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G.R. No. 110398 November 7, 1997NEGROS NAVIGATION CO., INC., petitioner,vs.THE COURT OF APPEALS, RAMON MIRANDA, SPS. RICARDO and VIRGINIA DE LAVICTORIA, respondents.

MENDOZA, J.:This is a petition for review on certiorariof the decision of the Court of Appeals affirming withmodification the Regional Trial Court's award of damages to private respondents for the death ofrelatives as a result of the sinking of petitioner's vessel.In April of 1980, private respondent Ramon Miranda purchased from the Negros Navigation Co.,

Inc. four special cabin tickets (#74411, 74412, 74413 and 74414) for his wife, daughter, son andniece who were going to Bacolod City to attend a family reunion. The tickets were for Voyage No.457-A of the M/V Don Juan, leaving Manila at 1:00 p.m. on April 22, 1980.The ship sailed from the port of Manila on schedule.

At about 10:30 in the evening of April 22, 1980, the Don Juan collided off the Tablas Strait inMindoro, with the M/T Tacloban City, an oil tanker owned by t he Philippine National Oil Company(PNOC) and the PNOC Shipping and Transport Corporation (PNOC/STC). As a result, theM/V Don Juan sank. Several of her passengers perished in the sea tragedy. The bodies of someof the victims were found and brought to shore, but the four members of private respondents'families were never found.Private respondents filed a complaint on July 16, 1980 in the Regional Trial Court of Manila,Branch 34, against the Negros Navigation, the Philippine National Oil Company (PNOC), and thePNOC Shipping and Transport Corporation (PNOC/STC), seeking damages for the death of

Ardita de la Victoria Miranda, 48, Rosario V. Miranda, 19, Ramon V. Miranda, Jr., 16, and Elfredade la Victoria, 26.

In its answer, petitioner admitted that private respondents purchased ticket numbers 74411,74412, 74413 and 74414; that the ticket numbers were listed in the passenger manifest; and thatthe Don Juan left Pier 2, North Harbor, Manila on April 22, 1980 and sank that night after beingrammed by the oil tanker M/T Tacloban City, and that, as a result of the collision, some of thepassengers of the M/V Don Juan died. Petitioner, however, denied that the four relatives ofprivate respondents actually boarded the vessel as shown by the fact that their bodies werenever recovered. Petitioner further averred that the Don Juan was seaworthy and manned by afull and competent crew, and that the collision was entirely due to the fault of the crew of theM/T Tacloban City.On January 20, 1986, the PNOC and petitioner Negros Navigation Co., Inc. entered into acompromise agreement whereby petitioner assumed full responsibility for the payment andsatisfaction of all claims arising out of or in connection with the collision and releasing the PNOCand the PNOC/STC from any liability to it. The agreement was subsequently held by the trialcourt to be binding upon petitioner, PNOC and PNOC/STC. Private respondents did not join inthe agreement.

After trial, the court rendered judgment on February 21, 1991, the dispositive portion of whichleads as follows:WHEREFORE, in view of the foregoing, judgment is hereby rendered in favor of theplaintiffs, ordering all the defendants to pay jointly and severally to the plaintiffsdamages as follows:

To Ramon Miranda:P42,025.00 for actual damages;P152,654.55 as compensatory damages for lossofearning capacity of his wife;

P90,000.00 as compensatory damages forwrongfuldeath of three (3) victims;P300,000.00 as moral damages;P50,000.00 as exemplary damages, all in thetotalamount of P634,679.55; andP40,000.00 as attorney's fees.To Spouses Ricardo and Virginia de la Victoria:P12,000.00 for actual damages;P158,899.00 as compensatory damages for loss

ofearning capacity;P30,000.00 as compensatory damages forwrongfuldeath;P100,000.00 as moral damages;P20,000.00 as exemplary damages, all in thetotalamount of P320,899.00; andP15,000.00 as attorney's fees.

On appeal, the Court of Appeals 1 affirmed the decision of the Regional Trial Court withmodification

1. Ordering and sentencing defendants-appellants, jointly and severally, to pay plaintiff-appellee Ramon Miranda the amount of P23,075.00 as actual damages instead ofP42,025.00;

2. Ordering and sentencing defendants-appellants, jointly and severally, to pay plaintiff-appellee Ramon Miranda the amount of P150,000.00, instead of P90,000.00, ascompensatory damages for the death of his wife and two children;3. Ordering and sentencing defendants-appellants, jointly and severally, to payplaintiffs-appellees Dela Victoria spouses the amount of P50,000.00, instead ofP30,000.00, as compensatory damages for the death of their daughter Elfreda DelaVictoria;

Hence this petition, raising the following issues:(1) whether the members of private respondents' families were actually passengers of the DonJuan;(2) whether the ruling in Mecenas v. Court of Appeals, 2 finding the crew members of petitioner tobe grossly negligent in the performance of their duties, is binding in this case;(3) whether the total loss of the M/V Don Juan extinguished petitioner's liability; and(4) whether the damages awarded by the appellate court are excessive, unreasonable andunwarranted.

First. The trial court held that the fact that the victims were passengers of the M/V Don Juan wassufficiently proven by private respondent Ramon Miranda, who testified that he purchased ticketsnumbered 74411, 74412, 74413, and 74414 at P131.30 each from the Makati office of petitionerfor Voyage No. 47-A of the M/V Don Juan, which was leaving Manila on April 22, 1980. This wascorroborated by the passenger manifest (Exh. E) on which the numbers of the tickets and thenames of Ardita Miranda and her children and Elfreda de la Victoria appear.Petitioner contends that the purchase of the tickets does not necessarily mean that the allegedvictims actually took the trip. Petitioner asserts that it is common knowledge that passengerspurchase tickets in advance but do not actually use them. Hence, private respondent should alsoprove the presence of the victims on the ship. The witnesses who affirmed that the victims wereon the ship were biased and unreliable.

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This contention is without merit. Private respondent Ramon Miranda testified that he personallytook his family and his niece to t he vessel on the day of the voyage and stayed with them on theship until it was time for it to leave. There is no reason he should claim members of his family tohave perished in the accident just to maintain an action. People do not normally lie about sograve a matter as the loss of dear ones. It would be more difficult for private respondents to keepthe existence of their relatives if indeed they are alive than it is for petitioner to show the contrary.Petitioner's only proof is that the bodies of the supposed victims were not among those recoveredfrom the site of the mishap. But so were the bodies of the other passengers reported missing notrecovered, as this Court noted in the Mecenas 3 case.Private respondent Miranda's testimony was corroborated by Edgardo Ramirez. Ramirez was aseminarian and one of the survivors of the collision. He testified that he saw Mrs. Miranda and

Elfreda de la Victoria on the ship and that he talked with them. He knew Mrs. Miranda who washis teacher in the grade school. He also knew Elfreda who was his childhood friend andtownmate. Ramirez said he was with Mrs. Miranda and her children and niece from 7:00 p.m.until 10:00 p.m. when the collision happened and that he in fact had dinner with them. Ramirezsaid he and Elfreda stayed on the deck after dinner and it was there where they were jolted bythe collision of the two vessels. Recounting the moments after the collision, Ramirez testified thatElfreda ran to fetch Mrs. Miranda. He escorted her to the room and then tried to go back to thedeck when the lights went out. He tried to return to the cabin but was not able to do so because itwas dark and there was a stampede of passengers from the deck.Petitioner casts doubt on Ramirez' testimony, claiming that Ramirez could not have talked withthe victims for about three hours and not run out of stories to tell, unless Ramirez had a"storehouse" of stories. But what is incredible about acquaintances thrown together on a long

journey staying together for hours on end, in idle conversation precisely to while the hours away?Petitioner also points out that it took Ramirez three (3) days before he finally contacted privaterespondent Ramon Miranda to tell him about the fate of his family. But it is not improbable that it

took Ramirez three days before calling on private respondent Miranda to tell him about the lasthours of Mrs. Miranda and her children and niece, in view of the confusion in the days followingthe collision as rescue teams and relatives searched for survivors.Indeed, given the facts of this case, it is improper for petitioner to even suggest that privaterespondents' relatives did not board the ill -fated vessel and perish in the accident simply becausetheir bodies were not recovered.Second. In finding petitioner guilty of negligence and in failing to exercise the extraordinarydiligence required of it in the carriage of passengers, both the trial court and the appellate courtrelied on the findings of this Court inMecenas v. Intermediate Appellate Court, 4 which case wasbrought for the death of other passengers. In that case it was found that although the proximatecause of the mishap was the negligence of the crew of the M/TTacloban City, the crew of the DonJuan was equally negligent as it found that the latter's master, Capt. Rogelio Santisteban, wasplaying mahjong at the time of collision, and the officer on watch, Senior Third Mate Rogelio DeVera, admitted that he failed to call the attention of Santisteban to the imminent danger facingthem. This Court found that Capt. Santisteban and the crew of the M/V Don Juan failed to take

steps to prevent the collision or at least delay the sinking of the ship and supervise theabandoning of the ship.Petitioner Negros Navigation was found equally negligent in tolerating the playing of mahjong bythe ship captain and other crew members while on board the ship and failing to keep the M/V DonJuan seaworthy so much so that the ship sank within 10 to 15 minutes of its impact with theM/T Tacloban City.In addition, the Court found that the Don Juan was overloaded. The Certificate of Inspection,dated August 27, 1979, issued by the Philippine Coast Guard Commander at Iloilo City statedthat the total number of persons allowed on the ship was 864, of whom 810 are passengers, butthere were actually 1,004 on board the vessel when it sank, 140 persons more than the maximumnumber that could be safely carried by it.

Taking these circumstances together, and the fact that the M/V Don Juan, as the faster andbetter-equipped vessel, could have avoided a collision with the PNOC tanker, this Court held thateven if the Tacloban Cityhad been at fault for failing to observe an internationally-recognized ruleof navigation, the Don Juan was guilty of contributory negligence. Through Justice Feliciano, thisCourt held:

The grossness of the negligence of the "Don Juan" is underscored when one considersthe foregoing circumstances in the context of the following facts: Firstly, the "Don Juan"was more than twice as fast as the "Tacloban City." The "Don Juan's" top speed was 17knots; while that of the "Tacloban City" was 6.3. knots. Secondly, the "Don Juan"carried the full complement of officers and crew members specified for a passengervessel of her class. Thirdly, the "Don Juan" was equipped with radar which was

functioning that night. Fourthly, the "Don Juan's officer on-watch had sighted the"Tacloban City" on his radar screen while the latter was still four (4) nautical miles away.Visual confirmation of radar contact was established by the "Don Juan" while the"Tacloban City" was still 2.7 miles away. In the total set of circumstances which existedin the instant case, the "Don Juan," had it taken seriously its duty of extraordinarydiligence, could have easily avoided the collision with the "Tacloban City." Indeed, the"Don Juan" might well have avoided the collision even if it hadexercised ordinarydiligence merely.It is true that the "Tacloban City" failed to follow Rule 18 of the International Rules of theRoad which requires two (2) power-driven vessels meeting end on or nearly end oneach to alter her course to starboard (right) so that each vessel may pass on the portside (left) of the other. The "Tacloban City," when the two (2) vessels were only three-tenths (0.3) of a mile apart, turned (for the second time) 15 to port side while the "DonJuan" veered hard to starboard. . . . [But] "route observance" of the International Rulesof the Road will not relieve a vessel from responsibility if the collision could have been

avoided by proper care and skill on her part or even by a departure from the rules.In the petition at bar, the "Don Juan" having sighted the "Tacloban City" when it was stil la long way off was negligent in failing to take early preventive action and in allowing thetwo (2) vessels to come to such close quarters as to render the collision inevitable whenthere was no necessity for passing so near to the "Tacloban City" as to create thathazard or inevitability, for the "Don Juan" could choose its own distance. It is noteworthythat the "Tacloban City," upon turning hard to port shortly before the moment ofcollision, signalled its intention to do so by giving two (2) short blasts with its horn. The"Don Juan" gave no answering horn blast to signal its own intention and proceeded toturn hard to starboard.We conclude that Capt. Santisteban and Negros Navigation are properly held liable forgross negligence in connection with the collision of the "Don Juan" and "Tacloban City"and the sinking of the "Don Juan" leading to the death of hundreds of passengers. . . . 5

Petitioner criticizes the lower court's reliance on the Mecenas case, arguing that, although thiscase arose out of the same incident as that involved in Mecenas, the parties are different and trial

was conducted separately. Petitioner contends that the decision in this case should be based onthe allegations and defenses pleaded and evidence adduced in it or, in short, on the record of thiscase.The contention is without merit. What petitioner contends may be true with respect to the meritsof the individual claims against petitioner but not as to the cause of the sinking of its ship on April22, 1980 and its liability for such accident, of which there can only be one truth. Otherwise, onewould be subscribing to the sophistry: truth on one side of the Pyrenees, falsehood on the other!

Adherence to the Mecenas case is dictated by this Court's policy of maintaining stability injurisprudence in accordance with the legal maxim "stare decisis et non quieta movere" (Followpast precedents and do not disturb what has been settled.) Where, as in this case, the samequestions relating to the same event have been put forward by parties similarly situated as in aprevious case litigated and decided by a competent court, the rule of stare decisis is a bar to any

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attempt to relitigate the same issue. 6In Woulfe v.Associated Realties Corporation, 7the SupremeCourt of New Jersey held that where substantially similar cases to the pending case werepresented and applicable principles declared in prior decisions, the court was bound by theprinciple of stare decisis. Similarly, in State ex rel. Tollinger v. Gill, 8 it was held that under thedoctrine of stare decisis a ruling is final even as to parties who are strangers to the originalproceeding and not bound by the judgment under the res judicata doctrine. The Philadelphiacourt expressed itself in this wise: "Stare decisis simply declares that, for the sake of certainty, aconclusion reached in one case should be applied to those which follow, if the facts aresubstantially the same, even though the parties may be different." 9 Thus, in J.M. Tuasonv. Mariano, supra, this Court relied on its rulings in other cases involving different parties insustaining the validity of a land title on the principle of"stare decisis et non quieta movere."

Indeed, the evidence presented in this case was the same as those presented inthe Mecenas case, to wit:

Document Mecenas case This caseDecision of Commandant, Exh. 10 10 Exh. 11-B-NN/XPhil. Coast Guardin BMI Case No.415-80 dated 3/26/81Decision of the Minister Exh. 11 11 Exh. ZZof National Defensedated 3/12/82Resolution on the Exh. 13 12 Exh. AAAmotion for reconsideration (privateof the decision of the respondents)Minister of Nationaldefense dated 7/27/84

Certificate of Exh. 1-A13

Exh. 19-NNinspection dated8/27/79Certificate of Stability Exh. 6-A 14 Exh. 19-D-NNdated 12/16/76

Nor is it true that the trial court merely based its decision on the Mecenas case. The trial courtmade its own independent findings on the basis of the testimonies of witnesses, such as SeniorThird Mate Rogelio de Vera, who incidentally gave substantially the same testimony onpetitioner's behalf before the Board of Marine Inquiry. The trial court agreed with the conclusionsof the then Minister of National Defense finding both vessels to be negligent.Third. The next issue is whether petitioner is liable to pay damages notwithstanding the total lossof its ship. The issue is not one of first impression. The rule is well-entrenched in our

jurisprudence that a shipowner may be held liable for injuries to passengers notwithstanding theexclusively real and hypothecary nature of maritime law if fault can be attributed to theshipowner. 15

In Mecenas, this Court found petitioner guilty of negligence in (1) allowing or tolerating the shipcaptain and crew members in playing mahjong during the voyage, (2) in failing to maintain thevessel seaworthy and (3) in allowing the ship to carry more passengers than it was allowed tocarry. Petitioner is, therefore, clearly liable for damages to the full extent.Fourth. Petitioner contends that, assuming that the Mecenas case applies, private respondentsshould be allowed to claim only P43,857.14 each as moral damages because inthe Mecenas case, the amount of P307,500.00 was awarded to the seven children of theMecenas couple. Under petitioner's formula, Ramon Miranda should receive P43,857.14, whilethe De la Victoria spouses should receive P97,714.28.Here is where the principle of stare decisis does not apply in view of differences in the personalcircumstances of the victims. For that matter, differentiation would be justified even if privaterespondents had joined the private respondents in the Mecenas case. The doctrine of stare

decisis works as a bar only against issues litigated in a previous case. Where the issue involvedwas not raised nor presented to the court and not passed upon by the court in the previous case,the decision in the previous case is not stare decisis of the question presently presented. 16 Thedecision in the Mecenas case relates to damages for which petitioner was liable to the claimantsin that case.In the case at bar, the award of P300,000.00 for moral damages is reasonable considering thegrief petitioner Ramon Miranda suffered as a result of the loss of his entire family. As a matter offact, three months after the collision, he developed a heart condition undoubtedly caused by thestrain of the loss of his family. The P100,000.00 given to Mr. and Mrs. de la Victoria is likewisereasonable and should be affirmed.

As for the amount of civil indemnity awarded to private respondents, the appellate court's award

of P50,000.00 per victim should be sustained. The amount of P30,000.00 formerly set in De Limav. Laguna Tayabas Co.,17 Heirs of Amparo delos Santos v. Court of Appeals, 18and PhilippineRabbit Bus Lines, Inc. v. Intermediate Appellate Court19as benchmark was subsequentlyincreased to P50,000.00 in the case of Sulpicio Lines, Inc. v. Court of Appeals, 20 which involvedthe sinking of another interisland ship on October 24, 1988.We now turn to the determination of the earning capacity of the victims. With respect to ArditaMiranda, the trial court awarded damages computed as follows: 21

In the case of victim Ardita V. Miranda whose age at the time of the accident was 48years, her life expectancy was computed to be 21.33 years, and therefore, she couldhave lived up to almost 70 years old. Her gross earnings for 21.33 years based onP10,224.00 per annum, would be P218,077.92. Deducting therefrom 30% as her livingexpenses, her net earnings would be P152,654.55, to which plaintiff Ramon Miranda isentitled to compensatory damages for the loss of earning capacity of his wife. Inconsidering 30% as the living expenses of Ardita Miranda, the Court takes into accountthe fact that plaintiff and his wife were supporting their daughter and son who were both

college students taking Medicine and Law respectively.In accordance with the ruling in Villa-Rey Transit, Inc. v. Court of Appeals, 22 we think the lifeexpectancy of Ardita Miranda was correctly determined to be 21.33 years, or up to age 69.Petitioner contends, however, that Mrs. Miranda would have retired from her job as a publicschool teacher at 65, hence her loss of earning capacity should be reckoned up to 17.33 yearsonly.The accepted formula for determining life expectancy is 2/3 multiplied by (80 minus the age of thedeceased). It may be that in the Philippines the age of retirement generally is 65 but, incalculating the life expectancy of individuals for the purpose of determining loss of earningcapacity under Art. 2206(1) of the Civil Code, it is assumed that the deceased would have earnedincome even after retirement from a particular job. In this case, the trial court took into accountthe fact that Mrs. Miranda had a master's degree and a good prospect of becoming principal ofthe school in which she was teaching. There was reason to believe that her income would haveincreased through the years and she could still earn more after her retirement, e.g., by becominga consultant, had she not died. The gross earnings which Mrs. Miranda could reasonably be

expected to earn were it not for her untimely death was, therefore, correctly computed by the trialcourt to be P218,077.92 (given a gross annual income of P10,224.00 and life expectancy of21.33 years).Petitioner contends that from the amount of gross earnings, 60% should be deducted asnecessary living expenses, not merely 30% as the trial court allowed. Petitioner contends that30% is unrealistic, considering that Mrs. Miranda's earnings would have been subject to taxes,social security deductions and inflation.We agree with this contention. In Villa-Rey Transit, Inc. v. Court of Appeals, 23 the Court alloweda deduction of P1,184.00 for living expenses from the P2,184.00 annual salary of the victim,which is roughly 54.2% thereof. The deceased was 29 years old and a training assistant in theBacnotan Cement Industries. In People v. Quilation, 24the deceased was a 26-year old laborerearning a daily wage. The court allowed a deduction of P120,000.00 which was 51.3% of his

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annual gross earnings of P234,000.00. In People v. Teehankee, 25 the court allowed a deductionof P19,800.00, roughly 42.4% thereof from the deceased's annual salary of P46,659.21. Thedeceased, Maureen Hultman, was 17 years old and had just received her first paycheck as asecretary. In the case at bar, we hold that a deduction of 50% from Mrs. Miranda's gross earnings(P218,077.92) would be reasonable, so that her net earning capacity should be P109,038.96.There is no basis for supposing that her living expenses constituted a smaller percentage of hergross income than the living expenses in the decided cases. To hold that she would have usedonly a small part of her income for herself, a larger part going to the support of her children wouldbe conjectural and unreasonable.

As for Elfreda de la Victoria, the trial court found that, at the time of her death, she was 26 yearsold, a teacher in a private school in Malolos, Bulacan, earning P6,192.00 per annum. Although a

probationary employee, she had already been working in the school for two years at the time ofher death and she had a general efficiency rating of 92.85% and it can be presumed that, if notfor her untimely death, she would have become a regular teacher. Hence, her loss of earningcapacity is P111,456.00, computed as follows:

net earning = life x gross less reasonablecapacity (x) expectancy annual & necessaryincome living expenses(50%)

x = [2(80-26)] x [P6,192.00 - P3,096.00]3

= 36 x 3,096.00= P111,456.00

On the other hand, the award of actual damages in the amount of P23,075.00 was determined bythe Court of Appeals on the basis receipts submitted by private respondents. This amount is

reasonable considering the expenses incurred by private respondent Miranda in organizing threesearch teams to look for his family, spending for transportation in going to places such asBatangas City and Iloilo, where survivors and the bodies of other victims were found, making longdistance calls, erecting a monument in honor of the four victims, spending for obituaries inthe Bulletin Todayand for food, masses and novenas.Petitioner's contention that the expenses for the erection of a monument and other expenses formemorial services for the victims should be considered included in the indemnity for deathawarded to private respondents is without merit. Indemnity for death is given to compensate forviolation of the rights of the deceased, i.e., his right to life and physical integrity. 26 On the otherhand, damages incidental to or arising out of such death are for pecuniary losses of thebeneficiaries of the deceased.

As for the award of attorney's fees, we agree with the Court of Appeals that the amount ofP40,000.00 for private respondent Ramon Miranda and P15,000.00 for the de la Victoria spousesis justified. The appellate court correctly held:

The Mecenas case cannot be made the basis for determining the award for attorney's

fees. The award would naturally vary or differ in each case. While it is admitted thatplaintiff-appellee Ramon Miranda who is himself a lawyer, represented also plaintiffs-appellees Dela Victoria spouses, we note that separate testimonial evidence wereadduced by plaintiff-appellee Ramon Miranda (TSN, February 26, 1982, p. 6) andplaintiffs-appellees spouses Dela Victoria (TSN, August 13, 1981, p. 43). Consideringthe amount of work and effort put into the case as indicated by the voluminoustranscripts of stenographic notes, we find no reason to disturb the award of P40,000.00for plaintiff-appellee Ramon Miranda and P15,000.00 for plaintiffs-appellees DelaVictoria spouses. 27

The award of exemplary damages should be increased to P300,000.00 for Ramon Miranda andP100,000.00 for the de la Victoria spouses in accordance with our ruling in the Mecenas case:

Exemplary damages are designed by our civil law to permit the courts to reshapebehaviour that is socially deleterious in its consequence by creating negative incentivesor deterrents against such behaviour. In requiring compliance with the standard ofextraordinary diligence, a standard which is in fact that of the highest possible degree ofdiligence, from common carriers and in creating a presumption of negligence againstthem, the law seeks to compel them to control their employees, to tame their recklessinstincts and to force them to take adequate care of human beings and their property.The Court will take judicial notice of the dreadful regularity with which grievous maritimedisasters occur in our waters with massive loss of life. The bulk of our population is toopoor to afford domestic air transportation. So it is that notwithstanding the frequentsinking of passenger vessels in our waters, crowds of people continue to travel by sea.

This Court is prepared to use the instruments given to it by the law for securing theends of law and public policy. One of those instruments is the institution of exemplarydamages; one of those ends, of special importance in an archipelagic state like thePhilippines, is the safe and reliable carriage of people and goods by sea.28

WHEREFORE, the decision of the Court of Appeals is AFFIRMED with modification andpetitioner is ORDERED to pay private respondents damages as follows:To private respondent Ramon Miranda:

P23,075.00 for actual damages;P109,038.96 as compensatory damages for loss ofearning capacity of his wife;P150,000.00 as compensatory damages for wrongfuldeath of three (3) victims;P300,000.00 as moral damages;P300,000.00 as exemplary damages, all in the totalamount of P882,113.96; and

P40,000.00 as attorney's fees.To private respondents Spouses Ricardo and Virginia de la Victoria:P12,000.00 for actual damages;P111,456.00 as compensatory damages for loss ofearning capacity;P50,000.00 as compensatory damages for wrongfuldeath;P100,000.00 as moral damages;P100,000.00 as exemplary damages, all in the totalamount of P373,456.00; andP15,000.00 as attorney's fees.

Petitioners are further ordered to pay costs of suit.In the event the Philippine National Oil Company and/or the PNOC Shipping and TransportCorporation pay or are required to pay all or a portion of the amounts adjudged, petitioner NegrosNavigation Co., Inc. shall reimburse either of them such amount or amounts as either may have

paid, and in the event of failure of Negros Navigation Co., Inc., to make the necessaryreimbursement, PNOC and/or PNOC/STC shall be entitled to a writ of execution without need offiling another action.SO ORDERED.Regalado and Puno, JJ., concur.

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G.R. No. L-74811 December 14, 1988CHUA YEK HONG, petitioner,vs.INTERMEDIATE APPELLATE COURT, MARIANO GUNO and DOMINADOROLIT, respondents.Francisco D. Estrada for petitioner.Purita Hostanosas-Cortes for private respondents.

MELENCIO-HERRERA,J. :Before us is a Motion for Reconsideration of our Decision dated 30 September 1988

affirming the judgment of the Court of Appeals dismissing the complaint against privaterespondents and absolving them from any and all liability arising from the loss of 1000sacks of copra shipped by petitioner aboard private respondents' vessel. Privaterespondents filed an opposition thereto.Petitioner argues that this Court failed to consider the Trial Court's finding that the loss ofthe vessel with its cargo was due to the fault of the shipowner or to the concurringnegligence of the shipowner and the captain.The Appellate Court Decision, however, mentions only the ship captain as having beennegligent in the performance of his duties (p. 3, Court of Appeals Decision, p. 15, Rollo).This is a factual finding binding on this Court. For the exception to the limited liability rule(Article 587, Code of Commerce) to apply, the loss must be due to the fault of theshipowner, or to the concurring negligence of the shipowner and the captain. As we held,there is nothing in the records showing such negligence (p. 6, Decision.)The invocation by petitioners of Articles 1733 and 1735 of the Civil Code is misplaced. Aswas stated in the Decision sought to be reconsidered, while the primary law governing theinstant case is the Civil Code, in all matters not regulated by said Code, the Code ofCommerce and other special laws shall govern. Since the Civil Code contains no provisionsregulating liability of shipowners or agents in the event of total loss or destruction of thevessel, it is the provisions of the Code of Commerce, particularly Article 587, that governs.Petitioner further contends that the ruling laid down in Eastern Shipping Lines vs. IAC, et al.(150 SCRA 464 [1987]) should be made to apply in the instant case. That case, however,involved foreign maritime trade while the present case involves localinter-island shipping. The environmental set-up in the two cases, therefore, is not on allfours.

ACCORDINGLY, petitioner's Motion for Reconsideration is hereby DENIED and this denialis FINAL.SO ORDERED.G.R. No. 74811 September 30, 1988CHUA YEK HONG, petitioner,

vs.INTERMEDIATE APPELLATE COURT, MARIANO GUNO, and DOMINADOROLIT, respondents.Francisco D. Estrada for petitioner.Purita Hontanosas-Cortes for private respondents.

MELENCIO-HERRERA,J. :In this Petition for Review on certiorari petitioner seeks to set aside the Decision ofrespondent Appellate Court in AC G.R. No. 01375 entitled "Chua Yek Hong vs. MarianoGuno, et al.," promulgated on 3 April 1986, reversing the Trial Court and relieving privaterespondents (defendants below) of any liability for damages for loss of cargo.

The basic facts are not disputed:Petitioner is a duly licensed copra dealer based at Puerta Galera, Oriental Mindoro, whileprivate respondents are the owners of the vessel, "M/V Luzviminda I," a common carrierengaged in coastwise trade from the different ports of Oriental Mindoro to the Port ofManila.In October 1977, petitioner loaded 1,000 sacks of copra, valued at P101,227.40, on boardthe vessel "M/V Luzviminda I" for shipment from Puerta Galera, Oriental Mindoro, to Manila.Said cargo, however, did not reach Manila because somewhere between Cape Santiagoand Calatagan, Batangas, the vessel capsized and sank with all its cargo.On 30 March 1979, petitioner instituted before the then Court of First Instance of Oriental

Mindoro, a Complaint for damages based on breach of contract of carriage against privaterespondents (Civil Case No. R-3205).In their Answer, private respondents averred that even assuming that the alleged cargo wastruly loaded aboard their vessel, their liability had been extinguished by reason of the totalloss of said vessel.On 17 May 1983, the Trial Court rendered its Decision, the dispositive portion of whichfollows:

WHEREFORE, in view of the foregoing considerations, the court believesand so holds that the preponderance of evidence militates in favor of theplaintiff and against the defendants by ordering the latter, jointly andseverally, to pay the plaintiff the sum of P101,227.40 representing thevalue of the cargo belonging to the plaintiff which was lost while in thecustody of the defendants; P65,550.00 representing miscellaneousexpenses of plaintiff on said lost cargo; attorney's fees in the amount ofP5,000.00, and to pay the costs of suit. (p. 30, Rollo).

On appeal, respondent Appellate Court ruled to the contrary when it applied Article 587 ofthe Code of Commerce and the doctrine in Yangco vs. Lasema (73 Phil. 330 [1941]) andheld that private respondents' liability, as ship owners, for the loss of the cargo is merely co-extensive with their interest in the vessel such that a total loss thereof results in itsextinction. The decretal portion of that Decision 1 reads:

IN VIEW OF THE FOREGOING CONSIDERATIONS, the decisionappealed from is hereby REVERSED, and another one entereddismissing the complaint against defendants-appellants and absolvingthem from any and all liabilities arising from the loss of 1,000 sacks ofcopra belonging to plaintiff-appellee. Costs against appellee.(p. 19, Rollo).

Unsuccessful in his Motion for Reconsideration of the aforesaid Decision, petitioner hasavailed of the present recourse.The basic issue for resolution is whether or not respondent Appellate Court erred in

applying the doctrine of limited liability under Article 587 of the Code of Commerce asexpounded in Yangco vs. Laserna, supra.

Article 587 of the Code of Commerce provides:Art. 587. The ship agent shall also be civilly liable for the indemnities infavor of third persons which may arise from the conduct of the captain inthe care of the goods which he loaded on the vessel; but he may exempthimself therefrom by abandoning the vessel with all the equipments andthe freight it may have earned during the voyage.

The term "ship agent" as used in the foregoing provision is broad enough to include the shipowner (Standard Oil Co. vs. Lopez Castelo, 42 Phil. 256 [1921]). Pursuant to said provision,therefore, both the ship owner and ship agent are civilly and directly liable for the

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indemnities in favor of third persons, which may arise from the conduct of the captain in thecare of goods transported, as well as for the safety of passengers transported Yangco vs.Laserna, supra; Manila Steamship Co., Inc. vs. Abdulhaman et al., 100 Phil. 32 [1956]).However, under the same Article, this direct liability is moderated and limited by the shipagent's or ship owner's right of abandonment of the vessel and earned freight. Thisexpresses the universal principle of limited liability under maritime law. The mostfundamental effect of abandonment is the cessation of the responsibility of the shipagent/owner (Switzerland General Insurance Co., Ltd. vs. Ramirez, L-48264, February 21,1980, 96 SCRA 297). It has thus been held that by necessary implication, the ship agent'sor ship owner's liability is confined to that which he is entitled as of right to abandon the

vessel with all her equipment and the freight it may have earned during the voyage," and "tothe insurance thereof if any" (Yangco vs. Lasema, supra). In other words, the ship owner'sor agent's liability is merely co-extensive with his interest in the vessel such that a total lossthereof results in its extinction. "No vessel, no liability" expresses in a nutshell the limitedliability rule. The total destruction of the vessel extinguishes maritime liens as there is nolonger any res to which it can attach (Govt. Insular Maritime Co. vs. The Insular Maritime,45 Phil. 805, 807 [1924]).

As this Court held:If the ship owner or agent may in any way be held civilly liable at all forinjury to or death of passengers arising from the negligence of the captainin cases of collisions or shipwrecks, his liability is merely co-extensivewith his interest in the vessel such that a total loss thereof results in itsextinction. (Yangco vs. Laserna, et al., supra).

The rationale therefor has been explained as follows:The real and hypothecary nature of the liability of the ship owner or agentembodied in the provisions of the Maritime Law, Book III, Code ofCommerce, had its origin in the prevailing conditions of the maritime tradeand sea voyages during the medieval ages, attended by innumerablehazards and perils. To offset against these adverse conditions and toencourage ship building and maritime commerce, it was deemednecessary to confine the liability of the owner or agent arising from theoperation of a ship to the vessel, equipment, and freight, or insurance, ifany, so that if the ship owner or agent abandoned the ship, equipment,and freight, his liability was extinguished. (Abueg vs. San Diego, 77 Phil.730 [1946])

0 Without the principle of limited liability, a ship owner and investor inmaritime commerce would run the risk of being ruined by the bad faith ornegligence of his captain, and the apprehension of this would be fatal to

the interest of navigation." Yangco vs. Lasema, supra). 0

As evidence of this real nature of the maritime law we have (1) thelimitation of the liability of the agents to the actual value of the vessel andthe freight money, and (2) the right to retain the cargo and the embargoand detention of the vessel even in cases where the ordinary civil lawwould not allow more than a personal action against the debtor or personliable. It will be observed that these rights are correlative, and naturallyso, because if the agent can exempt himself from liability by abandoningthe vessel and freight money, thus avoiding the possibility of risking hiswhole fortune in the business, it is also just that his maritime creditor may

for any reason attach the vessel itself to secure his claim without waitingfor a settlement of his rights by a final judgment, even to the prejudice of athird person. (Phil. Shipping Co. vs. Vergara, 6 Phil. 284 [1906]).

The limited liability rule, however, is not without exceptions, namely: (1) where the injury ordeath to a passenger is due either to the fault of the ship owner, or to the concurringnegligence of the ship owner and the captain (Manila Steamship Co., Inc. vs.

Abdulhaman supra); (2) where the vessel is insured; and (3) in workmen's compensationclaims Abueg vs. San Diego, supra). In this case, there is nothing in the records to showthat the loss of the cargo was due to the fault of the private respondent as shipowners, or totheir concurrent negligence with the captain of the vessel.

What about the provisions of the Civil Code on common carriers? Considering the "real andhypothecary nature" of liability under maritime law, these provisions would not have anyeffect on the principle of limited liability for ship owners or ship agents. As was expoundedby this Court:

In arriving at this conclusion, the fact is not ignored that the illfated, S.S.Negros, as a vessel engaged in interisland trade, is a common carrier,and that the relationship between the petitioner and the passengers whodied in the mishap rests on a contract of carriage. But assuming thatpetitioner is liable for a breach of contract of carriage, the exclusively 'realand hypothecary nature of maritime law operates to limit such liability tothe value of the vessel, or to the insurance thereon, if any. In the instantcase it does not appear that the vessel was insured. (Yangco vs. Laserila,et al., supra).

Moreover, Article 1766 of the Civil Code provides:Art. 1766. In all matters not regulated by this Code, the rights andobligations of common carriers shall be governed by the Code ofCommerce and by special laws.

In other words, the primary law is the Civil Code (Arts. 17321766) and in default thereof, theCode of Commerce and other special laws are applied. Since the Civil Code contains noprovisions regulating liability of ship owners or agents in the event of total loss or destructionof the vessel, it is the provisions of the Code of Commerce, more particularly Article 587,that govern in this case.In sum, it will have to be held that since the ship agent's or ship owner's liability is merelyco-extensive with his interest in the vessel such that a total loss thereof results in itsextinction (Yangco vs. Laserna, supra), and none of the exceptions to the rule on limitedliability being present, the liability of private respondents for the loss of the cargo of copramust be deemed to have been extinguished. There is no showing that the vessel wasinsured in this case.WHEREFORE, the judgment sought to be reviewed is hereby AFFIRMED. No costs.

SO ORDERED.

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G.R. No. 154305 December 9, 2004MACONDRAY & CO., INC., petitioner,vs.PROVIDENT INSURANCE CORPORATION, respondent.

D E C I S I O N

PANGANIBAN, J.:

Hornbook is the doctrine that the negligence of counsel binds the client. Also settled isthe rule that clients should take the initiative of periodically checking the progress oftheir cases, so that they could take timely steps to protect their interest.The CaseBefore us is a Petition for Review1under Rule 45 of the Rules of Court, seeking to setaside the February 28, 2002 Decision2and the July 12, 2002 Resolution3of the Courtof Appeals (CA) in CA-GR CV No. 57077. The dispositive portion of the Decision readsas follows:

"WHEREFORE, premises considered, the assailed Decision dated September17, 1996 is hereby REVERSED and SET ASIDE. Accordingly, [Petitioner]Macondray & Co., Inc., is hereby ORDERED to pay the [respondent] theamount of P1,657,700.95."

The assailed Resolution denied petitioner's Motion for Reconsideration.

The FactsThe CA adopted the factual antecedents narrated by the trial court, as follows:"x x x. On February 16, 1991, at Vancouver, B.C. Canada, CANPOTEXSHIPPING SERVICES LIMITED INC., of Saskatoon, Saskatchewan,(hereinafter the SHIPPER), shipped and loaded on board the vessel M/V'Trade Carrier', 5000 metric tons of Standard Grade Muriate of Potash in bulkfor transportation to and delivery at the port of Sangi, Toledo City, Cebu, infavor of ATLAS FERTILIZER CORPORATION, (hereinafter CONSIGNEE)covered by B/L Nos. VAN-SAN-1 for the 815.96 metric tons and VAN-SAN-2for the 4,184.04 metric tons. Subject shipments were insured with [respondent]against all risks under and by virtue of an Open Marine Policy No. MOP-00143and Certificate of Marine Insurance No. CMI-823-91."When the shipment arrived, CONSIGNEE discovered that the shipmentsustained losses/shortage of 476.140 metric tons valued at One Million Six

Hundred Fifty Seven Thousand Seven Hundred Pesos and Ninety FiveCentavos (P1,657,700.95), Philippine Currency. Provident paid losses. Formal

claims was then filed with Trade & Transport and Macondray but the samerefused and failed to settle the same. Hence, this complaint."As per Officer's Return dated 4 June 1992, summons was UNSERVED todefendant TRADE AND TRANSPORT at the given address for reason thatTRADE AND TRANSPORT is no longer connected with Macondray & Co. Inc.,and is not holding office at said address as alleged by Ms. Guadalupe Tan.For failure to effect service of summons the case against TRADE &TRANSPORT was considered dismissed without prejudice.

"Defendant MACONDRAY filed ANSWER, denying liability over the losses,having NO absolute relation with defendant TRADE AND TRANSPORT, thealleged operator of the vessel who transported the subject shipment; thataccordingly, MACONDRAY is the local representative of the SHIPPER; thecharterer of M/V TRADE CARRIER and not party to this case; that it has nocontrol over the acts of the captain and crew of the Carrier and cannot be heldresponsible for any damage arising from the fault or negligence of said captainand crew; that upon arrival at the port of Sangi, Toledo City, Cebu, the M/VTrade Carrier discharged the full amount of shipment, as shown by the draftsurvey with a total quantity of 5,033.59 metric tons discharged from the vessel

and delivered to the CONSIGNEE."ISSUES: Whether or not Macondray and Co. Inc., as an agent is responsiblefor any loss sustained by any party from the vessel owned by defendant Tradeand Transport. "Whether or not Macondray is liable for loss which wasallegedly sustained by the plaintiff in this case."EVIDENCE FOR THE PLAINTIFF"Plaintiff presented the testimonies of Marina Celerina P. Aguas anddepositions of Alberto Milan and Alfonso Picson submitted as additionalwitnesses for PROVIDENT to prove the material facts of the complaint aredeemed admitted by defendant MACONDRAY, on their defense that it is notan agent of TRADE AND TRANSPORT."EVIDENCE FOR THE DEFENDANT MACONDRAY:"Witness Ricardo de la Cruz testified as Supercargo of MACONDRAY, that

MACONDRAY was not an agent of defendant TRADE AND TRANSPORT;that his functions as Supercargo was to prepare a notice of readiness,statement of facts, sailing notice and custom's clearance in order to attend tothe formalities and the need of the vessel; that MACONDRAY is performingfunctions in behalf of CANPOTEX and was appointed as local agent of thevessel, which duty includes arrangement of the entrance and clearance of thevessel."The trial court, in the decision dated September 17, 1996 earlier adverted to,ruled in favor of the [petitioner] x x x, the dispositive portion of which reads:"WHEREFORE, PREMISES CONSIDERED, the case as against [petitioner]MACONDRAY is hereby DISMISSED."No pronouncement as to costs."4

Ruling of the Court of AppealsThe CA affirmed the trial court's finding that petitioner was not the agent of Trade and

Transport. The appellate court ruled, however, that petitioner could still be held liablefor the shortages of the shipment, because the latter was the ship agent of CanpotexShipping Services Ltd. -- the shipper and charterer of the vessel M/V Trade Carrier.All told, the CA held petitioner "liable for the losses incurred in the shipment of thesubject cargoes to the [respondent], who, being the insurer of the risk, was subrogatedto the rights and causes of action which the consignee, Atlas Fertilizer Corporation,had against the [petitioner]."5Hence, this Petition.6The IssuesPetitioner raises the following issues for our consideration:

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"Whether or not liability attached to petitioner despite the unequivocal factualfindings, that it was not a ship agent."Whether or not the 28 February 2002 Decision of the Court of Appeals hasattained finality."Whether or not by filing the instant Petition for Review on Certiorari, petitioneris guilty of forum-shopping."7

The Court's RulingThe Petition has no merit.First Issue:Petitioner's Liability

As a rule, factual findings of the Court of Appeals -- when not in conflict with those ofthe trial court -- are not disturbed by this Court,8to which only questions of law may beraised in an appeal by certiorari.9In the present case, we find no compelling reason to overturn the Court of Appeals inits categorical finding that petitioner was the ship agent. Such factual finding was not inconflict with the trial court's ruling, which had merely stated that petitioner was not theagent of Trade and Transport. Indeed, although it is not an agent of Trade andTransport, petitioner can still be the ship agent of the vessel M/V Trade Carrier.Article 586 of the Code of Commerce states that a ship agent is "the person entrustedwith provisioning or representing the vessel in the port in which it may be found."Hence, whether acting as agent of the owner10of the vessel or as agent of thecharterer,11petitioner will be considered as the ship agent12and may be held liable assuch, as long as the latter is the one that provisions or represents the vessel.

The trial court found that petitioner "was appointed as local agent of the vessel, whichduty includes arrangement for the entrance and clearance of the vessel."13Further, theCA found and the evidence shows that petitioner represented the vessel. The latterprepared the Notice of Readiness, the Statement of Facts, the Completion Notice, theSailing Notice and Custom's Clearance.14Petitioner's employees were present atSangi, Toledo City, one day before the arrival of the vessel, where they stayed until itdeparted. They were also present during the actual discharging of thecargo.15Moreover, Mr. de la Cruz, the representative of petitioner, also prepared forthe needs of the vessel, like money, provision, water and fuel.16These acts all point to the conclusion that it was the entity that represented the vesselin the Port of Manila and was the ship agent17within the meaning and context of Article586 of the Code of Commerce.As ship agent, it may be held civilly liable in certain instances. The Code of Commerceprovides:

"Article 586. The shipowner and the ship agent shall be civilly liable for theacts of the captain and for the obligations contracted by the latter to repair,equip, and provision the vessel, provided the creditor proves that the amountclaimed was invested for the benefit of the same.""Article 587. The ship agent shall also be civilly liable for the indemnities infavor of third persons which may arise from the conduct of the captain in thecare of the goods which he loaded on the vessel; but he may exempt himselftherefrom by abandoning the vessel with all her equipments and the freight itmay have earned during the voyage."

Petitioner does not dispute the liabilities of the ship agent for the loss/shortage of476.140 metric tons of standard-grade Muriate of Potash valued at P1,657,700.95.Hence, we find no reason to delve further into the matter or to disturb the finding of theCA holding petitioner, as ship agent, liable to respondent for the losses sustained bythe subject shipment.Second Issue:Finality of the CA DecisionPetitioner claims that it picked up the February 28, 2002 Decision of the CA on May 14,2002, after receiving the postal notice the day before. It further attributes grossnegligence to its previous counsel for not informing the CA of his change of address. It

thus contends that notice of the assailed Decision given to the previous counsel cannotbe considered as notice to petitioner.We are not persuaded. "It is well-settled that when a party is represented by counsel,notice should be made upon the counsel of record at his given address to whichnotices of all kinds emanating from the court should be sent in the absence of a properand adequate notice to the court of a change of address."18In the present case, service of the assailed Decision was made on petitioner's counselsof record, Attys. Moldez and Galoz, on March 6, 2002. That copy of the Decision was,however, returned to the sender for the reason that the addressee had "move[d] out." Ifcounsel moves to another address without informing the court of that change, suchomission or neglect is inexcusable and will not stay the finality of the decision.19"Thecourt cannot be expected to take judicial notice of the new address of a lawyer whohas moved or to ascertain on its own whether or not the counsel of record has been

changed and who the new counsel could possibly be or where he probably resides orholds office."20It is unfortunate that the lawyer of petitioner neglected his duties to the latter. Be thatas it may, the negligence of counsel binds the client.21Service made upon the presentcounsel of record at his given address is service to petitioner. Hence, the assailedDecision has already become f inal and unappealable.In the present case, there is no compelling reason to overturn well-settledjurisprudence or to interpret the rules liberally in favor of petitioner, who is not entirelyblameless. It should have taken the initiative of periodically keeping in touch with itscounsel, checking with the court, and inquiring about the status of its case.22In sodoing, it could have taken timely steps to neutralize the negligence of its chosencounsel and to protect its interests. "Litigants represented by counsel should not expectthat all they need to do is sit back, relax and await the outcome of their case."23In view of the foregoing, there is no necessity of passing upon the third issue raised by

petitioner.WHEREFORE, the Petition is DENIED and the assailed Decision AFFIRMED. Costsagainst petitioner.SO ORDERED.

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G.R. No. 110581 September 21, 1994TELENGTAN BROTHERS & SONS, INC. (LA SUERTE CIGAR & CIGARETTE), petitioner,vs.THE COURT OF APPEALS, KAWASAKI KISHEN KAISHA, LTD. and SMITH, BELL & CO.,INC., respondents.Juan, Luces, Luna and Associates for petitioner.Bito, Lozada, Ortega & Castillo for private respondents.

MENDOZA, J.:This is a petition for review of the decision of the Court of Appeals, 1in CA-G.R. CV No. 09514,affirming with modification the decision of the Regional Trial Court in a case for specific performancebrought by petitioner.

Private respondent Kawasaki Kishen Kaisha, Ltd. (K-Line) is a foreign shipping company doingbusiness in the Philippines, its shipping agent being respondent the Smith, Bell & Co., Inc. It is amember of the Far East Conference, the body which fixes rates by agreement of its member-shipowners. The conference is registered with the U.S. Federal Maritime Commission. 2On May 8, 1979, the Van Reekum Paper, Inc. entered into a contract of affreightment with the K-Linefor the shipment of 468 rolls of container board liners from Savannah, Georgia to Manila. The shipmentwas consigned to herein petitioner La Suerte Cigar & Cigarette Factory. The contract of affreightmentwas embodied in Bill of Lading No. 602 issued by the carrier to the shipper. The expenses of loadingand unloading were for the account of the consignee.The shipment was packed in 12 container vans and loaded on board the carrier's vessel, SS VerrazanoBridge. At Tokyo, Japan, the cargo was transhipped on two vessels of the K-Line. Ten container vanswere loaded on the SSFar East Friendship, while two were loaded on the SS Hangang Glory.Shortly thereafter, the consignee (herein petitioner) received from the shipper photocopies of the bill oflading, consular invoice and packing list, as well as notice of the estimated time of arrival of t he cargo.On June 11, 1979, the SS Far East Friendship arrived at the port of Manila. Aside from the regularadvertisements in the shipping section of the Bulletin Todayannouncing the arrival of its vessels,

petitioner was notified in writing of the ship's arrival, together with information that container demurrageat the rate of P4.00 per linear foot per day for t he first 5 days and P8.00 per linear foot per day after the5th day would be charged unless the consignee took delivery of the cargo within ten days.On June 21, 1979, the other vessel SS Hangang Glory, carrying petitioner's two other vans, arrived andwas discharged of its contents the next day. On the same day the shipping agent Smith, Bell & Co.released the Delivery Permit for twelve (12) containers to the broker upon payment of freight chargeson the bill of lading.The next day, June 22, 1979, the Island Brokerage Co. presented, in behalf of petitioner, the shippingdocuments to the Customs Marine Division of the Bureau of Customs. But the latter refused to act onthem because the manifest of the SS Far East Friendship covered only 10 containers, whereas the billof lading covered 12 containers.The broker, therefore, sent back the manifest to the shipping agent with the request that the manifestbe amended. Smith, Bell & Co. refused on the ground that an amendment, as requested, would violate1005 of the Tariff and Customs Code relating to unmanifested cargo. Later, however, it agreed to adda footnote reading "Two container vans carried by the SS Hangang Gloryto complete the shipment oftwelve containers under the bill of lading."

On June 29, 1979 the manifest was picked up from the office of respondent shipping agent by anemployee of the IBC and filed with the Bureau of Customs. The manifest was approved for release onJuly 3, 1979. IBC wrote Smith, Bell & Co. to make of record that entry of the shipment had beendelayed by the error in the manifest.On July 11, 1979, when the IBC tried to secure the release of the cargo, it was informed by privaterespondents' collection agent, the CBCS Guaranteed Fast Collection Services, that the free time forremoving the containers from the container yard had expired on June 26, 1979, in the case of theSS Far East Friendship, and on July 9, in the case of the SS Hangang Glory, 3and that demurragecharges had begun to run on June 27, 1979 with respect to the 10 containers on the SS Far EastFriendship and on July 10, 1979 with respect to the 2 containers shipped on board the SS HangangGlory.

On July 13, 1979, petitioner paid P47,680.00 representing the total demurrage charges on all thecontainers, but it was not able to obtain its goods. On July 16, 1979 it was able to obtain the release oftwo containers and onJuly 17, 1979 of one more container. It was able to obtain only a partial release of the cargo because ofthe breakdown of the arrastre's equipment at the container yard.This matter was reported by IBC in letters of complaint sent to the Philippine Ports Authority. Inaddition, on July 16, 1979, petitioner sent a letter dated July 12, 1979 (Exh. I) to Smith, Bell & Co.,requesting reconsideration of the demurrage charges, on the ground that the delay in claiming thegoods was due to the alleged late arrival of the shipping documents, the delay caused by theamendment of the manifest, and the fact that two of the containers arrived separately from the other tencontainers.On July 19, 1979, petitioner paid additional charges in the amount of P20,160.00 for the period July 14-

19, 1979 to secure the release of its cargo, but still petitioner was unable to get any cargo from theremaining nine container vans. It was only the next day, July 20, 1979, that it was able to have twomore containers released from the container yard, bringing to five the total number of containers whosecontents had been delivered to it.Subsequently, petitioner refused to pay any more demurrage charges on the ground that there wasagreement for their payment in the bill of lading and that the delay in the release of the cargo was notdue to its fault but to the breakdown of the equipment at the container yard. In all, petitioner had paiddemurrage charges from June 27 to July 19, 1979, in the total amount of P67,840.00, computed asfollows:

A. Container demurrage paid on July 13, 19791. Far East Friendship (Exh. H-1) June 27 July 13 (17 days)1st 5 days @ P4/day/foot5 days x P40 ft. x 10 ctrns. P 8,000.00Next 12 days @ P8/day/foot12 days x P8 x 40 ft. x 10 ctrns. P 38,400.00

P 46,400.002. Hangang Glory (Exh. H) July 10 July 13 (4 days)1st 4 days:4 days x P4 x 40 ft. x 2 ctnrs. P 1,280.00TOTAL PAID ON JULY 13 P 47,680.00(Exh. H-2)B. Container demurrage paid on July 19, 19791. Far East Friendshipa. on 2 containers released July 163 days x P8 x 40 ft. x 2 ctnrs. P 1,920.00(Exh. L-2)b. on 1 container released July 174 days x P8 x 40 ft. x 7 cntrs. P 1,280.00(Exh. L-3)c. remaining 7 containers as of July 19

6 days x P8 x 40 ft. x 7 cntrs. P 13,440.00(Exh. L-1)2. Hangang Glorya. 5th day (July 14)1 day x P4.00 x 40 ft. x 2 cntrs. P 320.00b. July 15-19:5 days x P8.00 x 40 ft. x 2 cntrs. P 3,200.00(Exh. L)TOTAL P 20,160.00(Exh. L-4)

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OVERALL TOTAL P 67,840.00=========

On July 20, 1979 petitioner wrote private respondent for a refund of the demurrage charges, but privaterespondent replied on July 25, 1979 that, as member of the Far East Conference, it could not modifythe rules or authorize re funds of the stipulated tariffs.Petitioner, therefore, filed this suit in the RTC for specific performance to compel private respondentcarrier, through it s shipping agent, the Smith, Bell & Co., to release 7 container vans consigned to itfree of charge and for a refund of P67,840.00 which it had paid, plus attorney's fees and otherexpenses of litigation. Petitioner also asked for the issuance of a writ of preliminary injunction to restrainprivate respondents from charging additional demurrage.In their amended answer, private respondents claimed that collection of container charges wasauthorized by 2, 23 and 29 of the bill of lading and that they were not free to waive these charges

because under the United States Shipping Act of 1916 it was unlawful for any common carrier engagedin transportation involving the foreign commerce of the United States to charge or collect a greater orlesser compensation that the rates and charges specified in its tariffs on file with the Federal MaritimeCommission.Private respondents alleged that petitioner knew that the contract of carriage was subject to the FarEast Conference rules and that the publication of the notice of reimposition of container demurragecharges published in the shipping section of the Bulletin Todayand Businessdaynewspapers fromFebruary 19 February 25, 1979 was binding upon petitioner. They contended further that thecollection of container demurrage was an international practice which is widely accepted in ports allover the world and that it was in conformity with Republic Act No. 1407, otherwise known as thePhilippine Overseas Shipping Act of 1955.Thereafter, a writ was issued after petitioner had posted a bond of P50,000.00 and the container vanswere released to the petitioner. On March 19, 1986, however, the RTC dismissed petitioner's complaint.It cited the bill of lading which provided:

23. The ocean carrier shall have a lien on the goods, which shall survive delivery,for all freight, dead freight, demurrage, damages, loss, charges, expenses and any

other sums whatsoever payable or chargeable to or for the account of theMerchant under this bill of lading . . . .

It likewise invoked clause 29 of the bill of lading which provided:29. . . .The terms of the ocean carrier's applicable tariff, including tariffs coveringintermodal transportation on file with the Federal Maritime Commission and theInterstate Commission or any other regulatory body which governs a portion of thecarriage of goods, are incorporated herein.

Rule 21 of the Far East Conference Tariff No. 28-FMC No. 12 Rules and Regulations, referred toabove, provides:

(D) Free Time, Demurrage, and Equipment Detention at Ports in the Philippines.Note: Philippine Customs Law prescribes all cargo discharged from vessels to begiven into custody of the Government Arrastre Contractor, appointed by PhilippineCustoms who undertakes delivery to the consignee.xxx xxx xxxDemurrage charges on Containers with CY Cargo.1. Free time will commence at 8:00 a.m. on the first working calendar day following

completion of discharge of the vessel. It shall expire at 12:00 p.m. (midnight) on thetenth working calendar day, excluding Saturdays, Sundays and holidays.Work stoppage at a terminal due to labor dispute or otherforce majeure as definedby the conference preventing delivery of cargo or containers shall be excluded fromthe calculation of the free time for the period of the work stoppage.2. Demurrage charges are incurred before the container leaves the carrier'sdesignated CY, and shall be applicable on the container commencing the nextworking calendar day following expiration of the allowable free time until theconsignee has taken delivery of the container or has fully striped the container ofits contents in the carrier's designated CY.Demurrage charges shall be assessed hereunder:

Ordinary containers P4.00 per linearfoot of the container per day for the firstfive days; P8.00 per linear foot of thecontainer per day, thereafter.

The RTC held that the bill of lading was the contract between the parties and, therefore, petitioner wasliable for demurrage charges. It rejected petitioner's claim offorce majeure. It held:

This Court cannot also accord faith and credit on the plaintiff's claim that the delayin the delivery of the containers was caused by the breaking down of theequipment of the arrastre operator. Such claim was not supported with competentevidence. Let us assume the fact that the arrastre operator's equipment brokedown still plaintiff has to pay the corresponding demurrage charges. The possibilitythat the equipment would break down was not only foreseeable, but actually,

foreseen, and was not caso fortuito. 4The RTC, therefore, ordered:WHEREFORE, finding the preponderance of evidence in favor of the defendantsand against the plaintiff, judgment is hereby rendered dismissing the complaint withcosts against it. Plaintiff is hereby ordered to pay defendants the sum ofP36,480.00 representing demurrage charges for the detention of the seven (7)forty-footer container vans from July 20 to August 7, 1979, with legal interestcommencing on August 7, 1979 until fully paid. And plaintiff has to pay the sum ofP10,000.00, by way of attorney's fees.SO ORDERED.

On appeal, the case was affirmed with modification by the Court of Appeals as follows:WHEREFORE, modified as indicated above deleting the award of attorney's fees,the decision appealed from is hereby AFFIRMED in all other respects.Costs against plaintiff-appellant.SO ORDERED. 5

Hence, this petition for review in which it is contended:

1 that no demurrage lies in the absence of any showing thatthe vessels had been improperly detained or that loss ordamage had been incurred as a consequence of improperdetention;2 that respondent Court's finding that private respondent SmithBell had promptly and on the same day amended the defectivemanifest is contrary to the evidence of record.3 that respondent Court manifestly over-looked undisputedevidence presented by petitioner showing that the breakdownin the facilities and equipment of the arrastre operator furtherdelayed petitioner's withdrawal of the cargo. 6

Petitioner prays for a reversal of the decision of the Court of Appeals and the refund to it of thedemurrage charges paid by it, with interest, as well as to pay attorney's fees and expenses of litigation.Our decision will be presently explained, but in brief it is this: petitioner is liable for demurrage for delayin removing its cargo from the containers but only for the period July 3 to 13, 1979 with respect to tencontainers and from July 10 to July 13, 1979, in respect of two other containers.

First. With respect to petitioner's liability for demurrage, petitioner's contention is that the bill of ladingdoes not provide for the payment of container demurrage, as Clause 23 of the bill of lading only says"demurrage," i.e., damages for the detention of vessels, and here there is no detention of vessels.Petitioner invokes the ruling inMagellan Manufacturing Marketing Corp. v. Court of Appeals 7, where wedefined "demurrage" as follows:

Demurrage, in its strict sense, is the compensation provided for in the contract ofaffreightment for the detention of the vessel beyond the time agreed on for loadingand unloading. Essentially, demurrage is the claim for damages for failure toaccept delivery. In a broad sense, every improper detention of a vessel may beconsidered a demurrage. Liability for demurrage, using the word in its strictlytechnical sense, exists only when expressly stipulated in the contract. Using theterm in [its broader sense, damages in the] nature of demurrage are recoverable

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for a breach of the implied obligation to load or unload the cargo with reasonabledispatch, but only by the party to whom the duty is owed and only against one whois a party to the shipping contract.

Whatever may be the merit of petitioner's contention as to the meaning of the word "demurrage" inclause 23 of the bill of lading, the fact is that clause 29(a) also of the bill of lading, in relation to Rule 21of the Far East Conference Tariff No. 28-FMC No. 12, as quoted above, specifically provides for thepayment by the consignee of demurrage for the detention of containers and other equipment after theso-called "free time."Now a bill of lading is both a receipt and a contract. As a contract, its terms and conditions areconclusive on the parties, including the consignee. What we said in one case mutatis mutandis appliesto this case:

A bill of lading operates both as a receipt and a contract . . . As a contract, it names

the contracting partieswhich include the consignee, fixes the route, destination,freight rate or charges, and stipulates the right and obligations assumed by theparties . . . . By receiving the bill of lading, Davao Parts and Services, Inc. assentedto the terms of the consignment contained therein, and became bound thereby, sofar as the conditions named are reasonable in the eyes of the law. Since neitherappellant nor appellee alleges that any provision therein is contrary to law, morals,good customs, public policy or public order and indeed we found none thevalidity of the Bill of Lading must be sustained and the provisions therein properlyapplies to resolve the conflict between the parties. 8

As the Court of Appeals pointed out in its appealed decision, the enforcement of the rules of the FarEast Conference and the Federal Maritime Commission is in accordance with Republic Act No. 1407,1 of which declares that the Philippines, in common with other maritime nations, recognizes theinternational character of shipping in foreign trade and existing international practices in maritimetransportation and that it is part of the national policy to cooperate with other friendly nations in themaintenance and improvement of such practices.Petitioner's argument that it is not bound by the bill of lading issued by K-Line because it is a contract of

adhesion, whose terms as set forth at the back are in small prints and are hardly readable, is withoutmerit. As we held inServando v. Philippine Steam Navigation: 9

While it may be true that petitioner had not signed the plane ticket (Exh. 12), he isnevertheless bound by the provisions thereof. "Such provisions have been held tobe a part of the contract of carriage, and valid and binding upon the passengerregardless of the latter's lack of knowledge or assent to the regulation". It is what isknown as a contract of "adhesion," in regards to which it has been said thatcontracts of adhesion wherein one party imposes a ready made form of contract onthe other, as the plane ticket in the case at bar, are contracts not entirelyprohibited. The one who adheres to the contract is in reality free to reject it entirely;if he adheres, he gives his consent. (Tolentino, Civil Code, Vol. IV, 1962 Ed., p.462, citingMr. Justice JBL Reyes, Lawyer's Journal, Jan. 31, 1951, p. 49).

Second. With respect to the period of petitioner's liability, private respondent's position is that the "freetime" expired on June 26, 1979 and demurrage began to toll on June 27, 1979, with respect to 10containers which were unloaded from the SS Far East Friendship, while with respect to the 2 containerswhich were unloaded from the SSHangang Glory, the free time expired on July 9, 1979 and demurrage

began to run on July 10, 1979.This contention is without merit. Petitioner cannot be held liable for demurrage starting June 27, 1979on the 10 containers which arrived on the SS Far East Friendship because the delay in obtainingrelease of the goods was not due to its fault. The evidence shows that because the manifest issued bythe respondent K-Line, through the Smith, Bell & Co., stated only 10 containers, whereas the bill oflading also issued by the K-Line showed there were 12 containers, the Bureau of Customs refused togive an entry permit to petitioner. For this reason, petitioner's broker, the IBC, had to see therespondent's agent (Smith, Bell & Co.) on June 22, 1979 but the latter did not immediately dosomething to correct the manifest. Smith, Bell & Co. was asked to "amend" the manifest, but it refusedto do so on the ground that this would violate the law. It was only on June 29, 1979 that it thought ofadding instead a footnote to indicate that two other container vans to account for a total of 12

container vans consigned to petitioner had been loaded on the other vesselSS Hangang Glory.It is not true that the necessary correction was made on June 22, 1979, the same day the manifest waspresented to Smith, Bell & Co. There is nothing in the testimonies of witnesses of either party t o supportthe appellate court's finding that the footnote, explaining the apparent discrepancy between the bill oflading and the manifest, was added on June 22, 1979 but that petitioner's representative did not returnto pick up the manifesst until June 29, 1979. To the contrary, it is more probable to believe thepetitioner's claim that the manifest was corrected only on June 29, 1979 (by which time the "free time"had already expired), because Smith, Bell & Co. did not immediately know what to do as it insisted itcould not amend the manifest and only thought of adding a footnote on June 29, 1979 upon thesuggestion of the IBC.Now June 29, 1979 was a Friday. Again it is probable the correct manifest was presented to the Bureau

of Customs only on Monday, July 2, 1979 and, therefore, it was only on July 3 that it was approved. Itwas, therefore, only from this date (July 3, 1979) that petitioner could have claimed its cargo andcharged for any delay in removing its cargo from the containers. With respect to the other twocontainers which arrived on the SS Hangang Glory, demurrage was properly considered to haveaccrued on July 10, 1979 since the "free time" expired on July 9.The period of delay, however, for all the 12 containers must be deemed to have stopped on July 13,1979, because on this date petitioner paid P47,680.00. If it was not able to get its cargo from thecontainer vans, it was because of the breakdown of the shifter or cranes. This breakdown cannot beblamed on petitioners since these were cranes of the arrastre service operator. It would be unjust tocharge demurrage after July 13, 1979 since the delay in emptying the containers was not due to thefault of the petitioner.Indeed, there is no reason why petitioner should not get its cargo after paying all demurrage chargesdue on July 13, 1979. If it paid P20,180.00 more in demurrage charges after July 13, 1979 it was onlybecause respondents would not release the goods. Even then petitioner was able to obtain the releaseof cargo from five container vans. Its trucks were unable to load anymore cargo and returned topetitioner's premises empty.

In sum, we hold that petitioner can be held liable for demurrage only for the period July 3-13, 1979 andthat in accordance with the stipulation in its bill of lading, it is liable for demurrage only in the amount ofP28,480.00 computed as follows;

A. 10 containers ex Far East Friendship (July 3-13, 1979)1. 1st 5 days @ P4.00/day/foot5 days x P4 x 40 ft. x 10 ctnrs. P 8,0002. Next 6 days @ P8.00/day/foot6 days x P8 x 40 ft. x 10 cntrs. P 19,200 P 27,200B. 2 containers ex Hangang Glory (July 10 -13, 1979)1st 4 days @ P4.00/day/foot4 days x P4 x 40 ft. x 10 cntrs. P 1,280TOTAL DEMURRAGE DUE P 28,480=======LESS: TOTAL PAID (P 67,840)

OVERPAYMENT (P 39,360)As shown above there is an overpayment of P39,360.00 which should be refunded to petitioner.WHEREFORE, the decision appealed from is SET ASIDE and another one is RENDERED,ORDERING the private respondents to pay to petitioner the sum of P39,360.00 by way of refund, withlegal interest.SO ORDERED.

Narvasa, C.J., Padilla and Regalado, JJ., concur.Puno, J., took no part.

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G.R. No. 143133 June 5, 2002BELGIAN OVERSEAS CHARTERING AND SHIPPING N.V. and JARDINE DAVIESTRANSPORT SERVICES, INC.,petitioners,vs.PHILIPPINE FIRST INSURANCE CO., INC., respondents.PANGANIBAN, J.:Proof of the delivery of goods in good order to a common carrier and of their arrival in bad orderat their destination constitutes prima facie fault or negligence on the part of the carrier. If noadequate explanation is given as to how the loss, the destruction or the deterioration of the goodshappened, the carrier shall be held liable therefor.Statement of the Case

Before us is a Petition for Review under Rule 45 of the Rules of Court, assailing the July 15, 1998Decision1 and the May 2, 2000 Resolution2 of the Court of Appeals3 (CA) in CA-GR CV No.53571. The decretal portion of the Decision reads as follows:

"WHEREFORE, in the light of the foregoing disquisition, the decision appealed from ishereby REVERSED and SET ASIDE. Defendants-appellees are ORDERED to jointlyand severally pay plaintiffs-appellants the following:

'1) FOUR Hundred Fifty One Thousand Twenty-Seven Pesos and 32/100(P451,027.32) as actual damages, representing the value of the damagedcargo, plus interest at the legal rate from the time of filing of the complaint onJuly 25, 1991, until fully paid;'2) Attorney's fees amounting to 20% of the claim; and'3) Costs of suit.'"4

The assailed Resolution denied petitioner's Motion for Reconsideration.The CA reversed the Decision of the Regional Trial Court (RTC) of Makati City (Branch 134),which had disposed as follows:

"WHEREFORE, in view of the foregoing, judgment is hereby rendered, dismissing thecomplaint, as well as defendant's counterclaim."5The FactsThe factual antecedents of the case are summarized by the Court of Appeals in this wise:

"On June 13, 1990, CMC Trading A.G. shipped on board the M/V 'Anangel Sky' atHamburg, Germany 242 coils of various Prime Cold Rolled Steel sheets fortransportation to Manila consigned to the Philippine Steel Trading Corporation. On July28, 1990, M/V Anangel Sky arrived at the port of Manila and, within the subsequentdays, discharged the subject cargo. Four (4) coils were found to be in bad order B.O.Tally sheet No. 154974. Finding the four (4) coils in their damaged state to be unfit forthe intended purpose, the consignee Philippine Steel Trading Corporation declared thesame as total loss.1wphi1.nt"Despite receipt of a formal demand, defendants-appellees refused to submit to theconsignee's claim. Consequently, plaintiff-appellant paid the consignee five hundred si xthousand eighty six & 50/100 pesos (P506,086.50), and was subrogated to the latter's

rights and causes of action against defendants-appellees. Subsequently, plaintiff-appellant instituted this complaint for recovery of the amount paid by them, to theconsignee as insured."Impugning the propriety of the suit against them, defendants-appellees imputed thatthe damage and/or loss was due to pre-shipment damage, to the inherent nature, viceor defect of the goods, or to perils, danger and accidents of the sea, or to insufficiencyof packing thereof, or to the act or omission of the shipper of the goods or theirrepresentatives. In addition thereto, defendants-appellees argued that their liability, ifthere be any, should not exceed the limitations of liability provided for in the bill of ladingand other pertinent laws. Finally, defendants-appellees averred that, in any event, theyexercised due diligence and foresight required by law to prevent any damage/loss tosaid shipment."6

Ruling of the Trial CourtThe RTC dismissed the Complaint because respondent had failed to prove its claims with thequantum of proof required by law.7It likewise debunked petitioners' counterclaim, because respondent's suit was not manifestlyfrivolous or primarily intended to harass them.8Ruling of the Court of AppealsIn reversing the trial court, the CA ruled that petitioners were liable for the loss or the damage ofthe goods shipped, because they had failed to overcome the presumption of negligence imposedon common carriers.The CA further held as inadequately proven petitioners' claim that the loss or the deterioration ofthe goods was due to pre-shipment damage. 9 It likewise opined that the notation "metal

envelopes rust stained and slightly dented" placed on the Bill of Lading had not been theproximate cause of the damage to the four (4) coils.10As to the extent of petitioners' liability, the CA held that the package limitation under COGSA wasnot applicable, because the words "L/C No. 90/02447" indicated that a higher