THIRD DIVISION [G.R. No. L-47822. December 22, 1988.] PEDRO DE GUZMAN, petitioner, vs.

COURT OF APPEALS and ERNESTO CENDAA, respondents. Vicente D. Millora for petitioner. Jacinto Callanta for private respondent. SYLLABUS 1. CIVIL CODE; COMMON CARRIERS; ARTICLE 1732, DEFINITION UNDER ARTICLE 1732 OF THE CODE. The Civil Code defines "common carriers" in the following terms: "Article 1732. Common carriers are persons, corporations, firms or associations engaged in the business of carrying or transporting passengers or goods or both, by land, water, or air for compensation, offering their services to the public." The above article makes no distinction between one whose principal business activity is the carrying of persons or goods or both, and one who does such carrying only as an ancillary activity (in local idiom, as "a sideline"). Article 1732 also carefully avoids making any distinction between a person or enterprise offering transportation service on a regular or scheduled basis and one offering such service on an occasional, episodic or unscheduled basis. Neither does Article 1732 distinguish between a carrier offering its services to the "general public," i.e., the general community or population, and one who offers services or solicits business only from a narrow segment of the general population. We think that Article 1733 deliberately refrained from making such distinctions. 2. ID.; ID.; ID.; LAW ON COMMON CARRIERS SUPPLEMENTED BY THE PUBLIC SERVICE ACT; SCOPE OF PUBLIC SERVICE. So understood, the concept of "common carrier" under Article 1732 may be seen to coincide neatly with the notion of "public service," under the Public Service Act (Commonwealth Act No. 1416, as amended) which at least partially supplements the law on common carriers set forth in the Civil Code. Under Section 13, paragraph (b) of the Public Service Act, "public service" includes: ". . . every person that now or hereafter may own, operate, manage, or control in the Philippines, for hire or compensation, with general or limited clientele, whether permanent, occasional or accidental, and done for general business purposes, any common carrier, railroad, street railway, traction railway, subway motor vehicle, either for freight or passenger, or both, with or without fixed route and whatever may be its classification, freight or carrier service of any class, express service, steamboat, or steamship line, pontines, ferries and water craft, engaged in the transportation of passengers or freight or both, shipyard, marine repair shop, wharf or dock, ice plant, ice-refrigeration plant, canal, irrigation system, gas, electric light, heat and power, water supply and power petroleum, sewerage system, wire or wireless communications systems, wire or wireless broadcasting stations and other similar public services . . ." (Emphasis supplied) It appears to the Court that private respondent is properly characterized as a common carrier even though he merely "back-hauled" goods for other merchants from Manila to Pangasinan, although such backhauling was done on a periodic or occasional rather than regular or scheduled manner, and even though private respondent's principal occupation was not the carriage of goods for others. There is no dispute that private respondent charged his customers a fee for hauling their goods; that fee frequently fell below commercial freight rates is not relevant here. 3. ID.; ID.; ID.; ID.; CERTIFICATE OF PUBLIC CONVENIENCE; NOT A REQUISITE FOR INCURRING LIABILITY AS A COMMON CARRIER; NATURE OF THE BUSINESS OF A COMMON CARRIER. The Court of Appeals referred to the fact that private respondent held no certificate of public convenience, and concluded he was not a common carrier. This is palpable error. A certificate of public convenience is not a requisite for the incurring of liability under the Civil Code provisions governing common carriers. That liability arises the moment a person or firm acts as a common carrier, without regard to whether or not such carrier has also complied with the requirements of the applicable regulatory statute and implementing regulations and has been granted a certificate of public convenience or other franchise. To exempt private respondent from the liabilities of a common carrier because he has not secured the necessary certificate of public convenience, would be offensive to sound public policy; that would be to reward private respondent precisely for failing to comply with applicable statutory requirements. The business of a common carrier impinges directly and intimately upon the safety and well being and property of those members of the general community who happen to deal with such carrier. The law imposes duties and liabilities upon common carriers for the safety and protection of those who utilize their services and the law cannot allow a common carrier to render such duties and liabilities merely facultative by simply failing to obtain the necessary permits and authorizations. 4. ID.; ID.; DEGREE OF DILIGENCE REQUIRED OF, COMMON CARRIERS. Common carriers, "by the nature of their business and for reasons of public policy," are held to a very high degree of care and diligence ("extraordinary diligence") in the carriage of goods as well as of passengers. The specific import of extraordinary diligence in the care of goods transported by a common carrier is, according to Article 1733, "further expressed in Articles 1734, 1735 and 1745, numbers 5, 6 and 7" of the Civil Code. 5. ID.; ID.; ID.; LIABILITY OF COMMON CARRIERS. Article 1734 establishes the general rule that common carriers are responsible for the loss, destruction or deterioration of the goods which they carry, "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; and (5) Order or act of competent public authority." It is important to point out that the above list of causes of loss, destruction or deterioration which exempt the common carrier for responsibility therefor, is a closed list. Causes falling outside the foregoing list, even if they appear to constitute a species of force majeure, fall within the scope of Article 1735, which provides as

follows: "In all cases other than those mentioned in numbers 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 in Article 1733." (Emphasis supplied) 6. ID.; ID.; ID.; ID.; COMMON CARRIER'S ARE NOT ABSOLUTE INSURERS AGAINST ALL RISKS; NO LIABILITY ATTACHES IN CASE OF FORTUITOUS EVENTS. Under Article 1745 (6) above, a common carrier is held responsible and will not be allowed to divest or to diminish such responsibility even for acts of strangers like thieves or robbers, except where such thieves or robbers in fact acted "with grave or irresistible threat, violence or force." We believe and so hold that the limits of the duty of extraordinary diligence in the vigilance over the goods carried are reached where the goods are lost as a result of a robbery which is attended by "grave or irresistible threat, violence or force." In these circumstances, we hold that the occurrence of the loss must reasonably be regarded as quite beyond the control of the common carrier and properly regarded as a fortuitous event. It is necessary to recall that even common carriers are not made absolute insurers against all risks of travel and of transport of goods, and are not held liable for acts or events which cannot be foreseen or are inevitable, provided that they shall have complied with the rigorous standard of extraordinary diligence. DECISION FELICIANO, J p: Respondent Ernesto Cendaa, a junk dealer, was engaged in buying up used bottles and scrap metal in Pangasinan. Upon gathering sufficient quantities of such scrap material, respondent would bring such material to Manila for resale. He utilized two (2) six-wheeler trucks which he owned for hauling the material to Manila. On the return trip to Pangasinan, respondent would load his vehicles with cargo which various merchants wanted delivered to differing establishments in Pangasinan. For that service, respondent charged freight rates which were commonly lower than regular commercial rates. llcd Sometime in November 1970, petitioner Pedro de Guzman, a merchant and authorized dealer of General Milk Company (Philippines), Inc. in Urdaneta, Pangasinan, contracted with respondent for the hauling of 750 cartons of Liberty filled milk from a warehouse of General Milk in Makati, Rizal, to petitioner's establishment in Urdaneta on or before 4 December 1970. Accordingly, on 1 December 1970, respondent loaded in Makati the merchandise on to his trucks: 150 cartons were loaded on a truck driven by respondent himself; while 600 cartons were placed on board the other truck which was driven by Manuel Estrada, respondent's driver and employee. Only 150 boxes of Liberty filled milk were delivered to petitioner. The other 600 boxes never reached petitioner, since the truck which carried these boxes was hijacked somewhere along the MacArthur Highway in Paniqui, Tarlac, by armed men who took with them the truck, its driver, his helper and the cargo. On 6 January 1971, petitioner commenced action against private respondent in the Court of First Instance of Pangasinan, demanding payment of P22,150.00, the claimed value of the lost merchandise, plus damages and attorney's fees. Petitioner argued that private respondent, being a common carrier, and having failed to exercise the extraordinary diligence required of him by the law, should be held liable for the value of the undelivered goods. In his Answer, private respondent denied that he was a common carrier and argued that he could not be held responsible for the value of the lost goods, such loss having been due to force majeure. On 10 December 1975, the trial court rendered a Decision' finding private respondent to be a common carrier and holding him liable for the value of the undelivered goods (P22,150.00) as well as for P4,000.00 as damages and P2,000.00 as attorney's fees. cdrep On appeal before the Court of Appeals, respondent urged that the trial court had erred in considering him a common carrier; in finding that he had habitually offered trucking services to the public; in not exempting him from liability on the ground of force majeure; and in ordering him to pay damages and attorney's fees. The Court of Appeals reversed the judgment of the trial court and held that respondent had been engaged in transporting return loads of freight "as a casual occupation a sideline to his scrap iron business" and not as a common carrier. Petitioner came to this Court by way of a Petition for Review assigning as errors the following conclusions of the Court of Appeals: 1. 2. 3. that private respondent was not a common carrier; that the hijacking of respondent's truck was force majeure; and that respondent was not liable for the value of the undelivered cargo. (Rollo, p. 111)

We consider first the issue of whether or not private respondent Ernesto Cendaa may, under the facts earlier set forth, be properly characterized as a common carrier. The Civil Code defines "common carriers" in the following terms: "Article 1732. Common carriers are persons, corporations, firms or associations engaged in the business of carrying or transporting passengers or goods or both, by land, water, or air for compensation, offering their services to the public."

The above article makes no distinction between one whose principal business activity is the carrying of persons or goods or both, and one who does such carrying only as an ancillary activity (in local idiom, as "a sideline"). Article 1732 also carefully avoids making any distinction between a person or enterprise offering transportation service on a regular or scheduled basis and one offering such service on an occasional, episodic or unscheduled basis. Neither does Article 1732 distinguish between a carrier offering its services to the "general public," i.e., the general community or population, and one who offers services or solicits business only from a narrow segment of the general population. We think that Article 1733 deliberately refrained from making such distinctions. So understood, the concept of "common carrier" under Article 1732 may be seen to coincide neatly with the notion of "public service," under the Public Service Act (Commonwealth Act No. 1416, as amended) which at least partially supplements the law on common carriers set forth in the Civil Code. Under Section 13, paragraph (b) of the Public Service Act, "public service" includes: ". . . every person that now or hereafter may own, operate, manage, or control in the Philippines, for hire or compensation, with general or limited clientele, whether permanent, occasional or accidental, and done for general business purposes, any common carrier, railroad, street railway, traction railway, subway motor vehicle, either for freight or passenger, or both, with or without fixed route and whatever may be its classification, freight or carrier service of any class, express service, steamboat, or steamship line, pontines, ferries and water craft, engaged in the transportation of passengers or freight or both, shipyard, marine repair shop, wharf or dock, ice plant, ice-refrigeration plant, canal, irrigation system, gas, electric light, heat and power, water supply and power petroleum, sewerage system, wire or wireless communications systems, wire or wireless broadcasting stations and other similar public services . . ." (Emphasis supplied) It appears to the Court that private respondent is properly characterized as a common carrier even though he merely "back-hauled" goods for other merchants from Manila to Pangasinan, although such backhauling was done on a periodic or occasional rather than regular or scheduled manner, and even though private respondent's principal occupation was not the carriage of goods for others. There is no dispute that private respondent charged his customers a fee for hauling their goods; that fee frequently fell below commercial freight rates is not relevant here. The Court of Appeals referred to the fact that private respondent held no certificate of public convenience, and concluded he was not a common carrier. This is palpable error. A certificate of public convenience is not a requisite for the incurring of liability under the Civil Code provisions governing common carriers. That liability arises the moment a person or firm acts as a common carrier, without regard to whether or not such carrier has also complied with the requirements of the applicable regulatory statute and implementing regulations and has been granted a certificate of public convenience or other franchise. To exempt private respondent from the liabilities of a common carrier because he has not secured the necessary certificate of public convenience, would be offensive to sound public policy; that would be to reward private respondent precisely for failing to comply with applicable statutory requirements. The business of a common carrier impinges directly and intimately upon the safety and well being and property of those members of the general community who happen to deal with such carrier. The law imposes duties and liabilities upon common carriers for the safety and protection of those who utilize their services and the law cannot allow a common carrier to render such duties and liabilities merely facultative by simply failing to obtain the necessary permits and authorizations. cdphil We turn then to the liability of private respondent as a common carrier. Common carriers, "by the nature of their business and for reasons of public policy," 2 are held to a very high degree of care and diligence ("extraordinary diligence") in the carriage of goods as well as of passengers. The specific import of extraordinary diligence in the care of goods transported by a common carrier is, according to Article 1733, "further expressed in Articles 1734, 1735 and 1745, numbers 5, 6 and 7" of the Civil Code. Article 1734 establishes the general rule that common carriers are responsible for the loss, destruction or deterioration of the goods which they carry, "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 or omission of the shipper or owner of the goods; The character of the goods or defects in the packing or in the containers; and Order or act of competent public authority."

It is important to point out that the above list of causes of loss, destruction or deterioration which exempt the common carrier for responsibility therefor, is a closed list. Causes falling outside the foregoing list, even if they appear to constitute a species of force majeure, fall within the scope of Article 1735, which provides as follows: "In all cases other than those mentioned in numbers 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 in Article 1733." (Emphasis supplied) Applying the above-quoted Articles 1734 and 1735, we note firstly that the specific cause alleged in the instant case the hijacking of the carrier's truck - does not fall within any of the five (5) categories of exempting causes listed in Article 1734. It would follow,

therefore, that the hijacking of the carrier's vehicle must be dealt with under the provisions of Article 1735, in other words, that the private respondent as common carrier is presumed to have been at fault or to have acted negligently. This presumption, however, may be overthrown by proof of extraordinary diligence on the part of private respondent. cdll Petitioner insists that private respondent had not observed extraordinary diligence in the care of petitioner's goods. Petitioner argues that in the circumstances of this case, private respondent should have hired a security guard presumably to ride with the truck carrying the 600 cartons of Liberty filled milk. We do not believe, however, that in the instant case, the standard of extraordinary diligence required private respondent to retain a security guard to ride with the truck and to engage brigands in a fire fight at the risk of his own life and the lives of the driver and his helper. The precise issue that we address here relates to the specific requirements of the duty of extraordinary diligence in the vigilance over the goods carried in the specific context of hijacking or armed robbery. As noted earlier, the duty of extraordinary diligence in the vigilance over goods is, under Article 1733, given additional specification not only by Articles 1734 and 1735 but also by Article 1745, numbers 4, 5 and 6, Article 1745 provides in relevant part: "Any of the following or similar stipulations shall be considered unreasonable, unjust and contrary to public policy: xxx (5) xxx xxx

that the common carrier shall not be responsible for the acts or omissions of his or its employees;

(6) that the common carrier's liability for acts committed by thieves, or of robbers who do not act with grave or irresistible threat, violence or force, is dispensed with or diminished; and (7) that the common carrier shall not responsible for the loss, destruction or deterioration of goods on account of the defective condition of the car, vehicle, ship, airplane or other equipment used in the contract of carriage." (Emphasis supplied) Under Article 1745 (6) above, a common carrier is held responsible and will not be allowed to divest or to diminish such responsibility even for acts of strangers like thieves or robbers, except where such thieves or robbers in fact acted "with grave or irresistible threat, violence or force." We believe and so hold that the limits of the duty of extraordinary diligence in the vigilance over the goods carried are reached where the goods are lost as a result of a robbery which is attended by "grave or irresistible threat, violence or force." In the instant case, armed men held up the second truck owned by private respondent which carried petitioner's cargo. The record shows that an information for robbery in band was filed in the Court of First Instance of Tarlac, Branch 2, in Criminal Case No. 198 entitled "People of the Philippines v. Felipe Boncorno, Napoleon Presno, Armando Mesina, Oscar Oria and one John Doe." There, the accused were charged with willfully and unlawfully taking and carrying away with them the second truck, driven by Manuel Estrada and loaded with the 600 cartons of Liberty filled milk destined for delivery at petitioner's store in Urdaneta, Pangasinan. The decision of the trial court shows that the accused acted with grave, if not irresistible, threat, violence or force. 3 Three (3) of the five (5) holduppers were armed with firearms. The robbers not only took away the truck and its cargo but also kidnapped the driver and his helper, detaining them for several days and later releasing them in another province (in Zambales). The hijacked truck was subsequently found by the police in Quezon City. The Court of First Instance convicted all the accused of robbery, though not of robbery in band. 4 In these circumstances, we hold that the occurrence of the loss must reasonably be regarded as quite beyond the control of the common carrier and properly regarded as a fortuitous event. It is necessary to recall that even common carriers are not made absolute insurers against all risks of travel and of transport of goods, and are not held liable for acts or events which cannot be foreseen or are inevitable, provided that they shall have complied with the rigorous standard of extraordinary diligence. prLL

We, therefore, agree with the result reached by the Court of Appeals that private respondent Cendaa is not liable for the value of the undelivered merchandise which was lost because of an event entirely beyond private respondent's control. ACCORDINGLY, the Petition for Review on Certiorari is hereby DENIED and the Decision of the Court of Appeals dated 3 August 1977 is AFFIRMED. No pronouncement as to costs. SO ORDERED. Fernan, C.J., Gutierrez, Jr., Bidin and Corts, JJ., concur.

SECOND DIVISION [G.R. No. 92288. February 9, 1993.] BRITISH AIRWAYS, INC., petitioner, vs. THE HON. COURT OF APPEALS, Twelfth Division, and FIRST INTERNATIONAL TRADING AND GENERAL SERVICES, respondents. Quasha, Asperilla, Ancheta, Pea & Nolasco for petitioner. Monina P. Lee for private respondent. SYLLABUS 1. CIVIL LAW; DAMAGES; THERE IS VALID CAUSE OF ACTION FOR DAMAGES AGAINST PETITIONER FOR ITS BREACH OF CONTRACT AND BAD FAITH. Private respondent had a valid cause of action for damages against petitioner. A cause of action is an act or omission of one party in violation of the legal right or rights of the other. petitioner's repeated failures to transport private respondent's workers in its flight despite confirmed booking of said workers clearly constitutes breach of contract and bad faith on its part.

2. ACTUAL OR COMPENSATORY DAMAGES CANNOT BE PRESUMED BUT MUST BE PROVED WITH REASONABLE DEGREE OF CERTAINTY; PRIVATE RESPONDENT NOT ENTITLED TO ACTUAL DAMAGES BECAUSE IT FAILED TO SUPPORT ITS CLAIM THAT IT SUFFERED THEM. In the Complaint filed by private respondent. it was alleged that private respondent suffered actual damages in the amount of P308,016.00 representing the money it borrowed from friends and financiers which is P304,416.00 for the 93 airline tickets and P3,600.00 for the travel tax of the 12 workers. It is clear therefore that the actual damages private respondent seeks to recover are the airline tickets and travel taxes it spent for its workers which were already reimbursed by its principal and not for any other expenses it had incurred in the process of recruiting said contract workers. Inasmuch as all expenses including the processing fees incurred by private respondent had already been paid for by the latter's principal on a staggered basis as admitted in open court by its managing director, Mrs. Bienvenida Brusellas, We do not find anymore justification in the appellate court's decision in granting actual damages to private respondent. Thus, while it may be true that private respondent was compelled to borrow money for the airfare tickets of its contract workers when petitioner failed to transport said workers, the reimbursements made by its principal to private respondent failed to support the latter's claim that it suffered actual damages as a result of petitioner's failure to transport said workers. It is undisputed that private respondent had consistently admitted that its principal and reimbursed all its expenses. Article 2199 of the Civil Code provides that: "Except as provided by law or by stipulations, one is entitled to an adequate compensation only for such pecuniary loss suffered by him as he has duly proved. Such compensation is referred to as actual or compensatory damages." Furthermore, actual or compensatory damages cannot be presumed, but must be duly proved, and proved with reasonable degree of certainty. A court cannot rely on speculation, conjecture or guesswork as to the fact and amount of damages, but must depend upon competent proof that they have suffered and on evidence of the actual amount thereof. 3. PRIVATE RESPONDENT, HOWEVER, IS ENTITLED TO AN AWARD OF MORAL AND EXEMPLARY DAMAGES; REASON; PETITIONER'S ALLEGED DAMAGES WERE MERE AFTERTHOUGHTS. However, private respondent is entitled to an award of moral and exemplary damages for the injury it suffered as a result of petitioner's failure to transport the former's workers because of the latter's patent bad faith in the performance of its obligation. As to the alleged damages suffered by the petitioner as stated in its counterclaims, the record shows that no claim for said damages was ever made by the petitioner immediately after their alleged occurrence therefore said counterclaims were mere afterthoughts when private respondent filed the present case. DECISION NOCON, J p: This is a petition for review on certiorari to annul and set aside the decision dated November 15, 1989 of the Court of Appeals 1 affirming the decision of the trial court 2 in ordering petitioner British Airways, Inc. to pay private respondent First International Trading and General Services actual damages, moral damages, corrective or exemplary damages, attorney's fees and the costs as well as the Resolution dated February 15, 1990 3 denying petitioner's Motion for Reconsideration in the appealed decision. It appears on record that on February 15, 1981, private respondent First International Trading and General Services Co., a duly licensed domestic recruitment and placement agency, received a telex message from its principal ROLACO Engineering and Contracting Services in Jeddah, Saudi Arabia to recruit Filipino contract workers in behalf of said principal. 4 During the early part of March 1981, said principal paid to the Jeddah branch of petitioner British Airways. Inc. airfare tickets for 93 contract workers with specific instruction to transport said workers to Jeddah on or before March 30, 1981. As soon as petitioner received a prepaid ticket advice from its Jeddah branch to transport the 93 workers, private respondent was immediately informed by petitioner that its principal had forwarded 93 prepaid tickets. Thereafter, private respondent instructed its travel agent, ADB Travel and Tours, Inc., to book the 93 workers with petitioner but the latter failed to fly said workers, thereby compelling private respondent to borrow money in the amount of P304.416.00 in order to purchase airline tickets from the other airlines as evidenced by the cash vouchers (Exhibits "B", "C" and "C-1 to C-7") for the 93 workers it had recruited who must leave

immediately since the visas of said workers are valid only for 45 days and the Bureau of Employment Services mandates that contract workers must be sent to the jobsite within a period of 30 days. LexLib Sometime in the first week of June, 1981, private respondent was again informed by the petitioner that it had received a prepaid ticket advice from its Jeddah branch for the transportation of 27 contract workers. Immediately, private respondent instructed its travel agent to book the 27 contract workers with the petitioner but the latter was only able to book and confirm 16 seats on its June 9, 1981 flight. However, on the date of the scheduled flight only 9 workers were able to board said flight while the remaining 7 workers were rebooked to June 30, 1981 which bookings were again cancelled by the petitioner without any prior notice to either private respondent or the workers. Thereafter, the 7 workers were rebooked to the July 4, 1981 flight of petitioner with 6 more workers booked for said flight. Unfortunately, the confirmed bookings of the 13 workers were again cancelled and rebooked to July 7, 1981. On July 6, 1981, private respondent paid the travel tax of the said workers as required by the petitioner but when the receipt of the tax payments was submitted, the latter informed private respondent that it can only confirm the seats of the 12 workers on its July 7, 1981 flight. However, the confirmed seats of said workers were again cancelled without any prior notice either to the private respondent or said workers. The 12 workers were finally able to leave for Jeddah after private respondent had bought tickets from the other airlines. As a result of these incidents, private respondent sent a letter to petitioner demanding compensation for the damages it had incurred by the latter's repeated failure to transport its contract workers despite confirmed bookings and payment of the corresponding travel taxes. cdll On July 23, 1981, the counsel of private respondent sent another letter to the petitioner demanding the latter to pay the amount of P350,000.00 representing damages and unrealized profit or income which was denied by the petitioner. On August 8, 1981, private respondent received a telex message from its principal cancelling the hiring of the remaining recruited workers due to the delay in transporting the workers to Jeddah. 5 On January 27, 1982, private respondent filed a complaint for damages against petitioner with the Regional Trial Court of Manila, Branch 1 in Civil Case No. 82-4653. On the other hand, petitioner alleged in its Answer with counterclaims that it received a telex message from Jeddah on March 20, 1981 advising that the principal of private respondent had prepaid the airfares of 100 persons to transport private respondent's contract workers from Manila to Jeddah on or before March 30, 1981. However, due to the unavailability of space and limited time, petitioner had to return to its sponsor in Jeddah the prepaid ticket advice consequently not even one of the alleged 93 contract workers were booked in any of its flights. On June 5, 1981, petitioner received another prepaid ticket advice to transport 16 contract workers of private respondent to Jeddah but the travel agent of the private respondent booked only 10 contract workers for petitioner's June 9, 1981 flight. However, only 9 contract workers boarded the scheduled flight with 1 passenger not showing up as evidenced by the Philippine Airlines' passenger manifest for Flight BA-020 (Exhibit "7", "7-A", "7-B", & "7-C"). 6 Thereafter, private respondent's travel agent booked seats for 5 contract workers on petitioner's July 4, 1981 flight but said travel agent cancelled the booking of 2 passengers while the other 3 passengers did not show up on said flight. Sometime in July 1981, the travel agent of the private respondent booked 7 more contract workers in addition to the previous 5 contract workers who were not able to board the July 4, 1981 flight with the petitioner's July 7, 1981 flight which was accepted by petitioner subject to reconfirmation. However on July 6, 1981, petitioner's computer system broke down which resulted to petitioner's failure to get a reconfirmation from Saudi Arabia Airlines causing the automatic cancellation of the bookings of private respondent's 12 contract workers. In the morning of July 7, 1981, the computer system of the petitioner was reinstalled and immediately petitioner tried to reinstate the bookings of the 12 workers with either Gulf Air or Saudi Arabia Airlines out both airlines replied that no seat was available on that date and had to place the 12 workers on the wait list. Said information was duly relayed to the private respondent and the 12 workers before the scheduled flight. After due trial or on August 27, 1985, the trial court rendered its decision, the dispositive portion of which reads as follows: "WHEREFORE, in view of all the foregoing, this Court renders judgment: LLphil "1. "2. "3. "4. "5. Ordering the defendant to pay the plaintiff actual damages in the sum of P308,016.00; Ordering defendant to pay moral damages to the plaintiff in the amount of P20,000.00; Ordering the defendant to pay to the plaintiff P10,000.00 by way of corrective or exemplary damages; Ordering the defendant to pay the plaintiff 30% of its total claim for and as attorney's fees; and To pay the costs." 7

On March 13, 1986, petitioner appealed said decision to respondent appellate court after the trial court denied its Motion for Reconsideration on February 28, 1986. On November 15, 1989, respondent appellate court affirmed the decision of the trial court, the dispositive portion of which reads: "WHEREFORE, the decision appealed from is hereby AFFIRMED with costs against the appellant." 8 On December 9, 1989, petitioner filed a Motion for Reconsideration which was also denied. Hence, this petition. It is the contention of petitioner that private respondent has no cause of action against it there being no perfected contract of carriage existing between them as no ticket was ever issued to private respondent's contract workers and. therefore, the obligation of the petitioner to transport said contract workers did not arise. Furthermore, private respondent's failure to attach any ticket in the complaint further proved that it was never a party to the alleged transaction. Petitioner's contention is untenable. Private respondent had a valid cause of action for damages against petitioner. A cause of action is an act or omission of one party in violation of the legal right or rights of the other. 9 petitioner's repeated failures to transport private respondent's workers in its flight despite confirmed booking of said workers clearly constitutes breach of contract and bad faith on its part. In resolving petitioner's theory that private respondent has no cause of action in the instant case, the appellate court correctly held that: prcd "In dealing with the contract of common carriage of passengers, for purpose of accuracy, there are two (2) aspects of the same, namely: (a) the contract 'to carry (at some future time),' which contract is consensual and is necessarily perfected by mere consent (See Article 1356, Civil Code of the Philippines) and (b) the contract 'of carriage' or 'of common carriage' itself which should be considered as a real contract for not until the carrier is actually used can the carrier be said to have already assumed the obligation of a carrier. (Paras, Civil Code Annotated, Vol. V. p. 429, Eleventh Ed.) "In the instant case, the contract 'to carry' is the one involved, which is consensual and is perfected by the mere consent of the parties. "There is no dispute as to the appellee's consent to the said contract 'to carry' its contract workers from Manila to Jeddah. The appellant's consent thereto, on the other hand, was manifested by its acceptance of the PTA or prepaid ticket advice that ROLACO Engineering has prepaid the airfares of the appellee's contract workers advising the appellant that it must transport the contract workers on or before the end of March, 1981 and the other batch in June, 1981. "Even if a PTA is merely an advice from the sponsors that an airline is authorized to issue a ticket and thus no ticket was yet issued, the fact remains that the passage had already been paid for by the principal of the appellee, and the appellant had accepted such payment. The existence of this payment was never objected to nor questioned by the appellant in the lower court. Thus, the cause or consideration which is the fare paid for the passengers exists in this case. "The third essential requisite of a contract is an object certain. In this contract `to carry', such an object is the transport of the passengers from the place of departure to the place of destination as stated in the telex. "Accordingly, there could be no more pretensions as to the existence of an oral contract of carriage imposing reciprocal obligations on both parties. "In the case of appellee, it has fully complied with the obligation, namely, the payment of the fare and its willingness for its contract workers to leave for their place of destination. "On the other hand, the facts clearly show that appellant was remiss in its obligation to transport the contract workers on their flight despite confirmation and bookings made by appellee's travelling agent. LLpr "xxx xxx xxx.

"Besides, appellant knew very well that time was of the essence as the prepaid ticket advice had specified the period of compliance therewith, and with emphasis that it could only be used if the passengers fly on BA. Under the circumstances, the appellant should have refused acceptance of the PTA from appellee's principal or to at least inform appellee that it could not accommodate the contract workers. "xxx xxx xxx.

"While there is no dispute that ROLACO Engineering advanced the payment for the airfares of the appellee's contract workers who were recruited for ROLACO Engineering and the said contract workers were the intended passengers in the aircraft of the appellant, the said contract `to carry' also involved the appellee for as recruiter he had to see to it that the contract workers should be transported to ROLACO Engineering in Jeddah thru the appellant's transportation. For that matter, the involvement of the appellee in the said contract `to carry' was well demonstrated when the appellant upon receiving the PTA immediately advised the appellee thereof." 10 Petitioner also contends that the appellate court erred in awarding actual damages in the amount of P308,016.00 to private respondent since all expenses had already been subsequently reimbursed by the latter's principal.

In awarding actual damages to private respondent, the appellate court held that the amount of P308,016.00 representing actual damages refers to private respondent's second cause of action involving the expenses incurred by the latter which were not reimbursed by ROLACO Engineering. However, in the Complaint 11 filed by private respondent. it was alleged that private respondent suffered actual damages in the amount of P308,016.00 representing the money it borrowed from friends and financiers which is P304,416.00 for the 93 airline tickets and P3,600.00 for the travel tax of the 12 workers. It is clear therefore that the actual damages private respondent seeks to recover are the airline tickets and travel taxes it spent for its workers which were already reimbursed by its principal and not for any other expenses it had incurred in the process of recruiting said contract workers. Inasmuch as all expenses including the processing fees incurred by private respondent had already been paid for by the latter's principal on a staggered basis as admitted in open court by its managing director, Mrs. Bienvenida Brusellas, 12 We do not find anymore justification in the appellate court's decision in granting actual damages to private respondent. Thus, while it may be true that private respondent was compelled to borrow money for the airfare tickets of its contract workers when petitioner failed to transport said workers, the reimbursements made by its principal to private respondent failed to support the latter's claim that it suffered actual damages as a result of petitioner's failure to transport said workers. It is undisputed that private respondent had consistently admitted that its principal and reimbursed all its expenses. cdll Article 2199 of the Civil Code provides that: "Except as provided by law or by stipulations, one is entitled to an adequate compensation only for such pecuniary loss suffered by him as he has duly proved. Such compensation is referred to as actual or compensatory damages." Furthermore, actual or compensatory damages cannot be presumed, but must be duly proved, and proved with reasonable degree of certainty. A court cannot rely on speculation, conjecture or guesswork as to the fact and amount of damages, but must depend upon competent proof that they have suffered and on evidence of the actual amount thereof. 13 However, private respondent is entitled to an award of moral and exemplary damages for the injury it suffered as a result of petitioner's failure to transport the former's workers because of the latter's patent bad faith in the performance of its obligation. As correctly pointed out by the appellate court: "As evidence had proved, there was complete failure on the part of the appellant to transport the 93 contract workers of the appellee on or before March 30, 1981 despite receipt of the payment for their airfares, and acceptance of the same by the appellant, with specific instructions from the appellee's principal to transport the contract workers on or before March 30, 1981. No previous notice was ever registered by the appellant that it could not comply with the same. And then followed the detestable act of appellant in unilaterally cancelling, booking and rebooking unreasonably the flight of appellee's contract workers in June to July, 1981 without prior notice. And all of these actuations of the appellant indeed constitute malice and evident bad faith which had caused damage and besmirched the reputation and business image of the appellee." 14 As to the alleged damages suffered by the petitioner as stated in its counterclaims, the record shows that no claim for said damages was ever made by the petitioner immediately after their alleged occurrence therefore said counterclaims were mere afterthoughts when private respondent filed the present case. WHEREFORE, the assailed decision is hereby AFFIRMED with the MODIFICATION that the award of actual damages be deleted from said decision. SO ORDERED. Narvasa, C .J ., Feliciano, Regalado and Campos, Jr., JJ., concur.

SECOND DIVISION [G.R. No. L-44627. December 14, 1978.] LUCIA S. PAJARITO, petitioner, vs. HON. ALBERTO V. SEERIS, Presiding Judge of Branch II, Court of First Instance of Zamboanga; JOSELITO AIZON, and FELIPE AIZON, respondents. Geronimo Pajarito for petitioner. Dominador L. Natividad for private respondents. SYNOPSIS Upon his plea of guilty, a bus driver was convicted of the crime of Double Homicide Through Reckless Imprudence and sentenced to indemnify the victim's heirs. When the writ of execution was returned unsatisfied because of his insolvency, the victim's mother moved for issuance of subsidiary writ of execution in the same criminal case against the employer. The trial court denied the motion on the ground that the employer was not a party in the criminal case, and therefore a separate civil action must be filed to enforce his subsidiary liability. The Supreme Court held that the employer's subsidiary liability under the Revised Penal Code may be enforced in the same criminal case where the award was made, and the validity of his claim that he is no longer the operator of the bus is a matter that could be litigated and resolved within the same proceeding because the execution of the judgment is a logical and integral part of the case itself. SYLLABUS 1. CRIMINAL LAW; CIVIL LIABILITY. Under Article 100 of the Revised Penal Code, a person criminally liable for a felony is also civilly liable. As a consequence, the institution of the criminal action carries with it the institution of the civil action arising therefrom, except when there is a separate civil action or reservation of the latter on the part of the complainant. 2. ID.; ID.; EMPLOYER'S SUBSIDIARY LIABILITY. Pursuant to Article 103, in relation to Article 102, of the Revised Penal Code, an employer may be subsidiarily liable for the employee's civil liability in a criminal action when: (1) the employer is engaged in any kind of industry; (2) the employee committed the offense in the discharge of his duties; (3) he is insolvent and has not satisfied his civil liability. The subsidiary liability of the employer, however, arises only after conviction of the employee in the criminal case. 3. ID.; ID.; ID.; EFFECT OF CONVICTION OF EMPLOYEE. A judgment of conviction sentencing a defendant employee to pay an indemnity, in the absence of any collusion between the defendant and the offended party, is binding and conclusive upon the employer in an action for the enforcement of the latter's subsidiary liability, not only with regard to the civil liability but also with regard to its amount because the liability of an employer cannot be separated from but follows that of his employee. To allow an employer to dispute the civil liability fixed in the criminal case would be to amend, nullify, or defeat a final judgment rendered by a competent court. 4. EVIDENCE; EMPLOYER'S LIABILITY; PROOF OF EMPLOYEE'S INSOLVENCY. The sheriff's return, submitted in evidence in the action against the employer, showing that the writ of execution was not satisfied because of the insolvency of the driver, is a prima facie evidence of the employee's insolvency. Similarly, the employee's insolvency may be proven by the certificate of the Director of Prisons that the employee is serving subsidiary imprisonment, or by the certificate of the sheriff that the employee has not satisfied his pecuniary liability and that no properties have been found registered in his name. 5. ACTIONS; PARTIES; EMPLOYER PARTY TO CRIMINAL CASE AGAINST EMPLOYEE. The employer is in substance and in effect a party to the criminal case instituted against his employee, considering the subsidiary liability imposed upon him by law. 6. ID.; COURT; EMPLOYEE'S LIABILITY; DUTY OF COURTS TO ENFORCE EMPLOYER'S SUBSIDIARY LIABILITY. Considering that the judgment of conviction, sentencing a defendant employee to pay an indemnity under Article 102 and 103 of the Revised Penal Code is conclusive upon the employer not only with regard to the latter's liability but also with regard to its amount, it was held that in an action to enforce the employer's subsidiary liability, the court has no other function than to render a decision based upon the indemnity awarded in the criminal case and has no power to amend or modify it even if in its opinion an error has been committed in the decision. 7. ID.; SEPARATE ACTION NOT NECESSARY TO ENFORCE EMPLOYER'S SUBSIDIARY LIABILITY. Where the employer does not deny that he was the registered operator of the bus but only claims that he sold the bus to the father of the accused, it would serve no important purpose to require the heirs of the victim to file a separate and independent action against the employer for the enforcement of the latter's subsidiary civil liability. Under the circumstances, it would not only prolong the litigation but would require the heirs of the deceased victim to incur unnecessary expenses. At any rate, the proceeding for the enforcement of subsidiary

liability may be considered as part of the proceeding for the execution of judgment. A case in which an execution has been issued is regarded as still pending so that all proceedings on the execution are proceedings in the suit. 8. ID.; COURTS; CONTROL OVER PROCESS OF EXECUTION. The court which rendered the judgment has a general supervisory control over its process of execution, and this power carries with it the right to determine every question of fact and law which may be involved in the execution. 9. ACTIONS; EMPLOYER'S LIABILITY MAY BE ENFORCED IN THE SAME PROCEEDINGS. The validity of the claim of an employer that he is no longer the owner and operator of the ill-fated bus, as he had sold it to the father of the accused, is a matter that could be litigated and resolved in the same criminal case. In support of the employer's opposition to the motion for the purpose of enforcement of his subsidiary liability, the employer may adduce all the evidence necessary for that purpose. Indeed, the enforcement of the employer's subsidiary liability may be litigated within the same proceeding because the execution of the judgment is a logical and integral part of the case itself. This would facilitate the application of justice to the rival claims of the contending parties. 10. RULES OF COURT; CONSTRUCTION AND APPLICATION OF. The purpose of the procedure is not to thwart justice. Its proper aim is to facilitate the application of justice to the rival claims of the contending parties. It was created not to hinder and delay but to facilitate and promote the administration of justice. Thus, the Rules require that they should be liberally construed "to promote their object and to assist the parties in obtaining just, speedy, and inexpensive determination of every action and proceeding. DECISION ANTONIO, J p: Original special civil action for certiorari. Private respondent Joselito Aizon was charged before the Court of First Instance of Zamboanga City, Branch II (respondent Judge Alberto V. Seeris, presiding), with Double Homicide Through Reckless Imprudence or a violation of Section 48 of Republic Act No. 4136. The pertinent portion of the Information reads as follows: "That on or about May 9, 1975, in the City of Zamboanga, Philippines, and within the jurisdiction of this Honorable Court, the abovenamed accused, being then the driver of an Isuzu Passenger Bus bearing Plate No. SB-511 owned and operated by FELIPE AIZON, operating on the public road, and without taking the necessary precautions, considering the width, traffic, visibility, grades, crossing, curvatures, and other conditions of the road, so as to avoid accident to persons or damage to properties, did then and there, through reckless and fast driving, caused the said Isuzu Passenger Bus to turn turtle, as a result of which, the persons of MYRNA PAJARITO DE SAN LUIS and MUSA BARING, both passengers on board the said Isuzu passenger bus sustained injuries on their persons which caused their death." (Emphasis supplied.) Upon arraignment, said respondent entered a plea of guilty. In view of said plea, the court rendered judgment convicting him of the offense charged and sentencing him "to indemnify the heirs of the late Myrna Pajarito de San Luis the amount of P12,000.00 . . .." After the judgment had become final and executory, a Writ of Execution was issued against Joselito Aizon for the indemnity of P12,000.00, but the same was returned unsatisfied because of his insolvency. Whereupon, petitioner Lucia S. Pajarito, mother of the late Myrna Pajarito de San Luis, filed with the court a quo a motion for the issuance of Subsidiary Writ of Execution and served a copy thereof to private respondent Felipe Aizon, employer of Joselito Aizon as alleged in the Information. Felipe Aizon opposed the motion on the grounds, to wit: (1) that he is not the employer of Joselito Aizon, the vehicle in question having been sold already to Isaac Aizon, father of Joselito, but that the deed of transfer has not been executed because the full price has not yet been paid; and (2) that in case of insolvency, Joselito has to suffer subsidiary imprisonment to satisfy the judgment insofar as the indemnity is concerned. cdll The court denied petitioner's motion for Subsidiary Writ of Execution on the ground that Felipe Aizon, alleged employer of Joselito, was not a party in the aforesaid criminal case. Said the court: "It is therefore, the well considered opinion of this Court that a separate civil action must be filed by movant Lucia S. Pajarito against Felipe Aizon in order to enforce the subsidiary liability of the latter under Article 103 of the Revised Penal Code, as amended." Petitioner moved for reconsideration of the foregoing ruling, but the same was denied. Hence, this petition. Petitioner contends that the enforcement of the subsidiary liability under Article 103 of the Revised Penal Code may be filed under the same criminal case, under which the subsidiary liability was granted; that respondent Felipe Aizon, alleged employer of Joselito Aizon, was given his day in court, as he was furnished a copy of the motion for issuance of the Subsidiary Writ of Execution, to which he filed his opposition; and that, although not made a party in the criminal case, the employer, Felipe Aizon, should have taken active participation in the defense of his employee, Joselito Aizon. On the other hand, respondents, in their Comment to the petition which We consider their Answer, maintain that to enforce the subsidiary liability under Article 103 of the Revised Penal Code, as amended, a separate civil action must be filed against the employer because under our present judicial system, before one could be held subsidiary liable, he should be made a party defendant to the action, which in this case is not legally feasible because respondent Felipe Aizon was not accused together with Joselito Aizon in Criminal Case No. 512 (1313) for Double Homicide Through Reckless Imprudence.

Obviously, the question to be considered here is whether the subsidiary civil liability established in Articles 102 and 103 of the Revised Penal Code may be enforced in the same criminal case where the award was made, or in a separate civil action. Under Article 100 of the Revised Penal Code, a person criminally liable for a felony is also civilly liable. As a consequence, the institution of the criminal action carries with it the institution of the civil action arising therefrom, except when there is a separate civil action or reservation of the latter on the part of the complainant. As explained in Ramcar, Incorporated v. De Leon: 1 "When no civil action is expressly instituted, according to subsection (a) of section 1 of Rule 107, it shall be impliedly jointly 'instituted with the criminal action.' That means as if two actions are joined in one as twins, each one complete with the same completeness as any of the two normal persons composing a twin. It means that the civil action may be tried and prosecuted, with all the ancillary processes provided by law." Pursuant to Article 103, in relation to Article 102, of the Revised Penal Code, an employer may be subsidiary liable for the employee's civil liability in a criminal action when: (1) the employer is engaged in any kind of industry; (2) the employee committed the offense in the discharge of his duties; and (3) he is insolvent and has not satisfied his civil liability. 2 The subsidiary civil liability of the employer, however, arises only after conviction of the employee in the criminal case. In Martinez v. Barredo, 3 this Court ruled that a judgment of conviction sentencing a defendant employee to pay an indemnity, in the absence of any collusion between the defendant and the offended party, is conclusive upon the employer in an action for the enforcement of the latter's subsidiary liability. cdrep ". . . The stigma of a criminal conviction surpasses in effect and implications mere civil liability. Common sense dictates that a finding of guilt in a criminal case in which proof beyond reasonable doubt is necessary, should not be nullified in a subsequent civil action requiring only preponderance of evidence to support a judgment, unless those who support the contrary rule should also hold that an absolution in a civil case will operate to automatically set aside the verdict against the defendant in the criminal case. It is anomalous, to say the least, to suppose that the driver, excelling 'Dr. Jekyll and Mr. Hyde', could be guilty of reckless negligence in so far as his obligation to pay indemnity is concerned, and at the same time could be free from any blame when said indemnity is sought to be collected from his employer, although the right to the indemnity arose from and was based on one and the same act of the driver. "The employer cannot be said to have been deprived of his day in court, because the situation before us is not one wherein the employer is sued for a primary liability under article 1903 of the Civil Code, but one in which enforcement is sought of a subsidiary civil liability incident to and dependent upon his driver's criminal negligence which is a proper issue to be tried and decided only in a criminal action. In other words, the employer becomes ipso facto subsidiarily liable upon his driver's conviction and upon proof of the latter's insolvency, in the same way that acquittal wipes out not only the employee's primary civil liability but also his employer's subsidiary liability for such criminal negligence. (Almeida et al. vs. Abaroa, 8 Phil., 178, affirmed in 218 U.S. 476, 54 Law ed., 1116; Wise & Co. vs. Larion, 45 Phil. 314, 320; Francisco vs. Onrubia, 46 Phil., 327; Province of Ilocos Sur vs. Tolentino, G.R. No. 34186, 56 Phil. 829; Moran, Comments on the Rules of Court, Vol. II, p. 403). "It is high time that the employer exercised the greatest care in selecting his employees, taking real and deep interest in their welfare; intervening in any criminal action brought against them by reason of or as a result of the performance of their duties, if only in the way of giving them the benefit of counsel; and consequently doing away with the practice of leaving them to their fates. If these be done, the American rule requiring notice on the part of the employer shall have been satisfied." (At pp. 3-4). In Miranda v. Malate Garage & Taxicab, Inc., 4 this Court further amplified the rule that the decision convicting the employee is binding and conclusive upon the employer, "not only with regard to (the latter's) civil liability but also with regard to its amount because the liability of an employer cannot be separated but follows that of his employee. That is why the law says that his liability is subsidiary (Article 103, Revised Penal Code). To allow an employer to dispute the civil liability fixed in the criminal case would be to amend, nullify, or defeat a final judgment rendered by a competent court." And this Court, in Miranda, further explained that the employer is in substance and in effect a party to the criminal case, considering the subsidiary liability imposed upon him by law. "It is true that an employer, strictly speaking, is not a party to the criminal case instituted against his employee, but in substance, and in effect he is considering the subsidiary liability imposed upon him by law. It is his concern, as well as of his employee, to see to it that his interest be protected in the criminal case by taking virtual participation in the defense of his employee. He cannot leave him to his own fate because his failure is also his. And if because of his indifference or inaction the employee is convicted and damages are awarded against him, he cannot later be heard to complain, if brought to court, for the enforcement of his subsidiary liability, that he was not given his day in court." (At p. 675. Emphasis supplied.) The conclusiveness upon the employer of the judgment of conviction sentencing the employee to pay civil indemnity, for the enforcement of the employer's subsidiary civil liability under Article 103 was again reiterated in Manalo and Salvador v. Robles Transportation Company, Inc., 5 where the Court ruled that the sheriff's return submitted in evidence in the action against the employer, Robles Transportation Company, Inc., showing that the two writs of execution were not satisfied because of the insolvency of the driver, is a prima facie evidence of the employee's insolvency. Similarly, this Court ruled that the defendant's insolvency may be proven by the certificate of the Director of Prisons that the employee is serving subsidiary imprisonment; 6 or by the certificate of the sheriff that the employee has not satisfied his pecuniary liability and that no properties have been found registered in his name. 7 Considering that the judgment of conviction, sentencing a defendant employee to pay an indemnity under Articles 102 and 103 of the Revised Penal Code, is conclusive upon the employer not only with regard to the latter's civil liability but also with regard to its amount, this Court stated in Rotea, 8 that in the action to enforce the employer's subsidiary liability, the court has no other function

than to render decision based upon the indemnity awarded in the criminal case and has no power to amend or modify it even if in its opinion an error has been committed in the decision. In view of the foregoing principles, and considering that Felipe Aizon does not deny that he was the registered operator of the bus but only claims now that he sold the bus to the father of the accused, it would serve no important purpose to require petitioner to file a separate and independent action against the employer for the enforcement of the latter's subsidiary civil liability. Under the circumstances, it would not only prolong the litigation but would require the heirs of the deceased victim to incur unnecessary expenses. At any rate, the proceeding for the enforcement of the subsidiary civil liability may be considered as part of the proceeding for the execution of the judgment. A case in which an execution has been issued is regarded as still pending so that all proceedings on the execution are proceedings in the suit. 9 There is no question that the court which rendered the judgment has a general supervisory control over its process of execution, and this power carries with it the right to determine every question of fact and law which may be involved in the execution. LibLex The validity of the claim of Felipe Aizon that he is no longer the owner and operator of the ill-fated bus as he sold it already to Isaac Aizon, father of the accused Joselito Aizon, is a matter that could be litigated and resolved in the same criminal case. In support of his opposition to the motion of the complainant, served upon him, for the purpose of the enforcement of his subsidiary liability, Felipe Aizon may adduce all the evidence necessary for that purpose. Indeed, the enforcement of the employer's subsidiary civil liability may be conveniently litigated within the same proceeding because the execution of the judgment is a logical and integral part of the case itself. This would certainly facilitate the application of justice to the rival claims of the contending parties. "The purpose of procedure", observed this Court in Manila Railroad Co. v. Attorney General, 10 "is not to thwart justice. Its proper aim is to facilitate the application of justice to the rival claims of the contending parties. It was created not to hinder and delay but to facilitate and promote the administration of justice." In proceedings to apply justice, it is the duty of the courts "to assist the parties in obtaining just, speedy, and inexpensive determination" of their rival claims. Thus, the Rules require that they should be liberally construed "to promote their object and to assist the parties in obtaining just, speedy, and inexpensive determination of every action and proceeding." 11 WHEREFORE, the Orders of respondent Court in Criminal Case No. 512 (1313) dated July 27, 1976 and August 14, 1976 are hereby set aside. The Court a quo is directed to hear and decide in the same proceeding the subsidiary liability of the alleged owner and operator of the passenger bus. Costs against private respondents. Fernando (Chairman), Aquino, Concepcion Jr., and Santos, JJ., concur.

EN BANC [G.R. No. L-20761. July 27, 1966.] LA MALLORCA, petitioner, vs. HONORABLE COURT OF APPEALS, MARIANO BELTRAN, ET AL., respondents. G. E. Yabut, R. Monterey and M. C. Lagman for petitioner. Achmed Garcia for respondents. SYLLABUS 1. COMMON CARRIERS; CARRIER - PASSENGER RELATION CONTINUES UNTIL PASSENGER HAS REASONABLE TIME TO LEAVE CARRIER'S PREMISES. The relation of carrier and passenger does not cease at the moment the passenger alights from the carrier's vehicle at a place selected by the carrier at the point of destination, but continues until the passenger has had a reasonable time or a reasonable opportunity to leave the carrier's premises (Ormond vs. Hayes, 60 Tex. 180, cited in 10 C.J. 626). 2. ID.; ID.; "REASONABLE TIME" CONSTRUED. What is a reasonable time or a reasonable delay is to be determined from all the circumstances. Thus, a person who, after alighting from a train, walks along the station platform, is considered still a passenger (Keefe vs. Boston, etc. R. Co., 142 Mass. 251, 7 N.E. 874). So also, where a passenger has alighted at his destination and is proceeding by the usual way to leave the company's premises, but before actually doing so is halted by the report that his brother, a fellow passenger, has been shot, and he in good faith and without intent of engaging in the difficulty, returns to relieve his brother, he is deemed reasonably and necessarily delayed and thus continues to be a passenger entitled as such to the protection of the railroad and company and its agents (Layne vs. Chesapeake, etc., R. Co., 68 W. Va. 213, 69 S.E. 700, 31 L.R.A., [N.S.] 414). 3. ID.; ID.; CARRIER'S RESPONSIBILITY FOR NEGLIGENCE; CASE AT BAR. In the present case, the father returned to the bus to get one of his baggages which was not unloaded when he end other members of his family alighted from the bus. The victim, one of his minor daughters, must have followed her father. However, although the father was still on the running board of the bus awaiting for the conductor to hand to him the bag or bayong, the bus started to run, so that even he (the father) had to jump down from the moving vehicle. It was at this instance that the child, who must be near the bus, was run over and killed. Held: In the circumstances, it cannot be claimed that the carrier's agent had exercised the "utmost diligence" of a "very cautious person" required by Article 1755 of the Civil Code to be observed by a common carrier in the discharge of its obligation to transport safely its passengers. In the first place, the driver, although stopping the bus, did not put off the engine. Secondly, he started to run the bus even before the bus conductor gave him the signal to go and while the latter was still unloading a baggage of some passengers. The presence of said passengers near the bus was not unreasonable and they are, therefore, to be considered still as passengers of the carrier, entitled to the protection under their contract of carriage. 4. ID.; ID.; ID.; AVERMENT FOR QUASI-DELICT, ALTHOUGH INCOMPATIBLE WITH CLAIM UNDER CONTRACT OF CARRIAGE, PERMISSIBLE. The inclusion of the averment for quasi-delict in appellee's complaint in the court a quo, while incompatible with the other claim under the contract of carriage, is permissible under Section 2, Rule 8 of the new Rules of Court, which allows a plaintiff to allege causes of action in the alternative, be they compatible with each other or not, to the end that the real matter in controversy may be resolved and determined (Nelayan, et al. vs. Nelayan, et al., 109 Phil., 183). 5. ID.; ID.; ID.; ID.; EFFECT OF PRESENTATION OF PROOF OF CARRIER'S NEGLIGENCE; CASE AT BAR. - The presentation of proof of the negligence of its employee gave rise to the presumption that the defendant employer did not exercise the diligence of a good father of the family in the selection and supervision of its employees. This presumption not having been overcome, the employer must be adjudged pecuniarily liable for the death of the passenger. 6. ID.; ID.; ID.; ID.; ID.; SUFFICIENT ALLEGATION IN THE COMPLAINT; CASE AT BAR. The allegation in the complaint to the effect that "the death of Raquel Beltran, plaintiffs' daughter, was caused by the negligence and want of exercise of the utmost diligence of a very cautious person on the part of the defendants and their agent," sufficiently pleads the culpa or negligence upon which the claim was predicated. This allegation was proved when it was established during the trial that the driver, even before receiving the proper signal from the conductor, and while there were still persons on the running board of the bus and near it, started to run off the vehicle. 7. APPEALS; WHAT CAN BE PASSED UPON ON APPEAL; CASE AT BAR. Generally, the appellate court can only pass upon and consider questions or issues raised and argued in appellant's brief. In the case at bar, plaintiffs did not appeal from that portion of the judgment of the trial court awarding them only P3,000.00 as damages for the death of their daughter. Neither did they point out in their brief in the Court of Appeals that the award was inadequate, or that the inclusion of that figure was merely a clerical error, in order that the matter may be treated as an exception to the general rule (Section 7, Rule 51, new Rules of Court). The Court of Appeals therefore erred in raising the amount of the award. DECISION

BARRERA, J .: La Mallorca seeks the review of the decision of the Court of Appeals in CA- G. R. No. 23267-R, holding it liable for quasi-delict and ordering it to pay to respondents Mariano Beltran, et al. P6,000.00 for the death of his minor daughter Raquel Beltran, plus P400.00 as actual damages. cdrep The facts of the case, as found by the Court of Appeals, briefly are: "On December 20, 1953, at about noontime, plaintiffs, husband and wife, together with their minor daughters, namely Milagros, 13 years old, Raquel, about 4-1/2 years old, and Fe, over 2 years old, boarded the Pambusco Bus No. 352, bearing plate TPU No. 757 (1953 Pampanga), owned and operated by the defendant, at San Fernando, Pampanga, bound for Anao, Mexico, Pampanga. At the time, they were carrying with them four pieces of baggages containing their personal belongings. The conductor of the bus who happened to be a half-brother of plaintiff Mariano Beltran, issued three tickets (Exhs. A, B, & C) covering the full fares of the plaintiff and their eldest child, Milagros. No fare was charged on Raquel and Fe, since both were below the height at which fare is charged in accordance with the appellant's rules and regulations. "After about an hour's trip, the bus reached Anao, whereat it stopped to allow the passengers bound therefor, among whom were the plaintiffs and their children to get off. With respect to the group of the plaintiffs, Mariano Beltran, then carrying some of their baggages, was the first to get down the bus, followed by his wife and his children. Mariano led his companions to a shaded spot on the left pedestrians side of the road about four or five meters away from the vehicle. Afterwards, he returned to the bus in controversy to get his other bayong, which he had left behind, but in so doing, his daughter Raquel followed him unnoticed by her father. While said Mariano Beltran was on the running board of the bus waiting for the conductor to hand him his bayong which he left under one of its seats near the door; the bus, whose motor was not shut off while unloading, suddenly started moving forward, evidently to resume its trip, notwithstanding the fact that the conductor has not given the driver the customary signal to start, since said conductor was still attending to the baggage left behind by Mariano Beltran. Incidentally, when the bus was again placed into a complete stop, it had travelled about ten meters from the point where the plaintiffs had gotten off. "Sensing that the bus was again in motion, Mariano Beltran immediately jumped from the running board without getting his bayong from the conductor. He landed on the side of the road almost in front of the shaded place where he left his wife and children. At that precise time, he saw people beginning to gather around the body of the child lying prostrate on the ground, her skull, crushed, and without life. The child was none other than his daughter Raquel, who was run over by the bus in which she rode earlier together with her parents. "For the death of their said child, the plaintiffs commenced the present suit against the defendant seeking to recover from the latter an aggregate amount of P6,000 to cover moral damages and actual damages sustained as a result thereof and attorney's fees. After trial on the merits the court below rendered the judgment in question." On the basis of these facts, the trial court found defendant liable for breach of contract of carriage and sentenced it to pay P3,000.00 for the death of the child and P400.00 as compensatory damages representing burial expenses and costs. LLpr On appeal to the Court of Appeals, La Mallorca claimed that there could not be a breach of contract in the case, for the reason that when the child met her death, she was no longer a passenger of the bus involved in the incident and, therefore, the contract of carriage had already terminated. Although the Court of Appeals sustained this theory, it nevertheless found the defendant-appellant guilty of quasi- delict and held the latter liable for damages, for the negligence of its driver, in accordance with Article 2180 of the Civil Code. And, the Court of Appeals did not only find the petitioner liable, but increased the damages awarded the plaintiffs-appellees to P6,000.00, instead of P3,000.00 granted by the trial court. In its brief now before us, La Mallorca contends that the Court of Appeals erred (1) in holding it liable for quasi- delict, considering that respondents' complaint was one for breach of contract, and (2) in raising the award of damages from P3,000.00 to P6,000.00 although respondents did not appeal from the decision of the lower court. Under the facts as found by the Court of Appeals we have to sustain the judgment holding petitioner liable for damages for the death of the child, Raquel Beltran. It may be pointed out that although it is true that respondent Mariano Beltran, his wife, and their children (including the deceased child) had alighted from the bus at a place designated for disembarking or unloading of passengers, it was also established that the father had to return to the vehicle (which was still at a stop) to get one of his bags or bayong that was left under one of the seats of the bus. There can be no controversy that as far as the father is concerned, when he returned to the bus for his bayong which was not unloaded, the relation of passenger and carrier between him and the petitioner remained subsisting. For, the relation of carrier and passenger does not necessarily cease where the latter, after alighting from the car, aids the carrier's servant or employee in removing his baggage from the car. 1 The issue to be determined here is whether as to the child, who was already led by the father to a place about 5 meters away from the bus, the liability of the carrier for her safety under the contract of carriage also persisted. LexLib It has been recognized as a rule that the relation of carrier and passenger does not cease at the moment the passenger alights from the carrier's vehicle at a place selected by the carrier at the point of destination, but continues until the passenger has had a reasonable time or a reasonable opportunity to leave the carrier's premises. And, what is a reasonable time or a reasonable delay within this rule is to be determined from all the circumstances. Thus, a person who, after alighting from a train, walks along the station platform is considered still a passenger. 2 So also, where a passenger has alighted at his destination and is proceeding by the usual way to leave

the company's premises, but before actually doing so is halted by the report that his brother, a fellow passenger, has been shot, and he in good faith and without intent of engaging in the difficulty, returns to relieve his brother, he is deemed reasonably and necessarily delayed and thus continues to be a passenger entitled as such to the protection of the railroad and company and its agents. 3 In the present case, the father returned to the bus to get one of his baggages which was not unloaded when they alighted from the bus. Raquel, the child that she was, must have followed the father. However, although the father was still on the running board of the bus awaiting for the conductor to hand him the bag or bayong, the bus started to run, so that even he (the father) had to jump down from the moving vehicle. It was at this instance that the child, who must be near the bus, was run over and killed. In the circumstances, it cannot be claimed that the carrier's agent had exercised the "utmost diligence" of a "very cautious person" required by Article 1755 of the Civil Code to be observed by a common carrier in the discharge of its obligation to transport safely its passengers. In the first place, the driver, although stopping the bus, nevertheless did not put off the engine. Secondly, he started to run the bus even before the bus conductor gave him the signal to go and while the latter was still unloading part of the baggages of the passengers Mariano Beltran and family. The presence of said passengers near the bus was not unreasonable and they are, therefore, to be considered still as passengers of the carrier, entitled to the protection under their contract of carriage. But even assuming arguendo that the contract of carriage has already terminated, herein petitioner can be held liable for the negligence of its driver, as ruled by the Court of Appeals, pursuant to Article 2180 of the Civil Code. Paragraph 7 of the complaint, which reads "That aside from the aforesaid breach of contract, the death of Raquel Beltran, plaintiff's daughter, was caused by the negligence and want of uxorious of the utmost diligence of a very cautious person on the part of the defendants and their agent, necessary to transport plaintiffs and their daughter safely as far as human and care and foresight can provide in the operation of their vehicle." is clearly an allegation for quasi-delict. The inclusion of this averment for quasi-delict, while incompatible with the other claim under the contract of carriage, is permissible under Section 2 of Rule 8 of the New Rules of Court, which allows a plaintiff to allege causes of action in the alternative, be they compatible with each other or not, to the end that the real matter in controversy may be resolved and determined. 4 The plaintiffs sufficiently pleaded the culpa or negligence upon which the claim was predicated when it was alleged in the complaint that "the death of Raquel Beltran, plaintiffs' daughter, was caused by the negligence and want of exercise of the utmost diligence of a very cautious person on the part of the defendants and their agent." This allegation was also proved when it was established during the trial that the driver, even before receiving the proper signal from the conductor, and while there were still persons on the running board of the bus and near it, started to run off the vehicle. The presentation of proof of the negligence of its employee gave rise to the presumption that the defendant employer did not exercise the diligence of a good father of the family in the selection and supervision of its employees. And this presumption, as the Court of Appeals found, petitioner had failed to overcome. Consequently, petitioner must be adjudged pecuniarily liable for the death of the child Raquel Beltran. The increase of the award of damages from P3,000.00 to P6,000.00 by the Court of Appeals, however, cannot be sustained. Generally, the appellate court can only pass upon and consider questions or issues raised and argued in appellant's brief. Plaintiffs did not appeal from that portion of the judgment of the trial court awarding them only P3,000.00 damages for the death of their daughter. Neither does it appear that, as appellees in the Court of Appeals, plaintiffs have pointed out in their brief the inadequacy of the award, or that the inclusion of the figure P3,000.00 was merely a clerical error, in order that the matter may be treated as an exception to the general rule. 5 Herein petitioner's contention, therefore, that the Court of Appeals committed error in raising the amount of the award for damages is, evidently, meritorious. cdrep WHEREFORE, the decision of the Court of Appeals is hereby modified by sentencing the petitioner to pay to the respondents Mariano Beltran, et al., the sum of P3,000.00 for the death of the child, Raquel Beltran, and the amount of P400.00 as actual damages. No costs in this instance. So ordered. Concepcion, C.J ., J.B.L., Reyes, Dizon, Regala, J.P. Bengzon, Zaldivar, Sanchez and Castro, JJ ., concur. Makalintal, J., concurs in the result.

SECOND DIVISION [G.R. No. 84458. November 6, 1989.] ABOITIZ SHIPPING CORPORATION, petitioner, vs. HON. COURT OF APPEALS, ELEVENTH DIVISION, LUCILA C. VIANA, SPS. ANTONIO VIANA and GORGONIA VIANA, and PIONEER STEVEDORING CORPORATION, respondents. Herenio E. Martinez for petitioner. M.R. Villaluz Law Office for private respondent. SYLLABUS 1. COMMERCIAL LAW; COMMON CARRIERS; CARRIER-PASSENGER RELATIONSHIP; CONTINUES UNTIL PASSENGER HAS BEEN LANDED AT THE PORT OF DESTINATION AND HAS LEFT VESSEL OWNER'S DOCK OR PREMISES. The rule is that the relation of carrier and passenger continues until the passenger has been landed at the port of destination and has left the vessel owner's dock or premises. Once created, the relationship will not ordinarily terminate until the passenger has, after reaching his destination, safely alighted from the carrier's conveyance or had a reasonable opportunity to leave the carrier's premises. All persons who remain on the premises a reasonable time after leaving the conveyance are to be deemed passengers, and what is a reasonable time or a reasonable delay within this rule is to be determined from all the circumstances, and includes a reasonable time to see after his baggage and prepare for his departure. The carrier-passenger relationship is not terminated merely by the fact that the person transported has been carried to his destination if, for example, such person remains in the carrier's premises to claim his baggage. 2. ID.; ID.; ID.; EXISTENCE OF A REASONABLE CAUSE AS WILL JUSTIFY PRESENCE OF VICTIM ON OR NEAR PETITIONER'S VESSEL, A PRIMARY FACTOR. It is apparent from the case of La Mallorca vs. Court of Appeals, et. al. that what prompted the Court to rule as it did in said case is the fact of the passenger's reasonable presence within the carrier's premises. That reasonableness of time should be made to depend on the attending circumstances of the case, such as the kind of common carrier, the nature of its business, the customs of the place, and so forth, and therefore precludes a consideration of the time element per se without taking into account such other factors. It is thus of no moment whether in the cited case of La Mallorca there was no appreciable interregnum for the passenger therein to leave the carrier's premises whereas in the case at bar, an interval of one (1) hour had elapsed before the victim met the accident. The primary factor to be considered is the existence of a reasonable cause as will justify the presence of the victim on or near the petitioner's vessel. We believe there exists such a justifiable cause. 3. ID.; ID.; ID.; PASSENGERS OF VESSELS ARE ALLOTED A LONGER PERIOD OF TIME TO DISEMBARK FROM SHIP THAN OTHER COMMON CARRIERS; REASON. It is of common knowledge that, by the very nature of petitioner's business as a shipper, the passengers of vessels are allotted a longer period of time to disembark from the ship than other common carriers such as a passenger bus. With respect to the bulk of cargoes and the number of passengers it can load, such vessels are capable of accommodating a bigger volume of both as compared to the capacity of a regular commuter bus. Consequently, a ship passenger will need at least an hour as is the usual practice, to disembark from the vessel and claim his baggage whereas a bus passenger can easily get off the bus and retrieve his luggage in a very short period of time. Verily, petitioner cannot categorically claim, through the bare expedient of comparing the period of time entailed in getting the passenger's cargoes, that the ruling in La Mallorca is inapplicable to the case at bar. On the contrary, if we are to apply the doctrine enunciated therein to the instant petition, we cannot in reason doubt that the victim Anacleto Viana was still a passenger at the time of the incident. When the accident occurred, the victim was in the act of unloading his cargoes, which he had every right to do, from petitioner's vessel. As earlier stated, a carrier is duty bound not only to bring its passengers safely to their destination but also to afford them a reasonable time to claim their baggage. 4. ID.; ID.; ID.; VICTIM RETRIEVING HIS BAGGAGE, DEEMED A PASSENGER OF CARRIER. It is not definitely shown that one (1) hour prior to the incident, the victim had already disembarked from the vessel. Petitioner failed to prove this. What is clear to us is that at the time the victim was taking his cargoes, the vessel had already docked an hour earlier. In consonance with common shipping procedure as to the minimum time of one (1) hour allowed for the passengers to disembark, it may be presumed that the victim had just gotten off the vessel when he went to retrieve his baggage. Yet, even if he had already disembarked an hour earlier, his presence in petitioner's premises was not without cause. The victim had to claim his baggage which was possible only one (1) hour after the vessel arrived since it was admittedly standard procedure in the case of petitioner's vessels that the unloading operations shall start only after that time. Consequently, under the foregoing circumstances, the victim Anacleto Viana is still deemed a passenger of said carrier at the time of his tragic death. 5. ID.; ID.; DUTIES THEREOF, CITED. Common carriers are, from the nature of their business and for reasons of public policy, 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. More particularly, 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. 6. ID.; ID.; CONTRACT OF CARRIAGE; DEATH OR INJURY OF PASSENGER GIVES RISE TO AN ACTION FOR BREACH, PROOF REQUIRED TO PROVE BREACH. Where a passenger dies or is injured, the common carrier is presumed to have been at fault or to have acted negligently. This gives rise to an action for breach of contract of carriage where all that is required

of plaintiff is to prove the existence of the contract of carriage and its non-performance by the carrier, that is, the failure of the carrier to carry the passenger safely to his destination, which, in the instant case, necessarily includes its failure to safeguard its passenger with extraordinary diligence while such relation subsists. 7. ID.; ID.; ID.; PRESUMPTION OF VESSEL'S NEGLIGENCE; HIGHEST DEGREE OF CARE AND DILIGENCE REQUIRED. The presumption is, therefore, established by law that in case of a passenger's death or injury the operator of the vessel was at fault or negligent, having failed to exercise extraordinary diligence, and it is incumbent upon it to rebut the same. This is in consonance with the avowed policy of the State to afford full protection to the passengers of common carriers which can be carried out only by imposing a stringent statutory obligation upon the latter. Concomitantly, this Court has likewise adopted a rigid posture in the application of the law by exacting the highest degree of care and diligence from common carriers, bearing utmost in mind the welfare of the passengers who often become hapless victims of indifferent and profit-oriented carriers. We cannot in reason deny that petitioner failed to rebut the presumption against it. Under the facts obtaining in the present case, it cannot be gainsaid that petitioner had inadequately complied with the required degree of diligence to prevent the accident from happening. 8. ID.; ID.; ID.; EXTRAORDINARY DILIGENCE NOT SHOWN BY PRECAUTIONARY MEASURES OF PETITIONER. The evidence does not show that there was a cordon of drums around the perimeter of the crane, as claimed by petitioner. It also adverted to the fact that the alleged presence of visible warning signs in the vicinity was disputable and not indubitably established. Thus, we are not inclined to accept petitioner's explanation that the victim and other passengers were sufficiently warned that merely venturing into the area in question was fraught with serious peril. Definitely, even assuming the existence of the supposed cordon of drums loosely placed around the unloading area and the guard's admonitions against entry therein, these were at most insufficient precautions which pale into insignificance if considered vis-a-vis the gravity of the danger to which the deceased was exposed. There is no showing that petitioner was extraordinarily diligent in requiring or seeing to it that said precautionary measures were strictly and actually enforced to subserve their purpose of preventing entry into the forbidden area. By no stretch of liberal evaluation can such perfunctory acts approximate the "utmost diligence of very cautious persons" to be exercised "as far as human care and foresight can provide" which is required by law of common carriers with respect to their passengers. 9. ID.; ID.; ID.; EVEN IF VICTIM IS CONTRIBUTORILY NEGLIGENT, PROXIMATE AND DIRECT CAUSE OF VICTIM'S DEATH IS PETITIONER'S FAILURE TO OBSERVE EXTRAORDINARY DILIGENCE. While the victim was admittedly contributorily negligent, still petitioner's aforesaid failure to exercise extraordinary diligence was the proximate and direct cause of, because it could definitely have prevented, the former's death. Moreover, in paragraph 5.6 of its petition, at bar, petitioner has expressly conceded the factual finding of respondent Court of Appeals that petitioner did not present sufficient evidence in support of its submission that the deceased Anacleto Viana was guilty of gross negligence. Petitioner cannot now be heard to claim otherwise. 10. ID.; ID.; NEGLIGENCE; IMPUTATION THEREOF ON PRIVATE RESPONDENT CORPORATION, NOT PROPER; RATIONALE. Aboitiz joined Pioneer in proving the alleged gross negligence of the victim, hence its present contention that the death of the passenger was due to the negligence of the crane operator cannot be sustained both on grounds of estoppel and for lack of evidence on its present theory. Even in its answer filed in the court below it readily alleged that Pioneer had taken the necessary safeguards insofar as its unloading operations were concerned, a fact which appears to have been accepted by the plaintiff therein by not impleading Pioneer as a defendant, and likewise inceptively by Aboitiz by filing its third-party complaint only after ten (10) months from the institution of the suit against it. Parenthetically, Pioneer is not within the ambit of the rule on extraordinary diligence required of, and the corresponding presumption of negligence foisted on, common carriers like Aboitiz. This, of course, does not detract from what we have said that no negligence can be imputed to Pioneer but, that on the contrary, the failure of Aboitiz to exercise extraordinary diligence for the safety of its passenger is the rationale for our finding on its liability. DECISION REGALADO, J p: In this appeal by certiorari, petitioner Aboitiz Shipping Corporation seeks a review of the decision 1 of respondent Court of Appeals, dated July 29, 1988, the decretal portion of which reads: "WHEREFORE, the judgment appealed from as modified by the order of October 27, 1982, is hereby affirmed with the modification that appellant Aboitiz Shipping is hereby ordered to pay plaintiff-appellees the amount of P30,000.00 for the death of Anacleto Viana; actual damages of P9,800.00; P160,000.00 for unearned income; P7,200.00 as support for deceased's parents;-P20,000.00 as moral damages; P10,000.00 as attorney's fees; and to pay the costs." The undisputed facts of the case, as found by the court a quo and adopted by respondent court, are as follows: cdrep "The evidence disclosed that on May 11, 1975, Anacleto Viana boarded the vessel M/V Antonia, owned by defendant, at the port at San Jose, Occidental Mindoro, bound for Manila, having purchased a ticket (No. 117392) in the sum of P23.10 (Exh. 'B'). On May 12, 1975, said vessel arrived at Pier 4, North Harbor, Manila, and the passengers therein disembarked, a gangplank having been provided connecting the side of the vessel to the pier. Instead of using said gangplank, Anacleto Viana disembarked on the third deck which was on the level with the pier. After said vessel had landed, the Pioneer Stevedoring Corporation took over the exclusive control of the cargoes loaded on said vessel pursuant to the Memorandum of Agreement dated July 26, 1975 (Exh. '2') between the third party defendant Pioneer Stevedoring Corporation and defendant Aboitiz Shipping Corporation.

"The crane owned by the third party defendant and operated by its crane operator Alejo Figueroa was placed alongside the vessel and one (1) hour after the passengers of said vessel had disembarked, it started operation by unloading the cargoes from said vessel. While the crane was being operated, Anacleto Viana who had already disembarked from said vessel obviously remembering that some of his cargoes were still loaded in the vessel, went back to the vessel, and it was while he was pointing to the crew of the said vessel to the place where his cargoes were loaded that the crane hit him, pinning him between the side of the vessel and the crane. He was thereafter brought to the hospital where he later expired three (3) days thereafter, on May 15, 1975, the cause of his death according to the Death Certificate (Exh. 'C') being "hypostatic pneumonia secondary to traumatic fracture of the pubic bone lacerating the urinary bladder" (See also Exh. 'B'). For his hospitalization, medical, burial and other miscellaneous expenses, Anacleto's wife, herein plaintiff, spent a total of P9,800.00 (Exhibits 'E', 'E-1', to 'E-5'). Anacleto Viana who was only forty (40) years old when he met said fateful accident (Exh. 'E') was in good health. His average annual income as a farmer or a farm supervisor was 400 cavans of palay annually. His parents, herein plaintiffs Antonio and Gorgonia Viana, prior to his death had been recipient of twenty (20) cavans of palay as support or P120.00 monthly. Because of Anacleto's death, plaintiffs suffered mental anguish and extreme worry or moral damages. For the filing of the instant case, they had to hire a lawyer for an agreed fee of ten thousand (P10,000.00) pesos." 2 Private respondents Vianas filed a complaint 3 for damages against petitioner corporation (Aboitiz, for brevity) for breach of contract of carriage. In its answer, 4 Aboitiz denied responsibility contending that at the time of the accident, the vessel was completely under the control of respondent Pioneer Stevedoring Corporation (Pioneer, for short) as the exclusive stevedoring contractor of Aboitiz, which handled the unloading of cargoes from the vessel of Aboitiz. It is also averred that since the crane operator was not an employee of Aboitiz, the latter cannot be held liable under the fellow-servant rule. prcd Thereafter, Aboitiz, as third-party plaintiff, filed a third-party complaint 5 against Pioneer imputing liability thereto for Anacleto Viana's death as having been allegedly caused by the negligence of the crane operator who was an employee of Pioneer under its exclusive control and supervision. Pioneer, in its answer to the third-party complaint, 6 raised the defenses that Aboitiz had no cause of action against Pioneer considering that Aboitiz is being sued by the Vianas for breach of contract of carriage to which Pioneer is not a party; that Pioneer had observed the diligence of a good father of a family both in the selection and supervision of its employees as well as in the prevention of damage or injury to anyone including the victim Anacleto Viana; that Anacleto Viana's gross negligence was the direct and proximate cause of his death; and that the filing of the third-party complaint was premature by reason of the pendency of the criminal case for homicide through reckless imprudence filed against the crane operator, Alejo Figueroa. In a decision rendered on April 17, 1980 by the trial court, 7 Aboitiz was ordered to pay the Vianas for damages incurred, and Pioneer was ordered to reimburse Aboitiz for whatever amount the latter paid the Vianas. The dispositive portion of said decision provides: "WHEREFORE, judgment is hereby rendered in favor of the plaintiffs: "(1) ordering defendant Aboitiz Shipping Corporation to pay to plaintiffs the sum of P12,000.00 for the death of Anacleto Viana; P9,800.00 as actual damages; P533,200.00 value of the 10,664 cavans of palay computed at P50.00 per cavan; P10,000.00 as attorney's fees; P5,000.00, value of the 100 cavans of palay as support for five (5) years for deceased (sic) parents, herein plaintiffs Antonio and Gorgonia Viana computed at P50.00 per cavan; P7,200.00 as support for deceased's parents computed at P120.00 a month for five years pursuant to Art. 2206, Par. 2, of the Civil Code; P20,000.00 as moral damages, and costs; and "(2) ordering the third party defendant Pioneer Stevedoring Corporation to reimburse defendant and third party plaintiff-Aboitiz Shipping Corporation the said amounts that it is ordered to pay to herein plaintiffs." Both Aboitiz and Pioneer filed separate motions for reconsideration wherein they similarly raised the trial court's failure to declare that Anacleto Viana acted with gross negligence despite the overwhelming evidence presented in support thereof. In addition, Aboitiz alleged, in opposition to Pioneer's motion, that under the memorandum of agreement the liability of Pioneer as contractor is automatic for any damages or losses whatsoever occasioned by and arising from the operation of its arrastre and stevedoring service. LLjur In an order dated October 27, 1982, 8 the trial court absolved Pioneer from liability for failure of the Vianas and Aboitiz to preponderantly establish a case of negligence against the crane operator which the court a quo ruled is never presumed, aside from the fact that the memorandum of agreement supposedly refers only to Pioneer's liability in case of loss or damage to goods handled by it but not in the case of personal injuries, and, finally, that Aboitiz cannot properly invoke the fellow-servant rule simply because its liability stems from a breach of contract of carriage. The dispositive portion of said order reads: "WHEREFORE, judgment is hereby modified insofar as third party defendant Pioneer Stevedoring Corporation is concerned rendered in favor of the plaintiffs: "(1) Ordering defendant Aboitiz Shipping Corporation to pay the plaintiffs the sum of P12,000.00 for the death of Anacleto Viana; P9,000.00 (sic) as actual damages; P533,200.00 value of the 10,664 cavans of palay computed at P50.00 per cavan; P10,000.00 as attorney's fees; P5,000.00 value of the 100 cavans of palay as support for five (5) years for deceased's parents, herein plaintiffs Antonio and Gorgonia Viana, computed at P50.00 per cavan; P7,200.00 as support for deceased's parents computed at P120.00 a month for five years pursuant to Art. 2206, Par. 2, of the Civil Code; P20,000.00 as moral damages, and costs; and"

(2) Absolving third-party defendant Pioneer Stevedoring Corporation for (sic) any liability for the death of Anacleto Viana, the passenger of M/V Antonia owned by defendant third party plaintiff Aboitiz Shipping Corporation it appearing that the negligence of its crane operator has not been established therein." Not satisfied with the modified judgment of the trial court, Aboitiz appealed the same to respondent Court of Appeals which affirmed the findings of the trial court except as to the amount of damages awarded to the Vianas. llcd Hence, this petition wherein petitioner Aboitiz postulates that respondent court erred: "(A) In holding that the doctrine laid down by this Honorable Court in La Mallorca vs. Court of Appeals, et al. (17 SCRA 739, July 27, 1966) is applicable to the case in the face of the undisputable fact that the factual situation under the La Mallorca case is radically different from the facts obtaining in this case; "(B) In holding petitioner liable for damages in the face of the finding of the court a quo and confirmed by the Honorable respondent Court of Appeals that the deceased, Anacleto Viana was guilty of contributory negligence, which, we respectfully submit, contributory negligence was the proximate cause of his death; specifically the Honorable respondent Court of Appeals failed to apply Art. 1762 of the New Civil Code;" (C) In the alternative assuming the holding of the Honorable respondent Court of Appeals that petitioner may be legally condemned to pay damages to the private respondents we respectfully submit that it committed a reversible error when it dismissed petitioner's third party complaint against private respondent Pioneer Stevedoring Corporation instead of compelling the latter to reimburse the petitioner for whatever damages it may be compelled to pay to the private respondents Vianas." 9 At threshold, it is to be observed that both the trial court and respondent Court of Appeals found the victim Anacleto Viana guilty of contributory negligence, but holding that it was the negligence of Aboitiz in prematurely turning over the vessel to the arrastre operator for the unloading of cargoes which was the direct, immediate and proximate cause of the victim's death. I. Petitioner contends that since one (1) hour had already elapsed from the time Anacleto Viana disembarked from the vessel and that he was given more than ample opportunity to unload his cargoes prior to the operation of the crane, his presence on the vessel was no longer reasonable and he consequently ceased to be a passenger. Corollarily, it insists that the doctrine in La Mallorca vs. Court of Appeals, et al. 10 is not applicable to the case at bar. The rule is that the relation of carrier and passenger continues until the passenger has been landed at the port of destination and has left the vessel owner's dock or premises. 11 Once created, the relationship will not ordinarily terminate until the passenger has, after reaching his destination, safely alighted from the carrier's conveyance or had a reasonable opportunity to leave the carrier's premises. All persons who remain on the premises a reasonable time after leaving the conveyance are to be deemed passengers, and what is a reasonable time or a reasonable delay within this rule is to be determined from all the circumstances, and includes a reasonable time to see after his baggage and prepare for his departure. 12 The carrier-passenger relationship is not terminated merely by the fact that the person transported has been carried to his destination if, for example, such person remains in the carrier's premises to claim his baggage. 13 It was in accordance with this rationale that the doctrine in the aforesaid case of La Mallorca was enunciated, to wit: "It has been recognized as a rule that the relation of carrier and passenger does not cease at the moment the passenger alights from the carrier's vehicle at a place selected by the carrier at the point of destination, but continues until the passenger has had a reasonable time or a reasonable opportunity to leave the carrier's premises. And, what is a reasonable time or a reasonable delay within this rule is to be determined from all the circumstances. Thus, a person who, after alighting from a train, walks along the station platform is considered still a passenger. So also, where a passenger has alighted at his destination and is proceeding by the usual way to leave the company's premises, but before actually doing so is halted by the report that his brother, a fellow passenger, has been shot, and he in good faith and without intent of engaging in the difficulty, returns to relieve his brother, he is deemed reasonably and necessarily delayed and thus continues to be a passenger entitled as such to the protection of the railroad company and its agents. llcd "In the present case, the father returned to the bus to get one of his baggages which was not unloaded when they alighted from the bus. Racquel, the child that she was, must have followed the father. However, although the father was still on the running board of the bus waiting for the conductor to hand him the bag or bayong, the bus started to run, so that even he (the father) had to jump down from the moving vehicle. It was at this instance that the child, who must be near the bus, was run over and killed. In the circumstances, it cannot be claimed that the carrier's agent had exercised the 'utmost diligence' of a 'very cautious person' required by Article 1755 of the Civil Code to be observed by a common carrier in the discharge of its obligation to transport safely its passengers . . . The presence of said passengers near the bus was not unreasonable and they are, therefore, to be considered still as passengers of the carrier, entitled to the protection under their contract of carriage." 14 It is apparent from the foregoing that what prompted the Court to rule as it did in said case is the fact of the passenger's reasonable presence within the carrier's premises. That reasonableness of time should be made to depend on the attending circumstances of the case, such as the kind of common carrier, the nature of its business, the customs of the place, and so forth, and therefore precludes a consideration of the time element per se without taking into account such other factors. It is thus of no moment whether in the cited case of La Mallorca there was no appreciable interregnum for the passenger therein to leave the carrier's premises whereas in the case at bar, an interval of one (1) hour had elapsed before the victim met the accident. The primary factor to be considered is the existence

of a reasonable cause as will justify the presence of the victim on or near the petitioner's vessel. We believe there exists such a justifiable cause. It is of common knowledge that, by the very nature of petitioner's business as a shipper, the passengers of vessels are allotted a longer period of time to disembark from the ship than other common carriers such as a passenger bus. With respect to the bulk of cargoes and the number of passengers it can load, such vessels are capable of accommodating a bigger volume of both as compared to the capacity of a regular commuter bus. Consequently, a ship passenger will need at least an hour as is the usual practice, to disembark from the vessel and claim his baggage whereas a bus passenger can easily get off the bus and retrieve his luggage in a very short period of time. Verily, petitioner cannot categorically claim, through the bare expedient of comparing the period of time entailed in getting the passenger's cargoes, that the ruling in La Mallorca is inapplicable to the case at bar. On the contrary, if we are to apply the doctrine enunciated therein to the instant petition, we cannot in reason doubt that the victim Anacleto Viana was still a passenger at the time of the incident. When the accident occurred, the victim was in the act of unloading his cargoes, which he had every right to do, from petitioner's vessel. As earlier stated, a carrier is duty bound not only to bring its passengers safely to their destination but also to afford them a reasonable time to claim their baggage. It is not definitely shown that one (1) hour prior to the incident, the victim had already disembarked from the vessel. Petitioner failed to prove this. What is clear to us is that at the time the victim was taking his cargoes, the vessel had already docked an hour earlier. In consonance with common shipping procedure as to the minimum time of one (1) hour allowed for the passengers to disembark, it may be presumed that the victim had just gotten off the vessel when he went to retrieve his baggage. Yet, even if he had already disembarked an hour earlier, his presence in petitioner's premises was not without cause. The victim had to claim his baggage which was possible only one (1) hour after the vessel arrived since it was admittedly standard procedure in the case of petitioner's vessels that the unloading operations shall start only after that time. Consequently, under the foregoing circumstances, the victim Anacleto Viana is still deemed a passenger of said carrier at the time of his tragic death. prcd II. Under the law, common carriers are, from the nature of their business and for reasons of public policy, 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. 15 More particularly, 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. 16 Thus, where a passenger dies or is injured, the common carrier is presumed to have been at fault or to have acted negligently. 17 This gives rise to an action for breach of contract of carriage where all that is required of plaintiff is to prove the existence of the contract of carriage and its non-performance by the carrier, that is, the failure of the carrier to carry the passenger safely to his destination, 18 which, in the instant case, necessarily includes its failure to safeguard its passenger with extraordinary diligence while such relation subsists. The presumption is, therefore, established by law that in case of a passenger's death or injury the operator of the vessel was at fault or negligent, having failed to exercise extraordinary diligence, and it is incumbent upon it to rebut the same. This is in consonance with the avowed policy of the State to afford full protection to the passengers of common carriers which can be carried out only by imposing a stringent statutory obligation upon the latter. Concomitantly, this Court has likewise adopted a rigid posture in the application of the law by exacting the highest degree of care and diligence from common carriers, bearing utmost in mind the welfare of the passengers who often become hapless victims of indifferent and profit-oriented carriers. We cannot in reason deny that petitioner failed to rebut the presumption against it. Under the facts obtaining in the present case, it cannot be gainsaid that petitioner had inadequately complied with the required degree of diligence to prevent the accident from happening. As found by the Court of Appeals, the evidence does not show that there was a cordon of drums around the perimeter of the crane, as claimed by petitioner. It also adverted to the fact that the alleged presence of visible warning signs in the vicinity was disputable and not indubitably established. Thus, we are not inclined to accept petitioner's explanation that the victim and other passengers were sufficiently warned that merely venturing into the area in question was fraught with serious peril. Definitely, even assuming the existence of the supposed cordon of drums loosely placed around the unloading area and the guard's admonitions against entry therein, these were at most insufficient precautions which pale into insignificance if considered vis-a-vis the gravity of the danger to which the deceased was exposed. There is no showing that petitioner was extraordinarily diligent in requiring or seeing to it that said precautionary measures were strictly and actually enforced to subserve their purpose of preventing entry into the forbidden area. By no stretch of liberal evaluation can such perfunctory acts approximate the "utmost diligence of very cautious persons" to be exercised "as far as human care and foresight can provide" which is required by law of common carriers with respect to their passengers. While the victim was admittedly contributorily negligent, still petitioner's aforesaid failure to exercise extraordinary diligence was the proximate and direct cause of, because it could definitely have prevented, the former's death. Moreover, in paragraph 5.6 of its petition, at bar, 19 petitioner has expressly conceded the factual finding of respondent Court of Appeals that petitioner did not present sufficient evidence in support of its submission that the deceased Anacleto Viana was guilty of gross negligence. Petitioner cannot now be heard to claim otherwise. LLpr No excepting circumstance being present, we are likewise bound by respondent court's declaration that there was no negligence on the part of Pioneer Stevedoring Corporation, a confirmation of the trial court's finding to that effect, hence our conformity to Pioneer's being absolved of any liability. As correctly observed by both courts, Aboitiz joined Pioneer in proving the alleged gross negligence of the victim, hence its present contention that the death of the passenger was due to the negligence of the crane operator cannot be sustained both on grounds of estoppel and for lack of evidence on its present theory. Even in its answer filed in the court below it readily alleged that Pioneer had

taken the necessary safeguards insofar as its unloading operations were concerned, a fact which appears to have been accepted by the plaintiff therein by not impleading Pioneer as a defendant, and likewise inceptively by Aboitiz by filing its third-party complaint only after ten (10) months from the institution of the suit against it. Parenthetically, Pioneer is not within the ambit of the rule on extraordinary diligence required of, and the corresponding presumption of negligence foisted on, common carriers like Aboitiz. This, of course, does not detract from what we have said that no negligence can be imputed to Pioneer but, that on the contrary, the failure of Aboitiz to exercise extraordinary diligence for the safety of its passenger is the rationale for our finding on its liability. WHEREFORE, the petition is DENIED and the judgment appealed from is hereby AFFIRMED in toto. SO ORDERED. Melencio-Herrera, Paras, Padilla and Sarmiento, JJ., concur.

EN BANC [G.R. No. L-22985. January 24, 1968.] BATANGAS TRANSPORTATION COMPANY, petitioner, vs. GREGORIO CAGUIMBAL, PANCRACIO CAGUIMBAL, MARIA MARANAN DE CAGUIMBAL, BIAN TRANSPORTATION COMPANY and MARCIANO ILAGAN, respondents. Ozaeta, Gibbs & Ozaeta and Domingo E. de Lara for the petitioner. Victoriano H. Endaya for the respondents. SYLLABUS 1. COMMON CARRIERS; CONTRACT OF CARRIAGE; DUTY OF CARRIER TOWARDS PASSENGERS; ACTION TO RECOVER DAMAGE FOR BREACH OF CONTRACT OF CARRIAGE; FINDINGS AS TO NEGLIGENCE; DUTY OF COURT. In an action based on a contract of carriage, the court need not make an express finding of fault or negligence on the part of the carrier in order to hold it responsible to pay the damages sought for by the passenger. By the contract of carriage, the carrier assumes the express obligation to transport the passenger to his destination safely and to observe extraordinary diligence with a due regard for all the circumstances, and any injury that might be suffered by the passenger is right away attributable to the fault or negligence of the carrier (Article 1756, new Civil Code). This is an exception to the general rule that negligence must be proved, and it is therefore incumbent upon the carrier to prove that it has exercised extraordinary diligence as prescribed in Article 1733 and 1755 of the new Civil Code. (Brito Sy v. Malata Taxicab & Garage, Inc. 102 Phil. 482). 2. ID.; ID.; ATTORNEY'S FEES. Where respondents were forced to litigate for over thirteen (13) years to vindicate their rights, and the public utility operators are not conscious of the nature and extent of their responsibility in respect of the safety of their passengers; and their duty to exercise greater care in the selection of drivers and conductors and in supervising the performance of their duties, in accordance, not only with Article 1733 of the Civil Code of the Philippines, but also, with Articles 1755 and 1756 thereof, as disclosed by the letter thereof, award of attorney's fees is authorized under Article 2208, paragraph 11 thereof. DECISION CONCEPCION, C.J p: Appeal by certiorari from a decision of the Court of Appeals. The main facts are set forth in said decision from which we quote: "There is no dispute at all that the deceased Pedro Caguimbal, Barrio Lieutenant of Barrio Calansayan, San Jose, Batangas, was a paying passenger of BTCO bus, with plate TPU-507, going south on its regular route from Calamba, Laguna, to Batangas, Batangas, driven by Tomas Perez, its regular driver, at about 5:30 o'clock on the early morning of April 25, 1954. The deceased's destination was his residence at Calansayan, San Jose, Batangas. The bus of the Bian Transportation Company, bearing plate TPU-820, driven by Marciano Ilagan, was coming from the opposite direction (north-bound). Along the national highway at Barrio Daraza, Tanauan, Batangas, on the date and hour above indicated, a horse-driven rig (calesa) managed by Benito Makahiya, which was then ahead of the Bian bus, was also coming from the opposite direction, meaning proceeding towards the north. As to what transpired thereafter, the lower court chose to give more credence to defendant Batangas Transportation Company's version which, in the words of the Court a quo, is as follows: 'As the BTCO bus was nearing a house, a passenger requested the conductor to stop as he was going to alight, and when he heard the signal of the conductor, the driver Tomas Perez slowed down his bus swerving it farther to the right in order to stop; at this juncture, a calesa then driven by Benito Makahiya was at a distance of several meters facing the BTCO bus coming from the opposite direction; that at the same time the Bian bus was about 100 meters away likewise going northward and following the direction of the calesa; that upon seeing the Bian bus, the driver of the BTCO bus dimmed his light as established by Magno Ilaw, the very conductor of the Bian bus at the time of the accident; that as the calesa and the BTCO bus were passing each other from the opposite directions, the Bian bus following the calesa swerved to its left in an attempt to pass between the BTCO bus and the calesa; that without diminishing its speed of about seventy (70) kilometers an hour, the Bian bus passed through the space between the BTCO bus and the calesa hitting first the left side of the BTCO bus with the left front corner of its body and then bumped and struck the calesa which was completely wrecked; that the driver was seriously injured and the horse was killed; that the second and all other posts supporting the top of the left side of the BTCO bus were completely smashed and half of the back wall to the left was ripped open (Exhibits 1 and 2). The BTCO bus suffered damages for the repair of its damaged portion.' As a consequence of this occurrence, two (2) passengers of BTCO died, namely, Pedro Caguimbal and Guillermo Tolentino, apart from others who were injured. The widow and children of Caguimbal instituted the present action, which was tried jointly with a similar action of the Tolentinos, to recover damages from the Batangas Transportation Company, hereinafter referred to as BTCO. The latter, in turn, filed a third-party complaint against the Bian Transportation Company hereinafter referred to as Bian and its driver, Marciano Ilagan. Subsequently, the Caguimbals amended their complaint, to include therein, as defendants, said Bian and Ilagan. After appropriate proceedings, the Court of First Instance of Batangas rendered a decision dismissing the complaint insofar as the BTCO is concerned, without prejudice to plaintiffs' right to sue Bian which had stopped participating in the proceedings herein,

owing, apparently, to a case in the Court of First Instance of Laguna for the insolvency of said enterprise and Ilagan, and without pronouncement as to costs. On appeal taken by the Caguimbals, the Court of Appeals reversed said decision and rendered judgment for them, sentencing the BTCO, Bian and Ilagan to, jointly and severally, pay to the plaintiffs the aggregate sum of P10,500.00 1 and the costs in both instances. Hence, this appeal by BTCO, upon the ground that the Court of Appeals erred: 1) in finding said appellant liable for damages; and 2) in awarding attorney's fees. In connection with the first assignment of error, we note that the recklessness of defendant Ilagan was, manifestly, a major factor in the occurrence of the accident which resulted, inter alia, in the death of Pedro Caguimbal. Indeed, as driver of the Bian bus, he overtook Benito Makahiya's horse-driven rig or calesa and passed between the same and the BTCO bus despite the fact that the space available was not big enough therefor, in view of which the Bian bus hit the left side of the BTCO bus and then the calesa. This notwithstanding, the Court of Appeals rendered judgment against the BTCO, upon the ground that its driver, Tomas Perez, had failed to exercise the "extraordinary diligence," required in Article 1733 of the new Civil Code, "in the vigilance for the safety" of his passengers. 2 The record shows that, in order to permit one of them to disembark, Perez drove his BTCO bus partly to the right shoulder of the road and partly on the asphalted portion thereof. Yet, he could have and should have seen to it had he exercised "extraordinary diligence" that his bus was completely outside the asphalted portion of the road, and fully within the shoulder thereof, the width of which being more than sufficient to accommodate the bus. He could have and should have done this, because, when the aforementioned passenger expressed his wish to alight from the bus, Ilagan had seen the aforementioned "calesa", driven by Makahiya, a few meters away, coming from the opposite direction, with the Bian bus about 100 meters behind the rig, cruising at a good speed. 3 When Perez slowed down his BTCO bus to permit said passenger to disembark, he must have known, therefore, that the Bian bus would overtake the "calesa", at about the time when the latter and BTCO bus would probably be on the same line, on opposite sides of the asphalted portions of the road, and that the space between the BTCO bus and the "calesa" would not be enough to allow the Bian bus to go through. It is true that the driver of the Bian bus should have slowed down or stopped, and, hence, was reckless in not doing so; but, he had no especial obligations towards the passengers of the BTCO, unlike Perez whose duty was to exercise "utmost" or "extraordinary" diligence for their safety. Perez was thus under obligation to avoid a situation which would be hazardous for his passengers, and make their safety dependent upon the diligence of the Bian driver. Such obligation becomes more patent which we consider the fact of which the Court may take judicial cognizance that our motor vehicle drivers, particularly those of public utilities, have not distinguished themselves for their concern over the safety, the comfort or the convenience of others. Besides, as correctly stated in the syllabus to Brito Sy vs. Malate Taxicab & Garage, Inc. 4 "In an action based on a contract of carriage, the court need not make an express finding of fault or negligence on the part of the carrier in order to hold it responsible to pay the damages sought for by the passenger. By the contract of carriage, the carrier assumes the express obligation to transport the passenger to his destination safely and to observe extraordinary diligence with a due regard for all the circumstances, and any injury that might be suffered by the passenger is right away attributable to the fault or negligence of the carrier (Article 1756, new Civil Code). This is an exception to the general rule that negligence must be proved, and it is therefore incumbent upon the carrier to prove that it has exercised extraordinary diligence as prescribed in Article 1733 and 1755 of the new Civil Code." In the case at bar, BTCO has not proven the exercise of extraordinary diligence on its part. For this reason, the case of Isaac vs. A.L. Ammen Trans. Co., Inc., 5 relied upon by BTCO, is not in point, for, in said case, the public utility driver had done "everything he could to avoid" the accident, and could not have possibly avoided it, for he "swerved the bus to the very extreme right of the road," which the driver, in the present case, had failed to do. As regards the second assignment of error, appellant argues that the award of attorney's fees is not authorized by law, because, of the eleven (11) cases specified in Article 1208 of the new Civil Code, only the fifth and the last are relevant to the one under consideration; but the fifth case requires bad faith, which does not exist in the case at bar. As regards the last case, which permits the award, "where the court deems it just and equitable that attorney's fees . . . should be recovered," it is urged that the evidence on record does not show the existence of such just and equitable grounds. We, however, believe otherwise, for: (1) the accident in question took place on April 25, 1954, and the Caguimbals have been constrained to litigate for over thirteen (13) years to vindicate their rights; and (2) it is high time to impress effectively upon public utility operators the nature and extent of their responsibility in respect of the safety of their passengers and their duty to exercise greater care in the selection of drivers and conductors and in supervising the performance of their duties, in accordance, not only with Article 1733 of the Civil Code of the Philippines, but, also, with Articles 1755 and 1756 thereof 6 and the spirit of these provisions, as disclosed by the letter thereof, and elucidated by the Commission that drafted the same. 7 Wherefore, the decision appealed from should be, as it is hereby affirmed, with the costs of this instance against appellant Batangas Transportation Company. Reyes, J.B.L., Dizon, Makalintal, Zaldivar, Sanchez, Ruiz Castro, Angeles and Fernando, JJ., concur.

EN BANC [G.R. No. 47933. July 29, 1942.] PANAY AUTOBUS COMPANY, INC., petitioner, vs. CRISANTA PASTOR, ET AL., respondents. Federico J. Jarantilla and B. Francisco, for petitioner. Jose C. Ganzon, for respondents. SYLLABUS 1. DAMAGES; PERSONAL INJURIES TO PASSENGER; ACT PERFORMED BY DECEASED, AND NOT DRIVER'S NEGLIGENCE, AS PROXIMATE CAUSE OF INJURY. While riding in a truck driven by petitioner's chauffeur, the deceased stretched her right arm beyond the railing of the bus and was caught and broken by another truck coming closely from the opposite direction. Held: That driving at an appropriate speed, almost at the middle of a six-meter highway which, at the time of the accident, was without traffic, is not negligence. Independently of the act of the deceased in stretching her right arm beyond the railing of the bus, the manner the bus was driven could not have produced the injury. Petitioner's driver at the time that the other bus was passing closely from the opposite direction, did not know that the deceased's arm was extended beyond the railing of the bus. He has the right to assume that all his passengers are taking the usual precaution for their own safety. If, without such knowledge of the position of the deceased and on the assurance of such assumption, the chauffeur drives his bus at a reasonably safe distance from that coming from the opposite direction, and one of his passengers suffers an injury, the negligence cannot be attributed to him. In other words, the act performed by the deceased at the time the accident occurred must be regarded as the proximate cause of the injury. DECISION MORAN, J p: Early in the morning of February 11, 1938, the deceased, Concepcion Gallopin, with her daughter-in-law, Carmen Areda, left Estancia, Iloilo, for the City of Iloilo on truck No. 408 of the petitioner, Panay Autobus Company, Inc., driven by one Felicisimo Tilos. Gallopin and Areda were seated at the extreme right of the second bench behind the driver's seat. In the course of transit, Gallopin stretched her right arm beyond the railing of the bus, apparently pointing to her companion the rice fields yonder. This arm was caught and broken by another truck driven by one Francisco Yap coming closely from the opposite direction. Whether Gallopin stretched her right arm at the precise moment that the two busses were about to cross each other or sometime prior thereto, and how close the two busses were to each other, the record does not disclose. Her wrist bled profusely and notwithstanding medical treatment at the Maternity Hospital at Sara and Mission Hospital at Jaro, Iloilo, where she was brought after the accident, she died the following day, undoubtedly as a result of hemorrhage and severe shock. Crisanta, Salome, and Jose, all surnamed Pastor, as heirs of the deceased, instituted in the court below an action against the petitioner as owner of truck No. 408, seeking to recover damages in the sum of P8,200 for the death of their mother. Petitioner having been absolved of the complaint, plaintiffs below appealed to the Court of Appeals where the judgment of the trial court was reversed and another entered in their favor awarding them damages in the sum of P2,000. Hence, this appeal by certiorari by the petitioner. The Court of Appeals rested its decision upon a finding of negligence on the part of petitioner's chauffeur in not having driven the bus in the proper place on the road, it having been found that the bus was driven "almost in the middle of a 6-meter road, the space between the right edge of the ditch on the left side of the road and the left side of the bus being two meters." And, on the basis of this finding, the appellate court held petitioner guilty of breach of contractual duty to carry the deceased safely to her destination. We are unable to agree with this view. Driving at an appropriate speed, almost at the middle of a six-meter highway which, at the time of the accident, was without traffic, is not, in our opinion, negligence. Independently of the act of the deceased in stretching her right arm beyond the railing of the bus, the manner the bus was driven could not have produced the injury. Petitioner's driver at the time that the other bus was passing closely from the opposite direction, did not know that the deceased's arm was extended beyond the railing of the bus. He has the right to assume that all his passengers are taking the usual precaution for their own safety. If, without such knowledge of the position of the deceased and on the assurance of such assumption, the chauffeur drives his bus at a reasonably safe distance from that coming from the opposite direction, and one of his passengers suffers an injury, the negligence cannot be attributed to him. In other words, the act performed by the deceased at the time the accident occurred must be regarded as the proximate cause of the injury. Judgment is reversed and petitioner is hereby absolved of the complaint, without costs. Yulo, C.J., Ozaeta, Paras and Bocobo, JJ., concur.

EN BANC [G.R. No. L-10605. June 30, 1958.] PRECILLANO NECESITO, ETC., plaintiff-appellant, vs. NATIVIDAD PARAS, ET AL., defendants-appellees. [G.R. No. L-10606. June 30, 1958.] GERMAN NECESITO, ET AL., plaintiffs-appellants, vs. NATIVIDAD PARAS, ET AL., defendants-appellees. Tomas Besa and Federico Agrava for appellants. Jose W. Diokno for appellees. SYLLABUS 1. CARRIERS; LIABILITY FOR DAMAGES CAUSED BY MECHANICAL DEFECTS. While the carrier is not an insurer of the safety of the passengers, it should nevertheless be held to answer for the laws its equipment if such flaws were at all discoverable. In this connection, the manufacturer of the defective appliance is considered in law the agent of the carrier, and the good repute of the manufacturer will not relieve the carrier from liability. The rationale of the carrier's liability is the fact that the passenger has no privity with the manufacturer of the defective equipment; hence, he has no remedy against him, while the carrier usually has. 2. DAMAGES; MORAL DAMAGES FOR BREACH OF CONTRACT, WHEN RECOVERABLE. Under Article 2220 of the new Civil Code, in case to suits for breach of contract, moral damages are recoverable only where the defendant acted fraudulently or in bad faith, and there is none in the case at bar. (But see Resolution on the Motion to Reconsider.) 3. CARRIERS; MECHANICAL DEFECTS. A carrier is liable to its passengers for damages caused by mechanical defects of the conveyance. 4. ID.; ID.; WHERE INJURY IS PATENT, INDEMNITY CANNOT BE DENIED. Where the injury is patent and not denied, the court is empowered to calculate moderate damages, although there is no definite proof of the pecuniary loss suffered by the injured party. 5. ID.; ID.; RIGHT OF HEIRS OF DECEASED PASSENGER TO RECOVER MORAL DAMAGES. In case of accident due to a carrier's negligence, the heirs of a deceased passenger may recover moral damages, even though a passenger who is injured, but manages to survive, is not entitled to them. This special rule (Arts. 1264 and 2206, No. 3) in case of death controls the general rule of Article 2220. 6. ATTORNEY'S FEES; LITIGANT CANNOT BE DEPRIVED OF FEE IF HE IS ENTITLED TO RECOVERY. A litigant who improvidently stipulates higher counsel fees than those to which he is entitled, does not for that reason earn the right to a larger indemnity; but, by parity of reasoning, he should not be deprived of counsel fees if by law he is entitled to recover them. DECISION REYES, J.B.L., J p: These cases involve actions ex contractu against the owners and operators of the common carrier known as Philippine Rabbit Bus Lines, filed by one passenger, and the heirs of another, who were injured as a result of the fall into a river of the vehicle in which they were riding. In the morning of January 28, 1954, Severina Garces and her one- year old son, Precillano Necesito, carrying vegetables, boarded passenger auto truck or bus No. 199 of the Philippine Rabbit Bus Lines at Agno, Pangasinan. The passenger truck, driven by Francisco Bandonell, then proceeded on its regular run from Agno to Manila. After passing Mangatarem, Pangasinan, truck No. 199 entered a wooden bridge, but the front wheels swerved to the right; the driver lost control, and after wrecking the bridge's wooden rails, the truck fell on its right side into a creek where water was breast deep. The mother, Severina Garces, was drowned; the son, Precillano Necesito, was injured, suffering abrasions and fracture of the left femur. He was brought to the Provincial Hospital at Dagupan, where the fracture was set but with fragments one centimeter out of line. The money, wrist watch and cargo of vegetables were lost. Two actions for damages and attorney's fees totalling over P85,000 having been filed in the Court of First Instance of Tarlac (Cases Nos. 908 and 909) against the carrier, the latter pleaded that the accident was due to "engine or mechanical trouble" independent or beyond the control of the defendants or of the driver Bandonell. After joint trial, the Court of First Instance found that the bus was proceeding slowly due to the bad condition of the road; that the accident was caused by the fracture of the right steering knuckle, which was defective in that its center or core was not compact but "bubbled and cellulous", a condition that could not be known or ascertained by the carrier despite the fact that regular thirty-day inspections were made of the steering knuckle, since the steel exterior was smooth and shiny to the depth of 3/16 of an inch all around; that the knuckles are designed and manufactured for heavy duty and may last up to ten years; that the knuckle of bus No. 199 that broke on January 28, 1954, was last inspected on January 5, 1954, and was due to be inspected again on February 5th. Hence, the trial

court, holding that the accident was exclusively due to fortuitous event, dismissed both actions. Plaintiffs appealed directly to this Court in view of the amount in controversy. We are inclined to agree with the trial court that it is not likely that bus No. 199 of the Philippine Rabbit Lines was driven over the deeply rutted road leading to the bridge at a speed of 50 miles per hour, as testified for the plaintiffs. Such conduct on the part of the driver would have provoked instant and vehement protest on the part of the passengers because of the attendant discomfort, and there is no trace of any such complaint in the records. We are thus forced to assume that the proximate cause of the accident was the reduced strength of the steering knuckle of the vehicle caused by defects in casting it. While appellants hint that the broken knuckle exhibited in court was not the real fitting attached to the truck at the time of the accident, the records show that they registered no objection on that ground at the trial below. The issue is thus reduced to the question whether or not the carrier is liable for the manufacturing defect of the steering knuckle, and whether the evidence discloses that in regard thereto the carrier exercised the diligence required by law (Art. 1755, new 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." It is clear that the carrier is not an insurer of the passengers' safety. His liability rests upon negligence, his failure to exercise the "utmost" degree of diligence that the law requires, and by Art. 1756, in case of a passenger's death or injury the carrier bears the burden of satisfying the court that he has duly discharged the duty of prudence required. In the American law, where the carrier is held to the same degree of diligence as under the new Civil Code, the rule on the liability of carriers for defects of equipment is thus expressed: "The preponderance of authority is in favor of the doctrine that a passenger is entitled to recover damages from a carrier for an injury resulting from a defect in an appliance purchased from a manufacturer, whenever it appears that the defect would have been discovered by the carrier if it had exercised the degree of care which under the circumstances was incumbent upon it, with regard to inspection and application of the necessary tests. For the purposes of this doctrine, the manufacturer is considered as being in law the agent or servant of the carrier, as far as regards the work of constructing the appliance. According to this theory, the good repute of the manufacturer will not relieve the carrier from liability" (10 Am. Jur. 205, s, 1324; see a]so Pennsylvania R. Co. vs. Roy, 102 U. S. 451; 20 L. Ed. 141; Southern R. Co. vs. Hussey, 74 ALR 1172; 42 Fed. 2d 70; and Ed Note, 29 ALR 788; Ann Cas. 1916E 929). The rationale of the carrier's liability is the fact that the passenger has neither choice nor control over the carrier in the selection and use of the equipment and appliances in use by the carrier. Having, no privity whatever with the manufacturer or vendor of the defective equipment, the passenger has no remedy against him, while the carrier usually has. It is but logical, therefore, that the carrier, while not an insurer of the safety of his passengers, should nevertheless be held to answer for the flaws of his equipment if such flaws were at all discoverable. Thus Hannen, J., in Francis vs. Cockrell, LR 5 Q. P. 184, said: "In the ordinary course of things, the passenger does not know whether the carrier has himself manufactured the means of carriage, or contracted with someone else for its manufacture. If the carrier has contracted with someone else the passenger does not usually know who that person is, and in no case has he any share in the selection. The liability of the manufacturer must depend on the terms of the contract between him and the carrier, of which the passenger has no knowledge, and over which he can have no control, while the carrier can introduce what stipulations and take what securities he may think proper. For injury resulting to the carrier himself by the manufacturer's want of care, the carrier has a remedy against the manufacturer; but the passenger has no remedy against the manufacturer for damage arising from a mere breach of contract with the carrier . . . Unless, therefore, the presumed intention of the parties be that the passenger should, in the event of his being injured by the breach of the manufacturer's contract, of which he has no knowledge, be without remedy, the only way in which effect can be given to a different intention is by supposing that the carrier is to be responsible to the passenger, and to look for his indemnity to the person whom he selected and whose breach of contract has caused the mischief." (29 ALR 789) And in the leading case of Morgan vs. Chesapeake & O. R. Co. 15 LRA (NS) 790, 16 Ann. Cas. 608, the Court, in holding the carrier responsible for damages caused by the fracture of a car axle, due to a "sand hole" in the course of moulding the axle, made the following observations. "The carrier, in consideration of certain well-known and highly valuable rights granted to it by the public, undertakes certain duties toward the public, among them being to provide itself with suitable and safe cars and vehicles in which to carry the traveling public. There is no such duty on the manufacturer of the cars. There is no reciprocal legal relation between him and the public in this respect. When the carrier elects to have another build its cars, it ought not to be absolved by that fact from its duty to the public to furnish safe care. The carrier cannot lessen its responsibility by shifting its undertaking to another's shoulders. Its duty to furnish safe care is side by side with its duty to furnish safe track, and to operate them in a safe manner. None of its duties in these respects can be sublet so as to relieve it from the full measure primarily exacted of it by law. The carrier selecta the manufacturer of its cars, if it does not itself construct them, precisely as it does those who grade its road, and lay its tracks, and operate its trains. That it does not exercise control over the former is because it elects to place that matter in the hands of the manufacturer, instead of retaining the supervising control itself. The manufacturer should be deemed the agent of the carrier as respects its duty to select the material out of which its cars and locomotive are built, as well as in inspecting each step of their construction. If there be tests known to the crafts of ear builders, or iron moulders, by which such defects might be discovered before the part was incorporated into the car, then the failure of the manufacturer to make the test will be deemed a failure by the carrier to make it. This is not a vicarious responsibility. It extends, as the necessity of this business demands, the rule of respondent superior to a situation which falls clearly within its scope and spirit. Where an injury is inflicted upon a passenger by the breaking or wrecking of a part of the train on which he is riding, it is presumably the

result of negligence at some point by the carrier. As stated by Judge Story, in Story on Bailments, sec. 601a: 'When the injury or damage happens to the passenger by the breaking down or overturning of the coach, or by any other accident occurring on the ground, the presumption prima facie is that it occurred by the negligence of the coachmen, and onus probandi is on the proprietors of the coach to establish that there has been no negligence whatever, and that the damage or injury has been occasioned by inevitable casualty, or by some cause which human care and foresight could not prevent; for the law will, in tenderness to human life and limb, hold the proprietors liable for the slightest negligence, and will compel them to repel by satisfactory proofs every imputation thereof.' When the passenger has proved his injury as the result of a breakage in the car or the wrecking of the train on which he was being carried, whether the defect was in the particular car in which he was riding or not, the burden is then cast upon the carrier to show that it was due to a cause or causes which the exercise of the utmost human skill and foresight could not prevent. And the carrier in this connection must show, if the accident was due to a latent defect in the material or construction of the car, that not only could it not have discovered the defect by the exercise of such care, but that the builders could not by the exercise of the same care have discovered the defect or foreseen the result. This rule applies the same whether the defective car belonged to the carrier or not." In the case now before us, the record is to the effect that the only test applied to the steering knuckle in question was a purely visual inspection every thirty days, to see if any cracks developed. It nowhere appears that either the manufacturer or the carrier at any time tested the steering knuckle to ascertain whether its strength was up to standard, or that it had no hidden flaws that would impair that strength. And yet the carrier must have been aware of the critical importance of the knuckle's resistance; that its failure or breakage would result in loss of balance and steering control of the bus, with disastrous effects upon the passengers. No argument is required to establish that a visual inspection could not directly determine whether the resistance of this critically important part was not impaired. Nor has it been shown that the weakening of the knuckle was impossible to detect by any known test; on the contrary, there is testimony that it could be detected. We are satisfied that the periodical visual inspection of the steering knuckle as practiced by the carrier's agents did not measure up to the required legal standard of "utmost diligence of very cautious persons" "as far as human care and foresight can provide", and therefore that the knuckle's failure can not be considered a fortuitous event that exempts the carrier from responsibility (Lasam vs. Smith, 45 Phil, 607; Son vs. Cebu Autobus Co., 94 Phil., 892.

It may be impracticable, as appellee argues, to require of carriers to test the strength of each and every part of its vehicles before each trip; but we are of the opinion that a due regard for the carrier's obligations toward the traveling public demands adequate periodical tests to determine the condition and strength of those vehicle portions the failure of which may endanger the safety of the passengers. As to the damages suffered by the plaintiffs, we agree with appellee that no allowance may be made for moral damages, since under Article 2220 of the new Civil Code, in case of suits for breach of contract, moral damages are recoverable only where the defendant acted fraudulently or in bad faith, and there is none in the case before us. As to exemp]ary damages, the carrier has not acted in a "wanton, fraudulent, reckless, oppressive or malevolent manner" to warrant their award. Hence, we believe that for the minor Precillano Necesito (G. R No. L-10605), an indemnity of P5,000 would be adequate for the abrasions and fracture of the femur, including medical and hospitalization expenses, there being no evidence that there would be any permanent impairment of his faculties or bodily functions, beyond the lack of anatomical symmetry. As for the death of Severina Garces (G. R. No. L-10606) who was 33 years old, with seven minor children when she died, her heirs are obviously entitled to indemnity not only for the incidental loses of property (cash, wrist watch and merchandise) worth P394 that she carried at the time of the accident and for the burial expenses of P490, but also for the loss of her earnings (shown to average P120 a month) and for the deprivation of her protection, guidance and company. In our judgment, an award of P15,000 would be adequate (cf Alcantara vs. Surro, 49 Off. Gaz. 2769; 93 Phil., 472). The low income of the plaintiffs-appellants makes an award for attorney's fees just and equitable (Civil Code, Art. 2208, par. 11). Considering that the two cases filed were tried jointly, a fee of P3,500 would be reasonable. In view of the foregoing, the decision appealed from is reversed, and the defendants-appellees are sentenced to indemnify the plaintiffs-appellants in the following amounts: P5,000 to Precillano Necesito, and P15,000 to the heirs of the deceased Severina Garces, plus P3,500 by way of attorney's fees and litigation expenses. Costs against defendants-appellees. So ordered. Paras, C.J., Bengzon, Reyes, A., Bautista Angelo, Concepcion and Endencia, JJ., concur. Felix, J., concurs in the result. RESOLUTION September 11, 1958 REYES, J.B.L., J.: Defendants-appellees have submitted a motion asking this Court to reconsider its decision of June 30, 1958, and that the same be modified with respect to (1) its holding the carrier liable for the breakage of the steering knuckle that caused the autobus No. 199 to overturn, whereby the passengers riding in it were injured; (2) the damages awarded, that appellees argue to be excessive; and (3) the award of attorneys' fees.

(1) The rule prevailing in this jurisdiction as established in previous decisions of this Court, cited in our main opinion, is that a carrier is liable to its passengers for damages caused by mechanical defects of the conveyance. As early as 1924, in Lasam vs. Smith, 45 Phil. 659 this Court ruled: "As far as the record shows, the accident was caused either by defects in the automobile or else through the negligence of its driver. That is not caso fortuito." And in Son vs. Cebu Autobus Company, 94 Phil., 892, this Court held a common carrier liable in damages to a passenger for injuries caused by an accident due to the breakage of a faulty drag-link spring. It can be seen that while the courts of the United States are at variance on the question of a carrier's liability for latent mechanical defects, the rule in this jurisdiction has been consistent in holding the carrier responsible. This Court has quoted from American and English decisions, not because it felt bound to follow the same, but merely in approval of the rationale of the rule as expressed therein, since the previous Philippine cases did not enlarge on the ideas underlying the doctrine established thereby. The new evidence sought to be introduced do not warrant the grant of a new trial, since the proposed proof was available when the original trial was held. Said evidence is not newly discovered. (2) With regard to the indemnity awarded to the child Precilliano Necesito, the injuries suffered by him are

incapable of accurate pecuniary estimation, particularly because the full effect of the injury is not ascertainable immediately. This uncertainty, however, does not preclude the right to an indemnity, since the injury is patent and not denied (Civil Code, Art. 2224). The reasons behind this award are expounded by the Code Commission in its report: "There are cases where from the nature of the case, definite proof of pecuniary loss cannot be offered, although the court is convinced that there has been such loss. For instance, injury to one's commercial credit or to the goodwill of a business firm is often hard to show with certainty in terms of money. Should damages be denied for that reason? The judge should be empowered to calculate moderate damages in such cases, rather than that the plaintiff should suffer, without redress, from the defendant's wrongful act." (Report of the Code Commission, p. 75) In awarding to the heirs of the deceased Severina Garces an indemnity for the loss of her "guidance, protection and company," although it is but moral damage, the Court took into account that the case of a passenger who dies in the course of an accident, due to the carrier's negligence constitutes an exception to the general rule. While, as pointed out in the main decision, under Article 2220 of the new Civil Code there can be no recovery of moral damages for a breach of contract in the absence of fraud malice) or bad faith, the case of a violation of the contract of carriage leading to a passenger's death escapes this general rule, in view of Article 1764 in connection with Article 2206, No. 3 of the new Civil Code. "ART. 1764. Damages in cases comprised in this Section shall be awarded in accordance with Title XVIII of this Book, concerning Damages. Article 2206 shall also apply to the death of a passenger caused by the breach of contract by a common carrier." "ART. 2206. ...

(3) The spouse, legitimate and illegitimate descendants and ascendants of the deceased may demand moral damages for mental anguish by reason of the death of the deceased." Being a special rule limited to cases of fatal injuries, these articles prevail over the general rule of Art. 2220. Special provisions control general ones (Lichauco & Co. vs. Apstol, 44 Phil. 138; Sancio vs. Lizarraga, 55 Phil. 601). It thus appears that under the new Civil Code, in case of accident due to a carrier's negligence, the heirs of a deceased passenger may recover moral damages, even though a passenger who is injured, but manages to survive, is not entitled to them. There is, therefore, no conflict between our main decision in the instant case and that of Cachero vs. Manila Yellow Taxi Cab Co., 101 Phil., 523, where the passenger suffered injuries, but did not lose his life. (3) In the Cachero case this Court disallowed attorneys' fees to the injured plaintiff because the litigation arose out of his exaggerated and unreasonable demands for an indemnity that was out of proportion with the compensatory damages to which he was solely entitled. Put in the present case, plaintiffs' original claims can not be deemed a priori wholly unreasonable, since they had a right to indemnity for moral damages besides compensatory ones, and moral damages are not determined by set and invariable bounds. Neither does the fact that the contract between the passengers and their counsel was on a contingent basis affect the former's right to counsel fees. As pointed out for appellants, the Court's award is an indemnity to the party and not to counsel. A litigant who improvidently stipulates higher counsel fees than those to which he is lawfully entitled, does not for that reason earn the right to a larger indemnity; but, by parity of reasoning, he should not be deprived of counsel fees if by law he is entitled to recover them. We find no reason to alter the main decision heretofore rendered. Ultimately, the position taken by this Court is that a common carrier's contract is not to be regarded as a game of chance wherein the passenger stakes his limb and life against the carrier's property and profits. Wherefore, the motion for reconsideration is hereby denied. So ordered.

EN BANC [G.R. Nos. L-28014-15. May 29, 1970.] SPOUSES MARCELO LANDINGIN and RACQUEL BOCASAS, TRANSPORTATION CO. and MARCELO OLIGAN, defendants-appellants. plaintiffs-appellees, vs. PANGASINAN

SPOUSES PEDRO GARCIA and EUFRACIA LANDINGIN, plaintiffs-appellees, vs. PANGASINAN TRANSPORTATION CO. and MARCELO OLIGAN, defendants-appellants. Gabriel A. Zabala for plaintiff -appellees. Vicente M. Erfe Law Office for defendants-appellants. SYLLABUS 1. CIVIL LAW; CONTRACTS; CONTRACT OF CARRIAGE; DUTY OF COMMON CARRIER, ARTICLE 1755 NEW CIVIL CODE. As a common carrier defendant-appellant was duty bound to carry its passengers "safely as far as human care and foresight can provide using the utmost diligence of a very cautious person, with due regard for all the circumstances." 2. ID.; ID.; ID.; ID.; DEFECT IN AUTOMOBILE NOT CASE FORTUITO; CASE OF LASAM VS. SMITH. In Lasam vs. Smith, the court held that an accident caused by defects in the automobile is not a caso fortuito. The rationale of the carrier's liability is the fact that "the passenger has neither the choice nor control over the carrier in the selection and use of the equipment and appliances in use by the carrier." 3. ID.; ID.; ID.; ID.; PRESUMPTION OF NEGLIGENCE REBUTTABLE IN CASE AT BAR. When a passenger dies or is injured, the presumption is that the common carrier is at fault or that it acted negligently. This presumption is only rebutted by proof on the carrier's part that it observed the "extraordinary diligence" required in Article 1733 and the "utmost diligence required of a very cautious person." 4. ID.; ID.; ID.; ID.; INSTANT CASE. In the instant case it appears that although the day before the broken joint was duly inspected and found to be in order, due regard for all the circumstances like the bus was heavily laden with passengers; that it would traverse mountainous, circuitous and ascending roads were not considered in connection with the said inspection. Unless it is shown that the particular circumstances under which the bus would travel were also considered, the mere inspection would not exempt the carrier from liability. DECISION VILLAMOR, J p: Direct appeal on a question of law from the portion of the judgment of the Court of First Instance of Manila ordering the defendants Pangasinan Transportation Co. (PANTRANCO) and Marcelo Oligan to pay the plaintiffs in Civil Case No. D-1468 (L-28014) the sum of P6,500.00, and the plaintiffs in Civil Case No. 1470 (L-28015) the sum of P3,500.00. The complaints in said Civil Cases Nos. D-1468 and D-1470 were filed by the spouses Marcelo Landingin and Racquel Bocasas, and the spouses Pedro Garcia and Eufracia Landingin, respectively, for damages allegedly suffered by them in connection with the death of their respective daughter, Leonila Landingin and Estrella Garcia, due to the alleged negligence of the defendants and/or breach of contract of carriage. In their complaints, plaintiffs averred, among others, that in the morning of April 20, 1963, their above-mentioned daughters were among the passengers in the bus driven by defendant Marcelo Oligan and owned and operated by defendant PANTRANCO on an excursion trip from Dagupan City to Baguio City and back, that the bus was open on one side and enclosed on the other, in gross violation of the rules of the Public Service Commission; that defendant PANTRANCO acted with negligence, fraud and bad faith in pretending to have previously secured a special permit for the trip when in truth it had not done so; that upon reaching an uphill point at Camp 8, Kennon Road, Baguio City, on the onward trip, defendant driver, through utter lack of foresight, experience and driving knowledge, caused the bus to stall and stop for a few moments; that through the said defendant's fault and mishandling, the motor ceased to function, causing the bus to slide back unchecked, that when the said defendant suddenly swerved and steered the bus toward the mountainside, Leonila and Estrella, together with several other passengers, were thrown out of the bus through its open side unto the road, suffering serious injuries as a result of which Leonila and Estrella died at the hospital on the same day; and that in connection with the incident, defendant driver had been charged with and convicted of multiple homicide and multiple slight physical injuries on account of the death of Leonila and Estrella and of the injuries suffered by four others, although it may be said, by way of parenthesis, that this case is now pending appeal in a higher court. The plaintiffs prayed for awards of moral, actual and exemplary damages in the total sum of P40,000.00 in Civil Case No. D-1468, and in the total sum of P25,000.00 in Civil Case No. D-1470 as well as attorney's fees in the amounts of P5,000.00 and P4,000.00, respectively. Defendants filed a joint answer to each of the two complaints alleging, among others, that at the time of the accident, defendant driver was driving the bus at the slow speed of about 10 kilometers per hour; that while the said defendant was steering his bus toward the mountainside after hearing a sound coming from under the rear end of the bus, Leonila and Estrella recklessly, and in disobedience to his shouted warnings and advice, jumped out of the bus causing their heads to hit the road or pavement; that the bus was then being

driven with extraordinary care, prudence and diligence; that defendant PANTRANCO observed the care and diligence of a good father of a family to prevent the accident as well as in the selection and supervision of its employees, particularly of defendant driver; and that the decision convicting the said defendant was not yet final, the same having been appealed to the Court of Appeals where it was still pending. By agreement of the parties, the two cases were tried jointly. On October 17, 1966, the court a quo rendered its decision therein in which it made the following findings; that upon reaching the fatal spot at Camp 8, a sudden snapping or breaking of metal below the floor of the bus was heard, and the bus abruptly stopped, rolling back a few moments later; that as a result, some of the passengers jumped out of the bus, while others stepped down; that defendant driver maneuvered the bus safely to and against the side of the mountain where its rear end was made to rest, ensuring the safety of the many passengers still inside the bus; that while defendant driver was steering the bus towards the mountainside, he advised the passengers not to jump, but to remain seated; that Leonila and Estrella were not thrown out of the bus, but that they panicked and jumped out; that the malfunctioning of the motor resulted from the breakage of the cross-joint; that there was no negligence on the part of either of the defendants; that only the day before, the said cross-joint was duly inspected and found to be in order; and that defendant PANTRANCO had exercised the requisite care in the selection and supervision of its employees, including the defendant driver. The court concluded that "the accident was caused by a fortuitous event or an act of God brought about by some extra-ordinary circumstances independent of the will of the Pantranco or its employees." One would wonder why in the face of such factual findings and conclusion of the trial court, the defendants, instead of the plaintiffs, should come to this Court on appeal. The answer lies in the dispositive portion of the decision, to wit: "IN VIEW OF THE FOREGOING CONSIDERATIONS, the Court hereby renders judgment: (a) Absolving the defendants from any liability on account of negligence on their part and therefore dismissing the complaints in these two cases; (b) However, as stated above, the Court hereby orders the defendant Pantranco to pay to the plaintiffs spouses Marcelo Landingin and Racquel Bocasas in Civil Case No. D-1468 the amount of P6,500.00; and the amount of P3,500.00 to the spouses Pedro Garcia and Eufracia Landingin in Civil Case No. D-1470, not in payment of liability because of any negligence on the part of the defendants but as an expression of sympathy and goodwill." (Emphasis supplied.) As to what impelled the court below to include item (b) in the dispositive portion of its decision, can be gathered from the penultimate paragraph of the decision, which reads: "However, there is evidence to the effect that an offer of P8,500.00 in the instant cases without any admission of fault or negligence had been made by the defendant Pantranco and that actually in Civil Case No. D-1469 for the death of Pacita Descalso, the other deceased passenger of the bus in question, the heirs of the deceased received P3,000.00 in addition to hospital and medical bills and the coffin of the deceased for the dismissal of the said case without Pantranco accepting liability. There was as a matter of fact during the pre-trial of these two cases a continuing offer of settlement on the part of the defendant Pantranco without accepting any liability for such damages, and the Court understood that the Pantranco would be willing still to pay said amounts even if these cases were to be tried on the merits. It is well-known that the defendant Pantranco is zealous in the preservation of its public relations. In the spirit therefore of the offer of the defendant Pantranco aforesaid, to assuage the feelings of the herein plaintiffs an award of P6,500.00 for the spouses Marcelo Landingin and Racquel Bocasas in Civil Case No. D-1468 whose daughter Leonila was, when she died, a thirdyear Commerce student at the Far Eastern University, and P3,500.00 for the spouses Pedro Garcia and Eufracia Landingin in Civil Case No. D-1470 whose daughter Estrella was in the fourth year high at the Dagupan Colleges when she died, is hereby made in their favor. This award is in addition to what Pantranco might have spent to help the parents of both deceased after the accident." Defendants-appellants complain that having found them to be absolutely free from fault or negligence, and having in fact dismissed the complaints against them, the court should not have ordered them to assume any pecuniary liability. There would be merit in his argument but for the fact that defendant-appellant PANTRANCO was guilty of breach of contract of carriage. It will be noted that in each of the two complaints it is averred that two buses, including the one in which the two deceased girls were riding, were hired to transport the excursionist passengers from Dagupan City to Baguio City, and return, and that the said two passengers did not reach destination safely. As a common carrier, defendant-appellant PANTRANCO was duty bound to carry its passengers "safely as far as human care and foresight can provide, using the utmost diligence of very cautious persons, with a due regard for all the circumstances." (Article 1755, Civil Code.) Did defendant-appellant PANTRANCO measure up to the degree of care and foresight required it under the circumstances? We think not. The court below found that the cross-joint of the bus in which the deceased were riding broke, which caused the malfunctioning of the motor, which in turn resulted in panic among some of the passengers. This is a finding of fact which this Court may not disturb. We are of the opinion, however, that the lower court's conclusion drawn from that fact, i.e., that "the accident was caused by a fortuitous event or an act of God brought about by some extraordinary circumstances independent of the will of the Pantranco or its employees," is in large measure conjectural and speculative, and was arrived at without due regard to all the circumstances, as required by Article 1755. In Lasam vs. Smith (45 Phil. 660), this Court held that an accident caused by defects in the automobile is not a caso fortuito. The rationale of the carrier's liability is the fact that "the passenger has neither the choice nor control over the carrier in the selection and use of the equipment and appliances in use by the carrier." (Necesito, et al. vs. Paras, et al., 104 Phil. 75) When a passenger dies or is injured, the presumption is that the common carrier is at fault or that it acted negligently (Article 1756). This presumption is only rebutted by proof on the carrier's part that it observed the "extraordinary diligence" required in Article 1733

and the "utmost diligence of very cautious persons" required in Article 1755 (Article 1756). In the instant case it appears that the court below considered the presumption rebutted on the strength of defendants-appellants' evidence that only the day before the incident, the cross-joint in question was duly inspected and found to be in order. It does not appear, however, that the carrier gave due regard for all the circumstances in connection with the said inspection. The bus in which the deceased we riding was heavily laden with passengers, and it would be traversing mountainous, circuitous and ascending roads. Thus the entire bus, including its mechanical parts, would naturally be taxed more heavily than it would be under ordinary circumstances. The mere fact that the bus was inspected only recently and found to be in order would not exempt the carrier from liability unless it is shown that the particular circumstances under which the bus would travel were also considered. In the premises, it was error for the trial court to dismiss the complaints. The awards made by the court should be considered in the concept of damages for breach of contracts of carriage. IN VIEW OF THE FOREGOING CONSIDERATIONS, the judgment appealed from is modified as indicated above, and defendantappellant PANTRANCO is ordered to pay to plaintiffs-appellees the amounts stated in the judgment appealed from, as damages for breach of contracts, with interest thereon at the legal rate from the date of the filing of the complaints. Costs against defendantappellant PANTRANCO. Concepcion, C.J., Reyes, J.B.L., Dizon, Makalintal, Zaldivar, Fernando, Teehankee and Barredo, JJ., concur. Castro, J., is on official leave.

EN BANC [G.R. No. L-22272. June 26, 1967.] ANTONIA MARANAN, plaintiff-appellant, vs. PASCUAL PEREZ, ET AL., defendants, PASCUAL PEREZ, defendantappellant. Pedro Panganiban for plaintiff-appellant. Magno T . Bueser for defendant-appellant. SYLLABUS 1. CIVIL LAW; COMMON CARRIERS; CASE AT BAR. R.C. was a passenger in a taxicab owned by P. P. when he was stabbed to death by the driver, S.V. In the subsequent action for damages, P. P. cited Gillaco vs. MRR, 97 Phil., 884, which ruled that the carrier is under no absolute liability for assaults of its employees upon the passengers. Held, the Gillaco case does not apply. There, the passenger was killed outside the scope and course of duty of the guilty employee while here, the killing took place in the course of duty of the guilty employee and when he was acting within the scope of his duties. 2. ID.; ID.; OLD AND NEW CIVIL CODES COMPARED. Unlike the old Civil Code, the new Civil Code of the Philippines in its Article 1759 expressly makes the common carrier liable for intentional assaults committed by its employees upon its passengers. 3. ID.; ID.; BASIS OF CARRIER'S LIABILITY FOR ASSAULTS ON PASSENGERS COMMITTED BY ITS DRIVERS. The Civil Code provisions on the subject of Common Carriers (Sec. 4, Chap. 3, Title VIII, Rep. Act No. 386) are new and were taken from Anglo-American Law (Report of the Code Commission, 64). There, the basis of the carrier's liability for assaults on passengers committed by its drivers rest either on (1) the doctrine of respondent superior, or (2) the principle that it is the carrier's implied duty to transport the passenger safely (53 ALR 2d 721-728; 732-734). Under the first, which is the minority view, the carrier is liable only when the act of the employee is within the scope of his authority and duty. It is not sufficient that the act be within the course of employment only. Under the second view, upheld by the majority and also by the later cases, it is enough that the assault happens within the course of the employee's duty. It is no defense for the carrier that the act was done in excess of authority or in disobedience of the carrier's orders (10 Am. Jur. 105-107; 263-265). The carrier's liability her is absolute in the sense that it practically secures the passengers from assaults committed by its own employees (Dixie Motor Coach Corp. vs. Toler, 1997 Ark. 1097, 126 S.W., 2d, 618; Van Hoeffen vs. Columbia Taxicab Co., 179 Mo. App. 591, 162 S.W. 694; Brockway vs. Mordenti, 199 Misc. 898, 103 N.Y.S. 621; Korner vs. Cosgrove, 141 N.E. 265, 31 A.L.R. 1193). 4. ID.; ID.; ID.; NEW CIVIL CODE FOLLOWS SECOND VIEW. As can be gleaned from the Article 1759, the Civil Code of the Philippines evidently follows the rule based on the second view: (1) the special undertaking of the carrier requires that it furnish its passengers that full measure of protection afforded by the exercise of the high degree of care prescribed by the law, inter alia from violence and insults at the hands of strangers and other passengers, but above all, from the acts of the carrier's own servants charged with the passenger's safety; (2) said liability of the carrier from the servant's violations of duty to passengers, is the result of the former's confiding in the servant's hands the performance of his contract to safely transport the passenger, with the utmost care prescribed by law; and (3) as between the carrier and the passenger, the former must bear the risk of wrongful acts or negligence of the carrier's employees against passengers, since it, and not the passengers, has power to select and remove them. (Texas Midland R.R. vs. Monroe 110 Tex 97, 216 S.W. 388, 380, 390; and Haver vs. Central Railroad Co., 43 L.R.A. 84, 85.) 5. ID.; ID.; CARRIER'S DUTY IN SELECTING ITS DRIVERS AND SIMILAR EMPLOYEES. It is the carrier's strict obligation to select its drivers and similar employees with due regard not only to their technical competence and physical ability, but also, no less important, to their total personality, including their patterns of behavior, moral fibers, and social attitude. 6. ID.; ID.; ACTUAL AND MORAL DAMAGES FOR PASSENGER'S DEATH. P3,000 is the minimum compensatory damages recoverable when a breach of contract of carriage results in the passenger's death (Arts 1764 & 2206, Civil Code) but consistent with the policy of this Court, the minimal award should be raised to P6,000. In addition, the parents of the decedent are entitled to moral damages to compensate for the mental anguish they suffered. A claim therefore having been properly made, it becomes the court's duty to award moral damages (Mercado vs. Lira, L-13328-29 & L-13358, Sept. 29, 1961). Interest upon such damages are also due to plaintiff-appellant (Art. 2210, Civil Code). DECISION BENGZON, J.P., J p: Rogelio Corachea, on October 18, 1960, was a passenger in a taxicab owned and operated by Pascual Perez when he was stabbed and killed by the driver, Simeon Valenzuela. Valenzuela was prosecuted for homicide in the Court of First Instance of Batangas. Found guilty, he was sentenced to suffer imprisonment and to indemnify the heirs of the deceased in the sum of P6,000. Appeal from said conviction was taken to the Court of Appeals.

On December 6, 1961, while appeal was pending in the Court of Appeals, Antonia Maranan, Rogelio's mother, filed an action in the Court of First Instance of Batangas to recover damages from Perez and Valenzuela for the death of her son. Defendants asserted that the deceased was killed in self-defense, since he first assaulted the driver by stabbing him from behind. Defendant Perez further claimed that the death was a caso fortuito for which the carrier was not liable. The court a quo, after trial, found for the plaintiff and awarded her P3,000 as damages against defendant Perez. The claim against defendant Valenzuela was dismissed. From this ruling, both plaintiff and defendant Perez appealed to this Court, the former asking for more damages and the latter insisting on non-liability. Subsequently, the Court of Appeals affirmed the judgment of conviction earlier mentioned, during the pendency of the herein appeal, and on May 19, 1964, final judgment was entered therein. (Rollo, p. 33). Defendant-appellant relies solely on the ruling enunciated in Gillaco vs. Manila Railroad Co., 97 Phil. 884, that the carrier is under no absolute liability for assaults of its employees upon the passengers. The attendant facts and controlling law of that case and the one at bar are very different however. In the Gillaco case, the passenger was killed outside the scope and the course of duty of the guilty employee. As this Court there found: ". . . when the crime took place, the guard Devesa had 10 duties to discharge in connection with the transportation of the deceased from Calamba to Manila. The stipulation of facts is clear that when Devesa shot and killed Gillaco, Devesa, was assigned to guard the Manila-San Fernando (La Union) trains, and he was at Paco Station awaiting transportation to Tutuban, the starting point of the train he was engaged to guard. In fact, his tour of duty was to start at 9:00 a.m., two hours after the commission of the crime. Devesa was therefore under no obligation to safeguard the passengers of the Calamba-Manila train, where the deceased was riding; and the killing of Gillaco was not done in line of duty. The position of Devesa at the time was that of another would be passenger, a stranger also awaiting transportation, and not that of an employee assigned to discharge any of the duties that the Railroad had assumed by its contract with the deceased. As a result, Devesa's assault can not be deemed in law a breach of Gillaco's contract of transportation by a servant or employee of the carrier. . . ." (Emphasis supplied) Now here, the killing was perpetrated by the driver of the very cab transporting the passenger, in whose hands the carrier had entrusted the duty of executing the contract of carriage. In other words, unlike the Gillaco case, the killing of the passenger here took place in the course of duty of the guilty employee and when the employee was acting within the scope of his duties. Moreover, the Gillaco case was decided under the provisions of the Civil Code of 1889 which, unlike the present Civil Code, did not impose upon common carriers absolute liability for the safety of passengers against wilful assaults or negligent acts committed by their employees. The death of the passenger in the Gillaco case was truly a fortuitous event which exempted the carrier from liability. It is true that Art. 1105 of the old Civil Code on fortuitous events has been substantially reproduced in Art. 1174 of the Civil Code of the Philippines but both articles clearly remove from their exempting effect the case where the law expressly provides for liability in spite of the occurrence of force majeure. And herein significantly lies the statutory difference between the old and present Civil Codes, in the backdrop of the factual situation before Us, which further accounts for a different result in the Gillaco case. Unlike the old Civil Code, the new Civil Code of the Philippines expressly makes the common carrier liable for intentional assaults committed by its employees upon its passengers, by the wording of Art. 1759 which categorically states that. "Common carriers are liable for the death of or injuries to passengers although the negligence or wilful acts of the former's employees, although such employees may have acted beyond the scope of their authority or in violation of the orders of the common carriers." The Civil Code provisions on the subject of Common Carriers 1 are new and were taken from Anglo-American Law. 2 There, the basis of the carrier's liability for assaults on passengers committed by its drivers rests either on (1) the doctrine of respondent superior or (2) the principle that it is the carrier's implied duty to transport the passenger safely. 3 Under the first, which is the minority view, the carrier is liable only when the act of the employee is within the scope of his authority and duty. It is not sufficient that the act be within the course of employment only. 4 Under the second view, upheld by the majority and also by the later cases, it is enough that the assault happens within the course of the employee's duty. It is no defense for the carrier that the act was done in excess of authority or in disobedience of the carrier's orders. 5 The carrier's liability here is absolute in the sense that it practically secures the passengers from assaults committed by its own employees. 6 As can be gleaned from Art. 1759, the Civil Code of the Philippines evidently follows the rule based on the second view. At least three very cogent reasons underlie this rule. As explained in Texas Midland R.R. vs. Monroe, 110 Tex. 97, 216 S.W. 388, 389-390, and Haver vs. Central Railroad Co., 43 LRA 84, 85; (1) the special undertaking of the carrier requires that it furnish its passenger that full measure of protection afforded by the exercise of the high degree of care prescribed by the law, inter alia from violence and insults at the hands of strangers and other passengers, but above all, from the acts of the carrier's own servants charged with the passenger's safety; (2) said liability of the carrier for the servant's violation of duty to passengers, is the result of the former's confiding in the servant's hands the performance of his contract to safely transport the passenger, delegating therewith the duty of protecting the passenger with the utmost care prescribed by law; and (3) as between the carrier and the passenger, the former must bear the risk of wrongful acts or negligence of the carrier's employees against passengers, since it, and not the passengers, has power to select and remove them. Accordingly, it is the carrier's strict obligation to select its drivers and similar employees with due regard not only to their technical competence and physical ability, but also, no less important, to their total personality, including their patterns of behavior, moral fibers, and social attitude.

Applying this stringent norm to the facts in this case, therefore, the lower court rightly adjudged the defendant carrier liable pursuant to Art. 1759 of the Civil Code. The dismissal of the claim against the defendant driver was also correct. Plaintiff's action was predicated on breach of contract of carriage 7 and the cab driver was not a party thereto. His civil liability is covered in the criminal case wherein he was convicted by final judgment. In connection with the award of damages, the court a quo granted only P3,000 to plaintiff-appellant. This is the minimum compensatory damages amount recoverable under Art. 1764 in connection with Art. 2206 of the Civil Code when a breach of contract results in the passenger's death. As has been the policy followed by this Court, this minimal award should be increased to P6,000. As to other alleged actual damages, the lower court's finding that plaintiff's evidence thereon was not convincing 8 should not be disturbed. Still, Arts. 2206 and 1764 award moral damages in addition to compensatory damages, to the parents of the passenger killed to compensate for the mental anguish they suffered. A claim therefor having been properly made, it becomes the court's duty to award moral damages. 9 Plaintiff demands P5,000 as moral damages; however, in the circumstances, We consider P3,000 moral damages, in addition to the P6,000 damages afore-stated, as sufficient. Interest upon such damages are also due to plaintiff-appellant. 10 Wherefore, with the modification increasing the award of actual damages in plaintiff's favor to P6,000, plus P3,000 moral damages, with legal interest on both from the filing of the complaint on December 6, 1961 until the whole amount is paid, the judgment appealed from is affirmed in all other respects. No costs. So ordered.

EN BANC [G.R. No. L-19161. April 29, 1966.] MANILA RAILROAD COMPANY, petitioner, vs. MACARIA BALLESTEROS, TIMOTEO CAMAYO, JOSE REYES and JULIAN MAIMBAN, JR., respondents. Gov't. Corp. Counsel S. M. Gopengco & Atty. R.G. Fernando, for petitioners. George G. Arbolario for respondents. SYLLABUS 1. APPEALS; COURTS CAN NOT BE COMPELLED TO APPROVE FRIVOLOUS APPEAL. Where the appeal is frivolous and interposed only for purposes of delay, the appellate court may deny a petition for mandamus to compel the trial court to approve and certify the appeal. 2. COMMON CARRIERS; LIABILITY FOR INJURIES SUFFERED BY PASSENGERS ON ACCOUNT OF WILLFUL ACTS OR NEGLIGENCE OF STRANGERS. A common carrier is liable for injuries suffered by its passengers due to the willful acts or negligence of other passengers or of strangers, if the common carrier's employees through the exercise of the diligence of a good father of a family could have prevented or stopped the act or omission. DECISION MAKALINTAL, J p: In Civil Case No. 45968 of the Court of First Instance of Manila (Macaria Ballesteros, Timoteo Camayo, Jose Reyes and Julian Maimban, Jr. vs. Manila Railroad Company) the defendant was adjudged to pay damages in the following amounts: P2,400 to Macaria Ballesteros; P4,000 to Timoteo Camayo; P3,000 to Jose Reyes; and P2,000, plus P1,000 as attorneys fees, to Julian Maimban, Jr.

The defendant appealed from the judgment, but upon motion by the plaintiffs the trial court, by order dated October 14, 1961, dismissed the appeal on the ground that it was "manifestly and palpably frivolous and interposed ostensibly to delay the settlement of the just and reasonable claims of the herein plaintiffs, which have been pending since 1958." The defendant moved to reconsider, and upon denial of its motion instituted in this Court the instant petition for mandamus to set aside the order of dismissal and to order respondent court to give due course to the appeal. In filing the petition directly with this Court, petitioner evidently intended to raise only questions of law in the appeal contemplated, since under Rule 41, section 15, "when erroneously a motion to dismiss an appeal is granted or a record on appeal is disallowed by the trial court, a proper petition for mandamus may be filed in the appellate court;" and under section 17(6) of the Judiciary Act this Court may review on appeal only questions of law in civil cases decided by inferior courts unless the value in controversy exceeds P200,000. The fact that an appeal is frivolous and interposed only for purposes of delay has been recognized as a valid ground to deny issuance of the writ of mandamus to compel the trial court to approve and certify the appeal. In De la Cruz vs. Blanco and Quevedo, 73 Phil. 596, We held: "And where as in the instant case, the dismissal has been ordered by the trial court, it would not be disturbed in the Appellate Court if the latter finds the appeal to have been interposed ostensibly for delay. It has been held that a frivolous appeal is one presenting no justiciable question or one so readily cognizable as devoid of merit on the face of the record that there is little, if any, prospect that it can ever succeed. The instant case is one such instance in which the appeal is evidently without merit, taken manifestly for delay." And in Paner vs. Yatco, 87 Phil. 271, We denied the writ prayed for and held that "while strictly and legally speaking the petition may be granted, we may, before acting thereon, inquire into the facts involved in order to determine whether once the writ is granted and the case is brought up here on appeal the appellant has any chance, even possibility, of having the basic decision of the trial court set aside or modified; for if the appellant has not that prospect or likelihood then the granting of the writ and the consequent appeal would be futile and would mean only a waste of time to the parties and to this Court." The material facts, as found by respondent court in its decision, are as follows: Private respondents here, plaintiffs below, were passengers on petitioner's bus, the driver of which was Jose Anastacio. In Bayombong, Nueva Vizcaya, Anastacio stopped the bus and got off to replace a defective spark plug. While he was thus engaged, one Dionisio Abello, an auditor assigned to defendant company by the General Auditing Office, took the wheel and told the driver to sit somewhere else. With Abello driving, the bus proceeded on its way, from time to time stopping to pick up passengers. Anastacio tried twice to take the wheel back but Abello would not relinquish it. Then, in the language of the trial court, "while the bus was negotiating between Km. posts 328 and 329 (in Isabela) a freight truck . . . driven by Marcial Nocum . . . bound for Manila, was also negotiating the same place; when these two vehicles were about to meet at the bend of the road, Marcial Nocum, in trying to evade several holes on the right lane, where his truck was running, swerved his truck towards the middle part of the road and in so doing, the left front fender and left side of the freight truck smashed the left side of the bus resulting in extensive damages to the body of the bus and injuries to seventeen of its passengers, . . . including the plaintiffs herein." In rejecting petitioner's contention that the negligence of Marcial Nocum could not be imputed to it and relieved it from liability, the trial court found that Dionisio Abello "was likewise reckless when he was driving the bus at the rate of from 40 to 50 kilometers per hour on a bumpy road at the moment of the collision." Another defense put up by petitioner is that since Abello was not its employee it should not be held responsible for his acts. This defense was correctly overruled by the trial court, considering the provisions of Article 1763 of the Civil Code and section 48 (b) of the Motor Vehicle Law, which respectively provide as follows: ART. 1763. A common carrier is responsible for injuries suffered by a passenger on account of the willful acts or negligence of other passengers or of strangers, if the common carrier's employees through the exercise of the diligence of a good father of a family could have prevented or stopped the act or omission. Sec. 48(b). No professional chauffeur shall permit any unlicensed person to drive the motor vehicle under his control, or permit a person, sitting beside him or in any other part of the car, to interfere with him in the operation of the motor vehicle, by allowing said person to take hold of the steering wheel, or in any other manner take part in the manipulation or control of the car. It appears further, and so the trial court found, that there were negotiations between the parties to compromise the case, as a result of which respondents herein, plaintiffs below, considerably reduced their claims to the amounts subsequently awarded in the judgment; that petitioner had in fact settled the claims of the other passengers who were also injured in the same accident and even the claim for damages filed in another action by the owner of the freight truck; and that the Government Corporate Counsel himself, who represents herein petitioner, rendered two separate opinions (Op. No. 86, May 19, 1960; and Op. No. 99, series of 1961) wherein, after analyzing the facts and the law applicable, he reached the conclusion that the acts of the bus personnel, particularly "in allowing Mr. Abello to drive despite two occasions when the bus stopped and the regular driver could have taken over, constitute reckless imprudence and wanton injurious conduct on the part of the MRR employees." On the basis of those opinions, the Government Corporate Counsel advised petitioner that the offer of the claimants was reasonable and should be accepted. His advice, however, was not favorably acted upon, petitioner obviously preferring to litigate. The issues proposed to be taken up on appeal, as set forth in the petition, are whether or not Dionisio Abello acted with reckless negligence while driving petitioner's bus at the time of the accident, and whether or not petitioner may be held liable on account of such negligence, considering that he was not its employee. These are no longer justiciable questions which would justify our issuing

the peremptory writ prayed for. The first is a question of fact on which the affirmative finding of respondent court is not reviewable by Us; and the second is one as to which there can be no possible doubt in view of the provisions of the Civil Code and of the Motor Vehicle Law hereinbefore cited. There would be no point in giving the appeal due course. The writ prayed for is denied, with costs against petitioner.

FIRST DIVISION [G.R. No. 82619. September 15, 1993.] PHILIPPINE AIRLINES, INC., petitioner, vs. COURT OF APPEALS AND PEDRO ZAPATOS, respondents. Leighton R. Liazon for petitioner. Balmes L. Ocampo for private respondent. SYLLABUS 1. REMEDIAL LAW; EVIDENCE; ADMISSION OF EVIDENCE; PROTEST OR OBJECTION THERETO; RULE. Significantly, PAL did not seem to mind the introduction of evidence which focused on its alleged negligence in caring for its stranded passengers. Well-settled is the rule in evidence that the protest or objection against the admission of evidence should be presented at the time the evidence is offered, and that the proper time to make protest or objection to the admissibility of evidence is when the question is presented to the witness or at the time the answer thereto is given. There being no objection, such evidence becomes property of the case and all the parties are amenable to any favorable or unfavorable effects resulting from the evidence. 2. ID.; CIVIL PROCEDURE; PLEADINGS; ISSUES NOT RAISED THEREIN BUT ARE TRIED BY EXPRESS OR IMPLIED CONSENT OF THE PARTIES; EFFECT. Having joined in the issue over the alleged lack of care it exhibited towards its passengers, PAL cannot now turn around and feign surprise at the outcome of the case. When issues not raised by the pleadings are tried by express or implied consent of the parties, they shall be treated in all respects as if they had been raised in the pleadings. (Sec. 5, Rule 10, Rules of Court) 3. CIVIL LAW; COMMON CARRIER; OBLIGATION TO OBSERVE EXTRAORDINARY DILIGENCE OVER ITS PASSENGERS; EXTENT. The contract of air carriage is a peculiar one. Being imbued with public interest, the law requires common carriers to carry the passengers safely as far as human care and foresight can provide, using the utmost diligence of very cautious persons, with due regard for all the circumstances. In Air France v. Carrascoso, we held that "A contract to transport passengers is quite different in kind and degree from any other contractual relation. And this, because of the relation which an air carrier sustains with the public. Its business is mainly with the travelling public. It invites people to avail of the comforts and

advantages it offers. The contract of air carriage, therefore, generates a relation attended with a public duty . . ." The position taken by PAL in this case clearly illustrates its failure to grasp the exacting standard required by law. Undisputably, PAL's diversion of its flight due to inclement weather was a fortuitous event. Nonetheless, such occurrence did not terminate PAL's contract with its passengers. Being in the business of air carriage and the sole one to operate in the country, PAL is deemed equipped to deal with situations as in the case at bar. What we said in one case once again must be stressed, i.e., the relation of carrier and passenger continues until the latter has been landed at the port of destination and has left the carrier's premises. Hence, PAL necessarily would still have to exercise extraordinary diligence in safeguarding the comfort, convenience and safety of its stranded passengers until they have reached their final destination. On this score, PAL grossly failed considering the then ongoing battle between government forces and Muslim rebels in Cotabato City and the fact that the private respondent was a stranger to the place. 4. ID.; MORAL DAMAGES; AWARD THEREOF; PURPOSE. Moral damages are not intended to enrich the private respondent. They are awarded only to enable the injured party to obtain means, diversion or amusements that will serve to alleviate the moral suffering he has undergone by reason of the defendant's culpable action. 5. ID.; ACTUAL DAMAGES; MUST BE DULY PROVED WITH REASONABLE DEGREE OF CERTAINTY. With regard to the award of actual damages in the amount of P5,000.00 representing private respondent's alleged business losses occasioned by his stay at Cotabato City, we find the same unwarranted. Private respondent's testimony that he had a scheduled business "transaction of shark liver oil supposedly to have been consummated on August 3, 1975 in the morning" and that "since (private respondent) was out for nearly two weeks I missed to buy about 10 barrels of shark liver oil," are purely speculative. Actual or compensatory damages cannot be presumed but must be duly proved with reasonable degree of certainty. A court cannot rely on speculation, conjecture or guesswork as to the fact and amount of damages, but must depend upon competent proof that they have suffered and on evidence of the actual amount thereof.

DECISION BELLOSILLO, J p: This petition for review on certiorari seeks to annul and set aside the decision of the then Intermediate Appellate Court, 1 now Court of Appeals, dated 28 February 1985, in AC-G.R. CV No. 69327 ("Pedro Zapatos v. Philippine Airlines, Inc.") affirming the decision of the then Court of First Instance, now Regional Trial Court, declaring Philippine Airlines, Inc., liable in damages for breach of contract. On 25 November 1976, private respondent filed a complaint for damages for breach of contract of carriage 2 against Philippine Airlines, Inc. (PAL), before the then Court of First Instance, now Regional Trial Court, of Misamis Occidental, at Ozamiz City. According to him, on 2 August 1976, he was among the twenty-one (21) passengers of PAL Flight 477 that took off from Cebu bound for Ozamiz City. The routing of this flight was Cebu-Ozamiz-Cotabato. While on flight and just about fifteen (15) minutes before landing at Ozamiz City, the pilot received a radio message that the airport was closed due to heavy rains and inclement weather and that he should proceed to Cotabato City instead. Upon arrival at Cotabato City, the PAL Station Agent informed the passengers of their options to return to Cebu on Flight 560 of the same day and thence to Ozamiz City on 4 August 1975, or take the next flight to Cebu the following day, or remain at Cotabato and take the next available flight to Ozamiz City on 5 August 1975. 3 The Station Agent likewise informed them that Flight 560 bound for Manila would make a stop-over at Cebu to bring some of the diverted passengers; that there were only six (6) seats available as there were already confirmed passengers for Manila; and, that the basis for priority would be the check-in sequence at Cebu. Private respondent chose to return to Cebu but was not accommodated because he checked-in as passenger No. 9 on Flight 477. He insisted on being given priority over the confirmed passengers in the accommodation, but the Station Agent refused private respondent's demand explaining that the latter's predicament was not due to PAL's own doing but to a force majeure. 4 Private respondent tried to stop the departure of Flight 560 as his personal belongings, including a package containing a camera which a certain Miwa from Japan asked him to deliver to Mrs. Fe Obid of Gingoog City, were still on board. His plea fell on deaf ears. PAL then issued to private respondent a free ticket to Iligan City, which the latter received under protest. 5 Private respondent was left at the airport and could not even hitch a ride in the Ford Fiera loaded with PAL personnel. 6 PAL neither provided private respondent with transportation from the airport to the city proper nor food and accommodation for his stay in Cotabato City. The following day, private respondent purchased a PAL ticket to Iligan City. He informed PAL personnel that he would not use the free ticket because he was filing a case against PAL. 7 In Iligan City, private respondent hired a car from the airport to Kolambugan, Lanao del Norte, reaching Ozamiz City by crossing the bay in a launch. 8 His personal effects including the camera, which were valued at P2,000.00, were no longer recovered. On 13 January 1977, PAL filed its answer denying that it unjustifiably refused to accommodate private respondent. 9 It alleged that there was simply no more seat for private respondent on Flight 560 since there were only six (6) seats available and the priority of accommodation on Flight 560 was based on the check-in sequence in Cebu; that the first six (6) priority passengers on Flight 477 chose to take Flight 560; that its Station Agent explained in a courteous and polite manner to all passengers the reason for PAL's inability to transport all of them back to Cebu; that the stranded passengers agreed to avail of the options and had their respective tickets exchanged for their onward trips; that it was only the private respondent who insisted on being given priority in the

accommodation; that pieces of checked-in baggage and hand-carried items of the Ozamiz City passengers were removed from the aircraft; that the reason for the pilot's inability to land at Ozamiz City airport was because the runway was wet due to rains thus posing a threat to the safety of both passengers and aircraft; and, that such reason of force majeure was a valid justification for the pilot to bypass Ozamiz City and proceed directly to Cotabato City. On 4 June 1981, the trial court rendered its decision 10 the dispositive portion of which states:

"WHEREFORE, judgment is hereby rendered in favor of the plaintiff and against the defendant Philippine Air Lines, Inc. ordering the latter to pay: (1) As actual damages, the sum of Two Hundred Pesos (P200.00) representing plaintiff's expenses for transportation, food and accommodation during his stranded stay at Cotabato City; the sum of Forty-Eight Pesos (P48.00) representing his flight fare from Cotabato City to Iligan City; the sum of Five Hundred Pesos (P500.00) representing plaintiff's transportation expenses from Iligan City to Ozamiz City; and the sum of Five Thousand Pesos (P5,000.00) as loss of business opportunities during his stranded stay in Cotabato City; (2) As moral damages, the sum of Fifty Thousand Pesos (P50,000.00) for plaintiff's hurt feelings, serious anxiety, mental anguish and unkind and discourteous treatment perpetrated by defendant's employees during his stay as stranded passenger in Cotabato City; (3) As exemplary damages, the sum of Ten Thousand Pesos (P10,000.00) to set a precedent to the defendant airline that it shall provide means to give comfort and convenience to stranded passengers; (4) (5) The sum of Three Thousand Pesos (P3,000.00) as attorney's fees; To pay the costs of this suit."

PAL appealed to the Court of Appeals which on 28 February 1985, finding no reversible error, affirmed the judgment of the court a quo. 11 PAL then sought recourse to this Court by way of a petition for review on certiorari 12 upon the following issues: (1) Can the Court of Appeals render a decision finding petitioner (then defendant-appellant in the court below) negligent and, consequently, liable for damages on a question of substance which was neither raised in the complaint nor proved at the trial? (2) Can the Court of Appeals award actual and moral damages contrary to the evidence and established jurisprudence? 13 An assiduous examination of the records yields no valid reason for reversal of the judgment on appeal; only a modification of its disposition. In its petition, PAL vigorously maintains that private respondent's principal cause of action was its alleged denial of private respondent's demand for priority over the confirmed passengers on Flight 560. Likewise, PAL points out that the complaint did not impute to PAL neglect in failing to attend to the needs of the diverted passengers; and, that the question of negligence was not and never put in issue by the pleadings or proved at the trial. Contrary to the above arguments, private respondent's amended complaint touched on PAL's indifference and inattention to his predicament. The pertinent portion of the amended complaint 14 reads: "10. That by virtue of the refusal of the defendant through its agent in Cotabato to accommodate (sic) and allow the plaintiff to take and board the plane back to Cebu, and by accommodating (sic) and allowing passengers from Cotabato for Cebu in his stead and place, thus forcing the plaintiff against his will, to be left and stranded in Cotabato, exposed to the peril and danger of muslim rebels plundering at the time, the plaintiff, as a consequence, (have) suffered mental anguish, mental torture, social humiliation, bismirched reputation and wounded feeling, all amounting to a conservative amount of thirty thousand (P30,000.00) Pesos." To substantiate this aspect of apathy, private respondent testified 15

"A. I did not even notice that I was I think the last passenger or the last person out of the PAL employees and army personnel that were left there. I did not notice that when I was already outside of the building after our conversation. Q. What did you do next?

A. I banished (sic) because it seems that there was a war not far from the airport. The sound of guns and the soldiers were plenty. Q. A. Q. After that what did you do? I tried to look for a transportation that could bring me down to the City of Cotabato. Were you able to go there?

A. I was at about 7:00 o'clock in the evening more or less and it was a private jeep that I boarded. I was even questioned why I and who am (sic) I then. Then I explained my side that I am (sic) stranded passenger. Then they brought me downtown at Cotabato.

Q. During your conversation with the Manager were you not offered any vehicle or transportation to Cotabato airport downtown? A. In fact I told him (Manager) now I am by-passed passenger here which is not my destination what can you offer me. Then they answered, "it is not my fault. Let us forget that. Q. In other words when the Manager told you that offer was there a vehicle ready?

A. Not yet. Not long after that the Ford Fiera loaded with PAL personnel was passing by going to the City of Cotabato and I stopped it to take me a ride because there was no more available transportation but I was not accommodated." Significantly, PAL did not seem to mind the introduction of evidence which focused on its alleged negligence in caring for its stranded passengers. Well-settled is the rule in evidence that the protest or objection against the admission of evidence should be presented at the time the evidence is offered, and that the proper time to make protest or objection to the admissibility of evidence is when the question is presented to the witness or at the time the answer thereto is given. 16 There being no objection, such evidence becomes property of the case and all the parties are amenable to any favorable or unfavorable effects resulting from the evidence. 17 PAL instead attempted to rebut the aforequoted testimony. In the process, it failed to substantiate its counter allegation for want of concrete proof 18 "Atty. Rubin O. Rivera PAL's counsel: Q. You said PAL refused to help you when you were in Cotabato, is that right?

Private respondent: A. Q. A. Yes. Did you ask them to help you regarding any offer of transportation or of any other matter asked of them? Yes, he (PAL PERSONNEL) said what is? It is not our fault.

Q. Are you not aware that one fellow passenger even claimed that he was given Hotel accommodation because they have no money? xxx xxx xxx

A. No, sir, that was never offered to me. I said, I tried to stop them but they were already riding that PAL pick-up jeep, and I was not accommodated." Having joined in the issue over the alleged lack of care it exhibited towards its passengers, PAL cannot now turn around and feign surprise at the outcome of the case. When issues not raised by the pleadings are tried by express or implied consent of the parties, they shall be treated in all respects as if they had been raised in the pleadings. 19 With regard to the award of damages affirmed by the appellate court, PAL argues that the same is unfounded. It asserts that it should not be charged with the task of looking after the passengers' comfort and convenience because the diversion of the flight was due to a fortuitous event, and that if made liable, an added burden is given to PAL which is over and beyond its duties under the contract of carriage. It submits that granting arguendo that negligence exists, PAL cannot be liable in damages in the absence of fraud or bad faith; that private respondent failed to apprise PAL of the nature of his trip and possible business losses; and, that private respondent himself is to be blamed for unreasonably refusing to use the free ticket which PAL issued. The contract of air carriage is a peculiar one. Being imbued with public interest, the law requires common carriers to carry the passengers safely as far as human care and foresight can provide, using the utmost diligence of very cautious persons, with due regard for all the circumstances. 20 In Air France v. Carrascoso, 21 we held that "A contract to transport passengers is quite different in kind and degree from any other contractual relation. And this, because of the relation which an air carrier sustains with the public. Its business is mainly with the travelling public. It invites people to avail of the comforts and advantages it offers. The contract of air carriage, therefore, generates a relation attended with a public duty . . ." (emphasis supplied). The position taken by PAL in this case clearly illustrates its failure to grasp the exacting standard required by law. Undisputably, PAL's diversion of its flight due to inclement weather was a fortuitous event. Nonetheless, such occurrence did not terminate PAL's contract with its passengers. Being in the business of air carriage and the sole one to operate in the country, PAL is deemed equipped to deal with situations as in the case at bar. What we said in one case once again must be stressed, i.e., the relation of carrier and passenger continues until the latter has been landed at the port of destination and has left the carrier's premises. 22 Hence, PAL necessarily would still have to exercise extraordinary diligence in safeguarding the comfort, convenience and safety of its stranded passengers until they have reached their final destination. On this score, PAL grossly failed considering the then ongoing battle between government forces and Muslim rebels in Cotabato City and the fact that the private respondent was a stranger to the place. As the appellate court correctly ruled

"While the failure of plaintiff in the first instance to reach his destination at Ozamis City in accordance with the contract of carriage was due to the closure of the airport on account of rain and inclement weather which was radioed to defendant 15 minutes before landing, it has not been disputed by defendant airline that Ozamis City has no all-weather airport and has to cancel its flight to Ozamis City or by-pass it in the event of inclement weather. Knowing this fact, it becomes the duty of defendant to provide all means of comfort and convenience to its passengers when they would have to be left in a strange place in case of such by-passing. The steps taken by defendant airline company towards this end has not been put in evidence, especially for those 7 others who were not accommodated in the return trip to Cebu, only 6 of the 21 having been so accommodated. It appears that plaintiff had to leave on the next flight 2 days later. If the cause of non-fulfillment of the contract is due to a fortuitous event, it has to be the sole and only cause (Art. 1755 C.C., Art. 1733 C.C.) Since part of the failure to comply with the obligation of common carrier to deliver its passengers safely to their destination lay in the defendant's failure to provide comfort and convenience to its stranded passengers using extraordinary diligence, the cause of non-fulfillment is not solely and exclusively due to fortuitous event, but due to something which defendant airline could have prevented, defendant becomes liable to plaintiff." 23 While we find PAL remiss in its duty of extending utmost care to private respondent while being stranded in Cotabato City, there is no sufficient basis to conclude that PAL failed to inform him about his non-accommodation on Flight 560, or that it was inattentive to his queries relative thereto. On 3 August 1975, the Station Agent reported to his Branch Manager in Cotabato City that "3. Of the fifteen stranded passengers two pax elected to take F478 on August 05, three pax opted to take F442 August 03. The remaining ten (10) including subject requested that they be instead accommodated (sic) on F446 CBO-IGN the following day where they intended to take the surface transportation to OZC. Mr. Pedro Zapatos had by then been very vocal and boiceterous (sic) at the counter and we tactfully managed to steer him inside the Station Agent's office. Mr. Pedro Zapatos then adamantly insisted that all the diverted passengers should have been given priority over the originating passengers of F560 whether confirmed or otherwise. We explained our policies and after awhile he seemed pacified and thereafter took his ticket (in-lieued (sic) to CBO-IGN, COCON basis) at the counter in the presence of five other passengers who were waiting for their tickets too. The rest of the diverted pax had left earlier after being assured that their ticket will be ready the following day." 24 Aforesaid Report being an entry in the course of business is prima facie evidence of the facts therein stated. Private respondent, apart from his testimony, did not offer any controverting evidence. If indeed PAL omitted to give information about the options available to its diverted passengers, it would have been deluged with complaints. But, only private respondent complained "Atty. Rivera (for PAL) Q. I understand from you Mr. Zapatos that at the time you were waiting at Cotabato Airport for the decision of PAL, you were not informed of that decision until after the airplane left is that correct? A. Yes.

COURT: Q. What do you mean by "yes"? You meant you were not informed?

A. Q. A.

Yes, I was not informed of their decision, that they will only accommodate few passengers. Aside from you there were many other stranded passengers? I believed, yes.

Q. And you want us to believe that PAL did not explain (to) any of these passengers about the decision regarding those who will board the aircraft back to Cebu? A. Q. A. Q. A. No, Sir. Despite these facts Mr. Zapatos did any of the other passengers complained (sic) regarding that incident? There were plenty of arguments and I was one of those talking about my case. Did you hear anybody complained (sic) that he has not been informed of the decision before the plane left for Cebu? No." 25

Admittedly, private respondent's insistence on being given priority in accommodation was unreasonable considering the fortuitous event and that there was a sequence to be observed in the booking, i.e., in the order the passengers checked-in at their port of origin. His intransigence in fact was the main cause for his having to stay at the airport longer than was necessary "Atty. Rivera:

Q. And, you were saying that despite the fact that according to your testimony there were at least 16 passengers who were stranded there in Cotabato airport according to your testimony, and later you said that there were no other people left there at that time, is that correct? A. Q. A. Yes, I did not see anyone there around. I think I was the only civilian who was left there. Why is it that it took you long time to leave that place? Because I was arguing with the PAL personnel." 26

Anent the plaint that PAL employees were disrespectful and inattentive toward private respondent, the records are bereft of evidence to support the same. Thus, the ruling of respondent Court of Appeals in this regard is without basis. 27 On the contrary, private respondent was attended to not only by the personnel of PAL but also by its Manager. 28 In the light of these findings, we find the award of moral damages of Fifty Thousand Pesos (P50,000.00) unreasonably excessive; hence, we reduce the same to Ten Thousand Pesos (P10,000.00). Conformably herewith, the award of exemplary damages is also reduced to Five Thousand Pesos (P5,000.00). Moral damages are not intended to enrich the private respondent. They are awarded only to enable the injured party to obtain means, diversion or amusements that will serve to alleviate the moral suffering he has undergone by reason of the defendant's culpable action. 29 With regard to the award of actual damages in the amount of P5,000.00 representing private respondent's alleged business losses occasioned by his stay at Cotabato City, we find the same unwarranted. Private respondent's testimony that he had a scheduled business "transaction of shark liver oil supposedly to have been consummated on August 3, 1975 in the morning" and that "since (private respondent) was out for nearly two weeks I missed to buy about 10 barrels of shark liver oil," 30 are purely speculative. Actual or compensatory damages cannot be presumed but must be duly proved with reasonable degree of certainty. A court cannot rely on speculation, conjecture or guesswork as to the fact and amount of damages, but must depend upon competent proof that they have suffered and on evidence of the actual amount thereof. 31 WHEREFORE the decision appealed from is AFFIRMED with modification however that the award of moral damages of Fifty Thousand Pesos (P50,000.00) is reduced to Ten Thousand Pesos (P10,000.00) while the exemplary damages of Ten Thousand Pesos (P10,000.00) is also reduced to Five Thousand Pesos (P5,000.00). The award of actual damages in the amount Five Thousand Pesos (P5,000.00) representing business losses occasioned by private respondent's being stranded in Cotabato City is deleted. SO ORDERED.

THIRD DIVISION [G.R. No. 85691. July 31, 1990.] BACHELOR EXPRESS, INCORPORATED, and CRESENCIO RIVERA, petitioners, vs. THE HONORABLE COURT OF APPEALS (Sixth Division), RICARDO BETER, SERGIA BETER, TEOFILO RAUTRAUT and ZOETERA RAUTRAUT, respondents. Aquino W. Gambe for petitioners. Tranquilino O. Calo, Jr. for private respondents. DECISION GUTIERREZ, JR., J p: This is a petition for review of the decision of the Court of Appeals which reversed and set aside the order of the Regional Trial Court, Branch I, Butuan City dismissing the private respondents' complaint for collection of "a sum of money" and finding the petitioners solidarily liable for damages in the total amount of One Hundred Twenty Thousand Pesos (P120,000.00). The petitioners also question the appellate court's resolution denying a motion for reconsideration. On August 1, 1980, Bus No. 800 owned by Bachelor Express, Inc. and driven by Cresencio Rivera was the situs of a stampede which resulted in the death of passengers Ornominio Beter and Narcisa Rautraut.

The evidence shows that the bus came from Davao City on its way to Cagayan de Oro City passing Butuan City; that while at TabonTabon, Butuan City, the bus picked up a passenger; that about fifteen (15) minutes later, a passenger at the rear portion suddenly stabbed a PC soldier which caused commotion and panic among the passengers; that when the bus stopped, passengers Ornominio Beter and Narcisa Rautraut were found lying down the road, the former already dead as a result of head injuries and the latter also suffering from severe injuries which caused her death later. The passenger-assailant alighted from the bus and ran toward the bushes but was killed by the police. Thereafter, the heirs of Ornomino Beter and Narcisa Rautraut, private respondents herein (Ricardo Beter and Sergia Beter are the parents of Ornominio while Teofilo Rautraut and Zoetera [should be Zotera] Rautraut are the parents of Narcisa) filed a complaint for "sum of money" against Bachelor Express, Inc. its alleged owner Samson Yasay, and the driver Rivera. In their answer, the petitioners denied liability for the death of Ornominio Beter and Narcisa Rautraut. They alleged that ". . . the driver was able to transport his passengers safely to their respective places of destination except Ornominio Beter and Narcisa Rautraut who jumped off the bus without the knowledge and consent, much less, the fault of the driver and conductor and the defendants in this case; the defendant corporation had exercised due diligence in the choice of its employees to avoid as much as possible accidents; the incident on August 1, 1980 was not a traffic accident or vehicular accident, it was an incident or event very much beyond the control of the defendants; defendants were not parties to the incident complained of as it was an act of a third party who is not in any way connected with the defendants and of which the latter have no control and supervision; . . ." (Rollo, pp. 112113). After due trial, the trial court issued an order dated August 8, 1985 dismissing the complaint. LibLex Upon appeal however, the trial court's decision was reversed and set aside. The dispositive portion of the decision of the Court of Appeals states: "WHEREFORE, the Decision appealed from is REVERSED and SET ASIDE and a new one entered finding the appellees jointly and solidarily liable to pay the plaintiffs-appellants the following amounts: 1) To the heirs of Ornominio Beter, the amount of Seventy Five Thousand Pesos (P75,000.00) in loss of earnings and support, moral damages, straight death indemnity and attorney's fees; and, 2) To the heirs of Narcisa Rautraut, the amount of Forty Five Thousand Pesos (P45,000.00) for straight death indemnity, moral damages and attorney's fees. Costs against appellees." (Rollo, pp. 71-72) The petitioners now pose the following questions: "What was the proximate cause of the whole incident? Why were the passengers on board the bus panicked (sic) and why were they shoving one another? Why did Narcisa Rautraut and Ornominio Beter jump off from the running bus?" The petitioners opine that answers to these questions are material to arrive at "a fair, just and equitable judgment." (Rollo, p. 5) They claim that the assailed decision is based on a misapprehension of facts and its conclusion is grounded on speculation, surmises or conjectures. As regards the proximate cause of the death of Ornominio Beter and Narcisa Rautraut, the petitioners maintain that it was the act of the passenger who ran amuck and stabbed another passenger of the bus. They contend that the stabbing incident triggered off the commotion and panic among the passengers who pushed one another and that "presumably out of fear and moved by that human instinct of self-preservation Beter and Rautraut jumped off the bus while the bus was still running resulting in their untimely death.' (Rollo, p. 6) Under these circumstances, the petitioners asseverate that they were not negligent in the performance of their duties and that the incident was completely and absolutely attributable to a third person, the passenger who ran amuck, for without his criminal act, Beter and Rautraut could not have been subjected to fear and shock which compelled them to jump off the running bus. They argue that they should not be made liable for damages arising from acts of third persons over whom they have no control or supervision. Furthermore, the petitioners maintain that the driver of the bus, before, during and after the incident was driving cautiously giving due regard to traffic rules, laws and regulations. The petitioners also argue that they are not insurers of their passengers as ruled by the trial court. The liability, if any, of the petitioners is anchored on culpa contractual or breach of contract of carriage. The applicable provisions of law under the New Civil Code are as follows: "ART. 1732. Common carriers are persons, corporations, firms or associations engaged in the business of carrying or transporting passengers or goods or both by land, water, or air, for compensation, offering their services to the public. "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. xxx xxx xxx

"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." There is no question that Bachelor Express, Inc. is a common carrier. Hence, from the nature of its business and for reasons of public policy Bachelor Express, Inc. is bound to carry its passengers safely as far as human care and foresight can provide using the utmost diligence of very cautious persons, with a due regard for all the circumstances. In the case at bar, Ornominio Beter and Narcisa Rautraut were passengers of a bus belonging to petitioner Bachelor Express, Inc. and, while passengers of the bus, suffered injuries which caused their death. Consequently, pursuant to Article 1756 of the Civil Code, petitioner Bachelor Express, Inc. is presumed to have acted negligently unless it can prove that it had observed extraordinary diligence in accordance with Articles 1733 and 1755 of the New Civil Code. Bachelor Express, Inc. denies liability for the death of Beter and Rautraut on its posture that the death of the said passengers was caused by a third person who was beyond its control and supervision. In effect, the petitioner, in order to overcome the presumption of fault or negligence under the law, states that the vehicular incident resulting in the death of passengers Beter and Rautraut was caused by force majeure or caso fortuito over which the common carrier did not have any control. Article 1174 of the present Civil Code states: "Except in cases expressly specified by law, or when it is otherwise declared by stipulations, or when the nature of the obligation requires the assumption of risk, no person shall be responsible for those events which could not be foreseen, or which though foreseen, were inevitable." The above - mentioned provision was substantially copied from Article 1105 of the old Civil Code which states" "No one shall be liable for events which could not be foreseen or which, even if foreseen, were inevitable, with the exception of the cases in which the law expressly provides otherwise and those in which the obligation itself imposes liability." In the case of Lasam v. Smith (45 Phil. 657 [1924]), we defined "events" which cannot be foreseen and which, having been foreseen, are inevitable in the following manner: ". . . The Spanish authorities regard the language employed as an effort to define the term 'caso fortuito' and hold that the two expressions are synonymous. (Manresa Comentarios al Codigo Civil Espaol, vol. 8, pp. 88 et seq.; Scaevola, Codigo Civil, vol. 19, pp. 526 et seq.) The antecedent to Article 1105 is found in Law II, Title 33, Partida 7, which defines caso fortuito as 'ocasion que acaese por aventura de que non se puede ante ver. E son estos, derrivamientos de casas e fuego que enciende a so ora, e quebrantamiento de navio, fuerca de ladrones.' (An event that takes place by incident and could not have been foreseen. Examples of this are destruction of houses, unexpected fire, shipwreck, violence of robbers. . . .) Escriche defines caso fortuito as an unexpected event or act of God which could neither be foreseen nor resisted, such as floods, torrents, shipwrecks, conflagrations, lightning, compulsion, insurrections, destruction of buildings by unforeseen accidents and other occurrences of a similar nature. In discussing and analyzing the term caso fortuito the Enciclopedia Juridica Espaola says: 'In a legal sense and, consequently, also in relation to contracts, a caso fortuito presents the following essential characteristics: (1 ) The cause of the unforeseen and unexpected occurrence, or of the failure of the debtor to comply with his obligation, must be independent of the human will. (2) 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. (3) The occurrence must be such as to render it impossible for the debtor to fulfill his obligation in a normal manner. And (4) the obligor (debtor) must be free from any participation in the aggravation of the injury resulting to the creditor. (5 Enciclopedia Juridica Espaola, 309) As will be seen, these authorities agree that some extraordinary circumstance independent of the will of the obligor, or of his employees, is an essential element of a caso fortuito. . . ." The running amuck of the passenger was the proximate cause of the incident as it triggered off a commotion and panic among the passengers such that the passengers started running to the sole exit shoving each other resulting in the falling off the bus by passengers Beter and Rautraut causing them fatal injuries. The sudden act of the passenger who stabbed another passenger in the bus is within the context of force majeure. However, in order that a common carrier may be absolved from liability in case of force majeure, it is not enough that the accident was caused by force majeure. The common carrier must still prove that it was not negligent in causing the injuries resulting from such accident. Thus, as early as 1912, we ruled: "From all the foregoing, it is concluded that the defendant is not liable for the loss and damage of the goods shipped on the lorcha Pilar by the Chinaman, Ong Bien Sip, inasmuch as such loss and damage were the result of a fortuitous event or force majeure, and there was no negligence or lack of care and diligence on the part of the defendant company or its agents." (Tan Chiong Sian v. Inchausti & Co., 22 Phil. 152 [1912] Emphasis supplied).

This principle was reiterated in a more recent case, Batangas Laguna Tayabas Co. v. Intermediate Appellate Court (167 SCRA 379 [1988]), wherein we ruled: ". . . [F]or their defense of force majeure or act of God to prosper the accident must be due to natural causes and exclusively without human intervention." (Emphasis supplied) Therefore, the next question to be determined is whether or not the petitioner's common carrier observed extraordinary diligence to safeguard the lives of its passengers. In this regard the trial court and the appellate court arrived at conflicting factual findings. The trial court found the following facts: "The parties presented conflicting evidence as to how the two deceased Narcisa Rautruat and Ornominio Beter met their deaths. However, from the evidence adduced by the plaintiffs, the Court could not see why the two deceased could have fallen off the bus when their own witnesses testified that when the commotion ensued inside the bus, the passengers pushed and shoved each other towards the door apparently in order to get off from the bus through the door. But the passengers also could not pass through the door because according to the evidence the door was locked. On the other hand, the Court is inclined to give credence to the evidence adduced by the defendants that when the commotion ensued inside the bus, the two deceased panicked and, in state of shock and fear, they jumped off from the bus by passing through the window. prcd It is the prevailing rule and settled jurisprudence that transportation companies are not insurers of their passengers. The evidence on record does not show that defendants' personnel were negligent in their duties. The defendants' personnel have every right to accept passengers absent any manifestation of violence or drunkenness. If and when such passengers harm other passengers without the knowledge of the transportation company's personnel, the latter should not be faulted." (Rollo, pp. 46-47) A thorough examination of the records, however, show that there are material facts ignored by the trial court which were discussed by the appellate court to arrive at a different conclusion. These circumstances show that the petitioner common carrier was negligent in the provision of safety precautions so that its passengers may be transported safely to their destinations. The appellate court states: LibLex "A critical eye must be accorded the lower court's conclusions of fact in its tersely written ratio decidendi. The lower court concluded that the door of the bus was closed; secondly, the passengers, specifically the two deceased, jumped out of the window. The lower court therefore concluded that the defendant common carrier is not liable for the death of the said passengers which it implicitly attributed to the unforeseen acts of the unidentified passenger who went amuck. There is nothing in the record to support the conclusion that the solitary door of the bus was locked as to prevent the passengers from passing through. Leonila Cullano, testifying for the defense, clearly stated that the conductor opened the door when the passengers were shouting that the bus stop while they were in a state of panic. Sergia Beter categorically stated that she actually saw her son fall from the bus as the door was forced open by the force of the onrushing passengers. Pedro Collango, on the other hand, testified that he shut the door after the last passenger had boarded the bus. But he had quite conveniently neglected to say that when the passengers had panicked, he himself panicked and had gone to open the door. Portions of the testimony of Leonila Cullano, quoted below, are illuminating: 'xxx Q A Q A xxx xxx xxx

When you said the conductor opened the door, the door at the front or rear portion of the bus? Front door. And these two persons whom you said alighted, where did they pass, the fron(t) door or rear door? Front door. xxx xxx

(Tsn., p. 4, Aug. 8, 1984) xxx Q xxx xxx

What happened after there was a commotion at the rear portion of the bus?

A When the commotion occurred, I stood up and I noticed that there was a passenger who was sounded (sic). The conductor panicked because the passengers were shouting 'stop, stop'. The conductor opened the bus.'" (Tsn., p. 3, August 8, 1984).

Accordingly, there is no reason to believe that the deceased passengers jumped from the window when it was entirely possible for them to have alighted through the door. The lower court's reliance on the testimony of Pedro Collango, as the conductor and employee of the common carrier, is unjustified, in the light of the clear testimony of Leonila Cullano as the sole uninterested eyewitness of the entire episode. Instead we find Pedro Collango's testimony to be infused by bias and fraught with inconsistencies, if not notably unreliable for lack of veracity. On direct examination, he testified: xxx Q A xxx xxx

So what happened to the passengers inside your bus? Some of the passengers jumped out of the window.

COURT: Q A While the bus was in motion? Yes, your Honor, but the speed was slow because we have just picked up a passenger.

Atty. Gambe: Q You said that at the time of the incident the bus was running slow because you have just picked up a passenger. Can you estimate what was your speed at that time?. Atty. Calo: No basis, your Honor, he is neither a driver nor a conductor. COURT: Let the witness answer. Estimate only, the conductor experienced. Witness: Not less than 30 to 40 miles. COURT: Kilometers or miles? A Miles.

Atty. Gambe: Q A That is only your estimate by your experience? Yes, sir, estimate.

(Tsn., pp. 4-5, Oct. 17, 1983). At such speed of not less than 30 to 40 miles . . ., or about 48 to 65 kilometers per hour, the speed of the bus could scarcely be considered slow considering that according to Collango himself, the bus had just come from a full stop after picking a passenger (Tsn, p. 4, id.) and that the bus was still on its second or third gear (Tsn., p. 12, id.). In the light of the foregoing, the negligence of the common carrier, through its employees, consisted of the lack of extraordinary diligence required of common carriers, in exercising vigilance and utmost care of the safety of its passengers, exemplified by the driver's belated stop and the reckless opening of the doors of the bus while the same was travelling at an appreciably fast speed. At the same time, the common carrier itself acknowledged, through its administrative officer, Benjamin Granada, that the bus was commissioned to travel and take on passengers and the public at large, while equipped with only a solitary door for a bus its size and loading capacity, in contravention of rules and regulations provided for under the Land Transportation and Traffic Code (RA 4136 as amended.)" (Rollo, pp. 23-26) Considering the factual findings of the Court of Appeals the bus driver did not immediately stop the bus at the height of the commotion; the bus was speeding from a full stop; the victims fell from the bus door when it was opened or gave way while the bus was still running; the conductor panicked and blew his whistle after people had already fallen off the bus; and the bus was not properly equipped with doors in accordance with law it is clear that the petitioners have failed to overcome the presumption of fault and negligence found in the law governing common carriers.The petitioners' argument that the petitioners "are not insurers of their passengers" deserves no merit in view of the failure of the petitioners to prove that the deaths of the two passengers were exclusively due to force majeure and not to the failure of the petitioners to observe extraordinary diligence

in transporting safely the passengers to their destinations as warranted by law. (See Batangas Laguna Tayabas Co. v. Intermediate Appellate Court, supra). The petitioners also contend that the private respondents failed to show to the court that they are the parents of Ornominio Beter and Narcisa Rautraut respectively and therefore have no legal personality to sue the petitioners. This argument deserves scant consideration. We find this argument a belated attempt on the part of the petitioners to avoid liability for the deaths of Beter and Rautraut. The private respondents were identified as the parents of the victims by witnesses during the trial and the trial court recognized them as such. The trial court dismissed the complaint solely on the ground that the petitioners were not negligent. Finally, the amount of damages awarded to the heirs of Beter and Rautraut by the appellate court is supported by the evidence. The appellate court stated: prLL "Ornominio Beter was 32 years of age at the time of his death, single, in good health and rendering support and service to his mother. As far as Narcisa Rautraut is concerned, the only evidence adduced is to the effect that at her death, she was 23 years of age, in good health and without visible means of support. In accordance with Art. 1764 in conjunction with Art. 2206 of the Civil Code, and established jurisprudence, several factors may be considered in determining the award of damages, namely: 1) life expectancy (considering the state of health of the deceased and the mortality tables are deemed conclusive) and loss of earning capacity; (2) pecuniary loss, loss of support and service; and (3) moral and mental suffering (Alcantara, et el. v. Surro, et al., 93 Phil. 470). In the case of People v. Daniel (No. L-66551, April 25, 1985, 136 SCRA 92, at page 104), the High Tribunal, reiterating the rule in Villa Rey Transit, Inc. v. Court of Appeals (31 SCRA 511), stated that the amount of loss of earning capacity is based mainly on two factors, namely, (1) the number of years on the basis of which the damages shall be computed; and (2) the rate at which the losses sustained by the heirs should be fixed. As the formula adopted in the case of Davila v. Philippine Air Lines, 49 SCRA 497, at the age of 30 one's normal life expectancy is 33 1/3 years based on the American Expectancy Table of Mortality (2/3 x 80-32). By taking into account the pace and nature of the life of a carpenter, it is reasonable to make allowances for these circumstances and reduce the life expectancy of the deceased Ornominio Beter to 25 years (People v. Daniel, supra). To fix the rate of losses it must be noted that Art. 2206 refers to gross earnings less necessary living expenses of the deceased, in other words, only net earnings are to be considered (People v. Daniel, supra; Villa Rey Transit, Inc. v. Court of Appeals, supra). Applying the foregoing rules with respect to Ornominio Beter, it is both just and reasonable, considering his social standing and position, to fix the deductible, living and incidental expenses at the sum of Four Hundred Pesos (P400.00) a month, or Four Thousand Eight Hundred Pesos (P4,800.00) annually. As to his income, considering the irregular nature of the work of a daily wage carpenter which is seasonal, it is safe to assume that he shall have worked for twenty (20) days a month at Twenty Five Pesos (P25.00) a day or Five Hundred Pesos (P500.00) a month. Annually, his income would amount to Six Thousand Pesos (P6,000.00) or One Hundred Fifty Thousand Pesos (P150,000.00) for twenty five years. Deducting therefrom his necessary expenses, his heirs would be entitled to Thirty Thousand Pesos (P30,000.00) representing loss of support and service (P150,000.00 less P120,000.00). In addition, his heirs are entitled to Thirty Thousand Pesos (P30,000.00) as straight death indemnity pursuant to Article 2206 (People v. Daniel, supra). For damages for their moral and mental anguish, his heirs are entitled to the reasonable sum of P10,000.00 as an exception to the general rule against moral damages in case of breach of contract rule Art. 2200 (Necesito v. Paras, 104 Phil. 75). As attorney's fees, Beter's heirs are entitled to P5,000.00. All in all, the plaintiff-appellants Ricardo and Sergia Beter as heirs of their son Ornominio are entitled to an indemnity of Seventy Five Thousand Pesos (P75,000.00). cdphil In the case of Narcisa Rautraut, her heirs are entitled to a straight death indemnity of Thirty Thousand Pesos (P30,000.00), to moral damages in the amount of Ten Thousand Pesos (P10,000.00) and Five Thousand Pesos (P5,000.00) as attorneys fees, or a total of Forty Five Thousand Pesos (P45,000.00) as total indemnity for her death in the absence of any evidence that she had visible means of support." (Rollo, pp. 30-31) WHEREFORE, the instant petition is DISMISSED. The questioned decision dated May 19, 1988 and the resolution dated August 1, 1988 of the Court of Appeals are AFFIRMED. SO ORDERED.

SECOND DIVISION [G.R. No. 111127. July 26, 1996.] MR. & MRS. ENGRACIO FABRE, JR. * and PORFIRIO CABIL, petitioners, vs. COURT OF APPEALS, THE WORD FOR THE WORLD CHRISTIAN FELLOWSHIP, INC., AMYLINE ANTONIO, JOHN RICHARDS, GONZALO GONZALES, VICENTE V. QUE, JR., ICLI CORDOVA, ARLENE GOJOCO, ALBERTO ROXAS CORDERO, RICHARD BAUTISTA,

JOCELYN GARCIA, YOLANDA CORDOVA, NOEL ROQUE, EDWARD TAN, ERNESTO NARCISO, ENRIQUETA LOCSIN, FRANCIS NORMAN O. LOPEZ, JULIUS CAESAR GARCIA, ROSARIO MA. V. ORTIZ, MARIETTA C. CLAVO, ELVIE SENIEL, ROSARIO MARAMARA, TERESITA REGALA, MELINDA TORRES, MARELLA MIJARES, JOSEFA CABATINGAN, MARA NADOC, DIANE MAYO, TESS PLATA, MAYETTE JOCSON, ARLENE Y. MORTIZ, LIZA MAYO, CARLOS RANARIO, ROSAMARIA T. RADOC and BERNADETTE FERRER, respondents. Maria del Valle for petitioners. Eduardo Claudio II for private respondents. SYLLABUS 1. CIVIL LAW; TRANSPORTATION; COMMON CARRIERS; UNDER THE PRINCIPLE THAT "THE ACT THAT BREAKS THE CONTRACT MAY BE ALSO A TORT" PETITIONERS IN THE INSTANT CASES ARE JOINTLY AND SEVERALLY LIABLE FOR THE INJURIES SUFFERED BY THE PRIVATE RESPONDENT. First, it is unnecessary for our purpose to determine whether to decide this case on the theory that petitioners are liable for breach of contract of carriage or culpa contractual or on the theory of quasi delict or culpa aquiliana as both the Regional Trial Court and the Court of Appeals held, for although the relation of passenger and carrier is "contractual both in origin and nature," nevertheless "the act that breaks the contract may be also a tort." In either case, the question is whether the bus driver, petitioner Porfirio Cabil, was negligent. The finding that Cabil drove his bus negligently, while his employer, the Fabres, who owned the bus, failed to exercise the diligence of a good father of the family in the selection and supervision of their employee is fully supported by the evidence on record. These factual findings of the two courts we regard as final and conclusive, supported as they are by the evidence. Indeed, it was admitted by Cabil that on the night in question, it was raining, and, as a consequence, the road was slippery, and it was dark. He averred these facts to justify his failure to see that there lay a sharp curve ahead. However, it is undisputed that Cabil drove his bus at the speed of 50 kilometers per hour and only slowed down when he noticed the curve some 15 to 30 meters ahead. By then it was too late for him to avoid falling off the road. Given the conditions of the road and considering that the trip was Cabil's first one outside of Manila, Cabil should have driven his vehicle at a moderate speed. There is testimony that the vehicles passing on that portion of the road should only be running 20 kilometers per hour, so that at 50 kilometers per hour, Cabil was running at a very high speed. Considering the foregoing the fact that it was raining and the road was slippery, that it was dark, that he drove his bus at 50 kilometers an hour when even on a good day the normal speed was only 20 kilometers an hour, and that he was unfamiliar with the terrain, Cabil was grossly negligent and should be held liable for the injuries suffered by private respondent Amyline Antonio. 2. ID.; NEGLIGENCE OF AN EMPLOYEE GIVES RISE TO THE PRESUMPTION THAT HIS EMPLOYERS ARE THEMSELVES NEGLIGENT IN THE SELECTION AND SUPERVISION OF THEIR EMPLOYEE. Pursuant to Arts. 2176 and 2180 of the Civil Code his negligence gave rise to the presumption that his employers, the Fabres, were themselves negligent in the selection and supervision of their employee. Due diligence in selection of employees is not satisfied by finding that the applicant possessed a professional driver's license. The employer should also examine the applicant for his qualifications, experience and record of service. Due diligence in supervision, on the other hand, requires the formulation of rules and regulations for the guidance of employees and the issuance of proper instructions as well as actual implementation and monitoring of consistent compliance with the rules. 3. ID.; CONTRACT OF CARRIAGE; PETITIONERS DID NOT HAVE TO BE ENGAGED IN THE BUSINESS OF PUBLIC TRANSPORTATION FOR THE PROVISIONS OF THE CIVIL CODE ON COMMON CARRIERS TO APPLY TO THEM. This case actually involves a contract of carriage. Petitioners, the Fabres, did not have to be engaged in the business of public transportation for the provisions of the Civil Code on common carriers to apply to them. As this Court has held: Art. 1732. Common carriers are persons, corporations, firms or associations engaged in the business of carrying or transporting passengers or goods or both, by land, water, or air for compensation, offering their services to the public. The above article makes no distinction between one whose principal business activity is the carrying of persons or goods or both, and one who does such carrying only as an ancillary activity (in local idiom, as "a sideline"). Article 1732 also carefully avoids making any distinction between a person or enterprise offering transportation service on a regular or scheduled basis and one offering such service on an occasional, episodic or unscheduled basis. Neither does Article 1732 distinguish between a carrier offering its services to the "general public," i.e., the general community or population, and one who offers services or solicits business only from a narrow segment of the general population. We think that Article 1732 deliberately refrained from making such distinctions. 4. ID.; PETITIONER'S DUTY TO EXERCISE "EXTRAORDINARY DILIGENCE" IS NOT EXCUSED BY PROOF THAT THEY EXERCISE THE DILIGENCE OF A GOOD FATHER OF THE FAMILY IN THE SELECTION AND SUPERVISION OF THEIR EMPLOYEE. As common carriers, the Fabres were bound to exercise "extraordinary diligence" for the safe transportation of the passengers to their destination. This duty of care is not excused by proof that they exercised the diligence of a good father of the family in the selection and supervision of their employee. As Art. 1759 of the Code provides: Common carriers are liable for the death of or injuries to passengers through the negligence or wilful acts of the former's employees, although such employees may have acted beyond the scope of their authority or in violation of the orders of the common carriers. This liability of the common carriers does not cease upon proof that they exercised all the diligence of a good father of a family in the selection and supervision of their employees. 5. ID.; DAMAGES; COMPENSATORY DAMAGES; THE COURT OF APPEALS ERRED IN INCREASING THE AMOUNT OF COMPENSATORY DAMAGES BECAUSE PRIVATE RESPONDENT DID NOT QUESTION THIS AWARD AS INADEQUATE. We sustain the award of damages in favor of Amyline Antonio. However, we think the Court of Appeals erred in

increasing the amount of compensatory damages because private respondents did not question this award as inadequate. To the contrary, the award of P500,000.00 for compensatory damages which the Regional Trial Court made is reasonable considering the contingent nature of her income as a casual employee of a company and as distributor of beauty products and the fact that the possibility that she might be able to work again has not been foreclosed. In fact she testified that one of her previous employers had expressed willingness to employ her again. 6. ID.; MORAL DAMAGES; AWARD OF MORAL DAMAGES IN CASES OF QUASI DELICT IS ALLOWED BY ART. 2219(2); IN CASES OF BREACH OF CONTRACT OF CARRIAGE, THE AWARD OF MORAL DAMAGES IS AUTHORIZED BY ART. 1764 IN RELATION TO ART. 2220. Viewed as an action for quasi-delict, this case falls squarely within the purview of Art. 2219(2) providing for the payment of moral damages in cases of quasi delict. On the theory that petitioners are liable for breach of contract of carriage, the award of moral damages is authorized by Art. 1764, in relation to Art. 2220, since Cabil's gross negligence amounted to bad faith. Amyline Antonio's testimony, as well as the testimonies of her father and co-passengers, fully establish the physical suffering and mental anguish she endured as a result of the injuries caused by petitioners' negligence. 7. ID.; OWNERS AND DRIVER OF THE BUS MAY BE MADE JOINTLY AND SEVERALLY LIABLE FOR DAMAGES FOR INJURIES SUFFERED BY A PASSENGER. The question is whether, as the two courts below held, petitioners, who are the owners and driver of the bus, may be made to respond jointly and severally to private respondent. We hold that they may be. In Dangwa Trans. Co. Inc. v. Court of Appeals, 202 SCRA 574 (1991) on facts similar to those in this case, this Court held the bus company and the driver jointly and severally liable for damages for injuries suffered by a passenger. Again, in Bachelor Express, Inc. v. Court of Appeals, 188 SCRA 216 (1990) a driver found negligent in failing to stop the bus in order to let off passengers when a fellow passenger ran amuck, as a result of which the passengers jumped out of the speeding bus and suffered injuries, was held also jointly and severally liable with the bus company to the injured passengers. The same rule of liability was applied in situations where the negligence of the driver of the bus on which plaintiff was riding concurred with the negligence of a third party who was the driver of another vehicle, thus causing an accident. Nor should it make any difference that the liability of petitioner [bus owner] springs from contract while that of respondents [owner and driver of other vehicle] arises from quasi-delict. As early as 1913, we already ruled in Gutierrez vs. Gutierrez, 56 Phil. 177, that in case of injury to a passenger due to the negligence of the driver of the bus on which he was riding and of the driver of another vehicle, the drivers as well as the owners of the two vehicles are jointly and severally liable for damages. Some members of the Court, though, are of the view that under the circumstances they are liable on quasi-delict. DECISION MENDOZA, J p: This is a petition for review on certiorari of the decision of the Court of Appeals 1 in CA-GR No. 28245, dated September 30, 1992, which affirmed with modification the decision of the Regional Trial Court of Makati, Branch 58, ordering petitioners jointly and severally to pay damages to private respondent Amyline Antonio, and its resolution which denied petitioners' motion for reconsideration for lack of merit. Petitioners Engracio Fabre, Jr. and his wife were owners of a 1982 model Mazda minibus. They used the bus principally in connection with a bus service for school children which they operated in Manila. The couple had a driver, Porfirio J. Cabil, whom they hired in 1981, after trying him out for two weeks. His job was to take school children to and from the St. Scholastica's College in Malate, Manila. On November 2, 1984 private respondent Word for the World Christian Fellowship Inc. (WWCF) arranged with petitioners for the transportation of 33 members of its Young Adults Ministry from Manila to La Union and back in consideration of which private respondent paid petitioners the amount of P3,000.00. The group was scheduled to leave on November 2, 1984, at 5:00 o'clock in the afternoon. However, as several members of the party were late, the bus did not leave the Tropical Hut at the corner of Ortigas Avenue and EDSA until 8:00 o'clock in the evening. Petitioner Porfirio Cabil drove the minibus. The usual route to Caba, La Union was through Carmen, Pangasinan. However, the bridge at Carmen was under repair, so that petitioner Cabil, who was unfamiliar with the area (it being his first trip to La Union), was forced to take a detour through the town of Ba-ay in Lingayen, Pangasinan. At 11:30 that night, petitioner Cabil came upon a sharp curve on the highway, running on a south to east direction, which he described as "siete." The road was slippery because it was raining, causing the bus, which was running at the speed of 50 kilometers per hour, to skid to the left road shoulder. The bus hit the left traffic steel brace and sign along the road and rammed the fence of one Jesus Escano, then turned over and landed on its left side, coming to a full stop only after a series of impacts. The bus came to rest off the road. A coconut tree which it had hit fell on it and smashed its front portion. Several passengers were injured. Private respondent Amyline Antonio was thrown on the floor of the bus and pinned down by a wooden seat which came off after being unscrewed. It took three persons to safely remove her from this position. She was in great pain and could not move. The driver, petitioner Cabil, claimed he did not see the curve until it was too late. He said he was not familiar with the area and he could not have seen the curve despite the care he took in driving the bus, because it was dark and there was no sign on the road. He said that he saw the curve when he was already within 15 to 30 meters of it. He allegedly slowed down to 30 kilometers per hour, but it was too late.

The Lingayen police investigated the incident the next day, November 3, 1984. On the basis of their finding they filed a criminal complaint against the driver, Porfirio Cabil. The case was later filed with the Lingayen Regional Trial Court. Petitioners Fabre paid Jesus Escano P1,500.00 for the damage to the latter's fence. On the basis of Escano's affidavit of desistance the case against petitioners Fabre was dismissed. Amyline Antonio, who was seriously injured, brought this case in the RTC of Makati, Metro Manila. As a result of the accident, she is now suffering from paraplegia and is permanently paralyzed from the waist down. During the trial she described the operations she underwent and adduced evidence regarding the cost of her treatment and therapy. Immediately after the accident, she was taken to the Nazareth Hospital in Ba-ay, Lingayen. As this hospital was not adequately equipped, she was transferred to the Sto. Nio Hospital, also in the town of Ba-ay, where she was given sedatives. An x-ray was taken and the damage to her spine was determined to be too severe to be treated there. She was therefore brought to Manila, first to the Philippine General Hospital and later to the Makati Medical Center where she underwent an operation to correct the dislocation of her spine. In its decision dated April 17, 1989, the trial court found that: No convincing evidence was shown that the minibus was properly checked for travel to a long distance trip and that the driver was properly screened and tested before being admitted for employment. Indeed, all the evidence presented have shown the negligent act of the defendants which ultimately resulted to the accident subject of this case. Accordingly, it gave judgment for private respondents holding: Considering that plaintiffs Word for the World Christian Fellowship, Inc. and Ms. Amyline Antonio were the only ones who adduced evidence in support of their claim for damages, the Court is therefore not in a position to award damages to the other plaintiffs. WHEREFORE, premises considered, the Court hereby renders judgment against defendants Mr. & Mrs. Engracio Fabre, Jr. and Porfirio Cabil y Jamil pursuant to articles 2176 and 2180 of the Civil Code of the Philippines and said defendants are ordered to pay jointly and severally to the plaintiffs the following amount: 1) 2) 3) 4) 5) 6) P93,657.11 as compensatory and actual damages; P500,000.00 as the reasonable amount of loss of earning capacity of plaintiff Amyline Antonio; P20,000.00 as moral damages; P20,000.00 as exemplary damages; and 25% of the recoverable amount as attorney's fees; Costs of suit.

SO ORDERED. The Court of Appeals affirmed the decision of the trial court with respect to Amyline Antonio but dismissed it with respect to the other plaintiffs on the ground that they failed to prove their respective claims. The Court of Appeals modified the award of damages as follows: 1) 2) 3) 4) 5) 6) P93,657.11 as actual damages; P600,000.00 as compensatory damages; P50,000.00 as moral damages; P20,000.00 as exemplary damages; P10,000.00 as attorney's fees; and Costs of suit.

The Court of Appeals sustained the trial court's finding that petitioner Cabil failed to exercise due care and precaution in the operation of his vehicle considering the time and the place of the accident. The Court of Appeals held that the Fabres were themselves presumptively negligent. Hence, this petition. Petitioners raise the following issues: I. II. III. WHETHER OR NOT PETITIONERS WERE NEGLIGENT. WHETHER OR NOT PETITIONERS WERE LIABLE FOR THE INJURIES SUFFERED BY PRIVATE RESPONDENTS. WHETHER OR NOT DAMAGES CAN BE AWARDED AND IN THE POSITIVE, UP TO WHAT EXTENT.

Petitioners challenge the propriety of the award of compensatory damages in the amount of P600,000.00. It is insisted that, on the assumption that petitioners are liable, an award of P600,000.00 is unconscionable and highly speculative. Amyline Antonio testified that she was a casual employee of a company called "Suaco," earning P1,650.00 a month, and a dealer of Avon products, earning an average of P1,000.00 monthly. Petitioners contend that as casual employees do not have security of tenure, the award of P600,000.00, considering Amyline Antonio's earnings, is without factual basis as there is no assurance that she would be regularly earning these amounts. With the exception of the award of damages, the petition is devoid of merit. First, it is unnecessary for our purpose to determine whether to decide this case on the theory that petitioners are liable for breach of contract of carriage or culpa contractual or on the theory of quasi delict or culpa aquiliana as both the Regional Trial Court and the Court of Appeals held, for although the relation of passenger and carrier is "contractual both in origin and nature," nevertheless "the act that breaks the contract may be also a tort." 2 In either case, the question is whether the bus driver, petitioner Porfirio Cabil, was negligent. The finding that Cabil drove his bus negligently, while his employer, the Fabres, who owned the bus, failed to exercise the diligence of a good father of the family in the selection and supervision of their employee is fully supported by the evidence on record. These factual findings of the two courts we regard as final and conclusive, supported as they are by the evidence. Indeed, it was admitted by Cabil that on the night in question, it was raining, and, as a consequence, the road was slippery, and it was dark. He averred these facts to justify his failure to see that there lay a sharp curve ahead. However, it is undisputed that Cabil drove his bus at the speed of 50 kilometers per hour and only slowed down when he noticed the curve some 15 to 30 meters ahead. 3 By then it was too late for him to avoid falling off the road. Given the conditions of the road and considering that the trip was Cabil's first one outside of Manila, Cabil should have driven his vehicle at a moderate speed. There is testimony 4 that the vehicles passing on that portion of the road should only be running 20 kilometers per hour, so that at 50 kilometers per hour, Cabil was running at a very high speed. Considering the foregoing the fact that it was raining and the road was slippery, that it was dark, that he drove his bus at 50 kilometers an hour when even on a good day the normal speed was only 20 kilometers an hour, and that he was unfamiliar with the terrain, Cabil was grossly negligent and should be held liable for the injuries suffered by private respondent Amyline Antonio. Pursuant to Arts. 2176 and 2180 of the Civil Code his negligence gave rise to the presumption that his employers, the Fabres, were themselves negligent in the selection and supervision of their employee. Due diligence in selection of employees is not satisfied by finding that the applicant possessed a professional driver's license. The employer should also examine the applicant for his qualifications, experience and record of service. 5 Due diligence in supervision, on the other hand, requires the formulation of rules and regulations for the guidance of employees and the issuance of proper instructions as well as actual implementation and monitoring of consistent compliance with the rules. 6 In the case at bar, the Fabres, in allowing Cabil to drive the bus to La Union, apparently did not consider the fact that Cabil had been driving for school children only, from their homes to the St. Scholastica's College in Metro Manila. 7 They had hired him only after a two-week apprenticeship. They had tested him for certain matters, such as whether he could remember the names of the children he would be taking to school, which were irrelevant to his qualification to drive on a long distance travel, especially considering that the trip to La Union was his first. The existence of hiring procedures and supervisory policies cannot be casually invoked to overturn the presumption of negligence on the part of an employer. 8 Petitioners argue that they are not liable because (1) an earlier departure (made impossible by the congregation's delayed meeting) could have averted the mishap and (2) under the contract, the WWCF was directly responsible for the conduct of the trip. Neither of these contentions hold water. The hour of departure had not been fixed. Even if it had been, the delay did not bear directly on the cause of the accident. With respect to the second contention, it was held in an early case that: [A] person who hires a public automobile and gives the driver directions as to the place to which he wishes to be conveyed, but exercises no other control over the conduct of the driver, is not responsible for acts of negligence of the latter or prevented from recovering for injuries suffered from a collision between the automobile and a train, caused by the negligence either of the locomotive engineer or the automobile driver. 9 As already stated, this case actually involves a contract of carriage. Petitioners, the Fabres, did not have to be engaged in the business of public transportation for the provisions of the Civil Code on common carriers to apply to them. As this Court has held: 10 Art. 1732. Common carriers are persons, corporations, firms or associations engaged in the business of carrying or transporting passengers or goods or both, by land, water, or air for compensation, offering their services to the public. The above article makes no distinction between one whose principal business activity is the carrying of persons or goods or both, and one who does such carrying only as an ancillary activity (in local idiom, as "a sideline"). Article 1732 also carefully avoids making any distinction between a person or enterprise offering transportation service on a regular or scheduled basis and one offering such service on an occasional, episodic or unscheduled basis. Neither does Article 1732 distinguish between a carrier offering its services to the "general public," i.e., the general community or population, and one who offers services or solicits business only from a narrow segment of the general population. We think that Article 1732 deliberately refrained from making such distinctions.As common

carriers, the Fabres were bound to exercise "extraordinary diligence" for the safe transportation of the passengers to their destination. This duty of care is not excused by proof that they exercised the diligence of a good father of the family in the selection and supervision of their employee. As Art. 1759 of the Code provides: Common carriers are liable for the death of or injuries to passengers through the negligence or wilful acts of the former's employees, although such employees may have acted beyond the scope of their authority or in violation of the orders of the common carriers. This liability of the common carriers does not cease upon proof that they exercised all the diligence of a good father of a family in the selection and supervision of their employees. The same circumstances detailed above, supporting the finding of the trial court and of the appellate court that petitioners are liable under Arts. 2176 and 2180 for quasi delict, fully justify finding them guilty of breach of contract of carriage under Arts. 1733, 1755 and 1759 of the Civil Code. Secondly, we sustain the award of damages in favor of Amyline Antonio. However, we think the Court of Appeals erred in increasing the amount of compensatory damages because private respondents did not question this award as inadequate. 11 To the contrary, the award of P500,000.00 for compensatory damages which the Regional Trial Court made is reasonable considering the contingent nature of her income as a casual employee of a company and as distributor of beauty products and the fact that the possibility that she might be able to work again has not been foreclosed. In fact she testified that one of her previous employers had expressed willingness to employ her again. With respect to the other awards, while the decisions of the trial court and the Court of Appeals do not sufficiently indicate the factual and legal basis for them, we find that they are nevertheless supported by evidence in the records of this case. Viewed as an action for quasi delict, this case falls squarely within the purview of Art. 2219(2) providing for the payment of moral damages in cases of quasi delict. On the theory that petitioners are liable for breach of contract of carriage, the award of moral damages is authorized by Art. 1764, in relation to Art. 2220, since Cabil's gross negligence amounted to bad faith. 12 Amyline Antonio's testimony as well as the testimonies of her father and co-passengers, fully establish the physical suffering and mental anguish she endured as a result of the injuries caused by petitioners' negligence. The award of exemplary damages and attorney's fees was also properly made. However, for the same reason that it was error for the appellate court to increase the award of compensatory damages, we hold that it was also error for it to increase the award of moral damages and reduce the award of attorney's fees, inasmuch as private respondents, in whose favor the awards were made, have not appealed. 13 As above stated, the decision of the Court of Appeals can be sustained either on the theory of quasi delict or on that of breach of contract. The question is whether, as the two courts below held, petitioners, who are the owners and driver of the bus, may be made to respond jointly and severally to private respondent. We hold that they may be. In Dangwa Trans. Co. Inc. v. Court of Appeals, 14 on facts similar to those in this case, this Court held the bus company and the driver jointly and severally liable for damages for injuries suffered by a passenger. Again, in Bachelor Express, Inc. v. Court of Appeals 15 a driver found negligent in failing to stop the bus in order to let off passengers when a fellow passenger ran amuck, as a result of which the passengers jumped out of the speeding bus and suffered injuries, was held also jointly and severally liable with the bus company to the injured passengers. The same rule of liability was applied in situations where the negligence of the driver of the bus on which plaintiff was riding concurred with the negligence of a third party who was the driver of another vehicle, thus causing an accident. In Anuran v. Buo, 16 Batangas Laguna Tayabas Bus Co. v. Intermediate Appellate Court, 17 and Metro Manila Transit Corporation v. Court of Appeals, 18 the bus company, its driver, the operator of the other vehicle and the driver of the vehicle were jointly and severally held liable to the injured passenger or the latter's heirs. The basis of this allocation of liability was explained in Viluan v. Court of Appeals, 19 thus: Nor should it make any difference that the liability of petitioner [bus owner] springs from contract while that of respondents [owner and driver of other vehicle] arises from quasi-delict. As early as 1913, we already ruled in Gutierrez vs. Gutierrez, 56 Phil. 177, that in case of injury to a passenger due to the negligence of the driver of the bus on which he was riding and of the driver of another vehicle, the drivers as well as the owners of the two vehicles are jointly and severally liable for damages. Some members of the Court, though, are of the view that under the circumstances they are liable on quasi-delict. 20 It is true that in Philippine Rabbit Bus Lines, Inc. v. Court of Appeals 21 this Court exonerated the jeepney driver from liability to the injured passengers and their families while holding the owners of the jeepney jointly and severally liable, but that is because that case was expressly tried and decided exclusively on the theory of culpa contractual. As this Court there explained: The trial court was therefore right in finding that Manalo [the driver] and spouses Mangune and Carreon [the jeepney owners] were negligent. However, its ruling that spouses Mangune and Carreon are jointly and severally liable with Manalo is erroneous. The driver cannot be held jointly and severally liable with the carrier in case of breach of the contract of carriage. The rationale behind this is readily discernible. Firstly, the contract of carriage is between the carrier and the passenger, and in the event of contractual liability, the carrier is exclusively responsible therefore to the passenger, even if such breach be due to the negligence of his driver (see Viluan v. The Court of Appeals, et al., G.R. Nos. L-21477-81, April 29, 1966, 16 SCRA 742) . . . 22

As in the case of BLTB, private respondents in this case and her co-plaintiffs did not stake out their claim against the carrier and the driver exclusively on one theory, much less on that of breach of contract alone. After all, it was permitted for them to allege alternative causes of action and join as many parties as may be liable on such causes of action 23 so long as private respondent and her coplaintiffs do not recover twice for the same injury. What is clear from the cases is the intent of the plaintiff there to recover from both the carrier and the driver, thus justifying the holding that the carrier and the driver were jointly and severally liable because their separate and distinct acts concurred to produce the same injury. WHEREFORE, the decision of the Court of Appeals is AFFIRMED with MODIFICATION as to the award of damages. Petitioners are ORDERED to PAY jointly and severally the private respondent Amyline Antonio the following amounts: 1) 2) 3) 4) 5) 6) P93, 657.11 as actual damages; P500,000.00 as the reasonable amount of loss of earning capacity of plaintiff Amyline Antonio; P20,000.00 as moral damages; P20,000.00 as exemplary damages; 25% of the recoverable amount as attorney's fees; and costs of suit.

SO ORDERED. Regalado, Romero, Puno, and Torres, Jr., JJ ., concur.

SECOND DIVISION [G.R. No. 116110. May 15, 1996.] BALIWAG TRANSIT, INC., petitioner, vs. COURT OF APPEALS, SPOUSES ANTONIO GARCIA & LETICIA GARCIA, A & J TRADING, AND JULIO RECONTIQUE, respondents. Leopoldo C. Sta. Maria for Baliwag Transit, Inc. Arturo D. Vallar for Sps. Antonio & Leticia Garcia. Allan A. Leynes for A&J Trading and Julio Recontique. SYLLABUS 1. CIVIL LAW; CONTRACTS; SPECIAL CONTRACTS; COMMON CARRIERS; LIABILITY FOR DAMAGES; ESTABLISHED IN CASE AT BAR. As a common carrier, Baliwag breached its contract of carriage when it failed to deliver its passengers, Leticia and Allan Garcia to their destination safe and sound. A common carrier is bound to carry its passengers safely as far as human care and foresight can provide, using the utmost diligence of a very cautious person, with due regard for all the circumstances. In a contract of carriage, it is presumed that the common carrier was at fault or was negligent when a passenger dies or is injured. Unless the presumption is rebutted, the court need not even make an express finding of fault or negligence on the part of the common carrier. This statutory presumption may only be overcome by evidence that the carrier exercised extraordinary diligence as prescribed in Articles 1733 and 1755 of the Civil Code. The records are bereft of any proof to show that Baliwag exercised extraordinary diligence. On the contrary, the evidence demonstrates its driver's recklessness. Leticia Garcia testified that the bus was running at a very high speed despite the drizzle and the darkness of the highway. The passengers pleaded for its driver to slow down, but their plea was ignored. Leticia also revealed that the driver was smelling of liquor. She could smell him as she was seated right behind the driver. Another passenger, Felix Cruz testified that immediately before the collision, the bus driver was conversing with a

co-employee. All these prove the bus driver's wanton disregard for the physical safety of his passengers, which make Baliwag as a common carrier liable for damages under Article 1759 of the Civil Code. 2. ID.; ID.; ID.; ID.; LAND TRANSPORTATION AND TRAFFIC CODE; SECTION 34(g) THEREOF; SUBSTANTIALLY COMPLIED WITH IN CASE AT BAR. Baliwag cannot evade its liability by insisting that the accident was caused solely by the negligence of A & J Trading and Julio Recontique. It harps on their alleged non-use of early warning device as testified to by Col. Demetrio dela Cruz, the station commander of Gapan, Nueva Ecija who investigated the incident, and Francisco Romano, the bus conductor. The records do not bear out Baliwag's 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 Transportation Office. However, the evidence shows that Recontique and Ecala placed a kerosene lamp or torch at the edge of the road, near the rear portion of the truck to serve as an early warning device. This substantially complies with Section 34(g) of the Land Transportation and Traffic Code, to wit: "(g) lights and reflector when parked or disabled. Appropriate parking lights or flares visible one hundred meters away shall be displayed at the corner of the vehicle whenever such vehicle is parked on highways or in places that are not well-lighted or, is placed in such manner as to endanger passing traffic. Furthermore, every motor vehicle shall be provided at all times with built-in reflectors or other similar warning devices either pasted, painted or attached at its front and back which shall likewise be visible at night at least one hundred meters away. No vehicle not provided with any of the requirements mentioned in this subsection shall be registered." Baliwag's argument that the kerosene lamp or torch does not substantially comply with the law is untenable. The aforequoted law clearly allows the use not only of an early warning device of the triangular reflectorized plates variety but also parking lights or flares visible one hundred meters away. Indeed, Col. dela Cruz himself admitted that a kerosene lamp is an acceptable substitute for the reflectorized plates. No negligence, therefore, may be imputed to A & J Trading and its driver, Recontique. 3. ID.; DAMAGES; TO PROVE ACTUAL DAMAGES, THE BEST EVIDENCE AVAILABLE TO THE PARTIES MUST BE PRESENTED. The propriety of the amount awarded as hospitalization and medical fees. The award of P25,000.00 is not supported by the evidence on record. The Garcias presented receipts marked as Exhibits "B-1" to B-42" but their total amounted only to P5,017.74. To be sure, Leticia testified as to the extra amount spent for her medical needs but without more reliable evidence, her lone testimony cannot justify the award of P25,000.00. To proved actual damages, the best evidence available to the injured party must be presented. The court cannot rely on uncorroborated testimony whose truth is suspect, but must depend upon competent proof that damages have been actually suffered. Thus, we reduce the actual damages for medical and hospitalization expenses to P5,017.74. 4. ID.; ID.; MORAL DAMAGES; RECOVERABLE IF THE CARRIER THROUGH ITS AGENT, ACTED FRAUDULENTLY OR IN BAD FAITH. The award of moral damages is in accord with law. In a breach of contract of carriage, moral damages are recoverable if the carrier, through its agent, acted fraudulently or bad faith. The evidence shows the gross negligence of the driver of Baliwag bus which amounted to bad faith. Without doubt, Leticia and Allan experienced physical suffering, mental anguish and serious anxiety by reason of the accident. DECISION PUNO, J p: This is a petition for certiorari to review the Decision 1 of the Court of Appeals in CA-G.R. CV-31246 awarding damages in favor of the spouses Antonio and Leticia Garcia for breach of contract of carriage. 2 The records show that on July 31, 1980, Leticia Garcia, and her five-year old son, Allan Garcia, boarded Baliwag Transit Bus No. 2036 bound for Cabanatuan City driven by Jaime Santiago. They took the seat behind the driver. At about 7:30 in the evening, in Malimba, Gapan, Nueva Ecija, the bus passengers saw a cargo truck parked at the shoulder of the national highway. Its left rear portion jutted to the outer lane, as the shoulder of the road was too narrow to accommodate the whole truck. A kerosene lamp appeared at the edge of the road obviously to serve as a warning device. The truck driver, Julio Recontique, and his helper, Arturo Escala, were then replacing a flat tire. The truck is owned by respondent A & J Trading. Bus driver Santiago was driving at an inordinately fast speed and failed to notice the truck and the kerosene lamp at the edge of the road. Santiago's passengers urged him to slow down but he paid them no heed. Santiago even carried animated conversations with his co-employees while driving. When the danger of collision became imminent, the bus passengers shouted "Babangga tayo!". Santiago stepped on the brake, but it was too late. His bus rammed into the stalled cargo truck. It caused the instant death of Santiago and Escala, and injury to several others. Leticia and Allan Garcia were among the injured passengers. Leticia suffered a fracture in her pelvis and right leg. They rushed her to the provincial hospital in Cabanatuan City where she was given emergency treatment. After three days, she was transferred to the National Orthopedic Hospital where she was confined for more than a month. 3 She underwent an operation for partial hip prosthesis. 4 Allan, on the other hand, broke a leg. He was also given emergency treatment at the provincial hospital. Spouses Antonio and Leticia Garcia sued Baliwag Transit, Inc., A & J Trading and Julio Recontique for damages in the Regional Trial Court of Bulacan. 5 Leticia sued as an injured passenger of Baliwag and as mother of Allan. At the time of the complaint, Allan was a minor, hence, the suit initiated by his parents in his favor.

Baliwag, A & J Trading and Recontique disclaimed responsibility for the mishap. Baliwag alleged that the accident was caused solely by the fault and negligence of A & J Trading and its driver, Recontique. Baliwag charged that Recontique failed to place an early warning device at the corner of the disabled cargo truck to warn oncoming vehicles. 6 On the other hand, A & J Trading and Recontique alleged that the accident was the result of the negligence and reckless driving of Santiago, bus driver of Baliwag. 7 After hearing, the trial court found all the defendants liable, thus: xxx xxx xxx

"In view thereof, the Court holds that both defendants should be held liable; the defendant Baliwag Transit, Inc. for having failed to deliver the plaintiff and her son to their point of destination safely in violation of plaintiff's and defendant Baliwag Transit's contractual relation. The defendant A & J and Julio Recontique for failure to provide its cargo truck with an early warning device in violation of the Motor Vehicle Law." 8 The trial court ordered Baliwag, A & J Trading and Recontique to pay jointly and severally the Garcia spouses the following: (1) P25,000.00 hospitalization and medication 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 attorney's fee. 9 On appeal, the Court of Appeals modified the trial court's Decision by absolving A & J Trading from liability and by reducing the award of attorney's fees to P10,000.00 and loss of earnings to P300,000.00, respectively. 10 Baliwag filed the present petition for review raising the following issues: "1. Did the Court of Appeals err in absolving A & J Trading from liability and holding Baliwag solely liable for the injuries suffered by Leticia and Allan Garcia in the accident? 2. Is the amount of damages awarded by the Court of Appeals to the Garcia spouses correct?"

We affirm the factual findings of the Court of Appeals. I As a common carrier, Baliwag breached its contract of carriage when it failed to deliver its passengers, Leticia and Allan Garcia to their destination safe and sound. A common carrier is bound to carry its passengers safely as far as human care and foresight can provide, using the utmost diligence of a very cautious person, with due regard for all the circumstances. 11 In a contract of carriage, it is presumed that the common carrier was at fault or was negligent when a passenger dies or is injured. Unless the presumption is rebutted, the court need not even make an express finding of fault or negligence on the part of the common carrier. This statutory presumption may only be overcome by evidence that the carrier exercised extraordinary diligence as prescribed in Articles 1733 and 1755 of the Civil Code. 12 The records are bereft of any proof to show that Baliwag exercised extraordinary diligence. On the contrary, the evidence demonstrates its driver's recklessness. Leticia Garcia testified that the bus was running at a very high speed despite the drizzle and the darkness of the highway. The passengers pleaded for its driver to slow down, but their plea was ignored. 13 Leticia also revealed that the driver was smelling of liquor. 14 She could smell him as she was seated right behind the driver. Another passenger, Felix Cruz testified that immediately before the collision, the bus driver was conversing with a co-employee. 15 All these prove the bus driver's wanton disregard for the physical safety of his passengers, which makes Baliwag as a common carrier liable for damages under Article 1759 of the Civil Code: "Art. 1759. Common carriers are liable for the death of or injuries to passengers through the negligence or willful acts of the former's employees, although such employees may have acted beyond the scope of their authority or in violation of the orders of the common carriers. This liability of the common carriers do not cease upon proof that they exercised all the diligence of a good father of a family in the selection or supervision of their employees." Baliwag cannot evade its liability by insisting that the accident was caused solely by the negligence of A & J Trading and Julio Recontique. It harps on their alleged non use of an early warning device as testified to by Col. Demetrio dela Cruz, the station commander of Gapan, Nueva Ecija who investigated the incident, and Francisco Romano, the bus conductor. The records do not bear out Baliwag's contention. Col. dela Cruz and Romano testified that they did not see any early warning device at the scene of the accident. 16 They were referring to the triangular reflectorized plates in red and yellow issued by the Land Transportation Office. However, the evidence shows that Recontique and Ecala placed a kerosene lamp or torch at the edge of the road, near the rear portion of the truck to serve as an early warning device. 17 This substantially complies with Section 34 (g) of the Land Transportation and Traffic Code, to wit: "(g) Lights and reflector when parked or disabled. Appropriate parking lights or flares visible one hundred meters away shall be displayed at the corner of the vehicle whenever such vehicle is parked on highways or in places that are not well-lighted or, is

placed in such manner as to endanger passing traffic. Furthermore, every motor vehicle shall be provided at all times with built-in reflectors or other similar warning devices either pasted, painted or attached at its front and back which shall likewise be visible at night at least one hundred meters away. No vehicle not provided with any of the requirements mentioned in this subsection shall be registered. (Emphasis supplied)" Baliwag's argument that the kerosene lamp or torch does not substantially comply with the law is untenable. The aforequoted law clearly allows the use not only of an early warning device of the triangular reflectorized plates variety but also parking lights or flares visible one hundred meters away. Indeed, Col. dela Cruz himself admitted that a kerosene lamp is an acceptable substitute for the reflectorized plates. 18 No negligence, therefore, may be imputed to A & J Trading and its driver, Recontique. Anent this factual issue, the analysis of evidence made by the Court of Appeals deserves our concurrence, viz: xxx xxx xxx

"In the case at bar, both the injured passengers of the Baliwag involved in the accident testified that they saw some sort of kerosene or a torch on the rear portion of the truck before the accident. Baliwag Transit's conductor attempted to defeat such testimony by declaring that he noticed no early warning device in front of the truck Among the testimonies offered by the witnesses who were present at the scene of the accident, we rule to uphold the affirmative testimonies given by the two injured passengers and give less credence to the testimony of the bus conductor who solely testified that no such early warning device exists. The testimonies of injured passengers who may well be considered as disinterested witness appear to be natural and more probable than the testimony given by Francisco Romano who is undoubtedly interested in the outcome of the case, being the conductor of the defendant-appellant Baliwag Transit Inc. It must be borne in mind that the situation then prevailing at the time of the accident was admittedly drizzly and all dark. This being so, it would be improbable and perhaps impossible on the part of the truck helper without the torch nor the kerosene to remove the flat tires of the truck. Moreover, witness including the bus conductor himself admitted that the passengers shouted, that they are going to bump before the collision which consequently caused the bus driver to apply the brake 3 to 4 meters away from the truck. Again, without the kerosene nor the torch in front of the truck, it would be improbable for the driver, more so the passengers to notice the truck to be bumped by the bus considering the darkness of the place at the time of the accident. xxx xxx xxx

While it is true that the investigating officer testified that he found no early warning device at the time of his investigation, We rule to give less credence to such testimony insofar as he himself admitted on cross examination that he did not notice the presence of any kerosene lamp at the back of the truck because when he arrived at the scene of the accident, there were already many people surrounding the place (TSN, Aug. 22, 1989, p. 13). He further admitted that there exists a probability that the lights of the truck may have been smashed by the bus at the time of the accident considering the location of the truck where its rear portion was connected with the front portion of the bus (TSN, March 29, 1985, pp. 11-13). Investigator's testimony therefore did not confirm nor deny the existence of such warning device, making his testimony of little probative value." 19 II We now review the amount of damages awarded to the Garcia spouses. First, the propriety of the amount awarded as hospitalization and medical fees. The award of P25,000.00 is not supported by the evidence on record. The Garcias presented receipts marked as Exhibits "B-1" to "B-42" but their total amounted only to P5,017.74. To be sure, Leticia testified as to the extra amount spent for her medical needs but without more reliable evidence, her lone testimony cannot justify the award of P25,000.00. To prove actual damages, the best evidence available to the injured party must be presented. The court cannot rely on uncorroborated testimony whose truth is suspect, but must depend upon competent proof that damages have been actually suffered. 20 Thus, we reduce the actual damages for medical and hospitalization expenses to P5,017.74. Second, we find as reasonable the award of P300,000.00 representing Leticia's lost earnings. Before the accident, Leticia was engaged in embroidery, earning P5,000.00 per month. 21 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, 22 we find it proper that Baliwag should compensate her lost income for five (5) years. 23 Third, the award of moral damages is in accord with law. In a breach of contract of carriage, moral damages are recoverable if the carrier, through its agent, acted fraudulently or in bad faith. 24 The evidence shows the gross negligence of the driver of Baliwag bus which amounted to bad faith. Without doubt, Leticia and Allan experienced physical suffering, mental anguish and serious anxiety by reason of the accident. Leticia underwent an operation to replace her broken hip bone with a metal plate. She was confined at the National Orthopedic Hospital for 45 days. The young Allan was also confined in the hospital for his foot injury. Contrary to the contention of Baliwag, the decision of the trial court as affirmed by the Court of Appeals awarded moral damages to Antonio and Leticia Garcia not in their capacity as parents of Allan. Leticia was given moral damages as

an injured party. Allan was also granted moral damages as an injured party but because of his minority, the award in his favor has to be given to his father who represented him in the suit. Finally, we find the award of attorney's fees justified. The complaint for damages was instituted by the Garcia spouses on December 15, 1982, following the unjustified refusal of Baliwag to settle their claim. The Decision was promulgated by the trial court only on January 29, 1991 or about nine years later. Numerous pleadings were filed before the trial court, the appellate court and to this Court. Given the complexity of the case and the amount of damages involved, 25 the award of attorney's fee for P10,000.00 is just and reasonable. IN VIEW WHEREOF, the Decision of the respondent Court of Appeals in CA-G.R. CV-31246 is AFFIRMED with the MODIFICATION reducing the actual damages for hospitalization and medical fees to P5,017.74. No costs. SO ORDERED. Regalado, Romero, Mendoza and Torres, Jr., JJ ., concur.

SECOND DIVISION [G.R. No. 94149. May 5, 1992.] AMERICAN HOME ASSURANCE, COMPANY, petitioner, vs. THE COURT OF APPEALS and NATIONAL MARINE CORPORATION and/or NATIONAL MARINE CORPORATION (Manila), respondents. SYLLABUS 1. REMEDIAL LAW; CIVIL PROCEDURE; APPEAL; PROPER REMEDY FROM FINAL JUDGMENT CONSTITUTING PLAIN ERRORS OF LAW. The Court of Appeals ruled that appeal is the proper remedy, for aside from the fact that the two orders dismissing the complaint for lack of cause of action are final orders within the meaning of Rule 41, Section 2 of the Rules of Court, subject petition raised questions which if at all, constitute plain errors of law or of judgment not constituting grave abuse of discretion correctible by certiorari. Evidently, the Court of Appeals did not err in dismissing the petition for certiorari for as ruled by this Court, an order of dismissal whether right or wrong is a final order, hence, a proper subject of appeal, not certiorari (Marahay v. Melicor, 181 SCRA 811 [1990]). 2. CIVIL LAW; COMMON CARRIERS; LIABILITY THEREOF IN CASES OF LOSS, DESTRUCTION OR DETERIORATION; GOVERNED BY THE LAW OF THE COUNTRY TO WHICH THE GOODS ARE TO BE TRANSPORTED; APPLICATION IN CASE AT BAR. This Court in National Development Co. v. C.A. (164 SCRA 593 [1988]; citing Eastern Shipping Lines, Inc. v. I.A.C., 150 SCRA 469, 470 [1987] held that "the law of the country to which the goods are to be transported governs the liability of the common carrier in case of their loss, destruction or deterioration." (Article 1753, Civil Code). Thus, for cargoes transported to the Philippines as in the case at bar, the liability of the carrier is governed primarily by the Civil Code and in all matters not regulated by said Code, the rights and obligations of common carrier shall be governed by the Code of Commerce and by special laws (Article 1766, Civil Code). 3. ID.; ID.; BOUND TO OBSERVE EXTRAORDINARY DILIGENCE IN THE VIGILANCE OVER THE GOODS AND THE SAFETY OF THE PASSENGERS TO BE TRANSPORTED; PRESUMPTION IN CASE OF LOSS, DESTRUCTION OR DETERIORATION. Corollary thereto, the Court held further that under Article 1733 of the Civil Code, 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 passengers transported by them according to all circumstances of each case. Thus, under Article 1735 of the same Code, in all cases other than those mentioned in Article 1734 thereof, the common carrier shall be presumed to have been at fault or to have acted negligently, unless it proves that it has observed the extraordinary diligence required by law. 4. ID.; ID.; CANNOT LIMIT THEIR LIABILITY WHEN INJURY OR LOSS WAS CAUSED BY THEIR OWN NEGLIGENCE; CASE AT BAR. The Court ruled that common carriers cannot limit their liability for injury or loss of goods

where such injury or loss was caused by its own negligence. Otherwise stated, the law on averages under the Code of Commerce cannot be applied in determining liability where there is negligence. Under the foregoing principle and in line with the Civil Code's mandatory requirement of extraordinary diligence on common carriers in the care of goods placed in their stead, it is but reasonable to conclude that the issue of negligence must first be addressed before the proper provisions of the Code of Commerce on the extent of liability may be applied. The records show that upon delivery of the shipment in question at Mayleen's warehouse in Manila, 122 bales were found to be damaged/lost with straps cut or loose, calculated by the so-called "percentage method" at 4,360 kilograms and amounting to P61,263.41. Instead of presenting proof of the exercise of extraordinary diligence as required by law, National Marine Corporation (NMC) filed its Motion to Dismiss dated August 7, 1989, hypothetically admitting the truth of the facts alleged in the complaint to the effect that the loss or damage to the 122 bales was due to the negligence or fault of NMC. As ruled by this Court, the filing of a motion to dismiss on the ground of lack of cause of action carries with it the admission of the material facts pleaded in the complaint (Sunbeam Convenience Foods, Inc. v. C.A., 181 SCRA 443 [1990]). Such being the case, it is evident that the Code of Commerce provisions on averages cannot apply. DECISION PARAS, J p: This is a petition for review on certiorari which seeks to annul and set aside the (a) decision 1 dated May 30, 1990 of the Court of Appeals in C.A. G.R. SP. No. 20043 entitled "American Home Assurance Company v. Hon. Domingo D. Panis, Judge of the Regional Trial Court of Manila, Branch 41 and National Marine Corporation and/or National Marine Corporation (Manila)", dismissing petitioner's petition for certiorari, and (b) resolution 2 dated June 29, 1990 of the Court of Appeals denying petitioner's motion for reconsideration. The undisputed facts of the case are as follows: Both petitioner American Home Assurance Co. and the respondent National Marine Corporation are foreign corporations licensed to do business in the Philippines, the former through its branch, The American Home Assurance Company (Philippines), Inc. and the latter through its branch, The National Marine Corporation (Manila) (Rollo, p. 20, Annex L, p. 1). That on or about June 19, 1988, Cheng Hwa Pulp Corporation shipped 5,000 bales (1,000 ADMT) of bleached kraft pulp from Haulien, Taiwan on board "SS Kaunlaran", which is owned and operated by herein respondent National Marine Corporation with Registration No. PID-224. The said shipment was consigned to Mayleen Paper, Inc. of Manila, which insured the shipment with herein petitioner American Home Assurance Co. as evidenced by Bill of Lading No. HLMN-01. Cdpr On June 22, 1988, the shipment arrived in Manila and was discharged into the custody of the Marina Port Services, Inc., for eventual delivery to the consignee-assured. However, upon delivery of the shipment to Mayleen Paper, Inc., it was found that 122 bales had either been damaged or lost. The loss was calculated to be 4,360 kilograms with an estimated value of P61,263.41. Mayleen Paper, Inc. then duly demanded indemnification from respondent National Marine Corporation for the aforesaid damages/losses in the shipment but, for apparently no justifiable reason, said demand was not heeded (Petition, p. 4). As the shipment was insured with petitioner in the amount of US $837,500.00, Mayleen Paper, Inc. sought recovery from the former. Upon demand and submission of proper documentation, American Home Assurance paid Mayleen Paper, Inc. the adjusted amount of P31,506.75 for the damages/losses suffered by the shipment, hence, the former was subrogated to the rights and interests of Mayleen Paper, Inc. On June 6, 1989, the petitioner, as subrogee, then brought suit against respondent for the recovery of the amount of P31,506.75 and 25% of the total amount due as attorney's fees, by filing a complaint for recovery of sum of money (Petition, p. 4). Respondent, National Marine Corporation, filed a motion to dismiss dated August 7, 1989 stating that American Home Assurance Company had no cause of action based on Article 848 of the Code of Commerce which provides "that claims for averages shall not be admitted if they do not exceed 5% of the interest which the claimant may have in the vessel or in the cargo if it be gross average and 1% of the goods damaged if particular average, deducting in both cases the expenses of appraisal, unless there is an agreement to the contrary." It contended that based on the allegations of the complaint, the loss sustained in the case was P35,506.75 which is only . 18% of P17,420,000.00, the total value of the cargo. On the other hand, petitioner countered that Article 848 does not apply as it refers to averages and that a particular average presupposes that the loss or damage is due to an inherent defect of the goods, an accident of the sea, or a force majeure or the negligence of the crew of the carrier, while claims for damages due to the negligence of the common carrier are governed by the Civil Code provisions on Common Carriers. In its order dated November 23, 1989, the Regional Trial Court sustained private respondent's contention. In part it stated: LLpr "Before the Court for resolution is a motion for reconsideration filed by defendant through counsel dated October 6, 1989. "The record shows that last August 8, 1989, defendant through counsel filed a motion to dismiss plaintiff's complaint.

"Resolving the said motion last September 18, 1989, the court ruled to defer resolution thereof until after trial on the merits. In the motion now under consideration, defendant prays for the reconsideration of the order of September 18, 1989 and in lieu thereof, another order be entered dismissing plaintiff's complaint. "There appears to be good reasons for the court to take a second look at the issues raised by the defendant. "xxx xxx xxx

"It is not disputed by the defendant that the loss suffered by the shipment is only .18% or less than 1% of the interest of the consignee on the cargo. Invoking the provision of Article 848 of the Code of Commerce which reads: 'Claims for average shall not be admitted if they do not exceed five percent of the interest which the claimant may have in the vessel or cargo if it is gross average, and one percent of the goods damaged if particular average, deducting in both cases the expenses of appraisal, unless there is an agreement to the contrary.' (Underscoring supplied). defendant claims that plaintiff is barred from suing for recovery. "Decisive in this case is whether the loss suffered by the cargo in question is a 'particular average'. 'Particular average is a loss happening to the ship, freight, or cargo which is not be (sic) shared by contributing among all those interested, but must be borne by the owner of the subject to which it occurs. (Black's Law Dictionary, Revised Fourth Edition, p. 172, citing Bargett v. Insurance Co. 3 Bosw. [N.Y.] 395).' as distinguished from general average which. 'is a contribution by the several interests engaged in the maritime venture to make good the loss of one of them for the voluntary sacrifice of a part of the ship or cargo to save the residue of the property and the lives of those on board, or for extraordinary expenses necessarily incurred for the common benefit and safety of all (Ibid., citing California Canneries Co. v. Canton Ins. Office 25 Cal. App. 303, 143 p. 549-553). "From the foregoing definition, it is clear that the damage on the cargo in question, is in the nature of the 'particular average.' Since the loss is less than 1% to the value of the cargo and there appears to be no allegations as to any agreement defendants and the consignee of the goods to the contrary, by express provision of the law, plaintiff is barred from suing for recovery. "WHEREOF, plaintiff's complaint is hereby dismissed for lack of cause of action." (Rollo, p. 27; Annex A, pp. 3-4). The petitioner then filed a motion for reconsideration of the order of dismissal but same was denied by the court in its order dated January 26, 1990 (supra). Instead of filing an appeal from the order of the court a quo dismissing the complaint for recovery of a sum of money, American Home Assurance Company filed a petition for certiorari with the Court of Appeals to set aside the two orders of respondent judge in said court (Rollo, p. 25). But the Court of Appeals in its decision dated May 30, 1990, dismissed the petition as constituting plain errors of law and not grave abuse of discretion correctible by certiorari (a Special Civil Action). If at all, respondent court ruled that there are errors of judgment subject to correction by certiorari as a mode of appeal but the appeal is to the Supreme Court under Section 17 of the Judiciary Act of 1948 as amended by Republic Act No. 5440. Otherwise stated, respondent Court opined that the proper remedy is a petition for review on certiorari with the Supreme Court on pure questions of law (Rollo, p. 30). Hence, this petition. In a resolution dated December 10, 1990, this Court gave due course to the petition and required both parties to file their respective memoranda (Rollo, p. 58). The procedural issue in this case is whether or not certiorari was the proper remedy in the case before the Court of Appeals. The Court of Appeals ruled that appeal is the proper remedy, for aside from the fact that the two orders dismissing the complaint for lack of cause of action are final orders within the meaning of Rule 41, Section 2 of the Rules of Court, subject petition raised questions which if at all, constitute plain errors of law or of judgment not constituting grave abuse of discretion correctible by certiorari. Evidently, the Court of Appeals did not err in dismissing the petition for certiorari for as ruled by this Court, an order of dismissal whether right or wrong is a final order, hence, a proper subject of appeal, not certiorari (Marahay v. Melicor, 181 SCRA 811 [1990]). However, where the fact remains that respondent Court of Appeals obviously in the broader interests of justice, nevertheless proceeded to decide the petition for certiorari and ruled on specific points raised therein in a manner akin to what would have been done on assignments of error in a regular appeal, the petition therein was therefore disposed of on the merits and not on a dismissal due to erroneous choice of remedies or technicalities (Cruz v. I.A.C., 169 SCRA 14 [1989]). Hence, a review of the decision of the Court of Appeals on the merits against the petitioner in this case is in order. LLphil On the main controversy, the pivotal issue to be resolved is the application of the law on averages (Articles 806, 809 and 848 of the Code of Commerce).

Petitioner avers that respondent court failed to consider that respondent National Marine Corporation being a common carrier, in conducting its business is regulated by the Civil Code primarily and suppletorily by the Code of Commerce; and that respondent court refused to consider the Bill of Lading as the law governing the parties. Private respondent countered that in all matters not covered by the Civil Code, the rights and obligations of the parties shall be governed by the Code of Commerce and by special laws as provided for in Article 1766 of the Civil Code; that Articles 806, 809 and 848 of the Code of Commerce should be applied suppletorily as they provide for the extent of the common carriers' liability. This issue has been resolved by this Court in National Development Co. v. C.A. (164 SCRA 593 [1988]; citing Eastern Shipping Lines, Inc. v. I.A.C., 150 SCRA 469, 470 [1987] where it was held that "the law of the country to which the goods are to be transported governs the liability of the common carrier in case of their loss, destruction or deterioration." (Article 1753, Civil Code). Thus, for cargoes transported to the Philippines as in the case at bar, the liability of the carrier is governed primarily by the Civil Code and in all matters not regulated by said Code, the rights and obligations of common carrier shall be governed by the Code of Commerce and by special laws (Article 1766, Civil Code). Corollary thereto, the Court held further that under Article 1733 of the Civil Code, 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 passengers transported by them according to all circumstances of each case. Thus, under Article 1735 of the same Code, in all cases other than those mentioned in Article 1734 thereof, the common carrier shall be presumed to have been at fault or to have acted negligently, unless it proves that it has observed the extraordinary diligence required by law (Ibid., p. 595). But more importantly, the Court ruled that common carriers cannot limit their liability for injury or loss of goods where such injury or loss was caused by its own negligence. Otherwise stated, the law on averages under the Code of Commerce cannot be applied in determining liability where there is negligence (Ibid., p. 606). Under the foregoing principle and in line with the Civil Code's mandatory requirement of extraordinary diligence on common carriers in the care of goods placed in their stead, it is but reasonable to conclude that the issue of negligence must first be addressed before the proper provisions of the Code of Commerce on the extent of liability may be applied. The records show that upon delivery of the shipment in question at Mayleen's warehouse in Manila, 122 bales were found to be damaged/lost with straps cut or loose, calculated by the so-called "percentage method" at 4,360 kilograms and amounting to P61,263.41 (Rollo, p. 68). Instead of presenting proof of the exercise of extraordinary diligence as required by law, National Marine Corporation (NMC) filed its Motion to Dismiss dated August 7, 1989, hypothetically admitting the truth of the facts alleged in the complaint to the effect that the loss or damage to the 122 bales was due to the negligence or fault of NMC (Rollo, p. 179). As ruled by this Court, the filing of a motion to dismiss on the ground of lack of cause of action carries with it the admission of the material facts pleaded in the complaint (Sunbeam Convenience Foods, Inc. v. C.A., 181 SCRA 443 [1990]). Such being the case, it is evident that the Code of Commerce provisions on averages cannot apply. llcd On the other hand, Article 1734 of the Civil Code provides that common carriers are responsible for loss, destruction or deterioration of the goods, unless due to any of the causes enumerated therein. It is obvious that the case at bar does not fall under any of the exceptions. Thus, American Home Assurance Company is entitled to reimbursement of what it paid to Mayleen Paper, Inc. as insurer. Accordingly, it is evident that the findings of respondent Court of Appeals, affirming the findings and conclusions of the court a quo are not supported by law and jurisprudence. PREMISES CONSIDERED, (1) the decisions of both the Court of Appeals and the Regional Trial Court of Manila, Branch 41, appealed from are REVERSED; and (2) private respondent National Marine Corporation is hereby ordered to reimburse the subrogee, petitioner American Home Assurance Company, the amount of P31,506.75. SO ORDERED. Melencio-Herrera, Padilla, Regalado and Nocon, JJ., concur.

SECOND DIVISION [G.R. No. L-48671. December 12, 1986.] MUNICIPALITY OF ECHAGUE, Represented by MAYOR SALVADOR H. GAFFUD, petitioner, vs. HONORABLE LEOPOLDO M. ABELLERA, Acting Chairman, BOARD OF TRANSPORTATION, and AVELINO BALLAD, respondents. Eugenio B. Javier, Jr. for petitioner. Aurora A. Dajoyag for respondent Board of Transportation. Benedicto Nanca for respondent Board of Transportation. Alfredo G. Vergara for private respondent. SYLLABUS 1. ADMINISTRATIVE LAW; PUBLIC SERVICE COMMISSION; CERTIFICATE OF PUBLIC CONVENIENCE; INADEQUATE NOTICE TO AFFECTED PARTY/IES, DENIAL OF ADMINISTRATIVE DUE PROCESS. The Court cannot consider the alleged publication of the said notice in two unnamed Manila dailies as sufficient compliance of notice to petitioner when the singular date of such supposed publication is not even mentioned by respondents nor disclosed by the records. As a party to be directly affected by the setting up of a ferry service by private respondent, petitioner Municipality is entitled to be directly informed and afforded an opportunity to be heard by the Board. In Cordero vs. Public Service Commission, 121 SCRA 249, citing Olongapo Jeepney Operators Association versus Public Service Commission, 13 SCRA 303, the Court stated: "The inadequate notification to the interested parties in this case which resulted in the oppositors' failure to be present during the hearing, deprived them of their day in court. The decision rendered in disregard of said right, consequently, is null and void." 2. ID.; MUNICIPAL COUNCIL OR SANGGUNIANG BAYAN; APPROVAL THEREOF NECESSARY BEFORE ISSUANCE OF CERTIFICATE OF PUBLIC CONVENIENCE BY BOARD OF TRANSPORTATION. With respect to the issue of whether an indorsing resolution is a requisite before the respondent Board may award a certificate of public convenience to respondent Ballad, the Court finds that in the case of Cababa vs. Public Service Commission, 102 Phil. 1013, it was held that "where a ferry lies entirely with in the territorial jurisdiction of a municipality, previous approval of that municipality is necessary before the Public Service Commission can grant a private operator a certificate of public convenience for its operation. And in Reyes vs. Pascual, 1 SCRA 1097, it was similarly ruled that "a private party desiring to operate a municipal ferry service should first be awarded by the municipality the right to operator the service before he could file an application for a certificate of permit with the public Service Commission." 3. ID.; SECTIONS 2318-2320, REVISED ADMINISTRATIVE CODE; THE SPECIFIC JURISDICTION AND AUTHORITY GIVEN TO THE MUNICIPALITY BY THE CODE PREVAIL OVER THAT OF THE BOARD OF TRANSPORTATION. The specific jurisdiction and authority given by Sections 2318-2320 of the Revised Administrative Code to a municipality to operate or lease the ferry service within its own territorial limits should prevail. The grant of supervision and authority by Administrative to the municipalities or municipal council over public utilities such as municipal ferries, markets, etc. is specific, and undoubtedly was "intended to provide an additional source of revenue to municipal corporations for their maintenance and operation". 4. ID.; AUTHORITY OF MUNICIPAL COUNCIL OR SANGGUNIANG BAYAN AND BOARD OF TRANSPORTATION, DISTINGUISHED. The provisions of the Revised Administrative Code which grant to the municipal council or Sangguniang Bayan the power to acquire or establish municipal ferries, are different and should be distinguished from the authority of the Board of Transportation to issue a Certificate of Public Convenience. While the establishment of a municipal ferry is first given to a municipality, ferry service will nevertheless be subject to the supervision and control of the Board of Transportation. The winner in a public bidding conducted by the municipal council obtains the privilege to operate the ferry service, but he has to apply for a

Certificate of Public Convenience from the Board of Transportation which then has the duty to regulate the operation, route, rates to be charged, as well as specify the kind of equipment to be used for the comfort, convenience and safety of the public using the ferry. Citing in the case Municipality of Gattaran versus Elizaga, 91 Phil. 443. DECISION ALAMPAY, J p: The petition for certiorari in this case seeks for the declaration of nullity of the Decision of public respondent Board of Transportation, dated October 13, 1977; the Order, dated June 26, 1978, denying the motion for reconsideration by petitioners; and for the cancellation or recall of the Certificate of Public Convenience awarded to private respondent Avelino Ballad by said Board. Said petition was given due course in this Court's resolution, dated December 13, 1978. The sole issue raised in the petition is whether or not, under Presidential Decree No. 1, or the Integrated Reorganization Plan, which vests on the Board of Transportation the jurisdiction and authority to issue Certificate of Public Convenience for the operation of public land, water and air transportation utilities, there would still be need for an applicant for a ferry boat service operating between two points within a municipality to obtain a favorable resolution of the Sangguniang Bayan of said municipality before the Board of Transportation can validly award the corresponding franchise to the applicant, considering the provisions of Sections 2318-2320 of the Revised Administrative Code. The aforestated sections of the Administrative Code read as follows: "Section 2318. Municipal ferries, wharves, markets, etc. A municipal council shall have authority to acquire or establish municipal ferries, wharves, markets, slaughterhouses, pounds, and cemeteries. Public utilities thus owned by the municipality may be conducted by the municipal authorities upon account of the municipality or may be let for a stipulated return to private parties." "Section 2320. Establishment of certain public utilities by private parties under license. Where provision is not made by a municipal council, pursuant to the provisions of the next two preceding sections hereof, for maintaining or conducting the ferries, wharves, markets, or slaughterhouses requisite for the needs of the municipality, the municipal council shall have authority in its discretion, to let the privilege of establishing and maintaining such utilities to private parties by license granted upon such terms as shall be fixed by the council. "The right to reject any or all bids shall be preserved in all proposals for such bids; and the maximum charges, rents, or fees which may be exacted by the lessees shall be fixed in advance and shall be stated in the proposals for bids. The decision of a municipal council rejecting any bid or awarding any such privilege shall be subject to final revisal by the provincial board." Since 1936, the petitioner municipality, through its then municipal council and later, its Sangguniang Bayan, had been operating a municipal ferry service traversing the Cagayan River to and from the Barangays Soyung-Malitao and Barangays EmbarcaderoDammang East and West, all within the municipality of Echague, Isabela. In this regard, petitioner either operated the ferry service itself, or annually leased the operation of the same to the highest bidder. The regular operation by the petitioner of the ferry service in the manner above stated resulted in an efficient and adequate transport service at reasonable rates to the people of the town and provided some modest revenue to the petitioner and its barangays (Memorandum for Petitioner, pp. 1-2; Rollo, p. 79-80). On November 16, 1977, herein private respondent Avelino Ballad furnished petitioner, through its then incumbent mayor, a xerox copy of a Decision issued on October 13, 1977 by the Board of Transportation granting respondent Ballad a Certificate of Public Convenience to operate a two-motor boat service for the regular and public transportation of passengers and freight between Barrio Soyung-Dammang West and vice-versa across the Cagayan River all in the municipality of Echague, Isabela. In furnishing petitioner with a copy of the Decision in his favor, private respondent gave notice that he would start his ferry boat service operation in January, 1978 and petitioner Municipality has to stop its own ferry boat service within the aforementioned routes. Petitioner expressed its surprise over said Decision because it is averred that it was never notified of the application of respondent Ballad with the Board of Transportation to operate the ferry service. On January 17, 1977, the respondent Board of Transportation, upon motion of petitioner Municipality, issued an Order suspending the operation of the motor boat service of private respondent after a rehearing of the case by the Board en banc. On February 14, 1978, the petitioner filed a Motion for Reconsideration of the Decision, dated October 13, 1977, on the grounds of lack of notice and deprivation of the opportunity to be heard by respondent Board; and secondly, the award of said Certificate of Public Convenience to respondent Ballad was approved without favorable indorsement by resolution of the Sangguniang Bayan of Echague, Isabela of Ballad's application. The respondent Board, on June 26, 1978, denied the Motion for Reconsideration and lifted and set aside the Order of suspension on the following explanation: "After a perusal of the records of this case and the existing provisions of law pertinent to the case at bar, this Board finds the motion for reconsideration to be without sufficient merit, it appearing that by virtue of the provision of Article 3, Paragraph 4(a), Part X, Chapter I of the Integrated Reorganization Plan, adopted and approved under Letter of Implementation No. 1 the Board has the authority to issue a certificate of public convenience for the operation of public land, water and air transportation facilities and services such as motor vehicles, railroad lines, domestic and water carriers, domestic and air carriers and similar public utilities; and it

appearing further, that the Motion for Reconsideration was filed out of time and that the decision has become final and executory, hence the Motion for Reconsideration is therefore, DENIED." (Rollo, pp. 23-24). Petitioner's case rests on two principal contentions which are: (1) lack of due process, denied to it by the respondents because the municipality was never notified of the application filed by Ballad with respondent Board; and (2) the absence of any resolution passed by the Sangguniang Bayan of Echague favorably indorsing to the respondent Board, Ballad's application for a certificate of public convenience to operate the ferry service. Petitioner submits that its favorable indorsement is a jurisdictional prerequisite before respondent Board can award a certificate of public convenience to respondent Ballad and thus, the issuance to Ballad of the certificate of public convenience was with grave abuse of discretion amounting to lack of or in excess of its jurisdiction. Indeed, the records reflect that in the case at bar there was no compliance made with the essential requirements of administrative due process. It appears that the notice of hearing was duly published once in two Manila daily newspapers of general circulation in the Philippines (Comment of Respondent Board of Transportation, pp. 12-13; Rollo, pp. 57-58). Nonetheless, Respondent Board ruled that petitioner is not entitled to be notified of the hearing inasmuch as petitioner Municipality never informed the respondent Board that it is an operator of a ferry boat service, and that petitioner Municipality being then a de facto ferry boat operator, has no personality to oppose the application of private respondent Ballad. The Court cannot consider the alleged publication of the said notice in two unnamed Manila dailies as sufficient compliance of notice to petitioner when the singular date of such supposed publication is not even mentioned by respondents nor disclosed by the records. As a party to be directly affected by the setting up of a ferry service by private respondent, petitioner Municipality is entitled to be directly informed and afforded an opportunity to be heard by the Board. In Cordero vs. Public Service Commission, 121 SCRA 249, citing Olongapo Jeepney Operators Association versus Public Service Commission, 135 SCRA 303, the Court stated: "xxx xxx xxx

"In this instance, respondent applicant contends that the publication of the notice of hearing in 2 newspapers of general circulation in the province of Zambales is notification not only to the interested parties, but to the whole world in general. This is inaccurate. The order required, in addition to publication, individual notice to the operators affected by the application and whose names appeared in the list attached to the order. The requirement, therefore, is not in the alternative, but conjuctive. "xxx xxx xxx

"The inadequate notification to the interested parties in this case which resulted in the oppositors" failure to be present during the hearing, deprived them of their day in court. The decision rendered in disregard of said right, consequently, is null and void." With respect to the issue of whether an indorsing resolution is a requisite before the respondent Board may award a certificate of public convenience to respondent Ballad, the Court finds that in the case of Cababa vs. Public Service Commission, 102 Phil. 1013, it was held that "where a ferry lies entirely within the territorial jurisdiction of a municipality, previous approval of that municipality is necessary before the Public Service Commission can grant a private operator a certificate of public convenience for its operation. And in Reyes vs. Pascual, 1 SCRA 1097, it was similarly ruled that "a private party desiring to operate a municipal ferry service should first be awarded by the municipality the right to operate the service before he could file an application for a certificate of permit with the Public Service Commission." The Court does not subscribe to the theory of the private respondent that with the Integrated Reorganization Plan mandated by Presidential Decree No. 1 and promulgated on September 24, 1972, wherein the Public Service Commission was abolished (Par. 8, Art. III, Chapter I, Part X, Integrated Reorganization Plan) and in lieu thereof, the Board of Transportation was created with broader jurisdiction, power and authority (Par. (a), No. 4, Article III, Chapter I, Part X), the power of the Board of Transportation to issue certificate of public convenience for the operation of water transportation utilities is absolute and without any qualification. Respondents argue that the judicial decisions relied upon and invoked by the petitioner were rendered prior to the effectivity of the Integrated Reorganization Plan, and, therefore, the pronouncements therein made are no longer governing. Respondents claim that the earlier court rulings would be contrary to the letter and spirit of the prescribed Integrated Reorganization Plan creating the Board of Transportation in substitution of the former Public Service Commission. Accordingly, private respondents contend that the Board of Transportation has the jurisdiction and authority to grant a certification of public convenience for the operation of a motor boat ferry service within the territorial jurisdiction of a municipality, without need for an indorsing resolution from the municipality concerned (Rollo, pp. 30-33). In resolving this petition, two sets of legal provisions are to be considered: (1). Under Article XX, Chapter 57, Title IX, Book III of the Revised Administrative Code, entitled "Conduct of Certain Public Utilities," Sections 2318-2320 provide that a municipal council shall have authority to acquire or establish municipal ferries; that the municipal authorities may either conduct said public utility upon account of the municipality or let it be a private party who is the highest and best bidder for a period of one year, or upon the previous approval of the Provincial Board, for a longer period not exceeding five years. (2). Under Paragraph (a)-(c), No. 4, Article III, Chapter I, Part X of the Integrated Reorganization Plan (Presidential Decree No. 1), the functions of the respondent Board of Transportation are as follows:

a.) Issue Certificate of Public Convenience for the operation of public land, water and air transportation utilities and services such as motor vehicles, railroad lines, domestic and overseas water carriers, domestic and international air carriers and similar public utilities; b.) Establish, prescribe and regulate routes, zones and/or areas of operation of particular operators of public land, water and air service transports; and determine fix and/or prescribe fares, charges and/or rates pertinent to the operation of such public utility facilities and services except in cases where fares, charges or rates are established by international bodies or associations of which the Philippines is a participating member or by bodies recognized by the Philippine Government as the proper arbiter of such fares, charges, or rates; c.) Establish, fix, and/or prescribe rules, regulations, standards and specifications in all cases related to the issued Certificates of Public Convenience; and administer and enforce the same through the Bureau of Transportation of the Department and appropriate police or enforcement agencies of the Government." We hold that the specific jurisdiction and authority given by Sections 2318-2320 of the Revised Administrative Code to a municipality to operate or lease the ferry service within its own territorial limits should prevail. The grant of supervision and authority by Administrative Code to municipalities or municipal councils over public utilities such as municipal ferries, markets, etc. is specific, and undoubtedly was "intended to provide an additional source of revenue to municipal corporations for their maintenance and operation" (Municipality of Gattaran vs. Elizaga, 91 Phil. 440). On the other hand, the authority conferred on the respondent Board of Transportation was intended principally to insure and safeguard the convenience, comfort and safety of the public. We decline to accept the proposition that the operation of the ferry being then exercised by petitioner municipality, pursuant to clear provisions of the law, was removed by a general reorganization plan which was intended only to indicate the agency which would supervise or regulate the operation of public services. The provisions of the Revised Administrative Code which grant to the municipal council or Sangguniang Bayan the power to acquire or establish municipal ferries, are different and should be distinguished from the authority of the Board of Transportation to issue a Certificate of Public Convenience. While the establishment of a municipal ferry is first given to a municipality, ferry service will nevertheless be subject to the supervision and control of the Board of Transportation. The winner in a public bidding conducted by the municipal council obtains the privilege to operate the ferry service, but he has to apply for a Certificate of Public Convenience from the Board of Transportation which then has the duty to regulate the operation, route, rates to be charged, as well as specify the kind of equipment to be used for the comfort, convenience and safety of the public using the ferry. In the case of Municipality of Gattaran versus Elizaga, 91 Phil. 443, this situation was clearly explained and We quote: "xxx xxx xxx

"The two seemingly conflicting jurisdictions one by the Public Service Commission and the other by the municipalities may readily be reconciled. Whether the operation of a municipal ferry be undertaken by the municipality itself or let and given to a private party after public bidding, it should be supervised and regulated by the Public Service Commission. When a private party, winner in a public bidding conducted by the Municipal Council, like Fruto Elizaga, gets the permit to operate a municipal ferry from the municipality, before he can operate, he must first obtain a certificate or permit from the Public Service Commission which upon granting it, will fix the rates to be charged by him as well as specify the kind of equipment to be used by him for the comfort, convenience and safety of the public using said ferry. . . ." Both Sangguniang Bayan and the Board of Transportation, in effect, act in concert with each other. They do not usurp nor appropriate functions particularly given to the other. As the ferry service in this case would be operating exclusively within municipal limits of Echague, Isabela, and as the petitioner herein evidently desires to operate the ferries thru its Barangays, the issuance to private respondent Ballad of the Certificate of Public Convenience by the Board of Transportation, renders the action taken by the Board unwarranted and more specially so considering the lack of acquiescence or even previous due notice thereof to the petitioner municipality. WHEREFORE, the petition for certiorari in this case is, therefore, GRANTED and the challenged Decision of respondent Board of Transportation in its Case No. 77-2802, dated October 13, 1977, is now SET ASIDE and the corresponding certificate of public convenience issued to private respondent Avelino Ballad, pursuant to the aforecited decision is hereby declared null and void. SO ORDERED. Feria, Fernan, Gutierrez, Jr. and Paras, JJ ., concur.

FIRST DIVISION [G.R. No. 74442. August 31, 1987.] PAN AMERICAN WORLD AIRWAYS, INC., petitioner, vs. THE INTERMEDIATE APPELLATE COURT, TEOFISTA P. TINITIGAN, joined by her husband, SEVERINO TINITIGAN, respondents. SYLLABUS REMEDIAL LAW; EVIDENCE; CREDIBILITY OF WITNESSES; FINDINGS OF FACT OF THE TRIAL COURT GENERALLY BINDING ON APPEAL. All of the issues raised by petitioner are factual issues which the trial court ruled upon by favoring plaintiff's evidence as more credible than the evidence for the defendant. A cursory reading of the decision of the trial court as well as the decision of the appellate court reveals that all evidence available were considered. It is not the function of this Court to analyze or weigh evidence all over again, as Our jurisdiction is limited to reviewing errors of law that might have been committed by the lower courts. Moreover, the findings of the lower court as to the credibility of the witnesses will not be generally disturbed on appeal and if the appeal is on questions of fact, the factual findings of the appellate court are binding on Us (Collector of Customs of Manila vs. IAC, 137 SCRA 3). DECISION PARAS, J p: Before Us is a petition to review by certiorari the judgment 1 of the respondent Court of Appeals (IAC) affirming with modification the decision 2 rendered by the trial court in favor of the plaintiff 3 and against the defendant 4 sentencing the latter to pay the former the sum of US$1,546.15 or its equivalent in Philippine Currency as actual and compensatory damages, P500,000.00 as moral damages, P200,000.00 as exemplary damages, P100,000.00 as attorney's fees and to pay the costs of litigation. The modification consists in that the payment of US$1,546.15 or its equivalent in Philippine Currency must be valued at the present rate of exchange. The statement of the case is as follows: On February 5, 1975, private respondent herein, Teofista P. Tinitigan, filed a complaint against petitioner herein, Pan American World Airways, Inc. (Pan Am for brevity) for damages arising from defendant's alleged refusal to accommodate her on Pan Am Flight No. 431 from Sto. Domingo, Republica Dominica to San Juan, Puerto Rico on April 29, 1973 notwithstanding the fact that she possessed a confirmed plane ticket purchased from Pan Am's Office at Sto. Domingo and thus causing her to suffer mental anguish, serious anxiety, besmirched reputation, wounded feelings and social humiliation. She prayed that she be awarded moral damages of P500,000.00, exemplary damages of P200,000.00, attorney's fees of P100,000.00 and actual damages sustained by her in the amount of US$1,546.15. Cdpr In its Answer, defendant denied that plaintiff was a confirmed passenger since the ticket for Flight No. 431 issued to her was on an open space basis which meant that she could only be accommodated if any of the confirmed passengers failed to show up at the airport before departure. Plaintiff was advised by defendant of this fact when plaintiff changed her ticket for a new route with San Juan as additional part of her itinerary. After due trial, the lower court rendered judgment on August 6, 1980 in favor of plaintiff and awarded the amount of damages as prayed for. Defendant appealed said decision on both questions of fact and law to the respondent court assigning errors, to wit: I. The lower court erred in holding that plaintiff had a confirmed reservation on Pan Am Flight 431 from Santo Domingo, Republica Dominica to San Juan, Puerto Rico on April 29, 1973. II. The lower court erred in holding defendant-appellant liable for compensatory damages in the sum of US$1,546.15, moral damages in the sum of P500,000.00 and exemplary damages in the sum of P200,000.00, it being contrary to law and the evidence. III. IV. The lower court erred in awarding attorney's fees to plaintiff. The lower court erred in not dismissing the complaint.

Respondent-appellate Court affirmed the assailed judgment of the trial court with modification as earlier stated. Hence, the instant petition, appellant-petitioner submitting the following grounds: I. II. Respondent is a holder of an open, unconfirmed or a standby ticket. Private respondent's ticket was not issued with an assigned seat.

III. The issuance of the boarding card to respondent Tinitigan and the fact that she was allowed to go through the departure area passing through customs and immigration did not make her a confirmed passenger. IV. V. VI. VII. There is no evidence to support respondent court's findings that private respondent's seat was given to a white man. The conclusion that the luggage of private respondent was taken on board flight 431 is not borne out by the evidence. Petitioner did not breach its contract with private respondent. There is no evidence to support private respondent's alleged loss of $1,000.00 in profits.

In other words, the aforementioned grounds can be briefly stated as follows: I. II. The respondent court misappreciated and ignored the facts of the case; The conclusions of the respondent court were not supported by the evidence.

Evidence for the plaintiff in the lower court consisted of Teofista Tinitigan's sole testimony in open court supported by documentary evidence marked as Exhibits "A" to "J" while evidence for the defendant consisted of documents marked as Exhibits "1" to "12." Cdpr Findings of fact of the lower court show that plaintiff, a businesswoman and a multimillionaire in her own right as evidenced by Exhs. "J" to "J-7," (proprietor of Sampaguita Restaurant, New York City USA; Treasurer of the Molave Development Corp., Phil., proprietor of Cavite Household Appliances and Rowena's Handicraft, Phil.), was on a business trip with a Pan-Am ticket (San Francisco-Miami-Haiti-San Francisco). While in Haiti, she inquired from Pan-Am employees how she could proceed to San Juan, Puerto Rico for business reasons. Whereupon she was advised that her ticket was valid for Sto. Domingo, Republica Dominica only but in Santo Domingo she could make arrangements with Pan-Am for her trip to San Juan. While in Sto. Domingo, after talking thru the telephone with Mrs. Lilibeth Warner, the former said that she (plaintiff) must be in San Juan that same day, to sign her contract or lose it. Plaintiff expected to make a profit of $1,000 in said contract. Plaintiff then proceeded to the airport at about 2 o'clock in the afternoon, or 3 hours ahead of the scheduled Pan Am flight. She was told to wait and upon the arrival of the plane bound for San Juan, she surrendered to the Pan Am employees passenger ticket No. 0264200919952 (Exh. "3") with Sto. Domingo-Miami Route and she was issued passenger ticket No. 023443466114 (Exh. "D" of Exh. "2") for flight No. 431 with Sto. Domingo-San Juan-Miami route. She was also issued baggage claim No. 474-618 (Exh. "A") and given the corresponding boarding pass (Exh. "B") and assigned seat 3-A (Exh. "B-1") after she paid the fare and terminal fee. Appellee was then instructed to proceed to the Immigration Section where her passport (Exh. "C") was stamped accordingly. While plaintiff was standing in line preparatory to boarding the aircraft, Rene Nolasco, a Pan Am employee ordered her in a loud voice to step out of line because her ticket was not confirmed to her consternation and embarrassment in the presence of several people who heard the order. Despite her pleas that she should be in San Juan because it was very important to her, she was not allowed to board the aircraft. And as if to add insult to injury, she saw that her seat was given to a white man prompting her to engage Nolasco, who knows both the English and Spanish languages, in a heated argument provoking her into telling him that she would file a suit against Pan Am. Later, a few Pan Am employees went near her to tell her she could finally board the plane and on the pretext that they would inspect her baggage, they led her to another place, which she finally realized, was not the departure area. Meanwhile, the plane took off without her but with her luggage on board. She was forced to return to her hotel without any luggage much less an extra dress. It was a good thing that the Hotel people remembered her because they do not usually accommodate female guests, without any luggage to stay in the hotel. While normally, hotel accommodation was paid before departure, plaintiff was made to pay the room accommodation in advance (Exh. "E"). She finally retrieved her luggage after five days in San Francisco after presenting her baggage ticket (Exh. "A"). She brought the matter to the attention of Mr. V.W. Smith, Manager of Pan Am in San Francisco, who sent a letter of apology (Exh. "G") for the "inconveniences" Pan Am caused her (plaintiff) and attached a refund check (Exh. "H") reflecting the value of the flight coupon issued for the flight from Sto. Domingo to San Juan in which plaintiff was denied boarding. On the other hand, there was no oral evidence for defendant Pan Am. Evidence consisted of documents which included depositions and counter depositions of witnesses and the following: LexLib "Exh. "1", Pan Am manifest on Flight 431 dated April 29, 1973 from Sto. Domingo to San Juan, Dominican Republic; Exh. 2, Ticket Coupon No. 026443466114 dated April 29, 1973 issued to plaintiff with status "open" with routing Sto. Domingo-Miami; Exh. 3, Ticket Coupon No. 0264200919952 dated April 29, 1973; Exh. 4, Letter of defendant's witness Raul Fiallo to Director of Pan Am, Manila dated March 29, 1974 furnishing a copy of said letter to Pan Am Sto. Domingo; Exh. 5 Item No. 26 in Exhibit 1 enclosed in blue ink which reads "T. Tinitigan NB;" Exh. 6, Message sent by deponent Raul Fiallo to Mr. McKenzie, Pan Am, Manila; Exh. 7, Brown envelope containing the deposition of the witness; Exhs. 8, 8-A to 8-G, Certification of the deposition officer and the deposition of Raul Fiallo consisting of 8 pages in Spanish, Exh. 8-A-1, Signature of the deponent appearing at the left hand margin in every page of the deposition; Exhs. 9, 9-A to 9-F, Translation of the deposition from Spanish to English consisting of 7 pages; Exh. 10 Official Receipt representing fee of the Languages Internationale in translating the deposition from Spanish to English; Exh. 11, Deponent's answer to cross interrogatories written in Spanish; and Exh. 12, Translation to deponent's answer to cross-interrogatories from Spanish to English by Languages Internationale upon plaintiff's request. (pp. 46-47, Record on Appeal)

Considering the aforementioned evidence for both parties, the lower court said: "Examining the evidence presented, the Court finds that the same preponderates in favor of the plaintiff. The plaintiff having been issued by the defendant with the necessary ticket (Exh. "D"), baggage claim symbol (Exh. "A"), the requisite boarding pass (Exh. "B") with assigned seat 3-A and her having been cleared through immigration (Exhs. C and C-1) all clearly and unmistakably show that plaintiff was indeed a confirmed passenger of defendant's Flight No. 431 for San Juan and that for all legal intents and purposes the contract of carriage between the plaintiff and the defendant was already perfected which bound the latter to transport the former to her place of destination on said Flight. This conclusion finds eloquent support in Exhibit Q of the defendant showing that plaintiff was included in the passenger manifest of said flight. The failure therefore of the defendant to accommodate plaintiff in said flight and the taking in by it of a white man in lieu of plaintiff, who was brazenly ordered by an employee of the defendant to get off the line and unceremoniously whisked off from the departure area on the pretext that her luggage had to undergo custom's inspection to plaintiff's chargrin and great humiliation, smacks of a clear case of racial discrimination for which the defendant should be held liable in damages to the plaintiff. Moreover, the written apology offered by the defendant to the plaintiff, thru its Manager in San Francisco, (Exh. G) is a tell-tale indication of an admission of fault by the defendant for the "inconvenience" it caused plaintiff. The defense put up by the defendant to the effect that the issuance by it of the boarding pass in favor of plaintiff with an assigned seat was merely in compliance with the formal requirements of immigration fails to generate belief. There was no evidence presented, save the evidently self-serving declaration of deponent Fiallo Rodriguez, of such a requirement by the immigration laws of said foreign country. cdrep Considering the sex, age and the social and business stature of the plaintiff in the community, the amounts of moral damages being claimed by her in the complaint cannot be said to be unreasonable. Moreover, the award of exemplary damages is called for under the circumstances to teach defendant a lesson for the public good. WHEREFORE, judgment is hereby rendered in favor of the plaintiff and against the defendant sentencing the latter to pay the former the sum of USS1,546.15 or its equivalent in Philippine Currency, as actual and compensatory damages, P200,000.00 as moral damages, P200,000.00 as exemplary damages, P20,000.00 as attorney's fees and the costs of litigation. SO ORDERED. (pp. 47-49, Record on Appeal). In its ruling, the appellate respondent court was merely echoing the findings of the lower court and in finding no merit in the appeal, gave the following reasons: FIRST: It is clear from the evidence that defendant issued a Passenger Ticket and Baggage Check No. 026443466114 (Exh. "D") with assigned seat 3-A (Exh. "B-1") and the corresponding pass (Exh. "B") and baggage claim symbol (Exh "A"). Plaintiff was made to pay the fare and terminal fee. At the immigration section, plaintiff's passport (Exh. "C") was stamped accordingly (Exh. "C-3"). Plaintiff's name was included in the passenger manifest (Exh. "1," "5") of PANAM for Flight 431 dated April 19, 1973. And these show that plaintiff was indeed a confirmed passenger of defendant's Flight 431 for San Juan on April 29, 1973. There was, therefore, a contract of carriage perfected between plaintiff and defendant for the latter to take plaintiff to her place of destination. By refusing to accommodate plaintiff in said flight, defendant had willfully and knowingly violated the contract of carriage and failed to bring the plaintiff to her place of destination under its contract with plaintiff. Defendant has from the start argued that plaintiff was merely a chance passenger thus she had to give way to a passenger with a confirmed reservation. However, defendant through Mr. Jose Raul Fiolla Rodriguez, testified that he cannot say exactly what the total capacity of the plane on Flight 431 was; that he does not know whether Mrs. Tinitigan was allowed to buy a ticket because there was still space available; that he cannot say whether Mrs. Tinitigan was the first or last to buy a ticket to San Juan because there is no knowing; that there is no way of knowing who occupied the seat (3-A) assigned to Mrs. Tinitigan; that he does not know if the ticket number of the person who occupied seat 3-A was higher or lower than the ticket number of Mrs. Tinitigan because it cannot be determined; that a higher number than that of Mrs. Tinitigan's ticket does not necessarily mean that Mrs. Tinitigan bought her ticket ahead; that no one else with open ticket was assigned the same seat number as Mrs. Tinitigan; that PANAM does not practice the principle of "first come, first served." In other words, defendant would like us to believe that plaintiff was a chance passenger only and was not assured of her flight on that day. Defendant, however has no way of proving the same as it was not certain whether plaintiff was a chance passenger or not. Bad faith means a breach of a known duty through some motive or interest or illwill. Self enrichment or fraternal interest and not personal illwill, may have been the motive of defendant, but it is malice nevertheless. The fact that plaintiff was ordered out under some pretext in order to accommodate a white man in an airline owned by an American firm with a reputation for bumping off noncaucasian to accommodate whites is very regrettable. When defendant's employee ordered plaintiff to step out of line because her ticket was not confirmed despite plaintiff's pleas that she should be in San Juan that day, this caused plaintiff embarrassment because so many people heard the same and plaintiff was prevented from boarding the plane at all while her seat (3-A) was given to another passenger (a white man). For being subjected to such indignities, plaintiff suffered social humiliation, wounded feelings, serious anxiety, and mental anguish. Defendant should be held liable to plaintiff for moral damages.

A contract to transport passengers is quite different in kind and degree from any other contractual relation. And this, because of the relation which an air carrier sustains with the public. Its business is mainly with the travelling public. It invites people to avail of the comforts and advantages it offers. The contract of carriage, therefore, generates a relation attended with a public duty. Neglect or malfeasance of the carrier's employees, naturally, could give ground for an action for damages. 5 By not allowing plaintiff to board Flight 431 on April 29, 1973, plaintiff was not able to sign a contract with Mrs. Lilibeth Warner who had earlier placed an order for a sizeable number of "capiz" shells in which transaction plaintiff expected to derive a profit of US $1,000.00. Plaintiff had to return to the Hotel El Embajador from the aircraft costing her US$20.00. She had to pay for additional accommodations in said hotel for US$26.15 and the damage to her personal property amounted to US$500.00. Defendant should be held liable to the plaintiff in the amount of US$1,546.15 or its equivalent in Philippine Currency at the present rate of exchange as actual or compensatory damages. Defendant having breached its contract with plaintiff in bad faith, it is not error for the trial court to have awarded exemplary damages. The rational behind exemplary or corrective damages is, as the name implies, to provide an example or correction for public good. 6 In view of it nature, it should be imposed in such amount as to sufficiently and effectively deter similar breach of contract in the future by defendant and other airlines. An award of attorney's fees is also in order, having found bad faith on the part of defendant. WHEREFORE, the decision appealed from is hereby AFFIRMED with the following modifications: defendant is sentenced to pay the plaintiff the sum of US$1,546.15 or its equivalent in Philippine Currency at the present rate of exchange with the US dollar. Costs against defendant-appellant. SO ORDERED. (pp. 3-5, Decision, pp. 96-98, Rollo) It is noted that petitioner submitted in this petition the same grounds enumerated in its Motion for Reconsideration of the assailed judgment of the respondent appellate court anchoring its claim mainly on the appreciation of facts as supported by the evidence on record. These same grounds are also raised in petitioner's appeal from the judgment of the lower court to the respondent appellate court which affirmed the said assailed judgment. All of the issues raised by petitioner are factual issues which the trial court ruled upon by favoring plaintiff's evidence as more credible than the evidence for the defendant. A cursory reading of the decision of the trial court as well as the decision of the appellate court reveals that all evidence available were considered. It is not the function of this Court to analyze or weigh evidence all over again, as Our jurisdiction is limited to reviewing errors of law that might have been committed by the lower courts. Moreover, the findings of the lower court as to the credibility of the witnesses will not be generally disturbed on appeal and if the appeal is on questions of fact, the factual findings of the appellate court are binding on Us (Collector of Customs of Manila vs. IAC, 137 SCRA 3). LibLex We believe, however the amount of some damages awarded to be exorbitant: We therefore reduce the moral and exemplary damages to the combined total sum of Two Hundred Thousand (P200,000.00) Pesos and the attorney's fees to Twenty Thousand (P20,000.00) Pesos. The award of actual damages in the amount of One Thousand Five Hundred Forty Six American dollars and fifteen cents (US$1,546.15) computed at the exchange rate prevailing at the time of payment is hereby retained and granted. WHEREFORE, as modified, the assailed decision of respondent appellate court is hereby AFFIRMED. SO ORDERED. Teehankee, C.J., Narvasa, Cruz and Gancayco, JJ., concur.

FIRST DIVISION [G.R. No. 61352. February 27, 1987.] DOLE PHILIPPINES, INC., plaintiff-appellant, vs. MARITIME COMPANY OF THE PHILIPPINES, defendant-appellee. Domingo E. de Lara & Associates for plaintiff-appellant. Bito, Misa and Lozada Law Office for defendant-appellee.

SYLLABUS 1. MERCANTILE LAW; CARRIAGE OF GOODS BY SEA ACT; EXTRAJUDICIAL DEMAND DID NOT TOLL ONE YEAR PRESCRIPTIVE PERIOD; CASE AT BAR. The pivotal issue is whether or not Article 1155 of the Civil Code providing that the prescription of actions is interrupted by the making of an extra-judicial written demand by the creditor is applicable to actions brought under the Carriage of Goods by Sea Act. The question has already received a definitive answer, adverse to the position taken by Dole, in The Yek Tong Lin Fire & Marine Insurance Co., Ltd. vs. American president Lines, Inc. There, in a parallel factual situation, where suit to recover for damage to cargo shipped by vessel from Tokyo to Manila was filed more than two years after the consignee's receipt of the cargo, this Court rejected the contention that an extrajudicial demand tolled the prescriptive period provided for in the Carriage of Goods by Sea Act, viz: x x x. "We have already decided that in a case governed by the Carriage of Goods by Sea Act, the general provisions of the Code of Civil Procedure on prescription should not be made to apply. (Chua Kuy vs. Everett Steamship Corp., G.R. No. L-5554, May 27, 1953.) Similarly, we now hold that in such a case the general provisions of the new Civil Code (Art. 1155) cannot be made to apply, as such application would have the effect of extending the one-year period of prescription fixed in the law. It is desirable that matters affecting transportation of goods by sea be decided in as short a time as possible; the application of the provisions of Article 1155 of the new Civil Code would unnecessarily extend the period and permit delays in the settlement of questions affecting transportation, contrary to the clear intent and purpose of the law. x x x." DECISION NARVASA, J p: This appeal, which was certified to the Court by the Court of Appeals as involving only questions of law, 1 relates to a claim for loss and/or damage to a shipment of machine parts sought to be enforced by the consignee, appellant Dole Philippines, Inc. (hereinafter called Dole) against the carrier, Maritime Company of the Philippines (hereinafter called Maritime), under the provisions of the Carriage of Goods by Sea Act. 2 The basic facts are succinctly stated in the order of the Trial Court 3 dated March 16, 1977, the relevant portion of which read: cdrep "xxx xxx xxx

Before the plaintiff started presenting evidence at today's trial, at the instance of the Court the lawyers entered into the following stipulation of facts: 1. The cargo subject of the instant case was discharged in Dadiangas unto the custody of the consignee on December 18, 1971;

2. The corresponding claim for the damages sustained by the cargo was filed by the plaintiff with the defendant vessel on May 4, 1972; 3. On June 11, 1973 the plaintiff filed a complaint in the Court of First Instance of Manila, docketed therein as Civil Case No. 91043, embodying three (3) causes of action involving three (3) separate and different shipments. The third cause of action therein involved the cargo now subject of this present litigation; 4. On December 11, 1974, Judge Serafin Cuevas issued an Order in Civil Case No. 91043 dismissing the first two causes of action in the aforesaid case with prejudice and without pronouncement as to costs because the parties had settled or compromised the claims involved therein. The third cause of action which covered the cargo subject of this case now was likewise dismissed but without prejudice as it was not covered by the settlement. The dismissal of that complaint containing the three causes of action was upon a joint motion to dismiss filed by the parties; 5. Because of the dismissal of the (complaint in Civil Case No. 91043 with respect to the third cause of action without prejudice, plaintiff instituted this present complaint on January 6, 1975. xxx xxx xxx" 4

To the complaint in the subsequent action Maritime filed an answer pleading inter alia the affirmative defense of prescription under the provisions of the Carriage of Goods by Sea Act, 5 and following pre-trial, moved for a preliminary hearing on said defense. 6 The Trial Court granted the motion, scheduling the preliminary hearing on April 27, 1977. 7 The record before the Court does not show whether or not that hearing was held, but under date of May 6, 1977, Maritime filed a formal motion to dismiss invoking once more the ground of prescription. 8 The motion was opposed by Dole 9 and the Trial Court, after due consideration, resolved the matter in favor of Maritime and dismissed the complaint. 10 Dole sought a reconsideration, which was denied, 11 and thereafter took the present appeal from the order of dismissal. The pivotal issue is whether or not Article 1155 of the Civil Code providing that the prescription of actions is interrupted by the making of an extrajudicial written demand by the creditor is applicable to actions brought under the Carriage of Goods by Sea Act which, in its Section 3, paragraph 6, provides that: ". . . the carrier and the ship shall be discharged from all liability in respect of loss or damage unless suit is brought within one year after delivery of the goods or the date when the goods should have been delivered; Provided, That, if a notice of loss or damage, either apparent or conceded, is not given as provided for in this section, that fact shall not affect or prejudice the right of the shipper to bring suit within one year after the delivery of the goods or the date when the goods should have been delivered.

xxx

xxx

xxx."

Dole concedes that its action is subject to the one-year period of limitation prescribed in the above-cited provision. 12 The substance of its argument is that since the provisions of the Civil Code are, by express mandate of said Code, suppletory of deficiencies in the Code of Commerce and special laws in matters governed by the latter, 13 and there being " . . . a patent deficiency . . . with respect to the tolling of the prescriptive period . . ." provided for in the Carriage of Goods by Sea Act, 14 prescription under said Act is subject to the provisions of Article 1155 of the Civil Code on tolling; and because Dole's claim for loss or damage made on May 4, 1972 amounted to a written extrajudicial demand which would toll or interrupt prescription under Article 1155, it operated to toll prescription also in actions under the Carriage of Goods by Sea Act. To much the same effect is the further argument based on Article 1176 of the Civil Code which provides that the rights and obligations of common carriers shall be governed by the Code of Commerce and by special laws in all matters not regulated by the Civil Code. These arguments might merit weightier consideration were it not for the fact that the question has already received a definitive answer, adverse to the position taken by Dole, in The Yek Tong Lin Fire & Marine Insurance Co., Ltd. vs. American President Lines, Inc. 15 There, in a parallel factual situation, where suit to recover for damage to cargo shipped by vessel from Tokyo to Manila was filed more than two years after the consignee's receipt of the cargo, this Court rejected the contention that an extrajudicial demand tolled the prescriptive period provided for in the Carriage of Goods by Sea Act, viz: "In the second assignment of error plaintiff-appellant argues that it was error for the court a quo not to have considered the action of plaintiff-appellant suspended by the extrajudicial demand which took place, according to defendant's own motion to dismiss, on August 22, 1952. We notice that while plaintiff avoids stating any date when the goods arrived in Manila, it relies upon the allegation made in the motion to dismiss that a protest was filed on August 22, 1952 which goes to show that plaintiff-appellant's counsel has not been laying the facts squarely before the court for the consideration of the merits of the case. We have already decided that in a case governed by the Carriage of Goods by Sea Act, the general provisions of the Code of Civil Procedure on prescription should not be made to apply. (Chua Kuy vs. Everett Steamship Corp., G.R. No. L-5554, May 27, 1953.) Similarly, we now hold that in such a case the general provisions of the new Civil Code (Art. 1155) cannot be made to apply, as such application would have the effect of extending the one-year period of prescription fixed in the law. It is desirable that matters affecting transportation of goods by sea be decided in as short a time as possible; the application of the provisions of Article 1155 of the new Civil Code would unnecessarily extend the period and permit delays in the settlement of questions affecting transportation, contrary to the clear intent and purpose of the law. . . ." Moreover, no different result would obtain even if the Court were to accept the proposition that a written extrajudicial demand does toll prescription under the Carriage of Goods by Sea Act. The demand in this instance would be the claim for damage filed by Dole with Maritime on May 4, 1972. The effect of that demand would have been to renew the one-year prescriptive period from the date of its making Stated otherwise, under Dole's theory, when its claim was received by Maritime, the one-year prescriptive period was interrupted "tolled" would be the more precise term and began to run anew from May 4, 1972, affording Dole another period of one (1) year counted from that date within which to institute action on its claim for damage. Unfortunately, Dole let the new period lapse without filing action. It instituted Civil Case No. 91043 only on June 11, 1973, more than one month after that period has expired and its right of action had prescribed. llcd Dole's contention that the prescriptive period ". . . remained tolled as of May 4, 1972 . . . (and that) in legal contemplation . . . (the) case (Civil Case No. 96353) was filed on January 6, 1975 . . . well within the one-year prescriptive period in Sec. 3(6) of the Carriage of Goods by Sea Act," 16 equates tolling with indefinite suspension. It is clearly fallacious and merits no consideration. WHEREFORE, the order of dismissal appealed from is affirmed, with Costs against the appellant, Dole Philippines, Inc. SO ORDERED. Yap, Melencio-Herrera, Cruz, Feliciano, Gancayco and Sarmiento, JJ ., concur. SECOND DIVISION [G.R. No. 110398. November 7, 1997.] NEGROS NAVIGATION CO., INC., petitioner, vs. THE COURT OF APPEALS, RAMON MIRANDA, SPS. RICARDO and VIRGINIA DE LA VICTORIA, respondents. Hernandez, Velicara, Vibar and Santiago for petitioner. Aquino and Miranda for private respondents. SYNOPSIS This is a petition for review on certiorari of the decision of the Court of Appeals affirming with modification the Regional Trial Court's award of damages to private respondents for the death of their four relatives as a result of the sinking of M/V Don Juan, a vessel owned by petitioner. The issues raised in this petition were: first, whether the members of private respondents; families were actually passengers of the M/V Don Juan; second, whether the ruling in the previous case (Mecenas vs. Court of Appeals) involving the same incident be binding on this case; third, whether the total loss of the M/V Don Juan extinguished petitioner's liability; and whether the damages awarded by the appellate court are excessive, unreasonable and unwarranted.

The decision of the Court of Appeals affirmed with the modification as to the amount of damages. On the first issue, the Supreme Court held that the fact that the victims were passengers of the M/V Don Juan was sufficiently testified to by private respondents Ramon Miranda, who purchased from the company four special cabin tickets for his family and niece. On the second issue, the Court ruled that adherence to the Mecenas case was dictated by the Court's policy of maintaining stability in jurisprudence in accordance with the legal maxim "stare decisis et non quieta movere" (Follow past precedents and do not disturb what has been settled.) Where, as in this case, the same questions relating to the same event have been put forward by parties similarly situated as in a previous case litigated and decided by a competent court, the rule of stare decisis is a bar to attempt to relitigate the same issue. Indeed, the evidence presented in the instant case was the same as those presented in the Mecenas case. As to the third case, the rule is that a shipowner may be held liable for injuries to passengers notwithstanding the exclusively real and hypothecary nature of martime law if fault can be attributed to shipowner. As to the damages awarded, the Court ruled that the principle of stare decisis does not apply here in view of the differences in the personal circumstances of the victims. For that matter differentiation would be justified even if private respondents had joined the private respondents in the Mecenas case. The doctrine of stare decisis works as a bar only against issues litigated in a previous case. SYLLABUS 1. REMEDIAL LAW; ACTION; JUDGMENT; STARE DECISIS; WHEN THE RULE BARS AN ATTEMPT TO RELITIGATE THE SAME ISSUE; CASE AT BAR. Adherence to the Mecenas case (Mecenas v. Intermediate Appellate Court, 180 SCRA 87) is dictated by this Court's policy of maintaining stability in jurisprudence in accordance with the legal maxim "stare decisis et non quieta movere" (Follow past precedents and do not disturb what has been settled.) Where, as in this case, the same questions relating to the same event have been put forward by parties similarly situated as in a previous case litigated and decided by a competent court, the rule of stare decisis is a bar to any attempt to relitigate the same issue. (J.M. Tuason & Corp. v. Mariano, 85 SCRA 644 (1978)). In (Woulfe v. Associated Realties Corporation, 130 N.J. Eq. 519, 23 A. 2d 399, 401 (1942)), the Supreme Court of New Jersey held that where substantially similar cases to the pending case were presented and applicable principles declared in prior decisions, the court was bound by the principle of stare decisis. Similarly, in State ex rel. Tollinger v. Gill, 75 Ohio App. __, 62 N.E. 2d 760 (1944), it was held that under the doctrine of stare decisis a ruling is final even as to parties who are strangers to the original proceeding and not bound by the judgment under the res judicata doctrine. The Philadelphia court expressed itself in this wise: "Stare decisis simply declares that, for the sake of certainty, a conclusion reached in one case should be applied to those which follow, if the facts are substantially the same, even though the parties may be different."' Thus, in J. M. Tuason v. Mariano, supra this Court relied on its rulings in other cases involving different parties in sustaining the validity of a land title on the principle of "stare decisis et non quieta movere." IEHSDA 2. ID.; ID.; ID.; ID.; WHEN NOT APPLICABLE; CASE AT BAR. Petitioner contends that, assuming that the Mecenas case applies, private respondents should be allowed to claim only P43,857.14 each as moral damages because in the Mecenas case, the amount of P307,500.00 was awarded to the seven children of the Mecenas couple. Under petitioner's formula, Ramon Miranda should receive P43,857.14, while the De la Victoria spouses should receive P97,714.28. Here is where the principle of stare decisis does not apply in view of differences in the personal circumstances of the victims. For that matter, differentiation would be justified even if private respondents had joined the private respondents in the Mecenas case. The doctrine of stare decisis works as a bar only against issues litigated in a previous case. Where the issue involved was not raised nor presented to the court and not passed upon by the court in the previous case, the decision in the previous case is not stare decisis of the question presently presented. The decision in the Mecenas case relates to damages for which petitioner was liable to the claimants in that case. In the case at bar, the award of P300,000.00 for moral damages is reasonable considering the grief petitioner Ramon Miranda suffered as a result of the loss of his entire family. 3. CIVIL LAW; DAMAGES; WHEN SHIPOWNER HELD LIABLE FOR INJURIES TO PASSENGERS; CASE AT BAR. The rule is well-entrenched in our jurisprudence that a shipowner may be held liable for injuries to passengers notwithstanding the exclusively real and hypothecary nature of maritime law if fault can be attributed to the shipowner. In Mecenas, this Court found petitioner guilty of negligence in (1) allowing or tolerating the ship captain and crew members in playing mahjong during the voyage, (2) in failing to maintain the vessel seaworthy and (3) in allowing the ship to carry more passengers than it was allowed to carry. Petitioner is, therefore, clearly liable for damages to the full extent. 4. ID.; ID.; LOSS OF EARNING CAPACITY; FORMULA FOR DETERMINING LIFE EXPECTANCY; APPLICATION IN CASE AT BAR. The accepted formula for determining life expectancy is 2/3 multiplied by (80 minus the age of the deceased). It may be that in the Philippines the age of retirement generally is 65 but, in calculating the life expectancy of individuals for the purpose of determining loss of earning capacity under Art. 2206(1) of the Civil Code, it is assumed that the deceased would have earned income even after retirement from a particular job. In this case, the trial court took into account the fact that Mrs. Miranda had a master's degree and a good prospect of becoming principal of the school in which she was teaching. There was reason to believe that her income would have increased through the years and she could still earn more after her retirement, e.g., by becoming a consultant, had she not died. The gross earnings which Mrs. Miranda could reasonably be expected to earn were it not for her untimely death was, therefore, correctly computed by the trial court to be P218,077.92 (given a gross annual income of P10,224.00 and life expectancy of 21.33 years). In the case at bar, we hold that a deduction of 50% from Mrs. Miranda's gross earnings (P218,077.92) would be reasonable, so that her net earning capacity should be P109,038.96. There is no basis for supposing that her living expenses constituted a smaller percentage of her gross income than the living expenses in the decided cases. To hold that she would have used only a small part of her income for herself, a larger part going to the support of her children would be conjectural and unreasonable.

5. ID.; ID.; ACTUAL DAMAGES; WHEN PROPER; CASE AT BAR. The award of actual damages in the amount of P23,075.00 was determined by the Court of Appeals on the basis of receipts submitted by private respondents. This amount is reasonable considering the expenses incurred by private respondent Miranda in organizing three search teams to look for his family, spending for transportation in going to places such as Batangas City and Iloilo, where survivors and the bodies of other victims were found, making long distance calls, erecting a monument in honor of the four victims, spending for obituaries in the Bulletin Today and for food, masses and novenas. Indemnity for death is given to compensate for violation of the rights of the deceased, i.e., his right to life and physical integrity. On the other hand, damages incidental to or arising out of such death are for pecuniary losses of the beneficiaries of the deceased. 6. ID.; ID.; EXEMPLARY DAMAGES, CONSTRUED; CASE AT BAR. The award of exemplary damages should be increased to P300,000.00 for Ramon Miranda and P100,000.00 for the de la Victoria spouses in accordance with our ruling in the Mecenas case: Exemplary damages are designed by our civil law to permit the courts to reshape behavior that is socially deleterious in its consequence by creating negative incentives or deterrents against such behaviour. In requiring compliance with the standard of extraordinary diligence, a standard which is in fact that of the highest possible degree of diligence, from common carriers and in creating a presumption of negligence against them, the law seeks to compel them to control their employees, to tame their reckless instincts and to force them to take adequate care of human beings and their property. The Court will take judicial notice of the dreadful regularity with which grievous maritime disasters occur in our waters with massive loss of life. The bulk of our population is too poor to afford domestic air transportation. So it is that notwithstanding the frequent sinking of passenger vessels in our waters, crowds of people continue to travel by sea. This Court is prepared to use the instruments given to it by the law for securing the ends of law and public policy. One of those instruments is the institution of exemplary damages; one of those ends, of special importance in an archipelagic state like the Philippines, is the safe and reliable carriage of people and goods by sea. ACTIHa DECISION MENDOZA, J p: This is a petition for review on certiorari of the decision of the Court of Appeals affirming with modification the Regional Trial Court's award of damages to private respondents for the death of relatives as a result of the sinking of petitioner's vessel. In April of 1980, private respondent Ramon Miranda purchased from the Negros Navigation Co., Inc. four special cabin tickets (#74411, 74412, 74413 and 74414) for his wife, daughter, son and niece who were going to Bacolod City to attend a family reunion. The tickets were for Voyage No. 457-A of the M/V Don Juan, leaving Manila at 1:00 p.m. on April 22, 1980. The ship sailed from the port of Manila on schedule. LLphil At about 10:30 in the evening of April 22, 1980, the Don Juan collided off the Tablas Strait in Mindoro, with the M/T Tacloban City, an oil tanker owned by the Philippine National Oil Company (PNOC) and the PNOC Shipping and Transport Corporation (PNOC/STC). As a result, the M/V Don Juan sank. Several of her passengers perished in the sea tragedy. The bodies of some of the victims were found and brought to shore, but the four members of private respondents' families were never found. Private respondents filed a complaint on July 16, 1980 in the Regional Trial Court of Manila, Branch 34, against the Negros Navigation, the Philippine National Oil Company (PNOC), and the PNOC Shipping and Transport Corporation (PNOC/STC), seeking damages for the death of Ardita de la Victoria Miranda, 48, Rosario V. Miranda, 19, Ramon V. Miranda, Jr., 16, and Elfreda de la Victoria, 26. In its answer, petitioner admitted that private respondents purchased ticket numbers 74411, 74412, 74413 and 74414; that the ticket numbers were listed in the passenger manifest; and that the Don Juan left Pier 2, North Harbor, Manila on April 22, 1980 and sank that night after being rammed by the oil tanker M/T Tacloban City, and that, as a result of the collision, some of the passengers of the M/V Don Juan died. Petitioner, however, denied that the four relatives of private respondents actually boarded the vessel as shown by the fact that their bodies were never recovered. Petitioner further averred that the Don Juan was seaworthy and manned by a full and competent crew, and that the collision was entirely due to the fault of the crew of the M/T Tacloban City. On January 20, 1986, the PNOC and petitioner Negros Navigation Co., Inc. entered into a compromise agreement whereby petitioner assumed full responsibility for the payment and satisfaction of all claims arising out of or in connection with the collision and releasing the PNOC and the PNOC/STC from any liability to it. The agreement was subsequently held by the trial court to be binding upon petitioner, PNOC and PNOC/STC. Private respondents did not join in the agreement. After trial, the court rendered judgment on February 21, 1991, the dispositive portion of which reads as follows: WHEREFORE, in view of the foregoing, judgment is hereby rendered in favor of the plaintiffs, ordering all the defendants to pay jointly and severally to the plaintiffs damages as follows: To Ramon Miranda: P42,025.00 P152,654.55 for actual damages; as compensatory damages for loss of

earning capacity of his wife;

P90,000.00

as compensatory damages for wrongful

death of three (3) victims; P300,000.00 P50,000.00 as moral damages; as exemplary damages, all in the total

amount of P634,679.55; and P40,000.00 as attorney's fees.

To Spouses Ricardo and Virginia de la Victoria: P12,000.00 P158,899.00 for actual damages; as compensatory damages for loss of

earning capacity; P30,000.00 death; P100,000.00 P20,000.00 as moral damages; as exemplary damages, all in the total as compensatory damages for wrongful

amount of P320,899.00; and P15,000.00 as attorney's fees.

On appeal, the Court of Appeals 1 affirmed the decision of the Regional Trial Court with modification 1. Ordering and sentencing defendants-appellants, jointly and severally, to pay plaintiff-appellee Ramon Miranda the amount of P23,075.00 as actual damages instead of P42,025.00; 2. Ordering and sentencing defendants-appellants, jointly and severally, to pay plaintiff-appellee Ramon Miranda the amount of P150,000.00, instead of P90,000.00, as compensatory damages for the death of his wife and two children; 3. Ordering and sentencing defendants-appellants, jointly and severally, to pay plaintiffs-appellees Dela Victoria spouses the amount of P50,000,00, instead of P30,000.00, as compensatory damages for the death of their daughter Elfreda Dela Victoria; Hence this petition, raising the following issues: (1) whether the members of private respondents' families were actually passengers of the Don Juan;

(2) whether the ruling in Mecenas vs. Court of Appeals, 2 finding the crew members of petitioner to be grossly negligent in the performance of their duties, is binding in this case; (3) (4) whether the total loss of the M/V Don Juan extinguished petitioner's liability; and whether the damages awarded by the appellate court are excessive, unreasonable and unwarranted.

First. The trial court held that the fact that the victims were passengers of the M/V Don Juan was sufficiently proven by private respondent Ramon Miranda, who testified that he purchased tickets numbered 74411, 74412, 74413 and 74414 at P131.30 each from the Makati office of petitioner for Voyage No. 47-A of the M/V Don Juan, which was leaving Manila on April 22, 1980. This was corroborated by the passenger manifest (Exh. E) on which the numbers of the tickets and the names of Ardita Miranda and her children and Elfreda de la Victoria appear. Petitioner contends that the purchase of the tickets does not necessarily mean that the alleged victims actually took the trip. Petitioner asserts that it is common knowledge that passengers purchase tickets in advance but do not actually use them. Hence, private respondent should also prove the presence of the victims on the ship. The witnesses who affirmed that the victims were on the ship were biased and unreliable. This contention is without merit. Private respondent Ramon Miranda testified that he personally took his family and his niece to the vessel on the day of the voyage and stayed with them on the ship until it was time for it to leave. There is no reason he should claim members of his family to have perished in the accident just to maintain an action. People do not normally lie about so grave a matter as the loss of dear ones. It would be more difficult for private respondents to keep

the existence of their relatives if indeed they are alive than it is for petitioner to show the contrary. Petitioner's only proof is that the bodies of the supposed victims were not among those recovered from the site of the mishap. But so were the bodies of the other passengers reported missing not recovered, as this Court noted in the Mecenas 3 case. Private respondent Miranda's testimony was corroborated by Edgardo Ramirez. Ramirez was a seminarian and one of the survivors of the collision. He testified that he saw Mrs. Miranda and Elfreda de la Victoria on the ship and that he talked with them. He knew Mrs. Miranda who was his teacher in the grade school. He also knew Elfreda who was his childhood friend and townmate. Ramirez said he was with Mrs. Miranda and her children and niece from 7:00 p.m. until 10:00 p.m. when the collision happened and that he in fact had dinner with them. Ramirez said he and Elfreda stayed on the deck after dinner and it was there where they were jolted by the collision of the two vessels. Recounting the moments after the collision, Ramirez testified that Elfreda ran to fetch Mrs. Miranda. He escorted her to the room and then tried to go back to the deck when the lights went out. He tried to return to the cabin but was not able to do so because it was dark and there was a stampede of passengers from the deck. Petitioner casts doubt on Ramirez' testimony, claiming that Ramirez could not have talked with the victims for about three hours and not run out of stories to tell, unless Ramirez had a "storehouse" of stories. But what is incredible about acquaintances thrown together on a long journey staying together for hours on end, in idle conversation precisely to while the hours away? Petitioner also points out that it took Ramirez three (3) days before he finally contacted private respondent Ramon Miranda to tell him about the fate of his family. But it is not improbable that it took Ramirez three days before calling on private respondent Miranda to tell him about the last hours of Mrs. Miranda and her children and niece, in view of the confusion in the days following the collision as rescue teams and relatives searched for survivors. Indeed, given the facts of this case, it is improper for petitioner to even suggest that private respondents' relatives did not board the illfated vessel and perish in the accident simply because their bodies were not recovered. Second. In finding petitioner guilty of negligence and in failing to exercise the extraordinary diligence required of it in the carriage of passengers, both the trial court and the appellate court relied on the findings of this Court in Mecenas vs. Intermediate Appellate Court, 4 which case was brought for the death of other passengers. In that case it was found that although the proximate cause of the mishap was the negligence of the crew of the M/T Tacloban City, the crew of the Don Juan was equally negligent as it found that the latter's master, Capt. Rogelio Santisteban, was playing mahjong at the time of collision, and the officer on watch, Senior Third Mate Rogelio De Vera, admitted that he failed to call the attention of Santisteban to the imminent danger facing them. This court found that Capt. Santisteban and the crew of the M/V Don Juan failed to take steps to prevent the collision or at least delay the sinking of the ship and supervise the abandoning of the ship. Petitioner Negros Navigation was found equally negligent in tolerating the playing of mahjong by the ship captain and other crew members while on board the ship and failing to keep the M/V Don Juan seaworthy so much so that the ship sank within 10 to 15 minutes of its impact with the M/T Tacloban City. In addition, the Court found that the Don Juan was overloaded. The Certificate of Inspection, dated August 27, 1979, issued by the Philippine Coast Guard Commander at Iloilo City stated that the total number of persons allowed on the ship was 864, of whom 810 are passengers, but there were actually 1,004 on board the vessel when it sank, 140 persons more than the maximum number that could be safely carried by it. Taking these circumstances together, and the fact that the M/V Don Juan, as the faster and better-equipped vessel, could have avoided a collision with the PNOC tanker, this Court held that even if the Tacloban City had been at fault for failing to observe an internationally-recognized rule of navigation, the Don Juan was guilty of contributory negligence. Through Justice Feliciano, this Court held: The grossness of the negligence of the "Don Juan" is underscored when one considers the foregoing circumstances in the context of the following facts: Firstly, the "Don Juan" was more than twice as fast as the "Tacloban City." The "Don Juan's" top speed was 17 knots; while that of the "Tacloban City" was 6.3 knots. Secondly, the "Don Juan" carried the full complement of officers and crew members specified for a passenger vessel of her class. Thirdly, the "Don Juan" was equipped with radar which was functioning that night. Fourthly, the "Don Juan's" officer on-watch had sighted the "Tacloban City" on his radar screen while the latter was still four (4) nautical miles away. Visual confirmation of radar contact was established by the "Don Juan" while the "Tacloban City" was still 2.7 miles away. In the total set of circumstances which existed in the instant case, the "Don Juan," had it taken seriously its duty of extraordinary diligence, could have easily avoided the collision with the "Tacloban City." Indeed, the "Don Juan" might well have avoided the collision even if it had exercised ordinary diligence merely. LibLex It is true that the "Tacloban City" failed to follow Rule 18 of the International Rules of the Road which requires two (2) power-driven vessels meeting end on or nearly end on each to alter her course to starboard (right) so that each vessel may pass on the port side (left) of the other. The "Tacloban City," when the two (2) vessels were only three-tenths (0.3) of a mile apart, turned (for the second time) 15 to port side while the "Don Juan" veered hard to starboard . . . [But] "route observance" of the International Rules of the Road will not relieve a vessel from responsibility if the collision could have been avoided by proper case and skill on her part or even by a departure from the rules.

In the petition at bar, the "Don Juan" having sighted the "Tacloban City" when it was still a long way off was negligent in failing to take early preventive action and in allowing the two (2) vessels to come to such close quarters as to render the collision inevitable when there was no necessity for passing so near to the "Tacloban City" as to create that hazard or inevitability, for the "Don Juan" could choose its own distance. It is noteworthy that the "Tacloban City," upon turning hard to port shortly before the moment of collision, signalled its intention to do so by giving two (2) short blasts with its horn. The "Don Juan" gave no answering horn blast to signal its own intention and proceeded to turn hard to starboard. We conclude that Capt. Santisteban and Negros Navigation are properly held liable for gross negligence in connection with the collision of the "Don Juan" and "Tacloban City" and the sinking of the "Don Juan' leading to the death of hundreds of passengers. . . . 5 Petitioner criticizes the lower court's reliance on the Mecenas case, arguing that, although this case arose out of the same incident as that involved in Mecenas, the parties are different and trial was conducted separately. Petitioner contends that the decision in this case should be based on the allegations and defenses pleaded and evidence adduced in it or, in short, on the record of this case. The contention is without merit. What petitioner contends may be true with respect to the merits of the individual claims against petitioner but not as to the cause of the sinking of its ship on April 22, 1980 and its liability for such accident, of which there can only be one truth. Otherwise, one would be subscribing to the sophistry: truth on one side of the Pyrenees, falsehood on the other! Adherence to the Mecenas case is dictated by this Court's policy of maintaining stability in jurisprudence in accordance with the legal maxim "stare decisis et non quieta movere" (Follow past precedents and do not disturb what has been settled.) Where, as in this case, the same questions relating to the same event have been put forward by parties similarly situated as in a previous case litigated and decided by a competent court, the rule of stare decisis is a bar to any attempt to relitigate the same issue. 6 In Woulfe v. Associated Realties Corporation, 7 the Supreme Court of New Jersey held that where substantially similar cases to the pending case were presented and applicable principles declared in prior decisions, the court was bound by the principle of stare decisis. Similarly, in State ex rel. Tollinger vs. Gill, 8 it was held that under the doctrine of stare decisis a ruling is final even as to parties who are strangers to the original proceeding and not bound by the judgment under the res judicata doctrine. The Philadelphia court expressed itself in this wise: "Stare decisis simply declares that, for the sake of certainty, a conclusion reached in one case should be applied to those which follow, if the facts are substantially the same, even though the parties may be different." 9 Thus, in J . M. Tuason v. Mariano, supra, this Court relied on its rulings in other cases involving different parties in sustaining the validity of a land title on the principle of "stare decisis et non quieta movere." Indeed, the evidence presented in this case was the same as those presented in the Mecenas case, to wit: Document Mecenas case This case Exh. 11-B-NN/X

Decision of Commandant, Exh. 10 10 Phil. Coast Guard in BMI Case No. 415-80 dated 3/26/81 Decision of the Minister Exh. 11 11

Exh. ZZ

of National Defense dated 3/12/82

Resolution on the Exh. 13 12 motion for reconsideration of the decision of the Minister of National Defense dated 7/24/84 Certificate of Exh. 1-A13 (private respondents)

Exh. AAA

Exh. 19-NN

inspection dated 8/27/79 Certificate of Stability dated 12/16/76 Nor is it true that the trial court merely based its decision on the Mecenas case. The trial court made its own independent findings on the basis of the testimonies of witnesses, such as Senior Third Mate Rogelio de Vera, who incidentally gave substantially the same testimony on petitioner's behalf before the Board of Marine Inquiry. The trial court agreed with the conclusions of the then Minister of National Defense finding both vessels to be negligent. Third. The next issue is whether petitioner is liable to pay damages notwithstanding the total loss of its ship. The issue is not one of first impression. The rule is well-entrenched in our jurisprudence that a shipowner may be held liable for injuries to passengers notwithstanding the exclusively real and hypothecary nature of maritime law if fault can be attributed to the shipowner. 15 In Mecenas, this Court found petitioner guilty of negligence in (1) allowing or tolerating the ship captain and crew members in playing mahjong during the voyage, (2) in failing to maintain the vessel seaworthy and (3) in allowing the ship to carry more passengers that it was allowed to carry. Petitioner is, therefore, clearly liable for damages to the full extent. Fourth. Petitioner contends that, assuming that the Mecenas case applies, private respondents should be allowed to claim only P43,857.14 each as moral damages because in the Mecenas case, the amount of P307,500.00 was awarded to the seven children of the Mecenas couple. Under petitioner's formula, Ramon Miranda should receive P43,857.14, while the De la Victoria spouses should receive P97,714.28. Here is where the principle of stare decisis does not apply in view of differences in the personal circumstances of the victims. For that matter, differentiation would be justified even if private respondents had joined the private respondents in the Mecenas case. The doctrine of stare decisis works as a bar only against issues litigated in a previous case. Where the issue involved was not raised nor presented to the court and not passed upon by the court in the previous case, the decision in the previous case is not stare decisis of the question presently presented. 16 The decision in the Mecenas case relates to damages for which petitioner was liable to the claimants in that case. In the case at bar, the award of P300,000.00 for moral damages is reasonable considering the grief petitioner Ramon Miranda suffered as a result of the loss of his entire family. As a matter of fact, three months after the collision, he developed a heart condition undoubtedly caused by the strain of the loss of his family. The 100,000.00 given to Mr. and Mrs. de la Victoria is likewise reasonable and should be affirmed. As for the amount of civil indemnity awarded to private respondents, the appellate court's award of P50,000.00 per victim should be sustained. The amount of P30,000.00 formerly set in De Lima v. Laguna Tayabas Co., 17 Heirs of Amparo delos Santos v. Court of Appeals, 18 and Philippine Rabbit Bus Lines, Inc. v. Intermediate Appellate Court 19 as benchmark was subsequently increased to P50,000.00 in the case of Sulpicio Lines, Inc. v. Court of Appeals, 20 which involved the sinking of another interisland ship on October 24, 1988. We now turn to the determination of the earning capacity of the victims. With respect to Ardita Miranda, the trial court awarded damages computed as follows: 21 In the case of victim Ardita V. Miranda whose age at the time of the accident was 48 years, her life expectancy was computed to be 21.33 years, and therefore, she could have lived up to almost 70 years old. Her gross earnings for 21.33 years based on P10,224.00 per annum, would be P218,077.92. Deducting therefrom 30% as her living expenses, her net earnings would be P152,654.55, to which plaintiff Ramon Miranda is entitled to compensatory damages for the loss of earning capacity of his wife. In considering 30% as the living expenses of Ardita Miranda, the Court takes into account the fact that plaintiff and his wife were supporting their daughter and son who were both college students taking Medicine and Law respectively. In accordance with the ruling in Villa-Rey Transit, Inc. v. Court of Appeals, 22 we think the life expectancy of Ardita Miranda was correctly determined to be 21.33 years, or up to age 69. Petitioner contends, however, that Mrs. Miranda would have retired from her job as a public school teacher at 65, hence her loss of earning capacity should be reckoned up to 17.33 years only. The accepted formula for determining life expectancy is 2/3 multiplied by (80 minus the age of the deceased). It may be that in the Philippines the age of retirement generally is 65 but, in calculating the life expectancy of individuals for the purpose of determining loss of earning capacity under Art. 2206(1) of the Civil Code, it is assumed that the deceased would have earned income even after retirement from a particular job. In this case, the trial court took into account the fact that Mrs. Miranda had a master's degree and a good prospect of becoming principal of the school in which she was teaching. There was reason to believe that her income would have increased through the years and she could still earn more after her retirement, e.g., by becoming a consultant, had she not died. The gross earnings which Mrs. Miranda could reasonably be expected to earn were it not for her untimely death was, therefore, correctly computed by the trial court to be P218,077.92 (given a gross annual income of P10,224.00 and life expectancy of 21.33 years). Exh. 6-A14 Exh. 19-D-NN

Petitioner contends that from the amount of gross earnings, 60% should be deducted as necessary living expenses, not merely 30% as the trial court allowed. Petitioner contends that 30% is unrealistic, considering that Mrs. Miranda's earnings would have been subject to taxes, social security deductions and inflation. We agree with this contention. In Villa-Rey Transit, Inc. v. Court of Appeals, 23 the Court allowed a deduction of P1,184.00 for living expenses from the P2,184.00 annual salary of the victim, which is roughly 54.2% thereof. The deceased was 29 years old and a training assistant in the Bacnotan Cement Industries. In People v. Quilation, 24 the deceased was a 26-year old laborer earning a daily wage. The court allowed a deduction of P120,000.00 which was 51.3% of his annual gross earnings of P234,000.00. In People v. Teehankee, 25 the court allowed a deduction of P19,800.00, roughly 42.4% thereof from the deceased's annual salary of P46,659.21. The deceased, Maureen Hultman, was 17 years old and had just received her first paycheck as a secretary. In the case at bar, we hold that a deduction of 50% from Mrs. Miranda's gross earnings (P218,077.92) would be reasonable, so that her net earning capacity should be P109,038.96. There is no basis for supposing that her living expenses constituted a smaller percentage of her gross income than the living expenses in the decided cases. To hold that she would have used only a small part of her income for herself, a larger part going to the support of her children would be conjectural and unreasonable. As for Elfreda de la Victoria, the trial court found that, at the time of her death, she was 26 years old, a teacher in a private school in Malolos, Bulacan, earning P6,192.00 per annum. Although a probationary employee, she had already been working in the school for two years at the time of her death and she had a general efficiency rating of 92.85% and it can be presumed that, if not for her untimely death, she would have become a regular teacher. Hence, her loss of earning capacity is P111,456.00, computed as follows: On the other hand, the award of actual damages in the amount of P23,075.00 was determined by the Court of Appeals on the basis of receipts submitted by private respondents. This amount is reasonable considering the expenses incurred by private respondent Miranda in organizing three search teams to look for his family, spending for transportation in going to places such as Batangas City and Iloilo, where survivors and the bodies of other victims were found, making long distance calls, erecting a monument in honor of the four victims, spending for obituaries in the Bulletin Today and for food, masses and novenas. Petitioner's contention that the expenses for the erection of a monument and other expenses for memorial services for the victims should be considered included in the indemnity for death awarded to private respondents is without merit. Indemnity for death is given to compensate for violation of the rights of the deceased, i.e., his right to life and physical integrity. 26 On the other hand, damages incidental to or arising out of such death are for pecuniary losses of the beneficiaries of the deceased. As for the award of attorney's fees, we agree with the Court of Appeals that the amount of P40,000.00 for private respondent Ramon Miranda and P15,000.00 for the de la Victoria spouses is justified. The appellate court correctly held: The Mecenas case cannot be made the basis for determining the award for attorney's fees. The award would naturally vary or differ in each case. While it is admitted that plaintiff-appellee Ramon Miranda who is himself a lawyer, represented also plaintiff-appellees Dela Victoria spouses, we note that separate testimonial evidence were adduced by plaintiff-appellee Ramon Miranda (TSN, February 26, 1982, p. 6) and plaintiffs-appellees spouses Dela Victoria (TSN, August 13, 1981, p. 43). Considering the amount of work and effort put into the case as indicated by the voluminous transcripts of stenographic notes, we find no reason to disturb the award of P40,000.00 for plaintiff-appellee Ramon Miranda and P15,000.00 for plaintiffs-appellees Dela Victoria spouses. 27 The award of exemplary damages should be increased to P300,000.00 for Ramon Miranda and P100,000.00 for the de la Victoria spouses in accordance with our ruling in the Mecenas case: Exemplary damages are designed by our civil law to permit the courts to reshape behavior that is socially deleterious in its consequence by creating negative incentives or deterrents against such behavior. In requiring compliance with the standard of extraordinary diligence, a standard which is in fact that of the highest possible degree of diligence, from common carriers and in creating a presumption of negligence against them, the law seeks to compel them to control their employees, to tame their reckless instincts and to force them to take adequate care of human beings and their property. The Court will take judicial notice of the dreadful regularity with which grievous maritime disasters occur in our waters with massive loss of life. The bulk of our population is too poor to afford domestic air transportation. So it is that notwithstanding the frequent sinking of passenger vessels in our waters, crowds of people continue to travel by sea. This Court is prepared to use the instruments given to it by the law for securing the ends of law and public policy. One of those instruments is the institution of exemplary damages; one of those ends, of special importance in an archipelagic state like the Philippines, is the safe and reliable carriage of people and goods by sea. 28 WHEREFORE, the decision of the Court of Appeals is AFFIRMED with modification and petitioner is ORDERED to pay private respondents damages as follows: To private respondent Ramon Miranda: P23,075.00 P109,038.96 for actual damages; as compensatory damages for loss of

earning capacity of his wife;

P150,000.00

as compensatory damages for wrongful

death of three (3) victims; P300,000.00 P300,000.00 as moral damages; as exemplary damages, all in the total

amount of P882,113.96; and P40,000.00 as attorney's fees.

To private respondents Spouses Ricardo and Virginia de la Victoria: P12,000.00 P111,456.00 for actual damages; as compensatory damages for loss of

earning capacity; P50,000.00 death; P100,000.00 P100,000.00 as moral damages; as exemplary damages, all in the total as compensatory damages for wrongful

amount of P373,456.00; and P15,000.00 as attorney's fees.

Petitioners are further ordered to pay costs of suit. In the event the Philippine National Oil Company and/or the PNOC Shipping and Transport Corporation pay or are required to pay all or a portion of the amounts adjudged, petitioner Negros Navigation Co., Inc. shall reimburse either of them such amount or amounts as either may have paid, and in the event of failure of Negros Navigation Co., Inc., to make the necessary reimbursement, PNOC and/or PNOC/STC shall be entitled to a writ of execution without need of filing another action. cdll SO ORDERED. Regalado and Puno, JJ ., concur.

THIRD DIVISION [G.R. No. 101683. February 23, 1995.] LBC AIR CARGO, INC., FERNANDO M. YU and JAIME TANO, JR., petitioners, vs. HON. COURT OF APPEALS, Fourth Division, SHERWIN MONTEROLA y OYON-OYON, represented by PATROCENIA GRONDIANO y MONTEROLA, and PATROCENIA GRONDIANO y MONTEROLA, respondents. SYLLABUS 1. COMMERCIAL LAW; TRANSPORTATION; COLLISION; DOCTRINE OF "LAST CLEAR CHANCE"; WHEN APPLICABLE; CASE AT BAR. For every indication, the proximate cause of the accident was the negligence of Tano who, despite extremely poor visibility, hastily executed a left turn (towards the Bislig airport road entrance) without first waiting for the dust to settle. It was this negligent act of Tano, which had placed his vehicle (LBC van) directly on the path of the motorcycle coming from the opposite direction, that almost instantaneously caused the collision to occur. Simple prudence required him not to attempt to cross the other lane until after it would have been safe from and clear of any oncoming vehicle. Petitioners poorly invoke the doctrine of "last clear chance" (also referred to, at times, as "supervening negligence" or as "discovered peril"). The doctrine, in essence, is to the effect that where both parties are negligent, but the negligent act of one is appreciably later in time than that of the other, or when it is impossible to determine whose fault or negligence should be attributed to the incident, the one who had the last clear opportunity to avoid the impending harm and failed to do so is chargeable with the consequences thereof (see Picart vs. Smith, 37 Phil. 809). Stated differently, the rule would also mean that an antecedent negligence of a person does not preclude the recovery of damages for the supervening negligence of, or bar a defense against liability sought by, another if the latter, who had the last fair chance, could have avoided the impending harm by the exercise of due diligence (Pantranco North Express, Inc. vs. Baesa, 179 SCRA 384; Glan People's Lumber and Hardware vs. Intermediate Appellate Court, 173 SCRA 464). In the case at bench, the victim was traveling along the land where he was rightly supposed to be. The incident occurred in an instant. No appreciable time had elapsed, from the moment Tano swerved to his left to the actual impact, that could have afforded the victim a last clear opportunity to avoid the collision. It is true, however, that the deceased was not all that free from negligence in evidently speeding too closely behind the vehicle he was following. We, therefore, agree with the appellate court that there indeed was contributory negligence on the victim's part that could warrant a mitigation of petitioners' liability for damages. DECISION VITUG, J p: In this petition for review, the application of the doctrines of "proximate cause" and "last clear chance" is, once again, being put to test. The petition questions the decision of the Court of Appeals dated 18 July 1991, which has reversed that of the trial court. cdphil The case arose from a vehicular collision which occurred at about 11:30 in the morning of 15 November 1987. Rogelio Monterola, a licensed driver, was traveling on board his Suzuki motorcycle towards Mangagoy on the right lane along a dusty national road in Bislig, Surigao del Sur. At about the same time, a cargo van of the LBC Air Cargo Incorporated, driven by defendant Jaime Tano, Jr., was coming from the opposite direction on its way to the Bislig Airport. On board were passengers Fernando Yu, Manager of LBC Air Cargo, and his son who was seated beside Tano. When Tano was approaching the vicinity of the airport road entrance on his left, he saw two vehicles racing against each other from the opposite direction. Tano stopped his vehicle and waited for the two racing vehicles to pass by. The stirred cloud of dust made visibility extremely bad. Instead of waiting for the dust to settle, Tano started to make a sharp left turn towards the airport road. When he was about to reach the center of the right lane, the motorcycle driven by Monterola suddenly emerged from the dust and smashed head-on against the right side of the LBC van. Monterola died from the severe injuries he sustained. cdasia A criminal case for "homicide thru reckless imprudence" was filed against Tano. A civil suit was likewise instituted by the heirs of deceased Monterola against Tano, along with Fernando Yu and LBC Air Cargo Incorporated, for the recovery of damages. The two cases were tried jointly by the Regional Trial Court, Branch 29, of Surigao del Sur. cdasia On 29 July 1990, the trial court dismissed both cases on the ground that the proximate cause of the "accident" was the negligence of deceased Rogelio Monterola. Private respondent appealed the dismissal of the civil case to the Court of Appeals. On 18 July 1991, the appellate court reversed the court a quo. It held: "WHEREFORE, the judgment appealed from is REVERSED, and another one is hereby rendered ordering the defendants Jaime Tano and LBC Air Cargo, Inc. to jointly and severally pay the plaintiff Patrocinia Monterola the following the following amounts:

"TO SHERWIN MONTEROLA: "1. Indemnity for the death of Rogelio Monterola "2. For Moral damages P50,000.00 20,000.00

"To PATROCINIA GRONDIANO Y MONTEROLA: "3. "4. "5. Actual damages P7,361.00 Hospitals & Burial Expenses Attorneys Fees and expenses of Litigation "Plus the costs. "Actual payment of the aforementioned amounts should, however, be reduced by twenty (20%) per cent." 1 In the instant petition for review, petitioners contend that "1. The Court of Appeals erred in finding that Jaime Tano, Jr. was negligent in the driving of his vehicle and in failing to give a signal to approaching vehicles of his intention to make a left turn. "2. The Court of Appeals erred in not finding that the proximate cause of the accident was the victim's negligence in the driving of his motorcycle in a very fast speed and thus hitting the petitioner's cargo van." 2 The issues raised are thus essentially factual. The intrinsic merit of, as well as cogency in, the detailed analyses made by the Court of Appeals in arriving at its findings is at once apparent. Said the appellate court: "That visibility was poor when Jaime Tano made a left turn was admitted by the latter. "Q "A "Q "A "Q "A When these two vehicles passed by your parked vehicle, as you said, there were clouds of dust, did I get you right? Yes sir, the road was dusty. So much so that you could no longer see the vehicles from the opposite direction following these vehicles? cdasia It is not clear, sir, so I even turned on my left signal and the headlight. What do you mean by it was not clear, you could not see the incoming vehicles? I could not see because of the cloud of dust. 10,000.00 15,000.00

"Q And it was at this juncture, when you were to follow your theory, when you started your LBC van again and swerved to the left leading to the Bislig airport? "A "xxx I did not enter immediately the airport, I waited the dust to clear a little before I drove. xxx xxx

"Q

In other words when you said that it was slightly clear, you would like to tell the Honorable Court that you could

only clearly see big vehicles . . . but not small vehicles like a motorcycle? "A "Q "A I could see clearly big vehicles but not small vehicles like a motorcycle. Like the motorcycle of Rogelio Monterola? Yes, sir. I could not see clearly. (Tano, tsn, April 18, 1989, pp. 26-30) (p. 15, Appellant's brief).

"Tano should not have made a left turn under the conditions admitted by him. Under the Land Transportation and Traffic Code, the driver of any vehicle upon a highway, before starting, stopping or turning from a direct line, is called upon to first see that such movement can be made in safety, and whenever the operation of any other vehicle approaching may be affected by such movement, shall give a signal plainly visible to the driver of such other vehicles of the intention to make such movement (Sec. 44, R.A. 4136, as amended). This means that before a driver turns from a direct line, in this case to the left, the driver must first see to it that there are no approaching vehicles and, if there are, to make the turn only if it can give a signal that is plainly visible to the driver of such other

vehicle. Tano did neither in this case, for he recklessly made a left turn even as visibility was still very poor, and thus failed to see the approaching motorcycle and warn the latter of his intention to make a left turn. This is plain and simple negligence. "In thus making the left turn, he placed his vehicle directly at the path of the motorcycle which, unaware of Tano's intention to make a left turn, smashed at Tano's vehicle. It was Tano's negligence that created the risk or the condition of danger that set into operation the event that led to the smashedup and untimely death of Rogelio Monterola. "Rogelio Monterola's motorcycle would not have hit the cargo van had Tano, in operating it, not recklessly turned left when visibility was still poor, and instead observed the directive of the Land Transportation Code that before doing so, he should first see to it that such movement can be made in safety, and that whenever any other vehicle approaching may be affected by such movement, should give a signal plainly visible to the driver of such other vehicle of the intention to make such movement. "That Rogelio Monterola was running fast despite poor visibility as evidenced by the magnitude of the damage to the vehicles is no defense. His negligence would at most be contributory (Article 2179, N.C.C.). Having negligently created the condition of danger, defendants may not avoid liability by pointing to the negligence of the former. cdasia "xxx xxx xxx

"Tano's proven negligence created a presumption of negligence on the part of his employer, the LBC Air Cargo Corporation, in supervising its employees properly and adequately (Phoenix Construction, Inc. vs. Intermediate Appellate Court, supra), which may only be destroyed by proof of due diligence in the selection and supervision of his employees to prevent the damage (Article 2180, N.C.C.). No such defense was interposed by defendants in their answer. "We, however, fail to see Fernando Yu's liability as Manager of LBC-Mangagoy Branch Office, there being no employer-employee relationship between him and Jaime Tano who is a driver of the LBC Air Cargo Inc. It was held in Philippine Rabbit Bus Lines Inc., et al. vs. Phil. American Forwarders, Inc., 63 SCRA 231, that the term 'Manager' in Article 2180 is used in the sense of 'employer.' Hence, no tortuous or quasi-delictual liability can be fastened on Fernando Yu as branch manager of LBC Air Cargo Inc. "Now for the amount of damages. Aside from the indemnity for death which People v. Sazon, 189 SCRA 700), the evidence disclose that as a result of the accident, Rogelio Monterola's motorcycle was damaged, the repair cost of which amounted to P7,361.00 (Exh. E-1), for the hospitalization, wake and burial expenses, plaintiff spent P15,000.00. There is likewise no question that by reason of Rogelio Monterola's untimely death, his only child 14 years old Sherwin Monterola, suffered mental anguish, fright, serious anxiety, wounded feelings and moral shock that entitles him to moral damages which we hereby fix at P20,000.00. Because of defendants' refusal to indemnify the plaintiff for his father's death, the latter was compelled to litigate and engage the services of counsel. He is therefore entitled to an additional amount of P10,000.00 for attorney's fees and expenses of litigation. cdasia "Considering, however, the contributory negligence of Rogelio Monterola in driving at a fast clip despite the fact that the road was dusty, we reduce the aggregate amount of damages to which the plaintiff is entitled by twenty per cent (Phoenix Construction Inc. v. Intermediate Appellate Court, supra.)." 3

For every indication, the proximate cause of the accident was the negligence of Tano who, despite extremely poor visibility, hastily executed a left turn (towards the Bislig airport road entrance) without first waiting for the dust to settle. It was this negligent act of Tano, which had placed his vehicle (LBC van) directly on the path of the motorcycle coming from the opposite direction, that almost instantaneously caused the collision to occur. Simple prudence required him not to attempt to cross the other lane until after it would have been safe from and clear of any oncoming vehicle. Petitioners poorly invoke the doctrine of "last clear chance" (also referred to, at times, as "supervening negligence" or as "discovered peril"). The doctrine, in essence, is to the effect that where both parties are negligent, but the negligent act of one is appreciably later in time than that of the other, or when it is impossible to determine whose fault or negligence should be attributed to the incident, the one who had the last clear opportunity to avoid the impeding harm and failed to do so is chargeable with the consequences thereof (see Picart vs. Smith, 37 Phil. 809). Stated differently, the rule would also mean that an antecedent negligence of a person does not preclude the recovery of damages for the supervening negligence of, or bar a defense against liability sought by, another if the latter, who had the last fair chance, could have avoided the impending harm by the exercise of due diligence (Pantranco North Express, Inc. vs. Baesa, 179 SCRA 384; Glan People's Lumber and Hardware vs. Intermediate Appellate Court, 173 SCRA 464).cdasia In the case at bench, the victim was traveling along the lane where he was rightly supposed to be. The incident occurred in an instant. No appreciable time had elapsed, from the moment Tano swerved to his left to the actual impact, that could have afforded the victim a last clear opportunity to avoid the collision. cdrep It is true, however, that the deceased was not all that free from negligence in evidently speeding too closely behind the vehicle he was following. We, therefore, agree with the appellate court that there indeed was contributory negligence on the victim's part that could warrant a mitigation of petitioners' liability for damages. WHEREFORE, the appealed decision is AFFIRMED. Costs against petitioners. SO ORDERED.

Feliciano, Romero, Melo and Francisco, JJ ., concur.

SECOND DIVISION [G.R. No. 106664. March 8, 1995.] PHILIPPINE AIR LINES, petitioner, vs. FLORANTE A. MIANO, respondent. Siguion Reyna, Montecillo & Ongsiako for petitioner. Florante A. Miano in his own behalf. SYLLABUS 1. CIVIL LAW; DAMAGES; MORAL DAMAGES; "BAD FAITH" MUST BE SUBSTANTIATED BY EVIDENCE; APPLICATION IN CASE OF CONTRACT OF CARRIAGE. Bad faith means a breach of a known duty through some motive of interest or ill will (Lopez, et al. vs. Pan American World Airways, No. L-22415, March 30, 1996, 16 SCRA 431). Bad faith must be substantiated by evidence. In LBC vs. Court of Appeals, (G.R. No. 108670, September 21, 1994), this Court ruled: "Bad faith under the law cannot be presumed; it must be established by clear and convincing evidence. Again, the unbroken jurisprudence is that in breach of contract cases where the defendant is not shown to have acted fraudulently or in bad faith, liability for damages is limited to the natural and probable consequences of the breach of the obligation which the parties had foreseen or could reasonably have foreseen. The damages, however, will not include liability for moral damages." 2. ID.; ID.; WHEN AVAILABLE; RULE; NOT APPLICABLE IN CASE AT BAR. In breach of contract of carriage by air, moral damages are awarded only if the defendant acted fraudulently or in bad faith (Civil Code, Article 220). The established facts evince that petitioner's late delivery of the baggage for eleven (11) days was not motivated by ill will or bad faith. In fact, it immediately coordinated with its Central Baggage Services to trace private respondent's suitcase and succeeded in finding it. At the hearing, petitioner's Manager for Administration of Airport Services Department Miguel Ebio testified that their records disclosed that Manila, the originating station, did not receive any tracer telex. A tracer telex, an airline lingo, is an action of any station that the airlines operate from whom a passenger may complain or have not received his baggage upon his arrival. It was reasonable to presume that the handling of the baggage was normal and regular. Upon inquiry from their Frankfurt Station, it was however discovered that the interline tag of private respondent's baggage was accidentally taken off. According to Mr. Ebio, it was customary for destination stations to hold a tagless baggage until properly identified. The tracer telex, which contained information on the baggage, is matched with the tagless luggage for identification. Without the tracer telex, the color and the type of baggage are used as basis for the matching. Thus, the delay. 3. ID.; ID.; EXEMPLARY DAMAGES; PREREQUISITES IN AWARDING THEREOF. The prerequisite for the award of exemplary damages in cases of contract or quasi-contract (Civil Code, Article 2232) is that the defendant acted in wanton, fraudulent, reckless, oppressive, or malevolent manner. (Albenson Enterprises Corp. vs. Court of Appeals, G.R. No. 88694, January 11, 1993, 217 SCRA 16) The undisputed facts do not so warrant the characterization of the action of petitioner. 4. ID.; ID.; ATTORNEY'S FEES; CANNOT BE RECOVERED AS PART OF DAMAGES; REASON THEREFOR. The award of attorney's fees must also be disallowed for lack of legal leg to stand on. The fact that private respondent was compelled to litigate and incur expenses to protect and enforce his claim did not justify the award of attorney's fees. The general rule is that attorney's fees cannot be recovered as part of damages because of the policy that no premium should be placed on the right to litigate (Firestone Tire & Rubber Company of the Philippines vs. Ines Chaves, No. L-17106, October 19, 1966, 18 SCRA 356). Petitioner is

willing to pay the just claim of $200.00 as a result of the delay in the transportation of the luggage in accord with the Warsaw Convention. Needless to say, the award of attorney's fees must be deleted where the award of moral and exemplary damages are eliminated. DECISION PUNO, J p:

The petitioner questions the Decision of the Regional Trial Court of Makati, Branch 148, dated July 29, 1992, 1 awarding private respondent moral and exemplary damages and attorney's fees for want of legal justification. We grant the petition. LLpr The facts are uncontroverted. On August 31, 1988, private respondent took petitioner's flight PR 722, Mabuhay Class, bound for Frankfurt, Germany. He had an immediate onward connecting flight via Lufthansa flight LH 1452 to Vienna, Austria. At the Ninoy Aquino International Airport, he checked-in one brown suitcase weighing twenty (20) kilograms 2 but did not declare a higher valuation. He claimed that his suitcase contained money, documents, one Nikkon camera with zoom lens, suits, sweaters, shirts, pants, shoes, and other accessories. 3 Upon private respondent's arrival at Vienna via Lufthansa flight LH 1452, his checked-in baggage was missing. He reported the matter to the Lufthansa authorities. After three (3) hours of waiting in vain, he proceeded to Piestany, Czechoslovakia. Eleven (11) days after or on September 11, 1988, his suitcase was delivered to him in his hotel in Piestany, Czechoslovakia. He claimed that because of the delay in the delivery of his suitcase, he was forced to borrow money to buy some clothes, to pay $200.00 for the transportation of his baggage from Vienna to Piestany, and lost his Nikkon camera. 4 In November 1988, private respondent wrote to petitioner a letter demanding: (1) P10,000.00 cost of allegedly lost Nikkon camera; (2) $200.00 for alleged cost of transporting luggage from Vienna to Piestany; and (3) P100,000.00 as damages. In its reply, petitioner informed private respondent that his letter was forwarded to its legal department for investigation. Private respondent felt his demand letter was left unheeded. He instituted an action for Damages docketed as Civil Case No. 89-3496 before the Regional Trial Court of Makati. Petitioner contested the complaint. It disclaimed any liability on the ground that there was neither a report of mishandled baggage on flight PR 722 nor a tracer telex received from its Vienna Station. It, however, contented that if at all liable its obligation is limited by the Warsaw Convention rate. Petitioner filed a Third-Party Complaint against Lufthansa German Airlines imputing the mishandling of private respondent's baggage, but was dismissed for its failure to prosecute. cdll In its decision, the trial court observed that petitioner's actuation was not attended by bad faith. Nevertheless, it awarded private respondent damages and attorney's fees, the dispositive portion of which reads: "WHEREFORE, judgment is hereby rendered in favor of the plaintiff (private respondent) and against the defendant (petitioner), thereby ordering the latter to pay the following: (a) (b) (c) (d) U.S. $200.00 as cost of transporting the suitcase from Vienna to Czechoslovakia; P40,000.00 as moral damages; P20,000.00 as exemplary damages; and P15,000.00 as attorney's fees.

SO ORDERED." 5 Hence, this petition for review. In breach of contract of carriage by air, moral damages are awarded only if the defendant acted fraudulently or in bad faith. 6 Bad faith means a breach of a known duty through some motive of interest or ill will. 7 The trial court erred in awarding moral damages to private respondent. The established facts evince that petitioner's late delivery of the baggage for eleven (11) days was not motivated by ill will or bad faith. In fact, it immediately coordinated with its Central Baggage Services to trace private respondent's suitcase and succeeded in finding it. At the hearing, petitioner's Manager for Administration of Airport Services Department Miguel Ebio testified that their records

disclosed that Manila, the originating station, did not receive any tracer telex. 8 A tracer telex, an airline lingo, is an action of any station that the airlines operate from whom a passenger may complain or have not received his baggage upon his arrival. 9 It was

reasonable to presume that the handling of the baggage was normal and regular. Upon inquiry from their Frankfurt Station, it was however discovered that the interline tag of private respondent's baggage was accidentally taken off. According to Mr. Ebio, it was customary for destination stations to hold a tagless baggage until properly identified. The tracer telex, which contained information on the baggage, is matched with the tagless luggage for identification. Without the tracer telex, the color and the type of baggage are used as basis for the matching. Thus, the delay. Worthy to stress, the trial court made an unequivocal conclusion that petitioner did not act in bad faith or with malice, viz: xxx xxx xxx "Absent a finding as to the bad intention of defendant (petitioner) PAL, this court finds it appropriate to apply the Warsaw Convention with respect to the liability of Air Carriers." 10 xxx xxx xxx

"The mere fact that defendant (petitioner) exerted effort to assist plaintiff (private respondent) in his predicament as shown in defendant's (petitioner's) letter to plaintiff (private respondent) (Exh. "E") and likewise the letter from Mr. Miguel Ebio, ManagerAirport Services Administration of defendant (petitioner) PAL to its Senior Counsel-Litigation, Atty. Marceliano Calica (Exh. "3") which reveals the fact that an investigation was conducted as to mishandled baggage, coupled with the fact that said information were then relayed to plaintiff (private respondent) as evidenced by a letter of defendant (petitioner) to plaintiff (private respondent) (Exh. "4") does not warrant a showing of malice on the part of defendant (petitioner)." 11 xxx xxx xxx

"Under the circumstances obtaining, considering that defendant's (petitioner's) actuation was not attendant with bad faith, the award of moral damages in the amount of P40,000.00 is but just and fair." 12 Bad faith must be substantiated by evidence. In LBC vs. Court of Appeals, 13 we ruled: "Bad faith under the law cannot be presumed; it must be established by clear and convincing evidence. Again, the unbroken jurisprudence is that in breach of contract cases where the defendant is not shown to have acted fraudulently or in bad faith, liability for damages is limited to the natural and probable consequences of the breach of the obligation which the parties had foreseen or could reasonably have foreseen. The damages, however, will not include liability for moral damages." (Citations omitted) We can neither sustain the award of exemplary damages. The prerequisite for the award of exemplary damages in cases of contract or quasi-contract 14 is that the defendant acted in wanton, fraudulent, reckless, oppressive, or malevolent manner. 15 The undisputed facts do not so warrant the characterization of the action of petitioner. The award of attorney's fees must also be disallowed for lack of legal leg to stand on. The fact that private respondent was compelled to litigate and incur expenses to protect and enforce his claim did not justify the award of attorney's fees. The general rule is that attorney's fees cannot be recovered as part of damages because of the policy that no premium should be placed on the right to litigate. 16 Petitioner is willing to pay the just claim of $200.00 as a result of the delay in the transportation of the luggage in accord with the Warsaw Convention. Needless to say, the award of attorney's fees must be deleted where the award of moral and exemplary damages are eliminated. cdphil IN VIEW WHEREOF, the assailed Decision of July 29, 1992 is MODIFIED deleting the award of moral and exemplary damages and attorney's fees. No costs. SO ORDERED.

THIRD DIVISION [G.R. No. 83612. November 24, 1994.] LUFTHANSA GERMAN AIRLINES, petitioner, vs. COURT OF APPEALS and TIRSO V. ANTIPORDA, SR., respondents. SYLLABUS 1. CIVIL LAW; OBLIGATION AND CONTRACTS; CONTRACT OF CARRIAGE; CARRIER ISSUING A CONFIRMED TICKET COVERING A FIVE-LEG TRIP ABOARD DIFFERENT AIRLINES, PRINCIPAL; LIABILITY FOR BREACH OF CONTRACT, PRINCIPAL. As ruled by the trial court, with the Court of Appeals concurring favorably, Antiporda was issued a confirmed Lufthansa ticket all throughout the five-leg trip. The fourth paragraph of the "Conditions of Contract" stipulated in the ticket indubitably showed that the contract of carriage was considered as one of continuous air transportation from Manila to Blantyre, Malawi, thus: "4. . . . carriage to be performed hereunder by several successive carriers is regarded as a single operation." In light of the stipulations expressly specified in the ticket defining the true nature of its contract of carriage with Antiporda, Lufthansa cannot claim that its liability thereon ceased at Bombay Airport and thence, shifted to the various carriers that assumed the actual task of transporting said private respondent. We, therefore, reject Lufthansa's theory that from the time another carrier was engaged to transport Antiporda on another segment of his trip, it merely acts as a ticket-issuing agent in behalf of said carrier. In the very nature of their contract, Lufthansa is clearly the principal in the contract of carriage with Antiporda and remains to be so, regardless of those instances when actual carriage was to be performed by various carriers. The issuance of a confirmed Lufthansa ticket in favor of Antiporda covering his entire five-leg trip aboard successive carriers concretely attests to this. This also serves as proof that Lufthansa, in effect guaranteed that the successive carriers, such as air Kenya would honor his ticket; assure him of a space therein and transport him on a particular segment of his trip. This ruling finds corroboration in the Supreme Court decision in KLM, where the same issues were confronted. 2. INTERNATIONAL LAW; WARSAW CONVENTION ON CONTRACT OF CARRIAGE; APPLICABLE ONLY TO OCCURRENCE OF ACCIDENT OR DELAY; CASE AT BAR. On the issue of whether the Warsaw Convention, particularly Section 2, Article 30 thereof is applicable herein, we agree with the Court of Appeals in ruling in the negative. We reiterate what has been settled in KLM: "1. The applicability insisted upon by the KLM of Article 30 of the Warsaw Convention cannot be sustained. That article presupposes the occurrence of either an accident or a delay, neither of which took place at the Barcelona airport; what is here manifest, instead, is that the Aer Lingus, through its manager there, refused to transport the respondents to their planned and contracted destination. . . ." Consequently, Section 2, Article 30 of the Warsaw Convention which does not contemplate the instance of "bumping-off" but merely of simple delay, cannot provide a handy excuse for Lufthansa as to exculpate it from any liability to Antiporda. The payment of damages is, thus, deemed warranted by this Court. We find no reversible error in the lower court's award of moral and exemplary damages, including attorney's fees in favor of Antiporda. 3. STATUTORY CONSTRUCTION; CONSTRUCTION REQUIRED ONLY WHERE TERMS OF LAW ARE AMBIGUOUS; "BUMPING-OFF" DOES NOT CONSTITUTE "DELAY". Lufthansa prays this court to take heed of jurisprudence in the United States where the term "delay" was interpreted to include "bumping-off" or failure to carry a passenger with a confirmed reservation. These decisions in the United States are not controlling in this jurisdiction. We are not prepared, absent reasons of compelling nature, to entertain an extended meaning of the term "delay," which in KLM was given its ordinary signification. "Construction and interpretation come only after it has been demonstrated that application is impossible or inadequate without them. The ordinary language of a statute must be given its ordinary meaning and limited to a reasonable interpretation." In its ordinary sense, "delay" means to prolong the time of or before; to stop, detain or hinder for a time, or cause someone or something to be behind in schedule or usual rate of movement in progress. "Bumping-off," which is the refusal to transport passengers with confirmed reservation to their planned and contracted destinations, totally forecloses said passengers' right to be transported, whereas delay merely postpones for a time being the enforcement of such right. 4. CIVIL LAW; OBLIGATIONS AND CONTRACTS; CONTRACT OF CARRIAGE; BREACH THEREOF MANIFESTED WITH BAD FAITH; CASE AT BAR. Clearly, bad faith attended the performance of the contract of carriage, for even while Antiporda was in Bombay, representatives of Lufthansa already tried to evade liability first, by claiming that the contract of carriage between Lufthansa and Antiporda ceased at Bombay airport, in disregard of the fact that Antiporda was holding a Lufthansa ticket for the entire five-leg trip; second, despite Berndt Loewe's knowledge that Antiporda's seat was allowed to be given to another passenger, the same suppressed the information and feigned ignorance of the matter, presenting altogether another reason why Antiporda was not listed in the manifest, i.e. that Air Kenya Boeing 707 was overbooked, notwithstanding clear proof that Lufthansa in Manila confirmed his reservation for said flight. Antiporda is likewise entitled to the award of exemplary damages on the basis of Article 2232 of the Civil Code.

5. REMEDIAL LAW; EVIDENCE; FINDINGS OF FACTS OF THE TRIAL COURT, GENERALLY UPHELD ON APPEAL. There is every indication that Lufthansa, through its representatives in Bombay, acted in a reckless and malevolent manner in dealing with Antiporda. These findings of the trial court were affirmed by the Court of Appeals on the ground that there are no cogent reasons to justify a contrary finding. The same holds true with this Court. The findings of fact of lower courts are binding on us and will not be generally disturbed on appeal. In affirming the lower court's award of damages to Antiporda, we take into account his high position in the government, coupled with the fact that he failed to meet his professional commitment in Blantyre, Malawi due

to the "bumping off" incident accompanied by rude and discourteous behavior on the part of airline officials who should have been the first to attend to his travel needs. DECISION ROMERO, J p: In this petition for review on certiorari, the Court is confronted with the issue of whether or not petitioner Lufthansa German Airlines which issued a confirmed Lufthansa ticket to private respondent Antiporda covering a five-leg trip abroad different airlines should be held liable for damages occasioned by the "bumping-off" of said private respondent Antiporda by Air Kenya, one of the airlines contracted to carry him to a particular destination of the five-leg trip. Tirso V. Antiporda, Sr. was an associate director of the Central Bank of the Philippines and a registered consultant of the Asian Development Bank, the World Bank and the UNDP. He was, contracted by Sycip, Gorres, Velayo & Co. (SGV) to be the institutional financial specialist for the agricultural credit institution project of the Investment and Development Bank of Malawi in Africa. According to the letter of August 30, 1984 addressed to Antiporda from J.F. Singson of SGV, he would render his services to the Malawi bank as an independent contractor for which he would be paid US$9,167 for a 50-day period commencing sometime in September 1984. For the engagement, Antiporda would be provided one round-trip economy ticket from Manila to Blantyre and back with a maximum travel time of four days per round-trip and, in addition, a travel allowance of $50 per day, a travel insurance coverage of P100,000 and major hospitalization with AFIA and an accident insurance coverage of P150,000. 1 On September 17, 1984, Lufthansa, through SGV, issued ticket No. 3477712678 for Antiporda's confirmed flights to Malawi, Africa. The ticket particularized his itinerary as follows: Carrier Flight Manila to Singapore Singapore to Bombay Bombay to Nairobi Nairobi to Lilongwe Lilongwe to Blantyre Thus, on September 25, 1984, Antiporda took the Lufthansa flight to Singapore from where he proceeded to Bombay on board the same airline. He arrived in Bombay as scheduled and waited at the transit area of the airport for his connecting flight to Nairobi which was, per schedule given him by Lufthansa, to leave Bombay in the morning of September 26, 1984. Finding no representative of Lufthansa waiting for him at the gate, Antiporda asked the duty officer of Air India how he could get in touch with Lufthansa. He was told to call up Lufthansa which informed him that somebody would attend to him shortly. LLjur Ten minutes later, Gerard Matias, Lufthansa's traffic officer, arrived, asked for Antiporda's ticket and told him to just sit down and wait. Matias returned with one Leslie Benent, duty officer of Lufthansa, who informed Antiporda that his seat in Air Kenya Flight 203 to Nairobi had been given to a very important person of Bombay who was attending a religious function in Nairobi. Antiporda protested, stressing that he had an important professional engagement in Blantyre, Malawi in the afternoon of September 26, 1984. He requested that the situation be remedied but Air Kenya Flight 203 left for Nairobi without him on board. Stranded in Bombay, Antiporda was booked for Nairobi via Addis Ababa only on September 27, 1984. He finally arrived in Blantyre at 9:00 o'clock in the evening of September 28, 1984, more than a couple of days late for his appointment with people from the institution he was to work with in Malawi. Consequently, on January 8, 1985, Antiporda's counsel wrote the general manager of Lufthansa in Manila demanding P1,000,000 in damages for the airline's "malicious, wanton, disregard of the contract of carriage." 2 In reply, Lufthansa general manager Hagen Keilich assured Antiporda that the matter would be investigated. Apparently getting no positive action from Lufthansa, on January 21, 1985, Antiporda filed with the Regional Trial Court of Quezon City a complaint against Lufthansa which was docketed as Civil Case No. Q-43810. QM 031 26-9-84 1600 OK QM 335 26-9-84 1395 OK KQ 203 26-9-84 0215 OK LH 695 25-9-84 2200 OK Date SQ Time 081 Status 25-9-84 1530 OK

The lower court, 3 guided by the Supreme Court ruling in KLM Dutch Airlines v. Court of Appeals, et al., 4 found that Lufthansa breached the contract to transport Antiporda from Manila to Blantyre on a trip of five legs. It said: "The threshold issue that confronts this Court is: Was there a breach of obligation by the defendant in failing to transport the plaintiff from Manila to Blantyre, Malawi, Africa? The defendant admits the issuance and validity of Ticket No. 3477712678 (Exh. B). However, it denies its obligation to transport the plaintiff to his point of destination at Blantyre, Malawi, Africa. Defendant claims that it was obligated to transport the plaintiff only up to Bombay. This case is one of a contract of carriage. And the ticket issued by the defendant to the plaintiff is the written agreement between the parties herein. Ticket No. 3477712678 particularizes the itinerary of the plaintiff . . . xxx xxx xxx

From the ticket, therefore, it is indubitably clear that it was the duty and responsibility of the defendant Lufthansa to transport the plaintiff from Manila to Blantyre, on a trip of five legs. The posture taken by the defendant that it was Air Kenya's, not Lufthansa's, liability to transport plaintiff from Bombay to Malawi, is unacceptable. The plaintiff dealt exclusively with the defendant Lufthansa which issued to him the ticket for his entire trip and which in effect guaranteed to the plaintiff that he would have sure space in Air Kenya's flight to Nairobi. Plaintiff, under that assurance of the defendant, naturally, had the right to expect that his ticket would be honored by Air Kenya, to which, in the legal sense, Lufthansa had endorsed and in effect guaranteed the performance of its principal engagement to carry out plaintiff's scheduled itinerary previously and mutually agreed upon by the parties. Defendant itself admitted that the flight from Manila, Singapore, Bombay, Nairobi, Lilongwe, Blantyre, Malawi, were all confirmed with the stamped letters 'OK' thereon. In short, after issuing a confirmed ticket from Manila to Malawi and receiv(ing) payment from the plaintiff for such one whole trip, how can the defendant now deny its contractual obligation by alleging that its responsibility ceased at the Bombay Airport? The contract of air transportation was exclusively between the plaintiff Antiporda and the defendant Lufthansa, the latter merely endorsing its performance to Air Kenya, as its subcontractor or agent. The fourth paragraph of the 'Conditions of Contracts' of the ticket (Exh. B) issued by Lufthansa to plaintiff indubitably shows that the contract was one of continuous air transportation from Manila to Blantyre, Malawi. '4. . . . carriage to be performed hereunder by several successive carriers is regarded as a single operation.'

This condition embodied in the ticket issued to plaintiff is diametrically opposed to the defense theory that Lufthansa's liability is only limited up to Bombay." Pursuant to the above reasoning, the lower court held that Lufthansa cannot limit its liability as a mere ticket issuing agent for other airlines and only to untoward occurrences on its own line. The lower court added that under the pool arrangement of the International Air Transport Association (IATA), of which Lufthansa and Air Kenya are members, member airlines are agents of each other in the issuance of tickets and, therefore, in accordance with Ortigas v. Lufthansa, 5 an airline company is considered bound by the mistakes committed by another member of IATA which, in behalf of the former, had confirmed a passenger's reservation for accommodation. In justifying its award of moral and exemplary damages, the lower court emphasized that the breach of contract was "aggravated by the discourteous and highly arbitrary conduct of Gerard Matias, an official of petitioner Lufthansa in Bombay." Its factual findings on the matter are the following: ". . . . Bumped off from his connecting flight to Nairobi and stranded in the Bombay Airport for 32 hours, when plaintiff insisted on taking his scheduled flight to Nairobi, Gerard Matias got angry and threw the ticket and passport on plaintiff's lap and was ordered to go to the basement with his heavy luggages for no reason at all. It was a difficult task for the plaintiff to carry three luggages and yet Gerard Matias did not even offer to help him. Plaintiff requested accommodation but Matias ignored it and just left. Not even Lufthansa office in Bombay, after learning plaintiff's being stranded in Bombay and his accommodation problem, provided any relief to plaintiff's sordid situation. Plaintiff had to stay in the transit area and could not sleep for fear that his luggages might be lost. Everytime he went to the toilet, he had to drag with him his luggages. He tried to eat the high-seasoned food available at the airport but developed stomach trouble. It was indeed a pathetic sight that the plaintiff, an official of the Central Bank, a multi-awarded institutional expert, tasked to perform consultancy work in a World Bank funded agricultural bank project in Malawi instead found himself stranded in a foreign land where nobody was expected to help him in his predicament except the defendant, who displayed utter lack of concern of its obligation to the plaintiff and left plaintiff alone in his misery at the Bombay airport." Citing Air France v. Carrascoso, 6 the lower court ruled that passengers have a right to be treated with kindness, respect, courtesy and consideration by the carrier's employees apart from their right to be protected against personal misconduct, injurious language, indignities and abuses from such employees. Consequently, the trial court ordered Lufthansa to pay Antiporda the following:

"(a) (b) (c)

the amount of P300,000.00 as moral damages; the amount of P200,000.00 as exemplary damages; and the amount of P50,000.00 as reasonable attorney's fees.

With costs against the defendant." Lufthansa elevated the case to the Court of Appeals arguing that it cannot be held liable for the acts committed by Air Kenya on the basis of the following: (a) it merely acted as a ticket-issuing agent in behalf of Air Kenya; consequently the contract of carriage entered into is between respondent Antiporda and Air Kenya, to the exclusion of petitioner Lufthansa; (b) under sections (1) and (2) Article 30 of the Warsaw Convention, an airline carrier is liable only to untoward occurrences on its own line; (c) the award of moral and exemplary damages in addition to attorney's fees by the trial court is without basis in fact and in law.

The Court of Appeals not convinced with Lufthansa's appeal, affirmed the decision on the trial court sought to be reviewed. LLphil Explained the Court of Appeals: although the contract of carriage was to be performed by several air carriers, the same is to be treated as a single operation conducted by Lufthansa because Antiporda dealt exclusively with it which issued him a Lufthansa ticket for the entire trip. By issuing a confirmed ticket, Lufthansa in effect guaranteed Antiporda a sure seat with Air Kenya. Private respondent Antiporda, maintained the Court of Appeals, had the right to expect that his ticket would be honored by Air Kenya which, in the legal sense, Lufthansa had endorsed and, in effect, guaranteed the performance of its principal engagement to carry out his five-leg trip. The appellate court also ruled that Lufthansa cannot rely on Sections (1) and (2), Article 30 of the Warsaw Convention 7 because the provisions thereof are not applicable under the circumstances of the case. Sections (1) and (2), Article 30 of the Warsaw Convention provide: "Art. 30 (1). In the case of transportation to be performed by various successive carriers and falling within the definition set out in the third paragraph of Article I, each carrier who accepts passengers, baggage, or goods shall be subject to the rules set out in the convention, and shall be deemed to be one of the contracting parties to the contract of transportation insofar as the contract deals with that part of the transportation which is performed under his supervision. (2) In the case of transportation of this nature, the passenger or his representative can take action only against the carrier who performed the transportation during which the accident or the delay occurred, save in the case where, by express agreement, the first carrier has assumed liability for the whole journey. (Emphasis supplied). According to the Court of Appeals, Antiporda's cause of action is not premised on the occurrence of an accident or delay as contemplated under Section 2 of said Article but on Air Kenya's refusal to transport him in order to accommodate another. To support this ruling, the Court of Appeals cited the Supreme Court ruling in KLM Royal Dutch Airlines v. Court of Appeals, 8 which held, inter alia, that: "1. The applicability insisted upon by the KLM of Article 30 of the Warsaw Convention cannot be sustained. That article presupposes the occurrence of either an accident or a delay, neither of which took place at the Barcelona airport; what is here manifest, instead, is that the Aer Lingus, through its manager there, refused to transport the respondents to their planned and contracted destination." The Court of Appeals concluded that Lufthansa cannot, thus, invoke Sections (1) and (2), Article 30 of the Warsaw Convention to evade liability. Failing to obtain a favorable decision, Lufthansa filed this petition for review on certiorari anchored on the following arguments: "1. "2. The respondent court erred as a matter of law in refusing to apply the Warsaw Convention to the instant case. Respondent court's ruling that Lufthansa had deceived private respondent has no factual or legal basis.

"3. The respondent court erred as a matter of law in affirming the trial court's award of moral damages in the face of this Court's rulings concerning moral damages in cases of breach of contract. "4. The respondent court erred as a matter of law in affirming the trial court's award of exemplary damages for lack of legal or factual basis therefor." The arguments propounded by petitioner Lufthansa cannot suffice to reverse the appellate court's decision as prayed for. Lufthansa raised four assignments of error but the focal point at issue has been defined by us at the inception of this ponencia. LibLex

Lufthansa maintains that its liability to any passenger is limited to occurrences in its own line, and, thus, in the case at bench, its liability to Antiporda is limited to the extent that it had transported him from Manila to Singapore and from Singapore to Bombay; that therefrom, responsibility for the performance of the contract of carriage is assumed by the succeeding carriers tasked to transport him for the remaining leg of his trip because at that stage, its contract of carriage with Antiporda ceases, with Lufthansa acting, no longer as the principal in the contract of carriage, but merely as a ticket-issuing agent for the other carriers. In further advancing this line of defense, Lufthansa invoked Section 2, Article 30 of the Warsaw Convention 9 which expressly stipulates that in cases where the transportation of passengers or goods is performed by various successive carriers, the passenger can take action only against the carrier which performed the transportation, during which the accident or delay occurred. Lufthansa further advanced the theory that this provision of the Warsaw Convention is applicable to the present case, contrary to the decision of the Court of Appeals which relied on the Supreme Court ruling in KLM Royal Dutch Lines. 10 For Lufthansa, "bumping-off" is considered delay since delay would inevitably result therefrom. It implored this Court to re-examine our ruling in KLM and take heed of jurisprudence 11 in the U.S. where "delay," unlike in our ruling in KLM, contemplates the instance of "bumping-off." In KLM, we held that the term "delay" does not encompass the instance of "bumpingoff," the latter having been defined as refusal to carry or transport a passenger. On his part, private respondent Antiporda insists that he entered with Lufthansa an exclusive contract of carriage, the nature of which is a continuous carriage by air from Manila to Blantyre Malawi; that it did not enter into a series of independent contracts with the carriers that transported him for the remaining leg of his trip. The basis for such claim is well-founded. As ruled by the trial court, with the Court of Appeals concurring favorably, Antiporda was issued a confirmed Lufthansa ticket all throughout the five-leg trip. The fourth paragraph of the "Conditions of Contract" stipulated in the ticket indubitably showed that the contract of carriage was considered as one of continuous air transportation from Manila to Blantyre, Malawi, thus: "4. . . . carriage to be performed hereunder by several successive carriers is regarded as a single operation."

In light of the stipulations expressly specified in the ticket defining the true nature of its contract of carriage with Antiporda, Lufthansa cannot claim that its liability thereon ceased at Bombay Airport and thence, shifted to the various carriers that assumed the actual task of transporting said private respondent. We, therefore, reject Lufthansa's theory that from the time another carrier was engaged to transport Antiporda on another segment of his trip, it merely acted as a ticket-issuing agent in behalf of said carrier. In the very nature of their contract, Lufthansa is clearly the principal in the contract of carriage with Antiporda and remains to be so, regardless of those instances when actual carriage was to be performed by various carriers. The issuance of a confirmed Lufthansa ticket in favor of Antiporda covering his entire five-leg trip abroad successive carriers concretely attests to this. This also serves as proof that Lufthansa, in effect guaranteed that the successive carriers, such as Air Kenya would honor his ticket; assure him of a space therein and transport him on a particular segment of his trip. This ruling finds corroboration in the Supreme Court decision in KLM , 12 where the same issues were confronted, thus: "xxx xxx xxx

The passage tickets of the respondents provide that the carriage to be performed thereunder by several successive carriers 'is to be regarded as a single operation,' which is diametrically incompatible with the theory of the KLM that the respondents entered into a series of independent contracts with the carriers which took them on the various segments of their trip. This position of KLM we reject. The respondents dealt exclusively with the KLM which issued them tickets for their entire trip and which in effect guaranteed to them that they would have sure space in Aer Lingus flight 861. The respondents, under that assurance of the internationally prestigious KLM, naturally had the right to expect that their tickets would be honored by Aer Lingus to which, in the legal sense, the KLM had indorsed and in effect guaranteed the performance of its principal engagement to carry out the respondents' scheduled itinerary previously and mutually agreed upon between the parties." On the issue of whether the Warsaw Convention, particularly Section 2, Article 30 thereof is applicable herein, we agree with the Court of Appeals in ruling in the negative. We reiterate what has been settled in KLM: "1. The applicability insisted upon by the KLM of article 30 of the Warsaw Convention cannot be sustained. That article presupposes the occurrence of either an accident or a delay, neither of which took place at the Barcelona airport; what is here manifest, instead, is that the Aer Lingus, through its manager there, refused to transport the respondents to their planned and contracted destination. . . ." Lufthansa prays this court to take heed of jurisprudence in the United States where the term "delay" was interpreted to include "bumping-off" or failure to carry a passenger with a confirmed reservation. These decisions in the United States are not controlling in this jurisdiction. We are not prepared, absent reasons of compelling nature, to entertain an extended meaning of the term "delay," which in KLM was given its ordinary signification. "Construction and interpretation come only after it has been demonstrated that application is impossible or inadequate without them. The ordinary language of a statute must be given its ordinary meaning and limited to a reasonable interpretation." 13 In its ordinary sense, "delay" means to prolong the time of or before; to stop, detain or hinder for a time, or cause someone

or something to be behind in schedule or usual rate of movement in progress. 14 "Bumping-off," which is the refusal to transport passengers with confirmed reservation to their planned and contracted destinations, totally forecloses said passengers' right to be transported, whereas delay merely postpones for a time being the enforcement of such right. cdphil Consequently, Section 2, Article 30 of the Warsaw Convention which does not contemplate the instance of "bumping-off" but merely of simple delay, cannot provide a handy excuse for Lufthansa as to exculpate it from any liability to Antiporda. The payment of damages is, thus, deemed warranted by this Court. We find no reversible error in the lower court's award of moral and exemplary damages, including attorney's fees in favor of Antiporda. Article 2220 of the Civil Code provides: "Art. 2220. Willful injury to property may be a legal ground for awarding moral damages if the court should find that, under the circumstances, such damages are justly due. The same rule applies to breaches of contract where the defendant acted fraudulently or in bad faith." According to the findings of the appellate court which affirmed that of the lower court, the reasons given by the witnesses for Lufthansa for private respondent's being "bumped off" at Bombay airport were conflicting. Observed the Court of Appeals: "If there was really no seat available because of over-booking, why did Lufthansa confirm the ticket of the plaintiff-appellee? It has to be pointed out that the confirmed ticket is up to Blantyre, Malawi, not only to Bombay. If the plaintiff-appellee was not in the list of passengers of Kenya Airways (the connecting flight) then Lufthansa must have deceived him in Manila because according to Gerard Matias, the passengers booked by Kenya Airways for Boeing 707 were 190 passengers when the plane could accommodate only 144 passengers considering that the name of plaintiff-appellee was not in the list. If that was the situation, Lufthansa by the issuance of its ticket should have not assured the plaintiff-appellee that he could get the connecting flights as scheduled. Surely, Lufthansa before confirming the ticket of the plaintiff-appellee must have confirmed the flight with Kenya Airways. If it was impossible to get a seat upon its own investigation in Bombay, then it should have not confirmed the ticket of the plaintiff-appellee. It is the defendant-appellant who was negligent in the performance of its duties, and plaintiff-appellee was just plainly deceived. Since the ticket was marked O.K., meaning confirmed, therefore plaintiff-appellee must have a definite seat with Kenya Airways but it was lost or given to another person. It is not true therefore, that plaintiff-appellee's name was not in the list of Kenya Airways. Besides, why should Lufthansa allow a passenger to depart from the Philippines with a confirmed ticket, without instructing its Bombay office to reserve a seat with Kenya Airways for its connecting flight? In spite of the confirmation, Nelda Aquino testified that plaintiff-appellee was stranded in Bombay because he did not get a seat with Kenya Airways, and his name did not appear in the list of passengers. Then contrary to the testimonies of Berndt Loewe and Gerard Matias that the obligation of the defendant-appellant is only up to Bombay and the reason why plaintiff-appellee was not in the list of passengers is because of overbooking. Nelda Aquino contrary to the testimonies of the two, testified that the reason for the bumping-off is that the seat was given to another passenger, to wit: 'Q A Q A Q A Q A Did you know or eventually learned later that the name of Antiporda was not in the list of confirmed passengers? I only learned from the office at Bombay that it was given to other passenger which I only learned from the office at Bombay. Who informed you that the seat of Mr. Antiporda was given to other passenger? From our international officer. Who is he? Our Sales Manager. Is he your Sales Manager in Bombay? Yes, our Manager.'

If Nelda Aquino knew that the reason for the bumping-off is that the seat was given to another, how come Berndt Loewe, passenger Sales Manager of defendant, Gerard Matias, an employee of defendant-appellant in Bombay did not know the said reason why the name of plaintiff-appellee did not appear in the list of passengers? It is either they knew the truth but because they wanted to escape liability they pretended not to know the truth." Clearly, bad faith attended the performance of the contract of carriage, for even while Antiporda was in Bombay, representatives of Lufthansa already tried to evade liability first, by claiming that the contract of carriage between Lufthansa and Antiporda ceased at Bombay airport, in disregard of the fact that Antiporda was holding a Lufthansa ticket for the entire five-leg trip; second, despite Berndt Loewe's knowledge that Antiporda's seat was allowed to be given to another passenger, the same suppressed the information and feigned ignorance of the matter, presenting altogether another reason why Antiporda was not listed in the manifest, i.e. that Air

Kenya Boeing 707 was overbooked, notwithstanding clear proof that Lufthansa in Manila confirmed his reservation for said flight. LibLex Antiporda is likewise entitled to the award of exemplary damages on the basis of Article 2232 of the Civil Code which provides: "Art. 2232. In contracts and quasi-contracts, the court may award exemplary damages if the defendant acted in a wanton, fraudulent, reckless, oppressive, or malevolent manner." There is every indication that Lufthansa, through its representatives in Bombay, acted in a reckless and malevolent manner in dealing with Antiporda. As found by the trial court: "The breach of the guarantee was aggravated by the discourteous and highly arbitrary conduct of Gerard Matias, an official of Lufthansa in Bombay. Bumped off from his connecting flight to Nairobi and stranded in the Bombay Airport for 32 hours, when plaintiff insisted on taking his scheduled flight to Nairobi, Gerard Matias got angry and threw the ticket and passport on plaintiff's lap and was ordered to go to the basement with his heavy luggages for no reason at all. It was a difficult task for the plaintiff to carry three luggages and yet Gerard Matias did not even offer to help him. Plaintiff requested accommodation but Matias ignored it and just left. Not even Lufthansa office in Bombay, after learning plaintiff's being stranded in Bombay and his accommodation problem, provided any relief to plaintiff's sordid situation. Plaintiff has to stay in the transit area and could not sleep for fear that his luggages might be lost. Everytime he went to the toilet, he had to drag with him his luggages. He tried to eat the high-seasoned food available at the airport but developed stomach trouble. It was indeed a pathetic sight that the plaintiff, an official of the Central Bank, a multi-awarded institutional expert, tasked to perform consultancy work in a World Bank funded agricultural bank project in Malawi instead found himself stranded in a foreign land where nobody was expected to help him in his predicament except the defendant, who displayed utter lack of concern of its obligation to the plaintiff and left plaintiff alone in his misery at the Bombay airport." These findings of the trial court were affirmed by the Court of Appeals on the ground that there are no cogent reasons to justify a contrary finding. The same holds true with this Court. The findings of fact of lower courts are binding on us and will not be generally disturbed on appeal. 15 In affirming the lower court's award of damages to Antiporda, we take into account his high position in the government, coupled with the fact that he failed to meet his professional commitment in Blantyre, Malawi due to the "bumping-off" incident accompanied by rude and discourteous behavior on the part of airline officials who should have been the first to attend to his travel needs. cdphil WHEREFORE, the petition for review is hereby DENIED and the decision of the Court of Appeals AFFIRMED. Costs against petitioner. SO ORDERED. Bidin and Vitug, JJ., concur. Feliciano, J., is on leave. Melo, J., took no part.

FIRST DIVISION [G.R. No. 101503. September 15, 1993.] PLANTERS PRODUCTS, INC., petitioner, vs. COURT OF APPEALS, SORIAMONT STEAMSHIP AGENCIES AND KYOSEI KISEN KABUSHIKI KAISHA, respondents. Gonzales, Sinense, Jimenez & Associates for petitioner. Siguion Reyna, Montecillo & Ongsiako Law Office for private respondents. DECISION BELLOSILLO, J p: Does a charter-party 1 between a shipowner and a charterer transform a common carrier into a private one as to negate the civil law presumption of negligence in case of loss or damage to its cargo? Planters Products, Inc. (PPI), purchased from Mitsubishi International Corporation (MITSUBISHI) of New York, U.S.A., 9,329.7069 metric tons (M/T) of Urea 46% fertilizer which the latter shipped in bulk on 16 June 1974 aboard the cargo vessel M/V "Sun Plum" owned by private respondent Kyosei Kisen Kabushiki Kaisha (KKKK) from Kenai, Alaska, U.S.A., to Poro Point, San Fernando, La Union, Philippines, as evidenced by Bill of Lading No. KP-1 signed by the master of the vessel and issued on the date of departure. On 17 May 1974, or prior to its voyage, a time charter-party on the vessel M/V "Sun Plum" pursuant to the Uniform General Charter 2 was entered into between Mitsubishi as shipper/charterer and KKKK as shipowner, in Tokyo, Japan. 3 Riders to the aforesaid charterparty starting from par. 16 to 40 were attached to the pre-printed agreement. Addenda Nos. 1, 2, 3 and 4 to the charter-party were also subsequently entered into on the 18th, 20th, 21st and 27th of May 1974, respectively. Before loading the fertilizer aboard the vessel, four (4) of her holds 4 were all presumably inspected by the charterer's representative and found fit to take a load of urea in bulk pursuant to par. 16 of the charter-party which reads: "16. . . . At loading port, notice of readiness to be accomplished by certificate from National Cargo Bureau inspector or substitute appointed by charterers for his account certifying the vessel's readiness to receive cargo spaces. The vessel's hold to be properly swept, cleaned and dried at the vessel's expense and the vessel to be presented clean for use in bulk to the satisfaction of the inspector before daytime commences" (emphasis supplied). After the Urea fertilizer was loaded in bulk by stevedores hired by and under the supervision of the shipper, the steel hatches were closed with heavy iron lids, covered with three (3) layers of tarpaulin, then tied with steel bonds. The hatches remained closed and tightly sealed throughout the entire voyage. 5 Upon arrival of the vessel at her port of call on 3 July 1974, the steel pontoon hatches were opened with the use of the vessel's boom. Petitioner unloaded the cargo from the holds into its steel-bodied dump trucks which were parked alongside the berth, using metal scoops attached to the ship, pursuant to the terms and conditions of the charter-party (which provided for an F.I.O.S. clause). 6 The hatches remained open throughout the duration of the discharge. 7 Each time a dump truck was filled up, its load of Urea was covered with tarpaulin before it was transported to the consignee's warehouse located some fifty (50) meters from the wharf. Midway to the warehouse, the trucks were made to pass through a weighing scale where they were individually weighed for the purpose of ascertaining the net weight of the cargo. The port area was windy, certain portions of the route to the warehouse were sandy and the weather was variable, raining occasionally while the discharge was in progress. 8 The petitioner's warehouse was made of corrugated galvanized iron (GI) sheets, with an opening at the front where the dump trucks entered and unloaded the fertilizer on the warehouse floor. Tarpaulins and GI sheets were placed in-between and alongside the trucks to contain spillages of the fertilizer. 9 It took eleven (11) days for PPI to unload the cargo, from 5 July to 18 July 1974 (except July 12th, 14th and 18th). 10 A private marine and cargo surveyor, Cargo Superintendents Company Inc. (CSCI), was hired by PPI to determine the "outturn" of the cargo shipped, by taking draft readings of the vessel prior to and after discharge. 11 The survey report submitted by CSCI to the consignee (PPI) dated 19 July 1974 revealed a shortage in the cargo of 106.726 M/T and that a portion of the Urea fertilizer approximating 18 M/T was contaminated with dirt. The same results were contained in a Certificate of Shortage/Damaged Cargo dated 18 July 1974 prepared by PPI which showed that the cargo delivered was indeed short of 94.839 M/T and about 23 M/T were rendered unfit for commerce, having been polluted with sand, rust and dirt. 12

Consequently, PPI sent a claim letter dated 18 December 1974 to Soriamont Steamship Agencies (SSA), the resident agent of the carrier, KKKK, for P245,969.31 representing the cost of the alleged shortage in the goods shipped and the diminution in value of that portion said to have been contaminated with dirt. 13 Respondent SSA explained that they were not able to respond to the consignee's claim for payment because, according to them, what they received was just a request for shortlanded certificate and not a formal claim, and that this "request" was denied by them because they "had nothing to do with the discharge of the shipment." 14 Hence, on 18 July 1975, PPI filed an action for damages with the Court of First Instance of Manila. The defendant carrier argued that the strict public policy governing common carriers does not apply to them because they have become private carriers by reason of the provisions of the charter-party. The court a quo however sustained the claim of the plaintiff against the defendant carrier for the value of the goods lost or damaged when it ruled thus: 15 ". . . Prescinding from the provision of the law that a common carrier is presumed negligent in case of loss or damage of the goods it contracts to transport, all that a shipper has to do in a suit to recover for loss or damage is to show receipt by the carrier of the goods and delivery by it of less than what it received. After that, the burden of proving that the loss or damage was due to any of the causes which exempt him from liability is shifted to the carrier, common or private he may be. Even if the provisions of the charter-party aforequoted are deemed valid, and the defendants considered private carriers, it was still incumbent upon them to prove that the shortage or contamination sustained by the cargo is attributable to the fault or negligence on the part of the shipper or consignee in the loading, stowing, trimming and discharge of the cargo. This they failed to do. By this omission, coupled with their failure to destroy the presumption of negligence against them, the defendants are liable" (italics supplied). On appeal, respondent Court of Appeals reversed the lower court and absolved the carrier from liability for the value of the cargo that was lost or damaged. 16 Relying on the 1968 case of Home Insurance Co. v. American Steamship Agencies, Inc., 17 the appellate court ruled that the cargo vessel M/V "Sun Plum" owned by private respondent KKKK was a private carrier and not a common carrier by reason of the time charter-party. Accordingly, the Civil Code provisions on common carriers which set forth a presumption of negligence do not find application in the case at bar. Thus ". . . In the absence of such presumption, it was incumbent upon the plaintiff-appellee to adduce sufficient evidence to prove the negligence of the defendant carrier as alleged in its complaint. It is an old and well settled rule that if the plaintiff, upon whom rests the burden of proving his cause of action, fails to show in a satisfactory manner the facts upon which he bases his claim, the defendant is under no obligation to prove his exception or defense (Moran, Commentaries on the Rules of Court, Volume 6, p. 2, citing Belen v. Belen, 13 Phil. 202). "But, the record shows that the plaintiff-appellee dismally failed to prove the basis of its cause of action, i.e., the alleged negligence of defendant carrier. It appears that the plaintiff was under the impression that it did not have to establish defendant's negligence. Be that as it may, contrary to the trial court's finding, the record of the instant case discloses ample evidence showing that defendant carrier was not negligent in performing its obligations . . ." 18 (emphasis supplied). Petitioner PPI appeals to us by way of a petition for review assailing the decision of the Court of Appeals. Petitioner theorizes that the Home Insurance case has no bearing on the present controversy because the issue raised therein is the validity of a stipulation in the charter-party delimiting the liability of the shipowner for loss or damage to goods caused by want of due diligence on its part or that of its manager to make the vessel seaworthy in all respects, and not whether the presumption of negligence provided under the Civil Code applies only to common carriers and not to private carriers. 19 Petitioner further argues that since the possession and control of the vessel remain with the shipowner, absent any stipulation to the contrary, such shipowner should be made liable for the negligence of the captain and crew. In fine, PPI faults the appellate court in not applying the presumption of negligence against respondent carrier, and instead shifting the onus probandi on the shipper to show want of due diligence on the part of the carrier, when he was not even at hand to witness what transpired during the entire voyage. As earlier stated, the primordial issue here is whether a common carrier becomes a private carrier by reason of a charter-party; in the negative, whether the shipowner in the instant case was able to prove that he had exercised that degree of diligence required of him under the law. It is said that etymology is the basis of reliable judicial decisions in commercial cases. This being so, we find it fitting to first define important terms which are relevant to our discussion. A "charter-party" is defined as a contract by which an entire ship, or some principal part thereof, is let by the owner to another person for a specified time or use; 20 a contract of affreightment by which the owner of a ship or other vessel lets the whole or a part of her to a merchant or other person for the conveyance of goods, on a particular voyage, in consideration of the payment of freight; 21 Charter parties are of two types: (a) contract of affreightment which involves the use of shipping space on vessels leased by the owner in part or as a whole, to carry goods for others; and, (b) charter by demise or bareboat charter, by the terms of which the whole vessel is let to the charterer with a transfer to him of its entire command and possession and consequent control over its navigation, including the master and the crew, who are his servants. Contract of affreightment may either be time charter, wherein the vessel is leased to the charterer for a fixed period of time, or voyage charter, wherein the ship is leased for a single voyage. 22 In both cases, the charterparty provides for the hire of the vessel only, either for a determinate period of time or for a single or consecutive voyage, the shipowner to supply the ship's stores, pay for the wages of the master and the crew, and defray the expenses for the maintenance of the ship.

Upon the other hand, the term "common or public carrier" is defined in Art. 1732 of the Civil Code. 23 The definition extends to carriers either by land, air or water which hold themselves out as ready to engage in carrying goods or transporting passengers or both for compensation as a public employment and not as a casual occupation. The distinction between a "common or public carrier" and a "private or special carrier" lies in the character of the business, such that if the undertaking is a single transaction, not a part of the general business or occupation, although involving the carriage of goods for a fee, the person or corporation offering such service is a private carrier. 24 Article 1733 of the New Civil Code mandates that common carriers, by reason of the nature of their business, should observe extraordinary diligence in the vigilance over the goods they carry. 25 In the case of private carriers, however, the exercise of ordinary diligence in the carriage of goods will suffice. Moreover, in case of loss, destruction or deterioration of the goods, common carriers are presumed to have been at fault or to have acted negligently, and the burden of proving otherwise rests on them. 26 On the contrary, no such presumption applies to private carriers, for whosoever alleges damage to or deterioration of the goods carried has the onus of proving that the cause was the negligence of the carrier. It is not disputed that respondent carrier, in the ordinary course of business, operates as a common carrier, transporting goods indiscriminately for all persons. When petitioner chartered the vessel M/V "Sun Plum", the ship captain, its officers and compliment were under the employ of the shipowner and therefore continued to be under its direct supervision and control. Hardly then can we charge the charterer, a stranger to the crew and to the ship, with the duty of caring for his cargo when the charterer did not have any control of the means in doing so. This is evident in the present case considering that the steering of the ship, the manning of the decks, the determination of the course of the voyage and other technical incidents of maritime navigation were all consigned to the officers and crew who were screened, chosen and hired by the shipowner. 27 It is therefore imperative that a public carrier shall remain as such, notwithstanding the charter of the whole or portion of a vessel by one or more persons, provided the charter is limited to the ship only, as in the case of a time-charter or voyage-charter. It is only when the charter includes both the vessel and its crew, as in a bareboat or demise that a common carrier becomes private, at least insofar as the particular voyage covering the charter-party is concerned. Indubitably, a shipowner in a time or voyage charter retains possession and control of the ship, although her holds may, for the moment, be the property of the charterer. 28 Respondent carrier's heavy reliance on the case of Home Insurance Co. v. American Steamship Agencies, supra, is misplaced for the reason that the meat of the controversy therein was the validity of a stipulation in the charter-party exempting the shipowner from liability for loss due to the negligence of its agent, and not the effects of a special charter on common carriers. At any rate, the rule in the United States that a ship chartered by a single shipper to carry special cargo is not a common carrier, 29 does not find application in our jurisdiction, for we have observed that the growing concern for safety in the transportation of passengers and/or carriage of goods by sea requires a more exacting interpretation of admiralty laws, more particularly, the rules governing common carriers. We quote with approval the observations of Raoul Colinvaux, the learned barrister-at-law 30 "As a matter of principle, it is difficult to find a valid distinction between cases in which a ship is used to convey the goods of one and of several persons. Where the ship herself is let to a charterer, so that he takes over the charge and control of her, the case is different; the shipowner is not then a carrier. But where her services only are let, the same grounds for imposing a strict responsibility exist, whether he is employed by one or many. The master and the crew are in each case his servants, the freighter in each case is usually without any representative on board the ship; the same opportunities for fraud or collussion occur; and the same difficulty in discovering the truth as to what has taken place arises . . ." In an action for recovery of damages against a common carrier on the goods shipped, the shipper or consignee should first prove the fact of shipment and its consequent loss or damage while the same was in the possession, actual or constructive, of the carrier. Thereafter, the burden of proof shifts to respondent to prove that he has exercised extraordinary diligence required by law or that the loss, damage or deterioration of the cargo was due to fortuitous event, or some other circumstances inconsistent with its liability. 31 To our mind, respondent carrier has sufficiently overcome, by clear and convincing proof, the prima facie presumption of negligence. The master of the carrying vessel, Captain Lee Tae Bo, in his deposition taken on 19 April 1977 before the Philippine Consul and Legal Attache in the Philippine Embassy in Tokyo, Japan, testified that before the fertilizer was loaded, the four (4) hatches of the vessel were cleaned, dried and fumigated. After completing the loading of the cargo in bulk in the ship's holds, the steel pontoon hatches were closed and sealed with iron lids, then covered with three (3) layers of serviceable tarpaulins which were tied with steel bonds. The hatches remained close and tightly sealed while the ship was in transit as the weight of the steel covers made it impossible for a person to open without the use of the ship's boom. 32 It was also shown during the trial that the hull of the vessel was in good condition, foreclosing the possibility of spillage of the cargo into the sea or seepage of water inside the hull of the vessel. 33 When M/V "Sun Plum" docked at its berthing place, representatives of the consignee boarded, and in the presence of a representative of the shipowner, the foreman, the stevedores, and a cargo surveyor representing CSCI, opened the hatches and inspected the condition of the hull of the vessel. The stevedores unloaded the cargo under the watchful eyes of the shipmates who were overseeing the whole operation on rotation basis. 34

Verily, the presumption of negligence on the part of respondent carrier has been efficaciously overcome by the showing of extraordinary zeal and assiduity exercised by the carrier in the care of the cargo. This was confirmed by respondent appellate court thus ". . . Be that as it may, contrary to the trial court's finding, the record of the instant case discloses ample evidence showing that defendant carrier was not negligent in performing its obligations. Particularly, the following testimonies of plaintiff-appellee's own witnesses clearly show absence of negligence by the defendant carrier; that the hull of the vessel at the time of the discharge of the cargo was sealed and nobody could open the same except in the presence of the owner of the cargo and the representatives of the vessel (TSN, 20 July 1977, p. 14); that the cover of the hatches was made of steel and it was overlaid with tarpaulins, three layers of tarpaulins and therefore their contents were protected from the weather (TSN, 5 April 1978, p. 24); and, that to open these hatches, the seals would have to be broken, all the seals were found to be intact (TSN, 20 July 1977, pp. 15-16)" (italics supplied). The period during which private respondent was to observe the degree of diligence required of it as a public carrier began from the time the cargo was unconditionally placed in its charge after the vessel's holds were duly inspected and passed scrutiny by the shipper, up to and until the vessel reached its destination and its hull was re-examined by the consignee, but prior to unloading. This is clear from the limitation clause agreed upon by the parties in the Addendum to the standard "GENCON" time charter-party which provided for an F.I.O.S., meaning, that the loading, stowing, trimming and discharge of the cargo was to be done by the charterer, free from all risk and expense to the carrier. 35 Moreover, a shipowner is liable for damage to the cargo resulting from improper stowage only when the stowing is done by stevedores employed by him, and therefore under his control and supervision, not when the same is done by the consignee or stevedores under the employ of the latter. 36 Article 1734 of the New Civil Code provides that common carriers are not responsible for the loss, destruction or deterioration of the goods if caused by the character of the goods or defects in the packaging or in the containers. The Code of Commerce also provides that all losses and deteriorations which the goods may suffer during the transportation by reason of fortuitous event, force majeure, or the inherent defect of the goods, shall be for the account and risk of the shipper, and that proof of these accidents is incumbent upon the carrier. 37 The carrier, nonetheless, shall be liable for the loss and damage resulting from the preceding causes if it is proved, as against him, that they arose through his negligence or by reason of his having failed to take the precautions which usage has established among careful persons. 38 Respondent carrier presented a witness who testified on the characteristics of the fertilizer shipped and the expected risks of bulk shipping. Mr. Estanislao Chupungco, a chemical engineer working with Atlas Fertilizer, described Urea as a chemical compound consisting mostly of ammonia and carbon monoxide compounds which are used as fertilizer. Urea also contains 46% nitrogen and is highly soluble in water. However, during storage, nitrogen and ammonia do not normally evaporate even on a long voyage, provided that the temperature inside the hull does not exceed eighty (80) degrees centigrade. Mr. Chupungco further added that in unloading fertilizer in bulk with the use of a clamped shell, losses due to spillage during such operation amounting to one percent (1%) against the bill of lading is deemed "normal" or "tolerable." The primary cause of these spillages is the clamped shell which does not seal very tightly. Also, the wind tends to blow away some of the materials during the unloading process. The dissipation of quantities of fertilizer, or its deterioration in value, is caused either by an extremely high temperature in its place of storage, or when it comes in contact with water. When Urea is drenched in water, either fresh or saline, some of its particles dissolve. But the salvaged portion which is in liquid form still remains potent and usable although no longer saleable in its original market value. The probability of the cargo being damaged or getting mixed or contaminated with foreign particles was made greater by the fact that the fertilizer was transported in "bulk," thereby exposing it to the inimical effects of the elements and the grimy condition of the various pieces of equipment used in transporting and hauling it. The evidence of respondent carrier also showed that it was highly improbable for sea water to seep into the vessel's holds during the voyage since the hull of the vessel was in good condition and her hatches were tightly closed and firmly sealed, making the M/V "Sun Plum" in all respects seaworthy to carry the cargo she was chartered for. If there was loss or contamination of the cargo, it was more likely to have occurred while the same was being transported from the ship to the dump trucks and finally to the consignee's warehouse. This may be gleaned from the testimony of the marine and cargo surveyor of CSCI who supervised the unloading. He explained that the 18 M/T of alleged "bad order cargo" as contained in their report to PPI was just an approximation or estimate made by them after the fertilizer was discharged from the vessel and segregated from the rest of the cargo. The Court notes that it was in the month of July when the vessel arrived port and unloaded her cargo. It rained from time to time at the harbor area while the cargo was being discharged according to the supply officer of PPI, who also testified that it was windy at the waterfront and along the shoreline where the dump trucks passed enroute to the consignee's warehouse. Indeed, we agree with respondent carrier that bulk shipment of highly soluble goods like fertilizer carries with it the risk of loss or damage. More so, with a variable weather condition prevalent during its unloading, as was the case at bar. This is a risk the shipper or the owner of the goods has to face. Clearly, respondent carrier has sufficiently proved the inherent character of the goods which makes it highly vulnerable to deterioration; as well as the inadequacy of its packaging which further contributed to the loss. On the other hand, no proof was adduced by the petitioner showing that the carrier was remiss in the exercise of due diligence in order to minimize the loss or damage to the goods it carried.

WHEREFORE, the petition is DISMISSED. The assailed decision of the Court of Appeals, which reversed the trial court, is AFFIRMED. Consequently, Civil Case No. 98623 of the then Court of the First Instance, now Regional Trial Court, of Manila should be, as it is hereby, DISMISSED. Costs against petitioner. SO ORDERED. Davide, Jr. and Quiason, JJ ., concur ,Cruz, J ., took no part.

FIRST DIVISION [G.R. No. 119197. May 16, 1997.] TABACALERA INSURANCE CO., PRUDENTIAL GUARANTEE & ASSURANCE, INC., and NEW ZEALAND INSURANCE CO., LTD., petitioners, vs. NORTH FRONT SHIPPING SERVICES, INC., and COURT OF APPEALS, respondents. Reloj Law Office for petitioners. Rogelio V . Garcia for private respondent. SYLLABUS 1. COMMERCIAL LAW; COMMON CARRIERS; REQUIRED TO OBSERVE EXTRAORDINARY DILIGENCE IN THEIR VIGILANCE OVER THE GOODS THEY TRANSPORT; HAVE THE BURDEN OF PROVING THAT THEY OBSERVED EXTRAORDINARY DILIGENCE IN ORDER TO AVOID RESPONSIBILITY FOR LOST CARGO. North Front Shipping Services, Inc., is a corporation engaged in the business of transporting cargo and offers its services indiscriminately to the public. It is without doubt a common carrier. As such it is required to observe extraordinary diligence in its vigilance over the goods it transports. When goods placed in its care are lost or damaged, the carrier is presumed to have been at fault or to have acted negligently. North Front Shipping Services, Inc., therefore has the burden of proving that it observed extraordinary diligence in order to avoid responsibility for the lost cargo. 2. ID.; ID.; ID.; ID.; THE MASTER OF THE VESSEL AND HIS CREW SHOULD HAVE UNDERTAKEN PRECAUTIONARY MEASURES TO AVOID OR LESSEN THE CARGO'S POSSIBLE DETERIORATION AS THEY WERE PRESUMED KNOWLEDGEABLE ABOUT THE NATURE OF SUCH CARGO; CASE AT BAR. - North Front Shipping Services. Inc., proved that the vessel was inspected prior to actual loading by representatives of the shipper and was found fit to take a load of corn grains. They were also issued Permit to Sail by the Coast Guard. The master of the vessel testified that the corn grains were farm wet when loaded. However, this testimony was disproved by the clean bill of lading issued by North Front Shipping Services, Inc., which did not contain a notation that the corn grains were wet and improperly dried. Having been in the service since 1968, the master of the vessel would have known at the outset that corn grains that were farm wet and not properly dried would eventually deteriorate

when stored in sealed and hot compartments as in hatches of a ship. Equipped with this knowledge, the master of the vessel and his crew should have undertaken precautionary measures to avoid or lessen the cargo's possible deterioration as they were presumed knowledgeable about the nature of such cargo. But none of such measures was taken. 3. ID.; ID.; ID.; ID.; CONSIGNEE OF CARGO FOUND GUILTY OF CONTRIBUTORY NEGLIGENCE; CASE AT BAR. We cannot attribute the destruction, loss or deterioration of the cargo solely to the carrier. We find the consignee Republic Flour Mills Corporation guilty of contributory negligence. It was seasonably notified of the arrival of the barge but did not immediately start the unloading operations. No explanation was proffered by the consignee as to why there was a delay of six (6) days. Had the unloading been commenced immediately the loss could have been completely avoided or at least minimized. As testified to by the chemist who analyzed the corn samples, the mold growth was only at its incipient stage and could still be arrested by drying. The corn grains were not yet toxic or unfit for consumption. For its contributory negligence, Republic Flour Mills corporation should share at least 40% of the loss. DECISION BELLOSILLO, J p: TABACALERA INSURANCE CO., Prudential Guarantee & Assurance, Inc., and New Zealand Insurance Co., Ltd., in this petition for review on certiorari, assail the 22 December 1994 decision of the Court of Appeals and its Resolution of 16 February 1995 which affirmed the 1 June 1993 decision of the Regional Trial Court dismissing their complaint for damages against North Front Shipping Services, Inc. aisadc On 2 August 1990, 20,234 sacks of corn grains valued at P3,500,640.00 were shipped on board North Front 777, a vessel owned by North Front Shipping Services, Inc. The cargo was consigned to Republic Flour Mills Corporation in Manila under Bill of Lading No. 001 1 and insured with the herein mentioned insurance companies. The vessel was inspected prior to actual loading by representatives of the shipper and was found fit to carry the merchandise. The cargo was covered with tarpaulins and wooden boards. The hatches were sealed and could only be opened by representatives of Republic Flour Mills Corporation. The vessel left Cagayan de Oro City on 2 August 1990 and arrived Manila on 16 August 1990. Republic Flour Mills Corporation was advised of its arrival but it did not immediately commence the unloading operations. There were days when unloading had to be stopped due to variable weather conditions and sometimes for no apparent reason at all. When the cargo was eventually unloaded there was a shortage of 26.333 metric tons. The remaining merchandise was already moldy, rancid and deteriorating. The unloading operations were completed on 5 September 1990 or twenty (20) days after the arrival of the barge at the wharf of Republic Flour Mills Corporation in Pasig City. Precision Analytical Service, Inc., was hired to examine the corn grains and determine the cause of deterioration. A Certificate of Analysis was issued indicating that the corn grains had 18.56% moisture content and the wetting was due to contact with salt water. The mold growth was only incipient and not sufficient to make the corn grains toxic and unfit for consumption. In fact the mold growth could still be arrested by drying. Republic Flour Mills Corporation rejected the entire cargo and formally demanded from North Front Shipping Services, Inc., payment for the damages suffered by it. The demands however were unheeded. The insurance companies were perforce obliged to pay Republic Flour Mills Corporation P2,189,433.40 By virtue of the payment made by the insurance companies they were subrogated to the rights of Republic Flour Mills Corporation. Thusly, they lodged a complaint for damages against North Front Shipping Services, Inc., claiming that the loss was exclusively attributable to the fault and negligence of the carrier. The Marine Cargo Adjusters hired by the insurance companies conducted a survey and found cracks in the bodega of the barge and heavy concentration of molds on the tarpaulins and wooden boards. They did not notice any seals in the hatches. The tarpaulins were not brand new as there were patches on them, contrary to the claim of North Front Shipping Services, Inc., thus making it possible for water to seep in. They also discovered that the bulkhead of the barge was rusty. North Front Shipping Service, Inc., averred in refutation that it could not be made culpable for the loss and deterioration of the cargo as it was never negligent. Captain Solomon Villanueva, master of the vessel, reiterated that the barge was inspected prior to the actual loading and was found adequate and seaworthy. In addition, they were issued a permit to sail by the Coast Guard. The tarpaulins were doubled and brand new and the hatches were properly sealed. They did not encounter big waves hence it was not possible for water to seep in. He further averred that the corn grains were farm wet and not properly dried when loaded. The court below dismissed the complaint and ruled that the contract entered into between North Front Shipping Service, Inc., and Republic Flour Mills Corporation was a charter-party agreement. As such, only ordinary diligence in the care of goods was required of North Front Shipping Services, Inc. The inspection of the barge by the shipper and the representatives of the shipping company before actual loading, coupled with the Permit to Sail issued by the Coast Guard, sufficed to meet the degree of diligence required of the carrier. On the other hand, the Court of Appeals ruled that as a common carrier required to observe a higher degree of diligence North Front 777 satisfactorily complied with all the requirements hence was issued a Permit to Sail after proper inspection. Consequently, the complaint was dismissed and the motion for reconsideration rejected.

The charter-party agreement between North Front Shipping Services, Inc., and Republic Flour Mills Corporation did not in any way convert the common carrier into a private carrier. We have already resolved this issue with finality in Planters Products, Inc. v. Court of Appeals 2 thus A 'charter-party' is defined as a contract by which an entire ship, or some principal part thereof, is let by the owner to another person for a specified time or use; a contract of affreightment by which the owner of a ship or other vessel lets the whole or a part of her to a merchant or other person for the conveyance of goods, on a particular voyage, in consideration of the payment of freight . . . Contract of affreightment may either be time charter, wherein the vessel is leased to the charterer for a fixed period of time, or voyage charter, wherein the ship is leased for a single voyage. In both cases, the charter-party provides for the hire of the vessel only, either for a determinate period of time or for a single or consecutive voyage, the ship owner to supply the ship's store, pay for the wages of the master of the crew, and defray the expenses for the maintenance of the ship. Upon the other hand, the term 'common or public carrier' is defined in Art. 1732 of the Civil Code. The definition extends to carriers either by land, air or water which hold themselves out as ready to engage in carrying goods or transporting passengers or both for compensation as a public employment and not as a casual occupation . . . It is therefore imperative that a public carrier shall remain as such, notwithstanding the charter of the whole or portion of a vessel by one or more persons, provided the charter is limited to the ship only, as in the case of a time-charter or voyage-charter (emphasis supplied). North Front Shipping Services, Inc., is a corporation engaged in the business of transporting cargo and offers its services indiscriminately to the public. It is without doubt a common carrier. As such it is required to observe extraordinary diligence in its vigilance over the goods it transports. 3 When goods placed in its care are lost or damaged, the carrier is presumed to have been at fault or to have acted negligently. 4 North Front Shipping Services Inc., therefore has the burden of proving that it observed extraordinary diligence in order to avoid responsibility for the lost cargo. North Front Shipping Services, Inc., proved that the vessel was inspected prior to actual loading by representatives of the shipper and was found fit to take a load of corn grains. They were also issued Permit to Sail by the Coast Guard. The master of the vessel testified that the corn grains were farm wet when loaded. However, this testimony was disproved by the clean bill of lading issued by North Front Shipping Services, Inc., which did not contain a notation that the corn grains were wet and improperly dried. Having been in the service since 1968, the master of the vessel would have known at the outset that corn grains that were farm wet and not properly dried would eventually deteriorate when stored in sealed and hot compartments as in hatches of a ship. Equipped with this knowledge, the master of the vessel and his crew should have undertaken precautionary measures to avoid or lessen the cargo's possible deterioration as they were presumed knowledgeable about the nature of such cargo. But none of such measures was taken. In Compania Maritima v. Court of Appeals 5 we ruled . . . Mere proof of delivery of the goods in good order to a common carrier, and of their arrival at the place of destination in bad order, makes out prima facie case against the common carrier, so that if no explanation is given as to how the loss, deterioration or destruction of the goods occurred, the common carrier must be held responsible. Otherwise stated, it is incumbent upon the common carrier to prove that the loss, deterioration or destruction was due to accident or some other circumstances inconsistent with its liability. . . . The extraordinary diligence in the vigilance over the goods tendered for shipment requires the common carrier to know and to follow the required precaution for avoiding damage to, or destruction of the goods entrusted to it for safe carriage and delivery. It requires common carriers to render service with the greatest skill and foresight and 'to use all reasonable means to ascertain the nature and characteristics of goods tendered for shipment, and to exercise due care in the handling and stowage, including such methods as their nature requires.' (emphasis supplied). In fine, we find that the carrier failed to observe the required extraordinary diligence in the vigilance over the goods placed in its care. The proofs presented by North Front Shipping Services, Inc., were insufficient to rebut the prima facie presumption of private respondent's negligence, more so if we consider the evidence adduced by petitioners. It is not denied by the insurance companies that the vessel was indeed inspected before actual loading and that North Front 777 was issued a Permit to Sail. They proved the fact of shipment and its consequent loss or damage while in the actual possession of the carrier. Notably, the carrier failed to volunteer any explanation why there was spoilage and how it occurred. On the other hand, it was shown during the trial that the vessel had rusty bulkheads and the wooden boards and tarpaulins bore heavy concentration of molds. The tarpaulins used were not new, contrary to the claim of North Front Shipping Services, Inc., as there were already several patches on them, hence, making it highly probable for water to enter. Laboratory analysis revealed that the corn grains were contaminated with salt water. North Front Shipping Services, Inc., failed to rebut all these arguments. It did not even endeavor to establish that the loss, destruction or deterioration of the goods was due to the following: (a) flood, storm, earthquake, lightning, or other natural disaster or calamity; (b) act of the public enemy in war, whether international or civil; (c) act or omission of the shipper or owner of the goods; (d) the character of the goods or defects in the packing or in the containers; (e) order or act of competent public authority. 6 This is a closed list. If the cause of destruction, loss or deterioration is other than the enumerated circumstances, then the carrier is rightly liable therefor. cdrep

However, we cannot attribute the destruction, loss or deterioration of the cargo solely to the carrier. We find the consignee Republic Flour Mills Corporation guilty of contributory negligence. It was seasonably notified of the arrival of the barge but did not immediately start the unloading operations. No explanation was proffered by the consignee as to why there was a delay of six (6) days. Had the unloading been commenced immediately the loss could have been completely avoided or at least minimized. As testified to by the chemist who analyzed the corn samples, the mold growth was only at its incipient stage and could still be arrested by drying. The corn grains were not yet toxic or unfit for consumption. For its contributory negligence, Republic Flour Mills Corporation should share at least 40% of the loss. 7 WHEREFORE, the Decision of the Court of Appeals of 22 December 1994 and its Resolution of 16 February 1995 are REVERSED and SET ASIDE. Respondent North Front Shipping Services, Inc., is ordered to pay petitioners Tabacalera Insurance Co., Prudential Guarantee & Assurance, Inc., and New Zealand Insurance Co. Ltd., P1,313,660.00 which is 60% of the amount paid by the insurance companies to Republic Flour Mills Corporation, plus interest at the rate of 12% per annum from the time this judgment becomes final until full payment. cdpr SO ORDERED. Vitug, Kapunan and Hermosisima, Jr., JJ., concur. Padilla, J., is on leave.

THIRD DIVISION [G.R. No. 112287. December 12, 1997.] NATIONAL STEEL CORPORATION, petitioner, vs. COURT OF APPEALS AND VLASONS SHIPPING, INC., respondents. [G.R. No. 112350. December 12, 1997.] VLASONS SHIPPING, INC., petitioner, vs. COURT OF APPEALS and NATIONAL STEEL CORPORATION, respondents. Poblador, De los Reyes & Dacayo, Jr. for National Steel Corp.

De Rosario & Del Rosario for Vlasons Shipping, Inc. SYNOPSIS The cases under consideration are two separate petitions for review filed by National Steel Corporation (NSC) and Vlasons Shipping Inc. (VSI), both assailing the decision of the Court of Appeals. The records of the case reveal that NSC hired MV Vlasons I, a private vessel owned by VSI. They entered into a contract of affreightment or contract of voyage charter hire wherein the contract states that NSC hired VSI's vessel to make one voyage to load steel products at Iligan City and discharge them at North Harbor, Manila. Thereafter, in accordance with the voyage charter hire, NSC's shipment of 1,677 skids of tinplates and 92 packages of hot rolled sheets were loaded to MV Vlasons I for carriage to Manila. The vessel arrived safely at North Harbor, Manila but upon opening the three hatches containing the shipment, nearly all the skids of tinplates and hot rolled sheets were allegedly found to be wet and rusty. On the basis of this incident, NSC filed a complaint against VSI for damages due to the downgrading of the damaged tinplates in the amount of P941,145.18. After trial on the merits, the court a quo rendered judgment dismissing the complaint and ordering NSC to pay VSI on the counterclaim prayed for by the latter. NSC seasonably filed an appeal to the Court of Appeals, but the said court just modified the appealed decision by reducing the award of demurrage and deleting the award of attorney's fees and expenses of litigation. Both parties filed their separate motions for reconsideration, but the appellate court denied both motions. Hence, this petition. The Supreme Court affirms the assailed decision of the Court of Appeals, except in respect with the demurrage. It is undisputed that VSI did not offer its services to the general public. As correctly concluded by the Court of Appeals, MV Vlasons I was not a common but a private carrier. Verily, the extent of VSI's responsibility and liability over NSC's cargo are determined primarily by the stipulations in the contract of carriage or charter party and the Code of Commerce. In the instant case, the burden of proof lies on the part of NSC and not the VSI. Additionally, the Court ruled that the since the problems raised by NSC were all factual issues already threshed out and decided by the trial court and subsequently affirmed by the Court of Appeals, the factual findings of both courts are binding on this Court. However, the Court disagrees with the findings of both courts to have found and affirmed respectively that NSC incurred eleven days of delay in unloading the cargo. In this case, the contract of voyage charter hire provided four-day laytime; it also qualified laytime as WWDSHINC or weather working days Sundays and holidays included. Consequently, NSC cannot be held liable for demurrage as the four-day laytime allowed it did not lapse, having been tolled by unfavorable weather condition in view of WWDSHINC qualification agreed upon by the parties. In view thereof, the consolidated petitions are denied and the questioned decision is affirmed with modification that the award of demurrage awarded to VSI is deleted. SYLLABUS 1. CIVIL LAW; COMMON CARRIERS; THE TRUE TEST OF A COMMON CARRIER IS THE CARRIAGE OF PASSENGERS OR GOODS, PROVIDED IT HAS SPACE, FOR ALL WHO OPT TO AVAIL THEMSELVES OF ITS TRANSPORTATION SERVICE FOR A FEE. Article 1732 of the Civil Code defines a common carrier as "persons, corporations, firms or associations engaged in the business of carrying or transporting passengers or goods or both, by land, water or air, for compensation, offering their services to the public." It has been held that the true test of a common carrier is the carriage of passengers or goods, provided it has space, for all who opt to avail themselves of its transportation service for a fee. A carrier which does not qualify under the above test is deemed a private carrier. "Generally, private carriage is undertaken by special agreement and the carrier does not hold himself out to carry goods for the general public. . . ." 2. ID.; ID.; A CARRIER CARRYING PASSENGERS OR GOODS ONLY FOR THOSE IT CHOSE UNDER A SPECIAL CONTRACT OF CHARTER PARTY IS PRIVATE CARRIER; CASE AT BAR. It is undisputed that VSI did not offer its services to the general public. As found by the Regional Trial Court, it carried passengers or goods only for those it chose under a "special contract of charter party." As correctly concluded by the Court of Appeals, the MV Vlason I "was not a common but a private carrier." Consequently, the rights and obligations of VSI and NSC, including their respective liability for damage to the cargo, are determined primarily by stipulations in their contract of private carriage or charter party. 3. ID.; ID.; IN A CONTRACT OF PRIVATE CARRIAGE, THE BURDEN OF PROOF IN CASE OF ACCIDENT IS ON THE CARRIER. In view of the aforementioned contractual stipulations, NSC must prove that the damage to its shipment was caused by VSI's willful negligence or failure to exercise due diligence in making MV Vlason I seaworthy and fit for holding, carrying and safekeeping the cargo. Ineluctably, the burden of proof was placed on NSC by the parties' agreement. Because the MV Vlason I was a private carrier, the shipowner's obligations are governed by the provisions of the Code of Commerce (Arts. 361 & 362) and not by the Civil Code which, as a general rule places the prima facie presumption of negligence on a common carrier. In the instant case, the Court of Appeals correctly found that NSC "has not taken the correct position in relation to the question of who has the burden of proof. Thus in its brief, after citing Clause 10 and Clause 12 of the NANYOZAI Charter Party it argues that 'a careful examination of the evidence will show that VSI miserably failed to comply with any of these obligations' as if defendant-appellee [VSI] had the burden of proof." 4. COMMERCIAL LAW; CARRIAGE OF GOODS BY SEA ACT; DEMURRAGE; DEFINED. The Court defined demurrage in its strict sense as the compensation provided for in the contract of affreightment for the detention of the vessel beyond the laytime or that period of time agreed on for loading and unloading of cargo. It is given to compensate the shipowner for the nonuse of the vessel. 5. ID.; ID.; PETITIONER NSC, NOT LIABLE FOR DEMURRAGE, AS THE FOUR-DAY LAYTIME ALLOWED IN THE CHARTER CONTRACT DID NOT LAPSE; CASE AT BAR. The contract of voyage charter hire provided for a four day laytime;

it also qualified laytime as WWDSHINC or weather working days Sundays and holidays included. The running of laytime was thus made subject to the weather, and would cease to run in the event unfavorable weather interfered with the unloading of cargo. Consequently, NSC may not be held liable for demurrage as the four-day laytime allowed it did not lapse, having been tolled by unfavorable weather condition in view of the WWDSHINC qualification agreed upon by the parties. Clearly, it was error for the trial court and the Court of Appeals to have found and affirmed respectively that NSC incurred eleven days of delay in unloading the cargo. The trial court arrived at this erroneous finding by subtracting from the twelve days, specifically August 13, 1974 to August 24, 1974, the only day of unloading unhampered by unfavorable weather or rain, which was August 22, 1974. Based on our previous discussion, such finding is a reversible error. 6. REMEDIAL LAW; CIVIL PROCEDURE; APPEAL TO THE SUPREME COURT; WHERE THE FACTUAL FINDINGS OF BOTH THE TRIAL COURT AND THE COURT OF APPEALS COINCIDE, THE SAME ARE BINDING ON THE COURT. The questions of fact were threshed out and decided by the trial court, which had the firsthand opportunity to hear the parties' conflicting claims and to carefully weigh their respective evidence. The findings of the trial court were subsequently affirmed by the Court of Appeals. Where the factual findings of both the trial court and the Court of Appeals coincide, the same are binding on this Court. We stress that, subject to some exceptional instances, only questions of law not questions of fact may be raised before this Court in a petition for review under Rule 45 of the Rules of Court. After a thorough review of the case at bar, we find no reason to disturb the lower courts' factual findings, as indeed NSC has not successfully proven the application of any of the aforecited exceptions. 7. ID.; EVIDENCE; ADMISSIBILITY OF EVIDENCE; AN ORIGINAL CERTIFICATE ISSUED BY AN OFFICER OF THE PHILIPPINE COAST GUARD, IS ADMISSIBLE UNDER A WELL-SETTLED EXCEPTION TO THE HEARSAY RULE UNDER SECTION 44, RULE 130 OF THE RULES OF COURT. Exhibit 11 is admissible under a well-settled exception to the hearsay rule per Section 44 of Rule 130 of the Rules of Courts which provides that "(e)ntries in official records made in the performance of a duty by a public officer of the Philippines, or by a person in the performance of a duty especially enjoined by law, are prima facie evidence of the facts therein stated." Exhibit 11 is an original certificate of the Philippine Coast Guard in Cebu issued by Lieutenant Junior Grade Noli C. Flores to the effect that "the vessel 'VLASONS I was drydocked . . . and PCG Inspectors were sent on board for inspection. . . . After completion of drydocking and duly inspected by PCG Inspectors, the vessel 'VLASONS I', a cargo vessel, is in seaworthy condition, meets all requirements, fitted and equipped for trading as a cargo vessel was cleared by the Philippine Coast Guard and sailed for Cebu Port on July 10, 1974." NSC's claim, therefore, is obviously misleading and erroneous. 8. CIVIL LAW; DAMAGES; ATTORNEY'S FEES; RESPONDENT VSI NOT ENTITLED THERETO, IN THE ABSENCE OF BAD FAITH ON THE PART OF THE PETITIONER NSC. VSI assigns as error of law the Court of Appeals' deletion of the award of attorney's fees. We disagree. While VSI was compelled to litigate to protect its rights, such fact by itself will not justify an award of attorney's fees under Article 2208 of the Civil Code when ". . . no sufficient showing of bad faith would be reflected in a party's persistence in a case other than an erroneous conviction of the righteousness of his cause. . . ." Moreover, attorney's fees may not be awarded to a party for the reason alone that the judgment rendered was favorable to the latter, as this is tantamount to imposing a premium on one's right to litigate or seek judicial redress of legitimate grievances. DECISION PANGANIBAN, J p: The Court finds occasion to apply the rules on the seaworthiness of a private carrier, its owner's responsibility for damage to the cargo and its liability for demurrage and attorney's fees. The Court also reiterates the well-known rule that findings of facts of trial courts, when affirmed by the Court of Appeals, are binding on this Court. cdasia The Case Before us are two separate petitions for review filed by National Steel Corporation (NSC) and Vlasons Shipping, Inc. (VSI), both of which assail the August 12, 1993 Decision of the Court of Appeals. 1 The Court of Appeals modified the decision of the Regional Trial Court of Pasig, Metro Manila, Branch 163 in Civil Case No. 23317. The RTC disposed as follows: "WHEREFORE, judgment is hereby rendered in favor of defendant and against the plaintiff dismissing the complaint with cost against plaintiff, and ordering plaintiff to pay the defendant on the counterclaim as follows: 1. The sum of P75,000.00 as unpaid freight and P88,000.00 as demurrage with interest at the legal rate on both amounts from April 7, 1976 until the same shall have been fully paid; 2. 3. Attorney's fees and expenses of litigation in the sum of P100,000.00; and Cost of suit.

SO ORDERED." 2 On the other hand, the Court of Appeals ruled:

"WHEREFORE, premises considered, the decision appealed from is modified by reducing the award for demurrage to P44,000.00 and deleting the award for attorney's fees and expenses of litigation. Except as thus modified, the decision is AFFIRMED. There is no pronouncement as to costs. SO ORDERED." 3 The Facts The MV Vlasons I is a vessel which renders tramping service and, as such, does not transport cargo or shipment for the general public. Its services are available only to specific persons who enter into a special contract of charter party with its owner. It is undisputed that the ship is a private carrier. And it is in this capacity that its owner, Vlasons Shipping, Inc., entered into a contract of affreightment or contract of voyage charter hire with National Steel Corporation. The facts as found by Respondent Court of Appeals are as follows: "(1) On July 17, 1974, plaintiff National Steel Corporation (NSC) as Charterer and defendant Vlasons Shipping, Inc. (VSI) as Owner, entered into a Contract of Voyage Charter Hire (Exhibit 'B'; also Exhibit '1') whereby NSC hired VSI's vessel, the MV 'VLASONS I' to make one (1) voyage to load steel products at Iligan City and discharge them at North Harbor, Manila, under the following terms and conditions, viz: '1. 2. 3. 4. 5. ... Cargo: Full cargo of steel products of not less than 2,500 MT, 10% more or less at Master's option. ... Freight/Payment: P30.00/metric ton, FIOST basis. Payment upon presentation of Bill of Lading within fifteen (15) days. Laydays/Cancelling: July 26, 1974/Aug. 5, 1974

6. Loading/Discharging Rate: 750 tons per WWDSHINC. (Weather Working Day of 24 consecutive hours, Sundays and Holidays Included). 7. 8. Demurrage/Dispatch: P8,000.00/P4,000.00 per day. ...

9. Cargo Insurance: Charterer's and/or Shipper's must insure the cargoes. Shipowners not responsible for losses/damages except on proven willful negligence of the officers of the vessel. 10. Other terms: (a) All terms/conditions of NONYAZAI C/P [sic] or other internationally recognized Charter Party Agreement shall form part of this Contract. xxx xxx xxx'

The terms 'F.I.O.S.T.' which is used in the shipping business is a standard provision in the NANYOZAI Charter Party which stands for 'Freight In and Out including Stevedoring and Trading', which means that the handling, loading and unloading of the cargoes are the responsibility of the Charterer. Under Paragraph 5 of the NANYOZAI Charter Party, it states, 'Charterers to load, stow and discharge the cargo free of risk and expenses to owners. . . .' (Emphasis supplied). Under paragraph 10 thereof, it is provided that '(o)wners shall, before and at the beginning of the voyage, exercise due diligence to make the vessel seaworthy and properly manned, equipped and supplied and to make the holds and all other parts of the vessel in which cargo is carried, fit and safe for its reception, carriage and preservation. Owners shall not be liable for loss of or damage of the cargo arising or resulting from: unseaworthiness unless caused by want of due diligence on the part of the owners to make the vessel seaworthy, and to secure that the vessel is properly manned, equipped and supplied and to make the holds and all other parts of the vessel in which cargo is carried, fit and safe for its reception, carriage and preservation; . . ; perils, dangers and accidents of the sea or other navigable waters; . . ; wastage in bulk or weight or any other loss or damage arising from inherent defect, quality or vice of the cargo; insufficiency of packing; . . .; latent defects not discoverable by due diligence; any other cause arising without the actual fault or privity of Owners or without the fault of the agents or servants of owners.' Paragraph 12 of said NANYOZAI Charter Party also provides that '(o)wners shall not be responsible for split, chafing and/or any damage unless caused by the negligence or default of the master and crew.' (2) On August 6, 7 and 8, 1974, in accordance with the Contract of Voyage Charter Hire, the MV 'VLASONS I' loaded at plaintiffs pier at Iligan City, the NSC's shipment of 1,677 skids of tinplates and 92 packages of hot rolled sheets or a total of 1,769 packages with a total weight of about 2,481.19 metric tons for carriage to Manila. The shipment was placed in the three (3) hatches of the ship. Chief Mate Gonzalo Sabando, acting as agent of the vessel[,] acknowledged receipt of the cargo on board and signed the corresponding bill of lading, B.L.P.P. No. 0233 (Exhibit 'D') on August 8, 1974.

(3) The vessel arrived with the cargo at Pier 12, North Harbor, Manila, on August 12, 1974. The following day, August 13, 1974, when the vessel's three (3) hatches containing the shipment were opened by plaintiff's agents, nearly all the skids of tinplates and hot rolled sheets were allegedly found to be wet and rusty. The cargo was discharged and unloaded by stevedores hired by the Charterer. Unloading was completed only on August 24, 1974 after incurring a delay of eleven (11) days due to the heavy rain which interrupted the unloading operations. (Exhibit 'E') (4) To determine the nature and extent of the wetting and rusting, NSC called for a survey of the shipment by the Manila Adjusters and Surveyors Company (MASCO). In a letter to the NSC dated March 17, 1975 (Exhibit 'G'), MASCO made a report of its ocular inspection conducted on the cargo, both while it was still on board the vessel and later at the NDC warehouse in Pureza St., Sta. Mesa, Manila where the cargo was taken and stored. MASCO reported that it found wetting and rusting of the packages of hot rolled sheets and metal covers of the tinplates; that tarpaulin hatch covers were noted torn at various extents; that container/metal casings of the skids were rusting all over. MASCO ventured the opinion that 'rusting of the tinplates was caused by contact with SEA WATER sustained while still on board the vessel as a consequence of the heavy weather and rough seas encountered while en route to destination (Exhibit 'F'). It was also reported that MASCO's surveyors drew at random samples of bad order packing materials of the tinplates and delivered the same to the M.I.T. Testing Laboratories for analysis. On August 31, 1974, the M.I.T. Testing Laboratories issued Report No. 1770 (Exhibit 'I') which in part, states, 'The analysis of bad order samples of packing materials . . . shows that wetting was caused by contact with SEA WATER'. (5) On September 6, 1974, on the basis of the aforesaid Report No. 1770, plaintiff filed with the defendant its claim for damages suffered due to the downgrading of the damaged tinplates in the amount of P941,145.18. Then on October 3, 1974, plaintiff formally demanded payment of said claim but defendant VSI refused and failed to pay. Plaintiff filed its complaint against defendant on April 21, 1976 which was docketed as Civil Case No. 23317, CFI, Rizal. (6) In its complaint, plaintiff claimed that it sustained losses in the aforesaid amount of P941,145.18 as a result of the act, neglect and default of the master and crew in the management of the vessel as well as the want of due diligence on the part of the defendant to make the vessel seaworthy and to make the holds and all other parts of the vessel in which the cargo was carried, fit and safe for its reception, carriage and preservation all in violation of defendant's undertaking under their Contract of Voyage Charter Hire. (7) In its answer, defendant denied liability for the alleged damage claiming that the MV 'VLASONS I' was seaworthy in all respects for the carriage of plaintiff's cargo; that said vessel was not a 'common carrier' inasmuch as she was under voyage charter contract with the plaintiff as charterer under the charter party; that in the course of the voyage from Iligan City to Manila, the MV 'VLASONS I' encountered very rough seas, strong winds and adverse weather condition, causing strong winds and big waves to continuously pound against the vessel and seawater to overflow on its deck and hatch covers; that under the Contract of Voyage Charter Hire, defendant shall not be responsible for losses/damages except on proven willful negligence of the officers of the vessel, that the officers of said MV 'VLASONS I' exercised due diligence and proper seamanship and were not willfully negligent; that furthermore the Voyage Charter Party provides that loading and discharging of the cargo was on FIOST terms which means that the vessel was free of risk and expense in connection with the loading and discharging of the cargo; that the damage, if any, was due to the inherent defect, quality or vice of the cargo or to the insufficient packing thereof or to latent defect of the cargo not discoverable by due diligence or to any other cause arising without the actual fault or privity of defendant and without the fault of the agents or servants of defendant; consequently, defendant is not liable; that the stevedores of plaintiff who discharged the cargo in Manila were negligent and did not exercise due care in the discharge of the cargo; and that the cargo was exposed to rain and seawater spray while on the pier or in transit from the pier to plaintiff's warehouse after discharge from the vessel; and that plaintiff's claim was highly speculative and grossly exaggerated and that the small stain marks or sweat marks on the edges of the tinplates were magnified and considered total loss of the cargo. Finally, defendant claimed that it had complied with all its duties and obligations under the Voyage Charter Hire Contract and had no responsibility whatsoever to plaintiff. In turn, it alleged the following counterclaim: (a) That despite the full and proper performance by defendant of its obligations under the Voyage Charter Hire Contract, plaintiff failed and refused to pay the agreed charter hire of P75,000.00 despite demands made by defendant; (b) That under their Voyage Charter Hire Contract, plaintiff had agreed to pay defendant the sum of P8,000.00 per day for demurrage. The vessel was on demurrage for eleven (11) days in Manila waiting for plaintiff to discharge its cargo from the vessel. Thus, plaintiff was liable to pay defendant demurrage in the total amount of P88,000.00. cdasia (c) For filing a clearly unfounded civil action against defendant, plaintiff should be ordered to pay defendant attorney's fees and all expenses of litigation in the amount of not less than P100,000.00. (8) From the evidence presented by both parties, the trial court came out with the following findings which were set forth in its decision: (a) The MV 'VLASONS I' is a vessel of Philippine registry engaged in the tramping service and is available for hire only under special contracts of charter party as in this particular case. (b) That for purposes of the voyage covered by the Contract of Voyage Charter Hire (Exh. '1'), the MV 'VLASONS I' was covered by the required seaworthiness certificates including the Certification of Classification issued by an international classification society, the NIPPON KAIJI KYOKAI (Exh. '4'); Coastwise License from the Board of Transportation (Exh. '5'); International Loadline Certificate from the Philippine Coast Guard (Exh. '6'); Cargo Ship Safety Equipment Certificate also from the Philippine

Coast Guard (Exh. '7'); Ship Radio Station License (Exh. '8'); Certificate of Inspection by the Philippine Coast Guard (Exh. '12'); and Certificate of Approval for Conversion issued by the Bureau of Customs (Exh. '9'). That being a vessel engaged in both overseas and coastwise trade, the MV 'VLASONS I' has a higher degree of seaworthiness and safety. (c) Before it proceeded to Iligan City to perform the voyage called for by the Contract of Voyage Charter Hire, the MV 'VLASONS I' underwent drydocking in Cebu and was thoroughly inspected by the Philippine Coast Guard. In fact, subject voyage was the vessel's first voyage after the drydocking. The evidence shows that the MV 'VLASONS I' was seaworthy and properly manned, equipped and supplied when it undertook the voyage. It had all the required certificates of seaworthiness. (d) The cargo/shipment was securely stowed in three (3) hatches of the ship. The hatch openings were covered by hatchboards which were in turn covered by two or double tarpaulins. The hatch covers were water tight. Furthermore, under the hatchboards were steel beams to give support. (e) The claim of the plaintiff that defendant violated the contract of carriage is not supported by evidence. The provisions of the Civil Code on common carriers pursuant to which there exists a presumption of negligence in case of loss or damage to the cargo are not applicable. As to the damage to the tinplates which was allegedly due to the wetting and rusting thereof, there is unrebutted testimony of witness Vicente Angliongto that tinplates 'sweat' by themselves when packed even without being in contract (sic) with water from outside especially when the weather is bad or raining. The rust caused by sweat or moisture on the tinplates may be considered as a loss or damage but then, defendant cannot be held liable for it pursuant to Article 1734 of the Civil Case which exempts the carrier from responsibility for loss or damage arising from the 'character of the goods . . .'. All the 1,769 skids of the tinplates could not have been damaged by water as claimed by plaintiff. It was shown as claimed by plaintiff that the tinplates themselves were wrapped in kraft paper lining and corrugated cardboards could not be affected by water from outside. (f) The stevedores hired by the plaintiff to discharge the cargo of tinplates were negligent in not closing the hatch openings of the MV 'VLASONS I' when rains occurred during the discharging of the cargo thus allowing rainwater to enter the hatches. It was proven that the stevedores merely set up temporary tents to cover the hatch openings in case of rain so that it would be easy for them to resume work when the rains stopped by just removing the tent or canvas. Because of this improper covering of the hatches by the stevedores during the discharging and unloading operations which were interrupted by rains, rainwater drifted into the cargo through the hatch openings. Pursuant to paragraph 5 of the NANYOSAI [sic] Charter Party which was expressly made part of the Contract of Voyage Charter Hire, the loading, stowing and discharging of the cargo is the sole responsibility of the plaintiff charterer and defendant carrier has no liability for whatever damage may occur or maybe [sic] caused to the cargo in the process. (g) It was also established that the vessel encountered rough seas and bad weather while en route from Iligan City to Manila causing sea water to splash on the ship's deck on account of which the master of the vessel (Mr. Antonio C. Dumlao) filed a 'Marine Protest' on August 13, 1974 (Exh. '15') which can be invoked by defendant as a force majeure that would exempt the defendant from liability. (h) Plaintiff did not comply with the requirement prescribed in paragraph 9 of the Voyage Charter Hire contract that it was to insure the cargo because it did not. Had plaintiff complied with the requirement, then it could have recovered its loss or damage from the insurer. Plaintiff also violated the charter party contract when it loaded not only 'steel products', i.e. steel bars, angular bars and the like but also tinplates and hot rolled sheets which are high grade cargo commanding a higher freight. Thus plaintiff was able to ship high grade cargo at a lower freight rate. (i) As regards defendant's counterclaim, the contract of voyage charter hire under paragraph 4 thereof, fixed the freight at P30.00 per metric ton payable to defendant carrier upon presentation of the bill of lading within fifteen (15) days. Plaintiff has not paid the total freight due of P75,000.00 despite demands. The evidence also showed that the plaintiff was required and bound under paragraph 7 of the same Voyage Charter Hire contract to pay demurrage of P8,000.00 per day of delay in the unloading of the cargoes. The delay amounted to eleven (11) days thereby making plaintiff liable to pay defendant for demurrage in the amount of P88,000.00. Appealing the RTC decision to the Court of Appeals, NSC alleged six errors: "I The trial court erred in finding that the MV 'VLASONS I' was seaworthy, properly manned, equipped and supplied, and that there is no proof of willful negligence of the vessel's officers. "II The trial court erred in finding that the rusting of NSC's tinplates was due to the inherent nature or character of the goods and not due to contact with seawater. "III The trial court erred in finding that the stevedores hired by NSC were negligent in the unloading of NSC's shipment. "IV

The trial court erred in exempting VSI from liability on the ground of force majeure. "V The trial court erred in finding that NSC violated the contract of voyage charter hire. "VI The trial court erred in ordering NSC to pay freight, demurrage and attorney's fees, to VSI." 4 As earlier stated, the Court of Appeals modified the decision of the trial court by reducing the demurrage from P88,000.00 to P44,000.00 and deleting the award of attorneys fees and expenses of litigation. NSC and VSI filed separate motions for reconsideration. In a Resolution 5 dated October 20, 1993, the appellate court denied both motions. Undaunted, NSC and VSI filed their respective petitions for review before this Court. On motion of VSI, the Court ordered on February 14, 1994 the consolidation of these petitions. 6 The Issues In its petition 7 and memorandum, 8 NSC raises the following questions of law and fact: Questions of Law "1. Whether or not a charterer of a vessel is liable for demurrage due to cargo unloading delays caused by weather interruption;

2. Whether or not the alleged 'seaworthiness certificates' (Exhibits '3', '4', '5', '6', '7', '8', '9', '11' and '12') were admissible in evidence and constituted evidence of the vessel's seaworthiness at the beginning of the voyages; and 3. Whether or not a charterer's failure to insure its cargo exempts the shipowner from liability for cargo damage."

Questions of Fact "1. 2. 3. 4. Whether or not the vessel was seaworthy and cargo-worthy; Whether or not vessel's officers and crew were negligent in handling and caring for NSC's cargo; Whether or not NSC's cargo of tinplates did sweat during the voyage and, hence, rusted on their own; and Whether or not NSC's stevedores were negligent and caused the wetting[/]rusting of NSC's tinplates."

In its separate petition, 9 VSI submits for the consideration of this Court the following alleged errors of the CA: "A. The respondent Court of Appeals committed an error of law in reducing the award of demurrage from P88,000.00 to P44,000.00. B. The respondent Court of Appeals committed an error of law in deleting the award of P10,000 for attorney's fees and expenses of litigation." Amplifying the foregoing, VSI raises the following issues in its memorandum: 10 "I. Whether or not the provisions of the Civil Code of the Philippines on common carriers pursuant to which there exist[s] a presumption of negligence against the common carrier in case of loss or damage to the cargo are applicable to a private carrier. II. Whether or not the terms and conditions of the Contract of Voyage Charter Hire, including the Nanyozai

Charter, are valid and binding on both contracting parties." The foregoing issues raised by the parties will be discussed under the following headings: 1. 2. 3. 4. Questions of Fact Effect of NSC's Failure to Insure the Cargo Admissibility of Certificates Proving Seaworthiness Demurrage and Attorney's Fees.

The Court's Ruling The Court affirms the assailed Decision of the Court of Appeals, except in respect of the demurrage. Preliminary Matter : Common Carrier or Private Carrier ?

At the outset, it is essential to establish whether VSI contracted with NSC as a common carrier or as a private carrier. The resolution of this preliminary question determines the law, standard of diligence and burden of proof applicable to the present case. Article 1732 of the Civil Code defines a common carrier as "persons, corporations, firms or associations engaged in the business of carrying or transporting passengers or goods or both, by land, water, or air, for compensation, offering their services to the public." It has been held that the true test of a common carrier is the carriage of passengers or goods, provided it has space, for all who opt to avail themselves of its transportation service for a fee. 11 A carrier which does not qualify under the above test is deemed a private carrier. "Generally, private carriage is undertaken by special agreement and the carrier does not hold himself out to carry goods for the general public. The most typical, although not the only form of private carriage, is the charter party, a maritime contract by which the charterer, a party other than the shipowner, obtains the use and service of all or some part of a ship for a period of time or a voyage or voyages." 12 In the instant case, it is undisputed that VSI did not offer its services to the general public. As found by the Regional Trial Court, it carried passengers or goods only for those it chose under a "special contract of charter party." 13 As correctly concluded by the Court of Appeals, the MV Vlasons I "was not a common but a private carrier." 14 Consequently, the rights and obligations of VSI and NSC, including their respective liability for damage to the cargo, are determined primarily by stipulations in their contract of private carriage or charter party. 15 Recently, in Valenzuela Hardwood and Industrial Supply, Inc., vs. Court of Appeals and Seven Brothers Shipping Corporation, 16 the Court ruled: ". . . in a contract of private carriage, the parties may freely stipulate their duties and obligations which perforce would be binding on them. Unlike in a contract involving a common carrier, private carriage does not involve the general public. Hence, the stringent provisions of the Civil Code on common carriers protecting the general public cannot justifiably be applied to a ship transporting commercial goods as a private carrier. Consequently, the public policy embodied therein is not contravened by stipulations in a charter party that lessen or remove the protection given by law in contracts involving common carriers." 17 Extent of VSI's Responsibility and Liability Over NSC's Cargo It is clear from the parties' Contract of Voyage Charter Hire, dated July 17, 1974, that VSI "shall not be responsible for losses except on proven willful negligence of the officers of the vessel." The NANYOZAI Charter Party, which was incorporated in the parties' contract of transportation further provided that the shipowner shall not be liable for loss of or damage to the cargo arising or resulting from unseaworthiness, unless the same was caused by its lack of due diligence to make the vessel seaworthy or to ensure that the same was "properly manned, equipped and supplied," and to "make the holds and all other parts of the vessel in which cargo [was] carried, fit and safe for its reception, carriage and preservation." 18 The NANYOZAI Charter Party also provided that "[o]wners shall not be responsible for split, chafing and/or any damage unless caused by the negligence or default of the master or crew." 19 Burden of Proof In view of the aforementioned contractual stipulations, NSC must prove that the damage to its shipment was caused by VSI's willful negligence or failure to exercise due diligence in making MV Vlasons I seaworthy and fit for holding, carrying and safekeeping the cargo. Ineluctably, the burden of proof was placed on NSC by the parties' agreement. This view finds further support in the Code of Commerce which pertinently provides: "Art. 361. stipulated. Merchandise shall be transported at the risk and venture of the shipper, if the contrary has not been expressly

Therefore, the damage and impairment suffered by the goods during the transportation, due to fortuitous event, force majeure, or the nature and inherent defect of the things, shall be for the account and risk of the shipper. The burden of proof of these accidents is on the carrier." "Art. 362. The carrier, however, shall be liable for damages arising from the cause mentioned in the preceding article if proofs against him show that they occurred on account of his negligence or his omission to take the precautions usually adopted by careful persons, unless the shipper committed fraud in the bill of lading, making him to believe that the goods were of a class or quality different from what they really were." Because the MV Vlasons I was a private carrier, the shipowner's obligations are governed by the foregoing provisions of the Code of Commerce and not by the Civil Code which, as a general rule, places the prima facie presumption of negligence on a common carrier. It is a hornbook doctrine that: "In an action against a private carrier for loss of, or injury to, cargo, the burden is on the plaintiff to prove that the carrier was negligent or unseaworthy, and the fact that the goods were lost or damaged while in the carrier's custody does not put the burden of proof on the carrier. Since . . . a private carrier is not an insurer but undertakes only to exercise due care in the protection of the goods committed to its care, the burden of proving negligence or a breach of that duty rests on plaintiff and proof of loss of, or damage to, cargo while in the carrier's possession does not cast on it the burden of proving proper care and diligence on its part or that the loss occurred from an

excepted cause in the contract or bill of lading. However, in discharging the burden of proof, plaintiff is entitled to the benefit of the presumptions and inferences by which the law aids the bailor in an action against a bailee, and since the carrier is in a better position to know the cause of the loss and that it was not one involving its liability, the law requires that it come forward with the information available to it, and its failure to do so warrants an inference or presumption of its liability. However, such inferences and presumptions, while they may affect the burden of coming forward with evidence, do not alter the burden of proof which remains on plaintiff, and, where the carrier comes forward with evidence explaining the loss or damage, the burden of going forward with the evidence is again on plaintiff. Where the action is based on the shipowner's warranty of seaworthiness, the burden of proving a breach thereof and that such breach was the proximate cause of the damage rests on plaintiff, and proof that the goods were lost or damaged while in the carrier's possession does not cast on it the burden of proving seaworthiness. . . . Where the contract of carriage exempts the carrier from liability for unseaworthiness not discoverable by due diligence, the carrier has the preliminary burden of proving the exercise of due diligence to make the vessel seaworthy." 20 In the instant case, the Court of Appeals correctly found that NSC "has not taken the correct position in relation to the question of who has the burden of proof. Thus, in its brief (pp. 10-11), after citing Clause 10 and Clause 12 of the NANYOZAI Charter Party (incidentally plaintiff-appellant's [NSC's] interpretation of Clause 12 is not even correct), it argues that 'a careful examination of the evidence will show that VSI miserably failed to comply with any of these obligations' as if defendant-appellee [VSI] had the burden of proof." 21 First Issue : Questions of Fact Based on the foregoing, the determination of the following factual questions is manifestly relevant: (1) whether VSI exercised due diligence in making MV Vlasons I seaworthy for the intended purpose under the charter party; (2) whether the damage to the cargo should be attributed to the willful negligence of the officers and crew of the vessel or of the stevedores hired by NSC; and (3) whether the rusting of the tinplates was caused by its own "sweat" or by contact with seawater. LibLex These questions of fact were threshed out and decided by the trial court, which had the firsthand opportunity to hear the parties' conflicting claims and to carefully weigh their respective evidence. The findings of the trial court were subsequently affirmed by the Court of Appeals. Where the factual findings of both the trial court and the Court of Appeals coincide, the same are binding on this Court. 22 We stress that, subject to some exceptional instances, 23 only questions of law not questions of fact may be raised before this Court in a petition for review under Rule 45 of the Rules of Court. After a thorough review of the case at bar, we find no reason to disturb the lower courts' factual findings, as indeed NSC has not successfully proven the application of any of the aforecited exceptions. Was MV Vlasons I Seaworthy? In any event, the records reveal that VSI exercised due diligence to make the ship seaworthy and fit for the carriage of NSC's cargo of steel and tinplates. This is shown by the fact that it was drydocked and harbored by the Philippine Coast Guard before it proceeded to Iligan City for its voyage to Manila under the contract of voyage charter hire. 24 The vessel's voyage from Iligan to Manila was the vessel's first voyage after drydocking. The Philippine Coast Guard Station in Cebu cleared it as seaworthy, fitted and equipped; it met all requirements for trading as cargo vessel. 25 The Court of Appeals itself sustained the conclusion of the trial court that MV Vlasons I was seaworthy. We find no reason to modify or reverse this finding of both the trial and the appellate courts. Who Were Negligent : Seamen or Stevedores? As noted earlier, the NSC had the burden of proving that the damage to the cargo was caused by the negligence of the officers and the crew of MV Vlasons I in making their vessel seaworthy and fit for the carriage of tinplates. NSC failed to discharge this burden. Before us, NSC relies heavily on its claim that MV Vlasons I had used an old and torn tarpaulin or canvas to cover the hatches through which the cargo was loaded into the cargo hold of the ship. It faults the Court 26 of Appeals for failing to consider such claim as an "uncontroverted fact and denies that MV Vlasons I "was equipped with new canvas covers in tandem with the old ones as indicated in the Marine Protest . . ." 27 We disagree. The records sufficiently support VSI's contention that the ship used the old tarpaulin, only in addition to the new one used primarily to make the ship's hatches watertight. The foregoing are clear from the marine protest of the master of the MV Vlasons I, Antonio C. Dumlao, and the deposition of the ship's boatswain, Jose Pascua. The salient portions of said marine protest read: ". . . That the M/V "VLASONS I" departed Iligan City on or about 0730 hours of August 8, 1974, loaded with approximately 2,487.9 tons of steel plates and tin plates consigned to National Steel Corporation; that before departure, the vessel was rigged, fully equipped and cleared by the authorities; that on or about August 9, 1974, while in the vicinity of the western part of Negros and Panay, we encountered very rough seas and strong winds and Manila office was advised by telegram of the adverse weather conditions encountered; that in the morning of August 10, 1974, the weather condition changed to worse and strong winds and big waves continued pounding the vessel at her port side causing sea water to overflow on deck and hatch (sic) covers and which caused the first layer of the canvass covering to give way while the new canvass covering still holding on;

That the weather condition improved when we reached Dumali Point protected by Mindoro; that we re-secured the canvass covering back to position; that in the afternoon of August 10, 1974, while entering Maricaban Passage, we were again exposed to moderate seas and heavy rains; that while approaching Fortune Island, we encountered again rough seas, strong winds and big waves which caused the same canvass to give way and leaving the new canvass holding on; xxx xxx xxx" 28

And the relevant portions of Jose Pascua's deposition are as follows: "q a q What is the purpose of the canvas cover? So that the cargo would not be soaked with water. And will you describe how the canvas cover was secured on the hatch opening?

WITNESS a It was placed flat on top of the hatch cover, with a little canvas flowing over the sides and we place[d] a flat bar over the canvas on the side of the hatches and then we place[d] a stopper so that the canvas could not be removed. ATTY. DEL ROSARIO q a xxx q a And will you tell us the size of the hatch opening? The length and the width of the hatch opening. Forty-five feet by thirty-five feet, sir. xxx xxx

How was the canvas supported in the middle of the hatch opening? There is a hatch board.

ATTY. DEL ROSARIO q a q a q a q a q a What is the hatch board made of? It is made of wood, with a handle. And aside from the hatch board, is there any other material there to cover the hatch? There is a beam supporting the hatch board. What is this beam made of? It is made of steel, sir. Is the beam that was placed in the hatch opening covering the whole hatch opening? No, sir. How many hatch beams were there placed across the opening? There are five beams in one hatch opening.

ATTY. DEL ROSARIO q a q a q a q a q And on top of the beams you said there is a hatch board. How many pieces of wood are put on top? Plenty, sir, because there are several pieces on top of the hatch beam. And is there a space between the hatch boards? There is none, sir. They are tight together? Yes, sir. How tight? Very tight, sir. Now, on top of the hatch boards, according to you, is the canvas cover. How many canvas covers?

Two, sir." 29

That due diligence was exercised by the officers and the crew of the MV Vlasons I was further demonstrated by the fact that, despite encountering rough weather twice, the new tarpaulin did not give way and the ship's hatches and cargo holds remained waterproof. As aptly stated by the Court of Appeals, ". . . we find no reason not to sustain the conclusion of the lower court based on overwhelming evidence, that the MV 'VLASONS I' was seaworthy when it undertook the voyage on August 8, 1974 carrying on board thereof plaintiff-appellant's shipment of 1,677 skids of tinplates and 92 packages of hot rolled sheets or a total of 1,769 packages from NSC's pier in Iligan City arriving safely at North Harbor, Port Area, Manila, on August 12, 1974; . . ." 30 Indeed, NSC failed to discharge its burden to show negligence on the part of the officers and the crew of MV Vlasons I, On the contrary, the records reveal that it was the stevedores of NSC who were negligent in unloading the cargo from the ship. cdasia The stevedores employed only a tent-like material to cover the hatches when strong rains occasioned by a passing typhoon disrupted the loading of the cargo. This tent-like covering, however, was clearly inadequate for keeping rain and seawater away from the hatches of the ship. Vicente Angliongto, an officer of VSI, testified thus: "ATTY. ZAMORA: Q Now, during your testimony on November 5, 1979, you stated on August 14 you went on board the vessel upon notice from the National Steel Corporation in order to conduct the inspection of the cargo. During the course of the investigation, did you chance to see the discharging operation? WITNESS: A Yes, sir, upon my arrival at the vessel, I saw some of the tinplates already discharged on the pier but majority of the tinplates were inside the hall, all the hatches were opened. Q A Q In connection with these cargoes which were unloaded, where is the place. At the Pier. What was used to protect the same from weather?

ATTY. LOPEZ: We object, your Honor, this question was already asked. This particular matter . . . the transcript of stenographic notes shows the same was covered in the direct examination. ATTY. ZAMORA: Precisely, your Honor, we would like to go on detail, this is the serious part of the testimony. COURT: All right, witness may answer. ATTY. LOPEZ: Q A What was used in order to protect the cargo from the weather? A base of canvas was used as cover on top of the tinplates, and tents were built at the opening of the hatches.

Q You also stated that the hatches were already opened and that there were tents constructed at the opening of the hatches to protect the cargo from the rain. Now, will you describe [to] the Court the tents constructed. A The tents are just a base of canvas which look like a tent of an Indian camp raise[d] high at the middle with the whole side separated down to the hatch, the size of the hatch and it is soaks [sic] at the middle because of those weather and this can be used only to temporarily protect the cargo from getting wet by rains. Q Now, is this procedure adopted by the stevedores of covering tents proper?

A No sir, at the time they were discharging the cargo, there was a typhoon passing by and the hatch tent was not good enough to hold all of it to prevent the water soaking through the canvas and enter the cargo. Q In the course of your inspection, Mr. Anglingto [sic], did you see in fact the water enter and soak into the canvas and tinplates. A Yes, sir, the second time I went there, I saw it.

Q As owner of the vessel, did you not advise the National Steel Corporation [of] the procedure adopted by its stevedores in discharging the cargo particularly in this tent covering of the hatches? A Yes, sir, I did the first time I saw it, I called the attention of the stevedores but the stevedores did not mind at all, so, I called the attention of the representative of the National Steel but nothing was done, just the same. Finally, I wrote a letter to them." 31 NSC attempts to discredit the testimony of Angliongto by questioning his failure to complain immediately about the stevedores' negligence on the first day of unloading, pointing out that he wrote his letter to petitioner only seven days later. 32 The Court is not persuaded. Angliongto's candid answer in his aforequoted testimony satisfactorily explained the delay. Seven days lapsed because he first called the attention of the stevedores, then the NSC's representative, about the negligent and defective procedure adopted in unloading the cargo. This series of actions constitutes a reasonable response in accord with common sense and ordinary human experience. Vicente Angliongto could not be blamed for calling the stevedores' attention first and then the NSC's representative on location before formally informing NSC of the negligence he had observed, because he was not responsible for the stevedores or the unloading operations. In fact, he was merely expressing concern for NSC which was ultimately responsible for the stevedores it had hired and the performance of their task to unload the cargo. We see no reason to reverse the trial and the appellate courts' findings and conclusions on this point, viz: "In the THIRD assigned error, [NSC] claims that the trial court erred in finding that the stevedores hired by NSC were negligent in the unloading of NSC's shipment. We do not think so. Such negligence according to the trial court is evident in the stevedores hired by [NSC], not closing the hatch of MV 'VLASONS I' when rains occurred during the discharging of the cargo thus allowing rain water and seawater spray to enter the hatches and to drift to and fall on the cargo. It was proven that the stevedores merely set up temporary tents or canvas to cover the hatch openings when it rained during the unloading operations so that it would be easier for them to resume work after the rains stopped by just removing said tents or canvass. It has also been shown that on August 20, 1974, VSI President Vicente Angliongto wrote [NSC] calling attention to the manner the stevedores hired by [NSC] were discharging the cargo on rainy days and the improper closing of the hatches which allowed continuous heavy rain water to leak through and drip to the tinplates' covers and [Vicente Angliongto] also suggesting that due to four (4) days continuous rains with strong winds that the hatches be totally closed down and covered with canvas and the hatch tents lowered. (Exh '13'). This letter was received by [NSC] on 22 August 1974 while discharging operations were still going on (Exhibit '13-A') " 33 The fact that NSC actually accepted and proceeded to remove the cargo from the ship during unfavorable weather will not make VSI liable for any damage caused thereby. In passing, it may be noted that the NSC may seek indemnification, subject to the laws on prescription, from the stevedoring company at fault in the discharge operations. "A. stevedore company engaged in discharging cargo . . . has the duty to load the cargo . . . in a prudent manner, and it is liable for injury to, or loss of, cargo caused by its negligence . . . and where the officers and members and crew of the vessel do nothing and have no responsibility in the discharge of cargo by stevedores . . . the vessel is not liable for loss of, or damage to, the cargo caused by the negligence of the stevedores . . ." 34 as in the instant case. Do Tinplates "Sweat"? The trial court relied on the testimony of Vicente Angliongto in finding that " . . . tinplates 'sweat' by themselves when packed even without being in contact with water from outside especially when the weather is bad or raining . . ." 35 The Court of Appeals affirmed the trial court's finding. A discussion of this issue appears inconsequential and unnecessary. As previously discussed, the damage to the tinplates was occasioned not by airborne moisture but by contact with rain and seawater which the stevedores negligently allowed to seep in during the unloading. Second Issue : Effect of NSC's Failure to Insure the Cargo The obligation of NSC to insure the cargo stipulated in the Contract of Voyage Charter Hire is totally separate and distinct from the contractual or statutory responsibility that may be incurred by VSI for damage to the cargo caused by the willful negligence of the officers and the crew of MV Vlasons I . Clearly, therefore, NSC's failure to insure the cargo will not affect its right, as owner and real party in interest, to file an action against VSI for damages caused by the latter's willful negligence. We do not find anything in the charter party that would make the liability of VSI for damage to the cargo contingent on or affected in any manner by NSC's obtaining an insurance over the cargo. Third Issue : Admissibility of Certificates Proving Seaworthiness NSC's contention that MV Vlasons I was not seaworthy is anchored on the alleged inadmissibility of the certificates of seaworthiness offered in evidence by VSI. The said certificates include the following: 1. 2. 3. Certificate of Inspection of the Philippine Coast Guard at Cebu Certificate of Inspection from the Philippine Coast Guard International Load Line Certificate from the Philippine Coast Guard

4. 5.

Coastwise License from the Board of Transportation Certificate of Approval for Conversion issued by the Bureau of Customs 36

NSC argues that the certificates are hearsay for not having been presented in accordance with the Rules of Court. It points out that Exhibits 3, 4 and 11 allegedly are "not written records or acts of public officers"; while Exhibits 5, 6, 7, 8, 9, 11 and 12 are not "evidenced by official publications or certified true copies" as required by Sections 25 and 26, Rule 132, of the Rules of Court. 37 After a careful examination of these exhibits, the Court rules that Exhibits 3, 4, 5, 6, 7, 8, 9 and 12 are inadmissible, for they have not been properly offered as evidence. Exhibits 3 and 4 are certificates issued by private parties, but they have not been proven by one who saw the writing executed, or by evidence of the genuineness of the handwriting of the maker, or by a subscribing witness. Exhibits 5, 6, 7, 8, 9, and 12 are photocopies, but their admission under the best evidence rule have not been demonstrated. We find, however, that Exhibit 11 is admissible under a well-settled exception to the hearsay rule per Section 44 of Rule 130 of the Rules of Court, which provides that "(e)ntries in official records made in the performance of a duty by a public officer of the Philippines, or by a person in the performance of a duty specially enjoined by law, are prima facie evidence of the facts therein stated." 38 Exhibit 11 is an original certificate of the Philippine Coast Guard in Cebu issued by Lieutenant Junior Grade Noli C. Flores to the effect that "the vessel 'VLASONS I', was drydocked . . . and PCG Inspectors were sent on board for inspection . . . After completion of drydocking and duly inspected by PCG Inspectors, the vessel 'VLASONS I', a cargo vessel, is in seaworthy condition, meets all requirements, fitted and equipped for trading as a cargo vessel was cleared by the Philippine Coast Guard and sailed for Cebu Port on July 10, 1974." (sic) NSC's Claim, therefore, is obviously misleading and erroneous. At any rate, it should be stressed that NSC has the burden of proving that MV Vlasons I was not seaworthy. As observed earlier, the vessel was a private carrier and, as such, it did not have the obligation of a common carrier to show that it was seaworthy. Indeed, NSC glaringly failed to discharge its duty of proving the willful negligence of VSI in making the ship seaworthy resulting in damage to its cargo. Assailing the genuineness of the certificate of seaworthiness is not sufficient proof that the vessel was not seaworthy. Fourth Issue : Demurrage and Attorney's Fees The contract of voyage charter hire provides inter alia: "xxx 2. xxx 6. 7. xxx xxx

Cargo : Full cargo of steel products of not less than 2,500 MT, 10% more or less at Master's option. xxx xxx

Loading/Discharging Rate : 750 tons per WWDSHINC. Demurrage/Dispatch : P8,000.00/P4,000.00 per day." 39

The Court defined demurrage in its strict sense as the compensation provided for in the contract of affreightment for the detention of the vessel beyond the laytime or that period of time agreed on for loading and unloading of cargo. 40 It is given to compensate the shipowner for the nonuse of the vessel. On the other hand, the following is well-settled: "Laytime runs according to the particular clause of the charter party. . . If laytime is expressed in 'running days,' this means days when the ship would be run continuously, and holidays are not excepted. A qualification of 'weather permitting' excepts only those days when bad weather reasonably prevents the work contemplated." 41 In this case, the contract of voyage charter hire provided for a four-day laytime; it also qualified laytime as WWDSHINC or weather working days Sundays and holidays included. 42 The running of laytime was thus made subject to the weather, and would cease to run in the event unfavorable weather interfered with the unloading of cargo. 43 Consequently, NSC may not be held liable for demurrage as the four-day laytime allowed it did not lapse, having been tolled by unfavorable weather condition in view of the WWDSHINC qualification agreed upon by the parties. Clearly, it was error for the trial court and the Court of Appeals to have found and affirmed respectively that NSC incurred eleven days of delay in unloading the cargo. The trial court arrived at this erroneous finding by subtracting from the twelve days, specifically August 13, 1974 to August 24, 1974, the only day of unloading unhampered by unfavorable weather or rain which was August 22, 1974. Based on our previous discussion, such finding is a reversible error. As mentioned, the respondent appellate court also erred in ruling that NSC was liable to VSI for demurrage, even if it reduced the amount by half. LibLex Attorney's Fees VSI assigns as error of law the Court of Appeals' deletion of the award of attorney's fees. We disagree. While VSI was compelled to litigate to protect its rights, such fact by itself will not justify an award of attorney's fees under Article 2208 of the Civil Code when" . . . no sufficient showing of bad faith would be reflected in a party's persistence in a case other than an erroneous conviction of the righteousness of his cause . . ." 44 Moreover, attorney's fees may not be awarded to a party for the reason alone that the judgment rendered was favorable to the latter, as this is tantamount to imposing a premium on one's right to litigate or seek judicial redress of legitimate grievances. 45

Epilogue At bottom, this appeal really hinges on a factual issue: when, how and who caused the damage to the cargo? Ranged against NSC are two formidable truths. First, both lower courts found that such damage was brought about during the unloading process when rain and seawater seeped through the cargo due to the fault or negligence of the stevedores employed by it. Basic is the rule that factual findings of the trial court, when affirmed by the Court of Appeals, are binding on the Supreme Court. Although there are settled exceptions, NSC has not satisfactorily shown that this case is one of them. Second, the agreement between the parties the Contract of Voyage Charter Hire placed the burden of proof for such loss or damage upon the shipper, not upon the shipowner. Such stipulation, while disadvantageous to NSC, is valid because the parties entered into a contract of private charter, not one of common carriage. Basic too is the doctrine that courts cannot relieve a party from the effects of a private contract freely entered into, on the ground that it is allegedly one-sided or unfair to the plaintiff. The charter party is a normal commercial contract and its stipulations are agreed upon in consideration of many factors, not the least of which is the transport price which is determined not only by the actual costs but also by the risks and burdens assumed by the shipper in regard to possible loss or damage to the cargo. In recognition of such factors, the parties even stipulated that the shipper should insure the cargo to protect itself from the risks it undertook under the charter party. That NSC failed or neglected to protect itself with such insurance should not adversely affect VSI, which had nothing to do with such failure or neglect. WHEREFORE, premises considered, the instant consolidated petitions are hereby DENIED. The questioned Decision of the Court of Appeals is AFFIRMED with the MODIFICATION that the demurrage awarded to VSI is deleted. No pronouncement as to costs. SO ORDERED. Narvasa, C .J ., Romero, Melo and Francisco, JJ ., concur.

FIRST DIVISION [G.R. Nos. 49664-67. November 22, 1990.] PANTRANCO SOUTH EXPRESS, INC., petitioner, vs. BOARD OF TRANSPORTATION and BATANGAS LAGUNA TAYABAS BUS CO., INC., respondents. Parco, Sabillo, Regondola & Maronilla for petitioner. Pablito A. Gahol for BLTB Co. SYLLABUS

1. CIVIL LAW; COMMON CARRIERS; CERTIFICATE OF PUBLIC CONVENIENCE; BOARD OF TRANSPORTATION, GIVEN THE POWER AND DISCRETION TO DECREE OR REFUSE THE CANCELLATION OF THE SAME IF SUPPORTED WITH EVIDENCE; OTHER BASES FOR BOT'S DECISIONS. There can be no dispute that the law (Section 16 (n) of the Public Service Act) gives to the BOT (successor of the Public Service Commission) ample power and discretion to decree or refuse the cancellation of a certificate of public convenience issued to an operator as long as there is evidence to support its action, as held by this Court in a long line of cases, wherein it was even intimated that in matters of this nature so long as the action is justified this Court will not substitute its discretion for that of the BOT (see Javier, et al. v. de Leon, et al., 109 Phil. 751; Santiago Ice Plant and Co. v. Lahoz, 87 Phil. 221; Raymundo Transportation Co. v. Cedra, 99 Phil. 99; Manila Yellow Taxicab Co., Inc. v. Castelo, 108 Phil. 394; Dagupan Ice Plant Co., Inc. v. de Lucero, et al. citing Manila Yellow Taxicab Co.; Inc., et al., v. Araullo, 34 O.G. 241; Sambrano v. Northern Luzon Transportation Co., 35 O.G. 2271). The BOT, in refusing to cancel the certificates of public convenience of BLTB, relied on these pieces of evidence; (1) the letter of BLTB dated September 18, 1972; (2) reports/complaints from the general public; (3) reports of its fieldmen; and (4) its own observations acquired thru inspection trips, all of which form part of its records. As We have ruled before, the BOT is particularly a fact-finding body whose decisions on questions regarding certificates of public convenience are influenced not only by the facts as disclosed by the evidence in the case before it but also by the reports of its field agents and inspectors that are periodically submitted to it (see La Mallorca and Pampanga Bus Co., Inc. v. Mercado, G.R. No. L19120, November 29, 1965, 15 SCRA 343). Likewise, the BOT has the power to take into consideration the result of its own observation and investigation of the matter submitted to it for decision, in connection with other evidence presented at the hearing of a case (Manila Yellow Taxicab Co., Inc., et al. v. N. & B. Stables Co., Inc., 60 Phil. 851 citing Manila Yellow Taxicab Co., Inc., et al. v. Danon, 58 Phil. 75; Manila Electric Co. v. Balagtas, 58 Phil. 429). 2. ID.; ID.; ID.; MERE FAILURE TO TEMPORARILY OPERATE THE TRANSPORTATION LINES SHOULD NOT BE A GROUND FOR THE CANCELLATION THEREOF. Taking into consideration BLTB's letter dated September 18, 1972, it acted in good faith when it did not immediately operate on those lines and not because of a design to prejudice public interest. Certificates of public convenience involve investment of a big amount of capital, both in securing the certificate and in maintaining the operation of the lines covered thereby, and mere failure to operate temporarily should not be a ground for cancellation, especially as when, in the case at bar, the suspension of the service was directly caused by circumstances beyond the operator's control (Pangasinan Transportation Co. v. F.F. Halili, et al., 95 Phil. 694). 3. ID.; ID.; ID.; MAY NOT BE VALIDLY REVOKED IN THE ABSENCE OF WILLFUL AND CONTUMACIOUS VIOLATION BY THE UTILITY OPERATOR; BOT GUIDED BY PUBLIC NECESSITY AND CONVENIENCE AS PRIMARY CONSIDERATIONS. In absence of showing that there is willful and contumacious violation on the part of the utility operator, no certificate of public convenience may be validly revoked (Manzanal v. Ausejo, et al., G.R. No. L-31056, August 4, 1988, 164 SCRA 36). More importantly, what cannot be ignored is that the needs of the public are paramount, as elucidated by the BOT in its order. In the exercise of its power to grant or cancel certificates of public convenience, the BOT is guided by public necessity and convenience as primary considerations (see Dizon v. Public Service Commission, et al., G.R. No. L-34820, April 30, 1973, 50 SCRA 500). DECISION MEDIALDEA, J p: This is a petition for certiorari and/or prohibition with prayer for the issuance of a restraining order seeking to annul the order of public respondent Board of Transportation dated January 4, 1979. The antecedent facts, as culled from the pleadings, are as follows: On August 5, 1971, the then Public Service Commission granted certificates of public convenience to private respondent Batangas Laguna Tayabas Bus Co., Inc. (BLTB) for the operation of twelve (12) bus units on the Pasay City Legaspi City line (Case No. 705749); six (6) bus units on the Pasay City Bulan, Sorsogon line (Case No. 70-5750), and ten (10) bus units on the Pasay City Sorsogon line (Case No. 70-5751) (pp. 59-64, Rollo). LLpr On April 4, 1975, petitioner Pantranco South Express, Inc. (PANTRANCO) filed a complaint against BLTB before public respondent Board of Transportation (BOT), docketed as Case No. 75-31-C, charging it with abandonment of services on said lines from August, 1971 to April, 1975 and praying for the cancellation of BLTB's certificates of public convenience (pp. 69-70, Rollo). On March 24, 1976, in Cases Nos. 70-5749, 70-5750 and 70-5751, PANTRANCO filed an urgent petition charging BLTB with abandoning said services from March, 1975 to March, 1976 and reiterating its prayer for the cancellation of the certificates of public convenience (pp. 77-78, Rollo). BLTB did not file any written answer either to the complaint in Case No. 75-31-C or to the urgent petition in Cases Nos. 70-5749, 705750, and 70-5751. Rather, in a Motion dated July 26, 1978, BLTB, referring to hearings before the BOT on March 24, 1977 and April 13, 1977, alleged (pp. 126-128, Rollo): "3. At said hearings, Respondent admitted non-operation of the bus services authorized in Cases Nos. 70-5749,70-5750 and 705751 and thus the need for Complainant to present evidence in both proceedings may be dispensed with. "4. At the said hearings, Respondent advanced affirmative defenses on Complainant's Urgent Motion of March 24, 1977 (sic) which Respondent, in its Rejoinder of May 5, 1977, adopted also as its affirmative defenses with respect to Case No. 75-31-C.

"Briefly, these affirmative defenses are: (a) Respondent actually registered under PUB denomination all the twenty eight (28) buses authorized for operation under the certificates sought to be cancelled (Annex 'A'); (b) The following supervening factors which are beyond Respondent's control however, arose and prevented Respondent from operating the lines at issue: (1) (2) (3) The gasoline crises starting 1971; The destructive big floods in 1972 and 1974; The general troubled conditions of peace and order in 1971 and 1972 leading to the declaration of martial law;

(4) Starting 1973 and on to 1974,1975 and 1976 the nearly prohibitive cost of units and spare parts (if available at all), the higher costs of operations and acute tire shortages particularly in 1974; (5) All these, which are of general public knowledge and known to the Board, brought the whole land transportation industry in what might be termed as in extremis condition causing the bankruptcy of many operators, big and small; and (6) Complainant Pantranco South Express, Inc. was not spared the ill effects of these adverse conditions to the extent that up to the present it has not registered all the buses required for its regular bus operations (Annex 'B', 'B-1'). "5. At the said hearings also, Respondent prayed that these incidents in these proceedings be considered and decided in the light of present conditions which are: (a) (b) The certificates of public convenience of Respondent are still valid; Respondent is willing and desirous to operate (sic) the said certificates;

(c) Respondent has the capability to operate, in fact, has ready the full twenty-eight (28) buses needed for full operation of the authorized services; (d) (e) (f) Complainant is not operating all its authorized bus services for lack of sufficient rolling stock; The need for the services sought to be cancelled is patent, in fact, urgent at the present time; and That the public interest is paramount against other considerations such as the incidents in these cases."

On January 4, 1979, the BOT issued an order, the dispositive portion of which reads (p. 133, Rollo): "In view of all the foregoing, this Board, in addition to its rulings mentioned above "1. Orders respondent to operate within fifteen (15) days from date hereof the whole complement of twenty-eight (28) units authorized under the said certificates, utilizing for the purpose such units presently authorized as RESERVES and inform the Board within ten (10) days from commencement of operation, the makes and motor numbers of the units to be operated for each line and the case numbers under which they are authorized for appropriate entry in the records of the above-entitled cases, and "2. Orders the fine of P10,000.00 imposed above to be paid to this Board within ten (10) days from receipt by it of a copy of this Order and declares the consolidated complaints filed in the above-entitled cases closed and terminated. "Failure of respondent/applicant to comply with any of the foregoing requirements shall be considered sufficient cause for this Board to withdraw the authority herein granted. "SO ORDERED." It rationalized the non-cancellation of BLTB's certificates of public convenience, as follows (pp. 128 A-133, Rollo): cdrep "Obviously, cancellation of a certificate of public convenience is a penalty of the severest degree. Its consequences are suffered not exclusively by the operator; it extends to the travelling public whose needs for transportation facilities would further be aggravated by a diminution of needed services. Consequently, where such a penalty is prayed for, this Board requires the evidence to be strong. Less than that this Board must apply the less severe penalties provided for by law, but equally disciplinary in nature. "Sec. 16 (n) of the Public Service Law empowers this Board 'to suspend or revoke any certificate . . . whenever the holder thereof has violated or wilfully (sic) and contumaciously refused to comply with any order, rule or regulation of the Board or any provision of this Act. '. . . "Sec. 21 of the same law provides that 'every public service violating or failing to comply with the terms and conditions of any certificate or any orders, decisions or regulations of the Commission shall be subject to a fine not exceeding two hundred pesos per day for every day of service during which such default or violation continues . . .'

"A reading of both provisions would show that failure to comply with the terms and conditions of any certificate of public convenience is basically punished with a fine, unless the violation is willful or contumacious, in which case the penalty of suspension, or cancellation may be imposed. "Judged by the foregoing standards, this Board declares the evidence of the complainant to be sadly lacking in elements that would qualify the respondent's failure to operate as wilful and contumacious. True the respondent did not operate on its certificate from the time it was granted on August 4, 1971 up to the present. It had not justified its non-operation from said date up to September 2, 1972. But on September 2, 1972, the respondent justified its non-operation by writing to the Board, that because of unfinished portions of the road it could not render the service authorized by the Board to be rendered. The Board never overruled the respondent. "xxx xxx xxx

"At this point, it must be borne in mind that whether in the case of application for new services, or for the cancellation of lines already granted, this Board must determine what the public need is. "This leads us into discussing what the public need is in the areas covered by the certificates of public convenience in question. "The Board, in its desire to be responsive to public need, has always kept itself informed of actual and latest transportation conditions in the provinces, including the Bicol region. Thru reports/complaints from the general public, from reports of its fieldmen, and from its own personal observations acquired thru inspection trips, this Board is aware that buses which are operating are very much less than what has been authorized. This was officially confirmed in a meeting of provincial and Metro-Manila bus operators held in Malacaang Palace on June 21, 1976, presided over by His Excellency, President Ferdinand E. Marcos himself. "In Bicol region, for instance, in the past four years (1974, 1975, 1976 and 1977) PSEI (PANTRANCO) registered and operated less than 50% of its authorized units: Year 1974 1975 1976 1977 466 Authorized Units Registered 159 units 162 units

(not available) 453 464

227 units 221 units

and among the lines not so operated or only partially operated, either through expiration of certificates, petitioned suspension of operation or for sheer lack of units are long distance lines from Manila to the provinces of Quezon, Camarines Norte, Camarines Sur, Albay and Sorsogon aside from lines serving inter-provincial and local needs in Quezon province and the whole Bicol Region. Among them are the following lines which are concurrent in whole or in portions of the lines Pasay City Legaspi City, Pasay Sorsogon and Pasay Bulan, all the said lines requiring the operation of some two hundred twenty seven (227) buses: "xxx xxx xxx

"The non-operation by PSEI (PANTRANCO) of these more than two hundred (200) buses clearly requires the entry or operation of an equal number of buses. Any prohibition against an effort to fill up a public need would be contrary to public interest. "Public interest will better be served if respondent is allowed to operate the service authorized in its certificate of public convenience. To cancel these certificates at a time when the clamor and demand for such service have been increasing day to day, prodded by the people's desire to avail of the excellent road conditions, which in turn conduces to fast and convenient travel, would be to negate and turn back the clock of progress which has been seeping steadily and constantly to the long neglected vast communal area that is the Bicol Region. To authorize the operation of these services will complement the government's multi-purpose development effort to hasten the Socio-Economic growth of these areas, notable among which are the Philippines-Japan Friendship Highway, of which the routes covered by applicant/respondent's certificates traverse and the Bicol River Basin Development Project, a program designed to tap the rich natural resources of the region." Hence, the present petition. On January 15, 1979, We issued a temporary restraining order enjoining the BOT from enforcing its January 4, 1979 order (pp. 147148, Rollo). cdrep In this petition, PANTRANCO imputes grave abuse of discretion, acting without or in excess of jurisdiction on the part of the BOT when it issued the questioned order, as indicated by several circumstance that it enumerated. Among these, only the following deserve discussion: 1) refusal to cancel the certificates of public convenience of BLTB despite its abandonment and/or non-operation on the subject lines since August 5, 1971 up to the present; 2) using as basis for its questioned order BLTB's letter dated September 2, 1972 (wherein it justified its non-operation on account of unfinished portions of the road) which is not part of the records of the case; and

3) resorting to extraneous facts not supported by competent evidence as basis for its conclusion that the demand of public need would be more paramount than the need to penalize BLTB. For its part, BLTB contends that: 1) the cancellation or non-cancellation of its certificates of public convenience is addressed to the sound discretion of the BOT;

2) its letter dated September 18, 1972 (erroneously referred to as the letter dated September 2, 1972) forms part of the BOT's records; and 3) the BOT acted correctly in the exercise of its sound discretion and within its jurisdiction when it found that the demand of public need would be paramount than the need to penalize it (BLTB). There can be no dispute that the law (Section 16 (n) of the Public Service Act) gives to the BOT (successor of the Public Service Commission * ample power and discretion to decree or refuse the cancellation of a certificate of public convenience issued to an operator as long as there is evidence to support its action, as held by this Court in a long line of cases, wherein it was even intimated that in matters of this nature so long as the action is justified this Court will not substitute its discretion for that of the BOT (see Javier, et al. v. de Leon, et al., 109 Phil. 751; Santiago Ice Plant and Co. v. Lahoz, 87 Phil. 221; Raymundo Transportation Co. v. Cedra, 99 Phil. 99; Manila Yellow Taxicab Co., Inc. v. Castelo, 108 Phil. 394; Dagupan Ice Plant Co., Inc. v. de Lucero, et al. citing Manila Yellow Taxicab Co.; Inc., et al. v. Araullo, 34 O.G. 241; Sambrano v. Northern Luzon Transportation Co., 35 O.G. 2271). The BOT, in refusing to cancel the certificates of public convenience of BLTB, relied on these pieces of evidence; (1) the letter of BLTB dated September 18, 1972; (2) reports/complaints from the general public; (3) reports of its fieldmen; and (4) its own observations acquired thru inspection trips, all of which form part of its records. As We have ruled before, the BOT is particularly a fact-finding body whose decisions on questions regarding certificates of public convenience are influenced not only by the facts as disclosed by the evidence in the case before it but also by the reports of its field agents and inspectors that are periodically submitted to it (see La Mallorca and Pampanga Bus Co., Inc. v. Mercado, G.R. No. L-19120, November 29, 1965, 15 SCRA 343). Likewise, the BOT has the power to take into consideration the result of its own observation and investigation of the matter submitted to it for decision, in connection with other evidence presented at the hearing of a case (Manila Yellow Taxicab Co., Inc., et al. v. N. & B. Stables Co., Inc., 60 Phil. 851 citing Manila Yellow Taxicab Co., Inc., et al. v. Danon, 58 Phil. 75; Manila Electric Co. v. Balagtas, 58 Phil. 429). Taking into consideration BLTB's letter dated September 18, 1972, it acted in good faith when it did not immediately operate on those lines and not because of a design to prejudice public interest. Certificates of public convenience involve investment of a big amount of capital, both in securing the certificate and in maintaining the operation of the lines covered thereby, and mere failure to operate temporarily should not be a ground for cancellation, especially as when, in the case at bar, the suspension of the service was directly caused by circumstances beyond the operator's control (Pangasinan Transportation Co. v. F.F. Halili, et al., 95 Phil. 694). In the absence of showing that there is willful and contumacious violation on the part of the utility operator, no certificate of public convenience may be validly revoked (Manzanal v. Ausejo, et al., G.R. No. L-31056, August 4, 1988, 164 SCRA 36). More importantly, what cannot be ignored is that the needs of the public are paramount, as elucidated by the BOT in its order. In the exercise of its power to grant or cancel certificates of public convenience, the BOT is guided by public necessity and convenience as primary considerations (see Dizon v. Public Service Commission, et al., G.R. No. L-34820, April 30, 1973, 50 SCRA 500). llcd Apparently, PANTRANCO's purpose in instituting the proceedings for cancellation of BLTB's certificates of public convenience is to remove it (BLTB) as a competitor in the business in which they are both engaged (see Pangasinan Transportation Co. v. F.F. Halili, et al., supra), which is detestable. Experience has demonstrated that healthy competition always redounds to the benefit of the commuters and the development of transportation as a whole. ACCORDINGLY, the petition is hereby DISMISSED. The order of the Board of Transportation dated January 4, 1979 is AFFIRMED. The temporary restraining order issued on January 15, 1979 is LIFTED. SO ORDERED. Narvasa, Cruz, Gancayco and Grio-Aquino, JJ., concur.

FIRST DIVISION [G.R. No. L-23733. October 31, 1969.] HERMINIO L. NOCUM, plaintiff-appellee, vs. LAGUNA TAYABAS BUS COMPANY, defendant-appellant. Fernando M. Mangubat and Felimon H. Mendoza for plaintiff-appellee. Domingo E. de Lara & Associates for defendant-appellant. SYLLABUS 1. CIVIL LAW; COMMON CARRIERS; EXTRAORDINARY DILIGENCE REQUIRED BY LAW; QUALIFICATION. Article 1733 of the Civil Code reasonably qualifies the extraordinary diligence required of common carriers for the safety of the passengers transported by them to be "according to all the circumstances of each case." In fact Article 1755 repeats this same qualification. 2. ID.; ID.; ID.; COMMON CARRIER IN INSTANT CASE NOT LIABLE FOR DAMAGES TO INJURED PASSENGER. A passenger in appellant's bus was injured as a consequence of the explosion of firecrackers, contained in a box, loaded in the bus and declared by another passenger to the conductor as containing clothes and miscellaneous items. The lower court sentenced appellant to pay damages to the injured passenger. Held. Appellant should not be made liable for damages to the injured passenger. Fairness demands that in measuring a common carrier's duty towards its passengers, allowance must be given to the reliance that should be reposed on the sense of responsibility of all the passengers in regard to their common safety. 3. ID.; ID.; ID.; DUTY REGARDING PASSENGER'S BAGGAGES. Inquiry may be verbally made as to the nature of a passenger's baggage when such is not outwardly perceptible, but beyond this, constitutional boundaries are already in danger of being transgressed. When there are sufficient indications that the representations of the passenger regarding the nature of his baggage may not be true, the assistance of the police authorities may be solicited, not necessarily to force the passenger to open his baggage, but to conduct the needed investigation consistent with the rules of propriety and, above all, the constitutional rights of the passenger. 4. ID.; ID.; ID.; ID.; WHEN COMMON CARRIER LIABLE BECAUSE OF PASSENGER'S DANGEROUS BAGGAGE. Where there is evidence of circumstances indicating cause or causes for apprehension that the passenger's baggage in dangerous, and the common carrier's employee has failed to act in the fact of such evidence, the common carrier becomes liable for any injury caused to its passengers by reason of such baggage. DECISION BARREDO, J p: Appeal of the Laguna Tayabas Bus Co., defendant in the court below, from a judgment of the said court (Court of First Instance of Batangas) in its Civil Case No. 834, wherein appellee Herminio L. Nocum was plaintiff, sentencing appellant to pay appellee the sum of P1,351.00 for actual damages and P500.00 as attorney's fees, with legal interest from the filing of the complaint plus costs. Appellee, who was a passenger in appellant's Bus No. 120 then making a trip within the barrio of Dita, Municipality of Bay, Laguna, was injured as a consequence of the explosion of firecrackers, contained in a box, loaded in said bus and declared to its conductor as

containing clothes and miscellaneous items by a co-passenger. The findings of fact of the trial court are not assailed. The appeal is purely on legal questions. Appellee has not filed any brief. All that We have before Us is appellant's brief with the following assignment of errors: "I "BASED ON THE FACTS THE LOWER COURT FOUND AS ESTABLISHED, IT ERRED AS A MATTER OF LAW IN NOT ABSOLVING APPELLANT FROM LIABILITY RESULTING FROM THE EXPLOSION OF FIRECRACKERS CONTAINED IN A PACKAGE, THE CONTENTS OF WHICH WERE MISREPRESENTED BY A PASSENGER. "II "THE LOWER COURT ERRED, AS A MATTER OF LAW, IN AWARDING DAMAGES WITH LEGAL INTEREST IN FAVOR OF THE APPELLEE. "III "THE LOWER COURT ERRED IN NOT DISMISSING THE COMPLAINT, WITH COSTS AGAINST THE APPELLEE." Upon consideration of the points raised and discussed by appellant, We find the appeal to be well taken. The main basis of the trial court's decision is that appellant did not observe the extraordinary or utmost diligence of a very cautious person required by the following articles 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 articles 1755 and 1756. "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." Analyzing the evidence presented by the parties, His Honor found: "According to Severino Andaya, a witness for the plaintiff, a man with a box went up the baggage compartment of the bus where he already was and said box was placed under the seat. They left Azcarraga at about 11:30 in the morning and when the explosion occurred, he was thrown out. PC investigation report states that thirty seven (37) passengers were injured (Exhibits 'O' and '2'). "The bus conductor, Sancho Mendoza, testified that the box belonged to a passenger whose name he does not know and who told him that it contained miscellaneous items and clothes. He helped the owner in loading the baggage which weighed about twelve (12) kilos and because of company regulation, he charged him for it twenty-five centavos (P0.25). From its appearance there was no indication at all that the contents were explosives or firecrackers. Neither did he open the box because he just relied on the word of the owner. "Dispatcher Nicolas Cornista of defendant company corroborrated the testimony of Mendoza and he said, among other things, that he was present when the box was loaded in the truck and the owner agreed to pay its fare. He added that they were not authorized to open the baggages of passengers because instruction from the management was to call the police if there were packages containing articles which were against regulations. xxx xxx xxx

"There is no question that Bus No. 120 was road worthy when it left its Manila Terminal for Lucena that morning of December 5, 1960. The injuries suffered by the plaintiff were not due to mechanical defects but to the explosion of firecrackers inside the bus which was loaded by a co-passenger. ". . . Turning to the present case, it is quite clear that extraordinary or utmost diligence of a very cautious person was not observed by the defendant company. The service manual, exhibits '3' and '3-A', prohibits the employees to allow explosives, such as dynamite and firecrackers to be transported on its buses. To implement this particular rule for 'the safety of passengers, it was therefore incumbent upon the employees of the company to make the proper inspection of all the baggages which are carried by the passengers. "But then, can it not be said that the breach of the contract was due to fortuitous event? The Supreme Court in the case of Lasam vs. Smith, 45 Phil. 657, quoted Escriche's definition of caso fortuito as 'an unexpected event or act of God which could neither be foreseen nor resisted, such as floods, torrents, shipwrecks, conflagrations, lightning, compulsions, insurrections, destructions of buildings by unforeseen accidents and other occurrences of a similar nature.' In other words, the cause of the unexpected event must be independent of the will of man, or something which cannot be avoided. This cannot be said of the instant case. If proper and rigid inspection were

observed by the defendant, the contents of the box could have been discovered and the accident avoided. Refusal by the passenger to have the package opened was no excuse because, as stated by Dispatcher Cornista, employees should call the police if there were packages containing articles against company regulations. Neither was failure by employees of defendant company to detect the contents of the packages of passengers because like the rationale in the Necesito vs. Paras case (supra), a passenger has neither choice nor control in the exercise of their discretion in determining what are inside the package of co-passengers which may eventually prove fatal." We cannot agree. No doubt, the views of His Honor do seem to be in line with the reasons that the Code Commission had for incorporating the above-quoted provisions in its draft of the Civil Code. Indeed, in approving the said draft, Congress must have concurred with the Commission that by requiring the highest degree of diligence from common carriers in the safe transport of their passengers and by creating a presumption of negligence against them, the recklessness of their drivers which is a common sight even in crowded areas and, particularly, on the highways throughout the country may, somehow, if not in a large measure, be curbed. We are not convinced, however, that the exacting criterion of said provisions has not been met by appellant in the circumstances of this particular case. It is undisputed that before the box containing the firecrackers were allowed to be loaded in the bus by the conductor, inquiry was made with the passenger carrying the same as to what was in it, since its "opening . . . was folded and tied with abaca." (Decision p. 16, Record on Appeal.) According to His Honor, "if proper and rigid inspection were observed by the defendant, the contents of the box could have been discovered and the accident avoided. Refusal by the passenger to have the package opened was no excuse because, as stated by Dispatcher Cornista, employees should call the police if there were packa ges containing articles against company regulations." That may be true, but it is Our considered opinion that the law does not require as much. Article 1733 is not as unbending as His Honor has held, for it reasonably qualifies the extraordinary diligence required of common carriers for the safety of the passengers transported by them to be "according to all the circumstances of each case." "In fact, Article 1755 repeats this same qualification: "A common carrier is bound to carry the passengers safely as far as human care and foresight can provide, using the utmost diligence of very cautious persons, with due regard for all the circumstances." In this particular case before Us, it must be considered, that while it is true the passengers of appellant's bus should not be made to suffer for something over which they had no control, as enunciated in the decision of this Court cited by His Honor, 1 fairness demands that in measuring a common carrier's duty towards its passengers, allowance must be given to the reliance that should be reposed on the sense of responsibility of all the passengers in regard to their common safety. It is to be presumed that a passenger will not take with him anything dangerous to the lives and limbs of his co-passengers, not to speak of his own. Not to be lightly considered be the right to privacy to which each passenger is entitled. He cannot be subjected to any unusual search, when he protests the innocuousness of his baggage and nothing appears to indicate the contrary, as in the case at bar. In other words, inquiry may be verbally made as to the nature of a passenger's baggage when such is not outwardly perceptible, but beyond this, constitutional boundaries are already in danger of being transgressed. Calling a policeman to his aid, as suggested by the service manual invoked by the trial judge, in compelling the passenger to submit to more rigid inspection, after the passenger had already declared that the box contained mere clothes and other miscellaneous, could not have justified invasion of a constitutionally protected domain. Police officers acting without judicial authority secured in the manner provided by law are not beyond the pale of constitutional inhibitions designed to protect individual human rights and liberties. Withal, what must be importantly considered here is not so much the infringement of the fundamental sacred rights of the particular passenger herein involved, but the constant threat any contrary ruling would pose on the right of privacy of all passengers of all common carriers, considering how easily the duty to inspect can be made an excuse for mischief and abuse. Of course, when there are sufficient indications that the representations of the passenger regarding the nature of his baggage may not be true, in the interest of the common safety of all, the assistance of the police authorities may be solicited, not necessarily to force the passenger to open his baggage, but to conduct the needed investigation consistent with the rules of propriety and, above all, the constitutional rights of the passenger. It is in this sense that the mentioned service manual issued by appellant to its conductors must be understood. Decisions in other jurisdictions cited by appellant in its brief, evidently because of the paucity of local precedents squarely in point, emphasize that there is need, as We hold here, for evidence of circumstances indicating cause or causes for apprehension that the passenger's baggage is dangerous and that it is failure of the common carrier's employee to act in the face of such evidence that constitutes the cornerstone of the common carrier's liability in cases similar to the present one. "The principle that must control the servants of the carrier in a case like the one before us is correctly stated in the opinion in the case of Clarke v. Louisville & N.R. Co. 20 Ky L. Rep. 839, 49 S.W. 1120. In that case Clarke was a passenger on the defendant's train. Another passenger took a quantity of gasoline into the same coach in which Clarke was riding. It ignited and exploded, by reason of which he was severely injured. The trial court peremptorily instructed the jury to find for the defendant. In the opinion, affirming the judgment, it is said: 'It may be stated briefly, in assuming the liability of a railroad to its passengers for injury done by another passenger, only where the conduct of this passenger had been such before the injury as to induce a reasonably prudent and vigilant conductor to believe that there was reasonable ground to apprehend violence and danger to the other passengers, and in that case asserting it to be the duty of the conductor of the railroad train to use all reasonable means to prevent such injury, and if he neglects this reasonable duty, and injury is done, that then the company is responsible; that otherwise the railroad is not responsible.'

"The opinion quotes with approval from the case of Gulf, C. & S. F. R. Co. vs. Shields, 9 Tex. Civ. App. 652, 29 S. W. 652, in which case the plaintiff was injured by alcohol which had been carried upon the train by another passenger. In the opinion in that case it is said: 'It was but a short period of time after the alcohol was spilt when it was set on fire and the accident occurred, and it was not shown that appellant's employees knew that the jug contained alcohol. In fact, it is not shown that the conductor or any other employee knew that Harris had a jug with him until it fell out of the sack, though the conductor had collected . . . (his) fare, and doubtless knew that he had the sack on the seat with him. . . . It cannot be successfully denied that Harris had the right as a passenger to carry baggage on the train, and that he had a right to carry it in a sack if he chose to do so. We think it is equally clear that, in the absence of some intimation or circumstance indicating that the sack contained something dangerous to other passengers, it was not the duty of appellant's conductor or any other employee to open the sack and examine its contents.' Quinn v. Louisville & N. R. Co. 98 Ky. 231, 32 S. W. 742; Wood v. Louisville & N. R. Co. 101 Ky. 703, 42 S. W. 349; Louisville & N. R. Co. v. Vincent, 29 Ky. L. Rep. 1049, 96 S. W. 898; Louisville & N. R. Co. v. Renfro, 142 Ky. 590, 33 L. R. A. (N. S.) 133, 135 S. W. 266." 2 (Italics supplied). "Explosive or Dangerous Contents. A carrier is ordinarily not liable for injuries to passengers from fires or explosions caused by articles brought into its conveyances by other passengers, in the absence of any evidence that the carrier, through its employees, was aware of the nature of the article or had any reason to anticipate danger therefrom. (Bogard v. Illinois C. R Co. 144 Ky. 649, 139 S. W. 855, 36 L. R. A. [N. S.] 337; Clarke v. Louisville & N. R. Co. 101 Ky. 34, 39 S. W. 840, 36 L. R. A. 123 [explosion of can of gasoline]; East Indian R. Co. v. Mukerjee [1901] A. C. [Eng.] 396, 3 B. R. C. 420 P. C. [explosion of fireworks]; Annotation: 37 L. R. A. [N. S.] 725.)" 3 Appellant further invokes Article 1174 of the Civil Code which relieves all obligors, including, of course, common carriers like appellant, from the consequence of fortuitous events. The court a quo held that "the breach of contract (in this case) was not due to fortuitous event and that, therefore, the defendant is liable in damages." Since We hold that appellant has succeeded in rebutting the presumption of negligence by showing that it has exercised extraordinary diligence for the safety of its passengers, "according to the circumstances of the (each) case", We deem it unnecessary to rule whether or not there was any fortuitous event in this case. ACCORDINGLY, the appealed judgment of the trial court is reversed and the case is dismissed, without costs. Concepcion, C.J., Reyes, J.B.L., Dizon, Makalintal, Zaldivar, Sanchez and Fernando, JJ., concur. Castro, J., concurs in the result. Teehankee, J., reserves his vote. FIRST DIVISION [G.R. No. L-28512. February 28, 1973.] PEDRO R. DAVILA and PRECIOSA C. TIRO, plaintiffs-appellants, vs. PHILIPPINE AIR LINES, defendant-appellant. Dizon, de Guzman & Vitug and Pedro R Davila for plaintiffs-appellees. Siguion Reyna, Montecillo, Belo & Ongsiako for defendant-appellant. SYLLABUS 1. CIVIL LAW; CONTRACT OF CARRIAGE; VIOLATION OF SUCH CONTRACT; LIABILITY THEREFOR; PROVISIONS OF CIVIL CODE INVOLVED. The provisions of the Civil Code on the question of liability for violation of the contract of carriage are clear and explicit. Article 1733 binds common carriers, "from the nature of their business and by reasons of public policy, . . . to observe extraordinary diligence in the vigilance . . . for the safety of the passengers transported by them according to all the circumstances of each case." Article 1755 establishes the standard of care required of a common carrier, which is, "to carry the passengers safely as far as human care and foresight can provide, using the utmost diligence of very cautious persons, with due regard for all the circumstances." Article 1756 fixes the burden of proof by providing that "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." Lastly, Article 1757 states that "the responsibility of a common carrier for the safety of pas engers . . . cannot be dispensed with or lessened by stipulation, by the posting of notices, by statements on tickets, or otherwise. 2. ID.; ID.; ID.; PRESUMPTION OF FAULT. Absent a satisfactory explanation as to how and why the accident occurred the presumption is that it was at fault, under Article 1716 of the Civil Code. 3. ID.; ID.; ID.; INDEMNITY FOR DEATH. Pursuant to current jurisprudence on indemnity for death, the amount therefor should be in the amount of P12,000.00. 4. ID.; ID.; ID.; LIABILITY FOR LOSS OF EARNING CAPACITY. According to Article 2206, paragraph (1), of the Civil Code, "the defendant shall be liable for the loss of the earning capacity of the deceased and indemnity shall be paid to the heirs of the latter." This article, while referring to "damages for death caused by crime or quasi-delict," is expressly made applicable by Article 1764 "to the death of a passenger caused by the breach of contract by a common carrier." 5. ID.; ID.; ID.; ID.; AMOUNT AWARDED IN INSTANT CASE. Considering that the deceased was getting his gross income of P15,000 a year from three different sources, namely, from managing a radio station, from law practice and from farming,

the expenses incidental to the generation of such income were necessarily more than if he had only one source. Together with his living expenses, a deduction of P600.00 a month, or P7,200.00 a year, seems to Us reasonable, leaving , a net yearly income of P7,800.00. This amount, multiplied by 25 years, or P195,000.00, is the amount which should be awarded to the plaintiffs in this particular respect. 6. ID.; ID.; ID.; LIABILITY FOR ACTUAL LOSSES IN INSTANT CASE. The lower court's award for actual losses sustained by the deceased, which consist of "Rolex Watch P600.00, pistol P300.00, Burial Expenses P600.00, and cost of cemetery lot and mausoleum P3,500.00" was affirmed by this Court. 7. ID.; ID.; ID.; LIABILITY FOR MORAL DAMAGES IN INSTANT CASE. Under Article 2206, in relation to Article 1764, of the Civil Code, the parents of the deceased are entitled to moral damages for their mental anguish. The trial court awarded P10,000.00 in this concept, and We find no justification to change the award, considering the long period of uncertainty and suffering the plaintiffs underwent from November 23, when the plane crash occurred, to December 19, when they received a letter from the defendant's president confirming the death of their son, and again to the following December 29, when his body was finally recovered and taken back to them. 8. ID.; ID.; ID.; NO LIABILITY FOR EXEMPLARY DAMAGES IN INSTANT CASE. With respect to the award of P10,000 as exemplary damages, It is Our opinion that the same should be eliminated. According to Article 2232 of the Civil Code, in contracts and quasi-contracts the court may award exemplary damages if the defendant acted in a wanton, fraudulent, reckless, oppressive or malevolent manner. The failure of the defendant here to exercise extraordinary diligence, as required by law, does not amount to anyone of the circumstances contemplated in the said provision. 9. ID.; ID.; ID.; LIABILITY FOR ATTORNEY'S FEES. The trial court has awarded attorney's fees of P10,000.00. We do not find this award groundless or the amount thereof unreasonable. DECISION MAKALINTAL, J p: In Civil Case No. 5728 of the Court of First Instance of Iloilo (Pedro R. Davila and Preciosa C. Tirol, plaintiffs, vs. Philippine Air Lines, Inc., defendant) judgment was rendered ordering the defendant to pay the plaintiffs various sums of money, as follows: "(1) For the death of Pedro T. Davila, Jr. the amount of P6,000.00;

(2) For the loss of the earning capacity of the deceased at the rate of P12,000.00 per annum for five (5) years in the amount of Sixty Thousand Pesos. (P60,000.00); (3) (4) For moral damages in favor of the plaintiffs Ten Thousand Pesos (P10,000.00); For exemplary damages in the amount of Ten Thousand Pesos P(10,000.00);

(5) For actual damages the amount of Five Thousand Pesos (P5,000.00) broken down to as follows: A rolex watch valued at P600.00; a pistol worth P300.00; burial expenses P600.00; for the lot and the mausoleum P3,500.00; (6) For Attorney's fees the amount of Ten Thousand Pesos (P10,000.00) or a total amount of One Hundred and One Thousand Pesos (P101,000.00) To pay the costs of this proceedings." Both parties appealed directly to this Court in view of the aggregate of the amounts awarded, the judgment having been rendered before the effectivity of Rep. Act No. 5440. In this appeal the plaintiffs seek an increase in said amounts, and the defendant, complete exoneration from, or at least mitigation of, liability. The case arose from the tragic crash of a passenger plane of the defendant which took the lives of all its crew and passengers. The plane, identified as PI-C133, was a DC-3 type of aircraft, manufactured in 1942 and acquired by the defendant in 1948. It had flown almost 18,000 hours at the time of its ill-fated flight. Despite its age, however, it had been certified as airworthy by the Civil Aeronautics Administration. On November 23, 1960, at 5:30 in the afternoon, it took off from the Manduriao Airport, Iloilo, on its way to Manila, with 33 people on board, including the plane's complement. It did not reach its destination, but crashed at Mt. Baco, Mindoro, one hour and fifteen minutes after take-off. A massive search was undertaken by the defendant and by other parties as soon as it was realized that the plane's arrival in Manila was overdue. The plaintiffs, parents of Pedro T. Davila, Jr., who was one of the passengers, had no definite news of what had happened to their son, getting what information they could only from conflicting newspaper reports, until they received, on December 19, 1960, a letter of condolence from the defendant's president Andres Soriano, informing them that their son had died in the crash. And it was only on December 29 that his body was recovered and taken back to Iloilo. The issues before the trial court, and now before Us in this appeal, are whether or not the defendant is liable for violation of its contract of carriage and if so, for how much. The provisions of the Civil Code on this substantive question of liability are clear and explicit. Article 1733 binds common carriers, "from the nature of their business and by reasons of public policy, . . . to observe extraordinary diligence in the vigilance.. for the safety of the passengers transported by them according to all the circumstances of

each case." Article 1755 establishes the standard of care required of a common carrier, which is, "to carry the passengers safely as far as human care and foresight can provide, using the utmost diligence of very cautious persons, with due regard for all the circumstances." Article 1756 fixes the burden of proof by providing that "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." Lastly, Article 1757 states that "the responsibility of a common carrier for the safety of passengers . . . cannot be dispensed with or lessened by stipulation, by the posting of notices, by statements on tickets, or otherwise." The route prescribed by the Civil Aeronautics Administration for the flight of plane PI-C113 in the afternoon of November 23, 1960 was Iloilo-Romblon-Manila, the latter stage, denominated as airway "Amber I," being a straight lane from Romblon to Manila. The prescribed elevation of the flight was 6,000 ft. The plane reported its position after take-off and again when it was abeam the Roxas homer. However, it did not intercept airway "Amber I" over Romblon as it was supposed to do, and the pilot did not give his position then although Romblon was a compulsory checking point. The fact was that the plane had deviated from the prescribed route by 32 miles to the west when it crashed at Mt. Baco. The reading of the altimeter of the plane when its wreckage was found was 6,800 ft. There is a suggestion that in the course of the flight between Romblon and Mindoro the aircraft was drifted westward by the crosswinds then blowing in the region. The defendant, however, has not given a definite explanation as to why, if such was the case, the pilot failed to make the necessary correction in his flight to compensate for the drift. According to the defendant's witness, Maj. Mijares, Chief of the Aviation Safety Division of the Civil Aeronautics Administration and Chairman of the CAA Investigating Committee, there was a navigational error, to which several factors contributed: "the weather observation at that time from the Weather Bureau was not so good between Mt. Baco and Romblon and the wind aloft was quite strong, which would be also one of the causes for the drifting of the aircraft; and the other strong probability, I would say, would be the malfunction of the aircraft's navigational instrument." He further explained that "a cross-wind can drift the plane if the pilot will not make the necessary correction, if his navigational instrument is malfunctioning and the visual reference outside the aircraft could not make the necessary corrections." There is nothing in the testimony of Maj. Mijares to show just how strong the cross-winds were in the region at the time, although in the investigation of the accident by the Senate Committee on transportation there was testimony that the cross-winds had a velocity of either 20 to 25 knots or 25 to 35 knots an hour. Considering the relatively short distance from Romblon to Mt. Baco and the brief span of time it would take to fly that distance, cross-winds with the velocity stated could not have possibly deviated the plane by as much as 32 miles. The defendant points out that the navigational instrument on board the plane consisted of two (2) sets of automatic direction finders (ADF) which, when found after the crash, showed a reading that the aircraft was heading north, which was the proper flight direction. This point, however, is of no vital significance in this case since it does not explain why the aircraft was 32 miles off its prescribed route in the first place. It is suggested that the pilot did not notice the drift of his plane because of poor visibility due to thick clouds, which prevented him from making the corresponding correction on the basis of visual references to the terrain outside. But according to Maj. Mijares himself the report from the Weather Bureau at the time showed that visibility was 15 miles between Romblon and Mt. Baco and that the clouds from 2,700 to 7,000 ft. elevation were "scattered." And the profile of the probable weather cross-section along airway "Amber I" during the flight (Exh. 33-A) shows that at 6,000 ft. the airplane was clear and free of clouds. The suggestion therefore that the pilot was practically flying blind and consequently failed to notice the drift of the aircraft is not justified by the evidence. Indeed even the investigating team of the defendant under the chairmanship of Capt. Jaime Manzano concluded in its report that "based on the limited evidences available, the board is of the opinion that the probable cause was the inability of the pilot to intersect airway 'Amber I' over Romblon and to maintain track within its designated airway lane for reasons unknown." What is undisputed therefore is that the pilot did not follow the route prescribed for his flight, at least between Romblon and Manila. Since up to that point over Romblon, where he was supposed to intersect airway "Amber I," the weather was clear, the most reasonable conclusion is that his failure to do so was intentional, and that he probably wanted to fly on a straight line to Manila. It was a violation of air-traffic rules to which, under the circumstances, the accident may be directly attributable. In any case, absent a satisfactory explanation on the part of the defendant as to how and why the accident occurred, the presumption is that it was at fault, under Article 1756 of the Civil Code. The next question relates to the amount of damages that should be awarded to the plaintiffs, parents of the deceased. The trial court fixed the indemnity for his death in the amount of P6,000.00. Pursuant to current jurisprudence on the point it should be increased to P12,000.00. 1 The deceased was employed as manager of a radio station 2 , from which he was earning P8,400.00 a year, consisting of a monthly salary of P600.00 and allowance of P100.00. As a lawyer and junior partner of his father in the law office, he had an annual income of P3,600.00. From farming he was getting an average of P3,000.00. All in all therefore the deceased had gross earnings of P15,000.00 a year. According to Article 2206, paragraph (1), of the Civil Code, "the defendant shall be liable for the loss of the earning capacity of the deceased and indemnity shall be paid to the heirs of the latter." This Article, while referring to "damages for death caused by crime or quasi-delict," is expressly made applicable by Article 1764 "to the death of a passenger caused by the breach of contract by a common carrier."

The deceased, Pedro Davila, Jr., was single and 30 years of age when he died. At that age one's normal life expectancy is 33-1/3 years, according to the formula (2/3 x [80 30]) adopted by this Court in the case of Villa Rey Transit, Inc. vs. Court of Appeals 3 on the basis of the American Expectancy Table of Mortality or the Actuarial of Combined Experience Table of Mortality. However, although the deceased was in relatively good health, his medical history shows that he had complained of and been treated for such ailments as backaches, chest pains and occasional feelings of tiredness. It is reasonable to make an allowance for these circumstances and consider, for purposes of this case, a reduction of his life expectancy to 25 years. In the same case of Villa Rey Transit this Court stated: ". . .earning capacity, as an element of damages to one's estate for his death by wrongful act is necessarily his net earning capacity or his capacity to acquire money, less the necessary expense for his own living. Stated otherwise, the amount recoverable is not loss of the entire earnings, but rather the loss of that portion of the earnings which the beneficiary would have received. In other words, only net earnings, not gross earnings, are to be considered, that is, the total of the earnings less expenses necessary in the creation of such earnings or income and less living and other incidental expenses." Considering the fact that the deceased was getting his income from three (3) different sources, namely, from managing a radio station, from law practice and from farming, the expenses incidental to the generation of such income were necessarily more than if he had only one source. Together with his living expenses, a deduction of P600.00 a month, or P7,200.00 a year, seems to Us reasonable, leaving a net yearly income of P7,800.00. This amount, multiplied by 25 years, or P195,000.00 is the amount which should be awarded to the plaintiffs in this particular respect. Actual losses sustained consist of the following, as found by the trial court: "Rolex Watch P600.00; pistol P300.00; Burial Expenses P600.00; and cost of cemetery lot and mausoleum P3,500.00." Under Article 2206, in relation to Article 1764, of the Civil Code, the parents of the deceased are entitled to moral damages for their mental anguish. The trial court awarded P10,000.00 in this concept, and We find no justification to change the award, considering the long period of uncertainty and suffering the plaintiffs underwent from November 23, when the plane crash occurred, to December 19, when they received a letter from the defendant's president confirming the death of their son, and again to the following December 29, when his body was finally recovered and taken back to them. With respect to the award of P10,000.00 as exemplary damages, it is Our opinion that the same should be eliminated. According to Article 2232 of the Civil Code, in contracts and quasi-contracts the court may award exemplary damages if the defendant acted in a wanton, fraudulent, reckless, oppressive or malevolent manner. The failure of the defendant here to exercise extraordinary diligence, as required by law, does not amount to anyone of the circumstances contemplated in the said provision. The trial court has awarded attorney's fees of P10,000.00. We do not find this award groundless or the amount thereof unreasonable. The total of the different items above enumerated is P232,000.00. The judgment of the court a quo is therefore modified accordingly and the defendant is ordered to pay the said amount to the plaintiffs, with legal interest thereon from the finality of this judgment. With costs against the defendant. Concepcion, C.J., Zaldivar, Castro, Fernando, Teehankee, Barredo, Makasiar, Antonio and Esguerra, JJ., concur.

SECOND DIVISION [G.R. No. L-28589. February 29, 1972.] RAFAEL ZULUETA, ET AL., plaintiffs-appellee, vs. PAN AMERICAN WORLD AIRWAYS, INC., defendant-appellant. Jose W. Diokno for plaintiffs-appellees. Ross, Salcedo, Del Rosario, Bito & Misa for defendant-appellant. SYLLABUS 1. REMEDIAL LAW; CIVIL PROCEDURE; MOTIONS, RULE 22, SEC. 4 REVISED RULES OF COURT APPLICABLE TO MOTION FOR OTHER HEARING DATES. Rule 22, Sec. 4, referring to motions "to postpone trial" applies with equal force to motions like the one under consideration wherein defendant PANAM moves that it be granted additional hearing dates about two months from Oct. 20, 1966 to present its other witnesses or their depositions. Hence, the latter can be granted only upon showing of the materiality of the evidence expected to be obtained and that due diligence has been used to procure it. 2. ID.; ID.; ID.; ID.; DENIAL OF MOTION, JUSTIFIED. That defendant PANAM knew, as early as August 2, 1966 that its turn to present evidence would take place as agreed upon about two and a half months later; that it has not offered any valid excuse for its failure to bring to court the witnesses mentioned in said motion nor exerted efforts to bring the "other witnesses" or to take or submit their depositions, justify the denial by the trial judge of said motion.

3. CIVIL. LAW; CONTRACTS; COMMON CARRIERS, BREACH OF CONTRACT; RIGHT OF PASSENGER TO DAMAGES; DELIBERATE ACT OF CARRIER IN LEAVING PASSENGER. It is urged that plaintiff is, at most, entitled to actual damages only, because he was the first to commit a breach of contract, for having gone over 200 yards away from the terminal where he could not expect to be paged. But PANAM has not pointed out what part of the contract has been violated thereby, apart from the fact that the award for damages made in the decision appealed from was due, not to PANAM's failure to so page the plaintiff, but to the former's deliberate act of leaving at Wake Island, and the embarrassment and humiliation caused to him and his family in the presence of many other person. 4. ID.; ID.; ID.; ID.; ID.; NO CONTRIBUTORY NEGLIGENCE IN INSTANT CASE. The failure of the plaintiff to reboard the plane within the time announced before the passengers debarked therefrom did not constitute contributory negligence for he had actually shown up before the plane had taken off. Despite this appearance, he was nevertheless off-loaded intentionally and with malice aforethought, for his "belligerent" attitude; for his having dared to answer the captain after being referred to as one of "three monkeys"; and for his categorical refusal to have his bags opened without a search warrant. 5. ID.; ID.; ID.; ID.; RIGHT TO MORAL AND EXEMPLARY DAMAGES. The rude and rough reception plaintiff's receive at the hands of the airline officers; the abusive language and highly scornful reference to them as "monkeys" by one of PANAM's employees; the unfriendly attitude; the ugly stares and unkind remarks to which they were subjected; their being cordoned by men in uniform as if they were subjected; their being cordoned by men in uniform as if they were criminals; the airline officials' refusal to allow Mr. Zulueta to board the plane on the pretext that he was hiding a bomb in his luggage and their arbitrary and highhanded decision, to leave him in Wake; Mrs. Zulueta's having suffered a nervous breakdown for which she was hospitalized as a result of the insults and humiliations to which they were exposed by the conduct of PANAM's employees; Miss Zulueta's having suffered shame and embarrassment for the treatment received by her parents at the airport all justify an award for moral damages. 6. ID.; ID.; ID.; ID.; ID.; REDUCTIONS IN INSTANT CASE. To some extent, plaintiff had contributed to the

gravity of the situation because of the extreme belligerance with which he had reacted on the occasion. Although PANAM agents had taken an arrogant and over-bearing attitude towards him, just the same, there is every reason to believe that, in all probability, things would not have turned out as bad as they became had plaintiff not allowed himself, in a way, to be dragged to the level or plane on which PANAM's personnel had placed themselves. In view of this circumstance the Court deems it proper that the moral and exemplary damages aside from the attorney's fees awarded by the lower court, should be reduced. 7. ID.; ID.; ID.; ID.; RIGHT TO MORAL DAMAGES; FACTORS CONSIDERED. It has been held that the discretion in fixing moral damages lies in the trial court. Among the factors courts take into account in assessing moral damages are the professional, social, political and financial standing of the offended parties on one hand, and the business and financial position of the offender on the other. 8. ID.; PERSONS AND FAMILY RELATIONS; SUITS AGAINST HUSBAND AND WIFE; REAL PARTY IN INTEREST; ART. 113, (2) CIVIL CODE OF THE PHILIPPINES, NOT APPLICABLE IN INSTANT CASE. Relying on Art. 113(2) of the Civil Code of the Philippines which permits the filing of a suit by the wife without being joined by her husband, as a result of a separation de facto between them, Mrs. Zulueta filed a motion to dismiss the case insofar as she is concerned, after a settlement of all her differences with PANAM. Said provision cannot possibly apply to a case, like the one at bar, in which the husband is the main party in interest, both as the person aggrieved and as the administrator of the original partnership. 9. ID.; ID.; ID.; ART. 113 (2) CIVIL CODE OF THE PHILIPPINES. The suit contemplated in Art. 113 of the Civil Code of the Philippines, pursuant to which "the husband must be joined in all suits by or against the wife except . . . (2) if they have in fact been separated for at least one year", is one in which the wife is the real party either plaintiff or defendant in interest, and, in which, without being so, the husband must be joined as a party, by reason only of his relations of affinity with her. DECISION CONCEPCION, J p: Appeal, taken by defendant Pan American World Airways, Inc., from a decision of the Court of First Instance of Rizal, sentencing said defendant to pay herein plaintiff Rafael Zulueta, Telly Albert Zulueta and Carolinda Zulueta "the sum of P5,502.85, as actual damages; plus the further sum of P1,000,000.00 as moral damages; the further sum of P400,000.00 as exemplary damages; and attorney's fees in the sum of P100,000.00," with the costs against said defendant, hereinafter referred to as PANAM, for the sake of brevity. It is not disputed that, on October 23, 1964, the spouses Rafael Zulueta and Telly Albert Zulueta hereinafter referred to as plaintiff and Mrs. Zulueta, respectively as well as their daughter, Carolinda Zulueta hereinafter referred to as Miss Zulueta were passengers aboard a PANAM plane, on Flight No. 841-23, from Honolulu to Manila, the first leg of which was Wake Island. As the plane landed on said Island, the passengers were advised that they could disembark for a stopover of about 30 minutes. Shortly before reaching that place, the flight was, according to the plaintiffs, "very rough." Testifying for PANAM, its purser, Miss Schmitz, asserted, however, that it was "very calm"; but her notes, Exhibit 7 prepared, upon the request of Captain Zentner, on account of the incident involved in this case state that there was "unusually small amount of roughness," which His Honor, the Trial Judge, considered properly as "an admission that there was roughness, only the degree thereof is in dispute." In any event, plaintiff testified that, having found the need to relieve himself, he went to the men's comfort room at the terminal building, but found it full of soldiers, in view of which he walked down the beach some 100 yards away.

Meanwhile, the flight was called and when the passengers had boarded the plane, plaintiff's absence was noticed. The take-off was, accordingly, delayed and a search for him was conducted by Mrs. Zulueta, Miss Zulueta and other persons. Minutes later, plaintiff was seen walking back from the beach towards the terminal. Heading towards the ramp of the plane, plaintiff remarked, "You people almost made me miss your flight. You have a defective announcing system and I was not paged." At this point, the decision appealed from has the following to say: "(1) Plaintiffs were on their way to the plane in order to board it, but defendant's employees Kenneth Sitton, defendant's airport manager, according to plaintiffs; Wayne Pendleton, defendant's airport customer service supervisor, according to defendant - stopped them at the gate. This is what the report of Wayne Pendleton, the airport customer service supervisor, says: "'. . . I made no comment to the passenger but turned and led the group toward the ramp. Just as we reached the boarding gate, Mr. Zulueta spoke to me for the first time saying, 'You people almost made me miss your flight. You have a defective announcing system and I was not paged.' "'I was about to make some reply when I noticed the captain of the flight standing on the ramp, midway between the gate and the aircraft, and talking with the senior maintenance supervisor and several other persons. The captain motioned for me to join him which I did, indicating to the Zulueta family that they should wait for a moment at the gate.' Exh. 5 "(2) Thereafter, one of defendant's employees Mr. Sitton, according to plaintiffs; Mr. Pendleton, according to defendants asked plaintiffs to turn over their baggage claim checks. Plaintiffs did so, handing him four (4) claim checks. "(3) However, only three (3) bags were located and segregated from the rest of the passenger's luggage. The items handcarried by plaintiffs, except for plaintiff's (overcoat) were also brought down. These handcarried items, however, were not opened or inspected; later, plaintiffs Mrs. Zulueta and Miss Zulueta were permitted to reboard the plane with their handcarried luggage; and when the plane took off, about two and a half hours later, it carried plaintiff's fourth bag, his overcoat and the handcarried luggage. "(4) Once three bags had been identified, and while the search was going on for the fourth bag, Mr. Sitton, defendant's airport manager, demanded that plaintiffs open the bags (actually, they were closed, but not locked) and allow defendant's employees to inspect them. Plaintiff Rafael Zulueta refused and warned that defendant could open the bags only by force and at its peril of a law suit. "(5) Mr. Sitton, defendant's manager, then told plaintiff that he would not be allowed to proceed to Manila or board the plane and handed Zulueta the following letters: "'24 October 1964 Wake Island "'Mr. Zulueta: Passenger aboard flight 84123 Honolulu/Manila Sir: We are forced to offload you from flight 84123 due to the fact that you have refused to open your checked baggage for Inspection as requested. During your stay on Wake Island, which will be for a minimum of one week, you will be charged $13.30 per day for each member of your party. K. Sitton

Airport Manager, Wake Island Pan American World Airways, Inc.' Exh. D. "(6) All this happened in plain view and within earshot of the other passengers on the plane, many of whom were Filipinos who knew plaintiffs; "The departure of the plane was delayed for about two hours.

"(7) Though originally all three plaintiffs had been off loaded, plaintiff requested that his wife and daughter be permitted to continue with the flight. This was allowed but they were required to leave the three bags behind. Nevertheless, the plane did fly with the plaintiff's fourth bag; it was found among all other passengers' luggage flown to Manila upon the plane's arrival here. "(8) Upon arrival at Manila, Mrs. Zulueta demanded of defendant's Manila office that it re-route plaintiff Rafael Zulueta to Manila at the earliest possible time, by the fastest route, and at its expense; defendant refused; so plaintiffs were forced to pay for his ticket and to send him money as he was without funds. "(9) On October 27, 1964, plaintiff Zulueta finally arrived at Manila, after spending two nights at Wake, going back to Honolulu, and from Honolulu flying thru Tokyo to Manila. "(10) On December 21, 1964, plaintiffs demanded that defendant reimburse them in the sum of P1,505,502.85 for damages; but defendants refused to do so; hence this action." In its brief, PANAM maintains that the trial court erred: (1) "in not granting defendant additional hearing dates (not a postponement) for the presentation of its other witnesses"; (2) "in assuming it to be true that the reason plaintiff Rafael Zulueta did not come aboard when the passengers were reboarded was that he had gone to the beach to relieve himself"; (3) "in not holding that the real reason why plaintiff Rafael Zulueta did not reboard the plane, when the announcement to do so was made, was that he had a quarrel with his wife and after he was found at the beach and his intention to be left behind at Wake was temporarily thwarted he did everything calculated to compel Pan American personnel to leave him behind"; (4) "in accepting as true plaintiff Rafael Zulueta's claim of what occurred when he arrived at the terminal after he was found at the beach"; (5) "in not holding that the captain was entitled to an explanation for Zulueta's failure to reboard and not having received a reasonable explanation and because of Zulueta's irrational behavior and refusal to have his bags examined, the captain had the right and duty to leave Zulueta behind"; (6) "in condemning the defendant to pay plaintiffs P5,502.85 as actual damages plus the further sum of P1,000,000.00 as moral damages, and the further sum of P400,000.00 as exemplary damages, and attorneys' fees in the sum of P100,000.00"; and (7) "in not granting defendant's counterclaim of attorney's fees and expenses of litigation." PANAM's first assignment of error refers to the denial of its motion, dated October 20, 1966, that it "be granted other hearing dates about two months from today so as to be able to present defendant's other witnesses or their depositions." It appears that the complaint in this case was filed on September 30, 1965. It was amended on December 1, 1965, and again on April 14, 1966. PANAM answered the second amended complaint on May 6, 1966. After a pre-trial conference, held on May 28, 1966, the case was set for hearing on June 1, 2 and 3, 1966. By subsequent agreement of the parties, the hearing was, on June 3, 1966, reset for August 1, 2 and 3, 1966. Plaintiffs rested their case on August 2, 1966, whereupon it was agreed that PANAM's witnesses would be presented "at a later date," months later, because they would "come from far-flung places like Wake Island, San Francisco, Seattle and it will take time to arrange for their coming here." Accordingly the case was reset for October 17, 18 and 19, 1966, at 8: 30 a.m. On motion of the plaintiffs, the trial scheduled for October 17 was cancelled, without any objection on the part of PANAM; but, to offset said action, additional hearings were set for October 18 and 19, in the afternoon, apart from those originally set in the morning of these dates. Before the presentation of PANAM's evidence, in the morning of October 18, 1966, plaintiffs' counsel asked for the names of the former's witnesses, so that those not on the witness stand could be excluded from the courtroom. PANAM's counsel announced that his witnesses were Marshall Stanley Ho, Kenneth Sitton, Michael Thomas, Wayne S. Pendleton, Capt. Robert Zentner and Miss Carol Schmitz. The defense then proceeded to introduce the testimony of said witnesses, and consumed therefor the morning and afternoon of October 18 and the morning of October 19. Upon the conclusion, that morning, of the testimony of the last witness for the defense, its counsel asked that it "be given an opportunity to present our other witnesses who are not present today, at the convenience of the Court." The motion was denied, but, said counsel sought a reconsideration and the court gave PANAM a last chance to present its "other witnesses" the next day, October 20. Instead of doing so, PANAM filed a written motion reiterating its prayer for "other hearing dates about two months from today so as to be able to present defendant's other witnesses or their depositions." Upon denial of this motion, PANAM made an offer of the testimony it expected from one Edgardo Gavino, an unnamed meteorologist, either Sue Welby and/or Helga Schley, and John C. Craig, Ida V. Pomeroy, Herman Jaffe, Gerry Cowles and Col. Nilo de Guia. His Honor, the Trial Judge, did not commit a reversible error in denying said motion of October 20, 1966. PANAM knew, as early as August 2, 1966, that its turn to present evidence would take place, as agreed upon, about two (2) months and a half later, or on October 17, 18 and 19, 1966. PANAM has not offered any valid excuse for its failure to bring to court the witnesses mentioned in said motion, despite the assurance given by its counsel, on August 2, 1966, that the defense would "spare no effort to bring them here," or, if they could not be brought due to circumstances beyond PANAM's control, to "submit their deposition." The records do not show that any such effort to bring the aforementioned witnesses had been exerted. The defense has not even tried to explain why the deposition of said witnesses was not taken. What is worse, the proffered explanation that the six (6) persons who testified for the defense 1 were believed, by defense counsel, to be enough for the three (3) days of October set for the reception of his evidence 2 indicates that no effort whatsoever had been made either to bring the "other witnesses" 3 or to take and submit their depositions. Besides, the testimony allegedly expected of said other witnesses for the defense namely: (1) that there was, according to official records, no turbulence in the flight from San Francisco to Honolulu, on which the testimony of Carol Schmitz had touched; (2) that Ida V. Pomeroy and John C. Craig would say that the passengers were advised not to go beyond the terminal and that the stopover would be for about 30 minutes only, on which duration of the stopover Miss Schmitz had, also testified, as she could have similarly testified

on said advice, had it been given; (3) that either Helga Schley or Sue Welby would narrate the sympathy with which Mrs. Zulueta was allegedly treated during the flight from Wake Island to Manila, which is not particularly relevant or material in the case at bar; (4) that Herman Jaffe, Gerry Cowles and Nilo de Guia were, also, expected to corroborate the testimony of Capt. Zentner; and (5) that Edgardo Gavino was expected to corroborate Michael Thomas regarding the remarks made by the plaintiff to Mrs. Zulueta and Miss Zulueta when they and other members of the searching party found him in the early morning of October 23, 1964 - were merely cumulative in nature. Then, again, PANAM did not comply with section 4 of Rule 22 of the Rules of Court, reading: "SEC. 4. Requisites of motion to postpone trial for absence of evidence. A motion to postpone a trial on the ground of absence can be granted only upon affidavit showing the materiality of evidence expected to be obtained, and that due diligence has been used to procure it. But if the adverse party admits the facts to be given in evidence, even if he objects or reserves the right to object to their admissibility, the trial must not be postponed." Although this provision refers to motions "to postpone trial," it applies with equal force to motions like the one under consideration, there being no plausible reason to distinguish between the same and a motion for postponement owing to the "absence of evidence." The second, third and fourth assignments of error are interrelated. They refer to the question whether the reason why plaintiff went to the beach was to relieve himself, as testified to by him, or to remain in Wake Island because he had quarreled with his wife, as contended by PANAM's counsel. The latter contention, however, is utterly devoid of merit. To begin with, plaintiff's testimony about what he did upon reaching the beach is uncontradicted. Secondly, other portions of his testimony such as, for instance, that the flight was somewhat rough, shortly before reaching Wake Island; that there were quite a number of soldiers in the plane and, later, in the terminal building; that he did not voluntarily remain in Wake Island, but was "off-loaded" by PANAM's agent therein are borne out by the very evidence for the defense. Thirdly, PANAM's efforts to show that plaintiff had decided to remain in the Island because he had quarreled with Mrs. Zulueta which is ridiculous merely underscores the artificious nature of PANAM's contention. Fourthly, there is absolutely no direct evidence about said alleged quarrel. Nobody testified about it. Counsel for the defense has, in effect, merely concluded that there must have been such quarrel because, when the searching party located plaintiff, he according to Stanley Ho was "shouting in a loud tone of voice" not at his wife, but "towards his wife and daughter," who headed said party and to which the words spoken were addressed, according to plaintiff. Capt. Zentner said that plaintiff was "angry with them" Mrs. Zulueta and Miss Zulueta who Michael Thomas affirmed were saying "I am sorry, I am sorry"; whereas, Wayne S. Pendleton declared that Gavino told him that this "seems to stem from a domestic issue" between Mr. and Mrs. Zulueta. Surely, this alleged surmise, not even by Pendleton, but by Gavino who was not placed on the witness stand cannot be taken as competent evidence that plaintiff had quarreled with his wife, apart from the circumstance that such quarrel if it took place and there is absolutely no evidence or offer to prove that anything had transpired between husband and wife before reaching Wake Island which may suggest a misunderstanding between them does not warrant jumping at the conclusion that plaintiff had decided to remain in the Island, for he would gain nothing thereby. Needless to say, if plaintiff's purpose in going to the beach was to hide from Mrs. and Miss Zulueta and PANAM's personnel, so that he may be left in the Island, he, surely, would not have walked back from the beach to the terminal, before the plane had resumed its flight to Manila, thereby exposing his presence to the full view of those who were looking for him. Then, again, the words uttered by him as he saw the search party and approached the plane "You people almost made me miss your flight. You have a defective announcing system and I was not paged" and the "belligerent" manner according to Captain Zentner in which he said it revealed his feeling of distress at the thought that the plane could have left without him. 4 The second, third and fourth assignments of error are thus clearly untenable. In connection with the fifth assignment of error, PANAM's witness, Captain Zentner, testified that, while he was outside the plane, waiting for the result of the search, a "man" approached him and expressed concern over the situation; that the "man" said he was with the State Department; that he, his wife and their children, who were on board the aircraft, would not want to continue the flight unless the missing person was found; that the "man" expressed fear of a "bomb," a word he used reluctantly, because he knew it is violative of a Federal law when said at the wrong time; that when plaintiff came, Zentner asked him. "why did you not want to get on the airplane?"; that plaintiff then became "very angry" and spoke to him "in a way I have not been spoken to in my whole adult life"; that the witness explained: "I am Captain of the aircraft and it is my duty to see to the flight's safety"; that he (Zentner) then told Wayne Pendleton PANAM's Customer Service Supervisor to get plaintiff's "bags off the plane to verify . . . about the bomb"; that PANAM's airport manager (K. Sitton) "got three bags of Mr. Zulueta"; that his fourth bag could not be located despite a thorough search; that believing that it must have been left behind, in Honolulu, "we took off"; and that he (Zentner) would not have done so had he thought it was still aboard. The lower court did not err in giving no credence to this testimony. Indeed, Captain Zentner did not explain why he seemingly assumed that the alleged apprehension of his informant was justified. He did not ask the latter whether he knew anything in particular about plaintiff herein, although some members of the crew would appear to have a notion that plaintiff is an impresario. Plaintiff himself intimated to them that he was well known to the U.S. State Department. Apparently, Captain Zentner did not even know the informant's name. Neither did the captain know whether the

informant was really working for or in the State Department. In other words, there was nothing absolutely nothing to justify the belief that the luggage of the missing person should be searched, in order to ascertain whether there was a bomb in it; that, otherwise, his presence in the aircraft would be inimical to its safety; and that, consequently, he should be off-loaded. In fact, PANAM has not given the name of that "man" of the State Department. Neither has the defense tried to explain such omission. Surely, PANAM's records would have disclosed the identity of said "man," if he were not a mere figment of the imagination. The list of passengers has been marked as Exh. A, and yet PANAM has not pointed out who among them is the aforementioned "man". The trial court did not believe the testimony of Captain Zentner and rejected the theory of the defense, for the following reasons: "(1) The defendant had contracted to transport plaintiff from Honolulu to Manila. It was its legal obligation to do so, and it could be excused from complying with the obligation only, if the passenger had refused to continue with the trip or it had become legally or physically impossible, without the carrier's fault, to transport him. "(2) In this case, it is plain that Zulueta was desirous of continuing with the trip. Although defendant's witnesses claim that Zulueta refused to board the plane, its own evidence belies this claim. The letter, Exh. 'D', shows that it was defendant who off-loaded Zulueta; not Zulueta who resisted from continuing the trip. In his testimony before the Court, Capt. Zentner, defendant's pilot, said that if a passenger voluntarily left the plane, the term used would be 'desistance,' but the term 'off-load' means that it is the decision of the Captain not to allow the passenger or luggage to continue the flight. However, Capt. Zentner admitted on his testimony that 'his drunkenness . . . was of no consequence in my report; (it) . . . had nothing to do with his being belligerent and unfriendly in his attitude towards me and the rest of the members of the crew.' The written report of Capt. Zentner made in transit from Wake to Manila 'intimated he might possibly continue;' but 'due to drinking, belligerent attitude, he was off-loaded along with his locked bags.' (Exh. 10). In a later report, Zentner admitted, 'The decision to leave Mr. Zulueta and his locked luggage in Wake was mine and mine alone.' (Exh. 9). Defendant's airport customer service supervisor, W.S. Pendleton, reported that: "'After the search for Mr. Zulueta had continued for almost 20 minutes and it was apparent that he was not to be found in the terminal building or immediate vicinity, I proceeded to the parking lot and picked up my jeep to continue the search in more remote areas. Just as I was getting underway, a small group of persons approached from the direction of the beach and a voice called out that the passenger had been found. Having parked the jeep again, I walked toward the group and was met by PAA fleet-serviceman E. Gavino who was walking somewhat ahead of the others. Mr. Gavino remarked to me privately that the trouble seemed to have stemmed from some domestic difference between the passenger and his wife who was not at his side and returning with him to the gate. "'On hearing Mr. Gavino's remark, I made no comment to the passenger but turned and led the group toward the ramp. Just as we reached the boarding gate, Mr. Zulueta spoke to me for the first time saying, 'You people almost made me miss your flight. You have a defective announcing system and was not paged.' Exh. 5. "Evidently, these could not have been the words of a man who refused to board the plane. "(3) There was no legal or physical impossibility for defendant to transport plaintiff Zulueta from Wake to

Manila, as it had contracted to do. Defendant claims that the safety of its craft and of the other passengers demanded that it inspect Zulueta's luggage and when he refused to allow inspection that it had no recourse but to leave him behind. The truth is that, knowing that of plaintiff's four pieces of luggage, one could still have been as it was aboard, defendant's plane still flew on to Manila. Surely, if the defendant's pilot and employees really believed that Zulueta had planted a bomb in one of the bags they would not have flown on until they had made sure that the fourth bag had been left behind at Honolulu or until enough time had lapsed for the bomb to have been exploded, since presumably it had to have been set to go off before they reached Manila. "At any rate, it was quite evident that Zulueta had nothing to hide; for the report of defendant's witness, Mr. Stanley L. E. Ho, U.S. Marshall on Wake, has this to say: "'About twenty minutes later while an attempt was being made to locate another piece of Mr. Zulueta's luggage, his daughter, Carolinda approached her father and wanted to get some clothes from one of the suitcases. Mr. Zulueta asked the undersigned if it was alright if he opened the suitcases and get the necessary clothes. To this I stated he was free to open his luggage and obtain whatever he needed. Mr. Zulueta opened a suitcase and took the dress for her then boarded the aircraft.' Exh. 2B. "(4) What is evident to the Court is that defendant acted in a manner deliberately calculated to humiliate and shame plaintiffs. Although the plane was held up to wait for plaintiff for, as the Captain admitted in his testimony, he did so because he knew that it would be a week before another plane would come in for Manila (t.s.n., 18 Oct. 1966, pp. 59-62) when plaintiff did come, he was met and treated roughly by defendant's manager Sitton. Here is what Zulueta testified to: "'Q. When you saw your wife and daughter what happened? A. Then I started going towards the airplane. At the ramp, I do not know what they call it, as soon as they arrived there, there was a man who subsequently identified himself as Kenneth Sitton. He identified himself as the Airport Manager of Wake Island. He did not ask me what happened, was I sick, he looked at me and said, what in the hell do you think you are? Get on that plane. Then I said, what right have you to talk to me that way, I am a paying

passenger, Do not treat me this. And this started the altercation, and then he said, do you know you held up the plane? And I answered, this is not my fault, I was sick. Did it not occur to you to ask me how I feel; then he said get on that plane. "'Q. What happened? A. we started discussing kept saying, 'You get on that plane' and then I said, 'I don't have to get on that plane.' After a prolonged discussion, he said, give me your baggage tags and I gave him four baggage tickets or tags. I did not realize what he was up to until finally, I saw people coming down the airplane and police cars arrived and people were coming down the ramp. I gave him the four baggage tags and a few minutes late, he brought three baggages and said, open them up. I said, to begin with, there is one baggage missing and that missing bag is my bag. Then I said you cannot make me open these baggages unless you are United States customs authorities and when I arrive in the Philippines they can be opened by the Philippine Customs authorities. But an Airport Manager cannot make me open my bags unless you do exactly the same thing to all the passengers. Open the bags of all the other passengers and I will open my bag. "'Q. What did he say: A. He just kept on saying, open your bag, and I drew up my hands and said, if you want, you open yourself or give me a search warrant and I shall open this bag but give me a search warrant and then I asked, who is the Chief of Police, and he said, 'I am the Chief of Police,' then I said how can you be the Chief of Police and Airport Manager and then he started to talk about double compensation and by this time we were both quarreling and he was shouting and so with me. Then there was a man who came around and said 'open the bag' and I said, show the warrant of arrest and do all the checking and the discussion kept on going, and finally, I said, look, my fourth bag is missing and he said, 'I don't give a damn.' People at the time were surrounding us and staring at us and also the passengers. My wife and daughter all along had been made to sit on a railing and this man screaming and looking at my wife and daughter. Then he said, will you pull these three monkeys out of here? And then I said, will you send my wife and daughter up to the plane which he did. However, they have come down in their slippers and when they were allowed to return to the plane none of the defendant's personnel who had brought down the overcoats, shoes and handcarried items of my wife and daughter ever offered to bring back these items to the plane, until I demanded that one of the defendants should help my wife and daughter which he did. And then one man told me, because you refused to open your bag, 'we shall hold you here in Wake Island.' And then I asked, are we under arrest? and the man answered, no. And further stated, your wife and daughter can continue their flight but you will not go to this flight and we will charge you $13.30 a day. Then I said, who are you to tell all these things, and he answered, I am the manager. I said, put it in writing, then left and in a few minutes he came back and handed me this letter (witness referring to Exhibit D).' t.s.n., August 1, 1966, pp. 15-21. "Anyone in Zulueta's position would have reached the same way if he had had a sense of dignity. Evidently, angered by Zulueta's reaction, irked by the delay he had caused them, defendant's employees decided to teach him a lesson by forcing him to open his bags when there was no justifiable reason to do so: "(a) Defendant did not make any attempt to inquire from any passenger or even the crew who knew Mr. Zulueta what his character and reputation are, before demanding that he open the bags; if it had done so, Miss Schmitz, the purser, and Col. Villamor would have vouched for plaintiffs; for Miss Schmitz believed she had flown before with the Zuluetas and they had been very nice people. "(b) Worse, defendant's manager Sitton admits that Zulueta had told him who he was and his social position in Manila; still he insisted that the bags be opened. Moreover, some passengers had informed the supervisor that Zulueta was 'the impresario'; but they persisted in their demands. "(c) Defendant never identified the alleged State Department men who reportedly approached the Captain and expressed fear about a bomb, nor did they confront him if he existed with Mr. Zulueta despite Mr. Zulueta's request. "(d) Defendant did not take any steps to put the luggage off-loaded far from its passengers and plane, a strange procedure if it really believed the luggage contained a bomb; "(e) Defendant continued with the flight knowing one bag Zulueta's bag himself had not been located and without verifying from Honolulu if the bag had been found there, nor even advising Honolulu that a bag possibly containing a bomb had been left there, again an inexplicable procedure if they sincerely believed that Zulueta had planted a bomb; "(f) Defendant's manager himself took Zulueta and his off-loaded bags, in his own car, from the terminal building to the hotel, which is also inconsistent with a serious belief that the luggages contained a bomb; "(g) Defendant knew that while Zulueta's bags were on the ground, he had opened one of them with the permission and in the presence of the U.S. Marshall in order to enable his daughter to get a dress from the bag; nothing suspicious was seen; still, defendant insisted on refusing to allow Zulueta to continue unless he opened and allowed inspection of the bags by them; "(h) Defendant completely changed his tone and behavior towards the Zuluetas after the plane had arrived at Manila and the Captain learned that its Manila manager, Mr. Oppenheimer, was a friend of Zulueta; "(i) Meantime, the attitude of Pan American towards the Zuluetas caused other passengers to resent Zulueta (See reports of Stewardesses and of Captain Zentner, Exhs. 7, 8, 9 and 10). 'Many passengers were angry towards the 'missing passenger,' says Miss

Schmitz's report. 'A few inquisitive PA (passengers) one woman quite rudely stared once we were airborne and left Mr. Zulueta behind . . . anyway I told the woman to sit down so did Helga so did the man near her,' saw Miss Schmitz's personal notes. This confirms the testimony of plaintiffs that, all the while the search and discussions were going on, they were the subject of stares, remarks and whispered comments from the passengers and other persons around the plane. "(j) Defendant did not allow plaintiff Zulueta to board the plane at all, even though it was aware that some of his personal belongings, such as his overcoat were on the plane. Plaintiffs so testified; and though defendant's witness Mr. Sitton denied it, claiming that plaintiff was always free to board the plane, this denial is belied by the report of defendant's own witness, U.S. Marshall Ho, who said that: "'Ten minutes later, Mr. Zulueta asked if he could talk to his wife who was aboard the aircraft. I then accompanied him and as we got to the ramp, we met Mr. Sitton who stated he would summon Mrs. Zulueta from the aircraft. Mr. Sitton summoned Mrs. Zulueta and she met her husband at the foot of the ramp. Mr. Zulueta then asked his wife and himself to which I replied I was not concerned what he had to say.' Exh. 2-B. "(k) Finally, to add further humiliation and heap indignity on plaintiffs, when Mrs. Zulueta arrived at Manila and appealed to defendant's Manila manager, Mr. Oppenheimer, to see to it that her husband got back as soon as possible and was made as comfortable as possible, at defendant's expense, Mr. Oppenheimer refused to acknowledge any obligation to transport Mr. Zulueta back to Manila and forcing Mrs. Zulueta to send her husband $100.00 for pocket money and pay for his fare from Wake to Manila, thru Honolulu and Tokyo." Upon a review of the record, We are satisfied that the foregoing findings of His Honor, the Trial Judge, are supported by a preponderance of the evidence. The last two (2) assignments of error are mere consequences of those already disposed of, and, hence, need no extended discussion. It is urged, however, that plaintiff is, at most, entitled to actual damages only, because he was the first to commit a breach of contract, for having gone over 200 yards away from the terminal, where he could not expect to be paged. But, PANAM has not pointed out what part of the contract has been violated thereby, apart from the fact that the award for damages made in the decision appealed from was due, not to PANAM's failure to so page the plaintiff, but to the former's deliberate act of leaving him at Wake Island, and the embarrassment and humiliation caused to him and his family in the presence of many other persons. Then, also, considering the flat nature of the terrain in Wake Island, and the absence of buildings and structures, other than the terminal and a modest "hotel," as well as plaintiff's need of relieving himself, he had to find a place beyond the view of the people and near enough the sea to wash himself up before going back to the plane. It is next argued that plaintiff was, also, guilty of contributory negligence for failure to reboard the plane within the 30 minutes announced before the passengers debarked therefrom. This might have justified a reduction of the damages, had plaintiff been unwittingly left by the plane, owing to the negligence of PANAM personnel, or even, perhaps, wittingly, if he could not be found before the plane's departure. It does not, and can not have such justification in the case at bar, plaintiff having shown up before the plane had taken off, and he having been off-loaded intentionally and with malice aforethought, for his "belligerent" attitude, according to Captain Zentner; for having dared despite his being one of "three monkeys," the term used by Captain Zentner to refer to the Zulueta family to answer him back when he (Captain Zentner) 5 said: "what in the hell do you think you are?" in a way he had "not been spoken to" in his "whole adult life," in the presence of the passengers and other PANAM employees; for having responded to a command of either Zentner or Sitton to open his (plaintiff's) bags, with a categorical refusal and a challenge for Zentner or Sitton to open the bags without a search warrant therefor, thereby making manifest the lack of authority of the aforementioned representative of PANAM to issue said command and exposing him to ridicule before said passengers and employees. Besides, PANAM's own witness and employee, Wayne Pendleton, testified that the plane could not take off at 4:30, as scheduled, because "we were still waiting for two (2) local passengers." Article 2201 of our Civil Code reads: "In contracts and quasi-contracts, the damages for which the obligor who acted in good faith is liable shall be those that are the natural and probable consequences of the breach of the obligation, and which the parties have foreseen or could have reasonably foreseen at the time the obligation was constituted. "In case of fraud, bad faith, malice or wanton attitude, the obligor shall be responsible for all damages which may be reasonably attributed to the non-performance of the obligation." This responsibility applies to common carriers. Pursuant to Article 1759 of the same Code: "ART. 1759. Common carriers are liable for the death of or injuries to passengers through the negligence or willful acts of the former's employees, although such employees may have acted beyond the scope of their authority or in violation of the orders of the common carriers.

"This liability of the common carriers does not cease upon proof that they exercised all the diligence of a good father of a family in the selection and supervision of their employees." Referring now to the specific amounts to damages due to plaintiffs herein, We note that the sum of P5,502.85 awarded to them as actual damages is not seriously disputed by PANAM. As regards the moral and exemplary damages claimed by the plaintiffs, our Civil Code provides: "ART. 21. Any person who wilfully causes loss or injury to another in a manner that is contrary to morals, good customs or public policy shall compensate the latter for the damage." "ART. 2217. Moral damages include physical suffering, mental anguish, fright, serious anxiety, besmirched reputation, wounded feelings, moral shock, social humiliation, and similar injury. Though incapable of pecuniary computation, moral damages may be recovered if they are the proximate result of the defendant's wrongful act or omission." "ART. 2229. Exemplary or corrective damages are imposed, by way of example or correction for the public good, in addition to the moral, temperate liquidated or compensatory damages." "ART. 2232. In contracts and quasi-contracts, the court may award exemplary damages if the defendant acted in a wanton, fraudulent, reckless, oppressive, or malevolent manner." The records amply establish plaintiffs' right to recover both moral and exemplary damages. Indeed, the rude and rough reception plaintiff received at the hands of Sitton or Captain Zentner when the latter met him at the ramp ("what in the hell do you think you are? Get on that plane"); the menacing attitude of Zentner or Sitton and the supercilious manner in which he had asked plaintiff to open his bags ("open your bag," and when told that a fourth bag was missing, "I don't give a damn"); the abusive language and highly scornful reference to plaintiffs as monkeys by one of PANAM's employees (who turning to Mrs. Zulueta and Miss Zulueta remarked, "will you pull these three monkeys out of here?"); the unfriendly attitude, the ugly stares and unkind remarks to which plaintiffs were subjected, and their being cordoned by men in uniform as if they were criminals, while plaintiff was arguing with Sitton; the airline officials' refusal to allow plaintiff to board the plane on the pretext that he was hiding a bomb in his luggage and their arbitrary and high-handed decision to leave him in Wake; Mrs. Zulueta's having suffered a nervous breakdown for which she was hospitalized as a result of the embarrassment, insults and humiliations to which plaintiffs were exposed by the conduct of PANAM's employees; Miss Zulueta's having suffered shame, humiliation and embarrassment for the treatment received by her parents at the airport 6 all these justify an award for moral damages resulting from mental anguish, serious anxiety, wounded feelings, moral shock, and social humiliation thereby suffered by plaintiffs. "The relation between carrier and passenger involves special and peculiar obligations and duties, differing in kind and degree, from those of almost every other legal or contractual relation. On account of the peculiar situation of the parties the law implies a promise and imposes upon the carrier the corresponding duty of protection and courteous treatment. Therefore, the carrier is under the absolute duty of protecting his passengers from assault or insult by himself or his servants." 7 "A contract to transport passengers is quite different in kind and degree from any other contractual relation. And this, because of the relation which an air-carrier sustains with the public. Its business is mainly with the travelling public. It invites people to avail of the comforts and advantages it offers. The contract of air carriage, therefore, generates a relation attended with a public duty. Neglect or malfeasance of the carrier's employees naturally could give ground for an action for damages. "Passengers do not contract merely for transportation. They have a right to be treated by the carrier's employees with kindness, respect, courtesy and due consideration. They are entitled to be protected against personal misconduct, injurious language, indignities and abuses from such employees. So it is, that any rude or discourteous conduct on the part of employees towards a passenger gives the latter an action for damages against the carrier." 8 "A carrier of passengers is as much bound to protect them from humiliation and insult as from physical injury. . . . It is held in nearly all jurisdictions, if not universally, that a carrier is liable to a passenger for humiliation and mental suffering caused by abusive or insulting language directed at such passenger by an employee of the carrier." 9 "Where a conductor uses language to a passenger which is calculated to insult, humiliate, or wound the feelings of a person of ordinary feelings and sensibilities, the carrier is liable, because the contract of carriage impliedly stipulates for decent, courteous, and respectful treatment, at hands of the carrier's employees." 10 "The general rule that a carrier owes to a passenger the highest degree of care has been held to include the duty to protect the passenger from abusive language by the carrier's agents, or by others if under such circumstances that the carrier's agents should have known about it and prevented it. Some of the courts have mentioned the implied duty of the carrier, arising out of the contract of carriage, not to insult the passenger, or permit him to be insulted, and even where no mention is made of this basis for liability, it is apparent that it is the ground upon which recovery is allowed." 11 The question is whether the award of P1,000,000 as moral damages was proper and justified by the circumstances. It has been held that the discretion in fixing moral damages lies in the trial court. 12 Among the factors courts take into account in assessing moral damages are the professional, social, political and financial standing of the offended parties on one hand, and the business and financial position of the offender on the other. 13

In comparatively recent cases in this jurisdiction, also involving breach of contract of air carriage, this Court awarded the amount of P25,000, where plaintiff, a first-class passenger in an Air France plane from Manila to Rome was, in Bangkok, forced by the manager of the airline company to leave his first class accommodation after he was already seated because there was a white man who, the manager alleged, had a "better right" to the seat 14 ; the amount of P200,000, where plaintiffs, upon confirmation of their reservation in defendant airline's flight from Tokyo to San Francisco were issued first class tickets, but upon arrival in Tokyo were informed that there was no accommodation for them in the first class compartment and told they could not go unless they took the tourist class 15 in both of which cases the Court found the airline companies to have acted in bad faith, or in a wanton, reckless and oppressive manner, justifying likewise the award of exemplary damages. None of the passengers involved in said cases was, however, off-loaded, much less in a place as barren and isolated as Wake Island, with the prospect of being stranded there for a week. The aforementioned passengers were merely constrained to take a tourist or third class accommodation in lieu of the first class passage they were entitled to. Then, also, in none of said cases had the agents of the carrier acted with the degree of malice or bad faith of those of PANAM in the case at bar, or caused to the offended passengers a mental suffering arising from injuries to feelings, fright and shock due to abusive, rude and insulting language used by the carrier's employees in the presence and within the hearing of others, comparable to that caused by PANAM's employees to plaintiffs herein. To some extent, however, plaintiff had contributed to the gravity of the situation because of the extreme belligerence with which he had reacted on the occasion. We do not overlook the fact that he justly believed he should uphold and defend his dignity and that of the people of this country; that the discomfort, the difficulties, and, perhaps, the ordeal through which he had gone to relieve himself which were unknown to PANAM's agents were such as to put him in no mood to be understanding of the shortcomings of others; and that said PANAM agents should have first inquired, with an open mind, about the cause of his delay, instead of assuming that he was at fault and of taking an arrogant and overbearing attitude, as if they were dealing with an inferior. Just the same, there is every reason to believe that, in all probability, things would not have turned out as bad as they became had he not allowed himself, in a way, to be dragged to the level or plane on which PANAM's personnel had placed themselves. In view of this circumstance, We feel that the moral and exemplary damages collectible by the plaintiffs should be reduced to one-half of the amounts awarded by the lower court, that is, to P500,000 for moral damages, and P200,000 for exemplary damages, aside from the attorney's fees which should, likewise, be reduced to P75,000. On April 22, 1971, Mrs. Zulueta filed a motion alleging that she had, for more than two (2) years, been actually living separately from her husband, plaintiff Rafael Zulueta, and that she had decided to settle separately with PANAM and had reached a full and complete settlement of all her differences with said defendant, and praying, accordingly, that this case be dismissed insofar as she is concerned. Required to comment on said motion, PANAM expressed no objection thereto. Upon the other hand, plaintiff prayed that the motion be denied, upon the ground that the case at bar is one for damages for breach of a contract of carriage, owing to the off-loading of plaintiff Rafael Zulueta, the husband and administrator of the conjugal partnership, with the funds of which the PANAM had been paid under said contract; that the action was filed by the plaintiffs as a family and the lower court had awarded damages to them as such family; that, although PANAM had questioned the award of damages, it had not raised the question whether the lower court should have specified what portion of the award should go to each plaintiff; that although Mr. and Mrs. Zulueta had, for sometime, been living separately, this has been without judicial approval; that Mrs. Zulueta may not, therefore, bind the conjugal partnership or settle this case separately; and that the sum given by PANAM to Mrs. Zulueta is believed to be P50,000, which is less than 3-1/2% of the award appealed from, thereby indicating the advisability of denying her motion to dismiss, for her own protection. Pursuant to a resolution, dated June 10, 1971, deferring action on said motion to dismiss until the case is considered on the merits. We now hold that the motion should be, as it is hereby denied. Indeed, "(t)he wife cannot bind the conjugal partnership without the husband's consent, except in cases provided by law," 16 and it has not been shown that this is one of the cases so provided. Article 113 of our Civil Code, pursuant to which " (t)he husband must be joined in all suits by or against the wife, except: . . . (2) If they have in fact been separated for at least one year . . ." relied upon by PANAM does not warrant the conclusion drawn therefrom by the latter. Obviously the suit contemplated in subdivision (2) of said Article 113 is one in which the wife is the real party either plaintiff or defendant in interest, and, in which, without being so, the husband must be joined as a party, by reason only of his relation of affinity with her. Said provision cannot possibly apply to a case, like the one at bar, in which the husband is the main party in interest, both as the person principally aggrieved and as administrator of the conjugal partnership. Moreover, he having acted in this capacity in entering into the contract of carriage with PANAM and paid the amount due to the latter, under the contract, with funds of the conjugal partnership, the damages recoverable for breach of such contract belongs to said partnership. Modified, as above stated, in the sense that plaintiffs shall recover from defendant, Pan American World Airways, Inc., the sums of P500,000 as moral damages, P200,000 as exemplary damages, and P75,000 as attorney's fees, apart from P5,502.85 as actual damages, and without prejudice to deducting the aforementioned sum of P50,000 already paid to Mrs. Zulueta, the decision appealed from is hereby affirmed in all other respects, with the costs against said defendant. Reyes, J.B.L., Makalintal, Zaldivar, Fernando, Barredo, Villamor and Makasiar, JJ., concur. Castro and Teehankee, JJ., did not take part.

EN BANC [G.R. No. L-9534. September 29, 1956.] MANILA STEAMSHIP CO., INC., petitioner, vs. INSA ABDULHAMAN (MORO) and LIM HONG TO, respondents. Pacifico de Ocampo for the petitioner. Felix F. Catis, Fernando P. Blanco and Carlos Camins, Jr., for respondents. SYLLABUS 1. COMMON CARRIERS; MARITIME TORTS; COLLISION IMPUTABLE TO BOTH VESSELS; LIABILITY OF SHIPOWNERS, SOLIDARILY. In case of collision between two vessels imputable to both of them, each vessel shall suffer her own damage and both shall be solidarily liable for the damages occasioned to their cargoes. (Article 827, Code of Commerce.) 2. ID.; ID.; LIABILITY OF SHIPOWNERS. The shipowner is directly and primarily responsible in tort resulting in a collision at sea, and it may not escape liability on the ground that it exercised due diligence in the selection and supervision of the vessels's officer and crew. 3. ID.; ID.; LIABILITY OF SHIPOWNER WHERE OFFICERS OF THE SHIP ARE UNLICENSED. The owner of a vessel who had caused the same to sail without licensed officers is liable for the injuries caused by the collission over and beyond the value of his vessel; hence, he can not escape liability because of the sinking of the vessel. DECISION REYES, J. B. L., J p: This case was begun in the Court of First Instance of Zamboanga (Civil Case No. 170) by Insa Abdulhaman against the Manila Steamship Co., owner of the M/S "Bowline Knot", and Lim Hong To, owner of the M/L "Consuelo V", to recover damages for the death of his (plaintiff's) five children and loss of personal properties on board the M/L "Consuelo V" as a result of a maritime collision between said vessel and the M/S "Bowline Knot" on May 4, 1948, a few kilometers distant from San Ramon Beach, Zamboanga City. On appeal, the Court of Appeals found the following facts to have been established: "From 7:00 to 8:00 o'clock in the evening of May 4, 1948, the M/L "Consuelo V", laden with cargoes and passengers left the port of Zamboanga City bound for Siokon under the command of Faustino Macrohon. She was then towing a kumpit, named "Sta. Maria Bay". The weather was good and fair. Among her passengers were the plaintiff Insa Abdulhaman, his wife Carimla Mora and their five children already mentioned. The plaintiff and his wife paid their fare before the voyage started. On that same night the M/S "Bowline Knot" was navigating from Maribojoc towards Zamboanga. Between 9:30 to 10:00 in the evening the dark clouds bloated with rain began to fall and the gushing strong wind began to blow steadily harder, lashing the waves into a choppy and roaring sea. Such weather lasted for about an hour and then it became fair although it was showering and the visibility was good enough. When some of the passengers of the M/L "Consuelo V" were then sleeping and some were lying down awake, all of a sudden they felt the shocking collision of the M/L "Consuelo V" and a big motorship, which later on was identified as the M/V "Bowline Knot". Because the M/L "Consuelo V" capsized, her crew and passengers, before realizing what had happened, found themselves swimming and floating on the crest of the waves and as a result of which nine (9) passengers were dead and missing and all the cargoes carried on said boat, including those of the plaintiff as appear in the list, Exhibit "A", were also lost. Among the dead passengers found were Maria, Amlasa, Bidoaya and Bidalla, all surnamed Inasa, while the body of the child Abdula Inasa of 6 years of age was never recovered. Before the collision, none of the passengers were warned or informed of the impending danger as the collision was so sudden and unexpected. All those rescued at sea were brought by the M/V "Bowline Knot" to Zamboanga City." (Decision of C. A., pp. 5-6). As the cause of the collision, the Court of Appeals affirmed the findings of the Board of Marine Inquiry, that the commanding officer of the colliding vessels had both been negligent in operating their respective vessels. Wherefore, the Court held the owners of both vessels solidarily liable to plaintiff for the damages caused to him by the collision, under Article 827 of the Code of Commerce; but

exempted defendant Lim Hong To from liability by reason of the sinking and total loss of his vessel, the M/L "Consuelo V", while the other defendant, the Manila Steamship Co., owner of the M/S "Bowline Knot", was ordered to pay all of plaintiff's damages in the amount of P20,784.00 plus one-half of the costs. It is from this judgment that defendant Manila Steamship Co. had appealed to this Court. Petitioner Manila Steamship Co. pleads that it is exempt from any liability to plaintiff under Article 1903 of the Civil Code because it had exercised the diligence of a good father of a family in the selection of its employees, particularly Third Mate Simplicio Ilagan, the officer in command of its vessels, the M/S "Bowline Knot", at the time of the collision. This defense is untenable. While it is true that plaintiff's action against petitioner is based on a tort or quasi-delict, the tort in question is not a civil tort under the Civil Code but a maritime tort resulting in a collision at sea, governed by Articles 826-939 of the Code of Commerce. Under Article 827 of the Code of Commerce, in case of collision between two vessels imputable to both of them, each vessel shall suffer her own damage and both shall be solidarily liable for the damages occasioned to their cargoes. The characteristic language of the law in making the "vessels" solidarily liable for the damages due to the maritime collision emphasizes the direct nature of the responsibilities on account of the collision incurred by the shipowner under maritime law, as distinguished from the civil law and mercantile law in general. This direct responsibility is recognized in Article 618 of the Code of Commerce under which the captain shall be civilly liable to the ship agent, and the latter is the one liable to third persons, as pointed out in the collision case of Yueng Sheng Exchange & Trading Co. vs. Urrutia & Co., 12 Phil. 747, 753: "The responsibility involved in the present action is that derived from the management of the vessel, which was defective on account of lack of skill, negligence, or fault, either of the captain or of the crew, for which the captain is responsible to the agent, who in his turn is responsible to the third party prejudiced or damaged. (Article 618, Code of Commerce)." In fact, it is a general principle, well established maritime law and custom, that shipowners and ship agents are civilly liable for the acts of the captain (Code of Commerce, Article 586) and for the indemnities due the third persons (Article 587); so that injured parties may immediately look for reimbursement to the owner of the ship, it being universally recognized that the ship master or captain is primarily the representative of the owner (Standard Oil Co. vs. Lopez Castelo, 42 Phil. 256, 260). This direct liability, moderated and limited by the owner's right of abandonment of the vessel and earned freight (Article 587), has been declared to exist, not only in case of breached contracts, but also in cases of tortious negligence (Yu Biao Sontua vs. Osorio, 43 Phil. 511, 515): "In the second assignment of error, the appellant contends that the defendant ought not to be held liable for the negligence of his agents and employees. It is proven that the agents and employees, through whose negligence the explosion and fire in question occurred, were agents, employees and mandatories of the defendant. Where the vessel is one of freight, a public concern or public utility, its owner or agents is liable for the tortious acts of his agents (Articles 587, 613, and 618 Code of Commerce; and Article 1902, 1903, 1908, Civil Code). This principle has been repeatedly upheld in various decisions of this court. The doctrines cited by the appellant in support of his theory have reference to the relations between principal and agent in general, but not to the relations between ship agent and his agents and employees; for this reason they cannot be applied in the present case." It is easy to see that to admit the defense of due diligence of a bonus paterfamilias (in the selection and vigilance of the officers and crew) as exempting the shipowner from any liability for their faults, would render nugatory the solidary liability established by Article 827 of the Code of Commerce for the greater protection of injured parties. Shipowners would be able to escape liability in practically every case, considering that the qualifications and licensing of ship masters and officers are determined by the State, and that vigilance is practically impossible to exercise over officers and crew of vessels at sea. To compel the parties prejudiced to look to the crew for indemnity and redress would be an illusory remedy for almost always its members are, from captains down, mere wage earners. We, therefore, find no reversible error in the refusal of the Court of Appeals to consider the defense of the Manila Steamship Co., that it is exempt from liability for the collision with the M/L "Consuelo V" due to absence of negligence on its parts in the selection and supervision of the officers and crew of the M/S "Bowline Knot". The case of Walter S. Smith & Co. vs. Cadwallader Gibson Lumber Co., 55 Phil. 517, invoked by petitioner, is not the point. Said case treated of a civil tort, in that the vessel of the defendant, allegedly negligently managed by its captain in the course of its maneuvers to moor at plaintiff's wharf, struck the same and partially demolished it, causing damage to plaintiff. Because the tort allegedly committed was civil, the provisions of Article 1903 of the Civil Code were correctly applied. The present case, on the other hand, involves tortious conduct resulting in a maritime collision; wherefore, the liability of the shipowner is, as already stated, governed by the provisions of the Code of Commerce and not by the Civil Code. We agree, however, with petitioner-appellant, that the Court of Appeals was in error in declaring the respondent Lim Hong To, owner of the M/L "Consuelo V", exempt from liability to the original plaintiff, Abdulhaman, in view of the total loss of his own vessel, that sank as a result of the collision. It is to be noted that both the master and the engineer of the motor launch "Consuelo V" were not duly licensed as such (Exh. 2). In applying for permission to operate, despite the lack of properly trained and experienced, crew, respondent Lim Hong To gave as a reason "that the income derived from the vessel is insufficient to pay licensed officers who demand high salaries", and expressly declared:

"That in case of any accident, damage or loss, I shall assume full risk and responsibility for all the consequences thereof." (Exhibit 2). His permit to operate, in fact, stipulated "that in case of any accident, damage or loss, the registered owner thereof shall assume full risk and responsibility for all the consequences thereof, and that said vessel shall be held answerable for any negligence, disregard or violation of any of the conditions herein imposed and for any consequence arising from such negligence, disregard or violations." (Exhibit 3.) The Court of Appeals held that neither the letter (Exhibit 2) nor the permit (Exhibit 3) contained any waiver of the right of respondent Lim Hong To to limit his liability to the value of his motor launch and that he did not lose the statutory right to limit his liability by abandonment of the vessel, as conferred by Article 587 of the Code of Commerce. We find the ruling untenable. Disregarding the question whether mere inability to meet the salary demands of duly licensed masters and engineers constitutes non-availability thereof that would excuse noncompliance with the law and authorize operation without licensed officers under Act 3553, the fact remains that by operating with an unlicensed master, Lim Hong To deliberately increased the risk to which the passengers and shippers of cargo aboard the "Consuelo V" would be subjected. In his desire to reap greater benefits in the maritime trade, Lim Hong To willfully augmented the dangers and hazards to his vessel's unwarry passengers, who would normally assume that the launch officers possessed the necessary skill and experience to evade the perils of the sea. Hence, the liability of said respondent can not be the identical to that of a shipowner who bears in mind the safety of the passengers and cargo by employing duly licensed officers. To hold, as the Court of Appeals has done, that Lim Hong To may limit his liability to the value of his vessels, is to erase all difference between compliance with law and the deliberate disregard thereof. To such proposition we can not assent. The international rule is to the effect that the right of abandonment of vessels, as a legal limitation of a shipowner's liability, does not apply to cases where the injury or the average is due to shipowner's own fault. Faria (Derecho Comercial Maritimo, Vol. I, pp. 122123), on the authority of judicial precedents from various nations, sets the rule to be as follows: "Esta generalmente admitido que el propietario del buque no tiene derecho a la limitacion legal de responsibilidad si los daos o averias que dan origen a la limitacion provienen de sus propias culpas. El Convenio de Bruselas de 25 de agosto de 1924 tambien invalida la limitacion en el caso de culpa personal en los accidentes o averas sobrevenidos (Art. 2)." To the same effect, a noted French author states: "La limitacion de la responsabilidad maritima ha sido admitida para proteger a los armadores contra los actos abusivos de sus encargados y no dejar su patrimonio entero a la discrecion del personal de sus buques, porque este personal cumple sus obligaciones en condiciones especiales; pero los armadores no tienen por sobre los demas derecho a ser amparados contra ellos mismos ni a ser protegidos contra sus propios actos." (Danjon, Derecho Maritimo, Vol. 2, p. 332). (Emphasis supplied.) That Lim Hong To understood that he would incur greater liability than that normally borne by shipowners, is clear from his assumption of " full" risk and responsibility for all the consequences" of the operation of the M/L "Consuelo V"; a responsibility expressly assumed in his letter Exhibit 2, and imposed in his special permit, in addition to the vessel itself being held answerable. This express assumption of "full risk and responsibility" would be meaningless unless intended to broaden the liability of respondent Lim Hong To beyond the value of his vessel. In resume, we hold: (1) That the Manila Steamship Co., owner of the M/S "Bowline Knot", is directly and primarily responsible in tort for the injuries caused to the plaintiff by the collision of said vessel with the launch "Consuelo V", through the negligence of the crews of both vessels, and it may not escape liability on the ground that it exercised due diligence in the selection and supervision of the officers and crew of the "Bowline Knot"; (2) That Lim Hong To, as owner of the motor launch "Consuelo V", having caused the same to sail without licensed officers, is liable for the injuries caused by the collision over and beyond the value of said launch; (3) That both vessels being at fault, the liability of Lim Hong To and Manila Steamship Co. to the plaintiff herein is in solidum, as prescribed by Article 827 of the Code of Commerce. In view of the foregoing, the decision of the Court of Appeals is modified, and that of the Court of First Instance affirmed, in the sense of declaring both original defendants solidarily liable to plaintiff Insa Abdulhaman in the sum of P20,784.00 and the cost of the litigation, without prejudice to the right of the one who should pay the judgment in full to demand contribution from his co-defendant. Paras, C. J., Padilla, Montemayor, Bautista Angelo, Labrador, Concepcion, Endencia and Felix, JJ., concur.

EN BANC [G.R. No. L-6393. January 31, 1955.] A. MAGSAYSAY, INC., plaintiff-appellee, vs. ANASTACIO AGAN, defendant-appellant. Custodio A. Villalva for appellant. Quijano, Alidio & Azores for appellee. SYLLABUS 1. ADMIRALTY LAW; VESSELS; ACCIDENTAL STRANDING; AVERAGES. The law on averages is contained in the Code of Commerce. Under that law, averages are classified into simple or particular and general or gross. Generally speaking, simple or particular averages include all expenses and damages caused to the vessel or cargo which have not inured to the common benefit (Art. 809) and are, therefore, to be borne only by the owner of the property which gave rise to the same (Art. 810); while general or gross averages include "all the damages and expenses which are deliberately caused in order to save the vessel, its cargo, or both at the same time, from a real and known risk" (Art. 811). Being for the common benefit, gross averages are to be borne by the owners of the articles saved (Art. 812). 2. ID.; ID.; ID.; CLASSIFICATION OF AVERAGES. In classifying averages into simple or particular and general or gross and defining each class, the Code (Arts. 809 and 811) at the same time enumerates certain specific cases as coming specially under one or the other denomination. While the expenses incurred in putting a vessel afloat may well come under number 2 of article 809 which refers to expenses suffered by the vessel "by reason of an accident of the sea or force majeure" and should therefore be classified as particular average, the said expenses do not fit into any of the specific cases of general average enumerated in article 811. No. 6 of this article does mention "expenses caused in order to float a vessel," but it specifically refers to "a vessel intentionally stranded for the purpose of saving it" and would have no application where the stranding was not intentional. 3. ID.; ID.; GENERAL AVERAGE; ITS REQUISITES. The following are the requisites for general average: (1) there must be a common danger; (2) for the common safety part of the vessel or of the cargo or both is sacrificed deliberately; (3) from the expenses or damages caused follows the successful saving of the vessel and cargo; and (4) the expenses or damages should have been incurred or inflicted after taking proper legal steps and authority. 4. ID.; ID.; ID.; ID. It is the deliverance from an immediate peril, by a common sacrifice, that constitutes the essence of general average (Columbian Insurance Co. of Alejandria vs. Ashby & Stribling, 13 Peters 331, 10 L. ed. 186). Where there is no proof that the stranded vessel had to be put afloat to save it from an imminent danger, and what does appear is that the vessel had to be salvaged in order to enable it "to proceed to its port or destination," the expenses incurred in floating the vessel do not constitute general average. It is the safety of the property, and not of the voyage, which constitutes the true foundation of general average. 5. ID.; ID.; ID.; ID. Even if the salvage operation was a success, yet if the sacrifice was for the benefit of the vessel - to enable it to proceed to its destination and not for the purpose of saving the cargo, the cargo owners are not in law bound to contribute to the expense. DECISION REYES, A., J p: The S S "San Antonio", a vessel owned and operated by plaintiff, left Manila on October 6, 1949, bound for Basco, Batanes, via Aparri, Cagayan, with general cargo belonging to different shippers, among them the defendant. The vessel reached Aparri on the 10th

of that month, and after a day's stopover in that port, weighed anchor to proceed to Basco. But while still in port, it ran aground at the mouth of the Cagayan river, and, attempts to refloat it under its own power having failed, plaintiff had it refloated by the Luzon Stevedoring Co. at an agreed compensation. Once afloat, the vessel returned to Manila to refuel and then proceeded to Basco, the port of destination. There the cargoes were delivered to their respective owners or consignees, who, with the exception of defendant, made a deposit or signed a bond to answer for their contribution to the average. On the theory that the expenses incurred in floating the vessel constitute general average to which both ship and cargo should contribute, plaintiff brought the present action in the Court of First Instance of Manila to make defendant pay his contribution, which, as determined by the average adjuster, amounts to P841.40. Defendant, in his answer, denies liability for this amount, alleging, among other things, that the stranding of the vessel was due to the fault, negligence and lack of skill of its master, that the expenses incurred in putting it afloat did not constitute general average, and that the liquidation of the average was not made in accordance with law. After trial, the lower court found for plaintiff and rendered judgment against the defendant for the amount of the claim, with legal interests. From this judgment defendant has appealed directly to this Court. Although appellant assigns various errors, under our view of the case only the following need be considered: "The trial court erred in allowing the general average for floating a vessel unintentionally stranded inside a port and at the mouth of a river during a fine weather." For the purposes of this assignment of error we may well accept the finding below that the stranding of plaintiff's vessel was due to the sudden shifting of the sandbars at the mouth of the river which the port pilot did not anticipate. The standing may, therefore, be regarded as accidental, and the question is whether the expenses incurred in floating a vessel so stranded should be considered general average and shared by the cargo owners. The law on averages is contained in the Code of Commerce. Under that law, averages are classified into simple or particular and general or gross. Generally speaking, simple or particular averages include all expenses and damages caused to the vessel or cargo which have not inured to the common benefit (Art. 809, and are, therefore, to be borne only by the owner of the property which gave rise to the same (Art. 810); while general or gross averages include "all the damages and expenses which are deliberately caused in order to save the vessel, its cargo, or both at the same time, from a real and known risk" (Art. 811). Being for the common benefit, gross averages are to be borne by the owners of the articles saved (Art. 812). In classifying averages into simple or particular and general or gross and defining each class, the Code (Art. 809 and 811) at the same time enumerates certain specific cases as coming specially under one or the other denomination. Going over the specific cases enumerated we find that, while the expenses incurred in putting plaintiff's vessel afloat may well come under number 2 of article 809 which refers to expenses suffered by the vessel "by reason of an accident of the sea or force majeure" and should therefore be classified as particular average, the said expenses do not fit into any of the specific cases of general average enumerated in article 811. No. 6 of this article does mention "expenses caused in order to float a vessel," but it specifically refers to "a vessel intentionally stranded for the purpose of saving it" and would have no application where, as in the present case, the stranding was not intentional. Let us now see whether the expenses here in question could come within the legal concept of general average. Tolentino, in his commentaries on the Code of Commerce, gives the following requisites for general average: "First, there must be a common danger. This means, that both the ship and the cargo, after it has been loaded, are subject to the same danger, whether during the voyage, or in the port of loading or unloading; that the danger arises from accidents of the sea, dispositions of the authority, or faults of men, provided, that the circumstance producing the peril should be ascertained and imminent - or may rationally be said to be certain and imminent. This last requirement excludes measures undertaken against a distant peril. "Second, that for the common safety part of the vessel or of the cargo or both is sacrificed deliberately. "Third, that from the expenses or damages caused follows the successful saving of the vessel and cargo. "Fourth, that the expenses or damages should have been incurred or inflicted after taking proper legal steps and authority." (Vol. I, 7th ed., p. 155.) With respect to the first requisite, the evidence does not disclose that the expenses sought to be recovered from defendant were incurred to save vessel and cargo from a common danger. The vessel ran aground in fine weather inside the port at the mouth of a river, a place described as "very shallow". It would thus appear that vessel and cargo were at the time in no imminent danger or a danger which might "rationally be sought to be certain and imminent." It is, of course, conceivable that, if left indefinitely at the mercy of the elements, they would run the risk of being destroyed. But as stated in the above quotation, "this last requirement excludes measures undertaken against a distant peril." It is the deliverance from an immediate, impending peril, by a common sacrifice, that constitutes the essence of general average. (The Columbian Insurance- Company of Alexandria vs. Ashby & Stribling et al., 13 Peters 331; 10 L. Ed., 186). In the present case there is no proof that the vessel had to be put afloat to save it from an imminent danger. What does appear from the testimony of plaintiff's manager is that the vessel had to be salvaged in order to enable it "to proceed to its port of destination." But as was said in the case just cited, it is the safety of the property, and not of the voyage, which constitutes the true foundation of general average.

As to the second requisite, we need only repeat that the expenses in question were not incurred for the common safety of vessel and cargo, since they, or at least the cargo, were not in imminent peril. The cargo could, without need of expensive salvage operation, have been unloaded by the owners if they had been required to do so. With respect to the third requisite, the salvage operation, it is true, was a success. But as the sacrifice was for the benefit of the vessel to enable it to proceed to destination and not for the purpose of saving the cargo, the cargo owners are not in law bound to contribute to the expenses. The final requisite has not been proved, for it does not appear that the expenses here in question were incurred after following the procedure laid down in articles 813 et seq. In conclusion, we find that plaintiff has not made out a case for general average, with the result that its claim for contribution against the defendant cannot be granted. Wherefore, the decision appealed from is reversed and plaintiff's complaint ordered dismissed with costs. Paras, C. J., Bengzon, Padilla, Montemayor, Jugo, Bautista Angelo, and Reyes, J. B. L., JJ., concur.

FIRST DIVISION [G.R. No. 7675. March 25, 1913.] A URRUTIA & CO., plaintiff-appellee, vs. BACO RIVER PLANTATION CO., defendant-appellee, M. GARZA, intervenerappellant. Antonio Sanz, for plaintiff. Hartford Beaumont, for defendant. Recaredo M.a Calvo, for intervener. SYLLABUS 1. SHIPS AND SHIPPING; COLLISION; ZONES OF TIME. In all collisions between vessels at sea there exist three divisions or zones of time: (1) The first division covers all the time up to the moment when the risk of collision may be said to have begun. (2) The second division covers the time between the moment when the risk of collision begins and the moment when it has become practically certain. (3) The third zone covers the time between the moment when the collision has become a practical certainty and the moment of actual contact. 2. ID.; ID.; ID.; NAUTICAL RULES. Nautical rules requires that, where a steamship and sailing vessel are approaching each other from opposite directions, or on intersecting lines, the steamship, from the moment the sailing vessel is seen, shall watch with the highest diligence her course and movements so as to be able to adopt such timely means of precaution as will necessarily prevent the two boats from coming in contact. 3. ID.; ID.; ID.; ID. Nautical rules also require that, where a steamship and a sailing vessel are approaching each other from opposite directions, or on intersecting lines, the sailing vessel is required to keep her course unless the circumstances are such as to render a departure from the rule necessary in order to avoid immediate danger. Where a steamship and a sailing vessel are approaching each other bow on, or on intersecting lines, the steamship must give way. In case of a collision between such vessels the steamship is prima facie in fault. 4. ID.; ID.; ID.; DAMAGES. Fault on the part of the sailing vessel at the moment preceding a collision, that is, during the third division of time, does not absolve the steamship which has suffered herself and a sailing vessel to get into such dangerous proximity as to cause inevitable alarm and confusion, and a collision results as a consequence. The steamer having incurred a far greater fault in allowing such proximity to be brought about is chargeable with all the damage resulting from the collision; and the act of the sailing vessel having been done in extremis, even if wrong, it is not responsible for the result. 5. ID.; ID.; ID.; ID. The responsibility of the owner of a steamship for the damage caused by a collision between the steamer and a sailing vessel brought about by the negligence of the steamship is extinguished where said steamship is sunk totally lost by reason of the collision. 6. ID.; ID.; ID.; ID. Where, however, such steamship is insured and the insurance is collected by the owner, the insurance substitutes the vessel and the owner becomes responsible for the injuries caused the sailing vessel to the extent of the insurance collected. 7. ID.; ID.; ID.; ID. In an action brought by a steamship owner against the owner of a sailing vessel for damages caused to the steamship by a collision, a passenger who suffered a loss of baggage and freight by reason of such collision cannot intervene in the action for the adjudication of his rights. He has "no legal interest in the matter in litigation, or in the success of either of the parties, or an interest against both."

DECISION MORELAND, J p: This action springs from a collision between the steamship Nuestra Senora del Pilar, owned by the plaintiff, and the schooner Mangyan, owned by defendant, which occurred in the early morning of the 8th of April, 1910, in Verde Island North Passage. The sail vessel was sailing with a fresh breeze dead astern, her sails wing and wing. The steamer was seen by those on board the sailing vessel some time before the actual collision, sailing erratically. The sail vessel kept her course steady until just before the actual contract when her helmsman threw her hard to port in an effort to avoid the collision. The movement, however, was unsuccessful and the sail vessel rammed the steamer sank and eight lives were lost. The sail vessel was considerably injured. This action was brought by the owners of the steamship against the owners of the sail vessel, to recover the value of the destroyed steamer and the damages caused by reason of its destruction, alleging as a basis therefore the negligence of the sail vessel. The defendant denied the material allegations of the complaint and set up a counterclaim for damages, alleging as grounds therefore that the injuries sustained by the sail vessel were due to the gross negligence of those handling plaintiff's steamer. Before the action was tried, M. Garza made an application to intervene under the provisions of section 121 of the Code of Civil Procedure, he alleging in support of his application thousand pesos' worth of merchandise as freight, which was lost as a result of the collision. He was permitted to intervene and accordingly filed a complaint setting up the loss of the his merchandise and the value thereof and alleging, as the basis for his right to recover, the negligence of one or the other of the vessels, without specifying which, and praying that the court award him damages against the vessel the negligence of which, upon the trial, was shown to have caused hi loss. The case turns upon the question which of the vessels was negligence in failing to conform to the International Rules for the Prevention of Collisions at Sea. The learned trial court found that those managing the steamer were guilty of gross negligence and that for that reason plaintiff could recover nothing. An examination of the record leaves no doubt that the finding of the trial court that steamer was handled in a grossly negligent manner is clearly and fully supported by the evidence. No other finding could be sustained. Relative to the alleged negligence of the sail vessel the learned trial court said: "I am satisfied beyond any reasonable doubt that the steamer Ntra. Sra. del Pilar was sailing erratically, that it did not have a proper watch on board, and that it therefore contributed neglect to the collision. "I am also thoroughly satisfied that the sailing vessel Mangyan had its lights properly on it long before the time the collision occurred, and that the lights were so arranged upon the rigging of the vessel as to comply with the rules, and that they were visible and were seen by the crew of the steamer Elcano and could have been seen by the watchman or the chief officer of the steamer Ntra. Sra. del Pilar, if they had been on the lookout for them; "That the steamer Ntra. Sra. del Pilar, being bound to keep out of the course of the sailing vessel and suddenly seeing the sailing vessel very close, went over hard to port and crossed the course of the sailing vessel. "I also find that the sailing vessel, notwithstanding the erratic movements of the steamer, proceeded directly on its course regardless of consequences when with all the searoom there was it could easily have maneuvered so as to very avoid the collision, and thereby having contributed neglect to the collision, neither is entitled to recover from the other any damages which may have occurred." These facts and circumstances clearly appear in the record and fully sustain the conclusions reached. We are of the opinion that under the facts stated in the decision of the trial court the defendant was entitled to recover upon its counterclaim. It being clear from the evidence that the gross negligence of those managing the steamer brought it into such close proximity to the sail vessel that a collision was apparently inevitable, the questions is whether or not the sail vessel was negligent in continuing its course without variation up to the moment that it found itself in extremis. Article 20 of the International Rules for the Prevention of Collisions at Sea is as follows: "If two ships, one of which is a sailing ship and the other as steam ship, are proceeding in such directions as to involve risk of collision, the steam ship shall keep out of the way of the sailing ship." Article 21 is as follows: "Where by any of these rules one of two vessels is to keep out of the way, the other shall keep her course and speed." Generally speaking, in collisions between vessels there exist there divisions of time, or zones: The first division covers all the time up to the moment when the risk of collision may be said to have begun. Within this zone no rule is applicable because none is necessary. Each vessel is free to direct its course as it deems best without reference to the movements of the other vessel. The second division covers the time between the moment when the risk of collision begins and the moment when it has become a practical certainty. The third division covers the time between the moment of actual contact.

It was during the time when the sail vessel was passing through the third zone that it changed its course to port in order to avoid, if possible, the collision. This act may be said to have been done in extremis, and, even if wrong, the sailing vessel is not responsible for the result. The question before us, as presented by the finding of the trial court, arises wholly over the action of the schooner in keeping her course through the second zone, that is, during the period when there was a risk of collision. In resolving this question we have to note the well-established presumption which favors the sail vessel in cases of this character. The rule relative to this presumption is conservatively stated in volume 25 of the American and English Encyclopedia of Law, page 926: "Subject to the general rules of evidence in collision cases as to the burden of proof, in the case of a collision between a steam vessel and a sail vessel, the presumption is against the steam vessel, and she must show that she took the proper measures to avoid a collision." Hughes on Admiralty, page 242, declares the law thus: "A steamer must keep out of the way of a sail vessel. In doing so she must allow the sail vessel a wide berth . . . "A steamer may take her own method of passing a sail vessel. The mere approach of the two vessels does not bring about risk of collision. The steamer may assume that the sail vessel will do her duty and do nothing to embarrass her. Hence the steamer may shape her course so as to avoid the sail vessel . . . "This rule that vessel may each assume that the other will obey the law is one of the most important in the law of collision. Were it otherwise and were vessels required to take all sorts of measures to keep out of the way, when they are not in each other's way, navigation would be impossible . . . There is, however, one important qualification which must be borne in mind. It is that a steamer must not approach so near a sailing vessels, and on such a course as to alarm a man of ordinary skill and prudence. If the man on the sailing vessel makes an improper maneuver, he is not responsible. It is what is called an 'error in extremis.' . . . The leading case on the subject is The Lucille (15 Wallace, 676). In that case a steamer and schooner were approaching on converging courses only half a point apart, so that they would have come within thirty yards of each other, and that in Chesapeake Bay. The court held that this was too close and condemned the steamer." On page 245 the same author says: "Article 21 . . . renders it obligatory on the vessel which has the right of way to pursue her course . . . She must rely on the other vessel to avoid the collision and not embarrass her by any maneuver. All she need do is to do nothing. Then the other vessel knows what to expect and navigates accordingly . . . "In collisions between steam and sail vessels the steamer's defense is almost invariably that the sail vessel changed her course." On page 255 of the same work appears the following: "In The Clara Davidson (42 Feb., 763), the court said: "But I do not find myself at liberty to ignore the inquiry whether a statutory rule of navigation was violated by the schooner. These rules are the law of laws in cases of collision. They admit of no option or choice. No navigator is at liberty to set up his discretion against them. If these rules were subject to the caprice or election of master and pilots, they would be not only useless, but worse than useless. The rules are imperative. They yield to necessity, indeed, but only to actual and obvious necessity. It is not stating the principles too strongly to say that nothing but imperious necessity or some overpowering vis major will excuse a sail vessel in changing her course when in the presence of a steamer in motion.' " Spencer on Marine Collisions, page 154, says: "The duties imposed upon vessels are of a mutual character; and where the statute directs on to give way to the other, it imposes an equal duty upon the latter to continue to its would be for the other to refuse to yield the right of way . . . "It is one of the conditions of the duty 'to keep out of the way,' that the vessel shall act intelligently, and afford reasonable evidence of her intention; while it is doubtful what the other will do, the former should hold her course. Like all other rules for the prevention of collisions at sea, there may be special circumstances which would warrant a ship in departing from her course, where collision appears inevitable by pursuing it; indeed, it is no other alternative, a vessel should hold her course when in a position required to do so by the statute." On page 181 the same author says: "The duty of one vessel to keep her course is not intended by the rules as a privilege conferred, but as a obligation imposed, in order to enable the other vessel with certainly that the other is not doing her duty, and that the situation imperatively demands a departure form the rules. It is the duty of the vessel required to keep out of the way to give an early and intelligible expression of her intentions to do so; and while there is any doubt as to what her actions will be, the vessel required to hold her course may presume that the other will act intelligently and lawfully, and she should hold her course until the contrary appears. It is no excuse for a vessel taking a course forbidden by law that the unlawful course was the best one." In the American and English Encyclopedia of law (vol. 25, p. 925) the rule is stated as follows:

"But it must be a strong case which puts the sail vessel in the wrong for obeying the rule to hold her course, for the court must clearly see, not only that a deviation from the rule would have prevented the collision, but that the officer in charge of the sail vessel was guilty of negligence or a culpable want of seamanship in not perceiving the necessity for a departure form the rule and acting accordingly. The sail vessel is justified in holding her course to the last minute possible for the steamship to avoid her by making the necessary maneuver." In the case of St. John vs. Paine (10 How., 557), the collision was between a schooner and a steamer. The schooner had no lights visible; the night was starlight and clear. The court reviewed the rules governing the management of sail vessels at some length, explained the rules applicable to the management of steam vessels, and gave the reasons why the rules which govern travelers on the highways of the sea should be strictly enforced. After showing the greater facility of maneuvering which a steamer has cover a sail vessel and, therefore, the greater ability to avoid collisions, the court said: "As a general rule, therefore, when meeting a sailing vessel, whether close hauled or with the wind free, the latter has a right to keep her course, and it is the duty of the steamer to adopt such precautions as will avoid her. (Cities cases.) "By an adherence to this rule on the part of the sailing vessel the steamer with proper lookout will be enabled, when approaching in an opposite direction, to adopt the necessary measures to avoid the danger, and she will have a right to assume that the sailing vessel will keep her course. If the latter fails to do this, the fault will be attributable to her, and the master of the steamer will be responsible only for as fair exertion of the power of his vessel to avoid the collision under unexpected change of the course of the other vessel, and the circumstances of the case." A similar case is that of The Genesee Chief vs. Fitzhugh (12 How., 443). This pertains also to a collision between a steamer, The Genesee Chief, and a sail vessel. The two watched each other for some time before the collision. The sailing vessel kept her course until in extremis when she made a wrong maneuver. The court said: "The collision took place in the open lake. It was a starlight night, and although there was haze near the surface of the lake, it was not sufficient to conceal the Cuba from those on board of the propeller . . . "The lake was smooth. The steamboat had the entire command of her course and a wide water, by which she might have passed the Cuba on either side, and at a safe distance. She was going at the rate of eight miles an hour. And if proper care had been taken on board the Genesee Chief, after the schooner was first seen, it would seem to be almost impossible that a collision could have happened with a vessel moving so slowly and sluggishly through the water even if she was carelessly or injudiciously managed. There was no necessity for passing so near her as to create the hazard. The steamboat could choose its own distance . . . "And the captain and crew of the Cuba appear to have been watchful and attentive from the time the propeller was discovered. Nor do we deem it material to inquire whether the order of the captain at the moment of collision was judicious or not. He saw the steamboat coming directly upon him; her speed not diminished; nor any measures taken to avoid a collision. And if, in the excitement and alarm of the moment, a different order might have been more fortunate, it was the fault of the propeller to have placed him a situation where there was no time for thought; and she is responsible for the consequences. She had the power to have passed at a safer distance, and has no right to place the schooner in such jeopardy, that the error of a moment might cause her destruction, and endanger the lives of those on board. And if an error was committed under such circumstances it was not a fault." In the case of The Ottawa (3 Wall., 269), the court said: "Rules of navigation are obligatory from the time the necessity for precaution begins, and continue to be applicable as the vessels advance, so long as the means and opportunity to avoid the danger remain; but they do not apply to a vessel required to keep her course after the approach is so near that the collision is inevitable, and are equally inapplicable to vessels of every description while they are yet so distant from each other that measures of precaution have not become necessary." This case exemplifies the three-zone theory already referred to. In the first zone no rules apply. In the second the burden is on the vessel required to keep away and void the danger. The third zone covers the period in which errors in extremis occur; and the rule is that the vessel which has forced the privileged vessel into danger is responsible even if the privileged vessel has committed an error within that zone. The duty of the sailing vessel to keep her course is well exemplified in the leading case of the Lucille vs. Respass (15 Wall., 676), which was a collision between a schooner and a steamer. Both vessels saw each other in time to have avoided the collisions. The court said: "The principles of law applicable to the case are well settled. They are not disputed by either party. In the case of The Carrol (8 Wall., 302), it is thus laid down, 'Nautical rules require that where a steamship and sailing vessel are approaching each other from opposite directions, or on intersecting line, the steamship from the moment the sailing vessel is seen, shall watch with the highest diligence her course and movements so as to be able to adopt such timely means of precaution as will necessarily prevent the two boats from coming in contract. Fault on the part of the sailing vessel at the moment preceding a collision does not absolve a steamer which has suffered herself and a sailing vessel to get in such dangerous proximity as to cause inevitable alarm and confusion and collision as a consequence. The steamer, as having committed a far greater fault in allowing such proximity to be brought about, is chargeable with all the damages resulting from a collision.'

"The rule laid down in the case of The Fannie (11 Wal., 238) is still more applicable to the case before us. It was held that a schooner meeting a steamer approaching her on a parallel line, with the difference of half a point in the course of the two, ought to have kept in her course; that a steamer approaching a sailing vessel is bound to keep out of her way, and to allow her a free and unobstructed passage. Whatever is necessary for his it is her duty to do, and avoid whatever obstructs or endangers the sailing vessel in her course. If, therefore, the sailing vessel does not change her course so as to embarrass the steamer, and render it difficult for her to avoid a collision, the steamer alone is answerable for the damage of a collision, if there is one." In the case of The Sea Gull (23 Wall., 165), the court said: "Steamer approaching a sail ship in such a direction as to involve risk of collision are required to keep out of the way of the sail ship; but the sail ship is required to keep her course unless the circumstances are such as to render a departure from the rule necessary in order to avoid immediate danger. "Vessels with sails being required to keep their course, the duty of adopting the necessary measures of precaution to keep out of the way is devolved upon the steamer subject only to the condition that the sail ship shall keep her course and do not act to embarrass the steamer in her efforts to perform her duty. Doubtless the steamer may go to the right or left if she can keep out of the way, but if not and the approach is such as to involve risk of collision she is required to slacken he speed, or, if necessary, stop and reverse, and if she fails to perform her duty as required by the rules of navigation she is responsible for the consequences if the sail vessel is without fault ... "Attempt is made in argument to show that the schooner also was in fault and that the case falls within the rule which requires that the damages shall be divided. "Support to that charge is attempted to be drown from the assumed fact that the schooner changed her course in violation of the rule of navigation which requires the sail ship to keep her course, as a correlative duty to that of the steamer whenever the latter is required to keep out of the way . . . "Two answers are made by the libelants to that defense, either of which, if found to be true, is sufficient to exonerate the schooner: . . . (2) That the schooner made no change in her course until the collision was inevitable, nor until it became indispensably necessary in order to avoid immediate danger caused by the fault of the steamer . . . "Rules of navigation continue to be applicable as long as the means and opportunity remain to avoid the danger, but they do not apply to a vessel required to keep her course after the wrongful approach of the opposite vessel is so near that a collision is inevitable . . . "Nor will an error committed by the sail vessel under such circumstances of peril, if she is otherwise without fault, impair the right of the sail vessel to recover for the injuries occasioned by the collision, for the plain reason that those who produce the peril and put the sail vessel in that situation are chargeable with the error and must answer for the consequences. (Steamship Co. vs. Rumball, 21 How., 383.) "Subject to that exception the sail vessel must keep he course." In the case of The Benefactor (102 U. S., 214), the court laid down the following conclusions: "1. Upon the steamship and schooner discovering each other proceeding in such directions as to involve risk of collision, as stated in the foregoing findings of fact, it was the right and duty of the schooner to keep her course, and the duty of the steamship was in fault in failing to perform that duty. "2. It was also the duty of the steamship under the circumstances stated, to pursue a course which should not needlessly put the schooner in imminent peril; and the steamship was in fault in failing to perform that duty. "3. It was duty of the steamship, before the time when she did so, to slacken her speed or stop, and the steamship was in fault in failing to perform that duty. "4. If, when a collision had become imminent by reason of the fault of the steamship, any error was committed in extremis by those in charge of the schooner, the schooner is not responsible therefor. "5. The steamship had no right, under the circumstance stated, needlessly to place herself in such close proximity to the schooner that the error of a moment would bring destruction. "6. The collision was occasioned by the fault of the steamship, and the steamship should be condemned therefor."

In the case of The Badger State (8 Fed. Rep., 526), the court said: "Where a sailing vessel and one propelled by steam are approaching each other bow on, the steamer must give way. In case of a collision between such vessels, the steamer is prima facie in fault." In the case of The Gate City (90 Fed. Rep., 314), the court held, according to the syllabus:

"The rule requiring a sailing vessel meeting a steamer to hold her course is a broad and general one intended to put the burden of avoiding a collision upon the steamer; and, if the sailing vessel departs from the injunction the burden is on her to show some reasonable excuse therefor. "A disregard of the rule not demanded by a clearly existing exigency should not be excused. "Therefore, she will not held in fault for adhering to her course, although the steamer seems to be maneuvering in an uncertain and dangerous way." We are satisfied from the authorities that, under the facts stated in the opinion of the trial court, the defendant is entitled to recover such damages as reasonably and naturally flowed from the collision. There is sufficient evidence in the record to fix such damages with reasonable accuracy. It was proved upon the trial that it would require an expenditure of P3,525 to put the sail vessel in the condition in which it was before the injury; that it cost P245 to get the vessel to Manila after the injury; that the value of the supplies lost was P240.99. The evidence relative to the loss of earnings is not sufficient to permit the court to formulate any conclusion in relation thereto, even if it be considered a proper item of damage. We think the judgment of the trial court correct in dismissing the complaint of intervention. The intervener had no "legal interest in the matter in litigation, or in the success of either of the parties, or an interest against both." Their action was personal, involved no rights in property which extended beyond their immediate selves, and touched no third party in any of the ramifications of those rights. The judgment of the court below, in so far as it finds against the plaintiff and the intervener, is hereby affirmed. As to that portion which dismisses the counterclaim of the defendant, the Baco River Plantation Company, the judgment is reversed and the cause remanded, with instructions to the trial court to enter judgment in favor of the defendant, the Baco River Plantation Company, and against the plaintiff, G. Urrutia & Company, for the sum of P4,010.99, and costs. No costs on this appeal. While it was held in the case of Philippine Shipping Co. vs. Vergara (6 Phil. Rep., 281), that, in accordance with articles 837 and 826 of the Code of Commerce, the defendant in an action such as the one at bar cannot be held responsible in damages when the ship causing the injury was wholly lost by reason of the accident, we do not apply it in this case for the reason that the vessel lost was insured and that defendant collected the insurance. That being the case, the insurance money substitutes the vessel and must be used, so far as necessary, to pay the judgment rendered in this case. In coming to this conclusion we have not lost sight of the case of Place vs. Nortwich and N. Y. Trans. Co. (118 U. S., 468), in which it was held that, under the provision of the Act of Congress relative thereto, insurance money obtained by reason of the loss of a vessel causing damages, as in the case at bar, was not subject to the payment of the damages sustained by the negligence of the vessel lost by reason of the accident in which the damages occurred. We do not follow that case because we are met in this jurisdiction with article 1186 of the Civil Code, which provides that "after the obligation is extinguished by the loss of the thing, all the actions which the debtor may have against third persons, by reason thereof, shall pertain to the creditor," and with article 2 of the Code of Commerce, which provides that where the Code of Commerce is silent as to the law relating to the matters of which it treats those matters shall be governed by the provisions of the Civil Code. That said article 1186 is, under the Spanish jurisprudence, applicable to money obtained from the insurance of the thing lost or destroyed, there can be no doubt. (Manresa, vol. 8, 353.) The judgment in this case is, therefore, collectible, but the amount collected cannot exceed the amount of insurance money actually received. The writer of this opinion had doubts of the applicability of article 1186, referred to; but has yielded to the learning of the majority relative to the Roman and Spanish jurisprudence on this point. Arellano, C.J., Torres and Trent, JJ., concur.

EN BANC [G.R. No. L-22491. January 27, 1967.] DOMINGO ANG, plaintiff-appellant, vs. AMERICAN STEAMSHIP AGENCIES, INC., defendant-appellee. Juan T. David and M.C. Gunigundo for plaintiff-appellant. Ross, Salcedo, Del Rosario, Bito & Misa for defendant-appellee. SYLLABUS 1. CARRIAGE OF GOODS BY SEA ACT; LOSS DEFINED. As defined in the Civil Code and as applied to Section 3(6), paragraph 4 of the Carriage of Goods by Sea Act, "loss" contemplates merely a situation where no delivery at all was made by the shipper of the goods because the same had perished, gone out of commerce, or disappeared in such a way that their existence is unknown or they cannot be recovered. It does not include a situation where there was indeed delivery but delivery to the wrong person, or a misdelivery. 2. PLEADING AND PRACTICE; MOTION TO DISMISS; EFFECT. It is well settled in this jurisdiction that when a defendant files a motion to dismiss, he thereby hypothetically admits the truth of the allegations of fact contained in the complaint. 3. PRESCRIPTION OF ACTIONS; SUITS PREDICATED ON MISDELIVERY; APPLICABLE RULE. Where the suit is predicated not upon loss or damage but on alleged misdelivery (or conversion) of the goods as in the case at bar, the applicable rule on prescription is not the one-year period provided for in Section 3(6), paragraph 4 of the Carriage of Goods by Sea Act, which short period is designed merely to meet the exigencies of maritime hazards but that found in the Civil Code, namely, either ten years for breach of a written contract or four years for quasi- delict. (Arts. 1144 [1] 1146, Civil Code) DECISION BENGZON, J.P., J p: Yau Yue Commercial Bank Ltd. of Hongkong, referred to hereafter as Yau Yue, agreed to sell 140 packages of galvanized steel durzinc sheets to one Herminio G. Teves (the date of said agreement is not shown in the record here) for the sum of $32,458.26 (US). Said agreement was subject to the following terms and arrangements: (a) the purchase price should be covered by a bank draft for the corresponding amount which should be paid by Herminio G. Teves in exchange for the delivery to him of the corresponding bill of lading to be deposited with a local bank, the Hongkong & Shanghai Bank of Manila; (b) upon arrival of the articles in Manila, Teves would be notified and he would have to pay the amount called for in the corresponding demand draft, after which the bill of lading would be delivered to him; and (c) Teves would present said bill of lading to the carrier's agent, American Steamship Agencies, Inc. which would then issue the corresponding "Permit To Deliver Imported Articles" to be presented to the Bureau of Customs to obtain the release of the articles. Pursuant to said terms and arrangements, Yau Yue, through Tokyo Boeki, Ltd. of Tokyo, Japan, shipped the articles at Yawata, Japan, on April 30, 1961 aboard the S.S. TENSAI MARU, Manila, belonging to the Nissho Shipping Co., Ltd. of Japan, of which the American Steamship Agencies, Inc. is the agent in the Philippines, under a shipping agreement, Bill of Lading No. WM-2, dated April 30, 1961, consigned "to order of the shipper", with Herminio G. Teves as the party to be notified of the arrival of the 140 packages of galvanize steel durzinc sheets in Manila. The bill of lading was indorsed to the order of and delivered to Yau Yue by the shipper. Upon receipt thereof, Yau Yue drew a demand draft together with the bill of lading against Herminio G. Teves, through the Hongkong & Shanghai Bank. When the articles arrived in Manila on or about May 9, 1961, Hongkong & Shanghai Bank notified Teves, the "notify party" under the bill of lading, of the arrival of the goods and requested payment of the demand draft representing the purchase price of the articles. Teves, however, did not pay the demand draft, prompting the bank to make the corresponding protest. The bank likewise returned the bill of lading and demand draft to Yau Yue which indorsed the said bill of lading to Domingo Ang. Meanwhile, despite his non-payment of the purchase price of the articles, Teves as able to obtain a bank guaranty in favor of the American Steamship Agencies, Inc., as carrier's agent, to the effect that he would surrender the original and negotiable bill of lading duly indorsed by Yau Yue. On the strength of this guaranty, Teves succeeded in securing a "Permit To Deliver Imported Articles"

from the carrier's agent, which he presented to the Bureau of Customs which in turn released to him the articles covered by the bill of lading. Subsequently, Domingo Ang claimed for the articles from American Steamship Agencies, Inc., by presenting the indorsed bill of lading, but he was informed by the latter that it had delivered the articles to Teves. On October 30, 1963 Domingo Ang filed a complaint in the Court of First Instance of Manila against the American Steamship Agencies, Inc., for having allegedly wrongfully delivered and/or converted the goods covered by the bill of lading belonging to plaintiff Ang, to the damage and prejudice of the latter. On December 2, 1963, defendant filed a motion to dismiss upon the ground that plaintiff's cause of action has prescribed under the Carriage of Goods by Sea Act (Commonwealth Act No. 65), more particularly Section 3(6), paragraph 4, which provides: "In any event, the carrier and the ship shall discharged from all liability in respect to loss or damage unless suit is brought within one year after delivery of the goods or the date when the goods should have been delivered." It argued that the cargo should have been delivered to the person entitled to the delivery thereof (meaning the plaintiff) on May 9, 1961, the date of the vessel's arrival in Manila, and that even allowing a reasonable time (even one month) after such arrival within which to make delivery, still, the action commenced on October 30, 1963 was filed beyond the prescribed period of one year. By order dated December 21, 1963, copy of which was received by plaintiff on December 26, 1963, the lower court dismissed the action on the ground of prescription. His motion for reconsideration dated December 26, 1963 having been denied by the lower court in its order dated January 13, ]964, plaintiff appealed directly to this Court on a question of law: Has plaintiff-appellant's cause of action prescribed under Section 3(6), paragraph 4 of the Carriage of Goods by Sea Act? The provision of law involved in this case speaks of "loss or damage". That there was no damage caused to the goods which were delivered intact to Herminio G. Teves who did not file any notice of damage, is admitted by both parties in this case. What is to be resolved in order to determine the applicability of the prescriptive period of one year to the case at bar is whether or not there was "loss" of the goods subject matter of the complaint. Nowhere is "loss" defined in the Carriage of Goods by Sea Act. Therefore, recourse must be had to the Civil Code which provides in Article 18 thereof that, "In matters which are governed by the Code of Commerce and special laws, their deficiency shall be supplied by the provisions of this Code." Article 1189 of the Civil Code defines the word "loss" in cases where conditions have been imposed with the intention of suspending the efficacy of an obligation to give. The contract of carriage under consideration entered into by and between American Steamship Agencies, Inc. and the Yau Yue (which later on endorsed the bill of lading covering the shipment to plaintiff herein Domingo Ang), is one involving an obligation to give or to deliver the goods "to the order of shipper", that is, upon the presentation and surrender of the bill of lading. This being so, said article can be applied to the present controversy, more specifically paragraph 2 thereof which provides that, ". . . it is understood that a thing is lost when it perishes, or goes out of commerce, or disappears in such a way that its existence is unknown or it cannot be recovered." As defined in the Civil Code and as applied to Section 3(6), paragraph 4 of the Carriage of Goods by Sea Act, "loss" contemplates merely a situation where no delivery at all was made by the shipper of the goods because the same had perished, gone out of commerce, or disappeared in such away that their existence is unknown or they cannot he recovered. It does not include a situation where there was indeed delivery but delivery to the wrong person, or a misdelivery, as alleged in the complaint in this case. The distinction between nondelivery and misdelivery has already been clearly made in reference to bills of lading. As this Court said in Tan Pho vs. Hassamal Dalamal, 67 Phil. 555, 557-558: "Considering that the bill of lading covering the goods in question has been made to order, which means that said goods cannot be delivered without previous payment of the value thereof, it is evident that, the said goods having been delivered to Aldeguer without paying the price of the same, these facts constitutes misdelivery and not nondelivery, because there was in fact delivery of merchandise. We do not believe it can be seriously and reasonably argued that what took place, as contended by the petitioner is a case of misdelivery with respect to Aldeguer and at the same time nondelivery with respect to the PNB who had the bill of lading, because the only thing to consider in this question is whether Enrique Aldeguer was entitled to get the merchandise or whether, on the contrary, the PNB is the one entitled thereto. Under the facts, the defendant petitioner should not have delivered the goods to Aldeguer but to the Philippine National Bank. Having made the delivery to Aldeguer, the delivery is a case of misdelivery. If the goods have been delivered, it cannot at the same time be said that they have not been delivered. "According to the bill of lading which was issued in the case at bar to the order of the shipper, the carrier was under a duty not to deliver the merchandise mentioned in the bill of lading except upon presentation of the bill of lading duly endorsed by the shipper. (10 C.J., 259) Hence, the defendant-petitioner Tan Pho having delivered the goods to Enrique Aldeguer without the presentation by the latter of the bill of lading duly endorsed to him by the shipper, the said defendant made a misdelivery and violated the bill of lading, because his duty was not only to transport the goods entrusted to him safely, but to deliver them to the person indicated in the bill of lading." (Italics supplied)

Now, it is well settled in this jurisdiction that when a defendant files a motion to dismiss, he thereby hypothetically admits the truth of the allegations of fact contained in the complaint (Philippine National Bank vs. Hipolito, et al., L-16463, Jan. 30, 1965; Republic vs. Ramos, L-15484, Jan. 31, 1963; Pascual vs. Secretary of Public Works & Communications, 110 Phil. 331; Pangan vs. Evening News Publishing Co., Inc., 110 Phil. 409). Thus, defendant-appellant having filed a motion to dismiss, it is deemed to have admitted, hypothetically, paragraphs 6, 7 and 8 of the complaint, and these allege: "6. That, when the said articles arrived in Manila, the defendant authorized the delivery thereof to Herminio G. Teves, through the issuance of the corresponding Permit to Deliver Imported Articles, without the knowledge and consent of the plaintiff, who is the holder in due course of said bill of lading, notwithstanding the fact that the said Herminio G. Teves could not surrender the corresponding bill of lading; "7. That, without any evidence of the fact that Herminio G. Teves is the holder of the corresponding bill of lading in due course; without the surrender of the bill of lading; without the knowledge and consent of the plaintiff, as holder thereof in due course, and in violation of the provision on the bill of lading which requires that the articles are only to be delivered to the person who is the holder in due course of the said bill of lading, or his order, the defendant issued the corresponding `Permit To Deliver Imported Articles' in favor of the defendant, without the knowledge and consent of the plaintiff as holder in due course of said bill of lading, which, originally was Yau Yue, subsequently, the plaintiff Domingo Ang; "8. That, as a result of the issuance by the defendant of said permit, Herminio G. Teves was able to secure the release of the articles from the Bureau of Customs, which is not legally possible without the presentation of said permit to the said Bureau; . . ." From the allegations of the complaint, therefore, the goods cannot be deemed "lost". They were delivered to Herminio G. Teves, so that there can only be either delivery, if Teves really was entitled to receive them or misdelivery, if he was not so entitled. It is not for Us now to resolve whether or not delivery of the goods to Teves was proper, that is, whether or not there was rightful delivery or misdelivery. The point that matters here is that the situation is either delivery or misdelivery, but not nondelivery. Thus, the goods were either rightly delivered or misdelivered, but they were not lost. There being no loss or damage to the goods, the afore-quoted provision of the Carriage of Goods by Sea Act stating that "In any event, the carrier and the ship shall be discharged from all liability in respect of loss or damage unless suit is brought within one year after delivery of the goods or the date when the goods should have been delivered," does not apply. The reason is not difficult to see. Said one-year period of limitation is designed to meet the exigencies of maritime hazards. In a case where the goods shipped were neither lost nor damaged in transit but were, on the contrary, delivered in port to someone who claimed to be entitled thereto, the situation is different, and the special need for the short period of limitation in cases of loss or damage caused by maritime perils does not obtain. It follows that for suits predicated not upon loss or damage but on alleged misdelivery (or conversion) of the goods, the applicable rule on prescription is that found in the Civil Code, namely, either ten years for breach of a written contract or four years for quasi-delict. (Arts. 1144(1), 1146, Civil Code) In either case, plaintiff's cause of action has not yet prescribed, since his right of action would have accrued at the earliest on May 9, 1961 when the ship arrived in Manila and he filed suit on October 30, 1963. Wherefore, the dismissal order appealed from is hereby reversed and set aside and this case is remanded to the court a quo for further proceedings. No costs. So ordered. Concepcion, C.J., Reyes, J.B.L., Dizon, Regala, Makalintal, Zaldivar, Sanchez and Ruiz Castro, JJ., concur.

EN BANC [G.R. No. L-24515. November 18, 1967.] THE AMERICAN INSURANCE COMPANY, plaintiff-appellant, vs. COMPAIA MARITIMA, ET AL., defendants; MACONDRAY & CO., INC., defendant-appellee. William H. Quasha & Associates for plaintiff-appellant. Ross, Selph & Carrascoso and Salcedo for defendant-appellee. SYLLABUS 1. CARRIAGE OF GOODS BY SEA ACT; OBLIGATIONS OF CARRIER; TRANS-SHIPMENT OF CARGO. Where a cargo had been shipped freight prepaid, from New York to Cebu under the bill of lading, but the carrier's last port of call was Manila and such cargo had to be trans-shipped by said carrier to Cebu through another interisland carrier, such transshipment was not a separate transaction from that originally entered into, and did not operate to remove the transaction from the operation of the Carriage of Goods by Sea Act (See Go Chang & Co., Inc., vs. Aboitiz & Co., Inc., 98 Phil., 179).

2. ID.; PRESCRIPTION OF ACTION FOR LOSS AND DAMAGE. Under Sec. 3(6) of the Carriage of Goods by Sea Act of the United States which was made applicable to all contracts for the carriage of goods by sea to and from Philippine ports in foreign trade by Sec. 1 of Commonwealth Act 65, the liability of the carrier for loss or damage ceases "unless suit is brought within one year after delivery of the goods or the date when the goods shall have been delivered," and where an amended complaint impleading such carrier was filed beyond the prescribed period, the order dismissing it as against such carrier must be upheld by reason of prescription. DECISION MAKALINTAL, J p: Appeal from the order of the Court of First Instance of Manila (Civil Case No. 55056) dismissing, on the ground of prescription, the amended complaint of plaintiff-appellant, The American Insurance Company, as against alternative defendant Macondray & Co., Inc. On August 11, 1962, a certain cargo insured with plaintiff corporation was shipped in New York, U.S.A. aboard "M/S TOREADOR", of which the general agent in the Philippines is appellee Macondray & Co. Inc. (hereinafter referred to as Macondray). The cargo, with an invoice value of $3,539.61 CIF Cebu, was consigned to the order of the importer Atlas Consolidated Mining and Development Corporation. Inasmuch as the final port of call of the "M/S TOREADOR" was Manila, the carrier, in accepting the cargo at the point of shipment, agreed to transship the same, after its discharge in Manila, aboard an inter-island vessel to its destination in Cebu. On September 18, 1962 the "M/S TOREADOR" arrived at the port of Manila and on the same date discharged the cargo in question. Pursuant to the arrangement the cargo was subsequently loaded aboard the "SS SIQUIJOR, an inter-island vessel. The shipment was finally discharged in Cebu on September 24, 1962. When the consignee took delivery of the shipment it was found to be short of two (2) pieces of tractor parts worth $2,834.88, or P11,063.12 at the exchange rate of P3.9025. Plaintiff paid the insured value of the lost merchandise to the consignee. To recover the said sum of P11,063.12 plaintiff, as subrogee of the consignee's rights, filed on September 24, 1963 a complaint against the Compaia Maritima and the Visayan Cebu Terminal Co., Inc. as alternative defendants. The former was sued as operator and owner of "SS SIQUIJOR" and the latter as operator of the arrastre service at the port of Cebu, charged with the care and custody of all cargo discharged there. In view of Maritima's allegation in its answer that the lost merchandise had not actually been delivered to it, plaintiff filed on November 6, 1964 a motion to admit its amended complaint impleading Macondray and Luzon Brokerage Corporation as additional defendants and eliminating the Visayan Cebu Terminal Co., Inc. According to plaintiff, "the amended complaint is necessary in view of defendant Maritima's assertion and records tending to show that the lost merchandise was not delivered to it, contrary to Macondray's representation, even after the filing of the original complaint, that the cargo was delivered to Maritima." The amended complaint was admitted on November 14, 1964. On December 23, 1964 Macondray moved to dismiss the amended complaint against it on the ground that plaintiff's action had already prescribed under the provisions of the Carriage of Goods by Sea Act 1 which provides in section 3 (6): "In any event, the carrier and the ship shall be discharged from all liability in respect of loss or damage unless suit is brought within one year after delivery of the goods or the date when the goods shall have been delivered: . . ." Macondray contended that since the amended complaint in which it was impleaded for the first time was filed only on November 6, 1964 and admitted on November 14, 1964, the period of one year had expired whether reckoned from one or the other of the two dates, namely: September 18, 1962, when the "M/S TOREADOR" arrived at the port of Manila and discharged the cargo for transshipment to Cebu on board the "SS SIQUIJOR", and September 24, 1962, when the shipment finally arrived in Cebu and was discharged the same day. The motion to dismiss was granted and plaintiff interposed the present appeal from the order of dismissal. Plaintiff avers that the one year prescriptive period provided for in the Carriage of Goods by Sea Act does not apply in this case, which should be governed by the statute of limitations in the Civil Code. In support of this contention it is pointed out that the cargo in question was transshipment cargo; that the discharge thereof in Manila terminated the obligation of Macondray as carrier; and that its obligation to transship the cargo to Cebu was merely that of a "forwarding agent" of the shipper. Reliance is placed on Clause 11 of the bill of lading which states: "This carrier, in making arrangements for any transshipping, or forwarding vessel or means of transportation not operated by this carrier shall be considered solely the forwarding agent of the shipper and without any other responsibility." We do not see that the use of the term "forwarding agent of the shipper" is decisive of the issue. According to paragraph 4 of the amended complaint the cargo was loaded on board the "M/S TOREADOR" in New York, "freight prepaid to Cebu City . . . pursuant to the bill of lading No. 13." In other words, the action is based on the contract of carriage up to the final port of destination, which was Cebu City, for which the corresponding freight had been prepaid. The following provisions of the bill of lading are the ones directly in point: "1. This bill of lading shall have effect subject to the provisions of the Carriage of Goods by Sea Act of the United States of America. approved April 16, 1936, which shall be deemed to be incorporated herein and nothing herein contained shall be deemed a

surrender by the Carrier of any of its rights or immunities or an increase of any of its responsibilities or liabilities under said Act. The provisions stated in said Act (except as may be otherwise specifically provided herein) shall govern before the goods are loaded on and after they are discharged from the ship and throughout the entire time the goods are in the custody of the carrier. . . . "19. `In any event the carrier and the ship shall be discharged from all liability in respect of loss or damage unless suit is brought within one year after delivery of the goods or the date when the goods should have been delivered. . . ." The transshipment of the cargo from Manila to Cebu was not a separate transaction from that originally entered into by Macondray, as general agent for the "M/S TOREADOR". It was part of Macondray's obligation under the contract of carriage and the fact that the transshipment was made via an inter-island vessel did not operate to remove the transaction from the operation of the Carriage of Goods by Sea Act. (See Go Chang & Co., Inc. vs. Aboitiz & Co., Inc., 98 Phil. 197). WHEREFORE, the order appealed from is hereby affirmed, with costs. Concepcion, C.J., Reyes, J.B.L., Dizon, Zaldivar, Bengzon, J.P., Sanchez, Castro, Angeles and Fernando, JJ., concur.

SECOND DIVISION [G.R. No. L-30232. July 29, 1988.] LUZON STEVEDORING CORPORATION, petitioner-appellant, vs. COURT OF TAX APPEALS and the HONORABLE COMMISSIONER OF INTERNAL REVENUE, respondents-appellee. H. San Luis & V.L. Simbulan for petitioner-appellant. SYLLABUS 1. TAXATION; TAX EXEMPTIONS; ANY DIMINUTION OF POWER TO TAX STRICTLY CONSTRUED; REASON. This Court has laid down the rule that "as the power of taxation is a high prerogative of sovereignty, the relinquishment is never presumed and any reduction or diminution thereof with respect to its mode or its rate, must be strictly construed, and the same must be

coached in clear and unmistakable terms in order that it may be applied." (84 C.J.S. pp. 659-800), More specifically stated, the general rule is that any claim for exemption from the tax statute should be strictly construed against the taxpayer (Acting Commissioner of Customs v. Manila Electric Co. et al., 69 SCRA 469 [1977] and Commissioner of Internal Revenue v. P.J. Kiener Co. Ltd., et al., 65 SCRA 142 [1975]). 2. ID.; ID.; TAX EXEMPTIONS FROM COMPENSATING TAX; REQUIREMENTS OF AMENDATORY LAW ENUMERATED. As correctly analyzed by the Court of Tax Appeals, in order that the importations in question may be declared exempt from the compensating tax, it is indispensable that the requirements of the amendatory law be complied with, namely: (1) the engines and spare parts must be used by the importer himself as a passenger and/or cargo vessel; and (2) the said passenger and/or cargo vessel must be used in coastwise or oceangoing navigation. As pointed out by the Court of Tax Appeals, the amendatory provisions of Republic Act No. 3176 limit tax exemption from the compensating tax to imported items to be used by the importer himself as operator of passenger and/or cargo vessel. 3. STATUTORY CONSTRUCTION AND INTERPRETATION; TERM "TUGBOAT" DEFINED. As quoted in the decision of the Court of Tax Appeals, a tugboat is defined as follows: "A tugboat is a strongly built, powerful steam or power vessel, used for towing and, now, also used for attendance on vessel. (Webster New International Dictionary, 2nd Ed.). "A tugboat is a diesel or steam power vessel designed primarily for moving large ships to and from piers for towing barges and lighters in harbors, rivers and canals. (Encyclopedia International Grolier, Vol. 18, p. 256). "A tug is a steam vessel built for towing, synonymous with tugboat." (Bouvier's Law Dictionary.) Under the foregoing definitions, petitioner's tugboats clearly do not fall under the categories of passenger and/or cargo vessels. Thus, it is a cardinal principle of statutory construction that where a provision of law speaks categorically, the need for interpretation is obviated, no plausible pretense being entertained to justify non-compliance. All that has to be done is to apply it in every case that falls within its terms (Allied Brokerage Corp. v. Commissioner of Customs, L-27641, 40 SCRA 555 [1971]; Quijano, etc. v. DBP, L-26419, 35 SCRA 270 [1970]). 4. ID.; STATUTES ARE TO BE CONSTRUED IN THE LIGHT OF THE PURPOSES TO BE ACHIEVED. Even if construction and interpretation of the law is insisted upon, following another fundamental rule that statutes are to be construed in the light of purposes to be achieved and the evils sought to be remedied (People v. Purisima etc., et al., L-42050-66, 86 SCRA 544 [1978]), it will be noted that the legislature in amending Section 190 of the Tax Code by Republic Act 3176, as appearing in the records, intended to provide incentives and inducements to bolster the shipping industry and not the business of stevedoring, as manifested in the sponsorship speech of Senator Gil Puyat. 5. TAXATION; COURT OF TAX APPEALS; FINDINGS AND CONCLUSION NOT DISTURBED LACKING ABUSE OF AUTHORITY; CASE AT BAR. On analysis of petitioner-appellant's transactions, the Court of Tax Appeals found that no evidence was adduced by petitioner-appellant that tugboats are passenger and/or cargo vessels used in the shipping industry as an independent business. There appears to be no plausible reason to disturb the findings and conclusion of the Court of Tax Appeals. As a matter of principle, this Court will not set aside the conclusion reached by an agency such as the Court of Tax Appeals, which is, by the very nature of its function, dedicated exclusively to the study and consideration of tax problems and has necessarily developed an expertise on the subject unless there has been an abuse or improvident exercise of authority (Reyes v. Commissioner of Internal Revenue, 24 SCRA 199 [1981]), which is not present in the instant case. DECISION PARAS, J p: This is a petition for review of the October 21, 1968 Decision * of the Court of Tax Appeals in CTA Case No. 1484, "Luzon Stevedoring Corporation v. Hon. Ramon Oben, Commissioner, Bureau of Internal Revenue", denying the various claims for tax refund; and the February 20, 1969 Resolution of the same court denying the motion for reconsideration. Herein petitioner-appellant, in 1961 and 1962, for the repair and maintenance of its tugboats, imported various engine parts and other equipment for which it paid, under protest, the assessed compensating tax. Unable to secure a tax refund from the Commissioner of Internal Revenue, on January 2, 1964, it filed a Petition for Review (Rollo, pp. 14-18) with the Court o Tax Appeals, docketed therein as CTA Case No. 1484, praying among others, that it be granted the refund of the amount o P33,442.13. The Court of Tax Appeals, however, in a Decision dated October 21, 1969 (Ibid., pp. 22-27), denied the various claims for tax refund. The decretal portion of the said decision reads: "WHEREFORE, finding petitioner's various claims for refund amounting to P33,442.13 without sufficient legal justification, the said claims have to be, as they are hereby, denied. With costs against petitioner." On January 24, 1969, petitioner-appellant filed a Motion for Reconsideration (Ibid., pp. 28-34), but the same was denied in a Resolution dated February 20, 1969 (Ibid., p. 35). Hence, the instant petition. This Court, in a Resolution dated March 13, 1969, gave due course to the petition (Ibid., p. 40). Petitioner-appellant raised three (3) assignments of error, to wit: I

The lower court erred in holding that the petitioner-appellant is engaged in business as stevedore, the work of unloading and loading of a vessel in port, contrary to the evidence on record. II The lower court erred in not holding that the business in which petitioner-appellant is engaged, is part and parcel of the shipping industry. III The lower court erred in not allowing the refund sought by petitioner-appellant. The instant petition is without merit. The pivotal issue in this case is whether or not petitioner's "tugboats" can be interpreted to be included in the term "cargo vessels" for purposes of the tax exemption provided for in Section 190 of the National Internal Revenue Code, as amended by Republic Act No. 3176. Said law provides: "Sec. 190. Compensating tax . . . And Provided further, That the tax imposed in this section shall not apply to articles to be used by the importer himself in the manufacture or preparation of articles subject to specific tax or those for consignment abroad and are to form part thereof or to articles to be used by the importer himself as passenger and/or cargo vessel, whether coastwise or oceangoing, including engines and spare parts of said vessel. . ." Petitioner contends that tugboats are embraced and included in the term cargo vessel under the tax exemption provisions of Section 190 of the Revenue Code, as amended by Republic Act. No. 3176. He argues that in legal contemplation, the tugboat and a barge loaded with cargoes with the former towing the latter for loading and unloading of a vessel in part, constitute a single vessel. Accordingly, it concludes that the engines, spare parts and equipment imported by it and used in the repair and maintenance of its tugboats are exempt from compensating tax (Rollo, p. 23). On the other hand, respondents-appellees counter that petitioner-appellant's "tugboats" are not "cargo vessel" because they are neither designed nor used for carrying and/or transporting persons or goods by themselves but are mainly employed for towing and pulling purposes. As such, it cannot be claimed that the tugboats in question are used in carrying and transporting passengers or cargoes as a common carrier by water, either coastwise or oceangoing and, therefore, not within the purview of Section 190 of the Tax Code, as amended by Republic Act No. 3176 (Brief for Respondents-Appellees, pp. 4-5). This Court has laid down the rule that "as the power of taxation is a high prerogative of sovereignty, the relinquishment is never presumed and any reduction or diminution thereof with respect to its mode or its rate, must be strictly construed, and the same must be coached in clear and unmistakable terms in order that it may be applied." (84 C.J.S. pp. 659-800), More specifically stated, the general rule is that any claim for exemption from the tax statute should be strictly construed against the taxpayer (Acting Commissioner of Customs v. Manila Electric Co. et al., 69 SCRA 469 [1977] and Commissioner of Internal Revenue v. P.J. Kiener Co. Ltd., et al., 65 SCRA 142 [1975]). As correctly analyzed by the Court of Tax Appeals, in order that the importations in question may be declared exempt from the compensating tax, it is indispensable that the requirements of the amendatory law be complied with, namely: (1) the engines and spare parts must be used by the importer himself as a passenger and/or cargo vessel; and (2) the said passenger and/or cargo vessel must be used in coastwise or oceangoing navigation (Decision, CTA Case No. 1484; Rollo, p. 24). As pointed out by the Court of Tax Appeals, the amendatory provisions of Republic Act No. 3176 limit tax exemption from the compensating tax to imported items to be used by the importer himself as operator of passenger and/or cargo vessel (Ibid., p. 25). As quoted in the decision of the Court of Tax Appeals, a tugboat is defined as follows: "A tugboat is a strongly built, powerful steam or power vessel, used for towing and, now, also used for attendance on vessel. (Webster New International Dictionary, 2nd Ed.) "A tugboat is a diesel or steam power vessel designed primarily for moving large ships to and from piers for towing barges and lighters in harbors, rivers and canals. (Encyclopedia International Grolier, Vol. 18, p.256). "A tug is a steam vessel built for towing, synonymous with tugboat. (Bouvier's Law Dictionary.)" (Rollo, p.24). Under the foregoing definitions, petitioner's tugboats clearly do not fall under the categories of passenger and/or cargo vessels. Thus, it is a cardinal principle of statutory construction that where a provision of law speaks categorically, the need for interpretation is obviated, no plausible pretense being entertained to justify non-compliance. All that has to be done is to apply it in every case that falls within its terms (Allied Brokerage Corp. v. Commissioner of Customs, L-27641, 40 SCRA 555 [1971]; Quijano, etc. v. DBP, L26419,35 SCRA 270 [1970]).

And, even if construction and interpretation of the law is insisted upon, following another fundamental rule that statutes are to be construed in the light of purposes to be achieved and the evils sought to be remedied (People v. Purisima etc., et al., L-42050-66, 86 SCRA 544 [1978], it will be noted that the legislature in amending Section 190 of the Tax Code by Republic Act 3176, as appearing in the records, intended to provide incentives and inducements to bolster the shipping industry and not the business of stevedoring, as manifested in the sponsorship speech of Senator Gil Puyat (Rollo, p. 26). On analysis of petitioner-appellant's transactions, the Court of Tax Appeals found that no evidence was adduced by petitionerappellant that tugboats are passenger and/or cargo vessels used in the shipping industry as an independent business. On the contrary, petitioner-appellant's own evidence supports the view that it is engaged as a stevedore, that is, the work of unloading and loading of a vessel in port; and towing of barges containing cargoes is a part of petitioner's undertaking as a stevedore. In fact, even its trade name is indicative that its sole and principal business is stevedoring and lighterage, taxed under Section 191 of the National Internal Revenue Code as a contractor, and not an entity which transports passengers or freight for hire which is taxed under Section 192 of the same Code as a common carrier by water (Decision, CTA Case No. 1484; Rollo, p. 25). Under the circumstances, there appears to be no plausible reason to disturb the findings and conclusion of the Court of Tax Appeals. As a matter of principle, this Court will not set aside the conclusion reached by an agency such as the Court of Tax Appeals, which is, by the very nature of its function, dedicated exclusively to the study and consideration of tax problems and has necessarily developed an expertise on the subject unless there has been an abuse or improvident exercise of authority (Reyes v. Commissioner of Internal Revenue, 24 SCRA 199 [1968]), which is not present in the instant case. PREMISES CONSIDERED, the instant petition is DISMISSED and the decision of the Court of Tax Appeals is AFFIRMED. SO ORDERED.

SECOND DIVISION [G.R. No. 95900. July 23, 1992.] JULIUS C. OUANO, petitioner, vs. COURT OF APPEALS, MARKET DEVELOPERS, INC. JULIAN O. CHUA, SUPREME MERCHANT CONSTRUCTION SUPPLY, INC., JOHNNY ANG, alias Chua Pek Giok, and FLORENTINO RAFOLS, JR., respondents. Ramon B. Ceniza for petitioner. Cornelio T. Falgui for SMCSI and Johnny Ang. Zosa & Quijano Law Offices for MADE and Chua. SYLLABUS 1. CIVIL LAW; OBLIGATIONS AND CONTRACTS; CONTRACTS; BINDING ONLY BETWEEN CONTRACTING PARTIES; CASE AT BAR. It is a basic principle in civil law that, with certain exceptions not obtaining in this case, a contract can only bind the parties who had entered into it or their successors who assumed their personalities or their juridical positions, and that, as a consequence, such contract can neither favor nor prejudice a third person. (see Art. 1311, Civil Code) The obligation of contracts is limited to the parties making them and, ordinarily, only those who are parties to contracts are liable for their breach. Parties to a contract cannot thereby impose any liability on one who, under its terms, is a stranger to the contract, and, in any event, in order to bind a third person contractually, an expression of agent by such person is necessary. 2. ID.; ID.; LEASE; SUB-LEASE; CONSTRUED. In a sublease arrangement, the basic principles of which are applicable in the present case, there are two distinct leases involved, that is, the principal lease and the sublease. There are two juridical relationships which co-exist and are intimately related to each other, but which are nonetheless distinct one from the other. In such arrangement, the personality of the lessee qua lessee does not disappear; his rights and obligations vis-a-vis the lessor are not passed on to nor acquired by the sublessee. The lessor is in the main and except only in the instances specified in the Civil Code, a stranger to the relationship between the lessee-sublessor and the sublessee. The lessee-sublessor is not an agent of the lessor nor is the lessor an agent of the lessee-sublessor. The sublessee has no right or authority to pay the sublease rentals to the lessor, said rentals being due and parable to the lessee-sublessor. (Blas vs. Court of Appeals, et al., 180 SCRA 60 [1989]) MADE was, therefore, under no obligation to pay petitioner since the freightage was payable to Rafols. 3. ID.; ID.; ID.; ID.; EXTENT OF LIABILITY OF SUBLESSEE TO LESSOR; CASE AT BAR. Although it is provided in Article 1652 of the Civil Code that the sublessee is subsidiarily liable to the lessor for any rent due from the lessee, the sublessee shall not be responsible beyond the amount of rent due from him, in accordance with the terms of the sublease, at the time of the extrajudicial demand by the lessor. 4. COMMERCIAL LAW; MARITIME TRANSPORTATION; CHARTER PARTY; KINDS. A charter party may, among other classifications, be of two kinds: One is where the owner agrees to carry a cargo which the charterer agrees to provide, and the second is where there is an entire surrender by the owner of the vessel to the charterer, who hires the vessel as one hires a house, takes her empty, and provides the officers and provisions, and, in short, the entire outfit. In such a contract, the charterer is substituted in place of the owner and becomes the owner for the voyage. This second type is also known as a bareboat charter or otherwise referred to as a demise of the vessel. (Litonjua Shipping Co. vs. National Seamen Board, et al., 176 SCRA 189 [1989]; Maritime Agencies & Services, Inc. vs. Court of Appeals, et al., 187 SCRA 346 [1990]) 5. ID.; ID.; ID.; BAREBOAT CHARTER; EXPLAINED; CASE AT BAR. In a charter party of the second kind, not only the entire capacity of the ship is let but the ship itself, and the possession is passed to the charterer. The entire control and management of it is given up to him. The general owner loses his lien for freight, but the lien itself is not destroyed, the charterer is substituted in

his place, in whose favor the lien continues to exist when goods are taken on freight. The general owner, however, has no remedy for the charter of his vessel but his personal action on the covenants of the charter party. It is a contract in which he trusts in the personal credit of the charterer. Therefore, where the charter constitutes a demise of the ship and the charterer is the owner for the voyage, and that is the kind of charter party involved in the instant case, the general owner has no lien on the cargo for the hire of the vessel, in the absence of an express provision therefor as in the case at bar. 6. ID.; ID.; FREIGHT CHARGES' LIEN ON CARGO FOR UNPAID FREIGHT; UNCONDITIONAL RELEASE OF CARGO CONSTITUTES WAIVER THEREOF. even on the assumption that petitioner had a lien on the cargo for unpaid freight, the same was deemed waived when the goods were unconditionally released to the consignee at the port of destination. A carrier has such a lien only while it retains possession of the goods, so that delivery of the goods to the consignee or a third person terminates, or constitutes a waiver of, the lien. The lien of a carrier for the payment of freight charges is nothing more than the right to withhold the goods, and is inseparably associated with its possession and dependent upon it. The shipowner's lien for freight is not in the nature of a hypothecation which will remain a charge upon the goods after he has parted with possession, but is simply the right to retain them until the freight is paid, and is therefore lost by an unconditional delivery of the goods to the consignee. 7. ID.; ID.; ID.; ID.; LIMITED FOR THIRTY (30) DAYS. Under Article 667 of the Code of Commerce, the period during which the lien shall subsist is twenty (20) days. Parenthetically, this has been modified by the Civil Code, Article 2241 whereof provides that credits for transportation of the goods carried, for the price of the contract and incidental expenses shall constitute a preferred claim or lien on the goods carried until their delivery and for thirty (30) days thereafter. During this period, the sale of the goods may be requested, even though there are other creditors and even if the shipper or consignee is insolvent. But, this right may not be made use of where the goods have been delivered and were turned over to a third person without malice on the part of the third person and for a valuable consideration. In the present case, the cargo of cement was unloaded from the vessel and delivered to the consignee on October 23, 1980, without any oral or written notice or demand having been made on SMCSI for unpaid freight on the cargo. Consequently, after the lapse of thirty (30) days from the date of delivery, the cargo of cement had been released from any maritime lien for unpaid freight. 8. ID.; ID.; ID.; ID.; ID.; CASE OF OVERSEAS FACTORS, INC. INAPPLICABLE. Petitioner's invocation of Overseas Factors, Inc., et al. vs. South Sea Shipping Co., et al., (4 SCRA 400 [1962]) therefore, is ineffectual and unavailing. In said case, the cargo was still in the possession of the carrier whose officers and crew refused to unload the same unless the balance of the freight was paid. In this case before us, the cargo had already been unconditionally delivered to the consignee SMCI without protest. DECISION REGALADO, J p: This petition for review on certiorari assails the decision of the Court of Appeals in CA-G.R. CV No. 12693, promulgated on August 30, 1990, reversing the decision of the Regional Trial Court of Cebu, Branch XI, in Civil Case No. R-20037 wherein judgment had been rendered for petitioner, as well as the resolution of said respondent court, dated October 15, 1990, denying petitioner's motion for reconsideration. 1 As found by respondent court, petitioner is the registered owner and operator of the motor vessel known as M/V Don Julio Ouano. On October 8, 1980, petitioner leased the said vessel to respondent Rafols under a charter party. The consideration for the letting and hiring of said vessel was P60,000.00 a month, with P30,000.00 as down payment and the balance of P30,000.00 to be paid within twenty (20) days after actual departure of the vessel from the port of call. It was also expressly stipulated that the charterer should operate the vessel for his own benefit and should not sublet or sub-charter the same without the knowledge and written consent of the owner. On October 11, 1980, Rafols contracted with respondent Market Developers, Inc. (hereafter, MADE) through its group manager, respondent Julian O. Chua, under an agreement denominated as a "Fixture Note" to transport 13,000 bags of cement from Iligan City to General Santos City, consigned to respondent Supreme Merchant Construction Supply, Inc. (SMCSI, for brevity) for a freightage of P46,150.00. Said amount was agreed to be payable to Rafols by MADE in two installments, that is, P23,075.00 upon loading of the cement at Iligan City and the balance of P23,075.00 upon completion of loading and receipt of the cement cargo by the consignee. The fixture note did not have the written consent of petitioner. Rafols had on board the M/V Don Julio Ouano his sobre cargo (jefe de viaje) when it departed from Iligan City until the cargo of cement was unloaded in General Santos City, the port of destination. On October 13, 1980, petitioner wrote a letter to MADE through its aforesaid manager, Chua, "to strongly request, if not demand to hold momentarily any payment or partial payment whatsoever due M/V Don Julio Ouano until Mr. Florentino Rafols makes good his commitment" to petitioner. On October 20, 1980, MADE, as shipper, paid Rafols the amount of P23,075.00 corresponding to the first installment of the freightage for the aforestated cargo of cement. The entire cargo was thereafter unloaded at General Santos City Port and delivered to the consignee, herein respondent SMCI, without any attempt on the part of either the captain of M/V Don Julio Ouano or the said sobre cargo of Rafols, or even of petitioner himself who was then in General Santos City Port, to hold and keep in deposit either the whole or part of the cement cargo to answer for freightage. Neither was there any demand made on any of the respondents for a bond to secure payment of the freightage, nor to assert in any manner the maritime lien for unpaid freight over the cargo by giving notice thereof to the consignee SMCI. The cement was sold in due course of trade by SMCI to its customers in October and November, 1980. On January 6, 1981, petitioner filed a complaint in the Regional Trial Court of Cebu against MADE, as shipper; SMC, as consignee; and Rafols, as charterer, seeking payment of P23,000.00 representing the freight charges for the cement cargo, aside from moral and exemplary damages in the sum of P150,000.00, attorney's fees and expenses of litigation. On March 10, 1981, MADE filed its answer, while Ang and Chua filed theirs on February 10 and May 31, 1982, respectively. Rafols was declared in default for failure to file his answer despite due service of summons.

On account of the subsequent dropping and impleading of parties defendant, the complaint underwent several amendments until the case was eventually tried on the third amended complaint, which alleged three causes of action against the aforenamed respondents as answering defendants therein. On May 25, 1985, the trial court rendered a decision in favor of petitioner, with the following disposition: "WHEREFORE, premises considered, this Court render(s) judgment 1) under plaintiff's first cause of action, ordering defendant MADE (Market Developers, Inc.), Julian O. Chua, Supreme Merchant Construction Supply, Inc., Johnny Ang otherwise known as Chua Pek Giok and defaulted defendant Florentino Rafols, Jr., jointly and severally, to pay to plaintiff Julius C. Ouano the sum of P23,075.00 corresponding to the first 50% freight installment on plaintiff's vessel `M/V Don Julio Ouano' included as part of the purchase price paid by defendant SMCSI to defendant MADE, plus legal interest from January 6, 1981 date of filing of the original complaint; 2) under the second cause of action, sentencing MADE (Market Developers), Julian O. Chua and Florentino Rafols, Jr., jointly and solidarily, to pay plaintiff P50,000.00 in concept, of moral and exemplary damages, and P5,000.00 attorney's fees; and 3) under the third cause of action, sentencing defendant Supreme Merchant Construction Supply, Inc. and Johnny Ang alias Chua Pek Giok, jointly and severally, to pay plaintiff P200,000.00 attorney's fees and expenses of litigation, P4,000.00, including P1,000.00 incurred by plaintiff for travel to General Santos City to coordinate with the plaintiff (sic) in serving an alias summons per sheriff's return of service (Exhibit `S'), with costs against all the defendants." 2 On appeal, respondent Court of Appeals reversed the aforesaid decision, holding as follows: "In the light of the foregoing, appellee Ouano has no cause of action against appellants MADE and SMCSI, but only against defendant Rafols. Their principals not being liable to appellee for the payment of the freightage in question, the agents, appellants Julian O. Chua and Johnny Ang alias Chua Pek Giok who had acted within the scope of their authority, would accordingly not be liable to appellee. "For the same reason that the defendants-appellants are not liable to pay the appellee the freightage in question, the award of moral and exemplary damages, attorney's fees and expenses of litigation in favor of appellee has no factual and legal basis. "WHEREFORE, premises, considered, the decision appealed from is reversed and set aside with respect to the defendants-appellants who are hereby absolved from the complaint. The decision is affirmed with respect to defendant Florentino Rafols." 3 Petitioner filed a motion for reconsideration which, as already stated, was denied by the Court of Appeals, 4 hence the present petition with the following assignment of errors: 1. The Honorable Court of Appeals erred in not holding respondents MADE and Chua liable for damages to petitioner for quasi-delict under Art. 2176, New Civil Code, let alone for inducement to violate contract under Art. 1314 thereof. 2. The Court of Appeals erred in not holding respondents MADE and Chua liable for all damages which are the natural and probable consequences of their act or omission, the term `all damages' being broad enough to embrace the P150,000.00 moral and exemplary damages claimed by petitioner, as well as P10,000.00 attorney's fees likewise claimed by him (Art. 2202, N.C.C.). 3. The Court of Appeals erred in not holding respondents MADE and Chua liable jointly and solidarily (Art. 2194, N.C.C.) for the foregoing damages and attorney's fee, as well as actual damages of P23,075.00 representing unpaid freight on petitioner's vessel. 4. The Court of Appeals erred in not holding that in contracts and quasi-delicts the defendants shall be liable for all damages which are the natural and probable consequences of the act or omission complained of, more so if attended with fraud, bad faith, malice or wanton attitude (Arts. 2201 and 2202, N.C.C.). 5. The Court, of Appeals erred in not holding, in accord with the settled doctrine in Overseas Factors, Inc. vs. South Sea Shipping, 4 SCRA 401, that where freight is included in the purchase price, the carrier's lien exists if freight was not paid, hence, the continued liability of respondents MADE and Chua and respondents Supreme Merchant Construction Supply, Inc. and Chua Pek Giok. 5 We find no merit in this petition. Preliminarily, the thesis of petitioner that the aforestated fixture note executed by Rafols and MADE was in derogation of the prohibition against the subletting or sub-chartering of the vessel has been duly confuted by respondent court. It pointed out that Rafols did not, by entering into said contract of transportation of the cement cargo, thereby sublease the vessel. The possession, operation, and management of the vessel was not transferred to MADE but remained with Rafols as the lessee or charterer. Rafols, as such lessee, was the one who bound himself to transport, as he did transport, the cargo of cement for a fixed price. 6 On the other hand, even indulging petitioner in his argument that there was a sublease or sub-charter by reason of that one particular cargo of MADE, still no right of recovery exists in his favor against any of the private respondents, except respondent Rafols, as we shall hereunder demonstrate. It is a basic principle in civil law that, with certain exceptions not obtaining in this case, a contract can only bind the parties who had entered into it or their successors who assumed their personalities or their juridical positions, and that, as a consequence, such contract can neither favor nor prejudice a third person. 7 It is undisputed that the charter contract was entered into only by and between petitioner and respondent Rafols, and the other private respondents were neither parties thereto nor were they aware of the provisions thereof. The aforesaid allegations of petitioner that Rafols violated the prohibition in the contract against the sublease or sub-charter of the vessel without his knowledge and written consent, even if true, does not give rise to a cause of action against the supposed sublessee or sub-charterer. The act of the charterer in sub-chartering the vessel, in spite of a categorical prohibition may be a violation of the contract, but the owner's right of recourse is against the original charterer, either for rescission or fulfillment, with the payment of damages in either case. 8 The obligation of contracts is limited to the parties making them and, ordinarily, only those who are parties to contracts are liable for their breach. Parties to a contract cannot thereby impose any liability on one who, under its terms, is a stranger to the contract, and, in any event, in order to bind a third person contractually, an expression of agent by such person is necessary. 9 We likewise reject the contention of petitioner that MADE and Chua should be held liable for damages for a quasi-delict under Article 176 of the Civil Code for having failed to obtain his consent before entering into an agreement with Rafols, and under Article 1314 of the same Code for inducing Rafols to violate the charter party. The obligation to obtain the written consent of petitioner before subleasing or sub-chartering the vessel was on Rafols and not on MADE, hence the latter cannot be held liable for the supposed non-compliance therewith.

Moreover, we cannot conceive of how MADE and Chua could be guilty of inducing Rafols to violate the original charter party. Firstly, there is no evidence on record to show that said respondents had knowledge of the prohibition imposed in the original charter party to sublease or sub-charter the vessel. Secondly, at the time the fixture note was entered into between Rafols and MADE, a written authorization signed by the wife of petitioner in his behalf, authorizing Rafols to execute contracts, negotiate for cargoes and receive freight payments, 10 was shown by the former to the latter. Although the said authorization may have been made by the wife, the same, however, can evidently be proof of good faith on the part of MADE and Chua who merely relied thereon. Thirdly, as stated in the fixture note, the agreement between Rafols and MADE was for the former to transport the cement of the latter using either the "M/V Don Julio Ouano or substitute vessel at his discretion." 11 Hence, the decision to use the M/V Don Julio Ouano in transporting the cargo of MADE was solely that of Rafols. Also, herein petitioner is deemed to have ratified the supposed sub-charter contract entered into by MADE and Rafols when he demanded the payment of the second freight installment as provided in the agreement and, later, received the same by virtue of the decision of the Court of First Instance of Cebu in Civil Case No. R-19845, an interpleader case filed by MADE. 12 Contrary to petitioner's contestation, the act of MADE in paying the first freight installment to Rafols is not an indication of bad faith or malice. Article 1240 of the Civil Code provides that "(p)ayment shall be made to the person in whose favor the obligation has been constituted, or his successor in interest, or any person authorized to receive it." Consequently, MADE, under the fixture note, was under obligation to pay the freight to Rafols. Now, even on petitioner's theory that there was a sublease, it must be stressed that in a sublease arrangement, the basic principles of which are applicable in the present case, there are two distinct leases involved, that is, the principal lease and the sublease. There are two juridical relationships which co-exist and are intimately related to each other, but which are nonetheless distinct one from the other. In such arrangement, the personality of the lessee qua lessee does not disappear; his rights and obligations vis-a-vis the lessor are not passed on to nor acquired by the sublessee. The lessor is. in the main and except only in the instances specified in the Civil Code, a stranger to the relationship between the lessee-sublessor and the sublessee. The lessee-sublessor is not an agent of the lessor nor is the lessor an agent of the lessee-sublessor. The sublessee has no right or authority to pay the sublease rentals to the lessor, said rentals being due and parable to the lessee-sublessor. 13 MADE was, therefore, under no obligation to pay petitioner since the freightage was payable to Rafols. Although it is provided in Article 1652 of the Civil Code that the sublessee is subsidiarily liable to the lessor for any rent due from the lessee, the sublessee shall not be responsible beyond the amount of rent due from him, in accordance with the terms of the sublease, at the time of the extrajudicial demand by the lessor. However, in the case at bar, petitioner made no demand for payment from MADE. His letter dated October 13, 1980 was only a request to hold momentarily any payment due for the use of M/V Don Julio Ouano until respondent Rafols had made good his obligations to him. In the absence of any positive action on the part of petitioner, MADE could not withhold the payment of the freight to Rafols. As stated in the fixture note, the first freight installment was due and payable upon arrival of the assigned vessel at the port of loading. The goods were loaded in the vessel on or before October 9, 1980, 14 hence on that date the first freight installment was already due and demandable. To further withhold the payment of said installment would constitute a breach of MADE's obligation under the foregoing contract. In addition, it is also worth noting that, as alleged in paragraph 6 of petitioner's basic complaint filed in the court below, payments were actually made after October 13, 1980 by Rafols to petitioner, to wit: (a) two checks in the total amount of P30,000.00 dated October 13 and 21, 1980, respectively; and (b) a third postdated check for P32,000.00 issued on November 9, 1980. 15 The fact that the said checks bounced for insufficient funds cannot in any way be ascribable to MADE nor can it create or affect any liability which petitioner seeks to impute to respondents MADE, SMCSI and their agents. Anent the issue on maritime lien on the cargo,. it is the theory of petitioner that the first freight installment having remained unpaid to him as owner of M/V Don Julio Ouano, the maritime lien on the cargo subsists. The said contention is specious and untenable. Herein petitioner, as owner of the vessel, has no lien on the cargo. A charter party may, among other classifications, be of two kinds: One is where the owner agrees to carry a cargo which the charterer agrees to provide, and the second is where there is an entire surrender by the owner of the vessel to the charterer, who hires the vessel as one hires a house, takes her empty, and provides the officers and provisions, and, in short, the entire outfit. In such a contract, the charterer is substituted in place of the owner and becomes the owner for the voyage. 16 This second type is also known as a bareboat charter or otherwise referred to as a demise of the vessel. 17 In a charter party of the second kind, not only the entire capacity of the ship is let but the ship itself, and the possession is passed to the charterer. The entire control and management of it is given up to him. The general owner loses his lien for freight, but the lien itself is not destroyed, the charterer is substituted in his place, in whose favor the lien continues to exist when goods are taken on freight. The general owner, however, has no remedy for the charter of his vessel but his personal action on the covenants of the charter party. It is a contract in which he trusts in the personal credit of the charterer. 18 Therefore, where the charter constitutes a demise of the ship and the charterer is the owner for the voyage, and that is the kind of charter party involved in the instant case, the general owner has no lien on the cargo for the hire of the vessel, in the absence of an express provision therefor 19 as in the case at bar. Moreover, even on the assumption that petitioner had a lien on the cargo for unpaid freight, the same was deemed waived when the goods were unconditionally released to the consignee at the port of destination. A carrier has such a lien only while it retains possession of the goods, so that delivery of the goods to the consignee or a third person terminates, or constitutes a waiver of, the lien. 20 The lien of a carrier for the payment of freight charges is nothing more than the right to withhold the goods, and is inseparably associated with its possession and dependent upon it. 21 The shipowner's lien for freight is not in the nature of a hypothecation which will remain a charge upon the goods after he has parted with possession, but is simply the right to retain them until the freight is paid, and is therefore lost by an unconditional delivery of the goods to the consignee. 22

Furthermore, under Article 667 of the Code of Commerce, the period during which the lien shall subsist is twenty (20) days. Parenthetically, this has been modified by the Civil Code, Article 2241 whereof provides that credits for transportation of the goods carried, for the price of the contract and incidental expenses shall constitute a preferred claim or lien on the goods carried until their delivery and for thirty (30) days thereafter. During this period, the sale of the goods may be requested, even though there are other creditors and even if the shipper or consignee is insolvent. But, this right may not be made use of where the goods have been delivered and were turned over to a third person without malice on the part of the third person and for a valuable consideration. In the present case, the cargo of cement was unloaded from the vessel and delivered to the consignee on October 23, 1980, without any oral or written notice or demand having been made on SMCSI for unpaid freight on the cargo. Consequently, after the lapse of thirty (30) days from the date of delivery, the cargo of cement had been released from any maritime lien for unpaid freight. Petitioner's invocation of Overseas Factors, Inc., et al. vs. South Sea Shipping Co., et al., 23 therefore, is ineffectual and unavailing. In said case, the cargo was still in the possession of the carrier whose officers and crew refused to unload the same unless the balance of the freight was paid. In this case before us, the cargo had already been unconditionally delivered to the consignee SMCI without protest. WHEREFORE, the petition is DENIED and the assailed judgment of respondent Court of Appeals is hereby AFFIRMED. SO ORDERED. Narvasa, C .J ., Padilla and Nocon, JJ ., concur.