RCL OF SINGAPORE vs.

NETHERLANDS
For our resolution is the petition for review on certiorari filed
by petitioners Regional Container Lines of Singapore (RCL) and EDSA
Shipping Agency (EDSA Shipping) to annul and set aside the
decision[1] and resolution[2] of the Court of Appeals (CA) dated May 26,
2004 and May 10, 2005, respectively, in CA-G.R. CV No. 76690.
RCL is a foreign corporation based in Singapore. It does
business in the Philippines through its agent, EDSA Shipping, a
domestic corporation organized and existing under Philippine laws.
Respondent Netherlands Insurance Company (Philippines), Inc.
(Netherlands Insurance) is likewise a domestic corporation engaged in
the marine underwriting business.
FACTUAL ANTECEDENTS
The pertinent facts, based on the records are summarized
below.
On October 20, 1995, 405 cartons of Epoxy Molding Compound
were consigned to be shipped from Singapore to Manila for Temic
Telefunken MicroelectronicsPhilippines (Temic). U-Freight Singapore
PTE Ltd.[3] (U-Freight Singapore), a forwarding agent based
in Singapore, contracted the services of Pacific Eagle Lines PTE. Ltd.
(Pacific Eagle) to transport the subject cargo. The cargo was packed,
stored, and sealed by Pacific Eagle in its Refrigerated Container No.
6105660 with Seal No. 13223. As the cargo was highly perishable, the
inside of the container had to be kept at a temperature of 0 Celsius.
Pacific Eagle then loaded the refrigerated container on board the M/V
Piya Bhum, a vessel owned by RCL, with which Pacific Eagle had a
slot charter agreement. RCL duly issued its own Bill of Lading in favor
of Pacific Eagle.
To insure the cargo against loss and damage, Netherlands
Insurance issued a Marine Open Policy in favor of Temic, as shown by
MPO-21-05081-94 and Marine Risk Note MRN-21 14022, to cover all
losses/damages to the shipment.
On October
25,
1995,
the M/V
Piya
Bhum docked
in Manila. After unloading the refrigerated container, it was plugged to
the power terminal of the pier to keep its temperature constant. Fidel
Rocha (Rocha), Vice-President for Operations of Marines Adjustment
Corporation, accompanied by two surveyors, conducted a protective
survey of the cargo. They found that based on the temperature chart,
the temperature reading was constant from October 18, 1995 to
October 25, 1995 at 0 Celsius. However, at midnightof October 25,
1995 when the cargo had already been unloaded from the ship the
temperature fluctuated with a reading of 33 Celsius. Rocha believed
the fluctuation was caused by the burnt condenser fan motor of the
refrigerated container.
On November 9, 1995, Temic received the shipment. It found
the cargo completely damaged. Temic filed a claim for cargo loss
against Netherlands Insurance, with supporting claims documents. The
Netherlands Insurance paid Temic the sum of P1,036,497.00 under the
terms of the Marine Open Policy. Temic then executed a loss and
subrogation receipt in favor of Netherlands Insurance.
Seven months from delivery of the cargo or on June 4, 1996,
Netherlands Insurance filed a complaint for subrogation of insurance
settlement with the Regional Trial Court, Branch 5, Manila, against the
unknown owner of M/V Piya Bhum and TMS Ship Agencies (TMS),
the latter thought to be the local agent of M/V Piya Bhums unknown
owner.[4] The complaint was docketed as Civil Case No. 96-78612.
Netherlands Insurance amended the complaint on January
17, 1997 to implead EDSA Shipping, RCL, Eagle Liner Shipping
Agencies, U-Freight Singapore, and U-Ocean (Phils.), Inc. (U-Ocean),
as additional defendants. A third amended complaint was later made,
impleading Pacific Eagle in substitution of Eagle Liner Shipping
Agencies.

counterclaim to the second amended complaint. U-Ocean likewise filed

an answer with compulsory counterclaim and cross-claim. During the
pendency of the case, U-Ocean, jointly with U-Freight Singapore, filed
another answer with compulsory counterclaim. Only Pacific Eagle and
TMS filed their answers to the third amended complaint.
The defendants all disclaimed liability for the damage caused to
the cargo, citing several reasons why Netherland Insurances claims
must be rejected. Specifically, RCL and EDSA Shipping denied
negligence in the transport of the cargo; they attributed any negligence
that may have caused the loss of the shipment to their co-defendants.
They likewise asserted that no valid subrogation exists, as the
payment made by Netherlands Insurance to the consignee was
invalid. By way of affirmative defenses, RCL and EDSA Shipping
averred that the Netherlands Insurance has no cause of action, and is
not the real party-in-interest, and that the claim is barred by
laches/prescription.
After Netherlands Insurance had made its formal offer of
evidence, the defendants including RCL and EDSA Shipping sought
leave of court to file their respective motions to dismiss based on
demurrer to evidence.
RCL and EDSA Shipping, in their motion, insisted that
Netherlands Insurance had (1) failed to prove any valid subrogation,
and (2) failed to establish that any negligence on their part or that the
loss was sustained while the cargo was in their custody.
On May 22, 2002, the trial court handed down an Order
dismissing Civil Case No. 96-78612 on demurrer to evidence. The trial
court ruled that while there was valid subrogation, the defendants
could not be held liable for the loss or damage, as their respective
liabilities ended at the time of the discharge of the cargo from the ship
at the Port ofManila.
Netherlands Insurance seasonably appealed the order of
dismissal to the CA.
On May 26, 2004, the CA disposed of the appeal as follows:
WHEREFORE, in view of the foregoing, the
dismissal of the complaint against defendants
Regional Container Lines and Its local agent,
EDSA Shipping Agency, is REVERSED and SET
ASIDE. The dismissal of the complaint against
the other defendants is AFFIRMED. Pursuant to
Section 1, Rule 33 of the 1997 Rules of Civil
Procedure, defendants Regional Container Lines
and EDSA Shipping Agency are deemed to have
waived the right to present evidence.
As such, defendants Regional Container
Lines and EDSA Shipping Agency are ordered to
reimburse plaintiff in the sum of P1,036,497.00
with interest from date hereof until fully paid.
No costs.
SO ORDERED. [Emphasis supplied.]
The CA dismissed Netherland Insurances complaint against the other
defendants after finding that the claim had already been barred by
prescription.[5]
Having been found liable for the damage to the cargo, RCL and
EDSA Shipping filed a motion for reconsideration, but the CA
maintained its original conclusions.
The sole issue for our resolution is whether the CA correctly
held RCL and EDSA Shipping liable as common carriers under the
theory of presumption of negligence.

THE COURTS RULING

TMS filed its answer to the original complaint. RCL and EDSA
Shipping filed their answers with cross-claim and compulsory

The present case is governed by the following provisions of the

Civil Code:
ART. 1733. Common carriers, from the nature of
their business and for reasons of public policy, are
bound to observe extraordinary diligence in the
vigilance over the goods and for the safety of the
passengers transported by them according to all
the circumstances of each case.
Such extraordinary diligence in the vigilance
over the goods is further expressed in articles
1734, 1735, and 1745, Nos. 5, 6, and 7, while the
extraordinary diligence for the safety of the
passengers is further set forth in articles1755 and
1756.
ART. 1734. Common carriers are
responsible for the loss, destruction, or
deterioration of the goods, unless the same is due
to any of the following causes only:
1)
2)
3)
4)
5)

Flood,
storm,
earthquake,
lightning, or other natural disaster
or calamity;
Act of the public enemy in war,
whether international or civil;
Act of omission of the shipper or
owner of the goods;
The character of the goods or
defects in the packing or in the
containers;
Order or act of competent public
authority.

ART. 1735. In all cases other that those

mentioned in Nos. 1, 2, 3, 4 and 5 of the preceding
article, if the goods are lost, destroyed, or
deteriorated, common carriers are presumed to
have been at fault or to have acted negligently,
unless they prove that they observed extraordinary
diligence as required by article 1733.
ART. 1736. The extraordinary responsibility
of the common carrier lasts from the time the
goods are unconditionally placed in the
possession of, and received by the carrier for
transportation until the sane are delivered, actually
or constructively, by the carrier to the consignee,
or to the person who has a right to receive
them, without prejudice to the provisions of articles
1738.
ART. 1738. The extraordinary liability of the
common carrier continues to be operative even
during the time the goods are stored in a
warehouse of the carrier at the place of
destination, until the consignee has been advised
of the arrival of the goods and has had reasonable
opportunity thereafter to remove them or otherwise
dispose of them.
ART. 1742. Even if the loss, destruction, or
deterioration of the goods should be caused by the
character of the goods, or the faulty nature of the
packing or of the containers, the common carrier
must exercise due diligence to forestall or lessen
the loss.
In Central Shipping Company, Inc. v. Insurance Company of
North America,[6] we reiterated the rules for the liability of a common
carrier for lost or damaged cargo as follows:
(1)

Common carriers are bound to observe

extraordinary diligence over the goods they
transport, according to all the circumstances of
each case;

(2)

(3)

In the event of loss, destruction, or deterioration

of the insured goods, common carriers are
responsible, unless they can prove that such loss,
destruction, or deterioration was brought about by,
among others, flood, storm, earthquake, lightning,
or other natural disaster or calamity; and
In all other cases not specified under Article 1734
of the Civil Code, common carriers are presumed
to have been at fault or to have acted negligently,
unless they observed extraordinary diligence.[7]

In the present case, RCL and EDSA Shipping disclaim any

responsibility for the loss or damage to the goods in question. They
contend that the cause of the damage to the cargo was the fluctuation
of the temperature in the reefer van, which fluctuation
occurred after the cargo had already been discharged from the vessel;
no fluctuation, they point out, arose when the cargo was still on
board M/V Piya Bhum. As the cause of the damage to the cargo
occurred after the same was already discharged from the vessel and
was under the custody of the arrastre operator (International Container
Terminal Services, Inc. or ICTSI), RCL and EDSA Shipping posit that
the presumption of negligence provided in Article 1735 of the Civil
Code should not apply. What applies in this case is Article 1734,
particularly paragraphs 3 and 4 thereof, which exempts the carrier from
liability for loss or damage to the cargo when it is caused either by an
act or omission of the shipper or by the character of the goods or
defects in the packing or in the containers. Thus, RCL and EDSA
Shipping seek to lay the blame at the feet of other parties.
We do not find the arguments of RCL and EDSA Shipping
meritorious.
A common carrier is presumed to have been negligent if it
fails to prove that it exercised extraordinary vigilance over the goods it
transported.[8] When the goods shipped are either lost or arrived in
damaged condition, a presumption arises against the carrier of its
failure to observe that diligence, and there need not be an express
finding of negligence to hold it liable.[9]
To overcome the presumption of negligence, the common
carrier must establish by adequate proof that it exercised extraordinary
diligence over the goods. It must do more than merely show that some
other party could be responsible for the damage.[10]
In the present case, RCL and EDSA Shipping failed to prove that
they did exercise that degree of diligence required by law over the
goods they transported. Indeed, there is sufficient evidence showing
that the fluctuation of the temperature in the refrigerated container van,
as recorded in the temperature chart, occurred after the cargo had
been discharged from the vessel and was already under the custody of
the arrastre operator, ICTSI. This evidence, however, does not
disprove that the condenser fan which caused the fluctuation of the
temperature in the refrigerated container was not damaged while the
cargo was being unloaded from the ship. It is settled in maritime law
jurisprudence that cargoes while being unloaded generally remain
under the custody of the carrier;[11] RCL and EDSA Shipping failed to
dispute this.
RCL and EDSA Shipping could have offered evidence before
the trial court to show that the damage to the condenser fan did not
occur: (1) while the cargo was in transit; (2) while they were in the act of
discharging it from the vessel; or (3) while they were delivering it
actually or constructively to the consignee. They could have presented
proof to show that they exercised extraordinary care and diligence in
the handling of the goods, but they opted to file a demurrer to
evidence. As the order granting their demurrer was reversed on appeal,
the CA correctly ruled that they are deemed to have waived their right to
present evidence,[12] and the presumption of negligence must stand.
It is for this reason as well that we find RCL and EDSA
Shippings claim that the loss or damage to the cargo was caused by a
defect in the packing or in the containers. To exculpate itself from
liability for the loss/damage to the cargo under any of the causes, the
common carrier is burdened to prove any of the causes in Article 1734
of the Civil Code claimed by it by a preponderance of evidence. If the
carrier succeeds, the burden of evidence is shifted to the shipper to
prove that the carrier is negligent. [13] RCL and EDSA Shipping,
however, failed to satisfy this standard of evidence and in fact offered

no evidence at all on this point; a reversal of a dismissal based on a

demurrer to evidence bars the defendant from presenting evidence
supporting its allegations.
WHEREFORE, we DENY the petition for review on certiorari filed
by the Regional Container Lines of Singapore and EDSA Shipping
Agency. The decision of the Court of Appeals dated May 26, 2004 in
CA-G.R. CV No. 76690 is AFFIRMED IN TOTO. Costs against the
petitioners.
SO ORDERED.
THE PHILIPPINE AMERICAN GENERAL
INC., petitioner,
vs.
MGG
MARINE
SERVICES,
INC.
GAERLAN, respondents.

INSURANCE

and

CO.,

DOROTEO

KAPUNAN, J.:
This petition for review seeks the reversal of the Decision, dated
September 23, 1998, of the Court of Appeals in CA-G.R. CV No.
43915,1 which absolved private respondents MCG Marine Services,
Inc. and Doroteo Gaerlan of any liability regarding the loss of the cargo
belonging to San Miguel Corporation due to the sinking of the M/V
Peatheray Patrick-G owned by Gaerlan with MCG Marine Services,
Inc. as agent.
On March 1, 1987, San Miguel Corporation insured several beer bottle
cases with an aggregate value of P5,836,222.80 with petitioner
Philippine American General Insurance Company.2 The cargo were
loaded on board the M/V Peatheray Patrick-G to be transported from
Mandaue City to Bislig, Surigao del Sur.
After having been cleared by the Coast Guard Station in Cebu the
previous day, the vessel left the port of Mandaue City for Bislig,
Surigao del Sur on March 2, 1987. The weather was calm when the
vessel started its voyage.
The following day, March 3, 1987, M/V Peatheray Patrick-G listed and
subsequently sunk off Cawit Point, Cortes, Surigao del Sur. As a
consequence thereof, the cargo belonging to San Miguel Corporation
was lost.
Subsequently, San Miguel Corporation claimed the amount of its loss
from petitioner.

Meanwhile, the Board of Marine Inquiry conducted its own

investigation of the sinking of the M/V Peatheray Patrick-G to
determine whether or not the captain and crew of the vessel should be
held responsible for the incident.3 On May 11, 1989, the Board
rendered its decision exonerating the captain and crew of the ill-fated
vessel for any administrative liability. It found that the cause of the
sinking of the vessel was the existence of strong winds and enormous
waves in Surigao del Sur, a fortuitous event that could not have been
for seen at the time the M/V Peatheray Patrick-G left the port of
Mandaue City. It was further held by the Board that said fortuitous
event was the proximate and only cause of the vessel's sinking.
On April 15, 1993, the RTC of Makati City, Branch 134, promulgated its
Decision finding private respondents solidarily liable for the loss of San
Miguel Corporation's cargo and ordering them to pay petitioner the full
amount of the lost cargo plus legal interest, attorney's fees and costs of
suit.4
Private respondents appealed the trial court's decision to the Court of
Appeals. On September 23, 1998, the appellate court issued the
assailed Decision, which reversed the ruling of the RTC. It held that
private respondents could not be held liable for the loss of San Miguel
Corporation's cargo because said loss occurred as a consequence of a
fortuitous event, and that such fortuitous event was the proximate and
only cause of the loss.5
Petitioner thus filed the present petition, contending that:
(A)
IN REVERSING AND SETTING ASIDE THE DECISION OF
RTC BR. 134 OF MAKATI CITY ON THE BASIS OF THE
FINDINGS OF THE BOARD OF MARINE INQUIRY,
APPELLATE COURT DECIDED THE CASE AT BAR NOT IN
ACCORD WITH LAW OR WITH THE APPLICABLE
DECISIONS OF THE HONORABLE COURT;
(B)
IN REVERSING THE TRIAL COURT'S DECISION, THE
APPELLATE
COURT
GRAVELY
ERRED
IN
CONTRADICTING AND IN DISTURBING THE FINDINGS
OF THE FORMER;
(C)

Upon petitioner's request, on March 18, 1987, Mr. Eduardo Sayo, a

surveyor from the Manila Adjusters and Surveyors Co., went to
Taganauan Island, Cortes, Surigao del Sur where the vessel was cast
ashore, to investigate the circumstances surrounding the loss of the
cargo. In his report, Mr. Sayo stated that the vessel was structurally
sound and that he did not see any damage or crack thereon. He
concluded that the proximate cause of the listing and subsequent
sinking of the vessel was the shifting of ballast water from starboard to
portside. The said shifting of ballast water allegedly affected the
stability of the M/V Peatheray Patrick-G.
Thereafter, petitioner paid San Miguel Corporation the full amount of
P5,836,222.80 pursuant to the terms of their insurance
contract.1wphi1.nt
On November 3, 1987, petitioner as subrogee of San Miguel
Corporation filed with the Regional Trial Court (RTC) of Makati City a
case for collection against private respondents to recover the amount it
paid to San Miguel Corporation for the loss of the latter's cargo.

THE APPELLATE COURT GRAVELY ERRED IN

REVERSING THE DECISION OF THE TRIAL COURT AND
IN DISMISSING THE COMPLAINT.6
Common carriers, from the nature of their business and for reasons of
public policy, are mandated to observe extraordinary diligence in the
vigilance over the goods and for the safety of the passengers
transported by them.7Owing to this high degree of diligence required of
them, common carriers, as a general rule, are presumed to have been
at fault or negligent if the goods transported by them are lost,
destroyed or if the same deteriorated.8
However, this presumption of fault or negligence does not arise in the
cases enumerated under Article 1734 of the Civil Code:
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.
In order that a common carrier may be absolved from liability where
the loss, destruction or deterioration of the goods is due to a natural
disaster or calamity, it must further be shown that the such natural
disaster or calamity was the proximate and only cause of the
loss;9 there must be "an entire exclusion of human agency from the
cause of the injury of the loss."10
Moreover, even in cases where a natural disaster is the proximate and
only cause of the loss, a common carrier is still required to exercise
due diligence to prevent or minimize loss before, during and after the
occurrence of the natural disaster, for it to be exempt from liability
under the law for the loss of the goods. 11 If a common carrier fails to
exercise due diligence--or that ordinary care which the circumstances
of the particular case demand12 -- to preserve and protect the goods
carried by it on the occasion of a natural disaster, it will be deemed to
have been negligent, and the loss will not be considered as having
been due to a natural disaster under Article 1734 (1).
In the case at bar, the issues may be narrowed down to whether the
loss of the cargo was due to the occurrence of a natural disaster, and if
so, whether such natural disaster was the sole and proximate cause of
the loss or whether private respondents were partly to blame for failing
to exercise due diligence to prevent the loss of the cargo.
The parties do not dispute that on the day the M/V Peatheray Patrick-G
sunk, said vessel encountered strong winds and huge waves ranging
from six to ten feet in height. The vessel listed at the port side and
eventually sunk at Cawit Point, Cortes, Surigao del Sur.
The Court of Appeals, citing the decision of the Board of Marine Inquiry
in the administrative case against the vessel's crew (BMI--646-87),
found that the loss of the cargo was due solely to the existence of a
fortuitous event, particularly the presence of strong winds and huge
waves at Cortes, Surigao del Sur on March 3, 1987:
xxx
III. WHAT WAS THE PROXIMATE CAUSE OF SINKING?
Evidence shows that when "LCT Peatheray Patrick-G" left
the port of Mandawe, Cebu for Bislig, Surigao del Sur on
March 2, 1987 the Captain had observed the fair
atmospheric condition of the area of the pier and confirmed
this good weather condition with the Coast Guard
Detachment of Mandawe City. However, on March 3, 1987 at
about 10:00 o'clock in the evening, when the vessel had
already passed Surigao Strait. the vessel started to
experience waves as high as 6 to 7 feet and that the
Northeasterly wind was blowing at about five (5) knot
velocity. At about 11:00 o'clock P.M. when the vessel was
already about 4.5 miles off Cawit Point, Cortes, Surigao del

Sur, the vessel was discovered to be listing 15 degrees to

port side and that the strength of the wind had increased to
15 knots and the waves were about ten (10) feet high
[Ramilo TSN 10-27-87 p. 32). Immediately thereafter,
emergency measures were taken by the crew. The officers
had suspected that a leak or crack might had developed at
the bottom hull particularly below one or two of the empty
wing tanks at port side serving as buoyancy tanks resulting
in ingress of sea water in the tanks was confirmed when the
Captain ordered to use the cargo pump. The suction valves
to the said tanks of port side were opened in order to suck or
draw out any amount of water that entered into the tanks.
The suction pressure of the pump had drawn out sea water
in large quantity indicating therefore, that a leak or crack had
developed in the hull as the vessel was continuously batted
and pounded by the huge waves. Bailing out of the water
through the pump was done continuously in an effort of the
crew to prevent the vessel from sinking. but then efforts were
in vain. The vessel still continued to list even more despite
the continuous pumping and discharging of sea water from
the wing tanks indicating that the amount of the ingress of
sea water was greater in volume that that was being
discharged by the pump. Considering therefore, the location
of the suspected source of the ingress of sea water which
was a crack or hole at the bottom hull below the buoyancy
tank's port side which was not accessible (sic) for the crew to
check or control the flow of sea water into the said tank. The
accumulation of sea water aggravated by the continuous
pounding, rolling and pitching of the vessel against huge
waves and strong northeasterly wind, the Captain then had
no other recourse except to order abandonship to save their
lives.13
The presence of a crack in the ill-fated vessel through which water
seeped in was confirmed by the Greutzman Divers who were
commissioned by the private respondents to conduct an underwater
survey and inspection of the vessel to determine the cause and
circumstances of its sinking. In its report, Greutzman Divers stated that
"along the port side platings, a small hole and two separate cracks
were found at about midship."14
The findings of the Board of Marine Inquiry indicate that the attendance
of strong winds and huge waves while the M/V Peatheray Patrick-G
was sailing through Cortes, Surigao del Norte on March 3, 1987 was
indeed fortuitous. A fortuitous event has been defined as one which
could not be foreseen, or which though foreseen, is inevitable. 15An
event is considered fortuitous if the following elements concur:
xxx (a) the cause of the unforeseen and unexpected
occurrence, or the failure of the debtor to comply with his
obligations, must be independent of human will; (b) it must
be impossible to foresee the event which constitutes
the caso fortuito, or if it can be foreseen, it must be
impossible to avoid; (c) the occurrence must be such as to
render it impossible for the debtor to fulfill his obligation in a
normal manner; and (d) the obligor must be free from any
participation in the aggravation of the injury resulting to the
creditor. xxx16
In the case at bar, it was adequately shown that before the M/V
Peatheray Patrick-G left the port of Mandaue City, the Captain
confirmed with the Coast Guard that the weather condition would
permit the safe travel of the vessel to Bislig, Surigao del Sur. Thus, he
could not be expected to have foreseen the unfavorable weather
condition that awaited the vessel in Cortes, Surigao del Sur. It was the
presence of the strong winds and enormous waves which caused the
vessel to list, keel over, and consequently lose the cargo contained

therein. The appellate court likewise found that there was no

negligence on the part of the crew of the M/V Peatheray Patrick-G,
citing the following portion of the decision of the Board of Marine
Inquiry:
I. WAS LCT PEATHERAY PATRICK-G SEAWORTHY WHEN
SHE LEFT THE PORT OF MANDAWE, CEBU AND AT THE
TIME OF SINKING?
Evidence clearly shows that the vessel was propelled with
three (3) diesel engines of 250 BHP each or a total of 750
BHP. It had three (3) propellers which were operating
satisfactorily from the time the vessel left the port of
Mandawe up to the time when the hull on the double bottom
tank was heavily floaded (sic) by uncontrollable entry of sea
water resulting in the stoppage of engines. The vessel was
also equipped with operating generator pumps for
emergency cases. This equipment was also operating
satisfactorily up to the time when the engine room was
heavily floaded (sic) with sea water. Further, the vessel had
undergone emergency drydocking and repair before the
accident occurred (sic) on November 9, 1986 at Trigon
Shipyard, San Fernando, Cebu as shown by the billing for
the Drydocking and Repair and certificate of Inspection No.
2588-86 issued by the Philippine coast Guard on December
5, 1986 which expired on November 8, 1987.
LCT Peatheray Patrick-G was skippered by Mr. Manuel P.
Ramilo, competent and experienced licensed Major Patron
who had been in command of the vessel for more than three
(3) years from July 1984 up to the time of sinking March 3,
1987. His Chief Mate Mr. Mariano Alalin also a licensed
Major Patron had been the Chief Mate of " LCT Peatheray
Patrick-G" for one year and three months at the time of the
accident. Further Chief Mate Alalin had commanded a tanker
vessel named M/T Mercedes of MGM Corporation for almost
two (2) years from 1983-1985 (Alalin TSN-4-13-88 pp. 3233).
That the vessel was granted SOLAS clearance by the
Philippine Coast Guard on March 1, 1987 to depart from
Mandawe City for Bislig, Surigao del Sur as evidenced by a
certification issued to D.C. Gaerlan Oil Products by Coast
Guard Station Cebu dated December 23, 1987.1wphi1.nt
Based on the foregoing circumstances, "LCT Peatheray
Patrick-G" should be considered seaworthy vessel at the
time she undertook that fateful voyage on March 2, 1987.
To be seaworthy, a vessel must not only be staunch and fit in
the hull for the voyage to be undertaken but also must be
properly equipped and for that purpose there is a duty upon
the owner to provide a competent master and a crew
adequate in number and competent for their duty and equals
in disposition and seamanship to the ordinary in that calling.
(Ralph 299 F-52, 1924 AMC 942). American President 2td v.
Ren Fen Fed 629. AMC 1723 LCA 9 CAL 1924).17
Overloading was also eliminated as a possible cause of the sinking of
the vessel, as the evidence showed that its freeboard clearance was
substantially greater than the authorized freeboard clearance.18
Although the Board of Marine Inquiry ruled only on the administrative
liability of the captain and crew of the M/V Peatheray Patrick-G, it had
to conduct a thorough investigation of the circumstances surrounding

the sinking of the vessel and the loss of its cargo in order to determine
their responsibility, if any. The results of its investigation as embodied
in its decision on the administrative case clearly indicate that the loss
of the cargo was due solely to the attendance of strong winds and
huge waves which caused the vessel accumulate water, tilt to the port
side and to eventually keel over. There was thus no error on the part of
the Court of Appeals in relying on the factual findings of the Board of
Marine Inquiry, for such factual findings, being supported by substantial
evidence are persuasive, considering that said administrative body is
an expert in matters concerning marine casualties.19
Since the presence of strong winds and enormous waves at Cortes,
Surigao del Sur on March 3, 1987 was shown to be the proximate and
only cause of the sinking of the M/V Peatheray Patrick-G and the loss
of the cargo belonging to San Miguel Corporation, private respondents
cannot be held liable for the said loss.
WHEREFORE, the assailed Decision of the Court of Appeals is
hereby AFFIRMED and the petition is herebyDENIED.
SO ORDERED.

FGU Insurance Corporation

No. 137775. March 31, 2005

vs.

Court

of

AppealsG.R.

Facts:Anco Enterprises Company (ANCO), a partnership between Ang

Gui and Co To, was engaged inthe shipping business. It owned the
D/B Lucio barge which had no engine of its own and the M/TANCO
tugboat which towed the former in order to maneuver it from one place
to another. On 23September 1979, San Miguel Corporation (SMC)
shipped from Mandaue City, Cebu, on board the D/BLucio, for towage
by M/T ANCO for a number of cases of its product. The barge and
tugboat arrived
at San Jose, Antique, in the afternoon of 30 September 1979, however,
At about ten to eleven oclock
in the evening of 01 October 1979, the crew of D/B Lucio abandoned
the vessel be
cause the barges
rope attached to the wharf was cut off by the big waves. At around
midnight, the barge run agroundand was broken and the cargoes of
beer in the barge were swept away. As a result, ANCO failed to
deliver to SMCs consignee Twenty
-Nine Thousand Two Hundred Ten (29,210) cases of Pale Pilsen
andFive Hundred Fifty (550) cases of Cerveza Negra. Prior to such
event, ANCO evidently asserted thatthere was an agreement between
them and SMC to insure the cargoes with FGU InsuranceCorporation
in order to recover indemnity in case of loss.
Issue:Whether or not FGU can be held liable under the insurance
policy to reimburse ANCO for the lossof the cargoes despite the
findings of the respondent court that such loss was occasioned by
theblatant ne
gligence of the latters employees.

Anent ANCOs first assignment of error, i.e., the appellate court

committed error in concluding that the negligence of ANCOs
representatives was the proximate cause of the loss, said issue is a
question of fact assailing the lower courts appreciation of evidence on
the negligence or lack thereof of the crewmembers of the D/B Lucio.
As a rule, findings of fact of lower courts, particularly when affirmed by
the appellate court, are deemed final and conclusive. The Supreme
Court cannot review such findings on appeal, especially when they are

borne out by the records or are based on substantial evidence. [9] As

held in the case of Donato v. Court of Appeals,[10] in this jurisdiction, it is
a fundamental and settled rule that findings of fact by the trial court are
entitled to great weight on appeal and should not be disturbed unless
for strong and cogent reasons because the trial court is in a better
position to examine real evidence, as well as to observe the demeanor
of the witnesses while testifying in the case.[11]
It is not the function of this Court to analyze or weigh evidence all
over again, unless there is a showing that the findings of the lower
court are totally devoid of support or are glaringly erroneous as to
constitute palpable error or grave abuse of discretion.[12]
A careful study of the records shows no cogent reason to fault
the findings of the lower court, as sustained by the appellate court, that
ANCOs representatives failed to exercise the extraordinary degree of
diligence required by the law to exculpate them from liability for the
loss of the cargoes.
First, ANCO admitted that they failed to deliver to the designated
consignee the Twenty Nine Thousand Two Hundred Ten (29,210)
cases of Pale Pilsen and Five Hundred Fifty (550) cases of Cerveza
Negra.
Second, it is borne out in the testimony of the witnesses on
record that the barge D/B Lucio had no engine of its own and could not
maneuver by itself. Yet, the patron of ANCOs tugboat M/T ANCO left it
to fend for itself notwithstanding the fact that as the two vessels arrived
at the port of San Jose, Antique, signs of the impending storm were
already manifest. As stated by the lower court, witness Mr. Anastacio
Manilag testified that the captain or patron of the tugboat M/T ANCO
left the barge D/B Lucio immediately after it reached San Jose,
Antique, despite the fact that there were already big waves and the
area was already dark. This is corroborated by defendants own
witness, Mr. Fernando Macabueg.[13]
The trial court continued:
At that precise moment, since it is the duty of the defendant to exercise
and observe extraordinary diligence in the vigilance over the cargo of
the plaintiff, the patron or captain of M/T ANCO, representing the
defendant could have placed D/B Lucio in a very safe location before
they left knowing or sensing at that time the coming of a typhoon. The
presence of big waves and dark clouds could have warned the patron
or captain of M/T ANCO to insure the safety of D/B Lucio including its
cargo. D/B Lucio being a barge, without its engine, as the patron or
captain of M/T ANCO knew, could not possibly maneuver by itself.
Had the patron or captain of M/T ANCO, the representative of the
defendants observed extraordinary diligence in placing the D/B Lucio
in a safe place, the loss to the cargo of the plaintiff could not have
occurred. In short, therefore, defendants through their representatives,
failed to observe the degree of diligence required of them under the
provision of Art. 1733 of the Civil Code of the Philippines.[14]
Petitioners Estate of Ang Gui and Co To, in their Memorandum,
asserted that the contention of respondents SMC and FGU that the
crewmembers of D/B Lucio should have left port at the onset of the
typhoon is like advising the fish to jump from the frying pan into the fire
and an advice that borders on madness.[15]
The argument does not persuade. The records show that the
D/B Lucio was the only vessel left at San Jose, Antique, during the
time in question. The other vessels were transferred and temporarily
moved to Malandong, 5 kilometers from wharf where the barge
remained.[16] Clearly, the transferred vessels were definitely safer in

Malandong than at the port of San Jose, Antique, at that particular

time, a fact which petitioners failed to dispute
ANCOs arguments boil down to the claim that the loss of the
cargoes was caused by the typhoon Sisang, a fortuitous event (caso
fortuito), and there was no fault or negligence on their part. In fact,
ANCO claims that their crewmembers exercised due diligence to
prevent or minimize the loss of the cargoes but their efforts proved no
match to the forces unleashed by the typhoon which, in petitioners
own words was, by any yardstick, a natural calamity, a fortuitous event,
an act of God, the consequences of which petitioners could not be held
liable for.[17]
The Civil Code provides:
Art. 1733. Common carriers, from the nature of their business and for
reasons of public policy are bound to observe extraordinary diligence
in the vigilance over the goods and for the safety of the passengers
transported by them, according to all the circumstances of each case.
Such extraordinary diligence in vigilance over the goods is further
expressed in Articles 1734, 1735, and 1745 Nos. 5, 6, and 7 . . .
Art. 1734. Common carriers are responsible for the loss, destruction,
or deterioration of the goods, unless the same is due to any of the
following causes only:
(1)

Flood, storm, earthquake, lightning, or other natural

disaster or calamity;

. . .
Art. 1739. In order that the common carrier may be exempted
from responsibility, the natural disaster must have been the
proximate and only cause of the loss. However, the common carrier
must exercise due diligence to prevent or minimize loss before, during
and after the occurrence of flood, storm, or other natural disaster in
order that the common carrier may be exempted from liability for the
loss, destruction, or deterioration of the goods . . . (Emphasis supplied)
Caso fortuito or force majeure (which in law are identical insofar
as they exempt an obligor from liability) [18] by definition, are
extraordinary events not foreseeable or avoidable, events that could
not be foreseen, or which though foreseen, were inevitable. It is
therefore not enough that the event should not have been foreseen or
anticipated, as is commonly believed but it must be one impossible to
foresee or to avoid.[19]
In this case, the calamity which caused the loss of the cargoes
was not unforeseen nor was it unavoidable. In fact, the other vessels
in the port of San Jose, Antique, managed to transfer to another place,
a circumstance which prompted SMCs District Sales Supervisor to
request that the D/B Lucio be likewise transferred, but to no avail. The
D/B Lucio had no engine and could not maneuver by itself. Even if
ANCOs representatives wanted to transfer it, they no longer had any
means to do so as the tugboat M/T ANCO had already departed,
leaving the barge to its own devices. The captain of the tugboat
should have had the foresight not to leave the barge alone considering
the pending storm.
While the loss of the cargoes was admittedly caused by the
typhoon Sisang, a natural disaster, ANCO could not escape liability to
respondent SMC. The records clearly show the failure of petitioners
representatives to exercise the extraordinary degree of diligence

mandated by law. To be exempted from responsibility, the natural

disaster should have been the proximate and only cause of the loss.
[20]
There must have been no contributory negligence on the part of the
common carrier. As held in the case of Limpangco Sons v. Yangco
Steamship Co.:[21]
. . . To be exempt from liability because of an act of God, the tug must
be free from any previous negligence or misconduct by which that loss
or damage may have been occasioned. For, although the immediate
or proximate cause of the loss in any given instance may have been
what is termed an act of God, yet, if the tug unnecessarily exposed the
two to such accident by any culpable act or omission of its own, it is
not excused.[22]
Therefore, as correctly pointed out by the appellate court, there
was blatant negligence on the part of M/T ANCOs crewmembers, first
in leaving the engine-less barge D/B Lucio at the mercy of the storm
without the assistance of the tugboat, and again in failing to heed the
request of SMCs representatives to have the barge transferred to a
safer place, as was done by the other vessels in the port; thus, making
said blatant negligence the proximate cause of the loss of the cargoes.
We now come to the issue of whether or not FGU can be held
liable under the insurance policy to reimburse ANCO for the loss of the
cargoes despite the findings of the respondent court that such loss was
occasioned by the blatant negligence of the latters employees.
One of the purposes for taking out insurance is to protect the
insured against the consequences of his own negligence and that of
his agents. Thus, it is a basic rule in insurance that the carelessness
and negligence of the insured or his agents constitute no defense on
the part of the insurer.[23] This rule however presupposes that the loss
has occurred due to causes which could not have been prevented by
the insured, despite the exercise of due diligence.
The question now is whether there is a certain degree of
negligence on the part of the insured or his agents that will deprive him
the right to recover under the insurance contract. We say there is.
However, to what extent such negligence must go in order to
exonerate the insurer from liability must be evaluated in light of the
circumstances surrounding each case. When evidence show that the
insureds negligence or recklessness is so gross as to be sufficient to
constitute a willful act, the insurer must be exonerated.
In the case of Standard Marine Ins. Co. v. Nome Beach L. & T.
Co.,[24] the United States Supreme Court held that:
The ordinary negligence of the insured and his agents has long been
held as a part of the risk which the insurer takes upon himself, and the
existence of which, where it is the proximate cause of the loss, does
not absolve the insurer from liability. But willful exposure, gross
negligence, negligence amounting to misconduct, etc., have often
been held to release the insurer from such liability.[25] [Emphasis ours]
...
In the case of Williams v. New England Insurance Co., 3 Cliff. 244,
Fed. Cas. No. 17,731, the owners of an insured vessel attempted to
put her across the bar at Hatteras Inlet. She struck on the bar and was
wrecked. The master knew that the depth of water on the bar was
such as to make the attempted passage dangerous. Judge Clifford
held that, under the circumstances, the loss was not within the
protection of the policy, saying:

Authorities to prove that persons insured cannot recover for a loss

occasioned by their own wrongful acts are hardly necessary, as the
proposition involves an elementary principle of universal application.
Losses may be recovered by the insured, though remotely occasioned
by the negligence or misconduct of the master or crew, if proximately
caused by the perils insured against, because such mistakes and
negligence are incident to navigation and constitute a part of the perils
which those who engage in such adventures are obliged to incur; but it
was never supposed that the insured could recover indemnity for a
loss occasioned by his own wrongful act or by that of any agent for
whose conduct he was responsible.[26] [Emphasis ours]
From the above-mentioned decision, the United States Supreme
Court has made a distinction between ordinary negligence and gross
negligence or negligence amounting to misconduct and its effect on
the insureds right to recover under the insurance contract. According
to the Court, while mistake and negligence of the master or crew are
incident to navigation and constitute a part of the perils that the insurer
is obliged to incur, such negligence or recklessness must not be of
such gross character as to amount to misconduct or wrongful acts;
otherwise, such negligence shall release the insurer from liability under
the insurance contract.
In the case at bar, both the trial court and the appellate court had
concluded from the evidence that the crewmembers of both the D/B
Lucio and the M/T ANCO were blatantly negligent. To wit:
There was blatant negligence on the part of the employees of
defendants-appellants when the patron (operator) of the tug boat
immediately left the barge at the San Jose, Antique wharf despite the
looming bad weather. Negligence was likewise exhibited by the
defendants-appellants representative who did not heed Macabuags
request that the barge be moved to a more secure place. The prudent
thing to do, as was done by the other sea vessels at San Jose, Antique
during the time in question, was to transfer the vessel to a safer
wharf. The negligence of the defendants-appellants is proved by the
fact that on 01 October 1979, the only simple vessel left at the wharf in
San Jose was the D/B Lucio.[27] [Emphasis ours]
As stated earlier, this Court does not find any reason to deviate
from the conclusion drawn by the lower court, as sustained by the
Court of Appeals, that ANCOs representatives had failed to exercise
extraordinary diligence required of common carriers in the shipment of
SMCs cargoes. Such blatant negligence being the proximate cause of
the loss of the cargoes amounting to One Million Three Hundred FortySix Thousand One Hundred Ninety-Seven Pesos (P1,346,197.00)
This Court, taking into account the circumstances present in the
instant case, concludes that the blatant negligence of ANCOs
employees is of such gross character that it amounts to a wrongful act
which must exonerate FGU from liability under the insurance contract.
WHEREFORE, premises considered, the Decision of the Court
of Appeals dated 24 February 1999 is hereby AFFIRMED with
MODIFICATION dismissing the third-party complaint.
SO ORDERED.

SULPICIO LINES, INC., petitioner, vs. FIRST LEPANTO-TAISHO

INSURANCE CORPORATION, respondent.
THE FACTS
On 25 February 1992, Taiyo Yuden Philippines, Inc. (owner of
the goods) and Delbros, Inc. (shipper) entered into a contract,
evidenced by Bill of Lading No. CEB/SIN-008/92 issued by the latter in
favor of the owner of the goods, for Delbros, Inc. to transport a
shipment of goods consisting of three (3) wooden crates containing
one hundred thirty-six (136) cartons of inductors and LC compound on
board the V Singapore V20 from Cebu City to Singapore in favor of the
consignee, Taiyo Yuden Singapore Pte, Ltd.

The plaintiff has failed to prove its case. The first witness for the
plaintiff merely testified about the payment of the claim based on the
documents accompanying the claim which were the Packing List,
Commercial Invoices, Bill of Lading, Claims Statement, Marine
Policies, Survey Report, Marine Risk Note, and the letter to Third Party
carriers and shipping lines (Exhibit A-J).
The check was paid and delivered to the assured as evidenced by the
check voucher and the subrogation receipt.
On cross-examination by counsel for the Sulpicio Lines, he said that
their company paid the claim less 35% salvage value based on the
adjuster report. This testimony is hearsay.

For the carriage of said shipment from Cebu City to Manila,

Delbros, Inc. engaged the services of the vessel M/V Philippine
Princess, owned and operated by petitioner Sulpicio Lines, Inc.
(carrier). The vessel arrived at the North Harbor, Manila, on 24
February 1992.

The second witness for the plaintiff, Arturo Valdez, testified, among
others, that he, together with a co-surveyor and a representative of
Sulpicio Lines had conducted a survey of the shipment at the
compound of Sulpicio Lines. He prepared a survey report (Exhibits G
and G-1) and took a picture of shipment (Exhibit G-2).

During the unloading of the shipment, one crate containing fortytwo (42) cartons dropped from the cargo hatch to the pier apron. The
owner of the goods examined the dropped cargo, and upon an alleged
finding that the contents of the crate were no longer usable for their
intended purpose, they were rejected as a total loss and returned to
Cebu City.

On cross-examination, he said that two cartons were torn at the sides

with top portion flaps opened and the 41 cartons were properly sealed
and in good order conditions. Two cartons were already opened and
slightly damaged. He merely looked at them but did not conduct an
inspection of the contents. What he was referring to as slightly
damaged were the cartons only and not the contents.

The owner of the goods filed a claim with herein petitioner-carrier

for the recovery of the value of the rejected cargo which was refused
by the latter. Thereafter, the owner of the goods sought payment from
respondent First Lepanto-Taisho Insurance Corporation (insurer) under
a marine insurance policy issued to the former. Respondent-insurer
paid the claim less thirty-five percent (35%) salvage value or P194,
220.31.

From the foregoing evidence, it is apparent that the plaintiff had failed
to prove its case with a preponderance of evidence.

The payment of the insurance claim of the owner of the goods by

the respondent-insurer subrogated the latter to whatever right or legal
action the owner of the goods may have against Delbros, Inc. and
petitioner-carrier, Sulpicio Lines, Inc. Thus, respondent-insurer then
filed claims for reimbursement from Delbros, Inc. and petitioner-carrier
Sulpicio Lines, Inc. which were subsequently denied.
On 04 November 1992, respondent-insurer filed a suit for
damages docketed as Civil Case No. 92-63337 with the trial court
against Delbros, Inc. and herein petitioner-carrier. On 05 February
1993, petitioner-carrier filed its Answer with Counterclaim. Delbros,
Inc. filed on 15 April 1993 its Answer with Counterclaim and Crossclaim, alleging that assuming the contents of the crate in question were
truly in bad order, fault is with herein petitioner-carrier which was
responsible for the unloading of the crates.

.
WHEREFORE, in view of the foregoing considerations, judgment is
hereby rendered dismissing the Complaint, defendant Sulpicio Lines
counterclaim and defendant Delbros Inc.s cross-claim.[4]
A Motion for Reconsideration was then filed by herein
respondent-insurer and subsequently denied by the trial court in an
Order dated 07 February 1995 on the ground that it did not raise any
new issue. Thus, respondent-insurer instituted an appeal with the
Court of Appeals, which reversed the dismissal of the complaint by the
lower court, the decretal portion of which reads:
WHEREFORE, the appeal is granted. The decision appealed from is
REVERSED. Defendants-appellees Delbros and Sulpicio Lines are
hereby ordered to pay, jointly and severally, plaintiff-appellant the sum
of P194,220.31 representing actual damages, plus legal interest
counted from the filing of the complaint until fully paid.[5]
The appellate court disposed of the issues in the case in this

Petitioner-carrier filed its Answer to Delbros, Inc.s cross-claim

asserting that it observed extraordinary diligence in the handling,
storage and general care of the shipment and that subsequent
inspection of the shipment by the Manila Adjusters and Surveyors
Company showed that the contents of the third crate that had fallen
were found to be in apparent sound condition, except that 2 cello bags
each of 50 pieces ferri inductors No. LC FL 112270K-60 (c) were
unaccounted for and missing as per packaging list.
After hearing, the trial court dismissed the complaint for
damages as well as the counterclaim filed by therein defendant
Sulpicio Lines, Inc. and the cross-claim filed by Delbros, Inc.
According to the RTC:

wise:
Furthermore, the evidence shows that one of the three crates fell
during the unloading at the pier in Manila. The wooden crate which fell
was damaged such that this particular crate was not anymore sent to
Singapore and was instead shipped back to Cebu from Manila. Upon
examination, it was found that two (2) cartons of the forty-two (42)
cartons contained in this crate were externally damaged. They were
torn at the sides and their top portions or flaps were open. These facts
were admitted by all the parties. Defendant-appellees, however, insist
that it was only the external packaging that was damaged, and that
there was no actual damage to the goods such that would make them
liable to the shipper. This theory is erroneous. When the goods are
placed at a common carriers possession for delivery to a specified

consignee, they are in good order and condition and are supposed to
be transported and delivered to the consignee in the same state. In
the case herein, the goods were received by defendant-appellee
Delbros in Cebu properly packed in cardboard cartons and then placed
in wooden crates, for delivery to the consignee in Singapore.
However, before the shipment reached Singapore (while it was in
Manila) one crate and 2 cartons contained therein were not anymore in
their original state. They were no longer fit to be sent to Singapore.
.
As We have already found, there is damage suffered by the goods of
the shipper. This consists in the destruction of one wooden crate and
the tearing of two of the cardboard boxes therein rendering then unfit
to be sent to Singapore. Defendant-appellee Sulpicio Lines admits
that this crate fell while it was being unloaded at the Manila pier.
Falling of the crate was negligence on the part of defendant-appellee
Sulpicio Lines under the doctrine of res ipsa loquitur. Defendantappellee Sulpicio Lines cannot exculpate itself from liability because it
failed to prove that it exercised due diligence in the selection and
supervision of its employees to prevent the damage.[6]
On 21 June 1999, herein petitioner-carrier filed its Motion for
Reconsideration of the decision of the Court of Appeals which was
subsequently denied in a Resolution dated 13 October 1999. Hence,
the instant petition.
During the pendency of the appeal before this Court, Delbros,
Inc. filed a manifestation stating that its appeal[7] filed before this Court
had been dismissed for being filed out of time and thus the case as
against it was declared closed and terminated. As a consequence, it
paid in full the amount of the damages awarded by the appellate court
to the respondent-insurer. Before this Court, Delbros, Inc. prays for
reimbursement, contribution, or indemnity from its co-defendant, herein
petitioner-carrier Sulpicio Lines, Inc. for whatever it had paid to
respondent-insurer in consonance with the decision of the appellate
court declaring both Delbros, Inc. and petitioner-carrier Sulpicio Lines,
Inc. jointly and severally liable.
ISSUES
Petitioner-carrier raises the following issues in its petition:
1. The Court of Appeals erred in not holding that the trial
court justly and correctly dismissed the complaint
against Sulpicio Lines, which dismissal is already final.
2. The Court of Appeals erred in not dismissing the
appeal for failure of appellant to comply with the
technical requirement of the Rules of Court.
RULING OF THE COURT
We shall first address the procedural issue raised by petitionercarrier, Sulpicio Lines, Inc. that the Court of Appeals should have
dismissed the appeal for failure of respondent-insurer to attach a copy
of the decision of the trial court to its appellants brief in violation of
Rule 44, Section 13(h) of the Rules of Civil Procedure.[8]
A perusal of the records will show, however, that in a
Resolution[9] dated 13 August 1996, the Court of Appeals required
herein respondent-insurer to submit seven (7) copies of the questioned
decision within five (5) days from notice. Said Resolution was properly
complied with.

As a rule, the right to appeal is a statutory right and one who

seeks to avail of that right must comply with the manner required by
the pertinent rules for the perfection of an appeal. Nevertheless, this
Court has allowed the filing of an appeal upon subsequent compliance
with the requirements imposed by law, where a strict application of the
technical rules will impair the proper administration of justice. As
enunciated by the Court in the case of Jaro v. Court of Appeals:[10]
There is ample jurisprudence holding that the subsequent and
substantial compliance of an appellant may call for the relaxation of the
rules of procedure. In Cusi-Hernandez vs. Diaz [336 SCRA 113]
andPiglas-Kamao vs. National Labor Relations Commission [357SCRA
640], we ruled that the subsequent submission of the missing
documents with the motion for reconsideration amounts to substantial
compliance. The reasons behind the failure of the petitioners in these
two cases to comply with the required attachments were no longer
scrutinized.[11]
We see no error, therefore, on the part of the Court of Appeals
when it gave due course to the appeal after respondent-insurer had
submitted copies of the RTC decision, albeit belatedly.
We now come to the substantial issues alleged by petitionercarrier. The pivotal question to be considered in the resolution of this
issue is whether or not, based on the evidence presented during the
trial, the owner of the goods, respondent-insurers predecessor-ininterest, did incur damages, and if so, whether or not petitioner-carrier
is liable for the same.
It cannot be denied that the shipment sustained damage while in
the custody of petitioner-carrier. It is not disputed that one of the three
(3) crates did fall from the cargo hatch to the pier apron while
petitioner-carrier was unloading the cargo from its vessel. Neither is it
impugned that upon inspection, it was found that two (2) cartons were
torn on the side and the top flaps were open and that two (2) cello
bags, each of 50 pieces ferri inductors, were missing from the cargo.
Petitioner-carrier contends that its liability, if any, is only to the
extent of the cargo damage or loss and should not include the lack of
fitness of the shipment for transport to Singapore due to the damaged
packing. This is erroneous. Petitioner-carrier seems to belabor under
the misapprehension that a distinction must be made between the
cargo packaging and the contents of the cargo. According to it,
damage to the packaging is not tantamount to damage to the cargo. It
must be stressed that in the case at bar, the damage sustained by the
packaging of the cargo while in petitioner-carriers custody resulted in
its unfitness to be transported to its consignee in Singapore. Such
failure to ship the cargo to its final destination because of the ruined
packaging, indeed, resulted in damages on the part of the owner of the
goods.
The falling of the crate during the unloading is evidence of
petitioner-carriers negligence in handling the cargo. As a common
carrier, it is expected to observe extraordinary diligence in the handling
of goods placed in its possession for transport. [12] The standard of
extraordinary diligence imposed upon common carriers is considerably
more demanding than the standard of ordinary diligence, i.e., the
diligence of a good paterfamilias established in respect of the ordinary
relations between members of society.[13] A common carrier is bound to
transport its cargo and its passengers safely "as far as human care
and foresight can provide, using the utmost diligence of a very
cautious person, with due regard to all circumstances.[14] 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 the damage to, or destruction of, the
goods entrusted to it for safe carriage and delivery.[15] 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.[16]
Thus, when the shipment suffered damages as it was being
unloaded, petitioner-carrier is presumed to have been negligent in the
handling of the damaged cargo. Under Articles 1735[17] and 1752[18] of
the Civil Code, common carriers are presumed to have been at fault or
to have acted negligently in case the goods transported by them are
lost, destroyed or had deteriorated. To overcome the presumption of
liability for loss, destruction or deterioration of goods under Article
1735, the common carrier must prove that they observed extraordinary
diligence as required in Article 1733[19] of the Civil Code.[20]
Petitioner-carrier miserably failed to adduce any shred of
evidence of the required extraordinary diligence to overcome the
presumption that it was negligent in transporting the cargo.
Coming now to the issue of the extent of petitioner-carriers
liability, it is undisputed that respondent-insurer paid the owner of the
goods under the insurance policy the amount of P194,220.31 for the
alleged damages the latter has incurred. Neither is there dispute as to
the fact that Delbros, Inc. paid P194,220.31 to respondent-insurer in
satisfaction of the whole amount of the judgment rendered by the Court
of Appeals. The question then is: To what extent is Sulpicio Lines, Inc.,
as common carrier, liable for the damages suffered by the owner of the
goods?
Upon respondent-insurers payment of the alleged amount of
loss suffered by the insured (the owner of the goods), the insurer is
entitled to be subrogated pro tanto to any right of action which the
insured may have against the common carrier whose negligence or
wrongful act caused the loss.[21] Subrogation is the substitution of one
person in the place of another with reference to a lawful claim or right,
so that he who is substituted succeeds to the rights of the other in
relation to a debt or claim, including its remedies or securities. [22] The
rights to which the subrogee succeeds are the same as, but not
greater than, those of the person for whom he is substituted, that is, he
cannot acquire any claim, security or remedy the subrogor did not
have.[23] In other words, a subrogee cannot succeed to a right not
possessed by the subrogor.[24] A subrogee in effect steps into the shoes
of the insured and can recover only if the insured likewise could have
recovered.[25]
As found by the Court of Appeals, there was damage suffered by
the goods which consisted in the destruction of one wooden crate and
the tearing of two (2) cardboard boxes therein which rendered them
unfit to be sent to Singapore. [26] The falling of the crate was negligence
on the part of Sulpicio Lines, Inc. for which it cannot exculpate itself
from liability because it failed to prove that it exercised extraordinary
diligence.[27]
Hence, we uphold the ruling of the appellate court that herein
petitioner-carrier is liable to pay the amount paid by respondent-insurer
for the damages sustained by the owner of the goods.
As stated in the manifestation filed by Delbros, Inc., however,
respondent-insurer had already been paid the full amount granted by
the Court of Appeals, hence, it will be tantamount to unjust enrichment
for respondent-insurer to again recover damages from herein
petitioner-carrier.

With respect to Delbros, Inc.s prayer contained in its

manifestation that, in case the decision in the instant case be adverse
to petitioner-carrier, a pronouncement as to the matter of
reimbursement, indemnification or contribution in favor of Delbros, Inc.
be included in the decision, this Court will not pass upon said issue
since Delbros, Inc. has no personality before this Court, it not being a
party to the instant case. Notwithstanding, this shall not bar any action
Delbros, Inc. may institute against petitioner-carrier Sulpicio Lines, Inc.
with respect to the damages the latter is liable to pay.
WHEREFORE, premises considered, the assailed Decision of
the Court of Appeals dated 26 May 1999 and its Resolution dated 13
October 1999 are hereby AFFIRMED. No costs.
SO ORDERED.

Common carrier; liability. Petitioner, through its bus driver, failed to

observe extraordinary diligence, and was, therefore, negligent in
transporting the passengers of the bus safely to Gapan, Nueva Ecija
on January 27, 1995, since the bus bumped a tree and a house, and
caused physical injuries to respondent. Article 1759 of the Civil Code
explicitly states that the common carrier is liable for the death or injury
to passengers through the negligence or willful acts of its employees,
and that such liability does not cease upon proof that the common
carrier exercised all the diligence of a good father of a family in the
selection and supervision of its employees. Hence, even if petitioner
was able to prove that it exercised the diligence of a good father of the
family in the selection and supervision of its bus driver, it is still liable to
respondent for the physical injuries he sustained due to the vehicular
accident. R Transport Corporation vs. Eduardo Pante, G.R. No.
162104, September 15, 2009.
Calalas

CA

FACTS:
At 10 o'clock in the morning of August 23, 1989, private respondent
Eliza Jujeurche G. Sunga, then a college freshman majoring in
Physical Education at the Siliman University, took a passenger jeepney
owned and operated by petitioner Vicente Calalas. As the jeepney was
filled to capacity of about 24 passengers, Sunga was given by the
conductor an "extension seat," a wooden stool at the back of the door
at
the
rear
end
of
the
vehicle.
On the way to Poblacion Sibulan, Negros Occidental, the jeepney
stopped to let a passenger off. As she was seated at the rear of the
vehicle, Sunga gave way to the outgoing passenger. Just as she was
doing so, an Isuzu truck driven by Iglecerio Verena and owned by
Francisco Salva bumped the left rear portion of the jeepney. As a
result,
Sunga
was
injured.
On October 9, 1989, Sunga filed a complaint for damages against
Calalas, alleging violation of the contract of carriage by the former in
failing to exercise the diligence required of him as a common carrier.
Calalas, on the other hand, filed a third-party complaint against
Francisco
Salva,
the
owner
of
the
Isuzu
truck.
DECISION
OF
LOWER
COURTS:
1. RTC Dumaguete rendered judgment against Salva holding that
the
driver
of
the
Isuzu
truck
was
responsible
It took cognizance of another case (Civil Case No. 3490), filed by
Calalas against Salva and Verena, for quasi-delict, in which Branch 37
of the same court held Salva and his driver Verena jointly liable to
Calalas
for
the
damage
to
his
jeepney.
2. CA reversed the RTC, awarding damages instead to Sunga as
plaintiff in an action for breach of contract of carriage since the cause
of action was based on such and not quasi delict.
Hence,
current
petition
for
review
on
certiorari.
ISSUE:
Whether (per ruling in Civil Case) negligence of Verena was the
proximate cause of the accident negates his liability and that to rule

otherwise would be to make the common carrier an insurer of the

safety
of
its
passengers
In relation thereto, does the principle of res judicata apply?
RULING:
No.
The issue in Civil Case No. 3490 was whether Salva and his driver
Verena were liable for quasi-delict for the damage caused to
petitioner's jeepney. On the other hand, the issue in this case is
whether petitioner is liable on his contract of carriage.

Quasi-delict / culpa aquiliana / culpa extra contractual

1. Has as its source the negligence of the tortfeasor
2. negligence or fault should be clearly established because it is the
basis of the action
3. doctrine of proximate cause is applicable
(device for imputing liability to a person where there is no relation
between him and another party, obligation is created by law itself)
Breach
of
contract
/
culpa
contractual
1. premised upon the negligence in the performance of a contractual
obligation
2. action can be prosecuted merely by proving the existence of the
contract and the fact that the obligor (here, the common carrier) failed
to
transport
his
passenger
safely
to
his
destination
3. not available; it is the parties themselves who create the obligation
and the function of the law is merely to regulate the relation thus
created
In case of death or injuries to passengers, Art. 1756 of the Civil Code
provides that common carriers are presumed to have been at fault or
to have acted negligently unless they prove that they observed
extraordinary diligence as defined in Arts. 1733 and 1755 of the Code.
This provision necessarily shifts to the common carrier the burden of
proof.
Hence, Vicente Calalas (operator) is liable since he did not exercise
utmost
diligence.
1. Jeepney was not properly parked;
2. Overloading of passengers.

Death of Marir Grace and physical injuries of other passengers.3.

FILED:
Damages arising from culpa contractual.ANSWER: Incident was
purely accidental. Always exercised extra-ord diligence in 50yr ops.4.
RTC :
In favor of Gammad. Awarded: Actual Damages 122K, Death
Indemnity 50K, Exemplary and Moral Damages
400K, Compensatory Dam 1.5M, attys fees 10% total, costs of suit.
CA:
Affirmed but changed amounts, deleting completely the death
indemnity and costs of suit. Actual P88K, Compe
1.5M, Moral and Exemp P400, attys fees 10%.
Issues: 1. w/n the pet. counsel was guilty of gross negligence2. w/n
pet should be held liable for breach of C of Carriage3. w/n the award of
damages was proper.Held:1.
Counsel guilty of negligence, but Pet. also guilty of contributory
negligence.a.
GN: Negligence counsel binds the client.EXC: where reckless or gross
negligence deprives client of due process.Application will result in
outright deprivation of liberty.b.
The exceptions are not present in this case. Although initially declared
in default Atty Paguirigan was able tosuccessfully move for setting
aside of the order of default. He also filed a timely appeal. Hence
pet was not deprived of DP. Pet also was late in issuing an SPA,
only after the order of default. Therefore contributory negligence.2.
Victory liner was correctly found liable for breach of contract of
carriage.a.
When a passenger dies or id injured, CC presumed at fault. Unless
presumption rebutted. Here no evidence waspresented to rebut this
statutory presumption that the proximate cause of the death of Marie
Grace is the negligenceof petitioner.The award of damages should be
modified.3.
Compensatory damages
should be deleted for lack of basis.GN:Docu evi should be presented
to substantiate damages for loss of earn capacity.EXC: (1) Deceased
was self-employed earning less than min wage. (2) deceased was a
daily wage worker earning less thanminimum wage.HERE: Only
testimony of Resp. was presented that the deceased was 39yo,
employed as Section Chief of BIR, earningP83K per annum. No docu
evidence was presented and the case fall on neither of the two
exception. Therefore the claimfor loss of earn capacity was
unsubstantiated.4.
Loss having been established, but the amount unsubstantiated
, temperate damages
may be awarded @P500K, pursuant to NCC 2224, when the court
finds that there is a loss but its amount cannot be proved with
certainty.a.
Pleno v. CA

the court awarded P200K temperate damages because the income of

the victim was not sufficientlyproven.5.

Victory Liner v. Gammad

Ynares-Santiago | Nov. 25, 2004Pet: Victory Liner

owner of bus that killed Marie Grace Gammad wife of Resp:

Respondent Rosalito Gammad, April Rossan, Rois Rozano and Diana
Gammad (children)Facts:1.
3:00 am, 14 Mar 96: Aircon Victory Liner bus (Tugegarao to Manila).
The bus was running at high speed. The bus fellinto a ravine at Sta Fe,
Nueva Vizcaya.2.

Moral Damages
cannot be lumped with exemplary damages. They are based on
different jural foundations. (People v.Trapane)In Culpa Contractual,
moral damages may be awarded when the defendant acted in bad
faith or was guilty of grossnegligence (amounting to BF) or in wanton
disregard of contractual obli and AS IN THIS CASE when the act
of breachof contract itself constitutes the ort that results in physical
injuries. By special provision (NCC1764 in relation to NCC2206) moral
damages may also be awarded in case of the death of a passenger
results from the breach of carriage.HERE: respondents should be
awarded moral damages due to compensate for the grief caused by
the death of thedeceased.6.

Furthermore Victory failed to prove the exercise the extra ord diligence,
and is presumed to have acted recklessly. Thus.The award for
exemplary damages
is proper.7.
People v. Duban: Only substantiated and proven expenses or those
that appear to have been genuinely incurred will berecognized. HERE
actual damages will be further reduced to the amount actually
supported by receipts in Ex J and F.8.
Attys fees
may also be recovered in case at bar where exemplary damages are
awarded. 10%WHEREFORE Affirmed with modification. P50K
indemnity for death, P100K moral damages, P100K exemplary
damages,
P78K actual damages, P500K temperate damages, 10% total amount
as attys 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
o

LRTA vs. NAVIDAD

FACTS:

October 14, 1993, 7:30 p.m. : Drunk Nicanor Navidad

(Nicanor) entered the EDSA LRT station after purchasing a
token.

While Nicanor was standing at the platform near

the LRT tracks, the guard Junelito Escartin approached him.

Due to misunderstanding, they had a fist fight

Nicanor fell on the tracks and killed

instantaneously upon being hit by a moving train operated by
Rodolfo Roman

December 8, 1994: The widow of Nicanor, along with her

children, filed a complaint for damages against Escartin, Roman,
LRTA, Metro Transit Org. Inc. and Prudent (agency of security
guards) for the death of her husband.

LRTA and Roman filed a counter-claim against

Nicanor and a cross-claim against Escartin and Prudent

Prudent: denied liability averred that it

had exercised due diligence in the selection and surpervision of
its security guards

LRTA and Roman: presented evidence

Prudent
and
Escartin:
demurrer
contending that Navidad had failed to prove that Escartin was
negligent in his assigned task

RTC: In favour of widow and against Prudent and Escartin,

complaint against LRT and Roman were dismissed for lack
of merit

CA: reversed by exonerating Prudent and held LRTA and

Roman liable
ISSUE: W/N LRTA and Roman should be liable according to the
contract of carriage
HELD: NO. Affirmed with Modification: (a) nominal damages is
DELETED (CANNOT co-exist w/ compensatory damages) (b) Roman
is absolved.

Law and jurisprudence dictate that a common carrier, both

from the nature of its business and for reasons of public policy, is
burdened with the duty off exercising utmost diligence in ensuring
the safety of passengers

Civil Code:

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

Art. 1756. In case of death or injuries to

passengers, common carriers are presumed to have been at fault
or to have acted negligently, unless they prove that they observed
extraordinary diligence as prescribed in articles 1733 and 1755

Art. 1759. Common carriers are liable for the

death of or injuries to passengers through the negligence or wilful
acts of the formers employees, although such employees may
have acted beyond the scope of their authority or in violation of
the orders of the common carriers

Art. 1763. A common carrier is responsible for

injuries suffered by a passenger on account of the wilful acts or
negligence of other passengers or of strangers, if the common
carriers employees through the exercise of the diligence of a
good father of a family could have prevented or stopped the act
or omission.
Carriers presumed to be at fault or been negligent and by
simple proof of injury, the passenger is relieaved of the duty to
still establish the fault or negligence of the carrier or of its
employees and the burden shifts upon the carrier to prove that
the injury is due to an unforeseen event or to force majeure
Where it hires its own employees or avail itself of
the services of an outsider or an independent firm to undertake
the task, the common carrier is NOT relieved of its responsibilities
under the contract of carriage
GR: Prudent can be liable only for tort under Art. 2176 and
related provisions in conjunction with Art. 2180 of the Civil Code.
(Tort may arise even under a contract, where tort [quasi-delict
liability] is that which breaches the contract)
EX: if employers liability is negligence or fault on
the part of the employee, employer can be made liable on the
basis of the presumption juris tantum that the employer failed to
exercise diligentissimi patris families in the selection and
supervision of its employees.
EX to the EX: Upon showing due diligence in the
selection and supervision of the employee
Factual finding of the CA: NO link bet. Prudent and the death
of Nicanor for the reason that the negligence of Escartin was
NOT proven
NO showing that Roman himself is guilty of any culpable act
or omission, he must also be absolved from liability
Contractual tie bet. LRT and Nicanor is NOT itself
a juridical relation bet. Nicanor and Roman
Roman can be liable only for his own
fault or negligence

Baliwag Transit vs. CA (GR 116110, 15 May 1996)

Second Division, Puno (J): 4 concur
Facts:
On 31 July 1980, Leticia Garcia, and her 5-year old son, Allan Garcia,
boarded Baliwag Transit Bus2036 bound for Cabanatuan City driven
by Jaime Santiago. They took the seat behind the driver. At about7:30
p.m., in Malimba, Gapan, Nueva Ecija, the bus passengers saw a
cargo truck, owned by A & J Trading,parked at the shoulder of the
national highway. Its left rear portion jutted to the outer lane, as the
shoulder ofthe road was too narrow to accommodate the whole truck. A
kerosene lamp appeared at the edge of the roadobviously to serve
as a warning device. The truck driver, Julio Recontique, and his helper,
Arturo Escala, werethen replacing a flat tire. Bus driver Santiago was
driving at an inordinately fast speed and failed to notice thetruck and
the kerosene lamp at the edge of the road. Santiagos passengers
urged him to slow down but hepaid them no heed. Santiago even
carried animated conversations with his co-employees while driving.
Whenthe danger of collision became imminent, the bus passengers
shouted Babangga tayo!. Santiago stepped onthe brake, bu t i t
was too la te. His bus rammed in to the stal led car go truck.
It caused the instant death of S a n t i a g o a n d E s c a l a , a n d
injury to several others. Leticia and Allan Garcia
w e r e a m o n g t h e i n j u r e d passengers. Leticia suffered a
fracture in her pelvis and right leg. They rushed her to the provincial
hospital inCabanatuan City where she was given emergency
treatment. After 3 days, she was transferred to the NationalOrthopedic
Hospital where she was confined for more than a month. She
underwent an operation for partialhip prosthesis. Allan, on the other
hand, broke a leg. He was also given emergency treatment at the
provincialhospital.Spouse s
Anton io
and
Leti cia
Ga rcia
sued Bal iwag Tran si t, In c., A & J Trading and Julio
Re contique for damages in the RTC of Bulacan. Leticia sued as an
injured passenger of Baliwag and as mother of Allan. Atthe time of

the co mplain t, Al lan was a minor, hence, the su it ini tia ted
b y his parents in his favor. Afte r hearing, the trial court
found Baliwag Transit, Inc. liable for having failed to deliver Garcia and
her son totheir poin t of destina tion safel y in viola tion of
Garcia s
and Bali wa g Transits
con tra ctual
relation ;
andlikewise found A & J and Julio Recontique liable for failure to
provide its cargo truck with an early warningdevice in violation of the
Motor Vehicle Law. The trial court ordered Baliwag, A & J Trading and
Recontiqueto pay join tl y and several l y the Gar cia spou ses
(1) P25 ,000.00 hosp ita li za tion and medi cation fee ,
(2) P450,000.00 loss of earnings in eight (8) years, (3) P2,000.00 for
the hospitalization of their son Allan Garcia,(4) P50,000.00 moral
damages, and (5) P30,000.00 attorneys fee.On appeal, the Court of
Appeals modified the trial courts Decision by absolving A & J Trading
from liabilityand by reducing the award of attorneys fees to P10,000.00
and loss of earnings to P300,000.00, respectively.Hence, the petition
for certiorari.The Supreme Court affirmed the Decision of the Court of
Appeals (CA-GR CV-31246) with the modificationreducing the actual
damages for hospitalization and medical fees to P5,017.74; without
costs.
As
a
common
carrier, Baliwag breached
its
contract of carriage when it failed to deliver
i t s passengers, Leticia and Allan Garcia to their destination safe and
sound. A common carrier is bound to carryits passen ger s safel y
as far as human ca re and fore sight can provide, usin g the
u tmost dili gen ce of a ver y cautious person, with due regard for all
the circumstances. In a contract of carriage, it is presumed that
thecommon carrier was at fault or was negligent when a passenger
dies or is injured. Unless the presumption isrebutted, the court need
not even make an express finding of fault or negligence on the part of
the commoncarrier. This statutory presumption may only be overcome
by evidence that the carrier exercised extraordinarydiligence as
prescribed in Articles 1733 and 1755 of the Civil Code.
2.Baliwag
did not
exercise
extraordinary diligence; Driver was
reckless
The records are bereft of any proof to show that Baliwag exercised
extraordinary diligence. On thecontrary, the evidence demonstrates its
drivers recklessness. Leticia Garcia testified that the bus
was runningat a very high speed despite the drizzle and the darkness
of the highway. The passengers pleaded for its driverto slow down ,
bu t their plea was i gnored . Leti cia also revealed that the
driver was smell ing of li quor. She could smell him as she
was sea ted right behind the driver. Ano ther passen ger,
Fel ix Cru z te stified tha t immediately before the collision, the bus
driver was conversing with a co-employee. All these prove the
busdrivers wanton disregard for the physical safety of his passengers,
which makes Baliwag as a common carrierliable for damages under
Article 1759 of the Civil Code.
3 . A r t i c l e
1 7 5 9 ,
N C C
Article 1759 of the Civil Code provides that Common carriers are
liable for the death of or injuriesto passengers th rough the
ne gli gen ce or wi llful l acts of the forme r s emplo yees,
al though such emplo yee s may have acted beyond the scope of
their authority or in violation of the orders of the common carriers.
Thisliability of the common carriers do not cease upon proof that they
exercised all the diligence of a good fatherof a family in the selection or
supervision of their employees.
4.Section
34
(g) of the
Land
Transportation and Traffic Code
Section 34 ( g) of the Land Transpor tation and Traffic Code
provides Lights and reflector wh en parked or disabled.
Appropriate parking lights or flares visible one hundred meters away
shall be displayedat the corner of the vehicle whenever such vehicle is
parked on highways or in places that are not well-lightedor, i s placed
in such manner as to endan ger passing traffi c.
Fur thermo re, ever y mo tor vehicle shall be provided at all times
with built-in reflectors or other similar warning devices either pasted,
painted or attachedat its front and back which shall likewise be visible
at night at least one hundred meters away. No vehicle notprovided with
any of the requirements mentioned in this subsection shall be
registered.
4.Use
of kerosene
lamp
a
substantial compliance of law as to early
warning device
Herein , Bal iwag canno t evade i ts liabi lity by insi sting that
the accident wa s cau sed solel y b y thenegli gen ce of A & J

Trad ing and Julio Recon ti que , for the alleged non use of
an early wa rning device (as testified to by Col. Demetrio dela
Cruz, the station commander of Gapan, Nueva Ecija who investigated
theincident, and Francisco Romano, the bus conductor). The records
do not bear out Baliwags contention. Col.dela Cruz and Romano
testified that they did not see any early warning device at the scene of
the accident.They were referring to the triangular reflectorized plates in
red and yellow issued by the Land TransportationOffice. However, the
evidence shows that Recontique and Ecala placed a kerosene lamp or
torch at the edgeof the road, near the rear portion of the truck to serve
as an early warning device. This substantially complieswith Section 34
(g) of the Land Transportation and Traffic Code. The law clearly allows
the use not only of anearly warning device of the triangular
reflectorized plates variety but also parking lights or flares visible
100meters away. Indeed, Col. dela Cruz himself admitted that a
kerosene lamp is an acceptable substitute for thereflectorized plates.
No negligence, therefore, may be imputed to A & J Trading and its
driver, Recontique.
5 .Tes t imo n y
of
injured
passengers
and
disinterested witnesses against
testimony
of bus conductor
The testimonies of injured passengers who may well be considered as
disinterested witness appear tobe natural and more probable than the
testimony given by Francisco Romano who is undoubtedly interested
inthe outcome of the case, being the conductor of Baliwag Transit Inc.
Thus, among the testimonies offered bythe wi tnesses wh o were
presen t at the scene of the accident, the affirma tive
testimon ies given by the two injured passengers must be upheld
and less credence must be given to the testimony of the bus conductor
whosolely testified that no such early warning device exists.
6 .Tes t imo n y su p p o rt in g p a rk ed t ruc k no t ice d in
drizzly and dark night due to kerosene lamp
T he si tuation then prevail ing a t the time of the accident
was admi ttedl y dri zzl y and all dark. Thi s being so, it would be
improbable and perhaps impossible on the part of the truck helper
without the torch northe kero sene to remove the flat tire s of
the truck. Moreover, wi tne ss including the bus condu ctor
him self admitted that the passengers shouted, that they are going to
bump before the collision which consequentlycaused the bus driver to
apply the brake 3 to 4 meters away from the truck. Again, without the
kerosene northe torch in front of the truck, it would be improbable for
the driver, more so the passengers to notice the truckto be bumped by
the bus considering the darkness of the place at the time of the
accident.
7.Testimony of investigating
officer of little probative value
Although that the investigating officer testified that he found no early
warning device at the time ofhi s investi ga tion , the Court give s
le ss creden ce to such testimon y insofar as he himself
admi tted on cross examination that he did not notice the presence
of any kerosene lamp at the back of the truck because when
hearrived at the scene of the accident, there we re alread y
man y people surroundin g the place . He fur ther admitted that
there exists a probability that the lights of the truck may have been
smashed by the bus at thetime of the accident considering the location
of the truck where its rear portion was connected with the frontportion
of the bus. Investigators testimony therefore did not confirm nor deny
the existence of such warningdevice, making his testimony of
little probative value.
8. Award of P25,000 as hospitalization and
medical fees not supported by evidence;
R e d u c e d t o P5,017.74
T he
award of P25,000 .00 , as hospi tali zation and
medi cal fees, is no t supported b y the evidence on record.
The Garcias presented receipts but their total amounted only to
P5,017.74. To be sure, Leticia testifiedas to the extra amoun t
spen t for her medica l needs but wi thou t more reliable
evidence, her lone testimon y cannot justify the award of
P25,000.00. To prove actual damages, the best evidence available to
the injuredparty must be presented. The court cannot rely on
uncorroborated testimony whose truth is suspect, but mustdepend
upon competent proof that damages have been actually suffered.
Thus, herein, the Court reduced theactual damages for medical
and hospitalization expenses to P5,017.74.
9.Award for amount representing lost
earnings reasonable

T he a ward of P300 ,000 .00 repre senting Leti cia s lost

earnin gs i s rea sonable. Before the acciden t, Leticia was
engaged in embroidery, earning P5,000.00 per month. Her injuries
forced her to stop working.Considering the nature and extent of her
injuries and the length of time it would take her to recover, the
Courtfound it proper that Baliwag should compensate her lost income
for 5 years.
10.Award of moral
damages in accord with law
The award of moral damages is in accord with law. In a breach of
contract of carriage, moral damagesare recoverable if the carrier,
through its agent, acted fraudulently or in bad faith. The evidence
shows thegross negligence of the driver of Baliwag bus which
amounted
to
bad
faith.
Without
doubt,
Leticia
and
Allanexperienced physi cal
suffering,
menta l an gui sh
and ser ious
anxie ty
b y reason of the
acciden t. Le ticiaunderwent an operation to replace her broken hip
bone with a metal plate. She was confined at the NationalOr thopedi c
Ho spital for 45 days. The youn g Allan wa s also confined in
the hosp ita l for hi s foot in jur y.Contrary to the contention
of Baliwag, the award of moral damages to Antonio and Leticia Garcia
was not intheir capaci ty as paren ts of Allan . Leti cia wa s
given moral dama ges as an injured party. Allan wa s also
granted moral damages as an injured party but because of his minority,
the award in his favor has to be givento his father who represented him
in the suit.
1 1 . A w a r d o f
a t t o r n e y s
f e e s
j u s t i f i e d
T he award of attorne ys fees is ju stified . The complain t for
dama ge s was in stitu ted by the Garcia spouses on 15 December
1982, following the unjustified refusal of Baliwag to settle their claim.
The Decisionwas promulgated by the trial court only on 29 January
1991 or about 9 years later. Numerous pleadings werefiled before the
trial court, the appellate court and to the Supreme Court. Given the
complexity of the case andthe amount of damages involved, the award
of attorneys fee for P10,000.00 is just and reasonable.

Zulueta vs. Pan American World Airways4 SCRA 397Facts

: Plaintiff Zulueta, his wife and daughter were pas
s e n g e r s a b o a r d defendants plane from Honolulu to
Manila . Upon rea ching Wake Island the passengers were
advised that they could disembark for a stopover for about30
minu te s. Plain tiff wen t to the toile t at the te rminal building
bu t
findin g
it f u l l
walked 200
ya r d s a wa y. Up o n r e t u r n in g h e t o l d a n e m p l o ye e o
f t h e defendant that the y almost made him mi ss the flight
becau se of a defectiveannouncin g system . He had a
di scu ssion
with
either
the
plan
cap tain
or
thet e r m i n a l m a n a g e r . H e w a s t o l d
that
they would open his
bags which her e f u s e d a n d h e w a r n e d t h e m o f
t h e c o n s e q u e n c e s . J u s t t h e s a m e t h e y opened
hi s ba gs and found no thing prohibited . They for ced him to
go out of the plane and left him at Wake Island . His wife
had to send him mone y and h e w a s a b l e t o l e a v e W a k e
I s l a n d a n d r e t u r n t o M a n i l a t h r u H o n o l u l u a n d Tokyo
after two days. This action was to recover damages from thedefendant.
Issue:
WON moral damages may be recovered.
Held
: The records amply establish plaintiffs right to recover both moral
andexemplary damages. Indeed, the rude and rough reception plaintiff
receiveda t t h e h a n d s o f S i t t o n o r C a p t a i n Z e n t n e r
when the latter met him at the r a m p ( W h a t i n
the hell do you think you are? Get on that
p l a n e ) ; t h e menacing attitude of Zentner or Sitton and the
supercilious manner in whichhe had asked plaintiff to open his bags
(open your bag, and when told that afourth ba g wa s mi ssing, I
don t
give
a
damn) ;
the
abusive
language
andh i g h l y s c o r n f u l r e f e r e n c e t o p l a i n t i f f s a s
m o n k e y s b y o n e o f P A N A M s employees (who turning
to Mrs. Zulueta remarked, will you pull these threemon ke ys out of
here?) ; the unfriendl y atti tude, the u gl y stare s and
unkindremarks to which plaintiffs were subjected, and their being
cordoned by menin uniform as if the y were cr iminal s, whi le
plain tiff wa s ar guing with Sitton ; the airline officials refusal to

allow plaintiff to board the plane on the pretextthat he was hiding a

bomb
in
his luggage
and
their
arbitrary
and
highhandedd e c i s i o n t o l e a v e h i m i n W a k e ; M r s . Z u l u e t a
s h a v i n g s u f f e r e d a n e r v o u s breakdown for which she was
hospitalized as a result of the embarrassment,in sults and
humi liations to whi ch plaintiffs were exposed b y the
condu ct of PAN AM s emplo yee s; Mrs. Zulue ta having
suffered shame , humilia tion and embarrassment for the
treatment received by her parents at the airport allt h e s e j u s t i f y
an award for moral damages resulting from mental
a n g u i s h , serious anxiety, wounded feelings, moral shock, and social
humiliationthereby suffered by plaintiffs. Plaintiffs were awarded
Pesos
500,000.00
andmoral dama ge s, Pe sos 200,000 .00 exemplar y damages,
Peso s 75 ,000.00 attorneys fees and Pesos 5,502.85 actual
damages.
American Airlines v CA
AMERICAN AIRLINES, petitioner, vs. COURT OF APPEALS, HON.
BERNARDO LL. SALAS and DEMOCRITO MENDOZA, respondents.
G.R. Nos. 116044-45. March 9, 2000.
Common Carrier: American Airlines
Passenger: Democrito Mendoza
Problem: Mendoza was treated badly in an airport in Geneva. What is
the proper venue? Who is liable?
Who won: Mendoza
Emergency Digest
Private respondent purchased from Singapore Airlines in Manila
conjunction tickets from Singapore Airlines for nine cities in different
countries with New York as the final destination. In Geneva, private
respondent bought from petitioner a ticket in exchange for the unused
conjunction ticket for a one-way ticket from Geneva to New York.
However, because of the embarrassment and mental anguish he
suffered in Geneva when he was prevented by petitioner's security
officer from boarding the plane, detained for about an hour and allowed
to board the plane only after all the other passengers have boarded,
private respondent filed an action for damages against petitioner in
Cebu. Petitioner moved to dismiss on the ground of improper venue
and that the ticket issued by petitioner in Geneva was a separate and
distinct contract of carriage from that entered into by the private
respondent with Singapore Airlines in Manila. When its motion was
denied, petitioner presented a deposition of its security officer taken in
Geneva.
The trial court ruled that under the pool partnership agreement among
the IATA members, including Singapore Airlines and American Airlines,
the members act as agents of each other in the issuance of tickets.
This decision was affirmed on appeal by the Court of Appeals. Hence,
this petition. Meanwhile, the security officer of petitioner subsequently
appeared before the Philippine consul and answered the crossinterrogatories of private respondent.T
A contract of carriage although performed by different carriers under a
series of airline tickets constitutes a single operation as members of
the IATA act as agents of each other in the issuance of tickets and that
the number of tickets issued does not detract from the oneness of the
contract of carriage as long as the parties regard the contract as a
single operation. Thus, petitioner tacitly recognized its commitment
when it accepted the unused portion of the conjunction tickets, entered
it in the IATA clearing house and undertook to transport the private
respondent over the route covered by the unused portion of the
conjunction tickets.
Venue is deemed waived when a party assailing the same presented
evidence before the trial court.
The subsequent appearance of petitioner's security officer to answer
the cross-interrogatories of private respondent constitute full

compliance with the requisites of the right of private respondent to

cross-examine the petitioner's witnesses.

AA filed a motion to dismiss for lack of jurisdiction of Philippine courts

to entertain the said proceedings under Art. 28 (1) of the Warsaw
Convention.

NATURE / ISSUES
Before us is a petition for review of the decision dated December 24,
1993 rendered by the Court of Appeals in the consolidated cases
docketed as CA-G.R. SP nos. 30946 and 31452 entitled American
Airlines vs. The Presiding Judge Branch 8 of the Regional Trial Court
of Cebu and Democrito Mendoza, petitions for certiorari and
prohibition.

The trial court denied the motion.

The order of denial was elevated to the Court of Appeals
which affirmed the ruling of the trial court.
Both the trial and the appellate courts held that (and the SC
essentially agreed)
o

Issues

In SP no. 30946, the petitioner assails the trial court's order

denying the petitioner's motion to dismiss the action for
damages filed by the private respondent for lack of
jurisdiction under Section 28 (1) of the Warsaw Convention;
and
o
The sole issue raised in SP No. 30946 is the
questioned jurisdiction of the Regional Trial Court
of Cebu to take cognizance of the action for
damages filed by the private respondent against
herein petitioner in view of Art 28 (1) of the
Warsaw Convention.

in SP No. 31452 the petitioner challenges the validity of the

trial court's order striking off the record the deposition of the
petitioner's security officer taken in Geneva, Switzerland for
failure of the said security officer to answer the cross
interrogatories propounded by the private respondent.

the suit may be brought in the Philippines under

the pool partnership agreement among the IATA
members, which include Singapore Airlines and
American Airlines.
In such partnership, the members act as agents of
each other in the issuance of tickets to those who
may need their services.
The contract of carriage perfected in Manila
between the AA and Singapore Airlines binds AA
as an agent of Singapore Airlines
And considering that the petitioner has a place of
business in Manila, the third option of the plaintiff
under the Warsaw Convention

i.e. the action may be brought in the

place where the contract was perfected
and where the airline has a place of
business, is applicable.

Hence this petition assailing the order

upholding the jurisdiction of Philippine
courts over the instant action.

FACTS

Both parties filed simultaneous memoranda pursuant to the resolution

of this Court giving due course to the petition.

Democrito Mendoza (Private respondent) purchased from Singapore

Airlines in Manila conjunction tickets for

AAS THEORY IS AS FOLLOWS:

Manila -> Singapore -> Athens -> Larnaca -> Rome-> Turin
-> Zurich -> Geneva -> Copenhagen -> New York.
o
American Airlines (AA, petitioner) was not (yet) a
participating airline in any of the segments in the
itinerary under the said conjunction tickets.

In Geneva, Mendoza decided to forego his trip to Copenhagen and to

go straight to New York

The petitioner filed in the Philippines which was not a proper

venue pursuant to Warsaw ; when Mendoza exchanged for new
tickets, a completely new contract was formed (rejected).
Under Art 28 (1) of the Warsaw convention an action for damages must
be brought at the option of the plaintiff ( in this case Mendoza) either
before the court of the
1

In the absence of a direct flight under his conjunction tickets

from Geneva to New York, the private respondent on June 7,
1989 exchanged the unused portion of the conjunction ticket
for a one-way ticket from Geneva to New York from the
petitioner airline.
AA issued its own ticket to Mendoza in Geneva and claimed
the value of the unused portion of the conjunction ticket from
the IATA clearing house in Geneva.

2
3

4
Mendoza was treated badly in Geneva: files suite in Cebu.
In September 1989, Mendoza filed an action for damages before the
regional trial court of Cebu for the alleged embarrassment and mental
anguish he suffered at the Geneva Airport in the hands of AAs security
officers.

prevented him from boarding the plane,

detained him for about an hour and
allowed him to board the plane only after all the other
passengers have boarded.

domicile of the carrier;

but AA is not domiciled in the Phil (correct)

the carrier's principal place of business;

but AAs principle place of business is US (correct)

the place where the carrier has a place of business through
which the contract was made;

AA CONTENDS that since the Philippines is not

the place where the contract of carriage was made
between the parties herein, Philippine courts do
not have jurisdiction over this action for damages.
(refuted by courts)
the place of destination.

But Philippines was not the destination, it was NY

(correct)

Further arguments against viability of third option (all rejected by

courts) :

The issuance of Mendoza's own ticket in Geneva in

exchange for the conjunction ticket issued by Singapore
Airlines for the final leg of the private respondent's trip gave
rise to a separate and distinct contract of carriage from that
entered into by the private respondent with Singapore
Airlines in Manila.
the plane ticket for a direct flight from Geneva to New York
was purchased by "exchange and cash" which signifies that

the contract of carriage with Singapore Airlines was

terminated and a second contract was perfected.
o
Moreover, the second contract of carriage cannot
be deemed to have been an extension of the first
as AA is not a participating airline in any of the
destinations under the first contract.

the IATA Rules and as an agent of the principal carrier the petitioner
may be held liable under the contract of carriage perfected in Manila,
citing
o

Rules on agency do not apply here (rejected) just use Warsaw

convention.
The petitioner claims that the private respondent's argument that the
petitioner is bound under the IATA Rules as agent of the principal
airline is irrelevant and the alleged bad faith of the airline does not
remove the case from the applicability of the Warsaw Convention.

the judicial admission made by the petitioner that it claimed

the value of the unused portion of the private respondent's
conjunction tickets from the IATA Clearing House in Geneva
where the accounts of both airlines are respectively credited
and debited. Accordingly, the petitioner cannot now deny the
contract of agency with Singapore Airlines after it honored
the conjunction tickets issued by the latter.

RATIO
The petition is without merit.

Further, the IATA Rule cited by the private respondent which

is admittedly printed on the ticket issued by the petitioner to
him which states,
"An air carrier issuing a ticket for carriage over the
lines of another carrier does so only as its agent"
..does not apply herein, as neither Singapore Airlines nor AA
issued a ticket to the private respondent covering the route
of the other.
o

Since the conjunction tickets issued by Singapore

Airlines do not include the route covered by the
ticket issued by the petitioner, the petitioner airline
submits that it did not act as an agent of
Singapore Airlines.

MENDOZAS CLAIMS
Warsaw Convention not applicable here. (kinda rejected)
He posits that under Article 17 of the Warsaw Convention
o

a carrier may be held liable for damages if the

"accident" occurred on board the airline or in the
course of "embarking or disembarking" from the
carrier and
that under Article 25 (1) thereof the provisions of
the convention will not apply if the damage is
caused by the "willful misconduct" of the carrier.

Also the Action is based on the incident at the pre-departure area of

the Geneva airport and not during the process of embarking nor
disembarking from the carrier and that security officers of the petitioner
airline acted in bad faith.
Even if Warsaw applied; still as single transaction. Final leg still
part of the original CoC perfected in Manila (correct)
assuming that the convention applies, his trip to nine cities in different
countries performed by different carriers under the conjunction tickets
issued in Manila by Singapore Airlines is regarded as a single
transaction;
o
o

as such the final leg of his trip from Geneva to New York with
the petitioner airline is part and parcel of the original contract
of carriage perfected in Manila.
Thus, the third option of the plaintiff under Art. 28 (1) e.g.,
where the carrier has a place of business through which the
contract of carriage was made, applies herein and the case
was properly filed in the Philippines.

The private respondent seeks affirmance of the ruling of the lower

courts that the petitioner acted as an agent of Singapore Airlines under

TOPIC STUFF
Warsaw convention; has force and effect of law in countries like
the Philippines which are parties thereto; convention applies to
international transportation.
The Warsaw Convention to which the Republic of the Philippines is a
party and which has the force and effect of law in this country applies
to all international transportation of persons, baggage or goods
performed by an aircraft gratuitously or for hire.
As enumerated in the Preamble of the Convention, one of the
objectives is "to regulate in a uniform manner the conditions of
international transportation by air." The contract of carriage entered
into by the private respondent with Singapore Airlines, and
subsequently with the petitioner, to transport him to nine cities in
different countries with New York as the final destination is a contract
of international transportation and the provisions of the Convention
automatically apply and exclusively govern the rights and liabilities of
the airline and its passengers.
This includes Section 28 (1) which enumerates the four places where
an action for damages may be brought.
1
2
3
4

domicile of the carrier;

the carrier's principal place of business;
the place where the carrier has a place of business through
which the contract was made;
the place of destination.

Members of IATA under general pool partnership agreement: a

contract of carriage although performed by different carriers
under a series of airline tickets, constitutes a single operation.
The contract of carriage between the AA and Singapore Airlines
although performed by different carriers under a series of airline
tickets, including that issued by the AA, constitutes a single operation.

Members of the IATA are under a general pool partnership

agreement wherein they act as agent of each other in the
issuance of tickets to contracted passengers to boost ticket
sales worldwide and at the same time provide passengers
easy access to airlines which are otherwise inaccessible in
some parts of the world.
o
Booking and reservation among airline members
are allowed even by telephone and it has become
an accepted practice among them.
o
A member airline which enters into a contract of
carriage consisting of a series of trips to be
performed by different carriers is authorized to
receive the fare for the whole trip and through the
required process of interline settlement of
accounts by way of the IATA clearing house an
airline is duly compensated for the segment of the
trip serviced.

Acceptance by another airline of unused portion of conjunction

ticket and undertaking to transport passenger over route covered
by unused ticket, tacit recognition of commitment to act as agent
of principal contracting airline
Thus, when AA
1
2
3

accepted the unused portion of the conjunction tickets,

entered it in the IATA clearing house and
undertook to transport the private respondent over the route
covered by the unused portion of the conjunction tickets, i.e.,
Geneva to New York,

AA tacitly recognized its commitment under the IATA pool arrangement

to act as agent of the principal contracting airline, Singapore Airlines,
as to the segment of the trip AA agreed to undertake.

As such, AA thereby assumed the obligation to take the

place of the carrier originally designated in the original
conjunction ticket.

for failure of the said security officer to appear before the Philippine
consul in Geneva to answer the cross-interrogatories filed by the
private respondent does not have to be resolved. The subsequent
appearance of the said security officer before the Philippine consul in
Geneva on September 19, 1994 and the answer to the crossinterrogatories propounded by the private respondent was transmitted
to the trial court by the Philippine consul in Geneva on September 23,
1994 should be deemed as full compliance with the requisites of the
right of the private respondent to cross-examine the petitioner's
witness. The deposition filed by the petitioner should be reinstated as
part of the evidence and considered together with the answer to the
cross-interrogatories.

WHEREFORE, the judgment of the appellate court in CA-G.R. SP No.

30946 is affirmed. The case is ordered remanded to the court of origin
for further proceedings. The decision of the appellate court in CA-G.R.
SP. No. 31452 is set aside. The deposition of the petitioner's security
officer is reinstated as part of the evidence.
Cathay Pacific Airways VS. Vazquez

AA's argument that it is not a designated carrier in the original

conjunction tickets and that it issued its own ticket is not decisive of its
liability.

399 SCRA 207 (2003)

Facts of the Case:

The new ticket was simply a replacement for the unused

portion of the conjunction ticket, both tickets being for the
same amount of US$2,760 and having the same points of
departure and destination.
By constituting itself as an agent of the principal carrier the
petitioner's undertaking should be taken as part of a single
operation under the contract of carriage executed by the
private respondent and Singapore Airlines in Manila.

Number of tickets issued does not detract from oneness of

contract of carriage; purpose.
The quoted provision of the Warsaw Convention Art. 1(3) clearly states
that a contract of air transportation is taken as a single operation
whether it is founded on a single contract or a series of contracts. The
number of tickets issued does not detract from the oneness of the
contract of carriage as long as the parties regard the contract as a
single operation. The evident purpose underlying this Article is to
promote international air travel by facilitating the procurement of a
series of contracts for air transportation through a single principal and
obligating different airlines to be bound by one contract of
transportation. Petitioner's acquiescence to take the place of the
original designated carrier binds it under the contract of carriage
entered into by the private respondent and Singapore Airlines in
Manila.

Respondents-spouses Dr. Daniel Earnshaw Vazquez and Maria Luisa

Madrigal Vazquez together with two friends went to Hong Kong for
business and pleasure. On their return flight to Manila, they were
booked on Cathay Pacifics flight CX-905. Upon boarding, Dr. Vazquez
was informed by ground attendant Clara Chiu that they were being
upgraded to first class from business class because Business Class
was fully booked. Dr. Vazquez refused the upgrade, explaining that it
would not look good for them as hosts to travel in First Class while
their guests remained in the Business Class Section. Moreover, they
were going to discuss business matters during the flight. He also told
Ms. Chiu that she could have other passengers transferred to the First
Class Section instead of them. Ms. Chiu informed them that since
they were Marco Polo Club members they had the priority to be
upgraded to First Class. Dr. Vazquez continued to refuse, so Ms. Chiu
told them that if they would not avail of the privilege, they would not be
allowed to take the flight. Eventually, Dr. Vazquez gave in and
proceeded to the First Class Cabin.
ISSUES:
1. Whether or not by upgrading the seating accommodations of the
Vazquezes from Business Class to First Class, Cathay Pacific Airways
breached its contract of carriage with the Vazquezes.
2. Whether or not the Vazquezes are entitled to damages.

OTHER PROCEDURAL STUFF

HELD:

Motion to dismiss; wrong venue; waived where party presented

evidence.

In previous cases, the breach of contract of carriage consisted in either

the bumping off of a passenger with confirmed reservation or the
downgrading of a passengers seat accommodation from one class to
a lower class. In this case, what happened was the reverse. The
Vazquezes knew that as members of the Marco Polo Club, they had
priority for upgrading of their seat accommodation at no extra cost
when an opportunity arises. But, just like other privileges, such priority
could be waived.

The third option of the plaintiff under Art. 28 (1) of the Warsaw
Convention e.g., to sue in the place of business of the carrier wherein
the contract was made, is therefore, Manila, and Philippine courts are
clothed with jurisdiction over this case. We note that while this case
was filed in Cebu and not in Manila the issue of venue is no longer an
issue as the petitioner is deemed to have waived it when it presented
evidence before the trial court.
Right to cross-examine witness; complied with by subsequent
appearance of witness before Philippine consul and answer to
cross-interrogatories transmitted to trial court.
The issue raised in SP No. 31452 which is whether or not the trial court
committed grave abuse of discretion in ordering the deposition of the
petitioner's security officer taken in Geneva to be stricken off the record

The Vazquezes should have been consulted first whether they wanted
to avail of the privilege or consent to a change of seat accommodation
before their seat assignments were given to other passengers. The
Vazquezes had every right to decline the upgrade and insist on the
Business Class accommodation they had booked for. They clearly
waived their priority or preference when they asked that other
passengers be given the upgrade. It should not have been imposed on
them over their vehement objection. By insisting on the upgrade,
Cathay Pacific breached its contract of carriage with the Vazquezes.

The Court, however, is not convinced that the upgrading or the breach
of contract was attended by fraud or bad faith. Bad faith and fraud are
allegations of fact that demand clear and convincing proof. The court
is not persuaded by the Vazquezes argument that the overbooking of
the Business Class Section constituted bad faith on the part of Cathay
Pacific Airways. Section 3 of the Economic Regulation No. 7 of The
Civil Aeronautics Board, as amended, provides that an overbooking
that does not exceed ten percent (10%) is not considered deliberate
and therefore does not amount to bad faith.
The Court of Appeals awarded each of the Vazquezes moral damages
in the amount of P250, 000. In this case, it was ruled that the breach of
contract of carriage was not attended by fraud or bad faith. The Court
Of Appeals award of moral damages has, therefore, no leg to stand
on. The most that can be adjudged in favour of the Vazquezes for
Cathays breach of contract is an award for nominal damages Under
Article 2221 of the New Civil Code.
Lopez vs Pan American World Airways (Pan Am)
Facts:
Senator Lopez et al made reservations for 1st class accommodations in
a flight of Pan Am from Tokyo to San Francisco. The reservations were
confirmed in a phone call. Tickets were also issued. However, Lopez et
al were not accommodated in the first class for the reason that there
was no accommodation for them. They instead took the tourist
passengers without prejudice to any claim against Pan Am.
Subsequently, a suit for damages was filed against Pan Am. Pan Am
answered admitting its breach of the contract of carriage but however
denied the allegation of bad faith. It contends that the failure to provide
1st class accommodations was made in honest mistake: That the
accommodation was mistakenly cancelled, and expecting that there
would be subsequent cancellation of bookings, they withheld the
information regarding the cancellation from Lopez et al.
Issue: WON Pan Am should be held liable for damages to Lopez et al.
Held:
Yes.
The actuation of Pan Am may have been prompted by nothing more
than the promotion of its self-interest in holding on to Senator Lopez
and party as passengers in its flight and foreclosing on their chances to
seek the services of other airlines that may have been able to afford
them first class accommodations. All the time, in legal contemplation
such conduct already amounts to action in bad faith. For bad faith
means a breach of a known duty through some motive of interest or illwill. Self-enrichment or fraternal interest, and not personal ill-will, may
well have been the motive; but it is malice nevertheless.
There being a clear admission in defendants evidence of facts
amounting to a bad faith on its part in regard to the breach of its
contracts with plaintiffs, it becomes unnecessary to further discuss the
evidence adduced by plaintiffs to establish defendants bad faith.
Among others, Lopez et al can be awarded moral damages (where the
defendant acted fraudulently or in bad faith) and exemplary damages
(where the defendant acted in a wanton, fraudulent, reckless,
oppressive or malevolent manner).

SPOUSES YU ENG CHO and FRANCISCO TAO YU, petitioners, vs.

PAN AMERICAN WORLD AIRWAYS, INC., TOURIST WORLD
SERVICES, INC., JULIETA CANILAO and CLAUDIA
TAGUNICAR, respondents.
In the case at bar, petitioners ticket were on "RQ" status. They were
not confirmed passengers and their names were not listed in the
passenger manifest. In other words, this is not a case where Pan Am
bound itself to transport petitioners and thereafter reneged on its
obligation. Hence, respondent airline cannot be held liable for
damages. Mis spped
IV. We hold that respondent Court of Appeals correctly ruled that the
tickets were never confirmed for good reasons: (1) The persistent calls
made by respondent Tagunicar to Canilao, and those made by
petitioners at the Manila, Hongkong and Tokyo offices of Pan Am, are
eloquent indications that petitioners knew that their tickets have not
been confirmed. For, as correctly observed by Pan Am, why would one
continually try to have ones ticket confirmed if it had already been

confirmed? (2) The validation stickers which respondent Tagunicar

attached to petitioners tickets were those intended for the exclusive
use of airline companies. She had no authority to use them. Hence,
said validation stickers, wherein the word "OK" appears in the status
box, are not valid and binding. (3) The names of petitioners do not
appear in the passenger manifest. (4) Respondent Tagunicars "Exhibit
1"[38] shows that the status of the San Francisco-New York segment
was "Ok", meaning it was confirmed, but that the status of the TokyoSan Francisco segment was still "on request". (5) Respondent Canilao
testified that on the day that petitioners were to depart for Hongkong,
respondent Tagunicar called her from the airport asking for
confirmation of the Tokyo-San Francisco flight, and that when she told
respondent Tagunicar that she should not have allowed petitioners to
leave because their tickets have not been confirmed, respondent
Tagunicar merely said "Bahala na."[39] This was never controverted nor
refuted by respondent Tagunicar. (6) To prove that it really did not
confirm the bookings of petitioners, respondent Canilao pointed out
that the validation stickers which respondent Tagunicar attached to the
tickets of petitioners had IATA No. 2-82-0770 stamped on it, whereas
the IATA number of TWSI is 28-30770.[40]
Undoubtedly, respondent Tagunicar should be liable for having acted in
bad faith in misrepresenting to petitioners that their tickets have been
confirmed. Her culpability, however, was properly mitigated. Petitioner
Yu Eng Cho testified that he repeatedly tried to follow up on the
confirmation of their tickets with Pan Am because he doubted the
confirmation made by respondent Tagunicar.[41] This is clear proof that
petitioners knew that they might be bumped off at Tokyo when they
decided to proceed with the trip. Aware of this risk, petitioners exerted
efforts to confirm their tickets in Manila, then in Hongkong, and finally
in Tokyo. Resultantly, we find the modification as to the amount of
damages awarded just and equitable under the circumstances.
MARIANO vs CALLEJAS
The following are the provisions of the Civil Code pertinent to
the case at bar:
ART. 1733. Common carriers, from the
nature of their business and for reasons of public
policy, are bound to observe extraordinary
diligence in the vigilance over the goods and for
the safety of the passengers transported by them,
according to all the circumstances of each case.
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.
ART. 1756. In case of death of or
injuries to passengers, common carriers are
presumed to have been at fault or to have acted
negligently, unless they prove that they observed
extraordinary diligence as prescribed in articles
1733 and 1755.
In accord with the above provisions, Celyrosa Express, a
common carrier, through its driver, respondent De Borja, and its
registered owner, respondent Callejas, has the express obligation 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, [11] and to observe extraordinary
diligence in the discharge of its duty. The death of the wife of the
petitioner in the course of transporting her to her destination gave rise
to the presumption of negligence of the carrier. To overcome the
presumption, respondents have to show that they observed
extraordinary diligence in the discharge of their duty, or that the
accident was caused by a fortuitous event.
This Court interpreted the above quoted provisions in Pilapil
v. Court of Appeals.[12] We elucidated:
While the law requires the highest
degree of diligence from common carriers in the
safe transport of their passengers and creates a
presumption of negligence against them, it does

not, however, make the carrier an insurer of

the absolute safety of its passengers.
Article 1755 of the Civil Code qualifies
the duty of extraordinary care, vigilance and
precaution in the carriage of passengers by
common carriers to only such as human care and
foresight
can
provide.
What
constitutes
compliance with said duty is adjudged with due
regard to all the circumstances.
Article 1756 of the Civil Code, in
creating a presumption of fault or negligence on
the part of the common carrier when its passenger
is injured, merely relieves the latter, for the time
being, from introducing evidence to fasten the
negligence on the former, because the
presumption
stands
in
the
place
of
evidence. Being a mere presumption, however,
the same is rebuttable by proof that the
common carrier had exercised extraordinary
diligence as required by law in the
performance of its contractual obligation, or
that the injury suffered by the passenger was
solely due to a fortuitous event.
In fine, we can only infer from the law
the intention of the Code Commission and
Congress to curb the recklessness of drivers and
operators of common carriers in the conduct of
their business.
Thus, it is clear that neither the law
nor the nature of the business of a
transportation company makes it an insurer of
the passenger's safety, but that its liability for
personal injuries sustained by its passenger rests
upon its negligence, its failure to exercise the
degree of diligence that the law requires.
In the case at bar, petitioner cannot succeed in his
contention that respondents failed to overcome the presumption of
negligence against them. The totality of evidence shows that the death
of petitioners spouse was caused by the reckless negligence of the
driver of the Isuzu trailer truck which lost its brakes and bumped the
Celyrosa Express bus, owned and operated by respondents.

ENGADA vs CA
FACTS:

November 29, 1989 1:30 pm: Edwin Iran was driving a blue
Toyota Tamaraw jeepney with the owner Sheila Seyan as
passnger.
The speeding Isuzu pick-up truck driven by Rogelio Engada
came from the opposing direction and swerved to its
left encroaching upon the lane of the Tamaraw. In attempt to
avoid the pick-up, Seyan shouted at Iran to swerve to the left but
the Engada also swerved to its right hitting the Tamaraw at its
right front passenger side causing its head and chassis to
separate from its body.
Seyan was thrown out of the Tamaraw and landed on a
ricefield. Seyan and Iran were brought to Barotac Nuevo
Medicare Hospital. Seyan suffered a fracture on the right femur,
lacerated wound on the right foot, multiple
contusions,abrasions, blunt abdominal injury, and lacerations of
the upper-lower pole of the right kidney. Upon discharge,
she Seyan incurred P130,000 in medical expenses. The Toyota
Tamaraw jeepney ended up in the junk heap totalling a loss of
P80,000
MTC: Engada guilty of damage to property through reckless
imprudence with serious physical injuries

CA: Affirmed MTC

Engada appealed alleging that CA failed to consider that he
already relayed his intention to go back to his lane by flashing the
pick-ups right signal light. He submits that at that moment Iran,
the driver of the Tamaraw, had no more reason to swerve to his
left
ISSUE: W/N under the doctrine of last clear chance Iran should be
liable.

HELD: NO. CA affirmed.

Engada's negligence was the proximate cause of the

collision

in abandoning his lane, he did not see to it first

that the opposite lane was free of oncoming traffic and was
available for a safe passage

after seeing the Tamaraw jeepney ahead, he did

not slow down

emergency rule

An individual who suddenly finds himself in a

situation of danger and is required to act without much time
to consider the best means that may be adopted to avoid the
impending danger, is not guilty of negligence if he fails to
undertake what subsequently and upon reflection may appear to
be a better solution, unless the emergency was brought by his
own negligence - Iran cannot be faulted

at a distance of 30 meters from it and driving the Isuzu pickup at a fast speed as it approached the Tamaraw, denied Iran
time and opportunity to ponder the situation at all. There was no
clear chance to speak of.
LAPANDAY vs ANGALA
Doctrine of Last Clear Chance Applies
Since both parties are at fault in this case, the doctrine of last clear
chance applies.
The doctrine of last clear chance states that where both parties are
negligent but the negligent act of one is appreciably later than that of
the other, or where it is impossible to determine whose fault or
negligence caused the loss, the one who had the last clear opportunity
to avoid the loss but failed to do so is chargeable with the loss.16 In this
case, Deocampo had the last clear chance to avoid the collision. Since
Deocampo was driving the rear vehicle, he had full control of the
situation since he was in a position to observe the vehicle in front of
him.17Deocampo had the responsibility of avoiding bumping the vehicle
in front of him.18 A U-turn is done at a much slower speed to avoid
skidding and overturning, compared to running straight
ahead.19 Deocampo could have avoided the vehicle if he was not
driving very fast while following the pick-up. Deocampo was not only
driving fast, he also admitted that he did not step on the brakes even
upon seeing the pick-up. He only stepped on the brakes after the
collision.
Petitioners are Solidarily Liable
LADECO alleges that it should not be held jointly and severally liable
with Deocampo because it exercised due diligence in the supervision
and selection of its employees. Aside from this statement, LADECO did
not proffer any proof to show how it exercised due diligence in the
supervision and selection of its employees. LADECO did not show its
policy in hiring its drivers, or the manner in which it supervised its
drivers. LADECO failed to substantiate its allegation that it exercised
due diligence in the supervision and selection of its employees.
Hence, we hold LADECO solidarily liable with Deocampo.