideration in its November 7, 2001 Resolution.4
The Facts
The factual antecedents, summarized by the trial court and adopted by the appellate court,
are as follows:
"On July 25, 1990 at Puerto Princesa, Palawan, the [petitioner] received on board
its vessel, the M/V ‘Central Bohol’, 376 pieces [of] Philippine Apitong Round Logs
and undertook to transport said shipment to Manila for delivery to Alaska Lumber
Co., Inc.
"The cargo was insured for ₱3,000,000.00 against total loss under [respondent’s]
Marine Cargo Policy No. MCPB-00170.
"On July 25, 1990, upon completion of loading of the cargo, the vessel left Palawan
and commenced the voyage to Manila.
"At about 0125 hours on July 26, 1990, while enroute to Manila, the vessel listed
about 10 degrees starboardside, due to the shifting of logs in the hold.
"At about 0128 hours, after the listing of the vessel had increased to 15 degrees, the
ship captain ordered his men to abandon ship and at about 0130 hours of the same
day the vessel completely sank. Due to the sinking of the vessel, the cargo was
totally lost.
"[Respondent] alleged that the total loss of the shipment was caused by the fault
and negligence of the [petitioner] and its captain and as direct consequence thereof
the consignee suffered damage in the sum of ₱3,000,000.00.
"The consignee, Alaska Lumber Co. Inc., presented a claim for the value of the
shipment to the [petitioner] but the latter failed and refused to settle the claim,
hence [respondent], being the insurer, paid said claim and now seeks to be
subrogated to all the rights and actions of the consignee as against the [petitioner].
"[Petitioner], while admitting the sinking of the vessel, interposed the defense that
the vessel was fully manned, fully equipped and in all respects seaworthy; that all
the logs were properly loaded and secured; that the vessel’s master exercised due
diligence to prevent or minimize the loss before, during and after the occurrence
of the storm.
"It raised as its main defense that the proximate and only cause of the sinking of
its vessel and the loss of its cargo was a natural disaster, a tropical storm which
neither [petitioner] nor the captain of its vessel could have foreseen."5
The RTC was unconvinced that the sinking of M/V Central Bohol had been caused by the
weather or any other caso fortuito. It noted that monsoons, which were common occurrences
during the months of July to December, could have been foreseen and provided for by an
ocean-going vessel. Applying the rule of presumptive fault or negligence against the carrier,
the trial court held petitioner liable for the loss of the cargo. Thus, the RTC deducted the
salvage value of the logs in the amount of ₱200,000 from the principal claim of respondent
and found that the latter was entitled to be subrogated to the rights of the insured. The court
a quo disposed as follows:
"WHEREFORE, premises considered, judgment is hereby rendered in favor of the
[respondent] and against the [petitioner] ordering the latter to pay the following:
1) the amount of ₱2,800,000.00 with legal interest thereof from the
filing of this complaint up to and until the same is fully paid;
2) ₱80,000.00 as and for attorney’s fees;
3) Plus costs of suit."6
Ruling of the Court of Appeals
71
The CA affirmed the trial court’s finding that the southwestern monsoon encountered by the
vessel was not unforeseeable. Given the season of rains and monsoons, the ship captain and
his crew should have anticipated the perils of the sea. The appellate court further held that
the weather disturbance was not the sole and proximate cause of the sinking of the vessel,
which was also due to the concurrent shifting of the logs in the hold that could have resulted
only from improper stowage. Thus, the carrier was held responsible for the consequent loss
of or damage to the cargo, because its own negligence had contributed thereto.
The CA found no merit in petitioner’s assertion of the vessel’s seaworthiness. It held that the
Certificates of Inspection and Drydocking were not conclusive proofs thereof. In order to
consider a vessel to be seaworthy, it must be fit to meet the perils of the sea.
Found untenable was petitioner’s insistence that the trial court should have given greater
weight to the factual findings of the Board of Marine Inquiry (BMI) in the investigation of
the Marine Protest filed by the ship captain, Enriquito Cahatol. The CA further observed that
what petitioner had presented to the court a quo were mere excerpts of the testimony of
Captain Cahatol given during the course of the proceedings before the BMI, not the actual
findings and conclusions of the agency. Citing Arada v. CA,7 it said that findings of the BMI
were limited to the administrative liability of the owner/operator, officers and crew of the
vessel. However, the determination of whether the carrier observed extraordinary diligence
in protecting the cargo it was transporting was a function of the courts, not of the BMI.
The CA concluded that the doctrine of limited liability was not applicable, in view of
petitioner’s negligence -- particularly its improper stowage of the logs.
Hence, this Petition.8
Issues
In its Memorandum, petitioner submits the following issues for our consideration:
"(i) Whether or not the weather disturbance which caused the sinking of the vessel
M/V Central Bohol was a fortuitous event.
"(ii) Whether or not the investigation report prepared by Claimsmen Adjustment
Corporation is hearsay evidence under Section 36, Rule 130 of the Rules of Court.
"(iii) Whether or not the finding of the Court of Appeals that ‘the logs in the hold
shifted and such shifting could only be due to improper stowage’ has a valid and
factual basis.
"(iv) Whether or not M/V Central Bohol is seaworthy.
"(v) Whether or not the Court of Appeals erred in not giving credence to the factual
finding of the Board of Marine Inquiry (BMI), an independent government agency
tasked to conduct inquiries on maritime accidents.
"(vi) Whether or not the Doctrine of Limited Liability is applicable to the case at
bar."9
The issues boil down to two: (1) whether the carrier is liable for the loss of the cargo; and (2)
whether the doctrine of limited liability is applicable. These issues involve a determination
of factual questions of whether the loss of the cargo was due to the occurrence of a natural
disaster; and if so, whether its sole and proximate cause was such natural disaster or whether
petitioner was partly to blame for failing to exercise due diligence in the prevention of that
loss.
The Court’s Ruling
The Petition is devoid of merit.
First Issue:
Liability for Lost Cargo
From the nature of their business and for reasons of public policy, common carriers are
bound to observe extraordinary diligence over the goods they transport, according to all the
circumstances of each case.10 In the event of loss, destruction or deterioration of the insured
goods, common carriers are responsible; that is, unless they can prove that such loss,
destruction or deterioration was brought about -- among others -- by "flood, storm,
earthquake, lightning or other natural disaster or calamity."11 In all other cases not specified
under Article 1734 of the Civil Code, common carriers are presumed to have been at fault or
to have acted negligently, unless they prove that they observed extraordinary diligence.12
In the present case, petitioner disclaims responsibility for the loss of the cargo by claiming
the occurrence of a "storm" under Article 1734(1). It attributes the sinking of its vessel solely
to the weather condition between 10:00 p.m. on July 25, 1990 and 1:25 a.m. on July 26,
1990.
At the outset, it must be stressed that only questions of law13 may be raised in a petition for
review on certiorari under Rule 45 of the Rules of Court. Questions of fact are not proper
subjects in this mode of appeal,14 for "[t]he Supreme Court is not a trier of facts."15 Factual
findings of the CA may be reviewed on appeal 16 only under exceptional circumstances such
as, among others, when the inference is manifestly mistaken,17 the judgment is based on a
misapprehension of facts,18 or the CA manifestly overlooked certain relevant and undisputed
facts that, if properly considered, would justify a different conclusion.19
In the present case, petitioner has not given the Court sufficient cogent reasons to disturb
the conclusion of the CA that the weather encountered by the vessel was not a "storm" as
contemplated by Article 1734(1). Established is the fact that between 10:00 p.m. on July 25,
1990 and 1:25 a.m. on July 26, 1990, M/V Central Bohol encountered a southwestern
monsoon in the course of its voyage.
The Note of Marine Protest,20 which the captain of the vessel issued under oath, stated that
he and his crew encountered a southwestern monsoon about 2200 hours on July 25, 1990,
and another monsoon about 2400 hours on July 26, 1990. Even petitioner admitted in its
Answer that the sinking of M/V Central Bohol had been caused by the strong southwest
monsoon.21 Having made such factual representation, it cannot now be allowed to retreat
and claim that the southwestern monsoon was a "storm."
72
The pieces of evidence with respect to the weather conditions encountered by the vessel
showed that there was a southwestern monsoon at the time. Normally expected on sea
voyages, however, were such monsoons, during which strong winds were not unusual. Rosa
S. Barba, weather specialist of the Philippine Atmospheric Geophysical and Astronomical
Services Administration (PAGASA), testified that a thunderstorm might occur in the midst
of a southwest monsoon. According to her, one did occur between 8:00 p.m. on July 25,
1990, and 2 a.m. on July 26, 1990, as recorded by the PAGASA Weather Bureau.22
Nonetheless, to our mind it would not be sufficient to categorize the weather condition at
the time as a "storm" within the absolutory causes enumerated in the law. Significantly, no
typhoon was observed within the Philippine area of responsibility during that period.23
According to PAGASA, a storm has a wind force of 48 to 55 knots,24 equivalent to 55 to 63
miles per hour or 10 to 11 in the Beaufort Scale. The second mate of the vessel stated that the
wind was blowing around force 7 to 8 on the Beaufort Scale.25 Consequently, the strong
winds accompanying the southwestern monsoon could not be classified as a "storm." Such
winds are the ordinary vicissitudes of a sea voyage.26
Even if the weather encountered by the ship is to be deemed a natural disaster under Article
1739 of the Civil Code, petitioner failed to show that such natural disaster or calamity was
the proximate and only cause of the loss. Human agency must be entirely excluded from the
cause of injury or loss. In other words, the damaging effects blamed on the event or
phenomenon must not have been caused, contributed to, or worsened by the presence of
human participation.27 The defense of fortuitous event or natural disaster cannot be
successfully made when the injury could have been avoided by human precaution.28
Hence, if a common carrier fails to exercise due diligence -- or that ordinary care that the
circumstances of the particular case demand -- to prevent or minimize the loss before, during
and after the occurrence of the natural disaster, the carrier shall be deemed to have been
negligent. The loss or injury is not, in a legal sense, due to a natural disaster under Article
1734(1).29
We also find no reason to disturb the CA’s finding that the loss of the vessel was caused not
only by the southwestern monsoon, but also by the shifting of the logs in the hold. Such
shifting could been due only to improper stowage. The assailed Decision stated:
"Notably, in Master Cahatol’s account, the vessel encountered the first
southwestern monsoon at about 1[0]:00 in the evening. The monsoon was coupled
with heavy rains and rough seas yet the vessel withstood the onslaught. The second
monsoon attack occurred at about 12:00 midnight. During this occasion, the
master ‘felt’ that the logs in the hold shifted, prompting him to order second mate
Percival Dayanan to look at the bodega. Complying with the captain’s order, 2nd
mate Percival Dayanan found that there was seawater in the bodega. 2nd mate
Dayanan’s account was:
‘14.T – Kung inyo pong natatandaan ang mga pangyayari, maari mo bang
isalaysay ang naganap na paglubog sa barkong M/V Central Bohol?
‘S – Opo, noong ika-26 ng Julio 1990 humigit kumulang alas 1:20 ng
umaga (dst) habang kami ay nagnanabegar patungong Maynila sa tapat
ng Cadlao Island at Cauayan Island sakop ng El Nido, Palawan, inutusan
ako ni Captain Enriquito Cahatol na tingnan ko ang bodega; nang ako ay
nasa bodega, nakita ko ang loob nang bodega na maraming tubig at
naririnig ko ang malakas na agos ng tubig-dagat na pumapasok sa loob
ng bodega ng barko; agad bumalik ako kay Captain Enriquito Cahatol at
sinabi ko ang malakas na pagpasok ng tubig-dagat sa loob nang bodega
ng barko na ito ay naka-tagilid humigit kumulang sa 020 degrees, nag-
order si Captain Cahatol na standby engine at tinawag ang lahat ng mga
officials at mga crew nang maipon kaming lahat ang barko ay naka-
tagilid at ito ay tuloy-tuloy ang pagtatagilid na ang ilan sa mga officials
ay naka-hawak na sa barandilla ng barko at di-nagtagal sumigaw nang
ABANDO[N] SHIP si Captain Cahatol at kami ay nagkanya-kanya nang
talunan at languyan sa dagat na malakas ang alon at nang ako ay
lumingon sa barko ito ay di ko na nakita.’
"Additionally, [petitioner’s] own witnesses, boatswain Eduardo Viñas Castro and
oiler Frederick Perena, are one in saying that the vessel encountered two weather
disturbances, one at around 10 o’clock to 11 o’clock in the evening and the other at
around 12 o’clock midnight. Both disturbances were coupled with waves and heavy
rains, yet, the vessel endured the first and not the second. Why? The reason is
plain. The vessel felt the strain during the second onslaught because the logs in the
bodega shifted and there were already seawater that seeped inside."30
The above conclusion is supported by the fact that the vessel proceeded through the first
southwestern monsoon without any mishap, and that it began to list only during the second
monsoon immediately after the logs had shifted and seawater had entered the hold. In the
hold, the sloshing of tons of water back and forth had created pressures that eventually
caused the ship to sink. Had the logs not shifted, the ship could have survived and reached
at least the port of El Nido. In fact, there was another motor launch that had been buffeted
by the same weather condition within the same area, yet it was able to arrive safely at El
Nido.31
In its Answer, petitioner categorically admitted the allegation of respondent in paragraph 5
of the latter’s Complaint "[t]hat at about 0125 hours on 26 July 1990, while enroute to
Manila, the M/V ‘Central Bohol’ listed about 10 degrees starboardside, due to the shifting of
logs in the hold." Further, petitioner averred that "[t]he vessel, while navigating through this
second southwestern monsoon, was under extreme stress. At about 0125 hours, 26 July
1990, a thud was heard in the cargo hold and the logs therein were felt to have shifted. The
vessel thereafter immediately listed by ten (10) degrees starboardside."32
Yet, petitioner now claims that the CA’s conclusion was grounded on mere speculations and
conjectures. It alleges that it was impossible for the logs to have shifted, because they had
fitted exactly in the hold from the port to the starboard side.
After carefully studying the records, we are inclined to believe that the logs did indeed shift,
and that they had been improperly loaded.
According to the boatswain’s testimony, the logs were piled properly, and the entire
shipment was lashed to the vessel by cable wire.33 The ship captain testified that out of the
376 pieces of round logs, around 360 had been loaded in the lower hold of the vessel and 16
on deck. The logs stored in the lower hold were not secured by cable wire, because they fitted
73
exactly from floor to ceiling. However, while they were placed side by side, there were
unavoidable clearances between them owing to their round shape. Those loaded on deck
were lashed together several times across by cable wire, which had a diameter of 60
millimeters, and were secured from starboard to port.34

It is obvious, as a matter of common sense, that the manner of stowage in the lower hold was
not sufficient to secure the logs in the event the ship should roll in heavy weather. Notably,
they were of different lengths ranging from 3.7 to 12.7 meters.35 Being clearly prone to
shifting, the round logs should not have been stowed with nothing to hold them securely in
place. Each pile of logs should have been lashed together by cable wire, and the wire fastened
to the side of the hold. Considering the strong force of the wind and the roll of the waves, the
loose arrangement of the logs did not rule out the possibility of their shifting. By force of
gravity, those on top of the pile would naturally roll towards the bottom of the ship.

The adjuster’s Report, which was heavily relied upon by petitioner to strengthen its claim
that the logs had not shifted, stated that "the logs were still properly lashed by steel chains
on deck." Parenthetically, this statement referred only to those loaded on deck and did not
mention anything about the condition of those placed in the lower hold. Thus, the finding of
the surveyor that the logs were still intact clearly pertained only to those lashed on deck.

The evidence indicated that strong southwest monsoons were common occurrences during
the month of July. Thus, the officers and crew of M/V Central Bohol should have reasonably
anticipated heavy rains, strong winds and rough seas. They should then have taken extra
precaution in stowing the logs in the hold, in consonance with their duty of observing
extraordinary diligence in safeguarding the goods. But the carrier took a calculated risk in
improperly securing the cargo. Having lost that risk, it cannot now escape responsibility for
the loss.

Second Issue:

Doctrine of Limited Liability

The doctrine of limited liability under Article 587 of the Code of Commerce36 is not
applicable to the present case. This rule does not apply to situations in which the loss or the
injury is due to the concurrent negligence of the shipowner and the captain.37 It has already
been established that the sinking of M/V Central Bohol had been caused by the fault or
negligence of the ship captain and the crew, as shown by the improper stowage of the cargo
of logs. "Closer supervision on the part of the shipowner could have prevented this fatal
miscalculation."38 As such, the shipowner was equally negligent. It cannot escape liability by
virtue of the limited liability rule.

WHEREFORE, the Petition is DENIED, and the assailed Decision and

Resolution AFFIRMED. Costs against petitioner.

SO ORDERED.

74
July 13, 2016 On August 5, 2004, Labor Arbiter (LA) Pablo S. Magat rendered a Decision10 finding solidary
liability among petitioner, TEMMPC, TMCL and Capt. Orbeta. The LA also found SSSICI
liable to the respondents for the proceeds of the Personal Accident Policies and attorney's
G.R. No. 181375
fees. The LA, however, ruled that the liability of petitioner shall be deemed extinguished only
upon SSSICI's payment of the insurance proceeds. The dispositive portion of the LA Decision
PHIL-NIPPON KYOEI, CORP., Petitioner, reads:
vs.
ROSALIA T. GUDELOSAO, on her behalf and in behalf of minor children
WHEREFORE, premises considered, CAPT. OSCAR ORBETA, [TEMMPC], [TMCL],
CHRISTY MAE T. GUDELOSAO and ROSE ELDEN T. GUDELOSAO, CARMEN
and PHIL-NIPPON KYOEI CORPORATION are hereby directed to pay solidarily the
TANCONTIAN, on her behalf and in behalf of the children CAMELA B.
complainants as follows:
TANCONTIAN, BEVERLY B. TANCONTIAN, and ACE B.
TANCONTIAN, Respondents.
Death Burial 10% atty's
DECISION Benefits Expenses [fees]

JARDELEZA, J.: 1. ROSALIA T.

US$50,000 US$1,000 US$5,100
GUDELOSAO:
This is a petition for review on certiorari1under Rule 45 of the Revised Rules of Court filed
by Phil-Nippon Kyoei, Corp. (Petitioner) from the Decision2 of the Court of Appeals (CA) 2. CARMEN B.
US$50,000 US$1,000 US$5,100
dated October 4, 2007 (CA Decision) and its Resolution3 dated January 11, 2008 in CA-G.R. TANCONTIAN:
SP No. 95456. The CA reinstated the Labor Arbiter's Decision4dated August 5, 2004 (LA
Decision) with the modification, among others, that petitioner is liable to respondents under 3. CARMELA B.
US$7,000 US$700
the insurance cover it procured from South Sea Surety & Insurance Co., Inc. (SSSICI). The TANCONTIAN:
CA ruled that petitioner's liability would be extinguished only upon payment by SSSICI of
the insurance proceeds to respondents.5 4. BEVERLY B.
US$7,000 US$700
TANCONTIAN:
Facts
5. ACE B. TANCONTIAN: US$7,000 US$700
Petitioner, a domestic shipping corporation, purchased a "Ro-Ro" passenger/cargo vessel
"MV Mahlia" in Japan in February 2003.6 For the vessel's one month conduction voyage
Further, respondent SOUTH SEA SURETY & INSURANCE CO., INC. is hereby
from Japan to the Philippines, petitioner, as local principal, and Top Ever Marine
directed to pay as beneficiaries complainants ROSALIA T. GUDELOSAO and
Management Maritime Co., Ltd. (TMCL), as foreign principal, hired Edwin C. Gudelosao,
CARMEN B. TANCONTIAN[P]3,240,000.00 each for the proceeds of the Personal
Virgilio A. Tancontian, and six other crewmembers. They were hired through the local
Accident Policy Cover it issued for each of the deceased seafarers EDWIN C. GUDELOSAO
manning agency of TMCL, Top Ever Marine Management Philippine Corporation
and VIRGILIO A. T ANCONTIAN plus 10% attorney's fees thereof at [P]324,000.00 each
(TEMMPC). TEMMPC, through their president and general manager, Capt. Oscar Orbeta
thereof or a total of [P]648,000.00.
(Capt. Orbeta), and the eight crewmembers signed separate contracts of employment.
Petitioner secured a Marine Insurance Policy (Maritime Policy No. 00001) from SSSICI over
the vessel for P10,800,000.00 against loss, damage, and third party liability or expense, Nevertheless, upon payment of said proceeds to said widows by respondent SOUTH SEA
arising from the occurrence of the perils of the sea for the voyage of the vessel from SURETY & INSURANCE CO., INC., respondent PHIL-NIPPON CORPORATION's
Onomichi, Japan to Batangas, Philippines. This Marine Insurance Policy included Personal liability to all the complainants is deemed extinguished.
Accident Policies for the eight crewmembers for P3,240,000.00 each in case of accidental
death or injury.7 Any other claim is hereby dismissed for lack of merit.

On February 24, 2003, while still within Japanese waters, the vessel sank due to extreme SO ORDERED.11
bad weather condition. Only Chief Engineer Nilo Macasling survived the incident while the
rest of the crewmembers, including Gudelosao and Tancontian, perished.8
On appeal, the NLRC modified the LA Decision in a Resolution12 dated February 28, 2006,
the dispositive portion of which reads:
Respondents, as heirs and beneficiaries of Gudelosao and Tancontian, filed separate
complaints for death benefits and other damages against petitioner, TEMMPC, Capt. Orbeta,
TMCL, and SSSICI, with the Arbitration Branch of the National Labor Relations Commission WHEREFORE, premises considered, the Appeals of Complainants and PNKC are
(NLRC).9 GRANTED but only partially in the case of Complainants' Appeal, and the Appeal of [SSSICI]

75
is DISMISSED for lack of merit. Accordingly, the Decision is SUSTAINED subject to the
modification that [SSSICI] is DIRECTED to pay Complainants in addition to their awarded
claims, in the appealed decision, additional death benefits of US$7,000 each to the minor
children of Complainant Gudelosao, namely, Christy Mae T. Gudelosao and Rose Elden T.
Gudelosao.
As regards the other issues, the appealed Decision is SUSTAINED.
SO ORDERED.13
Further, [respondents] CAPT. OSCAR ORBETA, [TEMMPC] and [TMCL] (the manning
agency) are hereby directed to pay solidarily the complainants in addition to their awarded
claims, additional death benefits of US$7,000 each to the minor children of petitioner
Rosalia T. Gudelosao, namely, Christy Mae T. Gudelosao and Rose Elden T. Gudelosao.
Respondent SOUTH SEA SURETY & INSURANCE CO., INC. is hereby directed to pay as
beneficiaries complainants ROSALIA T. GUDELOSAO and CARMEN B. TANCONTIAN
[P]3,240,000.00 each for the proceeds of the Personal Accident Policy Cover it issued for
each of the deceased seafarers EDWIN C. GUDELOSAO and VIRGILIO A. TANCONTIAN
plus 10% attorney's fees thereof at [P]324,000.00 each thereof or a total of [P]648,000.00.

The NLRC absolved petitioner, TEMMPC and TMCL and Capt. Orbeta from any liability
Nevertheless, upon payment of said proceeds to said widows by respondent SOUTH SEA
based on the limited liability rule.14 It, however, affirmed SSSICI's liability after finding that
SURETY & INSURANCE CO., INC., respondent PHIL-NIPPON CORPORATION's liability
the Personal Accident Policies answer for the death benefit claims under the Philippine
to all the complainants is deemed extinguished.
Overseas Employment Administration Standard Employment Contract
(POEASEC).15 Respondents filed a Partial Motion for Reconsideration which the NLRC
denied in a Resolution dated May 5, 2006.16 SO ORDERED.18

Respondents filed a petition for certiorari17before the CA where they argued that the NLRC
gravely abused its discretion in ruling that TEMMPC, TMCL, and Capt. Orbeta are absolved
from the terms and conditions of the POEA-SEC by virtue of the limited liability rule.
Respondents also argued that the NLRC gravely abused its discretion in ruling that the
obligation to pay the surviving heirs rests solely on SSSICI. The CA granted the petition, the
dispositive portion thereof reads:
WHEREFORE for being impressed with merit the petition is hereby GRANTED.
Accordingly, the Resolution dated February 28, 2006, and Resolution, dated May 5, 2006,
of the public respondent NLRC are hereby SET ASIDE. The Decision of the Labor Arbiter
dated [August 5, 2004] is REINSTATED, subject to the following modifications:
The CA found that the NLRC erred when it ruled that the obligation of petitioner, TEMMPC
and TMCL for the payment of death benefits under the POEA-SEC was ipso facto transferred
to SSSICI upon the death of the seafarers. TEMMPC and TMCL cannot raise the defense of
the total loss of the ship because its liability under POEA-SEC is separate and distinct from
the liability of the shipowner.19 To disregard the contract, which has the force of law between
the parties, would defeat the purpose of the Labor Code and the rules and regulations issued
by the Department of Labor and Employment (DOLE) in setting the minimum terms and
conditions of employment for the protection of Filipino seamen.20 The CA noted that the
benefits being claimed are not dependent upon whether there is total loss of the vessel,
because the liability attaches even if the vessel did not sink.21 Thus, it was error for the NLRC
to absolve TEMMPC and TMCL on the basis of the limited liability rule.

Significantly though, the CA ruled that petitioner is not liable under the POEA-SEC, but by
(1) [R]espondents CAPT. OSCAR ORBETA, [TEMMPC] and [TMCL] (the manning agency),
virtue of its being a shipowner.22 Thus, petitioner is liable for the injuries to passengers even
are hereby directed to pay solidarily the complainants as follows:
without a determination of its fault or negligence.1âwphi1 It is for this reason that petitioner
obtained insurance from SSSICI - to protect itself against the consequences of a total loss of
the vessel caused by the perils of the sea. Consequently, SSSICI's liability as petitioner's
Death Burial 10% atty's
insurer directly arose from the contract of insurance against liability (i.e., Personal Accident
Benefits Expenses fees Policy).23The CA then ordered that petitioner's liability will only be extinguished upon
payment by SSSICI of the insurance proceeds.24
ROSALIA T.
US$50,000 US$1,000 US$5,1OO
GUDELOSAO:
Petitioner filed a Motion for Reconsideration25 dated November 5, 2007 but this was denied
by the CA in its Resolution26 dated January 11, 2008. On the other hand, since SSSICI did
CARMEN B.
US$50,000 US$1,000 US$5,1OO not file a motion for reconsideration of the CA Decision, the CA issued a Partial Entry of
TANCONTIAN:
Judgment27 stating that the decision became final and executory as to SSSICI on October 27,
2007.
CARMELA B.
US$7,000 US$700
TANCONTIAN:
Hence, this petition where petitioner claims that the CA erred in ignoring the fundamental
BEVERLY B. rule in Maritime Law that the shipowner may exempt itself from liability by abandoning the
US$7,000 US$700 vessel and freight it may have earned during the voyage, and the proceeds of the insurance
TANCONTIAN:
if any. Since the liability of the shipowner is limited to the value of the vessel unless there is
insurance, any claim against petitioner is limited to the proceeds arising from the insurance
ACE B. TANCONTIAN: US$7,000 US$700 policies procured from SSSICI. Thus, there is no reason in making petitioner's exoneration
from liability conditional on SSSICI's payment of the insurance proceeds.
76
On December 8, 2008, TEMMPC filed its Manifestation28 informing us of TEMMPC and
TMCL's Joint Motion to Dismiss the Petition and the CA's Resolution29 dated January 11,
2008 granting it. The dismissal is based on the execution of the Release of All Rights and
Full Satisfaction Claim30 (Release and Quitclaim) on December 14, 2007 between
respondents and TEMMPC, TMCL, and Capt. Orbeta. In a Resolution31 dated January 28,
2009, we noted that TEMMPC, TMCL, and Capt. Orbeta will no longer comment on the
Petition.
On the other hand, SSSICI filed its Comment32 to the petition dated September 3, 2010. It
alleged that the NLRC has no jurisdiction over the insurance claim because claims on the
Personal Accident Policies did not arise from employer-employee relations. It also alleged
that petitioner filed a complaint for sum of money33 in the Regional Trial Court (RTC) of
Manila, Branch 46, where it prays for the payment of the insurance proceeds on the
individual Marine Insurance Policy with a Personal Accident Policy covering the
crewmembers of MV Mahlia. This case was eventually dismissed and is now subject of an
appeal34 before the CA. SSSICI prays that this matter be considered in resolving the present
case.35
Issues
I. Whether the doctrine of real and hypothecary nature of maritime law (also known as the
limited liability rule) applies in favor of petitioner.
II. Whether the CA erred in ruling that the liability of petitioner is extinguished only upon
SSSICI's payment of insurance proceeds.
Discussion
I. Liability under the POEA
Standard Employment Contract.
At the outset, the CA erred in absolving petitioner from the liabilities under the POEA-SEC.
Petitioner was the local principal of the deceased seafarers for the conduction trip of MV
Mahlia. Petitioner hired them through TMCL, which also acted through its agent, TEMMPC.
Petitioner admitted its role as a principal of its agents TMCL, TEMMPC and Capt. Orbeta in
their Joint Partial Appeal36 before the NLRC.37 As such, it is solidarily liable with TEMMPC
and TMCL for the benefits under the POEA-SEC.
Doctrine of limited liability is not
applicable to claims under POEA-SEC.
In this jurisdiction, the limited liability rule is embodied in Articles 587, 590 and 837 under
Book III of the Code of Commerce, viz:
Art. 587. The ship agent shall also be civilly liable for the indemnities in favor of third persons
which arise from the conduct of the captain in the care of the goods which the vessel carried;
but he may exempt himself therefrom by abandoning the vessel with all her equipment and
the freightage he may have earned during the voyage.
Art. 590. The co-owners of a vessel shall be civilly liable, in the proportion of their
contribution to the common fund, for the results of the acts of the captain, referred to in Art.
587.
Each part-owner may exempt himself from this liability by the abandonment before a notary
of the part of the vessel belonging to him.
Art. 837. The civil liability incurred by the shipowners in the cases prescribed in this section,
shall be understood as limited to the value of the vessel with all its appurtenances and
freightage earned during the voyage.
Article 83 7 applies the limited liability rule in cases of collision. Meanwhile, Articles 587 and
590 embody the universal principle of limited liability in all cases wherein the shipowner or
agent may be properly held liable for the negligent or illicit acts of the captain.38 These
articles precisely intend to limit the liability of the shipowner or agent to the value of the
vessel, its appurtenances and freightage earned in the voyage, provided that the owner or
agent abandons the vessel.39 When the vessel is totally lost, in which case abandonment is
not required because there is no vessel to abandon, the liability of the shipowner or agent for
damages is extinguished.40 Nonetheless, the limited liability rule is not absolute and is
without exceptions. It does not apply in cases: (1) where the injury or death to a passenger is
due either to the fault of the shipowner, or to the concurring negligence of the shipowner
and the captain; (2) where the vessel is insured; and (3) in workmen's compensation
claims.41
In Abueg v. San Diego,42 we ruled that the limited liability rule found in the Code of
Commerce is inapplicable in a liability created by statute to compensate employees and
laborers, or the heirs and dependents, in cases of injury received by or inflicted upon them
while engaged in the performance of their work or employment, to wit:
The real and hypothecary nature of the liability of the shipowner or agent embodied in the
provisions of the Maritime Law, Book III, Code of Commerce, had its origin in the prevailing
conditions of the maritime trade and sea voyages during the medieval ages, attended by
innumerable hazards and perils. To offset against these adverse conditions and to encourage
shipbuilding and maritime commerce, it was deemed necessary to confine the liability of the
owner or agent arising from the operation of a ship to the vessel, equipment, and freight, or
insurance, if any, so that if the shipowner or agent abandoned the ship, equipment, and
freight, his liability was extinguished.
But the provisions of the Code of Commerce invoked by appellant have no room in the
application of the Workmen's Compensation Act which seeks to improve, and aims at the
amelioration of, the condition of laborers and employees. It is not the liability for the damage
or loss of the cargo or injury to, or death of, a passenger by or through the misconduct of the
captain or master of the ship; nor the liability for the loss of the ship as a result of collision;
nor the responsibility for wages of the crew, but a liability created by a statute to compensate
employees and laborers in cases of injury received by or inflicted upon them, while engaged
in the performance of their work or employment, or the heirs and dependents of such
laborers and employees in the event of death caused by their employment. Such
compensation has nothing to do with the provisions of the Code of Commerce regarding
maritime commerce. It is an item in the cost of production which must be included in the
budget of any well-managed industry.43 (Underscoring supplied.)
77
We see no reason why the above doctrine should not apply here.
Act No. 3428, otherwise known as The Workmen's Compensation Act44 is the first law on
workmen's compensation in the Philippines for work-related injury, illness, or death. This
was repealed on November 1, 1974 by the Labor Code,45 and was further amended on
December 27, 1974 by Presidential Decree No. 626.46 The pertinent provisions are now found
in Title II, Book IV of the Labor Code on Employees Compensation and State Insurance
Fund.
The death benefits granted under Title II, Book IV of the Labor Code are similar to the death
benefits granted under the POEA-SEC.47 Specifically, its Section 20(A)(l) and (4)(c) provides
that:
1. In case of work-related death of the seafarer, during the term of his contract the employer
shall pay his beneficiaries the Philippine Currency equivalent to the amount of Fifty
Thousand US dollars (US$50,000) and an additional amount of Seven Thousand US dollars
(US$7,000) to each child under the age of twenty-one (21) but not exceeding four (4)
children, at the exchange rate prevailing during the time of payment.
xxx
4. The other liabilities of the employer when the seafarer dies as a result of work-related
injury or illness during the term of employment are as follows:
xxx
c. The employer shall pay the beneficiaries of the seafarer the [Philippine] currency
equivalent to the amount of One Thousand US dollars (US$1,000) for burial expenses at the
exchange rate prevailing during the time of payment.
Akin to the death benefits under the Labor Code, these benefits under the POEA-SEC are
given when the employee dies due to a work-related cause during the term of his
contract.48 The liability of the shipowner or agent under the POEA-SEC has likewise nothing
to do with the provisions of the Code of Commerce regarding maritime commerce. The death
benefits granted under the POEA-SEC is not due to the death of a passenger by or through
the misconduct of the captain or master of the ship; nor is it the liability for the loss of the
ship as result of collision; nor the liability for wages of the crew. It is a liability created by
contract between the seafarers and their employers, but secured through the State's
intervention as a matter of constitutional and statutory duty to protect Filipino overseas
workers and to secure for them the best terms and conditions possible, in order to
compensate the seafarers' heirs and dependents in the event of death while engaged in the
performance of their work or employment. The POEA-SEC prescribes the set of standard
provisions established and implemented by the POEA containing the minimum
requirements prescribed by the government for the employment of Filipino seafarers. While
it is contractual in nature, the POEA-SEC is designed primarily for the protection and benefit
of Filipino seamen in the pursuit of their employment on board ocean-going vessels.49 As
such, it is deemed incorporated in every Filipino seafarers' contract of employment.50 It is
established pursuant to POEA's power "to secure the best terms and conditions of
employment of Filipino contract workers and ensure compliance therewith" and "to protect
the well-being of Filipino workers overseas"51 pursuant to Article 17 of the Labor Code as
amended by Executive Order (EO) Nos. 79752 and 247.53
But while the nature of death benefits under the Labor Code and the POEA-SEC are similar,
the death benefits under the POEA-SEC are intended to be separate and distinct from, and
in addition to, whatever benefits the seafarer is entitled to under Philippine laws, including
those benefits which may be claimed from the State Insurance Fund.54
Thus, the claim for death benefits under the POEA-SEC is the same species as the workmen's
compensation claims under the Labor Code – both of which belong to a different realm from
that of Maritime Law. Therefore, the limited liability rule does not apply to petitioner's
liability under the POEA-SEC.
Nevertheless, the Release and Quitclaim benefit petitioner as a solidary debtor.
All the same, the Release and Quitclaim executed between TEMMPC, TMCL and Capt. Oscar
Orbeta, and respondents redounded to the benefit of petitioner as a solidary debtor.
Petitioner is solidarily liable with TEMMPC and TMCL for the death benefits under the
POEA-SEC. The basis of the solidary liability of the principal with the local manning agent
is found in the second paragraph of Section 10 of the Migrant Workers and Overseas Filipino
Act of 1995,55 which, in part, provides: "[t]he liability of the principal/employer and the
recruitment/placement agency for any and all claims under this section shall be joint and
several." This provision, is in tum, implemented by Section 1 (e)(8), Rule 2, Part II of the
POEA Rules and Regulations Governing the Recruitment and Employment of Seafarers,
which requires the undertaking of the manning agency to "[a]ssume joint and solidary
liability with the employer for all claims and liabilities which may arise in connection with
the implementation of the employment contract [and POEA-SEC]."
We have consistently applied the Civil Code provisions on solidary obligations, specifically
Articles 121756 and 1222,57 to labor cases.58 We explained in Varorient Shipping Co.,
Inc. v. NLRC59the nature of the solidary liability in labor cases, to wit:
x x x The POEA Rules holds her, as a corporate officer, solidarily liable with the local licensed
manning agency. Her liability is inseparable from those of Varorient and Lagoa. If anyone of
them is held liable then all of them would be liable for the same obligation. Each of the
solidary debtors, insofar as the creditor/s is/are concerned, is the debtor of the
entire amount; it is only with respect to his co-debtors that he/she is liable to
the extent of his/her share in the obligation. Such being the case, the Civil Code
allows each solidary debtor, in actions filed by the creditor/s, to avail himself
of all defenses which are derived from the nature of the obligation and of those
which are personal to him, or pertaining to his share. He may also avail of those
defenses personally belonging to his co-debtors, but only to the extent of their share in the
debt. Thus, Varorient may set up all the defenses pertaining to Colarina and Lagoa; whereas
Colarina and Lagoa are liable only to the extent to which Varorient may be found liable by
the court. The complaint against Varorient, Lagoa and Colarina is founded on a common
cause of action; hence, the defense or the appeal by anyone of these solidary debtors would
redound to the benefit of the others.
xxx
78
x x x If Varorient were to be found liable and made to pay pursuant thereto, the entire
obligation would already be extinguished even if no attempt was made to enforce the
judgment against Colarina. Because there existed a common cause of action against
the three solidary obligors, as the acts and omissions imputed against them are
one and the same, an ultimate finding that Varorient was not liable would,
under these circumstances, logically imply a similar exoneration from liability
for Colarina and Lagoa, whether or not they interposed any defense.60 (Emphasis
supplied.)
Thus, the rule is that the release of one solidary debtor redounds to the benefit of the
others.61 Considering that petitioner is solidarily liable with TEMMPC and TMCL, we hold
that the Release and Quitclaim executed by respondents in favor of TEMMPC and TMCL
redounded to petitioner's benefit. Accordingly, the liabilities of petitioner under Section
20(A)(l) and (4)(c) of the POEA-SEC to respondents are now deemed extinguished. We
emphasize, however, that this pronouncement does not foreclose the right of reimbursement
of the solidary debtors who paid (i.e., TEMMPC and TMCL) from petitioner as their co-
debtor.
II. Liability under the Personal
Accident Policies.
The NLRC has jurisdiction over the
claim on the Personal Accident
Policies.
We find that the CA correctly upheld the NLRC's jurisdiction to order SSSICI to pay
respondents the value of the proceeds of the Personal Accident Policies.
The Migrant Workers and Overseas Filipinos Act of 1995 gives the Labor Arbiters of the
NLRC the original and exclusive jurisdiction over claims arising out of an employer-
employee relationship or by virtue of any law or contract involving Filipino workers for
overseas deployment, including claims for actual, moral, exemplary and other forms of
damage. It further creates a joint and several liability among the principal or employer, and
the recruitment/placement agency, for any and all claims involving Filipino workers, viz:
SEC. 10. Money Claims. - Notwithstanding any provision of law to the contrary, the
Labor Arbiters of the National Labor Relations Commission (NLRC) shall have
the original and exclusive jurisdiction to hear and decide, within ninety (90)
calendar days after the filing of the complaint, the claims arising out of an employer-
employee relationship or by virtue of any law or contract involving Filipino
workers for overseas deployment including claims for actual, moral, exemplary and
other forms of damages. Consistent with this mandate, the NLRC shall endeavor to update
and keep abreast with the developments in the global services industry.
The liability of the principal/employer and the recruitment/placement agency for any and
all claims under this section shall be joint and several. This provision shall be incorporated
in the contract for overseas employment and shall be a condition precedent for its approval.
The performance bond to be filed by the recruitment/placement agency, as provided by law,
shall be answerable for all money claims or damages that may be awarded to the workers. If
the recruitment/placement agency is a juridical being, the corporate officers and directors
and partners as the case may be, shall themselves be jointly and solidarily liable with the
corporation or partnership for the aforesaid claims and damages. x x x (Emphasis supplied.)
In Finman General Assurance Corp. v. Inocencio,62 we upheld the jurisdiction of the POEA
to determine a surety's liability under its bond. We ruled that the adjudicatory power to do
so is not vested with the Insurance Commission exclusively. The POEA (now the NLRC) is
vested with quasi-judicial powers over all cases, including money claims, involving
employer-employee relations arising out of or by virtue of any law or contract involving
Filipino workers for overseas employment.63 Here, the award of the insurance proceeds
arose out of the personal accident insurance procured by petitioner as the local principal
over the deceased seafarers who were Filipino overseas workers. The premiums paid by
petitioner were, in actuality, part of the total compensation paid for the services of the
crewmembers.64 Put differently, the labor of the employees is the true source of the benefits
which are a form of additional compensation to them. Undeniably, such claim on the
personal accident cover is a claim under an insurance contract involving Filipino workers
for overseas deployment within the jurisdiction of the NLRC.
It must also be noted that the amendment under Section 37-A of the Migrant Workers and
Overseas Filipinos Act of 1995 on Compulsory Insurance Coverage does not
apply.1âwphi1 The amendment requires the claimant to bring any question or dispute in the
enforcement of any insurance policy before the Insurance Commission for mediation or
adjudication. The amendment, however, took effect on May 8, 2010 long after the Personal
Accident Policies in this case were procured in 2003. Accordingly, the NLRC has jurisdiction
over the claim for proceeds under the Personal Accident Policies.
In any event, SSSICI can no longer assail its liability under the Personal Accident Policies.
SSSICI failed to file a motion for reconsideration on the CA Decision. In a Resolution dated
April 24, 2008, the CA certified in a Partial Entry of Judgment that the CA Decision with
respect to SSSICI has become final and executory and is recorded in the Book of Entries of
Judgments.65 A decision that has acquired finality becomes immutable and unalterable. This
quality of immutability precludes the modification of a final judgment, even if the
modification is meant to correct erroneous conclusions of fact and law. This holds true
whether the modification is made by the court that rendered it or by the highest court in the
land. Thus, SSSICI's liability on the Personal Accident Policies can no longer be disturbed in
this petition.
SSSICI 's liability as insurer under the
Personal Accident Policies is direct.
We, however, find that the CA erred in ruling that "upon payment of [the insurance]
proceeds to said widows by respondent SOUTH SEA SURETY & INSURANCE CO., INC.,
respondent PHIL-NIPPON CORPORATION's liability to all the complainants is deemed
extinguished."66
This ruling makes petitioner's liability conditional upon SSSICI's payment of the insurance
proceeds. In doing so, the CA determined that the Personal Accident Policies are casualty
insurance, specifically one of liability insurance. The CA determined that petitioner, as
insured, procured from SSSICI the Personal Accident Policies in order to protect itself from
the consequences of the total loss of the vessel caused by the perils of the sea. The CA found
79
that the liabilities insured against are all monetary claims, excluding the benefits under the
POEA-SEC, of respondents in connection with the sinking of the vessel.
We rule that while the Personal Accident Policies are casualty insurance, they do not answer
for petitioner's liabilities arising from the sinking of the vessel. It is an indemnity insurance
procured by petitioner for the benefit of the seafarers. As a result, petitioner is not directly
liable to pay under the policies because it is merely the policyholder of the Personal Accident
Policies.
One final note. Petitioner's claim that the limited liability rule and its corresponding
exception (i.e., where the vessel is insured) apply here is irrelevant because petitioner was
not found liable under tort or quasi-delict. Moreover, the insurance proceeds contemplated
under the exception in the case of a lost vessel are the insurance over the vessel and pending
freightage for the particular voyage.76 It is not the insurance in favor of the seafarers, the
proceeds of which are intended for their beneficiaries. Thus, if ever petitioner is liable for
the value of the insurance proceeds under tort or quasi-delict, it would be from the Marine
Insurance Policy over the vessel and not from the Personal Accident Policies over the
seafarers.

Section 176 (formerly Sec. 174) of The Insurance Code67 defines casualty insurance as
WHEREFORE, the petition is PARTLY GRANTED. The CA Decision dated October 4,
follows:
2007 and the Resolution dated January 11, 2008 of the Court of Appeals are AFFIRMED
WITH THE FOLLOWING MODIFICATIONS:
SEC. 174. Casualty insurance is insurance covering loss or liability arising from
accident or mishap, excluding certain types of loss which by law or custom are
(1) The death benefits are limited to the amount granted under the Release of All Rights and
considered as falling exclusively within the scope of other types of insurance
Full Satisfaction of Claim dated December 14, 2007 executed between respondents and Top
such as fire or marine. It includes, but is not limited to, employer's liability insurance,
Ever Marine Management Company Ltd., Top Ever Marine Management Philippine
motor vehicle liability insurance, plate glass insurance, burglary and theft
Corporation, and Captain Oscar Or beta;
insurance, personal accident and health insurance as written by non-life
insurance companies, and other substantially similar kinds of
(2) As a solidary co-debtor, petitioner's liability to respondents under the POEA-SEC is also
extinguished by virtue of the Release of All Rights and Full Satisfaction of Claim dated
insurance. (Emphasis supplied.)
December 14, 2007; and

Based on Section 176, casualty insurance may cover liability or loss arising from accident or
(3) The last paragraph of the dispositive portion of the CA Decision dated October 4, 2007
mishap.1âwphi1 In a liability insurance, the insurer assumes the obligation to pay third party
stating: "Nevertheless, upon payment of said proceeds to said widows by respondent SOUTH
in whose favor the liability of the insured arises.68 On the other hand, personal accident
SEA SURETY & INSURANCE CO., INC., respondent PHIL-NIPPON CORPORATION's
insurance refers to insurance against death or injury by accident or accidental means.69 In
liability to all the complainants is deemed extinguished ... " is DELETED.
an accidental death policy, the accident causing the death is the thing insured against.70

SO ORDERED
Notably, the parties did not submit the Personal Accident Policies with the NLRC or the CA.
However, based on the pleadings submitted by the parties, SSSICI admitted that the
crewmembers of MV Mahlia are insured for the amount of P3,240,000.00, payable upon the
accidental death of the crewmembers.71 It further admitted that the insured risk is the loss
of life or bodily injury brought about by the violent external event or accidental
means.72 Based on the foregoing, the insurer itself admits that what is being insured against
is not the liability of the shipowner for death or injuries to passengers but the death of the
seafarers arising from accident.

The liability of SSSICI to the beneficiaries is direct under the insurance contract.73 Under the
contract, petitioner is the policyholder, with SSSICI as the insurer, the crewmembers as
the cestui que vie or the person whose life is being insured with another as beneficiary of the
proceeds,74 and the latter's heirs as beneficiaries of the policies. Upon petitioner's payment
of the premiums intended as additional compensation to the crewmembers, SSSICI as
insurer undertook to indemnify the crewmembers' beneficiaries from an unknown or
contingent event.75 Thus, when the CA conditioned the extinguishment of petitioner's
liability on SSSICI's payment of the Personal Accident Policies' proceeds, it made a finding
that petitioner is subsidiarily liable for the face value of the policies. To reiterate, however,
there is no basis for such finding; there is no obligation on the part of petitioner to pay the
insurance proceeds because petitioner is, in fact, the obligee or policyholder in the Personal
Accident Policies. Since petitioner is not the party liable for the value of the insurance
proceeds, it follows that the limited liability rule does not apply as well.

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G.R. No. 138334 August 25, 2003 "Jewels of Europe" tour, such that the cost of the former should be properly set-off against
the sum paid for the latter.
ESTELA L. CRISOSTOMO, Petitioner,
vs. For its part, respondent company, through its Operations Manager, Concepcion Chipeco,
The Court of Appeals and CARAVAN TRAVEL & TOURS INTERNATIONAL, denied responsibility for petitioner’s failure to join the first tour. Chipeco insisted that
INC., Respondents. petitioner was informed of the correct departure date, which was clearly and legibly printed
on the plane ticket. The travel documents were given to petitioner two days ahead of the
scheduled trip. Petitioner had only herself to blame for missing the flight, as she did not
DECISION
bother to read or confirm her flight schedule as printed on the ticket.

YNARES-SANTIAGO, J.:
Respondent explained that it can no longer reimburse the amount paid for "Jewels of
Europe", considering that the same had already been remitted to its principal in Singapore,
In May 1991, petitioner Estela L. Crisostomo contracted the services of respondent Caravan Lotus Travel Ltd., which had already billed the same even if petitioner did not join the tour.
Travel and Tours International, Inc. to arrange and facilitate her booking, ticketing and Lotus’ European tour organizer, Insight International Tours Ltd., determines the cost of a
accommodation in a tour dubbed "Jewels of Europe". The package tour included the package tour based on a minimum number of projected participants. For this reason, it is
countries of England, Holland, Germany, Austria, Liechstenstein, Switzerland and France at accepted industry practice to disallow refund for individuals who failed to take a booked
a total cost of P74,322.70. Petitioner was given a 5% discount on the amount, which included tour.3
airfare, and the booking fee was also waived because petitioner’s niece, Meriam Menor, was
respondent company’s ticketing manager.
Lastly, respondent maintained that the "British Pageant" was not a substitute for the package
tour that petitioner missed. This tour was independently procured by petitioner after
Pursuant to said contract, Menor went to her aunt’s residence on June 12, 1991 – a realizing that she made a mistake in missing her flight for "Jewels of Europe". Petitioner was
Wednesday – to deliver petitioner’s travel documents and plane tickets. Petitioner, in turn, allowed to make a partial payment of only US$300.00 for the second tour because her niece
gave Menor the full payment for the package tour. Menor then told her to be at the Ninoy was then an employee of the travel agency. Consequently, respondent prayed that petitioner
Aquino International Airport (NAIA) on Saturday, two hours before her flight on board be ordered to pay the balance of P12,901.00 for the "British Pageant" package tour.
British Airways.
After due proceedings, the trial court rendered a decision,4 the dispositive part of which
Without checking her travel documents, petitioner went to NAIA on Saturday, June 15, 1991, reads:
to take the flight for the first leg of her journey from Manila to Hongkong. To petitioner’s
dismay, she discovered that the flight she was supposed to take had already departed the
WHEREFORE, premises considered, judgment is hereby rendered as follows:
previous day. She learned that her plane ticket was for the flight scheduled on June 14, 1991.
She thus called up Menor to complain.
1. Ordering the defendant to return and/or refund to the plaintiff the amount of
Fifty Three Thousand Nine Hundred Eighty Nine Pesos and Forty Three Centavos
Subsequently, Menor prevailed upon petitioner to take another tour – the "British Pageant"
(P53,989.43) with legal interest thereon at the rate of twelve percent (12%) per
– which included England, Scotland and Wales in its itinerary. For this tour package,
annum starting January 16, 1992, the date when the complaint was filed;
petitioner was asked anew to pay US$785.00 or P20,881.00 (at the then prevailing exchange
rate of P26.60). She gave respondent US$300 or P7,980.00 as partial payment and
commenced the trip in July 1991. 2. Ordering the defendant to pay the plaintiff the amount of Five Thousand
(P5,000.00) Pesos as and for reasonable attorney’s fees;
Upon petitioner’s return from Europe, she demanded from respondent the reimbursement
of P61,421.70, representing the difference between the sum she paid for "Jewels of Europe" 3. Dismissing the defendant’s counterclaim, for lack of merit; and
and the amount she owed respondent for the "British Pageant" tour. Despite several
demands, respondent company refused to reimburse the amount, contending that the same
4. With costs against the defendant.
was non-refundable.1 Petitioner was thus constrained to file a complaint against respondent
for breach of contract of carriage and damages, which was docketed as Civil Case No. 92-133
and raffled to Branch 59 of the Regional Trial Court of Makati City. SO ORDERED.5

In her complaint,2 petitioner alleged that her failure to join "Jewels of Europe" was due to The trial court held that respondent was negligent in erroneously advising petitioner of her
respondent’s fault since it did not clearly indicate the departure date on the plane ticket. departure date through its employee, Menor, who was not presented as witness to rebut
Respondent was also negligent in informing her of the wrong flight schedule through its petitioner’s testimony. However, petitioner should have verified the exact date and time of
employee Menor. She insisted that the "British Pageant" was merely a substitute for the departure by looking at her ticket and should have simply not relied on Menor’s verbal

81
representation. The trial court thus declared that petitioner was guilty of contributory
negligence and accordingly, deducted 10% from the amount being claimed as refund.
Respondent appealed to the Court of Appeals, which likewise found both parties to be at
fault. However, the appellate court held that petitioner is more negligent than respondent
because as a lawyer and well-traveled person, she should have known better than to simply
rely on what was told to her. This being so, she is not entitled to any form of damages.
Petitioner also forfeited her right to the "Jewels of Europe" tour and must therefore pay
respondent the balance of the price for the "British Pageant" tour. The dispositive portion of
the judgment appealed from reads as follows:
WHEREFORE, premises considered, the decision of the Regional Trial Court dated October
26, 1995 is hereby REVERSED and SET ASIDE. A new judgment is hereby ENTERED
requiring the plaintiff-appellee to pay to the defendant-appellant the amount of P12,901.00,
representing the balance of the price of the British Pageant Package Tour, the same to earn
legal interest at the rate of SIX PERCENT (6%) per annum, to be computed from the time
the counterclaim was filed until the finality of this decision. After this decision becomes final
and executory, the rate of TWELVE PERCENT (12%) interest per annum shall be
additionally imposed on the total obligation until payment thereof is satisfied. The award of
attorney’s fees is DELETED. Costs against the plaintiff-appellee.
SO ORDERED.6
Upon denial of her motion for reconsideration,7 petitioner filed the instant petition under
Rule 45 on the following grounds:
I
It is respectfully submitted that the Honorable Court of Appeals committed a
reversible error in reversing and setting aside the decision of the trial court by
ruling that the petitioner is not entitled to a refund of the cost of unavailed "Jewels
of Europe" tour she being equally, if not more, negligent than the private
respondent, for in the contract of carriage the common carrier is obliged to observe
utmost care and extra-ordinary diligence which is higher in degree than the
ordinary diligence required of the passenger. Thus, even if the petitioner and
private respondent were both negligent, the petitioner cannot be considered to be
equally, or worse, more guilty than the private respondent. At best, petitioner’s
negligence is only contributory while the private respondent [is guilty] of gross
negligence making the principle of pari delicto inapplicable in the case;
II
The Honorable Court of Appeals also erred in not ruling that the "Jewels of
Europe" tour was not indivisible and the amount paid therefor refundable;
III
The Honorable Court erred in not granting to the petitioner the consequential
damages due her as a result of breach of contract of carriage.8
Petitioner contends that respondent did not observe the standard of care required of a
common carrier when it informed her wrongly of the flight schedule. She could not be
deemed more negligent than respondent since the latter is required by law to exercise
extraordinary diligence in the fulfillment of its obligation. If she were negligent at all, the
same is merely contributory and not the proximate cause of the damage she suffered. Her
loss could only be attributed to respondent as it was the direct consequence of its employee’s
gross negligence.
Petitioner’s contention has no merit.
By definition, a contract of carriage or transportation is one whereby a certain person or
association of persons obligate themselves to transport persons, things, or news from one
place to another for a fixed price.9 Such person or association of persons are regarded as
carriers and are classified as private or special carriers and common or public carriers.10 A
common carrier is defined under Article 1732 of the Civil Code 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 is obvious from the above definition that respondent is not an entity engaged in the
business of transporting either passengers or goods and is therefore, neither a private nor a
common carrier. Respondent did not undertake to transport petitioner from one place to
another since its covenant with its customers is simply to make travel arrangements in their
behalf. Respondent’s services as a travel agency include procuring tickets and facilitating
travel permits or visas as well as booking customers for tours.
While petitioner concededly bought her plane ticket through the efforts of respondent
company, this does not mean that the latter ipso facto is a common carrier. At most,
respondent acted merely as an agent of the airline, with whom petitioner ultimately
contracted for her carriage to Europe. Respondent’s obligation to petitioner in this regard
was simply to see to it that petitioner was properly booked with the airline for the appointed
date and time. Her transport to the place of destination, meanwhile, pertained directly to the
airline.
The object of petitioner’s contractual relation with respondent is the latter’s service of
arranging and facilitating petitioner’s booking, ticketing and accommodation in the package
tour. In contrast, the object of a contract of carriage is the transportation of passengers or
goods. It is in this sense that the contract between the parties in this case was an ordinary
one for services and not one of carriage. Petitioner’s submission is premised on a wrong
assumption.
The nature of the contractual relation between petitioner and respondent is determinative
of the degree of care required in the performance of the latter’s obligation under the contract.
For reasons of public policy, a common carrier in a contract of carriage is bound by law to
carry passengers as far as human care and foresight can provide using the utmost diligence
of very cautious persons and with due regard for all the circumstances.11 As earlier stated,
however, respondent is not a common carrier but a travel agency. It is thus not bound under
the law to observe extraordinary diligence in the performance of its obligation, as petitioner
claims.
Since the contract between the parties is an ordinary one for services, the standard of care
required of respondent is that of a good father of a family under Article 1173 of the Civil
82
Code.12 This connotes reasonable care consistent with that which an ordinarily prudent
person would have observed when confronted with a similar situation. The test to determine
whether negligence attended the performance of an obligation is: did the defendant in doing
the alleged negligent act use that reasonable care and caution which an ordinarily prudent
person would have used in the same situation? If not, then he is guilty of negligence.13
In the case at bar, the lower court found Menor negligent when she allegedly informed
petitioner of the wrong day of departure. Petitioner’s testimony was accepted as indubitable
evidence of Menor’s alleged negligent act since respondent did not call Menor to the witness
stand to refute the allegation. The lower court applied the presumption under Rule 131,
Section 3 (e)14 of the Rules of Court that evidence willfully suppressed would be adverse if
produced and thus considered petitioner’s uncontradicted testimony to be sufficient proof
of her claim.
On the other hand, respondent has consistently denied that Menor was negligent and
maintains that petitioner’s assertion is belied by the evidence on record. The date and time
of departure was legibly written on the plane ticket and the travel papers were delivered two
days in advance precisely so that petitioner could prepare for the trip. It performed all its
obligations to enable petitioner to join the tour and exercised due diligence in its dealings
with the latter.
We agree with respondent.
Respondent’s failure to present Menor as witness to rebut petitioner’s testimony could not
give rise to an inference unfavorable to the former. Menor was already working in France at
the time of the filing of the complaint,15 thereby making it physically impossible for
respondent to present her as a witness. Then too, even if it were possible for respondent to
secure Menor’s testimony, the presumption under Rule 131, Section 3(e) would still not
apply. The opportunity and possibility for obtaining Menor’s testimony belonged to both
parties, considering that Menor was not just respondent’s employee, but also petitioner’s
niece. It was thus error for the lower court to invoke the presumption that respondent
willfully suppressed evidence under Rule 131, Section 3(e). Said presumption would logically
be inoperative if the evidence is not intentionally omitted but is simply unavailable, or when
the same could have been obtained by both parties.16
In sum, we do not agree with the finding of the lower court that Menor’s negligence
concurred with the negligence of petitioner and resultantly caused damage to the latter.
Menor’s negligence was not sufficiently proved, considering that the only evidence presented
on this score was petitioner’s uncorroborated narration of the events. It is well-settled that
the party alleging a fact has the burden of proving it and a mere allegation cannot take the
place of evidence.17 If the plaintiff, upon whom rests the burden of proving his cause of
action, fails to show in a satisfactory manner facts upon which he bases his claim, the
defendant is under no obligation to prove his exception or defense.18
plane tickets. It arranged petitioner’s hotel accommodation as well as food, land transfers
and sightseeing excursions, in accordance with its avowed undertaking.
Therefore, it is clear that respondent performed its prestation under the contract as well as
everything else that was essential to book petitioner for the tour. Had petitioner exercised
due diligence in the conduct of her affairs, there would have been no reason for her to miss
the flight. Needless to say, after the travel papers were delivered to petitioner, it became
incumbent upon her to take ordinary care of her concerns. This undoubtedly would require
that she at least read the documents in order to assure herself of the important details
regarding the trip.
The negligence of the obligor in the performance of the obligation renders him liable for
damages for the resulting loss suffered by the obligee. Fault or negligence of the obligor
consists in his failure to exercise due care and prudence in the performance of the obligation
as the nature of the obligation so demands.20 There is no fixed standard of diligence
applicable to each and every contractual obligation and each case must be determined upon
its particular facts. The degree of diligence required depends on the circumstances of the
specific obligation and whether one has been negligent is a question of fact that is to be
determined after taking into account the particulars of each case.21 1âwphi1
The lower court declared that respondent’s employee was negligent. This factual finding,
however, is not supported by the evidence on record. While factual findings below are
generally conclusive upon this court, the rule is subject to certain exceptions, as when the
trial court overlooked, misunderstood, or misapplied some facts or circumstances of weight
and substance which will affect the result of the case.22
In the case at bar, the evidence on record shows that respondent company performed its
duty diligently and did not commit any contractual breach. Hence, petitioner cannot recover
and must bear her own damage.
WHEREFORE, the instant petition is DENIED for lack of merit. The decision of the Court
of Appeals in CA-G.R. CV No. 51932 is AFFIRMED. Accordingly, petitioner is ordered to pay
respondent the amount of P12,901.00 representing the balance of the price of the British
Pageant Package Tour, with legal interest thereon at the rate of 6% per annum, to be
computed from the time the counterclaim was filed until the finality of this Decision. After
this Decision becomes final and executory, the rate of 12% per annum shall be imposed until
the obligation is fully settled, this interim period being deemed to be by then an equivalent
to a forbearance of credit.23
SO ORDERED.

Contrary to petitioner’s claim, the evidence on record shows that respondent exercised due
diligence in performing its obligations under the contract and followed standard procedure
in rendering its services to petitioner. As correctly observed by the lower court, the plane
ticket19 issued to petitioner clearly reflected the departure date and time, contrary to
petitioner’s contention. The travel documents, consisting of the tour itinerary, vouchers and
instructions, were likewise delivered to petitioner two days prior to the trip. Respondent also
properly booked petitioner for the tour, prepared the necessary documents and procured the

83