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Republic of the Philippines

SUPREME COURT

Manila

EN BANC

G.R. No. L-21438 September 28, 1966

AIR FRANCE, petitioner,

vs.

RAFAEL CARRASCOSO and the HONORABLE COURT OF APPEALS, respondents.

Lichauco, Picazo and Agcaoili for petitioner.

Bengzon Villegas and Zarraga for respondent R. Carrascoso.

SANCHEZ, J.:

The Court of First Instance of Manila 1 sentenced petitioner to pay respondent Rafael Carrascoso

P25,000.00 by way of moral damages; P10,000.00 as exemplary damages; P393.20 representing the

difference in fare between first class and tourist class for the portion of the trip Bangkok-Rome, these

various amounts with interest at the legal rate, from the date of the filing of the complaint until paid;plus P3,000.00 for attorneys' fees; and the costs of suit.

On appeal,2 the Court of Appeals slightly reduced the amount of refund on Carrascoso's plane

ticket from P393.20 to P383.10, and voted to affirm the appealed decision "in all other respects", with

costs against petitioner.


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The case is now before us for review on certiorari.

The facts declared by the Court of Appeals as " fully supported by the evidence of record", are:

Plaintiff, a civil engineer, was a member of a group of 48 Filipino pilgrims that left Manila for

Lourdes on March 30, 1958.

On March 28, 1958, the defendant, Air France, through its authorized agent, Philippine Air Lines,

Inc., issued to plaintiff a "first class" round trip airplane ticket from Manila to Rome. From Manila to

Bangkok, plaintiff travelled in "first class", but at Bangkok, the Manager of the defendant airline forcedplaintiff to vacate the "first class" seat that he was occupying because, in the words of the witness

Ernesto G. Cuento, there was a "white man", who, the Manager alleged, had a "better right" to the seat.

When asked to vacate his "first class" seat, the plaintiff, as was to be expected, refused, and told

defendant's Manager that his seat would be taken over his dead body; a commotion ensued, and,

according to said Ernesto G. Cuento, "many of the Filipino passengers got nervous in the tourist class;

when they found out that Mr. Carrascoso was having a hot discussion with the white man [manager],

they came all across to Mr. Carrascoso and pacified Mr. Carrascoso to give his seat to the white man"

(Transcript, p. 12, Hearing of May 26, 1959); and plaintiff reluctantly gave his "first class" seat in the

plane.3

1. The trust of the relief petitioner now seeks is that we review "all the findings" 4 of respondent

Court of Appeals. Petitioner charges that respondent court failed to make complete findings of fact on

all the issues properly laid before it. We are asked to consider facts favorable to petitioner, and then, to

overturn the appellate court's decision.

Coming into focus is the constitutional mandate that "No decision shall be rendered by any court

of record without expressing therein clearly and distinctly the facts and the law on which it is based". 5This is echoed in the statutory demand that a judgment determining the merits of the case shall state

"clearly and distinctly the facts and the law on which it is based"; 6 and that "Every decision of the Court

of Appeals shall contain complete findings of fact on all issues properly raised before it". 7


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A decision with absolutely nothing to support it is a nullity. It is open to direct attack. 8 The law,

however, solely insists that a decision state the "essential ultimate facts" upon which the court's

conclusion is drawn. 9 A court of justice is not hidebound to write in its decision every bit and piece of

evidence 10 presented by one party and the other upon the issues raised. Neither is it to be burdened

with the obligation "to specify in the sentence the facts" which a party "considered as proved". 11 This is

but a part of the mental process from which the Court draws the essential ultimate facts. A decision isnot to be so clogged with details such that prolixity, if not confusion, may result. So long as the decision

of the Court of Appeals contains the necessary facts to warrant its conclusions, it is no error for said

court to withhold therefrom "any specific finding of facts with respect to the evidence for the defense".

Because as this Court well observed, "There is no law that so requires". 12 Indeed, "the mere failure to

specify (in the decision) the contentions of the appellant and the reasons for refusing to believe them is

not sufficient to hold the same contrary to the requirements of the provisions of law and the

Constitution". It is in this setting that in Manigque, it was held that the mere fact that the findings "were

based entirely on the evidence for the prosecution without taking into consideration or even mentioning

the appellant's side in the controversy as shown by his own testimony", would not vitiate the judgment.

13 If the court did not recite in the decision the testimony of each witness for, or each item of evidence

presented by, the defeated party, it does not mean that the court has overlooked such testimony or

such item of evidence. 14 At any rate, the legal presumptions are that official duty has been regularly

performed, and that all the matters within an issue in a case were laid before the court and passed upon

by it. 15

Findings of fact, which the Court of Appeals is required to make, maybe defined as "the written

statement of the ultimate facts as found by the court ... and essential to support the decision and

judgment rendered thereon". 16 They consist of the court's "conclusions" with respect to thedeterminative facts in issue". 17 A question of law, upon the other hand, has been declared as "one

which does not call for an examination of the probative value of the evidence presented by the parties."

18

2. By statute, "only questions of law may be raised" in an appeal by certiorari from a judgment of

the Court of Appeals. 19 That judgment is conclusive as to the facts. It is not appropriately the business

of this Court to alter the facts or to review the questions of fact. 20

With these guideposts, we now face the problem of whether the findings of fact of the Court of

Appeals support its judgment.

3. Was Carrascoso entitled to the first class seat he claims?


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It is conceded in all quarters that on March 28, 1958 he paid to and received from petitioner a first

class ticket. But petitioner asserts that said ticket did not represent the true and complete intent and

agreement of the parties; that said respondent knew that he did not have confirmed reservations for

first class on any specific flight, although he had tourist class protection; that, accordingly, the issuanceof a first class ticket was no guarantee that he would have a first class ride, but that such would depend

upon the availability of first class seats.

These are matters which petitioner has thoroughly presented and discussed in its brief before the

Court of Appeals under its third assignment of error, which reads: "The trial court erred in finding that

plaintiff had confirmed reservations for, and a right to, first class seats on the "definite" segments of his

journey, particularly that from Saigon to Beirut". 21

And, the Court of Appeals disposed of this contention thus:

Defendant seems to capitalize on the argument that the issuance of a first-class ticket was no

guarantee that the passenger to whom the same had been issued, would be accommodated in the first-

class compartment, for as in the case of plaintiff he had yet to make arrangements upon arrival at every

station for the necessary first-class reservation. We are not impressed by such a reasoning. We cannot

understand how a reputable firm like defendant airplane company could have the indiscretion to give

out tickets it never meant to honor at all. It received the corresponding amount in payment of first-classtickets and yet it allowed the passenger to be at the mercy of its employees. It is more in keeping with

the ordinary course of business that the company should know whether or riot the tickets it issues are

to be honored or not.22

Not that the Court of Appeals is alone. The trial court similarly disposed of petitioner's contention,

thus:

On the fact that plaintiff paid for, and was issued a "First class" ticket, there can be no question.

Apart from his testimony, see plaintiff's Exhibits "A", "A-1", "B", "B-1," "B-2", "C" and "C-1", and

defendant's own witness, Rafael Altonaga, confirmed plaintiff's testimony and testified as follows:

Q. In these tickets there are marks "O.K." From what you know, what does this OK mean?


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A. That the space is confirmed.

Q. Confirmed for first class?

A. Yes, "first class". (Transcript, p. 169)

x x x x x x x x x

Defendant tried to prove by the testimony of its witnesses Luis Zaldariaga and Rafael Altonaga thatalthough plaintiff paid for, and was issued a "first class" airplane ticket, the ticket was subject to

confirmation in Hongkong. The court cannot give credit to the testimony of said witnesses. Oral

evidence cannot prevail over written evidence, and plaintiff's Exhibits "A", "A-l", "B", "B-l", "C" and "C-1"

belie the testimony of said witnesses, and clearly show that the plaintiff was issued, and paid for, a first

class ticket without any reservation whatever.

Furthermore, as hereinabove shown, defendant's own witness Rafael Altonaga testified that the

reservation for a "first class" accommodation for the plaintiff was confirmed. The court cannot believe

that after such confirmation defendant had a verbal understanding with plaintiff that the "first class"

ticket issued to him by defendant would be subject to confirmation in Hongkong. 23

We have heretofore adverted to the fact that except for a slight difference of a few pesos in the

amount refunded on Carrascoso's ticket, the decision of the Court of First Instance was affirmed by the

Court of Appeals in all other respects. We hold the view that such a judgment of affirmance has merged

the judgment of the lower court. 24 Implicit in that affirmance is a determination by the Court of

Appeals that the proceeding in the Court of First Instance was free from prejudicial error and "all

questions raised by the assignments of error and all questions that might have been raised are to beregarded as finally adjudicated against the appellant". So also, the judgment affirmed "must be regarded

as free from all error". 25 We reached this policy construction because nothing in the decision of the

Court of Appeals on this point would suggest that its findings of fact are in any way at war with those of

the trial court. Nor was said affirmance by the Court of Appeals upon a ground or grounds different from

those which were made the basis of the conclusions of the trial court. 26


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If, as petitioner underscores, a first-class-ticket holder is not entitled to a first class seat,

notwithstanding the fact that seat availability in specific flights is therein confirmed, then an air

passenger is placed in the hollow of the hands of an airline. What security then can a passenger have? It

will always be an easy matter for an airline aided by its employees, to strike out the very stipulations in

the ticket, and say that there was a verbal agreement to the contrary. What if the passenger had a

schedule to fulfill? We have long learned that, as a rule, a written document speaks a uniform language;that spoken word could be notoriously unreliable. If only to achieve stability in the relations between

passenger and air carrier, adherence to the ticket so issued is desirable. Such is the case here. The lower

courts refused to believe the oral evidence intended to defeat the covenants in the ticket.

The foregoing are the considerations which point to the conclusion that there are facts upon which

the Court of Appeals predicated the finding that respondent Carrascoso had a first class ticket and was

entitled to a first class seat at Bangkok, which is a stopover in the Saigon to Beirut leg of the flight. 27

We perceive no "welter of distortions by the Court of Appeals of petitioner's statement of its position",

as charged by petitioner. 28 Nor do we subscribe to petitioner's accusation that respondent Carrascoso

"surreptitiously took a first class seat to provoke an issue". 29 And this because, as petitioner states,

Carrascoso went to see the Manager at his office in Bangkok "to confirm my seat and because from

Saigon I was told again to see the Manager". 30 Why, then, was he allowed to take a first class seat in

the plane at Bangkok, if he had no seat? Or, if another had a better right to the seat?

4. Petitioner assails respondent court's award of moral damages. Petitioner's trenchant claim is

that Carrascoso's action is planted upon breach of contract; that to authorize an award for moral

damages there must be an averment of fraud or bad faith;31 and that the decision of the Court ofAppeals fails to make a finding of bad faith. The pivotal allegations in the complaint bearing on this issue

are:

3. That ... plaintiff entered into a contract of air carriage with the Philippine Air Lines for a valuable

consideration, the latter acting as general agents for and in behalf of the defendant, under which said

contract, plaintiff was entitled to, as defendant agreed to furnish plaintiff, First Class passage on

defendant's plane during the entire duration of plaintiff's tour of Europe with Hongkong as starting point

up to and until plaintiff's return trip to Manila, ... .

4. That, during the first two legs of the trip from Hongkong to Saigon and from Saigon to Bangkok,

defendant furnished to the plaintiff First Class accommodation but only after protestations, arguments

and/or insistence were made by the plaintiff with defendant's employees.


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5. That finally, defendant failed to provide First Class passage, but instead furnished plaintiff only Tourist

Class accommodations from Bangkok to Teheran and/or Casablanca, ... the plaintiff has been compelled

by defendant's employees to leave the First Class accommodation berths at Bangkok after he was

already seated.

6. That consequently, the plaintiff, desiring no repetition of the inconvenience and embarrassments

brought by defendant's breach of contract was forced to take a Pan American World Airways plane on

his return trip from Madrid to Manila.32

x x x x x x x x x

2. That likewise, as a result of defendant's failure to furnish First Class accommodations aforesaid,plaintiff suffered inconveniences, embarrassments, and humiliations, thereby causing plaintiff mental

anguish, serious anxiety, wounded feelings, social humiliation, and the like injury, resulting in moral

damages in the amount of P30,000.00. 33

x x x x x x x x x

The foregoing, in our opinion, substantially aver: First, That there was a contract to furnish plaintiffa first class passage covering, amongst others, the Bangkok-Teheran leg; Second, That said contract was

breached when petitioner failed to furnish first class transportation at Bangkok; and Third, that there

was bad faith when petitioner's employee compelled Carrascoso to leave his first class accommodation

berth "after he was already, seated" and to take a seat in the tourist class, by reason of which he

suffered inconvenience, embarrassments and humiliations, thereby causing him mental anguish, serious

anxiety, wounded feelings and social humiliation, resulting in moral damages. It is true that there is no

specific mention of the term bad faith in the complaint. But, the inference of bad faith is there, it may be

drawn from the facts and circumstances set forth therein. 34 The contract was averred to establish the

relation between the parties. But the stress of the action is put on wrongful expulsion.

Quite apart from the foregoing is that (a) right the start of the trial, respondent's counsel placed

petitioner on guard on what Carrascoso intended to prove: That while sitting in the plane in Bangkok,

Carrascoso was ousted by petitioner's manager who gave his seat to a white man; 35 and (b) evidence of

bad faith in the fulfillment of the contract was presented without objection on the part of the petitioner.

It is, therefore, unnecessary to inquire as to whether or not there is sufficient averment in the complaint


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to justify an award for moral damages. Deficiency in the complaint, if any, was cured by the evidence. An

amendment thereof to conform to the evidence is not even required. 36 On the question of bad faith,

the Court of Appeals declared:

That the plaintiff was forced out of his seat in the first class compartment of the plane belonging to

the defendant Air France while at Bangkok, and was transferred to the tourist class not only without his

consent but against his will, has been sufficiently established by plaintiff in his testimony before the

court, corroborated by the corresponding entry made by the purser of the plane in his notebook which

notation reads as follows:

"First-class passenger was forced to go to the tourist class against his will, and that the captain

refused to intervene",

and by the testimony of an eye-witness, Ernesto G. Cuento, who was a co-passenger. The captain

of the plane who was asked by the manager of defendant company at Bangkok to intervene even

refused to do so. It is noteworthy that no one on behalf of defendant ever contradicted or denied this

evidence for the plaintiff. It could have been easy for defendant to present its manager at Bangkok to

testify at the trial of the case, or yet to secure his disposition; but defendant did neither. 37

The Court of appeals further stated

Neither is there evidence as to whether or not a prior reservation was made by the white man.

Hence, if the employees of the defendant at Bangkok sold a first-class ticket to him when all the seats

had already been taken, surely the plaintiff should not have been picked out as the one to suffer the

consequences and to be subjected to the humiliation and indignity of being ejected from his seat in the

presence of others. Instead of explaining to the white man the improvidence committed by defendant's

employees, the manager adopted the more drastic step of ousting the plaintiff who was then safely

ensconsced in his rightful seat. We are strengthened in our belief that this probably was what happened

there, by the testimony of defendant's witness Rafael Altonaga who, when asked to explain the meaningof the letters "O.K." appearing on the tickets of plaintiff, said "that the space is confirmed for first class.

Likewise, Zenaida Faustino, another witness for defendant, who was the chief of the Reservation Office

of defendant, testified as follows:


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"Q How does the person in the ticket-issuing office know what reservation the passenger has arranged

with you?

A They call us up by phone and ask for the confirmation." (t.s.n., p. 247, June 19, 1959)

In this connection, we quote with approval what the trial Judge has said on this point:

Why did the, using the words of witness Ernesto G. Cuento, "white man" have a "better right" to

the seat occupied by Mr. Carrascoso? The record is silent. The defendant airline did not prove "any

better", nay, any right on the part of the "white man" to the "First class" seat that the plaintiff was

occupying and for which he paid and was issued a corresponding "first class" ticket.

If there was a justified reason for the action of the defendant's Manager in Bangkok, the defendant

could have easily proven it by having taken the testimony of the said Manager by deposition, but

defendant did not do so; the presumption is that evidence willfully suppressed would be adverse if

produced [Sec. 69, par (e), Rules of Court]; and, under the circumstances, the Court is constrained to

find, as it does find, that the Manager of the defendant airline in Bangkok not merely asked but

threatened the plaintiff to throw him out of the plane if he did not give up his "first class" seat because

the said Manager wanted to accommodate, using the words of the witness Ernesto G. Cuento, the

"white man".38

It is really correct to say that the Court of Appeals in the quoted portion first transcribed did not

use the term "bad faith". But can it be doubted that the recital of facts therein points to bad faith? The

manager not only prevented Carrascoso from enjoying his right to a first class seat; worse, he imposed

his arbitrary will; he forcibly ejected him from his seat, made him suffer the humiliation of having to go

to the tourist class compartment - just to give way to another passenger whose right thereto has not

been established. Certainly, this is bad faith. Unless, of course, bad faith has assumed a meaning

different from what is understood in law. For, "bad faith" contemplates a "state of mind affirmatively

operating with furtive design or with some motive of self-interest or will or for ulterior purpose." 39

And if the foregoing were not yet sufficient, there is the express finding of bad faith in the

judgment of the Court of First Instance, thus:


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The evidence shows that the defendant violated its contract of transportation with plaintiff in bad

faith, with the aggravating circumstances that defendant's Manager in Bangkok went to the extent of

threatening the plaintiff in the presence of many passengers to have him thrown out of the airplane to

give the "first class" seat that he was occupying to, again using the words of the witness Ernesto G.

Cuento, a "white man" whom he (defendant's Manager) wished to accommodate, and the defendant

has not proven that this "white man" had any "better right" to occupy the "first class" seat that theplaintiff was occupying, duly paid for, and for which the corresponding "first class" ticket was issued by

the defendant to him.40

5. The responsibility of an employer for the tortious act of its employees need not be essayed. It is

well settled in law. 41 For the willful malevolent act of petitioner's manager, petitioner, his employer,

must answer. Article 21 of the Civil Code says:

ART. 21. Any person who willfully causes loss or injury to another in a manner that is contrary to

morals, good customs or public policy shall compensate the latter for the damage.

In parallel circumstances, we applied the foregoing legal precept; and, we held that upon the

provisions of Article 2219 (10), Civil Code, moral damages are recoverable. 42

6. A contract to transport passengers is quite different in kind and degree from any other

contractual relation. 43 And this, because of the relation which an air-carrier sustains with the public. Its

business is mainly with the travelling public. It invites people to avail of the comforts and advantages it

offers. The contract of air carriage, therefore, generates a relation attended with a public duty. Neglect

or malfeasance of the carrier's employees, naturally, could give ground for an action for damages.

Passengers do not contract merely for transportation. They have a right to be treated by the

carrier's employees with kindness, respect, courtesy and due consideration. They are entitled to be

protected against personal misconduct, injurious language, indignities and abuses from such employees.

So it is, that any rule or discourteous conduct on the part of employees towards a passenger gives thelatter an action for damages against the carrier. 44

Thus, "Where a steamship company 45 had accepted a passenger's check, it was a breach of

contract and a tort, giving a right of action for its agent in the presence of third persons to falsely notify

her that the check was worthless and demand payment under threat of ejection, though the language


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used was not insulting and she was not ejected." 46 And this, because, although the relation of

passenger and carrier is "contractual both in origin and nature" nevertheless "the act that breaks the

contract may be also a tort". 47 And in another case, "Where a passenger on a railroad train, when the

conductor came to collect his fare tendered him the cash fare to a point where the train was scheduled

not to stop, and told him that as soon as the train reached such point he would pay the cash fare from

that point to destination, there was nothing in the conduct of the passenger which justified theconductor in using insulting language to him, as by calling him a lunatic," 48 and the Supreme Court of

South Carolina there held the carrier liable for the mental suffering of said passenger.1awphl.nt

Petitioner's contract with Carrascoso is one attended with public duty. The stress of Carrascoso's

action as we have said, is placed upon his wrongful expulsion. This is a violation of public duty by the

petitioner air carrier a case of quasi-delict. Damages are proper.

7. Petitioner draws our attention to respondent Carrascoso's testimony, thus

Q You mentioned about an attendant. Who is that attendant and purser?

A When we left already that was already in the trip I could not help it. So one of the flight

attendants approached me and requested from me my ticket and I said, What for? and she said, "We

will note that you transferred to the tourist class". I said, "Nothing of that kind. That is tantamount to

accepting my transfer." And I also said, "You are not going to note anything there because I am

protesting to this transfer".

Q Was she able to note it?

A No, because I did not give my ticket.

Q About that purser?

A Well, the seats there are so close that you feel uncomfortable and you don't have enough leg room, I

stood up and I went to the pantry that was next to me and the purser was there. He told me, "I have


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recorded the incident in my notebook." He read it and translated it to me because it was recorded in

French "First class passenger was forced to go to the tourist class against his will, and that the captain

refused to intervene."

Mr. VALTE

I move to strike out the last part of the testimony of the witness because the best evidence would be

the notes. Your Honor.

COURT

I will allow that as part of his testimony. 49

Petitioner charges that the finding of the Court of Appeals that the purser made an entry in his

notebook reading "First class passenger was forced to go to the tourist class against his will, and that the

captain refused to intervene" is predicated upon evidence [Carrascoso's testimony above] which is

incompetent. We do not think so. The subject of inquiry is not the entry, but the ouster incident.

Testimony on the entry does not come within the proscription of the best evidence rule. Such testimony

is admissible. 49a

Besides, from a reading of the transcript just quoted, when the dialogue happened, the impact of

the startling occurrence was still fresh and continued to be felt. The excitement had not as yet died

down. Statements then, in this environment, are admissible as part of the res gestae. 50 For, they grow

"out of the nervous excitement and mental and physical condition of the declarant". 51 The utterance of

the purser regarding his entry in the notebook was spontaneous, and related to the circumstances of

the ouster incident. Its trustworthiness has been guaranteed. 52 It thus escapes the operation of the

hearsay rule. It forms part of the res gestae.

At all events, the entry was made outside the Philippines. And, by an employee of petitioner. It

would have been an easy matter for petitioner to have contradicted Carrascoso's testimony. If it were

really true that no such entry was made, the deposition of the purser could have cleared up the matter.


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We, therefore, hold that the transcribed testimony of Carrascoso is admissible in evidence.

8. Exemplary damages are well awarded. The Civil Code gives the court ample power to grant

exemplary damages in contracts and quasi- contracts. The only condition is that defendant should

have "acted in a wanton, fraudulent, reckless, oppressive, or malevolent manner." 53 The manner of

ejectment of respondent Carrascoso from his first class seat fits into this legal precept. And this, in

addition to moral damages.54

9. The right to attorney's fees is fully established. The grant of exemplary damages justifies a

similar judgment for attorneys' fees. The least that can be said is that the courts below felt that it is but

just and equitable that attorneys' fees be given. 55 We do not intend to break faith with the tradition

that discretion well exercised as it was here should not be disturbed.

10. Questioned as excessive are the amounts decreed by both the trial court and the Court of

Appeals, thus: P25,000.00 as moral damages; P10,000.00, by way of exemplary damages, and P3,000.00

as attorneys' fees. The task of fixing these amounts is primarily with the trial court. 56 The Court of

Appeals did not interfere with the same. The dictates of good sense suggest that we give our imprimatur

thereto. Because, the facts and circumstances point to the reasonableness thereof.57

On balance, we say that the judgment of the Court of Appeals does not suffer from reversible

error. We accordingly vote to affirm the same. Costs against petitioner. So ordered.

Concepcion, C.J., Reyes, J.B.L., Barrera, Dizon, Regala, Makalintal, Zaldivar and Castro, JJ., concur.

Bengzon, J.P., J., took no part.

[G.R. No. 138060. September 1, 2004]

WILLIAM TIU, doing business under the name and style of D Rough Riders, and VIRGILIO TE LAS PIAS

petitioners, vs. PEDRO A. ARRIESGADO, BENJAMIN CONDOR, SERGIO PEDRANO and PHILIPPINE

PHOENIX SURETY AND INSURANCE, INC., respondents.

D E C I S I O N


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CALLEJO, SR., J.:

This is a petition for review on certiorari under Rule 45 of the Rules of Court from the Decision[1] of the

Court of Appeals in CA-G.R. CV No. 54354 affirming with modification the Decision[2] of the Regional

Trial Court, 7th Judicial Region, Cebu City, Branch 20, in Civil Case No. CEB-5963 for breach of contract of

carriage, damages and attorneys fees, and the Resolution dated February 26, 1999 denying the motion

for reconsideration thereof.

The following facts are undisputed:

At about 10:00 p.m. of March 15, 1987, the cargo truck marked Condor Hollow Blocks and General

Merchandise bearing plate number GBP-675 was loaded with firewood in Bogo, Cebu and left for CebuCity. Upon reaching Sitio Aggies, Poblacion, Compostela, Cebu, just as the truck passed over a bridge,

one of its rear tires exploded. The driver, Sergio Pedrano, then parked along the right side of the

national highway and removed the damaged tire to have it vulcanized at a nearby shop, about 700

meters away.[3] Pedrano left his helper, Jose Mitante, Jr. to keep watch over the stalled vehicle, and

instructed the latter to place a spare tire six fathoms away[4] behind the stalled truck to serve as a

warning for oncoming vehicles. The trucks tail lights were also left on. It was about 12:00 a.m., March

16, 1987.

At about 4:45 a.m., D Rough Riders passenger bus with plate number PBP-724 driven by Virgilio Te

Laspias was cruising along the national highway of Sitio Aggies, Poblacion, Compostela, Cebu. The

passenger bus was also bound for Cebu City, and had come from Maya, Daanbantayan, Cebu. Among its

passengers were the Spouses Pedro A. Arriesgado and Felisa Pepito Arriesgado, who were seated at the

right side of the bus, about three (3) or four (4) places from the front seat.

As the bus was approaching the bridge, Laspias saw the stalled truck, which was then about 25 meters

away.[5] He applied the breaks and tried to swerve to the left to avoid hitting the truck. But it was too

late; the bus rammed into the trucks left rear. The impact damaged the right side of the bus and leftseveral passengers injured. Pedro Arriesgado lost consciousness and suffered a fracture in his right

colles.[6] His wife, Felisa, was brought to the Danao City Hospital. She was later transferred to the

Southern Island Medical Center where she died shortly thereafter.[7]


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Respondent Pedro A. Arriesgado then filed a complaint for breach of contract of carriage, damages and

attorneys fees before the Regional Trial Court of Cebu City, Branch 20, against the petitioners, D Rough

Riders bus operator William Tiu and his driver, Virgilio Te Laspias on May 27, 1987. The respondent

alleged that the passenger bus in question was cruising at a fast and high speed along the national road,

and that petitioner Laspias did not take precautionary measures to avoid the accident.[8] Thus:

6. That the accident resulted to the death of the plaintiffs wife, Felisa Pepito Arriesgado, as evidenced

by a Certificate of Death, a xerox copy of which is hereto attached as integral part hereof and marked as

ANNEXA, and physical injuries to several ofits passengers, including plaintiff himself who suffered a

COLLES FRACTURE RIGHT, per Medical Certificate, a xerox copy of which is hereto attached as integral

part hereof and marked as ANNEXB hereof.

7. That due to the reckless and imprudent driving by defendant Virgilio Te Laspias of the said RoughRiders passenger bus, plaintiff and his wife, Felisa Pepito Arriesgado, failed to safely reach their

destination which was Cebu City, the proximate cause of which was defendant-drivers failure to

observe utmost diligence required of a very cautious person under all circumstances.

8. That defendant William Tiu, being the owner and operator of the said Rough Riders passenger bus

which figured in the said accident, wherein plaintiff and his wife were riding at the time of the accident,

is therefore directly liable for the breach of contract of carriage for his failure to transport plaintiff and

his wife safely to their place of destination which was Cebu City, and which failure in his obligation to

transport safely his passengers was due to and in consequence of his failure to exercise the diligence of

a good father of the family in the selection and supervision of his employees, particularly defendant-

driver Virgilio Te Laspias.[9]

The respondent prayed that judgment be rendered in his favor and that the petitioners be condemned

to pay the following damages:

1). To pay to plaintiff, jointly and severally, the amount of P30,000.00 for the death and untimely demiseof plaintiffs wife, Felisa Pepito Arriesgado;

2). To pay to plaintiff, jointly and severally, the amount of P38,441.50, representing actual expenses

incurred by the plaintiff in connection with the death/burial of plaintiffs wife;


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3). To pay to plaintiff, jointly and severally, the amount of P1,113.80, representing

medical/hospitalization expenses incurred by plaintiff for the injuries sustained by him;

4). To pay to plaintiff, jointly and severally, the amount of P50,000.00 for moral damages;

5). To pay to plaintiff, jointly and severally, the amount of P50,000.00 by way of exemplary damages;

6). To pay to plaintiff, jointly and severally, the amount of P20,000.00 for attorneys fees;

7). To pay to plaintiff, jointly and severally, the amount of P5,000.00 for litigation expenses.

PLAINTIFF FURTHER PRAYS FOR SUCH OTHER RELIEFS AND REMEDIES IN LAW AND EQUITY.[10]

The petitioners, for their part, filed a Third-Party Complaint[11] on August 21, 1987 against the

following: respondent Philippine Phoenix Surety and Insurance, Inc. (PPSII), petitioner Tius insurer;

respondent Benjamin Condor, the registered owner of the cargo truck; and respondent Sergio Pedrano,the driver of the truck. They alleged that petitioner Laspias was negotiating the uphill climb along the

national highway of Sitio Aggies, Poblacion, Compostela, in a moderate and normal speed. It was further

alleged that the truck was parked in a slanted manner, its rear portion almost in the middle of the

highway, and that no early warning device was displayed. Petitioner Laspias promptly applied the

brakes and swerved to the left to avoid hitting the truck head-on, but despite his efforts to avoid

damage to property and physical injuries on the passengers, the right side portion of the bus hit the

cargo trucks left rear. The petitioners further alleged, thus:

5. That the cargo truck mentioned in the aforequoted paragraph is owned and registered in the name of

the third-party defendant Benjamin Condor and was left unattended by its driver Sergio Pedrano, one of

the third-party defendants, at the time of the incident;

6. That third-party defendant Sergio Pedrano, as driver of the cargo truck with marked (sic) Condor

Hollow Blocks & General Merchandise, with Plate No. GBP-675 which was recklessly and imprudently


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parked along the national highway of Compostela, Cebu during the vehicular accident in question, and

third-party defendant Benjamin Condor, as the registered owner of the cargo truck who failed to

exercise due diligence in the selection and supervision of third-party defendant Sergio Pedrano, are

jointly and severally liable to the third-party plaintiffs for whatever liability that may be adjudged against

said third-party plaintiffs or are directly liable of (sic) the alleged death of plaintiffs wife;

7. That in addition to all that are stated above and in the answer which are intended to show reckless

imprudence on the part of the third-party defendants, the third-party plaintiffs hereby declare that

during the vehicular accident in question, third-party defendant was clearly violating Section 34, par. (g)

of the Land Transportation and Traffic Code

10. That the aforesaid passenger bus, owned and operated by third-party plaintiff William Tiu, is covered

by a common carrier liability insurance with Certificate of Cover No. 054940 issued by Philippine Phoenix

Surety and Insurance, Inc., Cebu City Branch, in favor of third-party plaintiff William Tiu which covers the

period from July 22, 1986 to July 22, 1987 and that the said insurance coverage was valid, binding and

subsisting during the time of the aforementioned incident (Annex A as part hereof);

11. That after the aforesaid alleged incident, third-party plaintiff notified third-party defendant

Philippine Phoenix Surety and Insurance, Inc., of the alleged incident hereto mentioned, but to no avail;

12. That granting, et arguendo et arguendi, if herein third-party plaintiffs will be adversely adjudged,

they stand to pay damages sought by the plaintiff and therefore could also look up to the Philippine

Phoenix Surety and Insurance, Inc., for contribution, indemnification and/or reimbursement of any

liability or obligation that they might [be] adjudged per insurance coverage duly entered into by and

between third-party plaintiff William Tiu and third-party defendant Philippine Phoenix Surety and

Insurance, Inc.;[12]

The respondent PPSII, for its part, admitted that it had an existing contract with petitioner Tiu, but

averred that it had already attended to and settled the claims of those who were injured during the

incident.[13] It could not accede to the claim of respondent Arriesgado, as such claim was way beyond

the scheduled indemnity as contained in the contract of insurance. [14]


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After the parties presented their respective evidence, the trial court ruled in favor of respondent

Arriesgado. The dispositive portion of the decision reads:

WHEREFORE, in view of the foregoing, judgment is hereby rendered in favor of plaintiff as against

defendant William Tiu ordering the latter to pay the plaintiff the following amounts:

1 - The sum of FIFTY THOUSAND PESOS (P50,000.00) as moral damages;

2 - The sum of FIFTY THOUSAND PESOS (P50,000.00) as exemplary damages;

3 - The sum of THIRTY-EIGHT THOUSAND FOUR HUNDRED FORTY-ONE PESOS (P38,441.00) as actual

damages;

4 - The sum of TWENTY THOUSAND PESOS (P20,000.00) as attorneys fees;

5 - The sum of FIVE THOUSAND PESOS (P5,000.00) as costs of suit;

SO ORDERED.[15]

According to the trial court, there was no dispute that petitioner William Tiu was engaged in business as

a common carrier, in view of his admission that D Rough Rider passenger bus which figured in the

accident was owned by him; that he had been engaged in the transportation business for 25 years with

a sole proprietorship; and that he owned 34 buses. The trial court ruled that if petitioner Laspias had

not been driving at a fast pace, he could have easily swerved to the left to avoid hitting the truck, thus,

averting the unfortunate incident. It then concluded that petitioner Laspias was negligent.

The trial court also ruled that the absence of an early warning device near the place where the truck was

parked was not sufficient to impute negligence on the part of respondent Pedrano, since the tail lights


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of the truck were fully on, and the vicinity was well lighted by street lamps.[16] It also found that the

testimony of petitioner Tiu, that he based the selection of his driver Laspias on efficiency and in-service

training, and that the latter had been so far an efficient and good driver for the past six years of his

employment, was insufficient to prove that he observed the diligence of a good father of a family in the

selection and supervision of his employees.

After the petitioners motion for reconsideration of the said decision was denied, the petitioners

elevated the case to the Court of Appeals on the following issues:

I WHETHER THIRD PARTY DEFENDANT SERGIO PEDRANO WAS RECKLESS AND IMPRUDENT WHEN HE

PARKED THE CARGO TRUCK IN AN OBLIQUE MANNER;

II WHETHER THE THIRD PARTY DEFENDANTS ARE JOINTLY AND SEVERALLY LIABLE DIRECTLY TO

PLAINTIFF-APPELLEE OR TO DEFENDANTS-APPELLANTS FOR WHATEVER LIABILITY THAT MAY BE

ADJUDGED TO THE SAID DEFENDANTS-APPELLANTS;

III WHETHER DEFENDANT-APPELLANT VIRGILIO TE LASPIAS WAS GUILTY OF GROSS NEGLIGENCE;

IV WHETHER DEFENDANT-APPELLANT WILLIAM TIU HAD EXERCISED THE DUE DILIGENCE OF A GOODFATHER OF A FAMILY IN THE SELECTION AND SUPERVISION OF HIS DRIVERS;

V GRANTING FOR THE SAKE OF ARGUMENT THAT DEFENDANT-APPELLANT WILLIAM TIU IS LIABLE TO

PLAINTIFF-APPELLEE, WHETHER THERE IS LEGAL AND FACTUAL BASIS IN AWARDING EXCESSIVE MORAL

DAMAGES, EX[E]MPLARY DAMAGES, ATTORNEYS FEES AND LITIGATION EXPENSES TO PLAINTIFF-

APPELLEE;

VI WHETHER THIRD PARTY DEFENDANT PHILIPPINE PHOENIX SURETY AND INSURANCE, INC. IS LIABLE

TO DEFENDANT- APPELLANT WILLIAM TIU.[17]

The appellate court rendered judgment affirming the trial courts decision with the modification that the

awards for moral and exemplary damages were reduced to P25,000. The dispositive portion reads:


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WHEREFORE, the appealed Decision dated November 6, 1995 is hereby MODIFIED such that the awards

for moral and exemplary damages are each reduced to P25,000.00 or a total of P50,000.00 for both. The

judgment is AFFIRMED in all other respects.

SO ORDERED.[18]

According to the appellate court, the action of respondent Arriesgado was based not on quasi-delict but

on breach of contract of carriage. As a common carrier, it was incumbent upon petitioner Tiu to prove

that extraordinary diligence was observed in ensuring the safety of passengers during transportation.

Since the latter failed to do so, he should be held liable for respondent Arriesgados claim. The CA also

ruled that no evidence was presented against the respondent PPSII, and as such, it could not be held

liable for respondent Arriesgados claim, nor for contribution, indemnification and/or reimbursement in

case the petitioners were adjudged liable.

The petitioners now come to this Court and ascribe the following errors committed by the appellate

court:

I. THE HONORABLE COURT OF APPEALS ERRED IN NOT DECLARING RESPONDENTS BENJAMIN CONDOR

AND SERGIO PEDRANO GUILTY OF NEGLIGENCE AND HENCE, LIABLE TO RESPONDENT PEDRO A.

ARRIESGADO OR TO PETITIONERS FOR WHATEVER LIABILITY THAT MAY BE ADJUDGED AGAINST THEM.

II. THE HONORABLE COURT OF APPEALS ERRED IN FINDING PETITIONERS GUILTY OF NEGLIGENCE AND

HENCE, LIABLE TO RESPONDENT PEDRO A. ARRIESGADO.

III. THE HONORABLE COURT OF APPEALS ERRED IN FINDING PETITIONER WILLIAM TIU LIABLE FOR

EXEMPLARY DAMAGES, ATTORNEYS FEES AND LITIGATION EXPENSES.

IV.THE HONORABLE COURT OF APPEALS ERRED IN NOT FINDING RESPONDENT PHILIPPINE PHOENIX

SURETY AND INSURANCE, INC. LIABLE TO RESPONDENT PEDRO A. ARRIESGADO OR TO PETITIONER

WILLIAM TIU.[19]


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According to the petitioners, the appellate court erred in failing to appreciate the absence of an early

warning device and/or built-in reflectors at the front and back of the cargo truck, in clear violation of

Section 34, par. (g) of the Land Transportation and Traffic Code. They aver that such violation is only a

proof of respondent Pedranos negligence, as provided under Article 2185 of the New Civil Code. Theyalso question the appellate courts failure to take into account that the truck was parked in an oblique

manner, its rear portion almost at the center of the road. As such, the proximate cause of the incident

was the gross recklessness and imprudence of respondent Pedrano, creating the presumption of

negligence on the part of respondent Condor in supervising his employees, which presumption was not

rebutted. The petitioners then contend that respondents Condor and Pedrano should be held jointly and

severally liable to respondent Arriesgado for the payment of the latters claim.

The petitioners, likewise, aver that expert evidence should have been presented to prove that petitioner

Laspias was driving at a very fast speed, and that the CA could not reach such conclusion by merely

considering the damages on the cargo truck. It was also pointed out that petitioner Tiu presented

evidence that he had exercised the diligence of a good father of a family in the selection and supervision

of his drivers.

The petitioners further allege that there is no legal and factual basis to require petitioner Tiu to pay

exemplary damages as no evidence was presented to show that the latter acted in a fraudulent, reckless

and oppressive manner, or that he had an active participation in the negligent act of petitioner Laspias.

Finally, the petitioners contend that respondent PPSII admitted in its answer that while it had attended

to and settled the claims of the other injured passengers, respondent Arriesgados claim remained

unsettled as it was beyond the scheduled indemnity under the insurance contract. The petitioners argue

that said respondent PPSII should have settled the said claim in accordance with the scheduled

indemnity instead of just denying the same.

On the other hand, respondent Arriesgado argues that two of the issues raised by the petitioners

involved questions of fact, not reviewable by the Supreme Court: the finding of negligence on the part of

the petitioners and their liability to him; and the award of exemplary damages, attorneys fees and

litigation expenses in his favor. Invoking the principle of equity and justice, respondent Arriesgado

pointed out that if there was an error to be reviewed in the CA decision, it should be geared towards the

restoration of the moral and exemplary damages to P50,000 each, or a total of P100,000 which was

reduced by the Court of Appeals to P25,000 each, or a total of only P50,000.


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Respondent Arriesgado also alleged that respondents Condor and Pedrano, and respondent Phoenix

Surety, are parties with whom he had no contract of carriage, and had no cause of action against. It was

pointed out that only the petitioners needed to be sued, as driver and operator of the ill-fated bus, on

account of their failure to bring the Arriesgado Spouses to their place of destination as agreed upon inthe contract of carriage, using the utmost diligence of very cautious persons with due regard for all

circumstances.

Respondents Condor and Pedrano point out that, as correctly ruled by the Court of Appeals, the

proximate cause of the unfortunate incident was the fast speed at which petitioner Laspias was driving

the bus owned by petitioner Tiu. According to the respondents, the allegation that the truck was not

equipped with an early warning device could not in any way have prevented the incident from

happening. It was also pointed out that respondent Condor had always exercised the due diligence

required in the selection and supervision of his employees, and that he was not a party to the contract

of carriage between the petitioners and respondent Arriesgado.

Respondent PPSII, for its part, alleges that contrary to the allegation of petitioner Tiu, it settled all the

claims of those injured in accordance with the insurance contract. It further avers that it did not deny

respondent Arriesgados claim, and emphasizes that its liability should be within the scheduled limits of

indemnity under the said contract. The respondent concludes that while it is true that insurance

contracts are contracts of indemnity, the measure of the insurers liability is determined by the insureds

compliance with the terms thereof.

The Courts Ruling

At the outset, it must be stressed that this Court is not a trier of facts.[20] Factual findings of the Court

of Appeals are final and may not be reviewed on appeal by this Court, except when the lower court and

the CA arrived at diverse factual findings.[21] The petitioners in this case assail the finding of both the

trial and the appellate courts that petitioner Laspias was driving at a very fast speed before the bus

owned by petitioner Tiu collided with respondent Condors stalled truck. This is clearly one of fact, not

reviewable by the Court in a petition for review under Rule 45.[22]

On this ground alone, the petition is destined to fail.


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However, considering that novel questions of law are likewise involved, the Court resolves to examine

and rule on the merits of the case.

Petitioner Laspias

Was negligent in driving

The Ill-fated bus

In his testimony before the trial court, petitioner Laspias claimed that he was traversing the two-lane

road at Compostela, Cebu at a speed of only forty (40) to fifty (50) kilometers per hour before the

incident occurred.[23] He also admitted that he saw the truck which was parked in an oblique position

at about 25 meters before impact,[24] and tried to avoid hitting it by swerving to the left. However,

even in the absence of expert evidence, the damage sustained by the truck[25] itself supports thefinding of both the trial court and the appellate court, that the D Rough Rider bus driven by petitioner

Laspias was traveling at a fast pace. Since he saw the stalled truck at a distance of 25 meters, petitioner

Laspias had more than enough time to swerve to his left to avoid hitting it; that is, if the speed of the

bus was only 40 to 50 kilometers per hour as he claimed. As found by the Court of Appeals, it is easier to

believe that petitioner Laspias was driving at a very fast speed, since at 4:45 a.m., the hour of the

accident, there were no oncoming vehicles at the opposite direction. Petitioner Laspias could have

swerved to the left lane with proper clearance, and, thus, could have avoided the truck.[26] Instinct, at

the very least, would have prompted him to apply the breaks to avert the impending disaster which he

must have foreseen when he caught sight of the stalled truck. As we had occasion to reiterate:

A man must use common sense, and exercise due reflection in all his acts; it is his duty to be cautious,

careful and prudent, if not from instinct, then through fear of recurring punishment. He is responsible

for such results as anyone might foresee and for acts which no one would have performed except

through culpable abandon. Otherwise, his own person, rights and property, and those of his fellow

beings, would ever be exposed to all manner of danger and injury.[27]

We agree with the following findings of the trial court, which were affirmed by the CA on appeal:

A close study and evaluation of the testimonies and the documentary proofs submitted by the parties

which have direct bearing on the issue of negligence, this Court as shown by preponderance of evidence

that defendant Virgilio Te Laspias failed to observe extraordinary diligence as a driver of the common

carrier in this case. It is quite hard to accept his version of the incident that he did not see at a


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reasonable distance ahead the cargo truck that was parked when the Rough Rider [Bus] just came out of

the bridge which is on an (sic) [more] elevated position than the place where the cargo truck was

parked. With its headlights fully on, defendant driver of the Rough Rider was in a vantage position to see

the cargo truck ahead which was parked and he could just easily have avoided hitting and bumping the

same by maneuvering to the left without hitting the said cargo truck. Besides, it is (sic) shown that there

was still much room or space for the Rough Rider to pass at the left lane of the said national highwayeven if the cargo truck had occupied the entire right lane thereof. It is not true that if the Rough Rider

would proceed to pass through the left lane it would fall into a canal considering that there was much

space for it to pass without hitting and bumping the cargo truck at the left lane of said national highway.

The records, further, showed that there was no incoming vehicle at the opposite lane of the national

highway which would have prevented the Rough Rider from not swerving to its left in order to avoid

hitting and bumping the parked cargo truck. But the evidence showed that the Rough Rider instead of

swerving to the still spacious left lane of the national highway plowed directly into the parked cargo

truck hitting the latter at its rear portion; and thus, the (sic) causing damages not only to herein plaintiff

but to the cargo truck as well.[28]

Indeed, petitioner Laspias negligence in driving the bus is apparent in the records. By his own

admission, he had just passed a bridge and was traversing the highway of Compostela, Cebu at a speed

of 40 to 50 kilometers per hour before the collision occurred. The maximum speed allowed by law on a

bridge is only 30 kilometers per hour.[29] And, as correctly pointed out by the trial court, petitioner

Laspias also violated Section 35 of the Land Transportation and Traffic Code, Republic Act No. 4136, as

amended:

Sec. 35. Restriction as to speed. (a) Any person driving a motor vehicle on a highway shall drive the

same at a careful and prudent speed, not greater nor less than is reasonable and proper, having due

regard for the traffic, the width of the highway, and or any other condition then and there existing; and

no person shall drive any motor vehicle upon a highway at such speed as to endanger the life, limb and

property of any person, nor at a speed greater than will permit him to bring the vehicle to a stop within

the assured clear distance ahead.[30]

Under Article 2185 of the Civil Code, a person driving a vehicle is presumed negligent if at the time of

the mishap, he was violating any traffic regulation.[31]

Petitioner Tiu failed to

Overcome the presumption


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Of negligence against him as

One engaged in the business

Of common carriage

The rules which common carriers should observe as to the safety of their passengers are set forth in the

Civil Code, Articles 1733,[32] 1755[33] and 1756.[34] In this case, respondent Arriesgado and his

deceased wife contracted with petitioner Tiu, as owner and operator of D Rough Riders bus service, for

transportation from Maya, Daanbantayan, Cebu, to Cebu City for the price of P18.00.[35] It is

undisputed that the respondent and his wife were not safely transported to the destination agreed

upon. In actions for breach of contract, only the existence of such contract, and the fact that the obligor,

in this case the common carrier, failed to transport his passenger safely to his destination are the

matters that need to be proved.[36] This is because under the said contract of carriage, the petitioners

assumed the express obligation to transport the respondent and his wife to their destination safely andto observe extraordinary diligence with due regard for all circumstances.[37] Any injury suffered by the

passengers in the course thereof is immediately attributable to the negligence of the carrier.[38] Upon

the happening of the accident, the presumption of negligence at once arises, and it becomes the duty of

a common carrier to prove that he observed extraordinary diligence in the care of his passengers.[39] It

must be stressed that in requiring the highest possible degree of diligence from common carriers and in

creating a presumption of negligence against them, the law compels them to curb the recklessness of

their drivers.[40]

While evidence may be submitted to overcome such presumption of negligence, it must be shown that

the carrier observed the required extraordinary diligence, which means that the carrier must show the

utmost diligence of very cautious persons as far as human care and foresight can provide, or that the

accident was caused by fortuitous event.[41] As correctly found by the trial court, petitioner Tiu failed to

conclusively rebut such presumption. The negligence of petitioner Laspias as driver of the passenger

bus is, thus, binding against petitioner Tiu, as the owner of the passenger bus engaged as a common

carrier.[42]

The Doctrine of

Last Clear Chance

Is Inapplicable in the

Case at Bar


26/192

Contrary to the petitioners contention, the principle of last clear chance is inapplicable in the instant

case, as it only applies in a suit between the owners and drivers of two colliding vehicles. It does not

arise where a passenger demands responsibility from the carrier to enforce its contractual obligations,

for it would be inequitable to exempt the negligent driver and its owner on the ground that the other

driver was likewise guilty of negligence.[43] The common law notion of last clear chance permitted

courts to grant recovery to a plaintiff who has also been negligent provided that the defendant had thelast clear chance to avoid the casualty and failed to do so. Accordingly, it is difficult to see what role, if

any, the common law of last clear chance doctrine has to play in a jurisdiction where the common law

concept of contributory negligence as an absolute bar to recovery by the plaintiff, has itself been

rejected, as it has been in Article 2179 of the Civil Code.[44]

Thus, petitioner Tiu cannot escape liability for the death of respondent Arriesgadoswife due to the

negligence of petitioner Laspias, his employee, on this score.

Respondents Pedrano and

Condor were likewise

Negligent

In Phoenix Construction, Inc. v. Intermediate Appellate Court,[45] where therein respondent Dionisio

sustained injuries when his vehicle rammed against a dump truck parked askew, the Court ruled that the

improper parking of a dump truck without any warning lights or reflector devices created an

unreasonable risk for anyone driving within the vicinity, and for having created such risk, the truck driver

must be held responsible. In ruling against the petitioner therein, the Court elucidated, thus:

In our view, Dionisios negligence, although later in point of time than the truck drivers negligence,

and therefore closer to the accident, was not an efficient intervening or independent cause. What the

petitioners describe as an intervening cause was no more than a foreseeable consequence of the risk

created by the negligent manner in which the truck driver had parked the dump truck. In other words,

the petitioner truck driver owed a duty to private respondent Dionisio and others similarly situated notto impose upon them the very risk the truck driver had created. Dionisios negligence was not that of an

independent and overpowering nature as to cut, as it were, the chain of causation in fact between the

improper parking of the dump truck and the accident, nor to sever the juris vinculum of liability.


27/192

We hold that private respondent Dionisios negligence was only contributory, that the immediate and

proximate cause of the injury remained the truck drivers lack of due care.[46]

In this case, both the trial and the appellate courts failed to consider that respondent Pedrano was also

negligent in leaving the truck parked askew without any warning lights or reflector devices to alert

oncoming vehicles, and that such failure created the presumption of negligence on the part of his

employer, respondent Condor, in supervising his employees properly and adequately. As we ruled in

Poblete v. Fabros:[47]

It is such a firmly established principle, as to have virtually formed part of the law itself, that the

negligence of the employee gives rise to the presumption of negligence on the part of the employer.

This is the presumed negligence in the selection and supervision of employee. The theory of presumed

negligence, in contrast with the American doctrine of respondeat superior, where the negligence of the

employee is conclusively presumed to be the negligence of the employer, is clearly deducible from the

last paragraph of Article 2180 of the Civil Code which provides that the responsibility therein mentioned

shall cease if the employers prove that they observed all the diligence of a good father of a family to

prevent damages. [48]

The petitioners were correct in invoking respondent Pedranos failure to observe Article IV, Section 34(g)

of the Rep. Act No. 4136, which provides:

(g) Lights when parked or disabled. Appropriate parking lights or flares visible one hundred meters

away shall be displayed at a corner of the vehicle whenever such vehicle is parked on highways or in

places that are not well-lighted or is placed in such manner as to endanger passing traffic.

The manner in which the truck was parked clearly endangered oncoming traffic on both sides,

considering that the tire blowout which stalled the truck in the first place occurred in the wee hours ofthe morning. The Court can only now surmise that the unfortunate incident could have been averted

had respondent Condor, the owner of the truck, equipped the said vehicle with lights, flares, or, at the

very least, an early warning device.[49] Hence, we cannot subscribe to respondents Condor and

Pedranos claim that they should be absolved from liability because, as found by the trial and appellate

courts, the proximate cause of the collision was the fast speed at which petitioner Laspias drove the

bus. To accept this proposition would be to come too close to wiping out the fundamental principle of


28/192

law that a man must respond for the foreseeable consequences of his own negligent act or omission.

Indeed, our law on quasi-delicts seeks to reduce the risks and burdens of living in society and to allocate

them among its members. To accept this proposition would be to weaken the very bonds of society.[50]

The Liability of

Respondent PPSII

as Insurer

The trial court in this case did not rule on the liability of respondent PPSII, while the appellate court

ruled that, as no evidence was presented against it, the insurance company is not liable.

A perusal of the records will show that when the petitioners filed the Third-Party Complaint against

respondent PPSII, they failed to attach a copy of the terms of the insurance contract itself. Only

Certificate of Cover No. 054940[51] issued in favor of Mr. William Tiu, Lahug, Cebu City signed by

Cosme H. Boniel was appended to the third-party complaint. The date of issuance, July 22, 1986, the

period of insurance, from July 22, 1986 to July 22, 1987, as well as the following items, were also

indicated therein:

SCHEDULED VEHICLE

MODEL

MAKE

TYPE OF BODY

COLOR

BLT FILE NO.


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Isuzu Forward

Bus

blue mixed

PLATE NO. PBP-724

SERIAL/CHASSIS NO. SER450-1584124

MOTOR NO. 677836

AUTHORIZED CAPACITY 50

UNLADEN WEIGHT 6Cyls. Kgs.

SECTION 1/11

*LIMITS OF LIABILITY P50,000.00


30/192

PREMIUMS PAID

A. THIRD PARTY LIABILITY

B. PASSENGER LIABILITY

Per Person P12,000.00

Per Accident P50,000

P540.0052

In its Answer53 to the Third-Party Complaint, the respondent PPSII admitted the existence of the

contract of insurance, in view of its failure to specifically deny the same as required under then Section

8(a), Rule 8 of the Rules of Court,54 which reads:

Sec. 8. How to contest genuineness of such documents. When an action or defense is founded upon a

written instrument copied in or attached to the corresponding pleading as provided in the preceding

section, the genuineness and due execution of the instrument shall be deemed admitted unless the

adverse party, under oath, specifically denies them, and sets forth what he claims to be the facts; but

the requirement of an oath does not apply when the adverse party does not appear to be a party to the

instrument or when compliance with an order for inspection of the original instrument is refused.

In fact, respondent PPSII did not dispute the existence of such contract, and admitted that it was liable

thereon. It claimed, however, that it had attended to and settled the claims of those injured during theincident, and set up the following as special affirmative defenses:

Third party defendant Philippine Phoenix Surety and Insurance, Inc. hereby reiterates and incorporates

by way of reference the preceding paragraphs and further states THAT:-


31/192

8. It has attended to the claims of Vincent Canales, Asuncion Batiancila and Neptali Palces who sustained

injuries during the incident in question. In fact, it settled financially their claims per vouchers duly signed

by them and they duly executed Affidavit[s] of Desistance to that effect, xerox copies of which are

hereto attached as Annexes 1, 2, 3, 4, 5, and 6 respectively;

9. With respect to the claim of plaintiff, herein answering third party defendant through its authorized

insurance adjuster attended to said claim. In fact, there were negotiations to that effect. Only that it

cannot accede to the demand of said claimant considering that the claim was way beyond the scheduled

indemnity as per contract entered into with third party plaintiff William Tiu and third party defendant

(Philippine Phoenix Surety and Insurance, Inc.). Third party Plaintiff William Tiu knew all along the

limitation as earlier stated, he being an old hand in the transportation business; 55

Considering the admissions made by respondent PPSII, the existence of the insurance contract and the

salient terms thereof cannot be dispatched. It must be noted that after filing its answer, respondent

PPSII no longer objected to the presentation of evidence by respondent Arriesgado and the insured

petitioner Tiu. Even in its Memorandum56 before the Court, respondent PPSII admitted the existence of

the contract, but averred as follows:

Petitioner Tiu is insisting that PPSII is liable to him for contribution, indemnification and/or

reimbursement. This has no basis under the contract. Under the contract, PPSII will pay all sumsnecessary to discharge liability of the insured subject to the limits of liability but not to exceed the limits

of liability as so stated in the contract. Also, it is stated in the contract that in the event of accident

involving indemnity to more than one person, the limits of liability shall not exceed the aggregate

amount so specified by law to all persons to be indemnified.57

As can be gleaned from the Certificate of Cover, such insurance contract was issued pursuant to the

Compulsory Motor Vehicle Liability Insurance Law. It was expressly provided therein that the limit of the

insurers liability for each person was P12,000, while the limit per accident was pegged at P50,000. An

insurer in an indemnity contract for third party liability is directly liable to the injured party up to the

extent specified in the agreement but it cannot be held solidarily liable beyond that amount.58 The

respondent PPSII could not then just deny petitioner Tius claim; it should have paid P12,000 for the

death of Felisa Arriesgado,59 and respondent Arriesgados hospitalization expenses of P1,113.80, which

the trial court found to have been duly supported by receipts. The total amount of the claims, even

when added to that of the other injured passengers which the respondent PPSII claimed to have

settled,60 would not exceed the P50,000 limit under the insurance agreement.


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Indeed, the nature of Compulsory Motor Vehicle Liability Insurance is such that it is primarily intended

to provide compensation for the death or bodily injuries suffered by innocent third parties or passengers

as a result of the negligent operation and use of motor vehicles. The victims and/or their dependents

are assured of immediate financial assistance, regardless of the financial capacity of motor vehicleowners.61 As the Court, speaking through Associate Justice Leonardo A. Quisumbing, explained in

Government Service Insurance System v. Court of Appeals:62

However, although the victim may proceed directly against the insurer for indemnity, the third party

liability is only up to the extent of the insurance policy and those required by law. While it is true that

where the insurance contract provides for indemnity against liability to third persons, and such persons

can directly sue the insurer, the direct liability of the insurer under indemnity contracts against third

party liability does not mean that the insurer can be held liable in solidum with the insured and/or the

other parties found at fault. For the liability of the insurer is based on contract; that of the insured

carrier or vehicle owner is based on tort.

Obviously, the insurer could be held liable only up to the extent of what was provided for by the

contract of insurance, in accordance with the CMVLI law. At the time of the incident, the schedule of

indemnities for death and bodily injuries, professional fees and other charges payable under a CMVLI

coverage was provided for under the Insurance Memorandum Circular (IMC) No. 5-78 which was

approved on November 10, 1978. As therein provided, the maximum indemnity for death was twelve

thousand (P12,000.00) pesos per victim. The schedules for medical expenses were also provided by saidIMC, specifically in paragraphs (C) to (G).63

Damages to be

Awarded

The trial court correctly awarded moral damages in the amount of P50,000 in favor of respondent

Arriesgado. The award of exemplary damages by way of example or correction of the public good,64 islikewise in order. As the Court ratiocinated in Kapalaran Bus Line v. Coronado:65

While the immediate beneficiaries of the standard of extraordinary diligence are, of course, the

passengers and owners of cargo carried by a common carrier, they are not the only persons that the law

seeks to benefit. For if common carriers carefully observed the statutory standard of extraordinary


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diligence in respect of their own passengers, they cannot help but simultaneously benefit pedestrians

and the passengers of other vehicles who are equally entitled to the safe and convenient use of our

roads and highways. The law seeks to stop and prevent the slaughter and maiming of people (whether

passengers or not) on our highways and buses, the very size and power of which seem to inflame the

minds of their drivers. Article 2231 of the Civil Code explicitly authorizes the imposition of exemplary

damages in cases of quasi-delicts if the defendant acted with gross negligence.66

The respondent Pedro A. Arriesgado, as the surviving spouse and heir of Felisa Arriesgado, is entitled to

indemnity in the amount of P50,000.00.67

The petitioners, as well as the respondents Benjamin Condor and Sergio Pedrano are jointly and

severally liable for said amount, conformably with the following pronouncement of the Court in Fabre,

Jr. vs. Court of Appeals:68

The same rule of liability was applied in situations where the negligence of the driver of the bus on

which plaintiff was riding concurred with the negligence of a third party who was the driver of another

vehicle, thus causing an accident. In Anuran v. Buo, Batangas Laguna Tayabas Bus Co. v. Intermediate

Appellate Court, and Metro Manila Transit Corporation v. Court of Appeals, the bus company, its driver,

the operator of the other vehicle and the driver of the vehicle were jointly and severally held liable to

the injured passenger or the latters heirs. The basis of this allocation of liability was explained in Viluan

v. Court of Appeals, thus:

Nor should it make difference that the liability of petitioner [bus owner] springs from contract while

that of respondents [owner and driver of other vehicle] arises from quasi-delict. As early as 1913, we

already ruled in Gutierrez vs. Gutierrez, 56 Phil. 177, that in case of injury to a passenger due to the

negligence of the driver of the bus on which he was riding and of the driver of another vehicle, the

drivers as well as the owners of the two vehicles are jointly and severally liable for damages. Some

members of the Court, though, are of the view that under the circumstances they are liable on quasi-

delict.69

IN LIGHT OF ALL THE FOREGOING, the petition is PARTIALLY GRANTED. The Decision of the Court of

Appeals is AFFIRMED with MODIFICATIONS:


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(1) Respondent Philippine Phoenix Surety and Insurance, Inc. and petitioner William Tiu are ORDERED to

pay, jointly and severally, respondent Pedro A. Arriesgado the total amount of P13,113.80;

(2) The petitioners and the respondents Benjamin Condor and Sergio Pedrano are ORDERED to pay,

jointly and severally, respondent Pedro A. Arriesgado P50,000.00 as indemnity; P26,441.50 as actual

damages; P50,000.00 as moral damages; P50,000.00 as exemplary damages; and P20,000.00 as

attorneys fees.

SO ORDERED.

Austria-Martinez, (Acting Chairman), Tinga, and Chico-Nazario, JJ., concur.

Puno J., (Chairman), on official leave

Republic of the Philippines

SUPREME COURT

Manila

FIRST DIVISION

G.R. No. 153563 February 07, 2005

NATIONAL TRUCKING AND FORWARDING CORPORATION, petitioner,

vs.

LORENZO SHIPPING CORPORATION, Respondent.

D E C I S I O N


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QUISUMBING, J.:

For review on certiorari are the Decision1 dated January 16, 2002, of the Court of Appeals, in CA-G.R. CV

No. 48349, and its Resolution,2 of May 13, 2002, denying the motion for reconsideration of herein

petitioner National Trucking and Forwarding Corporation (NTFC). The impugned decision affirmed in

toto the judgment3 dated November 14, 1994 of the Regional Trial Court (RTC) of Manila, Branch 53, in

Civil Case No. 90-52102.

The undisputed facts, as summarized by the appellate court, are as follows:

On June 5, 1987, the Republic of the Philippines, through the Department of Health (DOH), and the

Cooperative for American Relief Everywhere, Inc. (CARE) signed an agreement wherein CARE wouldacquire from the United States government donations of non-fat dried milk and other food products

from January 1, 1987 to December 31, 1989. In turn, the Philippines would transport and distribute the

donated commodities to the intended beneficiaries in the country.

The government entered into a contract of carriage of goods with herein petitioner National Trucking

and Forwarding Corporation (NTFC). Thus, the latter shipped 4,868 bags of non-fat dried milk through

herein respondent Lorenzo Shipping Corporation (LSC) from September to December 1988. The

consignee named in the bills of lading issued by the respondent was Abdurahman Jama, petitioners

branch supervisor in Zamboanga City.

On reaching the port of Zamboanga City, respondents agent, Efren Ruste4 Shipping Agency, unloaded

the 4,868 bags of non-fat dried milk and delivered the goods to petitioners warehouse. Before each

delivery, Rogelio Rizada and Ismael Zamora, both delivery checkers of Efren Ruste Shipping Agency,

requested Abdurahman to surrender the original bills of lading, but the latter merely presented certified

true copies thereof. Upon completion of each delivery, Rogelio and Ismael asked Abdurahman to sign

the delivery receipts. However, at times when Abdurahman had to attend to other business before a

delivery was completed, he instructed his subordinates to sign the delivery receipts for him.

Notwithstanding the precautions taken, the petitioner allegedly did not receive the subject goods. Thus,

in a letter dated March 11, 1989, petitioner NTFC filed a formal claim for non-delivery of the goods

shipped through respondent.


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In its letter of April 26, 1989, the respondent explained that the cargo had already been delivered to

Abdurahman Jama. The petitioner then decided to investigate the loss of the goods. But before the

investigation was over, Abdurahman Jama resigned as branch supervisor of petitioner.

Noting but disbelieving respondents insistence that the goods were delivered, the government through

the DOH, CARE, and NTFC as plaintiffs filed an action for breach of contract of carriage, against

respondent as defendant, with the RTC of Manila.

After trial, the RTC resolved the case as follows:

WHEREFORE, judgment is hereby rendered in favor of the defendant and against the plaintiffs,

dismissing the latters complaint, and ordering the plaintiffs, pursuant to the defendants counterclaim,

to pay, jointly and solidarily, to the defendant, actual damages in the amount of P50,000.00, and

attorneys fees in the amount of P70,000.00, plus the costs of suit.

SO ORDERED.5

Dissatisfied with the foregoing ruling, herein petitioner appealed to the Court of Appeals. It faulted the

lower court for not holding that respondent failed to deliver the cargo, and that respondent failed to

exercise the extraordinary diligence required of common carriers. Petitioner also assailed the lower

court for denying its claims for actual, moral, and exemplary damages, and for awarding actual damages

and attorneys fees to the respondent.6

The Court of Appeals found that the trial court did not commit any reversible error. It dismissed the

appeal, and affirmed the assailed decision in toto.

Undaunted, petitioner now comes to us, assigning the following errors:

I


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THE COURT OF APPEALS GRAVELY ERRED WHEN IT FAILED TO APPRECIATE AND APPLY THE LEGAL

STANDARD OF EXTRAORDINARY DILIGENCE IN THE SHIPMENT AND DELIVERY OF GOODS TO THE

RESPONDENT AS A COMMON CARRIER, AS WELL AS THE ACCOMPANYING LEGAL PRESUMPTION OF

FAULT OR NEGLIGENCE ON THE PART OF THE COMMON CARRIER, IF THE GOODS ARE LOST, DESTROYEDOR DETERIORATED, AS REQUIRED UNDER THE CIVIL CODE.

II

THE COURT OF APPEALS GRAVELY ERRED WHEN IT SUSTAINED THE BASELESS AND ARBITRARY AWARD

OF ACTUAL DAMAGES AND ATTORNEYS FEES INASMUCH AS THE ORIGINAL COMPLAINT WAS FILED IN

GOOD FAITH, WITHOUT MALICE AND WITH THE BEST INTENTION OF PROTECTING THE INTEREST AND

INTEGRITY OF THE GOVERNMENT AND ITS CREDIBILITY AND RELATIONSHIP WITH INTERNATIONAL

RELIEF AGENCIES AND DONOR STATES AND ORGANIZATION.7

The issues for our resolution are: (1) Is respondent presumed at fault or negligent as common carrier for

the loss or deterioration of the goods? and (2) Are damages and attorneys fees due respondent?

Anent the first issue, petitioner contends that the respondent is presumed negligent and liable for

failure to abide by the terms and conditions of the bills of lading; that Abdurahman Jamas failure to

testify should not be held against petitioner; and that the testimonies of Rogelio Rizada and Ismael

Zamora, as employees of respondents agent, Efren Ruste Shipping Agency, were biased and could not

overturn the legal presumption of respondents fault or negligence.

For its part, the respondent avers that it observed extraordinary diligence in the delivery of the goods.

Prior to releasing the goods to Abdurahman, Rogelio and Ismael required the surrender of the original

bills of lading, and in their absence, the certified true copies showing that Abdurahman was indeed the

consignee of the goods. In addition, they required Abdurahman or his designated subordinates to signthe delivery receipts upon completion of each delivery.

We rule for respondent.


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Article 17338 of the Civil Code demands that a common carrier observe extraordinary diligence over the

goods transported by it. Extraordinary diligence is that extreme measure of care and caution which

persons of unusual prudence and circumspection use for securing and preserving their own property or

rights.9 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. Hence, in case of loss of goods in transit, the common carrier ispresumed under the law to have been at fault or negligent.10 However, the presumption of fault or

negligence, may be overturned by competent evidence showing that the common carrier has observed

extraordinary diligence over the goods.

In the instant case, we agree with the court a quo that the respondent adequately proved that it

exercised extraordinary diligence. Although the original bills of lading remained with petitioner,

respondents agents demanded from Abdurahman the certified true copies of the bills of lading. They

also asked the latter and in his absence, his designated subordinates, to sign the cargo delivery receipts.

This practice, which respondents agents testified to be their standard operating procedure, finds

support in Article 353 of the Code of Commerce:

ART. 353. . . .

After the contract has been complied with, the bill of lading which the carrier has issued shall be

returned to him, and by virtue of the exchange of this title with the thing transported, the respective

obligations and actions shall be considered cancelled, .

In case the consignee, upon receiving the goods, cannot return the bill of lading subscribed by the

carrier, because of its loss or of any other cause, he must give the latter a receipt for the goods

delivered, this receipt producing the same effects as the return of the bill of lading. (Emphasis supplied)

Conformably with the aforecited provision, the surrender of the original bill of lading is not a condition

precedent for a common carrier to be discharged of its contractual obligation. If surrender of the

original bill of lading is not possible, acknowledgment of the delivery by signing the delivery receipt

suffices. This is what respondent did.


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We also note that some delivery receipts were signed by Abdurahmans subordinates and not by

Abdurahman himself as consignee. Further, delivery checkers Rogelio and Ismael testified that

Abdurahman was always present at the initial phase of each delivery, although on the few occasions

when Abdurahman could not stay to witness the complete deliv

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