G.R. No.

148496

March 19, 2002

VIRGINES CALVO doing business under the name and style TRANSORIENT CONTAINER TERMINAL SERVICES, INC., petitioner, vs. UCPB GENERAL INSURANCE CO., INC. (formerly Allied Guarantee Ins. Co., Inc.) respondent. MENDOZA, J.: ISSUE: Whether or not petitioner is a common carrier? This is a petition for review of the decision,1 dated May 31, 2001, of the Court of Appeals, affirming the decision2of the Regional Trial Court, Makati City, Branch 148, which ordered petitioner to pay respondent, as subrogee, the amount of P93,112.00 with legal interest, representing the value of damaged cargo handled by petitioner, 25% thereof as attorney's fees, and the cost of the suit.
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The facts are as follows: Petitioner Virgines Calvo is the owner of Transorient Container Terminal Services, Inc. (TCTSI), a sole proprietorship customs broker. At the time material to this case, petitioner entered into a contract with San Miguel Corporation (SMC) for the transfer of 114 reels of semi-chemical fluting paper and 124 reels of kraft liner board from the Port Area in Manila to SMC's warehouse at the Tabacalera Compound, Romualdez St., Ermita, Manila. The cargo was insured by respondent UCPB General Insurance Co., Inc. On July 14, 1990, the shipment in question, contained in 30 metal vans, arrived in Manila on board "M/V Hayakawa Maru" and, after 24 hours, were unloaded from the vessel to the custody of the arrastre operator, Manila Port Services, Inc. From July 23 to July 25, 1990, petitioner, pursuant to her contract with SMC, withdrew the cargo from the arrastre operator and delivered it to SMC's warehouse in Ermita, Manila. On July 25, 1990, the goods were inspected by Marine Cargo Surveyors, who found that 15 reels of the semi-chemical fluting paper were "wet/stained/torn" and 3 reels of kraft liner board were likewise torn. The damage was placed at P93,112.00. SMC collected payment from respondent UCPB under its insurance contract for the aforementioned amount. In turn, respondent, as subrogee of SMC, brought suit against petitioner in the Regional Trial Court, Branch 148, Makati City, which, on December 20, 1995, rendered judgment finding petitioner liable to respondent for the damage to the shipment. The trial court held: It cannot be denied . . . that the subject cargoes sustained damage while in the custody of defendants. Evidence such as the Warehouse Entry Slip (Exh. "E"); the Damage Report (Exh. "F") with entries appearing therein, classified as "TED" and "TSN", which the claims processor, Ms. Agrifina De Luna, claimed to be tearrage at the end and tearrage at the middle of the subject damaged cargoes respectively, coupled with the Marine Cargo Survey Report (Exh. "H" - "H-4-A") confirms the fact of the damaged condition of the subject cargoes. The surveyor[s'] report (Exh. "H-4-A") in particular, which provides among others that: " . . . we opine that damages sustained by shipment is attributable to improper handling in transit presumably whilst in the custody of the broker . . . ."

is a finding which cannot be traversed and overturned. The evidence adduced by the defendants is not enough to sustain [her] defense that [she is] are not liable. Defendant by reason of the nature of [her] business should have devised ways and means in order to prevent the damage to the cargoes which it is under obligation to take custody of and to forthwith deliver to the consignee. Defendant did not present any evidence on what precaution [she] performed to prevent [the] said incident, hence the presumption is that the moment the defendant accepts the cargo [she] shall perform such extraordinary diligence because of the nature of the cargo. .... Generally speaking under Article 1735 of the Civil Code, if the goods are proved to have been lost, destroyed or deteriorated, common carriers are presumed to have been at fault or to have acted negligently, unless they prove that they have observed the extraordinary diligence required by law. The burden of the plaintiff, therefore, is to prove merely that the goods he transported have been lost, destroyed or deteriorated. Thereafter, the burden is shifted to the carrier to prove that he has exercised the extraordinary diligence required by law. Thus, it has been held that the mere proof of delivery of goods in good order to a carrier, and of their arrival at the place of destination in bad order, makes out a prima facie case against the carrier, so that if no explanation is given as to how the injury occurred, the carrier must be held responsible. It is incumbent upon the carrier to prove that the loss was due to accident or some other circumstances inconsistent with its liability." (cited in Commercial Laws of the Philippines by Agbayani, p. 31, Vol. IV, 1989 Ed.) Defendant, being a customs brother, warehouseman and at the same time a common carrier is supposed [to] exercise [the] extraordinary diligence required by law, hence the extraordinary responsibility lasts from the time the goods are unconditionally placed in the possession of and received by the carrier for transportation until the same are delivered actually or constructively by the carrier to the consignee or to the person who has the right to receive the same.3 Accordingly, the trial court ordered petitioner to pay the following amounts -1. The sum of P93,112.00 plus interest; 2. 25% thereof as lawyer's fee; 3. Costs of suit.4 The decision was affirmed by the Court of Appeals on appeal. Hence this petition for review on certiorari. Petitioner contends that: I. THE COURT OF APPEALS COMMITTED SERIOUS AND REVERSIBLE ERROR [IN] DECIDING THE CASE NOT ON THE EVIDENCE PRESENTED BUT ON PURE SURMISES, SPECULATIONS AND MANIFESTLY MISTAKEN INFERENCE.

II. THE COURT OF APPEALS COMMITTED SERIOUS AND REVERSIBLE ERROR IN CLASSIFYING THE PETITIONER AS A COMMON CARRIER AND NOT AS PRIVATE OR SPECIAL CARRIER WHO DID NOT HOLD ITS SERVICES TO THE PUBLIC.5 It will be convenient to deal with these contentions in the inverse order, for if petitioner is not a common carrier, although both the trial court and the Court of Appeals held otherwise, then she is indeed not liable beyond what ordinary diligence in the vigilance over the goods transported by her, would require.6 Consequently, any damage to the cargo she agrees to transport cannot be presumed to have been due to her fault or negligence. Petitioner contends that contrary to the findings of the trial court and the Court of Appeals, she is not a common carrier but a private carrier because, as a customs broker and warehouseman, she does not indiscriminately hold her services out to the public but only offers the same to select parties with whom she may contract in the conduct of her business. The contention has no merit. In De Guzman v. Court of Appeals,7 the Court dismissed a similar contention and held the party to be a common carrier, thus The Civil Code defines "common carriers" in the following terms: "Article 1732. Common carriers are persons, corporations, firms or associations engaged in the business of carrying or transporting passengers or goods or both, by land, water, or air for compensation, offering their services to the public." The above article makes no distinction between one whose principal business activity is the carrying of persons or goods or both, and one who does such carrying only as an ancillary activity . . . Article 1732 also carefully avoids making any distinction between a person or enterprise offering transportation service on aregular or scheduled basis and one offering such service on an occasional, episodic or unscheduled basis.Neither does Article 1732 distinguish between a carrier offering its services to the "general public," i.e., the general community or population, and one who offers services or solicits business only from a narrowsegment of the general population. We think that Article 1732 deliberately refrained from making such distinctions. So understood, the concept of "common carrier" under Article 1732 may be seen to coincide neatly with the notion of "public service," under the Public Service Act (Commonwealth Act No. 1416, as amended) which at least partially supplements the law on common carriers set forth in the Civil Code. Under Section 13, paragraph (b) of the Public Service Act, "public service" includes: " x x x every person that now or hereafter may own, operate, manage, or control in the Philippines, for hire or compensation, with general or limited clientele, whether permanent, occasional or accidental, and done for general business purposes, any common carrier, railroad, street railway, traction railway, subway motor vehicle, either for freight or passenger, or both, with or without fixed route and whatever may be its classification, freight or carrier service of any class, express service, steamboat, or steamship line, pontines, ferries and water craft, engaged in the transportation of passengers or freight or both, shipyard, marine repair shop, wharf or dock, ice plant, ice-refrigeration plant, canal, irrigation system, gas, electric light, heat and power, water supply and power petroleum, sewerage system, wire or wireless

communications systems, wire or wireless broadcasting stations and other similar public services. x x x" 8 There is greater reason for holding petitioner to be a common carrier because the transportation of goods is an integral part of her business. To uphold petitioner's contention would be to deprive those with whom she contracts the protection which the law affords them notwithstanding the fact that the obligation to carry goods for her customers, as already noted, is part and parcel of petitioner's business. Now, as to petitioner's liability, Art. 1733 of the Civil Code provides: Common carriers, from the nature of their business and for reasons of public policy, are bound to observe extraordinary diligence in the vigilance over the goods and for the safety of the passengers transported by them, according to all the circumstances of each case. . . . In Compania Maritima v. Court of Appeals,9 the meaning of "extraordinary diligence in the vigilance over goods" was explained thus: The extraordinary diligence in the vigilance over the goods tendered for shipment requires the common carrier to know and to follow the required precaution for avoiding damage to, or destruction of the goods entrusted to it for sale, carriage and delivery. It requires common carriers to render service with the greatest skill and foresight and "to use all reasonable means to ascertain the nature and characteristic of goods tendered for shipment, and to exercise due care in the handling and stowage, including such methods as their nature requires." In the case at bar, petitioner denies liability for the damage to the cargo. She claims that the "spoilage or wettage" took place while the goods were in the custody of either the carrying vessel "M/V Hayakawa Maru," which transported the cargo to Manila, or the arrastre operator, to whom the goods were unloaded and who allegedly kept them in open air for nine days from July 14 to July 23, 1998 notwithstanding the fact that some of the containers were deformed, cracked, or otherwise damaged, as noted in the Marine Survey Report (Exh. H), to wit: MAXU-2062880 ICSU-363461-3 PERU-204209-4 TOLU-213674-3 MAXU-201406-0 ICSU-412105-0 rain gutter deformed/cracked left side rubber gasket on door distorted/partly loose with pinholes on roof panel right portion wood flooring we[t] and/or with signs of water soaked with dent/crack on roof panel rubber gasket on left side/door panel partly detached loosened.10

In addition, petitioner claims that Marine Cargo Surveyor Ernesto Tolentino testified that he has no personal knowledge on whether the container vans were first stored in petitioner's warehouse prior to their delivery to the consignee. She likewise claims that after withdrawing the container vans from the arrastre operator, her driver, Ricardo Nazarro, immediately delivered the cargo to SMC's warehouse in Ermita, Manila, which is a mere thirty-minute drive from the Port Area where the cargo

came from. Thus, the damage to the cargo could not have taken place while these were in her custody.11 Contrary to petitioner's assertion, the Survey Report (Exh. H) of the Marine Cargo Surveyors indicates that when the shipper transferred the cargo in question to the arrastre operator, these were covered by clean Equipment Interchange Report (EIR) and, when petitioner's employees withdrew the cargo from the arrastre operator, they did so without exception or protest either with regard to the condition of container vans or their contents. The Survey Report pertinently reads -Details of Discharge: Shipment, provided with our protective supervision was noted discharged ex vessel to dock of Pier #13 South Harbor, Manila on 14 July 1990, containerized onto 30' x 20' secure metal vans, covered by clean EIRs. Except for slight dents and paint scratches on side and roof panels, these containers were deemed to have [been] received in good condition. .... Transfer/Delivery: On July 23, 1990, shipment housed onto 30' x 20' cargo containers was [withdrawn] by Transorient Container Services, Inc. . . . without exception. [The cargo] was finally delivered to the consignee's storage warehouse located at Tabacalera Compound, Romualdez Street, Ermita, Manila from July 23/25, 1990.12 As found by the Court of Appeals: From the [Survey Report], it [is] clear that the shipment was discharged from the vessel to the arrastre, Marina Port Services Inc., in good order and condition as evidenced by clean Equipment Interchange Reports (EIRs). Had there been any damage to the shipment, there would have been a report to that effect made by the arrastre operator. The cargoes were withdrawn by the defendant-appellant from the arrastre still in good order and condition as the same were received by the former without exception, that is, without any report of damage or loss. Surely, if the container vans were deformed, cracked, distorted or dented, the defendant-appellant would report it immediately to the consignee or make an exception on the delivery receipt or note the same in the Warehouse Entry Slip (WES). None of these took place. To put it simply, the defendant-appellant received the shipment in good order and condition and delivered the same to the consignee damaged. We can only conclude that the damages to the cargo occurred while it was in the possession of the defendant-appellant. Whenever the thing is lost (or damaged) in the possession of the debtor (or obligor), it shall be presumed that the loss (or damage) was due to his fault, unless there is proof to the contrary. No proof was proffered to rebut this legal presumption and the presumption of negligence attached to a common carrier in case of loss or damage to the goods.13 Anent petitioner's insistence that the cargo could not have been damaged while in her custody as she immediately delivered the containers to SMC's compound, suffice it to say that to prove the exercise of extraordinary diligence, petitioner must do more than merely show the possibility that some other party could be responsible for the damage. It must prove that it used "all reasonable means to ascertain the nature and characteristic of goods tendered for [transport] and that [it] exercise[d] due care in the handling [thereof]." Petitioner failed to do this.

Nor is there basis to exempt petitioner from liability under Art. 1734(4), which provides -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: .... (4) The character of the goods or defects in the packing or in the containers. .... For this provision to apply, the rule is that if the improper packing or, in this case, the defect/s in the container, is/are known to the carrier or his employees or apparent upon ordinary observation, but he nevertheless accepts the same without protest or exception notwithstanding such condition, he is not relieved of liability for damage resulting therefrom.14 In this case, petitioner accepted the cargo without exception despite the apparent defects in some of the container vans. Hence, for failure of petitioner to prove that she exercised extraordinary diligence in the carriage of goods in this case or that she is exempt from liability, the presumption of negligence as provided under Art. 173515 holds. WHEREFORE, the decision of the Court of Appeals, dated May 31, 2001, is AFFIRMED. SO ORDERED.
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G.R. No. L-12191

October 14, 1918

JOSE CANGCO, plaintiff-appellant, vs. MANILA RAILROAD CO., defendant-appellee. Ramon Sotelo for appellant. Kincaid & Hartigan for appellee. ISSUE: What is the nature of liability of the defendant? FISHER, J.: At the time of the occurrence which gave rise to this litigation the plaintiff, Jose Cangco, was in the employment of Manila Railroad Company in the capacity of clerk, with a monthly wage of P25. He lived in the pueblo of San Mateo, in the province of Rizal, which is located upon the line of the defendant railroad company; and in coming daily by train to the company's office in the city of Manila where he worked, he used a pass, supplied by the company, which entitled him to ride upon the company's trains free of charge. Upon the occasion in question, January 20, 1915, the plaintiff arose from his seat in the second class-car where he was riding and, making, his exit through the door, took his position upon the steps of the coach, seizing the upright guardrail with his right hand for support.

On the side of the train where passengers alight at the San Mateo station there is a cement platform which begins to rise with a moderate gradient some distance away from the company's office and extends along in front of said office for a distance sufficient to cover the length of several coaches. As the train slowed down another passenger, named Emilio Zuiga, also an employee of the railroad company, got off the same car, alighting safely at the point where the platform begins to rise from the level of the ground. When the train had proceeded a little farther the plaintiff Jose Cangco stepped off also, but one or both of his feet came in contact with a sack of watermelons with the result that his feet slipped from under him and he fell violently on the platform. His body at once rolled from the platform and was drawn under the moving car, where his right arm was badly crushed and lacerated. It appears that after the plaintiff alighted from the train the car moved forward possibly six meters before it came to a full stop. The accident occurred between 7 and 8 o'clock on a dark night, and as the railroad station was lighted dimly by a single light located some distance away, objects on the platform where the accident occurred were difficult to discern especially to a person emerging from a lighted car. The explanation of the presence of a sack of melons on the platform where the plaintiff alighted is found in the fact that it was the customary season for harvesting these melons and a large lot had been brought to the station for the shipment to the market. They were contained in numerous sacks which has been piled on the platform in a row one upon another. The testimony shows that this row of sacks was so placed of melons and the edge of platform; and it is clear that the fall of the plaintiff was due to the fact that his foot alighted upon one of these melons at the moment he stepped upon the platform. His statement that he failed to see these objects in the darkness is readily to be credited. The plaintiff was drawn from under the car in an unconscious condition, and it appeared that the injuries which he had received were very serious. He was therefore brought at once to a certain hospital in the city of Manila where an examination was made and his arm was amputated. The result of this operation was unsatisfactory, and the plaintiff was then carried to another hospital where a second operation was performed and the member was again amputated higher up near the shoulder. It appears in evidence that the plaintiff expended the sum of P790.25 in the form of medical and surgical fees and for other expenses in connection with the process of his curation. Upon August 31, 1915, he instituted this proceeding in the Court of First Instance of the city of Manila to recover damages of the defendant company, founding his action upon the negligence of the servants and employees of the defendant in placing the sacks of melons upon the platform and leaving them so placed as to be a menace to the security of passenger alighting from the company's trains. At the hearing in the Court of First Instance, his Honor, the trial judge, found the facts substantially as above stated, and drew therefrom his conclusion to the effect that, although negligence was attributable to the defendant by reason of the fact that the sacks of melons were so placed as to obstruct passengers passing to and from the cars, nevertheless, the plaintiff himself had failed to use due caution in alighting from the coach and was therefore precluded form recovering. Judgment was accordingly entered in favor of the defendant company, and the plaintiff appealed. It can not be doubted that the employees of the railroad company were guilty of negligence in piling these sacks on the platform in the manner above stated; that their presence caused the plaintiff to fall as he alighted from the train; and that they therefore constituted an effective legal cause of the injuries sustained by the plaintiff. It necessarily follows that the defendant company is liable for the damage thereby occasioned unless

recovery is barred by the plaintiff's own contributory negligence. In resolving this problem it is necessary that each of these conceptions of liability, to-wit, the primary responsibility of the defendant company and the contributory negligence of the plaintiff should be separately examined. It is important to note that the foundation of the legal liability of the defendant is the contract of carriage, and that the obligation to respond for the damage which plaintiff has suffered arises, if at all, from the breach of that contract by reason of the failure of defendant to exercise due care in its performance. That is to say, its liability is direct and immediate, differing essentially, in legal viewpoint from that presumptive responsibility for the negligence of its servants, imposed by article 1903 of the Civil Code, which can be rebutted by proof of the exercise of due care in their selection and supervision. Article 1903 of the Civil Code is not applicable to obligations arising ex contractu, but only to extra-contractual obligations or to use the technical form of expression, that article relates only to culpa aquiliana and not to culpa contractual. Manresa (vol. 8, p. 67) in his commentaries upon articles 1103 and 1104 of the Civil Code, clearly points out this distinction, which was also recognized by this Court in its decision in the case of Rakes vs. Atlantic, Gulf and Pacific Co. (7 Phil. rep., 359). In commenting upon article 1093 Manresa clearly points out the difference between "culpa, substantive and independent, which of itself constitutes the source of an obligation between persons not formerly connected by any legal tie" and culpa considered as an accident in the performance of an obligation already existing . . . ." In the Rakes case (supra) the decision of this court was made to rest squarely upon the proposition that article 1903 of the Civil Code is not applicable to acts of negligence which constitute the breach of a contract. Upon this point the Court said: The acts to which these articles [1902 and 1903 of the Civil Code] are applicable are understood to be those not growing out of pre-existing duties of the parties to one another. But where relations already formed give rise to duties, whether springing from contract or quasi-contract, then breaches of those duties are subject to article 1101, 1103, and 1104 of the same code. (Rakes vs. Atlantic, Gulf and Pacific Co., 7 Phil. Rep., 359 at 365.) This distinction is of the utmost importance. The liability, which, under the Spanish law, is, in certain cases imposed upon employers with respect to damages occasioned by the negligence of their employees to persons to whom they are not bound by contract, is not based, as in the English Common Law, upon the principle ofrespondeat superior if it were, the master would be liable in every case and unconditionally but upon the principle announced in article 1902 of the Civil Code, which imposes upon all persons who by their fault or negligence, do injury to another, the obligation of making good the damage caused. One who places a powerful automobile in the hands of a servant whom he knows to be ignorant of the method of managing such a vehicle, is himself guilty of an act of negligence which makes him liable for all the consequences of his imprudence. The obligation to make good the damage arises at the very instant that the unskillful servant, while acting within the scope of his employment causes the injury. The liability of the master is personal and direct. But, if the master has not been guilty of any negligence whatever in the selection and direction of the servant, he is not liable for the acts of the latter, whatever done within the scope of his employment or not, if the damage done by the servant does not amount to a breach of the contract between the master and the person injured.

It is not accurate to say that proof of diligence and care in the selection and control of the servant relieves the master from liability for the latter's acts on the contrary, that proof shows that the responsibility has never existed. As Manresa says (vol. 8, p. 68) the liability arising from extracontractual culpa is always based upon a voluntary act or omission which, without willful intent, but by mere negligence or inattention, has caused damage to another. A master who exercises all possible care in the selection of his servant, taking into consideration the qualifications they should possess for the discharge of the duties which it is his purpose to confide to them, and directs them with equal diligence, thereby performs his duty to third persons to whom he is bound by no contractual ties, and he incurs no liability whatever if, by reason of the negligence of his servants, even within the scope of their employment, such third person suffer damage. True it is that under article 1903 of the Civil Code the law creates a presumption that he has been negligent in the selection or direction of his servant, but the presumption is rebuttable and yield to proof of due care and diligence in this respect. The supreme court of Porto Rico, in interpreting identical provisions, as found in the Porto Rico Code, has held that these articles are applicable to cases of extra-contractual culpa exclusively. (Carmona vs. Cuesta, 20 Porto Rico Reports, 215.) This distinction was again made patent by this Court in its decision in the case of Bahia vs. Litonjua and Leynes, (30 Phil. rep., 624), which was an action brought upon the theory of the extra-contractual liability of the defendant to respond for the damage caused by the carelessness of his employee while acting within the scope of his employment. The Court, after citing the last paragraph of article 1903 of the Civil Code, said: From this article two things are apparent: (1) That when an injury is caused by the negligence of a servant or employee there instantly arises a presumption of law that there was negligence on the part of the master or employer either in selection of the servant or employee, or in supervision over him after the selection, or both; and (2) that that presumption is juris tantum and not juris et de jure, and consequently, may be rebutted. It follows necessarily that if the employer shows to the satisfaction of the court that in selection and supervision he has exercised the care and diligence of a good father of a family, the presumption is overcome and he is relieved from liability. This theory bases the responsibility of the master ultimately on his own negligence and not on that of his servant. This is the notable peculiarity of the Spanish law of negligence. It is, of course, in striking contrast to the American doctrine that, in relations with strangers, the negligence of the servant in conclusively the negligence of the master. The opinion there expressed by this Court, to the effect that in case of extracontractual culpa based upon negligence, it is necessary that there shall have been some fault attributable to the defendant personally, and that the last paragraph of article 1903 merely establishes a rebuttable presumption, is in complete accord with the authoritative opinion of Manresa, who says (vol. 12, p. 611) that the liability created by article 1903 is imposed by reason of the breach of the duties inherent in the special relations of authority or superiority existing between the person called upon to repair the damage and the one who, by his act or omission, was the cause of it. On the other hand, the liability of masters and employers for the negligent acts or omissions of their servants or agents, when such acts or omissions cause damages which amount to the breach of a contact, is not based upon a mere presumption of the master's negligence in their selection or control, and proof of exercise of the utmost diligence and care in this regard does not relieve the master of his liability for the breach of his contract.

Every legal obligation must of necessity be extra-contractual or contractual. Extra-contractual obligation has its source in the breach or omission of those mutual duties which civilized society imposes upon it members, or which arise from these relations, other than contractual, of certain members of society to others, generally embraced in the concept of status. The legal rights of each member of society constitute the measure of the corresponding legal duties, mainly negative in character, which the existence of those rights imposes upon all other members of society. The breach of these general duties whether due to willful intent or to mere inattention, if productive of injury, give rise to an obligation to indemnify the injured party. The fundamental distinction between obligations of this character and those which arise from contract, rests upon the fact that in cases of non-contractual obligation it is the wrongful or negligent act or omission itself which creates the vinculum juris, whereas in contractual relations the vinculum exists independently of the breach of the voluntary duty assumed by the parties when entering into the contractual relation. With respect to extra-contractual obligation arising from negligence, whether of act or omission, it is competent for the legislature to elect and our Legislature has so elected whom such an obligation is imposed is morally culpable, or, on the contrary, for reasons of public policy, to extend that liability, without regard to the lack of moral culpability, so as to include responsibility for the negligence of those person who acts or mission are imputable, by a legal fiction, to others who are in a position to exercise an absolute or limited control over them. The legislature which adopted our Civil Code has elected to limit extra-contractual liability with certain well-defined exceptions to cases in which moral culpability can be directly imputed to the persons to be charged. This moral responsibility may consist in having failed to exercise due care in the selection and control of one's agents or servants, or in the control of persons who, by reason of their status, occupy a position of dependency with respect to the person made liable for their conduct. The position of a natural or juridical person who has undertaken by contract to render service to another, is wholly different from that to which article 1903 relates. When the sources of the obligation upon which plaintiff's cause of action depends is a negligent act or omission, the burden of proof rests upon plaintiff to prove the negligence if he does not his action fails. But when the facts averred show a contractual undertaking by defendant for the benefit of plaintiff, and it is alleged that plaintiff has failed or refused to perform the contract, it is not necessary for plaintiff to specify in his pleadings whether the breach of the contract is due to willful fault or to negligence on the part of the defendant, or of his servants or agents. Proof of the contract and of its nonperformance is sufficient prima facie to warrant a recovery. As a general rule . . . it is logical that in case of extra-contractual culpa, a suing creditor should assume the burden of proof of its existence, as the only fact upon which his action is based; while on the contrary, in a case of negligence which presupposes the existence of a contractual obligation, if the creditor shows that it exists and that it has been broken, it is not necessary for him to prove negligence. (Manresa, vol. 8, p. 71 [1907 ed., p. 76]). As it is not necessary for the plaintiff in an action for the breach of a contract to show that the breach was due to the negligent conduct of defendant or of his servants, even though such be in fact the actual cause of the breach, it is obvious that proof on the part of defendant that the negligence or omission of his servants or agents caused the breach of the contract would not constitute a defense to the action. If the negligence of servants or agents could be invoked as a means of discharging the liability arising from contract, the anomalous result would be that person acting through the medium of agents or servants in the performance of their contracts, would be in a better position than those acting in person. If one delivers a valuable watch to watchmaker who contract to repair it, and the bailee, by a personal negligent act causes its destruction, he is unquestionably liable. Would it be logical to free him from his liability for the breach of his contract, which involves the duty to exercise due care in the preservation of the watch, if he shows that it was his servant whose negligence

caused the injury? If such a theory could be accepted, juridical persons would enjoy practically complete immunity from damages arising from the breach of their contracts if caused by negligent acts as such juridical persons can of necessity only act through agents or servants, and it would no doubt be true in most instances that reasonable care had been taken in selection and direction of such servants. If one delivers securities to a banking corporation as collateral, and they are lost by reason of the negligence of some clerk employed by the bank, would it be just and reasonable to permit the bank to relieve itself of liability for the breach of its contract to return the collateral upon the payment of the debt by proving that due care had been exercised in the selection and direction of the clerk? This distinction between culpa aquiliana, as the source of an obligation, and culpa contractual as a mere incident to the performance of a contract has frequently been recognized by the supreme court of Spain. (Sentencias of June 27, 1894; November 20, 1896; and December 13, 1896.) In the decisions of November 20, 1896, it appeared that plaintiff's action arose ex contractu, but that defendant sought to avail himself of the provisions of article 1902 of the Civil Code as a defense. The Spanish Supreme Court rejected defendant's contention, saying: These are not cases of injury caused, without any pre-existing obligation, by fault or negligence, such as those to which article 1902 of the Civil Code relates, but of damages caused by the defendant's failure to carry out the undertakings imposed by the contracts . . . . A brief review of the earlier decision of this court involving the liability of employers for damage done by the negligent acts of their servants will show that in no case has the court ever decided that the negligence of the defendant's servants has been held to constitute a defense to an action for damages for breach of contract. In the case of Johnson vs. David (5 Phil. Rep., 663), the court held that the owner of a carriage was not liable for the damages caused by the negligence of his driver. In that case the court commented on the fact that no evidence had been adduced in the trial court that the defendant had been negligent in the employment of the driver, or that he had any knowledge of his lack of skill or carefulness. In the case of Baer Senior & Co's Successors vs. Compania Maritima (6 Phil. Rep., 215), the plaintiff sued the defendant for damages caused by the loss of a barge belonging to plaintiff which was allowed to get adrift by the negligence of defendant's servants in the course of the performance of a contract of towage. The court held, citing Manresa (vol. 8, pp. 29, 69) that if the "obligation of the defendant grew out of a contract made between it and the plaintiff . . . we do not think that the provisions of articles 1902 and 1903 are applicable to the case." In the case of Chapman vs. Underwood (27 Phil. Rep., 374), plaintiff sued the defendant to recover damages for the personal injuries caused by the negligence of defendant's chauffeur while driving defendant's automobile in which defendant was riding at the time. The court found that the damages were caused by the negligence of the driver of the automobile, but held that the master was not liable, although he was present at the time, saying: . . . unless the negligent acts of the driver are continued for a length of time as to give the owner a reasonable opportunity to observe them and to direct the driver to desist therefrom. . . . The act complained of must be continued in the presence of the owner for such length of time that the owner by his acquiescence, makes the driver's acts his own.

In the case of Yamada vs. Manila Railroad Co. and Bachrach Garage & Taxicab Co. (33 Phil. Rep., 8), it is true that the court rested its conclusion as to the liability of the defendant upon article 1903, although the facts disclosed that the injury complaint of by plaintiff constituted a breach of the duty to him arising out of the contract of transportation. The express ground of the decision in this case was that article 1903, in dealing with the liability of a master for the negligent acts of his servants "makes the distinction between private individuals and public enterprise;" that as to the latter the law creates a rebuttable presumption of negligence in the selection or direction of servants; and that in the particular case the presumption of negligence had not been overcome. It is evident, therefore that in its decision Yamada case, the court treated plaintiff's action as though founded in tort rather than as based upon the breach of the contract of carriage, and an examination of the pleadings and of the briefs shows that the questions of law were in fact discussed upon this theory. Viewed from the standpoint of the defendant the practical result must have been the same in any event. The proof disclosed beyond doubt that the defendant's servant was grossly negligent and that his negligence was the proximate cause of plaintiff's injury. It also affirmatively appeared that defendant had been guilty of negligence in its failure to exercise proper discretion in the direction of the servant. Defendant was, therefore, liable for the injury suffered by plaintiff, whether the breach of the duty were to be regarded as constituting culpa aquiliana or culpa contractual. As Manresa points out (vol. 8, pp. 29 and 69) whether negligence occurs an incident in the course of the performance of a contractual undertaking or its itself the source of an extracontractual undertaking obligation, its essential characteristics are identical. There is always an act or omission productive of damage due to carelessness or inattention on the part of the defendant. Consequently, when the court holds that a defendant is liable in damages for having failed to exercise due care, either directly, or in failing to exercise proper care in the selection and direction of his servants, the practical result is identical in either case. Therefore, it follows that it is not to be inferred, because the court held in the Yamada case that defendant was liable for the damages negligently caused by its servants to a person to whom it was bound by contract, and made reference to the fact that the defendant was negligent in the selection and control of its servants, that in such a case the court would have held that it would have been a good defense to the action, if presented squarely upon the theory of the breach of the contract, for defendant to have proved that it did in fact exercise care in the selection and control of the servant. The true explanation of such cases is to be found by directing the attention to the relative spheres of contractual and extra-contractual obligations. The field of non- contractual obligation is much more broader than that of contractual obligations, comprising, as it does, the whole extent of juridical human relations. These two fields, figuratively speaking, concentric; that is to say, the mere fact that a person is bound to another by contract does not relieve him from extra-contractual liability to such person. When such a contractual relation exists the obligor may break the contract under such conditions that the same act which constitutes the source of an extra-contractual obligation had no contract existed between the parties. The contract of defendant to transport plaintiff carried with it, by implication, the duty to carry him in safety and to provide safe means of entering and leaving its trains (civil code, article 1258). That duty, being contractual, was direct and immediate, and its non-performance could not be excused by proof that the fault was morally imputable to defendant's servants. The railroad company's defense involves the assumption that even granting that the negligent conduct of its servants in placing an obstruction upon the platform was a breach of its contractual obligation to maintain safe means of approaching and leaving its trains, the direct and proximate cause of the injury suffered by plaintiff was his own contributory negligence in failing to wait until the train had come to a complete stop before alighting. Under the doctrine of comparative negligence announced in the Rakes case (supra), if the accident was caused by plaintiff's own negligence, no liability is imposed upon defendant's negligence and plaintiff's negligence merely contributed to his

injury, the damages should be apportioned. It is, therefore, important to ascertain if defendant was in fact guilty of negligence. It may be admitted that had plaintiff waited until the train had come to a full stop before alighting, the particular injury suffered by him could not have occurred. Defendant contends, and cites many authorities in support of the contention, that it is negligence per se for a passenger to alight from a moving train. We are not disposed to subscribe to this doctrine in its absolute form. We are of the opinion that this proposition is too badly stated and is at variance with the experience of every-day life. In this particular instance, that the train was barely moving when plaintiff alighted is shown conclusively by the fact that it came to stop within six meters from the place where he stepped from it. Thousands of person alight from trains under these conditions every day of the year, and sustain no injury where the company has kept its platform free from dangerous obstructions. There is no reason to believe that plaintiff would have suffered any injury whatever in alighting as he did had it not been for defendant's negligent failure to perform its duty to provide a safe alighting place. We are of the opinion that the correct doctrine relating to this subject is that expressed in Thompson's work on Negligence (vol. 3, sec. 3010) as follows: The test by which to determine whether the passenger has been guilty of negligence in attempting to alight from a moving railway train, is that of ordinary or reasonable care. It is to be considered whether an ordinarily prudent person, of the age, sex and condition of the passenger, would have acted as the passenger acted under the circumstances disclosed by the evidence. This care has been defined to be, not the care which may or should be used by the prudent man generally, but the care which a man of ordinary prudence would use under similar circumstances, to avoid injury." (Thompson, Commentaries on Negligence, vol. 3, sec. 3010.) Or, it we prefer to adopt the mode of exposition used by this court in Picart vs. Smith (37 Phil. rep., 809), we may say that the test is this; Was there anything in the circumstances surrounding the plaintiff at the time he alighted from the train which would have admonished a person of average prudence that to get off the train under the conditions then existing was dangerous? If so, the plaintiff should have desisted from alighting; and his failure so to desist was contributory negligence.
1aw ph!l.net

As the case now before us presents itself, the only fact from which a conclusion can be drawn to the effect that plaintiff was guilty of contributory negligence is that he stepped off the car without being able to discern clearly the condition of the platform and while the train was yet slowly moving. In considering the situation thus presented, it should not be overlooked that the plaintiff was, as we find, ignorant of the fact that the obstruction which was caused by the sacks of melons piled on the platform existed; and as the defendant was bound by reason of its duty as a public carrier to afford to its passengers facilities for safe egress from its trains, the plaintiff had a right to assume, in the absence of some circumstance to warn him to the contrary, that the platform was clear. The place, as we have already stated, was dark, or dimly lighted, and this also is proof of a failure upon the part of the defendant in the performance of a duty owing by it to the plaintiff; for if it were by any possibility concede that it had right to pile these sacks in the path of alighting passengers, the placing of them adequately so that their presence would be revealed. As pertinent to the question of contributory negligence on the part of the plaintiff in this case the following circumstances are to be noted: The company's platform was constructed upon a level higher than that of the roadbed and the surrounding ground. The distance from the steps of the car to the spot where the alighting passenger would place his feet on the platform was thus reduced, thereby decreasing the risk incident to stepping off. The nature of the platform, constructed as it was

of cement material, also assured to the passenger a stable and even surface on which to alight. Furthermore, the plaintiff was possessed of the vigor and agility of young manhood, and it was by no means so risky for him to get off while the train was yet moving as the same act would have been in an aged or feeble person. In determining the question of contributory negligence in performing such act that is to say, whether the passenger acted prudently or recklessly the age, sex, and physical condition of the passenger are circumstances necessarily affecting the safety of the passenger, and should be considered. Women, it has been observed, as a general rule are less capable than men of alighting with safety under such conditions, as the nature of their wearing apparel obstructs the free movement of the limbs. Again, it may be noted that the place was perfectly familiar to the plaintiff as it was his daily custom to get on and of the train at this station. There could, therefore, be no uncertainty in his mind with regard either to the length of the step which he was required to take or the character of the platform where he was alighting. Our conclusion is that the conduct of the plaintiff in undertaking to alight while the train was yet slightly under way was not characterized by imprudence and that therefore he was not guilty of contributory negligence. The evidence shows that the plaintiff, at the time of the accident, was earning P25 a month as a copyist clerk, and that the injuries he has suffered have permanently disabled him from continuing that employment. Defendant has not shown that any other gainful occupation is open to plaintiff. His expectancy of life, according to the standard mortality tables, is approximately thirty-three years. We are of the opinion that a fair compensation for the damage suffered by him for his permanent disability is the sum of P2,500, and that he is also entitled to recover of defendant the additional sum of P790.25 for medical attention, hospital services, and other incidental expenditures connected with the treatment of his injuries. The decision of lower court is reversed, and judgment is hereby rendered plaintiff for the sum of P3,290.25, and for the costs of both instances. So ordered.

G.R. No. 118126 March 4, 1996 TRANS-ASIA SHIPPING LINES, INC., petitioner, vs. COURT OF APPEALS and ATTY. RENATO T. ARROYO, respondents.

DAVIDE, JR., J.:p As formulated by the petitioner, the issue in this petition for review on certiorari under Rule 45 of the Rules of Court is as follows:
In case of interruption of a vessel's voyage and the consequent delay in that vessel's arrival at its port of destination, is the right of a passenger affected thereby to be determined and governed by the vague Civil Code provision on common carriers, or shall

it be, in the absence of a specific provision thereon governed by Art. 698 of the Code of Commerce? 1

The petitioner considers it a "novel question of law." Upon a closer evaluation, however, of the challenged decision of the Court of Appeals of 23 November 1994, 2 vis-a-vis, the decision of 29 June 1992 in Civil Case No. 91-491 of the Regional Trial Court (RTC) of Cagayan de Oro City, Branch 24, 3 as well as the allegations and arguments adduced by the parties, we find the petitioner's formulation of the issue imprecise. As this Court sees it, what stands for resolution is a common carrier's liability for damages to a passenger who disembarked from the vessel upon its return to the port of origin, after it suffered engine trouble and had to stop at sea, having commenced the contracted voyage on one engine. The antecedents are summarized by the Court of Appeals as follows: Plaintiff [herein private respondent Atty. Renato Arroyo], a public attorney, bought a ticket [from] defendant [herein petitioner], a corporation engaged in . . . inter-island shipping, for the voyage of M/V Asia Thailand vessel to Cagayan de Oro City from Cebu City on November 12, 1991. At around 5:30 in the evening of November 12, 1991, plaintiff boarded the M/V Asia Thailand vessel. At that instance, plaintiff noticed that some repair works [sic] were being undertaken on the engine of the vessel. The vessel departed at around 11:00 in the evening with only one (1) engine running. After an hour of slow voyage, the vessel stopped near Kawit Island and dropped its anchor thereat. After half an hour of stillness, some passengers demanded that they should be allowed to return to Cebu City for they were no longer willing to continue their voyage to, Cagayan de Oro City. The captain acceeded [sic] to their request and thus the vessel headed back to Cebu City. At Cebu City, plaintiff together with the other passengers who requested to be brought back to Cebu City, were allowed to disembark. Thereafter, the vessel proceeded to Cagayan de Oro City. Plaintiff, the next day, boarded the M/V Asia Japan for its voyage to Cagayan de Oro City, likewise a vessel of defendant.
On account of this failure of defendant to transport him to the place of destination on November 12, 1991, plaintiff filed before the trial court a complaint for damages against defendant. 4

In his complaint, docketed as Civil Case No. 91-491, plaintiff (hereinafter private respondent) alleged that the engines of the M/V Asia Thailand conked out in the open sea, and for more than an hour it was stalled and at the mercy of the waves, thus causing fear in the passengers. It sailed back to Cebu City after it regained power, but for unexplained reasons, the passengers, including the private respondent, were arrogantly told to disembark without the necessary precautions against possible injury to them. They were thus unceremoniously dumped, which only exacerbated the private respondent's mental distress. He further alleged that by reason of the petitioner's wanton, reckless, and willful acts, he was unnecessarily exposed to danger and, having been stranded in Cebu City for a day, incurred additional expenses and loss of income. He then prayed that he be awarded P1,100.00, P50,000.00, and P25,000.00 as compensatory, moral; and exemplary damages, respectively. 5

In his pre-trial brief, the private respondent asserted that his complaint was "an action for damages arising from bad faith, breach of contract and from tort," with the former arising from the petitioner's "failure to carry [him] to his place of destination as contracted," while the latter from the "conduct of the [petitioner] resulting [in] the infliction of emotional distress" to the private respondent. 6 After due trial, the trial court rendered its decision 7 and ruled that the action was only for breach of contract, with Articles 1170, 1172, and 1173 of the Civil Code as applicable law not Article 2180 of the same Code. It was of the opinion that Article 1170 made a person liable for damages if, in the performance of his obligation, he was guilty of fraud, negligence, or delay, or in any manner contravened the tenor thereof; moreover, pursuant to Article 2201 of the same Code, to be entitled to damages, the non-performance of the obligation must have been tainted not only by fraud, negligence, or delay, but also bad faith, malice, and wanton attitude. It then disposed of the case as follows:
WHEREFORE, it not appearing from the evidence that plaintiff was left in the Port of Cebu because of the fault, negligence, malice or wanton attitude of defendant's employees, the complaint is DISMISSED. Defendant's counterclaim is likewise dismissed it not appearing also that filing of the case by plaintiff was motivated by malice or bad faith. 8

The trial court made the following findings to support its disposition: In the light of the evidence adduced by the parties and of the above provisions of the New Civil Code, the issue to be resolved, in the resolution of this case is whether or not, defendant thru its employees in [sic] the night of November 12, 1991, committed fraud, negligence, bad faith or malice when it left plaintiff in the Port of Cebu when it sailed back to Cagayan de Oro City after it has [sic] returned from Kawit Island. Evaluation of the evidence of the parties tended to show nothing that defendant committed fraud. As early as 3:00 p.m. of November 12, 1991, defendant did not hide the fact that the cylinder head cracked. Plaintiff even saw during its repair. If he had doubts as to the vessel's capacity to sail, he had time yet to take another boat. The ticket could be returned to defendant and corresponding cash [would] be returned to him. Neither could negligence, bad faith or malice on the part of defendant be inferred from the evidence of the parties. When the boat arrived at [the] Port of Cebu after it returned from Kawit Island, there was an announcement that passengers who would like to disembark were given ten (10) minutes only to do so. By this announcement, it could be inferred that the boat will [sic] proceed to Cagayan de Oro City. If plaintiff entertained doubts, he should have asked a member of the crew of the boat or better still, the captain of the boat. But as admitted by him, he was of the impression only that the boat will not proceed to Cagayan de Oro that evening so he disembarked. He was instead, the ones [sic] negligent. Had he been prudent, with the announcement that those who will disembark were given ten minutes only, he should have lingered a little by staying in his cot and inquired whether the boat will proceed to Cagayan de Oro City or not. Defendant cannot be expected to be telling [sic] the reasons to each passenger. Announcement by microphone was enough. The court is inclined to believe that the story of defendant that the boat returned to the Port of Cebu because of the request of the passengers in view of the waves. That it did not return because of the defective engines as shown by the fact that

fifteen (15) minutes after the boat docked [at] the Port of Cebu and those who wanted to proceed to Cagayan de Oro disembarked, it left for Cagayan de Oro City. The defendant got nothing when the boat returned to Cebu to let those who did not want to proceed to Cagayan de Oro City including plaintiff disembarked. On the contrary, this would mean its loss instead because it will have to refund their tickets or they will use it the next trip without paying anymore. It is hard therefore, to imagine how defendant by leaving plaintiff in Cebu could have acted in bad faith, negligently, wantonly and with malice.
If plaintiff, therefore, was not able to [m]ake the trip that night of November 12, 1991, it was not because defendant maliciously did it to exclude him [from] the trip. If he was left, it was because of his fault or negligence. 9

Unsatisfied, the private respondent appealed to the Court of Appeals (CA-G.R. CV No. 39901) and submitted for its determination the following assignment of errors: (1) the trial court erred in not finding that the defendant-appellee was guilty of fraud, delay, negligence, and bad faith; and (2) the trial court. erred in not awarding moral and exemplary damages. 10 In its decision of 23 November 1994, 11 the Court of Appeals reversed the trial court's decision by applying Article 1755 in relation to Articles 2201, 2208, 2217, and 2232 of the Civil Code and, accordingly, awarded compensatory, moral, and exemplary damages as follows: WHEREFORE, premises considered, the appealed decision is hereby REVERSED and SET ASIDE and another one is rendered ordering defendant-appellee to pay plaintiff-appellant: 1. P20,000.00 as moral damages; 2. P10,000.00 as exemplary damages; 3. P5,000.00 as attorney's fees; 4. Cost of suit.
SO ORDERED. 12

It did not, however, allow the grant of damages for the delay in the performance of the petitioner's obligation as the requirement of demand set forth in Article 1169 of the Civil Code had not been met by the private respondent. Besides, it found that the private respondent offered no evidence to prove that his contract of carriage with the petitioner provided for liability in case of delay in departure, nor that a designation of the time of departure was the controlling motive for the establishment of the contract. On the latter, the court a quo observed that the private respondent even admitted he was unaware of the vessel's departure time, and it was only when he boarded the vessel that he became aware of such. Finally, the respondent Court found no reasonable basis for the private respondent's belief that demand was useless because the petitioner had rendered it beyond its power to perform its obligation; on the contrary, he even admitted that the petitioner had been assuring the passengers that the vessel would leave on time, and that it could still perform its obligation to transport them as scheduled. To justify its award of damages, the Court of Appeals ratiocinated as follows:

It is an established and admitted fact that the vessel before the voyage had undergone some repair work on the cylinder head of the engine. It is likewise admitted by defendant-appellee that it left the port of Cebu City with only one engine running. Defendant-appellee averred: . . . The dropping of the vessel's anchor after running slowly on only one engine when it departed earlier must have alarmed some nervous passengers . . . The entries in the logbook which defendant-appellee itself offered as evidence categorically stated therein that the vessel stopped at Kawit Island because of engine trouble. It reads: 2330 HRS STBD ENGINE' EMERGENCY STOP 2350 HRS DROP ANCHOR DUE TO ENGINE TROUBLE, 2 ENGINE STOP. The stoppage was not to start and synchronized [sic] the engines of the vessel as claimed by defendant-appellee. It was because one of the engines of the vessel broke down; it was because of the disability of the vessel which from the very beginning of the voyage was known to defendant-appellee. Defendant-appellee from the very start of the voyage knew for a fact that the vessel was not yet in its sailing condition because the second engine was still being repaired. Inspite of this knowledge, defendant-appellee still proceeded to sail with only one engine running. Defendant-appellee at that instant failed to exercise the diligence which all common carriers should exercise in transporting or carrying passengers. The law does not merely require extraordinary diligence in the performance of the obligation. The law mandates that common carrier[s] should exercise utmost diligence the transport of passengers. Article 1755 of the New Civil Code provides: Art. 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. Utmost diligence of a VERY CAUTIOUS person dictates that defendant-appellee should have pursued the voyage only when its vessel was already fit to sail. Defendant-appellee should have made certain that the vessel [could] complete the voyage before starting [to] sail. Anything less than this, the vessel [could not] sail . . . with so many passengers on board it. However, defendant-appellant [sic] in complete disregard of the safety of the passengers, chose to proceed with its voyage even if only one engine was running as the second engine was still being repaired during the voyage. Defendant-appellee disregarded the not very remote possibility that because of the disability of the

vessel, other problems might occur which would endanger the lives of the passengers sailing with a disabled vessel. As expected, . . . engine trouble occurred. Fortunate[ly] for defendant-appellee, such trouble only necessitated the stoppage of the vessel and did not cause the vessel to capsize. No wonder why some passengers requested to be brought back to Cebu City. Common carriers which are mandated to exercise utmost diligence should not be taking these risks.
On this premise, plaintiff-appellant should not be faulted why he chose to disembark from the vessel with the other passengers when it returned back to Cebu City. Defendantappellee may call him a very "panicky passenger" or a "nervous person", but this will not relieve defendant-appellee from the liability it incurred for its failure to exercise utmost diligence. 13

xxx xxx xxx As to the second assigned error, we find that plaintiff-appellant is entitled to the award of moral and exemplary damages for the breach committed by defendantappellee. As discussed, defendant-appellee in sailing to Cagayan de Oro City with only one engine and with full knowledge of the true condition of the vessel, acted. in bad faith with malice, in complete disregard for the safety of the passengers and only for its own personal advancement/interest. The Civil Code provides: Art. 2201. xxx xxx xxx In case of fraud, bad faith, malice or wanton attitude, the obligor shall be responsible for all damages which may be reasonably attributed to the non-performance of the obligation.
Plaintiff-appellant is entitled to moral damages for the mental anguish, fright and serious anxiety he suffered during the voyage when the vessel's engine broke down and when he disembarked from the vessel during the wee hours of the morning at Cebu City when it returned. 14 Moral damages are recoverable in a damage suit predicated upon a breach of contract of carriage where it is proved that the carrier was guilty of fraud or bad faith even if death does not result. 15 Fraud and bad faith by defendant-appellee having been established, the award of moral damages is in order. 16 To serve as a deterrent to the commission of similar acts in the future, exemplary damages should be imposed upon defendant-appellee. 17 Exemplary damages are designed by our civil law to permit the courts to reshape behavior that is socially

deleterious in its consequence by creating . . . negative incentives or deterrents against such behavior. 18 Moral damages having been awarded, exemplary damages maybe properly awarded. When entitlement to moral damages has been established, the award of exemplary damages is proper. 19

The petitioner then instituted this petition and submitted the question of law earlier adverted to. ISSUE: Whether or not the petitioner committed a breach of its responsibility to its passengers under Art. 1755 of the Civil Code. Undoubtedly, there was, between the petitioner and the private respondent, a contract of common carriage. The laws of primary application then are the provisions on common carriers under Section 4, Chapter 3, Title VIII, Book IV of the Civil Code, while for all other matters not regulated thereby, the Code of Commerce and special laws. 20 Under Article 1733 of the Civil Code, the petitioner was bound to observe extraordinary diligence in ensuring the safety of the private respondent. That meant that the petitioner was, pursuant to Article 1755 of the said Code, bound to carry the private respondent safely as far as human care and foresight could provide, using the utmost diligence of very cautious persons, with due regard for all the circumstances. In this case, we are in full accord with the Court of Appeals that the petitioner failed to discharge this obligation. Before commencing the contracted voyage, the petitioner undertook some repairs on the cylinder head of one of the vessel's engines. But even before it could finish these repairs, it allowed the vessel to leave the port of origin on only one functioning engine, instead of two. Moreover, even the lone functioning engine was not in perfect condition as sometime after it had run its course, it conked out. This caused the vessel to stop and remain a drift at sea, thus in order to prevent the ship from capsizing, it had to drop anchor. Plainly, the vessel was unseaworthy even before the voyage began. For a vessel to be seaworthy, it must be adequately equipped for the voyage and manned with a sufficient number of competent officers and crew. 21 The failure of a common carrier to maintain in seaworthy condition its vessel involved in a contract of carriage is a clear breach of its duty prescribed in Article 1755 of the Civil Code. As to its liability for damages to the private respondent, Article 1764 of the Civil Code expressly provides: Art. 1764. Damages in cases comprised in this Section shall be awarded in accordance with Title XVIII of this Book, concerning Damages. Article 2206 shall also apply to the death of a passenger caused by the breach of contract by common carrier. The damages comprised in Title XVIII of the Civil Code are actual or compensatory, moral, nominal, temperate or moderate, liquidated, and exemplary. In his complaint, the private respondent claims actual or compensatory, moral, and exemplary damages. Actual or compensatory damages represent the adequate compensation for pecuniary loss suffered and for profits the obligee failed to obtain. 22

In contracts or quasi-contracts, the obligor is liable for all the damages which may be reasonably attributed to the non-performance of the obligation if he is guilty of fraud, bad faith, malice, or wanton attitude. 23 Moral damages include moral suffering, mental anguish, fright, serious anxiety, besmirched reputation, wounded feelings, moral shock, social humiliation, or similar injury. They may be recovered in the cases enumerated in Article 2219 of the Civil Code, likewise, if they are the proximate result of, as in this case, the petitioner's breach of the contract of carriage. 24 Anent a breach of a contract of common carriage, moral damages may be awarded if the common carrier, like the petitioner, acted fraudulently or in bad faith. 25 Exemplary damages are imposed by way of example or correction for the public good, in addition to moral, temperate, liquidated or compensatory damages. 26 In contracts and quasi-contracts, exemplary damages may be awarded if the defendant acted in a wanton, fraudulent, reckless, oppressive or malevolent manner. 27 It cannot, however, be considered as a matter of right; the court having to decide whether or not they should be adjudicated.28 Before the court may consider an award for exemplary damages, the plaintiff must first show that he is entitled to moral, temperate or compensatory damages; but it is not necessary that he prove the monetary value thereof.29 The Court of Appeals did not grant the private respondent actual or compensatory damages, reasoning that no delay was incurred since there was no demand, as required by Article 1169 of the Civil Code. This article, however, finds no application in this case because, as found by the respondent Court, there was in fact no delay in the commencement of the contracted voyage. If any delay was incurred, it was after the commencement of such voyage, more specifically, when the voyage was subsequently interrupted when the vessel had to stop near Kawit Island after the only functioning engine conked out. As to the rights and duties of the parties strictly arising out of such delay, the Civil Code is silent. However, as correctly pointed out by the petitioner, Article 698 of the Code of Commerce specifically provides for such a situation. It reads: In case a voyage already begun should be interrupted, the passengers shall be obliged to pay the fare in proportion to the distance covered, without right to recover for losses and damages if the interruption is due to fortuitous event or force majeure, but with a right to indemnity if the interruption should have been caused by the captain exclusively. If the interruption should be caused by the disability of the vessel and a passenger should agree to await the repairs, he may not be required to pay any increased price of passage, but his living expenses during the stay shall be for his own account. This article applies suppletorily pursuant to Article 1766 of the Civil Code. Of course, this does not suffice for a resolution of the case at bench for, as earlier stated, the cause of the delay or interruption was the petitioner's failure to observe extraordinary diligence. Article 698 must then be read together with Articles 2199, 2200, 2201, and 2208 in relation to Article 21 of the Civil Code. So read, it means that the petitioner is liable for any pecuniary loss or loss of profits which the private respondent may have suffered by reason thereof. For the private respondent, such would be the loss of income if unable to report to his office on the day he was supposed to arrive were it not for the delay. This, however, assumes that he stayed on the vessel and was with it when it thereafter resumed its voyage; but he did not. As he and some passengers resolved not to complete the voyage, the vessel had to return to its port of origin and allow them to disembark. The

private respondent then took the petitioner's other vessel the following day, using the ticket he had purchased for the previous day's voyage. Any further delay then in the private respondent's arrival at the port of destination was caused by his decision to disembark. Had he remained on the first vessel, he would have reached his destination at noon of 13 November 1991, thus been able to report to his office in the afternoon. He, therefore, would have lost only the salary for half of a day. But actual or compensatory damages must be proved, 30 which the private respondent failed to do. There is no convincing evidence that he did not receive his salary for 13 November 1991 nor that his absence was not excused. We likewise fully agree with the Court of Appeals that the petitioner is liable for moral and exemplary damages. In allowing its unseaworthy M/V Asia Thailand to leave the port of origin and undertake the contracted voyage, with full awareness that it was exposed to perils of the sea, it deliberately disregarded its solemn duty to exercise extraordinary diligence and obviously acted with bad faith and in a wanton and reckless manner. On this score, however, the petitioner asserts that the safety or the vessel and passengers was never at stake because the sea was "calm" in the vicinity where it stopped as faithfully recorded in the vessel's log book (Exhibit "4"). Hence, the petitioner concludes, the private respondent was merely "over-reacting" to the situation obtaining then. 31 We hold that the petitioner's defense cannot exculpate it nor mitigate its liability. On the contrary, such a claim demonstrates beyond cavil the petitioner's lack of genuine concern for the safety of its passengers. It was, perhaps, only providential then the sea happened to be calm. Even so, the petitioner should not expect its passengers to act in the manner it desired. The passengers were not stoics; becoming alarmed, anxious, or frightened at the stoppage of a vessel at sea in an unfamiliar zone as nighttime is not the sole prerogative of the faint-hearted. More so in the light of the many tragedies at sea resulting in the loss of lives of hopeless passengers and damage to property simply because common carriers failed in their duty to exercise extraordinary diligence in the performance of their obligations. We cannot, however, give our affirmance to the award of attorney's fees. Under Article 2208 of the Civil Code, these are recoverable only in the concept of actual damages, 32 not as moral damages 33 nor judicial costs. 34Hence, to merit such an award, it is settled that the amount thereof must be proven. 35 Moreover, such must be specifically prayed for as was not done in this case and may not be deemed incorporated within a general prayer for "such other relief and remedy as this court may deem just and equitable." 36 Finally, it must be noted that aside from the following, the body of the respondent Court's decision was devoid of any statement regarding attorney's fees: Plaintiff-appellant was forced to litigate in order that he can claim moral and exemplary damages for the suffering he encurred [sic]. He is entitled to attorney's fees pursuant to Article 2208 of the Civil Code. It states: Art. 2208. In the absence of stipulation, attorney's fees and expenses of litigation, other than judicial costs cannot be recovered except: 1. When exemplary damages are awarded; 2. When the defendant's act or omission has compelled the plaintiff to litigate with third persons or to incur expenses to protect his interest. This Court holds that the above does not satisfy the benchmark of "factual, legal and equitable justification" needed as basis for an award of attorney's fees. 37 In sum, for lack of factual and legal basis, the award of attorney's fees must be deleted.

WHEREFORE, the instant petition is DENIED and the challenged decision of the Court of Appeals in CA-G.R. CV No. 39901 is AFFIRMED subject to the modification as to the award for attorney's fees which is hereby SET ASIDE. Costs against the petitioner. SO ORDERED.