Transportation Atty.
Valencia
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.[1] 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.
In her complaint,[2] 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.
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
I. Concept of common carriers
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,[4] the dispositive part of which reads:
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,[7] petitioner filed the instant petition under Rule 45 on the
following grounds:
I
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
extra-ordinary 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.[9] Such person or association of persons are regarded as carriers and are classified as private or
special carriers and common or public carriers.[10] A common carrier is defined under Article 1732 of the
Civil Code as persons, corporations, firms or associations engaged in the business of carrying or transporting
passengers or goods or both, by land, water or air, for compensation, offering their services to the public.
It is 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.[11] 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.
Since the contract between the parties is an ordinary one for services, the standard of care required of
respondent is that of a good father of a family under Article 1173 of the Civil Code.[12] This connotes
reasonable care consistent with that which an ordinarily prudent person would have observed when
confronted with a similar situation. The test to determine whether negligence attended the performance of
an obligation is: did the defendant in doing the alleged negligent act use that reasonable care and
caution which an ordinarily prudent person would have used in the same situation? If not, then he is guilty
of negligence.[13]
Transportation Atty. Valencia
I. Concept of common carriers
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)[14] 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.
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,[15] 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.[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.[17] 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.[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[19] 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.
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.[20] 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.[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
 Transportation Atty. Valencia
I. Concept of common carriers

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.

G.R. No. L-47822 December 22, 1988
PEDRO DE GUZMAN, petitioner,
vs.
COURT OF APPEALS and ERNESTO CENDANA, respondents.
Vicente D. Millora for petitioner.
Jacinto Callanta for private respondent.
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)
Transportation Atty. Valencia
I. Concept of common carriers
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's 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 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.
 Transportation Atty. Valencia
I. Concept of common carriers

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)
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.

Applying the above-quoted Articles 1734 and 1735, we note firstly that the specific cause alleged in the We, therefore, agree with the result reached by the Court of Appeals that private respondent Cendana is
instant case the hijacking of the carrier's truck does not fall within any of the five (5) categories of not liable for the value of the undelivered merchandise which was lost because of an event entirely
exempting causes listed in Article 1734. It would follow, therefore, that the hijacking of the carrier's vehicle beyond private respondent's control.
must be dealt with under the provisions of Article 1735, in other words, that the private respondent as ACCORDINGLY, the Petition for Review on certiorari is hereby DENIED and the Decision of the Court of
common carrier is presumed to have been at fault or to have acted negligently. This presumption, Appeals dated 3 August 1977 is AFFIRMED. No pronouncement as to costs.
however, may be overthrown by proof of extraordinary diligence on the part of private respondent.
SO ORDERED.
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

[G.R. No. 125948. December 29, 1998]
FIRST PHILIPPINE INDUSTRIAL CORPORATION, petitioner, vs. COURT OF APPEALS, HONORABLE PATERNO V.
TAC-AN, BATANGAS CITY and ADORACION C. ARELLANO, in her official capacity as City Treasurer of
Batangas, respondents.
DECISION
MARTINEZ, J.:
This petition for review on certiorari assails the Decision of the Court of Appeals dated November 29, 1995,
in CA-G.R. SP No. 36801, affirming the decision of the Regional Trial Court of Batangas City, Branch 84, in
Civil Case No. 4293, which dismissed petitioners' complaint for a business tax refund imposed by the City of
Batangas.
Petitioner is a grantee of a pipeline concession under Republic Act No. 387, as amended, to contract,
install and operate oil pipelines. The original pipeline concession was granted in 1967[1] and renewed by the
Energy Regulatory Board in 1992.[2]
Sometime in January 1995, petitioner applied for a mayor's permit with the Office of the Mayor of Batangas
City. However, before the mayor's permit could be issued, the respondent City Treasurer required petitioner
to pay a local tax based on its gross receipts for the fiscal year 1993 pursuant to the Local Government
Code.[3] The respondent City Treasurer assessed a business tax on the petitioner amounting to P956,076.04
payable in four installments based on the gross receipts for products pumped at GPS-1 for the fiscal year
1993 which amounted to P181,681,151.00. In order not to hamper its operations, petitioner paid the tax
under protest in the amount of P239,019.01 for the first quarter of 1993.
On January 20, 1994, petitioner filed a letter-protest addressed to the respondent City Treasurer, the
pertinent portion of which reads:
"Please note that our Company (FPIC) is a pipeline operator with a government concession granted under
the Petroleum Act. It is engaged in the business of transporting petroleum products from the Batangas
refineries, via pipeline, to Sucat and JTF Pandacan Terminals. As such, our Company is exempt from paying
tax on gross receipts under Section 133 of the Local Government Code of 1991 x x x x
"Moreover, Transportation contractors are not included in the enumeration of contractors under Section
131, Paragraph (h) of the Local Government Code. Therefore, the authority to impose tax 'on contractors
and other independent contractors' under Section 143, Paragraph (e) of the Local Government Code
does not include the power to levy on transportation contractors.
"The imposition and assessment cannot be categorized as a mere fee authorized under Section 147 of the
Local Government Code. The said section limits the imposition of fees and charges on business to such
amounts as may be commensurate to the cost of regulation, inspection, and licensing. Hence, assuming
arguendo that FPIC is liable for the license fee, the imposition thereof based on gross receipts is violative of
the aforecited provision. The amount of P956,076.04 (P239,019.01 per quarter) is not commensurate to the
cost of regulation, inspection and licensing. The fee is already a revenue raising measure, and not a mere
regulatory imposition."[4]
On March 8, 1994, the respondent City Treasurer denied the protest contending that petitioner cannot be
considered engaged in transportation business, thus it cannot claim exemption under Section 133 (j) of the
Local Government Code.[5]
On June 15, 1994, petitioner filed with the Regional Trial Court of Batangas City a complaint[6] for tax refund
with prayer for a writ of preliminary injunction against respondents City of Batangas and Adoracion
Arellano in her capacity as City Treasurer. In its complaint, petitioner alleged, inter alia, that: (1) the
imposition and collection of the business tax on its gross receipts violates Section 133 of the Local
Government Code; (2) the authority of cities to impose and collect a tax on the gross receipts of
"contractors and independent contractors" under Sec. 141 (e) and 151 does not include the authority to
collect such taxes on transportation contractors for, as defined under Sec. 131 (h), the term "contractors"
excludes transportation contractors; and, (3) the City Treasurer illegally and erroneously imposed and
collected the said tax, thus meriting the immediate refund of the tax paid.[7]
Transportation Atty. Valencia
I. Concept of common carriers
Traversing the complaint, the respondents argued that petitioner cannot be exempt from taxes under
Section 133 (j) of the Local Government Code as said exemption applies only to "transportation contractors
and persons engaged in the transportation by hire and common carriers by air, land and
water." Respondents assert that pipelines are not included in the term "common carrier" which refers solely
to ordinary carriers such as trucks, trains, ships and the like. Respondents further posit that the term
"common carrier" under the said code pertains to the mode or manner by which a product is delivered to
its destination.[8]
On October 3, 1994, the trial court rendered a decision dismissing the complaint, ruling in this wise:
"xxx Plaintiff is either a contractor or other independent contractor.
xxx the exemption to tax claimed by the plaintiff has become unclear. It is a rule that tax exemptions are to
be strictly construed against the taxpayer, taxes being the lifeblood of the government. Exemption may
therefore be granted only by clear and unequivocal provisions of law.
"Plaintiff claims that it is a grantee of a pipeline concession under Republic Act 387, (Exhibit A) whose
concession was lately renewed by the Energy Regulatory Board (Exhibit B). Yet neither said law nor the
deed of concession grant any tax exemption upon the plaintiff.
"Even the Local Government Code imposes a tax on franchise holders under Sec. 137 of the Local Tax
Code. Such being the situation obtained in this case (exemption being unclear and equivocal) resort to
distinctions or other considerations may be of help:
1. That the exemption granted under Sec. 133 (j) encompasses only common carriers so as not to
overburden the riding public or commuters with taxes. Plaintiff is not a common carrier, but a special carrier
extending its services and facilities to a single specific or "special customer" under a "special contract."
2. The Local Tax Code of 1992 was basically enacted to give more and effective local autonomy to local
governments than the previous enactments, to make them economically and financially viable to serve
the people and discharge their functions with a concomitant obligation to accept certain devolution of
powers, x x x So, consistent with this policy even franchise grantees are taxed (Sec. 137) and contractors
are also taxed under Sec. 143 (e) and 151 of the Code."[9]
Petitioner assailed the aforesaid decision before this Court via a petition for review. On February 27, 1995,
we referred the case to the respondent Court of Appeals for consideration and adjudication.[10]On
November 29, 1995, the respondent court rendered a decision[11] affirming the trial court's dismissal of
petitioner's complaint. Petitioner's motion for reconsideration was denied on July 18, 1996.[12]
Hence, this petition. At first, the petition was denied due course in a Resolution dated November 11,
1996.[13] Petitioner moved for a reconsideration which was granted by this Court in a Resolution[14]of
January 20, 1997. Thus, the petition was reinstated.
Petitioner claims that the respondent Court of Appeals erred in holding that (1) the petitioner is not a
common carrier or a transportation contractor, and (2) the exemption sought for by petitioner is not clear
under the law.
There is merit in the petition.
A "common carrier" may be defined, broadly, as one who holds himself out to the public as engaged in the
business of transporting persons or property from place to place, for compensation, offering his services to
the public generally.
Article 1732 of the Civil Code defines a "common carrier" as "any person, corporation, firm or association
engaged in the business of carrying or transporting passengers or goods or both, by land, water, or air, for
compensation, offering their services to the public."
The test for determining whether a party is a common carrier of goods is:
1. He must be engaged in the business of carrying goods for others as a public employment, and must hold
himself out as ready to engage in the transportation of goods for person generally as a business and not as
a casual occupation;

2. He must undertake to carry goods of the kind to which his business is confined;
3. He must undertake to carry by the method by which his business is conducted and over his established
roads; and
4. The transportation must be for hire.[15]
Based on the above definitions and requirements, there is no doubt that petitioner is a common carrier. It is
engaged in the business of transporting or carrying goods, i.e. petroleum products, for hire as a public
employment. It undertakes to carry for all persons indifferently, that is, to all persons who choose to employ
its services, and transports the goods by land and for compensation. The fact that petitioner has a limited
clientele does not exclude it from the definition of a common carrier. In De Guzman vs. Court of
Appeals[16] we ruled that:
"The above article (Art. 1732, 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 (in local idiom, as a 'sideline'). Article 1732 x x x 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
1877 deliberately refrained from 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.' "(Underscoring Supplied)
Also, respondent's argument that the term "common carrier" as used in Section 133 (j) of the Local
Government Code refers only to common carriers transporting goods and passengers through moving
vehicles or vessels either by land, sea or water, is erroneous.
As correctly pointed out by petitioner, the definition of "common carriers" in the Civil Code makes no
distinction as to the means of transporting, as long as it is by land, water or air. It does not provide that the
transportation of the passengers or goods should be by motor vehicle. In fact, in the United States, oil pipe
line operators are considered common carriers.[17]
Under the Petroleum Act of the Philippines (Republic Act 387), petitioner is considered a "common
carrier." Thus, Article 86 thereof provides that:
"Art. 86. Pipe line concessionaire as a common carrier. - A pipe line shall have the preferential right to utilize
installations for the transportation of petroleum owned by him, but is obligated to utilize the remaining
transportation capacity pro rata for the transportation of such other petroleum as may be offered by others
for transport, and to charge without discrimination such rates as may have been approved by the
Secretary of Agriculture and Natural Resources."
Republic Act 387 also regards petroleum operation as a public utility. Pertinent portion of Article 7 thereof
provides:
Transportation Atty. Valencia
I. Concept of common carriers
"that everything relating to the exploration for and exploitation of petroleum x x and everything relating to
the manufacture, refining, storage, or transportation by special methods of petroleum, is hereby declared
to be a public utility." (Underscoring Supplied)
The Bureau of Internal Revenue likewise considers the petitioner a "common carrier." In BIR Ruling No. 069-
83, it declared:
"x x x since [petitioner] is a pipeline concessionaire that is engaged only in transporting petroleum products,
it is considered a common carrier under Republic Act No. 387 x x x. Such being the case, it is not subject to
withholding tax prescribed by Revenue Regulations No. 13-78, as amended."
From the foregoing disquisition, there is no doubt that petitioner is a "common carrier" and, therefore,
exempt from the business tax as provided for in Section 133 (j), of the Local Government Code, to wit:
"Section 133. Common Limitations on the Taxing Powers of Local Government Units. - Unless otherwise
provided herein, the exercise of the taxing powers of provinces, cities, municipalities, and barangays shall
not extend to the levy of the following :
xxxxxxxxx
(j) Taxes on the gross receipts of transportation contractors and persons engaged in the transportation of
passengers or freight by hire and common carriers by air, land or water, except as provided in this Code."
The deliberations conducted in the House of Representatives on the Local Government Code of 1991 are
illuminating:
"MR. AQUINO (A). Thank you, Mr. Speaker.
Mr. Speaker, we would like to proceed to page 95, line 1. It states : "SEC.121 [now Sec. 131]. Common
Limitations on the Taxing Powers of Local Government Units." x x x
MR. AQUINO (A.). Thank you Mr. Speaker.
Still on page 95, subparagraph 5, on taxes on the business of transportation. This appears to be one of those
being deemed to be exempted from the taxing powers of the local government units. May we know the
reason why the transportation business is being excluded from the taxing powers of the local government
units?
MR. JAVIER (E.). Mr. Speaker, there is an exception contained in Section 121 (now Sec. 131), line 16,
paragraph 5. It states that local government units may not impose taxes on the business of transportation,
except as otherwise provided in this code.
Now, Mr. Speaker, if the Gentleman would care to go to page 98 of Book II, one can see there that
provinces have the power to impose a tax on business enjoying a franchise at the rate of not more than
one-half of 1 percent of the gross annual receipts. So, transportation contractors who are enjoying a
franchise would be subject to tax by the province. That is the exception, Mr. Speaker.
What we want to guard against here, Mr. Speaker, is the imposition of taxes by local government units on
the carrier business. Local government units may impose taxes on top of what is already being imposed by
the National Internal Revenue Code which is the so-called "common carriers tax." We do not want a
duplication of this tax, so we just provided for an exception under Section 125 [now Sec. 137] that a
province may impose this tax at a specific rate.
MR. AQUINO (A.). Thank you for that clarification, Mr. Speaker. x x x[18]
It is clear that the legislative intent in excluding from the taxing power of the local government unit the
imposition of business tax against common carriers is to prevent a duplication of the so-called "common
carrier's tax."
Petitioner is already paying three (3%) percent common carrier's tax on its gross sales/earnings under the
National Internal Revenue Code.[19] To tax petitioner again on its gross receipts in its transportation of
petroleum business would defeat the purpose of the Local Government Code.
 Transportation Atty. Valencia
I. Concept of common carriers

WHEREFORE, the petition is hereby GRANTED. The decision of the respondent Court of Appeals dated
November 29, 1995 in CA-G.R. SP No. 36801 is REVERSED and SET ASIDE.

SO ORDERED.

[G.R. No. 148496. March 19, 2002]
VIRGINES CALVO doing business under the name and style TRANSORIENT CONTAINER TERMINAL SERVICES,
INC., petitioner, vs. UCPB GENERAL INSURANCE CO., INC. (formerly Allied Guarantee Ins. Co.,
Inc.) respondent.
DECISION
MENDOZA, J.:
This is a petition for review of the decision,[1] dated May 31, 2001, of the Court of Appeals, affirming the
decision[2] of the Regional Trial Court, Makati City, Branch 148, which ordered petitioner to pay respondent,
as subrogee, the amount of P93,112.00 with legal interest, representing the value of damaged cargo
handled by petitioner, 25% thereof as attorneys fees, and the cost of the suit.
The facts are as follows:
Petitioner Virgines Calvo is the owner of Transorient Container Terminal Services, Inc. (TCTSI), a sole
proprietorship customs broker. At the time material to this case, petitioner entered into a contract with San
Miguel Corporation (SMC) for the transfer of 114 reels of semi-chemical fluting paper and 124 reels of kraft
liner board from the Port Area in Manila to SMCs warehouse at the Tabacalera Compound, Romualdez St.,
Ermita, Manila. The cargo was insured by respondent UCPB General Insurance Co., Inc.
On July 14, 1990, the shipment in question, contained in 30 metal vans, arrived in Manila on board M/V
Hayakawa Maru and, after 24 hours, were unloaded from the vessel to the custody of the arrastre operator,
Manila Port Services, Inc. From July 23 to July 25, 1990, petitioner, pursuant to her contract with SMC,
withdrew the cargo from the arrastre operator and delivered it to SMCs warehouse in Ermita, Manila. On
July 25, 1990, the goods were inspected by Marine Cargo Surveyors, who found that 15 reels of the semi-
chemical fluting paper were wet/stained/torn and 3 reels of kraft liner board were likewise torn. The
damage was placed at P93,112.00.
SMC collected payment from respondent UCPB under its insurance contract for the aforementioned
amount. In turn, respondent, as subrogee of SMC, brought suit against petitioner in the Regional Trial Court,
Branch 148, Makati City, which, on December 20, 1995, rendered judgment finding petitioner liable to
respondent for the damage to the shipment.
The trial court held:
It cannot be denied . . . that the subject cargoes sustained damage while in the custody of
defendants. Evidence such as the Warehouse Entry Slip (Exh. E); the Damage Report (Exh. F) with entries
appearing therein, classified as TED and TSN, which the claims processor, Ms. Agrifina De Luna, claimed to
be tearrage at the end and tearrage at the middle of the subject damaged cargoes respectively,
coupled with the Marine Cargo Survey Report (Exh. H - H-4-A) confirms the fact of the damaged condition
of the subject cargoes. The surveyor[s] report (Exh. H-4-A) in particular, which provides among others that:
. . . we opine that damages sustained by shipment is attributable to improper handling in transit presumably
whilst in the custody of the broker . . . .
is a finding which cannot be traversed and overturned.
The evidence adduced by the defendants is not enough to sustain [her] defense that [she is] are not
liable. Defendant by reason of the nature of [her] business should have devised ways and means in order
to prevent the damage to the cargoes which it is under obligation to take custody of and to forthwith
deliver to the consignee. Defendant did not present any evidence on what precaution [she] performed to
prevent [the] said incident, hence the presumption is that the moment the defendant accepts the cargo
[she] shall perform such extraordinary diligence because of the nature of the cargo.
....
Generally speaking under Article 1735 of the Civil Code, if the goods are proved to have been lost,
destroyed or deteriorated, common carriers are presumed to have been at fault or to have acted
negligently, unless they prove that they have observed the extraordinary diligence required by law. The
Transportation Atty. Valencia
I. Concept of common carriers
burden of the plaintiff, therefore, is to prove merely that the goods he transported have been lost,
destroyed or deteriorated. Thereafter, the burden is shifted to the carrier to prove that he has exercised the
extraordinary diligence required by law. Thus, it has been held that 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. It is incumbent upon the carrier to prove that the loss was due to accident
or some other circumstances inconsistent with its liability. (cited in Commercial Laws of the Philippines by
Agbayani, p. 31, Vol. IV, 1989 Ed.)
Defendant, being a customs brother, warehouseman and at the same time a common carrier is supposed
[to] exercise [the] extraordinary diligence required by law, hence the extraordinary responsibility lasts from
the time the goods are unconditionally placed in the possession of and received by the carrier for
transportation until the same are delivered actually or constructively by the carrier to the consignee or to
the person who has the right to receive the same.[3]
Accordingly, the trial court ordered petitioner to pay the following amounts
1. The sum of P93,112.00 plus interest;
2. 25% thereof as lawyers fee;
3. Costs of suit.[4]
The decision was affirmed by the Court of Appeals on appeal. Hence this petition for review on certiorari.
Petitioner contends that:
I. THE COURT OF APPEALS COMMITTED SERIOUS AND REVERSIBLE ERROR [IN] DECIDING THE CASE NOT ON
THE EVIDENCE PRESENTED BUT ON PURE SURMISES, SPECULATIONS AND MANIFESTLY MISTAKEN INFERENCE.
II. THE COURT OF APPEALS COMMITTED SERIOUS AND REVERSIBLE ERROR IN CLASSIFYING THE PETITIONER AS A
COMMON CARRIER AND NOT AS PRIVATE OR SPECIAL CARRIER WHO DID NOT HOLD ITS SERVICES TO THE
PUBLIC.[5]
It will be convenient to deal with these contentions in the inverse order, for if petitioner is not a common
carrier, although both the trial court and the Court of Appeals held otherwise, then she is indeed not liable
beyond what ordinary diligence in the vigilance over the goods transported by her, would
require.[6] Consequently, any damage to the cargo she agrees to transport cannot be presumed to have
been due to her fault or negligence.
Petitioner contends that contrary to the findings of the trial court and the Court of Appeals, she is not a
common carrier but a private carrier because, as a customs broker and warehouseman, she does not
indiscriminately hold her services out to the public but only offers the same to select parties with whom she
may contract in the conduct of her business.
The contention has no merit. In De Guzman v. Court of Appeals,[7] the Court dismissed a similar contention
and held the party to be a common carrier, thus
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 . . . 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 1732 deliberately refrained from 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:
x x x 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. x x x [8]
There is greater reason for holding petitioner to be a common carrier because the transportation of goods
is an integral part of her business. To uphold petitioners contention would be to deprive those with whom
she contracts the protection which the law affords them notwithstanding the fact that the obligation to
carry goods for her customers, as already noted, is part and parcel of petitioners business.
Now, as to petitioners liability, Art. 1733 of the Civil Code provides:
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 the circumstances of each case. . . .
In Compania Maritima v. Court of Appeals,[9] the meaning of extraordinary diligence in the vigilance over
goods was explained thus:
The extraordinary diligence in the vigilance over the goods tendered for shipment requires the common
carrier to know and to follow the required precaution for avoiding damage to, or destruction of the goods
entrusted to it for sale, carriage and delivery. It requires common carriers to render service with the greatest
skill and foresight and to use all reasonable means to ascertain the nature and characteristic of goods
tendered for shipment, and to exercise due care in the handling and stowage, including such methods as
their nature requires.
In the case at bar, petitioner denies liability for the damage to the cargo. She claims that the spoilage or
wettage took place while the goods were in the custody of either the carrying vessel M/V Hayakawa Maru,
which transported the cargo to Manila, or the arrastre operator, to whom the goods were unloaded and
who allegedly kept them in open air for nine days from July 14 to July 23, 1998 notwithstanding the fact that
some of the containers were deformed, cracked, or otherwise damaged, as noted in the Marine Survey
Report (Exh. H), to wit:
MAXU-2062880 - rain gutter deformed/cracked
ICSU-363461-3 - left side rubber gasket on door distorted/partly loose
PERU-204209-4 - with pinholes on roof panel right portion
TOLU-213674-3 - wood flooring we[t] and/or with signs of water soaked
MAXU-201406-0 - with dent/crack on roof panel
ICSU-412105-0 - rubber gasket on left side/door panel partly detached loosened.[10]
In addition, petitioner claims that Marine Cargo Surveyor Ernesto Tolentino testified that he has no personal
knowledge on whether the container vans were first stored in petitioners warehouse prior to their delivery to
the consignee. She likewise claims that after withdrawing the container vans from the arrastre operator, her
driver, Ricardo Nazarro, immediately delivered the cargo to SMCs warehouse in Ermita, Manila, which is a
mere thirty-minute drive from the Port Area where the cargo came from. Thus, the damage to the cargo
could not have taken place while these were in her custody.[11]
Transportation Atty. Valencia
I. Concept of common carriers
Contrary to petitioners assertion, the Survey Report (Exh. H) of the Marine Cargo Surveyors indicates that
when the shipper transferred the cargo in question to the arrastre operator, these were covered by clean
Equipment Interchange Report (EIR) and, when petitioners employees withdrew the cargo from the arrastre
operator, they did so without exception or protest either with regard to the condition of container vans
or their contents. The Survey Report pertinently reads
Details of Discharge:
Shipment, provided with our protective supervision was noted discharged ex vessel to dock of Pier #13
South Harbor, Manila on 14 July 1990, containerized onto 30 x 20 secure metal vans, covered by clean
EIRs. Except for slight dents and paint scratches on side and roof panels, these containers were deemed to
have [been] received in good condition.
....
Transfer/Delivery:
On July 23, 1990, shipment housed onto 30 x 20 cargo containers was [withdrawn] by Transorient Container
Services, Inc. . . . without exception.
[The cargo] was finally delivered to the consignees storage warehouse located at Tabacalera Compound,
Romualdez Street, Ermita, Manila from July 23/25, 1990.[12]
As found by the Court of Appeals:
From the [Survey Report], it [is] clear that the shipment was discharged from the vessel to the arrastre,
Marina Port Services Inc., in good order and condition as evidenced by clean Equipment Interchange
Reports (EIRs). Had there been any damage to the shipment, there would have been a report to that
effect made by the arrastre operator. The cargoes were withdrawn by the defendant-appellant from the
arrastre still in good order and condition as the same were received by the former without exception, that
is, without any report of damage or loss. Surely, if the container vans were deformed, cracked, distorted or
dented, the defendant-appellant would report it immediately to the consignee or make an exception on
the delivery receipt or note the same in the Warehouse Entry Slip (WES). None of these took place. To put it
simply, the defendant-appellant received the shipment in good order and condition and delivered the
same to the consignee damaged. We can only conclude that the damages to the cargo occurred while it
was in the possession of the defendant-appellant. Whenever the thing is lost (or damaged) in the
possession of the debtor (or obligor), it shall be presumed that the loss (or damage) was due to his fault,
unless there is proof to the contrary. No proof was proffered to rebut this legal presumption and the
presumption of negligence attached to a common carrier in case of loss or damage to the goods.[13]
Anent petitioners insistence that the cargo could not have been damaged while in her custody as she
immediately delivered the containers to SMCs compound, suffice it to say that to prove the exercise of
extraordinary diligence, petitioner must do more than merely show the possibility that some other party
could be responsible for the damage. It must prove that it used all reasonable means to ascertain the
nature and characteristic of goods tendered for [transport] and that [it] exercise[d] due care in the
handling [thereof]. Petitioner failed to do this.
Nor is there basis to exempt petitioner from liability under Art. 1734(4), which provides
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:
....
(4) The character of the goods or defects in the packing or in the containers.
....
For this provision to apply, the rule is that if the improper packing or, in this case, the defect/s in the
container, is/are known to the carrier or his employees or apparent upon ordinary observation, but he
nevertheless accepts the same without protest or exception notwithstanding such condition, he is not
relieved of liability for damage resulting therefrom.[14] In this case, petitioner accepted the cargo without
 Transportation Atty. Valencia
I. Concept of common carriers

exception despite the apparent defects in some of the container vans. Hence, for failure of petitioner to
prove that she exercised extraordinary diligence in the carriage of goods in this case or that she is exempt
from liability, the presumption of negligence as provided under Art. 1735[15] holds.
WHEREFORE, the decision of the Court of Appeals, dated May 31, 2001, is AFFIRMED.

SO ORDERED.

[G.R. No. 112287. December 12, 1997]
NATIONAL STEEL CORPORATION, petitioner, vs. COURT OF APPEALS AND VLASONS SHIPPING,
INC., respondents.
[G.R. No. 112350. December 12, 1997]
VLASONS SHIPPING, INC., petitioner, vs. COURT OF APPEALS AND NATIONAL STEEL
CORPORATION, respondents.
DECISION
PANGANIBAN, J.:
The Court finds occasion to apply the rules on the seaworthiness of a private carrier, its owners responsibility
for damage to the cargo and its liability for demurrage and attorneys fees.The Court also reiterates the
well-known rule that findings of facts of trial courts, when affirmed by the Court of Appeals, are binding on
this Court.
The Case
Before us are two separate petitions for review filed by National Steel Corporation (NSC) and Vlasons
Shipping, Inc. (VSI), both of which assail the August 12, 1993 Decision of the Court of Appeals. [1] The Court
of Appeals modified the decision of the Regional Trial Court of Pasig, Metro Manila, Branch 163 in Civil Case
No. 23317. The RTC disposed as follows:
WHEREFORE, judgment is hereby rendered in favor of defendant and against the plaintiff dismissing the
complaint with cost against plaintiff, and ordering plaintiff to pay the defendant on the counterclaim as
follows:
1. The sum of P75,000.00 as unpaid freight and P88,000.00 as demurrage with interest at the legal rate on
both amounts from April 7, 1976 until the same shall have been fully paid;
2. Attorneys fees and expenses of litigation in the sum of P100,000.00; and
3. Cost of suit.
SO ORDERED. [2]
On the other hand, the Court of Appeals ruled:
WHEREFORE, premises considered, the decision appealed from is modified by reducing the award for
demurrage to P44,000.00 and deleting the award for attorneys fees and expenses of litigation. Except as
thus modified, the decision is AFFIRMED. There is no pronouncement as to costs.
SO ORDERED. [3]
The Facts
The MV Vlasons I is a vessel which renders tramping service and, as such, does not transport cargo or
shipment for the general public. Its services are available only to specific persons who enter into a special
contract of charter party with its owner. It is undisputed that the ship is a private carrier. And it is in this
capacity that its owner, Vlasons Shipping, Inc., entered into a contract of affreightment or contract of
voyage charter hire with National Steel Corporation.
The facts as found by Respondent Court of Appeals are as follows:
(1) On July 17, 1974, plaintiff National Steel Corporation (NSC) as Charterer and defendant Vlasons
Shipping, Inc. (VSI) as Owner, entered into a Contract of Voyage Charter Hire (Exhibit B; also Exhibit 1)
whereby NSC hired VSIs vessel, the MV VLASONS I to make one (1) voyage to load steel products at Iligan
City and discharge them at North Harbor, Manila, under the following terms and conditions, viz:
1. x x x x x x.
Transportation Atty. Valencia
I. Concept of common carriers
2. Cargo: Full cargo of steel products of not less than 2,500 MT, 10% more or less at Masters option.
3. x x x x x x
4. Freight/Payment: P30.00 /metric ton, FIOST basis. Payment upon presentation of Bill of Lading within
fifteen (15) days.
5. Laydays/Cancelling: July 26, 1974/Aug. 5, 1974.
6. Loading/Discharging Rate: 750 tons per WWDSHINC. (Weather Working Day of 24 consecutive hours,
Sundays and Holidays Included).
7. Demurrage/Dispatch: P8,000.00/P4,000.00 per day.
8. x x x x x x
9. Cargo Insurance: Charterers and/or Shippers must insure the cargoes. Shipowners not responsible for
losses/damages except on proven willful negligence of the officers of the vessel.
10. Other terms:(a) All terms/conditions of NONYAZAI C/P [sic] or other internationally recognized Charter
Party Agreement shall form part of this Contract.
xxxxxxxxx
The terms F.I.O.S.T. which is used in the shipping business is a standard provision in the NANYOZAI Charter
Party which stands for Freight In and Out including Stevedoring and Trading, which means that the
handling, loading and unloading of the cargoes are the responsibility of the Charterer. Under Paragraph 5
of the NANYOZAI Charter Party, it states, Charterers to load, stow and discharge the cargo free of risk and
expenses to owners. x x x (Underscoring supplied).
Under paragraph 10 thereof, it is provided that (o)wners shall, before and at the beginning of the voyage,
exercise due diligence to make the vessel seaworthy and properly manned, equipped and supplied and
to make the holds and all other parts of the vessel in which cargo is carried, fit and safe for its reception,
carriage and preservation. Owners shall not be liable for loss of or damage of the cargo arising or resulting
from: unseaworthiness unless caused by want of due diligence on the part of the owners to make the
vessel seaworthy, and to secure that the vessel is properly manned, equipped and supplied and to make
the holds and all other parts of the vessel in which cargo is carried, fit and safe for its reception, carriage
and preservation; xxx; perils, dangers and accidents of the sea or other navigable waters; xxx; wastage in
bulk or weight or any other loss or damage arising from inherent defect, quality or vice of the cargo;
insufficiency of packing; xxx; latent defects not discoverable by due diligence; any other cause arising
without the actual fault or privity of Owners or without the fault of the agents or servants of owners.
Paragraph 12 of said NANYOZAI Charter Party also provides that (o)wners shall not be responsible for split,
chafing and/or any damage unless caused by the negligence or default of the master and crew.
(2) On August 6, 7 and 8, 1974, in accordance with the Contract of Voyage Charter Hire, the MV VLASONS I
loaded at plaintiffs pier at Iligan City, the NSCs shipment of 1,677 skids of tinplates and 92 packages of hot
rolled sheets or a total of 1,769 packages with a total weight of about 2,481.19 metric tons for carriage to
Manila. The shipment was placed in the three (3) hatches of the ship. Chief Mate Gonzalo Sabando, acting
as agent of the vessel[,] acknowledged receipt of the cargo on board and signed the corresponding bill of
lading, B.L.P.P. No. 0233 (Exhibit D) on August 8, 1974.
(3) The vessel arrived with the cargo at Pier 12, North Harbor, Manila, on August 12, 1974. The following day,
August 13, 1974, when the vessels three (3) hatches containing the shipment were opened by plaintiffs
agents, nearly all the skids of tinplates and hot rolled sheets were allegedly found to be wet and rusty. The
cargo was discharged and unloaded by stevedores hired by the Charterer. Unloading was completed only
on August 24, 1974 after incurring a delay of eleven (11) days due to the heavy rain which interrupted the
unloading operations. (Exhibit E)
(4) To determine the nature and extent of the wetting and rusting, NSC called for a survey of the shipment
by the Manila Adjusters and Surveyors Company (MASCO). In a letter to the NSC dated March 17, 1975
(Exhibit G), MASCO made a report of its ocular inspection conducted on the cargo, both while it was still on

board the vessel and later at the NDC warehouse in Pureza St., Sta. Mesa, Manila where the cargo was
taken and stored. MASCO reported that it found wetting and rusting of the packages of hot rolled sheets
and metal covers of the tinplates; that tarpaulin hatch covers were noted torn at various extents; that
container/metal casings of the skids were rusting all over. MASCO ventured the opinion that rusting of the
tinplates was caused by contact with SEA WATER sustained while still on board the vessel as a
consequence of the heavy weather and rough seas encountered while en route to destination (Exhibit F). It
was also reported that MASCOs surveyors drew at random samples of bad order packing materials of the
tinplates and delivered the same to the M.I.T. Testing Laboratories for analysis. On August 31, 1974, the M.I.T.
Testing Laboratories issued Report No. 1770 (Exhibit I) which in part, states, The analysis of bad order samples
of packing materials xxx shows that wetting was caused by contact with SEA WATER.
(5) On September 6, 1974, on the basis of the aforesaid Report No. 1770, plaintiff filed with the defendant its
claim for damages suffered due to the downgrading of the damaged tinplates in the amount
of P941,145.18. Then on October 3, 1974, plaintiff formally demanded payment of said claim but defendant
VSI refused and failed to pay. Plaintiff filed its complaint against defendant on April 21, 1976 which was
docketed as Civil Case No. 23317, CFI, Rizal.
(6) In its complaint, plaintiff claimed that it sustained losses in the aforesaid amount of P941,145.18 as a
result of the act, neglect and default of the master and crew in the management of the vessel as well as
the want of due diligence on the part of the defendant to make the vessel seaworthy and to make the
holds and all other parts of the vessel in which the cargo was carried, fit and safe for its reception, carriage
and preservation -- all in violation of defendants undertaking under their Contract of Voyage Charter Hire.
(7) In its answer, defendant denied liability for the alleged damage claiming that the MV VLASONS I was
seaworthy in all respects for the carriage of plaintiffs cargo; that said vessel was not a common
carrier inasmuch as she was under voyage charter contract with the plaintiff as charterer under the charter
party; that in the course of the voyage from Iligan City to Manila, the MV VLASONS I encountered very
rough seas, strong winds and adverse weather condition, causing strong winds and big waves to
continuously pound against the vessel and seawater to overflow on its deck and hatch covers; that under
the Contract of Voyage Charter Hire, defendant shall not be responsible for losses/damages except on
proven willful negligence of the officers of the vessel, that the officers of said MV VLASONS I exercised due
diligence and proper seamanship and were not willfully negligent; that furthermore the Voyage Charter
Party provides that loading and discharging of the cargo was on FIOST terms which means that the vessel
was free of risk and expense in connection with the loading and discharging of the cargo; that the
damage, if any, was due to the inherent defect, quality or vice of the cargo or to the insufficient packing
thereof or to latent defect of the cargo not discoverable by due diligence or to any other cause arising
without the actual fault or privity of defendant and without the fault of the agents or servants of defendant;
consequently, defendant is not liable; that the stevedores of plaintiff who discharged the cargo in Manila
were negligent and did not exercise due care in the discharge of the cargo; and that the cargo was
exposed to rain and seawater spray while on the pier or in transit from the pier to plaintiffs warehouse after
discharge from the vessel; and that plaintiffs claim was highly speculative and grossly exaggerated and
that the small stain marks or sweat marks on the edges of the tinplates were magnified and considered
total loss of the cargo. Finally, defendant claimed that it had complied with all its duties and obligations
under the Voyage Charter Hire Contract and had no responsibility whatsoever to plaintiff. In turn, it alleged
the following counterclaim:
(a) That despite the full and proper performance by defendant of its obligations under the Voyage Charter
Hire Contract, plaintiff failed and refused to pay the agreed charter hire of P75,000.00 despite demands
made by defendant;
(b) That under their Voyage Charter Hire Contract, plaintiff had agreed to pay defendant the sum
of P8,000.00 per day for demurrage. The vessel was on demurrage for eleven (11) days in Manila waiting for
plaintiff to discharge its cargo from the vessel. Thus, plaintiff was liable to pay defendant demurrage in the
total amount of P88,000.00.
(c) For filing a clearly unfounded civil action against defendant, plaintiff should be ordered to pay
defendant attorneys fees and all expenses of litigation in the amount of not less than P100,000.00.
Transportation Atty. Valencia
I. Concept of common carriers
(8) From the evidence presented by both parties, the trial court came out with the following findings which
were set forth in its decision:
(a) The MV VLASONS I is a vessel of Philippine registry engaged in the tramping service and is available for
hire only under special contracts of charter party as in this particular case.
(b) That for purposes of the voyage covered by the Contract of Voyage Charter Hire (Exh. 1), the MV
VLASONS I was covered by the required seaworthiness certificates including the Certification of
Classification issued by an international classification society, the NIPPON KAIJI KYOKAI (Exh. 4); Coastwise
License from the Board of Transportation (Exh. 5); International Loadline Certificate from the Philippine
Coast Guard (Exh. 6); Cargo Ship Safety Equipment Certificate also from the Philippine Coast Guard (Exh.
7); Ship Radio Station License (Exh. 8); Certificate of Inspection by the Philippine Coast Guard (Exh. 12); and
Certificate of Approval for Conversion issued by the Bureau of Customs (Exh. 9). That being a vessel
engaged in both overseas and coastwise trade, the MV VLASONS I has a higher degree of seaworthiness
and safety.
(c) Before it proceeded to Iligan City to perform the voyage called for by the Contract of Voyage Charter
Hire, the MV VLASONS I underwent drydocking in Cebu and was thoroughly inspected by the Philippine
Coast Guard. In fact, subject voyage was the vessels first voyage after the drydocking. The evidence shows
that the MV VLASONS I was seaworthy and properly manned, equipped and supplied when it undertook
the voyage. It had all the required certificates of seaworthiness.
(d) The cargo/shipment was securely stowed in three (3) hatches of the ship. The hatch openings were
covered by hatchboards which were in turn covered by two or double tarpaulins. The hatch covers were
water tight. Furthermore, under the hatchboards were steel beams to give support.
(e) The claim of the plaintiff that defendant violated the contract of carriage is not supported by
evidence. The provisions of the Civil Code on common carriers pursuant to which there exists a presumption
of negligence in case of loss or damage to the cargo are not applicable. As to the damage to the
tinplates which was allegedly due to the wetting and rusting thereof, there is unrebutted testimony of
witness Vicente Angliongto that tinplates sweat by themselves when packed even without being in
contract (sic) with water from outside especially when the weather is bad or raining. The rust caused by
sweat or moisture on the tinplates may be considered as a loss or damage but then, defendant cannot be
held liable for it pursuant to Article 1734 of the Civil Case which exempts the carrier from responsibility for
loss or damage arising from the character of the goods x x x. All the 1,769 skids of the tinplates could not
have been damaged by water as claimed by plaintiff. It was shown as claimed by plaintiff that the
tinplates themselves were wrapped in kraft paper lining and corrugated cardboards could not be affected
by water from outside.
(f) The stevedores hired by the plaintiff to discharge the cargo of tinplates were negligent in not closing the
hatch openings of the MV VLASONS I when rains occurred during the discharging of the cargo thus
allowing rainwater to enter the hatches. It was proven that the stevedores merely set up temporary tents to
cover the hatch openings in case of rain so that it would be easy for them to resume work when the rains
stopped by just removing the tent or canvas. Because of this improper covering of the hatches by the
stevedores during the discharging and unloading operations which were interrupted by rains, rainwater
drifted into the cargo through the hatch openings. Pursuant to paragraph 5 of the NANYOSAI [sic] Charter
Party which was expressly made part of the Contract of Voyage Charter Hire, the loading, stowing and
discharging of the cargo is the sole responsibility of the plaintiff charterer and defendant carrier has no
liability for whatever damage may occur or maybe [sic] caused to the cargo in the process.
(g) It was also established that the vessel encountered rough seas and bad weather while en route from
Iligan City to Manila causing sea water to splash on the ships deck on account of which the master of the
vessel (Mr. Antonio C. Dumlao) filed a Marine Protest on August 13, 1974 (Exh. 15) which can be invoked by
defendant as a force majeure that would exempt the defendant from liability.
(h) Plaintiff did not comply with the requirement prescribed in paragraph 9 of the Voyage Charter Hire
contract that it was to insure the cargo because it did not. Had plaintiff complied with the requirement,
then it could have recovered its loss or damage from the insurer. Plaintiff also violated the charter party
contract when it loaded not only steel products, i.e. steel bars, angular bars and the like but also tinplates

and hot rolled sheets which are high grade cargo commanding a higher freight. Thus plaintiff was able to
ship high grade cargo at a lower freight rate.
(I) As regards defendants counterclaim, the contract of voyage charter hire under paragraph 4 thereof,
fixed the freight at P30.00 per metric ton payable to defendant carrier upon presentation of the bill of
lading within fifteen (15) days. Plaintiff has not paid the total freight due of P75,000.00 despite
demands. The evidence also showed that the plaintiff was required and bound under paragraph 7 of the
same Voyage Charter Hire contract to pay demurrage of P8,000.00 per day of delay in the unloading of
the cargoes. The delay amounted to eleven (11) days thereby making plaintiff liable to pay defendant for
demurrage in the amount of P88,000.00.
Appealing the RTC decision to the Court of Appeals, NSC alleged six errors:
I attorneys fees and expenses of litigation.
The trial court erred in finding that the MV VLASONS I was seaworthy, properly manned, equipped and
supplied, and that there is no proof of willful negligence of the vessels officers.
II
The trial court erred in finding that the rusting of NSCs tinplates was due to the inherent nature or character
of the goods and not due to contact with seawater.
III
The trial court erred in finding that the stevedores hired by NSC were negligent in the unloading of NSCs
shipment.
IV
The trial court erred in exempting VSI from liability on the ground of force majeure.
V 4. Demurrage and Attorneys Fees.
The trial court erred in finding that NSC violated the contract of voyage charter hire.
VI
The trial court erred in ordering NSC to pay freight, demurrage and attorneys fees, to VSI.[4]
As earlier stated, the Court of Appeals modified the decision of the trial court by reducing the demurrage
from P88,000.00 to P44,000.00 and deleting the award of attorneys fees and expenses of litigation. NSC and
VSI filed separate motions for reconsideration. In a Resolution[5] dated October 20, 1993, the appellate
court denied both motions. Undaunted, NSC and VSI filed their respective petitions for review before this
Court. On motion of VSI, the Court ordered on February 14, 1994 the consolidation of these petitions.[6]
The Issues
In its petition[7] and memorandum,[8] NSC raises the following questions of law and fact:
Questions of Law
1. Whether or not a charterer of a vessel is liable for demurrage due to cargo unloading delays caused by
weather interruption;
2. Whether or not the alleged seaworthiness certificates (Exhibits 3, 4, 5, 6, 7, 8, 9, 11 and 12) were
admissible in evidence and constituted evidence of the vessels seaworthiness at the beginning of the
voyages; and
3. Whether or not a charterers failure to insure its cargo exempts the shipowner from liability for cargo
damage.
Questions of Fact
1. Whether or not the vessel was seaworthy and cargo-worthy;
Transportation Atty. Valencia
I. Concept of common carriers
2. Whether or not vessels officers and crew were negligent in handling and caring for NSCs cargo;
3. Whether or not NSCs cargo of tinplates did sweat during the voyage and, hence, rusted on their own;
and
(4) Whether or not NSCs stevedores were negligent and caused the wetting[/]rusting of NSCs tinplates.
In its separate petition, [9] VSI submits for the consideration of this Court the following alleged errors of the
CA:
A. The respondent Court of Appeals committed an error of law in reducing the award of demurrage
from P88,000.00 to P44,000.00.
B. The respondent Court of Appeals committed an error of law in deleting the award of P100,000 for
Amplifying the foregoing, VSI raises the following issues in its memorandum: [10]
I. Whether or not the provisions of the Civil Code of the Philippines on common carriers pursuant to which
there exist[s] a presumption of negligence against the common carrier in case of loss or damage to the
cargo are applicable to a private carrier.
II. Whether or not the terms and conditions of the Contract of Voyage Charter Hire, including the Nanyozai
Charter, are valid and binding on both contracting parties.
The foregoing issues raised by the parties will be discussed under the following headings:
1. Questions of Fact
2. Effect of NSCs Failure to Insure the Cargo
3. Admissibility of Certificates Proving Seaworthiness
The Courts Ruling
The Court affirms the assailed Decision of the Court of Appeals, except in respect of the demurrage.
Preliminary Matter: Common Carrier or Private Carrier?
At the outset, it is essential to establish whether VSI contracted with NSC as a common carrier or as a
private carrier. The resolution of this preliminary question determines the law, standard of diligence and
burden of proof applicable to the present case.
Article 1732 of the Civil Code defines a common carrier as persons, corporations, firms or associations
engaged in the business of carrying or transporting passengers or goods or both, by land, water, or air, for
compensation, offering their services to the public. It has been held that the true test of a common carrier is
the carriage of passengers or goods, provided it has space, for all who opt to avail themselves of its
transportation service for a fee. [11] A carrier which does not qualify under the above test is deemed a
private carrier. Generally, private carriage is undertaken by special agreement and the carrier does not
hold himself out to carry goods for the general public. The most typical, although not the only form of
private carriage, is the charter party, a maritime contract by which the charterer, a party other than the
shipowner, obtains the use and service of all or some part of a ship for a period of time or a voyage or
voyages. [12]
In the instant case, it is undisputed that VSI did not offer its services to the general public. As found by the
Regional Trial Court, it carried passengers or goods only for those it chose under a special contract of
charter party. [13] As correctly concluded by the Court of Appeals, the MV Vlasons I was not a common but
a private carrier. [14] Consequently, the rights and obligations of VSI and NSC, including their respective
liability for damage to the cargo, are determined primarily by stipulations in their contract of private
carriage or charter party. [15]Recently, in Valenzuela Hardwood and Industrial Supply, Inc., vs. Court of
Appeals and Seven Brothers Shipping Corporation, [16] the Court ruled:

x x x in a contract of private carriage, the parties may freely stipulate their duties and obligations which
perforce would be binding on them. Unlike in a contract involving a common carrier, private carriage does
not involve the general public. Hence, the stringent provisions of the Civil Code on common carriers
protecting the general public cannot justifiably be applied to a ship transporting commercial goods as a
private carrier. Consequently, the public policy embodied therein is not contravened by stipulations in a
charter party that lessen or remove the protection given by law in contracts involving common carriers.[17]
Extent of VSIs Responsibility and Liability Over NSCs Cargo
It is clear from the parties Contract of Voyage Charter Hire, dated July 17, 1974, that VSI shall not be
responsible for losses except on proven willful negligence of the officers of the vessel. The NANYOZAI
Charter Party, which was incorporated in the parties contract of transportation, further provided that the
shipowner shall not be liable for loss of or damage to the cargo arising or resulting from unseaworthiness,
unless the same was caused by its lack of due diligence to make the vessel seaworthy or to ensure that the
same was properly manned, equipped and supplied, and to make the holds and all other parts of the
vessel in which cargo [was] carried, fit and safe for its reception, carriage and preservation. [18] The
NANYOZAI Charter Party also provided that [o]wners shall not be responsible for split, chafing and/or any
damage unless caused by the negligence or default of the master or crew.[19]
Burden of Proof
In view of the aforementioned contractual stipulations, NSC must prove that the damage to its shipment
was caused by VSIs willful negligence or failure to exercise due diligence in making MV Vlasons I seaworthy
and fit for holding, carrying and safekeeping the cargo. Ineluctably, the burden of proof was placed on
NSC by the parties agreement.
This view finds further support in the Code of Commerce which pertinently provides:
Art. 361. Merchandise shall be transported at the risk and venture of the shipper, if the contrary has not
been expressly stipulated.
Therefore, the damage and impairment suffered by the goods during the transportation, due to fortuitous
event, force majeure, or the nature and inherent defect of the things, shall be for the account and risk of
the shipper.
The burden of proof of these accidents is on the carrier.
Art. 362. The carrier, however, shall be liable for damages arising from the cause mentioned in the
preceding article if proofs against him show that they occurred on account of his negligence or his
omission to take the precautions usually adopted by careful persons, unless the shipper committed fraud in
the bill of lading, making him to believe that the goods were of a class or quality different from what they
really were.
Because the MV Vlasons I was a private carrier, the shipowners obligations are governed by the foregoing
provisions of the Code of Commerce and not by the Civil Code which, as a general rule, places the prima
facie presumption of negligence on a common carrier. It is a hornbook doctrine that:
In an action against a private carrier for loss of, or injury to, cargo, the burden is on the plaintiff to prove
that the carrier was negligent or unseaworthy, and the fact that the goods were lost or damaged while in
the carriers custody does not put the burden of proof on the carrier.
Since x x x a private carrier is not an insurer but undertakes only to exercise due care in the protection of
the goods committed to its care, the burden of proving negligence or a breach of that duty rests on
plaintiff and proof of loss of, or damage to, cargo while in the carriers possession does not cast on it the
burden of proving proper care and diligence on its part or that the loss occurred from an excepted cause
in the contract or bill of lading. However, in discharging the burden of proof, plaintiff is entitled to the
benefit of the presumptions and inferences by which the law aids the bailor in an action against a bailee,
and since the carrier is in a better position to know the cause of the loss and that it was not one involving its
liability, the law requires that it come forward with the information available to it, and its failure to do so
warrants an inference or presumption of its liability. However, such inferences and presumptions, while they
may affect the burden of coming forward with evidence, do not alter the burden of proof which remains
Transportation Atty. Valencia
I. Concept of common carriers
on plaintiff, and, where the carrier comes forward with evidence explaining the loss or damage, the
burden of going forward with the evidence is again on plaintiff.
Where the action is based on the shipowners warranty of seaworthiness, the burden of proving a breach
thereof and that such breach was the proximate cause of the damage rests on plaintiff, and proof that the
goods were lost or damaged while in the carriers possession does not cast on it the burden of proving
seaworthiness. x x x Where the contract of carriage exempts the carrier from liability for unseaworthiness not
discoverable by due diligence, the carrier has the preliminary burden of proving the exercise of due
diligence to make the vessel seaworthy. [20]
In the instant case, the Court of Appeals correctly found that NSC has not taken the correct position in
relation to the question of who has the burden of proof. Thus, in its brief (pp. 10-11), after citing Clause 10
and Clause 12 of the NANYOZAI Charter Party (incidentally plaintiff-appellants [NSCs] interpretation of
Clause 12 is not even correct), it argues that a careful examination of the evidence will show that VSI
miserably failed to comply with any of these obligations as if defendant-appellee [VSI] had the burden of
proof.[21]
First Issue: Questions of Fact
Based on the foregoing, the determination of the following factual questions is manifestly relevant: (1)
whether VSI exercised due diligence in making MV Vlasons I seaworthy for the intended purpose under the
charter party; (2) whether the damage to the cargo should be attributed to the willful negligence of the
officers and crew of the vessel or of the stevedores hired by NSC; and (3) whether the rusting of the
tinplates was caused by its own sweat or by contact with seawater.
These questions of fact were threshed out and decided by the trial court, which had the firsthand
opportunity to hear the parties conflicting claims and to carefully weigh their respective evidence. The
findings of the trial court were subsequently affirmed by the Court of Appeals. Where the factual findings of
both the trial court and the Court of Appeals coincide, the same are binding on this Court. [22] We stress
that, subject to some exceptional instances, [23] only questions of law -- not questions of fact -- may be
raised before this Court in a petition for review under Rule 45 of the Rules of Court. After a thorough review
of the case at bar, we find no reason to disturb the lower courts factual findings, as indeed NSC has not
successfully proven the application of any of the aforecited exceptions.
Was MV Vlasons I Seaworthy?
In any event, the records reveal that VSI exercised due diligence to make the ship seaworthy and fit for the
carriage of NSCs cargo of steel and tinplates. This is shown by the fact that it was drydocked and inspected
by the Philippine Coast Guard before it proceeded to Iligan City for its voyage to Manila under the
contract of voyage charter hire. [24] The vessels voyage from Iligan to Manila was the vessels first voyage
after drydocking. The Philippine Coast Guard Station in Cebu cleared it as seaworthy, fitted and equipped;
it met all requirements for trading as cargo vessel. [25] The Court of Appeals itself sustained the conclusion of
the trial court that MV Vlasons I was seaworthy. We find no reason to modify or reverse this finding of both
the trial and the appellate courts.
Who Were Negligent: Seamen or Stevedores?
As noted earlier, the NSC had the burden of proving that the damage to the cargo was caused by the
negligence of the officers and the crew of MV Vlasons I in making their vessel seaworthy and fit for the
carriage of tinplates. NSC failed to discharge this burden.
Before us, NSC relies heavily on its claim that MV Vlasons I had used an old and torn tarpaulin or canvas to
cover the hatches through which the cargo was loaded into the cargo hold of the ship. It faults the Court
of Appeals for failing to consider such claim as an uncontroverted fact [26] and denies that MV Vlasons
I was equipped with new canvas covers in tandem with the old ones as indicated in the Marine Protest
xxx. [27] We disagree.
The records sufficiently support VSIs contention that the ship used the old tarpaulin, only in addition to the
new one used primarily to make the ships hatches watertight. The foregoing are clear from the marine

protest of the master of the MV Vlasons I, Antonio C. Dumlao, and the deposition of the ships boatswain,
Jose Pascua. The salient portions of said marine protest read:
x x x That the M/V VLASONS I departed Iligan City or or about 0730 hours of August 8, 1974, loaded with
approximately 2,487.9 tons of steel plates and tin plates consigned to National Steel Corporation; that
before departure, the vessel was rigged, fully equipped and cleared by the authorities; that on or about
August 9, 1974, while in the vicinity of the western part of Negros and Panay, we encountered very rough
seas and strong winds and Manila office was advised by telegram of the adverse weather conditions
encountered; that in the morning of August 10, 1974, the weather condition changed to worse and strong
winds and big waves continued pounding the vessel at her port side causing sea water to overflow on
deck andhatch (sic) covers and which caused the first layer of the canvass covering to give way while the
new canvass covering still holding on;
That the weather condition improved when we reached Dumali Point protected by Mindoro; that we re-
secured the canvass covering back to position; that in the afternoon of August 10, 1974, while entering
Maricaban Passage, we were again exposed to moderate seas and heavy rains; that while approaching
Fortune Island, we encountered again rough seas, strong winds and big waves which caused the same
canvass to give way and leaving the new canvass holding on;
xxx xxx xxx [28]
And the relevant portions of Jose Pascuas deposition are as follows:
Q: What is the purpose of the canvas cover?
A: So that the cargo would not be soaked with water.
A: And will you describe how the canvas cover was secured on the hatch opening?
WITNESS
A: It was placed flat on top of the hatch cover, with a little canvas flowing over the sides and we place[d]
a flat bar over the canvas on the side of the hatches and then we place[d] a stopper so that the canvas
could not be removed.
ATTY DEL ROSARIO
Q: And will you tell us the size of the hatch opening? The length and the width of the hatch opening.
A: Forty-five feet by thirty-five feet, sir.
xxxxxxxxx
Q: How was the canvas supported in the middle of the hatch opening?
A: There is a hatch board.
ATTY DEL ROSARIO
Q: What is the hatch board made of?
A: It is made of wood, with a handle.
Q: And aside from the hatch board, is there any other material there to cover the hatch?
A: There is a beam supporting the hatch board.
Q: What is this beam made of?
A: It is made of steel, sir.
Q: Is the beam that was placed in the hatch opening covering the whole hatch opening?
A: No, sir.
Transportation Atty. Valencia
I. Concept of common carriers
Q: How many hatch beams were there placed across the opening?
A: There are five beams in one hatch opening.
ATTY DEL ROSARIO
Q: And on top of the beams you said there is a hatch board. How many pieces of wood are put on top?
A: Plenty, sir, because there are several pieces on top of the hatch beam.
Q: And is there a space between the hatch boards?
A: There is none, sir.
Q: They are tight together?
A: Yes, sir.
Q: How tight?
A: Very tight, sir.
Q: Now, on top of the hatch boards, according to you, is the canvas cover. How many canvas covers?
A: Two, sir. [29]
That due diligence was exercised by the officers and the crew of the MV Vlasons I was further
demonstrated by the fact that, despite encountering rough weather twice, the new tarpaulin did not give
way and the ships hatches and cargo holds remained waterproof. As aptly stated by the Court of Appeals,
xxx we find no reason not to sustain the conclusion of the lower court based on overwhelming evidence,
that the MV VLASONS I was seaworthy when it undertook the voyage on August 8, 1974 carrying on board
thereof plaintiff-appellants shipment of 1,677 skids of tinplates and 92 packages of hot rolled sheets or a
total of 1,769 packages from NSCs pier in Iligan City arriving safely at North Harbor, Port Area, Manila, on
August 12, 1974; xxx. [30]
Indeed, NSC failed to discharge its burden to show negligence on the part of the officers and the crew
of MV Vlasons I. On the contrary, the records reveal that it was the stevedores of NSC who were negligent
in unloading the cargo from the ship.
The stevedores employed only a tent-like material to cover the hatches when strong rains occasioned by a
passing typhoon disrupted the unloading of the cargo. This tent-like covering, however, was clearly
inadequate for keeping rain and seawater away from the hatches of the ship. Vicente Angliongto, an
officer of VSI, testified thus:
ATTY ZAMORA:
Q: Now, during your testimony on November 5, 1979, you stated on August 14 you went on board the vessel
upon notice from the National Steel Corporation in order to conduct the inspection of the cargo. During
the course of the investigation, did you chance to see the discharging operation?
WITNESS:
A: Yes, sir, upon my arrival at the vessel, I saw some of the tinplates already discharged on the pier but
majority of the tinplates were inside the hall, all the hatches were opened.
Q: In connection with these cargoes which were unloaded, where is the place.
A: At the Pier.
Q: What was used to protect the same from weather?
ATTY LOPEZ:
We object, your Honor, this question was already asked. This particular matter . . . the transcript of
stenographic notes shows the same was covered in the direct examination.

ATTY ZAMORA:
Precisely, your Honor, we would like to go on detail, this is the serious part of the testimony.
COURT:
All right, witness may answer.
ATTY LOPEZ:
Q: What was used in order to protect the cargo from the weather?
A: A base of canvas was used as cover on top of the tin plates, and tents were built at the opening of the
hatches.
Q: You also stated that the hatches were already opened and that there were tents constructed at the
opening of the hatches to protect the cargo from the rain. Now, will you describe [to] the Court the tents
constructed.
A: The tents are just a base of canvas which look like a tent of an Indian camp raise[d] high at the middle
with the whole side separated down to the hatch, the size of the hatch and it is soaks [sic] at the middle
because of those weather and this can be used only to temporarily protect the cargo from getting wet by
rains.
Q: Now, is this procedure adopted by the stevedores of covering tents proper?
A: No, sir, at the time they were discharging the cargo, there was a typhoon passing by and the hatch tent
was not good enough to hold all of it to prevent the water soaking through the canvas and enter the
cargo.
Q: In the course of your inspection, Mr. Anglingto [sic], did you see in fact the water enter and soak into the
canvas and tinplates.
A: Yes, sir, the second time I went there, I saw it.
Q: As owner of the vessel, did you not advise the National Steel Corporation [of] the procedure adopted
by its stevedores in discharging the cargo particularly in this tent covering of the hatches?
A: Yes, sir, I did the first time I saw it, I called the attention of the stevedores but the stevedores did not mind
at all, so, I called the attention of the representative of the National Steel but nothing was done, just the
same. Finally, I wrote a letter to them. [31]
NSC attempts to discredit the testimony of Angliongto by questioning his failure to complain immediately
about the stevedores negligence on the first day of unloading, pointing out that he wrote his letter to
petitioner only seven days later. [32] The Court is not persuaded. Angliongtos candid answer in his
aforequoted testimony satisfactorily explained the delay. Seven days lapsed because he first called the
attention of the stevedores, then the NSCs representative, about the negligent and defective procedure
adopted in unloading the cargo. This series of actions constitutes a reasonable response in accord with
common sense and ordinary human experience. Vicente Angliongto could not be blamed for calling the
stevedores attention first and then the NSCs representative on location before formally informing NSC of
the negligence he had observed, because he was not responsible for the stevedores or the unloading
operations. In fact, he was merely expressing concern for NSC which was ultimately responsible for the
stevedores it had hired and the performance of their task to unload the cargo.
We see no reason to reverse the trial and the appellate courts findings and conclusions on this point, viz:
In the THIRD assigned error, [NSC] claims that the trial court erred in finding that the stevedores hired by NSC
were negligent in the unloading of NSCs shipment. We do not think so. Such negligence according to the
trial court is evident in the stevedores hired by [NSC], not closing the hatch of MV VLASONS I when rains
occurred during the discharging of the cargo thus allowing rain water and seawater spray to enter the
hatches and to drift to and fall on the cargo. It was proven that the stevedores merely set up temporary
tents or canvas to cover the hatch openings when it rained during the unloading operations so that it
would be easier for them to resume work after the rains stopped by just removing said tents or canvass. It
Transportation Atty. Valencia
I. Concept of common carriers
has also been shown that on August 20, 1974, VSI President Vicente Angliongto wrote [NSC] calling
attention to the manner the stevedores hired by [NSC] were discharging the cargo on rainy days and the
improper closing of the hatches which allowed continuous heavy rain water to leak through and drip to the
tinplates covers and [Vicente Angliongto] also suggesting that due to four (4) days continuos rains with
strong winds that the hatches be totally closed down and covered with canvas and the hatch tents
lowered. (Exh 13). This letter was received by [NSC] on 22 August 1974 while discharging operations were still
going on (Exhibit 13-A). [33]
The fact that NSC actually accepted and proceeded to remove the cargo from the ship during
unfavorable weather will not make VSI liable for any damage caused thereby. In passing, it may be noted
that the NSC may seek indemnification, subject to the laws on prescription, from the stevedoring company
at fault in the discharge operations. A stevedore company engaged in discharging cargo xxx has the duty
to load the cargo xxx in a prudent manner, and it is liable for injury to, or loss of, cargo caused by its
negligence xxx and where the officers and members and crew of the vessel do nothing and have no
responsibility in the discharge of cargo by stevedores xxx the vessel is not liable for loss of, or damage to,
the cargo caused by the negligence of the stevedores xxx [34] as in the instant case.
Do Tinplates Sweat?
The trial court relied on the testimony of Vicente Angliongto in finding that xxx tinplates sweat by
themselves when packed even without being in contact with water from outside especially when the
weather is bad or raining xxx. [35] The Court of Appeals affirmed the trial courts finding.
A discussion of this issue appears inconsequential and unnecessary. As previously discussed, the damage to
the tinplates was occasioned not by airborne moisture but by contact with rain and seawater which the
stevedores negligently allowed to seep in during the unloading.
Second Issue: Effect of NSCs Failure to Insure the Cargo
The obligation of NSC to insure the cargo stipulated in the Contract of Voyage Charter Hire is totally
separate and distinct from the contractual or statutory responsibility that may be incurred by VSI for
damage to the cargo caused by the willful negligence of the officers and the crew of MV Vlasons
I. Clearly, therefore, NSCs failure to insure the cargo will not affect its right, as owner and real party in
interest, to file an action against VSI for damages caused by the latters willful negligence. We do not find
anything in the charter party that would make the liability of VSI for damage to the cargo contingent on or
affected in any manner by NSCs obtaining an insurance over the cargo.
Third Issue: Admissibility of Certificates Proving Seaworthiness
NSCs contention that MV Vlasons I was not seaworthy is anchored on the alleged inadmissibility of the
certificates of seaworthiness offered in evidence by VSI. The said certificates include the following:
1. Certificate of Inspection of the Philippine Coast Guard at Cebu
2. Certificate of Inspection from the Philippine Coast Guard
3. International Load Line Certificate from the Philippine Coast Guard
4. Coastwise License from the Board of Transportation
5. Certificate of Approval for Conversion issued by the Bureau of Customs. [36]
NSC argues that the certificates are hearsay for not having been presented in accordance with the Rules
of Court. It points out that Exhibits 3, 4 and 11 allegedly are not written records or acts of public officers;
while Exhibits 5, 6, 7, 8, 9, 11 and 12 are not evidenced by official publications or certified true copies as
required by Sections 25 and 26, Rule 132, of the Rules of Court. [37]
After a careful examination of these exhibits, the Court rules that Exhibits 3, 4, 5, 6, 7, 8, 9 and 12 are
inadmissible, for they have not been properly offered as evidence. Exhibits 3 and 4 are certificates issued
by private parties, but they have not been proven by one who saw the writing executed, or by evidence of
the genuineness of the handwriting of the maker, or by a subscribing witness. Exhibits 5, 6, 7, 8, 9, and 12 are
photocopies, but their admission under the best evidence rule have not been demonstrated.
 Transportation Atty. Valencia
I. Concept of common carriers

We find, however, that Exhibit 11 is admissible under a well-settled exception to the hearsay rule per Section
44 of Rule 130 of the Rules of Court, which provides that (e)ntries in official records made in the
performance of a duty by a public officer of the Philippines, or by a person in the performance of a duty
specially enjoined by law, are prima facie evidence of the facts therein stated. [38] Exhibit 11 is an original
certificate of the Philippine Coast Guard in Cebu issued by Lieutenant Junior Grade Noli C. Flores to the
effect that the vessel VLASONS I was drydocked x x x and PCG Inspectors were sent on board for
inspection x x x. After completion of drydocking and duly inspected by PCG Inspectors, the vessel VLASONS
I, a cargo vessel, is in seaworthy condition, meets all requirements, fitted and equipped for trading as a
cargo vessel was cleared by the Philippine Coast Guard and sailed for Cebu Port on July 10, 1974.
(sic) NSCs claim, therefore, is obviously misleading and erroneous.
At any rate, it should be stressed that that NSC has the burden of proving that MV Vlasons I was not
seaworthy. As observed earlier, the vessel was a private carrier and, as such, it did not have the obligation
of a common carrier to show that it was seaworthy. Indeed, NSC glaringly failed to discharge its duty of
proving the willful negligence of VSI in making the ship seaworthy resulting in damage to its cargo. Assailing
the genuineness of the certificate of seaworthiness is not sufficient proof that the vessel was not seaworthy.
Fourth Issue: Demurrage and Attorneys Fees
The contract of voyage charter hire provides inter alia:
xxx xxx xxx
2. Cargo: Full cargo of steel products of not less than 2,500 MT, 10% more or less at Masters option.
xxx xxx xxx
6. Loading/Discharging Rate : 750 tons per WWDSHINC.
7. Demurrage/Dispatch : P8,000.00/P4,000.00 per day. [39]
rendered was favorable to the latter, as this is tantamount to imposing a premium on ones right to litigate
or seek judicial redress of legitimate grievances. [45]
Epilogue
At bottom, this appeal really hinges on a factual issue: when, how and who caused the damage to the
cargo? Ranged against NSC are two formidable truths. First, both lower courts found that such damage
was brought about during the unloading process when rain and seawater seeped through the cargo due
to the fault or negligence of the stevedores employed by it.Basic is the rule that factual findings of the trial
court, when affirmed by the Court of Appeals, are binding on the Supreme Court. Although there are
settled exceptions, NSC has not satisfactorily shown that this case is one of them. Second, the agreement
between the parties -- the Contract of Voyage Charter Hire -- placed the burden of proof for such loss or
damage upon the shipper, not upon the shipowner. Such stipulation, while disadvantageous to NSC, is
valid because the parties entered into a contract of private charter, not one of common carriage. Basic
too is the doctrine that courts cannot relieve a party from the effects of a private contract freely entered
into, on the ground that it is allegedly one-sided or unfair to the plaintiff. The charter party is a normal
commercial contract and its stipulations are agreed upon in consideration of many factors, not the least of
which is the transport price which is determined not only by the actual costs but also by the risks and
burdens assumed by the shipper in regard to possible loss or damage to the cargo. In recognition of such
factors, the parties even stipulated that the shipper should insure the cargo to protect itself from the risks it
undertook under the charter party. That NSC failed or neglected to protect itself with such insurance should
not adversely affect VSI, which had nothing to do with such failure or neglect.
WHEREFORE, premises considered, the instant consolidated petitions are hereby DENIED. The questioned
Decision of the Court of Appeals is AFFIRMED with the MODIFICATION that the demurrage awarded to VSI is
deleted. No pronouncement as to costs.
SO ORDERED.

The Court defined demurrage in its strict sense as the compensation provided for in the contract of
affreightment for the detention of the vessel beyond the laytime or that period of time agreed on for
loading and unloading of cargo. [40] It is given to compensate the shipowner for the nonuse of the
vessel. On the other hand, the following is well-settled:

Laytime runs according to the particular clause of the charter party. x x x If laytime is expressed in running
days, this means days when the ship would be run continuously, and holidays are not excepted. A
qualification of weather permitting excepts only those days when bad weather reasonably prevents the
work contemplated. [41]

In this case, the contract of voyage charter hire provided for a four-day laytime; it also qualified laytime as
WWDSHINC or weather working days Sundays and holidays included. [42] The running of laytime was thus
made subject to the weather, and would cease to run in the event unfavorable weather interfered with
the unloading of cargo. [43] Consequently, NSC may not be held liable for demurrage as the four-day
laytime allowed it did not lapse, having been tolled by unfavorable weather condition in view of the
WWDSHINC qualification agreed upon by the parties. Clearly, it was error for the trial court and the Court of
Appeals to have found and affirmed respectively that NSC incurred eleven days of delay in unloading the
cargo. The trial court arrived at this erroneous finding by subtracting from the twelve days, specifically
August 13, 1974 to August 24, 1974, the only day of unloading unhampered by unfavorable weather or rain
which was August 22, 1974. Based on our previous discussion, such finding is a reversible error. As
mentioned, the respondent appellate court also erred in ruling that NSC was liable to VSI for demurrage,
even if it reduced the amount by half.

Attorneys Fees

VSI assigns as error of law the Court of Appeals deletion of the award of attorneys fees. We disagree. While
VSI was compelled to litigate to protect its rights, such fact by itself will not justify an award of attorneys fees
under Article 2208 of the Civil Code when x x x no sufficient showing of bad faith would be reflected in a
partys persistence in a case other than an erroneous conviction of the righteousness of his cause x x
x. [44] Moreover, attorneys fees may not be awarded to a party for the reason alone that the judgment

[G.R. No. 131621. September 28, 1999]
LOADSTAR SHIPPING CO., INC., petitioner, vs. COURT OF APPEALS and THE MANILA INSURANCE CO.,
INC., respondents.
DECISION
DAVIDE, JR., C.J.:
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
Transportation Atty. Valencia
I. Concept of common carriers
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
Transportation Atty. Valencia
I. Concept of common carriers
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.
xxx
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:
 Transportation Atty. Valencia
I. Concept of common carriers

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.

[G.R. No. 147246. August 19, 2003]
ASIA LIGHTERAGE AND SHIPPING, INC., petitioner, vs. COURT OF APPEALS and PRUDENTIAL GUARANTEE AND
ASSURANCE, INC., respondents.
DECISION
PUNO, J.:
On appeal is the Court of Appeals May 11, 2000 Decision[1] in CA-G.R. CV No. 49195 and February 21, 2001
Resolution[2] affirming with modification the April 6, 1994 Decision[3] of the Regional Trial Court of Manila
which found petitioner liable to pay private respondent the amount of indemnity and attorney's fees.
First, the facts.
On June 13, 1990, 3,150 metric tons of Better Western White Wheat in bulk, valued at US$423,192.35[4] 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.[5] 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.[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[7] for delivery to consignee. The cargo did not reach its destination.
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.[8] It likewise secured the services of Gaspar Salvaging Corporation which
refloated the barge.[9] The hole was then patched with clay and cement.
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.[11] A second Marine Protest was filed on September 7, 1990.[12]
On September 14, 1990, a bidding was conducted to dispose of the damaged wheat retrieved and
loaded on the three other barges.[13] The total proceeds from the sale of the salvaged cargo
was P201,379.75.[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.[15] Thereafter, as subrogee, it sought recovery of said amount from the petitioner, but to no
avail.
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.[16] Petitioner filed its answer with counterclaim.[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
Transportation Atty. Valencia
I. Concept of common carriers
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,[21] 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 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[22] 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,[23] 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.
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.[24] 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.[25] In the case at bar, the petitioner admitted that it is engaged in the
business of shipping and lighterage,[26] offering its barges to the public, despite its limited clientele for
carrying or transporting goods by water for compensation.[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.[28] They are presumed to have been at fault or to have acted negligently if the goods are lost,
destroyed or deteriorated.[29] 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:
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.[30] 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
cross-examination of Alfredo Cunanan, cargo-surveyor of Tan-Gatue Adjustment Co., Inc., states:
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.
Transportation Atty. Valencia
I. Concept of common carriers
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.[32] A part of the testimony of
Robert Boyd, Cargo Operations Supervisor of the petitioner, reveals:
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
 Transportation Atty. Valencia
I. Concept of common carriers

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.

[G.R. No. 149038. April 9, 2003]
PHILIPPINE AMERICAN GENERAL INSURANCE COMPANY, petitioner, vs. PKS SHIPPING COMPANY, respondent.
DECISION
VITUG, J.:
The petition before the Court seeks a review of the decision of the Court of Appeals in C.A. G.R. CV No.
56470, promulgated on 25 June 2001, which has affirmed in toto the judgment of the Regional Trial Court
(RTC), Branch 65, of Makati, dismissing the complaint for damages filed by petitioner insurance corporation
against respondent shipping company.
Davao Union Marketing Corporation (DUMC) contracted the services of respondent PKS Shipping
Company (PKS Shipping) for the shipment to Tacloban City of seventy-five thousand (75,000) bags of
cement worth Three Million Three Hundred Seventy-Five Thousand Pesos (P3,375,000.00). DUMC insured the
goods for its full value with petitioner Philippine American General Insurance Company (Philamgen). The
goods were loaded aboard the dumb barge Limar I belonging to PKS Shipping. On the evening of 22
December 1988, about nine oclock, while Limar I was being towed by respondents tugboat, MT Iron Eagle,
the barge sank a couple of miles off the coast of Dumagasa Point, in Zamboanga del Sur, bringing down
with it the entire cargo of 75,000 bags of cement.
DUMC filed a formal claim with Philamgen for the full amount of the insurance. Philamgen promptly made
payment; it then sought reimbursement from PKS Shipping of the sum paid to DUMC but the shipping
company refused to pay, prompting Philamgen to file suit against PKS Shipping with the Makati RTC.
The RTC dismissed the complaint after finding that the total loss of the cargo could have been caused
either by a fortuitous event, in which case the ship owner was not liable, or through the negligence of the
captain and crew of the vessel and that, under Article 587 of the Code of Commerce adopting the Limited
Liability Rule, the ship owner could free itself of liability by abandoning, as it apparently so did, the vessel
with all her equipment and earned freightage.
Philamgen interposed an appeal to the Court of Appeals which affirmed in toto the decision of the trial
court. The appellate court ruled that evidence to establish that PKS Shipping was a common carrier at the
time it undertook to transport the bags of cement was wanting because the peculiar method of the
shipping companys carrying goods for others was not generally held out as a business but as a casual
occupation. It then concluded that PKS Shipping, not being a common carrier, was not expected to
observe the stringent extraordinary diligence required of common carriers in the care of goods. The
appellate court, moreover, found that the loss of the goods was sufficiently established as having been due
to fortuitous event, negating any liability on the part of PKS Shipping to the shipper.
In the instant appeal, Philamgen contends that the appellate court has committed a patent error in ruling
that PKS Shipping is not a common carrier and that it is not liable for the loss of the subject cargo. The fact
that respondent has a limited clientele, petitioner argues, does not militate against respondents being a
common carrier and that the only way by which such carrier can be held exempt for the loss of the cargo
would be if the loss were caused by natural disaster or calamity. Petitioner avers that typhoon "APIANG" has
not entered the Philippine area of responsibility and that, even if it did, respondent would not be exempt
from liability because its employees, particularly the tugmaster, have failed to exercise due diligence to
prevent or minimize the loss.
PKS Shipping, in its comment, urges that the petition should be denied because what Philamgen seeks is
not a review on points or errors of law but a review of the undisputed factual findings of the RTC and the
appellate court. In any event, PKS Shipping points out, the findings and conclusions of both courts find
support from the evidence and applicable jurisprudence.
The determination of possible liability on the part of PKS Shipping boils down to the question of whether it is
a private carrier or a common carrier and, in either case, to the other question of whether or not it has
observed the proper diligence (ordinary, if a private carrier, or extraordinary, if a common carrier) required
of it given the circumstances.
Transportation Atty. Valencia
I. Concept of common carriers
The findings of fact made by the Court of Appeals, particularly when such findings are consistent with those
of the trial court, may not at liberty be reviewed by this Court in a petition for review under Rule 45 of the
Rules of Court.[1] The conclusions derived from those factual findings, however, are not necessarily just
matters of fact as when they are so linked to, or inextricably intertwined with, a requisite appreciation of the
applicable law. In such instances, the conclusions made could well be raised as being appropriate issues in
a petition for review before this Court. Thus, an issue whether a carrier is private or common on the basis of
the facts found by a trial court or the appellate court can be a valid and reviewable question of law.
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.
Complementary to the codal definition is Section 13, paragraph (b), of the Public Service Act; it defines
public service to be
x x x 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, 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, 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 communication systems, wire or
wireless broadcasting stations and other similar public services. x x x. (Underscoring supplied).
The prevailing doctrine on the question is that enunciated in the leading case of De Guzman vs. Court of
Appeals.[2] Applying Article 1732 of the Code, in conjunction with Section 13(b) of the Public Service Act,
this Court has held:
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 1732 deliberately
refrained from 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.
Much of the distinction between a common or public carrier and a private or special carrier lies in the
character of the business, such that if the undertaking is an isolated transaction, not a part of the business
or occupation, and the carrier does not hold itself out to carry the goods for the general public or to a
limited clientele, although involving the carriage of goods for a fee,[3] the person or corporation providing
such service could very well be just a private carrier. A typical case is that of a charter party which includes
both the vessel and its crew, such as in a bareboat or demise, where the charterer obtains the use and
service of all or some part of a ship for a period of time or a voyage or voyages[4] and gets the control of
the vessel and its crew.[5] Contrary to the conclusion made by the appellate court, its factual findings
indicate that PKS Shipping has engaged itself in the business of carrying goods for others, although for a
limited clientele, undertaking to carry such goods for a fee. The regularity of its activities in this area
indicates more than just a casual activity on its part.[6] Neither can the concept of a common carrier
change merely because individual contracts are executed or entered into with patrons of the carrier. Such
restrictive interpretation would make it easy for a common carrier to escape liability by the simple
expedient of entering into those distinct agreements with clients.
 Transportation Atty. Valencia
I. Concept of common carriers

Addressing now the issue of whether or not PKS Shipping has exercised the proper diligence demanded of
common carriers, Article 1733 of the Civil Code requires common carriers to observe extraordinary
diligence in the vigilance over the goods they carry. In case of loss, destruction or deterioration of goods,
common carriers are presumed to have been at fault or to have acted negligently, and the burden of
proving otherwise rests on them.[7] The provisions of Article 1733, notwithstanding, common carriers are
exempt from liability for loss, destruction, or deterioration of the goods due to any of the following causes:

(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.[8]

The appellate court ruled, gathered from the testimonies and sworn marine protests of the respective vessel
masters of Limar I and MT Iron Eagle, that there was no way by which the barges or the tugboats crew
could have prevented the sinking of Limar I. The vessel was suddenly tossed by waves of extraordinary
height of six (6) to eight (8) feet and buffeted by strong winds of 1.5 knots resulting in the entry of water into
the barges hatches. The official Certificate of Inspection of the barge issued by the Philippine Coastguard
and the Coastwise Load Line Certificate would attest to the seaworthiness of Limar I and should strengthen
the factual findings of the appellate court.

Findings of fact of the Court of Appeals generally conclude this Court; none of the recognized exceptions
from the rule - (1) when the factual findings of the Court of Appeals and the trial court are contradictory;
(2) when the conclusion is a finding grounded entirely on speculation, surmises, or conjectures; (3) when the
inference made by the Court of Appeals from its findings of fact is manifestly mistaken, absurd, or
impossible; (4) when there is a grave abuse of discretion in the appreciation of facts; (5) when the
appellate court, in making its findings, went beyond the issues of the case and such findings are contrary to
the admissions of both appellant and appellee; (6) when the judgment of the Court of Appeals is premised
on a misapprehension of facts; (7) when the Court of Appeals failed to notice certain relevant facts which,
if properly considered, would justify a different conclusion; (8) when the findings of fact are themselves
conflicting; (9) when the findings of fact are conclusions without citation of the specific evidence on which
they are based; and (10) when the findings of fact of the Court of Appeals are premised on the absence of
evidence but such findings are contradicted by the evidence on record would appear to be clearly extant
in this instance.

All given then, the appellate court did not err in its judgment absolving PKS Shipping from liability for the loss
of the DUMC cargo.

WHEREFORE, the petition is DENIED. No costs.

SO ORDERED.
 Transportation Atty. Valencia
I. Concept of common carriers

[G.R. No. 131166. September 30, 1999] On September 15, 1992, the trial court rendered decision dismissing the third party complaint against
petitioner. The dispositive portion reads:
CALTEX (PHILIPPINES), INC. petitioner, vs. SULPICIO LINES, INC., GO SIOC SO, ENRIQUE S. GO, EUSEBIO S. GO,
CARLOS S. GO, VICTORIANO S. GO, DOMINADOR S. GO, RICARDO S. GO, EDWARD S. GO, ARTURO S. GO, WHEREFORE, judgement is hereby rendered in favor of plaintiffs and against defendant-3rd party plaintiff
EDGAR S. GO, EDMUND S. GO, FRANCISCO SORIANO, VECTOR SHIPPING CORPORATION, TERESITA G. CAEZAL Sulpicio Lines, Inc., to wit:
AND SOTERA E. CAEZAL, respondents.
1. For the death of Sebastian E. Caezal and his 11-year old daughter Corazon G. Caezal, including loss of
DECISION future earnings of said Sebastian, moral and exemplary damages, attorneys fees, in the total amount of P
1,241,287.44 and finally;
PARDO, J.:
2. The statutory costs of the proceedings.
Is the charterer of a sea vessel liable for damages resulting from a collision between the chartered vessel
and a passenger ship? Likewise, the 3rd party complaint is hereby DISMISSED for want of substantiation and with costs against the
3rd party plaintiff.
When MT Vector left the port of Limay, Bataan, on December 19, 1987 carrying petroleum products of
Caltex (Philippines), Inc. (hereinafter Caltex) no one could have guessed that it would collide with MV Doa IT IS SO ORDERED.
Paz, killing almost all the passengers and crew members of both ships, and thus resulting in one of the
countrys worst maritime disasters. DONE IN MANILA, this 15th day of September 1992.

The petition before us seeks to reverse the Court of Appeals decision[1]holding petitioner jointly liable with
the operator of MT Vector for damages when the latter collided with Sulpicio Lines, Inc.s passenger ship MV
Doa Paz.
The facts are as follows:
On December 19, 1987, motor tanker MT Vector left Limay, Bataan, at about 8:00 p.m., enroute to
Masbate, loaded with 8,800 barrels of petroleum products shipped by petitioner Caltex.[2] MT Vector is a
tramping motor tanker owned and operated by Vector Shipping Corporation, engaged in the business of
transporting fuel products such as gasoline, kerosene, diesel and crude oil. During that particular voyage,
the MT Vector carried on board gasoline and other oil products owned by Caltex by virtue of a charter
contract between them.[3]
On December 20, 1987, at about 6:30 a.m., the passenger ship MV Doa Paz left the port of Tacloban
headed for Manila with a complement of 59 crew members including the master and his officers, and
passengers totaling 1,493 as indicated in the Coast Guard Clearance.[4] The MV Doa Paz is a passenger
and cargo vessel owned and operated by Sulpicio Lines, Inc. plying the route of Manila/ Tacloban/
Catbalogan/ Manila/ Catbalogan/ Tacloban/ Manila, making trips twice a week.
At about 10:30 p.m. of December 20, 1987, the two vessels collided in the open sea within the vicinity of
Dumali Point between Marinduque and Oriental Mindoro. All the crewmembers of MV Doa Paz died, while
the two survivors from MT Vector claimed that they were sleeping at the time of the incident.
ARSENIO M. GONONG
Judge[7]
On appeal to the Court of Appeals interposed by Sulpicio Lines, Inc., on April 15, 1997, the Court of Appeal
modified the trial courts ruling and included petitioner Caltex as one of the those liable for damages. Thus:
WHEREFORE, in view of all the foregoing, the judgment rendered by the Regional Trial Court is hereby
MODIFIED as follows:
WHEREFORE, defendant Sulpicio Lines, Inc., is ordered to pay the heirs of Sebastian E. Caezal and Corazon
Caezal:
1. Compensatory damages for the death of Sebastian E.Caezal and Corazon Caezal the total amount of
ONE HUNDRED THOUSAND PESOS (P100,000);
2. Compensatory damages representing the unearned income of Sebastian E. Caezal, in the total amount
of THREE HUNDRED SIX THOUSAND FOUR HUNDRED EIGHTY (P306,480.00) PESOS;
3. Moral damages in the amount of THREE HUNDRED THOUSAND PESOS (P 300,000.00);
4. Attorneys fees in the concept of actual damages in the amount of FIFTY THOUSAND PESOS (P 50,000.00);
5. Costs of the suit.

The MV Doa Paz carried an estimated 4,000 passengers; many indeed, were not in the passenger
manifest. Only 24 survived the tragedy after having been rescued from the burning waters by vessels that
responded to distress calls.[5] Among those who perished were public school teacher Sebastian Caezal (47
years old) and his daughter Corazon Caezal (11 years old), both unmanifested passengers but proved to
be on board the vessel.
Third party defendants Vector Shipping Co. and Caltex (Phils.), Inc. are held equally liable under the third
party complaint to reimburse/indemnify defendant Sulpicio Lines, Inc. of the above-mentioned damages,
attorneys fees and costs which the latter is adjudged to pay plaintiffs, the same to be shared half by Vector
Shipping Co. (being the vessel at fault for the collision) and the other half by Caltex (Phils.), Inc. (being the
charterer that negligently caused the shipping of combustible cargo aboard an unseaworthy vessel).

On March 22, 1988, the board of marine inquiry in BMI Case No. 653-87 after investigation found that the MT SO ORDERED.
Vector, its registered operator Francisco Soriano, and its owner and actual operator Vector Shipping
JORGE S. IMPERIAL
Corporation, were at fault and responsible for its collision with MV Doa Paz.[6]
Associate Justice
On February 13, 1989, Teresita Caezal and Sotera E. Caezal, Sebastian Caezals wife and mother
respectively, filed with the Regional Trial Court, Branch 8, Manila, a complaint for Damages Arising from WE CONCUR:
Breach of Contract of Carriage against Sulpicio Lines, Inc. (hereafter Sulpicio). Sulpicio, in turn, filed a third
party complaint against Francisco Soriano, Vector Shipping Corporation and Caltex (Philippines), Inc. RAMON U. MABUTAS. JR. PORTIA ALIO HERMACHUELOS
Sulpicio alleged that Caltex chartered MT Vector with gross and evident bad faith knowing fully well that
Associate Justice Associate Justice[8]
MT Vector was improperly manned, ill-equipped, unseaworthy and a hazard to safe navigation; as a result,
it rammed against MV Doa Paz in the open sea setting MT Vectors highly flammable cargo ablaze. Hence, this petition.

We find the petition meritorious.


First: The charterer has no liability for damages under Philippine Maritime laws.
The respective rights and duties of a shipper and the carrier depends not on whether the carrier is public or
private, but on whether the contract of carriage is a bill of lading or equivalent shipping documents on the
one hand, or a charter party or similar contract on the other.[9]
Petitioner and Vector entered into a contract of affreightment, also known as a voyage charter.[10]
A charter party is a contract by which an entire ship, or some principal part thereof, is let by the owner to
another person for a specified time or use; a contract of affreightment is one by which the owner of a ship
or other vessel lets the whole or part of her to a merchant or other person for the conveyance of goods, on
a particular voyage, in consideration of the payment of freight.[11]
A contract of affreightment may be either time charter, wherein the leased vessel is leased to the charterer
for a fixed period of time, or voyage charter, wherein the ship is leased for a single voyage. In both cases,
the charter-party provides for the hire of the vessel only, either for a determinate period of time or for a
single or consecutive voyage, the ship owner to supply the ships store, pay for the wages of the master of
the crew, and defray the expenses for the maintenance of the ship.[12]
Under a demise or bareboat charter on the other hand, the charterer mans the vessel with his own people
and becomes, in effect, the owner for the voyage or service stipulated, subject to liability for damages
caused by negligence.
If the charter is a contract of affreightment, which leaves the general owner in possession of the ship as
owner for the voyage, the rights and the responsibilities of ownership rest on the owner. The charterer is free
from liability to third persons in respect of the ship.[13]
Second : MT Vector is a common carrier
Charter parties fall into three main categories: (1) Demise or bareboat, (2) time charter, (3) voyage
charter. Does a charter party agreement turn the common carrier into a private one? We need to answer
this question in order to shed light on the responsibilities of the parties.
In this case, the charter party agreement did not convert the common carrier into a private carrier. The
parties entered into a voyage charter, which retains the character of the vessel as a common carrier.
In Planters Products, Inc. vs. Court of Appeals,[14] we said:
It is therefore imperative that a public carrier shall remain as such, notwithstanding the charter of the whole
or portion of a vessel by one or more persons, provided the charter is limited to the ship only, as in the case
of a time-charter or voyage charter. It is only when the charter includes both the vessel and its crew, as in a
bareboat or demise that a common carrier becomes private, at least insofar as the particular voyage
covering the charter-party is concerned. Indubitably, a ship-owner in a time or voyage charter retains
possession and control of the ship, although her holds may, for the moment, be the property of the
charterer.
Later, we ruled in Coastwise Lighterage Corporation vs. Court of Appeals:[15]
Although a charter party may transform a common carrier into a private one, the same however is not true
in a contract of affreightment xxx
A common carrier is a person or corporation whose regular business is to carry passengers or property for all
persons who may choose to employ and to remunerate him.[16] MT Vector fits the definition of a common
carrier under Article 1732 of the Civil Code. In Guzman vs. Court of Appeals,[17] we ruled:
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 for 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
Transportation Atty. Valencia
I. Concept of common carriers
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 services on a 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, occasional rather than regular or scheduled manner, and even though
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 the fee frequently fell below
commercial freight rates is not relevant here.
Under the Carriage of Goods by Sea Act :
Sec. 3. (1) The carrier shall be bound before and at the beginning of the voyage to exercise due diligence
to -
(a) Make the ship seaworthy;
(b) Properly man, equip, and supply the ship;
xxx xxx xxx
Thus, the carriers are deemed to warrant impliedly the seaworthiness of the ship. 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 the vessel
involved in its contract of carriage is a clear breach of its duty prescribed in Article 1755 of the Civil
Code.[18]
The provisions owed their conception to the nature of the business of common carriers. This business is
impressed with a special public duty. The public must of necessity rely on the care and skill of common
carriers in the vigilance over the goods and safety of the passengers, especially because with the modern
development of science and invention, transportation has become more rapid, more complicated and
somehow more hazardous.[19] For these reasons, a passenger or a shipper of goods is under no obligation to
conduct an inspection of the ship and its crew, the carrier being obliged by law to impliedly warrant its
seaworthiness.
This aside, we now rule on whether Caltex is liable for damages under the Civil Code.
Third: Is Caltex liable for damages under the Civil Code?
We rule that it is not.
Sulpicio argues that Caltex negligently shipped its highly combustible fuel cargo aboard an unseaworthy
vessel such as the MT Vector when Caltex:
1. Did not take steps to have M/T Vectors certificate of inspection and coastwise license renewed;
2. Proceeded to ship its cargo despite defects found by Mr. Carlos Tan of Bataan Refinery Corporation;
3. Witnessed M/T Vector submitting fake documents and certificates to the Philippine Coast Guard.
Sulpicio further argues that Caltex chose MT Vector to transport its cargo despite these deficiencies:
1. The master of M/T Vector did not posses the required Chief Mate license to command and navigate the
vessel;
2. The second mate, Ronaldo Tarife, had the license of a Minor Patron, authorized to navigate only in bays
and rivers when the subject collision occurred in the open sea;
3. The Chief Engineer, Filoteo Aguas, had no license to operate the engine of the vessel;

4. The vessel did not have a Third Mate, a radio operator and a lookout; and
5. The vessel had a defective main engine.[20]
As basis for the liability of Caltex, the Court of Appeals relied on Articles 20 and 2176 of the Civil Code,
which provide:
Article 20. - Every person who contrary to law, willfully or negligently causes damage to another, shall
indemnify the latter for the same.
Article 2176. - Whoever by act or omission causes damage to another, there being fault or negligence, is
obliged to pay for the damage done. 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.
And what is negligence?
The Civil Code provides:
Article 1173. The fault or negligence of the obligor consists in the omission of that diligence which is required
by the nature of the obligation and corresponds with the circumstances of the persons, of the time and of
the place. When negligence shows bad faith, the provisions of Article 1171 and 2201 paragraph 2, shall
apply.
If the law does not state the diligence which is to be observed in the performance, that which is expected
of a good father of a family shall be required.
In Southeastern College, Inc. vs. Court of Appeals,[21] we said that negligence, as commonly understood, is
conduct which naturally or reasonably creates undue risk or harm to others. It may be the failure to observe
that degree of care, precaution, and vigilance, which the circumstances justly demand, or the omission to
do something which ordinarily regulate the conduct of human affairs, would do.
The charterer of a vessel has no obligation before transporting its cargo to ensure that the vessel it
chartered complied with all legal requirements. The duty rests upon the common carrier simply for being
engaged in public service.[22] The Civil Code demands diligence which is required by the nature of the
obligation and that which corresponds with the circumstances of the persons, the time and the
place.Hence, considering the nature of the obligation between Caltex and MT Vector, the liability as found
by the Court of Appeals is without basis.
The relationship between the parties in this case is governed by special laws. Because of the implied
warranty of seaworthiness,[23] shippers of goods, when transacting with common carriers, are not expected
to inquire into the vessels seaworthiness, genuineness of its licenses and compliance with all maritime
laws. To demand more from shippers and hold them liable in case of failure exhibits nothing but the futility
of our maritime laws insofar as the protection of the public in general is concerned. By the same token, we
cannot expect passengers to inquire every time they board a common carrier, whether the carrier
possesses the necessary papers or that all the carriers employees are qualified. Such a practice would be
an absurdity in a business where time is always of the essence. Considering the nature of transportation
business, passengers and shippers alike customarily presume that common carriers possess all the legal
requisites in its operation.
Thus, the nature of the obligation of Caltex demands ordinary diligence like any other shipper in shipping his
cargoes.
A cursory reading of the records convinces us that Caltex had reasons to believe that MT Vector could
legally transport cargo that time of the year.
Atty. Poblador: Mr. Witness, I direct your attention to this portion here containing the entries here
under VESSELS DOCUMENTS
1. Certificate of Inspection No. 1290-85, issued December 21, 1986, and Expires December 7, 1987, Mr.
Witness, what steps did you take regarding the impending expiry of the C.I. or the Certificate of Inspection
No. 1290-85 during the hiring of MT Vector?
Transportation Atty. Valencia
I. Concept of common carriers
Apolinar Ng: At the time when I extended the Contract, I did nothing because the tanker has a valid C.I.
which will expire on December 7, 1987 but on the last week of November, I called the attention of Mr.
Abalos to ensure that the C.I. be renewed and Mr. Abalos, in turn, assured me they will renew the same.
Q: What happened after that?
A: On the first week of December, I again made a follow-up from Mr. Abalos, and said they were going to
send me a copy as soon as possible, sir.[24]
xxx xxx xxx
Q: What did you do with the C.I.?
A: We did not insist on getting a copy of the C.I. from Mr. Abalos on the first place, because of our long
business relation, we trust Mr. Abalos and the fact that the vessel was able to sail indicates that the
documents are in order. xxx[25]
On cross examination -
Atty. Sarenas: This being the case, and this being an admission by you, this Certificate of Inspection has
expired on December 7. Did it occur to you not to let the vessel sail on that day because of the very
approaching date of expiration?
Apolinar Ng: No sir, because as I said before, the operation Manager assured us that they were able to
secure a renewal of the Certificate of Inspection and that they will in time submit us a copy.[26]
Finally, on Mr. Ngs redirect examination:
Atty. Poblador: Mr. Witness, were you aware of the pending expiry of the Certificate of Inspection in the
coastwise license on December 7, 1987. What was your assurance for the record that this document was
renewed by the MT Vector?
Atty. Sarenas: xxx
Atty. Poblador: The certificate of Inspection?
A: As I said, firstly, we trusted Mr. Abalos as he is a long time business partner; secondly, those three years,
they were allowed to sail by the Coast Guard. That are some that make me believe that they in fact were
able to secure the necessary renewal.
Q: If the Coast Guard clears a vessel to sail, what would that mean?
Atty. Sarenas: Objection.
Court: He already answered that in the cross examination to the effect that if it was allowed, referring to
MV Vector, to sail, where it is loaded and that it was scheduled for a destination by the Coast Guard, it
means that it has Certificate of Inspection extended as assured to this witness by Restituto Abalos. That in
no case MV Vector will be allowed to sail if the Certificate of Inspection is, indeed, not to be
extended. That was his repeated explanation to the cross-examination. So, there is no need to clarify the
same in the re-direct examination.[27]
Caltex and Vector Shipping Corporation had been doing business since 1985, or for about two years before
the tragic incident occurred in 1987. Past services rendered showed no reason for Caltex to observe a
higher degree of diligence.
Clearly, as a mere voyage charterer, Caltex had the right to presume that the ship was seaworthy as even
the Philippine Coast Guard itself was convinced of its seaworthiness. All things considered, we find no legal
basis to hold petitioner liable for damages.
As Vector Shipping Corporation did not appeal from the Court of Appeals decision, we limit our ruling to
the liability of Caltex alone. However, we maintain the Court of Appeals ruling insofar as Vector is
concerned .
 Transportation Atty. Valencia
I. Concept of common carriers

WHEREFORE, the Court hereby GRANTS the petition and SETS ASIDE the decision of the Court of Appeals in
CA-G. R. CV No. 39626, promulgated on April 15, 1997, insofar as it held Caltex liable under the third party
complaint to reimburse/indemnify defendant Sulpicio Lines, Inc. the damages the latter is adjudged to pay
plaintiffs-appellees. The Court AFFIRMS the decision of the Court of Appeals insofar as it orders Sulpicio
Lines, Inc. to pay the heirs of Sebastian E. Caezal and Corazon Caezal damages as set forth therein. Third-
party defendant-appellee Vector Shipping Corporation and Francisco Soriano are held liable to
reimburse/indemnify defendant Sulpicio Lines, Inc. whatever damages, attorneys fees and costs the latter is
adjudged to pay plaintiffs-appellees in the case.

No costs in this instance.

SO ORDERED

G.R. No. 114167 July 12, 1995
COASTWISE LIGHTERAGE CORPORATION, petitioner,
vs.
COURT OF APPEALS and the PHILIPPINE GENERAL INSURANCE COMPANY, respondents.
RESOLUTION
FRANCISCO, R., J.:
This is a petition for review of a Decision rendered by the Court of Appeals, dated December 17, 1993,
affirming Branch 35 of the Regional Trial Court, Manila in holding that herein petitioner is liable to pay herein
private respondent the amount of P700,000.00, plus legal interest thereon, another sum of P100,000.00 as
attorney's fees and the cost of the suit.
The factual background of this case is as follows:
Pag-asa Sales, Inc. entered into a contract to transport molasses from the province of Negros to Manila
with Coastwise Lighterage Corporation (Coastwise for brevity), using the latter's dumb barges. The barges
were towed in tandem by the tugboat MT Marica, which is likewise owned by Coastwise.
Upon reaching Manila Bay, while approaching Pier 18, one of the barges, "Coastwise 9", struck an unknown
sunken object. The forward buoyancy compartment was damaged, and water gushed in through a hole
"two inches wide and twenty-two inches long"1 As a consequence, the molasses at the cargo tanks were
contaminated and rendered unfit for the use it was intended. This prompted the consignee, Pag-asa Sales,
Inc. to reject the shipment of molasses as a total loss. Thereafter, Pag-asa Sales, Inc. filed a formal claim
with the insurer of its lost cargo, herein private respondent, Philippine General Insurance Company
(PhilGen, for short) and against the carrier, herein petitioner, Coastwise Lighterage. Coastwise Lighterage
denied the claim and it was PhilGen which paid the consignee, Pag-asa Sales, Inc., the amount of
P700,000.00, representing the value of the damaged cargo of molasses.
In turn, PhilGen then filed an action against Coastwise Lighterage before the Regional Trial Court of Manila,
seeking to recover the amount of P700,000.00 which it paid to Pag-asa Sales, Inc. for the latter's lost cargo.
PhilGen now claims to be subrogated to all the contractual rights and claims which the consignee may
have against the carrier, which is presumed to have violated the contract of carriage.
The RTC awarded the amount prayed for by PhilGen. On Coastwise Lighterage's appeal to the Court of
Appeals, the award was affirmed.
Hence, this petition.
There are two main issues to be resolved herein. First, whether or not petitioner Coastwise Lighterage was
transformed into a private carrier, by virtue of the contract of affreightment which it entered into with the
consignee, Pag-asa Sales, Inc. Corollarily, if it were in fact transformed into a private carrier, did it exercise
the ordinary diligence to which a private carrier is in turn bound? Second, whether or not the insurer was
subrogated into the rights of the consignee against the carrier, upon payment by the insurer of the value of
the consignee's goods lost while on board one of the carrier's vessels.
On the first issue, petitioner contends that the RTC and the Court of Appeals erred in finding that it was a
common carrier. It stresses the fact that it contracted with Pag-asa Sales, Inc. to transport the shipment of
molasses from Negros Oriental to Manila and refers to this contract as a "charter agreement". It then
proceeds to cite the case of Home Insurance Company vs. American Steamship Agencies, Inc.2 wherein
this Court held: ". . . a common carrier undertaking to carry a special cargo or chartered to a special
person only becomes a private carrier."
Petitioner's reliance on the aforementioned case is misplaced. In its entirety, the conclusions of the court
are as follows:
Transportation Atty. Valencia
I. Concept of common carriers
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.3
The distinction between the two kinds of charter parties (i.e. bareboat or demise and contract of
affreightment) is more clearly set out in the case of Puromines, Inc. vs. Court of Appeals,4 wherein we ruled:
Under the demise or bareboat charter of the vessel, the charterer will generally be regarded as the owner
for the voyage or service stipulated. The charterer mans the vessel with his own people and becomes the
owner pro hac vice, subject to liability to others for damages caused by negligence. To create a demise,
the owner of a vessel must completely and exclusively relinquish possession, command and navigation
thereof to the charterer, anything short of such a complete transfer is a contract of affreightment (time or
voyage charter party) or not a charter party at all.
On the other hand a contract of affreightment is one in which the owner of the vessel leases part or all of its
space to haul goods for others. It is a contract for special service to be rendered by the owner of the vessel
and under such contract the general owner retains the possession, command and navigation of the ship,
the charterer or freighter merely having use of the space in the vessel in return for his payment of the
charter hire. . . . .
. . . . An owner who retains possession of the ship though the hold is the property of the charterer, remains
liable as carrier and must answer for any breach of duty as to the care, loading and unloading of the
cargo. . . .
Although a charter party may transform a common carrier into a private one, the same however is not true
in a contract of affreightment on account of the aforementioned distinctions between the two.
Petitioner admits that the contract it entered into with the consignee was one of affreightment.5 We agree.
Pag-asa Sales, Inc. only leased three of petitioner's vessels, in order to carry cargo from one point to
another, but the possession, command and navigation of the vessels remained with petitioner Coastwise
Lighterage.
Pursuant therefore to the ruling in the aforecited Puromines case, Coastwise Lighterage, by the contract of
affreightment, was not converted into a private carrier, but remained a common carrier and was still liable
as such.
The law and jurisprudence on common carriers both hold that the mere proof of delivery of goods in good
order to a carrier and the subsequent arrival of the same goods at the place of destination in bad order
makes for a prima facie case against the carrier.
It follows then that the presumption of negligence that attaches to common carriers, once the goods it
transports are lost, destroyed or deteriorated, applies to the petitioner. This presumption, which is overcome
only by proof of the exercise of extraordinary diligence, remained unrebutted in this case.
The records show that the damage to the barge which carried the cargo of molasses was caused by its
hitting an unknown sunken object as it was heading for Pier 18. The object turned out to be a submerged
derelict vessel. Petitioner contends that this navigational hazard was the efficient cause of the accident.
Further it asserts that the fact that the Philippine Coastguard "has not exerted any effort to prepare a chart
to indicate the location of sunken derelicts within Manila North Harbor to avoid navigational
accidents"6 effectively contributed to the happening of this mishap. Thus, being unaware of the hidden
danger that lies in its path, it became impossible for the petitioner to avoid the same. Nothing could have
prevented the event, making it beyond the pale of even the exercise of extraordinary diligence.
However, petitioner's assertion is belied by the evidence on record where it appeared that far from having
rendered service with the greatest skill and utmost foresight, and being free from fault, the carrier was
culpably remiss in the observance of its duties.
Jesus R. Constantino, the patron of the vessel "Coastwise 9" admitted that he was not licensed. The Code of
Commerce, which subsidiarily governs common carriers (which are primarily governed by the provisions of
the Civil Code) provides:
 Transportation Atty. Valencia
I. Concept of common carriers

Art. 609. Captains, masters, or patrons of vessels must be Filipinos, have legal capacity to contract in
accordance with this code, and prove the skill capacity and qualifications necessary to command and
direct the vessel, as established by marine and navigation laws, ordinances or regulations, and must not be
disqualified according to the same for the discharge of the duties of the position. . . .

Clearly, petitioner Coastwise Lighterage's embarking on a voyage with an unlicensed patron violates this
rule. It cannot safely claim to have exercised extraordinary diligence, by placing a person whose
navigational skills are questionable, at the helm of the vessel which eventually met the fateful accident. It
may also logically, follow that a person without license to navigate, lacks not just the skill to do so, but also
the utmost familiarity with the usual and safe routes taken by seasoned and legally authorized ones. Had
the patron been licensed, he could be presumed to have both the skill and the knowledge that would
have prevented the vessel's hitting the sunken derelict ship that lay on their way to Pier 18.

As a common carrier, petitioner is liable for breach of the contract of carriage, having failed to overcome
the presumption of negligence with the loss and destruction of goods it transported, by proof of its exercise
of extraordinary diligence.
On the issue of subrogation, which petitioner contends as inapplicable in this case, we once more rule
against the petitioner. We have already found petitioner liable for breach of the contract of carriage it
entered into with Pag-asa Sales, Inc. However, for the damage sustained by the loss of the cargo which
petitioner-carrier was transporting, it was not the carrier which paid the value thereof to Pag-asa Sales, Inc.
but the latter's insurer, herein private respondent PhilGen.

Article 2207 of the Civil Code is explicit on this point:

Art. 2207. If the plaintiffs property has been insured, and he has received indemnity from the insurance
company for the injury or loss arising out of the wrong or breach of contract complained of, the insurance
company shall be subrogated to the rights of the insured against the wrongdoer or the person who
violated the contract. . . .

This legal provision containing the equitable principle of subrogation has been applied in a long line of
cases including Compania Maritima v. Insurance Company of North America;7 Fireman's Fund Insurance
Company v. Jamilla & Company, Inc.,8 and Pan Malayan Insurance Corporation v. Court of
Appeals,9 wherein this Court explained:

Article 2207 of the Civil Code is founded on the well-settled principle of subrogation. If the insured property
is destroyed or damaged through the fault or negligence of a party other than the assured, then the
insurer, upon payment to the assured will be subrogated to the rights of the assured to recover from the
wrongdoer to the extent that the insurer has been obligated to pay. Payment by the insurer to the assured
operated as an equitable assignment to the former of all remedies which the latter may have against the
third party whose negligence or wrongful act caused the loss. The right of subrogation is not dependent
upon, nor does it grow out of, any privity of contract or upon written assignment of claim. It accrues simply
upon payment of the insurance claim by the insurer.

Undoubtedly, upon payment by respondent insurer PhilGen of the amount of P700,000.00 to Pag-asa Sales,
Inc., the consignee of the cargo of molasses totally damaged while being transported by petitioner
Coastwise Lighterage, the former was subrogated into all the rights which Pag-asa Sales, Inc. may have
had against the carrier, herein petitioner Coastwise Lighterage.

WHEREFORE, premises considered, this petition is DENIED and the appealed decision affirming the order of
Branch 35 of the Regional Trial Court of Manila for petitioner Coastwise Lighterage to pay respondent
Philippine General Insurance Company the "principal amount of P700,000.00 plus interest thereon at the
legal rate computed from March 29, 1989, the date the complaint was filed until fully paid and another
sum of P100,000.00 as attorney's fees and costs"10 is likewise hereby AFFIRMED

SO ORDERED.

G.R. No. 101503 September 15, 1993
PLANTERS PRODUCTS, INC., petitioner,
vs.
COURT OF APPEALS, SORIAMONT STEAMSHIP AGENCIES AND KYOSEI KISEN KABUSHIKI KAISHA, respondents.
Gonzales, Sinense, Jimenez & Associates for petitioner.
Siguion Reyna, Montecillo & Ongsiako Law Office for private respondents.
BELLOSILLO, J.:
Does a charter-party1 between a shipowner and a charterer transform a common carrier into a private one
as to negate the civil law presumption of negligence in case of loss or damage to its cargo?
Planters Products, Inc. (PPI), purchased from Mitsubishi International Corporation (MITSUBISHI) of New York,
U.S.A., 9,329.7069 metric tons (M/T) of Urea 46% fertilizer which the latter shipped in bulk on 16 June 1974
aboard the cargo vessel M/V "Sun Plum" owned by private respondent Kyosei Kisen Kabushiki Kaisha (KKKK)
from Kenai, Alaska, U.S.A., to Poro Point, San Fernando, La Union, Philippines, as evidenced by Bill of Lading
No. KP-1 signed by the master of the vessel and issued on the date of departure.
On 17 May 1974, or prior to its voyage, a time charter-party on the vessel M/V "Sun Plum" pursuant to the
Uniform General Charter2 was entered into between Mitsubishi as shipper/charterer and KKKK as shipowner,
in Tokyo, Japan.3 Riders to the aforesaid charter-party starting from par. 16 to 40 were attached to the pre-
printed agreement. Addenda Nos. 1, 2, 3 and 4 to the charter-party were also subsequently entered into
on the 18th, 20th, 21st and 27th of May 1974, respectively.
Before loading the fertilizer aboard the vessel, four (4) of her holds4 were all presumably inspected by the
charterer's representative and found fit to take a load of urea in bulk pursuant to par. 16 of the charter-
party which reads:
16. . . . At loading port, notice of readiness to be accomplished by certificate from National Cargo Bureau
inspector or substitute appointed by charterers for his account certifying the vessel's readiness to receive
cargo spaces. The vessel's hold to be properly swept, cleaned and dried at the vessel's expense and the
vessel to be presented clean for use in bulk to the satisfaction of the inspector before daytime
commences. (emphasis supplied)
After the Urea fertilizer was loaded in bulk by stevedores hired by and under the supervision of the shipper,
the steel hatches were closed with heavy iron lids, covered with three (3) layers of tarpaulin, then tied with
steel bonds. The hatches remained closed and tightly sealed throughout the entire voyage.5
Upon arrival of the vessel at her port of call on 3 July 1974, the steel pontoon hatches were opened with the
use of the vessel's boom. Petitioner unloaded the cargo from the holds into its steelbodied dump trucks
which were parked alongside the berth, using metal scoops attached to the ship, pursuant to the terms
and conditions of the charter-partly (which provided for an F.I.O.S. clause).6 The hatches remained open
throughout the duration of the discharge.7
Each time a dump truck was filled up, its load of Urea was covered with tarpaulin before it was transported
to the consignee's warehouse located some fifty (50) meters from the wharf. Midway to the warehouse, the
trucks were made to pass through a weighing scale where they were individually weighed for the purpose
of ascertaining the net weight of the cargo. The port area was windy, certain portions of the route to the
warehouse were sandy and the weather was variable, raining occasionally while the discharge was in
progress.8 The petitioner's warehouse was made of corrugated galvanized iron (GI) sheets, with an opening
at the front where the dump trucks entered and unloaded the fertilizer on the warehouse floor. Tarpaulins
and GI sheets were placed in-between and alongside the trucks to contain spillages of the ferilizer.9
It took eleven (11) days for PPI to unload the cargo, from 5 July to 18 July 1974 (except July 12th, 14th and
18th).10A private marine and cargo surveyor, Cargo Superintendents Company Inc. (CSCI), was hired by PPI
to determine the "outturn" of the cargo shipped, by taking draft readings of the vessel prior to and after
Transportation Atty. Valencia
I. Concept of common carriers
discharge. 11 The survey report submitted by CSCI to the consignee (PPI) dated 19 July 1974 revealed a
shortage in the cargo of 106.726 M/T and that a portion of the Urea fertilizer approximating 18 M/T was
contaminated with dirt. The same results were contained in a Certificate of Shortage/Damaged Cargo
dated 18 July 1974 prepared by PPI which showed that the cargo delivered was indeed short of 94.839 M/T
and about 23 M/T were rendered unfit for commerce, having been polluted with sand, rust and
dirt. 12
Consequently, PPI sent a claim letter dated 18 December 1974 to Soriamont Steamship Agencies (SSA), the
resident agent of the carrier, KKKK, for P245,969.31 representing the cost of the alleged shortage in the
goods shipped and the diminution in value of that portion said to have been contaminated with dirt. 13
Respondent SSA explained that they were not able to respond to the consignee's claim for payment
because, according to them, what they received was just a request for shortlanded certificate and not a
formal claim, and that this "request" was denied by them because they "had nothing to do with the
discharge of the shipment." 14 Hence, on 18 July 1975, PPI filed an action for damages with the Court of First
Instance of Manila. The defendant carrier argued that the strict public policy governing common carriers
does not apply to them because they have become private carriers by reason of the provisions of the
charter-party. The court a quo however sustained the claim of the plaintiff against the defendant carrier for
the value of the goods lost or damaged when it ruled thus: 15
. . . Prescinding from the provision of the law that a common carrier is presumed negligent in case of loss or
damage of the goods it contracts to transport, all that a shipper has to do in a suit to recover for loss or
damage is to show receipt by the carrier of the goods and to delivery by it of less than what it
received. After that, the burden of proving that the loss or damage was due to any of the causes which
exempt him from liability is shipted to the carrier, common or private he may be. Even if the provisions of
the charter-party aforequoted are deemed valid, and the defendants considered private carriers, it was
still incumbent upon them to prove that the shortage or contamination sustained by the cargo is
attributable to the fault or negligence on the part of the shipper or consignee in the loading, stowing,
trimming and discharge of the cargo. This they failed to do. By this omission, coupled with their failure to
destroy the presumption of negligence against them, the defendants are liable (emphasis supplied).
On appeal, respondent Court of Appeals reversed the lower court and absolved the carrier from liability for
the value of the cargo that was lost or damaged. 16 Relying on the 1968 case of Home Insurance
Co. v. American Steamship Agencies, Inc.,17 the appellate court ruled that the cargo vessel M/V "Sun Plum"
owned by private respondent KKKK was a private carrier and not a common carrier by reason of the time
charterer-party. Accordingly, the Civil Code provisions on common carriers which set forth a presumption
of negligence do not find application in the case at bar. Thus
. . . In the absence of such presumption, it was incumbent upon the plaintiff-appellee to adduce sufficient
evidence to prove the negligence of the defendant carrier as alleged in its complaint. It is an old and well
settled rule that if the plaintiff, upon whom rests the burden of proving his cause of action, fails to show in a
satisfactory manner the facts upon which he bases his claim, the defendant is under no obligation to prove
his exception or defense (Moran, Commentaries on the Rules of Court, Volume 6, p. 2, citing Belen v. Belen,
13 Phil. 202).
But, the record shows that the plaintiff-appellee dismally failed to prove the basis of its cause of action,
i.e. the alleged negligence of defendant carrier. It appears that the plaintiff was under the impression that
it did not have to establish defendant's negligence. Be that as it may, contrary to the trial court's finding,
the record of the instant case discloses ample evidence showing that defendant carrier was not negligent
in performing its obligation . . . 18 (emphasis supplied).
Petitioner PPI appeals to us by way of a petition for review assailing the decision of the Court of Appeals.
Petitioner theorizes that the Home Insurance case has no bearing on the present controversy because the
issue raised therein is the validity of a stipulation in the charter-party delimiting the liability of the shipowner
for loss or damage to goods cause by want of due deligence on its part or that of its manager to make the
vessel seaworthy in all respects, and not whether the presumption of negligence provided under the Civil
Code applies only to common carriers and not to private carriers. 19 Petitioner further argues that since the
possession and control of the vessel remain with the shipowner, absent any stipulation to the contrary, such
shipowner should made liable for the negligence of the captain and crew. In fine, PPI faults the appellate

court in not applying the presumption of negligence against respondent carrier, and instead shifting
the onus probandi on the shipper to show want of due deligence on the part of the carrier, when he was
not even at hand to witness what transpired during the entire voyage.
As earlier stated, the primordial issue here is whether a common carrier becomes a private carrier by
reason of a charter-party; in the negative, whether the shipowner in the instant case was able to prove that
he had exercised that degree of diligence required of him under the law.
It is said that etymology is the basis of reliable judicial decisions in commercial cases. This being so, we find it
fitting to first define important terms which are relevant to our discussion.
A "charter-party" is defined as a contract by which an entire ship, or some principal part thereof, is let by
the owner to another person for a specified time or use; 20 a contract of affreightment by which the owner
of a ship or other vessel lets the whole or a part of her to a merchant or other person for the conveyance of
goods, on a particular voyage, in consideration of the payment of freight; 21 Charter parties are of two
types: (a) contract of affreightment which involves the use of shipping space on vessels leased by the
owner in part or as a whole, to carry goods for others; and, (b) charter by demise or bareboat charter, by
the terms of which the whole vessel is let to the charterer with a transfer to him of its entire command and
possession and consequent control over its navigation, including the master and the crew, who are his
servants. Contract of affreightment may either be time charter, wherein the vessel is leased to the charterer
for a fixed period of time, or voyage charter, wherein the ship is leased for a single voyage. 22 In both cases,
the charter-party provides for the hire of vessel only, either for a determinate period of time or for a single or
consecutive voyage, the shipowner to supply the ship's stores, pay for the wages of the master and the
crew, and defray the expenses for the maintenance of the ship.
Upon the other hand, the term "common or public carrier" is defined in Art. 1732 of the Civil Code. 23 The
definition extends to carriers either by land, air or water which hold themselves out as ready to engage in
carrying goods or transporting passengers or both for compensation as a public employment and not as a
casual occupation. The distinction between a "common or public carrier" and a "private or special carrier"
lies in the character of the business, such that if the undertaking is a single transaction, not a part of the
general business or occupation, although involving the carriage of goods for a fee, the person or
corporation offering such service is a private carrier. 24
Article 1733 of the New Civil Code mandates that common carriers, by reason of the nature of their
business, should observe extraordinary diligence in the vigilance over the goods they carry.25 In the case of
private carriers, however, the exercise of ordinary diligence in the carriage of goods will suffice. Moreover,
in the case of loss, destruction or deterioration of the goods, common carriers are presumed to have been
at fault or to have acted negligently, and the burden of proving otherwise rests on them.26 On the contrary,
no such presumption applies to private carriers, for whosoever alleges damage to or deterioration of the
goods carried has the onus of proving that the cause was the negligence of the carrier.
It is not disputed that respondent carrier, in the ordinary course of business, operates as a common carrier,
transporting goods indiscriminately for all persons. When petitioner chartered the vessel M/V "Sun Plum", the
ship captain, its officers and compliment were under the employ of the shipowner and therefore continued
to be under its direct supervision and control. Hardly then can we charge the charterer, a stranger to the
crew and to the ship, with the duty of caring for his cargo when the charterer did not have any control of
the means in doing so. This is evident in the present case considering that the steering of the ship, the
manning of the decks, the determination of the course of the voyage and other technical incidents of
maritime navigation were all consigned to the officers and crew who were screened, chosen and hired by
the shipowner. 27
It is therefore imperative that a public carrier shall remain as such, notwithstanding the charter of the whole
or portion of a vessel by one or more persons, provided the charter is limited to the ship only, as in the case
of a time-charter or voyage-charter. It is only when the charter includes both the vessel and its crew, as in a
bareboat or demise that a common carrier becomes private, at least insofar as the particular voyage
covering the charter-party is concerned. Indubitably, a shipowner in a time or voyage charter retains
possession and control of the ship, although her holds may, for the moment, be the property of the
charterer. 28
Transportation Atty. Valencia
I. Concept of common carriers
Respondent carrier's heavy reliance on the case of Home Insurance Co. v. American Steamship Agencies,
supra, is misplaced for the reason that the meat of the controversy therein was the validity of a stipulation in
the charter-party exempting the shipowners from liability for loss due to the negligence of its agent, and not
the effects of a special charter on common carriers. At any rate, the rule in the United States that a ship
chartered by a single shipper to carry special cargo is not a common carrier, 29 does not find application in
our jurisdiction, for we have observed that the growing concern for safety in the transportation of
passengers and /or carriage of goods by sea requires a more exacting interpretation of admiralty laws,
more particularly, the rules governing common carriers.
We quote with approval the observations of Raoul Colinvaux, the learned barrister-at-law 30
As a matter of principle, it is difficult to find a valid distinction between cases in which a ship is used to
convey the goods of one and of several persons. Where the ship herself is let to a charterer, so that he
takes over the charge and control of her, the case is different; the shipowner is not then a carrier. But where
her services only are let, the same grounds for imposing a strict responsibility exist, whether he is employed
by one or many. The master and the crew are in each case his servants, the freighter in each case is usually
without any representative on board the ship; the same opportunities for fraud or collusion occur; and the
same difficulty in discovering the truth as to what has taken place arises . . .
In an action for recovery of damages against a common carrier on the goods shipped, the shipper or
consignee should first prove the fact of shipment and its consequent loss or damage while the same was in
the possession, actual or constructive, of the carrier. Thereafter, the burden of proof shifts to respondent to
prove that he has exercised extraordinary diligence required by law or that the loss, damage or
deterioration of the cargo was due to fortuitous event, or some other circumstances inconsistent with its
liability. 31
To our mind, respondent carrier has sufficiently overcome, by clear and convincing proof, the prima
faciepresumption of negligence.
The master of the carrying vessel, Captain Lee Tae Bo, in his deposition taken on 19 April 1977 before the
Philippine Consul and Legal Attache in the Philippine Embassy in Tokyo, Japan, testified that before the
fertilizer was loaded, the four (4) hatches of the vessel were cleaned, dried and fumigated. After
completing the loading of the cargo in bulk in the ship's holds, the steel pontoon hatches were closed and
sealed with iron lids, then covered with three (3) layers of serviceable tarpaulins which were tied with steel
bonds. The hatches remained close and tightly sealed while the ship was in transit as the weight of the steel
covers made it impossible for a person to open without the use of the ship's boom. 32
It was also shown during the trial that the hull of the vessel was in good condition, foreclosing the possibility
of spillage of the cargo into the sea or seepage of water inside the hull of the vessel. 33 When M/V "Sun
Plum" docked at its berthing place, representatives of the consignee boarded, and in the presence of a
representative of the shipowner, the foreman, the stevedores, and a cargo surveyor representing CSCI,
opened the hatches and inspected the condition of the hull of the vessel. The stevedores unloaded the
cargo under the watchful eyes of the shipmates who were overseeing the whole operation on rotation
basis. 34
Verily, the presumption of negligence on the part of the respondent carrier has been efficaciously
overcome by the showing of extraordinary zeal and assiduity exercised by the carrier in the care of the
cargo. This was confirmed by respondent appellate court thus
. . . Be that as it may, contrary to the trial court's finding, the record of the instant case discloses ample
evidence showing that defendant carrier was not negligent in performing its obligations. Particularly, the
following testimonies of plaintiff-appellee's own witnesses clearly show absence of negligence by the
defendant carrier; that the hull of the vessel at the time of the discharge of the cargo was sealed and
nobody could open the same except in the presence of the owner of the cargo and the representatives of
the vessel (TSN, 20 July 1977, p. 14); that the cover of the hatches was made of steel and it was overlaid
with tarpaulins, three layers of tarpaulins and therefore their contents were protected from the weather
(TSN, 5 April 1978, p. 24); and, that to open these hatches, the seals would have to be broken, all the seals
were found to be intact (TSN, 20 July 1977, pp. 15-16) (emphasis supplied).

The period during which private respondent was to observe the degree of diligence required of it as a
public carrier began from the time the cargo was unconditionally placed in its charge after the vessel's
holds were duly inspected and passed scrutiny by the shipper, up to and until the vessel reached its
destination and its hull was reexamined by the consignee, but prior to unloading. This is clear from the
limitation clause agreed upon by the parties in the Addendum to the standard "GENCON" time charter-
party which provided for an F.I.O.S., meaning, that the loading, stowing, trimming and discharge of the
cargo was to be done by the charterer, free from all risk and expense to the carrier. 35 Moreover, a
shipowner is liable for damage to the cargo resulting from improper stowage only when the stowing is done
by stevedores employed by him, and therefore under his control and supervision, not when the same is
done by the consignee or stevedores under the employ of the latter. 36
Article 1734 of the New Civil Code provides that common carriers are not responsible for the loss,
destruction or deterioration of the goods if caused by the charterer of the goods or defects in the
packaging or in the containers. The Code of Commerce also provides that all losses and deterioration
which the goods may suffer during the transportation by reason of fortuitous event, force majeure, or the
inherent defect of the goods, shall be for the account and risk of the shipper, and that proof of these
accidents is incumbent upon the carrier. 37 The carrier, nonetheless, shall be liable for the loss and damage
resulting from the preceding causes 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 has established among careful
persons. 38
Respondent carrier presented a witness who testified on the characteristics of the fertilizer shipped and the
expected risks of bulk shipping. Mr. Estanislao Chupungco, a chemical engineer working with Atlas Fertilizer,
described Urea as a chemical compound consisting mostly of ammonia and carbon monoxide
compounds which are used as fertilizer. Urea also contains 46% nitrogen and is highly soluble in water.
However, during storage, nitrogen and ammonia do not normally evaporate even on a long voyage,
provided that the temperature inside the hull does not exceed eighty (80) degrees centigrade. Mr.
Chupungco further added that in unloading fertilizer in bulk with the use of a clamped shell, losses due to
spillage during such operation amounting to one percent (1%) against the bill of lading is deemed "normal"
or "tolerable." The primary cause of these spillages is the clamped shell which does not seal very tightly.
Also, the wind tends to blow away some of the materials during the unloading process.
The dissipation of quantities of fertilizer, or its daterioration in value, is caused either by an extremely high
temperature in its place of storage, or when it comes in contact with water. When Urea is drenched in
water, either fresh or saline, some of its particles dissolve. But the salvaged portion which is in liquid form still
remains potent and usable although no longer saleable in its original market value.
The probability of the cargo being damaged or getting mixed or contaminated with foreign particles was
made greater by the fact that the fertilizer was transported in "bulk," thereby exposing it to the inimical
effects of the elements and the grimy condition of the various pieces of equipment used in transporting
and hauling it.
The evidence of respondent carrier also showed that it was highly improbable for sea water to seep into
the vessel's holds during the voyage since the hull of the vessel was in good condition and her hatches
were tightly closed and firmly sealed, making the M/V "Sun Plum" in all respects seaworthy to carry the
cargo she was chartered for. If there was loss or contamination of the cargo, it was more likely to have
occurred while the same was being transported from the ship to the dump trucks and finally to the
consignee's warehouse. This may be gleaned from the testimony of the marine and cargo surveyor of CSCI
who supervised the unloading. He explained that the 18 M/T of alleged "bar order cargo" as contained in
their report to PPI was just an approximation or estimate made by them after the fertilizer was discharged
from the vessel and segregated from the rest of the cargo.
The Court notes that it was in the month of July when the vessel arrived port and unloaded her cargo. It
rained from time to time at the harbor area while the cargo was being discharged according to the supply
officer of PPI, who also testified that it was windy at the waterfront and along the shoreline where the dump
trucks passed enroute to the consignee's warehouse.
Indeed, we agree with respondent carrier that bulk shipment of highly soluble goods like fertilizer carries
with it the risk of loss or damage. More so, with a variable weather condition prevalent during its unloading,
Transportation Atty. Valencia
I. Concept of common carriers
as was the case at bar. This is a risk the shipper or the owner of the goods has to face. Clearly, respondent
carrier has sufficiently proved the inherent character of the goods which makes it highly vulnerable to
deterioration; as well as the inadequacy of its packaging which further contributed to the loss. On the other
hand, no proof was adduced by the petitioner showing that the carrier was remise in the exercise of due
diligence in order to minimize the loss or damage to the goods it carried.
WHEREFORE, the petition is DISMISSED. The assailed decision of the Court of Appeals, which reversed the
trial court, is AFFIRMED. Consequently, Civil Case No. 98623 of the then Court of the First Instance, now
Regional Trial Court, of Manila should be, as it is hereby DISMISSED.
Costs against petitioner.
SO ORDERED.
[G.R. No. 150255. April 22, 2005]
SCHMITZ TRANSPORT & BROKERAGE CORPORATION, petitioner, vs. TRANSPORT VENTURE, INC., INDUSTRIAL
INSURANCE COMPANY, LTD., and BLACK SEA SHIPPING AND DODWELL now INCHCAPE SHIPPING
SERVICES, respondents.
DECISION
CARPIO-MORALES, J.:
On petition for review is the June 27, 2001 Decision[1] of the Court of Appeals, as well as its
Resolution[2] dated September 28, 2001 denying the motion for reconsideration, which affirmed that of
Branch 21 of the Regional Trial Court (RTC) of Manila in Civil Case No. 92-63132[3] holding petitioner Schmitz
Transport Brokerage Corporation (Schmitz Transport), together with Black Sea Shipping Corporation (Black
Sea), represented by its ship agent Inchcape Shipping Inc. (Inchcape), and Transport Venture
(TVI), solidarily liable for the loss of 37 hot rolled steel sheets in coil that were washed overboard a barge.
On September 25, 1991, SYTCO Pte Ltd. Singapore shipped from the port of Ilyichevsk, Russia on board M/V
Alexander Saveliev (a vessel of Russian registry and owned by Black Sea) 545 hot rolled steel sheets in coil
weighing 6,992,450 metric tons.
The cargoes, which were to be discharged at the port of Manila in favor of the consignee, Little Giant Steel
Pipe Corporation (Little Giant),[4] were insured against all risks with Industrial Insurance Company Ltd.
(Industrial Insurance) under Marine Policy No. M-91-3747-TIS.[5]
The vessel arrived at the port of Manila on October 24, 1991 and the Philippine Ports Authority (PPA)
assigned it a place of berth at the outside breakwater at the Manila South Harbor.[6]
Schmitz Transport, whose services the consignee engaged to secure the requisite clearances, to receive
the cargoes from the shipside, and to deliver them to its (the consignees) warehouse at Cainta, Rizal,[7] in
turn engaged the services of TVI to send a barge and tugboat at shipside.
On October 26, 1991, around 4:30 p.m., TVIs tugboat Lailani towed the barge Erika V to shipside.[8]
By 7:00 p.m. also of October 26, 1991, the tugboat, after positioning the barge alongside the vessel, left and
returned to the port terminal.[9] At 9:00 p.m., arrastre operator Ocean Terminal Services Inc. commenced to
unload 37 of the 545 coils from the vessel unto the barge.
By 12:30 a.m. of October 27, 1991 during which the weather condition had become inclement due to an
approaching storm, the unloading unto the barge of the 37 coils was accomplished.[10] No tugboat pulled
the barge back to the pier, however.
At around 5:30 a.m. of October 27, 1991, due to strong waves,[11] the crew of the barge abandoned it and
transferred to the vessel. The barge pitched and rolled with the waves and eventually capsized, washing
the 37 coils into the sea.[12] At 7:00 a.m., a tugboat finally arrived to pull the already empty and damaged
barge back to the pier.[13]
Earnest efforts on the part of both the consignee Little Giant and Industrial Insurance to recover the lost
cargoes proved futile.[14]

Little Giant thus filed a formal claim against Industrial Insurance which paid it the amount of P5,246,113.11.
Little Giant thereupon executed a subrogation receipt[15] in favor of Industrial Insurance.
Industrial Insurance later filed a complaint against Schmitz Transport, TVI, and Black Sea through its
representative Inchcape (the defendants) before the RTC of Manila, for the recovery of the amount it paid
to Little Giant plus adjustment fees, attorneys fees, and litigation expenses.[16]
Industrial Insurance faulted the defendants for undertaking the unloading of the cargoes while typhoon
signal No. 1 was raised in Metro Manila.[17]
By Decision of November 24, 1997, Branch 21 of the RTC held all the defendants negligent for unloading the
cargoes outside of the breakwater notwithstanding the storm signal.[18] The dispositive portion of the
decision reads:
WHEREFORE, premises considered, the Court renders judgment in favor of the plaintiff, ordering the
defendants to pay plaintiff jointly and severally the sum of P5,246,113.11 with interest from the date the
complaint was filed until fully satisfied, as well as the sum of P5,000.00 representing the adjustment fee plus
the sum of 20% of the amount recoverable from the defendants as attorneys fees plus the costs of suit. The
counterclaims and cross claims of defendants are hereby DISMISSED for lack of [m]erit.[19]
To the trial courts decision, the defendants Schmitz Transport and TVI filed a joint motion for reconsideration
assailing the finding that they are common carriers and the award of excessive attorneys fees of more
than P1,000,000. And they argued that they were not motivated by gross or evident bad faith and that the
incident was caused by a fortuitous event. [20]
By resolution of February 4, 1998, the trial court denied the motion for reconsideration. [21]
All the defendants appealed to the Court of Appeals which, by decision of June 27, 2001, affirmed in toto
the decision of the trial court, [22] it finding that all the defendants were common carriers Black Sea and TVI
for engaging in the transport of goods and cargoes over the seas as a regular business and not as an
isolated transaction,[23] and Schmitz Transport for entering into a contract with Little Giant to transport the
cargoes from ship to port for a fee.[24]
In holding all the defendants solidarily liable, the appellate court ruled that each one was essential such
that without each others contributory negligence the incident would not have happened and so much so
that the person principally liable cannot be distinguished with sufficient accuracy.[25]
In discrediting the defense of fortuitous event, the appellate court held that although defendants obviously
had nothing to do with the force of nature, they however had control of where to anchor the vessel, where
discharge will take place and even when the discharging will commence.[26]
The defendants respective motions for reconsideration having been denied by Resolution[27] of September
28, 2001, Schmitz Transport (hereinafter referred to as petitioner) filed the present petition against TVI,
Industrial Insurance and Black Sea.
Petitioner asserts that in chartering the barge and tugboat of TVI, it was acting for its principal, consignee
Little Giant, hence, the transportation contract was by and between Little Giant and TVI.[28]
By Resolution of January 23, 2002, herein respondents Industrial Insurance, Black Sea, and TVI were required
to file their respective Comments.[29]
By its Comment, Black Sea argued that the cargoes were received by the consignee through petitioner in
good order, hence, it cannot be faulted, it having had no control and supervision thereover.[30]
For its part, TVI maintained that it acted as a passive party as it merely received the cargoes and
transferred them unto the barge upon the instruction of petitioner.[31]
In issue then are:
(1) Whether the loss of the cargoes was due to a fortuitous event, independent of any act of negligence
on the part of petitioner Black Sea and TVI, and
(2) If there was negligence, whether liability for the loss may attach to Black Sea, petitioner and TVI.
Transportation Atty. Valencia
I. Concept of common carriers
When a fortuitous event occurs, Article 1174 of the Civil Code absolves any party from any and all liability
arising therefrom:
ART. 1174. Except in cases expressly specified by the law, or when it is otherwise declared by stipulation, or
when the nature of the obligation requires the assumption of risk, no person shall be responsible for those
events which could not be foreseen, or which though foreseen, were inevitable.
In order, to be considered a fortuitous event, however, (1) the cause of the unforeseen and unexpected
occurrence, or the failure of the debtor to comply with his obligation, must be independent of human will;
(2) it must be impossible to foresee the event which constitute the caso fortuito, or if it can be foreseen it
must be impossible to avoid; (3) the occurrence must be such as to render it impossible for the debtor to
fulfill his obligation in any manner; and (4) the obligor must be free from any participation in the
aggravation of the injury resulting to the creditor.[32]
[T]he principle embodied in the act of God doctrine strictly requires that the act must be occasioned solely
by the violence of nature. Human intervention is to be excluded from creating or entering into the cause of
the mischief. When the effect is found to be in part the result of the participation of man, whether due to
his active intervention or neglect or failure to act, the whole occurrence is then humanized and removed
from the rules applicable to the acts of God.[33]
The appellate court, in affirming the finding of the trial court that human intervention in the form of
contributory negligence by all the defendants resulted to the loss of the cargoes,[34] held that unloading
outside the breakwater, instead of inside the breakwater, while a storm signal was up constitutes
negligence.[35] It thus concluded that the proximate cause of the loss was Black Seas negligence in
deciding to unload the cargoes at an unsafe place and while a typhoon was approaching.[36]
From a review of the records of the case, there is no indication that there was greater risk in loading the
cargoes outside the breakwater. As the defendants proffered, the weather on October 26, 1991 remained
normal with moderate sea condition such that port operations continued and proceeded normally.[37]
The weather data report,[38] furnished and verified by the Chief of the Climate Data Section of PAG-ASA
and marked as a common exhibit of the parties, states that while typhoon signal No. 1 was hoisted over
Metro Manila on October 23-31, 1991, the sea condition at the port of Manila at 5:00 p.m. - 11:00 p.m. of
October 26, 1991 was moderate. It cannot, therefore, be said that the defendants were negligent in not
unloading the cargoes upon the barge on October 26, 1991 inside the breakwater.
That no tugboat towed back the barge to the pier after the cargoes were completely loaded by 12:30 in
the morning[39] is, however, a material fact which the appellate court failed to properly consider and
appreciate[40] the proximate cause of the loss of the cargoes. Had the barge been towed back promptly
to the pier, the deteriorating sea conditions notwithstanding, the loss could have been avoided. But the
barge was left floating in open sea until big waves set in at 5:30 a.m., causing it to sink along with the
cargoes.[41] The loss thus falls outside the act of God doctrine.
The proximate cause of the loss having been determined, who among the parties is/are responsible
therefor?
Contrary to petitioners insistence, this Court, as did the appellate court, finds that petitioner is a common
carrier. For it undertook to transport the cargoes from the shipside of M/V Alexander Saveliev to the
consignees warehouse at Cainta, Rizal. As the appellate court put it, as long as a person or corporation
holds [itself] to the public for the purpose of transporting goods as [a] business, [it] is already considered a
common carrier regardless if [it] owns the vehicle to be used or has to hire one.[42] That petitioner is a
common carrier, the testimony of its own Vice-President and General Manager Noel Aro that part of the
services it offers to its clients as a brokerage firm includes the transportation of cargoes reflects so.
Atty. Jubay: Will you please tell us what [are you] functions x x x as Executive Vice-President and General
Manager of said Company?
Mr. Aro: Well, I oversee the entire operation of the brokerage and transport business of the company. I also
handle the various division heads of the company for operation matters, and all other related functions
that the President may assign to me from time to time, Sir.

Q: Now, in connection [with] your duties and functions as you mentioned, will you please tell the Honorable
Court if you came to know the company by the name Little Giant Steel Pipe Corporation?
A: Yes, Sir. Actually, we are the brokerage firm of that Company.
Q: And since when have you been the brokerage firm of that company, if you can recall?
A: Since 1990, Sir.
Q: Now, you said that you are the brokerage firm of this Company. What work or duty did you perform in
behalf of this company?
A: We handled the releases (sic) of their cargo[es] from the Bureau of Customs. We [are] also in-charged of
the delivery of the goods to their warehouses. We also handled the clearances of their shipment at the
Bureau of Customs, Sir.
xxx
Q: Now, what precisely [was] your agreement with this Little Giant Steel Pipe Corporation with regards to
this shipment? What work did you do with this shipment?
A: We handled the unloading of the cargo[es] from vessel to lighter and then the delivery of [the]
cargo[es] from lighter to BASECO then to the truck and to the warehouse, Sir.
Q: Now, in connection with this work which you are doing, Mr. Witness, you are supposed to perform, what
equipment do (sic) you require or did you use in order to effect this unloading, transfer and delivery to the
warehouse?
A: Actually, we used the barges for the ship side operations, this unloading [from] vessel to lighter, and on
this we hired or we sub-contracted with [T]ransport Ventures, Inc. which [was] in-charged (sic) of the
barges. Also, in BASECO compound we are leasing cranes to have the cargo unloaded from the barge to
trucks, [and] then we used trucks to deliver [the cargoes] to the consignees warehouse, Sir.
Q: And whose trucks do you use from BASECO compound to the consignees warehouse?
A: We utilized of (sic) our own trucks and we have some other contracted trucks, Sir.
xxx
ATTY. JUBAY: Will you please explain to us, to the Honorable Court why is it you have to contract for the
barges of Transport Ventures Incorporated in this particular operation?
A: Firstly, we dont own any barges. That is why we hired the services of another firm whom we know
[al]ready for quite sometime, which is Transport Ventures, Inc. (Emphasis supplied)[43]
It is settled that under a given set of facts, a customs broker may be regarded as a common carrier. Thus,
this Court, in A.F. Sanchez Brokerage, Inc. v. The Honorable Court of Appeals,[44] held:
The appellate court did not err in finding petitioner, a customs broker, to be also a common carrier, as
defined under Article 1732 of the Civil Code, to wit,
Art. 1732. Common carriers are persons, corporations, firms or associations engaged in the business of
carrying or transporting passengers or goods or both, by land, water, or air, for compensation, offering their
services to the public.
xxx
Article 1732 does not distinguish between one whose principal business activity is the carrying of goods and
one who does such carrying only as an ancillary activity. The contention, therefore, of petitioner that it is
not a common carrier but a customs broker whose principal function is to prepare the correct customs
declaration and proper shipping documents as required by law is bereft of merit. It suffices that petitioner
undertakes to deliver the goods for pecuniary consideration.[45]
Transportation Atty. Valencia
I. Concept of common carriers
And in Calvo v. UCPB General Insurance Co. Inc.,[46] this Court held that as the transportation of goods is an
integral part of a customs broker, the customs broker is also a common carrier. For to declare otherwise
would be to deprive those with whom [it] contracts the protection which the law affords them
notwithstanding the fact that the obligation to carry goods for [its] customers, is part and parcel of
petitioners business.[47]
As for petitioners argument that being the agent of Little Giant, any negligence it committed was deemed
the negligence of its principal, it does not persuade.
True, petitioner was the broker-agent of Little Giant in securing the release of the cargoes. In effecting the
transportation of the cargoes from the shipside and into Little Giants warehouse, however, petitioner was
discharging its own personal obligation under a contact of carriage.
Petitioner, which did not have any barge or tugboat, engaged the services of TVI as handler[48] to provide
the barge and the tugboat. In their Service Contract,[49] while Little Giant was named as the consignee,
petitioner did not disclose that it was acting on commission and was chartering the vessel for Little
Giant.[50] Little Giant did not thus automatically become a party to the Service Contract and was not,
therefore, bound by the terms and conditions therein.
Not being a party to the service contract, Little Giant cannot directly sue TVI based thereon but it can
maintain a cause of action for negligence.[51]
In the case of TVI, while it acted as a private carrier for which it was under no duty to observe extraordinary
diligence, it was still required to observe ordinary diligence to ensure the proper and careful handling, care
and discharge of the carried goods.
Thus, Articles 1170 and 1173 of the Civil Code provide:
ART. 1170. Those who in the performance of their obligations are guilty of fraud, negligence, or delay, and
those who in any manner contravene the tenor thereof, are liable for damages.
ART. 1173. The fault or negligence of the obligor consists in the omission of that diligence which is required
by the nature of the obligation and corresponds with the circumstances of the persons, of the time and of
the place. When negligence shows bad faith, the provisions of articles 1171 and 2202, paragraph 2, shall
apply.
If the law or contract does not state the diligence which is to be observed in the performance, that which is
expected of a good father of a family shall be required.
Was the reasonable care and caution which an ordinarily prudent person would have used in the same
situation exercised by TVI?[52]
This Court holds not.
TVIs failure to promptly provide a tugboat did not only increase the risk that might have been reasonably
anticipated during the shipside operation, but was the proximate cause of the loss. A man of ordinary
prudence would not leave a heavily loaded barge floating for a considerable number of hours, at such a
precarious time, and in the open sea, knowing that the barge does not have any power of its own and is
totally defenseless from the ravages of the sea. That it was nighttime and, therefore, the members of the
crew of a tugboat would be charging overtime pay did not excuse TVI from calling for one such tugboat.
As for petitioner, for it to be relieved of liability, it should, following Article 1739 [53] of the Civil Code, prove
that it exercised due diligence to prevent or minimize the loss, before, during and after the occurrence of
the storm in order that it may be exempted from liability for the loss of the goods.
While petitioner sent checkers[54] and a supervisor[55] on board the vessel to counter-check the operations
of TVI, it failed to take all available and reasonable precautions to avoid the loss. After noting that TVI failed
to arrange for the prompt towage of the barge despite the deteriorating sea conditions, it should have
summoned the same or another tugboat to extend help, but it did not.
This Court holds then that petitioner and TVI are solidarily liable[56] for the loss of the cargoes. The following
pronouncement of the Supreme Court is instructive:
 Transportation Atty. Valencia
I. Concept of common carriers

The foundation of LRTAs liability is the contract of carriage and its obligation to indemnify the victim arises
from the breach of that contract by reason of its failure to exercise the high diligence required of the
common carrier. In the discharge of its commitment to ensure the safety of passengers, a carrier may
choose to hire its own employees or avail itself of the services of an outsider or an independent firm to
undertake the task. In either case, the common carrier is not relieved of its responsibilities under the
contract of carriage.

Should Prudent be made likewise liable? If at all, that liability could only be for tort under the provisions of
Article 2176 and related provisions, in conjunction with Article 2180 of the Civil Code. x x x [O]ne might ask
further, how then must the liability of the common carrier, on one hand, and an independent contractor,
on the other hand, be described? It would be solidary. A contractual obligation can be breached by tort
and when the same act or omission causes the injury, one resulting in culpa contractual and the other in
culpa aquiliana, Article 2194 of the Civil Code can well apply. In fine, a liability for tort may arise even
under a contract, where tort is that which breaches the contract. Stated differently, when an act which
constitutes a breach of contract would have itself constituted the source of a quasi-delictual liability had
no contract existed between the parties, the contract can be said to have been breached by tort,
thereby allowing the rules on tort to apply.[57]

As for Black Sea, its duty as a common carrier extended only from the time the goods were surrendered or
unconditionally placed in its possession and received for transportation until they were delivered actually or
constructively to consignee Little Giant.[58]

Parties to a contract of carriage may, however, agree upon a definition of delivery that extends the
services rendered by the carrier. In the case at bar, Bill of Lading No. 2 covering the shipment provides that
delivery be made to the port of discharge or so near thereto as she may safely get, always afloat.[59] The
delivery of the goods to the consignee was not from pier to pier but from the shipside of M/V Alexander
Saveliev and into barges, for which reason the consignee contracted the services of petitioner. Since Black
Sea had constructively delivered the cargoes to Little Giant, through petitioner, it had discharged its
duty.[60]

In fine, no liability may thus attach to Black Sea.

Respecting the award of attorneys fees in an amount over P1,000,000.00 to Industrial Insurance, for lack of
factual and legal basis, this Court sets it aside. While Industrial Insurance was compelled to litigate its rights,
such fact by itself does not justify the award of attorneys fees under Article 2208 of the Civil Code. For no
sufficient showing of bad faith would be reflected in a partys persistence in a case other than an erroneous
conviction of the righteousness of his cause.[61] To award attorneys fees to a party just because the
judgment is rendered in its favor would be tantamount to imposing a premium on ones right to litigate or
seek judicial redress of legitimate grievances.[62]

On the award of adjustment fees: The adjustment fees and expense of divers were incurred by Industrial
Insurance in its voluntary but unsuccessful efforts to locate and retrieve the lost cargo. They do not
constitute actual damages.[63]

As for the court a quos award of interest on the amount claimed, the same calls for modification following
the ruling in Eastern Shipping Lines, Inc. v. Court of Appeals[64] that when the demand cannot be
reasonably established at the time the demand is made, the interest shall begin to run not from the time
the claim is made judicially or extrajudicially but from the date the judgment of the court is made (at which
the time the quantification of damages may be deemed to have been reasonably ascertained).[65]

WHEREFORE, judgment is hereby rendered ordering petitioner Schmitz Transport & Brokerage Corporation,
and Transport Venture Incorporation jointly and severally liable for the amount of P5,246,113.11 with the
MODIFICATION that interest at SIX PERCENT per annum of the amount due should be computed from the
promulgation on November 24, 1997 of the decision of the trial court.

Costs against petitioner.

SO ORDERED.

[G.R. No. 147079. December 21, 2004]
A.F. SANCHEZ BROKERAGE INC., petitioners, vs. THE HON. COURT OF APPEALS and FGU INSURANCE
CORPORATION, respondents.
DECISION
CARPIO MORALES, J.:
Before this Court on a petition for Certiorari is the appellate courts Decision[1] of August 10, 2000 reversing
and setting aside the judgment of Branch 133, Regional Trial Court of Makati City, in Civil Case No. 93-76B
which dismissed the complaint of respondent FGU Insurance Corporation (FGU Insurance) against
petitioner A.F. Sanchez Brokerage, Inc. (Sanchez Brokerage).
On July 8, 1992, Wyeth-Pharma GMBH shipped on board an aircraft of KLM Royal Dutch Airlines at
Dusseldorf, Germany oral contraceptives consisting of 86,800 Blisters Femenal tablets, 14,000 Blisters Nordiol
tablets and 42,000 Blisters Trinordiol tablets for delivery to Manila in favor of the consignee, Wyeth-Suaco
Laboratories, Inc.[2] The Femenal tablets were placed in 124 cartons and the Nordiol tablets were placed in
20 cartons which were packed together in one (1) LD3 aluminum container, while the Trinordial tablets
were packed in two pallets, each of which contained 30 cartons.[3]
Wyeth-Suaco insured the shipment against all risks with FGU Insurance which issued Marine Risk Note No.
4995 pursuant to Marine Open Policy No. 138.[4]
Upon arrival of the shipment on July 11, 1992 at the Ninoy Aquino International Airport (NAIA),[5] it was
discharged without exception[6] and delivered to the warehouse of the Philippine Skylanders, Inc. (PSI)
located also at the NAIA for safekeeping.[7]
In order to secure the release of the cargoes from the PSI and the Bureau of Customs, Wyeth-Suaco
engaged the services of Sanchez Brokerage which had been its licensed broker since 1984.[8] As its customs
broker, Sanchez Brokerage calculates and pays the customs duties, taxes and storage fees for the cargo
and thereafter delivers it to Wyeth-Suaco.[9]
On July 29, 1992, Mitzi Morales and Ernesto Mendoza, representatives of Sanchez Brokerage, paid PSI
storage fee amounting to P8,572.35 a receipt for which, Official Receipt No. 016992,[10] was issued. On the
receipt, another representative of Sanchez Brokerage, M. Sison,[11] acknowledged that he received the
cargoes consisting of three pieces in good condition.[12]
Wyeth-Suaco being a regular importer, the customs examiner did not inspect the cargoes[13] which were
thereupon stripped from the aluminum containers[14] and loaded inside two transport vehicles hired by
Sanchez Brokerage.[15]
Among those who witnessed the release of the cargoes from the PSI warehouse were Ruben Alonso and
Tony Akas,[16] employees of Elite Adjusters and Surveyors Inc. (Elite Surveyors), a marine and cargo surveyor
and insurance claim adjusters firm engaged by Wyeth-Suaco on behalf of FGU Insurance.
Upon instructions of Wyeth-Suaco, the cargoes were delivered to Hizon Laboratories Inc. in Antipolo City for
quality control check.[17] The delivery receipt, bearing No. 07037 dated July 29, 1992, indicated that the
delivery consisted of one container with 144 cartons of Femenal and Nordiol and 1 pallet containing
Trinordiol.[18]
On July 31, 1992, Ronnie Likas, a representative of Wyeth-Suaco, acknowledged the delivery of the cargoes
by affixing his signature on the delivery receipt.[19] Upon inspection, however, he, together with Ruben
Alonzo of Elite Surveyors, discovered that 44 cartons containing Femenal and Nordiol tablets were in bad
order.[20] He thus placed a note above his signature on the delivery receipt stating that 44 cartons of oral
contraceptives were in bad order. The remaining 160 cartons of oral contraceptives were accepted as
complete and in good order.
Ruben Alonzo thus prepared and signed, along with Ronnie Likas, a survey report[21] dated July 31, 1992
stating that 41 cartons of Femenal tablets and 3 cartons of Nordiol tablets were wetted (sic).[22]
Transportation Atty. Valencia
I. Concept of common carriers
The Elite Surveyors later issued Certificate No. CS-0731-1538/92[23] attached to which was an Annexed
Schedule whereon it was indicated that prior to the loading of the cargoes to the brokers trucks at the
NAIA, they were inspected and found to be in apparent good condition.[24] Also noted was that at the time
of delivery to the warehouse of Hizon Laboratories Inc., slight to heavy rains fell, which could account for
the wetting of the 44 cartons of Femenal and Nordiol tablets.[25]
On August 4, 1992, the Hizon Laboratories Inc. issued a Destruction Report[26] confirming that 38 x 700 blister
packs of Femenal tablets, 3 x 700 blister packs of Femenal tablets and 3 x 700 blister packs of Nordiol tablets
were heavily damaged with water and emitted foul smell.
On August 5, 1992, Wyeth-Suaco issued a Notice of Materials Rejection[27] of 38 cartons of Femenal and 3
cartons of Nordiol on the ground that they were delivered to Hizon Laboratories with heavy water
damaged (sic) causing the cartons to sagged (sic) emitting a foul order and easily attracted flies.[28]
Wyeth-Suaco later demanded, by letter[29] of August 25, 1992, from Sanchez Brokerage the payment
of P191,384.25 representing the value of its loss arising from the damaged tablets.
As the Sanchez Brokerage refused to heed the demand, Wyeth-Suaco filed an insurance claim against
FGU Insurance which paid Wyeth-Suaco the amount of P181,431.49 in settlement of its claim under Marine
Risk Note Number 4995.
Wyeth-Suaco thus issued Subrogation Receipt[30] in favor of FGU Insurance.
On demand by FGU Insurance for payment of the amount of P181,431.49 it paid Wyeth-Suaco, Sanchez
Brokerage, by letter[31] of January 7, 1993, disclaimed liability for the damaged goods, positing that the
damage was due to improper and insufficient export packaging; that when the sealed containers were
opened outside the PSI warehouse, it was discovered that some of the loose cartons were
wet,[32] prompting its (Sanchez Brokerages) representative Morales to inform the Import-Export Assistant of
Wyeth-Suaco, Ramir Calicdan, about the condition of the cargoes but that the latter advised to still deliver
them to Hizon Laboratories where an adjuster would assess the damage.[33]
Hence, the filing by FGU Insurance of a complaint for damages before the Regional Trial Court of Makati
City against the Sanchez Brokerage.
The trial court, by Decision[34] of July 29, 1996, dismissed the complaint, holding that the Survey Report
prepared by the Elite Surveyors is bereft of any evidentiary support and a mere product of pure
guesswork.[35]
On appeal, the appellate court reversed the decision of the trial court, it holding that the Sanchez
Brokerage engaged not only in the business of customs brokerage but also in the transportation and
delivery of the cargo of its clients, hence, a common carrier within the context of Article 1732 of the New
Civil Code.[36]
Noting that Wyeth-Suaco adduced evidence that the cargoes were delivered to petitioner in good order
and condition but were in a damaged state when delivered to Wyeth-Suaco, the appellate court held
that Sanchez Brokerage is presumed negligent and upon it rested the burden of proving that it exercised
extraordinary negligence not only in instances when negligence is directly proven but also in those cases
when the cause of the damage is not known or unknown.[37]
The appellate court thus disposed:
IN THE LIGHT OF ALL THE FOREGOING, the appeal of the Appellant is GRANTED. The Decision of the Court a
quo is REVERSED. Another Decision is hereby rendered in favor of the Appellant and against the Appellee
as follows:
1. The Appellee is hereby ordered to pay the Appellant the principal amount of P181, 431.49, with interest
thereupon at the rate of 6% per annum, from the date of the Decision of the Court, until the said amount is
paid in full;
2. The Appellee is hereby ordered to pay to the Appellant the amount of P20,000.00 as and by way of
attorneys fees; and

3. The counterclaims of the Appellee are DISMISSED.[38]
Sanchez Brokerages Motion for Reconsideration having been denied by the appellate courts Resolution of
December 8, 2000 which was received by petitioner on January 5, 2001, it comes to this Court on petition
for certiorari filed on March 6, 2001.
In the main, petitioner asserts that the appellate court committed grave and reversible error tantamount to
abuse of discretion when it found petitioner a common carrier within the context of Article 1732 of the New
Civil Code.
Respondent FGU Insurance avers in its Comment that the proper course of action which petitioner should
have taken was to file a petition for review on certiorari since the sole office of a writ of certiorari is the
correction of errors of jurisdiction including the commission of grave abuse of discretion amounting to lack
or excess of jurisdiction and does not include correction of the appellate courts evaluation of the evidence
and factual findings thereon.
On the merits, respondent FGU Insurance contends that petitioner, as a common carrier, failed to
overcome the presumption of negligence, it being documented that petitioner withdrew from the
warehouse of PSI the subject shipment entirely in good order and condition.[39]
The petition fails.
Rule 45 is clear that decisions, final orders or resolutions of the Court of Appeals in any case, i.e., regardless
of the nature of the action or proceedings involved, may be appealed to this Court by filing a petition for
review, which would be but a continuation of the appellate process over the original case.[40]
The Resolution of the Court of Appeals dated December 8, 2000 denying the motion for reconsideration of
its Decision of August 10, 2000 was received by petitioner on January 5, 2001. Since petitioner failed to
appeal within 15 days or on or before January 20, 2001, the appellate courts decision had become final
and executory. The filing by petitioner of a petition for certiorari on March 6, 2001 cannot serve as a
substitute for the lost remedy of appeal.
In another vein, the rule is well settled that in a petition for certiorari, the petitioner must prove not merely
reversible error but also grave abuse of discretion amounting to lack or excess of jurisdiction.
Petitioner alleges that the appellate court erred in reversing and setting aside the decision of the trial court
based on its finding that petitioner is liable for the damage to the cargo as a common carrier. What
petitioner is ascribing is an error of judgment, not of jurisdiction, which is properly the subject of an ordinary
appeal.
Where the issue or question involves or affects the wisdom or legal soundness of the decision not the
jurisdiction of the court to render said decision the same is beyond the province of a petition
for certiorari.[41] The supervisory jurisdiction of this Court to issue a cert writ cannot be exercised in order to
review the judgment of lower courts as to its intrinsic correctness, either upon the law or the facts of the
case.[42]
Procedural technicalities aside, the petition still fails.
The appellate court did not err in finding petitioner, a customs broker, to be also a common carrier, as
defined under Article 1732 of the Civil Code, to wit:
Art. 1732. Common carriers are persons, corporations, firms or associations engaged in the business of
carrying or transporting passengers or goods or both, by land, water, or air, for compensation, offering their
services to the public.
Anacleto F. Sanchez, Jr., the Manager and Principal Broker of Sanchez Brokerage, himself testified that the
services the firm offers include the delivery of goods to the warehouse of the consignee or importer.
ATTY. FLORES:
Q: What are the functions of these license brokers, license customs broker?
WITNESS:
Transportation Atty. Valencia
I. Concept of common carriers
As customs broker, we calculate the taxes that has to be paid in cargos, and those upon approval of the
importer, we prepare the entry together for processing and claims from customs and finally deliver the
goods to the warehouse of the importer.[43]
Article 1732 does not distinguish between one whose principal business activity is the carrying of goods and
one who does such carrying only as an ancillary activity.[44] The contention, therefore, of petitioner that it is
not a common carrier but a customs broker whose principal function is to prepare the correct customs
declaration and proper shipping documents as required by law is bereft of merit. It suffices that petitioner
undertakes to deliver the goods for pecuniary consideration.
In this light, petitioner as a common carrier is mandated to observe, under Article 1733[45] of the Civil Code,
extraordinary diligence in the vigilance over the goods it transports according to all the circumstances of
each case. In the event that the goods are lost, destroyed or deteriorated, it is presumed to have been at
fault or to have acted negligently, unless it proves that it observed extraordinary diligence.[46]
The concept of extra-ordinary diligence was explained in Compania Maritima v. Court of Appeals:[47]
The extraordinary diligence in the vigilance over the goods tendered for shipment requires the common
carrier to know and to follow the required precaution for avoiding damage to, or destruction of the goods
entrusted to it for sale, carriage and delivery. It requires common carriers to render service with the greatest
skill and foresight and to use all reasonable means to ascertain the nature and characteristics of goods
tendered for shipment, and to exercise due care in the handling and stowage, including such methods as
their nature requires.[48]
In the case at bar, it was established that petitioner received the cargoes from the PSI warehouse in NAIA in
good order and condition;[49] and that upon delivery by petitioner to Hizon Laboratories Inc., some of the
cargoes were found to be in bad order, as noted in the Delivery Receipt[50] issued by petitioner, and as
indicated in the Survey Report of Elite Surveyors[51]and the Destruction Report of Hizon Laboratories, Inc.[52]
In an attempt to free itself from responsibility for the damage to the goods, petitioner posits that they were
damaged due to the fault or negligence of the shipper for failing to properly pack them and to the
inherent characteristics of the goods[53]; and that it should not be faulted for following the instructions of
Calicdan of Wyeth-Suaco to proceed with the delivery despite information conveyed to the latter that
some of the cartons, on examination outside the PSI warehouse, were found to be wet.[54]
While paragraph No. 4 of Article 1734[55] of the Civil Code exempts a common carrier from liability if the loss
or damage is due to the character of the goods or defects in the packing or in the containers, the rule is
that if the improper packing is known to the carrier or his employees or is apparent upon ordinary
observation, but he nevertheless accepts the same without protest or exception notwithstanding such
condition, he is not relieved of liability for the resulting damage.[56]
If the claim of petitioner that some of the cartons were already damaged upon delivery to it were true,
then it should naturally have received the cargo under protest or with reservations duly noted on the
receipt issued by PSI. But it made no such protest or reservation.[57]
Moreover, as observed by the appellate court, if indeed petitioners employees only examined the cargoes
outside the PSI warehouse and found some to be wet, they would certainly have gone back to PSI, showed
to the warehouseman the damage, and demanded then and there for Bad Order documents or a
certification confirming the damage.[58] Or, petitioner would have presented, as witness, the employees of
the PSI from whom Morales and Domingo took delivery of the cargo to prove that, indeed, part of the
cargoes was already damaged when the container was allegedly opened outside the warehouse.[59]
Petitioner goes on to posit that contrary to the report of Elite Surveyors, no rain fell that day. Instead, it
asserts that some of the cargoes were already wet on delivery by PSI outside the PSI warehouse but such
notwithstanding Calicdan directed Morales to proceed with the delivery to Hizon Laboratories, Inc.
While Calicdan testified that he received the purported telephone call of Morales on July 29, 1992, he
failed to specifically declare what time he received the call. As to whether the call was made at the PSI
warehouse when the shipment was stripped from the airport containers, or when the cargoes were already
in transit to Antipolo, it is not determinable. Aside from that phone call, petitioner admitted that it had no
 Transportation Atty. Valencia
I. Concept of common carriers

documentary evidence to prove that at the time it received the cargoes, a part of it was wet, damaged or
in bad condition.[60]

The 4-page weather data furnished by PAGASA[61] on request of Sanchez Brokerage hardly impresses, no
witness having identified it and interpreted the technical terms thereof.

The possibility on the other hand that, as found by Hizon Laboratories, Inc., the oral contraceptives were
damaged by rainwater while in transit to Antipolo City is more likely then. Sanchez himself testified that in
the past, there was a similar instance when the shipment of Wyeth-Suaco was also found to be wet by rain.

ATTY. FLORES:

Q: Was there any instance that a shipment of this nature, oral contraceptives, that arrived at the NAIA were
damaged and claimed by the Wyeth-Suaco without any question?

WITNESS:

A: Yes sir, there was an instance that one cartoon (sic) were wetted (sic) but Wyeth-Suaco did not claim
anything against us.

ATTY. FLORES:
Q: HOW IS IT?

WITNESS:

A: We experienced, there was a time that we experienced that there was a cartoon (sic) wetted (sic) up to
the bottom are wet specially during rainy season.[62]

Since petitioner received all the cargoes in good order and condition at the time they were turned over by
the PSI warehouseman, and upon their delivery to Hizon Laboratories, Inc. a portion thereof was found to
be in bad order, it was incumbent on petitioner to prove that it exercised extraordinary diligence in the
carriage of the goods. It did not, however. Hence, its presumed negligence under Article 1735 of the Civil
Code remains unrebutted.

WHEREFORE, the August 10, 2000 Decision of the Court of Appeals is hereby AFFIRMED.

Costs against petitioner.

SO ORDERED.

LOADSTAR SHIPPING CO., INC., G.R. No. 157481
Petitioner,
Present:
Quisumbing, J.,
- versus - (Chairman),
Carpio,
Carpio Morales, and
Tinga, JJ.
PIONEER ASIA INSURANCE CORP., Promulgated:
Respondent.
January 24, 2006
x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x
DECISION
QUISUMBING, J.:
For review on certiorari are (1) the Decision[1] dated October 15, 2002 and (2) the Resolution[2] dated
February 27, 2003, of the Court of Appeals in CA-G.R. CV No. 40999, which affirmed with modification the
Decision[3] dated February 15, 1993 of the Regional Trial Court of Manila, Branch 8 in Civil Case No. 86-
37957.
The pertinent facts are as follows:
Petitioner Loadstar Shipping Co., Inc. (Loadstar for brevity) is the registered owner and operator of the
vessel M/V Weasel. It holds office at 1294 Romualdez St., Paco, Manila.
On June 6, 1984, Loadstar entered into a voyage-charter with Northern Mindanao Transport Company, Inc.
for the carriage of 65,000 bags of cement from Iligan City to Manila. The shipper was Iligan Cement
Corporation, while the consignee in Manila was Market Developers, Inc.
On June 24, 1984, 67,500 bags of cement were loaded on board M/V Weasel and stowed in the cargo
holds for delivery to the consignee. The shipment was covered by petitioners Bill of Lading[4] dated June 23,
1984.
Prior to the voyage, the consignee insured the shipment of cement with respondent Pioneer Asia Insurance
Corporation for P1,400,000, for which respondent issued Marine Open Policy No. MOP-006
dated September 17, 1980, covering all shipments made on or after September 30, 1980.[5]
At 12:50 in the afternoon of June 24, 1984, M/V Weasel left Iligan City for Manila in good weather. However,
at 4:31 in the morning of June 25, 1984, Captain Vicente C. Montera, master of M/V Weasel, ordered the
vessel to be forced aground. Consequently, the entire shipment of cement was good as gone due to
exposure to sea water. Petitioner thus failed to deliver the goods to the consignee in Manila.
The consignee demanded from petitioner full reimbursement of the cost of the lost shipment. Petitioner,
however, refused to reimburse the consignee despite repeated demands.
Transportation Atty. Valencia
I. Concept of common carriers
Nonetheless, on March 11, 1985, respondent insurance company paid the consignee P1,400,000 plus an
additional amount of P500,000, the value of the lost shipment of cement. In return, the consignee executed
a Loss and Subrogation Receipt in favor of respondent concerning the latters subrogation rights against
petitioner.
Hence, on October 15, 1986, respondent filed a complaint docketed as Civil Case No. 86-37957, against
petitioner with the Regional Trial Court of Manila, Branch 8. It alleged that: (1) the M/V Weasel was not
seaworthy at the commencement of the voyage; (2) the weather and sea conditions then prevailing were
usual and expected for that time of the year and as such, was an ordinary peril of the voyage for which
the M/V Weasel should have been normally able to cope with; and (3) petitioner was negligent in the
selection and supervision of its agents and employees then manning the M/V Weasel.
In its Answer, petitioner alleged that no fault nor negligence could be attributed to it because it exercised
due diligence to make the ship seaworthy, as well as properly manned and equipped. Petitioner insisted
that the failure to deliver the subject cargo to the consignee was due to force majeure. Petitioner claimed
it could not be held liable for an act or omission not directly attributable to it.
On February 15, 1993, the RTC rendered a Decision in favor of respondent, to wit:
WHEREFORE, in view of the foregoing, judgment is hereby rendered in favor of plaintiff and against
defendant Loadstar Shipping Co., Inc. ordering the latter to pay as follows:
1. To pay plaintiff the sum of P1,900,000.00 with legal rate of interest per annum from date of complaint
until fully paid;
2. To pay the sum equal to 25% of the claim as and for attorneys fees and litigation expenses; and,
3. To pay the costs of suit.
IT IS SO ORDERED.[6]
The RTC reasoned that petitioner, as a common carrier, bears the burden of proving that it exercised
extraordinary diligence in its vigilance over the goods it transported. The trial court explained that in case of
loss or destruction of the goods, a statutory presumption arises that the common carrier was negligent
unless it could prove that it had observed extraordinary diligence.
Petitioners defense of force majeure was found bereft of factual basis. The RTC called attention to the
PAG-ASA report that at the time of the incident, tropical storm Asiang had moved away from
the Philippines. Further, records showed that the sea and weather conditions in the area of Hinubaan,
Negros Occidental from 8:00 p.m. of June 24, 1984 to 8:00 a.m. the next day were slight and smooth. Thus,
the trial court concluded that the cause of the loss was not tropical storm Asiang or any other force
majeure, but gross negligence of petitioner.
Petitioner appealed to the Court of Appeals.
In its Decision dated October 15, 2002, the Court of Appeals affirmed the RTC Decision with modification
that Loadstar shall only pay the sum of 10% of the total claim for attorneys fees and litigation expenses. It
ruled,
WHEREFORE, premises considered, the Decision dated February 15, 1993, of the Regional Trial Court of
Manila, National Capital Judicial Region, Branch 8, in Civil Case No. 86-37957 is hereby AFFIRMED with the
MODIFICATION that the appellant shall only pay the sum of 10% of the total claim as and for attorneys fees
and litigation expenses. Costs against the appellant.
SO ORDERED.[7]
Petitioners Motion for Reconsideration was denied.[8]
The instant petition is anchored now on the following assignments of error:
I

THE HONORABLE COURT OF APPEALS ERRED IN HOLDING THAT PETITIONER IS A COMMON CARRIER UNDER
ARTICLE 1732 OF THE CIVIL CODE.
II
ASSUMING ARGUENDO THAT PETITIONER IS A COMMON CARRIER, THE HONORABLE COURT OF APPEALS
ERRED IN HOLDING THAT THE PROXIMATE CAUSE OF THE LOSS OF CARGO WAS NOT A FORTUITOUS EVENT BUT
WAS ALLEGEDLY DUE TO THE FAILURE OF PETITIONER TO EXERCISE EXTRAORDINARY DILIGENCE.
III
THE HONORABLE COURT OF APPEALS ERRED IN AFFIRMING THE AWARD BY THE TRIAL COURT OF ATTORNEYS
FEES AND LITIGATION EXPENSES IN FAVOR OF HEREIN RESPONDENT.[9]
On the first and second issues, petitioner contends that at the time of the voyage the carriers voyage-
charter with the shipper converted it into a private carrier. Thus, the presumption of negligence against
common carriers could not apply. Petitioner further avers that the stipulation in the voyage-charter holding
it free from liability is valid and binds the respondent. In any event, petitioner insists that it had exercised
extraordinary diligence and that the proximate cause of the loss of the cargo was a fortuitous event.
With regard to the third issue, petitioner points out that the award of attorneys fees and litigation expenses
appeared only in the dispositive portion of the RTC Decision with nary a justification. Petitioner maintains
that the Court of Appeals thus erred in affirming the award.
For its part, respondent dismisses as factual issues the inquiry on (1) whether the loss of the cargo was due
to force majeure or due to petitioners failure to exercise extraordinary diligence; and (2) whether
respondent is entitled to recover attorneys fees and expenses of litigation.
Respondent further counters that the Court of Appeals was correct when it held that petitioner was a
common carrier despite the charter of the whole vessel, since the charter was limited to the ship only.
Prefatorily, we stress that the finding of fact by the trial court, when affirmed by the Court of Appeals, is not
reviewable by this Court in a petition for review on certiorari. However, the conclusions derived from such
factual finding are not necessarily pure issues of fact when they are inextricably intertwined with the
determination of a legal issue. In such instances, the conclusions made may be raised in a petition for
review before this Court.[10]
The threshold issues in this case are: (1) Given the circumstances of this case, is petitioner a common or a
private carrier? and (2) In either case, did petitioner exercise the required diligence i.e., the extraordinary
diligence of a common carrier or the ordinary diligence of a private carrier?
Article 1732 of the Civil Code defines a common carrier as follows:
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.
Petitioner is a corporation engaged in the business of transporting cargo by water and for compensation,
offering its services indiscriminately to the public. Thus, without doubt, it is a common carrier. However,
petitioner entered into a voyage-charter with the Northern Mindanao Transport Company, Inc. Now, had
the voyage-charter converted petitioner into a private carrier?
We think not. The voyage-charter agreement between petitioner and Northern Mindanao Transport
Company, Inc. did not in any way convert the common carrier into a private carrier. We have already
resolved this issue with finality in Planters Products, Inc. v. Court of Appeals[11] where we ruled that:
It is therefore imperative that a public carrier shall remain as such, notwithstanding the charter of the whole
or portion of a vessel by one or more persons, provided the charter is limited to the ship only, as in the case
of a time-charter or voyage-charter. It is only when the charter includes both the vessel and its crew, as in a
bareboat or demise that a common carrier becomes private, at least insofar as the particular voyage
covering the charter-party is concerned. Indubitably, a shipowner in a time or voyage charter retains
Transportation Atty. Valencia
I. Concept of common carriers
possession and control of the ship, although her holds may, for the moment, be the property of the
charterer.[12]
Conformably, petitioner remains a common carrier notwithstanding the existence of the charter
agreement with the Northern Mindanao Transport Company, Inc. since the said charter is limited to the ship
only and does not involve both the vessel and its crew. As elucidated in Planters Products, its charter is only
a voyage-charter, not a bareboat charter.
As a common carrier, petitioner is required to observe extraordinary diligence in the vigilance over the
goods it transports.[13] When the goods placed in its care are lost, petitioner is presumed to have been at
fault or to have acted negligently. Petitioner therefore has the burden of proving that it observed
extraordinary diligence in order to avoid responsibility for the lost cargo.[14]
In Compania Maritima v. Court of Appeals,[15] we said:
it is incumbent upon the common carrier to prove that the loss, deterioration or destruction was due to
accident or some other circumstances inconsistent with its liability.
...
The extraordinary diligence in the vigilance over the goods tendered for shipment requires the common
carrier to know and to follow the required precaution for avoiding damage to, or destruction of the goods
entrusted to it for safe carriage and delivery. It requires common carriers to render service with the greatest
skill and foresight and to use all reasonable means to ascertain the nature and characteristics of goods
tendered for shipment, and to exercise due care in the handling and stowage, including such methods as
their nature requires.[16]
Article 1734 enumerates the instances when a carrier might be exempt from liability for the loss of the
goods. These are:
(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.[17]
Petitioner claims that the loss of the goods was due to a fortuitous event under paragraph 1. Yet, its claim is
not substantiated. On the contrary, we find supported by evidence on record the conclusion of the trial
court and the Court of Appeals that the loss of the entire shipment of cement was due to the gross
negligence of petitioner.
Records show that in the evening of June 24, 1984, the sea and weather conditions in the vicinity of Negros
Occidental were calm. The records reveal that petitioner took a shortcut route, instead of the usual route,
which exposed the voyage to unexpected hazard. Petitioner has only itself to blame for its misjudgment.
Petitioner heavily relies on Home Insurance Co. v. American Steamship Agencies, Inc.[18] and Valenzuela
Hardwood and Industrial Supply, Inc. v. Court of Appeals.[19]The said cases involved a private carrier, not a
common carrier. Moreover, the issue in both cases is not the effect of a voyage-charter on a common
carrier, but the validity of a stipulation absolving the private carrier from liability in case of loss of the cargo
attributable to the negligence of the private carrier.
Lastly, on the third issue, we find consistent with law and prevailing jurisprudence the Court of Appeals
award of attorneys fees and expenses of litigation equivalent to ten percent (10%) of the total claim. The
contract between the parties in this case contained a stipulation that in case of suit, attorneys fees and
expenses of litigation shall be limited to only ten percent (10%) of the total monetary award. Given the
circumstances of this case, we deem the said amount just and equitable.WHEREFORE, the petition
is DENIED. The assailed Decision dated October 15, 2002 and the Resolution dated February 27, 2003, of the
Court of Appeals in CA-G.R. CV No. 40999, are AFFIRMED.Costs against petitioner.SO ORDERED

G.R. No. L-69044 May 29, 1987
EASTERN SHIPPING LINES, INC., petitioner,
vs.
INTERMEDIATE APPELLATE COURT and DEVELOPMENT INSURANCE & SURETY CORPORATION, respondents.
No. 71478 May 29, 1987
EASTERN SHIPPING LINES, INC., petitioner,
vs.
THE NISSHIN FIRE AND MARINE INSURANCE CO., and DOWA FIRE & MARINE INSURANCE CO.,
LTD., respondents.
MELENCIO-HERRERA, J.:
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.
Transportation Atty. Valencia
I. Concept of common carriers
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. 8Common 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.
Transportation Atty. Valencia
I. Concept of common carriers
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 carrier- furnished 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.
Transportation Atty. Valencia
I. Concept of common carriers
(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
 Transportation Atty. Valencia
I. Concept of common carriers

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.

[G.R. No. 104685. March 14, 1996]
SABENA BELGIAN WORLD AIRLINES, petitioner, vs. HON. COURT OF APPEALS and MA. PAULA SAN
AGUSTIN, respondents.
DECISION
VITUG, J.:
The appeal before the Court involves the issue of an airlines liability for lost luggage. The petition for review
assails the decision of the Court Appeals,[1] dated 27 February 1992, affirming an award of damages made
by the trial court in a complaint filed by private respondent against petitioner.
The factual background of the case, narrated by the trial court and reproduced at length by the appellate
court, is hereunder quoted:
On August 21, 1987, plaintiff was a passenger on board Flight SN 284 of defendant airline originating from
Casablanca to Brussels, Belgium on her way back to Manila. Plaintiff checked in her luggage which
contained her valuables, namely: jewelries valued at $2,350.00; clothes $1,500.00; shoes/bag $150;
accessories $75; luggage itself $10.00; or a total of $4,265.00, for which she was issued Tag No. 71423. She
stayed overnight in Brussels and her luggage was left on board Flight SN 284.
Plaintiff arrived at Manila International Airport on September 2, 1987 and immediately submitted her Tag
No. 71423 to facilitate the release of her luggage hut the luggage was missing. She was advised to
accomplish and submit a property Irregularity Report which she submitted and filed on the same day.
She followed up her claim on September 14, 1987 but the luggage remained to be missing.
On September 15, 1987, she filed her formal complaint with the office of Ferge Massed, defendants Local
Manager, demanding immediate attention (Exh. A).
On September 30, 1987, on the occasion of plaintiffs following up of her luggage claim, she was furnished
copies of defendants telexes with an information that the Brussels Office of defendant found the luggage
and that they have broken the locks for identification (Exhibit B). Plaintiff was assured by the defendant that
it has notified its Manila Office that the luggage will be shipped to Manila on October 27, 1987. But
unfortunately plaintiff was informed that the luggage was lost for the second time (Exhibits C and C-1).
At the time of the filling of the complaint, the luggage with its content has not been found.
Plaintiff demanded from the defendant the money value of the luggage and its contents amounting to
$4,265.00 or its exchange value, but defendant refused to settle the claim.
Defendant asserts in its Answer and its evidence tend to show that while it admits that the plaintiff was a
passenger on board Flight No. SN 284 with a piece of checked in luggage bearing Tag No. 71423, the loss
of the luggage was due to plaintiffs sole if not contributory negligence; that she did not declare the
valuable items in her checked-in luggage at the flight counter when she checked in for her flight from
Casablanca to Brussels so that either the representative of the defendant at the counter would have
advised her to secure an insurance on the alleged valuable items and required her to pay additional
charges, or would have refused acceptance of her baggage as required by the generally accepted
practices of international carriers; that Section 9(a), Article IX of General Conditions of carriage requiring
passengers to collect their checked baggage at the place of stopover, plaintiff neglected to claim her
baggage at the Brussels Airport; that plaintiff should have retrieved her undeclared valuables from her
baggage at the Brussels Airport since her flight from Brussels to Manila will still have to visit for confirmation
inasmuch as only her flight from Casablanca to Brussels was confirmed; that defendant incorporated in all
Sabena Plane Tickets, including Sabena Ticket No. 082422-72502241 issued to plaintiff in Manila on August
21, 1987, a warning that Items of value should be carried on your person and that some carriers assume no
liability for fragile, valuable or perishable articles and that further information may he obtained from the
carrier for guidance; that granting without conceding that defendant is liable, its liability is limited only to US
$20.00 per kilo due to plaintiffs failure to declare a higher value on the contents of her checked in luggage
and pay additional charges thereon.[2]
Transportation Atty. Valencia
I. Concept of common carriers
The trial court rendered judgment ordering petitioner Sabena Belgian World Airlines to pay private
respondent Ma. Paula San Agustin
(a) x x x US$4,265.00 or its legal exchange in Philippine pesos;
(b) x x x P30,000.00 as moral damages;
(c) x x x P10,000.00 as exemplary damages;
(d) x x x P10,000.00 attorneys fees; and
(e) (t)he costs of the suit.[3]
Sabena appealed the decision of the Regional Trial Court to the Court of Appeals. The appellate court, in
its decision of 27 February 1992, affirmed in toto the trial courts judgment.
Petitioner airline company, in contending that the alleged negligence of private respondent should be
considered the primary cause for the loss of her luggage, avers that, despite her awareness that the flight
ticket had been confirmed only for Casablanca and Brussels, and that her flight from Brussels to Manila had
yet to be confirmed, she did not retrieve the luggage upon arrival in Brussels. Petitioner insists that private
respondent, being a seasoned international traveler, must have likewise been familiar with the standard
provisions contained in her flight ticket that items of value are required to be hand-carried by the
passenger and that the liability of the airline or loss, delay or damage to baggage would be limited, in any
event, to only US$20.00 per kilo unless a higher value is declared in advance and corresponding additional
charges are paid thereon. At the Casablanca International Airport, private respondent, in checking in her
luggage, evidently did not declare its contents or value. Petitioner cites Section 5(c), Article IX, of the
General Conditions of Carriage, signed at Warsaw, Poland, on 02 October 1929, as amended by the
Hague Protocol of 1955, generally observed by International carriers, stating, among other things, that:
Passengers shall not include in his checked baggage, and the carrier may refuse to carry as checked
baggage, fragile or perishable articles, money, jewelry, precious metals, negotiable papers, securities or
other valuables.[4]
Fault or negligence consists in the omission of that diligence which is demanded by the nature of an
obligation and corresponds with the circumstances of the person, of the time, and of the place. When the
source of an obligation is derived from a contract, the mere breach or non-fulfillment of the prestation
gives rise to the presumption of fault on the part of the obligor.This rule is not different in the case of
common carriers in the carriage of goods which, indeed, are bound to observe not just the due diligence
of a good father of a family but that of extraordinary care in the vigilance over the goods. The appellate
court has aptly observed:
x x x Art. 1733 of the [Civil] Code provides that from the very nature of their business and by reasons of
public policy, common carriers are bound to observe extraordinary diligence in the vigilance over the
goods transported by them. This extraordinary responsibility, according to Art. 1736, lasts from the time the
goods are unconditionally placed in the possession of and received by the carrier until they are delivered
actually or constructively to the consignee or person who has the right to receive them. Art. 1737 states that
the common carriers duty to observe extraordinary diligence in the vigilance over the goods transported
by them remains in full force and effect even when they are temporarily unloaded or stored in transit. And
Art. 1735 establishes the presumption that 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 had
observed extraordinary diligence as required in Article 1733.
The only exceptions to the foregoing extraordinary responsibility of the common carrier is when the loss,
destruction, or deterioration of the goods is due to any of the following causes:
(1) Flood, storm, earthquake, lightning, or other natural disaster or calamity;
(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;
 Transportation Atty. Valencia
I. Concept of common carriers

(5) Order or act of competent public authority. some particular or exceptional type of damage. Otherwise, an air carrier would be exempt from any
liability for damages in the event of its absolute refusal, in bad faith, to comply with a contract of carriage,
Not one of the above excepted causes obtains in this case.[5] which is absurd. Nor may it for a moment be supposed that if a member of the aircraft complement should
The above rules remain basically unchanged even when the contract is breached by tort[6] although inflict some physical injury on a passenger, or maliciously destroy or damage the latters property, the
noncontradictory principles on quasi-delict may then be assimilated as also forming part of the governing Convention might successfully be pleaded as the sole gauge to determine the carriers liability to the
law. Petitioner is not thus entirely off track when it has likewise raised in its defense the tort doctrine of passenger. Neither may the Convention be invoked to justify the disregard of some extraordinary sort of
proximate cause. Unfortunately for petitioner, however, the doctrine cannot, in this particular instance, damage resulting to a passenger and preclude recovery therefor beyond the limits set by said
support its case. Proximate cause is that which, in natural and continuous sequence, unbroken by any Convention. It is in this sense that the Convention has been applied, or ignored, depending on the peculiar
efficient intervening cause, produces injury and without which the result would not have occurred. The facts presented by each case.
exemplification by the Court in one case[7] is simple and explicit; viz: The Court thus sees no error in the preponderant application to the instant case by the appellate court, as
(T)he proximate legal cause is that acting first and producing the injury, either immediately or by setting well as by the trial court, of the usual rules on the extent of recoverable damages beyond the Warsaw
other events in motion, all constituting a natural and Continuous chain of events, each having a close limitations. Under domestic law and jurisprudence (the Philippines being the country of destination), the
causal Connection with its immediate predecessor, the final event in the chain immediately affecting the attendance of gross negligence (given the equivalent of fraud or bad faith) holds the common carrier
injury as a natural and probable result of the cause which first acted, under such circumstances that the liable for all damages which can be reasonably attributed, although unforeseen, to the non-performance
person responsible for the first event should, as an ordinarily prudent, and intelligent person, have of the obligation,[9] including moral and exemplary damages.[10]
reasonable ground to expect at the moment of his act or default that an injury to some person might WHEREFORE, the decision appealed from is AFFIRMED. Costs against petitioner.
probably result therefrom.
SO ORDERED.
It remained undisputed that private respondents luggage was lost while it was in the custody of
petitioner. It was supposed to arrive on the same flight that private respondent took in returning to Manila
on 02 September 1987. When she discovered that the luggage was missing, she promptly accomplished
and filed a Property Irregularity Report. She followed up her claim on 14 September 1987, and filed, on the
following day, a formal letter-complaint with petitioner. She felt relieved when, on 23 October 1987, she
was advised that her luggage had finally been found, with its contents intact when examined, and that she
could expect it to arrive on 27 October 1987. She then waited anxiously only to be told later that her
luggage had been lost for the second time. Thus, the appellate court, given all the facts before it,
sustained the trial court in finding petitioner ultimately guilty of gross negligence in the handling of private
respondents luggage. The loss of said baggage not only once by twice, said the appellate court,
underscores the wanton negligence and lack of care on the part of the carrier.
The above findings, which certainly cannot be said to be without basis, foreclose whatever rights petitioner
might have had to the possible limitation of liabilities enjoyed by international air carriers under the Warsaw
Convention (Convention for the Unification of Certain Rules Relating to International Carriage by Air, as
amended by the Hague Protocol of 1955, the Montreal Agreement of 1966, the Guatemala Protocol of
1971 and the Montreal Protocols of 1975). In Alitalia vs. Intermediate Appellate Court,[8] now Chief Justice
Andres R. Narvasa, speaking for the Court, has explained it well; he said:

The Warsaw Convention however denies to the carrier availment of the provisions which exclude or limit his
liability, if the damage is caused by his wilful misconduct or by such default on his part as, in accordance
with the law of the court seized of the case, is considered to be equivalent to wilful misconduct, or if the
damage is (similarly) caused x x x by any agent of the carrier acting within the scope of his employment.
The Hague Protocol amended the Warsaw Convention by removing the provision that if the airline took all
necessary steps to avoid the damage, it could exculpate itself completely, and declaring the stated limits
of liability not applicable if it is proved that the damage resulted from an act or omission of the carrier, its
servants or agents, done with intent to cause damage or recklessly and with knowledge that damage
would probably result. The same deletion was effected by the Montreal Agreement of 1966, with the result
that a passenger could recover unlimited damages upon proof of wilful misconduct.

The Convention does not thus operate as an exclusive enumeration of the instances of an airlines liability, or
as an absolute limit of the extent of that liability. Such a proposition is not borne out by the language of the
Convention, as this Court has now, and at an earlier time, pointed out. Moreover, slight reflection readily
leads to the conclusion that it should be deemed a limit of liability only in those cases where the cause of
the death or injury to person, or destruction, loss or damage to property or delay in its transport is not
attributable to or attended by any wilful misconduct, bad faith, recklessness or otherwise improper conduct
on the part of any official or employee for which the carrier is responsible, and there is otherwise no special
or extraordinary form of resulting injury. The Contentions provisions, in short, do not regulate or exclude
liability for other breaches of contract by the carrier or misconduct of its officers and employees, or for

[G.R. No. 125817. January 16, 2002]
ABELARDO LIM and ESMADITO GUNNABAN, petitioners, vs. COURT OF APPEALS and DONATO H.
GONZALES, respondents.
DECISION
BELLOSILLO, J.:
When a passenger jeepney covered by a certificate of public convenience is sold to another who
continues to operate it under the same certificate of public convenience under the so-called kabit system,
and in the course thereof the vehicle meets an accident through the fault of another vehicle, may the new
owner sue for damages against the erring vehicle? Otherwise stated, does the new owner have any legal
personality to bring the action, or is he the real party in interest in the suit, despite the fact that he is not the
registered owner under the certificate of public convenience?
Sometime in 1982 private respondent Donato Gonzales purchased an Isuzu passenger jeepney from
Gomercino Vallarta, holder of a certificate of public convenience for the operation of public utility vehicles
plying the Monumento-Bulacan route. While private respondent Gonzales continued offering the jeepney
for public transport services he did not have the registration of the vehicle transferred in his name nor did
he secure for himself a certificate of public convenience for its operation. Thus Vallarta remained on record
as its registered owner and operator.
On 22 July 1990, while the jeepney was running northbound along the North Diversion Road somewhere in
Meycauayan, Bulacan, it collided with a ten-wheeler-truck owned by petitioner Abelardo Lim and driven
by his co-petitioner Esmadito Gunnaban. Gunnaban owned responsibility for the accident, explaining that
while he was traveling towards Manila the truck suddenly lost its brakes. To avoid colliding with another
vehicle, he swerved to the left until he reached the center island. However, as the center island eventually
came to an end, he veered farther to the left until he smashed into a Ferroza automobile, and later, into
private respondent's passenger jeepney driven by one Virgilio Gonzales. The impact caused severe
damage to both the Ferroza and the passenger jeepney and left one (1) passenger dead and many
others wounded.
Petitioner Lim shouldered the costs for hospitalization of the wounded, compensated the heirs of the
deceased passenger, and had the Ferroza restored to good condition. He also negotiated with private
respondent and offered to have the passenger jeepney repaired at his shop. Private respondent however
did not accept the offer so Lim offered him P20,000.00, the assessment of the damage as estimated by his
chief mechanic. Again, petitioner Lim's proposition was rejected; instead, private respondent demanded a
brand-new jeep or the amount of P236,000.00. Lim increased his bid to P40,000.00 but private respondent
was unyielding. Under the circumstances, negotiations had to be abandoned; hence, the filing of the
complaint for damages by private respondent against petitioners.
In his answer Lim denied liability by contending that he exercised due diligence in the selection and
supervision of his employees. He further asserted that as the jeepney was registered in Vallartas name, it
was Vallarta and not private respondent who was the real party in interest.[1] For his part, petitioner
Gunnaban averred that the accident was a fortuitous event which was beyond his control.[2]
Meanwhile, the damaged passenger jeepney was left by the roadside to corrode and decay. Private
respondent explained that although he wanted to take his jeepney home he had no capability, financial
or otherwise, to tow the damaged vehicle.[3]
The main point of contention between the parties related to the amount of damages due private
respondent. Private respondent Gonzales averred that per estimate made by an automobile repair shop
he would have to spend P236,000.00 to restore his jeepney to its original condition.[4] On the other hand,
petitioners insisted that they could have the vehicle repaired for P20,000.00.[5]
On 1 October 1993 the trial court upheld private respondent's claim and awarded him P236,000.00 with
legal interest from 22 July 1990 as compensatory damages and P30,000.00 as attorney's fees. In support of
its decision, the trial court ratiocinated that as vendee and current owner of the passenger jeepney private
respondent stood for all intents and purposes as the real party in interest. Even Vallarta himself supported
Transportation Atty. Valencia
I. Concept of common carriers
private respondent's assertion of interest over the jeepney for, when he was called to testify, he
dispossessed himself of any claim or pretension on the property. Gunnaban was found by the trial court to
have caused the accident since he panicked in the face of an emergency which was rather palpable
from his act of directing his vehicle to a perilous streak down the fast lane of the superhighway then across
the island and ultimately to the opposite lane where it collided with the jeepney.
On the other hand, petitioner Lim's liability for Gunnaban's negligence was premised on his want of
diligence in supervising his employees. It was admitted during trial that Gunnaban doubled as mechanic of
the ill-fated truck despite the fact that he was neither tutored nor trained to handle such task.[6]
Forthwith, petitioners appealed to the Court of Appeals which, on 17 July 1996, affirmed the decision of the
trial court. In upholding the decision of the court a quo the appeals court concluded that while an
operator under the kabit system could not sue without joining the registered owner of the vehicle as his
principal, equity demanded that the present case be made an exception.[7] Hence this petition.
It is petitioners' contention that the Court of Appeals erred in sustaining the decision of the trial court
despite their opposition to the well-established doctrine that an operator of a vehicle continues to be its
operator as long as he remains the operator of record. According to petitioners, to recognize an operator
under the kabit system as the real party in interest and to countenance his claim for damages is utterly
subversive of public policy. Petitioners further contend that inasmuch as the passenger jeepney was
purchased by private respondent for only P30,000.00, an award of P236,000.00 is inconceivably large and
would amount to unjust enrichment.[8]
Petitioners' attempt to illustrate that an affirmance of the appealed decision could be supportive of the
pernicious kabit system does not persuade. Their labored efforts to demonstrate how the questioned rulings
of the courts a quo are diametrically opposed to the policy of the law requiring operators of public utility
vehicles to secure a certificate of public convenience for their operation is quite unavailing.
The kabit system is an arrangement whereby a person who has been granted a certificate of public
convenience allows other persons who own motor vehicles to operate them under his license, sometimes
for a fee or percentage of the earnings.[9] Although the parties to such an agreement are not outrightly
penalized by law, the kabit system is invariably recognized as being contrary to public policy and therefore
void and inexistent under Art. 1409 of the Civil Code.
In the early case of Dizon v. Octavio[10] the Court explained that one of the primary factors considered in
the granting of a certificate of public convenience for the business of public transportation is the financial
capacity of the holder of the license, so that liabilities arising from accidents may be duly
compensated. The kabit system renders illusory such purpose and, worse, may still be availed of by the
grantee to escape civil liability caused by a negligent use of a vehicle owned by another and operated
under his license. If a registered owner is allowed to escape liability by proving who the supposed owner of
the vehicle is, it would be easy for him to transfer the subject vehicle to another who possesses no
property with which to respondfinancially for the damage done. Thus, for the safety of passengers and the
public who may have been wronged and deceived through the baneful kabit system, the registered
owner of the vehicle is not allowed to prove that another person has become the owner so that he may be
thereby relieved of responsibility. Subsequent cases affirm such basic doctrine.[11]
It would seem then that the thrust of the law in enjoining the kabit system is not so much as to penalize the
parties but to identify the person upon whom responsibility may be fixed in case of an accident with the
end view of protecting the riding public. The policy therefore loses its force if the public at large is not
deceived, much less involved.
In the present case it is at once apparent that the evil sought to be prevented in enjoining the kabit system
does not exist. First, neither of the parties to the pernicious kabit system is being held liable for
damages. Second, the case arose from the negligence of another vehicle in using the public road to
whom no representation, or misrepresentation, as regards the ownership and operation of the passenger
jeepney was made and to whom no such representation, or misrepresentation, was necessary. Thus it
cannot be said that private respondent Gonzales and the registered owner of the jeepney were in
estoppel for leading the public to believe that the jeepney belonged to the registered owner. Third, the
riding public was not bothered nor inconvenienced at the very least by the illegal arrangement. On the
 Transportation Atty. Valencia
I. Concept of common carriers

contrary, it was private respondent himself who had been wronged and was seeking compensation for the damages but also the amount thereof; failing in this regard, the amount of damages awarded cannot be
damage done to him. Certainly, it would be the height of inequity to deny him his right. proportionately reduced.

In light of the foregoing, it is evident that private respondent has the right to proceed against petitioners for
the damage caused on his passenger jeepney as well as on his business.Any effort then to frustrate his
claim of damages by the ingenuity with which petitioners framed the issue should be discouraged, if not
repelled.
In awarding damages for tortuous injury, it becomes the sole design of the courts to provide for adequate
compensation by putting the plaintiff in the same financial position he was in prior to the tort. It is a
fundamental principle in the law on damages that a defendant cannot be held liable in damages for
more than the actual loss which he has inflicted and that a plaintiff is entitled to no more than the just and
adequate compensation for the injury suffered. His recovery is, in the absence of circumstances giving rise
to an allowance of punitive damages, limited to a fair compensation for the harm done. The law will not
put him in a position better than where he should be in had not the wrong happened.[12]
WHEREFORE, the questioned Decision awarding private respondent Donato Gonzales P236,000.00 with legal
interest from 22 July 1990 as compensatory damages and P30,000.00 as attorney's fees is MODIFIED. Interest
at the rate of six percent (6%) per annum shall be computed from the time the judgment of the lower court
is made until the finality of this Decision.If the adjudged principal and interest remain unpaid thereafter, the
interest shall be twelve percent (12%) per annum computed from the time judgment becomes final and
executory until it is fully satisfied.
Costs against petitioners.
SO ORDERED.

In the present case, petitioners insist that as the passenger jeepney was purchased in 1982 for
only P30,000.00 to award damages considerably greater than this amount would be improper and
unjustified. Petitioners are at best reminded that indemnification for damages comprehends not only the
value of the loss suffered but also that of the profits which the obligee failed to obtain. In other words,
indemnification for damages is not limited to damnum emergens or actual loss but extends to lucrum
cessans or the amount of profit lost.[13]

Had private respondent's jeepney not met an accident it could reasonably be expected that it would
have continued earning from the business in which it was engaged. Private respondent avers that he
derives an average income of P300.00 per day from his passenger jeepney and this earning was included
in the award of damages made by the trial court and upheld by the appeals court. The award therefore
of P236,000.00 as compensatory damages is not beyond reason nor speculative as it is based on a
reasonable estimate of the total damage suffered by private respondent, i.e. damage wrought upon his
jeepney and the income lost from his transportation business. Petitioners for their part did not offer any
substantive evidence to refute the estimate made by the courts a quo.
However, we are constrained to depart from the conclusion of the lower courts that upon the award of
compensatory damages legal interest should be imposed beginning 22 July 1990, i.e. the date of the
accident. Upon the provisions of Art. 2213 of the Civil Code, interest "cannot be recovered upon
unliquidated claims or damages, except when the demand can be established with reasonable certainty."
It is axiomatic that if the suit were for damages, unliquidated and not known until definitely ascertained,
assessed and determined by the courts after proof, interest at the rate of six percent (6%) per annum
should be from the date the judgment of the court is made (at which time the quantification of damages
may be deemed to be reasonably ascertained).[14]
In this case, the matter was not a liquidated obligation as the assessment of the damage on the vehicle
was heavily debated upon by the parties with private respondent's demand for P236,000.00 being refuted
by petitioners who argue that they could have the vehicle repaired easily for P20,000.00. In fine, the
amount due private respondent was not a liquidated account that was already demandable and
payable.

One last word. We have observed that private respondent left his passenger jeepney by the roadside at
the mercy of the elements. Article 2203 of the Civil Code exhorts parties suffering from loss or injury to
exercise the diligence of a good father of a family to minimize the damages resulting from the act or
omission in question. One who is injured then by the wrongful or negligent act of another should exercise
reasonable care and diligence to minimize the resulting damage. Anyway, he can recover from the
wrongdoer money lost in reasonable efforts to preserve the property injured and for injuries incurred in
attempting to prevent damage to it.[15]

However we sadly note that in the present case petitioners failed to offer in evidence the estimated
amount of the damage caused by private respondent's unconcern towards the damaged vehicle. It is the
burden of petitioners to show satisfactorily not only that the injured party could have mitigated his

G.R. No. L-64693 April 27, 1984
LITA ENTERPRISES, INC., petitioner,
vs.
SECOND CIVIL CASES DIVISION, INTERMEDIATE APPELLATE COURT, NICASIO M. OCAMPO and FRANCISCA P.
GARCIA, respondents.
Manuel A. Concordia for petitioner.
Nicasio Ocampo for himself and on behalf of his correspondents.
ESCOLIN, J.:+.wph!1 that: t.hqw
"Ex pacto illicito non oritur actio" [No action arises out of an illicit bargain] is the tune-honored maxim that
must be applied to the parties in the case at bar. Having entered into an illegal contract, neither can seek
relief from the courts, and each must bear the consequences of his acts.
The factual background of this case is undisputed.
Sometime in 1966, the spouses Nicasio M. Ocampo and Francisca Garcia, herein private respondents,
purchased in installment from the Delta Motor Sales Corporation five (5) Toyota Corona Standard cars to
be used as taxicabs. Since they had no franchise to operate taxicabs, they contracted with petitioner Lita
Enterprises, Inc., through its representative, Manuel Concordia, for the use of the latter's certificate of public
convenience in consideration of an initial payment of P1,000.00 and a monthly rental of P200.00 per
taxicab unit. To effectuate Id agreement, the aforesaid cars were registered in the name of petitioner Lita
Enterprises, Inc, Possession, however, remained with tile spouses Ocampo who operated and maintained
the same under the name Acme Taxi, petitioner's trade name.
About a year later, on March 18, 1967, one of said taxicabs driven by their employee, Emeterio Martin,
collided with a motorcycle whose driver, one Florante Galvez, died from the head injuries sustained
therefrom. A criminal case was eventually filed against the driver Emeterio Martin, while a civil case for
damages was instituted by Rosita Sebastian Vda. de Galvez, heir of the victim, against Lita Enterprises, Inc.,
as registered owner of the taxicab in the latter case, Civil Case No. 72067 of the Court of First Instance of
Manila, petitioner Lita Enterprises, Inc. was adjudged liable for damages in the amount of P25,000.00 and
P7,000.00 for attorney's fees.
This decision having become final, a writ of execution was issued. One of the vehicles of respondent
spouses with Engine No. 2R-914472 was levied upon and sold at public auction for 12,150.00 to one Sonnie
Cortez, the highest bidder. Another car with Engine No. 2R-915036 was likewise levied upon and sold at
public auction for P8,000.00 to a certain Mr. Lopez.
Thereafter, in March 1973, respondent Nicasio Ocampo decided to register his taxicabs in his name. He
requested the manager of petitioner Lita Enterprises, Inc. to turn over the registration papers to him, but the
latter allegedly refused. Hence, he and his wife filed a complaint against Lita Enterprises, Inc., Rosita
Sebastian Vda. de Galvez, Visayan Surety & Insurance Co. and the Sheriff of Manila for reconveyance of
motor vehicles with damages, docketed as Civil Case No. 90988 of the Court of First Instance of Manila. Trial
on the merits ensued and on July 22, 1975, the said court rendered a decision, the dispositive portion of
which reads: t.hqw The defect of inexistence of a contract is permanent and incurable, and cannot be cured by ratification or
WHEREFORE, the complaint is hereby dismissed as far as defendants Rosita Sebastian Vda. de Galvez,
Visayan Surety & Insurance Company and the Sheriff of Manila are concerned.
Defendant Lita Enterprises, Inc., is ordered to transfer the registration certificate of the three Toyota cars not
levied upon with Engine Nos. 2R-230026, 2R-688740 and 2R-585884 [Exhs. A, B, C and D] by executing a
deed of conveyance in favor of the plaintiff.
Plaintiff is, however, ordered to pay Lita Enterprises, Inc., the rentals in arrears for the certificate of
convenience from March 1973 up to May 1973 at the rate of P200 a month per unit for the three cars.
(Annex A, Record on Appeal, p. 102-103, Rollo)
Transportation Atty. Valencia
I. Concept of common carriers
Petitioner Lita Enterprises, Inc. moved for reconsideration of the decision, but the same was denied by the
court a quo on October 27, 1975. (p. 121, Ibid.)
On appeal by petitioner, docketed as CA-G.R. No. 59157-R, the Intermediate Appellate Court modified the
decision by including as part of its dispositive portion another paragraph, to wit: t.hqw
In the event the condition of the three Toyota rears will no longer serve the purpose of the deed of
conveyance because of their deterioration, or because they are no longer serviceable, or because they
are no longer available, then Lita Enterprises, Inc. is ordered to pay the plaintiffs their fair market value as of
July 22, 1975. (Annex "D", p. 167, Rollo.)
Its first and second motions for reconsideration having been denied, petitioner came to Us, praying
1. ...
2. ... after legal proceedings, decision be rendered or resolution be issued, reversing, annulling or amending
the decision of public respondent so that:
(a) the additional paragraph added by the public respondent to the DECISION of the lower court (CFI) be
deleted;
(b) that private respondents be declared liable to petitioner for whatever amount the latter has paid or
was declared liable (in Civil Case No. 72067) of the Court of First Instance of Manila to Rosita Sebastian
Vda. de Galvez, as heir of the victim Florante Galvez, who died as a result ot the gross negligence of
private respondents' driver while driving one private respondents' taxicabs. (p. 39, Rollo.)
Unquestionably, the parties herein operated under an arrangement, comonly known as the "kabit system",
whereby a person who has been granted a certificate of convenience allows another person who owns
motors vehicles to operate under such franchise for a fee. A certificate of public convenience is a special
privilege conferred by the government . Abuse of this privilege by the grantees thereof cannot be
countenanced. The "kabit system" has been Identified as one of the root causes of the prevalence of graft
and corruption in the government transportation offices. In the words of Chief Justice Makalintal, 1 "this is a
pernicious system that cannot be too severely condemned. It constitutes an imposition upon the goo faith
of the government.
Although not outrightly penalized as a criminal offense, the "kabit system" is invariably recognized as being
contrary to public policy and, therefore, void and inexistent under Article 1409 of the Civil Code, It is a
fundamental principle that the court will not aid either party to enforce an illegal contract, but will leave
them both where it finds them. Upon this premise, it was flagrant error on the part of both the trial and
appellate courts to have accorded the parties relief from their predicament. Article 1412 of the Civil Code
denies them such aid. It provides:t.hqw
ART. 1412. if the act in which the unlawful or forbidden cause consists does not constitute a criminal
offense, the following rules shall be observed;
(1) when the fault, is on the part of both contracting parties, neither may recover what he has given by
virtue of the contract, or demand the performance of the other's undertaking.
by prescription. As this Court said in Eugenio v. Perdido, 2 "the mere lapse of time cannot give efficacy to
contracts that are null void."
The principle of in pari delicto is well known not only in this jurisdiction but also in the United States where
common law prevails. Under American jurisdiction, the doctrine is stated thus: "The proposition is universal
that no action arises, in equity or at law, from an illegal contract; no suit can be maintained for its specific
performance, or to recover the property agreed to be sold or delivered, or damages for its property
agreed to be sold or delivered, or damages for its violation. The rule has sometimes been laid down as
though it was equally universal, that where the parties are in pari delicto, no affirmative relief of any kind will
be given to one against the other." 3 Although certain exceptions to the rule are provided by law, We see
no cogent reason why the full force of the rule should not be applied in the instant case.
 Transportation Atty. Valencia
I. Concept of common carriers

WHEREFORE, all proceedings had in Civil Case No. 90988 entitled "Nicasio Ocampo and Francisca P.
Garcia, Plaintiffs, versus Lita Enterprises, Inc., et al., Defendants" of the Court of First Instance of Manila and
CA-G.R. No. 59157-R entitled "Nicasio Ocampo and Francisca P. Garica, Plaintiffs-Appellees, versus Lita
Enterprises, Inc., Defendant-Appellant," of the Intermediate Appellate Court, as well as the decisions
rendered therein are hereby annuleled and set aside. No costs.

SO ORDERED.1wph1.t

[G.R. No. 144274. September 20, 2004]
NOSTRADAMUS VILLANUEVA petitioner, vs. PRISCILLA R. DOMINGO and LEANDRO LUIS R.
DOMINGO, respondents.
DECISION
CORONA, J.:
This is a petition to review the decision[1] of the Court of Appeals in CA-G.R. CV No. 52203 affirming in turn
the decision of the trial court finding petitioner liable to respondent for damages. The dispositive portion
read:
WHEREFORE, the appealed decision is hereby AFFIRMED except the award of attorneys fees including
appearance fees which is DELETED.
SO ORDERED.[2]
The facts of the case, as summarized by the Court of Appeals, are as follows:
[Respondent] Priscilla R. Domingo is the registered owner of a silver Mitsubishi Lancer Car model 1980
bearing plate No. NDW 781 91 with [co-respondent] Leandro Luis R. Domingo as authorized driver.
[Petitioner] Nostradamus Villanueva was then the registered owner of a green Mitsubishi Lancer bearing
Plate No. PHK 201 91.
On 22 October 1991 at about 9:45 in the evening, following a green traffic light, [respondent] Priscilla
Domingos silver Lancer car with Plate No. NDW 781 91 then driven by [co-respondent] Leandro Luis R.
Domingo was cruising along the middle lane of South Superhighway at moderate speed from north to
south. Suddenly, a green Mitsubishi Lancer with plate No. PHK 201 91 driven by Renato Dela Cruz Ocfemia
darted from Vito Cruz Street towards the South Superhighway directly into the path of NDW 781 91 thereby
hitting and bumping its left front portion. As a result of the impact, NDW 781 91 hit two (2) parked vehicles
at the roadside, the second hitting another parked car in front of it.
Per Traffic Accident Report prepared by Traffic Investigator Pfc. Patrocinio N. Acido, Renato dela Cruz
Ocfemia was driving with expired license and positive for alcoholic breath. Hence, Manila Assistant City
Prosecutor Oscar A. Pascua recommended the filing of information for reckless imprudence resulting to
(sic) damage to property and physical injuries.
The original complaint was amended twice: first, impleading Auto Palace Car Exchange as commercial
agent and/or buyer-seller and second, impleading Albert Jaucian as principal defendant doing business
under the name and style of Auto Palace Car Exchange.
Except for Ocfemia, all the defendants filed separate answers to the complaint. [Petitioner] Nostradamus
Villanueva claimed that he was no longer the owner of the car at the time of the mishap because it was
swapped with a Pajero owned by Albert Jaucian/Auto Palace Car Exchange. For her part, Linda Gonzales
declared that her presence at the scene of the accident was upon the request of the actual owner of the
Mitsubishi Lancer (PHK 201 91) [Albert Jaucian] for whom she had been working as agent/seller. On the
other hand, Auto Palace Car Exchange represented by Albert Jaucian claimed that he was not the
registered owner of the car. Moreover, it could not be held subsidiary liable as employer of Ocfemia
because the latter was off-duty as utility employee at the time of the incident. Neither was Ocfemia
performing a duty related to his employment.[3]
After trial, the trial court found petitioner liable and ordered him to pay respondent actual, moral and
exemplary damages plus appearance and attorneys fees:
WHEREFORE, judgment is hereby rendered for the plaintiffs, ordering Nostradamus Villanueva to pay the
amount of P99,580 as actual damages, P25,000.00 as moral damages, P25,000.00 as exemplary damages
and attorneys fees in the amount of P10,000.00 plus appearance fees of P500.00 per hearing with legal
interest counted from the date of judgment. In conformity with the law on equity and in accordance with
the ruling in First Malayan Lending and Finance Corporation vs. Court of Appeals (supra), Albert Jaucian is
Transportation Atty. Valencia
I. Concept of common carriers
hereby ordered to indemnify Nostradamus Villanueva for whatever amount the latter is hereby ordered to
pay under the judgment.
SO ORDERED.[4]
The CA upheld the trial courts decision but deleted the award for appearance and attorneys fees because
the justification for the grant was not stated in the body of the decision. Thus, this petition for review which
raises a singular issue:
MAY THE REGISTERED OWNER OF A MOTOR VEHICLE BE HELD LIABLE FOR DAMAGES ARISING FROM A
VEHICULAR ACCIDENT INVOLVING HIS MOTOR VEHICLE WHILE BEING OPERATED BY THE EMPLOYEE OF ITS
BUYER WITHOUT THE LATTERS CONSENT AND KNOWLEDGE?[5]
Yes.
We have consistently ruled that the registered owner of any vehicle is directly and primarily responsible to
the public and third persons while it is being operated.[6] The rationale behind such doctrine was explained
way back in 1957 in Erezo vs. Jepte[7]:
The principle upon which this doctrine is based is that in dealing with vehicles registered under the Public
Service Law, the public has the right to assume or presume that the registered owner is the actual owner
thereof, for it would be difficult for the public to enforce the actions that they may have for injuries caused
to them by the vehicles being negligently operated if the public should be required to prove who the
actual owner is. How would the public or third persons know against whom to enforce their rights in case of
subsequent transfers of the vehicles? We do not imply by his doctrine, however, that the registered owner
may not recover whatever amount he had paid by virtue of his liability to third persons from the person to
whom he had actually sold, assigned or conveyed the vehicle.
Under the same principle the registered owner of any vehicle, even if not used for a public service, should
primarily be responsible to the public or to third persons for injuries caused the latter while the vehicle is
being driven on the highways or streets. The members of the Court are in agreement that the defendant-
appellant should be held liable to plaintiff-appellee for the injuries occasioned to the latter because of the
negligence of the driver, even if the defendant-appellant was no longer the owner of the vehicle at the
time of the damage because he had previously sold it to another. What is the legal basis for his
(defendant-appellants) liability?
There is a presumption that the owner of the guilty vehicle is the defendant-appellant as he is the registered
owner in the Motor Vehicles Office. Should he not be allowed to prove the truth, that he had sold it to
another and thus shift the responsibility for the injury to the real and actual owner? The defendant holds the
affirmative of this proposition; the trial court held the negative.
The Revised Motor Vehicle Law (Act No. 3992, as amended) provides that no vehicle may be used or
operated upon any public highway unless the same is property registered. It has been stated that the
system of licensing and the requirement that each machine must carry a registration number,
conspicuously displayed, is one of the precautions taken to reduce the danger of injury to pedestrians and
other travelers from the careless management of automobiles. And to furnish a means of ascertaining the
identity of persons violating the laws and ordinances, regulating the speed and operation of machines
upon the highways (2 R.C.L. 1176). Not only are vehicles to be registered and that no motor vehicles are to
be used or operated without being properly registered for the current year, but that dealers in motor
vehicles shall furnish thee Motor Vehicles Office a report showing the name and address of each purchaser
of motor vehicle during the previous month and the manufacturers serial number and motor number.
(Section 5(c), Act No. 3992, as amended.)
Registration is required not to make said registration the operative act by which ownership in vehicles is
transferred, as in land registration cases, because the administrative proceeding of registration does not
bear any essential relation to the contract of sale between the parties (Chinchilla vs. Rafael and
Verdaguer, 39 Phil. 888), but to permit the use and operation of the vehicle upon any public highway
(section 5 [a], Act No. 3992, as amended). The main aim of motor vehicle registration is to identify the
owner so that if any accident happens, or that any damage or injury is caused by the vehicle on the public
highways, responsibility therefore can be fixed on a definite individual, the registered owner. Instances are

numerous where vehicles running on public highways caused accidents or injuries to pedestrians or other
vehicles without positive identification of the owner or drivers, or with very scant means of identification. It is
to forestall these circumstances, so inconvenient or prejudicial to the public, that the motor vehicle
registration is primarily ordained, in the interest of the determination of persons responsible for damages or
injuries caused on public highways:
One of the principal purposes of motor vehicles legislation is identification of the vehicle and of the
operator, in case of accident; and another is that the knowledge that means of detection are always
available may act as a deterrent from lax observance of the law and of the rules of conservative and safe
operation. Whatever purpose there may be in these statutes, it is subordinate at the last to the primary
purpose of rendering it certain that the violator of the law or of the rules of safety shall not escape because
of lack of means to discover him. The purpose of the statute is thwarted, and the displayed number
becomes a share and delusion, if courts would entertain such defenses as that put forward by appellee in
this case. No responsible person or corporation could be held liable for the most outrageous acts of
negligence, if they should be allowed to pace a middleman between them and the public, and escape
liability by the manner in which they recompense servants. (King vs. Brenham Automobile Co., Inc. 145 S.W.
278, 279.)
With the above policy in mind, the question that defendant-appellant poses is: should not the registered
owner be allowed at the trial to prove who the actual and real owner is, and in accordance with such
proof escape or evade responsibility by and lay the same on the person actually owning the vehicle? We
hold with the trial court that the law does not allow him to do so; the law, with its aim and policy in mind,
does not relieve him directly of the responsibility that the law fixes and places upon him as an incident or
consequence of registration. Were a registered owner allowed to evade responsibility by proving who the
supposed transferee or owner is, it would be easy for him, by collusion with others or otherwise, to escape
said responsibility and transfer the same to an indefinite person, or to one who possesses no property with
which to respond financially for the damage or injury done. A victim of recklessness on the public highways
is usually without means to discover or identify the person actually causing the injury or damage. He has no
means other than by a recourse to the registration in the Motor Vehicles Office to determine who is the
owner. The protection that the law aims to extend to him would become illusory were the registered owner
given the opportunity to escape liability by disproving his ownership. If the policy of the law is to be
enforced and carried out, the registered owner should not be allowed to prove the contrary to the
prejudice of the person injured, that is, to prove that a third person or another has become the owner, so
that he may thereby be relieved of the responsibility to the injured person.
The above policy and application of the law may appear quite harsh and would seem to conflict with truth
and justice. We do not think it is so. A registered owner who has already sold or transferred a vehicle has
the recourse to a third-party complaint, in the same action brought against him to recover for the damage
or injury done, against the vendee or transferee of the vehicle. The inconvenience of the suit is no
justification for relieving him of liability; said inconvenience is the price he pays for failure to comply with the
registration that the law demands and requires.
In synthesis, we hold that the registered owner, the defendant-appellant herein, is primarily responsible for
the damage caused to the vehicle of the plaintiff-appellee, but he (defendant-appellant) has a right to be
indemnified by the real or actual owner of the amount that he may be required to pay as damage for the
injury caused to the plaintiff-appellant.[8]
Petitioner insists that he is not liable for damages since the driver of the vehicle at the time of the accident
was not an authorized driver of the new (actual) owner of the vehicle. He claims that the ruling in First
Malayan Leasing and Finance Corporation vs. CA[9] implies that to hold the registered owner liable for
damages, the driver of the vehicle must have been authorized, allowed and permitted by its actual owner
to operate and drive it. Thus, if the vehicle is driven without the knowledge and consent of the actual
owner, then the registered owner cannot be held liable for damages.
He further argues that this was the underlying theory behind Duavit vs. CA[10] wherein the court absolved
the registered owner from liability after finding that the vehicle was virtually stolen from the owners garage
by a person who was neither authorized nor employed by the owner. Petitioner concludes that the ruling
in Duavit and not the one in First Malayan should be applicable to him.
Transportation Atty. Valencia
I. Concept of common carriers
Petitioners argument lacks merit. Whether the driver is authorized or not by the actual owner is irrelevant to
determining the liability of the registered owner who the law holds primarily and directly responsible for any
accident, injury or death caused by the operation of the vehicle in the streets and highways. To require the
driver of the vehicle to be authorized by the actualowner before the registered owner can be held
accountable is to defeat the very purpose why motor vehicle legislations are enacted in the first place.
Furthermore, there is nothing in First Malayan which even remotely suggests that the driver must be
authorized before the registered owner can be held accountable. In First Malayan, the registered owner,
First Malayan Corporation, was held liable for damages arising from the accident even if the vehicle
involved was already owned by another party:
This Court has consistently ruled that regardless of who the actual owner is of a motor vehicle might be, the
registered owner is the operator of the same with respect to the public and third persons, and as such,
directly and primarily responsible for the consequences of its operation. In contemplation of law, the
owner/operator of record is the employer of the driver, the actual operator and employer being
considered merely as his agent (MYC-Agro-Industrial Corporation vs. Vda. de Caldo, 132 SCRA 10, citing
Vargas vs. Langcay, 6 SCRA 174; Tamayo vs. Aquino, 105 Phil. 949).
We believe that it is immaterial whether or not the driver was actually employed by the operator of record.
It is even not necessary to prove who the actual owner of the vehicle and the employer of the driver is.
Granting that, in this case, the father of the driver is the actual owner and that he is the actual employer,
following the well-settled principle that the operator of record continues to be the operator of the vehicle
in contemplation of law, as regards the public and third person, and as such is responsible for the
consequences incident to its operation, we must hold and consider such owner-operator of record as the
employer, in contemplation of law, of the driver. And, to give effect to this policy of law as enunciated in
the above cited decisions of this Court, we must now extend the same and consider the actual operator
and employer as the agent of the operator of record.[11]
Contrary to petitioners position, the First Malayan ruling is applicable to him since the case involves the
same set of facts the registered owner had previously sold the vehicle to someone else and was being
driven by an employee of the new (actual) owner. Duavit is inapplicable since the vehicle there was not
transferred to another; the registered and the actual owner was one and the same person. Besides,
in Duavit, the defense of the registered owner, Gilberto Duavit, was that the vehicle was practically stolen
from his garage by Oscar Sabiano, as affirmed by the latter:
Defendant Sabiano, in his testimony, categorically admitted that he took the jeep from the garage of
defendant Duavit without the consent and authority of the latter. He testified further that Duavit even filed
charges against him for the theft of the jeep but which Duavit did not push through as his (Sabianos)
parents apologized to Duavit on his behalf.[12]
As correctly pointed out by the CA, the Duavit ruling is not applicable to petitioners case since the
circumstance of unauthorized use was not present. He in fact voluntarily delivered his car to Albert Jaucian
as part of the downpayment for a vehicle he purchased from Jaucian. Thus, he could not claim that the
vehicle was stolen from him since he voluntarily ceded possession thereof to Jaucian. It was the latter, as
the new (actual) owner, who could have raised the defense of theft to prove that he was not liable for the
acts of his employee Ocfemia. Thus, there is no reason to apply the Duavit ruling to this case.
The ruling in First Malayan has been reiterated in BA Finance Corporation vs. CA[13] and more recently
in Aguilar, Sr. vs. Commercial Savings Bank.[14] In BA Finance, we held the registered owner liable even if, at
the time of the accident, the vehicle was leased by another party and was driven by the lessees
employee. In Aguilar, the registered owner-bank answered for damages for the accident even if the
vehicle was being driven by the Vice-President of the Bank in his private capacity and not as an officer of
the Bank, as claimed by the Bank. We find no reason to deviate from these decisions.
The main purpose of vehicle registration is the easy identification of the owner who can be held responsible
for any accident, damage or injury caused by the vehicle. Easy identification prevents inconvenience and
prejudice to a third party injured by one who is unknown or unidentified. To allow a registered owner to
escape liability by claiming that the driver was not authorized by the new (actual) owner results in the
public detriment the law seeks to avoid.
 Transportation Atty. Valencia
I. Concept of common carriers

Finally, the issue of whether or not the driver of the vehicle during the accident was authorized is not at all
relevant to determining the liability of the registered owner. This must be so if we are to comply with the
rationale and principle behind the registration requirement under the motor vehicle law.
WHEREFORE, the petition is hereby DENIED. The January 26, 2000 decision of the Court of Appeals is
AFFIRMED.

SO ORDERED.

[G.R. No. 143360. September 5, 2002]
EQUITABLE LEASING CORPORATION, petitioner, vs. LUCITA SUYOM, MARISSA ENANO, MYRNA TAMAYO and
FELIX OLEDAN, respondents.
DECISION
PANGANIBAN, J.:
In an action based on quasi delict, the registered owner of a motor vehicle is solidarily liable for the injuries
and damages caused by the negligence of the driver, in spite of the fact that the vehicle may have
already been the subject of an unregistered Deed of Sale in favor of another person. Unless registered with
the Land Transportation Office, the sale -- while valid and binding between the parties -- does not affect
third parties, especially the victims of accidents involving the said transport equipment. Thus, in the present
case, petitioner, which is the registered owner, is liable for the acts of the driver employed by its former
lessee who has become the owner of that vehicle by virtue of an unregistered Deed of Sale.
Statement of the Case
Before us is a Petition for Review under Rule 45 of the Rules of Court, assailing the May 12, 2000 Decision[1] of
the Court of Appeals[2] (CA) in CA-GR CV No. 55474. The decretal portion of the Decision reads as follows:
WHEREFORE, premises considered, the instant appeal is hereby DISMISSED for lack of merit. The assailed
decision, dated May 5, 1997, of the Regional Trial Court of Manila, Branch 14, in Civil Case No. 95-73522, is
hereby AFFIRMED with MODIFICATION that the award of attorneys fees is DELETED.[3]
On the other hand, in Civil Case No. 95-73522, the Regional Trial Court (RTC) of Manila (Branch 14) had
earlier disposed in this wise:
WHEREFORE, judgment is hereby rendered in favor of the plaintiffs and against the defendant Equitable
Leasing Corporation ordering said defendant to pay to the plaintiffs the following:
A. TO MYRNA TAMAYO
1. the sum of P50,000.00 for the death of Reniel Tamayo;
2. P50,000.00 as moral damages; and
3. P56,000.00 for the damage to the store and its contents, and funeral expenses.
B. TO FELIX OLEDAN
1. the sum of P50,000.00 for the death of Felmarie Oledan;
2. P50,000.00 as moral damages; and
3. P30,000.00 for medical expenses, and funeral expenses.
C. TO MARISSA ENANO
1. P7,000.00 as actual damages
D. TO LUCITA SUYOM
1. The sum of P5,000.00 for the medical treatment of her two sons.
The sum of P120,000.00 as and for attorneys fees.[4]
The Facts
On July 17, 1994, a Fuso Road Tractor driven by Raul Tutor rammed into the house cum store of Myrna
Tamayo located at Pier 18, Vitas, Tondo, Manila. A portion of the house was destroyed. Pinned to death
under the engine of the tractor were Respondent Myrna Tamayos son, Reniel Tamayo, and Respondent
Felix Oledans daughter, Felmarie Oledan. Injured were Respondent Oledan himself, Respondent Marissa
Enano, and two sons of Respondent Lucita Suyom.
Transportation Atty. Valencia
I. Concept of common carriers
Tutor was charged with and later convicted of reckless imprudence resulting in multiple homicide and
multiple physical injuries in Criminal Case No. 296094-SA, Metropolitan Trial Court of Manila, Branch 12.[5]
Upon verification with the Land Transportation Office, respondents were furnished a copy of Official
Receipt No. 62204139[6] and Certificate of Registration No. 08262797,[7] showing that the registered owner of
the tractor was Equitable Leasing Corporation/leased to Edwin Lim. On April 15, 1995, respondents filed
against Raul Tutor, Ecatine Corporation (Ecatine) and Equitable Leasing Corporation (Equitable) a
Complaint[8] for damages docketed as Civil Case No. 95-73522 in the RTC of Manila, Branch 14.
The trial court, upon motion of plaintiffs counsel, issued an Order dropping Raul Tutor, Ecatine and Edwin
Lim from the Complaint, because they could not be located and served with summonses.[9] On the other
hand, in its Answer with Counterclaim,[10] petitioner alleged that the vehicle had already been sold to
Ecatine and that the former was no longer in possession and control thereof at the time of the incident. It
also claimed that Tutor was an employee, not of Equitable, but of Ecatine.
After trial on the merits, the RTC rendered its Decision ordering petitioner to pay actual and moral damages
and attorneys fees to respondents. It held that since the Deed of Sale between petitioner and Ecatine had
not been registered with the Land Transportation Office (LTO), the legal owner was still Equitable.[11] Thus,
petitioner was liable to respondents.[12]
Ruling of the Court of Appeals
Sustaining the RTC, the CA held that petitioner was still to be legally deemed the owner/operator of the
tractor, even if that vehicle had been the subject of a Deed of Sale in favor of Ecatine on December 9,
1992. The reason cited by the CA was that the Certificate of Registration on file with the LTO still remained in
petitioners name.[13] In order that a transfer of ownership of a motor vehicle can bind third persons, it must
be duly recorded in the LTO.[14]
The CA likewise upheld respondents claim for moral damages against petitioner because the appellate
court considered Tutor, the driver of the tractor, to be an agent of the registered owner/operator.[15]
Hence, this Petition.[16]
Issues
In its Memorandum, petitioner raises the following issues for the Courts consideration:
I
Whether or not the Court of Appeals and the trial court gravely erred when they decided and held that
petitioner [was] liable for damages suffered by private respondents in an action based on quasi delict for
the negligent acts of a driver who [was] not the employee of the petitioner.
II
Whether or not the Court of Appeals and the trial court gravely erred when they awarded moral damages
to private respondents despite their failure to prove that the injuries they suffered were brought by
petitioners wrongful act.[17]
This Courts Ruling
The Petition has no merit.
First Issue:
Liability for Wrongful Acts
Petitioner contends that it should not be held liable for the damages sustained by respondents and that
arose from the negligence of the driver of the Fuso Road Tractor, which it had already sold to Ecatine at
the time of the accident. Not having employed Raul Tutor, the driver of the vehicle, it could not have
controlled or supervised him.[18]

We are not persuaded. In negligence cases, the aggrieved party may sue the negligent party under (1)
Article 100[19] of the Revised Penal Code, for civil liability ex delicto; or (2) under Article 2176[20] of the Civil
Code, for civil liability ex quasi delicto.[21]
Furthermore, under Article 103 of the Revised Penal Code, employers may be held subsidiarily liable for
felonies committed by their employees in the discharge of the latters duties.[22]This liability attaches when
the employees who are convicted of crimes committed in the performance of their work are found to be
insolvent and are thus unable to satisfy the civil liability adjudged.[23]
On the other hand, under Article 2176 in relation to Article 2180[24] of the Civil Code, an action predicated
on quasi delict may be instituted against the employer for an employees act or omission. The liability for the
negligent conduct of the subordinate is direct and primary, but is subject to the defense of due diligence in
the selection and supervision of the employee.[25]The enforcement of the judgment against the employer
for an action based on Article 2176 does not require the employee to be insolvent, since the liability of the
former is solidary -- the latter being statutorily considered a joint tortfeasor.[26] To sustain a claim based on
quasi delict, the following requisites must be proven: (a) damage suffered by the plaintiff, (b) fault or
negligence of the defendant, and (c) connection of cause and effect between the fault or negligence of
the defendant and the damage incurred by the plaintiff.[27]
These two causes of action (ex delicto or ex quasi delicto) may be availed of, subject to the caveat[28] that
the offended party cannot recover damages twice for the same act or omission or under both
causes.[29] Since these two civil liabilities are distinct and independent of each other, the failure to recover
in one will not necessarily preclude recovery in the other.[30]
In the instant case, respondents -- having failed to recover anything in the criminal case -- elected to file a
separate civil action for damages, based on quasi delict under Article 2176 of the Civil Code.[31] The
evidence is clear that the deaths and the injuries suffered by respondents and their kins were due to the
fault of the driver of the Fuso tractor.
Dated June 4, 1991, the Lease Agreement[32] between petitioner and Edwin Lim stipulated that it is the
intention of the parties to enter into a FINANCE LEASE AGREEMENT.[33] Under such scheme, ownership of the
subject tractor was to be registered in the name of petitioner, until the value of the vehicle has been fully
paid by Edwin Lim.[34] Further, in the Lease Schedule,[35] the monthly rental for the tractor was stipulated,
and the term of the Lease was scheduled to expire on December 4, 1992. After a few months, Lim
completed the payments to cover the full price of the tractor.[36] Thus, on December 9, 1992, a Deed of
Sale[37] over the tractor was executed by petitioner in favor of Ecatine represented by Edwin Lim. However,
the Deed was not registered with the LTO.
We hold petitioner liable for the deaths and the injuries complained of, because it was the registered
owner of the tractor at the time of the accident on July 17, 1994.[38] The Court has consistently ruled that,
regardless of sales made of a motor vehicle, the registered owner is the lawful operator insofar as the
public and third persons are concerned; consequently, it is directly and primarily responsible for the
consequences of its operation.[39] In contemplation of law, the owner/operator of record is the employer of
the driver, the actual operator and employer being considered as merely its agent.[40] The same principle
applies even if the registered owner of any vehicle does not use it for public service.[41]
Since Equitable remained the registered owner of the tractor, it could not escape primary liability for the
deaths and the injuries arising from the negligence of the driver.[42]
The finance-lease agreement between Equitable on the one hand and Lim or Ecatine on the other has
already been superseded by the sale. In any event, it does not bind third persons.The rationale for this rule
has been aptly explained in Erezo v. Jepte,[43] which we quote hereunder:
x x x. The main aim of motor vehicle registration is to identify the owner so that if any accident happens, or
that any damage or injury is caused by the vehicle on the public highways, responsibility therefor can be
fixed on a definite individual, the registered owner. Instances are numerous where vehicles running on
public highways caused accidents or injuries to pedestrians or other vehicles without positive identification
of the owner or drivers, or with very scant means of identification. It is to forestall these circumstances, so
inconvenient or prejudicial to the public, that the motor vehicle registration is primarily ordained, in the
interest of the determination of persons responsible for damages or injuries caused on public highways.[44]
Transportation Atty. Valencia
I. Concept of common carriers
Further, petitioners insistence on FGU Insurance Corp. v. Court of Appeals is misplaced.[45] First, in FGU
Insurance, the registered vehicle owner, which was engaged in a rent-a-car business, rented out the car. In
this case, the registered owner of the truck, which is engaged in the business of financing motor vehicle
acquisitions, has actually sold the truck to Ecatine, which in turn employed Tutor. Second, in FGU
Insurance, the registered owner of the vehicle was not held responsible for the negligent acts of the person
who rented one of its cars, because Article 2180 of the Civil Code was not applicable. We held that
no vinculum juris as employer and employee existed between the owner and the driver.[46] In this case, the
registered owner of the tractor is considered under the law to be the employer of the driver, while the
actual operator is deemed to be its agent.[47] Thus, Equitable, the registered owner of the tractor, is -- for
purposes of the law on quasi delict -- the employer of Raul Tutor, the driver of the tractor. Ecatine, Tutors
actual employer, is deemed as merely an agent of Equitable.[48]
True, the LTO Certificate of Registration, dated 5/31/91, qualifies the name of the registered owner as
EQUITABLE LEASING CORPORATION/Leased to Edwin Lim. But the lease agreement between Equitable and
Lim has been overtaken by the Deed of Sale on December 9, 1992, between petitioner and Ecatine. While
this Deed does not affect respondents in this quasi delict suit, it definitely binds petitioner because, unlike
them, it is a party to it.
We must stress that the failure of Equitable and/or Ecatine to register the sale with the LTO should not
prejudice respondents, who have the legal right to rely on the legal principle that the registered vehicle
owner is liable for the damages caused by the negligence of the driver. Petitioner cannot hide behind its
allegation that Tutor was the employee of Ecatine. This will effectively prevent respondents from recovering
their losses on the basis of the inaction or fault of petitioner in failing to register the sale. The non-registration
is the fault of petitioner, which should thus face the legal consequences thereof.
Second Issue:
Moral Damages
Petitioner further claims that it is not liable for moral damages, because respondents failed to establish or
show the causal connection or relation between the factual basis of their claim and their wrongful act or
omission, if any. [49]
Moral damages are not punitive in nature, but are designed to compensate[50] and alleviate in some way
the physical suffering, mental anguish, fright, serious anxiety, besmirched reputation, wounded feelings,
moral shock, social humiliation, and similar injury unjustly caused a person.[51] Although incapable of
pecuniary computation, moral damages must nevertheless be somehow proportional to and in
approximation of the suffering inflicted.[52] This is so because moral damages are in the category of an
award designed to compensate the claimant for actual injury suffered, not to impose a penalty on the
wrongdoer.[53]
Viewed as an action for quasi delict, the present case falls squarely within the purview of Article 2219
(2),[54] which provides for the payment of moral damages in cases of quasi delict.[55] Having established the
liability of petitioner as the registered owner of the vehicle,[56] respondents have satisfactorily shown the
existence of the factual basis for the award[57] and its causal connection to the acts of Raul Tutor, who is
deemed as petitioners employee.[58] Indeed, the damages and injuries suffered by respondents were the
proximate result of petitioners tortious act or omission.[59]
Further, no proof of pecuniary loss is necessary in order that moral damages may be awarded, the amount
of indemnity being left to the discretion of the court.[60] The evidence gives no ground for doubt that such
discretion was properly and judiciously exercised by the trial court.[61] The award is in fact consistent with
the rule that moral damages are not intended to enrich the injured party, but to alleviate the moral
suffering undergone by that party by reason of the defendants culpable action.[62]
WHEREFORE, the Petition is DENIED and the assailed Decision AFFIRMED. Costs against petitioner.SO
ORDERED.