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G.R. No. 171468               August 24, 2011NEW WORLD INTERNATIONAL DEVELOPMENT (PHILS.), INC., Petitioner, vs.NYK-FILJAPAN SHIPPING CORP., LEP PROFIT INTERNATIONAL, INC. (ORD), LEP INTERNATIONAL PHILIPPINES, INC., DMT CORP., ADVATECH INDUSTRIES, INC., MARINA PORT SERVICES, INC., SERBROS CARRIER CORPORATION, and SEABOARD-EASTERN INSURANCE CO., INC., Respondents.x - - - - - - - - - - - - - - - - - - - - - - -xG.R. No. 174241NEW WORLD INTERNATIONAL DEVELOPMENT (PHILS.), INC., Petitioner, vs.SEABOARD-EASTERN INSURANCE CO., INC., Respondent.

D E C I S I O NABAD, J.:These consolidated petitions involve a cargo owner’s right to recover damages from the loss of insured goods under the Carriage of Goods by Sea Act and the Insurance Code.

The Facts and the CasePetitioner New World International Development (Phils.), Inc. (New World) bought from DMT Corporation (DMT) through its agent, Advatech Industries, Inc. (Advatech) three emergency generator sets worth US$721,500.00.DMT shipped the generator sets by truck from Wisconsin, United States, to LEP Profit International, Inc. (LEP Profit) in Chicago, Illinois. From there, the shipment went by train to Oakland, California, where it was loaded on S/S California Luna V59, owned and operated by NYK Fil-Japan Shipping Corporation (NYK) for delivery to petitioner New World in Manila. NYK issued a bill of lading, declaring that it received the goods in good condition.NYK unloaded the shipment in Hong Kong and transshipped it to S/S ACX Ruby V/72 that it also owned and operated. On its journey to Manila, however, ACX Ruby encountered typhoon Kadiang whose captain filed a sea protest on arrival at the Manila South Harbor on October 5, 1993 respecting the loss and damage that the goods on board his vessel suffered.Marina Port Services, Inc. (Marina), the Manila South Harbor arrastre or cargo-handling operator, received the shipment on October 7, 1993. Upon inspection of the three container vans separately carrying the generator sets, two vans bore signs of external damage while the third van appeared unscathed. The shipment remained at Pier 3’s Container Yard under Marina’s care pending clearance from the Bureau of Customs. Eventually, on October 20, 1993 customs authorities allowed petitioner’s customs broker, Serbros Carrier Corporation

(Serbros), to withdraw the shipment and deliver the same to petitioner New World’s job site in Makati City.An examination of the three generator sets in the presence of petitioner New World’s representatives, Federal Builders (the project contractor) and surveyors of petitioner New World’s insurer, Seaboard–Eastern Insurance Company (Seaboard), revealed that all three sets suffered extensive damage and could no longer be repaired. For these reasons, New World demanded recompense for its loss from respondents NYK, DMT, Advatech, LEP Profit, LEP International Philippines, Inc. (LEP), Marina, and Serbros. While LEP and NYK acknowledged receipt of the demand, both denied liability for the loss.Since Seaboard covered the goods with a marine insurance policy, petitioner New World sent it a formal claim dated November 16, 1993. Replying on February 14, 1994, Seaboard required petitioner New World to submit to it an itemized list of the damaged units, parts, and accessories, with corresponding values, for the processing of the claim. But petitioner New World did not submit what was required of it, insisting that the insurance policy did not include the submission of such a list in connection with an insurance claim. Reacting to this, Seaboard refused to process the claim.On October 11, 1994 petitioner New World filed an action for specific performance and damages against all the respondents before the Regional Trial Court (RTC) of Makati City, Branch 62, in Civil Case 94-2770.On August 16, 2001 the RTC rendered a decision absolving the various respondents from liability with the exception of NYK. The RTC found that the generator sets were damaged during transit while in the care of NYK’s vessel, ACX Ruby. The latter failed, according to the RTC, to exercise the degree of diligence required of it in the face of a foretold raging typhoon in its path.The RTC ruled, however, that petitioner New World filed its claim against the vessel owner NYK beyond the one year provided under the Carriage of Goods by Sea Act (COGSA). New World filed its complaint on October 11, 1994 when the deadline for filing the action (on or before October 7, 1994) had already lapsed. The RTC held that the one-year period should be counted from the date the goods were delivered to the arrastre operator and not from the date they were delivered to petitioner’s job site.1

As regards petitioner New World’s claim against Seaboard, its insurer, the RTC held that the latter cannot be faulted for denying the claim against it since New World refused to submit the itemized list that Seaboard needed for assessing the damage to the shipment. Likewise, the belated filing of the complaint prejudiced Seaboard’s right to pursue a claim against NYK in the event of subrogation.On appeal, the Court of Appeals (CA) rendered judgment on January 31, 2006,2 affirming the RTC’s rulings except with respect to Seaboard’s liability. The

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CA held that petitioner New World can still recoup its loss from Seaboard’s marine insurance policy, considering a) that the submission of the itemized listing is an unreasonable imposition and b) that the one-year prescriptive period under the COGSA did not affect New World’s right under the insurance policy since it was the Insurance Code that governed the relation between the insurer and the insured.Although petitioner New World promptly filed a petition for review of the CA decision before the Court in G.R. 171468, Seaboard chose to file a motion for reconsideration of that decision. On August 17, 2006 the CA rendered an amended decision, reversing itself as regards the claim against Seaboard. The CA held that the submission of the itemized listing was a reasonable requirement that Seaboard asked of New World. Further, the CA held that the one-year prescriptive period for maritime claims applied to Seaboard, as insurer and subrogee of New World’s right against the vessel owner. New World’s failure to comply promptly with what was required of it prejudiced such right.Instead of filing a motion for reconsideration, petitioner instituted a second petition for review before the Court in G.R. 174241, assailing the CA’s amended decision.

The Issues PresentedThe issues presented in this case are as follows:a) In G.R. 171468, whether or not the CA erred in affirming the RTC’s release from liability of respondents DMT, Advatech, LEP, LEP Profit, Marina, and Serbros who were at one time or another involved in handling the shipment; andb) In G.R. 174241, 1) whether or not the CA erred in ruling that Seaboard’s request from petitioner New World for an itemized list is a reasonable imposition and did not violate the insurance contract between them; and 2) whether or not the CA erred in failing to rule that the one-year COGSA prescriptive period for marine claims does not apply to petitioner New World’s prosecution of its claim against Seaboard, its insurer.

The Court’s RulingsIn G.R. 171468 --Petitioner New World asserts that the roles of respondents DMT, Advatech, LEP, LEP Profit, Marina and Serbros in handling and transporting its shipment from Wisconsin to Manila collectively resulted in the damage to the same, rendering such respondents solidarily liable with NYK, the vessel owner.But the issue regarding which of the parties to a dispute incurred negligence is factual and is not a proper subject of a petition for review on certiorari. And petitioner New World has been unable to make out an exception to this rule.3 Consequently, the Court will not disturb the finding of the RTC, affirmed by the CA, that the generator sets were totally damaged during the typhoon which beset the vessel’s voyage from Hong Kong to Manila and that it was her negligence in

continuing with that journey despite the adverse condition which caused petitioner New World’s loss.That the loss was occasioned by a typhoon, an exempting cause under Article 1734 of the Civil Code, does not automatically relieve the common carrier of liability. The latter had the burden of proving that the typhoon was the proximate and only cause of loss and that it exercised due diligence to prevent or minimize such loss before, during, and after the disastrous typhoon.4 As found by the RTC and the CA, NYK failed to discharge this burden.In G.R. 174241 --One. The Court does not regard as substantial the question of reasonableness of Seaboard’s additional requirement of an itemized listing of the damage that the generator sets suffered. The record shows that petitioner New World complied with the documentary requirements evidencing damage to its generator sets.The marine open policy that Seaboard issued to New World was an all-risk policy. Such a policy insured against all causes of conceivable loss or damage except when otherwise excluded or when the loss or damage was due to fraud or intentional misconduct committed by the insured. The policy covered all losses during the voyage whether or not arising from a marine peril.5

Here, the policy enumerated certain exceptions like unsuitable packaging, inherent vice, delay in voyage, or vessels unseaworthiness, among others.6 But Seaboard had been unable to show that petitioner New World’s loss or damage fell within some or one of the enumerated exceptions.What is more, Seaboard had been unable to explain how it could not verify the damage that New World’s goods suffered going by the documents that it already submitted, namely, (1) copy of the Supplier’s Invoice KL2504; (2) copy of the Packing List; (3) copy of the Bill of Lading 01130E93004458; (4) the Delivery of Waybill Receipts 1135, 1222, and 1224; (5) original copy of Marine Insurance Policy MA-HO-000266; (6) copies of Damage Report from Supplier and Insurance Adjusters; (7) Consumption Report from the Customs Examiner; and (8) Copies of Received Formal Claim from the following: a) LEP International Philippines, Inc.; b) Marina Port Services, Inc.; and c) Serbros Carrier Corporation.7 Notably, Seaboard’s own marine surveyor attended the inspection of the generator sets.Seaboard cannot pretend that the above documents are inadequate since they were precisely the documents listed in its insurance policy.8 Being a contract of adhesion, an insurance policy is construed strongly against the insurer who prepared it. The Court cannot read a requirement in the policy that was not there.Further, it appears from the exchanges of communications between Seaboard and Advatech that submission of the requested itemized listing was incumbent on the latter as the seller DMT’s local agent.

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Petitioner New World should not be made to suffer for Advatech’s shortcomings.Two. Regarding prescription of claims, Section 3(6) of the COGSA provides that the carrier and the ship shall be discharged from all liability in case of loss or damage unless the suit is brought within one year after delivery of the goods or the date when the goods should have been delivered.But whose fault was it that the suit against NYK, the common carrier, was not brought to court on time? The last day for filing such a suit fell on October 7, 1994. The record shows that petitioner New World filed its formal claim for its loss with Seaboard, its insurer, a remedy it had the right to take, as early as November 16, 1993 or about 11 months before the suit against NYK would have fallen due.In the ordinary course, if Seaboard had processed that claim and paid the same, Seaboard would have been subrogated to petitioner New World’s right to recover from NYK. And it could have then filed the suit as a subrogee. But, as discussed above, Seaboard made an unreasonable demand on February 14, 1994 for an itemized list of the damaged units, parts, and accessories, with corresponding values when it appeared settled that New World’s loss was total and when the insurance policy did not require the production of such a list in the event of a claim.Besides, when petitioner New World declined to comply with the demand for the list, Seaboard against whom a formal claim was pending should not have remained obstinate in refusing to process that claim. It should have examined the same, found it unsubstantiated by documents if that were the case, and formally rejected it. That would have at least given petitioner New World a clear signal that it needed to promptly file its suit directly against NYK and the others. Ultimately, the fault for the delayed court suit could be brought to Seaboard’s doorstep.Section 241 of the Insurance Code provides that no insurance company doing business in the Philippines shall refuse without just cause to pay or settle claims arising under coverages provided by its policies. And, under Section 243, the insurer has 30 days after proof of loss is received and ascertainment of the loss or damage within which to pay the claim. If such ascertainment is not had within 60 days from receipt of evidence of loss, the insurer has 90 days to pay or settle the claim. And, in case the insurer refuses or fails to pay within the prescribed time, the insured shall be entitled to interest on the proceeds of the policy for the duration of delay at the rate of twice the ceiling prescribed by the Monetary Board.Notably, Seaboard already incurred delay when it failed to settle petitioner New World’s claim as Section 243 required. Under Section 244, a prima facie evidence of unreasonable delay in payment of the claim is created

by the failure of the insurer to pay the claim within the time fixed in Section 243.Consequently, Seaboard should pay interest on the proceeds of the policy for the duration of the delay until the claim is fully satisfied at the rate of twice the ceiling prescribed by the Monetary Board. The term "ceiling prescribed by the Monetary Board" means the legal rate of interest of 12% per annum provided in Central Bank Circular 416, pursuant to Presidential Decree 116.9 Section 244 of the Insurance Code also provides for an award of attorney’s fees and other expenses incurred by the assured due to the unreasonable withholding of payment of his claim.In Prudential Guarantee and Assurance, Inc. v. Trans-Asia Shipping Lines, Inc.,10 the Court regarded as proper an award of 10% of the insurance proceeds as attorney’s fees. Such amount is fair considering the length of time that has passed in prosecuting the claim.11 Pursuant to the Court’s ruling in Eastern Shipping Lines, Inc. v. Court of Appeals,12 a 12% interest per annum from the finality of judgment until full satisfaction of the claim should likewise be imposed, the interim period equivalent to a forbearance of credit.1avvphi1Petitioner New World is entitled to the value stated in the policy which is commensurate to the value of the three emergency generator sets or US$721,500.00 with double interest plus attorney’s fees as discussed above.WHEREFORE, the Court DENIES the petition in G.R. 171468 and AFFIRMS the Court of Appeals decision of January 31, 2006 insofar as petitioner New World International Development (Phils.), Inc. is not allowed to recover against respondents DMT Corporation, Advatech Industries, Inc., LEP International Philippines, Inc., LEP Profit International, Inc., Marina Port Services, Inc. and Serbros Carrier Corporation.With respect to G.R. 174241, the Court GRANTS the petition and REVERSES and SETS ASIDE the Court of Appeals Amended Decision of August 17, 2006. The Court DIRECTS Seaboard-Eastern Insurance Company, Inc. to pay petitioner New World International Development (Phils.), Inc. US$721,500.00 under Policy MA-HO-000266, with 24% interest per annum for the duration of delay in accordance with Sections 243 and 244 of the Insurance Code and attorney’s fees equivalent to 10% of the insurance proceeds. Seaboard shall also pay, from finality of judgment, a 12% interest per annum on the total amount due to petitioner until its full satisfaction.SO ORDERED.G.R. No. 95536 March 23, 1992ANICETO G. SALUDO, JR., MARIA SALVACION SALUDO, LEOPOLDO G. SALUDO and SATURNINO G. SALUDO, petitioners, vs.HON. COURT OF APPEALS, TRANS WORLD

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AIRLINES, INC., and PHILIPPINE AIRLINES, INC., respondents. REGALADO, J.:Assailed in this petition for review on certiorari is the decision in CA-G.R. CV No. 20951 of respondent Court of Appeals 1 which affirmed the decision of the trial court 2 dismissing for lack of evidence herein petitioners' complaint in Civil Case No R-2101 of the then Court of First Instance of Southern Leyte, Branch I.The facts, as recounted by the court a quo and adopted by respondent court after "considering the evidence on record," are as follows:After the death of plaintiffs' mother, Crispina Galdo Saludo, in Chicago Illinois, (on) October 23, 1976 (Exh. A), Pomierski and Son Funeral Home of Chicago, made the necessary preparations and arrangements for the shipment, of the remains from Chicago to the Philippines. The funeral home had the remains embalmed (Exb. D) and secured a permit for the disposition of dead human body on October 25, 1976 (Exh. C), Philippine Vice Consul in Chicago, Illinois, Bienvenido M. Llaneta, at 3:00 p.m. on October 26, 1976 at the Pomierski & Son Funeral Home, sealed the shipping case containing a hermetically sealed casket that is airtight and waterproof wherein was contained the remains of Crispina Saludo Galdo (sic) (Exb. B). On the same date, October 26, 1976, Pomierski brought the remains to C.M.A.S. (Continental Mortuary Air Services) at the airport (Chicago) which made the necessary arrangements such as flights, transfers, etc.; C.M.A.S. is a national service used by undertakers to throughout the nation (U.S.A.), they furnish the air pouch which the casket is enclosed in, and they see that the remains are taken to the proper air freight terminal (Exh. 6-TWA). C.M.A.S. booked the shipment with PAL thru the carrier's agent Air Care International, with Pomierski F.H. as the shipper and Mario (Maria) Saludo as the consignee. PAL Airway Bill No. 079-01180454 Ordinary was issued wherein the requested routing was from Chicago to San Francisco on board TWA Flight 131 of October 27, 1976 and from San Francisco to Manila on board PAL Flight No. 107 of the same date, and from Manila to Cebu on board PAL Flight 149 of October 29, 1976 (See Exh. E., Also Exh. 1-PAL).In the meantime, plaintiffs Maria Salvacion Saludo and Saturnino Saludo, thru a travel agent, were booked with United Airlines from Chicago to California, and with PAL from California to Manila. She then went to the funeral director of Pomierski Funeral Home who had her mother's remains and she told the director that they were booked with United Airlines. But the director told her that the remains were booked with TWA flight to California. This upset her, and she and her brother had to change reservations from UA to the TWA flight after she confirmed by phone that her mother's remains should be on that TWA flight. They went to the airport

and watched from the look-out area. She saw no body being brought. So, she went to the TWA counter again, and she was told there was no body on that flight. Reluctantly, they took the TWA flight upon assurance of her cousin, Ani Bantug, that he would look into the matter and inform her about it on the plane or have it radioed to her. But no confirmation from her cousin reached her that her mother was on the West Coast.Upon arrival at San Francisco at about 5:00 p.m., she went to the TWA counter there to inquire about her mother's remains. She was told they did not know anything about it.She then called Pomierski that her mother's remains were not at the West Coast terminal, and Pomierski immediately called C.M.A.S., which in a matter of 10 minutes informed him that the remains were on a plane to Mexico City, that there were two bodies at the terminal, and somehow they were switched; he relayed this information to Miss Saludo in California; later C.M.A.S. called and told him they were sending the remains back to California via Texas (see Exh. 6-TWA).It-turned out that TWA had carried a shipment under PAL Airway Bill No. 079-ORD-01180454 on TWA Flight 603 of October 27, 1976, a flight earlier than TWA Flight 131 of the same date. TWA delivered or transferred the said shipment said to contain human remains to PAL at 1400H or 2:00 p.m. of the same date, October 27, 1976 (Bee Exh. 1- TWA). "Due to a switch(ing) in Chicago", this shipment was withdrawn from PAL by CMAS at 1805H (or 6:05 p.m.) of the same date, October 27 (Exh. 3-PAL, see Exh. 3-a-PAL).What transpired at the Chicago (A)irport is explained in a memo or incident report by Pomierski (Exh. 6-TWA) to Pomierski's lawyers who in turn referred to said' memo and enclosed it in their (Pomierski's lawyers) answer dated July 18, 1981 to herein plaintiff's counsel (See Exh. 5-TWA). In that memo or incident report (Exh. 6-TWA), it is stated that the remains (of Crispina Saludo) were taken to CMAS at the airport; that there were two bodies at the (Chicago Airport) terminal, and somehow they were switched, that the remains (of Crispina Saludo) were on a plane to Mexico City; that CMAS is a national service used by undertakers throughout the nation (U.S.A.), makes all the necessary arrangements, such as flights, transfers, etc., and see(s) to it that the remains are taken to the proper air freight terminal.The following day October 28, 1976, the shipment or remains of Crispina Saludo arrived (in) San Francisco from Mexico on board American Airlines. This shipment was transferred to or received by PAL at 1945H or 7:45 p.m. (Exh. 2-PAL, Exh. 2-a-PAL). This casket bearing the remains of Crispina Saludo, which was mistakenly sent to Mexico and was opened (there), was resealed by Crispin F. Patagas for shipment to the Philippines (See Exh. B-1). The shipment was immediately loaded on PAL flight for Manila that same evening and arrived

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(in) Manila on October 30, 1976, a day after its expected arrival on October 29, 1976. 3

In a letter dated December 15, 1976, 4 petitioners' counsel informed private respondent Trans World Airlines (TWA) of the misshipment and eventual delay in the delivery of the cargo containing the remains of the late Crispin Saludo, and of the discourtesy of its employees to petitioners Maria Salvacion Saludo and Saturnino Saludo. In a separate letter on June 10, 1977 addressed to co-respondent Philippine Airlines (PAL), 5 petitioners stated that they were holding PAL liable for said delay in delivery and would commence judicial action should no favorable explanation be given.Both private respondents denied liability. Thus, a damage suit 6 was filed by petitioners before the then Court of First Instance, Branch III, Leyte, praying for the award of actual damages of P50,000.00, moral damages of P1,000,000.00, exemplary damages, attorney's fees and costs of suit.As earlier stated, the court below absolved the two respondent airlines companies of liability. The Court of Appeals affirmed the decision of the lower court in toto, and in a subsequent resolution, 7 denied herein petitioners' motion for reconsideration for lack of merit.In predictable disagreement and dissatisfaction with the conclusions reached by respondent appellate court, petitioners now urge this Court to review the appealed decision and to resolve whether or not (1) the delay in the delivery of the casketed remains of petitioners' mother was due to the fault of respondent airline companies, (2) the one-day delay in the delivery of the same constitutes contractual breach as would entitle petitioners to damages, (3) damages are recoverable by petitioners for the humiliating, arrogant and indifferent acts of the employees of TWA and PAL, and (4) private respondents should be held liable for actual, moral and exemplary damages, aside from attorney's fees and litigation expenses. 8

At the outset and in view of the spirited exchanges of the parties on this aspect, it is to be stressed that only questions of law may be raised in a petition filed in this Court to review on certiorari the decision of the Court of Appeals. 9 This being so, the factual findings of the Court of Appeals are final and conclusive and cannot be reviewed by the Supreme Court. The rule, however, admits of established exceptions, to wit: (a) where there is grave abuse of discretion; (b) when the finding is grounded entirely on speculations, surmises or conjectures;(c) when the inference made is manifestly-mistaken, absurd or impossible; (d) when the judgment of the Court of Appeals was based on a misapprehension of facts; (e) when the factual findings are conflicting; (f) when the Court of Appeals, in making its findings, went beyond the issues of the case and the same are contrary to the admissions of both appellant and appellee; 10 (g) when the Court of Appeals manifestly overlooked certain relevant facts not disputed

by the parties and which, if properly considered, would justify a different conclusion; 11and (h) where the findings of fact of the Court of Appeals are contrary to those of the trial court, or are mere conclusions without citation of specific evidence, or where the facts of set forth by the petitioner are not disputed by the respondent, or where the findings of fact of the Court of Appeals are premised on the absence of evidence and are contradicted by the evidence on record. 12

To distinguish, a question of law is one which involves a doubt or controversy on what the law is on a certain state of facts; and, a question of fact, contrarily, is one in which there is a doubt or difference as to the truth or falsehood of the alleged facts. 13 One test, it has been held, is whether the appellate court can determine the issue raised without reviewing or evaluating the evidence, in which case it is a question of law, otherwise it will be a question of fact. 14

Respondent airline companies object to the present recourse of petitioners on the ground that this petition raises only factual questions. 15 Petitioners maintain otherwise or, alternatively, they are of the position that, assuming that the petition raises factual questions, the same are within the recognized exceptions to the general rule as would render the petition cognizable and worthy of review by the Court. 16

Since it is precisely the soundness of the inferences or conclusions that may be drawn from the factual issues which are here being assayed, we find that the issues raised in the instant petition indeed warrant a second look if this litigation is to come to a reasonable denouement. A discussion seriatim of said issues will further reveal that the sequence of the events involved is in effect disputed. Likewise to be settled is whether or not the conclusions of the Court of Appeals subject of this review indeed find evidentiary and legal support.I. Petitioners fault respondent court for "not finding that private respondents failed to exercise extraordinary diligence required by law which resulted in the switching and/or misdelivery of the remains of Crispina Saludo to Mexico causing gross delay in its shipment to the Philippines, and consequently, damages to petitioners." 17

Petitioner allege that private respondents received the casketed remains of petitioners' mother on October 26, 1976, as evidenced by the issuance of PAL Air Waybill No. 079-01180454 18 by Air Care International as carrier's agent; and from said date, private respondents were charged with the responsibility to exercise extraordinary diligence so much so that for the alleged switching of the caskets on October 27, 1976, or one day after private respondents received the cargo, the latter must necessarily be liable.To support their assertion, petitioners rely on the jurisprudential dictum, both under American and Philippine law, that "(t)he issuance of a bill of lading carries the presumption that the goods were delivered

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to the carrier issuing the bill, for immediate shipment, and it is nowhere questioned that a bill of lading is prima facie evidence of the receipt of the goods by the carrier. . . . In the absence of convincing testimony establishing mistake, recitals in the bill of lading showing that the carrier received the goods for shipment on a specified date control (13 C.J.S. 235)."19

A bill of lading is a written acknowledgment of the receipt of the goods and an agreement to transport and deliver them at a specified place to a person named or on his order. Such instrument may be called a shipping receipt, forwarder's receipt and receipt for transportation. 20 The designation, however, is immaterial. It has been hold that freight tickets for bus companies as well as receipts for cargo transported by all forms of transportation, whether by sea or land, fall within the definition. Under the Tariff and Customs Code, a bill of lading includes airway bills of lading. 21 The two-fold character of a bill of lading is all too familiar; it is a receipt as to the quantity and description of the goods shipped and a contract to transport the goods to the consignee or other person therein designated, on the terms specified in such instrument. 22

Logically, since a bill of lading acknowledges receipt of goods to be transported, delivery of the goods to the carrier normally precedes the issuance of the bill; or, to some extent, delivery of the goods and issuance of the bill are regarded in commercial practice as simultaneous acts. 23 However, except as may be prohibited by law, there is nothing to prevent an inverse order of events, that is, the execution of the bill of lading even prior to actual possession and control by the carrier of the cargo to be transported. There is no law which requires that the delivery of the goods for carriage and the issuance of the covering bill of lading must coincide in point of time or, for that matter, that the former should precede the latter.Ordinarily, a receipt is not essential to a complete delivery of goods to the carrier for transportation but, when issued, is competent and prima facie, but not conclusive, evidence of delivery to the carrier. A bill of lading, when properly executed and delivered to a shipper, is evidence that the carrier has received the goods described therein for shipment. Except as modified by statute, it is a general rule as to the parties to a contract of carriage of goods in connection with which a bill of lading is issued reciting that goods have been received for transportation, that the recital being in essence a receipt alone, is not conclusive, but may be explained, varied or contradicted by parol or other evidence. 24

While we agree with petitioners' statement that "an airway bill estops the carrier from denying receipt of goods of the quantity and quality described in the bill," a further reading and a more faithful quotation of the authority cited would reveal that "(a) bill of lading may

contain constituent elements of estoppel and thus become something more than a contract between the shipper and the carrier. . . . (However), as between the shipper and the carrier, when no goods have been delivered for shipment no recitals in the bill can estop the carrier from showing the true facts . . . Between the consignor of goods and receiving carrier, recitals in a bill of lading as to the goods shipped raise only a rebuttable presumption that such goods were delivered for shipment. As between the consignor and a receiving carrier, the fact must outweigh the recital." 25 (Emphasis supplied)For this reason, we must perforce allow explanation by private respondents why, despite the issuance of the airway bill and the date thereof, they deny having received the remains of Crispina Saludo on October 26, 1976 as alleged by petitioners.The findings of the trial court, as favorably adopted by the Court of Appeals and which we have earner quoted, provide us with the explanation that sufficiently over comes the presumption relied on by petitioners in insisting that the remains of their mother were delivered to and received by private respondents on October 26, 1976. Thus —. . . Philippine Vice Consul in Chicago, Illinois, Bienvenido M. Llaneta, at 3:00 p.m. on October 26, 1976 at the Pomierski & Son Funeral Home, sealed the shipping case containing a hermetically sealed casket that is airtight and waterproof wherein was contained the remains of Crispina Saludo Galdo (sic) (Exh. B). On the same date October 26, 1976, Pomierski brought the remains to C.M.A.S. (Continental Mortuary Air Services) at the airport (Chicago) which made the necessary arrangements such as flights, transfers, etc; C.M.A.S. is a national service used by undertakers throughout the nation (U.S.A.), they furnish the air pouch which the casket is enclosed in, and they see that the remains are taken to the proper air freight terminal (Exh. G-TWA). C.M.A.S. booked the shipment with PAL thru the carrier's agent Air Care International, with Pomierski F.H. as the shipper and Mario (Maria) Saludo as the consignee. PAL Airway Bill No. 079- 01180454 Ordinary was issued wherein the requested routing was from Chicago to San Francisco on board TWA Flight-131 of October 27;1976, and from San Francisco to Manila on board PAL Flight No. 107 of the same date, and from Manila to Cebu on board PAL Flight 149 of October 29, 1976 (See Exh. E, also Exh. 1-PAL). 26 (Emphasis ours.)Moreover, we are persuaded to believe private respondent PAL's account as to what transpired October 26, 1976:. . . Pursuant thereto, on 26 October 1976, CMAS acting upon the instruction of Pomierski, F.H., the shipper requested booking of the casketed remains of Mrs. Cristina (sic) Saludo on board PAL's San Francisco-Manila Flight No. PR 107 on October 27, 1976.

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2. To signify acceptance and confirmation of said booking, PAL issued to said Pomierski F.H., PAL Airway Bill No. 079-01180454 dated October 27, 1976 (sic, "10/26/76"). PAL confirmed the booking and transporting of the shipment on board of its Flight PR 107 on October 27, 1976 on the basis of the representation of the shipper and/or CMAS that the said cargo would arrive in San Francisco from Chicago on board United Airlines Flight US 121 on 27 October 1976. 27

In other words, on October 26, 1976 the cargo containing the casketed remains of Crispina Saludo was booked for PAL Flight Number PR-107 leaving San Francisco for Manila on October 27, 1976, PAL Airway Bill No. 079-01180454 was issued, not as evidence of receipt of delivery of the cargo on October 26, 1976, but merely as a confirmation of the booking thus made for the San Francisco-Manila flight scheduled on October 27, 1976. Actually, it was not until October 28, 1976 that PAL received physical delivery of the body at San Francisco, as duly evidenced by the Interline Freight Transfer Manifest of the American Airline Freight System and signed for by Virgilio Rosales at 1945H, or 7:45 P.M. on said date. 28

Explicit is the rule under Article 1736 of the Civil Code that the extraordinary responsibility of the common carrier begins from the time the goods are delivered to the carrier. This responsibility remains in full force and effect even when they are temporarily unloaded or stored in transit, unless the shipper or owner exercises the right of stoppage in transitu, 29 and terminates only after the lapse of a reasonable time for the acceptance, of the goods by the consignee or such other person entitled to receive them. 30 And, there is delivery to the carrier when the goods are ready for and have been placed in the exclusive possession, custody and control of the carrier for the purpose of their immediate transportation and the carrier has accepted them. 31 Where such a delivery has thus been accepted by the carrier, the liability of the common carrier commences eo instanti. 32

Hence, while we agree with petitioners that the extraordinary diligence statutorily required to be observed by the carrier instantaneously commences upon delivery of the goods thereto, for such duty to commence there must in fact have been delivery of the cargo subject of the contract of carriage. Only when such fact of delivery has been unequivocally established can the liability for loss, destruction or deterioration of goods in the custody of the carrier, absent the excepting causes under Article 1734, attach and the presumption of fault of the carrier under Article 1735 be invoked.As already demonstrated, the facts in the case at bar belie the averment that there was delivery of the cargo to the carrier on October 26, 1976. Rather, as earlier explained, the body intended to be shipped as agreed upon was really placed in the possession and control of

PAL on October 28, 1976 and it was from that date that private respondents became responsible for the agreed cargo under their undertakings in PAL Airway Bill No. 079-01180454. Consequently, for the switching of caskets prior thereto which was not caused by them, and subsequent events caused thereby, private respondents cannot be held liable.Petitioners, proceeding on the premise that there was delivery of the cargo to private respondents on October 26,1976 and that the latter's extraordinary responsibility had by then become operative, insist on foisting the blame on private respondents for the switching of the two caskets which occurred on October 27, 1976. It is argued that since there is no clear evidence establishing the fault Continental Mortuary Air Services (CMAS) for the mix-up, private respondents are presumably negligent pursuant to Article 1735 of the Civil Code and, for failure to rebut such presumption, they must necessarily be held liable; or, assuming that CMAS was at fault, the same does not absolve private respondents of liability because whoever brought the cargo to the airport or loaded it on the plane did so as agent of private respondents.This contention is without merit. As pithily explained by the Court of Appeals:The airway bill expressly provides that "Carrier certifies goods described below were received for carriage", and said cargo was "casketed human remains of Crispina Saludo," with "Maria Saludo as Consignee; Pomierski F.H. as Shipper; Air Care International as carrier's agent." On the face of the said airway bill, the specific flight numbers, specific routes of shipment and dates of departure and arrival were typewritten, to wit: Chicago TWA Flight 131/27 to San Francisco and from San Francisco by PAL 107 on, October 27, 1976 to Philippines and to Cebu via PAL Flight 149 on October 29, 1976. The airway bill also contains the following typewritten words, as follows: all documents have been examined (sic). Human remains of Crispina Saludo. Please return back (sic) first available flight to SFO.But, as it turned out and was discovered later the casketed human remains which was issued PAL Airway Bill #079-1180454 was not the remains of Crispina Saludo, the casket containing her remains having been shipped to Mexico City.However, it should be noted that, Pomierski F.H., the shipper of Mrs. Saludo's remains, hired Continental Mortuary Services (hereafter referred to as C.M.A.S.), which is engaged in the business of transporting and forwarding human remains. Thus, C.M.A.S. made all the necessary arrangements such as flights, transfers, etc. — for shipment of the remains of Crispina Saludo.The remains were taken on October 26th, 1976, to C.M.A.S. at the airport. These people made all the necessary arrangements, such as flights, transfers, etc. This is a national service used by undertakers throughout the nation. They furnished the air pouch

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which the casket is enclosed in, and they see that the remains are taken to the proper air frieght terminal. I was very surprised when Miss Saludo called me to say that the remains were not at the west coast terminal. I immediately called C.M.A.S. They called me back in a matter of ten minutes to inform me that the remains were on a plane to Mexico City. The man said that there were two bodies at the terminal, and somehow they were switched. . . . (Exb. 6 — "TWA", which is the memo or incident report enclosed in the stationery of Walter Pomierski & Sons Ltd.)Consequently, when the cargo was received from C.M.A.S. at the Chicago airport terminal for shipment, which was supposed to contain the remains of Crispina Saludo, Air Care International and/or TWA, had no way of determining its actual contents, since the casket was hermetically sealed by the Philippine Vice-Consul in Chicago and in an air pouch of C.M.A.S., to the effect that Air Care International and/or TWA had to rely on the information furnished by the shipper regarding the cargo's content. Neither could Air Care International and/or TWA open the casket for further verification, since they were not only without authority to do so, but even prohibited.Thus, under said circumstances, no fault and/or negligence can be attributed to PAL (even if Air Care International should be considered as an agent of PAL) and/or TWA, the entire fault or negligence being exclusively with C.M.A.S. 33 (Emphasis supplied.)It can correctly and logically be concluded, therefore, that the switching occurred or, more accurately, was discovered on October 27, 1976; and based on the above findings of the Court of appeals, it happened while the cargo was still with CMAS, well before the same was place in the custody of private respondents.Thus, while the Air Cargo Transfer Manifest of TWA of October 27, 1976 34 was signed by Garry Marcial of PAL at 1400H, or 2:00 P.M., on the same date, thereby indicating acknowledgment by PAL of the transfer to them by TWA of what was in truth the erroneous cargo, said misshipped cargo was in fact withdrawn by CMAS from PAL as shown by the notation on another copy of said manifest 35 stating "Received by CMAS — Due to switch in Chicago 10/27-1805H," the authenticity of which was never challenged. This shows that said misshipped cargo was in fact withdrawn by CMAS from PAL and the correct shipment containing the body of Crispina Saludo was received by PAL only on October 28, 1976, at 1945H, or 7:45 P.M., per American Airlines Interline Freight Transfer Manifest No. AA204312. 36

Witness the deposition of TWA's ramp serviceman, Michael Giosso, on this matter:ATTY. JUAN COLLAS, JR.:On that date, do (sic) you have occasion to handle or deal with the transfer of cargo from TWA Flight No. 603 to PAL San Francisco?MICHAEL GIOSSO:

Yes, I did.ATTY. JUAN COLLAS, JR.:What was your participation with the transfer of the cargo?MICHAEL GIOSSO:I manifested the freight on a transfer manifest and physically moved it to PAL and concluded the transfer by signing it off.ATTY. JUAN COLLAS, JR.:You brought it there yourself?MICHAEL GIOSSO:Yes sir.ATTY. JUAN COLIAS, JR.:Do you have anything to show that PAL received the cargo from TWA on October 27, 1976?MICHAEL GIOSSO:Yes, I do.(Witness presenting a document)ATTY. JUAN COLLAS, JR.:For purposes of clarity, Exhibit I is designated as Exhibit I-TWA.

xxx xxx xxxATTY. JUAN COLLAS, JR.:This Exhibit I-TWA, could you tell what it is, what it shows?MICHAEL GIOSSO:It shows transfer of manifest on 10-27-76 to PAL at 1400 and verified with two signatures as it completed the transfer.ATTY. JUAN COLLAS, JR.:Very good,. Who was the PAL employee who received the cargo?MICHAEL GIOSSO:The name is Garry Marcial." 37

The deposition of Alberto A. Lim, PAL's cargo supervisor at San Francisco, as deponent-witness for PAL, makes this further clarification:ATTY. CESAR P. MANALAYSAY:You mentioned Airway Bill, Mr. Lim. I am showing to you a PAL Airway Bill Number 01180454 which for purposes of evidence, I would like to request that the same be marked as evidence Exhibit I for PAL.

xxx xxx xxxIn what circumstances did you encounter Exhibit I-PAL?ALBERTO A. LIM:If I recall correctly, I was queried by Manila, our Manila office with regard to a certain complaint that a consignee filed that this shipment did not arrive on the day that the consignee expects the shipment to arrive.ATTY CESAR P. MANALAYSAY:Okay. Now, upon receipt of that query from your Manila office, did you conduct any investigation to pinpoint the possible causes of mishandling?ALBERTO A. LIM:Yes.

xxx xxx xxxATTY. CESAR P. MANALAYSAY:

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What is the result of your investigation?ALBERTO A. LIM:In the course of my investigation, I found that we received the body on October 28, 1976, from American Airlines.ATTY. CESAR P. MANALAYSAY:What body are you referring to?

xxx xxx xxxALBERTO A. LIM:The remains of Mrs. Cristina (sic) Saludo.ATTY. CESAR P. MANALAYSAY:Is that the same body mentioned in this Airway Bill?ALBERTO A. LIM:Yes.ATTY. CESAR P. MANALAYSAY:What time did you receive said body on October 28, 1976?ALBERTO A. LIM:If I recall correctly, approximately 7:45 of October 28, 1976.ATTY. CESAR P. MANALAYSAY:Do you have any proof with you to back the statement?ALBERTO A. LIM:Yes. We have on our records a Transfer Manifest from American Airlines Number 204312 showing that we received a human remains shipment belong to Mrs. Cristina (sic) Saludo or the human remains of Mrs. Cristina (sic) Saludo.ATTY. CESAR P. MAIALAYSAY:At this juncture, may I request that the Transfer Manifest referred to by the witness be marked as an evidence as Exhibit II-PAL.

xxx xxx xxxMr. Lim, yesterday your co-defendant TWA presented as their Exhibit I evidence tending to show that on October 27, 1976 at about 2:00 in the, afternoon they delivered to you a cargo bearing human remains. Could you go over this Exhibit I and please give us your comments as to that exhibit?ATTY. ALBERTO C. MENDOZA:That is a vague question. I would rather request that counsel propound specific questions rather than asking for comments on Exhibit I-TWA.ATTY. CESAR P. MANALAYSAY:In that case, I will reform my question. Could you tell us whether TWA in fact delivered to you the human remains as indicated in that Transfer Manifest?ALBERTO A. LIM:Yes, they did.ATTY. CESAR P. MANALAYSAY:I noticed that the Transfer Manifest of TWA marked as Exhibit I-TWA bears the same numbers or the same entries as the Airway Bill marked as Exhibit I-A PAL tending to show that this is the human remains of Mrs Cristina (sic) Saludo. Could you tell us whether this is true?ALBERTO A. LIM:

It is true that we received human remains shipment from TWA as indicated on this Transfer Manifest. But in the course of investigation, it was found out that the human remains transferred to us is not the remains of Mrs. Cristina (sic) Saludo this is the reason why we did not board it on our flight. 38

Petitioners consider TWA's statement that "it had to rely on the information furnished by the shipper" a lame excuse and that its failure to prove that its personnel verified and identified the contents of the casket before loading the same constituted negligence on the part of TWA. 39

We upbold the favorable consideration by the Court of Appeals of the following findings of the trial court:It was not (to) TWA, but to C.M.A.S. that the Pomierski & Son Funeral Home delivered the casket containing the remains of Crispina Saludo. TWA would have no knowledge therefore that the remains of Crispina Saludo were not the ones inside the casket that was being presented to it for shipment. TWA would have to rely on there presentations of C.M.A.S. The casket was hermetically sealed and also sealed by the Philippine Vice Consul in Chicago. TWA or any airline for that matter would not have opened such a sealed casket just for the purpose of ascertaining whose body was inside and to make sure that the remains inside were those of the particular person indicated to be by C.M.A.S. TWA had to accept whatever information was being furnished by the shipper or by the one presenting the casket for shipment. And so as a matter of fact, TWA carried to San Francisco and transferred to defendant PAL a shipment covered by or under PAL Airway Bill No. 079-ORD-01180454, the airway bill for the shipment of the casketed remains of Crispina Saludo. Only, it turned out later, while the casket was already with PAL, that what was inside the casket was not the body of Crispina Saludo so much so that it had to be withdrawn by C.M.A.S. from PAL. The body of Crispina Saludo had been shipped to Mexico. The casket containing the remains of Crispina Saludo was transshipped from Mexico and arrived in San Francisco the following day on board American Airlines. It was immediately loaded by PAL on its flight for Manila.The foregoing points at C.M.A.S., not defendant TWA much less defendant PAL, as the ONE responsible for the switching or mix-up of the two bodies at the Chicago Airport terminal, and started a chain reaction of the misshipment of the body of Crispina Saludo and a one-day delay in the delivery thereof to its destination. 40

Verily, no amount of inspection by respondent airline companies could have guarded against the switching that had already taken place. Or, granting that they could have opened the casket to inspect its contents, private respondents had no means of ascertaining whether the body therein contained was indeed that of Crispina Saludo except, possibly, if the body was that of a male person and such fact was visually apparent upon

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opening the casket. However, to repeat, private respondents had no authority to unseal and open the same nor did they have any reason or justification to resort thereto.It is the right of the carrier to require good faith on the part of those persons who deliver goods to be carried, or enter into contracts with it, and inasmuch as the freight may depend on the value of the article to be carried, the carrier ordinarily has the right to inquire as to its value. Ordinarily, too, it is the duty of the carrier to make inquiry as to the general nature of the articles shipped and of their value before it consents to carry them; and its failure to do so cannot defeat the shipper's right to recovery of the full value of the package if lost, in the absence of showing of fraud or deceit on the part of the shipper. In the absence of more definite information, the carrier has a the right to accept shipper's marks as to the contents of the package offered for transportation and is not bound to inquire particularly about them in order to take advantage of a false classification and where a shipper expressly represents the contents of a package to be of a designated character, it is not the duty of the carrier to ask for a repetition of the statement nor disbelieve it and open the box and see for itself. 41 However, where a common carrier has reasonable ground to suspect that the offered goods are of a dangerous or illegal character, the carrier has the right to know the character of such goods and to insist on an inspection, if reasonable and practical under the circumstances, as a condition of receiving and transporting such goods. 42

It can safely be said then that a common carrier is entitled to fair representation of the nature and value of the goods to be carried, with the concomitant right to rely thereon, and further noting at this juncture that a carrier has no obligation to inquire into the correctness or sufficiency of such information. 43 The consequent duty to conduct an inspection thereof arises in the event that there should be reason to doubt the veracity of such representations. Therefore, to be subjected to unusual search, other than the routinary inspection procedure customarily undertaken, there must exist proof that would justify cause for apprehension that the baggage is dangerous as to warrant exhaustive inspection, or even refusal to accept carriage of the same; and it is the failure of the carrier to act accordingly in the face of such proof that constitutes the basis of the common carrier's liability.44

In the case at bar, private respondents had no reason whatsoever to doubt the truth of the shipper's representations. The airway bill expressly providing that "carrier certifies goods received below were received for carriage," and that the cargo contained "casketed human remains of Crispina Saludo," was issued on the basis of such representations. The reliance thereon by private respondents was reasonable and, for so doing, they cannot be said to have acted negligently. Likewise,

no evidence was adduced to suggest even an iota of suspicion that the cargo presented for transportation was anything other than what it was declared to be, as would require more than routine inspection or call for the carrier to insist that the same be opened for scrutiny of its contents per declaration.Neither can private respondents be held accountable on the basis of petitioners' preposterous proposition that whoever brought the cargo to the airport or loaded it on the airplane did so as agent of private respondents, so that even if CMAS whose services were engaged for the transit arrangements for the remains was indeed at fault, the liability therefor would supposedly still be attributable to private respondents.While we agree that the actual participation of CMAS has been sufficiently and correctly established, to hold that it acted as agent for private respondents would be both an inaccurate appraisal and an unwarranted categorization of the legal position it held in the entire transaction.It bears repeating that CMAS was hired to handle all the necessary shipping arrangements for the transportation of the human remains of Crispina Saludo to Manila. Hence, it was to CMAS that the Pomierski & Son Funeral Home, as shipper, brought the remains of petitioners' mother for shipment, with Maria Saludo as consignee. Thereafter, CMAS booked the shipment with PAL through the carrier's agent, Air Care International. 45 With its aforestated functions, CMAS may accordingly be classified as a forwarder which, by accepted commercial practice, is regarded as an agent of the shipper and not of the carrier. As such, it merely contracts for the transportation of goods by carriers, and has no interest in the freight but receives compensation from the shipper as his agent. 46

At this point, it can be categorically stated that, as culled from the findings of both the trial court and appellate courts, the entire chain of events which culminated in the present controversy was not due to the fault or negligence of private respondents. Rather, the facts of the case would point to CMAS as the culprit. Equally telling of the more likely possibility of CMAS' liability is petitioners' letter to and demanding an explanation from CMAS regarding the statement of private respondents laying the blame on CMAS for the incident, portions of which, reading as follows:. . . we were informed that the unfortunate a mix-up occurred due to your negligence. . . .Likewise, the two airlines pinpoint the responsibility upon your agents. Evidence were presented to prove that allegation.On the face of this overwhelming evidence we could and should have filed a case against you. . . . 47

clearly allude to CMAS as the party at fault. This is tantamount to an admission by petitioners that they consider private respondents without fault, or is at the very least indicative of the fact that petitioners

11

entertained serious doubts as to whether herein private respondents were responsible for the unfortunate turn of events.Undeniably, petitioners' grief over the death of their mother was aggravated by the unnecessary inconvenience and anxiety that attended their efforts to bring her body home for a decent burial. This is unfortunate and calls for sincere commiseration with petitioners. But, much as we would like to give them consolation for their undeserved distress, we are barred by the inequity of allowing recovery of the damages prayed for by them at the expense of private respondents whose fault or negligence in the very acts imputed to them has not been convincingly and legally demonstrated.Neither are we prepared to delve into, much less definitively rule on, the possible liability of CMAS as the evaluation and adjudication of the same is not what is presently at issue here and is best deferred to another time and addressed to another forum.II. Petitioners further fault the Court of Appeals for ruling that there was no contractual breach on the part of private respondents as would entitle petitioners to damages.Petitioners hold that respondent TWA, by agreeing to transport the remains of petitioners' mother on its Flight 131 from Chicago to San Francisco on October 27, 1976, made itself a party to the contract of carriage and, therefore, was bound by the terms of the issued airway bill. When TWA undertook to ship the remains on its Flight 603, ten hours earlier than scheduled, it supposedly violated the express agreement embodied in the airway bill. It was allegedly this breach of obligation which compounded, if not directly caused, the switching of the caskets.In addition, petitioners maintain that since there is no evidence as to who placed the body on board Flight 603, or that CMAS actually put the cargo on that flight, or that the two caskets at the Chicago airport were to be transported by the same airline, or that they came from the same funeral home, or that both caskets were received by CMAS, then the employees or agents of TWA presumably caused the mix-up by loading the wrong casket on the plane. For said error, they contend, TWA must necessarily be presumed negligent and this presumption of negligence stands undisturbed unless rebutting evidence is presented to show that the switching or misdelivery was due to circumstances that would exempt the carrier from liability.Private respondent TWA professes otherwise. Having duly delivered or transferred the cargo to its co-respondent PAL on October 27, 1976 at 2:00 P.M., as supported by the TWA Transfer Manifest, TWA faithfully complied with its obligation under the airway bill. Said faithful compliance was not affected by the fact that the remains were shipped on an earlier flight as there was no fixed time for completion of carriage stipulated on.

Moreover, the carrier did not undertake to carry the cargo aboard any specified aircraft, in view of the condition on the back of the airway bill which provides:

CONDITIONS OF CONTRACTxxx xxx xxx

It is agreed that no time is fixed for the completion of carriage hereunder and that Carrier may without notice substitute alternate carriers or aircraft. Carrier assumes no obligation to carry the goods by any specified aircraft or over any particular route or routes or to make connection at any point according to any particular schedule, and Carrier is hereby authorized to select, or deviate from the route or routes of shipment, notwithstanding that the same may be stated on the face hereof. The shipper guarantees payment of all charges and advances. 48

Hence, when respondent TWA shipped the body on earlier flight and on a different aircraft, it was acting well within its rights. We find this argument tenable.The contention that there was contractual breach on the part of private respondents is founded on the postulation that there was ambiguity in the terms of the airway bill, hence petitioners' insistence on the application of the rules on interpretation of contracts and documents. We find no such ambiguity. The terms are clear enough as to preclude the necessity to probe beyond the apparent intendment of the contractual provisions.The hornbook rule on interpretation of contracts consecrates the primacy of the intention of the parties, the same having the force of law between them. When the terms of the agreement are clear and explicit, that they do not justify an attempt to read into any alleged intention of the parties, the terms are to be understood literally just as they appear on the face of the contract. 49 The various stipulations of a contract shall be interpreted together 50and such a construction is to be adopted as will give effect to all provisions thereof. 51 A contract cannot be construed by parts, but its clauses should be interpreted in relation to one another. The whole contract must be interpreted or read together in order to arrive at its true meaning. Certain stipulations cannot be segregated and then made to control; neither do particular words or phrases necessarily determine the character of a contract. The legal effect of the contract is not to be determined alone by any particular provision disconnected from all others, but in the ruling intention of the parties as gathered from all the language they have used and from their contemporaneous and subsequent acts. 52

Turning to the terms of the contract at hand, as presented by PAL Air Waybill No. 079-01180454, respondent court approvingly quoted the trial court's disquisition on the aforequoted condition appearing on the reverse side of the airway bill and its disposition of this particular assigned error:

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The foregoing stipulation fully answers plaintiffs' objections to the one-day delay and the shipping of the remains in TWA Flight 603 instead of TWA Flight 131. Under the stipulation, parties agreed that no time was fixed to complete the contract of carriage and that the carrier may, without notice, substitute alternate carriers or aircraft. The carrier did not assume the obligation to carry the shipment on any specified aircraft.

xxx xxx xxxFurthermore, contrary to the claim of plaintiffs-appellants, the conditions of the Air Waybill are big enough to be read and noticed. Also, the mere fact that the cargo in question was shipped in TWA Flight 603, a flight earlier on the same day than TWA Flight 131, did not in any way cause or add to the one-day delay complained of and/or the switching or mix-up of the bodies. 53

Indubitably, that private respondent can use substitute aircraft even without notice and without the assumption of any obligation whatsoever to carry the goods on any specified aircraft is clearly sanctioned by the contract of carriage as specifically provided for under the conditions thereof.Petitioners' invocation of the interpretative rule in the Rules of Court that written words control printed words in documents, 54 to bolster their assertion that the typewritten provisions regarding the routing and flight schedule prevail over the printed conditions, is tenuous. Said rule may be considered only when there is inconsistency between the written and printed words of the contract.As previously stated, we find no ambiguity in the contract subject of this case that would call for the application of said rule. In any event, the contract has provided for such a situation by explicitly stating that the above condition remains effective "notwithstanding that the same (fixed time for completion of carriage, specified aircraft, or any particular route or schedule) may be stated on the face hereof." While petitioners hinge private respondents' culpability on the fact that the carrier "certifies goods described below were received for carriage," they may have overlooked that the statement on the face of the airway bill properly and completely reads —Carrier certifies goods described below were received for carriage subject to the Conditions on the reverse hereof the goods then being in apparent good order and condition except as noted hereon. 55 (Emphasis ours.)Private respondents further aptly observe that the carrier's certification regarding receipt of the goods for carriage "was of a smaller print than the condition of the Air Waybill, including Condition No. 5 — and thus if plaintiffs-appellants had recognized the former, then with more reason they were aware of the latter. 56

In the same vein, it would also be incorrect to accede to the suggestion of petitioners that the typewritten specifications of the flight, routes and dates of

departures and arrivals on the face of the airway bill constitute a special contract which modifies the printed conditions at the back thereof. We reiterate that typewritten provisions of the contract are to be read and understood subject to and in view of the printed conditions, fully reconciling and giving effect to the manifest intention of the parties to the agreement.The oft-repeated rule regarding a carrier's liability for delay is that in the absence of a special contract, a carrier is not an insurer against delay in transportation of goods. When a common carrier undertakes to convey goods, the law implies a contract that they shall be delivered at destination within a reasonable time, in the absence, of any agreement as to the time of delivery. 57 But where a carrier has made an express contract to transport and deliver property within a specified time, it is bound to fulfill its contract and is liable for any delay, no matter from what cause it may have arisen. 58 This result logically follows from the well-settled rule that where the law creates a duty or charge, and the party is disabled from performing it without any default in himself, and has no remedy over, then the law will excuse him, but where the party by his own contract creates a duty or charge upon himself, he is bound to make it good notwithstanding any accident or delay by inevitable necessity because he might haveprovided against it by contract. Whether or not there has been such an undertaking on the part of the carrier to be determined from the circumstances surrounding the case and by application of the ordinary rules for the interpretation of contracts. 59

Echoing the findings of the trial court, the respondent court correctly declared that —In a similar case of delayed delivery of air cargo under a very similar stipulation contained in the airway bill which reads: "The carrier does not obligate itself to carry the goods by any specified aircraft or on a specified time. Said carrier being hereby authorized to deviate from the route of the shipment without any liability therefor", our Supreme Court ruled that common carriers are not obligated by law to carry and to deliver merchandise, and persons are not vested with the right to prompt delivery, unless such common carriers previously assume the obligation. Said rights and obligations are created by a specific contract entered into by the parties (Mendoza vs. PAL, 90 Phil. 836).There is no showing by plaintiffs that such a special or specific contract had been entered into between them and the defendant airline companies.And this special contract for prompt delivery should call the attention of the carrier to the circumstances surrounding the case and the approximate amount of damages to be suffered in case of delay (See Mendoza vs. PAL, supra). There was no such contract entered into in the instant case. 60

Also, the theory of petitioners that the specification of the flights and dates of departure and arrivals constitute

13

a special contract that could prevail over the printed stipulations at the back of the airway bill is vacuous. To countenance such a postulate would unduly burden the common carrier for that would have the effect of unilaterally transforming every single bill of lading or trip ticket into a special contract by the simple expedient of filling it up with the particulars of the flight, trip or voyage, and thereby imposing upon the carrier duties and/or obligations which it may not have been ready or willing to assume had it been timely, advised thereof.Neither does the fact that the challenged condition No. 5 was printed at the back of the airway bill militate against its binding effect on petitioners as parties to the contract, for there were sufficient indications on the face of said bill that would alert them to the presence of such additional condition to put them on their guard. Ordinary prudence on the part of any person entering or contemplating to enter into a contract would prompt even a cursory examination of any such conditions, terms and/or stipulations.There is a holding in most jurisdictions that the acceptance of a bill of lading without dissent raises a presumption that all terms therein were brought to the knowledge of the shipper and agreed to by him, and in the absence of fraud or mistake, he is estopped from thereafter denying that he assented to such terms. This rule applies with particular force where a shipper accepts a bill of lading with full knowledge of its contents, and acceptance under such circumstances makes it a binding contract. In order that any presumption of assent to a stipulation in a bill of lading limiting the liability of a carrier may arise, it must appear that the clause containing this exemption from liability plainly formed a part of the contract contained in the bill of lading. A stipulation printed on the back of a receipt or bill of lading or on papers attached to such receipt will be quite as effective as if printed on its face, if it is shown that the consignor knew of its terms. Thus, where a shipper accepts a receipt which states that its conditions are to be found on the back, such receipt comes within the general rule, and the shipper is held to have accepted and to be bound by the conditions there to be found. 61

Granting arguendo that Condition No. 5 partakes of the nature of a contract of adhesion and as such must be construed strictly against the party who drafted the same or gave rise to any ambiguity therein, it should be borne in mind that a contract of adhesion may be struck down as void and unenforceable, for being subversive of public policy, only when the weaker party is imposed upon in dealing with the dominant bargaining party and is reduced to the alternative of taking it or leaving it, completely deprived of the opportunity to bargain on equal footing. 62However, Ong Yiu vs. Court of Appeals, et al 63 instructs us that contracts of adhesion are not entirely prohibited. The one who adheres to the contract is in reality free to reject it entirely; if he adheres, be

gives his consent. Accordingly, petitioners, far from being the weaker party in this situation, duly signified their presumed assent to all terms of the contract through their acceptance of the airway bill and are consequently bound thereby. It cannot be gainsaid that petitioners' were not without several choices as to carriers in Chicago with its numerous airways and airliner servicing the same.We wish to allay petitioners' apprehension that Condition No. 5 of the airway bill is productive of mischief as it would validate delay in delivery, sanction violations of contractual obligations with impunity or put a premium on breaches of contract.Just because we have said that condition No. 5 of the airway bill is binding upon the parties to and fully operative in this transaction, it does not mean, and let this serve as fair warning to respondent carriers, that they can at all times whimsically seek refuge from liability in the exculpatory sanctuary of said Condition No. 5 or arbitrarily vary routes, flights and schedules to the prejudice of their customers. This condition only serves to insulate the carrier from liability in those instances when changes in routes, flights and schedules are clearly justified by the peculiar circumstances of a particular case, or by general transportation practices, customs and usages, or by contingencies or emergencies in aviation such as weather turbulence, mechanical failure, requirements of national security and the like. And even as it is conceded that specific routing and other navigational arrangements for a trip, flight or voyage, or variations therein, generally lie within the discretion of the carrier in the absence of specific routing instructions or directions by the shipper, it is plainly incumbent upon the carrier to exercise its rights with due deference to the rights, interests and convenience of its customers.A common carrier undertaking to transport property has the implicit duty to carry and deliver it within reasonable time, absent any particular stipulation regarding time of delivery, and to guard against delay. In case of any unreasonable delay, the carrier shall be liable for damages immediately and proximately resulting from such neglect of duty. 64 As found by the trial court, the delay in the delivery of the remains of Crispina Saludo, undeniable and regrettable as it was, cannot be attributed to the fault, negligence or malice of private respondents, 65 a conclusion concurred in by respondent court and which we are not inclined to disturb.We are further convinced that when TWA opted to ship the remains of Crispina Saludo on an earlier flight, it did so in the exercise of sound discretion and with reasonable prudence, as shown by the explanation of its counsel in his letter of February 19, 1977 in response to petitioners' demand letter:Investigation of TWA's handling of this matter reveals that although the shipment was scheduled on TWA Flight 131 of October 27, 1976, it was actually boarded

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on TWA Flight 603 of the same day, approximately 10 hours earlier, in order to assure that the shipment would be received in San Francisco in sufficient time for transfer to PAL. This transfer was effected in San Francisco at 2:00 P.M. on October 27, 1976. 66

Precisely, private respondent TWA knew of the urgency of the shipment by reason of this notation on the lower portion of the airway bill: "All documents have been certified. Human remains of Cristina (sic) Saludo. Please return bag first available flight to SFO." Accordingly, TWA took it upon itself to carry the remains of Crispina Saludo on an earlier flight, which we emphasize it could do under the terms of the airway bill, to make sure that there would be enough time for loading said remains on the transfer flight on board PAL.III. Petitioners challenge the validity of respondent court's finding that private respondents are not liable for tort on account of the humiliating, arrogant and indifferent acts of their officers and personnel. They posit that since their mother's remains were transported ten hours earlier than originally scheduled, there was no reason for private respondents' personnel to disclaim knowledge of the arrival or whereabouts of the same other than their sheer arrogance, indifference and extreme insensitivity to the feelings of petitioners. Moreover, being passengers and not merely consignors of goods, petitioners had the right to be treated with courtesy, respect, kindness and due consideration.In riposte, TWA claims that its employees have always dealt politely with all clients, customers and the public in general. PAL, on the other hand, declares that in the performance of its obligation to the riding public, other customers and clients, it has always acted with justice, honesty, courtesy and good faith.Respondent appellate court found merit in and reproduced the trial court's refutation of this assigned error:About the only evidence of plaintiffs that may have reference to the manner with which the personnel of defendants treated the two plaintiffs at the San Francisco Airport are the following pertinent portions of Maria Saludo's testimony:Q When you arrived there, what did you do, if any?A I immediately went to the TWA counter and I inquired about whether my mother was there or if' they knew anything about it.Q What was the answer?A They said they do not know. So, we waited.Q About what time was that when you reached San Francisco from Chicago?A I think 5 o'clock. Somewhere around that in the afternoon.Q You made inquiry it was immediately thereafter?A Right after we got off the plane.Q Up to what time did you stay in the airport to wait until the TWA people could tell you the whereabouts?

A Sorry, Sir, but the TWA did not tell us anything. We stayed there until about 9 o'clock. They have not heard anything about it. They did not say anything.Q Do you want to convey to the Court that from 5 up to 9 o'clock in the evening you yourself went back to the TWA and they could not tell you where the remains of your mother were?A Yes sir.Q And after nine o'clock, what did you do?A I told my brother my Mom was supposed to be on the Philippine Airlines flight. "Why don't" we check with PAL instead to see if she was there?" We tried to comfort each other. I told him anyway that was a shortest flight from Chicago to California. We will be with our mother on this longer flight. So, we checked with the PAL.Q What did you find?A We learned, Yes, my Mom would be on the flight.Q Who was that brother?A Saturnino Saludo.Q And did you find what was your flight from San Francisco to the Philippines?A I do not know the number. It was the evening flight of the Philippine Airline(s) from San Francisco to Manila.Q You took that flight with your mother?A We were scheduled to, Sir.Q Now, you could not locate the remains of your mother in San Francisco could you tell us what did you feel?A After we were told that my mother was not there?Q After you learned that your mother could not fly with you from Chicago to California?A Well, I was very upset. Of course, I wanted the confirmation that my mother was in the West Coast. The fliqht was about 5 hours from Chicago to California. We waited anxiously all that time on the plane. I wanted to be assured about my mother's remains. But there was nothing and we could not get any assurance from anyone about it.Q Your feeling when you reached San Francisco and you could not find out from the TWA the whereabouts of the remains, what did you feel?A Something nobody would be able to describe unless he experiences it himself. It is a kind of panic. I think it's a feeling you are about to go crazy. It is something I do not want to live through again. (Inting, t.s.n., Aug. 9, 1983, pp. 14-18).The foregoing does not show any humiliating or arrogant manner with which the personnel of both defendants treated the two plaintiffs. Even their alleged indifference is not clearly established. The initial answer of the TWA personnel at the counter that they did not know anything about the remains, and later, their answer that they have not heard anything about the remains, and the inability of the TWA counter personnel to inform the two plaintiffs of the whereabouts of the remains, cannot be said to be total or complete indifference to the said plaintiffs. At any rate, it is any rude or discourteous conduct, malfeasance or neglect,

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the use of abusive or insulting language calculated to humiliate and shame passenger or had faith by or on the part of the employees of the carrier that gives the passenger an action for damages against the carrier (Zulueta vs. Pan American World Airways, 43 SCRA 397; Air France vs. Carrascoso, et al., 18 SCRA 155; Lopez, et al. vs. Pan American World Airways, 16 SCRA 431; Northwest Airlines, Inc. vs. Cuenca, 14 SCRA 1063), and none of the above is obtaining in the instant case. 67

We stand by respondent court's findings on this point, but only to the extent where it holds that the manner in which private respondent TWA's employees dealt with petitioners was not grossly humiliating, arrogant or indifferent as would assume the proportions of malice or bad faith and lay the basis for an award of the damages claimed. It must however, be pointed out that the lamentable actuations of respondent TWA's employees leave much to be desired, particularly so in the face of petitioners' grief over the death of their mother, exacerbated by the tension and anxiety wrought by the impasse and confusion over the failure to ascertain over an appreciable period of time what happened to her remains.Airline companies are hereby sternly admonished that it is their duty not only to cursorily instruct but to strictly require their personnel to be more accommodating towards customers, passengers and the general public. After all, common carriers such as airline companies are in the business of rendering public service, which is the primary reason for their enfranchisement and recognition in our law. Because the passengers in a contract of carriage do not contract merely for transportation, they have a right to be treated with kindness, respect, courtesy and consideration. 68 A contract to transport passengers is quite different in kind and degree from any other contractual relation, and generates a relation attended with public duty. The operation of a common carrier is a business affected with public interest and must be directed to serve the comfort and convenience of passengers.69 Passengers are human beings with human feelings and emotions; they should not be treated as mere numbers or statistics for revenue.The records reveal that petitioners, particularly Maria and Saturnino Saludo, agonized for nearly five hours, over the possibility of losing their mother's mortal remains, unattended to and without any assurance from the employees of TWA that they were doing anything about the situation. This is not to say that petitioners were to be regaled with extra special attention. They were, however, entitled to the understanding and humane consideration called for by and commensurate with the extraordinary diligence required of common carriers, and not the cold insensitivity to their predicament. It is hard to believe that the airline's counter personnel were totally helpless about the

situation. Common sense would and should have dictated that they exert a little extra effort in making a more extensive inquiry, by themselves or through their superiors, rather than just shrug off the problem with a callous and uncaring remark that they had no knowledge about it. With all the modern communications equipment readily available to them, which could have easily facilitated said inquiry and which are used as a matter of course by airline companies in their daily operations, their apathetic stance while not legally reprehensible is morally deplorable.Losing a loved one, especially one's, parent, is a painful experience. Our culture accords the tenderest human feelings toward and in reverence to the dead. That the remains of the deceased were subsequently delivered, albeit belatedly, and eventually laid in her final resting place is of little consolation. The imperviousness displayed by the airline's personnel, even for just that fraction of time, was especially condemnable particularly in the hour of bereavement of the family of Crispina Saludo, intensified by anguish due to the uncertainty of the whereabouts of their mother's remains. Hence, it is quite apparent that private respondents' personnel were remiss in the observance of that genuine human concern and professional attentiveness required and expected of them.The foregoing observations, however, do not appear to be applicable or imputable to respondent PAL or its employees. No attribution of discourtesy or indifference has been made against PAL by petitioners and, in fact, petitioner Maria Saludo testified that it was to PAL that they repaired after failing to receive proper attention from TWA. It was from PAL that they received confirmation that their mother's remains would be on the same flight to Manila with them.We find the following substantiation on this particular episode from the deposition of Alberto A. Lim, PAL's cargo supervisor earlier adverted to, regarding their investigation of and the action taken on learning of petitioner's problem:ATTY. ALBERTO C. MENDOZA:Yes.Mr. Lim, what exactly was your procedure adopted in your so called investigation?ALBERTO A. LIM:I called the lead agent on duty at that time and requested for a copy of airway bill, transfer manifest and other documents concerning the shipment.ATTY ALBERTO C. MENDOZA:Then, what?ALBERTO A. LIM:They proceeded to analyze exactly where PAL failed, if any, in forwarding the human remains of Mrs. Cristina (sic) Saludo. And I found out that there was not (sic) delay in shipping the remains of Mrs. Saludo to Manila. Since we received the body from American Airlines on

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28 October at 7:45 and we expedited the shipment so that it could have been loaded on our flight leaving at 9:00 in the evening or just barely one hour and 15 minutes prior to the departure of the aircraft. That is so (sic) being the case, I reported to Manila these circumstances. 70

IV. Finally, petitioners insist, as a consequence of the delay in the shipment of their mother's remains allegedly caused by wilful contractual breach, on their entitlement to actual, moral and exemplary damages as well as attorney's fees, litigation expenses, and legal interest.The uniform decisional tenet in our jurisdiction bolds that moral damages may be awarded for wilful or fraudulent breach of contract 71 or when such breach is attended by malice or bad faith. 72 However, in the absence of strong and positive evidence of fraud, malice or bad faith, said damages cannot be awarded. 73 Neither can there be an award of exemplary damages 74 nor of attorney's fees 75 as an item of damages in the absence of proof that defendant acted with malice, fraud or bad faith.The censurable conduct of TWA's employees cannot, however, be said to have approximated the dimensions of fraud, malice or bad faith. It can be said to be more of a lethargic reaction produced and engrained in some people by the mechanically routine nature of their work and a racial or societal culture which stultifies what would have been their accustomed human response to a human need under a former and different ambience.Nonetheless, the facts show that petitioners' right to be treated with due courtesy in accordance with the degree of diligence required by law to be exercised by every common carrier was violated by TWA and this entitles them, at least, to nominal damages from TWA alone. Articles 2221 and 2222 of the Civil Code make it clear that nominal damages are not intended for indemnification of loss suffered but for the vindication or recognition of a right violated of invaded. They are recoverable where some injury has been done but the amount of which the evidence fails to show, the assessment of damages being left to the discretion of the court according to the circumstances of the case. 76 In the exercise of our discretion, we find an award of P40,000.00 as nominal damages in favor of, petitioners to be a reasonable amount under the circumstances of this case.WHEREFORE, with the modification that an award of P40,000.00 as and by way of nominal damages is hereby granted in favor of petitioners to be paid by respondent Trans World Airlines, the appealed decision is AFFIRMED in all other respects.SO ORDERED.G.R. No. 94761 May 17, 1993MAERSK LINE, petitioner, vs.COURT OF APPEALS AND EFREN V. CASTILLO,

doing business under the name and style of Ethegal Laboratories, respondents.Bito, Lozada, Ortega & Castillo for petitioner.Humberto A. Jambora for private respondent. BIDIN, J.:Petitioner Maersk Line is engaged in the transportation of goods by sea, doing business in the Philippines through its general agent Compania General de Tabacos de Filipinas.Private respondent Efren Castillo, on the other hand, is the proprietor of Ethegal Laboratories, a firm engaged in the manutacture of pharmaceutical products.On November 12, 1976, private respondent ordered from Eli Lilly. Inc. of Puerto Rico through its (Eli Lilly, Inc.'s) agent in the Philippines, Elanco Products, 600,000 empty gelatin capsules for the manufacture of his pharmaceutical products. The capsules were placed in six (6) drums of 100,000 capsules each valued at US $1,668.71.Through a Memorandum of Shipment (Exh. "B"; AC GR CV No.10340, Folder of Exhibits, pp. 5-6), the shipper Eli Lilly, Inc. of Puerto Rico advised private respondent as consignee that the 600,000 empty gelatin capsules in six (6) drums of 100,000 capsules each, were already shipped on board MV "Anders Maerskline" under Voyage No. 7703 for shipment to the Philippines via Oakland, California. In said Memorandum, shipper Eli Lilly, Inc. specified the date of arrival to be April 3, 1977.For reasons unknown, said cargo of capsules were mishipped and diverted to Richmond, Virginia, USA and then transported back Oakland, Califorilia. The goods finally arrived in the Philippines on June 10, 1977 or after two (2) months from the date specified in the memorandum. As a consequence, private respondent as consignee refused to take delivery of the goods on account of its failure to arrive on time.Private respondent alleging gross negligence and undue delay in the delivery of the goods, filed an action before the court a quo for rescission of contract with damages against petitioner and Eli Lilly, Inc. as defendants.Denying that it committed breach of contract, petitioner alleged in its that answer that the subject shipment was transported in accordance with the provisions of the covering bill of lading and that its liability under the law on transportation of good attaches only in case of loss, destruction or deterioration of the goods as provided for in Article 1734 of Civil Code (Rollo, p. 16).Defendant Eli Lilly, Inc., on the other hand, filed its answer with compulsory and cross-claim. In its cross-claim, it alleged that the delay in the arrival of the the subject merchandise was due solely to the gross negligence of petitioner Maersk Line.The issues having been joined, private respondent moved for the dismissal of the complaint against Eli Lilly, Inc.on the ground that the evidence on record

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shows that the delay in the delivery of the shipment was attributable solely to petitioner.Acting on private respondent's motion, the trial court dismissed the complaint against Eli Lilly, Inc. Correspondingly, the latter withdraw its cross-claim against petitioner in a joint motion dated December 3, 1979.After trial held between respondent and petitioner, the court a quo rendered judgment dated January 8, 1982 in favor of respondent Castillo, the dispositive portion of which reads:IN VIEW OF THE FOREGOING, this Court believe (sic) and so hold (sic) that there was a breach in the performance of their obligation by the defendant Maersk Line consisting of their negligence to ship the 6 drums of empty Gelatin Capsules which under their own memorandum shipment would arrive in the Philippines on April 3, 1977 which under Art. 1170 of the New Civil Code, they stood liable for damages.Considering that the only evidence presented by the defendant Maersk line thru its agent the Compania de Tabacos de Filipinas is the testimony of Rolando Ramirez who testified on Exhs. "1" to "5" which this Court believe (sic) did not change the findings of this Court in its decision rendered on September 4, 1980, this Court hereby renders judgment in favor of the plaintiff Efren Castillo as against the defendant Maersk Line thru its agent, the COMPANIA GENERAL DE TABACOS DE FILIPINAS and ordering:(a) Defendant to pay the plaintiff Efren V. Castillo the amount of THREE HUNDRED SIXTY NINE THOUSAND PESOS, (P369,000.00) as unrealized profit;.(b) Defendant to pay plaintiff the sum of TWO HUNDRED THOUSAND PESOS (P200,000.00), as moral damages;(c) Defendant to pay plaintiff the sum of TEN THOUSAND PESOS (P10,000.00) as exemplary damages;(d) Defendant to pay plaintiff the sum of ELEVEN THOUSAND SIX HUNDRED EIGHTY PESOS AND NINETY SEVEN CENTAVOS (P11,680.97) as cost of credit line; and(e) Defendant to pay plaintiff the sum of FIFTY THOUSAND PESOS (P50,000.00), as attorney's fees and to pay the costs of suit.That the above sums due to the plaintiff will bear the legal rate of interest until they are fully paid from the time the case was filed.SO ORDERED. (AC-GR CV No. 10340, Rollo, p. 15).On appeal, respondent court rendered its decision dated August 1, 1990 affirming with modifications the lower court's decision as follows:WHEREFORE, the decision appealed from is affirmed with a modification, and, as modified, the judgment in this case should read as follows:

Judgment is hereby rendered ordering defendant-appellant Maersk Line to pay plaintiff-appellee (1) compensatory damages of P11,680.97 at 6% annual interest from filing of the complaint until fully paid, (2) moral damages of P50,000.00, (3) exemplary damages of P20,000,00, (3) attorney's fees, per appearance fees, and litigation expenses of P30,000.00, (4) 30% of the total damages awarded except item (3) above, and the costs of suit.SO ORDERED. (Rollo, p. 50)In its Memorandum, petitioner submits the following "issues" for resolution of the court :

IWhether or not the respondent Court of Appeals committed an error when it ruled that a defendant's cross-claim against a co-defendant survives or subsists even after the dismissal of the complaint against defendant-cross claimant.

IIWhether or not respondent Castillo is entitled to damages resulting from delay in the delivery of the shipment in the absence in the bill of lading of a stipulation on the period of delivery.

IIIWhether or not the respondent appellate court erred in awarding actual, moral and exemplary damages and attorney's fees despite the absence of factual findings and/or legal bases in the text of the decision as support for such awards.

IVWhether or not the respondent Court of Appeals committed an error when it rendered an ambiguous and unexplained award in the dispositive portion of the decision which is not supported by the body or the text of the decision. (Rollo, pp.94-95).With regard to the first issue raised by petitioner on whether or not a defendant's cross-claim against co-defendant (petitioner herein) survives or subsists even after the dismissal of the complaint against defendant-cross-claimant (petitioner herein), we rule in the negative.Apparently this issue was raised by reason of the declaration made by respondent court in its questioned decision, as follows:Re the first assigned error: What should be rescinded in this case is not the "Memorandum of Shipment" but the contract between appellee and defendant Eli Lilly (embodied in three documents, namely: Exhs. A, A-1 and A-2) whereby the former agreed to buy and the latter to sell those six drums of gelatin capsules. It is by virtue of the cross-claim by appellant Eli Lilly against defendant Maersk Line for the latter's gross negligence in diverting the shipment thus causing the delay and damage to appellee that the trial court found appellant Maersk Line liable. . . .

xxx xxx xxx

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Re the fourth assigned error: Appellant Maersk Line's insistence that appellee has no cause of action against it and appellant Eli Lilly because the shipment was delivered in good order and condition, and the bill of lading in question contains "stipulations, exceptions and conditions" Maersk Line's liability only to the "loss, destruction or deterioration," indeed, this issue of lack of cause of action has already been considered in our foregoing discussion on the second assigned error, and our resolution here is still that appellee has a cause of action against appellant Eli Lilly. Since the latter had filed a cross-claim against appellant Maersk Line, the trial court committed no error, therefore, in holding the latter appellant ultimately liable to appellee. (Rollo, pp. 47-50; Emphasis supplied)Reacting to the foregoing declaration, petitioner submits that its liability is predicated on the cross-claim filed its co-defendant Eli Lilly, Inc. which cross-claim has been dismissed, the original complaint against it should likewise be dismissed. We disagree. It should be recalled that the complaint was filed originally against Eli Lilly, Inc. as shipper-supplier and petitioner as carrier. Petitioner being an original party defendant upon whom the delayed shipment is imputed cannot claim that the dismissal of the complaint against Eli Lilly, Inc. inured to its benefit.Respondent court, erred in declaring that the trial court based petitioner's liability on the cross-claim of Eli Lilly, Inc. As borne out by the record, the trial court anchored its decision on petitioner's delay or negligence to deliver the six (6) drums of gelatin capsules within a reasonable time on the basis of which petitioner was held liable for damages under Article 1170 of the New Civil Code which provides that those who in the performance of their obligations are guilty of fraud, negligence, or delay and those who in any manner contravene the tenor thereof, are liable for damages.Nonetheless, petitioner maintains that it cannot be held for damages for the alleged delay in the delivery of the 600,000 empty gelatin capsules since it acted in good faith and there was no special contract under which the carrier undertook to deliver the shipment on or before a specific date (Rollo, p. 103).On the other hand, private respondent claims that during the period before the specified date of arrival of the goods, he had made several commitments and contract of adhesion. Therefore, petitioner can be held liable for the damages suffered by private respondent for the cancellation of the contracts he entered into.We have carefully reviewed the decisions of respondent court and the trial court and both of them show that, in finding petitioner liable for damages for the delay in the delivery of goods, reliance was made on the rule that contracts of adhesion are void. Added to this, the lower court stated that the exemption against liability for delay is against public policy and is thus, void. Besides, private respondent's action is anchored on Article 1170

of the New Civil Code and not under the law on Admiralty (AC-GR CV No. 10340, Rollo, p. 14).The bill of lading covering the subject shipment among others, reads:6. GENERAL(1) The Carrier does not undertake that the goods shall arive at the port of discharge or the place of delivery at any particular time or to meet any particular market or use and save as is provided in clause 4 the Carrier shall in no circumstances be liable for any direct, indirect or consequential loss or damage caused by delay. If the Carrier should nevertheless be held legally liable for any such direct or indirect or consequential loss or damage caused by delay, such liability shall in no event exceed the freight paid for the transport covered by this Bill of Lading. (Exh. "1-A"; AC-G.R. CV No. 10340, Folder of Exhibits, p. 41)It is not disputed that the aforequoted provision at the back of the bill of lading, in fine print, is a contract of adhesion. Generally, contracts of adhesion are considered void since almost all the provisions of these types of contracts are prepared and drafted only by one party, usually the carrier (Sweet Lines v. Teves, 83 SCRA 361 [1978]). The only participation left of the other party in such a contract is the affixing of his signature thereto, hence the term "Adhesion" (BPI Credit Corporation v. Court of Appeals, 204 SCRA 601 [1991]; Angeles v. Calasanz, 135 SCRA 323 [1985]).Nonetheless, settled is the rule that bills of lading are contracts not entirely prohibited (Ong Yiu v. Court of Appeals, et al., 91 SCRA 223 [1979]; Servando, et al. v. Philippine Steam Navigation Co., 117 SCRA 832 [1982]). One who adheres to the contract is in reality free to reject it in its entirety; if he adheres, he gives his consent (Magellan Manufacturing Marketing Corporation v. Court of Appeals, et al., 201 SCRA 102 [1991]).In Magellan, (supra), we ruled:It is a long standing jurisprudential rule that a bill of lading operates both as a receipt and as contract to transport and deliver the same a therein stipulated. As a contract, it names the parties, which includes the consignee, fixes the route, destination, and freight rates or charges, and stipulates the rights and obligations assumed by the parties. Being a contract, it is the law between the parties who are bound by its terms and conditions provided that these are not contrary to law, morals, good customs, public order and public policy. A bill of lading usually becomes effective upon its delivery to and acceptance by the shipper. It is presumed that the stipulations of the bill were, in the absence of fraud, concealment or improper conduct, known to the shipper, and he is generally bound by his acceptance whether he reads the bill or not. (Emphasis supplied)However, the aforequoted ruling applies only if such contracts will not create an absurd situation as in the case at bar. The questioned provision in the subject bill

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of lading has the effect of practically leaving the date of arrival of the subject shipment on the sole determination and will of the carrier.While it is true that common carriers are not obligated by law to carry and to deliver merchandise, and persons are not vested with the right to prompt delivery, unless such common carriers previously assume the obligation to deliver at a given date or time (Mendoza v. Philippine Air Lines, Inc., 90 Phil. 836 [1952]), delivery of shipment or cargo should at least be made within a reasonable time.In Saludo, Jr. v. Court of Appeals (207 SCRA 498 [1992]) this Court held:The oft-repeated rule regarding a carrier's liability for delay is that in the absence of a special contract, a carrier is not an insurer against delay in transportation of goods. When a common carrier undertakes to convey goods, the law implies a contract that they shall be delivered at destination within a reasonable time, in the absence, of any agreement as to the time of delivery. But where a carrier has made an express contract to transport and deliver properly within a specified time, it is bound to fulfill its contract and is liable for any delay, no matter from what cause it may have arisen. This result logically follows from the well-settled rule that where the law creates a duty or charge, and the default in himself, and has no remedy over, then his own contract creates a duty or charge upon himself, he is bound to make it good notwithstanding any accident or delay by inevitable necessity because he might have provided against it by contract. Whether or not there has been such an undertaking on the part of the carrier is to be determined from the circumstances surrounding the case and by application of the ordinary rules for the interpretation of contracts.An examination of the subject bill of lading (Exh. "1"; AC GR CV No. 10340, Folder of Exhibits, p. 41) shows that the subject shipment was estimated to arrive in Manila on April 3, 1977. While there was no special contract entered into by the parties indicating the date of arrival of the subject shipment, petitioner nevertheless, was very well aware of the specific date when the goods were expected to arrive as indicated in the bill of lading itself. In this regard, there arises no need to execute another contract for the purpose as it would be a mere superfluity.In the case before us, we find that a delay in the delivery of the goods spanning a period of two (2) months and seven (7) days falls was beyond the realm of reasonableness. Described as gelatin capsules for use in pharmaceutical products, subject shipment was delivered to, and left in, the possession and custody of petitioner-carrier for transport to Manila via Oakland, California. But through petitioner's negligence was mishipped to Richmond, Virginia. Petitioner's insitence that it cannot be held liable for the delay finds no merit.

Petition maintains that the award of actual, moral and exemplary dames and attorney's fees are not valid since there are no factual findings or legal bases stated in the text of the trial court's decision to support the award thereof.Indeed, it is settled that actual and compensataory damages requires substantial proof (Capco v. Macasaet. 189 SCRA 561 [1990]). In the case at bar, private respondent was able to sufficiently prove through an invoice (Exh. 'A-1'), certification from the issuer of the letter of credit (Exh.'A-2') and the Memorandum of Shipment (Exh. "B"), the amount he paid as costs of the credit line for the subject goods. Therefore, respondent court acted correctly in affirming the award of eleven thousand six hundred eighty pesos and ninety seven centavos (P11,680.97) as costs of said credit line.As to the propriety of the award of moral damages, Article 2220 of the Civil Code provides that moral damages may be awarded in "breaches of contract where the defendant acted fraudulently or in bad faith" (Pan American World Airways v. Intermediate Appellate Court, 186 SCRA 687 [1990]).In the case before us, we that the only evidence presented by petitioner was the testimony of Mr. Rolando Ramirez, a claims manager of its agent Compania General de Tabacos de Filipinas, who merely testified on Exhs. '1' to '5' (AC-GR CV No. 10340, p. 2) and nothing else. Petitioner never even bothered to explain the course for the delay, i.e. more than two (2) months, in the delivery of subject shipment. Under the circumstances of the case, we hold that petitioner is liable for breach of contract of carriage through gross negligence amounting to bad faith. Thus, the award of moral damages if therefore proper in this case.In line with this pronouncement, we hold that exemplary damages may be awarded to the private respondent. In contracts, exemplary damages may be awarded if the defendant acted in a wanton, fraudulent, reckless, oppresive or malevolent manner. There was gross negligence on the part of the petitioner in mishiping the subject goods destined for Manila but was inexplicably shipped to Richmond, Virginia, U.S.A. Gross carelessness or negligence contitutes wanton misconduct, hence, exemplary damages may be awarded to the aggrieved party (Radio Communication of the Phils., Inc. v. Court of Appeals, 195 SCRA 147 [1991]).Although attorney's fees are generally not recoverable, a party can be held lible for such if exemplary damages are awarded (Artice 2208, New Civil Code). In the case at bar, we hold that private respondent is entitled to reasonable attorney`s fees since petitioner acte with gross negligence amounting to bad faith.However, we find item 4 in the dispositive portion of respondent court`s decision which awarded thirty (30) percent of the total damages awarded except item 3

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regarding attorney`s fees and litigation expenses in favor of private respondent, to be unconsionable, the same should be deleted.WHEREFORE, with the modification regarding the deletion of item 4 of respondent court`s decision, the appealed decision is is hereby AFFIRMED in all respects.SO ORDERED.G.R. No. L-50076 September 14, 1990NORBERTO QUISUMBING, SR., and GUNTHER LOEFFLER petitioners, vs.COURT OF APPEALS and PHILIPPINE AIR LINES, INC., respondents.N.J. Quisumbing & Associates for petitionersSiguion Reyna, Montecillo & Ongsiako for private respondent. NARVASA, J.:Having met with no success in the Court of First Instance of Rizal and in the Court of Appeals, the petitioners are now in this Court in a third and final attempt to recover from the Philippine Airlines, Inc. (hereafter, simply PAL) the value of jewelry, other valuables and money taken from them by four (4) armed robbers on board one of the latter's airplanes while on a flight from Mactan City to Manila, as well as moral and exemplary damages, attorney's fees and expenses of litigation.The petitioners accept the correctness of the basic facts adopted by the Court of Appeals from the judgment of the Court of First Instance, to wit: 1

1. . . . Norberto Quisumbing, Sr. and Gunther Leoffler were among the of ... (PAL's) Fokker 'Friendship' PIC-536 plane in its flight of November 6,1968 which left Mactan City at about 7:30 in the evening with Manila for its destination.2. After the plane had taken off, Florencio O. Villarin, a Senior NBI Agent who was also a passenger of the said plane, noticed a certain 'Zaldy,' a suspect in the killing of Judge Valdez, seated at the front seat near the door leading to the cockpit of the plane. A check by Villarin with the passenger's ticket in the possession of flight Stewardess Annie Bontigao, who was seated at the last seat right row, revealed that 'Zaldy' had used the name 'Cardente,' one of his aliases known to Villarin. Villarin also came to know from the stewardess that 'Zaldy' had three companions on board the plane."3. Villarin then scribbled a note addressed to the pilot of the plane requesting the latter to contact NBI duty agents in Manila for the said agents to ask the Director of the NBI to send about six NBI agents to meet the plane because the suspect in the killing of Judge Valdez was on board (Exh. 'G'). The said note was handed by Villarin to the stewardess who in tum gave the same to the pilot.

4. After receiving the note, which was about 15 minutes after take off, the pilot of the plane, Capt. Luis Bonnevie, Jr., came out of the cockpit and sat beside Villarin at the rear portion of the plane and explained that he could not send the message because it would be heard by all ground aircraft stations. Villarin, however, told the pilot of the danger of commission of violent acts on board the plane by the notorious 'Zaldy' and his three companions.5. While the pilot and Villarin were talking, 'Zaldy' and one of his companions walked to the rear and stood behind them. Capt. Bonnevie then stood up and went back to the cockpit. 'Zaldy' and his companions returned to their seats, but after a few minutes they moved back to the rear throwing ugly looks at Villarin who, sensing danger, stood up and went back to his original seat across the aisle on the second to the last seat near the window. 'Zaldy and his companion likewise went back to their respective seats in front.6. Soon thereafter an exchange of gunshots ensued between Villarin and 'Zaldy' and the latter's companions. 'Zaldy' announced to the passengers and the pilots in the cockpit that it was a hold-up and ordered the pilot not to send any SOS. The hold-uppers divested passengers of their belongings.7. Specifically, ... Norberto Quisumbing, Sr. was divested of jewelries and cash in the total amount of P18,650.00 out of which recoveries were made amounting to P4,550.00. . . Gunther Leoffler was divested of a wrist watch, cash and a wallet in the total of P1,700.00. As a result of the incident ... Quisumbing, Sr.suffered shock, because a gun had been pointed at him by one of the holduppers.8. Upon landing at the Manila International Airport. 'Zaldy' and his three companions succeeded in escaping.Demands were thereafter made on PAL by Quisumbing and Loeffler "to indemnify ... (them) on their aforesaid loss, but ... (PAL) refused ... (averring that) it is not liable to (them) in law or in fact." 2

Contending that the "aforesaid loss is a result of breach of ... (PAL's) contractual obligation to carry ... (them) and their belongings and effects to their Manila destination without loss or damage, and constitutes a serious dereliction of ... (PAL's) legal duty to exercise extraordinary diligence in the vigilance over the same." , Quisumbing and Loeffler brought suit against PAL in the Court of First Instance of Rizal, as stated in this opinion's opening paragraph, to recover the value of the property lost by them to the robbers as well as moral and exemplary damages, attorney's fees and expenses of litigation. 3 The plaintiffs declared that their suit was instituted "... pursuant to Civil Code articles 1754, 998, 2000 and 2001 and on the ground that in relation to said Civil Code article 2001 the complained-of act of the armed robbers is not a force majeure, as the 'use of arms' or 'irresistible force' was not taken advantage of

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by said armed robbers in gaining entrance to defendant's ill-fated plane in questions. And, with respect to said Civil Code article 1998, it is not essential that the lost effects and belongings of plaintiffs were actually delivered to defendant's plane personnel or that the latter were notified thereof (De los Santos v. Tamn Khey, [CA] 58 O.G. 7693)." 4

PAL filed answer denying liability, alleging inter alia that the robbery during the flight and after the aircraft was forcibly landed at the Manila Airport did indeed constitute force majeure, and neither of the plaintiffs had notified PAL "or its crew or employees that they were in possession of cash, German marks and valuable jewelries and watches" or surrendered said items to "the crew or personnel on board the aircraft." 5

After trial, the Court of First Instance rendered judgment 'dismissing plaintiffs' complaint with costs against ... (them)." 6 The Court opined that since the plaintiffs "did not notify defendant or its employees that they were in possession of the cash, jewelries, and the wallet they are now claiming," the very provision of law invoked by them, Article 1998 of the Civil Code, denies them any recourse against PAL. The Court also pointed out that-... while it is true that the use of gems was not taken advantage of by the robbers in gaining entrance to defendant's ill-fated plane, the armed robbery that took place constitutes force majeure for which defendant is not liable because the robbers were able to gain entrance to the plane with the guns they used already in their possession, which fact could not have been prevented nor avoided by the defendant since it was not authorized to search its passengers for firearms and deadly weapons as shown in Exhibits '6', '7', '8,' and '8-A.' As its robbery constitutes force majeure, defendant is not liable.The plaintiffs appealed to the Court of Appeals. 7 The Court affirmed the trial court's judgment. 8 It rejected the argument that "the use of arms or ... irresistible force" referred to in Article 2001 constitutes force majeure only if resorted to gain entry into the airplane, and not if it attends "the robbery itself." The Court ruled that under the facts, "the highjacking-robbery was force majeure," observing that —... hijackers do not board an airplane through a blatant display of firepower and violent fury. Firearms, hand-grenades, dynamite, and explosives are introduced into the airplane surreptitiously and with the utmost cunning and stealth, although there is an occasional use of innocent hostages who will be coldly murdered unless a plane is given to the hijackers' complete disposal. The objective of modern-day hijackers is to display the irresistible force amounting to force majeure only when it is most effective and that is when the jetliner is winging its way at Himalayan altitudes and ill-advised heroics by either crew or passengers would send the multi-million peso airplane and the priceless lives of all its occupants into certain death and destruction. ...

The Appellate Court also ruled that in light of the evidence PAL could not be faulted for want of diligence, particularly for failing "to take positive measures to implement Civil Aeronautics Administration regulations prohibiting civilians from carrying firearms on board aircrafts;" and that "the absence of coded transmissions, the amateurish behaviour of the pilot in dealing with the NBI agent, the allegedly open cockpit door, and the failure to return to Mactan, in the light of the circumstances of the case ..., were not negligent acts sufficient to overcome the force majeure nature of the armed robbery." In fact, the Court went on to says, 9

... it is illusive to assume that had these precautions been taken, the hijacking or the robbery would not have succeeded. The mandatory use of the most sophisticated electronic detection devices and magnetometers, the imposition of severe penalties, the development of screening procedures, the compilation of hijacker behavioural profiles, the assignment of sky marshals, and the weight of outraged world opinion may have minimized hijackings but all these have proved ineffective against truly determined hijackers. World experience shows that if a group of armed hijackers want to take over a plane in flight, they can elude the latest combined government and airline industry measures. And as our own experience in Zamboanga City illustrates, the use of force to overcome hijackers, results in the death and injury of innocent passengers and crew members. We are not in the least bit suggesting that the Philippine Airlines should not do everything humanly possible to protect passengers from hijackers' acts. We merely state that where the defendant has faithfully complied with the requirements of government agencies and adhered to the established procedures and precautions of the airline industry at any particular time, its failure to take certain steps that a passenger in hindsight believes should have been taken is not the negligence or misconduct which mingles with force majeure as an active and cooperative cause.Under the circumstance of the instant case, the acts of the airline and its crew cannot be faulted as negligence. The hijackers had already shown their willingness to kill. One passenger was in fact killed and another survived gunshot wounds. The lives of the rest of the passengers and crew were more important than their properties. Cooperation with the hijackers until they released their hostages at the runway end near the South Superhighway was dictated by the circumstances.Insisting that the evidence demonstrates negligence on the part of the PAL crew "occurring before and exposing them to hijacking," Quisumbing and Loeffler have come up to this Court praying that the judgments of the trial Court and the Court of Appeals be reversed and another rendered in their favor. Once again, the issue will be resolved against them.A careful analysis of the record in relation to the memoranda and other pleadings of the parties,

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convinces this Court of the correctness of the essential conclusion of both the trial and appellate courts that the evidence does indeed fail to prove any want of diligence on the part of PAL, or that, more specifically, it had failed to comply with applicable regulations or universally accepted and observed procedures to preclude hijacking; and that the particular acts singled out by the petitioners as supposedly demonstrative of negligence were, in the light of the circumstances of the case, not in truth negligent acts "sufficient to overcome the force majeure nature of the armed robbery." The Court quite agrees, too, with the Appellate Tribunal's wry observation that PAL's "failure to take certain steps that a passenger in hindsight believes should have been taken is not the negligence or misconduct which mingles with force majeure as an active and cooperative cause."No success can therefore attend petitioners' appeal, not only because they wish to have a review and modification of factual conclusions of the Court of Appeals, which established and uniformly observed axiom proscribes, 10 but also because those factual conclusions have in this Court's view been correctly drawn from the proofs on record.WHEREFORE, the petition is DENIED and the appealed Decision of the Court of Appeals is AFFIRMED, with costs against petitioners.SO ORDERED.G.R. No. 60673 May 19, 1992PAN AMERICAN WORLD AIRWAYS, INC., petitioner, vs.JOSE K. RAPADAS and THE COURT OF APPEALS, respondents.Froilan P. Pobre for private respondent. GUTIERREZ, JR., J.:This is a petition for review assailing the decision of the respondent Court of Appeals which affirmed in totothe trial court decision on the liability of petitioner Pan American World Airways for damages due to private respondent. The trial court ruled that the petitioner can not avail of a limitation of liabilities for lost baggages of a passenger. The dispositive portion of the trial court decision reads:WHEREFORE, in view of the foregoing considerations, judgment is hereby rendered ordering defendant to pay plaintiff by way of actual damages the equivalent peso value of the amount of $5,228.90 and 100 paengs, nominal damages in the amount of P20,000.00 and attorney's fees of P5,000.00, and the costs of the suit. Defendant's counterclaim is dismissed. (Rollo, p. 13)On January 16, 1975, private respondent Jose K. Rapadas held Passenger Ticket and Baggage Claim Check No. 026-394830084-5 for petitioner's Flight No. 841 with the route from Guam to Manila. While standing in line to board the flight at the Guam airport, Rapadas was ordered by petitioner's handcarry control agent to

check-in his Samsonite attache case. Rapadas protested pointing to the fact that other co-passengers were permitted to handcarry bulkier baggages. He stepped out of the line only to go back again at the end of it to try if he can get through without having to register his attache case. However, the same man in charge of handcarry control did not fail to notice him and ordered him again to register his baggage. For fear that he would miss the plane if he insisted and argued on personally taking the valise with him, he acceded to checking it in. He then gave his attache case to his brother who happened to be around and who checked it in for him, but without declaring its contents or the value of its contents. He was given a Baggage Claim Tag No. P-749-713. (Exhibit "B" for the plaintiff-respondent)Upon arriving in Manila on the same date, January 16, 1975, Rapadas claimed and was given all his checked-in baggages except the attache case. Since Rapadas felt ill on his arrival, he sent his son, Jorge Rapadas to request for the search of the missing luggage. The petitioner exerted efforts to locate the luggage through the Pan American World Airways-Manila International Airport (PAN AM-MIA) Baggage Service.On January 30, 1975, the petitioner required the private respondent to put the request in writing. The respondent filled in a Baggage Claim Blank Form. Thereafter, Rapadas personally followed up his claim. For several times, he called up Mr. Panuelos, the head of the Baggage Section of PAN AM. He also sent letters demanding and reminding the petitioner of his claim.Rapadas received a letter from the petitioner's counsel dated August 2, 1975 offering to settle the claim for the sum of one hundred sixty dollars ($160.00) representing the petitioner's alleged limit of liability for loss or damage to a passenger's personal property under the contract of carriage between Rapadas and PAN AM. Refusing to accept this kind of settlement, Rapadas filed the instant action for damages on October 1, 1975. Rapadas alleged that PAN AM discriminated or singled him out in ordering that his luggage be checked in. He also alleged that PAN AM neglected its duty in the handling and safekeeping of his attache case from the point of embarkation in Guam to his destination in Manila. He placed the value of the lost attache case and its contents at US$42,403.90. According to him, the loss resulted in his failure to pay certain monetary obligations, failure to remit money sent through him to relatives, inability to enjoy the fruits of his retirement and vacation pay earned from working in Tonga Construction Company (he retired in August 1974) and inability to return to Tonga to comply with then existing contracts.In its answer, petitioner-defendant PAN AM acknowledged responsibility for the loss of the attache case but asserted that the claim was subject to the "Notice of Baggage Liability Limitations" allegedly attached to and forming part of the passenger ticket.

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The petitioner argued that the same notice was also conspicuously posted in its offices for the guidance of the passengers.At the trial, private respondent showed proof of his retirement award and vacation pay amounting to $4,750.00. He claimed that the attache case also contained other money consisting of $1,400 allegedly given to him by his son, Jaime, as a round trip fare of his (plaintiff-respondent) wife, but which amount was later found to be actually intended by Jaime as payment for arrears of a lot purchased from Tropical Homes, Inc.; $3,000 allegedly given by his brothers for payment of taxes and for constructing improvements on the Rapadas estates; and $300.00 birthday present of the spouses Mr. and Mrs. Ruben Canonizado to plaintiff-respondent's wife. He also claimed having kept several items in the attache case, namely –– (1) contracts and records of employment, letters of commendation, testimonials and newspaper clippings on his achievement for 13 years in Tonga, New Zealand and Australia, drafts of manuscripts, photographs and drivers license alleged to be worth $20,000.00; a Polaroid camera, films, calculator, and other personal items worth $403.90; memorabilia, autographs personally acquired from Charles Lindberg, Lawrence Rockefeller and Ryoichi Sasakawa, a commemorative palladium coin worth Tongan 100 paengs and unused Tongan stamps, all totalling $7,500.00; and a plan worth $5,000.00 drawn by his son Jaime, who is an architect, for the construction of a residential house and a 6-story commercial building. Rapadas claimed the amount of the attache case itself to be $25.50. (See Decision in Civil Case No. 99564 in Amended Record on Appeal, pp. 61-85)The lower court ruled in favor of complainant Rapadas after finding no stipulation giving notice to the baggage liability limitation. The court rejected the claim of defendant PANAM that its liability under the terms of the passenger ticket is only up to $160.00. However, it scrutinized all the claims of the plaintiff. It discredited insufficient evidence to show discriminatory acts or bad faith on the part of petitioner PANAM.On appeal, the Court of Appeals affirmed the trial court decision. Hence, this petition.The main issue raised in the case at bar is whether or not a passenger is bound by the terms of a passenger ticket declaring that the limitations of liability set forth in the Warsaw Convention (October 12, 1929; 137 League of Nations Treaty Series II; See Proclamation No. 201 [1955], 51 O.G. 4933 [October, 1955]) as amended by the Hague Protocol (September 28, 1955; 478 UNTS 373; III PTS 515), shall apply in case of loss, damage or destruction to a registered luggage of a passenger.The petitioner maintains that its liability for the lost baggage of respondent Rapadas was limited to $160.00 since the latter did not declare a higher value for his

baggage and did not pay the corresponding additional charges.The private respondent, on the other hand, insists that he is entitled to as much damages as those awarded by the court and affirmed by the respondent appellate court.After a review of the various arguments of the opposing parties as well as the records of the case, the Court finds sufficient basis under the particular facts of this case for the availment of the liability limitations under the Warsaw Convention.There is no dispute, and the courts below admit, that there was such a Notice appearing on page two (2) of the airline ticket stating that the Warsaw Convention governs in case of death or injury to a passenger or of loss, damage or destruction to a passenger's luggage.The Notice states:If the passenger's journey involves an ultimate destination or stop in a country other than the country of departure the Warsaw Convention may be applicable and the Convention governs and in most cases limits the liability of carriers for death or personal injury and in respect of loss of or damage to baggage. See also notice headed "Advice to International Passengers on Limitation of Liability." (The latter notice refers to limited liability for death or personal injury to passengers with proven damages not exceeding US $75,000 per passenger; Exhibit "K" for plaintiff respondent, Table of Exhibits, p. 19)Furthermore, paragraph 2 of the "Conditions of Contract" also appearing on page 2 of the ticket states:2. Carriage hereunder is subject to the rules and limitations relating to liability established by the Warsaw Convention unless such carriage is not "international carriage" as defined by that Convention. (Exhibit "K", supra)We note that plaintiff-respondent Rapadas presented as proof of the Passenger Ticket and Baggage Check No. 026-394830084-5 a xerox copy of its page 2 which contains the Notice and Conditions of Contract, and also page 3 which recites the Advice to International Passengers on Limitation of Liability. He also presented two xerox copies of Flight Coupon No. 3 of the same passenger ticket showing the fares paid for the trips Honolulu to Guam, Guam to Manila, and Manila to Honolulu to prove his obligations which remained unpaid because of the unexpected loss of money allegedly placed inside the missing attache case. Rapadas explained during the trial that the same passenger ticket was returned by him to one Mr. S.L. Faupula of the Union Steam Ship Company of New Zealand, Ltd., Tonga who demanded the payment of the fares or otherwise, the return of the unused plane tickets (including the subject Passenger Ticket & Baggage Check No. 026-394830084-5). The issuance of these tickets was facilitated by Mr. Faupula on credit.

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Meanwhile, the petitioner offered as evidence Exhibit "1" also showing page 2 of the passenger ticket to prove the notice and the conditions of the contract of carriage. It likewise offered Exhibit "1-A", a xerox copy of a "Notice of Baggage Liability Limitations" which the trial court disregarded and held to be non-existent. The same Exhibit "1-A" contained the following stipulations:NOTICE OF BAGGAGE LIABILITY LIMITATIONS –– Liability for loss, delay, or damage to baggage is limited as follows unless a higher value is declared in advance and additional charges are paid: (1) for most international travel (including domestic portions of international journeys) to approximately $8.16 per pound ($18.00 per kilo; now $20.00 per Exhibit "13") for checked baggage and $360 (now $400 per Exhibit "13") per passenger for unchecked baggage; (2) for travel wholly between U.S. points, to $500 per passenger on most carriers (a few have lower limits). Excess valuation may not be declared on certain types of valuable articles. Carriers assume no liability for fragile or perishable articles. Further information may be obtained from the carrier. (Table of Exhibits, p. 45)The original of the Passenger Ticket and Baggage Check No. 026-394830084-5 itself was not presented as evidence as it was among those returned to Mr. Faupula. Thus, apart from the evidence offered by the defendant airline, the lower court had no other basis for determining whether or not there was actually a stipulation on the specific amounts the petitioner had expressed itself to be liable for loss of baggage.Although the trial court rejected the evidence of the defendant-petitioner of a stipulation particularly specifying what amounts it had bound itself to pay for loss of luggage, the Notice and paragraph 2 of the "Conditions of Contract" should be sufficient notice showing the applicability of the Warsaw limitations.The Warsaw Convention, as amended, specifically provides that it is applicable to international carriage which it defines in Article 1, par. 2 as follows:(2) For the purposes of this Convention, the expression "international carriage" means any carriage in which, according to the agreement between the parties, the place of departure and the place of destination, whether or not there be a breach in the carriage or a transhipment, are situated either within the territories of two High Contracting Parties or within the territory of a single High Contracting Party if there is an agreed stopping place within the territory of another State, even if that State is not a High Contracting Party. Carriage between two points within the territory of a single High Contracting Party without an agreed stopping place within the territory of another State is not international carriage for the purposes of this Convention. ("High Contracting Party" refers to a state which has ratified or adhered to the Convention, or which has not effectively denounced the Convention [Article 40A(l)]).

Nowhere in the Warsaw Convention, as amended, is such a detailed notice of baggage liability limitations required. Nevertheless, it should become a common, safe and practical custom among air carriers to indicate beforehand the precise sums equivalent to those fixed by Article 22 (2) of the Convention.The Convention governs the availment of the liability limitations where the baggage check is combined with or incorporated in the passenger ticket which complies with the provisions of Article 3, par. l (c). (Article 4, par. 2) In the case at bar, the baggage check is combined with the passenger ticket in one document of carriage. The passenger ticket complies with Article 3, par. l (c) which provides:(l) In respect of the carriage of passengers a ticket shall be delivered containing:(a) . . .(b) . . .(c) a notice to the effect that, if the passenger's journey involves an ultimate destination or stop in a country other than the country of departure, the Warsaw Convention may be applicable and that the Convention governs and in most cases limits the liability of carriers for death or personal injury and in respect of loss of or damage to baggage.We have held in the case of Ong Yiu v. Court of Appeals, supra, and reiterated in a similar case where herein petitioner was also sued for damages, Pan American World Airways v. Intermediate Appellate Court(164 SCRA 268 [1988]) that:It (plane ticket) is what is known as a contract of "adhesion", in regards which it has been said that contracts of adhesion wherein one party imposes a ready made form of contract on the other, as the plane ticket in the case at bar, are contracts not entirely prohibited. The one who adheres to the contract is in reality free to reject it entirely; if he adheres, he gives his consent. (Tolentino, Civil Code, Vol. IV, 1962 ed., p. 462, citing Mr. Justice J.B.L. Reyes, Lawyer's Journal, January 31, 1951, p. 49) And as held in Randolph v. American Airlines, 103 Ohio App. 172, 144 N.E. 2d 878; Rosenchein v. Trans World Airlines, Inc., 349 S.W. 2d 483, "a contract limiting liability upon an agreed valuation does not offend against the policy of the law forbidding one from contracting against his own negligence.Considering, therefore, that petitioner had failed to declare a higher value for his baggage, he cannot be permitted a recovery in excess of P100.00 . . . (91 SCRA 223 at page 231)We hasten to add that while contracts of adhesion are not entirely prohibited, neither is a blind reliance on them encouraged. In the face of facts and circumstances showing they should be ignored because of their basically one sided nature, the Court does not hesitate to rule out blind adherence to their terms. (See

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Sweet Lines, Inc. v. Teves, 83 SCRA 361, 368-369[1978])The arguments of the petitioner do not belie the fact that it was indeed accountable for the loss of the attache case. What the petitioner is concerned about is whether or not the notice, which it did not fail to state in the plane ticket and which it deemed to have been read and accepted by the private respondent will be considered by this Court as adequate under the circumstances of this case. As earlier stated, the Court finds the provisions in the plane ticket sufficient to govern the limitations of liabilities of the airline for loss of luggage. The passenger, upon contracting with the airline and receiving the plane ticket, was expected to be vigilant insofar as his luggage is concerned. If the passenger fails to adduce evidence to overcome the stipulations, he cannot avoid the application of the liability limitations.The facts show that the private respondent actually refused to register the attache case and chose to take it with him despite having been ordered by the PANAM agent to check it in. In attempting to avoid registering the luggage by going back to the line, private respondent manifested a disregard of airline rules on allowable handcarried baggages. Prudence of a reasonably careful person also dictates that cash and jewelry should be removed from checked-in-luggage and placed in one's pockets or in a handcarried Manila-paper or plastic envelope.The alleged lack of enough time for him to make a declaration of a higher value and to pay the corresponding supplementary charges cannot justify his failure to comply with the requirement that will exclude the application of limited liability. Had he not wavered in his decision to register his luggage, he could have had enough time to disclose the true worth of the articles in it and to pay the extra charges or remove them from the checked-in-luggage. Moreover, an airplane will not depart meantime that its own employee is asking a passenger to comply with a safety regulation.Passengers are also allowed one handcarried bag each provided it conforms to certain prescribed dimensions. If Mr. Rapadas was not allowed to handcarry the lost attache case, it can only mean that he was carrying more than the allowable weight for all his luggages or more than the allowable number of handcarried items or more than the prescribed dimensions for the bag or valise. The evidence on any arbitrary behavior of a Pan Am employee or inexcusable negligence on the part of the carrier is not clear from the petition. Absent such proof, we cannot hold the carrier liable because of arbitrariness, discrimination, or mistreatment.We are not by any means suggesting that passengers are always bound to the stipulated amounts printed on a ticket, found in a contract of adhesion, or printed elsewhere but referred to in handouts or forms. We simply recognize that the reasons behind stipulations on liability limitations arise from the difficulty, if not

impossibility, of establishing with a clear preponderance of evidence the contents of a lost valise or suitcase. Unless the contents are declared, it will always be the word of a passenger against that of the airline. If the loss of life or property is caused by the gross negligence or arbitrary acts of the airline or the contents of the lost luggage are proved by satisfactory evidence other than the self-serving declarations of one party, the Court will not hesitate to disregard the fine print in a contract of adhesion. (See Sweet Lines Inc. v. Teves, supra) Otherwise, we are constrained to rule that we have to enforce the contract as it is the only reasonable basis to arrive at a just award.We note that the finding on the amount lost is more of a probability than a proved conclusion.The trial court stated:

xxx xxx xxxWe come now to the actual loss of $4,750.00 which the plaintiff claims was the amount of his retirement award and vacation pay. According to the plaintiff, this was in cash of $100 denominations and was placed in an envelope separate from the other money he was carrying. Plaintiff presented the memorandum award, Exhibit T-1 and the vouchers of payment, Exhibits T-2 and T-3. Under the circumstances, recited by the plaintiff in which the loss occurred, the Court believes that plaintiff could really have placed this amount in the attache case considering that he was originally handcarrying said attache case and the same was looked, and he did not expect that he would be required to check it in. . . . (Amended Record on Appeal, p. 75; Emphasis ours)The above conclusion of the trial court does not arise from the facts. That the attache case was originally handcarried does not beg the conclusion that the amount of $4,750.00 in cash could have been placed inside. It may be noted that out of a claim for US$42,403.90 as the amount lost, the trial court found for only US$5,228.90 and 100 paengs. The court had doubts as to the total claim.The lost luggage was declared as weighing around 18 pounds or approximately 8 kilograms. At $20.00 per kilogram, the petitioner offered to pay $160.00 as a higher value was not declared in advance and additional charges were not paid. We note, however, that an amount of $400.00 per passenger is allowed for unchecked luggage. Since the checking-in was against the will of the respondent, we treat the lost bag as partaking of involuntarily and hurriedly checked-in luggage and continuing its earlier status as unchecked luggage. The fair liability under the petitioner's own printed terms is $400.00. Since the trial court ruled out discriminatory acts or bad faith on the part of Pan Am or other reasons warranting damages, there is no factual basis for the grant of P20,000.00 damages.As to the question of whether or not private respondent should be paid attorney's fees, the Court sustains the

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finding of the trial court and the respondent appellate court that it is just and equitable for the private respondent to recover expenses for litigation in the amount of P5,000.00. Article 22(4) of the Warsaw Convention, as amended does not preclude an award of attorney's fees. That provision states that the limits of liability prescribed in the instrument "shall not prevent the court from awarding, in accordance with its own law, in addition, the whole or part of the court costs and other expenses of litigation incurred by the plaintiff." We, however, raise the award to P10,000.00 considering the resort to the Court of Appeals and this Court.WHEREFORE, the petition is hereby GRANTED and the decision of the respondent Court of Appeals is REVERSED and SET ASIDE. The petitioner is ordered to pay the private respondent damages in the amount of US$400.00 or its equivalent in Philippine Currency at the time of actual payment, P10,000.00 in attorney's fees, and costs of the suit.SO ORDERED.G.R. No. 121824 January 29, 1998BRITISH AIRWAYS, petitioner, vs.COURT OF APPEALS, GOP MAHTANI, and PHILIPPINE AIRLINES, respondents. ROMERO, J.:In this appeal by certiorari, petitioner British Airways (BA) seeks to set aside the decision of respondent Court of Appeals 1 promulgated on September 7, 1995, which affirmed the award of damages and attorney's fees made by the Regional Trial Court of Cebu, 7th Judicial Region, Branch 17, in favor of private respondent GOP Mahtani as well as the dismissal of its third-party complaint against Philippine Airlines (PAL). 2

The material and relevant facts are as follows:On April 16, 1989, Mahtani decided to visit his relatives in Bombay, India. In anticipation of his visit, he obtained the services of a certain Mr. Gumar to prepare his travel plans. The latter, in turn, purchased a ticket from BA where the following itinerary was indicated: 3

CARRIER FLIGHT DATE

MANILA MNL PR 310 Y 16 APR.

HONGKONG HKG BA 20 M 16 APR.

BOMBAY BOM BA 19 M 23 APR.

HONGKONG HKG PR 311 Y

MANILA MNL

Since BA had no direct flights from Manila to Bombay, Mahtani had to take a flight to Hongkong via PAL, and upon arrival in Hongkong he had to take a connecting flight to Bombay on board BA.

Prior to his departure, Mahtani checked in at the PAL counter in Manila his two pieces of luggage containing his clothings and personal effects, confident that upon reaching Hongkong, the same would be transferred to the BA flight bound for Bombay.Unfortunately, when Mahtani arrived in Bombay he discovered that his luggage was missing and that upon inquiry from the BA representatives, he was told that the same might have been diverted to London. After patiently waiting for his luggage for one week, BA finally advised him to file a claim by accomplishing the "Property Irregularity Report." 4

Back in the Philippines, specifically on June 11, 1990, Mahtani filed his complaint for damages and attorney's fees5 against BA and Mr. Gumar before the trial court, docketed as Civil Case No. CEB-9076.On September 4, 1990, BA filed its answer with counter claim 6 to the complaint raising, as special and affirmative defenses, that Mahtani did not have a cause of action against it. Likewise, on November 9, 1990, BA filed a third-party complaint 7 against PAL alleging that the reason for the non-transfer of the luggage was due to the latter's late arrival in Hongkong, thus leaving hardly any time for the proper transfer of Mahtani's luggage to the BA aircraft bound for Bombay.On February 25, 1991, PAL filed its answer to the third-party complaint, wherein it disclaimed any liability, arguing that there was, in fact, adequate time to transfer the luggage to BA facilities in Hongkong. Furthermore, the transfer of the luggage to Hongkong authorities should be considered as transfer to BA. 8

After appropriate proceedings and trial, on March 4, 1993, the trial court rendered its decision in favor of Mahtani,9 the dispositive portion of which reads as follows:WHEREFORE, premises considered, judgment is rendered for the plaintiff and against the defendant for which defendant is ordered to pay plaintiff the sum of Seven Thousand (P7,000.00) Pesos for the value of the two (2) suit cases; Four Hundred U.S. ($400.00) Dollars representing the value of the contents of plaintiff's luggage; Fifty Thousand (P50,000.00) Pesos for moral and actual damages and twenty percent (20%) of the total amount imposed against the defendant for attorney's fees and costs of this action.The Third-Party Complaint against third-party defendant Philippine Airlines is DISMISSED for lack of cause of action.SO ORDERED.Dissatisfied, BA appealed to the Court of Appeals, which however, affirmed the trial court's findings. Thus:WHEREFORE, in view of all the foregoing considerations, finding the Decision appealed from to be in accordance with law and evidence, the same is hereby AFFIRMED in toto, with costs against defendant-appellant.SO ORDERED. 10

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BA is now before us seeking the reversal of the Court of Appeals' decision.In essence, BA assails the award of compensatory damages and attorney's fees, as well as the dismissal of its third-party complaint against PAL. 11

Regarding the first assigned issue, BA asserts that the award of compensatory damages in the separate sum of P7,000.00 for the loss of Mahtani's two pieces of luggage was without basis since Mahtani in his complaint 12stated the following as the value of his personal belongings:8. On the said travel, plaintiff took with him the following items and its corresponding value, to wit:1. personal belonging P10,000.002. gifts for his parents and relatives $5,000.00Moreover, he failed to declare a higher valuation with respect to his luggage, a condition provided for in the ticket, which reads: 13

Liability for loss, delay, or damage to baggage is limited unless a higher value is declared in advance and additional charges are paid:1. For most international travel (including domestic corporations of international journeys) the liability limit is approximately U.S. $9.07 per pound (U.S. $20.000) per kilo for checked baggage and U.S. $400 per passenger for unchecked baggage.Before we resolve the issues raised by BA, it is needful to state that the nature of an airline's contract of carriage partakes of two types, namely: a contract to deliver a cargo or merchandise to its destination and a contract to transport passengers to their destination. A business intended to serve the traveling public primarily, it is imbued with public interest, hence, the law governing common carriers imposes an exacting standard. 14 Neglect or malfeasance by the carrier's employees could predictably furnish bases for an action for damages. 15

In the instant case, it is apparent that the contract of carriage was between Mahtani and BA. Moreover, it is indubitable that his luggage never arrived in Bombay on time. Therefore, as in a number of cases 16 we have assessed the airlines' culpability in the form of damages for breach of contract involving misplaced luggage.In determining the amount of compensatory damages in this kind of cases, it is vital that the claimant satisfactorily prove during the trial the existence of the factual basis of the damages and its causal connection to defendant's acts. 17

In this regard, the trial court granted the following award as compensatory damages:Since plaintiff did not declare the value of the contents in his luggage and even failed to show receipts of the alleged gifts for the members of his family in Bombay, the most that can be expected for compensation of his lost luggage (2 suit cases) is Twenty U.S. Dollars ($20.00) per kilo, or combined value of Four Hundred ($400.00) U.S. Dollars for Twenty kilos representing the

contents plus Seven Thousand (P7,000.00) Pesos representing the purchase price of the two (2) suit cases.However, as earlier stated, it is the position of BA that there should have been no separate award for the luggage and the contents thereof since Mahtani failed to declare a separate higher valuation for the luggage, 18 and therefore, its liability is limited, at most, only to the amount stated in the ticket.Considering the facts of the case, we cannot assent to such specious argument.Admittedly, in a contract of air carriage a declaration by the passenger of a higher value is needed to recover a greater amount. Article 22(1) of the Warsaw Convention, 19 provides as follows:

xxx xxx xxx(2) In the transportation of checked baggage and goods, the liability of the carrier shall be limited to a sum of 250 francs per kilogram, unless the consignor has made, at time the package was handed over to the carrier, a special declaration of the value at delivery and has paid a supplementary sum if the case so requires. In that case the carrier will be liable to pay a sum not exceeding the declared sum, unless he proves that the sum is greater than the actual value to the consignor at delivery.American jurisprudence provides that an air carrier is not liable for the loss of baggage in an amount in excess of the limits specified in the tariff which was filed with the proper authorities, such tariff being binding, on the passenger regardless of the passenger's lack of knowledge thereof or assent thereto. 20 This doctrine is recognized in this jurisdiction. 21

Notwithstanding the foregoing, we have, nevertheless, ruled against blind reliance on adhesion contracts where the facts and circumstances justify that they should be disregarded. 22

In addition, we have held that benefits of limited liability are subject to waiver such as when the air carrier failed to raise timely objections during the trial when questions and answers regarding the actual claims and damages sustained by the passenger were asked. 23

Given the foregoing postulates, the inescapable conclusion is that BA had waived the defense of limited liability when it allowed Mahtani to testify as to the actual damages he incurred due to the misplacement of his luggage, without any objection. In this regard, we quote the pertinent transcript of stenographic notes of Mahtani's direct testimony: 24

Q — How much are you going to ask from this court?A — P100,000.00.Q — What else?A — Exemplary damages.Q — How much?A — P100,000.00.Q — What else?

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A — The things I lost, $5,000.00 for the gifts I lost and my personal belongings, P10,000.00.Q — What about the filing of this case?A — The court expenses and attorney's fees is 30%.Indeed, it is a well-settled doctrine that where the proponent offers evidence deemed by counsel of the adverse party to be inadmissible for any reason, the latter has the right to object. However, such right is a mere privilege which can be waived. Necessarily, the objection must be made at the earliest opportunity, lest silence when there is opportunity to speak may operate as a waiver of objections. 25 BA has precisely failed in this regard.To compound matters for BA, its counsel failed, not only to interpose a timely objection, but even conducted his own cross-examination as well. 26 In the early case of Abrenica v. Gonda, 27 we ruled that:. . . (I)t has been repeatedly laid down as a rule of evidence that a protest or objection against the admission of any evidence must be made at the proper time, and that if not so made it will be understood to have been waived. The proper time to make a protest or objection is when, from the question addressed to the witness, or from the answer thereto, or from the presentation of proof, the inadmissibility of evidence is, or may be inferred.Needless to say, factual findings of the trial court, as affirmed by the Court of Appeals, are entitled to great respect. 28 Since the actual value of the luggage involved appreciation of evidence, a task within the competence of the Court of Appeals, its ruling regarding the amount is assuredly a question of fact, thus, a finding not reviewable by this Court. 29

As to the issue of the dismissal of BA's third-party complaint against PAL, the Court of Appeals justified its ruling in this wise, and we quote: 30

Lastly, we sustain the trial court's ruling dismissing appellant's third-party complaint against PAL.The contract of air transportation in this case pursuant to the ticket issued by appellant to plaintiff-appellee was exclusively between the plaintiff Mahtani and defendant-appellant BA. When plaintiff boarded the PAL plane from Manila to Hongkong, PAL was merely acting as a subcontractor or agent of BA. This is shown by the fact that in the ticket issued by appellant to plaintiff-appellee, it is specifically provided on the "Conditions of Contract," paragraph 4 thereof that:4. . . . carriage to be performed hereunder by several successive carriers is regarded as a single operation.The rule that carriage by plane although performed by successive carriers is regarded as a single operation and that the carrier issuing the passenger's ticket is considered the principal party and the other carrier merely subcontractors or agent, is a settled issue.We cannot agree with the dismissal of the third-complaint.

In Firestone Tire and Rubber Company of the Philippines v. Tempengko, 31 we expounded on the nature of a third-party complaint thus:The third-party complaint is, therefore, a procedural device whereby a "third party" who is neither a party nor privy to the act or deed complained of by the plaintiff, may be brought into the case with leave of court, by the defendant, who acts, as third-party plaintiff to enforce against such third-party defendant a right for contribution, indemnity, subrogation or any other relief, in respect of the plaintiff's claim. The third-party complaint is actually independent of and separate and distinct from the plaintiff's complaint. Were it not for this provision of the Rules of Court, it would have to be filed independently and separately from the original complaint by the defendant against the third-party. But the Rules permit defendant to bring in a third-party defendant or so to speak, to litigate his separate cause of action in respect of plaintiff's claim against a third-party in the original and principal case with the object of avoiding circuitry of action and unnecessary proliferation of law suits and of disposing expeditiously in one litigation the entire subject matter arising from one particular set of facts.Undeniably, for the loss of his luggage, Mahtani is entitled to damages from BA, in view of their contract of carriage. Yet, BA adamantly disclaimed its liability and instead imputed it to PAL which the latter naturally denies. In other words, BA and PAL are blaming each other for the incident.In resolving this issue, it is worth observing that the contract of air transportation was exclusively between Mahtani and BA, the latter merely endorsing the Manila to Hongkong leg of the former's journey to PAL, as its subcontractor or agent. In fact, the fourth paragraph of the "Conditions of Contracts" of the ticket 32 issued by BA to Mahtani confirms that the contract was one of continuous air transportation from Manila to Bombay.4. . . . carriage to be performed hereunder by several successive carriers is regarded as a single operation.Prescinding from the above discussion, it is undisputed that PAL, in transporting Mahtani from Manila to Hongkong acted as the agent of BA.Parenthetically, the Court of Appeals should have been cognizant of the well-settled rule that an agent is also responsible for any negligence in the performance of its function. 33 and is liable for damages which the principal may suffer by reason of its negligent act. 34 Hence, the Court of Appeals erred when it opined that BA, being the principal, had no cause of action against PAL, its agent or sub-contractor.Also, it is worth mentioning that both BA and PAL are members of the International Air Transport Association (IATA), wherein member airlines are regarded as agents of each other in the issuance of the tickets and other matters pertaining to their relationship. 35 Therefore, in the instant case, the

29

contractual relationship between BA and PAL is one of agency, the former being the principal, since it was the one which issued the confirmed ticket, and the latter the agent.Our pronouncement that BA is the principal is consistent with our ruling in Lufthansa German Airlines v. Court of Appeals. 36 In that case, Lufthansa issued a confirmed ticket to Tirso Antiporda covering five-leg trip aboard different airlines. Unfortunately, Air Kenya, one of the airlines which was to carry Antiporda to a specific destination "bumped" him off.An action for damages was filed against Lufthansa which, however, denied any liability, contending that its responsibility towards its passenger is limited to the occurrence of a mishap on its own line. Consequently, when Antiporda transferred to Air Kenya, its obligation as a principal in the contract of carriage ceased; from there on, it merely acted as a ticketing agent for Air Kenya.In rejecting Lufthansa's argument, we ruled: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 confirmed Lufthansa ticket in favor of Antiporda covering his entire five-leg trip abroad successive carriers concretely attest to this.Since the instant petition was based on breach of contract of carriage, Mahtani can only sue BA alone, and not PAL, since the latter was not a party to the contract. However, this is not to say that PAL is relieved from any liability due to any of its negligent acts. In China Air Lines, Ltd. v. Court of Appeals, 37 while not exactly in point, the case, however, illustrates the principle which governs this particular situation. In that case, we recognized that a carrier (PAL), acting as an agent of another carrier, is also liable for its own negligent acts or omission in the performance of its duties.Accordingly, to deny BA the procedural remedy of filing a third-party complaint against PAL for the purpose of ultimately determining who was primarily at fault as between them, is without legal basis. After all, such proceeding is in accord with the doctrine against multiplicity of cases which would entail receiving the same or similar evidence for both cases and enforcing separate judgments therefor. It must be borne in mind that the purpose of a third-party complaint is precisely to avoid delay and circuitry of action and to enable the controversy to be disposed of in one suit. 38 It is but logical, fair and equitable to allow BA to sue PAL for indemnification, if it is proven that the latter's negligence was the proximate cause of Mahtani's unfortunate experience, instead of totally absolving PAL from any liability.WHEREFORE, in view of the foregoing, the decision of the Court of Appeals in CA-G.R. CV No. 43309 dated

September 7, 1995 is hereby MODIFIED, reinstating the third-party complaint filed by British Airways dated November 9, 1990 against Philippine Airlines. No costs.SO ORDERED.G.R. No. 135802             March 3, 2000PRISCILLA L. TAN, petitioner, vs.NORTHWEST AIRLINES, INC., respondent.PARDO, J.:Petitioner Priscilla L. Tan appeals via certiorari from the decision of the Court of Appeals 1 affirming with modification 2 the decision of the trial court, 3 ordering respondent to pay petitioner the following amounts: (1) P15,000.00, as actual damages; (2) P100,000.00, as moral damages; (3) P50,000.00, as exemplary damages; (4) P30,000.00, as and for attorney's fees; and (6) costs.The case before the Court traces its roots from an action for damages for breach of contract of air carriage for failure to deliver petitioner's baggages on the date of her arrival filed on June 29, 1994 with the Regional Trial Court, Makati, Branch 150 against respondent Northwest Airlines, Inc., a foreign corporation engaged in the business of air transportation.The antecedent facts are as follows:On May 31, 1994, Priscilla L. Tan and Connie Tan boarded Northwest Airlines Flight 29 in Chicago, U. S. A. bound for the Philippines, with a stop-over at Detroit, U. S. A. They arrived at the Ninoy Aquino International Airport (NAIA) on June 1, 1994 at about 10:40 in the evening.Upon their arrival, petitioner and her companion Connie Tan found that their baggages were missing. They returned to the airport in the evening of the following day and they were informed that their baggages might still be in another plane in Tokyo, Japan.On June 3, 1994, they recovered their baggages and discovered that some of its contents were destroyed and soiled.Claiming that they "suffered mental anguish, sleepless nights and great damage" because of Northwest's failure to inform them in advance that their baggages would not be loaded on the same flight they boarded and because of their delayed arrival, they demanded from Northwest Airlines compensation for the damages they suffered. On June 15, 1994 and June 22, 1994, petitioner sent demand letters to Northwest Airlines, but the latter did not respond. Hence, the filing of the case with the regional trial court.In its answer to the complaint, respondent Northwest Airlines did not deny that the baggages of petitioners were not loaded on Northwest Flight 29. Petitioner's baggages could not be carried on the same flight because of "weight and balance restrictions." However, the baggages were loaded in another Northwest Airlines flight, which arrived in the evening of June 2, 1994.

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When petitioner received her baggages in damaged condition, Northwest offered to either (1) reimburse the cost or repair of the bags; or (2) reimburse the cost for the purchase of new bags, upon submission of receipts.After due trial, on June 10, 1996, the trial court rendered decision finding respondent Northwest Airlines, Inc. liable for damages, as follows:WHEREFORE judgment is rendered ordering the defendant to pay the plaintiff the following amounts:1. P15,000.00, as actual damages;2. P100,000.00, as moral damages;3. P50,000.00, as exemplary damages;4. P30,000.00, as and for attorney's fees and5. Costs.SO ORDERED.Given this 10th day of June, 1996 at Makati City.

ERNA FALLORAN ALIPOSAJ u d g e 4

Respondent Northwest Airlines, Inc. appealed from the trial court's decision to the Court of Appeals contending that the court a quo erred in finding it guilty of breach of contract of carriage and of willful misconduct and awarded damages which had no basis in fact or were otherwise excessive.On September 30, 1998, the Court of Appeals promulgated its decision partially granting the appeal by deleting the award of moral and exemplary damages and reducing the attorney's fees, specifically providing that:WHEREFORE, PREMISES CONSIDERED, the appeal is hereby GRANTED partially. The Decision of the lower court dated June 10, 1996 is AFFIRMED with the modification that the award of moral and exemplary damages is deleted and the amount of attorney's fees is reduced to ten thousand pesos (P10,000.00).No pronouncement as to costs.SO ORDERED. 5

Hence, this appeal. 6

The issue is whether respondent is liable for moral and exemplary damages for willful misconduct and breach of the contract of air carriage.The petition is without merit.We agree with the Court of Appeals that respondent was not guilty of willful misconduct. "For willful misconduct to exist there must be a showing that the acts complained of were impelled by an intention to violate the law, or were in persistent disregard of one's rights. It must be evidenced by a flagrantly or shamefully wrong or improper conduct." 7

Contrary to petitioner's contention, there was nothing in the conduct of respondent which showed that they were motivated by malice or bad faith in loading her baggages on another plane. Due to weight and balance restrictions, as a safety measure, respondent airline had to transport the baggages on a different flight, but with the same expected date and time of arrival in the Philippines. As aptly explained by respondent:

To ensure the safety of each flight, Northwest's personnel determine every flight's compliance with "weight and balance restrictions." They check the factors like weight of the aircraft used for the flight gas input, passenger and crew load, baggage weight, all in relation to the wind factor anticipated on the flight. If there is an overload, i.e., a perceived safety risk, the aircraft's load will be reduced by off-loading cargo, which will then be placed on the next available flight. 8

It is admitted that respondent failed to deliver petitioner's luggages on time. However, there was no showing of malice in such failure. By its concern for safety, respondent had to ship the baggages in another flight with the same date of arrival.Hence, the Court of Appeals correctly held that respondent did not act in bad faith. 9

"Bad faith does not simply connote bad judgment or negligence, it imports a dishonest purpose or some moral obliquity and conscious doing of a wrong, a breach of known duty through some motive or interest or ill-will that partakes of the nature of fraud." 10

"Where in breaching the contract of carriage the defendant airline 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 obligation which the parties had foreseen or could have reasonably foreseen. In that case, such liability does not include moral and exemplary damages." 11

Consequently, we have no reason to reverse the decision of the Court of Appeals.WHEREFORE, the Court DENIES the petition for lack of merit. The Court AFFIRMS the decision of the Court of Appeals deleting, however, the award of attorney's fees.1âwphi1.nêtNo costs.SO ORDERED.G.R. No. 118126 March 4, 1996TRANS-ASIA SHIPPING LINES, INC., petitioner,vs.COURT OF APPEALS and ATTY. RENATO T. ARROYO, respondents. DAVIDE, JR., J.:pAs formulated by the petitioner, the issue in this petition for review on certiorari under Rule 45 of the Rules of Court is as follows:In case of interruption of a vessel's voyage and the consequent delay in that vessel's arrival at its port of destination, is the right of a passenger affected thereby to be determined and governed by the vague Civil Code provision on common carriers, or shall it be, in the absence of a specific provision thereon governed by Art. 698 of the Code of Commerce? 1

The petitioner considers it a "novel question of law."Upon a closer evaluation, however, of the challenged decision of the Court of Appeals of 23 November

31

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

In his complaint, docketed as Civil Case No. 91-491, plaintiff (hereinafter private respondent) alleged that the engines of the M/V Asia Thailand conked out in the open sea, and for more than an hour it was stalled and at the mercy of the waves, thus causing fear in the passengers. It sailed back to Cebu City after it regained power, but for unexplained reasons, the passengers, including the private respondent, were arrogantly told to disembark without the necessary precautions against possible injury to them. They were thus unceremoniously dumped, which only exacerbated the private respondent's mental distress. He further alleged that by reason of the petitioner's wanton, reckless, and willful acts, he was unnecessarily exposed to danger

and, having been stranded in Cebu City for a day, incurred additional expenses and loss of income. He then prayed that he be awarded P1,100.00, P50,000.00, and P25,000.00 as compensatory, moral; and exemplary damages, respectively. 5

In his pre-trial brief, the private respondent asserted that his complaint was "an action for damages arising from bad faith, breach of contract and from tort," with the former arising from the petitioner's "failure to carry [him] to his place of destination as contracted," while the latter from the "conduct of the [petitioner] resulting [in] the infliction of emotional distress" to the private respondent. 6

After due trial, the trial court rendered its decision 7 and ruled that the action was only for breach of contract, with Articles 1170, 1172, and 1173 of the Civil Code as applicable law — not Article 2180 of the same Code. It was of the opinion that Article 1170 made a person liable for damages if, in the performance of his obligation, he was guilty of fraud, negligence, or delay, or in any manner contravened the tenor thereof; moreover, pursuant to Article 2201 of the same Code, to be entitled to damages, the non-performance of the obligation must have been tainted not only by fraud, negligence, or delay, but also bad faith, malice, and wanton attitude. It then disposed of the case as follows:WHEREFORE, it not appearing from the evidence that plaintiff was left in the Port of Cebu because of the fault, negligence, malice or wanton attitude of defendant's employees, the complaint is DISMISSED. Defendant's counterclaim is likewise dismissed it not appearing also that filing of the case by plaintiff was motivated by malice or bad faith. 8

The trial court made the following findings to support its disposition:In the light of the evidence adduced by the parties and of the above provisions of the New Civil Code, the issue to be resolved, in the resolution of this case is whether or not, defendant thru its employees in [sic] the night of November 12, 1991, committed fraud, negligence, bad faith or malice when it left plaintiff in the Port of Cebu when it sailed back to Cagayan de Oro City after it has [sic] returned from Kawit Island.Evaluation of the evidence of the parties tended to show nothing that defendant committed fraud. As early as 3:00 p.m. of November 12, 1991, defendant did not hide the fact that the cylinder head cracked. Plaintiff even saw during its repair. If he had doubts as to the vessel's capacity to sail, he had time yet to take another boat. The ticket could be returned to defendant and corresponding cash [would] be returned to him.Neither could negligence, bad faith or malice on the part of defendant be inferred from the evidence of the parties. When the boat arrived at [the] Port of Cebu after it returned from Kawit Island, there was an announcement that passengers who would like to disembark were given ten (10) minutes only to do so. By

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this announcement, it could be inferred that the boat will [sic] proceed to Cagayan de Oro City. If plaintiff entertained doubts, he should have asked a member of the crew of the boat or better still, the captain of the boat. But as admitted by him, he was of the impression only that the boat will not proceed to Cagayan de Oro that evening so he disembarked. He was instead, the ones [sic] negligent. Had he been prudent, with the announcement that those who will disembark were given ten minutes only, he should have lingered a little by staying in his cot and inquired whether the boat will proceed to Cagayan de Oro City or not. Defendant cannot be expected to be telling [sic] the reasons to each passenger. Announcement by microphone was enough.The court is inclined to believe that the story of defendant that the boat returned to the Port of Cebu because of the request of the passengers in view of the waves. That it did not return because of the defective engines as shown by the fact that fifteen (15) minutes after the boat docked [at] the Port of Cebu and those who wanted to proceed to Cagayan de Oro disembarked, it left for Cagayan de Oro City.The defendant got nothing when the boat returned to Cebu to let those who did not want to proceed to Cagayan de Oro City including plaintiff disembarked. On the contrary, this would mean its loss instead because it will have to refund their tickets or they will use it the next trip without paying anymore. It is hard therefore, to imagine how defendant by leaving plaintiff in Cebu could have acted in bad faith, negligently, wantonly and with malice.If plaintiff, therefore, was not able to [m]ake the trip that night of November 12, 1991, it was not because defendant maliciously did it to exclude him [from] the trip. If he was left, it was because of his fault or negligence. 9

Unsatisfied, the private respondent appealed to the Court of Appeals (CA-G.R. CV No. 39901) and submitted for its determination the following assignment of errors: (1) the trial court erred in not finding that the defendant-appellee was guilty of fraud, delay, negligence, and bad faith; and (2) the trial court. erred in not awarding moral and exemplary damages. 10

In its decision of 23 November 1994, 11 the Court of Appeals reversed the trial court's decision by applying Article 1755 in relation to Articles 2201, 2208, 2217, and 2232 of the Civil Code and, accordingly, awarded compensatory, moral, and exemplary damages as follows:WHEREFORE, premises considered, the appealed decision is hereby REVERSED and SET ASIDE and another one is rendered ordering defendant-appellee to pay plaintiff-appellant:1. P20,000.00 as moral damages;2. P10,000.00 as exemplary damages;3. P5,000.00 as attorney's fees;

4. Cost of suit.SO ORDERED. 12

It did not, however, allow the grant of damages for the delay in the performance of the petitioner's obligation as the requirement of demand set forth in Article 1169 of the Civil Code had not been met by the private respondent. Besides, it found that the private respondent offered no evidence to prove that his contract of carriage with the petitioner provided for liability in case of delay in departure, nor that a designation of the time of departure was the controlling motive for the establishment of the contract. On the latter, the court a quo observed that the private respondent even admitted he was unaware of the vessel's departure time, and it was only when he boarded the vessel that he became aware of such. Finally, the respondent Court found no reasonable basis for the private respondent's belief that demand was useless because the petitioner had rendered it beyond its power to perform its obligation; on the contrary, he even admitted that the petitioner had been assuring the passengers that the vessel would leave on time, and that it could still perform its obligation to transport them as scheduled.To justify its award of damages, the Court of Appeals ratiocinated as follows:It is an established and admitted fact that the vessel before the voyage had undergone some repair work on the cylinder head of the engine. It is likewise admitted by defendant-appellee that it left the port of Cebu City with only one engine running. Defendant-appellee averred:. . . The dropping of the vessel's anchor after running slowly on only one engine when it departed earlier must have alarmed some nervous passengers . . .The entries in the logbook which defendant-appellee itself offered as evidence categorically stated therein that the vessel stopped at Kawit Island because of engine trouble. It reads:2330 HRS STBD ENGINE' EMERGENCY STOP2350 HRS DROP ANCHOR DUE TO ENGINE TROUBLE, 2 ENGINE STOP.The stoppage was not to start and synchronized [sic] the engines of the vessel as claimed by defendant-appellee. It was because one of the engines of the vessel broke down; it was because of the disability of the vessel which from the very beginning of the voyage was known to defendant-appellee.Defendant-appellee from the very start of the voyage knew for a fact that the vessel was not yet in its sailing condition because the second engine was still being repaired. Inspite of this knowledge, defendant-appellee still proceeded to sail with only one engine running.Defendant-appellee at that instant failed to exercise the diligence which all common carriers should exercise in transporting or carrying passengers. The law does not merely require extraordinary diligence in the

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performance of the obligation. The law mandates that common carrier[s] should exercise utmost diligence the transport of passengers.Article 1755 of the New Civil Code provides:Art. 1755. A common carrier is bound to carry the passengers safely as far as human care and foresight can provide, using the utmost diligence of very cautious persons, with a due regard for all the circumstances.Utmost diligence of a VERY CAUTIOUS person dictates that defendant-appellee should have pursued the voyage only when its vessel was already fit to sail. Defendant-appellee should have made certain that the vessel [could] complete the voyage before starting [to] sail. Anything less than this, the vessel [could not] sail . . . with so many passengers on board it.However, defendant-appellant [sic] in complete disregard of the safety of the passengers, chose to proceed with its voyage even if only one engine was running as the second engine was still being repaired during the voyage. Defendant-appellee disregarded the not very remote possibility that because of the disability of the vessel, other problems might occur which would endanger the lives of the passengers sailing with a disabled vessel.As expected, . . . engine trouble occurred. Fortunate[ly] for defendant-appellee, such trouble only necessitated the stoppage of the vessel and did not cause the vessel to capsize. No wonder why some passengers requested to be brought back to Cebu City. Common carriers which are mandated to exercise utmost diligence should not be taking these risks.On this premise, plaintiff-appellant should not be faulted why he chose to disembark from the vessel with the other passengers when it returned back to Cebu City. Defendant-appellee may call him a very "panicky passenger" or a "nervous person", but this will not relieve defendant-appellee from the liability it incurred for its failure to exercise utmost diligence. 13

xxx xxx xxxAs to the second assigned error, we find that plaintiff-appellant is entitled to the award of moral and exemplary damages for the breach committed by defendant-appellee.As discussed, defendant-appellee in sailing to Cagayan de Oro City with only one engine and with full knowledge of the true condition of the vessel, acted. in bad faith with malice, in complete disregard for the safety of the passengers and only for its own personal advancement/interest.The Civil Code provides:Art. 2201.

xxx xxx xxxIn case of fraud, bad faith, malice or wanton attitude, the obligor shall be responsible for all damages which may be reasonably attributed to the non-performance of the obligation.

Plaintiff-appellant is entitled to moral damages for the mental anguish, fright and serious anxiety he suffered during the voyage when the vessel's engine broke down and when he disembarked from the vessel during the wee hours of the morning at Cebu City when it returned. 14

Moral damages are recoverable in a damage suit predicated upon a breach of contract of carriage where it is proved that the carrier was guilty of fraud or bad faith even if death does not result. 15

Fraud and bad faith by defendant-appellee having been established, the award of moral damages is in order. 16

To serve as a deterrent to the commission of similar acts in the future, exemplary damages should be imposed upon defendant-appellee. 17 Exemplary damages are designed by our civil law to permit the courts to reshape behavior that is socially deleterious in its consequence by creating . . . negative incentives or deterrents against such behavior. 18

Moral damages having been awarded, exemplary damages maybe properly awarded. When entitlement to moral damages has been established, the award of exemplary damages is proper. 19

The petitioner then instituted this petition and submitted the question of law earlier adverted to.Undoubtedly, there was, between the petitioner and the private respondent, a contract of common carriage. The laws of primary application then are the provisions on common carriers under Section 4, Chapter 3, Title VIII, Book IV of the Civil Code, while for all other matters not regulated thereby, the Code of Commerce and special laws. 20

Under Article 1733 of the Civil Code, the petitioner was bound to observe extraordinary diligence in ensuring the safety of the private respondent. That meant that the petitioner was, pursuant to Article 1755 of the said Code, bound to carry the private respondent safely as far as human care and foresight could provide, using the utmost diligence of very cautious persons, with due regard for all the circumstances. In this case, we are in full accord with the Court of Appeals that the petitioner failed to discharge this obligation.Before commencing the contracted voyage, the petitioner undertook some repairs on the cylinder head of one of the vessel's engines. But even before it could finish these repairs, it allowed the vessel to leave the port of origin on only one functioning engine, instead of two. Moreover, even the lone functioning engine was not in perfect condition as sometime after it had run its course, it conked out. This caused the vessel to stop and remain a drift at sea, thus in order to prevent the ship from capsizing, it had to drop anchor. Plainly, the vessel was unseaworthy even before the voyage began. For a vessel to be seaworthy, it must be adequately equipped for the voyage and manned with a sufficient number of competent officers and crew. 21 The failure of a common carrier to maintain in seaworthy condition its

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vessel involved in a contract of carriage is a clear breach of its duty prescribed in Article 1755 of the Civil Code.As to its liability for damages to the private respondent, Article 1764 of the Civil Code expressly provides:Art. 1764. Damages in cases comprised in this Section shall be awarded in accordance with Title XVIII of this Book, concerning Damages. Article 2206 shall also apply to the death of a passenger caused by the breach of contract by common carrier.The damages comprised in Title XVIII of the Civil Code are actual or compensatory, moral, nominal, temperate or moderate, liquidated, and exemplary.In his complaint, the private respondent claims actual or compensatory, moral, and exemplary damages.Actual or compensatory damages represent the adequate compensation for pecuniary loss suffered and for profits the obligee failed to obtain. 22

In contracts or quasi-contracts, the obligor is liable for all the damages which may be reasonably attributed to the non-performance of the obligation if he is guilty of fraud, bad faith, malice, or wanton attitude. 23

Moral damages include moral suffering, mental anguish, fright, serious anxiety, besmirched reputation, wounded feelings, moral shock, social humiliation, or similar injury. They may be recovered in the cases enumerated in Article 2219 of the Civil Code, likewise, if they are the proximate result of, as in this case, the petitioner's breach of the contract of carriage. 24 Anent a breach of a contract of common carriage, moral damages may be awarded if the common carrier, like the petitioner, acted fraudulently or in bad faith. 25

Exemplary damages are imposed by way of example or correction for the public good, in addition to moral, temperate, liquidated or compensatory damages. 26 In contracts and quasi-contracts, exemplary damages may be awarded if the defendant acted in a wanton, fraudulent, reckless, oppressive or malevolent manner. 27 It cannot, however, be considered as a matter of right; the court having to decide whether or not they should be adjudicated.28 Before the court may consider an award for exemplary damages, the plaintiff must first show that he is entitled to moral, temperate or compensatory damages; but it is not necessary that he prove the monetary value thereof.29

The Court of Appeals did not grant the private respondent actual or compensatory damages, reasoning that no delay was incurred since there was no demand, as required by Article 1169 of the Civil Code. This article, however, finds no application in this case because, as found by the respondent Court, there was in fact no delay in the commencement of the contracted voyage. If any delay was incurred, it was after the commencement of such voyage, more specifically, when the voyage was subsequently interrupted when the vessel had to stop near Kawit Island after the only functioning engine conked out.

As to the rights and duties of the parties strictly arising out of such delay, the Civil Code is silent. However, as correctly pointed out by the petitioner, Article 698 of the Code of Commerce specifically provides for such a situation. It reads:In case a voyage already begun should be interrupted, the passengers shall be obliged to pay the fare in proportion to the distance covered, without right to recover for losses and damages if the interruption is due to fortuitous event or force majeure, but with a right to indemnity if the interruption should have been caused by the captain exclusively. If the interruption should be caused by the disability of the vessel and a passenger should agree to await the repairs, he may not be required to pay any increased price of passage, but his living expenses during the stay shall be for his own account.This article applies suppletorily pursuant to Article 1766 of the Civil Code.Of course, this does not suffice for a resolution of the case at bench for, as earlier stated, the cause of the delay or interruption was the petitioner's failure to observe extraordinary diligence. Article 698 must then be read together with Articles 2199, 2200, 2201, and 2208 in relation to Article 21 of the Civil Code. So read, it means that the petitioner is liable for any pecuniary loss or loss of profits which the private respondent may have suffered by reason thereof. For the private respondent, such would be the loss of income if unable to report to his office on the day he was supposed to arrive were it not for the delay. This, however, assumes that he stayed on the vessel and was with it when it thereafter resumed its voyage; but he did not. As he and some passengers resolved not to complete the voyage, the vessel had to return to its port of origin and allow them to disembark. The private respondent then took the petitioner's other vessel the following day, using the ticket he had purchased for the previous day's voyage.Any further delay then in the private respondent's arrival at the port of destination was caused by his decision to disembark. Had he remained on the first vessel, he would have reached his destination at noon of 13 November 1991, thus been able to report to his office in the afternoon. He, therefore, would have lost only the salary for half of a day. But actual or compensatory damages must be proved, 30 which the private respondent failed to do. There is no convincing evidence that he did not receive his salary for 13 November 1991 nor that his absence was not excused.We likewise fully agree with the Court of Appeals that the petitioner is liable for moral and exemplary damages. In allowing its unseaworthy M/V Asia Thailand to leave the port of origin and undertake the contracted voyage, with full awareness that it was exposed to perils of the sea, it deliberately disregarded its solemn duty to exercise extraordinary diligence and obviously acted with bad faith and in a wanton and

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reckless manner. On this score, however, the petitioner asserts that the safety or the vessel and passengers was never at stake because the sea was "calm" in the vicinity where it stopped as faithfully recorded in the vessel's log book (Exhibit "4"). Hence, the petitioner concludes, the private respondent was merely "over-reacting" to the situation obtaining then. 31

We hold that the petitioner's defense cannot exculpate it nor mitigate its liability. On the contrary, such a claim demonstrates beyond cavil the petitioner's lack of genuine concern for the safety of its passengers. It was, perhaps, only providential then the sea happened to be calm. Even so, the petitioner should not expect its passengers to act in the manner it desired. The passengers were not stoics; becoming alarmed, anxious, or frightened at the stoppage of a vessel at sea in an unfamiliar zone as nighttime is not the sole prerogative of the faint-hearted. More so in the light of the many tragedies at sea resulting in the loss of lives of hopeless passengers and damage to property simply because common carriers failed in their duty to exercise extraordinary diligence in the performance of their obligations.We cannot, however, give our affirmance to the award of attorney's fees. Under Article 2208 of the Civil Code, these are recoverable only in the concept of actual damages, 32 not as moral damages 33 nor judicial costs. 34Hence, to merit such an award, it is settled that the amount thereof must be proven. 35 Moreover, such must be specifically prayed for — as was not done in this case—and may not be deemed incorporated within a general prayer for "such other relief and remedy as this court may deem just and equitable." 36 Finally, it must be noted that aside from the following, the body of the respondent Court's decision was devoid of any statement regarding attorney's fees:Plaintiff-appellant was forced to litigate in order that he can claim moral and exemplary damages for the suffering he encurred [sic]. He is entitled to attorney's fees pursuant to Article 2208 of the Civil Code. It states:Art. 2208. In the absence of stipulation, attorney's fees and expenses of litigation, other than judicial costs cannot be recovered except:1. When exemplary damages are awarded;2. When the defendant's act or omission has compelled the plaintiff to litigate with third persons or to incur expenses to protect his interest.This Court holds that the above does not satisfy the benchmark of "factual, legal and equitable justification" needed as basis for an award of attorney's fees. 37 In sum, for lack of factual and legal basis, the award of attorney's fees must be deleted.WHEREFORE, the instant petition is DENIED and the challenged decision of the Court of Appeals in CA-G.R. CV No. 39901 is AFFIRMED subject to the modification as to the award for attorney's fees which is hereby SET ASIDE.

Costs against the petitioner.SO ORDERED.G.R. No. 125524           August 25, 1999BENITO MACAM doing business under the name and style BEN-MAC ENTERPRISES, petitioner, vs.COURT OF APPEALS, CHINA OCEAN SHIPPING CO., and/or WALLEM PHILIPPINES SHIPPING, INC.,respondents.BELLOSILLO, J.:On 4 April 1989 petitioner Benito Macam, doing business under the name and style Ben-Mac Enterprises, shipped on board the vessel Nen Jiang, owned and operated by respondent China Ocean Shipping Co., through local agent respondent Wallem Philippines Shipping, Inc. (hereinafter WALLEM), 3,500 boxes of watermelons valued at US$5,950.00 covered by Bill of Lading No. HKG 99012 and exported through Letter of Credit No. HK 1031/30 issued by National Bank of Pakistan, Hongkong (hereinafter PAKISTAN BANK) and 1,611 boxes of fresh mangoes with a value of US$14,273.46 covered by Bill of Lading No. HKG 99013 and exported through Letter of Credit No. HK 1032/30 also issued by PAKISTAN BANK. The Bills of Lading contained the following pertinent provision: "One of the Bills of Lading must be surrendered duly endorsed in exchange for the goods or delivery order.1 The shipment was bound for Hongkong with PAKISTAN BANK as consignee and Great Prospect Company of Kowloon, Hongkong (hereinafter GPC) as notify party.On 6 April 1989, per letter of credit requirement, copies of the bills of lading and commercial invoices were submitted to petitioner's depository bank, Consolidated Banking Corporation (hereinafter SOLIDBANK), which paid petitioner in advance the total value of the shipment of US$20,223.46.1âwphi1.nêtUpon arrival in Hongkong, the shipment was delivered by respondent WALLEM directly to GPC, not to PAKISTAN BANK, and without the required bill of lading having been surrendered. Subsequently, GPC failed to pay PAKISTAN BANK such that the latter, still in possession of the original bills of lading, refused to pay petitioner through SOLIDBANK. Since SOLIDBANK already pre-paid petitioner the value of the shipment, it demanded payment from respondent WALLEM through five (5) letters but was refused. Petitioner was thus allegedly constrained to return the amount involved to SOLIDBANK, then demanded payment from respondent WALLEM in writing but to no avail.On 25 September 1991 petitioner sought collection of the value of the shipment of US$20,223.46 or its equivalent of P546,033.42 from respondents before the Regional Trial Court of Manila, based on delivery of the shipment to GPC without presentation of the bills of lading and bank guarantee.

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Respondents contended that the shipment was delivered to GPC without presentation of the bills of lading and bank guarantee per request of petitioner himself because the shipment consisted of perishable goods. The telex dated 5 April 1989 conveying such request read —AS PER SHPR'S REQUEST KINDLY ARRANGE DELIVERY OF A/M SHIPT TO RESPECTIVE CNEES WITHOUT PRESENTATION OF OB/L2 and bank guarantee since for prepaid shipt ofrt charges already fully paid our end . . . .3

Respondents explained that it is a standard maritime practice, when immediate delivery is of the essence, for the shipper to request or instruct the carrier to deliver the goods to the buyer upon arrival at the port of destination without requiring presentation of the bill of lading as that usually takes time. As proof thereof, respondents apprised the trial court that for the duration of their two-year business relationship with petitioner concerning similar shipments to GPC deliveries were effected without presentation of the bills of lading.4 Respondents advanced next that the refusal of PAKISTAN BANK to pay the letters of credit to SOLIDBANK was due to the latter's failure to submit a Certificate of Quantity and Quality. Respondents counterclaimed for attorney's fees and costs of suit.On 14 May 1993 the trial court ordered respondents to pay, jointly and severally, the following amounts: (1) P546,033.42 plus legal interest from 6 April 1989 until full payment; (2) P10,000.00 as attorney's fees; and, (3) the costs. The counterclaims were dismissed for lack of merit.5 The trial court opined that respondents breached the provision in the bill of lading requiring that "one of the Bills of Lading must be surrendered duly endorsed in exchange for the goods or delivery order," when they released the shipment to GPC without presentation of the bills of lading and the bank guarantee that should have been issued by PAKISTAN BANK in lieu of the bills of lading. The trial court added that the shipment should not have been released to GPC at all since the instruction contained in the telex was to arrange delivery to the respective consignees and not to any party. The trial court observed that the only role of GPC in the transaction as notify party was precisely to be notified of the arrival of the cargoes in Hongkong so it could in turn duly advise the consignee.Respondent Court of Appeals appreciated the evidence in a different manner. According to it, as established by previous similar transactions between the parties, shipped cargoes were sometimes actually delivered not to the consignee but to notify party GPC without need of the bills of lading or bank guarantee.6 Moreover, the bills of lading were viewed by respondent court to have been properly superseded by the telex instruction and to implement the instruction, the delivery of the shipment must be to GPC, the real importer/buyer of the goods as shown by the export invoices,7 and not to PAKISTAN

BANK since the latter could very well present the bills of lading in its possession; likewise, if it were the PAKISTAN BANK to which the cargoes were to be strictly delivered it would no longer be proper to require a bank guarantee. Respondent court noted that besides, GPC was listed as a consignee in the telex. It observed further that the demand letter of petitioner to respondents never complained of misdelivery of goods. Lastly, respondent court found that petitioner's claim of having reimbursed the amount involved to SOLIDBANK was unsubstantiated. Thus, on 13 March 1996 respondent court set aside the decision of the trial court and dismissed the complaint together with the counterclaims.8 On 5 July 1996 reconsideration was denied.9

Petitioner submits that the fact that the shipment was not delivered to the consignee as stated in the bill of lading or to a party designated or named by the consignee constitutes a misdelivery thereof. Moreover, petitioner argues that from the text of the telex, assuming there was such an instruction, the delivery of the shipment without the required bill of lading or bank guarantee should be made only to the designated consignee, referring to PAKISTAN BANK.We are not persuaded. The submission of petitioner that "the fact that the shipment was not delivered to the consignee as stated in the Bill of Lading or to a party designated or named by the consignee constitutes a misdelivery thereof" is a deviation from his cause of action before the trial court. It is clear from the allegation in his complaint that it does not deal with misdelivery of the cargoes but of delivery to GPC without the required bills of lading and bank guarantee —6. The goods arrived in Hongkong and were released by the defendant Wallem directly to the buyer/notify party, Great Prospect Company and not to the consignee, the National Bank of Pakistan, Hongkong, without the required bills of lading and bank guarantee for the release of the shipment issued by the consignee of the goods . . . .10

Even going back to an event that transpired prior to the filing of the present case or when petitioner wrote respondent WALLEM demanding payment of the value of the cargoes, misdelivery of the cargoes did not come into the picture —We are writing you on behalf of our client, Ben-Mac Enterprises who informed us that Bills of Lading No. 99012 and 99013 with a total value of US$20,223.46 were released to Great Prospect, Hongkong without the necessary bank guarantee. We were further informed that the consignee of the goods, National Bank of Pakistan, Hongkong, did not release or endorse the original bills of lading. As a result thereof, neither the consignee, National Bank of Pakistan, Hongkong, nor the importer, Great Prospect Company, Hongkong, paid our client for the goods . . . .11

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At any rate, we shall dwell on petitioner's submission only as a prelude to our discussion on the imputed liability of respondents concerning the shipped goods. Article 1736 of the Civil Code provides —Art. 1736. The extraordinary responsibility of the common carriers lasts from the time the goods are unconditionally placed in the possession of, and received by the carrier for transportation until the same are delivered, actually or constructively, by the carrier to the consignee, or to the person who has a right to receive them, without prejudice to the provisions of article 1738.12

We emphasize that the extraordinary responsibility of the common carriers lasts until actual or constructive delivery of the cargoes to the consignee or to the person who has a right to receive them. PAKISTAN BANK was indicated in the bills of lading as consignee whereas GPC was the notify party. However, in the export invoices GPC was clearly named as buyer/importer. Petitioner also referred to GPC as such in his demand letter to respondent WALLEM and in his complaint before the trial court. This premise draws us to conclude that the delivery of the cargoes to GPC as buyer/importer which, conformably with Art. 1736 had, other than the consignee, the right to receive them14 was proper.The real issue is whether respondents are liable to petitioner for releasing the goods to GPC without the bills of lading or bank guarantee.Respondents submitted in evidence a telex dated 5 April 1989 as basis for delivering the cargoes to GPC without the bills of lading and bank guarantee. The telex instructed delivery of various shipments to the respective consignees without need of presenting the bill of lading and bank guarantee per the respective shipper's request since "for prepaid shipt ofrt charges already fully paid." Petitioner was named therein as shipper and GPC as consignee with respect to Bill of Lading Nos. HKG 99012 and HKG 99013. Petitioner disputes the existence of such instruction and claims that this evidence is self-serving.From the testimony of petitioner, we gather that he has been transacting with GPC as buyer/importer for around two (2) or three (3) years already. When mangoes and watermelons are in season, his shipment to GPC using the facilities of respondents is twice or thrice a week. The goods are released to GPC. It has been the practice of petitioner to request the shipping lines to immediately release perishable cargoes such as watermelons and fresh mangoes through telephone calls by himself or his "people." In transactions covered by a letter of credit, bank guarantee is normally required by the shipping lines prior to releasing the goods. But for buyers using telegraphic transfers, petitioner dispenses with the bank guarantee because the goods are already fully paid. In his several years of business relationship with GPC and respondents, there was not a

single instance when the bill of lading was first presented before the release of the cargoes. He admitted the existence of the telex of 3 July 1989 containing his request to deliver the shipment to the consignee without presentation of the bill of lading15 but not the telex of 5 April 1989 because he could not remember having made such request.Consider pertinent portions of petitioner's testimony —Q: Are you aware of any document which would indicate or show that your request to the defendant Wallem for the immediate release of your fresh fruits, perishable goods, to Great Prospect without the presentation of the original Bill of Lading?A: Yes, by telegraphic transfer, which means that it is fully paid. And I requested immediate release of the cargo because there was immediate payment.Q: And you are referring, therefore, to this copy Telex release that you mentioned where your Company's name appears Ben-Mac?Atty. Hernandez: Just for the record, Your Honor, the witness is showing a Bill of Lading referring to SKG (sic) 93023 and 93026 with Great Prospect Company.Atty. Ventura:Q: Is that the telegraphic transfer?A: Yes, actually, all the shippers partially request for the immediate release of the goods when they are perishable. I thought Wallem Shipping Lines is not neophyte in the business. As far as LC is concerned, Bank guarantee is needed for the immediate release of the goods . . . .15

Q: Mr. Witness, you testified that if is the practice of the shipper of the perishable goods to ask the shipping lines to release immediately the shipment. Is that correct?A: Yes, sir.Q: Now, it is also the practice of the shipper to allow the shipping lines to release the perishable goods to the importer of goods without a Bill of Lading or Bank guarantee?A: No, it cannot be without the Bank Guarantee.Atty. Hernandez:Q: Can you tell us an instance when you will allow the release of the perishable goods by the shipping lines to the importer without the Bank guarantee and without the Bill of Lading?A: As far as telegraphic transfer is concerned.Q: Can you explain (to) this Honorable Court what telegraphic transfer is?A: Telegraphic transfer, it means advance payment that I am already fully paid . . . .Q: Mr. Macam, with regard to Wallem and to Great Prospect, would you know and can you recall that any of your shipment was released to Great Prospect by Wallem through telegraphic transfer?A: I could not recall but there were so many instances sir.Q: Mr. Witness, do you confirm before this Court that in previous shipments of your goods through Wallem, you

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requested Wallem to release immediately your perishable goods to the buyer?A: Yes, that is the request of the shippers of the perishable goods . . . .16

Q: Now, Mr. Macam, if you request the Shipping Lines for the release of your goods immediately even without the presentation of OBL, how do you course it?A: Usually, I call up the Shipping Lines, sir . . . .17

Q: You also testified you made this request through phone calls. Who of you talked whenever you made such phone call?A: Mostly I let my people to call, sir. (sic)Q: So everytime you made a shipment on perishable goods you let your people to call? (sic)A: Not everytime, sir.Q: You did not make this request in writing?A: No, sir. I think I have no written request with Wallem . . . .18

Against petitioner's claim of "not remembering" having made a request for delivery of subject cargoes to GPC without presentation of the bills of lading and bank guarantee as reflected in the telex of 5 April 1989 are damaging disclosures in his testimony. He declared that it was his practice to ask the shipping lines to immediately release shipment of perishable goods through telephone calls by himself or his "people." He no longer required presentation of a bill of lading nor of a bank guarantee as a condition to releasing the goods in case he was already fully paid. Thus, taking into account that subject shipment consisted of perishable goods and SOLIDBANK pre-paid the full amount of the value thereof, it is not hard to believe the claim of respondent WALLEM that petitioner indeed requested the release of the goods to GPC without presentation of the bills of lading and bank guarantee.The instruction in the telex of 5 April 1989 was "to deliver the shipment to respective consignees." And so petitioner argues that, assuming there was such an instruction, the consignee referred to was PAKISTAN BANK. We find the argument too simplistic. Respondent court analyzed the telex in its entirety and correctly arrived at the conclusion that the consignee referred to was not PAKISTAN BANK but GPC —There is no mistake that the originals of the two (2) subject Bills of Lading are still in the possession of the Pakistani Bank. The appealed decision affirms this fact. Conformably, to implement the said telex instruction, the delivery of the shipment must be to GPC, the notify party or real importer/buyer of the goods and not the Pakistani Bank since the latter can very well present the original Bills of Lading in its possession. Likewise, if it were the Pakistani Bank to whom the cargoes were to be strictly delivered, it will no longer be proper to require a bank guarantee as a substitute for the Bill of Lading. To construe otherwise will render meaningless the telex instruction. After all, the cargoes consist of perishable fresh fruits and immediate delivery thereof to the

buyer/importer is essentially a factor to reckon with. Besides, GPC is listed as one among the several consignees in the telex (Exhibit 5-B) and the instruction in the telex was to arrange delivery of A/M shipment (not any party) to respective consignees without presentation of OB/L and bank guarantee . . . .20

Apart from the foregoing obstacles to the success of petitioner's cause, petitioner failed to substantiate his claim that he returned to SOLIDBANK the full amount of the value of the cargoes. It is not far-fetched to entertain the notion, as did respondent court, that he merely accommodated SOLIDBANK in order to recover the cost of the shipped cargoes from respondents. We note that it was SOLIDBANK which initially demanded payment from respondents through five (5) letters. SOLIDBANK must have realized the absence of privity of contract between itself and respondents. That is why petitioner conveniently took the cudgels for the bank.In view of petitioner's utter failure to establish the liability of respondents over the cargoes, no reversible error was committed by respondent court in ruling against him.WHEREFORE, the petition is DENIED. The decision of respondent Court of Appeals of 13 March 1996 dismissing the complaint of petitioner Benito Macam and the counterclaims of respondents China Ocean Shipping Co. and/or Wallem Philippines Shipping, Inc., as well as its resolution of 5 July 1996 denying reconsideration, is AFFIRMED.1âwphi1.nêtSO ORDERED.G.R. No. 95582 October 7, 1991DANGWA TRANSPORTATION CO., INC. and THEODORE LARDIZABAL y MALECDAN, petitioners, vs.COURT OF APPEALS, INOCENCIA CUDIAMAT, EMILIA CUDIAMAT BANDOY, FERNANDO CUDLAMAT, MARRIETA CUDIAMAT, NORMA CUDIAMAT, DANTE CUDIAMAT, SAMUEL CUDIAMAT and LIGAYA CUDIAMAT, all Heirs of the late Pedrito Cudiamat represented by Inocencia Cudiamat, respondents.Francisco S. Reyes Law Office for petitioners.Antonio C. de Guzman for private respondents. REGALADO, J.:pOn May 13, 1985, private respondents filed a complaint 1 for damages against petitioners for the death of Pedrito Cudiamat as a result of a vehicular accident which occurred on March 25, 1985 at Marivic, Sapid, Mankayan, Benguet. Among others, it was alleged that on said date, while petitioner Theodore M. Lardizabal was driving a passenger bus belonging to petitioner corporation in a reckless and imprudent manner and without due regard to traffic rules and regulations and safety to persons and property, it ran over its passenger, Pedrito Cudiamat. However, instead

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of bringing Pedrito immediately to the nearest hospital, the said driver, in utter bad faith and without regard to the welfare of the victim, first brought his other passengers and cargo to their respective destinations before banging said victim to the Lepanto Hospital where he expired.On the other hand, petitioners alleged that they had observed and continued to observe the extraordinary diligence required in the operation of the transportation company and the supervision of the employees, even as they add that they are not absolute insurers of the safety of the public at large. Further, it was alleged that it was the victim's own carelessness and negligence which gave rise to the subject incident, hence they prayed for the dismissal of the complaint plus an award of damages in their favor by way of a counterclaim.On July 29, 1988, the trial court rendered a decision, effectively in favor of petitioners, with this decretal portion:IN VIEW OF ALL THE FOREGOING, judgment is hereby pronounced that Pedrito Cudiamat was negligent, which negligence was the proximate cause of his death. Nonetheless, defendants in equity, are hereby ordered to pay the heirs of Pedrito Cudiamat the sum of P10,000.00 which approximates the amount defendants initially offered said heirs for the amicable settlement of the case. No costs.SO ORDERED. 2Not satisfied therewith, private respondents appealed to the Court of Appeals which, in a decision 3 in CA-G.R. CV No. 19504 promulgated on August 14, 1990, set aside the decision of the lower court, and ordered petitioners to pay private respondents:1. The sum of Thirty Thousand (P30,000.00) Pesos by way of indemnity for death of the victim Pedrito Cudiamat;2. The sum of Twenty Thousand (P20,000.00) by way of moral damages;3. The sum of Two Hundred Eighty Eight Thousand (P288,000.00) Pesos as actual and compensatory damages;4. The costs of this suit. 4Petitioners' motion for reconsideration was denied by the Court of Appeals in its resolution dated October 4, 1990,5 hence this petition with the central issue herein being whether respondent court erred in reversing the decision of the trial court and in finding petitioners negligent and liable for the damages claimed.It is an established principle that the factual findings of the Court of Appeals as a rule are final and may not be reviewed by this Court on appeal. However, this is subject to settled exceptions, one of which is when the findings of the appellate court are contrary to those of the trial court, in which case a reexamination of the facts and evidence may be undertaken. 6In the case at bar, the trial court and the Court of Appeal have discordant positions as to who between the

petitioners an the victim is guilty of negligence. Perforce, we have had to conduct an evaluation of the evidence in this case for the prope calibration of their conflicting factual findings and legal conclusions.The lower court, in declaring that the victim was negligent, made the following findings:This Court is satisfied that Pedrito Cudiamat was negligent in trying to board a moving vehicle, especially with one of his hands holding an umbrella. And, without having given the driver or the conductor any indication that he wishes to board the bus. But defendants can also be found wanting of the necessary diligence. In this connection, it is safe to assume that when the deceased Cudiamat attempted to board defendants' bus, the vehicle's door was open instead of being closed. This should be so, for it is hard to believe that one would even attempt to board a vehicle (i)n motion if the door of said vehicle is closed. Here lies the defendant's lack of diligence. Under such circumstances, equity demands that there must be something given to the heirs of the victim to assuage their feelings. This, also considering that initially, defendant common carrier had made overtures to amicably settle the case. It did offer a certain monetary consideration to the victim's heirs. 7However, respondent court, in arriving at a different opinion, declares that:From the testimony of appellees'own witness in the person of Vitaliano Safarita, it is evident that the subject bus was at full stop when the victim Pedrito Cudiamat boarded the same as it was precisely on this instance where a certain Miss Abenoja alighted from the bus. Moreover, contrary to the assertion of the appellees, the victim did indicate his intention to board the bus as can be seen from the testimony of the said witness when he declared that Pedrito Cudiamat was no longer walking and made a sign to board the bus when the latter was still at a distance from him. It was at the instance when Pedrito Cudiamat was closing his umbrella at the platform of the bus when the latter made a sudden jerk movement (as) the driver commenced to accelerate the bus.Evidently, the incident took place due to the gross negligence of the appellee-driver in prematurely stepping on the accelerator and in not waiting for the passenger to first secure his seat especially so when we take into account that the platform of the bus was at the time slippery and wet because of a drizzle. The defendants-appellees utterly failed to observe their duty and obligation as common carrier to the end that they should observe extra-ordinary diligence in the vigilance over the goods and for the safety of the passengers transported by them according to the circumstances of each case (Article 1733, New Civil Code). 8After a careful review of the evidence on record, we find no reason to disturb the above holding of the Court of Appeals. Its aforesaid findings are supported by the testimony of petitioners' own witnesses. One of them,

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Virginia Abalos, testified on cross-examination as follows:Q It is not a fact Madam witness, that at bunkhouse 54, that is before the place of the incident, there is a crossing?A The way going to the mines but it is not being pass(ed) by the bus.Q And the incident happened before bunkhouse 56, is that not correct?A It happened between 54 and 53 bunkhouses. 9The bus conductor, Martin Anglog, also declared:Q When you arrived at Lepanto on March 25, 1985, will you please inform this Honorable Court if there was anv unusual incident that occurred?A When we delivered a baggage at Marivic because a person alighted there between Bunkhouse 53 and 54.Q What happened when you delivered this passenger at this particular place in Lepanto?A When we reached the place, a passenger alighted and I signalled my driver. When we stopped we went out because I saw an umbrella about a split second and I signalled again the driver, so the driver stopped and we went down and we saw Pedrito Cudiamat asking for help because he was lying down.Q How far away was this certain person, Pedrito Cudiamat, when you saw him lying down — from the bus how far was he?A It is about two to three meters.Q On what direction of the bus was he found about three meters from the bus, was it at the front or at the back?A At the back, sir. 10 (Emphasis supplied.)The foregoing testimonies show that the place of the accident and the place where one of the passengers alighted were both between Bunkhouses 53 and 54, hence the finding of the Court of Appeals that the bus was at full stop when the victim boarded the same is correct. They further confirm the conclusion that the victim fell from the platform of the bus when it suddenly accelerated forward and was run over by the rear right tires of the vehicle, as shown by the physical evidence on where he was thereafter found in relation to the bus when it stopped. Under such circumstances, it cannot be said that the deceased was guilty of negligence.The contention of petitioners that the driver and the conductor had no knowledge that the victim would ride on the bus, since the latter had supposedly not manifested his intention to board the same, does not merit consideration. When the bus is not in motion there is no necessity for a person who wants to ride the same to signal his intention to board. A public utility bus, once it stops, is in effect making a continuous offer to bus riders. Hence, it becomes the duty of the driver and the conductor, every time the bus stops, to do no act that would have the effect of increasing the peril to a passenger while he was attempting to board the same.

The premature acceleration of the bus in this case was a breach of such duty. 11It is the duty of common carriers of passengers, including common carriers by railroad train, streetcar, or motorbus, to stop their conveyances a reasonable length of time in order to afford passengers an opportunity to board and enter, and they are liable for injuries suffered by boarding passengers resulting from the sudden starting up or jerking of their conveyances while they are doing so. 12Further, even assuming that the bus was moving, the act of the victim in boarding the same cannot be considered negligent under the circumstances. As clearly explained in the testimony of the aforestated witness for petitioners, Virginia Abalos, th bus had "just started" and "was still in slow motion" at the point where the victim had boarded and was on its platform. 13It is not negligence per se, or as a matter of law, for one attempt to board a train or streetcar which is moving slowly. 14 An ordinarily prudent person would have made the attempt board the moving conveyance under the same or similar circumstances. The fact that passengers board and alight from slowly moving vehicle is a matter of common experience both the driver and conductor in this case could not have been unaware of such an ordinary practice.The victim herein, by stepping and standing on the platform of the bus, is already considered a passenger and is entitled all the rights and protection pertaining to such a contractual relation. Hence, it has been held that the duty which the carrier passengers owes to its patrons extends to persons boarding cars as well as to those alighting therefrom. 15Common carriers, from the nature of their business and reasons of public policy, are bound to observe extraordina diligence for the safety of the passengers transported by the according to all the circumstances of each case. 16 A common carrier is bound to carry the passengers safely as far as human care and foresight can provide, using the utmost diligence very cautious persons, with a due regard for all the circumstances. 17It has also been repeatedly held that 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 by the passenger. By contract of carriage, the carrier assumes the express obligation to transport the passenger to his destination safely and 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. 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 Articles 1733 and 1755 of the Civil Code. 18

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Moreover, the circumstances under which the driver and the conductor failed to bring the gravely injured victim immediately to the hospital for medical treatment is a patent and incontrovertible proof of their negligence. It defies understanding and can even be stigmatized as callous indifference. The evidence shows that after the accident the bus could have forthwith turned at Bunk 56 and thence to the hospital, but its driver instead opted to first proceed to Bunk 70 to allow a passenger to alight and to deliver a refrigerator, despite the serious condition of the victim. The vacuous reason given by petitioners that it was the wife of the deceased who caused the delay was tersely and correctly confuted by respondent court:... The pretension of the appellees that the delay was due to the fact that they had to wait for about twenty minutes for Inocencia Cudiamat to get dressed deserves scant consideration. It is rather scandalous and deplorable for a wife whose husband is at the verge of dying to have the luxury of dressing herself up for about twenty minutes before attending to help her distressed and helpless husband. 19Further, it cannot be said that the main intention of petitioner Lardizabal in going to Bunk 70 was to inform the victim's family of the mishap, since it was not said bus driver nor the conductor but the companion of the victim who informed his family thereof. 20 In fact, it was only after the refrigerator was unloaded that one of the passengers thought of sending somebody to the house of the victim, as shown by the testimony of Virginia Abalos again, to wit:Q Why, what happened to your refrigerator at that particular time?A I asked them to bring it down because that is the nearest place to our house and when I went down and asked somebody to bring down the refrigerator, I also asked somebody to call the family of Mr. Cudiamat.COURT:Q Why did you ask somebody to call the family of Mr. Cudiamat?A Because Mr. Cudiamat met an accident, so I ask somebody to call for the family of Mr. Cudiamat.Q But nobody ask(ed) you to call for the family of Mr. Cudiamat?A No sir. 21With respect to the award of damages, an oversight was, however, committed by respondent Court of Appeals in computing the actual damages based on the gross income of the victim. The rule is that the amount recoverable by the heirs of a victim of a tort is not the 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 minus living and other incidental expenses. 22

We are of the opinion that the deductible living and other expense of the deceased may fairly and reasonably be fixed at P500.00 a month or P6,000.00 a year. In adjudicating the actual or compensatory damages, respondent court found that the deceased was 48 years old, in good health with a remaining productive life expectancy of 12 years, and then earning P24,000.00 a year. Using the gross annual income as the basis, and multiplying the same by 12 years, it accordingly awarded P288,000. Applying the aforestated rule on computation based on the net earnings, said award must be, as it hereby is, rectified and reduced to P216,000.00. However, in accordance with prevailing jurisprudence, the death indemnity is hereby increased to P50,000.00. 23WHEREFORE, subject to the above modifications, the challenged judgment and resolution of respondent Court of Appeals are hereby AFFIRMED in all other respects.SO ORDERED.G.R. No. 145804             February 6, 2003LIGHT RAIL TRANSIT AUTHORITY & RODOLFO ROMAN, petitioners, vs.MARJORIE NAVIDAD, Heirs of the Late NICANOR NAVIDAD & PRUDENT SECURITY AGENCY, respondents.

D E C I S I O NVITUG, J.:The case before the Court is an appeal from the decision and resolution of the Court of Appeals, promulgated on 27 April 2000 and 10 October 2000, respectively, in CA-G.R. CV No. 60720, entitled "Marjorie Navidad and Heirs of the Late Nicanor Navidad vs. Rodolfo Roman, et. al.," which has modified the decision of 11 August 1998 of the Regional Trial Court, Branch 266, Pasig City, exonerating Prudent Security Agency (Prudent) from liability and finding Light Rail Transit Authority (LRTA) and Rodolfo Roman liable for damages on account of the death of Nicanor Navidad.On 14 October 1993, about half an hour past seven o’clock in the evening, Nicanor Navidad, then drunk, entered the EDSA LRT station after purchasing a "token" (representing payment of the fare). While Navidad was standing on the platform near the LRT tracks, Junelito Escartin, the security guard assigned to the area approached Navidad. A misunderstanding or an altercation between the two apparently ensued that led to a fist fight. No evidence, however, was adduced to indicate how the fight started or who, between the two, delivered the first blow or how Navidad later fell on the LRT tracks. At the exact moment that Navidad fell, an LRT train, operated by petitioner Rodolfo Roman, was coming in. Navidad was struck by the moving train, and he was killed instantaneously.On 08 December 1994, the widow of Nicanor, herein respondent Marjorie Navidad, along with her children,

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filed a complaint for damages against Junelito Escartin, Rodolfo Roman, the LRTA, the Metro Transit Organization, Inc. (Metro Transit), and Prudent for the death of her husband. LRTA and Roman filed a counterclaim against Navidad and a cross-claim against Escartin and Prudent. Prudent, in its answer, denied liability and averred that it had exercised due diligence in the selection and supervision of its security guards.The LRTA and Roman presented their evidence while Prudent and Escartin, instead of presenting evidence, filed a demurrer contending that Navidad had failed to prove that Escartin was negligent in his assigned task. On 11 August 1998, the trial court rendered its decision; it adjudged:"WHEREFORE, judgment is hereby rendered in favor of the plaintiffs and against the defendants Prudent Security and Junelito Escartin ordering the latter to pay jointly and severally the plaintiffs the following:"a) 1) Actual damages of P44,830.00;2) Compensatory damages of P443,520.00;3) Indemnity for the death of Nicanor Navidad in the sum of P50,000.00;"b) Moral damages of P50,000.00;"c) Attorney’s fees of P20,000;"d) Costs of suit."The complaint against defendants LRTA and Rodolfo Roman are dismissed for lack of merit."The compulsory counterclaim of LRTA and Roman are likewise dismissed."1

Prudent appealed to the Court of Appeals. On 27 August 2000, the appellate court promulgated its now assailed decision exonerating Prudent from any liability for the death of Nicanor Navidad and, instead, holding the LRTA and Roman jointly and severally liable thusly:"WHEREFORE, the assailed judgment is hereby MODIFIED, by exonerating the appellants from any liability for the death of Nicanor Navidad, Jr. Instead, appellees Rodolfo Roman and the Light Rail Transit Authority (LRTA) are held liable for his death and are hereby directed to pay jointly and severally to the plaintiffs-appellees, the following amounts:a) P44,830.00 as actual damages;b) P50,000.00 as nominal damages;c) P50,000.00 as moral damages;d) P50,000.00 as indemnity for the death of the deceased; ande) P20,000.00 as and for attorney’s fees."2

The appellate court ratiocinated that while the deceased might not have then as yet boarded the train, a contract of carriage theretofore had already existed when the victim entered the place where passengers were supposed to be after paying the fare and getting the corresponding token therefor. In exempting Prudent from liability, the court stressed that there was nothing to link the security agency to the death of Navidad. It said that Navidad failed to show that Escartin inflicted fist blows upon the victim and the evidence merely

established the fact of death of Navidad by reason of his having been hit by the train owned and managed by the LRTA and operated at the time by Roman. The appellate court faulted petitioners for their failure to present expert evidence to establish the fact that the application of emergency brakes could not have stopped the train.The appellate court denied petitioners’ motion for reconsideration in its resolution of 10 October 2000.In their present recourse, petitioners recite alleged errors on the part of the appellate court; viz:

"I.THE HONORABLE COURT OF APPEALS GRAVELY ERRED BY DISREGARDING THE FINDINGS OF FACTS BY THE TRIAL COURT

"II.THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN FINDING THAT PETITIONERS ARE LIABLE FOR THE DEATH OF NICANOR NAVIDAD, JR.

"III.THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN FINDING THAT RODOLFO ROMAN IS AN EMPLOYEE OF LRTA."3

Petitioners would contend that the appellate court ignored the evidence and the factual findings of the trial court by holding them liable on the basis of a sweeping conclusion that the presumption of negligence on the part of a common carrier was not overcome. Petitioners would insist that Escartin’s assault upon Navidad, which caused the latter to fall on the tracks, was an act of a stranger that could not have been foreseen or prevented. The LRTA would add that the appellate court’s conclusion on the existence of an employer-employee relationship between Roman and LRTA lacked basis because Roman himself had testified being an employee of Metro Transit and not of the LRTA.Respondents, supporting the decision of the appellate court, contended that a contract of carriage was deemed created from the moment Navidad paid the fare at the LRT station and entered the premises of the latter, entitling Navidad to all the rights and protection under a contractual relation, and that the appellate court had correctly held LRTA and Roman liable for the death of Navidad in failing to exercise extraordinary diligence imposed upon a common carrier.Law and jurisprudence dictate that a common carrier, both from the nature of its business and for reasons of public policy, is burdened with the duty of exercising utmost diligence in ensuring the safety of passengers.4 The Civil Code, governing the liability of a common carrier for death of or injury to its passengers, provides:"Article 1755. A common carrier is bound to carry the passengers safely as far as human care and foresight can provide, using the utmost diligence of very cautious persons, with a due regard for all the circumstances.

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"Article 1756. In case of death of or injuries to passengers, common carriers are presumed to have been at fault or to have acted negligently, unless they prove that they observed extraordinary diligence as prescribed in articles 1733 and 1755.""Article 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.""Article 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."The law requires common carriers to carry passengers safely using the utmost diligence of very cautious persons with due regard for all circumstances.5 Such duty of a common carrier to provide safety to its passengers so obligates it not only during the course of the trip but for so long as the passengers are within its premises and where they ought to be in pursuance to the contract of carriage.6 The statutory provisions render a common carrier liable for death of or injury to passengers (a) through the negligence or wilful acts of its employees or b) on account of wilful acts or negligence of other passengers or of strangers if the common carrier’s employees through the exercise of due diligence could have prevented or stopped the act or omission.7 In case of such death or injury, a carrier is presumed to have been at fault or been negligent, and8 by simple proof of injury, the passenger is relieved of the duty to still establish the fault or negligence of the carrier or of its employees and the burden shifts upon the carrier to prove that the injury is due to an unforeseen event or to force majeure.9 In the absence of satisfactory explanation by the carrier on how the accident occurred, which petitioners, according to the appellate court, have failed to show, the presumption would be that it has been at fault,10 an exception from the general rule that negligence must be proved.11

The foundation of LRTA’s liability is the contract of carriage and its obligation to indemnify the victim arises from the breach of that contract by reason of its failure to exercise the high diligence required of the common carrier. In the discharge of its commitment to ensure the safety of passengers, a carrier may choose to hire its own employees or avail itself of the services of an outsider or an independent firm to undertake the task. In either case, the common carrier is not relieved of its responsibilities under the contract of carriage.

Should Prudent be made likewise liable? If at all, that liability could only be for tort under the provisions of Article 217612 and related provisions, in conjunction with Article 2180,13 of the Civil Code. The premise, however, for the employer’s liability is negligence or fault on the part of the employee. Once such fault is established, the employer can then be made liable on the basis of the presumption juris tantum that the employer failed to exercise diligentissimi patris families in the selection and supervision of its employees. The liability is primary and can only be negated by showing due diligence in the selection and supervision of the employee, a factual matter that has not been shown. Absent such a showing, one might ask further, how then must the liability of the common carrier, on the one hand, and an independent contractor, on the other hand, be described? It would be solidary. A contractual obligation can be breached by tort and when the same act or omission causes the injury, one resulting in culpa contractual and the other in culpa aquiliana, Article 219414 of the Civil Code can well apply.15 In fine, a liability for tort may arise even under a contract, where tort is that which breaches the contract.16 Stated differently, when an act which constitutes a breach of contract would have itself constituted the source of a quasi-delictual liability had no contract existed between the parties, the contract can be said to have been breached by tort, thereby allowing the rules on tort to apply.17

Regrettably for LRT, as well as perhaps the surviving spouse and heirs of the late Nicanor Navidad, this Court is concluded by the factual finding of the Court of Appeals that "there is nothing to link (Prudent) to the death of Nicanor (Navidad), for the reason that the negligence of its employee, Escartin, has not been duly proven x x x." This finding of the appellate court is not without substantial justification in our own review of the records of the case.There being, similarly, no showing that petitioner Rodolfo Roman himself is guilty of any culpable act or omission, he must also be absolved from liability. Needless to say, the contractual tie between the LRT and Navidad is not itself a juridical relation between the latter and Roman; thus, Roman can be made liable only for his own fault or negligence.The award of nominal damages in addition to actual damages is untenable. Nominal damages are adjudicated in order that a right of the plaintiff, which has been violated or invaded by the defendant, may be vindicated or recognized, and not for the purpose of indemnifying the plaintiff for any loss suffered by him.18 It is an established rule that nominal damages cannot co-exist with compensatory damages.19

WHEREFORE, the assailed decision of the appellate court is AFFIRMED with MODIFICATION but only in that (a) the award of nominal damages is DELETED

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and (b) petitioner Rodolfo Roman is absolved from liability. No costs.SO ORDERED.G.R. No. L-21486             May 14, 1966LA MALLORCA and PAMPANGA BUS COMPANY, petitioner, vs.VALENTIN DE JESUS, MANOLO TOLENTINO and COURT OF APPEALS, respondents.Manuel O. Chan for petitioners.Sixto T. Antonio for respondents.MAKALINTAL, J.:La Mallorca and Pampanga Bus Company, Inc., commonly known as La Mallorca-Pambusco, filed this appeal bycertiorari from the decision of the Court of Appeals which affirmed that rendered by the Court of First Instance of Bulacan in its civil case No. 2100, entitled "Valentin de Jesus and Manolo Tolentino vs. La Mallorca-Pambusco." The court a quo sentenced the defendant, now petitioner, "to pay to plaintiffs the amount of P2,132.50 for actual damages; P14,400.00 as compensatory damages; P10,000.00 to each plaintiff by way of moral damages; and P3,000.00 as counsel fees."Two errors are attributed to the appellate Court: (1) "in sustaining the decision (of the court a quo) holding that the petitioners were liable for the accident which was caused by a blow-out of one of the tires of the bus and in not considering the same as caso fortuito," and (2) in holding petitioners liable for moral damages.The suit arose by reason of the death of Lolita de Jesus, 20-year old daughter of Valentin de Jesus and wife of Manolo Tolentino, in a head-on collision between petitioner's bus, on which she was a passenger, and a freight truck traveling in the opposite direction, in a barrio in Marilao Bulacan, in the morning of October 8, 1959. The immediate cause of the collision was the fact that the driver of the bus lost control of the wheel when its left front tire suddenly exploded.Petitioner maintains that a tire blow-out is a fortuitous event and gives rise to no liability for negligence, citing the rulings of the Court of Appeals in Rodriguez vs. Red Line Transportation Co., CA-G.R. No. 8136, December 29, 1954, and People vs. Palapad, CA-G.R. No. 18480, June 27, 1958. These rulings, however, not only are not not binding on this Court but were based on considerations quite different from those that obtain in the at bar. The appellate Court there made no findings of any specified acts of negligence on the part of the defendants and confined itself to the question of whether or not a tire blow-out, by itself alone and without a showing as to the causative factors, would generate liability. In the present case, the cause of the blow-out was known. The inner tube of the left front tire, according to petitioner's own evidence and as found by the Court of Appeals "was pressed between the inner circle of the left wheel and the rim which had slipped out

of the wheel." This was, said Court correctly held, a mechanical defect of the conveyance or a fault in its equipment which was easily discoverable if the bus had been subjected to a more thorough, or rigid check-up before it took to the road that morning.Then again both the trial court and the Court of Appeals found as a fact that the bus was running quite fast immediately before the accident. Considering that the tire which exploded was not new — petitioner describes it as "hindi masyadong kalbo," or not so very worn out — the plea of caso fortuito cannot be entertained.1äwphï1.ñëtThe second issue raised by petitioner is already a settled one. In this jurisdiction moral damages are recoverable by reason of the death of a passenger caused by the breach of contract of a common carrier, as provided in Article 1764, in relation to Article 2206, of the Civil Code. These articles have been applied by this Court in a number of cases, among them Necesito, etc. vs. Paras, et al., L-10605-06, June 30, 1958; Mercado vs. Lira, L-13328-29, Sept. 29, 1961; Villa-Rey Transit vs. Bello, L-18957, April 23, 1963.Wherefore, the judgment appealed from is affirmed, with costs against petitioners.G.R. No. 84458 November 6, 1989ABOITIZ 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. REGALADO, J.: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; P150,000.00 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: .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,

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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.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 plantiffs:(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; F 5,000.00, 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.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

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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 of the trial court except as to the amount of damages awarded to the Vianas.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 Appears 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 e 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

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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.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 Mallorcathere 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.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, 18which, 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

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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.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.G.R. No. 122039 May 31, 2000VICENTE CALALAS, petitioner,vs.COURT OF APPEALS, ELIZA JUJEURCHE SUNGA and FRANCISCO SALVA, respondents.

MENDOZA, J.:This is a petition for review on certiorari of the decision1 of the Court of Appeals, dated March 31, 1991, reversing the contrary decision of the Regional Trial Court, Branch 36, Dumaguete City, and awarding damages instead to private respondent Eliza Jujeurche Sunga as plaintiff in an action for breach of contract of carriage.The facts, as found by the Court of Appeals, are as follows:At 10 o'clock in the morning of August 23, 1989, private respondent Eliza Jujeurche G. Sunga, then a college freshman majoring in Physical Education at the Siliman University, took a passenger jeepney owned and operated by petitioner Vicente Calalas. As the jeepney was filled to capacity of about 24 passengers, Sunga was given by the conductor an "extension seat," a wooden stool at the back of the door at the rear end of the vehicle.On the way to Poblacion Sibulan, Negros Occidental, the jeepney stopped to let a passenger off. As she was seated at the rear of the vehicle, Sunga gave way to the outgoing passenger. Just as she was doing so, an Isuzu truck driven by Iglecerio Verena and owned by Francisco Salva bumped the left rear portion of the jeepney. As a result, Sunga was injured. She sustained a fracture of the "distal third of the left tibia-fibula with

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severe necrosis of the underlying skin." Closed reduction of the fracture, long leg circular casting, and case wedging were done under sedation. Her confinement in the hospital lasted from August 23 to September 7, 1989. Her attending physician, Dr. Danilo V. Oligario, an orthopedic surgeon, certified she would remain on a cast for a period of three months and would have to ambulate in crutches during said period.On October 9, 1989, Sunga filed a complaint for damages against Calalas, alleging violation of the contract of carriage by the former in failing to exercise the diligence required of him as a common carrier. Calalas, on the other hand, filed a third-party complaint against Francisco Salva, the owner of the Isuzu truck.The lower court rendered judgment against Salva as third-party defendant and absolved Calalas of liability, holding that it was the driver of the Isuzu truck who was responsible for the accident. It took cognizance of another case (Civil Case No. 3490), filed by Calalas against Salva and Verena, for quasi-delict, in which Branch 37 of the same court held Salva and his driver Verena jointly liable to Calalas for the damage to his jeepney.On appeal to the Court of Appeals, the ruling of the lower court was reversed on the ground that Sunga's cause of action was based on a contract of carriage, not quasi-delict, and that the common carrier failed to exercise the diligence required under the Civil Code. The appellate court dismissed the third-party complaint against Salva and adjudged Calalas liable for damages to Sunga. The dispositive portion of its decision reads:WHEREFORE, the decision appealed from is hereby REVERSED and SET ASIDE, and another one is entered ordering defendant-appellee Vicente Calalas to pay plaintiff-appellant:(1) P50,000.00 as actual and compensatory damages;(2) P50,000.00 as moral damages;(3) P10,000.00 as attorney's fees; and(4) P1,000.00 as expenses of litigation; and(5) to pay the costs.SO ORDERED.Hence, this petition. Petitioner contends that the ruling in Civil Case No. 3490 that the negligence of Verena was the proximate cause of the accident negates his liability and that to rule otherwise would be to make the common carrier an insurer of the safety of its passengers. He contends that the bumping of the jeepney by the truck owned by Salva was a caso fortuito. Petitioner further assails the award of moral damages to Sunga on the ground that it is not supported by evidence.The petition has no merit.The argument that Sunga is bound by the ruling in Civil Case No. 3490 finding the driver and the owner of the truck liable for quasi-delict ignores the fact that she was never a party to that case and, therefore, the principle ofres judicata does not apply.

Nor are the issues in Civil Case No. 3490 and in the present case the same. The issue in Civil Case No. 3490 was whether Salva and his driver Verena were liable for quasi-delict for the damage caused to petitioner's jeepney. On the other hand, the issue in this case is whether petitioner is liable on his contract of carriage. The first, quasi-delict, also known as culpa aquiliana or culpa extra contractual, has as its source the negligence of the tortfeasor. The second, breach of contract or culpa contractual, is premised upon the negligence in the performance of a contractual obligation.Consequently, in quasi-delict, the negligence or fault should be clearly established because it is the basis of the action, whereas in breach of contract, the action can be prosecuted merely by proving the existence of the contract and the fact that the obligor, in this case the common carrier, failed to transport his passenger safely to his destination.2 In case of death or injuries to passengers, Art. 1756 of the Civil Code provides that common carriers are presumed to have been at fault or to have acted negligently unless they prove that they observed extraordinary diligence as defined in Arts. 1733 and 1755 of the Code. This provision necessarily shifts to the common carrier the burden of proof.There is, thus, no basis for the contention that the ruling in Civil Case No. 3490, finding Salva and his driver Verena liable for the damage to petitioner's jeepney, should be binding on Sunga. It is immaterial that the proximate cause of the collision between the jeepney and the truck was the negligence of the truck driver. The doctrine of proximate cause is applicable only in actions for quasi-delict, not in actions involving breach of contract. The doctrine is a device for imputing liability to a person where there is no relation between him and another party. In such a case, the obligation is created by law itself. But, where there is a pre-existing contractual relation between the parties, it is the parties themselves who create the obligation, and the function of the law is merely to regulate the relation thus created. Insofar as contracts of carriage are concerned, some aspects regulated by the Civil Code are those respecting the diligence required of common carriers with regard to the safety of passengers as well as the presumption of negligence in cases of death or injury to passengers. It provides:Art. 1733. Common carriers, from the nature of their business and for reasons of public policy, are bound to observe extraordinary diligence in the vigilance over the goods and for the safety of the passengers transported by them, according to all the circumstances of each case.Such extraordinary diligence in the vigilance over the goods is further expressed in articles 1734, 1735, and 1746, Nos. 5, 6, and 7, while the extraordinary diligence for the safety of the passengers is further set forth in articles 1755 and 1756.

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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 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 by articles 1733 and 1755.In the case at bar, upon the happening of the accident, the presumption of negligence at once arose, and it became the duty of petitioner to prove that he had to observe extraordinary diligence in the care of his passengers.Now, did the driver of jeepney carry Sunga "safely as far as human care and foresight could provide, using the utmost diligence of very cautious persons, with due regard for all the circumstances" as required by Art. 1755? We do not think so. Several factors militate against petitioner's contention.First, as found by the Court of Appeals, the jeepney was not properly parked, its rear portion being exposed about two meters from the broad shoulders of the highway, and facing the middle of the highway in a diagonal angle. This is a violation of the R.A. No. 4136, as amended, or the Land Transportation and Traffic Code, which provides:Sec. 54. Obstruction of Traffic. — No person shall drive his motor vehicle in such a manner as to obstruct or impede the passage of any vehicle, nor, while discharging or taking on passengers or loading or unloading freight, obstruct the free passage of other vehicles on the highway.Second, it is undisputed that petitioner's driver took in more passengers than the allowed seating capacity of the jeepney, a violation of §32(a) of the same law. It provides:Exceeding registered capacity. — No person operating any motor vehicle shall allow more passengers or more freight or cargo in his vehicle than its registered capacity.The fact that Sunga was seated in an "extension seat" placed her in a peril greater than that to which the other passengers were exposed. Therefore, not only was petitioner unable to overcome the presumption of negligence imposed on him for the injury sustained by Sunga, but also, the evidence shows he was actually negligent in transporting passengers.We find it hard to give serious thought to petitioner's contention that Sunga's taking an "extension seat" amounted to an implied assumption of risk. It is akin to arguing that the injuries to the many victims of the tragedies in our seas should not be compensated merely because those passengers assumed a greater risk of drowning by boarding an overloaded ferry. This is also true of petitioner's contention that the jeepney being bumped while it was improperly parked

constitutes caso fortuito. A caso fortuito is an event which could not be foreseen, or which, though foreseen, was inevitable.3 This requires that the following requirements be present: (a) the cause of the breach is independent of the debtor's will; (b) the event is unforeseeable or unavoidable; (c) the event is such as to render it impossible for the debtor to fulfill his obligation in a normal manner, and (d) the debtor did not take part in causing the injury to thecreditor.4 Petitioner should have foreseen the danger of parking his jeepney with its body protruding two meters into the highway.Finally, petitioner challenges the award of moral damages alleging that it is excessive and without basis in law. We find this contention well taken.In awarding moral damages, the Court of Appeals stated:Plaintiff-appellant at the time of the accident was a first-year college student in that school year 1989-1990 at the Silliman University, majoring in Physical Education. Because of the injury, she was not able to enroll in the second semester of that school year. She testified that she had no more intention of continuing with her schooling, because she could not walk and decided not to pursue her degree, major in Physical Education "because of my leg which has a defect already."Plaintiff-appellant likewise testified that even while she was under confinement, she cried in pain because of her injured left foot. As a result of her injury, the Orthopedic Surgeon also certified that she has "residual bowing of the fracture side." She likewise decided not to further pursue Physical Education as her major subject, because "my left leg . . . has a defect already."Those are her physical pains and moral sufferings, the inevitable bedfellows of the injuries that she suffered. Under Article 2219 of the Civil Code, she is entitled to recover moral damages in the sum of P50,000.00, which is fair, just and reasonable.As a general rule, moral damages are not recoverable in actions for damages predicated on a breach of contract for it is not one of the items enumerated under Art. 2219 of the Civil Code.5 As an exception, such damages are recoverable: (1) in cases in which the mishap results in the death of a passenger, as provided in Art. 1764, in relation to Art. 2206(3) of the Civil Code; and (2) in the cases in which the carrier is guilty of fraud or bad faith, as provided in Art. 2220.6

In this case, there is no legal basis for awarding moral damages since there was no factual finding by the appellate court that petitioner acted in bad faith in the performance of the contract of carriage. Sunga's contention that petitioner's admission in open court that the driver of the jeepney failed to assist her in going to a nearby hospital cannot be construed as an admission of bad faith. The fact that it was the driver of the Isuzu truck who took her to the hospital does not imply that petitioner was utterly indifferent to the plight of his

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injured passenger. If at all, it is merely implied recognition by Verena that he was the one at fault for the accident.WHEREFORE, the decision of the Court of Appeals, dated March 31, 1995, and its resolution, dated September 11, 1995, are AFFIRMED, with the MODIFICATION that the award of moral damages is DELETED.SO ORDERED.G.R. No. 94151 April 30, 1991EASTERN SHIPPING LINES, INC., petitioner, vs.THE COURT OF APPEALS and THE FIRST NATIONWIDE ASSURANCE CORPORATION, respondents.Jimenez, Dala & Zaragoza for petitioner.Reloy Law Office for private respondent. GANCAYCO, J.:pThe extent of the liability of the common carrier and its insurer for damage to the cargo upon its delivery to the arrastre operator is the center of this controversy.The findings of fact of the trial court which were adopted by the appellate court and which are not disputed are as follows:On September 4, 1978, thirteen coils of uncoated 7-wire stress relieved wire strand for prestressed concrete were shipped on board the vessel "Japri Venture," owned and operated by the defendant Eastern Shipping Lines, Inc., at Kobe, Japan, for delivery to Stresstek Post-Tensioning Phils., Inc. in Manila, as evidenced by the bill of lading, commercial invoice, packing list and commercial invoice marked Exhibits A, B, C, D; 3, 4, 5 and 6-Razon which were insured by the plaintiff First Nationwide Assurance Corporation for P171,923 (Exhibit E).On September 16, 1978, the carrying vessel arrived in Manila and discharged the cargo to the custody of the defendant E. Razon, Inc. (Exhibits 1, 2, 3, 4 and 5-ESL), from whom the consignee's customs broker received it for delivery to the consignee's warehouse.On February 19, 1979, the plaintiff indemnified the consignee in the amount of P171,923.00 for damage and loss to the insured cargo, whereupon the former was subrogated for the latter (Exhibit I).The plaintiff now seeks to recover from the defendants what it has indemnified the consignee, less P48,293.70, the salvage value of the cargo, or the total amount of P123,629.30.It appears that while enroute from Kobe to Manila, the carrying vessel "encountered very rough seas and stormy weather" for three days, more or less, which caused it to roll and pound heavily, moving its master to execute a marine note of protest upon arrival at the port of Manila on September 15, 1978 (Exhibit 1-Razon); that the coils wrapped in burlap cloth and cardboard paper were stored in the lower hold of the hatch of the

vessel which was flooded with water about one foot deep; that the water entered the hatch when the vessel encountered heavy weather enroute to Manila (Exhibits G, 2, 2A, 2B-Razon); that upon request, a survey of bad order cargo was conducted at the pier in the presence of the representatives of the consignee and the defendant E. Razon, Inc. and it was found that seven coils were rusty on one side each (Exhibits F and 10-Razon); that upon survey conducted at the consignee's warehouse it was found that the "wetting (of the cargo) was caused by fresh water" that entered the hatch when the vessel encountered heavy weather enroute to Manila (p. 3, Exhibit G); and that all thirteen coils were extremely rusty and totally unsuitable for the intended purpose (p. 3, Exhibit G), (pp. 217-218, orig. rec.) 1

The complaint that was filed by the First Nationwide Assurance Corporation (insurer) against Eastern Shipping Lines, Inc. and E. Razon, Inc., in the Regional Trial Court, Manila, was dismissed in a decision dated November 25, 1985. An appeal therefrom was interposed by the insurer to the Court of Appeals wherein in due course a decision was rendered on April 27, 1990, the dispositive part of which reads as follows:WHEREFORE, the judgment appealed from is hereby SET ASIDE. The appellees are ordered to pay the appellant the sum of P123,629.30, with legal rate of interest from July 24, 1979 until fully paid, Eastern Shipping Lines, Inc. to assume 8/13 thereof, and E. Razon, Inc. to assume 5/13 thereof. No pronouncement as to costs.SO ORDERED. 2

Only Eastern Shipping Lines, Inc. filed this petition for review by certiorari based on the following assigned errors:I. IT REFUSED TO CONSIDER THE COUNTER-ASSIGNMENT OF ERRORS OF PETITIONER AS CONTAINED IN ITS BRIEF FOR THE DEFENDANT-APPELLEE EASTERN SHIPPING LINES, INC. AND WHICH ARE ONLY MEANT TO SUSTAIN THE DECISION OF DISMISSAL OF THE TRIAL COURT;II. AGAINST ITS OWN FINDINGS OF FACT THAT THE CARGO WAS DISCHARGED AND DELIVERED COMPLETE UNTO THE CUSTODY OF THE ARRASTRE OPERATOR UNDER CLEAN TALLY SHEETS, IT NEVERTHELESS ARBITRARILY CONCLUDED PETITIONER AS LIABLE FOR THE CLAIMED DAMAGES;III. IT FAILED TO HOLD PETITIONER RELIEVED OF ANY LIABILITY OVER THE CARGO NOTWITHSTANDING IT FOUND THAT THE SAME WAS DISCHARGED AND DELIVERED UNTO THE CUSTODY OF THE ARRASTRE OPERATOR UNDER CLEAN TALLY SHEETS AND ERGO TO BE CONSIDERED GOOD ORDER CARGO WHEN DELIVERED; and,IV. IT ARBITRARILY AWARDED INTEREST AT THE LEGAL RATE TO COMMENCE FROM THE DATE OF

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THE COMPLAINT IN VIOLATION OF THE DOCTRINAL RULE THAT IN CASE OF UNLIQUIDATED CLAIMS SUCH AS THE CLAIM IN QUESTION, INTEREST SHOULD ONLY COMMENCE FROM THE DATE OF THE DECISION OF THE TRIAL COURT. 3

Under the first assigned error, petitioner contends that the appellate court did not consider its counter-assignment of errors which was only meant to sustain the decision of dismissal of the trial court. An examination of the questioned decision shows that the appellate court did not consider the counter-assignment of errors of petitioner as it did not appeal the decision of the trial court.Nevertheless, when such counter-assignments are intended to sustain the judgment appealed from on other grounds, but not to seek modification or reversal thereof, the appellate court should consider the same in the determination of the case but no affirmative relief can be granted thereby other than what had been obtained from the lower court. 4 The contention of petitioner on this aspect is, thus, well-taken.Be that as it may, under the second and third assigned errors, petitioner claims it should not be held liable as the shipment was discharged and delivered complete into the custody of the arrastre operator under clean tally sheets.While it is true the cargo was delivered to the arrastre operator in apparent good order condition, it is also undisputed that while en route from Kobe to Manila, the vessel encountered "very rough seas and stormy weather", the coils wrapped in burlap cloth and cardboard paper were stored in the lower hatch of the vessel which was flooded with water about one foot deep; that the water entered the hatch; that a survey of bad order cargo which was conducted in the pier in the presence of representatives of the consignee and E. Razon, Inc., showed that seven coils were rusty on one side (Exhibits F and 10-Razon); that a survey conducted at the consignee's warehouse also showed that the "wetting (of the cargo) was caused by fresh water" that entered the hatch when the vessel encountered heavy rain en route to Manila (Exhibit G); and that all thirteen coils were extremely rusty and totally unsuitable for the intended purpose. 5

Consequently, based on these facts, the appellate court made the following findings and conclusions:Plainly, the heavy seas and rains referred to in the master's report were not caso fortuito, but normal occurrences that an ocean-going vessel, particularly in the month of September which, in our area, is a month of rains and heavy seas would encounter as a matter of routine. They are not unforeseen nor unforeseeable. These are conditions that ocean-going vessels would encounter and provide for, in the ordinary course of a voyage. That rain water (not sea water) found its way into the holds of theJupri Venture is a clear indication

that care and foresight did not attend the closing of the ship's hatches so that rain water would not find its way into the cargo holds of the ship.Moreover, under Article 1733 of the Civil Code, common carriers are bound to observe "extra-ordinary vigilance over goods . . . .according to all circumstances of each case," and Article 1735 of the same Code states, to wit:Art. 1735. In all cases other than those mentioned in Nos. 1, 2, 3, 4, and 5 of the preceding article, if the goods are lost, destroyed or deteriorated, common carriers are presumed to have been at fault or to have acted negligently, unless they prove that they observed extraordinary diligence as required in article 1733.Since the carrier has failed to establish any caso fortuito, the presumption by law of fault or negligence on the part of the carrier applies; and the carrier must present evidence that it has observed the extraordinary diligence required by Article 1733 of the Civil Code in order to escape liability for damage or destruction to the goods that it had admittedly carried in this case. No such evidence exists of record. Thus, the carrier cannot escape liability.The Court agrees with and is bound by the foregoing findings of fact made by the appellate court. The presumption, therefore, that the cargo was in apparent good condition when it was delivered by the vessel to the arrastre operator by the clean tally sheets has been overturned and traversed. The evidence is clear to the effect that the damage to the cargo was suffered while aboard petitioner's vessel.The last assigned error is untenable. The interest due on the amount of the judgment should commence from the date of judicial demand. 6

WHEREFORE, the petition is DISMISSED, with costs against petitioner.SO ORDERED.G.R. No. 101426 May 17, 1993PHILIPPINE AMERICAN GENERAL INSURANCE COMPANY, INC., petitioner, vs.COURT OF APPEALS and TRANSPACIFIC TOWAGE, INC., respondents.Linsangan Law Office for petitioner.Misa, Castro & Associates for private respondent. PADILLA, J.:In this petition for review on certiorari, Philippine American General Insurance Company, Incorporated assails the decision * of the Court of Appeals, dated 31 July 1991, rendered in CA-G.R. CV. No. 21252, which reversed and set aside the decision of the Regional Trial Court of Manila, Branch 16 1 and entered a new one dismissing the petitioner's complaint which sought to collect the sum of P1,511,210.00 from the private respondent.The facts of the case, as found by the Court of Appeals, 2 are as follows:

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On September 4, 1985 the Davao Union Marketing Corporation of Davao City shipped on board the vessel M/V "Crazy Horse" operated by the Transpacific Towage, Inc. cargo consisting of 9,750 sheets of union brand GI sheets with a declared value of P1,086,750.00 and 86,860 bags of union Pozzolan and union Portland Cement with a declared value of P4,300,000.00. The cargo was consigned to the Bicol Union Center of Pasacao, Camarines Sur, with a certain Pedro Olivan as the "Notify-Party."The cargo was insured by the Philippine American General Insurance Co., Inc., under Marine Note No. 023408 covering 86,000, of Union Pozzolan and POrtland cement for the amount of P3,440,000.00.The vessel M/V "Crazy Horse" arrived on September 7, 1985 as scheduled as the port of Pasacao, Camarines Sur. Upon arrival the shipmaster notified the consignee's "Notify-Party" that the vessel was already (sic) to discharge the cargo. The discharging could not be affected immediately and continuously because of certain reasons. First, the buoys were installed only on September 11, 1985; second, the dischrage permit was secured by the consignee only on September 13, 1985; third a wooden catwalk had to be installed and extension of the wharf had to be made, which was completed only on September 26, 1985; fourth, the discharging was not continuous because there were intermittent rains and the stevedores supplied by the consignee did not work during the town fiesta. (Emphasis supplied ours)On October 16, 1985, a super typhoon code named "Saling" entered the Philippine area of responsibility and was felt in the eastern coast of the country on October 17, 1985. It had a strength of 240 KPH and Pasacao was placed under Storm Signal No. 3. The discharging of the cargo had to be suspended at 11:40 A.M. on October 17, 1985 due to the heavy downpour, strong winds, and turbulent sea. To prevent damage to the cargo all hatches of the vessel were closed and secured. (Emphasis supplied ours)At the time the discharging of the cargo was suspended, a total of 59,625 bags of cement and 26 crates of GI sheets had already been discharged.In further preparation for the typhoon the vessel was loaded with 22 tons of fresh water and 3,000 liters of fuel. The shipmaster ordered the vessel to be moved about 300 meters seaward in order that it would not hit the cat walk or the wooden bridge or the wharf, or the rocks. The vessel was ready for any maneuver that may have to be made.According to the shipmaster who was plotting the typhoon's path in a chart, the radius was so wide that there was no way the typhoon could be evaded. From 8:00 P.M. of October 17, 1985 to 8:00 P.M. of October 18, 1985 the typhoon raged in the area. It was at about 5:20 A.M. of October 18, 1985 when the shipmaster ordered the maneuvering of the vessel but it could not

be steered on account of the strong winds and rough seas. The vessel's lines snapped, causing her to be dragged against the rocks, and the anchor chain stopper gave way. The vessel sustained holes in the engine room and there was a power failure in the vessel. Water started to fill the engine room and at about 6:15 A.M. the engine broke down.The shipmaster had no choice but to order the ship to be abandoned. He told the crew to secure the vessel while he went to the Municipal Mayor of Pasacao to request for police assistance to prevent pilferage of the vessel and its cargo. He was, however, unable to get any assistance. When he returned to the vessel he found that it was being continuously pounded by the strong sea waves against the rocks. This caused the vessel to break into two (2) parts and to sink partially. The shipmaster reported the incident to the Philippine Coast Guard but inspite the presence of three (3) coast guards, nothing could be done about the pilferage done on the vessel and its cargo. Almost the whole barrio and because there were so many of them the crew and the guards were helpless to stop the pilferage and looting. As a result of the incident the cargo of cement was damaged while the GI sheets were looted and nothing was left of the undischarged pieces.The total number of cement bags damaged and/or lost was 26,424 costing P1,056,960.00 while there were 4,000 pieces of the GI sheets unrecovered, the cost of which was P454,250.00.Because the cargo was insured by it the Philippine American General Insurance Co., Inc. paid the shipper Davao Union Marketing Corporation the sum of P1,511,210.00. Thereafter, the said insurer made demands upon the Transpacific Towage, Inc. for the payment of said amount as subrogee of the insured, claiming that the loss of the cargo was directly and exclusively brought about by the fault and negligence of the shipmaster and the crew of M/V "Crazy Horse". Because the latter refused to pay the amount of P1,511,210.00 demanded, the Philippine American General Insurance Co., Inc. filed the present complaint.The lower court found that although the immediate cause of the loss may have been due to an act of God, the defendant carrier had exposed the property to the accident. The court also found plaintiff guilty of contributory negligence and mitigated the plaintiff's claim to three-fourths (3/4) of its value. Thus the lower court, in its Decision, ordered the defendant:1) To pay plaintiff the mitigated amount of P1,133,408.00 plus 12% legal interest per annumcomputed from the date of the filing of herein complaint on May 15, 1986, until duly paid;2) To pay P8,000.00 as attorney's fees; and3) To pay costs of suit.SO ORDERED.In its now assailed decision, respondent Court of Appeals reversed the decision of the trial court and

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ruled instead that private respondent, as a common carrier, is not responsible for the loss of the insured cargo involved in the case at bar, as said loss was due solely to a fortituous event.Petitioner in the present petition contends that respondent appellate court erred in not holding private respondent liable for the loss of the said insured cargo.We affirm the decision of the Court of Appeals.It is not disputed that private respondent is a common carrier as defined in Article 1732 of the Civil Code. 3 The following facts are also not contested: (1) that the cargo-carrying vessel was wrecked and partially sank on 18 October 1985 due to typhoon "Saling"; (2) that typhoon "Saling" was a fortuitous event; and (3) that at the time said vessel sank, the remaining undischarged cargo, consisting of 26,424 cement bags and 4,000 pieces of G.I. sheets, were still on board the vessel.However, the Court notes the fact that as of 17 October 1985, the time when the Pasacao area was placed under storm signal No. 3 due to "Saling", the unloading of the cargo from the vessel was still unfinished, notwithstanding the lapse of forty (40) days from the time the vessel arrived in Pasacao on 7 September 1985, or the lapse of thirty-four (34) days from the time actual discharge of the cargo commenceds on 13 September 1985.In the opinion of the trial court, this lapse of thirty four (34) days with private respondent not having completed the unloading of the goods, is tantamount to unreasonable delay, which delay exposed the unloaded cargo to accident. The trial court held private respondent liable for the loss of goods under Article 1740 of the Civil Code which provides that if the common carrier negligently incurs in delay in transporting the goods, a natural disaster shall not free the carrier from responsibility.On the other hand, the appellate court ruled out any negligence committed by private respondent and held that the delay in fully unloading the cargo from the vessel "was occasioned by causes that may not be attributed solely to human factors, among which were the natural conditions of the port where the M/V "Crazy Horse" had docked, the customs of the place and the weather conditions. 4

The appellate court in exempting private respondent from liability applied Article 1739 of the Civil Code which provides as follows:In order that the common carrier may be exempted from responsibility, the natural disaster must have been the proximate and only cause of the loss. However, the common carrier must exercise due diligence to prevent or minimize loss before, during and after the occurrence of flood, storm, or other natural disaster in order that the common carrier may be exempted from liability for the loss, destruction, or deterioration of the goods.The appellate court ruled that the los of cargo in the present case was due solely to typhoon "Saling" and

that private respondent had shown that it had observed due diligence before, during and after the occurrence of "Saling"; hence, it should not be liable under Article 1739.Considering the disputed fact that there really was delay in completing the unloading of the goods from the vessel, the Court believes that the real issue at bar centers on the application of Article 1740 of the Civil Code. In short, the principal question, in determining which of the parties in the present case should bear the loss of the goods, is whether the delay involved in the unloading of the goods is deemed negligently incurred in, so as not to free private respondent from liability, notwithstanding the fact that the ultimate cause of the loss of the goods was the sinking of the vessel brought about by typhoon "Saling."Indeed, from the time the vessel arrived at port Pasacao on 7 September 1985 up to 17 October 1985 when the Pasacao area was placed under storm signal No. 3 due to typhoon "Saling", forty (40) days had passed. Under normal conditions, a period of forty (40) days is undoubtedly more than enough time within which the unloading of the cargo (given its nature) from the vessel could be completed. Hence, the question boils down further to which party should be faulted for this delay.Private respondent argues that its duty to unload ceased on 7 September 1985 when the shipmaster notified the consignee's "Notify-Party" that the vessel was ready to discharge the cargo. On the other hand, petitioner contends that the duty to unload the cargo from the vessel continued to remain with private respondent. Respondent appellate court, however, ruled that the question as to which party had the task to discharge the cargo is actually immaterial under the circumstances, as the delay could not be attributed to any of the parties, but to several causes such as the natural conditions of the Pasacao port, the customs of the place and the weather conditions obtaining at the time. The appellate court made the following observations:

xxx xxx xxxTo our mind whichever of the parties had the obligation to unload the cargo is not material. For, analyzing the causes for the delay in such unloading, we find that such delay was not due to the negligence of any party but was occasioned by causes that may not be attributed solely to human factors, among which were the natural conditions of the port where the M/V "Crazy Horse" had docked, the customs of the place, and the weather conditions.The wharf where the vessel had to dock was shallow and rocky, hence it had to drop anchor some distance away in a private port. Buoys had to be constructed in order that the vessel may properly moored. After the buoys were installed a wooden stage had to be constructed so that the stevedores could reach the vessel. For this they needed a floating crane which was

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not immediately available. The barges that were to load the cargo from the vessel could not go near the wharf because of the shallow and rocky condition. A catwalk had to be installed between the barge and the wharf. This necessitated the dismantling of the wooden stage previously installed.Apart from these preparations and constructions that had to be made, the weather was not cooperative. Even before the typhoon struck there were intermittent rains, hence the unloading was not continuous. The actual unloading started on September 13, 1985 and could have been finished in 4 or 5 days but because of the rains it was delayed. Another factor that caused further delay was the fact that the fiesta of the Virgin of Penafrancia was celebrated and for the length of time that the celebrations were held, the stevedores who were from the place refused to work.

xxx xxx xxxThe Court of Appeals summarized the reasons which adversely affected the completion of the unloading of the cargo from the time the vessel arrived at the Pasacao area on 7 September 1985, namely: first, the buoys were installed only on 11 September 1985; second, the consignee secured the discharge permit only on 13 September 1985; third, a wooden catwalk had to be installed and the extension of the wharf had to be made, which was completed only on 16 September 1985; fourth, there were intermittent rains and the stevedores supplied by the consignee did not work during the town fiesta of the Virgin of Penafrancia, hence, the unloading was not continuous.We respect the above-mentioned factual findings of the appellate court as to the natural conditions of the port of Pasacao were the vessel was docked, and several other factors which harshly affected the completion of the discharge of the cargo, as these findings of fact are substantially supported by evidence. 6

While it is true that there was indeed delay in discharging the cargo from the vessel, we agree with the Court of Appeals that neither of the parties herein could be faulted for such delay, for the same (delay) was due not to negligence, but to several factors earlier discussed. The cargo having been lost due to typhoon "Saling", and the delay incurred in its unloading not being due to negligence, private respondent is exempt from liability for the loss of the cargo, pursuant to Article 1740 of the Civil Code.The records also show that before, during and after the occurrence of typhoon "Saling", private respondent through its shipmaster exercised due negligence to prevent or minimize the loss of the cargo, as shown by the following facts: (1) at 5:20 a.m. of 18 October 1985, as typhoon "Saling" continued to batter the Pasacao area, the shipmaster tried to maneuver the vesel amidst strong winds and rough seas; (2) when water started to enter the engine room and later the engine broke down, the shipmaster ordered ths ship to be abandoned, but

he sought police assistance to prevent pilferage of the vessel and its cargo; (3) after the vessel broke into two (2) parts and sank partially, the shipmaster reported th eincident to the Philippine Coast Guard, but unfortunately, despite the presence of three (3) coast guards, nothing could be done to stop the pilferage as almost the entire barrio folk came to loot the vessel and its cargo, including the G.I. sheets.The diligennced exercised by the shipmaster further supports the exemption of private respondent from liability for the loss of the cargo, in accordance with Article 1739 of the Civil Code.Although we find private respondent free from liability for the loss of the cargo, we disagree with its contention that the doctrine of res judicata applies in the case at bar, because the Board of Marine Inquiry rendered a decision dated 11 April 1988 (acting on the marine protest filed on 19 October 1985 by the shipmaster of M/V "Crazy Horse") holding that said shipmaster was not guilty of "negligence as the proximate cause of the grounding and subsequent wreckage of M/S "Crazy Horse", hence, recommending that the captain, his officers and crew be absolved from any administrative liability arising out of the subject incident." 7

The resolution of the present case is not barred by the judgment of the Board of Marine Inquiry. One of the requisites of the principle of res judicata is that there must be, among other things, identity of subject matters and causes of action between a first and second case in order that the judgment in the prior case may bar that in the subsequent case. 8

The cause of action in the marine protest was to enforce the administrative liability of the shipmaster/captain of M/V "Crazy Horse", its officers and crew for the wreckage and sinking of the subject vessel. On the other hand, the cause of action at bar is to enforce the civil liability of private respondent, a common carrier, for its failure to unload the subject cargo within a period of time considered unreasonably long by the petitioner. While it may be true that the Court is bound to accord great weight to factual findings of the Board, 9 we hold that the protest filed before it and the present case assert different causes of action and seek different reliefs.All told, we find private respondent not legally liable for the loss of the insured cargo involved in the present case.WHEREFORE, the petition is DENIED. The appealed decision of the Court of Appeals, dated 31 July 1991, rendered in CA-G.R. CV No. 21252, is hereby AFFIRMED.SO ORDERED.