recitation trans.docx

7/29/2019 recitation trans.docx

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1. Picart vs. Smith

Republic of the PhilippinesSUPREME COURT

Manila

EN BANC

G.R. No. L-12219 March 15, 1918

AMADO PICART, plaintiff-appellant,vs.FRANK SMITH, JR., defendant-appellee.

Alejo Mabanag for appellant.G. E. Campbell for appellee.

STREET,J .:

In this action the plaintiff, Amado Picart, seeks to recover of the defendant, Frank Smith,jr., the sum of P31,000, as damages alleged to have been caused by an automobile

driven by the defendant. From a judgment of the Court of First Instance of the Provinceof La Union absolving the defendant from liability the plaintiff has appealed.

The occurrence which gave rise to the institution of this action took place on December12, 1912, on the Carlatan Bridge, at San Fernando, La Union. It appears that upon theoccasion in question the plaintiff was riding on his pony over said bridge. Before he hadgotten half way across, the defendant approached from the opposite direction in anautomobile, going at the rate of about ten or twelve miles per hour. As the defendantneared the bridge he saw a horseman on it and blew his horn to give warning of hisapproach. He continued his course and after he had taken the bridge he gave two moresuccessive blasts, as it appeared to him that the man on horseback before him was not

observing the rule of the road.

The plaintiff, it appears, saw the automobile coming and heard the warning signals.However, being perturbed by the novelty of the apparition or the rapidity of theapproach, he pulled the pony closely up against the railing on the right side of the bridgeinstead of going to the left. He says that the reason he did this was that he thought hedid not have sufficient time to get over to the other side. The bridge is shown to have alength of about 75 meters and a width of 4.80 meters. As the automobile approached,


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the defendant guided it toward his left, that being the proper side of the road for themachine. In so doing the defendant assumed that the horseman would move to theother side. The pony had not as yet exhibited fright, and the rider had made no sign forthe automobile to stop. Seeing that the pony was apparently quiet, the defendant,instead of veering to the right while yet some distance away or slowing down, continued

to approach directly toward the horse without diminution of speed. When he had gottenquite near, there being then no possibility of the horse getting across to the other side,the defendant quickly turned his car sufficiently to the right to escape hitting the horsealongside of the railing where it as then standing; but in so doing the automobile passedin such close proximity to the animal that it became frightened and turned its bodyacross the bridge with its head toward the railing. In so doing, it as struck on the hock ofthe left hind leg by the flange of the car and the limb was broken. The horse fell and itsrider was thrown off with some violence. From the evidence adduced in the case webelieve that when the accident occurred the free space where the pony stood betweenthe automobile and the railing of the bridge was probably less than one and one halfmeters. As a result of its injuries the horse died. The plaintiff received contusions which

caused temporary unconsciousness and required medical attention for several days.

The question presented for decision is whether or not the defendant in maneuvering hiscar in the manner above described was guilty of negligence such as gives rise to a civilobligation to repair the damage done; and we are of the opinion that he is so liable. Asthe defendant started across the bridge, he had the right to assume that the horse andthe rider would pass over to the proper side; but as he moved toward the center of thebridge it was demonstrated to his eyes that this would not be done; and he must in amoment have perceived that it was too late for the horse to cross with safety in front ofthe moving vehicle. In the nature of things this change of situation occurred while theautomobile was yet some distance away; and from this moment it was not longer withinthe power of the plaintiff to escape being run down by going to a place of greater safety.The control of the situation had then passed entirely to the defendant; and it was hisduty either to bring his car to an immediate stop or, seeing that there were no otherpersons on the bridge, to take the other side and pass sufficiently far away from thehorse to avoid the danger of collision. Instead of doing this, the defendant ran straighton until he was almost upon the horse. He was, we think, deceived into doing this by thefact that the horse had not yet exhibited fright. But in view of the known nature ofhorses, there was an appreciable risk that, if the animal in question was unacquaintedwith automobiles, he might get exited and jump under the conditions which hereconfronted him. When the defendant exposed the horse and rider to this danger he was,in our opinion, negligent in the eye of the law.

The test by which to determine the existence of negligence in a particular case may bestated as follows: Did the defendant in doing the alleged negligent act use that personwould have used in the same situation? If not, then he is guilty of negligence. The lawhere in effect adopts the standard supposed to be supplied by the imaginary conduct ofthe discreet paterfamilias of the Roman law. The existence of negligence in a givencase is not determined by reference to the personal judgment of the actor in thesituation before him. The law considers what would be reckless, blameworthy, or


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negligent in the man of ordinary intelligence and prudence and determines liability bythat.

The question as to what would constitute the conduct of a prudent man in a givensituation must of course be always determined in the light of human experience and in

view of the facts involved in the particular case. Abstract speculations cannot here be ofmuch value but this much can be profitably said: Reasonable men govern their conductby the circumstances which are before them or known to them. They are not, and arenot supposed to be, omniscient of the future. Hence they can be expected to take careonly when there is something before them to suggest or warn of danger. Could aprudent man, in the case under consideration, foresee harm as a result of the courseactually pursued? If so, it was the duty of the actor to take precautions to guard againstthat harm. Reasonable foresight of harm, followed by ignoring of the suggestion born ofthis prevision, is always necessary before negligence can be held to exist. Stated inthese terms, the proper criterion for determining the existence of negligence in a givencase is this: Conduct is said to be negligent when a prudent man in the position of the

tortfeasor would have foreseen that an effect harmful to another was sufficientlyprobable to warrant his foregoing conduct or guarding against its consequences.

Applying this test to the conduct of the defendant in the present case we think thatnegligence is clearly established. A prudent man, placed in the position of thedefendant, would in our opinion, have recognized that the course which he waspursuing was fraught with risk, and would therefore have foreseen harm to the horseand the rider as reasonable consequence of that course. Under these circumstancesthe law imposed on the defendant the duty to guard against the threatened harm.

It goes without saying that the plaintiff himself was not free from fault, for he was guilty

of antecedent negligence in planting himself on the wrong side of the road. But as wehave already stated, the defendant was also negligent; and in such case the problemalways is to discover which agent is immediately and directly responsible. It will benoted that the negligent acts of the two parties were not contemporaneous, since thenegligence of the defendant succeeded the negligence of the plaintiff by an appreciableinterval. Under these circumstances the law is that the person who has the last fairchance to avoid the impending harm and fails to do so is chargeable with theconsequences, without reference to the prior negligence of the other party.

The decision in the case of Rkes vs. Atlantic, Gulf and Pacific Co. (7 Phil. Rep., 359)should perhaps be mentioned in this connection. This Court there held that whilecontributory negligence on the part of the person injured did not constitute a bar torecovery, it could be received in evidence to reduce the damages which wouldotherwise have been assessed wholly against the other party. The defendant companyhad there employed the plaintiff, as a laborer, to assist in transporting iron rails from abarge in Manila harbor to the company's yards located not far away. The rails wereconveyed upon cars which were hauled along a narrow track. At certain spot near thewater's edge the track gave way by reason of the combined effect of the weight of thecar and the insecurity of the road bed. The car was in consequence upset; the rails slid


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off; and the plaintiff's leg was caught and broken. It appeared in evidence that theaccident was due to the effects of the typhoon which had dislodged one of the supportsof the track. The court found that the defendant company was negligent in having failedto repair the bed of the track and also that the plaintiff was, at the moment of theaccident, guilty of contributory negligence in walking at the side of the car instead of

being in front or behind. It was held that while the defendant was liable to the plaintiff byreason of its negligence in having failed to keep the track in proper repair neverthelessthe amount of the damages should be reduced on account of the contributorynegligence in the plaintiff. As will be seen the defendant's negligence in that caseconsisted in an omission only. The liability of the company arose from its responsibilityfor the dangerous condition of its track. In a case like the one now before us, where thedefendant was actually present and operating the automobile which caused thedamage, we do not feel constrained to attempt to weigh the negligence of the respectiveparties in order to apportion the damage according to the degree of their relative fault. Itis enough to say that the negligence of the defendant was in this case the immediateand determining cause of the accident and that the antecedent negligence of the

plaintiff was a more remote factor in the case.

A point of minor importance in the case is indicated in the special defense pleaded inthe defendant's answer, to the effect that the subject matter of the action had beenpreviously adjudicated in the court of a justice of the peace. In this connection it appearsthat soon after the accident in question occurred, the plaintiff caused criminalproceedings to be instituted before a justice of the peace charging the defendant withthe infliction of serious injuries (lesiones graves). At the preliminary investigation thedefendant was discharged by the magistrate and the proceedings were dismissed.Conceding that the acquittal of the defendant at the trial upon the merits in a criminalprosecution for the offense mentioned would be res adjudicata upon the question of hiscivil liability arising from negligence -- a point upon which it is unnecessary to expressan opinion -- the action of the justice of the peace in dismissing the criminal proceedingupon the preliminary hearing can have no effect. (See U. S. vs. Banzuela and Banzuela,31 Phil. Rep., 564.)

From what has been said it results that the judgment of the lower court must bereversed, and judgment is her rendered that the plaintiff recover of the defendant thesum of two hundred pesos (P200), with costs of other instances. The sum here awardedis estimated to include the value of the horse, medical expenses of the plaintiff, the lossor damage occasioned to articles of his apparel, and lawful interest on the whole to thedate of this recovery. The other damages claimed by the plaintiff are remote orotherwise of such character as not to be recoverable. So ordered.

Arellano, C.J., Torres, Carson, Araullo, Avancea, and Fisher, JJ., concur.Johnson, J., reserves his vote.


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Separate Opinions

MALCOLM,J ., concurring:

After mature deliberation, I have finally decided to concur with the judgment in this case.

I do so because of my understanding of the "last clear chance" rule of the law ofnegligence as particularly applied to automobile accidents. This rule cannot be invokedwhere the negligence of the plaintiff is concurrent with that of the defendant. Again, if atraveler when he reaches the point of collision is in a situation to extricate himself andavoid injury, his negligence at that point will prevent a recovery. But Justice Street findsas a fact that the negligent act of the interval of time, and that at the moment the plaintiffhad no opportunity to avoid the accident. Consequently, the "last clear chance" rule isapplicable. In other words, when a traveler has reached a point where he cannotextricate himself and vigilance on his part will not avert the injury, his negligence inreaching that position becomes the condition and not the proximate cause of the injuryand will not preclude a recovery. (Note especially Aiken vs. Metcalf [1917], 102 Atl.,

330.)

2. PAL vs CA


Manila

FIRST DIVISION

G.R. No. L-82619 September 15, 1993

PHILIPPINE AIRLINES, INC., petitioner,vs.COURT OF APPEALS and PEDRO ZAPATOS, respondents.

Leighton R. Liazon for petitioner.

Balmes L. Ocampo for private respondent.


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BELLOSILLO,J .:

This petition for review in certiorariseeks to annul and set aside the decision of the then

Intermediate Appellant Court,

1

now Court of Appeals, dated 28 February 1985, in AC-G.R. CV No. 69327 ("Pedro Zapatos v. Philippine Airlines, Inc.") affirming the decisionof the then Court of first Instance, now Regional Trial Court, declaring Philippine

Airlines, Inc., liable in damages for breach of contract.

On 25 November 1976, private respondent filed a complaint for damages for breach ofcontract of carriage 2against Philippine Airlines, Inc. (PAL), before the then Court of FirstInstance, now Regional Trial Court, of Misamis Occidental, at Ozamiz City. According tohim, on 2 August 1976, he was among the twenty-one (21) passengers of PAL Flight477 that took off from Cebu bound for Ozamiz City. The routing of this flight was Cebu-Ozamiz-Cotabato. While on flight and just about fifteen (15) minutes before landing at

Ozamiz City, the pilot received a radio message that the airport was closed due toheavy rains and inclement weather and that he should proceed to Cotabato Cityinstead.

Upon arrival at Cotabato City, the PAL Station Agent informed the passengers of theiroptions to return to Cebu on flight 560 of the same day and thence to Ozamiz City on 4

August 1975, or take the next flight to Cebu the following day, or remain at Cotabatoand take the next available flight to Ozamiz City on 5 August 1975. 3 The Station Agentlikewise informed them that Flight 560 bound for Manila would make a stop-over atCebu to bring some of the diverted passengers; that there were only six (6) seatsavailable as there were already confirmed passengers for Manila; and, that the basis for

priority would be the check-in sequence at Cebu.

Private respondent chose to return to Cebu but was not accommodated because hechecked-in as passenger No. 9 on Flight 477. He insisted on being given priority overthe confirmed passengers in the accommodation, but the Station Agent refused privaterespondent's demand explaining that the latter's predicament was not due to PAL's owndoing but to be a force majeure. 4

Private respondent tried to stop the departure of Flight 560 as his personal belongings,including a package containing a camera which a certain Miwa from Japan asked him todeliver to Mrs. Fe Obid of Gingoog City, were still on board. His plea fell on deaf ears.PAL then issued to private respondent a free ticket to Iligan city, which the latterreceived under protest. 5 Private respondent was left at the airport and could not evenhitch a ride in the Ford Fiera loaded with PAL personnel. 6 PAL neither provided privaterespondent with transportation from the airport to the city proper nor food andaccommodation for his stay in Cotabato City.

The following day, private respondent purchased a PAL ticket to Iligan City. He informedPAL personnel that he would not use the free ticket because he was filing a case


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against PAL. 7 In Iligan City, private respondent hired a car from the airport toKolambugan, Lanao del Norte, reaching Ozamiz City by crossing the bay in alaunch. 8 His personal effects including the camera, which were valued at P2,000.00were no longer recovered.

On 13 January 1977, PAL filed its answer denying that it unjustifiably refused toaccommodate private respondent.9 It alleged that there was simply no more seat forprivate respondent on Flight 560 since there were only six (6) seats available and thepriority of accommodation on Flight 560 was based on the check-in sequence in Cebu;that the first six (6) priority passengers on Flight 477 chose to take Flight 560; that itsStation Agent explained in a courteous and polite manner to all passengers the reasonfor PAL's inability to transport all of them back to Cebu; that the stranded passengersagreed to avail of the options and had their respective tickets exchanged for theironward trips; that it wasonly the private respondent who insisted on being given priority in the accommodation;that pieces of checked-in baggage and had carried items of the Ozamiz City

passengers were removed from the aircraft; that the reason for their pilot's inability toland at Ozamis City airport was because the runway was wet due to rains thus posing athreat to the safety of both passengers and aircraft; and, that such reason of forcemajeure was a valid justification for the pilot to bypass Ozamiz City and proceed directlyto Cotabato City.

On 4 June 1981, the trial court rendered its decision 10 the dispositive portion of whichstates:

WHEREFORE, judgment is hereby rendered in favor of the plaintiff andagainst the defendant Philippine AirLines, Inc. ordering the latter to pay:

(1) As actual damages, the sum of Two Hundred Pesos (P200.00)representing plaintiff's expenses for transportation, food andaccommodation during his stranded stay at Cotabato City; the sum ofForty-Eight Pesos (P48.00) representing his flight fare from Cotabato Cityto Iligan city; the sum of Five Hundred Pesos (P500.00) representingplaintiff's transportation expenses from Iligan City to Ozamiz City; and thesum of Five Thousand Pesos (P5,000.00) as loss of businessopportunities during his stranded stay in Cotabato City;

(2) As moral damages, the sum of Fifty Thousand Pesos (P50,000.00) forplaintiff's hurt feelings, serious anxiety, mental anguish and unkind anddiscourteous treatment perpetrated by defendant's employees during hisstay as stranded passenger in Cotabato City;

(3) As exemplary damages, the sum of Ten Thousand Pesos(P10,000.00) to set a precedent to the defendant airline that it shallprovide means to give comfort and convenience to stranded passengers;


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(4) The sum of Three Thousand Pesos (P3,000.00) as attorney's fees;

(5) To pay the costs of this suit.

PAL appealed to the Court of Appeals which on 28 February 1985, finding no reversible

error, affirmed the judgment of the court a quo.

11

PAL then sought recourse to this Court by way of a petition for reviewon certiorari12 upon the following issues: (1) Can the Court of Appeals render a decisionfinding petitioner (then defendant-appellant in the court below) negligent and,consequently, liable for damages on a question of substance which was neither raisedon a question nor proved at the trial? (2) Can the Court of Appeals award actual andmoral damages contrary to the evidence and established jurisprudence? 13

An assiduous examination of the records yields no valid reason for reversal of thejudgment on appeal; only a modification of its disposition.

In its petition, PAL vigorously maintains that private respondent's principal cause ofaction was its alleged denial of private respondent's demand for priority over theconfirmed passengers on Flight 560. Likewise, PAL points out that the complaint did notimpute to PAL neglect in failing to attend to the needs of the diverted passengers; and,that the question of negligence was not and never put in issue by the pleadings orproved at the trial.

Contrary to the above arguments, private respondent's amended complaint touched onPAL's indifference and inattention to his predicament. The pertinent portion of theamended complaint 14 reads:

10. That by virtue of the refusal of the defendant through its agent inCotabato to accommodate (sic) and allow the plaintiff to take and boardthe plane back to Cebu, and by accomodating (sic)and allowingpassengers from Cotabato for Cebu in his stead and place, thus forcingthe plaintiff against his will, to be left and stranded in Cotabato, exposed tothe peril and danger of muslim rebels plundering at the time, the plaintiff,as a consequence, (have) suffered mental anguish, mental torture, socialhumiliation, bismirched reputation and wounded feeling, all amounting to aconservative amount of thirty thousand (P30,000.00) Pesos.

To substantiate this aspect of apathy, private respondent testified

15

A I did not even notice that I was I think the last passengeror the last person out of the PAL employees and armypersonnel that were left there. I did not notice that when Iwas already outside of the building after our conversation.

Q What did you do next?


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A I banished (sic) because it seems that there was a war notfar from the airport. The sound of guns and the soldiers wereplenty.

Q After that what did you do?

A I tried to look for a transportation that could bring me downto the City of Cotabato.

Q Were you able to go there?

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

Q During your conversation with the Manager were you notoffered any vehicle or transportation to Cotabato airportdowntown?

A In fact I told him (Manager) now I am by-passedpassenger here which is not my destination what can youoffer me. Then they answered, "it is not my fault. Let usforget that."

Q In other words when the Manager told you that offer was

there a vehicle ready?

A Not yet. Not long after that the Ford Fiera loaded with PALpersonnel was passing by going to the City of Cotabato and Istopped it to take me a ride because there was no moreavailable transportation but I was not accommodated.

Significantly, PAL did not seem to mind the introduction of evidence which focused onits alleged negligence in caring for its stranded passengers. Well-settled is the rule inevidence that the protest or objection against the admission of evidence should bepresented at the time the evidence is offered, and that the proper time to make protest

or objection to the admissibility of evidence is when the question is presented to thewitness or at the time the answer thereto is given. 16 There being no objection, suchevidence becomes property of the case and all the parties are amenable to anyfavorable or unfavorable effects resulting from the evidence. 17

PAL instead attempted to rebut the aforequoted testimony. In the process, it failed tosubstantiate its counter allegation for want of concrete proof18


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Atty. Rubin O. Rivera PAL's counsel:

Q You said PAL refused to help you when you were inCotabato, is that right?

Private respondent:

A Yes.

Q Did you ask them to help you regarding any offer oftransportation or of any other matter asked of them?

A Yes, he (PAL PERSONNEL) said what is? It is not ourfault.

Q Are you not aware that one fellow passenger even

claimed that he was given Hotel accommodation becausethey have no money?

xxx xxx xxx

A No, sir, that was never offered to me. I said, I tried to stopthem but they were already riding that PAL pick-up jeep, andI was not accommodated.

Having joined in the issue over the alleged lack of care it exhibited towards itspassengers, PAL cannot now turn around and feign surprise at the outcome of the case.

When issues not raised by the pleadings are tried by express or implied consent of theparties, they shall be treated in all respects as if they had been raised in thepleadings. 19

With regard to the award of damages affirmed by the appellate court, PAL argues thatthe same is unfounded. It asserts that it should not be charged with the task of lookingafter the passengers' comfort and convenience because the diversion of the flight wasdue to a fortuitous event, and that if made liable, an added burden is given to PAL whichis over and beyond its duties under the contract of carriage. It submits thatgranting arguendo that negligence exists, PAL cannot be liable in damages in theabsence of fraud or bad faith; that private respondent failed to apprise PAL of the nature

of his trip and possible business losses; and, that private respondent himself is to beblamed for unreasonably refusing to use the free ticket which PAL issued.

The contract of air carriage is a peculiar one. Being imbued with public interest, the lawrequires common carriers to carry the passengers safely as far as human care andforesight can provide, using the utmost diligence of very cautious persons, with dueregard for all the circumstances. 20 InAir France v. Carrascoso, 21 we held that


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A contract to transport passengers is quite different in kind and degreefrom any other contractual relation. And this, because of the relation whichan air carrier sustains with the public. Its business is mainly with thetravelling public. It invites people to avail of the comforts and advantages itoffers. The contract of air carriage, therefore, generates a relation

attended with a public duty . . . . ( emphasis supplied).

The position taken by PAL in this case clearly illustrates its failure to grasp the exactingstandard required by law. Undisputably, PAL's diversion of its flight due to inclementweather was a fortuitous event. Nonetheless, such occurrence did not terminate PAL'scontract with its passengers. Being in the business of air carriage and the sole one tooperate in the country, PAL is deemed equipped to deal with situations as in the case atbar. What we said in one case once again must be stressed, i.e., the relation of carrierand passenger continues until the latter has been landed at the port of destination andhas left the carrier's premises. 22 Hence, PAL necessarily would still have to exerciseextraordinary diligence in safeguarding the comfort, convenience and safety of its

stranded passengers until they have reached their final destination. On this score, PALgrossly failed considering the then ongoing battle between government forces andMuslim rebels in Cotabato City and the fact that the private respondent was a strangerto the place. As the appellate court correctly ruled

While the failure of plaintiff in the first instance to reach his destination at Ozamis City inaccordance with the contract of carriage was due to the closure of the airport on accountof rain and inclement weather which was radioed to defendant 15 minutes before landing,it has not been disputed by defendant airline that Ozamis City has no all-weather airportand has to cancel its flight to Ozamis City or by-pass it in the event of inclement weather.Knowing this fact, it becomes the duty of defendant to provide all means of comfort andconvenience to its passengers when they would have to be left in a strange place in caseof such by-passing. The steps taken by defendant airline company towards this end has

not been put in evidence, especially for those 7 others who were not accommodated inthe return trip to Cebu, only 6 of the 21 having been so accommodated. It appears thatplaintiff had to leave on the next flight 2 days later. If the cause of non-fulfillment of thecontract is due to a fortuitous event, it has to be the sole and only cause (Art. 1755 CC.,Art. 1733 C.C.) Since part of the failure to comply with the obligation of common carrier todeliver its passengers safely to their destination lay in the defendant's failure to providecomfort and convenience to its stranded passengers using extra-ordinary diligence, thecause of non-fulfillment is not solely and exclusively due to fortuitous event, but due tosomething which defendant airline could have prevented, defendant becomes liable toplaintiff.

23

While we find PAL remiss in its duty of extending utmost care to private respondentwhile being stranded in Cotabato City, there is no sufficient basis to conclude that PALfailed to inform him about his non-accommodation on Flight 560, or that it wasinattentive to his queries relative thereto.

On 3 August 1975, the Station Agent reported to his Branch Manager in Cotabato Citythat

3. Of the fifteen stranded passengers two pax elected to take F478 on August 05, threepax opted to take F442 August 03. The remaining ten (10) including subject requested


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that they be instead accommodated (sic) on F446 CBO-IGN the following day where theyintended to take the surface transportation to OZC. Mr. Pedro Zapatos had by then beenvery vocal and boiceterous (sic) at the counter and we tactfully managed to steer himinside the Station Agent's office. Mr. Pedro Zapatos then adamantly insisted that all thediverted passengers should have been given priority over the originating passengers ofF560 whether confirmed or otherwise. We explained our policies and after awhile heseemed pacified and thereafter took his ticket (in-lieued (sic) to CBO-IGN, COCONbasis), at the counter in the presence of five other passengers who were waiting for theirtickets too. The rest of the diverted pax had left earlier after being assured their ticketswill be ready the following day.

24

Aforesaid Report being an entry in the course of business is prima facie evidence of thefacts therein stated. Private respondent, apart from his testimony, did not offer anycontroverting evidence. If indeed PAL omitted to give information about the optionsavailable to its diverted passengers, it would have been deluged with complaints. But,only private respondent complained

Atty. Rivera (for PAL)

Q I understand from you Mr. Zapatos that at the time youwere waiting at Cotabato Airport for the decision of PAL, youwere not informed of the decision until after the airplane leftis that correct?

A Yes.

COURT:

Q What do you mean by "yes"? You meant you were not

informed?

A Yes, I was not informed of their decision, that they will onlyaccommodate few passengers.

Q Aside from you there were many other strandedpassengers?

A I believed, yes.

Q And you want us to believe that PAL did not explain (to)

any of these passengers about the decision regarding thosewho will board the aircraft back to Cebu?

A No, Sir.

Q Despite these facts Mr. Zapatos did any of the otherpassengers complained (sic) regarding that incident?


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xxx xxx xxx

A There were plenty of argument and I was one of thosetalking about my case.

Q Did you hear anybody complained (sic) that he has notbeen informed of the decision before the plane left for Cebu?

A No.25

Admittedly, private respondent's insistence on being given priority in accommodationwas unreasonable considering the fortuitous event and that there was a sequence to beobserved in the booking, i.e., in the order the passengers checked-in at their port oforigin. His intransigence in fact was the main cause for his having to stay at the airportlonger than was necessary.

Atty. Rivera:

Q And, you were saying that despite the fact that accordingto your testimony there were at least 16 passengers whowere stranded there in Cotabato airport according to yourtestimony, and later you said that there were no other peopleleft there at that time, is that correct?

A Yes, I did not see anyone there around. I think I was theonly civilian who was left there.

Q Why is it that it took you long time to leave that place?

A Because I was arguing with the PAL personnel.26

Anent the plaint that PAL employees were disrespectful and inattentive toward privaterespondent, the records are bereft of evidence to support the same. Thus, the ruling ofrespondent Court of Appeals in this regard is without basis. 27 On the contrary, privaterespondent was attended to not only by the personnel of PAL but also by itsManager." 28

In the light of these findings, we find the award of moral damages of Fifty ThousandPesos (P50,000.00) unreasonably excessive; hence, we reduce the same to TenThousand Pesos (P10,000.00). Conformably herewith, the award of exemplarydamages is also reduced to five Thousand Pesos (5,000.00). Moral damages are notintended to enrich the private respondent. They are awarded only to enable the injuredparty to obtain means, diversion or amusements that will serve to alleviate the moralsuffering he has undergone by reason of the defendant's culpable action. 29

With regard to the award of actual damages in the amount of P5,000.00 representingprivate respondent's alleged business losses occasioned by his stay at Cotabato City,


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we find the same unwarranted. Private respondent's testimony that he had a scheduledbusiness "transaction of shark liver oil supposedly to have been consummated on

August 3, 1975 in the morning" and that "since (private respondent) was out for nearlytwo weeks I missed to buy about 10 barrels of shark liver oil," 30 are purely speculative.

Actual or compensatory damages cannot be presumed but must be duly proved with

reasonable degree of certainty. A court cannot rely on speculation, conjecture orguesswork as to the fact and amount of damages, but must depend upon competentproof that they have suffered and on evidence of the actual amount thereof. 31

WHEREFORE the decision appealed from is AFFIRMED with modification however thatthe award of moral damages of Fifty Thousand Pesos (P50,000.00) is reduced to TenThousand Pesos (P10,000.00) while the exemplary damages of Ten Thousand Pesos(P10,000.00) is also reduced to Five Thousand Pesos (P5,000.00). The award of actualdamages in the amount Five Thousand Pesos (P5,000.00) representing businesslosses occasioned by private respondent's being stranded in Cotabato City is deleted.

SO ORDERED.

Cruz, Grio-Aquino, Davide, Jr. and Quiason, JJ., concur.

3. Mendoza vs. PAL


Manila

EN BANC

G.R. No. L-3678 February 29, 1952

JOSE MENDOZA, plaintiff-appellant,vs.PHILIPPINE AIR LINES, INC., defendant-appellee.

Manuel O. Chan, Reyes and Dy-Liaco for appellant.Daniel Me. Gomez and Emigdio Tanjuatco for appellee.

MONTEMAYOR,J .:


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The present appeal by plaintiff Jose Mendoza from the decision of the Court of FirstInstance of Camarines Sur, has come directly to this Tribunal for the reason that bothparties, appellant and appellee, accepted the findings of fact made by the trial court andhere raise only questions of law. On our part, we must also accept said findings of factof the lower court.

In the year 1948, appellant Jose Mendoza was the owner of the Cita Theater located inthe City of Naga, Camarines Sur, where he used to exhibit movie pictures booked frommovie producers or film owners in Manila. The fiesta or town holiday of the City of Naga,held on September 17 and 18, yearly, was usually attended by a great many people,mostly from the Bicol region, especially since the Patron Saint Virgin of Pea Franciawas believed by many to be miraculous. As a good businessman, appellant, takingadvantage of these circumstances, decided to exhibit a film which would fit the occasionand have a special attraction and significance to the people attending said fiesta. Amonth before the holiday, that is to say, August 1948, he contracted with the LVNpictures, Inc., a movie producer in Manila for him to show during the town fiesta the

Tagalog film entitled "Himala ng Birhen" or Miracle of the Virgin. He made extensivepreparations; he had two thousand posters printed and later distributed not only in theCity of Naga but also in the neighboring towns. He also advertised in a weekly ofgeneral circulation in the province. The posters and advertisement stated that the filmwould be shown in the Cita theater on the 17th and 18th of September, correspondingto the eve and day of the fiesta itself.

In pursuance of the agreement between the LVN Pictures Inc. and Mendoza, the formeron September 17th, 1948, delivered to the defendant Philippine Airlines (PAL) whoseplanes carried passengers and cargo and made regular trips from Manila to the Pili AirPort near Naga, Camarines Sur, a can containing the film "Himala ng Birhen" consigned

to the Cita Theater. For this shipment the defendant issued its Air Way Bill No. 317133marked Exhibit "1". This can of films was loaded on flight 113 of the defendant, theplane arriving at the Air Port at Pili a little after four o'clock in the afternoon of the sameday, September 17th. For reasons not explained by the defendant, but which wouldappear to be the fault of its employees or agents, this can of film was not unloaded atPili Air Port and it was brought ba to Manila. Mendoza who had completed allarrangements for the exhibition of the film beginning in the evening of September 17th,to exploit the presence of the big crowd that came to attend the town fiesta, went to the

Air Port and inquired from the defendant's station master there about the can of film.Said station master could not explain why the film was not unloaded and sent severalradiograms to his principal in Manila making inquiries and asking that the film be sent toNaga immediately. After investigation and search in the Manila office, the film wasfinally located the following day, September 18th, and then shipped to the Pili Air Porton September 20th. Mendoza received it and exhibited the film but he had missed hisopportunity to realize a large profit as he expected for the people after the fiesta hadalready left for their towns. To recoup his losses, Mendoza brought this action againstthe PAL. After trial, the lower court found that because of his failure to exhibit the film"Himala ng Birhen" during the town fiesta, Mendoza suffered damages or rather failed to


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earn profits in the amount of P3,000.00, but finding the PAL not liable for said damages,dismissed the complaint.

To avoid liability, defendant-appellee, called the attention of the trial court to the termsand conditions of paragraph 6 of the Way Bill printed on the back thereof which

paragraph reads as follows:

6. The Carrier does not obligate itself to carry the Goods by any specified aircraftor on a specified time. Said Carrier being hereby authorized to deviate from theroute of the shipment without any liability therefor.

It claimed that since there was no obligation on its part to carry the film in question onany specified time, it could not be held accountable for the delay of about three days.The trial court, however, found and held that although the defendant was not obligatedto load the film on any specified plane or on any particular day, once said can film wasloaded and shipped on one of its planes making trip to Camarines, then it assumed the

obligation to unload it at its point of destination and deliver it to the consignee, and itsunexplained failure to comply with this duty constituted negligence. If however foundthat fraud was not involved and that the defendant was a debtor in good faith.

The trial court presided over by Judge Jose N. Leuterio in a well-considered decisionciting authorities, particularly the case ofDaywalt vs. Corporacion de PP. AgustinosRecoletos, 39 Phil. 587, held that not because plaintiff failed to realize profits in the sumof P3,000.00 due to the negligence of the defendant, should the latter be made toreimburse him said sum. Applying provisions of Art. 1107 of the Civil Code whichprovides that losses and those foreseen, or which might have been foreseen, at thetime of constituting the obligation, and which are a necessary consequence of the

failure to perform it, the trial court held that inasmuch as these damages suffered byMendoza were not foreseen or could not have been foreseen at the time that thedefendant accepted the can of film for shipment, for the reason that neither the shipperLVN Pictures Inc. nor the consignee Mendoza had called its attention to the specialcircumstances attending the shipment and the showing of the film during the town fiestaof Naga, plaintiff may not recover the damages sought.

Counsel for appellant insists that the articles of the Code of Commerce rather thanthose of the Civil Code should have been applied in deciding this case for the reasonthat the shipment of the can of film is an act of commerce; that the contract oftransportation in this case should be considered commercial under Art. 349 of the Codeof Commerce because it only involves merchandise or an object of commerce but alsothe transportation company, the defendant herein, was a common carrier, that is to say,customarily engaged in transportation for the public, and that although the contract oftransportation was not by land or waterways as defined in said Art. 349, nevertheless,air transportation being analogous to land and water transportation, should beconsidered as included, especially in view of the second paragraph of Art. 2 of the sameCode which says that transactions covered by the Code of Commerce and all others ofanalogous character shall be deemed acts of commerce. The trial court, however,


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disagreed to this contention and opined that air transportation not being expresslycovered by the Code of Commerce, cannot be governed by its provisions.

We believe that whether or not transportation by air should be regarded as acommercial contract under Art. 349, would be immaterial in the present case, as will be

explained later. Without making a definite ruling on the civil or commercial nature oftransportation by air, it being unnecessary, we are inclined to believe and to hold that acontract of transportation by air may be regarded as commercial. The reason is that atleast in the present case the transportation company (PAL) is a common carrier;besides, air transportation is clearly similar or analogous to land and watertransportation. The obvious reason for its non-inclusion in the Code of Commerce wasthat at the time of its promulgation, transportation by air on a commercial basis was notyet known. In the United Sates where air transportation has reached its highestdevelopment, an airline company engaged in the transportation business is regarded asa common carrier.

The principles which govern carriers by other means, such as by railroad ormotor bus, govern carriers by aircraft. 6 Am. Jur., Aviation, Sec. 56, p. 33.

When Aircraft Operator is Common Carrier. That aircraft and the industry ofcarriage by aircraft are new is no reason why one in fact employing aircraft ascommon-carrier vehicles should not be classified as a common carrier andcharged with liability as such. There can be no doubt, under the general law ofcommon carriers, that those air lines and aircraft owners engaged in thepassenger service on regular schedules on definite routes, who solicit thepatronage of the traveling public, advertise schedules for routes, time of leaving,and rates of fare, and make the usual stipulation as to baggage, are common

carriers by air. A flying service company which, according to its printedadvertising, will take anyone anywhere at any time, though not operating onregular routes or schedules, and basing its charges not on the number ofpassengers, but on the operating cost of the plane per mile, has been held to bea common carrier. It is not necessary, in order to make one carrying passengersby aircraft a common carrier of passengers that the passengers can be carriedfrom one point to another; the status and the liability as a common carrier mayexist notwithstanding the passenger's ticket issued by an airplane carrier ofpassengers for hire contains a statement that it is not a common carrier, etc., or astipulation that it is to be held only for its proven negligence. But an airplaneowner cannot be classed as a common carrier of passengers unless heundertakes, for hire, to carry all persons who apply for passage indiscriminatelyas long as there is room and no legal excuse for refusing. . . . 6 Am. Jur.,

Aviation, Sec. 58, pp. 34-35.

The rules governing the business of a common carrier by airship or flyingmachine may be readily assimilated to those applied to other common carriers. 2C.J.S., 1951, Cumulative Pocket Part, Aerial Navigation, Sec. 38, p. 99.


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The test of whether one is a common carrier by air is whether he holds out thathe will carry for hire, so long as he has room, goods for everyone bringing goodsto him for carriage, not whether he is carrying as a public employment or whetherhe carries to a fixed place. (Ibid., Sec. 39, p. 99.)

Appellant contends that Art. 358 of the Code of Commerce should govern the award ofthe damages in his favor. Said article provides that if there is no period fixed for thedelivery of the goods, the carrier shall be bound to forward them in the first shipment ofthe same or similar merchandise which he may make to the point of delivery, and thatupon failure to do so, the damages caused by the delay should be suffered by thecarrier. This is a general provision for ordinary damages and is no different from theprovisions of the Civil Code, particularly Art. 1101 thereof, providing for the payment ofdamages caused by the negligence or delay in the fulfillment of one's obligation. Evenapplying the provisions of the Code of Commerce, as already stated, the pertinentprovisions regarding damages only treats of ordinary damages or damages in general,not special damages like those suffered by the plaintiff herein. Article 2 of the Code of

Commerce provides that commercial transactions are to be governed by the provisionsof the Code of Commerce, but in the absence of applicable provisions, they will begoverned by the usages of commerce generally observed in each place; and in defaultof both, by those of the Civil Law. So that assuming that the present case involved acommercial transaction, still inasmuch as the special damages herein claimed finds noapplicable provision in the Code of Commerce, neither has it been shown that there areany commercial usages applicable thereto, then in the last analysis, the rules of the civillaw would have to come into play. Under Art. 1107 of the Civil Code, a debtor in goodfaith like the defendant herein, may be held liable only for damages that were foreseenor might have been foreseen at the time the contract of the transportation was enteredinto. The trial court correctly found that the defendant company could not have foreseenthe damages that would be suffered by Mendoza upon failure to deliver the can of filmon the 17th of September, 1948 for the reason that the plans of Mendoza to exhibit thatfilm during the town fiesta and his preparations, specially the announcement of saidexhibition by posters and advertisement in the newspaper, were not called to thedefendant's attention.

In our research for authorities we have found a case very similar to the one underconsideration. In the case of Chapman vs. Fargo, L.R.A. (1918 F) p. 1049, the plaintiffin Troy, New York, delivered picture films to the defendant Fargo, an express company,consigned and to be delivered to him in Utica. At the time of the shipment the attentionof the express company was called to the fact that the shipment involved motion picturefilms to be exhibited in Utica, and that they should be sent to their destination, rush.There was delay in their delivery and it was found that the plaintiff because of his failureto exhibit the film in Utica due to the delay suffered damages or loss of profits. But thehighest court in the State of New York refused to award him special damages. Saidappellate court observed:

But before defendant could be held to special damages, such as the presentalleged loss of profits on account of delay or failure of delivery, it must have


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appeared that he had notice at the time of delivery to him of the particularcircumstances attending the shipment, and which probably would lead to suchspecial loss if he defaulted. Or, as the rule has been stated in another form, inorder to impose on the defaulting party further liability than for damages naturallyand directly, i.e., in the ordinary course of things, arising from a breach of

contract, such unusual or extraordinary damages must have been brought withinthe contemplation of the parties as the probable result of a breach at the time ofor prior to contracting. Generally, notice then of any special circumstances whichwill show that the damages to be anticipated from a breach would be enhancedhas been held sufficient for this effect.

As may be seen, that New York case is a stronger one than the present case for thereason that the attention of the common carrier in said case was called to the nature ofthe articles shipped, the purpose of shipment, and the desire to rush the shipment,circumstances and facts absent in the present case.

But appellants now contends that he is not suing on a breach of contract but on a tort asprovided for in Art. 1902 of the Civil Code. We are a little perplexed as to this newtheory of the appellant. First, he insists that the articles of the Code of Commerceshould be applied; that he invokes the provisions of said Code governing the obligationsof a common carrier to make prompt delivery of goods given to it under a contract oftransportation. Later, as already said, he says that he was never a party to the contractof transportation and was a complete stranger to it, and that he is now suing on a tort orviolation of his rights as a stranger (culpa aquiliana). If he does not invoke the contractof carriage entered into with the defendant company, then he would hardly have any legto stand on. His right to prompt delivery of the can of film at the Pili Air Port stems and isderived from the contract of carriage under which contract, the PAL undertook to carry

the can of film safely and to deliver it to him promptly. Take away or ignore that contractand the obligation to carry and to deliver and the right to prompt delivery disappear.Common carriers are not obligated by law to carry and to deliver merchandise, andpersons are not vested with the right of prompt delivery, unless such common carrierspreviously assume the obligation. Said rights and obligations are created by a specificcontract entered into by the parties. In the present case, the findings of the trial courtwhich as already stated, are accepted by the parties and which we must accept are tothe effect that the LVN Pictures Inc. and Jose Mendoza on one side, and the defendantcompany on the other, entered into a contract of transportation. (p. 29, Rec. on Appeal).One interpretation of said finding is that the LVN Pictures Inc. through previousagreement with Mendoza acted as the latter's agent. When he negotiated with the LVNPictures Inc. to rent the film "Himala ng Birhen" and show it during the Naga town fiesta,he most probably authorized and enjoined the Picture Company to ship the film for himon the PAL on September 17th. Another interpretation is that even if the LVN PicturesInc. as consignor of its own initiative, and acting independently of Mendoza for the timebeing, made Mendoza as consignee, a stranger to the contract if that is possible,nevertheless when he, Mendoza, appeared at the Pili Air Port armed with the copy ofthe Air Way Bill (Exh. 1) demanding the delivery of the shipment to him, he therebymade himself a party to the contract of the transportation. The very citation made by


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appellant in his memorandum supports this view. Speaking of the possibility of a conflictbetween the order of the shipper on the one hand and the order of the consignee on theother, as when the shipper orders the shipping company to return or retain the goodsshipped while the consignee demands their delivery, Malagarriga in his book Codigo deComercio Comentado, Vol. I, p. 400, citing a decision of Argentina Court of Appeals on

commercial matters, cited by Tolentino in Vol. II of his book entitled "Commentaries andJurisprudence on the Commercial Laws of the Philippines" p. 209, says that the right ofthe shipper to countermand the shipment terminates when the consignee or legitimateholder of the bill of lading appears with such bill of lading before the carrier and makeshimself a party to the contract. Prior to that time, he is stranger to the contract.

Still another view of this phase of the case is that contemplated in Art. 1257, paragraph2, of the old Civil Code which reads thus:

Should the contract contain any stipulation in favor of a third person, he maydemand its fulfillment, provided he has given notice of his acceptance to the

person bound before the stipulation has been revoked.

Here, the contract of carriage between the LVN Pictures Inc. and the defendant carriercontains the stipulations of the delivery to Mendoza as consignee. His demand for thedelivery of the can of film to him at the Pili Air Port may be regarded as a notice of hisacceptance of the stipulation of the delivery in his favor contained in the contract ofcarriage, such demand being one of the fulfillment of the contract of carriage anddelivery. In this case he also made himself a party to the contract, or at least has cometo court to enforce it. His cause of action must necessarily be founded on its breach.

One can readily sympathize with the appellant herein for his loss of profits which he

expected to realize. But he overlooked the legal angle. In situations like the presentwhere failure to exhibit films on a certain day would spell substantial damages orconsiderable loss of profits, including waste of efforts on preparations and expensesincurred in advertisements, exhibitors, for their security, may either get hold of the filmswell ahead of the time of exhibition in order to make allowance for any hitch in thedelivery, or else enter into a special contract or make a suitable arrangement with thecommon carrier for the prompt delivery of the films, calling the attention of the carrier tothe circumstances surrounding the case and the approximate amount of damages to besuffered in case of delay.

Finding no reversible error in the decision appealed from, the same is hereby affirmed.No pronouncement as to costs. So ordered.


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Republic of the Philippines

SUPREME COURTManila

FIRST DIVISION

G.R. No. 75118 August 31, 1987

SEA-LAND SERVICE, INC., petitioner,vs.INTERMEDIATE APPELLATE COURT and PAULINO CUE, doing business underthe name and style of "SEN HIAP HING," respondents.

NARVASA,J .:

The main issue here is whether or not the consignee of seaborne freight is bound bystipulations in the covering bill of lading limiting to a fixed amount the liability of thecarrier for loss or damage to the cargo where its value is not declared in the bill.

The factual antecedents, for the most part, are not in dispute.

On or about January 8, 1981, Sea-Land Service, Inc. (Sea-Land for brevity), a foreignshipping and forwarding company licensed to do business in the Philippines, receivedfrom Seaborne Trading Company in Oakland, California a shipment consigned to SenHiap Hing the business name used by Paulino Cue in the wholesale and retail tradewhich he operated out of an establishment located on Borromeo and Plaridel Streets,Cebu City.

The shipper not having declared the value of the shipment, no value was indicated inthe bill of lading. The bill described the shipment only as "8 CTNS on 2 SKIDS-FILES. 1 Based on volume measurements Sea-land charged the shipper the totalamount of US$209.28 2 for freight age and other charges. The shipment was loaded on

board the MS Patriot, a vessel owned and operated by Sea-Land, for discharge at thePort Of Cebu.

The shipment arrived in Manila on February 12, 1981, and there discharged inContainer No. 310996 into the custody of the arrastre contractor and the customs andport authorities. 3 Sometime between February 13 and 16, 1981, after the shipment hadbeen transferred, along with other cargoes to Container No. 40158 near Warehouse 3


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at Pier 3 in South Harbor, Manila, awaiting trans-shipment to Cebu, it was stolen bypilferers and has never been recovered. 4

On March 10, 1981, Paulino Cue, the consignee, made formal claim upon Sea-Land forthe value of the lost shipment allegedly amounting to P179,643.48. 5 Sea-Land offered

to settle for US$4,000.00, or its then Philippine peso equivalent of P30,600.00.asserting that said amount represented its maximum liability for the loss of the shipmentunder the package limitation clause in the covering bill of lading. 6 Cue rejected the offerand thereafter brought suit for damages against Sea-Land in the then Court of FirstInstance of Cebu, Branch X. 7 Said Court, after trial, rendered judgment in favor of Cue,sentencing Sea-Land to pay him P186,048.00 representing the Philippine currencyvalue of the lost cargo, P55,814.00 for unrealized profit with one (1%) percent monthlyinterest from the filing of the complaint until fully paid, P25,000.00 for attorney's feesand P2,000.00 as litigation expenses.8

Sea-Land appealed to the Intermediate Appellate Court. 9 That Court however affirmed

the decision of the Trial Court xxx in all its parts ... . 10 Sea-Land thereupon filed thepresent petition for review which, as already stated, poses the question of whether,upon the facts above set forth, it can be held liable for the loss of the shipment in anyamount beyond the limit of US$600.00 per package stipulated in the bill of lading.

To begin with, there is no question of the right, in principle, of a consignee in a bill oflading to recover from the carrier or shipper for loss of, or damage to, goods beingtransported under said bill ,although that document may have been as in practice itoftentimes is drawn up only by the consignor and the carrierwithout the interventionof the consignee. In Mendoza vs. Philippine Air Lines, Inc. 11 the Court delved at somelength into the reasons behind this when, upon a claim made by the consignee of a

motion picture film shipped by air that he was never a party to the contract oftransportation and was a complete stranger thereto, it said:

But appellant now contends that he is not suing on a breach of contractbut on a tort as provided for in Art. 1902 of the Civil Code. We are a littleperplexed as to this new theory of the appellant. First, he insists that thearticles of the Code of Commerce should be applied: that he invokes theprovisions of aid Code governing the obligations of a common carrier tomake prompt delivery of goods given to it under a contract oftransportation. Later, as already said, he says that he was never a party tothe contract of transportation and was a complete stranger to it, and thathe is now suing on a tort or a violation of his rights as a stranger (culpaaquiliana) If he does not invoke the contract of carriage entered into withthe defendant company, then he would hardly have any leg to stand on.His right to prompt delivery of the can of film at the Phil. Air Port stemsand is derived from the contract of carriage under which contract, the PALundertook to carry the can of film safely and to deliver it to him promptly.Take away or ignore that contract and the obligation to carry and to deliverand right to prompt delivery disappear. Common carriers are not obligated


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by law to carry and to deliver merchandise, and persons are not vestedwith the right to prompt delivery, unless such common carriers previouslyassume the obligation. Said rights and obligations are created by aspecific contract entered into by the parties. In the present case, thefindings of the trial court which as already stated, are accepted by the

parties and which we must accept are to the effect that the LVN PicturesInc. and Jose Mendoza on one side, and the defendant company on theother, entered into a contract of transportation (p. 29, Rec. on Appeal).One interpretation of said finding is that the LVN Pictures Inc. throughprevious agreement with Mendoza acted as the latter's agent. When henegotiated with the LVN Pictures Inc. to rent the film "Himala ng Birhen"and show it during the Naga town fiesta, he most probably authorized andenjoined the Picture Company to ship the film for him on the PAL onSeptember 17th. Another interpretation is that even if the LVN PicturesInc. as consignor of its own initiative, and acting independently ofMendoza for the time being, made Mendoza as consignee, a stranger to

the contract if that is possible, nevertheless when he, Mendoza appearedat the Phil Air Port armed with the copy of the Air Way Bill (Exh. 1)demanding the delivery of the shipment to him, he thereby made himself aparty to the contract of transportation. The very citation made by appellantin his memorandum supports this view. Speaking of the possibility of aconflict between the order of the shipper on the one hand and the order ofthe consignee on the other, as when the shipper orders the shippingcompany to return or retain the goods shipped while the consigneedemands their delivery, Malagarriga in his book Codigo de ComercioComentado, Vol. 1, p. 400, citing a decision of the Argentina Court of

Appeals on commercial matters, cited by Tolentino in Vol. II of his bookentitled "Commentaries and Jurisprudence on the Commercial Laws of thePhilippines" p. 209, says that the right of the shipper to countermand theshipment terminates when the consignee or legitimate holder of the bill oflading appears with such big of lading before the carrier and makeshimself a party to the contract. Prior to that time he is a stranger to thecontract.

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

Should the contract contain any stipulation in favor of a thirdperson, he may demand its fulfillment provided he has givennotice of his acceptance to the person bound before thestipulation has been revoked.

Here, the contract of carriage between the LVN Pictures Inc. and thedefendant carrier contains the stipulations of delivery to Mendoza asconsignee. His demand for the delivery of the can of film to him at the Phil


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Air Port may be regarded as a notice of his acceptance of the stipulationof the delivery in his favor contained in the contract of carriage anddelivery. In this case he also made himself a party to the contract, or atleast has come to court to enforce it. His cause of action must necessarilybe founded on its breach.

Since the liability of a common carrier for loss of or damage to goods transported by itunder a contract of carriage is governed by the laws of the country of destination 12 andthe goods in question were shipped from the United States to the Philippines, theliability of petitioner Sea-Land to the respondent consignee is governed primarily by theCivil Code, and as ordained by the said Code, suppletorily, in all matters not determinedthereby, by the Code of Commerce and special laws. 13 One of these suppletory speciallaws is the Carriage of Goods by Sea Act, U.S. Public Act No. 521 which was madeapplicable to all contracts for the carriage of goods by sea to and from Philippine portsin foreign trade by Commonwealth Act No. 65, approved on October 22, 1936. Sec. 4(5)of said Act in part reads:

(5) Neither the carrier nor the ship shall in any event be or become liablefor any loss or damage to or in connection with the transportation of goodsin an amount exceeding $500 per package lawful money of the UnitedStates, or in case of goods not shipped in packages, per customary freightunit, or the equivalent of that sum in other currency, unless the nature andvalue of such goods have been declared by the shipper before shipmentand inserted in the bill of lading. This declaration, if embodied in the bill oflading, shall be prima facie evidence, but shall not be conclusive on thecarrier.

By agreement between the carrier, master, or agent of the carrier, and theshipper another maximum amount than that mentioned in this paragraphmay be fixed: Provided, That such maximum shall not be less than thefigure above named. In no event shall the carrier be liable for more thanthe amount of damage actually sustained.

xxx xxx xxx

Clause 22, first paragraph, of the long form bill of lading customarily issued by Sea-Land to its shipping clients 14is a virtual copy of the first paragraph of the foregoingprovision. It says:

22. VALUATION. In the event of any loss, damage or delay to or inconnection with goods exceeding in actual value $500 per package, lawfulmoney of the United States, or in case of goods not shipped in packages,per customary freight unit, the value of the goods shall be deemed to be$500 per package or per customary freight unit, as the case may be, andthe carrier's liability, if any, shall be determined on the basis of a value of$500 per package or customary freight unit, unless the nature and a


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higher value shall be declared by the shipper in writing before shipmentand inserted in this Bill of Lading.

And in its second paragraph, the bill states:

If a value higher than $500 shag have been declared in writing by theshipper upon delivery to the carrier and inserted in this bill of lading andextra freight paid, if required and in such case if the actual value of thegoods per package or per customary freight unit shall exceed suchdeclared value, the value shall nevertheless be deemed to be declaredvalue and the carrier's liability, if any, shall not exceed the declared valueand any partial loss or damage shall be adjusted pro rata on the basis ofsuch declared value.

Since, as already pointed out, Article 1766 of the Civil Code expressly subjects therights and obligations of common carriers to the provisions of the Code of Commerce

and of special laws in matters not regulated by said (Civil) Code, the Court fails tofathom the reason or justification for the Appellate Court's pronouncement in itsappealed Decision that the Carriage of Goods by Sea Act " ... has no applicationwhatsoever in this case. 15 Not only is there nothing in the Civil Code which absolutelyprohibits agreements between shipper and carrier limiting the latter's liability for loss ofor damage to cargo shipped under contracts of carriage; it is also quite clear that saidCode in fact has agreements of such character in contemplation in providing, in its

Articles 1749 and 1750, that:

ART. 1749 A stipulation that the common carrier's liability is limited to thevalue of the goods appearing in the bill of lading, unless the shipper or

owner declares a greater value, is binding.

ART. 1750. A contract fixing the sum that may be recovered by the owneror shipper for the loss, destruction, or deterioration of the goods is valid, ifit is reasonable and just under the circumstances, and has been fairly andfreely agreed upon.

Nothing contained in section 4(5) of the Carriage of Goods by Sea Act already quoted isrepugnant to or inconsistent with any of the just-cited provisions of the Civil Code. Saidsection merely gives more flesh and greater specificity to the rather general terms of

Article 1749 (without doing any violence to the plain intent thereof) and of Article 1750,to give effect to just agreements limiting carriers' liability for loss or damage which arefreely and fairly entered into.

It seems clear that even if said section 4(5) of the Carriage of Goods by Sea Act did notexist, the validity and binding effect of the liability limitation clause in the bill of ladinghere are nevertheless fully sustainable on the basis alone of the cited Civil Codeprovisions. That said stipulation is just and reasonable is arguable from the fact that itechoes Art. 1750 itself in providing a limit to liability only if a greater value is not


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declared for the shipment in the bill of lading. To hold otherwise would amount toquestioning the justice and fairness of that law itself, and this the private respondentdoes not pretend to do. But over and above that consideration, the lust and reasonablecharacter of such stipulation is implicit in it giving the shipper or owner the option ofavoiding acrrual of liability limitation by the simple and surely far from onerous expedient

of declaring the nature and value of the shipment in the bill of lading. And since theshipper here has not been heard to complaint of having been "rushed," imposed uponor deceived in any significant way into agreeing to ship the cargo under a bill of ladingcarrying such a stipulation in fact, it does not appear that said party has been heardfrom at all insofar as this dispute is concerned there is simply no ground forassuming that its agreement thereto was not as the law would require, freely and fairlysought and given.

The private respondent had no direct part or intervention in the execution of the contractof carriage between the shipper and the carrier as set forth in the bill of lading inquestion. As pointed out in Mendoza vs. PAL, supra, the right of a party in the same

situation as respondent here, to recover for loss of a shipment consigned to him under abill of lading drawn up only by and between the shipper and the carrier, springs fromeither a relation of agency that may exist between him and the shipper or consignor, orhis status as a stranger in whose favor some stipulation is made in said contract, andwho becomes a party thereto when he demands fulfillment of that stipulation, in thiscase the delivery of the goods or cargo shipped. In neither capacity can he assertpersonally, in bar to any provision of the bill of lading, the alleged circumstance that fairand free agreement to such provision was vitiated by its being in such fine print as to behardly readable. Parenthetically, it may be observed that in one comparatively recentcase 16 where this Court found that a similar package limitation clause was "(printed inthe smallest type on the back of the bill of lading, it nonetheless ruled that the consigneewas bound thereby on the strength of authority holding that such provisions on liabilitylimitation are as much a part of a bill of lading as though physically in it and as thoughplaced therein by agreement of the parties.

There can, therefore, be no doubt or equivocation about the validity and enforceability offreely-agreed-upon stipulations in a contract of carriage or bill of lading limiting theliability of the carrier to an agreed valuation unless the shipper declares a higher valueand inserts it into said contract or bill. This pro position, moreover, rests upon an almostuniform weight of authority. 17

The issue of alleged deviation is also settled by Clause 13 of the bill of lading whichexpressly authorizes trans-shipment of the goods at any point in the voyage in theseterms:

13. THROUGH CARGO AND TRANSSHIPMENT. The carrier or master,in the exercise of its or his discretion and although transshipment orforwarding of the goods may not have been contemplated or provided forherein, may at port of discharge or any other place whatsoever transshipor forward the goods or any part thereof by any means at the risk and


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expense of the goods and at any time, whether before or after loading onthe ship named herein and by any route, whether within or outside thescope of the voyage or beyond the port of discharge or destination of thegoods and without notice to the shipper or consignee. The carrier ormaster may delay such transshipping or forwarding for any reason,

including but not limited to awaiting a vessel or other means oftransportation whether by the carrier or others.

Said provision obviates the necessity to offer any other justification for offloading theshipment in question in Manila for transshipment to Cebu City, the port of destinationstipulated in the bill of lading. Nonetheless, the Court takes note of Sea-Land'sexplanation that it only directly serves the Port of Manila from abroad in the usualcourse of voyage of its carriers, hence its maintenance of arrangements with a localforwarder. Aboitiz and Company, for delivery of its imported cargo to the agreed finalpoint of destination within the Philippines, such arrangements not being prohibited, butin fact recognized, by law. 18

Furthermore, this Court has also ruled 19 that the Carriage of Goods by Sea Act isapplicable up to the final port of destination and that the fact that transshipment wasmade on an interisland vessel did not remove the contract of carriage of goods from theoperation of said Act.

Private respondent also contends that the aforecited Clauses 22 and 13 of the bill oflading relied upon by petitioner Sea Land form no part of the short-form bill of ladingattached to his complaint before the Trial Court and appear only in the long form of thatdocument which, he claims. SeaLand offered (as its Exhibit 2) as an unused blank formwith no entries or signatures therein. He, however, admitted in the Trial Court that

several times in the past shipments had been delivered to him through Sea-Land, 20 from which the assumption may fairly follow that by the time of the consignmentnow in question, he was already reasonably apprised of the usual terms coveringcontracts of carriage with said petitioner.

At any rate, as observed earlier, it has already been held that the provisions of theCarriage of Goods by Sea Act on package limitation [sec 4(5) of the Act hereinabovereferred to] are as much a part of a bill of lading as though actually placed therein byagreement of the parties. 21

Private respondent, by making claim for loss on the basis of the bill of lading, to allintents and purposes accepted said bill. Having done so, he

... becomes bound by all stipulations contained therein whether on the front or the backthereof. Respondent cannot elude its provisions simply because they prejudice him andtake advantage of those that are beneficial. Secondly, the fact that respondent shippedhis goods on board the ship of petitioner and paid the corresponding freight thereonshows that he impliedly accepted the bill of lading which was issued in connection withthe shipment in question, and so it may be said that the same is finding upon him as if ithad been actually signed by him or by any other person in his behalf. ...

22.


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There is one final consideration. The private respondent admits 23that as early as onApril 22, 1981, Sea-Land had offered to settle his claim for US$4,000.00, the limit ofsaid carrier's liability for loss of the shipment under the bill of lading. This Court havingreached the conclusion that said sum is all that is justly due said respondent, it does notappear just or equitable that Sea-Land, which offered that amount in good faith as early

as six years ago, should, by being made to pay at the current conversion rate of thedollar to the peso, bear for its own account all of the increase in said rate since the timeof the offer of settlement. The decision of the Regional Trial Court awarding the privaterespondent P186,048.00 as the peso value of the lost shipment is clearly based on aconversion rate of P8.00 to US$1.00, said respondent having claimed a dollar value of$23,256.00 for said shipment. 24 All circumstances considered, it is just and fair thatSea-Land's dollar obligation be convertible at the same rate.

WHEREFORE, the Decision of the Intermediate Appellate Court complained of isreversed and set aside. The stipulation in the questioned bill of lading limiting Sea-Land's liability for loss of or damage to the shipment covered by said bill to US$500.00

per package is held valid and binding on private respondent. There being no question ofthe fact that said shipment consisted of eight (8) cartons or packages, for the loss ofwhich Sea-Land is therefore liable in the aggregate amount of US$4,000.00, it is the

judgment of the Court that said petitioner discharge that obligation by paying privaterespondent the sum of P32,000.00, the equivalent in Philippine currency ofUS$4,000.00 at the conversion rate of P8.00 to $1.00. Costs against privaterespondent.

SO ORDERED.


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Manila

EN BANC

G.R. No. L-18965 October 30, 1964

COMPAIA MARITIMA, petitioner,vs.INSURANCE COMPANY OF NORTH AMERICA, respondent.

Rafael Dinglasan for petitioner.Ozaeta Gibbs & Ozaeta for respondent.

BAUTISTA ANGELO,J .:

Sometime in October, 1952, Macleod and Company of the Philippines contracted bytelephone the services of the Compaia Maritima, a shipping corporation, for theshipment of 2,645 bales of hemp from the former's Sasa private pier at Davao City toManila and for their subsequent transhipment to Boston, Massachusetts, U.S.A. onboard the S.S. Steel Navigator. This oral contract was later on confirmed by a formaland written booking issued by Macleod's branch office in Sasa and handcarried toCompaia Maritima's branch office in Davao in compliance with which the latter sent toMacleod's private wharf LCT Nos. 1023 and 1025 on which the loading of the hemp wascompleted on October 29, 1952. These two lighters were manned each by a patron andan assistant patron. The patrons of both barges issued the corresponding carrier's

receipts and that issued by the patron of Barge No. 1025 reads in part:

Received in behalf of S.S. Bowline Knot in good order and condition fromMACLEOD AND COMPANY OF PHILIPPINES, Sasa Davao, for transhipment atManila onto S.S. Steel Navigator.

FINAL DESTINATION: Boston.

Thereafter, the two loaded barges left Macleod's wharf and proceeded to and moored atthe government's marginal wharf in the same place to await the arrival of the S.S.Bowline Knot belonging to Compaia Maritima on which the hemp was to be loaded.

During the night of October 29, 1952, or at the early hours of October 30, LCT No. 1025sank, resulting in the damage or loss of 1,162 bales of hemp loaded therein. OnOctober 30, 1952, Macleod promptly notified the carrier's main office in Manila and itsbranch in Davao advising it of its liability. The damaged hemp was brought to OdellPlantation in Madaum, Davao, for cleaning, washing, reconditioning, and redrying.During the period from November 1-15, 1952, the carrier's trucks and lighters hauledfrom Odell to Macleod at Sasa a total of 2,197.75 piculs of the reconditioned hemp outof the original cargo of 1,162 bales weighing 2,324 piculs which had a total value of


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116,835.00. After reclassification, the value of the reconditioned hemp was reduced toP84,887.28, or a loss in value of P31,947.72. Adding to this last amount the sum ofP8,863.30 representing Macleod's expenses in checking, grading, rebating, and otherfees for washing, cleaning and redrying in the amount of P19.610.00, the total loss addsup to P60,421.02.

All abaca shipments of Macleod, including the 1,162 bales loaded on the carrier's LCTNo. 1025, were insured with the Insurance Company of North America against all lossesand damages. In due time, Macleod filed a claim for the loss it suffered as above statedwith said insurance company, and after the same had been processed, the sum ofP64,018.55 was paid, which was noted down in a document which aside from being areceipt of the amount paid, was a subrogation agreement between Macleod and theinsurance company wherein the former assigned to the latter its rights over the insuredand damaged cargo. Having failed to recover from the carrier the sum of P60,421.02,which is the only amount supported by receipts, the insurance company instituted thepresent action on October 28, 1953. After trial, the court a quo rendered judgment

ordering the carrier to pay the insurance company the sum of P60,421.02, with legalinterest thereon from the date of the filing of the complaint until fully paid, and the costs.This judgment was affirmed by the Court of Appeals on December 14, 1960. Hence, thispetition for review.

The issues posed before us are: (1) Was there a contract of carriage between thecarrier and the shipper even if the loss occurred when the hemp was loaded on a bargeowned by the carrier which was loaded free of charge and was not actually loaded onthe S.S. Bowline Knot which would carry the hemp to Manila and no bill of lading wasissued therefore?; (2) Was the damage caused to the cargo or the sinking of the bargewhere it was loaded due to a fortuitous event, storm or natural disaster that would

exempt the carrier from liability?; (3) Can respondent insurance company sue the carrierunder its insurance contract as assignee of Macleod in spite of the fact that the liabilityof the carrier as insurer is not recognized in this jurisdiction?; (4) Has the Court of

Appeals erred in regarding Exhibit NNN-1 as an implied admission by the carrier of thecorrectness and sufficiency of the shipper's statement of accounts contrary to theburden of proof rule?; and (5) Can the insurance company maintain this suit withoutproof of its personality to do so?

1. This issue should be answered in the affirmative. As found by the Court of Appeals,Macleod and Company contracted by telephone the services of petitioner to ship thehemp in question from the former's private pier at Sasa, Davao City, to Manila, to besubsequently transhipped to Boston, Massachusetts, U.S.A., which oral contract waslater confirmed by a formal and written booking issued by the shipper's branch office,Davao City, in virtue of which the carrier sent two of its lighters to undertake the service.It also appears that the patrons of said lighters were employees of the carrier with dueauthority to undertake the transportation and to sign the documents that may benecessary therefor so much so that the patron of LCT No. 1025 signed the receiptcovering the cargo of hemp loaded therein as follows: .


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Received in behalf of S.S. Bowline Knot in good order and condition fromMACLEOD AND COMPANY OF PHILIPPINES, Sasa Davao, for transhipment atManila onto S.S. Steel Navigator.

FINAL DESTINATION: Boston.

The fact that the carrier sent its lighters free of charge to take the hemp from Macleod'swharf at Sasa preparatory to its loading onto the ship Bowline Knot does not in any wayimpair the contract of carriage already entered into between the carrier and the shipper,for that preparatory step is but part and parcel of said contract of carriage. The lighterswere merely employed as the first step of the voyage, but once that step was taken andthe hemp delivered to the carrier's employees, the rights and obligations of the partiesattached thereby subjecting them to the principles and usages of the maritime law. Inother words, here we have a complete contract of carriage the consummation of whichhas already begun: the shipper delivering the cargo to the carrier, and the latter takingpossession thereof by placing it on a lighter manned by its authorized employees, under

which Macleod became entitled to the privilege secured to him by law for its safetransportation and delivery, and the carrier to the full payment of its freight uponcompletion of the voyage.

The receipt of goods by the carrier has been said to lie at the foundation of thecontract to carry and deliver, and if actually no goods are received there can beno such contract. The liability and responsibility of the carrier under a contract forthe carriage of goods commence on theiractual delivery to, orreceipt by, thecarrier oran authorized agent. ... and delivery to a lighter in charge of a vesselfor shipment on the vessel, where it is the custom to deliver in that way, is a gooddelivery and binds the vessel receiving the freight, the liability commencing at the

time of delivery to the lighter. ... and, similarly, where there is a contract to carrygoods from one port to another, and they cannot be loaded directly on the vesseland lighters are sent by the vessel to bring the goods to it, the lighters are for thetime its substitutes, so that the bill of landing is applicable to the goods as soonas they are placed on the lighters. (80 C.J.S., p. 901, emphasis supplied)

... The test as to whether the relation of shipper and carrier had been establishedis, Had the control and possession of the cotton been completely surrendered bythe shipper to the railroad company? Whenever the control and possession ofgoods passes to the carrier and nothing remains to be done by the shipper, thenit can be said with certainty that the relation of shipper and carrier has beenestablished. Railroad Co. v. Murphy, 60 Ark. 333, 30 S.W. 419, 46 A. St. Rep.202; Pine Bluff & Arkansas River Ry. v. MaKenzie, 74 Ark. 100, 86 S.W. 834;Matthews & Hood v. St. L., I.M. & S.R. Co., 123 Ark. 365, 185 S.W. 461, L.R.A.1916E, 1194. (W.F. Bogart & Co., et al. v. Wade, et al., 200 S.W. 148).

The claim that there can be no contract of affreightment because the hemp was notactually loaded on the ship that was to take it from Davao City to Manila is of nomoment, for, as already stated, the delivery of the hemp to the carrier's lighter is in line


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with the contract. In fact, the receipt signed by the patron of the lighter that carried thehemp stated that he was receiving the cargo "in behalf of S.S. Bowline Knot in goodorder and condition." On the other hand, the authorities are to the effect that a bill oflading is not indispensable for the creation of a contract of carriage.

Bill of lading not indispensable to contract of carriage. As to the issuance of abill of lading, although article 350 of the Code of Commerce provides that "theshipper as well as the carrier of merchandise or goods may mutua-lly demandthat a bill of lading is not indispensable. As regards the form of the contract ofcarriage it can be said that provided that there is a meeting of the minds and fromsuch meeting arise rights and obligations, there should be no limitations as toform." The bill of lading is not essential to the contract, although it may becomeobligatory by reason of the regulations of railroad companies, or as a conditionimposed in the contract by the agreement of the parties themselves. The bill oflad

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