G.R. No.

157917 August 29, 2012

SPOUSES TEODORO and NANETTE PERENA vs. SPOUSES TERESITA PHILIPPINE NICOLAS and L. ZARATE, NATIONAL
RAILWAYS, and the COURT OF APPEALS Respondents.
BERSAMIN, J.:
DOCTRINE: 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.
Teodoro and Nanette Pereña: 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, they used a KIA Ceres Van, 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 as driver of the van.
Nicolas and Teresita Zarate: contracted the Pereñas to transport Aaron to and from Don Bosco. On August 22, 1996, the
van picked Aaron up around 6:00 a.m. from the Zarates’ residence. 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.
At about the time the van was to traverse the railroad crossing, PNR Commuter No. 302, operated by Jhonny 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.
Thus, the Zarates commenced this action for damages against Alfaro, the Pereñas, PNR and Alano. 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.
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.
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.
RTC: decreed the Pereñas jointly and severally liable with Philippine National Railways, their co-defendant, to Spouses
Zarate for the death of their 15-year old son, Aaron John Zarate (Aaron), then a high school student of Don Bosco Technical
Institute to pay the plaintiffs as follows. It held 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.
(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
(7) Cost of suit.
CA: affirmed the findings of the RTC, but 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. 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, 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.
ISSUE/S:

I. W/N the Pereñas and PNR should be held jointly and severally liable for damages?

SC: YES. 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.
Pereñas’ defense: 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. 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, primarily
because he only caters to some specific or privileged individuals, and his operation is neither open to the indefinite public
nor for public use, the exact nature of the operation of a school bus service has not been finally settled. This is the
occasion to lay the matter to rest.
A carrier is a person or corporation who undertakes to transport or convey goods or persons from one place to another,
gratuitously or for hire. The carrier is classified either as a private/special carrier or as a common/public carrier. A private
carrier is one who, without making the activity a vocation, or without holding himself or itself out to the public as ready to
act for all who may desire his or its services, undertakes, by special agreement in a particular instance only, to transport
goods or persons from one place to another either gratuitously or for hire. The provisions on ordinary contracts of the Civil
Code govern the contract of private carriage. The diligence required of a private carrier is only ordinary, that is, the
diligence of a good father of the family.
In contrast, a common carrier is a person, corporation, firm or association engaged in the business of carrying or
transporting passengers or goods or both, by land, water, or air, for compensation, offering such services to the public.
Contracts of common carriage are governed by the provisions on common carriers of the Civil Code, the Public Service Act,
and other special laws relating to transportation. A common carrier is required to observe extraordinary diligence, and is
presumed to be at fault or to have acted negligently in case of the loss of the effects of passengers, or the death or injuries
to passengers.
In relation to common carriers, the Court defined public use in the following terms in United States v. Tan Piaco, viz:
"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, 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, custom brokers and warehousemen, and barge operators even if they had limited clientèle.
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.
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 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." 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. 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.
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. 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. 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. In this connection, the records showed their
driver’s actual negligence. There was a showing 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. He thereby violated a specific traffic regulation on right of way, by virtue of which he was
immediately presumed to be negligent.
Layugan v. IAC: Negligence is "the omission to do something which a reasonable man, guided by those considerations
which ordinarily regulate the conduct of human affairs, would do, or the doing of something which a prudent and
reasonable man would not do, or as Judge Cooley defines it, ‘the 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.’"
Picart v. Smith: 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
to leave himself blind to the approach of the oncoming train that he knew was on the opposite side of the bus.
Unrelenting, the Pereñas cite Phil. National Railways v. Intermediate Appellate Court, where the Court held the PNR
solely liable for the damages caused to a passenger bus and its passengers when its train hit the rear end of the bus that
was then traversing the railroad crossing. But the circumstances of that case and this one share no similarities. In
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 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. Intermediate Appellate Court was
traversing the dedicated railroad crossing when it was hit by the train, but the Pereñas’ school van traversed the railroad
tracks at a point not intended for that purpose.
At any rate, the lower courts correctly held both the Pereñas and the PNR "jointly and severally" liable for damages arising
from the death of Aaron. They had been impleaded in 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 questions
of fact and of law were common as to the Zarates. Although the basis of the right to relief of the Zarates (i.e., breach of
contract of carriage) against the Pereñas was distinct from the basis of the Zarates’ right to relief against the PNR (i.e.,
quasi-delict under Article 2176, Civil Code), they nonetheless could be held jointly and severally liable by virtue of their
respective negligence combining to cause the death of Aaron. As to the PNR, the RTC rightly found the PNR also guilty of
negligence despite the school van of the Pereñas traversing the railroad tracks at a point not dedicated by the PNR as a
railroad crossing for pedestrians and motorists, because the PNR did not ensure the safety of others through the placing of
crossbars, signal lights, warning signs, and other permanent safety barriers to prevent vehicles or pedestrians from
crossing there. The RTC observed that the fact that a crossing 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.

II. W/N 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 was proper?
SC: YES. The basis for the computation of Aaron’s earning capacity was not what he would have become or what he would
have wanted to be if not for his untimely death, but the minimum wage in effect at the time of his death. Moreover, the
RTC’s computation of 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.
The CA and the RTC were not speculating that Aaron would be some highly-paid professional, like a pilot (or, for that
matter, an engineer, 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 high school like Don Bosco in Makati, a
fact that would have likely ensured his success in his later years in life and at work.
Secondly, the fact that Aaron was then without a history of earnings should not be taken against his parents and in favor of
the defendants whose negligence not only cost Aaron his life and his right to work and earn money, but also deprived his
parents of their right to his presence and his services as well. Our law itself states that the loss of the earning capacity of
the deceased shall be the liability of the guilty party in favor of the heirs of the deceased, and 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."Accordingly, we emphatically hold in favor of the
indemnification for Aaron’s loss of earning capacity despite him having been unemployed, because compensation of this
nature is awarded not for loss of time or earnings but for loss of the deceased’s power or ability to earn money. 39
This favorable treatment of the Zarates’ claim is not unprecedented. In Cariaga v. Laguna Tayabas Bus Company and
Manila Railroad Company, fourth-year medical student Edgardo Carriaga’s earning capacity, although he survived the
accident but his injuries rendered him permanently incapacitated, was computed to be that of the physician that he
dreamed to become. The Court considered his scholastic record sufficient to justify the 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 income as a medical practitioner. Also, in People v. Sanchez,41 the Court opined that murder and
rape victim Eileen Sarmienta and murder victim Allan Gomez could have easily landed good-paying jobs had they
graduated in due time, and that their jobs would probably pay them high monthly salaries from P10,000 to P15,000 upon
their graduation. Their earning capacities were computed at rates higher than the minimum wage at the time of their
deaths due to their being already senior agriculture students of the University of the Philippines in Los Baños, the country’s
leading educational institution in agriculture.

III. W/N the amount of damages awarded were excessive?

SC: NO. 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.
G.R. No. 170071 March 9, 2011
HEIRS OF JOSE MARCIAL K. OCHOA vs. G & S TRANSPORT CORPORATION
DEL CASTILLO, J.:
Jose Marcial Ochoa: sometime in the evening of March 10, 1995, at the Manila Domestic Airport, Ochoa boarded and rode
an Avis taxicab owned and operated by G & S Transport Corporation (G & S), a common carrier, and driven by Bibiano
Padilla, Jr. on his way home to Teacher’s Village, Diliman, Quezon City.
At about 11:00 p.m., the taxicab was cruising along EDSA, in front of Camp Aguinaldo in Quezon City at high speed. While
going up the Boni Serrano (Santolan) fly-over, it overtook another cab driven by Pablo Clave and tried to pass another
vehicle, a ten-wheeler cargo truck. Because of the narrow space between the left side railing of the fly-over and the ten-
wheeler truck, the Avis cab was unable to pass and because of its speed, its driver (Padilla) was unable to control it. To
avoid colliding with the truck, Padilla turned the wheel to the left causing his taxicab to ram the railing throwing itself off
the fly-over and fell on the middle surface of EDSA below. Ochoa was declared dead on arrival from the accident.
Ruby Bueno, Micaela and Jomar Ochoa (the heirs): sent G & S a letter 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 Complaint for Damages before the RTC of Pasig City.
The heirs alleged that G & S, as a common carrier, is under legal obligation to observe and exercise extraordinary diligence
in transporting its passengers to their destination safely and securely. However, G & S failed to observe and exercise this
extraordinary diligence because its employee failed to transport Jose Marcial to his destination safely. They averred that G
& S is liable to them for having breached the contract of common carriage. As an alternative cause of action, they asserted
that G & S is likewise liable for damages based on quasi-delict pursuant to Article 2180 in relation to Article 2176 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.
G & S: claimed that while passing the Santolan fly-over, 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. 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. G & S 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.
RTC: rendered a Decision finding the vehicular mishap not caused by a fortuitous event but by the negligence of Padilla. It
likewise found the evidence adduced by G & S to show that it exercised the diligence of a good father of a family in the
selection and supervision of its employees as insufficient. Hence, the trial court declared G & S civilly liable to the heirs.
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 defendant was
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 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.
Upon the heirs’ Motion for Partial Reconsideration, RTC declared them entitled to moral and exemplary damages.
3. ₱300,000.00 as moral damages;
4. ₱50,000.00 as exemplary damages;
CA: ruled in favor of the heirs. It held 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, Padilla failed to employ
reasonable foresight, diligence and care needed to exempt G & S from liability for Jose Marcial’s death. It also quoted
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.
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 Certification issued by Jose Marcial’s employer, the United States Agency for International
Development (USAID) through its Chief of Human Resources Division Jonas 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. Ereño 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 excessive and thus reduced the same to ₱200,000 as
to make it proportionate to the award of exemplary damages which is ₱50,000.
G & S: argues that the CA erred in (1) not ruling that the proximate cause of death of Ochoa was a fortuitous event and/or
was due to the fault or negligence of another and should thus exempt it from liability; (2) not taking note of the fact that
the petitioner’s employee had been acquitted of the crime of reckless imprudence resulting in homicide; (3) 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; and (4) not ruling that the petitioner exercised the diligence of a good father
of a family in the selection and supervision of its employees, particularly, Padilla.
HEIRS: argue that the CA erred in (1) completely deleting the trial court’s award for the loss of earning capacity of the
deceased; and (2) reducing the trial court’s award for moral damages from ₱300,000 to ₱200,000.
SC: The first, third and fourth issues raised by G & S involve questions of fact. 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.
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, "this 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
Memorandum34 the exceptions35 to the rule that a petition for review on certiorari should only raise questions of law, it
nevertheless did not point out under what exception its case falls. And, upon review of the records of the case, we are
convinced that it does not fall under any.
There is a contract of carriage between G & S, as the owner and operator of the Avis taxicab, and Jose Marcial, as the
passenger of said vehicle. As a common carrier, G & S "is bound to carry [Jose Marcial] safely as far as human care and
foresight can provide, using the utmost diligence of very cautious persons, with due regard for all the
circumstances." However, Jose Marcial was not able to reach his destination safely as he died during the course of the
travel. "In a contract of carriage, it is presumed that the common carrier is at fault or is negligent when a passenger dies or
is injured. In fact, there is even no need for the court to make an express finding of fault or negligence on the part of the
common carrier. This statutory presumption may only be overcome by evidence that the carrier exercised extraordinary
diligence." Unfortunately, G & S miserably failed to overcome this presumption. Both the trial court and the CA found that
the accident which led to Jose Marcial’s death was due to the reckless driving and gross negligence of G & S’ driver, Padilla,
thereby holding G & S liable to the heirs of Jose Marcial for breach of contract of carriage.
The acquittal of Padilla in the criminal case is immaterial to the instant case for breach of contract
ISSUE: W/N 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: 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.
Cancio, Jr. v. Isip: 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."
DOCTRINE: 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. The fact that the MTC Decision from which the subject quoted portions were
lifted has already been reversed by the RTC is therefore immaterial.
ISSUE: W/N CA erred in deleting the award for loss of earning capacity and in reducing the award for moral damages
made by the trial court
This likewise raise questions of fact as they "involve an examination of the probative value of the evidence presented by
the parties". 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.
Ereño: SC 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.
People v. Caraig: "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".
Pleyto v. Lomboy: "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 victim’s widow that her husband was earning a monthly income
of ₱8,000.
Victory Liner, Inc. v. Gammad: after finding that the deceased’s earnings does not fall 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 husband’s testimony that the deceased was 39 years of age and a Section Chief of the
Bureau 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
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 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 Certification issued by the USAID. However
in Ereño, we declared as self-serving the 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.
The CA sweepingly concluded that the USAID Certification is self-serving and 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 countries recovering from disaster, trying to escape poverty, and engaging in democratic reforms." 48 It
is an "independent federal government agency that receives over-all foreign 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 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 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 authenticity, due
execution and correctness of said certification have not been put in issue either before the trial court or the CA.
‘Self-serving evidence,’: The term, if used with any legal sense, refers only to acts or declarations made by a party in his
own interest at some place and time out of court. Verily, the USAID certification cannot be said to be self-serving because
it does not refer to an act or declaration made out of court by the heirs themselves as parties to this case. Clearly, the CA
erred in deleting the award for lost income on the ground that the USAID 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.
Net Earning Capacity = life expectancy* x (gross annual income - reasonable living expenses)
*
Life expectancy = 2/3 (80 – age of the deceased)
We, however, find incorrect the amount of ₱6,537, 244.96 arrived at. The award should be ₱6,611,634.59 as borne out by
the computation. The award of moral damages should be modified
While we deemed it proper to modify the amount of moral damages awarded by the trial court as discussed below, we
nevertheless agree with the heirs that the CA should not have pegged said award in proportion to the award of exemplary
damages. Moral and exemplary damages are based on different jural foundations. They are different in nature and require
separate determination. The amount of one cannot be made to depend on the other.
In Victory Liner Inc. v. Gammad59 we awarded ₱100,000.00 by way of moral damages to the husband and three children of
the deceased, a 39-year old Section Chief of the Bureau of Internal Revenue, to compensate said heirs for the grief caused
by her death. This is pursuant to the provisions of Articles 1764 and 2206(3) which provide:
Art. 1764. Damages in cases comprised in this Section shall be awarded in accordance with Title XVIII of this Book,
concerning Damages. Articles 2206 shall also apply to the death of a passenger caused by the breach of contract by a
common carrier.
Art. 2206. x x x
(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. 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.
Under this circumstance, we thus find as sufficient and "somehow proportional to and in approximation of the suffering
inflicted” 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.

G.R. No. 172822 ; December18, 2009

MOF COMPANY, INC. vs. SHIN YANG BROKERAGE CORPORATION
DEL CASTILLO, J.:
The necessity of proving lies with the person who sues.
The refusal of the consignee named in the bill of lading to pay the freightage on the claim that it is not privy to the contract
of affreightment propelled the shipper to sue for collection of money, stressing that its sole evidence, the bill of lading,
suffices to prove that the consignee is bound to pay. Petitioner now comes to us by way of Petition for Review
on Certiorari1 under Rule 45 praying for the reversal of the Court of Appeals' (CA) judgment that dismissed its action for
sum of money for insufficiency of evidence.
Halla Trading Co.: In 2001, a company based in Korea, shipped to Manila secondhand cars and other articles on board the
vessel Hanjin Busan 0238W. The bill of lading covering the shipment which was prepared by the carrier, Hanjin Shipping
Co., Ltd. (Hanjin), named respondent Shin Yang Brokerage Corp. (Shin Yang) as the consignee and indicated that payment
was on a "Freight Collect" basis, i.e., that the consignee/receiver of the goods would be the one to pay for the freight and
other charges in the total amount of ₱57,646.00.
MOF Company, Inc.: is Hanjin’s exclusive general agent in the Philippines. When the shipment arrived in Manila on
October 29, 2001, it repeatedly demanded the payment of ocean freight, documentation fee and terminal handling
charges from Shin Yang. The latter, however, failed and refused to pay, contending that it did not cause the importation of
the goods, that it is only the Consolidator of the said shipment, that the ultimate consignee did not endorse in its favor the
original bill of lading, and that the bill of lading was prepared without its consent.Thus, MOF filed a case for sum of money
before the MeTC Pasay.
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.
Shin Yang: denied any involvement in shipping the goods or in promising to shoulder the freightage, claiming that it is
merely a consolidator/forwarder and that Bill of Lading No. HJSCPUSI14168303 was not endorsed to it by the ultimate
consignee. 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 to prove that it was Shin Yang that
caused the importation or the one that assured payment of the shipping charges upon arrival of the goods in Manila.
MeTC: rendered its Decision in favor of MOF. It ruled that Shin Yang cannot disclaim being a party to the contract of
affreightment because: x x x it would appear that Shin Yang has business transactions with plaintiff. This is evident from
Shin Yang’s letters dated May 9 and 13 May 2002, where it requested for the release of refund of container deposits x x x.
[In] the mind of the Court, by analogy, a written contract need not be necessary; a mutual understanding [would suffice].
Further, plaintiff would have not included the name of the defendant in the bill of lading, had there been no prior
agreement to that effect. In sum, plaintiff has sufficiently proved its cause of action against the defendant and the latter is
obliged to honor its agreement with plaintiff despite the absence of a written contract.
RTC: 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. The bill of lading contain[s] the information
embodied in the contract.
Article 652 of the Code of Commerce provides that the charter party must be in writing; however, Article 653 says: "If the
cargo should be received without charter party having been signed, the contract shall be understood as executed in
accordance with what appears in the bill of lading, the sole evidence of title with regard to the cargo for determining the
rights and obligations of the ship agent, of the captain and of the charterer".
CA: set aside the decision of the lower courts, ruling that said decision was purely speculative and conjectural. It 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. CA said:
This Court is persuaded [that except] for the Bill of Lading, MOF has not presented any other evidence to bolster its claim
that Shin Yang has entered [into] an agreement of affreightment with MOF, be it verbal or written. It is noted that the Bill
of Lading was prepared by Hanjin Shipping, not MOF. Hanjin is the principal while MOF is the former’s agent.
While it is true that a bill of lading serves two functions: first, it is a receipt for the goods shipped; second, it is a contract
by which three parties, namely, the shipper, the carrier and the consignee who undertake specific responsibilities and
assume stipulated obligations, 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 disowned 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.
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: W/N a consignee, who is not a signatory to the bill of lading, is bound by the stipulations thereof. Corollarily,
whether Shin Yang 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.
SC: NOPE, Shin Yang is not liable. 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.
Keng Hua Paper Products Co., Inc. v. Court of Appeals: 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.
Mendoza v. Philippine Air Lines, Inc.: 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. SC debunked Mendoza’s
contention.
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, 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.'
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.
DOCTRINE: 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.
In the instant case, Shin Yang consistently denied in all of its pleadings that it authorized Halla Trading, Co. to ship the
goods on its behalf; or that it got hold of the bill of lading covering the shipment or that it demanded the release of the
cargo. Basic is the rule in evidence that the burden of proof lies upon him who asserts it, not upon him who denies, since,
by the nature of things, he who denies a fact cannot produce any proof of it. Thus, MOF has the burden to controvert all
these denials, it being insistent that Shin Yang asserted itself as the consignee and the one that caused the shipment of the
goods to the Philippines.
In civil cases, the party having the burden of proof must establish his case by preponderance of evidence, which means
evidence which is of greater weight, or more convincing than that which is offered in opposition to it. 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.

G.R. No. 186312 June 29, 2010

SPOUSES DANTE and LEONORA CRUZ vs. SUN HOLIDAYS, INC.
CARPIO MORALES, J.:
Spouses Dante and Leonora Cruz: lodged a Complaint against Sun Holidays, Inc. with the RTC of Pasig City for damages
arising from the death of their son, 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 was by virtue of a tour package-contract with Sun Holidays that included transportation to and from the Resort
and the point of departure in Batangas.
Miguel Matute: a scuba diving instructor and one of the survivors, gave his account of the incident that led to the filing of
the complaint. 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, demanded
indemnification for the death of their son in the amount of at least ₱4,000,000. Sun Holidays 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.
Spouses Cruz declined the offer and filed the Complaint, 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 PAGASA as early as
5:00 a.m. of September 11, 2000. They add 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.
Sun Holidays: 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. He added that M/B Coco Beach
III met all four conditions on September 11, 2000, but a subasco or squall, characterized by strong winds and big waves,
suddenly occurred, causing the boat to capsize.10
RTC: dismissed the spouses Cruz’ Complaint and Sun Holiday’s Counterclaim.
CA: denied spouses Cruz’ appeal, holding, among other things, that the trial court correctly ruled that Sun Holiday 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.
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.
DOCTRINE: 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.
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. 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.
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.
Respondent nevertheless harps on its strict compliance with the earlier mentioned conditions of voyage before it allowed
M/B Coco Beach III to sail on September 11, 2000. Respondent’s position does not impress. The evidence shows that
PAGASA issued 24-hour public weather forecasts and tropical cyclone warnings for shipping on September 10 and 11, 2000
advising of tropical depressions in Northern Luzon which would also affect the province of Mindoro. 22 By the testimony of
Dr. Frisco Nilo, supervising weather specialist of PAGASA, squalls are to be expected under such weather condition. 23
A very cautious person exercising the utmost diligence would thus not brave such stormy weather and put other people’s
lives at risk. The extraordinary diligence required of common carriers demands that they take care of the goods or lives
entrusted to their hands as if they were their own. This respondent failed to do.
Respondent’s insistence that the incident was caused by a fortuitous event does not impress either.
The elements of a "fortuitous event" are: (a) the cause of the unforeseen and unexpected occurrence, or the failure of the
debtors to comply with their obligations, must have been independent of human will; (b) the event that constituted the
caso fortuito must have been impossible to foresee or, if foreseeable, impossible to avoid; (c) the occurrence must have
been such as to render it impossible for the debtors to fulfill their obligation in a normal manner; and (d) the obligor must
have been free from any participation in the aggravation of the resulting injury to the creditor. 24
To fully free a common carrier from any liability, the fortuitous event must have been the proximate and only cause of
the loss. AND it should have exercised due diligence to prevent or minimize the loss before, during and after the
occurrence of the fortuitous event.25
Respondent cites the squall that occurred during the voyage as the fortuitous event that overturned M/B Coco Beach III.
As reflected above, however, the occurrence of squalls was expected under the weather condition of September 11, 2000.
Moreover, evidence shows that M/B Coco Beach III suffered engine trouble before it capsized and sank. 26 The incident was,
therefore, not completely free from human intervention.
[G.R. NO. 144274 : September 20, 2004]
NOSTRADAMUS VILLANUEVA v. PRISCILLA and LEANDRO LUIS DOMINGO
CORONA, J.:
Priscilla R. Domingo: is the registered owner of a silver Mitsubishi Lancer Car model 1980 bearing plate No. NDW 781 '91
with Leandro Luis R. Domingo as authorized driver.
Nostradamus Villanueva: was then the registered "owner" of a green Mitsubishi Lancer bearing Plate No. PHK 201 '91.
One night, following a green traffic light, Priscilla’s silver Lancer then driven by Leandro was cruising along the middle lane
of South Superhighway at moderate speed from north to south. Suddenly, a green Mitsubishi Lancer driven by Renato
Dela Cruz Ocfemia darted from Vito Cruz Street towards the South Superhighway directly into the path of the silver Lancer,
bumping its left front portion. As a result of the impact, the silver Lancer hit two parked vehicles at the roadside, the
second hitting another parked car in front of it.
Per Traffic Accident Report, 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
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.
Nostradamus Villanueva: claimed that he was no longer the owner of the car at the time of the mishap because it was
swapped with a Pajero owned by Albert Jaucian/Auto Palace Car Exchange.
Auto Palace Car Exchange: 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.
RTC: Found Nostradamus liable and ordered him to pay the Domingos actual, moral and exemplary damages plus
appearance and attorney's fees. In conformity with the law on equity and in accordance with the ruling in First Malayan
Lending and Finance Corporation v. Court of Appeals, Albert Jaucian is hereby ordered to indemnify Nostradamus
Villanueva for whatever amount the latter is hereby ordered to pay under the judgment.
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:
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?
SC: Yes. The registered owner of any vehicle is directly and primarily responsible to the public and third persons while it is
being operated.
1957 case of Erezo v. Jepte (RATIONALE): 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 may not recover whatever amount he had
paid by virtue of his liability to third persons from the person to whom he had actually sold, assigned or conveyed the
vehicle.
Under the same principle, the registered owner of any vehicle, even if not used for a public service, should primarily be
responsible to the public or to third persons for injuries caused the latter while the vehicle is being driven on the highways
or streets. There is a presumption that the owner of the guilty vehicle is the defendant-appellant as he is the registered
owner in the Motor Vehicles Office.
The Revised Motor Vehicle Law (Act No. 3992, as amended) provides that no vehicle may be used or operated upon any
public highway unless the same is properly registered. It has been stated that the system of licensing and the requirement
that each machine must carry a registration number, conspicuously displayed, is one of the precautions taken to reduce
the danger of injury to pedestrians and other travelers from the careless management of automobiles. And to furnish a
means of ascertaining the identity of persons violating the laws and ordinances, regulating the speed and operation of
machines upon the highways. Not only are vehicles to be registered and that no motor vehicles are to be used or operated
without being properly registered for the current year, but that dealers in motor vehicles shall furnish the Motor Vehicles
Office a report showing the name and address of each purchaser of motor vehicle during the previous month and the
manufacturer's serial number and motor number. (Section 5(c), Act No. 3992, as amended.)
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, 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 therefore can be fixed
on a definite individual, the registered owner.
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 "share and delusion," if courts would entertain such defenses as that put forward by
appellee in this case.
Can 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 by and lay the same on the person actually owning the vehicle? 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.
Petitioner insists that he is not liable for damages since the driver of the vehicle at the time of the accident was not an
authorized driver of the new (actual) owner of the vehicle.
SC: 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.
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.
[Duavit v. CA: 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.]
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.
Finally, the issue of whether or not the driver of the vehicle during the accident was authorized is not at all relevant to
determining the liability of the registered owner. This must be so if we are to comply with the rationale and principle
behind the registration requirement under the motor vehicle law.
G.R. No. 209969, September 27, 2017
JOSE SANICO AND VICENTE CASTRO v. WERHERLINA P. COLIPANO
CAGUIOA, J.:
Werherlina Colipano: filed a complaint for breach of contract of carriage and damages against Jose Sanico and Vicente
Castro. In her complaint, Colipano claimed that on December 25, 1993, she and her daughter were paying passengers in
the jeepney operated by Sanico, which was driven by Castro. Colipano was made to sit on an empty beer case at the edge
of the rear entrance of the jeepney with her sleeping child on her lap. At an uphill incline in the road to Natimao-an,
Carmen, Cebu, the jeepney slid backwards because it did not have the power to reach the top. Colipano pushed both her
feet against the step board to prevent herself and her child from being thrown out of the exit, but because the step board
was wet, her left foot slipped and got crushed between the step board and a coconut tree which the jeepney bumped.
Colipano's leg was badly injured and was eventually amputated. Colipano prayed for actual damages, loss of income, moral
damages, exemplary damages, and attorney's fees.

Sanico and Castro: admitted that Colipano's leg was crushed and amputated but claimed that it was Colipano's fault that
her leg was crushed. They admitted that the jeepney slid backwards because the jeepney lost power. The conductor then
instructed everyone not to panic but Colipano tried to disembark and her foot got caught in between the step board and
the coconut tree.Sanico claimed that he paid for all the hospital and medical expenses of Colipano, and that Colipano
eventually freely and voluntarily executed an Affidavit of Desistance and Release of Claim.

RTC: found that Sanico and Castro breached the contract of carriage between them and Colipano but only awarded actual
and compensatory damages in favor of Colipano, in the amount of P2,098.80; and P360,000.00, respectively.
CA: AFFIRMED with MODIFICATION the award for compensatory damages for loss of income in the RTC decision to
P200,000.

ISSUES:
a. Whether Sanico and Castro breached the contract of carriage with Colipano;
b. Whether the Affidavit of Desistance and Release of Claim is binding on Colipano; and
c. Whether the CA erred in the amount of damages awarded.

SC: Only Sanico breached the contract of carriage. It is beyond dispute that Colipano was injured while she was a
passenger in the jeepney owned and operated by Sanico that was being driven by Castro. Both the CA and RTC found
Sanico and Castro jointly and severally liable. This, however, is erroneous because only Sanico was the party to the
contract of carriage with Colipano. Since the cause of action is based on a breach of a contract of carriage, the liability of
Sanico is direct [and immediate] as the contract is between him and Colipano. Castro, being merely the driver of Sanico's
jeepney, cannot be made liable as he is not a party to the contract of carriage.

Soberano v. Manila Railroad Co.: a complaint for breach of a contract of carriage is dismissible as against the employee
who was driving the bus because the parties to the contract of carriage are only the passenger, the bus owner, and the
operator.
Since Castro was not a party to the contract of carriage, Colipano had no cause of action against him and the complaint
against him should be dismissed. Although he was driving the jeepney, he was a mere employee of Sanico, who was the
operator and owner of the jeepney. The obligation to carry Colipano safely to her destination was with Sanico. In fact, the
elements of a contract of carriage existed between Colipano and Sanico: consent, as shown when Castro, as employee of
Sanico, accepted Colipano as a passenger when he allowed Colipano to board the jeepney, and as to Colipano, when she
boarded the jeepney; cause or consideration, when Colipano, for her part, paid her fare; and, object, the transportation of
Colipano from the place of departure to the place of destination.
Sanico is liable as operator and owner of a common carrier. Specific to a contract of carriage, the Civil Code requires
common carriers to observe extraordinary diligence in safely transporting their passengers.
ART. 1733. Common carriers, by the nature of their business and for reasons of public policy, are bound to observe
extraordinary diligence in the vigilance over the goods and for the safety of the passengers transported by them, according
to all the circumstances of each case.

Such extraordinary diligence in the vigilance over the goods is further expressed in Articles 1734, 1735 and 1745, Nos. 5, 6,
and 7, while the extraordinary diligence for the safety of the passengers is further set forth in Articles 1755 and 1756.
This extraordinary diligence, following Article 1755 of the Civil Code, means that common carriers have the obligation 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.

In case of death of or injury to their passengers, Article 1756 of the Civil Code provides that common carriers are
presumed to have been at fault or negligent, and this presumption can be overcome only by proof of the extraordinary
diligence exercised to ensure the safety of the passengers. Being an operator and owner of a common carrier, Sanico was
required to observe extraordinary diligence in safely transporting Colipano. When Colipano's leg was injured while she was
a passenger in Sanico's jeepney, the presumption of fault or negligence on Sanico's part arose and he had the burden to
prove that he exercised the extraordinary diligence required of him. He failed to do this.
For the driver, Vicente Castro, to allow a seat extension made of an empty case of beer clearly indicates lack of prudence.
Permitting Werherlina to occupy an improvised seat in the rear portion of the jeepney, with a child on her lap to boot,
exposed her and her child in a peril greater than that to which the other passengers were exposed. The defense of engine
failure, instead of exonerating Sanico, only aggravated his already precarious position.26 The engine failure "hinted lack of
regular check and maintenance to ensure that the engine is at its best, considering that the jeepney regularly passes
through a mountainous area.
Further, common carriers may also be liable for damages when they contravene the tenor of their obligations. ART. 1170.
Those who in the performance of their obligations are guilty of fraud, negligence, or delay, and those who in any
manner contravene the tenor thereof, are liable for damages. There is no question here that making Colipano sit on the
empty beer case was a clear showing of how Sanico contravened the tenor of his obligation to safely transport Colipano
from the place of departure to the place of destination 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.

Sanico's attempt to evade liability by arguing that he exercised extraordinary diligence when he hired; Castro, who was
allegedly an experienced and time-tested driver, whom he had even accompanied on a test-drive and in whom he was
personally convinced of the driving skills, are not enough to exonerate him from liability - because the liability of 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. 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. The only defenses available to common carriers are (1) proof
that they observed extraordinary diligence as prescribed in Article 1756, 31 and (2) following Article 1174 of the Civil Code,
proof that the injury or death was brought about by an event which "could not be foreseen, or which, though foreseen,
were inevitable," or a fortuitous event. The Court finds that neither of these defenses obtain. Thus, Sanico is liable for
damages to Colipano because of the injury that Colipano suffered as a passenger of Sanico's jeepney.

The Affidavit of Desistance and Release of Claim is void.

Sanico cannot be exonerated from liability under the Affidavit of Desistance and Release of Claim and his payment of the
hospital and medical bills of Colipano amounting to P44,900. The Affidavit of Desistance and Release of Claim is not
binding on [Colipano] in the absence of proof that the contents thereof were sufficiently translated and explained to her."
It is clear from the plaintiffs circumstances that she is not able to understand English, more so stipulations stated in the
said Affidavit and Release. It is understandable that in her pressing need, the plaintiff may have been easily convinced to
sign the document with the promise that she will be compensated for her injuries.35
For there to be a valid waiver, the following requisites are essential: (1) that the person making the waiver possesses the
right, (2) that he has the capacity and power to dispose of the right, (3) that the waiver must be clear and unequivocal
although it may be made expressly or impliedly, and (4) that the waiver is not contrary to law, public policy, public order,
morals, good customs or prejudicial to a third person with a right recognized by law. While the first two requirements can
be said to exist in this case, the third and fourth requirements are, however, lacking.
For the waiver to be clear and unequivocal, the person waiving the right should understand what she is waiving and the
effect of such waiver. Both the CA and RTC made the factual deitermination that Colipano was not able to understand
English and that there was no proof that the documents and their contents and effects were explained to her. Colipano
could not have clearly and unequivocally waived her right to claim damages when she had no understanding of the right
she was waiving and the extent of that right. Worse, she was made to sign a document written in a language she did not
understand.

The fourth requirement for a valid waiver is also lacking as the waiver, based on the attendant facts, can only be construed
as contrary to public policy.
Gatchalian v. Delim: Finally, because what is involved here is the liability of a common carrier for injuries sustained by
passengers in respect of whose safety a common carrier must exercise extraordinary diligence, we must construe any such
purported waiver most strictly against the common carrier. For a waiver to be valid and effective, it must not be contrary to
law, morals, public policy or good customs. To uphold a supposed waiver of any right to claim damages by an injured
passenger, under circumstances like those exhibited in this case, would be to dilute and weaken the standard of
extraordinary diligence exacted by the law from common carriers and hence to render that standard unenforceable. We
believe such a purported waiver is offensive to public policy.
"Public policy refers to the aims of the state to promote the social and general well-being of the inhabitants." The Civil
Code requires extraordinary diligence from common carriers because the nature of their business requires the public to
put their safety and lives in the hands of these common carriers. The State imposes this extraordinary diligence to promote
the well-being of the public who avail themselves of the services of common carriers. Thus, in instances of injury or death,
a waiver of the right to claim damages is strictly construed against the common carrier so as not to dilute or weaken the
public policy behind the required standard of extraordinary diligence.
Colipano testified that she did not understand the document she signed.45 She also did not understand the nature and
extent of her waiver as the content of the document was not explained to her.46 The waiver is therefore void because it is
contrary to public policy. Waivers executed under similar circumstances are indeed contrary to public policy and are
void.48 To uphold waivers taken from injured passengers who have no knowledge of their entitlement under the law and
the extent of liability of common carriers would indeed dilute the extraordinary diligence required from common carriers,
and contravene a public policy reflected in the Civil Code.

By virtue of their negligence, defendants-appellants are liable to pay Werherlina compensatory damages for loss of earning
capacity. In arriving at the proper amount, the Supreme Court has consistently used the following formula:
Net Earning Capacity = Life Expectancy x [Gross Annual Income - Living Expenses (50% of gross annual income)] where life
expectancy= 2/3 (80 - the age of the deceased).
The award of the sum of P200,000.00 as compensatory damages for loss of earning capacity is in order, notwithstanding
the objections of defendants-appellants with respect to lack of evidence on Werherlina's age and annual income.
Sanico argues that Colipano failed to present documentary evidence to support her age and her income, so that her
testimony is self-serving and that there was no basis for the award of compensatory damages in her favor. Sanico is gravely
mistaken. "Self-serving evidence" is not to be taken literally to mean any evidence that serves its proponent's interest. The
term, if used with any legal sense, refers only to acts or declarations made by a party in his own interest at some place and
time out of court, and it does not include testimony that he gives as a witness in court. Evidence of this sort is excluded on
the same ground as any hearsay evidence, that is, lack of opportunity for cross-examination by the adverse party and on
the consideration that its admission would open the door to fraud and fabrication. In contrast, a party's testimony in court
is sworn and subject to cross-examination by the other party, and therefore, not susceptible to an objection on the ground
that it is self-serving.
Colipano was subjected to cross-examination and both the RTC and CA believed her testimony on her age and annual
income. In fact, as these are questions of facts, these findings of the RTC and CA are likewise binding on the Court. Further,
although as a general rule, documentary evidence is required to prove loss of earning capacity, Colipano's testimony on
her annual earnings of P12,000.00 is an allowed exception.
By way of exception, damages for loss of earning capacity may be awarded despite the absence of documentary evidence
when (1) the deceased is self-employed earning less than the minimum wage under current labor laws, and judicial notice
may be taken of the fact that in the deceased's line of work no documentary evidence is available; or (2) the deceased is
employed as a daily wage worker earning less than the minimum wage under current labor laws. 55
The CA applied the correct formula for computing the loss of Colipano's earning capacity. However, the CA erred when it
used Colipano's age at the time she testified as basis for computing the loss of earning capacity. 57 The loss of earning
capacity commenced when Colipano's leg was crushed on December 25, 1993. Given that Colipano was 30 years old when
she testified on October 14, 1997, she was roughly 27 years old on December 25, 1993 when the injury was sustained.
Following the foregoing formula, the net earning capacity of Colipano is P212,000.00. 58

Sanico is liable to pay interest. Under Article 2210 of the Civil Code, "[i]nterest may, in the discretion of the court, be
allowed upon damages awarded for breach of contract." Here, given the gravity of the breach of the contract of carriage
causing the serious injury to the leg of Colipano that resulted in its amputation, the Court deems it just and equitable to
award interest from the date of the RTC decision.
G.R. No. 162267 July 4, 2008
PCI LEASING AND FINANCE, INC. vs. UCPB GENERAL INSURANCE CO., INC.
AUSTRIA-MARTINEZ, J.:
United Coconut Planters Bank: owner of a Mitsubishi Lancer car, insured with UCPB General Insurance Inc. One night,
while the car, then driven by Flaviano Isaac with Conrado Geronimo, the Asst. Manager of said bank, along the Laurel
Highway in Lipa City, the car was hit and bumped by an 18-wheeler Fuso Tanker Truck, owned by PCI Leasing & Finance,
Inc. allegedly leased to and operated by Superior Gas & Equitable Co., Inc. (SUGECO) and driven by its employee, 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 Gonzaga continued on its way to its destination and did
not bother to bring his victims to the hospital. UCPB General Insurance Inc. 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 UCPB General Insurance Inc. for the payment of the aforesaid
amounts. However, no payment was made. Thus, UCPB General Insurance Inc. filed the instant case on March 13, 1991.
PCI Leasing and Finance, Inc.: argued 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 SUGECO. In fact, it was SUGECO, and not PCI Leasing, that was
the actual operator of the truck, pursuant to a Contract of Lease signed by PCI Leasing and SUGECO. PCI Leasing, however,
admitted that it was the owner of the truck in question.
RTC: rendered judgment in favor of UCPB General Insurance, ordering PCI Leasing 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; andP20,000.00 as costs of suit.
CA: affirmed the RTC's decision, with modification that the award of attorney's fees is deleted and the rate of interest shall
be 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.
ISSUE: 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.
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.
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.
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.
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. 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. This being the case, even if a sale has been executed before a tortious incident, the sale, if unregistered, has no
effect as to the right of the public and third persons to recover from the registered owner. The public has the right to
conclusively presume that the registered owner is the real owner, and may sue accordingly.
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.
ISSUE: 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.
Financial lease or Financing lease: 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 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 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.
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. The petition adds that these developments have been legislated in our jurisdiction in Republic Act (R.A.)
No. 8556, 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.
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. x x x x
(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.
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. 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. 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.
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.
G.R. No. 142305 December 10, 2003
SINGAPORE AIRLINES LIMITED vs. ANDION FERNANDEZ
CALLEJO, SR., J.:
Andion Fernandez: is an acclaimed soprano here in the Philippines and abroad. At the time of the incident, she was
studying in Germany, pursuing a Master’s Degree in Music. She was invited to sing before the King and Queen of Malaysia
on February 3 and 4, 1991. For this engagement, an airline passage ticket was purchased from Singapore Airlines which
would transport her to Manila from Frankfurt, Germany on January 28, 1991. From Manila, she would proceed to Malaysia
on the next day. It was necessary for Fernandez to pass by Manila in order to gather her wardrobe; and to rehearse and
coordinate with her pianist her repertoire for the aforesaid performance.
Singapore Airlines: issued Fernandez a Singapore Airlines ticket for Flight No. SQ 27, leaving Frankfurt, Germany on
January 27, 1991 bound for Singapore with onward connections from Singapore to Manila. Flight No. SQ 27 was scheduled
to leave Frankfurt at 1:45 PM of January 27, 1991, arriving at Singapore at 8:50 AM of January 28, 1991. The connecting
flight from Singapore to Manila, Flight No. SQ 72, was leaving Singapore at 11:00 AM of January 28, 1991.
On January 27, 1991, Flight No. SQ 27 left Frankfurt but arrived in Singapore two hours late. By then, the aircraft bound for
Manila had left as scheduled, leaving Fernandez and about 25 other passengers stranded in Singapore. Upon
disembarkation at Singapore, Fernandez was informed that there were no more flights to Manila for that day. She was told
that she can fly to Hong Kong going to Manila but since her ticket was non-transferable, she would have to pay for the
ticket. Fernandez could not accept the offer because she had no money to pay for it. Her pleas for the respondent to make
arrangements to transport her to Manila were unheeded. Fernandez was able to contact a family friend who picked her
up from the airport for her overnight stay in Singapore.
The next day, Fernandez proceeded to Singapore Airlines’ counter which says: "Immediate Attention To Passengers with
Immediate 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: "Can’t you see I am doing something." She
explained her predicament but the male employee uncaringly retorted: "It’s your problem, not ours."
Fernandez never made it to Manila and was forced to take a direct flight from Singapore to Malaysia on January 29, 1991,
through the efforts of her mother and travel agency in Manila. Her mother also had to travel to Malaysia bringing with her
the wardrobe and personal things needed for the performance that caused them to incur an expense of about P50,000.
Because of the rude and unkind treatment she received from Singapore Airlines’ personnel in Singapore, Fernandez was
engulfed with fear, anxiety, humiliation and embarrassment causing her to suffer mental fatigue and skin rashes. She was
thereby compelled to seek immediate medical attention upon her return to Manila for "acute urticaria."
RTC: rendered a decision in favor of FERNANDEZ, and ordered Singapore Airlines to pay the former P50,000 as
compensatory or actual damages; P250,000 as moral damages ; P100,000 as exemplary damages; P75,000 as attorney’s
fees; and To pay the costs of suit.
CA: affirmed the decision of the RTC.
Singapore Airlines: 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 its control. Inclement weather prevented its 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 Fernandez arrived in Singapore two hours behind schedule. 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.
It 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 Fernandez. They were automatically booked to the flight the next day and gave
them free hotel accommodations for the night. It was Fernandez who did not take the offer and opted to stay with a family
friend in Singapore.
ISSUES: W/N Singapore Airlines exercised the extraordinary diligence required by law under the given circumstances,
since the delay of Flight No. SQ 27 from Frankfurt to Singapore was due to a fortuitous event
HELD: NOPE. The defense that the delay was due to fortuitous events and beyond petitioner’s control is unavailing.
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.
In an action for breach of contract of carriage, the aggrieved party does not have to prove that the common carrier was at
fault or was negligent. All that is necessary to prove is the existence of the contract and the fact of its non-performance by
the carrier. In the case at bar, it is undisputed that the respondent carried a confirmed ticket for the two-legged trip from
Frankfurt to Manila: 1) Frankfurt-Singapore; and 2) Singapore-Manila. In her contract of carriage with the petitioner, the
respondent certainly expected that she would fly to Manila on Flight No. SQ 72 on January 28, 1991. Since Singapore
Airlines did not transport Fernandez as covenanted by it on said terms, Singapore Airlines clearly breached its contract of
carriage with Fernandez, and the latter had every right to sue Singapore Airlines for this breach.
PAL vs. CA: .... 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, PAL is deemed
to be equipped to deal with situations as in the case at bar. 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 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:
(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 pointed out above, delay is normal in commercial air transportation" (RTC Decision, p. 22); or
(b) Petitioner airlines could have carried her on one of its flights bound for 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.
Knowing the predicament of the respondent, petitioner did not offer to shoulder the cost of the ticket for that flight; or
(c) A passenger such as the plaintiff could have been accommodated in another international airline such as Lufthansa to bring the plaintiff to
Singapore early enough from Frankfurt provided that there was prior communication from that station to enable her to catch the connecting
flight to Manila because of the urgency of her business in Manila…

The petitioner’s diligence in communicating to its passengers the consequences of the delay in their flights was wanting. It
maybe that delay in the take off and arrival of commercial aircraft could not be avoided and may be caused by diverse
factors such as those testified to by defendant’s pilot. However, knowing fully well that even before the plaintiff boarded
defendant’s Jumbo aircraft in Frankfurt bound for Singapore, it has already incurred a delay of two hours. Nevertheless,
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 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 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.
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.
When a passenger contracts for a specific flight, he has a purpose in making that choice 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. For petitioner’s failure to bring the respondent to her destination, as scheduled, we find the petitioner clearly
liable for the breach of its contract of carriage with the respondent.
We are convinced that the petitioner acted in bad faith. Bad faith means a breach of known duty through some motive of
interest or ill will. Self-enrichment or fraternal interest, and not personal ill will, may well have been the motive; but it is
malice nevertheless. Article 2232 of the Civil Code provides that in a contractual or quasi-contractual relationship,
exemplary damages may be awarded only if the defendant had acted in a "wanton, fraudulent, reckless, oppressive or
malevolent manner." In this case, petitioner’s employees acted in a wanton, oppressive or malevolent manner. The award
of exemplary damages is, therefore, warranted in this case.
G.R. No. 161730 January 28, 2005
JAPAN AIRLINES vs. MICHAEL ASUNCION and JEANETTE ASUNCION
YNARES-SANTIAGO, J.:
Michael and Jeanette Asuncion: left Manila on board Japan Airlines’ 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, Noriko Etou-Higuchi of
JAL endorsed their applications for shore pass and directed them to the Japanese immigration official. A shore pass is
required of a foreigner aboard a vessel or aircraft who desires to stay in the neighborhood of the port of call for not more
than 72 hours. During the interview, the Japanese immigration official noted that Michael appeared shorter than his height
as indicated in his passport. Because of this inconsistency, the Asuncions were denied shore pass entries and were brought
instead to the Narita Airport Rest House where they were billeted overnight, until their departure the following day for Los
Angeles. The Asuncions were charged $400 each for their accommodation, security service and meals. They filed a
complaint for damages claiming that JAL did not fully apprise them of their travel requirements and that they were
rudely and forcibly detained at Narita Airport.
JAL: denied the allegations. 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 the Asuncions be billeted at Hotel Nikko instead of the airport resthouse.
RTC: rendered judgment in favor of the Asuncions, ordering JAL to pay $800 representing the expenses incurred at the
Narita Airport; P200,000.00 for each plaintiff as moral damages; P100,000 for each plaintiff as exemplary damages;
P100,000 as attorney’s fees; and costs of suit.The trial court dismissed JAL’s counterclaim for litigation expenses, exemplary
damages and attorney’s fees
CA: affirmed the decision of the trial court.
ISSUE: W/N JAL is guilty of breach of contract.
SC: NO. 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. 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.
DOCTRINE: 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 the 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.
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 Narita. They imputed that JAL did not exhaust all means to
prevent the denial of their shore pass entry applications. To reiterate, JAL or any of its representatives have no authority
to interfere with or influence the immigration authorities. The most that could be expected of JAL is to endorse
respondents’ applications, which Higuchi did immediately upon their arrival in Narita.
Moral damages may be recovered in cases where one willfully causes injury to property, or in cases of breach of contract
where the other party acts fraudulently or in bad faith. Exemplary damages are imposed by way of example or correction
for the public good, when the party to a contract acts in wanton, fraudulent, oppressive or malevolent manner. Attorney’s
fees are allowed when exemplary damages are awarded and when the party to a suit is compelled to incur expenses to
protect his interest. 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 $800. 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.
G.R. No. L-22272 June 26, 1967
ANTONIA MARANAN vs. PASCUAL PEREZ, ET AL.
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.
Simeon Valenzuela: was prosecuted for homicide in the CFI of Batangas. Found guilty, he was sentenced to suffer
imprisonment and to indemnify the heirs of the deceased in the sum of P6,000. While appeal for the conviction was
pending in the Court of Appeals, Antonia Maranan, Rogelio's mother, filed an action in the CFI of Batangas to recover
damages from Perez and Valenzuela for the death of her son.
Pascual Perez, et. al.: asserted that Corachea was killed in self-defense, since he first assaulted Valenzuela by stabbing him
from behind. Perez further claimed that the death was a caso fortuito for which the carrier was not liable.
CFI: found for Antonia Maranan and awarded her P3,000 as damages against Perez. The claim against Valenzuela was
dismissed. From this ruling, both Maranan and Perez appealed to SC, Maranan asking for more damages and Perez
insisting on non-liability.
CA: affirmed the judgment of conviction earlier mentioned, during the pendency of the herein appeal, and such eventually
became final.
Gillaco v. Manila Railroad Co.: 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.
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. 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. . .

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 willful 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 Carriersare new and were taken from Anglo-American Law. There, 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.
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.
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. The carrier's liability here is absolute in the sense that it practically secures the
passengers from assaults committed by its own employees.
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, and Haver v. Central Railroad Co.: (1) the special undertaking of the carrier
requires that it furnish its passenger that full measure of protection afforded by the exercise of the high degree of care
prescribed by the law, inter alia from violence and insults at the hands of strangers and other passengers, but above all,
from the acts of the carrier's own servants charged with the passenger's safety; (2) said liability of the carrier for the
servant's violation of duty to passengers, is the result of the 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 Valenzuela was also correct. The action
was predicated on breach of contract of carriage and the cab driver was not a party thereto. His civil liability is covered in
the criminal case wherein he was convicted by final judgment.
In connection with the award of damages, the court a quo granted only P3,000 to Marana. 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, 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. 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.
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.

G.R. No. L-31379 August 29, 1988

COMPAÑIA MARITIMA vs. COURT OF APPEALS and VICENTE CONCEPCION
FERNAN, C.J.:
Vicente Concepcion: a civil engineer doing business under the name and style of Consolidated Construction with office
address in Manila, had a contract with the Civil Aeronautics Administration (CAA) sometime in 1964 for the construction
of the airport in Cagayan de Oro City Misamis Oriental. Being a Manila-based contractor, Concepcion had to ship his
construction equipment to CDO. Having shipped some of his equipment through Compañia Maritima, Concepcion
negotiated anew with it, thru its collector, Pacifico Fernandez, for the shipment to CDO City of one payloader, four 6x6 Reo
trucks and two pieces of water tanks. He was issued a Bill of Lading on the same date.
When the equipments arrived at CDO, the Reo trucks and water tanks were safely unloaded, but while the payloader was
about two meters above the pier in the course of unloading, the swivel pin of the heel block of the port block of Hatch No.
2 gave way, causing the payloader to fall. The payloader was damaged and was thereafter taken to Compañia Maritima’s
compound in Cagayan de Oro City. Thus, Consolidated Construction,wrote Compañia Maritima to replace the payloader
and notified it of its claim for damages. Unable to elicit response, the demand was repeated in a letter.
Compañia Maritima: shipped the payloader to Manila where it was weighed at the San Miguel Corporation. Finding that
the payloader weighed 7.5 tons and not 2.5 tons as declared in the Bill of Lading, Compañia Maritima denied the claim for
damages of Consolidated Construction, contending that had Concepcion declared the actual weight of the payloader,
damage to their ship as well as to his payloader could have been prevented. To replace the damaged payloader,
Consolidated Construction in the meantime bought a new one at P45,000 from Bormaheco Inc., while Concepcion filed an
action for damages against Compañia Maritima with CFI Manila.
CFI of Manila: dismissed the complaint with costs against Concepcion, stating that the proximate cause of the fall of the
payloader was. Concepcion's act or omission in having misrepresented the weight of the payloader as 2.5 tons 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.
CA: reversed the judgment of the RTC, and ordered Compañia Maritima to pay Concepcion P24,652.07 with legal interest;
the payloader is declared abandoned to defendant; costs against the latter.
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.

Compañia Maritima: claims absolute exemption under this provision upon the reasoning that Concepcion'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. Concepcion had led petitioner's officer to
believe that the same was within the 5 tons capacity of the heel block of Hatch No. 2. Compañia Maritima would thus
insist that the proximate and only cause of the damage to the payloader was Concepcion’s alleged misrepresentation of
the weight of the machinery in question; hence, any resultant damage to it must be borne by Concepcion.
ISSUE: Whether or not the act of Concepcion in furnishing 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 Payloader, ,
as would absolutely exempt Compañia Maritima from liability for damages under Article 1734(3) of the Civil Code
SC: NOPE. Compania Maritima 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.
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. 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.
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." Under Article 1736, 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 Compania Maritima failed to take the necessary and adequate precautions for avoiding damage to, or destruction
of, the payloader entrusted to it for safe carriage and delivery to CDO, it cannot be reasonably concluded that the damage
caused to the payloader was due to the alleged misrepresentation of Concepcion as to the correct and accurate weight of
the payloader. As found by the Court of Appeals, the fact is that Compania Maritima used a 5-ton capacity lifting apparatus
to lift and unload a visibly heavy cargo like a payloader. Concepcion has, likewise, sufficiently established the laxity and
carelessness of Compania Maritima’s crew in their methods of ascertaining the weight of heavy cargoes offered for
shipment before loading and unloading them, as is customary among careful persons.
It must be noted that the weight submitted by Concepcion as an addendum to the original enumeration of equipment to
be shipped was entered into the bill of lading by Compania Maritima, thru Pacifico Fernandez, a company collector,
without seeing the equipment to be shipped. The weights stated in a bill of lading are prima facie evidence of the
amount received and the fact that the weighing was done by another will not relieve the common carrier where it
accepted such weight and entered it on the bill of lading. Besides, common carriers can protect themselves against
mistakes in the bill of lading as to weight by exercising diligence before issuing the same.
While Compania Maritima has proven that Concepcion did furnish it with an inaccurate weight of the payloader, Compania
Maritima 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. 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, Felix Pisang, who is tasked with the over-all supervision of loading and unloading heavy
cargoes . Acknowledging that there was a "jumbo" in the MV Cebu which has the capacity of lifting 20 to 25 ton cargoes,
Mr. Felix Pisang chose not to use it, because according to him, since the ordinary boom has a capacity of 5 tons while the
payloader was only 2.5 tons, he did not bother to use the "jumbo" anymore.
In that sense, therefore, Concepcion’s act of furnishing an inaccurate weight of the payloader upon being asked by the
collector, cannot be used as an excuse to avoid liability for the damage caused, as the same could have been avoided had
Compania Maritima 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 Compania Maritima.
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 was valued at P34,000, 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 plus an additional
deduction of P228.63 representing the freight charges for the undeclared weight of 5 tons (difference between 7.5 and 2.5
tons) leaving, therefore, a final recoverable amount of damages of P24,652.97 due to Concepcion.

[G.R. No. 157009 : March 17, 2010]

SULPICIO LINES, INC., VS. DOMINGO CURSO, et. al.
BERSAMIN, J.:
Dr. Cenon Curso: boarded at the port of Manila the MV Doña Marilyn, an inter-island vessel owned and operated by
Sulpicio Lines, Inc., bound for Tacloban City. Unfortunately, the MV Doña Marilyn sank in the afternoon of October 24,
1988 while at sea due to the inclement sea and weather conditions brought about by Typhoon Unsang. The body of Dr.
Curso was not recovered, along with hundreds of other passengers of the ill-fated vessel. At the time of his death, Dr.
Curso was 48 years old, and employed as a resident physician at the Naval District Hospital in Naval, Biliran. He had a basic
monthly salary of P3,940, and would have retired from government service by December 20, 2004 at the age of 65.
Domingo Curso, et. al.: allegedly the surviving brothers and sisters of Dr. Curso. They sued Sulpicio Lines, Inc. in the RTC to
claim damages based on breach of contract of carriage by sea, averring that Sulpicio Lines, Inc. 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. As such, they were Dr. Curso's surviving heirs and successors in interest entitled to
recover moral and other damages. They prayed for judgment, as follows: (a) compensatory damages of P1,924,809.00; (b)
moral damages of P100,000.00; (c) exemplary or corrective damages in the amount deemed proper and just; (d) expenses
of litigation of at least P50,000.00; (e) attorney's fees of P50,000.00; and (f) costs of suit.
Sulpicio Lines, Inc.: 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.
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.
CA: rendered judgment reversing the ruling of the RTC. It found Sulpicio Lines, Inc, to have been negligent in transporting
Cenon Curso, and ordered it to pay the heirs of Curso: Death indemnity in the amount of P50,000; Loss of Earning Capacity
in the amount of P504,241; (3) Moral Damages in the amount of P100,000; and (4) Costs of the suit. CA 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. 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.
Sulpicio Lines, Inc.: 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; It disregarded Article 1764 and Article 2206 of the Civil
Code, and the ruling in Receiver for North Negros Sugar Co., Inc. v. Ybañez, whereby SC 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.
ISSUE: W/N collateral relatives, such as the brothers and sisters of a deceased passenger, in a case of breach of contract
of carriage, are entitled to an award of moral damages against the carrier?
SC: NO. 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, in accordance with Article 1764, in relation to Article 2206 (3), of the Civil
Code. Article 2206 shall also apply to the death of a passenger caused by the breach of contract by a common carrier.
Article 1764. Damages in cases comprised in this Section shall be awarded in accordance with Title XVIII of this Book, concerning Damages.
Article 2206. The amount of damages for death caused by a crime or quasi-delict shall be at least P3,000, 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.

DOCTRINE: 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.
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. 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, 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, the conditions for awarding moral damages are: (a) there must be an injury,
whether physical, mental, or psychological, clearly substantiated by the claimant; (b) there must be a culpable act or
omission factually established; (c) the wrongful act or omission of the defendant must be the proximate cause of the injury
sustained by the claimant; and (d) the award of damages is predicated on any of the cases stated in Article 2219 of the
Civil Code.
To be entitled to moral damages, the respondents must have a right based upon law. It is true that under Article 1003 14 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:
(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.
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
question 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. 16Article
2206 of the Civil Code entitles the descendants, ascendants, illegitimate children, and surviving spouse of the deceased
passenger to demand moral damages for mental anguish by reason of the death of the deceased. 17

G.R. No. 171092 March 15, 2010

EDNA DIAGO LHUILLIER vs. BRITISH AIRWAYS
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.
Edna Diago Lhuillier: took British Airways’ flight 548 from London, United Kingdom to Rome, Italy. Once on board, she
requested Julian Halliday, one of the 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!" She further alleged that when the plane was about to land in Rome,
Italy, another flight attendant, Nickolas Kerrigan, singled her out from among all the passengers in the business class
section to lecture on plane safety. Affronted, she 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, she complained to the ground manager
and demanded an apology. However, the latter declared that the flight stewards were "only doing their job." Thus, she
filed the complaint for damages, praying that British Airways be ordered to pay ₱5 million as moral damages, ₱2 million as
nominal damages, ₱1 million as exemplary damages, ₱300,000 as attorney’s fees, ₱200,000 as litigation expenses, and
cost of the suit.
British Airways: filed a Motion to Dismiss on grounds of lack of jurisdiction over the case and over the person of the
respondent. Respondent alleged that only the courts of London, United Kingdom or Rome, Italy, have jurisdiction over the
complaint for damages pursuant to the Warsaw Convention, Article 28(1) 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) British Airways is domiciled in London; b) British Airways’ principal place of business is in
London; c) Lhuillier bought her ticket in Italy (through Jeepney Travel S.A.S, in Rome); and d) Rome, Italy is Lhuillier’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.
RTC: granting British Airways’ Motion to Dismiss. RTC held that 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 is to be instituted, as provided for under Article 28(1) thereof. 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. Since the Philippines is not the place of domicile of British Airways 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.
LHUILLLIER: argues that her cause of action arose not from the contract of carriage, but from the tortious conduct
committed by airline personnel of British Airways 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, she asserts that she has the option to pursue this case
in this jurisdiction pursuant to Philippine laws.
British Airways: 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.
ISSUES:
I. W/N 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.
HELD: NO, the RTC of Makati does not have jurisdiction over the case filed by the petitioner.
Santos III v. Northwest Orient Airlines: 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.
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.

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". In the case at bench, Lhullier’s place of
departure was London, United Kingdom while her place of destination was Rome, Italy. Both the United Kingdom and
Italy signed and ratified the Warsaw Convention. As such, the transport of the petitioner is deemed to be an "international
carriage" within the contemplation of the Warsaw Convention. Since the Warsaw Convention applies in the instant case,
then the jurisdiction over the subject matter of the action is governed by the provisions of the Warsaw Convention.
Under Article 28(1) of the Warsaw Convention, the plaintiff may bring the action for damages before –

1. the court where the carrier is domiciled; [London, United Kingdom]

2. the court where the carrier has its principal place of business; [ London]

3. the court where the carrier has an establishment by which the contract has been made; or [Ticket issued in Rome, Italy]

4. the court of the place of destination. [Rome, Italy]

Article 28(1) of the Warsaw Convention is jurisdictional in character, not a venue provision. 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.
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. Tortious conduct as ground for the petitioner’s complaint is within
the purview of the Warsaw Convention.
II. W/N British Airways, 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.
SC: NO. 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. Special Appearance to Question a Court’s Jurisdiction
Is Not Voluntary Appearance. 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 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.
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.
G.R. No. 213418, September 21, 2016
ALFREDO RAMOS, et. al. v. CHINA SOUTHERN AIRLINES CO. LTD.
PEREZ, J.:
Alfredo Ramos, et. al.: purchased five China Southern Airlines roundtrip plane tickets from Active Travel Agency for $985.
It is provided in their itineraries that Ramos will be leaving Manila on August 8, 2003 at 9:00am and will be leaving Xiamen
on August 12, 2003 at 7:20PM. When the Ramoses were on their way back to the Manila, they were prevented from taking
their designated flight despite the fact that earlier that day, an agent from Active Tours informed them that their bookings
for China Southern Airlines flight are confirmed.The refusal came after the Ramoses already checked in all their baggages
and were given the corresponding claim stubs and after they had paid the terminal fees. According to the airlines' agent
with whom they spoke at the airport, the Ramoses were merely chance passengers but they may be allowed to join the
flight if they are willing to pay an 500 Yuan per person. When the Ramoses refused to defray the additional cost, their
baggages were offloaded and the plane left without them. Because they have business commitments waiting for them in
Manila, the Ramoses were constrained to go to Hongkong, where they purchased new plane tickets from PAL that flew
them back to Manila.
Active Travel: To avoid lawsuit, it offered to refund the price of the plane tickets but the Ramoses refused. The Ramoses
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, the Ramoses initiated an action for damages before
the RTC of Manila against China Southern Airlines and Active Travel, where the sought for the payment of P87,375 as
actual damages, P500,000 as moral damages, P500,000.00 as exemplary damages and cost of the suit.
China Southern Airlines: denied liability by alleging that petitioners were not confirmed passengers of the airlines but
were merely chance passengers. According to the airlines, it was specifically provided in the issued tickets that petitioners
are required to re-confirm all their bookings at least 72 hours before their scheduled time of departures but they failed to
do so which resulted in the automatic cancellation of their bookings.
RTC: rendered a Decision in favor of the Ramoses and ordered China Southern to pay damages. in the amount of
P692,000: [P]62,000 as actual damages; [P]300,000 as moral damages; [P]300,000 as exemplary damages; and
[P]30,000.00 for attorney's fees.
CA: modified the RTC Decision by deleting the award for moral and exemplary damages. According to the appellate court,
the Ramoses failed to prove that China Southern Airlines' breach of contractual obligation was attended with bad faith.
Where in breaching the contract, the defendant is not shown to have acted fraudulently or in bad faith, liability for
damages is limited to the natural and probable consequences of the breach of the obligation and which the parties had
foreseen or could reasonably have foreseen; and in that case, such liability would not include liability for moral and
exemplary damages.
ISSUE: W/N China Southern Airlines' refusal to let petitioners board the plane was attended by bad faith, thus entitling
the Ramoses to moral and exemplary damages.
SC: YES. A contract of carriage, in this case, air transport, is intended to serve the traveling public and thus, imbued with
public interest. The law governing common carriers consequently imposes an exacting standard of conduct.
1755 of the New Civil Code: A common carrier is bound to carry passengers safely as far as human care and foresight can
provide, using the utmost diligence of very cautious persons, with due regard for all the circumstances."
When an airline issues a ticket to a passenger confirmed on a particular flight, on a certain date, a contract of carriage
arises, and the passenger has every right to expect that he would fly on that flight and on that date. If that does not
happen, then the carrier opens itself to a suit for breach of contract of carriage. In an action based on a breach of contract
of carriage, the aggrieved party does not have to prove that the common carrier was at fault or was negligent. All he has to
prove is the existence of the contract and the fact of its non-performance by the carrier, through the latter's failure to carry
the passenger to its destination.
It is beyond question in the case at bar that the Ramoses had an existing contract of air carriage with China Southern
Airlines as evidenced by the airline tickets issued by Active Travel. The airlines' claim that petitioners do not have
confirmed reservations cannot be given credence by the Court. The petitioners were issued two-way tickets with
itineraries indicating the date and time of their return flight to Manila. These are binding contracts of carriage. China
Southern Airlines allowed petitioners to check in their luggage and issued the necessary claim stubs showing that they
were part of the flight. It was only after petitioners went through all the required check-in procedures that they were
informed by the airlines that they were merely chance passengers. Airlines companies do not, as a practice, accept pieces
of luggage from passengers without confirmed reservations. The foregoing circumstances lead us to the inevitable
conclusion that petitioners were bumped off from the flight.
There is no doubt that petitioners are entitled to actual or compensatory damages. Both the RTC and the CA uniformly
held that there was a breach of contract committed by China Southern Airlines when it failed to deliver petitioners to their
intended destination, a factual finding that we do not intend to depart from in the absence of showing that it is
unsupported by evidence. As the aggrieved parties, petitioners had satisfactorily proven the existence of the contract and
the fact of its non-performance by China Southern Airlines; the concurrence of these elements called for the imposition of
actual or compensatory damages.

With respect to moral damages, the following provision of the New Civil Code is instructive:
Article 2220. Willful injury to property may be a legal ground for awarding moral damages if the court should find that,
under the circumstances, such damages are justly due. The same rule applies to breaches of contract where the defendant
acted fraudulently or in bad faith.
Bad faith does not simply connote bad judgment or negligence. It imports dishonest purpose or some moral obliquity and
conscious doing of a wrong. It means breach of a known duty through some motive, interest or ill will that partakes the
nature of fraud. Bad faith is in essence a question of intention.

Japan Airlines v. Simangan: "Clearly, JAL is liable for moral damages. It is firmly settled that moral damages are recoverable in
suits predicated on breach of a contract of carriage where it is proved that the carrier was guilty of fraud or bad faith, as in this
case. Inattention to and lack of care for the interests of its passengers who are entitled to its utmost consideration, particularly as
to their convenience, amount to bad faith which entitles the passenger to an award of moral damages. What the law considers
as bad faith which may furnish the ground for an award of moral damages would be bad faith in securing the contract and in the
execution thereof, as well as in the enforcement of its terms, or any other kind of deceit."
Applying the foregoing yardstick in the case at bar, We find that the airline company acted in bad faith in insolently
bumping petitioners off the flight after they have completed all the pre-departure routine. Bad faith is evident when the
ground personnel of the airline company unjustly and unreasonably refused to board petitioners to the plane which
compelled them to rent a car and take the train to the nearest airport where they bought new sets of plane tickets from
another airline that could fly them home. Petitioners have every reason to expect that they would be transported to their
intended destination after they had checked in their luggage and had gone through all the security checks. Instead, China
Southern Airlines offered to allow them to join the flight if they are willing to pay additional cost; this amount is on top of
the purchase price of the plane tickets. The requirement to pay an additional fare was insult upon injury. It is an
aggravation of the breach of contract. Undoubtedly, petitioners are entitled to the award of moral damages. The purpose
of awarding moral damages is to enable the injured party to obtain means, diversion or amusement that will serve to
alleviate the moral suffering [that] he has undergone by reason of defendant['s] culpable action
China Southern Airlines is also liable for exemplary damages as it acted in a wantonly oppressive manner 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.
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. With fairness as the benchmark, We
find adequate the amount of P300,000 each for moral and exemplary damages imposed by the trial court.
Nacar v. Gallery Frames: the 6% rate of interest per annum shall be reckoned from the date of their extrajudicial demand
until the date of finality of this judgment. The total amount shall thereafter earn interest at the rate of 6% per annum from
such finality of judgment until its satisfaction.

G.R. No. 172682 ; July 27, 2016

SULPICIO LINES, INC. vs. NAPOLEON SESANTE, NOW SUBSTITUTED BY HEIRS MARIBEL ATILANO, et. al.
BERSAMIN, J.:
DOCTRINE: 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.
Napoleon Sesante: was one of the passengers of M/V Princess of the Orient in 1998 when it sank near Fortune Island in
Batangas. Of the 388 recorded passengers, 150 were lost. Sesante survived the sinking, and sued SULPICIO LINES, INC. for
breach of contract and damages.
Sesante alleged that the M/V Princess of the Orient left the Port of Manila while Metro Manila was experiencing stormy
weather; that at around 11:00 p.m., he had noticed the vessel listing starboard, so he had gone to the uppermost deck
where he witnessed the strong winds and big waves pounding the vessel; that at the same time, he had seen how the
passengers had been panicking, crying for help and frantically scrambling for life jackets in the absence of the vessel's
officers and crew; that sensing danger, he had called a certain Veney Ceballos through his cellphone to request him to
inform the proper authorities of the situation; that thereafter, big waves had rocked the vessel, tossing him to the floor
where he was pinned by a long steel bar; that he had freed himself only after another wave had hit the vessel; 5 that he had
managed to stay afloat after the vessel had sunk, and had been carried by the waves to the coastline of Cavite and
Batangas until he had been rescued; that he had suffered tremendous hunger, thirst, pain, fear, shock, serious anxiety and
mental anguish; that he had sustained injuries,6 and had lost money, jewelry, important documents, police uniforms and
the .45 caliber pistol issued to him by the PNP; and that because it had committed bad faith in allowing the vessel to sail
despite the storm signal, the petitioner should pay him actual and moral damages of ₱500,000.00 and ₱l,000,000.00,
respectively.7
SULPICIO LINES, INC.: 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
RTC: rendered judgment in favor of Sesante and against Sulpicio Lines, Inc., ordering the latter to pay: Temperate damages
in the amount of ₱400,000; Moral damages in the amount of ₱1 million; and Costs of suit.
The RTC observed that Sulpicio Lines, being negligent, was liable pursuant to Articles 1739 and 1759 of the Civil Code; that
Sulpicio Lines 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, the erroneous maneuvering of
the vessel by the captain during extreme weather conditions had been the immediate and proximate cause of the sinking.
CA: lowered the temperate damages to ₱120,000, which approximated the cost of Sesante's lost personal belongings; and
held that despite the seaworthiness of the vessel, Sulpicio Lines remained civilly liable because its officers and crew had
been negligent in performing their duties.
ISSUES:
I. W/N the complaint for breach of contract and damages is a personal action that does not survive the death of
the plaintiff?
II. W/N petitioner is liable for damages under Article 1759 of the Civil Code?; and
III. W/N there is sufficient basis for awarding moral and temperate damages?
SC: NO. An action for breach of contract of carriage survives the death of the plaintiff. 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. Substitution by the heirs is not a matter of jurisdiction, but a
requirement of due process. The application of the rule on substitution depends on whether or not the action survives the
death of the litigant. Section 1, Rule 87 of the Rules of Court enumerates the following actions that survive the death of a
party, namely: (1) recovery of real or personal property, or an interest from the estate; (2) enforcement of liens on the
estate; and (3) recovery of damages for an injury to person or property.
On the one hand, Section 5, Rule 86 of the Rules of Court lists the actions abated by death as including: (1) claims for
funeral expenses and those for the last sickness of the decedent; (2) judgments for money; and (3) all claims for money
against the deceased, arising from contract, express or implied.
A contract of carriage generates a relation attended with public duty, neglect or malfeasance of the carrier's employees
and gives ground for an action for damages. Sesante's claim against the petitioner involved his personal injury caused by
the breach of the contract of carriage. Pursuant to the aforecited rules, the complaint survived his death, and could be
continued by his heirs following the rule on substitution.
SC: The petitioner is liable for breach of contract of carriage
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.
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. 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.
DOCTRINE: Clearly, the trial court is not required to make an express finding of the common carrier's fault or negligence.
Even the mere proof of injury relieves the passengers from establishing the fault or negligence of the carrier or its
employees. The presumption of negligence applies so long as there is evidence showing that: (a) a contract exists between
the passenger and the common carrier; and (b) the injury or death took place during the existence of such contract. In
such event, the burden shifts to the common carrier to prove its observance of extraordinary diligence, and that an
unforeseen event or force majeure had caused the injury.
Sesante sustained injuries due to the buffeting by the waves and consequent sinking of M/V Princess of the Orient where
he was a passenger. To exculpate itself from liability, the common carrier vouched for the seaworthiness of M/V Princess of
the Orient, and referred to the BMI report to the effect that the severe weather condition - a force majeure – had brought
about the sinking of the vessel. The petitioner was directly liable to Sesante and his heirs.
A common carrier may be relieved of any liability arising from a fortuitous event pursuant to Article 1174 of theCivil
Code. But while it may free a common carrier from liability, the provision still requires exclusion of human agency from the
cause of injury or loss. Else stated, for a common carrier to be absolved from liability in case of force majeure, it is not
enough that the accident was caused by a fortuitous event. The common carrier must still prove that it did not contribute
to the occurrence of the incident due to its own or its employees' negligence.
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.
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. 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.
SC: The award of moral damages and temperate damages is proper
We agree with the Sulpicio Lines 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. 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. The 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, warranted the award
of moral damages. The amount of ₱l million, as granted by the RTC and affirmed by the CA, is maintained.
Sulpicio Lines 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.
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.
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.

Sulpicio Lines 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.
ISSUE: W/N notification is required before the common carrier becomes liable for lost belongings that remained in the
custody of the passenger?
HELD: NO.
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 remains with the passenger;
otherwise, extraordinary diligence must be exercised. Furthermore, the liability of the common carrier attaches even if the
loss or damage to the belongings resulted from the acts of the common carrier's employees, the only exception being
where such loss or damages is due to force majeure.
YHT Realty Corporation v. Court of Appeals: the actual delivery of the goods to the innkeepers or their employees is
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.
DOCTRINE: Accordingly, actual notification was not necessary to render Sulpicio Lines 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
Sulpicio Lines became sufficiently notified of such belongings. So long as the belongings were brought inside the premises
of the vessel, Sulpicio Lines 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 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. Article 222446 of the Civil
Code expressly authorizes the courts to award temperate damages despite the lack of certain proof of actual 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. 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. "
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, 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.
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
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.
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.

G.R. No. 194121 ; July 11, 2016

TORRES-MADRID BROKERAGE, INC. vs. FEB MITSUI MARINE INSURANCE CO., INC.
BRION, J.:
We resolve the petition for review on certiorari challenging the Court of Appeals' (CA) October 14, 2010 decision in CA-
G.R. CV No. 91829.1
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 tofacilitate, 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."9 The
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
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; 17and (4) even if TMBI had not been
negligent in the handling, transport and the delivery of the shipment, TMBI still breached its contractual obligation to Sony
when it failed to deliver the shipment.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.,36 Loadmasters 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]?
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 exercisedextraordinary 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.
A third party may recover from a
common carrier for quasi-delict but must
prove actual negligence
We likewise disagree with the finding that BMT is directly liable to Sony/Mitsui for the loss of the cargo. While it is
undisputed that the cargo was lost under the actual custody of BMT (whose employee is the primary suspect in the
hijacking or robbery of the shipment), no direct contractual relationship existed between Sony/Mitsui and BMT. If at all,
Sony/Mitsui’s cause of action against BMT could only arise from quasi-delict, as a third party suffering damage from the
action of another due to the latter’s fault or negligence, pursuant to Article 2176 of the Civil Code. 51
We have repeatedly distinguished between an action for breach of contract (culpa contractual) and an action for quasi-
delict (culpa aquiliana).
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
WHEREFORE, the Court hereby ORDERS petitioner TorresMadrid Brokerage, Inc. to pay the respondent FEB Mitsui Marine
Insurance Co", Inc. the following:
a. Actual damages in the amount of PHP 7,293,386.23 plus legal interest from the time the complaint was filed until it is
fully paid;
b. Attorney's foes in the amount of PHP 200,000.00; and
c. Costs of suit.
Respondent Benjamin P. Manalastas is in turn ORDERED to REIMBURSE Torres-Madrid Brokerage, Inc. of the above-
mentioned amounts.
SO ORDERED.

G.R. No. 213088 ; June 28, 2017

LAND TRANSPORTATION FRANCHISING AND REGULATORY BOARD (LTFRB) vs. G.V. FLORIDA TRANSPORT, INC.,
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,4respectively; 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.
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 herebySET 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.
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 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.).
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.).
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 Dictionarydefines 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 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.

July 13, 2016

G.R. No. 181375
PHIL-NIPPON KYOEI, CORP., Petitioner,
vs.
ROSALIA T. GUDELOSAO, on her behalf and in behalf of minor children CHRISTY MAE T. GUDELOSAO and ROSE ELDEN T.
GUDELOSAO, CARMEN TANCONTIAN, on her behalf and in behalf of the children CAMELA B. TANCONTIAN, BEVERLY B.
TANCONTIAN, and ACE B. TANCONTIAN, Respondents.
DECISION
JARDELEZA, J.:
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) dated October 4, 2007 (CA Decision) and its Resolution3 dated
January 11, 2008 in CA-G.R. SP No. 95456. The CA reinstated the Labor Arbiter's Decision 4dated August 5, 2004 (LA
Decision) with the modification, among others, that petitioner is liable to respondents under the insurance cover it
procured from South Sea Surety & Insurance Co., Inc. (SSSICI). The CA ruled that petitioner's liability would be extinguished
only upon payment by SSSICI of the insurance proceeds to respondents. 5
Facts
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 from Japan to the Philippines, petitioner, as local principal, and Top
Ever Marine Management Maritime Co., Ltd. (TMCL), as foreign principal, hired Edwin C. Gudelosao, Virgilio A. Tancontian,
and six other crewmembers. They were hired through the local manning agency of TMCL, Top Ever Marine Management
Philippine Corporation (TEMMPC). TEMMPC, through their president and general manager, Capt. Oscar Orbeta (Capt.
Orbeta), and the eight crewmembers signed separate contracts of employment. Petitioner secured a Marine Insurance
Policy (Maritime Policy No. 00001) from SSSICI over the vessel for P10,800,000.00 against loss, damage, and third party
liability or expense, arising from the occurrence of the perils of the sea for the voyage of the vessel from Onomichi, Japan
to Batangas, Philippines. This Marine Insurance Policy included Personal Accident Policies for the eight crewmembers for
P3,240,000.00 each in case of accidental death or injury.7
On February 24, 2003, while still within Japanese waters, the vessel sank due to extreme bad weather condition. Only
Chief Engineer Nilo Macasling survived the incident while the rest of the crewmembers, including Gudelosao and
Tancontian, perished.8
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 (NLRC).9
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 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 reads:
WHEREFORE, premises considered, CAPT. OSCAR ORBETA, [TEMMPC], [TMCL], and PHIL-NIPPON KYOEI
CORPORATION are hereby directed to pay solidarily the complainants as follows:

Death Benefits Burial Expenses 10% atty's [fees]

1. ROSALIA T. GUDELOSAO: US$50,000 US$1,000 US$5,100

2. CARMEN B. TANCONTIAN: US$50,000 US$1,000 US$5,100

3. CARMELA B. TANCONTIAN: US$7,000 US$700

4. BEVERLY B. TANCONTIAN: US$7,000 US$700

5. ACE B. TANCONTIAN: US$7,000 US$700

Further, 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. T ANCONTIAN plus 10%
attorney's fees thereof at [P]324,000.00 each thereof or a total of [P]648,000.00.
Nevertheless, upon payment of said 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.
Any other claim is hereby dismissed for lack of merit.
SO ORDERED.11
On appeal, the NLRC modified the LA Decision in a Resolution12 dated February 28, 2006, the dispositive portion of which
reads:
WHEREFORE, premises considered, the Appeals of Complainants and PNKC are GRANTED but only partially in the case of
Complainants' Appeal, and the Appeal of [SSSICI] 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
The NLRC absolved petitioner, TEMMPC and TMCL and Capt. Orbeta from any liability based on the limited liability
rule.14 It, however, affirmed SSSICI's liability after finding that the Personal Accident Policies answer for the death benefit
claims under the Philippine Overseas Employment Administration Standard Employment Contract
(POEASEC).15 Respondents filed a Partial Motion for Reconsideration which the NLRC denied in a Resolution dated May 5,
2006.16
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] isREINSTATED, subject to the following modifications:
(1) [R]espondents CAPT. OSCAR ORBETA, [TEMMPC] and [TMCL] (the manning agency), are hereby directed to pay
solidarily the complainants as follows:

Death Benefits Burial Expenses 10% atty's fees

ROSALIA T. GUDELOSAO: US$50,000 US$1,000 US$5,1OO

CARMEN B. TANCONTIAN: US$50,000 US$1,000 US$5,1OO

CARMELA B. TANCONTIAN: US$7,000 US$700

BEVERLY B. TANCONTIAN: US$7,000 US$700

ACE B. TANCONTIAN: US$7,000 US$700

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.
Nevertheless, upon payment of said 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.
SO ORDERED.18
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 virtue of its being a
shipowner.22 Thus, petitioner is liable for the injuries to passengers even 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
insurer directly arose from the contract of insurance against liability (i.e., Personal Accident Policy).23The CA then ordered
that petitioner's liability will only be extinguished upon payment by SSSICI of the insurance proceeds. 24
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 not file a motion for reconsideration of the CA
Decision, the CA issued a Partial Entry of Judgment27 stating that the decision became final and executory as to SSSICI on
October 27, 2007.
Hence, this petition where petitioner claims that the CA erred in ignoring the fundamental rule in Maritime Law that the
shipowner may exempt itself from liability by abandoning the vessel and freight it may have earned during the voyage, and
the proceeds of the insurance 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 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.
On December 8, 2008, TEMMPC filed its Manifestation 28 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.)
We see no reason why the above doctrine should not apply here.
Act No. 3428, otherwise known as The Workmen's Compensation Act 44 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
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 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.
Section 176 (formerly Sec. 174) of The Insurance Code67 defines casualty insurance as follows:
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 considered as falling exclusively within the scope of other types of insurance
such as fire or marine. It includes, but is not limited to, employer's liability insurance, motor vehicle liability insurance,
plate glass insurance, burglary and theft insurance, personal accident and health insurance as written by non-life
insurance companies, and other substantially similar kinds of
insurance. (Emphasis supplied.)
Based on Section 176, casualty insurance may cover liability or loss arising from accident or mishap.1âwphi1 In a liability
insurance, the insurer assumes the obligation to pay third party in whose favor the liability of the insured arises. 68On the
other hand, personal accident insurance refers to insurance against death or injury by accident or accidental means. 69 In an
accidental death policy, the accident causing the death is the thing insured against. 70
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.72Based 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.
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.
WHEREFORE, the petition is PARTLY GRANTED. The CA Decision dated October 4, 2007 and the Resolution dated January
11, 2008 of the Court of Appeals are AFFIRMED WITH THE FOLLOWING MODIFICATIONS:
(1) The death benefits are limited to the amount granted under the Release of All Rights and Full Satisfaction of Claim
dated December 14, 2007 executed between respondents and Top Ever Marine Management Company Ltd., Top Ever
Marine Management Philippine Corporation, and Captain Oscar Or beta;
(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 December 14, 2007; and
(3) The last paragraph of the dispositive portion of the CA Decision dated October 4, 2007 stating: "Nevertheless, upon
payment of said 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 ... " isDELETED.
SO ORDERED.
 August 2, 2017
G.R. No. 226345
PIONEER INSURANCE and SURETY CORPORATION, Petitioner,
vs.
APL CO. PTE. LTD.,, Respondent.
DECISION
MENDOZA, J.:
This petition for review on certiorari seeks to reverse and set aside the May 26, 2016 Decision1 and August 8, 2016
Resolution2 of the Court of Appeals (CA) in CA-G.R. SP No. 143912, which reversed the November 3, 2015 Decision 3 of the
Regional Trial Court, Branch 137, Makati City (RTC). The RTC affirmed in toto the March 9, 2015 Decision4 of the Municipal
Trial Court, Branch 65, Makati City (MTC).
On January 13, 2012, the shipper, Chillies Export House Limited, turned over to respondent APL Co. Pte. Ltd.(APL) 250 bags
of chili pepper for transport from the port of Chennai, India, to Manila. The shipment, with a total declared value of
$12,272.50, was loaded on board MN Wan Hai 262. In turn, BSFIL Technologies, Inc. (BSFIL),as consignee, insured the cargo
with petitioner Pioneer Insurance and Surety Corporation (Pioneer Insurance). 5
On February 2, 2012, the shipment arrived at the port of Manila and was temporarily stored at North Harbor, Manila. On
February 6, 2012, the bags of chili were withdrawn and delivered to BSFIL. Upon receipt thereof, it discovered that 76 bags
were wet and heavily infested with molds. The shipment was declared unfit for human consumption and was eventually
declared as a total loss.6
As a result, BSFIL made a formal claim against APL and Pioneer Insurance. The latter hired an independent insurance
adjuster, which found that the shipment was wet because of the water which seeped inside the container van APL
provided. Pioneer Insurance paid BSFIL Pl 95,505.65 after evaluating the claim.7
Having been subrogated to all the rights and cause of action of BSFIL, Pioneer Insurance sought payment from APL, but the
latter refused. This prompted Pioneer Insurance to file a complaint for sum of money against APL.
MTC Ruling
In its March 9, 2015 decision, the MTC granted the complaint and ordered APL to pay Pioneer Insurance the amount
claimed plus six percent (6%) interest per annum from the filing of the complaint until fully paid, and ₱10,000.00 as
attorney's fees. It explained that by paying BSFIL, Pioneer Insurance was subrogated to the rights of the insured and, as
such, it may pursue all the remedies the insured may have against the party whose negligence or wrongful act caused the
loss. The MTC declared that as a common carrier, APL was bound to observe extraordinary diligence. It noted that because
the goods were damaged while it was in APL's custody, it was presumed that APL did not exercise extraordinary diligence,
and that the latter failed to overcome such presumption. The dispositive portion reads:
WHEREFORE, premises considered, judgment is hereby rendered ordering defendant APL Co. Pte Ltd. to pay plaintiff the
amount of ₱195,505.65 plus 6% interest per annum from the filing of this case (01 February 2013) until the whole amount
is fully paid and the amount of ₱10,000.00 as attorney's fees; and the costs.
SO ORDERED.8
Aggrieved, APL appealed to the RTC.
The RTC Ruling
In its November 3, 2015 decision, the RTC concurred with the MTC. It agreed that APL was presumed to have acted
negligently because the goods were damaged while in its custody. In addition, the RTC stated that under the Carriage of
Goods by Sea Act (COOSA), lack of written notice shall not prejudice the right of the shipper to bring a suit within one year
after delivery of the goods. Further, the trial court stated that the shorter prescriptive period set in the Bill of Lading could
not apply because it is contrary to the provisions of the COGSA. It ruled:
WHEREFORE, PREMISESCONSIDERED, the Decision dated March 9, 2015 of the Metropolitan Trial Court Branch 65, Makati
City is hereby AFFIRMED in toto, with costs against defendant-appellant APL.
SO ORDERED.9
Undeterred, APL appealed before the CA.
The CA Ruling
In its May 26, 2016 decision, the CA reversed the decisions of the trial courts and ruled that the present action was barred
by prescription. The appellate court noted that under Clause 8 of the Bill of Lading, the carrier shall be absolved from any
liability unless a case is filed within nine (9) months after the delivery of the goods. It explained that a shorter prescriptive
period may be stipulated upon, provided it is reasonable. The CA opined that the nine-month prescriptive period set out in
the Bill of Lading was reasonable and provided a sufficient period of time within which an action to recover any loss or
damage arising from the contract of carriage may be instituted.
The appellate court pointed out that as subrogee, Pioneer Insurance was bound by the stipulations of the Bill of Lading,
including the shorter period to file an action. It stated that the contract had the force of law between the parties and so it
could not countenance an interpretation which may undermine the stipulations freely agreed upon by the parties.
The fallo reads:
WHEREFORE, premises considered, the instant Petition for Review is hereby GRANTED. The assailed Decision dated
November 3, 2015 of the RTC, Branch 137, Makati City in Civil Case No. 15-403 is hereby REVERSED andSETASIDE.
Respondent Pioneer Insurance & Surety Corporation's Complaint is accordingly DISMISSED.
SO ORDERED.10
Pioneer Insurance moved for reconsideration, but the CA denied its motion in its August 8, 2016 Resolution.
Hence, this petition.
ISSUES
I
WHETHER THE HONORABLE COURT OF APPEALS SERIOUSLY ERRED WHEN IT RULED THAT PETITIONER'S CLAIM AGAINST
THE RESPONDENT IS ALREADY BARRED BY PRESCRIPTION; AND
II
WHETHER THE HONORABLE COURT OF APPEALS SERIOSULY ERRED IN HOLDING THAT THE ONE YEAR PRESCRIPTIVE
PERIOD PROVIDED UNDER THE CARRIAGE OF GOODS BY SEA ACT (COGSA) IS NOT APPLICABLE IN THE INSTANT CASE. 11
Pioneer Insurance insists the action, which was filed on February 1, 2013, was within the one year prescriptive period
under the COGSA after BSFIL received the goods on February 6, 2012. It argues that the nine-month period provided under
the Bill of Lading was inapplicable because the Bill of Lading itself states that in the event that such time period is found to
be contrary to any law compulsorily applicable, then the period prescribed by such law shall then apply. Pioneer Insurance
is of the view that the stipulation in the Bill of Lading is subordinate to the COOSA. It asserts that while parties are free to
stipulate the terms and conditions of their contract, the same should not be contrary to law, morals, good customs, public
order, or public policy.
Further, Pioneer Insurance contends that it was not questioning the validity of the terms and conditions of the Bill of
Lading as it was merely pointing out that the Bill of Lading itself provides that the nine-month prescriptive period is
subservient to the one-year prescriptive period under the COOSA.
In its Comment,12 dated November 3, 2016, APL countered that Pioneer Insurance erred in claiming that the nine-month
period under the Bill of Lading applies only in the absence of an applicable law. It stressed that the nine-month period
under the Bill of Lading applies, unless there is a law to the contrary. APL explained that "absence" differs from "contrary."
It, thus, argued that the nine-month period was applicable because it is not contrary to any applicable law.
In its Reply,13 dated February 23, 2017, Pioneer Insurance averred that the nine-month period shall be applied only if there
is no law to the contrary. It noted that the COGSA was clearly contrary to the provisions of the Bill of Lading because it
provides for a different prescriptive period. For said reason, Pioneer Insurance believed that the prescriptive period under
the COGSA should be controlling.
The Court's Ruling
The petition is meritorious
It is true that in Philippine American General Insurance Co., Inc. v. Sweet Lines, Inc. (Philippine American), 14 the Court
recognized that stipulated prescriptive periods shorter than their statutory counterparts are generally valid because they
do not affect the liability of the carrier but merely affects the shipper's remedy. The CA, nevertheless, erred in
applying Philippine American in the case at bench as it does not fall squarely with the present circumstances.
It is elementary that a contract is the law between the parties and the obligations it carries must be complied with in good
faith.15 In Norton Resources and Development Corporation v. All Asia Bank Corporation, 16 the Court reiterated that when
the terms of the contract are clear, its literal meaning shall control, to wit:
The cardinal rule in the interpretation of contracts is embodied in the first paragraph of Article 1370 of the Civil Code: 11
[i]f the terms of a contract are clear and leave no doubt upon the intention of the contracting parties, the literal
meaning of its stipulations shall control. "This provision is akin to the "plain meaning rule" applied by Pennsylvania courts,
which assumes that the intent of the parties to an instrument is "embodied in the writing itself, and when the words are
clear and unambiguous the intent is to be discovered only from the express language of the agreement". It also resembles
the "four corners" rule, a principle which allows courts in some cases to search beneath the semantic surface for clues to
meaning. A court's purpose in examining a contract is to interpret the intent of the contracting parties, as objectively
manifested by them. The process of interpreting a contract requires the court to make a preliminary inquiry as to whether
the contract before it is ambiguous. A contract provision is ambiguous if it is susceptible of two reasonable alternative
interpretations.Where the written terms of the contract are not ambiguous and can only be read one way, the court will
interpret the contract as a matter of law. If the contract is determined to be ambiguous, then the interpretation of the
contract is left to the court, to resolve the ambiguity in the light of the intrinsic evidence. 17[Emphases supplied]
After a closer persual of the the Bill of Lading, the Court finds that its provisions are clear and unequivocal leaving no room
for interpretation.
In the Bill of Lading, it was categorically stated that the carrier shall in any event be discharged from all liability whatsoever
in respect of the goods, unless suit is brought in the proper forum within nine (9) months after delivery of the goods or the
date when they should have been delivered. The same, however, is qualified in that when the said nine-month period is
contrary to any law compulsory applicable, the period prescribed by the said law shall apply.
The present case involves lost or damaged cargo. It has long been settled that in case of loss or damage of cargoes, the
one-year prescriptive period under the COOSA applies.18 It is at this juncture where the parties are at odds, with Pioneer
Insurance claiming that the one-year prescriptive period under the COOSA governs; whereas APL insists that the nine-
month prescriptive period under the Bill of Lading applies.
A reading of the Bill of Lading between the parties reveals that the nine-month prescriptive period is not applicable in all
actions or claims.1âwphi1 As an exception, the nine-month period is inapplicable when there is a different period provided
by a law for a particular claim or action-unlike in Philippine American where the Bill of Lading stipulated a prescriptive
period for actions without exceptions. Thus, it is readily apparent that the exception under the Bill of Lading became
operative because there was a compulsory law applicable which provides for a different prescriptive period. Hence, strictly
applying the terms of the Bill of Lading, the one-year prescriptive period under the COOSA should govern because the
present case involves loss of goods or cargo. In finding so, the Court does not construe the Bill of Lading any further but
merely applies its terms according to its plain and literal meaning.
WHEREFORE, the petition is GRANTED. The November 3, 2015 Decision of the Regional Trial Court, Branch 137, Makati
City in Civil Case No. 15-403 is REINSTATED.
SO ORDERED.
G.R. No. 171591 25 June 2012
ACE NAVIGATION CO., INC., petitioner,
vs.
FGU INSURANCE CORPORATION and PIONEER INSURANCE AND SURETY CORPORATION, Respondents.
DECISION
PERLAS-BERNABE, J.:
This is an appeal under Rule 45 of the Rules of Court seeking to reverse the June 22, 2004 Decision 1 and February 17, 2006
Resolution2 of the Court of Appeals (CA) ordering petitioner Ace Navigation Co., Inc., jointly and severally with Cardia
Limited, to pay respondents FGU Insurance Corp. and Pioneer Insurance and Surety Corp. the sum of P213,518.20 plus
interest at the rate of six percentum (6%) from the filing of the complaint until paid.
The Facts
On July 19, 1990, Cardia Limited (CARDIA) shipped on board the vessel M/V Pakarti Tiga at Shanghai Port China, 8,260
metric tons or 165,200 bags of Grey Portland Cement to be discharged at the Port of Manila and delivered to its consignee,
Heindrich Trading Corp. (HEINDRICH). The subject shipment was insured with respondents, FGU Insurance Corp. (FGU) and
Pioneer Insurance and Surety Corp. (PIONEER), against all risks under Marine Open Policy No. 062890275 for the amount
of P18,048,421.00. 3
The subject vessel is owned by P.T. Pakarti Tata (PAKARTI) which it chartered to Shinwa Kaiun Kaisha Ltd.
(SHINWA). 4 Representing itself as owner of the vessel, SHINWA entered into a charter party contract with Sky
International, Inc. (SKY), an agent of Kee Yeh Maritime Co. (KEE YEH), 5 which further chartered it to Regency Express Lines
S.A. (REGENCY). Thus, it was REGENCY that directly dealt with consignee HEINDRICH, and accordingly, issued Clean Bill of
Lading No. SM-1. 6
On July 23, 1990, the vessel arrived at the Port of Manila and the shipment was discharged. However, upon inspection of
HEINDRICH and petitioner Ace Navigation Co., Inc. (ACENAV), agent of CARDIA, it was found that out of the 165,200 bags
of cement, 43,905 bags were in bad order and condition. Unable to collect the sustained damages in the amount of
P1,423,454.60 from the shipper, CARDIA, and the charterer, REGENCY, the respondents, as co-insurers of the cargo, each
paid the consignee, HEINDRICH, the amounts of P427,036.40 and P284,690.94, respectively, 7 and consequently became
subrogated to all the rights and causes of action accruing to HEINDRICH.
Thus, on August 8, 1991, respondents filed a complaint for damages against the following defendants: "REGENCY EXPRESS
LINES, S.A./ UNKNOWN CHARTERER OF THE VESSEL 'PAKARTI TIGA'/ UNKNOWN OWNER and/or DEMIFE (sic) CHARTERER
OF THE VESSEL 'PAKARTI TIGA', SKY INTERNATIONAL, INC. and/or ACE NAVIGATION COMPANY, INC." 8 which was docketed
as Civil Case No. 90-2016.
In their answer with counterclaim and cross-claim, PAKARTI and SHINWA alleged that the suits against them cannot
prosper because they were not named as parties in the bill of lading. 9
Similarly, ACENAV claimed that, not being privy to the bill of lading, it was not a real party-in-interest from whom the
respondents can demand compensation. It further denied being the local ship agent of the vessel or REGENCY and claimed
to be the agent of the shipper, CARDIA. 10
For its part, SKY denied having acted as agent of the charterer, KEE YEH, which chartered the vessel from SHINWA, which
originally chartered the vessel from PAKARTI. SKY also averred that it cannot be sued as an agent without impleading its
alleged principal, KEE YEH. 11
On September 30, 1991, HEINDRICH filed a similar complaint against the same parties and Commercial Union Assurance
Co. (COMMERCIAL), docketed as Civil Case No. 91-2415, which was later consolidated with Civil Case No. 91-2016.
However, the suit against COMMERCIAL was subsequently dismissed on joint motion by the respondents and
COMMERCIAL. 12
Proceedings Before the RTC and the CA
In its November 26, 2001 Decision, 13 the RTC dismissed the complaint, the fallo of which reads:
WHEREFORE, premises considered, plaintiffs’ complaint is DISMISSED. Defendants’ counter-claim against the plaintiffs are
likewise dismissed, it appearing that plaintiff[s] did not act in evident bad faith in filing the present complaint against them.
Defendant Pakarti and Shinwa’s cross-claims against their co-defendants are likewise dismissed for lack of sufficient
evidence.
No costs.
SO ORDERED.
Dissatisfied, the respondents appealed to the CA which, in its assailed June 22, 2004 Decision, 14 found PAKARTI, SHINWA,
KEE YEH and its agent, SKY, solidarily liable for 70% of the respondents' claim, with the remaining 30% to be shouldered
solidarily by CARDIA and its agent, ACENAV, thus:
WHEREFORE, premises considered, the Decision dated November 26, 2001 is hereby MODIFIED in the sense that:
a) defendant-appellees P.T. Pakarti Tata, Shinwa Kaiun Kaisha, Ltd., Kee Yeh Maritime Co., Ltd. and the latter’s agent
Sky International, Inc. are hereby declared jointly and severally liable, and are DIRECTED to pay FGU Insurance
Corporation the amount of Two Hundred Ninety Eight Thousand Nine Hundred Twenty Five and 45/100
(P298,925.45) Pesos and Pioneer Insurance and Surety Corp. the sum of One Hundred Ninety Nine Thousand Two
Hundred Eighty Three and 66/100 (P199,283.66) Pesos representing Seventy (70%) percentum of their respective
claims as actual damages plus interest at the rate of six (6%) percentum from the date of the filing of the
complaint; and
b) defendant Cardia Ltd. and defendant-appellee Ace Navigation Co., Inc. are DECLARED jointly and severally liable
and are hereby DIRECTED to pay FGU Insurance Corporation One Hundred Twenty Eight Thousand One Hundred
Ten and 92/100 (P128,110.92) Pesos and Pioneer Insurance and Surety Corp. Eighty Five Thousand Four Hundred
Seven and 28/100 (P85,407.28) Pesos representing thirty (30%) percentum of their respective claims as actual
damages, plus interest at the rate of six (6%) percentum from the date of the filing of the complaint.
SO ORDERED.
Finding that the parties entered into a time charter party, not a demise or bareboat charter where the owner completely
and exclusively relinquishes possession, command and navigation to the charterer, the CA held PAKARTI, SHINWA, KEE YEH
and its agent, SKY, solidarily liable for 70% of the damages sustained by the cargo. This solidarity liability was borne by their
failure to prove that they exercised extraordinary diligence in the vigilance over the bags of cement entrusted to them for
transport. On the other hand, the CA passed on the remaining 30% of the amount claimed to the shipper, CARDIA, and its
agent, ACENAV, upon a finding that the damage was partly due to the cargo's inferior packing.
With respect to REGENCY, the CA affirmed the findings of the RTC that it did not acquire jurisdiction over its person for
defective service of summons.
PAKARTI's, SHINWA's, SKY's and ACENAV's respective motions for reconsideration were subsequently denied in the CA's
assailed February 17, 2006 Resolution.
Issues Before the Court
PAKARTI, SHINWA, SKY and ACENAV filed separate petitions for review on certiorari before the Court, docketed as G.R.
Nos. 171591, 171614, and 171663, which were ordered consolidated in the Court’s Resolution dated July 31, 2006. 15
On April 21, 2006, SKY manifested 16 that it will no longer pursue its petition in G.R. No. 171614 and has preferred to await
the resolution in G.R. No. 171663 filed by PAKARTI and SHINWA. Accordingly, an entry of judgment 17against it was made
on August 18, 2006. Likewise, on November 29, 2007, PAKARTI and SHINWA moved 18 for the withdrawal of their petitions
for lack of interest, which the Court granted in its January 21, 2008 Resolution. 19 The corresponding entry of
judgment 20 against them was made on March 17, 2008.
Thus, only the petition of ACENAV remained for the Court's resolution, with the lone issue of whether or not it may be
held liable to the respondents for 30% of their claim.
Maintaining that it was not a party to the bill of lading, ACENAV asserts that it cannot be held liable for the damages
sought to be collected by the respondents. It also alleged that since its principal, CARDIA, was not impleaded as a party-
defendant/respondent in the instant suit, no liability can therefore attach to it as a mere agent. Moreover, there is dearth
of evidence showing that it was responsible for the supposed defective packing of the goods upon which the award was
based.
The Court's Ruling
A bill of lading is defined as "an instrument in writing, signed by a carrier or his agent, describing the freight so as to
identify it, stating the name of the consignor, the terms of the contract for carriage, and agreeing or directing that the
freight to be delivered to the order or assigns of a specified person at a specified place." 21
It operates both as a receipt and as a contract. As a receipt, it recites the date and place of shipment, describes the goods
as to quantity, weight, dimensions, identification marks and condition, quality, and value. As a contract, it names the
contracting parties, which include the consignee, fixes the route, destination, and freight rates or charges, and stipulates
the rights and obligations assumed by the parties. 22 As such, it shall only be binding upon the parties who make them,
their assigns and heirs. 23
In this case, the original parties to the bill of lading are: (a) the shipper CARDIA; (b) the carrier PAKARTI; and (c) the
consignee HEINDRICH. However, by virtue of their relationship with PAKARTI under separate charter arrangements,
SHINWA, KEE YEH and its agent SKY likewise became parties to the bill of lading. In the same vein, ACENAV, as admitted
agent of CARDIA, also became a party to the said contract of carriage.
The respondents, however, maintain 24 that ACENAV is a ship agent and not a mere agent of CARDIA, as found by both the
CA 25 and the RTC. 26
The Court disagrees.
Article 586 of the Code of Commerce provides:
ART. 586. The shipowner and the ship agent shall be civilly liable for the acts of the captain and for the obligations
contracted by the latter to repair, equip, and provision the vessel, provided the creditor proves that the amount claimed
was invested therein.
By ship agent is understood the person entrusted with the provisioning of a vessel, or who represents her in the port in
which she may be found. (Emphasis supplied)
Records show that the obligation of ACENAV was limited to informing the consignee HEINDRICH of the arrival of the vessel
in order for the latter to immediately take possession of the goods. No evidence was offered to establish that ACENAV had
a hand in the provisioning of the vessel or that it represented the carrier, its charterers, or the vessel at any time during the
unloading of the goods. Clearly, ACENAV's participation was simply to assume responsibility over the cargo when they
were unloaded from the vessel. Hence, no reversible error was committed by the courts a quo in holding that ACENAV was
not a ship agent within the meaning and context of Article 586 of the Code of Commerce, but a mere agent of CARDIA, the
shipper.
On this score, Article 1868 of the Civil Code states:
ART. 1868. By the contract of agency, a person binds himself to render some service or to do something in representation
or on behalf of another, with the consent or authority of the latter.
Corollarily, Article 1897 of the same Code provides that an agent is not personally liable to the party with whom he
contracts, unless he expressly binds himself or exceeds the limits of his authority without giving such party sufficient notice
of his powers.
Both exceptions do not obtain in this case. Records are bereft of any showing that ACENAV exceeded its authority in the
discharge of its duties as a mere agent of CARDIA. Neither was it alleged, much less proved, that ACENAV's limited
obligation as agent of the shipper, CARDIA, was not known to HEINDRICH.
Furthermore, since CARDIA was not impleaded as a party in the instant suit, the liability attributed upon it by the CA 27 on
the basis of its finding that the damage sustained by the cargo was due to improper packing cannot be borne by ACENAV.
As mere agent, ACENAV cannot be made responsible or held accountable for the damage supposedly caused by its
principal. 28
Accordingly, the Court finds that theCA erred in ordering ACENAV jointly and severally liable with CARDIA to pay 30o/o of
the respondents' claim.
WHEREFORE, the assailed Decision and Resolution of the Court of Appeals are hereby REVERSED.1awp++i1 The complaint
against petitioner Ace Navigation Co., Inc. is hereby DISMISSED.
SO ORDERED.

G.R. No. 210621, April 04, 2016

ALFREDO MANAY, JR., FIDELINO SAN LUIS, ADRIAN SAN LUIS, ANNALEE SAN LUIS, MARK ANDREW JOSE, MELISSA JOSE,
CHARLOTTE JOSE, DAN JOHN DE GUZMAN, PAUL MARK BALUYOT, AND CARLOS S. JOSE, Petitioners, v. CEBU
AIR,INC, Respondent.
DECISION
LEONEN, J.:
The Air Passenger Bill of Rights1 mandates that the airline must inform the passenger in writing of all the conditions and
restrictions in the contract of carriage.2 Purchase of the contract of carriage binds the passenger and imposes reciprocal
obligations on both the airline and the passenger. The airline must exercise extraordinary diligence in the fulfillment of the
terms and conditions of the contract of carriage. The passenger, however, has the correlative obligation to exercise
ordinary diligence in the conduct of his or her affairs.

This resolves a Petition for Review on Certiorari3 assailing the Court of Appeals Decision4 dated December 13, 2013 in CA-
G.R. SP. No. 129817. In the assailed Decision, the Court of Appeals reversed the Metropolitan Trial Court Decision 5 dated
December 15, 2011 and the Regional Trial Court Decision6 dated November 6, 2012 and dismissed the Complaint for
Damages filed by petitioners Alfredo Manay, Jr., Fidelino San Luis, Adrian San Luis, Annalee San Luis, Mark Andrew Jose,
Melissa Jose, Charlotte Jose, Dan John De Guzman, Paul Mark Baluyot, and Carlos S. Jose against respondent Cebu Air,
Incorporated (Cebu Pacific).7

On June 13, 2008, Carlos S. Jose (Jose) purchased 20 Cebu Pacific round-trip tickets from Manila to Palawan for himself and
on behalf of his relatives and friends.8 He made the purchase at Cebu Pacific's branch office in Robinsons Galleria. 9

Jose alleged that he specified to "Alou," the Cebu Pacific ticketing agent, that his preferred date and time of departure
from Manila to Palawan should be on July 20, 2008 at 0820 (or 8:20 a.m.) and that his preferred date and time for their
flight back to Manila should be on July 22, 2008 at 1615 (or 4:15 p.m.).10 He paid a total amount of P42,957.00 using his
credit card.11 He alleged that after paying for the tickets, Alou printed the tickets, 12 which consisted of three (3) pages, and
recapped only the first page to him.13Since the first page contained the details he specified to Alou, he no longer read the
other pages of the flight information.14

On July 20, 2008, Jose and his 19 companions boarded the 0820 Cebu Pacific flight to Palawan and had an enjoyable stay. 15

On the afternoon of July 22, 2008, the group proceeded to the airport for their flight back to Manila. 16 During the
processing of their boarding passes, they were informed by Cebu Pacific personnel that nine (9)17 of them could not be
admitted because their tickets were for the 1005 (or 10:05 a.m.)18 flight earlier that day.19 Jose informed the ground
personnel that he personally purchased the tickets and specifically instructed the ticketing agent that all 20 of them should
be on the 4:15 p.m. flight to Manila.20

Upon checking the tickets, they learned that only the first two (2) pages had the schedule Jose specified. 21 They were left
with no other option but to rebook their tickets.22They then learned that their return tickets had been purchased as part of
the promo sales of the airline, and the cost to rebook the flight would be P7,000.00 more expensive than the promo
tickets.23 The sum of the new tickets amounted to P65,000.00.24

They offered to pay the amount by credit card but were informed by the ground personnel that they only accepted
cash.25 They then offered to pay in dollars, since most of them were balikbayans and had the amount on hand, but the
airline personnel still refused.26

Eventually, they pooled enough cash to be able to buy tickets for five (5) of their companions. 27 The other four (4) were
left behind in Palawan and had to spend the night at an inn, incurring additional expenses. 28 Upon his arrival in Manila,
Jose immediately purchased four (4) tickets for the companions they left behind, which amounted to P5,205. 29

Later in July 2008, Jose went to Cebu Pacific's ticketing office in Robinsons Galleria to complain about the allegedly
erroneous booking and the rude treatment that his group encountered from the ground personnel in Palawan. 30 He
alleged that instead of being assured by the airline that someone would address the issues he raised, he was merely "given
a run around."31

Jose and his companions were frustrated and annoyed by Cebu Pacific's handling of the incident so they sent the airline
demand letters dated September 3, 200832 and January 20, 200933 asking for a reimbursement of P42,955.00, representing
the additional amounts spent to purchase the nine (9) tickets, the accommodation, and meals of the four (4) that were left
behind.34 They also filed a complaint35 before the Department of Trade and Industry.36

On February 24, 2009, Cebu Pacific, through its Guest Services Department, sent petitioners' counsel an email 37 explaining
that "ticketing agents, like Alou, recap [the] flight details to the purchaser to avoid erroneous booking[s]." 38 The recap is
given one other time by the cashier.39 Cebu Pacific stated that according to its records, Jose was given a full recap and was
made aware of the flight restriction of promo tickets,40 "which included [the] promo fare being non-refundable."41

Jose and his companions were unsatisfied with Cebu Pacific's response so they filed a Complaint 42 for Damages against
Cebu Pacific before Branch 59 of the Metropolitan Trial Court of Mandaluyong. 43 The Complaint prayed for actual damages
in the amount of P42,955.00, moral damages in the amount of P45,000.00, exemplary damages in the amount of
P50,000.00, and attorney's fees.44

In its Answer,45 Cebu Pacific essentially denied all the allegations in the Complaint and insisted that Jose was given a full
recap of the tickets.46 It also argued that Jose had possession of the tickets 37 days before the scheduled flight; hence, he
had sufficient time and opportunity to check the flight information and itinerary.47 It also placed a counterclaim of
PI00,000.00 by reason that it was constrained to litigate and it incurred expenses for litigation.48

On December 15, 2011, the Metropolitan Trial Court rendered its Decision ordering Cebu Pacific to pay Jose and his
companions P41,044.50 in actual damages and P20,000.00 in attorney's fees with costs of suit.49 The Metropolitan Trial
Court found that as a common carrier, Cebu Pacific should have exercised extraordinary diligence in performing its
contractual obligations.50 According to the Metropolitan Trial Court, Cebu Pacific's ticketing agent "should have placed
markings or underlined the time of the departure of the nine passengers" 51 who were not in the afternoon flight since it
was only logical for Jose to expect that all of them would be on the same flight.52 It did not find merit, however, in the
allegation that the airline's ground personnel treated Jose and his companions rudely since this allegation was
unsubstantiated by evidence.53

Cebu Pacific appealed to the Regional Trial Court, reiterating that its ticketing agent gave Jose a full recap of the tickets he
purchased.54

On November 6, 2012, Branch 212 of the Regional Trial Court of Mandaluyong rendered the Decision dismissing the
appeal.55 The Regional Trial Court affirmed the findings of the Metropolitan Trial Court but deleted the award of attorney's
fees on the ground that this was granted without stating any ground under Article 2208 of the Civil Code to justify its
grant.56

Cebu Pacific appealed to the Court of Appeals, arguing that it was not at fault for the damages caused to the passengers. 57

On December 13, 2013, the Court of Appeals rendered the Decision granting the appeal and reversing the Decisions of the
Metropolitan Trial Court and the Regional Trial Court.58 According to the Court of Appeals, the extraordinary diligence
expected of common carriers only applies to the carriage of passengers and not to the act of encoding the requested flight
schedule.59 It was incumbent upon the passenger to exercise ordinary care in reviewing flight details and checking
schedules.60 Cebu Pacific's counterclaim, however, was denied since there was no evidence that Jose and his companions
filed their Complaint in bad faith and with malice.61

Aggrieved, Alfredo Manay, Jr., Fidelino San Luis, Adrian San Luis, Annalee San Luis, Mark Andrew Jose, Melissa Jose,
Charlotte Jose, Dan John De Guzman, Paul Mark Baluyot, and Carlos S. Jose (Jose, et al.) filed before this Court a Petition
for Review on Certiorari62 assailing the Court of Appeals' December 13, 2013 Decision.63

Cebu Pacific was ordered to comment on the Petition. Upon compliance, 65 Jose, et al. submitted their Reply.66 The parties
were then directed67 to submit their respective memoranda.68

Jose, et al. argue that Cebu Pacific is a common carrier obligated to exercise extraordinary diligence to carry Jose, et al. to
their destination at the time clearly instructed to its ticketing agent. 69 They argue that they have the decision to choose
flight schedules and that Cebu Pacific should not choose it for them.70 They insist that they have made their intended flight
schedule clear to the ticketing agent and it would have been within normal human behavior for them to expect that their
entire group would all be on the same flight.71 They argue that they should not have to ask for a full recap of the tickets
since they are under no obligation, as passengers, to remind Cebu Pacific's ticketing agent of her duties. 72

Jose, et al. further pray that they be awarded actual damages in the amount of P43,136.52 since the Metropolitan Trial
Court erroneously failed to add the costs of accommodations and dinner spent on by four (4) of the petitioners who were
left behind in Palawan.73 They also pray for PI00,000.00 in moral damages and P100,000.00 in exemplary damages for the
"profound distress and anxiety"74 they have undergone from the experience, with PI00,000.00 in attorney's fees to
represent the reasonable expenses incurred from "engaging the services of their counsel." 75

Cebu Pacific, on the other hand, argues that the damage in this case was caused by Jose, et al.'s "gross and inexplicable
[negligence.]"76 It maintains that Jose, et al. should have read the details of their flight, and if there were errors in the
encoded flight details, Jose, et al. would still have ample time to have the error corrected. 77 It argues further that its
ticketing agent did not neglect giving Jose a full recap of his purchase since the tickets clearly indicated in the "Comments"
section: "FULL RECAP GVN TO CARLOS JOSE."78

Cebu Pacific further posits that according to the Parol Evidence Rule, the plane tickets issued to Jose, et al. contain all the
terms the parties agreed on, and it was agreed that nine (9) of the passengers would be on the July 22, 2008, 1005 flight to
Manila.79 It argues that Jose, et al. have not been able to present any evidence to substantiate their allegation that their
intent was to be on the July 22, 2008 1615 flight to Manila.80

From the arguments in the parties' pleadings, the sole issue before this Court is whether respondent Cebu Air, Inc. is liable
to petitioners Alfredo Manay, Jr., Fidelino San Luis, Adrian San Luis, Annalee San Luis, Mark Andrew Jose, Melissa Jose,
Charlotte Jose, Dan John De Guzman, Paul Mark Baluyot, and Carlos S. Jose for damages for the issuance of a plane ticket
with an allegedly erroneous flight schedule.
I

Although it was not mentioned by the parties, a procedural issue must first be addressed before delving into the merits of
the case.

Petitioners received the assailed Court of Appeals Decision on December 27, 2013.81 They chose to forego the filing of a
motion for reconsideration. Instead, petitioners filed before this Court a Motion for Extension of Time 82 on January 13,
2014.

Under Rule 45, Section 2 of the Rules of Court,83 petitioners only had 15 days or until January 11, 2014 to file their petition.
Since January 11, 2014 fell on a Saturday, petitioners could have filed their pleading on the following Monday, or on
January 13, 2014.

In their Motion for Extension of Time, however, petitioners requested an additional 30 days from January 13, 2014 within
which to file their petition for review on certiorari.84

This Court already clarified the periods of extension in A.M. No. 00-2-14-SC: 85
Whereas, Section 1, Rule 22 of the 1997 Rules of Civil Procedure provides:
chanRoblesvirtualLawlibrary
Section 1. How to compute time. - In computing any period of time prescribed or allowed by these Rules, or by order of the
court, or by any applicable statute, the day of the act or event from which the designated period of time begins to run is to
be excluded and the date of performance included. If the last day of the period, as thus computed, falls on a Saturday, a
Sunday, or a legal holiday in the place where the court sits, the time shall not run until the next working day.
Whereas, the aforecited provision applies in the matter of filing of pleadings in courts when the due date falls on a
Saturday, Sunday or legal holiday, in which case, the filing of the said pleading on the next working day is deemed on time;

Whereas, the question has been raised if the period is extended ipso jure to the next working day immediately following
where the last day of the period is a Saturday, Sunday or a legal holiday, so that when a motion for extension of time is
filed, the period of extension is to be reckoned from the next working day and not from the original expiration of the
period.

NOW THEREFORE, the Court Resolves, for the guidance of the Bench and the Bar, to declare that Section 1, Rule 22 speaks
only of "the last day of the period" so that when a party seeks an extension and the same is granted, the due date ceases
to be the last day and hence, the provision no longer applies. Any extension of time to file the required pleading should
therefore be counted from the expiration of the period regardless of the fact that said due date is a Saturday, Sunday or
legal holiday. (Emphasis supplied)

Thus, petitioners' request for extension of time should have been reckoned from the original due date on January 11,
2014, even if this day fell on a Saturday. A request for extension of 30 days would have ended on February 10, 2014. 86

Petitioners subsequently filed their Petition for Review on Certiorari on February 12, 2014. 87 Pursuant to A.M. No. 00-2-14-
SC,88 this Petition would have been filed out of time.

We are not, however, precluded from granting the period of extension requested and addressing the Petition filed on its
merits, instead of outright dismissing it. After all, "[l]itigations should, as much as possible, be decided on the merits and
not on technicalities."89

However, it does not follow that in the relaxation of the procedural rules, this Court automatically rules in favor of
petitioners. Their case must still stand on its own merits for this Court to grant the relief petitioners pray for.
 II

Common carriers are required to exercise extraordinary diligence in the performance of its obligations under the contract
of carriage. This extraordinary diligence must be observed not only in the transportation of goods and services but also in
the issuance of the contract of carriage, including its ticketing operations.
Article 1732 of the Civil Code defines a common carrier as "persons, corporations or 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." Articles 1733, 1755, and 1756 of the Civil Code outline the degree of diligence required of common
carriers:
....

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

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

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.

Respondent, as one of the four domestic airlines in the country,90 is a common carrier required by law to exercise
extraordinary diligence. Extraordinary diligence requires that the common carrier must transport goods and passengers
"safely as far as human care and foresight can provide," and it must exercise the "utmost diligence of very cautious persons
. . . with due regard for all the circumstances."91

When a common carrier, through its ticketing agent, has not yet issued a ticket to the prospective passenger, the
transaction between them is still that of a seller and a buyer. The obligation of the airline to exercise extraordinary
diligence commences upon the issuance of the contract of carriage.92 Ticketing, as the act of issuing the contract of
carriage, is necessarily included in the exercise of extraordinary diligence.

A contract of carriage is defined as "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."93 In Cathay Pacific Airways v. Reyes:94
[W]hen 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 he does not, then
the carrier opens itself to a suit for breach of contract of carriage. 95 (Emphasis supplied)

Once a plane ticket is issued, the common carrier binds itself to deliver the passenger safely on the date and time stated in
the ticket. The contractual obligation of the common carrier to the passenger is governed principally by what is written on
the contract of carriage.

In this case, both parties stipulated96 that the flight schedule stated on the nine (9) disputed tickets was the 10:05 a.m.
flight of July 22, 2008. According to the contract of carriage, respondent's obligation as a common carrier was to transport
nine (9) of the petitioners safely on the 10:05 a.m. flight of July 22, 2008.

Petitioners, however, argue that respondent was negligent in the issuance of the contract of carriage since the contract did
not embody their intention. They insist that the nine (9) disputed tickets should have been scheduled for the 4:15 p.m.
flight of July 22, 2008. Respondent, on the other hand, denies this and states that petitioner Jose was fully informed of the
schedules of the purchased tickets and petitioners were negligent when they failed to correct their ticket schedule.

Respondent relies on the Parol Evidence Rule in arguing that a written document is considered the best evidence of the
terms agreed on by the parties. Petitioners, however, invoke the exception in Rule 130, Section 9(b) of the Rules of Court
that evidence may be introduced if the written document fails to express the true intent of the parties: 97
Section 9. Evidence of written agreements. When the terms of an agreement have been reduced to writing, it is
considered as containing all the terms agreed upon and there can be, between the parties and their successors in interest,
no evidence of such terms other than the contents of the written agreement.
However, a party may present evidence to modify, explain or add to the terms of the written agreement if he puts in issue
in his pleading:

(a) An intrinsic ambiguity, mistake, or imperfection in the written agreement;

(b) The failure of the written agreement to express the true intent and agreement of the parties thereto;

(c) The validity of the written agreement; or

(d) The existence of other terms agreed to by the parties or their successors in interest after the execution of the written
agreement.

In ACI Philippines, Inc. v. Coquia:98

It is a cardinal rule of evidence, not just one of technicality but of substance, that the written document is the best
evidence of its own contents. It is also a matter of both principle and policy that when the written contract is established
as the repository of the parties stipulations, any other evidence is excluded and the same cannot be used as a substitute
for such contract, nor even to alter or contradict them. This rule, however, is not without exception. Section 9, Rule 130 of
the Rules of Court states that a party may present evidence to modify, explain or add to the terms of the agreement if he
puts in issue in his pleading the failure of the written agreement to express the true intent and agreement of the parties. 99

It is not disputed that on June 13, 2008, petitioner Jose purchased 20 Manila-Palawan-Manila tickets from respondent's
ticketing agent. Since all 20 tickets were part of a single transaction made by a single purchaser, it is logical to presume that
all 20 passengers would prefer the same flight schedule, unless the purchaser stated otherwise.

In petitioners' Position Paper before the Metropolitan Trial Court, they maintain that respondent's ticketing agent was
negligent when she failed to inform or explain to petitioner Jose that nine (9) members of their group had been booked for
the 10:05 a.m. flight, and not the 4:15 p.m. flight.100

The first page of the tickets contained the names of eight (8) passengers.101 In the Information box on the left side of the
ticket, it reads:
Sunday, July 20, 2008 HK PHP999.00 PHP
5J 637 MNL-PPS 08:20- 09:35
Tuesday, July 22, 2008 HK PHP999.00 PH
5J 640 PPS-MNL 16:15- 17:30102

In the Comments box, it reads:

R - FULL RECAP GVN TO CARLOS JOSE//AWRE
I - FULL RECAP GVN TO CARLOS JOSE//AWRE
M - FULL RECAP GVN TO CARLOS JOSE//AWRI 103

The second page contained the names of three (3) passengers.104 In the Information box, it reads:
Sunday, July 20, 2008 HK PHP1,998.00 PH
5J 637 MNL-PPS 08:20- 09:35
Tuesday, July 22, 2008 HK PHP999.00 PH
5J 640 PPS-MNL 16:15- 17:30105

Under the caption "Comments," it reads:

R - FULL RECAP GVN TO CARLOS JOSE//AWRE
I - FULL RECAP GVN TO CARLOS JOSE//AWRE
M - FULL RECAP GVN TO CARLOS JOSE//AWRI 106

The third page contained the names of nine (9) passengers.107 In the Information box, it reads:
Sunday, July 20, 2008 HK PHP999.00 PHP
5J637MNL-PPS 08:20-09:35
Tuesday, July 22, 2008 HK PHP999.00 PH
5J638PPS-MNL 10:05-11:20108ChanRoblesVirtualawlibrary

In the Comments box, it reads:

R - FULL RECAP GVNT O JOSE//CARLOS AWRE
R - NON-REFUNDBLE//VALID TIL 15 OCT08 O109

Respondent explained that as a matter of protocol, flight information is recapped to the purchaser twice: first by the
ticketing agent before payment, and second by the cashier during payment. The tickets were comprised of three (3) pages.
Petitioners argue that only the first page was recapped to petitioner Jose when he made the purchase.

The common carrier's obligation to exercise extraordinary diligence in the issuance of the contract of carriage is fulfilled by
requiring a full review of the flight schedules to be given to a prospective passenger before payment. Based on the
information stated on the contract of carriage, all three (3) pages were recapped to petitioner Jose.

The only evidence petitioners have in order to prove their true intent of having the entire group on the 4:15 p.m. flight is
petitioner Jose's self-serving testimony that the airline failed to recap the last page of the tickets to him. They have neither
shown nor introduced any other evidence before the Metropolitan Trial Court, Regional Trial Court, Court of Appeals, or
this Court.

Even assuming that the ticketing agent encoded the incorrect flight information, it is incumbent upon the purchaser of the
tickets to at least check if all the information is correct before making the purchase. Once the ticket is paid for and printed,
the purchaser is presumed to have agreed to all its terms and conditions. In Ong Yiu v. Court of Appeals:110
While it may be true that petitioner had not signed the plane ticket, he is nevertheless bound by the provisions thereof.
"Such provisions have been held to be a part of the contract of carriage, and valid and binding upon the passenger
regardless of the latter's lack of knowledge or assent to the regulation." It is what is known as a contract of "adhesion," in
regards which it has been said that contracts of adhesion wherein one party imposes a ready made form of contract on the
other, as the plane ticket in the case at bar, are contracts not entirely prohibited. The one who adheres to the contract is in
reality free to reject it entirely; if he adheres, he gives his consent.111ChanRoblesVirtualawlibrary

One of the terms stated in petitioners' tickets stipulates that the photo identification of the passenger must match the
name entered upon booking:
Guests should present a valid photo ID to airport security and upon check-in. Valid IDs for this purpose are Company ID,
Driver's License, Passport, School ID, SSS Card, TIN Card. The name in the photo-ID should match the guest name that was
entered upon booking. Failure to present a valid photo ID will result in your being refused check-in.112

Considering that respondent was entitled to deny check-in to passengers whose names do not match their photo
identification, it would have been prudent for petitioner Jose to check if all the names of his companions were encoded
correctly. Since the tickets were for 20 passengers, he was expected to have checked each name on each page of the
tickets in order to see if all the passengers' names were encoded and correctly spelled. Had he done this, he would have
noticed that there was a different flight schedule encoded on the third page of the tickets since the flight schedule was
stated directly above the passengers' names.

Petitioners' flight information was not written in fine print. It was clearly stated on the left portion of the ticket above the
passengers' names. If petitioners had exercised even the slightest bit of prudence, they would have been able to remedy
any erroneous booking.

This is not the first time that this Court has explained that an air passenger has the correlative duty to exercise ordinary
care in the conduct of his or her affairs.

In Crisostomo v. Court of Appeals,113 Estela Crisostomo booked a European tour with Caravan Travel and Tours, a travel
agency. She was informed by Caravan's travel agent to be at the airport on Saturday, two (2) hours before her flight.
Without checking her travel documents, she proceeded to the airport as planned, only to find out that her flight was
actually scheduled the day before. She subsequently filed a suit for damages against Caravan Travel and Tours based on the
alleged negligence of their travel agent in informing her of the wrong flight details. 114
This Court, while ruling that a travel agency was not a common carrier and was not bound to exercise extraordinary
diligence in the performance of its obligations, also laid down the degree of diligence concurrently required of passengers:
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 ticket issued to petitioner clearly reflected the departure date and time,contrary to
petitioner's contention. The travel documents, consisting of the tour itinerary, vouchers and instructions, were likewise
delivered to petitioner two days prior to the trip. Respondent also properly booked petitioner for the tour, prepared the
necessary documents and procured the plane tickets. It arranged petitioner's hotel accommodation as well as food, land
transfers and sightseeing excursions, in accordance with its avowed undertaking.

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.115 (Emphasis supplied)

Most of the petitioners were balikbayans.116 It is reasonable to presume that they were adequately versed with the
procedures of air travel, including familiarizing themselves with the itinerary before departure. Moreover, the tickets were
issued 37 days before their departure from Manila and 39 days from their departure from Palawan. There was more than
enough time to correct any alleged mistake in the flight schedule.

Petitioners, in failing to exercise the necessary care in the conduct of their affairs, were without a doubt negligent. Thus,
they are not entitled to damages.

Before damages may be awarded, "the claimant should satisfactorily show the existence of the factual basis of damages
and its causal connection to defendant's acts."117 The cause of petitioners' injury was their own negligence; hence, there is
no reason to award moral damages. Since the basis for moral damages has not been established, there is no basis to
recover exemplary damages118 and attorney's fees119 as well.
III

Traveling by air for leisure is a fairly new concept to the average Filipino. From 1974, there was only one local airline
commanding a monopoly on domestic air travel.120 In 1996, respondent introduced the concept of a budget airline in the
Philippines, touting "low-cost services to more destinations and routes with higher flight frequency within the Philippines
than any other airline."121 In its inception, respondent offered plane fares that were "40% to 50% lower than [Philippine
Airlines]."122

On March 1, 2007, to celebrate its new fleet of aircraft, respondent offered a promo of P1.00 base fare for all their
domestic and international destinations.123 The fare was non-refundable and exclusive of taxes and surcharges.124

Despite the conditions imposed on these "piso fares," more people were enticed to travel by air. From January to June
2007, respondent had a total number of 2,256,289 passengers while Philippines Airlines had a total of 1,981,267
passengers.125 The domestic air travel market also had a 24% increase in the first half of 2007.126

Promotional fares encouraged more Filipinos to travel by air as the number of fliers in the country increased from 7.2
million in 2005 to 16.5 million in 2010.127 The emergence of low-cost carriers "liberalized [the] aviation regime" 128 and
contributed to an "unprecedented and consistent double digit growth rates of domestic and international travel" 129from
2007 to 2012.

This development, however, came with its own set of problems. Numerous complaints were filed before the Department
of Trade and Industry and the Department of Transportation and Communications, alleging "unsatisfactory airline
service"130 as a result of flight overbooking, delays, and cancellations.131

This prompted concerned government agencies to issue Department of Transportation and Communications-Department
of Trade and Industry Joint Administrative Order No. 1, Series of 2012, otherwise known as the Air Passenger Bill of Rights.

Section 4 of the Joint Administrative Order requires airlines to provide the passenger with accurate information before the
purchase of the ticket:
Section 4. Right to Full, Fair, and Clear Disclosure of the Service Offered and All the Terms and Conditions of the Contract
of Carriage. Every passenger shall, before purchasing any ticket for a contract of carriage by the air carrier or its agents, be
entitled to the full, fair, and clear disclosure of all the terms and conditions of the contract of carriage about to be
purchased. The disclosure shall include, among others, documents required to be presented at check-in, provisions on
check-in deadlines, refund and rebooking policies, and procedures and responsibility for delayed and/or cancelled flights.
These terms and conditions may include liability limitations, claim-filing deadlines, and other crucial conditions.

4.1 An air carrier shall cause the disclosure under this Section to be printed on or attached to the passenger ticket and/or
boarding pass, or the incorporation of such terms and conditions of carriage by reference. Incorporation by reference
means that the ticket and/or boarding pass shall clearly state that the complete terms and conditions of carriage are
available for perusal and/or review on the air carrier's website, or in some other document that may be sent to or
delivered by post or electronic mail to the passenger upon his/her request.
....

4.3 Aside from the printing and/or publication of the above disclosures, the same shall likewise be verbally explained to
the passenger by the air carrier and/or its agent/s in English and Filipino, or in a language that is easily understood by the
purchaser, placing emphasis on the limitations and/or restrictions attached to the ticket.
.....

4.5 Any violation of the afore-stated provisions shall be a ground for the denial of subsequent applications for approval of
promotional fare, or for the suspension or recall of the approval made on the advertised fare/rate. (Emphasis in the
original)

The Air Passenger Bill of Rights recognizes that a contract of carriage is a contract of adhesion, and thus, all conditions and
restrictions must be fully explained to the passenger before the purchase of the ticket:
WHEREAS, such a contract of carriage creates an asymmetrical relationship between an air carrier and a passenger,
considering that, while a passenger has the option to buy or not to buy the service, the decision of the passenger to buy
the ticket binds such passenger, by adhesion, to all the conditions and/or restrictions attached to the air carrier ticket on an
all-or-nothing basis, without any say, whatsoever, with regard to the reasonableness of the individual conditions and
restrictions attached to the air carrier ticket;132ChanRoblesVirtualawlibrary

Section 4.4 of the Air Passenger Bill of Rights requires that "all rebooking, refunding, baggage allowance and check-in
policies" must be stated in the tickets:
4.4 The key terms of a contract of carriage, which should include, among others, the rebooking, refunding, baggage
allowance and check-in policies, must be provided to a passenger and shall substantially be stated in the following manner
and, if done in print, must be in bold letters:
(English)

"NOTICE:

The ticket that you are purchasing is subject to the following conditions/restrictions:

1. _______________
2. _______________
3. _______________

Your purchase of this ticket becomes a binding contract on your part to follow the terms and conditions of the ticket and
of the flight. Depending on the fare rules applicable to your ticket, non-use of the same may result in forfeiture of the
fare or may subject you to the payment of penalties and additional charges if you wish to change or cancel your
booking.

For more choices and/or control in your flight plans, please consider other fare types."

(Filipino)

"PAALALA:
Ang tiket na ito ay binibili ninyo nang may mga kondisyon/ restriksyon:

1. _______________
2. _______________
3. _______________

Sa pagpili at pagbili ng tiket na ito, kayo ay sumasang-ayon sa mga kondisyon at restriksyon na nakalakip dito, bilang
kontrata ninyo sa air carrier. Depende sa patakarang angkop sa iyong tiket, ang hindi paggamit nito ay maaaring
magresulta sa pagwawalang bisa sa inyong tiket o sa paniningil ng karagdagang bayad kung nais ninyong baguhin o
kanselahin ang inyong tiket.

Para sa mas maraming pagpipilian at malawak na control sa inyong flight, inaanyayahan kayong bumili ng iba pang klase
ng tiket galing sa air carrier." (Emphasis in the original)

The Air Passenger Bill of Rights acknowledges that "while a passenger has the option to buy or not to buy the service, the
decision of the passenger to buy the ticket binds such passenger[.]"133 Thus, the airline is mandated to place in writing all
the conditions it will impose on the passenger.

However, the duty of an airline to disclose all the necessary information in the contract of carriage does not remove the
correlative obligation of the passenger to exercise ordinary diligence in the conduct of his or her affairs. The passenger is
still expected to read through the flight information in the contract of carriage before making his or her purchase. If he or
she fails to exercise the ordinary diligence expected of passengers, any resulting damage should be borne by the
passenger.chanrobleslaw

WHEREFORE, the Petition is DENIED.

SO ORDERED.

February 8, 2017
G.R. No. 212038
SPOUSES JESUS FERNANDO and ELIZABETH S. FERNANDO, Petitioners
vs.
NORTHWEST AIRLINES, INC., Respondent
x-----------------------x
G.R. No. 212043
NORTHWEST AIRLINES, INC., Petitioner,
vs.
SPOUSES JESUS FERNANDO and ELIZABETH S. FERNANDO, Respondents.
DECISION
PERALTA, J.:
Before us are consolidated petitions for review on certiorari under Rule 45 of the Rules of Court assailing the
Decision1 dated August 30, 2013, and Resolution2 dated March 31, 2014 of the Court of Appeals (CA) in CA-G.R. CV No.
93496 which affirmed the Decision3 dated September 9, 2008 of the Regional Trial Court (RTC), Branch 97, Quezon City in
Civil Case No. Q-N-02-46727 finding Northwest Airlines, Inc. (Northwest) liable for breach of contract of carriage.
The spouses Jesus and Elizabeth S. Fernando (Fernandos) are frequent flyers of Northwest Airlines, Inc. and are holders of
Elite Platinum World Perks Card, the highest category given to frequent flyers of the carrier.4 They are known in the musical
instruments and sports equipments industry in the Philippines being the owners of JB Music and JB Sports with outlets all
over the country. They likewise own the five (5) star Hotel Elizabeth in Baguio City and Cebu City, and the chain of Fersal
Hotels and Apartelles in the country.5
The Fernandos initiated the filing of the instant case which arose from two (2) separate incidents: first, when Jesus
Fernando arrived at Los Angeles (LA) Airport on December 20, 2001; second, when the Fernandos were to depart from the
LA Airport on January 29, 2002. The factual antecedents are as follows:
Version of Spouses Jesus and Elizabeth S. Fernando:
a.) The arrival at Los Angeles Airport on December 20, 2001
Sometime on December 20, 2001, Jesus Fernando arrived at the LA Airport via Northwest Airlines Flight No. NW02 to join
his family who flew earlier to the said place for a reunion for the Christmas holidays.6
When Jesus Fernando presented his documents at the immigration counter, he was asked by the Immigration Officer to
have his return ticket verified and validated since the date reflected thereon is August 2001. So he approached a
Northwest personnel who was later identified as Linda Puntawongdaycha, but the latter merely glanced at his ticket
without checking its status with the computer and peremptorily said that the ticket has been used and could not be
considered as valid. He then explained to the personnel that he was about to use the said ticket on August 20 or 21, 2001
on his way back to Manila from LA but he could not book any seat because of some ticket restrictions so he, instead,
purchased new business class ticket on the said date.7 Hence, the ticket remains unused and perfectly valid.
To avoid further arguments, Jesus Fernando gave the personnel the number of his Elite Platinum World Perks Card for the
latter to access the ticket control record with the airline's computer and for her to see that the ticket is still valid. But Linda
Puntawongdaycha refused to check the validity of the ticket in the computer but, instead, looked at Jesus Fernando with
contempt, then informed the Immigration Officer that the ticket is not valid because it had been used. 8
The Immigration Officer brought Jesus Fernando to the interrogation room of the Immigration and Naturalization Services
(INS) where he was asked humiliating questions for more than two (2) hours. When he was finally cleared by the
Immigration Officer, he was granted only a twelve (12)-day stay in the United States (US), instead of the usual six (6)
months.9
When Jesus Fernando was finally able to get out of the airport, to the relief of his family, Elizabeth Fernando proceeded to
a Northwest Ticket counter to verify the status of the ticket. The personnel manning the counter courteously assisted her
and confirmed that the ticket remained unused and perfectly valid. To avoid any future problems that may be encountered
on the validity of the ticket, a new ticket was issued to Jesus Fernando. 10
Since Jesus Fernando was granted only a twelve (12)-day stay in the US, his scheduled plans with his family as well as his
business commitments were disrupted. He was supposed to stay with his family for the entire duration of the Christmas
season because his son and daughter were then studying at Pepperton University in California. But he was forced to fly
back to Manila before the twelve (12)-day stay expired and flew back to the US on January 15, 2002. The Fernandos were,
likewise, scheduled to attend the Musical Instrument Trade Show in LA on January 1 7, 2002 and the Sports Equipment
Trade Show in Las Vegas on January 21 to 23, 2002 which were both previously scheduled. Hence, Jesus Fernando had to
spend additional expenses for plane fares and other related expenses, and missed the chance to be with his family for the
whole duration of the Christmas holidays.11
b.) The departure from the Los Angeles Airport on January 29, 2002.
On January 29, 2002, the Fernandos were on their way back to the Philippines. They have confirmed bookings on
Northwest Airlines NW Flight No. 001 for Narita, Japan and NW 029 for Manila. They checked in with their luggage at the
LA Airport and were given their respective boarding passes for business class seats and claim stubs for six (6) pieces of
luggage. With boarding passes, tickets and other proper travel documents, they were allowed entry to the departure area
and joined their business associates from Japan and the Philippines who attended the Musical Instrument Trade Show in
LA on January 17, 2002 and the Sports Equipment Trade Show in Las Vegas on January 21 to 23, 2002. When it was
announced that the plane was ready for boarding, the Fernandos joined the long queue of business class passengers along
with their business associates.12
When the Fernandos reached the gate area where boarding passes need to be presented, Northwest supervisor Linda Tang
stopped them and demanded for the presentation of their paper tickets (coupon type). They failed to present the same
since, according to them, Northwest issued electronic tickets (attached to the boarding passes) which they showed to the
supervisor.13 In the presence of the other passengers, Linda Tang rudely pulled them out of the queue. Elizabeth Fernando
explained to Linda Tang that the matter could be sorted out by simply verifying their electronic tickets in her computer and
all she had to do was click and punch in their Elite Platinum World Perks Card number. But Linda Tang arrogantly told them
that if they wanted to board the plane, they should produce their credit cards and pay for their new tickets, otherwise
Northwest would order their luggage off-loaded from the plane. Exasperated and pressed for time, the Fernandos rushed
to the Northwest Airline Ticket counter to clarify the matter. They were assisted by Northwest personnel Jeanne Meyer
who retrieved their control number from her computer and was able to ascertain that the Fernandos' electronic tickets
were valid and they were confirmed passengers on both NW Flight No. 001 for Narita Japan and NW 029 for Manila on
that day. To ensure that the Fernandos would no longer encounter any problem with Linda Tang, Jeanne Meyer printed
coupon tickets for them who were then advised to rush back to the boarding gates since the plane was about to depart.
But when the Fernandos reached the boarding gate, the plane had already departed. They were able to depart, instead,
the day after, or on January 30, 2002, and arrived in the Philippines on January 31,2002. 14
Version of Northwest Airlines, Inc.:
a.) The arrival at the Los Angeles Airport on December 20, 2001.
Northwest claimed that Jesus Fernando travelled from Manila to LA on Northwest Airlines on December 20, 2001. At the
LA Airport, it was revealed that Jesus Fernando's return ticket was dated August 20 or 21, 2001 so he encountered a
problem in the Immigration Service. About an hour after the aircraft had arrived, Linda Puntawongdaycha, Northwest
Customer Service Agent, was called by a US Immigration Officer named "Nicholas" to help verify the ticket of Jesus
Fernando. Linda Puntawongdaycha then asked Jesus Fernando to "show" her "all the papers." Jesus Fernando only showed
her the passenger receipt of his ticket without any ticket coupon attached to it. The passenger receipt which was labelled
"Passenger Receipt" or "Customer Receipt" was dated August 2001. Linda Puntawongdaycha asked Jesus Fernando several
times whether he had any other ticket, but Jesus Fernando insisted that the "receipt" was "all he has", and the passenger
receipt was his ticket. He failed to show her any other document, and was not able to give any other relevant information
about his return ticket. Linda Puntawongdaycha then proceeded to the Interline Department and checked Jesus
Fernando's Passenger Name Record (PNR) and his itinerary. The itinerary only showed his coming from Manila to Tokyo
and Los Angeles; nothing would indicate about his flight back to Manila. She then looked into his record and checked
whether he might have had an electronic ticket but she could not find any. For failure to find any other relevant
information regarding Fernando's return ticket, she then printed out Jesus Fernando's PNR and gave the document to the
US Immigration Officer. Linda Puntawongdaycha insisted that she did her best to help Jesus Fernando get through the US
Immigration.15
b.) The departure from the Los Angeles Airport on January 29, 2002.
On January 29, 2002, the Fernandos took Northwest for their flight back to Manila. In the trip, the Fernandos used
electronic tickets but the tickets were dated January 26, 2002 and August 21, 2001. They reached the boarding gate few
minutes before departure. Northwest personnel Linda Tang was then the one assigned at the departure area. As a
standard procedure, Linda Tang scanned the boarding passes and collected tickets while the passengers went through the
gate. When the Fernandos presented their boarding passes, Linda Tang asked for their tickets because there were no
tickets stapled on their boarding passes. She explained that even though the Fernandos had electronic tickets, they had
made "several changes on their ticket over and over". And when they made the booking/reservation at Northwest, they
never had any ticket number or information on the reservation. 16
When the Fernandos failed to show their tickets, Linda Tang called Yong who was a supervisor at the ticket counter to
verify whether the Fernandos had checked in, and whether there were any tickets found at the ticket counter. Upon
verification, no ticket was found at the ticket counter, so apparently when the Fernandos checked in, there were no tickets
presented. Linda Tang also checked with the computer the reservation of the Fernandos, but again, she failed to see any
electronic ticket number of any kind, and/or any ticket record. So as the Fernandos would be able to get on with the flight
considering the amount of time left, she told them that they could purchase tickets with their credit cards and deal with
the refund later when they are able to locate the tickets and when they reach Manila. Linda Tang believed that she did the
best she could under the circumstances.17
However, the Fernandos did not agree with the solution offered by Linda Tang. Instead, they went back to the Northwest
ticket counter and were attended to by Jeanne Meyer who was "courteous" and "was very kind enough" to assist them.
Jeanne Meyer verified their bookings and "printed paper tickets" for them. Unfortunately, when they went back to the
boarding gate, the plane had departed. Northwest offered alternative arrangements for them to be transported to Manila
on the same day on another airline, either through Philippine Airlines or Cathay Pacific Airways, but they refused.
Northwest also offered them free hotel accommodations but they, again, rejected the offer 18 Northwest then made
arrangements for the transportation of the Fernandos from the airport to their house in LA, and booked the Fernandos on
a Northwest flight that would leave the next day, January 30, 2002. On January 30, 2002, the Fernandos flew to Manila on
business class seats.19
On April 30, 2002, a complaint for damages20 was instituted by the Fernandos against Northwest before the RTC, Branch
97, Quezon City. During the trial of the case, the Fernandos testified to prove their claim. On the part of Northwest, Linda
Tang-Mochizuki and Linda Puntawongdaycha testified through oral depositions taken at the Office of the Consulate
General, Los Angeles City. The Northwest Manager for HR-Legal Atty. Cesar Veneracion was also presented and testified on
the investigation conducted by Northwest as a result of the letters sent by Elizabeth Fernando and her counsel prior to the
filing of the complaint before the RTC.21
On September 9, 2008, the RTC issued a Decision, the dispositive portion of which states, thus:
WHEREFORE, in view of the foregoing, this Court rendered judgment in favor of the plaintiffs and against defendant
ordering defendant to pay the plaintiffs, the following:
1. Moral damages in the amount of Two Hundred Thousand Pesos (₱200,000.00);
2. Actual or compensatory damages in the amount of Two Thousand US Dollars ($2,000.00) or its corresponding
Peso equivalent at the time the airline ticket was purchased;
3. Attorney's fees in the amount of Fifty Thousand pesos (₱50,000.00); and,
4. Cost of suit.
SO ORDERED.22
Both parties filed their respective appeals which were dismissed by the CA in a Decision dated August 30, 2013, and
affirmed the RTC Decision.
The Fernandos and Northwest separately filed motions for a reconsideration of the Decision, both of which were denied by
the CA on March 31, 2014.
The Fernandos filed a petition for review on certiorari23before this court docketed as G.R. No. 212038. Northwest followed
suit and its petition24 was docketed as G.R. No. 212043. Considering that both petitions involved similar parties, emanated
from the same Civil Case No. Q-N-02-46727 and assailed the same CA judgment, they were ordered consolidated in a
Resolution25 dated June 18, 2014.
In G.R. No. 212038, the Fernandos raised the following issues:
WHETHER OR NOT THE ACTS OF THE PERSONNEL AND THAT OF DEFENDANT NORTHWEST ARE WANTON, MALICIOUS,
RECKLESS, DELIBERATE AND OPPRESSIVE IN CHARACTER, AMOUNTING TO FRAUD AND BAD FAITH;
WHETHER OR NOT PETITIONER SPOUSES ARE ENTITLED TO MORAL DAMAGES IN AN AMOUNT MORE THAN THAT
AWARDED BY THE TRIAL COURT;
WHETHER OR NOT DEFENDANT NORTHWEST IS LIABLE TO PETITIONER SPOUSES FOR EXEMPLARY DAMAGES; [AND]
WHETHER OR NOT THE PETITIONER SPOUSES ARE ENTITLED TO ATTORNEY'S FEES IN AN AMOUNT MORE THAN THAT
AWARDED BY THE TRIAL COURT.26
In G.R. No. 212043, Northwest anchored its petition on the following assigned errors:
I
THE COURT OF APPEALS COMMITTED REVERSIBLE ERROR IN RULING THAT NORTHWEST COMMITTED A BREACH OF
CONTRACT OF CARRIAGE;
II
THE COURT OF APPEALS COMMITTED REVERSIBLE ERROR IN RULING THAT NORTHWEST IS LIABLE FOR DAMAGES AND THE
AWARDS FOR MORAL DAMAGES AND ATTORNEY'S FEES ARE APPROPRIATE;
III
THE COURT OF APPEALS COMMITTED REVERSIBLE ERROR IN RULING THAT NORTHWEST IS NOT ENTITLED TO RECOVER ON
ITS COUNTERCLAIMS.27
The Issues
The arguments proffered by the parties can be summed up into the following issues: (1) whether or not there was breach
of contract of carriage and whether it was done in a wanton, malevolent or reckless manner amounting to bad faith; (2)
whether or not Northwest is liable for the payment of moral damages and attorney's fees and whether it is liable to pay
more than that awarded by the RTC; (3) whether or not Northwest is liable for the payment of exemplary damages; and (4)
whether or not Northwest Airlines is entitled to recover on its counterclaim.
In their petition, the Fernandos contended that it was the personal misconduct, gross negligence and the rude and abusive
attitude of Northwest employees Linda Puntawongdaycha and Linda Tang which subjected them to indignities, humiliation
and embarrassment. The attitude of the aforesaid employees was wanton and malevolent allegedly amounting to fraud
and bad faith. According to the Fernandos, if only Linda Puntawongdaycha had taken the time to verify the validity of the
ticket in the computer, she would have not given the wrong information to the Immigration Officer because the August
2001 return ticket remained unused and valid for a period of one (1) year, or until August 2002. The wrong information
given by Linda Puntawongdaycha aroused doubts and suspicions on Jesus Fernando's travel plans. The latter was then
subjected to two (2) hours of questioning which allegedly humiliated him. He was even suspected of being an "illegal
alien". The negligence of Linda Puntawongdaycha was allegedly so gross and reckless amounting to malice or bad faith.
As to the second incident, the Fernandos belied the accusation of Northwest that they did not present any tickets. They
presented their electronic tickets which were attached to their boarding passes. If they had no tickets, the personnel at the
check-in counter would have not issued them their boarding passes and baggage claim stubs. That's why they could not
understand why the coupon-type ticket was still demanded by Northwest.
On the award of moral damages, the Fernandos referred to the testimony of Elizabeth Fernando that she could not sleep
and had a fever the night after the second incident. Thus, the Fernandos demanded that they should be given more than
the "token amount" granted by the RTC which was affirmed by the CA. They stated that their status in the society and in
the business circle should also be considered as a factor in awarding moral damages. They averred that they are well-
known in the musical instruments and sports equipment industry in the country being the owners of JB Music and JB
Sports with outlets all over the country. They own hotels, a chain of apartelles and a parking garage building in Indiana,
USA. And since the breach of contract allegedly amounted to fraud and bad faith, they likewise demanded for the payment
of exemplary damages and attorney's fees more than the amount awarded by the RTC.
On the other hand, Northwest stated in its petition that Linda Puntawongdaycha tried her best to help Jesus Fernando get
through the US Immigration. Notwithstanding that Linda Puntawongdaycha was not able to find any relevant information
on Jesus Fernando's return ticket, she still went an extra mile by printing the PNR of Jesus Fernando and handling the same
personally to the Immigration Officer. It pointed out that the Immigration Officer "noticed in the ticket that it was dated
sometime August 20 or 21, 2001, although it was already December 2001."
As to the incident with Linda Tang, Northwest explained that she was only following Northwest standard boarding
procedures when she asked the Fernandos for their tickets even if they had boarding passes. Thus, the conduct cannot be
construed as bad faith. The dates indicated on the tickets did not match the booking. Elizabeth Fernando was using an
electronic ticket dated August 21, 2001, while the electronic ticket of Jesus Fernando was dated January 26, 2002.
According to Northwest, even if the Fernandos had electronic tickets, the same did not discount the fact that, on the face
of the tickets, they were for travel on past dates. Also, the electronic tickets did not contain the ticket number or any
information regarding the reservation. Hence, the alleged negligence of the Fernandos resulted in the confusion in the
procedure in boarding the plane and the eventual failure to take their flight.
Northwest averred that the award of moral damages and attorney's fees were exorbitant because such must be
proportionate to the suffering inflicted. It argued that it is not obliged to give any "special treatment" to the Fernandos just
because they are good clients of Northwest, because the supposed obligation does not appear in the contract of carriage.
It further averred that it is entitled to its counterclaim in the amount of ₱500,000.00 because the Fernandos allegedly
acted in bad faith in prosecuting the case which it believed are baseless and unfounded.
In the Comment28 of Northwest, it insisted that assuming a mistake was committed by Linda Tang and Linda
Puntawongdaycha, such mistake alone, without malice or ill will, is not equivalent to fraud or bad faith that would entitle
the Fernandos to the payment of moral damages.
In the Reply29 of the Fernandos, they asserted that it was a lie on the part of Linda Puntawongdaycha to claim that she
checked the passenger name or PNR of Jesus Fernando from the computer and, as a result, she was not allegedly able to
find any return ticket for him. According to Jesus Fernando, Linda Puntawongdaycha merely looked at his ticket and
declared the same to be invalid. The Fernandos reiterated that after Jesus Fernando was released by the US Immigration
Service, Elizabeth Fernando proceeded to a Northwest Ticket counter to verify the status of the ticket. The personnel
manning the counter courteously assisted her and confirmed that the ticket remained unused and perfectly valid. The
personnel merely punched the Elite Platinum World Perks Card number of Jesus Fernando and was able to verify the status
of the ticket. The Fernandos further argued that if there was a discrepancy with the tickets or reservations, they would not
have been allowed to check in, and since they were allowed to check in then they were properly booked and were
confirmed passengers of Northwest.
Our Ruling
We find merit in the petition of the Spouses Jesus and Elizabeth Fernando. The Fernandos' cause of action against
Northwest stemmed from a breach of contract of carriage. A contract is a meeting of minds between two persons whereby
one agrees to give something or render some service to another for a consideration. There is no contract unless the
following requisites concur: (1) consent of the contracting parties; (2) an object certain which is the subject of the contract;
and (3) the cause of the obligation which is established. 30
A contract of carriage is defined as one whereby a certain person or association of persons obligate themselves to
transport persons, things, or goods from one place to another for a fixed price. Under Article 1732 of the Civil Code, this
"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" is called a common
carrier.31 Undoubtedly, a contract of carriage existed between Northwest and the Fernandos. They voluntarily and freely
gave their consent to an agreement whose object was the transportation of the Fernandos from LA to Manila, and whose
cause or consideration was the fare paid by the Fernandos to Northwest. 32
In Alitalia Airways v. CA, et al.,33 We held that 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 would fly on that flight
and on that date. If he does not, then the carrier. opens itself to a suit for breach of contract of carriage. 34
When Northwest confirmed the reservations of the Fernandos, it bound itself to transport the Fernandos on their flight on
29 January 2002.
We note that the witness35 of Northwest admitted on cross-examination that based on the documents submitted by the
Fernandos, they were confirmed
passengers on the January 29, 2002 flight.36
In an action based on a breach of contract of carriage, the aggrieved party does not have to prove that the common carrier
was at fault or was negligent. All that he has to prove is the existence of the contract and the fact of its non-performance
by the carrier.37 As the aggrieved party, the Fernandos only had to prove the existence of the contract and the fact of its
non-performance by Northwest, as carrier, in order to be awarded compensatory and actual damages. 38
Therefore, having proven the existence of a contract of carriage between Northwest and the Fernandos, and the fact of
non-performance by Northwest of its obligation as a common carrier, it is clear that Northwest breached its contract of
carriage with the Fernandos. Thus, Northwest opened itself to claims for compensatory, actual, moral and exemplary
damages, attorney's fees and costs of suit.39
Moreover, Article 1733 of the New Civil Code provides that common carriers, from the nature of their business and for
reasons of public policy, are bound to observe extraordinary diligence in the vigilance over the goods and for the safety of
the passengers transported by them, according to all the circumstances of each case. Also, Article 1755 of the same Code
states that a common carrier is bound to carry the passengers safely as far as human care and foresight can provide, using
the utmost diligence of very cautious persons, with due regard for all the circumstances.
We, thus, sustain the findings of the CA and the RTC that Northwest committed a breach of contract "in failing to provide
the spouses with the proper assistance to avoid any inconvenience" and that the actuations of Northwest in both subject
incidents "fall short of the utmost diligence of a very cautious person expected of it". Both ruled that considering that the
Fernandos are not just ordinary passengers but, in fact, frequent flyers of Northwest, the latter should have been more
courteous and accommodating to their needs so that the delay and inconveniences they suffered could have been
avoided. Northwest was remiss in its duty to provide the proper and adequate assistance to them.
Nonetheless, We are not in accord with the common finding of the CA and the RTC when both ruled out bad faith on the
part of Northwest. While We agree that the discrepancy between the date of actual travel and the date appearing on the
tickets of the Fernandos called for some verification, however, the Northwest personnel failed to exercise the utmost
diligence in assisting the Fernandos. The actuations of Northwest personnel in both subject incidents are constitutive of
bad faith.
On the first incident, Jesus Fernando even gave the Northwest personnel the number of his Elite Platinum World Perks
Card for the latter to access the ticket control record with the airline's computer for her to see that the ticket is still valid.
But Linda Puntawongdaycha refused to check the validity of the ticket in the computer. As a result, the Immigration Officer
brought Jesus Fernando to the interrogation room of the INS where he was interrogated for more than two (2) hours.
When he was finally cleared by the Immigration Officer, he was granted only a twelve (12)-day stay in the United States
(US), instead of the usual six (6) months.40
As in fact, the RTC awarded actual or compensatory damages because of the testimony of Jesus Fernando that he had to
go back to Manila and then return again to LA, USA, two (2) days after requiring him to purchase another round trip ticket
from Northwest in the amount of $2,000.00 which was not disputed by Northwest. 41 In ignoring Jesus Fernando's pleas to
check the validity of the tickets in the computer, the Northwest personnel exhibited an indifferent attitude without due
regard for the inconvenience and anxiety Jesus Fernando might have experienced.
Passengers do not contract merely for transportation. They have a right to be treated by the carrier's employees with
kindness, respect, courtesy and due consideration. They are entitled to be protected against personal misconduct,
injurious language, indignities and abuses from such employees. So it is, that any rule or discourteous conduct on the part
of employees towards a passenger gives the latter an action for damages against the carrier.42
In requiring compliance with the standard of extraordinary diligence, a standard which is, in fact, that of the highest
possible degree of diligence, from common carriers and in creating a presumption of negligence against them, the law
seeks to compel them to control their employees, to tame their reckless instincts and to force them to take adequate care
of human beings and their property.43
Notably, after the incident, the Fernandos proceeded to a Northwest Ticket counter to verify the status of the ticket and
they were assured that the ticked remained unused and perfectly valid. And, to avoid any future problems that may be
encountered on the validity of the ticket, a new ticket was issued to Jesus Fernando. The failure to promptly verify the
validity of the ticket connotes bad faith on the part of Northwest.
Bad faith does not simply connote bad judgment or negligence. It imports a 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 of
the nature of fraud. A finding of bad faith entitles the offended party to moral damages. 44
As to the second incident, there was likewise fraud or bad faith on the part of Northwest when it did not allow the
Fernandos to board their flight for Manila on January 29, 2002, in spite of confirmed tickets. We need to stress that they
have confirmed bookings on Northwest Airlines NW Flight No. 001 for Narita, Japan and NW 029 for Manila. They checked
in with their luggage at LA Airport and were given their respective boarding passes for business class seats and claim stubs
for six (6) pieces of luggage. With boarding passes and electronic tickets, apparently, they were allowed entry to the
departure area; and, they eventually joined the long queue of business class passengers along with their business
associates.
However, in the presence of the other passengers, Northwest personnel Linda Tang pulled the Fernandos out of the queue
and asked for paper tickets (coupon type). Elizabeth Fernando explained to Linda Tang that the matter could be sorted out
by simply verifying their electronic tickets in her computer and all she had to do was click and punch in their Elite Platinum
World Perks Card number. Again, the Northwest personnel refused to do so; she, instead, told them to pay for new tickets
so they could board the plane. Hence, the Fernandos rushed to the Northwest Airline Ticket counter to clarify the matter.
They were assisted by Northwest personnel Jeanne Meyer who retrieved their control number from her computer and was
able to ascertain that the Fernandos' electronic tickets were valid, and they were confirmed passengers on both NW Flight
No. 001 for Narita Japan and NW 029 for Manila on that day.
In Ortigas, Jr. v. Lufthansa German Airlines,45 this Court declared that "(i)n contracts of common carriage, in attention and
lack of care on the part of the carrier resulting in the failure of the passenger to be accommodated in the class contracted
for amounts to bad faith or fraud which entitles the passengers to the award of moral damages in accordance with Article
2220 of the Civil Code."
In Pan American World Airways, Inc. v. Intermediate Appellate Court,46 where a would-be passenger had the necessary
ticket, baggage claim and clearance from immigration, all clearly and unmistakably showing that she was, in fact, included
in the passenger manifest of said flight, and yet was denied accommodation in said flight, this Court did not hesitate to
affirm the lower court's finding awarding her damages on the ground that the breach of contract of carriage amounted to
bad faith.47 For the indignity and inconvenience of being refused a confirmed seat on the last minute, said passenger is
entitled to an award of moral damages.48
In this case, We need to stress that the personnel who assisted the Fernandos even printed coupon tickets for them and
advised them to rush back to the boarding gates since the plane was about to depart. But when the Fernandos reached
the boarding gate, the plane had already departed. They were able to depart, instead, the day after, or on January 30,
2002.
In Japan Airlines v. Jesus Simangan,49 this Court held that the acts committed by Japan Airlines against Jesus Simangan
amounted to bad faith, thus:
x x x JAL did not allow respondent to fly. It informed respondent that there was a need to first check the authenticity of
his travel documents with the U.S. Embassy. As admitted by JAL, "the flight could not wait for Mr. Simangan because it
was ready to depart."
Since JAL definitely declared that the flight could not wait for respondent, it gave respondent no choice but to be left
behind. The latter was unceremoniously bumped off despite his protestations and valid travel documents and
notwithstanding his contract of carriage with JAL. Damage had already been done when respondent was offered to fly
the next day on July 30, 1992. Said offer did not cure JAL's default.50
Similarly, in Korean Airlines Co., Ltd. v. Court of Appeals,51 where private respondent was not allowed to board the plane
because her seat had already been given to another passenger even before the allowable period for passengers to check in
had lapsed despite the fact that she had a confirmed ticket and she had arrived on time, this Court held that petitioner
airline acted in bad faith in violating private respondent's rights under their contract of carriage and is, therefore, liable for
the injuries she has sustained as a result.52
Under Article 222053 of the Civil Code of the Philippines, an award of moral damages, in breaches of contract, is in order
upon a showing that the defendant acted fraudulently or in bad faith.54 Clearly, in this case, the Fernandos are entitled to
an 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 he has undergone by reason of defendant's
culpable action.55
We note that even if both the CA and the RTC ruled out bad faith on the part of Northwest, the award of "some moral
damages" was recognized. Both courts believed that considering that the Fernandos are good clients of Northwest for
almost ten (10) years being Elite Platinum World Perks Card holders, and are known in their business circle, they should
have been given by Northwest the corresponding special treatment. 56 They own hotels and a chain of apartelles in the
country, and a parking garage building in Indiana, USA. From this perspective, We adopt the said view. We, thus, increase
the award of moral damages to the Fernandos in the amount of ₱3,000,000.00.
As held in Kierulf v. Court of Appeals,57 the social and financial standing of a claimant may be considered if he or she was
subjected to contemptuous conduct despite the offender's knowledge of his or her social and financial standing.
In Trans World Airlines v. Court of Appeals,58 this Court considered the social standing of the aggrieved passenger:
At the time of this unfortunate incident, the private respondent was a practicing lawyer, a senior partner of a big law firm
in Manila. He was a director of several companies and was active in civic and social organizations in the Philippines.
Considering the circumstances of this case and the social standing of private respondent in the community, he is entitled
to the award ofmoral and exemplary damages. x x x This award should be reasonably sufficient to indemnify private
respondent for the humiliation and embarrassment that he suffered and to serve as an example to discourage the
repetition of similar oppressive and discriminatory acts. 59
Exemplary damages, which are awarded by way of example or correction for the public good, may be recovered in
contractual obligations, if defendant acted in wanton, fraudulent, reckless, oppressive, or malevolent manner.60They 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.61 Hence, given the facts and circumstances of this case,
We hold Northwest liable for the payment of exemplary damages in the amount of ₱2,000,000.00.
In the case of Northwest Airlines, Inc. v. Chiong,62 Chiong was given the run-around at the Northwest check-in counter,
instructed to deal with a man in barong to obtain a boarding pass, and eventually barred from boarding a Northwest flight
to accommodate an American passenger whose name was merely inserted in the Flight Manifest, and did not even
personally check-in at the counter. Under the foregoing circumstances, the award of moral and exemplary damages was
given by this Court.
Time and again, We have declared that a contract of carriage, in this case, air transport, is primarily intended to serve the
traveling public and thus, imbued with public interest. The law governing common carriers consequently imposes an
exacting standard of conduct.63 A contract to transport passengers is quite different in kind and degree from any other
contractual relation because of the relation which an air-carrier sustains with the public. Its business is mainly with the
travelling public. It invites people to avail of the comforts and advantages it offers. The contract of air carriage, therefore,
generates a relation attended with a public duty. Neglect or malfeasance of the carrier's employees, naturally, could give
ground for an action or damages.64
As to the payment of attorney's fees, We sustain the award thereof on the ground that the Fernandos were ultimately
compelled to litigate and incurred expenses to protect their rights and interests, and because the Fernandos are entitled to
an award for exemplary damages. Pursuant to Article 2208 of the Civil Code, attorney's fees may be awarded when
exemplary damages are awarded, or a party is compelled to litigate or incur expenses to protect his interest, or where the
defendant acted in gross and evident bad faith in refusing to satisfy the plaintiff's plainly valid, just and demandable claim.
Records show that the Fernandos demanded payment for damages from Northwest even before the filing of this case in
court.1âwphi1 Clearly, the Fernandos were forced to obtain the services of counsel to enforce a just claim, for which they
should be awarded attorney's fees.65 We deem it just and equitable to grant an award of attorney's fees equivalent to 10%
of the damages awarded.
Lastly, the counterclaim of Northwest in its Answer66 is a compulsory counterclaim for damages and attorney's fees arising
from the filing of the complaint. This compulsory counterclaim of Northwest arising from the filing of the complaint may
not be granted inasmuch as the complaint against it is obviously not malicious or unfounded. It was filed by the Fernandos
precisely to claim their right to damages against Northwest. Well-settled is the rule that the commencement of an action
does not per se make the action wrongful and subject the action to damages, for the law could not have meant to impose
a penalty on the right to litigate.67
WHEREFORE, the Decision dated August 30, 2013 and the Resolution dated March 31, 2014 of the Court of Appeals, in CA-
G.R. CV No. 93496 are hereby AFFIRMED WITH MODIFICATION. The award of moral damages and attorney's fees are
hereby increased to ₱3,000,000.00 and ten percent (10%) of the damages awarded, respectively. Exemplary damages in
the amount of ₱2,000,000.00 is also awarded. Costs against Northwest Airlines.
The total amount adjudged shall earn legal interest at the rate of twelve percent (12%) per annum computed from judicial
demand or from April 30, 2002 to June 30 2013, and six percent (6%) per annum from July 1, 2013 until their full
satisfaction.
SO ORDERED.

G.R. No. 147079 December 21, 2004

A.F. SANCHEZ BROKERAGE INC., petitioners,
vs.
THE HON. COURT OF APPEALS and FGU INSURANCE CORPORATION, respondents.

DECISION

CARPIO MORALES, J.:

Before this Court on a petition for Certiorari is the appellate court’s Decision1 of August 10, 2000 reversing and setting
aside the judgment of Branch 133, Regional Trial Court of Makati City, in Civil Case No. 93-76B which dismissed the
complaint of respondent FGU Insurance Corporation (FGU Insurance) against petitioner A.F. Sanchez Brokerage, Inc.
(Sanchez Brokerage).
On July 8, 1992, Wyeth-Pharma GMBH shipped on board an aircraft of KLM Royal Dutch Airlines at Dusseldorf, Germany
oral contraceptives consisting of 86,800 Blisters Femenal tablets, 14,000 Blisters Nordiol tablets and 42,000 Blisters
Trinordiol tablets for delivery to Manila in favor of the consignee, Wyeth-Suaco Laboratories, Inc. 2The Femenal tablets
were placed in 124 cartons and the Nordiol tablets were placed in 20 cartons which were packed together in one (1) LD3
aluminum container, while the Trinordial tablets were packed in two pallets, each of which contained 30 cartons. 3
Wyeth-Suaco insured the shipment against all risks with FGU Insurance which issued Marine Risk Note No. 4995 pursuant
to Marine Open Policy No. 138.4
Upon arrival of the shipment on July 11, 1992 at the Ninoy Aquino International Airport (NAIA),5 it was discharged "without
exception"6 and delivered to the warehouse of the Philippine Skylanders, Inc. (PSI) located also at the NAIA for
safekeeping.7
In order to secure the release of the cargoes from the PSI and the Bureau of Customs, Wyeth-Suaco engaged the services
of Sanchez Brokerage which had been its licensed broker since 1984.8 As its customs broker, Sanchez Brokerage calculates
and pays the customs duties, taxes and storage fees for the cargo and thereafter delivers it to Wyeth-Suaco. 9
On July 29, 1992, Mitzi Morales and Ernesto Mendoza, representatives of Sanchez Brokerage, paid PSI storage fee
amounting to P8,572.35 a receipt for which, Official Receipt No. 016992, 10 was issued. On the receipt, another
representative of Sanchez Brokerage, M. Sison,11 acknowledged that he received the cargoes consisting of three pieces in
good condition.12
Wyeth-Suaco being a regular importer, the customs examiner did not inspect the cargoes 13 which were thereupon stripped
from the aluminum containers14 and loaded inside two transport vehicles hired by Sanchez Brokerage.15
Among those who witnessed the release of the cargoes from the PSI warehouse were Ruben Alonso and Tony
Akas,16 employees of Elite Adjusters and Surveyors Inc. (Elite Surveyors), a marine and cargo surveyor and insurance claim
adjusters firm engaged by Wyeth-Suaco on behalf of FGU Insurance.
Upon instructions of Wyeth-Suaco, the cargoes were delivered to Hizon Laboratories Inc. in Antipolo City for quality control
check.17 The delivery receipt, bearing No. 07037 dated July 29, 1992, indicated that the delivery consisted of one container
with 144 cartons of Femenal and Nordiol and 1 pallet containing Trinordiol. 18
On July 31, 1992, Ronnie Likas, a representative of Wyeth-Suaco, acknowledged the delivery of the cargoes by affixing his
signature on the delivery receipt.19 Upon inspection, however, he, together with Ruben Alonzo of Elite Surveyors,
discovered that 44 cartons containing Femenal and Nordiol tablets were in bad order.20 He thus placed a note above his
signature on the delivery receipt stating that 44 cartons of oral contraceptives were in bad order. The remaining 160
cartons of oral contraceptives were accepted as complete and in good order.
Ruben Alonzo thus prepared and signed, along with Ronnie Likas, a survey report21 dated July 31, 1992 stating that 41
cartons of Femenal tablets and 3 cartons of Nordiol tablets were "wetted" (sic).22
The Elite Surveyors later issued Certificate No. CS-0731-1538/9223 attached to which was an "Annexed Schedule" whereon
it was indicated that prior to the loading of the cargoes to the broker’s trucks at the NAIA, they were inspected and found
to be in "apparent good condition."24 Also noted was that at the time of delivery to the warehouse of Hizon Laboratories
Inc., slight to heavy rains fell, which could account for the wetting of the 44 cartons of Femenal and Nordiol tablets. 25
On August 4, 1992, the Hizon Laboratories Inc. issued a Destruction Report26 confirming that 38 x 700 blister packs of
Femenal tablets, 3 x 700 blister packs of Femenal tablets and 3 x 700 blister packs of Nordiol tablets were heavily damaged
with water and emitted foul smell.
On August 5, 1992, Wyeth-Suaco issued a Notice of Materials Rejection 27 of 38 cartons of Femenal and 3 cartons of Nordiol
on the ground that they were "delivered to Hizon Laboratories with heavy water damaged (sic) causing the cartons to
sagged (sic) emitting a foul order and easily attracted flies."28
Wyeth-Suaco later demanded, by letter29 of August 25, 1992, from Sanchez Brokerage the payment ofP191,384.25
representing the value of its loss arising from the damaged tablets.
As the Sanchez Brokerage refused to heed the demand, Wyeth-Suaco filed an insurance claim against FGU Insurance which
paid Wyeth-Suaco the amount of P181,431.49 in settlement of its claim under Marine Risk Note Number 4995.
Wyeth-Suaco thus issued Subrogation Receipt30 in favor of FGU Insurance.
On demand by FGU Insurance for payment of the amount of P181,431.49 it paid Wyeth-Suaco, Sanchez Brokerage, by
letter31 of January 7, 1993, disclaimed liability for the damaged goods, positing that the damage was due to improper and
insufficient export packaging; that when the sealed containers were opened outside the PSI warehouse, it was discovered
that some of the loose cartons were wet,32 prompting its (Sanchez Brokerage’s) representative Morales to inform the
Import-Export Assistant of Wyeth-Suaco, Ramir Calicdan, about the condition of the cargoes but that the latter advised to
still deliver them to Hizon Laboratories where an adjuster would assess the damage. 33
Hence, the filing by FGU Insurance of a complaint for damages before the Regional Trial Court of Makati City against the
Sanchez Brokerage.
The trial court, by Decision34 of July 29, 1996, dismissed the complaint, holding that the Survey Report prepared by the
Elite Surveyors is bereft of any evidentiary support and a mere product of pure guesswork.35
On appeal, the appellate court reversed the decision of the trial court, it holding that the Sanchez Brokerage engaged not
only in the business of customs brokerage but also in the transportation and delivery of the cargo of its clients, hence, a
common carrier within the context of Article 1732 of the New Civil Code. 36
Noting that Wyeth-Suaco adduced evidence that the cargoes were delivered to petitioner in good order and condition but
were in a damaged state when delivered to Wyeth-Suaco, the appellate court held that Sanchez Brokerage is presumed
negligent and upon it rested the burden of proving that it exercised extraordinary negligence not only in instances when
negligence is directly proven but also in those cases when the cause of the damage is not known or unknown. 37
The appellate court thus disposed:
IN THE LIGHT OF ALL THE FOREGOING, the appeal of the Appellant is GRANTED. The Decision of the Court a quo is
REVERSED. Another Decision is hereby rendered in favor of the Appellant and against the Appellee as follows:
1. The Appellee is hereby ordered to pay the Appellant the principal amount of P181, 431.49, with
interest thereupon at the rate of 6% per annum, from the date of the Decision of the Court, until the said
amount is paid in full;
2. The Appellee is hereby ordered to pay to the Appellant the amount of P20,000.00 as and by way of
attorney’s fees; and
3. The counterclaims of the Appellee are DISMISSED.38
Sanchez Brokerage’s Motion for Reconsideration having been denied by the appellate court’s Resolution of December 8,
2000 which was received by petitioner on January 5, 2001, it comes to this Court on petition for certiorari filed on March 6,
2001.
In the main, petitioner asserts that the appellate court committed grave and reversible error tantamount to abuse of
discretion when it found petitioner a "common carrier" within the context of Article 1732 of the New Civil Code.
Respondent FGU Insurance avers in its Comment that the proper course of action which petitioner should have taken was
to file a petition for review on certiorari since the sole office of a writ of certiorari is the correction of errors of jurisdiction
including the commission of grave abuse of discretion amounting to lack or excess of jurisdiction and does not include
correction of the appellate court’s evaluation of the evidence and factual findings thereon.
On the merits, respondent FGU Insurance contends that petitioner, as a common carrier, failed to overcome the
presumption of negligence, it being documented that petitioner withdrew from the warehouse of PSI the subject shipment
entirely in good order and condition.39
The petition fails.
Rule 45 is clear that decisions, final orders or resolutions of the Court of Appeals in any case, i.e., regardless of the nature
of the action or proceedings involved, may be appealed to this Court by filing a petition for review, which would be but a
continuation of the appellate process over the original case.40
The Resolution of the Court of Appeals dated December 8, 2000 denying the motion for reconsideration of its Decision of
August 10, 2000 was received by petitioner on January 5, 2001. Since petitioner failed to appeal within 15 days or on or
before January 20, 2001, the appellate court’s decision had become final and executory. The filing by petitioner of a
petition for certiorari on March 6, 2001 cannot serve as a substitute for the lost remedy of appeal.
In another vein, the rule is well settled that in a petition for certiorari, the petitioner must prove not merely reversible
error but also grave abuse of discretion amounting to lack or excess of jurisdiction.
Petitioner alleges that the appellate court erred in reversing and setting aside the decision of the trial court based on its
finding that petitioner is liable for the damage to the cargo as a common carrier. What petitioner is ascribing is an error of
judgment, not of jurisdiction, which is properly the subject of an ordinary appeal.
Where the issue or question involves or affects the wisdom or legal soundness of the decision – not the jurisdiction of the
court to render said decision – the same is beyond the province of a petition for certiorari.41 The supervisory jurisdiction of
this Court to issue a cert writ cannot be exercised in order to review the judgment of lower courts as to its intrinsic
correctness, either upon the law or the facts of the case. 42
Procedural technicalities aside, the petition still fails.
The appellate court did not err in finding petitioner, a customs broker, to be also a common carrier, as defined under
Article 1732 of the Civil Code, to wit:
Art. 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.
Anacleto F. Sanchez, Jr., the Manager and Principal Broker of Sanchez Brokerage, himself testified that the services the firm
offers include the delivery of goods to the warehouse of the consignee or importer.
ATTY. FLORES:
Q: What are the functions of these license brokers, license customs broker?
WITNESS:
As customs broker, we calculate the taxes that has to be paid in cargos, and those upon approval of the importer,
we prepare the entry together for processing and claims from customs and finally deliver the goods to the
warehouse of the importer.43
Article 1732 does not distinguish between one whose principal business activity is the carrying of goods and one who does
such carrying only as an ancillary activity.44 The contention, therefore, of petitioner that it is not a common carrier but a
customs broker whose principal function is to prepare the correct customs declaration and proper shipping documents as
required by law is bereft of merit. It suffices that petitioner undertakes to deliver the goods for pecuniary consideration.
In this light, petitioner as a common carrier is mandated to observe, under Article 1733 45 of the Civil Code, extraordinary
diligence in the vigilance over the goods it transports according to all the circumstances of each case. In the event that the
goods are lost, destroyed or deteriorated, it is presumed to have been at fault or to have acted negligently, unless it proves
that it observed extraordinary diligence.46
The concept of "extra-ordinary diligence" was explained in Compania Maritima v. Court of Appeals:47
The extraordinary diligence in the vigilance over the goods tendered for shipment requires the common carrier to
know and to follow the required precaution for avoiding damage to, or destruction of the goods entrusted to it for
sale, carriage and delivery. It requires common carriers to render service with the greatest skill and foresight and
"to use all reasonable means to ascertain the nature and characteristics of goods tendered for shipment, and to
exercise due care in the handling and stowage, including such methods as their nature requires."48
In the case at bar, it was established that petitioner received the cargoes from the PSI warehouse in NAIA in good order
and condition;49 and that upon delivery by petitioner to Hizon Laboratories Inc., some of the cargoes were found to be in
bad order, as noted in the Delivery Receipt 50 issued by petitioner, and as indicated in the Survey Report of Elite
Surveyors51 and the Destruction Report of Hizon Laboratories, Inc.52
In an attempt to free itself from responsibility for the damage to the goods, petitioner posits that they were damaged due
to the fault or negligence of the shipper for failing to properly pack them and to the inherent characteristics of the goods 53 ;
and that it should not be faulted for following the instructions of Calicdan of Wyeth-Suaco to proceed with the delivery
despite information conveyed to the latter that some of the cartons, on examination outside the PSI warehouse, were
found to be wet.54
While paragraph No. 4 of Article 173455 of the Civil Code exempts a common carrier from liability if the loss or damage is
due to the character of the goods or defects in the packing or in the containers, the rule is that if the improper packing is
known to the carrier or his employees or is apparent upon ordinary observation, but he nevertheless accepts the same
without protest or exception notwithstanding such condition, he is not relieved of liability for the resulting damage. 56
If the claim of petitioner that some of the cartons were already damaged upon delivery to it were true, then it should
naturally have received the cargo under protest or with reservations duly noted on the receipt issued by PSI. But it made
no such protest or reservation.57
Moreover, as observed by the appellate court, if indeed petitioner’s employees only examined the cargoes outside the PSI
warehouse and found some to be wet, they would certainly have gone back to PSI, showed to the warehouseman the
damage, and demanded then and there for Bad Order documents or a certification confirming the damage. 58 Or, petitioner
would have presented, as witness, the employees of the PSI from whom Morales and Domingo took delivery of the cargo
to prove that, indeed, part of the cargoes was already damaged when the container was allegedly opened outside the
warehouse.59
Petitioner goes on to posit that contrary to the report of Elite Surveyors, no rain fell that day. Instead, it asserts that some
of the cargoes were already wet on delivery by PSI outside the PSI warehouse but such notwithstanding Calicdan directed
Morales to proceed with the delivery to Hizon Laboratories, Inc.
While Calicdan testified that he received the purported telephone call of Morales on July 29, 1992, he failed to specifically
declare what time he received the call. As to whether the call was made at the PSI warehouse when the shipment was
stripped from the airport containers, or when the cargoes were already in transit to Antipolo, it is not determinable. Aside
from that phone call, petitioner admitted that it had no documentary evidence to prove that at the time it received the
cargoes, a part of it was wet, damaged or in bad condition.60
The 4-page weather data furnished by PAGASA61 on request of Sanchez Brokerage hardly impresses, no witness having
identified it and interpreted the technical terms thereof.
The possibility on the other hand that, as found by Hizon Laboratories, Inc., the oral contraceptives were damaged by
rainwater while in transit to Antipolo City is more likely then. Sanchez himself testified that in the past, there was a similar
instance when the shipment of Wyeth-Suaco was also found to be wet by rain.
ATTY. FLORES:
Q: Was there any instance that a shipment of this nature, oral contraceptives, that arrived at the NAIA were
damaged and claimed by the Wyeth-Suaco without any question?
WITNESS:
A: Yes sir, there was an instance that one cartoon (sic) were wetted (sic) but Wyeth-Suaco did not claim anything
against us.
ATTY. FLORES:
Q: HOW IS IT?
WITNESS:
A: We experienced, there was a time that we experienced that there was a cartoon (sic) wetted (sic) up to the
bottom are wet specially during rainy season.62
Since petitioner received all the cargoes in good order and condition at the time they were turned over by the PSI
warehouseman, and upon their delivery to Hizon Laboratories, Inc. a portion thereof was found to be in bad order, it was
incumbent on petitioner to prove that it exercised extraordinary diligence in the carriage of the goods. It did not, however.
Hence, its presumed negligence under Article 1735 of the Civil Code remains unrebutted.
WHEREFORE, the August 10, 2000 Decision of the Court of Appeals is hereby AFFIRMED.
Costs against petitioner.
SO ORDERED.

G.R. No. 138334 August 25, 2003

ESTELA L. CRISOSTOMO, Petitioner,
vs.
The Court of Appeals and CARAVAN TRAVEL & TOURS INTERNATIONAL, INC., Respondents.
DECISION
YNARES-SANTIAGO, J.:
In May 1991, petitioner Estela L. Crisostomo contracted the services of respondent Caravan Travel and Tours International,
Inc. to arrange and facilitate her booking, ticketing and accommodation in a tour dubbed "Jewels of Europe". The package
tour included the countries of England, Holland, Germany, Austria, Liechstenstein, Switzerland and France at a total cost of
P74,322.70. Petitioner was given a 5% discount on the amount, which included airfare, and the booking fee was also
waived because petitioner’s niece, Meriam Menor, was respondent company’s ticketing manager.
Pursuant to said contract, Menor went to her aunt’s residence on June 12, 1991 – a Wednesday – to deliver petitioner’s
travel documents and plane tickets. Petitioner, in turn, gave Menor the full payment for the package tour. Menor then told
her to be at the Ninoy Aquino International Airport (NAIA) on Saturday, two hours before her flight on board British
Airways.
Without checking her travel documents, petitioner went to NAIA on Saturday, June 15, 1991, to take the flight for the first
leg of her journey from Manila to Hongkong. To petitioner’s dismay, she discovered that the flight she was supposed to
take had already departed the previous day. She learned that her plane ticket was for the flight scheduled on June 14,
1991. She thus called up Menor to complain.
Subsequently, Menor prevailed upon petitioner to take another tour – the "British Pageant" – which included England,
Scotland and Wales in its itinerary. For this tour package, 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.
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" 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
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.
In her complaint,2 petitioner alleged that her failure to join "Jewels of Europe" was due to respondent’s fault since it did
not clearly indicate the departure date on the plane ticket. Respondent was also negligent in informing her of the wrong
flight schedule through its employee Menor. She insisted that the "British Pageant" was merely a substitute for the "Jewels
of Europe" tour, such that the cost of the former should be properly set-off against the sum paid for the latter.
For its part, respondent company, through its Operations Manager, Concepcion Chipeco, denied responsibility for
petitioner’s failure to join the first tour. Chipeco insisted that petitioner was informed of the correct departure date, which
was clearly and legibly printed on the plane ticket. The travel documents were given to petitioner two days ahead of the
scheduled trip. Petitioner had only herself to blame for missing the flight, as she did not bother to read or confirm her
flight schedule as printed on the ticket.
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, Lotus Travel Ltd., which had already billed the same even if
petitioner did not join the tour. Lotus’ European tour organizer, Insight International Tours Ltd., determines the cost of a
package tour based on a minimum number of projected participants. For this reason, it is accepted industry practice to
disallow refund for individuals who failed to take a booked tour.3
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 realizing that she made a mistake in missing her flight for "Jewels
of Europe". Petitioner was allowed to make a partial payment of only US$300.00 for the second tour because her niece
was then an employee of the travel agency. Consequently, respondent prayed that petitioner be ordered to pay the
balance of P12,901.00 for the "British Pageant" package tour.
After due proceedings, the trial court rendered a decision, 4 the dispositive part of which reads:
WHEREFORE, premises considered, judgment is hereby rendered as follows:
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 (P53,989.43) with legal interest thereon at the rate of twelve
percent (12%) per annum starting January 16, 1992, the date when the complaint was filed;
2. Ordering the defendant to pay the plaintiff the amount of Five Thousand (P5,000.00) Pesos as and for
reasonable attorney’s fees;
3. Dismissing the defendant’s counterclaim, for lack of merit; and
4. With costs against the defendant.
SO ORDERED.5
The trial court held that respondent was negligent in erroneously advising petitioner of her departure date through its
employee, Menor, who was not presented as witness to rebut petitioner’s testimony. However, petitioner should have
verified the exact date and time of departure by looking at her ticket and should have simply not relied on Menor’s verbal
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 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
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 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.