Transportation Laws

A. Common Carriers
A. In General;
a. Definition, essential elements (1732)
U.S. V. TAN PIACO, 40 PHIL 853

FIRST DIVISION
[G.R. No. 15122. March 10, 1920. ]
THE UNITED STATES, Plaintiff-Appellee, v. TAN PIACO, VENTURA ESTUYA, PEDRO
HOMERES, MAXIMINO GALSA and EMILIO LEOPANDO, Defendants. TAN
PIACO, Appellant.
Recaredo Ma. Calvo for Appellant.
Attorney-General Paredes for Appellee.
SYLLABUS

1. PUBLIC UTILITY, CONTROL BY PUBLIC UTILITY COMMISSION;

CRIMINAL LIABILITY OF OWNER OF AUTOMOBILE. TRUCK OPERATED
UNDER SPECIAL CONTRACT AND NOT FOR GENERAL PUBLIC
BUSINESS. The owner of an automobile truck who operates the
same under a special contract for carrying passengers and freight, in
each case, and has not held himself out to carry all passengers and
freight for all persons who might offer, is not a public utility and is not
criminally liable for his failure to obtain a license from the Public
Utility Commissioner. If the use is merely optional with the owner, or
the public benefit is merely accidental, it is not a public use,
authorizing the exercise of the jurisdiction of the public utility
commission. The true criterion by which to judge of the character of
the use is whether the public may enjoy it by right or only by
permission.
DECISION
Said defendants were charged with a violation of the Public Utility Law
(Act No. 2307 as amended by Acts Nos. 2362 and 2694), in that they
were operating a public utility without permission from the Public
Utility Commissioner.
Upon the complaint presented each of said defendants were arrested
and brought to trial. After hearing the evidence the Honorable
Cayetano Lukban, judge, found that the evidence was insufficient to
support the charges against Ventura Estuya, Pedro Homeres,

Maximino Galsa and Emilio Leopando, and absolved them from all
liability under the complaint and discharged them from the custody of
the law. The lower court found the defendant Tan Piaco guilty of the
crime charged in the complaint and sentence him to pay a fine of
P100, and, in case of insolvency, to suffer subsidiary imprisonment,
and to pay one- fifth part of the costs. :E; rom that sentence Tan
Piaco appealed to this court.
The facts proved during the trial of the cause may be stated as
follows:chanrob1es virtual 1aw library
The appellant rented two automobile trucks and was using them upon
the highways of the Province of Leyte for the purpose of carrying
some passengers and freight; that he cal ried passengers and freight
under a special contract in each case; that he had not held himself
out to carry all passengers and all freight for all persons who might
offer passengers and freight.
The Attorney-General, in a carefully prepared brief, says: "The
question is whether the appellant, under the above facts, was a public
utility under the foregoing definitions," and was therefore subject to
the control and regulation of the Public Utility Commission. "We have
not found anything in the evidence showing that the appellant
operated the trucks in question for public use. These trucks, so far as
indicated by the evidence and as far as the appellant is concerned,
furnished service under special agreements to carry particular
persons and property. . . For all that we can deduce from the
evidence, these passengers, or the owners of the freight, may have
controlled the whole vehicles both as to contents, direction, and time
of use, which facts, under all the circumstances of the case, would, in
our opinion, take away the defendants business from the provisions
of the Public Utility Act."cralaw virtua1aw library
In support of the conclusion of the Attorney-General, he cites the
case of Terminal Taxicab Co. v. Kutz (241 U. S., 252). In that case the
Terminal Taxicab Co. furnished automobiles from its central garage on
special orders and did not hold itself out to accommodate any and all
persons. The plaintiff reserved to itself the right to refuse service. The
Supreme Court of the United States, speaking through Mr. Justice
Holmes, said: "The bargains made by the plaintiff are individual, and
however much they may tend towards uniformity in price, probably
have not the mechanical fixity of charges that attend the use of
taxicabs from the stations to the hotels. The court is of the opinion
that that part of the business is not to be regarded as a public utility.

It is true that all business, and, for the matter of that, every life in all
its details, has a public aspect, some bearing upon the welfare of the
country in which it is passed." The court held that by virtue of the fact
that said company did not hold itself out to serve any and all persons,
it was not a public utility and was not subject to the jurisdiction of the
public utility commission.
Upon the facts adduced during the trial of the cause, and for the
foregoing reasons, the Attorney-General recommends that the
sentence of the lower court be revoked and that the appellant be
absolved from all liability under the complaint.
Section 14 of Act No. 2307, as amended by section 9 of Act No. 2694,
provides that: "The Public Utility Commission or Commissioners shall
have general supervision and regulation of, jurisdiction and control
over, all public utilities. . . The term public utility is hereby defined to
include every individual, copartnership, association, corporation or
joint stock company, etc., etc., that now or hereafter may own,
operate, manage, or control any common carrier, railroad, street
railway, etc., etc., engaged in the transportation of passengers, cargo,
etc., etc., for public use."cralaw virtua1aw library
Under the provisions of said section, two things are necessary: (a)
The individual, copartnership, etc., etc., must be a public utility; and
(b) the business in which such individual, copartnership, etc., etc., is
engaged must be for public use. So long as the individual or
copartnership, etc., etc., is engaged in a purely private enterprise,
without attempting to render service to all who may apply, he can in
no sense be considered a public utility, for public use.
"Public use" means the same as "use by the public." The essential
feature of the public use is that it is not confined to privileged
individuals, but is open to the indefinite public. It is this indefinite or
unrestricted quality that gives it its public character. In determining
whether a use is public, we must look not only to the character of the
business to be done, but also to the proposed mode of doing it. If the
use is merely optional with the owners, or the public benefit is merely
incidental, it is not a public use, authorizing the exercise of the
jurisdiction of the public utility commission. There must be, in
general, a right which the law compels the owner to give to the
general public. It is not enough that the general prosperity of the
public is promoted. Public use is not synonymous with public interest.
The true criterion by which to judge of the character of the use is
whether the public may enjoy it by right or only by permission.

For all of the foregoing reasons, we agree with the Attorney-General

that the appellant was not operating a public utility, for public use,
and was not, therefore, subject to the jurisdiction of the Public Utility
Commission.
Therefore, the sentence of the lower court is hereby revoked, and it is
hereby ordered and decreed that the complaint be dismissed and that
the defendant be absolved from all liability under the same, and that
he be discharged from the custody of the law, without any finding as
to cost. So ordered.
Arellano, C.J., Torres, Araullo, Street, Malcolm and Avancea, JJ.,
concur.

Transportation Laws
A. Common Carriers
A. In General;
a. Definition, essential elements (1732)
HOME INSURANCE CO. VS. AMERICAN STEAMSHIP, 23 SCRA 24
April 4, 1968
"Consorcio Pesquero del Peru of South America" shipped freight pre-paid at
Chimbate, Peru, 21,740 jute bags of Peruvian fish meal through SS
Crowborough, covered by clean bills of lading Numbers 1 and 2, both dated
January 17, 1963. The cargo, consigned to San Miguel Brewery, Inc., now San
Miguel Corporation, and insured by Home Insurance Company for $202,505,
arrived in Manila on March 7, 1963 and was discharged into the lighters of
Luzon Stevedoring Company. When the cargo was delivered to consignee
San Miguel Brewery Inc., there were shortages amounting to P12,033.85,
causing the latter to lay claims against Luzon Stevedoring Corporation, Home
Insurance Company and the American Steamship Agencies, owner and
operator of SS Crowborough.

Because the others denied liability, Home Insurance Company paid the
consignee P14,870.71 the insurance value of the loss, as full settlement of
the claim. Having been refused reimbursement by both the Luzon
Stevedoring Corporation and American Steamship Agencies, Home Insurance
Company, as subrogee to the consignee, filed against them on March 6, 1964
before the Court of First Instance of Manila a complaint for recovery of
P14,870.71 with legal interest, plus attorney's fees.
In answer, Luzon Stevedoring Corporation alleged that it delivered with due
diligence the goods in the same quantity and quality that it had received the
same from the carrier. It also claimed that plaintiff's claim had prescribed
under Article 366 of the Code of Commerce stating that the claim must be
made within 24 hours from receipt of the cargo.
American Steamship Agencies denied liability by alleging that under the
provisions of the Charter party referred to in the bills of lading, the charterer,
not the shipowner, was responsible for any loss or damage of the cargo.
Furthermore, it claimed to have exercised due diligence in stowing the goods
and that as a mere forwarding agent, it was not responsible for losses or
damages to the cargo.
On November 17, 1965, the Court of First Instance, after trial, absolved
Luzon Stevedoring Corporation, having found the latter to have merely
delivered what it received from the carrier in the same condition and quality,
and ordered American Steamship Agencies to pay plaintiff P14,870.71 with
legal interest plus P1,000 attorney's fees. Said court cited the following
grounds:
(a) The non-liability claim of American Steamship Agencies under the charter
party contract is not tenable because Article 587 of the Code of Commerce
makes the ship agent also civilly liable for damages in favor of third persons
due to the conduct of the captain of the carrier;

(b) The stipulation in the charter party contract exempting the owner from
liability is against public policy under Article 1744 of the Civil Code;
(c) In case of loss, destruction or deterioration of goods, common carriers are
presumed at fault or negligent under Article 1735 of the Civil Code unless
they prove extraordinary diligence, and they cannot by contract exempt
themselves from liability resulting from their negligence or that of their
servants; and
(d) When goods are delivered to the carrier in good order and the same are
in bad order at the place of destination, the carrier is prima facie liable.
Disagreeing with such judgment, American Steamship Agencies appealed
directly to Us. The appeal brings forth for determination this legal issue: Is
the stipulation in the charter party of the owner's non-liability valid so as to
absolve the American Steamship Agencies from liability for loss?
The bills of lading,[[1]] covering the shipment of Peruvian fish meal provide at
the back thereof that the bills of lading shall be governed by and subject to
the terms and conditions of the charter party, if any, otherwise, the bills of
lading prevail over all the agreements.[[2]] On the of the bills are stamped
"Freight prepaid as per charter party. Subject to all terms, conditions and
exceptions of charter party dated London, Dec. 13, 1962."
A perusal of the charter party[[3]] referred to shows that while the possession
and control of the ship were not entirely transferred to the charterer, [[4]] the
vessel was chartered to its full and complete capacity (Exh. 3). Furthermore,
the, charter had the option to go north or south or vice-versa,[[5]] loading,
stowing and discharging at its risk and expense.[[6]] Accordingly, the charter
party contract is one of affreightment over the whole vessel rather than a
demise. As such, the liability of the shipowner for acts or negligence of its
captain and crew, would remain in the absence of stipulation.
Section 2, paragraph 2 of the charter party, provides that the owner is liable
for loss or damage to the goods caused by personal want of due diligence on
its part or its manager to make the vessel in all respects seaworthy and to

secure that she be properly manned, equipped and supplied or by the

personal act or default of the owner or its manager. Said paragraph,
however, exempts the owner of the vessel from any loss or damage or delay
arising from any other source, even from the neglect or fault of the captain
or crew or some other person employed by the owner on board, for whose
acts the owner would ordinarily be liable except for said paragraph.
Regarding the stipulation, the Court of First Instance declared the contract as
contrary to Article 587 of the Code of Commerce making the ship agent
civilly liable for indemnities suffered by third persons arising from acts or
omissions of the captain in the care of the goods and Article 1744 of the Civil
Code under which a stipulation between the common carrier and the shipper
or owner limiting the liability of the former for loss or destruction of the
goods to a degree less than extraordinary diligence is valid provided it be
reasonable, just and not contrary to public policy. The release from liability in
this case was held unreasonable and contrary to the public policy on
common carriers.
The provisions of our Civil Code on common carriers were taken from AngloAmerican law.[[7]] Under American jurisprudence, a common carrier
undertaking to carry a special cargo or chartered to a special person only,
becomes a private carrier.[[8]] As a private carrier, a stipulation exempting the
owner from liability for the negligence of its agent is not against public
policy,[[9]] and is deemed valid.
Such doctrine We find reasonable. The Civil Code provisions on common
carriers should not be applied where the carrier is not acting as such but as a
private carrier. The stipulation in the charter party absolving the owner from
liability for loss due to the negligence of its agent would be void only if the
strict public policy governing common carriers is applied. Such policy has no
force where the public at large is not involved, as in the case of a ship totally
chartered for the use of a single party.

And furthermore, in a charter of the entire vessel, the bill of lading issued by
the master to the charterer, as shipper, is in fact and legal contemplation
merely a receipt and a document of title not a contract, for the contract is
the charter party.[[10]] The consignee may not claim ignorance of said charter
party because the bills of lading expressly referred to the same. Accordingly,
the consignees under the bills of lading must likewise abide by the terms of
the charter party. And as stated, recovery cannot be had thereunder, for loss
or damage to the cargo, against the shipowners, unless the same is due to
personal acts or negligence of said owner or its manager, as distinguished
from its other agents or employees. In this case, no such personal act or
negligence has been proved.
WHEREFORE, the judgment appealed from is hereby reversed and appellant
is absolved from liability to plaintiff. No costs. So ordered.

epublic of the Philippines

SUPREME COURT
Manila
THIRD DIVISION
G.R. No. L-47822 December 22, 1988
PEDRO DE GUZMAN, petitioner,
vs.
COURT OF APPEALS and ERNESTO CENDANA, respondents.
FELICIANO, J.:
Respondent Ernesto Cendana, a junk dealer, was engaged in buying up used bottles
and scrap metal in Pangasinan. Upon gathering sufficient quantities of such scrap
material, respondent would bring such material to Manila for resale. He utilized two (2)
six-wheeler trucks which he owned for hauling the material to Manila. On the return trip

to Pangasinan, respondent would load his vehicles with cargo which various merchants
wanted delivered to differing establishments in Pangasinan. For that service,
respondent charged freight rates which were commonly lower than regular commercial
rates.
Sometime in November 1970, petitioner Pedro de Guzman a merchant and authorized
dealer of General Milk Company (Philippines), Inc. in Urdaneta, Pangasinan, contracted
with respondent for the hauling of 750 cartons of Liberty filled milk from a warehouse of
General Milk in Makati, Rizal, to petitioner's establishment in Urdaneta on or before 4
December 1970. Accordingly, on 1 December 1970, respondent loaded in Makati the
merchandise on to his trucks: 150 cartons were loaded on a truck driven by respondent
himself, while 600 cartons were placed on board the other truck which was driven by
Manuel Estrada, respondent's driver and employee.
Only 150 boxes of Liberty filled milk were delivered to petitioner. The other 600 boxes
never reached petitioner, since the truck which carried these boxes was hijacked
somewhere along the MacArthur Highway in Paniqui, Tarlac, by armed men who took
with them the truck, its driver, his helper and the cargo.
On 6 January 1971, petitioner commenced action against private respondent in the
Court of First Instance of Pangasinan, demanding payment of P 22,150.00, the claimed
value of the lost merchandise, plus damages and attorney's fees. Petitioner argued that
private respondent, being a common carrier, and having failed to exercise the
extraordinary diligence required of him by the law, should be held liable for the value of
the undelivered goods.
In his Answer, private respondent denied that he was a common carrier and argued that
he could not be held responsible for the value of the lost goods, such loss having been
due to force majeure.
On 10 December 1975, the trial court rendered a Decision 1 finding private respondent
to be a common carrier and holding him liable for the value of the undelivered goods (P
22,150.00) as well as for P 4,000.00 as damages and P 2,000.00 as attorney's fees.
On appeal before the Court of Appeals, respondent urged that the trial court had erred
in considering him a common carrier; in finding that he had habitually offered trucking
services to the public; in not exempting him from liability on the ground of force
majeure; and in ordering him to pay damages and attorney's fees.
The Court of Appeals reversed the judgment of the trial court and held that respondent
had been engaged in transporting return loads of freight "as a casual
occupation a sideline to his scrap iron business" and not as a common carrier.
Petitioner came to this Court by way of a Petition for Review assigning as errors the
following conclusions of the Court of Appeals:
1. that private respondent was not a common carrier;

2. that the hijacking of respondent's truck was force majeure; and

3. that respondent was not liable for the value of the undelivered cargo.
(Rollo, p. 111)
We consider first the issue of whether or not private respondent Ernesto Cendana may,
under the facts earlier set forth, be properly characterized as a common carrier.
The Civil Code defines "common carriers" in the following terms:
Article 1732. Common carriers are persons, corporations, firms or
associations engaged in the business of carrying or transporting
passengers or goods or both, by land, water, or air for compensation,
offering their services to the public.
The above article makes no distinction between one whose principal business activity is
the carrying of persons or goods or both, and one who does such carrying only as
an ancillary activity (in local Idiom as "a sideline"). Article 1732 also carefully avoids
making any distinction between a person or enterprise offering transportation service on
a regular or scheduled basis and one offering such service on an occasional, episodic
or unscheduled basis. Neither does Article 1732 distinguish between a carrier offering
its services to the "general public," i.e., the general community or population, and one
who offers services or solicits business only from a narrow segment of the general
population. We think that Article 1733 deliberaom making such distinctions.
So understood, the concept of "common carrier" under Article 1732 may be seen to
coincide neatly with the notion of "public service," under the Public Service Act
(Commonwealth Act No. 1416, as amended) which at least partially supplements the
law on common carriers set forth in the Civil Code. Under Section 13, paragraph (b) of
the Public Service Act, "public service" includes:
... every person that now or hereafter may own, operate, manage, or
control in the Philippines, for hire or compensation, with general or limited
clientele, whether permanent, occasional or accidental, and done for
general business purposes, any common carrier, railroad, street railway,
traction railway, subway motor vehicle, either for freight or passenger, or
both, with or without fixed route and whatever may be its classification,
freight or carrier service of any class, express service, steamboat, or
steamship line, pontines, ferries and water craft, engaged in the
transportation of passengers or freight or both, shipyard, marine repair
shop, wharf or dock, ice plant,
ice-refrigeration plant, canal, irrigation system, gas, electric light, heat and
power, water supply and power petroleum, sewerage system, wire or
wireless communications systems, wire or wireless broadcasting stations
and other similar public services. ... (Emphasis supplied)

It appears to the Court that private respondent is properly characterized as a common

carrier even though he merely "back-hauled" goods for other merchants from Manila to
Pangasinan, although such back-hauling was done on a periodic or occasional rather
than regular or scheduled manner, and even though private
respondent'sprincipal occupation was not the carriage of goods for others. There is no
dispute that private respondent charged his customers a fee for hauling their goods; that
fee frequently fell below commercial freight rates is not relevant here.
The Court of Appeals referred to the fact that private respondent held no certificate of
public convenience, and concluded he was not a common carrier. This is palpable error.
A certificate of public convenience is not a requisite for the incurring of liability under the
Civil Code provisions governing common carriers. That liability arises the moment a
person or firm acts as a common carrier, without regard to whether or not such carrier
has also complied with the requirements of the applicable regulatory statute and
implementing regulations and has been granted a certificate of public convenience or
other franchise. 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 failing to obtain the necessary
permits and authorizations.
We turn then to the liability of private respondent as a common carrier.
Common carriers, "by the nature of their business and for reasons of public policy" 2 are
held to a very high degree of care and diligence ("extraordinary diligence") in the
carriage of goods as well as of passengers. The specific import of extraordinary
diligence in the care of goods transported by a common carrier is, according to Article
1733, "further expressed in Articles 1734,1735 and 1745, numbers 5, 6 and 7" of the
Civil Code.
Article 1734 establishes the general rule that common carriers are responsible for the
loss, destruction or deterioration of the goods which they carry, "unless the same is due
to any of the following causes only:
(1) Flood, storm, earthquake, lightning or other natural
disaster or calamity;
(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; and

(5) Order or act of competent public authority.
It is important to point out that the above list of causes of loss, destruction or
deterioration which exempt the common carrier for responsibility therefor, is a closed
list. Causes falling outside the foregoing list, even if they appear to constitute a species
of force majeure fall within the scope of Article 1735, which provides as follows:
In all cases other than those mentioned in numbers 1, 2, 3, 4 and 5 of the
preceding article, if the goods are lost, destroyed or deteriorated, common
carriers are presumed to have been at fault or to have acted negligently,
unless they prove that they observed extraordinary diligence as required
in Article 1733. (Emphasis supplied)
Applying the above-quoted Articles 1734 and 1735, we note firstly that the specific
cause alleged in the instant case the hijacking of the carrier's truck does not fall
within any of the five (5) categories of exempting causes listed in Article 1734. It would
follow, therefore, that the hijacking of the carrier's vehicle must be dealt with under the
provisions of Article 1735, in other words, that the private respondent as common carrier
is presumed to have been at fault or to have acted negligently. This presumption,
however, may be overthrown by proof of extraordinary diligence on the part of private
respondent.
Petitioner insists that private respondent had not observed extraordinary diligence in the
care of petitioner's goods. Petitioner argues that in the circumstances of this case,
private respondent should have hired a security guard presumably to ride with the truck
carrying the 600 cartons of Liberty filled milk. We do not believe, however, that in the
instant case, the standard of extraordinary diligence required private respondent to
retain a security guard to ride with the truck and to engage brigands in a firelight at the
risk of his own life and the lives of the driver and his helper.
The precise issue that we address here relates to the specific requirements of the duty
of extraordinary diligence in the vigilance over the goods carried in the specific context
of hijacking or armed robbery.
As noted earlier, the duty of extraordinary diligence in the vigilance over goods is, under
Article 1733, given additional specification not only by Articles 1734 and 1735 but also
by Article 1745, numbers 4, 5 and 6, Article 1745 provides in relevant part:
Any of the following or similar stipulations shall be considered
unreasonable, unjust and contrary to public policy:
xxx xxx xxx
(5) that the common carrier shall not be responsible for the
acts or omissions of his or its employees;

(6) that the common carrier's liability for acts committed by

thieves, or of robbers who donot act with grave or
irresistible threat, violence or force, is dispensed with or
diminished; and
(7) that the common carrier shall not responsible for the loss,
destruction or deterioration of goods on account of the
defective condition of the car vehicle, ship, airplane or other
equipment used in the contract of carriage. (Emphasis
supplied)
Under Article 1745 (6) above, a common carrier is held responsible and will not be
allowed to divest or to diminish such responsibility even for acts of strangers like
thieves or robbers, except where such thieves or robbers in fact acted "with grave or
irresistible threat, violence or force." We believe and so hold that the limits of the duty of
extraordinary diligence in the vigilance over the goods carried are reached where the
goods are lost as a result of a robbery which is attended by "grave or irresistible threat,
violence or force."
In the instant case, armed men held up the second truck owned by private respondent
which carried petitioner's cargo. The record shows that an information for robbery in
band was filed in the Court of First Instance of Tarlac, Branch 2, in Criminal Case No.
198 entitled "People of the Philippines v. Felipe Boncorno, Napoleon Presno, Armando
Mesina, Oscar Oria and one John Doe." There, the accused were charged with willfully
and unlawfully taking and carrying away with them the second truck, driven by Manuel
Estrada and loaded with the 600 cartons of Liberty filled milk destined for delivery at
petitioner's store in Urdaneta, Pangasinan. The decision of the trial court shows that the
accused acted with grave, if not irresistible, threat, violence or force. 3 Three (3) of the
five (5) hold-uppers were armed with firearms. The robbers not only took away the truck
and its cargo but also kidnapped the driver and his helper, detaining them for several
days and later releasing them in another province (in Zambales). The hijacked truck
was subsequently found by the police in Quezon City. The Court of First Instance
convicted all the accused of robbery, though not of robbery in band. 4
In these circumstances, we hold that the occurrence of the loss must reasonably be
regarded as quite beyond the control of the common carrier and properly regarded as a
fortuitous event. It is necessary to recall that even common carriers are not made
absolute insurers against all risks of travel and of transport of goods, and are not held
liable for acts or events which cannot be foreseen or are inevitable, provided that they
shall have complied with the rigorous standard of extraordinary diligence.
We, therefore, agree with the result reached by the Court of Appeals that private
respondent Cendana is not liable for the value of the undelivered merchandise which
was lost because of an event entirely beyond private respondent's control.

ACCORDINGLY, the Petition for Review on certiorari is hereby DENIED and the
Decision of the Court of Appeals dated 3 August 1977 is AFFIRMED. No
pronouncement as to costs.
SO ORDERED.

LOADSTAR SHIPPING CO., INC., petitioner, vs. COURT OF APPEALS and THE
MANILA INSURANCE CO., INC., respondents.
Petitioner Loadstar Shipping Co., Inc. (hereafter LOADSTAR), in this petition for review
on certiorari under Rule 45 of the 1997 Rules of Civil Procedure, seeks to reverse and
set aside the following: (a) the 30 January 1997 decision[1] of the Court of Appeals in
CA-G.R. CV No. 36401, which affirmed the decision of 4 October 1991[2] of the
Regional Trial Court of Manila, Branch 16, in Civil Case No. 85-29110, ordering
LOADSTAR to pay private respondent Manila Insurance Co. (hereafter MIC) the amount
of P6,067,178, with legal interest from the filing of the complaint until fully paid, P8,000
as attorneys fees, and the costs of the suit; and (b) its resolution of 19 November 1997,
[3] denying LOADSTARs motion for reconsideration of said decision.
The facts Are undisputed.
On 19 November 1984, LOADSTAR received on board its M/V Cherokee (hereafter, the
vessel) the following goods for shipment:
a) 705 bales of lawanit hardwood;

b) 27 boxes and crates of tilewood assemblies and others; and

c) 49 bundles of mouldings R & W (3) Apitong Bolidenized.
The goods, amounting to P6,067,178, were insured for the same amount with MIC
against various risks including TOTAL LOSS BY TOTAL LOSS OF THE VESSEL. The
vessel, in turn, was insured by Prudential Guarantee & Assurance, Inc. (hereafter PGAI)
for P4 million. On 20 November 1984, 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. As the insurer, MIC paid P6,075,000 to the insured in full
settlement of its claim, and the latter executed a subrogation receipt therefor.
On 4 February 1985, MIC filed 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. It also prayed that PGAI be ordered to pay the insurance proceeds from the
loss of the vessel directly to MIC, said amount to be deducted from MICs claim from
LOADSTAR.
In its answer, LOADSTAR denied any liability for the loss of the shippers goods and
claimed that the sinking of its vessel was due to force majeure. PGAI, on the other
hand, averred that MIC had no cause of action against it, LOADSTAR being the party
insured. In any event, PGAI was later dropped as a party defendant after it paid the
insurance proceeds to LOADSTAR.
As stated at the outset, the court a quo rendered judgment in favor of MIC, prompting
LOADSTAR to elevate the matter to the Court of Appeals, which, however, agreed with
the trial court and affirmed its decision in toto.
In dismissing LOADSTARs appeal, the appellate court made the following observations:
1) LOADSTAR cannot be considered a private carrier on the sole ground that there was
a single shipper on that fateful voyage. The court noted that the charter of the vessel
was limited to the ship, but LOADSTAR retained control over its crew.[4]
2) As a common carrier, it is the Code of Commerce, not the Civil Code, which should
be applied in determining the rights and liabilities of the parties.
3) The vessel was not seaworthy because it was undermanned on the day of the
voyage. If it had been seaworthy, it could have withstood the natural and inevitable
action of the sea on 20 November 1984, when the condition of the sea was moderate.
The vessel sank, not because of force majeure, but because it was not seaworthy.
LOADSTARS allegation that the sinking was probably due to the convergence of the
winds, as stated by a PAGASA expert, was not duly proven at the trial. The limited
liability rule, therefore, is not applicable considering that, in this case, there was an
actual finding of negligence on the part of the carrier.[5]

4) Between MIC and LOADSTAR, the provisions of the Bill of Lading do not apply
because said provisions bind only the shipper/consignee and the carrier. When MIC
paid the shipper for the goods insured, it was subrogated to the latters rights as against
the carrier, LOADSTAR.[6]
5) There was a clear breach of the contract of carriage when the shippers goods never
reached their destination. LOADSTARs defense of diligence of a good father of a family
in the training and selection of its crew is unavailing because this is not a proper or
complete defense in culpa contractual.
6) Art. 361 (of the Code of Commerce) has been judicially construed to mean that when
goods are delivered on board a ship in good order and condition, and the shipowner
delivers them to the shipper in bad order and condition, it then devolves upon the
shipowner to both allege and prove that the goods were damaged by reason of some
fact which legally exempts him from liability. Transportation of the merchandise at the
risk and venture of the shipper means that the latter bears the risk of loss or
deterioration of his goods arising from fortuitous events, force majeure, or the inherent
nature and defects of the goods, but not those caused by the presumed negligence or
fault of the carrier, unless otherwise proved.[7]
The errors assigned by LOADSTAR boil down to a determination of the following issues:

(1) Is the M/V Cherokee a private or a common carrier?

(2) Did LOADSTAR observe due and/or ordinary diligence in these premises?
Regarding the first issue, 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.
In refutation, MIC argues that the issue as to the 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 also
carrying passengers as part of its regular business. Moreover, the bills of lading in this
case made no 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 for one shipper is not sufficient to convert the
vessel into a private carrier.
As regards the second error, 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 that the vessel was seaworthy. Before the fateful voyage on
19 November 1984, the vessel was allegedly dry docked at Keppel Philippines Shipyard
and 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 the diligence of a good
father of a family in ensuring the vessels seaworthiness.
LOADSTAR further claims that it was not responsible for the loss of the cargo, such loss
being due to force majeure. It points out that when the vessel left Nasipit, Agusan del
Norte, on 19 November 1984, the weather was fine until the next day when the vessel
sank due to strong waves. MICs witness, Gracelia Tapel, fully established the existence
of two typhoons, WELFRING and YOLING, inside the Philippine area of responsibility.
In fact, on 20 November 1984, signal no. 1 was declared over Eastern Visayas, which
includes Limasawa Island. Tapel also testified that the convergence of winds brought
about by these two typhoons strengthened wind velocity in the area, naturally producing
strong waves and winds, in turn, causing the vessel to list and eventually sink.
LOADSTAR goes on to argue that, being a private carrier, any agreement limiting its
liability, such as what transpired in this case, is valid. Since the cargo was being
shipped at owners risk, LOADSTAR was not liable for any loss or damage to the same.
Therefore, the Court of Appeals erred in holding that the provisions of the bills of lading
apply only to the shipper and the carrier, and not to the insurer of the goods, which
conclusion runs counter to the Supreme Courts ruling in the case of St. Paul Fire &
Marine Insurance Co. v. Macondray & Co., Inc.,[9] and National Union Fire Insurance
Company of Pittsburg v. Stolt-Nielsen Phils., Inc.[10]
Finally, 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. The vessel
sank on 20 November 1984; yet, the case for recovery was filed only on 4 February
1985.
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 fault or negligent, and because it failed to maintain a seaworthy
vessel. Authorizing the voyage notwithstanding its knowledge of a typhoon is
tantamount to negligence.

We find no merit in this petition.

Anent the first assigned error, we 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.
In support of its position, LOADSTAR relied on the 1968 case of Home Insurance Co. v.
American Steamship Agencies, Inc.,[11] where this Court held that a common carrier
transporting special cargo or chartering the vessel to a special person becomes a
private carrier that is not subject to the provisions of the Civil Code. Any stipulation in
the charter party absolving the owner from liability for loss due to the negligence of its
agent is void only if the strict policy governing common carriers is upheld. Such policy
has no force where the public at large is not involved, as in the case of a ship totally
chartered for the use of a single party. LOADSTAR also cited Valenzuela Hardwood and
Industrial Supply, Inc. v. Court of Appeals[12] and National Steel Corp. v. Court of
Appeals,[13] both of which upheld the Home Insurance doctrine.
These cases invoked by LOADSTAR are not applicable in the case at bar for simple
reason that the factual settings are different. The records do not disclose that the M/V
Cherokee, on the date in question, undertook to carry a special cargo or was chartered
to a special person only. There was no charter party. 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 the facts and circumstances obtaining in this case, LOADSTAR fits the definition
of a common carrier under Article 1732 of the Civil Code. In the case of De Guzman v.
Court of Appeals,[15] the Court juxtaposed the statutory definition of common carriers
with the peculiar circumstances of that case, viz.:
The Civil Code defines common carriers in the following terms:
Article 1732. Common carriers are persons, corporations, firms or associations engaged
in the business of carrying or transporting passengers or goods or both, by land, water,
or air for compensation, offering their services to the public.
The above article makes no distinction between one whose principal business activity is
the carrying of persons or goods or both, and one who does such carrying only as an
ancillary activity (in local idiom, as a sideline. Article 1732 also carefully avoids making
any distinction between a person or enterprise offering transportation service on a
regular or scheduled basis and one offering such service on an occasional, episodic or
unscheduled basis. Neither does Article 1732 distinguish between a carrier offering its

services to the general public, i.e., the general community or population, and one who
offers services or solicits business only from a narrow segment of the general
population. We think that Article 1733 deliberately refrained from making such
distinctions.
It appears to the Court that private respondent is properly characterized as a common
carrier even though he merely back-hauled goods for other merchants from Manila to
Pangasinan, although such backhauling was done on a periodic or occasional rather
than regular or scheduled manner, and even though private respondents principal
occupation was not the carriage of goods for others. There is no dispute that private
respondent charged his customers a fee for hauling their goods; that that fee frequently
fell below commercial freight rates is not relevant here.
The Court of Appeals referred to the fact that private respondent held no certificate of
public convenience, and concluded he was not a common carrier. This is palpable error.
A certificate of public convenience is not a requisite for the incurring of liability under the
Civil Code provisions governing common carriers. That liability arises the moment a
person or firm acts as a common carrier, without regard to whether or not such carrier
has also complied with the requirements of the applicable regulatory statute and
implementing regulations and has been granted a certificate of public convenience or
other franchise. 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 failing to obtain the necessary
permits and authorizations.
Moving 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 prescribed in Article
1755 of the Civil Code.[16]
Neither do we agree with LOADSTARs argument that the limited liability theory should
be applied in this case. The doctrine of limited liability does not apply where there was
negligence on the part of the vessel owner or agent.[17] LOADSTAR was at fault or
negligent in not maintaining a seaworthy vessel and in having allowed its vessel to sail
despite knowledge of an approaching typhoon. In any event, it did not sink because of
any storm that may be deemed as force majeure, inasmuch as the wind condition in the
area where it sank was determined to be moderate. Since it was remiss in the

performance of its duties, LOADSTAR cannot hide behind the limited liability doctrine to
escape responsibility for the loss of the vessel and its cargo.
LOADSTAR also claims that the Court of Appeals erred in holding it liable for the loss of
the goods, in utter disregard of this Courts pronouncements in St. Paul Fire & Marine
Ins. Co. v. Macondray & Co., Inc.,[18] and National Union Fire Insurance v. Stolt-Nielsen
Phils., Inc.[19] It was ruled in these two cases that after paying the claim of the insured
for damages under the insurance policy, the insurer is subrogated merely to the rights of
the assured, that is, it can recover only the amount that may, in turn, be recovered by
the latter. Since the right of the assured in case of loss or damage to the goods is
limited or restricted by the provisions in the bills of lading, a suit by the insurer as
subrogee is necessarily subject to the same limitations and restrictions. We do not
agree. In the first place, the cases relied on by LOADSTAR involved a limitation on the
carriers liability to an amount fixed in the bill of lading which the parties may enter into,
provided that the same was freely and fairly agreed upon (Articles 1749-1750). On the
other hand, the stipulation in the case at bar effectively reduces the common carriers
liability for the loss or destruction of the goods to a degree less than extraordinary
(Articles 1744 and 1745), that is, the carrier is not liable for any loss or damage to
shipments made at owners risk. Such stipulation is obviously null and void for being
contrary to public policy.[20] It has been said:

Three kinds of stipulations have often been made in a bill of lading. The first is one
exempting the carrier from any and all liability for loss or damage occasioned by its own
negligence. The second is one providing for an unqualified limitation of such liability to
an agreed valuation. And the third is one limiting the liability of the carrier to an agreed
valuation unless the shipper declares a higher value and pays a higher rate of freight.
According to an almost uniform weight of authority, the first and second kinds of
stipulations are invalid as being contrary to public policy, but the third is valid and
enforceable.[21]
Since the stipulation in question is null and void, it follows that when MIC paid the
shipper, it was subrogated to all the rights which the latter has against the common
carrier, LOADSTAR.
Neither is there merit to the contention that the claim in this case was barred by
prescription. MICs cause of action had not yet prescribed at the time it was concerned.
Inasmuch as neither the Civil Code nor the Code of Commerce states a specific
prescriptive period on the matter, the Carriage of Goods by Sea Act (COGSA) which
provides for a one-year period of limitation on claims for loss of, or damage to, cargoes
sustained during transit may be applied suppletorily to the case at bar. This one-year
prescriptive period also applies to the insurer of the good.[22] In this case, the period for
filing the action for recovery has not yet elapsed. Moreover, a stipulation reducing the
one-year period is null and void;[23] it must, accordingly, be struck down.

WHEREFORE, the instant petition is DENIED and the challenged decision of 30

January 1997 of the Court of Appeals in CA-G.R. CV No. 36401 is AFFIRMED. Costs
against petitioner.
SO ORDERED.

ESTELA
L.
CRISOSTOMO, petitioner, vs. THE
COURT
OF
APPEALS and CARAVAN TRAVEL & TOURS INTERNATIONAL,

INC., respondents.
DECISION
YNARES-SANTIAGO, J.:

In May 1991, petitioner Estela L. Crisostomo contracted the services of

respondent Caravan Travel and Tours International, Inc. to arrange and
facilitate her booking, ticketing and accommodation in a tour dubbed Jewels of
Europe. The package tour included the countries of England, Holland,
Germany, Austria, Liechstenstein, Switzerland and France at a total cost of
P74,322.70. Petitioner was given a 5% discount on the amount, which
included airfare, and the booking fee was also waived because petitioners
niece, Meriam Menor, was respondent companys ticketing manager.
Pursuant to said contract, Menor went to her aunts residence on June 12,
1991 a Wednesday to deliver petitioners travel documents and plane
tickets. Petitioner, in turn, gave Menor the full payment for the package
tour. Menor then told her to be at the Ninoy Aquino International Airport (NAIA)
on Saturday, two hours before her flight on board British Airways.

Without checking her travel documents, petitioner went to NAIA on

Saturday, June 15, 1991, to take the flight for the first leg of her journey from
Manila to Hongkong. To petitioners dismay, she discovered that the flight she
was supposed to take had already departed the previous day. She learned
that her plane ticket was for the flight scheduled on June 14, 1991. She thus
called up Menor to complain.
Subsequently, Menor prevailed upon petitioner to take another tour the
British Pageant which included England, Scotland and Wales in its itinerary.
For this tour package, petitioner was asked anew to pay US$785.00 or
P20,881.00 (at the then prevailing exchange rate of P26.60). She gave
respondent US$300 or P7,980.00 as partial payment and commenced the trip
in July 1991.
Upon petitioners return from Europe, she demanded from respondent the
reimbursement of P61,421.70, representing the difference between the sum
she paid for Jewels of Europe and the amount she owed respondent for the
British Pageant tour. Despite several demands, respondent company refused
to reimburse the amount, contending that the same was non-refundable.
Petitioner was thus constrained to file a complaint against respondent for
breach of contract of carriage and damages, which was docketed as Civil
Case No. 92-133 and raffled to Branch 59 of the Regional Trial Court of
Makati City.
[1]

In her complaint, petitioner alleged that her failure to join Jewels of

Europe was due to respondents fault since it did not clearly indicate the
departure date on the plane ticket. Respondent was also negligent in
informing her of the wrong flight schedule through its employee Menor. She
insisted that the British Pageant was merely a substitute for the Jewels of
Europe tour, such that the cost of the former should be properly set-off against
the sum paid for the latter.
[2]

For its part, respondent company, through its Operations Manager,

Concepcion Chipeco, denied responsibility for petitioners failure to join the
first tour. Chipeco insisted that petitioner was informed of the correct
departure date, which was clearly and legibly printed on the plane ticket. The
travel documents were given to petitioner two days ahead of the scheduled
trip. Petitioner had only herself to blame for missing the flight, as she did not
bother to read or confirm her flight schedule as printed on the ticket.
Respondent explained that it can no longer reimburse the amount paid for
Jewels of Europe, considering that the same had already been remitted to its
principal in Singapore, Lotus Travel Ltd., which had already billed the same
even if petitioner did not join the tour. Lotus European tour organizer, Insight

International Tours Ltd., determines the cost of a package tour based on a

minimum number of projected participants. For this reason, it is accepted
industry practice to disallow refund for individuals who failed to take a booked
tour.
[3]

Lastly, respondent maintained that the British Pageant was not a substitute
for the package tour that petitioner missed. This tour was independently
procured by petitioner after realizing that she made a mistake in missing her
flight for Jewels of Europe. Petitioner was allowed to make a partial payment
of only US$300.00 for the second tour because her niece was then an
employee of the travel agency. Consequently, respondent prayed that
petitioner be ordered to pay the balance of P12,901.00 for the British Pageant
package tour.
After due proceedings, the trial court rendered a decision, the dispositive
part of which reads:
[4]

WHEREFORE, premises considered, judgment is hereby rendered as follows:

1. Ordering the defendant to return and/or refund to the plaintiff the amount of
Fifty Three Thousand Nine Hundred Eighty Nine Pesos and Forty Three
Centavos (P53,989.43) with legal interest thereon at the rate of twelve
percent (12%) per annum starting January 16, 1992, the date when the
complaint was filed;
2. Ordering the defendant to pay the plaintiff the amount of Five Thousand
(P5,000.00) Pesos as and for reasonable attorneys fees;
3. Dismissing the defendants counterclaim, for lack of merit; and
4. With costs against the defendant.
SO ORDERED.

[5]

The trial court held that respondent was negligent in erroneously advising
petitioner of her departure date through its employee, Menor, who was not
presented as witness to rebut petitioners testimony. However, petitioner
should have verified the exact date and time of departure by looking at her
ticket and should have simply not relied on Menors verbal representation. The
trial court thus declared that petitioner was guilty of contributory negligence
and accordingly, deducted 10% from the amount being claimed as refund.
Respondent appealed to the Court of Appeals, which likewise found both
parties to be at fault. However, the appellate court held that petitioner is more

negligent than respondent because as a lawyer and well-traveled person, she

should have known better than to simply rely on what was told to her. This
being so, she is not entitled to any form of damages. Petitioner also forfeited
her right to the Jewels of Europe tour and must therefore pay respondent the
balance of the price for the British Pageant tour. The dispositive portion of the
judgment appealed from reads as follows:
WHEREFORE, premises considered, the decision of the Regional Trial Court dated
October 26, 1995 is hereby REVERSED and SET ASIDE. A new judgment is hereby
ENTERED requiring the plaintiff-appellee to pay to the defendant-appellant the
amount of P12,901.00, representing the balance of the price of the British Pageant
Package Tour, the same to earn legal interest at the rate of SIX PERCENT (6%) per
annum, to be computed from the time the counterclaim was filed until the finality of
this decision. After this decision becomes final and executory, the rate of TWELVE
PERCENT (12%) interest per annum shall be additionally imposed on the total
obligation until payment thereof is satisfied. The award of attorneys fees is
DELETED. Costs against the plaintiff-appellee.
SO ORDERED.

[6]

Upon denial of her motion for reconsideration, petitioner filed the instant
petition under Rule 45 on the following grounds:
[7]

It is respectfully submitted that the Honorable Court of Appeals committed a

reversible error in reversing and setting aside the decision of the trial court by ruling
that the petitioner is not entitled to a refund of the cost of unavailed Jewels of Europe
tour she being equally, if not more, negligent than the private respondent, for in the
contract of carriage the common carrier is obliged to observe utmost care and extraordinary diligence which is higher in degree than the ordinary diligence required of
the passenger. Thus, even if the petitioner and private respondent were both negligent,
the petitioner cannot be considered to be equally, or worse, more guilty than the
private respondent. At best, petitioners negligence is only contributory while the
private respondent [is guilty] of gross negligence making the principle of pari delicto
inapplicable in the case;
II

The Honorable Court of Appeals also erred in not ruling that the Jewels of Europe
tour was not indivisible and the amount paid therefor refundable;
III

The Honorable Court erred in not granting to the petitioner the consequential damages
due her as a result of breach of contract of carriage.
[8]

Petitioner contends that respondent did not observe the standard of care
required of a common carrier when it informed her wrongly of the flight
schedule. She could not be deemed more negligent than respondent since the
latter is required by law to exercise extraordinary diligence in the fulfillment of
its obligation. If she were negligent at all, the same is merely contributory and
not the proximate cause of the damage she suffered. Her loss could only be
attributed to respondent as it was the direct consequence of its employees
gross negligence.
Petitioners contention has no merit.
By definition, a contract of carriage or transportation is one whereby a
certain person or association of persons obligate themselves to transport
persons, things, or news from one place to another for a fixed price. Such
person or association of persons are regarded as carriers and are classified
as private or special carriers and common or public carriers. A common
carrier is defined under Article 1732 of the Civil Code as persons,
corporations, firms or associations engaged in the business of carrying or
transporting passengers or goods or both, by land, water or air, for
compensation, offering their services to the public.
[9]

[10]

It is obvious from the above definition that respondent is not an entity

engaged in the business of transporting either passengers or goods and is
therefore, neither a private nor a common carrier. Respondent did not
undertake to transport petitioner from one place to another since its covenant
with its customers is simply to make travel arrangements in their behalf.
Respondents services as a travel agency include procuring tickets and
facilitating travel permits or visas as well as booking customers for tours.
While petitioner concededly bought her plane ticket through the efforts of
respondent company, this does not mean that the latter ipso facto is a
common carrier. At most, respondent acted merely as an agent of the airline,
with whom petitioner ultimately contracted for her carriage to Europe.
Respondents obligation to petitioner in this regard was simply to see to it that
petitioner was properly booked with the airline for the appointed date and
time. Her transport to the place of destination, meanwhile, pertained directly to
the airline.
The object of petitioners contractual relation with respondent is the latters
service of arranging and facilitating petitioners booking, ticketing and
accommodation in the package tour. In contrast, the object of a contract of

carriage is the transportation of passengers or goods. It is in this sense that

the contract between the parties in this case was an ordinary one for services
and not one of carriage. Petitioners submission is premised on a wrong
assumption.
The nature of the contractual relation between petitioner and respondent is
determinative of the degree of care required in the performance of the latters
obligation under the contract. For reasons of public policy, a common carrier in
a contract of carriage is bound by law to carry passengers as far as human
care and foresight can provide using the utmost diligence of very cautious
persons and with due regard for all the circumstances. As earlier stated,
however, respondent is not a common carrier but a travel agency. It is thus not
bound under the law to observe extraordinary diligence in the performance of
its obligation, as petitioner claims.
[11]

Since the contract between the parties is an ordinary one for services, the
standard of care required of respondent is that of a good father of a family
under Article 1173 of the Civil Code. This connotes reasonable care
consistent with that which an ordinarily prudent person would have observed
when confronted with a similar situation. The test to determine whether
negligence attended the performance of an obligation is: did the defendant in
doing the alleged negligent act use that reasonable care and caution which an
ordinarily prudent person would have used in the same situation? If not, then
he is guilty of negligence.
[12]

[13]

In the case at bar, the lower court found Menor negligent when she
allegedly informed petitioner of the wrong day of departure. Petitioners
testimony was accepted as indubitable evidence of Menors alleged negligent
act since respondent did not call Menor to the witness stand to refute the
allegation. The lower court applied the presumption under Rule 131, Section 3
(e) of the Rules of Court that evidence willfully suppressed would be adverse
if produced and thus considered petitioners uncontradicted testimony to be
sufficient proof of her claim.
[14]

On the other hand, respondent has consistently denied that Menor was
negligent and maintains that petitioners assertion is belied by the evidence on
record. The date and time of departure was legibly written on the plane ticket
and the travel papers were delivered two days in advance precisely so that
petitioner could prepare for the trip. It performed all its obligations to enable
petitioner to join the tour and exercised due diligence in its dealings with the
latter.
We agree with respondent.

Respondents failure to present Menor as witness to rebut petitioners

testimony could not give rise to an inference unfavorable to the former. Menor
was already working in France at the time of the filing of the complaint,
thereby making it physically impossible for respondent to present her as a
witness. Then too, even if it were possible for respondent to secure Menors
testimony, the presumption under Rule 131, Section 3(e) would still not
apply. The opportunity and possibility for obtaining Menors testimony
belonged to both parties, considering that Menor was not just respondents
employee, but also petitioners niece. It was thus error for the lower court to
invoke the presumption that respondent willfully suppressed evidence under
Rule 131, Section 3(e). Said presumption would logically be inoperative if the
evidence is not intentionally omitted but is simply unavailable, or when the
same could have been obtained by both parties.
[15]

[16]

In sum, we do not agree with the finding of the lower court that Menors
negligence concurred with the negligence of petitioner and resultantly caused
damage to the latter.Menors negligence was not sufficiently proved,
considering that the only evidence presented on this score was petitioners
uncorroborated narration of the events. It is well-settled that the party alleging
a fact has the burden of proving it and a mere allegation cannot take the place
of evidence. If the plaintiff, upon whom rests the burden of proving his cause
of action, fails to show in a satisfactory manner facts upon which he bases his
claim, the defendant is under no obligation to prove his exception or defense.
[17]

[18]

Contrary to petitioners claim, the evidence on record shows that

respondent exercised due diligence in performing its obligations under the
contract and followed standard procedure in rendering its services to
petitioner. As correctly observed by the lower court, the plane ticket issued to
petitioner clearly reflected the departure date and time, contrary to petitioners
contention. The travel documents, consisting of the tour itinerary, vouchers
and instructions, were likewise delivered to petitioner two days prior to the trip.
Respondent also properly booked petitioner for the tour, prepared the
necessary documents and procured the plane tickets. It arranged petitioners
hotel accommodation as well as food, land transfers and sightseeing
excursions, in accordance with its avowed undertaking.
[19]

Therefore, it is clear that respondent performed its prestation under the

contract as well as everything else that was essential to book petitioner for the
tour. Had petitioner exercised due diligence in the conduct of her affairs, there
would have been no reason for her to miss the flight. Needless to say, after
the travel papers were delivered to petitioner, it became incumbent upon her
to take ordinary care of her concerns. This undoubtedly would require that she

at least read the documents in order to assure herself of the important details
regarding the trip.
The negligence of the obligor in the performance of the obligation renders
him liable for damages for the resulting loss suffered by the obligee. Fault or
negligence of the obligor consists in his failure to exercise due care and
prudence in the performance of the obligation as the nature of the obligation
so demands. There is no fixed standard of diligence applicable to each and
every contractual obligation and each case must be determined upon its
particular facts. The degree of diligence required depends on the
circumstances of the specific obligation and whether one has been negligent
is a question of fact that is to be determined after taking into account the
particulars of each case.
[20]

[21]

The lower court declared that respondents employee was negligent. This
factual finding, however, is not supported by the evidence on record. While
factual findings below are generally conclusive upon this court, the rule is
subject to certain exceptions, as when the trial court overlooked,
misunderstood, or misapplied some facts or circumstances of weight and
substance which will affect the result of the case.
[22]

In the case at bar, the evidence on record shows that respondent

company performed its duty diligently and did not commit any contractual
breach. Hence, petitioner cannot recover and must bear her own damage.
WHEREFORE, the instant petition is DENIED for lack of merit. The
decision of the Court of Appeals in CA-G.R. CV No. 51932 is
AFFIRMED. Accordingly, petitioner is ordered to pay respondent the amount
of P12,901.00 representing the balance of the price of the British Pageant
Package Tour, with legal interest thereon at the rate of 6% per annum, to be
computed from the time the counterclaim was filed until the finality of this
Decision. After this Decision becomes final and executory, the rate of 12% per
annum shall be imposed until the obligation is fully settled, this interim period
being deemed to be by then an equivalent to a forbearance of credit.
[23]

SO ORDERED.

Transportation Laws
A. Common Carriers
A. In General;
b. Nature of Business; power of the state ro regulate (1765)

PANTRANCO VS. PSC, 70 Phil. 221

June 26, 1940
G.R. No. 47065
PANGASINAN TRANSPORTATION CO., INC., petitioner,
vs.
THE PUBLIC SERVICE COMMISSION, respondent.
The petitioner has been engaged for the past twenty years in the business of
transporting passengers in the Province of Pangasinan and Tarlac and, to a certain
extent, in the Province of Nueva Ecija and Zambales, by means of motor vehicles
commonly known as TPU buses, in accordance with the terms and conditions of the
certificates of public convenience issued in its favor by the former Public Utility
Commission in cases Nos. 24948, 30973, 36830, 32014 and 53090. On August 26,
1939, the petitioner filed with the Public Service Commission an application for
authorization to operate ten additional new Brockway trucks (case No. 56641), on the
ground that they were needed to comply with the terms and conditions of its existing
certificates and as a result of the application of the Eight Hour Labor Law. In the
decision of September 26, 1939, granting the petitioner's application for increase of
equipment, the Public Service Commission ordered:
Y de acuerdo con que se provee por el articulo 15 de la ley No. 146 del
Commonwealth, tal como ha sido enmendada por el articulo 1 de la Ley No. 454, por la
presente se enmienda las condiciones de los certificados de convenciencia publica
expedidos en los expedientes Nos. 24948, 30973, 36831, 32014 y la authorizacion el el
expediente No. 53090, asi que se consideran incorporadas en los mismos las dos
siguientes condiciones:
Que los certificados de conveniencia publica y authorizacion arriba mencionados seran
validos y subsistentes solamente durante de veinticinco (25) anos, contados desde la
fecha de la promulgacion de esta decision.
Que la empresa de la solicitante porda ser adquirida por el Commonwealth de Filipinas
o por alguna dependencia del mismo en cualquier tiempo que lo deseare previo pago
del precio d costo de su equipo util, menos una depreciacion razonable que se ha fijar
por la Comision al tiempo de su adquisicion.
Not being agreeable to the two new conditions thus incorporated in its existing
certificates, the petitioner filed on October 9, 1939 a motion for reconsideration which
was denied by the Public Service Commission on November 14, 1939. Whereupon, on
November 20, 1939, the present petition for a writ of certiorari was instituted in this court
praying that an order be issued directing the secretary of the Public Service
Commission to certify forthwith to this court the records of all proceedings in case No.
56641; that this court, after hearing, render a decision declaring section 1 of
Commonwealth Act No. 454 unconstitutional and void; that, if this court should be of the

opinion that section 1 of Commonwealth Act No. 454 is constitutional, a decision be

rendered declaring that the provisions thereof are not applicable to valid and subsisting
certificates issued prior to June 8, 1939. Stated in the language of the petitioner, it is
contended:
1. That the legislative powers granted to the Public Service Commission by section 1 of
Commonwealth Act No. 454, without limitation, guide or rule except the unfettered
discretion and judgment of the Commission, constitute a complete and total abdication
by the Legislature of its functions in the premises, and for that reason, the Act, in so far
as those powers are concerned, is unconstitutional and void.
2. That even if it be assumed that section 1 of Commonwealth Act No. 454, is valid
delegation of legislative powers, the Public Service Commission has exceeded its
authority because: (a) The Act applies only to future certificates and not to valid and
subsisting certificates issued prior to June 8, 1939, when said Act took effect, and (b)
the Act, as applied by the Commission, violates constitutional guarantees.
Section 15 of Commonwealth Act No. 146, as amended by section 1 of Commonwealth
Act No. 454, invoked by the respondent Public Service Commission in the decision
complained of in the present proceedings, reads as follows:
With the exception to those enumerated in the preceding section, no public service shall
operate in the Philippines without possessing a valid and subsisting certificate from the
Public Service Commission, known as "certificate of public convenience," or "certificate
of convenience and public necessity," as the case may be, to the effect that the
operation of said service and the authorization to do business will promote the public
interests in a proper and suitable manner.
The Commission may prescribed as a condition for the issuance of the certificate
provided in the preceding paragraph that the service can be acquired by the
Commonwealth of the Philippines or by any instrumentality thereof upon payment of the
cost price of its useful equipment, less reasonable depreciation; and likewise, that the
certificate shall valid only for a definite period of time; and that the violation of any of
these conditions shall produce the immediate cancellation of the certificate without the
necessity of any express action on the part of the Commission.
In estimating the depreciation, the effect of the use of the equipment, its actual
condition, the age of the model, or other circumstances affecting its value in the market
shall be taken into consideration.
The foregoing is likewise applicable to any extension or amendment of certificates
actually force and to those which may hereafter be issued, to permits to modify
itineraries and time schedules of public services and to authorization to renew and
increase equipment and properties.

Under the first paragraph of the aforequoted section 15 of Act No. 146, as amended, no
public service can operate without a certificate of public convenience or certificate of
convenience and public necessity to the effect that the operation of said service and the
authorization to do business will "public interests in a proper and suitable manner."
Under the second paragraph, one of the conditions which the Public Service
Commission may prescribed the issuance of the certificate provided for in the first
paragraph is that "the service can be acquired by the Commonwealth of the Philippines
or by any instrumental thereof upon payment of the cost price of its useful equipment,
less reasonable depreciation," a condition which is virtually a restatement of the
principle already embodied in the Constitution, section 6 of Article XII, which provides
that "the State may, in the interest of national welfare and defense, establish and
operate industries and means of transportation and communication, and, upon payment
of just compensation, transfer to public ownership utilities and other private enterprises
to be operated by the Government. "Another condition which the Commission may
prescribed, and which is assailed by the petitioner, is that the certificate "shall be valid
only for a definite period of time." As there is a relation between the first and second
paragraphs of said section 15, the two provisions must be read and interpreted together.
That is to say, in issuing a certificate, the Commission must necessarily be satisfied that
the operation of the service under said certificate during a definite period fixed therein
"will promote the public interests in a proper and suitable manner." Under section 16 (a)
of Commonwealth Act. No. 146 which is a complement of section 15, the Commission is
empowered to issue certificates of public convenience whenever it "finds that the
operation of the public service proposed and the authorization to do business will
promote the public interests in a proper and suitable manner." Inasmuch as the period
to be fixed by the Commission under section 15 is inseparable from the certificate itself,
said period cannot be disregarded by the Commission in determining the question
whether the issuance of the certificate will promote the public interests in a proper and
suitable manner. Conversely, in determining "a definite period of time," the Commission
will be guided by "public interests," the only limitation to its power being that said period
shall not exceed fifty years (sec. 16 (a), Commonwealth Act No. 146; Constitution, Art.
XIII, sec. 8.) We have already ruled that "public interest" furnishes a sufficient standard.
(People vs. Fernandez and Trinidad, G. R. No. 45655, promulgated June 15, 1938;
People vs. Rosenthal and Osmea, G. R. Nos. 46076 and 46077, promulgated June 12,
1939, citing New York Central Securities Corporation vs. U.S.A., 287 U.S. 12, 24, 25, 77
Law. ed. 138, 145, 146; Schenchter Poultry Corporation vs. I.S., 295, 540, 79 Law. ed.
1570, 1585; Ferrazzini vs. Gsell, 34 Phil., 697, 711-712.)
Section 8 of Article XIII of the Constitution provides, among other things, that no franchise,
certificate, or any other form of authorization for the operation of a public utility shall be "for a
longer period than fifty years," and when it was ordained, in section 15 of Commonwealth Act
No. 146, as amended by Commonwealth Act No. 454, that the Public Service Commission may
prescribed as a condition for the issuance of a certificate that it "shall be valid only for a definite
period of time" and, in section 16 (a) that "no such certificates shall be issued for a period of
more than fifty years," the National Assembly meant to give effect to the aforesaid constitutional
mandate. More than this, it has thereby also declared its will that the period to be fixed by the
Public Service Commission shall not be longer than fifty years. All that has been delegated to the

Commission, therefore, is the administrative function, involving the use discretion, to carry out
the will of the National Assembly having in view, in addition, the promotion of "public interests
in a proper and suitable manner." The fact that the National Assembly may itself exercise the
function and authority thus conferred upon the Public Service Commission does not make the
provision in question constitutionally objectionable.
The theory of the separation of powers is designed by its originators to secure action and at the
same time to forestall overaction which necessarily results from undue concentration of powers,
and thereby obtain efficiency and prevent deposition. Thereby, the "rule of law" was established
which narrows the range of governmental action and makes it subject to control by certain
devices. As a corollary, we find the rule prohibiting delegation of legislative authority, and from
the earliest time American legal authorities have proceeded on the theory that legislative power
must be exercised by the legislature alone. It is frankness, however, to confess that as one delves
into the mass of judicial pronouncement, he finds a great deal of confusion. One thing, however,
is apparent in the development of the principle of separation of powers and that is that the maxim
of delegatus non potest delegari or delegata potestas non potest delegari, attributed to Bracton
(De Legius et Consuetedinious Angliae, edited by G. E. Woodbine, Yale University Press, 1922,
vol. 2, p. 167) but which is also recognized in principle in the Roman Law (D. 17.18.3), has been
made to adapt itself to the complexities of modern governments, giving rise to the adoption,
within certain limits, of the principle of "subordinate legislation," not only in the United States
and England but in practically all modern governments. (People vs. Rosenthal and Osmea, G.
R. Nos. 46076 and 46077, promulgated June 12, 1939.) Accordingly, with the growing
complexity of modern life, the multiplication of the subjects of governmental regulation, and the
increased difficulty of administering the laws, there is a constantly growing tendency toward the
delegation of greater powers by the legislature, and toward the approval of the practice by the
court. (Dillon Catfish Drainage Dist, v. Bank of Dillon, 141 S. E. 274, 275, 143 S. Ct. 178; State
vs. Knox County, 54 S. W. 2d. 973, 976, 165 Tenn. 319.) In harmony with such growing
tendency, this Court, since the decision in the case of Compaia General de Tabacos de
Filipinas vs. Board of Public Utility Commissioner (34 Phil., 136), relied upon by the petitioner,
has, in instances, extended its seal of approval to the "delegation of greater powers by the
legislature." (Inchausti Steamship Co. vs. Public Utility Commissioner, 44 Phil., 363; Autobus
Co. vs. De Jesus, 56 Phil., 446; People vs. Fernandez & Trinidad, G. R. No. 45655, promulgated
June 15, 1938; People vs. Rosenthal & Osmea, G. R. Nos. 46076, 46077, promulgated June 12,
1939; and Robb and Hilscher vs. People, G. R. No. 45866, promulgated June 12, 1939.)
Under the fourth paragraph of section 15 of Commonwealth Act No. 146, as amended by
Commonwealth Act No. 454, the power of the Public Service Commission to prescribed the
conditions "that the service can be acquired by the Commonwealth of the Philippines or by any
instrumentality thereof upon payment of the cost price of its useful equipment, less reasonable,"
and "that the certificate shall be valid only for a definite period of time" is expressly made
applicable "to any extension or amendment of certificates actually in force" and "to
authorizations to renew and increase equipment and properties." We have examined the
legislative proceedings on the subject and have found that these conditions were purposely made
applicable to existing certificates of public convenience. The history of Commonwealth Act No.
454 reveals that there was an attempt to suppress, by way of amendment, the sentence "and

likewise, that the certificate shall be valid only for a definite period of time," but the attempt
failed:
xxxxxxxxx
Sr. CUENCO. Se?or Presidente, para otra enmienda. En la misma pagina, lineas 23 y 24, pido
que se supriman las palabras 'and likewise, that the certificate shall be valid only for a definite
period time.' Esta disposicion del proyecto autoriza a la Comision de Servicios Publicos a fijar
un plazo de vigencia certificado de conveniencia publica. Todo el mundo sabe que bo se puede
determinar cuando los intereses del servicio publico requiren la explotacion de un servicio
publico y ha de saber la Comision de Servisios, si en un tiempo determinado, la explotacion de
algunos buses en cierta ruta ya no tiene de ser, sobre todo, si tiene en cuenta; que la explotacion
de los servicios publicos depende de condiciones flutuantes, asi como del volumen como trafico
y de otras condiciones. Ademas, el servicio publico se concede por la Comision de Servicios
Publicos el interes publico asi lo exige. El interes publico no tiene duracion fija, no es
permanente; es un proceso mas o menos indefinido en cuanto al tiempo. Se ha acordado eso en el
caucus de anoche.
EL PRESIDENTE PRO TEMPORE. ?Que dice el Comite?
Sr. ALANO. El Comite siente tener que rechazar esa enmienda, en vista de que esto certificados
de conveniencia publica es igual que la franquicia: sepuede extender. Si los servicios presentados
por la compa?ia durante el tiempo de su certificado lo require, puede pedir la extension y se le
extendera; pero no creo conveniente el que nosotros demos un certificado de conveniencia
publica de una manera que podria pasar de cincuenta anos, porque seria anticonstitucional.
xxxxxxxxx
By a majority vote the proposed amendment was defeated. (Sesion de 17 de mayo de 1939,
Asamblea Nacional.)
The petitioner is mistaken in the suggestion that, simply because its existing certificates had been
granted before June 8, 1939, the date when Commonwealth Act No. 454, amendatory of section
15 of Commonwealth Act No. 146, was approved, it must be deemed to have the right of holding
them in perpetuity. Section 74 of the Philippine Bill provided that "no franchise, privilege, or
concession shall be granted to any corporation except under the conditions that it shall be subject
to amendment, alteration, or repeal by the Congress of the United States." The Jones Law,
incorporating a similar mandate, provided, in section 28, that "no franchise or right shall be
granted to any individual, firm, or corporation except under the conditions that it shall be subject
to amendment, alteration, or repeal by the Congress of the United States." Lastly, the
Constitution of the Philippines provided, in section 8 of Article XIII, that "no franchise or right
shall be granted to any individual, firm, or corporation, except under the condition that it shall be
subject to amendment, alteration, or repeal by the National Assembly when the public interest so
requires." The National Assembly, by virtue of the Constitution, logically succeeded to the
Congress of the United States in the power to amend, alter or repeal any franchise or right
granted prior to or after the approval of the Constitution; and when Commonwealth Acts Nos.

146 and 454 were enacted, the National Assembly, to the extent therein provided, has declared its
will and purpose to amend or alter existing certificates of public convenience.
Upon the other hand, statutes enacted for the regulation of public utilities, being a proper
exercise by the state of its police power, are applicable not only to those public utilities coming
into existence after its passage, but likewise to those already established and in operation.
Nor is there any merit in petitioner's contention, that, because of the establishment of petitioner's
operations prior to May 1, 1917, they are not subject to the regulations of the Commission.
Statutes for the regulation of public utilities are a proper exercise by the state of its police power.
As soon as the power is exercised, all phases of operation of established utilities, become at once
subject to the police power thus called into operation. Procedures' Transportation Co. v. Railroad
Commission, 251 U. S. 228, 40 Sup. Ct. 131, 64 Law. ed. 239, Law v. Railroad Commission, 184
Cal. 737, 195 Pac. 423, 14 A. L. R. 249. The statute is applicable not only to those public utilities
coming into existence after its passage, but likewise to those already established and in
operation. The 'Auto Stage and Truck Transportation Act' (Stats. 1917, c. 213) is a statute passed
in pursuance of the police power. The only distinction recognized in the statute between those
established before and those established after the passage of the act is in the method of the
creation of their operative rights. A certificate of public convenience and necessity it required for
any new operation, but no such certificate is required of any transportation company for the
operation which was actually carried on in good faith on May 1, 1917, This distinction in the
creation of their operative rights in no way affects the power of the Commission to supervise and
regulate them. Obviously the power of the Commission to hear and dispose of complaints is as
effective against companies securing their operative rights prior to May 1, 1917, as against those
subsequently securing such right under a certificate of public convenience and necessity. (Motor
Transit Co. et al. v. Railroad Commission of California et al., 209 Pac. 586.)
Moreover, Commonwealth Acts Nos. 146 and 454 are not only the organic acts of the Public
Service Commission but are "a part of the charter of every utility company operating or seeking
to operate a franchise" in the Philippines. (Streator Aqueduct Co. v. et al., 295 Fed. 385.) The
business of a common carrier holds such a peculiar relation to the public interest that there is
superinduced upon it the right of public regulation. When private property is "affected with a
public interest it ceased to be juris privati only." When, therefore, one devotes his property to a
use in which the public has an interest, he, in effect, grants to the public an interest in that use,
and must submit to be controlled by the public for the common good, to the extent of the interest
he has thus created. He may withdraw his grant by discounting the use, but so long as he
maintains the use he must submit to control. Indeed, this right of regulation is so far beyond
question that it is well settled that the power of the state to exercise legislative control over
public utilities may be exercised through boards of commissioners. (Fisher vs. Yangco Steamship
Company, 31 Phil., 1, citing Munn vs. Illinois, 94 U.S. 113; Georgia R. & Bkg. Co. vs. Smith,
128 U.S. 174; Budd vs. New York, 143 U.S. 517; New York etc. R. Co. vs. Bristol 151 U.S. 556,
571; Connecticut etc. R. Co. vs. Woodruff, 153 U.S. 689; Louisville etc. Ry Co. vs. Kentucky,
161 U.S. 677, 695.) This right of the state to regulate public utilities is founded upon the police
power, and statutes for the control and regulation of utilities are a legitimate exercise thereof, for
the protection of the public as well as of the utilities themselves. Such statutes are, therefore, not
unconstitutional, either impairing the obligation of contracts, taking property without due

process, or denying the equal protection of the laws, especially inasmuch as the question whether
or not private property shall be devoted to a public and the consequent burdens assumed is
ordinarily for the owner to decide; and if he voluntarily places his property in public service he
cannot complain that it becomes subject to the regulatory powers of the state. (51 C. J., sec. 21,
pp. 9-10.) in the light of authorities which hold that a certificate of public convenience
constitutes neither a franchise nor contract, confers no property right, and is mere license or
privilege. (Burgess vs. Mayor & Alderman of Brockton, 235 Mass. 95, 100, 126 N. E. 456;
Roberto vs. Commisioners of Department of Public Utilities, 262 Mass. 583, 160 N. E. 321;
Scheible vs. Hogan, 113 Ohio St. 83, 148 N. E. 581; Martz vs. Curtis [J. L.] Cartage Co. [1937],
132 Ohio St. 271, 7 N. E. [d] 220; Manila Yellow Taxicab Co. vs. Sabellano, 59 Phil., 773.)
Whilst the challenged provisions of Commonwealth Act No. 454 are valid and constitutional, we
are, however, of the opinion that the decision of the Public Service Commission should be
reversed and the case remanded thereto for further proceedings for the reason now to be stated.
The Public Service Commission has power, upon proper notice and hearing, "to amend, modify
or revoke at any time any certificate issued under the provisions of this Act, whenever the facts
and circumstances on the strength of which said certificate was issued have been misrepresented
or materially changed." (Section 16, par. [m], Commonwealth Act No. 146.) The petitioner's
application here was for an increase of its equipment to enable it to comply with the conditions
of its certificates of public convenience. On the matter of limitation to twenty five (25) years of
the life of its certificates of public convenience, there had been neither notice nor opportunity
given the petitioner to be heard or present evidence. The Commission appears to have taken
advantage of the petitioner to augment petitioner's equipment in imposing the limitation of
twenty-five (25) years which might as well be twenty or fifteen or any number of years. This is,
to say the least, irregular and should not be sanctioned. There are cardinal primary rights which
must be respected even in proceedings of this character. The first of these rights is the right to a
hearing, which includes the right of the party interested or affected to present his own case and
submit evidence in support thereof. In the language of Chief Justice Hughes, in Morgan v. U.S.,
(304 U.S. 1, 58 S. Ct. 773, 999, 82 Law. ed. 1129), "the liberty and property of the citizen shall
be protected by the rudimentary requirements of fair play." Not only must the party be given an
opportunity to present his case and to adduce evidence tending to establish the rights which he
asserts but the tribunal must consider the evidence presented. (Chief Justice Hughes in Morgan
vs. U.S., 298 U.S. 468, 56 S. Ct. 906, 80 Law. ed. 1288.) In the language of this Court in
Edwards vs. McCoy (22 Phil., 598), "the right to adduce evidence, without the corresponding
duty on the part of the board to consider it, is vain. Such right is conspicuously futile if the
person or persons to whom the evidence is presented can thrust it aside without or
consideration." While the duty to deliberate does not impose the obligation to decide right, it
does imply a necessity which cannot be disregarded, namely, that of having something to support
its decision. A decision with absolutely nothing to support it is a nullity, at least when directly
attacked. (Edwards vs. McCoy, supra.) This principle emanates from the more fundamental
principle that the genius of constitutional government is contrary to the vesting of unlimited
power anywhere. Law is both a grant and a limitation upon power.
The decision appealed from is hereby reversed and the case remanded to the Public Service
Commission for further proceedings in accordance with law and this decision, without any
pronouncement regarding costs. So ordered.

Transportation Laws
c. Nature and basis of liability (1733)
ISAAC vs. A.L. AMMEN TRANSPORTATION CO. INC., 101 PHIL. 1046
A. L. Ammen Transportation Co., Inc., hereinafter referred to as defendant, is a corporation
engaged in the business of transporting passengers by land for compensation in the Bicol
provinces and one of the lines it operates is the one connecting Legaspi City, Albay with Naga
City, Camarines Sur. One of the buses which defendant was operating is Bus No. 31. On May 31,
1951, plaintiff boarded said bus as a passenger paying the required fare from Ligao, Albay bound
for Pili, Camarines Sur, but before reaching his destination, the bus collided with a motor vehicle
of the pick-up type coming from the opposite direction, as a result of which plaintiff's left arm
was completely severed and the severed portion fell inside the bus. Plaintiff was rushed to a
hospital in Iriga, Camarines Sur where he was given blood transfusion to save his life. After four
days, he was transferred to another hospital in Tabaco, Albay, where he under went treatment for
three months. He was moved later to the Orthopedic Hospital where he was operated on and
stayed there for another two months. For these services, he incurred expenses amounting to
P623.40, excluding medical fees which were paid by defendant.
As an aftermath, plaintiff brought this action against defendants for damages alleging that the
collision which resulted in the loss of his left arm was mainly due to the gross incompetence and
recklessness of the driver of the bus operated by defendant and that defendant incurred in culpa
contractual arising from its non-compliance with its obligation to transport plaintiff safely to his,
destination. Plaintiff prays for judgment against defendant as follows: (1) P5,000 as expenses for
his medical treatment, and P3,000 as the cost of an artificial arm, or a total of P8,000; (2) P6,000
representing loss of earning; (3) P75,000 for diminution of his earning capacity; (4) P50,000 as
moral damages; and (5) P10,000 as attorneys' fees and costs of suit.
Defendant set up as special defense that the injury suffered by plaintiff was due entirely to the
fault or negligence of the driver of the pick-up car which collided with the bus driven by its
driver and to the contributory negligence of plaintiff himself. Defendant further claims that the
accident which resulted in the injury of plaintiff is one which defendant could not foresee or,
though foreseen, was inevitable.
The after trial found that the collision occurred due to the negligence of the driver of the pick-up
car and not to that of the driver of the bus it appearing that the latter did everything he could to
avoid the same but that notwithstanding his efforts, he was not able to avoid it. As a
consequence, the court dismissed complaint, with costs against plaintiff. This is an appeal from
said decision.
It appears that plaintiff boarded a bus of defendant as paying passenger from Ligao, Albay,
bound for Pili, Camarines Sur, but before reaching his destination, the bus collided with a pickup car which was coming from the opposite direction and, as a, result, his left arm was
completely severed and fell inside the back part of the bus. Having this background in view, and
considering that plaintiff chose to hold defendant liable on its contractual obligation to carry him

safely to his place of destination, it becomes important to determine the nature and extent of the
liability of a common carrier to a passenger in the light of the law applicable in this jurisdiction.
In this connection, appellant invokes the rule that, "when an action is based on a contract of
carriage, as in this case, all that is necessary to sustain recovery is proof of the existence of the
contract of the breach thereof by act or omission", and in support thereof, he cites several
Philippine cases.[[1]] With the ruling in mind, appellant seems to imply that once the contract of
carriage is established and there is proof that the same was broken by failure of the carrier to
transport the passenger safely to his destination, the liability of the former attaches. On the other
hand, appellee claims that is a wrong presentation of the rule. It claims that the decisions of this
Court in the cases cited do not warrant the construction sought to be placed upon, them by
appellant for a mere perusal thereof would show that the liability of the carrier was predicated
not upon mere breach of its contract of carriage but upon the finding that its negligence was
found to be the direct or proximate cause of the injury complained of. Thus, appellee contends
that "if there is no negligence on the part of the common carrier but that the accident resulting in
injuries is due to causes which are inevitable and which could not have been avoided or
anticipated notwithstanding the exercise of that high degree of care and skill which the carrier is
bound to exercise for the safety of his passengers", neither the common carrier nor the driver is
liable therefor.
We believe that the law concerning the liability of a common carrier has now suffered a
substantial modification in view of the innovations introduced by the new Civil Code. These
innovations are the ones embodied in Articles 1733, 1755 and 1756 in so far as the relation
between a common carrier and its passengers is concerned, which, for ready reference, we quote
hereunder:
ART. 1733. Common carriers, from the nature of their business and for reasons of public policy,
are bound to observe extra ordinary diligence in the vigilance over the goods and for the safety
of the passengers transported by them according to all the circumstances of each case.
Such extraordinary diligence in the vigilance over the goods is further expressed in articles 1734,
1735, and 1745, Nos. 5, 6, and 7, while the extraordinary diligence for the safety of the
passengers is further set forth in articles 1755 and 1756.
ART. 1755. A common carrier is bound to carry the passengers safely as far as human care and
foresight can provide, using the utmost diligence of very cautious persons, with a due regard for
all the circumstances.
ART. 1756. In case of death of or injuries to passengers, common carriers are presumed to have
been at fault or to have acted negligently, unless they prove that they observed extraordinary
diligence as prescribed in articles 1733 and 1755.
The Code Commission, in justifying this extraordinary diligence required of a common carrier,
says the following:

A common carrier is bound to carry the passengers safely as far as human care and foresight can
provide, using the utmost deligence of very cautions persons, with due regard for all
circumstances. This extraordinary diligence required of common carriers is calculated to protect
the passengers from the tragic mishaps that frequently occur in connection with rapid modern
transportation. This high standard of care is imperatively demanded by the precariousness of
human life and by the consideration that every person must in every way be safeguarded against
all injury. (Report of the Code Commission, pp. 35-36)" (Padilla, Civil Code of the Philippines,
Vol. IV, 1956 ed., p. 197).
From the above legal provisions, we can make the following restatement of the principles
governing the liability of a common carrier: (1) the liability of a carrier is contractual and arises
upon breach of its obligation. There is breach if it fails to exert extraordinary diligence according
to all circumstances of each case; (2) a carrier is obliged to carry its passenger with the utmost
diligence of a very cautious person, having due regard for all the circumstances; (3) a carrier is
presumed to be at fault or to have acted negligently in case of death of, or injury to, passengers, it
being its duty to prove that it exercised extraordinary diligence; and (4) the carrier is not an
insurer against all risks of travel.
The question that now arises is: Has defendant observed extraordinary diligence or the utmost
diligence of every cautious person, having due regard for all circumstances, in avoiding the
collision which resulted in the injury caused to the plaintiff?
After examining the evidence in connection with how the collision occurred, the lower court
made the following finding:
Hemos examinado muy detenidamente las pruebas presentadas en la vista, principalmente, las
declaraciones que hemos acotado arriba, y hernos Ilegado a la conclusion de que el demandado
ha hecho, todo cuanto estuviere de su parte para evitar el accidente, pero sin embargo, no ha
podido evitarlo.
EI hecho de que el demandado, antes del choque, tuvo que hacer pasar su truck encima de los
montones de grava que estaban depositados en la orilla del camino, sin que haya ido mas alla,
por el grave riesgo que corrian las vidas de sus pasajeros, es prueba concluyente de lo que
tenemos dicho, a saber: que el cuanto esuba de su parte, para evitar el accidente, sin que haya
podidoevitardo, por estar fuera de su control.
The evidence would appear to support the above finding. Thus, it appears that Bus No. 31,
immediately prior to the collision, was running at a moderate speed because it had just stopped at
the school zone of Matacong, Polangui, Albay. The pick-up car was at full speed and was
running outside of its proper lane. The driver of the bus, upon seeing the manner in which the
pick-up was then running, swerved the bus to the very extreme right of the road until its front
and rear wheels have gone over the pile of stones or gravel situated on the rampart of the road.
Said driver could not move the bus farther right and run over a greater portion of the pile, the
peak of which was about 3 feet high, without endangering the safety of his passengers. And
notwithstanding all these efforts, the rear left side of the bus was hit by the pick-up car.

Of course, this finding is disputed by appellant who cannot see eye to eye with the evidence for
the appellee and insists that the collision took place because the driver of the bus was going at a
fast speed. He contends that, having seen that a car was coming from the opposite direction at a
distance which allows the use of moderate care and prudence to avoid an accident, and knowing
that on the side of the road along which he was going there was a pile of gravel, the driver of the
bus should have stopped and waited for the vehicle from the opposite direction to pass, and
should have proceeded only after the other vehicle had passed. In other words, according to
appellant, the act of the driver of the bus in squeezing his way through of the bus in squeezing
his way through between the oncoming pick-up and the pile of gravel under the circumstances
was considered negligent.
But this matter is one of credibility and evaluation of the evidence. This is evidence. This is the
function of the trial court. The trial court has already spoken on this matter as we have pointed
out above. This is also a matter of appreciation of the situation on the part of the driver. While
the position taken by appellant appeals more to the sense of caution that one should observe in a
given situation to avoid an accident or mishap, such however can not always be expected from
one who is placed suddenly in a predicament where he is not given enough time to take the
course of action as he should under ordinary circumstances. One who is placed in such a
predicament cannot exercise such coolness or accuracy of judgment as is required of him under
ordinary circumstances and he cannot therefore be expected to observe the same judgment, care
and precaution as in the latter. For this reason, authorities abound where failure to observe the
same degree of care that as ordinary prudent man would exercise under ordinary circumstances
when confronted with a sadden emergency was held to be warranted and a justification to exempt
the carrier from liability. Thus, it was held that "where a carrier's employee is confronted with a
sudden emergency, the fact that he is obliged to act quickly and without a chance for deliberation
must be taken into account, and he is held to the some degree of care that he would otherwise be
required to exercise in the absence of such emergency but must exercise only such care as any
ordinary prudent person would exercise under like circumstances and conditions, and the failure
on his part to exercise the best judgement the case renders possible does not establish lack of
care and skill on his part which renders the company, liable. . . . (13 C. J. S., 1412; 10 C. J.,970).
Considering all the circumstances, we are persuaded to conclude that the driver of the bus has
done what a prudent man could have done to avoid the collision and in our opinion this relieves
appellee from legibility under our law.
A circumstances which miliates against the stand of appellant is the fact borne out by the
evidence that when he boarded the bus in question, he seated himself on the left side thereof
resting his left arm on the window sill but with his left elbow outside the window, this being his
position in the bus when the collision took place. It is for this reason that the collision resulted in
the severance of said left arm from the body of appellant thus doing him a great damage. It is
therefore apparent that appellant is guilty of contributory negligence. Had he not placed his left
arm on the window sill with a portion thereof protruding outside, perhaps the injury would have
been avoided as is the case with the other passenger. It is to be noted that appellant was the only
victim of the collision.

It is true that such contributory negligence cannot relieve appellee of its liability but will only
entitle it to a reduction of the amount of damage caused (Article 1762, new Civil Code), but this
is a circumstance which further militates against the position taken by appellant in this case.
It is the prevailing rule that it is negligence per se for a passenger on a railroad voluntarily or
inadvertently to protrude his arm, hand, elbow, or any other part of his body through the window
of a moving car beyond the outer edge of the window or outer surface of the car, so as to come in
contact with objects or obstacles near the track, and that no recovery can be had for an injury
which but for such negligence would not have been sustained. (10 C. J. 1139)
Plaintiff, (passenger) while riding on an interurban car, to flick the ashes, from his cigar, thrust
his hand over the guard rail a sufficient distance beyond the side line of the car to bring it in
contact with the trunk of a tree standing beside the track; the force of the blow breaking his wrist.
Held, that he was guilty of contributory negligence as a matter of law. (Malakia vs. Rhode Island
Co., 89 A., 337.)
Wherefore, the decision appealed from is affirmed, with cost against appellant.
Paras, C.J., Bengzon, Padilla, Montemayor, Reyes, A., Labrador, Concepcion, Endencia and
Felix, JJ., concur.

c. Nature and basis of liability (1733)

Fores v. Miranda, 105 Phil. 267

Defendant-petitioner Paz Fores brings this petition for review of the

decision of the Court of Appeals (C.A. Case No. 1437-R) awarding to
the plaintiff-respondent Ireneo Miranda the sums of P5,000 by way
of actual damages and counsel fees, and P10,000 as moral
damages, with costs.
Respondent was one of the passengers on a jeepney driven by
Eugenio Luga. While the vehicle was descending the Sta. Mesa
bridge at an excessive rate of speed, the driver lost control thereof,
causing it to swerve and to his the bridge wall. The accident
occurred on the morning of March 22, 1953. Five of the passengers

were injured, including the respondent who suffered a fracture of the

upper right humerus. He was taken to the National Orthopedic
Hospital for treatment, and later was subjected to a series of
operations; the first on May 23, 1953, when wire loops were wound
around the broken bones and screwed into place; a second, effected
to insert a metal splint, and a third one to remove such splint. At the
time of the trial, it appears that respondent had not yet recovered
the use of his right arm.
The driver was charged with serious physical injuries through
reckless imprudence, and upon interposing a plea of guilty was
sentenced accordingly.
The contention that the evidence did not sufficiently establish the
identity of the vehicle as the belonging to the petitioner was
rejected by the appellate court which found, among other things,
that is carried plate No. TPU-1163, SERIES OF 1952, Quezon City,
registered in the name of Paz Fores, (appellant herein) and that the
vehicle even had the name of "Doa Paz" painted below its wind
shield. No evidence to the contrary was introduced by the petitioner,
who relied on an attack upon the credibility of the two policemen
who went to the scene of the incident.
A point to be further remarked is petitioner's contention that on
March 21, 1953, or one day before the accident happened, she
allegedly sold the passenger jeep that was involved therein to a
certain Carmen Sackerman.
The initial problem raised by the petitioner in this appeal may be
formulated thus "Is the approval of the Public Service Commission
necessary for the sale of a public service vehicle even without
conveying therewith the authority to operate the same?" Assuming

the dubious sale to be a fact, the court of Appeals answered the

query in the affirmative. The ruling should be upheld.
Section 20 of the Public Service Act (Commonwealth Act No. 146)
provides:
Sec. 20. Subject to established limitations and exceptions and
saving provisions to the contrary, it shall be unlawful for any public
service or for the owner, lessee or operator thereof, without the
previous approval and authority of the Commission previously had

xxxxxxxxx
(g) To sell, alienate, mortgage, encumber or lease its property,
franchises, certificates, privileges, or rights, or any part thereof; or
merge or consolidate its property, franchises, privileges or rights, or
any part thereof, with those of any other public service. The
approval herein required shall be given, after notice to the public
and after hearing the persons interested at a public hearing, if it be
shown that there are just and reasonable grounds for making the
mortgage or encumbrance, for liabilities of more than one year
maturity, or the sale, alienation, lease, merger, or consolidation to
be approved and that the same are not detrimental to the public
interest, and in case of a sale, the date on which the same is to be
consummated
shall
be
fixed
in
the
order
of
approval: Provided, however, That nothing herein contained shall be
construed to prevent the transaction from being negotiated or
completed before its approval or to prevent the sale, alienation, or
lease by any public service of any of its property in the ordinary
course of its business.
Interpreting the effects of this particular provision of law, we have
held in the recent cases of Montoya vs. Ignacio, 50 Off. Gaz. No. 1,
p. 108 * ; Timbol vs. Osias, et al., G. R. No. L-7547, April 30, 1955,
and Medina vs. Cresencia, 99 Phil., 506; 52 Off. Gaz. No. 10, p. 4606,
[[ ]]

that a transfer contemplated by the law, if made without the

requisite approval of the Public Service Commission, is not effective
and binding in so far as the responsibility of the grantee under the
franchise in relation to the public is concerned. Petitioner assails,
however, the applicability of these rulings to the instant case,
contending that in those cases, the operator did not convey, by
lease or by sale, the vehicle independently of his rights under the
franchise. This line of reasoning does not find support in the law. The
provisions of the statute are clear and prohibit the sale, alienation,
lease, or encumbrance of the property, franchise, certificate,
privileges or rights, or any part thereof of the owner or operator of
the public service Commission. The law was designed primarily for
the protection of the public interest; and until the approval of the
public Service Commission is obtained the vehicle is, in
contemplation of law, still under the service of the owner or operator
standing in the records of the Commission which the public has a
right to rely upon.
The proviso contained in the aforequoted law, to the effect that
nothing therein shall be construed "to prevent the transaction from
being negotiated or complete before its approval", means only that
the sale without the required approval is still valid and binding
between the parties (Montoya vs. Ignacio, supra). The phrase "in the
ordinary course of its business" found in the other proviso" or to
prevent the sale, alienation, or lease by any public service of any of
its property". As correctly observed by the lower court, could not
have been intended to include the sale of the vehicle itself, but at
most may refer only to such property that may be conceivably
disposed or by the carrier in the ordinary course of its business, like
junked equipment or spare parts.
The case of Indalecio de Torres vs. Vicente Ona (63 Phil., 594,
597) is enlightening; and there, it was held:
Under the law, the Public Service Commission has not only general
supervision and regulation of, but also full jurisdiction and control

over all public utilities including the property, equipment and

facilities used, and the property rights and franchise enjoyed by
every individual and company engaged i the performance of a public
service in the sense this phrase is used in the Public Service Act or
Act No. 3108). By virtue of the provisions of said Act, motor vehicles
used in the performance of a service, as the transportation of
freight from one point to another, have to this date been considered
and they cannot but be so considered-public service property;
and, by reason of its own nature, a TH truck, which means that the
operator thereof places it at the disposal of anybody who is willing
to pay a rental of its use, when he desires to transfer or carry his
effects, merchandise or any other cargo from one place to another,
is necessarily a public service property. (Emphasis supplied)
Of course, this court has held in the case of Bachrach Motor co. vs.
Zamboanga Transportation Co., 52 Phil., 244, that there may be
a nunc pro tunc authorization which has the effect of having the
approval retroact to the date of the transfer; but such outcome
cannot prejudice rights intervening in the meantime. It appears that
no such approval was given by the Commission before the accident
occurred.
The P10,000 actual damages awarded by the Court of First Instance
of Manila were reduced by the Court of Appeals to only P2,000, on
the ground that a review of the records failed to disclose a sufficient
basis for the trial court's appraisal, since the only evidence
presented on this point consisted of respondent's bare statement
that his expenses and loss of income amounted to P20,000. On the
other hand, "it cannot be denied," the lower court said, "that
appellee (respondent) did incur expenses"' It is well to note further
that respondent was a painter by profession and a professor of Fine
Arts, so that the amount of P2,000 awarded cannot be said to be
excessive (see Arts. 2224 and 2225, Civil Code of the Philippines).
The attorney's fees in the sum of P3,000 also awarded to the
respondent are assailed on the ground that the Court of First

Instance did not provided for the same, and since no appeal was
interposed by said respondent, it was allegedly error for the Court of
Appeals to award them motu proprio. Petitioner fails to note that
attorney's fees are included in the concept of actual damages under
the Civil Code and may be awarded whenever the court deems it is
just and equitable (Art. 2208, Civil Code of the Philippines). We see
no reason to alter these awards.
Anent the moral damages ordered to be paid to the respondent, the
same must be discarded. We have repeatedly ruled (Cachero vs.
Manila Yellow Taxicab Co. Inc., 101 Phil., 523; 54 Off. Gaz., [26],
6599; Necesito, et al vs. Paras, 104 Phil., 75; 56 Off. Gaz., [23] 4023,
that moral damages are not recoverable in damage actions
predicted on a breach of the contract of transportation, in view of
Articles 2219 and 2220 of the new Civil Code, which provide as
follows:
Art. 2219. Moral damages may be recovered in the following and
analogous cases:
(1) A criminal offense resulting in physical injuries;
(2) Quasi-delicts causing physical injuries;
xxxxxxxxx
Art. 2220. Willful injury to property may be a legal ground for
awarding moral damages if the court should find that, under
circumstances, such damages are justify due. The same rule applies
to breaches of contract where the defendant acted fraudulently or in
bad faith.
By contrasting the provisions of these two article it immediately
becomes apparent that:

(a) In case of breach of contract (including one of transportation)

proof of bad faith or fraud (dolus), i.e., wanton or deliberately
injurious conduct, is essential to justify an award of moral damages;
and
(b) That a breach of contract can not be considered included in the
descriptive term "analogous cases" used in Art. 2219; not only
because Art. 2220 specifically provides for the damages that are
caused by contractual breach, but because the definition of quasidelict in Art. 2176 of the Code expressly excludes the cases where
there is a "preexisting contractual relation between the parties."
Art. 2176. Whoever by act or omission causes damage to another,
there being fault or negligence, is obliged to pay for the damage
dome. Such fault or negligence, if there is no pre-existing
contractual relation between the parties, is called a quasi-delict and
is governed by the provisions of this Chapter.
The exception to the basic rule of damages now under consideration
is a mishap resulting in the death of a passenger, in which case
Article 1764 makes the common carrier expressly subject to the rule
of Art. 2206, that entitles the deceased passenger to "demand moral
damages for mental anguish by reason of the death of the
deceased" (Necesito vs. Paras, 104 Phil., 84, Resolution on motion to
reconsider, September 11, 1958). But the exceptional rule of Art.
1764 makes it all the more evident that where the injured passenger
does not die, moral damages are not recoverable unless it is proved
that the carrier was guilty of malice or bad faith. We think it is clear
that the mere carelessness of the carrier's driver does not per
se constitute of justify an inference of malice or bad faith on the part
of the carrier; and in the case at bar there is no other evidence of
such malice to support the award of moral damages by the Court of
Appeals. To award moral damages for breach of contract, therefore,
without proof of bad faith or malice on the part of the defendant, as

required by Art. 220, would be to violate the clear provisions of the

law, and constitute unwarranted judicial legislation.
The Court of Appeals has invoked our rulings in Castro vs. Acro
Taxicab Co., G.R. No. 49155, December 14, 1948 and Layda vs.
Court of Appeals, 90 Phil., 724; but these doctrines were predicated
upon our former law of damages, before judicial discretion in fixing
them became limited by the express provisions of the new Civil
Code (previously quoted). Hence, the aforesaid rulings are now
inapplicable.
Upon the other hand, the advantageous position of a party suing a
carrier for breach of the contract of transportations explains, to
some extent, the limitations imposed by the new Code on the
amount of the recovery. The action for breach of contract imposes
on the defendant carrier a presumption of liability upon mere proof
of injury to the passenger; that latter is relieved from the duty to
established the fault of the carrier, or of his employees, and the
burden is placed on the carrier to prove that it was due to an
unforseen event or to force majeure (Cangco vs. Manila Railroad Co.,
38 Phil., 768, 777). Moreover, the carrier, unlike in suits for quasidelict, may not escape liability by proving that it has exercised due
diligence in the selection and supervision of its employees (Art.
1759, new civil code; Cangco vs. Manila Railroad Co., supra; Prado
vs. Manila Electric Co., 51 Phil., 900).
The difference in conditions, defenses and proof, as well as the codal
concept of quasi-delict as essentially extra contractual negligence,
compel us to differentiate between action ex contractu, and
actions quasi ex delicto, and prevent us from viewing the action for
breach of contract as simultaneously embodying an action on tort.
Neither can this action be taken as one to enforce on employee's
liability under Art. 103 of the Revised Penal Code, since the
responsibility is not alleged to be subsidiary, nor is there on record
any averment or proof that the driver of appellant was insolvent. In
fact, he is not even made a party to the suit.

It is also suggested that a carrier's violation of its engagement to

safety transport the passenger involves a breach of the passenger's
confidence, and therefore should be regarded as a breach of
contract in bad faith, justifying recovery of moral damages under
Art. 2220. This theory is untenable, for under it the carrier would
always be deemed in bad faith, in every case its obligation to the
passenger is infringed, and it would be never accountable for simple
negligence; while under the law (Art. 1756). the presumption is that
common carriers acted negligently (and not maliciously), and Art.
1762 speaks of negligence of the common carrier.
ART. 1756. In case of death of or injuries to passengers, common
carriers are presumed to have been at fault or to have acted
negligently, unless they prove that they observed extraordinary
diligence as prescribed in article 1733 and 1755.
ART. 1762. The contributory negligence of the passenger does not
bar recovery of damages for his death or injuries, if the proximate
cause thereof is the negligence of the common carrier, but the
amount of damages shall be equitably reduced.
The distinction between fraud, bad faith or malice in the sense of
deliberate or wanton wrong doing and negligence (as mere
carelessness) is too fundamental in our law to be ignored (Arts.
1170-1172); their consequences being clearly differentiated by the
Code.
ART. 2201. In contracts and quasi-contracts, the damages for which
the obligor who acted in good faith is liable shall be those that are
the natural and probable consequences of the breach of the
obligation, and which the parties have foreseen or could have
reasonably foreseen at the time the obligation was constituted.

In case of fraud, bad faith, malice or wanton attitude, the obligor

shall be responsible for all damages which may be reasonably
attributed to the non-performance of the obligation.
It is to be presumed, in the absence of statutory provision to the
contrary, that this difference was in the mind of the lawmakers when
in Art. 2220 they limited recovery of moral damages to breaches of
contract in bad faith. It is true that negligence may be occasionally
so gross as to amount to malice; but that fact must be shown in
evidence, and a carrier's bad faith is not to be lightly inferred from a
mere finding that the contract was breached through negligence of
the carrier's employees.
In view of the foregoing considerations, the decision of the Court of
Appeals is modified by eliminating the award of P5,000.00 by way of
moral damages. (Court of Appeals Resolution of May 5, 1957). In all
other respects, the judgment is affirmed. No costs in this instance.
So ordered.
c. Nature and basis of liability (1733)
SARKIES TOURS PHILIPPINES, INC. petitioner vs. CA, 280 SCRA 58

This petition for review is seeking the reversal of the decision of the Court of
Appeals in CA-G.R. CV No. 18979 promulgated on January 13, 1993, as well
as its resolution of February 19, 1993, denying petitioners motion for
reconsideration for being a mere rehash of the arguments raised in the
appellants brief.
The case arose from a damage suit filed by private respondents Elino,
Marisol, and Fatima Minerva, all surnamed Fortades, against petitioner for
breach of contract of carriage allegedly attended by bad faith.
On August 31, 1984, Fatima boarded petitioners De Luxe Bus No. 5 in
Manila on her way to Legazpi City. Her brother Raul helped her load three
pieces of luggage containing all of her optometry review books, materials and

equipment, trial lenses, trial contact lenses, passport and visa, as well as her
mother Marisols U.S. immigration (green) card, among other important
documents and personal belongings. Her belongings was kept in the baggage
compartment of the bus, but during a stopover at Daet, it was discovered that
all but one bag remained in the open compartment. The others, including
Fatimas things, were missing and could have dropped along the way. Some of
the passengers suggested retracing the route to try to recover the lost items,
but the driver ignored them and proceeded to Legazpi City.
Fatima immediately reported the loss to her mother who, in turn, went to
petitioners office in Legazpi City and later at its head office in Manila. The
latter, however, merely offered her P1,000.00 for each piece of luggage lost,
which she turned down. After returning to Bicol disappointed but not defeated,
they asked assistance from the radio stations and even from Philtranco bus
drivers who plied the same route on August 31st. The effort paid off when one
of Fatimas bags was recovered. Marisol also reported the incident to the
National Bureau of Investigations field office in Legazpi City, and to the local
police.
On September 20, 1984, respondents, through counsel, formally
demanded satisfaction of their complaint from petitioner. In a letter dated
October 1, 1984, the latter apologized for the delay and said that (a) team has
been sent out to Bicol for the purpose of recovering or at least getting the full
detail of the incident.
[1]

After more than nine months of fruitless waiting, respondents decided to

file the case below to recover the value of the remaining lost items, as well as
moral and exemplary damages, attorneys fees and expenses of
litigation. They claimed that the loss was due to petitioners failure to observe
extraordinary diligence in the care of Fatimas luggage and that petitioner dealt
with them in bad faith from the start. Petitioner, on the other hand, disowned
any liability for the loss on the ground that Fatima allegedly did not declare
any excess baggage upon boarding its bus.
On June 15, 1988, after trial on the merits, the court a quo adjudged the
case in favor of herein respondents, viz:
PREMISES CONSIDERED, judgment is hereby rendered in favor of the plaintiffs
(herein respondents) and against the herein defendant Sarkies Tours Philippines, Inc.,
ordering the latter to pay to the former the following sums of money, to wit:
1. The sum of P30,000.00 equivalent to the value of the personal belongings of
plaintiff Fatima Minerva Fortades, etc. less the value of one luggage recovered;

2. The sum of P90,000.00 for the transportation expenses, as well as moral damages;
3. The sum of P10,000.00 by way of exemplary damages;
4. The sum of P5,000.00 as attorneys fees; and
5. The sum of P5,000.00 as litigation expenses or a total of One Hundred Forty
Thousand (P140,000.00) Pesos.
to be paid by herein defendant Sarkies Tours Philippines, Inc. to the herein plaintiffs
within 30 days from receipt of this Decision.
SO ORDERED.
On appeal, the appellate court affirmed the trial courts judgment, but
deleted the award of moral and exemplary damages. Thus,
WHEREFORE, premises considered, except as above modified, fixing the award for
transportation expenses at P30,000.00 and the deletion of the award for moral and
exemplary damages, the decision appealed from is AFFIRMED, with costs against
defendant-appellant.
SO ORDERED."
Its motion for reconsideration having was likewise rejected by the Court of
Appeals, so petitioner elevated its case to this Court for a review.
After a careful scrutiny of the records of this case, we are convinced that
the trial and appellate courts resolved the issues judiciously based on the
evidence at hand.
Petitioner claims that Fatima did not bring any piece of luggage with her,
and even if she did, none was declared at the start of the trip. The
documentary and testimonial evidence presented at the trial, however,
established that Fatima indeed boarded petitioners De Luxe Bus No. 5 in the
evening of August 31, 1984, and she brought three pieces of luggage with her,
as testified by her brother Raul, who helped her pack her things and load
them on said bus. One of the bags was even recovered with the help of a
Philtranco bus driver. In its letter dated October 1, 1984, petitioner tacitly
admitted its liability by apologizing to respondents and assuring them that
efforts were being made to recover the lost items.
[2]

The records also reveal that respondents went to great lengths just to
salvage their loss. The incident was reported to the police, the NBI, and the

regional and head offices of petitioner. Marisol even sought the assistance of
Philtranco bus drivers and the radio stations. To expedite the replacement of
her mothers lost U.S. immigration documents, Fatima also had to execute an
affidavit of loss. Clearly, they would not have gone through all that trouble in
pursuit of a fancied loss.
[3]

Fatima was not the only one who lost her luggage. Other passengers
suffered a similar fate: Dr. Lita Samarista testified that petitioner offered
her P1,000.00 for her lost baggage and she accepted it; Carleen CarulloMagno also lost her chemical engineering review materials, while her brother
lost abaca products he was transporting to Bicol.
[4]

[5]

Petitioners receipt of Fatimas personal luggage having been thus

established, it must now be determined if, as a common carrier, it is
responsible for their loss. Under the Civil Code, (c)ommon carriers, from the
nature of their business and for reasons of public policy, are bound to observe
extraordinary diligence in the vigilance over the goods x xx transported by
them, and this liability lasts from the time the goods are unconditionally
placed in the possession of, and received by the carrier for transportation until
the same are delivered, actually or constructively, by the carrier for
transportation until the same are delivered, actually or constructively, by the
carrier to x x x the person who has a right to receive them, unless the loss is
due to any of the excepted causes under Article 1734 thereof.
[6]

[7]

[8]

The cause of the loss in the case at bar was petitioners negligence in not
ensuring that the doors of the baggage compartment of its bus were securely
fastened. As a result of this lack of care, almost all of the luggage was lost, to
the prejudice of the paying passengers. As the Court of Appeals correctly
observed:
x x x. Where the common carrier accepted its passengers baggage for transportation
and even had it placed in the vehicle by its own employee, its failure to collect the
freight charge is the common carriers own lookout. It is responsible for the
consequent loss of the baggage. In the instant case, defendant appellants employee
even helped Fatima Minerva Fortades and her brother load the luggages/baggages in
the bus baggage compartment, without asking that they be weighed, declared,
receipted or paid for (TSN, August 4, 1986, pp. 29, 34, 54, 57, 70; December 23,
1987, p. 35). Neither was this required of the other passengers (TSN, August 4, 1986,
p. 104; February 5, 1988, p. 13).
Finally, petitioner questions the award of actual damages to
respondents. On this point, we likewise agree with the trial and appellate
courts conclusions. There is no dispute that of the three pieces of luggage of

Fatima, only one was recovered. The other two contained optometry books,
materials, equipment, as well as vital documents and personal
belongings. Respondents had to shuttle between Bicol and Manila in their
efforts to be compensated for the loss. During the trial, Fatima and Marisol
had to travel from the United States just to be able to testify. Expenses were
also incurred in reconstituting their lost documents. Under these
circumstances, the Court agrees with the Court of Appeals in
awarding P30,000.00 for the lost items and P30,000.00 for the transportation
expenses, but disagrees with the deletion of the award of moral and
exemplary damages which, in view of the foregoing proven facts, with
negligence and bad faith on the fault of petitioner having been duly
established, should be granted to respondents in the amount of P20,000.00
and P5,000.00, respectively.
WHEREFORE, the assailed decision of the Court of Appeals dated
January 13, 1993, and its resolution dated February 19, 1993, are hereby
AFFIRMED with the MODIFICATION that petitioner is ordered to pay
respondent an additional P20,000.00 as moral damages and P5,000.00 as
exemplary damages. Costs against petitioner.
SO ORDERED.

Transportation Laws
A. Common Carriers
A. In General;
e. Laws Applicable (1753, 1766)
National Development Corp. v. Court of Appeals, 164 SCRA 593
Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. L-49407 August 19, 1988
NATIONAL DEVELOPMENT COMPANY, petitioner-appellant,
vs.
THE COURT OF APPEALS and DEVELOPMENT INSURANCE & SURETY
CORPORATION, respondents-appellees.
No. L-49469 August 19, 1988

MARITIME COMPANY OF THE PHILIPPINES, petitioner-appellant,

vs.
THE COURT OF APPEALS and DEVELOPMENT INSURANCE & SURETY
CORPORATION, respondents- appellees.
These are appeals by certiorari from the decision * of the Court of Appeals in CA G.R.
No: L- 46513-R entitled "Development Insurance and Surety Corporation plaintiffappellee vs. Maritime Company of the Philippines and National Development Company
defendant-appellants," affirming in toto the decision ** in Civil Case No. 60641 of the
then Court of First Instance of Manila, Sixth Judicial District, the dispositive portion of
which reads:
WHEREFORE, judgment is hereby rendered ordering the defendants
National Development Company and Maritime Company of the
Philippines, to pay jointly and severally, to the plaintiff Development
Insurance and Surety Corp., the sum of THREE HUNDRED SIXTY FOUR
THOUSAND AND NINE HUNDRED FIFTEEN PESOS AND EIGHTY SIX
CENTAVOS (364,915.86) with the legal interest thereon from the filing of
plaintiffs complaint on April 22, 1965 until fully paid, plus TEN THOUSAND
PESOS (Pl0,000.00) by way of damages as and for attorney's fee.
On defendant Maritime Company of the Philippines' cross-claim against
the defendant National Development Company, judgment is hereby
rendered, ordering the National Development Company to pay the crossclaimant Maritime Company of the Philippines the total amount that the
Maritime Company of the Philippines may voluntarily or by compliance to
a writ of execution pay to the plaintiff pursuant to the judgment rendered in
this case.
With costs against the defendant Maritime Company of the Philippines.
(pp. 34-35, Rollo, GR No. L-49469)
The facts of these cases as found by the Court of Appeals, are as follows:
The evidence before us shows that in accordance with a memorandum
agreement entered into between defendants NDC and MCP on
September 13, 1962, defendant NDC as the first preferred mortgagee of
three ocean going vessels including one with the name 'Dona Nati'
appointed defendant MCP as its agent to manage and operate said vessel
for and in its behalf and account (Exh. A). Thus, on February 28, 1964 the
E. Philipp Corporation of New York loaded on board the vessel "Dona
Nati" at San Francisco, California, a total of 1,200 bales of American raw
cotton consigned to the order of Manila Banking Corporation, Manila and
the People's Bank and Trust Company acting for and in behalf of the Pan
Asiatic Commercial Company, Inc., who represents Riverside Mills

Corporation (Exhs. K-2 to K7-A & L-2 to L-7-A). Also loaded on the same
vessel at Tokyo, Japan, were the cargo of Kyokuto Boekui, Kaisa, Ltd.,
consigned to the order of Manila Banking Corporation consisting of 200
cartons of sodium lauryl sulfate and 10 cases of aluminum foil (Exhs. M &
M-1). En route to Manila the vessel Dofia Nati figured in a collision at 6:04
a.m. on April 15, 1964 at Ise Bay, Japan with a Japanese vessel 'SS
Yasushima Maru' as a result of which 550 bales of aforesaid cargo of
American raw cotton were lost and/or destroyed, of which 535 bales as
damaged were landed and sold on the authority of the General Average
Surveyor for Yen 6,045,-500 and 15 bales were not landed and deemed
lost (Exh. G). The damaged and lost cargoes was worth P344,977.86
which amount, the plaintiff as insurer, paid to the Riverside Mills
Corporation as holder of the negotiable bills of lading duly endorsed
(Exhs. L-7-A, K-8-A, K-2-A, K-3-A, K-4-A, K-5-A, A- 2, N-3 and R-3}. Also
considered totally lost were the aforesaid shipment of Kyokuto, Boekui
Kaisa Ltd., consigned to the order of Manila Banking Corporation, Manila,
acting for Guilcon, Manila, The total loss was P19,938.00 which the
plaintiff as insurer paid to Guilcon as holder of the duly endorsed bill of
lading (Exhibits M-1 and S-3). Thus, the plaintiff had paid as insurer the
total amount of P364,915.86 to the consignees or their successors-ininterest, for the said lost or damaged cargoes. Hence, plaintiff filed this
complaint to recover said amount from the defendants-NDC and MCP as
owner and ship agent respectively, of the said 'Dofia Nati' vessel. (Rollo, L49469, p.38)
On April 22, 1965, the Development Insurance and Surety Corporation filed before the
then Court of First Instance of Manila an action for the recovery of the sum of
P364,915.86 plus attorney's fees of P10,000.00 against NDC and MCP (Record on
Appeal), pp. 1-6).
Interposing the defense that the complaint states no cause of action and even if it does,
the action has prescribed, MCP filed on May 12, 1965 a motion to dismiss (Record on
Appeal, pp. 7-14). DISC filed an Opposition on May 21, 1965 to which MCP filed a reply
on May 27, 1965 (Record on Appeal, pp. 14-24). On June 29, 1965, the trial court
deferred the resolution of the motion to dismiss till after the trial on the merits (Record
on Appeal, p. 32). On June 8, 1965, MCP filed its answer with counterclaim and crossclaim against NDC.
NDC, for its part, filed its answer to DISC's complaint on May 27, 1965 (Record on
Appeal, pp. 22-24). It also filed an answer to MCP's cross-claim on July 16, 1965
(Record on Appeal, pp. 39-40). However, on October 16, 1965, NDC's answer to DISC's
complaint was stricken off from the record for its failure to answer DISC's written
interrogatories and to comply with the trial court's order dated August 14, 1965 allowing
the inspection or photographing of the memorandum of agreement it executed with
MCP. Said order of October 16, 1965 likewise declared NDC in default (Record on

Appeal, p. 44). On August 31, 1966, NDC filed a motion to set aside the order of
October 16, 1965, but the trial court denied it in its order dated September 21, 1966.
On November 12, 1969, after DISC and MCP presented their respective evidence, the
trial court rendered a decision ordering the defendants MCP and NDC to pay jointly and
solidarity to DISC the sum of P364,915.86 plus the legal rate of interest to be computed
from the filing of the complaint on April 22, 1965, until fully paid and attorney's fees of
P10,000.00. Likewise, in said decision, the trial court granted MCP's crossclaim against
NDC.
MCP interposed its appeal on December 20, 1969, while NDC filed its appeal on
February 17, 1970 after its motion to set aside the decision was denied by the trial court
in its order dated February 13,1970.
On November 17,1978, the Court of Appeals promulgated its decision
affirming in toto the decision of the trial court.
Hence these appeals by certiorari.
NDC's appeal was docketed as G.R. No. 49407, while that of MCP was docketed as
G.R. No. 49469. On July 25,1979, this Court ordered the consolidation of the above
cases (Rollo, p. 103). On August 27,1979, these consolidated cases were given due
course (Rollo, p. 108) and submitted for decision on February 29, 1980 (Rollo, p. 136).
In its brief, NDC cited the following assignments of error:
I
THE COURT OF APPEALS ERRED IN APPLYING ARTICLE 827 OF THE CODE OF
COMMERCE AND NOT SECTION 4(2a) OF COMMONWEALTH ACT NO. 65,
OTHERWISE KNOWN AS THE CARRIAGE OF GOODS BY SEA ACT IN
DETERMINING THE LIABILITY FOR LOSS OF CARGOES RESULTING FROM THE
COLLISION OF ITS VESSEL "DONA NATI" WITH THE YASUSHIMA
MARU"OCCURRED AT ISE BAY, JAPAN OR OUTSIDE THE TERRITORIAL
JURISDICTION OF THE PHILIPPINES.
II
THE COURT OF APPEALS ERRED IN NOT DISMISSING THE C0MPLAINT FOR
REIMBURSEMENT FILED BY THE INSURER, HEREIN PRIVATE RESPONDENTAPPELLEE, AGAINST THE CARRIER, HEREIN PETITIONER-APPELLANT. (pp. 1-2,
Brief for Petitioner-Appellant National Development Company; p. 96, Rollo).
On its part, MCP assigned the following alleged errors:
I

THE RESPONDENT COURT OF APPEALS ERRED IN NOT HOLDING THAT

RESPONDENT DEVELOPMENT INSURANCE AND SURETY CORPORATION HAS
NO CAUSE OF ACTION AS AGAINST PETITIONER MARITIME COMPANY OF THE
PHILIPPINES AND IN NOT DISMISSING THE COMPLAINT.
II
THE RESPONDENT COURT OF APPEALS ERRED IN NOT HOLDING THAT THE
CAUSE OF ACTION OF RESPONDENT DEVELOPMENT INSURANCE AND SURETY
CORPORATION IF ANY EXISTS AS AGAINST HEREIN PETITIONER MARITIME
COMPANY OF THE PHILIPPINES IS BARRED BY THE STATUTE OF LIMITATION
AND HAS ALREADY PRESCRIBED.
III
THE RESPONDENT COURT OF APPEALS ERRED IN ADMITTING IN EVIDENCE
PRIVATE RESPONDENTS EXHIBIT "H" AND IN FINDING ON THE BASIS THEREOF
THAT THE COLLISION OF THE SS DONA NATI AND THE YASUSHIMA MARU WAS
DUE TO THE FAULT OF BOTH VESSELS INSTEAD OF FINDING THAT THE
COLLISION WAS CAUSED BY THE FAULT, NEGLIGENCE AND LACK OF SKILL OF
THE COMPLEMENTS OF THE YASUSHIMA MARU WITHOUT THE FAULT OR
NEGLIGENCE OF THE COMPLEMENT OF THE SS DONA NATI
IV
THE RESPONDENT COURT OF APPEALS ERRED IN HOLDING THAT UNDER THE
CODE OF COMMERCE PETITIONER APPELLANT MARITIME COMPANY OF THE
PHILIPPINES IS A SHIP AGENT OR NAVIERO OF SS DONA NATI OWNED BY COPETITIONER APPELLANT NATIONAL DEVELOPMENT COMPANY AND THAT SAID
PETITIONER-APPELLANT IS SOLIDARILY LIABLE WITH SAID CO-PETITIONER FOR
LOSS OF OR DAMAGES TO CARGO RESULTING IN THE COLLISION OF SAID
VESSEL, WITH THE JAPANESE YASUSHIMA MARU.
V
THE RESPONDENT COURT OF APPEALS ERRED IN FINDING THAT THE LOSS OF
OR DAMAGES TO THE CARGO OF 550 BALES OF AMERICAN RAW COTTON,
DAMAGES WERE CAUSED IN THE AMOUNT OF P344,977.86 INSTEAD OF ONLY
P110,000 AT P200.00 PER BALE AS ESTABLISHED IN THE BILLS OF LADING AND
ALSO IN HOLDING THAT PARAGRAPH 1O OF THE BILLS OF LADING HAS NO
APPLICATION IN THE INSTANT CASE THERE BEING NO GENERAL AVERAGE TO
SPEAK OF.
VI

THE RESPONDENT COURT OF APPEALS ERRED IN HOLDING THE PETITIONERS

NATIONAL DEVELOPMENT COMPANY AND COMPANY OF THE PHILIPPINES TO
PAY JOINTLY AND SEVERALLY TO HEREIN RESPONDENT DEVELOPMENT
INSURANCE AND SURETY CORPORATION THE SUM OF P364,915.86 WITH LEGAL
INTEREST FROM THE FILING OF THE COMPLAINT UNTIL FULLY PAID PLUS
P10,000.00 AS AND FOR ATTORNEYS FEES INSTEAD OF SENTENCING SAID
PRIVATE RESPONDENT TO PAY HEREIN PETITIONERS ITS COUNTERCLAIM IN
THE AMOUNT OF P10,000.00 BY WAY OF ATTORNEY'S FEES AND THE COSTS.
(pp. 1-4, Brief for the Maritime Company of the Philippines; p. 121, Rollo)
The pivotal issue in these consolidated cases is the determination of which laws govern
loss or destruction of goods due to collision of vessels outside Philippine waters, and
the extent of liability as well as the rules of prescription provided thereunder.
The main thrust of NDC's argument is to the effect that the Carriage of Goods by Sea
Act should apply to the case at bar and not the Civil Code or the Code of Commerce.
Under Section 4 (2) of said Act, the carrier is not responsible for the loss or damage
resulting from the "act, neglect or default of the master, mariner, pilot or the servants of
the carrier in the navigation or in the management of the ship." Thus, NDC insists that
based on the findings of the trial court which were adopted by the Court of Appeals,
both pilots of the colliding vessels were at fault and negligent, NDC would have been
relieved of liability under the Carriage of Goods by Sea Act. Instead, Article 287 of the
Code of Commerce was applied and both NDC and MCP were ordered to reimburse the
insurance company for the amount the latter paid to the consignee as earlier stated.
This issue has already been laid to rest by this Court of Eastern Shipping Lines Inc. v.
IAC (1 50 SCRA 469-470 [1987]) where it was held under similar circumstance "that 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" (Article 1753, Civil
Code). Thus, the rule was specifically laid down that for cargoes transported from Japan
to the Philippines, the liability of the carrier is governed primarily by the Civil Code and
in all matters not regulated by said Code, the rights and obligations of common carrier
shall be governed by the Code of commerce and by laws (Article 1766, Civil Code).
Hence, the Carriage of Goods by Sea Act, a special law, is merely suppletory to the
provision of the Civil Code.
In the case at bar, it has been established that the goods in question are transported
from San Francisco, California and Tokyo, Japan to the Philippines and that they were
lost or due to a collision which was found to have been caused by the negligence or
fault of both captains of the colliding vessels. Under the above ruling, it is evident that
the laws of the Philippines will apply, and it is immaterial that the collision actually
occurred in foreign waters, such as Ise Bay, Japan.
Under Article 1733 of the Civil Code, common carriers from the nature of their business
and for reasons of public policy are bound to observe extraordinary diligence in the
vigilance over the goods and for the safety of the passengers transported by them

according to all circumstances of each case. Accordingly, under Article 1735 of the
same Code, in all other than those mentioned is Article 1734 thereof, the common
carrier shall be presumed to have been at fault or to have acted negigently, unless it
proves that it has observed the extraordinary diligence required by law.
It appears, however, that collision falls among matters not specifically regulated by the
Civil Code, so that no reversible error can be found in respondent courses application to
the case at bar of Articles 826 to 839, Book Three of the Code of Commerce, which deal
exclusively with collision of vessels.
More specifically, Article 826 of the Code of Commerce provides that where collision is
imputable to the personnel of a vessel, the owner of the vessel at fault, shall indemnify
the losses and damages incurred after an expert appraisal. But more in point to the
instant case is Article 827 of the same Code, which provides that if the collision is
imputable to both vessels, each one shall suffer its own damages and both shall be
solidarily responsible for the losses and damages suffered by their cargoes.
Significantly, under the provisions of the Code of Commerce, particularly Articles 826 to
839, the shipowner or carrier, is not exempt from liability for damages arising from
collision due to the fault or negligence of the captain. Primary liability is imposed on the
shipowner or carrier in recognition of the universally accepted doctrine that the
shipmaster or captain is merely the representative of the owner who has the actual or
constructive control over the conduct of the voyage (Y'eung Sheng Exchange and
Trading Co. v. Urrutia & Co., 12 Phil. 751 [1909]).
There is, therefore, no room for NDC's interpretation that the Code of Commerce should
apply only to domestic trade and not to foreign trade. Aside from the fact that the
Carriage of Goods by Sea Act (Com. Act No. 65) does not specifically provide for the
subject of collision, said Act in no uncertain terms, restricts its application "to all
contracts for the carriage of goods by sea to and from Philippine ports in foreign trade."
Under Section I thereof, it is explicitly provided that "nothing in this Act shall be
construed as repealing any existing provision of the Code of Commerce which is now in
force, or as limiting its application." By such incorporation, it is obvious that said law not
only recognizes the existence of the Code of Commerce, but more importantly does not
repeal nor limit its application.
On the other hand, Maritime Company of the Philippines claims that Development
Insurance and Surety Corporation, has no cause of action against it because the latter
did not prove that its alleged subrogers have either the ownership or special property
right or beneficial interest in the cargo in question; neither was it proved that the bills of
lading were transferred or assigned to the alleged subrogers; thus, they could not
possibly have transferred any right of action to said plaintiff- appellee in this case. (Brief
for the Maritime Company of the Philippines, p. 16).
The records show that the Riverside Mills Corporation and Guilcon, Manila are the
holders of the duly endorsed bills of lading covering the shipments in question and an

examination of the invoices in particular, shows that the actual consignees of the said
goods are the aforementioned companies. Moreover, no less than MCP itself issued a
certification attesting to this fact. Accordingly, as it is undisputed that the insurer, plaintiff
appellee paid the total amount of P364,915.86 to said consignees for the loss or
damage of the insured cargo, it is evident that said plaintiff-appellee has a cause of
action to recover (what it has paid) from defendant-appellant MCP (Decision, CA-G.R.
No. 46513-R, p. 10; Rollo, p. 43).
MCP next contends that it can not be liable solidarity with NDC because it is merely the
manager and operator of the vessel Dona Nati not a ship agent. As the general
managing agent, according to MCP, it can only be liable if it acted in excess of its
authority.
As found by the trial court and by the Court of Appeals, the Memorandum Agreement of
September 13, 1962 (Exhibit 6, Maritime) shows that NDC appointed MCP as Agent, a
term broad enough to include the concept of Ship-agent in Maritime Law. In fact, MCP
was even conferred all the powers of the owner of the vessel, including the power to
contract in the name of the NDC (Decision, CA G.R. No. 46513, p. 12; Rollo, p. 40).
Consequently, under the circumstances, MCP cannot escape liability.
It is well settled that both the owner and agent of the offending vessel are liable for the
damage done where both are impleaded (Philippine Shipping Co. v. Garcia Vergara, 96
Phil. 281 [1906]); that in case of collision, both the owner and the agent are civilly
responsible for the acts of the captain (Yueng Sheng Exchange and Trading Co. v.
Urrutia & Co., supra citing Article 586 of the Code of Commerce; Standard Oil Co. of
New York v. Lopez Castelo, 42 Phil. 256, 262 [1921]); that while it is true that the liability
of the naviero in the sense of charterer or agent, is not expressly provided in Article 826
of the Code of Commerce, it is clearly deducible from the general doctrine of
jurisprudence under the Civil Code but more specially as regards contractual obligations
in Article 586 of the Code of Commerce. Moreover, the Court held that both the owner
and agent (Naviero) should be declared jointly and severally liable, since the obligation
which is the subject of the action had its origin in a tortious act and did not arise from
contract (Verzosa and Ruiz, Rementeria y Cia v. Lim, 45 Phil. 423 [1923]).
Consequently, the agent, even though he may not be the owner of the vessel, is liable
to the shippers and owners of the cargo transported by it, for losses and damages
occasioned to such cargo, without prejudice, however, to his rights against the owner of
the ship, to the extent of the value of the vessel, its equipment, and the freight (Behn
Meyer Y Co. v. McMicking et al. 11 Phil. 276 [1908]).
As to the extent of their liability, MCP insists that their liability should be limited to
P200.00 per package or per bale of raw cotton as stated in paragraph 17 of the bills of
lading. Also the MCP argues that the law on averages should be applied in determining
their liability.
MCP's contention is devoid of merit. The declared value of the goods was stated in the
bills of lading and corroborated no less by invoices offered as evidence ' during the trial.

Besides, common carriers, in the language of the court in Juan Ysmael & Co., Inc. v.
Barrette et al., (51 Phil. 90 [1927]) "cannot limit its liability for injury to a loss of goods
where such injury or loss was caused by its own negligence." Negligence of the
captains of the colliding vessel being the cause of the collision, and the cargoes not
being jettisoned to save some of the cargoes and the vessel, the trial court and the
Court of Appeals acted correctly in not applying the law on averages (Articles 806 to
818, Code of Commerce).
MCP's claim that the fault or negligence can only be attributed to the pilot of the vessel
SS Yasushima Maru and not to the Japanese Coast pilot navigating the vessel Dona
Nati need not be discussed lengthily as said claim is not only at variance with NDC's
posture, but also contrary to the factual findings of the trial court affirmed no less by the
Court of Appeals, that both pilots were at fault for not changing their excessive speed
despite the thick fog obstructing their visibility.
Finally on the issue of prescription, the trial court correctly found that the bills of lading
issued allow trans-shipment of the cargo, which simply means that the date of arrival of
the ship Dona Nati on April 18,1964 was merely tentative to give allowances for such
contingencies that said vessel might not arrive on schedule at Manila and therefore,
would necessitate the trans-shipment of cargo, resulting in consequent delay of their
arrival. In fact, because of the collision, the cargo which was supposed to arrive in
Manila on April 18, 1964 arrived only on June 12, 13, 18, 20 and July 10, 13 and 15,
1964. Hence, had the cargoes in question been saved, they could have arrived in
Manila on the above-mentioned dates. Accordingly, the complaint in the instant case
was filed on April 22, 1965, that is, long before the lapse of one (1) year from the date
the lost or damaged cargo "should have been delivered" in the light of Section 3, subparagraph (6) of the Carriage of Goods by Sea Act.
PREMISES CONSIDERED, the subject petitions are DENIED for lack of merit and the
assailed decision of the respondent Appellate Court is AFFIRMED.
SO ORDERED.

Transportation Laws
A. Common Carriers
B. Common Carriers of Goods
a. Liability and presumption of negligence (1733, 1734, 1735)
Ynchausti Steamship Co. v. Dexter and Unson, 41 Phil. 289
Republic of the Philippines
SUPREME COURT
Manila

EN BANC
G.R. No. L-15652 December 14, 1920
THE YNCHAUSTI STEAMSHIP COMPANY, petitioner,
vs.
I. B. DEXTER, as Auditor of the Philippine Islands, and C. E. UNSON, as Acting
Purchasing Agent of the Philippine Islands, respondents.
Cohn & Fisher for petitioner.
Attorney-General Paredes and Assistant Attorney-General A. Santos for respondents.
STREET, J.:
This a petition for a writ of mandamus filed in this court of the Ynchausti Steamship
Company to compel the Purchasing Agent of the Philippine Islands and the Insular
Auditor to sign, countersign, and deliver to the petitioner a warrant upon the Treasurer
of the Philippine Islands for the sum of P82.79 in satisfaction of a claim for that amount,
which is alleged to be due the petitioner as a common carrier for freight earned in
transporting for the Government two distinct consignments of mineral oil from Manila to
two other ports in the Philippine Islands. After the defendants had duly answered,
denying all the allegations of the petition except such as relate to the character and
places of residence of the parties to the petition (which are admitted) the controversy
was submitted for determination by this court upon an agreed statement of facts as
follows:
On July 23, 1918, the Government of the Philippine Islands, acting by and
through the respondent Insular Purchasing Agent, employed the services of the
petitioner, Ynchausti Steamship Co., a common carrier, for the transportation, on
board the steamship Venus, from the port of Manila to the port of Aparri,
Cagayan, of a consignment of merchandise, consisting of thirty (30) cases of
"White Rose" mineral oil of two five-gallon cans to the case; and on September
18, 1918, the said Government likewise employed the services of petitioner for
the transportation on board the steamship Venus, from Manila to Aparri,
Cagayan, of ninety-six cases of "Cock" Brand mineral oil, ten gallons to the case.
The goods were delivered by the shipper to the carrier, which accordingly
received them, and to evidence the contract of transportation, the parties duly
executed and delivered what is popularly called the Government bill of lading
(General Form 9-A), hereto attached, marked Exhibit A and made a part hereof,
wherein and whereby it was stipulated that the carrier, the petitioner Ynchausti &
Co., received the above-mentioned supplies in apparent good condition,
obligating itself to carry said supplies to the place agreed upon, in accordance
with the authorized and prescribed rates and classifications, and subject to the
law of common carriers in force on the date of the shipment, and to the
conditions prescribed by the Insular Collector of Customs in Philippine Marine

Regulations at page 16 under the heading of "Bill of Lading Conditions," hereto

attached, marked Exhibit B and made a part hereof.
Upon the delivery of the said shipment of "Cock" brand oil and consignee
claimed that one case was delivered empty, and noted such claim upon the bill of
lading; and upon the delivery of the said shipment of "White Rose," brand oil the
consignee claimed that one case was delivered empty, and noted said claim
upon the bill of lading.
Thereafter, notwithstanding the protestations of the petitioner, Ynchausti
Steamship Co., that said shortages were due to causes entirely unknown to it,
and were not due to any fault or negligence on its part, or on the part of its
agents or servants, the Acting Insular Purchasing Agent of the Philippine Islands
notified the petitioners herein that after due investigation the Insular Auditor found
and decided that the leakages of the two whole cases were due to its negligence
and that the deduction of the sum of P22.53, the invoice value of the goods lost,
and held by the Auditor to be the true value thereof had been authorized by the
said Insular Auditor.
Petitioner thereupon protested against the threatened deduction, and demanded
that it be paid the full amount due for the transportation of the two said shipments
of merchandise, to wit, the sum of P82.79, as shown by its transportation
voucher presented in this cause, hereto attached. marked Exhibit C and made a
part hereof.
Thereafter, notwithstanding the protest and demand of the petitioner as
aforesaid, the Insular Auditor, in conformity with his ruling, declined and still
declines to issue to the petitioner a warrant for the full sum of P82.79, and has
tendered to it a warrant for the sum of P60.26, which the petitioner has refused to
accept.lawphi1.net
The sum of P22.53 authorized to be deducted by the Insular Auditor, as appears
herein, has not at any time been liquidated by consent, agreement, or by the
judgment of any court of competent jurisdiction.
Upon a perusal of the foregoing agreed statement it will be seen that the present
litigation had its origin in a situation practically identical with that considered by this
court in Compaia General de Tabacos vs. French and Unson (39 Phil., 34). It will be
noted, however, that the case mentioned was decided upon demurrer, while the one
now before us is to be heard and determined upon the petition, answer, and the
admitted facts.
We note that in this case, as in the case of Compaia General de Tabacos vs. French
and Unson (supra), the petition alleges that the leakage of the lost gasoline was due to
causes unknown to the petitioner and was not due to any fault or negligence of
petitioner, its agents, or servants. The respondents, by demurring to the petition in the

earlier case, admitted that allegation. In the case now before us that allegation is put in
issue, and we find nothing in the admitted statement of facts to support it. It results that
if that allegation is material to the relief here sought, the petition must fail.
We are of the opinion that the allegation in question is material and that the belief
sought in this case cannot be granted.
In section 646 of the Administrative Code it is provided that when Government property
is transmitted from one place to another by carrier, it shall be upon proper bill of lading,
or receipt, from such carrier, and it shall be the duty of the consignee, or his
representative, to make full notation of any evidence of loss, shortage, or damage, upon
the bill of lading, or receipt, before accomplishing it. It is admitted by the petitioner in the
agreed statement of facts that the consignee, at the time the oil was delivered, noted
the loss in the present case upon the two respective bills of lading. The notation of
these losses by the consignee, in obedience to the precept of section 646 of the
Administrative Code, is competent evidence to show that the shortage in fact existed.
As the petitioner admits that the oil was received by it for carriage and inasmuch as the
fact of loss is proved in the manner just stated, it results that there is a presumption that
the petitioner was to blame for the loss; and it was incumbent upon the petitioner in
order to entitle it to relief in the case to rebut that presumption by proving, as is alleged
in the petition, that the loss was not due to any fault or negligence of the petitioner.
The mere proof of delivery of goods in good order to a carrier, and of their arrival at the
place of destination in bad order, makes out a prima facie case against the carrier, so
that if no explanation is given as to how the injury occurred, the carrier must be held
responsible. (4 R. C. L., p. 917.) It is incumbent upon the carrier to prove that the loss
was due to accident or some other circumstance inconsistent with its liability. (Articles
361-363, Code of Commerce.) Indeed, if the Government of the Philippine Islands had
instituted an action in a court of law against the petitioner to recover the value of the oil
lost while these consignments were in the court of transportation, it would, upon the
facts appearing before us, have been entitled to judgment.
From this it is apparent that the mandamus prayed for cannot be granted. It is a rule of
universal application that a petition for extraordinary relief of the character here sought
must show merit. That is, the petitioner's right to relief must be clear. Such cannot be
said to be the case where, as here, a presumption of responsibility on the part of the
petitioner stands unrefuted upon the record.
We are of the opinion that, in the absence of proof showing that the carrier was not at
fault in respect to the matter under discussion, the Insular Auditor was entitled to
withhold, from the amount admittedly due to the petitioner for the freight charges, a sum
sufficient to cover the value of the oil lost in transit.
The petition will be dismissed, with costs against the petitioner. So ordered.

Transportation Laws

A. Common Carriers
B. Common Carriers of Goods
a. Liability and presumption of negligence (1733, 1734, 1735)
Mirasol v. Robot Dollar Co., 53 Phil. 125
AMANDO MIRASOL, plaintiff-appellant,
vs.
THE ROBERT DOLLAR CO., defendant-appellant.
STATEMENT
After the promulgation of the decision rendered by the Second Division of February 13,
1929,1 the defendant filed a motion to have the case heard and decided in banc, and
inasmuch as the legal questions involved are important to the shipping interests, the
court thought it best to do so.
After the formal pleas, plaintiff alleges that he is the owner and consignee of two cases
of books, shipped in good order and condition at New York, U.S.A., on board the
defendant's steamship President Garfield, for transport and delivery to the plaintiff in the
City of Manila, all freight charges paid. That the two cases arrived in Manila on
September 1, 1927, in bad order and damaged condition, resulting in the total loss of
one case and a partial loss of the other. That the loss in one case is P1,630, and the
other P700, for which he filed his claims, and defendant has refused and neglected to
pay, giving as its reason that the damage in question "was caused by sea water." That
plaintiff never entered into any contract with the defendant limiting defendant's liability
as a common carrier, and when he wrote the letter of September 3, 1927, he had not
then ascertained the contents of the damaged case, and could not determine their
value. That he never intended to ratify or confirm any agreement to limit the liability of
the defendant. That on September 9, 1927, when the other case was found, plaintiff
filed a claim for the real damage of the books therein named in the sum of $375.
Plaintiff prays for corresponding judgment, with legal interest from the filing of the
complaint and costs.
For answer the defendant made a general and specific denial, and as a separate and
special defense alleges that the steamship President Garfield at all the times alleged
was in all respects seaworthy and properly manned, equipped and supplied, and fit for
the voyage. That the damage to plaintiff's merchandise, if any, was not caused through
the negligence of the vessel, its master, agent, officers, crew, tackle or appurtenances,
nor by reason of the vessel being unseaworthy or improperly manned, "but that such
damage, if any, resulted from faults or errors in navigation or in the management of said
vessel." As a second separate and special defense, defendant alleges that in the bill of
lading issued by the defendant to plaintiff, it was agreed in writing that defendant should
not be "held liable for any loss of, or damage to, any of said merchandise resulting from

any of the following causes, to wit: Acts of God, perils of the sea or other waters," and
that plaintiff's damage, if any, was caused by "Acts of God" or "perils of the sea." As a
third special defense, defendant quoted clause 13 of the bill of lading, in which it is
stated that in no case shall it be held liable "for or in respect to said merchandise or
property beyond the sum of two hundred and fifty dollars for any piece, package or any
article not enclosed in a package, unless a higher value is stated herein and ad valorem
freight paid or assessed thereon," and that there was no other agreement. That no
September 3, 1927 the plaintiff wrote the defendant a letter as follows:
Therefore, I wish to file claim of damage to the meager maximum value that your
bills of lading will indemnify me, that is $250 as per condition 13.
As a fourth special defense, defendant alleges that the damage, if any, was caused by
"sea water," and that the bill of lading exempts defendant from liability for that cause.
That damage by "sea water" is a shipper's risk, and that defendant is not liable.
As a result of the trial upon such issues, the lower court rendered judgment for the
plaintiff for P2,080, with legal interest thereon from the date of the final judgment, with
costs, from which both parties appealed, and the plaintiff assigns the following errors:
I. The lower court erred in holding that plaintiff's damage on account of the loss of
the damaged books in the partially damaged case can be compensated with an
indemnity of P450 instead of P750 as claimed by plaintiff.
II. The lower court, consequently, also erred in giving judgment for plaintiff for
only P2,080 instead of P2,380.
III. The lower court erred in not sentencing defendant to pay legal interest on the
amount of the judgment, at least, from the date of the rendition of said judgment,
namely, January 30, 1928.
The defendant assigns the following errors:
I. The lower court erred in failing to recognize the validity of the limited liability
clause of the bill of lading, Exhibit 2.
II. The lower court erred in holding defendant liable in any amount and in failing
to hold, after its finding as a fact that the damage was caused by sea water, that
the defendant is not liable for such damage by sea water.
III. The lower court erred in awarding damages in favor of plaintiff and against
defendant for P2,080 or in any other amount, and in admitting, over objection,
Exhibits G, H, I and J.
JOHNS, J.:

Plaintiff's contention that he is entitled to P700 for his Encyclopedia Britannica is not
tenable. The evidence shows that the P400 that the court allowed, he could buy a new
set which could contain all of the material and the subject matter of the one which he
lost. Plaintiff's third assignment of error is well taken, as under all of the authorities, he is
entitled to legal interest from the date of his judgement rendered in the lower court and
not the date when it becomes final. The lower court found that plaintiff's damage was
P2,080, and that finding is sustained by that evidence. There was a total loss of one
case and a partial loss of the other, and in the very nature of the things, plaintiff could
not prove his loss in any other way or manner that he did prove it, and the trial court
who heard him testify must have been convinced of the truth of his testimony.
There is no claim or pretense that the plaintiff signed the bill of lading or that he knew of
his contents at the time that it was issued. In that situation he was not legally bound by
the clause which purports to limit defendant's liability. That question was squarely met
and decided by this court in banc in Juan Ysmael and Co., vs. Gabino Baretto and Co.,
(51 Phil., 90; see numerous authorities there cited).
Among such authorities in the case of The Kengsington decided by the Supreme Court
of the U.S. January 6, 1902 (46 Law. Ed., 190), in which the opinion was written by the
late Chief Justice White, the syllabus of which is as follows:
1. Restrictions of the liability of a steamship company for its own negligence or
failure of duty toward the passenger, being against the public policy enforced by
the courts of the United States, will not to be upheld, though the ticket was issued
and accepted in a foreign country and contained a condition making it subject to
the law thereof, which sustained such stipulation.
2. The stipulation in a steamship passenger's ticket, which compels him to value
his baggage, at a certain sum, far less than it is worth, or, in order to have a
higher value put upon it, to subject it to the provisions of the Harter Act, by which
the carrier would be exempted from all the liability therefore from errors in
navigation or management of the vessel of other negligence is unreasonable and
in conflict with public policy.
3. An arbitrary limitation of 250 francs for the baggage of any steamship
passenger unaccompanied by any right to increase the amount of adequate and
reasonable proportional payment, is void as against public policy.
Both the facts upon which it is based and the legal principles involved are square in
point in this case.
The defendant having received the two boxes in good condition, its legal duty was to
deliver them to the plaintiff in the same condition in which it received them. From the
time of their delivery to the defendant in New York until they are delivered to the plaintiff
in Manila, the boxes were under the control and supervision of the defendant and
beyond the control of the plaintiff. The defendant having admitted that the boxes were

damaged while in transit and in its possession, the burden of proof then shifted, and it
devolved upon the defendant to both allege and prove that the damage was caused by
reason of some fact which exempted it from liability. As to how the boxes were
damaged, when or where, was a matter peculiarly and exclusively within the knowledge
of the defendant and in the very nature of things could not be in the knowledge of the
plaintiff. To require the plaintiff to prove as to when and how the damage was caused
would force him to call and rely upon the employees of the defendant's ship, which in
legal effect would be to say that he could not recover any damage for any reason. That
is not the law.
Shippers who are forced to ship goods on an ocean liner or any other ship have some
legal rights, and when goods are delivered on board ship in good order and condition,
and the shipowner delivers them to the shipper in bad order and condition, it then
devolves upon the shipowner to both allege and prove that the goods were damaged by
the reason of some fact which legally exempts him from liability; otherwise, the shipper
would be left without any redress, no matter what may have caused the damage.
The lower court in its opinion says:
The defendant has not even attempted to prove that the two cases were wet with
sea water by fictitious event, force majeure or nature and defect of the things
themselves. Consequently, it must be presumed that it was by causes entirely
distinct and in no manner imputable to the plaintiff, and of which the
steamerPresident Garfield or any of its crew could not have been entirely
unaware.
And the evidence for the defendant shows that the damage was largely caused by "sea
water," from which it contends that it is exempt under the provisions of its bill of lading
and the provisions of the article 361 of the Code of Commerce, which is as follows:
Merchandise shall be transported at the risk and venture of the shipper, if the
contrary was not expressly stipulated.
Therefore, all damages and impairment suffered by the goods during the
transportation, by reason of accident, force majeure, or by virtue of the nature or
defect of the articles, shall be for the account and risk of the shipper.
The proof of these accidents is incumbent on the carrier.
In the final analysis, the cases were received by the defendant in New York in good
order and condition, and when they arrived in Manila, they were in bad condition, and
one was a total loss. The fact that the cases were damaged by "sea water," standing
alone and within itself, is not evidence that they were damaged by force majeure or for a
cause beyond the defendant's control. The words "perils of the sea," as stated in
defendant's brief apply to "all kinds of marine casualties, such as shipwreck, foundering,
stranding," and among other things, it is said: "Tempest, rocks, shoals, icebergs and

other obstacles are within the expression," and "where the peril is the proximate cause
of the loss, the shipowner is excused." "Something fortuitous and out of the ordinary
course is involved in both words 'peril' or 'accident'."
Defendant also cites and relies on the case of Government of the Philippine Islands vs.
Ynchausti & Company (40 Phil., 219), but it appears from a reading of that case that the
facts are very different and, hence, it is not in point. In the instant case, there is no claim
or pretense that the two cases were not in good order when received on board the ship,
and it is admitted that they were in bad order on their arrival at Manila. Hence, they
must have been damaged in transit. In the very nature of things, if they were damaged
by reason of a tempest, rocks, icebergs, foundering, stranding or the perils of the sea,
that would be a matter exclusively within the knowledge of the officers of defendant's
ship, and in the very nature of things would not be within plaintiff's knowledge, and upon
all of such questions, there is a failure of proof.
The judgment of the lower court will be modified, so as to give the plaintiff legal interest
on the amount of his judgment from the date of its rendition in the lower court, and in all
respects affirmed, with costs. So ordered.

Transportation Laws
A. Common Carriers
B. Common Carriers of Goods
b. Exemption from Liability
i. Natural Disaster (1734 etc.)
Tan Chiong v. Inchausti, 22 phil 153
G.R. No. L-6092

March 8, 1912

TAN CHIONG SIAN, plaintiff-appellee,

vs.
INCHAUSTI AND CO., defendant-appellant.
This is an appeal through bill of exceptions, by counsel for the firm of Inchausti & Co.,
from a judgment rendered by the Honorable A.S. Crossfield, judge.
On January 11, 1909, the Chinaman, Tan Chiong Sian or Tan Chinto, filed a written
complaint, which was amended on the 28th of the same month and again amended on
October 27 of the same year, against the said firm, wherein he alleged, among other
things, as a cause of action: That, on or about November 25, 1908, the plaintiff
delivered to the defendant 205 bundles or cases of general merchandise belonging to
him, which Inchausti & Co., upon receiving, bound themselves to deliver in the pueblo of
Catarman, Province of Samar, to the Chinaman, Ong Bieng Sip, and in consideration of
the obligations contracted by the defendant party, the plaintiff obligated himself to pay to

the latter the sum of P250 Philippine currency, which payment should be made upon the
delivery of the said merchandise in the said pueblo Catarman; but that the defendant
company neither carried nor delivered the aforementioned merchandise to the said Ong
Bieng Sip, in Catarman, but unjustly and negligently failed to do so, with the result that
the said merchandise was almost totally lost; that, had the defendant party complied
well and faithfully with its obligation, according to the agreement made, the merchandise
concerned would have a value of P20,000 in the said pueblo of Catarman on the date
when it should have been delivered there, wherefore the defendant party owed the
plaintiff the said sum of P20,000, which it had not paid him, or any part thereof,
notwithstanding the many demands of the plaintiff; therefore the latter prayed for
judgment against the defendant for the said sum, together with legal interest thereon
from November 25, 1908, and the costs of the suit.
Counsel for the defendant company, in his answer, set forth, that he admitted the
allegations of paragraphs 1 and 2 of the complaint, amended for the second time, and
denied those paragraphs 3, 4, 5, 6 and 7 of the same. As his first special defense, he
alleged that on or about November 28, 1908, his client, the said firm, received in Manila
from Ong Bieng Sip 205 bundles, bales, or cases of merchandise to be placed on board
the steamerSorsogon, belonging to the defendant, for shipment to the port of Gubat,
Province of Sorsogon, to be in the said port transshipped into another of the defendant's
vessels for transportation to the port of Catarman, Samar, and delivered to the aforesaid
Chinaman, Ong Bieng Sip; that the defendant company, upon receiving the said
merchandise from the latter, Ong Bieng Sip, and on its entering into a contract of
maritime transportation with him did not know and was not notified that the plaintiff, Tan
Chiong Sian, had any interest whatever in the said merchandise and had made with the
plaintiff no contract relative to the transportation of such goods, for, on receiving the
latter from the said Ong Bieng Sip, for transportation, there were made out and
delivered to him three bills of lading, Nos. 38, 39 and 76, which contained a list of the
goods received and, printed on the back thereof were the terms of the maritime
transportation contract entered into by and between the plaintiff and the defendant
company, copies of which bills of lading and contract, marked as Exhibits A, B, and C,
are of record, attached to and made an integral part of the said answer; that Ong Bieng
Sip accepted the said bills of lading and the contract extended on the backs thereof;
that the merchandise mentioned was put on board the steamerSorsogon and carried to
the port of Gubat, Province of Sorsogon, where this vessel arrived on November 28,
1908, on which date the lorcha Pilar, into which the said merchandise was to be
transshipped for carriage to Catarman, was not at Gubat, and therefore the goods had
to be unloaded and stored in the defendant company's warehouses at Gubat; that, on
the 4th of December of the same year, the lorcha Pilar arrived at Gubat and, after the
termination of certain necessary work, the goods received from Chinaman, Ong Bieng
Sip, were taken aboard the same, together with other merchandise belonging to the
defendant party, for the purpose of transportation to the port of Catarman; that, before
the said lorcha could leave for its destination, a strong wind arose which in the course of
the day increased in force until, early in the morning of the following day, the lorcha was
dragged and driven, by the force of the storm, upon the shore, despite the means
employed by the crew to avoid the accident, and notwithstanding the five anchors that

held the craft, which was thus wrecked and completely destroyed and the merchandise
with which it was laden, including the 205 bundles or packages taken aboard for the
said Chinaman, was scattered on the shore; that, on the occasion, the lorcha Pilar was
in good condition, provided with all the proper and necessary equipment and
accessories and carried a crew of sufficient number in command of a skillful patron or
master, wherefore the wreck of the said craft was solely due to the irresistible force of
the elements and of the storm which drove it upon the shore; that the defendant
company, with the greatest possible diligence, gathered up the said shipwrecked goods
that had been shipped by the Chinaman, Ong Bieng Sip, but, owing to the damage they
had suffered, it was impossible to preserve them, so, after having offered to deliver
them to him, the defendant proceeded, in the presence of a notary, to sell them at public
auction and realized from the sale thereof P1,693.67, the reasonable value of the same
in the condition in which they were after they had been gathered up and salved from the
wreck of the lorcha Pilar; that the expenses occasioned by such salvage and sale of the
said goods amounted to P151.35, which were paid by the defendant party; that the
latter offered to the Chinese shipper, the plaintiff, the amount realized from the sale of
the said merchandise, less P151.35, the amount of the expenses, and the sum of P250,
the amount of the freight stipulated, and is still willing to pay such products of the said
sale to the aforementioned Ong Bieng Sip or to any other person who should establish
his subrogation to the rights of the Chinaman, Ong Bieng Sip, with respect to the said
amount; that, as his client's second special defense, the defendant company alleged
that one of the conditions of the shipping contract executed between it and the
Chinaman, Ong Bieng Sip, relative to the transportation of the said merchandise, was
that the said firm should not be held liable for more than P25 for any bundle or package,
unless the value of its contents should be stated in the bill of lading, and that the
shipper, Chinaman, Ong Bieng Sip, did not state in the bill of lading the value of any of
the bundles or packages in which the goods shipped by him were packed. Counsel for
the defendant company, therefore, prayed the court to absolve his client from the
complaint, with costs against the plaintiff.
After the hearing of the case and the introduction of testimony by the parties, judgment
was rendered, on March 18, 1910, in favor of the plaintiff, Tan Chiong Sian or Tan
Chinto, against the defendant Inchausti and Co., for the sum of P14,642.63, with
interest at the rate of 6 per cent per annum from January 11, 1909, and for the costs of
the trial. The defendant party appealed from this judgment.
This suit was brought for the purpose of collecting a certain sum which it is alleged the
defendant firm owes the plaintiff for losses and damages suffered by the latter as a
result of the former's noncompliance with the terms of an agreement or contract to
transport certain merchandise by sea from this city to the pueblo of Catarman, Island of
Samar, for the sum of P250.
The principal question to be determined is whether the defendant is liable for the loss of
the merchandise and for failure to deliver the same at the place of destination, or
whether he is relieved from responsibility on the ground of force majeure.

Article 1601 of the Civil Code prescribes:

Carriers of goods by land or by water shall be subject with regard to the keeping
and preservation of the things entrusted to them, to the same obligations as
determined for innkeepers by articles 1783 and 1784.
The provisions of this article shall be understood without prejudice to what is
prescribed by the Code of Commerce with regard to transportation by sea and
land.
Article 1602 reads:
Carriers are also liable for the loss of and damage to the things which they
receive, unless they prove that the loss or damage arose from a fortuitous event
or force majeure.
The articles aforecited are as follows:
ART. 1783. The depositum of goods made by travelers in inns or hostelries shall
also be considered a necessary one. The keepers of inns and hostelries are
liable for them as such bailees, provided that notice thereof may have been given
to them or to their employees, and that the travelers on their part take the
precautions which said innkeepers or their substitutes may have advised them
concerning the care and vigilance of said goods.
ART. 1784. The liability referred to in the preceding article shall include damages
to the goods of the travelers caused the servants or employees of the keepers for
inns or hostelries as well as by strangers, but not those arising from robbery or
which may be caused by any other case of force majeure.
Article 361 of the Code of Commerce provides:
Merchandise shall be transported at the risk and venture of the shipper, unless
the contrary was expressly stipulated.
Therefore, all damages and impairment suffered by the goods in transportation,
by reason of accident,force majeure, or by virtue of the nature or defect of the
articles, shall be for the account and risk of the shipper.
The proof of these accidents in incumbent on the carrier.
ART. 362. The carrier, however, shall be liable for the losses and damages
arising from the causes mentioned in the foregoing article if it is proved that they
occurred on account of his negligence or because he did not take the
precautions usually adopted by careful persons, unless the shipper committed

fraud in the bill of lading, stating that the goods were of a class or quality different
from what they really were.
If, notwithstanding the precaution referred to in this article, the goods transported
run the risk of being lost on account of the nature or by reason of an unavoidable
accident, without there being time for the owners of the same to dispose thereof,
the carrier shall proceed to their sale, placing them for this purpose at the
disposal of the judicial authority or of the officials determined by special
provisions.
ART. 363. With the exception of the cases prescribed in the second paragraph of
article 361, the carrier shall be obliged to deliver the goods transported in the
same condition in which, according to the bill of lading, they were at the time of
their receipt, without any detriment or impairment, and should he not do so, he
shall be obliged to pay the value of the goods not delivered at the point where
they should have been and at the time the delivery should have taken place.
If part of the goods transported should be delivered the consignee may refuse to
receive them, when he proves that he can not make use thereof without the
others.
On November 25, 1908, Inchausti & Co. received in Manila from the Chinaman, Ong
Bieng Sip, 205 bundles, bales or cases of goods to be conveyed by the
steamer Sorsogon to the port of Gubat, Province of Sorsogon, where they were to be
transshipped to another vessel belonging to the defendant company and by the latter
transported to the pueblo of Catarman, Island of Samar, there to be delivered to the
Chinese shipper with whom the defendant party made the shipping contract. To this end
three bills of lading were executed, Nos. 38, 39, and 76, copies of which, marked as
Exhibits A, B, and C, are found on pages 13, 14, and 15 of the record.
The steamer Sorsogon, which carried the goods, arrived at the port of Gubat on the
28th of that month and as thelorcha Pilar, to which the merchandise was to be
transshipped for its transportation to Catarman, was not yet there, the cargo was
unloaded and stored in the defendant company's warehouses at that port.
Several days later, the lorcha just mentioned arrived at Gubat and, after the cargo it
carried had been unloaded, the merchandise belonging to the Chinaman, Ong Bieng
Sip, together with other goods owned by the defendant Inchausti & Co., was taken
aboard to be transported to Catarman; but on December 5, 1908, before the Pilarcould
leave for its destination, towed by the launch Texas, there arose and, as a result of the
strong wind and heavy sea, the lorcha was driven upon the shore and wrecked, and its
cargo, including the Chinese shipper's 205 packages of goods, scattered on the beach.
Laborers or workmen of the defendant company, by its order, then proceeded to gather
up the plaintiff's merchandise and, as it was impossible to preserve it after it was salved
from the wreck of the lorcha, it was sold at public auction before a notary for the sum of
P1,693.67.

The contract entered into between the Chinese shipper, Ong Bieng Sip, and the firm of
Inchausti & Co., provided that transportation should be furnished from Manila to
Catarman, although the merchandise taken aboard the steamer Sorsogon was to be
transshipped at Gubat to another vessel which was to convey it from that port to
Catarman; it was not stipulated in the said contract that the Sorsogon should convey the
goods to their final destination, nor that the vessel into which they were to be
transshipped, should be a steamer. The shipper, Ong Bieng Sip, therefore assented to
these arrangements and made no protest when his 205 packages of merchandise were
unloaded from the ship and, on account of the absence of the lorcha Pilar, stored in the
warehouses at Gubat nor did he offer any objection to the lading of his merchandise on
to this lorcha as soon as it arrived and was prepared to receive cargo; moreover, he
knew that to reach the port of Catarman with promptness and dispatch, the lorcha had
to be towed by some vessel like the launch Texas, which the defendant company had
been steadily using for similar operations in those waters.
Hence the shipper, Ong Bieng Sip, made no protest or objection to the methods
adopted by the agents of the defendant for the transportation of his gods to the port of
their destination, and the record does not show that in Gubat the defendant possessed
any other means for the conveyance and transportation of merchandise, at least for
Catarman, than the lorcha Pilar, towed by said launch and exposed during its passage
to all sorts of accidents and perils from the nature and seafaring qualities of a lorcha,
from the circumstances then present and the winds prevailing on the Pacific Ocean
during the months of November and December.
It is to be noted that a lorcha is not easily managed or steered when the traveling, for,
out at sea, it can only be moved by wind and sails; and along the coast near the shore
and in the estuaries where it customarily travels, it can only move by poling. For this
reason, in order to arrive at the pueblo of Catarman with promptness and dispatch,
the lorcha was usually towed by the launch Texas.
The record does not show that, from the afternoon of the 4th of December, 1908, until
the morning of the following day, the 5th, the patron or master of the lorcha which was
anchored in the cove of Gubat, received any notice from the captain of the steamer Ton
Yek, also anchored near by, of the near approach of a storm. The said captain, Juan
Domingo Alberdi, makes no reference in his sworn testimony of having given any such
notice to thepatron of the lorcha, nor did the latter, Mariano Gadvilao, testify that he
received such notice from the captain of the Ton Yek or from the person in charge of the
Government observatory. Gadvilao, the patron, testified that only between 10 and 11
o'clock of Saturday morning, the 5th of December, was he informed by Inchausti & Co.'s
agent in Gubat that a baguio was approaching; that thereupon, on account of the
condition of the sea, he dropped the four anchors that the lorcha had on board and
immediately went ashore to get another anchor and a new cable in order more securely
to hold the boat in view of the predicted storm. This testimony was corroborated by the
said representative, Melchor Muoz. So the lorcha, when the storm broke upon it, was
held fast by five anchors and was, as testified by the defendant without contradiction or

evidence to the contrary, well found and provided with all proper and necessary
equipment and had a sufficient crew for its management and preservation.
The patron of the lorcha testified specifically that at Gubat or in its immediate vicinity
there is no port whatever adequate for the shelter and refuge of vessels in cases of
danger, and that, even though there were, on being advised between 10 and 11 o'clock
of the morning of the 5th, of the approach of a storm from the eastern Pacific, it would
have been impossible to spread any sails or weigh anchor on the lorcha without being
dragged or driven against the reefs by the force of the wind. As the craft was not
provided with steam or other motive power, it would not have been possible for it to
change its anchorage, nor move from the place where it lay, even several hours before
the notice was received by its patron. A lorcha can not be compared with a steamer
which does not need the help or assistance of any other vessel in its movements.
Due importance must be given to the testimony of the weather observer, Antonio Rocha,
that the notice received from the Manila Observatory on the afternoon of December 4,
with regard to a storm travelling from the east of the Pelew Islands toward the
northwest, was not made known to the people of Gubat and that he merely left a
memorandum notice on the desk of the station, intending to give explanations thereof to
any person who should request them of him. So the notice of the storm sent by the
Manila Observatory was only known to the said observer, and he did not apprise the
public of the approach of the storm until he received another notice from Manila at 20
minutes past 8 o'clock on Saturday morning, December 5. Then he made a public
announcement and advised the authorities of the storm that was coming.
The patron of the lorcha Pilar is charged with gross negligence for not having
endeavored to remove his craft to a safe place in the Sabang River, about half a mile
from where it was anchored.
In order to find out whether there was or was not such negligence on the part of
the patron, it becomes necessary to determine, first, whether the lorcha, on the morning
of December 5, could be moved by its own power and without being towed by any
steamboat, since it had no steam engine of its own; second, whether the lorcha, on
account of its draft and the shallowness of the mouth of the said river, could have
entered the latter before the storm broke.
The patron, Mariano Gadvilao, stated under oath that the weather during the night of
December 4 was not threatening and he did not believe there would be a storm; that he
knew the Sabang River; and that the lorchaPilar, when loaded, could not enter as there
was not sufficient water in its channel; that, according to an official chart of the port of
Gubat, the bar of the Sabang River was covered by only a foot and a half of water at
ordinary low tide and the lorcha Pilar, when loaded, drew 6 feet and a half; that aside
from the fact that the condition of the sea would not have permitted the lorcha to take
shelter in the said river, even could it have relied upon the assistance of a towboat, at
half past 8 o'clock in the morning the tide was still low; there was but little water in the
river and still less over the bar.

It was proven by the said official chart of the port of Gubat, that the depth of water over
the bar or entrance of the Sabang River is only one foot and a half at ordinary low tide;
that the rise and fall of the tide is about 4__ feet, the highest tide being at 2 o'clock in
the afternoon of every day; and at that hour, on the 5th of December, the hurricane had
already made its appearance and the wind was blowing with all its fury and raising great
waves.
The lorcha Pilar, loaded as it had been from the afternoon of December 4, even though
it could have been moved by means of poles, without being towed, evidently could not
have entered the Sabang River on the morning of the 5th, when the wind began to
increase and the sea to become rough, on account of the low tide, the shallowness of
the channel, and the boat's draft.
The facts stated in the foregoing paragraph were proved by the said chart which was
exhibited in evidence and not rejected or assailed by the plaintiff. They were also
supported by the sworn testimony of the patron of thelorcha, unrebutted by any oral
evidence on the part of the plaintiff such as might disprove the certainty of the facts
related, and, according to section 275 of the Code of Civil Procedure, the natural
phenomenon of the tides, mentioned in the official hydrographic map, Exhibit 7, which
is prima facie evidence on the subject, of the hours of its occurrence and of the
conditions and circumstances of the port of Gubat, shall be judicially recognized without
the introduction of proof, unless the facts to the contrary be proven, which was not done
by the plaintiff, nor was it proven that between the hours of 10 and 11 o'clock of the
morning of December 5, 1908, there did not prevail a state of low tide in the port of
Gubat.
The oral evidence adduced by the plaintiff with respect to the depth of the Sabang
River, was unable to overcome that introduced by the defendant, especially the said
chart. According to section 320 of the Code of Civil Procedure, such a chart is prima
facie evidence of particulars of general notoriety and interest, such as the existence of
shoals of varying depths in the bar and mouth of the Sabang River and which obstruct
the entrance into the same; the distance, length, and number of the said shoals, with
other details apparently well known to thepatron of the lorcha Pilar, to judge from his
testimony.
Vessels of considerable draft, larger than the said lorcha, might have entered the
Sabang River some seven or nine years before, according to the testimony of the
Chinaman, Antonio B. Yap Cunco, though he did not state whether they did so at high
tide; but, since 1901, or previous years, until 1908, changes may have taken place in
the bed of the river, its mouth and its bar. More shoals may have formed or those in
existence may have increased in extent by the constant action of the sea. This is the
reason why the patron, Gadvilao, who was acquainted with the conditions of the port
and cove of Gubat, positively declared that the lorcha Pilar could not, on account of her
draft, enter the Sabang River, on account of low water.

The patron of the lorcha, after stating (p.58) that at Gubat or in its vicinity there is no
port that affords shelter, affirmed that it was impossible to hoist the sails or weigh the
anchors on the morning of the 5th of December, owing to the force of the wind and
because the boat would immediately have been dragged or driven upon the shoals; that
furthermore the lorcha was anchored in a channel some 300 brazas wide, but,
notwithstanding this width, the Pilar was, for want of motive power, unable to move
without being exposed to be dashed against the coast by the strong wind and the heavy
sea then prevailing. The testimony of this witness was neither impugned nor offset by
any evidence whatever; he was a patron of long years of service and of much practice
in seafaring, especially in the port of Gubat and its vicinity, who had commanded or
been intrusted with the command of other crafts similar to the lorcha Pilar and his
testimony was absolutely uncontradicted.
The patron Gadvilao, being cognizant of the duties imposed upon him by rules 14 and
15 of article 612, and others, of the Code of Commerce, remained with sailors, during
the time the hurricane was raging, on board thelorcha from the morning of December 5
until early the following morning, the 6th, without abandoning the boat, notwithstanding
the imminent peril to which he was exposed, and kept to his post until after the wreck
and thelorcha had been dashed against the rocks. Then he solicited help from the
captain of the steamer Ton Yek, and, thanks to the relief afforded by a small boat sent
by the latter officer, Gadvilao with his crew succeeded in reaching land and immediately
reported the occurrence to the representative of Inchausti & Co. and to the public official
from whom he obtained the document of protest, Exhibit 1. By such procedure, he
showed that, as apatron skilled in the exercise of his vocation, he performed the duties
imposed by law in cases of shipwreck brought about by force majeure.
Treating of shipwrecks, article 840 of the Code of Commerce prescribes:
The losses and damages suffered by a vessel and her cargo by reason of
shipwreck or standing shall be individually for the account of the owners, the part
of the wreck which may be saved belonging to them in the same proportion.
And Article 841 of the same code reads:
If the wreck or stranding should arise through the malice, negligence, or lack of
skill of the captain, or because the vessel put to sea insufficiently repaired and
supplied, the owner or the freighters may demand indemnity of the captain for the
damages caused to the vessel or cargo by the accident, in accordance with the
provisions contained in articles 610, 612, 614, and 621.
The general rule established in the first of the foregoing articles is that the loss of the
vessel and of its cargo, as the result of shipwreck, shall fall upon the respective owners
thereof, save for the exceptions specified in the second of the said articles.
These legal provisions are in harmony with those of articles 361 and 362 of the Code of
Commerce, and are applicable whenever it is proved that the loss of, or damage to, the

goods was the result of a fortuitous event or offorce majeure; but the carrier shall be
liable for the loss or the damage arising from the causes aforementioned, if it shall have
been proven that they occurred through his own fault or negligence or by his failure to
take the same precautions usually adopted by diligent and careful persons.
In the contract made and entered into by and between the owner of the goods and the
defendant, no term was fixed within which the said merchandise should be delivered to
the former at Catarman, nor was it proved that there was any delay in loading the goods
and transporting them to their destination. From the 28th of November, when the
steamer Sorsogon arrived at Gubat and landed the said goods belonging to Ong Bieng
Sip to await thelorcha Pilar which was to convey them to Catarman, as agreed upon, no
vessel carrying merchandise made the voyage from Gubat to the said pueblo of the
Island of Samar, and with Ong Bieng Sip's merchandise there were also to be shipped
goods belonging to the defendant company, which goods were actually taken on board
the said lorcha and suffered the same damage as those belonging to the Chinaman. So
that there was no negligence, abandonment, or delay in the shipment of Ong Bieng
Sip's merchandise, and all that was done by the carrier, Inchausti & Co., was what it
regularly and usually did in the transportation by sea from Manila to Catarman of all
classes of merchandise. No attempt has been made to prove that any course other than
the foregoing was pursued by that firm on this occasion; therefore the defendant party is
not liable for the damage occasioned as a result of the wreck or stranding of
the lorcha Pilar because of the hurricane that overtook this craft while it was anchored in
the port of Gubat, on December 5, 1908, ready to be conveyed to that of Catarman.
It is a fact not disputed, and admitted by the plaintiff, that the lorcha Pilar was stranded
and wrecked on the coast of Gubat during the night of the 5th or early in the morning of
the 6th of December, 1908, as a result of a violent storm that came from the Pacific
Ocean, and, consequently, it is a proven fact that the loss or damage of the goods
shipped on the said lorcha was due to the force majeure which caused the wreck of the
said craft.
According to the aforecited article 361 of the Code of Commerce, merchandise shall be
transported at the risk and venture of the shipper, unless the contrary be expressly
stipulated. No such stipulation appears of record, therefore, all damages and
impairment suffered by the goods in transportation, by reason of accident, force
majeure, or by virtue of the nature or defect of the articles, are for the account and risk
of the shipper.
A final clause of this same article adds that the burden of proof of these accidents is
upon the carrier; the trial record fully discloses that the loss and damage of the goods
shipped by the Chinaman, Ong Bieng Sip, was due to the stranding and wreck of
the lorcha Pilar in the heavy storm or hurricane aforementioned; this the plaintiff did not
deny, and admitted that it took place between the afternoon of the 5th and early in the
morning of the 6th of December, 1908, so it is evident that the defendant is exempt from
the obligation imposed by the law to prove the occurrence of the said storm, hurricane,
or cyclone in the port of Gubat, and, therefore, if said goods were lost or damaged and

could not be delivered in Catarman, it was due to a fortuitous event and a superior,
irresistible natural force, or force majeure, which completely disabled
the lorcha intended for their transportation to the said port of the Island of Samar.
The record bears no proof that the said loss or damage caused by the stranding or
wreck of the lorcha Pilar as a result of the storm mentioned, occurred through
carelessness or negligence on the part of the defendant company, its agents or
the patron of the said lorcha, or because they did not take the precautions usually
adopted by careful and diligent persons, as required by article 362 of the Code of
Commerce; the defendant company, as well as its agents and the patron of the lorcha,
had a natural interest in preserving the craft and its own goods laden therein an
interest equal to that of the Chinese shipper in preserving his own which were on board
the ship lorcha and, in fact, the defendant, his agents and the patron did take the
measures which they deemed necessary and proper in order to save the lorcha and its
cargo from the impending danger; accordingly, thepatron, as soon as he was informed
that a storm was approaching, proceeded to clear the boat of all gear which might offer
resistance to the wind, dropped the four anchors he had, and even procured an extra
anchor from the land, together with a new cable, and cast it into the water, thereby
adding, in so far as possible, to the stability and security of the craft, in anticipation of
what might occur, as presaged by the violence of the wind and the heavy sea; and
Inchausti & Company's agent furnished the articles requested by the patron of
the lorcha for the purpose of preventing the loss of the boat; thus did they all display all
the diligence and care such as might have been employed by anyone in similar
circumstances, especially the patron who was responsible for the lorcha under his
charge; nor is it possible to believe that the latter failed to adopt all the measures that
were necessary to save his own life and those of the crew and to free himself from the
imminent peril of shipwreck.
In view of the fact that the lorcha Pilar had no means of changing its anchorage, even
supposing that there was a better one, and was unable to accept help from any steamer
that might have towed it to another point, as wherever it might have anchored, it would
continually have been exposed to the lashing of the waves and to the fury of the
hurricane, for the port of Gubat is a cove or open roadstead with no shelter whatever
from the winds that sweep over it from the Pacific Ocean, and in view of the
circumstances that it was impossible for the saidlorcha, loaded as it then was, to have
entered the Sabang River, even though there had been a steamer to tow it, not only
because of an insufficient depth of water in its channel, but also on account of the very
high bar at the entrance of the said river, it is incontrovertible that the stranding and
wreck of the lorcha Pilar was due to a fortuitous event or to force majeure and not to the
fault and negligence of the defendant company and its agents or of the patron, Mariano
Gadvilao, inasmuch as the record discloses it to have been duly proved that the latter, in
difficult situation in which unfortunately the boat under his charge was placed, took all
the precautions that any diligent man should have taken whose duty it was to save the
boat and its cargo, and, by the instinct of self-preservation, his own life and those of the
crew of the lorcha; therefore, considering the conduct of the patron of the lorcha and
that of the defendant's agent in Gubat, during the time of the occurrence of the disaster,

the defendant company has not incurred any liability whatever for the loss of the goods,
the value of which is demanded by the plaintiff; it must, besides, be taken into account
that the defendant itself also lost goods of its own and the lorcha too.
From the moment that it is held that the loss of the said lorcha was due to force
majeure, a fortuitous event, with no conclusive proof or negligence or of the failure to
take the precautions such as diligent and careful persons usually adopt to avoid the loss
of the boat and its cargo, it is neither just nor proper to attribute the loss or damage of
the goods in question to any fault, carelessness, or negligence on the part of the
defendant company and its agents and, especially, the patron of the lorcha Pilar.
Moreover, it is to be noted that, subsequent to the wreck, the defendant company's
agent took all the requisite measures for the salvage of such of the goods as could be
recovered after the accident, which he did with the knowledge of the shipper, Ong Bieng
Sip, and, in effecting their sale, he endeavored to secure all possible advantage to the
Chinese shipper; in all these proceedings, as shown by the record, he acted in
obedience to the law.
From all the foregoing it is concluded that the defendant is not liable for the loss and
damage of the goods shipped on the lorcha Pilar by the Chinaman, Ong Bieng Sip,
inasmuch as such loss and damage were the result of a fortuitous event or force
majeure, and there was no negligence or lack of care and diligence on the part of the
defendant company or its agents.
Therefore, we hold it proper to reverse the judgment appealed from, and to absolve, as
we hereby do, the defendant, Inchausti & Co., without special findings as to costs.
Separate Opinions
MORELAND, J., dissenting:
In my opinion the decision of the court below, which this court reverses, is clearly in
accordance with law and in strict conformity with equity and justice. The defendant, a
shipowner, agreed with the plaintiff to transport P14,000 worth of property from Manila
to Catarman, Province of Samar. The defendant never fulfilled its contract. Instead of
delivering the property at Catarman, Province of Samar, it left it on board of a lorcha in
the waters of Gubat, a port in the southern part of the Island of Luzon, where, during a
storm, the lorcha foundered and the property was lost.
This court holds that the Chinaman must lose his property. This is the manner in which
the defendant lost the goods of the plaintiff:
The Sorsogon, on which the goods were loaded at Manila, arrived at Gubat about the
28th of November, 1908. A few days later the lorcha Pilar arrived at Gubat, towed by the
tug Texas. The lorcha was without means of locomotion of its own, except its sails,
which, from the record, appear never to have been used and were substantially useless,

and could move about and protect itself from the weather only by being towed or
"poled." The only boat on the coast owned by the defendant which could tow
the lorcha was the tug Texas. Sometime before the 5th of December, at least one day
before the storm broke, the goods belonging to the plaintiff were loaded on this lorcha.
The tug Texas, under the orders of the defendant, left the locality where the lorcha was
loaded and did not return until after it was wrecked.
Let us see what were the conditions at the time the defendant voluntarily and
unnecessarily placed the property of the plaintiff on the lorcha Pilar:
(1) It must be remembered that Gubat is located on the Pacific coast. The waters of
Gubat are not protected waters; they are not inclosed; they are in the form of a bay;
they are directly open to the winds from the Pacific Ocean, without protection or shelter
of any kind, except possibly the mouth of the river, a matter here in dispute and which
will be referred to later. They are likewise open to the full sweep of the waves of the
Pacific coming from its widest reaches.
(2) At the time the plaintiff's goods were loaded upon the lorcha Pilar it was the height of
the typhoon season in that locality. The prevailing winds were from the Pacific.
Destructive baguios might reasonably be expected at any time. It was only with the
exercise of diligence and prudence that shipping could be protected therefrom.
(3) As I have before indicated, the lorcha Pilar had substantially no means of locomotion
of its own and depended for its protection in stormy weather entirely upon the steam
tug Texas or being "poled" into the mouth of the river by its crew. At the time of the
storm which destroyed the lorcha, and for some time prior thereto and for some days
thereafter, the Texas was at the port of Barcelona, on the coast several miles south of
Gubat, having been sent by order of the defendant, its owner.
Summarizing, then, we have the defendant voluntarily placing the property of the
plaintiff upon the kind of craft above described, dispatching to a distant port substantially
the only means of locomotion and protection which that craft had, except, as we have
said, by being poled, placing that lorcha in waters directly exposed to the winds and
waves of the Pacific and at the mercy of every baguio that blew; and this during a
season of the year when winds were generally high and destructive baguios might be
expected at any time, and with full knowledge that if a typhoon came while the agents of
the defendant were unprepared the property of the plaintiff would in all probability be
lost.
Having these facts in mind, let us see what the agents of the defendant did to protect
the property of the plaintiff which they had voluntarily placed in a situation of such peril.
(4) At the time of the destruction of the lorcha there was a Government weather
observatory at Gubat which received advices many hours in advance of the approach of
a typhoon toward the locality. It had been there for some years. The purpose of that
observatory was to furnish information to the public concerning the formation and

approach of typhoons from the Pacific and of warning the people with exposed shipping
to take such precautions as were necessary for its protection. This was known to the
defendant's agents at Gubat. They knew that the observatory had a public office, open
to anybody who cared to visit it, in which would be found all of the latest information
relating to storms and baguios coming from the Pacific Ocean. They knew that the
officials of said observatory were there for the express purpose of giving such
information. The defendant's agents had at Gubat a barometer and all the other
instruments usually kept by seamen and navigators for forecasting the weather.
(5) As we have said, the storm occurred on the 5th of December. It wrought its greatest
havoc late in the afternoon and the early part of the night. At about 2 o'clock on the day
before the storm, that is, on the 4th of December, the observatory at Gubat received
notice from the Manila observatory that a baguio was forming in the Pacific Ocean. At
about the same time at Barcelona, only 10 miles south of Gubat, the barometer on
board the Texas dropped so rapidly as to indicate such dangerous weather probabilities
that the captain of the Texas deemed it unsafe to venture out of the harbor. On the
same afternoon the barometer on board the only steam vessel near Gubat, the Ton Yek,
also went down. Although it does not expressly appear in the evidence, yet it is an
inference entirely fair from the record, and against which nothing whatever can be
urged, that the barometer in the possession of agents of the defendant also dropped
with the same rapidity. In all human probability this could not be otherwise in view of the
rapid and decisive fall of the barometer on board the Texas, only 10 miles away, and the
fact that the typhoon broke over both places equally. At the same time, and more
pronounced a little later, every symptom which men who have to deal with the sea could
and would readily observe, and which the captain of the Ton Yek did observe as a
matter of fact, indicated the approach of a heavy storm. These evidences were heeded
by the captain of the Ton Yek, who, early on the morning of the 5th, without waiting for
the appearance of a storm signal at the observatory, sent a messenger to the
observatory for the purpose of ascertaining with more accuracy what was going to
happen. In spite of all these things, most of which occurred on the afternoon or evening
of the day preceding the storm, the agents of the defendant did absolutely nothing to
inform themselves as to the prospective whether conditions or as to whether or not
a baguio was approaching, and did absolutely nothing to preserve or protect the
property which they had placed in so exposed and dangerous a place.
(6) The morning of the 5th arrived. As we have already stated, all of the signs which
men who have to do with the sea so readily read indicated unquestionably and
decisively the approach of the storm which the advices received by the observatory at 2
o'clock on the afternoon before told the inhabitants of that locality was probably coming.
Still the agents of the defendant did nothing. The captain of the Ton Yek, although his
vessel was a steam vessel and was able to take care of itself by reason of its
machinery, judging these signs and portents, found it advisable to consult with the
observatory early on the morning of the 5th. The approach of a storm was apparent to
him and he took precautions accordingly. Yet the agents of the defendant did nothing.
Although the lorcha on which they had put the property of the plaintiff was, according to
their own admissions, utterly unprotected, and although P14,000 worth of goods

intrusted to their care was in great danger of being lost, still they did absolutely nothing,
either by anticipation or otherwise, to protect that property therefrom.
(7) On the morning of the 5th at about 8.20 or 8.30 o'clock the observatory run up the
first danger signal. Still the agents of the defendant noted nothing, did nothing. They
paid absolutely no attention to it, as they had paid no attention whatever to the other
indications. They left the lorcha to its fate without lifting a finger to save it. At 9 o'clock
the wind had risen and the waves had commenced to roll. Still nothing was done. At
9.30 the winds were still stronger and the waves higher. Still nothing was done. At 10.30
the increase in the strength of the wind and of the height of the waves continued. And
yet the agents of the defendant did nothing. It was well toward 11 o'clock before they
began to move. And that time it was too late. The wind and waves were so high that,
with the means at hand, the lorcha could not be moved from the exposed position in
which it was, even if it be conceded that there was any safer place within those waters.
The lorcha was prevented from dashing itself immediately upon the rocks only by virtue
of its anchor. At between 10.30 and 11 o'clock the captain of the lorcha came to ashore
to secure additional anchors. And that time, however, as we have observed, it was too
late to unload the goods and too late to remove the lorcha to a safe place within the
mouth of the river, even if that were possible. The agents of the defendant, having done
absolutely nothing up to this time, now found, after they had awakened from their
lethargy, that it was too late to do more than stand by and see the property, which had
been intrusted to their care and for carrying of which they had been paid, dashed to
pieces on the rock and swallowed up by the sea.
(8) For nearly eighteen hours prior to the disaster the information that the disaster was
coming lay under the very noses of the agents of the defendant. For nearly eighteen
hours the barometer had been dropping steadily, so much so that their own vessel
dared not leave a port only 10 miles distant on the afternoon before. For eighteen hours
every warning which nature could give, indicating the disaster which subsequently
came, had been repeatedly thrust upon them. Yet they did nothing. Having placed the
goods of the plaintiff in an exposed and dangerous position, in waters open to the winds
and waves of the Pacific Ocean, at the height of the typhoon season, in a vessel which
had no motive power of its own, and having sent away that which they themselves
substantially admit was its only protection, the agents of the defendant exercised no
care or precaution whatever to the end that they might protect the goods which they
themselves had so recklessly exposed.
Yet this court, under such circumstances, holds that the defendant may go in peace and
that the plaintiff is the one who must bear the burden of such negligence.
With that decision I can not agree.
An act of God can not be urged for the protection of a person who has been guilty of
gross negligence in not trying to avert its results. One who has accepted responsibility
for pay can not weakly fold his hands and say that he was prevented from meeting that
responsibility by an act of God, when the exercise of the ordinary care and prudence

would have averted the results flowing from that act. One who has placed the property
of another, intrusted to his care, in an unseaworthy craft, upon dangerous waters,
cannot absolve himself by crying, "an act of God," when every effect which a typhoon
produced upon that property could have been avoided by the exercise of common care
and prudence. When the negligence of the carrier concurs with an act of God producing
a loss, the carrier is not exempted from liability by showing that the immediate cause of
the damage was the act of God; or, as it has been expressed, "when the loss is caused
by the act of God, if the negligence of the carrier mingles with it as an active and
cooperative cause, he is still liable." The loss and damage to perishable articles in
consequence of the weather will not excuse the carrier if it could have been prevented
by due care and diligence. The carrier must not only show that it did all that was usual,
but all that was necessary to be done under the circumstances. (Wing vs. New York,
etc., Ry. Co., 1 Hilt. (N.Y.), 235; Philleo vs. Sanford, 17 Tex., 228.) To be exempt from
liability for loss because of an act of God, the common carrier must be free from any
previous negligence or misconduct by which that loss or damage may have been
occasioned. For, although the immediate or proximate cause of a loss in any given
instance may have been what is termed an act of God, yet if the carrier unnecessarily
exposed the property to such accident by any culpable act or omission of his own, he is
not excused. (Mc-Graw vs. Baltimore and Ohio Ry. Co., 41 Am. Rep., 696.) In the case
of Wolf vs. American Express Co,., 43 Mo., 421, Wagner, J., said:
The act of God which excuses the carrier must not only be the proximate cause
of the loss, but the better opinion is that it must be the sole cause. And where the
loss is caused by the "act of God," if the negligence of the carrier mingles with it
as an active and cooperative cause, he is still responsible. (Amies vs. Stevens, 1
Stra., 128.)
Where perishable property, such as potatoes, is received by a common carrier at a
season when a very low temperature may reasonably apprehended, great diligence
should be used in forwarding such property with dispatch and haste; and where, by a
delay of two or three days, the property is damaged by freezing, the carrier may be held
liable for the damage. (Hewett vs. The Chicago, B & Q. Ry. Co., 63 Ia., 611.) A carrier is
bound to provide a vessel in all respects adequate to the purpose, with a captain and
crew of requisite skill or ability; and, failing in these particulars, though the loss be
occasioned by an act of God, the carrier may not set up a providential calamity to
protect himself against what may have arisen from his own folly. (Hart vs. Allen and
Grant, 2 Watts (Pa.), 114.)
This doctrine is fully supported by the Spanish authorities on the subject.
Manresa in his commentaries to section 1105 of the Civil Code of Spain, volume 8,
page 91, says:
Elucidation of article 1105 and the idea of the accident is interesting under the
following aspects; Relation between it and the blame; enumeration of the

requisites that must be present; proof of the event and characterization thereof;
and the consequence it produces. Let us examine them.
Even when the distinction is simple and reasonable between blame for some
exempting circumstance (because it may not be serious enough to involve such
blame, under the law or the obligation) and accident, since the former admits an
imputation which the latter excludes, even when the former may not be the basis
for legal responsibility, and therefore it can not be said that where no responsible
blame exists there the accident commences, yet the latter is undeniably
characterized by unexpectedness and inevitability, circumstances susceptible of
relative interpretation, and so whatever relates to the blame must be taken into
account, because, as we shall see, it is in certain sense, especially in practical
application, connected with the matter under consideration.
Aside from this statement of ideas, there may be another of consequences, for in
the complexity of facts, in the same obligation, there may be present blame
enough to involve such and also accident. When both causes are present, with
separation of time and affects, for partial breach due to one of them may be
possible and then the other may operate to aggravate or complete these
consequences, the distinction is easy and to each cause may be assigned its
own effect for the corresponding result, as neither exemption, on account of
accident, can be extended to what may be imputed nor to what in any way
depends upon it by basing responsibility arising from blame on the fact that the
damage is the result thereof.
The problem becomes more difficult when both causes concur to produce the
same effect or when, even though the effect may be due to accident, the obligor
has not exercised necessary diligence, however, blameless he was for the
results arising from the breach. In the first of the last two suppositions, the
solution is plain, because when the obligor incurs the blame of actually producing
the result, or even when it is not the only cause, or even the principal one, there
is still sufficient connection between it and the consequences to cause them to
be imputed to him and, as a voluntary elements exists in the causes, there is
lacking the circumstance indispensable to exemption on account of accident. The
second supposition presents a very difficult problem of proof, which rests upon
the obligor, and calls for a careful analysis of the origin of the breach. The
difficulty in this case consists in that the blame, in addition to its subjective aspect
for imputing the consequences to the obligor, has an objective aspect, to wit, that
these consequences may rise, that the damage which must be repaired is
caused, in such manner that due diligence may be lacking and yet not extend to
the point of involving responsibility, because it produces no results. Now then, if
an accident occurs under these conditions, absolutely independent of the
negligence that may have existed, it may have occurred with or without
negligence and therefore any derivation of consequences was lacking, then it
can not be said that responsibility arises therefrom; but to reach this conclusion
there first rests with the obligor proof so difficult that, in addition to overcoming

the presumption of existence of blame, it involves the very fine distinction of the
origin of the breach and perfectly reveals the occurrence of the accident, joined
by their coexistence, and demonstrating absolute lack of consequences and
influence of blame.
In connection with this question, a judgment of November 22, 1904, declares that
there are some events which, independent of the will of the obligor, hinder the
fulfillment of the obligation, and yet do not constitute cases of force majeure for
the purposes of such fulfillment, because the possibility that they would occur
could have been foreseen, articles 1101 and 1104 being applicable and not
article 1105, since negligence or blame is also present from not informing the
obligee, either at first or later on, of the state of affairs and the situation, so as to
avoid the consequent damage. This was the case of a bull fight that could not be
held because the ring was not completed in time for reasons beyond the control
of the contractor, but the fact that the contract did not state that the ring was
unconstructed and the possibility that it would not be at the time specified,
reveals, in the opinion of the court, the lack of foresight or the negligence which
makes article 1105 inapplicable.
In an essentially analogous way, judgments were pronounced on June 12, 1899
(Tribunal contencioso administrativo), and on October 27, 1905 (Sala tercera),
against the company leasing the tobacco monopoly, for losses caused by theft
and fire. It was further decided in these cases that the company and not the State
must bear the losses, for while accidental fire in a tobacco factory and theft of
stamped goods stored in a branch house may constitute accidents, yet they do
not deserve this characterization when they occur through omission, neglect or
lack of care which imply breach of the contract.
According to the text of article 1105, which agrees with the rational idea of
accident, it is sufficient for the event to constitute such that it have any of the two
characteristics enumerated; if it is foreseen, it is of little import that it be
unavoidable; and if it is unavoidable it does not matter that it may have been
foreseen. The first supposition requires some explanation: an event may be
wholly unforeseen, but, after it has occurred, be very slow in producing effects,
and in such case, although it could not have been foreseen, as there is time
before it produces its effects, the latter must be considered.
Besides this special supposition, in which, if carefully considered, the two
characteristics do not concur, since the idea of unexpectedness, as is seen, is
relative, it will be sufficient that one or the other be present. The possibility of
foresight must be weighed rationally with consideration of all the circumstances,
but this general rule has, strictly speaking, an exception when the event,
although in a general way very difficult, almost impossible to be foreseen, should
for some reason be known to the obligor in due time.

The condition of inevitability can not be understood in so absolute a sense that it

should take away the character of accident from many that are strictly such,
because they are undoubtedly causes, however powerful they may be, whose
injurious effects may have been avoided by exercising a number of precautions,
so exaggerated and so out of proportion to the importance of the trouble
anticipated, that they would be unreasonable and not required in law. In such
cases, if the means which can and must rationally be employed are not effective,
it will be held to have been unavoidable. So we see demonstrated how the idea
of diligence is related, somewhat in the nature of limitation, to the accident.
Such was the doctrine established in our ancient law regarding the obligor; the
reasons whereof are theoretically set forth further on; and as a written provision,
law 20, title 13, partida 5, which expressly laid down this principle in connection
with pawn-broking contracts, and which was, by analogy, made the basis for
extending a similar provision to the remaining cases.
That the Civil Code is inspired by the same idea is clearly expressed in article
1183 thereof, the commentary on which should be consulted. Still such solution
depends upon the nature of proof and of the accident, since its existence as an
abnormal event hindering the fulfillment of the obligation must be proved and not
presumed, and the burden of this proof rests upon the obligor, and not upon the
obligee, whose proof would have to be negative. Moreover since an accident is
the basis for exemption from responsibility, it must be proved by him who will
benefit thereby and who objects to the requirement that he fulfill his obligations.
To these reasons are joined those above set forth in connection with the proof of
contractual blame, since they are, according to the same article, 1183, above
cited, closely related questions, so much so that they become two phases of one
question presumption against the existence of accident of what tends to
establish presumption of blame, in the absence of proof to overcome it.
Proof of accident must include these points; the occurrence of the event, the
bearing it has upon breach of the obligation, and the concurrence of
unexpectedness and inevitably. In connection with the first two points, the proof
resting upon the obligor must be specific and exact; but as for the last, although it
may be admitted as a general proposition that, in addition to proving the event,
he must also demonstrate that it involves the condition required to make it an
accident, there are some of such magnitude and, by their nature, of almost
impossible prevision, that proof of their occurrence demonstrates their condition.
Undoubtedly, and differently from proof of the accident, the exceptional
circumstance that the event (which should as a general proposition be regarded
as unforeseen) was known to the obligor for some special reason, must be of
proven by the obligee who asserts it, since the obligation of proof resting upon
the former is fulfilled in this regard by demonstrating that the event ought
rationally to be held to have been unforeseen.

Since proof of the accident is related to proof of the blame, it is evident that the
obligor must also prove, so far as he is concerned, that he is not to blame for
breach of the obligation.
Exemption from responsibility in accidents established by article 1105 has,
according to its text, two exceptions, whereby an event may be plainly proven,
and be unforeseen and unavoidable and still not produce such exemption, viz,
when the execution is either stipulated in the obligation or is expressly mentioned
by the law. The basis for these exceptions rests, according to this cases, either
upon the freedom of contracts, which is opposed to prohibition of a compact,
wherein, without immorality, there is merely an emphasized stipulation, which is
meant to guarantee in every case an interest and indirectly to secure careful and
special diligence in the fulfillment of the obligation; or upon the nature of the
obligations when risk is an essential element therein; or finally upon cases whose
circumstances, as happens with that provided for by the last paragraph of article
1096, justify the special strictness of the law.
In conclusion, we shall point out that in order to relieve the obligor from his
obligation, it must be remembered that the occurrence of the event does not
suffice, but that the impossibility of fulfilling the obligation must be the direct
consequences of the accident, so that when it can be fulfilled it will subsists, even
if only in part, and therefore, in order to see whether or not the accident produces
this result the nature of the obligation must be considered, and according to
whether it be specific or general, etc., it will or will not be extinguished.
To hold the carrier responsible in the case at bar, it is not necessary to go so far as the
authorities just cited. The negligence is so clear that it is not necessary to strain
doctrines or even press them to their limits.
I do not agree here argue the assertion of the plaintiff denied by the defendant, that, at
any time before nine o'clock of the day of the destruction of the lorcha, the defendant's
agents could have placed the lorcha in the mouth of the river out of harm's way. I
believe that a fair preponderance of the evidence shows that this could have been done.
The defendant denies this, asserting that the water was too shallow. Nevertheless,
fourteen days after the storm, the foundered lorcha, water-logged and undoubtedly
containing water, was " poled" by its crew from the place where it went on the rocks to a
place of safety inside the mouth of the river. It is more than probable that this could
have been done at any time before the storm became too high. At last common
prudence would have required the unloading of the lorcha, which could easily have
been accomplished before the storm if the agents of the defendant had awakened
themselves to their duty.

Transportation Laws
A. Common Carriers
B. Common Carriers of Goods

b. Exemption from Liability

i. Natural Disaster (1734 etc.)
Martini Ltd. vs. Macondray & Co., 39 phil 934
In September of the year 1916, the Plaintiff G. Martini, Ltd., arranged with the
Defendant company, as agents of the Eastern and Australian Steamship Company, for
the shipment of two hundred and nineteen cases or packages of chemical products
from Manila, Philippine Islands, to Kobe, Japan. The goods were embarked at Manila
on the steamship Eastern, and were carried to Kobe on the deck of that ship. Upon
arrival at the port of destination it was found that the chemicals comprised in the
shipment had suffered damage from the effects of both fresh and salt water; and the
present action was instituted by the Plaintiff to recover the amount of the damage
thereby occasioned. In the Court of First Instance judgment was rendered in favor of the
Plaintiffs for the sum of P34,997.56, with interest from March 24, 1917, and costs of the
proceeding. From this judgment the Defendant appealed.
That the damage was caused by water, either falling in the form of rain or splashing
aboard by the action of wind and waves, is unquestionable; and the contention of the
Plaintiff is that it was the duty of the ships company to stow this cargo in the hold and
not to place it in an exposed position on the open deck. The defense is that by the
contract of affreightment the cargo in question was to be carried on deck at the
shippers risk; and attention is directed to the fact that on the face of each bill of lading is
clearly stamped with a rubber stencil in conspicuous letters the words on deck at
shippers risk. In this connection the Defendant relies upon paragraph 19 of the several
bills of lading issued for transportation of this cargo, which reads as follows:
19.
Goods signed for on this bill of lading as carried on deck are entirely at
shippers risk, whether carried on deck or under hatches, and the steamer is not liable
for any loss or damage from any cause whatever.
The Plaintiff insists that the agreement was that the cargo in question should be carried
in the ordinary manner, that is, in the ships hold, and that the Plaintiff never gave its
consent for the goods to be carried on deck. The material facts bearing on this
controverted point appear to be these: On September 15, 1916, the Plaintiff applied to
the Defendant for necessary space on the steamship Eastern, and received a shipping
order, which constituted authority for the ships officers to receive the cargo aboard. One
part of this document contained a form which, when signed by the mate, would
constitute the mates receipt, showing that the cargo had been taken on.
Ordinarily the shipper is supposed to produce the mates receipt to the agents of the
ships company, who thereupon issue the bill of lading to the shipper. When, however,
the shipper, as not infrequently happens, desires to procure the bill of lading before he
obtains the mates receipt, it is customary for him to enter into a written obligation,
binding himself, among other things, to abide by the terms of the mates receipt. In the
present instance the mates receipt did not come to the Plaintiffs hand until Monday

night, but as the Plaintiff was desirous of obtaining the bills of lading on the Saturday
morning preceding in order that he might negotiate them at the bank, a request was
made for the delivery of the bills of lading on that day To effectuate this, the Plaintiff was
required to enter into the written obligation, calling itself a letter of guarantee, which
was introduced in evidence as Exhibit D-C. This document is of the date of September
16, 1916, and of the following tenor:
In consideration of your signing us clean B/L for the undermentioned cargo per above
steamer to be shipped on or under deck at ships option, for Kobe without production of
the mates receipt, we hereby guarantee to hold you free from any responsibility by your
doing so, and for any expense should the whole or part of the cargo be shut out, or
otherwise, and to hand you said mates receipt as soon as it reaches us and to abide by
all clauses and notations on the same.
In conformity with the purpose of this document the bills of lading were issued, and the
negotiable copies were, upon the same day, negotiated at the bank by the Plaintiff for
90 per cent of the invoice value of the goods. As already stated these bills of lading
contained on their face, conspicuously stenciled, the words on deck at shippers risks.
The mates receipt, received by the Plaintiff two days later also bore the notation on
deck at shippers risk, written with pencil, and evidently by the officer who took the
cargo on board and signed the receipt.
The Plaintiff insists that it had at no time agreed for the cargo to be carried on deck; and
G. Martini, manager of Martini & Company, says that the first intimation he had of this
was when, at about 4 p.m. on that Saturday afternoon, he examined the nonnegotiable
copies of the bills of lading, which had been retained by the house, and discovered the
words on deck at shippers risk stamped thereon. Martini says that upon seeing this,
he at once called the attention of S. Codina thereto, the latter being an employee of the
house whose duty it was to attend to all shipments of merchandise and who in fact had
entire control of all matters relating to the shipping of this cargo. Codina pretends that
up to the time when Martini directed his attention to the fact, he himself was unaware
that the cargo was being stowed on deck; and upon the discovery of this fact the two
gentlemen mentioned expressed mutual surprise and dissatisfaction. Martini says that
he told Codina to protest at once to Macondray & Company over the telephone, while
Martini himself proceeded to endite a letter, which appears in evidence as Exhibit D-T of
the Defendant and is in its material part as follows:
MANILA, September 16, 1916.
MESSRS. MACONDRAY & Co.,
Manila,
DEAR SIRS: In re our shipment per steamship Eastern, we are very much surprised to
see that the remark on deck at shippers risk has been stamped on the bills of lading
Nos. 8 to 23. . . . and although not believing that the same have actually been shipped

on deck we must hold you responsible for any consequence, loss, or damage deriving
from your action should they have been shipped as stated.
Yours faithfully,
G. MARTINI, LTD.
By S. CODINA.
This letter was followed by another of the same date and of substantially the same tenor
but containing the following additional statement:
It is the prevailing practice that, whenever a cargo is being carried on deck, shipowners
or agents give advice of it to shippers previous to shipment taking place, and obtain
their consent to it. If we had been advised of it, shipment would not have been effected
by us. We regret very much this occurrence, but you will understand that in view of your
having acted in this case on your own responsibility, we shall have to hold you
amenable for any consequences that may be caused from your action.
The first of these letters was forthwith dispatched by messenger, and upon receiving it,
Macondray & Company called Codina by telephone at about 4.30 p.m. and, referring to
the communication just received, told him that Macondray & Company could not accept
the cargo for transportation otherwise than on deck and that if Martini & Company were
dissatisfied, the cargo could be discharged from the ship.
There is substantial conformity in the testimony of the two parties with respect to the
time of the conversation by telephone and the nature of the message which Macondray
& Company intended to convey, though the witnesses differ as to some details and in
respect to what occurred immediately thereafter. Basa, who was in charge of the
shipping department of Macondray & Company and who conducted the conversation on
the part of the latter, says that he told Codina that if Martini & Company was unwilling
for the cargo to be carried on deck that they could discharge it and further advised him
that Macondray & Companys empty boats were still at the ships side ready to receive
the cargo. In reply Codina stated that Martini, the manager, was then out and that he
would answer in a few minutes, after communication with Martini. Within the course of
half an hour Codina called Basa up and said that as the cargo was already stowed on
deck, Martini & Company were willing for it to be carried in this way, and that their
protest was a mere formality. Codina admits that he was informed by Basa that the
cargo could not be carried under the hatches, and that if Martini & Company were
dissatisfied to have it carried on deck, they could discharge it. He denies being told that
it could be taken off in Macondray & Companys boats. Codina further states that when
the conversation was broken off for the purpose of enabling him to communicate with
Martini, he consulted with the latter, and was directed to say that Martini & Company did
not consent for the cargo to be carried on deck and that it must be discharged. Upon
returning to the telephone, he found that the connection had been broken, and he says

that he was thereafter unable to get Macondray & Company by telephone during that
afternoon, although he attempted to do so more than once.
In the light of all the evidence the conclusion seems clear enough that, although Martini
& Company would have greatly preferred for the cargo to be carried under the hatches,
they nevertheless consented for it to go on deck. Codina, if attentive to the interests of
his house, must have known from the tenor of the guaranty to which his signature is
affixed that the Defendant had reserved the right to carry it on deck, and when the bills
of lading were delivered to the Plaintiff they plainly showed that the cargo would be so
carried.
It must therefore be considered that the Plaintiff was duly affected with notice as to the
manner in which the cargo was shipped. No complaint, however, was made until after
the bills of lading had been negotiated at the bank. When the manager of Martini &
Company first had his attention drawn to the fact that the cargo was being carried on
deck, he called Codina to account, and the latter found it to his interest to feign surprise
and pretend that he had been deceived by Macondray & Company. Even then there
was time to stop the shipment, but Martini & Company failed to give the necessary
instructions, thereby manifesting acquiescence in the accomplished fact.
In a later letter of October 25, 1916, addressed to Macondray & Company, Martini,
referring to the incident says: If previous to the mailing of the documents, you had
actually notified us by phone or otherwise that you could not accept our cargo in any
other way but on deck, we should have promptly given you instructions to leave it on the
lighters and at our disposal.
From this it is inferable that one reason why the Plaintiff allowed the cargo to be carried
away without being discharged, was that the bills had been discounted and to stop the
shipment would have entailed the necessity of refunding the money which the bank had
advanced, with the inconveniences incident thereto. Another reason apparently was that
Martini discerned, or thought he discerned the possibility of shifting the risk so as to
make it fall upon the ships company.
With reference to the practicability of discharging the cargo in the late afternoon or
evening of Saturday, September 16, before the ship departed, as it did at 8 p.m. some
evidence was introduced tending to show that in order to get the cargo off certain
formalities were necessary which could not be accomplished, as for instance, the return
of the mates receipt (which had not yet come to the Plaintiffs hands), the securing of a
permit from the customs authorities, and the securing of an order of discharge from the
steamship company. In view of the fact that the Plaintiff did nothing whatever looking
towards the discharge of the cargo, not even so much as to notify Macondray &
Company that the cargo must come off, the proof relative to the practicability of
discharge is inconclusive. If the Plaintiff had promptly informed Macondray & Company
of their resolve to have the cargo discharged, and the latter had nevertheless permitted
the ship to sail without discharging it, there would have been some ground for Plaintiffs
contention that its consent had not been given for the goods to be carried on deck.

Needless to say we attach no weight to the statement of Codina that he was unable to
get Macondray & Company by telephone in order to communicate directions for the
discharge of the cargo.
The evidence submitted in behalf of the Defendant shows that there was no space in
the hold to take the cargo; and it was therefore unnecessary to consider whether the
chemicals to be shipped were of an explosive or inflammable character, such as to
require stowage on deck. By reason of the fact that the cargo had to be carried on deck
at all events, if carried at all, the guaranty Exhibit D-C was so drawn as to permit
stowage either on or under deck at the ships option; and the attention of Codina must
have been drawn to this provision because Macondray & Company refused to issue the
bills of lading upon a guaranty signed by Codina upon another form (Exhibit R), which
contained no such provision. The messenger between the two establishments who was
sent for the bills of lading accordingly had to make a second trip and go back for a letter
of guaranty signed upon the desired form. The pretense of Codina that he was deceived
into signing a document different from that which he supposed himself to be signing is
wholly unsustained.
The result of the discussion is that Martini & Company must be held to have assented to
the shipment of the cargo on deck and that they are bound by the bills of lading in the
form in which they were issued. The trial court in our opinion erred in holding otherwise,
and in particular by ignoring, or failing to give sufficient weight to the contract of
guaranty.
Having determined that the Plaintiff consented to the shipment of the cargo on deck, we
proceed to consider whether the Defendant can be held liable for the damage which
befell the cargo in question. It of course goes without saying that if a clean bill of lading
had been issued and the Plaintiff had not consented for the cargo to go on deck, the
ships company would have been liable for all damage which resulted from the carriage
on deck. In the case of The Paragon (1 Ware, 326; 18 Fed. Cas. No. 10708), decided in
1836 in one of the district courts of the United States, it appeared that cargo was
shipped from Boston, Massachusetts, to Portland, Maine, upon what is called a clean
bill of lading, that is, one in the common form without any memorandum in the margin or
on its face showing that the goods are to be carried on deck. It was proved that the
shipper had not given his consent for carriage on deck. Nevertheless, the master
stowed the goods on deck; and a storm having arisen, it became necessary to jettison
them. None of the cargo in the hold was lost. It was thus evident that although the cargo
in question was lost by peril of the sea, it would not have been lost except for the fact
that it was being carried on deck. It was held that the ship was liable. In the course of
the opinion the following language was used:
It is contended that the goods, in this case, having been lost by the dangers of the
seas, both the master and the vessel are exempted from responsibility within the
common exemption in bills of lading; and the goods having been thrown overboard from
necessity, and for the safety of the vessel and cargo, as well as the lives of the crew,
that it presents a case for a general average or contribution, upon the common principle

that when a sacrifice is made for the benefit of all, that the loss shall be shared by
all. . . . In every contract of affreightment, losses by the dangers of the seas are
excepted from the risks which the master takes upon himself, whether the exception is
expressed in the contract or not. The exception is made by the law, and falls within the
general principle that no one is responsible for fortuitous events and accidents of major
force. Casus fortuitous nemo praestat. But then the general law is subject to an
exception, that when the inevitable accident is preceded by a fault of the debtor or
person bound without which it would not have happened, then he becomes responsible
for it. (Pothier, des Obligations, No. 542; Pret. a Usage, No. 57; Story, Bailm., c. 4, No.
241; In Majorious casibus si culpa ejus interveniat tenetur; Dig. 44, 7, 1, s. 4.)
The master is responsible for the safe and proper stowage of the cargo, and there is no
doubt that by the general maritime law he is bound to secure the cargo safely under
deck. . . . If the master carries goods on deck without the consent of the shipper . . . he
does it at his own risk. If they are damaged or lost in consequence of their being thus
exposed, he cannot protect himself from responsibility by showing that they were
damaged or lost by the dangers of the seas. . . . When the shipper consents to his
goods being carried on deck, he takes the risk upon himself of these peculiar perils. . . .
This is the doctrine of all the authorities, ancient and modern.
Van Horn vs. Taylor (2 La. Ann., 587; 46 Am. Dec., 558), was a case where goods
stowed on deck were lost in a collision. The court found that the ship carrying these
goods was not at fault, and that the shipper had notice of the fact that the cargo was
being carried on deck. It was held that the ship was not liable. Said the court:
It is said that the Plaintiffs goods were improperly stowed on deck; that the deck load
only was thrown overboard by the collision, the cargo in the hold not being injured. The
goods were thus laden with the knowledge and implied approbation of the Plaintiff. He
was a passenger on board the steamer, and does not appear to have made any
objection to the goods being thus carried, though the collision occurred several days
after the steamer commenced her voyage.
In the case of The Thomas P. Thorn (8 Ben., 3; 23 Fed., Cas. No. 13927), decided in
the District Court in the State of New York, it appeared that tobacco was received upon
a canal boat, with the understanding that it was to be carried on deck, covered with
tarpaulins. Upon arrival at its destination it was found damaged by water, for the most
part on the top, and evidently as a consequence of rains. At the same time a quantity of
malt stowed below deck on the same voyage was uninjured. In discussing the question
whether upon a contract to carry on deck, the vessel was liable for the wetting of the
tobacco, the court said:
It is manifest that the injury to the tobacco arose simply from the fact that it was carried
on deck. The malt, carried below, although an article easily injured, received no
damage, and the voyage was performed with usual care, and without disaster. Indeed,
there is evidence of a statement by the libelant, that tobacco must of necessity be
injured by being carried on deck. But, under a contract to carry upon deck, the risk of

any damage resulting from the place of carriage rests upon the shipper, and, without
proof of negligence causing the damage, there can be no recovery. Here the evidence
shows that all reasonable care was taken of the tobacco during its transportation; that
the manner of stowing and covering it was known to and assented to by the shipper;
and the inference is warranted that the injury arose, without fault of the carrier, from
rain, to which merchandise transported on deck must necessarily be in some degree
exposed. Any loss arising from damaged thus occasioned is to be borne by the shipper.
Lawrence vs. Minturn (17 How [U.S,], 100; 15 L ed., 58), was a case where goods
stowed on deck with the consent of the shipper were jettisoned during a storm at sea. In
discussing whether this cargo was entitled to general average, the Supreme Court of
the United States said:
The maritime codes and writers have recognized the distinction between cargo placed
on deck, with the consent of the shipper, and cargo under deck.
There is not one of them which gives a recourse against the master, the vessel, or the
owners, if the property lost had been placed on deck with the consent of its owner, and
they afford very high evidence of the general and appropriate usages, in this particular,
of merchants and shipowners.
So the courts of this country and England, and the writers on this subject, have treated
the owner of goods on deck, with his consent, as not having a claim on the master or
owner of the ship in case of jettison. The received law, on the point, is expressed by
Chancellor Kent, with his usual precision, in 3 Com., 240: Nor is the carrier in that case
(Jettison of deck load) responsible to the owner, unless the goods were stowed on deck
without the consent of the owner, or a general custom binding him, and then he would
be chargeable with the loss.
In Gould vs. Oliver (4 Bing., N. C., 132), decided in the English Court of Common Pleas
in 1837, Tindal, C.J., said:
Where the loading on deck has taken place with the consent of the merchant, it is
obvious that no remedy against the shipowner or master for a wrongful loading of the
goods on deck can exist. The foreign authorities are indeed express; on that point. And
the general rule of the English law, that no one can maintain an action for a wrong,
where he has consented or contributed to the act which occasioned his loss, leads to
the same conclusion.
The foregoing authorities fully sustain the proposition that where the shipper consents to
have his goods carried on deck he takes the risks of any damage or loss sustained as a
consequence of their being so carried. In the present case it is indisputable that the
goods were injured during the voyage and solely as a consequence of their being on
deck, instead of in the ships hold. The loss must therefore fall on the owner. And this
would be true, under the authorities, even though paragraph 19 of the bills of lading,
quoted near the beginning of this opinion, had not been made a term of the contract.

It is undoubtedly true that, upon general principle, and momentarily ignoring paragraph
19 of these bills of lading, the ships owner might be held liable for any damage directly
resulting from a negligent failure to exercise the care properly incident to the carriage of
the merchandise on deck. For instance, if it had been improperly placed or secured, and
had been swept overboard as a proximate result of such lack of care, the ship would be
liable, to the same extent as if the cargo had been deliberately thrown over without
justification. So, if it had been shown that, notwithstanding the stowage of these goods
on deck, the damage could have been prevented, by the exercise of proper skill and
diligence in the discharge of the duties incumbent on the ship, the owner might still be
held.
To put the point concretely, let it be supposed that a custom had been proved among
mariners to protect deck cargo from the elements by putting a tarpaulin over it; or
approaching still more to imaginable conditions in the present case, let it be supposed
that the persons charged with the duty of transporting this cargo, being cognizant of the
probability of damage by water, had negligently and without good reason failed to
exercise reasonable care to protect it by covering it with tarpaulins. In such case it could
hardly be denied that the ships company should be held liable for such damage as
might have been avoided by the use of such precaution.
But it should be borne in mind in this connection that it is incumbent on the Plaintiff, if
his cause of action is founded on negligence of this character, to allege and prove that
the damage suffered was due to failure of the persons in charge of the cargo to use the
diligence properly incident to carriage under these conditions.
In Clark vs. Barnwell (12 How. [U.S.], 272; 13 L. ed., 985), the Supreme Court
distinguishes with great precision between the situation where the burden of proof is
upon the shipowner to prove that the loss resulted from an excepted peril and that
where the burden of proof is upon the owner of the cargo to prove that the loss was
caused by negligence on the part of the persons employed in the conveyance of the
goods. The first two syllabi in Clark vs. Barnwell read as follows:
Where goods are shipped and the usual bill of lading given, promising to deliver them
in good order, the dangers of the seas excepted, and they are found to be damaged the
onus probandi is upon the owners of the vessel, to show that the injury was occasioned
by one of the excepted causes.
But, although the injury may have been occasioned by one of the excepted causes, yet
still the owners of the vessel are responsible if the injury might have been avoided, by
the exercise of reasonable skill and attention on the part of the persons employed in the
conveyance of the goods. But the onus probandi then becomes shifted upon the
shipper, to show the negligence.
The case just referred to was one where cotton thread, put up in boxes, had
deteriorated during a lengthy voyage in a warm climate, owing to dampness and

humidity. In discussing the question of the responsibility of the ships owner, the court
said:
Notwithstanding, therefore, the proof was clear that the damage was occasioned by the
effect of the humidity and dampness of the vessel, which is one of the dangers of
navigation, it was competent for the libelants to show that the Respondents might have
prevented it by proper skill and diligence in the discharge of their duties; but no such
evidence is found in the record. For caught that appears every precaution was taken
that is usual or customary, or known to shipmasters, to avoid the damage in question.
And hence we are obliged to conclude that it is to be attributed exclusively to the
dampness of the atmosphere of the vessel, without negligence or fault on the part of the
master or owners.
Exactly the same words might be used as applicable to the facts of the present case;
and as it is apparent that the damage here was caused by rain and sea water the risk
of which is inherently incident to carriage on deck the Defendant cannot be held
liable. It is not permissible for the court, in the absence of any allegation or proof of
negligence, to attribute negligence to the ships employees in the matter of protecting
the goods from rains and storms. The complaint on the contrary clearly indicates that
the damage done was due to the mere fact of carriage on deck, no other fault or
delinquency on the part of anybody being alleged.
It will be observed that by the terms of paragraph 19 of the bills of lading, the ship is not
to be held liable, in the case of goods signed for as carried on deck, for any loss or
damage from any cause whatever. We are not to be understood as holding that this
provision would have protected the ship from liability for the consequences of negligent
acts, if negligence had been alleged and proved. From the discussion in Manila
Railroad Co. vs. Compania Transatlantica and Atlantic, Gulf & Pacific Co. (38 Phil. Rep.,
875), it may be collected that the carrier would be held liable in such case,
notwithstanding the exemption contained in paragraph 19. But however that may be
damages certainly cannot be recovered on the ground of negligence, even from a
carrier, where negligence is neither alleged nor proved.
The judgment appealed from is reversed and the Defendant is absolved from the
complaint. No express pronouncement will be made as to the costs of either instance.
SO ORDERED.

Transportation Laws
A. Common Carriers
B. Common Carriers of Goods
b. Exemption from Liability
i. Natural Disaster (1734 etc.)
Eastern Shipping Lines Inc. v. IAC, 150 SCRA 463

EASTERN SHIPPING LINES, INC., petitioner,

vs.
INTERMEDIATE APPELLATE COURT and DEVELOPMENT INSURANCE & SURETY
CORPORATION,respondents.
No. 71478 May 29, 1987
These two cases, both for the recovery of the value of cargo insurance, arose from the
same incident, the sinking of the M/S ASIATICA when it caught fire, resulting in the total
loss of ship and cargo.
The basic facts are not in controversy:
In G.R. No. 69044, sometime in or prior to June, 1977, the M/S ASIATICA, a vessel
operated by petitioner Eastern Shipping Lines, Inc., (referred to hereinafter as Petitioner
Carrier) loaded at Kobe, Japan for transportation to Manila, 5,000 pieces of calorized
lance pipes in 28 packages valued at P256,039.00 consigned to Philippine Blooming
Mills Co., Inc., and 7 cases of spare parts valued at P92,361.75, consigned to Central
Textile Mills, Inc. Both sets of goods were insured against marine risk for their stated
value with respondent Development Insurance and Surety Corporation.
In G.R. No. 71478, during the same period, the same vessel took on board 128 cartons
of garment fabrics and accessories, in two (2) containers, consigned to Mariveles
Apparel Corporation, and two cases of surveying 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.
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.
G.R. NO. 69044
On May 11, 1978, respondent Development Insurance & Surety Corporation
(Development Insurance, for short), having been subrogated unto the rights of the two
insured companies, filed suit against petitioner Carrier for the recovery of the amounts it
had paid to the insured before the then Court of First instance of Manila, Branch XXX
(Civil Case No. 6087).
Petitioner-Carrier denied liability mainly on the ground that the loss was due to an
extraordinary fortuitous event, hence, it is not liable under the law.
On August 31, 1979, the Trial Court rendered judgment in favor of Development
Insurance in the amounts of P256,039.00 and P92,361.75, respectively, with legal

interest, plus P35,000.00 as attorney's fees and costs. Petitioner Carrier took an appeal
to the then Court of Appeals which, on August 14, 1984, affirmed.
Petitioner Carrier is now before us on a Petition for Review on Certiorari.
G.R. NO. 71478
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.
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.
On September 15, 1980, the Trial Court rendered judgment in favor of NISSHIN and
DOWA in the amounts of US $46,583.00 and US $11,385.00, respectively, with legal
interest, plus attorney's fees of P5,000.00 and costs. On appeal by petitioner, the then
Court of Appeals on September 10, 1984, affirmed with modification the Trial Court's
judgment by decreasing the amount recoverable by DOWA to US $1,000.00 because of
$500 per package limitation of liability under the COGSA.
Hence, this Petition for Review on certiorari by Petitioner Carrier.
Both Petitions were initially denied for lack of merit. G.R. No. 69044 on January 16,
1985 by the First Division, and G. R. No. 71478 on September 25, 1985 by the Second
Division. Upon Petitioner Carrier's Motion for Reconsideration, however, G.R. No. 69044
was given due course on March 25, 1985, and the parties were required to submit their
respective Memoranda, which they have done.
On the other hand, in G.R. No. 71478, Petitioner Carrier sought reconsideration of the
Resolution denying the Petition for Review and moved for its consolidation with G.R.
No. 69044, the lower-numbered case, which was then pending resolution with the First
Division. The same was granted; the Resolution of the Second Division of September
25, 1985 was set aside and the Petition was given due course.
At the outset, we reject Petitioner Carrier's claim that it is not the operator of the M/S
Asiatica but merely a charterer thereof. We note that in G.R. No. 69044, Petitioner
Carrier stated in its Petition:
There are about 22 cases of the "ASIATICA" pending in various courts
where various plaintiffs are represented by various counsel representing

various consignees or insurance companies. The common defendant in

these cases is petitioner herein, being the operator of said vessel. ... 1
Petitioner Carrier should be held bound to said admission. As a general rule, the facts
alleged in a party's pleading are deemed admissions of that party and binding upon
it. 2 And an admission in one pleading in one action may be received in evidence
against the pleader or his successor-in-interest on the trial of another action to which he
is a party, in favor of a party to the latter action. 3
The threshold issues in both cases are: (1) which law should govern the Civil Code
provisions on Common carriers or the Carriage of Goods by Sea Act? and (2) who has
the burden of proof to show negligence of the carrier?
On the Law Applicable
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. 4 As the cargoes in
question were transported from Japan to the Philippines, the liability of Petitioner Carrier
is governed primarily by the Civil Code. 5 However, in all matters not regulated by said
Code, the rights and obligations of common carrier shall be governed by the Code of
Commerce and by special laws. 6 Thus, the Carriage of Goods by Sea Act, a special
law, is suppletory to the provisions of the Civil Code. 7
On the Burden of Proof
Under the Civil Code, common carriers, from the nature of their business and for
reasons of public policy, are bound to observe extraordinary diligence in the vigilance
over goods, according to all the circumstances of each case. 8 Common carriers are
responsible for the loss, destruction, or deterioration of the goods unless the same is
due to any of the following causes only:
(1) Flood, storm, earthquake, lightning or other natural disaster or
calamity;
xxx xxx xxx 9
Petitioner Carrier claims that the loss of the vessel by fire exempts it from liability under
the phrase "natural disaster or calamity. " However, we are of the opinion that fire may
not be considered a natural disaster or calamity. This must be so as it arises almost
invariably from some act of man or by human means. 10 It does not fall within the
category of an act of God unless caused by lightning 11 or by other natural disaster or
calamity. 12 It may even be caused by the actual fault or privity of the carrier. 13
Article 1680 of the Civil Code, which considers fire as an extraordinary fortuitous event
refers to leases of rural lands where a reduction of the rent is allowed when more than

one-half of the fruits have been lost due to such event, considering that the law adopts a
protection policy towards agriculture. 14
As the peril of the fire is not comprehended within the exception in Article
1734, supra, Article 1735 of the Civil Code provides that all cases than those mention in
Article 1734, the common carrier shall be presumed to have been at fault or to have
acted negligently, unless it proves that it has observed the extraordinary deligence
required by law.
In this case, the respective Insurers. as subrogees of the cargo shippers, have proven
that the transported goods have been lost. Petitioner Carrier has also proved that the
loss was caused by fire. The burden then is upon Petitioner Carrier to proved that it has
exercised the extraordinary diligence required by law. In this regard, the Trial Court,
concurred in by the Appellate Court, made the following Finding of fact:
The cargoes in question were, according to the witnesses defendant
placed in hatches No, 2 and 3 cf the vessel, Boatswain Ernesto Pastrana
noticed that smoke was coming out from hatch No. 2 and hatch No. 3; that
where the smoke was noticed, the fire was already big; that the fire must
have started twenty-four 24) our the same was noticed; that carbon
dioxide was ordered released and the crew was ordered to open the hatch
covers of No, 2 tor commencement of fire fighting by sea water: that all of
these effort were not enough to control the fire.
Pursuant to Article 1733, common carriers are bound to extraordinary
diligence in the vigilance over the goods. The evidence of the defendant
did not show that extraordinary vigilance was observed by the vessel to
prevent the occurrence of fire at hatches numbers 2 and 3. Defendant's
evidence did not likewise show he amount of diligence made by the crew,
on orders, in the care of the cargoes. What appears is that after the
cargoes were stored in the hatches, no regular inspection was made as to
their condition during the voyage. Consequently, the crew could not have
even explain what could have caused the fire. The defendant, in the
Court's mind, failed to satisfactorily show that extraordinary vigilance and
care had been made by the crew to prevent the occurrence of the fire. The
defendant, as a common carrier, is liable to the consignees for said lack of
deligence required of it under Article 1733 of the Civil Code. 15
Having failed to discharge the burden of proving that it had exercised the extraordinary
diligence required by law, Petitioner Carrier cannot escape liability for the loss of the
cargo.
And even if fire were to be considered a "natural disaster" within the meaning of Article
1734 of the Civil Code, it is required under Article 1739 of the same Code that the
"natural disaster" must have been the "proximate and only cause of the loss," and that
the carrier has "exercised due diligence to prevent or minimize the loss before, during or

after the occurrence of the disaster. " This Petitioner Carrier has also failed to establish
satisfactorily.
Nor may Petitioner Carrier seek refuge from liability under the Carriage of Goods by
Sea Act, It is provided therein that:
Sec. 4(2). Neither the carrier nor the ship shall be responsible for loss or
damage arising or resulting from
(b) Fire, unless caused by the actual fault or privity of the carrier.
xxx xxx xxx
In this case, both the Trial Court and the Appellate Court, in effect, found, as a fact, that
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 twenty-four
(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." The
foregoing suffices to show that the circumstances under which the fire originated and
spread are such as to show that Petitioner Carrier or its servants were negligent in
connection therewith. Consequently, the complete defense afforded by the COGSA
when loss results from fire is unavailing to Petitioner Carrier.
On the US $500 Per Package Limitation:
Petitioner Carrier avers that its liability if any, should not exceed US $500 per package
as provided in section 4(5) of the COGSA, which reads:
(5) Neither the carrier nor the ship shall in any event be or become liable
for any loss or damage to or in connection with the transportation of goods
in an amount exceeding $500 per package lawful money of the United
States, or in case of goods not shipped in packages, per customary freight
unit, or the equivalent of that sum in other currency, unless the nature and
value of such goods have been declared by the shipper before shipment
and inserted in bill of lading. This declaration if embodied in the bill of
lading shall be prima facie evidence, but all be conclusive on the carrier.
By agreement between the carrier, master or agent of the carrier, and the
shipper another maximum amount than that mentioned in this paragraph
may be fixed: Provided, That such maximum shall not be less than the
figure above named. In no event shall the carrier be Liable for more than
the amount of damage actually sustained.
xxx xxx xxx
Article 1749 of the New Civil Code also allows the limitations of liability in this wise:

Art. 1749. A stipulation that the common carrier's liability as limited to the
value of the goods appearing in the bill of lading, unless the shipper or
owner declares a greater value, is binding.
It is to be noted that the Civil Code does not of itself limit the liability of the common
carrier to a fixed amount per package although the Code expressly permits a stipulation
limiting such liability. Thus, the COGSA which is suppletory to the provisions of the Civil
Code, steps in and supplements the Code by establishing a statutory provision limiting
the carrier's liability in the absence of a declaration of a higher value of the goods by the
shipper in the bill of lading. The provisions of 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. 16
In G.R. No. 69044, there is no stipulation in the respective Bills of Lading (Exhibits "C-2"
and "I-3") 1 7 limiting the carrier's liability for the loss or destruction of the goods. Nor is
there a declaration of a higher value of the goods. Hence, Petitioner Carrier's liability
should not exceed US $500 per package, or its peso equivalent, at the time of payment
of the value of the goods lost, but in no case "more than the amount of damage actually
sustained."
The actual total loss for the 5,000 pieces of calorized lance pipes was P256,039 (Exhibit
"C"), which was exactly the amount of the insurance coverage by Development
Insurance (Exhibit "A"), and the amount affirmed to be paid by respondent Court. The
goods were shipped in 28 packages (Exhibit "C-2") Multiplying 28 packages by $500
would result in a product of $14,000 which, at the current exchange rate of P20.44 to
US $1, would be P286,160, or "more than the amount of damage actually sustained."
Consequently, the aforestated amount of P256,039 should be upheld.
With respect to the seven (7) cases of spare parts (Exhibit "I-3"), their actual value was
P92,361.75 (Exhibit "I"), which is likewise the insured value of the cargo (Exhibit "H")
and amount was affirmed to be paid by respondent Court. however, multiplying seven
(7) cases by $500 per package at the present prevailing rate of P20.44 to US $1 (US
$3,500 x P20.44) would yield P71,540 only, which is the amount that should be paid by
Petitioner Carrier for those spare parts, and not P92,361.75.
In G.R. No. 71478, in so far as the two (2) cases of surveying instruments are
concerned, the amount awarded to DOWA which was already reduced to $1,000 by the
Appellate Court following the statutory $500 liability per package, is in order.
In respect of the shipment of 128 cartons of garment fabrics in two (2) containers and
insured with NISSHIN, the Appellate Court also limited Petitioner Carrier's liability to
$500 per package and affirmed the award of $46,583 to NISSHIN. it multiplied 128
cartons (considered as COGSA packages) by $500 to arrive at the figure of $64,000,
and explained that "since this amount is more than the insured value of the goods, that
is $46,583, the Trial Court was correct in awarding said amount only for the 128 cartons,
which amount is less than the maximum limitation of the carrier's liability."

We find no reversible error. The 128 cartons and not the two (2) containers should be
considered as the shipping unit.
In Mitsui & Co., Ltd. vs. American Export Lines, Inc. 636 F 2d 807 (1981), the
consignees of tin ingots and the shipper of floor covering brought action against the
vessel owner and operator to recover for loss of ingots and floor covering, which had
been shipped in vessel supplied containers. The U.S. District Court for the Southern
District of New York rendered judgment for the plaintiffs, and the defendant appealed.
The United States Court of Appeals, Second Division, modified and affirmed holding
that:
When what would ordinarily be considered packages are shipped in a
container supplied by the carrier and the number of such units is disclosed
in the shipping documents, each of those units and not the container
constitutes the "package" referred to in liability limitation provision of
Carriage of Goods by Sea Act. Carriage of Goods by Sea Act, 4(5), 46
U.S.C.A.& 1304(5).
Even if language and purposes of Carriage of Goods by Sea Act left doubt
as to whether carrier-furnished containers whose contents are disclosed
should be treated as packages, the interest in securing international
uniformity would suggest that they should not be so treated. Carriage of
Goods by Sea Act, 4(5), 46 U.S.C.A. 1304(5).
... After quoting the statement in Leather's Best, supra, 451 F 2d at 815,
that treating a container as a package is inconsistent with the
congressional purpose of establishing a reasonable minimum level of
liability, Judge Beeks wrote, 414 F. Supp. at 907 (footnotes omitted):
Although this approach has not completely escaped
criticism, there is, nonetheless, much to commend it. It gives
needed recognition to the responsibility of the courts to
construe and apply the statute as enacted, however great
might be the temptation to "modernize" or reconstitute it by
artful judicial gloss. If COGSA's package limitation scheme
suffers from internal illness, Congress alone must undertake
the surgery. There is, in this regard, obvious wisdom in the
Ninth Circuit's conclusion in Hartford that technological
advancements, whether or not forseeable by the COGSA
promulgators, do not warrant a distortion or artificial
construction of the statutory term "package." A ruling that
these large reusable metal pieces of transport equipment
qualify as COGSA packages at least where, as here, they
were carrier owned and supplied would amount to just
such a distortion.

Certainly, if the individual crates or cartons prepared by the

shipper and containing his goods can rightly be considered
"packages" standing by themselves, they do not suddenly
lose that character upon being stowed in a carrier's
container. I would liken these containers to detachable
stowage compartments of the ship. They simply serve to
divide the ship's overall cargo stowage space into smaller,
more serviceable loci. Shippers' packages are quite literally
"stowed" in the containers utilizing stevedoring practices and
materials analogous to those employed in traditional on
board stowage.
In Yeramex International v. S.S. Tando,, 1977 A.M.C. 1807 (E.D. Va.) rev'd
on other grounds, 595 F 2nd 943 (4 Cir. 1979), another district with many
maritime cases followed Judge Beeks' reasoning in Matsushita and
similarly rejected the functional economics test. Judge Kellam held that
when rolls of polyester goods are packed into cardboard cartons which are
then placed in containers, the cartons and not the containers are the
packages.
xxx xxx xxx
The case of Smithgreyhound v. M/V Eurygenes, 18 followed the Mitsui test:
Eurygenes concerned a shipment of stereo equipment packaged by the
shipper into cartons which were then placed by the shipper into a carrierfurnished container. The number of cartons was disclosed to the carrier in
the bill of lading. Eurygenes followed the Mitsui test and treated the
cartons, not the container, as the COGSA packages. However, Eurygenes
indicated that a carrier could limit its liability to $500 per container if the bill
of lading failed to disclose the number of cartons or units within the
container, or if the parties indicated, in clear and unambiguous language,
an agreement to treat the container as the package.
(Admiralty Litigation in Perpetuum: The Continuing Saga of
Package Limitations and Third World Delivery Problems by
Chester D. Hooper & Keith L. Flicker, published in Fordham
International Law Journal, Vol. 6, 1982-83, Number 1)
(Emphasis supplied)
In this case, the Bill of Lading (Exhibit "A") disclosed the following data:
2 Containers
(128) Cartons)

Men's Garments Fabrics and Accessories Freight Prepaid

Say: Two (2) Containers Only.
Considering, therefore, that the Bill of Lading clearly disclosed the contents of the
containers, the number of cartons or units, as well as the nature of the goods, and
applying the ruling in the Mitsui and Eurygenes cases it is clear that the 128 cartons, not
the two (2) containers should be considered as the shipping unit subject to the $500
limitation of liability.
True, the evidence does not disclose whether the containers involved herein were
carrier-furnished or not. Usually, however, containers are provided by the carrier. 19 In
this case, the probability is that they were so furnished for Petitioner Carrier was at
liberty to pack and carry the goods in containers if they were not so packed. Thus, at the
dorsal side of the Bill of Lading (Exhibit "A") appears the following stipulation in fine
print:
11. (Use of Container) Where the goods receipt of which is acknowledged
on the face of this Bill of Lading are not already packed into container(s) at
the time of receipt, the Carrier shall be at liberty to pack and carry them in
any type of container(s).
The foregoing would explain the use of the estimate "Say: Two (2) Containers Only" in
the Bill of Lading, meaning that the goods could probably fit in two (2) containers only. It
cannot mean that the shipper had furnished the containers for if so, "Two (2)
Containers" appearing as the first entry would have sufficed. and if there is any
ambiguity in the Bill of Lading, it is a cardinal principle in the construction of contracts
that the interpretation of obscure words or stipulations in a contract shall not favor the
party who caused the obscurity. 20 This applies with even greater force in a contract of
adhesion where a contract is already prepared and the other party merely adheres to it,
like the Bill of Lading in this case, which is draw. up by the carrier. 21
On Alleged Denial of Opportunity to Present Deposition of Its Witnesses: (in G.R. No.
69044 only)
Petitioner Carrier claims that the Trial Court did not give it sufficient time to take the
depositions of its witnesses in Japan by written interrogatories.
We do not agree. petitioner Carrier was given- full opportunity to present its evidence
but it failed to do so. On this point, the Trial Court found:
xxx xxx xxx
Indeed, since after November 6, 1978, to August 27, 1979, not to mention
the time from June 27, 1978, when its answer was prepared and filed in
Court, until September 26, 1978, when the pre-trial conference was

conducted for the last time, the defendant had more than nine months to
prepare its evidence. Its belated notice to take deposition on written
interrogatories of its witnesses in Japan, served upon the plaintiff on
August 25th, just two days before the hearing set for August 27th, knowing
fully well that it was its undertaking on July 11 the that the deposition of
the witnesses would be dispensed with if by next time it had not yet been
obtained, only proves the lack of merit of the defendant's motion for
postponement, for which reason it deserves no sympathy from the Court
in that regard. The defendant has told the Court since February 16, 1979,
that it was going to take the deposition of its witnesses in Japan. Why did
it take until August 25, 1979, or more than six months, to prepare its
written interrogatories. Only the defendant itself is to blame for its failure to
adduce evidence in support of its defenses.
xxx xxx xxx 22
Petitioner Carrier was afforded ample time to present its side of the case. 23 It cannot
complain now that it was denied due process when the Trial Court rendered its Decision
on the basis of the evidence adduced. What due process abhors is absolute lack of
opportunity to be heard. 24
On the Award of Attorney's Fees:
Petitioner Carrier questions the award of attorney's fees. In both cases, respondent
Court affirmed the award by the Trial Court of attorney's fees of P35,000.00 in favor of
Development Insurance in G.R. No. 69044, and P5,000.00 in favor of NISSHIN and
DOWA in G.R. No. 71478.
Courts being vested with discretion in fixing the amount of attorney's fees, it is believed
that the amount of P5,000.00 would be more reasonable in G.R. No. 69044. The award
of P5,000.00 in G.R. No. 71478 is affirmed.
WHEREFORE, 1) in G.R. No. 69044, the judgment is modified in that petitioner Eastern
Shipping Lines shall pay the Development Insurance and Surety Corporation the
amount of P256,039 for the twenty-eight (28) packages of calorized lance pipes, and
P71,540 for the seven (7) cases of spare parts, with interest at the legal rate from the
date of the filing of the complaint on June 13, 1978, plus P5,000 as attorney's fees, and
the costs.
2) In G.R.No.71478,the judgment is hereby affirmed.
SO ORDERED.
Separate Opinions
YAP, J., concurring and dissenting:

With respect to G.R. No. 71478, the majority opinion holds that the 128 cartons of textile
materials, and not the two (2) containers, should be considered as the shipping unit for
the purpose of applying the $500.00 limitation under the Carriage of Goods by Sea Act
(COGSA).
The majority opinion followed and applied the interpretation of the COGSA "package"
limitation adopted by the Second Circuit, United States Court of Appeals, in Mitsui &
Co., Ltd. vs. American Export Lines, Inc., 636 F. 2d 807 (1981) and the Smithgreyhound
v. M/V Eurygenes, 666, F 2nd, 746. Both cases adopted the rule that carrier-furnished
containers whose contents are fully disclosed are not "packages" within the meaning of
Section 4 (5) of COGSA.
I cannot go along with the majority in applying the Mitsui and Eurygenes decisions to
the present case, for the following reasons: (1) The facts in those cases differ materially
from those obtaining in the present case; and (2) the rule laid down in those two cases
is by no means settled doctrine.
In Mitsui and Eurygenes, the containers were supplied by the carrier or shipping
company. In Mitsui the Court held: "Certainly, if the individual crates or cartons prepared
by the shipper and containing his goods can rightly be considered "packages" standing
by themselves, they do not suddenly lose that character upon being stowed in a
carrier's container. I would liken these containers to detachable stowage compartments
of the ship." Cartons or crates placed inside carrier-furnished containers are deemed
stowed in the vessel itself, and do not lose their character as individual units simply by
being placed inside container provided by the carrier, which are merely "detachable
stowage compartments of the ship.
In the case at bar, there is no evidence showing that the two containers in question
were carrier-supplied. This fact cannot be presumed. The facts of the case in fact show
that this was the only shipment placed in containers. The other shipment involved in the
case, consisting of surveying instruments, was packed in two "cases."
We cannot speculate on the meaning of the words "Say: Two (2) Containers Only, "
which appear in the bill of lading. Absent any positive evidence on this point, we cannot
say that those words constitute a mere estimate that the shipment could fit in two
containers, thereby showing that when the goods were delivered by the shipper, they
were not yet placed inside the containers and that it was the petitioner carrier which
packed the goods into its own containers, as authorized under paragraph 11 on the
dorsal side of the bill of lading, Exhibit A. Such assumption cannot be made in view of
the following words clearly stamped in red ink on the face of the bill of lading: "Shipper's
Load, Count and Seal Said to Contain." This clearly indicates that it was the shipper
which loaded and counted the goods placed inside the container and sealed the latter.
The two containers were delivered by the shipper to the carrier already sealed for
shipment, and the number of cartons said to be contained inside them was indicated in
the bill of lading, on the mere say-so of the shipper. The freight paid to the carrier on the

shipment was based on the measurement (by volume) of the two containers at $34.50
per cubic meter. The shipper must have saved on the freight charges by using
containers for the shipment. Under the circumstances, it would be unfair to the carrier to
have the limitation of its liability under COGSA fixed on the number of cartons inside the
containers, rather than on the containers themselves, since the freight revenue was
based on the latter.
The Mitsui and Eurygenes decisions are not the last word on the subject. The
interpretation of the COGSA package limitation is in a state of flux, 1 as the courts
continue to wrestle with the troublesome problem of applying the statutory limitation
under COGSA to containerized shipments. The law was adopted before modern
technological changes have revolutionized the shipping industry. There is need for the
law itself to be updated to meet the changes brought about by the container revolution,
but this is a task which should be addressed by the legislative body. Until then, this
Court, while mindful of American jurisprudence on the subject, should make its own
interpretation of the COGSA provisions, consistent with what is equitable to the parties
concerned. There is need to balance the interests of the shipper and those of the
carrier.
In the case at bar, the shipper opted to ship the goods in two containers, and paid
freight charges based on the freight unit, i.e., cubic meters. The shipper did not declare
the value of the shipment, for that would have entailed higher freight charges; instead of
paying higher freight charges, the shipper protected itself by insuring the shipment. As
subrogee, the insurance company can recover from the carrier only what the shipper
itself is entitled to recover, not the amount it actually paid the shipper under the
insurance policy.
In our view, under the circumstances, the container should be regarded as the shipping
unit or "package" within the purview of COGSA. However, we realize that this may not
be equitable as far as the shipper is concerned. If the container is not regarded as a
"package" within the terms of COGSA, then, the $500.00 liability limitation should be
based on "the customary freight unit." Sec. 4 (5) of COGSA provides that in case of
goods not shipped in packages, the limit of the carrier's liability shall be $500.00 "per
customary freight unit." In the case at bar, the petitioner's liability for the shipment in
question based on "freight unit" would be $21,950.00 for the shipment of 43.9 cubic
meters.
I concur with the rest of the decision.
Sarmiento, J., concur.
Separate Opinions
YAP, J., concurring and dissenting:

With respect to G.R. No. 71478, the majority opinion holds that the 128 cartons of textile
materials, and not the two (2) containers, should be considered as the shipping unit for
the purpose of applying the $500.00 limitation under the Carriage of Goods by Sea Act
(COGSA).
The majority opinion followed and applied the interpretation of the COGSA "package"
limitation adopted by the Second Circuit, United States Court of Appeals, in Mitsui &
Co., Ltd. vs. American Export Lines, Inc., 636 F. 2d 807 (1981) and the Smithgreyhound
v. M/V Eurygenes, 666, F 2nd, 746. Both cases adopted the rule that carrier-furnished
containers whose contents are fully disclosed are not "packages" within the meaning of
Section 4 (5) of COGSA.
I cannot go along with the majority in applying the Mitsui and Eurygenes decisions to
the present case, for the following reasons: (1) The facts in those cases differ materially
from those obtaining in the present case; and (2) the rule laid down in those two cases
is by no means settled doctrine.
In Mitsui and Eurygenes, the containers were supplied by the carrier or shipping
company. In Mitsui the Court held: "Certainly, if the individual crates or cartons prepared
by the shipper and containing his goods can rightly be considered "packages" standing
by themselves, they do not suddenly lose that character upon being stowed in a
carrier's container. I would liken these containers to detachable stowage compartments
of the ship." Cartons or crates placed inside carrier-furnished containers are deemed
stowed in the vessel itself, and do not lose their character as individual units simply by
being placed inside container provided by the carrier, which are merely "detachable
stowage compartments of the ship.
In the case at bar, there is no evidence showing that the two containers in question
were carrier-supplied. This fact cannot be presumed. The facts of the case in fact show
that this was the only shipment placed in containers. The other shipment involved in the
case, consisting of surveying instruments, was packed in two "cases."
We cannot speculate on the meaning of the words "Say: Two (2) Containers Only, "
which appear in the bill of lading. Absent any positive evidence on this point, we cannot
say that those words constitute a mere estimate that the shipment could fit in two
containers, thereby showing that when the goods were delivered by the shipper, they
were not yet placed inside the containers and that it was the petitioner carrier which
packed the goods into its own containers, as authorized under paragraph 11 on the
dorsal side of the bill of lading, Exhibit A. Such assumption cannot be made in view of
the following words clearly stamped in red ink on the face of the bill of lading: "Shipper's
Load, Count and Seal Said to Contain." This clearly indicates that it was the shipper
which loaded and counted the goods placed inside the container and sealed the latter.
The two containers were delivered by the shipper to the carrier already sealed for
shipment, and the number of cartons said to be contained inside them was indicated in
the bill of lading, on the mere say-so of the shipper. The freight paid to the carrier on the

shipment was based on the measurement (by volume) of the two containers at $34.50
per cubic meter. The shipper must have saved on the freight charges by using
containers for the shipment. Under the circumstances, it would be unfair to the carrier to
have the limitation of its liability under COGSA fixed on the number of cartons inside the
containers, rather than on the containers themselves, since the freight revenue was
based on the latter.
The Mitsui and Eurygenes decisions are not the last word on the subject. The
interpretation of the COGSA package limitation is in a state of flux, 1 as the courts
continue to wrestle with the troublesome problem of applying the statutory limitation
under COGSA to containerized shipments. The law was adopted before modern
technological changes have revolutionized the shipping industry. There is need for the
law itself to be updated to meet the changes brought about by the container revolution,
but this is a task which should be addressed by the legislative body. Until then, this
Court, while mindful of American jurisprudence on the subject, should make its own
interpretation of the COGSA provisions, consistent with what is equitable to the parties
concerned. There is need to balance the interests of the shipper and those of the
carrier.
In the case at bar, the shipper opted to ship the goods in two containers, and paid
freight charges based on the freight unit, i.e., cubic meters. The shipper did not declare
the value of the shipment, for that would have entailed higher freight charges; instead of
paying higher freight charges, the shipper protected itself by insuring the shipment. As
subrogee, the insurance company can recover from the carrier only what the shipper
itself is entitled to recover, not the amount it actually paid the shipper under the
insurance policy.
In our view, under the circumstances, the container should be regarded as the shipping
unit or "package" within the purview of COGSA. However, we realize that this may not
be equitable as far as the shipper is concerned. If the container is not regarded as a
"package" within the terms of COGSA, then, the $500.00 liability limitation should be
based on "the customary freight unit." Sec. 4 (5) of COGSA provides that in case of
goods not shipped in packages, the limit of the carrier's liability shall be $500.00 "per
customary freight unit." In the case at bar, the petitioner's liability for the shipment in
question based on "freight unit" would be $21,950.00 for the shipment of 43.9 cubic
meters.
I concur with the rest of the decision.

Transportation Laws
A. Common Carriers
B. Common Carriers of Goods
b. Exemption from Liability
i. Natural Disaster (1734 etc.)

Asia Lighterage vs. CA, 409 scra 340

On appeal is the Court of Appeals May 11, 2000 Decision in CA-G.R. CV

No. 49195 and February 21, 2001 Resolution affirming with modification the
April 6, 1994 Decision of the Regional Trial Court of Manila which found
petitioner liable to pay private respondent the amount of indemnity and
attorney's fees.
[1]

[2]

[3]

First, the facts.

On June 13, 1990, 3,150 metric tons of Better Western White Wheat in
bulk, valued at US$423,192.35 was shipped by Marubeni American
Corporation of Portland, Oregon on board the vessel M/V NEO CYMBIDIUM
V-26 for delivery to the consignee, General Milling Corporation in Manila,
evidenced by Bill of Lading No. PTD/Man-4. The shipment was insured by
the private respondent Prudential Guarantee and Assurance, Inc. against loss
or damage for P14,621,771.75 under Marine Cargo Risk Note RN 11859/90.
[4]

[5]

[6]

On July 25, 1990, the carrying vessel arrived in Manila and the cargo was
transferred to the custody of the petitioner Asia Lighterage and Shipping,
Inc. The petitioner was contracted by the consignee as carrier to deliver the
cargo to consignee's warehouse at Bo. Ugong, Pasig City.
On August 15, 1990, 900 metric tons of the shipment was loaded on barge
PSTSI III, evidenced by Lighterage Receipt No. 0364 for delivery to
consignee. The cargo did not reach its destination.
[7]

It appears that on August 17, 1990, the transport of said cargo was
suspended due to a warning of an incoming typhoon. On August 22, 1990, the
petitioner proceeded to pull the barge to Engineering Island off Baseco to
seek shelter from the approaching typhoon. PSTSI III was tied down to other
barges which arrived ahead of it while weathering out the storm that night. A
few days after, the barge developed a list because of a hole it sustained after
hitting an unseen protuberance underneath the water. The petitioner filed a
Marine Protest on August 28, 1990. It likewise secured the services of
Gaspar Salvaging Corporation which refloated the barge. The hole was then
patched with clay and cement.
[8]

[9]

The barge was then towed to ISLOFF terminal before it finally headed
towards the consignee's wharf on September 5, 1990. Upon reaching the Sta.
Mesa spillways, the barge again ran aground due to strong current. To avoid
the complete sinking of the barge, a portion of the goods was transferred to
three other barges.
[10]

The next day, September 6, 1990, the towing bits of the barge broke. It
sank completely, resulting in the total loss of the remaining cargo. A second
Marine Protest was filed on September 7, 1990.
[11]

[12]

On September 14, 1990, a bidding was conducted to dispose of the

damaged wheat retrieved and loaded on the three other barges. The total
proceeds from the sale of the salvaged cargo was P201,379.75.
[13]

[14]

On the same date, September 14, 1990, consignee sent a claim letter to
the petitioner, and another letter dated September 18, 1990 to the private
respondent for the value of the lost cargo.
On January 30, 1991, the private respondent indemnified the consignee in
the amount of P4,104,654.22. Thereafter, as subrogee, it sought recovery of
said amount from the petitioner, but to no avail.
[15]

On July 3, 1991, the private respondent filed a complaint against the

petitioner for recovery of the amount of indemnity, attorney's fees and cost of
suit. Petitioner filed its answer with counterclaim.
[16]

[17]

The Regional Trial Court ruled in favor of the private respondent. The
dispositive portion of its Decision states:
WHEREFORE, premises considered, judgment is hereby rendered ordering
defendant Asia Lighterage & Shipping, Inc. liable to pay plaintiff Prudential
Guarantee & Assurance Co., Inc. the sum of P4,104,654.22 with interest from the date
complaint was filed on July 3, 1991 until fully satisfied plus 10% of the amount
awarded as and for attorney's fees. Defendant's counterclaim is hereby
DISMISSED. With costs against defendant.
[18]

Petitioner appealed to the Court of Appeals insisting that it is not a

common carrier. The appellate court affirmed the decision of the trial court
with modification. The dispositive portion of its decision reads:
WHEREFORE, the decision appealed from is hereby AFFIRMED with modification
in the sense that the salvage value of P201,379.75 shall be deducted from the amount
of P4,104,654.22.Costs against appellant.
SO ORDERED.
Petitioners Motion for Reconsideration dated June 3, 2000 was likewise
denied by the appellate court in a Resolution promulgated on February 21,
2001.

Hence, this petition. Petitioner submits the following errors allegedly

committed by the appellate court, viz:
[19]

(1) THE COURT OF APPEALS DECIDED THE CASE A QUO IN A WAY NOT IN
ACCORD WITH LAW AND/OR WITH THE APPLICABLE DECISIONS OF THE
SUPREME COURT WHEN IT HELD THAT PETITIONER IS A COMMON
CARRIER.
(2) THE COURT OF APPEALS DECIDED THE CASE A QUO IN A WAY NOT IN
ACCORD WITH LAW AND/OR WITH THE APPLICABLE DECISIONS OF THE
SUPREME COURT WHEN IT AFFIRMED THE FINDING OF THE LOWER
COURT A QUO THAT ON THE BASIS OF THE PROVISIONS OF THE CIVIL
CODE APPLICABLE TO COMMON CARRIERS, THE LOSS OF THE CARGO IS,
THEREFORE, BORNE BY THE CARRIER IN ALL CASES EXCEPT IN THE
FIVE (5) CASES ENUMERATED.
(3) THE COURT OF APPEALS DECIDED THE CASE A QUO IN A WAY NOT IN
ACCORD WITH LAW AND/OR WITH THE APPLICABLE DECISIONS OF THE
SUPREME COURT WHEN IT EFFECTIVELY CONCLUDED THAT PETITIONER
FAILED TO EXERCISE DUE DILIGENCE AND/OR WAS NEGLIGENT IN ITS
CARE AND CUSTODY OF THE CONSIGNEES CARGO.

The issues to be resolved are:

(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.
On the first issue, we rule that petitioner is a common carrier.
Article 1732 of the Civil Code defines common carriers as persons,
corporations, firms or associations engaged in the business of carrying or
transporting passengers or goods or both, by land, water, or air, for
compensation, offering their services to the public.
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.
[20]

We disagree.
In De Guzman vs. Court of Appeals, we held that the definition
of common carriers in Article 1732 of the Civil Code makes no distinction
between one whose principal business activity is the carrying of persons or
goods or both, and one who does such carrying only as an ancillary
activity. We also did not distinguish between a person or enterprise offering
transportation service on a regular or scheduled basis and one offering such
[21]

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.
In the case at bar, the principal business of the petitioner is that of
lighterage and drayage and it offers its barges to the public for carrying or
transporting goods by water for compensation. Petitioner is clearly a common
carrier. In De Guzman, supra, we considered private respondent Ernesto
Cendaa to be a common carrier even if his principal occupation was not the
carriage of goods for others, but that of buying used bottles and scrap metal in
Pangasinan and selling these items in Manila.
[22]

[23]

We therefore hold that petitioner is a common carrier whether its carrying

of goods is done on an irregular rather than scheduled manner, and with an
only limited clientele.A common carrier need not have fixed and publicly
known routes. Neither does it have to maintain terminals or issue tickets.
To be sure, petitioner fits the test of a common carrier as laid down
in Bascos vs. Court of Appeals. The test to determine a common carrier is
whether the given undertaking is a part of the business engaged in by the
carrier which he has held out to the general public as his occupation rather
than the quantity or extent of the business transacted. 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 for compensation.
[24]

[25]

[26]

[27]

On the second issue, we uphold the findings of the lower courts that
petitioner failed to exercise extraordinary diligence in its care and custody of
the consignees goods.
Common carriers are bound to observe extraordinary diligence in the
vigilance over the goods transported by them. They are presumed to have
been at fault or to have acted negligently if the goods are lost, destroyed or
deteriorated. To overcome the presumption of negligence in the case of loss,
destruction or deterioration of the goods, the common carrier must prove that
it exercised extraordinary diligence. There are, however, exceptions to this
rule. Article 1734 of the Civil Code enumerates the instances when the
presumption of negligence does not attach:
[28]

[29]

Art. 1734. Common carriers are responsible for the loss, destruction, or deterioration
of the goods, unless the same is due to any of the following causes only:

(1) Flood, storm, earthquake, lightning, or other natural disaster or

calamity;
(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 competent public authority.
In the case at bar, the barge completely sank after its towing bits broke,
resulting in the total loss of its cargo. Petitioner 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. 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. A portion of the crossexamination of Alfredo Cunanan, cargo-surveyor of Tan-Gatue Adjustment
Co., Inc., states:
[30]

CROSS-EXAMINATION BY ATTY. DONN LEE:

[31]

xxxxxxxxx
q - Can you tell us what else transpired after that incident?
a - After the first accident, through the initiative of the barge owners, they tried to pull
out the barge from the place of the accident, and bring it to the anchor terminal for
safety, then after deciding if the vessel is stabilized, they tried to pull it to the
consignees warehouse, now while on route another accident occurred, now this
time the barge totally hitting something in the course.
q - You said there was another accident, can you tell the court the nature of the second
accident?
a - The sinking, sir.

q - Can you tell the nature . . . can you tell the court, if you know what caused the
sinking?
a - Mostly it was related to the first accident because there was already a
whole (sic) on the bottom part of the barge.

xxxxxxxxx
This is not all. Petitioner still headed to the consignees wharf despite
knowledge of an incoming typhoon. During the time that the barge was
heading towards the consignee's wharf on September 5, 1990, typhoon
Loleng has already entered the Philippine area of responsibility. A part of the
testimony of Robert Boyd, Cargo Operations Supervisor of the petitioner,
reveals:
[32]

DIRECT-EXAMINATION BY ATTY. LEE:

[33]

xxxxxxxxx
q - Now, Mr. Witness, did it not occur to you it might be safer to just allow the Barge to
lie where she was instead of towing it?
a - Since that time that the Barge was refloated, GMC (General Milling Corporation, the
consignee) as I have said was in a hurry for their goods to be delivered at their
Wharf since they needed badly the wheat that was loaded in PSTSI-3. It was
needed badly by the consignee.
q - And this is the reason why you towed the Barge as you did?
a - Yes, sir.

xxxxxxxxx
CROSS-EXAMINATION BY ATTY. IGNACIO:

[34]

xxxxxxxxx
q - And then from ISLOFF Terminal you proceeded to the premises of the
GMC? Am I correct?
a - The next day, in the morning, we hired for additional two (2) tugboats as I
have stated.
q - Despite of the threats of an incoming typhoon as you testified a while ago?
a - It is already in an inner portion of Pasig River. The typhoon would be
coming and it would be dangerous if we are in the vicinity of Manila
Bay.

q - But the fact is, the typhoon was incoming? Yes or no?
a - Yes.
q - And yet as a standard operating procedure of your Company, you have to
secure a sort of Certification to determine the weather condition, am I
correct?
a - Yes, sir.
q - So, more or less, you had the knowledge of the incoming typhoon, right?
a - Yes, sir.
q - And yet you proceeded to the premises of the GMC?
a - ISLOFF Terminal is far from Manila Bay and anytime even with the
typhoon if you are already inside the vicinity or inside Pasig entrance, it
is a safe place to tow upstream.
Accordingly, the petitioner cannot invoke the occurrence of the typhoon as
force majeure to escape liability for the loss sustained by the private
respondent. Surely, meeting a typhoon head-on falls short of due diligence
required from a common carrier. More importantly, the officers/employees
themselves of petitioner admitted that when the towing bits of the vessel broke
that caused its sinking and the total loss of the cargo upon reaching the Pasig
River, it was no longer affected by the typhoon. The typhoon then is not the
proximate cause of the loss of the cargo; a human factor, i.e., negligence had
intervened.
IN VIEW THEREOF, the petition is DENIED. The Decision of the Court of
Appeals in CA-G.R. CV No. 49195 dated May 11, 2000 and its Resolution
dated February 21, 2001 are hereby AFFIRMED. Costs against petitioner.
SO ORDERED.

Transportation Laws
A. Common Carriers
B. Common Carriers of Goods
b. Exemption from Liability
iv. Character of Goods, etc

Government v. Ynchausti and Company, 40 Phil. 219

G.R. No. 14191, Government v. Ynchausti and Company, 40 Phil. 219
September 29, 1919
THE GOVERNMENT OF THE PHILIPPINE ISLANDS, plaintiff-appellant,
vs.
YNCHAUSTI & COMPANY, defendant-appellee.
Attorney-General Paredes for the appellant. Charles C. Cohn for the appellee.
JOHNSON, J.:
The purpose of this action was to recover the sum of P200 as damages to
certain cargo of roofing tiles shipped by the plaintiff from Manila to Iloilo on a
vessel belonging to the defendant. The tiles were delivered by the defendant
to the consignee of the plaintiff at Iloilo. Upon delivery it was found that
some of the tiles had been damaged; that the damage amounted to about
P200. Upon a submission of that question to the lower court a judgment was
rendered against the plaintiff in favor of the defendant, absolving the latter
from all liability under the complaint.
There seems to be no dispute about the facts, except whether or not the tiles
were broken by the negligence of the defendant. The defendant denied that
the tiles were broken by reason of its negligence. The defendant proved, and
the plaintiff did not attempt to dispute, that the roofing tiles in question were
of a brittle and fragile nature; that they were delivered by the plaintiff to the
defendant in bundles of ten each, tied with bejuco [rattan], without any
packing or protective covering. The plaintiff did not even attempt to prove
any negligence on the part of the defendant. On the hand, the defendant
offered proof to show that there was no negligence on its part, by showing
that the tiles were loaded, stowed, and discharged by handlabor, and not be
mechanical devices which might have caused the breakage in question.
It appears from the record that the tiles in question were received by the
defendant from the plaintiff, as representative on a Government bill of lading
known as "General Form No. 9-A," which was made out and submitted by a

representative of the Bureau of Supply to the defendant. (Exhibit A.) At the

head of Exhibit A is found the following:
You are hereby authorized to receive, carry, and deliver the following
described merchandise to treasurer of Iloilo at Iloilo in accordance with the
authorized and prescribed rates and classifications, and according to the
laws of common carriers in force on the date hereof, settlement and
payment of charges to be made by Bureau of Supply. (Sgd.) T. R. SCHOON,
Chief Division of Supplies, Bureau of Supply.
On the said bill of lading we find the following, which was attempted thereon
by the defendant:
The goods have been accepted for transportation subject to the conditions
prescribed by the Insular Collector of Customs in Philippine Marine
Regulations, page 16, under the heading "Bill of Lading Conditions."
The lower court, in discussing the said bill of lading with the two conditions
found thereon, reached the conclusion that the plaintiff was bound by the
terms of the bill of lading as issued by the defendant and not by the terms
which the plaintiff attempted to impose, - that is to say, that such
merchandise was to be carried at owner's risk only; that there was no
presumption of negligence on the part of the defendant from the fact that
the tiles were broken when received by the consignee; and that since the
plaintiff did not prove negligence on the part of the defendant, the former
was not entitled to recover damages from the latter. The lower court
rendered judgment absolving the defendant from all liability under the
complaint.
The important questions presented by the appeal are: (a) Where the terms
and conditions stamped by the defendant upon the Government's bill of
lading binding upon the plaintiff? (b) Was there a presumption of negligence
on the part of the defendant?

The record shows that ever since the Government began to use the bill of
lading, General Form No. 9-A, the shipowners had always used the "stamp" in
question; that in the present case the defendant placed said stamp upon the
bill of lading before the plaintiff shipped the tiles in question; that having
shipped the goods under the said bill of lading, with the terms and conditions
of the carriage stamped thereon, the appellant must be deemed to have
assented to the said terms and conditions thereon stamped.
The appellant contends also that it was not bound by the terms and
conditions inserted by the appellee, because (a) the reference made by the
appellee to the "Philippine Marine Regulations" prescribed by the Collector of
Customs was vague; that the appellee should have expressed the conditions
fully and clearly on the face of the bill of lading; and (b) that the Insular
Collector of Customs had no authority to issue such regulations.
As to the first contention, it seems that the appellant fully knew the import
and significance of the reference made in said regulations. The appellant
attempted to show that prior to the transaction in question the Government
notified the defendant and other shipowners that it would not be bound by
the "stamp" that was placed by the shipowners on the Government's bill of
lading.
With reference to the contention of the appellant that the Collector of
Customs had no authority to make such regulations, it may be said in the
present case that the binding effect of the conditions stamped on the bill of
lading did not proceed from the authority of the Collector of Customs but
from the actual contract which the parties made in the present case. Each
bill of lading is a contract and the parties thereto are bound by its terms.
Findings as we do that the tiles in question were shipped at the owner's risk,
under the law in this jurisdiction, the carrier is only liable where the evidence
shows that he was guilty of some negligence and that the damages claimed

were the result of such negligence. As was said above, the plaintiff offered no
proof whatever to show negligence on the part of the defendant.
The plaintiff cites some American authorities to support its contention that
the carrier is an absolute insurer of merchandise shipped and that the proof
of breakage or damage to goods shipped in the hands of the carrier makes
out a prima facie case of negligence against him, and that the burden of
proof is thrown on him to show due care and diligence.
The law upon that question in this jurisdiction is found in articles 361 and
362 of the Commercial Code. Article 361 provides:
ART. 361. Merchandise shall be transported at the risk and venture of the
shipper, if the contrary be not expressly stipulated.
Therefore, all damages and impairment, suffered by the goods in
transportation by reason of accident, force majeure, or by virtue of the
nature or defect of the articles, shall be for the account and risk of the
shipper.
The proof of these accidents is incumbent upon the carrier.
Article 362 provides:
ART. 362. The carrier, however, shall be liable for the losses and damages
arising from the causes mentioned in the foregoing article, if it be proved
against him that they occurred on account of his negligence or because he
did not take the precautions usually adopted by careful persons, unless the
shipper committed fraud in the bill of lading stating that the goods were of a
class or quality different from what they really were. . . .
Under the provisions of article 361 the defendant, in order to free itself from
liability, was only obliged to prove that the damages suffered by the goods
were "by virtue of the nature or defect of the articles." Under the provisions

of article 362 the plaintiff, in order to hold the defendant liable, was obliged
to prove that the damages to the goods by virtue of their nature, occurred on
account of its negligence or because the defendant did not take the
precaution usually adopted by careful persons.
The defendant herein proved, and the plaintiff did not attempt to dispute,
that the tiles in question were of a brittle and fragile nature and that they
were delivered by the plaintiff to the defendant without any packing or
protective covering. The defendant also offered proof to show that there was
no negligence on its part, by showing that the tiles were loaded, stowed, and
discharged in a careful and diligent manner.
In this jurisdiction there is no presumption of negligence on the part of the
carriers in case like the present. The plaintiff, not having proved negligence
on the part of the defendant, is not entitled to recover damages.
For the foregoing reasons, the judgment of the lower court is hereby
affirmed, with costs. So ordered.

Transportation Laws
A. Common Carriers
B. Common Carriers of Goods
b. Exemption from Liability
iv. Character of Goods, etc
Southern Lines Inc. v. CA and Iloilo City, 4 SCRA 258
G.R. No. L-16629, Southern Lines Inc. v. CA and Iloilo City, 4 SCRA 258
SOUTHERN LINES, INC., petitioner,
vs.
COURT OF APPEALS and CITY OF ILOILO, respondents.
Jose Ma. Lopez Vito, Jr. for petitioner.
The City Fiscal for respondents.
DE LEON, J.:

This is a petition to review on certiorari the decision of the Court of Appeals

in CA-G.R. No. 15579-R affirming that of the Court of First Instance of Iloilo
which sentenced petitioner Southern Lines, Inc. to pay respondent City of
Iloilo the amount of P4,931.41.
Sometime in 1948, the City of Iloilo requisitioned for rice from the National
Rice and Corn Corporation (hereafter referred to as NARIC) in Manila. On
August 24 of the same year, NARIC, pursuant to the order, shipped 1,726
sacks of rice consigned to the City of Iloilo on board the SS "General Wright"
belonging to the Southern Lines, Inc. Each sack of rice weighed 75 kilos and
the entire shipment as indicated in the bill of lading had a total weight of
129,450 kilos. According to the bill of lading, the cost of the shipment was
P63,115.50 itemized and computed as follows:
Unit Price per bag P36.25

P62,567.50

Handling at P0.13 per bag

224.38

Trucking at P2.50 per bag

323.62

63,115.50
T o t a l . . . . . .. . . . .
On September 3, 1948, the City of Iloilo received the shipment and paid the
amount of P63,115.50. However, it was noted that the foot of the bill of
lading that the City of Iloilo 'Received the above mentioned merchandise
apparently in same condition as when shipped, save as noted below: actually
received 1685 sacks with a gross weight of 116,131 kilos upon actual
weighing. Total shortage ascertained 13,319 kilos." The shortage was
equivalent to 41 sacks of rice with a net weight of 13,319 kilos, the
proportionate value of which was P6,486.35.

On February 14, 1951 the City of Iloilo filed a complaint in the Court of First
Instance of Iloilo against NARIC and the Southern Lines, Inc. for the recovery
of the amount of P6,486.35 representing the value of the shortage of the
shipment of rice. After trial, the lower court absolved NARIC from the
complaint, but sentenced the Southern Lines, Inc. to pay the amount of
P4,931.41 which is the difference between the sum of P6,486.35 and
P1,554.94 representing the latter's counterclaim for handling and freight.
The Southern Lines, Inc. appealed to the Court of Appeals which affirmed the
judgment of the trial court. Hence, this petition for review.
The only question to be determined in this petition is whether or not the
defendant-carrier, the herein petitioner, is liable for the loss or shortage of
the rice shipped.
Article 361 of the Code of Commerce provides:
ART. 361. The merchandise shall be transported at the risk and venture of
the shipper, if the contrary has not been expressly stipulated.
As a consequence, all the losses and deteriorations which the goods may
suffer during the transportation by reason of fortuitous event, force majeure,
or the inherent nature and defect of the goods, shall be for the account and
risk of the shipper.
Proof of these accidents is incumbent upon the carrier.
Article 362 of the same Code provides:
ART. 362. Nevertheless, the carrier shall be liable for the losses and
damages resulting from the causes mentioned in the preceding article if it is
proved, as against him, that they arose through his negligence or by reason
of his having failed to take the precautions which usage his establisbed
among careful persons, unless the shipper has committed fraud in the bill of

lading, representing the goods to be of a kind or quality different from what

they really were.
If, notwithstanding the precautions referred to in this article, the goods
transported run the risk of being lost, on account of their nature or by reason
of unavoidable accident, there being no time for their owners to dispose of
them, the carrier may proceed to sell them, placing them for this purpose at
the disposal of the judicial authority or of the officials designated by special
provisions.
Under the provisions of Article 361, the defendant-carrier in order to free
itself from liability, was only obliged to prove that the damages suffered by
the goods were "by virtue of the nature or defect of the articles." Under the
provisions of Article 362, the plaintiff, in order to hold the defendant liable,
was obliged to prove that the damages to the goods by virtue of their nature,
occurred on account of its negligence or because the defendant did not take
the precaution adopted by careful persons. (Government v. Ynchausti &
Co., 40 Phil. 219, 223).
Petitioner claims exemption from liability by contending that the shortage in
the shipment of rice was due to such factors as the shrinkage, leakage or
spillage of the rice on account of the bad condition of the sacks at the time it
received the same and the negligence of the agents of respondent City of
Iloilo in receiving the shipment. The contention is untenable, for, if the fact of
improper packing is known to the carrier or his servants, or apparent upon
ordinary observation, but it accepts the goods notwithstanding such
condition, it is not relieved of liability for loss or injury resulting thereform. (9
Am Jur. 869.) Furthermore, according to the Court of Appeals, "appellant
(petitioner) itself frankly admitted that the strings that tied the bags of rice
were broken; some bags were with holes and plenty of rice were spilled
inside the hull of the boat, and that the personnel of the boat collected no
less than 26 sacks of rice which they had distributed among themselves."
This finding, which is binding upon this Court, shows that the shortage
resulted from the negligence of petitioner.

Invoking the provisions of Article 366 of the Code of Commerce and those of
the bill of lading, petitioner further contends that respondent is precluded
from filing an action for damages on account of its failure to present a claim
within 24 hours from receipt of the shipment. It also cites the cases
of Government v. Ynchausti & Co., 24 Phil. 315 andTriton Insurance Co. v.
Jose, 33 Phil. 194, ruling to the effect that the requirement that the claim for
damages must be made within 24 hours from delivery is a condition
precedent to the accrual of the right of action to recover damages. These
two cases above-cited are not applicable to the case at bar. In the first cited
case, the plaintiff never presented any claim at all before filing the action. In
the second case, there was payment of the transportation charges which
precludes the presentation of any claim against the carrier. (See Article 366,
Code of Commerce.) It is significant to note that in the American case
of Hoye v. Pennsylvania Railroad Co., 13 Ann. Case. 414, it has been said:
... "It has been held that a stipulation in the contract of shipment requiring
the owner of the goods to present a notice of his claim to the carrier within a
specified time after the goods have arrived at their destination is in the
nature of a condition precedent to the owner's right to enforce a recovery,
that he must show in the first instance that be has complied with the
condition, or that the circumstances were such that to have complied with it
would have required him to do an unreasonable thing. The weight of
authority, however, sustains the view that such a stipulation is more in the
nature of a limitation upon the owner's right to recovery, and that the burden
of proof is accordingly on the carrier to show that the limitation was
reasonable and in proper form or within the time stated." (Hutchinson on
Carrier, 3d ed., par. 44) Emphasis supplied.
In the case at bar, the record shows that petitioner failed to plead this
defense in its answer to respondent's complaint and, therefore, the same is
deemed waived (Section 10, Rule 9, Rules of Court), and cannot be raised for
the first time at the trial or on appeal. (Maxilom v. Tabotabo, 9 Phil. 390.)
Moreover, as the Court of Appeals has said:

... the records reveal that the appellee (respondent) filed the present action,
within a reasonable time after the short delivery in the shipment of the rice
was made. It should be recalled that the present action is one for the refund
of the amount paid in excess, and not for damages or the recovery of the
shortage; for admittedly the appellee (respondent) had paid the entire value
of the 1726 sacks of rice, subject to subsequent adjustment, as to shortages
or losses. The bill of lading does not at all limit the time for filing an action
for the refund of money paid in excess.
WHEREFORE, the decision of the Court of Appeals is hereby affirmed in all
respects and the petition for certiorari denied.
With costs against the petitioner.

Transportation Laws
A. Common Carriers
B. Common Carriers of Goods
b. Exemption from Liability
v. Order of Competent authority (1734(5), 1743)
Ganzon vs. CA, 161 SCRA 646
Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. L-48757 May 30, 1988
MAURO GANZON, petitioner,
vs.
COURT OF APPEALS and GELACIO E. TUMAMBING, respondents.
Antonio B. Abinoja for petitioner.
Quijano, Arroyo & Padilla Law Office for respondents.

SARMIENTO, J.:
The private respondent instituted in the Court of First Instance of Manila 1 an action
against the petitioner for damages based on culpa contractual. The antecedent facts, as
found by the respondent Court, 2 are undisputed:
On November 28, 1956, Gelacio Tumambing contracted the services of Mauro B.
Ganzon to haul 305 tons of scrap iron from Mariveles, Bataan, to the port of Manila on
board the lighter LCT "Batman" (Exhibit 1, Stipulation of Facts, Amended Record on
Appeal, p. 38). Pursuant to that agreement, Mauro B. Ganzon sent his lighter "Batman"
to Mariveles where it docked in three feet of water (t.s.n., September 28, 1972, p. 31).
On December 1, 1956, Gelacio Tumambing delivered the scrap iron to defendant
Filomeno Niza, captain of the lighter, for loading which was actually begun on the same
date by the crew of the lighter under the captain's supervision. When about half of the
scrap iron was already loaded (t.s.n., December 14, 1972, p. 20), Mayor Jose Advincula
of Mariveles, Bataan, arrived and demanded P5,000.00 from Gelacio Tumambing. The
latter resisted the shakedown and after a heated argument between them, Mayor Jose
Advincula drew his gun and fired at Gelacio Tumambing (t.s.n., March 19, 1971, p. 9;
September 28, 1972, pp. 6-7).<re||an1w> The gunshot was not fatal but
Tumambing had to be taken to a hospital in Balanga, Bataan, for treatment (t.s.n.,
March 19, 1971, p. 13; September 28, 1972, p. 15).
After sometime, the loading of the scrap iron was resumed. But on December 4, 1956,
Acting Mayor Basilio Rub, accompanied by three policemen, ordered captain Filomeno
Niza and his crew to dump the scrap iron (t.s.n., June 16, 1972, pp. 8-9) where the
lighter was docked (t.s.n., September 28, 1972, p. 31). The rest was brought to the
compound of NASSCO (Record on Appeal, pp. 20-22). Later on Acting Mayor Rub
issued a receipt stating that the Municipality of Mariveles had taken custody of the scrap
iron (Stipulation of Facts, Record on Appeal, p. 40; t.s.n., September 28, 1972, p. 10.)
On the basis of the above findings, the respondent Court rendered a decision, the
dispositive portion of which states:
WHEREFORE, the decision appealed from is hereby reversed and set
aside and a new one entered ordering defendant-appellee Mauro Ganzon
to pay plaintiff-appellant Gelacio E. Tumambimg the sum of P5,895.00 as
actual damages, the sum of P5,000.00 as exemplary damages, and the
amount of P2,000.00 as attorney's fees. Costs against defendant-appellee
Ganzon. 3
In this petition for review on certiorari, the alleged errors in the decision of the Court of
Appeals are:
I

THE COURT OF APPEALS FINDING THE HEREIN PETITIONER GUILTY OF

BREACH OF THE CONTRACT OF TRANSPORTATION AND IN IMPOSING A
LIABILITY AGAINST HIM COMMENCING FROM THE TIME THE SCRAP WAS
PLACED IN HIS CUSTODY AND CONTROL HAVE NO BASIS IN FACT AND IN LAW.
II
THE APPELLATE COURT ERRED IN CONDEMNING THE PETITIONER FOR THE
ACTS OF HIS EMPLOYEES IN DUMPING THE SCRAP INTO THE SEA DESPITE
THAT IT WAS ORDERED BY THE LOCAL GOVERNMENT OFFICIAL WITHOUT HIS
PARTICIPATION.
III
THE APPELLATE COURT FAILED TO CONSIDER THAT THE LOSS OF THE SCRAP
WAS DUE TO A FORTUITOUS EVENT AND THE PETITIONER IS THEREFORE NOT
LIABLE FOR LOSSES AS A CONSEQUENCE THEREOF. 4
The petitioner, in his first assignment of error, insists that the scrap iron had not been
unconditionally placed under his custody and control to make him liable. However, he
completely agrees with the respondent Court's finding that on December 1, 1956, the
private respondent delivered the scraps to Captain Filomeno Niza for loading in the
lighter "Batman," That the petitioner, thru his employees, actually received the scraps is
freely admitted. Significantly, there is not the slightest allegation or showing of any
condition, qualification, or restriction accompanying the delivery by the private
respondent-shipper of the scraps, or the receipt of the same by the petitioner. On the
contrary, soon after the scraps were delivered to, and received by the petitionercommon carrier, loading was commenced.
By the said act of delivery, the scraps were unconditionally placed in the possession
and control of the common carrier, and upon their receipt by the carrier for
transportation, the contract of carriage was deemed perfected. Consequently, the
petitioner-carrier's extraordinary responsibility for the loss, destruction or deterioration of
the goods commenced. Pursuant to Art. 1736, such extraordinary responsibility would
cease only upon the delivery, actual or constructive, by the carrier to the consignee, or
to the person who has a right to receive them. 5 The fact that part of the shipment had
not been loaded on board the lighter did not impair the said contract of transportation as
the goods remained in the custody and control of the carrier, albeit still unloaded.
The petitioner has failed to show that the loss of the scraps was due to any of the
following causes enumerated in Article 1734 of the Civil Code, namely:
(1) Flood, storm, earthquake, lightning, or other natural disaster or calamity;
(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 competent public authority.
Hence, the petitioner is presumed to have been at fault or to have acted
negligently. 6 By reason of this presumption, the court is not even required to make an
express finding of fault or negligence before it could hold the petitioner answerable for
the breach of the contract of carriage. Still, the petitioner could have been exempted
from any liability had he been able to prove that he observed extraordinary diligence in
the vigilance over the goods in his custody, according to all the circumstances of the
case, or that the loss was due to an unforeseen event or to force majeure. As it was,
there was hardly any attempt on the part of the petitioner to prove that he exercised
such extraordinary diligence.
It is in the second and third assignments of error where the petitioner maintains that he
is exempt from any liability because the loss of the scraps was due mainly to the
intervention of the municipal officials of Mariveles which constitutes a caso fortuito as
defined in Article 1174 of the Civil Code. 7
We cannot sustain the theory of caso fortuito. In the courts below, the petitioner's
defense was that the loss of the scraps was due to an "order or act of competent public
authority," and this contention was correctly passed upon by the Court of Appeals which
ruled that:
... In the second place, before the appellee Ganzon could be absolved
from responsibility on the ground that he was ordered by competent public
authority to unload the scrap iron, it must be shown that Acting Mayor
Basilio Rub had the power to issue the disputed order, or that it was
lawful, or that it was issued under legal process of authority. The appellee
failed to establish this. Indeed, no authority or power of the acting mayor
to issue such an order was given in evidence. Neither has it been shown
that the cargo of scrap iron belonged to the Municipality of Mariveles.
What we have in the record is the stipulation of the parties that the cargo
of scrap iron was accilmillated by the appellant through separate
purchases here and there from private individuals (Record on Appeal, pp.
38-39). The fact remains that the order given by the acting mayor to dump
the scrap iron into the sea was part of the pressure applied by Mayor Jose
Advincula to shakedown the appellant for P5,000.00. The order of the
acting mayor did not constitute valid authority for appellee Mauro Ganzon
and his representatives to carry out.
Now the petitioner is changing his theory to caso fortuito. Such a change of theory on
appeal we cannot, however, allow. In any case, the intervention of the municipal officials
was not In any case, of a character that would render impossible the fulfillment by the

carrier of its obligation. The petitioner was not duty bound to obey the illegal order to
dump into the sea the scrap iron. Moreover, there is absence of sufficient proof that the
issuance of the same order was attended with such force or intimidation as to
completely overpower the will of the petitioner's employees. The mere difficulty in the
fullfilment of the obligation is not considered force majeure. We agree with the private
respondent that the scraps could have been properly unloaded at the shore or at the
NASSCO compound, so that after the dispute with the local officials concerned was
settled, the scraps could then be delivered in accordance with the contract of carriage.
There is no incompatibility between the Civil Code provisions on common carriers and
Articles 361 8 and 362 9 of the Code of Commerce which were the basis for this Court's
ruling in Government of the Philippine Islands vs. Ynchausti & Co.10 and which the
petitioner invokes in tills petition. For Art. 1735 of the Civil Code, conversely stated,
means that the shipper will suffer the losses and deterioration arising from the causes
enumerated in Art. 1734; and in these instances, the burden of proving that damages
were caused by the fault or negligence of the carrier rests upon him. However, the
carrier must first establish that the loss or deterioration was occasioned by one of the
excepted causes or was due to an unforeseen event or to force majeure. Be that as it
may, insofar as Art. 362 appears to require of the carrier only ordinary diligence, the
same is .deemed to have been modified by Art. 1733 of the Civil Code.
Finding the award of actual and exemplary damages to be proper, the same will not be
disturbed by us. Besides, these were not sufficiently controverted by the petitioner.
WHEREFORE, the petition is DENIED; the assailed decision of the Court of Appeals is
hereby AFFIRMED. Costs against the petitioner.
This decision is IMMEDIATELY EXECUTORY.
Separate Opinions
MELENCIO-HERRERA, J., dissenting:
I am constrained to dissent.
It is my view that petitioner can not be held liable in damages for the loss and
destruction of the scrap iron. The loss of said cargo was due to an excepted cause an
'order or act of competent public authority" (Article 1734[5], Civil Code).
The loading of the scrap iron on the lighter had to be suspended because of Municipal
Mayor Jose Advincula's intervention, who was a "competent public authority." Petitioner
had no control over the situation as, in fact, Tumambing himself, the owner of the cargo,
was impotent to stop the "act' of said official and even suffered a gunshot wound on the
occasion.

When loading was resumed, this time it was Acting Mayor Basilio Rub, accompanied by
three policemen, who ordered the dumping of the scrap iron into the sea right where the
lighter was docked in three feet of water. Again, could the captain of the lighter and his
crew have defied said order?
Through the "order" or "act" of "competent public authority," therefore, the performance
of a contractual obligation was rendered impossible. The scrap iron that was dumped
into the sea was "destroyed" while the rest of the cargo was "seized." The seizure is
evidenced by the receipt issues by Acting Mayor Rub stating that the Municipality of
Mariveles had taken custody of the scrap iron. Apparently, therefore, the seizure and
destruction of the goods was done under legal process or authority so that petitioner
should be freed from responsibility.
Art. 1743. If through order of public authority the goods are seized or
destroyed, the common carrier is not responsible, provided said public
authority had power to issue the order.