TRANSPORTATION LAW CASES

G.R. No. 122039 May 31, 2000

VICENTE 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 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.
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 the
creditor.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 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.
Footnotes
1

Penned by Justice Renato C. Dacudao and concurred in by Justices Quirino D. Abad

Santos, Jr. (now retired) and B.A. Adefuindela Cruz (now retired); rollo, pp. 38-53.
2

Rollo, pp. 55-56.

Docketed as Civil Case No. 8122; records, pp. 1-5.

Id. at pp.53-56.

Id. at pp. 72-74.

Id. at pp. 307-310; Penned by Judge Teofisto L. Calumpang.

Penned by Judge Arsenio J. Magpale (now Associate Justice of the Court of

Appeals); rollo, pp. 57-79.
8

Rollo, p.79

Id. at p. 221.

Art. 2179. When the plaintiffs own negligence was the immediate and proximate cause of
his injury, he cannot recover damages. But if his negligence was only contributory, the
immediate and proximate cause of the injury being the defendants lack of due care, the
plaintiff may recover damages, but the courts shall mitigate the damages to be awarded.
10

11

Yambao v. Zuiga, G.R. No. 146173, December 11, 2003, 418 SCRA 266, 271.

12

Child Learning Center Inc. v. Tagario, G.R. No. 150920, November 25, 2005.

13

TSN, August 12, 1987, p.31.

14

Id. at p. 10.

15

Id. at p. 13.

16

Id.

17

Id.

18

Id. at p. 24.

19

TSN, March 25, 1987, p. 31.

20

TSN, August 29, 1985, p. 9.

21

Id. at p.10.

22

TSN, October 20, 1987, pp. 10-11.

23

Valenzuela v. Court of Appeals, 323 Phil. 374, 388 (1996).

24

Ma-ao Sugar Central Co., Inc. v. Court of Appeals, G.R. No. 83491, August 27, 1990, 189
SCRA 88, 93.
25

See Smith Bell Dodwell Shipping Agency Corporation v. Borja, 432 Phil. 913, 922 (2002).

26

Tugade, Sr. v. Court of Appeals 455 Phil. 258, 280-281 (2003), citing Viron Transportation
Co., Inc., v. Delos Santos, 399 Phil. 243, 253 (2000); Victory Liner, Inc. v. Heirs of Malecdan,
442 Phil. 784, 793 (2002).
27

Supra note 11 at pp 273-274.

28

Id., at pp. 273-275.

29

TSN, August 12, 1987, pp.24-25.

30

Id. at p. 26.

31

Id.

32

Lambert v. Heirs of Ray Castillon, G.R. No. 160709, February 23, 2005, 452 SCRA 285,
293, citing Syki v. Begasa, G.R. No. 149149, October 23, 2003, 414 SCRA 237, 244.
33

G.R. No. L-65295, March 10, 1987, 148 SCRA 353, 370.

34

Id. at p. 371.

35

G.R. No. 138060, September 1, 2004, 437 SCRA 426.

36

Id. at p. 451.

PHILIPPINE CHARTER INSURANCE CORPORATION, petitioner,

vs. CHEMOIL LIGHTERAGE CORPORATION, respondent.
DECISION
CHICO-NAZARIO, J.:

Before Us is a petition for review on certiorari which assails the Decision of

the Court of Appeals[1] in CA-G.R. CV No. 56209, dated 18 December 1998.
The Decision reversed and set aside the decision of the Regional Trial Court
(RTC),[2] Branch 16, City of Manila, which ordered herein respondent to pay
the petitioners claim in the amount of P5,000,000.00 with legal interest from
the date of the filing of the complaint.
THE FACTS
Petitioner Philippine Charter Insurance Corporation is a domestic
corporation engaged in the business of non-life insurance. Respondent
Chemoil Lighterage Corporation is also a domestic corporation engaged in the
transport of goods.
On 24 January 1991, Samkyung Chemical Company, Ltd., based in Ulsan,
South Korea, shipped 62.06 metric tons of the liquid chemical DIOCTYL
PHTHALATE (DOP) on board MT TACHIBANA which was valued at
US$90,201.57 under Bill of Lading No. ULS/MNL-1[3] and another 436.70
metric tons of DOP valued at US$634,724.89 under Bill of Lading No.
ULS/MNL-2[4] to the Philippines. The consignee was Plastic Group Phils., Inc.
(PGP) in Manila.
PGP insured the cargo with herein petitioner Philippine Charter Insurance
Corporation against all risks. The insurance was under Marine Policies No.
MRN-30721[5] dated 06 February 1991 for P31,757,969.19 and No. MRN30722[6] for P4,514,881.00. Marine Endorsement No. 2786[7] dated 11 May
1991 was attached and formed part of MRN-30721, amending the latters
insured value to P24,667,422.03, and reduced the premium accordingly.
The ocean tanker MT TACHIBANA unloaded the cargo to Tanker Barge
LB-1011 of respondent Chemoil Lighterage Corporation, which shall transport
the same to Del Pan Bridge in Pasig River. Tanker Barge LB-1011 would
unload the cargo to tanker trucks, also owned by the respondent, and haul it
by land to PGPs storage tanks in Calamba, Laguna.

Upon inspection by PGP, the samples taken from the shipment showed
discoloration from yellowish to amber, demonstrating that it was damaged, as
DOP is colorless and water clear. PGP then sent a letter to the petitioner
dated 18 February 1991[8] where it formally made an insurance claim for the
loss it sustained due to the contamination.
The petitioner requested an independent insurance adjuster, the GIT
Insurance Adjusters, Inc. (GIT), to conduct a Quantity and Condition Survey of
the shipment. On 22 February 1991, GIT issued a Report,[9] part of which
states:
As unloading progressed, it was observed on February 14, 1991 that DOP samples
taken were discolored from yellowish to amber. Inspection of cargo tanks showed
manhole covers of ballast tanks ceilings loosely secured. Furthermore, it was noted
that the rubber gaskets of the manhole covers of the ballast tanks re-acted to the
chemical causing shrinkage thus, loosening the covers and cargo ingress to the rusty
ballast tanks[10]
On 13 May 1991, the petitioner paid PGP the amount
of P5,000,000.00[11] as full and final payment for the loss. PGP issued a
Subrogation Receipt to the petitioner.
Meanwhile, on 03 April 1991, PGP paid the respondent the amount
of P301,909.50 as full payment for the latters services, as evidenced by
Official Receipt No. 1274.[12]
On 15 July 1991, an action for damages was instituted by the petitionerinsurer against respondent-carrier before the RTC, Branch 16, City of Manila,
docketed as Civil Case No. 91-57923.[13] The petitioner prayed for actual
damages in the amount of P5,000,000.00, attorneys fees in the amount of no
less than P1,000,000.00, and costs of suit.
An Answer with Compulsory Counterclaim[14] was filed by the respondent
on 05 September 1991. The respondent admitted it undertook to transport the
consignees shipment from MT TACHIBANA to the Del Pan Bridge, Pasig
River, where it was transferred to its tanker trucks for hauling to PGPs
storage tanks in Calamba, Laguna. The respondent alleged that before the
DOP was loaded into its barge (LB-1011), the surveyor/representative of
PGP, Adjustment Standard Corporation, inspected it and found the same
clean, dry, and fit for loading. The entire loading and unloading of the
shipment were also done under the control and supervision of PGPs
surveyor/representative. It was also mentioned by the respondent that the
contract between it and PGP expressly stipulated that it shall be free from any
and all claims arising from contamination, loss of cargo or part thereof; that

the consignee accepted the cargo without any protest or notice; and that the
cargo shall be insured by its owner sans recourse against all risks. As
subrogee, the petitioner was bound by this stipulation. As carrier, no fault and
negligence can be attributed against respondent as it exercised extraordinary
diligence in handling the cargo.[15]
After due hearing, the trial court rendered a Decision on 06 January 1997,
the dispositive portion of which reads:
WHEREFORE, PREMISES CONSIDERED, judgment is hereby rendered in favor of
plaintiff ordering defendant to pay plaintiffs claim of P5,000,000.00 with legal
interest from the date of the filing of the complaint. The counterclaims are
DISMISSED.[16]
Aggrieved by the trial courts decision, the respondent sought relief with
the Court of Appeals where it alleged in the main that PGP failed to file any
notice, claim or protest within the period required by Article 366 of the Code of
Commerce, which is a condition precedent to the accrual of a right of action
against the carrier.[17] A telephone call which was supposedly made by a
certain Alfred Chan, an employee of PGP, to one of the Vice Presidents of the
respondent, informing the latter of the discoloration, is not the notice required
by Article 366 of the Code of Commerce.[18]
On 18 December 1998, the Court of Appeals promulgated its Decision
reversing the trial court, the dispositive portion of which reads:
WHEREFORE, the decision appealed from is hereby REVERSED AND SET
ASIDE and a new one is entered dismissing the complaint.[19]
A petition for review on certiorari[20] was filed by the petitioner with this
Court, praying that the decision of the trial court be affirmed.
After the respondent filed its Comment[21] and the petitioner filed its
Reply[22] thereto, this Court issued a Resolution[23] on 18 August 1999, giving
due course to the petition.
ASSIGNMENT OF ERRORS
The petitioner assigns as errors the following:
I

THE APPELLATE COURT GRAVELY ERRED IN FINDING THAT THE NOTICE

OF CLAIM WAS NOT FILED WITHIN THE REQUIRED PERIOD.
II

THE APPELLATE COURT GRAVELY ERRED IN NOT HOLDING THAT

DAMAGE TO THE CARGO WAS DUE TO THE FAULT OR NEGLIGENCE OF
RESPONDENT CHEMOIL.
III

THE APPELLATE COURT GRAVELY ERRED IN SETTING ASIDE THE TRIAL

COURTS DECISION AND IN DISMISSING THE COMPLAINT.[24]
ISSUES
Synthesized, the issues that must be addressed by this Court are:
I

WHETHER OR NOT THE NOTICE OF CLAIM WAS FILED WITHIN THE

REQUIRED PERIOD. If the answer is in the affirmative,
II

WHETHER OR NOT THE DAMAGE TO THE CARGO WAS DUE TO THE

FAULT OR NEGLIGENCE OF THE RESPONDENT.
THE COURTS RULINGS
Article 366 of the Code of Commerce has profound application in the case
at bar. This provision of law imparts:
Art. 366. Within twenty-four hours following the receipt of the merchandise a claim
may be made against the carrier on account of damage or average found upon opening
the packages, provided that the indications of the damage or average giving rise to the
claim cannot be ascertained from the exterior of said packages, in which case said
claim shall only be admitted at the time of the receipt of the packages.

After the periods mentioned have elapsed, or after the transportation charges have
been paid, no claim whatsoever shall be admitted against the carrier with regard to the
condition in which the goods transported were delivered.
As to the first issue, the petitioner contends that the notice of
contamination was given by Alfredo Chan, an employee of PGP, to Ms.
Encarnacion Abastillas, Vice President for Administration and Operations of
the respondent, at the time of the delivery of the cargo, and therefore, within
the required period.[25] This was done by telephone.
The respondent, however, claims that the supposed notice given by PGP
over the telephone was denied by Ms. Abastillas. Between the testimonies of
Alfredo Chan and Encarnacion Abastillas, the latters testimony is purportedly
more credible because it would be quite unbelievable and contrary to
business practice for Alfredo Chan to merely make a verbal notice of claim
that involves millions of pesos.[26]
On this point, the Court of Appeals declared:
. . . We are inclined to sustain the view that a telephone call made to defendantcompany could constitute substantial compliance with the requirement of notice
considering that the notice was given to a responsible official, the Vice-President, who
promptly replied that she will look into the matter. However, it must be pointed out
that compliance with the period for filing notice is an essential part of the
requirement, i.e.. immediately if the damage is apparent, or otherwise within twentyfour hours from receipt of the goods, the clear import being that prompt examination
of the goods must be made to ascertain damage if this is not immediately apparent.
We have examined the evidence, and We are unable to find any proof of compliance
with the required period, which is fatal to the accrual of the right of action against the
carrier.[27]
The petitioner is of the view that there was an incongruity in the findings of
facts of the trial court and the Court of Appeals, the former allegedly holding
that the period to file the notice had been complied with, while the latter held
otherwise.
We do not agree. On the matter concerning the giving of the notice of
claim as required by Article 366 of the Code of Commerce, the finding of fact
of the Court of Appeals does not actually contradict the finding of fact of the
trial court. Both courts held that, indeed, a telephone call was made by
Alfredo Chan to Encarnacion Abastillas, informing the latter of the
contamination. However, nothing in the trial courts decision stated that the
notice of claim was relayed or filed with the respondent-carrier immediately or

within a period of twenty-four hours from the time the goods were received.
The Court of Appeals made the same finding. Having examined the entire
records of the case, we cannot find a shred of evidence that will precisely and
ultimately point to the conclusion that the notice of claim was timely relayed or
filed.
The allegation of the petitioner that not only the Vice President of the
respondent was informed, but also its drivers, as testified by Alfredo Chan,
during the time that the delivery was actually being made, cannot be given
great weight as no driver was presented to the witness stand to prove this.
Part of the testimony of Alfredo Chan is revealing:
Q:
Mr. Witness, were you in your plant site at the time these various cargoes were
delivered?
A:

No, sir.

Q: So, do you have a first hand knowledge that your plant representative informed the
driver of the alleged contamination?
A:

What do you mean by that?

Q: Personal knowledge [that] you yourself heard or saw them [notify] the driver?
A:

No, sir.[28]

From the preceding testimony, it is quite palpable that the witness Alfredo
Chan had no personal knowledge that the drivers of the respondent were
informed of the contamination.
The requirement that a notice of claim should be filed within the period
stated by Article 366 of the Code of Commerce is not an empty or worthless
proviso. In a case, we held:
The object sought to be attained by the requirement of the submission of claims in
pursuance of this article is to compel the consignee of goods entrusted to a carrier to
make prompt demand for settlement of alleged damages suffered by the goods while
in transport, so that the carrier will be enabled to verify all such claims at the time of
delivery or within twenty-four hours thereafter, and if necessary fix responsibility and
secure evidence as to the nature and extent of the alleged damages to the goods while
the matter is still fresh in the minds of the parties.[29]
In another case, we ruled, thus:

More particularly, where the contract of shipment contains a reasonable requirement

of giving notice of loss of or injury to the goods, the giving of such notice is a
condition precedent to the action for loss or injury or the right to enforce the carriers
liability. Such requirement is not an empty formalism. The fundamental reason or
purpose of such a stipulation is not to relieve the carrier from just liability, but
reasonably to inform it that the shipment has been damaged and that it is charged with
liability therefore, and to give it an opportunity to examine the nature and extent of the
injury. This protects the carrier by affording it an opportunity to make an investigation
of a claim while the matter is fresh and easily investigated so as to safeguard itself
from false and fraudulent claims.[30]
The filing of a claim with the carrier within the time limitation therefore
actually constitutes a condition precedent to the accrual of a right of action
against a carrier for loss of, or damage to, the goods. The shipper or
consignee must allege and prove the fulfillment of the condition. If it fails to do
so, no right of action against the carrier can accrue in favor of the former. The
aforementioned requirement is a reasonable condition precedent; it does not
constitute a limitation of action.[31]
The second paragraph of Article 366 of the Code of Commerce is also
edifying. It is not only when the period to make a claim has elapsed that no
claim whatsoever shall be admitted, as no claim may similarly be admitted
after the transportation charges have been paid.
In this case, there is no question that the transportation charges have
been paid, as admitted by the petitioner, and the corresponding official
receipt[32] duly issued. But the petitioner is of the view that the payment for
services does not invalidate its claim. It contends that under the second
paragraph of Article 366 of the Code of Commerce, it is clear that if notice or
protest has been made prior to payment of services, claim against the bad
order condition of the cargo is allowed.
We do not believe so. As discussed at length above, there is no evidence
to confirm that the notice of claim was filed within the period provided for
under Article 366 of the Code of Commerce. Petitioners contention proceeds
from a false presupposition that the notice of claim was timely filed.
Considering that we have resolved the first issue in the negative, it is
therefore unnecessary to make a resolution on the second issue.
WHEREFORE, in view of all the foregoing, the Decision of the Court of
Appeals dated 18 December 1998, which reversed and set aside the decision
of the trial court, is hereby AFFIRMED in toto. No pronouncement as to costs.
SO ORDERED.

G.R. No. 144723

February 27, 2006

LARRY ESTACION, Petitioner,

vs.
NOE BERNARDO, thru and his guardian ad litem ARLIE BERNARDO, CECILIA
BANDOQUILLO and GEMINIANO QUINQUILLERA, Respondents.
DECISION
AUSTRIA-MARTINEZ, J.:
Before us is a petition for review on certiorari filed by Larry Estacion (petitioner) seeking to annul the
Decision dated April 17, 20001 of the Court of Appeals (CA) in CA-GR CV No. 41447 which
affirmed in toto the decision of the Regional Trial Court (RTC) of Dumaguete City, Branch 41,
Negros Oriental, holding petitioner and his driver Bienvenido Gerosano (Gerosano) liable for
damages for the injury sustained by Noe Bernardo (respondent Noe). Also assailed is the appellate
courts Resolution dated August 16, 20002 denying petitioners motion for reconsideration.
In the afternoon of October 16, 1982, respondent Noe was going home to Dumaguete from
Cebu, via Bato and Tampi. At Tampi, he boarded a Ford Fiera passenger jeepney with plate no.
NLD 720 driven by respondent Geminiano Quinquillera (Quinquillera), owned by respondent Cecilia
Bandoquillo (Bandoquillo), and was seated on the extension seat placed at the center of the Fiera.
From San Jose, an old woman wanted to ride, so respondent Noe offered his seat. Since the Fiera
was already full, respondent Noe hung or stood on the left rear carrier of the vehicle. Somewhere
along Barangay Sto. Nio, San Jose, Negros Oriental, between kilometers 13 and 14, the Fiera
began to slow down and then stopped by the right shoulder of the road to pick up passengers.
Suddenly, an Isuzu cargo truck, owned by petitioner and driven by Gerosano, which was traveling in
the same direction, hit the rear end portion of the Fiera where respondent Noe was standing. Due to
the tremendous force, the cargo truck smashed respondent Noe against the Fiera crushing his legs
and feet which made him fall to the ground. A passing vehicle brought him to the Silliman University
Medical Center where his lower left leg was amputated.
Police investigation reports showed that respondent Noe was one of the 11 passengers of the Fiera
who suffered injuries; that when the Fiera stopped to pick up a passenger, the cargo truck bumped
the rear left portion of the Fiera; that only one tire mark from the front right wheel of the cargo truck
was seen on the road. A sketch of the accident was drawn by investigator Mateo Rubia showing the
relative positions of the two vehicles, their distances from the shoulder of the road and the skid
marks of the right front wheel of the truck measuring about 48 feet.
On February 18, 1993, respondent Noe, through his guardian ad litem Arlie Bernardo, filed with the
RTC of Dumaguete City a complaint3 for damages arising from quasi delict against petitioner as the
registered owner of the cargo truck and his driver Gerosano. He alleged that the proximate cause of
his injuries and suffering was the reckless imprudence of Gerosano and petitioners negligence in
the selection of a reckless driver and for operating a vehicle that was not roadworthy. He prayed for
actual damages, loss of income, moral and exemplary damages, attorneys fees, litigation expenses
and costs of suit.
Petitioner and his driver Gerosano filed their Answer4 denying the material allegations in the
complaint. They, in turn, filed a third party complaint5 against respondents Bandoquillo and
Quinquillera, as owner and driver respectively of the Fiera. They alleged that it was the reckless
imprudence of respondent driver Quinquillera and his clear violation of the traffic rules and
regulations which was the proximate cause of the accident and asked for indemnification for

whatever damages they would be sentenced to pay. Respondents Bandoquillo and Quinquillera filed
their Answer to the third party complaint asking for the dismissal of the third party complaint and for
payment of attorneys fees.
Driver Gerosano was charged criminally for reckless imprudence resulting to multiple physical
injuries with damage to property before the Municipal Circuit Trial Court (MCTC) of Pamplona-Amlan
and San Jose, Negros Oriental. On November 16, 1987, the MCTC rendered its decision6 finding
him guilty of the crime charged and was sentenced to four months and one day to two years and
four months and to pay the costs.
On February 18, 1993, the RTC rendered its judgment in the civil case,7 the dispositive portion of
which reads:
WHEREFORE, in view of the foregoing, judgment is hereby rendered, ordering defendants
Gerosano and Estacion, to pay plaintiff, jointly or solidarily, the following:
1. P129,584.20 for actual damages in the form of medical and hospitalization expenses;
2. P50,000.00 for moral damages, consisting of mental anguish, moral shock, serious
anxiety and wounded feelings;
3. P10,000.00 for attorneys fees; and
4. P5,000.00 for litigation expenses.
SO ORDERED.8
The trial court ruled that the negligence of Gerosano, petitioners driver, is the direct and proximate
cause of the incident and of the injuries suffered by respondent Noe; that Gerosanos gross
negligence and reckless imprudence had been confirmed by the Judgment in Criminal Case No.
463; that based on the findings of the police investigator, the faulty brakes caused the cargo truck to
bump the Fiera; that the Traffic Accident Report showed that the tire mark of the cargo truck
measuring 48 feet is visibly imprinted on the road where the incident took place indicating that the
said vehicle was speeding fast; that the existence of one tire mark of the cargo truck proved that the
said vehicle had a faulty brake, otherwise, it would have produced two tire marks on the road; and
that the photographs taken right after the incident also showed who the guilty party was.
The trial court did not give credence to the argument of petitioner and his driver that the truck was
properly checked by a mechanic before it was dispatched for a trip. It found that petitioner is
negligent in maintaining his vehicle in good condition to prevent any accident to happen; that
petitioner is liable under Article 2180 of the Civil Code as employer of driver Gerosano for being
negligent in the selection and supervision of his driver as well as for maintaining and operating a
vehicle that was not roadworthy; and that petitioner and his driver are solidarily liable for all the
natural and probable consequences of their negligent acts or omissions. The trial court dismissed
the third party complaint filed by petitioner and his driver against respondents Bandoquillo and
Quinquillera.
Dissatisfied, only petitioner appealed to the CA. On April 17, 2000, the CA rendered the assailed
decision which affirmed in toto the decision of the trial court. Petitioners motion for reconsideration
was denied in a Resolution dated August 16, 2000.

Hence, the herein petition for review.

Petitioner submits the following issues for resolution:9
WHETHER THE COURT OF APPEALS ERRED IN NOT FINDING THAT PETITIONER LARRY
ESTACION EXERCISED THE DUE DILIGENCE OF A GOOD FATHER OF A FAMILY TO
PREVENT DAMAGE DESPITE ABUNDANCE OF EVIDENCE TO THAT EFFECT;
WHETHER THE COURT OF APPEALS ERRED IN NOT HOLDING THAT PETITIONER LARRY
ESTACION EXERCISED DUE DILIGENCE IN THE SELECTION AND SUPERVISION OF HIS
EMPLOYEE AND IN MAINTAINING HIS CARGO TRUCK ROADWORTHY AND IN GOOD
OPERATING CONDITION;
WHETHER THE COURT OF APPEALS ERRED IN EXONERATING RESPONDENTS CECILIA
BANDOQUILLO AND GEMINIANO QUINQUILLERA.
In his Memorandum, petitioner contends that he was able to establish that he observed the diligence
of a good father of a family not only in the selection of his employees but also in maintaining his
truck roadworthy and in good operating condition; that the CA erred in exonerating respondents
Bandoquillo and Quinquillera, owner and driver, respectively of the Fiera from liability when their
negligence was the proximate cause of respondent Noes injuries; that respondent Noes act of
standing in the rear carrier of the Fiera is in itself negligence on his part which was aggravated by
the fact that respondent Quinquillera overtook the cargo truck driven by Gerosano on the curve and
suddenly cut into the latters lane; that due to the overloading of passengers, Gerosano was not able
to see the brake lights of the Fiera when it suddenly stopped to pick up passengers; that overloading
is in violation of the applicable traffic rules and regulations and Article 2185 is explicit when it
provides that "unless there is proof to the contrary, it is presumed that a person driving a motor
vehicle has been negligent if at the time of the mishap, he was violating any traffic regulation"; that
since the Fiera driver was negligent, there arises a presumption that respondent Bandoquillo, as
owner of the Fiera, is negligent in the selection and supervision of her employee; that assuming
petitioner Estacion and his driver are not entirely blameless, the negligence of Quinquillera is
sufficient basis why the respective liabilities should be delineated vis--vis their degree of negligence
consistent with Article 217910 of the Civil Code.
Respondent Noe filed his Memorandum alleging that the first and second issues raised are factual in
nature which are beyond the ambit of a petition for review; that petitioner failed to overcome the
presumption of negligence thus he is liable for the negligence of his driver Gerosano; and that the
third issue is best addressed to respondents Bandoquillo and Quinquillera.
Respondents Bandoquillo and Quinquillera failed to file their memorandum despite receipt of our
Resolution requiring them to submit the same.
We find it apropos to resolve first the third issue considering that the extent of the liability of
petitioner and his driver is dependent on whether respondents Bandoquillo and Quinquillera are the
ones negligent in the vehicular mishap that happened in the afternoon of October 16, 1982 where
respondent Noe was injured, resulting in the amputation of his left leg.
At the outset, the issue raised is factual in nature. Whether a person is negligent or not is a question
of fact which we cannot pass upon in a petition for review on certiorari, as our jurisdiction is limited to
reviewing errors of law.11As a rule, factual findings of the trial court, affirmed by the CA, are final and
conclusive and may not be reviewed on appeal. The established exceptions are: (1) when the
inference made is manifestly mistaken, absurd or impossible; (2) when there is grave abuse of

discretion; (3) when the findings are grounded entirely on speculations, surmises or conjectures; (4)
when the judgment of the CA is based on misapprehension of facts; (5) when the findings of fact are
conflicting; (6) when the CA, in making its findings, went beyond the issues of the case and the
same is contrary to the admissions of both appellant and appellee; (7) when the findings of fact are
conclusions without citation of specific evidence on which they are based; (8) when the CA
manifestly overlooked certain relevant facts not disputed by the parties and which, if properly
considered, would justify a different conclusion; and (9) when the findings of fact of the CA are
premised on the absence of evidence and are contradicted by the evidence on record.12
On the basis of the records of this case, we find that there is cogent reason for us to review the
factual findings of the lower courts to conform to the evidence on record and consider this case as
an exception to the general rule.
The trial court and the appellate court had made a finding of fact that the proximate cause of the
injury sustained by respondent Noe was the negligent and careless driving of petitioners driver,
Gerosano, who was driving at a fast speed with a faulty brake when the accident happened. We see
no cogent reason to disturb the trial courts finding in giving more credence to the testimony of
respondent Noe than the testimony of Gerosano, petitioners truck driver.
The correctness of such finding is borne by the records. In his testimony, Gerosano said that he was
driving the truck at a speed of about 40 kilometers per hour;13 that the Fiera was behind him but
upon reaching the curve, i.e., after passing San Jose going to Dumaguete, the Fiera overtook him
and blocked his way;14 that he was 10 meters from the Fiera prior to the impact15 when he applied
the brakes16 and tried to evade the Fiera but he still hit it.17
We agree with the trial court and the appellate court when they found that the truck was running at a
fast speed because if Gerosano was really driving at a speed of 40 kilometers per hour and
considering that the distance between the truck and the Fiera in front was about 10 meters, he had
more than enough time to slacken his speed and apply his break to avoid hitting the Fiera. However,
from the way the truck reacted to the application of the brakes, it showed that Gerosano was driving
at a fast speed because the brakes skidded a lengthy 48 feet as shown in the sketch of police
investigator Rubia of the tire marks visibly printed on the road.
Moreover, the photographs taken after the incident and the testimony of Gerosano as to the extent
of damage to the truck, i.e. the trucks windshield was broken and its hood was damaged after the
impact,18 further support the finding of both courts that Gerosano was driving at a fast pace.
The accident was further caused by the faulty brakes of the truck. Based on the sketch report, there
was only one tire mark of the right tire of the cargo truck during the incident which, as testified to by
police investigator Rubia, meant that the brakes of the truck were not aligned otherwise there would
be two tire marks impressions on the road.19 Although petitioner contends that there are other factors
to explain why only one skid mark was found at the place of the incident, such as the angle and
edges of the road as well as the balance of the weight of the cargo laden in the truck, he failed to
show that indeed those factors were present to prove his defense. Such claim cannot be given
credence considering that investigator Rubia testified that the body of the truck was very much on
the road, i.e., not over the shoulder of the road,20 and the road was straight.21 Indeed, it is the
negligent act of petitioners driver of driving the cargo truck at a fast speed coupled with faulty brakes
which was the proximate cause of respondent Noes injury.
Petitioners claim that right after overtaking the cargo truck, the Fiera driver suddenly stopped to pick
up three passengers from the side of the road; that the overloading of passengers prevented his
truck driver from determining that the Fiera had pulled over to pick up passengers as the latters

brakelights were obstructed by the passengers standing on the rear portion of the Fiera were not
substantiated at all. Respondent Quinquillera, the driver of the Fiera, testified that the distance from
the curve of the road when he stopped and picked up passengers was estimated to be about 80 to
90 feet.22 In fact, from the sketch drawn by investigator Rubia, it showed a distance of 145 feet from
the curve of the road to the speed tire mark (which measured about 48 feet) visibly printed on the
road to the Fiera. This means that the Fiera driver did not stop immediately after the curve as what
petitioner claims. Moreover, Gerosano admitted that his truck was at a distance of 10 meters prior to
the impact. The distance between the two vehicles was such that it would be impossible for
Gerosano not to have seen that the Fiera had pulled over to pick up passengers.
However, we agree with petitioner that respondent Noes act of standing on the rear carrier of the
Fiera exposing himself to bodily injury is in itself negligence on his part. We find that the trial court
and the CA erred when they failed to consider that respondent Noe was also guilty of contributory
negligence. Contributory negligence is conduct on the part of the injured party, contributing as a
legal cause to the harm he has suffered, which falls below the standard to which he is required to
conform for his own protection. 23
It has been established by the testimony of respondent Noe that he was with four or five other
persons standing on the rear carrier of the Fiera since it was already full. Respondent Noes act of
standing on the left rear carrier portion of the Fiera showed his lack of ordinary care and foresight
that such act could cause him harm or put his life in danger. It has been held that "to hold a person
as having contributed to his injuries, it must be shown that he performed an act that brought about
his injuries in disregard of warning or signs of an impending danger to health and
body.24 Respondent Noes act of hanging on the Fiera is definitely dangerous to his life and limb.
We likewise find merit in petitioners contention that respondent Quinquillera, the Fiera driver, was
also negligent. There is merit to petitioners claim that there was overloading which is in violation of
traffic rules and regulations. Respondent Noe himself had testified that he was standing at the rear
portion of the Fiera because the Fiera was already full. Respondent Quinquillera should not have
taken more passengers than what the Fiera can accommodate. If the Fiera was not overloaded,
respondent Noe would not have been standing on the rear carrier and sustained such extent of
injury.
Furthermore, we find that respondent Quinquillera was negligent in allowing respondent Noe to
stand on the Fieras rear portion. Section 32(c) of Article III of Republic Act No. 4136, otherwise
known as "The Land Transportation and Traffic Code" provides:
(c) Riding on running boards No driver shall allow any person to ride on running board, step board
or mudguard of his motor vehicle for any purpose while the vehicle is in motion.
Respondent Quinquilleras act of permitting respondent Noe to hang on the rear portion of the Fiera
in such a dangerous position creates undue risk of harm to respondent Noe. Quinquillera failed to
observe that degree of care, precaution and vigilance that the circumstances justly demand. Thus,
respondent Noe suffered injury.25Since respondent Quinquillera is negligent, there arises a
presumption of negligence on the part of his employer, respondent Bandoquillo, in supervising her
employees properly. Such presumption was not rebutted at all by Bandoquillo. Thus, the CA erred in
affirming the dismissal of the third party complaint filed by petitioner against respondents
Quinquillera and Bandoquillo.
Petitioner contends that he was able to establish that he exercised the due diligence of a good father
of a family in the selection of his employees as well as in the maintenance of his cargo truck in good
operating condition. He claims that in addition to looking at Gerosanos drivers license, he

accompanied the latter in his first two trips, during which he ascertained Gerosanos competence as
a driver, petitioner being a driver himself; that the truck driven by Gerosano has never figured in any
accident prior to the incident involved; that upon his acquisition of the cargo truck on March 16,
1982, only 7 months prior to the incident, the same was thoroughly checked up and reconditioned;
and that he had in his employ a mechanic who conducted periodic check-ups of the engine and
brake system of the cargo truck.
We are not persuaded.
Article 2180 of the Civil Code provides:
Art. 2180. The obligation imposed by Article 2176 is demandable not only for ones own acts or
omissions, but also for those of persons for whom one is responsible.
xxx
Employers shall be liable for the damages caused by their employees and household helpers acting
within the scope of their assigned tasks, even though the former are not engaged in any business or
industry.
xxx
The responsibility treated of in this article shall cease when the persons herein mentioned prove that
they observed all the diligence of a good father of a family to prevent damage.
As the employer of Gerosano, petitioner is primarily and solidarily liable for the quasidelict committed by the former. Petitioner is presumed to be negligent in the selection and
supervision of his employee by operation of law and may be relieved of responsibility for the
negligent acts of his driver, who at the time was acting within the scope of his assigned task, only if
he can show that he observed all the diligence of a good father of a family to prevent damage.26
In Yambao v. Zuniga,27 we have clarified the meaning of the diligence of a good father of a family,
thus:
The "diligence of a good father" referred to in the last paragraph of the aforecited statute means
diligence in the selection and supervision of employees. Thus, when an employee, while performing
his duties, causes damage to persons or property due to his own negligence, there arises the juris
tantum presumption that the employer is negligent, either in the selection of the employee or in the
supervision over him after the selection. For the employer to avoid the solidary liability for a tort
committed by his employee, an employer must rebut the presumption by presenting
adequate and convincing proof that in the selection and supervision of his employee, he or
she exercises the care and diligence of a good father of a family. x x x
Petitioners claim that she exercised due diligence in the selection and supervision of her driver,
Venturina, deserves but scant consideration. Her allegation that before she hired Venturina she
required him to submit his drivers license and clearances is worthless, in view of her failure
to offer in evidence certified true copies of said license and clearances. Bare allegations,
unsubstantiated by evidence, are not equivalent to proof under the rules of evidence. x x x
In any case, assuming arguendo that Venturina did submit his license and clearances when he
applied with petitioner in January 1992, the latter still fails the test of due diligence in the selection of

her bus driver. Case law teaches that for an employer to have exercised the diligence of a
good father of a family, he should not be satisfied with the applicants mere possession of a
professional drivers license; he must also carefully examine the applicant for employment as
to his qualifications, his experience and record of service. Petitioner failed to present convincing
proof that she went to this extent of verifying Venturinas qualifications, safety record, and driving
history. The presumption juris tantum that there was negligence in the selection of her bus driver,
thus, remains unrebutted.
Nor did petitioner show that she exercised due supervision over Venturina after his selection. For as
pointed out by the Court of Appeals, petitioner did not present any proof that she drafted and
implemented training programs and guidelines on road safety for her employees. In fact, the
record is bare of any showing that petitioner required Venturina to attend periodic seminars
on road safety and traffic efficiency.Hence, petitioner cannot claim exemption from any liability
arising from the recklessness or negligence of Venturina.
In sum, petitioners liability to private respondents for the negligent and imprudent acts of her driver,
Venturina, under Article 2180 of the Civil Code is both manifest and clear. Petitioner, having failed to
rebut the legal presumption of negligence in the selection and supervision of her driver, is
responsible for damages, the basis of the liability being the relationship of pater familias or on the
employers own negligence. x x x28 (Emphasis supplied)
Petitioner failed to show that he examined driver Gerosano as to his qualifications, experience and
service records. In fact, the testimony of driver Gerosano in his cross-examination showed the nonobservance of these requirements. Gerosano testified that petitioner was his first employer in
Dumaguete and that he was accepted by petitioner on the very day he applied for the job;29 that his
drivers license was issued in Mindanao where he came from30 and that while petitioner asked him
about his driving record in Mindanao, he did not present any document of his driving record.31 Such
admission clearly established that petitioner did not exercise due diligence in the selection of his
driver Gerosano.
Moreover, the fact that petitioners driver Gerosano was driving in an efficient manner when
petitioner was with him in his first two trips would not conclusively establish that Gerosano was not at
all reckless. It could not be considered as due diligence in the supervision of his driver to exempt
petitioner from liability. In the supervision of his driver, petitioner must show that he had formulated
training programs and guidelines on road safety for his driver which the records failed to show. We
find that petitioner failed to rebut the presumption of negligence in the selection and supervision of
his employees.
Moreover, there was also no proof that he exercised diligence in maintaining his cargo truck
roadworthy and in good operating condition. While petitioners mechanic driver testified that he made
a routine check up on October 15, 1982, one day before the mishap happened, and found the truck
operational, there was no record of such inspection.
Turning now to the award of damages, since there was contributory negligence on the part of
respondent Noe, petitioners liability should be mitigated in accordance with Article 2179 of the Civil
Code which provides:
When the plaintiffs own negligence was the immediate and proximate cause of his injury, he cannot
recover damages. But if his negligence was only contributory, the immediate and proximate cause of
the injury being the defendants lack of due care, the plaintiff may recover damages, but the courts
shall mitigate the damages to be awarded.

The underlying precept of the above article on contributory negligence is that a plaintiff who is partly
responsible for his own injury should not be entitled to recover damages in full but must bear the
consequences of his own negligence. The defendant must thus be held liable only for the damages
actually caused by his negligence.32
In Phoenix Construction, Inc., v. Intermediate Appellate Court,33 where we held that the legal and
proximate cause of the accident and of Dionisios injuries was the wrongful and negligent manner in
which the dump truck was parked but found Dionisio guilty of contributory negligence on the night of
the accident, we allocated most of the damages on a 20-80 ratio. In said case, we required Dionisio
to bear 20% of the damages awarded by the appellate court, except as to the award of exemplary
damages, attorneys fees and costs.
In the present case, taking into account the contributing negligence of respondent Noe, we likewise
rule that the demands of substantial justice are satisfied by distributing the damages also on a 20-80
ratio excluding attorneys fees and litigation expenses.34 Consequently, 20% should be deducted
from the actual and moral damages awarded by the trial court in favor of respondent Noe, that is:
20% of P129,584.20 for actual damages isP25,916.84 and 20% of P50,000.00 for moral damages
is P10,000.00. Thus, after deducting the same, the award for actual damages should
be P103,667.36 and P40,000.00 for moral damages or 80% of the damages so awarded.
Petitioner and respondents Bandoquillo and Quinquillera are jointly and severally liable for the 80%
of the damages as well as attorneys fees and litigation expenses conformably with our
pronouncement in Tiu v. Arriesgado35 where we held:
The petitioners, as well as the respondents Benjamin Condor and Sergio Pedrano are jointly and
severally liable for said amount, conformably with the following pronouncement of the Court
in Fabre, Jr. v. Court of Appeals:
The same rule of liability was applied in situations where the negligence of the driver of the bus on
which plaintiff was riding concurred with the negligence of a third party who was the driver of another
vehicle, thus causing an accident. In Anuran v. Buo, Batangas Laguna Tayabas Bus Co. v.
Intermediate Appellate Court, and Metro Manila Transit Corporation v. Court of Appeals, the bus
company, its driver, the operator of the other vehicle and the driver of the vehicle were jointly and
severally held liable to the injured passenger or the latters heirs. The basis of this allocation of
liability was explained in Viluan v. Court of Appeals, thus:
"Nor should it make difference that the liability of petitioner [bus owner] springs from contract while
that of respondents [owner and driver of other vehicle] arises from quasi delict. As early as 1913, we
already ruled inGutierrez v. Gutierrez, 56 Phil. 177, that in case of injury to a passenger due to the
negligence of the driver of the bus on which he was riding and of the driver of another vehicle, the
drivers as well as the owners of the two vehicles are jointly and severally liable for damages. Some
members of the Court, though, are of the view that under the circumstances they are liable on quasi
delict."36
WHEREFORE, the instant petition is PARTIALLY GRANTED. The assailed Decision of the Court of
Appeals dated April 17, 2000 as well as its Resolution dated August 16, 2000
are AFFIRMED with MODIFICATION to the effect that the dispositive portion of the Decision dated
February 18, 1993 of the Regional Trial Court of Dumaguete City in Civil Case No. 8122, should
read as follows:

"WHEREFORE, in view of the foregoing, judgment is hereby rendered, ordering defendants

Gerosano and Estacion, as well as third party defendants Bandoquillo and Quinquillera, to pay
plaintiff, jointly and solidarily, the following:
1. P103,667.36 for actual damages in the form of medical and hospitalization expenses;
2. P40,000.00 for moral damages, consisting of mental anguish, moral shock, serious
anxiety and wounded feelings;
3. P10,000.00 for attorneys fees; and
4. P5,000.00 for litigation expenses.

1avvphil.net

SO ORDERED."
No pronouncement as to costs.
SO ORDERED.
MA. ALICIA AUSTRIA-MARTINEZ
Associate Justice
WE CONCUR:
ARTEMIO V. PANGANIBAN
Chief Justice
Chairperson
(No Part)
CONSUELO YNARES-SANTIAGO
Associate Justice

ROMEO J. CALLEJO, SR.

Asscociate Justice

(On Leave)
MINITA V. CHICO-NAZARIO
Associate Justice
CERTIFICATION
Pursuant to Section 13, Article VIII of the Constitution, it is hereby certified that the conclusions in
the above Decision were reached in consultation before the case was assigned to the writer of the
opinion of the Courts Division.
ARTEMIO V. PANGANIBAN
Chief Justice
Footnotes
1

Penned by Justice Renato C. Dacudao and concurred in by Justices Quirino D. Abad

Santos, Jr. (now retired) and B.A. Adefuindela Cruz (now retired); rollo, pp. 38-53.

Rollo, pp. 55-56.

Docketed as Civil Case No. 8122; records, pp. 1-5.

Id. at pp.53-56.

Id. at pp. 72-74.

Id. at pp. 307-310; Penned by Judge Teofisto L. Calumpang.

Penned by Judge Arsenio J. Magpale (now Associate Justice of the Court of

Appeals); rollo, pp. 57-79.
8

Rollo, p.79

Id. at p. 221.

Art. 2179. When the plaintiffs own negligence was the immediate and proximate cause of
his injury, he cannot recover damages. But if his negligence was only contributory, the
immediate and proximate cause of the injury being the defendants lack of due care, the
plaintiff may recover damages, but the courts shall mitigate the damages to be awarded.
10

11

Yambao v. Zuiga, G.R. No. 146173, December 11, 2003, 418 SCRA 266, 271.

12

Child Learning Center Inc. v. Tagario, G.R. No. 150920, November 25, 2005.

13

TSN, August 12, 1987, p.31.

14

Id. at p. 10.

15

Id. at p. 13.

16

Id.

17

Id.

18

Id. at p. 24.

19

TSN, March 25, 1987, p. 31.

20

TSN, August 29, 1985, p. 9.

21

Id. at p.10.

22

TSN, October 20, 1987, pp. 10-11.

23

Valenzuela v. Court of Appeals, 323 Phil. 374, 388 (1996).

24

Ma-ao Sugar Central Co., Inc. v. Court of Appeals, G.R. No. 83491, August 27, 1990, 189
SCRA 88, 93.

25

See Smith Bell Dodwell Shipping Agency Corporation v. Borja, 432 Phil. 913, 922 (2002).

26

Tugade, Sr. v. Court of Appeals 455 Phil. 258, 280-281 (2003), citing Viron Transportation
Co., Inc., v. Delos Santos, 399 Phil. 243, 253 (2000); Victory Liner, Inc. v. Heirs of Malecdan,
442 Phil. 784, 793 (2002).
27

Supra note 11 at pp 273-274.

28

Id., at pp. 273-275.

29

TSN, August 12, 1987, pp.24-25.

30

Id. at p. 26.

31

Id.

32

Lambert v. Heirs of Ray Castillon, G.R. No. 160709, February 23, 2005, 452 SCRA 285,
293, citing Syki v. Begasa, G.R. No. 149149, October 23, 2003, 414 SCRA 237, 244.
33

G.R. No. L-65295, March 10, 1987, 148 SCRA 353, 370.

34

Id. at p. 371.

35

G.R. No. 138060, September 1, 2004, 437 SCRA 426.

36

Id. at p. 451.

G.R. No. 97412 July 12, 1994

EASTERN SHIPPING LINES, INC., petitioner,
vs.
HON. COURT OF APPEALS AND MERCANTILE INSURANCE COMPANY, INC., respondents.
Alojada & Garcia and Jimenea, Dala & Zaragoza for petitoner.
Zapa Law Office for private respondent.

VITUG, J.:
The issues, albeit not completely novel, are: (a) whether or not a claim for damage sustained on a
shipment of goods can be a solidary, or joint and several, liability of the common carrier, the arrastre
operator and the customs broker; (b) whether the payment of legal interest on an award for loss or
damage is to be computed from the time the complaint is filed or from the date the decision
appealed from is rendered; and (c) whether the applicable rate of interest, referred to above, is
twelve percent (12%) or six percent (6%).
The findings of the court a quo, adopted by the Court of Appeals, on the antecedent and undisputed
facts that have led to the controversy are hereunder reproduced:
This is an action against defendants shipping company, arrastre operator and brokerforwarder for damages sustained by a shipment while in defendants' custody, filed by
the insurer-subrogee who paid the consignee the value of such losses/damages.
On December 4, 1981, two fiber drums of riboflavin were shipped from Yokohama,
Japan for delivery vessel "SS EASTERN COMET" owned by defendant Eastern
Shipping Lines under Bill of Lading
No. YMA-8 (Exh. B). The shipment was insured under plaintiff's Marine Insurance
Policy No. 81/01177 for P36,382,466.38.
Upon arrival of the shipment in Manila on December 12, 1981, it was discharged
unto the custody of defendant Metro Port Service, Inc. The latter excepted to one
drum, said to be in bad order, which damage was unknown to plaintiff.
On January 7, 1982 defendant Allied Brokerage Corporation received the shipment
from defendant Metro Port Service, Inc., one drum opened and without seal (per
"Request for Bad Order Survey." Exh. D).
On January 8 and 14, 1982, defendant Allied Brokerage Corporation made deliveries
of the shipment to the consignee's warehouse. The latter excepted to one drum
which contained spillages, while the rest of the contents was adulterated/fake (per
"Bad Order Waybill" No. 10649, Exh. E).
Plaintiff contended that due to the losses/damage sustained by said drum, the
consignee suffered losses totaling P19,032.95, due to the fault and negligence of
defendants. Claims were presented against defendants who failed and refused to
pay the same (Exhs. H, I, J, K, L).

As a consequence of the losses sustained, plaintiff was compelled to pay the

consignee P19,032.95 under the aforestated marine insurance policy, so that it
became subrogated to all the rights of action of said consignee against defendants
(per "Form of Subrogation", "Release" and Philbanking check, Exhs. M, N, and O).
(pp. 85-86, Rollo.)
There were, to be sure, other factual issues that confronted both courts. Here, the appellate court
said:
Defendants filed their respective answers, traversing the material allegations of the
complaint contending that: As for defendant Eastern Shipping it alleged that the
shipment was discharged in good order from the vessel unto the custody of Metro
Port Service so that any damage/losses incurred after the shipment was incurred
after the shipment was turned over to the latter, is no longer its liability (p. 17,
Record); Metroport averred that although subject shipment was discharged unto its
custody, portion of the same was already in bad order (p. 11, Record); Allied
Brokerage alleged that plaintiff has no cause of action against it, not having negligent
or at fault for the shipment was already in damage and bad order condition when
received by it, but nonetheless, it still exercised extra ordinary care and diligence in
the handling/delivery of the cargo to consignee in the same condition shipment was
received by it.
From the evidence the court found the following:
The issues are:
1. Whether or not the shipment sustained losses/damages;
2. Whether or not these losses/damages were sustained while in the
custody of defendants (in whose respective custody, if determinable);
3. Whether or not defendant(s) should be held liable for the
losses/damages (see plaintiff's pre-Trial Brief, Records, p. 34; Allied's
pre-Trial Brief, adopting plaintiff's Records, p. 38).
As to the first issue, there can be no doubt that the shipment
sustained losses/damages. The two drums were shipped in good
order and condition, as clearly shown by the Bill of Lading and
Commercial Invoice which do not indicate any damages drum that
was shipped (Exhs. B and C). But when on December 12, 1981 the
shipment was delivered to defendant Metro Port Service, Inc., it
excepted to one drum in bad order.
Correspondingly, as to the second issue, it follows that the
losses/damages were sustained while in the respective and/or
successive custody and possession of defendants carrier (Eastern),
arrastre operator (Metro Port) and broker (Allied Brokerage). This
becomes evident when the Marine Cargo Survey Report (Exh. G),
with its "Additional Survey Notes", are considered. In the latter notes,
it is stated that when the shipment was "landed on vessel" to dock of
Pier # 15, South Harbor, Manila on December 12, 1981, it was
observed that "one (1) fiber drum (was) in damaged condition,

covered by the vessel's Agent's Bad Order Tally Sheet No. 86427."
The report further states that when defendant Allied Brokerage
withdrew the shipment from defendant arrastre operator's custody on
January 7, 1982, one drum was found opened without seal, cello bag
partly torn but contents intact. Net unrecovered spillages was
15 kgs. The report went on to state that when the drums reached the
consignee, one drum was found with adulterated/faked contents. It is
obvious, therefore, that these losses/damages occurred before the
shipment reached the consignee while under the successive
custodies of defendants. Under Art. 1737 of the New Civil Code, the
common carrier's duty to observe extraordinary diligence in the
vigilance of goods remains in full force and effect even if the goods
are temporarily unloaded and stored in transit in the warehouse of the
carrier at the place of destination, until the consignee has been
advised and has had reasonable opportunity to remove or dispose of
the goods (Art. 1738, NCC). Defendant Eastern Shipping's own
exhibit, the "Turn-Over Survey of Bad Order Cargoes" (Exhs. 3Eastern) states that on December 12, 1981 one drum was found
"open".
and thus held:
WHEREFORE, PREMISES CONSIDERED, judgment is hereby
rendered:
A. Ordering defendants to pay plaintiff, jointly and severally:
1. The amount of P19,032.95, with the present legal interest of
12% per annum from October 1, 1982, the date of filing of this
complaints, until fully paid (the liability of defendant Eastern Shipping,
Inc. shall not exceed US$500 per case or the CIF value of the loss,
whichever is lesser, while the liability of defendant Metro Port
Service, Inc. shall be to the extent of the actual invoice value of each
package, crate box or container in no case to exceed P5,000.00
each, pursuant to Section 6.01 of the Management Contract);
2. P3,000.00 as attorney's fees, and
3. Costs.
B. Dismissing the counterclaims and crossclaim of
defendant/cross-claimant Allied Brokerage
Corporation.
SO ORDERED. (p. 207, Record).
Dissatisfied, defendant's recourse to US.
The appeal is devoid of merit.

After a careful scrutiny of the evidence on record. We find that the conclusion drawn
therefrom is correct. As there is sufficient evidence that the shipment sustained
damage while in the successive possession of appellants, and therefore they are
liable to the appellee, as subrogee for the amount it paid to the consignee. (pp. 8789, Rollo.)
The Court of Appeals thus affirmed in toto the judgment of the court
a quo.
In this petition, Eastern Shipping Lines, Inc., the common carrier, attributes error and grave abuse of
discretion on the part of the appellate court when
I. IT HELD PETITIONER CARRIER JOINTLY AND SEVERALLY LIABLE WITH THE
ARRASTRE OPERATOR AND CUSTOMS BROKER FOR THE CLAIM OF
PRIVATE RESPONDENT AS GRANTED IN THE QUESTIONED DECISION;
II. IT HELD THAT THE GRANT OF INTEREST ON THE CLAIM OF PRIVATE
RESPONDENT SHOULD COMMENCE FROM THE DATE OF THE FILING OF THE
COMPLAINT AT THE RATE OF TWELVE PERCENT PER ANNUM INSTEAD OF
FROM THE DATE OF THE DECISION OF THE TRIAL COURT AND ONLY AT THE
RATE OF SIX PERCENT PER ANNUM, PRIVATE RESPONDENT'S CLAIM BEING
INDISPUTABLY UNLIQUIDATED.
The petition is, in part, granted.
In this decision, we have begun by saying that the questions raised by petitioner carrier are not all
that novel. Indeed, we do have a fairly good number of previous decisions this Court can merely tack
to.
The common carrier's duty to observe the requisite diligence in the shipment of goods lasts from the
time the articles are surrendered to or unconditionally placed in the possession of, and received by,
the carrier for transportation until delivered to, or until the lapse of a reasonable time for their
acceptance by, the person entitled to receive them (Arts. 1736-1738, Civil Code; Ganzon vs. Court
of Appeals, 161 SCRA 646; Kui Bai vs. Dollar Steamship Lines, 52 Phil. 863). When the goods
shipped either are lost or arrive in damaged condition, a presumption arises against the carrier of its
failure to observe that diligence, and there need not be an express finding of negligence to hold it
liable (Art. 1735, Civil Code; Philippine National Railways vs. Court of Appeals, 139 SCRA 87; Metro
Port Service vs. Court of Appeals, 131 SCRA 365). There are, of course, exceptional cases when
such presumption of fault is not observed but these cases, enumerated in Article 1734 1 of the Civil
Code, are exclusive, not one of which can be applied to this case.

The question of charging both the carrier and the arrastre operator with the obligation of properly
delivering the goods to the consignee has, too, been passed upon by the Court. In Fireman's Fund
Insurance vs. Metro Port Services (182 SCRA 455), we have explained, in holding the carrier and
the arrastre operator liable in solidum,thus:
The legal relationship between the consignee and the arrastre operator is akin to that
of a depositor and warehouseman (Lua Kian v. Manila Railroad Co., 19 SCRA 5
[1967]. The relationship between the consignee and the common carrier is similar to
that of the consignee and the arrastre operator (Northern Motors, Inc. v. Prince Line,
et al., 107 Phil. 253 [1960]). Since it is the duty of the ARRASTRE to take good care
of the goods that are in its custody and to deliver them in good condition to the

consignee, such responsibility also devolves upon the CARRIER. Both the
ARRASTRE and the CARRIER are therefore charged with the obligation to deliver
the goods in good condition to the consignee.
We do not, of course, imply by the above pronouncement that the arrastre operator and the customs
broker are themselves always and necessarily liable solidarily with the carrier, or vice-versa, nor that
attendant facts in a given case may not vary the rule. The instant petition has been brought solely by
Eastern Shipping Lines, which, being the carrier and not having been able to rebut the presumption
of fault, is, in any event, to be held liable in this particular case. A factual finding of both the court a
quo and the appellate court, we take note, is that "there is sufficient evidence that the shipment
sustained damage while in the successive possession of appellants" (the herein petitioner among
them). Accordingly, the liability imposed on Eastern Shipping Lines, Inc., the sole petitioner in this
case, is inevitable regardless of whether there are others solidarily liable with it.
It is over the issue of legal interest adjudged by the appellate court that deserves more than just a
passing remark.
Let us first see a chronological recitation of the major rulings of this Court:
The early case of Malayan Insurance Co., Inc., vs. Manila Port
Service, 2 decided 3 on 15 May 1969, involved a suit for recovery of money arising out of short deliveries
and pilferage of goods. In this case, appellee Malayan Insurance (the plaintiff in the lower court) averred
in its complaint that the total amount of its claim for the value of the undelivered goods amounted to
P3,947.20. This demand, however, was neither established in its totality nor definitely ascertained. In the
stipulation of facts later entered into by the parties, in lieu of proof, the amount of P1,447.51 was agreed
upon. The trial court rendered judgment ordering the appellants (defendants) Manila Port Service and
Manila Railroad Company to pay appellee Malayan Insurance the sum of P1,447.51 with legal interest
thereon from the date the complaint was filed on 28 December 1962 until full payment thereof. The
appellants then assailed,inter alia, the award of legal interest. In sustaining the appellants, this Court
ruled:

Interest upon an obligation which calls for the payment of money, absent a
stipulation, is the legal rate. Such interest normally is allowable from the date of
demand, judicial or extrajudicial. The trial court opted for judicial demand as the
starting point.
But then upon the provisions of Article 2213 of the Civil Code, interest "cannot be
recovered upon unliquidated claims or damages, except when the demand can be
established with reasonable certainty." And as was held by this Court in Rivera
vs. Perez, 4 L-6998, February 29, 1956, if the suit were for damages, "unliquidated and
not known until definitely ascertained, assessed and determined by the courts after proof
(Montilla c. Corporacion de P.P. Agustinos, 25 Phil. 447; Lichauco v. Guzman,
38 Phil. 302)," then, interest "should be from the date of the decision." (Emphasis
supplied)

The case of Reformina vs. Tomol, 5 rendered on 11 October 1985, was for "Recovery of Damages for
Injury to Person and Loss of Property." After trial, the lower court decreed:

WHEREFORE, judgment is hereby rendered in favor of the plaintiffs and third party
defendants and against the defendants and third party plaintiffs as follows:

Ordering defendants and third party plaintiffs Shell and Michael, Incorporated to pay
jointly and severally the following persons:
xxx xxx xxx
(g) Plaintiffs Pacita F. Reformina and Francisco Reformina the sum of P131,084.00
which is the value of the boat F B Pacita III together with its accessories, fishing gear
and equipment minus P80,000.00 which is the value of the insurance recovered and
the amount of P10,000.00 a month as the estimated monthly loss suffered by them
as a result of the fire of May 6, 1969 up to the time they are actually paid or
already the total sum of P370,000.00 as of June 4, 1972 with legal interest from the
filing of the complaint until paid and to pay attorney's fees of P5,000.00 with costs
against defendants and third party plaintiffs. (Emphasis supplied.)
On appeal to the Court of Appeals, the latter modified the amount of damages awarded but
sustained the trial court in adjudging legal interest from the filing of the complaint until fully
paid. When the appellate court's decision became final, the case was remanded to the lower
court for execution, and this was when the trial court issued its assailed resolution which
applied the 6% interest per annum prescribed in Article 2209 of the Civil Code. In their
petition for review on certiorari, the petitioners contended that Central Bank Circular
No. 416, providing thus
By virtue of the authority granted to it under Section 1 of Act 2655, as amended,
Monetary Board in its Resolution No. 1622 dated July 29, 1974, has prescribed that
the rate of interest for the loan, or forbearance of any money, goods, or credits and
the rate allowed in judgments, in the absence of express contract as to such rate of
interest, shall be twelve (12%) percent per annum. This Circular shall take effect
immediately. (Emphasis found in the text)
should have, instead, been applied. This Court 6 ruled:
The judgments spoken of and referred to are judgments in litigations involving loans
or forbearance of any money, goods or credits. Any other kind of monetary judgment
which has nothing to do with, nor involving loans or forbearance of any money,
goods or credits does not fall within the coverage of the said law for it is not within
the ambit of the authority granted to the Central Bank.
xxx xxx xxx
Coming to the case at bar, the decision herein sought to be executed is one
rendered in an Action for Damages for injury to persons and loss of property and
does not involve any loan, much less forbearances of any money, goods or credits.
As correctly argued by the private respondents, the law applicable to the said case is
Article 2209 of the New Civil Code which reads
Art. 2209. If the obligation consists in the payment of a sum of
money, and the debtor incurs in delay, the indemnity for damages,
there being no stipulation to the contrary, shall be the payment of
interest agreed upon, and in the absence of stipulation, the legal
interest which is six percent per annum.

The above rule was reiterated in Philippine Rabbit Bus Lines, Inc., v. Cruz, 7 promulgated on 28 July
1986. The case was for damages occasioned by an injury to person and loss of property. The trial court
awarded private respondent Pedro Manabat actual and compensatory damages in the amount of
P72,500.00 with legal interest thereon from the filing of the complaint until fully paid. Relying on
the Reformina v. Tomol case, this Court 8 modified the interest award from 12% to 6% interest per annum
but sustained the time computation thereof, i.e., from the filing of the complaint until fully paid.

In Nakpil and Sons vs. Court of Appeals, 9 the trial court, in an action for the recovery of damages
arising from the collapse of a building, ordered,
inter alia, the "defendant United Construction Co., Inc. (one of the petitioners)
. . . to pay the plaintiff, . . . , the sum of P989,335.68 with interest at the legal rate from November 29,
1968, the date of the filing of the complaint until full payment . . . ." Save from the modification of the
amount granted by the lower court, the Court of Appeals sustained the trial court's decision. When taken
to this Court for review, the case, on 03 October 1986, was decided, thus:

WHEREFORE, the decision appealed from is hereby MODIFIED and considering the
special and environmental circumstances of this case, we deem it reasonable to
render a decision imposing, as We do hereby impose, upon the defendant and the
third-party defendants (with the exception of Roman Ozaeta) a solidary (Art. 1723,
Civil Code, Supra.
p. 10) indemnity in favor of the Philippine Bar Association of FIVE MILLION
(P5,000,000.00) Pesos to cover all damages (with the exception to attorney's fees)
occasioned by the loss of the building (including interest charges and lost rentals)
and an additional ONE HUNDRED THOUSAND (P100,000.00) Pesos as and for
attorney's fees, the total sum being payable upon the finality of this decision. Upon
failure to pay on such finality, twelve (12%) per cent interest per annum shall be
imposed upon aforementioned amounts from finality until paid. Solidary costs against
the defendant and third-party defendants (Except Roman Ozaeta). (Emphasis
supplied)
A motion for reconsideration was filed by United Construction, contending that "the interest
of twelve (12%) per cent per annum imposed on the total amount of the monetary award was
in contravention of law." The Court 10 ruled out the applicability of the Reformina and Philippine
Rabbit Bus Lines cases and, in its resolution of 15 April 1988, it explained:

There should be no dispute that the imposition of 12% interest pursuant to Central
Bank Circular No. 416 . . . is applicable only in the following: (1) loans; (2)
forbearance of any money, goods or credit; and
(3) rate allowed in judgments (judgments spoken of refer to judgments involving
loans or forbearance of any money, goods or credits. (Philippine Rabbit Bus Lines
Inc. v. Cruz, 143 SCRA 160-161 [1986]; Reformina v. Tomol, Jr., 139 SCRA 260
[1985]). It is true that in the instant case, there is neither a loan or a forbearance, but
then no interest is actually imposed provided the sums referred to in the judgment
are paid upon the finality of the judgment. It is delay in the payment of such final
judgment, that will cause the imposition of the interest.
It will be noted that in the cases already adverted to, the rate of interest is imposed
on the total sum, from the filing of the complaint until paid; in other words, as part of
the judgment for damages. Clearly, they are not applicable to the instant case.
(Emphasis supplied.)
The subsequent case of American Express International, Inc., vs. Intermediate Appellate
Court 11 was a petition for review on certiorari from the decision, dated 27 February 1985, of the then

Intermediate Appellate Court reducing the amount of moral and exemplary damages awarded by the trial
court, to P240,000.00 and P100,000.00, respectively, and its resolution, dated 29 April 1985, restoring the
amount of damages awarded by the trial court, i.e., P2,000,000.00 as moral damages and P400,000.00
as exemplary damages with interest thereon at 12% per annum from notice of judgment, plus costs of
suit. In a decision of 09 November 1988, this Court, while recognizing the right of the private respondent
to recover damages, held the award, however, for moral damages by the trial court, later sustained by the
IAC, to be inconceivably large. The Court 12 thus set aside the decision of the appellate court and
rendered a new one, "ordering the petitioner to pay private respondent the sum of One Hundred
Thousand (P100,000.00) Pesos as moral damages, with
six (6%) percent interest thereon computed from the finality of this decision until paid. (Emphasis
supplied)

Reformina came into fore again in the 21 February 1989 case of Florendo v. Ruiz 13 which arose from
a breach of employment contract. For having been illegally dismissed, the petitioner was awarded by the
trial court moral and exemplary damages without, however, providing any legal interest thereon. When
the decision was appealed to the Court of Appeals, the latter held:

WHEREFORE, except as modified hereinabove the decision of the CFI of Negros

Oriental dated October 31, 1972 is affirmed in all respects, with the modification that
defendants-appellants, except defendant-appellant Merton Munn, are ordered to pay,
jointly and severally, the amounts stated in the dispositive portion of the decision,
including the sum of P1,400.00 in concept of compensatory damages, with interest at
the legal rate from the date of the filing of the complaint until fully paid(Emphasis
supplied.)
The petition for review to this Court was denied. The records were thereupon transmitted to
the trial court, and an entry of judgment was made. The writ of execution issued by the trial
court directed that only compensatory damages should earn interest at 6% per annum from
the date of the filing of the complaint. Ascribing grave abuse of discretion on the part of the
trial judge, a petition for certiorari assailed the said order. This Court said:
. . . , it is to be noted that the Court of Appeals ordered the payment of interest "at the
legal rate"from the time of the filing of the complaint. . . Said circular [Central Bank
Circular No. 416] does not apply to actions based on a breach of employment
contract like the case at bar. (Emphasis supplied)
The Court reiterated that the 6% interest per annum on the damages should be computed
from the time the complaint was filed until the amount is fully paid.
Quite recently, the Court had another occasion to rule on the matter. National Power Corporation
vs. Angas, 14decided on 08 May 1992, involved the expropriation of certain parcels of land. After
conducting a hearing on the complaints for eminent domain, the trial court ordered the petitioner to pay
the private respondents certain sums of money as just compensation for their lands so expropriated "with
legal interest thereon . . . until fully paid." Again, in applying the 6% legal interest per annum under the
Civil Code, the Court 15 declared:

. . . , (T)he transaction involved is clearly not a loan or forbearance of money, goods

or credits but expropriation of certain parcels of land for a public purpose, the
payment of which is without stipulation regarding interest, and the interest adjudged
by the trial court is in the nature of indemnity for damages. The legal interest required
to be paid on the amount of just compensation for the properties expropriated is
manifestly in the form of indemnity for damages for the delay in the payment thereof.
Therefore, since the kind of interest involved in the joint judgment of the lower court

sought to be enforced in this case is interest by way of damages, and not by way of
earnings from loans, etc. Art. 2209 of the Civil Code shall apply.
Concededly, there have been seeming variances in the above holdings. The cases can perhaps be
classified into two groups according to the similarity of the issues involved and the corresponding
rulings rendered by the court. The "first group" would consist of the cases of Reformina
v. Tomol (1985), Philippine Rabbit Bus Lines v. Cruz(1986), Florendo v. Ruiz (1989)
and National Power Corporation v. Angas (1992). In the "second group" would be Malayan
Insurance Company v.Manila Port Service (1969), Nakpil and Sons v. Court of
Appeals (1988), and American Express International v.Intermediate Appellate Court (1988).
In the "first group", the basic issue focuses on the application of either the 6% (under the Civil Code)
or 12% (under the Central Bank Circular) interest per annum. It is easily discernible in these cases
that there has been a consistent holding that the Central Bank Circular imposing the 12%
interest per annum applies only to loans or forbearance 16 of money, goods or credits, as well as to
judgments involving such loan or forbearance of money, goods or credits, and that the 6% interest under
the Civil Code governs when the transaction involves the payment of indemnities in the concept of
damage arising from the breach or a delay in the performance of obligations in general. Observe, too, that
in these cases, a common time frame in the computation of the 6% interest per annum has been
applied, i.e., from the time the complaint is filed until the adjudged amount is fully paid.

The "second group", did not alter the pronounced rule on the application of the 6% or 12%
interest per annum, 17depending on whether or not the amount involved is a loan or forbearance, on the
one hand, or one of indemnity for damage, on the other hand. Unlike, however, the "first group" which
remained consistent in holding that the running of the legal interest should be from the time of the filing of
the complaint until fully paid, the "second group" varied on the commencement of the running of the legal
interest.

Malayan held that the amount awarded should bear legal interest from the date of the decision of the
court a quo,explaining that "if the suit were for damages, 'unliquidated and not known until definitely
ascertained, assessed and determined by the courts after proof,' then, interest 'should be from the
date of the decision.'" American Express International v. IAC, introduced a different time frame for
reckoning the 6% interest by ordering it to be "computed from the finality of (the) decision until paid."
The Nakpil and Sons case ruled that 12% interest per annum should be imposed from the finality of
the decision until the judgment amount is paid.
The ostensible discord is not difficult to explain. The factual circumstances may have called for
different applications, guided by the rule that the courts are vested with discretion, depending on the
equities of each case, on the award of interest. Nonetheless, it may not be unwise, by way of
clarification and reconciliation, to suggest the following rules of thumb for future guidance.
I. When an obligation, regardless of its source, i.e., law, contracts, quasi-contracts, delicts or quasidelicts 18 is breached, the contravenor can be held liable for damages. 19 The provisions under Title XVIII
on "Damages" of the Civil Code govern in determining the measure of recoverable damages. 20

II. With regard particularly to an award of interest in the concept of actual and compensatory
damages, the rate of interest, as well as the accrual thereof, is imposed, as follows:
1. When the obligation is breached, and it consists in the payment of a sum of money, i.e., a loan or
forbearance of money, the interest due should be that which may have been stipulated in
writing. 21 Furthermore, the interest due shall itself earn legal interest from the time it is judicially
demanded. 22 In the absence of stipulation, the rate of interest shall be 12% per annum to be computed

from default, i.e., from judicial or extrajudicial demand under and subject to the provisions of Article
1169 23 of the Civil Code.

2. When an obligation, not constituting a loan or forbearance of money, is breached, an interest on

the amount of damages awarded may be imposed at the discretion of the court 24 at the rate of 6% per
annum. 25 No interest, however, shall be adjudged on unliquidated claims or damages except when or
until the demand can be established with reasonable certainty. 26 Accordingly, where the demand is
established with reasonable certainty, the interest shall begin to run from the time the claim is made
judicially or extrajudicially (Art. 1169, Civil Code) but when such certainty cannot be so reasonably
established at the time the demand is made, the interest shall begin to run only from the date the
judgment of the court is made (at which time the quantification of damages may be deemed to have been
reasonably ascertained). The actual base for the computation of legal interest shall, in any case, be on
the amount finally adjudged.

3. When the judgment of the court awarding a sum of money becomes final and executory, the rate
of legal interest, whether the case falls under paragraph 1 or paragraph 2, above, shall be 12% per
annum from such finality until its satisfaction, this interim period being deemed to be by then an
equivalent to a forbearance of credit.
WHEREFORE, the petition is partly GRANTED. The appealed decision is AFFIRMED with the
MODIFICATION that the legal interest to be paid is SIX PERCENT (6%) on the amount due
computed from the decision, dated
03 February 1988, of the court a quo. A TWELVE PERCENT (12%) interest, in lieu of SIX
PERCENT (6%), shall be imposed on such amount upon finality of this decision until the payment
thereof.
SO ORDERED.
Narvasa, C.J., Cruz, Feliciano, Padilla, Bidin, Regalado, Davide, Jr., Romero, Bellosillo,
Melo, Quiason, Puno and Kapunan, JJ., concur.
Mendoza, J., took no part.

#Footnotes

1 Art. 1734. Common carriers are responsible for the loss, destruction, or
deterioration of the goods, unless the same is due to any of the following causes
only:
(1) Flood, storm, earthquake, lightning, or other natural disaster or calamity;
(2) Act of the public enemy in war, whether international or civil;
(3) Act or omission of the shipper or owner of the goods;
(4) The character of the goods or defects in the packing or in the containers;
(5) Order or act of competent public authority.

2 28 SCRA 65.
3 Penned by Justice Conrado Sanchez, concurred in by Justices Jose B.L. Reyes,
Arsenio Dizon, Querube Makalintal, Calixto Zaldivar, Enrique Fernando, Francisco
Capistrano, Claudio Teehankee and Antonio Barredo, Chief Justice Roberto
Concepcion and Justice Fred Ruiz Castro were on official leave.
4 The correct caption of the case is "Claro Rivera vs. Amadeo Matute, L-6998,
29 February 1956," 98 Phil. 516.
5 139 SCRA 260, 265.
6 Penned by Justice Serafin Cuevas, concurred in by Justices Hermogenes
Concepcion, Jr., Vicente Abad Santos, Ameurfina Melencio-Herrera, Venicio Escolin,
Lorenzo Relova, Hugo Gutierrez, Jr., Buenaventura de la Fuente, Nestor Alampay
and Lino Patajo. Justice Ramon Aquino concurred in the result. Justice Efren Plana
filed a concurring and dissenting opinion, concurred in by Justice Claudio Teehankee
while Chief Justice Felix Makasiar concurred with the separate opinion of Justice
Plana.
7 143 SCRA 158.
8 Penned by then Justice, now Chief Justice, Andres Narvasa, concurred in by
Justices Pedro Yap, Ameurfina Melencio-Herrera, Isagani A. Cruz and Edgardo
Paras.
9 160 SCRA 334.
10 Penned by Justice Edgardo Paras, with the concurrence of Justices Marcelo
Fernan, Teodoro Padilla, Abdulwahid Bidin, and Irene Cortes. Justice Hugo
Gutierrez, Jr., took no part because he was the ponente in the Court of Appeals.
11 167 SCRA 209.
12 Rendered per curiam with the concurrence of then Chief Justice Marcelo Fernan,
Justices Andres Narvasa, Isagani A. Cruz, Emilio Gancayco, Teodoro Padilla,
Abdulwahid Bidin, Abraham Sarmiento, Irene Cortes, Carolina Grio-Aquino, Leo
Medialdea and Florenz Regalado. Justices Ameurfina Melencio-Herrera and Hugo
Gutierrez, Jr., took no part because they did not participate in the deliberations.
Justices Edgardo Paras and Florentino Feliciano also took no part.
13 170 SCRA 461.
14 208 SCRA 542.
15 Penned by Justice Edgardo Paras with the concurrence of Justices Ameurfina
Melencio-Herrera, Teodoro Padilla, Florenz Regalado and Rodolfo Nocon.
16 Black's Law Dictionary (1990 ed., 644) citing the case of Hafer v. Spaeth,
22 Wash. 2d 378, 156 P.2d 408, 411 defines the word forbearance, within the
context of usury law, as a contractual obligation of lender or creditor to refrain, during

given period of time, from requiring borrower or debtor to repay loan or debt then due
and payable.
17 In the case of Malayan Insurance, the application of the 6% and 12% interest per
annum has no bearing considering that this case was decided upon before the
issuance of Circular No. 416 by the Central Bank.
18 Art. 1157. Obligations arise from.
(1) Law;
(2) Contracts;
(3) Quasi-contracts;
(4) Acts or omissions punished by law; and
(5) Qausi-delicts."
19 Art. 1170. 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.
20 Art. 2195. The provisions of this Title (on Damages) shall be respectively
applicable to all obligations mentioned in article 1157.
21 Art. 1956. No interest shall be due unless it has been expressly stipulated in
writing.
22 Art. 2212. Interest due shall earn legal interest from the time it is judicially
demanded, although the obligation may be silent upon this point.
23 Art. 1169. Those obliged to deliver or to do something incur in delay from the time
the obligee judicially or extrajudicially demands from them the fulfillment of their
obligation.
"However, the demand by the creditor shall not be necessary in order that
delay may exist:
(1) When the obligation or the law expressly so declare; or
(2) When from the nature and the circumstances of the obligation it appears
that the designation of the time when the thing is to be delivered or the
service is to be rendered was a controlling motive for the establishment of the
contract; or
(3) When demand would be useless, as when the obligor has rendered it
beyond his power to perform.

"In reciprocal obligations, neither party incurs in delay if the other does not
comply or is not ready to comply in a proper manner with what is incumbent
upon him. From the moment one of the parties fulfills his obligation, delay by
the other begins."
24 Art. 2210. Interest may, in the discretion of the court, be allowed upon damages
awarded for breach of contract.
Art. 2211. In crimes and quasi-delicts, interest as a part of the damages may, in a
proper case, be adjudicated in the discretion of the court.
25 Art. 2209. If the obligation consists in the payment of a sum of money, and the
debtor incurs in delay, the indemnity for damages, there being no stipulation to the
contrary, shall be the payment of the interest agreed upon, and in the absence of
stipulation, the legal interest, which is six per centper annum.
26 Art. 2213. Interest cannot be recovered upon unliquidated claims or damages,
except when the demand can be established with reasonable certainty