CHARTER PARTIES Cargo Superintendents Company Inc.
Cargo Superintendents Company Inc. (CSCI), private marine and
Planters Products Inc V. CA (1993)
G.R. No. 101503 September 15, 1993
Lessons Applicable: Charter Party (Transportation)
FACTS:
June 16 1974: Mitsubishi International Corporation (Mitsubishi) of
New York, U.S.A., 9,329.7069 M/T of Urea 46% fertilizer bought
by Planters Products, Inc. (PPI) on aboard the cargo vessel M/V
"Sun Plum" owned by private Kyosei Kisen Kabushiki Kaisha
(KKKK) from Kenai, Alaska, U.S.A., to Poro Point, San Fernando,
La Union, Philippines, as evidenced by Bill of Lading
May 17 1974: a time charter-party on the vessel M/V "Sun Plum"
pursuant to the Uniform General Charter was entered into
between Mitsubishi as shipper/charterer and KKKK as shipowner,
in Tokyo, Japan
Before loading the fertilizer aboard the vessel, 4 of her holds were
all presumably inspected by the charterer's representative and
found fit
The hatches remained closed and tightly sealed throughout the
entire voyage
July 3, 1974: PPI unloaded the cargo from the holds into its
steelbodied dump trucks which were parked alongside the berth,
using metal scoops attached to the ship, pursuant to the terms
and conditions of the charter-partly
hatches remained open throughout the duration of the discharge
Each time a dump truck was filled up, its load of Urea was
covered with tarpaulin before it was transported to the consignee's
warehouse located some 50 meters from the wharf
Midway to the warehouse, the trucks were made to pass through
a weighing scale where they were individually weighed for the
purpose of ascertaining the net weight of the cargo.
The port area was windy, certain portions of the route to the
warehouse were sandy and the weather was variable, raining
occasionally while the discharge was in progress.
Tarpaulins and GI sheets were placed in-between and alongside
the trucks to contain spillages of the ferilizer
It took 11 days for PPI to unload the cargo
This is a risk the shipper or the owner of the goods has to face.
cargo surveyor, was hired by PPI to determine the "outturn" of the
cargo shipped, by taking draft readings of the vessel prior to and
after discharge
shortage in the cargo of 106.726 M/T and that a portion of the
Urea fertilizer approximating 18 M/T was contaminated with dirt
Certificate of Shortage/Damaged Cargo prepared by PPI
short of 94.839 M/T and about 23 M/T were rendered unfit for
commerce, having been polluted with sand, rust and dirt
PPI sent a claim letter 1974 to Soriamont Steamship Agencies
(SSA), the resident agent of the carrier, KKKK, for P245,969.31
representing the cost of the alleged shortage in the goods shipped
and the diminution in value of that portion said to have been
contaminated with dirt
SSA: what they received was just a request for shortlanded
certificate and not a formal claim, and that they "had nothing to do
with the discharge of the shipment
RTC: failure to destroy the presumption of negligence against
them, SSA are liable
CA: REVERSED - failed to prove the basis of its cause of action
ISSUE: W/N a time charter between a shipowner and a charterer
transforms a common carrier into a private one as to negate the
civil law presumption of negligence in case of loss or damage to
its cargo
HELD: NO. petition is DISMISSED
When PPI chartered the vessel M/V "Sun Plum", the ship captain,
its officers and compliment were under the employ of the
shipowner and therefore continued to be under its direct
supervision and control. Hardly then can we charge the charterer,
a stranger to the crew and to the ship, with the duty of caring for
his cargo when the charterer did not have any control of the
means in doing so
carrier has sufficiently overcome, by clear and convincing proof,
the prima facie presumption of negligence. The hatches remained
close and tightly sealed while the ship was in transit as the weight
of the steel covers made it impossible for a person to open without
the use of the ship's boom.
bulk shipment of highly soluble goods like fertilizer carries with it
the risk of loss or damage. More so, with a variable weather
condition prevalent during its unloading
Clearly, KKKK has sufficiently proved the inherent character of the
goods which makes it highly vulnerable to deterioration; as well as
the inadequacy of its packaging which further contributed to the
loss.
On the other hand, no proof was adduced by the petitioner
showing that the carrier was remise in the exercise of due
diligence in order to minimize the loss or damage to the goods it
carried.
Coastwise Lighterage Corporation v. CA
FACTS:
Pag-asa Sales Inc. entered into a contract to transport molasses
from the province of Negros to Manila with Coastwise Lighterage
Corporation (Coastwise for brevity), using the latter's dumb
barges. The barges were towed in tandem by the tugboat MT
Marica, which is likewise owned by Coastwise. Upon reaching
Manila Bay, one of the barges, "Coastwise 9", struck an unknown
sunken object. The forward buoyancy compartment was
damaged, and water gushed in through a hole "two inches wide
and twenty-two inches long". As a consequence, the molasses at
the cargo tanks were contaminated. Pag-asa filed a claim against
Philippine General Insurance Company, the insurer of its cargo.
Philgen paid P700,000 for the value of the molasses lost.
Philgen then filed an action against Coastwise to recover the
money it paid, claiming to be subrogated to the claims which the
consignee may have against the carrier. Both the trial court and
the Court of Appeals ruled against Coastwise.
ISSUE: Whether Coastwise was transformed into a private carrier
by virtue of the contract it entered into with Pag-asa, and whether
it exercised the required degree of diligence? NO
HELD:
Pag-asa Sales, Inc. only leased three of petitioner's vessels, in
order to carry cargo from one point to another, but the possession,
command mid navigation of the vessels remained with petitioner
Coastwise Lighterage. Coastwise Lighterage, by the contract of
affreightment, was not converted into a private carrier, but
remained a common carrier and was still liable as such. The law
and jurisprudence on common carriers both hold that the mere
proof of delivery of goods in good order to a carrier and the
subsequent arrival of the same goods at the place of destination
in bad order makes for a prima facie case against the carrier. It
follows then that the presumption of negligence that attaches to
common carriers, once the goods it is sports are lost, destroyed or
deteriorated, applies to the petitioner. This presumption, which is
overcome only by proof of the exercise of extraordinary diligence,
remained unrebutted in this case. Jesus R. Constantino, the
patron of the vessel "Coastwise 9" admitted that he was not
licensed. Coastwise Lighterage cannot safely claim to have
exercised extraordinary diligence, by placing a person whose
navigational skills are questionable, at the helm of the vessel
which eventually met the fateful accident. It may also logically,
follow that a person without license to navigate, lacks not just the
skill to do so, but also the utmost familiarity with the usual and
safe routes taken by seasoned and legally authorized ones. Had
the patron been licensed he could be presumed to have both the
skill and the knowledge that would have prevented the vessel's
hitting the sunken derelict ship that lay on their way to Pier 18. As
a common carrier, petitioner is liable for breach of the contract of
carriage, having failed to overcome the presumption of negligence
with the loss and destruction of goods it transported, by proof of
its exercise of extraordinary diligence.
The distinction between the two kinds of charter parties (i.e.
bareboat or demise and contract of affreightment) is more clearly
set out in the case of Puromines, Inc. vs. Court of Appeals:
Under the demise or bareboat charter of the vessel, the charterer
will generally be regarded as the owner for the voyage or service
stipulated. The charterer mans the vessel with his own people and
becomes the owner pro hac vice, subject to liability to others for
damages caused by negligence. To create a demise, the owner of
a vessel must completely and exclusively relinquish possession,
command and navigation thereof to the charterer, anything short
of such a complete transfer is a contract of affreightment (time or
voyage charter party) or not a charter party at all. In this case,
there was no demise, and only a contract of affreightment. Hence,
the carrier was not transformed into a private carrier.
On the other hand a contract of affreightment is one in which the
owner of the vessel leases part or all of its space to haul goods for
others. It is a contract for special service to be rendered by the
owner of the vessel and under such contract the general owner
retains the possession, command and navigation of the ship, the
charterer or freighter merely having use of the space in the vessel
in return for his payment of the charter hire.
An owner who retains possession of the ship though the hold is
the property of the charterer, remains liable as carrier and must
answer for any breach of duty as to the care, loading and
unloading of the cargo. Although a charter party may transform a
common carrier into a private one, the same however is not true in
a contract of affreightment on account of the aforementioned
distinctions between the two. PETITION DENIED.
Valenzuela Hardwood and Industrial Supply vs. Court
of Appeals
FACTS:
Plaintiff shipped at Maconcon Port, Isabela 940 round logs on
board M/V Seven Ambassador, a vessel owned by defendant
Seven Brothers Shipping Corporation. Plaintiff insured the logs
against loss and/or damage with defendant South Sea Surety and
Insurance Co., Inc. for P2M and the latter issued its Marine Cargo
Insurance Policy on said date. In the meantime, the M/V Seven
Ambassador sank resulting in the loss of the plaintiff’s insured
logs.
Plaintiff demanded from defendant South Sea Surety and
Insurance Co., Inc. the payment of the proceeds of the policy but
the latter denied liability under the policy. Plaintiff likewise filed a
formal claim with defendant Seven Brothers Shipping Corporation
for the value of the lost logs but the latter denied the claim.
Court of Appeals affirmed in part the RTC judgment by sustaining
the liability of South Sea Surety and Insurance Company (“South
Sea”), but modified it by holding that Seven Brothers Shipping
Corporation (“Seven Brothers”) was not liable for the lost cargo.
ISSUE:
Whether defendants shipping corporation and the surety company
are liable to the plaintiff for the latter’s lost logs.
HELD:
The charter party between the petitioner and private respondent
stipulated that the “(o)wners shall not be responsible for loss, split,
short-landing, breakages and any kind of damages to the cargo” –
VALID
There is no dispute between the parties that the proximate cause
of the sinking of M/V Seven Ambassadors resulting in the loss of
its cargo was the “snapping of the iron chains and the subsequent
rolling of the logs to the portside due to the negligence of the
captain in stowing and securing the logs on board the vessel and
not due to fortuitous event.” Likewise undisputed is the status of
Private Respondent Seven Brothers as a private carrier when it
contracted to transport the cargo of Petitioner Valenzuela. Even
the latter admits this in its petition.
Private respondent had acted as a private carrier in transporting
petitioner’s lauan logs. Thus, Article 1745 and other Civil Code
provisions on common carriers which were cited by petitioner may
not be applied unless expressly stipulated by the parties in their
charter party.
In a contract of private carriage, the parties may validly stipulate
that responsibility for the cargo rests solely on the charterer,
exempting the shipowner from liability for loss of or damage to the
cargo caused even by the negligence of the ship captain.
Pursuant to Article 1306 of the Civil Code, such stipulation is valid
because it is freely entered into by the parties and the same is not
contrary to law, morals, good customs, public order, or public
policy. Indeed, their contract of private carriage is not even a
contract of adhesion. We stress that in a contract of private
carriage, the parties may freely stipulate their duties and
obligations which perforce would be binding on them. Unlike in
contract involving a common carrier, private carriage does not
involve the general public. Hence, the stringent provisions of the
Civil Code on common carriers protecting the general public
cannot justifiably be applied to a ship transporting commercial
goods as a private carrier. Consequently, the public policy
embodied therein is not contravened by stipulations in a charter
party that lessen or remove the protection given by law in
contracts involving common carriers.
The provisions of our Civil Code on common carriers were taken
from Anglo-American law. Under American jurisprudence, a
common carrier undertaking to carry a special cargo or chartered
to a special person only, becomes a private carrier. As a private
carrier a stipulation exempting the owner from liability for the
negligence of its agent is not against public policy and is deemed
valid. Such doctrine We find reasonable. The Civil Code
provisions on common carriers should not be applied where the
carrier is not acting as such but as a private carrier. The
stipulation in the charter party absolving the owner from liability for
loss due to the negligence of its agent would be void only if the
strict public policy governing common carriers is applied. Such
policy has no force where the public at large is not involved as in
this case of a ship totally chartered for the use of a single party.
(Home Insurance Co. vs. American Steamship Agencies Inc., 23
SCRA 24, April 4, 1968)
Caltex V. Sulpicio Lines (1999)
G.R.No. 131166 September 30, 1999
Lessons Applicable: Charter Party (Transportation)
FACTS:
December 19, 1987 8 pm: motor tanker MT Vector owned and
operated by Vector Shipping Corporation carried 8,800 barrels of
petroleum products of Caltex by virtue of a charter contract
December 20, 1987 6:30 am: MV Doña Paz passenger and cargo
vessel owned and operated by Sulpicio Lines, Inc. left the port of
Tacloban headed for Manila with 1,493 passengers indicated in
the Coast Guard Clear
December 20, 1987: MT Vector collided with MV Doña Paz in the
open sea within the vicinity of Dumali Point between Marinduque
and Oriental Mindoro, killing almost all the passengers and crew
members of both ships except for 24 survivors
MV Doña Paz carried an estimated 4,000 passengers most were
not in the passenger manifest
board of marine inquiry in BMI Case No. 653-87 after investigation
found that the MT Vector, its registered operator Francisco
Soriano, and its owner and actual operator Vector Shipping
Corporation, were at fault and responsible for its collision with MV
Doña Paz
February 13, 1989: Teresita Cañezal and Sotera E. Cañezal,
Sebastian Cañezal’s wife and mother respectively, filed a
complaint for “Damages Arising from Breach of Contract of
Carriage” against Sulpicio Lines, Inc. for the death of Sebastian E.
Cañezal (public school teacher 47 years old) and his 11-year old
daughter Corazon G. Cañezal
Sulpicio, in turn, filed a 3rd party complaint against Francisco
Soriano, Vector Shipping Corporation and Caltex
Sulpicio alleged that Caltex chartered MT Vector with gross and
evident bad faith knowing fully well that MT Vector was improperly
manned, ill-equipped, unseaworthy and a hazard to safe
navigation
RTC: dismissed the third party complaint and favored the
Cañezal's against Sulpicio Lines
CA: included Caltex as liable party
ISSUE: W/N Caltex as a voyage charterer of a sea vessel liable
for damages resulting from a collision between the chartered
vessel and a passenger ship
HELD: NO. Grants Petition. CA set aside.
respective rights and duties of a shipper and the carrier depends
not on whether the carrier is public or private, but on whether the
contract of carriage:
bill of lading or equivalent shipping documents; or
charter party or similar contract on the other
Caltex and Vector entered into a contract of affreightment, also
known as a voyage charter
charter party
contract by which an entire ship, or some principal part thereof, is
let by the owner to another person for a specified time or use
Charter parties fall into three main categories:
(1) Demise or bareboat
charterer mans the vessel with his own people and becomes, in
effect, the owner for the voyage or service stipulated, subject to
liability for damages caused by negligence
common carrier becomes private
contract of affreightment
one by which the owner of a ship or other vessel lets the whole or
part of her to a merchant or other person for the conveyance of
goods, on a particular voyage, in consideration of the payment of
freight
may be either:
(2)time charter - wherein the leased vessel is leased to the
charterer for a fixed period of time
(3) voyage charter - wherein the ship is leased for a single voyage
charter-party provides for the hire of the vessel only, either for a
determinate period of time or for a single or consecutive voyage,
the ship owner to supply the ship’s store, pay for the wages of the
master of the crew, and defray the expenses for the maintenance
of the ship
charterer is free from liability to third persons in respect of the ship
does not convert the common carrier into a private carrier
Carriage of Goods by Sea Act :
Sec. 3. (1) The carrier shall be bound before and at the beginning
of the voyage to exercise due diligence to -
(a) Make the ship seaworthy;
(b) Properly man, equip, and supply the ship;
xxx xxx xxx
Thus, the carriers are deemed to warrant impliedly the
seaworthiness of the ship. For a vessel to be seaworthy, it must
be adequately equipped for the voyage and manned with a
sufficient number of competent officers and crew. The failure of a
common carrier to maintain in seaworthy condition the vessel
involved in its contract of carriage is a clear breach of its duty
prescribed in Article 1755 of the Civil Code
a passenger or a shipper of goods is under no obligation to
conduct an inspection of the ship and its crew, the carrier being
obliged by law to impliedly warrant its seaworthiness
nature of the obligation of Caltex demands ordinary diligence like
any other shipper in shipping his cargoes
Caltex and Vector Shipping Corporation had been doing business
since 1985, or for about two years before the tragic incident
occurred in 1987. Past services rendered showed no reason for
Caltex to observe a higher degree of diligence.
Caltex had the right to presume that the ship was seaworthy as
even the Philippine Coast Guard itself was convinced of its
seaworthiness
---
First: The charterer has no liability for damages under
Philippine Maritime laws.
Petitioner and Vector entered into a contract of affreightment, also
known as a voyage charter.
A charter party is a contract by which an entire ship, or some
principal part thereof, is let by the owner to another person for a
specified time or use; a contract of affreightment is one by which
the owner of a ship or other vessel lets the whole or part of her to
a merchant or other person for the conveyance of goods, on a
particular voyage, in consideration of the payment of freight. A
contract of affreightment may be either time charter, wherein the
leased vessel is leased to the charterer for a fixed period of time,
or voyage charter, wherein the ship is leased for a single voyage.
In both cases, the charter-party provides for the hire of the vessel
only, either for a determinate period of time or for a single or
consecutive voyage, the ship owner to supply the ship’s store, pay
for the wages of the master of the crew, and defray the expenses
for the maintenance of the ship. If the charter is a contract of
affreightment, which leaves the general owner in possession of
the ship as owner for the voyage, the rights and the
responsibilities of ownership rest on the owner. The charterer is
free from liability to third persons in respect of the ship.
Second: MT Vector is a common carrier
The charter party agreement did not convert the common carrier
into a private carrier. The parties entered into a voyage charter,
which retains the character of the vessel as a common carrier. It is
imperative that a public carrier shall remain as such,
notwithstanding the charter of the whole or portion of a vessel by
one or more persons, provided the charter is limited to the ship
only, as in the case of a time-charter or voyage charter. It is only
when the charter includes both the vessel and its crew, as in a
bareboat or demise that a common carrier becomes private, at
least insofar as the particular voyage covering the charter-party is
concerned. Indubitably, a ship-owner in a time or voyage charter
retains possession and control of the ship, although her holds
may, for the moment, be the property of the charterer. A common
carrier is a person or corporation whose regular business is to
carry passengers or property for all persons who may choose to
employ and to remunerate him. 16 MT Vector fits the definition of
a common carrier under Article 1732 of the Civil Code.
The public must of necessity rely on the care and skill of common
carriers in the vigilance over the goods and safety of the
passengers, especially because with the modern development of
science and invention, transportation has become more rapid,
more complicated and somehow more hazardous. For these
reasons, a passenger or a shipper of goods is under no obligation
to conduct an inspection of the ship and its crew, the carrier being
obliged by law to impliedly warrant its seaworthiness.
Third: Is Caltex liable for damages under the Civil Code?
The charterer of a vessel has no obligation before transporting its
cargo to ensure that the vessel it chartered complied with all legal
requirements. The duty rests upon the common carrier simply for
being engaged in "public service." The relationship between the
parties in this case is governed by special laws. Because of the
implied warranty of seaworthiness, shippers of goods, when
transacting with common carriers, are not expected to inquire into
the vessel’s seaworthiness, genuineness of its licenses and
compliance with all maritime laws. To demand more from shippers
and hold them liable in case of failure exhibits nothing but the
futility of our maritime laws insofar as the protection of the public
in general is concerned. Such a practice would be an absurdity in
a business where time is always of the essence. Considering the
nature of transportation business, passengers and shippers alike
customarily presume that common carriers possess all the legal
requisites in its operation.
BREACH OF CONTRACT OF
CARRIAGE:VIGILANCE OVER GOODS
BELGIAN OVERSEAS CHARTERING AND SHIPPING N.V. V.
PHILIPPINE FIRST INSURANCE CO.
Facts:
- CMC Trading A.G. shipped on board the M/V Anangel Sky at
Hamburg, Germany 242 coils of various Prime Cold Rolled Steel
sheets for transportation to Manila consigned to the Philippine
Steel Trading Corporation.
- On July 28, 1990, M/V Anangel Sky arrived at the port of
Manila and, within the subsequent days, discharged the subject
cargo. Four (4) coils were found to be in bad order.
- Finding the four (4) coils in their damaged state to be unfit for
the intended purpose, the consignee Philippine Steel Trading
Corporation declared the same as total loss.
- Philippine First Insurance paid the claim of Philippine Steel and
was thus subrogated.
- Philippine First then instituted a complaint for recovery of the
amount paid to the consignee as insured.
- Belgian claims that the damage and/or loss was due to pre-
shipment damage, to the inherent nature, vice or defect of the
goods, or to perils, danger and accidents of the sea, or to
insufficiency of packing thereof, or to the act or omission of the
shipper of the goods or their representatives. Belgian further
argued that their liability, if there be any, should not exceed the
limitations of liability provided for in the bill of lading and other
pertinent laws. Finally, Belgian averred that, in any event, they
exercised due diligence and foresight required by law to prevent
any damage/loss to said shipment.
- The RTC dismissed the complaint.
- The CA reversed and ruled that Belgian were liable for the loss
or the damage of the goods shipped, because they had failed to
overcome the presumption of negligence imposed on common
carriers. As to the extent of Belgian’s liability, the CA held that the
package limitation under COGSA was not applicable, because the
words "L/C No. 90/02447" indicated that a higher valuation of the
cargo had been declared by the shipper.
Issues:
- Whether the notice of loss was timely filed. (Belgian claims that
pursuant to Section 3, paragraph 6 of COGSA, respondent should
have filed its Notice of Loss within three days from delivery. They
assert that the cargo was discharged on July 31, 1990, but that
respondent filed its Notice of Claim only on September 18, 1990.)
Whether the package limitation of liability under COGSA is
applicable. (Belgian contends that assuming that they are liable
their liability should be limited to US$500 per package as provided
in the Bill of Lading and by Section 4(5)of COGS
Held:
- NO. Mere proof of delivery of the goods in good order to a
common carrier and of their arrival in bad order at their destination
constitutes a prima facie case of fault or negligence against the
carrier.
- In this case, Belgian failed to rebut the prima facie presumption
of negligence. First, as stated in the Bill of Lading, Belgian
received the subject shipment in good order and condition in
Germany. Second, prior to the unloading of the cargo, an
Inspection Report prepared and signed by representatives of both
parties showed the steel bands broken, the metal envelopes rust-
stained and heavily buckled, and the contents thereof exposed
and rusty. Third, Bad Order Tally Sheet issued by Jardine Davies
Transport Services stated that the four coils were in bad order and
condition. Normally, a request for a bad order survey is made in
case there is an apparent or a presumed loss or damage.Fourth,
the Certificate of Analysis stated that, based on the sample
submitted and tested, the steel sheets found in bad order were
wet with fresh water. Fifth, Belgian -- in a letteraddressed to the
Philippine Steel --admitted that they were aware of the condition
of the four coils found in bad order and condition.
- YES. First, the provision of COGSA provides that the notice of
claim need not be given if the state of the goods, at the time of
their receipt, has been the subject of a joint inspection or survey.
Here, prior to unloading the cargo, an Inspection Report as to the
condition of the goods was prepared and signed by
representatives of both parties. Second, as stated in the same
provision, a failure to file a notice of claim within three days will
not bar recovery if it is nonetheless filed within one year. This one-
year prescriptive period also applies to the shipper, the consignee,
the insurer of the goods or any legal holder of the bill of lading.
- A claim is not barred by prescription as long as the one-year
period has not lapsed. In the present case, the cargo was
discharged on July 31, 1990, while the Complaint51 was filed by
respondent on July 25, 1991, within the one-year prescriptive
period.
- YES. In this case, there was no stipulation in the Bill of Lading
limiting the carrier's liability. Neither did the shipper declare a
higher valuation of the goods to be shipped. This fact
notwithstanding, the insertion of the words "L/C No. 90/02447
cannot be the basis for Belgian’s liability.
- First, a notation in the Bill of Lading which indicated the
amount of the Letter of Credit obtained by the shipper for the
importation of steel sheets did not effect a declaration of the value
of the goods as required by the bill. That notation was made only
for the convenience of the shipper and the bank processing the
Letter of Credit.
- Second, a bill of lading is separate from the Other Letter of
Credit arrangements. Thus, Belgian’s liability should be computed
based on US$500 per package and not on the per metric ton price
declared in the Letter of Credit.
FGU Insurance Corporation V. CA (2005)
G.R.No. 137775 March 31, 2005
Lessons Applicable: Loss caused by negligence of the
insured (Insurance)
FACTS:
Anco Enterprises Company (ANCO), a partnership between Ang
Gui and Co To, was engaged in the shipping business operating
two common carriers
M/T ANCO tugboat
D/B Lucio barge - no engine of its own, it could not maneuver by
itself and had to be towed by a tugboat for it to move from one
place to another.
September 23 1979: San Miguel Corporation (SMC) shipped from
Mandaue City, Cebu, on board the D/B Lucio, for towage by M/T
ANCO:
25,000 cases Pale Pilsen and 350 cases Cerveza Negra -
consignee SMC’s Beer Marketing Division (BMD)-Estancia Beer
Sales Office, Estancia, Iloilo
15,000 cases Pale Pilsen and 200 cases Cerveza Negra -
consignee SMC’s BMD-San Jose Beer Sales Office, San Jose,
Antique
September 30, 1979: D/B Lucio was towed by the M/T ANCO
arrived and M/T ANCO left the barge immediately
The clouds were dark and the waves were big so SMC’s District
Sales Supervisor, Fernando Macabuag, requested ANCO’s
representative to transfer the barge to a safer place but it refused
so around the midnight, the barge sunk along with 29,210 cases
of Pale Pilsen and 500 cases of Cerveza Negra totalling to
P1,346,197
When SMC claimed against ANCO it stated that they agreed that
it would not be liable for any losses or damages resulting to the
cargoes by reason of fortuitous event and it was agreed to be
insured with FGU for 20,000 cases or P858,500
ANCO filed against FGU
FGU alleged that ANCO and SMC failed to exercise ordinary
diligence or the diligence of a good father of the family in the care
and supervision of the cargoes
RTC: ANCO liable to SMC and FGU liable for 53% of the lost
cargoes
CA affirmed
ISSUE: W/N FGU should be exempted from liability to ANCO for
the lost cargoes because of a fortuitous event and negligence of
ANCO
HELD: YES. Affirmed with modification. Third-party complainant
is dismissed.
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.
both the D/B Lucio and the M/T ANCO were blatantly negligent
Such extraordinary diligence in vigilance over the goods is further
expressed in Articles 1734, 1735, and 1745 Nos. 5, 6, and 7 . . .
-PET: FGU Insurance Corporation
RES: CA; San Miguel Corporation (SMC); Estate of Ang Gui represented
by Lucio, Julian, Jaime, all surnamed Ang; Co To
Art. 1734. Common carriers are responsible for the loss,
destruction, or deterioration of the goods, unless the same is due
to any of the following causes only:
(1) Flood, storm, earthquake, lightning, or other natural disaster
or calamity;
Art. 1739. In order that the common carrier may be exempted
from responsibility, the natural disaster must have been the
proximate and only cause of the loss. However, the common
carrier must exercise due diligence to prevent or minimize loss
before, during and after the occurrence of flood, storm, or other
natural disaster in order that the common carrier may be
exempted from liability for the loss, destruction, or deterioration of
the goods . . .
Caso fortuito or force majeure
extraordinary events not foreseeable or avoidable, events that
could not be foreseen, or which though foreseen, were inevitable
not enough that the event should not have been foreseen or
anticipated, as is commonly believed but it must be one
impossible to foresee or to avoid - not in this case
other vessels in the port of San Jose, Antique, managed to
transfer to another place
To be exempted from responsibility, the natural disaster should
have been the proximate and only cause of the loss. There must
have been no contributory negligence on the part of the common
carrier.
there was blatant negligence on the part of M/T ANCO’s
crewmembers, first in leaving the engine-less barge D/B Lucio at
the mercy of the storm without the assistance of the tugboat, and
again in failing to heed the request of SMC’s representatives to
have the barge transferred to a safer place
When evidence show that the insured’s negligence or
recklessness is so gross as to be sufficient to constitute a willful
act, the insurer must be exonerated.
ANCO’s employees is of such gross character that it amounts to a
wrongful act which must exonerate FGU from liability under the
insurance contract
These are two separate Petitions for review assailing the
decision of the Court of Appeals which affirmed the decision of
RTC of Cebu City.
1. Evidence shows that Anco Enterprises Company
(ANCO), a partnership between Ang Gui and Co To,
was engaged in the shipping business. It owned the
M/T ANCO tugboat and the D/B Lucio barge which
were operated as common carriers.

2. Since the D/B Lucio had no engine of its own, it could
not maneuver by itself and had to be towed by a
tugboat for it to move from one place to another.
3. On September 23, 1979, SMC shipped from Mandaue
City, on board the D/B Lucio for towage by M/T ANCO:
a. Bill of Lading #1: 25,000 cases of Pale
Pilsen + 350 cases of Cerveza Negra to
Estancia, Iloilo
b. Bill of Lading #2: 15,000 cases of Pale
Pilsen + 200 cases of Cerveza Negra to San
Jose, Antique
4. When the barge and tugboat arrived at Antique in the
afternoon, the clouds over the area were dark and the
waves were already big. SMCs Supervisor, Fernando I.
Macabuag, requested ANCOs representative to
transfer the barge to a safer place because the vessel
might not be able to withstand the big waves. ANCO
did not heed the request because he was confident.
5. On October 01, 1979, 10pm, the crew of D/B Lucio
abandoned the vessel because the barges rope
attached to the wharf was cut off by the big waves.
6. Thus, ANCO failed to deliver to SMCs consignee
29,210 cases of Pale Pilsen and 550 cases of Cerveza
Negra. The value amounted to P1,346,197. SMC filed
a complaint for Breach of Contract of Carriage and
Damages against ANCO for the amount aforesaid plus
interest & damages
7. Upon Ang Guis death, ANCO, as a partnership, was
dissolved. Hence, SMC filed a second amended
complaint impleading the surviving partner, Co To and
the Estate of Ang Gui represented by Lucio, Julian and
Jaime, all surnamed Ang.
II.
8. ANCO admitted that the cases of beer were indeed
loaded on the vessel belonging to them. It claimed
however that it had an agreement with SMC that ANCO
would not be liable for any losses or damages resulting
to the cargoes by reason of fortuitous event. Since the
cases of beer Pale Pilsen and Cerveza Negra were lost
by reason of a storm, a fortuitous event which battered
and sunk the vessel in which they were loaded, they
should not be held liable.
9. ANCO filed a Third-Party Complaint against FGU
alleging that before the vessel of ANCO left for San
Jose, the cargoes were insured with FGU. ANCO
alleged that the third-party defendant corporation
should be held liable to indemnify or reimburse ANCO
whatever amounts, or damages, it may be required to
pay to SMC.
10. The trial court found that while the cargoes were
indeed lost due to fortuitous event, there was failure on
ANCOs part to observe the degree of diligence
required. The trial court thus held the Estate of Ang Gui
and Co To liable to SMC for the amount of the lost
shipment. FGU liable to bear 53% of the amount of the
lost cargoes.CA affirmed in toto.
I.
WON ANCO exercised due diligence?
II.
WON respondent Court of Appeals committed grave abuse
of discretion in holding FGU liable under the insurance
contract considering the circumstances surrounding the loss
of the cargoes?
NO.
ANCO claims that their crewmembers exercised due diligence to
prevent or minimize the loss of the cargoes but their efforts proved
no match to the forces unleashed by the typhoon. The argument
does not persuade.
Caso fortuito or force majeure by definition, are extraordinary
events not foreseeable or avoidable, events that could not be
foreseen, or which though foreseen, were inevitable. It is therefore
not enough that the event should not have been foreseen or
anticipated, as is commonly believed but it must be one
impossible to foresee or to avoid. In this case, the calamity which
caused the loss of the cargoes was not unforeseen nor was it
unavoidable. In fact, the other vessels in the port of San Jose,
Antique, managed to transfer to another place, a circumstance
which prompted SMCs District Sales Supervisor to request that
the D/B Lucio be likewise transferred.
To be exempted from responsibility, the natural disaster should
have been the proximate and only cause of the loss. There must
have been no contributory negligence on the part of the common
carrier.
FGU not liable.
It is a basic rule in insurance that the carelessness and
negligence of the insured or his agents constitute no defense on
the part of the insurer. This rule however presupposes that the
loss has occurred due to causes which could not have been
prevented by the insured, despite the exercise of due diligence.
The question now is whether there is a certain degree of
negligence on the part of the insured or his agents that will
deprive him the right to recover under the insurance contract.
According to the Court, while mistake and negligence of the
master or crew are incident to navigation and constitute a part of
the perils that the insurer is obliged to incur, such negligence or
recklessness must not be of such gross character as to amount to
misconduct or wrongful acts; otherwise, such negligence shall
release the insurer from liability under the insurance contract.
In the case at bar, both the trial court and the appellate court had
concluded from the evidence that the crewmembers of both the
D/B Lucio and the M/T ANCO were blatantly negligent.
Taking into account the circumstances present in the instant case,
concludes that the blatant negligence of ANCOs employees is of
such gross character that it amounts to a wrongful act which must
exonerate FGU from liability under the insurance contract.
Sulpicio Lines, Inc. vs. First Lepanto-Taisho Insurance
GR No. 140349, June 29, 2005
FACTS:
Taiyo Yuden Philippines, Inc. (owner of the goods) and Delbros,
Inc. (shipper) entered into a contract, evidenced by Bill of Lading
issued by the latter in favor of the owner of the goods, for Delbros,
Inc. to transport a shipment of goods consisting of 3 wooden
crates containing 136 cartons of inductors and LC compound on
board the V Singapore V20 from Cebu City to Singapore in favor
of the consignee, Taiyo Yuden Singapore Pte, Ltd. For the
carriage of said shipment from Cebu City to Manila, Delbros, Inc.
engaged the services of the vessel M/V Philippine Princess,
owned and operated by petitioner Sulpicio Lines, Inc. (carrier).
During the unloading of the shipment, one crate containing 42
cartons dropped from the cargo hatch to the pier apron. The
owner of the goods examined the dropped cargo, and upon an
alleged finding that the contents of the crate were no longer
usable for their intended purpose, they were rejected as a total
loss and returned to Cebu City. The owner of the goods filed a
claim with herein petitioner-carrier for the recovery of the value of
the rejected cargo which was refused by the latter. Thereafter, the
owner of the goods sought payment from respondent First
Lepanto-Taisho Insurance Corporation (insurer) under a marine
insurance policy issued to the former. Respondent-insurer paid
the claim less thirty-five percent (35%) salvage value or P194,
220.31. The payment of the insurance claim of the owner of the
goods by the respondent-insurer subrogated the latter to whatever
right or legal action the owner of the goods may have against
Delbros, Inc. and petitioner-carrier, Sulpicio Lines, Inc. Thus,
respondent-insurer then filed claims for reimbursement from
Delbros, Inc. and petitioner-carrier Sulpicio Lines, Inc. which were
subsequently denied. In 1992, respondent-insurer filed a suit for
damages with the trial court against Delbros, Inc. and herein
petitioner-carrier. Delbros, Inc. filed on 15 April 1993 its Answer
with Counterclaim and Cross-claim, alleging that assuming the
contents of the crate in question were trulyin bad order, fault is
with herein petitioner-carrier which was responsible forthe
unloading of the crates. Petitioner-carrier filed its Answer to
Delbros, Inc.’s cross-claim asserting that it observed extraordinary
diligence in the handling, storage and general care of the goods
ISSUE:
Whether or not petitioner is liable for the breach of
contract of carriage (vigilance over goods)?
RULING:
YES. There was damage suffered by the goods which consisted
in the destruction of one wooden crate and the tearing of two (2)
cardboard boxes therein which rendered them unfit to be sent to
Singapore. The falling of the crate was negligence on the part of
Sulpicio Lines, Inc. for which it cannot exculpate itself from liability
because it failed to prove that it exercised extraordinary diligence.
Delsan Transport Lines vs. American Home Assurance
GR No. 149019, August 15, 2006
FACTS:
Caltex engaged into a contract of freight with the
petitioner, Delsan Transport Lines, Inc., (Delsan), for a period of
one year whereby the said common carrier agreed to transport
Caltex’s industrial fuel oil from the Batangas-Bataan Refinery to
different parts of the country. Under the contract, petitioner took
on board its vessel, MT Maysun, 2,277.314 kiloliters of industrial
fuel oil of Caltex to be delivered to the Caltex Oil Terminal in
Zamboanga City. The shipment was insured with private
respondent, American Home Assurance Corporation (American
Home). The vessel sank in the early morning of August 15, 1986
near Panay Gulf in the Visayas taking with it the entire cargo of
fuel oil. Subsequently, American Home paid Caltex the sum of
Php 5,096,635.57 representing the insured value of the cargo.
Exercising its right to subrogation under Article 2207 of the New
Civil Code, the American Home demanded the Delsan the same
amount it paid to Caltex. Due to its failure to collect from Delsan
despite prior demand, American Home filed a complaint with the
RTC of Makati for collection of a sum of money. The trial court
dismissed the complaint against Delsan. It ruled that the vessel,
MT Maysun, was seaworthy and that the incident was caused by
unexpected inclement weather condition or force majeure, thus
exempting the common carrier from liability for the loss of its
cargo. The CA reversed. It gave credence to the weather report
issued by PAGASA which stated that the waves were only .7 to 2
meters in height in the vicinity of the Panay Gulf at the day the
ship sank, in contrast to the claim of the crew of the ship that the
waves were 20 feet high.
ISSUE:
Whether or not the payment made by American Home
to Caltex for the insured value of the lost cargo amounted to an
admission that the vessel was seaworthy, thus precluding any
action for recovery against the petitioner.
RULING: by the unexplained sinking of its vessel, MT Maysun, while in
transit.
NO. The payment made by American Home for the
insured value of the lost cargo operates as waiver of its right to
BREACH OF CONTRACT OF CARRIAGE
enforce the term of the implied warranty against Caltex under the
marine insurance policy. However, the same cannot be validly
[ GR No. 213418, Sep 21, 2016 ]
interpreted as an automatic admission of the vessel’s
seaworthiness by American Home as to foreclose recourse
ALFREDO S.RAMOS v. CHINA SOUTHERN AIRLINES CO.
against Delsan for any liability under its contractual obligation as a
LTD. +
common carrier. The fact of payment grants American Home
subrogatory right which enables it to exercise legal remedies that
For resolution of the Court is this Petition for Review
would otherwise be available to Caltex as owner of the lost cargo
on Certiorari[1] filed by petitioners Alfredo S. Ramos, Conchita S.
against Delsan, the common carrier.
Ramos, Benjamin B. Ramos, Nelson T. Ramos and Robinson T.
Ramos, seeking to reverse and set aside the Decision[2] dated 19
March 2013 and Resolution[3] dated 9 July 2014 of the Court of
Appeals (CA) in CA-G.R. CV. No. 94561. The assailed decision
From the nature of their business and for reasons of public policy,
and resolution affirmed with modification the 23 March 2009
common carriers are bound to observe extraordinary diligence in
Decision[4] of the Regional Trial Court (RTC) of Manila, Branch 36,
the vigilance over the goods and for the safety of passengers
which ordered respondent China Southern Airlines to pay
transported by them, according to all the circumstances of each
petitioners the amount of P692,000.00, representing the amount
case. In the event of loss, destruction or deterioration of the
of damages and attorney's fees. On appeal, the appellate court
insured goods, common carriers shall be responsible unless the
affirmed the award of actual damages but deleted the order for
same is brought about, among others, by flood, storm,
payment of moral and exemplary damages in the amount of
earthquake, lightning or other natural disaster or calamity. In all
P600,000.00.[5]
other cases, if the goods are lost, destroyed or deteriorated.
Common carriers are presumed to have been at fault or to have
acted negligently, unless they prove they observed extraordinary
diligence.
The Facts
On 7 August 2003, petitioners purchased five China Southern
In order to escape liability for the loss of its cargo of industrial fuel
Airlines roundtrip plane tickets from Active Travel Agency for
oil belonging to Caltex, Delsan attributes the sinking of MT
$985.00.[6]It is provided in their itineraries that petitioners will be
Maysun to fortuitous event or force majeure. Although the
leaving Manila on 8 August 2003 at 0900H and will be leaving
testimony of the captain and chief mate that there were strong
Xiamen on 12 August 2003 at 1920H.[7] Nothing eventful
winds and waves 20 feet high was effectively rebutted and belied
happened during petitioners' flight going to Xiamen as they were
by the weather report of PAGASA. Thus, as the CA correctly
able to successfully board the plane which carried them to Xiamen
ruled, Delsan’s vessel, MT Maysun, sank with its entire cargo for
International Airport. On their way back to the Manila, however,
the reason that it was not seaworthy. There was no squall or bad
petitioners were prevented from taking their designated flight
weather or extremely poor sea condition in the vicinity where the
despite the fact that earlier that day an agent from Active Tours
said vessel sank.
informed them that their bookings for China Southern Airlines
1920H flight are confirmed.[8] The refusal came after petitioners
already checked in all their baggages and were given the
corresponding claim stubs and after they had paid the terminal
Additionally, the exoneration of MT Maysun’s officers and crew
fees. According to the airlines' agent with whom they spoke at the
merely concern their respective administrative liabilities. It does
airport, petitioners were merely chance passengers but they may
not in any way operate to absolve Delsan the common carrier
be allowed to join the flight if they are willing to pay an additional
from its civil liability arising from its failure to observe extraordinary
500 Renminbi (RMB) per person. When petitioners refused to
diligence in the vigilance over the goods it was transporting and
defray the additional cost, their baggages were offloaded from the
for the negligent acts or omissions of its employees, the
plane and China Southern Airlines 1920H flight then left Xiamen
determination of which properly belongs to the courts. In the case
International Airport without them.[9] Because they have business
at bar, Delsan is liable for the insured value of the lost cargo of
commitments waiting for them in Manila, petitioners were
industrial fuel oil belonging to Caltex for its failure to rebut the
constrained to rent a car that took them to Chuan Chio Station
presumption of fault or negligence as common carrier occasioned
where they boarded the train to Hongkong.[10] Upon reaching
Hong Kong, petitioners purchased new plane tickets from
Philippine Airlines (PAL) that flew them back to Manila.[11]
Upon arrival in Manila, petitioners went to Active Travel to inform
them of their unfortunate fate with China Southern Airlines. In their
effort to avoid lawsuit, Active Travel offered to refund the price of
the plane tickets but petitioners refused to accept the offer.
Petitioners then went to China Southern Airlines to demand for the
reimbursement of their airfare and travel expenses in the amount
of P87,375.00. When the airline refused to accede to their
demand, petitioners initiated an action for damages before the
RTC of Manila against China Southern Airlines and Active Travel.
In their Complaint docketed as Civil Case No. 04-109574,
petitioners sought for the payment of the amount of P87,375.00 as
actual damages, P500,000.00 as moral damages, P500,000.00 as
exemplary damages and cost of the suit.[12]
In their Answer,[13] China Southern Airlines denied liability by
alleging that petitioners were not confirmed passengers of the
airlines but were merely chance passengers. According to the
airlines, it was specifically provided in the issued tickets that
petitioners are required to re-confirm all their bookings at least 72
hours before their scheduled time of departures but they failed to
do so which resulted in the automatic cancellation of their
bookings.
The RTC then proceeded with the reception of evidence after the
pre-trial conference.
On 23 March 2009, the RTC rendered a Decision[14] in favor of the
petitioners and ordered Chkia Southern Airlines to pay damages
in the amount of P692,000.00, broken down as follows:
"WHEREFORE, judgment is hereby rendered ordering the
defendant [China Southern Airlines] to pay [petitioners]:
1. The sum of [P]62,000.00 as actual damages;
2. The sum of [P]300,000.00 as moral damages;
3. The sum of [P]300,000.00 as exemplary damages; and
4. The sum of [P]30,000.00 for attorney's fees.
The defendants' counterclaim against plaintiffs are [hereby]
dismissed for insufficiency of evidence [enough] to sustain the
damages claimed."[15]
On appeal, however, the CA modified the RTC Decision by
deleting the award for moral and exemplary damages. According
to the appellate court, petitioners failed to prove that China
Southern Airlines' breach of contractual obligation was attended
with bad faith.[16]The disquisition of the CA reads:
"xxx. Where in breaching the contract, the defendant is not shown
to have acted fraudulently or in bad faith, liability for damages is
limited to the natural and probable consequences of the breach of
the obligation and which the parties had foreseen or could
reasonably have foreseen; and in that case, such liability would
not include liability for moral and exemplary damages.
In this case, We are not persuaded that [China Southern Airlines]
breach of contractual obligation had been attended by bad faith or
malice or gross negligence amounting to bad faith. On the
contrary, it appears that despite [petitioner's] failure to "re-confirm"
their bookings, [China Southern Airlines] exerted diligent efforts to
comply with its obligation to [petitioners]. If at the outset, [China
Southern Airlines] simply did not intend to comply with its promise
to transport [petitioners] back to Manila, it would not have taken
the trouble of proposing that the latter could still board the plane
as "chance passengers" provided [that] they will pay the
necessary pay and penalties.
Thus, We believe and so hold that the damages recoverable by
[petitioners] are limited to the peso value of the PAL ticket they
had purchased for their return flight from Xiamen, plus attorney's
fees, in the amount of [P]30,000.00, considering that [petitioners]
were ultimately compelled to litigate their claim[s] against [China
Southern Airlines]."[17]
Since China Southern, Airlines' refusal to let petitioners board the
plane was not attended by bad faith, the appellate court decided
not to award petitioners moral and exemplary damages. The CA
disposed in this wise:
"WHEREFORE, premises considered, the instant appeal is
hereby AFFIRMED with MODIFICATION in that the award of
moral and exemplary damages are hereby DELETED."[18]
Dissatisfied, petitioners timely interposed a Motion for Partial
Reconsideration which was partially granted by the CA in a
Resolution[19]dated 9 July 2014, to wit:
"ACCORDINGLY, the instant Motion is PARTIALLY GRANTED.
The Decision dated 19 March 2013 rendered by this Court in CA-
G.R. CV No. 94561 is hereby MODIFIED in that [China Southern
Airlines] is ORDERED to pay [petitioners] interest of 6% per
annum on the P62,000.00 as actual damages from the finality of
this Court's Decision until the same is fully satisfied."[20]
Unflinching, petitioners elevated the matter before the Court by
filing the instant Petition for Review on Certiorari assailing the CA
Decision and Resolution on the following grounds:
The Issues
I.THE COURT OF APPEALS COMMITTED GRAVE AND
SERIOUS ERROR WHEN IT DELETED THE AWARDS OF
MORAL AND EXEMPLARY DAMAGES, A DEPARTURE FROM
ESTABLISHED DOCTRINES THAT PASSENGERS WHO ARE
BUMPED-OFF ARE ENTITLED TO MORAL AND EXEMPLARY
DAMAGES;
I.THE COURT OF APPEALS COMMITTED GRAVE AND
SERIOUS ERROR WHEN IT DECLARED THAT BUMPING OFF
OF THE PETITIONERS WAS NOT ATTENDED BY BAD FAITH
AND MALICE CONTRARY TO THE FINDINGS OF THE LOWER
COURT;
III.THE COURT OF APPEALS COMMITTED GRAVE AND
SERIOUS ERROR WHEN IT HELD THAT THE LEGAL
INTEREST COMMENCE ONLY FROM THE FINALITY OF THE
DECISION INSTEAD OF FROM THE DATE OF EXTRA-
JUDICIAL DEMAND ON 18 AUGUST 2003.[21]
The Court's Ruling
We resolve to grant the petition.
A contract of carriage, in this case, air transport, is intended to
serve the traveling public and thus, imbued with public
interest.[22] The law governing common carriers consequently
imposes an exacting standard of conduct,[23] viz:
"1755 of the New Civil Code. A common carrier is bound to carry
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."
When an airline issues a ticket to a passenger confirmed on a
particular flight, on a certain date, a contract of carriage arises,
and the passenger has every right to expect that he would fly on
that flight and on that date. If that does not happen, then the
carrier opens itself to a suit for breach of contract of carriage.[24] In
an action based on a breach of contract of carriage, the aggrieved
party does not have to prove that the common carrier was at fault
or was negligent.[25] All he has to prove is the existence of the
contract and the fact of its non-performance by the carrier,
through the latter's failure to carry the passenger to its
destination.[26]
It is beyond question in the case at bar that petitioners had an
existing contract of air carriage with China Southern Airlines as
evidenced by the airline tickets issued by Active Travel. When
they showed up at the airport and after they went through the
routine security check including the checking in of their luggage
and the payment of the corresponding terminal fees, petitioners
were not allowed by China Southern Airlines to board on the
plane. The airlines' claim that petitioners do not have confirmed
reservations cannot be given credence by the Court. The
petitioners were issued two-way tickets with itineraries indicating
the date and time of their return flight to Manila. These are binding
contracts of carriage.[27] China Southern Airlines allowed
petitioners to check in their luggage and issued the necessary
claim stubs showing that they were part of the flight. It was only
after petitioners went through all the required check-in procedures
that they were informed by the airlines that they were merely
chance passengers. Airlines companies do not, as a practice,
accept pieces of luggage from passengers without confirmed
reservations. Quite tellingly, all the foregoing circumstances lead
us to the inevitable conclusion that petitioners indeed were
bumped off from the flight. We cannot from the records of this
case deduce the true reason why the airlines refused to board
petitioners back to Manila. What we can be sure of is the
unacceptability of the proffered reason that rightfully gives rise to
the claim for damages.
The prologue shapes the body of the petitioners' rights, that is,
that they are entitled to damages, actual, moral and exemplary.
There is no doubt that petitioners are entitled to actual or
compensatory damages. Both the RTC and the CA uniformly held
that there was a breach of contract committed by China Southern
Airlines when it failed to deliver petitioners to their intended
destination, a factual finding that we do not intend to depart from
in the absence of showing that it is unsupported by evidence. As
the aggrieved parties, petitioners had satisfactorily proven the
existence of the contract and the fact of its non-performance by
China Southern Airlines; the concurrence of these elements called
for the imposition of actual or compensatory damages.
With respect to moral damages, the following provision of the New
Civil Code is instructive:
Article 2220. Willful injury to property may be a legal ground for
awarding moral damages if the court should find that, under the
circumstances, such damages are justly due. The same rule
applies to breaches of contract where the defendant acted
fraudulently or in bad faith.
Bad faith does not simply connote bad judgment or negligence. It
imports dishonest purpose or some moral obliquity and conscious
doing of a wrong. It means breach of a known duty through some
motive, interest or ill will that partakes the nature of fraud. Bad
faith is in essence a question of intention.[28]
In Japan Airlines v. Simangan,[29] the Court took the occasion to
expound on the meaning of bad faith in a breach of contract of
carriage that merits the award of moral damages: The last issue is the reckoning point of the 6% interest on the
money judgment. Following this Court's ruling in Nacar v. Gallery
Frames,[33] we agree with the petitioners that the 6% rate of
"Clearly, JAL is liable for moral damages. It is firmly settled that interest per annum shall be reckoned from the date of their
moral damages are recoverable in suits predicated on breach of a extrajudicial demand on 18 August 2003 until the date of finality of
contract of carriage where it is proved that the carrier was guilty of this judgment. The total amount shall thereafter earn interest at
fraud or bad faith, as in this case. Inattention to and lack of care the rate of six percent (6%) per annum from such finality of
for the interests of its passengers who are entitled to its utmost judgment until its satisfaction.
consideration, particularly as to their convenience, amount to bad
faith which entitles the passenger to an award of moral damages. WHEREFORE, premises considered, the petition is GRANTED.
What the law considers as bad faith which may furnish the ground The Court hereby AWARDS petitioners the following amounts:
for an award of moral damages would be bad faith in securing the
contract and in the execution thereof, as well as in the
enforcement of its terms, or any other kind of deceit." P62,000.00 as actual damages, with 6% interest per annum
from date of extrajudicial demand on 18 August 2003 until
Applying the foregoing yardstick in the case at bar, We find that (a) finality of this judgment, and the total amount to thereafter earn
the airline company acted in bad faith in insolently bumping interest at 6% per annum from finality of judgment until full
petitioners off the flight after they have completed all the pre- satisfaction;
departure routine. Bad faith is evident when the ground personnel
of the airline company unjustly and unreasonably refused to board (b) P300,000.00 as moral damages; and
petitioners to the plane which compelled them to rent a car and
take the train to the nearest airport where they bought new sets of (c) P300,000.00 as exemplary damages.
plane tickets from another airline that could fly them home.
Petitioners have every reason to expect that they would be
transported to their intended destination after they had checked in
their luggage and had gone through all the security checks.
Calalas vs. CA, et. al.
Instead, China Southern Airlines offered to allow them to join the
flight if they are willing to pay additional cost; this amount is on top
GR No. 122039, May 31, 2000
of the purchase price of the plane tickets. The requirement to pay
an additional fare was insult upon injury. It is an aggravation of the
FACTS:
breach of contract. Undoubtedly, petitioners are entitled to the
award of moral damages. The purpose of awarding moral
Private respondent Eliza Jujeurche G. Sunga took a
damages is to enable the injured party to obtain means, diversion
passenger jeepney owned and operated by petitioner Vicente
or amusement that will serve to alleviate the moral suffering [that]
Calalas. As the jeepney was already full, Calalas gave Sunga an
he has undergone by reason of defendant['s] culpable action.[30]
stool at the back of the door at the rear end of the vehicle. Along
the way, the jeepney stopped to let a passenger off. Sunga
China Southern Airlines is also liable for exemplary damages as it
stepped down to give way when an Isuzu truck owned by
acted in a wantonly oppressive manner as succinctly discussed
Francisco Salva and driven by Iglecerio Verena bumped the
above against the petitioners. Exemplary damages which are
jeepney. As a result, Sunga was injured. Sunga filed a complaint
awarded by way of example or correction for the public good, may
against Calalas for violation of contract of carriage. Calalas filed a
be recovered in contractual obligations, as in this case, if
third party complaint against Salva. The trial court held Salva
defendant acted in wanton, fraudulent, reckless, oppressive or
liable and absolved Calalas, taking cognizance of another civil
malevolent manner.[31]
case for quasi-delict wherein Salva and Verena were held liable to
Calalas. The Court of Appeals reversed the decision and found
Article 2216 of the Civil Code provides that assessment of
Calalas liable to Sunga for violation of contract of carriage.
damages is left to the discretion of the court according to the
circumstances of each case. This discretion is limited by the
ISSUE:
principle that the amount awarded should not be palpably
excessive as to indicate that it was the result of prejudice or
Whether or not Calalas exercised the extraordinary
corruption on the part of the trial court. Simply put, the amount of
diligence required in the contract of carriage.
damages must be fair, reasonable and proportionate to the injury
suffered.[32] With fairness as the benchmark, We find adequate the
amount of P300,000.00 each for moral and exemplary damages
imposed by the trial court.
RULING:
NO. First, 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. Second, it is undisputed that petitioner's driver took in more
passengers than the allowed seating capacity of the jeepney. 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. 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. Petitioner should have foreseen the danger of
parking his jeepney with its body protruding two meters into the
highway.
PHILIPPINE AIRLINES, INC., Petitioner, vs.
COURT OF APPEALS Respondents.
FACTS:
Sometime before 2 May 1980, private respondents spouses
Buncio purchased from petitioner Philippine Airlines, Incorporated,
two plane tickets for their two minor children, (Deanna), then 9
years of age, and (Nikolai), then 8 years old. Since Deanna and
Nikolai will travel as unaccompanied minors, petitioner required
private respondents to accomplish, sign and submit to it an
indemnity bond. Private respondents complied with this
requirement. For the purchase of the said two plane tickets,
petitioner agreed to transport Deanna and Nikolai on 2 May 1980
from Manila to San Francisco, California, through one of its
planes. Petitioner also agreed that upon the arrival of Deanna and
Nikolai in San Francisco Airport on 3 May 1980, it would again
transport the two on that same day through a connecting flight
from San Francisco to Los Angeles, via another airline, United
Airways. Deanna and Nikolai then will be met by their
grandmother, Mrs. Regalado, at the Los Angeles Airport on their
scheduled arrival on 3 May 1980.
On 2 May 1980, Deanna and Nikolai boarded Flight 106 in Manila.
On 3 May 1980, Deanna and Nikolai arrived at the San Francisco
Airport. However, the staff of United Airways refused to take
aboard Deanna and Nikolai for their connecting flight to Los
Angeles because petitioner’s personnel in San Francisco could
not produce the indemnity bond accomplished and submitted by
private respondents. The said indemnity bond was lost by
petitioner’s personnel during the previous stop-over in Honolulu,
Hawaii. Deanna and Nikolai were then left stranded at the San
Francisco Airport. Subsequently, Mr. Strigl, then the Lead Traffic
Agent of petitioner in San Francisco took Deanna and Nikolai to
his residence where they stayed overnight.
Meanwhile, Mrs. Regalado and several relatives waited for the
arrival of Deanna and Nikolai at the Los Angeles Airport (LAX).
When United Airways landed at the LAX and its passengers
disembarked, Mrs. Regalado sought Deanna and Nikolai but she
failed to find them. Mrs. Regalado called private respondents and
informed them that Deanna and Nikolai did not arrive at LAX.
Private respondents inquired about the location of Deanna and
Nikolai from petitioner’s personnel, but the latter replied that they
were still verifying their whereabouts.On the morning of 4 May
1980, Strigl took the kids to San Francisco Airport where the two
boarded a Western Airlines plane bound for Los Angeles. Later
that day, Deanna and Nikolai arrived at the Los Angeles Airport
where they were met by Mrs. Regalado.
G.R. No. 123238
On July 1980, private respondents, through their lawyer, sent a
letter to petitioner demanding payment of 1 million pesos as
September 22, 2008
damages for the gross negligence and inefficiency of its
employees in transporting Deanna and Nikolai. Petitioner did not
heed the demand.
On November 1981, private respondents filed a complaint for
damages against petitioner before the RTC. Private respondents
alleged that Deanna and Nikolai were not able to take their
connecting flight from San Francisco to Los Angeles as scheduled
because the required indemnity bond was lost on account of the
gross negligence and malevolent conduct of petitioner’s
personnel. As a consequence thereof, Deanna and Nikolai were
stranded in San Francisco overnight, thereby exposing them to
grave danger. This dilemma caused Deanna, Nikolai, Mrs.
Regalado and private respondents to suffer serious anxiety,
mental anguish, wounded feelings, and sleepless nights.
After trial, the RTC rendered a decision holding petitioner liable for
damages for breach of contract of carriage. It also held that
petitioner should pay exemplary damages by way of example or
correction for the public good under Article 2229 and 2232 of the
Civil Code, plus attorney’s fees and costs of suit.
Petitioner filed the instant petition. Petitioner maintains that moral
damages may be awarded in a breach of contract of air carriage
only if the mishap results in death of a passenger or if the carrier
acted fraudulently or in bad faith, that is, by breach of a known
duty through some motive of interest or ill will, some dishonest
purpose or conscious doing of wrong; if there was no finding of
fraud or bad faith on its part; if, although it lost the indemnity bond,
there was no finding that such loss was attended by ill will, or
some motive of interest, or any dishonest purpose; and if there
was no finding that the loss was deliberate, intentional or
consciously done.
ISSUE:
Whether or not petitioner is correct that it should not pay moral
damages.
RULING:
No. When an airline issues a ticket to a passenger, confirmed for
a particular flight on a certain date, a contract of carriage arises.
The passenger has every right to expect that he be transported on
that flight and on that date, and it becomes the airline’s obligation
to carry him and his luggage safely to the agreed destination
without delay. If the passenger is not so transported or if in the
process of transporting, he dies or is injured, the carrier may be
held liable for a breach of contract of carriage.
In breach of contract of air carriage, moral damages may be
recovered where (1) the mishap results in the death of a
passenger; or (2) where the carrier is guilty of fraud or bad faith;
or (3) where the negligence of the carrier is so gross and reckless
as to virtually amount to bad faith.
It was established in the instant case that since Deanna and
Nikolai would travel as unaccompanied minors, petitioner required
private respondents to accomplish, sign and submit to it an
indemnity bond. Evidently, petitioner was fully aware that Deanna
and Nikolai would travel as unaccompanied minors and, therefore,
should be specially taken care of considering their tender age and
delicate situation.
The foregoing circumstances reflect petitioner’s utter lack of care
for and inattention to the welfare of Deanna and Nikolai as
unaccompanied minor passengers. They also indicate petitioner’s
failure to exercise even slight care and diligence in handling the
indemnity bond. Clearly, the negligence of petitioner was so gross
and reckless that it amounted to bad faith.
It is worth emphasizing that petitioner, as a common carrier, is
bound by law to exercise extraordinary diligence and utmost care
in ensuring for the safety and welfare of its passengers with due
regard for all the circumstances. The negligent acts of petitioner
signified more than inadvertence or inattention and thus
constituted a radical departure from the extraordinary standard of
care required of common carriers.
As we have earlier found, petitioner breached its contract of
carriage with private respondents, and it acted recklessly and
malevolently in transporting Deanna and Nikolai as
unaccompanied minors and in handling their indemnity bond. We
have also ascertained that private respondents are entitled to
moral damages because they have sufficiently established
petitioner’s gross negligence which amounted to bad faith. This
being the case, the award of exemplary damages is warranted.
The records show that Mrs. Regalado died in 1995 at the age of
74, while Deanna passed away in 2003 at the age of 32. This
being the case, the foregoing award of damages plus interests in
their favor should be given to their respective heirs.
NOTICE OF CLAIM
Philippine Charter Insurance vs. Chemoil
GR No. 136888, June 29, 2005
FACTS:
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 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 and another 436.70 metric tons of DOP
valued at US$634,724.89 to the Philippines. The consignee was
Plastic Group Phils., Inc. in Manila. PGP insured the cargo with
Philippine Charter Insurance Corporation against all risks. The
insurance was under Marine Policies No. MRN-30721 dated 06
February 1991. Marine Endorsement No. 2786 dated 11 May
1991 was attached and formed part of MRN-30721, amending the
latter’s insured value to P24,667,422.03, and reduced the
premium accordingly. The ocean tanker MT “TACHIBANA”
unloaded the cargo to the tanker barge, which shall transport the
same to Del Pan Bridge in Pasig River and haul it by land to
PGP’s storage tanks in Calamba, Laguna. Upon inspection by
PGP, the samples taken from the shipment showed discoloration
demonstrating that it was damaged. PGP then sent a letter where
it formally made an insurance claim for the loss it sustained.
Petitioner requested the GIT Insurance Adjusters, Inc. (GIT), to
conduct a Quantity and Condition Survey of the shipment which
issued a report stating that DOP samples taken were discolored.
Inspection of cargo tanks showed manhole covers of ballast tanks’
ceilings loosely secured and 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.
Petitioner paid PGP the full and final payment for the loss and
issued a Subrogation Receipt. Meanwhile, PGP paid the
respondent the as full payment for the latter’s services. On 15 July
1991, an action for damages was instituted by the petitioner-
insurer against respondent-carrier before the RTC, Br.16, City of
Manila. Respondent filed an answer which admitted that it
undertook to transport the shipment, but alleged that before the
DOP was loaded into its barge, the representative of PGP,
Adjustment Standard Corporation, inspected it and found the
same clean, dry, and fit for loading, thus accepted the cargo
without any protest or notice. As carrier, no fault and negligence
can be attributed against respondent as it exercised extraordinary
diligence in handling the cargo. After due hearing, the trial court
rendered a Decision in favor of plaintiff. On appeal, the Court of
Appeals promulgated its Decision reversing the trial court. A
petition for review on certiorari was filed by the petitioner with this
Court.
ISSUE:
Whether or not the notice of claim was filed within the required
period?
RULING:
YES. The petitioner contends that the notice of contamination was
given by PGP employee, to Ms. Abastillas, at the time of the
delivery of the cargo, and therefore, within the required period.
The respondent, however, claims that the supposed notice given
by PGP over the telephone was denied by Ms. Abastillas. The
Court of Appeals declared that a telephone call made to
defendant-company could constitute substantial compliance with
the requirement of notice. However, it must be pointed out that
compliance with the period for filing notice is an essential part of
the requirement.
CONTRIBUTORY NEGLIGENCE
Estacion vs. Bernardo, et. al
GR No. 144723, February 27, 2006
FACTS:
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. Niño, 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.
ISSUE:
Whether or not the petitioner’s liability be equitably
reduced due to contributory negligence?
RULING:
NO. As the employer of Gerosano, petitioner is primarily and
solidarily liable for the quasi-delict 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