CASES ON COMMERCIAL LAW

1) G.R. No. 157917 August 29, 2012

SPOUSES TEODORO and NANETTE PERENA, Petitioners,
vs. SPOUSES TERESITA PHILIPPINE NICOLAS and L. ZARATE, NATIONAL RAILWAYS, and the COURT OF
APPEALS Respondents.

FACTS:

The Pereñas were engaged in the business of transporting students from their respective residences in
Parañaque City to Don Bosco in Pasong Tamo, Makati City, and back.

The Zarates contracted the Pereñas to transport Aaron to and from Don Bosco. The spouses Parenas
employed a driver and picked up Aron. Considering were already running late because of the heavy
vehicular traffic, the van traverse the railroad crossing. However, the train hit the rear end of the van, and
the impact threw nine of the 12 students in the rear, including Aaron, out of the van. Aaron landed in the
path of the train, which dragged his body and severed his head, instantaneously killing him. Alano fled
the scene on board the train, and did not wait for the police investigator to arrive.

Devastated by the early and unexpected death of Aaron, the Zarates commenced this action for damages
against Alfaro, the Pereñas, PNR and Alano. RTC rendered its decision, and judgment is rendered in favor
of the plaintiff. On November 13, 2002, the CA promulgated its decision, affirming the findings of the
RTC, but limited the moral damages to ₱ 2,500,000.00; and deleted the attorney’s fees because the RTC
did not state the factual and legal bases

ISSUE:

Whether the lower court erred when it upheld the trial court’s decision holding the petitioners jointly and
severally liable to pay damages with Philippine National Railways and dismissing their cross-claim against
the latter.

RULING:

The petition has no merit. We find no adequate cause to differ from the conclusions of the lower courts
that the Pereñas operated as a common carrier; and that their standard of care was extraordinary
diligence, not the ordinary diligence of a good father of a family.

A carrier is a person or corporation who undertakes to transport or convey goods or persons from one
place to another, gratuitously or for hire. The carrier is classified either as a private/special carrier or as a
common/public carrier.10 A private carrier is one who, without making the activity a vocation, or without
holding himself or itself out to the public as ready to act for all who may desire his or its services,
undertakes, by special agreement in a particular instance only, to transport goods or persons from one
place to another either gratuitously or for hire. The provisions on ordinary contracts of the Civil Code
govern the contract of private carriage. The diligence required of a private carrier is only ordinary, that is,
the diligence of a good father of the family. In contrast, a common carrier is a person, corporation, firm
or association engaged in the business of carrying or transporting passengers or goods or both, by land,
water, or air, for compensation, offering such services to the public. At any rate, the lower courts
correctly held both the Pereñas and the PNR "jointly and severally" liable for damages arising from the
death of Aaron.

The court DENY the petition for review on certiorari; AFFIRM the decision promulgated on November
13, 2002; and ORDER the petitioners to pay the costs of suit.
2) G.R. No. 150403 January 25, 2007
CEBU SALVAGE CORPORATION, Petitioner,
vs. PHILIPPINE HOME ASSURANCE CORPORATION, Respondent

FACTS:

The petitioner Cebu Salvage Corporation and respondent Philippine Home Assurance Corporation are
involved in a dispute regarding the liability for the loss of cargo resulting from the sinking of a ship.

On November 12, 1984, petitioner entered into a voyage charter with Maria Cristina Chemicals Industries,
Inc. (MCCII) to transport silica quartz from Ayungon, Negros Occidental to Tagoloan, Misamis Oriental.
The cargo was loaded on board the M/T Espiritu Santo, which sank on December 24, 1984, resulting in
the total loss of the cargo.

MCCII filed a claim with its insurer, respondent, who paid the claim and was subrogated to MCCII's rights.
Respondent filed a case against petitioner for reimbursement of the amount it paid MCCII.
The Regional Trial Court (RTC) ruled in favor of respondent, and the Court of Appeals (CA) affirmed the
decision.

ISSUE:

Whether a carrier be held liable for the loss of cargo resulting from the sinking of a ship it does not own?

RULING:

The Supreme Court denied the petition and upheld the rulings of the lower courts, holding petitioner
liable for the loss of cargo. Petitioner failed to prove that it exercised extraordinary diligence to prevent
the loss or that it was due to some casualty or force majeure.

The Court based its decision on the nature of the agreement between petitioner and MCCII, which was a
contract of carriage. Despite not owning the vessel, petitioner actively negotiated and solicited MCCII's
account, offered its services to ship the cargo, and proposed to utilize the M/T Espiritu Santo.
As a common carrier, petitioner was bound to observe extraordinary diligence over the goods it
transported.
Common carriers are responsible for the loss of goods, unless they can prove that it was caused by the
causes specified in Article 1734 of the Civil Code.

Petitioner's argument that the contract was a contract of hire between MCCII and the vessel owner was
rejected, as the voyage charter clearly indicated that petitioner was the "owner/operator" of the vessel.
The Court also dismissed petitioner's contention that MCCII should be held liable for its own loss, as the
cargo insurance being for the charterer's account did not absolve the carrier from liability for the breach
of its contract of carriage.

The Court held that the voyage charter was a contract of affreightment, making petitioner liable for the
loss of the goods.
3) July 11, 2016 G.R. No. 194121
TORRES-MADRID BROKERAGE, INC., Petitioner
vs. FEB MITSUI MARINE INSURANCE CO., INC. and BENJAMIN P. MANALASTAS, doing business under the
name of BMT TRUCKING SERVICES, Respondents

FACTS:

Sony Philippines engaged the services of TMBI to facilitate, process, withdraw and deliver the shipment
from the port to its warehouse in Biñan, Laguna. TMBI, who did not own any delivery trucks
subcontracted the services of Benjamin Manalastas‘ company, BMT Trucking Services (BMT), to transport
the shipment from the port to the Biñan warehouse. TMBI notified Sony who had no objections to the
arrangement.

Four trucks left BMT’s garage for Laguna. However, only three trucks arrived at Sony’s Biñan warehouse.
The other truck, driven by Rufo Reynaldo Lapesura was found abandoned along the Muntinlupa City. Both
the driver and the shipment were missing. TMBI notified Sony of the loss. It also sent BMT a letter
demanding payment for the lost shipment. BMT refused to pay, insisting that the goods were “hijacked.”

Sony filed an insurance claim with Mitsui, the insurer of the goods. Mitsui paid Sony PHP7,293,386.23
corresponding to the value of the lost goods. After being subrogated to Sony’s rights, Mitsui sent TMBI a
demand letter for payment of the lost goods. TMBI refused to pay Mitsui’s claim. As a result, Mitsui filed a
complaint against TMBI.

The RTC rendered a decision that TMBI and Benjamin Manalastas are jointly and solidarily liable to pay
Mitsui. It held that TMBI and Manalastas were common carriers and had acted negligently. Court of
Appeals affirmed the RTC’s decision.

ISSUE:

Whether TMBI is a common carrier

RULING:

YES. A brokerage may be considered a common carrier if it also undertakes to deliver the goods for its
customers. Common carriers are persons, corporations, firms or associations engaged in the business of
transporting passengers or goods or both, by land, water, or air, for compensation, offering their services
to the public.

Despite TMBI’s present denials, we find that the delivery of the goods is an integral, albeit ancillary, part
of its brokerage services. TMBI admitted that it was contracted to facilitate, process, and clear the
shipments from the customs authorities, withdraw them from the pier, then transport and deliver them to
Sony’s warehouse in Laguna. That TMBI does not own trucks and has to subcontract the delivery of its
clients’ goods, is immaterial. As long as an entity holds itself to the public for the transport of goods as a
business, it is considered a common carrier regardless of whether it owns the vehicle used or has to
actually hire one.

TMBI’s customs brokerage services including the transport/delivery of the cargo — are available to
anyone willing to pay its fees. Given these circumstances, we find it undeniable that TMBI is a common
carrier. Despite the subcontract, TMBI remained responsible for the cargo. Under Article 1736, a common
carrier’s extraordinary responsibility over the shipper’s goods lasts from the time these goods are
unconditionally placed in the possession of, and received by, the carrier for transportation, until they are
delivered, actually or constructively, by the carrier to the consignee. That the cargo disappeared during
transit while under the custody of BMT, TMBI’s subcontractor did not diminish nor terminate TMBI’s
responsibility over the cargo. Article 1735 of the Civil Code presumes that it was at fault.
4) G.R. No. 186312 June 29, 2010
SPOUSES DANTE CRUZ and LEONORA CRUZ, Petitioners,
vs. SUN HOLIDAYS, INC., Respondent.

FACTS:

Spouses Dante and Leonora Cruz (petitioners) lodged a Complaint on January 25, 20011 against Sun
Holidays, Inc. (respondent) with the Regional Trial Court (RTC) of Pasig City for damages arising from the
death of their son Ruelito C. Cruz (Ruelito) who perished with his wife on September 11, 2000 on board
the boat M/B Coco Beach III that capsized en route to Batangas from Puerto Galera, Oriental Mindoro
where the couple had stayed at Coco Beach Island Resort (Resort) owned and operated by respondent.

As petitioners declined respondent’s offer, they filed the Complaint, as earlier reflected, alleging that
respondent, as a common carrier, was guilty of negligence in allowing M/B Coco Beach III to sail
notwithstanding storm warning bulletins issued by the PAGASA.

Respondent denied being a common carrier, alleging that its boats are not available to the general public
as they only ferry Resort guests and crew members.

RTC dismissed petitioners’ Complaint and respondent’s Counterclaim. The appellate court denied
petitioners’ appeal, holding, among other things, that the trial court correctly ruled that respondent is a
private carrier which is only required to observe ordinary diligence.

ISSUE:

Whether respondent is a common carrier since by its tour package, the transporting of its guests is an
integral part of its resort business.

RULING:

Article 1732. Common carriers are persons, corporations, firms or associations engaged in the business of
carrying or transporting passengers or goods or both, by land, water, or air for compensation, offering
their services to the public.

The above article makes no distinction between one whose principal business activity is the carrying of
persons or goods or both, and one who does such carrying only as an ancillary activity (in local idiom, as
"a sideline"). Article 1732 also carefully avoids making any distinction between a person or enterprise
offering transportation service on a regular or scheduled basis and one offering such service on
an occasional, episodic or unscheduled basis. Neither does Article 1732 distinguish between a carrier
offering its services to the "general public," i.e., the general community or population, and one who
offers services or solicits business only from a narrow segment of the general population. We think that
Article 1733 deliberately refrained from making such distinctions.

To fully free a common carrier from any liability, the fortuitous event must have been the proximate and
only cause of the loss. And it should have exercised due diligence to prevent or minimize the loss before,
during and after the occurrence of the fortuitous event.

WHEREFORE, the Court of Appeals Decision of August 19, 2008 is REVERSED and SET ASIDE. Judgment
is rendered in favor of petitioners ordering respondent to pay petitioners.
5) G.R. No. 166250 July 26, 2010
UNSWORTH TRANSPORT INTERNATIONAL (PHILS.), INC., Petitioner,
vs. COURT OF APPEALS and PIONEER INSURANCE AND SURETY CORPORATION, Respondents.

FACTS:

On August 31, 1992, the shipper Sylvex Purchasing Corporation delivered to UTI a shipment of 27 drums
of various raw materials for pharmaceutical manufacturing. The subject shipment was insured with
private respondent Pioneer Insurance and Surety Corporation in favor of Unilab against all risk.

On September 30, 1992, the shipment arrived at the port of Manila. On October 6, 1992, petitioner
received the said shipment in its warehouse after it stamped the Permit to Deliver Imported
Goods9 procured by the Champs Customs Brokerage. 10 Three days thereafter, or on October 9, 1992,
Oceanica Cargo Marine Surveyors Corporation (OCMSC) conducted a stripping survey of the shipment
located in petitioner’s warehouse.

Consequently, Unilab’s quality control representative rejected one paper bag containing dried yeast and
one steel drum containing Vitamin B Complex as unfit for the intended purpose. Unilab filed a formal
claim17 for the damage against private respondent and UTI.

On February 22, 2001, the RTC decided in favor of private respondent and against APL, UTI and
petitioner. On appeal, the CA affirmed the RTC decision on April 29, 2004.

ISSUE:

Whether or not petitioner UTI is a common carrier

RULING:

The petition is partly meritorious.

A freight forwarder’s liability is limited to damages arising from its own negligence, including negligence
in choosing the carrier; however, where the forwarder contracts to deliver goods to their destination
instead of merely arranging for their transportation, it becomes liable as a common carrier for loss or
damage to goods. A bill of lading is a written acknowledgement of the receipt of goods and an agreement
to transport and to deliver them at a specified place to a person named or on his or her order. 25 It
operates both as a receipt and as a contract.

Undoubtedly, UTI is liable as a common carrier. Common carriers, as a general rule, are presumed to
have been at fault or negligent if the goods they transported deteriorated or got lost or destroyed. That
is, unless they prove that they exercised extraordinary diligence in transporting the goods. In order to
avoid responsibility for any loss or damage, therefore, they have the burden of proving that they
observed such diligence.27 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. If no adequate explanation is given as to how the deterioration, loss, or destruction of the
goods happened, the transporter shall be held responsible.

In light of the foregoing, petitioner’s liability should be limited to $500 per steel drum. In this case, as
there was only one drum lost, private respondent is entitled to receive only $500 as damages for the loss.
In addition to said amount, as aptly held by the trial court, an interest rate of 6% per annum should also
be imposed, plus 25% of the total sum as attorney’s fees.

WHEREFORE, premises considered, the petition is PARTIALLY GRANTED.

6) G.R. No. 200289 November 25, 2013
WESTWIND SHIPPING CORPORATION, Petitioner,
vs. UCPB GENERAL INSURANCE CO., INC. and ASIAN TERMINALS INC., Respondents.

x-----------------------x

G.R. No. 200314

ORIENT FREIGHT INTERNATIONAL INC., Petitioner,
vs. UCPB GENERAL INSURANCE CO., INC. and ASIAN TERMINALS INC., Respondents.

FACTS:

On August 23, 1993, Kinsho-Mataichi Corporation shipped from the port of Kobe, Japan, 197 metal
containers/skids of tin-free steel for delivery to the consignee, San Miguel Corporation (SMC). The
shipment was loaded and received clean on board M/V Golden Harvest Voyage a vessel owned and
operated by Westwind Shipping Corporation (Westwind).

SMC insured the cargoes against all risks with UCPB General Insurance Co., Inc. (UCPB). During the
unloading operation, however, six containers/skids sustained dents and punctures from the forklift used
by the stevedores of Ocean Terminal Services, Inc. (OTSI) in centering and shuttling the containers/skids.
As a consequence, the local ship agent of the vessel, Baliwag Shipping Agency, Inc., issued two Bad
Order Cargo Receipt.

SMC filed a claim against UCPB, Westwind, ATI, and OFII to recover the amount corresponding to the
damaged 15 containers/skids. When UCPB paid the total sum SMC signed the subrogation receipt.
Thereafter, in the exercise of its right of subrogation, UCPB instituted a complaint for damages against
Westwind, ATI, and OFII.

After trial, the RTC dismissed UCPB’s complaint and the counterclaims of Westwind, ATI, and OFII. On
appeal by UCPB, the CA reversed and set aside the trial court.

ISSUE:

Whether respondent OFII is a common carrier

RULING:

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 transported by them. Subject to certain exceptions
enumerated under Article 1734 of the Civil Code, common carriers are responsible for the loss,
destruction, or deterioration of the goods. The extraordinary responsibility of the common carrier lasts
from the time the goods are unconditionally placed in the possession of, and received by the carrier for
transportation until the same are delivered, actually or constructively, by the carrier to the consignee, or
to the person who has a right to receive them.
And in Calvo v. UCPB General Insurance Co. Inc., this Court held that as the transportation of goods is an
integral part of a customs broker, the customs broker is also a common carrier. For to declare otherwise
"would be to deprive those with whom [it] contracts the protection which the law affords them
notwithstanding the fact that the obligation to carry goods for its customers, is part and parcel of
petitioner’s business."

As a common carrier, OFII is mandated to observe, under Article 1733 of the Civil Code, extraordinary
diligence in the vigilance over the goods it transports according to the peculiar circumstances of each
case.

WHEREFORE, premises considered the petitions of Westwind and OFII in G.R. Nos. 200289 and 200314
respectively are DENIED.
7) G.R. No. 179446 January 10, 2011
LOADMASTERS CUSTOMS SERVICES, INC., Petitioner,
vs. GLODEL BROKERAGE CORPORATION and R&B INSURANCE CORPORATION, Respondents.

FACTS:

On August 28, 2001, R&B Insurance issued Marine Policy No. MN-00105/2001 in favor of Columbia to
insure the shipment of 132 bundles of electric copper cathodes against All Risks. On August 28, 2001, the
cargoes were shipped on board the vessel "Richard Rey" from Isabela, Leyte, to Pier 10, North Harbor,
Manila. They arrived on the same date.

Columbia engaged the services of Glodel for the release and withdrawal of the cargoes from the pier and
the subsequent delivery to its warehouses/plants. Glodel, in turn, engaged the services of Loadmasters
for the use of its delivery trucks to transport the cargoes to Columbia’s warehouses/plants in Bulacan and
Valenzuela City.

One (1) truck, loaded with 11 bundles or 232 pieces of copper cathodes, failed to deliver its cargo. Later
on, the said truck, was recovered but without the copper cathodes. Because of this incident, Columbia
filed with R&B Insurance a claim for insurance indemnity.

R&B Insurance, thereafter, filed a complaint for damages against both Loadmasters and Glodel before the
Regional Trial Court. t claimed that it had been subrogated "to the right of the consignee to recover from
the party/parties who may be held legally liable for the loss.

The RTC rendered a decision holding Glodel liable for damages for the loss of the subject cargo and
dismissing Loadmasters’ counterclaim for damages and attorney’s fees against R&B Insurance. CA
rendered the decision that appellee Loadmasters is likewise held liable to appellant Glodel in the amount
of ₱1,896,789.62 representing the insurance indemnity.

ISSUE:

Whether petitioner Loadmasters be legally considered as an Agent of respondent Glodel

RULING:

Loadmasters is a common carrier because it is engaged in the business of transporting goods by land,
through its trucking service. It is a common carrier as distinguished from a private carrier wherein the
carriage is generally undertaken by special agreement and it does not hold itself out to carry goods for
the general public. The distinction is significant in the sense that "the rights and obligations of the
parties to a contract of private carriage are governed principally by their stipulations, not by the law on
common carriers.

Loadmasters and Glodel, being both common carriers, are mandated from the nature of their business
and for reasons of public policy, to observe the extraordinary diligence in the vigilance over the goods
transported by them according to all the circumstances of such case, as required by Article 1733 of the
Civil Code. When the Court speaks of extraordinary diligence, it is that extreme measure of care and
caution which persons of unusual prudence and circumspection observe for securing and preserving their
own property or rights.15 This exacting standard imposed on common carriers in a contract of carriage of
goods is intended to tilt the scales in favor of the shipper who is at the mercy of the common carrier once
the goods have been lodged for shipment.16 Thus, in case of loss of the goods, the common carrier is
presumed to have been at fault or to have acted negligently.17 This presumption of fault or negligence,
however, may be rebutted by proof that the common carrier has observed extraordinary diligence over
the goods.

Accordingly, there can be no contract of agency between the parties. Loadmasters never represented
Glodel. Neither was it ever authorized to make such representation. It is a settled rule that the basis for
agency is representation, that is, the agent acts for and on behalf of the principal on matters within the
scope of his authority and said acts have the same legal effect as if they were personally executed by the
principal.

WHEREFORE, judgment is rendered declaring petitioner Loadmasters Customs Services, Inc. and
respondent Glodel Brokerage Corporation jointly and severally liable to respondent R&B Insurance
Corporation for the insurance indemnity it paid to consignee Columbia Wire & Cable Corporation and
ordering both parties to pay, jointly and severally, R&B Insurance Corporatio

8) G.R. No. 138334 August 25, 2003

ESTELA L. CRISOSTOMO, Petitioner,
vs. The Court of Appeals and CARAVAN TRAVEL & TOURS INTERNATIONAL, INC., Respondents.

FACTS:

In May 1991, petitioner Estela L. Crisostomo contracted the services of respondent Caravan Travel and
Tours International, Inc. to arrange and facilitate her booking, ticketing and accommodation in a tour
dubbed "Jewels of Europe".

Without checking her travel documents, petitioner went to NAIA on Saturday, June 15, 1991, to take the
flight for the first leg of her journey from Manila to Hongkong. To petitioner’s dismay, she discovered that
the flight she was supposed to take had already departed the previous day.

Subsequently, Menor prevailed upon petitioner to take another tour. Upon petitioner’s return from Europe,
she demanded from respondent the reimbursement of P61,421.70, representing the difference between
the sum she paid for "Jewels of Europe" and the amount she owed respondent for the "British Pageant"
tour.

Despite several demands, respondent company refused to reimburse the amount, contending that the
same was non-refundable. Petitioner was thus constrained to file a complaint against respondent for
breach of contract of carriage and damages.

The trial court held that respondent was negligent in erroneously advising petitioner of her departure
date through its employee, Menor, who was not presented as witness to rebut petitioner’s testimony. The
trial court thus declared that petitioner was guilty of contributory negligence and accordingly, deducted
10% from the amount being claimed as refund.

Respondent appealed to the Court of Appeals, which likewise found both parties to be at fault.

ISSUE:

Whether Honorable Court of Appeals committed a reversible error in reversing and setting aside the
decision of the trial court by ruling that the petitioner is not entitled to a refund of the cost of unavailed
for in the contract of carriage the common carrier is obliged to observe utmost care and extra-ordinary
diligence

RULING:

Petitioner’s contention has no merit. By definition, a contract of carriage or transportation is one whereby
a certain person or association of persons obligate themselves to transport persons, things, or news from
one place to another for a fixed price.9 Such person or association of persons are regarded as carriers
and are classified as private or special carriers and common or public carriers.10 A common carrier is
defined under Article 1732 of the Civil Code as persons, corporations, firms or associations engaged in
the business of carrying or transporting passengers or goods or both, by land, water or air, for
compensation, offering their services to the public.

It is in this sense that the contract between the parties in this case was an ordinary one for services and
not one of carriage. Petitioner’s submission is premised on a wrong assumption. The nature of the
contractual relation between petitioner and respondent is determinative of the degree of care required in
the performance of the latter’s obligation under the contract.

Since the contract between the parties is an ordinary one for services, the standard of care required of
respondent is that of a good father of a family under Article 1173 of the Civil Code.12 This connotes
reasonable care consistent with that which an ordinarily prudent person would have observed when
confronted with a similar situation. The test to determine whether negligence attended the performance
of an obligation is: did the defendant in doing the alleged negligent act use that reasonable care and
caution which an ordinarily prudent person would have used in the same situation? If not, then he is
guilty of negligence
In the case at bar, the evidence on record shows that respondent company performed its duty diligently
and did not commit any contractual breach. Hence, petitioner cannot recover and must bear her own
damage. The instant petition is DENIED for lack of merit.

9) G.R. No. 131166 September 30, 1999

CALTEX (PHILIPPINES), INC., petitioner,
vs. SULPICIO LINES, INC., GO SIOC SO, ENRIQUE S. GO, EUSEBIO S. GO, CARLOS S. GO, VICTORIANO
S. GO, DOMINADOR S. GO, RICARDO S. GO, EDWARD S. GO, ARTURO S. GO, EDGAR S. GO, EDMUND S.
GO, FRANCISCO SORIANO, VECTOR SHIPPING CORPORATION, TERESITA G. CAÑEZAL, AND SOTERA E.
CAÑEZAL, respondents.

FACTS:

On December 19, 1987, motor tanker MT Vector left Limay, Bataan, at about 8:00 p.m., enroute to
Masbate, loaded with 8,800 barrels of petroleum products shipped by petitioner Caltex. MT Vector is a
tramping motor tanker owned and operated by Vector Shipping Corporation, engaged in the business of
transporting fuel products such as gasoline, kerosene, diesel and crude oil.

The passenger ship MV Doña Paz left the port of Tacloban headed for Manila. The MV Doña Paz is a
passenger and cargo vessel owned and operated by Sulpicio Lines.

The two vessels collided in the open sea.

On February 13, 1989, Teresita Cañezal and Sotera E. Cañezal, Sebastian Cañezal's wife and mother
respectively, filed with the Regional Trial Court, Branch 8, Manila, a complaint for "Damages Arising from
Breach of Contract of Carriage" against Sulpicio Lines, Inc. Sulpicio, in turn, filed a third party complaint
against Francisco Soriano, Vector Shipping Corporation and Caltex (Philippines), Inc. 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; as a result, it rammed
against MV Doña Paz in the open sea setting MT Vector's highly flammable cargo ablaze.

The trial court rendered decision dismissing, the third party complaint against petitioner. Court of Appeal
modified the trial court's ruling and included petitioner Caltex as one of the those liable for damages.

ISSUE:

Whether Caltex (Phils.), Inc. is held liable for being the charterer that negligently caused the shipping of
combustible cargo aboard an unseaworthy vessel

RULING:

We rule that it is not.

Petitioner and Vector entered into a contract of affreightment, also known as a voyage charter. 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.

The nature of the obligation of Caltex demands ordinary diligence like any other shipper in shipping his
cargoes. Clearly, as a mere voyage charterer, Caltex had the right to presume that the ship was
seaworthy as even the Philippine Coast Guard itself was convinced of its seaworthiness. All things
considered, we find no legal basis to hold petitioner liable for damages.

The Court hereby GRANTS the petition and SETS ASIDE the decision of the Court of Appeals insofar as it
held Caltex liable under the third party complaint to reimburse/indemnify defendant Sulpicio Lines, Inc.
the damages the latter is adjudged to pay plaintiffs-appellees.
10) G.R. No. 188118, November 23, 2015
FEDERAL PHOENIX ASSURANCE CO., LTD., Petitioner, v. FORTUNE SEA CARRIER, INC., Respondent.

FACTS:

On March 9, 1994, Fortune Sea agreed to lease its vessel M/V Ricky Rey to Northern Mindanao Transport
Co., Inc. The Time Charter Party agreement executed by the parties provides that the vessel shall be
leased to Northern Transport for 90 days to carry bags of cement to different ports of destination. Later
on, the parties extended the period of lease for another 90 days.

Northern Transport ordered 2,069 bales of abaca fibers to be shipped on board M/V Ricky Rey by shipper
Manila Hemp Trading Corporation, for delivery to consignee Newtech Pulp Inc. (Newtech) in Iligan City.
The shipment was insured by petitioner Federal Phoenix Assurance Co., Ltd.

Upon arrival of M/V Ricky Rey at the Iligan City port the stevedores started to discharge the abaca
shipment the following clay. The stevedores noticed smoke coming out of the cargo haul where the bales
of abaca where located, 60 bales of abaca were damaged.

As a result of the losses, Newtech filed an insurance claim for P260,000.00 with Federal Phoenix. After
evaluation, Federal Phoenix paid Newtech P162,419.25 for the losses it incurred due to the damaged and
undelivered bales of abaca. Upon payment. Federal Phoenix was subrogated to the rights of Newtech and
pursued its claim against Fortune Sea. Despite several demands to Fortune Sea, however. Federal
Phoenix's claims were not settled. As a result, Federal Phoenix filed a Complaint for Sum of Money
against Fortune Sea before the RTC of Makati.

RTC rendered a Decision in favor of Federal Phoenix and ordered Fortune Sea to pay. CA issued a
Decision reversing and setting aside the of the RTC and ordered the dismissal of the complaint for sum of
money filed by Federal Phoenix against Fortune Sea for lack of merit.

ISSUE:

Whether or not the CA erred in declaring that Fortune Sea was converted into a private carrier by virtue
of the charter party agreement it entered into with Northern Transport.

RULING:

This Court rules in the affirmative.

Time and again, this Court have ruled that "[i]n determining the nature of a contract, courts are not
bound by the title or name given by the parties. The decisive factor in evaluating an agreement is the
intention of the parties, as shown, not necessarily by the terminology used in the contract but by their
conduct, words, actions and deeds prior to, during and immediately alter executing the agreement.

Moreover, although the master and crew of the vessel were those of the shipowner, records show that at
the time of the execution of the charter party, Fortune Sea had completely relinquished possession,
command, and navigation of M/V Ricky Rey to Northern Transport.

As such, the master and all the crew of the ship were all made subject to the direct control and
supervision of the charterer. In fact, the instructions on the voyage and other relative directions or orders
were handed out by Northern Transport. Thus, the CA correctly ruled that the nature of the vessel's
charter is one of bareboat or demise charter.

The Court hereby AFFIRMS the Decision of the Court of Appeals dated February 10, 2009 in CA-G.R. CV
No. 88607 finding the Time Charter Party agreement entered into by Fortune Sea Carrier, Inc. and
Northern Mindanao Transport Co., Inc. as in reality a Bareboat Charter which effectively converted the
subject M/V Ricky Rey as a private carrier. As such, this Court likewise AFFIRMS the decision of the CA in
dismissing the Complaint for Sum of Money filed by petitioner Federal Phoenix Assurance Co., Ltd. for lack
of merit.
40) G.R. No. 127957 February 21, 2001
COLLIN A. MORRIS and THOMAS P. WHITTIER, petitioner,
vs. COURT OF APPEALS (Tenth Division) and SCANDINAVIAN AIRLINES SYSTEM, respondents.

FACTS:

On February 14, 1978, petitioners filed with the Regional Trial Court, an action for damages for breach of
contract of air carriage against respondent airline because they were bumped off from SAS Flight SK 893,
Manila-Tokyo, on February 14, 1978, despite a confirmed booking in the first class section of the flight.

Petitioners Collin A. Morris and Thomas P. Whittier were American citizens; the vice-president for
technical service and the director for quality assurance, respectively, of Sterling Asia, a foreign
corporation with regional headquarters. Respondent Scandinavian Airline System (SAS) is and at times
material hereto has been engaged in the commercial air transport of passengers globally.

Petitioner Morris and co-petitioner Whittier had a series of business meetings in Japan They requested
their travel agent, Staats Travel Service. Inc. to book them as first class passengers in SAS Manila-Tokyo
flight on February 14, 1978.

A supervisor of respondent airline company, testified that SAS Flight SK 893 on February 14, 1978 was
overbooked in the economy class. Petitioner. Morris and Whittier were among the names listed in the first
class section of the flight manifest. However, their names were crossed out and the symbols "NOSH",
meaning NO SHOW, written after their names. The "NO SHOW" notation could mean either that the
booked passengers of his travel documents were not at the counter at the time of the closing of the flight
manifest.

The trial court rendered a judgement against respondent and in favor of petitioners Morris and Whittier.
Court of Appeals Promulgated a decision reversing the decision of the court a quo, and ordering the
dismissal of the complaint for damages.

ISSUE:

Whether Court of Appeals gravely erred in dismissing their complaint for damages and in finding their
testimonies self-serving

RULING:

The petition has no merit.

It must be emphasized that a contract to transport passengers is quite different kind and degree from
any other contractual relations, and this is because relation, which an air carrier sustains with the public.
Its business is mainly with the travelling public. It invites people business is mainly with the traveling
public. It invites people to avail [themselves] of the comforts and advantages it offers. The contract of air
carriage, therefore, generates a relation attended wit h a pubic duty. Neglect or malfeasance of the
carrier's employees naturally could give ground for an action for damages.

"In awarding moral damages for breach of contract of carriage, the breach must be wanton and
deliberately injurious or the one responsible acted fraudulently or with malice or bad faith." "Where in
breaching the contract of carriage the defendant airline is not shown to have acted fraudulently or in bad
faith, liability for damages is limited to the natural and probable consequences of the breach of obligation
which the parties had foreseen or could have reasonably foreseen. In that case, such liability does not
include moral and exemplary damages."18 "Moral damages are generally not recoverable in culpa
contractual except when bad faith had been proven. However, the same damages may be recovered
when reach of contract of carriage results in the death of a passenger.

"Bad faith does not simply connote bad judgement or negligence, it imports a dishonest purpose or some
moral obliquity and conscious doing of a wrong, a breach of known duty through some motive or interest
or ill will that partakes of the nature of fraud."22
In the instant case, respondent's denial of petitioners' boarding on SAS Flight 893 was not attended by
bad faith or malice.

The Court DENIES the petition for lack of merit. The Court AFFIRMS in toto decision of the Court of
Appeals

41) G.R. No. L-68988 June 21, 1990

PAN AMERICAN WORLD AIRWAYS, INC., petitioners,
vs. INTERMEDIATE APPELLATE COURT, and EDMUNDO P. ONGSIAKO, respondents.

Guerrero and Torres for petitioner.

Emmanuel C. Ongsiako for private respondent.

FACTS:

Edmundo P. Ongsiako, "with one piece of checked-in luggage, was a paying passenger on the PAN AM
Flight 842 that left Manila for Honolulu, Hawaii, U.S.A., at about 12:30 p.m. on June 8, 1978, with Los
Angeles, California, as his ultimate destination

At Honolulu, Ongsiako "discovered that his luggage was not carried on board it was left at PAN AM's
airport office in Manila where it was found a week later. A PAN AM employee in Honolulu, instead of
helping him search for his bag, arrogantly threatened to "bump him off in Honolulu should he persist in
looking for his bag.

Verbal complaint was made first at PAN AM's Honolulu airport office, then at Los Angeles, but written
complaint was made.

PAN AM (Pan American World Airways, Inc.) was sentenced by the Court of First Instance of Rizal on
complaint of Ongsiako, to pay to the latter. the Trial Court's judgment was affirmed by the Intermediate
Appellate Court, with the sole modification that the award of actual damages was reduced to P4,814.75
and that of exemplary damages, eliminated.

ISSUE:

Whether the private respondent is entitled to moral damages

RULING:

Article 2220 of the Civil Code says that moral damages may be awarded in "breaches of contract where
the defendant acted fraudulently or in bad faith." So, proof of infringement of an agreement by a party,
standing alone, will not justify an award of moral damages.

The Court believes and so holds that there is sufficient evidence of gross and reckless negligence
amounting to bad faith on the part of defendant. If defendant was not sure that it could transport plaintiff
and his luggage to Los Angeles, it should not have accepted plaintiff who was a waitlisted passenger. It is
not a valid excuse on its part to claim that plaintiff checked in at the last minute and that there was
insufficient time to load his bag in the plane. In fact, that makes the position of defendant even more
untenable, because in accepting and holding on to plaintiff as its passenger, probably to fill in cancelled
bookings, although it knew or must have known that the bag of plaintiff might not be loaded on time, it
was guilty of conduct amounting to bad faith. Accepting last minute passengers and their baggage with
no definite assurance that the carrier can comply with its obligation due to lack of time amounts to
"negligence so gross and reckless as to amount to malice or bad faith.

Surely, these acts of callous indifference to the plight of a person in a foreign land could not be less
distressing, depressing or disheartening to the latter, or judged less harshly, simply because not attended
by any shouted remarks.

All things considered, the Court is satisfied that moral damages have been correctly granted.

WHEREFORE, the petitioner's appeal is DISMISSED, and the judgment of the Intermediate Appellate
Court, AFFIRMED
42) G.R. No. 83612 November 24, 1994
LUFTHANSA GERMAN AIRLINES, petitioner,
vs. COURT OF APPEALS and TIRSO V. ANTIPORDA, SR., respondents.

Quisumbing, Torres & Evangelista for petitioner.

Quirante and Associates Law Office for private respondent.

FACTS:

Tirso V. Antiporda, Sr. was an associate director of the Central Bank of the Philippines, he would render
his services to the Malawi bank as an independent contractor for which he would be paid. Lufthansa,
through SGV, issued ticket No. 3477712678 for Antiporda's confirmed flights to Malawi, Africa.

The duty officer of Lufthansa, informed Antiporda that his seat on Air Kenya Flight 203 to Nairobi had
been given to a very important person of Bombay who was attending a religious function in Nairobi.
Antiporda protested, stressing that he had an important professional engagement in Blantyre, Malawi He
requested that the situation be remedied but Air Kenya Flight 203 left for Nairobi without him on board.
Stranded in Bombay, Antiporda was booked for Nairobi via Addis Ababa only on September 27, 1984. He
finally arrived in Blantyre at 9:00 o'clock in the evening of September 28, 1984, more than a couple of
days late for his appointment with people from the institution he was to work with in Malawi.

Consequently, on January 8, 1985, Antiporda's counsel wrote the general manager of Lufthansa in Manila
demanding P1,000,000 in damages for the airline's "malicious, wanton, disregard of the contract of
carriage. Antiporda filed with the Regional Trial Court of Quezon City a complaint against Lufthansa.

The lower court, found that Lufthansa breached the contract to transport Antiporda from Manila to
Blantyre on a trip of five legs. The Court of Appeals affirmed the decision on the trial court sought to be
reviewed.

ISSUE:

Whether or not petitioner Lufthansa German Airlines which issued a confirmed Lufthansa ticket to private
respondent Antiporda covering a five-leg trip abroad different airlines should be held liable for damages
occasioned by the "bumping-off" of said private respondent Antiporda by Air Kenya, one of the airlines
contracted to carry him to a particular destination of the five-leg trip.

RULING:

Clearly, bad faith attended the performance of the contract of carriage, for even while Antiporda was in
Bombay, representatives of Lufthansa already tried to evade liability first, by claiming that the contract of
carriage between Lufthansa and Antiporda ceased at Bombay airport, in disregard of the fact that
Antiporda was holding a Lufthansa ticket for the entire five-leg trip; second, despite Berndt Loewe's
knowledge that Antiporda's seat was allowed to be given to another passenger, the same suppressed the
information and feigned ignorance of the matter, presenting altogether another reason why Antiporda
was not listed in the manifest, i.e. that Air Kenya Boeing 707 was overbooked, notwithstanding clear
proof that Lufthansa in Manila confirmed his reservation for said flight.

Antiporda is likewise entitled to the award of exemplary damages on the basis of Article 2232 of the Civil
Code which provides:
Art. 2232. In contracts and quasi-contracts, the court may award exemplary damages if the defendant
acted in a wanton, fraudulent, reckless, oppressive, or malevolent manner.

The findings of fact of lower courts are binding on us and will not be generally disturbed on appeal. In
affirming the lower court's award of damages to Antiporda, we take into account his high position in the
government, coupled with the fact that he failed to meet his professional commitment in Blantyre, Malawi
due to the "bumping-off" incident accompanied by rude and discourteous behavior on the part of airline
officials who should have been the first to attend to his travel needs.

WHEREFORE, the petition for review is hereby DENIED and the decision of the Court of Appeals
AFFIRMED.
43) G.R. No. 121824 January 29, 1998
BRITISH AIRWAYS, petitioner,
vs. COURT OF APPEALS, GOP MAHTANI, and PHILIPPINE AIRLINES, respondents.

FACTS:

On April 16, 1989, Mahtani decided to visit his relatives in Bombay, India. In anticipation of his visit, he
obtained the services of a certain Mr. Gumar to prepare his travel plans. The latter, in turn, purchased a
ticket from BA.

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

Prior to his departure, Mahtani checked in at the PAL counter in Manila his two pieces of luggage
containing his clothings and personal effects, confident that upon reaching Hongkong, the same would be
transferred to the BA flight bound for Bombay.

Unfortunately, when Mahtani arrived in Bombay he discovered that his luggage was missing and that
upon inquiry from the BA representatives, he was told that the same might have been diverted to
London. After patiently waiting for his luggage for one week, BA finally advised him to file a claim by
accomplishing the "Property Irregularity Report.

Mahtani filed his complaint for damages and attorney's fees against BA and Mr. Gumar before the trial
court.

After appropriate proceedings and trial, on March 4, 1993, the trial court rendered its decision in favor of
Mahtani. BA appealed to the Court of Appeals, which however, affirmed the trial court's findings.

ISSUE:

Whether the CA erred in the awarding of compensatory damages and attorney's fees, and the dismissal
of the third-party complaint against PAL

RULING:

American jurisprudence provides that an air carrier is not liable for the loss of baggage in an amount in
excess of the limits specified in the tariff which was filed with the proper authorities, such tariff being
binding, on the passenger regardless of the passenger's lack of knowledge thereof or assent thereto. This
doctrine is recognized in this jurisdiction.

Needless to say, factual findings of the trial court, as affirmed by the Court of Appeals, are entitled to
great respect. Since the actual value of the luggage involved an appreciation of evidence, a task within
the competence of the Court of Appeals, its ruling regarding the amount is assuredly a question of fact,
thus, a finding not reviewable by this Court.

The court sustains the trial court's ruling dismissing the appellant's third-party complaint against PAL.

Therefore, in the instant case, the contractual relationship between BA and PAL is one of agency, the
former being the principal, since it was the one which issued the confirmed ticket, and the latter the
agent.

Since the instant petition was based on a breach of contract of carriage, Mahtani can only sue BA alone,
and not PAL, since the latter was not a party to the contract. However, this is not to say that PAL is
relieved from any liability due to any of its negligent acts. In that case, we recognized that a carrier
(PAL), acting as an agent of another carrier, is also liable for its own negligent acts or omission in the
performance of its duties.

in view of the foregoing, the decision of the Court of Appeals in CA-G.R. CV No. 43309 dated September
7, 1995 is hereby MODIFIED, reinstating the third-party complaint filed by British Airways dated
November 9, 1990 against Philippine Airlines.

4) G.R. No. 171092 March 15, 2010

EDNA DIAGO LHUILLIER, Petitioner,
vs. BRITISH AIRWAYS, Respondent.

FACTS:

On April 28, 2005, petitioner Edna Diago Lhuillier filed a Complaint for damages against respondent
British Airways before the Regional Trial Court (RTC) of Makati City. She alleged that on February 28,
2005, she took respondent’s flight 548 from London, United Kingdom to Rome, Italy. Once on board, she
allegedly requested Julian Halliday (Halliday), one of the respondent’s flight attendants, to assist her in
placing her hand-carried luggage in the overhead bin. However, Halliday allegedly refused to help and
assist her, and even sarcastically remarked.

Upon arrival in Rome, petitioner complained to respondent’s ground manager and demanded an apology.
However, the latter declared that the flight stewards were "only doing their job."

On May 16, 2005, summons, together with a copy of the complaint, was served on the respondent
through Violeta Echevarria, General Manager of Euro-Philippine Airline Services, Inc.

It was alleged that the case must be dismissed for lack of jurisdiction over the person of the respondent
because the summons was erroneously served on Euro-Philippine Airline Services, Inc. which is not its
resident agent in the Philippines.

The trial court issued an Order requiring herein petitioner to file her Comment/Opposition on the Motion
to Dismiss within 10 days from notice thereof, and for respondent to file a Reply thereon. RTC of Makati
City, issued an Order granting respondent’s Motion to Dismiss.

ISSUE:

Whether Philippine courts have jurisdiction over a tortious conduct committed against a Filipino citizen
and resident by airline personnel of a foreign carrier traveling beyond the territorial limit of any foreign
country; and thus is outside the ambit of the Warsaw convention.

RULING:

The petition is without merit.

The Warsaw Convention applies because the air travel, where the alleged tortious conduct occurred, was
between the United Kingdom and Italy, which are both signatories to the Warsaw Convention.

Article 1 of the Warsaw Convention provides:

1. This Convention applies to all international carriage of persons, luggage or goods performed by aircraft
for reward. It applies equally to gratuitous carriage by aircraft performed by an air transport undertaking.

Thus, when the place of departure and the place of destination in a contract of carriage are situated
within the territories of two High Contracting Parties, said carriage is deemed an "international carriage".
The High Contracting Parties referred to herein were the signatories to the Warsaw Convention and those
which subsequently adhered to it.

Since the Warsaw Convention applies in the instant case, then the jurisdiction over the subject matter of
the action is governed by the provisions of the Warsaw Convention.
Under Article 28(1) of the Warsaw Convention, the plaintiff may bring the action for damages before
1. the court where the carrier is domiciled; 2. the court where the carrier has its principal place of
business;
3. the court where the carrier has an establishment by which the contract has been made; or 4. the court
of the place of destination.

It is thus settled that allegations of tortious conduct committed against an airline passenger during the
course of the international carriage do not bring the case outside the ambit of the Warsaw Convention.

WHEREFORE, the petition is DENIED. The October 14, 2005 Order of the Regional Trial Court of Makati
City, Branch 132, dismissing the complaint for lack of jurisdiction, is AFFIRMED.

45) G.R. No. 149547 July 4, 2008

PHILIPPINE AIRLINES, INC., petitioner,
vs. HON. ADRIANO SAVILLO, Presiding Judge of RTC Branch 30 , Iloilo City, and SIMPLICIO GRIÑO,
respondents.

FACTS:

PAL is a corporation duly organized under Philippine law, engaged in the business of providing air carriage
for passengers, baggage and cargo. Public respondent Hon. Adriano Savillo is the presiding judge of
Branch 30 of the Iloilo RTC, where Civil Case No. 23773 was filed; while private respondent Simplicio
Griño is the plaintiff in the aforementioned case

On 3 October 1993, private respondent and his companions took the PAL flight to Singapore Singapore
Airlines rejected the tickets of private respondent and his group because they were not endorsed by PAL.
It was explained to private respondent and his group that if Singapore Airlines honored the tickets
without PAL’s endorsement, PAL would not pay Singapore Airlines for their passage. Private respondent
tried to contact PAL’s office at the airport, only to find out that it was closed.

Stranded at the airport in Singapore and left with no recourse, private respondent was in panic and at a
loss where to go; and was subjected to humiliation, embarrassment, mental anguish, serious anxiety, fear
and distress. After the series of nerve-wracking experiences, private respondent became ill and was
unable to participate in the tournament. Private respondent filed a Complaint for Damages before the
RTC seeking compensation for moral damages in the amount of P1,000,000.00 and attorney’s fees.

The RTC issued an Order denying the Motion to Dismiss. The Court of Appeals, likewise dismissed the
Petition for Certiorari filed by PAL and affirmed the 9 June 1998 Order of the RTC.

ISSUE:

The court of appeals erred in not applying the provisions of the warsaw convention despite the fact that
Griño’s cause of action arose from a breach of contract for international air transport.

RULING:

The petition is without merit.

The Warsaw Convention applies to "all international transportation of persons, baggage or goods
performed by any aircraft for hire." It seeks to accommodate or balance the interests of passengers
seeking recovery for personal injuries and the interests of air carriers seeking to limit potential liability. It
employs a scheme of strict liability favoring passengers and imposing damage caps to benefit air carriers.

Had the present case merely consisted of claims incidental to the airlines’ delay in transporting their
passengers, the private respondent’s Complaint would have been time-barred under Article 29 of the
Warsaw Convention. However, the present case involves a special species of injury resulting from the
failure of PAL and/or Singapore Airlines to transport private respondent from Singapore to Jakarta – the
profound distress, fear, anxiety and humiliation that private respondent experienced when, despite PAL’s
earlier assurance that Singapore Airlines confirmed his passage, he was prevented from boarding the
plane and he faced the daunting possibility that he would be stranded in Singapore Airport because the
PAL office was already closed.
These claims are covered by the Civil Code provisions on tort, and not within the purview of the Warsaw
Convention. Hence, the applicable prescription period is that provided under Article 1146 of the Civil
Code:

Art. 1146. The following actions must be instituted within four years:

(1) Upon an injury to the rights of the plaintiff; (2) Upon a quasi-delict.

Private respondent’s Complaint was filed with the RTC on 15 August 1997, which was less than four years
since PAL received his extrajudicial demand on 25 January 1994. Thus, private respondent’s claims have
not yet prescribed and PAL’s Motion to Dismiss must be denied.

IN VIEW OF THE FOREGOING, the instant Petition is DENIED. The assailed Decision of the Court of
Appeals in CA-G.R. SP No. 48664, promulgated on 17 August 2001 is AFFIRMED.