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G.R. No. 157917               August 29, 2012 Devastated by the early and unexpected death of Aaron, the Zarates commenced this action for damages against
Alfaro, the Pereñas, PNR and Alano. The Pereñas and PNR filed their respective answers, with cross-claims against
each other, but Alfaro could not be served with summons.
SPOUSES TEODORO1 and NANETTE PERENA, Petitioners,
vs.
SPOUSES TERESITA PHILIPPINE NICOLAS and L. ZARATE, NATIONAL RAILWAYS, and the COURT OF At the pre-trial, the parties stipulated on the facts and issues, viz:
APPEALS Respondents.

A. FACTS:
D E C I S I O N BERSAMIN, J.:

(1) That spouses Zarate were the legitimate parents of Aaron John L. Zarate;
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 (2) Spouses Zarate engaged the services of spouses Pereña for the adequate and safe transportation
be an unemployed high school student at the time of the accident. carriage of the former spouses' son from their residence in Parañaque to his school at the Don Bosco
Technical Institute in Makati City;

The Case
(3) During the effectivity of the contract of carriage and in the implementation thereof, Aaron, the minor
son of spouses Zarate died in connection with a vehicular/train collision which occurred while Aaron was
By petition for review on certiorari, Spouses Teodoro and Nanette Perefia (Perefias) appeal the adverse decision riding the contracted carrier Kia Ceres van of spouses Pereña, then driven and operated by the latter's
promulgated on November 13, 2002, by which the Court of Appeals (CA) affirmed with modification the decision employee/authorized driver Clemente Alfaro, which van collided with the train of PNR, at around 6:45 A.M.
rendered on December 3, 1999 by the Regional Trial Court (RTC), Branch 260, in Parañaque City that had decreed of August 22, 1996, within the vicinity of the Magallanes Interchange in Makati City, Metro Manila,
them jointly and severally liable with Philippine National Railways (PNR), their co-defendant, to Spouses Nicolas and Philippines;
Teresita Zarate (Zarates) for the death of their 15-year old son, Aaron John L. Zarate (Aaron), then a high school
student of Don Bosco Technical Institute (Don Bosco).
(4) At the time of the vehicular/train collision, the subject site of the vehicular/train collision was a
railroad crossing used by motorists for crossing the railroad tracks;
Antecedents

(5) During the said time of the vehicular/train collision, there were no appropriate and safety warning
The Pereñas were engaged in the business of transporting students from their respective residences in Parañaque signs and railings at the site commonly used for railroad crossing;
City to Don Bosco in Pasong Tamo, Makati City, and back. In their business, the Pereñas used a KIA Ceres Van (van)
with Plate No. PYA 896, which had the capacity to transport 14 students at a time, two of whom would be seated in
the front beside the driver, and the others in the rear, with six students on either side. They employed Clemente (6) At the material time, countless number of Makati bound public utility and private vehicles used on a
Alfaro (Alfaro) as driver of the van. daily basis the site of the collision as an alternative route and short-cut to Makati;

In June 1996, the Zarates contracted the Pereñas to transport Aaron to and from Don Bosco. On August 22, 1996, (7) The train driver or operator left the scene of the incident on board the commuter train involved
as on previous school days, the van picked Aaron up around 6:00 a.m. from the Zarates’ residence. Aaron took his without waiting for the police investigator;
place on the left side of the van near the rear door. The van, with its air-conditioning unit turned on and the stereo
playing loudly, ultimately carried all the 14 student riders on their way to Don Bosco. Considering that the students (8) The site commonly used for railroad crossing by motorists was not in fact intended by the railroad
were due at Don Bosco by 7:15 a.m., and that they were already running late because of the heavy vehicular traffic operator for railroad crossing at the time of the vehicular collision;
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 (9) PNR received the demand letter of the spouses Zarate;
jeepneys, and the railroad crossing in the narrow path had no railroad warning signs, or watchmen, or other
responsible persons manning the crossing. In fact, the bamboo barandilla was up, leaving the railroad crossing open
to traversing motorists. (10) PNR refused to acknowledge any liability for the vehicular/train collision;

At about the time the van was to traverse the railroad crossing, PNR Commuter No. 302 (train), operated by Jhonny (11) The eventual closure of the railroad crossing alleged by PNR was an internal arrangement between
Alano (Alano), was in the vicinity of the Magallanes Interchange travelling northbound. As the train neared the the former and its project contractor; and
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 (12) The site of the vehicular/train collision was within the vicinity or less than 100 meters from the
horn to warn motorists of its approach. When the train was about 50 meters away from the passenger bus and the Magallanes station of PNR.
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, B. ISSUES
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.
(1) Whether or not defendant-driver of the van is, in the performance of his functions, liable for
negligence constituting the proximate cause of the vehicular collision, which resulted in the death of
plaintiff spouses' son;
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(2) Whether or not the defendant spouses Pereña being the employer of defendant Alfaro are liable for (1) (for) the death of Aaron- Php50,000.00;
any negligence which may be attributed to defendant Alfaro;

(2) Actual damages in the amount of Php100,000.00;

(3) Whether or not defendant Philippine National Railways being the operator of the railroad system is
liable for negligence in failing to provide adequate safety warning signs and railings in the area commonly
used by motorists for railroad crossings, constituting the proximate cause of the vehicular collision which (3) For the loss of earning capacity- Php2,109,071.00;
resulted in the death of the plaintiff spouses' son;
(4) Moral damages in the amount of Php4,000,000.00;
(4) Whether or not defendant spouses Pereña are liable for breach of the contract of carriage with
plaintiff-spouses in failing to provide adequate and safe transportation for the latter's son; (5) Exemplary damages in the amount of Php1,000,000.00;

(5) Whether or not defendants spouses are liable for actual, moral damages, exemplary damages, and (6) Attorney’s fees in the amount of Php200,000.00; and
attorney's fees;

(7) Cost of suit.

(6) Whether or not defendants spouses Teodorico and Nanette Pereña observed the diligence of employers
and school bus operators;
SO ORDERED.

(7) Whether or not defendant-spouses are civilly liable for the accidental death of Aaron John Zarate;
On June 29, 2000, the RTC denied the Pereñas’ motion for reconsideration, 4 reiterating that the cooperative gross
negligence of the Pereñas and PNR had caused the collision that led to the death of Aaron; and that the damages
(8) Whether or not defendant PNR was grossly negligent in operating the commuter train involved in the awarded to the Zarates were not excessive, but based on the established circumstances.
accident, in allowing or tolerating the motoring public to cross, and its failure to install safety devices or
equipment at the site of the accident for the protection of the public;
The CA’s Ruling

(9) Whether or not defendant PNR should be made to reimburse defendant spouses for any and whatever
amount the latter may be held answerable or which they may be ordered to pay in favor of plaintiffs by Both the Pereñas and PNR appealed (C.A.-G.R. CV No. 68916).
reason of the action;
PNR assigned the following errors, to wit:5
(10) Whether or not defendant PNR should pay plaintiffs directly and fully on the amounts claimed by the
latter in their Complaint by reason of its gross negligence;
The Court a quo erred in:

(11) Whether or not defendant PNR is liable to defendants spouses for actual, moral and exemplary
1. In finding the defendant-appellant Philippine National Railways jointly and severally liable together with
damages and attorney's fees.2
defendant-appellants spouses Teodorico and Nanette Pereña and defendant-appellant Clemente Alfaro to
pay plaintiffs-appellees for the death of Aaron Zarate and damages.
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.
2. In giving full faith and merit to the oral testimonies of plaintiffs-appellees witnesses despite
overwhelming documentary evidence on record, supporting the case of defendants-appellants Philippine
In their defense, the Pereñas adduced evidence to show that they had exercised the diligence of a good father of the National Railways.
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;
The Pereñas ascribed the following errors to the RTC, namely:
and that Teodoro Pereña had sometimes accompanied Alfaro in the van’s trips transporting the students to school.

The trial court erred in finding defendants-appellants jointly and severally liable for actual, moral and exemplary
For its part, PNR tended to show that the proximate cause of the collision had been the reckless crossing of the van
damages and attorney’s fees with the other defendants.
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.
The trial court erred in dismissing the cross-claim of the appellants Pereñas against the Philippine National Railways
and in not holding the latter and its train driver primarily responsible for the incident.
Ruling of the RTC

The trial court erred in awarding excessive damages and attorney’s fees.
On December 3, 1999, the RTC rendered its decision, 3 disposing:

The trial court erred in awarding damages in the form of deceased’s loss of earning capacity in the absence of
WHEREFORE, premises considered, judgment is hereby rendered in favor of the plaintiff and against the defendants
sufficient basis for such an award.
ordering them to jointly and severally pay the plaintiffs as follows:
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On November 13, 2002, the CA promulgated its decision, affirming the findings of the RTC, but limited the moral The RTC found the Pereñas and the PNR negligent. The CA affirmed the findings.
damages to ₱ 2,500,000.00; and deleted the attorney’s fees because the RTC did not state the factual and legal
bases, to wit:6
We concur with the CA.

WHEREFORE, premises considered, the assailed Decision of the Regional Trial Court, Branch 260 of Parañaque City
is AFFIRMED with the modification that the award of Actual Damages is reduced to ₱ 59,502.76; Moral Damages is To start with, the Pereñas’ defense was that they exercised the diligence of a good father of the family in the
reduced to ₱ 2,500,000.00; and the award for Attorney’s Fees is Deleted. 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
SO ORDERED. 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.

The CA upheld the award for the loss of Aaron’s earning capacity, taking cognizance of the ruling in Cariaga v.
Laguna Tayabas Bus Company and Manila Railroad Company,7 wherein the Court gave the heirs of Cariaga a sum We find no adequate cause to differ from the conclusions of the lower courts that the Pereñas operated as a common
representing the loss of the deceased’s earning capacity despite Cariaga being only a medical student at the time of carrier; and that their standard of care was extraordinary diligence, not the ordinary diligence of a good father of a
the fatal incident. Applying the formula adopted in the American Expectancy Table of Mortality:– family.

2/3 x (80 - age at the time of death) = life expectancy Although in this jurisdiction the operator of a school bus service has been usually regarded as a private
carrier,9 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
the CA determined the life expectancy of Aaron to be 39.3 years upon reckoning his life expectancy from age of 21 finally settled. This is the occasion to lay the matter to rest.
(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 ₱ A carrier is a person or corporation who undertakes to transport or convey goods or persons from one place to
110,716.65, inclusive of the thirteenth month pay. Multiplying this annual salary by Aaron’s life expectancy of 39.3 another, gratuitously or for hire. The carrier is classified either as a private/special carrier or as a common/public
years, his gross income would aggregate to ₱ 4,351,164.30, from which his estimated expenses in the sum of ₱ carrier.10 A private carrier is one who, without making the activity a vocation, or without holding himself or itself out
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 to the public as ready to act for all who may desire his or its services, undertakes, by special agreement in a
turning out to be higher than the amount claimed by the Zarates, only ₱ 2,109,071.00, the amount expressly prayed particular instance only, to transport goods or persons from one place to another either gratuitously or for hire. 11 The
for by them, was granted. 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
On April 4, 2003, the CA denied the Pereñas’ motion for reconsideration. 8 both, by land, water, or air, for compensation, offering such services to the public. 12 Contracts of common carriage
are governed by the provisions on common carriers of the Civil Code, the Public Service Act, 13 and other special laws
Issues relating to transportation. A common carrier is required to observe extraordinary diligence, and is presumed to be at
fault or to have acted negligently in case of the loss of the effects of passengers, or the death or injuries to
passengers.14
In this appeal, the Pereñas list the following as the errors committed by the CA, to wit:

In relation to common carriers, the Court defined public use in the following terms in United States v. Tan
I. The lower court erred when it upheld the trial court’s decision holding the petitioners jointly and severally liable to Piaco,15 viz:
pay damages with Philippine National Railways and dismissing their cross-claim against the latter.

"Public use" is the same as "use by the public". The essential feature of the public use is not confined to privileged
II. The lower court erred in affirming the trial court’s decision awarding damages for loss of earning capacity of a individuals, but is open to the indefinite public. It is this indefinite or unrestricted quality that gives it its public
minor who was only a high school student at the time of his death in the absence of sufficient basis for such an character. In determining whether a use is public, we must look not only to the character of the business to be
award. 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
III. The lower court erred in not reducing further the amount of damages awarded, assuming petitioners are liable at that the general prosperity of the public is promoted. Public use is not synonymous with public interest. The true
all. criterion by which to judge the character of the use is whether the public may enjoy it by right or only by
permission.
Ruling
In De Guzman v. Court of Appeals, 16 the Court noted that Article 1732 of the Civil Code avoided any distinction
The petition has no merit. 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.
1. Were the Pereñas and PNR jointly
and severally liable for damages?
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
The Zarates brought this action for recovery of damages against both the Pereñas and the PNR, basing their claim Civil Code. Public service, according to Section 13, paragraph (b) of the Public Service Act, includes:
against the Pereñas on breach of contract of carriage and against the PNR on quasi-delict.
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x x x every person that now or hereafter may own, operate, manage, or control in the Philippines, for hire or The Pereñas were liable for the death of Aaron despite the fact that their driver might have acted beyond the scope
compensation, with general or limited clientèle, whether permanent or occasional, and done for the general business of his authority or even in violation of the orders of the common carrier. 27 In this connection, the records showed
purposes, any common carrier, railroad, street railway, traction railway, subway motor vehicle, either for freight or their driver’s actual negligence. There was a showing, to begin with, that their driver traversed the railroad tracks at
passenger, or both, with or without fixed route and whatever may be its classification, freight or carrier service of a point at which the PNR did not permit motorists going into the Makati area to cross the railroad tracks. Although
any class, express service, steamboat, or steamship line, pontines, ferries and water craft, engaged in the that point had been used by motorists as a shortcut into the Makati area, that fact alone did not excuse their driver
transportation of passengers or freight or both, shipyard, marine repair shop, ice-refrigeration plant, canal, irrigation into taking that route. On the other hand, with his familiarity with that shortcut, their driver was fully aware of the
system, gas, electric light, heat and power, water supply and power petroleum, sewerage system, wire or wireless risks to his passengers but he still disregarded the risks. Compounding his lack of care was that loud music was
communications systems, wire or wireless broadcasting stations and other similar public services. x x x. 17 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
Given the breadth of the aforequoted characterization of a common carrier, the Court has considered as common so doing, he lost his view of the train that was then coming from the opposite side of the passenger bus, leading him
carriers pipeline operators,18 custom brokers and warehousemen, 19 and barge operators20 even if they had limited to miscalculate his chances of beating the bus in their race, and of getting clear of the train. As a result, the bus
clientèle. 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
As all the foregoing indicate, the true test for a common carrier is not the quantity or extent of the business actually to a full stop were in observance of the right of way at railroad tracks as defined by the traffic laws and
transacted, or the number and character of the conveyances used in the activity, but whether the undertaking is a regulations.28 He thereby violated a specific traffic regulation on right of way, by virtue of which he was immediately
part of the activity engaged in by the carrier that he has held out to the general public as his business or occupation. presumed to be negligent.29
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, The omissions of care on the part of the van driver constituted negligence, 30 which, according to Layugan v.
carrier. The question must be determined by the character of the business actually carried on by the carrier, not by Intermediate Appellate Court,31 is "the omission to do something which a reasonable man, guided by those
any secret intention or mental reservation it may entertain or assert when charged with the duties and obligations considerations which ordinarily regulate the conduct of human affairs, would do, or the doing of something which a
that the law imposes.21 prudent and reasonable man would not do,32 or as Judge Cooley defines it, ‘(t)he failure to observe for the protection
of the interests of another person, that degree of care, precaution, and vigilance which the circumstances justly
Applying these considerations to the case before us, there is no question that the Pereñas as the operators of a demand, whereby such other person suffers injury.’" 33
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 The test by which to determine the existence of negligence in a particular case has been aptly stated in the leading
conducted; and (c) transporting students for a fee. Despite catering to a limited clientèle, the Pereñas operated as a case of Picart v. Smith,34 thuswise:
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 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
The common carrier’s standard of care and vigilance as to the safety of the passengers is defined by law. Given the person would have used in the same situation? If not, then he is guilty of negligence. The law here in effect adopts
nature of the business and for reasons of public policy, the common carrier is bound "to observe extraordinary the standard supposed to be supplied by the imaginary conduct of the discreet paterfamilias of the Roman law. The
diligence in the vigilance over the goods and for the safety of the passengers transported by them, according to all existence of negligence in a given case is not determined by reference to the personal judgment of the actor in the
the circumstances of each case." 22 Article 1755 of the Civil Code specifies that the common carrier should "carry the situation before him. The law considers what would be reckless, blameworthy, or negligent in the man of ordinary
passengers safely as far as human care and foresight can provide, using the utmost diligence of very cautious intelligence and prudence and determines liability by that.
persons, with a due regard for all the circumstances." To successfully fend off liability in an action upon the death or
injury to a passenger, the common carrier must prove his or its observance of that extraordinary diligence;
otherwise, the legal presumption that he or it was at fault or acted negligently would stand. 23 No device, whether by The question as to what would constitute the conduct of a prudent man in a given situation must of course be
stipulation, posting of notices, statements on tickets, or otherwise, may dispense with or lessen the responsibility of always determined in the light of human experience and in view of the facts involved in the particular case. Abstract
the common carrier as defined under Article 1755 of the Civil Code. 24 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
And, secondly, the Pereñas have not presented any compelling defense or reason by which the Court might now suggest or warn of danger. Could a prudent man, in the case under consideration, foresee harm as a result of the
reverse the CA’s findings on their liability. On the contrary, an examination of the records shows that the evidence course actually pursued? If so, it was the duty of the actor to take precautions to guard against that harm.
fully supported the findings of the CA. 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
As earlier stated, the Pereñas, acting as a common carrier, were already presumed to be negligent at the time of the negligence in a given case is this: Conduct is said to be negligent when a prudent man in the position of the
accident because death had occurred to their passenger.25 The presumption of negligence, being a presumption of tortfeasor would have foreseen that an effect harmful to another was sufficiently probable to warrant his foregoing
law, laid the burden of evidence on their shoulders to establish that they had not been negligent. 26 It was the law no the conduct or guarding against its consequences. (Emphasis supplied)
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 Pursuant to the Picart v. Smith test of negligence, the Pereñas’ driver was entirely negligent when he traversed the
responsible for the death of Aaron and thus to be held liable for all the natural consequences of such death. 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
There is no question that the Pereñas did not overturn the presumption of their negligence by credible evidence. the bus on the left side as to leave himself blind to the approach of the oncoming train that he knew was on the
Their defense of having observed the diligence of a good father of a family in the selection and supervision of their opposite side of the bus.
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 Unrelenting, the Pereñas cite Phil. National Railways v. Intermediate Appellate Court,35 where the Court held the PNR
supervision of their employee. This was the reason why the RTC treated this defense of the Pereñas as inappropriate solely liable for the damages caused to a passenger bus and its passengers when its train hit the rear end of the bus
in this action for breach of contract of carriage. 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
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against the owner of the bus. Instead, it was the owner of the bus who proved the exercise of extraordinary unemployed, because compensation of this nature is awarded not for loss of time or earnings but for loss of the
diligence by preponderant evidence. Also, the records are replete with the showing of negligence on the part of both deceased’s power or ability to earn money.39
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. This favorable treatment of the Zarates’ claim is not unprecedented. In Cariaga v. Laguna Tayabas Bus Company
and Manila Railroad Company,40 fourth-year medical student Edgardo Carriaga’s earning capacity, although he
survived the accident but his injuries rendered him permanently incapacitated, was computed to be that of the
At any rate, the lower courts correctly held both the Pereñas and the PNR "jointly and severally" liable for damages physician that he dreamed to become. The Court considered his scholastic record sufficient to justify the assumption
arising from the death of Aaron. They had been impleaded in the same complaint as defendants against whom the that he could have finished the medical course and would have passed the medical board examinations in due time,
Zarates had the right to relief, whether jointly, severally, or in the alternative, in respect to or arising out of the and that he could have possibly earned a modest income as a medical practitioner. Also, in People v. Sanchez, 41 the
accident, and questions of fact and of law were common as to the Zarates. 36 Although the basis of the right to relief Court opined that murder and rape victim Eileen Sarmienta and murder victim Allan Gomez could have easily landed
of the Zarates (i.e., breach of contract of carriage) against the Pereñas was distinct from the basis of the Zarates’ good-paying jobs had they graduated in due time, and that their jobs would probably pay them high monthly
right to relief against the PNR (i.e., quasi-delict under Article 2176, Civil Code), they nonetheless could be held salaries from ₱ 10,000.00 to ₱ 15,000.00 upon their graduation. Their earning capacities were computed at rates
jointly and severally liable by virtue of their respective negligence combining to cause the death of Aaron. As to the higher than the minimum wage at the time of their deaths due to their being already senior agriculture students of
PNR, the RTC rightly found the PNR also guilty of negligence despite the school van of the Pereñas traversing the the University of the Philippines in Los Baños, the country’s leading educational institution in agriculture.
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 3. Were the amounts of damages excessive?
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 The Pereñas plead for the reduction of the moral and exemplary damages awarded to the Zarates in the respective
Pereñas and the PNR were joint tortfeasors. amounts of ₱ 2,500,000.00 and ₱ 1,000,000.00 on the ground that such amounts were excessive.

2. Was the indemnity for loss of The plea is unwarranted.

Aaron’s earning capacity proper?

The moral damages of ₱ 2,500,000.00 were really just and reasonable under the established circumstances of this
The RTC awarded indemnity for loss of Aaron’s earning capacity. Although agreeing with the RTC on the liability, the case because they were intended by the law to assuage the Zarates’ deep mental anguish over their son’s
CA modified the amount. Both lower courts took into consideration that Aaron, while only a high school student, had unexpected and violent death, and their moral shock over the senseless accident. That amount would not be too
been enrolled in one of the reputable schools in the Philippines and that he had been a normal and able-bodied child much, considering that it would help the Zarates obtain the means, diversions or amusements that would alleviate
prior to his death. The basis for the computation of Aaron’s earning capacity was not what he would have become or their suffering for the loss of their child. At any rate, reducing the amount as excessive might prove to be an
what he would have wanted to be if not for his untimely death, but the minimum wage in effect at the time of his injustice, given the passage of a long time from when their mental anguish was inflicted on them on August 22,
death. Moreover, the RTC’s computation of Aaron’s life expectancy rate was not reckoned from his age of 15 years 1996.
at the time of his death, but on 21 years, his age when he would have graduated from college.

Anent the ₱ 1,000,000.00 allowed as exemplary damages, we should not reduce the amount if only to render
We find the considerations taken into account by the lower courts to be reasonable and fully warranted. 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
Yet, the Pereñas submit that the indemnity for loss of earning capacity was speculative and happening again. Only by an award of exemplary damages in that amount would suffice to instill in them and others
unfounded.1âwphi1 They cited People v. Teehankee, Jr.,37 where the Court deleted the indemnity for victim Jussi similarly situated like them the ever-present need for greater and constant vigilance in the conduct of a business
Leino’s loss of earning capacity as a pilot for being speculative due to his having graduated from high school at the imbued with public interest.
International School in Manila only two years before the shooting, and was at the time of the shooting only enrolled
in the first semester at the Manila Aero Club to pursue his ambition to become a professional pilot. That meant, WHEREFORE, we DENY the petition for review on certiorari; AFFIRM the decision promulgated on November 13,
according to the Court, that he was for all intents and purposes only a high school graduate. 2002; and ORDER the petitioners to pay the costs of suit.

We reject the Pereñas’ submission. SO ORDERED.

First of all, a careful perusal of the Teehankee, Jr. case shows that the situation there of Jussi Leino was not akin to
that of Aaron here. 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.

And, 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." 38 Accordingly, we
emphatically hold in favor of the indemnification for Aaron’s loss of earning capacity despite him having been
 6

FIRST DIVISION On May 13, 1999, Jose Marcial’s wife, Ruby Bueno Ochoa, and his two minor children, Micaela B. Ochoa and Jomar
B. Ochoa (the heirs), through counsel, sent G & S a letter4 demanding that the latter indemnify them for Jose
Marcial’s death, his loss of earning capacity, and funeral expenses in the total amount of ₱15,000,000.00. As G & S
G.R. No. 170071               March 9, 2011 failed to heed the same, the heirs filed a Complaint5 for Damages before the Regional Trial Court (RTC) of Pasig City
which was raffled to Branch 164 of said court.
HEIRS OF JOSE MARCIAL K. OCHOA namely: RUBY B. OCHOA, MICAELA B. OCHOA and JOMAR B.
OCHOA, Petitioners, The heirs alleged that G & S, as a common carrier, is under legal obligation to observe and exercise extraordinary
vs. diligence in transporting its passengers to their destination safely and securely. However, G & S failed to observe
G & S TRANSPORT CORPORATION, Respondent. 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
x - - - - - - - - - - - - - - - - - - - - - - -x alternative cause of action, they asserted that G & S is likewise liable for damages based on quasi-delict pursuant to
Article 21806 in relation to Article 21767 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.R. No. 170125

In its Answer With Compulsory Counterclaims,8  G & S claimed that Jose Marcial boarded an Avis taxicab driven by
G & S TRANSPORT CORPORATION, Petitioner, its employee, Bibiano Padilla (Padilla), at the Domestic Airport to bring him to Teacher’s Village in Quezon City.
vs. While passing the Santolan fly-over, however, the Avis taxicab was bumped by an on-rushing delivery van at the
HEIRS OF JOSE MARCIAL K. OCHOA namely: RUBY B. OCHOA, MICAELA B. OCHOA and JOMAR B. 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
OCHOA, Respondents. the center of the island below. The taxicab was split into two and Jose Marcial was thrown 10 meters away. G & S
posited that the proximate cause of Jose Marcial’s death is a
DECISION
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
DEL CASTILLO, J.: employees including Padilla. By way of compulsory counterclaim, G & S sought to recover from the heirs the amount
of ₱300,000.00 as attorney’s fees and costs of suit.
An accident which claimed the life of a passenger is the root of these two petitions - one brought before us by the
common carrier and the other by the heirs of the deceased. Ruling of the Regional Trial Court

These consolidated Petitions for Review on Certiorari assail the Court of Appeals’ (CA) Decision 1 dated June 29, 2005 On December 27, 2001, the trial court rendered a Decision 9 finding the vehicular mishap not caused by a fortuitous
in CA-G.R. CV No. 75602 which affirmed with modification the December 21, 2001 Decision and March 5, 2002 event but by the negligence of Padilla. It likewise found the evidence adduced by G & S to show that it exercised the
Order of the trial court. Likewise assailed is the Resolution 2 dated October 12, 2005 denying the parties’ respective diligence of a good father of a family in the selection and supervision of its employees as insufficient. Hence, the trial
Motions for Reconsideration thereto. 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
Factual Antecedents exemplary damages for lack of legal basis. The dispositive portion of said Decision reads:

Jose Marcial K. Ochoa (Jose Marcial) died on the night of March 10, 1995 while on board an Avis taxicab owned and WHEREFORE, defendant is hereby adjudged guilty of breach of contract of carriage and is ordered to pay plaintiffs
operated by G & S Transport Corporation (G & S), a common carrier. As narrated by the trial court, the the following amounts:
circumstances attending Jose Marcial’s death are as follows:
1. ₱50,000.00 as civil indemnity for the death of deceased Jose Marcial K. Ochoa;
It appears that sometime in the evening of March 10, 1995, at the Manila Domestic Airport, the late Jose Marcial K.
Ochoa boarded and rode a taxicab with Plate No. PKR-534, a passenger vehicle for hire owned and operated by 2. ₱6,537,244.96 for the loss of earning capacity of the deceased;
defendant corporation under the business name "Avis Coupon Taxi" (Avis) and driven by its employee and
authorized driver Bibiano Padilla, Jr. on his way home to Teacher’s Village, Diliman, Quezon City.
3. ₱100,00.00 for attorney’s fees;
At about 11:00 p.m., the taxicab was cruising along Epifanio delos Santos Avenue [EDSA], in front of Camp
Aguinaldo in Quezon City at high speed. While going up the Boni Serrano (Santolan) fly-over, it overtook another 4. And the cost of litigation.
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 SO ORDERED.10
the left causing his taxicab to ram the railing throwing itself off the fly-over and fell on the middle surface of EDSA
below. The forceful drop of the vehicle on the floor of the road broke and split it into two parts. Both driver Padilla G & S filed a Notice of Appeal11 while the heirs filed a Motion for Partial Reconsideration. 12 The heirs averred that
and passenger Jose Marcial K. Ochoa were injured and rushed to the hospital. At the East Avenue Medical Center, they are entitled to moral damages pursuant to Article 1764 13 in relation to Article 2206(3)14 of the Civil Code. They
Ochoa was not as lucky as Padilla who was alive. He was declared dead on arrival from the accident. The death also cited applicable jurisprudence providing that moral damages are recoverable in a damage suit predicated upon
certificate issued by the Office of the Civil Registrar of Quezon City cited the cause of his death as vehicular a breach of contract of carriage where the mishap results in the death of the passenger. With respect to their claim
accident.3 for exemplary damages, the heirs relied upon Article 2232 of the Civil Code which provides that in contracts
 7

and quasi-contracts, the court may award exemplary damages if the defendant acted in a wanton, fraudulent, Therefore, what transpired was beyond Padilla’s control. There was no negligence on his part but on the part of the
reckless, oppressive or malevolent manner. And, since Padilla was declared by the trial court to have been grossly driver of the delivery van. For this reason, G & S opined that it was not liable to the heirs.
negligent in driving the taxicab, the heirs claimed that they are likewise entitled to exemplary damages.

On the other hand, the heirs maintained that Padilla was grossly negligent in driving the Avis taxicab on the night of
After G & S filed its Opposition (To Plaintiffs’ Motion for Partial Reconsideration), 15 the trial court issued an March 10, 1995. They claimed that Padilla, while running at a very high speed, acted negligently when he tried to
Order16 on March 5, 2002. It found merit in the heirs’ Motion for Partial Reconsideration and thus declared them overtake a ten-wheeler truck at the foot of the fly-over. This forced him to swerve to the left and as a consequence,
entitled to moral and exemplary damages, viz: the Avis taxicab hit the center of the railing and was split into two upon hitting the ground. The manner by which
Padilla drove the taxicab clearly showed that he acted without regard to the safety of his passenger.

WHEREFORE, the decision dated December 27, 2001 is hereby modified so as to order defendant Corporation to pay
plaintiffs the amount of P300,000.00 as moral damages and P50,000.00 as exemplary damages. The dispositive The heirs also averred that in order for a fortuitous event to exempt one from liability, it is necessary that he has
portion of said decision is hereby amended to read as follows: committed no negligence or conduct that may have occasioned the loss. Thus, to be exempt from liability for the
death of Jose Marcial on this ground, G & S must clearly show that the proximate cause of the casualty was entirely
independent of human will and that it was impossible to avoid. And since in the case at bar it was Padilla’s
‘WHEREFORE, defendant is hereby adjudged guilty of breach of contract of carriage and is ordered to pay plaintiffs inexcusable poor judgment, utter lack of foresight and extreme negligence which were the immediate and proximate
the following amounts: causes of the accident, same cannot be considered to be due to a fortuitous event. This is bolstered by the fact that
the court trying the case for criminal negligence arising from the same incident convicted Padilla for said charge. 20
1. ₱50,000.00 as civil indemnity for the death of the deceased Jose Marcial K. Ochoa;
At any rate, the heirs contended that regardless of whether G & S observed due diligence in the selection of its
2. ₱6,537,244.96 for the loss of earning capacity of the deceased. employees, it should nonetheless be held liable for the death of Jose Marcial pursuant to Article 1759 of the Civil
Code which provides:

3. ₱300,000.00 as moral damages;

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
4. ₱50,000.00 as exemplary damages; violation of the orders of the common carriers.

5. ₱100,000.00 for attorney’s fees; 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.
6. And the costs of litigation.’
In sum, the heirs prayed that the appeal be dismissed for lack of merit and the assailed Decision and Order of the
trial court be affirmed in toto.
SO ORDERED.17

In a Decision21 dated June 29, 2005, the CA ruled in favor of the heirs. The appellate court gave weight to their
Because of this, G & S filed another Notice of Appeal18 and same was given due course by the trial court in an argument that in order for a fortuitous event to exempt one from liability, it is necessary that he committed no
Order19 dated April 23, 2002. negligence or misconduct that may have occasioned the loss. In this case, the CA noted that Padilla failed to employ
reasonable foresight, diligence and care needed to exempt G & S from liability for Jose Marcial’s death. Said court
Ruling of the Court of Appeals also quoted pertinent portions of the MTC decision convicting Padilla of reckless imprudence resulting in homicide to
negate G & S’ claim that the proximate cause of the accident was the fault of the driver of the delivery van who
allegedly hit the right side of the taxicab. And just like the trial court, the CA found insufficient the evidence adduced
Before the CA, G & S continued to insist that it exercised the diligence of a good father of the family in the selection by G & S to support its claim that it exercised due diligence in the selection and supervision of its employees.
and supervision of its employees. It averred that it has been carrying out not only seminars for its drivers even
before they were made to work, but also periodic evaluations for their performance. Aside from these, it has also
been conducting monthly check-up of its automobiles and has regularly issued rules regarding the conduct of its With respect to the award of ₱6,537,244.96 for Jose Marcial’s loss of earning capacity, the CA declared the same
drivers. G & S claimed that it was able to establish a good name in the industry and maintain a clientele. unwarranted. It found the Certification22 issued by Jose Marcial’s employer, the United States Agency for
International Development (USAID) through its Chief of Human Resources Division Jonas Cruz (Cruz), as self-
serving, unreliable, and biased. While said certification states that Jose Marcial was earning an annual salary of
In an effort to build up Padilla’s character as an experienced and careful driver, G & S averred that: (1) before G & S ₱450,844.49 at the time of his untimely demise, the CA noted that same is unsupported by competent evidence
employed Padilla, he was a delivery truck driver of Inter Island Gas Service for 11 years; (2) Padilla has been an such as income tax returns or receipts. This is in view of the ruling in People v. Ereño23 where it was held that "there
employee of G & S from 1989 to 1996 and during said period, there was no recorded incident of his being a must be unbiased proof of the deceased’s average income." Anent moral damages, the CA found the award of
negligent driver; (3) despite his qualifications, G & S still required Padilla to submit an NBI clearance, driver’s license ₱300,000.00 excessive and thus reduced the same to ₱200,000.00 as to make it proportionate to the award of
and police clearance; (4) Padilla’s being a good driver-employee was manifest in his years of service with G & S, as exemplary damages which is ₱50,000.00. The dispositive portion of said Decision reads:
in fact, he has received congratulatory messages from the latter as shown by the inter-office memos dated August
23, 1990 and February 1, 1993; and that (5) Padilla attended a seminar at the Pope Pius Center sometime in
December 1999 as part of the NAIA Taxi Operation Program. WHEREFORE, the assailed Decision dated December 27, 2001 and Order dated March 5, 2002 are AFFIRMED with
the following MODIFICATION: appellant is ordered to pay appellees the sum of ₱50,000.00 as civil indemnity for the
death of the deceased Jose Marcial K. Ochoa, ₱200,000.00 as moral damages, ₱50,000.00 as exemplary damages,
G & S also argued that the proximate cause of Jose Marcial’s death is a fortuitous event and/or the fault or ₱100,000.00 for attorney’s fees and the costs of litigation. The trial court’s award of ₱6,537,244.96 for the loss of
negligence of another and not of its employee. According to G & S, the collision was totally unforeseen since Padilla earning capacity of the deceased is DELETED for lack of basis.
had every right to expect that the delivery van would just overtake him and not hit the right side of the taxicab.
 8

SO ORDERED. The heirs, on the other hand, advance the following grounds in support of their petition:

Both parties moved for reconsideration24 but the CA denied their respective motions for reconsideration in a THE COURT OF APPEALS MANIFESTLY AND GRAVELY ERRED IN COMPLETELY DELETING THE TRIAL COURT’S AWARD
Resolution25 dated October 12, 2005. FOR THE LOSS OF EARNING CAPACITY OF THE DECEASED.

Hence, G & S and the heirs filed their respective Petitions for Review on Certiorari before this Court. The heirs’ THE COURT OF APPEALS MANIFESTLY AND GRAVELY ERRED IN REDUCING THE TRIAL COURT’S AWARD FOR MORAL
petition was docketed as G.R. No. 170071 and that of G & S as G.R. No. 170125. These petitions were later DAMAGES.28
consolidated pursuant to this Court’s Resolution of November 21, 2005.26

The focal point of the heirs’ petition is the CA’s deletion of the award of ₱6,537,244.96 for Jose Marcial’s loss of
G.R. No. 170125 earning capacity as well as the reduction of the award of moral damages from ₱300,000.00 to ₱200,000.00.

G & S anchors its petition on the following grounds: The heirs aver that the appellate court gravely erred in relying upon Ereño as said case is not on all fours with the
present case. They contend that in Ereño, this Court disallowed the award for loss of income because the only proof
presented was a handwritten statement of the victim’s spouse stating the daily income of the deceased as a self-
I. THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN NOT RULING THAT THE PROXIMATE CAUSE OF DEATH employed fish vendor. The heirs argue that the reason why this Court declared said handwritten statement as self-
OF MR. JOSE MARCIAL K. OCHOA WAS A FORTUITOUS EVENT AND/OR WAS DUE TO THE FAULT OR NEGLIGENCE serving is because the one who prepared it, the deceased’s wife, was also the one who would directly and personally
OF ANOTHER AND SHOULD THUS EXEMPT THE PETITIONER FROM LIABILITY. benefit from such an award.29 This cannot be said in the case at bar since the same bias and personal interest
cannot be attributed to Jose Marcial’s employer, the USAID. Unlike in Ereño, USAID here does not stand to be
II. THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN NOT TAKING NOTE OF THE FACT THAT THE benefited by an award for Jose Marcial’s loss of earning capacity. Clearly, the Certification issued by it is far from
PETITIONER’S EMPLOYEE HAD BEEN ACQUITTED OF THE CRIME OF RECKLESS IMPRUDENCE RESULTING (IN) being self-serving. At any rate, the heirs contend that Ereño  has already been superseded by Pleyto v.
HOMICIDE. Lomboy30 where this Court held that in awarding damages for loss of earning capacity, "mere testimonial evidence
suffices to establish a basis for which the court can make a fair and reasonable estimate of the loss of earning
capacity". In addition, the heirs point out that the authenticity and accuracy of said Certification was neither
III. THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN UPHOLDING THE TESTIMONY OF A WITNESS WHO questioned by G & S nor discredited by any controverting evidence. In fact, its admission by the trial court was not
SURFACED MONTHS AFTER THE INCIDENT WHILE DISREGARDING THAT OF AN EYEWITNESS WHO WAS PRESENT even assigned by G & S as an error in their appeal before the CA.
AT THE TIME AND PLACE OF THE ACCIDENT.

As to the reduction of moral damages, the heirs claim that since the CA agreed with the factual circumstances of the
IV. THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN NOT RULING THAT THE PETITIONER EXERCISED THE case as found by the trial court, there is therefore no reason for it to alter the award of damages arising from such
DILIGENCE OF A GOOD FATHER OF A FAMILY IN THE SELECTION AND SUPERVISION OF ITS EMPLOYEES factual circumstances. They aver that the CA may only modify the damages awarded by the trial court when it is
PARTICULARLY MR. BIBIANO PADILLA.27 excessive and scandalous as held in Meneses v. Court of Appeals.31 Here, they claim that the award of moral
damages in the amount of ₱300,000.00 cannot be considered as excessive and unreasonable but only
commensurate to the sufferings caused by the incident to a wife who became a young widow at the age of 33 and to
G & S reiterates its arguments that the proximate cause of the accident is a fortuitous event and/or the negligence two minor children who lost a father. Moreover, the heirs aver that the CA should not have reduced the award of
of the driver of the delivery van which bumped the right portion of its taxicab and, that it exercised the diligence of a moral damages just to make said amount proportionate to the exemplary damages awarded. This is because there
good father of a family in the selection and supervision of its employees. It faults the CA when it overlooked the fact is no such rule which dictates that the amount of moral damages should be proportionate to that of the exemplary
that the MTC Decision convicting Padilla of reckless imprudence has already been reversed on appeal by the RTC damages. The heirs pray that the assailed CA Decision and Resolution be reversed and set aside insofar as they
with Padilla having been accordingly acquitted of the crime charged. Moreover, it claims that the appellate court deleted the award for loss of earning capacity and reduced the award for moral damages.
erred in according respect to the testimony of the lone prosecution witness, Pablo Clave (Clave), when it concluded
that Padilla was driving negligently at the time of the accident. It asserts that Clave is not a credible witness and so
is his testimony. Thus, G & S prays that the assailed CA Decision and Resolution be reversed and set aside. For its part, G & S avers that the Certification issued by USAID is self-serving because the USAID officer who issued
it has not been put on the witness stand to validate the contents thereof. Moreover, said Certification was not
supported by competent evidence such as income tax returns and receipts. G & S likewise finds the reduction of the
On the other hand, the heirs posit that the determination of the issues raised by G & S necessarily entails a re- award of moral damages appropriate in view of the settled rule that moral damages are not meant to enrich the
examination of the factual findings which this Court cannot do in this petition for review on certiorari. At any rate, complainant at the expense of the defendant. Hence, it prays that the petition be dismissed for lack of merit.
they maintain that the trial court itself is convinced of Clave’s credibility. They stress the settled rule that the
evaluation of the credibility of witnesses is a matter that particularly falls within the authority of the trial court
because it had the opportunity to observe the demeanor of the witnesses on the stand. Our Ruling

The heirs assert that fortuitous event was not the proximate cause of the mishap. They point out that as correctly We shall first tackle the issues raised by G & S in its petition.
found by the trial court, Padilla was running at an extremely high speed. This was why the impact was so strong
when the taxicab rammed the fly-over railings and was split into two when it hit the ground. Also, while it is true
that the MTC Decision in the criminal case for reckless imprudence has been reversed by the RTC, this does not The first, third and fourth issues raised by G & S involve questions of fact
excuse G & S from its liability to the heirs because its liability arises from its breach of contract of carriage and from
its negligence in the selection and supervision of its employees. Also, since the acquittal of Padilla is based on We have reviewed said issues and we find that the determination of the first, third and fourth issues raised entails
reasonable doubt, same does not in any way rule out his negligence as this may merely mean that the prosecution re-examination of the evidence presented because they all involve questions of fact. In Microsoft Corporation v.
failed to meet the requisite quantum of evidence to sustain his conviction. Therefore, G & S cannot bank on said Maxicorp, Inc.,32  we held that:
acquittal to disprove its liability.

Once it is clear that the issue invites a review of the evidence presented, the question posed is one of fact. If the
G.R. No. 170071 query requires a re-evaluation of the credibility of witnesses, or the existence or relevance of surrounding
 9

circumstances and their relation to each other, the issue in that query is factual. Our ruling in Paterno v. Paterno is Thus, in Cancio, Jr. v. Isip,39 we declared:
illustrative on this point:

In the instant case, it must be stressed that the action filed by petitioner is an independent civil action, which
Such questions as whether certain items of evidence should be accorded probative value or weight, or rejected as remains separate and distinct from any criminal prosecution based on the same act. Not being deemed instituted in
feeble or spurious, or whether or not the proof on one side or the other are clear and convincing and adequate to the criminal action based on culpa criminal, a ruling on the culpability of the offender will have no bearing on
establish a proposition in issue, are without doubt questions of fact. Whether or not the body of proofs presented by said independent civil action based on an entirely different cause of action, i.e., culpa contractual."
a party, weighed and analyzed in relation to contrary evidence submitted by adverse party, may be said to be (Emphasis supplied; Citations omitted.)
strong, clear and convincing; whether or not certain documents presented by one side should be accorded full faith
and credit in the face of protests as to their spurious character by the other side; whether or not inconsistencies in
the body of proofs of a party are of such a gravity as to justify refusing to give said proofs weight – all these are In this case, the action filed by the heirs is primarily for the recovery of damages arising from breach of contract of
issues of fact. (Citations omitted) 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,
In this case, the said three issues boil down to the determination of the following questions: What is the proximate same has no bearing in the resolution of the present case. There was therefore no error on the part of the CA when
cause of the death of Jose Marcial? Is the testimony of prosecution witness Clave credible? Did G & S exercise the it resolved this case without regard to the fact that Padilla has already been acquitted by the RTC in the criminal
diligence of a good father of a family in the selection and supervision of its employees? Suffice it to say that these case. Moreover, while the CA quoted some portions of the MTC Decision in said criminal case, we however find that
are all questions of fact which require this Court to inquire into the probative value of the evidence presented before those quoted portions were only meant to belie G & S’ claim that the proximate cause of the accident was the
the trial court. As we have consistently held, "[t]his Court is not a trier of facts. It is not a function of this court to negligence of the driver of the delivery van which allegedly hit the Avis taxicab. Even without those quoted portions,
analyze or weigh evidence. When we give due course to such situations, it is solely by way of exception. Such the appellate court’s ultimate finding that it was Padilla’s negligence which was the proximate cause of the mishap
exceptions apply only in the presence of extremely meritorious circumstances." 33 Here, we note that although G & S would still be the same. This is because the CA has, in fact, already made this declaration in the earlier part of its
enumerated in its Consolidated Memorandum34 the exceptions35 to the rule that a petition for review assailed Decision. The fact that the MTC Decision from which the subject quoted portions were lifted has already
on certiorari should only raise questions of law, it nevertheless did not point out under what exception its case falls. been reversed by the RTC is therefore immaterial.
And, upon review of the records of the case, we are convinced that it does not fall under any. Hence, we cannot
proceed to resolve said issues and disturb the findings and conclusions of the CA with respect thereto. As we
declared in Diokno v. Cacdac:36 In view of the foregoing, we deny G & S’ petition for lack of merit.

It is aphoristic that a re-examination of factual findings cannot be done through a petition for review The denial by the CA of the heirs’ claim for lost earnings is unwarranted
on certiorari under Rule 45 of the Rules of Court because as earlier stated, this Court is not a trier of facts; it
reviews only questions of law. The Supreme Court is not duty-bound to analyze and weigh again the evidence Going now to the petition filed by the heirs, we note at the outset that the issues of whether the CA erred in deleting
considered in the proceedings below. This is already outside the province of the instant Petition the award for loss of earning capacity and in reducing the award for moral damages made by the trial court likewise
for Certiorari. [Citations omitted.] raise questions of fact as they "involve an examination of the probative value of the evidence presented by the
parties".40 However, we find that the heirs’ case falls under one of the exceptions because the findings of the CA
There is a contract of carriage between G & S and Jose Marcial conflict with the findings of the RTC.41 Since the heirs properly raised the conflicting findings of the lower courts, it is
proper for this Court to resolve such contradiction. 42

What is clear from the records is that there existed a contract of carriage between G & S, as the owner and operator
of the Avis taxicab, and Jose Marcial, as the passenger of said vehicle. As a common carrier, G & S "is bound to In Ereño, we denied the claim for loss of income because the handwritten estimate of the deceased’s daily income
carry [Jose Marcial] safely as far as human care and foresight can provide, using the utmost diligence of very as a self-employed vendor was not supported by competent evidence like income tax returns or receipts. This was in
cautious persons, with due regard for all the circumstances." 37 However, Jose Marcial was not able to reach his view of the rule that compensation for lost income is in the nature of damages and as such requires due proof of
destination safely as he died during the course of the travel. "In a contract of carriage, it is presumed that the damages suffered. We reiterated this rule in People v. Yrat43 where we likewise denied the same claim because 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 only evidence presented to show that the deceased was earning ₱50,000.00 a month was the testimony of the wife.
court to make an express finding of fault or negligence on the part of the common carrier. This statutory There we stated that for lost income due to death, there must be unbiased proof of the deceased’s average income.
presumption may only be overcome by evidence that the carrier exercised extraordinary diligence." 38 Unfortunately, Self-serving, hence, unreliable statement is not enough. In People v. Caraig,44 we declared that "documentary
G & S miserably failed to overcome this presumption. Both the trial court and the CA found that the accident which evidence should be presented to substantiate the claim for damages for loss of earning capacity. By way of
led to Jose Marcial’s death was due to the reckless driving and gross negligence of G & S’ driver, Padilla, thereby exception, damages therefor may be awarded despite the absence of documentary evidence, provided that there is
holding G & S liable to the heirs of Jose Marcial for breach of contract of carriage. 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".
The acquittal of Padilla in the criminal case is immaterial to the instant case for breach of contract However, we subsequently ruled in Pleyto v. Lomboy45  that "failure to present documentary evidence to support a
claim for loss of earning capacity of the deceased need not be fatal to its cause. Testimonial evidence suffices to
establish a basis for which the court can make a fair and reasonable estimate of the loss of earning capacity".
This thus now leaves us with the remaining issue raised by G & S, that is, whether the CA gravely erred in not Hence, we held as sufficient to establish a basis for an estimate of damages for loss of earning capacity the
taking note of the fact that Padilla has already been acquitted of the crime of reckless imprudence resulting in testimony of the victim’s widow that her husband was earning a monthly income of ₱8,000.00. Later, in Victory
homicide, a charge which arose from the same incident subject of this case. Liner, Inc. v. Gammad,46 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
Article 31 of the Civil Code provides, viz: 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
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.
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
 10

deceased was accompanied by a handwritten estimate of her daughter’s alleged income as a fish vendor, the The award of moral damages should be modified
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 While we deemed it proper to modify the amount of moral damages awarded by the trial court as discussed below,
lost income after it found the USAID Certification to be self-serving and unreliable. 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. 57 They are different in
nature and require separate determination.58 The amount of one cannot be made to depend on the other.
We disagree. 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 In Victory Liner Inc. v. Gammad59 we awarded ₱100,000.00 by way of moral damages to the husband and three
engaging in democratic reforms."48 It is an "independent federal government agency that receives over-all foreign children of the deceased, a 39-year old Section Chief of the Bureau of Internal Revenue, to compensate said heirs
policy guidance from the Secretary of the State [of the United States]." 49 Given this background, it is highly for the grief caused by her death. This is pursuant to the provisions of Articles 1764 and 2206(3) which provide:
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 Art. 1764. Damages in cases comprised in this Section shall be awarded in accordance with Title XVIII of this Book,
the contrary, it is presumed that Cruz, as Chief of Human Resources Division of USAID, has regularly performed his concerning Damages. Articles 2206 shall also apply to the death of a passenger caused by the breach of contract by
duty relative to the issuance of said certification and therefore, the correctness of its contents can be relied upon. a common carrier.
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. As to its being self-serving, our discussion on "self-
serving evidence" in Heirs of Pedro Clemeña y Zurbano v. Heirs of Irene B. Bien 51 is enlightening, viz: Art. 2206. x x x

‘Self-serving evidence,’ perhaps owing to its descriptive formulation, is a concept much misunderstood. Not (3) The spouse, legitimate and illegitimate descendants and the ascendants of the deceased may demand moral
infrequently, the term is employed as a weapon to devalue and discredit a party's testimony favorable to his cause. damages for mental anguish by reason of the death of the deceased.
That, it seems, is the sense in which petitioners are using it now. This is a grave error. "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
Here, there is no question that the heirs are likewise entitled to moral damages pursuant to the above provisions,
sense, refers only to acts or declarations made by a party in his own interest at some place and time out
considering the mental anguish suffered by them by reason of Jose Marcial’s untimely death, as can be deduced
of court x x x. (Citations omitted; emphasis supplied.)
from the following testimony of his wife Ruby:

Verily, the USAID certification cannot be said to be self-serving because it does not refer to an act or declaration
Atty. Suarez:
made out of court by the heirs themselves as parties to this case.1awphi1

Q: How would you describe Jose Marcial Ochoa?

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 just like in Tamayo v. Señora52 where (Ruby) A: My husband was a very loving husband, faithful husband, a very [good] provider[.] I depended
we based the victim’s gross annual income on his pay slip from the Philippine National Police. Hence, we uphold the on him so much financially [and] emotionally[.] He was practically my life then.
trial court’s award for Jose Marcial’s loss of earning capacity.

Q: How is he as a father?
While the trial court applied the formula generally used by the courts to determine net earning capacity which is, to
wit:
A: A very good father, he is very committed to Micaela[. H]e has always time for her[. H]e is a family
man, so it’s really a great [loss] to me and to Micaela.
* 53
Net Earning Capacity = life expectancy  x (gross annual income - reasonable living expenses),

Q: What was your reaction upon learning of your husband’s death?

*
Life expectancy = 2/3 (80 – age of the deceased)

A: Immediately after I learned of his death, I tried very hard to keep a clear mind for my little girl, she
we, however, find incorrect the amount of ₱6,537, 244.96 arrived at. The award should be ₱6,611,634.59 as borne was 3 ½ and she could not grasp what death is, so I found [it] so hard to explain to her [at] that time
out by the following computation: what happened [e]specially [because] she just talked to her father from the airport telling her that he is
coming home, tapos hindi na pala.

2 (80-3654)
Q: How did it affect you?
Net earning capacity = x 450,844.4955-50%56
3
A: It was a painful struggle everyday just to get up and move on when someone who [you] really really
88 love and [who] is important to you … it is very hard to move on and [it is even] harder to move on [when]
= x 225,422.25 I found out that I was pregnant with my second child, parang tinabunan ka [ng] lahat eh[. I]t’s [too] hard
3 to find happiness, you’re pregnant, when you know wala naman talagang father yung bata later on x x x

= 29.33 x 225,422.25
xxxx
= ₱6, 611,634.59
 11

Q: How did this affect your family?

A: Yung effect kay Micaela, she [used] to be a gregarious child, yung happy ganyan, but nung wala na
yong father niya that time, [during] graduation ng nursery that time naging very very [quiet] siya, so a lot
of emotional support from my own family was given to her at the time para makacope-up siya sa loss kasi
she is very close to the father.

Q: Financially, how did it affect you?

A: I had to make do of what was left by my husband, I couldn’t also work so much at the time because I
was….and hirap eh, I cannot find enthusiasm in what I do, tapos pregnant pa ako, and hirap talaga.

Q: How else did it affect you?

A: We had to move houses like we used to live in Quezon City at (the) time of his death, tapos kinuha
kami ni Gorjie my brother-in-law sa compound nila para hindi… [to] support us emotionally (at that time)
kasi nga I was pregnant and then I also decided to move (to make it easy for me) to adjust yung lifestyle
ng mga bata, because I cannot cope [here] financially on my own[. N]ahihirapan na ako dito because the
living expenses here are quite high compared sa probinsiya so I decided to move.

Q: If you would assign that pain and suffering that you suffered as a result of the death of your husband,
what will be the monetary consideration?

A: I struggled with that kasi….I can honestly say no amount of money can ever repay the [loss] that my
children suffered, future nila yan eh, and my son was not given a chance to get to know his father, so I
cannot imagine kung ano yung sinasabi n’yong amount that will compensate the suffering that I have to
go through and my children will go through, ‘yon and mahirap bayaran. 60

Under this circumstance, we thus find as sufficient and "somehow proportional to and in approximation of the
suffering inflicted"61 an award of moral damages in an amount similar to that awarded in Victory which is
₱100,000.00.

From the above discussion, we, thus, partly grant the heirs’ petition.

WHEREFORE, the petition for review on certiorari in G.R. No. 170071 is PARTLY GRANTED while the petition in G.R.
No. 170125 is DENIED. The assailed Decision and Resolution dated June 29, 2005 and October 12, 2005 of the
Court of Appeals in CA-G.R. CV No. 75602 are AFFIRMED with the MODIFICATIONS that G & S is ordered to pay the
heirs of Jose Marcial K. Ochoa the sum of ₱6,611,634.59 for loss of earning capacity of the deceased and
₱100,000.00 as moral damages.

SO ORDERED.
 12

SECOND DIVISION On June 16, 2004, the MeTC of Pasay City, Branch 48 rendered its Decision 4 in favor of MOF. It ruled that Shin Yang
cannot disclaim being a party to the contract of affreightment because:

[G.R. NO. 172822 : December18, 2009]

x x x it would appear that defendant has business transactions with plaintiff. This is evident from defendant's letters
dated 09 May 2002 and 13 May 2002 (Exhibits "1" and "2", defendant's Position Paper) where it requested for the
MOF COMPANY, INC., Petitioner, v. SHIN YANG BROKERAGE CORPORATION Respondent. 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
DECISION defendant in the bill of lading, had there been no prior agreement to that effect.

DEL CASTILLO, J.: 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. 5

The necessity of proving lies with the person who sues.

The dispositive portion of the MeTC Decision reads:

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 WHEREFORE, premises considered, judgment is hereby rendered in favor of plaintiff and against the defendant,
bill of lading, suffices to prove that the consignee is bound to pay. Petitioner now comes to us by way of Petition for ordering the latter to pay plaintiff as follows:
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. 1. P57,646.00 plus legal interest from the date of demand until fully paid,

Factual Antecedents 2. P10,000.00 as and for attorney's fees and

On October 25, 2001, Halla Trading Co., a company based in Korea, shipped to Manila secondhand cars and other 3. the cost of suit.
articles on board the vessel Hanjin Busan 0238W. The bill of lading covering the shipment, i.e., Bill of Lading No.
HJSCPUSI14168303,2 which was prepared by the carrier Hanjin Shipping Co., Ltd. (Hanjin), named respondent Shin
Yang Brokerage Corp. (Shin Yang) as the consignee and indicated that payment was on a "Freight Collect" SO ORDERED.6
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 P57,646.00.3
Ruling of the Regional Trial Court

The shipment arrived in Manila on October 29, 2001. Thereafter, petitioner MOF Company, Inc. (MOF), Hanjin's
exclusive general agent in the Philippines, repeatedly demanded the payment of ocean freight, documentation fee The Regional Trial Court (RTC) of Pasay City, Branch 108 affirmed in toto  the Decision of the MeTC. It held that:
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 MOF and Shin Yang entered into a contract of affreightment which Black's Law Dictionary defined as a contract with
consignee did not endorse in its favor the original bill of lading and that the bill of lading was prepared without its 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
consent. party or a bill of lading.

Thus, on March 19, 2003, MOF filed a case for sum of money before the Metropolitan Trial Court of Pasay City (MeTC The bill of lading contain[s] the information embodied in the contract.
Pasay) which was docketed as Civil Case No. 206-03 and raffled to Branch 48. MOF alleged that Shin Yang, a regular
client, caused the importation and shipment of the goods and assured it that ocean freight and other charges would
be paid upon arrival of the goods in Manila. Yet, after Hanjin's compliance, Shin Yang unjustly breached its Article 652 of the Code of Commerce provides that the charter party must be in writing; however, Article 653 says:
obligation to pay. MOF argued that Shin Yang, as the named consignee in the bill of lading, entered itself as a party "If the cargo should be received without charter party having been signed, the contract shall be understood as
to the contract and bound itself to the "Freight Collect" arrangement. MOF thus prayed for the payment executed in accordance with what appears in the bill of lading, the sole evidence of title with regard to the cargo for
of P57,646.00 representing ocean freight, documentation fee and terminal handling charges as well as damages and determining the rights and obligations of the ship agent, of the captain and of the charterer". Thus, the Supreme
attorney's fees. Court opined in the Market Developers, Inc. (MADE) v. Honorable Intermediate Appellate Court and Gaudioso Uy,
G.R. No. 74978, September 8, 1989, this kind of contract may be oral. In another case, Compania Maritima v.
Insurance Company of North America, 12 SCRA 213 the contract of affreightment by telephone was recognized
Claiming that it is merely a consolidator/forwarder and that Bill of Lading No. HJSCPUSI14168303 was not endorsed where the oral agreement was later confirmed by a formal booking.
to it by the ultimate consignee, Shin Yang denied any involvement in shipping the goods or in promising to shoulder
the freightage. It asserted that it never authorized Halla Trading Co. to ship the articles or to have its name included
in the bill of lading. Shin Yang also alleged that MOF failed to present supporting documents to prove that it was xxx
Shin Yang that caused the importation or the one that assured payment of the shipping charges upon arrival of the
goods in Manila.
Defendant is liable to pay the sum of P57,646.00, with interest until fully paid, attorney's fees of P10,000.00 [and]
cost of suit.
Ruling of the Metropolitan Trial Court
Considering all the foregoing, this Court affirms in toto the decision of the Court a quo.
 13

SO ORDERED.7 In assailing the CA's Decision, MOF argues that the factual findings of both the MeTC and RTC are entitled to great
weight and respect and should have bound the CA. It stresses that the appellate court has no justifiable reason to
disturb the lower courts' judgments because their conclusions are well-supported by the evidence on record.

MOF further argues that the CA erred in labeling the findings of the lower courts as purely 'speculative and
Ruling of the Court of Appeals conjectural'. According to MOF, the bill of lading, which expressly stated Shin Yang as the consignee, is the best
evidence of the latter's actual participation in the transportation of the goods. Such document, validly entered,
Seeing the matter in a different light, the CA dismissed MOF's complaint and refused to award any form of damages stands as the law among the shipper, carrier and the consignee, who are all bound by the terms stated therein.
or attorney's fees. It opined that MOF failed to substantiate its claim that Shin Yang had a hand in the importation of Besides, a carrier's valid claim after it fulfilled its obligation cannot just be rejected by the named consignee upon a
the articles to the Philippines or that it gave its consent to be a consignee of the subject goods. In its March 22, simple denial that it ever consented to be a party in a contract of affreightment, or that it ever participated in the
2006 Decision,8 the CA said: preparation of the bill of lading. As against Shin Yang's bare denials, the bill of lading is the sufficient preponderance
of evidence required to prove MOF's claim. MOF maintains that Shin Yang was the one that supplied all the details in
the bill of lading and acquiesced to be named consignee of the shipment on a 'Freight Collect' basis.
This Court is persuaded [that except] for the Bill of Lading, respondent has not presented any other evidence to
bolster its claim that petitioner has entered [into] an agreement of affreightment with respondent, be it verbal or
written. It is noted that the Bill of Lading was prepared by Hanjin Shipping, not the petitioner. Hanjin is the principal Lastly, MOF claims that even if Shin Yang never gave its consent, it cannot avoid its obligation to pay, because it
while respondent is the former's agent. (p. 43, rollo) never objected to being named as the consignee in the bill of lading and that it only protested when the shipment
arrived in the Philippines, presumably due to a botched transaction between it and Halla Trading Co. Furthermore,
Shin Yang's letters asking for the refund of container deposits highlight the fact that it was aware of the shipment
The conclusion of the court a quo, which was upheld by the RTC Pasay City, Branch 108 xxx is purely speculative and that it undertook preparations for the intended release of the shipment.
and conjectural. A court cannot rely on speculations, conjectures or guesswork, but must depend upon competent
proof and on the basis of the best evidence obtainable under the circumstances. Litigation cannot be properly
resolved by suppositions, deductions or even presumptions, with no basis in evidence, for the truth must have to be Respondent's Arguments
determined by the hard rules of admissibility and proof (Lagon v. Hooven Comalco Industries, Inc. 349 SCRA 363).
Echoing the CA decision, Shin Yang insists that MOF has no evidence to prove that it consented to take part in the
While it is true that a bill of lading serves two (2) functions: first, it is a receipt for the goods shipped; second, it is a contract of affreightment. Shin Yang argues that MOF miserably failed to present any evidence to prove that it was
contract by which three parties, namely, the shipper, the carrier and the consignee who undertake specific the one that made preparations for the subject shipment, or that it is an 'actual shipping practice' that
responsibilities and assume stipulated obligations (Belgian Overseas Chartering and Shipping N.V. v. Phil. First forwarders/consolidators as consignees are the ones that provide carriers details and information on the bills of
Insurance Co., Inc., 383 SCRA 23), x x x if the same is not accepted, it is as if one party does not accept the lading.
contract. Said the Supreme Court:
Shin Yang contends that a bill of lading is essentially a contract between the shipper and the carrier and ordinarily,
"A bill of lading delivered and accepted constitutes the contract of carriage[,] even though not signed, because the the shipper is the one liable for the freight charges. A consignee, on the other hand, is initially a stranger to the bill
acceptance of a paper containing the terms of a proposed contract generally constitutes an acceptance of the of lading and can be liable only when the bill of lading specifies that the charges are to be paid by the consignee.
contract and of all its terms and conditions of which the acceptor has actual or constructive notice" (Keng Hua Paper This liability arises from either a) the contract of agency between the shipper/consignor and the consignee; or b) the
Products Co., Inc. v. CA, 286 SCRA 257). 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
In the present case, petitioner did not only [refuse to] accept the bill of lading, but it likewise disown[ed] the benefited from the shipment. It never claimed or accepted the goods, it was not the shipper's agent, it was not
shipment x x x. [Neither did it] authorize Halla Trading Company or anyone to ship or export the same on its behalf. aware of its designation as consignee and the original bill of lading was never endorsed to it.

It is settled that a contract is upheld as long as there is proof of consent, subject matter and cause (Sta. Clara Issue
Homeowner's Association v. 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.
The issue for resolution is whether a consignee, who is not a signatory to the bill of lading, is bound by the
stipulations thereof. Corollarily, whether respondent who was not an agent of the shipper and who did not make any
"He who alleges a fact has the burden of proving it and a mere allegation is not evidence" (Luxuria Homes Inc. v. demand for the fulfillment of the stipulations of the bill of lading drawn in its favor is liable to pay the corresponding
CA, 302 SCRA 315). freight and handling charges.

The 40-footer van contains goods of substantial value. It is highly improbable for petitioner not to pay the charges, Our Ruling
which is very minimal compared with the value of the goods, in order that it could work on the release thereof.

Since the CA and the trial courts arrived at different conclusions, we are constrained to depart from the general rule
For failure to substantiate its claim by preponderance of evidence, respondent has not established its case against that only errors of law may be raised in a Petition for Review on Certiorari under Rule 45 of the Rules of Court and
petitioner.9 will review the evidence presented.11

Petitionersfiled a motion for reconsideration but it was denied in a Resolution 10 dated May 25, 2006. Hence, this The bill of lading is oftentimes drawn up by the shipper/consignor and the carrier without the intervention of the
Petition for Review on Certiorari . consignee. However, the latter can be bound by the stipulations of the bill of lading when a) there is a relation of
agency between the shipper or consignor and the consignee or b) when the consignee demands fulfillment of the
stipulation of the bill of lading which was drawn up in its favor. 12
Petitioner's Arguments
 14

In Keng Hua Paper Products Co., Inc. v. Court of Appeals, 13 we held that once the bill of lading is received by the demands before the carrier the fulfillment of the stipulation made by the consignor/shipper in the consignee's favor,
consignee who does not object to any terms or stipulations contained therein, it constitutes as an acceptance of the specifically the delivery of the goods/cargoes shipped. 16
contract and of all of its terms and conditions, of which the acceptor has actual or constructive
notice.ςηαñrοblεš νιr†υαl lαω lιbrαrÿ
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
14
In Mendoza v. Philippine Air Lines, Inc.,  the consignee sued the carrier for damages but nevertheless claimed that of the cargo. Basic is the rule in evidence that the burden of proof lies upon him who asserts it, not upon him who
he was never a party to the contract of transportation and was a complete stranger thereto. In debunking Mendoza's denies, since, by the nature of things, he who denies a fact cannot produce any proof of it. 17 Thus, MOF has the
contention, we held that: 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.

x x x First, he insists that the articles of the Code of Commerce should be applied; that he invokes the provisions of
said Code governing the obligations of a common carrier to make prompt delivery of goods given to it under a In civil cases, the party having the burden of proof must establish his case by preponderance of evidence, 18 which
contract of transportation. Later, as already said, he says that he was never a party to the contract of transportation means evidence which is of greater weight, or more convincing than that which is offered in opposition to it. 19 Here,
and was a complete stranger to it, and that he is now suing on a tort or a violation of his rights as a stranger (culpa MOF failed to meet the required quantum of proof. Other than presenting the bill of lading, which, at most, proves
aquiliana). If he does not invoke the contract of carriage entered into with the defendant company, then he would that the carrier acknowledged receipt of the subject cargo from the shipper and that the consignee named is to
hardly have any leg to stand on. His right to prompt delivery of the can of film at the Pili Air Port stems and is shoulder the freightage, MOF has not adduced any other credible evidence to strengthen its cause of action. It did
derived from the contract of carriage under which contract, the PAL undertook to carry the can of film safely and to not even present any witness in support of its allegation that it was Shin Yang which furnished all the details
deliver it to him promptly. Take away or ignore that contract and the obligation to carry and to deliver and right to indicated in the bill of lading and that Shin Yang consented to shoulder the shipment costs. There is also nothing in
prompt delivery disappear. Common carriers are not obligated by law to carry and to deliver merchandise, and the records which would indicate that Shin Yang was an agent of Halla Trading Co. or that it exercised any act that
persons are not vested with the right to prompt delivery, unless such common carriers previously assume the would bind it as a named consignee. Thus, the CA correctly dismissed the suit for failure of petitioner to establish its
obligation. Said rights and obligations are created by a specific contract entered into by the parties. In the present cause against respondent.
case, the findings of the trial court which as already stated, are accepted by the parties and which we
must accept are to the effect that the LVN Pictures Inc. and Jose Mendoza on one side, and the
defendant company on the other, entered into a contract of transportation (p. 29, Rec. on Appeal). One WHEREFORE, the petition is DENIED. The assailed Decision of the Court of Appeals dated March 22, 2006 dismissing
interpretation of said finding is that the LVN Pictures Inc. through previous agreement with Mendoza petitioner's complaint and the Resolution dated May 25, 2006 denying the motion for reconsideration are AFFIRMED.
acted as the latter's agent. When he negotiated with the LVN Pictures Inc. to rent the film 'Himala ng
Birhen' and show it during the Naga town fiesta, he most probably authorized and enjoined the Picture SO ORDERED.
Company to ship the film for him on the PAL on September 17th. Another interpretation is that even if
the LVN Pictures Inc. as consignor of its own initiative, and acting independently of Mendoza for the
time being, made Mendoza a consignee. [Mendoza made himself a party to the contract of transportaion
when he appeared at the Pili Air Port armed with the copy of the Air Way Bill (Exh. 1) demanding the
delivery of the shipment to him.] The very citation made by appellant in his memorandum supports this view.
Speaking of the possibility of a conflict between the order of the shipper on the one hand and the order of the
consignee on the other, as when the shipper orders the shipping company to return or retain the goods shipped
while the consignee demands their delivery, Malagarriga in his book Codigo de Comercio Comentado, Vol. 1, p. 400,
citing a decision of the Argentina Court of Appeals on commercial matters, cited by Tolentino in Vol. II of his book
entitled 'Commentaries and Jurisprudence on the Commercial Laws of the Philippines' p. 209, says that the right of
the shipper to countermand the shipment terminates when the consignee or legitimate holder of the bill
of lading appears with such bill of lading before the carrier and makes himself a party to the contract.
Prior to that time he is a stranger to the contract.

Still another view of this phase of the case is that contemplated in Art. 1257, paragraph 2, of the old
Civil Code (now Art. 1311, second paragraph) which reads thus:

'Should the contract contain any stipulation in favor of a third person, he may demand its fulfillment
provided he has given notice of his acceptance to the person bound before the stipulation has been
revoked.'

Here, the contract of carriage between the LVN Pictures Inc. and the defendant carrier contains the
stipulations of delivery to Mendoza as consignee. His demand for the delivery of the can of film to him at
the Pili Air Port may be regarded as a notice of his acceptance of the stipulation of the delivery in his
favor contained in the contract of carriage and delivery. In this case he also made himself a party to the
contract, or at least has come to court to enforce it. His cause of action must necessarily be founded on
its breach.15 (Emphasis Ours)

In sum, a consignee, although not a signatory to the contract of carriage between the shipper and the carrier,
becomes a party to the contract by reason of either a) the relationship of agency between the consignee and the
shipper/ consignor; b) the unequivocal acceptance of the bill of lading delivered to the consignee, with full
knowledge of its contents or c) availment of the stipulation pour autrui, i.e., when the consignee, a third person,
 15

THIRD DIVISION Petitioners, by letter of October 26, 2000,4 demanded indemnification from respondent for the death of their son in
the amount of at least ₱4,000,000.

G.R. No. 186312               June 29, 2010

Replying, respondent, by letter dated November 7, 2000,5 denied any responsibility for the incident which it
considered to be a fortuitous event. It nevertheless offered, as an act of commiseration, the amount of ₱10,000 to
SPOUSES DANTE CRUZ and LEONORA CRUZ, Petitioners, petitioners upon their signing of a waiver.
vs.
SUN HOLIDAYS, INC., Respondent.
As petitioners declined respondent’s offer, they filed the Complaint, as earlier reflected, alleging that respondent, as
a common carrier, was guilty of negligence in allowing M/B Coco Beach III to sail notwithstanding storm warning
DECISION bulletins issued by the Philippine Atmospheric, Geophysical and Astronomical Services Administration (PAGASA) as
early as 5:00 a.m. of September 11, 2000.6
CARPIO MORALES, J.:
In its Answer,7 respondent denied being a common carrier, alleging that its boats are not available to the general
1
Spouses Dante and Leonora Cruz (petitioners) lodged a Complaint on January 25, 2001  against Sun Holidays, Inc. public as they only ferry Resort guests and crew members. Nonetheless, it claimed that it exercised the utmost
(respondent) with the Regional Trial Court (RTC) of Pasig City for damages arising from the death of their son diligence in ensuring the safety of its passengers; contrary to petitioners’ allegation, there was no storm on
Ruelito C. Cruz (Ruelito) who perished with his wife on September 11, 2000 on board the boat M/B Coco Beach III September 11, 2000 as the Coast Guard in fact cleared the voyage; and M/B Coco Beach III was not filled to
that capsized en route to Batangas from Puerto Galera, Oriental Mindoro where the couple had stayed at Coco Beach capacity and had sufficient life jackets for its passengers. By way of Counterclaim, respondent alleged that it is
Island Resort (Resort) owned and operated by respondent. entitled to an award for attorney’s fees and litigation expenses amounting to not less than ₱300,000.

The stay of the newly wed Ruelito and his wife at the Resort from September 9 to 11, 2000 was by virtue of a tour Carlos Bonquin, captain of M/B Coco Beach III, averred that the Resort customarily requires four conditions to be
package-contract with respondent that included transportation to and from the Resort and the point of departure in met before a boat is allowed to sail, to wit: (1) the sea is calm, (2) there is clearance from the Coast Guard, (3)
Batangas. there is clearance from the captain and (4) there is clearance from the Resort’s assistant manager. 8 He added that
M/B Coco Beach III met all four conditions on September 11, 2000,9 but a subasco or squall, characterized by strong
winds and big waves, suddenly occurred, causing the boat to capsize. 10
Miguel C. Matute (Matute),2 a scuba diving instructor and one of the survivors, gave his account of the incident that
led to the filing of the complaint as follows:
By Decision of February 16, 2005,11 Branch 267 of the Pasig RTC dismissed petitioners’ Complaint and respondent’s
Counterclaim.
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. Petitioners’ Motion for Reconsideration having been denied by Order dated September 2, 2005, 12 they appealed to
the Court of Appeals.

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 By Decision of August 19, 2008,13 the appellate court denied petitioners’ appeal, holding, among other things, that
M/B Coco Beach III, which was to ferry them to Batangas. the trial court correctly ruled that respondent is a private carrier which is only required to observe ordinary
diligence; that respondent in fact observed extraordinary diligence in transporting its guests on board M/B Coco
Beach III; and that the proximate cause of the incident was a squall, a fortuitous event.
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. Petitioners’ Motion for Reconsideration having been denied by Resolution dated January 16, 2009, 14 they filed the
present Petition for Review.15

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. Petitioners maintain the position they took before the trial court, adding that respondent is a common carrier since
by its tour package, the transporting of its guests is an integral part of its resort business. They inform that another
division of the appellate court in fact held respondent liable for damages to the other survivors of the incident.
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). Upon the other hand, respondent contends that petitioners failed to present evidence to prove that it is a common
carrier; that the Resort’s ferry services for guests cannot be considered as ancillary to its business as no income is
derived therefrom; that it exercised extraordinary diligence as shown by the conditions it had imposed before
Help came after about 45 minutes when two boats owned by Asia Divers in Sabang, Puerto Galera passed by the allowing M/B Coco Beach III to sail; that the incident was caused by a fortuitous event without any contributory
capsized M/B Coco Beach III. Boarded on those two boats were 22 persons, consisting of 18 passengers and four negligence on its part; and that the other case wherein the appellate court held it liable for damages involved
crew members, who were brought to Pisa Island. Eight passengers, including petitioners’ son and his wife, died different plaintiffs, issues and evidence.16
during the incident.

The petition is impressed with merit.

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 correctly rely on De Guzman v. Court of Appeals 17 in characterizing respondent as a common carrier.
 16

The Civil Code defines "common carriers" in the following terms: 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.

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 The evidence shows that PAGASA issued 24-hour public weather forecasts and tropical cyclone warnings for shipping
public. 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
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 very cautious person exercising the utmost diligence would thus not brave such stormy weather and put other
a regular or scheduled basis and one offering such service on an occasional, episodic or unscheduled basis. Neither people’s lives at risk. The extraordinary diligence required of common carriers demands that they take care of the
does Article 1732 distinguish between a carrier offering its services to the "general public," i.e., the general goods or lives entrusted to their hands as if they were their own. This respondent failed to do.
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.
Respondent’s insistence that the incident was caused by a fortuitous event does not impress either.

So understood, the concept of "common carrier" under Article 1732 may be seen to coincide neatly with the notion
of "public service," under the Public Service Act (Commonwealth Act No. 1416, as amended) which at least partially The elements of a "fortuitous event" are: (a) the cause of the unforeseen and unexpected occurrence, or the failure
supplements the law on common carriers set forth in the Civil Code. Under Section 13, paragraph (b) of the Public of the debtors to comply with their obligations, must have been independent of human will; (b) the event that
Service Act, "public service" includes: 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
. . . every person that now or hereafter may own, operate, manage, or control in the Philippines, for hire or the creditor.24
compensation, with general or limited clientele, whether permanent, occasional or accidental, and done for general
business purposes, any common carrier, railroad, street railway, traction railway, subway motor vehicle, either for
freight or passenger, or both, with or without fixed route and whatever may be its classification, freight or carrier To fully free a common carrier from any liability, the fortuitous event must have been the proximate and only
service of any class, express service, steamboat, or steamship line, pontines, ferries and water craft, engaged in the cause of the loss. And it should have exercised due diligence to prevent or minimize the loss before, during and after
transportation of passengers or freight or both, shipyard, marine repair shop, wharf or dock, ice plant, ice- the occurrence of the fortuitous event.25
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 Respondent cites the squall that occurred during the voyage as the fortuitous event that overturned M/B Coco Beach
public services . . .18 (emphasis and underscoring supplied.) 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
Indeed, respondent is a common carrier. Its ferry services are so intertwined with its main business as to be sank.26 The incident was, therefore, not completely free from human intervention.
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 The Court need not belabor how respondent’s evidence likewise fails to demonstrate that it exercised due diligence
services, may be availed of by anyone who can afford to pay the same. These services are thus available to the to prevent or minimize the loss before, during and after the occurrence of the squall.
public.

Article 176427 vis-à-vis Article 220628 of the Civil Code holds the common carrier in breach of its contract of carriage
That respondent does not charge a separate fee or fare for its ferry services is of no moment. It would be imprudent that results in the death of a passenger liable to pay the following: (1) indemnity for death, (2) indemnity for loss of
to suppose that it provides said services at a loss. The Court is aware of the practice of beach resort operators earning capacity and (3) moral damages.
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. Petitioners are entitled to indemnity for the death of Ruelito which is fixed at ₱50,000. 29

As De Guzman instructs, Article 1732 of the Civil Code defining "common carriers" has deliberately refrained from As for damages representing unearned income, the formula for its computation is:
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
Net Earning Capacity = life expectancy x (gross annual income - reasonable and necessary living expenses).
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. Life expectancy is determined in accordance with the formula:

Under the Civil Code, common carriers, from the nature of their business and for reasons of public policy, are bound 2 / 3 x [80 — age of deceased at the time of death]30
to observe extraordinary diligence for the safety of the passengers transported by them, according to all the
circumstances of each case.19 They are bound to carry the passengers safely as far as human care and foresight can
provide, using the utmost diligence of very cautious persons, with due regard for all the circumstances. 20 The first factor, i.e., life expectancy, is computed by applying the formula (2/3 x [80 — age at death]) adopted in
the American Expectancy Table of Mortality or the Actuarial of Combined Experience Table of Mortality. 31

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 The second factor is computed by multiplying the life expectancy by the net earnings of the deceased, i.e., the total
negligence on the part of the common carrier. This statutory presumption may only be overcome by evidence that earnings less expenses necessary in the creation of such earnings or income and less living and other incidental
the carrier exercised extraordinary diligence. 21 expenses.32 The loss is not equivalent to the entire earnings of the deceased, but only such portion as he would have
 17

used to support his dependents or heirs. Hence, to be deducted from his gross earnings are the necessary expenses demand can be established with reasonable certainty. Accordingly, where the demand is established with
supposed to be used by the deceased for his own needs. 33 reasonable certainty, the interest shall begin to run from the time the claim is made judicially or
extrajudicially (Art. 1169, Civil Code) but when such certainty cannot be so reasonably established at the
time the demand is made, the interest shall begin to run only from the date the judgment of the court is
In computing the third factor – necessary living expense, Smith Bell Dodwell Shipping Agency Corp. v. made (at which time the quantification of damages may be deemed to have been reasonably ascertained).
Borja34 teaches that when, as in this case, there is no showing that the living expenses constituted the smaller The actual base for the computation of legal interest shall, in any case, be on the amount finally adjudged.
percentage of the gross income, the living expenses are fixed at half of the gross income.

3. When the judgment of the court awarding a sum of money becomes final and executory, the rate of
Applying the above guidelines, the Court determines Ruelito's life expectancy as follows: legal interest, whether the case falls under paragraph 1 or paragraph 2, above, shall be 12% per annum
from such finality until its satisfaction, this interim period being deemed to be by then an equivalent to a
forbearance of credit. (emphasis supplied).
Life expectancy = 2/3 x [80 - age of deceased at the time of death]
2/3 x [80 - 28]
2/3 x [52] Since the amounts payable by respondent have been determined with certainty only in the present petition, the
interest due shall be computed upon the finality of this decision at the rate of 12% per annum until satisfaction, in
Life expectancy = 35 accordance with paragraph number 3 of the immediately cited guideline in Easter Shipping Lines, Inc.

Documentary evidence shows that Ruelito was earning a basic monthly salary of $900 35 which, when converted to WHEREFORE, the Court of Appeals Decision of August 19, 2008 is REVERSED and SET ASIDE. Judgment is rendered
Philippine peso applying the annual average exchange rate of $1 = ₱44 in 2000,36 amounts to ₱39,600. Ruelito’s net in favor of petitioners ordering respondent to pay petitioners the following: (1) ₱50,000 as indemnity for the death
earning capacity is thus computed as follows: of Ruelito Cruz; (2) ₱8,316,000 as indemnity for Ruelito’s loss of earning capacity; (3) ₱100,000 as moral damages;
(4) ₱100,000 as exemplary damages; (5) 10% of the total amount adjudged against respondent as attorneys fees;
and (6) the costs of suit.
Net Earning = life expectancy x (gross annual income - reasonable and necessary living
Capacity expenses).
The total amount adjudged against respondent shall earn interest at the rate of 12% per annum computed from the
= 35 x (₱475,200 - ₱237,600)
finality of this decision until full payment.
= 35 x (₱237,600)

Net Earning
= ₱8,316,000 SO ORDERED.
Capacity

Respecting the award of moral damages, since respondent common carrier’s breach of contract of carriage resulted
in the death of petitioners’ son, following Article 1764 vis-à-vis Article 2206 of the Civil Code, petitioners are entitled
to moral damages.

Since respondent failed to prove that it exercised the extraordinary diligence required of common carriers, it is
presumed to have acted recklessly, thus warranting the award too of exemplary damages, which are granted in
contractual obligations if the defendant acted in a wanton, fraudulent, reckless, oppressive or malevolent manner. 37

Under the circumstances, it is reasonable to award petitioners the amount of ₱100,000 as moral damages and
₱100,000 as exemplary damages.381avvphi1

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

Finally, Eastern Shipping Lines, Inc. v. Court of Appeals 40 teaches that when an obligation, regardless of its source,
i.e., law, contracts, quasi-contracts, delicts or quasi-delicts is breached, the contravenor can be held liable for
payment of interest in the concept of actual and compensatory damages, subject to the following rules, to wit —

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

2. When an obligation, not constituting a loan or forbearance of money, is breached, an interest on the
amount of damages awarded may be imposed at the discretion of the court at the rate of 6% per annum.
No interest, however, shall be adjudged on unliquidated claims or damages except when or until the
 18

THIRD DIVISION After trial, the trial court found petitioner liable and ordered him to pay respondent actual, moral and exemplary
damages plus appearance and attorney's fees:

[G.R. NO. 144274 : September 20, 2004]

WHEREFORE, judgment is hereby rendered for the plaintiffs, ordering Nostradamus Villanueva to pay the amount
of P99,580 as actual damages, P25,000.00 as moral damages, P25,000.00 as exemplary damages and attorney's
NOSTRADAMUS VILLANUEVA, Petitioner, v. PRISCILLA R. DOMINGO and LEANDRO LUIS R. fees in the amount of P10,000.00 plus appearance fees of P500.00 per hearing with legal interest counted from the
DOMINGO, Respondents. date of judgment. In conformity with the law on equity and in accordance with the ruling in First Malayan Lending
and Finance Corporation v. Court of Appeals (supra), Albert Jaucian is hereby ordered to indemnify Nostradamus
DECISION Villanueva for whatever amount the latter is hereby ordered to pay under the judgment.

CORONA, J.: SO ORDERED.4

This is a petition to review the decision 1 of the Court of Appeals in CA-G.R. CV No. 52203 affirming in turn the The CA upheld the trial court's decision but deleted the award for appearance and attorney's fees because the
decision of the trial court finding petitioner liable to respondent for damages. The dispositive portion read: justification for the grant was not stated in the body of the decision. Thus, this Petition for Review which raises a
singular issue:

WHEREFORE, the appealed decision is hereby AFFIRMED except the award of attorney's fees including appearance
fees which is DELETED. MAY THE REGISTERED OWNER OF A MOTOR VEHICLE BE HELD LIABLE FOR DAMAGES ARISING FROM A VEHICULAR
ACCIDENT INVOLVING HIS MOTOR VEHICLE WHILE BEING OPERATED BY THE EMPLOYEE OF ITS BUYER WITHOUT
THE LATTER'S CONSENT AND KNOWLEDGE?5
SO ORDERED.2

Yes.
The facts of the case, as summarized by the Court of Appeals, are as follows:

We have consistently ruled that the registered owner of any vehicle is directly and primarily responsible to the public
[Respondent] Priscilla R. Domingo is the registered owner of a silver Mitsubishi Lancer Car model 1980 bearing plate and third persons while it is being operated.6 The rationale behind such doctrine was explained way back in 1957
No. NDW 781 '91 with [co-respondent] Leandro Luis R. Domingo as authorized driver. [Petitioner] Nostradamus in Erezo v. Jepte7:
Villanueva was then the registered "owner" of a green Mitsubishi Lancer bearing Plate No. PHK 201 '91.

The principle upon which this doctrine is based is that in dealing with vehicles registered under the Public Service
On 22 October 1991 at about 9:45 in the evening, following a green traffic light, [respondent] Priscilla Domingo's Law, the public has the right to assume or presume that the registered owner is the actual owner thereof, for it
silver Lancer car with Plate No. NDW 781 '91 then driven by [co-respondent] Leandro Luis R. Domingo was cruising would be difficult for the public to enforce the actions that they may have for injuries caused to them by the vehicles
along the middle lane of South Superhighway at moderate speed from north to south. Suddenly, a green Mitsubishi being negligently operated if the public should be required to prove who the actual owner is. How would the public
Lancer with plate No. PHK 201 '91 driven by Renato Dela Cruz Ocfemia darted from Vito Cruz Street towards the or third persons know against whom to enforce their rights in case of subsequent transfers of the vehicles? We do
South Superhighway directly into the path of NDW 781 '91 thereby hitting and bumping its left front portion. As a not imply by his doctrine, however, that the registered owner may not recover whatever amount he had paid by
result of the impact, NDW 781 '91 hit two (2) parked vehicles at the roadside, the second hitting another parked car virtue of his liability to third persons from the person to whom he had actually sold, assigned or conveyed the
in front of it. vehicle.

Per Traffic Accident Report prepared by Traffic Investigator Pfc. Patrocinio N. Acido, Renato dela Cruz Ocfemia was Under the same principle the registered owner of any vehicle, even if not used for a public service, should primarily
driving with expired license and positive for alcoholic breath. Hence, Manila Assistant City Prosecutor Oscar A. be responsible to the public or to third persons for injuries caused the latter while the vehicle is being driven on the
Pascua recommended the filing of information for reckless imprudence resulting to (sic) damage to property and highways or streets. The members of the Court are in agreement that the defendant-appellant should be held liable
physical injuries. to plaintiff-appellee for the injuries occasioned to the latter because of the negligence of the driver, even if the
defendant-appellant was no longer the owner of the vehicle at the time of the damage because he had previously
sold it to another. What is the legal basis for his (defendant-appellant's) liability?
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. 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. Should he not be allowed to prove the truth, that he had sold it to another and thus
shift the responsibility for the injury to the real and actual owner? The defendant holds the affirmative of this
Except for Ocfemia, all the defendants filed separate answers to the complaint. [Petitioner] Nostradamus Villanueva proposition; the trial court held the negative.
claimed that he was no longer the owner of the car at the time of the mishap because it was swapped with a Pajero
owned by Albert Jaucian/Auto Palace Car Exchange. For her part, Linda Gonzales declared that her presence at the
scene of the accident was upon the request of the actual owner of the Mitsubishi Lancer (PHK 201 '91) [Albert The Revised Motor Vehicle Law (Act No. 3992, as amended) provides that no vehicle may be used or operated upon
Jaucian] for whom she had been working as agent/seller. On the other hand, Auto Palace Car Exchange represented any public highway unless the same is property registered. It has been stated that the system of licensing and the
by Albert Jaucian claimed that he was not the registered owner of the car. Moreover, it could not be held subsidiary requirement that each machine must carry a registration number, conspicuously displayed, is one of the precautions
liable as employer of Ocfemia because the latter was off-duty as utility employee at the time of the incident. Neither taken to reduce the danger of injury to pedestrians and other travelers from the careless management of
was Ocfemia performing a duty related to his employment. 3 automobiles.
 19

And to furnish a means of ascertaining the identity of persons violating the laws and ordinances, regulating the the real or actual owner of the amount that he may be required to pay as damage for the injury caused to the
speed and operation of machines upon the highways (2 R.C.L. 1176). Not only are vehicles to be registered and that plaintiff-appellant.8
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 thee Motor Vehicles Office a report showing the name and address of each purchaser
of motor vehicle during the previous month and the manufacturer's serial number and motor number. (Section 5(c), Petitioner insists that he is not liable for damages since the driver of the vehicle at the time of the accident was not
Act No. 3992, as amended.) an authorized driver of the new (actual) owner of the vehicle. He claims that the ruling in First Malayan Leasing and
Finance Corporation v. CA9 implies that to hold the registered owner liable for damages, the driver of the vehicle
must have been authorized, allowed and permitted by its actual owner to operate and drive it. Thus, if the vehicle is
Registration is required not to make said registration the operative act by which ownership in vehicles is transferred, driven without the knowledge and consent of the actual owner, then the registered owner cannot be held liable for
as in land registration cases, because the administrative proceeding of registration does not bear any essential damages.
relation to the contract of sale between the parties (Chinchilla v. Rafael and Verdaguer, 39 Phil. 888), but to permit
the use and operation of the vehicle upon any public highway (section 5 [a], Act No. 3992, as amended).
He further argues that this was the underlying theory behind Duavit v. CA10 wherein the court absolved the
registered owner from liability after finding that the vehicle was virtually stolen from the owner's garage by a person
The main aim of motor vehicle registration is to identify the owner so that if any accident happens, or that any who was neither authorized nor employed by the owner. Petitioner concludes that the ruling in Duavit and not the
damage or injury is caused by the vehicle on the public highways, responsibility therefore can be fixed on a definite one in First Malayan should be applicable to him.
individual, the registered owner. Instances are numerous where vehicles running on public highways caused
accidents or injuries to pedestrians or other vehicles without positive identification of the owner or drivers, or with
very scant means of identification. It is to forestall these circumstances, so inconvenient or prejudicial to the public, Petitioner's argument lacks merit. Whether the driver is authorized or not by the actual owner is irrelevant to
that the motor vehicle registration is primarily ordained, in the interest of the determination of persons responsible determining the liability of the registered owner who the law holds primarily and directly responsible for any
for damages or injuries caused on public highways: 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.
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 Furthermore, there is nothing in First Malayan which even remotely suggests that the driver must be authorized
in these statutes, it is subordinate at the last to the primary purpose of rendering it certain that the violator of the before the registered owner can be held accountable. In First Malayan, the registered owner, First Malayan
law or of the rules of safety shall not escape because of lack of means to discover him. Corporation, was held liable for damages arising from the accident even if the vehicle involved was already owned
by another party:

The purpose of the statute is thwarted, and the displayed number becomes a "share and delusion," if courts would
entertain such defenses as that put forward by appellee in this case. No responsible person or corporation could be This Court has consistently ruled that regardless of who the actual owner is of a motor vehicle might be, the
held liable for the most outrageous acts of negligence, if they should be allowed to pace a "middleman" between registered owner is the operator of the same with respect to the public and third persons, and as such, directly and
them and the public, and escape liability by the manner in which they recompense servants. (King v. Brenham primarily responsible for the consequences of its operation. In contemplation of law, the owner/operator of record is
Automobile Co., Inc. 145 S.W. 278, 279.) the employer of the driver, the actual operator and employer being considered merely as his agent (MYC-Agro-
Industrial Corporation v. Vda. de Caldo, 132 SCRA 10, citing Vargas v. Langcay, 6 SCRA 174; Tamayo v. Aquino,
105 Phil. 949).
With the above policy in mind, the question that defendant-appellant poses is: should not the registered owner be
allowed at the trial to prove who the actual and real owner is, and in accordance with such proof escape or evade
responsibility by and lay the same on the person actually owning the vehicle? We hold with the trial court that the 'We believe that it is immaterial whether or not the driver was actually employed by the operator of record. It is
law does not allow him to do so; the law, with its aim and policy in mind, does not relieve him directly of the even not necessary to prove who the actual owner of the vehicle and the employer of the driver is. Granting that, in
responsibility that the law fixes and places upon him as an incident or consequence of registration. this case, the father of the driver is the actual owner and that he is the actual employer, following the well-settled
principle that the operator of record continues to be the operator of the vehicle in contemplation of law, as regards
the public and third person, and as such is responsible for the consequences incident to its operation, we must hold
Were a registered owner allowed to evade responsibility by proving who the supposed transferee or owner is, it and consider such owner-operator of record as the employer, in contemplation of law, of the driver. And, to give
would be easy for him, by collusion with others or otherwise, to escape said responsibility and transfer the same to effect to this policy of law as enunciated in the above cited decisions of this Court, we must now extend the same
an indefinite person, or to one who possesses no property with which to respond financially for the damage or injury and consider the actual operator and employer as the agent of the operator of record.' 11
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 Contrary to petitioner's position, the First Malayan ruling is applicable to him since the case involves the same set of
illusory were the registered owner given the opportunity to escape liability by disproving his ownership. If the policy facts ― the registered owner had previously sold the vehicle to someone else and was being driven by an employee
of the law is to be enforced and carried out, the registered owner should not be allowed to prove the contrary to the of the new (actual) owner. Duavit is inapplicable since the vehicle there was not transferred to another; the
prejudice of the person injured, that is, to prove that a third person or another has become the owner, so that he registered and the actual owner was one and the same person. Besides, in Duavit, the defense of the registered
may thereby be relieved of the responsibility to the injured person. owner, Gilberto Duavit, was that the vehicle was practically stolen from his garage by Oscar Sabiano, as affirmed by
the latter:

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 Defendant Sabiano, in his testimony, categorically admitted that he took the jeep from the garage of defendant
a third-party complaint, in the same action brought against him to recover for the damage or injury done, against Duavit without the consent and authority of the latter. He testified further that Duavit even filed charges against him
the vendee or transferee of the vehicle. The inconvenience of the suit is no justification for relieving him of liability; for the theft of the jeep but which Duavit did not push through as his (Sabiano's) parents apologized to Duavit on
said inconvenience is the price he pays for failure to comply with the registration that the law demands and requires. his behalf.12

In synthesis, we hold that the registered owner, the defendant-appellant herein, is primarily responsible for the As correctly pointed out by the CA, the Duavit ruling is not applicable to petitioner's case since the circumstance of
damage caused to the vehicle of the plaintiff-appellee, but he (defendant-appellant) has a right to be indemnified by 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
 20

him since he voluntarily ceded possession thereof to Jaucian. It was the latter, as the new (actual) owner, who could
have raised the defense of theft to prove that he was not liable for the acts of his employee Ocfemia. Thus, there is
no reason to apply the Duavit  ruling to this case.

The ruling in First Malayan has been reiterated in BA Finance Corporation v. CA13 and more recently in Aguilar, Sr. v.
Commercial Savings Bank.14 In BA Finance, we held the registered owner liable even if, at the time of the accident,
the vehicle was leased by another party and was driven by the lessee's employee. In Aguilar, the registered owner-
bank answered for damages for the accident even if the vehicle was being driven by the Vice-President of the Bank
in his private capacity and not as an officer of the Bank, as claimed by the Bank. We find no reason to deviate from
these decisions.

The main purpose of vehicle registration is the easy identification of the owner who can be held responsible for any
accident, damage or injury caused by the vehicle. Easy identification prevents inconvenience and prejudice to a third
party injured by one who is unknown or unidentified. To allow a registered owner to escape liability by claiming that
the driver was not authorized by the new (actual) owner results in the public detriment the law seeks to avoid.

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.

WHEREFORE, the petition is hereby DENIED. The January 26, 2000 decision of the Court of Appeals is AFFIRMED.

SO ORDERED.
 21

SUPREME COURT WHEREFORE, premises considered, judgment is hereby rendered in favor of plaintiff UCPB General
Manila Insurance [respondent], ordering the defendants PCI Leasing and Finance, Inc., [petitioner] and Renato
Gonzaga, to pay jointly and severally the former the following amounts: the principal amount
of P244,500.00 with 12% interest as of the filing of this complaint until the same is paid; P50,000.00 as
THIRD DIVISION attorney's fees; and P20,000.00 as costs of suit.

G.R. No. 162267             July 4, 2008 SO ORDERED.8

PCI LEASING AND FINANCE, INC., petitioner, Aggrieved by the decision of the trial court, petitioner appealed to the CA.
vs.
UCPB GENERAL INSURANCE CO., INC., respondent.
In its Decision dated December 12, 2003, the CA affirmed the RTC's decision, with certain modifications, as follows:

DECISION
WHEREFORE, the appealed decision dated April 15, 1999 is hereby AFFIRMED with modification that the
award of attorney's fees is hereby deleted and the rate of interest shall be six percent (6%) per annum
AUSTRIA-MARTINEZ, J.: 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
Before the Court is a Petition for Review on Certiorari under Rule 45 of the Rules of Court, seeking a reversal of the (12%) per annum computed from the time the judgment becomes final and executory until it is fully
Decision1 of the Court of Appeals (CA) dated December 12, 2003 affirming with modification the Decision of the satisfied.
Regional Trial Court (RTC) of Makati City which ordered petitioner and Renato Gonzaga (Gonzaga) to pay, jointly and
severally, respondent the amount of P244,500.00 plus interest; and the CA Resolution 2 dated February 18, 2004 SO ORDERED.9
denying petitioner's Motion for Reconsideration.

Petitioner filed a Motion for Reconsideration which the CA denied in its Resolution dated February 18, 2004.
The facts, as found by the CA, are undisputed:

Hence, herein Petition for Review.

On October 19, 1990 at about 10:30 p.m., a Mitsubishi Lancer car with Plate Number PHD-206 owned by
United Coconut Planters Bank was traversing the Laurel Highway, Barangay Balintawak, Lipa City. The car
was insured with plantiff-appellee [UCPB General Insurance Inc.], then driven by Flaviano Isaac with The issues raised by petitioner are purely legal:
Conrado Geronimo, the Asst. Manager of said bank, was hit and bumped by an 18-wheeler Fuso Tanker
Truck with Plate No. PJE-737 and Trailer Plate No. NVM-133, owned by defendants-appellants PCI Leasing
& Finance, Inc. allegedly leased to and operated by defendant-appellant Superior Gas & Equitable Co., Inc. Whether petitioner, as registered owner of a motor vehicle that figured in a quasi-delict may be held
(SUGECO) and driven by its employee, defendant appellant Renato Gonzaga. liable, jointly and severally, with the driver thereof, for the damages caused to third parties.

The impact caused heavy damage to the Mitsubishi Lancer car resulting in an explosion of the rear part of Whether petitioner, as a financing company, is absolved from liability by the enactment of Republic Act
the car. The driver and passenger suffered physical injuries. However, the driver defendant-appellant (R.A.) No. 8556, or the Financing Company Act of 1998.
Gonzaga continued on its [sic] way to its [sic] destination and did not bother to bring his victims to the
hospital. Anent the first issue, the CA found petitioner liable for the damage caused by the collision since under the Public
Service Act, if the property covered by a franchise is transferred or leased to another without obtaining the requisite
Plaintiff-appellee paid the assured UCPB the amount of P244,500.00 representing the insurance coverage approval, the transfer is not binding on the Public Service Commission and, in contemplation of law, the grantee
of the damaged car. continues to be responsible under the franchise in relation to the operation of the vehicle, such as damage or injury
to third parties due to collisions.10

As the 18-wheeler truck is registered under the name of PCI Leasing, repeated demands were made by
plaintiff-appellee for the payment of the aforesaid amounts. However, no payment was made. Thus, Petitioner claims that the CA's reliance on the Public Service Act is misplaced, since the said law applies only to
plaintiff-appellee filed the instant case on March 13, 1991.3 cases involving common carriers, or those which have franchises to operate as public utilities. In contrast, the case
before this Court involves a private commercial vehicle for business use, which is not offered for service to the
general public.11
PCI Leasing and Finance, Inc., (petitioner) interposed the defense that it could not be held liable for the collision,
since the driver of the truck, Gonzaga, was not its employee, but that of its co-defendant Superior Gas & Equitable
Co., Inc. (SUGECO).4 In fact, it was SUGECO, and not petitioner, that was the actual operator of the truck, pursuant Petitioner's contention has partial merit, as indeed, the vehicles involved in the case at bar are not common carriers,
to a Contract of Lease signed by petitioner and SUGECO. 5 Petitioner, however, admitted that it was the owner of the which makes the Public Service Act inapplicable.
truck in question. 6
However, the registered owner of the vehicle driven by a negligent driver may still be held liable under applicable
After trial, the RTC rendered its Decision dated April 15, 1999,7 the dispositive portion of which reads: jurisprudence involving laws on compulsory motor vehicle registration and the liabilities of employers for quasi-
delicts under the Civil Code.
 22

The principle of holding the registered owner of a vehicle liable for quasi-delicts resulting from its use is well- The case is still good law and has been consistently cited in subsequent cases. 14 Thus, there is no good reason to
established in jurisprudence. Erezo v. Jepte,12 with Justice Labrador as ponente,  wisely explained the reason behind depart from its tenets.
this principle, thus:

For damage or injuries arising out of negligence in the operation of a motor vehicle, the registered owner may be
Registration is required not to make said registration the operative act by which ownership in vehicles is held civilly liable with the negligent driver either 1) subsidiarily, if the aggrieved party seeks relief based on
transferred, as in land registration cases, because the administrative proceeding of registration does not a delict or crime under Articles 100 and 103 of the Revised Penal Code; or 2) solidarily, if the complainant seeks
bear any essential relation to the contract of sale between the parties (Chinchilla vs. Rafael and relief based on a quasi-delict under Articles 2176 and 2180 of the Civil Code. It is the option of the plaintiff whether
Verdaguer, 39 Phil. 888), but to permit the use and operation of the vehicle upon any public highway to waive completely the filing of the civil action, or institute it with the criminal action, or file it separately or
(section 5 [a], Act No. 3992, as amended.) The main aim of motor vehicle registration is to identify the independently of a criminal action;15 his only limitation is that he cannot recover damages twice for the same act or
owner so that if any accident happens, or that any damage or injury is caused by the vehicle on the public omission of the defendant.16
highways, responsibility therefor can be fixed on a definite individual, the registered owner. Instances are
numerous where vehicles running on public highways caused accidents or injuries to pedestrians or other
vehicles without positive identification of the owner or drivers, or with very scant means of identification. In case a separate civil action is filed, the long-standing principle is that the registered owner of a motor vehicle is
It is to forestall these circumstances, so inconvenient or prejudicial to the public, that the motor vehicle primarily and directly responsible for the consequences of its operation, including the negligence of the driver, with
registration is primarily ordained, in the interest of the determination of persons responsible for damages respect to the public and all third persons.17 In contemplation of law, the registered owner of a motor vehicle is the
or injuries caused on public highways. employer of its driver, with the actual operator and employer, such as a lessee, being considered as merely the
owner's agent.18 This being the case, even if a sale has been executed before a tortious incident, the sale, if
unregistered, has no effect as to the right of the public and third persons to recover from the registered owner. 19 The
"'One of the principal purposes of motor vehicles legislation is identification of the vehicle and of public has the right to conclusively presume that the registered owner is the real owner, and may sue accordingly. 20
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 In the case now before the Court, there is not even a sale of the vehicle involved, but a mere lease, which remained
subordinate at the last to the primary purpose of rendering it certain that the violator of the law unregistered up to the time of the occurrence of the quasi-delict that gave rise to the case. Since a lease, unlike a
or of the rules of safety shall not escape because of lack of means to discover him.' The purpose sale, does not even involve a transfer of title or ownership, but the mere use or enjoyment of property, there is
of the statute is thwarted, and the displayed number becomes a 'snare and delusion,' if courts more reason, therefore, in this instance to uphold the policy behind the law, which is to protect the unwitting public
would entertain such defenses as that put forward by appellee in this case. No responsible and provide it with a definite person to make accountable for losses or injuries suffered in vehicular accidents. 21 This
person or corporation could be held liable for the most outrageous acts of negligence, if they is and has always been the rationale behind compulsory motor vehicle registration under the Land Transportation
should be allowed to place a 'middleman' between them and the public, and escape liability by and Traffic Code and similar laws, which, as early as Erezo, has been guiding the courts in their disposition of cases
the manner in which they recompense their servants." (King vs. Brenham Automobile Co., 145 involving motor vehicular incidents. It is also important to emphasize that such principles apply to all vehicles in
S.W. 278, 279.) general, not just those offered for public service or utility. 22

With the above policy in mind, the question that defendant-appellant poses is: should not the registered The Court recognizes that the business of financing companies has a legitimate and commendable purpose. 23 In
owner be allowed at the trial to prove who the actual and real owner is, and in accordance with such proof earlier cases, it considered a financial lease or financing lease a legal contract, 24 though subject to the restrictions of
escape or evade responsibility and lay the same on the person actually owning the vehicle? We hold with the so-called Recto Law or Articles 1484 and 1485 of the Civil Code.25 In previous cases, the Court adopted the
the trial court that the law does not allow him to do so; the law, with its aim and policy in mind, does not statutory definition of a financial lease or financing lease, as:
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 [A] mode of extending credit through a non-cancelable lease contract under which the lessor purchases or
supposed transferee or owner is, it would be easy for him, by collusion with others or otherwise, to escape acquires, at the instance of the lessee, machinery, equipment, motor vehicles, appliances, business and
said responsibility and transfer the same to an indefinite person, or to one who possesses no property with office machines, and other movable or immovable property in consideration of the periodic payment by
which to respond financially for the damage or injury done. A victim of recklessness on the public the lessee of a fixed amount of money sufficient to amortize at least seventy (70%) of the purchase price
highways is usually without means to discover or identify the person actually causing the injury or or acquisition cost, including any incidental expenses and a margin of profit over an obligatory period of
damage. He has no means other than by a recourse to the registration in the Motor Vehicles Office to not less than two (2) years during which the lessee has the right to hold and use the leased property, x x
determine who is the owner. The protection that the law aims to extend to him would become illusory x but with no obligation or option on his part to purchase the leased property from the owner-lessor at the
were the registered owner given the opportunity to escape liability by disproving his ownership. If the end of the lease contract. 26
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. Petitioner presented a lengthy discussion of the purported trend in other jurisdictions, which apparently tends to
favor absolving financing companies from liability for the consequences of quasi-delictual acts or omissions involving
financially leased property.27 The petition adds that these developments have been legislated in our jurisdiction in
The above policy and application of the law may appear quite harsh and would seem to conflict with truth Republic Act (R.A.) No. 8556,28 which provides:
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 Section 12. Liability of lessors. - Financing companies shall not be liable for loss, damage or injury caused
justification for relieving him of liability; said inconvenience is the price he pays for failure to comply with by a motor vehicle, aircraft, vessel, equipment, machinery or other property leased to a third person or
the registration that the law demands and requires. entity except when the motor vehicle, aircraft, vessel, equipment or other property is operated by the
financing company, its employees or agents at the time of the loss, damage or injury.1avvphi1

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 Petitioner's argument that the enactment of R.A. No. 8556, especially its addition of the new Sec. 12 to the old law,
be indemnified by the real or actual owner of the amount that he may be required to pay as damage for is deemed to have absolved petitioner from liability, fails to convince the Court.
the injury caused to the plaintiff-appellant.13
 23

These developments, indeed, point to a seeming emancipation of financing companies from the obligation to WHEREFORE, the petition is DENIED. The Decision dated December 12, 2003 and Resolution dated February 18,
compensate claimants for losses suffered from the operation of vehicles covered by their lease. Such, however, are 2004 of the Court of Appeals are AFFIRMED.
not applicable to petitioner and do not exonerate it from liability in the present case.

Costs against petitioner.

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: SO ORDERED.

Sec. 5. Compulsory registration of motor vehicles. - (a) All motor vehicles and trailer of any type
used or operated on or upon any highway of the Philippines must be registered with the Bureau of Land
Transportation (now the Land Transportation Office, per Executive Order No. 125, January 30, 1987, and
Executive Order No. 125-A, April 13, 1987) for the current year in accordance with the provisions of this
Act.

xxxx

(e) Encumbrances of motor vehicles. - Mortgages, attachments, and other encumbrances of motor
vehicles, in order to be valid against third parties must be recorded in the Bureau (now the Land
Transportation Office). Voluntary transactions or voluntary encumbrances shall likewise be properly
recorded on the face of all outstanding copies of the certificates of registration of the vehicle concerned.

Cancellation or foreclosure of such mortgages, attachments, and other encumbrances shall likewise be
recorded, and in the absence of such cancellation, no certificate of registration shall be issued without the
corresponding notation of mortgage, attachment and/or other encumbrances.

x x x x (Emphasis supplied)

Neither is there an implied repeal of R.A. No. 4136. As a rule, repeal by implication is frowned upon, unless there is
clear showing that the later statute is so irreconcilably inconsistent and repugnant to the existing law that they
cannot be reconciled and made to stand together.29 There is nothing in R.A. No. 4136 that is inconsistent and
incapable of reconciliation.

Thus, the rule remains the same: a sale, lease, or financial lease, for that matter, that is not registered with the
Land Transportation Office, still does not bind third persons who are aggrieved in tortious incidents, for the latter
need only to rely on the public registration of a motor vehicle as conclusive evidence of ownership. 30 A lease such as
the one involved in the instant case is an encumbrance in contemplation of law, which needs to be registered in
order for it to bind third parties.31 Under this policy, the evil sought to be avoided is the exacerbation of the suffering
of victims of tragic vehicular accidents in not being able to identify a guilty party. A contrary ruling will not serve the
ends of justice. The failure to register a lease, sale, transfer or encumbrance, should not benefit the parties
responsible, to the prejudice of innocent victims.

The non-registration of the lease contract between petitioner and its lessee precludes the former from enjoying the
benefits under Section 12 of R.A. No. 8556.

This ruling may appear too severe and unpalatable to leasing and financing companies, but the Court believes that
petitioner and other companies so situated are not entirely left without recourse. They may resort to third-party
complaints against their lessees or whoever are the actual operators of their vehicles. In the case at bar, there is, in
fact, a provision in the lease contract between petitioner and SUGECO to the effect that the latter shall indemnify
and hold the former free and harmless from any "liabilities, damages, suits, claims or judgments" arising from the
latter's use of the motor vehicle. 32 Whether petitioner would act against SUGECO based on this provision is its own
option.

The burden of registration of the lease contract is minuscule compared to the chaos that may result if registered
owners or operators of vehicles are freed from such responsibility. Petitioner pays the price for its failure to obey the
law on compulsory registration of motor vehicles for registration is a pre-requisite for any person to even enjoy the
privilege of putting a vehicle on public roads.
 24

G.R. No. 142305               December 10, 2003 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." 10

SINGAPORE AIRLINES LIMITED, petitioner,

vs. The respondent never made it to Manila and was forced to take a direct flight from Singapore to Malaysia on January
ANDION FERNANDEZ, respondent. 29, 1991, through the efforts of her mother and travel agency in Manila. Her mother also had to travel to Malaysia
bringing with her respondent’s wardrobe and personal things needed for the performance that caused them to incur
an expense of about P50,000.11
DECISION

As a result of this incident, the respondent’s performance before the Royal Family of Malaysia was below par.
CALLEJO, SR., J.: Because of the rude and unkind treatment she received from the petitioner’s personnel in Singapore, the respondent
was engulfed with fear, anxiety, humiliation and embarrassment causing her to suffer mental fatigue and skin
This is a petition for review on certiorari assailing the Decision 1 of the Court of Appeals which affirmed in toto the rashes. She was thereby compelled to seek immediate medical attention upon her return to Manila for "acute
decision2 of the Regional Trial Court of Pasig City, Branch 164 in Civil Case No. 60985 filed by the respondent for urticaria." 12
damages.
On June 15, 1993, the RTC rendered a decision with the following dispositive portion:
The Case for the Respondent
ACCORDINGLY and as prayed for, defendant Singapore Airlines is ordered to pay herein plaintiff Andion H.
Respondent Andion Fernandez is an acclaimed soprano here in the Philippines and abroad. At the time of the Fernandez the sum of:
incident, she was availing an educational grant from the Federal Republic of Germany, pursuing a Master’s Degree in
Music majoring in Voice.3 1. FIFTY THOUSAND (P50,000.00) PESOS as compensatory or actual damages;

She was invited to sing before the King and Queen of Malaysia on February 3 and 4, 1991. For this singing 2. TWO HUNDRED and FIFTY THOUSAND (P250,000.00) PESOS as moral damages considering plaintiff’s
engagement, an airline passage ticket was purchased from petitioner Singapore Airlines which would transport her professional standing in the field of culture at home and abroad;
to Manila from Frankfurt, Germany on January 28, 1991. From Manila, she would proceed to Malaysia on the next
day.4 It was necessary for the respondent to pass by Manila in order to gather her wardrobe; and to rehearse and
coordinate with her pianist her repertoire for the aforesaid performance. 3. ONE HUNDRED THOUSAND (P100,000.00) PESOS as exemplary damages;

The petitioner issued the respondent a Singapore Airlines ticket for Flight No. SQ 27, leaving Frankfurt, Germany on 4. SEVENTY-FIVE THOUSAND (P75,000.00) PESOS as attorney’s fees; and
January 27, 1991 bound for Singapore with onward connections from Singapore to Manila. Flight No. SQ 27 was
scheduled to leave Frankfurt at 1:45 in the afternoon of January 27, 1991, arriving at Singapore at 8:50 in the
morning of January 28, 1991. The connecting flight from Singapore to Manila, Flight No. SQ 72, was leaving 5. To pay the costs of suit.
Singapore at 11:00 in the morning of January 28, 1991, arriving in Manila at 2:20 in the afternoon of the same day. 5
SO ORDERED.13
On January 27, 1991, Flight No. SQ 27 left Frankfurt but arrived in Singapore two hours late or at about 11:00 in
the morning of January 28, 1991. By then, the aircraft bound for Manila had left as scheduled, leaving the The petitioner appealed the decision to the Court of Appeals.
respondent and about 25 other passengers stranded in the Changi Airport in Singapore. 6

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

THE HONORABLE COURT OF APPEALS ERRED IN AFFIRMING IN TOTO THE DECISION OF THE TRIAL COURT THAT
The respondent then requested the lady employee to use their phone to make a call to Manila. Over the employees’
AWARDED DAMAGES TO RESPONDENT FOR THE ALLEGED FAILURE OF THE PETITIONER TO EXERCISE
reluctance, the respondent telephoned her mother to inform the latter that she missed the connecting flight. The
EXTRAORDINARY DILIGENCE.
respondent was able to contact a family friend who picked her up from the airport for her overnight stay in
Singapore.9
II
The next day, after being brought back to the airport, the respondent proceeded to petitioner’s counter which says:
"Immediate Attention To Passengers with Immediate Booking." There were four or five passengers in line. The THE HONORABLE COURT OF APPEALS ERRED IN HOLDING THAT THE PETITIONER ACTED IN BAD FAITH.
respondent approached petitioner’s male employee at the counter to make arrangements for immediate booking

III
 25

THE HONORABLE COURT OF APPEALS ERRED IN DISMISSING THE PETITIONER’S COUNTERCLAIMS. 15 "...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
The petitioner assails the award of damages contending that it exercised the extraordinary diligence required by law stranded passengers using extraordinary diligence, the cause of non-fulfillment is not solely and exclusively due to
under the given circumstances. The delay of Flight No. SQ 27 from Frankfurt to Singapore on January 28, 1991 for fortuitous event, but due to something which defendant airline could have prevented, defendant becomes liable to
more than two hours was due to a fortuitous event and beyond petitioner’s control. Inclement weather prevented plaintiff."
the petitioner’s plane coming from Copenhagen, Denmark to arrive in Frankfurt on time on January 27, 1991. The
plane could not take off from the airport as the place was shrouded with fog. This delay caused a "snowball effect"
whereby the other flights were consequently delayed. The plane carrying the respondent arrived in Singapore two Indeed, in the instant case, petitioner was not without recourse to enable it to fulfill its obligation to transport the
(2) hours behind schedule. 16 The delay was even compounded when the plane could not travel the normal route respondent safely as scheduled as far as human care and foresight can provide to her destination. Tagged as a
which was through the Middle East due to the raging Gulf War at that time. It had to pass through the restricted premiere airline as it claims to be and with the complexities of air travel, it was certainly well-equipped to be able to
Russian airspace which was more congested.17 foresee and deal with such situation. The petitioner’s indifference and negligence by its absence and insensitivity
was exposed by the trial court, thus:

Under these circumstances, petitioner therefore alleged that it cannot be faulted for the delay in arriving in
Singapore on January 28, 1991 and causing the respondent to miss her connecting flight to Manila. (a) Under Section 9.1 of its Traffic Manual (Exhibit 4) "…flights can be delayed to await the uplift of
connecting cargo and passengers arriving on a late in-bound flight…" As adverted to by the trial court,
…"Flight SQ-27/28 maybe delayed for about half an hour to transfer plaintiff to her connecting flight. As
The petitioner further contends that it could not also be held in bad faith because its personnel did their best to look pointed out above, delay is normal in commercial air transportation" (RTC Decision, p. 22); or
after the needs and interests of the passengers including the respondent. Because the respondent and the other 25
passengers missed their connecting flight to Manila, the petitioner automatically booked them to the flight the next
day and gave them free hotel accommodations for the night. It was respondent who did not take petitioner’s offer (b) Petitioner airlines could have carried her on one of its flights bound for Hongkong and arranged for a
and opted to stay with a family friend in Singapore. connecting flight from Hongkong to Manila all on the same date. But then the airline personnel who
informed her of such possibility told her that she has to pay for that flight. Regrettably, respondent did not
have sufficient funds to pay for it. (TSN, 30 March 1992, pp.8-9; RTC Decision, pp. 22-23) Knowing the
The petitioner also alleges that the action of the respondent was baseless and it tarnished its good name and image predicament of the respondent, petitioner did not offer to shoulder the cost of the ticket for that flight; or
earned through the years for which, it was entitled to damages in the amount of ₱1,000,000; exemplary damages of
₱500,000; and attorney’s fees also in the amount of ₱500,000.18
(c) As noted by the trial court from the account of petitioner’s witness, Bob Khkimyong, that "a passenger
such as the plaintiff could have been accommodated in another international airline such as Lufthansa to
The petition is barren of merit. 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
When an airline issues a ticket to a passenger, confirmed for a particular flight on a certain date, a contract of business in Manila…(RTC Decision, p. 23)
carriage arises. The passenger then has every right to expect that he be transported on that flight and on that date.
If he does not, then the carrier opens itself to a suit for a breach of contract of carriage. 19 The petitioner’s diligence in communicating to its passengers the consequences of the delay in their flights was
wanting. As elucidated by the trial court:
The contract of air carriage is a peculiar one. Imbued with public interest, the law requires common carriers to carry
the passengers safely as far as human care and foresight can provide, using the utmost diligence of very cautious It maybe that delay in the take off and arrival of commercial aircraft could not be avoided and may be caused by
persons with due regard for all the circumstances. 20 In an action for breach of contract of carriage, the aggrieved diverse factors such as those testified to by defendant’s pilot. However, knowing fully well that even before the
party does not have to prove that the common carrier was at fault or was negligent. All that is necessary to prove is plaintiff boarded defendant’s Jumbo aircraft in Frankfurt bound for Singapore, it has already incurred a delay of two
the existence of the contract and the fact of its non-performance by the carrier. 21 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
In the case at bar, it is undisputed that the respondent carried a confirmed ticket for the two-legged trip from connecting airport; and much less did it inquire from the plaintiff and the other 25 passengers bound for Manila
Frankfurt to Manila: 1) Frankfurt-Singapore; and 2) Singapore-Manila. In her contract of carriage with the petitioner, whether they are amenable to stay overnight in Singapore and to take the connecting flight to Manila the next day.
the respondent certainly expected that she would fly to Manila on Flight No. SQ 72 on January 28, 1991. Since the Such information should have been given and inquiries made in Frankfurt because even the defendant airline’s
petitioner did not transport the respondent as covenanted by it on said terms, the petitioner clearly breached its manual provides that in case of urgency to reach his or her destination on the same date, the head office of
contract of carriage with the respondent. The respondent had every right to sue the petitioner for this breach. The defendant in Singapore must be informed by telephone or telefax so as the latter may make certain arrangements
defense that the delay was due to fortuitous events and beyond petitioner’s control is unavailing. In PAL vs. CA, 22 we with other airlines in Frankfurt to bring such a passenger with urgent business to Singapore in such a manner that
held that: the latter can catch up with her connecting flight such as S-27/28 without spending the night in Singapore… 23

.... Undisputably, PAL’s diversion of its flight due to inclement weather was a fortuitous event. Nonetheless, such The respondent was not remiss in conveying her apprehension about the delay of the flight when she was still in
occurrence did not terminate PAL’s contract with its passengers. Being in the business of air carriage and the sole Frankfurt. Upon the assurance of petitioner’s personnel in Frankfurt that she will be transported to Manila on the
one to operate in the country, PAL is deemed to be equipped to deal with situations as in the case at bar. What we same date, she had every right to expect that obligation fulfilled. She testified, to wit:
said in one case once again must be stressed, i.e., the relation of carrier and passenger continues until the latter has
been landed at the port of destination and has left the carrier’s premises. Hence, PAL necessarily would still have to Q: Now, since you were late, when the plane that arrived from Frankfurt was late, did you not make arrangements
exercise extraordinary diligence in safeguarding the comfort, convenience and safety of its stranded passengers until so that your flight from Singapore to Manila would be adjusted?
they have reached their final destination...

A: I asked the lady at the ticket counter, the one who gave the boarding pass in Frankfurt and I asked her, "Since
... my flight going to Singapore would be late, what would happen to my Singapore-Manila flight?" and then she said,
"Don’t worry, Singapore Airlines would be responsible to bring you to Manila on the same date." And then they have
informed the name of the officer, or whatever, that our flight is going to be late. 24
 26

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.25 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.1âwphi1 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.26 Bad faith was imputed by the trial court when it found that the
petitioner’s employees at the Singapore airport did not accord the respondent the attention and treatment allegedly
warranted under the circumstances. The lady employee at the counter was unkind and of no help to her. The
respondent further alleged that without her threats of suing the company, she was not allowed to use the company’s
phone to make long distance calls to her mother in Manila. The male employee at the counter where it says:
"Immediate Attention to Passengers with Immediate Booking" was rude to her when he curtly retorted that he was
busy attending to other passengers in line. The trial court concluded that this inattentiveness and rudeness of
petitioner’s personnel to respondent’s plight was gross enough amounting to bad faith. This is a finding that is
generally binding upon the Court which we find no reason to disturb.

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.

WHEREFORE, the Petition is DENIED. The Decision of the Court of Appeals is AFFIRMED.

SO ORDERED.
 27

G.R. No. 161730            January 28, 2005 4. the amount of P100,000.00 as attorney’s fees; and

JAPAN AIRLINES, petitioner, 5. costs of suit.

vs.
MICHAEL ASUNCION and JEANETTE ASUNCION, respondents.
SO ORDERED.8

DECISION
The trial court dismissed JAL’s counterclaim for litigation expenses, exemplary damages and attorney’s fees.

YNARES-SANTIAGO, J.:
On October 9, 2002, the Court of Appeals affirmed in toto the decision of the trial court. Its motion for
reconsideration having been denied,9 JAL now files the instant petition.
1
This petition for review seeks to reverse and set aside the October 9, 2002 decision  of the Court of Appeals and its
January 12, 2004 resolution, 2 which affirmed in toto the June 10, 1997 decision of the Regional Trial Court of Makati
City, Branch 61 in Civil Case No. 92-3635.3 The basic issue for resolution is whether JAL is guilty of breach of contract.

On March 27, 1992, respondents Michael and Jeanette Asuncion left Manila on board Japan Airlines’ (JAL) Flight 742 Under Article 1755 of the Civil Code, a common carrier such as JAL is bound to carry its passengers safely as far as
bound for Los Angeles. Their itinerary included a stop-over in Narita and an overnight stay at Hotel Nikko Narita. human care and foresight can provide, using the utmost diligence of very cautious persons, with due regard for all
Upon arrival at Narita, Mrs. Noriko Etou-Higuchi of JAL endorsed their applications for shore pass and directed them the circumstances. When an airline issues a ticket to a passenger, confirmed for a particular flight on a certain date,
to the Japanese immigration official.4 A shore pass is required of a foreigner aboard a vessel or aircraft who desires a contract of carriage arises. The passenger has every right to expect that he be transported on that flight and on
to stay in the neighborhood of the port of call for not more than 72 hours. that date and it becomes the carrier’s obligation to carry him and his luggage safely to the agreed destination. 10 If
the passenger is not so transported or if in the process of transporting he dies or is injured, the carrier may be held
liable for a breach of contract of carriage.11
During their interview, the Japanese immigration official noted that Michael appeared shorter than his height as
indicated in his passport. Because of this inconsistency, respondents were denied shore pass entries and were
brought instead to the Narita Airport Rest House where they were billeted overnight. 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 immigration official also handed Mrs. Higuchi a Notice 5 where it was stated that respondents were to be the correctness of the entries therein. The power to admit or not an alien into the country is a sovereign act which
"watched so as not to escape". cannot be interfered with even by JAL. This is not within the ambit of the contract of carriage entered into by JAL
and herein respondents. As such, JAL should not be faulted for the denial of respondents’ shore pass applications.

Mr. Atsushi Takemoto of the International Service Center (ISC), the agency tasked by Japan’s Immigration
Department to handle passengers who were denied shore pass entries, brought respondents to the Narita Airport Prior to their departure, respondents were aware that upon arrival in Narita, they must secure shore pass entries for
Rest House where they stayed overnight until their departure the following day for Los Angeles. Respondents were their overnight stay. Respondents’ mother, Mrs. Imelda Asuncion, insisted though that Ms. Linda Villavicencio of JAL
charged US$400.00 each for their accommodation, security service and meals. assured her that her children would be granted the passes. 12 This assertion was satisfactorily refuted by Ms.
Villavicencio’s testimony during the cross examination, to wit:

On December 12, 1992, respondents filed a complaint for damages 6 claiming that JAL did not fully apprise them of
their travel requirements and that they were rudely and forcibly detained at Narita Airport. ATTY. GONZAGA:

JAL denied the allegations of respondents. It maintained that the refusal of the Japanese immigration authorities to Q I will show to you Exh. 9 which is the TIM and on page 184 hereof, particularly number 10, and I quote,
issue shore passes to respondents is an act of state which JAL cannot interfere with or prevail upon. Consequently, it "Those holding tickets with confirmed seats and other documents for their onward journey and continuing
cannot impose upon the immigration authorities that respondents be billeted at Hotel Nikko instead of the airport their journey to a third country provided that they obtain an indorsement with an application of shore pass
resthouse.7 or transit pass from the airline ground personnel before clearing the immigration formality?"

On June 10, 1997, the trial court rendered its decision, the dispositive portion of which reads: WITNESS:

WHEREFORE PREMISES CONSIDERED, judgment is hereby rendered in favor of plaintiffs ordering defendant JAL to A Yes, Sir.
pay plaintiffs as follows:

Q Did you tell this provision to Mrs. Asuncion?

1. the sum of US$800.00 representing the expenses incurred at the Narita Airport with interest at 12%
per annum from March 27, 1992 until the sum is fully paid;
A Yes, Sir. I did.

2. the sum of P200,000.00 for each plaintiff as moral damages;

Q Are you sure?

3. the amount of P100,000.00 for each plaintiff as exemplary damages;

A Yes, Sir.
 28

Q Did you give a copy? Q: Why not?

A No, Sir, I did not give a copy but verbally I explained to her the procedure they have to undergo when A: This notice is evidence which shows the decision of immigration authorities. It shows there that the
they get to narita airport. immigration inspector also designated Room 304 of the Narita Airport Resthouse as the place where the
passengers were going to wait for their outbound flight.1awphi1.nét I cannot interfere with that decision.15

….
Mrs. Higuchi did all she could to assist the respondents. Upon being notified of the denial of respondents’
applications, Mrs. Higuchi immediately made reservations for respondents at the Narita Airport Rest House which is
Q And you read the contents of this [TIM]? really more a hotel than a detention house as claimed by respondents. 16

A No, Sir, I did not read it to her but I explained to her the procedure that each passenger has to go More importantly, nowhere in respondent Michael’s testimony did he state categorically that Mrs. Higuchi or any
through before when they get to narita airport before they line up in the immigration counter. other employee of JAL treated them rudely or exhibited improper behavior throughout their stay. We therefore find
JAL not remiss in its obligations as a common carrier.1awphi1.nét
Q In other words, you told Mrs. Asuncion the responsibility of securing shore passes bears solely on the
passengers only? 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
A Yes, Sir. 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.17 There being no breach of contract nor proof that JAL acted in
Q That the airline has no responsibility whatsoever with regards (sic) to the application for shore passes? wanton, fraudulent or malevolent manner, there is no basis for the award of any form of damages.

A Yes, Sir.13 Neither should JAL be held liable to reimburse respondents the amount of US$800.00. It has been sufficiently
proven that the amount pertained to ISC, an agency separate and distinct from JAL, in payment for the
accommodations provided to respondents. The payments did not in any manner accrue to the benefit of JAL.
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. 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
To reiterate, JAL or any of its representatives have no authority to interfere with or influence the immigration holding him liable for damages. This is especially true when the filing of the case is to enforce what he believes to be
authorities. The most that could be expected of JAL is to endorse respondents’ applications, which Mrs. Higuchi did his rightful claim against another although found to be erroneous. 18
immediately upon their arrival in Narita.

WHEREFORE, in view of the foregoing, the instant petition is PARTLY GRANTED. The October 9, 2002 decision of
As Mrs. Higuchi stated during her deposition: the Court of Appeals and its January 12, 2004 resolution in CA-G.R. CV No. 57440, are REVERSED and SET ASIDE
insofar as the finding of breach on the part of petitioner and the award of damages, attorney’s fees and costs of the
ATTY. QUIMBO suit in favor of respondents is concerned. Accordingly, there being no breach of contract on the part of petitioner,
the award of actual, moral and exemplary damages, as well as attorney’s fees and costs of the suit in favor of
respondents Michael and Jeanette Asuncion, is DELETED for lack of basis. However, the dismissal for lack of merit of
Q: Madam Witness, what assistance did you give, if any, to the plaintiffs during this interview? petitioner’s counterclaim for litigation expenses, exemplary damages and attorney’s fees, is SUSTAINED. No
pronouncement as to costs.
A: No, I was not present during their interview. I cannot assist.
SO ORDERED.
Q: Why not?

A: It is forbidden for a civilian personnel to interfere with the Immigration agent’s duties. 14

….

Q: During the time that you were in that room and you were given this notice for you to sign, did you tell
the immigration agent that Michael and Jeanette Asuncion should be allowed to stay at the Hotel Nikko
Narita because, as passengers of JAL, and according to the plaintiff, they had vouchers to stay in that
hotel that night?

A: No, I couldn’t do so.

 29

G.R. No. L-22272             June 26, 1967 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
ANTONIA MARANAN, plaintiff-appellant, the old Civil Code, the new Civil Code of the Philippines expressly makes the common carrier liable for intentional
vs. assaults committed by its employees upon its passengers, by the wording of Art. 1759 which categorically states
PASCUAL PEREZ, ET AL., defendants. that
PASCUAL PEREZ, defendant appellant.

Common carriers are liable for the death of or injuries to passengers through the negligence or willful acts
BENGZON, J.P., J.: 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.
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. The Civil Code provisions on the subject of Common Carriers1 are new and were taken from Anglo-American
Law.2 There, the basis of the carrier's liability for assaults on passengers committed by its drivers rests either on (1)
Valenzuela was prosecuted for homicide in the Court of First Instance of Batangas. Found guilty, he was sentenced the doctrine of respondeat superior  or (2) the principle that it is the carrier's implied duty  to transport the passenger
to suffer imprisonment and to indemnify the heirs of the deceased in the sum of P6,000. Appeal from said conviction safely.3
was taken to the Court of Appeals.1äwphï1.ñët
Under the first, which is the minority view, the carrier is liable only when the act of the employee is within the scope
On December 6 1961, while appeal was pending in the Court of Appeals, Antonia Maranan, Rogelio's mother, filed an of his authority and duty. It is not sufficient that the act be within the course of employment only. 4
action in the Court of First Instance of Batangas to recover damages from Perez and Valenzuela for the death of her
son. Defendants asserted that the deceased was killed in self-defense, since he first assaulted the driver by stabbing Under the second view, upheld by the majority and also by the later cases, it is enough that the assault happens
him from behind. Defendant Perez further claimed that the death was a caso fortuito for which the carrier was not within the course of the employee's duty. It is no defense for the carrier that the act was done in excess of authority
liable. or in disobedience of the carrier's orders. 5 The carrier's liability here is absolute in the sense that it practically
secures the passengers from assaults committed by its own employees. 6
The court a quo, after trial, found for the plaintiff and awarded her P3,000 as damages against defendant Perez. The
claim against defendant Valenzuela was dismissed. From this ruling, both plaintiff and defendant Perez appealed to As can be gleaned from Art. 1759, the Civil Code of the Philippines evidently follows the rule based on the second
this Court, the former asking for more damages and the latter insisting on non-liability. Subsequently, the Court of view. At least three very cogent reasons underlie this rule. As explained in Texas Midland R.R. v. Monroe, 110 Tex.
Appeals affirmed the judgment of conviction earlier mentioned, during the pendency of the herein appeal, and on 97, 216 S.W. 388, 389-390, and Haver v. Central Railroad Co., 43 LRA 84, 85: (1) the special undertaking of the
May 19, 1964, final judgment was entered therein. (Rollo, p. 33). 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
Defendant-appellant relies solely on the ruling enunciated in Gillaco v. Manila Railroad Co., 97 Phil. 884, that the passengers, but above all, from the acts of the carrier's own servants charged with the passenger's safety; (2) said
carrier is under no absolute liability for assaults of its employees upon the passengers. The attendant facts and liability of the carrier for the servant's violation of duty to passengers, is the result of the formers confiding in the
controlling law of that case and the one at bar are very different however. In the Gillaco case, the passenger was servant's hands the performance of his contract to safely transport the passenger, delegating therewith the duty of
killed outside the scope and the course of duty of the guilty employee. As this Court there found: 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.
x x x when the crime took place, the guard Devesa had no duties to discharge in connection with the
transportation of the deceased from Calamba to Manila. The stipulation of facts is clear that when Devesa
shot and killed Gillaco, Devesa was assigned to guard the Manila-San Fernando (La Union) trains, and he Accordingly, it is the carrier's strict obligation to select its drivers and similar employees with due regard not only to
was at Paco Station awaiting transportation to Tutuban, the starting point of the train that he was their technical competence and physical ability, but also, no less important, to their total personality, including their
engaged to guard. In fact, his tour of duty was to start at 9:00 two hours after the commission of the patterns of behavior, moral fibers, and social attitude.
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 Applying this stringent norm to the facts in this case, therefore, the lower court rightly adjudged the defendant
of Devesa at the time was that of another would be passenger, a stranger also awaiting transportation, carrier liable pursuant to Art. 1759 of the Civil Code. The dismissal of the claim against the defendant driver was
and not that of an employee assigned to discharge any of the duties that the Railroad had assumed by its also correct. Plaintiff's action was predicated on breach of contract of carriage 7 and the cab driver was not a party
contract with the deceased. As a result, Devesa's assault can not be deemed in law a breach of Gillaco's thereto. His civil liability is covered in the criminal case wherein he was convicted by final judgment.
contract of transportation by a servant or employee of the carrier. . . . (Emphasis supplied)

In connection with the award of damages, the court a quo granted only P3,000 to plaintiff-appellant. This is the
Now here, the killing was perpetrated by the driver of the very cab transporting the passenger, in whose hands the minimum compensatory damages amount recoverable under Art. 1764 in connection with Art. 2206 of the Civil Code
carrier had entrusted the duty of executing the contract of carriage. In other words, unlike the Gillaco case, the when a breach of contract results in the passenger's death. As has been the policy followed by this Court, this
killing of the passenger here took place in the course of duty of the guilty employee and when the employee was minimal award should be increased to P6,000. As to other alleged actual damages, the lower court's finding that
acting within the scope of his duties. plaintiff's evidence thereon was not convincing, 8 should not be disturbed. Still, Arts. 2206 and 1764
award moral damages in addition to compensatory damages, to the parents of the passenger killed to compensate
Moreover, the Gillaco case was decided under the provisions of the Civil Code of 1889 which, unlike the present Civil for the mental anguish they suffered. A claim therefor, having been properly made, it becomes the court's duty to
Code, did not impose upon common carriers absolute liability for the safety of passengers against wilful assaults or award moral damages.9 Plaintiff demands P5,000 as moral damages; however, in the circumstances, We consider
negligent acts committed by their employees. The death of the passenger in the Gillaco case was truly a fortuitous P3,000 moral damages, in addition to the P6,000 damages afore-stated, as sufficient. Interest upon such damages
event which exempted the carrier from liability. It is true that Art. 1105 of the old Civil Code on fortuitous events are also due to plaintiff-appellant. 10 Wherefore, with the modification increasing the award of actual
has been substantially reproduced in Art. 1174 of the Civil Code of the Philippines but both articles clearly remove damages in plaintiff's favor to P6,000, plus P3,000.00 moral damages, with legal interest on both from
 30

the filing of the complaint on December 6, 1961 until the whole amount is paid, the judgment appealed not able to employ a payloader in the construction job at the rate of P450.00 a day; P34,000.00 representing the
from is affirmed in all other respects. No costs. So ordered. cost of the damaged payloader; Pl 1, 000. 00 representing the difference between the cost of the damaged
payloader and that of the new payloader; P20,000.00 representing the losses suffered by him due to the diversion of
funds to enable him to buy a new payloader; P10,000.00 as attorney's fees; P5,000.00 as exemplary damages; and
THIRD DIVISION cost of the suit. 7

G.R. No. L-31379 August 29, 1988 After trial, the then Court of First Instance of Manila, Branch VII, dismissed on April 24, 1968 the complaint with
costs against therein plaintiff, herein private respondent Vicente E. Concepcion, stating that the proximate cause of
COMPAÑIA MARITIMA, petitioner, the fall of the payloader was Vicente E. Concepcion's act or omission in having misrepresented the weight of the
vs. payloader as 2.5 tons instead of its true weight of 7.5 tons, which underdeclaration was intended to defraud
COURT OF APPEALS and VICENTE CONCEPCION, respondents. Compañia Maritima of the payment of the freight charges and which likewise led the Chief Officer of the vessel to
use the heel block of hatch No. 2 in unloading the payloader. 8

FERNAN, C.J.:
From the adverse decision against him, Vicente E. Concepcion appealed to the Court of Appeals which, on December
5, 1965 rendered a decision, the dispositive portion of which reads:
Petitioner Compañia Maritima seeks to set aside through this petition for review on certiorari the decision 1 of the
Court of Appeals dated December 5, 1965, adjudging petitioner liable to private respondent Vicente E. Concepcion
for damages in the amount of P24,652.97 with legal interest from the date said decision shall have become final, for IN VIEW WHEREOF, judgment must have to be as it is hereby reversed; defendant is
petitioner's failure to deliver safely private respondent's payloader, and for costs of suit. The payloader was declared condemned to pay unto plaintiff the sum in damages of P24,652.07 with legal interest from the
abandoned in favor of petitioner. date the present decision shall have become final; the payloader is declared abandoned to
defendant; costs against the latter. 9

The facts of the case are as follows:

Hence, the instant petition.

Private respondent Vicente E. Concepcion, a civil engineer doing business under the name and style of Consolidated
Construction with office address at Room 412, Don Santiago Bldg., Taft Avenue, Manila, had a contract with the Civil The principal issue in the instant case is whether or not the act of private respondent Vicente E. Concepcion in
Aeronautics Administration (CAA) sometime in 1964 for the construction of the airport in Cagayan de Oro City furnishing petitioner Compañia Maritima with an inaccurate weight of 2.5 tons instead of the payloader's actual
Misamis Oriental. weight of 7.5 tons was the proximate and only cause of the damage on the Oliver Payloader OC-12 when it fell while
being unloaded by petitioner's crew, as would absolutely exempt petitioner from liability for damages under
paragraph 3 of Article 1734 of the Civil Code, which provides:
Being a Manila — based contractor, Vicente E. Concepcion had to ship his construction equipment to Cagayan de Oro
City. Having shipped some of his equipment through petitioner and having settled the balance of P2,628.77 with
respect to said shipment, Concepcion negotiated anew with petitioner, thru its collector, Pacifico Fernandez, on Art. 1734. Common carriers are responsible for the loss, destruction, or deterioration of the
August 28, 1964 for the shipment to Cagayan de Oro City of one (1) unit payloader, four (4) units 6x6 Reo trucks goods, unless the same is due to any of the following causes only:
and two (2) pieces of water tanks. He was issued Bill of Lading 113 on the same date upon delivery of the
equipment at the Manila North Harbor. 2 xxx xxx xxx

These equipment were loaded aboard the MV Cebu in its Voyage No. 316, which left Manila on August 30, 1964 and (3) Act or omission of the shipper or owner of the goods.
arrived at Cagayan de Oro City in the afternoon of September 1, 1964. The Reo trucks and water tanks were safely
unloaded within a few hours after arrival, but while the payloader was about two (2) meters above the pier in the
course of unloading, the swivel pin of the heel block of the port block of Hatch No. 2 gave way, causing the Petitioner claims absolute exemption under this provision upon the reasoning that private respondent's act of
payloader to fall. 3 The payloader was damaged and was thereafter taken to petitioner's compound in Cagayan de furnishing it with an inaccurate weight of the payloader constitutes misrepresentation within the meaning of "act or
Oro City. omission of the shipper or owner of the goods" under the above- quoted article. It likewise faults the respondent
Court of Appeals for reversing the decision of the trial court notwithstanding that said appellate court also found that
by representing the weight of the payloader to be only 2.5 tons, private respondent had led petitioner's officer to
On September 7, 1964, Consolidated Construction, thru Vicente E. Concepcion, wrote Compañia Maritima to demand believe that the same was within the 5 tons capacity of the heel block of Hatch No. 2. Petitioner would thus insist
a replacement of the payloader which it was considering as a complete loss because of the extent of that the proximate and only cause of the damage to the payloader was private respondent's alleged
damage. 4 Consolidated Construction likewise notified petitioner of its claim for damages. Unable to elicit response, misrepresentation of the weight of the machinery in question; hence, any resultant damage to it must be borne by
the demand was repeated in a letter dated October 2, 1964. 5 private respondent Vicente E. Concepcion.

Meanwhile, petitioner shipped the payloader to Manila where it was weighed at the San Miguel Corporation. Finding The general rule under Articles 1735 and 1752 of the Civil Code is that common carriers are presumed to have been
that the payloader weighed 7.5 tons and not 2.5 tons as declared in the B-111 of Lading, petitioner denied the claim at fault or to have acted negligently in case the goods transported by them are lost, destroyed or had deteriorated.
for damages of Consolidated Construction in its letter dated October 7, 1964, contending that had Vicente E. To overcome the presumption of liability for the loss, destruction or deterioration of the goods under Article 1735,
Concepcion declared the actual weight of the payloader, damage to their ship as well as to his payloader could have the common carriers must prove that they observed extraordinary diligence as required in Article 1733 of the Civil
been prevented. 6 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.
To replace the damaged payloader, Consolidated Construction in the meantime bought a new one at P45,000.00
from Bormaheco Inc. on December 3, 1964, and on July 6, 1965., Vicente E. Concepcion filed an action for damages Corollary is the rule that mere proof of delivery of the goods in good order to a common carrier, and of their arrival
against petitioner with the then Court of First Instance of Manila, Branch VII, docketed as Civil Case No. 61551, at the place of destination in bad order, makes out prima facie case against the common carrier, so that if no
seeking to recover damages in the amount of P41,225.00 allegedly suffered for the period of 97 days that he was explanation is given as to how the loss, deterioration or destruction of the goods occurred, the common carrier must
 31

be held responsible. 10 Otherwise stated, it is incumbent upon the common carrier to prove that the loss, before accepting them. Mr. Felix Pisang took the bill of lading on its face value and presumed the same to be correct
deterioration or destruction was due to accident or some other circumstances inconsistent with its liability. by merely "seeing" it. 19 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. 20
In the instant case, We are not persuaded by the proferred explanation of petitioner alleged to be the proximate
cause of the fall of the payloader while it was being unloaded at the Cagayan de Oro City pier. Petitioner seems to
have overlooked the extraordinary diligence required of common carriers in the vigilance over the goods transported In that sense, therefore, private respondent's act of furnishing petitioner with an inaccurate weight of the payloader
by them by virtue of the nature of their business, which is impressed with a special public duty. upon being asked by petitioner's collector, cannot be used by said petitioner as an excuse to avoid liability for the
damage caused, as the same could have been avoided had petitioner utilized the "jumbo" lifting apparatus which
has a capacity of lifting 20 to 25 tons of heavy cargoes. It is a fact known to the Chief Officer of MV Cebu that the
Thus, Article 1733 of the Civil Code provides: 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
Art. 1733. Common carriers, from the nature of their business and for reason of public policy, weight of the payloader, extraordinary care and diligence compel the use of the "jumbo" lifting apparatus as the
are bound to observe extraordinary diligence in the vigilance over the goods and for the safety most prudent course for petitioner.
of the passengers transported by them according to all the circumstances of each case.
While the act of private respondent in furnishing petitioner with an inaccurate weight of the payloader cannot
Such extraordinary diligence in the vigilance over the goods is further expressed in Articles successfully be used as an excuse by petitioner to avoid liability to the damage thus caused, said act constitutes a
1734, 1735 and 1745, Nos. 5, 6 and 7, ... contributory circumstance to the damage caused on the payloader, which mitigates the liability for damages of
petitioner in accordance with Article 1741 of the Civil Code, to wit:

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 Art. 1741. If the shipper or owner merely contributed to the loss, destruction or deterioration of
safe carriage and delivery. It requires common carriers to render service with the greatest skill and foresight and "to the goods, the proximate cause thereof being the negligence of the common carrier, the latter
use all reasonable means to ascertain the nature and characteristic of goods tendered for shipment, and to exercise shall be liable in damages, which however, shall be equitably reduced.
due care in the handling and stowage including such methods as their nature requires." 11 Under Article 1736 of the
Civil Code, the responsibility to observe extraordinary diligence commences and lasts from the time the goods are We find equitable the conclusion of the Court of Appeals reducing the recoverable amount of damages by 20% or
unconditionally placed in the possession of, and received by the carrier for transportation until the same are 1/5 of the value of the payloader, which at the time the instant case arose, was valued at P34,000. 00, thereby
delivered, actually or constructively, by the carrier to the consignee, or to the person who has the right to receive reducing the recoverable amount at 80% or 4/5 of P34,000.00 or the sum of P27,200.00. Considering that the
them without prejudice to the provisions of Article 1738. freight charges for the entire cargoes shipped by private respondent amounting to P2,318.40 remained unpaid.. the
same would be deducted from the P27,000.00 plus an additional deduction of P228.63 representing the freight
Where, as in the instant case, petitioner, upon the testimonies of its own crew, failed to take the necessary and charges for the undeclared weight of 5 tons (difference between 7.5 and 2.5 tons) leaving, therefore, a final
adequate precautions for avoiding damage to, or destruction of, the payloader entrusted to it for safe carriage and recoverable amount of damages of P24,652.97 due to private respondent Concepcion.
delivery to Cagayan de Oro City, it cannot be reasonably concluded that the damage caused to the payloader was
due to the alleged misrepresentation of private respondent Concepcion as to the correct and accurate weight of the Notwithstanding the favorable judgment in his favor, private respondent assailed the Court of Appeals' decision
payloader. As found by the respondent Court of Appeals, the fact is that petitioner used a 5-ton capacity lifting insofar as it limited the damages due him to only P24,652.97 and the cost of the suit. Invoking the provisions on
apparatus to lift and unload a visibly heavy cargo like a payloader. Private respondent has, likewise, sufficiently damages under the Civil Code, more particularly Articles 2200 and 2208, private respondent further seeks additional
established the laxity and carelessness of petitioner's crew in their methods of ascertaining the weight of heavy damages allegedly because the construction project was delayed and that in spite of his demands, petitioner failed
cargoes offered for shipment before loading and unloading them, as is customary among careful persons. to take any steps to settle his valid, just and demandable claim for damages.

It must be noted that the weight submitted by private respondent Concepcion appearing at the left-hand portion of We find private respondent's submission erroneous. It is well- settled that an appellee, who is not an appellant, may
Exhibit 8 12 as an addendum to the original enumeration of equipment to be shipped was entered into the bill of assign errors in his brief where his purpose is to maintain the judgment on other grounds, but he may not do so if
lading by petitioner, thru Pacifico Fernandez, a company collector, without seeing the equipment to be shipped. 13 Mr. his purpose is to have the judgment modified or reversed, for, in such case, he must appeal. 22 Since private
Mariano Gupana, assistant traffic manager of petitioner, confirmed in his testimony that the company never checked respondent did not appeal from the judgment insofar as it limited the award of damages due him, the reduction of
the information entered in the bill of lading. 14 Worse, the weight of the payloader as entered in the bill of lading was 20% or 1/5 of the value of the payloader stands.
assumed to be correct by Mr. Felix Pisang, Chief Officer of MV Cebu. 15

WHEREFORE, in view of the foregoing, the petition is DENIED. The decision of the Court of Appeals is hereby
The weights stated in a bill of lading are prima facie evidence of the amount received and the fact that the weighing AFFIRMED in all respects with costs against petitioner. In view of the length of time this case has been pending, this
was done by another will not relieve the common carrier where it accepted such weight and entered it on the bill of decision is immediately executory.
lading. 16 Besides, common carriers can protect themselves against mistakes in the bill of lading as to weight by
exercising diligence before issuing the same. 17
Gutierrez, Jr., Feliciano, Bidin and Cortes JJ., concur.

While petitioner has proven that private respondent Concepcion did furnish it with an inaccurate weight of the
payloader, petitioner is nonetheless liable, for the damage caused to the machinery could have been avoided by the
exercise of reasonable skill and attention on its part in overseeing the unloading of such a heavy equipment. And
circumstances clearly show that the fall of the payloader could have been avoided by petitioner's crew. Evidence on
record sufficiently show that the crew of petitioner had been negligent in the performance of its obligation by reason
of their having failed to take the necessary precaution under the circumstances which usage has established among
careful persons, more particularly its Chief Officer, Mr. Felix Pisang, who is tasked with the over-all supervision of
loading and unloading heavy cargoes and upon whom rests the burden of deciding as to what particular winch the
unloading of the payloader should be undertaken. 18 While it was his duty to determine the weight of heavy cargoes
 32

G.R. No. 157009               March 17, 2010 Ruling of the CA

SULPICIO LINES, INC., Petitioner, The respondents appealed to the CA, contending that the RTC erred: (a) in considering itself barred from
vs. entertaining the case by the findings of fact of the SBMI in SBMI-ADM Case No. 08-88; (b) in not holding that the
DOMINGO E. CURSO, LUCIA E. CURSO, MELECIO E. CURSO, SEGUNDO E. CURSO, VIRGILIO E. CURSO, petitioner was negligent and did not exercise the required diligence and care in conducting Dr. Curso to his
DIOSDADA E. CURSO, and CECILIA E. CURSO, Respondents. destination; (c) in not finding that the MV  Doña Marilyn was unseaworthy at the time of its sinking; and (d) in not
awarding damages to them.2

DECISION
In its decision dated September 16, 2002,3 the CA held and disposed:

BERSAMIN, J.:
Based on the events described by the appellee’s witness, the Court found inadequate proof to show that Sulpicio
Lines, Inc., or its officers and crew, had exercised the required degree of diligence to acquit the appellee of liability.
Are the surviving brothers and sisters of a passenger of a vessel that sinks during a voyage entitled to recover moral
damages from the vessel owner as common carrier?
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
This is the question presented in the appeal taken by the common carrier from the reversal by the Court of Appeals cyclone, bearing upon the general direction of the path of the M.V. Doña Marilyn. If the officers and crew of the
(CA) of the decision of the Regional Trial Court (RTC) dismissing the complaint for various damages filed by the Doña Marilyn had indeed been adequately monitoring the strength and direction of the typhoon, and had acted
surviving brothers and sisters of the late Dr. Cenon E. Curso upon a finding that force majeure had caused the promptly and competently to avoid the same, then such a mishap would not have occurred.
sinking. The CA awarded moral and other damages to the surviving brothers and sisters.

Furthermore, there was no account of the acts and decision of the crew of the ill-fated ship from 8:00 PM on October
Antecedents 23, 1988 when the Chief Mate left his post until 4:00 AM the next day when he resumed duty. It does not appear
what occurred during that time, or what weather reports were received and acted upon by the ship captain. What
On October 23, 1988, Dr. Curso boarded at the port of Manila the MV  Doña Marilyn, an inter-island vessel owned happened during such time is important in determining what information about the typhoon was gathered and how
and operated by petitioner Sulpicio Lines, Inc., bound for Tacloban City. Unfortunately, the MV  Doña Marilyn sank in the ship officers reached their decision to just change course, and not take shelter while a strong typhoon was
the afternoon of October 24, 1988 while at sea due to the inclement sea and weather conditions brought about by approaching.
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 Furthermore, the Court doubts the fitness of the ship for the voyage, since at the first sign of bad weather, the
District Hospital in Naval, Biliran. He had a basic monthly salary of ₱3,940.00, and would have retired from ship’s hydraulic system failed and had to be repaired mid-voyage, making the vessel a virtual derelict amidst a
government service by December 20, 2004 at the age of 65. raging storm at sea. It is part of the appellee’s extraordinary diligence as a common carrier to make sure that its
ships can withstand the forces that bear upon them during a voyage, whether they be the ordinary stress of the sea
On January 21, 1993, the respondents, allegedly the surviving brothers and sisters of Dr. Curso, sued the petitioner during a calm voyage or the rage of a storm. The fact that the stud bolts in the ships hydraulic system gave way
in the RTC in Naval, Biliran to claim damages based on breach of contract of carriage by sea, averring that the while the ship was at sea discredits the theory that the appellee exercised due diligence in maintaining the
petitioner had acted negligently in transporting Dr. Curso and the other passengers. They stated, among others, that seaworthy condition of the M.V. Doña Marilyn. xxx. 4
their parents had predeceased Dr. Curso, who died single and without issue; and that, as such, they were Dr.
Curso’s surviving heirs and successors in interest entitled to recover moral and other damages. 1 They prayed for xxx
judgment, as follows: (a) compensatory damages of ₱1,924,809.00; (b) moral damages of ₱100,000.00; (c)
exemplary or corrective damages in the amount deemed proper and just; (d) expenses of litigation of at least
₱50,000.00; (e) attorney’s fees of ₱50,000.00; and (f) costs of suit. Aside from these, the defendant must compensate the plaintiffs for moral damages that they suffered as a result of
the negligence attending the loss of the M.V. Doña Marilyn. Plaintiffs, have established that they took great pains to
recover, in vain, the body of their brother, at their own cost, while suffering great grief due to the loss of a loved
The petitioner denied liability, insisting that the sinking of the vessel was due to force majeure  (i.e., one. Furthermore, Plaintiffs were unable to recover the body of their brother. Moral damages worth ₱100,000.00 is
Typhoon Unsang), which exempted a common carrier from liability. It averred that the MV Doña Marilyn  was proper.
seaworthy in all respects, and was in fact cleared by the Philippine Coast Guard for the voyage; and that after the
accident it conducted intensive search and rescue operations and extended assistance and aid to the victims and
their families. WHEREFORE, premises considered, the appealed decision of the RTC of Naval, Biliran, Branch 16, rendered in Civil
Case No. B-0851, is hereby SET ASIDE. In lieu thereof, judgment is hereby rendered, finding the defendant-appellee
Sulpicio Lines, Inc, to have been negligent in transporting the deceased Cenon E. Curso who was on board the ill-
Ruling of the RTC fated M.V. Doña Marilyn, resulting in his untimely death. Defendant-appellee is hereby ordered to pay the plaintiffs
heirs of Cenon E. Curso the following:
On July 28, 1995, the RTC dismissed the complaint upon its finding that the sinking of the vessel was due to force
majeure. The RTC concluded that the officers of the MV Doña Marilyn  had acted with the diligence required of a (1) Death indemnity in the amount of ₱50,000.00;
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 (2) Loss of Earning Capacity in the amount of ₱504,241.20;
petitioner, its officers, and crew of any negligence and administrative liability; and that the respondents failed to
prove their claim for damages.
(3) Moral Damages in the amount of ₱100,000.00.
 33

(4) Costs of the suit.5 The petitioner has correctly relied on the holding in Receiver for North Negros Sugar Company, Inc. v. Ybañez,12 to
the effect that in case of death caused by quasi-delict, the brother of the deceased was not entitled to the award of
moral damages based on Article 2206 of the Civil Code.
Hence, this appeal, in which the petitioner insists that the CA committed grievous errors in holding that the
respondents were entitled to moral damages as the brothers and sisters of the late Dr. Curso; that the CA thereby
disregarded Article 1764 and Article 2206 of the Civil Code, and the ruling in Receiver for North Negros Sugar Co., Essentially, the purpose of moral damages is indemnity or reparation, that is, to enable the injured party to obtain
Inc. v. Ybañez,6 whereby the Supreme Court disallowed the award of moral damages in favor of the brothers and the means, diversions, or amusements that will serve to alleviate the moral suffering he has undergone by reason of
sisters of a deceased passenger in an action upon breach of a contract of carriage. 7 the tragic event. According to Villanueva v. Salvador, 13 the conditions for awarding moral damages are: (a) there
must be an injury, whether physical, mental, or psychological, clearly substantiated by the claimant; (b) there must
be a culpable act or omission factually established; (c) the wrongful act or omission of the defendant must be the
Issues 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.
The petitioner raises the following issues:
To be entitled to moral damages, the respondents must have a right based upon law. It is true that under Article
ARE THE BROTHERS AND SISTERS OF A DECEASED PASSENGER IN A CASE OF BREACH OF CONTRACT OF 100314 of the Civil Code they succeeded to the entire estate of the late Dr. Curso in the absence of the latter’s
CARRIAGE ENTITLED TO AN AWARD OF MORAL DAMAGES AGAINST THE CARRIER? 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:

ASSUMING (THAT) THEY ARE ENTITLED TO CLAIM MORAL DAMAGES, SHOULD THE AWARD BE GRANTED OR GIVEN
TO THE BROTHER OR SISTER NOTWITHSTANDING (THE) LACK OF EVIDENCE AS REGARDS HIS OR HER PERSONAL Article 2219. Moral damages may be recovered in the following and analogous cases:
SUFFERING?
(1) A criminal offense resulting in physical injuries;
Ruling
(2) Quasi-delicts causing physical injuries;
The petition is meritorious.
(3) Seduction, abduction, rape or other lascivious acts;
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 (4) Adultery or concubinage;
carriage that results in the death of a passenger,9 in accordance with Article 1764, in relation to Article 2206 (3), of
the Civil Code, which provide:
(5) Illegal or arbitrary detention or arrest;

Article 1764. Damages in cases comprised in this Section shall be awarded in accordance with Title XVIII of this
Book, concerning Damages. Article 2206 shall also apply to the death of a passenger caused by the breach of (6) Illegal search;
contract by a common carrier.

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

Article 2206. The amount of damages for death caused by a crime or quasi-delict shall be at least three thousand
pesos, even though there may have been mitigating circumstances. In addition:
(8) Malicious prosecution;

(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 (9) Acts mentioned in article 309;
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; (10) Acts and actions referred to in articles 21, 26, 27, 28, 29, 30, 32, 34 and 35.

(2) If the deceased was obliged to give support according to the provisions of article 291, the recipient The parents of the female seduced, abducted, raped or abused referred to in No. 3 of this article, may also recover
who is not an heir called to the decedent's inheritance by the law of testate or intestate succession, may moral damages.
demand support from the person causing the death, for a period not exceeding five years, the exact
duration to be fixed by the court;
The spouse, descendants, ascendants and brothers and sisters may bring the action mentioned in No. 9 of this
article, in the order named.1avvphi1
(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.
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
The foregoing legal provisions set forth the persons entitled to moral damages. The omission from Article 2206 (3) analogous cases in the provision means simply that the situation must be held similar to those expressly
of the brothers and sisters of the deceased passenger reveals the legislative intent to exclude them from the enumerated in the law in question15 following the ejusdem generis rule. Hence, Article 1003 of the Civil Code is not
recovery of moral damages for mental anguish by reason of the death of the deceased. Inclusio unius est exclusio concerned with recovery of moral damages.
alterius.10 The solemn power and duty of the courts to interpret and apply the law do not include the power to
correct the law by reading into it what is not written therein. 11 Thus, the CA erred in awarding moral damages to the
respondents.
 34

In fine, moral damages may be recovered in an action upon breach of contract of carriage only when: (a) where
death of a passenger results, or (b) it is proved that the carrier was guilty of fraud and bad faith, even if death does
not result.16 Article 2206 of the Civil Code entitles the descendants, ascendants, illegitimate children, and surviving
spouse of the deceased passenger to demand moral damages for mental anguish by reason of the death of the
deceased.17

WHEREFORE, the petition for review on certiorari is granted, and the award made to the respondents in the decision
dated September 16, 2002 of the Court of Appeals of moral damages amounting to ₱100,000.00 is deleted and set
aside.

SO ORDERED.
 35

G.R. No. 171092               March 15, 2010 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.
EDNA DIAGO LHUILLIER, Petitioner,
vs.
BRITISH AIRWAYS, Respondent. On June 3, 2005, the trial court issued an Order requiring herein petitioner to file her Comment/Opposition on the
Motion to Dismiss within 10 days from notice thereof, and for respondent to file a Reply thereon. 7 Instead of filing a
Comment/Opposition, petitioner filed on June 27, 2005, an Urgent Ex-Parte Motion to Admit Formal Amendment to
DECISION the Complaint and Issuance of Alias Summons.8 Petitioner alleged that upon verification with the Securities and
Exchange Commission, she found out that the resident agent of respondent in the Philippines is Alonzo Q. Ancheta.
DEL CASTILLO, J.: Subsequently, on September 9, 2005, petitioner filed a Motion to Resolve Pending Incident and Opposition to Motion
to Dismiss.9

Jurisdictio est potestas de publico introducta cum necessitate juris dicendi. Jurisdiction is a power introduced for the
public good, on account of the necessity of dispensing justice. 1 Ruling of the Regional Trial Court

Factual Antecedents On October 14, 2005, the RTC of Makati City, Branch 132, issued an Order 10 granting respondent’s Motion to
Dismiss. It ruled that:

On April 28, 2005, petitioner Edna Diago Lhuillier filed a Complaint 2 for damages against respondent British Airways
before the Regional Trial Court (RTC) of Makati City. She alleged that on February 28, 2005, she took respondent’s The Court sympathizes with the alleged ill-treatment suffered by the plaintiff. However, our Courts have to apply the
flight 548 from London, United Kingdom to Rome, Italy. Once on board, she allegedly requested Julian Halliday principles of international law, and are bound by treaty stipulations entered into by the Philippines which form part
(Halliday), one of the respondent’s flight attendants, to assist her in placing her hand-carried luggage in the of the law of the land. One of this is the Warsaw Convention. Being a signatory thereto, the Philippines adheres to
overhead bin. However, Halliday allegedly refused to help and assist her, and even sarcastically remarked that "If I its stipulations and is bound by its provisions including the place where actions involving damages to plaintiff is to be
were to help all 300 passengers in this flight, I would have a broken back!" instituted, as provided for under Article 28(1) thereof. The Court finds no justifiable reason to deviate from the
indicated limitations as it will only run counter to the provisions of the Warsaw Convention. Said adherence is in
consonance with the comity of nations and deviation from it can only be effected through proper denunciation as
Petitioner further alleged that when the plane was about to land in Rome, Italy, another flight attendant, Nickolas enunciated in the Santos case (ibid). Since the Philippines is not the place of domicile of the defendant nor is it the
Kerrigan (Kerrigan), singled her out from among all the passengers in the business class section to lecture on plane principal place of business, our courts are thus divested of jurisdiction over cases for damages. Neither was
safety. Allegedly, Kerrigan made her appear to the other passengers to be ignorant, uneducated, stupid, and in need plaintiff’s ticket issued in this country nor was her destination Manila but Rome in Italy. It bears stressing however,
of lecturing on the safety rules and regulations of the plane. Affronted, petitioner assured Kerrigan that she knew that referral to the court of proper jurisdiction does not constitute constructive denial of plaintiff’s right to have
the plane’s safety regulations being a frequent traveler. Thereupon, Kerrigan allegedly thrust his face a mere few access to our courts since the Warsaw Convention itself provided for jurisdiction over cases arising from
centimeters away from that of the petitioner and menacingly told her that "We don’t like your attitude." international transportation. Said treaty stipulations must be complied with in good faith following the time honored
principle of pacta sunt servanda.
Upon arrival in Rome, petitioner complained to respondent’s ground manager and demanded an apology. However,
the latter declared that the flight stewards were "only doing their job." The resolution of the propriety of service of summons is rendered moot by the Court’s want of jurisdiction over the
instant case.
Thus, petitioner filed the complaint for damages, praying that respondent be ordered to pay ₱5 million as moral
damages, ₱2 million as nominal damages, ₱1 million as exemplary damages, ₱300,000.00 as attorney’s fees, WHEREFORE, premises considered, the present Motion to Dismiss is hereby GRANTED and this case is hereby
₱200,000.00 as litigation expenses, and cost of the suit. ordered DISMISSED.

On May 16, 2005, summons, together with a copy of the complaint, was served on the respondent through Violeta Petitioner filed a Motion for Reconsideration but the motion was denied in an Order 11 dated January 4, 2006.
Echevarria, General Manager of Euro-Philippine Airline Services, Inc. 3

Petitioner now comes directly before us on a Petition for Review on Certiorari on pure questions of law, raising the
On May 30, 2005, respondent, by way of special appearance through counsel, filed a Motion to Dismiss 4 on grounds following issues:
of lack of jurisdiction over the case and over the person of the respondent. Respondent alleged that only the courts
of London, United Kingdom or Rome, Italy, have jurisdiction over the complaint for damages pursuant to the
Warsaw Convention,5 Article 28(1) of which provides: Issues

An action for damages must be brought at the option of the plaintiff, either before the court of domicile of the carrier I. WHETHER X X X PHILIPPINE COURTs HAVE JURISDICTION OVER A TORTIOUS CONDUCT COMMITTED AGAINST A
or his principal place of business, or where he has a place of business through which the contract has been made, or FILIPINO CITIZEN AND RESIDENT BY AIRLINE PERSONNEL OF A FOREIGN CARRIER TRAVELLING BEYOND THE
before the court of the place of destination. TERRITORIAL LIMIT OF ANY FOREIGN COUNTRY; AND THUS IS OUTSIDE THE AMBIT OF THE WARSAW
CONVENTION.

Thus, since a) respondent is domiciled in London; b) respondent’s principal place of business is in London; c)
petitioner bought her ticket in Italy (through Jeepney Travel S.A.S, in Rome); 6 and d) Rome, Italy is petitioner’s II. WHETHER x x x RESPONDENT AIR CARRIER OF PASSENGERS, IN FILING ITS MOTION TO DISMISS BASED ON
place of destination, then it follows that the complaint should only be filed in the proper courts of London, United LACK OF JURISDICTION OVER THE SUBJECT MATTER OF THE CASE AND OVER ITS PERSON MAY BE DEEMED AS
Kingdom or Rome, Italy. 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.
 36

Petitioner’s Arguments Parties referred to herein were the signatories to the Warsaw Convention and those which subsequently adhered to
it.14

Petitioner argues that her cause of action arose not from the contract of carriage, but from the tortious conduct
committed by airline personnel of respondent in violation of the provisions of the Civil Code on Human Relations. In the case at bench, petitioner’s place of departure was London, United Kingdom while her place of destination was
Since her cause of action was not predicated on the contract of carriage, petitioner asserts that she has the option to Rome, Italy.15 Both the United Kingdom16 and Italy17 signed and ratified the Warsaw Convention. As such, the
pursue this case in this jurisdiction pursuant to Philippine laws. transport of the petitioner is deemed to be an "international carriage" within the contemplation of the Warsaw
Convention.

Respondent’s Arguments
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.
In contrast, respondent maintains that petitioner’s claim for damages fell within the ambit of Article 28(1) of the
Warsaw Convention. As such, the same can only be filed before the courts of London, United Kingdom or Rome,
Italy. Under Article 28(1) of the Warsaw Convention, the plaintiff may bring the action for damages before –

Our Ruling 1. the court where the carrier is domiciled;

The petition is without merit. 2. the court where the carrier has its principal place of business;

The Warsaw Convention has the force and effect of law in this country. 3. the court where the carrier has an establishment by which the contract has been made; or

It is settled that the Warsaw Convention has the force and effect of law in this country. In Santos III v. Northwest 4. the court of the place of destination.
Orient Airlines,12 we held that:

In this case, it is not disputed that respondent is a British corporation domiciled in London, United Kingdom with
The Republic of the Philippines is a party to the Convention for the Unification of Certain Rules Relating to London as its principal place of business. Hence, under the first and second jurisdictional rules, the petitioner may
International Transportation by Air, otherwise known as the Warsaw Convention. It took effect on February 13, bring her case before the courts of London in the United Kingdom. In the passenger ticket and baggage check
1933. The Convention was concurred in by the Senate, through its Resolution No. 19, on May 16, 1950. The presented by both the petitioner and respondent, it appears that the ticket was issued in Rome, Italy. Consequently,
Philippine instrument of accession was signed by President Elpidio Quirino on October 13, 1950, and was deposited under the third jurisdictional rule, the petitioner has the option to bring her case before the courts of Rome in Italy.
with the Polish government on November 9, 1950. The Convention became applicable to the Philippines on February Finally, both the petitioner and respondent aver that the place of destination is Rome, Italy, which is properly
9, 1951. On September 23, 1955, President Ramon Magsaysay issued Proclamation No. 201, declaring our formal designated given the routing presented in the said passenger ticket and baggage check. Accordingly, petitioner may
adherence thereto, "to the end that the same and every article and clause thereof may be observed and fulfilled in bring her action before the courts of Rome, Italy. We thus find that the RTC of Makati correctly ruled that it does not
good faith by the Republic of the Philippines and the citizens thereof." have jurisdiction over the case filed by the petitioner.

The Convention is thus a treaty commitment voluntarily assumed by the Philippine government and, as such, has Santos III v. Northwest Orient Airlines18 applies in this case.
the force and effect of law in this country. 13

Petitioner contends that Santos III v. Northwest Orient Airlines 19 cited by the trial court is inapplicable to the present
The Warsaw Convention applies because the air travel, where the alleged tortious conduct occurred, was between controversy since the facts thereof are not similar with the instant case.
the United Kingdom and Italy, which are both signatories to the Warsaw Convention.

We are not persuaded.

Article 1 of the Warsaw Convention provides:

In Santos III v. Northwest Orient Airlines, 20 Augusto Santos III, a resident of the Philippines, purchased a ticket from
1. This Convention applies to all international carriage of persons, luggage or goods performed by aircraft Northwest Orient Airlines in San Francisco, for transport between San Francisco and Manila via Tokyo and back to
for reward. It applies equally to gratuitous carriage by aircraft performed by an air transport undertaking. San Francisco. He was wait-listed in the Tokyo to Manila segment of his ticket, despite his prior reservation.
Contending that Northwest Orient Airlines acted in bad faith and discriminated against him when it canceled his
confirmed reservation and gave his seat to someone who had no better right to it, Augusto Santos III sued the
2. For the purposes of this Convention the expression "international carriage" means any carriage in carrier for damages before the RTC. Northwest Orient Airlines moved to dismiss the complaint on ground of lack of
which, according to the contract made by the parties, the place of departure and the place of destination, jurisdiction citing Article 28(1) of the Warsaw Convention. The trial court granted the motion which ruling was
whether or not there be a break in the carriage or a transhipment, are situated either within the territories affirmed by the Court of Appeals. When the case was brought before us, we denied the petition holding that under
of two High Contracting Parties, or within the territory of a single High Contracting Party, if there is an Article 28(1) of the Warsaw Convention, Augusto Santos III must prosecute his claim in the United States, that
agreed stopping place within a territory subject to the sovereignty, suzerainty, mandate or authority of place being the (1) domicile of the Northwest Orient Airlines; (2) principal office of the carrier; (3) place where
another Power, even though that Power is not a party to this Convention. A carriage without such an contract had been made (San Francisco); and (4) place of destination (San Francisco). 21
agreed stopping place between territories subject to the sovereignty, suzerainty, mandate or authority of
the same High Contracting Party is not deemed to be international for the purposes of this Convention.
(Emphasis supplied) We further held that Article 28(1) of the Warsaw Convention is jurisdictional in character. Thus:

Thus, when the place of departure and the place of destination in a contract of carriage are situated within the A number of reasons tends to support the characterization of Article 28(1) as a jurisdiction and not a venue
territories of two High Contracting Parties, said carriage is deemed an "international carriage". The High Contracting provision. First, the wording of Article 32, which indicates the places where the action for damages "must" be
 37

brought, underscores the mandatory nature of Article 28(1). Second, this characterization is consistent with one of Convention "created no exception for an injury suffered as a result of intentional conduct" 43 which in that case
the objectives of the Convention, which is to "regulate in a uniform manner the conditions of international involved a claim for intentional infliction of emotional distress.
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 It is thus settled that allegations of tortious conduct committed against an airline passenger during the course of the
"jurisdictions," which, as such, cannot be left to the will of the parties regardless of the time when the damage international carriage do not bring the case outside the ambit of the Warsaw Convention.
occurred.
Respondent, in seeking remedies from the trial court through special appearance of counsel, is not deemed to have
xxxx voluntarily submitted itself to the jurisdiction of the trial court.

In other words, where the matter is governed by the Warsaw Convention, jurisdiction takes on a dual concept. Petitioner argues that respondent has effectively submitted itself to the jurisdiction of the trial court when the latter
Jurisdiction in the international sense must be established in accordance with Article 28(1) of the Warsaw stated in its Comment/Opposition to the Motion for Reconsideration that "Defendant [is at a loss] x x x how the
Convention, following which the jurisdiction of a particular court must be established pursuant to the applicable plaintiff arrived at her erroneous impression that it is/was Euro-Philippines Airlines Services, Inc. that has been
domestic law. Only after the question of which court has jurisdiction is determined will the issue of venue be taken making a special appearance since x x x British Airways x x x has been clearly specifying in all the pleadings that it
up. This second question shall be governed by the law of the court to which the case is submitted. 22 has filed with this Honorable Court that it is the one making a special appearance." 44

Contrary to the contention of petitioner, Santos III v. Northwest Orient Airlines 23 is analogous to the instant case In refuting the contention of petitioner, respondent cited La Naval Drug Corporation v. Court of Appeals 45 where we
because (1) the domicile of respondent is London, United Kingdom; 24 (2) the principal office of respondent airline is held that even if a party "challenges the jurisdiction of the court over his person, as by reason of absence or
likewise in London, United Kingdom;25 (3) the ticket was purchased in Rome, Italy; 26 and (4) the place of destination defective service of summons, and he also invokes other grounds for the dismissal of the action under Rule 16, he is
is Rome, Italy.27 In addition, petitioner based her complaint on Article 217628 of the Civil Code on quasi-delict and not deemed to be in estoppel or to have waived his objection to the jurisdiction over his person." 46
Articles 1929 and 2130 of the Civil Code on Human Relations. In Santos III v. Northwest Orient Airlines, 31 Augusto
Santos III similarly posited that Article 28 (1) of the Warsaw Convention did not apply if the action is based on tort. This issue has been squarely passed upon in the recent case of Garcia v. Sandiganbayan, 47 where we reiterated our
Hence, contrary to the contention of the petitioner, the factual setting of Santos III v. Northwest Orient ruling in La Naval Drug Corporation v. Court of Appeals 48 and elucidated thus:
Airlines32 and the instant case are parallel on the material points.

Special Appearance to Question a Court’s Jurisdiction Is Not

Tortious conduct as ground for the petitioner’s complaint is within the purview of the Warsaw Convention.

Voluntary Appearance
Petitioner contends that in Santos III v. Northwest Orient Airlines, 33 the cause of action was based on a breach of
contract while her cause of action arose from the tortious conduct of the airline personnel and violation of the Civil
Code provisions on Human Relations.34 In addition, she claims that our pronouncement in Santos III v. Northwest The second sentence of Sec. 20, Rule 14 of the Revised Rules of Civil Procedure clearly provides:
Orient Airlines35 that "the allegation of willful misconduct resulting in a tort is insufficient to exclude the case from
the comprehension of the Warsaw Convention," is more of an obiter dictum rather than the ratio decidendi. 36 She
Sec. 20. Voluntary appearance. – The defendant’s voluntary appearance in the action shall be equivalent to service
maintains that the fact that said acts occurred aboard a plane is merely incidental, if not irrelevant. 37
of summons. The inclusion in a motion to dismiss of other grounds aside from lack of jurisdiction over the person of
the defendant shall not be deemed a voluntary appearance.
We disagree with the position taken by the petitioner. Black defines obiter dictum as "an opinion entirely
unnecessary for the decision of the case" and thus "are not binding as precedent." 38 In Santos III v. Northwest
Thus, a defendant who files a motion to dismiss, assailing the jurisdiction of the court over his person, together with
Orient Airlines,39 Augusto Santos III categorically put in issue the applicability of Article 28(1) of the Warsaw
other grounds raised therein, is not deemed to have appeared voluntarily before the court. What the rule on
Convention if the action is based on tort.
voluntary appearance – the first sentence of the above-quoted rule – means is that the voluntary appearance of the
defendant in court is without qualification, in which case he is deemed to have waived his defense of lack of
In the said case, we held that the allegation of willful misconduct resulting in a tort is insufficient to exclude the case jurisdiction over his person due to improper service of summons.
from the realm of the Warsaw Convention. In fact, our ruling that a cause of action based on tort did not bring the
case outside the sphere of the Warsaw Convention was our ratio decidendi in disposing of the specific issue
The pleadings filed by petitioner in the subject forfeiture cases, however, do not show that she voluntarily appeared
presented by Augusto Santos III. Clearly, the contention of the herein petitioner that the said ruling is an obiter
without qualification. Petitioner filed the following pleadings in Forfeiture I: (a) motion to dismiss; (b) motion for
dictum is without basis.
reconsideration and/or to admit answer; (c) second motion for reconsideration; (d) motion to consolidate forfeiture
case with plunder case; and (e) motion to dismiss and/or to quash Forfeiture I. And in Forfeiture II: (a) motion to
Relevant to this particular issue is the case of Carey v. United Airlines, 40 where the passenger filed an action against dismiss and/or to quash Forfeiture II; and (b) motion for partial reconsideration.
the airline arising from an incident involving the former and the airline’s flight attendant during an international
flight resulting to a heated exchange which included insults and profanity. The United States Court of Appeals (9th
The foregoing pleadings, particularly the motions to dismiss, were filed by petitioner solely for special appearance
Circuit) held that the "passenger's action against the airline carrier arising from alleged confrontational incident
with the purpose of challenging the jurisdiction of the SB over her person and that of her three children. Petitioner
between passenger and flight attendant on international flight was governed exclusively by the Warsaw Convention,
asserts therein that SB did not acquire jurisdiction over her person and of her three children for lack of valid service
even though the incident allegedly involved intentional misconduct by the flight attendant." 41
of summons through improvident substituted service of summons in both Forfeiture I and Forfeiture II. This stance
the petitioner never abandoned when she filed her motions for reconsideration, even with a prayer to admit their
In Bloom v. Alaska Airlines,42 the passenger brought nine causes of action against the airline in the state court, attached Answer Ex Abundante Ad Cautelam dated January 22, 2005 setting forth affirmative defenses with a claim
arising from a confrontation with the flight attendant during an international flight to Mexico. The United States for damages. And the other subsequent pleadings, likewise, did not abandon her stance and defense of lack of
Court of Appeals (9th Circuit) held that the "Warsaw Convention governs actions arising from international air travel jurisdiction due to improper substituted services of summons in the forfeiture cases. Evidently, from the foregoing
and provides the exclusive remedy for conduct which falls within its provisions." It further held that the said Sec. 20, Rule 14 of the 1997 Revised Rules on Civil Procedure, petitioner and her sons did not voluntarily appear
before the SB constitutive of or equivalent to service of summons.
 38

Moreover, the leading La Naval Drug Corp. v. Court of Appeals applies to the instant case. Said case elucidates the
current view in our jurisdiction that a special appearance before the court––challenging its jurisdiction over the
person through a motion to dismiss even if the movant invokes other grounds––is not tantamount to estoppel or a
waiver by the movant of his objection to jurisdiction over his person; and such is not constitutive of a voluntary
submission to the jurisdiction of the court.1avvphi1

Thus, it cannot be said that petitioner and her three children voluntarily appeared before the SB to cure the
defective substituted services of summons. They are, therefore, not estopped from questioning the jurisdiction of
the SB over their persons nor are they deemed to have waived such defense of lack of jurisdiction. Consequently,
there being no valid substituted services of summons made, the SB did not acquire jurisdiction over the persons of
petitioner and her children. And perforce, the proceedings in the subject forfeiture cases, insofar as petitioner and
her three children are concerned, are null and void for lack of jurisdiction. (Emphasis supplied)

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

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

SO ORDERED.
 39

HIRD DIVISION chanRoblesvirtualLawlibrary1. The sum of [P]62,000.00 as actual damages;

2. The sum of [P]300,000.00 as moral damages;

G.R. No. 213418, September 21, 2016
3. The sum of [P]300,000.00 as exemplary damages; and cralawlawlibrary
ALFREDO S.RAMOS, CONCHITA S. RAMOS, BENJAMIN B. RAMOS, NELSON T. RAMOS AND ROBINSON T.
RAMOS, Petitioners, v. CHINA SOUTHERN AIRLINES CO. LTD., Respondent. 4. The sum of [P]30,000.00 for attorney's fees.

The defendants' counterclaim against plaintiffs are [hereby] dismissed for insufficiency of evidence [enough] to
DECISION sustain the damages claimed."15chanroblesvirtuallawlibrary
On appeal, however, the CA modified the RTC Decision by deleting the award for moral and exemplary damages.
PEREZ, J.: According to the appellate court, petitioners failed to prove that China Southern Airlines' breach of contractual
obligation was attended with bad faith.16 The disquisition of the CA reads:ChanRoblesVirtualawlibrary
"xxx. Where in breaching the contract, the defendant is not shown to have acted fraudulently or in bad faith, liability
For resolution of the Court is this Petition for Review on Certiorari1 filed by petitioners Alfredo S. Ramos, Conchita S. for damages is limited to the natural and probable consequences of the breach of the obligation and which the
Ramos, Benjamin B. Ramos, Nelson T. Ramos and Robinson T. Ramos, seeking to reverse and set aside the parties had foreseen or could reasonably have foreseen; and in that case, such liability would not include liability for
Decision2 dated 19 March 2013 and Resolution3 dated 9 July 2014 of the Court of Appeals (CA) in CA-G.R. CV. No. moral and exemplary damages.
94561. The assailed decision and resolution affirmed with modification the 23 March 2009 Decision 4 of the Regional
Trial Court (RTC) of Manila, Branch 36, which ordered respondent China Southern Airlines to pay petitioners the In this case, We are not persuaded that [China Southern Airlines] breach of contractual obligation had been
amount of P692,000.00, representing the amount of damages and attorney's fees. On appeal, the appellate court attended by bad faith or malice or gross negligence amounting to bad faith. On the contrary, it appears that despite
affirmed the award of actual damages but deleted the order for payment of moral and exemplary damages in the [petitioner's] failure to "re-confirm" their bookings, [China Southern Airlines] exerted diligent efforts to comply with
amount of P600,000.00.5chanrobleslaw its obligation to [petitioners]. If at the outset, [China Southern Airlines] simply did not intend to comply with its
promise to transport [petitioners] back to Manila, it would not have taken the trouble of proposing that the latter
The Facts could still board the plane as "chance passengers" provided [that] they will pay the necessary pay and penalties.

On 7 August 2003, petitioners purchased five China Southern Airlines roundtrip plane tickets from Active Travel Thus, We believe and so hold that the damages recoverable by [petitioners] are limited to the peso value of the PAL
Agency for $985.00.6 It is provided in their itineraries that petitioners will be leaving Manila on 8 August 2003 at ticket they had purchased for their return flight from Xiamen, plus attorney's fees, in the amount of [P]30,000.00,
0900H and will be leaving Xiamen on 12 August 2003 at 1920H.7 Nothing eventful happened during petitioners' considering that [petitioners] were ultimately compelled to litigate their claim[s] against [China Southern
flight going to Xiamen as they were able to successfully board the plane which carried them to Xiamen International Airlines]." 17chanroblesvirtuallawlibrary
Airport. On their way back to the Manila, however, petitioners were prevented from taking their designated flight
Since China Southern, Airlines' refusal to let petitioners board the plane was not attended by bad faith, the appellate
despite the fact that earlier that day an agent from Active Tours informed them that their bookings for China
court decided not to award petitioners moral and exemplary damages. The CA disposed in this
Southern Airlines 1920H flight are confirmed.8 The refusal came after petitioners already checked in all their
wise:ChanRoblesVirtualawlibrary
baggages and were given the corresponding claim stubs and after they had paid the terminal fees. According to the
"WHEREFORE, premises considered, the instant appeal is hereby AFFIRMED with MODIFICATION in that the
airlines' agent with whom they spoke at the airport, petitioners were merely chance passengers but they may be
award of moral and exemplary damages are hereby DELETED."18chanroblesvirtuallawlibrary
allowed to join the flight if they are willing to pay an additional 500 Renminbi (RMB) per person. When petitioners
refused to defray the additional cost, their baggages were offloaded from the plane and China Southern Airlines Dissatisfied, petitioners timely interposed a Motion for Partial Reconsideration which was partially granted by the CA
1920H flight then left Xiamen International Airport without them. 9 Because they have business commitments waiting in a Resolution 19 dated 9 July 2014, to wit:ChanRoblesVirtualawlibrary
for them in Manila, petitioners were constrained to rent a car that took them to Chuan Chio Station where they "ACCORDINGLY, the instant Motion is PARTIALLY GRANTED. The Decision dated 19 March 2013 rendered by this
boarded the train to Hongkong.10 Upon reaching Hong Kong, petitioners purchased new plane tickets from Philippine Court in CA-G.R. CV No. 94561 is hereby MODIFIED in that [China Southern Airlines] is ORDERED to pay
Airlines (PAL) that flew them back to Manila. 11chanrobleslaw [petitioners] interest of 6% per annum on the P62,000.00 as actual damages from the finality of this Court's
Decision until the same is fully satisfied."20chanroblesvirtuallawlibrary
Upon arrival in Manila, petitioners went to Active Travel to inform them of their unfortunate fate with China Southern
Airlines. In their effort to avoid lawsuit, Active Travel offered to refund the price of the plane tickets but petitioners Unflinching, petitioners elevated the matter before the Court by filing the instant Petition for Review
refused to accept the offer. Petitioners then went to China Southern Airlines to demand for the reimbursement of on Certiorari assailing the CA Decision and Resolution on the following grounds:ChanRoblesVirtualawlibrary
their airfare and travel expenses in the amount of P87,375.00. When the airline refused to accede to their demand, The Issues
petitioners initiated an action for damages before the RTC of Manila against China Southern Airlines and Active
Travel. In their Complaint docketed as Civil Case No. 04-109574, petitioners sought for the payment of the amount I.
of P87,375.00 as actual damages, P500,000.00 as moral damages, P500,000.00 as exemplary damages and cost of
the suit.12chanrobleslaw THE COURT OF APPEALS COMMITTED GRAVE AND SERIOUS ERROR WHEN IT DELETED THE AWARDS OF MORAL
AND EXEMPLARY DAMAGES, A DEPARTURE FROM ESTABLISHED DOCTRINES THAT PASSENGERS WHO ARE
In their Answer,13 China Southern Airlines denied liability by alleging that petitioners were not confirmed passengers BUMPED-OFF ARE ENTITLED TO MORAL AND EXEMPLARY DAMAGES;
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 I.
time of departures but they failed to do so which resulted in the automatic cancellation of their bookings.
THE COURT OF APPEALS COMMITTED GRAVE AND SERIOUS ERROR WHEN IT DECLARED THAT BUMPING OFF OF
The RTC then proceeded with the reception of evidence after the pre-trial conference. THE PETITIONERS WAS NOT ATTENDED BY BAD FAITH AND MALICE CONTRARY TO THE FINDINGS OF THE LOWER
COURT;
On 23 March 2009, the RTC rendered a Decision 14 in favor of the petitioners and ordered Chkia Southern Airlines to
pay damages in the amount of P692,000.00, broken down as follows:ChanRoblesVirtualawlibrary
III.
"WHEREFORE, judgment is hereby rendered ordering the defendant [China Southern Airlines] to pay [petitioners]:
 40

damages. What the law considers as bad faith which may furnish the ground for an award of moral damages would
THE COURT OF APPEALS COMMITTED GRAVE AND SERIOUS ERROR WHEN IT HELD THAT THE LEGAL INTEREST be bad faith in securing the contract and in the execution thereof, as well as in the enforcement of its terms, or any
COMMENCE ONLY FROM THE FINALITY OF THE DECISION INSTEAD OF FROM THE DATE OF EXTRA-JUDICIAL other kind of deceit."
DEMAND ON 18 AUGUST 2003.21chanroblesvirtuallawlibrary
Applying the foregoing yardstick in the case at bar, We find that the airline company acted in bad faith in insolently
The Court's Ruling 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
We resolve to grant the petition. 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
A contract of carriage, in this case, air transport, is intended to serve the traveling public and thus, imbued with transported to their intended destination after they had checked in their luggage and had gone through all the
public interest.22 The law governing common carriers consequently imposes an exacting standard of security checks. Instead, China Southern Airlines offered to allow them to join the flight if they are willing to pay
conduct,23viz:ChanRoblesVirtualawlibrary additional cost; this amount is on top of the purchase price of the plane tickets. The requirement to pay an
"1755 of the New Civil Code. A common carrier is bound to carry passengers safely as far as human care and additional fare was insult upon injury. It is an aggravation of the breach of contract. Undoubtedly, petitioners are
foresight can provide, using the utmost diligence of very cautious persons, with due regard for all the entitled to the award of moral damages. The purpose of awarding moral damages is to enable the injured party to
circumstances." obtain means, diversion or amusement that will serve to alleviate the moral suffering [that] he has undergone by
reason of defendant['s] culpable action. 30chanrobleslaw
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 China Southern Airlines is also liable for exemplary damages as it acted in a wantonly oppressive manner as
does not happen, then the carrier opens itself to a suit for breach of contract of carriage. 24 In an action based on a succinctly discussed above against the petitioners. Exemplary damages which are awarded by way of example or
breach of contract of carriage, the aggrieved party does not have to prove that the common carrier was at fault or correction for the public good, may be recovered in contractual obligations, as in this case, if defendant acted in
was negligent.25cralawred All he has to prove is the existence of the contract and the fact of its non-performance by wanton, fraudulent, reckless, oppressive or malevolent manner.31chanrobleslaw
the carrier, through the latter's failure to carry the passenger to its destination. 26chanrobleslaw
Article 2216 of the Civil Code provides that assessment of damages is left to the discretion of the court according to
It is beyond question in the case at bar that petitioners had an existing contract of air carriage with China Southern the circumstances of each case. This discretion is limited by the principle that the amount awarded should not be
Airlines as evidenced by the airline tickets issued by Active Travel. When they showed up at the airport and after palpably excessive as to indicate that it was the result of prejudice or corruption on the part of the trial court. Simply
they went through the routine security check including the checking in of their luggage and the payment of the put, the amount of damages must be fair, reasonable and proportionate to the injury suffered. 32 With fairness as the
corresponding terminal fees, petitioners were not allowed by China Southern Airlines to board on the plane. The benchmark, We find adequate the amount of P300,000.00 each for moral and exemplary damages imposed by the
airlines' claim that petitioners do not have confirmed reservations cannot be given credence by the Court. The trial court.
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.27 China Southern Airlines allowed petitioners to check in their luggage and The last issue is the reckoning point of the 6% interest on the money judgment. Following this Court's ruling
issued the necessary claim stubs showing that they were part of the flight. It was only after petitioners went through in Nacar v. Gallery Frames,33 we agree with the petitioners that the 6% rate of interest per annum shall be reckoned
all the required check-in procedures that they were informed by the airlines that they were merely chance from the date of their extrajudicial demand on 18 August 2003 until the date of finality of this judgment. The total
passengers. Airlines companies do not, as a practice, accept pieces of luggage from passengers without confirmed amount shall thereafter earn interest at the rate of six percent (6%) per annum from such finality of judgment until
reservations. Quite tellingly, all the foregoing circumstances lead us to the inevitable conclusion that petitioners its satisfaction.
indeed were bumped off from the flight. We cannot from the records of this case deduce the true reason why the
airlines refused to board petitioners back to Manila. What we can be sure of is the unacceptability of the proffered WHEREFORE, premises considered, the petition is GRANTED. The Court hereby AWARDS petitioners the following
reason that rightfully gives rise to the claim for damages. amounts:ChanRoblesVirtualawlibrary
The prologue shapes the body of the petitioners' rights, that is, that they are entitled to damages, actual, moral and (a) P62,000.00 as actual damages, with 6% interest per annum from date of extrajudicial demand on 18 August
exemplary. 2003 until finality of this judgment, and the total amount to thereafter earn interest at 6% per annum from
finality of judgment until full satisfaction;
There is no doubt that petitioners are entitled to actual or compensatory damages. Both the RTC and the CA
(b) P300,000.00 as moral damages; and
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 (c) P300,000.00 as exemplary damages.
showing that it is unsupported by evidence. As the aggrieved parties, petitioners had satisfactorily proven the
SO ORDERED.
existence of the contract and the fact of its non-performance by China Southern Airlines; the concurrence of these
elements called for the imposition of actual or compensatory damages.

With respect to moral damages, the following provision of the New Civil Code is
instructive:ChanRoblesVirtualawlibrary
Article 2220. Willful injury to property may be a legal ground for awarding moral damages if the court should find
that, under the circumstances, such damages are justly due. The same rule applies to breaches of contract where
the defendant acted fraudulently or in bad faith.
Bad faith does not simply connote bad judgment or negligence. It imports dishonest purpose or some moral
obliquity and conscious doing of a wrong. It means breach of a known duty through some motive, interest or ill will
that partakes the nature of fraud. Bad faith is in essence a question of intention. 28chanrobleslaw

In Japan Airlines v. Simangan,29 the Court took the occasion to expound on the meaning of bad faith in a breach of
contract of carriage that merits the award of moral damages:ChanRoblesVirtualawlibrary
"Clearly, JAL is liable for moral damages. It is firmly settled that moral damages are recoverable in suits predicated
on breach of a contract of carriage where it is proved that the carrier was guilty of fraud or bad faith, as in this case.
Inattention to and lack of care for the interests of its passengers who are entitled to its utmost consideration,
particularly as to their convenience, amount to bad faith which entitles the passenger to an award of moral
 41

FIRST DIVISION 1. Temperate damages in the amount of P400,000.00;

G.R. No. 172682, July 27, 2016 2. Moral damages in the amount of One Million Pesos (P1,000,000.00);

3. Costs of suit.
SULPICIO LINES, INC., Petitioner, v. NAPOLEON SESANTE, NOW SUBSTITUTED BY MARIBEL ATILANO,
KRISTEN MARIE, CHRISTIAN IONE, KENNETH KERRN AND KARISNA KATE, ALL SURNAMED
SESANTE, Respondent. SO ORDERED.10chanroblesvirtuallawlibrary
The RTC observed that the petitioner, being negligent, was liable to Sesante pursuant to Articles 1739 and 1759 of
DECISION the Civil Code; that the petitioner had not established its due diligence in the selection and supervision of the vessel
crew; that the ship officers had failed to inspect the stowage of cargoes despite being aware of the storm signal;
that the officers and crew of the vessel had not immediately sent a distress signal to the Philippine Coast Guard;
BERSAMIN, J.:
that the ship captain had not called for then "abandon ship" protocol; and that based on the report of the Board of
Marine Inquiry (BMI), the erroneous maneuvering of the vessel by the captain during the extreme weather condition
Moral damages are meant to enable the injured party to obtain the means, diversions or amusements in order to had been the immediate and proximate cause of the sinking.
alleviate the moral suffering. Exemplary damages are designed to permit the courts to reshape behavior that is
socially deleterious in its consequence by creating negative incentives or deterrents against such behavior. The petitioner sought reconsideration, but the RTC only partly granted its motion by reducing the temperate
damages from P500,000.00 to P300,000.00.11chanrobleslaw
The Case Dissatisfied, the petitioner appealed.12 It was pending the appeal in the CA when Sesante passed away. He was
substituted by his heirs.13chanrobleslaw
This appeal seeks to undo and reverse the adverse decision promulgated on June 27, 2005, 1 whereby the Court of
Appeals (CA) affirmed with modification the judgment of the Regional Trial Court (RTC), Branch 91, in Quezon City
holding the petitioner liable to pay temperate and moral damages due to breach of contract of Judgment of the CA
carriage.2chanrobleslaw
On June 27, 2005, the CA promulgated its assailed decision. It lowered the temperate damages to P120,000.00,
which approximated the cost of Sesante's lost personal belongings; and held that despite the seaworthiness of the
Antecedents vessel, the petitioner remained civilly liable because its officers and crew had been negligent in performing their
duties.14chanrobleslaw
On September 18, 1998, at around 12:55 p.m., the M/V Princess of the Orient, a passenger vessel owned and
operated by the petitioner, sank near Fortune Island in Batangas. Of the 388 recorded passengers, 150 were Sttill aggrieved, Sulpicio Lines moved for reconsideration, but the CA denied the motion. 15chanrobleslaw
lost.3 Napoleon Sesante, then a member of the Philippine National Police (PNP) and a lawyer, was one of the
passengers who survived the sinking. He sued the petitioner for breach of contract and damages. 4chanrobleslaw Hence, this appeal.
Sesante alleged in his complaint that the M/V Princess of the Orient left the Port of Manila while Metro Manila was
experiencing stormy weather; that at around 11:00 p.m., he had noticed the vessel listing starboard, so he had Issues
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 The petitioner attributes the following errors to the CA, to wit:
jackets in the absence of the vessel's officers and crew; that sensing danger, he had called a certain Vency Ceballos I
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 THE ASSAILED DECISION ERRED IN SUSTAINING THE AWARD OF MORAL DAMAGES, AS THE INSTANT CASE IS FOR
after another wave had hit the vessel;5 that he had managed to stay afloat after the vessel had sunk, and had been ALLEGED PERSONAL INJURIES PREDICATED ON BREACH OF CONTRACT OF CARRIAGE, AND THERE BEING NO
carried by the waves to the coastline of Cavite and Batangas until he had been rescued; that he had suffered PROOF OF BAD FAITH ON THE PART OF SULPICIO
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 II
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 P500,000.00 and P1,000,000.00, THE ASSAILED DECISION ERRED IN SUSTAINING THE AMOUNT OF MORAL DAMAGES AWARDED, THE SAME BEING
respectively.7chanrobleslaw UNREASONABLE, EXCESSIVE AND UNCONSCIONABLE, AND TRANSLATES TO UNJUST ENRICHMENT AGAINST
SULPICIO
In its defense, the petitioner insisted on the seaworthiness of the M/V Princess of the Orient due to its having been
cleared to sail from the Port of Manila by the proper authorities; that the sinking had been due to force majeure;
that it had not been negligent; and that its officers and crew had also not been negligent because they had made III
preparations to abandon the vessel because they had launched life rafts and had provided the passengers assistance
in that regard.8chanrobleslaw THE ASSAILED DECISION ERRED IN SUSTAINING THE AWARD OF TEMPERATE DAMAGES AS THE SAME CANNOT
SUBSTITUTE FOR A FAILED CLAIM FOR ACTUAL DAMAGES, THERE BEING NO COMPETENT PROOF TO WARRANT
SAID AWARD
Decision of the RTC

On October 12, 2001, the RTC rendered its judgment in favor of the respondent, 9 holding as IV
follows:ChanRoblesVirtualawlibrary
WHEREFORE, judgment is hereby rendered in favor of plaintiff Napoleon Sesante and against defendant Sulpicio THE AWARD OF TEMPERATE DAMAGES IS UNTENABLE AS THE REQUISITE NOTICE UNDER THE LAW WAS NOT
Lines, Inc., ordering said defendant to pay plaintiff:
 42

GIVEN TO SULPICIO IN ORDER TO HOLD IT LIABLE FOR THE ALLEGED LOSS OF SESANTE'S PERSONAL II
BELONGINGS
The petitioner is liable for breach of contract of carriage
V
The petitioner submits that an action for damages based on breach of contract of carriage under Article 1759 of
the Civil Code should be read in conjunction with Article 2201 of the same code; that although Article 1759 only
THE ASSAILED DECISION ERRED IN SUBSTITUTING THE HEIRS OF RESPONDENT SESANTE IN THE INSTANT CASE,
provides for a presumption of negligence, it does not envision automatic liability; and that it was not guilty of bad
THE SAME BEING A PERSONAL ACTION WHICH DOES NOT SURVIVE
faith considering that the sinking of M/V Princess of the Orient had been due to a fortuitous event, an exempting
circumstance under Article 1174 of the Civil Code.
VI
The submission has no substance.
THE ASSAILED DECISION ERRED IN APPLYING ARTICLE 1759 OF THE NEW CIVIL CODE AGAINST SULPICIO SANS A
CLEAR-CUT FINDING OF SULPICIO'S BAD FAITH IN THE INCIDENT 16chanroblesvirtuallawlibrary 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
In other words, to be resolved are the following, namely: (1) Is the complaint for breach of contract and damages a
carrier's employees. It reads:ChanRoblesVirtualawlibrary
personal action that does not survive the death of the plaintiff?; (2) Is the petitioner liable for damages under Article
Article 1759. Common carriers are liable for the death or injuries to passengers through the negligence or
1759 of the Civil Code?; and (3) Is there sufficient basis for awarding moral and temperate damages?
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.
Ruling of the Court
This liability of the common carriers does not cease upon proof that they exercised all the diligence of a good father
The appeal lacks merit. 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
I common carriers in safely carrying their passengers. 20chanrobleslaw

An action for breach of contract of carriage survives the death of the plaintiff 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.:ChanRoblesVirtualawlibrary
The petitioner urges that Sesante's complaint for damages was purely personal and cannot be transferred to his Article 1756. In case of death of or injuries to passengers, common carriers are presumed to have been at fault or to
heirs upon his death. Hence, the complaint should be dismissed because the death of the plaintiff abates a personal have acted negligently, unless they prove that they observed extraordinary diligence as prescribed in Articles 1733
action. and 1755.

The petitioner's urging is unwarranted. Clearly, the trial court is not required to make an express finding of the common carrier's fault or negligence. 21 Even
the mere proof of injury relieves the passengers from establishing the fault or negligence of the carrier or its
Section 16, Rule 3 of the Rules of Court lays down the proper procedure in the event of the death of a employees.22 The presumption of negligence applies so long as there is evidence showing that: (a) a contract exists
litigant, viz.:ChanRoblesVirtualawlibrary between the passenger and the common carrier; and (b) the injury or death took place during the existence of such
Section 16. Death of party; duty of counsel. - Whenever a party to a pending action dies, and the claim is not contract.23 In such event, the burden shifts to the common carrier to prove its observance of extraordinary diligence,
thereby extinguished, it shall be the duty of his counsel to inform the court within thirty (30) days after such and that an unforeseen event or force majeure had caused the injury.24chanrobleslaw
death of the fact thereof, and to give the name and address of his legal representative or representatives. Failure of
counsel to comply with his duty shall be a ground for disciplinary action. 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
The heirs of the deceased may be allowed to be substituted for the deceased, without requiring the M/V Princess of the Orient, and referred to the BMI report to the effect that the severe weather condition - a force
appointment of an executor or administrator and the court may appoint a guardian ad litem for the minor heirs. majeure - had brought about the sinking of the vessel.

xxxx The petitioner was directly liable to Sesante and his heirs.
17
Substitution by the heirs is not a matter of jurisdiction, but a requirement of due process.  It protects the right of A common carrier may be relieved of any liability arising from a fortuitous event pursuant to Article
due process belonging to any party, that in the event of death the deceased litigant continues to be protected and 117425cralawred of the Civil Code. But while it may free a common carrier from liability, the provision still requires
properly represented in the suit through the duly appointed legal representative of his estate. 18chanrobleslaw exclusion of human agency from the cause of injury or loss. 26 Else stated, for a common carrier to be absolved from
liability in case of  force majeure, it is not enough that the accident was caused by a fortuitous event. The common
The application of the rule on substitution depends on whether or not the action survives the death of the litigant. carrier must still prove that it did not contribute to the occurrence of the incident due to its own or its employees'
Section 1, Rule 87 of the Rules of Court enumerates the following actions that survive the death of a party, namely: negligence.27 We explained in Schmitz Transport & Brokerage Corporation v. Transport Venture, Inc.,28 as
(1) recovery of real or personal property, or an interest from the estate; (2) enforcement of liens on the estate; and follows:ChanRoblesVirtualawlibrary
(3) recovery of damages for an injury to person or property. On the one hand, Section 5, Rule 86 of the Rules of In order to be considered a fortuitous event, however, (1) the cause of the unforeseen and unexpected occurrence,
Court lists the actions abated by death as including: (1) claims for funeral expenses and those for the last sickness or the failure of the debtor to comply with his obligation, must be independent of human will; (2) it must be
of the decedent; (2) judgments for money; and (3) all claims for money against the deceased, arising from contract, impossible to foresee the event which constitute the caso fortuito, or if it can be foreseen it must be impossible to
express or implied. 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
A contract of carriage generates a relation attended with public duty, neglect or malfeasance of the carrier's creditor.
employees and gives ground for an action for damages.19 Sesante's claim against the petitioner involved his personal [T]he principle embodied in the act of God doctrine strictly requires that the act must be occasioned solely by
injury caused by the breach of the contract of carriage. Pursuant to the aforecited rules, the complaint survived his the violence of nature. Human intervention is to be excluded from creating or entering into the cause of
death, and could be continued by his heirs following the rule on substitution. the mischief. When the effect is found to be in part the result of the participation of man, whether due to
his active intervention or neglect or failure to act, the whole occurrence is then humanized and removed
from the rules applicable to the acts of God.29 (bold underscoring supplied for emphasis)
 43

The petitioner has attributed the sinking of the vessel to the storm notwithstanding its position on the seaworthiness
of M/V Princess of the Orient. Yet, the findings of the BMI directly contradicted the petitioner's attribution, as The CA enumerated the negligent acts committed by the officers and crew of M/V Princess of the
follows:ChanRoblesVirtualawlibrary Orient, viz.:ChanRoblesVirtualawlibrary
7. The Immediate and the Proximate Cause of the Sinking x x x. [W]hile this Court yields to the findings of the said investigation report, yet it should be observed that what
was complied with by Sulpicio Lines were only the basic and minimal safety standards which would qualify the vessel
The Captain's erroneous maneuvers of the M/V Princess of the Orient minutes before she sunk [sic] had caused the as seaworthy. In the same report however it also revealed that the immediate and proximate cause of the sinking of
accident. It should be noted that during the first two hours when the ship left North Harbor, she was navigating the M/V Princess of the Orient was brought by the following: erroneous maneuvering command of Captain Esrum
smoothly towards Limbones Point. During the same period, the ship was only subjected to the normal weather Mahilum and due to the weather condition prevailing at the time of the tragedy. There is no doubt that under the
stress prevailing at the time. She was then inside Manila Bar. The waves were observed to be relatively small to circumstances the crew of the vessel were negligent in manning it. In fact this was clearly established by the
endanger the safety of the ship. It was only when the MV Princess of the Orient had cleared Limbones Pt. while investigation of the Board of Marine Inquiry where it was found that:ChanRoblesVirtualawlibrary
navigating towards the direction of the Fortune Island when this agonizing misfortune struck the ship. The Chief Mate, when interviewed under oath, had attested that he was not able to make stability calculation of the
ship vis-a-vis her cargo. He did not even know the metacentric height (GM) of the ship whether it be positive or
Initially, a list of three degrees was observed. The listing of the ship to her portside had continuously increased. It negative.
was at this point that the captain had misjudged the situation. While the ship continuously listed to her portside and
was battered by big waves, strong southwesterly winds, prudent judgement [sic] would dictate that the Captain As cargo officer of the ship, he failed to prepare a detailed report of the ship's cargo stowage plan.
should have considerably reduced the ship's speed. He could have immediately ordered the Chief Engineer to
He likewise failed to conduct the soundings (measurement) of the ballast tanks before the ship departed from port.
slacken down the speed. Meanwhile, the winds and waves continuously hit the ship on her starboard side. The
He readily presumed that the ship was full of ballast since the ship was fully ballasted when she left Cebu for Manila
waves were at least seven to eight meters in height and the wind velocity was a[t] 25 knots. The MV Princess of the
on 16 September 1998 and had never discharge[d] its contents since that time.
Orient being a close-type ship (seven decks, wide and high superstructure) was vulnerable and exposed to the
howling winds and ravaging seas. Because of the excessive movement, the solid and liquid cargo below the decks
Being the officer-in-charge for emergency situation (sic) like this, he failed to execute and supervise the actual
must have shifted its weight to port, which could have contributed to the tilted position of the ship.
abandonship (sic) procedure. There was no announcement at the public address system of abandonship (sic), no
orderly distribution of life jackets and no orderly launching of life rafts. The witnesses have confirmed this finding on
Minutes later, the Captain finally ordered to reduce the speed of the ship to 14 knots. At the same time, he ordered
their sworn statements.
to put ballast water to the starboard-heeling tank to arrest the continuous listing of the ship. This was an exercise in
futility because the ship was already listing between 15 to 20 degrees to her portside. The ship had almost reached
There was miscalculation in judgment on the part of the Captain when he erroneously navigated the ship at her last
the maximum angle of her loll. At this stage, she was about to lose her stability.
crucial moment. x x x
Despite this critical situation, the Captain executed several starboard maneuvers. Steering the course of
To aggravate his case, the Captain, having full command and responsibility of the MV Princess of the Orient, had
the Princess to starboard had greatly added to her tilting. In the open seas, with a fast speed of 14 knots, advance
failed to ensure the proper execution of the actual abandoning of the ship.
maneuvers such as this would tend to bring the body of the ship in the opposite side. In navigational terms, this
movement is described as the centripetal force. This force is produced by the water acting on the side of the ship
The deck and engine officers (Second Mate, Third Mate, Chief Engineers, Second Engineer, Third Engineer and
away from the center of the turn. The force is considered to act at the center of lateral resistance which, in this
Fourth Engineer), being in charge of their respective abandonship (sic) post, failed to supervise the crew and
case, is the centroid of the underwater area of the ship's side away from the center of the turn. In the case of
passengers in the proper execution of abandonship (sic) procedure.
the Princess, when the Captain maneuvered her to starboard, her body shifted its weight to port. Being already
inclined to an angle of 15 degrees, coupled with the instantaneous movement of the ship, the cargoes below deck
The Radio Officer (spark) failed to send the SOS message in the internationally accepted communication network
could have completely shifted its position and weight towards portside. By this time, the ship being ravaged
(VHF Channel 16). Instead, he used the Single Side Band (SSB) radio in informing the company about the
simultaneously by ravaging waves and howling winds on her starboard side, finally lost her
emergency situation. x x x x35chanroblesvirtuallawlibrary
grip.30chanroblesvirtuallawlibrary
The aforestated negligent acts of the officers and crew of M/V Princess of the Orient could not be ignored in view of
Even assuming the seaworthiness of the MA/ Princess of the Orient, the petitioner could not escape liability
the extraordinary duty of the common carrier to ensure the safety of the passengers. The totality of the negligence
considering that, as borne out by the aforequoted findings of the BMI, the immediate and proximate cause of the
by the officers and crew of M/V Princess of the Orient, coupled with the seeming indifference of the petitioner to
sinking of the vessel had been the gross negligence of its captain in maneuvering the vessel.
render assistance to Sesante,36 warranted the award of moral damages.
The Court also notes that Metro Manila was experiencing Storm Signal No. 1 during the time of the sinking. 31 The
While there is no hard-and-fast rule in determining what is a fair and reasonable amount of moral damages, the
BMI observed that a vessel like the M/V Princess of the Orient, which had a volume of 13.734 gross tons, should
discretion to make the determination is lodged in the trial court with the limitation that the amount should not be
have been capable of withstanding a Storm Signal No. 1 considering that the responding fishing boats of less than
palpably and scandalously excessive. The trial court then bears in mind that moral damages are not intended to
500 gross tons had been able to weather through the same waves and winds to go to the succor of the sinking
impose a penalty on the wrongdoer, or to enrich the plaintiff at the expense of the defendant. 37 The amount of the
vessel and had actually rescued several of the latter's distressed passengers. 32chanrobleslaw
moral damages must always reasonably approximate the extent of injury and be proportional to the wrong
committed.38chanrobleslaw
III
The Court recognizes the mental anguish, agony and pain suffered by Sesante who fought to survive in the midst of
The award of moral damages and temperate damages is proper the raging waves of the sea while facing the immediate prospect of losing his life. His claim for moral and economic
vindication is a bitter remnant of that most infamous tragedy that left hundreds of families broken in its wake. The
The petitioner argues that moral damages could be meted against a common carrier only in the following instances, anguish and moral sufferings he sustained after surviving the tragedy would always include the memory of facing
to wit: (1) in the situations enumerated by Article 2201 of the Civil Code; (2) in cases of the death of a passenger; the prospect of his death from drowning, or dehydration, or being preyed upon by sharks. Based on the established
or (3)where there was bad faith on the part of the common carrier. It contends that none of these instances circumstances, his survival could only have been a miracle wrought by God's grace, by which he was guided in his
obtained herein; hence, the award should be deleted. desperate swim for the safety of the shore. But even with the glory of survival, he still had to grapple with not just
the memory of having come face to face with almost certain death, but also with having to answer to the instinctive
We agree with the petitioner that moral damages may be recovered in an action upon breach of contract of carriage guilt for the rest of his days of being chosen to live among the many who perished in the tragedy. 39chanrobleslaw
only when: (a) death of a passenger results, or (b) it is proved that the carrier was guilty of fraud and bad faith,
even if death does not result. 33 However, moral damages may be awarded if the contractual breach is found to be While the anguish, anxiety, pain and stress experienced by Sesante during and after the sinking cannot be
wanton and deliberately injurious, or if the one responsible acted fraudulently or with malice or bad quantified, the moral damages to be awarded should at least approximate the reparation of all the consequences of
faith.34chanrobleslaw the petitioner's negligence. With moral damages being meant to enable the injured party to obtain the means,
 44

diversions or amusements in order to alleviate his moral and physical sufferings, 40 the Court is called upon to ensure petitioner was the immediate and proximate cause of the sinking of the M/V Princess of the Orient, its liability for
that proper recompense be allowed to him, through his heirs. For this purpose, the amount of P1,000,000.00, as Sesante's lost personal belongings was beyond question.
granted by the RTC and affirmed by the CA, is maintained.
The petitioner claims that temperate damages were erroneously awarded because Sesante had not proved pecuniary
The petitioner contends that its liability for the loss of Sesante's personal belongings should conform with Article loss; and that the CA merely relied on his self-serving testimony.
1754, in relation to Articles 1998, 2000 to 2003 of the Civil Code, which provide:ChanRoblesVirtualawlibrary
Article 1754. The provisions of Articles 1733 to 1753 shall apply to the passenger's baggage which is not in his The award of temperate damages was proper.
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. Temperate damages may be recovered when some pecuniary loss has been suffered but the amount cannot, from
the nature of the case, be proven with certainty.45 Article 222446 of the Civil Code expressly authorizes the courts to
xxxx award temperate damages despite the lack of certain proof of actual damages. 47chanrobleslaw

Article 1998. The deposit of effects made by travellers in hotels or inns shall also be regarded as necessary. The Indubitably, Sesante suffered some pecuniary loss from the sinking of the vessel, but the value of the loss could not
keepers of hotels or inns shall be responsible for them as depositaries, provided that notice was given to them, or to be established with certainty. The CA, which can try facts and appreciate evidence, pegged the value of the lost
their employees, of the effects brought by the guests and that, on the part of the latter, they take the precautions belongings as itemized in the police report at P120,000.00. The valuation approximated the costs of the lost
which said hotel-keepers or their substitutes advised relative to the care and vigilance of their effects. belongings. In that context, the valuation of P120,000.00 is correct, but to be regarded as temperate damages.

xxxx In fine, the petitioner, as a common carrier, was required to observe extraordinary diligence in ensuring the safety
of its passengers and their personal belongings. It being found herein short of the required diligence rendered it
Article 2000. The responsibility referred to in the two preceding articles shall include the loss of, or injury to the liable for the resulting injuries and damages sustained by Sesante as one of its passengers.
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 Should the petitioner be further held liable for exemplary damages?
on the vigilance of the keeper of the hotel or inn shall be considered in determining the degree of care required of
him. 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
Article 2001. The act of a thief or robber, who has entered the hotel is not deemed force majeure, unless it is done recovered as a matter of right, and it is left to the court to decide whether or not to award them. 49 In consideration
with the use of arms or through an irresistible force. 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
Article 2002. The hotel-keeper is not liable for compensation if the loss is due to the acts of the guest, his family, manner, the Court hereby awards exemplary damages to Sesante.
servants or visitors, or if the loss arises from the character of the things brought into the hotel.
First of all, exemplary damages did not have to be specifically pleaded or proved, because the courts had the
Article 2003. The hotel-keeper cannot free himself from responsibility by posting notices to the effect that he is not discretion to award them for as long as the evidence so warranted. In Marchan v. Mendoza,50 the Court has
liable for the articles brought by the guest. Any stipulation to the contrary between the hotel-keeper and the guest relevantly discoursed:ChanRoblesVirtualawlibrary
whereby the responsibility of the former as set forth in Articles 1998 to 2001 is suppressed or diminished shall be x x x. It is argued that this Court is without jurisdiction to adjudicate this exemplary damages since
void. there was no allegation nor prayer, nor proof, nor counterclaim of error for the same by the appellees. It
is to be observed however, that in the complaint, plaintiffs "prayed for such other and further relief as
The petitioner denies liability because Sesante's belongings had remained in his custody all throughout the voyage this Court may deem just and equitable." Now, since the body of the complaint sought to recover
until the sinking, and he had not notified the petitioner or its employees about such belongings. Hence, absent such damages against the defendant-carrier wherein plaintiffs prayed for indemnification for the damages
notice, liability did not attach to the petitioner. they suffered as a result of the negligence of said Silverio Marchan who is appellant's employee; and
since exemplary damages is intimately connected with general damages, plaintiffs may not be expected
Is notification required before the common carrier becomes liable for lost belongings that remained in the custody of to single out by express term the kind of damages they are trying to recover against the defendant's
the passenger? carrier. Suffice it to state that when plaintiffs prayed in their complaint for such other relief and
remedies that may be availed of under the premises, in effect, therefore, the court is called upon to
We answer in the negative. exercise and use its discretion whether the imposition of punitive or exemplary damages even though
not expressly prayed or pleaded in the plaintiffs' complaint.
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 x x x It further appears that the amount of exemplary damages need not be proved, because its
only highlights the degree of care required of it depending on who has the custody of the belongings. Hence, the law determination depends upon the amount of compensatory damages that may be awarded to the
requires the common carrier to observe the same diligence as the hotel keepers in case the baggage remains with claimant. If the amount of exemplary damages need not be proved, it need not also be alleged, and the
the passenger; otherwise, extraordinary diligence must be exercised. 41 Furthermore, the liability of the common reason is obvious because it is merely incidental or dependent upon what the court may award as
carrier attaches even if the loss or damage to the belongings resulted from the acts of the common carrier's compensatory damages. Unless and until this premise is determined and established, what may be
employees, the only exception being where such loss or damages is due to force majeure.42chanrobleslaw claimed as exemplary damages would amount to a mere surmise or speculation. It follows as a
necessary consequence that the amount of exemplary damages need not be pleaded in the complaint
In YHT Realty Corporation v. Court of Appeals,43 we declared the actual delivery of the goods to the innkeepers or because the same cannot be predetermined. One can merely ask that it be determined by the court if in
their employees as unnecessary before liability could attach to the hotelkeepers in the event of loss of personal the use of its discretion the same is warranted by the evidence, and this is just what appellee has
belongings of their guests considering that the personal effects were inside the hotel or inn because the hotelkeeper done. (Bold underscoring supplied for emphasis)
shall remain accountable.44 Accordingly, actual notification was not necessary to render the petitioner as the
common carrier liable for the lost personal belongings of Sesante. By allowing him to board the vessel with his And, secondly, exemplary damages are designed by our civil law to "permit the courts to reshape behavior that is
belongings without any protest, the petitioner became sufficiently notified of such belongings. So long as the socially deleterious in its consequence by creating negative incentives or deterrents against such behavior." 51 The
belongings were brought inside the premises of the vessel, the petitioner was thereby effectively notified and nature and purpose for this kind of damages have been well-stated in People v. Dalisay,52 to
consequently duty-bound to observe the required diligence in ensuring the safety of the belongings during the wit:ChanRoblesVirtualawlibrary
voyage. Applying Article 2000 of the Civil Code, the petitioner assumed the liability for loss of the belongings caused Also known as 'punitive' or 'vindictive' damages, exemplary or corrective damages are intended to serve as a
by the negligence of its officers or crew. In view of our finding that the negligence of the officers and crew of the deterrent to serious wrong doings, and as a vindication of undue sufferings and wanton invasion of the
 45

rights of an injured or a punishment for those guilty of outrageous conduct. These terms are generally, but the finality of this decision until fully paid. Costs of suit to be paid by the petitioner.
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 SO ORDERED
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 are intended in good measure to deter the wrongdoer and others like him from
similar conduct in the future. (Bold underscoring supplied for emphasis)
The BMI found that the "erroneous maneuvers" during the ill-fated voyage by the captain of the petitioner's vessel
had caused the sinking. After the vessel had cleared Limbones Point while navigating towards the direction of
Fortune Island, the captain already noticed the listing of the vessel by three degrees to the portside of the vessel,
but, according to the BMI, he did not exercise prudence as required by the situation in which his vessel was suffering
the battering on the starboard side by big waves of seven to eight meters high and strong southwesterly winds of 25
knots. The BMI pointed out that he should have considerably reduced the speed of the vessel based on his
experience about the vessel - a close-type ship of seven decks, and of a wide and high superstructure - being
vulnerable if exposed to strong winds and high waves. He ought to have also known that maintaining a high speed
under such circumstances would have shifted the solid and liquid cargo of the vessel to port, worsening the tilted
position of the vessel. It was only after a few minutes thereafter that he finally ordered the speed to go down to 14
knots, and to put ballast water to the starboard-heeling tank to arrest the continuous listing at portside. By then, his
moves became an exercise in futility because, according to the BMI, the vessel was already listing to her portside
between 15 to 20 degrees, which was almost the maximum angle of the vessel's loll. It then became inevitable for
the vessel to lose her stability.

The BMI concluded that the captain had executed several starboard maneuvers despite the critical situation of the
vessel, and that the maneuvers had greatly added to the tilting of the vessel. It
observed:ChanRoblesVirtualawlibrary
x x x In the open seas, with a fast speed of 14 knots, advance maneuvers such as this would tend to
bring the body of the ship in the opposite side. In navigational terms, this movement is described as the
centripetal force. This force is produced by the water acting on the side of the ship away from the center
of the turn. The force is considered to act at the center of lateral resistance which, in this case, is the
centroid of the underwater area of the ship's side away from the center of the turn. In the case of
the Princess, when the Captain maneuvered her to starboard, her body shifted its weight to port. Being
already inclined to an angle of 15 degrees, coupled with the instantaneous movement of the ship, the
cargoes below deck could have completely shifted its position and weight towards portside. By this time,
the ship being ravaged simultaneously by ravaging waves and howling winds on her starboard side,
finally lost her grip.53chanroblesvirtuallawlibrary
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. 54Wanton 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.56chanrobleslaw

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 P1,000,000.00 in order to serve fully the objective of exemplarity
among those engaged in the business of transporting passengers and cargo by sea. The amount would not be
excessive, but proper. As the Court put it in Pereña v. Zarate:57
Anent the P1,000,000.00 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 Perenas needed to be vigorously
reminded to observe their duty to exercise extraordinary diligence to prevent a similarly senseless accident from
happening again. Only by an award of exemplary damages in that amount would suffice to instill in them and others
similarly situated like them the ever-present need for greater and constant vigilance in the conduct of a business
imbued with public interest.58 (Bold underscoring supplied for emphasis)
WHEREFORE, the Court AFFIRMS the decision promulgated on June 27, 2005 with the MODIFICATIONS that:
(a) the amount of moral damages is fixed at P1,000,000.00; (b) the amount of P1,000,000.00 is granted as
exemplary damages; and (c) the sum of P120,000.00 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
 46

SECOND DIVISION 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,
G.R. No. 194121, July 11, 2016
At the trial, it was revealed that BMT and TMBI have been doing business with each other since the early 80's. It
TORRES-MADRID BROKERAGE, INC., Petitioner, v. FEB MITSUI MARINE INSURANCE CO., INC. AND also came out that there had been a previous hijacking incident involving Sony's cargo in 1997, but neither Sony nor
BENJAMIN P. MANALASTAS, DOING BUSINESS UNDER THE NAME OF BMT TRUCKING its insurer filed a complaint against BMT or TMBI.13chanrobleslaw
SERVICES, Respondents.
On August 5, 2008, the RTC found TMBI and Benjamin Manalastas jointly and solidarity 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
DECISION 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.

BRION, J.:
TMBI denied that it was a common carrier required to exercise extraordinary diligence. It maintains that it exercised
We resolve the petition for review on certiorari challenging the Court of Appeals' (CA)  October 14, 2010 decision the diligence of a good father of a family and should be absolved of liability because the truck was "hijacked"  and
in CA-G.R. CV No. 91829. 1chanrobleslaw this was a fortuitous event.

The CA affirmed the Regional Trial Court's (RTC)  decision in Civil Case No. 01-1596, and found petitioner Torres- BMT claimed that it had exercised extraordinary diligence over the lost shipment, and argued as well that the loss
Madrid Brokerage, Inc. (TMBI)  and respondent Benjamin P. Manalastas jointly and solidarily liable to respondent FEB resulted from a fortuitous event.
Mitsui Marine Insurance Co., Inc. (Mitsui) for damages from the loss of transported cargo.
On October 14, 2010, the CA affirmed the RTC's decision but reduced the award of attorney's fees to PHP 200,000.

Antecedents 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
On October 7, 2000, a shipment of various electronic goods from Thailand and Malaysia arrived at the Port of Manila general public for a fee; 16 (3) even if the "hijacking"  were a fortuitous event, TMBI's failure to observe extraordinary
for Sony Philippines, Inc. (Sony).  Previous to the arrival, Sony had engaged the services of TMBI to facilitate, diligence in overseeing the cargo and adopting security measures rendered it liable for the loss; 17 and (4) even if
process, withdraw, and deliver the shipment from the port to its warehouse in Binan, Laguna. 2chanrobleslaw 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.18chanrobleslaw
TMBI - who did not own any delivery trucks - subcontracted the services of Benjamin Manalastas' company, BMT
Trucking Services (BMT),  to transport the shipment from the port to the Binan warehouse. 3 Incidentally, TMBI TMBI disagreed with the CA's ruling and filed the present petition on December 3, 2010.
notified Sony who had no objections to the arrangement.4chanrobleslaw

Four BMT trucks picked up the shipment from the port at about 11:00 a.m. of October 7, 2000. However, BMT could The Arguments
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. TMBI's Petition

In the early morning of October 9, 2000, the four trucks left BMT's garage for Laguna. 5 However, only three trucks TMBI insists that the hijacking of the truck was a fortuitous event. It contests the CA's finding that neither force nor
arrived at Sony's Binan warehouse. 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. 19chanrobleslaw
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. 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
Later that evening, BMT's Operations Manager Melchor Manalastas informed Victor Torres, TMBI's General Manager, vehicles and would subcontract the delivery to a third-party.
of the development.7 They went to Muntinlupa together to inspect the truck and to report the matter to the
police.8chanrobleslaw 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. 21chanrobleslaw
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 TMBI solely blames BMT as it had full control and custody of the cargo when it was lost. 22 BMT, as a common carrier,
prosecute Lapesura for qualified theft.10chanrobleslaw is presumed negligent and should be responsible for the loss.

TMBI notified Sony of the loss through a letter dated October 10, 2000,11 It also sent BMT a letter dated March 29, BhtT's Comment
2001, demanding payment for the lost shipment. BMT refused to pay, insisting that the goods were "hijacked."
BMT insists that it observed the required standard of care.23 Like the petitioner, BMT maintains that the hijacking
In the meantime, Sony filed an insurance claim with the Mitsui, the insurer of the goods. After evaluating the merits was a fortuitous event - a force majeure  - that exonerates it from liability.24 It points out that Lapesura has never
of the claim, Mitsui paid Sony PHP7,293,386.23 corresponding to the value of the lost goods.12chanrobleslaw 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. 25cralawredchanrobleslaw
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, If there was any attendant negligence, BMT points the finger on TMBI who failed to send a representative to
2001, accompany the shipment.26 BMT further blamed TMBI for the latter's failure to adopt security measures to protect
Sony's cargo.27chanrobleslaw
TMBI, in turn, impleaded Benjamin Manalastas, the proprietor of BMT, as a third-party defendant. TMBI alleged that
 47

Mitsui's Comment unless it results from:

Mitsui counters that neither TMBI nor BMT alleged or proved during the trial that the taking of the cargo was chanRoblesvirtualLawlibrary
accompanied with grave or irresistible threat, violence, or force. 28 Hence, the incident cannot be considered "force (1) Flood, storm, earthquake, lightning, or other natural disaster or calamity;
majeure" and TMBI remains liable for breach of contract.
(2) Act of the public enemy in war, whether international or civil;
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 (3) Act of omission of the shipper or owner of the goods;
lack of supporting evidence.
(4) The character of the goods or defects in the packing or in the containers;
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 (5) Order or act of competent public authority.42chanroblesvirtuallawlibrary
consignee.30chanrobleslaw
For all other cases - such as theft or robbery - a common carrier is presumed to have been at fault or to have
Mitsui invokes as well the legal presumption of negligence against TMBI, pointing out that TMBI simply entrusted the
acted negligently, unless it can prove that it observed extraordinary diligence.43chanrobleslaw
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. 31chanrobleslaw
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
Mitsui affirms that TMBI breached the contract of carriage through its negligent handling of the cargo, resulting in its
exercised extraordinary diligence in transporting and safekeeping the goods; 44 or (2) if it stipulated with the
loss.
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.45chanrobleslaw
The Court's Ruling
However, a stipulation diminishing or dispensing with the common carrier's liability for acts committed by thieves or
A brokerage may be considered a  common robbers who do not act with grave or irresistible threat, violence, or force is void under Article 1745 of the Civil
carrier if it also undertakes to  deliver the Code for being contrary to public policy. 46Jurisprudence, too, has expanded Article 1734's five exemptions. De
goods for its customers 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.
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 In the present case, the shipper, Sony, engaged the services of TMBI, a common carrier, to facilitate the release of
nature of their business and for reasons of public policy, they are bound to observe extraordinary diligence in the its shipment and deliver the goods to its warehouse. In turn, TMBI subcontracted a portion of its obligation - the
vigilance over the goods and in the safety of their passengers. 33chanrobleslaw delivery of the cargo - to another common carrier, BMT.

In A.F. Sanchez Brokerage Inc. v. Court of Appeals,34we held that a customs broker - whose principal business is the Despite the subcontract, TMBI remained responsible for the cargo. Under Article 1736, a common carrier's
preparation of the correct customs declaration and the proper shipping documents - is still considered a common extraordinary responsibility over the shipper's goods lasts from the time these goods are unconditionally placed in
carrier if it also undertakes to deliver the goods for its customers. The law does not distinguish between one whose the possession of, and received by, the carrier for transportation, until they are delivered, actually or
principal business activity is the carrying of goods and one who undertakes this task only as an ancillary constructively, by the carrier to the consignee. 48chanrobleslaw
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,37 and Wesrwind That the cargo disappeared during transit while under the custody of BMT - TMBI's subcontractor - did not diminish
Shipping Corporation  v. UCPB General Insurance Co., Inc.38chanrobleslaw nor terminate TMBFs responsibility over the cargo. Article 1735 of the Civil Code presumes that it was at fault.

Despite TMBI's present denials, we find that the delivery of the goods is an integral, albeit ancillary, part of its Instead of showing that it had acted with extraordinary diligence,  TMBI simply argued that it was not a common
brokerage services. TMBI admitted that it was contracted to facilitate, process, and clear the shipments from the carrier bound to observe extraordinary diligence. Its failure to successfully establish this premise carries with it the
customs authorities, withdraw them from the pier, then transport and deliver them to Sony's warehouse in presumption of fault or negligence, thus rendering it liable to Sony/Mitsui for breach of contract.
Laguna.39chanrobleslaw
Specifically, TMBI's current theory - that the hijacking was attended by force or intimidation - is untenable.
Further, TMBI's General Manager Victor Torres described the nature of its services as follows:
First,  TMBI alleged in its Third Party Complaint against BMT that Lapesura was responsible for hijacking the
chanRoblesvirtualLawlibrary shipment.49 Further, Victor Torres filed a criminal complaint against Lapesura with the NBI. 50 These actions constitute
ATTY. VIRTUDAZO: Could you please tell the court what is the nature of the business of [TMBI]? 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.
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 Second,  neither TMBI nor BMT succeeded in substantiating this theory through evidence. Thus, the theory remained
warehouse and we are engaged in that kind of business, sir. 40 an unsupported allegation no better than speculations and conjectures. The CA therefore correctly disregarded the
defense of force majeure.
That TMBI does not own trucks and has to subcontract the delivery of its clients' goods, is immaterial. As long as an
TMBI and BMT are not solidarity liable
entity holds itself to the public for the transport of goods as a business, it is considered a common carrier regardless
to Mitsui 
of whether it owns the vehicle used or has to actually hire one. 41chanrobleslaw
We disagree with the lower courts" ruling that TMBI and BMT are solidarity liable to Mitsui for the loss as joint
Lastly, TMBI's customs brokerage services - including the transport/delivery of the cargo - are available to anyone
tortfeasors. The ruling was based on Article 2194 of the Civil Code:
willing to pay its fees. Given these circumstances, we find it undeniable that TMBI is a common carrier.
chanRoblesvirtualLawlibrary
Consequently, TMBI should be held responsible for the loss, destruction, or deterioration of the goods it transports
 48

Art. 2194. The responsibility of two or more persons who are liable for quasi-delict is solidary. b. Attorney's fees in the amount of PHP 200,000.00; and cralawlawlibrary

Notably, TMBI's liability to Mitsui does not stem from a quasi-delict (culpa aquiliana)  but from its breach of c. Costs of suit.
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-
Respondent Benjamin P. Manalastas is in turn ORDERED to REIMBURSE Torres-Madrid Brokerage, Inc. of the
delict based Article 2194.
above-mentioned amounts.
A third party may recover from a
SO ORDERED
common carrier for quasi-delict
but must prove actual n  egligence

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.51chanrobleslaw

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. 52chanrobleslaw

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, 54chanrobleslaw

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

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 turn, 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 2181,55chanrobleslaw

WHEREFORE, the Court hereby ORDERS petitioner Torres- Madrid Brokerage, Inc. to pay the respondent FEB
Mitsui Marine Insurance Co., Inc. the following:

chanRoblesvirtualLawlibrary

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;
 49

June 28, 2017 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.

G.R. No. 213088

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
LAND TRANSPORTATION FRANCHISING AND REGULATORY BOARD (LTFRB), Petitioner the wrecked bus had actual engine and chassis numbers DE12T-601104BD and KTP1011611C, 4 respectively; that,
vs. per registration records, the subject bus was registered as "private" on April 4, 2013 with issued License Plate No.
G.V. FLORIDA TRANSPORT, INC., Respondent UDO 762; and that the registered owner is Dagupan Bus Co., Inc. (Dagupan Bus) while the previous owner is herein
respondent bus company.
DECISION
As a result, Dagupan Bus was also ordered to submit an Answer on the DOTC-CAR Incident Report, particularly, to
PERALTA, J.: 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.

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. 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 pertinent factual and procedural antecedents of the case are as follows: 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.
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) On the other hand, Cue filed his Position Paper contending that: License Plate No. TXT-872 was issued by the LTO to
passengers and injured thirty-two (32) others. 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
An initial investigation report, which came from the Department of Transportation and Communications of the completely ceded the operation and maintenance of the subject buses in favor of G.R. Florida.
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 In its Position Paper, herein respondent alleged that: it, indeed, bought Cue's CPC and the ten public utility buses
No. 2007-0407 and bears engine and chassis numbers LX004564 and KN2EAM12PK004452, respectively; and that operating under the said CPC, including the one which bears License Plate No. TXT-872; since Cue's buses were
the bus involved in the accident is not duly authorized to operate as a public transportation. 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
Thus, on the same day of the accident, herein petitioner, pursuant to its regulatory powers, immediately issued an notwithstanding the absence of prior adequate compliance with the requirements that will constitute its operation
Order2 preventively suspending, for a period not exceeding thirty (30) days, the operations of ten (10) buses of Cue legal.
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: 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:
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; 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:
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; 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,
3. Compulsory Drug Testing of the respondents-operators' drivers and conductors to be conducted by INC. is hereby directed to CEASE and DESIST from operating the Certificate of Public Convenience under Case No.
authorized/accredited agency of the Department of Health and the Land Transportation Office; 2007-0407 involving ten (10) authorized units, to wit:

4. Submit the Certificates of Registration and latest LTO Official Receipts of the units, including the names of the xxxx
respective drivers and conductors; and

b. Upon finality of this Decision, the above-mentioned for hire plates of respondent-operator NORBERTO M. CUE, SR.
5. Submit the video clippings of roadworthiness inspection, Road Safety Seminar and Drug Testing. 3 are hereby ordered DESTRUCTED (sic) and DESTROYED prior to their turn over to the Land Transportation Office
(LTO).
 50

xxxx 3. The condition set forth in the Decision for the lifting of the penalty of suspension is DELETED; and

c. All existing Certificates of Public Convenience of respondent-operator G.V. FLORIDA TRANSPORT, INC. under case 4. The order to apprehend and impound petitioner G.V. Florida Transport, Inc.'s 186 authorized bus units under the
numbers listed under case numbers listed below are hereby SUSPENDED for a period of SIX (6) MONTHS 28 CPCs if found operating is RECALLED
commencing from March 11, 2014, which is the lapse of the 30-day preventive suspension order issued by this
Board, to wit:
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
xxxx 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.
[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:
SO ORDERED.7

1. All its authorized drivers must secure the National Competency III issued by the Technical Education and Skills
Development Authority (TESDA) Hence, the present petition grounded on a lone issue, to wit:

2. All its conductors must secure Conductor's License from the Land Transportation Office (LTO); 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

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 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?
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. 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
[e.] The Show Cause Order issued against respondent-operator DAGUPAN BUS CO., INC. is hereby SET ASIDE. 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
The Information Systems Management Division (ISMD) is also directed to make proper recording of this Decision violations of the law is broad and is consistent with its mandate and regulatory capability.
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 On the other hand, respondent, in its Comment to the present Petition, contends that the suspension of its 28 CPCs
submission of all requirements for confirmation. 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
The Law Enforcement Unit of this Board, the Land Transportation Office (LTO), the Metro Manila penalty imposed by petitioner is not commensurate to the infraction it had committed.
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, The Court rules in favor of petitioner.
if found operating.

Section 16(n) of Commonwealth Act. No. 146, otherwise known as the Public Service Act, provides:
SO ORDERED.6

Section 16. Proceedings of the Commission, upon notice and hearing.  - The Commission shall have power, upon
Respondent then filed with the CA a petition for certiorari  under Rule 65 of the Rules of Court, with prayer for the proper notice and hearing in accordance with the rules and provisions of this Act, subject to the limitations and
issuance of a preliminary mandatory injunction, assailing petitioner's above Decision. exceptions mentioned and saving provisions to the contrary:

On June 26, 2014, the CA promulgated its questioned Decision, disposing as follows: xxxx

WHEREFORE, the instant petition is PARTIALLY GRANTED. The Decision dated March 14, 2014 of the Land (n) To suspend or revoke any certificate issued under the provisions of this Act whenever the holder thereof has
Transportation Franchising and Regulatory Board is MODIFIED as follows: 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
1. The Order canceling and reverting to the State of the Certificate of Public Convenience of operator Cue under period not to exceed thirty days any certificate or the exercise of any right or authority issued or granted under this
Case No. 2007-0407, under the beneficial ownership of petitioner G.V. Florida Transport, Inc. is AFFIRMED; 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.

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; xxxx
 51

Also, Section 5(b) of E.O. 202 states: 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
Sec. 5. Powers and Functions of the Land Transportation Franchising and Regulatory Board. The Board shall have certificate and its incapability to comply with its commitment as shown by its inadequate service, were the
the following powers and functions: 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
Also, Section 5(b) of E.O. 202 states: convenience in favor of private interest.

Sec. 5. Powers and Functions of the Land Transportation Franchising and Regulatory Board. The Board shall have A grant of a certificate of public convenience confers no property rights but is a mere license or privilege, and such
the following powers and functions: 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 &
xxxx L- 11542-46, July 31, 1958)

b. To issue, amend, revise, suspend or cancel Certificates of Public Convenience or permits authorizing the operation (T)he Public Service Commission, . . . has the power to specify and define the terms and conditions upon which the
of public land transportation services provided by motorized vehicles, and to prescribe the appropriate terms and public utility shall be operated, and to make reasonable rules and regulations for its operation and the compensation
conditions therefor; 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
xxxx with any of its terms and provisions. x xx  x x x14

In the present case, respondent is guilty of several violations of the law, to wit: lack of petitioner's approval of the Respondent likewise contends that, in suspending its 28 CPCs, the LTFRB acted in reckless disregard of the property
sale and transfer of the CPC which respondent bought from Cue; operating the ill-fated bus under its name when the rights of respondent as a franchise holder, considering that it has put in substantial investments amounting to
same is registered under the name of Dagupan Bus Co., Inc.; attaching a vehicle license plate to the ill-fated bus hundreds of millions in running its operations. In this regard, the Court's ruling in the case of Luque v.
when such plate belongs to a different bus owned by Cue; and operating the subject bus under the authority of a Villegas  15  is apropos:
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?
xxxx
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. 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.
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 Petitioner's argument pales on the face of the fact that the very nature of a certificate of public convenience is at
issued by petitioner, which is tantamount to a willful and contumacious refusal to comply with the requirements of cross purposes with the concept of vested rights. To this day, the accepted view, at least insofar as the State is
law or of the orders, rules or regulations issued by petitioner and which is punishable, under the law, by suspension concerned, is that "a certificate of public convenience constitutes neither a franchise nor a contract, confers no
or revocation of any of its CPCs. 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
The Court agrees with petitioner that its power to suspend the CPCs issued to public utility vehicles depends on its that the certificate of public convenience is granted with so many strings attached. New and additional burdens,
assessment of the gravity of the violation, the potential and actual harm to the public, and the policy impact of its alteration of the certificate, and even revocation or annulment thereof is reserved to the State.
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.
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
Indeed, the law gives to the LTFRB (previously known, among others, as Public Service Commission or Board of empowered, upon proper notice and hearing, amongst others: (1) "[t]o amend, modify or revoke at any time a
Transportation) ample power and discretion to decree or refuse the cancellation of a certificate of public convenience certificate issued under the provisions of this Act [Commonwealth Act 146, as amended], whenever the facts and
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 circumstances on the strength of which said certificate was issued have been misrepresented or materially
cases, 12 it was even intimated that, in matters of this nature so long as the action is justified, this Court will not changed"; and (2) "[t]o suspend or revoke any certificate issued under the provisions of this Act whenever the
substitute its discretion for that of the regulatory agency which, in this case, is the LTFRB. 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
Moreover, the Court finds the ruling in Rizal Light & Ice Co., Inc. v. The Municipality of Morang, Rizal and The Public suspend for a period not to exceed thirty days any certificate or the exercise of any right or authority issued or
Service Commission,  13 instructive, to wit: 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
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
It should be observed that Section 16(n) of Commonwealth Act No. 146, as amended, confers upon the Commission to the condition that all public services "shall observe and comply [with] ... all the rules and regulations of the
ample power and discretion to order the cancellation and revocation of any certificate of public convenience issued Commission relative to" the service. To further emphasize the control imposed on public services, before any public
to an operator who has violated, or has willfully and contumaciously refused to comply with, any order, rule or
 52

service can "adopt, maintain, or apply practices or measures, rules, or regulations to which the public shall be As to whether or not the penalty imposed by petitioner is reasonable, respondent appears to trivialize the effects of
subject in its relation with the public service," the Commission's approval must first be had. 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
And more. Public services must also reckon with provincial resolutions and municipal ordinances relating to the regulations imposed by petitioner upon all holders of CPCs. Thus, the Court finds nothing irregular in petitioner's
operation of public utilities within the province or municipality concerned. The Commission can require compliance imposition of the penalty of sixmonths suspension of the operations of respondent's 28 CPCs. In other words,
with these provincial resolutions or municipal ordinances. petitioner did not commit grave abuse of discretion in imposing the questioned penalty.

Illustrative of the lack of "absolute, complete, and unconditional" right on the part of public services to operate Lastly, the suspension of respondent's CPCs finds relevance in light of the series of accidents met by different bus
because of the delimitations and restrictions which circumscribe the privilege afforded a certificate of public units owned by different operators in recent events. This serves as a reminder to all operators of public utility
convenience is the following from the early (March 31, 1915) decision of this Court in Fisher vs. Yangco Steamship vehicles that their franchises and CPCs are mere privileges granted by the government. As such, they are sternly
Company, 31 Phil. 1, 18-19: 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
Common carriers exercise a sort of public office, and have duties to perform in which the public is interested. Their the requirements of the law in the conduct of their operations, failing which they shall suffer the consequences of
business is, therefore, affected with a public interest, and is subject of public regulation. (New Jersey Steam Nav. their own actions or inaction.
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 WHEREFORE, the instant petition is GRANTED. The Decision of the Court of Appeals, dated June 26, 2014 in CA-
companies and other carriers 'in all respects necessary to protect the public against danger, injustice and GR. SP No. 134772, is REVERSED and SET ASIDE. The March 14, 2014 Decision of the Land Transportation
oppression' may be exercised through boards of commissioners. (New York, etc. R. Co. vs. Bristol, 151 U.S. 556, Franchising and Regulatory Board is REINSTATED.
571; Connecticut, etc. R. Co. vs. Woodruff, 153 U.S. 689.).

SO ORDERED.
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
Dictionary  defines the word "any" as "one, some, or all indiscriminately of whatever quantity"; "used to indicate a
maximum or whole"; "unmeasured or unlimited in amount, number, or extent." 18 Hence, under the above
definitions, petitioner undoubtedly wields authority, under the law, to suspend not only one but all of respondent's
CPCs if warranted, which is proven to be the case here.
 53

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

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

G.R. No. 181375, July 13, 2016
5. ACE B. TANCONTIAN: US$7,000 US$700
PHIL-NIPPON KYOEI, CORP., Petitioner, v. ROSALIA T. GUDELOSAO, ON HER BEHALF AND IN BEHALF OF
MINOR CHILDREN CHRISTY MAE T. GUDELOSAO AND ROSE ELDEN T. GUDELOSAO, CARMEN Further, respondent SOUTH SEA SURETY & INSURANCE CO., INC. is hereby directed to pay as
TANCONTIAN, ON HER BEHALF AND IN BEHALF OF THE CHILDREN CAMELA B. TANCONTIAN, BEVERLY B. beneficiaries complainants ROSALIA T. GUDELOSAO and CARMEN B. TANCONTIAN [P]3,240,000.00 each
TANCONTIAN, AND ACE B. TANCONTIAN, Respondents. 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.
DECISION
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.
JARDELEZA, J.:
Any other claim is hereby dismissed for lack of merit.
This is a petition for review on certiorari1 under Rule 45 of the Revised Rules of Court filed by Phil-Nippon Kyoei,
Corp. (Petitioner) from the Decision 2 of the Court of Appeals (CA) dated October 4, 2007 (CA Decision) and its SO ORDERED.11chanroblesvirtuallawlibrary
Resolution3 dated January 11, 2008 in CA-G.R. SP No. 95456. The CA reinstated the Labor Arbiter's Decision 4 dated
On appeal, the NLRC modified the LA Decision in a Resolution 12 dated February 28, 2006, the dispositive portion of
August 5, 2004 (LA Decision) with the modification, among others, that petitioner is liable to respondents under the
which reads:ChanRoblesVirtualawlibrary
insurance cover it procured from South Sea Surety & Insurance Co., Inc. (SSSICI). The CA ruled that petitioner's
WHEREFORE, premises considered, the Appeals of Complainants and PNKC are GRANTED but only partially in the
liability would be extinguished only upon payment by SSSICI of the insurance proceeds to
case of Complainants' Appeal, and the Appeal of [SSSICI] is DISMISSED for lack of merit. Accordingly, the Decision
respondents.5chanrobleslaw
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
Facts Complainant Gudelosao, namely, Christy Mae T. Gudelosao and Rose Elden T. Gudelosao.

Petitioner, a domestic shipping corporation, purchased a "Ro-Ro" passenger/cargo vessel "MV Mahlia" in Japan in As regards the other issues, the appealed Decision is SUSTAINED.
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. SO ORDERED.13chanroblesvirtuallawlibrary
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 The NLRC absolved petitioner, TEMMPC and TMCL and Capt. Orbeta from any liability based on the limited liability
manager, Capt. Oscar Orbeta (Capt. Orbeta), and the eight crewmembers signed separate contracts of employment. rule.14 It, however, affirmed SSSICI's liability after finding that the Personal Accident Policies answer for the death
Petitioner secured a Marine Insurance Policy (Maritime Policy No. 00001) from SSSICI over the vessel for benefit claims under the Philippine Overseas Employment Administration Standard Employment Contract (POEA-
P10,800,000.00 against loss, damage, and third party liability or expense, arising from the occurrence of the perils SEC).15 Respondents filed a Partial Motion for Reconsideration which the NLRC denied in a Resolution dated May 5,
of the sea for the voyage of the vessel from Onomichi, Japan to Batangas, Philippines. This Marine Insurance Policy 2006.16chanrobleslaw
included Personal Accident Policies for the eight crewmembers for P3,240,000.00 each in case of accidental death or
injury.7chanrobleslaw Respondents filed a petition for certiorari17 before 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-
On February 24, 2003, while still within Japanese waters, the vessel sank due to extreme bad weather condition. SEC by virtue of the limited liability rule. Respondents also argued that the NLRC gravely abused its discretion in
Only Chief Engineer Nilo Macasling survived the incident while the rest of the crewmembers, including Gudelosao ruling that the obligation to pay the surviving heirs rests solely on SSSICI. The CA granted the petition, the
and Tancontian, perished.8chanrobleslaw dispositive portion thereof reads:ChanRoblesVirtualawlibrary
WHEREFORE for being impressed with merit the petition is hereby GRANTED. Accordingly, the Resolution dated
Respondents, as heirs and beneficiaries of Gudelosao and Tancontian, filed separate complaints for death benefits February 28, 2006, and Resolution, dated May 5, 2006, of the public respondent NLRC are hereby SET ASIDE. The
and other damages against petitioner, TEMMPC, Capt. Orbeta, TMCL, and SSSICI, with the Arbitration Branch of the Decision of the Labor Arbiter dated [August 5, 2004] is REINSTATED, subject to the following modifications:
National Labor Relations Commission (NLRC).9chanrobleslaw
chanRoblesvirtualLawlibrary(1) [Respondents CAPT. OSCAR ORBETA, [TEMMPC] and [TMCL] (the manning agency),
On August 5, 2004, Labor Arbiter (LA) Pablo S. Magat rendered a Decision 10 finding solidary liability among are hereby directed to pay solidarily the complainants as follows:
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 chanRoblesvirtualLawlibrary
deemed extinguished only upon SSSICI's payment of the insurance proceeds. The dispositive portion of the LA
  Death Benefits Burial Expenses 10% atty's [fees]
Decision reads:ChanRoblesVirtualawlibrary
WHEREFORE, premises considered, CAPT. OSCAR ORBETA, [TEMMPC], [TMCL], and PHIL-NIPPON KYOEI ROSALIA T. GUDELOSAO: US$50,000 US$1,000 US$5,100
CORPORATION are hereby directed to pay solidarily the complainants as follows:
CARMEN B. TANCONTIAN: US$50,000 US$1,000 US$5,100
chanRoblesvirtualLawlibrary
CARMELA B. TANCONTIAN: US$7,000 US$700
  Death Benefits Burial Expenses 10% atty's [fees]
BEVERLY B. TANCONTIAN: US$7,000 US$700
1. ROSALIA T. GUDELOSAO: US$50,000 US$1,000 US$5,100
ACE B. TANCONTIAN: US$7,000 US$700
2. CARMEN B. TANCONTIAN: US$50,000 US$1,000 US$5,100
 54

I. Whether the doctrine of real and hypothecary nature of maritime law (also known as the limited liability rule)
Further, [respondents] CAPT. OSCAR ORBETA, [TEMMPC] and [TMCL] (the manning agency) are hereby directed to applies in favor of petitioner.
pay solidarity 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. II. Whether the CA erred in ruling that the liability of petitioner is extinguished only upon SSSICI's payment of
Gudelosao. insurance proceeds.
Discussion
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 I. Liability under the POEA Standard Employment Contract.
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. 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
Nevertheless, upon payment of said proceeds to said widows by respondent SOUTH SEA SURETY & INSURANCE CO., also acted through its agent, TEMMPC. Petitioner admitted its role as a principal of its agents TMCL, TEMMPC and
INC. respondent PHIL-NIPPON CORPORATION'S liability to all the complainants is deemed extinguished. 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.
SO ORDERED.18chanroblesvirtuallawlibrary
The CA found that the NLRC erred when it ruled that the obligation of petitioner, TEMMPC and TMCL for the payment Doctrine of limited liability is not applicable to claims under POEA-SEC.
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 In this jurisdiction, the limited liability rule is embodied in Articles 587, 590 and 837 under Book III of the Code of
separate and distinct from the liability of the shipowner. 19 To disregard the contract, which has the force of law Commerce, viz:ChanRoblesVirtualawlibrary
between the parties, would defeat the purpose of the Labor Code and the rules and regulations issued by the Art. 587. The ship agent shall also be civilly liable for the indemnities in favor of third persons which arise from the
Department of Labor and Employment (DOLE) in setting the minimum terms and conditions of employment for the conduct of the captain in the care of the goods which the vessel carried; but he may exempt himself therefrom by
protection of Filipino seamen.20 The CA noted that the benefits being claimed are not dependent upon whether there abandoning the vessel with all her equipment and the freightage he may have earned during the voyage.
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. 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.
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 Each part-owner may exempt himself from this liability by the abandonment before a notary of the part of the vessel
negligence. It is for this reason that petitioner obtained insurance from SSSICI - to protect itself against the belonging to him.
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 Art. 837. The civil liability incurred by the shipowners in the cases prescribed in this section, shall be understood as
Policy).23 The CA then ordered that petitioner's liability will only be extinguished upon payment by SSSICI of the limited to the value of the vessel with all its appurtenances and freightage earned during the voyage.
insurance proceeds.24chanrobleslaw Article 837 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
Petitioner filed a Motion for Reconsideration 25cralawred dated November 5, 2007 but this was denied by the CA in its negligent or illicit acts of the captain.38 These articles precisely intend to limit the liability of the shipowner or agent
Resolution26 dated January 11, 2008. On the other hand, since SSSICI did not file a motion for reconsideration of the to the value of the vessel, its appurtenances and freightage earned in the voyage, provided that the owner or agent
CA Decision, the CA issued a Partial Entry of Judgment 27 stating that the decision became final and executory as to abandons the vessel.39 When the vessel is totally lost, in which case abandonment is not required because there is
SSSICI on October 27, 2007. 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
Hence, this petition where petitioner claims that the CA erred in ignoring the fundamental rule in Maritime Law that passenger is due either to the fault of the shipowner, or to the concurring negligence of the shipowner and the
the shipowner may exempt itself from liability by abandoning the vessel and freight it may have earned during the captain; (2) where the vessel is insured; and (3) in workmen's compensation claims.41chanrobleslaw
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 In Abueg v. San Diego,42 we ruled that the limited liability rule found in the Code of Commerce is inapplicable in a
policies procured from SSSICI. Thus, there is no reason in making petitioner's exoneration from liability conditional liability created by statute to compensate employees and laborers, or the heirs and dependents, in cases of injury
on SSSICI's payment of the insurance proceeds. received by or inflicted upon them while engaged in the performance of their work or employment, to
wit:ChanRoblesVirtualawlibrary
On December 8, 2008, TEMMPC filed its Manifestation 28 informing us of TEMMPC and TMCL's Joint Motion to Dismiss The real and hypothecary nature of the liability of the shipowner or agent embodied in the provisions of the Maritime
the Petition and the CA's Resolution29 dated January 11, 2008 granting it. The dismissal is based on the execution of Law, Book III, Code of Commerce, had its origin in the prevailing conditions of the maritime trade and sea voyages
the Release of All Rights and Full Satisfaction Claim 30 (Release and Quitclaim) on December 14, 2007 between during the medieval ages, attended by innumerable hazards and perils. To offset against these adverse conditions
respondents and TEMMPC, TMCL, and Capt. Orbeta. In a Resolution 31 dated January 28, 2009, we noted that and to encourage shipbuilding and maritime commerce, it was deemed necessary to confine the liability of the owner
TEMMPC, TMCL, and Capt. Orbeta will no longer comment on the Petition. 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.
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 But the provisions of the Code of Commerce invoked by appellant have no room in the application of the Workmen's
employer-employee relations. It also alleged that petitioner filed a complaint for sum of money 33 in the Regional Compensation Act which seeks to improve, and aims at the amelioration of, the condition of laborers and employees.
Trial Court (RTC) of Manila, Branch 46, where it prays for the payment of the insurance proceeds on the individual 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
Marine Insurance Policy with a Personal Accident Policy covering the crewmembers of MV Mahlia. This case was misconduct of the captain or master of the ship; nor the liability for the loss of the ship as a result of collision; nor
eventually dismissed and is now subject of an appeal34 before the CA. SSSICI prays that this matter be considered in the responsibility for wages of the crew, but a liability created by a statute to compensate employees and laborers in
resolving the present case.35 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
Issues 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.)
 55

We see no reason why the above doctrine should not apply here. 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
44
Act No. 3428, otherwise known as The Workmen's Compensation Act  is the first law on workmen's compensation in principal/employer and the recruitment/placement agency for any and all claims under this section shall be joint and
the Philippines for work-related injury, illness, or death. This was repealed on November 1, 1974 by the Labor several." This provision, is in turn, implemented by Section 1 (e)(8), Rule 2, Part II of the POEA Rules and
Code,45 and was further amended on December 27, 1974 by Presidential Decree No. 626.46 The pertinent provisions Regulations Governing the Recruitment and Employment of Seafarers, which requires the undertaking of the
are now found in Title II, Book IV of the Labor Code on Employees Compensation and State Insurance Fund. 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]."
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:ChanRoblesVirtualawlibrary We have consistently applied the Civil Code provisions on solidary obligations, specifically Articles 1217 56 and
1222,57 to labor cases.58 We explained in Varorient Shipping Co., Inc. v. NLRC59 the nature of the solidary liability in
labor cases, to wit:ChanRoblesVirtualawlibrary
1. In case of work-related death of the seafarer, during the term of his contract the employer shall x x x The POEA Rules holds her, as a corporate officer, solidarily liable with the local licensed manning agency. Her
pay his beneficiaries the Philippine Currency equivalent to the amount of Fifty Thousand US liability is inseparable from those of Varorient and Lagoa. If anyone of them is held liable then all of them would be
dollars (US$50,000) and an additional amount of Seven Thousand US dollars (US$7,000) to liable for the same obligation. Each of the solidary debtors, insofar as the creditor/s is/are concerned, is
each child under the age of twenty-one (21) but not exceeding four (4) children, at the the debtor of the entire amount; it is only with respect to his co-debtors that he/she is liable to the
exchange rate prevailing during the time of payment. 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
xxx 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
4. The other liabilities of the employer when the seafarer dies as a result of work-related injury or extent to which Varorient may be found liable by the court. The complaint against Varorient, Lagoa and Colarina is
illness during the term of employment are as follows: 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
xxx

c. The employer shall pay the beneficiaries of the seafarer the [Philippine] currency equivalent to the amount of x x x If Varorient were to be found liable and made to pay pursuant thereto, the entire obligation would already be
One Thousand US dollars (US$1,000) for burial expenses at the exchange rate prevailing during the time of extinguished even if no attempt was made to enforce the judgment against Colarina. Because there existed a
payment. common cause of action against the three solidary obligors, as the acts and omissions imputed against
Akin to the death benefits under the Labor Code, these benefits under the POEA-SEC are given when the employee them are one and the same, an ultimate finding that Varorient was not liable would, under these
dies due to a work-related cause during the term of his contract. 48 The liability of the shipowner or agent under the circumstances, logically imply a similar exoneration from liability for Colarina and Lagoa, whether or not
POEA-SEC has likewise nothing to do with the provisions of the Code of Commerce regarding maritime commerce. they interposed any defense.60 (Emphasis supplied.)
The death benefits granted under the POEA-SEC is not due to the death of a passenger by or through the Thus, the rule is that the release of one solidary debtor redounds to the benefit of the others. 61 Considering that
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 petitioner is solidarily liable with TEMMPC and TMCL, we hold that the Release and Quitclaim executed by
the liability for wages of the crew. It is a liability created by contract between the seafarers and their employers, but respondents in favor of TEMMPC and TMCL redounded to petitioner's benefit. Accordingly, the liabilities of petitioner
secured through the State's intervention as a matter of constitutional and statutory duty to protect Filipino overseas under Section 20(A)(l) and (4)(c) of the POEA-SEC to respondents are now deemed extinguished. We emphasize,
workers and to secure for them the best terms and conditions possible, in order to compensate the seafarers' heirs however, that this pronouncement does not foreclose the right of reimbursement of the solidary debtors who paid
and dependents in the event of death while engaged in the performance of their work or employment. The POEA- (i.e., TEMMPC and TMCL) from petitioner as their co-debtor.
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 II. Liability under the Personal Accident Policies.
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 The NLRC has jurisdiction over the claim on the Personal Accident Policies.
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 We find that the CA correctly upheld the NLRC's jurisdiction to order SSSICI to pay respondents the value of the
workers overseas"51 pursuant to Article 17 of the Labor Code as amended by Executive Order (EO) Nos. 797 52 and proceeds of the Personal Accident Policies.
247.53chanrobleslaw
The Migrant Workers and Overseas Filipinos Act of 1995 gives the Labor Arbiters of the NLRC the original and
But while the nature of death benefits under the Labor Code and the POEA-SEC are similar, the death benefits under exclusive jurisdiction over claims arising out of an employer-employee relationship or by virtue of any law or
the POEA-SEC are intended to be separate and distinct from, and in addition to, whatever benefits the seafarer is contract involving Filipino workers for overseas deployment, including claims for actual, moral, exemplary and other
entitled to under Philippine laws, including those benefits which may be claimed from the State Insurance forms of damage. It further creates a joint and several liability among the principal or employer, and the
Fund.54chanrobleslaw recruitment/placement agency, for any and all claims involving Filipino workers, viz:ChanRoblesVirtualawlibrary
SEC. 10. Money Claims. - Notwithstanding any provision of law to the contrary, the Labor Arbiters of the
Thus, the claim for death benefits under the POEA-SEC is the same species as the workmen's compensation claims National Labor Relations Commission (NLRC) shall have the original and exclusive jurisdiction to hear
under the Labor Code - both of which belong to a different realm from that of Maritime Law. Therefore, the limited and decide, within ninety (90) calendar days after the filing of the complaint, the claims arising out of an
liability rule does not apply to petitioner's liability under the POEA-SEC. 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
Nevertheless, the Release and Quitclaim benefit petitioner as a solidary debtor. mandate, the NLRC shall endeavor to update and keep abreast with the developments in the global services
industry.
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. 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
Petitioner is solidarity liable with TEMMPC and TMCL for the death benefits under the POEA-SEC. The basis of the shall be a condition precedent for its approval. The performance bond to be filed by the recruitment/placement
 56

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 Notably, the parties did not submit the Personal Accident Policies with the NLRC or the CA. However, based on the
as the case may be, shall themselves be jointly and solidarily liable with the corporation or partnership for the pleadings submitted by the parties, SSSICI admitted that the crewmembers of MV Mahlia are insured for the amount
aforesaid claims and damages. x x x (Emphasis supplied.) of P3,240,000.00, payable upon the accidental death of the crewmembers. 71 It further admitted that the insured risk
is the loss of life or bodily injury brought about by the violent external event or accidental means. 72 Based on the
In Finman General Assurance Corp. v. Inocencio,62 we upheld the jurisdiction of the POEA to determine a surety's foregoing, the insurer itself admits that what is being insured against is not the liability of the shipowner for death or
liability under its bond. We ruled that the adjudicatory power to do so is not vested with the Insurance Commission injuries to passengers but the death of the seafarers arising from accident.
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 The liability of SSSICI to the beneficiaries is direct under the insurance contract. 73 Under the contract, petitioner is
overseas employment. 63 Here, the award of the insurance proceeds arose out of the personal accident insurance the policyholder, with SSSICI as the insurer, the crewmembers as the cestui que vie or the person whose life is
procured by petitioner as the local principal over the deceased seafarers who were Filipino overseas workers. The being insured with another as beneficiary of the proceeds, 74 and the latter's heirs as beneficiaries of the policies.
premiums paid by petitioner were, in actuality, part of the total compensation paid for the services of the Upon petitioner's payment of the premiums intended as additional compensation to the crewmembers, SSSICI as
crewmembers.64 Put differently, the labor of the employees is the true source of the benefits which are a form of insurer undertook to indemnify the crewmembers' beneficiaries from an unknown or contingent event. 75 Thus, when
additional compensation to them. Undeniably, such claim on the personal accident cover is a claim under an the CA conditioned the extinguishment of petitioner's liability on SSSICI's payment of the Personal Accident Policies'
insurance contract involving Filipino workers for overseas deployment within the jurisdiction of the NLRC. 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
It must also be noted that the amendment under Section 37-A of the Migrant Workers and Overseas Filipinos Act of proceeds because petitioner is, in fact, the obligee or policyholder in the Personal Accident Policies. Since petitioner
1995 on Compulsory Insurance Coverage does not apply. The amendment requires the claimant to bring any is not the party liable for the value of the insurance proceeds, it follows that the limited liability rule does not apply
question or dispute in the enforcement of any insurance policy before the Insurance Commission for mediation or as well.
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 One final note. Petitioner's claim that the limited liability rule and its corresponding exception (i.e., where the vessel
Accident Policies. 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
In any event, SSSICI can no longer assail its liability under the Personal Accident Policies. SSSICI failed to file a and pending freightage for the particular voyage.76 It is not the insurance in favor of the seafarers, the proceeds of
motion for reconsideration on the CA Decision. In a Resolution dated April 24, 2008, the CA certified in a Partial which are intended for their beneficiaries. Thus, if ever petitioner is liable for the value of the insurance proceeds
Entry of Judgment that the CA Decision with respect to SSSICI has become final and executory and is recorded in under tort or quasi-delict, it would be from the Marine Insurance Policy over the vessel and not from the Personal
the Book of Entries of Judgments.65 A decision that has acquired finality becomes immutable and unalterable. This Accident Policies over the seafarers.
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 WHEREFORE, the petition is PARTLY GRANTED. The CA Decision dated October 4, 2007 and the Resolution dated
or by the highest court in the land. Thus, SSSICI's liability on the Personal Accident Policies can no longer be January 11, 2008 of the Court of Appeals are AFFIRMED WITH THE FOLLOWING MODIFICATIONS:
disturbed in this petition.
chanRoblesvirtualLawlibrary
SSSICI's liability as insurer under the Personal Accident Policies is direct.
(1) The death benefits are limited to the amount granted under the Release of All Rights and Full Satisfaction of
We, however, find that the CA erred in ruling that "upon payment of [the insurance] proceeds to said widows by Claim dated December 14, 2007 executed between respondents and Top Ever Marine Management Company
respondent SOUTH SEA SURETY & INSURANCE CO., INC., respondent PHIL-NIPPON CORPORATION'S liability to all Ltd., Top Ever Marine Management Philippine Corporation, and Captain Oscar Orbeta;
the complainants is deemed extinguished."66chanrobleslaw
(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
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 (3) The last paragraph of the dispositive portion of the CA Decision dated October 4, 2007 stating:
CA determined that petitioner, as insured, procured from SSSICI the Personal Accident Policies in order to protect "Nevertheless, upon payment of said proceeds to said widows by respondent SOUTH SEA SURETY &
itself from the consequences of the total loss of the vessel caused by the perils of the sea. The CA found that the INSURANCE CO., INC., respondent PHIL-NIPPON CORPORATION'S liability to all the complainants is deemed
liabilities insured against are all monetary claims, excluding the benefits under the POEA-SEC, of respondents in extinguished..." is DELETED.
connection with the sinking of the vessel.
SO ORDERED
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:ChanRoblesVirtualawlibrary
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. In a liability
insurance, the insurer assumes the obligation to pay third party in whose favor the liability of the insured
arises.68 On 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.70chanrobleslaw
 57

August 2, 2017 Aggrieved, APL appealed to the RTC.

G.R. No. 226345 The RTC Ruling

PIONEER INSURANCE and SURETY CORPORATION, Petitioner, In its November 3, 2015 decision, the RTC concurred with the MTC. It agreed that APL was presumed to have acted
vs. negligently because the goods were damaged while in its custody. In addition, the RTC stated that under the
APL CO. PTE. LTD.,, Respondent. 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:
DECISION

WHEREFORE, PREMISESCONSIDERED, the Decision dated March 9, 2015 of the Metropolitan Trial Court Branch
MENDOZA, J.: 65, Makati City is hereby AFFIRMED in toto, with costs against defendant-appellant APL.

This petition for review on certiorari seeks to reverse and set aside the May 26, 2016 Decision 1 and August 8, 2016 SO ORDERED.9
Resolution2 of the Court of Appeals (CA) in CA-G.R. SP No. 143912, which reversed the November 3, 2015
Decision3 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). Undeterred, APL appealed before the CA.

On January 13, 2012, the shipper, Chillies Export House Limited, turned over to respondent APL Co. Pte. The CA Ruling
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 In its May 26, 2016 decision, the CA reversed the decisions of the trial courts and ruled that the present action was
Insurance). 5 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-
On February 2, 2012, the shipment arrived at the port of Manila and was temporarily stored at North Harbor, Manila. month prescriptive period set out in the Bill of Lading was reasonable and provided a sufficient period of time within
On February 6, 2012, the bags of chili were withdrawn and delivered to BSFIL. Upon receipt thereof, it discovered which an action to recover any loss or damage arising from the contract of carriage may be instituted.
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
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
As a result, BSFIL made a formal claim against APL and Pioneer Insurance. The latter hired an independent parties and so it could not countenance an interpretation which may undermine the stipulations freely agreed upon
insurance adjuster, which found that the shipment was wet because of the water which seeped inside the container by the parties. The fallo reads:
van APL provided. Pioneer Insurance paid BSFIL Pl 95,505.65 after evaluating the claim. 7

WHEREFORE, premises considered, the instant Petition for Review is hereby GRANTED. The assailed Decision
Having been subrogated to all the rights and cause of action of BSFIL, Pioneer Insurance sought payment from APL, dated November 3, 2015 of the RTC, Branch 137, Makati City in Civil Case No. 15-403 is
but the latter refused. This prompted Pioneer Insurance to file a complaint for sum of money against APL. hereby REVERSED and SETASIDE. Respondent Pioneer Insurance & Surety Corporation's Complaint is
accordingly DISMISSED.

MTC Ruling
SO ORDERED.10

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 Pioneer Insurance moved for reconsideration, but the CA denied its motion in its August 8, 2016 Resolution.
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. Hence, this petition.
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 ISSUES
reads:

I
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. WHETHER THE HONORABLE COURT OF APPEALS SERIOUSLY ERRED WHEN IT RULED THAT PETITIONER'S
CLAIM AGAINST THE RESPONDENT IS ALREADY BARRED BY PRESCRIPTION; AND

SO ORDERED.8
II
 58

WHETHER THE HONORABLE COURT OF APPEALS SERIOSULY ERRED IN HOLDING THAT THE ONE YEAR After a closer persual of the the Bill of Lading, the Court finds that its provisions are clear and unequivocal leaving
PRESCRIPTIVE PERIOD PROVIDED UNDER THE CARRIAGE OF GOODS BY SEA ACT (COGSA) IS NOT no room for interpretation.
APPLICABLE IN THE INSTANT CASE.11

In the Bill of Lading, it was categorically stated that the carrier shall in any event be discharged from all liability
Pioneer Insurance insists the action, which was filed on February 1, 2013, was within the one year prescriptive whatsoever in respect of the goods, unless suit is brought in the proper forum within nine (9) months after delivery
period under the COGSA after BSFIL received the goods on February 6, 2012. It argues that the nine-month period of the goods or the date when they should have been delivered. The same, however, is qualified in that when the
provided under the Bill of Lading was inapplicable because the Bill of Lading itself states that in the event that such said nine-month period is contrary to any law compulsory applicable, the period prescribed by the said law shall
time period is found to be contrary to any law compulsorily applicable, then the period prescribed by such law shall apply.
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. 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
Further, Pioneer Insurance contends that it was not questioning the validity of the terms and conditions of the Bill of that the nine-month prescriptive period under the Bill of Lading applies.
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.
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
12
In its Comment,  dated November 3, 2016, APL countered that Pioneer Insurance erred in claiming that the nine- period provided by a law for a particular claim or action-unlike in Philippine American where the Bill of Lading
month period under the Bill of Lading applies only in the absence of an applicable law. It stressed that the nine- stipulated a prescriptive period for actions without exceptions. Thus, it is readily apparent that the exception under
month period under the Bill of Lading applies, unless there is a law to the contrary. APL explained that "absence" the Bill of Lading became operative because there was a compulsory law applicable which provides for a different
differs from "contrary." It, thus, argued that the nine-month period was applicable because it is not contrary to any prescriptive period. Hence, strictly applying the terms of the Bill of Lading, the one-year prescriptive period under
applicable law. 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.

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 WHEREFORE, the petition is GRANTED. The November 3, 2015 Decision of the Regional Trial Court, Branch 137,
because it provides for a different prescriptive period. For said reason, Pioneer Insurance believed that the Makati City in Civil Case No. 15-403 is REINSTATED.
prescriptive period under the COGSA should be controlling.

SO ORDERED.
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]
 59

G.R. No. 210621, April 04, 2016 "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
ALFREDO MANAY, JR., FIDELINO SAN LUIS, ADRIAN SAN LUIS, ANNALEE SAN LUIS, MARK ANDREW
airline demand letters dated September 3, 200832 and January 20, 200933 asking for a reimbursement of
JOSE, MELISSA JOSE, CHARLOTTE JOSE, DAN JOHN DE GUZMAN, PAUL MARK BALUYOT, AND CARLOS S.
P42,955.00, representing the additional amounts spent to purchase the nine (9) tickets, the accommodation, and
JOSE, Petitioners, v. CEBU AIR,INC, Respondent.
meals of the four (4) that were left behind.34 They also filed a complaint 35 before the Department of Trade and
Industry.36
DECISION
On February 24, 2009, Cebu Pacific, through its Guest Services Department, sent petitioners' counsel an
LEONEN, J.: email37 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]
The Air Passenger Bill of Rights1 mandates that the airline must inform the passenger in writing  of all the conditions promo fare being non-refundable."41
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 Jose and his companions were unsatisfied with Cebu Pacific's response so they filed a Complaint 42 for Damages
fulfillment of the terms and conditions of the contract of carriage. The passenger, however, has the correlative against Cebu Pacific before Branch 59 of the Metropolitan Trial Court of Mandaluyong. 43 The Complaint prayed for
obligation to exercise ordinary diligence in the conduct of his or her affairs. 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
This resolves a Petition for Review on Certiorari 3 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 In its Answer,45 Cebu Pacific essentially denied all the allegations in the Complaint and insisted that Jose was given a
Decision5 dated December 15, 2011 and the Regional Trial Court Decision 6 dated November 6, 2012 and dismissed full recap of the tickets.46 It also argued that Jose had possession of the tickets 37 days before the scheduled flight;
the Complaint for Damages filed by petitioners Alfredo Manay, Jr., Fidelino San Luis, Adrian San Luis, Annalee San hence, he had sufficient time and opportunity to check the flight information and itinerary. 47 It also placed a
Luis, Mark Andrew Jose, Melissa Jose, Charlotte Jose, Dan John De Guzman, Paul Mark Baluyot, and Carlos S. Jose counterclaim of PI00,000.00 by reason that it was constrained to litigate and it incurred expenses for litigation. 48
against respondent Cebu Air, Incorporated (Cebu Pacific). 7
On December 15, 2011, the Metropolitan Trial Court rendered its Decision ordering Cebu Pacific to pay Jose and his
On June 13, 2008, Carlos S. Jose (Jose) purchased 20 Cebu Pacific round-trip tickets from Manila to Palawan for companions P41,044.50 in actual damages and P20,000.00 in attorney's fees with costs of suit. 49 The Metropolitan
himself and on behalf of his relatives and friends. 8 He made the purchase at Cebu Pacific's branch office in Robinsons Trial Court found that as a common carrier, Cebu Pacific should have exercised extraordinary diligence in performing
Galleria.9 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
Jose alleged that he specified to "Alou," the Cebu Pacific ticketing agent, that his preferred date and time of 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,
departure from Manila to Palawan should be on July 20, 2008 at 0820 (or 8:20 a.m.) and that his preferred date and however, in the allegation that the airline's ground personnel treated Jose and his companions rudely since this
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 allegation was unsubstantiated by evidence.53
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. 13 Since the first page contained the details he Cebu Pacific appealed to the Regional Trial Court, reiterating that its ticketing agent gave Jose a full recap of the
specified to Alou, he no longer read the other pages of the flight information. 14 tickets he purchased.54

On July 20, 2008, Jose and his 19 companions boarded the 0820 Cebu Pacific flight to Palawan and had an enjoyable On November 6, 2012, Branch 212 of the Regional Trial Court of Mandaluyong rendered the Decision dismissing the
stay.15 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
On the afternoon of July 22, 2008, the group proceeded to the airport for their flight back to Manila. 16 During the to justify its grant.56
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 Cebu Pacific appealed to the Court of Appeals, arguing that it was not at fault for the damages caused to the
ground personnel that he personally purchased the tickets and specifically instructed the ticketing agent that all 20 passengers.57
of them should be on the 4:15 p.m. flight to Manila. 20
On December 13, 2013, the Court of Appeals rendered the Decision granting the appeal and reversing the Decisions
Upon checking the tickets, they learned that only the first two (2) pages had the schedule Jose specified. 21 They of the Metropolitan Trial Court and the Regional Trial Court. 58 According to the Court of Appeals, the extraordinary
were left with no other option but to rebook their tickets. 22 They then learned that their return tickets had been diligence expected of common carriers only applies to the carriage of passengers and not to the act of encoding the
purchased as part of the promo sales of the airline, and the cost to rebook the flight would be P7,000.00 more requested flight schedule. 59 It was incumbent upon the passenger to exercise ordinary care in reviewing flight details
expensive than the promo tickets.23 The sum of the new tickets amounted to P65,000.00.24 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
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 Aggrieved, Alfredo Manay, Jr., Fidelino San Luis, Adrian San Luis, Annalee San Luis, Mark Andrew Jose, Melissa Jose,
the airline personnel still refused.26 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
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 Cebu Pacific was ordered to comment on the Petition. Upon compliance, 65 Jose, et al. submitted their Reply.66 The
Manila, Jose immediately purchased four (4) tickets for the companions they left behind, which amounted to parties were then directed67 to submit their respective memoranda.68
P5,205.29
Jose, et al. argue that Cebu Pacific is a common carrier obligated to exercise extraordinary diligence to carry Jose, et
Later in July 2008, Jose went to Cebu Pacific's ticketing office in Robinsons Galleria to complain about the allegedly al. to their destination at the time clearly instructed to its ticketing agent. 69 They argue that they have the decision
erroneous booking and the rude treatment that his group encountered from the ground personnel in Palawan. 30 He to choose flight schedules and that Cebu Pacific should not choose it for them. 70 They insist that they have made
alleged that instead of being assured by the airline that someone would address the issues he raised, he was merely
 60

their intended flight schedule clear to the ticketing agent and it would have been within normal human behavior for NOW THEREFORE, the Court Resolves, for the guidance of the Bench and the Bar, to declare that Section 1, Rule 22
them to expect that their entire group would all be on the same flight. 71 They argue that they should not have to ask speaks only of "the last day of the period" so that when a party seeks an extension and the same is granted, the
for a full recap of the tickets since they are under no obligation, as passengers, to remind Cebu Pacific's ticketing due date ceases to be the last day and hence, the provision no longer applies. Any extension of time to file the
agent of her duties.72 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)
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 Thus, petitioners' request for extension of time should have been reckoned from the original due date on January
damages for the "profound distress and anxiety" 74 they have undergone from the experience, with PI00,000.00 in 11, 2014, even if this day fell on a Saturday. A request for extension of 30 days would have ended on February 10,
attorney's fees to represent the reasonable expenses incurred from "engaging the services of their counsel." 75 2014.86

Cebu Pacific, on the other hand, argues that the damage in this case was caused by Jose, et al.'s "gross and Petitioners subsequently filed their Petition for Review on Certiorari on February 12, 2014. 87 Pursuant to A.M. No.
inexplicable [negligence.]"76 It maintains that Jose, et al. should have read the details of their flight, and if there 00-2-14-SC,88 this Petition would have been filed out of time.
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 We are not, however, precluded from granting the period of extension requested and addressing the Petition filed on
indicated in the "Comments" section: "FULL RECAP GVN TO CARLOS JOSE." 78 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
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, However, it does not follow that in the relaxation of the procedural rules, this Court automatically rules in favor of
2008, 1005 flight to Manila.79 It argues that Jose, et al. have not been able to present any evidence to substantiate petitioners. Their case must still stand on its own merits for this Court to grant the relief petitioners pray for.
their allegation that their intent was to be on the July 22, 2008 1615 flight to Manila. 80
II
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, Common carriers are required to exercise extraordinary diligence in the performance of its obligations under the
Melissa Jose, Charlotte Jose, Dan John De Guzman, Paul Mark Baluyot, and Carlos S. Jose for damages for the contract of carriage. This extraordinary diligence must be observed not only in the transportation of goods and
issuance of a plane ticket with an allegedly erroneous flight schedule. services but also in the issuance of the contract of carriage, including its ticketing operations.

I 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,
Although it was not mentioned by the parties, a procedural issue must first be addressed before delving into the offering their services to the public." Articles 1733, 1755, and 1756 of the Civil Code outline the degree of diligence
merits of the case. required of common carriers:
....
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 ARTICLE 1733. Common carriers, from the nature of their business and for reasons of public policy, are bound to
January 13, 2014. 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.
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 ARTICLE 1755. A common carrier is bound to carry the passengers safely as far as human care and foresight can
Monday, or on January 13, 2014. provide, using the utmost diligence of very cautious persons, with a due regard for all the circumstances.

In their Motion for Extension of Time, however, petitioners requested an additional 30 days from January 13, ARTICLE 1756. In case of death of or injuries to passengers, common carriers are presumed to have been at fault or
2014 within which to file their petition for review on certiorari. 84 to have acted negligently, unless they prove that they observed extraordinary diligence as prescribed in articles
1733 and 1755.
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: Respondent, as one of the four domestic airlines in the country, 90 is a common carrier required by law to exercise
chanRoblesvirtualLawlibrary extraordinary diligence. Extraordinary diligence requires that the common carrier must transport goods and
Section 1. How to compute time. - In computing any period of time prescribed or allowed by these Rules, or by passengers "safely as far as human care and foresight can provide," and it must exercise the "utmost diligence of
order of the court, or by any applicable statute, the day of the act or event from which the designated period of time very cautious persons . . . with due regard for all the circumstances." 91
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 When a common carrier, through its ticketing agent, has not yet issued a ticket to the prospective passenger, the
until the next working day. 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
Whereas, the aforecited provision applies in the matter of filing of pleadings in courts when the due date falls on a carriage, is necessarily included in the exercise of extraordinary diligence.
Saturday, Sunday or legal holiday, in which case, the filing of the said pleading on the next working day is deemed
on time; 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.
Whereas, the question has been raised if the period is extended  ipso jure to the next working day immediately Reyes:94
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 [W]hen an airline issues a ticket to a passenger confirmed on a particular flight, on a certain date, a contract of
original expiration of the period. 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)
 61

Tuesday, July 22, 2008   HK  PHP999.00 PH

Once a plane ticket is issued, the common carrier binds itself to deliver the passenger safely on the date and time 5J 640 PPS-MNL 16:15- 17:30102
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 the Comments box, it reads:
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 R - FULL RECAP GVN TO CARLOS JOSE//AWRE
to transport nine (9) of the petitioners safely on the 10:05 a.m. flight of July 22, 2008. I - FULL RECAP GVN TO CARLOS JOSE//AWRE
M - FULL RECAP GVN TO CARLOS JOSE//AWRI103
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 The second page contained the names of three (3) passengers. 104 In the Information box, it reads:
was fully informed of the schedules of the purchased tickets and petitioners were negligent when they failed to
correct their ticket schedule.
Sunday, July 20, 2008     HK PHP1,998.00 PH
Respondent relies on the Parol Evidence Rule in arguing that a written document is considered the best evidence of 5J 637 MNL-PPS 08:20- 09:35
the terms agreed on by the parties. Petitioners, however, invoke the exception in Rule 130, Section 9(b) of the Tuesday, July 22, 2008     HK PHP999.00 PH
Rules of Court that evidence may be introduced if the written document fails to express the true intent of the 5J 640 PPS-MNL  16:15- 17:30105
parties:97

Under the caption "Comments," it reads:

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. R - FULL RECAP GVN TO CARLOS JOSE//AWRE
I - FULL RECAP GVN TO CARLOS JOSE//AWRE
However, a party may present evidence to modify, explain or add to the terms of the written agreement if he puts in M - FULL RECAP GVN TO CARLOS JOSE//AWRI106
issue in his pleading:
The third page contained the names of nine (9) passengers. 107 In the Information box, it reads:
(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; Sunday, July 20, 2008     HK  PHP999.00 PHP
5J637MNL-PPS  08:20-09:35
(c)  The validity of the written agreement; or Tuesday, July 22, 2008    HK  PHP999.00 PH
5J638PPS-MNL  10:05-11:20108ChanRoblesVirtualawlibrary
(d) The existence of other terms agreed to by the parties or their successors in interest after the execution of the
written agreement.
In the Comments box, it reads:

98
In ACI Philippines, Inc. v. Coquia: R - FULL RECAP GVNT O JOSE//CARLOS AWRE
R - NON-REFUNDBLE//VALID TIL 15 OCT08 O109
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 Respondent explained that as a matter of protocol, flight information is recapped to the purchaser twice: first by the
used as a substitute for such contract, nor even to alter or contradict them. This rule, however, is not without ticketing agent before payment, and second by the cashier during payment. The tickets were comprised of three (3)
exception. Section 9, Rule 130 of the Rules of Court states that a party may present evidence to modify, explain or pages. Petitioners argue that only the first page was recapped to petitioner Jose when he made the purchase.
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 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.
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 The only evidence petitioners have in order to prove their true intent of having the entire group on the 4:15 p.m.
logical to presume that all 20 passengers would prefer the same flight schedule, unless the purchaser stated flight is petitioner Jose's self-serving testimony that the airline failed to recap the last page of the tickets to him.
otherwise. They have neither shown nor introduced any other evidence before the Metropolitan Trial Court, Regional Trial
Court, Court of Appeals, or this Court.
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 Even assuming that the ticketing agent encoded the incorrect flight information, it is incumbent upon the purchaser
booked for the 10:05 a.m. flight, and not the 4:15 p.m. flight.100 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
The first page of the tickets contained the names of eight (8) passengers. 101 In the Information box on the left side Appeals:110
of the ticket, it reads:
While it may be true that petitioner had not signed the plane ticket, he is nevertheless bound by the provisions
Sunday, July 20, 2008     HK PHP999.00 PHP thereof. "Such provisions have been held to be a part of the contract of carriage, and valid and binding upon the
5J 637 MNL-PPS  08:20- 09:35 passenger regardless of the latter's lack of knowledge or assent to the regulation." It is what is known as a contract
 62

of "adhesion," in regards which it has been said that contracts of adhesion wherein one party imposes a ready made Thus, they are not entitled to damages.
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 Before damages may be awarded, "the claimant should satisfactorily show the existence of the factual basis of
consent.111ChanRoblesVirtualawlibrary 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 damages 118 and attorney's fees119 as well.
One of the terms stated in petitioners' tickets stipulates that the photo identification of the passenger must match
the name entered upon booking:
III

Guests should present a valid photo ID to airport security and upon check-in. Valid IDs for this purpose are Traveling by air for leisure is a fairly new concept to the average Filipino. From 1974, there was only one local airline
Company ID, Driver's License, Passport, School ID, SSS Card, TIN Card. The name in the photo-ID should match the commanding a monopoly on domestic air travel.120 In 1996, respondent introduced the concept of a budget airline in
guest name that was entered upon booking. Failure to present a valid photo ID will result in your being refused the Philippines, touting "low-cost services to more destinations and routes with higher flight frequency within the
check-in.112 Philippines than any other airline."121 In its inception, respondent offered plane fares that were "40% to 50% lower
than [Philippine Airlines]." 122

Considering that respondent was entitled to deny check-in to passengers whose names do not match their photo On March 1, 2007, to celebrate its new fleet of aircraft, respondent offered a promo of P1.00 base fare for all their
identification, it would have been prudent for petitioner Jose to check if all the names of his companions were domestic and international destinations.123 The fare was non-refundable and exclusive of taxes and surcharges. 124
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 Despite the conditions imposed on these "piso fares," more people were enticed to travel by air. From January to
this, he would have noticed that there was a different flight schedule encoded on the third page of the tickets since June 2007, respondent had a total number of 2,256,289 passengers while Philippines Airlines had a total of
the flight schedule was stated directly above the passengers' names. 1,981,267 passengers.125 The domestic air travel market also had a 24% increase in the first half of 2007.126

Petitioners' flight information was not written in fine print. It was clearly stated on the left portion of the ticket above Promotional fares encouraged more Filipinos to travel by air as the number of fliers in the country increased from
the passengers' names. If petitioners had exercised even the slightest bit of prudence, they would have been able to 7.2 million in 2005 to 16.5 million in 2010.127 The emergence of low-cost carriers "liberalized [the] aviation
remedy any erroneous booking. regime"128 and contributed to an "unprecedented and consistent double digit growth rates of domestic and
international travel"129 from 2007 to 2012.
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. 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
113
In Crisostomo v. Court of Appeals,  Estela Crisostomo booked a European tour with Caravan Travel and Tours, a "unsatisfactory airline service"130 as a result of flight overbooking, delays, and cancellations. 131
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 This prompted concerned government agencies to issue Department of Transportation and Communications-
flight was actually scheduled the day before. She subsequently filed a suit for damages against Caravan Travel and Department of Trade and Industry Joint Administrative Order No. 1, Series of 2012, otherwise known as the Air
Tours based on the alleged negligence of their travel agent in informing her of the wrong flight details. 114 Passenger Bill of Rights.

This Court, while ruling that a travel agency was not a common carrier and was not bound to exercise extraordinary Section 4 of the Joint Administrative Order requires airlines to provide the passenger with accurate information
diligence in the performance of its obligations, also laid down the degree of diligence concurrently required of before the purchase of the ticket:
passengers:
Section 4. Right to Full, Fair, and Clear Disclosure of the Service Offered and All the Terms and
Contrary to petitioner's claim, the evidence on record shows that respondent exercised due diligence in performing Conditions of the Contract of Carriage.  Every passenger shall, before purchasing any ticket for a contract of
its obligations under the contract and followed standard procedure in rendering its services to petitioner. As correctly carriage by the air carrier or its agents, be entitled to the full, fair, and clear disclosure of all the terms and
observed by the lower court, the plane ticket issued to petitioner clearly reflected the departure date and conditions of the contract of carriage about to be purchased. The disclosure shall include, among others, documents
time, contrary to petitioner's contention. The travel documents, consisting of the tour itinerary, vouchers and required to be presented at check-in, provisions on check-in deadlines, refund and rebooking policies, and
instructions, were likewise delivered to petitioner two days prior to the trip. Respondent also properly booked procedures and responsibility for delayed and/or cancelled flights. These terms and conditions may include liability
petitioner for the tour, prepared the necessary documents and procured the plane tickets. It arranged petitioner's limitations, claim-filing deadlines, and other crucial conditions.
hotel accommodation as well as food, land transfers and sightseeing excursions, in accordance with its avowed
undertaking. 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
Therefore, it is clear that respondent performed its prestation under the contract as well as everything else that was reference means that the ticket and/or boarding pass shall clearly state that the complete terms and conditions of
essential to book petitioner for the tour. Had petitioner exercised due diligence in the conduct of her affairs, there carriage are available for perusal and/or review on the air carrier's website, or in some other document that may be
would have been no reason for her to miss the flight. Needless to say, after the travel papers were delivered to sent to or delivered by post or electronic mail to the passenger upon his/her request.
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) 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.
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 4.5 Any violation of the afore-stated provisions shall be a ground for the denial of subsequent applications for
more than enough time to correct any alleged mistake in the flight schedule. approval of promotional fare, or for the suspension or recall of the approval made on the advertised fare/rate.
(Emphasis in the original)
Petitioners, in failing to exercise the necessary care in the conduct of their affairs, were without a doubt negligent.
 63

be borne by the passenger.chanrobleslaw

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: WHEREFORE, the Petition is DENIED.

SO ORDERED.
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
 64

February 8, 2017 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
G.R. No. 212038 Jesus Fernando with contempt, then informed the Immigration Officer that the ticket is not valid because it had been
used.8
SPOUSES JESUS FERNANDO and ELIZABETH S. FERNANDO, Petitioners
vs. The Immigration Officer brought Jesus Fernando to the interrogation room of the Immigration and Naturalization
NORTHWEST AIRLINES, INC., Respondent 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
x-----------------------x usual six (6) months.9

G.R. No. 212043 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
NORTHWEST AIRLINES, INC., Petitioner, problems that may be encountered on the validity of the ticket, a new ticket was issued to Jesus Fernando. 10
vs.
SPOUSES JESUS FERNANDO and ELIZABETH S. FERNANDO, Respondents.
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
DECISION 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,
PERALTA, J.: 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
Before us are consolidated petitions for review on certiorari  under Rule 45 of the Rules of Court assailing the missed the chance to be with his family for the whole duration of the Christmas holidays. 11
Decision1 dated August 30, 2013, and Resolution 2 dated March 31, 2014 of the Court of Appeals (CA)  in CA-G.R. CV
No. 93496 which affirmed the Decision 3 dated September 9, 2008 of the Regional Trial Court (RTC), Branch 97, b.) The departure from the Los Angeles Airport on January 29, 2002.
Quezon City in Civil Case No. Q-N-02-46727 finding Northwest Airlines, Inc. (Northwest)  liable for breach of contract
of carriage.
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 spouses Jesus and Elizabeth S. Fernando (Fernandos) are frequent flyers of Northwest Airlines, Inc. and are the LA Airport and were given their respective boarding passes for business class seats and claim stubs for six (6)
holders of Elite Platinum World Perks Card, the highest category given to frequent flyers of the carrier. 4 They are pieces of luggage. With boarding passes, tickets and other proper travel documents, they were allowed entry to the
known in the musical instruments and sports equipments industry in the Philippines being the owners of JB Music departure area and joined their business associates from Japan and the Philippines who attended the Musical
and JB Sports with outlets all over the country. They likewise own the five (5) star Hotel Elizabeth in Baguio City and Instrument Trade Show in LA on January 17, 2002 and the Sports Equipment Trade Show in Las Vegas on January
Cebu City, and the chain of Fersal Hotels and Apartelles in the country. 5 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
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 When the Fernandos reached the gate area where boarding passes need to be presented, Northwest supervisor
from the LA Airport on January 29, 2002. The factual antecedents are as follows: 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)
Version of Spouses Jesus and Elizabeth  S. Fernando: 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
a.) The arrival at Los Angeles Airport on December 20, 2001 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
Sometime on December 20, 2001, Jesus Fernando arrived at the LA Airport via  Northwest Airlines Flight No. NW02
matter. They were assisted by Northwest personnel Jeanne Meyer who retrieved their control number from her
to join his family who flew earlier to the said place for a reunion for the Christmas holidays. 6
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
When Jesus Fernando presented his documents at the immigration counter, he was asked by the Immigration Officer Fernandos would no longer encounter any problem with Linda Tang, Jeanne Meyer printed coupon tickets for them
to have his return ticket verified and validated since the date reflected thereon is August 2001. So he approached a who were then advised to rush back to the boarding gates since the plane was about to depart. But when the
Northwest personnel who was later identified as Linda Puntawongdaycha, but the latter merely glanced at his ticket Fernandos reached the boarding gate, the plane had already departed. They were able to depart, instead, the day
without checking its status with the computer and peremptorily said that the ticket has been used and could not be after, or on January 30, 2002, and arrived in the Philippines on January 31,2002.14
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,
Version of Northwest Airlines, Inc.:
instead, purchased new business class ticket on the said date.7 Hence, the ticket remains unused and perfectly valid.

a.) The arrival at the Los Angeles Airport on December 20, 2001.
 65

Northwest claimed that Jesus Fernando travelled from Manila to LA on Northwest Airlines on December 20, 2001. At 1. Moral damages in the amount of Two Hundred Thousand Pesos (₱200,000.00);
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 2. Actual or compensatory damages in the amount of Two Thousand US Dollars ($2,000.00) or its
help verify the ticket of Jesus Fernando. Linda Puntawongdaycha then asked Jesus Fernando to "show" her "all the corresponding Peso equivalent at the time the airline ticket was purchased;
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. 3. Attorney's fees in the amount of Fifty Thousand pesos (₱50,000.00); and,
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 4. Cost of suit.
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
SO ORDERED.22
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 Both parties filed their respective appeals which were dismissed by the CA in a Decision dated August 30, 2013, and
Puntawongdaycha insisted that she did her best to help Jesus Fernando get through the US Immigration. 15 affirmed the RTC Decision.

b.) The departure from the Los Angeles Airport on January 29, 2002. 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.
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 The Fernandos filed a petition for review on certiorari23before this court docketed as G.R. No. 212038. Northwest
few minutes before departure. Northwest personnel Linda Tang was then the one assigned at the departure area. As followed suit and its petition24 was docketed as G.R. No. 212043. Considering that both petitions involved similar
a standard procedure, Linda Tang scanned the boarding passes and collected tickets while the passengers went parties, emanated from the same Civil Case No. Q-N-02-46727 and assailed the same CA judgment, they were
through the gate. When the Fernandos presented their boarding passes, Linda Tang asked for their tickets because ordered consolidated in a Resolution 25 dated June 18, 2014.
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 In G.R. No. 212038, the Fernandos raised the following issues:

When the Fernandos failed to show their tickets, Linda Tang called Yong who was a supervisor at the ticket counter WHETHER OR NOT THE ACTS OF THE PERSONNEL AND THAT OF DEFENDANT NORTHWEST ARE WANTON,
to verify whether the Fernandos had checked in, and whether there were any tickets found at the ticket counter. MALICIOUS, RECKLESS, DELIBERATE AND OPPRESSIVE IN CHARACTER, AMOUNTING TO FRAUD AND BAD FAITH;
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,
WHETHER OR NOT PETITIONER SPOUSES ARE ENTITLED TO MORAL DAMAGES IN AN AMOUNT MORE THAN THAT
she failed to see any electronic ticket number of any kind, and/or any ticket record. So as the Fernandos would be
AWARDED BY THE TRIAL COURT;
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 WHETHER OR NOT DEFENDANT NORTHWEST IS LIABLE TO PETITIONER SPOUSES FOR EXEMPLARY DAMAGES;
[AND]
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" WHETHER OR NOT THE PETITIONER SPOUSES ARE ENTITLED TO ATTORNEY'S FEES IN AN AMOUNT MORE THAN
to assist them. Jeanne Meyer verified their bookings and "printed paper tickets" for them. Unfortunately, when they THAT AWARDED BY THE TRIAL COURT.26
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 In G.R. No. 212043, Northwest anchored its petition on the following assigned errors:
offer18 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
I
30, 2002, the Fernandos flew to Manila on business class seats. 19

THE COURT OF APPEALS COMMITTED REVERSIBLE ERROR IN RULING THAT NORTHWEST COMMITTED A BREACH OF
On April 30, 2002, a complaint for damages20 was instituted by the Fernandos against Northwest before the RTC,
CONTRACT OF CARRIAGE;
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 II
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
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;
On September 9, 2008, the RTC issued a Decision, the dispositive portion of which states, thus:

III
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:
 66

THE COURT OF APPEALS COMMITTED REVERSIBLE ERROR IN RULING THAT NORTHWEST IS NOT ENTITLED TO In the Comment28 of Northwest, it insisted that assuming a mistake was committed by Linda Tang and Linda
RECOVER ON ITS COUNTERCLAIMS.27 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.

The Issues
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
The arguments proffered by the parties can be summed up into the following issues: (1) whether or not there was allegedly able to find any return ticket for him. According to Jesus Fernando, Linda Puntawongdaycha merely looked
breach of contract of carriage and whether it was done in a wanton, malevolent or reckless manner amounting to at his ticket and declared the same to be invalid. The Fernandos reiterated that after Jesus Fernando was released
bad faith; (2) whether or not Northwest is liable for the payment of moral damages and attorney's fees and whether by the US Immigration Service, Elizabeth Fernando proceeded to a Northwest Ticket counter to verify the status of
it is liable to pay more than that awarded by the RTC; (3) whether or not Northwest is liable for the payment of the ticket. The personnel manning the counter courteously assisted her and confirmed that the ticket remained
exemplary damages; and (4) whether or not Northwest Airlines is entitled to recover on its counterclaim. 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
In their petition, the Fernandos contended that it was the personal misconduct, gross negligence and the rude and discrepancy with the tickets or reservations, they would not have been allowed to check in, and since they were
abusive attitude of Northwest employees Linda Puntawongdaycha and Linda Tang which subjected them to allowed to check in then they were properly booked and were confirmed passengers of Northwest.
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 Our Ruling
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 We find merit in the petition of the Spouses Jesus and Elizabeth Fernando. The Fernandos' cause of action against
Jesus Fernando's travel plans. The latter was then subjected to two (2) hours of questioning which allegedly Northwest stemmed from a breach of contract of carriage. A contract is a meeting of minds between two persons
humiliated him. He was even suspected of being an "illegal alien". The negligence of Linda Puntawongdaycha was whereby one agrees to give something or render some service to another for a consideration. There is no contract
allegedly so gross and reckless amounting to malice or bad faith. 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

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 A contract of carriage is defined as one whereby a certain person or association of persons obligate themselves to
personnel at the check-in counter would have not issued them their boarding passes and baggage claim stubs. transport persons, things, or goods from one place to another for a fixed price. Under Article 1732 of the Civil Code,
That's why they could not understand why the coupon-type ticket was still demanded by Northwest. 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
On the award of moral damages, the Fernandos referred to the testimony of Elizabeth Fernando that she could not freely gave their consent to an agreement whose object was the transportation of the Fernandos from LA to Manila,
sleep and had a fever the night after the second incident. Thus, the Fernandos demanded that they should be given and whose cause or consideration was the fare paid by the Fernandos to Northwest. 32
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 In Alitalia Airways v. CA, et al.,33 We held that when an airline issues a ticket to a passenger confirmed for a
owners of JB Music and JB Sports with outlets all over the country. They own hotels, a chain of apartelles and a particular flight on a certain date, a contract of carriage arises. The passenger then has every right to expect that he
parking garage building in Indiana, USA. And since the breach of contract allegedly amounted to fraud and bad faith, 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
they likewise demanded for the payment of exemplary damages and attorney's fees more than the amount awarded of carriage.34
by the RTC.

When Northwest confirmed the reservations of the Fernandos, it bound itself to transport the Fernandos on their
On the other hand, Northwest stated in its petition that Linda Puntawongdaycha tried her best to help Jesus flight on 29 January 2002.
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 We note that the witness35 of Northwest admitted on cross-examination that based on the documents submitted by
"noticed in the ticket that it was dated sometime August 20 or 21, 2001, although it was already December 2001." the Fernandos, they were confirmed

As to the incident with Linda Tang, Northwest explained that she was only following Northwest standard boarding passengers on the January 29, 2002 flight.36
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 In an action based on a breach of contract of carriage, the aggrieved party does not have to prove that the common
was using an electronic ticket dated August 21, 2001, while the electronic ticket of Jesus Fernando was dated 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-
January 26, 2002. According to Northwest, even if the Fernandos had electronic tickets, the same did not discount performance by the carrier.37 As the aggrieved party, the Fernandos only had to prove the existence of the contract
the fact that, on the face of the tickets, they were for travel on past dates. Also, the electronic tickets did not and the fact of its non-performance by Northwest, as carrier, in order to be awarded compensatory and actual
contain the ticket number or any information regarding the reservation. Hence, the alleged negligence of the damages.38
Fernandos resulted in the confusion in the procedure in boarding the plane and the eventual failure to take their
flight.
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
Northwest averred that the award of moral damages and attorney's fees were exorbitant because such must be contract of carriage with the Fernandos. Thus, Northwest opened itself to claims for compensatory, actual, moral
proportionate to the suffering inflicted. It argued that it is not obliged to give any "special treatment" to the and exemplary damages, attorney's fees and costs of suit. 39
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.
 67

Moreover, Article 1733 of the New Civil Code provides that common carriers, from the nature of their business and were allowed entry to the departure area; and, they eventually joined the long queue of business class passengers
for reasons of public policy, are bound to observe extraordinary diligence in the vigilance over the goods and for the along with their business associates.
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. 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
We, thus, sustain the findings of the CA and the RTC that Northwest committed a breach of contract "in failing to in their Elite Platinum World Perks Card number. Again, the Northwest personnel refused to do so; she, instead, told
provide the spouses with the proper assistance to avoid any inconvenience" and that the actuations of Northwest in them to pay for new tickets so they could board the plane. Hence, the Fernandos rushed to the Northwest Airline
both subject incidents "fall short of the utmost diligence of a very cautious person expected of it". Both ruled that Ticket counter to clarify the matter. They were assisted by Northwest personnel Jeanne Meyer who retrieved their
considering that the Fernandos are not just ordinary passengers but, in fact, frequent flyers of Northwest, the latter control number from her computer and was able to ascertain that the Fernandos' electronic tickets were valid, and
should have been more courteous and accommodating to their needs so that the delay and inconveniences they they were confirmed passengers on both NW Flight No. 001 for Narita Japan and NW 029 for Manila on that day.
suffered could have been avoided. Northwest was remiss in its duty to provide the proper and adequate assistance
to them.
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
Nonetheless, We are not in accord with the common finding of the CA and the RTC when both ruled out bad faith on the class contracted for amounts to bad faith or fraud which entitles the passengers to the award of moral damages
the part of Northwest. While We agree that the discrepancy between the date of actual travel and the date in accordance with Article 2220 of the Civil Code."
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. 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
On the first incident, Jesus Fernando even gave the Northwest personnel the number of his Elite Platinum World did not hesitate to affirm the lower court's finding awarding her damages on the ground that the breach of contract
Perks Card for the latter to access the ticket control record with the airline's computer for her to see that the ticket of carriage amounted to bad faith.47 For the indignity and inconvenience of being refused a confirmed seat on the
is still valid. But Linda Puntawongdaycha refused to check the validity of the ticket in the computer. As a result, the last minute, said passenger is entitled to an award of moral damages. 48
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 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
As in fact, the RTC awarded actual or compensatory damages because of the testimony of Jesus Fernando that he January 30, 2002.
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 In Japan Airlines v. Jesus Simangan,49 this Court held that the acts committed by Japan Airlines against Jesus
indifferent attitude without due regard for the inconvenience and anxiety Jesus Fernando might have experienced. Simangan amounted to bad faith, thus:

Passengers do not contract merely for transportation. They have a right to be treated by the carrier's employees x x x JAL did not allow respondent to fly. It informed respondent that there was a need to first check the
with kindness, respect, courtesy and due consideration. They are entitled to be protected against personal authenticity of his travel documents with the U.S. Embassy. As admitted by JAL, "the flight could not wait for
misconduct, injurious language, indignities and abuses from such employees. So it is, that any rule or discourteous Mr. Simangan because it was ready to depart."
conduct on the part of employees towards a passenger gives the latter an action for damages against the carrier. 42
Since JAL definitely declared that the flight could not wait for respondent, it gave respondent no choice but to be left
In requiring compliance with the standard of extraordinary diligence, a standard which is, in fact, that of the highest behind. The latter was unceremoniously bumped off despite his protestations and valid travel documents and
possible degree of diligence, from common carriers and in creating a presumption of negligence against them, the notwithstanding his contract of carriage with JAL. Damage had already been done when respondent was
law seeks to compel them to control their employees, to tame their reckless instincts and to force them to take offered to fly the next day on July 30, 1992. Said offer did not cure JAL's default.50
adequate care of human beings and their property.43
Similarly, in Korean Airlines Co., Ltd. v. Court of Appeals, 51 where private respondent was not allowed to board the
Notably, after the incident, the Fernandos proceeded to a Northwest Ticket counter to verify the status of the ticket plane because her seat had already been given to another passenger even before the allowable period for
and they were assured that the ticked remained unused and perfectly valid. And, to avoid any future problems that passengers to check in had lapsed despite the fact that she had a confirmed ticket and she had arrived on
may be encountered on the validity of the ticket, a new ticket was issued to Jesus Fernando. The failure to promptly time, this Court held that petitioner airline acted in bad faith in violating private respondent's rights under their
verify the validity of the ticket connotes bad faith on the part of Northwest. contract of carriage and is, therefore, liable for the injuries she has sustained as a result. 52

Bad faith does not simply connote bad judgment or negligence. It imports a dishonest purpose or some moral Under Article 222053 of the Civil Code of the Philippines, an award of moral damages, in breaches of contract, is in
obliquity and conscious doing of a wrong. It means breach of a known duty through some motive, interest or ill will order upon a showing that the defendant acted fraudulently or in bad faith.54 Clearly, in this case, the Fernandos are
that partakes of the nature of fraud. A finding of bad faith entitles the offended party to moral damages. 44 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
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. We note that even if both the CA and the RTC ruled out bad faith on the part of Northwest, the award of "some
They checked in with their luggage at LA Airport and were given their respective boarding passes for business class moral damages" was recognized. Both courts believed that considering that the Fernandos are good clients of
seats and claim stubs for six (6) pieces of luggage. With boarding passes and electronic tickets, apparently, they Northwest for almost ten (10) years being Elite Platinum World Perks Card holders, and are known in their business
 68

circle, they should have been given by Northwest the corresponding special treatment.56 They own hotels and a WHEREFORE, the Decision dated August 30, 2013 and the Resolution dated March 31, 2014 of the Court of
chain of apartelles in the country, and a parking garage building in Indiana, USA. From this perspective, We adopt Appeals, in CA-G.R. CV No. 93496 are hereby AFFIRMED WITH MODIFICATION. The award of moral damages
the said view. We, thus, increase the award of moral damages to the Fernandos in the amount of ₱3,000,000.00. 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.

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. 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.
In Trans World Airlines v. Court of Appeals,58 this Court considered the social standing of the aggrieved passenger:

SO ORDERED.
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 of moral 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. 60 They
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
 69

G.R. No. 138334               August 25, 2003 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

ESTELA L. CRISOSTOMO, Petitioner,
vs. Lastly, respondent maintained that the "British Pageant" was not a substitute for the package tour that petitioner
The Court of Appeals and CARAVAN TRAVEL & TOURS INTERNATIONAL, INC., Respondents. 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
DECISION be ordered to pay the balance of P12,901.00 for the "British Pageant" package tour.

YNARES-SANTIAGO, J.: After due proceedings, the trial court rendered a decision, 4 the dispositive part of which reads:

In May 1991, petitioner Estela L. Crisostomo contracted the services of respondent Caravan Travel and Tours WHEREFORE, premises considered, judgment is hereby rendered as follows:
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, 1. Ordering the defendant to return and/or refund to the plaintiff the amount of Fifty Three Thousand Nine
and the booking fee was also waived because petitioner’s niece, Meriam Menor, was respondent company’s ticketing Hundred Eighty Nine Pesos and Forty Three Centavos (P53,989.43) with legal interest thereon at the rate
manager. of twelve percent (12%) per annum starting January 16, 1992, the date when the complaint was filed;

Pursuant to said contract, Menor went to her aunt’s residence on June 12, 1991 – a Wednesday – to deliver 2. Ordering the defendant to pay the plaintiff the amount of Five Thousand (P5,000.00) Pesos as and for
petitioner’s travel documents and plane tickets. Petitioner, in turn, gave Menor the full payment for the package reasonable attorney’s fees;
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.
3. Dismissing the defendant’s counterclaim, for lack of merit; and

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 4. With costs against the defendant.
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. SO ORDERED.5

Subsequently, Menor prevailed upon petitioner to take another tour – the "British Pageant" – which included The trial court held that respondent was negligent in erroneously advising petitioner of her departure date through
England, Scotland and Wales in its itinerary. For this tour package, petitioner was asked anew to pay US$785.00 or its employee, Menor, who was not presented as witness to rebut petitioner’s testimony. However, petitioner should
P20,881.00 (at the then prevailing exchange rate of P26.60). She gave respondent US$300 or P7,980.00 as partial have verified the exact date and time of departure by looking at her ticket and should have simply not relied on
payment and commenced the trip in July 1991. 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.
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 Respondent appealed to the Court of Appeals, which likewise found both parties to be at fault. However, the
for the "British Pageant" tour. Despite several demands, respondent company refused to reimburse the amount, appellate court held that petitioner is more negligent than respondent because as a lawyer and well-traveled person,
contending that the same was non-refundable.1 Petitioner was thus constrained to file a complaint against she should have known better than to simply rely on what was told to her. This being so, she is not entitled to any
respondent for breach of contract of carriage and damages, which was docketed as Civil Case No. 92-133 and raffled form of damages. Petitioner also forfeited her right to the "Jewels of Europe" tour and must therefore pay
to Branch 59 of the Regional Trial Court of Makati City. respondent the balance of the price for the "British Pageant" tour. The dispositive portion of the judgment appealed
from reads as follows:
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 WHEREFORE, premises considered, the decision of the Regional Trial Court dated October 26, 1995 is hereby
wrong flight schedule through its employee Menor. She insisted that the "British Pageant" was merely a substitute REVERSED and SET ASIDE. A new judgment is hereby ENTERED requiring the plaintiff-appellee to pay to the
for the "Jewels of Europe" tour, such that the cost of the former should be properly set-off against the sum paid for defendant-appellant the amount of P12,901.00, representing the balance of the price of the British Pageant Package
the latter. 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
For its part, respondent company, through its Operations Manager, Concepcion Chipeco, denied responsibility for of TWELVE PERCENT (12%) interest per annum shall be additionally imposed on the total obligation until payment
petitioner’s failure to join the first tour. Chipeco insisted that petitioner was informed of the correct departure date, thereof is satisfied. The award of attorney’s fees is DELETED. Costs against the plaintiff-appellee.
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 SO ORDERED.6
or confirm her flight schedule as printed on the ticket.

Upon denial of her motion for reconsideration,7 petitioner filed the instant petition under Rule 45 on the following
Respondent explained that it can no longer reimburse the amount paid for "Jewels of Europe", considering that the grounds:
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
 70

I 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
It is respectfully submitted that the Honorable Court of Appeals committed a reversible error in reversing using the utmost diligence of very cautious persons and with due regard for all the circumstances. 11 As earlier stated,
and setting aside the decision of the trial court by ruling that the petitioner is not entitled to a refund of however, respondent is not a common carrier but a travel agency. It is thus not bound under the law to observe
the cost of unavailed "Jewels of Europe" tour she being equally, if not more, negligent than the private extraordinary diligence in the performance of its obligation, as petitioner claims.
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 Since the contract between the parties is an ordinary one for services, the standard of care required of respondent is
considered to be equally, or worse, more guilty than the private respondent. At best, petitioner’s that of a good father of a family under Article 1173 of the Civil Code.12 This connotes reasonable care consistent with
negligence is only contributory while the private respondent [is guilty] of gross negligence making the that which an ordinarily prudent person would have observed when confronted with a similar situation. The test to
principle of pari delicto inapplicable in the case; 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
II

In the case at bar, the lower court found Menor negligent when she allegedly informed petitioner of the wrong day of
The Honorable Court of Appeals also erred in not ruling that the "Jewels of Europe" tour was not indivisible departure. Petitioner’s testimony was accepted as indubitable evidence of Menor’s alleged negligent act since
and the amount paid therefor refundable; 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
III and thus considered petitioner’s uncontradicted testimony to be sufficient proof of her claim.

The Honorable Court erred in not granting to the petitioner the consequential damages due her as a result On the other hand, respondent has consistently denied that Menor was negligent and maintains that petitioner’s
of breach of contract of carriage.8 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
Petitioner contends that respondent did not observe the standard of care required of a common carrier when it latter.
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 We agree with respondent.
be attributed to respondent as it was the direct consequence of its employee’s gross negligence.
Respondent’s failure to present Menor as witness to rebut petitioner’s testimony could not give rise to an inference
Petitioner’s contention has no merit. 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
By definition, a contract of carriage or transportation is one whereby a certain person or association of persons opportunity and possibility for obtaining Menor’s testimony belonged to both parties, considering that Menor was not
obligate themselves to transport persons, things, or news from one place to another for a fixed price. 9 Such person just respondent’s employee, but also petitioner’s niece. It was thus error for the lower court to invoke the
or association of persons are regarded as carriers and are classified as private or special carriers and common or presumption that respondent willfully suppressed evidence under Rule 131, Section 3(e). Said presumption would
public carriers.10 A common carrier is defined under Article 1732 of the Civil Code as persons, corporations, firms or logically be inoperative if the evidence is not intentionally omitted but is simply unavailable, or when the same could
associations engaged in the business of carrying or transporting passengers or goods or both, by land, water or air, have been obtained by both parties.16
for compensation, offering their services to the public.

In sum, we do not agree with the finding of the lower court that Menor’s negligence concurred with the negligence of
It is obvious from the above definition that respondent is not an entity engaged in the business of transporting petitioner and resultantly caused damage to the latter. Menor’s negligence was not sufficiently proved, considering
either passengers or goods and is therefore, neither a private nor a common carrier. Respondent did not undertake that the only evidence presented on this score was petitioner’s uncorroborated narration of the events. It is well-
to transport petitioner from one place to another since its covenant with its customers is simply to make travel settled that the party alleging a fact has the burden of proving it and a mere allegation cannot take the place of
arrangements in their behalf. Respondent’s services as a travel agency include procuring tickets and facilitating evidence.17 If the plaintiff, upon whom rests the burden of proving his cause of action, fails to show in a satisfactory
travel permits or visas as well as booking customers for tours. manner facts upon which he bases his claim, the defendant is under no obligation to prove his exception or
defense.18
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 Contrary to petitioner’s claim, the evidence on record shows that respondent exercised due diligence in performing
whom petitioner ultimately contracted for her carriage to Europe. Respondent’s obligation to petitioner in this regard its obligations under the contract and followed standard procedure in rendering its services to petitioner. As correctly
was simply to see to it that petitioner was properly booked with the airline for the appointed date and time. Her observed by the lower court, the plane ticket19 issued to petitioner clearly reflected the departure date and time,
transport to the place of destination, meanwhile, pertained directly to the airline. 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
The object of petitioner’s contractual relation with respondent is the latter’s service of arranging and facilitating accommodation as well as food, land transfers and sightseeing excursions, in accordance with its avowed
petitioner’s booking, ticketing and accommodation in the package tour. In contrast, the object of a contract of undertaking.
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. 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
 71

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.
 72

THIRD DIVISION In its May 8, 2008 Decision,16 the Regional Trial Court ruled for Luwalhati and Eliza, awarding them moral and
exemplary damages, and attorney's fees.17

G.R. No. 199455, June 27, 2018

The Regional Trial Court found that Luwalhati failed to accurately declare the contents of the package as
"checks."18 However, it ruled that a check is not legal tender or a "negotiable instrument equivalent to cash," as
FEDERAL EXPRESS CORPORATION, Petitioner, v. LUWALHATI R. ANTONINO AND ELIZA BETTINA RICASA prohibited by the Air Waybill. 19 It explained that common carriers are presumed to be at fault whenever goods are
ANTONINO, Respondents. lost.20 Luwalhati testified on the non-delivery of the package. FedEx, on the other hand, claimed that the shipment
was released without the signature of the actual recipient, as authorized by the shipper or recipient. However, it
DECISION failed to show that this authorization was made; thus, it was still liable for the loss of the package. 21

LEONEN, J.: On non-compliance with a condition precedent, it ruled that under the Air Waybill, the prescriptive period for filing
an action was "within two (2) years from the date of delivery of the shipment or from the date on which the
shipment should have been delivered."22 Luwalhati and Eliza's demand letter made on March 11, 2004 was within
The duty of common carriers to observe extraordinary diligence in shipping goods does not terminate until delivery the two (2)-year period sanctioned by the Air Waybill. 23 The trial court also noted that they were given a "run-
to the consignee or to the specific person authorized to receive the shipped goods. Failure to deliver to the person around" by FedEx employees, and thus, were deemed to have complied with the filing of the formal claim. 24
authorized to receive the goods is tantamount to loss of the goods, thereby engendering the common carrier's
liability for loss. Ambiguities in contracts of carriage, which are contracts of adhesion, must be interpreted against
the common carrier that prepared these contracts. The dispositive portion of the Regional Trial Court May 8, 2008 Decision read:

This resolves a Petition for Review on Certiorari 1 under Rule 45 of the 1997 Rules of Civil Procedure praying that the WHEREFORE, judgment is hereby rendered in favor of plaintiffs Luwalhati R. Antonino and Eliza Bettina Ricasa
assailed Court of Appeals August 31, 2011 Decision 2 and November 21, 2011 Resolution3 in CA-G.R. CV No. 91216 Antonino ordering the following:
be reversed and set aside and that Luwalhati R. Antonino (Luwalhati) and Eliza Bettina Ricasa Antonino (Eliza) be
held liable on Federal Express Corporation's (FedEx) counterclaim. 1) The amount of P200,000.00 by way of moral damages;
2) The amount of P100,000.00 by way of exemplary damages; and
The assailed Court of Appeals August 31, 2011 Decision denied the appeal filed by FedEx and affirmed the May 8, [3]) The amount of P150,000.00 as and for attorney's fees. Costs against defendant.
2008 Decision4 of Branch 217, Regional Trial Court, Quezon City, awarding moral and exemplary damages, and
attorney's fees to Luwalhati and Eliza.5 In its assailed November 21, 2011 Resolution, the Court of Appeals denied The counterclaim is ordered dismissed.
FedEx's Motion for Reconsideration.6

SO ORDERED.25
Eliza was the owner of Unit 22-A (the Unit) in Allegro Condominium, located at 62 West 62 nd St., New York, United
States.7 In November 2003, monthly common charges on the Unit became due. These charges were for the period
of July 2003 to November 2003, and were for a total amount of US$9,742.81. 8 In its assailed August 31, 2011 Decision, 26 the Court of Appeals affirmed the ruling of the Regional Trial
Court.27 According to it, by accepting the package despite its supposed defect, FedEx was deemed to have
acquiesced to the transaction. Thus, it must deliver the package in good condition and could not subsequently deny
On December 15, 2003, Luwalhati and Eliza were in the Philippines. As the monthly common charges on the Unit liability for loss.28 The Court of Appeals sustained the Regional Trial Court's conclusion that checks are not legal
had become due, they decided to send several Citibank checks to Veronica Z. Sison (Sison), who was based in New tender, and thus, not covered by the Air Waybill's prohibition. 29 It further noted that an Air Waybill is a contract of
York. Citibank checks allegedly amounting to US$17,726.18 for the payment of monthly charges and US$11,619.35 adhesion and should be construed against the party that drafted it. 30
for the payment of real estate taxes were sent by Luwalhati through FedEx with Account No. x2546-4948-1 and
Tracking No. 8442 4588 4268. The package was addressed to Sison who was tasked to deliver the checks payable to
Maxwell-Kates, Inc. and to the New York County Department of Finance. Sison allegedly did not receive the The dispositive portion of the Court of Appeals August 31, 2011 Decision read:
package, resulting in the non-payment of Luwalhati and Eliza's obligations and the foreclosure of the Unit. 9

WHEREFORE, premises considered, the present appeal is hereby DENIED. The assailed May 08, 2008 Decision of the
Upon learning that the checks were sent on December 15, 2003, Sison contacted FedEx on February 9, 2004 to Regional Trial Court, Branch 217, Quezon City in Civil case No. Q-04-52325 is AFFIRMED. Costs against the herein
inquire about the non-delivery. She was informed that the package was delivered to her neighbor but there was no appellant.
signed receipt.10

SO ORDERED.31
On March 14, 2004, Luwalhati and Eliza, through their counsel, sent a demand letter to FedEx for payment of
damages due to the non-delivery of the package, but FedEx refused to heed their demand. 11 Hence, on April 5,
2004, they filed their Complaint 12 for damages. Following the Court of Appeals' denial32 of its Motion for Reconsideration, FedEx filed the present Petition.

FedEx claimed that Luwalhati and Eliza "ha[d] no cause of action against it because [they] failed to comply with a For resolution of this Court is the sole issue of whether or not petitioner Federal Express Corporation may be held
condition precedent, that of filing a written notice of claim within the 45 calendar days from the acceptance of the liable for damages on account of its failure to deliver the checks shipped by respondents Luwalhati R. Antonino and
shipment."13 It added that it was absolved of liability as Luwalhati and Eliza shipped prohibited items and Eliza Bettina Ricasa Antonino to the consignee Veronica Sison.
misdeclared these items as "documents." 14 It pointed to conditions under its Air Waybill prohibiting the
"transportation of money (including but not limited to coins or negotiable instruments equivalent to cash such as I
endorsed stocks and bonds)."15
 73

Petitioner disclaims liability because of respondents' failure to comply with a condition precedent, that is, the filing of damage sustained by private respondent's cargo, constituted substantial compliance with the requirement in the
a written notice of a claim for non-delivery or misdelivery within 45 days from acceptance of the shipment. 33 The contract for the filing of a formal claim. 43 (Citations omitted)
Regional Trial Court found the condition precedent to have been substantially complied with and attributed
respondents' noncompliance to FedEx for giving them a run-around.34 This Court affirms this finding.
Here, the Court of Appeals detailed the efforts made by respondent Luwalhati and consignee Sison. It also noted
petitioner's ambiguous and evasive responses, nonchalant handling of respondents' concerns, and how these bogged
A provision in a contract of carriage requiring the filing of a formal claim within a specified period is a valid down respondents' actions and impaired their compliance with the required 45-day period:
stipulation. Jurisprudence maintains that compliance with this provision is a legitimate condition precedent to an
action for damages arising from loss of the shipment:
Anent the issues concerning lack of cause of action and their so-called "run-around" matter, We uphold the lower
court's finding that the herein appellees complied with the requirement for the immediate filing of a formal claim for
More particularly, where the contract of shipment contains a reasonable requirement of giving notice of loss of or damages as required in the Air Waybill or, at least, We find that there was substantial compliance therewith.
injury to the goods, the giving of such notice is a condition precedent to the action for loss or injury or the right to Luwalhati testified that the addressee, Veronica Z. Sison promptly traced the whereabouts of the said package, but
enforce the carrier's liability. Such requirement is not an empty formalism. The fundamental reason or purpose of to no avail. Her testimony narrated what happened thereafter, thus:
such a stipulation is not to relieve the carrier from just liability, but reasonably to inform it that the shipment has
been damaged and that it is charged with liability therefor, and to give it an opportunity to examine the nature and
extent of the injury. This protects the carrier by affording it an opportunity to make an investigation of a claim while ". . .
the matter is fresh and easily investigated so as to safeguard itself from false and fraudulent claims. 35 (Citation
omitted) "COURT: All right. She was informed that it was lost. What steps did you take to find out or to recover back
this package?

Petitioner's Air Waybill stipulates the following on filing of claims:  

"ATTY. ALENTAJAN:
Claims for Loss, Damage, or Delay. All claims must be made in writing and within strict time limits. See any
"Q What did you do to Fedex?
applicable tariff, our service guide or our standard conditions for carriage for details.
". . .
The right to damages against us shall be extinguished unless an action is brought within two (2) years from the date    
of delivery of the shipment or from the date on which the shipment should have been delivered.
WITNESS: First, I asked the secretary here to call Fedex Manila and they said, the record show that it was sent
to New York, Your Honor.
Within forty-five (45) days after notification of the claim, it must be documented by sending to us [all the] relevant
information about it.36  

". . .
For their claim to prosper, respondents must, thus, surpass two (2) hurdles: first, the filing of their formal claim
within 45 days; and second, the subsequent filing of the action within two (2) years. ATTY. ALENTAJAN:

"Q After calling Fedex, what did Fedex do?

There is no dispute on respondents' compliance with the second period as their Complaint was filed on April 5,
   
2004.37
"A None, sir. They washed their hands because according to them it is New York because they have sent
In appraising respondents' compliance with the first condition, this Court is guided by settled standards in it. Their records show that New York received it, Sir.
jurisprudence.    

"Q New York Fedex?

In Philippine Airlines, Inc. v. Court of Appeals,38 Philippine Airlines alleged that shipper Gilda Mejia (Mejia) failed to
file a formal claim within the period stated in the Air Waybill. 39 This Court ruled that there was substantial    
compliance with the period because of the zealous efforts demonstrated by Mejia in following up her claim. 40 These
efforts coupled with Philippine Airlines' "tossing around the claim and leaving it unresolved for an indefinite period of "A Yes, Sir.
time" led this Court to deem the requisite period satisfied. 41 This is pursuant to Article 1186 of the New Civil Code
   
which provides that "[t]he condition shall be deemed fulfilled when the obligor voluntarily prevents its fulfillment": 42
"Q Now what else did you do after that?
Considering the abovementioned incident and private respondent Mejia's own zealous efforts in following up the    
claim, it was clearly not her fault that the letter of demand for damages could only be filed, after months of
exasperating follow-up of the claim, on August 13, 1990. If there was any failure at all to file the formal claim within "A And then I asked my friend Mrs. Veronica Sison to trace it, Sir.
the prescriptive period contemplated in the air waybill, this was largely because of PAL's own doing, the
consequences of which cannot, in all fairness, be attributed to private respondent.    

". . .  
Even if the claim for damages was conditioned on the timely filing of a formal claim, 'under Article 1186 of the Civil
   
Code that condition was deemed fulfilled, considering that the collective action of PAL's personnel in tossing around
the claim and leaving it unresolved for an indefinite period of time was tantamount to "voluntarily preventing its "Q What did she report to you?
fulfillment." On grounds of equity, the filing of the baggage freight claim, which sufficiently informed PAL of the
 74

    In all other cases, common carriers must prove that they exercised extraordinary diligence in the performance of
their duties, if they are to be absolved of liability. 48
"A She reported to me that first, she checked with the Fedex and the first answer was they were going
to trace it. The second answer was that, it was delivered to the lady, her neighbor and the neighbor
The responsibility of common carriers to exercise extraordinary diligence lasts from the time the goods are
completely denied it and as they show a signature that is not my signature, so the next time she
unconditionally placed in their possession until they are delivered "to the consignee, or to the person who has a right
called again, another person answered. She called to say that the neighbor did not receive and the
to receive them."49 Thus, part of the extraordinary responsibility of common carriers is the duty to ensure that
person on the other line I think she got his name, said that, it is because it is December and we
shipments are received by none but "the person who has a right to receive them." 50 Common carriers must ascertain
usually do that just leave it and then they cut the line and so I asked my friend to issue a sworn
the identity of the recipient. Failing to deliver shipment to the designated recipient amounts to a failure to deliver.
statement in the form of affidavit and have it notarized in the Philippine Embassy or Consulate, Sir.
The shipment shall then be considered lost, and liability for this loss ensues.
That is what she did.

   
Petitioner is unable to prove that it exercised extraordinary diligence in ensuring delivery of the package to its
"Q On your part here in the Philippines after doing that, after instructing Veronica Sison, what else did designated consignee. It claims to have made a delivery but it even admits that it was not to the designated
you do because of this violation? consignee. It asserts instead that it was authorized to release the package without the signature of the designated
recipient and that the neighbor of the consignee, one identified only as "LGAA 385507," received it. 51 This fails to
    impress.
"A I think the next step was to issue a demand letter because any way I do not want to go to Court, it is
so hard, Sir." The assertion that receipt was made by "LGAA 385507" amounts to little, if any, value in proving petitioner's
successful discharge of its duty. "LGAA 385507" is nothing but an alphanumeric code that outside of petitioner's
personnel and internal systems signifies nothing. This code does not represent a definite, readily identifiable person,
The foregoing event show Luwalhati's own ardent campaign in following up the claim. To the Court's mind, it is contrary to how commonly accepted identifiers, such as numbers attached to official, public, or professional
beyond her control why the demand letter for damages was only sent subsequent to her infuriating follow-ups identifications like social security numbers and professional license numbers, function. Reliance on this code is
regarding the whereabouts of the said package. We can surmise that if there was any omission at all to file the said tantamount to reliance on nothing more than petitioner's bare, self-serving allegations. Certainly, this cannot satisfy
claim within the prescriptive period provided for under the Air Waybill it was mostly due to herein appellant's own the requisite of extraordinary diligence consummated through delivery to none but "the person who has a right to
behavior, the outcome thereof cannot, by any chance, be imputed to the herein appellees. 44 (Grammatical errors in receive"52 the package.
the original)

Given the circumstances in this case, the more reasonable conclusion is that the package was not delivered. The
Petitioner has been unable to persuasively refute Luwalhati's recollection of the efforts that she and Sison exerted, package shipped by respondents should then be considered lost, thereby engendering the liability of a common
and of the responses it gave them. It instead insists that the 45-day period stated in its Air Waybill is sacrosanct. carrier for this loss.
This Court is unable to bring itself to sustaining petitioner's appeal to a convenient reprieve. It is one with the
Regional Trial Court and the Court of Appeals in stressing that respondents' inability to expediently file a formal
claim can only be attributed to petitioner hampering its fulfillment. Thus, respondents must be deemed to have Petitioner cannot but be liable for this loss. It failed to ensure that the package was delivered to the named
substantially complied with the requisite 45-day period for filing a formal claim. consignee. It admitted to delivering to a mere neighbor. Even as it claimed this, it failed to identify that neighbor.

II III

The Civil Code mandates common carriers to observe extraordinary diligence in caring for the goods they are Petitioner further asserts that respondents violated the terms of the Air Waybill by shipping checks. It adds that this
transporting: violation exempts it from liability.53

Article 1733. Common carriers, from the nature of their business and for reasons of public policy, are bound to This is untenable.
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. Petitioner's International Air Waybill states:

"Extraordinary diligence is that extreme measure of care and caution which persons of unusual prudence and Items Not Acceptable for Transportation. We do not accept transportation of money (including but not limited
circumspection use for securing and preserving their own property or rights." 45 Consistent with the mandate of to coins or negotiable instruments equivalent to cash such as endorsed stocks and bonds). We exclude all liability for
extraordinary diligence, the Civil Code stipulates that in case of loss or damage to goods, common carriers are shipments of such items accepted by mistake. Other items may be accepted for carriage only to limited destinations
presumed to be negligent or at fault,46 except in the following instances: or under restricted conditions. We reserve the right to reject packages based upon these limitations or for reasons of
safety or security. You may consult our Service Guide, Standard Conditions of Carriage, or any applicable tariff for
specific details.54 (Emphasis in the original)
(1) Flood, storm, earthquake, lightning, or other natural disaster or calamity;

(2) Act of the public enemy in war, whether international or civil; The prohibition has a singular object: money. What follows the phrase "transportation of money" is a phrase
enclosed in parentheses, and commencing with the words "including but not limited to." The additional phrase,
(3) Act or omission of the shipper or owner of the goods;
enclosed as it is in parentheses, is not the object of the prohibition, but merely a postscript to the word "money."
(4) The character of the goods or defects in the packing or in the containers; Moreover, its introductory words "including but not limited to" signify that the items that follow are illustrative
examples; they are not qualifiers that are integral to or inseverable from "money." Despite the utterance of the
(5) Order or act or competent public authority. 47 enclosed phrase, the singular prohibition remains: money.
 75

Money is "what is generally acceptable in exchange for goods." 55 It can take many forms, most commonly as coins Ultimately, in shipping checks, respondents were not violating petitioner's Air Waybill. From this, it follows that they
and banknotes. Despite its myriad forms, its key element is its general acceptability. 56 Laws usually define what can committed no breach of warranty that would absolve petitioner of liability.
be considered as a generally acceptable medium of exchange. 57 In the Philippines, Republic Act No. 7653, otherwise
known as The New Central Bank Act, defines "legal tender" as follows:
WHEREFORE, the Petition for Review on Certiorari is DENIED. The assailed August 31, 2011 Decision and
November 21, 2011 Resolution of the Court of Appeals in CA-G.R. CV No. 91216 are AFFIRMED.
All notes and coins issued by the Bangko Sentral shall be fully guaranteed by the Government of the Republic of the
Philippines and shall be legal tender in the Philippines for all debts, both public and private: Provided,
however, That, unless otherwise fixed by the Monetary Board, coins shall be legal tender in amounts not exceeding
Fifty pesos (P50.00) for denomination of Twenty-five centavos and above, and in amounts not exceeding Twenty
pesos (P20.00) for denominations of Ten centavos or less. 58

It is settled in jurisprudence that checks, being only negotiable instruments, are only substitutes for money and are
not legal tender; more so when the check has a named payee and is not payable to bearer. In Philippine Airlines,
Inc. v. Court of Appeals,59 this Court ruled that the payment of a check to the sheriff did not satisfy the judgment
debt as checks are not considered legal tender. This has been maintained in other cases decided by this Court.
In Cebu International Finance Corporation v. Court of Appeals,60 this Court held that the debts paid in a money
market transaction through the use of a check is not a valid tender of payment as a check is not legal tender in the
Philippines. Further, in Bank of the Philippine Islands v. Court of Appeals,61 this Court held that "a check, whether a
manager's check or ordinary check, is not legal tender."62

The Air Waybill's prohibition mentions "negotiable instruments" only in the course of making an example. Thus, they
are not prohibited items themselves. Moreover, the illustrative example does not even pertain to negotiable
instruments per se but to "negotiable instruments equivalent to cash."63

The checks involved here are payable to specific payees, Maxwell-Kates, Inc. and the New York County Department
of Finance.64 Thus, they are order instruments. They are not payable to their bearer, i.e., bearer instruments. Order
instruments differ from bearer instruments in their manner of negotiation:

Under Section 30 of the [Negotiable Instruments Law], an order instrument requires an indorsement from the payee
or holder before it may be validly negotiated. A bearer instrument, on the other hand, does not require an
indorsement to be validly negotiated.65

There is no question that checks, whether payable to order or to bearer, so long as they comply with the
requirements under Section 1 of the Negotiable Instruments Law, are negotiable instruments. 66 The more relevant
consideration is whether checks with a specified payee are negotiable instruments equivalent to cash, as
contemplated in the example added to the Air Waybill's prohibition.

This Court thinks not. An order instrument, which has to be endorsed by the payee before it may be
negotiated,67 cannot be a negotiable instrument equivalent to cash. It is worth emphasizing that the instruments
given as further examples under the Air Waybill must be endorsed to be considered equivalent to cash: 68

Items Not Acceptable for Transportation. We do not accept transportation of money (including but not limited
to coins or negotiable instruments equivalent to cash such as endorsed stocks and bonds). ... (Emphasis in the
original)69

What this Court's protracted discussion reveals is that petitioner's Air Waybill lends itself to a great deal of
confusion. The clarity of its terms leaves much to be desired. This lack of clarity can only militate against petitioner's
cause.

The contract between petitioner and respondents is a contract of adhesion; it was prepared solely by petitioner for
respondents to conform to.70 Although not automatically void, any ambiguity in a contract of adhesion is construed
strictly against the party that prepared it. 71 Accordingly, the prohibition against transporting money must be
restrictively construed against petitioner and liberally for respondents. Viewed through this lens, with greater reason
should respondents be exculpated from liability for shipping documents or instruments, which are reasonably
understood as not being money, and for being unable to declare them as such.
 76

THIRD DIVISION In its August 4, 2000 Decision, 18 the Regional Trial Court of Manila found Karamihan guilty as an accessory after the
fact of theft, and sentenced him to serve a prison sentence between six (6) months of  arresto mayor  maximum to
one (1) year of prision correccional minimum. He was also ordered to indemnify Tan P75,000.00, the amount he had
G.R. No. 220400, March 20, 2019 paid Cabugatan for the 430 bags of soya beans.19

ANNIE TAN, PETITIONER, v. GREAT HARVEST ENTERPRISES, INC., RESPONDENT. In its January 3, 2012 Decision, 20 the Regional Trial Court of Quezon City granted Great Harvest's Complaint for sum
of money. It found that Tan entered into a verbal contract of hauling with Great Harvest, and held her responsible
DECISION for her driver's failure to deliver the soya beans to Great Harvest. 21 The dispositive portion of the Decision read:

LEONEN, J.: WHEREFORE, judgment is hereby rendered in favor of the plaintiff and against the defendant, ordering the latter:

Common carriers are obligated to exercise extraordinary diligence over the goods entrusted to their care. This is due 1. To pay the sum of P230,000.00 with interest thereon at the rate of 12% per annum starting
to the nature of their business, with the public policy behind it geared toward achieving allocative efficiency and from June 2, 1994 (when the case was filed) and until paid;
minimizing the inherently inequitable dynamics between the parties to the transaction.
2. To pay the sum of P50,000.00 as Attorney's fees; and
This resolves a Petition for Review on Certiorari 1 filed under Rule 45 of the Rules of Civil Procedure by Annie Tan
(Tan), assailing the Court of Appeals March 13, 2015 Decision 2 and September 15, 2015 Resolution 3 in CA-G.R. CV 3. Costs against the defendant.
No. 100412. The assailed judgments upheld the Regional Trial Court January 3, 2012 Decision 4 in Civil Case No. Q-
94-20745, which granted Great Harvest Enterprises, Inc.'s (Great Harvest) Complaint for sum of money against Tan.
SO ORDERED.22

On February 3, 1994, Great Harvest hired Tan to transport 430 bags of soya beans worth P230,000.00 from Tacoma
Tan moved for reconsideration of the January 3, 2012 Decision, but her Motion was denied by the trial court in its
Integrated Port Services, Inc. (Tacoma) in Port Area, Manila to Selecta Feeds in Camarin, Novaliches, Quezon City. 5
November 21, 2012 Order.23

That same day, the bags of soya beans were loaded into Tan's hauling truck. Her employee, Rannie Sultan
Tan filed an Appeal, but the Court of Appeals dismissed it in its March 13, 2015 Decision. 24
Cabugatan (Cabugatan), then delivered the goods to Selecta Feeds. 6

In affirming the January 3, 2012 Decision, the Court of Appeals found that the parties' standard business practice
At Selecta Feeds, however, the shipment was rejected. Upon learning of the rejection, Great Harvest instructed
when the recipient would reject the cargo was to deliver it to Great Harvest's warehouse. Thus, contrary to Tan's
Cabugatan to deliver and unload the soya beans at its warehouse in Malabon. Yet, the truck and its shipment never
claim, there was no deviation from the original destination. 25
reached Great Harvest's warehouse.7

The Court of Appeals also held that the cargo loss was due to Tan's failure to exercise the extraordinary level of
On February 7, 1994, Great Harvest asked Tan about the missing delivery. At first, Tan assured Great Harvest that
diligence required of her as a common carrier, as she did not provide security for the cargo or take out insurance on
she would verify the whereabouts of its shipment, but after a series of follow-ups, she eventually admitted that she
it.26
could not locate both her truck and Great Harvest's goods. 8 She reported her missing truck to the Western Police
District Anti-Carnapping Unit and the National Bureau of Investigation. 9
The dispositive portion of the Court of Appeals Decision read:
On February 19, 1994, the National Bureau of Investigation informed Tan that her missing truck had been found in
Cavite. However, the truck had been cannibalized and had no cargo in it. 10 Tan spent over P200,000.00 to have it WHEREFORE, the premises considered, the instant appeal is hereby DISMISSED and the assailed Decision dated
fixed.11 January 3, 2012 [is] AFFIRMED in toto.

Tan filed a Complaint against Cabugatan and Rody Karamihan (Karamihan), whom she accused of conspiring with IT IS SO ORDERED.27 (Emphasis in the original)
each other to steal the shipment entrusted to her.12 An Information13 for theft was filed against Karamihan, while
Cabugatan was charged with qualified theft.14
Tan moved for reconsideration, but her Motion was denied by the Court of Appeals in its September 15, 2015
Resolution.28
On March 2, 1994, Great Harvest, through counsel, sent Tan a letter demanding full payment for the missing bags of
soya beans. On April 26, 1994, it sent her another demand letter. Still, she refused to pay for the missing shipment
or settle the matter with Great Harvest.15 Thus, on June 2, 1994, Great Harvest filed a Complaint for sum of money Thus, Tan filed her Petition for Review on Certiorari, 29 maintaining that her Petition falls under the exceptions to a
against Tan.16 Rule 45 petition since the assailed Court of Appeals Decision was based on a misapprehension of facts. 30

In her Answer, Tan denied that she entered into a hauling contract with Great Harvest, insisting that she merely Petitioner contends that she is not liable for the loss of the soya beans and points out that the agreement with
accommodated it. Tan also pointed out that since Great Harvest instructed her driver to change the point of delivery respondent Great Harvest was to deliver them to Selecta Feeds, an obligation with which she complied. She claims
without her consent, it should bear the loss brought about by its deviation from the original unloading point. 17 that what happened after that was beyond her control. When Selecta Feeds rejected the soya beans and respondent
directed Cabugatan to deliver the goods to its warehouse, respondent superseded her previous instruction to
 77

Cabugatan to return the goods to Tacoma, the loading point. Hence, she was no longer required to exercise the Allocative efficiency is an economic term that describes an optimal market where customers are willing to pay for
extraordinary diligence demanded of her as a common carrier. 31 the goods produced.39 Thus, both consumers and producers benefit and stability is achieved.

Tan opines that she is not liable for the value of the lost soya beans since the truck hijacking was a fortuitous event The notion of common carriers is synonymous with public service under Commonwealth Act No. 146 or the Public
and because "the carrier is not an insurer against all risks of travel." 32 Service Act.40 Due to the public nature of their business, common carriers are compelled to exercise extraordinary
diligence since they will be burdened with the externalities or the cost of the consequences of their contract of
carriage if they fail to take the precautions expected of them.
She prayed for: (1) P500,000.00 in actual damages to compensate for the expenses she incurred in looking for and
fixing her truck; (2) P500,000.00 in moral damages for the stress and mental anguish she experienced in searching
for her truck and the missing soya beans; (3) P500,000.00 in exemplary damages to deter respondent from filing a Common carriers are mandated to internalize or shoulder the costs under the contracts of carriage. This is so
similar baseless complaint in the future; and (4) P200,000.00 as attorney's fees. On the other hand, if she is found because a contract of carriage is structured in such a way that passengers or shippers surrender total control over
liable to respondent, petitioner concedes that her liability should only be pegged at P75,000.00, the actual price their persons or goods to common carriers, fully trusting that the latter will safely and timely deliver them to their
Karamihan paid for respondent's shipment.33 destination. In light of this inherently inequitable dynamics— and the potential harm that might befall passengers or
shippers if common carriers exercise less than extraordinary diligence— the law is constrained to intervene and
impose sanctions on common carriers for the parties to achieve allocative efficiency. 41
On January 25, 2016,34 respondent was directed to comment on the petition but it manifested 35 that it was waiving
its right to file a comment.
Here, petitioner is a common carrier obligated to exercise extraordinary diligence 42 over the goods entrusted to her.
Her responsibility began from the time she received the soya beans from respondent's broker and would only cease
The sole issue for this Court's resolution is whether or not petitioner Annie Tan should be held liable for the value of after she has delivered them to the consignee or any person with the right to receive them. 43
the stolen soya beans.

Petitioner's argument is that her contract of carriage with respondent was limited to delivering the soya beans to
The Petition must fail. Selecta Feeds. Thus, when Selecta Feeds refused to accept the delivery, she directed her driver to return the
shipment to the loading point. Respondent refutes petitioner's claims and asserts that their standing agreement was
The Rules of Court is categorical that only questions of law may be raised in petitions filed under Rule 45, as this to deliver the shipment to respondent's nearest warehouse in case the consignee refused the delivery.
Court is not a trier of facts. Further, factual findings of appellate courts, when supported by substantial evidence, are
binding upon this Court.36 After listening to the testimonies of both parties, the trial court found that respondent was able to prove its contract
of carriage with petitioner. It also found the testimony of respondent's witness, Cynthia Chua (Chua), to be more
However, these rules do admit of exceptions. 37 In particular, petitioner referred to the exception "[w]hen the believable over that of petitioner when it came to the details of their contract of carriage:
judgment is based on a misapprehension of facts"38 to justify the questions of fact in her Petition for Review on
Certiorari. Defendant's assertion that the diversion of the goods was done without her consent and knowledge is self-serving
and is effectively belied by the positive testimony of witness Cynthia Chua, Account Officer of plaintiff corporation
A careful review of the records of this case convinces us that the assailed judgments of the Court of Appeals are (page 23, TSN, March 26, 1996). Equally self-serving is defendant's claim that she is not liable for the loss of the
supported by substantial evidence. soyabeans (sic) considering that the plaintiff has no existing contract with her. Such a sweeping submission is also
belied by the testimony of plaintiff's witness Cynthia Chua who categorically confirmed the existing business
relationship of plaintiff and defendant for hauling and delivery of goods as well as the arrangement to deliver the
Article 1732 of the Civil Code defines common carriers as "persons, corporations, firms or associations engaged in rejected goods to the plaintiff's nearest warehouse in the event that goods are rejected by the consignee with prior
the business of carrying or transporting passengers or goods or both, by land, water or air, for compensation, approval of the consignor (page 11, TSN, March 26, 1996).44
offering their services to the public." The Civil Code outlines the degree of diligence required of common carriers in
Articles 1733, 1755, and 1756:
The trial court's appreciation of Chua's testimony was upheld by the Court of Appeals:

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 Verily, the testimony alone of appellee's Account Officer, Cynthia Chua, dispels the contrary allegations made by
them, according to all the circumstances of each case. appellant in so far as the nature of their business relationship is concerned. Consistently and without qualms, said
witness narrated the details respecting the company's relations with the appellant and the events that transpired
before, during and after the perfection of the contract and the subsequent loss of the subject cargo. Said testimony
.... and the documentary exhibits, i.e., the Tacoma waybill and the appellee's waybill, prove the perfection and
existence of the disputed verbal contract.
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. Emphatically, from the aforesaid waybills, it was duly established that while verbal, the parties herein has (sic)
agreed for the hauling and delivery of the soya beans from the company's broker to the intended recipient. It was
further proven by evidence that appellant had agreed and consented to the delivery of the soya beans to the
ARTICLE 1756. In case of death of or injuries to passengers, common carriers are presumed to have been at fault or company's nearest warehouse in case the cargo goods had been rejected by the recipient as it had been the practice
to have acted negligently, unless they prove that they observed extraordinary diligence as prescribed in articles between the parties.45 (Citation omitted)
1733 and 1755.

This Court accords the highest respect to the trial court's assessment of a witness' credibility, as it was in a better
Law and economics provide the policy justification of our existing jurisprudence. The extraordinary diligence required position to observe the witness' demeanor while testifying. 46 We see no reason to disturb the factual findings of the
by the law of common carriers is primarily due to the nature of their business, with the public policy behind it geared lower courts, especially since they were supported by substantial evidence.
toward achieving allocative efficiency between the parties to the transaction.
 78

Furthermore, Article 1734 of the Civil Code holds a common carrier fully responsible for the goods entrusted to him
or her, unless there is enough evidence to show that the loss, destruction, or deterioration of the goods falls under
any of the enumerated exceptions:

ARTICLE 1734. Common carriers are responsible for the loss, destruction, or deterioration of the goods, unless the
same is due to any of the following causes only:

(1) Flood, storm, earthquake, lightning, or other natural disaster or calamity;

(2) Act of the public enemy in war, whether international or civil;

(3) Act or omission of the shipper or owner of the goods;

(4) The character of the goods or defects in the packing or in the containers;

(5) Order or act of competent public authority.

Nothing in the records shows that any of these exceptions caused the loss of the soya beans. Petitioner failed to
deliver the soya beans to respondent because her driver absconded with them. She cannot shift the blame for the
loss to respondent's supposed diversion of the soya beans from the loading point to respondent's warehouse, as the
evidence has conclusively shown that she had agreed beforehand to deliver the cargo to respondent's warehouse if
the consignee refused to accept it.47

Finally, petitioner's reliance on De Guzman v. Court of Appeals48 is misplaced. There, the common carrier was
absolved of liability because the goods were stolen by robbers who used "grave or irresistible threat, violence[,] or
force"49 to hijack the goods. De Guzman viewed the armed hijack as a fortuitous event:

Under Article 1745 (6) above, a common carrier is held responsible — and will not be allowed to divest or to
diminish such responsibility — even for acts of strangers like thieves or robbers, except where such thieves or
robbers in fact acted "with grave or irresistible threat, violence or force." We believe and so hold that the limits of
the duty of extraordinary diligence in the vigilance over the goods carried are reached where the goods are lost as a
result of a robbery which is attended by "grave or irresistible threat, violence[,] or force." 50

In contrast to De Guzman, the loss of the soya beans here was not attended by grave or irresistible threat, violence,
or force. Instead, it was brought about by petitioner's failure to exercise extraordinary diligence when she neglected
vetting her driver or providing security for the cargo and failing to take out insurance on the shipment's value. As
the Court of Appeals held:

Besides, as the records would show, appellant did not observe extra-ordinary (sic) diligence in the conduct of her
business as a common carrier. In breach of their agreement, appellant did not provide security while the goods were
in transit and she also did not pay for the insurance coverage of said goods. These measures could have prevented
the hijacking (sic) or could have ensured the payment of the damages sustained by the appellee.51

WHEREFORE, the Petition is DENIED. Petitioner Annie Tan is directed to pay respondent Great Harvest
Enterprises, Inc. the sum of Two Hundred Thirty Thousand Pesos (P230,000.00) with interest at the rate of twelve
percent (12%) per annum from June 2, 1994 until June 30, 2013, and at the rate of six percent (6%) per annum
from July 1, 2013 until its full satisfaction. She is further directed to pay Fifty Thousand Pesos (P50,000.00) as
attorney's fees and the costs of suit.

SO ORDERED.