CASE First Philippine Industrial Corporation vs. Court of Appeals G.R. No.

125948 December 29, 1998

FACTS Petitioner, First Phil. Industrial Corporation (FirstPhil for brevity) is a grantee of a pipeline concession under Republic Act No. 387, as amended, to contract, install and operate oil pipelines. FirstPhil applied for a mayor's permit, but before the mayor's permit could be issued, the respondent City Treasurer required petitioner to pay a local tax pursuant to the Local Government Code. Petitioner filed a letter-protest addressed to the respondent City Treasurer, but the latter denied the same contending that petitioner cannot be considered engaged in transportation business, thus it cannot claim exemption under Section 133 (j) of the Local Government Code.

CONTENTION OF PETITIONER

CONTENTION OF RESPONDENTS imposition of tax upon them assert that pipelines violates Sec 133 of the Local are not included in the Government Code term "common carrier" which refers solely to ordinary carriers such as trucks, trains, ships and th e like. Respondents further posit that the term "common carrier" under the said code pertains to the mode or manner by which a product is delivered to its destination.

ISSUE/S

RULING

WON the petitioner is a Petition was granted. CA decision was "common carrier" and, REVERSED and SET ASIDE. therefore, exempt from the SC ruled in this case that petitioner is a business tax. common carrier and thus, exempt from business tax. RULING Under the Petroleum Act of the Philippines (Republic Act 387), petitioner is considered a "common carrier.", and at the same time, said act also regards petroleum operation as a public utility. BIR likewise considers the petitioner a "common carrier." In so ruling, it held that, since petitioner is a pipeline concessionaire that is engaged only in transporting petroleum products, it is considered a common carrier under Republic Act No. 387. Such being the case, it is not subject to withholding tax prescribed by Revenue Regulations No. 13-78, as amended. Section 133 (j), of the Local Government Code, provides: Sec. 133. Common Limitations on the Taxing Powers of Local Government Units. Unless otherwise provided herein, the exercise of the taxing powers of provinces, cities, municipalities, and barangays shall not extend to the levy of the following: (j) Taxes on the gross receipts 1732 of the Civil Code FOR DEFINITION OF COMMON CARRIER The test for determining whether a party is a common carrier of goods are: 1. He must be engaged in the business of carrying goods for others as a public employment, and must hold himself out as ready to engage in the transportation of goods for person generally as a business and not as a casual occupation; 2. He must undertake to carry goods of the kind to which his business is confined; 3. He must undertake to carry by the method by which his business is conducted and over his established roads; and 4. The transportation must be for hire. There is no doubt that petitioner is a common carrier. It is engaged in the business of transporting or carrying goods, i.e. petroleum products, for hire as a public employment. It undertakes to carry for all persons indifferently, that is, to all persons who choose to employ its services, and transports the goods by land and for compensation. The fact that petitioner has a limited clientele does not exclude it from the definition of a common carrier.

of transportation contractors and persons engaged in the transportation of passengers or freight by hire and common carriers by air, land or water, except as provided in this Code. SC held that the legislative intent in excluding from the taxing power of the local government unit the imposition of business tax against common carriers is to prevent a duplication of the so-called "common carrier's tax." Asia Lighterage and FACTS: Shipping Inc. v. CA Gr, No. 147246, August Petitioner was contracted as carrier 19, 2003 by a corporation from Portland, Oregon to deliver a cargo to the consignee's warehouse at Pasig City. The cargo, however, never reached the consignee as the barge that carried the cargo sank completely, resulting in damage to the cargo. Private respondent, as insurer, indemnified the consignee for the lost cargo and thus, as subrogee, sought recovery from petitioner. Both the trial court and the appellate court ruled in favor of private respondent. PETITIONERS CONTENTION Petitioner contends that it is not a common carrier but a private carrier. Allegedly, it has no fixed and publicly known route, maintains no terminals, and issues no tickets. It points out that it is not obliged to carry indiscriminately for any person. It is not bound to carry goods unless it consents. In short, it does not hold out its services to the general public claims that this was caused by a typhoon, hence, it should not be held liable for the loss of the cargo. However, petitioner failed to prove that the typhoon is the proximate and only cause of the loss of the goods, and that it has exercised due diligence before, during and after the occurrence of the typhoon to prevent or minimize the loss. RULING The Court ruled in favor of private respondent. Whether or not petitioner is a common carrier, the Court ruled in the affirmative. The principal business of petitioner is that of lighterage and drayage, offering its barges to the public, although for limited clientele, for carrying or transporting goods by water for compensation. Whether or not petitioner failed to exercise extraordinary diligence in its care and custody of the consignee's goods, the Court also ruled in the affirmative. The barge completely sank after its towing bits broke, resulting in the loss of the cargo. Petitioner failed to prove that the typhoon was the proximate and only cause of the loss and that it has exercised due diligence before, during and after the occurrence.

ISSUES (1) Whether the petitioner is a common carrier; and, (2) Assuming the petitioner is a common carrier, whether it exercised extraordinary diligence in its care and custody of the consignees cargo.

RULING In the case at bar, the petitioner admitted that it is engaged in the business of shipping and lighterage, offering its barges to the public, despite its limited clientele for carrying or transporting goods by water Article 1732 of the Civil Code makes no distinction between one whose principal for compensation.

The evidence show that, even before the towing bits of the barge broke, it had already previously sustained damage when it hit a sunken object while docked at the Engineering Island. It even suffered a hole. Clearly, this could not be solely attributed to the typhoon. The partly-submerged vessel was refloated but its hole was patched with only clay and cement. The patch work was merely a provisional remedy, not enough for the barge to sail safely. Thus, when petitioner persisted to proceed with the voyage, it recklessly exposed the cargo to further damage. LOADSTAR SHIPPING CO., INC., v. CA FACTS On 19 November 1984, LOADSTAR received on board a) 705 bales of lawanit hardwood; b) 27 boxes and crates of tilewood assemblies and the others ;and c) 49 bundles of mouldings R & W (3) Apitong Bolidenized. On its way to Manila from the port of Nasipit, Agusan del Norte, the vessel, along with its cargo, sank off Limasawa Island. As a result of the total loss of its shipment, the consignee made a claim with LOADSTAR which, however, ignored the same. MIC fi l e d a complaint against LOADSTAR and PGAI, alleging that the sinking of the vessel was due to the fault and negligence of LOADSTAR and its employees. LOADSTAR denied any liability for the loss of the shipper's goods and claimed that sinking of its vessel PETITIONERS CONTENTION LOADSTAR submits that the vessel was a private carrier because it was not issued a certificate of public convenience, it did not have a regular trip or schedule nor a fixed route, and there was only one shipper, one consignee for a special cargo. LOADSTAR argues that as a private carrier, it cannot be presumed to have been negligent, and the burden of proving otherwise devolved upon MIC.[8] LOADSTAR also maintains th a t th e vessel was seaworthy. Before the fateful voyage on 19 November 1984, the vessel was allegedly dry docked at Keppel Philippines Shipyard and RESPONDENTS CONTENTION ISSUES:

business activity is the carrying of persons or goods or both, and one who does such carrying only as an ancillary activity. We also did not distinguish between a person or enterprise offering transportation service on a regular or scheduled basis and one offering such service on an occasional, episodic or unscheduled basis. Further, we ruled that Article 1732 does not distinguish between a carrier offering its services to the general public, and one who offers services or solicits business only from a narrow segment of the general population.

RULING SC hold that LOADSTAR is a common carrier. It is not necessary that the carrier be issued a certificate of public convenience, and this public character is not altered by the fact that the carriage of the goods in question was periodic, occasional, episodic or unscheduled. The bills of lading failed to show any special arrangement, but only a general provision to the effect that the M/V"Cherokee" was a "general cargo carrier." 14 Further, the bare fact that the vessel was carrying a particular type of cargo for one shipper, which appears to be purely coincidental, is not reason enough to convert the vessel from a common to a private carrier, especially where, as in this case, it was shown that the vessel was also carrying passengers. Under Article 1732 of the Civil Code the Civil Code defines "common carriers" in the following terms:

(1) Is the M/V "Cherokee" a private or a common carrier? (2) Did LOADSTAR observe MIC argues that the due and/or ordinary diligence issue as to the in these premises. classification of the M/V Cherokee was not timely raised below; hence, it is barred by estoppel. While it is true that the vessel had on board only the cargo of wood products for delivery to one consignee, it was al s o carrying passengers as part of i ts regular business. Moreover, the bills of lading in this case made no

was due to force majeure. LOADSTAR submits that the vessel was a private carrier because it was not issued certificate of public convenience, it did not have a regular trip or schedule nor a fixed route, and there was only "one shipper, one consignee for a special cargo.

was duly inspected by the maritime safety engineers of the Philippine Coast Guard, who certified that the ship was fit to undertake a voyage. Its crew at the time was experienced, licensed and unquestionably competent. With all these precautions, there could be no other conclusion except that LOADSTAR exercised th e diligence of a good father of a family in ensuring the vessels seaworthiness.

mention of any charter party but only a statement that the vessel was a general cargo carrier. Neither was there any special arrangement between LOADSTAR and the shipper regarding the shipment of the cargo. The singular fact that the vessel was carrying a particular type of cargo LOADSTAR further claims for one shipper is not that it was not responsible for the sufficient to convert loss of the cargo, such loss being the vessel into a due to force majeure. private carrier. MIC, on the other hand, claims that LOADSTAR was liable, notwithstanding that the loss of the cargo was due to force majeure, because the same concurred with LOADSTARs fault or negligence. Secondly, LOADSTAR did not raise the issue of prescription in the court below; hence, the same must be deemed waived. Thirdly, the limited liability theory is not applicable in the case at bar because LOADSTAR was at

Art. 1732. Common carriers are persons, corporations, firms or associations engaged in the business of carrying or transporting passengers or goods or both, by land, water, or air for compensation, offering their services to the public. On to the second assigned error, we find that the M/V "Cherokee" was not seaworthy when it embarked on its voyage on 19 November 1984. The vessel was not even sufficiently manned at the time. "For a vessel to be seaworthy, it must be adequately equipped for the voyage and manned with a sufficient number of competent officers and crew. The failure of a common carrier to maintain in seaworthy condition its vessel involved in a contract of carriage is a clear breach of its duty. . To exempt private respondent from the liabilities of a common carrier because he has not secured the necessary certificate of public convenience, would be offensive to sound public policy; that would be to reward private respondent precisely for failing to comply with applicable statutory requirements. The business of a common carrier impinges directly and intimately upon the safety and well being and property of those members of the general community who happen to deal with such carrier. The law imposes duties and liabilities upon common carriers for the safety and protection of those who utilize their services and the law cannot allow a common carrier to render such duties and liabilities merely facultative by simply

Since the cargo was being shipped at owners risk, LOADSTAR was not liable for any loss or damage to the same LOADSTAR avers that MICs claim had already prescribed, the case having been instituted beyond the period stated in the bills of lading for instituting the same suits based upon claims arising from shortage, damage, or non-delivery of shipment shall be instituted within sixty days from the accrual of the right of action.

fault or negligent, and because it failed to maintain a seaworthy vessel. Authorizing th e voyage notwithstanding its knowledge of a typhoon is tantamount to negligence. Eastern Shipping Lines, Inc. v. The Nisshin Fire FACTS and Marine Insurance the same vessel took on board Co., and Dowa Fire & 128 cartons of garment fabrics Marine Insurance Co., and accessories, in 2 containers, Ltd. consigned to Mariveles Apparel G.R. No. 71478 May 29, Corporation, and two cases of 1987 surveying instruments consigned to Aman Enterprises and General Merchandise the vessel caught fire and sank, resulting in the total loss of ship and cargo PETITONERS CONTENTION Petitioner Carrier denied liability on the principal grounds that the fire which caused the sinking of the ship is an exempting circumstance under Section 4(2) (b) of the Carriage of Goods by Sea Act (COGSA); and that when the loss of fire is established, the burden of proving negligence of the vessel is shifted to the cargo shipper. ISSUES 1. which law should govern the Civil Code provisions on Common carriers or the Carriage of Goods by Sea Act?; 2. who has the burden of proof to show negligence of the carrier? 3. what is the extent of the carriers liability?___

failing to obtain the necessary permits and authorizations.

RULING:

Petitioner Carrier claims that the In G.R. No. 71478, during the loss of the vessel by fire exempts it same period, the same vessel from liability under the phrase took on board 128 cartons of "natural disaster or calamity. garment fabrics and accessories, in two (2) containers, consigned to Petitioner Carrier avers that its Mariveles Apparel Corporation, liability if any, should not exceed and two cases of surveying US $500 per package instruments consigned to Aman Enterprises and General Merchandise. The 128 cartons were insured for their stated value by respondent Nisshin Fire & Marine Insurance Co., for US $46,583.00, and the 2 cases by respondent Dowa Fire & Marine Insurance Co., Ltd., for US $11,385.00.

The law of the country to which the goods are to be transported governs the liability of the common carrier in case of their loss, destruction or deterioration. As the cargoes were transported from Japan to the Philippines, the liability of Petitioner Carrier is governed primarily by the Civil Code. However, in all matters not regulated by said Code, the rights and obligations of common carrier shall be governed by the Code of RULING Commerce and by special laws. Thus, t It is to be noted that the Civil he Carriage of Goods by Sea Act, a Code does not of itself limit the special law, is suppletory to the liability of the common carrier provisions of the Civil Code to a fixed amount per package although the Code expressly Note: fire not considered a natural permits a stipulation limiting disaster or calamity within the such liability. Thus, the contemplation of Art. 1734 for it arises COGSA which is suppletory to almost invariably from some act of man the provisions of the Civil or by human means; it does not fall Code, steps in and within the category of an act of God supplements the Code by unless caused by lightning or by other establishing a statutory natural disaster or calamity provision limiting the carrier's having failed to discharge the burden of liability in the absence of a proving that it had exercised the declaration of a higher value of extraordinary diligence required by law, the goods by the shipper in the Eastern Shipping Lines cannot escape bill of lading. The provisions of liability for the loss of the cargo As it was at fault, it cannot seek the

Enroute for Kobe, Japan, to Manila, the vessel caught fire and sank, resulting in the total loss of ship and cargo. The respective respondent Insurers paid the corresponding marine insurance values to the consignees concerned and were thus subrogated unto the rights of the latter as the insured. On June 16, 1978, respondents Nisshin Fire & Marine Insurance Co. NISSHIN for short), and Dowa Fire & Marine Insurance Co., Ltd. (DOWA, for brevity), as subrogees of the insured, filed suit against Petitioner Carrier for the recovery of the insured value of the cargo lost with the then Court of First Instance of Manila, Branch 11 (Civil Case No. 116151), imputing unseaworthiness of the ship and non-observance of extraordinary diligence by petitioner Carrier

the Carriage of Goods by.Sea Act on limited liability are as much a part of a bill of lading as though physically in it and as much a part thereof as though placed therein by agreement of the parties.

protective mantle of Sec. 4(2) of Carriage of Goods by Sea Act which provides: Neither the carrier nor the ship shall be responsible for loss or damage arising or resulting from x x x (b) Fire, unless caused by the actual fault or privity of the carrier. there was actual fault of the carrier shown by lack of diligence in that when the smoke was noticed, the fire was already big; that the fire must have started 24 hours before the same was noticed; and that after the cargoes were stored in the hatches, no regular inspection was made as to their condition during the voyage

Sabena Belgian World Airlines vs. CA (GR FACTS 104685, 14 March 1996) On 21 August 1987, Ma. Paula San Agustin was a passenger on board flight SN 284 of Sabena Belgian World Airlines originating from Casablanca to Brussels, Belgium. She was issued Tag 77143 on her valuables, namely: jewelries valued at $2,350.00; clothes $1,500.00 shoes/bag $150; accessories $75; luggage itself $10.00; or a total of $4,265.00. She stayed overnight in Brussels and her luggage was left on board Flight SN 284. When she arrived at Manila International

CONTENTIONS OF PETITIONER she did not declare the valuable items in her checked-in luggage at the flight counter when she checked in for her flight from Casablanca to Brussels so that either the representative of the defendant at the counter would have advised her to secure an insurance on the alleged valuable items and required her to pay additional charges, or would have refused acceptance of her baggage as required by the generally accepted practices of international carriers; that Section 9(a), Article

RULING: 4. Tort doctrine not a defense in failure to observe extraordinary diligence The rules as to the extraordinary diligence required in carriers remain basically unchanged even when th e contract is breached by tort (on th e ground that Section 5(c), Article IX, of th e General

RULING: 8. Warsaw convention denies the carrier availment of provisions limiting liability if damage is caused by willful misconduct or default The Warsaw Convention denies to the carrier availment of the provisions which exclude or limit his liability if the damage is caused by his willful; misconduct or by such default on his part as, in accordance with the law of the court seized of the case, is

RULING 1. Fault or negligence; Rule in contracts and common carriers Fault or negligence consists in the omission of that diligence which is demanded by the nature of an obligation and corresponds with the circumstances of the person, of the time, and of the place. When the source of an obligation is derived from a contract, the mere breach or non-fulfillment of the prestation gives rise to the presumption of fault on the part of the obligor. This rule is not different in the case of common carriers in the carriage of good father of a family but that of extraordinary care in the

Airport on 2 September 1987 and immediately submitted her Tag to facilitate the release of her luggage but the luggage was missing. She was advised to accomplish and submitted and filed on the same day. She followed up her claim on 14 September 1987 but the luggage remained to be missing. On 15 September 1987, she filed her formal complaint with the office of Ferge Massed, the airliness Local Manager, demanding immediate attention. On 30 September 1987, on the Occasion of San Agustins following up her luggage claim, she was furnished copies of the airliness telexes with and information that the Brussels Office of defendant found the luggage and that they have assured by the airline that it has notified its Manila Office 1987. But unfortunately San Agustin was informed that the luggage was lost for the second time. At the time of the filling of the complaint, the luggage was its content has not been found. San Agustin demanded from the defendant the money value of the luggage and its contents amounting to $4,265.00 or its exchange value, but the airline refused to settle the claim. After trial, the trial court rendered judgment ordering Sabena Belgian World Airlines to pay Ma. Paula San Agustin (a) US$4,265.00 or its legal exchange in Philippine pesos; (b) P30,000.00 as moral damages; (c) P10,000.00 as exemplary damages; (d) P10,000.00. attorneys fees; and (e) (t)he cost of the suit. Sabena

IX of General Conditions of carriage requiring passengers to collect their checked baggage at the place of stopover, plaintiff neglected to claim her baggage at the Brussels Airport; that plaintiff should have retrieved her undeclared valuables from her baggage at the Brussels Airport since her flight from Brussels to Manila will still have to visit for confirmation inasmuch as only her flight from Casablanca to Brussels was confirmed; that defendant incorporated in all Sabena Plane Tickets, including Sabena Ticket No. 082422-72502241 issued to plaintiff in Manila on August 21, 1987, a warning that Items of value should be carried on your person and that some carriers assume no liability for fragile, valuable or perishable articles and that further information may he obtained from the carrier for guidance; that granting without conceding that defendant is liable, its liability is limited only to US $20.00 per kilo due to plaintiffs failure to declare a higher value on the contents of her checked in luggage and pay additional charges thereon.[2]

Conditions of Carriage, signed at Warsaw, Poland, on 02 October 1929, as amended by the Hague Protocol of 1955, generally observed by International carriers, stating among other th i n g s , that: Passengers shall not include in his checked baggage, and the carrier may refuse to carry as checked baggage, Fragiles or perishable articles, m oney , jewelry, precious metals, negotiable papers, securities or other valuable) although noncontradictory principles on quasidelict may then be assimilated as also forming part of the governing law. The airline company is not thus entirely off track when it has likewise raised in its defense the tort doctrine cannot support its case. 5. Proximate cause defined Proximate cause is that which, in natural and continues sequence, unbroken by any efficient

considered to be equivalent to willful misconduct, or if the damage is (similarly) caused by any agent of the carrier acting within the scope of his employment. The Hague Protocol amended the Warsaw Convention by removing the provision that if the airline took all necessary steps to avoid the damage, it could exculpate itself completely, and declaring the stated limits of liability not applicable if it is proved that the damage resulted from an act or omission of the carrier, its servants or agents, done with intent to cause damage or recklessly and with knowledge that damage would probably result. The same deletion was effected by the Montreal Agreement of 1966, with the result that a passenger could recover unlimited damages upon proof of wilful misconduct. The Convention does not thus operate as an exclusive enumeration of the instances of an airlines liability, or as an absolute limit of the extent of that liability. Slight reflection readily leads to the conclusion that it should be deemed a limit of liability only in those cases where the cause of the death or injury to person, or destruction, loss or damage to property or delay in its transport is not attributable to or attended by any wilful misconduct, bad faith,

vigilance over the goods. 2. Extraordinary diligence required on carriers Art. 1733 of the [Civil] Code provides that from the very nature of their business and by reason of public policy, common carriers are bound to observe extraordinary diligence in the vigilance over the goods transported by them. This extraordinary responsibility, according to Art. 1736, lasts from the time the goods are unconditionally placed in the possession of and received by the consignee or person who has the right to receive them. Art 1737 states that the common carriers duty to observe extraordinary diligence in the vigilance over the goods transported by them remains in full force and effect even when they are temporarily unloaded or stored in transits. And Art. 1735 establishes the presumption that if the goods are lost, destroyed or deteriorate, common carrier are presumed to have been at fault or to have acted negligently, unless they prove that they had observed extraordinary diligence as required in Article 1733. had observed extraordinary diligence as required in Article 1733. 3. Exceptions to extraordinary diligence requirement The only exceptions to the foregoing extraordinary responsibility of the common carrier is when the loss, destruction, or deterioration of the goods is due to any of the following causes: (1) Flood, storm, earthquake, lightning, or other natural disaster or calamity;

appealed the decision of the Regional Trial Court to the Court of Appeals. The appellate court, in its decision of 27 February 1992, affirmed in toto the trial courts judgment.

intervening cause, produces injury and without which the result would not have occurred.

recklessness or otherwise improper conduct on the part of any official or employee for which th e carrier is responsible, and the carrier or misconduct of its employees, 6. Proximate legal or for some Particular or cause defined exceptional type of The proximate legal damage. (Alitalia vs. IAC) cause is that acting first and producing the 9. Philippines is country of injury, either destination; No error in immediately or by application of usual rules on setting other events in extent of motion, all constituting recoverable damages a natural and beyond the Warsaw continuous chain of limitations events, each having a There is no error in the c l os e causal preponderant application to connection with its the case of the usual rules on immediate the extent of predecessors, the final recoverable damages beyond event in the chain the Warsaw limitations. Under immediately affecting domestic law and the injury as a natural jurisprudence (the Philippines and probable result of being the country of the cause which first destination), the attendance of acted, under such gross negligence (given the circumstances that the equivalent of fraud or bad person responsible for faith) holds the common the event should, as carrier liable for all damages an ordinarily prudent which can be reasonably and intelligent person, attribute, although hav e reasonable unforeseen,to the nonground to expect at the performance of the obligation, moment of his act or including moral and exemplary default that an injury to damages. some person might probably result therefrom. 7. Loss of baggage

(2) Act of the public enemy in war, whether international or civil; (3) Act or omission of the shipper or owner of the goods; (4) The character of the goods or defects in the packing or in the containers; (5) Order or act of excepted causes obtains in the case.

twice shows gross negligence It remained undisputed that San Agustins luggage was lost while it was in the custody of Sabena Belgian World Airlines. It was supposed to arrive on the same flight that San Agustin took in returning to Manila on 2 September 1987. On 23 October 1987, she was advised that her luggage had finally been found, with its contents intact; only to be told later that her luggage had been lost for the second time. Thus, Sabena Belgian World Airlines is ultimately guilty of gross negligence in the handling of San Agustins luggage, for the loss of said baggage not only once by twice underscore the wanton negligence and lack of care on th e part of the carrier.